UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE
ACT OF 1934
OR
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2015.
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
OR
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
OR
Date of event requiring this shell company report
Commission file number: 001-36140
58.com Inc.
(Exact name of Registrant as specified in its charter)
N/A
(Translation of Registrant’s name into English)
Cayman Islands
(Jurisdiction of incorporation or organization)
Building 105, 10 Jiuxianqiao North Road Jia
Chaoyang District, Beijing 100015
People’s Republic of China
(Address of principal executive offices)
Hao Zhou, Chief Financial Officer
Telephone: +86 10 5956-5858
Building 105, 10 Jiuxianqiao North Road Jia
Chaoyang District, Beijing 100015
People’s Republic of China
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class
American depositary shares, each representing two Class A ordinary shares
Class A ordinary shares, par value US$0.00001 per share*
Name of each exchange on which registered
New York Stock Exchange
New York Stock Exchange*
* Not for trading, but only in connection with the listing on the New York Stock Exchange of American depositary shares.
Securities registered or to be registered pursuant to Section 12(g) of the Act:
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of Class)
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the
annual report. 283,068,677 ordinary shares, par value US$0.00001 per share, being the sum of 219,413,764 Class A ordinary shares and 63,654,913 Class
B ordinary shares as of December 31, 2015.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934. Yes No
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
Non-accelerated filer
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP
International Financial Reporting Standards as issued by
the International Accounting Standards Board
Other
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected
to follow. Item 17 Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
No
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No
INTRODUCTION
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
TABLE OF CONTENTS
PART I
ITEM 1.
ITEM 2.
ITEM 3.
ITEM 4.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
OFFER STATISTICS AND EXPECTED TIMETABLE
KEY INFORMATION
INFORMATION ON THE COMPANY
ITEM 4A.
UNRESOLVED STAFF COMMENTS
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 8.
ITEM 9.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
FINANCIAL INFORMATION
THE OFFER AND LISTING
ITEM 10.
ADDITIONAL INFORMATION
ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
PART II
ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
ITEM 14.
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS
ITEM 15.
CONTROLS AND PROCEDURES
ITEM 16A.
AUDIT COMMITTEE FINANCIAL EXPERT
ITEM 16B.
CODE OF ETHICS
ITEM 16C.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
ITEM 16D.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
ITEM 16E.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
i
iii
iii
1
1
1
1
37
65
65
93
101
107
108
110
120
121
123
123
123
123
124
124
125
125
125
ITEM 16F.
CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
ITEM 16G.
CORPORATE GOVERNANCE
ITEM 16H.
MINE SAFETY DISCLOSURE
PART III
ITEM 17.
FINANCIAL STATEMENTS
ITEM 18.
FINANCIAL STATEMENTS
ITEM 19.
EXHIBITS
ii
125
125
126
126
126
126
126
In this annual report, unless otherwise indicated or the context otherwise requires, references to:
“ADSs” refers to our American depositary shares, each of which represents two Class A ordinary shares of 58.com Inc.;
INTRODUCTION
“58.com,” “we,” “us,” “our company,” and “our” refer to 58.com Inc., its subsidiaries and its consolidated variable interest entities;
“China” or “PRC” refers to the People’s Republic of China, excluding, for purposes of this annual report only, Taiwan, Hong Kong and Macau;
“Renminbi” or “RMB” refers to the legal currency of China;
“U.S. GAAP” refers to generally accepted accounting principles in the United States; and
“US$,” “dollars” or “U.S. dollars” refers to the legal currency of the United States.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This annual report on Form 20-F contains forward-looking statements that relate to our current expectations and views of future events. The
forward-looking statements are contained principally in the items entitled “Information on the Company,” “Risk Factors,” “Operating and Financial Review
and Prospects,” “Financial Information” and “Quantitative and Qualitative Disclosures About Market Risk.” Our forward-looking statements relate to
events that involve known and unknown risks, uncertainties and other factors, including those listed under “Risk Factors,” which may cause our actual
results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-
looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigations Reform Act of 1995. You can
identify some of these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,”
“believe,” “is/are likely to,” “potential,” “continue” or other similar expressions, although not all forward-looking statement contain these words. Forward-
looking statements include, but are not limited to, statements relating to:
our goals and strategies;
our expansion plans;
our future business development, financial condition and results of operations;
the expected growth of the online marketing services, mobile services and e-commerce industries;
our expectations regarding demand for, and market acceptance of, our services;
our expectations regarding keeping and strengthening our relationships with customers;
our plans to invest in research and development to enhance our solution and service offerings; and
general economic and business conditions in the regions where we provide our solutions and services.
We would like to caution you not to place undue reliance on forward-looking statements and you should read these statements in conjunction with
the risk factors disclosed in “Item 3. Key Information — D. Risk Factors.” Those risks are not exhaustive. We operate in an emerging and evolving
environment. New risk factors emerge from time to time and it is impossible for our management to predict all risk factors, nor can we assess the impact of
all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in
any forward-looking statement. We do not undertake any obligation to update or revise the forward-looking statements except as required under applicable
law. You should read this annual report and the documents that we reference in this annual report completely and with the understanding that our actual
future results may be materially different from what we expect.
iii
ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
PART I
Not applicable.
ITEM 2.
OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3.
KEY INFORMATION
A. Selected Financial Data
Selected Consolidated Financial Data
The following table presents the selected consolidated financial information of our company. Our summary data of consolidated statements of
comprehensive income/(loss) and summary consolidated cash flow data presented below for the years ended December 31, 2013, 2014 and 2015 and our
summary consolidated balance sheet data as of December 31, 2014 and 2015 have been derived from our audited consolidated financial statements included
elsewhere in this annual report. Our summary data of consolidated statements of comprehensive income/(loss), and summary consolidated cash flow data
presented below for the years ended December 31, 2011 and 2012 and our summary consolidated balance sheet data as of December 31, 2011, 2012 and
2013 have been derived from our audited consolidated financial statements which are not included in this annual report. Our audited consolidated financial
statements are prepared in accordance with U.S. GAAP.
You should read the summary consolidated financial information in conjunction with our consolidated financial statements and related notes and
“Item 5. Operating and Financial Review and Prospects” included elsewhere in this annual report. Our historical results are not necessarily indicative of our
results expected for future periods.
2011
For the Year Ended December 31,
2013
(in thousands of US$, except for share, per share and per ADS data)
2012
2014
Summary Data of Consolidated Statements of
Comprehensive Income/(Loss):
Revenues:
Membership
Online marketing services
E-commerce service
Other services
Total revenues
Cost of revenues(1)
Gross profit
Operating expenses(1):
Sales and marketing expenses
Research and development expenses
General and administrative expenses
Total operating expenses
Income/(loss) from operations
Net income/(loss)
Add: Net loss attributable to noncontrolling
interests
Less:
Deemed dividend to mezzanine classified
noncontrolling interests
Accretions to preference shares redemption
values
Income attributable to preference shareholders
Net income/(loss) attributable to 58.com Inc.
19,654
15,500
—
6,380
41,534
(6,301)
35,233
(100,134)
(7,784)
(10,721)
(118,639)
(83,406)
(83,402)
—
—
47,919
28,509
—
10,694
87,122
(10,406)
76,716
(76,422)
(18,464)
(13,088)
(107,974)
(31,258)
(30,401)
—
—
(6,547)
—
(89,949)
(10,233)
—
(40,634)
85,725
58,457
—
1,565
145,747
(8,471)
137,276
(84,534)
(25,138)
(12,983)
(122,655)
14,621
19,557
—
—
(9,134)
(1,230)
9,193
139,490
125,033
—
455
264,978
(13,844)
251,134
(180,148)
(43,676)
(20,633)
(244,457)
6,677
22,644
—
—
—
—
22,644
2015
297,150
385,543
23,046
9,097
714,836
(51,268)
663,568
(689,014)
(121,404)
(105,049)
(915,467)
(251,899)
(262,956)
12,920
(898)
—
—
(250,934)
2011
For the Year Ended December 31,
2013
(in thousands of US$, except for share, per share and per ADS data)
2012
2014
2015
Net income/(loss)
(83,402)
(30,401)
19,557
22,644
(262,956)
Foreign currency translation adjustment, net of nil
tax
Unrealized gain/(loss) on available-for-sale
securities
Total comprehensive income/(loss)
Net income/(loss) per ordinary share
attributable to ordinary shareholders –
basic
Net income/(loss) per ordinary share
attributable to ordinary shareholders – diluted
Net income/(loss) per ADS attributable to
ordinary shareholders – basic
Net income/(loss) per ADS attributable to
ordinary shareholders – diluted
Weighted average number of ordinary
shares used in computing basic
earnings/(losses) per share
Weighted average number of ordinary shares used in
computing diluted earnings/(losses) per share
Notes:
2
(48)
(570)
396
(174,419)
—
(83,400)
—
(30,449)
—
18,987
(1,111)
21,929
2,978
(434,397)
(2.03)
(2.03)
(4.07)
(4.07)
(0.92)
(0.92)
(1.84)
(1.84)
0.14
0.13
0.29
0.27
0.13
0.13
0.27
0.26
(1.07)
(1.07)
(2.14)
(2.14)
44,245,388
44,245,388
63,717,007
168,589,273
234,811,986
44,245,388
44,245,388
69,159,524
174,024,997
234,811,986
(1) Share-based compensation expenses were allocated in cost of revenues and operating expenses as follows:
Cost of revenues
Sales and marketing expenses
Research and development expenses
General and administrative expenses
Total
2011
26
225
443
1,276
1,970
2
2012
For the Year Ended December 31,
2013
(in thousands of US$)
2014
30
270
489
882
1,671
36
445
996
1,388
2,865
18
1,395
2,403
2,357
6,173
2015
121
6,997
9,432
11,510
28,060
2011
2012
As of December 31,
2013
(in thousands of US$)
2014
2015
Summary Data of Consolidated Balance Sheets:
Cash, cash equivalents, term deposits and short-term
investments
Total assets
Deferred revenues
Customer advances and deposits
Total liabilities
Total mezzanine equity
Total shareholders’ equity/(deficit)
Summary Data of Consolidated Statements of
Cash Flows:
Net cash provided by/(used in) operating activities
Cash used in purchase of property and equipment
Cash paid for business acquisition of Anjuke and
Ganji, net of acquisition of cash
Net cash used in investing activities
Net cash provided by financing activities
Exchange Rate Information
45,485
65,994
15,399
3,813
50,016
129,284
(113,306)
2011
(50,323)
(5,655)
—
(10,455)
57,110
35,647
56,456
28,955
11,040
69,003
139,517
(152,064)
311,095
333,341
55,099
21,369
113,058
—
220,283
609,035
703,932
95,336
35,983
196,615
—
507,317
2012
For the Year Ended December 31,
2013
(in thousands of US$)
2014
(4,728)
(5,227)
—
(27,153)
253
66,304
(4,177)
—
(230,046)
213,343
98,585
(32,476)
—
(305,272)
257,430
524,523
4,067,193
207,059
151,138
1,230,294
15,038
2,821,861
2015
10,785
(195,446)
(659,115)
(443,181)
804,993
Substantially all of our operations are conducted in China and substantially all of our revenues are denominated in Renminbi. This annual report
contains translations of Renminbi amounts into U.S. dollars at specific rates solely for the convenience of the reader. We use U.S. dollars as our reporting
currency in our consolidated financial statements and in this annual report. Assets and liabilities denominated in RMB are translated into U.S. dollars at the
rates of exchange as of the balance sheet date, equity accounts are translated at historical exchange rates and revenues, expenses, gains and losses are
translated using the average rate for the year as published by the State Administration of Foreign Exchange, or SAFE. With respect to amounts not recorded
in our consolidated financial statements included elsewhere in this annual report, all translations from Renminbi to U.S. dollars and from U.S. dollars to
Renminbi in this annual report were made at a rate of RMB6.4778 to US$1.00, the exchange rate set forth in the H.10 statistical release of the Board of
Governors of Federal Reserve Bank on December 31, 2015. We make no representation that any Renminbi or U.S. dollar amounts could have been, or
could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, the rates stated below, or at all. The PRC government imposes
control over its foreign currency reserves in part through direct regulation of the conversion of Renminbi into foreign exchange and through restrictions on
foreign trade. On May 6, 2016, the certified exchange rate was RMB6.4970 to US$1.00.
B. Capitalization and Indebtedness
Not applicable.
3
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
Risks Related to Our Business
We operate in a fast-evolving industry, which makes it difficult to evaluate our business and prospects.
We commenced operations in 2005 and many of the elements of our business are evolving and relatively unproven. The markets for our
technology and products and services are relatively new and rapidly developing and are subject to significant challenges. Our business plan relies heavily
upon growing our user base and exploring new market opportunities, and we may not succeed in any of these respects.
As the online marketing services and mobile services industries in China are relatively young and untested, there are few proven methods of
projecting user demand or available industry standards on which we can rely. We cannot assure you that our attempts to expand our user base and products
and services will be successful, profitable or widely accepted and therefore the future revenue and income potential of our business are difficult to evaluate.
You should consider our prospects in light of the risks and uncertainties fast-growing companies with limited operating histories may encounter.
If we fail to continually anticipate user preferences and provide attractive services on our online platforms, we may not be able to grow and retain
our user base.
Our success depends on our ability to grow and retain our user base. In order to attract and retain users and compete against our direct competitors
and other industry or content-specific vertical websites, we must continue to innovate and introduce services that our users find useful and attract them to
use our online platforms more frequently and become our paying users. For example, we must continue to develop new content categories on our online
platforms that appeal to our users. The popularity of online marketing services and other internet services is difficult to predict, and we cannot be certain
that the services we offer will continue to be popular with our users or sufficiently successful to offset the costs incurred to offer these services. Given that
we operate in a rapidly evolving industry in China, we need to continually anticipate user preferences and industry changes and respond to such changes in
a timely and effective manner. If we fail to anticipate and meet the needs of our users, the size of our user base may decrease. A decrease in our user base
would render our online platforms less attractive to merchants and may reduce our membership and online marketing revenues, which may have a material
and adverse effect on our marketing business, financial condition and results of operations.
If we fail to retain existing or attract new local merchants to use our online platforms and pay for our membership and online marketing services,
our business, financial condition and prospects may be materially and adversely affected.
The success of our business depends on our ability to attract and retain local merchants that provide information on our online platforms to
consumers and pay for our membership and online marketing services and to offer attractive products and services to our consumer users. If we are unable
to grow and maintain a healthy ecosystem of local merchants, our users may find our online platforms to be less useful than expected and may not continue
to use our online platforms. This in turn may affect our ability to attract new merchants and convince existing merchants to renew their paid memberships
or increase their level of spending on our services. Our membership contracts have terms ranging from one month to one year. A significant portion of our
paying merchant members are small and medium-sized local merchants who fail to renew their membership contracts upon expiration for a number of
reasons. The competitive landscape for such local merchants changes quickly and they may have only temporary or occasional recruiting or marketing
needs. In addition, our efforts to provide greater incentives for our existing paying merchant members to use our online marketing services, including
marketing activities to highlight the value of differentiated paying merchant members-only services, may not be successful. Our customers may terminate
their memberships or other spending on our online marketing services because we no longer serve their needs or because their demands can be better
fulfilled by our competitors or other service providers. Decisions by our customers not to renew their memberships or not to use our online marketing
services could reduce our revenues, as well as cause us to incur additional cost in attracting new paying merchant members and other customers. A
significant increase in local merchant attrition or decrease in local merchant spending on our services would have an adverse effect on our business,
financial condition and results of operations.
4
We may not be able to regain profitability or maintain positive net cash flow from operations.
We generated net income in 2013 and 2014 but incurred losses in 2015. Our losses in 2015 were attributable to increased competition and the fact
that we had new initiatives such as 58 Home and Guazi.com Inc., or Guazi, a subsidiary that operated our consumer-to-consumer (C2C) used car trading
platform, that were still in early stages of development. Cash from operating activities was positive in each year from 2013 through 2015 but decreased
significantly in 2015. Meanwhile, our cash used in investing activities has been larger than our cash generated from operating activities, and it continued to
increase in 2015 due to our increased mergers and acquisitions activity and our purchase of headquarters office space. We expect that we will continue to
incur marketing and sales, research and development and other expenses to launch new services and grow our user base, which may affect our profitability
and operating cash flow in the future.
Our future profitability may also be significantly impacted by the success of our recent and new service offerings, such as our mobile applications.
Since the completion of 58 Home’s Series A equity funding round on November 27, 2015, we have ceased consolidating its financial results of in our
consolidated financial statements, as we divested Guazi on December 31, 2015. As competition in these new services intensifies in China, we may choose
to invest heavily to gain market share, which may adversely affect our profitability. Our future profitability may also be significantly impacted by our
integration with Anjuke and Ganji. We have consolidated Anjuke since March 2015 and Ganji since August 2015. The Ganji and Anjuke businesses have
thousands of employees and their own respective users and merchant networks. We are keeping their brands and hope to grow the user base and enhance
monetization. Failure to integrate these businesses might adversely affect our profitability.
In addition, our ability to achieve or maintain profitability is affected by various factors that are beyond our control. For example, our revenues
and profitability depend on the continuous development of the online marketing industry in China and local merchants’ allocation of more of their budgets
to online marketing services companies. We cannot assure you that online marketing services companies will become more widely accepted in China or
that merchants will increase their spending on online marketing services websites.
If we are unsuccessful in addressing any of these risks and uncertainties, our business may be materially and adversely affected and we may incur
net loss in the future. If we are unable to maintain positive operating cash flows, we may need to seek debt or equity financing or may cease to operate as a
going concern. Further equity financings may dilute our existing shareholders.
We have committed significant resources to acquisitions and investments, including, among others, acquisition of Anjuke and a strategic stake in
Ganji, and if we cannot successfully integrate these businesses with our own, our results of operations and return on capital may be materially
adversely affected.
Since our IPO in October 2013, we have made a number of acquisitions and investments, including several major ones. In March 2015, we
acquired Anjuke, a major online real estate listing platform in China, for a combination of share consideration and cash, including 4,839,372 newly issued
ordinary shares of our company and US$160.2 million in cash. We also issued 248,216 fully vested restricted share units of our company to former Anjuke
employees as part of the share consideration. In April 2015, we acquired a less than 50% equity stake in Ganji, a major online local services platform in
China, for a combination of share consideration and cash, including 34,039,136 newly issued ordinary shares of our company and US$412.2 million in
cash. Later in 2015, our company, as a limited partner, committed an aggregate of 46,505,912 newly issued ordinary shares and approximately US$406.7
million in cash to several private equity funds, of which all the ordinary shares and US$272.4 million in cash were contributed in August 2015. These funds
are dedicated to investing in businesses in China and are separately managed by different investment entities as general partners which are unaffiliated with
each other and unaffiliated with us. These funds, together with Tencent, acquired all the remaining equity interest in Ganji in August 2015. We also
transferred an aggregate of 4,449,002 fully vested restricted share units of our company and approximately US$51.0 million in cash to former Ganji
employees. We have consolidated the financial statements of Anjuke into our financial statements since March 2015. The acquisition of the strategic stake
in Ganji and the subsequent business cooperation and integration has led to our consolidation of Ganji’s financial statements into our own beginning in
August 2015.
5
The addition of Anjuke has strengthened our market position in the online rental and secondary property sales markets and has allowed us to enter
the primary home sales segment. The acquisition of the strategic stake in Ganji and our subsequent business cooperation and integration have allowed us to
increase our market share in the job, housing, yellow page local services and used car categories and reduce marketing costs and expenses. However,
Anjuke and Ganji are major businesses with thousands of employees in distributed locations. They also have their own respective user bases and merchant
networks that might not overlap with those of 58. Their business processes and practices, system infrastructure and architecture and company values are
also different from those of 58. We might experience unexpected employee turnover or loss of users and customers after our acquisition or investment.
These acquisitions and investments expose us to potential risks, including risks associated with unforeseen or hidden liabilities, diversion of management
attention and resources from our existing business and inability to generate sufficient revenues to offset the costs and expenses of the acquisition or
investment.
Other than Anjuke and Ganji, we have made various other acquisitions and investments since our IPO in 2013. If we fail to integrate these
acquired businesses or the companies in which we invested fail to grow as we expect, we may experience losses in our acquisitions and investments.
If we are presented with appropriate opportunities in the future, we may acquire or invest in additional businesses or assets that are complementary
to our business. Difficulties encountered in the acquisition or investment process may have an adverse effect on our ability to manage our business.
We face intense competition, and if we do not compete successfully against existing and new competitors, we may lose market share and suffer
losses.
We face intense competition. Our competitors in the online marketing space include other smaller multi-category online classifieds companies as
well as industry or content-specific vertical websites whose information serve the same underlying industries as certain content categories of our online
platforms. We may also face competition from major internet companies, who may enter the online classifieds market in China. We compete primarily on
the basis of user traffic, effectiveness of services in reaching targeted users, ability to demonstrate marketing results and customer service capabilities.
We believe that our competitiveness depends upon many factors both within and beyond our control, including our ability to increase our brand
recognition and continue to develop user loyalty, our ability to keep up with the technological developments and users’ changing demands and our ability to
raise sufficient capital to sustain and expand our business. For example, we may have to increase our sales and marketing expenses from time to time to
promote our brand, especially when the competition is intense. Some of our current and potential competitors may have greater financial, marketing, user
traffic and other resources than we have. In addition, local content providers may be acquired by, receive investments from or enter into strategic
relationships with larger, well-established and well-financed companies or investors. Certain of our competitors may be able to devote greater resources to
marketing and promotional campaigns and devote substantially more resources to website and system development than us. Increased competition may
reduce our market share and require us to increase our marketing and promotion efforts, which could negatively affect our operating margins or force us to
incur losses. There can be no assurance that we will be able to compete successfully against current and future competitors or maintain our leading position
or level of user traffic in the online marketing services market in China, and competitive pressures may have a material adverse effect on our business,
prospects, financial condition and results of operations.
We may not be able to effectively manage our growth and expansion or implement our business strategies, in which case our business and results
of operations may be materially and adversely affected.
We have experienced a period of rapid growth and expansion, which has placed, and continues to place, significant strain on our management and
resources. We cannot assure you that this level of significant growth and expansion will be sustainable or achieved at all in the future. We believe that our
continued growth and expansion will depend on our ability to develop new sources of revenue, attract new users, paying merchant members and customers,
retain and expand paying merchant members and customers, encourage additional spending by our customers, continue developing innovative technologies
in response to user demand, increase brand awareness through marketing and promotional activities, react to changes in user access to and use of the
internet, expand into new market segments, integrate new devices, platforms and operating systems and take advantage of any growth in the relevant
markets. We cannot assure you that we will achieve any of the above.
6
To manage our growth and expansion, and to attain and maintain profitability, we anticipate that we will need to implement a variety of new and
upgraded operational and financial systems, procedures and controls, including the improvement of our accounting and other internal management systems.
We will also need to further expand, train, manage and motivate our workforce and manage our relationships with our paying merchant members and
customers. All of these endeavors involve risks and will require substantial management efforts and skills and significant additional expenditures. Our
further expansion may divert our management, operational or technological resources from our existing business operations. In addition, our expansion may
require us to operate in new cities in China, including a number of small cities in China, where we may have difficulty in adjusting to local market demands
and regulatory requirements. We cannot assure you that we will be able to effectively manage our growth and expansion or implement our future business
strategies effectively, and failure to do so may materially and adversely affect our business and results of operations.
Any damage to our reputation and brand or failure to enhance our brand recognition may materially and adversely affect our business, financial
condition and results of operations.
We believe that the market recognition and reputation of our brand have significantly contributed to the success of our business. Maintaining and
enhancing our brand is critical to our success and ability to compete. Many factors, some of which are beyond our control, may negatively impact our brand
and reputation, such as:
any failure to maintain a pleasant and reliable experience for users as their preferences evolve and as we expand into new services;
any decrease in brand awareness among our existing and potential users; and
any negative publicity about us or online marketing services or mobile services in general, including any actual or perceived security or product or
service quality problems involving online marketing service providers in China.
Although all of our paying merchant members and a portion of our registered users go through certain verification procedures, fraudulent
transactions and sale of counterfeit or pirated, as well as faulty or defective, items through our online platforms have occurred in the past and may occur in
the future. In the past, we found several counterfeit products sold through our website primarily relating to our group buying business, which we
significantly scaled back since mid-2012, and immediately stopped the sellers from selling such counterfeit products. Although we do not believe that we
are responsible for the sellers’ wrongdoings, several Chinese media reported the incidents and accused us of failure to safeguard buyers’ rights on our
website. These incidents and any similar incidents or true or untrue claims of such incidents could harm our reputation, impair our ability to attract and
retain users and grow our base of paying customers. If we are unable to maintain a good reputation, further enhance our brand recognition, continue to
develop our user loyalty and increase positive awareness of our website, our results of operations may be materially and adversely affected.
In addition, any claims or negative publicity about our company, our products and services, our employees, our business practices, regardless of
their veracity, could harm our brand image and in turn adversely affect our business and results of operations. We cannot assure you that we will be able to
defuse negative publicity to the satisfaction of our investors, users, customers and business partners. From time to time, there have been claims or negative
publicities about our company and our business practice, which adversely affected our public image and reputation during the period of such negative
publicities. Intense negative publicities may divert our management’s attention and may adversely impact our business, and we cannot assure you that our
brand, public image and reputation will not be materially and adversely affected.
7
We have incurred significant costs on a variety of marketing efforts, including significant advertising expenses, designed to attract users, and some
marketing campaigns and methods may turn out to be ineffective.
We have invested significantly in marketing to promote public awareness of online marketing services, enhance our brand recognition and drive
user growth, including incurring US$22.7 million, US$73.4 million and US$289.1 million in advertising expenses in 2013, 2014 and 2015, respectively.
Such advertising expenses represented 26.9%, 40.8% and 42.0% of our total sales and marketing expenses and 15.6%, 27.7% and 40.4% of our revenues in
the corresponding periods. Our marketing activities may not be well received by users and may not attract the additional traffic that we anticipated. The
evolving marketing approaches and tools require us to enhance our marketing approaches and experiment with new marketing methods to keep pace with
industry developments and user preferences. Failure to refine our existing marketing approaches or to introduce new effective marketing approaches in a
cost-effective manner could reduce our market share, cause our revenues to decline and negatively impact our profitability.
We derive a significant portion of our revenues from five of China’s major cities and we face market risk due to our concentration in these major
urban areas.
We derive a significant portion of our revenues from five of China’s major cities: Beijing, Shanghai, Shenzhen, Guangzhou and Chengdu. We
expect these five cities to continue to be important sources of revenues in all of our content categories. If any of these major cities experience events which
negatively impact the internet industry, such as a serious economic downturn or contraction, a natural disaster, or slower economic growth due to adverse
governmental policies or otherwise, demand for our services could decline significantly and our revenues and profitability could be materially reduced. Any
of these cities may experience decreases in demand for services related to specific content categories on our platforms, such as real estate or automotive,
due to local policies, regulations or economic conditions. In addition, if a competitor, including a local competitor whose business focuses on one of these
cities, were to gain significant market share in any of these cities, our revenues may be materially and adversely affected.
The markets for online marketing services and mobile services in China are constantly evolving and may not grow as quickly as expected or at all.
Our business and prospects are affected by the development of emerging internet business models in China, including those for online marketing
services and mobile services. Our membership services and other online marketing services have distinct business models which may differ from models
for these businesses in other markets, such as the United States, and that are in varying stages of development and monetization. Our future success will
depend on our ability to respond to rapidly changing technologies, adapt our products and services to evolving industry standards and improve the
performance and reliability of our products and services. Our failure to adapt to such changes could harm our business. In addition, changes in user
behavior resulting from technological developments may also adversely affect us. We cannot assure you that the online marketing services and mobile
services industries in China will continue to grow as rapidly as they have in the past or at all. With the development of technology, new internet services
may emerge which are not a part of our service offerings and which may render online marketing services or mobile services less attractive to users. The
growth and development of these industries are affected by numerous factors, such as the macroeconomic environment, regulatory changes, technological
innovations, development of internet and internet-based services, users’ general online experience, cultural influences and changes in tastes and
preferences. If the online marketing services and mobile services industries in China do not grow as quickly as expected or at all, or if we fail to benefit
from such growth by successfully implementing our business strategies, our business and prospects may be adversely affected.
If we fail to keep up with the technological developments and users’ changing requirements or to successfully capture and retain a significant
portion of the growing number of users that access online marketing services, we may be unable to meet our revenue growth expectations and our
results of operation may be adversely affected.
8
The internet industries in China are subject to rapid and continuous changes in technology, user preferences, the nature of services offered and
business models. Our success will depend on our ability to keep up with the changes in technology and user behavior resulting from technological
developments. If we do not adapt our services to such changes in an effective and timely manner, we may suffer from decreased user traffic, which may
result in a reduction of revenues from our membership services or a decrease in spending on our other services.
Our online marketing services are now accessible to users from many internet-enabled devices, and we offer versions of our services for mobile
operating systems, including Android and iOS. An important element of our strategy is to continue to develop our online platforms and services for mobile
devices to capture a greater share of the growing number of users that access online marketing services and other internet services through smartphones and
other mobile devices. The lower resolution, functionality and memory associated with some mobile devices make the use of services through such devices
more difficult and the services we develop for these devices may fail to prove compelling to users. Manufacturers or distributors may establish unique
technical standards for their devices, and our services may not work or be viewable on these devices as a result. As new devices and new services are
continually being released, it is difficult to predict the problems we may encounter in developing our services for use on these devices and we may need to
devote significant resources to the creation, support and maintenance of such services. Devices providing access to our products and services are not
manufactured and sold by us, and we cannot assure you that the companies who manufacture or sell these devices would always ensure that their devices
perform reliably and are maximally compatible with our systems. Any faulty connection between these devices and our products and services may result in
consumer dissatisfaction with us, which could damage our brand and have a material and adverse effect on our financial results. Furthermore, new online
marketing services may emerge which are specifically created to function on mobile platforms, as compared to our online marketing services that were
originally designed to be accessed through personal computers, or PCs, and such new services may operate more effectively through mobile devices than
our own. If we are unable to attract and retain a substantial number of mobile device users to our services, or if we are slower than our competitors in
developing attractive services that are adapted for such devices, we may fail to capture a significant share of an increasingly important portion of the market
for our services or lose existing users, either of which may have a material adverse effect on our business, financial condition and results of operations.
Furthermore, changes in technologies may require substantial capital expenditures in development of new features, applications and services as
well as in modification of existing features, applications, services or infrastructure. We may not successfully execute our business strategies due to a variety
of reasons such as technical hurdles, misunderstandings or erroneous predictions of market demand or lack of necessary resources. Failure in keeping up
with technological developments may result in our online platforms being less attractive, and as a result we may be unable to meet our revenue growth
expectations and our results of operations may be adversely affected.
If internet search engines’ ranking methodologies are modified or our search result page rankings decline for other reasons, our user traffic could
decrease.
We depend in part on various internet companies to direct traffic to our website. Our ability to maintain the number of visitors directed to our
website is not entirely within our control. Our competitors’ search engine optimization efforts may result in their websites receiving a higher search result
page ranking than ours, or internet companies could revise their methodologies in an attempt to improve their search results, which could adversely affect
the placement of our search result page ranking. If internet companies modify their search algorithms in ways that are detrimental to our user growth or in
ways that make it harder for our users to find our website, or if our competitors’ search engine optimization efforts are more successful than ours, our
overall growth in user traffic could slow down or decrease, and we could lose existing users. Our website has experienced fluctuations in search result
rankings in the past, and we anticipate similar fluctuations in the future. Any reduction in the number of users directed to our website would harm our
business and results of operations.
Our business depends substantially on the continuing efforts of our executive officers and key employees, and our business may be severely
disrupted if we lose their services.
We currently depend on the continued services and performance of the key members of our management team, in particular Mr. Jinbo Yao, our
chairman and chief executive officer. Mr. Yao is one of our founders and his leadership has played an integral role in our growth. Our future success
depends substantially on the continued efforts of our executive officers and key employees. If one or more of our executive officers or key employees were
unable or unwilling to continue their service, we might not be able to replace them easily, in a timely manner, or at all, and our business may be severely
disrupted, our financial conditions and results of operations may be materially and adversely affected and we may incur additional expenses to recruit, train
and retain personnel. If any of our executive officers or key employees joins a competitor or forms a competing company, we may lose users, know-how
and key professionals and staff members. Each of our executive officers and key employees has entered into an employment agreement and a
confidentiality and non-competition agreement with us. However, if any dispute arises between our executive officers and key employees, on one hand, and
us on the other, we cannot assure you that we would be able to enforce these non-compete provisions in China, where these executive officers reside, in
light of uncertainties with the PRC legal system. See “— Risks Related to Doing Business in China — Uncertainties in the interpretation and enforcement
of PRC laws and regulations could limit the legal protections available to you and us.”
