Document:

EX-10.5

 Exhibit 10.5 

CORTEXYME, INC. 
 2019
EMPLOYEE STOCK PURCHASE PLAN
  

	 	1.	 General; Purpose. 

(a)    The Plan provides a means by which Eligible Employees and/or Eligible Service Providers of either the Company or a
Designated Company may be given an opportunity to purchase shares of Common Stock. The Plan permits the Company to grant a series of Purchase Rights to Eligible Employees and/or Eligible Service Providers. 

(b)    The Company, by means of the Plan, seeks to retain and assist its Related Corporations or Affiliates in retaining
the services of such Eligible Employees and Eligible Service Providers, to secure and retain the services of new Eligible Employees and Eligible Service Providers and to provide incentives for such persons to exert maximum efforts for the success of
the Company and its Related Corporations and Affiliates. 
 (c)    The Plan includes two components: a 423 Component and
a Non-423 Component. The Company intends (but makes no undertaking or representation to maintain) the 423 Component to qualify as an Employee Stock Purchase Plan. The provisions of the 423 Component,
accordingly, will be construed in a manner that is consistent with the requirements of Section 423 of the Code, including without limitation, to extend and limit Plan participation in a uniform and
non-discriminating basis. In addition, this Plan authorizes grants of Purchase Rights under the Non-423 Component that do not meet the requirements of an Employee Stock
Purchase Plan. Except as otherwise provided in the Plan or determined by the Board, the Non-423 Component will operate and be administered in the same manner as the 423 Component. In addition, the Company may
make separate Offerings which vary in terms (provided that such terms are not inconsistent with the provisions of the Plan or the requirements of an Employee Stock Purchase Plan, except in each case with respect to a
Non-423 Component), and the Company will designate which Designated Company is participating in each separate Offering and if any Eligible Service Providers will be eligible to participate in a separate
Offering. Eligible Employees will be able to participate in the 423 Component or Non-423 Component of the Plan. Eligible Service Providers will only be able to participate in the
Non-423 Component of the Plan. 
  

	 	2.	 Administration. 

(a)    The Board will administer the Plan unless and until the Board delegates administration of the Plan to a Committee or
Committees, as provided in Section 2(c). 
 (b)    The Board will have the power, subject to, and within the
limitations of, the express provisions of the Plan: 
 (i)    To determine how and when Purchase Rights will be granted
and the provisions of each Offering (which need not be identical). 
 (ii)    To designate from time to time which
Related Corporations will be eligible to participate in the Plan as Designated 423 Corporations or as Designated Non-423 Corporations, which Affiliates will be eligible to participate in the Plan as Designated
Non-423 Corporations, and which Designated Companies will participate in each separate Offering (to the extent that the Company makes separate Offerings). 

 (iii)    To designate from time to time which persons will be Eligible
Service Providers and which Eligible Service Providers will participate in each separate Offering (to the extent that the Company makes separate Offerings). 

(iv)    To construe and interpret the Plan and Purchase Rights, and to establish, amend and revoke rules and regulations
for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan, in a manner and to the extent it deems necessary or expedient to make the Plan fully effective. 

(v)    To settle all controversies regarding the Plan and Purchase Rights granted under the Plan. 

(vi)    To suspend or terminate the Plan at any time as provided in Section 12. 

(vii)    To amend the Plan at any time as provided in Section 12. 

(viii)    Generally, to exercise such powers and to perform such acts as it deems necessary or expedient to promote the
best interests of the Company, its Related Corporations, and Affiliates and to carry out the intent that the 423 Component be treated as an Employee Stock Purchase Plan. 

(ix)    To adopt such rules, procedures and sub-plans relating to the operation
and administration of the Plan as are necessary or appropriate under applicable local laws, regulations and procedures to permit or facilitate participation in the Plan by Employees or Eligible Service Providers who are foreign nationals or employed
or providing services or located or otherwise subject to the laws of a jurisdiction outside the United States. Without limiting the generality of, but consistent with, the foregoing, the Board specifically is authorized to adopt rules, procedures,
and sub-plans, which, for purposes of the Non-423 Component, may be beyond the scope of Section 423 of the Code, regarding, without limitation, eligibility to
participate in the Plan, handling and making of Contributions, establishment of bank or trust accounts to hold Contributions, payment of interest, conversion of local currency, obligations to pay payroll tax, determination of beneficiary designation
requirements, withholding procedures and handling of share issuances, any of which may vary according to applicable requirements. 

(c)    The Board may delegate some or all of the administration of the Plan to a Committee or Committees. If
administration is delegated to a Committee, the Committee will have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to a
subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board will thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The Board may retain the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the Board some or all of the powers previously
delegated. Whether or not the Board has delegated administration of the Plan to a Committee, the Board will have the final power to determine all questions of policy and expediency that may arise in the administration of the Plan. 

  
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 (d)    All determinations, interpretations and constructions made by the
Board in good faith will not be subject to review by any person and will be final, binding and conclusive on all persons. 
  

	 	3.	 Shares of Common Stock Subject to the Plan. 

(a)    Subject to the provisions of Section 11(a) relating to Capitalization Adjustments, the maximum number of shares
of Common Stock that may be issued under the Plan will not exceed 268,295 shares of Common Stock, plus the number of shares of Common Stock that are automatically added on the first day of each Fiscal Year beginning with the 2020 Fiscal Year and
ending on (and including) the first day of the 2030 Fiscal Year, in an amount equal to the lesser of (i) one percent (1%) of the total number of shares of Common Stock outstanding on the last day of the calendar month prior to the date of such
automatic increase, and (ii) 536,589 shares of Common Stock. Notwithstanding the foregoing, the Board may act prior to the first day of any fiscal year to provide that there will be no increase in the share reserve for such fiscal year or that the
increase in the share reserve for such fiscal year will be a lesser number of shares of Common Stock than would otherwise occur pursuant to the preceding sentence. 

(b)    If any Purchase Right granted under the Plan terminates without having been exercised in full, the shares of Common
Stock not purchased under such Purchase Right will again become available for issuance under the Plan. 
 (c)    The
stock purchasable under the Plan will be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Company on the open market. 
  

	 	4.	 Grant of Purchase Rights; Offering. 

(a)    The Board may from time to time grant or provide for the grant of Purchase Rights to Eligible Employees and/or
Eligible Service Providers under an Offering (consisting of one or more Purchase Periods) on an Offering Date or Offering Dates selected by the Board. Each Offering will be in such form and will contain such terms and conditions as the Board will
deem appropriate, and, with respect to the 423 Component, will comply with the requirement of Section 423(b)(5) of the Code that all Employees granted Purchase Rights will have the same rights and privileges. The terms and conditions of an
Offering will be incorporated by reference into the Plan and treated as part of the Plan. The provisions of separate Offerings need not be identical, but each Offering will include (through incorporation of the provisions of this Plan by reference
in the Offering Document or otherwise) the period during which the Offering will be effective, which period will not exceed 27 months beginning with the Offering Date, and the substance of the provisions contained in Sections 5 through 8,
inclusive. 
 (b)    If a Participant has more than one Purchase Right outstanding under the Plan, unless he or she
otherwise indicates in forms delivered to the Company: (i) each form will apply to all of his or her Purchase Rights under the Plan, and (ii) a Purchase Right with a lower exercise price (or an earlier-granted Purchase Right, if different
Purchase Rights have identical exercise prices) will be exercised to the fullest possible extent before a Purchase Right with a higher exercise price (or a later-granted Purchase Right if different Purchase Rights have identical exercise prices)
will be exercised. 

  
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 (c)    The Board will have the discretion to structure an Offering so
that if the Fair Market Value of a share of Common Stock on the first Trading Day of a new Purchase Period within that Offering is less than or equal to the Fair Market Value of a share of Common Stock on the Offering Date for that Offering, then
(i) that Offering will terminate immediately as of that first Trading Day, and (ii) the Participants in such terminated Offering will be automatically enrolled in a new Offering beginning on the first Trading Day of such new Offering
Period and Purchase Period. 
  

	 	5.	 Eligibility. 

(a)    Purchase Rights may be granted only to Employees of the Company or, as the Board may designate in accordance with
Section 2(b), to Employees of a Related Corporation or, solely with respect to the Non-423 Component, Employees of an Affiliate or Eligible Service Providers. 

(b) The Board may provide that Employees will not be eligible to be granted Purchase Rights under the Plan if, on the Offering Date, the
Employee (i) has not completed at least two (2) years of service since the Employee’s last hire date (or such lesser period of time as may be determined by the Board in its discretion), (ii) customarily works not more than
twenty (20) hours per week (or such lesser period of time as may be determined by the Board in its discretion), (iii) customarily works not more than five (5) months per calendar year (or such lesser period of time as may be
determined by the Board in its discretion), (iv) is an officer or a manager (i.e., a person whose principal duties consist of supervising the work of other employees), or (v) is a highly compensated employee within the meaning of
Section 423(b)(4)(D) of the Code. Unless otherwise determined by the Board for any Offering Period, an Employee will not be eligible to be granted Purchase Rights unless, on the Offering Date, the Employee customarily works more than
twenty (20) hours per week and more than five (5) months per calendar year, and has been employed by the Company, a Related Corporation, or an Affiliate, as the case may be, for at least three (3) continuous months preceding such
Offering Date. 
 (c)    No Employee will be eligible for the grant of any Purchase Rights if, immediately after any
such Purchase Rights are granted, such Employee owns stock possessing five (5) percent or more of the total combined voting power or value of all classes of stock of the Company or of any Related Corporation. For purposes of this
Section 5(c), the rules of Section 424(d) of the Code will apply in determining the stock ownership of any Employee, and stock which such Employee may purchase under all outstanding Purchase Rights and options will be treated as stock
owned by such Employee. 
 (d)    As specified by Section 423(b)(8) of the Code, an Eligible Employee may be
granted Purchase Rights only if such Purchase Rights, together with any other rights granted under all Employee Stock Purchase Plans of the Company and any Related Corporations, do not permit such Eligible Employee’s rights to purchase stock of
the Company or any Related Corporation to accrue at a rate which, when aggregated, exceeds U.S. $25,000 of Fair Market Value of such stock (determined at the time such rights are granted, and which, with respect to the Plan, will be determined as of
their respective Offering Dates) for each calendar year in which such rights are outstanding at any time. 

  
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 (e)    An Eligible Service Provider will not be eligible to be granted
Purchase Rights unless the Eligible Service Provider is providing bonafide services to the Company or a Designated Company on the applicable Offering Date. 

(f)    Notwithstanding anything set forth herein except for Section 5(e) above, the Board may establish additional
eligibility requirements, or fewer eligibility requirements, for Employees and/or Eligible Service Providers with respect to Offerings made under the Non-423 Component even if such requirements are not
consistent with Section 423 of the Code. 
  

	 	6.	 Purchase Rights; Purchase Price. 

(a)    On each Offering Date, each Eligible Employee or Eligible Service Provider, pursuant to an Offering made under the
Plan, will be granted a Purchase Right to purchase up to that number of shares of Common Stock (rounded down to the nearest whole share) purchasable either with a percentage or with a maximum dollar amount, as designated by the Board; provided
however, that in the case of Eligible Employees, such percentage or maximum dollar amount will in either case not exceed 15% of such Employee’s earnings (as defined by the Board in each Offering) during the period that begins on the Offering
Date (or such later date as the Board determines for a particular Offering) and ends on the date stated in the Offering, which date will be no later than the end of the Offering, unless otherwise provided for in an Offering. 

(b)    The Board will establish one or more Purchase Dates during an Offering on which Purchase Rights granted for that
Offering will be exercised and shares of Common Stock will be purchased in accordance with such Offering. 
 (c)    In
connection with each Offering made under the Plan, the Board may specify (i) a maximum number of shares of Common Stock that may be purchased by any Participant on any Purchase Date during such Offering, (ii) a maximum aggregate number of
shares of Common Stock that may be purchased by all Participants pursuant to such Offering, and (iii) a maximum aggregate number of shares of Common Stock that may be purchased by all Participants on any Purchase Date under the Offering. If the
aggregate purchase of shares of Common Stock issuable on exercise of Purchase Rights granted under the Offering would exceed any such maximum aggregate number, then, in the absence of any Board action otherwise, a pro rata (based on each
Participant’s accumulated Contributions) allocation of the shares of Common Stock (rounded down to the nearest whole share) available will be made in as nearly a uniform manner as will be practicable and equitable. 

(d)    The purchase price of shares of Common Stock acquired pursuant to Purchase Rights will be not less than the lesser
of: 
 (i)    an amount equal to 85% of the Fair Market Value of the shares of Common Stock on the Offering Date; or

 (ii)    an amount equal to 85% of the Fair Market Value of the shares of Common Stock on the applicable Purchase
Date. 

  
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	 	7.	 Participation; Withdrawal; Termination. 

(a)    An Eligible Employee may elect to authorize payroll deductions as the means of making Contributions by completing
and delivering to the Company, within the time specified by the Company, an enrollment form provided by the Company or any third party designated by the Company (each, a “Company Designee”). The enrollment form will specify the
amount of Contributions not to exceed the maximum amount specified by the Board. Each Participant’s Contributions will be credited to a bookkeeping account for such Participant under the Plan and will be deposited with the general funds of the
Company except where applicable laws or regulations require that Contributions be deposited with a Company Designee or otherwise be segregated. 

(b)    If permitted in the Offering, a Participant may begin Contributions with the first payroll or payment date
occurring on or after the Offering Date (or, in the case of a payroll date or payment date that occurs after the end of the prior Offering but before the Offering Date of the next new Offering, Contributions from such payroll or payment will be
included in the new Offering) or on such other date as set forth in the Offering. If permitted in the Offering, a Participant may thereafter reduce (including to zero) or increase his or her Contributions. If required under applicable laws or
regulations or if specifically provided in the Offering, in addition to or instead of making Contributions by payroll deductions, a Participant may make Contributions through a payment by cash, check, or wire transfer prior to a Purchase Date, in a
manner directed by the Company or a Company Designee. 
 (c)    During an Offering, a Participant may cease making
Contributions and withdraw from the Offering by delivering to the Company or a Company Designee a withdrawal form provided by the Company. The Company may impose a deadline before a Purchase Date for withdrawing. On such withdrawal, such
Participant’s Purchase Right in that Offering will immediately terminate and the Company will distribute as soon as practicable to such Participant all of his or her accumulated but unused Contributions without interest and such
Participant’s Purchase Right in that Offering will then terminate. A Participant’s withdrawal from that Offering will have no effect on his or her eligibility to participate in any other Offerings under the Plan, but such Participant will
be required to deliver a new enrollment form to participate in subsequent Offerings. 
 (d)    Purchase Rights granted
pursuant to any Offering under the Plan will terminate immediately if the Participant either (i) is no longer an Eligible Employee or Eligible Service Provider for any reason or for no reason, or (ii) is otherwise no longer eligible to
participate. The Company shall have the exclusive discretion to determine when Participant is no longer actively providing services and the date of the termination of employment or service for purposes of the Plan. As soon as practicable, the
Company will distribute to such individual all of his or her accumulated but unused Contributions without interest. 

(e)    During a Participant’s lifetime, Purchase Rights will be exercisable only by such Participant. Purchase Rights
are not transferable by a Participant, except by will, by the laws of descent and distribution, or, if permitted by the Company, by a beneficiary designation as described in Section 10. 

(f)    Unless otherwise specified in the Offering or required by applicable law, the Company will have no obligation to
pay interest on Contributions. 

  
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	 	8.	 Exercise of Purchase Rights. 

(a)    On each Purchase Date, each Participant’s accumulated Contributions will be applied to the purchase of shares
of Common Stock (rounded down to the nearest whole share), up to the maximum number of shares of Common Stock permitted by the Plan and the applicable Offering, at the purchase price specified in the Offering. No fractional shares will be issued
unless specifically provided for in the Offering. 
 (b)    Unless otherwise provided in the Offering, if any amount of
accumulated Contributions remains in a Participant’s account after the purchase of shares of Common Stock on the final Purchase Date in an Offering, then such remaining amount will roll over to the next Offering. 

(c)    No Purchase Rights may be exercised to any extent unless the shares of Common Stock to be issued on such exercise
under the Plan are covered by an effective registration statement pursuant to the Securities Act and the Plan is in material compliance with all applicable U.S. federal and state, foreign and other securities, exchange control, and other laws
applicable to the Plan. If on a Purchase Date the shares of Common Stock are not so registered or the Plan is not in such compliance, no Purchase Rights will be exercised on such Purchase Date, and the Purchase Date will be delayed until the shares
of Common Stock are subject to such an effective registration statement and the Plan is in material compliance, except that the Purchase Date will in no event be more than three (3) months from the original Purchase Date. If, on the Purchase
Date, as delayed to the maximum extent permissible, the shares of Common Stock are not registered and the Plan is not in material compliance with all applicable laws or regulations, as determined by the Company in its sole discretion, no Purchase
Rights will be exercised and all accumulated but unused Contributions will be distributed as soon as practicable to the Participants without interest. 

9.    Covenants of the Company. The Company will seek to obtain from each U.S. federal or state, foreign or other
regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Purchase Rights and issue and sell shares of Common Stock thereunder unless the Company determines, in its sole discretion, that doing so
would cause the Company to incur costs that are unreasonable. If, after commercially reasonable efforts, the Company is unable to obtain the authority that counsel for the Company deems necessary for the grant of Purchase Rights or the lawful
issuance and sale of Common Stock under the Plan, and at a commercially reasonable cost, the Company will be relieved from any liability for failure to grant Purchase Rights or to issue and sell Common Stock on exercise of such Purchase Rights. 

 

	 	10.	 Designation of Beneficiary. 

(a)    The Company may, but is not obligated to, permit a Participant to submit a form designating a beneficiary who will
receive any shares of Common Stock or Contributions from the Participant’s account under the Plan if the Participant dies before such shares or Contributions are delivered to the Participant. The Company may, but is not obligated to, permit the
Participant to change such designation of beneficiary. Any such designation or change must be on a form approved by the Company or as approved by the Company for use by a Company Designee. 

  
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 (b)    If a Participant dies, in the absence of a valid beneficiary
designation, the Company will deliver any shares of Common Stock and Contributions to the executor or administrator of the estate of the Participant. If no executor or administrator has been appointed (to the knowledge of the Company), the Company,
in its sole discretion, may deliver such shares of Common Stock and Contributions, without interest, to the Participant’s spouse, dependents or relatives, or if no spouse, dependent or relative is known to the Company, then to such other person
as the Company may designate. 
  

	 	11.	 Capitalization Adjustments; Dissolution or Liquidation; Corporate Transactions. 

(a)    In the event of a Capitalization Adjustment, the Board will appropriately and proportionately adjust: (i) the
class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a), (ii) the class(es) and maximum number of securities by which the share reserve is to increase automatically each year pursuant to Section 3(a), (iii)
the class(es) and number of securities subject to, and the purchase price applicable to outstanding Offerings and Purchase Rights, and (iv) the class(es) and number of securities that are the subject of the purchase limits under each ongoing
Offering. The Board will make these adjustments, and its determination will be final, binding, and conclusive. 
 (b) In the event of a
dissolution or liquidation of the Company, the Board will shorten any Offering then in progress by setting a New Purchase Date prior to the consummation of such proposed dissolution or liquidation. The Board will notify each Participant in writing,
prior to the New Purchase Date that the Purchase Date for the Participant’s Purchase Rights has been changed to the New Purchase Date and that such Purchase Rights will be automatically exercised on the New Purchase Date, unless prior to such
date the Participant has withdrawn from the Offering as provided in Section 7. 
 (c)    In the event of a
Corporate Transaction, then: (i) any surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) may assume or continue outstanding Purchase Rights or may substitute similar rights (including
a right to acquire the same consideration paid to the stockholders in the Corporate Transaction) for outstanding Purchase Rights, or (ii) if any surviving or acquiring corporation (or its parent company) does not assume or continue such
Purchase Rights or does not substitute similar rights for such Purchase Rights, then the Participants’ accumulated Contributions will be used to purchase shares of Common Stock (rounded down to the nearest whole share) prior to the Corporate
Transaction under the outstanding Purchase Rights (with such actual date to be determined by the Board in its sole discretion), and the Purchase Rights will terminate immediately after such purchase. The Board will notify each Participant in
writing, prior to the New Purchase Date that the Purchase Date for the Participant’s Purchase Rights has been changed to the New Purchase Date and that such Purchase Rights will be automatically exercised on the New Purchase Date, unless prior
to such date the Participant has withdrawn from the Offering as provided in Section 7. 
  

	 	12.	 Amendment, Termination or Suspension of the Plan. 

(a)    The Board may amend the Plan at any time in any respect the Board deems necessary or advisable. However, except as
provided in Section 11(a) relating to Capitalization Adjustments, stockholder approval will be required for any amendment of the Plan for which stockholder approval is required by applicable laws, regulations or listing requirements, including
any amendment that either (i) increases the number of shares of Common Stock available for issuance 

  
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under the Plan, (ii) expands the class of individuals eligible to become Participants and receive Purchase Rights, (iii) materially increases the benefits accruing to Participants under
the Plan or reduces the price at which shares of Common Stock may be purchased under the Plan, (iv) extends the term of the Plan, or (v) expands the types of awards available for issuance under the Plan, but in each of (i) through (v)
above only to the extent stockholder approval is required by applicable laws, regulations, or listing requirements. 

(b)    The Board may suspend or terminate the Plan at any time. No Purchase Rights may be granted under the Plan while the
Plan is suspended or after it is terminated. 
 (c)    Any benefits, privileges, entitlements, and obligations under any
outstanding Purchase Rights granted before an amendment, suspension, or termination of the Plan will not be materially impaired by any such amendment, suspension, or termination except (i) with the consent of the person to whom such Purchase
Rights were granted, (ii) as necessary to comply with any laws, listing requirements, or governmental regulations (including, without limitation, the provisions of Section 423 of the Code and the regulations and other interpretive guidance
issued thereunder relating to Employee Stock Purchase Plans) including without limitation any such regulations or other guidance that may be issued or amended after the date the Plan is adopted by the Board, or (iii) as necessary to obtain or
maintain any special tax, listing, or regulatory treatment. To be clear, the Board may amend outstanding Purchase Rights without a Participant’s consent if such amendment is necessary to ensure that the Purchase Right or the 423 Component
complies with the requirements of Section 423 of the Code. 
  

	 	13.	 Section 409A of the Code; Tax Qualification. 

(a)    Purchase Rights granted under the 423 Component are intended to be exempt from the application of Section 409A
of the Code under U.S. Treasury Regulation Section 1.409A-1(b)(5)(ii). Purchase Rights granted under the Non-423 Component to U.S. taxpayers are intended to be
exempt from the application of Section 409A of the Code under the short-term deferral exception and any ambiguities will be construed and interpreted in accordance with such intent. Subject to Section 13(b) below, Purchase Rights granted
to U.S. taxpayers under the Non-423 Component will be subject to such terms and conditions that will permit such Purchase Rights to satisfy the requirements of the short-term deferral exception available under
Section 409A of the Code, including the requirement that the shares subject to a Purchase Right be delivered within the short-term deferral period. Subject to Section 13(b) below, in the case of a Participant who would otherwise be subject
to Section 409A of the Code, to the extent the Board determines that a Purchase Right or the exercise, payment, settlement, or deferral thereof is subject to Section 409A of the Code, the Purchase Right will be granted, exercised, paid,
settled, or deferred in a manner that will comply with Section 409A of the Code, including U.S. Department of Treasury regulations and other interpretive guidance issued thereunder, including, without limitation, any such regulations or other
guidance that may be issued after the adoption of the Plan. Notwithstanding the foregoing, the Company will have no liability to a Participant or any other party if the Purchase Right that is intended to be exempt from or compliant with
Section 409A of the Code is not so exempt or compliant or for any action taken by the Board with respect thereto. 

  
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 (b)    Although the Company may endeavor to (i) qualify a Purchase
Right for special tax treatment under the laws of the United States or jurisdictions outside of the United States, or (ii) avoid adverse tax treatment (e.g., under Section 409A of the Code), the Company makes no representation to
that effect and expressly disavows any covenant to maintain special or to avoid unfavorable tax treatment, notwithstanding anything to the contrary in this Plan, including Section 13(a) above. The Company will be unconstrained in its corporate
activities without regard to the potential negative tax impact on Participants under the Plan. 
 14.    Effective
Date of Plan. The Plan will become effective on the Effective Date. No Purchase Rights will be exercised unless and until the Plan has been approved by the stockholders of the Company, which approval must be within 12 months before or after the
date the Plan is adopted (or, if required under Section 12(a) above, amended) by the Board. 
  

	 	15.	 Miscellaneous Provisions. 

(a)    Proceeds from the sale of shares of Common Stock pursuant to Purchase Rights will constitute general funds of the
Company. 
 (b)    A Participant will not be deemed to be the holder of, or to have any of the rights of a holder with
respect to, shares of Common Stock subject to Purchase Rights unless and until the Participant’s shares of Common Stock acquired on exercise of Purchase Rights are recorded in the books of the Company (or its transfer agent). 

(c)    The Plan and Offering do not constitute an employment or service contract. Nothing in the Plan or in the Offering
will in any way alter the at-will nature of a Participant’s employment, if applicable, or be deemed to create in any way whatsoever any obligation on the part of any Participant to continue his or her
employment or service relationship with the Company, a Related Corporation, or an Affiliate, or on the part of the Company, a Related Corporation, or an Affiliate to continue the employment or service of a Participant. 

(d)    The provisions of the Plan will be governed by the laws of the State of Delaware without resort to that
state’s conflicts of laws rules. For purposes of litigating any dispute that may arise directly or indirectly from the Plan or any Offering, the parties hereby submit and consent to the exclusive jurisdiction of the State of California and
agree that any such litigation shall be conducted only in the courts of California or the federal courts of the United States located in California and no other courts. 

(e)    If any particular provision of the Plan is found to be invalid or otherwise unenforceable, such provision will not
affect the other provisions of the Plan, but the Plan will be construed in all respects as if such invalid provision were omitted. 

(f)    If any provision of the Plan does not comply with applicable law or regulations, such provision will be construed
in such a manner as to comply with applicable law or regulations. 
 16.    Definitions. As used in the Plan, the
following definitions will apply to the capitalized terms indicated below: 
 (a)    “423 Component”
means the part of the Plan, which excludes the Non-423 Component, pursuant to which Purchase Rights that satisfy the requirements for an Employee Stock Purchase Plan may be granted to Eligible Employees.

  
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 (b)    “Affiliate” means any entity, other than a
Related Corporation, in which the Company has an equity or other ownership interest or that is directly or indirectly controlled by, controls, or is under common control with the Company, in all cases, as determined by the Board, whether now or
hereafter existing. 
 (c)    “Board” means the Board of Directors of the Company. 

(d)    “Capitalization Adjustment” means, with respect to the Common Stock subject to the Plan or subject
to any Purchase Right after the date the Plan is adopted by the Board, a stock split, reverse stock split, stock dividend, combination, consolidation, recapitalization (including a recapitalization through a large nonrecurring cash dividend) or
reclassification of the Common Stock, subdivision of the Common Stock, a rights offering, a reorganization, merger, spin-off, split-up, repurchase, or exchange of Common
Stock or other securities of the Company or other significant corporate transaction, or other change affecting the Common Stock occurs. 

(e)    “Code” means the U.S. Internal Revenue Code of 1986, as amended, including any applicable
regulations and guidance thereunder.
 (f)    “Committee” means a committee of one or more
members of the Board to whom authority has been delegated by the Board in accordance with Section 2(c). 

(g)    “Common Stock” means the common stock of the Company. 

(h)    “Company” means Cortexyme, Inc., a Delaware corporation. 

(i)    “Contributions” means the payroll deductions or other payments specifically provided for in
the Offering that a Participant contributes to fund the exercise of a Purchase Right. A Participant may make additional payments into his or her account if specifically provided for in the Offering, and then only if the Participant has not already
contributed the maximum permitted amount of payroll deductions and other payments during the Offering. 

(j)    “Corporate Transaction” means the consummation, in a single transaction or in a series of related
transactions, of any one or more of the following events: 
 (i) a transfer of all or substantially all of the
Company’s assets; 
 (ii)    a merger, consolidation or other capital reorganization or business
combination transaction of the Company with or into another corporation, entity or person; or 
 (iii) the consummation of a
transaction, or series of related transactions, in which any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule
13d-3 of the Exchange Act), directly or indirectly, of more than 50% of the Company’s then outstanding capital stock. 

(k)     “Designated 423 Corporation” means any Related Corporation selected by the Board as
participating in the 423 Component. 

  
 -11- 

 (l)    “Designated Company” means any Designated Non-423 Corporation or Designated 423 Corporation, provided, however, that at any given time, a Related Corporation participating in the 423 Component will not be a Related Corporation participating in the Non-423 Component. 
 (m)    “Designated
Non-423 Corporation” means any Related Corporation or Affiliate selected by the Board as participating in the Non-423 Component. 

(n)    “Director” means a member of the Board. 

(o) “Effective Date” means the day immediately prior to the Registration Date. 

(p)    “Eligible Employee” means an Employee who meets the requirements set forth in the document(s)
governing the Offering for eligibility to participate in the Offering, provided that such Employee also meets the requirements for eligibility to participate set forth in the Plan. For purposes of the Plan, the employment relationship will be
treated as continuing intact while the Employee is on sick leave or other leave of absence approved by the Company or a Related Corporation or Affiliate that directly employs the Employee. Where the period of leave exceeds three (3) months and
the Employee’s right to reemployment is not guaranteed either by statute or by contract, the employment relationship will be deemed to have terminated three (3) months and one (1) day following the commencement of such leave. 

(q)    “Eligible Service Provider” means a natural person other than an Employee or Director who
(i) is designated by the Committee to be an “Eligible Service Provider,” (ii) provides bonafide services to the Company or a Related Corporation, (iii) is not a U.S. taxpayer and (iv) meets the requirements set forth in the
document(s) governing the Offering for eligibility to participate in the Offering, provided that such person also meets the requirements for eligibility to participate set forth in the Plan. 

(r)    “Employee” means any person, including an Officer or Director, who is treated as an employee in
the records of the Company or a Related Corporation or Affiliate. However, service solely as a Director, or payment of a fee for such services, will not cause a Director to be considered an “Employee” for purposes of the Plan. 

(s)    “Employee Stock Purchase Plan” means a plan that grants Purchase Rights intended to be options
issued under an “employee stock purchase plan,” as that term is defined in Section 423(b) of the Code. 

(t)    “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended and the rules and
regulations promulgated thereunder. 
 (u)    “Fair Market Value” means, as of any date, the value of
the Common Stock determined as follows: 
 (i)    If the Common Stock is listed on any established stock exchange or a
national market system, its Fair Market Value will be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system on the date of determination, as reported in such source as the Board
deems reliable; 

  
 -12- 

 (ii)    If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value will be the mean of the closing bid and asked prices for the Common Stock on the date of determination, as reported in such source as the Board deems reliable; 

(iii)    In the absence of an established market for the Common Stock, the Fair Market Value will be determined in good
faith by the Board in compliance with applicable laws and regulations and in a manner that complies with Sections 409A of the Code; or 

(iv)    Notwithstanding the foregoing, for any Offering that commences on the Registration Date, the Fair Market Value of
the shares of Common Stock on the Offering Date will be the price per share at which shares are first sold to the public in the Company’s initial public offering as specified in the final prospectus for that initial public offering. 

(v) “Fiscal Year” means the fiscal year of the Company. 

(w)     “New Purchase Date” means a new Purchase Date set by shortening any Offering then in progress.

 (x)    “Non-423 Component” means the part of the Plan, which
excludes the 423 Component, pursuant to which Purchase Rights that are not intended to satisfy the requirements for an Employee Stock Purchase Plan may be granted to Eligible Employees and Eligible Service Providers. 

(y)    “Offering” means the grant to Eligible Employees or Eligible Service Providers of Purchase Rights,
with the exercise of those Purchase Rights automatically occurring at the end of one or more Purchase Periods. The terms and conditions of an Offering will generally be set forth in the “Offering Document” approved by the Board for
that Offering. 
 (z)    “Offering Date” means a date selected by the Board for an Offering to
commence. 
 (aa)    “Officer” means a person who is an officer of the Company or a Related Corporation
or Affiliate within the meaning of Section 16 of the Exchange Act. 
 (bb)    “Participant” means
an Eligible Employee or Eligible Service Provider who holds an outstanding Purchase Right. 

(cc)    “Plan” means this Cortexyme, Inc. 2019 Employee Stock Purchase Plan, including both the 423
Component and the Non-423 Component, as amended from time to time. 

(dd)    “Purchase Date” means one or more dates during an Offering selected by the Board on which
Purchase Rights will be exercised and on which purchases of shares of Common Stock will be carried out in accordance with such Offering. 

(ee)    “Purchase Period” means a period of time specified within an Offering, generally beginning on the
Offering Date or on the first Trading Day following a Purchase Date, and ending on a Purchase Date. An Offering may consist of one or more Purchase Periods. 

  
 -13- 

 (ff)    “Purchase Right” means an option to purchase
shares of Common Stock granted pursuant to the Plan. 
 (gg) “Registration Date” means the effective date of the first
registration statement that is filed by the Company and declared effective pursuant to Section 12(g) of the Exchange Act, with respect to any class of the Company’s securities. 

(hh) “Related Corporation” means any “parent corporation” or “subsidiary corporation” of the Company
whether now or subsequently established, as those terms are defined in Sections 424(e) and (f), respectively, of the Code. 

(ii)    “Securities Act” means the U.S. Securities Act of 1933, as amended. 

(jj)    “Trading Day” means any day on which the exchange or market on which shares of Common Stock are
listed is open for trading. 
 o O o 

  
 -14-EXHIBIT 4.19

 

CONVERTIBLE NOTE AND WARRANT SUBSCRIPTION AGREEMENT

 

dated as of July 9, 2018

 

between

 

SECOO HOLDING LIMITED

 

and

 

GREAT WORLD LUX PTE. LTD

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
ARTICLE I   DEFINITION AND INTERPRETATION
    	
1
    
	
 
    	
 
    	
 
    
	
Section 1.01
    	
Definition, Interpretation   and Rules of Construction
    	
1
    
	
 
    	
 
    	
 
    
	
ARTICLE II   PURCHASE AND SALE; CLOSING
    	
7
    
	
 
    	
 
    	
 
    
	
Section 2.01
    	
Issuance, Sale and   Purchase of the Purchased Securities
    	
7
    
	
Section 2.02
    	
Closing
    	
7
    
	
 
    	
 
    	
 
    
	
ARTICLE III   CONDITIONS TO CLOSING
    	
8
    
	
 
    	
 
    	
 
    
	
Section 3.01
    	
Conditions to   Obligations of All Parties
    	
8
    
	
Section 3.02
    	
Conditions to   Obligations of Purchaser
    	
9
    
	
Section 3.03
    	
Conditions to   Obligations of the Company
    	
10
    
	
 
    	
 
    	
 
    
	
ARTICLE IV   REPRESENTATIONS AND WARRANTIES
    	
10
    
	
 
    	
 
    	
 
    
	
Section 4.01
    	
Representations and   Warranties of the Company
    	
10
    
	
Section 4.02
    	
Representations and   Warranties of the Purchaser
    	
19
    
	
 
    	
 
    	
 
    
	
ARTICLE V   COVENANTS
    	
21
    
	
 
    	
 
    	
 
    
	
Section 5.01
    	
Conduct of Business of   the Company
    	
21
    
	
Section 5.02
    	
FPI Status
    	
21
    
	
Section 5.03
    	
Exclusivity
    	
22
    
	
Section 5.04
    	
Further Assurances
    	
22
    
	
Section 5.05
    	
No Contract
    	
22
    
	
Section 5.06
    	
Reservation of Shares
    	
22
    
	
Section 5.07
    	
Director and Observer   Appointment
    	
22
    
	
Section 5.08
    	
No Integrated Offering
    	
23
    
	
Section 5.09
    	
Use of Proceeds
    	
23
    
	
Section 5.10
    	
US Tax Election
    	
23
    
	
 
    	
 
    	
 
    
	
ARTICLE VI   INDEMNIFICATION
    	
23
    
	
 
    	
 
    	
 
    
	
Section 6.01
    	
Indemnification
    	
23
    
	
Section 6.02
    	
Third Party Claims
    	
24
    
	
Section 6.03
    	
Other Claims
    	
25
    
	
Section 6.04
    	
Limitation on the   Company’s Liability
    	
25
    
	
 
    	
 
    	
 
    
	
ARTICLE VII   MISCELLANEOUS
    	
25
    
	
 
    	
 
    	
 
    
	
Section 7.01
    	
Survival of the   Representations and Warranties
    	
25
    
	
Section 7.02
    	
Governing Law;   Arbitration
    	
26
    
	
Section 7.03
    	
No Third Party   Beneficiaries
    	
26
    

 

 

	
Section 7.04
    	
Acknowledgement
    	
26
    
	
Section 7.05
    	
Amendment
    	
26
    
	
Section 7.06
    	
Binding Effect
    	
26
    
	
Section 7.07
    	
Assignment
    	
26
    
	
Section 7.08
    	
Notices
    	
27
    
	
Section 7.09
    	
Entire Agreement
    	
27
    
	
Section 7.10
    	
Severability
    	
27
    
	
Section 7.11
    	
Fees and Expenses
    	
28
    
	
Section 7.12
    	
Confidentiality
    	
28
    
	
Section 7.13
    	
Specific Performance
    	
29
    
	
Section 7.14
    	
Termination
    	
29
    
	
Section 7.15
    	
Headings
    	
30
    
	
Section 7.16
    	
Execution in   Counterparts
    	
30
    
	
Section 7.17
    	
Public Disclosure
    	
30
    
	
Section 7.18
    	
Waiver
    	
31
    
	
 
    	
 
    	
 
    
	
Exhibit B
    	
 
    	
34
    
	
 
    	
 
    	
 
    
	
Exhibit C
    	
 
    	
74
    

 

ii

 

CONVERTIBLE NOTE AND WARRANT SUBSCRIPTION AGREEMENT

 

This Convertible Note and Warrant Subscription Agreement (this “Agreement”) is made as of July 9, 2018, between:

 

1.                                      SECOO HOLDING LIMITED, an exempted company with limited liability organized and existing under the laws of the Cayman Islands (the “Company”); and

 

2.                                      GREAT WORLD LUX PTE. LTD, a limited liability company organized and existing under the laws of Singapore (“Purchaser”).

 

RECITALS

 

WHEREAS the Purchaser desires to subscribe for and purchase and the Company desires to issue and sell certain Convertible Note (as defined below) and certain Warrant (as defined below) pursuant to the terms and conditions set forth in this Agreement;

 

WHEREAS, in relation to this Agreement, the Company and the Purchaser will enter into an investor rights agreement (the “Investor Rights Agreement”), in substantially the same form attached hereto as Exhibit A to memorialize their mutual agreements and understandings relating to the transactions contemplated by this Agreement and other Transaction Agreements and certain rights granted to the Purchaser by the Company in relation thereto; and

 

NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements set forth herein, as well as other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each of the Parties hereto, intending to be legally bound, agrees as follows:

 

ARTICLE I
 DEFINITION AND INTERPRETATION

 

Section 1.01                             Definition, Interpretation and Rules of Construction

 

(a)                       As used in this Agreement, the following terms have the following meanings:

 

“ADSs” means the American depositary shares of the Company, two of which represents one (1) Class A Share of the Company.

 

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person; provided, that none of the Company, nor any of its Subsidiaries shall be considered an Affiliate of the Purchaser.  For purposes of this definition, “control” when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have correlative meanings. For the avoidance of doubt, Affiliates of the Purchaser shall include (i) investment funds managed and/or advised by L Catterton Asia Advisors or L Catterton  Singapore Pte. Ltd. or their successors or respective Affiliates or wholly-owned subsidiaries of these funds, (ii) employees and officers of, and other persons associated with, L Catterton Asia Advisors or L Catterton Singapore Pte. Ltd. and their respective Affiliates, and (iii) the investors in the funds managed and/or advised by L Catterton Asia Advisors or L Catterton Singapore Pte. Ltd and Affiliates of such investors.

 

1

 

“Applicable Law” means, with respect to any Person, any transnational, domestic or foreign, state or local law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement enacted, adopted, promulgated or applied by a Governmental Authority that is binding upon or applicable to such Person, as amended unless expressly specified otherwise.

 

“Business Cooperation Agreement” means the business cooperation agreement to be entered into between the Company and L Catterton Asia Advisors, in substantially the same form attached hereto as Exhibit D, at or prior to Closing.

 

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in the People’s Republic of China (the “PRC” or “China”, which for the purpose of this Agreement shall exclude Hong Kong SAR, Macau SAR and Taiwan), Hong Kong SAR, Singapore or New York are required or authorized by law or executive order to be closed or on which a tropical cyclone warning no. 8 or above or a “black” rainstorm warning signal is hoisted in Hong Kong at any time between 9:00 a.m. and 5:00 p.m. Hong Kong time.

 

“Class A Shares” means Class A ordinary shares, par value US$0.001 per share, in the share capital of the Company.

 

“Class B Shares” means the Class B ordinary shares, par value US$0.001 per share, in the share capital of the Company.

 

“Company SEC Documents” means all registration statements, proxy statements and other statements, reports, schedules, forms and other documents required to be filed or furnished by the Company with the SEC pursuant to the Exchange Act and the Securities Act and all exhibits included therein and financial statements, notes and schedules thereto and documents incorporated by reference therein, in each case, filed or furnished with the SEC prior to the date hereof.

 

“Condition” means any condition to any Party’s obligation to effect the Closing as set forth in ARTICLE III, and collectively, the “Conditions”.

 

“Director Indemnification Agreement” means the indemnification agreement to be entered into between the Company and the Purchaser Director, in substantially the same form attached hereto as Exhibit F, at or prior to Closing.

 

“Employee Benefit Plan” means any written plan, program, policy, contract or other arrangement providing for severance, termination pay, deferred compensation, performance awards, share or share-related awards, housing funds, insurance arrangements, fringe benefits, perquisites, superannuation funds retirement  benefits, pension schemes or other employee benefits, that is maintained, contributed to or required to be contributed to by the Company or any of its Subsidiaries for the benefit of any current or former employee, director, officer or independent contractor of the Company or any of its Subsidiaries, or with respect to which the Company or any of its Subsidiaries has or would reasonably expect to have any liability or obligation, other than, in each case, one that is sponsored and maintained by a Governmental Authority;

 

2

 

“Environment” means land (including, without limitation, surface land, sub-surface strata and natural and man-made structures), water (including, without limitation, coastal and inland waters, surface waters, ground waters and water in drains and sewers), and air.

 

“Environmental Law” means all Applicable Laws in relation to (i) pollution or contamination of the Environment; (ii) the production, storage, use, transport, disposal, release or discharge of hazardous substances; (iii) the exposure of any person or other living organism to hazardous substances; or (iv) the creation of any noise, vibration or other material adverse impact on the Environment.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any successor statute, and the rules and regulations promulgated thereunder.

 

“Fundamental Warranties” means any representations and warranties of the Company contained in Section 4.01(a) to Section 4.01(f) and Section 4.01(i).

 

“GAAP” means generally accepted accounting principles in the United States.

 

“Material Adverse Effect” with respect to a party shall mean any event, fact, circumstance or occurrence that, individually or in the aggregate with any other events, facts, circumstances or occurrences, results in or would reasonably be expected to result in a material adverse change in or a material adverse effect on (i) the financial condition, assets, liabilities, results of operations, business or operations of such party or its Subsidiaries taken as a whole, or (ii) the ability of such party to consummate the transactions contemplated by the Transaction Agreements and to timely perform its obligations hereunder and thereunder, except to the extent that any such material adverse effect results from (a) changes in generally accepted accounting principles that are generally applicable to comparable companies (to the extent not materially disproportionately affecting such party or its Subsidiaries), (b) changes in general economic and market conditions and capital market conditions or changes affecting any of the industries in which such party or its Subsidiaries operate generally (in each case to the extent not materially disproportionately affecting such party or its Subsidiaries), (c) the announcement or disclosure of this Agreement or any other Transaction Agreement or the consummation of the transactions hereunder or thereunder, or any act or omission required or specifically permitted by this Agreement and/or any other Transaction Agreement; (d) any pandemic, earthquake, typhoon, tornado or other natural disaster or similar force majeure event, (e) in the case of the Company, any failure to meet any internal or public projections, forecasts, or guidance, or (f) in the case of the Company, any change in the Company’s stock price or trading volume, in and of itself; provided, however, that the underlying causes giving rise to or contributing to any such change or  failure under sub-clause (e) or (f) shall not be excluded in determining whether a Material Adverse Effect has occurred except to the extent such underlying causes are otherwise excluded pursuant to any of sub-clauses (a) through (d).

 

3

 

“NASDAQ” means the Nasdaq Global Market.

 

“Ordinary Shares” means collectively the Class A Shares and the Class B Shares.

 

“Person” means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization.

 

“Pre-IPO Investors” means, collectively, (i) IDG Technology Venture Investment IV, L.P., IDG-Accel China Growth Fund III L.P. and IDG-Accel China III Investors L.P.; (ii) Ventech ChinaII SICAR; (iii) Blue Lotus Investment SA; (iv) Bertelsmann Asia Investments AG; (v) Vangoo China Growth Fund II L.P.; (vi) CMC Galaxy Holdings Ltd; (vii) Pingan eCommerce Limited Partnership and Rhythm Way Limited; and (viii) WJ Investment Group Limited.

 

“Pre-IPO Shareholders Agreement” means the amended and restated shareholders agreement dated July 8, 2015 entered into between, amongst others, the Company and the Pre-IPO Investors.

 

“Sarbanes-Oxley Act” means the Sarbanes-Oxley Act of 2002, as amended.

 

“SEC” means the Securities and Exchange Commission of the United States of America or any other federal agency at the time administering the Securities Act.

 

“Securities Act” means the Securities Act of 1933, as amended, and all of the rules and regulations promulgated thereunder.

 

“Subsidiary” of a party means any organization or entity, whether incorporated or unincorporated, which is controlled by such party and, for the avoidance of doubt, the Subsidiaries of a party shall include any variable interest entity over which such party or any of its Subsidiaries effects control pursuant to contractual arrangements and which is consolidated with such party in accordance with generally accepted accounting principles applicable to such party and any Subsidiaries of such variable interest entity. Significant Subsidiaries is as defined in Article 1, Rule 1-02 of Regulation S-X under the U.S. Securities Exchange Act of 1934, as amended.

 

“Transaction Agreements” include this Agreement, the Investor Rights Agreement, the Convertible Note Instrument, the Warrant Instrument, the Business Cooperation Agreement, the Director Indemnification Agreement, and each of the other agreements and documents entered into or delivered by the parties hereto or their respective Affiliates in connection with the transactions contemplated by this Agreement.

 

4

 

(b)                       Each of the following terms is defined in the Section set forth opposite such term:

 

	
Term
    	
 
    	
Section
    
	
“Agreement”
    	
 
    	
Preamble
    
	
“Bankruptcy and Equity Exception”
    	
 
    	
4.01(b)
    
	
“Claim Notice”
    	
 
    	
6.02(a)
    
	
“Closing”
    	
 
    	
2.02(a)
    
	
“Closing Date”
    	
 
    	
2.02(a)
    
	
“Company”
    	
 
    	
Preamble
    
	
“Confidential Information”
    	
 
    	
7.11(a)
    
	
“Control Contracts”
    	
 
    	
4.01(aa)
    
	
“Convertible Note”
    	
 
    	
2.01
    
	
“Convertible Note Instrument”
    	
 
    	
2.01
    
	
“Conversion Shares”
    	
 
    	
2.01
    
	
“Encumbrances”
    	
 
    	
4.01(d)
    
	
“ESOP”
    	
 
    	
4.01(i)
    
	
“Governmental Authority”
    	
 
    	
3.01(a)
    
	
“Indemnifying Party”
    	
 
    	
6.01
    
	
“Indemnified Party”
    	
 
    	
6.01
    
	
“Indemnity Notice”
    	
 
    	
6.03
    
	
“Intellectual Property”
    	
 
    	
4.01(u)
    
	
“Investor Rights Agreement”
    	
 
    	
Recitals
    
	
“Losses”
    	
 
    	
6.01
    
	
“Material Contracts”
    	
 
    	
4.01(r)
    
	
“Note Purchase Price”
    	
 
    	
2.01
    
	
“Permits”
    	
 
    	
4.01(g)
    
	
“Purchase Price”
    	
 
    	
2.01
    
	
“Purchased Securities”
    	
 
    	
2.01
    
	
“Purchaser Director”
    	
 
    	
5.07
    
	
“Purchaser”
    	
 
    	
Preamble
    
	
“Returns”
    	
 
    	
4.01(w)
    
	
“Tax”
    	
 
    	
4.01(r)
    
	
“Third Party Claim”
    	
 
    	
6.02(a)
    
	
“Warrant”
    	
 
    	
2.01
    
	
“Warrant Instrument”
    	
 
    	
2.01
    
	
“Warrant Purchase Price”
    	
 
    	
2.01
    
	
“Warrant Shares”
    	
 
    	
2.01
    

 

(c)                        In this Agreement, except to the extent otherwise provided or that the context otherwise requires:

 

(i)                           The words “Party” and “Parties” shall be construed to mean a party or the parties to this Agreement, and any reference to a party to this Agreement or any other agreement or document contemplated hereby shall include such party’s successors and permitted assigns.

 

(ii)                        When a reference is made in this Agreement to an Article, Section, Exhibit, Schedule or clause, such reference is to an Article, Section, Exhibit, Schedule or clause of this Agreement.

 

5

 

(iii)                     The headings for this Agreement are for reference purposes only and do not affect in any way the meaning or interpretation of this Agreement.

 

(iv)                    Whenever the words “include,” “includes” or “including” are used in this Agreement, they are deemed to be followed by the words “without limitation.”

 

(v)                       The words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement.

 

(vi)                    All terms defined in this Agreement have the defined meanings when used in any certificate or other document made or delivered pursuant hereto, unless otherwise defined therein.

 

(vii)                 The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms.

 

(viii)              The use of “or” is not intended to be exclusive unless expressly indicated otherwise.

 

(ix)                    The term “$” means United States Dollars.

 

(x)                       The word “will” shall be construed to have the same meaning and effect as the word “shall.”

 

(xi)                    References to “law,” “laws” or to a particular statute or law shall be deemed also to include any and all Applicable Law.

 

(xii)                 A reference to any legislation or to any provision of any legislation shall include any modification, amendment, re-enactment thereof, any legislative provision substituted therefor and all rules, regulations and statutory instruments issued or related to such legislation.

 

(xiii)              References herein to any gender include the other gender.

 

(xiv)             The Parties hereto have each participated in the negotiation and drafting of this Agreement and if any ambiguity or question of interpretation should arise, this Agreement shall be construed as if drafted jointly by the Parties hereto and no presumption or burden of proof shall arise favoring or burdening any Party by virtue of the authorship of any of the provisions in this Agreement or any interim drafts thereof.

 

6

 

ARTICLE II
 PURCHASE AND SALE; CLOSING

 

Section 2.01                             Issuance, Sale and Purchase of the Purchased Securities.

 

Upon the terms and subject to the conditions of this Agreement, at Closing (as defined below), the Purchaser hereby agrees to subscribe for and purchase, and the Company hereby agrees to issue and sell to the Purchaser (i) a convertible note with the principal amount of US$175,000,000 (the “Convertible Note”), substantially in the form attached hereto as Exhibit B (the “Convertible Note Instrument”), convertible into certain number of Class A Shares (the “Conversion Shares”) on, and subject to, the terms and conditions set forth in the Convertible Note Instrument, for a purchase price of US$175,000,000 (the “Note Purchase Price”); and (ii) a warrant (the “Warrant”, together with the Convertible Note, the “Purchased Securities”), substantially in the form attached hereto as Exhibit C (the “Warrant Instrument”), which entitles the Purchaser to purchase from the Company 500,000 ADSs (the “Warrant Shares”) on, and subject to, the terms and conditions set forth in the Warrant Instrument, for a purchase price of US$1.00 (the “Warrant Purchase Price”, together with the Note Purchase Price, the “Purchase Price”).

 

Section 2.02                             Closing.

 

(a)                       Closing. Subject to satisfaction or, to the extent permissible, waiver by the Party or Parties entitled to the benefit of the relevant Conditions, of all the Conditions (other than Conditions that by their nature are to be satisfied at Closing, but subject to the satisfaction or, to the extent permissible, waiver of those Conditions at Closing), the closing of the sale and purchase of the Purchased Securities pursuant to this Section 2.02(a) (the “Closing”) shall take place remotely by electronic means on the earlier of (i) the 30th day after the date of this Agreement or (ii) any other earlier time before the 30th day after the date of this Agreement as notified by the Investor in writing (the “Closing Date”), provided that such notice shall be given at least 10 days prior to the Closing Date. The Purchaser shall not be obliged to complete the consummation of the sale and purchase of the Convertible Note unless the sale and purchase of the Warrant is completed simultaneously.

 

(b)                       Payment and Delivery.  At Closing,

 

(i)             the Purchaser shall deliver an irrevocable MT103 in respect of the electronic funds transfer in immediately available funds of the Purchase Price in U.S. dollars to such bank account designated in writing by the Company to the Purchaser at least ten (10) Business Days prior to Closing; and

 

(ii)          the Company shall deliver

 

(1)         the duly executed Convertible Note Instrument dated as of the Closing Date and issued in the name of the Purchaser;

 

(2)         the duly executed Warrant Instrument dated as of the Closing Date and issued in the name of the Purchaser;

 

(3)         a certified true copy of the register of directors of the Company showing the director and the observer nominated by the Purchaser at the Closing Date as a director and an observer respectively of the board of directors of the Company pursuant to Section 5.07; and

 

7

 

(4)         copies of all the written consents and waivers referred to in Section 3.02(c).

 

(c)                        Restrictive Legend. Each certificate representing any Ordinary Shares received by the Purchaser after conversion or exercise of the Purchased Securities on, and subject to, the terms and conditions set forth in the Convertible Note Instrument or Warrant Instrument (as the case may be) shall be endorsed with the following legend:

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (AS AMENDED, THE “SECURITIES ACT”) OR UNDER THE SECURITIES LAWS OF ANY OTHER JURISDICTIONS.  THESE SECURITIES MAY NOT BE TRANSFERRED, SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED: (A) IN THE ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (2) AN EXEMPTION OR QUALIFICATION UNDER APPLICABLE SECURITIES LAWS, AND (B) UNLESS IN COMPLIANCE WITH THE CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT AMONG THE COMPANY AND GREAT WORLD LUX PTE. LTD, DATED          , 2018 (THE “PURCHASE AGREEMENT”) AND THE INVESTOR RIGHTS AGREEMENT AMONG THE COMPANY AND GREAT WORLD LUX PTE. LTD AND CERTAIN OTHER PARTIES THEREIN, DATED          , 2018 (THE “INVESTOR RIGHTS AGREEMENT”). ANY ATTEMPT TO TRANSFER, SELL, PLEDGE OR HYPOTHECATE THIS SECURITY IN VIOLATION OF THESE RESTRICTIONS OR ANY OTHER RESTRICTIONS SET FORTH IN THE PURCHASE AGREEMENT AND THE INVESTOR RIGHTS AGREEMENT SHALL BE VOID.

 

ARTICLE III
 CONDITIONS TO CLOSING

 

Section 3.01                             Conditions to Obligations of All Parties.

 

(a)                       No United States or non-United States federal, national, supranational, state, provincial, local or similar government, governmental, regulatory or administrative authority, branch, agency or commission or any court, tribunal, or arbitral or judicial body (including any grand jury) (each, a “Governmental Authority”) shall have enacted, issued, promulgated, enforced or entered any law, rule, regulation, judgment, injunction, order or decree (in each case, whether temporary, preliminary or permanent) that is in effect and restrains, enjoins, prevents, prohibits or otherwise makes illegal the consummation of the transactions contemplated by the Transaction Agreements.