9
If we are unable to attract, train and retain qualified personnel, our business may be materially and adversely affected.
Our future success depends, to a significant extent, on our ability to attract, train and retain qualified personnel, particularly management, technical
and marketing personnel with expertise in the online marketing industry. Our field sales and customer service teams are also critical to maintaining the
quality of our services as they interact with local merchants on a daily basis. We must continue to attract qualified personnel at a fast pace to keep up with
our growing user base and the scale of our operations. Since our industry is characterized by high demand and intense competition for talent, there can be
no assurance that we will be able to attract or retain qualified staff or other highly skilled employees that we will need to achieve our strategic objectives.
As we are still a relatively young company, our ability to train and integrate new employees into our operations may not meet the growing demands of our
business. If we are unable to attract, train, and retain qualified personnel, our business may be materially and adversely affected.
Future strategic alliances, acquisitions or business disposals may have a material and adverse effect on our business, reputation and results of
operations.
We may enter into strategic alliances with various third parties to further our business purposes from time to time. For example, in June 2014, we
entered into a strategic partnership with Tencent Holdings Limited, or Tencent, a leading provider of comprehensive Internet services in China, pursuant to
which Tencent invested US$736.1 million in exchange for an approximately 19.9% equity interest in our company on a fully-diluted basis. Strategic
alliances with third parties could subject us to a number of risks, including risks associated with sharing proprietary information, non-performance by the
counter-party, and an increase in expenses incurred in establishing new strategic alliances, any of which may materially and adversely affect our business.
In addition, to the extent the strategic partner suffers negative publicity or harm to their reputation from events relating to their business, we may also suffer
negative publicity or harm to our reputation by virtue of our association with such third parties, and we may have little ability to control or monitor their
actions.
Investments and acquisitions and the subsequent integration of new assets and businesses into our own require significant attention from our
management and may divert resources from our existing business, which in turn could have an adverse effect on our business operations. Invested or
acquired assets or businesses may not generate the financial results we expect and may adversely affect our results of operations. Furthermore, investments
and acquisitions could result in the use of substantial amounts of cash, potentially dilutive issuances of equity securities, the occurrence of significant
goodwill impairment charges, amortization expenses for other intangible assets and exposure to potential unknown liabilities of the acquired businesses.
Moreover, the costs of identifying and consummating acquisitions may be significant.
Furthermore, the legal requirements on acquisitions by us and our PRC subsidiaries are different from acquisitions by our consolidated affiliated
entities. Most importantly, if we or our PRC subsidiaries acquire any domestic companies in China, such acquisition will be subject to PRC laws and
regulations on foreign investment. We and our PRC subsidiaries are restricted or prohibited from directly acquiring interests in companies in certain
industries under PRC laws and regulations. See “Item 4. Information on the Company — B. Business Overview — Regulation — Regulations on Value-
Added Telecommunication Services.” Our consolidated affiliated entities are not subject to PRC laws and regulations on foreign investment and may
acquire PRC companies operating in industries where foreign investments are restricted or prohibited. However, there are uncertainties with respect to the
interpretation and application of PRC laws and regulations regarding indirect foreign investments in such industries. See “— Risks Related to Our
Corporate Structure and Restrictions on Our Industry — Substantial uncertainties and restrictions exist with respect to the interpretation and application of
PRC laws and regulations relating to online commerce and the distribution of internet content in China. If the PRC government finds that the structure we
have adopted for our business operations does not comply with PRC laws and regulations, we could be subject to severe penalties, including the shutting
down of our website.”
10
On December 31, 2015, we sold our controlling ownership stake in Guazi, a subsidiary that operated our consumer-to-consumer (C2C) used car
trading platform, to Mr. Mark Haoyong Yang, the former co-chairman of our board of directors and our former co-CEO, for cash consideration of US$50.0
million. We may dispose of other businesses that we control, particularly ones that are not closely related to our core focus areas or might require more
resources or financial capital than we can allocate to them. These decisions are largely based on our management’s assessment of the business models and
likelihood of success of these businesses. Our judgment could be inaccurate and divesting ownership of these businesses might negatively affect our
operations or long-term value.
The proper functioning of our platforms, network infrastructure and information technology systems is essential to our business, and any failure to
maintain the satisfactory performance, security and integrity of our systems will materially and adversely impair our ability to provide services and
affect our business, reputation, financial condition and results of operations.
The proper functioning of our platforms is essential to the conduct of our business. Specifically, the satisfactory performance, reliability and
availability of our website and mobile applications, our transaction-processing systems and our network infrastructure are critical to our success and our
ability to attract and retain users and provide adequate services. Our revenues depend on the user traffic on our website and the volume of activities that
traffic creates.
In addition, our ability to provide consumers and local merchants with a high-quality online experience depends on the continuing operation and
scalability of our network infrastructure and information technology systems. The risks we face in this area include:
our systems are potentially vulnerable to damage or interruption as a result of earthquakes, floods, fires, extreme temperatures, power loss,
telecommunications failures, technical error, computer viruses, hacking and similar events;
we may encounter problems when upgrading our systems or services and undetected programming errors could adversely affect the performance
of the software we use to provide our services. The development and implementation of software upgrades and other improvements to our internet
services is a complex process, and issues not identified during pre-launch testing of new services may only become evident when such services are
made available to our entire user base; and
we rely on servers, data centers and other network facilities provided by third parties, and the limited availability of third-party providers with
sufficient capacity to house additional network facilities and broadband capacity in China may lead to higher costs or limit our ability to offer
certain services or expand our business. In particular, electricity, temperature control or other failures at the data centers we use may adversely
affect the operation of our servers or result in service interruptions or data loss.
These and other events in the past occasionally led to and may in the future lead to interruptions, decreases in connection speed, degradation of our
services or the permanent loss of user data and uploaded content. Any system interruptions caused by telecommunications failures, computer viruses, or
hacking or other attempts to harm our systems that result in the unavailability of our website and mobile applications or reduced performance would reduce
the attractiveness of the services offered on our online platforms. If we experience frequent or persistent service disruptions, whether caused by failures of
our own systems or those of third-party service providers, our reputation or relationships with our users may be damaged and our users may switch to our
competitors, which may have a material adverse effect on our business, financial condition and results of operations.
Our operations depend on the performance of the internet infrastructure and fixed telecommunications networks in China.
11
Almost all access to the internet in China is maintained through state-owned telecommunication operators under the administrative control and
regulatory supervision of the Ministry of Industry and Information Technology, or the MIIT. Moreover, we primarily rely on a limited number of
telecommunication service providers to provide us with data communications capacity through local telecommunications lines and internet data centers to
host our servers. We have limited access to alternative networks or services in the event of disruptions, failures or other problems with the PRC internet
infrastructure or the fixed telecommunications networks provided by telecommunication service providers. With the expansion of our business, we may be
required to upgrade our technology and infrastructure to keep up with the increasing traffic on our website. We cannot assure you that the internet
infrastructure and the fixed telecommunications networks in China will be able to support the demands associated with the continued growth in internet
usage.
In addition, we have no control over the costs of the services provided by telecommunication service providers. If the prices we pay for
telecommunications and internet services rise significantly, our results of operations may be materially and adversely affected. Furthermore, if internet
access fees or other charges to internet users increase, our user traffic may decline and our business may be harmed.
We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position.
We regard our trademarks, service marks, domain names, trade secrets, proprietary technologies and similar intellectual property as critical to our
success, and we rely on trademark law, trade secret protection and confidentiality and license agreements with our employees, partners and others to protect
our proprietary rights. As of March 31, 2016, we had registered 35 domain names that are material to our business, including www.58.com,
www.58.com.cn, anjuke.cn and anjuke.com, and 136 trademarks in China, excluding those relating to 58 Home. As the registrant of the trademarks, Beijing
58 Information Technology Co., Ltd., or Beijing 58, has an exclusive right to use such trademarks in China for the goods or services under the trademark
categories that it has registered. Beijing 58 also enjoys the exclusive right to use the domain names that it has registered. However, trademarks may also be
invalidated, circumvented or challenged. For example, under PRC law, certain graphics may not be registered as a trademark and if a registered trademark
is found to violate such prohibition, the relevant authority can invalidate the trademark; third parties may challenge such registered trademarks and apply to
the authority for invalidation. In addition, if a registered trademark is identical or similar to a well-known trademark or prejudices the existing right
obtained by others, it may be invalidated by the relevant authority upon request by the right holder. Trade secrets are difficult to protect, and our trade
secrets may be leaked or otherwise become known or be independently discovered by competitors. Confidentiality agreements may be breached, and we
may not have adequate remedies for any breach.
It is often difficult to enforce intellectual property rights in China. Even where adequate laws exist in China, it may not be possible to obtain
prompt and equitable enforcement of such laws, or to obtain enforcement of a court judgment or an arbitration award delivered in another jurisdiction, and
accordingly, we may not be able to effectively protect our intellectual property rights in China. Policing any unauthorized use of our intellectual property is
difficult and costly and the steps we have taken may be inadequate to prevent the misappropriation of our technologies.
We may not be able to successfully halt the operations of websites that aggregate our data as well as data from other companies, including social
networks, or “copycat” websites that have misappropriated our data in the past or may misappropriate our data in the future.
From time to time, third parties have misappropriated our data through website scraping, robots or other means and aggregated this data on their
websites. In addition, “copycat” websites have misappropriated data on our website and attempted to imitate our brand or the functionality of our website.
When we have become aware of such websites, we have taken measures to halt such conduct. However, we may not be able to detect all such websites in a
timely manner and the measures we take may be insufficient to stop their conduct. In those cases, our available remedies may not be adequate to protect us
against such websites. Regardless of whether we can successfully enforce our rights against these websites, any measures that we may take could require us
to expend significant financial or other resources.
12
We may be subject to intellectual property infringement claims or other allegations by third parties for services we provide or for information or
content displayed on, retrieved from or linked to our website, or distributed to our users, which may materially and adversely affect our business,
financial condition and prospects.
Internet, technology and media companies are frequently involved in litigation based on allegations of infringement of intellectual property rights,
unfair competition, invasion of privacy, defamation and other violations of other parties’ rights. The validity, enforceability and scope of protection of
intellectual property rights in internet-related industries, particularly in China, are uncertain and still evolving. We face, from time to time, and expect to
face in the future, allegations that we have infringed the trademarks, copyrights, patents and other intellectual property rights of third parties, including our
competitors, or allegations that we are involved in unfair competition against our competitors. As we face increasing competition and sometimes have to
take defensive measures in response to competitive pressure and as litigation become more common in China in resolving commercial disputes, we face a
higher risk of being the subject of intellectual property infringement and unfair competition claims. Intellectual property and unfair competition claims and
litigation may be expensive and time-consuming to investigate and defend, and may divert resources and management attention from the operation of our
business. Such claims, even if they do not result in liability, may harm our reputation. Any resulting liability or expenses, or changes required to be made to
our website to reduce the risk of future liability, may have a material adverse effect on our business, financial condition and prospects.
We utilize software that selectively identifies classified information listings on other websites in certain content categories for which our
certification procedure is not required and replicates such listings on www.58.com. These replicated listings are not given individualized registered user
accounts and are not counted as listings for purposes of calculating the listings per day posted by our users as disclosed in this annual report. If an original
poster wants to delete a replicated listing on our website, the poster can either use our online self-help functions or contact our customer service online to
delete the listing. We do not explicitly indicate the replicated listings on our website, although we notify our users of the replicated nature of the listings
upon inquiry. We believe this is a widespread practice in our industry in China. However, the practice may be deemed to be in violation of the PRC Anti-
Unfair Competition Law. If other market participants bring legal claims against us for conducting unfair competition, we may be held liable by the court
and be required to pay damages to the plaintiffs equal to the losses suffered by the market participants as a result of the unfair competition practices or, if it
is difficult to calculate the losses, equal to the aggregate profits earned through the unfair competition practices and the reasonable expenses incurred by the
plaintiffs to investigate the unfair competition practices. We have never generated revenue from replicated listings. In addition, if the replicated listings are
protected under copyright law, the practice of replicating listings may be deemed to be copyright infringement. In such case, we may be required to cease
the act of infringement, eliminate any influence caused, apologize to and pay damages to the copyright owners and be subject to penalties including
confiscation of illegal gains and imposition of fines by the relevant governmental authorities. In addition, we have from time to time been the subject of
critical media coverage due to this practice, which could harm our reputation and business.
We may be held liable to third parties for information or content displayed on, retrieved from or linked to our website, or distributed to website
users, which could harm our reputation and business.
Our online marketing services enable users to exchange local business or service information, generate content, market products and services,
conduct business and engage in various other online activities. Claims may be brought against us for defamation, libel, negligence, copyright, patent or
trademark infringement, tort (including personal injury), fraud, other unlawful activity or other theories and claims based on the nature and content of
information to which we link or that may be posted on our website, generated by our users, or delivered or shared hypertext links to third-party websites, or
video or image services, if appropriate licenses and/or third-party consents have not been obtained. Third-parties may also seek to assert claims against us
alleging unfair competition or violations of privacy rights or failure to maintain the confidentiality of user data. Our defense of any such actions could be
costly and involve significant time and attention of our management and other resources.
13
We are also regularly approached and asked to remove content uploaded by users on the grounds of alleged copyright or personal rights
infringement. In such cases, we investigate the claims and remove any uploads that appear to infringe the rights of a third party after our reasonable
investigation and determination. Our corporate policy requires a user to enter into a user agreement in the registration process before posting any content on
our website. Pursuant to the user agreement, a user makes certain representations and warranties relating to the user generated content on our website. See
“Item 4. Information on the Company — B. Business Overview — Content Management and Monitoring.” However, we have been and in the future may
be subject to intellectual property infringement claims or other allegations by third parties for services provided or content displayed on our website.
Although we believe that we will have recourse to indemnification from alleged infringing users on the basis of the user agreement, such right to recourse is
subject to the enforcement mechanism of PRC legal system, which may not be effective. Our data security team also screens our website to eliminate
content that we believe may infringe copyrights. Although our internal policy, terms of our user agreements and the screening system are designed to help
limit the occurrences and impact of infringing activities, they may not be effective in eliminating such occurrences or dissemination of infringing materials
on our website.
Pursuant to PRC national and Beijing local regulations and judicial interpretations, online service providers that provide information storage space
for users to upload works or link services may be held liable for damages if such providers know or have reason to know that the works uploaded or linked
infringe others’ copyrights. The Supreme People’s Court of China promulgated a judicial interpretation on infringement of the right of dissemination
through internet in December 2012. This judicial interpretation, like certain court rulings and certain other judicial interpretations, provide that the courts
will place the burden on internet service providers to remove not only links or contents that have been specifically mentioned in the notices of infringement
from right holders, but also links or contents they should have known to contain infringing content. The interpretation further provides that where an
internet service provider has directly obtained economic benefits from any contents made available by an internet user, it has a higher duty of care with
respect to internet users’ infringement of third-party copyrights. This interpretation could subject us and other online service providers to significant
administrative burdens and litigation risks.
Concerns about collection and use of personal data could damage our reputation and deter current and potential users from using our services.
Concerns about our practices with regard to the collection, use or disclosure of personal information or other privacy-related matters, even if
unfounded, could damage our reputation and operating results. Pursuant to the applicable PRC laws and regulations concerning the collection, use and
sharing of personal data, our PRC subsidiaries and consolidated affiliated entities are required to keep our users’ personal information confidential and are
prohibited from disclosing such information to any third parties without the users’ consent. We apply strict management and protection to any information
provided by users, and under our privacy policy, without our users’ prior consent, we will not provide any of our users’ personal information to any
unrelated third party. In December 2012 and July 2013, new laws and regulations were issued by the standing committee of the PRC National People’s
Congress and the MIIT to enhance the legal protection of information security and privacy on the internet. The laws and regulations also require internet
operators to take measures to ensure confidentiality of information of users. While we strive to comply with our privacy guidelines as well as all applicable
data protection laws and regulations, any failure or perceived failure to comply may result in proceedings or actions against us by government entities or
others, and could damage our reputation. User and regulatory attitudes towards privacy are evolving, and future regulatory or user concerns about the extent
to which personal information is shared with merchants or others may adversely affect our ability to share certain data with merchants, which may limit
certain methods of targeted marketing. Concerns about the security of personal data could also lead to a decline in general internet usage, which could lead
to lower user traffic on our website. A significant reduction in user traffic could lead to lower revenues from paying users, which could have a material
adverse effect on our business, financial condition and results of operations.
We could be liable for any breach of security relating to the third-party online payment platforms we use, and concerns about the security of
internet transactions could damage our reputation, deter current and potential users from using our online platforms and have other adverse
consequences to our business.
14
Users may conduct transactions on our online platforms through third-party online payment platforms. In these online payment transactions,
secured transmission of confidential information, such as customers’ credit card numbers and expiration dates, personal information and billing addresses,
over public networks is essential to maintain consumer confidence. In addition, we expect that an increasing amount of our sales and transactions conducted
on our online platforms will be conducted over the internet as a result of the growing use of online payment platforms. As the prevalence of using online
payment methods increases, associated online crimes will likely increase as well. Our current security measures and those of the third-party online payment
platform service providers may not be adequate. We must be prepared to increase and enhance our security measures and efforts so that our users have
confidence in the reliability of the online payment platforms that we use, which will impose additional costs and expenses and may still not guarantee
complete safety. In addition, we do not have control over the security measures of our third-party online payment platform service providers. Security
breaches of the online payment platforms that we use could expose us to litigation and possible liability for failing to secure confidential user information
and could, among other things, damage our reputation.
A significant barrier to financial transactions or other electronic payment processing platforms over the internet in general has been public concern
over the security of online payments. If these concerns are not adequately addressed, they may inhibit the growth of paid online services generally. If an
internet or mobile network security breach were to occur and get publicized, the perceived security of the online payment platforms may be damaged, and
users concerned about the security of their transactions may become reluctant to purchase our services even if the publicized breach did not involve
payment platforms or methods used by us.
If any of the above were to occur and damage our reputation or the perceived security of the online payment platforms that we use, we may lose
users and user traffic, and users may be discouraged from purchasing our services, which may have an adverse effect on our business. Any significant
reduction in user traffic could lead to lower revenues from membership and online marketing services.
Spammers and malicious applications may make our services less user-friendly and discourage users from using our website or services.
Spammers may use our website and services to send targeted and untargeted spam messages to users, which may embarrass or annoy users and
make usage of our website and services more time-consuming and less user-friendly. As a result, our users may use our services less or stop using them
altogether. As part of fraudulent spamming activities, spammers typically create multiple user accounts, such as accounts being set-up for the purposes of
sending spam messages. Although we have technologies and employees that attempt to identify and delete accounts created for spamming purposes, we are
not able to eliminate all spam messages from being sent on our website.
Our business, financial condition and results of operations, as well as our ability to obtain financing, may be adversely affected by the downturn in
the global or Chinese economy.
The online information services and mobile services industries may be affected by economic downturns. Thus, our business and prospects may be
affected by the macroeconomic environment in China. A prolonged slowdown in the Chinese economy may lead to a reduced amount of activities on our
platforms, which could materially and adversely affect our business, financial condition and results of operations. In addition, our products and services
may be viewed as discretionary by our users, who may choose to discontinue or reduce spending on such products and services during an economic
downturn. In such an event, our ability to retain existing paying merchant members and customers and recruiting new paying merchant members and
customers will be adversely affected, which would in turn negatively impact our business and results of operations.
Moreover, a slowdown or disruption in the global or China’s economy may have a material and adverse impact on financings available to us. The
weakness in the economy could erode investors’ confidence, which constitutes the basis of the credit market. The recent financial turmoil affecting the
financial markets and banking system may significantly restrict our ability to obtain financing in the capital markets or from financial institutions on
commercially reasonable terms, or at all. Although we are uncertain about the extent to which the recent global financial and economic crisis and slowdown
of China’s economy may impact our business in the short-term and long-term, there is a risk that our business, results of operations and prospects would be
materially and adversely affected by any global economic downturn or disruption or slowdown of China’s economy.
We may need additional capital, and the sale of additional ADSs or other equity securities could result in additional dilution to our shareholders.
15
We believe that our current cash and cash equivalents and anticipated cash flow from operations will be sufficient to meet our anticipated cash
needs for the foreseeable future. We may, however, require additional cash resources due to changed business conditions or other future developments,
including to make any investments or acquisitions we may decide to pursue or to pay down loans from financial institutions. If these resources are
insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. For example, in June 2014
and April 2015, we issued 36,805,000 ordinary shares at the equivalent of US$20.00 per ordinary share and 15,384,616 ordinary shares at the equivalent of
US$26.00 per ordinary share, respectively, to a holding vehicle of Tencent Holdings Limited, or Tencent. The sale of additional equity securities could
result in additional dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in
operating and financing covenants that would restrict our operations. It is uncertain whether financing will be available in amounts or on terms acceptable
to us, if at all.
If we fail to implement and maintain an effective system of internal controls, we may be unable to accurately or timely report our results of
operations or prevent fraud, and investor confidence and the market price of our ADSs may be materially and adversely affected.
In connection with our independent registered public accounting firm’s audit of the effectiveness of our internal control over financial reporting as
of December 31, 2015, and our management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2015, we
and our independent registered public accounting firm identified one “material weakness” in our internal control over financial reporting, as defined in the
standards established by the Public Company Accounting Oversight Board of the United States, or PCAOB. The material weakness identified related to the
lack of adequate resources with an appropriate level of knowledge in U.S. GAAP to properly account for significant complex transactions under U.S.
GAAP. As a result, certain significant complex transactions were not initially accounted for properly.
Although we have taken measures and plan to continue to take measures to remedy this weakness, the implementation of these measures may not
fully address this weakness in our internal control over financial reporting, and we may not be able to conclude that it has been fully remedied. Failure to
correct this weakness or failure to discover and address any other control deficiencies could result in inaccuracies in our financial statements and could also
impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis. As a result, our business,
financial condition, results of operations and prospects, as well as the trading price of our ADSs, may be materially and adversely affected. Moreover,
ineffective internal control over financial reporting significantly hinders our ability to prevent fraud.
In addition, our reporting obligations may place a significant strain on our management, operational and financial resources and systems for the
foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation.
During the course of documenting and testing our internal control procedures, we may identify other weaknesses and deficiencies in our internal
control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are
modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over
financial reporting. If we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our financial
statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This
could in turn limit our access to capital markets, harm our results of operations, and lead to a decline in the trading price of our ADSs. Additionally,
ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential
delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our
financial statements from prior periods.
We have granted employee share options and other share-based awards in the past and will continue to do so in the future. We recognize share-
based compensation expenses in our consolidated statement of comprehensive income/(loss) in accordance with U.S. GAAP. Any additional grant
of employee share options and other share-based awards in the future may have a material adverse effect on our results of operation.
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We adopted an employee stock option plan in 2010, or the 2010 Plan, and a share incentive plan in 2013, or the 2013 Plan, for the purpose of
granting share-based compensation awards to employees, directors and consultants to incentivize their performance and align their interests with ours.
Under the 2010 Plan, we are permitted to issue options to purchase up to 20,173,225 ordinary shares. Under the 2013 Plan, we are authorized to grant
options, restricted shares, restricted share units or other awards to purchase up to 17,932,158 or more ordinary shares as of February 29, 2016, including the
automatic increase of 4,246,030 ordinary shares pursuant to the terms of the 2013 Plan. As of February 29, 2016, restricted share units and options to
purchase 12,389,414 ordinary shares were issued and outstanding under the 2013 Plan, and 4,872,214 options to purchase 4,872,214 ordinary shares were
issued and outstanding under the 2010 Plan. 58 Daojia Inc., or 58 Home, an unconsolidated subsidiary of ours, adopted a share incentive plan in 2015 and
granted options and restricted shares under that plan to certain employees of 58 Home and our company. See “Item 6. Directors, Senior Management and
Employees — B. Compensation.” We may grant substantial additional share-based awards in connection with our acquisition of or investment in Ganji and
other companies. As a result of these grants and potential future grants, we incurred in the past and expect to continue to incur in future periods significant
share-based compensation expenses. The amount of share-based compensation expenses is based on the fair value of the share-based awards. We account
for compensation costs for all share-based awards using a fair-value based method and recognize expenses in our consolidated statement of comprehensive
income/(loss) in accordance with U.S. GAAP. The expenses associated with share-based compensation will increase our net loss or decrease our net
income, perhaps materially, and the additional securities issued under share-based compensation plans will dilute the ownership interests of our
shareholders, including holders of our ADSs. However, if we limit the scope of our share-based compensation plan, we may not be able to attract or retain
key personnel who are expected to be compensated by incentive shares or options.
We have limited business insurance coverage.
Insurance companies in China currently do not offer as extensive an array of insurance products as insurance companies do in more developed
economies. Except for the property insurance and third-party liability insurance purchased by Beijing Chengshi Wanglin Information Technology Co., Ltd.,
or Wanglin, we do not have any business liability or disruption insurance to cover our operations. We have determined that the costs of insuring for these
risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for us to have such insurance. Any
uninsured occurrence of business disruption may result in our incurring substantial costs and the diversion of resources, which could have an adverse effect
on our results of operations and financial condition.
Failure to renew our current leases or locate desirable alternatives for our facilities could materially and adversely affect our business.
In September 2014, we entered into an agreement to purchase 44,915 square meters of office space in Chaoyang District, Beijing, which will be
used for our company’s new corporate headquarters. Approximately 37% of the total new office space was ready and was put in use for occupancy in
October 2015, and the remaining space will be ready for occupancy in July 2016. We have purchased a smaller office space in Tianjin as well. However,
outside of Beijing and Tianjin, all of our offices in the other 34 cities and data centers are presently located on leased premises. At the end of each lease
term, we may not be able to negotiate an extension of the lease and may therefore be forced to move to a different location, or the rent we pay may increase
significantly. This could disrupt our operations and adversely affect our profitability. We compete with other businesses for premises with certain
characteristics or in desirable locations and some landlords may have entered into long-term leases with our competitors for such premises. As a result, we
may not be able to obtain new leases at desirable locations or renew our existing leases on acceptable terms or at all, which could materially and adversely
affect our business.
Risks Related to Our Corporate Structure and Restrictions on Our Industry
Substantial uncertainties and restrictions exist with respect to the interpretation and application of PRC laws and regulations relating to online
commerce and the distribution of internet content in China. If the PRC government finds that the structure we have adopted for our business
operations does not comply with PRC laws and regulations, we could be subject to severe penalties, including the shutting down of our website.
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Foreign ownership of internet-based businesses is subject to significant restrictions under current PRC laws and regulations. The PRC government
regulates internet access, the distribution of online information and the conduct of online commerce through strict business licensing requirements and
other government regulations. These laws and regulations also include limitations on foreign ownership in PRC companies that provide internet content
distribution services. Specifically, foreign investors are not allowed to own more than 50% of the equity interests in any entity conducting an internet
content distribution business. The Circular on Strengthening the Administration of Foreign Investment in and Operation of Value-added
Telecommunications Business, or the MIIT Circular, issued by the MIIT in July 2006, reiterated the regulations on foreign investment in
telecommunications businesses, which require foreign investors to set up foreign-invested enterprises and obtain business operating licenses for internet
content provision to conduct any value-added telecommunications business in China. Under the MIIT Circular, a domestic company that holds an internet
content provision license, or ICP license, is prohibited from leasing, transferring or selling the license to foreign investors in any form, and from providing
any assistance, including providing resources, sites or facilities, to foreign investors that conduct value-added telecommunications business illegally in
China. Furthermore, the relevant trademarks and domain names that are used in the value-added telecommunications business must be owned by the local
ICP license holder or its shareholders. Due to a lack of interpretation from MIIT, it is unclear what impact the MIIT Circular will have on us or the other
PRC internet companies that have adopted the same or similar corporate and contractual structures as ours. Beijing 58 holds an ICP license, and owns all
domain names used in our value-added telecommunications businesses. Beijing 58 is also the owner of all registered trademarks used in our value-added
telecommunications businesses and is the applicant of all the applications for trademark registration we have made.
We are a Cayman Islands company and our PRC subsidiary, Wanglin, is considered a foreign invested enterprise. To comply with PRC laws and
regulations, we conduct our operations in China through a series of contractual arrangements entered into among Wanglin, Beijing 58 and Beijing 58’s
shareholders. As a result of these contractual arrangements, we exert control over our Beijing 58 and its subsidiaries and consolidate their financial results
in our financial statements under U.S. GAAP. In August 2015, 58 Home, through its PRC subsidiary, Beijing 58 Daojia Information Technology Co., Ltd.,
or Beijing 58 Home, entered into contractual arrangements with Tianjin 58 Daojia Life Services Co., Ltd., or Tianjin 58 Home, which had previously been
an indirect subsidiary of Beijing 58. As a result of these contractual arrangements, 58 Home exert control over Tianjin 58 Home. In addition, Ganji operates
online multi-content category classified advertising platforms in China through its PRC subsidiaries and consolidated affiliated entities, including Beijing
Shanjing Kechuang Network Technology Co., Ltd., or Shanjing Kechuang. For a detailed description of these contractual arrangements, see “Item 4.
Information on the Company — C. Organizational Structure — Our Contractual Arrangements.”
In the opinion of our PRC counsel, Han Kun Law Offices, our current ownership structure, the ownership structure of our PRC subsidiaries and
our consolidated affiliated entities, the contractual arrangements relating to our consolidated affiliated entities, and, except as otherwise disclosed in this
annual report, our business operations, are not in violation of any existing PRC laws, rules and regulations. There are, however, substantial uncertainties
regarding the interpretation and application of current or future PRC laws and regulations. In particular, in January 2015, the Ministry of Commerce
published a discussion draft of the proposed Foreign Investment Law for public review and comments. Among other things, the draft Foreign Investment
Law expands the definition of foreign investment and introduces the principle of “actual control” in determining whether a company is considered a
foreign-invested enterprise. Under the draft Foreign Investment Law, variable interest entities would also be deemed as foreign-invested enterprises, if they
are ultimately “controlled” by foreign investors, and be subject to restrictions on foreign investments. However, the draft law has not taken a position on
what actions will be taken with respect to the existing companies with the “variable interest entity” structure, whether or not these companies are controlled
by Chinese parties. It is uncertain when the draft would be signed into law and whether the final version would have any substantial changes from the draft.
See “Item 4. Information on the Company — B. Business Overview — Regulation — Regulations on PRC Foreign Investment” and “— Substantial
uncertainties exist with respect to the enactment timetable, interpretation and implementation of draft PRC Foreign Investment Law and how it may impact
the viability of our current corporate structure, corporate governance and business operations.” Accordingly, we cannot assure you that PRC government
authorities will not ultimately take a view contrary to the opinion of our PRC legal counsel.
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Accordingly, if our ownership structure, contractual arrangements and businesses of our company, our PRC subsidiaries or our consolidated
affiliated entities are found to be in violation of any existing or future PRC laws or regulations, or we fail to obtain or maintain any of the required permits
or approvals, the relevant governmental authorities would have broad discretion in dealing with such violation, including levying fines, confiscating our
income or the income of our PRC subsidiaries or consolidated affiliated entities, revoking the business licenses or operating licenses of our PRC
subsidiaries or consolidated affiliated entities, shutting down our servers or blocking our website, discontinuing or placing restrictions or onerous
conditions on our operations, requiring us to undergo a costly and disruptive restructuring, and taking other regulatory or enforcement actions that could be
harmful to our business. Any of these actions could cause significant disruption to our business operations and severely damage our reputation, which
would in turn materially and adversely affect our business, financial condition and results of operations. If any of these occurrences results in our inability
to direct the activities of any of our consolidated affiliated entities that most significantly impact its economic performance, and/or our failure to receive the
economic benefits from any of our consolidated affiliated entities, we may not be able to consolidate the entity in our consolidated financial statements in
accordance with U.S. GAAP.