 

(b)                       No action, suit, proceeding or investigation shall have been instituted or threatened by a Governmental Authority or any third party that seeks to restrain, enjoin, prevent, prohibit or otherwise make illegal the consummation of the transactions contemplated by the Transaction Agreements.

 

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Section 3.02                             Conditions to Obligations of Purchaser. The obligations of the Purchaser to subscribe for, purchase and pay for the Purchased Securities as contemplated by this Agreement are subject to the satisfaction, on or before the Closing Date, of the following conditions, any of which may be waived in writing by the Purchaser in its sole discretion:

 

(a)                       The Fundamental Warranties shall have been true and correct in all respects on the date of this Agreement and true and accurate on and as of the Closing Date as though such representations and warranties were made on and as of the Closing Date (except for representations and warranties that expressly speak as of a specific date, in which case on and as of such specified date). Other representations and warranties of the Company contained in Section 4.01 of this Agreement shall have been true and correct on the date of this Agreement, and true and correct in all material respects (or, if qualified by materiality or Material Adverse Effect, true and correct in all respects) on and as of the Closing Date as though such representations and warranties were made on and as of the Closing Date (except for representations and warranties that expressly speak as of a specified date, in which case on and as of such specified date).

 

(b)                       The Company shall have performed and complied with all, and not be in breach or default in under any agreements, covenants, conditions and obligations contained in this Agreement that are required to be performed or complied with on or before the Closing Date in all material aspects.

 

(c)                        The Company shall have obtained (i) the written consent of the Pre-IPO Investors, who in aggregate hold no less than a majority of the outstanding Registrable Securities (as defined in the Pre-IPO Shareholders Agreement) as of the Closing Date, in accordance with clause 2.10 of the Pre-IPO Shareholders Agreement with respect to the registration rights of any kind granted by the Company to the Purchaser under the Transaction Agreements and (ii) the written consent of SPD Bank with respect to the transactions contemplated by the Transaction Agreements as required under the SPD Financing Documents, in each case in form and substance reasonably satisfactory to the Purchaser.

 

(d)                       There shall have been no Material Adverse Effect with respect to the Company.

 

(e)                        All corporate and other actions required to be taken by the Company in connection with the issuance and sale of the Purchased Securities and the Company’s execution, delivery and performance of this Agreement and the other Transaction Agreements and the transactions contemplated hereby and thereby shall have been completed.

 

(f)                         The board of directors of the Company shall have approved the appointment of a director and an observer nominated by the Purchaser pursuant to Section 5.07 to the board of directors of the Company, which shall be effective immediately upon Closing.

 

(g)                        The Purchaser shall have received an opinion, dated the Closing Date, of Maples and Calder (Hong Kong) LLP, Cayman counsel to the Company, substantially in the form as set forth in Exhibit E.

 

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(h)                       No stop order or suspension of trading shall have been imposed by NASDAQ, the SEC or any other Governmental Authority with respect to the public trading of the ADSs.

 

(i)                           The Company shall have duly executed and delivered or shall have caused to be duly executed and delivered each Transaction Agreement to which it is a party to the Purchaser at or prior to Closing.

 

Section 3.03                             Conditions to Obligations of the Company.  The obligation of the Company to issue and sell the Purchased Securities to the Purchaser as contemplated by this Agreement are subject to the satisfaction, on or before the Closing Date, of each of the following conditions, any of which may be waived in writing by the Company in its sole discretion:

 

(a)                       The representations and warranties of the Purchaser contained in Section 4.02 of this Agreement shall have been true and correct in all material respects (or, if qualified by materiality or Material Adverse Effect, true and correct in all respects) on the date of this Agreement and on and as of the Closing Date as though such representations and warranties were made on and as of the Closing Date; provided that each representation and warranty of the Purchaser contained in Sections 4.02(a) to 4.02(c) of this Agreement shall have been true and correct in all respects on the date of this Agreement and on and as of the Closing Date as though such representations and warranties were made on and as of the Closing Date.

 

(b)                       The Purchaser shall have performed and complied with all, and not be in breach or default under any, agreements, covenants, conditions and obligations contained in this Agreement that are required to be performed or complied with on or before the Closing Date.

 

(c)                        The Purchaser shall have duly executed and delivered each Transaction Agreement to which it is a party to the Company at or prior to Closing.

 

ARTICLE IV
 REPRESENTATIONS AND WARRANTIES

 

Section 4.01                             Representations and Warranties of the Company.  The Company hereby represents and warrants to the Purchaser, as of the date hereof and as of the Closing Date that, except as set forth in the Company SEC Documents:

 

(a)                       Due Formation.  The Company is an exempted company, duly incorporated, validly existing and in good standing under the laws of the Cayman Islands. Each of the Company and the Company’s Subsidiaries is duly formed, validly existing and in good standing in the jurisdiction of its organization.  Each of the Company and the Subsidiaries has all requisite power and authority to carry on its business as it is currently being conducted.

 

(b)                       Authority; Valid Agreement. The Company has all requisite legal power and authority to execute, deliver and perform its obligations under the Transaction Agreements to which it is a party and each other agreement, certificate, document and instrument to be executed by the Company pursuant to this Agreement and each other Transaction Agreement.  The execution, delivery and performance by the Company of this Agreement and each other Transaction Agreement to which it is a party and the performance by the Company of its obligations hereunder and thereunder have been duly authorized by all necessary corporate action on the part of the Company.  This Agreement has been, and each other Transaction Agreements to which it is a party will be duly executed and delivered by the Company and, assuming due authorization, execution and delivery by the Purchaser, constitutes (or, when executed and delivered in accordance herewith will constitute) a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as enforcement may be limited by general principles of equity, whether applied in a court of law or a court of equity, and by applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar law affecting creditors’ rights and remedies generally (the “Bankruptcy and Equity Exception”).  Without limiting the generality of the foregoing, as of Closing, no approval by the shareholders of the Company is required in connection with this Agreement or other Transaction Agreements, the performance by the Company of its obligations hereunder or thereunder, or the consummation by the Company of the transactions contemplated hereby or thereby, except for those that have been obtained, waived or exempted at or prior to Closing.

 

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(c)                        Convertible Note.  The Convertible Note, when issued and delivered by the Company, will constitute direct, unconditional, unsecured and unsubordinated obligations of the Company and will at all times rank pari passu with all other present and future unconditional and unsubordinated obligations of the Company (other than those preferred by Applicable Law that are mandatory and of general application).

 

(d)                       Conversion Shares and Warrant Shares.  The Conversion Shares and the Warrant Shares have been duly and validly authorized for issuance by the Company and, when issued and delivered by the Company to the Purchaser in accordance with the terms of the Convertible Note Instrument and Warrant Instrument respectively, will be (i) duly and validly issued, fully paid and non-assessable, and rank pari passu with, and carry the same rights in all aspects as, the other Class A Shares then in issue, (ii) entitled to all dividends and other distributions declared, paid or made thereon, and (iii) free and clear of any pledge, mortgage, security interest, encumbrance, lien, charge, assessment, right of first refusal, right of pre-emption, third party right or interest, claim or restriction of any kind or nature, except for restrictions arising under the Securities Act or as disclosed in the Company SEC Documents or created by virtue of the transactions under this Agreement (collectively, the “Encumbrances”).  Upon entry of the Purchaser into the register of members of the Company as the legal owner of the relevant Conversion Shares and/or Warrant Shares, the Company will transfer to the Purchaser good and valid title to such relevant Conversion Shares and/or Warrant Shares respectively, in each case free and clear of any Encumbrances.

 

(e)                        Non-contravention.  None of the execution and the delivery of this Agreement and other Transaction Agreements, nor the consummation of the transactions contemplated hereby or thereby, will (i) violate any provision of the organizational documents of the Company, (ii) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental entity or court to which the Company is subject, or (iii) conflict with, result in a breach of, constitute a default under, result in the acceleration of or creation of any Encumbrances under, or create in any party the right to accelerate, terminate, modify, or cancel, any agreement, contract, lease, license, instrument, or other arrangement to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound or to which any of the Company’s or any of its Subsidiaries’ assets are subject, except, in the case of (ii) and (iii) above, for such conflicts, breach, defaults, rights or violations, which would not reasonably be expected to result in a Material Adverse Effect.  There is no action, suit or proceeding, pending or, to the knowledge of the Company, threatened against the Company that questions the validity of the Transaction Agreements or the right of the Company to enter into this Agreement or to consummate the transactions contemplated hereby or thereby.

 

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(f)                         Consents and Approvals.  None of the execution and delivery by the Company of this Agreement or any Transaction Agreement, nor the consummation by the Company of any of the transactions contemplated hereby or thereby, nor the performance by the Company of this Agreement or other Transaction Agreements in accordance with their respective terms requires the consent, approval, order or authorization of, or registration with, or the giving notice to, any governmental or public body or authority or any third party, except such as have been or will have been obtained, made or given on or prior to the Closing Date and except for any filing or notification required to made with the SEC or NASDAQ regarding the issuance of the Purchased Securities, the Conversion Shares or the Warrant Shares.

 

(g)                        Compliance with Laws.  The business of the Company and its Subsidiaries is not being conducted, and has not been conducted at any time during the three years prior to the date hereof, in violation of any applicable law (including, without limitation, the U.S. Foreign Corrupt Practices Act, the UK Bribery Act 2010 and the PRC anti-bribery laws, in each case as supplemented, amended, re-enacted or replaced from time to time) or government order applicable to the Company in any material respect.  Except as disclosed in the Company SEC Documents, the Company and each of its Subsidiaries have all permits, licenses, authorizations, consents, orders and approvals in material respects (collectively, “Permits”) that are required in order to carry on their business as presently conducted.  Except as disclosed in the Company SEC Documents, all such Permits are in full force and effect and, to the knowledge of the Company, no suspension or cancellation of any of them is threatened.  The Company has complied with the applicable listing and corporate governance rules and regulations of the NASDAQ in all material respects.  The Company and its Subsidiaries have taken no action designed to, or reasonably likely to have the effect of, delisting the ADSs from the NASDAQ.  There are no proceedings pending or, to the Company’s knowledge, threatened against the Company relating to the continued listing of the ADSs on NASDAQ and the Company has not received any notification that the SEC or the NASDAQ is contemplating suspending or terminating such listing (or the applicable registration under the Exchange Act related thereto).

 

(h)                       Information.  All information which has been provided by or on behalf of the Company or its authorized representatives to the Purchaser, its advisers or agents in the course of the due diligence conducted by the Purchaser and the negotiation leading to this Agreement and the other Transaction Agreements is true, complete and accurate.

 

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(i)                           Capitalization.

 

(i)             The authorized capital stock of the Company consists of 150,000,000 Ordinary Shares, of which 18,708,629 Class A Shares (including 1,307,672 Class A Shares that have been issued to the Company’s depositary under the 2017 Share Incentive Plan of the Company as disclosed in the Company SEC Documents (the “ESOP”)) and 6,571,429 Class B Shares are issued and outstanding as of the date hereof. As of the date of this Agreement, 213,259 Class A Shares are reserved and available for issuance pursuant to the ESOP. Except as set forth in the ESOP, the Company has no outstanding bonds, debentures, notes or other obligations, the holders of which have the right to vote (or which are convertible into or exercisable for securities having the right to vote) with the shareholders of the Company on any matter. All issued and outstanding Ordinary Shares have been duly authorized and validly issued and are fully paid and non-assessable, are free of preemptive rights, were issued in compliance with applicable U.S. and other applicable securities laws and were not issued in violation of any preemptive right, resale right, right of first refusal, or similar right and the ADSs have been duly listed and admitted and authorized for trading on the NASDAQ.

 

(ii)          Except as set forth above in this Section 4.01(i), there are no outstanding (A) shares of capital stock or voting securities of the Company, (B) securities of the Company convertible into or exchangeable for shares of capital stock or voting securities of the Company or (C) preemptive or other outstanding rights, options, warrants, conversion rights, “phantom” stock rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements, calls, commitments or rights of any kind that obligate the Company to issue or sell any shares of capital stock or other securities of the Company or any securities or obligations convertible or exchangeable into or exercisable for, or giving any person a right to subscribe for or acquire, any securities of the Company, and no securities or obligations evidencing such rights are authorized, issued or outstanding.

 

(iii)       Except as disclosed in the Company SEC Documents, to the knowledge of the Company, there are no registration rights, rights of first offer, rights of first refusal, tag-along rights with respect to the securities of the Company or any Subsidiary of the Company that have been granted to any Person.

 

(iv)      All outstanding shares of capital stock or other securities or ownership interests of the Subsidiaries are duly authorized, validly issued, fully paid and non-assessable and all such shares or other securities or ownership interests in any Subsidiary (except for any Subsidiary which is a variable interest entity over which the Company or any of its Subsidiaries effects control pursuant to the Control Contracts) are owned, directly or indirectly, by the Company free and clear of any Encumbrance.

 

(j)                          SEC Matters.  The Company has filed or furnished, as applicable, on a timely basis, all registration statements, proxy statements and other documents required to be filed or furnished by it with the SEC, including the Company SEC Documents.  None of the Subsidiaries is required to file periodic reports with the SEC pursuant to the Exchange Act.  As of their respective effective dates (in the case of the Company SEC Documents that are registration statements filed pursuant to the requirements of the Securities Act) and as of their respective SEC filing dates (in the case of all other Company SEC Documents), or in each case, if amended prior to the date hereof, as of the date of the last such amendment: (A) each of the Company SEC Documents complied in all material respects with the applicable requirements of the Securities Act or the Exchange Act and the Sarbanes-Oxley Act of 2002, as amended, and any rules and regulations promulgated thereunder applicable to the Company SEC Documents (as the case may be) and (B) none of the Company SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

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(k)                       Financial Statements.

 

(i)             The financial statements (including any related notes) contained in the Company SEC Documents: (A) complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, (B) were prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby (except (a) as may be otherwise specifically provided in such financial statements or the notes thereto, or (b) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed to summary statements) and (C) fairly present in all material respects the consolidated financial position of the Company and the Subsidiaries as of the respective dates thereof and the consolidated results of operations and cash flows of the Company and its Subsidiaries for the periods covered thereby (other than as may have corrected or clarified in a subsequent Company SEC Document), in each case except as disclosed therein and as permitted under the Exchange Act.

 

(ii)          Neither the Company nor any of its Subsidiaries is a party to, nor has any commitment to become a party to, any joint venture, off-balance sheet partnership or any similar contract, agreement, arrangement or undertaking (including any contract, agreement, arrangement or undertaking relating to any transaction or relationship between or among one or more of the Company and/or any of its Subsidiaries, on the one hand, and any unconsolidated Affiliate, including any structured finance, special purpose or limited purpose entity or Person, on the other hand), or any “off-balance sheet arrangements” (as defined in Item 303(a) of Regulation S-K promulgated by the SEC), where the result, purpose or intended effect of such contract, agreement, arrangement or undertaking is to avoid disclosure of any material transaction involving, or material liabilities of, the Company or any of the Subsidiaries in the Company’s or such Subsidiary’s published financial statements or other Company SEC Documents.

 

(l)                           Internal Control and Procedures. The Company has established and maintains a system of internal control over financial reporting (as defined in Rule 13a-15 or 15d-15, as applicable, under the Exchange Act) sufficient to provide reasonable assurance regarding the reliability of financial reporting, including policies and procedures that (A) mandate the maintenance of records that in reasonable detail accurately and fairly reflect the material transactions and dispositions of the assets of the Company, (B) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with appropriate authorizations of management and the board of directors of the Company and (C) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the assets of the Company.  Save as disclosed in the Company SEC Documents, there are no material weaknesses or significant deficiencies in the Company’s internal controls.  The Company’s auditors and the audit committee of the board of directors of the Company have not been advised of any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.  Since December 31, 2014, there has been no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting, except for the implementation of certain measures to address the material weakness in the Company’s internal control over financial reporting that has been disclosed in the Company SEC Documents.

 

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(m)                   No Undisclosed Liabilities.  There are no liabilities of the Company or any Subsidiary of any kind, whether accrued, contingent, absolute, determined, determinable or otherwise, and there is no existing condition, situation or set of circumstances which could reasonably be expected to result in such a liability, other than: (i) liabilities reflected on, reserved against, or disclosed in the Company’s unaudited consolidated balance sheet as of March 31, 2018, (ii) liabilities incurred since March 31, 2018 in the ordinary course of business consistent with past practices, (iii) any other undisclosed liabilities that are not material to the Company and its Subsidiaries on a consolidated basis, and (iv) any liabilities incurred as a result of the Company’s performing the transactions contemplated by any Transaction Agreement. There are no unconsolidated Subsidiaries of the Company or any off-balance sheet arrangements of any type (including any off-balance sheet arrangement required to be disclosed pursuant to Item 303(a)(4) of Regulation S-K promulgated under the Securities Act) that have not been so described in the Company SEC Documents nor any obligations to enter into any such arrangements.

 

(n)                       Investment Company.  The Company is not and, after giving effect to the offering and sale of the Purchased Securities, the consummation of the offering and the application of the proceeds hereof, will not be an “investment company,” as such term is defined in the U.S. Investment Company Act of 1940, as amended.

 

(o)                       No Registration.  Assuming the accuracy of the representations and warranties set forth in Section 4.02 of this Agreement, it is not necessary in connection with the issuance and sale of the Purchased Securities (and, when issued, the Conversion Shares and the Warrant Shares) to register the Purchased Securities (and, when issued, the Conversion Shares and the Warrant Shares) under the Securities Act or to qualify or register them under applicable U.S. state securities laws.  No directed selling efforts (as defined in Rule 902 of Regulation S under the Securities Act) have been made by any of the Company, any of its Affiliates or any person acting on its behalf with respect to any Purchased Securities; and none of such Persons has taken any actions that would result in the sale of the Purchased Securities to the Purchaser under this Agreement requiring registration under the Securities Act; and the Company is a “foreign issuer” (as defined in Regulation S).

 

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(p)                       Brokers.  The Company has not dealt with any broker, finder, commission agent, placement agent or arranger in connection with the sale of the Purchased Securities, and the Company is not under any obligation to pay any broker’s fee or commission in connection with the sale of the Purchased Securities.

 

(q)                       Absence of Changes.  Since March 31, 2018, the Company and its Subsidiaries have conducted their business in the ordinary course of business consistent with past practice and there has not been

 

(i)             any declaration, setting aside or payment of any dividend or other distribution with respect to any securities of the Company or any of its Subsidiaries (except for dividends or other distributions by any Subsidiary to the Company or to any of the Company’s wholly owned Subsidiaries);

 

(ii)          any issuances or sales of shares of capital stock or other securities or obligations convertible or exchangeable into or exercisable for, or giving any person a right to subscribe for or acquire, any securities of the Company or any of its Subsidiaries or any redemption, share splits, reclassifications, share dividends, share combinations or other recapitalizations of any such securities other than pursuant to any Employee Benefit Plan effective as at the date of this Agreement;

 

(iii)       any amendment to the constitutional documents of the Company;

 

(iv)      any redemption or repurchase of any equity securities of the Company; or

 

(v)         any entry into any contract, agreement, instrument or other document in respect of any of the foregoing.

 

(r)                          Contracts.  The Company has filed as exhibits to the Company SEC Documents all contracts, agreements and instruments (including all amendments thereto) to which the Company or any of its Subsidiaries is a party or by which it is bound and which is material to the business of the Company and its Subsidiaries, taken as a whole, and are required to be filed as an exhibit to the Company SEC Documents pursuant to Item 601(b)(4) or Item 601(b)(10) of Regulation S-K promulgated by the SEC(the “Material Contracts”).  Each Material Contract is in full force and effect and, to the knowledge of the Company, enforceable against the counterparties of the Company or the Subsidiaries party thereto, except for the contracts and agreements that have already expired pursuant to the terms therein (which for the avoidance of doubt excludes those contracts or agreements that had been terminated by the other party thereto for cause).  The Company and its Subsidiaries and, to the knowledge of the Company, each other party thereto, are not in default under, or in breach or violation of, any Material Contract, in all material respects. To the Company’s knowledge, no event, fact or circumstance has occurred that will have or is reasonably expected to have a material adverse impact on the renewal or extension of any Material Contract.

 

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(s)                         Litigation.  Except as disclosed in the Company SEC Documents and to the knowledge of the Company, any officer and director of the Company or any of its Subsidiaries in their capacities as such, there are no pending or threatened material actions, claims, demands, investigations, examinations, indictments, litigations, suits or other criminal, civil or administrative or investigative proceedings before or by any Governmental Authority or by any other person against the Company or any of its Subsidiaries or any proceedings that seek to restrain or enjoin the consummation of the transactions under the Transaction Agreements.

 

(t)                          Ownership of Assets.  The Company and its Subsidiaries have good and marketable title to, or in the case of leased property and assets, have valid leasehold interests in, all property and assets (whether real, personal, tangible or intangible) reflected on the Company’s consolidated unaudited balance sheet as of March 31, 2018 or acquired thereafter, except for properties and assets sold since such date in the ordinary course of business consistent with past practices and except where the failure to have such good and marketable title or valid leasehold interests would not have a Material Adverse Effect.

 

(u)                       Intellectual Property.  All registered or unregistered, (i) patents, patentable inventions and other patent rights (including any divisions, continuations, continuations-in-part, reissues, reexaminations and interferences thereof); (ii) trademarks, service marks, trade dress, trade names, taglines, brand names, logos and corporate names and all goodwill related thereto; (iii) copyrights, mask works and designs; (iv) trade secrets, know-how, inventions, processes, procedures, databases, confidential business information and other proprietary information and rights; (v) computer software programs, including all source code, object code, specifications, designs and documentation related thereto; and (vi) domain names, Internet addresses and other computer identifiers, in each case that is material to the business of the Company or any of its Subsidiaries as currently being conducted (the “Intellectual Property”) is either (a) owned by the Company or one or more of its Subsidiaries or (b) is used by the Company or one or more of its Subsidiaries pursuant to a valid license.  To the knowledge of the Company, there are no material infringements or other material violations of any Intellectual Property owned by the Company or any of its Subsidiaries by any third party.  The Company and its Subsidiaries have taken all necessary actions to maintain and protect each item of Intellectual Property.  The conduct of the business of the Company and its Subsidiaries does not infringe or otherwise violate any intellectual property or other proprietary rights of any other person in material respects, and there is no action pending or, to the knowledge of the Company, threatened alleging any such infringement or violation or challenging the Company’s or any of its Subsidiaries’ rights in or to any Intellectual Property which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

 

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(v)        Employment Matters.

 

(i)           Neither the Company nor any of its Significant Subsidiaries is a party to or bound by any collective bargaining agreement or  other labor union contract applicable to persons employed by the Company or any of its Significant Subsidiaries. There are no unfair labor practice complaints pending, or to the knowledge of the Company, threatened, against the Company or any of its Significant Subsidiaries before any Governmental Authority. Each of the Company and its Subsidiaries complies with all Applicable Laws relating to employment and employment practices (including without limitation, terms and conditions of employment, termination of employment, mandatory severance benefits, pension programs, social insurance programs, employee health and safety, equal employment, employment of veterans and the handicapped, and prohibition of discrimination) in all material aspects. There is no material claim with respect to payment of wages, salary, overtime pay, withholding individual income taxes, social security fund or housing fund that has been asserted and is now pending or, to the knowledge of the Company, threatened before any Governmental Authority with respect to any persons currently or formerly employed by the Company or any of its Significant Subsidiaries.

 

(ii)                              Each Employee Benefit Plan is in compliance in all material respects with its terms and the requirements of all Applicable Laws. All employer and employee contributions to each Employee Benefit Plan required by the terms of such Employee Benefit Plan or by the Applicable Laws have been made, or, if applicable, accrued in accordance with normal accounting practices and in compliance in all material respects with its terms and the requirements of all Applicable Laws. Each Employee Benefit Plan required to be registered has been registered and has been maintained in good standing with applicable Governmental Authorities.

 

(w)                     Tax Status.                Except as disclosed in the Company SEC Documents, the Company and each of its Subsidiaries (i) has made or filed in the appropriate jurisdictions all material foreign, federal and state income and all other tax returns required to be filed or maintained in connection with the calculation, determination, assessment or collection of any and all federal, state, local, foreign and other taxes, levies, fees, imposts, duties, governmental fees and charges of whatever kind (including any interest, penalties or additions to the tax imposed in connection therewith or with respect thereto) (each a “Tax”), including all amended returns required as a result of examination adjustments made by any Governmental Authority responsible for the imposition of any Tax (collectively, the “Returns”), and such Returns are true, correct and complete in all material respects, and (ii) has paid all material Taxes and other governmental assessments and charges shown or determined to be due on such Returns, except those being contested or will be contested in good faith.  Except as disclosed in the Company SEC Documents, neither the Company nor any of its Subsidiaries has received notice regarding unpaid foreign, federal and state income in any amount or any Taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the Company is not aware of any reasonable basis for such claim.  No Returns filed by or on behalf of the Company or any of its Subsidiaries with respect to material Taxes are currently being audited, and neither the Company nor any of its Subsidiaries has received notice of any such audit.

 

(x)                       Tax Election.      No Tax elections under the income tax laws of the United States have been made with respect to the Company or any of its Subsidiaries other than Secoo Inc. None of the Company or any of its Subsidiaries is, or is at risk of being or becoming, classified as a “passive foreign investment company” or a “controlled foreign corporation” for United States federal income tax purposes.

 

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(y)                       Solvency.  Both before and after giving effect to the transactions contemplated by this Agreement and other Transaction Agreements, each of the Company and its Subsidiaries (i) will be solvent (in that both the fair value of its assets will not be less than the sum of its debts and that the present fair saleable value of its assets will not be less than the amount required to pay its probable liability on its recourse debts as they mature or become due) and (ii) will have adequate capital and liquidity with which to engage in the their businesses as currently conducted and as described in the Company SEC Documents.

 

(z)                        Transactions with Affiliates and Employees.  All related party transactions required to be disclosed under applicable rules of the NASDAQ or the applicable securities law have been accurately described in the Company SEC Documents in all material respects.  Any such related party transaction was entered into on terms and conditions no less favorable to the Company or its applicable Subsidiary than those applicable in comparable transactions between independent parties acting at arm’s length.

 

(aa)                Variable Interest Entities.  The Company controls its variable interest entities, Beijing Wo Mai Wo Pai Auction Co., Ltd. and Beijing Secoo Trading Limited, through a series of contractual arrangements (“Control Contracts”), and there is no enforceable agreement or understanding to rescind, amend or change the nature of such captive structure or the terms of the Control Contracts.

 

(bb)                Environment.  Each of the Company and its Subsidiaries (i) has at all times complied and are presently in compliance with all applicable Environmental Laws in all material respects; (ii) has not received any notice, demand, claim, letter or request for information, relating to any alleged violation of Environmental Law, or otherwise identifies an environmental concern, health and safety concern or any other concern relating to the security and protection of people, property, flora and fauna relating thereto; (iii) possesses all approvals, consents or authorizations required under Environmental Laws for its business as presently conducted and there are no circumstances that could reasonably be expected to result in any such approvals, consents or authorizations being revoked, terminated, revised, amended or not renewed in the ordinary course of its business.  There has been no incident of any occupational disease incurred by any employees of the Company or any of its Subsidiaries due to harmful factors present in their working environment or the nature of their work, and there are no other circumstances or conditions.

 

Section 4.02                             Representations and Warranties of the Purchaser.  The Purchaser hereby represents and warrants to the Company as of the date hereof and as of Closing, as follows:

 

(a)                       Due Formation.  The Purchaser is duly formed, validly existing and in good standing in the jurisdiction of its organization.  The Purchaser has all requisite power and authority to carry on its business as it is currently being conducted.

 

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(b)                       Authority.  The Purchaser has full power and authority to enter into, execute and deliver this Agreement and other Transaction Agreements to which it is to become a party and each other agreement, certificate, document and instrument to be executed and delivered by the Purchaser pursuant to this Agreement and each other Transaction Agreement and to perform its obligations hereunder and thereunder.  The execution and delivery by the Purchaser of this Agreement and each other Transaction Agreement to which it is or is to become a party and the performance by the Purchaser of its obligations hereunder and thereunder have been duly authorized by all requisite actions on its part.

 

(c)                        Valid Agreement.  This Agreement has been, and each other Transaction Agreement to which it is to become a party will be, duly executed and delivered by the Purchaser and, assuming the due authorization, execution and delivery by the Company, constitutes (or, when executed and delivered in accordance herewith will constitute), the legal, valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms, subject to the Bankruptcy and Equity Exception and except as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.

 

(d)                       Non-contravention.  None of the execution and the delivery of this Agreement or any other Transaction Agreement, nor the consummation of the transactions contemplated hereby or thereby, by the Purchaser will violate any provision of the organizational documents of the Purchaser or violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental entity or court to which the Purchaser is subject.

 

(e)                        Consents and Approvals.  None of the execution and delivery by the Purchaser of this Agreement and the Transaction Agreements to which the Purchaser is to become a Party, nor the consummation by the Purchaser of any of the transactions contemplated hereby or thereby, nor the performance by the Purchaser of this Agreements or any such Transaction Agreement in accordance with its terms requires the consent, approval, order or authorization of, or registration with, or the giving notice to, any governmental or public body or authority or any third party, except such as have been or will have been obtained, made or given at or prior to Closing.

 

(f)                         Status and Investment Intent.

 

(i)                                 Experience.  The Purchaser has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of its investment in the relevant Purchased Convertible Note. The Purchaser is capable of bearing the economic risks of such investment, including a complete loss of its investment.

 

(ii)                              Purchase Entirely for Own Account.  The Purchaser is acquiring the Purchased Securities pursuant to this Agreement for investment for its own account for investment purposes only and not with the view to, or with any intention of, resale, distribution or other disposition thereof in a manner that would violate the registration requirements of the Securities Act.

 

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(iii)                           Restricted Securities.  The Purchaser acknowledges that the Purchased Securities are “restricted securities” that have not been registered under the Securities Act or any applicable state securities law. The Purchaser further acknowledges that, absent an effective registration under the Securities Act, the Securities may only be offered, sold or otherwise transferred (x) to the Company, (y) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, or (z) pursuant to an exemption from registration under the Securities Act.

 

(iv)                          Not a U.S. Person.  The Purchaser is either (i) not a “U.S. person” as defined in Rule 902 of Regulation S, or (ii) an “accredited investor” within the meaning of Rule 501(a) under Regulation D of the Securities Act.

 

ARTICLE V
 COVENANTS

 

Section 5.01                             Conduct of Business of the Company.  From the date hereof until the Closing Date,

 

(a)                       the Company shall, and the Company shall cause each of its Subsidiaries to (i) conduct its business and operations in the ordinary course of business consistent with past practice, and (ii) not take any action, or omit to take any action, that would reasonably be expected to make any of its representations and warranties in this Agreement untrue at, or as of any time before, the Closing Date;

 

(b)                       the Company shall (i) take all actions necessary to continue the listing and trading of its ADSs on the NASDAQ and shall comply with the Company’s reporting, filing and other obligations under the rules of the NASDAQ, and (ii) file with the NASDAQ a supplemental listing application in respect of the Conversion Shares and the Warrant Shares, when issued and delivered in the manner contemplated by the Convertible Note Instrument and the Warrant Instrument respectively; and

 

(c)                        the Company shall promptly notify the Purchaser of any event, condition or circumstance occurring prior to the Closing Date that would constitute a breach of any terms and conditions contained in this Agreement.

 

Section 5.02                             FPI Status. Without limiting the generality of the foregoing, the Company shall promptly after the date hereof and reasonably prior to Closing take all necessary or desirable actions required to duly and validly rely on the exemption for foreign private issuers from applicable rules and regulations of the NASDAQ with respect to corporate governance to rely on “home country practice” in connection with the transactions contemplated hereunder (including an exemption from any NASDAQ rules that would otherwise require seeking shareholder approval in respect of such transactions), including without limitation, to the extent necessary, making disclosures, notices and filings to or with the SEC and NASDAQ and obtaining an adequate opinion of counsel in respect of the home country practice exemption.  The Company will use commercially reasonable efforts to continue the listing and trading of its ADSs on NASDAQ and, in accordance, therewith, will use commercially reasonable efforts to comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of such market or exchange, as applicable.

 

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Section 5.03                             Exclusivity. During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement pursuant to Section 7.14 hereof or the Closing Date, the Company agrees not to initiate, solicit, encourage or engage in any discussion or negotiation of any type with, provide any information to, accept any proposal from, or enter into any letter of intent, purchase contract or any other similar agreement, or consummate any transaction, with any Persons other than the Purchaser with respect to the issuance, sale, grant, transfer, purchase or other acquisition by any such Person of any Company Securities (as defined in the Investor Rights Agreement) other than pursuant to the Employee Benefit Plan effective as at the date of this Agreement, except with the Purchaser’s prior written consent; provided, that if the Purchaser grants such consent, and the relevant transaction contains terms and conditions with respect to the subscription or purchase of securities of the Company, or has the effect of establishing any investor or shareholder rights or benefits to such Person, that are in each case more favorable than the comparable terms and conditions or rights or benefits of the Purchaser under this Agreement or the other Transaction Agreements, the Company shall also with no further action required by the Purchaser be deemed to have offered all such terms and conditions, rights or benefits, mutatis mutandis, to the Purchaser.

 

Section 5.04                             Further Assurances. From the date of this Agreement until Closing, the Parties shall each use their respective reasonable best efforts to fulfill or obtain the fulfillment of the conditions precedent to the consummation of the transactions contemplated hereby and by the Transaction Agreements.

 

Section 5.05                             No Contract. Without limiting the generality of the foregoing, the Company agrees that from the date hereof until the Closing Date, it shall not make (or otherwise enter into any contract with respect to) (x) any material change in any method of accounting or accounting practice by the Company or any of its Subsidiaries; (y) any declaration, setting aside or payment of any dividend or other distribution with respect to any securities of the Company or any of its Subsidiaries (except for dividends or other distributions by any Subsidiary to the Company or to any of the Company’s Subsidiaries) or (z) any redemption, repurchase or other acquisition of any share capital of the Company or any of its Subsidiaries, except in each case for the avoidance of doubt as contemplated by the Transaction Agreements.

 

Section 5.06                             Reservation of Shares. The Company shall ensure that it has sufficient number of duly authorized Ordinary Shares to comply with its obligations to issue the Conversion Shares and Warrant Shares pursuant to the Convertible Note Instrument and the Warrant Instrument respectively.

 

Section 5.07                             Director and Observer Appointment. The Company shall take all necessary or desirable actions as may be required under Applicable Law and in accordance with its memorandum and articles of association to cause (i) one individual designated by the Purchaser as a director (the “Purchaser Director”), and (ii) one individual designated by the Purchaser as an observer, in each case to be appointed to the Board at Closing. The Purchaser’s director and observer appointment rights stated in Section 5.07 herein shall expire on the date when the Purchaser’s equity interest falls below 5% of all issued and outstanding share capital of the Company on a fully diluted basis as if the Purchaser has fully converted and exercised the Convertible Note and the Warrant.

 

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Section 5.08                             No Integrated Offering. The Company shall not, and shall cause its Affiliates and any Person acting on its or their behalf not to, directly or indirectly, make any offers or sales of any security or solicit any offers to buy any security, under circumstances that would require registration of the issuance of any of the Purchased Securities (and, when issued, the Conversion Shares and the Warrant Shares) under the Securities Act whether through integration with prior offerings or otherwise.

 

Section 5.09                             Use of Proceeds. The Company undertakes to reserve and dedicate US$25 million of the Purchase Price solely for (i) renovation of offline experience centers, (ii) onboarding corner-stone brands and opening offline stores in selective cities, (iii) hiring of global talents for business expansion, (iv) investment in branding and marketing, and/or (v) any other purposes as approved by the Purchaser from time to time.

 

Section 5.10                             US Tax Election.  At the request of the Purchaser, the Company shall, and shall cause its Subsidiaries to, cooperate with the Purchaser in (i) the prompt preparation and filing of ‘check the box’ elections effective at least two (2) days prior to Closing to specify the US tax classification of the Company and/or any such Subsidiary, (ii) the prompt conversion of the Company and/or any of its Subsidiaries that is not currently eligible to make a check the box election into a company form which is eligible to make such an election, and (iii) taking any other action that is reasonably requested to enhance, rationalize, and/or simplify the US tax treatment of the Company and its Subsidiaries; it being understood that (x) no check the box election shall have any bearing on the tax treatment or legal status of the subject entity for non-US purposes, (y) no conversion or action shall be undertaken as described above if it is determined that doing so would have an adverse impact on either the Company or any of its Subsidiaries, and (z) the reasonable costs and expenses incurred in this connection shall be promptly paid or reimbursed by the Purchaser.

 

ARTICLE VI
 INDEMNIFICATION

 

Section 6.01                             Indemnification.  From and after the Closing Date and subject to Section 6.04, the Company (the “Indemnifying Party”), shall indemnify and hold the Purchaser, its Affiliates and their respective directors, officers, agents, successors and assigns (collectively, the “Indemnified Party”) harmless from and against any losses, claims, damages, liabilities, judgments, fines, obligations, expenses and liabilities, including but not limited to any investigative, legal and other expenses incurred and any Taxes or levies that may be payable by reason of the indemnification of any indemnifiable loss hereunder (collectively, “Losses”) by any Indemnified Party as a result of or arising out of: (i) the breach of any representation or warranty of the Indemnifying Party contained in the Transaction Agreements; (ii) the violation or nonperformance, partial or total, of any covenant or agreement of the Indemnifying Party contained in the Transaction Agreements; or (iii) any failure of the Indemnifying Party to comply with Applicable Laws in relation to Taxes to the extent required in connection with the transactions contemplated by this Agreement or any other Transaction Agreement and/or any conversion or exercise of the Purchased Securities.  In calculating the amount of any Losses of an Indemnified Party hereunder, there shall be subtracted the amount of any insurance proceeds and third-party payments received by the Indemnified Party with respect to such Losses, if any.

 

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Section 6.02                             Third Party Claims.

 

(a)                       If any third party shall notify any Indemnified Party in writing with respect to any matter involving a claim by such third party (a “Third Party Claim”) which such Indemnified Party believes would give rise to a claim for indemnification against the Indemnifying Party under this ARTICLE VI, then the Indemnified Party shall promptly following receipt of notice of such claim (i) notify the Indemnifying Party thereof in writing and (ii) transmit to the Indemnifying Party a written notice (“Claim Notice”) describing in reasonable detail the nature of the Third Party Claim, a copy of all papers served with respect to such claim (if any), and the basis of the Indemnified Party’s request for indemnification under this Agreement.  Notwithstanding the foregoing, no failure or delay in providing such notice shall constitute a waiver or otherwise modify the Indemnified Party’s right to indemnity hereunder, except to the extent that the Indemnifying Party shall have been materially prejudiced by such failure or delay.

 

(b)                       Upon receipt of a Claim Notice with respect to a Third Party Claim, the Indemnifying Party shall have the right to assume the defense of any Third Party Claim by, within 30 days of receipt of the Claim Notice, notifying the Indemnified Party in writing that the Indemnifying Party elects to assume the defense of such Third Party Claim, and upon delivery of such notice by the Indemnifying Party, the Indemnifying Party shall have the right to fully control and settle the proceeding; provided, that, any such settlement or compromise shall be permitted hereunder only with the written consent of the Indemnified Party.  Notwithstanding the foregoing, the Indemnifying Party shall not be entitled to assume the defense of any Third Party Claim if (i) the Third Party Claim relates to or arises in connection with any criminal action, (ii) the Third Party Claim seeks an injunction or equitable relief against any Indemnified Party (other than immaterial equitable relief in connection with an award of monetary damages) or (iii) the Indemnifying Party has not acknowledged that such Third Party Claim is subject to indemnification pursuant to this ARTICLE VI.  If the Indemnifying Party assumes the defense of a Third Party Claim pursuant to this Section 6.02(b), the Indemnifying Party shall conduct such defense in good faith.

 

(c)                        If requested by the Indemnifying Party, the Indemnified Party shall, at the sole cost and expense of the Indemnifying Party, cooperate reasonably with the Indemnifying Party and its counsel in contesting any Third Party Claim which the Indemnifying Party elects to contest, including in connection with the making of any related counterclaim against the person asserting the Third Party Claim or any cross complaint against any person.  The Indemnified Party shall have the right to receive copies of all pleadings, notices and communications with respect to any Third Party Claim, other than any privileged communications between the Indemnifying Party and its counsel, and shall be entitled, at its sole cost and expense, to retain separate co-counsel and participate in, but not control, any defense or settlement of any Third Party Claim assumed by the Indemnifying Party pursuant to Section 6.02(b).

 

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(d)                       In the event of a Third Party Claim for which the Indemnifying Party elects not to assume the defense or fails to make such an election within the 30 days of the Claim Notice, the Indemnified Party may, at its option, defend, settle, compromise or pay such action or claim at the expense of the Indemnifying Party; provided, that any such settlement or compromise shall be permitted hereunder only with the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld or delayed.

 

Section 6.03                             Other Claims.  In the event any Indemnified Party should have a claim against the Indemnifying Party hereunder which does not involve a Third Party Claim, the Indemnified Party shall promptly transmit to the Indemnifying Party a written notice (the “Indemnity Notice”) describing in reasonable detail the nature of the claim, the Indemnified Party’s best estimate of the amount of Losses attributable to such claim and the basis of the Indemnified Party’s request for indemnification under this Agreement; provided, that no failure or delay in providing such notice shall constitute a waiver or otherwise modify the Indemnified Party’s right to indemnity hereunder, except to the extent that the Indemnifying Party shall have been materially prejudiced by such failure or delay.

 

Section 6.04                             Limitation on the Company’s Liability. Absent fraud, intentional misrepresentation or willful breach on the part of the Company:

 

(a)                       the Indemnifying Party shall have no liability to the Indemnified Parties with respect to any breach of any representation or warranty (other than Fundamental Warranties) made by the Company in this Agreement unless the aggregate amount of the Losses suffered or incurred by such Indemnified Parties thereunder exceeds US$5 million, in which case the Indemnifying Party shall be liable to such Indemnified Parties for the full amount of their Losses from dollar one pursuant to Section 6.01;

 

(b)                       the maximum aggregate liabilities of the Indemnifying Party in respect of Losses suffered by the Indemnified Parties with respect to any breach of any representation or warranty (other than Fundamental Warranties) made by the Company in this Agreement shall not in any event be greater than the Purchase Price; and

 

(c)                        notwithstanding any other provision contained herein, from and after the Closing, the right to indemnity pursuant to ARTICLE VI shall be the sole and exclusive remedy of any of the Indemnified Party for any claims against the Company arising out of or resulting from this Agreement; provided that the Purchaser shall also be entitled to specific performance or other equitable remedies in any court of competent jurisdiction pursuant to Section 7.13 hereof.

 

ARTICLE VII
 MISCELLANEOUS

 

Section 7.01                             Survival of the Representations and Warranties.

 

(a)                       The Fundamental Warranties shall survive indefinitely or until the latest date permitted by law and the representations contained in Section 4.01(w) shall survive until the expiration of the applicable statute of limitations. All other representations and warranties of the Company contained in this Agreement shall survive Closing until eighteen (18) months after the Closing Date.

 

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(b)                       Notwithstanding anything to the contrary in the foregoing clauses, (i) any breach of representation or warranty in respect of which indemnity may be sought under this Agreement shall survive the time at which it would otherwise terminate pursuant to the preceding sentences, if notice of the inaccuracy or breach thereof giving rise to such right of indemnity shall have been given to the party against whom such indemnity may be sought in accordance with this Agreement prior to such time and (ii) any breach of representation or warranty in respect of which indemnity may be sought that was caused as a result of fraud or intentional misrepresentation shall survive until the latest date permitted by law.

 

Section 7.02                             Governing Law; Arbitration.  This Agreement shall be governed and interpreted in accordance with the laws of Hong Kong.  Any dispute arising out of or relating to this Agreement, including any question regarding its existence, validity or termination shall be referred to and finally resolved by arbitration at the Hong Kong International Arbitration Centre in accordance with the Hong Kong International Arbitration Centre Administered Arbitration Rules then in force at the time of commencement of the arbitration.  There shall be three arbitrators.  The Company shall have the right to appoint one arbitrator, the Purchaser shall have the right to appoint the second arbitrator, and the third arbitrator shall be appointed by the Hong Kong International Arbitration Centre.  The language to be used in the arbitration proceedings shall be English.  Each of the Parties irrevocably waives any immunity to jurisdiction to which it may be entitled or become entitled (including without limitation sovereign immunity, immunity to pre-award attachment, post-award attachment or otherwise) in any arbitration proceedings and/or enforcement proceedings against it arising out of or based on this Agreement or the transactions contemplated hereby.

 

Section 7.03                             No Third Party Beneficiaries.  A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Ordinance (Cap. 623) to enforce any term of this Agreement.

 

Section 7.04                             Acknowledgement. The Purchaser acknowledges that it understands that the Company, in issuing the Purchased Convertible Note to the Purchaser pursuant to this Agreement, is relying upon the exemption from registration provided by Regulation S under the Securities Act.

 

Section 7.05                             Amendment.  This Agreement shall not be amended, changed or modified, except by another agreement in writing executed by the Parties hereto.

 

Section 7.06                             Binding Effect.  This Agreement shall inure to the benefit of, and be binding upon, each of the Parties and their respective heirs, successors and permitted assigns and legal representatives.

 

Section 7.07                             Assignment.  Neither this Agreement nor any of the rights, duties or obligations hereunder may be assigned by the any Party without the express written consent of the other Parties.  Any purported assignment in violation of the foregoing sentence shall be null and void.  Notwithstanding the foregoing, the Purchaser may assign its rights hereunder to any of its Affiliates, provided, that no such assignment shall relieve the Purchaser of its obligations hereunder.

 

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Section 7.08                             Notices.  All notices, requests, demands, and other communications under this Agreement shall be in writing and shall be deemed to have been duly given if (a) in writing and served by personal delivery upon the party for whom it is intended; (b) if delivered by facsimile with receipt confirmed; or (c) if delivered by certified mail, registered mail or courier service, return-receipt received to the party at the address set forth below:

 

	
If to Company, at:
    	
SECOO HOLDING LIMITED
   Address: 15/F, Building C, Galaxy SOHO, Chaonei Street, Dongcheng District,   Beijing 100000, The People’s Republic of China
   Attention: Ms. Jingbo Ma
   Email: jingboma@secoo.com
    
	
 
    	
 
    
	
With a copy to:
    	
Skadden, Arps, Slate,   Meagher & Flom
   Address: 42/F, Edinburgh Tower, The Landmark, 15 Queen’s Road Central, Hong   Kong, Hong Kong
   Attention: Ms. Haiping Li
   Email: haiping.li@skadden.com
    
	
 
    	
 
    
	
If to Purchaser, at:
    	
GREAT WORLD LUX PTE.   LTD
   Address: 1 Kim Seng Promenade #18-07/12 Great World City West Tower Singapore   237994
   Attention: Gilbert Ong / Chris Youm
   Email: gilbert.ong@lcatterton.com / chris.youm@lcatterton.com
    
	
 
    	
 
    
	
With a copy to:
    	
Latham &   Watkins
   Address: 18th Floor, One Exchange Square, 8 Connaught Place, Central, Hong   Kong
   Attention: Frank Sun
   Email: frank.sun@lw.com
    

 

Any Party may change its address for purposes of this Section 7.08 by giving the other Parties hereto written notice of the new address in the manner set forth above.

 

Section 7.09                             Entire Agreement.  This Agreement and the other Transaction Agreements including the schedules and exhibits hereto and thereto constitutes the entire understanding and agreement between the Parties with respect to the matters covered hereby and thereby, and all prior agreements and understandings, oral or in writing, if any, between the Parties with respect to the matters covered hereby and thereby are merged and superseded by this Agreement and the other Transaction Agreements.

 

Section 7.10                             Severability.  If any provisions of this Agreement shall be adjudicated to be illegal, invalid or unenforceable in any action or proceeding whether in its entirety or in any portion, then such provision shall be deemed amended, if possible, or deleted, as the case may be, from the Agreement in order to render the remainder of the Agreement and any provision thereof both valid and enforceable, and all other provisions hereof shall be given effect separately therefrom and shall not be affected thereby.

 

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Section 7.11                             Fees and Expenses.  Except as otherwise provided in this Agreement or other Transaction Agreements, the Parties will bear their respective expenses incurred in connection with the negotiation, preparation and execution of this Agreement and other Transaction Agreements and the transactions contemplated hereby and thereby, including fees and expenses of attorneys, accountants, consultants and financial advisors.

 

Section 7.12                             Confidentiality.

 

(a)                       Each Party shall keep confidential any non-public material or information with respect to the business, technology, financial conditions, and other aspects of the other Parties which it is aware of, or have access to, in signing or performing this Agreement (including written or non-written information, hereinafter the “Confidential Information”).  Confidential Information shall not include any information that is (a) previously known on a non-confidential basis by the receiving Party, (b) in the public domain through no fault of such receiving Party, its Affiliates or its or its Affiliates’ officers, directors or employees, (c) received from a party other than the Company or the Company’s representatives or agents, so long as such party was not, to the knowledge of the receiving party, subject to a duty of confidentiality to the Company or (d) developed independently by the receiving Party without reference to confidential information of the disclosing Party.  No Party shall disclose such Confidential Information to any third Party.  Either Party may use the Confidential Information only for the purpose of, and to the extent necessary for performing this Agreement; and shall not use such Confidential Information for any other purposes.  The Parties hereby agree, for the purpose of this Section 7.12, that the existence and terms and conditions of this Agreement and schedule hereof shall be deemed as Confidential Information.

 

(b)                       Notwithstanding any other provisions in this Section 7.12, if any Party believes in good faith that any announcement or notice must be prepared or published pursuant to applicable laws (including any rules or regulations of any securities exchange or valid legal process) or information is otherwise required to be disclosed to any Governmental Authority, such Party may, in accordance with its understanding of the applicable laws, make the required disclosure in the manner it deems in compliance with the requirements of applicable laws; provided, that, the Party who is required to make such disclosure shall, to the extent permitted by law and so far as it is practicable, provide the other Parties with prompt notice of such requirement and cooperate with the other Parties at such other Parties’ request and at the requesting Party’s cost, to enable such other Parties to seek an appropriate protection order or remedy.  In addition, each Party may disclose, after giving prior notice to the other Parties to the extent practicable under the circumstances and subject to any practicable arrangements to protect confidentiality, Confidential Information to the extent required under judicial or regulatory process or in connection with any judicial process regarding any legal action, suit or proceeding arising out of or relating to this Agreement or any Transaction Agreement; provided that, the Party who is required to make such disclosure shall, to the extent permitted by law and so far as it is practicable, at the other Parties’ request and at the requesting Party’s cost, cooperate with the other Parties to enable such other Parties to seek an appropriate protection order or remedy.

 

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(c)                        Each Party may disclose the Confidential Information only to its Affiliates and its and its Affiliates’ officers, directors, employees, agents and representatives on a need-to-know basis in the performance of the Transaction Agreements; provided that, such Party shall ensure such persons strictly abide by the confidentiality obligations hereunder.

 

(d)                       Without the prior written consent of the Purchaser (regardless of whether or not the Purchaser is then a shareholder of the Company), the Company shall not, and shall cause its Affiliates not to, (i) use in advertising, publicity, announcements, or otherwise, the name of the Purchaser or any Affiliate of the Purchaser, either alone or in combination with any company name, trade name, trademark, service mark, domain name, device, design, symbol or any abbreviation, contraction or simulation thereof owned or used by the Purchaser or any of its Affiliates, or (ii) represent, directly or indirectly, that any product or services provided by the Company or any of its Affiliates has been approved or endorsed by the Purchaser or any of its Affiliates.

 

(e)                        The confidentiality obligations of each Party hereunder shall survive the termination of this Agreement.  Each Party shall continue to abide by the confidentiality clause hereof and perform the obligation of confidentiality it undertakes until the other Party approves release of that obligation or until a breach of the confidentiality clause hereof will no longer result in any prejudice to the other Party.

 

Section 7.13                             Specific Performance.  The Parties agree that irreparable damage would occur in the event any provision of this Agreement were not performed in accordance with the terms hereof and that the Parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or equity.

 

Section 7.14                             Termination.

 

(a)                       This Agreement shall automatically terminate as between the Company and the Purchaser upon the earliest to occur of:

 

(i)    the written consent of each of the Company and the Purchaser;

 

(ii)          the delivery of written notice to terminate by either the Company or the Purchaser if Closing shall not have occurred by 3 months after the date of this Agreement; provided, however, that such right to terminate this Agreement under this Section 7.14(a)(ii) shall not be available to any party whose failure to fulfill any obligation under this Agreement shall have been the principal cause of, or shall have resulted in, the failure of Closing to occur on or prior to such date; or

 

(iii)       by the Company or the Purchaser in the event that any Governmental Authority shall have issued a judgment or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated by the Transaction Agreements and such judgment or other action shall have become final and non-appealable.

 

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(b)                       Upon the termination of this Agreement, this Agreement will have no further force or effect, except for the provisions of Section 7.02, Section 7.08 and Section 7.12 hereof, which shall survive any termination under this Section 7.14; provided, that neither the Company nor the Purchaser shall be relieved or released from any liabilities or damages arising out of (i) fraud or (ii) any breach of this Agreement prior to such termination.

 

Section 7.15                             Headings.  The headings of the various articles and sections of this Agreement are inserted merely for the purpose of convenience and do not expressly or by implication limit, define or extend the specific terms of the section so designated.

 

Section 7.16                             Execution in Counterparts.  For the convenience of the Parties and to facilitate execution, this Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute but one and the same instrument.  Signatures in the form of facsimile or electronically imaged “PDF” shall be deemed to be original signatures for all purposes hereunder.

 

Section 7.17                             Public Disclosure.  Without limiting any other provision of this Agreement, both the Purchaser and the Company shall consult and agree with each other on the terms and content of a joint press release with respect to the execution of this Agreement and any other Transaction Agreements and the transactions contemplated hereby and thereby and no press release shall be issued by any Party hereto without the prior written consent of the other Parties. Thereafter, neither the Company nor the Purchaser, nor any of their respective Affiliates, shall issue any press release or other public announcement or communication (to the extent not previously publicly disclosed or made in accordance with this Agreement or any other Transaction Agreements) with respect to the transactions contemplated hereby or thereby without the prior written consent of the other parties (such consent not to be unreasonably withheld, conditioned or delayed), except to the extent a party’s counsel deems such disclosure necessary or desirable in order to comply with any law or the regulations or policies of any securities exchange or other similar regulatory body (in which case the disclosing party shall give the other parties notice as promptly as is reasonably practicable of any required disclosure to the extent permitted by applicable law), shall limit such disclosure to the information such counsel advises is required to comply with such law or regulations, and if reasonably practicable, shall consult with the other party regarding such disclosure and give good faith consideration to any suggested changes to such disclosure from the other party.  Notwithstanding anything to the contrary in this Section 7.17, the Purchaser and the Company may make public statements in response to specific questions by the press, analysts, investors or those attending industry conferences or financial analyst conference calls, so long as any such statements are not materially inconsistent with previous press releases, public disclosures or public statements made by the Company or the Purchaser and do not reveal material, non-public information regarding the other Parties or the transactions contemplated by this Agreement.

 

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Section 7.18                             Waiver.  No waiver of any provision of this Agreement shall be effective unless set forth in a written instrument signed by the Party waiving such provision.  No failure or delay by a Party in exercising any right, power or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of the same preclude any further exercise thereof or the exercise of any other right, power or remedy.

 

[Signature pages follow]

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date first above written.