We rely on contractual arrangements with our consolidated affiliated entities and their shareholders for the operation of our business, which may
not be as effective as direct ownership. If we are unable to maintain control, we would not be able to continue to consolidate the financial results of
these entities with our financial results. If our consolidated affiliated entities and their shareholders fail to perform their obligations under these
contractual arrangements, we may have to resort to litigation or arbitration to enforce our rights, which may be time-consuming, unpredictable,
expensive and damaging to our operations and reputation.
Because of PRC restrictions and qualification requirements on foreign ownership of value-added telecommunications services in China, we
depend on contractual arrangements with our consolidated affiliated entities, in which we have no ownership interest, to conduct our business. These
contractual arrangements are intended to provide us with control over these entities and allow us to obtain economic benefits from them. Although we have
been advised by our PRC counsel, Han Kun Law Offices, that these contractual arrangements are valid, binding and enforceable under current PRC laws,
these contractual arrangements may not be as effective in providing control as direct ownership. For example, our consolidated affiliated entities and their
shareholders could breach their contractual arrangements with us by, among other things, failing to conduct its operations, including maintaining our
website and using the domain names and trademarks for which it has exclusive right to use, in an acceptable manner or taking other actions that are
detrimental to our interests. If we were the controlling shareholder of our consolidated affiliated entities with direct ownership, we would be able to
exercise our rights as shareholders to effect changes to their board of directors, which in turn could implement changes at the management and operational
level. Furthermore, each of our consolidated affiliated entities’ company chops are held by each company’s legal or accounting department. Our ability to
ensure the consolidated affiliated entities’ performance under the contractual agreements may be limited if we were unable to secure control of the
company chops in the event of a dispute with the entity’s management or shareholders as many official documents require affixation of company chops to
become fully effective. As a result, if our consolidated affiliated entities or their shareholders fail to perform their obligations under these contractual
arrangements we may have to incur substantial costs to enforce such arrangements, and rely on legal remedies under PRC law, including contract remedies,
which may not be sufficient or effective. If we are unable to maintain control, we would not be able to continue to consolidate the financial results of these
entities with our financial results.
These contractual arrangements are governed by PRC law and provide for dispute resolution through arbitration in China. Accordingly, these
contracts would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. Under PRC law,
if parties to a contract have agreed to resolve disputes arising from the contract by arbitration, a PRC court will not accept a lawsuit initiated at the court by
any contract party, unless the agreement for arbitration is invalid. An arbitration award issued by the arbitration commission chosen in accordance with the
agreement is final, binding and enforceable against the parties. If any party fails to comply with the arbitration award, the other party has the right to apply
with a competent court for enforcement. However, the legal environment in China is not as developed as other jurisdictions such as the United States. As a
result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements, which may make it difficult to exert control
over our consolidated affiliated entities, and our ability to conduct our business may be negatively affected. In addition, a PRC court or arbitration tribunal
may refuse to enforce the contractual arrangements on the grounds that they are designed to circumvent PRC foreign investment restrictions and therefore
are against PRC public policy.
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If we are unable to enforce these contractual arrangements, or if we suffer significant delay or other obstacles in the process of enforcing these
contractual arrangements, our business and operations could be severely disrupted, which could materially and adversely affect our results of operations
and damage our reputation. See “— Risks Related to Doing Business in China — Uncertainties in the interpretation and enforcement of PRC laws and
regulations could limit the legal protections available to you and us.”
The shareholders of our consolidated affiliated entities have potential conflicts of interest with us, which may adversely affect our business.
Mr. Jinbo Yao is the founder, chairman and chief executive officer of our company, having beneficial ownership of 11.3% of the total outstanding
shares of our company as of February 29, 2016. See “Item 7. Major Shareholders and Related Party Transactions — A. Major Shareholders.” He is also the
sole director, an executive officer and a shareholder of Beijing 58, our consolidated affiliated entity, holding a 37.8% equity interest in the entity. In
addition, Mr. Yao is the sole director and a 16.7% shareholder of Beijing Wanglintong Information Technology Co., Ltd., an entity that holds a 13.4%
equity interest in Beijing 58. Mr. Yao is also an executive director and a 1.4% shareholder of Tianjin 58 Home, 58 Home’s consolidated affiliated entity.
Conflicts of interest between his duties to our company, his duties to Beijing 58 or Tianjin 58 Home and his interests as a shareholder of Beijing 58 may
arise. We cannot assure you that he will act entirely in our interests when conflicts of interest arise or that conflicts of interest will be resolved in the favor
of our company. Furthermore, in the context of Mr. Yao’s acting as the director and an executive officer of Beijing 58 or a director of Tianjin 58 Home,
PRC law would not require him to consider our company’s best interests. We rely on Mr. Yao to abide by the laws of China, which provide that directors
and executive officers owe a duty of loyalty and duty of care to the company and require them to avoid conflicts of interest and not to take advantage of
their positions for personal gains, and the laws of Cayman Islands, which provide that directors owe a duty of care and duty of loyalty to the company. The
respective legal framework of China and the Cayman Islands does not provide guidance in the event of a conflict with another corporate governance
regime. If we cannot resolve any conflict of interest or dispute between us and the shareholders of our consolidated affiliated entities should one arise, we
would have to rely on legal proceedings, which could result in disruption of our business and subject us to substantial uncertainty as to the outcome of any
such legal proceedings. In addition, Mr. Yao could violate his non-competition or employment agreements with us or his legal duties by diverting business
opportunities from us, resulting in our loss of corporate opportunities. If we are unable to resolve any such conflicts, or if we suffer significant delays or
other obstacles as a result of such conflicts, our business and operations could be severely disrupted, which could materially and adversely affect our results
of operations and damage our reputation. See “— Risks Related to Doing Business in China — Uncertainties in the interpretation and enforcement of PRC
laws and regulations could limit the legal protections available to you and us.”
We may lose the ability to use and enjoy assets held by our consolidated affiliated entities that are material to the operation of our business if any of
such entities goes bankrupt or becomes subject to a dissolution or liquidation proceeding.
As part of our contractual arrangements with Beijing 58 and other consolidated affiliated entities, these entities hold certain assets that are material
to the operation of our business, including the ICP license, and the domain names and trademarks for which Beijing 58 or any of the other consolidated
affiliated entities has exclusive right to use. If any of our consolidated affiliated entities goes bankrupt and all or part of its assets become subject to liens or
rights of third-party creditors, we may be unable to continue some or all of our business activities, which could materially and adversely affect our business,
financial condition and results of operations. Under the contractual arrangements, our consolidated affiliated entities may not, in any manner, sell, transfer,
mortgage or dispose of their assets or legal or beneficial interests in the business without our prior consent. If any of our consolidated affiliated entities
undergoes a voluntary or involuntary liquidation proceeding, the unrelated third-party creditors may claim rights to some or all of these assets, thereby
hindering our ability to operate our business, which could materially and adversely affect our business, financial condition and results of operations.
Our contractual arrangements with our consolidated affiliated entities may result in adverse tax consequences to us.
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Under PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax
authorities within ten years after the taxable year when the transactions are conducted. The PRC enterprise income tax law requires every enterprise in
China to submit its annual enterprise income tax return together with a report on transactions with its related parties to the relevant tax authorities. The tax
authorities may impose reasonable adjustments on taxation if they have identified any related party transactions that are inconsistent with arm’s length
principles. We may be subject to adverse tax consequences if the PRC tax authorities were to determine that the contracts between our PRC subsidiaries
and our consolidated affiliated entities were not on an arm’s length basis and therefore constitute a favorable transfer pricing arrangements. If this occurs,
the PRC tax authorities could request that our consolidated affiliated entities adjust their taxable income, if any, upward for PRC tax purposes. Such a
pricing adjustment could adversely affect us by increasing our consolidated affiliated entities’ tax expenses without reducing our tax expenses, which could
subject our consolidated affiliated entities to late payment fees and other penalties for underpayment of taxes.
We may be adversely affected by the complexity, uncertainties and changes in China regulation of internet business and companies.
The internet industry in China is highly regulated by the PRC government and numerous regulatory authorities of the central PRC government are
empowered to issue and implement regulations governing various aspects of the internet industry including foreign ownership of and licensing and permit
requirements pertaining to companies in the internet industry. See “Item 4. Information on the Company — B. Business Overview — Regulation.” These
internet-related laws and regulations are relatively new and evolving, and their interpretation and enforcement involve significant uncertainty. As a result,
in certain circumstances, it may be difficult to determine what actions or omissions may be deemed to be in violation of applicable laws and regulations.
Our consolidated affiliated entities are required to obtain and maintain applicable licenses or approvals from different regulatory authorities in order to
provide their current services, including but not limited to the ICP license, the Surveying and Mapping Qualification Certificate for internet mapping and
the Employment Agency License.
Furthermore, our consolidated affiliated entities may be required to obtain additional licenses. If any of them fails to obtain or maintain any of the
required licenses or approvals, its continued business operations in the internet industry may subject it to various penalties, such as confiscation of illegal
net sales, fines and the discontinuation or restriction of its operations. Any such disruption in the business operations of our consolidated affiliated entities
will materially and adversely affect our business, financial condition and results of operations.
Regulation and censorship of information distribution over the internet in China may adversely affect our business, and we may be liable for
information displayed on, retrieved from or linked to our website.
The PRC government has adopted regulations governing internet access and the distribution of information over the internet. Under these
regulations, internet content providers and internet publishers are prohibited from posting or displaying over the internet content that, among other things,
violates PRC laws and regulations, impairs the national dignity of China or the public interest, contains terrorism or extremism content, or is reactionary,
obscene, superstitious, fraudulent or defamatory. Failure to comply with these requirements may result in the revocation of licenses to provide internet
content and other licenses, the closure of the concerned websites and reputational harm. A website operator may also be held liable for such censored
information displayed on or linked to its website. For a detailed discussion, see “Item 4. Information on the Company — B. Business Overview —
Regulation — Regulations on Value-Added Telecommunication Services” and “Item 4. Information on the Company — B. Business Overview —
Regulation — Regulations on Information Security and Censorship.” We have a team within our data security department which implements internal
procedures to review the content in our system for compliance with applicable laws and regulations, aided by a program designed to periodically sweep our
website and the data being conveyed in our system for sensitive keywords or questionable materials. In spite of this screening system, we may have
difficulty identifying and removing all illegal content or transactions involving illegal sales of goods and services, which could expose us to the penalties
described above.
If the PRC government were to deem our membership services or online marketing services as a form of online advertising, our business, results of
operations and financial condition may be materially and adversely affected.
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We do not believe our membership and online marketing services are deemed a form of online advertising under PRC laws and regulations.
However, there are uncertainties regarding the interpretation and application of current or future PRC laws and regulations. For example, in July 2015, the
State Administration for Industry and Commerce promulgated the Interim Measures for the Supervision and Administration of Online Advertising (Draft
for Comment) for comments. Online advertisements are defined under these draft interim measures as including various commercial displays, links and
other advertisements displayed in forms of text, image, audio, video and otherwise through all kinds of internet websites, forums, and other internet media
resources. It is also stipulated that except for identification information of goods or services such as pictures of the goods, text or graphic descriptions of
delivery and packaging that is normally required by national standards or industry practices to be displayed for such goods or services, other texts, images
and pictures that are displayed on the internet that are related to the goods or services and have characteristics of commercial advertisements will be
deemed as online advertisements. There are substantial uncertainties as to if and when these draft interim measures will be adopted into law and what
further changes might be made to such measures prior to or during their adoption. If our membership and online marketing services are deemed by the
relevant authorities as a form of online advertising, such services will be subject to PRC advertising laws and regulations. Under PRC advertising laws and
regulations, advertising operators, including advertising agencies, and advertising distributors, are obligated to monitor the advertising content and examine
the supporting documents for advertisements provided by advertisers to ensure that the content is fair and accurate and in compliance with applicable law.
There are also specific restrictions, requirements or prohibitions regarding advertisements that relate to certain products. Therefore, if our membership or
online marketing services are deemed a form of online advertising, we will be obligated to conduct the examination, review and monitoring of advertising
content on our online platforms as required by PRC advertising laws and regulations, which could be burdensome, and we may be required to edit or delete
certain content on our online platforms. This risk could also apply to other content categories we may from time to time include on our website. In addition,
if any of our membership or online marketing services are characterized as a form of online advertising, we may be subject to an additional 3% surcharge
with respect to the revenues we derive from such services, potentially with retroactive effect, which could adversely affect our financial condition and
results of operations.
Risks Related to Doing Business in China
Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us.
The PRC legal system is based on written statutes. Unlike common law systems, it is a system in which legal cases have limited value as
precedents. In the late 1970s, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in
general. The overall effect of legislation over the past three decades has significantly increased the protections afforded to various forms of foreign or
private-sector investment in China. Our PRC subsidiaries, Wanglin and 58 Tongcheng Information Technology Co., Ltd., or 58 Technology, are foreign-
invested enterprises and are subject to laws and regulations applicable to foreign-invested enterprises as well as various PRC laws and regulations generally
applicable to companies in China. However, since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, the
interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involve uncertainties.
From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC administrative
and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the
outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore, the PRC
legal system is based in part on government policies and internal rules (some of which are not published in a timely manner or at all) that may have
retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties,
including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights, and any failure to
respond to changes in the regulatory environment in China could materially and adversely affect our business and impede our ability to continue our
operations.
Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and
operations.
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Substantially all of our assets and almost all of our users are located in China. Accordingly, our business, financial condition, results of operations
and prospects may be influenced to a significant degree by political, economic and social conditions in China generally and by continued economic growth
in China as a whole.
China’s economy differs from the economies of most developed countries in many respects, including the level of government involvement, level
of development, growth rate, control of foreign exchange and allocation of resources. Although the PRC government has implemented measures since the
late 1970s emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment of
improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the PRC government. In
addition, the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. The PRC government
also exercises significant control over the PRC economic growth through allocating resources, controlling payment of foreign currency-denominated
obligations, setting monetary policy, and providing preferential treatment to particular industries or companies.
While China’s economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among
various sectors of the economy, and may slow down in the future. Some of the government measures may benefit the overall Chinese economy, but may
have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital
investments or changes in tax regulations. Any stimulus measures designed to boost the Chinese economy may contribute to higher inflation, which could
adversely affect our results of operations and financial condition. For example, certain operating costs and expenses, such as employee compensation and
office operating expenses, may increase as a result of higher inflation.
Substantial uncertainties exist with respect to the enactment timetable, interpretation and implementation of draft PRC Foreign Investment Law
and how it may impact the viability of our current corporate structure, corporate governance and business operations.
The Ministry of Commerce published a discussion draft of the proposed Foreign Investment Law in January 2015 aiming to, upon its enactment,
replace the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign
Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary
regulations. The draft Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line
with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. The
Ministry of Commerce solicited comments on this draft and substantial uncertainties exist with respect to its enactment timetable, interpretation and
implementation. The draft Foreign Investment Law, if enacted as proposed, may materially impact the viability of our current corporate structure, corporate
governance and business operations in many aspects.
Among other things, the draft Foreign Investment Law expands the definition of foreign investment and introduces the principle of “actual
control” in determining whether a company is considered a foreign-invested enterprise, or an FIE. The draft Foreign Investment Law specifically provides
that entities established in China but “controlled” by foreign investors will be treated as FIEs, whereas an entity set up in a foreign jurisdiction would
nonetheless be, upon market entry clearance by the Ministry of Commerce, treated as a PRC domestic investor provided that the entity is “controlled” by
PRC entities and/or citizens. In this connection, “foreign investors” refers to the following subjects making investments within the PRC: (i) natural persons
without PRC nationality; (ii) enterprises incorporated under the laws of countries or regions other than China; (iii) the governments of countries or regions
other than the PRC and the departments or agencies thereunder; and (iv) international organizations. Domestic enterprises under the control of the subjects
as mentioned in the preceding sentence are deemed foreign investors, and “control” is broadly defined in the draft law to cover the following summarized
categories: (i) holding, directly or indirectly, not less than 50% of shares, equities, share of voting rights or other similar rights of the subject entity; (ii)
holding, directly or indirectly, less than 50% of the voting rights of the subject entity but having the power to secure at least 50% of the seats on the board
or other equivalent decision making bodies, or having the voting power to exert material influence on the board, the shareholders’ meeting or other
equivalent decision making bodies; or (iii) having the power to exert decisive influence, via contractual or trust arrangements, over the subject entity’s
operations, financial matters or other key aspects of business operations. Once an entity is determined to be an FIE, it will be subject to the foreign
investment restrictions or prohibitions set forth in a “catalogue of special administrative measures,” which is classified into the “catalogue of prohibitions”
and “the catalogue of restrictions”, to be separately issued by the State Council later. Foreign investors are not allowed to invest in any sector set forth in
the catalogue of prohibitions. However, unless the underlying business of the FIE falls within the catalogue of restrictions, which calls for market entry
clearance by the Ministry of Commerce, prior approval from the government authorities as mandated by the existing foreign investment legal regime would
no longer be required for establishment of the FIE.
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The “variable interest entity” structure, or VIE structure, has been adopted by many PRC-based companies, including us, to obtain necessary
licenses and permits in the industries that are currently subject to foreign investment restrictions in China. See “— Risks Related to Our Corporate Structure
and Restrictions on Our Industry” and “Item 4. Information on the Company — C. Organizational Structure.” Under the draft Foreign Investment Law,
variable interest entities that are controlled via contractual arrangement would also be deemed as FIEs, if they are ultimately “controlled” by foreign
investors. Therefore, for any companies with a VIE structure in an industry category that is included in the “negative list” as restricted industry, the VIE
structure may be deemed legitimate only if the ultimate controlling person(s) is/are of PRC nationality (either PRC government authorities and its affiliates
or PRC citizens). Conversely, if the actual controlling person(s) is/are of foreign nationalities, then the variable interest entities will be treated as FIEs and
any operation in the industry category on the “negative list” without market entry clearance may be considered as illegal.
It is uncertain whether we would be considered as ultimately controlled by Chinese parties. Besides, the draft Foreign Investment Law has not
taken a position on what actions shall be taken with respect to the existing companies with a VIE structure, whether or not these companies are controlled
by Chinese parties, while the Ministry of Commerce solicited comments from the public on this point. Moreover, it is uncertain whether the value-added
telecommunications services, in which our variable interest entities operate, will be subject to the foreign investment restrictions or prohibitions set forth in
the “negative list” to be issued. If the enacted version of the Foreign Investment Law and the final “negative list” mandate further actions, such as Ministry
of Commerce market entry clearance, to be completed by companies with existing VIE structure like us, we face uncertainties as to whether such clearance
can be timely obtained, or at all.
The draft Foreign Investment Law, if enacted as proposed, may also materially impact our corporate governance practice and increase our
compliance costs. For instance, the draft Foreign Investment Law imposes stringent ad hoc and periodic information reporting requirements on foreign
investors and the applicable FIEs. Aside from investment implementation report required at each investment and investment amendment reports, which
shall be submitted upon alteration of investment specifics, it is mandatory for entities established by foreign investors to submit an annual report, and large
foreign investors meeting certain criteria are required to report on a quarterly basis. Any company found to be non-compliant with these information
reporting obligations may potentially be subject to fines and/or administrative or criminal liabilities, and the persons directly responsible may be subject to
criminal liabilities.
Under the Enterprise Income Tax Law, we may be classified as a PRC “resident enterprise” for PRC enterprise income tax purposes. Such
classification would likely result in unfavorable tax consequences to us and our non-PRC shareholders and have a material adverse effect on our
results of operations and the value of your investment.
Under the PRC Enterprise Income Tax Law, an enterprise established outside the PRC with “de facto management bodies” within China is
considered a “resident enterprise” for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its
worldwide income. Under the implementation rules to the Enterprise Income Tax Law, a “de facto management body” is defined as a body that has
material and overall management and control over the manufacturing and business operations, personnel and human resources, finances and properties of
an enterprise. In addition, a circular, known as SAT Circular 82, issued in April 2009 and amended in January 2014 by the State Administration of Taxation
specifies that certain offshore incorporated enterprises controlled by PRC enterprises or PRC enterprise groups will be classified as PRC resident
enterprises if the following are located or resident in China: senior management personnel and departments that are responsible for daily production,
operation and management; financial and personnel decision making bodies; key properties, accounting books, company seal, and minutes of board
meetings and shareholders’ meetings; and half or more of the senior management or directors having voting rights. Further to SAT Circular 82, the State
Administration of Taxation issued a bulletin, known as SAT Bulletin 45, which took effect in September 2011, to provide more guidance on the
implementation of SAT Circular 82 and clarify the reporting and filing obligations of such “Chinese-controlled offshore incorporated resident enterprises.”
SAT Bulletin 45 provides procedures and administrative details for the determination of resident status and administration on post-determination matters.
Although both SAT Circular 82 and SAT Bulletin 45 only apply to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those
controlled by PRC individuals or foreign individuals, the determining criteria set forth in SAT Circular 82 and SAT Bulletin 45 may reflect the State
Administration of Taxation’s general position on how the “de facto management body” test should be applied in determining the tax resident status of
offshore enterprises, regardless of whether they are controlled by PRC enterprises, PRC enterprise groups or by PRC or foreign individuals.
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We do not believe that 58.com Inc., China Classified Network Corporation, China Classified Information Corporation Limited, or any of our other
offshore subsidiaries meet all of the conditions above and thus we do not believe that 58.com Inc., China Classified Network Corporation, China Classified
Information Corporation Limited or any of our other offshore subsidiaries is a PRC resident enterprise, though some of the members of our management
team as well as the management team of our offshore holding companies are located in China. However, if the PRC tax authorities determine that 58.com
Inc., China Classified Network Corporation, China Classified Information Corporation Limited or any of our other offshore subsidiaries is a PRC resident
enterprise for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, we or our offshore subsidiaries will
be subject to the uniform 25% enterprise income tax on our world-wide income, which could materially reduce our net income. In addition, we will also be
subject to PRC enterprise income tax reporting obligations.
Furthermore, although dividends paid by one PRC tax resident enterprise to an offshore incorporated PRC resident enterprise controlled by PRC
enterprises or PRC enterprise groups should qualify as “tax-exempt income” under the Enterprise Income Tax Law and Bulletin 45, we cannot assure you
that dividends paid by any of our PRC subsidiaries to their shareholder in Hong Kong such as China Classified Information Corporation Limited will not be
subject to a 10% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax on dividends, and the PRC tax
authorities have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC
enterprise income tax purposes but not controlled by PRC enterprises or PRC enterprise groups.
Finally, dividends payable by us to our investors and gains on the sale of our shares may be become subject to PRC withholding tax.
We may not be able to obtain certain benefits under relevant tax treaty on dividends paid by our PRC subsidiaries to us through China Classified
Information Corporation Limited or other Hong Kong subsidiaries.
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We are a holding company incorporated under the laws of the Cayman Islands and as such rely on dividends and other distributions on equity from
our PRC subsidiaries to satisfy part of our liquidity requirements. Pursuant to the Enterprise Income Tax Law, a withholding tax rate of 10% currently
applies to dividends paid by a PRC “resident enterprise” to a foreign enterprise investor, unless any such foreign investor’s jurisdiction of incorporation has
a tax treaty with China that provides for preferential tax treatment. Pursuant to a Notice 112 issued by the State Administration of Taxation in January 2008
and the Arrangement between the Mainland China and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and
Prevention of Fiscal Evasion, or the Double Taxation Arrangement (Hong Kong), such withholding tax rate may be lowered to 5% if the PRC enterprise is
at least 25% held by a Hong Kong enterprise at all times within the 12-month period immediately prior to distribution of the dividends and is determined by
the relevant PRC tax authority to have satisfied other conditions and requirements under the Double Tax Avoidance Arrangement (Hong Kong) and other
applicable PRC laws. Pursuant to SAT Circular 601 issued by the State Administration of Taxation in October 2009, non-resident enterprises that cannot
provide valid supporting documents as “beneficial owners” may not be approved to enjoy tax treaty benefits, and “beneficial owners” refers to individuals,
enterprises or other organizations which are normally engaged in substantive operations. These rules also set forth certain adverse factors on the recognition
of a “beneficial owner”. Specifically, they expressly exclude a “conduit company,” or any company established for the purposes of avoiding or reducing tax
obligations or transferring or accumulating profits and not engaged in actual operations such as manufacturing, sales or management, from being a
“beneficial owner.” Whether a non-resident company may obtain tax benefits under the relevant tax treaty will be subject to approval of the relevant PRC
tax authority and will be determined by the PRC tax authority on a case-by-case basis. In June 2012, the State Administration of Taxation further provides
in an announcement that a comprehensive analysis should be made when determining the beneficial owner status based on various factors supported by
documents including the articles of association, financial statements, records of cash movements, board meeting minutes, board resolutions, staffing and
materials, relevant expenditures, functions and risk assumption as well as relevant contracts and other information. In August 2015, the State
Administration of Taxation promulgated the Administrative Measures for Non-Resident Taxpayers to Enjoy Treatments under Tax Treaties, or SAT
Circular 60, which became effective on November 1, 2015. SAT Circular 60 provides that non-resident enterprises are not required to obtain pre-approval
from the relevant tax authority in order to enjoy the reduced withholding tax rate. Instead, non-resident enterprises and their withholding agents may, by
self-assessment and upon their confirmation that the prescribed criteria are met, directly apply the reduced withholding tax rate, and file necessary forms
and supporting documents when conducting tax filings, which will be subject to post-filing examinations by the relevant tax authorities. None of our Hong
Kong subsidiaries has applied for the approval for a withholding tax rate of 5% from the local tax authority prior to SAT Circular 60, nor has any of our
PRC subsidiaries applied the 5% tax rate directly to any dividend payment after the SAT Circular 60, as our PRC subsidiaries have not paid dividends to us.
We plan to have our Hong Kong subsidiaries assume some managerial and administrative functions, as well as conduct other business functions in the
future. Once we implement such a plan, we do not believe that our Hong Kong subsidiaries will be considered a conduit company as defined under SAT
Circular 601. However, our Hong Kong subsidiaries as currently situated may be considered a conduit company and we cannot assure you that the relevant
PRC tax authority will agree with our view when any of our PRC subsidiaries directly applies reduced withholding tax rate under the relevant tax treaty in
the future. As a result, we may not be able to enjoy the preferential withholding tax rate of 5% under the Double Taxation Arrangement (Hong Kong) and
therefore be subject to withholding tax at a rate of 10% with respect to dividends to be paid by our PRC subsidiaries to their shareholders in Hong Kong
such as China Classified Information Corporation Limited.
Enhanced scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in
the future.
In connection with the Enterprise Income Tax Law, the Ministry of Finance and the State Administration of Taxation jointly issued SAT Circular
59 in April 2009, and the State Administration of Taxation issued SAT Circular 698 in December 2009. Both SAT Circular 59 and SAT Circular 698
became effective retroactively on January 1, 2008.
According to SAT Circular 698, where a non-resident enterprise transfers the equity interests of a PRC “resident enterprise” indirectly by
disposition of the equity interests of an overseas holding company, the non-resident enterprise, being the transferor, may be subject to PRC enterprise
income tax, if the indirect transfer is considered to be an abusive use of company structure without reasonable commercial purposes. As a result, gains
derived from such Indirect Transfer may be subject to PRC withholding tax at a rate of up to 10%. In addition, the PRC “resident enterprise” is supposed to
provide necessary assistance to support the enforcement of SAT Circular 698.
On February 3, 2015, the State Administration of Tax issued a Public Notice Regarding Certain Corporate Income Tax Matters on Indirect
Transfer of Properties by Non-Tax Resident Enterprises, or Public Notice 7. Public Notice 7 has introduced a new tax regime that is significantly different
from that under Circular 698. Public Notice 7 extends its tax jurisdiction to not only indirect transfers set forth under Circular 698 but also transactions
involving transfer of other taxable assets, through the offshore transfer of a foreign intermediate holding company. In addition, Public Notice 7 provides
clearer criteria than Circular 698 on how to assess reasonable commercial purposes and has introduced safe harbors for internal group restructurings and the
purchase and sale of equity through a public securities market. Public Notice 7 also brings challenges to both the foreign transferor and transferee (or other
person who is obligated to pay for the transfer) of the taxable assets. Where a non-resident enterprise conducts an “indirect transfer” by transferring the
taxable assets indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise being the transferor, or the
transferee, or the PRC entity which directly owned the taxable assets may report to the relevant tax authority such indirect transfer. Using a “substance over
form” principle, the PRC tax authority may re-characterize such indirect transfer as a direct transfer of the equity interests in the PRC tax resident enterprise
and other properties in China. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax, and the transferee or other
person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of up to 10% for the transfer of equity
interests in a PRC resident enterprise. Both the transferor and the transferee may be subject to penalties under PRC tax laws if the transferee fails to
withhold the taxes and the transferor fails to pay the taxes.
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We face uncertainties on the reporting and consequences on private equity financing transactions, share exchange or other transactions involving
the transfer of shares in our company by investors that are non-PRC resident enterprises, or sale or purchase of shares in other non-PRC resident companies
or other taxable assets by us. Our company and other non-resident enterprises in our group may be subject to filing obligations or being taxed if our
company and other non-resident enterprises in our group are transferors in such transactions, and may be subject to withholding obligations if our company
and other non-resident enterprises in our group are transferees in such transactions, under Circular 698 and Public Notice 7. For the transfer of shares in our
company by investors that are non-PRC resident enterprises, our PRC subsidiaries may be requested to assist in the filing under Circular 698 and Public
Notice 7. As a result, we may be required to expend valuable resources to comply with Circular 698 and Public Notice 7 or to request the relevant
transferors from whom we purchase taxable assets to comply with these circulars, or to establish that our company and other non-resident enterprises in our
group should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations.
The PRC tax authorities have the discretion under Circular 698 and Public Notice 7 to make adjustments to the taxable capital gains based on the
difference between the fair value of the taxable assets transferred and the cost of investment. If the PRC tax authorities make adjustments to the taxable
income of the transactions under Circular 698 and Public Notice 7, our income tax costs associated with such potential acquisitions will be increased, which
may have an adverse effect on our financial condition and results of operations. We have conducted acquisition transactions in the past and may conduct
additional acquisition transactions in the future. We cannot assure you that the PRC tax authorities will not, at their discretion, adjust any capital gains and
impose tax return filing obligations on us or require us to provide assistance for the investigation by PRC tax authorities with respect thereto. Heightened
scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the future.
PRC regulations establish complex procedures for mergers and acquisitions, including acquisitions of PRC companies by foreign investors, which
could make it more difficult for us to pursue growth through acquisitions in China.
Six PRC regulatory agencies promulgated regulations effective on September 8, 2006 that are commonly referred to as the M&A Rules. See “Item
4. Information on the Company — B. Business Overview — Regulation.” The M&A Rules establish procedures and requirements that could make some
acquisitions of PRC companies by foreign investors more time-consuming and complex, including requirements in some instances that the Ministry of
Commerce be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise. In addition,
national security review rules issued by the PRC governmental authorities in 2011 require acquisitions by foreign investors of domestic companies engaged
in military-related or certain other industries that are crucial to national security to be subject to prior security review. Moreover, the Anti-Monopoly Law
requires that the Ministry of Commerce shall be notified in advance of any concentration of undertaking, occurring inside or outside China, if certain
thresholds are triggered. We may expand our business in part by acquiring complementary businesses. Complying with the requirements of the M&A
Rules, security review rules and other PRC regulations to complete such transactions could be time-consuming, and any required approval processes,
including obtaining approval from the Ministry of Commerce, may delay or inhibit our ability to complete such transactions, which could affect our ability
to expand our business or maintain our market share. In addition, due to lack of clarity under some PRC laws and regulations, it is unclear in some
circumstances whether an approval is required for a merger or acquisition transaction and we cannot assure you that the PRC governmental authorities will
agree with our view on whether the approval is required for transactions conducted or to be conducted by us.
27
PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiaries’ ability to increase their registered
capital or distribute profits to us, limit our ability to inject capital into our PRC subsidiaries, or otherwise expose us to liability and penalties under
PRC law.