 

	
SECOO HOLDING LIMITED
    	
 
    
	
 
    	
 
    
	
By:
    	
 /s/ Rixue Li
    	
 
    
	
 
    	
 
    	
 
    
	
Name:
    	
 Rixue Li
    	
 
    
	
 
    	
 
    	
 
    
	
Title:
    	
 Chairman and Chief Executive Director
    	
 
    

 

[Signatue Page to Convertible Note and Warrant Subscription Agreement]

 

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date first above written.

 

	
GREAT WORLD LUX PTE.   LTD
    	
 
    
	
 
    	
 
    
	
By:
    	
 /s/ Gilbert Ong
    	
 
    
	
 
    	
 
    	
 
    
	
Name:
    	
 Gilbert Ong
    	
 
    
	
 
    	
 
    	
 
    
	
Title:
    	
 Director
    	
 
    

 

 

[Signatue Page to Convertible Note and Warrant Subscription Agreement]

 

 

Exhibit B

 

Form of Convertible Note Instrument

 

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CONVERTIBLE NOTE

 

THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER ANY OTHER SECURITIES LAWS. THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND OTHER APPLICABLE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM, AND IN THE CASE OF A TRANSACTION EXEMPT FROM REGISTRATION, UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT AND SUCH OTHER APPLICABLE LAWS. HOLDERS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

 

CONVERTIBLE NOTE

 

US$175,000,000

 

_______________, 2018

 

Subject to the terms and conditions of this Convertible Note (the “Note”), for good and valuable consideration received, Secoo Holding Limited, an exempted company incorporated with limited liability under the laws of the Cayman Islands (the “Company”), promises to pay to the order of Great World Lux Pte. Ltd, an exempted company incorporated with limited liability under the laws of Singapore (such party and any other permitted transferee, the “Holder”), the principal amount of US$175,000,000, plus accrued and unpaid interest thereon at the rate provided below, and plus other amounts payable provided below, on the third (3rd) anniversary of the Issue Date (as defined below) (the “Maturity Date”), or such earlier date as may be otherwise provided herein, unless the outstanding principal, together with accrued interest, is settled in accordance with Article 3 of the Note.

 

The Note is issued pursuant to, and in accordance with, the Convertible Note and Warrant Subscription Agreement, dated _____________, 2018 (the “Subscription Agreement”), between the Company, the Holder and other parties thereto, and is subject to the provisions thereof. Capitalized terms used and not defined herein shall have the meaning set forth in the Subscription Agreement.

 

The following is a statement of the rights of the Holder of the Note and the terms and conditions to which the Note is subject, and to which the Holder hereof, by the acceptance of the Note, agrees:

 

1.                                      DEFINITIONS

 

“ADS” means an American Depositary Share, two of which represent one Class A Share of the Company as of the date of this Note.

 

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“Board of Directors” means the board of directors of the Company or a committee of such board duly authorized to act for it hereunder.

 

“Business Day” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by Law to be closed in the People’s Republic of China (which for the purpose of this Note excludes Hong Kong SAR, Macau SAR and Taiwan), , Singapore, Hong Kong or New York.

 

“Capital Stock” means for any entity, any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) stock issued by that entity.

 

“Class A Shares” means Class A ordinary shares, par value US$0.001 per share, in the share capital of the Company.

 

“Clause A Distribution” shall have the meaning ascribed to such term in Section 4.2(c).

 

“Clause B Distribution” shall have the meaning ascribed to such term in Section 4.2(c).

 

“Clause C Distribution” shall have the meaning ascribed to such term in Section 4.2(c).

 

“close of business” means 5:00 p.m. (New York City time).

 

“Common Equity” of any Person means ordinary share capital or Capital Stock of such Person that is generally entitled (a) to vote in the election of directors of such Person or (b) if such Person is not a corporation, to vote or otherwise participate in the selection of the governing body, partners, managers or others that will control the management or policies of such Person.

 

“Company” shall have the meaning ascribed to such term in the Preamble.

 

“Control” (including the terms “Controlled by” and “under common Control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, as trustee or executor, by contract or otherwise, including the ownership, directly or indirectly, of securities having the power to elect a majority of the board of directors or similar body governing the affairs of such Person or securities that represent a majority of the outstanding voting securities of such Person.

 

“Conversion Date” shall have the meaning ascribed to such term in Section 3.3.

 

“Conversion Notice” shall have the meaning ascribed to such term in Section 3.3.

 

“Conversion Period” shall mean the period starting from (and including) the first anniversary of the Issue Date and prior to the close of business on the second Business Day immediately preceding the Maturity Date.

 

“Conversion Rate” shall have the meaning ascribed to such term in Section 3.2.

 

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“Current Market Price” means, in respect of an ADS at a particular date, the volume-weighted average of the Last Reported Sale Prices for one ADS (carrying full entitlement to dividend) for the thirty (30) consecutive Trading Days ending on the Trading Day immediately preceding such date, provided that if at any time during the said thirty (30) Trading Day period the ADSs shall have been quoted ex-dividend and during some other part of that period the ADSs shall have been quoted cum-dividend then:

 

(a)                                 if the ADSs (or the Ordinary Shares) to be issued in such circumstances do not rank for the dividend in question, the quotations on the dates on which the ADSs shall have been quoted cum-dividend shall for the purpose of this definition be deemed to be the amount thereof reduced by an amount equal to the amount of that dividend per ADS; or

 

(b)                                 if the ADSs (or the Ordinary Shares) to be issued in such circumstances rank for the dividend in question, the quotations on the dates on which the ADSs shall have been quoted ex-dividend shall for the purpose of this definition be deemed to be the amount thereof increased by such similar amount;

 

and provided further that if the ADSs on each of the said thirty (30) Trading Days have been quoted cum-dividend in respect of a dividend which has been declared or announced but the ADSs or the Ordinary Shares to be issued do not rank for that dividend, the quotations on each of such dates shall for the purpose of this definition be deemed to be the amount thereof reduced by an amount equal to the amount of that dividend per ADS

 

“Default” means any event that is, or after notice or passage of time, or both, would be, an Event of Default.

 

“Defaulted Amounts” means any amounts on this Note (including, without limitation, the Fundamental Change Repurchase Price, principal and interest) that are payable but are not punctually paid or duly provided for.

 

“Distributed Property” shall have the meaning ascribed to such term in Section 4.2(c).

 

“EBITDA” means, with respect to the relevant period, the consolidated profits of the Company from ordinary activities before taxation in compliance with the U.S. generally accepted accounting principles:

 

(a)                                  before deducting any interest, commission, fees, costs, prepayment penalties or other finance payments in respect of any bank loans or indebtedness in the nature of borrowings, whether paid or accrued;

 

(b)                                  before deducting any amount attributable to the amortization of intangible assets or the depreciation of tangible assets;

 

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(c)                                   before taking into account any accrued or paid interest owing to the Company or any of its Subsidiaries;

 

(d)                                  before deducting expenses and restructuring or integration charges incurred in connection with any acquisition of assets or businesses and expenses incurred in connection with equity and debt issuances;

 

(e)                                   before taking into consideration any non-cash stock-based compensation expenses, unrealized foreign currency gains or losses, non-cash charges attributable to the application of purchase accounting principles, or gain or loss arising from reappraisal or write-up or write-down of assets;

 

(f)                                    before deducting any loss from discontinued operations (or operations disposed of outside of the ordinary course of business); and

 

(g)                                   before taking into account any other non-operating, abnormal, non-recurring, exceptional or extraordinary items.

 

“Event of Default” shall have the meaning ascribed to such term in Section 2.4.

 

“Ex-Dividend Date” means the first date on which the Class A Shares, ADSs representing Class A Shares (or other applicable security), trade on the applicable exchange or in the applicable market, regular way, without the right to receive the issuance, dividend or distribution in question, from the Company or, if applicable, from the seller of the Class A Shares, ADSs representing Class A Shares (or other applicable security) on such exchange or market (in the form of due bills or otherwise) as determined by such exchange or market.

 

“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“Expiring Rights” means any rights, options or warrants to purchase Class A Shares or ADSs that expire on or prior to the Maturity Date.

 

“Fundamental Change” shall be deemed to have occurred if any of the following occurs after the Note is originally issued:

 

(a)                                 a “person” or “group” within the meaning of Section 13(d) of the Exchange Act, other than the Company, its Subsidiaries, the employee benefit plans of the Company and its Subsidiaries and any of the Permitted Holders has become the direct or indirect “beneficial owner,” as defined in Rule 13d-3 under the Exchange Act, of the Company’s Common Equity (including Common Equity held in the form of ADSs) representing more than 50% of the voting power of the Company’s Common Equity;

 

(b)                                 the consummation of (A) any recapitalization, reclassification or change of the Class A Shares or the ADSs (other than changes resulting from a subdivision or combination) as a result of which the Class A Shares or the ADSs would be converted into, or exchanged for, stock, other securities, other property or assets; (B) any share exchange, consolidation or merger of the Company, or transactions to the similar effect, pursuant to which the Class A Shares or the ADSs will be converted into cash, securities or other property; or (C) any sale, lease or other transfer in one transaction or a series of transactions of all or substantially all of the consolidated assets of the Company and its Significant Subsidiaries and Variable Interest Entities, taken as a whole, to any Person other than one of the Company’s wholly-owned Significant Subsidiaries; provided, however, that a transaction described in clause (b) in which the holders of all classes of the Company’s Common Equity immediately prior to such transaction own, directly or indirectly, more than 50% of all classes of Common Equity of the continuing or surviving corporation or transferee or the parent thereof immediately after such transaction in substantially the same proportions vis-a-vis each other as such ownership immediately prior to such transaction shall not be a Fundamental Change pursuant to this clause (b);

 

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(c)                                  the shareholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company; or

 

(d)                                 the ADSs (or other Common Equity or ADSs in respect of the Common Equity underlying the Note) cease to be listed or quoted on The NASDAQ Global Market or its successor;

 

provided, however, that a transaction or transactions described in clause (a) or (b) above shall not constitute a Fundamental Change if at least 90% of the consideration received or to be received by holders of the ADSs, excluding cash payments for any fractional Class A Shares and cash payments made in connection with dissenters’ appraisal rights, in connection with such transaction or transactions consists of shares of Common Equity or ADSs or depositary receipts in respect of Common Equity that are listed or quoted on any of The New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or any of their respective successors) or will be so listed or quoted when issued or exchanged in connection with such transaction or transactions and as a result of such transaction or transactions the Note become convertible into such consideration, excluding cash payments for any fractional Class A Shares and cash payments made in connection with dissenters’ appraisal rights.

 

“Fundamental Change Repurchase Date” shall have the meaning ascribed to such term in Section 5.2.

 

“Fundamental Change Repurchase Notice” shall have the meaning ascribed to such term in Section 5.3(a).

 

“Fundamental Change Repurchase Price” shall have the meaning ascribed to such term in Section 5.2.

 

“Fundamental Change Company Notice” shall have the meaning ascribed to such term in Section 5.4.

 

“GAAP” means the generally accepted accounting principles in the United States.

 

“Governmental Authority” means any federal, national, foreign, supranational, state, provincial, local, municipal or other political subdivision or other government, governmental, regulatory or administrative authority, agency, board, bureau, department, instrumentality or commission or any court, tribunal, judicial or arbitral body of competent jurisdiction or stock exchange.

 

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“Holder” shall have the meaning ascribed to such term in the Preamble.

 

“Interest Payment Date” means the anniversary date of the Issue Date each year, beginning on __________, 2019.

 

“Internal Rate of Return” means an amount to be received by the Holder from the Company sufficient to cause the Holder to have received, as of the date of determination, an aggregate internal rate of return of a stated rate per annum on the principal amount of the Note (or any relevant portion thereof) advanced to the Company, as calculated in US$ and after deduction of any tax payable in respect of any such payment by the Company to the Holder but excluding any tax levied on the Holder for receiving such payment.  For such purposes, an internal rate of return shall be calculated in US$ using the “xIRR” function in Excel and using contributions and advances made or credited as the investment “out-flows” with any payment received by the Holder at any time from (as appropriate) its contribution to the Company taken into account as “in-flows” on a discounted cash flow basis.

 

“Issue Date” means _______________, 2018.

 

“Last Reported Sale Price” of the Class A Shares on any date shall be calculated as (i) the closing sale price per ADS (or if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on that date as reported in composite transactions for the principal U.S. national or regional securities exchange on which the ADSs are traded divided by (ii) 0.50 (or the applicable number of Class A Shares then represented by one ADS). If the ADSs are not listed for trading on a U.S. national or regional securities exchange on the relevant date, the “Last Reported Sale Price” shall be (i) the last quoted bid price for the ADSs in the over-the-counter market on the relevant date as reported by OTC Markets Group Inc. or a similar organization divided by (ii) 0.50 (or the applicable number of Class A Shares then represented by one ADS). If the ADSs are not so quoted, the “Last Reported Sale Price” shall be (i) the average of the midpoint of the last bid and ask prices for the ADSs on the relevant date from each of at least three nationally recognized independent investment banking firms selected by the Company for this purpose divided by (ii) 0.50 (or the applicable number of Class A Shares then represented by one ADS).

 

“Law” means any statute, law, ordinance, regulation, rule, code, order, judgment, writ, injunction, decree or requirement of law (including common law) enacted, issued, promulgated, enforced or entered by a Governmental Authority.

 

“Lock-up Period” shall have the meaning ascribed to such term in Section 10.5(a).

 

“Maturity Date” shall have the meaning ascribed to such term in the Preamble.

 

“Maturity Repurchase Price” shall have the meaning ascribed to such term in Section 5.1.

 

“Merger Event” shall have the meaning ascribed to such term in Section 4.4.

 

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“Note” shall have the meaning ascribed to such term in the Preamble.

 

“Officer” means, with respect to the Company, the Chairman, President, the Chief Executive Officer, the Secretary, any Executive or any Vice President (whether or not designated by a number or numbers or word or words added before or after the title “Vice President”).

 

“Officer’s Certificate”, when used with respect to the Company, means a certificate that is delivered to the Holder and that is signed by the principal executive, financial or accounting officer of the Company. To the extent applicable, each such certificate shall include (a) a statement that the person making such certificate is familiar with the requested action and the Note; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statement contained in such certificate is based; (c) a statement that, in the judgment of such person, he or she has made such examination or investigation as is necessary to enable him or her to express an informed judgment as to whether or not such action is permitted by the Note; and (d) a statement as to whether or not, in the judgment of such person, such action is permitted by the Note, if and to the extent required by the provisions of the Note.

 

“open of business” means 9:00 a.m. (New York City time).

 

“Performance Failure Event” shall have the meaning ascribed to such term in Section 5.5.

 

“Performance Failure Repurchase Date” shall have the meaning ascribed to such term in Section 5.5.

 

“Performance Failure Repurchase Notice” shall have the meaning ascribed to such term in Section 5.5.

 

“Performance Failure Repurchase Price” shall have the meaning ascribed to such term in Section 5.5.

 

“Permitted Holders” means Mr. Richard Li and any his estates and lineal descendants, and any bona fide trust and trustee of any such bona fide trust that holds the Company’s ordinary shares pursuant to which one or more of the foregoing are sole beneficiaries or the grantors, or any person of which any of the forgoing, individually or collectively, beneficially own (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) voting securities representing at least a majority of the total voting power of all classes of capital stock of such person (exclusive of any matters as to which class voting rights exist).

 

“Per Share Purchase Price” shall have the meaning ascribed to such term in the Subscription Agreement.

 

“Person” means any individual, partnership, corporation, association, joint stock company, trust, joint venture, limited liability company, organization, entity or Governmental Authority.

 

“Record Date” means, with respect to any dividend, distribution or other transaction or event in which the holders of the Class A Shares (directly or in the form of ADSs) (or other applicable security) have the right to receive any cash, securities or other property or in which the Class A Shares (directly or in the form of ADSs) (or such other security) is exchanged for or converted into any combination of cash, securities or other property, the date fixed for determination of security holders entitled to receive such cash, securities or other property (whether such date is fixed by the Board of Directors, statute, contract or otherwise).

 

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“Reference Price” means the higher of (i) US$13.00 per ADS or US$26.00 per Class A Share, subject to the same adjustment to the Conversion Rate pursuant to this Note and (ii) the Current Market Price, in each case on the date of announcement of the issuance referred to under the provisions in Section 2.3.

 

“Reference Property” and “unit of Reference Property” have the meanings ascribed thereto in Section 4.4.

 

“Regular Interest” shall have the meaning ascribed to such term in Section 2.1.

 

“Relevant Securities” shall have the meaning ascribed to such term in Section 4.2(f).

 

“Significant Subsidiary” means a Subsidiary of the Company that meets the definition of “significant subsidiary” in Article 1, Rule 1-02 of Regulation S-X under the Exchange Act.

 

“Spin-Off” shall have the meaning ascribed to such term in Section 4.2(c).

 

“Subscription Agreement” shall have the meaning ascribed to such term in the Preamble.

 

“Subsidiary” of any Person means any corporation, partnership, limited liability company, joint stock company, joint venture or other organization or entity, whether incorporated or unincorporated, which is Controlled by such Person and, for the avoidance of doubt, the Subsidiaries of any Person shall include any Variable Interest Entity over which such Person or any of its Subsidiaries effects Control pursuant to contractual arrangements and which is consolidated with such Person in accordance with GAAP applicable to such Person.

 

“Successor Company” shall have the meaning ascribed to such term in Section 7.1(a).

 

“Top-up Interest” shall have the meaning ascribed to such term in Section 2.1.

 

“Trading Day” means a day on which (i) trading in the ADSs (or other security for which a closing sale price must be determined) generally occurs on NASDAQ Global Market or, if the ADSs (or such other security) are not then listed on NASDAQ Global Market, on the principal other U.S. national or regional securities exchange on which the ADSs (or such other security) are then listed or, if the ADSs (or such other security) are not then listed on a U.S. national or regional securities exchange, on the principal other market on which the ADSs (or such other security) are then traded and (ii) a Last Reported Sale Price with respect to the ADSs (or closing sale price for such other security) is available on such securities exchange or market; provided that if the ADSs (or such other security) are not so listed or traded, “Trading Day” means a Business Day.

 

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“Transaction Documents” shall have the meaning ascribed to such term in the Subscription Agreement.

 

“Trigger Event” shall have the meaning ascribed to such term in Section 4.2(c).

 

“U.S.” means United States.

 

“US$” or “$” means the United States dollar, the lawful currency of the United States of America.

 

“Valuation Period” shall have the meaning ascribed to such term in Section 4.2(c).

 

“Variable Interest Entity” shall have the meaning ascribed to such term in the Subscription Agreement.

 

2.                                      INTEREST; PAYMENTS; DEFAULTS

 

2.1                               Interest Rate. The principal amount outstanding under the Note shall bear (x) interest at a rate of 4% per annum until the Regular Interest Ending Date  (the “Regular Interest”),  which shall be payable annually in arrears on each Interest Payment Date, and (y) shall bear additional interest in a total amount that shall, together with the Regular Interest accrued on the Note, provide the Holder an Internal Rate of Return of 8.0% on the principal amount of the Note over the period starting from (and including) the date of the Issue Date and ending on (and including) the Regular Interest Ending Date (the “Top-up Interest”), payable on the Regular Interest Ending Date. The Regular Interest shall accrue daily from and including the Issue Date and shall be computed on the basis of a 360-day year composed of twelve 30-day months and, for partial months, on the basis of actual days elapsed over a 30-day month.

 

“Regular Interest Ending Date” means the earliest of (i) the Maturity Date, (ii) the Conversion Date, and (iii) any other date on which the outstanding principal amount of the Note (or the relevant portion thereof) becomes due and payable pursuant to the terms hereunder, whether through repurchase upon an Event of Default or otherwise.

 

2.2                               Payment. All amounts payable on or in respect of the Note or the indebtedness evidenced hereby shall be paid to the Holder in U.S. dollars, in immediately available funds on the date that any principal or interest payment is due and payable hereunder. The Company shall make such principal or interest payments to the Holder by wire transfer of immediately available funds for the account of the Holder as the Holder may designate from time to time, provided that any change to the account of the Holder must be notified in writing to the Company at least three (3) Business Days prior to relevant payment date. If any such payment date or the Maturity Date falls on a day that is not a Business Day, the required payment will be made on the next succeeding Business Day and no interest on such payment will accrue in respect of the delay.

 

2.3                               Seniority. The Note ranks senior in right of payment to any of the Company’s future indebtedness that is expressly subordinated in right of payment to the Note, equal in right of payment to any of the Company’s present and future indebtedness and other liabilities of the Company 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 future indebtedness incurred by the Company’s Subsidiaries and their other liabilities (including trade payables) and save for obligations that are preferred by provisions of Law that are mandatory and of general application.

 

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2.4                               Events of Default. For purposes of the Note, an “Event of Default” shall be deemed to have occurred if any of the following events occurs, whatever the reason or cause for such Event of Default:

 

(a)                                 Failure to Pay Principal. The Company defaults in the payment of principal of the Note when due and payable on the Maturity Date, upon any required repurchase, upon declaration of acceleration or otherwise;

 

(b)                                 Failure to Pay Interest. The Company defaults in the payment of interest when any such interest payment becomes due and payable and the default continues for a period of thirty (30) days;

 

(c)                                  Breach of Conversion Obligation. The Company fails to comply with its obligation to convert all or a portion of the Note in accordance with Article 3 upon Holder’s exercise of its conversion rights and such failure continues for a period of ten (10) Business Days;

 

(d)                                 Breach of Article 6. The Company fails to comply with its obligations under Article 6 and such failure has not been fully and completely remedied within thirty (30) days;

 

(e)                                  Breach of Other Obligations. The Company fails for sixty (60) days after written notice from the Holder has been received by the Company to comply with any of its other agreements contained in any Transaction Document to which the Company is a party;

 

(f)                                   Cross Default. Any default by the Company or any Subsidiary of the Company with respect to any mortgage, agreement or other instrument under which there may be outstanding, or by which there may be secured or evidenced, any indebtedness for money borrowed in excess of US$80 million (or the foreign currency equivalent thereof) in the aggregate of the Company and/or any such Significant Subsidiary, whether such indebtedness now exists or shall hereafter be created (A) resulting in such indebtedness becoming or being declared due and payable or (B) constituting a failure to pay the principal or interest of any such debt when due and payable at its stated maturity, upon required repurchase, upon declaration of acceleration or otherwise and such acceleration shall not have been rescinded or annulled or such failure to pay shall not have been cured or waived or such indebtedness shall not have been repaid, as the case may be, within 30 days after written notice from the Holder;

 

(g)                                  Adverse Judgment. A final judgment for the payment of US$5 million (or the foreign currency equivalent thereof) or more (excluding any amounts covered by insurance) is rendered against the Company or any Significant Subsidiary of the Company, which judgment is not paid, bonded or otherwise discharged or stayed within sixty (60) days after the earlier of (i) the date on which the right to appeal thereof has expired if no such appeal has commenced and (ii) the date on which all rights to appeal have been extinguished;

 

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(h)                                 Trading Suspension. The ADSs (or other Common Equity or ADSs in respect of the Common Equity underlying the Note) have been suspended from trading on The NASDAQ Global Market or its successor for a period of 90 consecutive trading days or for more than 180 trading days in any 12-month period;

 

(i)                                     Bankruptcy. The Company or any Significant Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, winding-up, reorganization or other relief with respect to the Company or any such Significant Subsidiary or its debts under any bankruptcy, liquidation, insolvency or other similar Law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of the Company or any such Significant Subsidiary or all or substantially all of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due; or

 

(j)                                    Involuntary Proceedings. An involuntary case or other proceeding shall be commenced against the Company or any Significant Subsidiary seeking liquidation, winding-up, reorganization or other relief with respect to the Company or such Significant Subsidiary or its debts under any bankruptcy, liquidation, insolvency or other similar Law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of the Company or such Significant Subsidiary or all or substantially all of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of sixty (60) consecutive days.

 

2.5                               Consequences of Event of Default.

 

(a)                                 If one or more Events of Default shall have occurred and be continuing (whatever the reason or cause for such Event of Default), then, (x) in each and every such case (other than an Event of Default specified in Section 2.4(i) or Section 2.4(j)), unless the principal of the Note shall have already become due and payable, the Holder may by notice in writing to the Company (the “EoD Notice”) to require the Company to repurchase for cash all of the Note or any portion thereof on the 5th Business Days after the date of the EoD Notice at a repurchase price (the “EoD Repurchase Price”) equal to (i) 100% of the principal amount (or such portion thereof as the case may be), plus (ii) accrued and unpaid interest thereon (including any accrued and unpaid interest on the Defaulted Amounts, if any), and plus (iii) an additional amount that shall, together with any interest accrued on the Note payable to the Holder, provide the Holder an Internal Rate of Return of 8.0% on the principal amount (or such portion thereof as the case may be) over the period starting from (and including) the date of the Issue Date and ending on (and including) the date when the EoD Repurchase Price is made in full, and (y) if an Event of Default specified in Section 2.4(i) or Section 2.4(j) occurs and is continuing, the Company shall promptly repurchase for cash all of the Note at a repurchase price equal to the EoD Repurchase Price without any action on the part of the Holder.

 

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(b)                                 Section 2.5(a), however, is subject to the conditions that if, at any time after the outstanding principal of the Note shall have been so declared due and payable, and before any arbitral award for the payment of the monies due shall have been obtained or entered as hereinafter provided, the Company shall pay or shall deposit with the Holder a sum sufficient to pay installments of accrued and unpaid interest upon the Note and the outstanding principal of the Note that shall have become due otherwise than by acceleration (with interest on overdue installments of accrued and unpaid interest to the extent that payment of such interest is enforceable under applicable Law, and on such principal at the rate per annum borne by the Note plus one percent), and if (1) rescission would not conflict with any such arbitral award and (2) any and all existing Events of Default under the Note, other than the nonpayment of the principal of and accrued and unpaid interest on the Note that shall have become due solely by such acceleration, shall have been cured or waived, then and in every such case the Holder, by written notice to the Company, may waive all Default or Events of Default with respect to the Note and rescind and annul such declaration and its consequences and such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of the Note; but no such waiver or rescission and annulment shall extend to or shall affect any subsequent Default or Event of Default, or shall impair any right consequent thereon.

 

2.6                               Defaulted Amounts. Any Defaulted Amounts shall accrue interest at the rate per annum borne by the Note plus 1%, subject to the enforceability thereof under applicable Law, from, and including, such relevant payment date, and such Defaulted Amounts together with such interest thereon shall be paid by the Company to the Holder by wire transfer of immediately available funds pursuant to the procedures set forth in Section 2.2.

 

3.                                      CONVERSION

 

3.1                               Conversion by Holder. Subject to and upon compliance with the provisions of this Article 3, the Holder shall have the right from time to time, at the Holder’s option, to convert all or any portion (if the portion to be converted is US$1,000 principal amount or an integral thereof) of the Note to the Company’s fully paid Class A Shares at the applicable Conversion Rate at any time during the Conversion Period.

 

3.2                               Conversion Price; Conversion Rate. Subject to adjustments as provided in Article 4, the initial conversion price shall be equal to US$26.00 per Class A Share, representing an initial conversion rate of 38.46 Class A Shares (the “Conversion Rate”) per US$1,000 principal amount of the Note.

 

3.3                               Conversion Procedure; Settlement Upon Conversion.

 

(a)                                 Subject to Section 3.3(b), this Note shall be deemed to have been converted immediately prior to the close of business on the date (the “Conversion Date”) that the Holder has delivered a duly completed irrevocable written notice to the Company (the “Conversion Notice”) and the Note for cancellation to the Company. Within five (5) Business Days after the delivery of the Note and the Conversion Notice to the Company pursuant to Section 3.1 above, the Company shall (i) take all actions and execute all documents necessary to effect the issuance of the full number of Class A Shares to which the Holder shall be entitled in satisfaction of any conversion pursuant to Section 3.1, (ii) deliver to the Holder certificate(s) representing the number of Class A Shares delivered upon each such conversion, (iii) deliver to the Holder a certified copy of the register of members of the Company, reflecting the Holder’s ownership of the Class A Shares delivered upon each such conversion, (iv) pay the Top-up Interest and the accrued and unpaid Regular Interest on the principal amount of the Note or the relevant portion thereof as being converted, in each case to (and including) the Conversion Date, and (v) subject to Section 3.3(b), cancel the Note. No Conversion Notice may be delivered and the Note may not be surrendered by a Holder for conversion thereof if the Holder has also delivered a Fundamental Change Repurchase Notice to the Company in respect of the Note and not validly withdrawn such Fundamental Change Repurchase Notice in accordance with Article 5.