SAFE promulgated the Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through
Special Purpose Vehicles, or SAFE Circular 37, in July 2014, to replace the Notice on Relevant Issues Concerning Foreign Exchange Administration for
PRC Residents Engaging in Financing and Roundtrip Investments via Overseas Special Purpose Vehicles, or SAFE Circular 75. SAFE Circular 37 requires
PRC residents, including PRC individuals and entities, to register with SAFE or its local branch in connection with their establishment or control of an
offshore entity established for the purpose of overseas investment or financing. In addition, such PRC residents must update their SAFE registrations when
the offshore special purpose vehicle undergoes material events relating to any change of basic information (including change of such PRC residents, name
and operation term), increases or decreases in investment amount, transfers or exchanges of shares, or mergers or divisions. In February 2015, SAFE
promulgated the Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or SAFE Notice 13, which
became effective on June 1, 2015. Pursuant to SAFE Notice 13, instead of applying for approvals regarding foreign exchange registrations of foreign direct
investment and overseas direct investment from SAFE as required under current laws, entities and individuals are required to apply for such foreign
exchange registrations, including those required under the SAFE Circular 37, from qualified banks. The qualified banks, under the supervision of SAFE,
will examine the applications and conduct the registration. If a PRC resident fails to make the required SAFE registration with the local SAFE branches, the
PRC subsidiaries of such offshore company may be prohibited from distributing their profits and proceeds from any reduction in capital, share transfer or
liquidation to the offshore company, and the offshore company may be restricted in its ability to contribute additional capital to its PRC subsidiaries.
Moreover, failure to comply with SAFE registration and amendment requirements described above could result in liability under PRC law for evasion of
applicable foreign exchange restrictions.
Furthermore, it is unclear how these regulations, and any future regulation concerning offshore or cross-border transactions, will be interpreted,
amended and implemented by the relevant government authorities. We cannot predict how these regulations will affect our business operations or future
strategy. For example, we may be subject to a more stringent review and approval process with respect to our foreign exchange activities, such as
remittance of dividends and foreign-currency-denominated borrowings, which may adversely affect our financial condition and results of operations. In
addition, if we decide to acquire a PRC domestic company, either we or the owners of such company, as the case may be, may not be able to obtain the
necessary approvals or complete the necessary filings and registrations required by the foreign exchange regulations. This may restrict our ability to
implement our acquisition strategy and could adversely affect our business and prospects.
Failure to comply with PRC regulations regarding the registration requirements for employee share ownership plans or share option plans may
subject the PRC plan participants or us to fines and other legal or administrative sanctions.
In February 2012, SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals
Participating in Stock Incentive Plans of Overseas Publicly-Listed Companies, or the Stock Option Rules, replacing the previous rules issued by SAFE in
March 2007. Under the Stock Option Rules and other relevant rules and regulations, PRC residents who participate in stock incentive plan in an overseas
publicly-listed company are required to register with SAFE or its local branches and complete certain other procedures. Participants of a stock incentive
plan who are PRC residents must retain a qualified PRC agent, which could be a PRC subsidiary of the overseas publicly listed company or another
qualified institution selected by the PRC subsidiary, to conduct the SAFE registration and other procedures with respect to the stock incentive plan on
behalf of its participants. The participants must also retain an overseas entrusted institution to handle matters in connection with their exercise of stock
options, the purchase and sale of corresponding stocks or interests and fund transfers. In addition, the PRC agent is required to amend the SAFE registration
with respect to the stock incentive plan if there is any material change to the stock incentive plan, the PRC agent or the overseas entrusted institution or
other material changes. See “Item 4. Information on the Company — B. Business Overview — Regulation — Regulations on Employee Stock Option
Plans.” We and our PRC employees who have been granted share options and restricted shares are subject to these regulations. Failure of our PRC share
option holders or restricted shareholders to complete their SAFE registrations may subject these PRC residents to fines and legal sanctions and may also
limit our ability to contribute additional capital into our PRC subsidiaries, limited our PRC subsidiaries’ ability to distribute dividends to us, or otherwise
materially adversely affect our business.
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PRC regulation of direct investment and loans by offshore holding companies to PRC entities and governmental control of currency conversion
may delay or limit us from using the proceeds of our securities offering to make additional capital contributions or loans to our PRC subsidiaries.
Any capital contributions or loans that we, as an offshore entity, make to our PRC subsidiaries, including from the proceeds of our securities
offerings, are subject to PRC regulations. Under PRC laws and regulations, we are permitted to utilize the proceeds from our securities offering to fund our
PRC subsidiaries only through loans or capital contributions, subject to applicable government registration and approval requirements. None of our loans to
a PRC subsidiary can exceed the difference between its total amount of investment and its registered capital approved under relevant PRC laws, and the
loans must be registered with the local branch of SAFE. As of March 31, 2016, the difference between the total amount of investment and registered capital
is US$220 million for Wanglin and approximately US$193 million for 58 Technology, respectively. Our capital contributions to our PRC subsidiaries must
be approved by the Ministry of Commerce or its local counterpart. We cannot assure you that we will be able to complete the necessary registration or
obtain the necessary approval on a timely basis, or at all. If we fail to complete the necessary registration or obtain the necessary approval, our ability to
make loans or equity contributions to our PRC subsidiaries may be negatively affected, which could adversely affect our PRC subsidiaries’ liquidity and
their ability to fund their working capital and expansion projects and meet their obligations and commitments.
In March 2015, SAFE promulgated SAFE Circular 19, which took effective and replaced SAFE Circular 142 from June 1, 2015. Although SAFE
Circular 19 removed certain restrictions previously provided under SAFE Circular 142 for conversion by a foreign-invested enterprise of foreign currency
registered capital into RMB and use of such RMB capital, it continues to prohibit foreign-invested enterprises from, among other things, using RMB fund
converted from its foreign exchange capital for expenditure beyond its business scope, providing entrusted loans or repaying loans between non-financial
enterprises. In addition, SAFE Circular 19 is still unclear whether a foreign-invested enterprise whose business scope does not include equity investment or
similar activities may use Renminbi converted from the foreign currency-denominated capital for equity investments in the PRC. For example, the business
scopes of Wanglin and 58 Technology include, among others, research and development of online classified information technology and software systems,
information technology consulting, technical services and marketing and promotional services. Each of Wanglin, 58 Technology and our other PRC
subsidiaries that are foreign-invested enterprises may only use Renminbi converted from foreign exchange capital contribution for activities within its
approved business scope. In addition, the use of such Renminbi capital may not be altered without SAFE approval, and such Renminbi capital may not in
any case be used to repay Renminbi loans if the proceeds of such loans have not been used. Violations of these circulars and rules could result in severe
monetary or other penalties. If we convert the net proceeds we receive from our securities offerings into Renminbi pursuant to the applicable laws and
regulations, our use of Renminbi funds for general corporate purposes will be within the business scope of our PRC subsidiaries.
PRC regulation of loans by offshore holding companies to PRC entities and governmental control of currency conversion may limit our ability to
fund the operations of our consolidated affiliated entities.
Due to the restrictions imposed on loans in foreign currencies extended to any PRC domestic companies, any loans from our Cayman Islands
holding company or other offshore entities to PRC domestic company shall obtain certain approvals from local SAFE and complete record-filling
procedures with local SAFE on an item-by-item basis. Therefore, we are not likely to have our Cayman Islands holding company or other offshore entities
to use the proceeds from our securities offerings to extend loans to our consolidated affiliated entities or their subsidiaries, each of which is a PRC domestic
company. Meanwhile, we are not likely to finance the activities of our consolidated affiliated entities by means of capital contributions due to regulatory
restrictions relating to foreign investment in PRC domestic enterprises engaged in value-added telecommunications services. In addition, due to the
restrictions on a foreign-invested enterprise’s use of Renminbi converted from foreign-currency registered capital under PRC regulations, including SAFE
Circular 19, as described under the foregoing risk factor, our PRC subsidiaries may be unable to use the Renminbi converted from their registered capital to
provide loans or financial support to our consolidated affiliated entities. We currently do not plan to use the proceeds from our securities offering to fund
the operations of our consolidated affiliated entities and their subsidiaries. Additionally, our PRC subsidiaries are not prohibited under PRC laws and
regulations from using their capital generated from their operating activities to provide entrusted loans or other forms of financial support to consolidated
affiliated entities. We will assess the working capital requirements of our consolidated affiliated entities on an ongoing basis and, if needed, may have our
PRC subsidiaries to use their capital from operating activities to provide financial support to our consolidated affiliated entities.
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Our PRC subsidiaries are subject to restrictions on paying dividends or making other payments to us, which may restrict our ability to satisfy our
liquidity requirements.
We are a holding company incorporated in the Cayman Islands. We may need dividends and other distributions on equity from our PRC
subsidiaries to satisfy our liquidity requirements. Current PRC regulations permit our PRC subsidiaries to pay dividends to us only out of their accumulated
profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, our PRC subsidiaries are required to set aside at least
10% of their respective accumulated profits each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of their respective
registered capital. Our PRC subsidiaries may also allocate a portion of its after-tax profits based on PRC accounting standards to employee welfare and
bonus funds at their discretion. These reserves are not distributable as cash dividends. As of the date of this annual report, our PRC subsidiaries have not
paid dividends to us. Further, if any of our PRC subsidiaries incurs debt on its own behalf in the future, the instruments governing the debt may restrict its
ability to pay dividends or make other payments to us, which may restrict our ability to satisfy our liquidity requirements. As of March 31, 2016, the
registered capital of our PRC subsidiaries Wanglin and 58 Technology is US$280 million and approximately US$107 million, respectively. See “Item 4.
Information on the Company — B. Business Overview — Regulation — Regulations on Foreign Currency Exchange.”
Discontinuation of any of the preferential tax treatments and government subsidies or imposition of any additional taxes and surcharges could
adversely affect our financial condition and results of operations.
The Enterprise Income Tax Law and its implementing rules impose a uniform statutory enterprise income tax rate of 25% on all enterprises in
China. The Enterprise Income Tax Law and its implementing rules also permit qualified “high and new technology enterprises” to enjoy a preferential
enterprise income tax rate of 15% upon filing with relevant tax authorities. This qualification generally has a valid term of three years and the renewal of
the qualification is subject to review by the relevant authorities in China. Beijing 58, one of our consolidated affiliated entities, first obtained its certificate
as a “high and new technology enterprise” in May 2009 and renewed the certificate in May 2012 and again in July 2015, each time valid for a period of
three years. Beijing 58 is eligible to enjoy a preferential tax rate of 15% until the end of 2017 when it has taxable income under the Enterprise Income Tax
Law, as long as it maintains this qualification and obtains approval from the relevant tax authority. Wanglin, one of our PRC subsidiaries, obtained its
certificate in November 2012 and renewed its certificate in July 2015, each time valid for a period of three years. Wanglin also obtained qualification as a
“software enterprise” in July 2014. In April 2015, the local tax authority granted Wanglin a two-year exemption followed by a three-year 50% reduction on
its taxable income under the Enterprise Income Tax Law, effective retroactively from January 1, 2014. If Beijing 58 or Wanglin fails to maintain its
qualification as a “high and new technology enterprises” or to renew its qualification when its current term expires, its applicable enterprise income tax rate
may increase to 25%, which could have an adverse effect on our financial condition and results of operations.
In addition, our PRC subsidiaries and consolidated affiliated entities have received various financial subsidies from PRC local government
authorities. The financial subsidies are discretionary incentives and policies adopted by PRC local government authorities. Local governments may decide
to change or discontinue such financial subsidies at any time. The discontinuation of such financial subsidies or imposition of any additional taxes could
adversely affect our financial condition and results of operations.
Fluctuations in exchange rates could have a material adverse effect on our results of operations and the value of your investment.
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Substantially all of our revenues and expenditures are denominated in Renminbi. As the functional currency for our PRC subsidiaries and
consolidated affiliated entities is Renminbi, fluctuations in the exchange rate may cause us to incur foreign exchange losses on any foreign currency
holdings they may have. In addition, appreciation or depreciation in the value of the Renminbi relative to the U.S. dollar would affect our financial results
in U.S. dollar terms without giving effect to any underlying change in our business or results of operations. If we decide to convert our Renminbi into U.S.
dollars for the purpose of making payments for dividends on our ordinary shares or for other business purposes, appreciation of the U.S. dollar against the
Renminbi would have a negative effect on the U.S. dollar amount available to us.
The value of the RMB against the U.S. dollar and other currencies is affected by changes in China’s political and economic conditions and by
China’s foreign exchange policies, among other things. In July 2005, the PRC government changed its decades-old policy of pegging the value of the RMB
to the U.S. dollar, and the RMB appreciated more than 20% against the U.S. dollar over the following three years. Between July 2008 and June 2010, this
appreciation halted and the exchange rate between the RMB and the U.S. dollar remained within a narrow band. Since June 2010, the RMB has fluctuated
against the U.S. dollar, at times significantly and unpredictably. It is difficult to predict how market forces or PRC or U.S. government policy may impact
the exchange rate between the RMB and the U.S. dollar in the future.
Any significant appreciation or depreciation of the Renminbi may materially and adversely affect our revenues, earnings and financial position,
and the value of, and any dividends payable on, our ADSs in U.S. dollars. For example, to the extent that we need to convert U.S. dollars we receive from
this initial public offering into Renminbi to pay our operating expenses, appreciation of the Renminbi against the U.S. dollar would have an adverse effect
on the Renminbi amount we would receive from the conversion. Conversely, a significant depreciation of the Renminbi against the U.S. dollar may
significantly reduce the U.S. dollar equivalent of our earnings, which in turn could adversely affect the price of our ADSs.
Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any
hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the
future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In addition, our
currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi into foreign currency. As a
result, fluctuations in exchange rates may have a material adverse effect on your investment.
Our failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties.
Companies operating in China are required to participate in social insurance and housing fund plans. We have not fully contributed to such plans
as required by applicable PRC regulations. As of December 31, 2015, with regards to the outstanding contributions, including historical underpayments to
such plans, we made a provision of RMB67.6 million (US$10.4 million), which is reflected in our audited financial statements included in this annual
report. While we believe this provision is adequate, our failure to make sufficient payments to such plans does not fully comply with applicable PRC laws
and regulations and we may be required to make up the contributions for such plans as well as to pay late fees and fines.
Registered public accounting firms in China, including our independent registered public accounting firm, are not inspected by the U.S. Public
Company Accounting Oversight Board, which deprives us and our investors of the benefits of such inspection.
Auditors of companies whose shares are registered with the U.S. Securities and Exchange Commission, or the SEC and traded publicly in the
United States, including our independent registered public accounting firm, must be registered with the U.S. Public Company Accounting Oversight Board,
or PCAOB, and are required by the laws of the United States to undergo regular inspections by the PCAOB to assess their compliance with the laws of the
United States and professional standards applicable to auditors. Our independent registered public accounting firm is located in, and organized under the
laws of the Peoples’ Republic of China, or the PRC, which is a jurisdiction where the PCAOB, notwithstanding the requirements of U.S. law, is currently
unable to conduct inspections without the approval of the Chinese authorities. In May 2013, PCAOB announced that it had entered into a Memorandum of
Understanding on Enforcement Cooperation with the China Securities Regulatory Commission, or the CSRC and the PRC Ministry of Finance, which
establishes a cooperative framework between the parties for the production and exchange of audit documents relevant to investigations undertaken by
PCAOB, the CSRC or the PRC Ministry of Finance in the United States and the PRC, respectively. PCAOB continues to be in discussions with the CSRC
and the PRC Ministry of Finance to permit joint inspections in the PRC of audit firms that are registered with PCAOB and audit Chinese companies that
trade on U.S. exchanges.
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This lack of PCAOB inspections in China prevents the PCAOB from fully evaluating audits and quality control procedures of any auditors
operating in China, including our independent registered public accounting firm. As a result, we and investors in our common stock are deprived of the
benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the
effectiveness of our independent registered public accounting firm’s audit procedures or quality control procedures as compared to auditors outside of
China that are subject to PCAOB inspections, which could cause investors and potential investors in our common stock to lose confidence in our audit
procedures and reported financial information and the quality of our financial statements.
If additional remedial measures are imposed on the Big Four PRC-based accounting firms, including our independent registered public
accounting firm, in administrative proceedings brought by the SEC alleging the firms’ failure to meet specific criteria set by the SEC, we could
unable to timely file future financial statements in compliance with the requirements of the Securities Exchange Act of 1934, as amended, or the
Exchange Act.
In December 2012, the SEC instituted administrative proceedings against the Big Four PRC-based accounting firms, including our independent
registered public accounting firm, alleging that these firms had violated U.S. securities laws and the SEC’s rules and regulations thereunder by failing to
provide to the SEC the firms’ audit work papers with respect to certain PRC-based companies that are publicly traded in the United States. On January 22,
2014, an initial administrative law decision was issued, censuring that each of the firms had violated the SEC’s rules of practice by failing to produce audit
work papers to the SEC. The initial decision censured each of the firms and barred them from practicing before the SEC for a period of six months. The
decision is not effective unless and until it is endorsed by the SEC. On February 12, 2014, the four PRC-based accounting firms appealed to the SEC
against this sanction. On February 6, 2015, the four PRC-based accounting firms each agreed to a censure and to pay a fine to the SEC to settle the dispute
and avoid suspension of their ability to practice before the SEC and audit U.S. listed companies. The settlement required the firms to follow detailed
procedures to seek to provide the SEC with access to Chinese firms’ audit documents via the CSRC. If future document productions fail to comply with the
documentation production procedures that are in the settlement agreement or if there is a failure of the process between the SEC and the CSRC, the SEC
retains authority to impose a variety of additional remedial measures on the firms depending on the nature of the failure. If the accounting firms are subject
to additional remedial measures, our ability to file our financial statements in compliance with SEC requirements could be impacted. A determination that
we have not timely filed financial statements in compliance with SEC requirements could ultimately lead to the delisting of our common stock from the
NYSE or the termination of the registration of our common stock under the Securities Exchange Act of 1934, or both, which would substantially reduce or
effectively terminate the trading of our common stock in the United States.
Risks Related to Our ADSs
The trading prices of our ADSs have fluctuated and may be volatile.
The trading prices of our ADSs have fluctuated since we first listed our ADSs. Since our ADSs became listed on the NYSE on October 31, 2013,
the trading price of our ADSs has ranged from US$17.00 to US$83.71 per ADS, and the last reported trading price on May 12, 2016 was US$50.43 per
ADS. The prices for our ADSs may continue to fluctuate because of broad market and industry factors, like the performance and fluctuation of the market
prices of other companies with business operations located mainly in China that have listed their securities in the United States. In recent years, the
widespread negative publicity of alleged fraudulent accounting practices and poor corporate governance of certain U.S. public companies with operations
in China were believed to have negatively affected investors’ perception and sentiment towards companies with connection with China, which significantly
and negatively affected the trading prices of some companies’ securities listed in the United States. Any similar negative publicity or sentiment may affect
the performances of our ADSs. The securities of some PRC companies that have listed their securities on U.S. stock markets have experienced significant
volatility. The trading performances of these PRC companies’ securities after their offerings may affect the attitudes of investors toward PRC companies
listed in the United States in general and consequently may impact the trading performance of our ADSs, regardless of our actual operating performance.
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In addition to market and industry factors, the price and trading volume for our ADSs may be highly volatile for factors specific to our own
operations, including the following:
the financial projections that we may choose to provide to the public, any changes in those projections or our failure for any reason to meet those
projections;
variations in our net sales, earnings and cash flow;
announcements of new investments, acquisitions, strategic partnerships, or joint ventures;
announcements of new services and expansions by us or our competitors;
changes in financial estimates by securities analysts;
additions or departures of key personnel;
release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities;
detrimental negative publicity about us, our competitors or our industry;
potential litigation or regulatory investigations or other proceedings involving us;
fluctuations in market prices for our products; and
proceedings instituted recently by the SEC against five PRC-based accounting firms, including our independent registered public accounting firm.
Any of these factors may result in large and sudden changes in the volume and price at which our ADSs will trade.
If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations
regarding our ADSs, the market price for our ADSs and trading volume could decline.
The trading market for our ADSs will be influenced by research or reports that industry or securities analysts publish about our business. If one or
more analysts who cover us downgrade our ADSs, or publish unfavorable research about us, the market price for our ADSs would likely decline. If one or
more of these analysts cease to cover us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which, in turn, could
cause the market price or trading volume for our ADSs to decline.
Our dual class share structure with different voting rights will limit your ability to influence corporate matters and could discourage others from
pursuing any change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial.
Our ordinary shares are divided into Class A ordinary shares and Class B ordinary shares. Holders of Class A ordinary shares are entitled to one
vote per share, while holders of Class B ordinary shares are entitled to ten votes per share, with Class A and Class B ordinary shares voting together as one
class on all matters subject to a shareholders’ vote. As of February 29, 2016, holders of our Class B ordinary shares collectively owned approximately
22.3% of our outstanding ordinary shares, representing 74.2% of our total voting power. As of February 29, 2016, our founder, chairman and chief
executive officer, Mr. Jinbo Yao and Tencent beneficially own an aggregate of 34.2% of our outstanding shares.
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As a result of the dual class share structure and the concentration of ownership, holders of our Class B ordinary shares have substantial influence
over our business, including decisions regarding mergers, consolidations and the sale of all or substantially all of our assets, election of directors and other
significant corporate actions. They may take actions that are not in the best interest of us or our other shareholders. This concentration of ownership may
discourage, delay or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their
shares as part of a sale of our company and may reduce the price of our ADSs. This concentrated control will limit your ability to influence corporate
matters and could discourage others from pursuing any potential merger, takeover or other change of control transactions that holders of Class A ordinary
shares and ADSs may view as beneficial. For more information regarding our principal shareholders and their affiliated entities, see “Item 7. Major
Shareholders and Related Party Transactions.”
The sale or availability for sale of substantial amounts of our ADSs could adversely affect their market price.
Sales of substantial amounts of our ADSs in the public market, or the perception that these sales could occur, could adversely affect the market
price of our ADSs and could materially impair our ability to raise capital through equity offerings in the future. We cannot predict what effect, if any,
market sales of securities held by our significant shareholders or any other shareholder or the availability of these securities for future sale will have on the
market price of our ADSs.
We may be classified as a passive foreign investment company for United States federal income tax purposes, which could result in adverse United
States federal income tax consequences to United States investors in the ADSs or Class A ordinary shares.
Depending upon the value of our assets, which may be determined based, in part, on the market value of our Class A ordinary shares and ADSs,
and the nature of our assets and income over time, we could be classified as a “passive foreign investment company,” or PFIC, for United States federal
income tax purposes. Under United States federal income tax law, we will be classified as a PFIC for any taxable year if either (i) at least 75% of our gross
income for the taxable year is passive income or (ii) at least 50% of the value of our assets (based on the average quarterly value of our assets during the
taxable year) is attributable to assets that produce or are held for the production of passive income. Based on our income and assets and the value of our
ADSs and Class A ordinary shares, we do not believe that we were a PFIC for the taxable year ended December 31, 2015 and, although no assurances can
be made in this regard, we do not expect to be a PFIC for the current taxable year or any subsequent taxable year. While we do not anticipate being a PFIC,
changes in the nature of our income or assets or the value of our assets may cause us to become a PFIC for the current or any subsequent taxable year.
Although the law in this regard is not entirely clear, we treat Beijing 58 and other consolidated affiliated entities as being owned by us for United
States federal income tax purposes, because we control their management decisions and we are entitled to substantially all of the economic benefits
associated with them, and, as a result, we consolidate their results of operations in our consolidated U.S. GAAP financial statements. If it were determined,
however, that we are not the owner of Beijing 58 and other consolidated affiliated entities for United States federal income tax purposes, we would likely
be treated as a PFIC for our taxable year ending December 31, 2016 and for subsequent taxable years. Because of the uncertainties in the application of the
relevant rules and because PFIC status is a factual determination made annually after the close of each taxable year on the basis of the composition of our
income and the value of our active versus passive assets, there can be no assurance that we will not be a PFIC for our taxable year ending December 31,
2015 or any future taxable year. Under circumstances where revenues from activities that produce passive income significantly increase relative to our
revenues from activities that produce non-passive income or where we determine not to deploy significant amounts of cash for active purposes, our risk of
becoming classified as a PFIC may substantially increase.
If we were to be or become a PFIC, a U.S. Holder (as defined in “Item 10. Additional Information — E. Taxation — United States Federal Income
Tax Considerations” and “Item 10. Additional Information — E. Taxation — United States Federal Income Tax Considerations — General”) may incur
significantly increased United States federal income tax on gain recognized on the sale or other disposition of the ADSs or Class A ordinary shares and on
the receipt of distributions on the ADSs or Class A ordinary shares to the extent such gain or distribution is treated as an “excess distribution” under the
United States income tax rules. Further, if we were a PFIC for any year during which a U.S. Holder held our ADSs or Class A ordinary shares, we
generally would continue to be treated as a PFIC with respect to such U.S. Holder for all succeeding years during which such U.S. Holder held our ADSs or
Class A ordinary shares. Each U.S. Holder is urged to consult its tax advisor concerning the United States federal income tax consequences of purchasing,
holding and disposing of ADSs or Class A ordinary shares if we are or become treated as a PFIC.
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The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right to vote your
Class A ordinary shares.
As a holder of our ADSs, you will only be able to exercise the voting rights with respect to the underlying Class A ordinary shares in accordance
with the provisions of the deposit agreement. Under the deposit agreement, you must vote by giving voting instructions to the depositary. Upon receipt of
your voting instructions, the depositary will vote the underlying Class A ordinary shares in accordance with these instructions. You will not be able to
directly exercise your right to vote with respect to the underlying shares unless you withdraw the shares. Under our amended and restated memorandum and
articles of association, the minimum notice period required for convening a general meeting is ten clear days. When a general meeting is convened, you
may not receive sufficient advance notice to withdraw the shares underlying your ADSs to allow you to vote with respect to any specific matter. If we ask
for your instructions, the depositary will notify you of the upcoming vote and will arrange to deliver our voting materials to you. We cannot assure you that
you will receive the voting materials in time to ensure that you can instruct the depositary to vote your shares. In addition, the depositary and its agents are
not responsible for failing to carry out voting instructions or for their manner of carrying out your voting instructions. This means that you may not be able
to exercise your right to vote and you may have no legal remedy if the shares underlying your ADSs are not voted as you requested.
We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions
applicable to United States domestic public companies.
Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and
regulations in the United States that are applicable to U.S. domestic issuers, including:
the rules under the Exchange Act requiring the filing with the Securities and Exchange Commission, or the SEC, of quarterly reports on Form 10-
Q or current reports on Form 8-K;
the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the
Exchange Act;
the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders
who profit from trades made in a short period of time; and
the selective disclosure rules by issuers of material nonpublic information under Regulation FD.
We are required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish our
results on a quarterly basis as press releases, distributed pursuant to the rules and regulations of the NYSE. Press releases relating to financial results and
material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC are less
extensive and less timely as compared to that required to be filed with the SEC by United States domestic issuers. As a Cayman Islands company listed on
the NYSE, we are subject to the NYSE corporate governance listing standards. Among other things, Section 303A.08 of the NYSE Listed Company
Manual requires shareholder approval of material revisions to equity-compensation plans and Section 312.03(c) of the NYSE Listed Company Manual
requires shareholder approval of new share issuances above the 20% threshold specified therein. However, NYSE rules permit a foreign private issuer like
us to follow the corporate governance practices of its home country. We have elected to follow the Cayman Islands practices with respect to the amendment
of our 2013 share incentive plan to increase the total number of ordinary shares that may be issued pursuant to awards granted under the plan. In addition,
we have also elected to follow the Cayman Islands practices with respect to the issuance of new ordinary shares above the 20% threshold as specified in
Section 312.03(c).
You may not receive dividends or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or
impractical to make them available to you.
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The depositary of our ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on Class A ordinary
shares or other deposited securities underlying our ADSs, after deducting its fees and expenses. You will receive these distributions in proportion to the
number of Class A ordinary shares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a
distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that
require registration under the Securities Act but that are not properly registered or distributed under an applicable exemption from registration. The
depositary may also determine that it is not feasible to distribute certain property through the mail. Additionally, the value of certain distributions may be
less than the cost of mailing them. In these cases, the depositary may determine not to distribute such property. We have no obligation to register under
U.S. securities laws any ADSs, ordinary shares, rights or other securities received through such distributions. We also have no obligation to take any other
action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. This means that you may not receive distributions we
make on our ordinary shares or any value for them if it is illegal or impractical for us to make them available to you. These restrictions may cause a
material decline in the value of our ADSs.
You may not be able to participate in rights offerings and may experience dilution of your holdings.
We may, from time to time, distribute rights to our shareholders, including rights to acquire securities. Under the deposit agreement, the depositary
will not distribute rights to holders of ADSs unless the distribution and sale of rights and the securities to which these rights relate are either exempt from
registration under the Securities Act with respect to all holders of ADSs, or are registered under the provisions of the Securities Act. The depositary may,
but is not required to, attempt to sell these undistributed rights to third parties, and may allow the rights to lapse. We may be unable to establish an
exemption from registration under the Securities Act, and we are under no obligation to file a registration statement with respect to these rights or
underlying securities or to endeavor to have a registration statement declared effective. Accordingly, holders of ADSs may be unable to participate in our
rights offerings and may experience dilution of their holdings as a result.
You may be subject to limitations on transfer of your ADSs.
Your ADSs are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it
deems expedient in connection with the performance of its duties. The depositary may close its books from time to time for a number of reasons, including
in connection with corporate events such as a rights offering, during which time the depositary needs to maintain an exact number of ADS holders on its
books for a specified period. The depositary may also close its books in emergencies, and on weekends and public holidays. The depositary may refuse to
deliver, transfer or register transfers of our ADSs generally when our share register or the books of the depositary are closed, or at any time if we or the
depositary thinks it is advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the
deposit agreement, or for any other reason.
We incur increased costs as a result of being a public company.
As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley
Act of 2002, as well as rules subsequently implemented by the SEC and NYSE, impose various requirements on the corporate governance practices of
public companies. For example, as a public company, we need to increase the number of independent directors and adopt policies regarding internal
controls and disclosure controls and procedures. We have incurred additional costs in obtaining director and officer liability insurance. In addition, we also
incur additional costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on
our board of directors or as executive officers. We expect these rules and regulations to increase our legal and financial compliance costs and to make some
corporate activities more time-consuming and costly. We are currently evaluating and monitoring developments with respect to these rules and regulations,
and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.
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In addition, we have ceased to be an “emerging growth company” as of December 31, 2014, and therefore are no longer able to take advantage of
certain exemptions from various requirements applicable to other public companies that are not emerging growth companies including, most significantly,
not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002. We have incurred significant
expenses and devoted substantial management effort, and expect to continue to do so to ensure compliance with the requirements of Section 404 of the
Sarbanes-Oxley Act of 2002 and the other rules and regulations of the SEC.
In the past, shareholders of a public company often brought securities class action suits against the company following periods of instability in the
market price of that company’s securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention and
other resources from our business and operations, which could harm our results of operations and require us to incur significant expenses to defend the suit.
Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is
successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and
results of operations.
ITEM 4.
INFORMATION ON THE COMPANY
A. History and Development of the Company
We began our operations in China in 2005 through Beijing 58, a PRC limited liability company, which has become our consolidated affiliated
entity through a series of contractual arrangements. Our current holding company, 58.com Inc., was incorporated in May 2011 as a limited liability
company in the Cayman Islands.
On November 5, 2013, we raised US$200.0 million in net proceeds from the initial public offering of our ADSs and another US$15.0 million from
a concurrent private placement of Class A ordinary shares to DCM Hybrid RMB Fund, L.P., a fund affiliated with DCM V, L.P., one of our existing
shareholders. Our ADSs trade on the New York Stock Exchange under the symbol “WUBA.”
On April 2, 2014, we and certain selling shareholders completed a follow-on public offering of ADSs. Our net proceeds, after deducting
underwriting commissions, amounted to approximately US$73.0 million. We did not receive any proceeds from the sale of the ADSs by the selling
shareholders.
In June 2014, Tencent invested US$736.1 million in our company and acquired 36,805,000 Class A and Class B ordinary shares, representing a
19.9% equity interest in our company on a fully-diluted basis at that time. We applied part of the proceeds from this transaction to repurchase 27,603,750
ordinary shares of our company from certain pre-IPO shareholders.
In March 2015, we acquired Anjuke, a major online real estate listing platform in China, through the purchase of a 100% equity interest in Anjuke
Inc., a company incorporated under the laws of the Cayman Islands, for 4,839,372 newly issued Class A ordinary shares of our company and US$160.2
million in cash. We also issued 248,216 fully vested restricted share units of our company to former Anjuke employees as part of the share consideration.
In April 2015, we acquired a less than 50% equity stake in Falcon View Technology, or Ganji, the holding company of the PRC entities operating
Ganji.com, a major online local services platform in China, for 34,039,136 newly issued Class A ordinary shares of our company and US$412.2 million in
cash. Concurrent with this acquisition, Tencent purchased 15,384,616 additional newly issued Class A ordinary shares of our company from us for
US$400.0 million.
Later in 2015, our company, as a limited partner, committed an aggregate of 46,505,912 newly issued ordinary shares and US$406.7 million in
cash to several private equity funds, of which all the ordinary shares and US$272.4 million in cash were contributed to the funds in August 2015. These
funds are dedicated to investing in businesses in China and separately managed by different investment entities, as general partners, which are unaffiliated
with each other and unaffiliated with us. These funds, together with Tencent, acquired all the remaining equity interest in Ganji in August 2015. We also
transferred an aggregate of 4,449,002 fully vested restricted share units of our company and approximately US$51.0 million in cash to former Ganji
employees as part of the total consideration of step acquisition of Ganji. We considered that we have a controlling financial interest over the equity funds
under the voting interest model, and as a result have consolidated Ganji since August 6, 2015.
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On November 27, 2015, 58 Home raised US$300.0 million in a Series A preferred shares equity funding round, with participation from Alibaba
Group Holding Limited, global investment firm KKR, and Ping An Group, among which US$10.0 million was contributed by 58.com Inc. Following the
closing of the series A financing of 58 Home, 58.com Inc. holds 87.9% of the total outstanding ordinary shares of 58 Home and 61.7% of the total
outstanding shares of 58 Home on an as-converted basis. As certain rights provided to the non-controlling Series A preferred shareholders of 58 Home
would be viewed as substantive participating rights under U.S. GAAP, we have ceased consolidating the financial results of 58 Home in our consolidated
financial statements in accordance with U.S. GAAP since November 27, 2015.
On December 31, 2015, we divested our controlling ownership stake in Guazi, a subsidiary that operated our consumer-to-consumer (C2C) used
car trading platform, to Mr. Mark Haoyong Yang, co-chairman of our board of directors at the time. We had a 45.6% stake in Guazi immediately following
the spin-off.
On December 11, 2015, we issued 4,267,344 Class A ordinary shares at a price of US$31.0 per share to Tencent in exchange for the cancellation
of US$125 million principal amount of a loan from Tencent, together with accrued but unpaid interest on the principal amount of US$400 million as of
December 11, 2015.
Our principal executive offices are located at Building 105, 10 Jiuxianqiao North Road Jia, Chaoyang District, Beijing 100015, the People’s
Republic of China. Our telephone number at this address is +86 10 5956-5858. Our registered office in the Cayman Islands is located at the offices of
Codan Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands. Our agent for
service of process in the United States is Law Debenture Corporate Services Inc., located at 400 Madison Avenue, 4th Floor, New York, New York 10017.
B. Business Overview
Our business is comprised principally of our online classifieds and listing platforms. Our online classifieds and listings platforms enable local
merchants and consumers to connect, share information and conduct business in China. These platforms include 58, Ganji and Anjuke. 58 and Ganji are
online multi-content category-classified advertising platforms, while Anjuke is an online real estate listing platform.
In addition, 58 Home, our unconsolidated subsidiary, operates a mobile-based closed-loop transactional platform for home services, which directly
connects consumers and individual service providers for local services such as home cleaning, moving services and manicure services provided at home.
Our Classifieds and Listing Platforms
Our classifieds and listing platforms contain local information for approximately 485 cities across diverse content categories, including jobs, real
estate, used goods, automotive and yellow pages. Users can browse and search for free for local information that they need. Users, including both
consumers and merchants, can also post content for free. The content includes job resumes, real estate rental and sales listings, and used vehicles and used
goods for sale, among others.
To improve user experience, our teams design and provide templates to users to make listings easier to post and more informative and relevant.
We conduct automatic and manual screening using proprietary technology and processes to improve the information quality on our online platforms. Our
information quality teams leverage our years of experience and continue to strengthen processes to certify local merchants offline, detect spam, and collect
and respond to customer feedback online.
On our online classifieds and listing platforms, merchants can post content to attract potential customer leads for free, but for paying merchants we
provide subscription-based membership services to help them attract more customers. For further enhanced marketing effectiveness, merchants can
purchase various additional online marketing services such as real-time bidding and priority listing. Merchants can pay for these services online, including
through their mobile phones.
We have field sales teams in 39 cities in China. In approximately 330 other cities where we do not have field sales teams, we work with sales
agencies to market locally. Our field sales and sales agency teams educate local merchants about the internet market and how the subscription-based
membership services on our classifieds and listing platforms can help them do better business. We also have centralized customer service teams who
maintain regular contact with our customers and upsell various online marketing services to help them optimize their marketing effectiveness.
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Our business model is highly compatible with mobile internet. User experience of browsing or listing information on our mobile applications is
much better than on PC applications because of smart phone features such as location based services and more convenient photo shooting and
communication tools. The enhanced mobile user experience also significantly increases user engagement.
Similar to our www.58.com website, our main 58 mobile application contains information in the various content categories. It allows users to
access information in different categories in one application. Our newly acquired and consolidated businesses also have their own respective mobile
applications. Ganji’s mobile application is a multiple category classifieds application similar to our 58 mobile application. Anjuke’s mobile application
mainly focuses on secondary and primary home sales. We have various merchant mobile applications through which merchants can manage content,
interact with consumers and purchase online marketing services to better attract consumers. We also have other category-specific mobile applications from
acquisitions or internal development that are still relatively small in terms of user traffic. In 2015, 71% of our total detail page views were on mobile
applications.
58 Home
The home services industry in China is a massive but fragmented industry. China has over one hundred cities with a population of a million or
more. These cities create a strong demand for home services such as home cleaning, cooking, laundry, automotive maintenance and cleaning, tutoring,
healthcare and moving services. On the supply side, China has a sufficient labor pool to provide these services. These service providers typically form
small or micro-scale businesses or attach themselves to middleman agency companies. These businesses are generally small and local and lack strong
brands. As a result, Chinese consumers generally have difficulty in searching for these services providers, let alone those who can provide high-quality and
consistent services.
In the second half of 2014, 58 Home launched its first mobile application. The search, reservation, payment, rating and review of these services
can be done on the mobile application. 58 Home finds and certifies individual service providers and trains them to use the merchant version of the mobile
application. There are no middleman agency companies on 58 Home. Consumers can select individual service providers or leave the selection of the service
providers to the system, which recommends service providers based on location, availability and other criteria specified by the consumers. Other than
online efforts, 58 Home also conducts regular training for services providers in an effort to raise the quality of their services, which is a key aspect of user
experience. 58 Home also has customer services call center teams that collect customer feedback to enhance our operations. Currently 58 Home focuses on
three core categories: home cleaning, moving services and manicure services provided at home or merchant locations. 58 Home also partners with third-
party companies that provide a single vertical home service category in order to widen the content categories on 58 Home. The 58 Home applications
facilitate the matching of supply and demand for local services and help raise the quality of these services provided in China. Currently, there are over 30
cities in China where most of 58 Home services are available. 58 Home is still in an early stage and 58 Home plans to roll out services to more cities and
categories in 2016.
Our Revenue Model
We generate revenues primarily from memberships and online marketing services. A membership is a basic service package mainly consisting of
merchant certification, display of an online storefront on our platforms, preferential listing benefits such as daily priority listings and higher quota for daily
listings, and access to our dedicated customer service support team and online account management system. Our online marketing services include listing
services, such as real-time bidding and priority listing, as well as marketing services through collaboration with third-party internet companies in China.
Merchants can use our real-time bidding services to bid for the most prominent placement of their listings in specific categories and locations on a daily or
a cost per click, or CPC, basis. Merchants can also purchase our priority listing services, which place their listings below real-time bidding listings and
above paying merchant members’ listings.
Our revenues were US$145.7 million, US$265.0 million and US$714.8 million in 2013, 2014 and 2015, respectively. We had net income of
US$19.6 million in 2013 and US$22.6 million in 2014 and we incurred net loss of US$263.0 million in 2015.
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Our Users
Our users refer to all participants on our platforms, including consumers and local merchants. Users may browse and search information on our
online platforms without the need to register an account with us. After completing a user registration process, a user can post information and use our
communication tools and other services.
Our paying merchant members refer to the registered accounts through which our users have purchased our membership services. Users who have
purchased our membership are entitled to additional services and benefits after paying membership fees to us. See also “— Service Offerings —
Membership.” Our online marketing customers refer to users who have purchased our various online marketing services to enhance their marketing
effectiveness. Our paying merchant members can also purchase online marketing services in addition to membership subscriptions. Online marketing
customers also include third-party internet companies who collaborate with us on performance-based online marketing services for their own advertisers.
Content Categories
Our users post a massive number of listings on our platforms covering a wide range of services and products. We organize the listings on our
platforms by content categories in an intuitive and easy-to-use directory to facilitate the browsing and viewing of listings. Within each main content
category, information is further sorted into subcategories with various search criteria and parameters to allow users to further refine their information search
and increase the relevancy of their search results. Currently, listings on our platforms cover major categories such as jobs, real estate, used goods,
automotive and yellow pages.
Key features of the main content categories are summarized as follows:
Jobs. Jobs currently covers a wide range of job categories such as sales people, skilled workers, food and beverage staff, delivery staff, and
homecare and cleaning staff. Our 58 and Ganji platforms have largely blue collar job listings and resumes. Employers can search and review
resumes on our database. In addition, this content category contains other tools that enable employers to manage, organize and streamline the
recruitment and hiring process.
Real estate. Real estate is sorted into sub-groups of residential leasing, primary and secondary property sales, office space, retail space and
industrial real estate leasing. Our 58 and Ganji platforms have mainly secondary property sales and rental listings, while our Anjuke platform has
both primary and secondary property sales listings. Listings are uploaded by either individual consumers or real estate agents. We further facilitate
users’ decision making by providing property pricing indices, generated from our listing database, for different areas and property categories. Our
PC and mobile applications enable real estate agents to conveniently upload new listings, manage their listings, communicate with consumers and
monitor marketing effectiveness.
Used goods. Used goods covers a wide selection of used consumer products such as computers and peripherals, mobile phones, digital cameras,
furniture, household appliances and goods, books, artwork, sporting goods and musical instruments. Listings are uploaded by either individual
consumers or used goods buy-sell merchants. In addition to the exchange of information, we also facilitate online transactions through our main 58
mobile application or through Zhuanzhuan, an internally developed used goods mobile application.
Automotive. Automotive includes listings of new and used cars, car leasing, driving school services, automotive repair and maintenance services,
and other car-related services. Listings are uploaded by either individual consumers or used car dealers. The platforms also contain automotive
manufacturers’ brand advertising for their new and used car businesses. For selected vehicles, we also provide vehicle inspection information as
well as financial services, mostly through qualified third-party partners, in an effort to better facilitate the automotive transaction. We also have
mobile applications that help users to prepare for driving license examinations, find driving tutors or access other information or services needed
by car owners.
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Yellow pages local services. This business directory covers a variety of general local services, which include homecare, business services,
renovation, education and training, vehicle rental, franchise licensing services, wedding and filming, and travel services. In some relevant content
categories, we facilitate commerce by providing online user reviews, reservations, and transaction and payment tools. These functionalities further
enhance user engagement and bring a higher level of convenience to users.
Our Websites and Mobile Applications
Our Websites
Our key websites include www.58.com, www.ganji.com and www.anjuke.com. Website layouts are designed to ensure a smooth user experience.
Users are typically brought to one of the approximately 485 city websites, or they can manually select the city they are interested in. Within each city
website, listings are grouped by content categories and subcategories. Users can further select a specific neighborhood within the city, leading users to
information that is only relevant to the selected neighborhood. In each content category, we provide customized parameters to allow users to further filter
their search queries.
From the home page, once users select the location and category, users will access a listing page, where numerous listings are displayed. The
listings on this page typically include brief information on merchants and their services. When users click on an individual listing, a landing page will show
more detailed information about the merchant and the product and service the merchant provides. These subcategories and additional parameters are
regularly reviewed and optimized for each content category based on user feedback and user traffic data to ensure we continue to provide a superior user
experience.
Our Mobile Applications
Our listing-based content is easily accessible through our different mobile applications. We mainly offer three types of mobile applications:
downloadable applications developed for Android and iOS platforms, browser-adapted applications for users accessing our websites through their
smartphone browsers and tailor-made mobile applications for merchants.
The mobile application content layout for classifieds and listings is intuitive and easy to use. Once users select a location and a main content
category, they are presented with the listings results. Users can further narrow the search by selecting more detailed search parameters, customized for
different content categories.
Mobile functions further enhance user experience on mobile phones. For example, a direct dial feature on our mobile-enabled platform allows
users to call the phone numbers displayed on a listing with one simple touch. In addition, mobile users can send messages or use instant messaging software
from our mobile applications at any time. We designed additional features for users to upload photos from mobile phones to update the listing content,
which is immediately synchronized with our web content. The multi-media functionalities of mobile phones further enrich the listing content on our
platforms. Furthermore, location-based functionalities of mobile phones enable us to provide information that is more geographically relevant to users on a
real-time basis. We have also developed technologies to recommend content based on users’ past browsing history. Our merchant mobile applications
simplify the processes for merchants to manage their listings, such as uploading, modifying, searching and prioritizing the listings and also purchasing
online marketing services to enhance their marketing effectiveness. Our mobile applications also allow merchants to communicate in real time with users
and manage their customer relationships on our applications. We also leverage big data ability to better match consumers who look for local services
information with those merchants who can provide the most relevant services. We continually work on developing additional features to better utilize
mobile device functionalities to enhance user experience.
In the case of 58 Home (the home services app) or Zhuanzhuan (our used goods app), mobile payment technology has made closed-loop services,
from searching to paying for services, not only possible but convenient.
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The 58 Home mobile applications, launched in the second half of 2014, currently contain content categories such as home cleaning, moving
services and manicure services. These mobile applications focus on services that generally require service providers to go to the consumer’s home to render
the services. Users can easily book services through the application after identifying the services they need, the location and the expected timing. Users can
use a system recommended service provider or select service providers through browsing the service providers available and their rating and reviews from
other consumers. When the services are rendered, users can pay online or with cash in person. They can also pay a lump sum to become members, which
entitles them to better discounts for booking future services from the platform.
Apart from the user versions of the 58 Home PC and mobile applications, 58 Home has also launched separate applications for service providers.
They enable service providers to receive and act on incoming orders, communicate with the consumers, receive payments and track service remuneration.
These applications simplify the process for users to find local services and enable them to make more informed decisions about selecting service
providers. They also enable the service providers who were previously typically affiliated with offline service agencies to gain direct access to consumers
and over time create a reputation by providing high-quality services and accumulating good reviews. 58 Home services, by connecting increasingly more
consumers and service providers, aim to become a more efficient platform in matching supply and demand for local services. By making the booking,
communication and payment process more transparent and conducting regular training for the service providers, 58 Home expects to help raise the quality
standards of the local services and increase the satisfaction rate of consumers and service providers.
The Zhuanzhuan mobile application, which we launched in the fourth quarter of 2015, allows users to search and trade used goods such as
computers and peripherals, mobile phones, digital cameras, furniture, household appliances and goods, books, artwork, sporting goods and musical
instruments.
Functionalities of our Platforms
All users can use our platforms to:
Browse and search. Users can browse and search our large database of listings to retrieve specific listings relevant to their needs for free and
without the need of registering an account with us. Users are able to obtain search results based on keyword searches as well as an intelligent
dictionary of commercial products and associated terms.
Post listings. Users who register with us enjoy the basic services of listing information on our online platforms for free as well as other additional
benefits. A registered user can choose to go through our certification process by providing personal identification information, a mobile phone
number and an email address for an individual, or business license and contact information for an enterprise. Listings by a registered user that has
passed the merchant certification process will be identified with a trust rating score on our online platforms.
Communicate. Other than traditional phone communication, most of our websites and mobile applications offer instant messaging tools enabling
users to maintain a “friends list” and communicate online. In addition to the instant messaging tools, our mobile site and mobile applications
contain a direct dial feature which allows users to call or send text messages to phone numbers displayed on the listings with one simple touch.
Our instant messaging software and mobile application are designed specifically for merchants. They have features such as instant notification
when users visit their listings, which ensures real-time interaction between merchants and consumers, and recommending users to merchants based
on our system’s intelligent matching capability after analyzing a merchant’s listing content and a user’s viewing history.
Make reservation and purchase. In addition to providing a local information directory, our online platforms also facilitate online reservations and
transactions between consumers and local merchants in 58 Home or used goods categories. For example, users can book home cleaning, moving
services and manicure services on 58 Home or buy and sell used goods on Zhuanzhuan. We partner with well-known third parties to provide
mobile payment interfaces and escrow payment ability.
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Review and report. Users can post reviews on listings on our platforms, which provides transparency on merchant credibility. Reviews and ratings
are most common in 58 Home and Zhuanzhuan used goods categories. Consumers can also easily report fraud if they come across suspicious
content.
Service Offerings
Membership
A subscription-based membership is a basic service package consisting mainly of merchant certification, display of an online storefront on our
platforms, preferential listing benefits such as daily priority listings and a higher quota for daily listings, and access to our dedicated customer service
support team and online account management system. Merchants who subscribe to our membership can enjoy more services and obtain more effective
marketing than non-paying merchants on our platforms. 58, Ganji and Anjuke offer subscription-based merchant membership packages that include similar
types of services although the specific details of the services, such as the quotas for daily listings and downloadable resumes, may vary from platform to
platform.
We offer memberships of varying lengths across different content categories. Memberships in the yellow pages and jobs categories are primarily
12-month packages. In China, due to relatively high employee turnover among migrant workers, many businesses have ongoing hiring needs. Memberships
in the real estate category are primarily one- to three-month packages due to the higher turnover of real estate agents. We acquire a majority of paying
merchant members through our field sales teams. Our centralized and dedicated tele-customer service team supports our paying merchant members during
their membership to enhance the effectiveness of the paying merchant members’ marketing efforts and improve the likelihood of membership renewals. A
majority of our paying merchant members are small and medium-sized local merchants.
The following table sets forth the number of subscription-based paying membership accounts for the periods indicated:
March 31,
2013
June 30,
2013
Sept. 30,
2013
Dec. 31,
2013
March 31,
2014
June 30,
2014
Sept. 30,
2014
Dec. 31,
2014
March 31,
2015
June 30,
2015
Sept. 30,
2015
Dec. 31,
2015
58
Ganji
Anjuke
_____________
248.8
—
—
297.7
—
—
352.9
—
—
392.9
—
—
441.0
—
—
(in thousands)
510.3
—
—
560.1
—
—
604.5
—
—
668.6
—
129.1
783.8
—
206.2
893.4
495.1
293.5
963.5
464.0
327.4
Note: We define paying membership accounts as the registered accounts through which our users have purchased our membership subscriptions. The
number of paying membership accounts in a given period represents the paying merchant members whose membership subscriptions are in their
service period at any point during such given period.
Our membership services package includes the following services:
Certification services. We require merchant certification for local merchants who intend to become our paying merchant members. We require
membership applicants to provide us with copies of their business licenses and we check the authenticity of details included in the business
licenses against those available in third-party databases, such as the publicly available database of the local administration of industry and
commerce. We have also developed various other certification processes and requirements that are specific to different content categories based on
our years of experience. Each member that has passed the merchant certification process will be identified as a certified merchant on our
platforms.
Online storefront. Paying merchant members can set up online storefronts by utilizing 615 standard website templates that we have developed in-
house and that can be customized for different service sectors. A member may include a brief company profile containing the member’s contact
information and a virtual showroom of the member’s products and services. The online storefront also includes online reservation, transaction and
payment functions.
Preferential listing benefits. Paying merchant members’ listings and online storefronts have priority placement in the listings and search results
over those of our non-member registered users. In addition, paying merchant members can designate time intervals throughout a day to refresh
their listings up to a pre-set number of times a day without additional fees. Other benefits include higher daily quotas to upload listings, higher
discounts to purchase other online marketing services, dedicated telephone numbers through which users can contact merchants for customer
services and statistical reports to track marketing effectiveness and participation opportunity in our marketing events.
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Customer service. We provide our paying merchant members with a dedicated and experienced customer support team that attends to their
inquiries, assists them with setting up their online storefronts, and follows up with them to help optimize their listings and marketing effectiveness.
In addition to general customer service, we also provide industry specific online marketing know-how to help merchants maximize their market
effectiveness.
Account management system. We have developed a comprehensive account management system which serves as a one-stop shop for our paying
merchant members. Our account management system allows paying merchant members to conduct various activities, including managing listings,
tracking and evaluating the marketing effectiveness of listings, managing business operations, and purchasing our online marketing services, via a
user-friendly interface. Our account management interface is tailored in design and functions for the varying needs and requirements of our paying
merchant members in different sectors. We have also developed a mobile merchant application through which our paying merchant members are
provided with access to the same information and services on mobile devices as on PCs. In addition to enabling listings with increased relevance
of information through location-based services, the mobile application also allows merchants to communicate in real time with users.
Membership revenues from customers are mostly collected by our field sales teams, while customers can also opt to request and subscribe to
memberships through our online interface.
Online Marketing Services
Our online marketing services primarily include listing services, such as real-time bidding and priority listing, display advertising and online
marketing services through collaboration with third-party internet companies in China. All of our 58, Ganji and Anjuke platforms offer some sort of online
marketing services. 58’s and Ganji’s online marketing services are mainly listing services that customers purchase to enhance the exposure of their listings.
Anjuke’s marketing services relate to primary real estate properties. On average, approximately 45.1% of our quarterly paying membership accounts
purchased our online marketing services in 2015.
Merchants can use our real-time bidding services to bid for the most prominent placement of their listings in specific categories and locations on a
cost per click basis, also known as CPC. We have developed a user-friendly bidding system through which merchants can create text- and graphic-based
descriptions for their listings and bid on the placements of their listings. We set minimum bidding prices which are based on metrics such as traffic and
number of clicks generated by precedent placements. We launched our real-time bidding services, mainly for daily listings, in selected categories and
locations in the first quarter of 2013. We upgraded the daily bidding systems to a CPC basis for major categories in first quarter of 2015. The bidding
services enable merchants to market their services to broader and more precise consumer populations. We generate much higher revenues than we
otherwise could with the same amount of listing space by attracting more customers and monetize the traffic to their market value. On 58’s classifieds
platform, an increasingly larger percentage of subscription-based payment merchant members have been purchasing bidding services. The newly
consolidated Ganji and Anjuke platforms have only a low percentage of their paying customers purchasing bidding services due to the lack of experience in
this area. We are working to transfer the knowledge and systems to the Ganji and Anjuke platforms.
Merchants can also purchase our priority listing services, which place their listings below real-time bidding listings and above paying merchant
members’ listings. Merchants can purchase listing placements of varying durations from several hours to several days to several weeks.
We provide display advertisement for real estate developers on our Anjuke platform. The customers use these services to enhance their brand
recognition and attract consumer attention to the primary real estate projects that are on the market. They can be text- or graphic-based displays for varying
time periods ranging from several days to several months.
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We collaborate with third-party internet companies by placing the marketing links of their marketing customers on the relevant listing pages on
our online platforms. We generate revenues based on the number of clicks or cost-per-thousand impressions at pre-determined prices.
In most cases customers are required to make payment in advance before purchasing our online marketing services, in the form of purchasing
virtual online currencies of our platforms. Paying merchant members can log into our account management webpage or mobile application and purchase
various online marketing services through an easy-to-use interface. Our account management system enables paying merchant members to review and
optimize the performance of their existing listings and to upload and market new listings.
Our field sales and customer service teams stay in regular contact with our customers and play an essential role in promoting our online marketing
services to our paying merchant members. Leveraging our expertise in online marketing services, we help our paying merchant members to select the most
suitable services to maximize their marketing effectiveness.
E-commerce services
Our e-commerce services are mainly related to Anjuke’s primary real estate business. Our e-commerce services for new residential properties take
place in the form of selling discount coupons to consumers. We promote developers’ properties on the Anjuke platform and facilitate physical property
visits and pre-sale customer support. We earn revenue when the discount coupons are used for actual property purchases.
Technology
We have made significant investments in different technologies to ensure superior user experience and information quality. We have built strong
capabilities in real-time search, anti-fraud protection and information quality assurance, large-scale systems and scalable infrastructure, account
management and real-time bidding technology, mobile technologies, and big data. We have taken over and integrated systems and technologies in our
newly acquired and consolidated internet businesses such as Ganji and Anjuke. As of December 31, 2015, we had a team of 2,744 highly skilled product
development personnel and engineers with expertise in a broad range of technical areas.
Real-time Search
To accomplish the timely display of information, we have developed a proprietary search engine with high levels of performance, reliability and
scalability.
High performance levels. We have implemented an advanced search indexing system through which all new data are stored immediately after
they are posted. Our new postings are typically available for search within three seconds after they are posted.
Highly reliable. We have developed a load balancing mechanism in the search engine to ensure that our overall searching system will be
unaffected by server failure.
Highly scalable. Our search system is implemented on a distributed and clustered infrastructure which enables the storage and processing of large
datasets and facilitates deployment of resources on a larger scale.
Anti-fraud Protection and Information Quality Assurance
We have built a framework in which we measure information quality and classify quality issues into different levels such as fraud risk,
authenticity, clarity and relevance. Based on the results of the initial information quality measurement, we deploy information screening technologies
according to the level of quality issues we identify. To maximize the efficiency of our system, if we identify a listing as involving a higher level of risk, we
do not proceed further with the lower level of screening procedures. Our strong anti-fraud capabilities include:
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Content analysis technology. Our system screens every listing for fraud risk before a listing can be displayed on our online platforms by using
various specific technologies such as watermark identification, information retrieval and machine learning technologies. Our system is designed to
sweep the data being transmitted on our platforms on a real-time basis for sensitive keywords, questionable content and unusual levels of activity.
User behavior analysis technology. Equipped with data mining technology to track and analyze a wide range of anonymous user information, our
system can detect and flag potential irregularities and initiate the relevant procedures to quickly identify and fix any potential problems.
Manual review and feedback adopting system. We use a manual review process to screen information that is flagged by our system, requiring a
more detailed follow-up. We have built a mechanism through which our system can “learn” from the results if a listing is checked and validated to
be accurate through our manual review process, by incorporating the manual review results in our system database. Thus we are able to continue to
update our system and enhance the system’s screening capability and efficiency.
Large-Scale Systems and Scalable Infrastructure
We have built a system infrastructure that is easily scalable, supports a massive number of software and systems and has large data storage
capacity. Our entire system is built on a distributed, load-balanced computing infrastructure, which is both highly scalable and reliable. The infrastructure
can be expanded easily as data storage and user visits increase. We have designed a unified platform, which administrates all systems and servers and can
reconfigure or redeploy systems or servers automatically whenever needed. We continue to upgrade our system infrastructure so that it can support the mid-
to long-term growth of the platform in a more cost effective and efficient manner.
Account Management System
We have developed a comprehensive account management system, which serves as a one-stop shop for our paying merchant members. Our
account management system allows paying merchant members to conduct various activities, including managing listings, tracking and evaluating the
marketing effectiveness of listings, managing business operations, and purchasing our online marketing services, via a user-friendly online interface.
Listing management. Paying merchant members can generate, upload and delete both text- and graphic-based listings via an easy-to-navigate
online interface. Our account management system provides search functions with category-specific search criteria to help our paying merchant
members to access and utilize our listing database more effectively and efficiently. The system is also equipped with additional analytic tools for
listings in different content categories.
Tracking and evaluation of marketing effectiveness. Paying merchant members can log into our account management webpage to review and
optimize performance of their listings. The system keeps track of traffic brought to their listings, and provides further detail on traffic by listing or
by time period. Our paying merchant members are therefore able to evaluate their marketing effectiveness by analyzing traffic to their listings
compared to that of other listings in similar content subcategories and locations.
Business operations management. Paying merchant members can manage part of their business operations using our account management system.
Purchasing online marketing services. We have placed links to purchase our various online marketing services on our account management
webpage, as we believe these services can help our customers achieve better marketing performance. Our paying merchant members can also
participate in real-time bidding for priority listings through a simple interface that we provide.
Mobile Technologies
Page views from mobile applications represented 71% of total detail page views in 2015. We use native web development capabilities to ensure
our applications can be upgraded rapidly and third-party applications can be integrated onto our mobile platform in a flexible and efficient manner.
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In addition, our mobile applications allow us to collect more detailed user behavior data, leverage our data mining capabilities and introduce new
user features, such as personalized content, to enhance user experience.
Big Data Platform and Data Intelligence
We have developed our own big data platform due to the increasing need for large scale and real time data analysis to enhance our operation and
user experience.
We have built our big data platform based on existing open source architecture such as hadoop, which we have modified and customized for our
business scenario, to create a reliable and high performance system. We have also built real time data analysis capabilities on top of the big data platform.
We have built a recommendation platform that uses machine learning and data intelligence technologies and gives us fast customization
capabilities for different business scenarios. We have customized recommendation systems for different business sectors such as housing, cars and used
goods.
Content Management and Monitoring
We have dedicated personnel reviewing content on our platforms for compliance with applicable laws and regulations, aided by a program
designed to sweep our platforms and the data being transmitted on our system on a real-time basis for sensitive keywords, questionable content and unusual
levels of activity. Content that contains certain keywords is automatically filtered by our program and cannot be successfully posted on our online
platforms.
Apart from ensuring our content is compliant with applicable laws and regulations, we believe information quality is critical to superior user
experience. We utilize proprietary technology such as text- or picture-based content screening analysis technologies together with manual screening to
ensure the relevance, accuracy and credibility of the content on our online platforms. Through the combination of manual review and our system’s self-
learning ability, we have been increasingly able to identify spam and fraudulent listings. Consumers can also post reviews on merchant listings, which
provide transparency on merchant credibility. We also encourage consumers to report fraud if they come across suspicious content by making the fraud
report process easy.
We encourage merchants to further increase their credibility by going through our merchant certification procedure, which is mandatory for our
subscription-based paying merchant members. The increased quality of our merchant network increases the quality of information on our platforms. In
addition, we have rolled out a consumer protection program, which contains various measures to help improve information credibility and promote safer
online transactions.
We continue to work with other internet companies to share knowledge and practices with respect to information quality management as well as
whitelists and blacklists in this area.
Our corporate policy requires a user to enter into a user agreement in the registration process before posting any content on our online platforms.
In the user agreement, the user makes certain representations and warranties, including, among other things, that (1) all information submitted for
registration purposes and all user-generated content are true, (2) none of the user-generated content infringes on third-party rights or properties, (3) the user-
generated content is in compliance with relevant PRC laws and regulations, (4) the user alone is responsible for any losses, injuries, liabilities or expenses
arising from or caused by the user-generated content, and (5) the user will not hold us liable for any losses arising from intellectual property right
infringement by using our online platforms. However, we may be subject to intellectual property infringement claims or other allegations by third parties
for services provided or content displayed on our online platforms. Although we believe that we will have recourse to indemnification from alleged
infringing users on the basis of the user agreement, such right to recourse is subject to enforcement mechanisms of the PRC legal system which may not be
effective. See “Item 3. Key Information — D. Risk Factors — Risks Related to Our Business — We may be subject to intellectual property infringement
claims or other allegations by third parties for services we provide or for information or content displayed on, retrieved from or linked to our website, or
distributed to our users, which may materially and adversely affect our business, financial condition and prospects.”
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Sales and Customer Service
Sales
Our field sales force provides us with direct access to local merchants and helps us better understand local needs. They help to certify our paying
merchant members in person, organize focused workshops or seminars with interested merchants to promote basic concepts of internet marketing, promote
our services and develop paying merchant members.
As of December 31, 2015, we established branches in 29 major cities and employed sales teams of 11,934 employees. This includes our teams
from Ganji and Anjuke in addition to our 58 field sales teams. Our field sales teams have directly contributed to the revenue growth of our subscription-
based membership services. They also lay the foundation for our online marketing services growth by selling packages that combine subscription-based
packages and virtual currencies which customers can later use to purchase various forms of online marketing services.
The compensation package for our sales teams includes fixed basic salaries and commissions based on the revenues they achieve. We provide
regular in-house and external education and training, internally developed customer relationship management, call center and other business intelligence
systems to our field sales and sales management teams to help them keep up-to-date on new products and services of our company and increase their
efficiency in developing new subscription-based paying merchants.