 

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(b)                                 In the event the Holder surrenders this Note pursuant to Section 3.3(a) for partial conversion, the Company shall, in addition to cancelling the Note upon such surrender, execute and deliver to the Holder a new note denominated in U.S. dollars and in an aggregate principal amount equal to the unconverted portion of the surrendered Note, without payment of any service charge by the Holder.

 

(c)                                  If the Holder submits the Note for conversion, the Company shall pay any documentary, stamp or similar issue or transfer tax due on the delivery of the Class A Shares upon such conversion of the Note, unless the tax is due because the Holder requests such Class A Shares to be issued in a name other than the Holder’s name, in which case (i) if in the name of any Person which is an Affiliate of the Holder (which, for the avoidance of doubt, shall include JD.com, Inc. or any of its Affiliates), the Company shall pay that tax, or (ii) if in the name of any other Person, the Holder shall pay that tax. The Company shall pay the relevant fees for issuance of the Class A Shares and shall pay the relevant depositary’s fees for any future conversion of the issued Class A Shares into the ADSs.

 

(d)                                 Except as provided in Section 4.2, no adjustment shall be made for dividends on any Class A Shares delivered upon any conversion of this Note as provided in this Article 3.

 

(e)                                  Without prejudice to the Holder’s right to receive the interest in accordance with clause (iv) of Section 3.3(a) and subject to Section 3.3(h), the Company’s settlement of each conversion pursuant to this Article 3 shall be deemed to satisfy in full its obligation to pay the principal amount of the Note converted and accrued and unpaid interest thereon, if any. As a result, such accrued and unpaid interest, if any, shall be deemed to be paid in full rather than cancelled, extinguished or forfeited.

 

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(f)                                   The Holder in whose name the certificate for any Class A Shares delivered upon conversion is registered shall be treated as a holder of record of such Class A Shares as of the close of business on the relevant Conversion Date. Upon a conversion of the entire outstanding amount of the Note, the Holder shall no longer be a holder of the Note surrendered for conversion.

 

(g)                                  The Company shall not issue any fractional Class A Share upon conversion of the Note and shall instead pay cash in lieu of any fractional Class A Share deliverable upon conversion based on the Last Reported Sale Price of the Class A Shares on the relevant Conversion Date.

 

(h)                                 Nothing in this Article 3 shall prejudice the Holder’s entitlement to receive interest on any of the Defaulted Amounts in accordance with Section 2.6.

 

4.                                      ADJUSTMENTS

 

4.1                               [Reserved]

 

4.2                               Adjustment of Conversion Rate. If the number of Class A Shares represented by the ADSs is changed, after the date of this Note, for any reason other than one or more of the events described in this Section 4.2, the Company shall make an appropriate adjustment to the Conversion Rate such that the number of Class A Shares represented by the ADSs upon which any conversion of this Note is based remains the same.

 

Notwithstanding the adjustment provisions described in this Section 4.2, if the Company distributes to holders of the Class A Shares any cash, rights, options, warrants, shares of capital stock or similar equity interest, evidences of indebtedness or other assets or property of the Company (but excluding Expiring Rights) and a corresponding distribution is not made to holders of the ADSs, but, instead, the ADSs shall represent, in addition to Class A Shares, such cash, rights, options, warrants, shares of Capital Stock or similar equity interest, evidences of indebtedness or other assets or property of the Company, then an adjustment to the Conversion Rate described in this Section 4.2 shall not be made until and unless a corresponding distribution (if any) is made to holders of the ADSs, and such adjustment to the Conversion Rate shall be based on the distribution made to the holders of the ADSs and not on the distribution made to the holders of the Class A Shares. However, in the event that the Company issues or distributes to all holders of the Class A Shares any Expiring Rights, notwithstanding the immediately preceding sentence, the Company shall adjust the Conversion Rate pursuant to Section 4.2(b) (in the case of in-the-money Expiring Rights entitling holders of the Class A Shares for a period of not more than 45 calendar days after the announcement date of such issuance to subscribe for or purchase Class A Shares or ADSs) or Section 4.2(c) (in the case of all other Expiring Rights).

 

For the avoidance of doubt, if any event described in this Section 4.2 results in a change to the number of Class A Shares represented by the ADSs, then such change shall be deemed to satisfy the Company’s obligation to effect the relevant adjustment to the Conversion Rate on account of such event to the extent such change produces the same economic result as the adjustment to the Conversion Rate that would otherwise have been on account of such event. 

 

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Subject to the foregoing, the Conversion Rate shall be adjusted from time to time by the Company if any of the following events occurs, except that the Company shall not make any adjustments to the Conversion Rate if the Holder participates (other than in the case of a share split or share combination), at the same time and upon the same terms as holders of the Class A Shares and solely as a result of holding the Note, in any of the transactions described in this Section 4.2, without having to convert the Note, as if it held a number of Class A Shares equal to the Conversion Rate, multiplied by the principal amount of the Note held by the Holder.

 

(a)                                 If the Company exclusively issues Class A Shares as a dividend or distribution on the Class A Shares, or if the Company effects a share split or share combination, the Conversion Rate shall be adjusted based on the following formula:

 

 

where,

 

CR0   = the Conversion Rate in effect immediately prior to the close of business on the Record Date for such dividend or distribution, or immediately prior to the close of business on the effective date of such share split or share combination, as applicable;

 

CR1   = the Conversion Rate in effect immediately after the close of business on such Record Date or immediately after the close of business on such effective date, as applicable;

 

OS0   = the number of Class A Shares outstanding immediately prior to the close of business on such Record Date or immediately prior to the close of business on such effective date, as applicable; and

 

OS1   = the number of Class A Shares outstanding immediately after giving effect to such dividend, distribution, share split or share combination.

 

Any adjustment made under this Section 4.2(a) shall become effective immediately after the close of business on the Record Date for such dividend or distribution, or immediately after the open of business on the effective date for such share split or share combination, as applicable. If any dividend or distribution of the type described in this Section 4.2(a) is declared but not so paid or made, the Conversion Rate shall be immediately readjusted, effective as of the date the Board of Directors determines not to pay such dividend or distribution, to the Conversion Rate that would then be in effect if such dividend or distribution had not been declared.

 

(b)                                 If the Company issues to all or substantially all holders of the Class A Shares (directly in or in the form of ADSs) any rights, options or warrants entitling them, for a period of not more than 45 calendar days after the announcement date of such issuance, to subscribe for or purchase Class A Shares (directly or in the form of ADSs) at a price per Class A Share that is less than the average of the Last Reported Sale Prices of the Class A Shares, for the 10 consecutive Trading Day period ending on, and including, the Trading Day immediately preceding the date of announcement of such issuance, the Conversion Rate shall be increased based on the following formula:

 

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where,

 

CR0   = the Conversion Rate in effect immediately prior to the close of business on the Record Date for such issuance;

 

CR1   = the Conversion Rate in effect immediately after the close of business on such Record Date;

 

OS0   = the number of Class A Shares outstanding immediately prior to the close of business on such Record Date;

 

X       = the total number of Class A Shares (directly or in the form of ADSs) deliverable pursuant to such rights, options or warrants; and

 

Y       = the number of Class A Shares equal to (i) the aggregate price payable to exercise such rights, options or warrants, divided by (ii) the average of the Last Reported Sale Prices of the Class A Shares over the 10 consecutive Trading Day period ending on, and including, the Trading Day immediately preceding the date of announcement of the issuance of such rights, options or warrants.

 

Any increase made under this Section 4.2(b) shall be made successively whenever any such rights, options or warrants are issued and shall become effective immediately after the close of business on the Record Date for the Class A Shares (directly or in the form of ADSs), as applicable, for such issuance. To the extent that Class A Shares or ADSs are not delivered after the expiration of such rights, options or warrants, the Conversion Rate shall be decreased to the Conversion Rate that would then be in effect had the increase with respect to the issuance of such rights, options or warrants been made on the basis of delivery of only the number of Class A Shares actually delivered (directly or in the form of ADSs). If such rights, options or warrants are not so issued, the Conversion Rate shall be decreased to the Conversion Rate that would then be in effect if such the Record Date for such issuance had not occurred.

 

For purposes of this Section 4.2(b), in determining whether any rights, options or warrants entitle the holders to subscribe for or purchase Class A Shares (directly or in the form of ADSs) at a price per Class A Share that is less than such average of the Last Reported Sale Prices of the Class A Shares, for the 10 consecutive Trading Day period ending on, and including, the Trading Day immediately preceding the date of announcement for such issuance, and in determining the aggregate offering price of such Class A Shares (directly or in the form of ADSs), there shall be taken into account any consideration received by the Company for such rights, options or warrants and any amount payable on exercise or conversion thereof, the value of such consideration, if other than cash, to be determined by the Board of Directors acting in good faith.

 

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(c)                                  If the Company distributes shares of its Capital Stock, evidences of its indebtedness, other assets or property of the Company or rights, options or warrants to acquire its Capital Stock or other securities, to all or substantially all holders of the Class A Shares (directly or in the form of ADSs), excluding (i) dividends, distributions or issuances as to which an adjustment was effected pursuant to Section 4.2(a) or Section 4.2(b), (ii) dividends or distributions paid exclusively in cash as to which an adjustment was effected pursuant to Section 4.2(d), and (iii) Spin-Offs as to which the provisions set forth below in this Section 4.2(c) shall apply (any of such shares of Capital Stock, evidences of indebtedness, other assets or property or rights, options or warrants to acquire Capital Stock or other securities of the Company, the “Distributed Property”), then the Conversion Rate shall be increased based on the following formula:

 

 

where,

 

CR0   = the Conversion Rate in effect immediately prior to the close of business on the Record Date for such distribution;

 

CR1   = the Conversion Rate in effect immediately after the close of business on such Record Date;

 

SP0    = the average of the Last Reported Sale Prices of the Class A Shares over the 10 consecutive Trading Day period ending on, and including, the Trading Day immediately preceding the Ex-Dividend Date for such distribution; and

 

FMV  = the fair market value (as determined by the Board of Directors acting in good faith) of the Distributed Property with respect to each outstanding Class A Share (directly or in the form of ADSs) on the Record Date for such distribution.

 

Any increase made under the portion of this Section 4.2(c) above shall become effective immediately after the close of business on the Record Date for such distribution. If such distribution is not so paid or made, the Conversion Rate shall be decreased to the Conversion Rate that would then be in effect if such distribution had not been declared. Notwithstanding the foregoing, if “FMV” (as defined above) is equal to or greater than “SP0” (as defined above), in lieu of the foregoing increase, the Holder shall receive, in respect of each US$1,000 principal amount thereof, at the same time and upon the same terms as holders of the Class A Shares receive the Distributed Property, the amount and kind of Distributed Property the Holder would have received if the Holder owned a number of Class A Shares equal to the Conversion Rate in effect on the Record Date for the distribution.

 

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With respect to an adjustment pursuant to this Section 4.2(c) where there has been a payment of a dividend or other distribution on the Class A Shares (directly or in the form of ADSs) of shares of Capital Stock of any class or series, or similar equity interest, of or relating to a Subsidiary or other business unit of the Company, that are, or, when issued, will be, listed or admitted for trading on a U.S. national securities exchange (a “Spin-Off”), the Conversion Rate shall be increased based on the following formula:

 

 

where,

 

CR0   = the Conversion Rate in effect immediately prior to the end of the Valuation Period;

 

CR1   = the Conversion Rate in effect immediately after the end of the Valuation Period;

 

FMV0 = the average of the Last Reported Sale Prices of the Capital Stock or similar equity interest distributed to holders of the Class A Shares (directly or in the form of ADSs) applicable to one Class A Share (determined by reference to the definition of Last Reported Sale Price as if references therein to the ADSs were to such Capital Stock or similar equity interest) over the first 10 consecutive Trading Day period after, and including, the Ex-Dividend Date of the Spin-Off (the “Valuation Period”); and

 

MP0  = the average of the Last Reported Sale Prices of the Class A Shares over the Valuation Period.

 

The adjustment to the Conversion Rate under the preceding paragraph shall occur on the last Trading Day of the Valuation Period; provided that in respect of any conversion during the Valuation Period, references in the portion of this Section 4.2(c) related to Spin-Offs to 10 Trading Days shall be deemed to be replaced with such lesser number of Trading Days as have elapsed from, and including, the Ex-Dividend Date of such Spin-Off to, and including, the Conversion Date in determining the Conversion Rate.

 

For purposes of this Section 4.2(c) (and subject in all respect to Section 4.2(f)), rights, options or warrants distributed by the Company to all holders of the Class A Shares (directly or in the form of ADSs) entitling them to subscribe for or purchase shares of the Company’s Capital Stock, including Class A Shares (either initially or under certain circumstances), which rights, options or warrants, until the occurrence of a specified event or events (“Trigger Event”): (i) are deemed to be transferred with such Class A Shares (directly or in the form of ADSs); (ii) are not exercisable; and (iii) are also issued in respect of future issuances of the Class A Shares (directly or in the form of ADSs), shall be deemed not to have been distributed for purposes of this Section 4.2(c) (and no adjustment to the Conversion Rate under this Section 4.2(c) will be required) until the occurrence of the earliest Trigger Event, whereupon such rights, options or warrants shall be deemed to have been distributed and an appropriate adjustment (if any is required) to the Conversion Rate shall be made under this Section 4.2(c). If any such right, option or warrant, including any such existing rights, options or warrants distributed prior to the date of this Note, are subject to events, upon the occurrence of which such rights, options or warrants become exercisable to purchase different securities, evidences of indebtedness or other assets, then the date of the occurrence of any and each such event shall be deemed to be the date of distribution and Record Date with respect to new rights, options or warrants with such rights (in which case the existing rights, options or warrants shall be deemed to terminate and expire on such date without exercise by any of the holders thereof). In addition, in the event of any distribution (or deemed distribution) of rights, options or warrants, or any Trigger Event or other event (of the type described in the immediately preceding sentence) with respect thereto that was counted for purposes of calculating a distribution amount for which an adjustment to the Conversion Rate under this Section 4.2(c) was made, (1) in the case of any such rights, options or warrants that shall all have been redeemed or purchased without exercise by any holders thereof, upon such final redemption or purchase (x) the Conversion Rate shall be readjusted as if such rights, options or warrants had not been issued and (y) the Conversion Rate shall then again be readjusted to give effect to such distribution, deemed distribution or Trigger Event, as the case may be, as though it were a cash distribution, equal to the per Class A Share redemption or purchase price received by a holder or holders of Class A Shares (directly or in the form of ADSs) with respect to such rights, options or warrants (assuming such holder had retained such rights, options or warrants), made to all holders of Class A Shares (directly or in the form of ADSs) as of the date of such redemption or purchase, and (2) in the case of such rights, options or warrants that shall have expired or been terminated without exercise by any holders thereof, the Conversion Rate shall be readjusted as if such rights, options and warrants had not been issued.

 

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For purposes of Section 4.2(a), Section 4.2(b) and this Section 4.2(c), any dividend or distribution to which this Section 4.2(c) is applicable that also includes one or both of:

 

(A)                               a dividend or distribution of Class A Shares (directly or in the form of ADSs) to which Section 4.2(a) is applicable (the “Clause A Distribution”); or

 

(B)                               a dividend or distribution of rights, options or warrants to which Section 4.2(b) is applicable (the “Clause B Distribution”),

 

then (1) such dividend or distribution, other than the Clause A Distribution and the Clause B Distribution, shall be deemed to be a dividend or distribution to which this Section 4.2(c) is applicable (the “Clause C Distribution”) and any Conversion Rate adjustment required by this Section 4.2(c) with respect to such Clause C Distribution shall then be made, and (2) the Clause A Distribution and Clause B Distribution shall be deemed to immediately follow the Clause C Distribution and any Conversion Rate adjustment required by Section 4.2(a) and Section 4.2(b) with respect thereto shall then be made, except that, if determined by the Company (I) the “Record Date” of the Clause A Distribution and the Clause B Distribution shall be deemed to be the Record Date of the Clause C Distribution and (II) any Class A Shares (directly or in the form of ADSs) included in the Clause A Distribution or Clause B Distribution shall be deemed not to be “outstanding immediately prior to the close of business on such Record Date or immediately after the open of business on such effective date, as applicable” within the meaning of Section 4.2(a) or “outstanding immediately prior to the close of business on such Record Date” within the meaning of Section 4.2(b).

 

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(d)                                 If any cash dividend or distribution is made to all or substantially all holders of the Class A Shares (directly or in the form of ADSs), the Conversion Rate shall be adjusted based on the following formula:

 

where,

 

CR0 = the Conversion Rate in effect immediately prior to the close of business on the Record Date for such dividend or distribution;

 

CR1 = the Conversion Rate in effect immediately after the close of business on such Record Date;

 

SP0 = the Last Reported Sale Price of the Class A Shares on the Trading Day immediately preceding the Ex-Dividend Date for such dividend or distribution; and

 

C = the amount in cash per Class A Share the Company distributes to all or substantially all holders of the Class A Shares (directly or in the form of ADSs).

 

Any increase pursuant to this Section 4.2(d) shall become effective immediately after the close of business on the Record Date for such dividend or distribution. If such dividend or distribution is not so paid, the Conversion Rate shall be decreased, effective as of the date the Board of Directors determines not to make or pay such dividend or distribution, to be the Conversion Rate that would then be in effect if such dividend or distribution had not been declared. Notwithstanding the foregoing, if “C” (as defined above) is equal to or greater than “SP0” (as defined above), in lieu of the foregoing increase, the Holder shall receive, for each US$1,000 principal amount of the Note, at the same time and upon the same terms as holders of the Class A Shares (directly or in the form of ADSs), the amount of cash that the Holder would have received if the Holder owned a number of Class A Shares equal to the Conversion Rate on the Record Date for such cash dividend or distribution.

 

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(e)                                  If the Company or any of its Subsidiaries make a payment in respect of a tender or exchange offer for the Class A Shares (directly or in the form of ADSs), to the extent that the cash and value of any other consideration included in the payment per Class A Share exceeds the average of the Last Reported Sale Prices of the Class A Shares over the 10 consecutive Trading Day period commencing on, and including, the Trading Day next succeeding the date such tender or exchange offer expires, the Conversion Rate shall be increased based on the following formula:

 

 

where,

 

CR0 = the Conversion Rate in effect immediately prior to the close of business on the 10th Trading Day immediately following, and including, the Trading Day next succeeding the date such tender or exchange offer expires;

 

CR1 = the Conversion Rate in effect immediately after the close of business on the 10th Trading Day immediately following, and including, the Trading Day next succeeding the date such tender or exchange offer expires;

 

AC = the aggregate value of all cash and any other consideration (as determined by the Board of Directors acting in good faith) paid or payable for Class A Shares (directly or in the form of ADSs) purchased in such tender or exchange offer;

 

OS0 = the number of Class A Shares outstanding immediately prior to the date such tender or exchange offer expires (prior to giving effect to the purchase of all Class A Shares (directly or in the form of ADSs) accepted for purchase or exchange in such tender or exchange offer);

 

OS1 = the number of Class A Shares outstanding immediately after the date such tender or exchange offer expires (after giving effect to the purchase of all Class A Shares (directly or in the form of ADSs) accepted for purchase or exchange in such tender or exchange offer); and

 

SP = the average of the Last Reported Sale Prices of the Class A Shares over the 10 consecutive Trading Day period commencing on, and including, the Trading Day next succeeding the date such tender or exchange offer expires.

 

The adjustment to the Conversion Rate under this Section 4.2(e) shall occur at the close of business on the 10th Trading Day immediately following, and including, the Trading Day next succeeding the date such tender or exchange offer expires; provided that in respect of any conversion within the 10 Trading Days immediately following, and including, the expiration date of any tender or exchange offer, references in this Section 4.2(e) with respect to 10 Trading Days shall be deemed replaced with such lesser number of Trading Days as have elapsed from, and including, the Trading Day next succeeding the expiration date of such tender or exchange offer to, and including, the Conversion Date in determining the Conversion Rate. No adjustment to the Conversion Rate under this Section 4.2(e) shall be made if such adjustment would result in a decrease in the Conversion Rate. In the event that the Company or one of the Company’s Subsidiaries is obligated to purchase Class A Shares (directly or in the form of ADSs) pursuant to any such tender offer or exchange offer, but the Company or such Subsidiary is permanently prevented by applicable law from effecting any such purchases, or all such purchases are rescinded, then the Conversion Rate shall again be adjusted to be the Conversion Rate that would then be in effect if such tender offer or exchange offer had not been made.

 

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(f)                                   If and whenever the Company shall issue any Ordinary Shares or ADSs (other than any issuance pursuant to this Warrant or on the exercise of any other rights of conversion into, or exchange or subscription for, Ordinary Shares or ADSs) or issue or grant options, warrants or other rights to purchase, subscribe, convert into, exercise or exchange for Ordinary Shares or ADSs (the “Relevant Securities”, which for the purposes of this definition only excludes any Ordinary Shares, ADSs, option, warrant or other rights to purchase, subscribe, convert into, exercise or exchange for Ordinary Shares or ADSs issued or granted in accordance with any Employee Stock Incentive Plan (as defined in the Investor Rights Agreement)), in each case at a consideration per ADS (on an as-converted and as-exercised basis and, in the case of any issuance of Ordinary Shares, such issue price per Ordinary Share multiplied by the applicable number of Ordinary Shares then represented by each ADS) which is less than the Reference Price, the Conversion Rate shall be adjusted based on the following formula:

 

 

where:

 

CR0 = the Conversion Rate in effect immediately prior to the date of issue of the Relevant Securities;

 

CR1 = the Conversion Rate in effect as from the date of issue of the Relevant Securities;

 

A = the number of Ordinary Shares in issue immediately before the issue of the Relevant Securities;

 

B = the number of Ordinary Shares which the aggregate consideration receivable for the issue of the Relevant Securities would purchase at the price equal to (x) Reference Price, multiplied by (y) the applicable number of Ordinary Shares then represented by each ADS; and

 

C = the number of Ordinary Shares in issue immediately after the issue of the Relevant Securities,

 

provided that references to the number of Ordinary Shares in the above formula shall include all the Ordinary Shares to be issued assuming that all options, warrants or other rights to purchase, subscribe, convert into, exercise or exchange for Ordinary Shares or ADSs are exercised in full at the initial exercise price on the date of issue of such options, warrants or other rights.

 

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(g)                                  Except as stated herein, the Company shall not adjust the Conversion Rate for the issuance of Class A Shares or ADSs or any securities convertible into or exchangeable for Class A Shares or ADSs or the right to purchase Class A Shares or ADSs or such convertible or exchangeable securities.

 

(h)                                 In addition to those adjustments required by subsections (a), (b), (c), (d), (e) and (f) of this Section 4.2, and to the extent permitted by applicable Law and subject to the applicable rules of The NASDAQ Global Market and any other securities exchange on which any of the Company’s securities are then listed, the Company from time to time may increase the Conversion Rate by any amount for a period of at least 20 Business Days if the Board of Directors determines that such increase would be in the Company’s best interest, and the Company may (but is not required to) increase the Conversion Rate to avoid or diminish any income tax to holders of the Class A Shares or the ADSs or rights to purchase Class A Shares or ADSs in connection with a dividend or distribution of Class A Shares or ADSs (or rights to acquire Class A Shares or ADSs) or similar event.

 

(i)                                     Notwithstanding anything to the contrary in this Section 4.2, the Conversion Rate shall not be adjusted:

 

(i)            upon the issuance of any Class A Shares or ADSs pursuant to any present or future plan providing for the reinvestment of dividends or interest payable on the Company’s securities and the investment of additional optional amounts in Class A Shares or ADSs under any plan;

 

(ii)           upon the issuance of any Class A Shares or ADSs or options or rights to purchase those Class A Shares or ADSs pursuant to any present or future employee, director or consultant benefit plan or program of or assumed by the Company or any of the Company’s Subsidiaries;

 

(iii)          upon the issuance of any Class A Shares or ADSs pursuant to any option, warrant, right or exercisable, exchangeable or convertible security not described in clause (ii) of this subsection and outstanding as of the date this Note was first issued;

 

(iv)          solely for a change in the par value of the Class A Shares or ADSs; or

 

(v)           for accrued and unpaid interest, if any.

 

(j)                                    All calculations and other determinations under this Section 4.2 shall be made by the Company and shall be made to the nearest one-ten thousandth (1/10,000) of a Class A Shares.

 

(k)                                 Whenever the Conversion Rate is adjusted as herein provided, the Company shall promptly prepare a notice of such adjustment of the Conversion Rate setting forth the adjusted Conversion Rate and the date on which each adjustment becomes effective and shall mail such notice of such adjustment of the Conversion Rate to the Holder.

 

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(l)                                     For purposes of this Article 4, the number of Class A Shares at any time outstanding shall not include Class A Shares held in the treasury of the Company (directly or in the form of ADSs) so long as the Company does not pay any dividend or make any distribution on Class A Shares held in the treasury of the Company (directly or in the form of ADSs), but shall include Class A Shares issuable in respect of scrip certificates issued in lieu of fractions of Class A Shares.

 

(m)                             For purposes of this Section 4.2, the “effective date” means the first date on which the ADSs trade on the applicable exchange or in the applicable market, regular way, reflecting the relevant share split or share combination, as applicable.

 

4.3                               Adjustments of Prices. Whenever any provision of this Note requires the Company to calculate the Last Reported Sale Prices over a span of multiple days, the Board of Directors shall make appropriate adjustments to each to account for any adjustment to the Conversion Rate that becomes effective pursuant to Section 4.2, or any event requiring an adjustment to the Conversion Rate pursuant to Section 4.2 where the Record Date, effective date or expiration date, as the case may be, of the event occurs, at any time during the period when such Last Reported Sale Prices are to be calculated.

 

4.4                               Effect of Recapitalizations, Reclassifications and Changes of the Class A Shares.

 

(a)                                 In the case of:

 

(i)            any recapitalization, reclassification or change of the Class A Shares (other than changes resulting from a subdivision or combination),

 

(ii)           any consolidation, merger, combination or similar transaction involving the Company,

 

(iii)          any sale, lease or other transfer to a third party of the consolidated assets of the Company and the Company’s Subsidiaries substantially as an entirety; or

 

(iv)          any statutory share exchange,

 

in each case, as a result of which the Class A Shares (directly or in the form of ADSs) would be converted into, or exchanged for, stock, other securities, other property or assets (including cash or any combination thereof) (any such event, a “Merger Event”), then, prior to or at the effective time of such Merger Event, the Company or the successor or purchasing Person, as the case may be, shall execute an amendment to this Note providing that, at and after the effective time of such Merger Event, the right to convert the Note shall be changed into a right to convert the Note into the kind and amount of shares of stock, other securities or other property or assets (including cash or any combination thereof) that a holder of a number of Class A Shares equal to the Conversion Rate immediately prior to such Merger Event would have owned or been entitled to receive (the “Reference Property”, with each “unit of Reference Property” meaning the kind and amount of Reference Property that a holder of one Class A Share is entitled to receive) upon such Merger Event; provided, however, that at and after the effective time of the Merger Event the number of Class A Shares otherwise deliverable upon any conversion of the Note in accordance with Article 3 shall instead be deliverable in the amount and type of Reference Property that a holder of that number of Class A Shares would have been entitled to receive in such Merger Event.

 

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If the Merger Event causes the Class A Shares (directly or in the form of ADSs) to be converted into, or exchanged for, the right to receive more than a single type of consideration (determined based in part upon any form of holder election), then (i) the Reference Property into which the Note will be convertible shall be deemed to be the weighted average of the types and amounts of consideration received by the holders of Class A Shares (directly or in the form of ADSs) that affirmatively make such an election, and (ii) the unit of Reference Property for purposes of the immediately preceding paragraph shall refer to the consideration referred to in clause (i) attributable to one Class A Shares. The Company shall provide written notice to the Holder of such weighted average as soon as practicable after such determination is made.