Currently, to a large extent, we have separate teams selling separate services for our 58, Ganji and Anjuke businesses. For 58 we have field sales
teams in 27 cities. For Ganji, we have direct field sales teams in 4 cities. For Anjuke, we have direct field sales teams in 39 cities. In cities other than those
cities where we have direct sales teams, we utilize sales agencies to grow our business. As of December 31, 2015, we had relationships with over 330 sales
agencies. We will continue to evaluate our strategies with respect to the use of field sales teams or sales agencies as well as the decision to maintain
separate sales or sales agencies to sell different brands or using teams to sell multiple brands.
Customer Service
General user service. We have dedicated teams who are committed to address general users’ queries within 24 hours through online messages or
emails. In addition, we closely monitor user feedback from various other channels, such as popular social network services platforms and promptly elevate
issues internally and respond to valuable user feedback we collect.
Member service. For our paying merchant members, we have a dedicated customer service center in Tianjin, China, which supports our paying
merchant members through our paying merchant members-only toll-free phone number and other online communication channels. Our customer service
center was staffed with 1,285 customer service personnel as of December 31, 2015. Our dedicated customer service team is well trained on our membership
services functionalities and online marketing services offerings. Using our internally developed customer services systems, our customer service teams
analyze data on the performance of the marketing services and help paying merchant members to optimize their online marketing strategies and
performance.
New Member Generation. In some cases, we utilize our customer service team to develop new paying merchant members through tele-sales
activities. In the industries where local merchants are more familiar with online marketing, we find this to be more cost-effective to promote our online
marketing services on the phone, as opposed to having in-person demonstrations of our service offerings. We also use our tele-sales teams to cover remote
areas where it is not economical to cover through our field sales teams or sales agent network.
As of December 31, 2015, we had approximately 1,285 employees in our customer service teams.
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Marketing and Brand Promotion
We believe that there is still lots of room in China for user growth for our platforms as smart phones continue to proliferate. Other than continuing
enhancing user experience, which drives word-of-mouth and repeat usage, it is also critical to continue to promote our brand and attract more users through
various forms of online and offline marketing. Our online marketing activities consist of paid marketing through internet navigation sites and various
popular search engines in China and display advertisements. It also includes traffic acquisition on mobile browsers, mobile application stores and selected
smart phone application pre-installation. Our offline marketing activities include traditional mainstream media such as television, billboard, direct mailing
advertisements, public relations activities, as well as sponsored events to increase our visibility and promote our brand. Our branding efforts cover major
brands, such as “58,” “Ganji” and “Anjuke.” Although majority of the advertising expenses are incurred to attract consumer users, we also conduct
merchant related marketing events, such as seminars and workshops, where we meet with local merchants to share insights in the industries, introduce and
promote our various online marketing services to deepen our relationship with the merchant network.
Intellectual Property
Our success and ability to compete depend, in part, upon our ability to establish and adequately protect our intellectual property rights. In this
regard, we rely primarily on a combination of patent, copyright, software registration, trademark, trade secret and unfair competition laws and contractual
rights, such as confidentiality and license agreements with our employees, partners and others. We hold 16 patents and have applied for the registration of
111 other patents, which cover a variety of technologies, including those relating to data processing, search, distribution and publishing. As of March 31,
2016, we had registered 166 computer software copyrights and 49 artwork copyrights in China, and had registered 35 domain names that are material to our
business, including www.58.com, www.58.com.cn, www.anjuke.com and www.anjuke.cn, and 136 trademarks, including
, in
China, excluding those relating to 58 Home. As of March 31, 2016, Ganji had registered 31 computer software copyrights and 1 artwork copyright in China
and had registered 4 domain names that are material, including www.ganji.com and www.ganji.com.cn, as well as 249 trademarks.
and
,
Competition
Our competitors in the online marketing space include smaller or regional online classifieds websites as well as industry- or content-specific
vertical websites, whose information serve the same underlying industries as certain content categories of our online platforms. We may also face
competition from major internet companies, who may enter the online classifieds market in China. We compete primarily with our user traffic,
effectiveness of services in reaching targeted users, ability to demonstrate marketing results and customer service capabilities. In some cases, we partner
with other internet companies to provide better user experiences and achieve win-win collaborations.
Regulation
This section sets forth a summary of the significant regulations or requirements that affect our business activities in China or our shareholders’
rights to receive dividends and other distributions from us.
Regulations on Value-Added Telecommunication Services
The PRC government extensively regulates the telecommunications industry, including the internet sector. The PRC State Council, the MIIT, the
Ministry of Commerce, the State Administration for Industry and Commerce, the State Administration of Press, Publication, Radio, Film and Television
(formerly the General Administration of Press and Publication) and other relevant government authorities have promulgated an extensive regulatory
scheme governing telecommunications, internet-related services and e-commerce. However, the PRC telecommunications industry and internet-related
industry are at an early stage of development. New laws and regulations may be adopted from time to time that will require us to obtain additional licenses
and permits in addition to those that we currently have, and will require us to address new issues that arise from time to time. As a result, substantial
uncertainties exist regarding the interpretation and implementation of current and any future Chinese laws and regulations applicable to the
telecommunications, internet-related services and e-commerce. See “Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in
China — Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us.”
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Licenses for Value-Added Telecommunication Services
The Catalogue for the Guidance of Foreign Investment Industries, or the Catalogue, as promulgated and amended from time to time by the
Ministry of Commerce and the National Development and Reform Commission, is the principal guide to foreign investors’ investment activities in China.
The most recent version of the Catalogue, which was promulgated in 2015, divides the industries into three categories: encouraged, restricted and
prohibited. Industries not listed in the Catalogue are generally open to foreign investment unless specifically restricted by other PRC laws and regulations.
A wholly foreign-owned enterprise is generally permitted for encouraged industries, while for restricted industries, such as value-added
telecommunications service industry, there are some limitations to the ownership and/or corporate structure of the foreign-invested companies that operate
in such industries. Industries in the prohibited category are not open to foreign investors.
The Telecommunications Regulations issued by the PRC State Council in September 2000 are the primary regulations governing
telecommunication services. The Telecommunications Regulations set out the general framework for the provision of telecommunication services by PRC
companies. Under the Telecommunications Regulations, it is a requirement that telecommunications service providers procure operating licenses prior to
their commencement of operations. The Telecommunications Regulations draw a distinction between “basic telecommunications services” and “value-
added telecommunications services.” Information services such as content service, entertainment and online games services are classified as value-added
telecommunications services.
Pursuant to the Administrative Measures for Telecommunications Business Operating Permit promulgated by the MIIT in March 2009, there are
two types of telecom operating licenses for operators in China, namely, licenses for basic telecommunications services and licenses for value-added
telecommunications services. The operation scope of the license will detail the permitted activities of the enterprise to which it is granted. An approved
telecommunication services operator must conduct its business in accordance with the specifications recorded on its value-added telecommunications
services operating license.
Pursuant to the Administrative Measures on Internet Information Services, promulgated by the PRC State Council in September 2000, commercial
internet information services operators must obtain an ICP License, from the relevant government authorities before engaging in any commercial internet
information services operations within China. Beijing 58, our consolidated affiliated entity, obtained an ICP License issued by Beijing Administration of
Telecommunication in May 2006, which was renewed in May 2011 and again in April 2016, and will expire in April 2021.
Foreign Investment in Value-Added Telecommunications Services
Pursuant to the Provisions on Administration of Foreign-Invested Telecommunications Enterprises, promulgated by the State Council in
December 2001 and amended subsequently, the ultimate foreign equity ownership in a value-added telecommunications services provider may not exceed
50%, except for e-commerce business, in which foreign investors are allowed to have 100% ownership in accordance with the Guidance Catalog of
Industries for Foreign Investment amended in March 2015, and an announcement by the MIIT in June 2015. Moreover, for a foreign investor to acquire any
equity interest in a value-added telecommunication business in China, it must satisfy a number of stringent performance and operational experience
requirements, including demonstrating good track records and experience in operating value-added telecommunication business overseas. Foreign investors
that meet these requirements must obtain approvals from the MIIT and the Ministry of Commerce or its authorized local counterparts, which retain
considerable discretion in granting approvals. Pursuant to publicly available information, the PRC government has issued telecommunications business
operating licenses to only a limited number of foreign-invested companies, all of which are Sino-foreign joint ventures engaging in the value-added
telecommunication business.
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The MIIT Circular issued in July 2006, reiterated the regulations on foreign investment in telecommunications businesses, which require foreign
investors to set up foreign-invested enterprises and obtain a business operating license for internet content provision to conduct any value-added
telecommunications business in China. Pursuant to the circular, a domestic company that holds an ICP license is prohibited from leasing, transferring or
selling the license to foreign investors in any form, and from providing any assistance, including providing resources, sites or facilities, to foreign investors
that conduct value-added telecommunications business illegally in China. Furthermore, the relevant trademarks and domain names that are used in the
value-added telecommunications business must be owned by the local ICP license holder or its shareholders. The MIIT Circular further requires each ICP
license holder to have the necessary facilities for its approved business operations and to maintain such facilities in the regions covered by its license. In
addition, all value-added telecommunications service providers are required to maintain network and information security in accordance with the standards
set forth under relevant PRC regulations.
In light of the aforesaid restrictions, we rely on Beijing 58, our consolidated affiliated entity, to hold and maintain the licenses necessary to provide
online marketing services and other value-added telecommunications services in China. For a detailed discussion of our contractual arrangement, please
refer to “— C. Organizational Structure.” To comply with these PRC regulations, we operate our website and value-added telecommunications services
through Beijing 58. Beijing 58 holds an ICP license and owns all domain names used in our value-added telecommunications businesses. Beijing 58,
together with its subsidiaries, is also the owner of all registered trademarks which are used in our value-added telecommunications businesses and is the
applicant of all registered trademark applications we are currently making.
Regulations on Information Security and Censorship
The PRC government regulates and restricts internet content in China to protect state security and ensure the legality of the internet content. The
National People’s Congress, the PRC national legislative body, enacted a law in December 2000, as subsequently amended, among other things, makes it
unlawful to: (1) gain improper entry into a computer or system of strategic importance; (2) disseminate politically disruptive information; (3) leak state
secrets; (4) spread false commercial information; or (5) infringe intellectual property rights. Pursuant to the Administrative Measures on Internet
Information Services and other applicable laws, internet content providers and internet publishers are prohibited from posting or displaying over the
internet content which violates PRC laws and regulations, impairs the national dignity of China, or is reactionary, obscene, superstitious, fraudulent or
defamatory. Internet service providers are required to monitor their websites, including electronic bulletin boards. They may not post or disseminate any
content that falls within these prohibited categories and must remove any such content from their websites. The PRC government may shut down the
websites of ICP license holders that violate any of the above-mentioned content restrictions and revoke their ICP licenses. In addition, the MIIT has
published regulations that subject ICP operators to potential liability for content displayed on their websites and the actions of users and others using their
systems, including liability for violations of PRC laws and regulations prohibiting the dissemination of content deemed to be socially destabilizing. The
Ministry of Public Security has the authority to order any local internet service provider to block any internet website at its sole discretion. From time to
time, the Ministry of Public Security has stopped the dissemination over the internet of information which it believes to be socially destabilizing.
The Ministry of Public Security has promulgated measures in December 1997 that prohibit the use of the internet in ways which, among other
things, result in a leakage of State secrets or the distribution of socially destabilizing content. Socially destabilizing content includes any content that incites
defiance or violations of PRC laws or regulations or subversion of the PRC government or its political system, spreads socially disruptive rumors or
involves cult activities, superstition, obscenities, pornography, gambling or violence. Under PRC law, state secrets are defined broadly to include
information concerning PRC national defense, state affairs and other matters as determined by the PRC authorities.
In December 2005, the Ministry of Public Security promulgated Provisions on Technological Measures for Internet Security Protection. These
measures and the Administrative Measures on Internet Information Services require all ICP operators to keep records of certain information about their
users (including user registration information, log-in and log-out time, IP address, content and time of listings by users) for at least 60 days and submit the
above information as required by laws and regulations. The ICP operators must regularly update information security and censorship systems for their
websites with local public security authorities, and must also report any public dissemination of prohibited content. If an ICP operator violates these
measures, the PRC government may revoke its ICP license and shut down its websites. Pursuant to the Decision on Strengthening Network Information
Protection issued by the Standing Committee of the PRC National People’s Congress in December 2012, ICP operators must request identity information
from users when ICP operators provide information publication services to the users. If ICP operators come across prohibited information, they must
immediately cease the transmission of such information, delete the information, keep relevant records, and report to relevant government authorities. In
July 2013, the MIIT promulgated the Regulation on Protection of Personal Information of Telecommunication and Internet Users to provide for more
detailed rules in this respect.
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In addition, the State Secrecy Bureau has issued provisions authorizing the blocking of access to any website it deems to be leaking state secrets or
failing to comply with the relevant legislation regarding the protection of state secrets.
The Standing Committee of the National People’s Congress promulgated Anti-Terrorism Law on December 27, 2015, which took effect on
January 1, 2016. According to the Anti-Terrorism Law, telecommunication service operators or internet service providers must, among others, (i) provide
technical support and assistance to the relevant government authorities in preventing and investigating terrorist activities, (ii) implement network security
and information monitoring systems and take safety and prevention measures to prevent the dissemination of terrorism information, delete the terrorism
information, immediately stop its dissemination, and keep record and report to the relevant government authorities once the terrorism information is
discovered, and (iii) examine the identity of customers before providing services. Any violation of the Anti-Terrorism Law may result in severe penalties,
including substantial fines.
As Beijing 58 is an ICP operator, it is subject to the laws and regulations relating to information security. To comply with these laws and
regulations, it has completed the mandatory security filing procedures with the local public security authorities, regularly update their information security
and content-filtering systems with newly issued content restrictions, and maintains records of users’ information as required by the relevant laws and
regulations. Beijing 58 has also taken measures to delete or remove links to content that to its knowledge contains information violating PRC laws and
regulations. The majority of the content posted on our online platforms is first screened by our filtering systems. Content containing prohibited words or
images is then manually screened by employees who are dedicated to screening and monitoring content published on our online platforms and removing
prohibited content. We believe that with these measures in place, no prohibited content under PRC information security laws and regulations should have
been publicly disseminated through our online platforms in the past. However, there is significant amount of content posted on our online platforms by our
users on a daily basis. If any prohibited content is publicly disseminated in the future and we become aware of it, we will report it to the relevant
government authority. We believe these measures taken by us are generally in compliance with the relevant laws and regulations.
If, despite the precautions, we fail to identify and prevent illegal or inappropriate content from being displayed on or through our online platforms,
we may be subject to liability. In addition, these laws and regulations are subject to interpretation by the relevant authorities, and it may not be possible to
determine in all cases the types of content that could result in liability. To the extent that PRC regulatory authorities find any content displayed on or
through our online platforms objectionable, they may require us to limit or eliminate the dissemination or availability of such content or impose penalties,
including the revocation of our operating licenses or the suspension or shutdown of our online operations. In addition, the costs of compliance with these
regulations may increase as the volume of content and users on our online platforms increases.
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Regulations on Internet Privacy
The PRC Constitution states that PRC law protects the freedom and privacy of communications of citizens and prohibits infringement of these
rights. In recent years, PRC government authorities have promulgated laws and regulations on internet use to protect personal information from any
unauthorized disclosure. The Decision on Strengthening Network Information Protection and the Regulation on Protection of Personal Information of
Telecommunication and Internet Users provide that information that identifies a citizen, the time or location for his use of telecommunication and internet
services, or involves privacy of any citizen such as his birth date, ID card number, and address is protected by law and must not be unlawfully collected or
provided to others. ICP operators collecting or using personal electronic information of citizens must specify the purposes, manners and scopes of
information collection and uses, obtain consent of the relevant citizens, and keep the collected personal information confidential. ICP operators are
prohibited from disclosing, tampering with, damaging, selling or illegally providing others with, collected personal information. ICP operators are also
prohibited from collection and use of personal information after a user has stopped using the services. ICP operators are required to take technical and other
measures to prevent the collected personal information from any unauthorized disclosure, damage or loss as well as conducting a self-examination of their
protection of personal information at least once a year. The Administrative Measures on Internet Information Services prohibit an ICP operator from
insulting or slandering a third party or infringing upon the lawful rights and interests of a third party. The relevant telecommunications authorities are
further authorized to order ICP operators to rectify unauthorized disclosure. ICP operators are subject to legal liability, including warnings, fines,
confiscation of illegal gains, revocation of licenses or filings, closing of the relevant websites, administrative punishment, criminal liabilities, or civil
liabilities, if they violate relevant provisions on internet privacy. Pursuant to the Ninth Amendment to the Criminal Law issued by the Standing Committee
of the National People’s Congress in August 2015 and becoming effective in November, 2015, any ICP provider that fails to fulfill its obligations relating
to internet information security administration under applicable law and refuses to rectify upon an order will be subject to criminal liability for (i) any
dissemination of illegal information on a large scale, (ii) any severe effect due to the leakage of client information, (iii) any serious loss of evidence of
criminal activities, or (iv) other severe situations, while any individual or entity that sells or provides personal information to others unlawfully, or steals or
otherwise unlawfully obtains any personal information will be subject to criminal liability in severe situations. The PRC government, however, has the
power and authority to order ICP operators to turn over personal information if an internet user posts any prohibited content or engages in illegal activities
on the internet.
Regulations on Internet Mapping Services
Pursuant to the PRC regulations applicable to internet mapping services issued by the National Administration of Surveying, Mapping and Geo
information (formerly known as the State Bureau of Surveying and Mapping), maps transmitted through internet are internet maps. To provide internet
mapping services, the provider shall apply for a Surveying and Mapping Qualification Certificate for internet mapping with the competent surveying and
mapping bureau. The PRC regulations also provide for certain conditions and requirements for issuing the Surveying and Mapping Qualification
Certificate, such as the number of technical personnel and map security verification personnel, security facilities, and approval from relevant provincial or
municipal surveying and mapping bureau on security system, qualification management and filing management. Internet maps must be approved by
relevant government authority before they can be publicized on internet. Further, the State Bureau of Surveying and Mapping and other seven PRC
government authorities jointly issued a notice in 2008, to investigate and punish the illegal and non-compliance activities with respect to the internet
mapping services or geography information services. We currently provide location information in our real estate directory by using maps provided by a
third-party internet map operator, which may be deemed as one type of internet mapping services. Our consolidated affiliated entity, Beijing 58, obtained a
Surveying and Mapping Qualification Certificate for internet map search and location services in May 2012, which was renewed in January 2015 and will
expire in December 2019. Shanghai Ruijia, a subsidiary of Beijing 58, is in the process of applying for the Surveying and Mapping Qualification
Certificate.
Regulations on Employment Agency Services
In accordance with the Employment Promotion Law promulgated by the Ministry of Human Resources and Social Security and the Regulations on
Employment Service and Employment Administration promulgated by the Ministry of Human Resources and Social Security, both with effect from
January 1, 2008, an employment agency, which provides intermediary and other services for recruitment by employers and job seeking by employees, must
obtain an Employment Agency License from the relevant labor authority and be subject to annual inspection by such authority. An employment agency
may engage in collecting and publishing job seeking and recruitment information and providing internet employment information services in accordance
with relevant laws and regulations. An employment agency is prohibited from providing services for individuals without legal identity certifications or
enterprises without legal licenses. A wholly foreign-owned enterprise (other than owned by Hong Kong and Macau service providers) is prohibited from
conducting employment agency business. Our jobs and resumes directory provides an online platform for job seekers and employers to post resumes and
job opportunities. Our consolidated affiliated entity, Beijing 58, initially obtained an Employment Agency License in March 2012 and recently had it
renewed in April 2016. The renewed Employment Agency License will expire in March 2019.
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Regulations on E-commerce
The PRC e-commerce industry is at an early stage of development and there are few PRC laws or regulations specifically regulating e-commerce
business. In December 2007, the Standing Committee of Beijing Municipal People’s Congress adopted the Beijing Municipal Regulations on Promotion of
Informatization, which provide that any individual or enterprise that conducts business operations through the internet must obtain a business license and/or
other necessary licenses prior to operation. The operator of an online platform is responsible for checking such individuals’ or enterprises’ licenses. In July
2008, the Beijing AIC promulgated certain rules for implementing the above-mentioned regulation. Pursuant to these rules, any individual or enterprise
failing to obtain a business license may be prohibited from doing business on an e-commerce platforms operating in Beijing, and violation of these rules
may lead to penalties on either the individual/enterprise or the operator of the e-commerce platforms. On January 26, 2014, the State Administration for
Industry and Commerce adopted the Administrative Measures for Online Trading, or the Online Trading Measures, which became effective on March 15,
2014 and repealed the Interim Measures for the Administration of Online Products Sales and Relevant Services previously issued in May 2010. Pursuant to
the Online Trading Measures, enterprises or other operators that engage in online product sales and other services and have been registered with the State
Administration for Industry and Commerce or its local branch must make available to the public the information stated in their business licenses or the link
to their business licenses online on their websites; individuals that engage in online product sales and other services must submit actual identification
information such as name and address to the operator of the e-commerce platforms. The Online Trading Measures, however, allow individuals to engage in
online product sales and other services without obtaining a business license. Under the Online Trading Measures, a consumer is entitled to return the
products (other than customized products, fresh and perishable goods, audio or visual products, computer software and other digital products downloaded
online or unpackaged by consumers, and newspapers and journals that have been delivered) within seven days from the date after receipt of the products
without giving any reason. The online sellers must, within seven days upon receipt of the returned products, refund the prices paid by consumers for
relevant products. In addition, sellers are prohibited from using contract terms or other means setting out provisions that are unfair or unreasonable to
consumers such as those excluding or restricting consumers’ rights, reducing or exempting operators’ responsibilities, and increasing the consumers’
responsibilities, and are prohibited from forcing consumers to enter into transactions by using contract terms and technical means.
Beijing 58 has obtained a business license from a branch of the Beijing AIC with a term from December 2005 to December 2025. Based our
verbal consultation with the Beijing AIC, we believe that, except for merchants who conduct transactions on our online platforms, our other users who list
information on our platforms and conduct the product sales and other services offline are not subject to the provisions regarding online platforms. As for
merchants who conduct transactions on our online platforms, we check their business licenses before allowing them to post listings on our platforms to
ensure compliance with license requirements under PRC laws and regulations. However, uncertainties exist in terms of the implementation of these national
and Beijing local rules due to the lack of practical guidance. We cannot predict with certainty to what extent these rules will affect our business operations
or future strategies.
Regulations on Software Products
The Administrative Measures on Software Products, issued by the MIIT in October 2000 and subsequently amended, provide a registration and
filing system with respect to software products made in or imported into China. These software products may be registered with the relevant local
authorities in charge of software industry administration. Registered software products may enjoy preferential treatment status granted by relevant software
industry regulations. Software products can be registered for five years, and the registration is renewable upon expiration.
In order to further implement the Computer Software Protection Regulations promulgated by the State Council in December 2001, the State
Copyright Bureau issued the Computer Software Copyright Registration Procedures in February 2002, which apply to software copyright registration,
license contract registration and transfer contract registration. As of March 31, 2016, we had registered 166 computer software copyrights in China,
excluding those relating to 58 Home.
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Regulations on Trademarks
Trademarks are protected by the PRC Trademark Law adopted in 1982 and subsequently amended as well as the Implementation Regulation of the
PRC Trademark Law adopted by the State Council in 2002 and subsequently amended. The Trademark Office under the State Administration for Industry
and Commerce handles trademark registrations. Trademarks can be registered for a term of ten years and can be extended for another ten years if requested
upon expiry of the first or any renewed ten-year term. The PRC Trademark Law has adopted a “first-to-file” principle with respect to trademark
registration. Where a trademark for which a registration application has been made is identical or similar to another trademark which has already been
registered or been subject to a preliminary examination and approval for use on the same type of or similar commodities or services, the application for
such trademark registration may be rejected. Any person applying for the registration of a trademark may not prejudice the existing right first obtained by
others, nor may any person register in advance a trademark that has already been used by another party and has already gained a “sufficient degree of
reputation” through such another party’s use. Trademark license agreements must be filed with the Trademark Office or its regional offices. As of March
31, 2016, we had registered 136 trademarks in China, excluding those relating to 58 Home.
Regulations on Patent
The PRC Patent Law provides for patentable inventions, utility models and designs, which must meet three conditions: novelty, inventiveness and
practical applicability. The State Intellectual Property Office is responsible for examining and approving patent applications. A patent is valid for a term of
twenty years in the case of an invention and a term of ten years in the case of utility models and designs. As of March 31, 2016, we held 16 patents and had
applied for the registration of 111 other patents, all of which are in the process of examination by the State Intellectual Property Office.
Tort Liability Law
In accordance with the Tort Liability Law, internet users and internet service providers bear tortious liabilities in the event they infringe other
persons’ rights and interests through the internet. Where an internet user conducts tortious acts through internet services, the infringed person has the right
to request the internet service provider to take necessary actions such as deleting contents, screening and delinking. The internet service provider, failing to
take necessary actions after being informed, will be subject to joint and several liabilities with the internet user with regard to the additional damages
incurred. If an internet service provider knows an internet user is infringing other persons’ rights and interests through its internet service but fails to take
necessary action, it shall be jointly and severally liable with the internet user. We have internal policy designed to reduce the likelihood that user content
may be used without proper licenses or third-party consents. When we are approached and requested to remove content uploaded by users on the grounds
of infringement, we investigate the claims and remove any uploads that appear to infringe the rights of a third party after our reasonable investigation and
determination. However, such policy may not be effective in preventing the unauthorized listing of copyrighted materials or materials infringing other
rights of third parties. See “Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in China — We may be held liable to third
parties for information or content displayed on, retrieved from or linked to our website, or distributed to website users, which could harm our reputation and
business.”
Regulations on Foreign Currency Exchange
Pursuant to the Foreign Exchange Administration Regulations, as amended in August 2008, the Renminbi is freely convertible for current account
items, including the distribution of dividends, interest payments, trade and service-related foreign exchange transactions, but not for capital account items,
such as direct investments, loans, repatriation of investments and investments in securities outside of China, unless SAFE’s prior approval is obtained and
prior registration with SAFE is made. In May, 2013 SAFE promulgated SAFE Circular 21 which provides for and simplifies the operational steps and
regulations on foreign exchange matters related to direct investment by foreign investors, including foreign exchange registration, account opening and use,
receipt and payment of funds, and settlement and sales of foreign exchange. In February 2015, SAFE promulgated the Notice on Further Simplifying and
Improving Foreign Exchange Administration Policy on Direct Investment, or the SAFE Notice 13, which became effective on June 1, 2015. Pursuant to
SAFE Notice 13, instead of applying for approvals regarding foreign exchange registrations of foreign direct investment and overseas direct investment
from SAFE as required under current laws, entities and individuals will be required to apply for such foreign exchange registrations from qualified banks.
The qualified banks, under the supervision of SAFE, will directly examine the applications and conduct the registration. We generally follow the
regulations and apply to obtain the approval of SAFE and other relevant PRC government authorities. However, we may not be able to obtain these
government registrations or approvals on a timely basis, if at all. If we fail to receive such registrations or approvals, our ability to provide loans or capital
contributions to our PRC subsidiaries and our consolidated affiliated entities may be negatively affected, which could adversely affect our liquidity and our
ability to fund and expand our business.
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In August 2008, SAFE promulgated a SAFE Circular 142 regulating the conversion, by a foreign-invested enterprise, of foreign currency into
Renminbi by restricting how the converted Renminbi may be used. The SAFE Circular 142 requires that the registered capital of a foreign-invested
enterprise settled in Renminbi converted from foreign currencies may only be used for purposes within the business scope approved by the applicable
government authority and may not be used for equity investments within China. In July 2014, SAFE promulgated the SAFE Circular 36 regarding the pilot
administration on the settlement of the foreign currency-denominated capital of foreign-invested enterprises in certain designated areas and removed some
of the restrictions provided under SAFE Circular 142 in these areas. In March 2015, SAFE promulgated SAFE Circular 19, which came into force replacing
both SAFE Circular 142 and SAFE Circular 36 on June 1, 2015. Although SAFE Circular 19 allows for the use of Renminbi converted from the foreign
currency-denominated capital for equity investments in the PRC, the restrictions will continue to apply as to foreign-invested enterprises’ use of the
converted Renminbi for purposes beyond the business scope, for entrusted loans or for inter-company Renminbi loans. In addition, SAFE Circular 19 is
still unclear whether a foreign-invested enterprise whose business scope does not include equity investment or similar activities may use Renminbi
converted from the foreign currency-denominated capital for equity investments in the PRC. Violations of these circulars and rules will result in severe
penalties, such as heavy fines. These circulars may significantly limit our ability to use Renminbi converted from net proceeds of our securities offerings to
provide financial support to our consolidated variable interest entitles in China through our PRC subsidiaries.
The principal regulations governing distribution of dividends of foreign-invested enterprises include the Foreign-Invested Enterprise Law, as
amended in October 2000, and the Implementation Rules of the Foreign-invested Enterprise Law, as amended in April 2001 and in February 2014.
Pursuant to these laws and regulations, foreign-invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in
accordance with PRC accounting standards and regulations. In addition, foreign-invested enterprises in China are required to allocate at least 10% of their
respective accumulated profits each year, if any, to fund certain reserve funds unless these reserves have reached 50% of the registered capital of the
enterprises. In addition, these companies may allocate a portion of their after-tax profits based on PRC accounting standards to employee welfare and bonus
funds at their discretion. These reserves are not distributable as cash dividends.
Regulations on Offshore Financing
Pursuant to a SAFE Circular 37 issued by SAFE in July 2014, prior registration with the local SAFE branch is required for PRC residents,
including PRC individuals and PRC entities, to establish or control an offshore company for the purposes of overseas investment or financing with
legitimate assets or equity interests in an onshore enterprise or offshore assets or interests located in China. The PRC residents are also required to amend
the registration or filing with the local SAFE branch any material change in the offshore company, such as any change of basic information (including
change of such PRC residents, name and operation term), increase or decreases in investment amount, transfers or exchanges of shares, or merger or
divisions. On February 28, 2015, SAFE promulgated the Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct
Investment, or SAFE Notice 13, which became effective on June 1, 2015. Pursuant to SAFE Notice 13, instead of applying for approvals regarding foreign
exchange registrations of foreign direct investment and overseas direct investment from SAFE as required under current laws, entities and individuals will
be required to apply for such foreign exchange registrations, including those required under the SAFE Circular 37, from qualified banks. The qualified
banks, under the supervision of SAFE, will directly examine the applications and conduct the registration.
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Failure to comply with the registration procedures set forth in the SAFE Circular 37, or making misrepresentation on or failure to disclose
controllers of foreign-invested enterprise that is established through round-trip investment, may result in restrictions being imposed on the foreign exchange
activities of the relevant onshore company, including the increase of its registered capital, the payment of dividends and other distributions to its offshore
parent or affiliate and the capital inflow from the offshore entities, and may also subject relevant PRC residents to penalties under PRC foreign exchange
administration regulations. PRC residents who directly or indirectly hold any shares in our company from time to time are required to register with SAFE in
connection with their investments in us. We have requested PRC residents holding direct or indirect interest in our company to our knowledge to make the
necessary applications, filings and amendments as required under the SAFE Circular 37 and other related rules. To our knowledge, all of our shareholders
who are PRC citizens and hold interest in us, have registered with the local SAFE branch as required under the SAFE Circular 37 and are in the process of
amending certain applicable registrations with the local SAFE pursuant to the SAFE Circular 37. See “Item 3. Key Information — D. Risk Factors — Risks
Related to Doing Business in China — PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiaries’ ability
to increase their registered capital or distribute profits to us, limit our ability to inject capital into our PRC subsidiaries, or otherwise expose us to liability
and penalties under PRC law. “
Regulations on Employee Stock Option Plans
In February 2012, SAFE promulgated the Stock Option Rules, replacing the previous rules issued by SAFE in March 2007. Under the Stock
Option Rules and other relevant rules and regulations, PRC residents who participate in stock incentive plan in an overseas publicly-listed company are
required to register with SAFE or its local branches and complete certain other procedures. Participants of a stock incentive plan who are PRC residents
must retain a qualified PRC agent, which could be a PRC subsidiary of the overseas publicly listed company or another qualified institution selected by the
PRC subsidiary, to conduct the SAFE registration and other procedures with respect to the stock incentive plan on behalf of its participants. The
participants must also retain an overseas entrusted institution to handle matters in connection with their exercise of stock options, the purchase and sale of
corresponding stocks or interests and fund transfers. In addition, the PRC agent is required to amend the SAFE registration with respect to the stock
incentive plan if there is any material change to the stock incentive plan, the PRC agent or the overseas entrusted institution or other material changes. The
PRC agents must, on behalf of the PRC residents who have the right to exercise the employee share options, apply to SAFE or its local branches for an
annual quota for the payment of foreign currencies in connection with the PRC residents’ exercise of the employee share options. The foreign exchange
proceeds received by the PRC residents from the sale of shares under the stock incentive plans granted and dividends distributed by the overseas listed
companies must be remitted into the bank accounts in China opened by the PRC agents before distribution to such PRC residents.
We adopted an employee stock option plan in 2010 and a share incentive plan in 2013. Pursuant to these two plans, we may issue options,
restricted shares, restricted share units or other type of awards to our qualified employees and directors and consultants on a regular basis. We have advised
our employees and directors participating in the employee stock option plan to handle foreign exchange matters in accordance with the Stock Option Rules.
However, we cannot assure you that our PRC individual beneficiary owners and the share options holders can successfully register with SAFE in full
compliance with the Stock Option Rules. The failure of our PRC individual beneficiary owners and the share options holders to complete their registration
pursuant to the Stock Option Rules and other foreign exchange requirements may subject these PRC individuals to fines and legal sanctions, and may also
limit our ability to contribute additional capital to our PRC subsidiaries, limit our PRC subsidiaries’ ability to distribute dividends to us or otherwise
materially adversely affect our business. See “Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in China — Failure to
comply with PRC regulations regarding the registration requirements for employee share ownership plans or share option plans may subject the PRC plan
participants or us to fines and other legal or administrative sanctions”
In addition, the State Administration for Taxation has issued circulars concerning employee share options, under which our employees working in
China who exercise share options will be subject to PRC individual income tax. Our PRC subsidiaries have obligations to file documents related to
employee share options with relevant tax authorities and to withhold individual income taxes of those employees who exercise their share options. If our
employees fail to pay or if we fail to withhold their income taxes as required by relevant laws and regulations, we may face sanctions imposed by the PRC
tax authorities or other PRC government authorities.
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PRC Enterprise Income Tax Law and Individual Income Tax Law
Under the Enterprise Income Tax Law, enterprises are classified as resident enterprises and non-resident enterprises. PRC resident enterprises
typically pay an enterprise income tax at the rate of 25%. An enterprise established outside of the PRC with its “de facto management bodies” located
within China is considered a “resident enterprise,” meaning that it can be treated in a manner similar to a PRC domestic enterprise for enterprise income tax
purposes. The implementation rules of the Enterprise Income Tax Law define “de facto management body” as a managing body that in practice exercises
“substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise.
SAT Circular 82, issued by the State Administration of Taxation in April 2009 and amended in January 2014, provides certain specific criteria for
determining whether the “de facto management body” of a PRC-controlled offshore incorporated enterprise is located in China. Pursuant to SAT Circular
82, a PRC-controlled offshore incorporated enterprise has its “de facto management body” in China only if all of the following conditions are met: (a) the
senior management and core management departments in charge of its daily operations function have their presence mainly in China; (b) its financial and
human resources decisions are subject to determination or approval by persons or bodies in China; (c) its major assets, accounting books, company seals,
and minutes and files of its board and shareholders’ meetings are located or kept in China; and (d) more than half of the enterprise’s directors or senior
management with voting rights habitually reside in China. SAT Bulletin 45, which took effect from September 2011, provides more guidance on the
implementation of SAT Circular 82 and provides for procedures and administration details of determination on resident status and administration on post-
determination matters. Although SAT Circular 82 and SAT Bulletin 45 only apply to offshore enterprises controlled by PRC enterprises or PRC enterprise
groups, not those controlled by PRC individuals or foreign individuals, the determining criteria set forth there may reflect the State Administration of
Taxation’s general position on how the “de facto management body” test should be applied in determining the tax resident status of offshore enterprises,
regardless of whether they are controlled by PRC enterprises or PRC enterprise groups or by PRC or foreign individuals.
Due to the lack of applicable legal precedents, it remains unclear how the PRC tax authorities will determine the PRC tax resident treatment of a
foreign company controlled by individuals like us. We do not believe 58.com Inc., China Classified Network Corporation, China Classified Information
Corporation Limited or any of our other offshore subsidiaries meet all the criteria provided by the implementation rules, thus we do not believe 58.com
Inc., China Classified Network Corporation, China Classified Information Corporation Limited or any of our other offshore subsidiaries is a PRC “resident
enterprise.” If the PRC tax authorities determine that 58.com Inc., China Classified Network Corporation, China Classified Information Corporation
Limited or any of our other offshore subsidiaries is a “resident enterprise” for PRC enterprise income tax purposes, a number of unfavorable PRC tax
consequences could follow. See “Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in China — Under the Enterprise Income
Tax Law, we may be classified as a PRC “resident enterprise” for PRC enterprise income tax purposes. Such classification would likely result in
unfavorable tax consequences to us and our non-PRC shareholders and have a material adverse effect on our results of operations and the value of your
investment.”
The Enterprise Income Tax Law and its implementation rules permit certain “high and new technology enterprises strongly supported by the state”
that hold independent ownership of core intellectual property and simultaneously meet a list of other criteria, financial or non-financial, as stipulated in the
implementation rules and other regulations, to enjoy a reduced 15% enterprise income tax rate subject to certain new qualification criteria. The State
Administration of Taxation, the Ministry of Science and Technology and the Ministry of Finance jointly issued the Administrative Rules for the
Certification of High and New Technology Enterprises delineating the specific criteria and procedures for the “high and new technology enterprises”
certification in April 2008. Enterprises recognized as “high and new technology enterprises” will enjoy a reduced 15% enterprise income tax rate after they
go through tax reduction application formalities with relevant tax authorities. Beijing 58, our consolidated affiliated entity, renewed its “high and new
technology enterprise” certificate in 2015, which will be valid until 2017. Beijing 58 will be eligible for a preferential tax rate of 15% when it has taxable
income under the Enterprise Income Tax Law, as long as it maintains “high and new technology enterprise” status. Wanglin, one of our PRC subsidiaries,
also renewed its “high and new technology enterprise” status in 2015 and will be eligible for a preferential tax rate of 15% when it has taxable income
under the Enterprise Income Tax Law as long as it maintains this status.
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In addition, qualified software enterprises are exempt from the enterprise income tax for two years beginning from their first profitable year and
are entitled to a 50% tax rate reduction for the subsequent three years. The software enterprise qualification is subject to an annual assessment. Wanglin
was determined to be a qualified software enterprise in July 2014 and was granted a two-year exemption followed by a 50% reduction on its taxable income
under the Enterprise Income Tax Law for the subsequent three years, effective retroactively from January 1, 2014. Therefore, Wanglin is entitled to an
exemption in 2014 and 2015 and a 50% tax rate deduction from 2016 to 2018 as long as it is able to pass the annual assessment for software enterprise
qualification for each of the respective years.
Regulation on PRC Business Tax and VAT
Prior to January 1, 2012, pursuant to the Provisional Regulation of China on Business Tax and its implementing rules, any entity or individual
rendering services in the territory of PRC was generally subject to a business tax at the rate of 5% on the revenues generated from provision of such
services. Our PRC subsidiaries and consolidated affiliated entities were subject to business tax at the rate of 5% for the membership and online marketing
services.
Since January 1, 2012, the PRC Ministry of Finance and the State Administration of Taxation have been implementing the VAT Pilot Program,
which imposes VAT in lieu of business tax for certain industries in Shanghai, and since September 1, 2012, this Pilot Program has been expanded to other
regions. In August 2013, the program was further expanded nationwide. By the end of 2015, the reform had been completed for industries such as certain
modern services and telecommunications, and our classifieds and listing platforms had become subject to VAT as a result. In 2016, the Pilot Program will
be further expanded to more industries such as financial services and consumer services and 58 Home will become subject to VAT from May 1, 2016.
VAT is applicable at a rate of 6% in lieu of business tax for the membership, online marketing services and e-commerce services rendered by all
of our PRC subsidiaries and consolidated affiliated entities. VAT payable on goods sold or taxable services provided by a general VAT taxpayer for a
taxable period is the net balance of the output VAT for the period after crediting the input VAT for the period. With the adoption of the Pilot Program, our
revenues are subject to VAT payable on goods sold or taxable labor services provided by a general VAT taxpayer for a taxable period. VAT payable is the
net balance of the output VAT for the period after deducting the input VAT for the period. Hence, the amount of VAT payable does not result directly from
output VAT generated from goods sold or taxable labor services provided. Accordingly, we have adopted the net presentation of VAT.
Employment Laws
In accordance with the PRC National Labor Law, which became effective in January 1995, and the PRC Labor Contract Law, which became
effective in January 2008, as amended subsequently, employers must execute written labor contracts with full-time employees in order to establish an
employment relationship. All employers must compensate their employees equal to at least the local minimum wage standards. All employers are required
to establish a system for labor safety and sanitation, strictly abide by state rules and standards and provide employees with appropriate workplace safety
training. In addition, employers in China are obliged to pay contributions to the social insurance plan and the housing fund plan for employees.
We have entered into employment agreements with all of our full-time employees. We have not fully contributed to the social insurance plan and
the housing fund plan as required by applicable PRC regulations. As of December 31, 2015, with regards to the outstanding contributions to such plans, we
made provisions of approximately RMB67.6 million (US$10.4 million). While we believe we have made adequate provision of such outstanding amounts
of contributions to such plans in our audited financial statements, our failure to make sufficient payments to such plans does not fully comply with
applicable PRC laws and regulations and we may be required to make up the contributions for such plans as well as to pay late fees and fines. See “Item 3.
Key Information — D. Risk Factors — Risks Related to Doing Business in China — Our failure to make adequate contributions to various employee
benefit plans as required by PRC regulations may subject us to penalties.”
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Regulations on PRC Foreign Investment
The Ministry of Commerce, published a discussion draft of the proposed Foreign Investment Law in January 2015 aiming to, upon its enactment,
replace the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign
Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary
regulations. The draft Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line
with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. The
Ministry of Commerce is currently soliciting comments on this draft and substantial uncertainties exist with respect to its enactment timetable,
interpretation and implementation. The draft Foreign Investment Law, if enacted as proposed, may materially impact the viability of our current corporate
structure, corporate governance and business operations in many aspects.
Among other things, the draft Foreign Investment Law expands the definition of foreign investment and introduces the principle of “actual
control” in determining whether a company should be treated as a foreign-invested enterprise, or an FIE. According to the definition set forth in the draft
Foreign Investment Law, FIEs shall refer to enterprises established in China pursuant to PRC laws that are solely or partially invested by foreign investors.
The draft Foreign Investment Law specifically provides that entities established in China (without direct foreign share ownership) but “controlled” by
foreign investors, via contracts or trust, for example, will be treated as FIEs. Once an entity falls within the definition of FIE, it may be subject to foreign
investment restrictions or prohibitions set forth in a “negative list” to be separately issued by the State Council later. If the underlying business of an FIE is
subject to foreign investment restrictions, it needs to go through a market entry clearance process carried out by the Ministry of Commerce before the FIE
can be established. If the underlying business of the FIE is subject to foreign investment prohibitions, it may not enter such business in China. However, an
FIE, during the market entry clearance process, may apply in writing to be treated as a PRC domestic enterprise if its foreign investor(s) is/are “controlled”
by PRC government authorities and its affiliates and/or PRC citizens. In this connection, “control” is broadly defined in the draft law to cover the following
summarized categories: (i) holding 50% of more of the voting rights of the subject entity; (ii) holding less than 50% of the voting rights of the subject entity
but having the power to secure at least 50% of the seats on the board or other equivalent decision making bodies, or having the voting power to exert
material influence on the board, the shareholders’ meeting or other equivalent decision making bodies; or (iii) having the power to exert decisive influence,
via contractual or trust arrangements, over the subject entity’s operations, financial matters or other key aspects of business operations.
The draft also emphasizes the security review requirements, whereby all foreign investments concerning national security must be reviewed and
approved in accordance with the security review procedure. In addition, the draft imposes stringent ad hoc and periodic information reporting requirements
on foreign investors and applicable FIEs. In addition to investment implementation reports and investment amendment reports, which are required for each
investment and alteration of investment specifics, an annual report is mandatory, and large foreign investors meeting certain criteria are required to report
on a quarterly basis. Any company found to be non-compliant with these information reporting obligations may potentially be subject to fines and/or
administrative or criminal liabilities, and the persons directly responsible may be subject to criminal liabilities.
The draft is now open for public review and comments. It is still uncertain when the draft would be signed into law and whether the final version
would have any substantial changes from the draft. When the Foreign Investment Law becomes effective, the trio of existing laws regulating foreign
investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the
Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations, will be abolished.
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C. Organizational Structure
The following diagram illustrates our corporate structure, including our principal subsidiaries and consolidated affiliated entities as of the date of
this annual report:
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Notes:
* We have omitted from this diagram other consolidated entities of 58.com Inc. that, in the aggregate, would not constitute a significant subsidiary as
defined in Rule 1-02(w) of Regulation S-X as of December 31, 2015.
(1) Jinbo Yao, Lianqing Zhang, Jianbo Su and Beijing Wanglintong Information Technology Co., Ltd. hold 37.8%, 39.8%, 9.0% and 13.4% equity
interests in Beijing 58, respectively. Among the shareholders of Beijing 58, Jinbo Yao and Jianbo Su are shareholders of our company. Lianqing Zhang
is not affiliated to us. Jinbo Yao is the sole director and holds a 16.7% equity interest in Beijing Wanglintong which is jointly owned by Jinbo Yao,
Xiaohua Chen, holding 15.92% equity interest, Jiandong Zhuang, holding 15.8% equity interest, and five other individuals who are employees or ex-
employees of our company. Beijing Wanglintong, a PRC domestic company, does not have any business operations or assets other than its equity
interest in Beijing 58. The registered business scope of Beijing Wanglintong includes technology promotional services, software development and
computer technology training.
(2) Falcon View Technology, or Ganji, is the holding company of the PRC entities operating Ganji.com, a major online local services platform in China.
In April 2015, we acquired a less than 50% equity stake in Ganji. Later in 2015, our company, as a limited partner, contributed newly issued Class A
ordinary shares and cash to several private equity funds that are dedicated to investing in businesses in China. These funds are managed by investment
entities unaffiliated with each other and unaffiliated with us. These funds, together with Tencent, acquired all the remaining equity interest in Ganji in
August 2015. Since August 2015, we have consolidated the financial results of Ganji in our consolidated financial statements. See “Item 4. Information
on the Company — A. History and Development of the Company.”
(3) 58 Co., Ltd., Mark Haoyong Yang, one Ganji employee and one 58 employee hold 49.00%, 0.31%, 30.69% and 20.00% equity interest in Shanjing
Kechuang, respectively. Mark Haoyong Yang is our former co-chairman of board of directors and former co-chief executive officer, and he currently
serves as chairman and chief executive officer of Guazi.
(4) 58 Daojia Inc., or 58 Home, is the holding company of the PRC entities that operate 58 Home business. On November 27, 2015, 58 Home completed a
Series A equity funding round, with participation from Alibaba Group Holding Limited, global investment firm KKR, and Ping An Group. Following
the closing of the Series A financing of 58 Home, 58.com Inc. holds 87.9% of the total outstanding ordinary shares of 58 Home and 61.7% of the total
outstanding shares of 58 Home on an as-converted basis. As certain rights provided to the non-controlling Series A preferred shareholders of 58 Home
would be viewed as substantive participating rights under U.S. GAAP, we have ceased consolidating the financial results of 58 Home in our
consolidated financial statements in accordance with U.S. GAAP since November 27, 2015.
(5) 58 Co., Ltd., Jinbo Yao, Xiaohua Chen and one of our employees hold 91.8%, 1.4%, 4.5% and 2.3% equity interest in Tianjin 58 Home, respectively.
Jinbo Yao is our chairman and chief executive officer, and Xiaohua Chen is our chief strategic officer and the chief executive officer of 58 Home.
Our Contractual Arrangements
Prior to 2012, we conducted substantially all of our business operations through Beijing 58. Since 2012, we have started to conduct our business
operations that are not subject to PRC legal restrictions on foreign ownership through our wholly owned subsidiaries, Wanglin and 58 Technology, to
address risks related to the contractual arrangements discussed above and under “Item 3. Key Information — D. Risk Factors — Risks Related to Our
Corporate Structure and Restrictions on Our Industry.” Currently, we primarily use Wanglin and 58 Technology, rather than Beijing 58, to provide services
to our customers, and we have transferred a significant portion of our personnel, including substantially all of our administrative and product development
personnel, from Beijing 58 to Wanglin and 58 Technology. As of December 31, 2015, a majority of our assets were held by Wanglin, 58 Technology and
Ruiting Network Technology (Shanghai) Co., Ltd., or Shanghai Ruiting. Wanglin, 58 Technology and Shanghai Ruiting collectively generated a majority
of our revenues in 2015 and we currently expect that they will continue to generate a majority of our revenues going forward. We further expect Beijing
58’s business to be limited primarily to services that are legally required to be conducted through a PRC domestic entity.
We acquired a less than 50% equity stake in Ganji in April 2015, and have consolidated the financial results of Ganji in our consolidated financial
statements since August 2015. Ganji operates online multi-content category classified advertising platforms in China through its PRC subsidiaries and
consolidated affiliated entities, including Shanjing Kechuang.
In August 2015, Tianjin 58 Home, which had previously been an indirect subsidiary of Beijing 58, became 58 Home’s consolidated affiliated
entity.
In the opinion of our PRC counsel, Han Kun Law Offices, the contractual arrangements described below are valid, binding and enforceable under
current PRC laws. However, these contractual arrangements may not be as effective in providing control as direct ownership. There are substantial
uncertainties regarding the interpretation and application of current or future PRC laws and regulations. For a description of the risks related to our
corporate structure, please see “Item 3. Key Information — D. Risk Factors — Risks Related to Our Corporate Structure and Restrictions on Our Industry.”
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Contractual Arrangements with Beijing 58
We have entered into contractual arrangements with Beijing 58 and its shareholders described below, which we refer to as the Beijing 58
Agreements. Through the Beijing 58 Agreements, we exercise control over the operations of Beijing 58 and receive substantially all its economic benefits
and residual returns. Through the amended and restated exclusive business cooperation agreement between Beijing 58 and Wanglin, Wanglin agrees to
provide certain technical and business support and related consulting services to Beijing 58 in exchange for service fees. In addition, pursuant to the
amended and restated exclusive option agreement, Beijing 58 is prohibited from declaring and paying any dividends without Wanglin’s prior consent and
Wanglin enjoys an irrevocable and exclusive option to purchase Beijing 58 shareholders’ equity interests, to the extent permitted by applicable PRC laws,
at a nominal price from Beijing Wanglintong Information Technology Co., Ltd., or Beijing Wanglintong, which is one of the shareholders of Beijing 58, or
at a specified price equal to the loan provided by Wanglin to the individual shareholders. If the lowest price permitted under PRC law is higher than the
above price, the lowest price permitted under PRC law shall apply. Through the arrangements, we can obtain all of Beijing 58’s income and all of its
residual interests, such as undistributed earnings, either through dividend distribution or purchase of Beijing 58’s equity interests from its existing
shareholders. As a result of the contractual arrangements, we consolidate Beijing 58’s financial results in our consolidated financial statements in
accordance with U.S. GAAP.
Exclusive Business Cooperation Agreement. Under the exclusive business cooperation agreement between Beijing 58 and Wanglin, as amended
and restated, Wanglin has the exclusive right to provide, among other things, technical support and business support and related consulting services to
Beijing 58 and Beijing 58 agrees to accept all the consultation and services provided by Wanglin. Without Wanglin’s prior written consent, Beijing 58 is
prohibited from engaging any third party to provide any of the services under this agreement. In addition, Wanglin exclusively owns all intellectual
property rights arising out of or created during the performance of this agreement. Beijing 58 agrees to pay a quarterly service fee to Wanglin at an amount
determined solely by Wanglin after taking into account factors including the complexity and difficulty of the services provided, the time consumed, the
seniority of the Wanglin employees providing services to Beijing 58, the value of services provided, the market price of comparable services and the
operating conditions of Beijing 58. This agreement will remain effective unless Wanglin terminates the agreement in writing or a competent governmental
authority rejects the renewal applications by either Beijing 58 or Wanglin to renew its respective business license upon expiration. Beijing 58 is not
permitted to terminate this agreement in any event unless required by applicable laws. In 2015, Wanglin provided technical support services to Beijing 58
and its subsidiaries and collected service fee payments of approximately US$0.4 million.
Powers of Attorney. Pursuant to the powers of attorney, the shareholders of Beijing 58 each irrevocably appointed Wanglin as the attorney-in-fact
to act on their behalf on all matters pertaining to Beijing 58 and to exercise all of their rights as a shareholder of Beijing 58, including but not limited to
attend shareholders’ meetings, vote on their behalf on all matters of Beijing 58 requiring shareholders’ approval under PRC laws and regulations and the
articles of association of Beijing 58, designate and appoint directors and senior management members. Wanglin may authorize or assign its rights under this
appointment to any other person or entity at its sole discretion without prior notice to the shareholders of Beijing 58. Each power of attorney will remain in
force until the shareholder ceases to hold any equity interest in Beijing 58.
Equity Interest Pledge Agreements. Under the equity interest pledge agreements between Wanglin, Beijing 58 and the shareholders of Beijing
58, as amended and restated, the shareholders pledged all of their equity interests in Beijing 58 to Wanglin to guarantee Beijing 58’s and Beijing 58’s
shareholders’ performance of their obligations under the contractual arrangements including, but not limited to, the payments due to Wanglin for services
provided. If Beijing 58 or any of Beijing 58’s shareholders breaches its contractual obligations under the contractual arrangements, Wanglin, as the
pledgee, will be entitled to certain rights and entitlements, including receiving proceeds from the auction or sale of whole or part of the pledged equity
interests of Beijing 58 in accordance with legal procedures. Wanglin has the right to receive dividends generated by the pledged equity interests during the
term of the pledge. If any event of default as provided in the contractual arrangements occurs, Wanglin, as the pledgee, will be entitled to dispose of the
pledged equity interests in accordance with PRC laws and regulations. The pledge will become effective on the date when the pledge of equity interests
contemplated in these agreements are registered with the relevant local administration for industry and commerce and will remain binding until Beijing 58
and its shareholders discharges all their obligations under the contractual arrangements. We registered these equity interest pledge agreements with
Chaoyang Branch of Beijing Administration for Industry and Commerce in July 2013.
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Exclusive Option Agreements. Under the exclusive option agreements between Wanglin, as amended and restated, each of the shareholders of
Beijing 58 and Beijing 58, each of the shareholders irrevocably granted Wanglin or its designated representative(s) an exclusive option to purchase, to the
extent permitted under PRC law, all or part of his, her or its equity interests in Beijing 58. In addition, Wanglin has the option to acquire all the equity
interests of Beijing 58 for either a nominal price from Beijing Wanglintong or a specified price equal to the loan provided by Wanglin to the individual
shareholders. If the lowest price permitted under PRC law is higher than the above price, the lowest price permitted under PRC law shall apply. Wanglin or
its designated representative(s) have sole discretion as to when to exercise such options, either in part or in full. Without Wanglin’s prior written consent,
Beijing 58’s shareholders shall not transfer, donate, pledge, or otherwise dispose any equity interests in Beijing 58. These agreements will remain effective
until all equity interests held in Beijing 58 by the Beijing 58’s shareholders are transferred or assigned to Wanglin or Wanglin’s designated representatives.
At the moment, we cannot exercise the exclusive option to purchase the current shareholders’ equity interests in Beijing 58 due to the PRC regulatory
restrictions on foreign ownership in the value-added telecommunications services. We intend to exercise such option once China opens up these industries
to foreign investment.
Loan Agreements. Pursuant to the loan agreements between Wanglin and each individual shareholder of Beijing 58, Wanglin provided interest-
free loans with an aggregate amount of approximately RMB7.8 million (US$1.2 million) to the individual shareholders of Wanglin for the sole purpose of
funding the capital increase of Beijing 58. The loans can be repaid by transferring the individual shareholders’ equity interest in Beijing 58 to Wanglin or
its designated person pursuant to Exclusive Option Agreements. The term of each loan agreement is ten years from the date of the agreement expiring on
December 1, 2021 and can be extended with the written consent of both parties before expiration.
Contractual Arrangements with Shanjing Kechuang
Ganji, through its PRC subsidiary, Beijing Yangguang Gudi Science Development Co., Ltd., or Yangguang Gudi, has entered into contractual
arrangements with Shanjing Kechuang and its shareholders described below, which we refer to as the Shanjing Kechuang Agreements. Through the
Shanjing Kechuang Agreements, Ganji exercises control over the operations of Shanjing Kechuang and receives substantially all its economic benefits and
residual returns. Through the exclusive business cooperation agreement between Yangguang Gudi and Shanjing Kechuang, Yangguang Gudi agrees to
provide certain technical and business support and related consulting services to Shanjing Kechuang in exchange for service fees. In addition, pursuant to
the exclusive option agreements, Shanjing Kechuang is prohibited from declaring and paying any dividends without Yangguang Gudi’s prior consent and
Yangguang Gudi enjoys an irrevocable and exclusive option to purchase Shanjing Kechuang shareholders’ equity interests, to the extent permitted by
applicable PRC laws, at a specified price equal to the loan amount provided by Yangguang Gudi to the shareholders. If the lowest price permitted under
PRC law is higher than the above price, the lowest price permitted under PRC law shall apply. Through these arrangements, Ganji can obtain all of the
income and the residual interests of Shanjing Kechuang, such as undistributed earnings, either through dividend distributions or purchase of equity interests
of Shanjing Kechuang from its existing shareholders. As a result of the contractual arrangements, we, through Ganji, consolidate the financial results of
Shanjing Kechuang in our consolidated financial statements in accordance with U.S. GAAP.
Exclusive Business Cooperation Agreement. The terms and arrangements of the exclusive business cooperation agreement between Yangguang
Gudi and Shanjing Kechuang are substantially similar to those under the Beijing 58 Agreements. In 2015, Yangguang Gudi provided technical support
services to Shanjing Kechuang amounting to US$2.0 million with no service fees collected.
Powers of Attorney. Each shareholder of Shanjing Kechuang has executed a power of attorney to irrevocably appoint Yangguang Gudi as the
attorney-in-fact to act on the shareholder’s behalf. The terms of the powers of attorney are substantially similar to those under the Beijing 58 Agreements.
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Equity Interest Pledge Agreements. Yangguang Gudi, Shanjing Kechuang and each of the shareholders of Shanjing Kechuang have entered into
equity interest pledge agreements with terms and arrangements that are substantially similar to those under the Beijing 58 Agreements. We registered these
equity interest pledge agreements with Shunyi Branch of Beijing Administration for Industry and Commerce Bureau on March 18, 2016 for the three
individual shareholders and April 1, 2016 for 58 Co., Ltd.
Exclusive Option Agreements. Yangguang Gudi, Shanjing Kechuang and each of the shareholders of Shanjing Kechuang have entered into
exclusive option agreements with terms and arrangements that are substantially similar to those under the Beijing 58 Agreements. At the moment, Ganji
cannot exercise the exclusive options to purchase the current shareholders’ equity interests in Shanjing Kechuang due to the PRC regulatory restrictions on
foreign ownership in the value-added telecommunications services. Ganji may exercise the options if China opens up these industries to foreign investment.
Loan Agreements. Yangguang Gudi and each shareholder of Shanjing Kechuang have entered into loan agreements with an aggregate amount of
interest-free loans of approximately RMB38.7 million (US$6.0 million). The terms of the loan agreements are substantially similar to those under the
Beijing 58 Agreements and each loan agreement expires on August 6, 2025 and can be extended with the written consent of both parties before expiration.
58 Home’s Contractual Arrangements with Tianjin 58 Home
58 Home has through Beijng 58 Home entered into contractual arrangements with Tianjin 58 Home and its shareholders described below, which
we refer to as the Tianjin 58 Home Agreements. Through the Tianjin 58 Home Agreements, Beijing 58 Home exercises control over the operations of
Tianjin 58 Home and receives substantially all its economic benefits and residual returns. Through the exclusive business cooperation agreement between
Beijing 58 Home and Tianjin 58 Home, Beijing 58 Home agrees to provide certain technical and business support and related consulting services to Tianjin
58 Home in exchange for service fees. In addition, pursuant to the exclusive option agreements, Tianjin 58 Home is prohibited from declaring and paying
any dividends without Beijing 58 Home’s prior consent and Beijing 58 Home enjoys an irrevocable and exclusive option to purchase Tianjin 58 Home
shareholders’ equity interests, to the extent permitted by applicable PRC laws, at a specified price equal to the loan amount provided by Beijing 58 Home to
the shareholders. If the lowest price permitted under PRC law is higher than the above price, the lowest price permitted under PRC law shall apply.
Through these arrangements, 58 Home can obtain all of the income and the residual interests of Tianjin 58 Home, such as undistributed earnings, either
through dividend distributions or purchase of equity interests of Tianjin 58 Home from its existing shareholders. As a result of the contractual
arrangements, 58 Home consolidates the financial results of Tianjin 58 Home in accordance with U.S. GAAP.
Exclusive Business Cooperation Agreement. The terms and arrangements of the exclusive business cooperation agreement between Tianjin 58
Home and Beijing 58 Home under the Tianjin 58 Home Agreements are substantially similar to those under the Beijing 58 Agreements, except that Tianjin
58 Home agrees to pay a monthly service fee to Beijing 58 Home in an amount determined by both parties after taking into account factors similar to those
provided under the Beijing 58 Agreements. Beijing 58 Home did not collect any service fee payments from Tianjin 58 Home in 2015.
Powers of Attorney. Each shareholder of Tianjin 58 Home has executed a power of attorney to irrevocably appoint Beijing 58 Home as the
attorney-in-fact to act on the shareholder’s behalf. The terms of the powers of attorney are substantially similar to those under the Beijing 58 Agreements.
Equity Interest Pledge Agreements. Beijing 58 Home, Tianjin 58 Home and each of the shareholders of Tianjin 58 Home have entered into equity
interest pledge agreements with terms and arrangements that are substantially similar to those under the Beijing 58 Agreements. We registered these equity
interest pledge agreements with the Tianjin Binhai New Area Market and Quality Supervision and Administration Bureau on September 8, 2015.
Exclusive Option Agreements. Beijing 58 Home, Tianjin 58 Home and each of the shareholders of Tianjin 58 Home have entered into exclusive
option agreements with terms and arrangements that are substantially similar to those under the Beijing 58 Agreements, except that the purchase price to be
paid by Beijing 58 Home to each shareholder by exercising its option to purchase all the equity interests held by the shareholder in Tianjin 58 Home equal
to the loan amount provided by Beijing 58 Home to the shareholder. At the moment, 58 Home cannot exercise the exclusive options to purchase the current
shareholders’ equity interests in Tianjin 58 Home due to the PRC regulatory restrictions on foreign ownership in the value-added telecommunications
services. 58 Home may exercise the options if China opens up these industries to foreign investment.
Loan Agreements. Beijing 58 Home and each shareholder of Tianjin 58 Home have entered into loan agreements with an aggregate amount of
interest-free loans of approximately RMB100 million (US$15.4 million). The terms of the loan agreements are substantially similar to those under the
Beijing 58 Agreements and each loan agreement expires on August 5, 2025 and can be extended with the written consent of both parties before expiration.
D. Property, Plants and Equipment
Our principal headquarter offices are located on 44,915 square meters of our purchased office space at Building 105, 10 Jiuxianqiao North Road
Jia, Chaoyang District, Beijing, China. In September 2014, we entered into an agreement with Beijing Electronics Zone Investment and Development Co.,
Ltd. to purchase 44,915 square meters of office space in Chaoyang District, Beijing, for RMB1,033.0 million (US$159.5 million), to accommodate our
business expansion and increase in headcount. The first building, which accounts for approximately 37% of the total new office space, was ready for
occupancy in October 2015, and our corporate headquarters were relocated to this building at that time. The remaining new office space is expected to be
ready for occupancy in July 2016.