 

Such amendment described in the second immediately preceding paragraph shall provide for anti-dilution and other adjustments that shall be as nearly equivalent as is practicable to the adjustments provided for in this Article 4 (it being understood that no such adjustments shall be required with respect to any portion of the Reference Property that does not consist of shares of Common Equity (however evidenced) or depositary receipts in respect thereof). If, in the case of any Merger Event, the Reference Property includes shares of stock, securities or other property or assets (including cash or any combination thereof) of a Person other than the Company or the successor or purchasing Person, as the case may be, in such Merger Event, then such other Person shall also execute such amendment, and such amendment shall contain such additional provisions to protect the interests of the Holder, including the rights of the Holder to require the Company to repurchase this Note upon a Fundamental Change pursuant to Article 5 as the Board of Directors shall reasonably consider necessary by reason of the foregoing.

 

(b)                                 None of the foregoing provisions shall affect the right of the Holder to convert this Note into Class A Shares as set forth in Article 3 prior to the effective date of such Merger Event.

 

(c)                                  The above provisions of this Section 4.4 shall similarly apply to successive Merger Events.

 

4.5                               No Adjustment. Notwithstanding anything herein to the contrary, no adjustment under this Article 4 shall be required to be made to the Conversion Rate if the Company receives written notice from the Holder that no such adjustment is required.

 

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4.6                               Certain Covenants.

 

(a)                                 The Company covenants that all Class A Shares delivered upon any conversion of this Note will be fully paid and non-assessable by the Company and free from all taxes, liens and charges with respect to the issue thereof.

 

(b)                                 The Company covenants that if any Class A Shares to be provided for the purpose of any conversion of this Note require registration with or approval of any Governmental Authority under any Law before such Class A Shares may be validly issued upon conversion, the Company will, to the extent then permitted by applicable Law, secure such registration or approval, as the case may be.

 

(c)                                  The Company further covenants to take all actions and obtain all approvals and registrations required with respect to any conversion of this Note into Class A Shares, and shall reserve for issuance an adequate number of Class A Shares, such that Class A Shares can be delivered in accordance with the terms of this Note upon any conversion hereunder. In addition, the Company further covenants to provide the Holder with a reasonably detailed description of the mechanics for the delivery of Class A Shares upon any conversion of this Note upon request.

 

(d)                                 The parties hereto acknowledge and agree that the Holder may only resell the Note, the Class A Shares delivered upon conversion of all or any portion of the Note pursuant to an effective registration statement or an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and other applicable securities Laws.

 

4.7                               Notice for Certain Actions. In case of any (a) action by the Company or one of its Subsidiaries that would require an adjustment in the Conversion Rate pursuant to Section 4.2, (b) Merger Event or (c) voluntary or involuntary dissolution, liquidation or winding-up of the Company or any of its Subsidiaries, then, in each case (unless notice of such event is otherwise required pursuant to another provision of this Note), the Company shall deliver a written notice to the Holder, as promptly as possible but in any event at least 20 days prior to the applicable date hereinafter specified, stating (i) the date on which a record is to be taken for the purpose of such action by the Company or one of its Subsidiaries or, if a record is not to be taken, the date as of which the holders of Class A Shares, of record are to be determined for the purposes of such action by the Company or one of its Subsidiaries, or (ii) the date on which such Merger Event, dissolution, liquidation or winding-up is expected to become effective or occur, and the date as of which it is expected that holders of Class A Shares, of record shall be entitled to exchange their Class A Shares, for securities or other property deliverable upon such Merger Event, dissolution, liquidation or winding-up. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such action by the Company or one of its Subsidiaries, dissolution, liquidation or winding-up unless otherwise provided for pursuant to any applicable Laws, the constitutional documents of the Company or any such Subsidiaries or any agreement or document to which the Company or any such Subsidiaries is a party; provided that nothing herein shall adversely affect any right, claim or other remedies, at law or contract, of the Holder arising as a result of or in connection with such failure or defect.

 

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4.8                               Termination of Depository Receipt Program. If the Class A Shares cease to be represented by ADSs issued under a depositary receipt program sponsored by the Company, all references in this Note to the ADSs shall be deemed to have been replaced by a reference to the number of Class A Shares (and other property, if any) represented by the ADSs on the last day on which the ADSs represented the Class A Shares and as if the Class A Shares and the other property had been distributed to holders of the ADSs on that day. In addition, all references to the Last Reported Sale Price of the ADSs will be deemed to refer to the Last Reported Sale Price of the Class A Shares, and other appropriate adjustments, including adjustments to the Conversion Rate, will be made to reflect such change. In making such adjustments, where currency translations between U.S. dollars and any other currency are required, the exchange rate in effect on the date of determination will apply.

 

5.                                      REPURCHASE

 

5.1                               Repurchase on Maturity Date.  Unless previously redeemed or surrendered and converted, the Company shall redeem this Note in whole on the Maturity Date at a price equal to (i) the outstanding principal amount, plus (ii) accrued and unpaid interest thereon (including any accrued and unpaid interest on the Defaulted Amounts, if any), and plus (iii) an additional amount that shall, together with any interest accrued on the Note payable to the Holder, provide the Holder an Internal Rate of Return of 8.0% on such principal amount over the period starting from (and including) the date of the Issue Date and ending on (and including) the Maturity Date (the “Maturity Repurchase Price”).

 

5.2                               Repurchase on Fundamental Change. If a Fundamental Change occurs at any time, the Holder shall have the right, at its option, to require the Company to repurchase for cash all of the Note or any portion thereof on the date (the “Fundamental Change Repurchase Date”) notified in writing by the Company that is not less than 20 Business Days and not more than 35 Business Days following the date of the Fundamental Change Company Notice (as defined below) at a repurchase price equal to (i) 100% of the principal amount (or such portion thereof, as the case may be), plus (ii) accrued and unpaid interest thereon (including any accrued and unpaid interest on the Defaulted Amounts, if any), and plus (iii) an additional amount that shall, together with any interest accrued on the Note payable to the Holder, provide the Holder an Internal Rate of Return of 8.0% on such principal amount (or such portion thereof, as the case may be) over the period starting from (and including) the date of the Issue Date and ending on (and including) the Fundamental Change Repurchase Date (the “Fundamental Change Repurchase Price”).

 

5.3                               Delivery of Fundamental Change Repurchase Notice and the Note by the Holder.

 

(a)                                 Repurchases of the Note under Section 5.2 shall be made, at the option of the Holder thereof, upon: (i) delivery by the Holder to the Company of a duly completed notice (the “Fundamental Change Repurchase Notice”), in the form attached hereto as Exhibit A, on or before the close of business on the second Business Day immediately preceding the Fundamental Change Repurchase Date; and (ii) delivery of the Note to the Company at any time after delivery of the Fundamental Change Repurchase Notice (together with all necessary endorsements for transfer), such delivery being a condition to receipt by the Holder of the Fundamental Change Repurchase Price therefor.

 

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(b)                                 Each Fundamental Change Repurchase Notice delivered pursuant to this Section 5.3 shall state (i) the portion of the principal amount of the Note to be repurchased and (ii) that the Note is to be repurchased by the Company pursuant to the applicable provisions of this Note.

 

(c)                                  Notwithstanding anything herein to the contrary, the Holder shall have the right to withdraw, in whole or in part, such Fundamental Change Repurchase Notice at any time prior to the close of business on the second Business Day immediately preceding the Fundamental Change Repurchase Date by delivery of a written notice of withdrawal to the Company in accordance with Section 5.7.

 

5.4                               Fundamental Change Company Notice. On or before the 30th calendar day after the occurrence or the effective date of a Fundamental Change, the Company shall provide to the Holder a written notice (the “Fundamental Change Company Notice”) by first class mail of the occurrence of the effective date of the Fundamental Change and of the repurchase right at the option of the Holder arising as a result thereof. Each Fundamental Change Company Notice shall specify:

 

(a)                                 the events causing the Fundamental Change;

 

(b)                                 the date of the Fundamental Change;

 

(c)                                  the last date on which the Holder may exercise the repurchase right pursuant to this Article 5;

 

(d)                                 the Fundamental Change Repurchase Price;

 

(e)                                  the Fundamental Change Repurchase Date;

 

(f)            if applicable, the Conversion Rate and any adjustments to the Conversion Rate;

 

(g)           that the Note may be converted only if any Fundamental Change Repurchase Notice that has been delivered by the Holder has been withdrawn in accordance with the terms of this Note; and

 

(h)           the procedures that the Holder must follow to require the Company to repurchase the Note.

 

No failure of the Company to give the foregoing notices and no defect therein shall limit the Holder’s repurchase rights or affect the validity of the proceedings for the repurchase of the Note pursuant to this Article 5.

 

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5.5                               Repurchase on Performance Failure. If the EBITDA of the Company for the financial year ending on December 31, 2018, as determined based on the audited consolidated financial statements of the Company prepared and filed pursuant to the Securities Act, is lower than US$40,000,000 (the “Performance Failure Event”), the Holder shall have the right, at its option, to require the Company to repurchase for cash all of the Note or any portion thereof, by delivering a duly completed notice in writing to the Company (the “Performance Failure Repurchase Notice”), in the form attached hereto as Exhibit B, within 60 days after the date on which the audited consolidated financial statements of the Company for the financial year ending on December 31, 2018 is publicly available, on such date (the “Performance Failure Repurchase Date”) specified by the Holder in the Performance Failure Purchase Notice that is not less than 30 Business Days and not more than 60 Business Days following the date of the Performance Failure Repurchase Notice and at a repurchase price equal to (i) 100% of the principal amount (or such portion thereof, as the case may be), plus (ii) accrued and unpaid interest thereon (including any accrued and unpaid interest on the Defaulted Amounts, if any), and plus (iii) an additional amount that shall, together with any interest accrued on the Note and paid or payable to the Holder, provide the Holder an Internal Rate of Return of 12.0% on such principal amount (or such portion thereof, as the case may be) over the period starting from (and including) the date of the Issue Date and ending on (and including) the Performance Failure Repurchase Date (the “Performance Failure Repurchase Price”). The Holder shall also deliver the Note to the Company at any time after delivery of the Performance Failure Repurchase Notice, such delivery being a condition to receipt by the Holder of the Performance Failure Repurchase Price therefor.

 

5.6                               No Repurchase in the Event of Acceleration. Notwithstanding the foregoing, the Note may not be repurchased by the Company on any date at the option of the Holder upon a Fundamental Change or the Performance Failure Event if the principal amount of the Note has been accelerated, and such acceleration has not been rescinded, on or prior to such date (except in the case of an acceleration resulting from a default by the Company in the payment of the Fundamental Change Repurchase Price or the Performance Failure Repurchase Price (as the case may be) with respect to the Note).

 

5.7                               Withdrawal of Fundamental Change Repurchase Notice or Performance Failure Repurchase Notice. A Fundamental Change Repurchase Notice or a Performance Failure Repurchase Notice (as the case may be) may be withdrawn (in whole or in part) by means of a duly completed written notice of withdrawal delivered to the Company in accordance with this Section 5.7 at any time prior to the close of business on the second Business Day immediately preceding the Fundamental Change Repurchase Date or the Performance Failure Repurchase Date (as the case may be), specifying (a) the principal amount of the Note with respect to which such notice of withdrawal is being submitted and (b) the principal amount, if any, of the Note that remains subject to the original Fundamental Change Repurchase Notice or the Performance Failure Repurchase Notice (as the case may be).

 

5.8                               Payment of Fundamental Change Repurchase Price or Performance Failure Repurchase Price.

 

(a)                                 On or prior to 10:00 a.m., New York time, on one Business Day prior to the Fundamental Change Repurchase Date or the Performance Failure Repurchase Date (as the case may be), the Company shall set aside, segregate and hold in trust for the benefit of the Holder an amount of money sufficient to repurchase the applicable portion of the Note to be repurchased at the appropriate Fundamental Change Repurchase Price or the Performance Failure Repurchase Price (as the case may be). Payment for the applicable portion of the Note surrendered for repurchase (and not withdrawn in accordance with Section 5.7) will be made on the later of (i) the Fundamental Change Repurchase Date or the Performance Failure Repurchase Price (as the case may be), provided the Holder has satisfied the conditions in this Article 5 and (ii) the time of delivery of the applicable portion of the Note by the Holder to the Company in the manner required by Section 5.3 or 5.6 (as the case may be), by mailing checks for the amount payable to the Holder.

 

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(b)                                 If by 10:00 a.m., New York time, on one Business Day prior to the Fundamental Change Repurchase Date or the Performance Failure Repurchase Date (as the case may be), the Company holds money sufficient to make payment on the applicable portion of the Note to be repurchased on such Fundamental Change Repurchase Date or the Performance Failure Repurchase Date (as the case may be), then, with respect to the applicable portion of the Note that has been properly surrendered for repurchase and not validly withdrawn in accordance with this Article 5, on such Fundamental Change Repurchase Date or the Performance Failure Repurchase Date (as the case may be), (i) such portion of the Note will cease to be outstanding, (ii) interest will cease to accrue on such portion of the Note and (iii) in the event the entire outstanding amount of the Note is surrendered by the Holder to be repurchased, all other rights of the Holder will terminate (other than the right to receive the Fundamental Change Repurchase Price or the Performance Failure Repurchase Price (as the case may be)).

 

(c)                                  Upon the surrender of the Note that is to be repurchased in part pursuant to this Article 5, the Company shall execute and deliver to the Holder a new Note in an authorized denomination equal in principal amount to the unrepurchased portion of the Note.

 

5.9                               Covenant to Comply with Applicable Laws Upon Repurchase of the Note. In connection with any repurchase offer, the Company will, if required, comply with all federal and state securities laws in connection with any offer by the Company to repurchase the Note so as to permit the rights and obligations under this Article 5 to be exercised in the time and in the manner specified in this Article 5.

 

6.                                      COVENANTS

 

6.1                               Payment of Principal and Interest. The Company covenants and agrees that it will cause to be paid the principal (including, if applicable, the Maturity Repurchase Price, the Fundamental Change Repurchase Price or the Performance Failure Repurchase Price) of, and accrued and unpaid interest on, the Note at the respective times and in the manner provided herein.

 

6.2                               Existence. Subject to Article 7, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence.

 

6.3                               No Withholding. All payments and deliveries made by, or on behalf of, the Company or any successor to the Company under or with respect to this Note, including, but not limited to, payments of principal (including, if applicable, the Fundamental Change Repurchase Price), payments of interest and deliveries of Class A Shares (together with payments of cash for any fractional Class A Share) upon any conversion of the Note, shall be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied by or within any jurisdiction in which the Company or any successor to the Company is, for tax purposes, organized or resident or doing business or through which payment is made or deemed made (or any political subdivision or taxing authority thereof or therein), unless such withholding or deduction is required by Law or by regulation or governmental policy having the force of law.

 

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6.4                               Stay, Extension and Usury Laws. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other Law that would prohibit or forgive the Company from paying all or any portion of the principal of or interest on the Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or that may affect the covenants or the performance of the Note; and the Company (to the extent it may lawfully do so) hereby expressly waives all benefit or advantage of any such Law, and covenants that it will not, by resort to any such Law.

 

6.5                               Compliance Certificates; Statements as to Defaults. The Company shall deliver to the Holder within 120 days after the end of each fiscal year of the Company (beginning with the fiscal year ending on December 31, 2018) and within 30 days of a written request made by the Holder a certificate executed by an executive officer of the Company stating that a review has been conducted of the Company’s activities under this Note and whether the Company has fulfilled its obligations hereunder, and whether such officer thereof have knowledge of any Default by the Company that occurred during the previous year that is then continuing and, if so, specifying each such Default and the nature thereof. The Company shall deliver to the Holder, as soon as possible, and in any event within 30 days after the Company becomes aware of the occurrence of any Default if such Default is then continuing, an Officer’s Certificate setting forth the details of such Default, its status and the action that the Company is taking or proposing to take in respect thereof.

 

6.6                               Further Instruments and Acts. Upon request of the Holder, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Note.

 

6.7                               New Note Instruments. Upon request of the Holder for the Note to be broken down into a number of note instruments of smaller principal amounts, the Company shall issue additional note instruments of such smaller principal amounts without charge within three (3) Business Days after the date of such request, provided that the existing note instrument of this Note shall be returned by the Holder to the Company for cancellation.

 

6.8                               Replacement of Note. Upon the loss, theft, destruction or mutilation of this Note (and in the case of loss, theft or destruction, of indemnity from the Holder reasonably satisfactory to the Company, or in the case of mutilation, upon surrender and cancellation thereof), the Company shall at its the Holder’s expense within five (5) Business Days execute and deliver to the Holder, in lieu thereof, a new Note, dated and bearing interest from the date hereof.

 

6.9                               PFIC Disclosure. The Company shall use its reasonable efforts to avoid the Company or any of its Subsidiaries being classified as a “passive foreign investment company” (a “PFIC”) as defined in Section 1297 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), for the current and any future taxable year. Within seventy-five (75) days from the end of each taxable year of the Company, the Company shall determine whether the Company or any of its Subsidiaries was a PFIC in such taxable year. If the Company determines that the Company or, if applicable, any of its Subsidiaries was a PFIC in a taxable year (or if the U.S. Internal Revenue Service or such Purchaser informs the Company that it has so determined), the Company shall, within one hundred and five (105) days from the end of such taxable year, inform such Purchaser of such determination and shall provide or cause to be provided to such Purchaser upon request a complete and accurate “PFIC Annual Information Statement” as described in Section 1.1295-1(g)(1) of the U.S. Treasury Regulations for the Company or the applicable Subsidiary of the Company.

 

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7.                                      CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

 

7.1                               Company May Consolidate, Etc. on Certain Terms. Subject to the provisions of Section 7.2, the Company shall not consolidate with, merge with or into, or sell, convey, transfer or lease all or substantially all of its properties and assets to another Person unless:

 

(a)                                 the resulting, surviving or transferee Person (the “Successor Company”), if not the Company, shall be a corporation, organized and existing under the laws of the United States of America, any State thereof, the District of Columbia, the Cayman Islands, the British Virgin Islands, Bermuda or Hong Kong and the Successor Company (if not the Company) shall expressly assume all of the obligations of the Company under the Note and the Subscription Agreement; and

 

(b)                                 immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing under this Note.

 

For purposes of this Section 7.1, the sale, conveyance, transfer or lease of all or substantially all of the properties and assets of one or more Subsidiaries of the Company to another Person, which properties and assets, if held by the Company instead of such Subsidiaries, would constitute all or substantially all of the properties and assets of the Company on a consolidated basis, shall be deemed to be the sale, conveyance, transfer or lease of all or substantially all of the properties and assets of the Company to another Person.

 

7.2                               Successor Corporation to Be Substituted. In case of any such consolidation, merger, sale, conveyance, transfer or lease and upon the assumption by the Successor Company of the due and punctual payment of the principal of and accrued and unpaid interest on the Note, the due and punctual delivery or payment, as the case may be, of any consideration due upon conversion of the Note and the due and punctual performance of all of the covenants and conditions of the Note to be performed by the Company, such Successor Company (if not the Company) shall succeed to and, except in the case of a lease of all or substantially all of the Company’s properties and assets, shall be substituted for the Company, with the same effect as if it had been named herein as the party of the first part. In the event of any such consolidation, merger, sale, conveyance or transfer (but not in the case of a lease), upon compliance with this Article 7 the Person named as the “Company” in the first paragraph of the Note (or any successor that shall thereafter have become such in the manner prescribed in this Article 7) may be dissolved, wound up and liquidated at any time thereafter and, except in the case of a lease, such Person shall be released from its liabilities as obligor and maker of the Note and from its obligations under the Note.

 

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7.3                               No consolidation, merger, sale, conveyance, transfer or lease shall be effective if any such consolidation, merger, sale, conveyance, transfer or lease and any such assumption fails to comply with the provisions of this Article 7.

 

8.                                      CANCELLATION

 

After all amounts at any time owing on the Note have been paid in full or upon the conversion of the Note in full pursuant to Article 3, the Note shall be surrendered to the Company for cancellation and shall not be reissued.

 

9.                                      NO REDEMPTION OR PREPAYMENT

 

This Note shall not be redeemable or pre-paid by the Company prior to the Maturity Date, and no sinking fund is provided for this Note.

 

10.                               MISCELLANEOUS

 

10.1                        Termination of Rights. All rights under this Note shall terminate when (a) all amounts at any time owing on the Note have been paid in full or (ii) the Note is converted in full pursuant to the terms set forth in Article 3.

 

10.2                        Provisions Binding on Company’s Successors. All the covenants, stipulations, promises and agreements of the Company contained in the Note shall bind its successors and assigns whether so expressed or not.

 

10.3                        Official Acts by Successor Company. Any act or proceeding by any provision of the Note authorized or required to be done or performed by any board, committee or Officer of the Company shall and may be done and performed with like force and effect by the like board, committee or officer of any corporation or other entity that shall at the time be the lawful sole successor of the Company.

 

10.4                        Amendments and Waivers; Notice. The amendment or waiver of any term of the Note shall be subject to the written consent of the Holder and the Company. The provision of notice shall be made pursuant to the terms of the Subscription Agreement.

 

10.5                        Transfer Restrictions.

 

(a)                                 The Holder shall not, during the period that commences on the Issue Date and continues until the third anniversary of the Issue Date (inclusive) (the “Lock-up Period”), resell, pledge or transfer the Note (or any portion thereof) (a “Transfer”) without the prior written consent of the Board of Directors, except for (i) any Transfer to the Affiliates of the Holder (which, for the avoidance of doubt, shall include JD.com, Inc. or any of its Affiliates), (ii) any Transfer in connection with or following a Fundamental Change, and (iii) any Transfer as a result of an exercise of the piggyback registration rights pursuant to the Investor Rights Agreement by the Holder. For the avoidance of doubt, (i) the Note (or any portion thereof) may be offered for a Transfer without the consent of the Board of Directors at any time after the expiry of the Lock-up Period, and (ii) none of the Class A Shares issuable upon conversion of the Note shall be subject to any restrictions set out in this Section 10.5(a).

 

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(b)                                 The Holder covenants that the Note and/or the Class A Shares issuable upon conversion of the Note will only be disposed of pursuant to an effective registration statement under, and in compliance with the requirements of, the Securities Act or pursuant to an available exemption from the registration requirements of the Securities Act, and in compliance with any applicable state securities laws. In connection with any transfer of Notes and/or the Class A Shares issuable upon conversion of the Note other than pursuant to an effective registration statement or Rule 144 promulgated under the Securities Act (“Rule 144”), the Company may require the transferor to provide to the Company an opinion of counsel selected by the transferor, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration under the Securities Act.

 

(c)                                  The Holder agrees to the imprinting, until no longer required by this Section 10.5, of the following legend on any certificate evidencing any of the Note or the Class A Shares issuable upon conversion of the Note:

 

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER ANY OTHER SECURITIES LAWS. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND OTHER APPLICABLE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.

 

The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of the Note or the Class A Shares issuable upon conversion of the Note if, unless otherwise required by state securities laws, (i) such securities are registered for resale under the Securities Act and are transferred to a Holder pursuant to a registration statement that is effective at the time of such transfer, (ii) in connection with a sale, assignment or other transfer, such Holder provides the Company with an opinion of counsel, the form and substance of which opinion shall be reasonably acceptable to the Company, that the sale, assignment or transfer of the securities may be made without registration under the applicable requirements of the Securities Act or (iii) such Holder provides the Company with reasonable assurance that the securities can be sold, assigned or transferred pursuant to Rule 144 or have been sold under Rule 144.

 

(d)                                 Notwithstanding anything to the contrary herein, transfers of this Note shall be registered upon registration books maintained for such purpose by or on behalf of the Company. Prior to presentation of this Note for registration of transfer, the Company shall treat the registered holder hereof as the owner and holder of this Note for the purpose of receiving all payments of principal and interest hereon and for all other purposes whatsoever. This provision is intended to be a book entry system as defined in Treasury Regulations Section 5f.103-1(c) and shall be interpreted consistently therewith.

 

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10.6                        No Third Party Beneficiary.  A person who is not a party to this Note shall have no right under the Contracts (Rights of Third Parties) Ordinance (Chapter 623) to enforce any of its terms.

 

10.7                        Governing Law.

 

THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF HONG KONG WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

 

10.8                        Arbitration.

 

(a)                                 Any dispute, controversy, difference or claim arising out of or relating to this Note, including the existence, validity, interpretation, performance, breach or termination thereof or any dispute regarding non-contractual obligations arising out of or relating to it shall be referred to and finally resolved by arbitration administered by the Hong Kong International Arbitration Centre (“HKIAC”) under the HKIAC Administered Arbitration Rules in force when the Notice of Arbitration is submitted.

 

(b)                                 The law of this arbitration clause shall be Hong Kong law.

 

(c)                                  The seat of arbitration shall be Hong Kong.

 

(d)                                 The number of arbitrators shall be three. The arbitrators shall be appointed in accordance with the HKIAC rules. The arbitration proceedings shall be conducted in English.

 

(e)                                  It shall not be incompatible with this arbitration agreement for any party to seek interim or conservatory relief from courts of competent jurisdiction before the constitution of the arbitral tribunal.

 

10.9                        Force Majeure. In no event shall the Holder be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being understood that the Holder shall use reasonable efforts to resume performance as soon as practicable under the circumstances.

 

10.10                 Calculations. Except as otherwise provided herein, the Company shall be responsible for making all calculations called for under the Note. These calculations include, but are not limited to, determinations of the Last Reported Sale Prices, accrued interest payable on the Note, if any, and the Conversion Rate of the Note. The Company shall make all these calculations in good faith and, absent manifest error, the Company’s calculations shall be final and binding on the Holder. The Company shall provide a schedule of its calculations to the Holder.

 

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10.11                 Delays or Omissions. No delay or failure by any party to insist on the strict performance of any provision of the Note, or to exercise any power, right or remedy, will be deemed a waiver or impairment of such performance, power, right or remedy or of any other provision of the Note, nor shall it be construed to be a waiver of any breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring.

 

10.12                 Interpretation. If any claim is made by a party relating to any conflict, omission or ambiguity in the provisions of the Note, no presumption or burden of proof or persuasion will be implied because the Note was prepared by or at the request of any party or its counsel.

 

[The remainder of this page has been deliberately left blank]

 

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IN WITNESS WHEREOF, the Company has caused the Note to be issued on the date first above written.

 

	
COMPANY:
    	
 
    
	
 
    	
 
    
	
Secoo Holding Limited
    	
 
    
	
 
    	
 
    
	
By: 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    

 

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Agreed Form

 

Exhibit A

 

FORM OF FUNDAMENTAL CHANGE REPURCHASE NOTICE

 

To:                             [Name of Company]

 

The undersigned Holder of this Note hereby acknowledges receipt of a notice from Secoo Holding Limited (the “Company”) as to the occurrence of a Fundamental Change with respect to the Company and specifying the Fundamental Change Repurchase Date and requests and instructs the Company to pay to the Holder in accordance with Section 5.2 of this Note the entire principal amount of this Note, or the portion thereof below designated.

 

Principal amount to be repaid (if less than all): US$_____________

 

Dated:

 

[NAME OF HOLDER]

 

By:

 

Name:

 

Capacity:

 

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Exhibit B

 

FORM OF PERFORMANCE FAILURE REPURCHASE NOTICE

 

To:                             [Name of Company]

 

The undersigned Holder of this Note hereby requests and instructs the Company to pay to the Holder in accordance with Section 5.5 of this Note the entire principal amount of this Note, or the portion thereof below designated.

 

Principal amount to be repaid (if less than all): US$_____________

 

Performance Failure Repurchase Date:

 

[NAME OF HOLDER]

 

By:

 

Name:

 

Capacity:

 

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Exhibit C

 

Form of Warrant Instrument

 

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Agreed Form

 

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION.  THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OR IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF THAT ACT, OR (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE STATE SECURITIES LAWS AND THE SECURITIES LAWS OF OTHER JURISDICTIONS, AND IN THE CASE OF A TRANSACTION EXEMPT FROM REGISTRATION, UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT AND SUCH OTHER APPLICABLE LAWS. HOLDERS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

 

SECOO HOLDING LIMITED

 

WARRANT TO PURCHASE AMERICAN DEPOSITARY SHARES

 

Warrant No.: _____________
 Outstanding Principal Amount: $9,000,000.00
 Date of Issuance: _____________, 2018 (“Issuance Date”)

 

Secoo Holding Limited, an exempted company incorporated and existing under the laws of the Cayman Islands (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Great World Lux Pte. Ltd, the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company, pursuant to this warrant (including any warrants issued in exchange, transfer or replacement hereof, this “Warrant”) to purchase ADSs (the “Warrant ADSs”), at any time or times on or after the Initial Exercise Date (as defined below) and subject to the applicable securities laws and regulations, but not after 11:59 p.m., New York time, on the Expiration Date (as defined below), at the Exercise Price (as defined below) then in effect up to a maximum of $9,000,000.00.  For purposes of clarification, two ADS represents one Class A ordinary share, par value US$0.001 per share, in the share capital of the Company (the “Class A Shares”) as at the Issuance Date.  This Warrant is issued pursuant to that certain Convertible Note and Warrant Subscription Agreement dated as of _____________, 2018 by and among the Company, the Holder and the other parties named therein (as amended, supplemented or modified from time to time the “Subscription Agreement”). Except as otherwise defined herein, capitalized terms in this Warrant shall have the meanings set forth in Section 16 or as otherwise given in accordance with the Subscription Agreement.

 

The Warrant ADSs issuable upon exercise of this Warrant are “Registrable Securities” as defined in the Subscription Agreement.

 

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1.                                      EXERCISE OF WARRANT

 

1.1                               Mechanics of Exercise

 

(a)                                 Subject to the terms and conditions hereof, this Warrant may be exercised by the Holder on any day on or after the Initial Exercise Date, in whole or in part, by delivery of a written notice, in the form attached hereto as Schedule 1 (the “Exercise Notice”), of the Holder’s election to exercise this Warrant.  Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant ADSs available hereunder such that the Outstanding Principal Amount has been reduced to zero and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date the final Exercise Notice is delivered to the Company. Partial exercises of this Warrant shall have the effect of lowering the Outstanding Principal Amount by an amount equal to the product of the number of Warrant ADSs purchased as part of the partial exercise and the then applicable Exercise Price (as defined below).  The Company shall maintain records showing the date of such purchases of Warrant ADSs and the Outstanding Principal Amount.  The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of this paragraph, following the purchase of a portion of the Warrant ADSs hereunder, the Outstanding Principal Amount at any given time may be less than the Outstanding Principal Amount stated on the face hereof.  On or before the third (3rd) Business Day following the date on which the Company has received the Exercise Notice and representation letters and other documents reasonably requested by the Depositary, the Company shall transmit by facsimile an acknowledgment of confirmation of receipt of the Exercise Notice to the Holder and Deutsche Bank Trust Company Americas (the “Depositary”) for the ADSs.  On or before the fifth (5th) Business Day following the date on which the Company has received the Exercise Notice and representation letters and other documents requested by the Depositary (the “ADS Delivery Date”), the Company shall (A) issue and deposit with the Depositary a number of Class A Shares that will be represented by the number of Warrant ADSs to which the Holder is entitled in respect of that exercise, (B) pay the fee of the Depositary for the issuance of that number of Warrant ADSs and (C) instruct the Depositary to promptly execute and deliver to that Holder the Warrant ADSs subject to the applicable securities laws and regulations.  No fractional ADSs are to be issued upon the exercise of this Warrant.  If any fractional share of an ADS would, except for the provisions of the prior sentence, be deliverable upon such exercise, the Company, in lieu of delivering such fractional share of an ADS, shall pay to the exercising Holder an amount in cash equal to the Closing Sale Price on the Principal Market of such fractional ADS on the date of exercise.  The Holder shall pay any and all taxes and expenses which may be payable with respect to the issuance and delivery of Warrant ADSs upon exercise of this Warrant, unless otherwise agreed in any Transaction Agreement.

 

(b)                                 In the case of Warrant ADSs issued with any restrictive legends, upon the Company’s receipt of notice and representation letters and other documents reasonably requested by the Depositary from the Holder that (A) Warrant ADSs containing any restrictive legends have been resold in reliance on an effective resale registration statement relating to the resale of ADSs representing Warrant ADSs or pursuant to Rule 144, or (B) Warrant ADSs containing any restrictive legends that are beneficially owned by it have become freely tradable pursuant to Rule 144 without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such Warrant ADSs and without volume or manner-of-sale restrictions, accompanied by a certificate or certificates evidencing the Warrant ADSs, if any, that have been sold pursuant to clause (A) above or for which the legend is to be removed pursuant to clause (B) above, the Company shall within ten (10) Business Days cause to be issued and delivered for deposit to the Depositary irrevocable instructions that the Depositary deliver ADSs without any restrictive legend with respect to such Warrant ADSs to or upon the directions of the Holder and such other documents as the Depositary may reasonably require from the Company in connection therewith. From and after the date the Company receives the notice specified in clause (B) above, Warrant ADSs which are subsequently issued upon exercise of this Warrant shall not bear a restrictive legend, provided that the conditions specified in clause (B) above are still satisfied at such time. If the Company fails to cause the Depositary to deliver ADSs representing Warrant ADSs pursuant to the terms of this Warrant, then the Company shall fully indemnify the Holder for any liabilities, judgments, costs, losses, fines and expenses of any kind the Holder incurs in connection with such failure.

 

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1.2                               Exercise Price

 

For purposes of this Warrant, “Exercise Price” means $18.00 per ADS, subject to adjustment as provided herein.

 

1.3                               Payment of Exercise Price

 

The Company shall promptly, and in no case later than the third (3rd) Business Day immediately following receipt of an Exercise Notice confirm such receipt via facsimile to the number specified in such Exercise Notice.  Within three (3) Business Days of the date of the Exercise Notice, the Holder shall make payment to the Company of an amount equal to the applicable Exercise Price multiplied by the number of Warrant ADSs as to which this Warrant is being exercised (the “Aggregate Exercise Price”) in cash or by wire transfer of immediately available funds.

 

1.4                               Company’s Failure to Timely Deliver Securities.

 

(a)                                 If the Company fails to deliver to the Holder the number of ADSs to which such Holder is entitled upon exercise by the ADS Delivery Date (an “Exercise Failure”) and such Exercise Failure is not completely and fully cured within five (5) Business Days after the ADS Delivery Date, then:

 

(i)                                     the Company shall pay damages to the Holder, for the ADS Delivery Date and each subsequent day on which such Exercise Failure continues, an amount equal to an annual interest rate of one percent (1%) of the product of (x) the sum of the number of ADSs not issued to the Holder on or prior to the ADS Delivery Date and to which the Holder is entitled, times (y) the Closing Sale Price of the ADSs on the ADS Delivery Date, and

 

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(ii)                                  the Holder, upon written notice to the Company, may, no later than seven (7) Business Days after the ADS Delivery Date, at its sole discretion, void its Exercise Notice with respect to, and retain or have returned, as the case may be, any portion of this Warrant that has not been converted pursuant to such Exercise Notice and rescind such exercise.

 

(b)                                 Without prejudice to any other remedies available to the Holder, upon an Exercise Failure, in the event that the highest Closing Sale Price of the ADS on each date during the period starting from (and including) the ADS Delivery Date and ending on (and excluding) the actual date of delivery of the required ADSs by the Company (the “Relevant Closing Sale Price”) is higher than the Closing Sale Price of the ADS on the actual date of delivery of the required ADSs by the Company, the Holder shall be entitled to an amount equal to the product of (i) the number of ADSs that the Company fails to deliver to the Holder on the ADS Delivery Date and (ii) the difference between the Relevant Closing Sale Price and the Closing Sale Price of the ADS on the actual date of delivery of the required ADSs by the Company, to be paid by the Company to the Holder in cash, no later than five (5) Business Days after the actual date of delivery of the required ADSs by the Company.  The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Exercise Failure.

 

(c)                                  In case of an Exercise Failure, the rights of the Holder pursuant to paragraph (a) or (b) above shall be without prejudice to any other rights or remedies available to the Holder under this Warrant or under applicable laws in the event of an Exercise Failure.

 

1.5                               Disputes

 

In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant ADSs or the Outstanding Principal Amount, the Company shall promptly issue to the Holder the number of Warrant ADSs that are not disputed.

 

2.                                      ADJUSTMENT OF EXERCISE PRICE

 

The Exercise Price shall be adjusted from time to time as follows:

 

2.1                               Adjustment upon Subdivision or Combination of Ordinary Shares or ADSs

 

If the Company, at any time while this Warrant is outstanding: (i) subdivides outstanding ADSs or Ordinary Shares into a larger number of shares, (ii) combines (including by way of reverse stock split) outstanding ADSs or Ordinary Shares into a smaller number of shares, or (iii) issues by reclassification of ADSs or Ordinary Shares, then in each case the Exercise Price shall be multiplied by a fraction, of which (x) the numerator shall be the number of Ordinary Shares (including the Ordinary Shares represented by all the ADSs outstanding, but excluding treasury shares, if any) outstanding immediately before such event  and (y) the denominator shall be the number of Ordinary Shares (including the Ordinary Shares represented by all the ADSs outstanding, but excluding treasury shares, if any) outstanding immediately after such event. Any adjustment made pursuant to this Section 2.1 shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

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2.2                               Adjustment upon Distribution of Assets

 

If the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of Ordinary Shares or ADSs, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, stock split, spin off, subdivision, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case the Exercise Price in effect immediately prior to the close of business on the record date fixed for the determination of holders of Ordinary Shares or ADSs entitled to receive the Distribution shall be reduced, effective as of the close of business on such record date, to a price determined by multiplying such Exercise Price by a fraction, of which (x) the numerator shall be the Closing Bid Price of the Ordinary Shares or ADSs, as applicable, on the Trading Day immediately preceding such record date minus the value of the Distribution (as determined in good faith by the Company’s Board of Directors) applicable to one Ordinary Share or ADS, as applicable, and (y) the denominator shall be the Closing Bid Price of the Ordinary Shares or ADSs, as applicable on the Trading Day immediately preceding such record date; provided that in the event that the Distribution is of securities (“Other Securities”) of a company which are traded on a national securities exchange or a national automated quotation system, then the Holder may elect to receive a warrant to purchase Other Securities in lieu of an adjustment in the Exercise Price, the terms of which shall be identical to those of this Warrant, except that such warrant shall be exercisable into the number of Other Securities that would have been payable to the Holder pursuant to the Distribution had the Holder exercised this Warrant immediately prior to such record date and with an aggregate exercise price of zero.

 

2.3                               Adjustment upon Issuance at less than Reference Price

 

If and whenever the Company shall issue any Ordinary Shares or ADSs (other than any issuance pursuant to this Warrant or on the exercise of any other rights of conversion into, or exchange or subscription for, Ordinary Shares or ADSs) or issue or grant options, warrants or other rights to purchase, subscribe, convert into, exercise or exchange for Ordinary Shares or ADSs (the “Relevant Securities”), in each case at a consideration per ADS (on an as-converted and as-exercised basis and, in the case of any issuance of Ordinary Shares, such issue price per Ordinary Share multiplied by the applicable number of Ordinary Shares then represented by each ADS) which is less than the Reference Price, the Exercise Price shall be adjusted by multiplying the Exercise Price in force immediately before such issuance by the following fraction:

 

(A + B) / C

 

Where:

 

A = the number of Ordinary Shares in issue immediately before the issue of the Relevant Securities;

 

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B = the number of Ordinary Shares which the aggregate consideration receivable for the issue of the Relevant Securities would purchase at the price equal to (x) Reference Price, multiplied by (y) the applicable number of Ordinary Shares then represented by each ADS; and

 

C = the number of Ordinary Shares in issue immediately after the issue of the Relevant Securities,

 

provided that references to the number of Ordinary Shares in the above formula shall include all the Ordinary Shares to be issued assuming that all options, warrants or other rights to purchase, subscribe, convert into, exercise or exchange for Ordinary Shares or ADSs are exercised in full at the initial exercise price on the date of issue of such options, warrants or other rights. Such adjustment shall become effective on the date of issue of the Relevant Securities.

 

2.4                               Other Adjustment Events

 

If any event occurs of the type contemplated by the provisions of this Section 2 but not expressly provided for by such provisions, then the Company’s Board of Directors will make an appropriate adjustment in the Exercise Price so as to protect the rights of the Holder; provided that no such adjustment pursuant to this Section 2.4 will increase the Exercise Price unless as otherwise determined pursuant to this Section 2.

 

2.5                               Exceptions to Adjustment

 

Anything herein to the contrary notwithstanding, there shall be no adjustment to the Exercise Price with respect to any Excluded Issuance.

 

3.                                      PURCHASE RIGHTS

 

In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any rights to purchase stock, warrants, securities or other property pro rata to all the record holders of Ordinary Shares or ADSs (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired as if the Holder had held the number of Ordinary Shares or ADSs issuable upon the full conversion of the Convertible Note and the complete and full exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Ordinary Shares or ADSs are to be determined for the grant, issue or sale of such Purchase Rights, provided that the Ownership Percentage of the Holder shall not exceed the Ownership Cap (as defined in the Investor Rights Agreement) immediately after such subscription and purchase; provided further that any change to the Ownership Percentage of the Holder as a result of any adjustment to the Exercise Price in accordance with the terms and conditions herein or to the Conversion Rate (as defined in the Convertible Note Instrument) in accordance with the terms and condition set forth in the Convertible Note Instrument, shall not be taken into account when determining whether the Ownership Cap has been exceeded.

 

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4.                                      FUNDAMENTAL TRANSACTIONS

 

In connection with any Fundamental Transaction, the Company shall make appropriate provision so that this Warrant shall thereafter be exercisable for shares of the Successor Entity based upon the conversion ratio or other consideration payable in the Fundamental Transaction. The provisions of this Section shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the exercise of this Warrant.

 

In the event that any Person becomes a Parent Entity of the Company, such Person shall assume all of the obligations of the Company under this Warrant with the same effect as if such Person had been named as the Company herein.

 

5.                                      NONCIRCUMVENTION

 

The Company hereby covenants and agrees that the Company will not, by amendment of its memorandum and articles of association or other constitutional documents or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder.  Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any Ordinary Shares underlying the ADSs receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable ADSs upon the exercise of this Warrant, and (iii) shall, so long as this Warrant is outstanding, take all action necessary to reserve and keep available out of its authorized and unissued Ordinary Shares, solely for the purpose of effecting the exercise of this Warrant, 100% of the number of Ordinary Shares issuable upon exercise of this Warrant then outstanding (without regard to any limitations on exercise).

 

6.                                      WARRANT HOLDER NOT DEEMED A SHAREHOLDER

 

Except as otherwise specifically provided herein, the Holder, solely in such Person’s capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company or a holder of ADSs for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in such Person’s capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant ADSs which such Person is then entitled to receive upon the due exercise of this Warrant.  In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a shareholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.

 

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7.                                      REISSUANCE OF WARRANTS

 

7.1                               Transfer of Warrant

 

Subject to Section 13, if this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7.4), registered as the Holder may request, representing any portion of the then Outstanding Principal Amount being transferred by the Holder and, if less than the total amount of the applicable Outstanding Principal Amount is being transferred, a new Warrant (in accordance with Section 7.4) to the Holder representing the portion of the Outstanding Principal Amount not being transferred.

 

7.2                               Lost, Stolen or Mutilated Warrant

 

Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7.4) representing the then Outstanding Principal Amount.

 

7.3                               Exchangeable for Multiple Warrants

 

This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Warrant or Warrants (in accordance with Section 7.4) representing in the aggregate the then applicable Outstanding Principal Amount, and each such new Warrant will represent the right to purchase such portion of Outstanding Principal Amount as is designated by the Holder at the time of such surrender.

 

7.4                               Issuance of New Warrants

 

Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the then applicable Outstanding Principal Amount (or in the case of a new Warrant being issued pursuant to Section 7.1 or Section 7.3, such principal amount designated by the Holder which, when added to the principal amount of the other new Warrants issued in connection with such issuance, does not exceed the then applicable Outstanding Principal Amount), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shall have the same rights and conditions as this Warrant.

 

8.                                      NOTICES

 

Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with the Subscription Agreement.  The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant, including in reasonable detail a description of such action and the reason therefore.

 

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9.                                      AMENDMENT AND WAIVER

 

Except as otherwise provided herein, the provisions of this Warrant may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder.

 

10.                               GOVERNING LAW AND DISPUTE RESOLUTION

 

(a)                                 This Warrant shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the laws of Hong Kong without regard to any choice of laws or conflict of laws provisions that would require the application of the laws of any other jurisdiction.

 

(b)                                 Any dispute, controversy, difference, proceedings or claim arising out of or relating to this Warrant, including the existence, validity, interpretation, performance, breach or termination thereof or any dispute regarding non-contractual obligations arising out of or relating to it shall be referred to and finally resolved by arbitration administered by the Hong Kong International Arbitration Centre (“HKIAC”) under the HKIAC Administered Arbitration Rules in force when the notice of arbitration is submitted (the “Rules”).

 

(c)                                  The seat of arbitration shall be Hong Kong. The number of arbitrators shall be three. The arbitrators shall be appointed in accordance with the Rules. The arbitration proceedings shall be conducted in English.

 

(d)                                 Each of the Parties shall cooperate with any party to the dispute in making full disclosure of and providing complete access to all information and documents requested by such party in connection with such arbitration proceedings, subject only to any confidentiality obligations binding on the party receiving the request.

 

(e)                                  The award of the arbitration tribunal shall be final and binding upon the disputing parties, and any party to the dispute may apply to a court of competent jurisdiction for enforcement of such award.

 

(f)                                   Nothing in this Section 10 shall prevent, obstruct or otherwise restrict any party from seeking interim or conservatory relief from courts of competent jurisdiction before the constitution of the arbitral tribunal.

 

11.                               CONSTRUCTION; HEADINGS

 

This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any person as the drafter hereof.  The headings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant.

 

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12.                               REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF

 

The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual damages for any failure by the Company to comply with the terms of this Warrant.

 

13.                               TRANSFER RESTRICTIONS

 

Notwithstanding anything to the contrary herein, the Holder shall not, during the period that commences on the Issuance Date and continues until the third anniversary of the Issuance Date (inclusive) (the “Lock-up Period”), resell, pledge or transfer this Warrant and(a “Transfer”), without, in each case, the prior written consent of the board of directors the Company, except for (i) any Transfer to the Affiliates of the Holder (which, for the avoidance of doubt, shall include JD.com, Inc. or any of its Affiliates), (ii) any Transfer in connection with or following a Fundamental Transaction, and (iii) any Transfer as a result of an exercise of the piggyback registration rights pursuant to the Investor Rights Agreement by the Holder. For the avoidance of doubt, (i) this Warrant may be offered for a Transfer without the consent of the board of directors of the Company at any time after the expiry of the Lock-up Period; and (ii) none of the ADSs issued upon exercise of this Warrant shall be subject to any restrictions set out in this Section 13.

 

14.                               NO THIRD PARTY BENEFICIARY

 

A person who is not a party to this Warrant shall have no right under the Contracts (Rights of Third Parties) Ordinance (Chapter 623) to enforce any of its terms.

 

15.                               WARRANT AGENT

 

The Company shall serve as warrant agent under this Warrant. Upon thirty (30) days’ notice to the Holder, the Company may appoint a new warrant agent. Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or shareholder services business shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be given to the Holder in accordance with Section 8.

 

16.                               CERTAIN DEFINITIONS AND INTERPRETATION

 

16.1                        For purposes of this Warrant, the following terms shall have the following meanings:

 

“ADS” means the American depositary share of the Company, two of which represent one (1) Class A Share as of the date of this Warrant, and deposited with the Depositary or its designee.

 

“ADS Delivery Date” shall have the meaning set forth in Section 1.1.

 

“Aggregate Exercise Price” shall have the meaning set forth in Section 1.3.

 

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“Bloomberg” means Bloomberg L.P. (or any successor thereto).

 

“Business Day” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by Law to be closed in the People’s Republic of China (which for the purpose of this Note excludes Hong Kong, Macau SAR and Taiwan), Singapore, Hong Kong or New York.

 

“Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price, as the case may be, then the last bid price or the last trade price, respectively, of such security prior to 4:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the “OTCPink” marketplace by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price, as the case may be, of such security on such date shall be the fair market value as mutually determined by the Company’s Board of Directors and the Holder. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.

 

“Company” shall have the meaning set forth in the Preamble.

 

“Current Market Price” means, in respect of an ADS at a particular date, the volume-weighted average of the Closing Sale Prices for one ADS (carrying full entitlement to dividend) for the thirty (30) consecutive Trading Days ending on the Trading Day immediately preceding such date, provided that if at any time during the said 30 Trading Day period the ADSs shall have been quoted ex-dividend and during some other part of that period the ADSs shall have been quoted cum-dividend then:

 

(a)                                 if the ADSs (or the Ordinary Shares) to be issued in such circumstances do not rank for the dividend in question, the quotations on the dates on which the ADSs shall have been quoted cum-dividend shall for the purpose of this definition be deemed to be the amount thereof reduced by an amount equal to the amount of that dividend per ADS; or

 

(b)                                 if the ADSs (or the Ordinary Shares) to be issued in such circumstances rank for the dividend in question, the quotations on the dates on which the ADSs shall have been quoted ex-dividend shall for the purpose of this definition be deemed to be the amount thereof increased by such similar amount;

 

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and provided further that if the ADSs on each of the said thirty (30) Trading Days have been quoted cum-dividend in respect of a dividend which has been declared or announced but the ADSs or the Ordinary Shares to be issued do not rank for that dividend, the quotations on each of such dates shall for the purpose of this definition be deemed to be the amount thereof reduced by an amount equal to the amount of that dividend per ADS.

 

“Depositary” shall have the meaning set forth in Section 1.1.

 

“Distribution” shall have the meaning set forth in Section 2.2.

 

“Employee Incentive Plan” means the Company’s incentive plan or plans adopted for its directors, officers, employees and consultants and approved by the Company’s Board of Directors.

 

“Excluded Issuance” means any issuance or sale (or deemed issuance or sale) by the Company after the Issuance Date of (a) Ordinary Shares or ADSs issued upon the conversion or exercise of any Ordinary Share Equivalents issued prior to the Issuance Date, provided that such securities are not amended after the Issuance Date to increase the number of Ordinary Shares or ADSs issuable thereunder, lower the exercise or conversion price thereof or in a manner that otherwise adversely affects the Holder; (b) Ordinary Shares or ADSs issued upon the exercise of this Warrant or pursuant to any transaction contemplated under the Subscription Agreement; or (c) all Ordinary Shares, ADSs or Ordinary Share Equivalents that are issued under the Employee Incentive Plan.

 

“Exercise Price” shall have the meaning set forth in Section 1.2.

 

“Exercise Notice” shall have the meaning set forth in Section 1.1.

 

“Expiration Date” means the date 36 months after the Issuance Date or, if such date falls on a day other than a Business Day or on which trading does not take place on the Principal Market (in each case, a “Holiday”), the next date that is not a Holiday.

 

“Fundamental Transaction” means that the Company shall, directly or indirectly, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Person, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company to another Person, or (iii) allow another Person to make a purchase, tender or exchange offer that is accepted by the holders of more than the 50% of the outstanding Ordinary Shares (not including any Ordinary Shares held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (iv) consummate a stock purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than the 50% of the outstanding Ordinary Shares (not including any Ordinary Shares held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock purchase agreement or other business combination), (v) reorganize, recapitalize or reclassify its Ordinary Shares, or (vi) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the  Exchange Act) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Ordinary Shares.

 

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“HKIAC” shall have the meaning set forth in Section 10(b).

 

“Holder” shall have the meaning set forth in the Preamble.

 

“Hong Kong” means the Hong Kong Special Administrative Region of the People’s Republic of China.

 

“Initial Exercise Date” means the first anniversary of the Issuance Date.

 

“Ordinary Shares” means (i) the Company’s ordinary shares, consisting of the Class A Shares and the Class B Shares, and (ii) any share capital into which such ordinary shares shall have been changed or any share capital resulting from a reclassification of such ordinary shares.

 

“Ordinary Share Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Ordinary Shares, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Ordinary Shares or ADSs.

 

“Other Securities” shall have the meaning set forth in Section 2.2.

 

“Outstanding Principal Amount” means the outstanding principal amount of this Warrant applicable from time to time as calculated in accordance with the terms of this Warrant. The Outstanding Principal Amount as at the Issuance Date is $9,000,000.

 

“Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.

 

“Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.

 

“Principal Market” means The NASDAQ Global Market.

 

“Purchase Rights” shall have the meaning set forth in Section 3.

 

“Reference Price” means the higher of (i) the Exercise Price then in effect and (ii) the Current Market Price, in each case on the date of announcement of the issuance referred to under the provisions in Section 2.3.

 

“Relevant Securities” shall have the meaning ascribed to such term in Section 2.3.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

87

 

“Subscription Agreement” shall have the meaning set forth in the Preamble.

 

“Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity of such Person) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Holder, the Parent Entity of such Person) with which such Fundamental Transaction shall have been entered into.

 

“Trading Day” means any day on which the ADSs are traded on the Principal Market, or, if the Principal Market is not the principal trading market for the ADSs, then on the principal securities exchange or securities market on which the ADSs are then traded; provided that “Trading Day” shall not include any day on which the ADSs are scheduled to trade on such exchange or market for less than 4 hours or any day that the ADSs are suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00 p.m., New York time).

 

“Warrant” shall have the meaning set forth in the Preamble.

 

“Warrant ADSs” shall have the meaning set forth in the Preamble.

 

“$” or “US$” means the legal currency of the United States of America.

 

16.2                        A section, clause, paragraph or schedule, unless the context otherwise requires, is a reference to a section, clause, paragraph or schedule to, this Warrant.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase American Depositary Shares to be duly executed as of the Issuance Date set out above.

 

 

	
 
    	
SECOO HOLDING LIMITED
    
	
 
    	
 
    
	
 
    	
By: 
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    

 

89

 

SCHEDULE 1

 

EXERCISE NOTICE

 

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT TO PURCHASE AMERICAN DEPOSITARY SHARES

 

SECOO HOLDING LIMITED

 

The undersigned holder hereby exercises the right to purchase _________ American Depositary Shares (“Warrant ADSs”) of Secoo Holding Limited, an exempted company incorporated existing under the laws of the Cayman Islands (the “Company”), evidenced by the attached Warrant to American Depositary Shares (the “Warrant”).  Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.

 

1.                                      Form of Exercise Price.  The Holder’s payment of the Exercise Price shall be made as a “Cash Exercise” with respect to _________ Warrant ADSs

 

2.                                      Payment of Exercise Price.  In the event that the Holder conducted a Cash Exercise with respect to some or all of the Warrant ADSs to be issued pursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum of $_________ to the Company in accordance with the terms of the Warrant.

 

3.                                      Delivery of Warrant ADSs.  The Company shall deliver to the Holder _________ Warrant ADSs in accordance with the terms of the Warrant.

 

4.                                      Confirmation.  Please send confirmation of receipt of this Exercise Notice to the following facsimile number:  _________.

 

	
Date: 
    	
 
    	
,
    
	
 
    	
 
    
	
Name of Holder
    	
 
    
	
 
    	
 
    
	
By: 
    	
 
    	
 
    
	
Name:
    	
 
    
	
Title:
    	
 
    

 

90

 

ACKNOWLEDGMENT

 

The Company hereby acknowledges this Exercise Notice and hereby directs Deutsche Bank Trust Company Americas to issue the above indicated number of American Depositary Shares in accordance with the Depositary Instructions dated _________, 20_________ from the Company and acknowledged and agreed to by Deutsche Bank Trust Company Americas.

 

	
SECOO HOLDING LIMITED
    	
 
    
	
 
    	
 
    
	
By: 
    	
 
    	
 
    
	
Name:
    	
 
    
	
Title:
    	
 
    
			

 

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