We also lease an additional 31,173 square meters office spaces in other locations in Beijing, China, excluding the office spaces for 58 Home. We
maintain leased offices in 35 additional cities in China totaling 102,480 square meters, excluding those for 58 Home. We lease our premises from unrelated
third parties under non-cancelable operating lease agreements. The leases typically have terms of one to eight years, some of which are due to expire during
2016 or 2017.
Our servers are primarily hosted at internet data centers owned by major domestic internet data center providers. The hosting services agreements
typically have one-year terms and are renewed automatically upon expiration. We believe that we will be able to obtain adequate facilities, principally
through leasing, to accommodate our future expansion plans.
ITEM 4A.
UNRESOLVED STAFF COMMENTS
None.
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated
financial statements and the related notes included elsewhere in this annual report on Form 20-F. This discussion and analysis may contain forward-
looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of various factors, including those set forth under “Item 3. Key Information — D. Risk Factors”
or in other parts of this annual report on Form 20-F.
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A. Operating Results
Overview
Our business is comprised principally of our online classifieds and listing platforms. Our online classifieds and listings platforms enable local
merchants and consumers to connect, share information and conduct business in China. These platforms include 58, Ganji and Anjuke. 58 and Ganji are
online multi-content category-classified advertising platforms, while Anjuke is an online real estate listing platform. We have consolidated Anjuke since
March 2015 and Ganji since August 2015. Guazi, a subsidiary that operated our consumer-to-consumer (C2C) used car trading platform, was de-
consolidated on December 31, 2015.
Our revenues are mainly generated from subscription based merchant memberships and online marketing services on our online classifieds and
listing platforms. The number of our average quarterly paying membership accounts increased from approximately 323,000 in 2013 to approximately
529,000 in 2014 and further to approximately 827,000 in 2015. We continue to make progress in upselling additional online marketing services, such as
real time bidding services, to our merchant members.
The significant increase in our operating expenses in 2015 was driven by both organic increases on our 58 platform as well as consolidation of
Ganji’s and Anjuke’s financials. Following the integration of 58 and Ganji, we anticipate less rapid growth in operating expenses and improvements in the
operating efficiency of our sales, customer services and research and development teams. We expect to continue to increase our investment in research and
development for innovations and enhancement of our user experience and we will continue to make the necessary investment for the long term value of our
company.
Our revenues increased from US$145.7 million in 2013 to US$265.0 million in 2014 and further to US$714.8 million in 2015. The increase was
driven by the addition of revenues from Ganji and Anjuke as well as the organic growth of the 58.com platform. We had net income of US$19.6 million in
2013 and US$22.6 million in 2014 and we incurred net loss of US$263.0 million in 2015.
In addition, 58 Home, our unconsolidated subsidiary, operates a mobile-based closed-loop transactional platform for home services, which directly
connects consumers and individual service providers for local services such as home cleaning, moving services and manicure services provided at home.
We have ceased consolidating 58 Home since the closing of 58 Home’s series A financing on November 27, 2015. 58 Home, which is in the early stages of
building the scale of its platform, generates minimal commission revenues from the services provided through the service providers on 58 Home.
How We Generate Revenues
While many of our users browse and post information on our online platforms for free, we generate revenues from the following services:
Membership
A subscription-based membership is a basic service package consisting mainly of merchant certification, display of an online storefront on our
platforms, preferential listing benefits such as daily priority listings and higher quota for daily listings, and access to our dedicated customer service support
team and online account management system. Merchants who subscribe to a membership with us can enjoy more services and achieve more effective
marketing than non-paying merchants on our platforms. 58, Ganji and Anjuke offer subscription-based merchant membership packages that include similar
types of services although the specific details of the services, such as the quotas for daily listings and downloadable resumes, may vary from platform to
platform.
We offer memberships of varying lengths across different content categories. Memberships in the yellow pages and jobs categories are primarily
12-month packages. In China, due to relatively high employee turnover among migrant workers, many businesses have ongoing hiring needs. Memberships
in the real estate category are primarily one- to three-month packages due to the higher turnover of real estate agents. We acquire the majority of our paying
merchant members through our field sales teams. In cities where we do not have field sales teams on the ground, we work with sales agency companies to
help to grow our paying merchant network locally. Our centralized and dedicated tele-customer service team supports our paying merchant members during
their membership to enhance the effectiveness of the member’s marketing efforts and improve the likelihood of membership renewal. A majority of our
paying merchant members are small and medium-sized local merchants. We believe that our field sales, sales agency network and customer service teams
have been effective in increasing the number of our paying merchant members, retaining high-quality existing paying merchant members and increasing
spending by our existing paying merchant members, all of which are important to the growth of our revenues. See “Item 4. Information on the Company —
B. Business Overview — Service offerings — Memberships” for details of the number of subscription based paying membership accounts.
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Most paying merchant members pay their membership fees in advance. These advance payments are made to our field sales teams or sales agency
companies or through our membership subscription webpage and are recorded as customer advances and deposits. Once a member completes the purchase
of a membership, we deduct that amount from the customer advances and deposits account and record it as deferred revenues. The amounts of revenues are
recognized ratably over the contract period for the membership services.
Online Marketing Services
Our online marketing services primarily include listing services, such as real-time bidding and priority listing, display advertising and marketing
services through collaboration with third-party internet companies in China. All of our 58.com, Ganji and Anjuke platforms offer some sort of online
marketing services. Online marketing services of 58 and Ganji are mainly listing services that customers purchase to enhance the exposure of their listings.
Anjuke’s marketing services relate to primary real estate properties. On average, approximately 45.1% of our quarterly paying membership accounts
purchased our online marketing services in 2015.
Merchants can use our real-time bidding services to bid for the most prominent placement of their listings in specific categories and locations on a
cost per click basis, also known as CPC. We have developed a user-friendly bidding system, through which merchants can generate text- and graphic-based
descriptions for their listings and bid on placements of their listings. We set minimum bidding prices which are based on metrics such as traffic and number
of clicks generated by precedent placements. We generate much higher revenues than we otherwise could with the same amount of listing space by
attracting more customers and monetize the traffic to their market value. On 58’s classifieds platform, an increasingly larger percentage of subscription-
based paying merchant members have been purchasing bidding services. The newly consolidated Ganji and Anjuke platforms have lower percentage of
their paying customers purchasing bidding services due to the lack of experience in this area. We are working to transfer the knowledge and systems to the
Ganji and Anjuke platforms.
Merchants can also purchase our priority listing services, which place their listings below real-time bidding listings and above paying merchant
members’ listings. Merchants can purchase listing placements of varying duration from several hours to several days to several weeks.
We provide display advertisement for real estate developers on our Anjuke platform. The customers use these services to enhance their brand
recognition and attract consumer attention to the primary real estate projects that are on the market or open positions that employers offer. They can be text-
or graphic-based displays for varying time periods ranging from several days to several months.
We collaborate with third-party internet companies by placing the marketing links of their marketing customers on the relevant listing pages on
our online platforms. We generate revenues based on the number of clicks or cost-per-thousand impressions at pre-determined prices.
In most cases customers are required to make payment in advance before purchasing our online marketing services, in the form of purchasing
virtual online currencies of our platforms. Paying merchant members can log into our account management webpage or mobile application and purchase
various online marketing services through an easy-to-use interface. Our account management system enables paying merchant members to review and
optimize the performance of their existing listings and to upload and market new listings.
Our field sales and customer service teams stay in regular contact with our customers and play an essential role in promoting our online marketing
services to our paying merchant members. Leveraging our expertise in online marketing services, we help our paying merchant members to select the most
suitable services to maximize their marketing effectiveness.
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E-Commerce Services
We enter into promotional service agreements with real estate developers pursuant to which we are authorized to sell discount coupons with face
value ranging from RMB2,000 (US$309) to RMB100,000 (US$15,437) to prospective home buyers. The home buyers are required to prepay the full face
value of the coupon to us before they can use the coupon to purchase specified properties from the real estate developers at a discount significantly greater
than the coupon value. The coupons purchased by prospective home buyers are refundable before a purchase of the specified properties prior to the expiry
date of the coupon. We recognize revenues when home buyers apply the discount coupons to pay for the purchase price of the specified properties from real
estate developers. Cash received in advance of the purchase of specified properties is recorded as customer advances.
Other Services
Revenues from other services are derived from various off-line services we provide. In 2013 and 2014, revenues from other services were mainly
derived from group buying services. We exited from the group buying services in second half 2014. In 2015, other services revenues were mainly
contributed by Guazi C2C services and offline recruitment services.
Taxation
Cayman Islands
We are incorporated in the Cayman Islands. Under the current laws of the Cayman Islands, we are not subject to tax on income or capital gains.
Additionally, upon payments of dividends to our shareholders, no Cayman Islands withholding tax will be imposed.
British Virgin Islands
We are exempted from income tax in the British Virgin Islands on our foreign-derived income. There are no withholding taxes in the British
Virgin Islands.
Hong Kong
The operations in Hong Kong have incurred net accumulated operating losses for income tax purposes. The corporate income tax rate in Hong
Kong is 16.5%.
PRC
Pursuant to the Enterprise Income Tax Law, foreign-invested enterprises and domestic companies are subject to enterprise income tax at a uniform
rate of 25%. In addition, “high and new technology enterprises” will enjoy a preferential enterprise income tax rate of 15%. Beijing 58, our consolidated
affiliated entity, is qualified as a “high and new technology enterprise” under the Enterprise Income Tax Law and is eligible for a preferential enterprise
income tax rate of 15% for the period from 2012 to 2017, so long as it obtains approval from the relevant tax authority if it is profitable during the period.
Wanglin, one of our PRC subsidiaries, was qualified as a “high and new technology enterprise” from 2012 to 2014 and obtained its software enterprise
status in July 2014. The local tax authority granted Wanglin a two-year tax holiday effective from January 1, 2014 followed by a three-year 50% tax rate
reduction from January 1, 2016 to December 31, 2018.
As we had net operating losses or net operating loss carryforward for the year ended December 31, 2013, we did not incur any PRC income taxes
for that period. For the year ended December 31, 2014, Wanglin had taxable income and accrued approximately US$6.2 million income tax expense.
Wanglin was determined as a software enterprise in July 2014. In April 2015, Wanglin submitted its application for preferential tax treatment for software
enterprise and was informed by the tax authority that it was granted a two-year exemption and a 50% reduction on its taxable income under the Enterprise
Income Tax Law for the subsequent three years effective retroactively from January 1, 2014. Wanglin paid approximately US$1.2 million in income tax in
2014 and received a US$1.2 million refund in the second half of 2015.
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Effective January 1, 2012, the PRC Ministry of Finance and the State Administration of Taxation launched a Business Tax to Value-Added Tax
Transformation Pilot Program, or the VAT Pilot Program, which imposes VAT in lieu of business tax for certain “modern service industries” in certain
regions. According to the implementation circulars released by the Ministry of Finance and the State Administration of Taxation on the VAT Pilot
Program, the “modern service industries” include research, development and technology services, information technology services, cultural innovation
services, logistics support, lease of corporeal properties, attestation and consulting services. In August 2013, the program was further expanded nationwide.
With the adoption of the program, our revenues are subject to VAT. VAT payable on goods sold or taxable services provided by a general VAT taxpayer
for a taxable period is the net balance of the output VAT for the period after crediting the input VAT for the period. Hence, the amount of VAT payable
does not result directly from output VAT generated from goods sold or taxable services provided. Therefore, we have adopted the net presentation of VAT.
From May 1, 2016, the program will be further expanded to cover all industries.
Critical Accounting Policies
We prepare our financial statements in conformity with U.S. GAAP, which requires us to make judgments, estimates and assumptions. We
continually evaluate these estimates and assumptions based on the most recently available information, our own historical experience and various other
assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting
process, actual results could differ from our expectations as a result of changes in our estimates.
An accounting policy is considered critical if it requires an accounting estimate to be made based on assumptions about matters that are highly
uncertain at the time such estimate is made, and if different accounting estimates that reasonably could have been used, or changes in the accounting
estimates that are reasonably likely to occur periodically, could materially impact the consolidated financial statements. The selection of critical accounting
policies, the judgments and other uncertainties affecting application of those policies, and the sensitivity of reported results to changes in conditions and
assumptions are factors that should be considered when reviewing our consolidated financial statements. We believe that the following accounting policies
involve a higher degree of judgment and complexity in their application and require us to make significant accounting estimates. The following descriptions
of critical accounting policies, judgments and estimates should be read in conjunction with our consolidated financial statements and other disclosures
included in this annual report.
Consolidation
Our consolidated financial statements include the accounts of 58.com Inc. and its wholly-owned and majority owned subsidiaries and consolidated
variable interest entities in which our company has a controlling financial interest. All intercompany transactions are eliminated.
Our variable interest entities are wholly or partially owned by certain of our employees as shareholders. For consolidated variable interest entities,
our management made evaluations of our relationships with the variable interest entities and the economic benefit flow of contractual arrangements with
the variable interest entities. In connection with such evaluation, we also take into account the fact that, as a result of such contractual arrangements, we
control the shareholders’ voting interests in these variable interest entities. As a result of such evaluation, we concluded that we are the primary beneficiary
of these consolidated variable interest entities.
Deconsolidation
We deconsolidate our subsidiaries in accordance with ASC 810-10-40-4 as of the date we ceased to have a controlling financial interest in the
subsidiaries.
We account for the deconsolidation of our subsidiaries by recognizing a gain or loss in net income/(loss) attributable to us in accordance with ASC
810-10-40-5. This gain or loss is measured at the date the subsidiaries are deconsolidated as the difference between (a) the aggregate of the fair value of any
consideration received, the fair value of any retained noncontrolling interest in the subsidiaries being deconsolidated, and the carrying amount of any
noncontrolling interest in the subsidiaries being deconsolidated, including any accumulated other comprehensive income/(loss) attributable to the
noncontrolling interest, and (b) the carrying amount of the assets and liabilities of the subsidiaries being deconsolidated.
Business Combination, Noncontrolling Interests and Mezzanine Classified Noncontrolling Interests
We account for our business combinations using the acquisition method of accounting in accordance with Accounting Standards Codification
(“ASC”) 805 “Business Combinations” (“ASC 805”). The cost of an acquisition is measured as the aggregate of the acquisition date fair values of the
assets transferred and liabilities incurred by us to the sellers and equity instruments issued. Transaction costs directly attributable to the acquisition are
expensed as incurred. Identifiable assets and liabilities acquired or assumed are measured separately at their fair values as of the acquisition date. The
excess of (i) the total costs of acquisition, fair value of the noncontrolling interests and acquisition date fair value of any previously held equity interest in
the acquiree over (ii) the fair value of the identifiable net assets of the acquiree is recorded as goodwill. If the cost of acquisition is less than the fair value
of the net assets of the subsidiary acquired, the difference is recognized directly in the consolidated statements of comprehensive income/(loss). During the
measurement period, which can be up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with
the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities
assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations.
In a business combination achieved in stages, we re-measure the previously held equity interest in the acquiree immediately before obtaining
control at its acquisition-date fair value and the re-measurement gain or loss, if any, is recognized in the consolidated statements of comprehensive income/
(loss).
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For our majority-owned subsidiaries and VIEs, a noncontrolling interest is recognized to reflect the portion of their equity which is not
attributable, directly or indirectly, to us. When the noncontrolling interest is contingently redeemable upon the occurrence of a conditional event, which is
not solely within our control, the noncontrolling interest is classified as mezzanine classified noncontrolling interest. Consolidated net income/(loss) on the
consolidated income statements includes the net income/(loss) attributable to noncontrolling interests and mezzanine equity holders when applicable. The
cumulative results of operations attributable to noncontrolling interests are also recorded as noncontrolling interests in our consolidated balance sheets.
Cash flows related to transactions with noncontrolling interests are presented under financing activities in the consolidated statements of cash flows.
Goodwill
Goodwill represents the excess of the purchase consideration over the fair value of the identifiable tangible and intangible assets acquired and
liabilities assumed of the acquired entity as a result of our acquisitions of interests in its subsidiaries and VIEs. Goodwill is not amortized but is tested for
impairment on an annual basis, or more frequently if events or changes in circumstances indicate that it might be impaired. We first assess qualitative
factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. In the qualitative assessment, we consider
primary factors such as industry and market considerations, overall financial performance of the reporting unit, and other specific information related to the
operations. Based on the qualitative assessment, if it is more likely than not that the fair value of each reporting unit is less than the carrying amount, the
quantitative impairment test is performed.
In performing the two-step quantitative impairment test, the first step compares the fair values of each reporting unit to its carrying amount,
including goodwill. If the fair value of each reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will
not be required. If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the carrying
value of a reporting unit’s goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business combination with the
allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the fair value of the reporting
unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. This allocation process is only performed for the purposes
of evaluating goodwill impairment and does not result in an entry to adjust the value of any assets or liabilities. Application of a goodwill impairment test
requires significant management judgment, including the identification of reporting units, assigning assets, liabilities and goodwill to reporting units, and
determining the fair value of each reporting unit.
We perform impairment tests in the fourth quarter of each year. No impairment loss was recognized for all periods presented.
Long-lived Assets
Intangible assets acquired through business acquisitions are recognized as assets separate from goodwill if they satisfy either the “contractual-
legal” or “separability” criterion. Purchased intangible assets and intangible assets arising from the acquisitions of subsidiaries and VIE subsidiaries are
recognized and measured at fair value upon acquisition. Separately identifiable intangible assets that have determinable lives continue to be amortized over
their estimated useful lives using the straight-line method. Separately identifiable intangible assets to be held and used are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is
based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of any impairment loss
for identifiable intangible assets is based on the amount by which the carrying amount of the assets exceeds the fair value of the asset.
Property and equipment are stated at cost less accumulated depreciation and impairment. Property and equipment are depreciated on a straight-line
basis over the estimated useful lives, which is generally from 30 to 50 years for buildings and 3 to 5 years for the other properties and equipment.
Expenditures for maintenance and repairs are expensed as incurred. The gain or loss on the disposal of property and equipment is the difference between
the net sales proceeds and the carrying amount of the relevant assets and is recognized in the consolidated statements of comprehensive income/(loss).
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Long-term Investments
Long-term investments represent our investments in privately held companies. In accordance with ASC 323 “Investment-Equity Method and Joint
Ventures”, we apply the equity method of accounting to equity investments, in common stock or in-substance common stock, over which it has significant
influence but does not own a majority equity interest or otherwise control. Under the equity method, we initially record our investment at cost. The
difference between the cost of the equity investment and the amount of the underlying equity in the net assets of the equity investee is recognized as equity
method goodwill or as an intangible asset as appropriate, which is included in the equity method investment on the consolidated balance sheets. We
subsequently adjust the carrying amount of the investment to recognize our proportionate share of each equity investee’s net income or loss into
consolidated statements of comprehensive income/(loss) after the date of acquisition. We will discontinue applying the equity method if an investment (and
additional financial supports to the investee, if any) has been reduced to zero.
An investment in in-substance common stock is an investment that has risk and reward characteristics that are substantially similar to that entity’s
common stock. We consider subordination, risks and rewards of ownership and obligation to transfer value when determining whether an investment in an
entity is substantially similar to an investment in that entity’s common stock.
For long-term investments in equity securities that are not accounted for using equity method of accounting and have no readily determinable fair
value, the cost method accounting is used.
We continually review our long-term investments accounted for under the cost and equity methods to determine whether a decline in fair value to
below the carrying value is other than temporary. The primary factors we consider in our determination are the length of time that the fair value of the
investment is below our carrying value; the financial condition, operating performance and the prospects of the equity investee; and other company specific
information such as recent financing rounds. If the decline in fair value is deemed to be other than temporary, the carrying value of the equity investee is
written down to fair value. In 2015, we recognized US$0.9 million impairment loss on long-term investment.
Revenue Recognition
We generate revenues primarily from membership, online marketing services and E-commerce services. We sell these services through our direct
sales teams and third party sales agencies. Under the terms of the agreement with the sales agencies, the sales agencies remit to us a certain percentage of
our listed sales price. We recognize revenue net of the amounts retained by the sales agencies because the sales agencies will offer discretionary discount to
the customer. Additionally, we do not receive information from the sales agencies indicating the amount of such discounts offered to the customers or
regarding the actual cash paid by the customers to the sales agencies. As such, we are unable to determine the gross amounts paid by the customers to the
sales agencies. Accordingly, we believe that it is more appropriate to recognize revenue net of the amounts retained by the sale agencies. Revenue is
recognized when persuasive evidence of an arrangement exists, the price is fixed or determinable, service is performed and collectability of the related fee
is reasonably assured.
We have adopted the gross presentation for business tax and related surcharges pursuant to ASC 605-45, “Revenue Recognition: Principal Agent
Considerations”. The amount of business tax and related surcharges included in cost of revenues were US$1.7 million, US$1.6 million and US$3.7 million
for the years ended December 31, 2013, 2014 and 2015, respectively. Effective January 1, 2012, the PRC Ministry of Finance and the State Administration
of Taxation launched the Value Added Tax Pilot Program for certain industries in certain regions. According to the implementation circulars released by
the Ministry of Finance and the State Administration of Taxation on the Pilot Program, the “Modern Service Industries” includes research, development
and technological services, information technology services, cultural innovation services, logistics support, lease of corporeal properties, attestation and
consulting services. Subsidiaries in different regions were affected at different times as the program was rolled out. Most of our entities were subject to the
VAT Pilot Program as of December 31, 2015. With the adoption of the Pilot Program, our revenues are subject to VAT payable on goods sold or taxable
labor services provided by a general VAT taxpayer for a taxable period. VAT payable is the net balance of the output VAT for the period after crediting the
input VAT for the period. Hence, the amount of VAT payable does not result directly from output VAT generated from goods sold or taxable labor services
provided. Accordingly, we have adopted the net presentation of VAT.
Membership. A membership is a basic services package mainly consisting of the following services: customer certification, display of an online
storefront on our platforms, preferential listing benefits such as limited daily priority listings and higher quota for free daily listings and access to our
dedicated customer service support team and online account management system. Membership revenues are recognized ratably over the contract period
when membership services are provided.
71
Online marketing services. Our online marketing services include time-based services and performance-based services. Revenues from time-
based services are recognized ratably over the service period. Revenues from performance-based services are recognized when the agreed performance
criteria are achieved. For service arrangements that include multiple deliverables, revenues are allocated to each unit of accounting based on relative selling
price of each unit of accounting according to the selling price hierarchy established by ASU No. 2009-13. We use (a) vendor-specific objective evidence of
selling price, if it exists, (b) otherwise, third-party evidence of selling price. If neither (a) nor (b) exists, we will use (c) the management’s best estimate of
the selling price for that deliverable. Selling price is generally determined by vendor specific objective evidence.
E-commerce services. We enter into promotional service agreements with real estate developers pursuant to which we are authorized to sell
discount coupons with face value ranging from RMB2,000 (US$309) to RMB100,000 (US$15,437) to prospective home buyers. The home buyers are
required to prepay the full face value of the coupon to us before they can use the coupon to purchase specified properties from the real estate developers at a
discount significantly greater than the coupon value. The coupons purchased by prospective home buyers are refundable before a purchase of the specified
properties prior to the expiry date of the coupon. We recognize revenues when home buyers apply the discount coupons to pay for the purchase price of the
specified properties from real estate developers. Cash received in advance of the purchase of specified properties is recorded as customer advances.
Other services. Other services include various off-line services provided. We recognize other service revenue when the related services are
rendered.
Income Taxes
Current income taxes are provided on the basis of net income for financial reporting purposes, adjusted for income and expense items which are
not assessable or deductible for income tax purposes, in accordance with the regulations of the relevant tax jurisdictions. Deferred income taxes are
provided using the liability method. Under this method, deferred income taxes are recognized for the tax consequences of temporary differences by
applying enacted statutory rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing
assets and liabilities. The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes. The effect on deferred taxes of a
change in tax rates is recognized in the statement of comprehensive loss in the period of change. A valuation allowance is provided to reduce the amount of
deferred tax assets if it is considered more likely than not that some portion of, or all of the deferred tax assets will not be realized.
The guidance prescribes a more likely than not threshold for financial statement recognition and measurement of a tax position taken or expected
to be taken in a tax return. Guidance was also provided on derecognition of income tax assets and liabilities, classification of current and deferred income
tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods, and income tax
disclosures. Significant judgment is required in evaluating our uncertain tax positions and determining its provision for income taxes. We recognize
interests and penalties, if any, under accrued expenses and other current liabilities on our balance sheet and under other expenses in our statement of
comprehensive income/(loss). We did not have any interest or penalties associated with tax positions as of December 31, 2013, 2014 and 2015. As of
December 31, 2013, 2014 and 2015, we did not have any significant unrecognized uncertain tax positions.
In order to assess uncertain tax positions, we apply a more likely than not threshold and a two-step approach for the tax position measurement and
financial statement recognition. Under the two-step approach, the first step is to evaluate the tax position for recognition by determining if the weight of
available evidence indicates that it is more likely than not that the position will be sustained, including resolution of related appeals or litigation processes,
if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement.
72
Share-Based Compensation
All share-based awards to employees and directors, including share options, restricted share units, or RSUs, and restricted shares are measured at the
grant date based on the fair value of the awards. Share-based compensation, net of forfeitures, is recognized as expense on a straight-line basis over the
requisite service period, which is the vesting period.
Share options
We use the Binominal option pricing model to determine the fair value of share options. We account for share-based compensation expenses using
an estimated forfeiture rate at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from initial estimates. Share-based
compensation expenses were recorded net of estimated forfeitures such that expense was recorded only for those share-based awards that are expected to
vest. Historically, our share-based compensation expenses were relatively low.
We adopted an employee stock option plan in March 2010. We refer to this as the 2010 Plan. The maximum number of shares in respect of which
share awards may be granted under the 2010 Plan is 20,173,225. The 2010 Plan will terminate automatically 10 years after its adoption, unless terminated
earlier by our shareholders’ approval.
We also adopted a share incentive plan in September 2013. We refer to this as the 2013 Plan. The maximum aggregate number of shares which
may be issued pursuant to all awards under the 2013 Plan was 2,800,000 shares as of the date of its adoption. The number of shares reserved for future
issuances under the 2013 Plan will be increased by a number equal to 1.5% of the total number of outstanding shares on the last day of the immediately
preceding calendar year, on the first day of each calendar year during the term of the 2013 Plan beginning in 2015, or such lesser number of ordinary shares
as determined by our board of directors. In addition, in April 2015, in connection with our acquisition of a strategic stake in Ganji, we further increased
such number of maximum aggregate number of shares which may be issued by an additional 7,000,000 ordinary shares, reserved for future grants. The
annual general meeting of our shareholders held on December 17, 2015, further increased the maximum aggregate number of shares that may be issued
pursuant to all awards under the 2013 Plan to a total of 13,686,128 ordinary shares (consisting of 6,686,128 Class A ordinary shares and 7,000,000 Class B
ordinary shares), plus any applicable annual increase beginning in 2016.
58 Home adopted its 2015 Share Incentive Plan, which we refer to as the 58 Home 2015 Plan, in February 2015. The maximum aggregate number
of shares which may be issued pursuant to all awards under the 58 Home 2015 Plan is 20,000,000 ordinary shares of 58 Home. In connection with the
Series A round of equity financing closed on November 27, 2015, the maximum aggregate number of shares which may be issued under the 58 Home 2015
Plan was increased by 2,000,000 ordinary shares of 58 Home.
A summary of the share option grants under our 2010 Plan and 2013 Plan since January 1, 2013, is presented below (share and per share
information is presented to give retroactive effect to the share splits that we have conducted so far).
January 1, 2013
July 31, 2013
September 17, 2013
October 14, 2013
October 30, 2013
February 27, 2014
May 14, 2014
June 25, 2014
November 3, 2014
February 27, 2015
April 13, 2015
May 22, 2015
August 24, 2015
August 24, 2015
Number of
Options
Granted
Exercise
Price
US$
Fair Value of
the Options
as of the
Grant Date
US$
Fair Value of
the
Underlying
Ordinary
Shares
as of the
Grant Date
US$
Intrinsic
Value
as of the
Grant Date
US$
2.300
2.500
2.500
5.600
8.500
15.950
18.460
20.000
17.770
18.675
22.030
38.140
20.980
20.980
1,187,000
1,900,000
30,000
646,000
70,000
138,200
109,200
217,000
257,200
201,600
7,000
1,600
2,400
1,426,000
73
1.340
3.500
3.500
3.770
4.580
12.060
10.250
12.440
10.740
12.060
16.520
24.850
10.930
12.010
2.484
5.286
5.286
6.720
8.500
21.000
19.260
22.950
19.840
20.840
25.415
39.555
21.400
21.400
0.184
2.786
2.786
1.120
—
5.05
0.8
2.95
2.07
2.165
3.385
1.415
0.42
0.42
A summary of the share option grants under the 58 Home 2015 Plan since January 1, 2015, is presented below.
Number of
Options
Granted
2,000,000
2,671,000
1,700,000
1,400,000
1,000,000
150,000
Exercise
Price
US$
0.010
0.100
0.170
0.170
0.170
0.170
Fair Value of
the
Underlying
Ordinary
Shares
as of the
Grant Date
US$
Fair Value of
the Options
as of the
Grant Date
US$
0.170
0.120
0.110
0.100
0.270
0.250
0.176
0.176
0.176
0.176
0.200
0.200
Intrinsic
Value
as of the
Grant Date
US$
0.166
0.076
0.006
0.006
0.030
0.030
February 10, 2015
February 10, 2015
February 10, 2015
February 10, 2015
April 1, 2015
April 30, 2015
We estimated the fair value of share options using the binominal option-pricing model with the assistance from an independent valuation firm.
The fair value of each option grant under the 2013 Plan is estimated on the date of grant with the following assumptions:
Expected volatility(1)
Risk-free interest rate
(per annum)(2)
Exercise multiple(3)
Expected dividend yield(4)
Expected term (in years)(5)
Expected forfeiture rate
(post-vesting)(6)
July 31,
and
Sept. 17,
2013
Oct. 14,
and
Oct. 30,
2013
Jan. 1,
2013
Feb. 27,
2014
May 14,
2014
June 25,
2014
Nov. 3,
2014
Feb. 27,
Apr. 13,
and
May 22,
2015
Aug. 24,
2015
59.1%
55.6%
54.1%
53.3%
52.8%
52.5%
50.8%
49.0%
48.5%
2.032%
2
0.00%
10
2.877%
2
0.00%
10
3.100%
2
0.00%
10
3.730%
2
0.00%
10
3.170%
2
0.00%
10
3.200%
2
0.00%
10
3.010%
2
0.00%
10
3.2%
3.3%
1.0%
0.4%
0.4%
0.4%
0.3%
2.760%
2 or 2.8
2.670%
2 or 2.8
0.00%
10
0.25%
0.00%
10
0.17%
74
The fair value of each option grant under the 58 Home 2015 Plan was estimated on the date of grant with the following assumptions:
Expected volatility(1)
Risk-free interest rate
(per annum)(2)
Exercise multiple(3)
Expected dividend yield(4)
Expected term (in years)(5)
Expected forfeiture rate
(post-vesting)(6)
Notes:
Feb. 10, 2015
Apr. 1, 2015
Apr. 30, 2015
59.7%
2.600%
2 or 2.8
0.00%
10
0.25%
59.4%
2.460%
2.8
0.00%
10
0.25%
60.0%
2.630%
2
0.00%
10
0.25%
(1) We estimated expected volatility based on the annualized standard deviation of the daily return embedded in historical share prices of comparable
companies with a time horizon close to the expected expiry of the term.
(2) We estimated risk-free interest rate based on the yield to maturity of US$ denominated Chinese Government bonds with a maturity similar to the
expected expiry of the term.
(3) The exercise multiple is estimated as the ratio of fair value of underlying shares over the exercise price as at the time the option is exercised, based on a
consideration of research study regarding exercise pattern based on historical statistical data.
(4) Expected dividend yield: We have never declared or paid any cash dividends on our capital stock, and we do not anticipate any dividend payments on
our ordinary shares in the foreseeable future.
(5) Expected term (in years): Expected term is the contract life of the option.
(6) Expected forfeiture rate (post-vesting): Estimated based on historical employee turnover rate after each option grant.
Determining the fair value of our ordinary shares required us to make complex and subjective judgments, assumptions and estimates, which
involved inherent uncertainty. Had our management used different assumptions and estimates, the resulting fair value of our ordinary shares and the
resulting share-based compensation expenses could have been different.
Restricted share units
RSUs issued to our employees are measured based on the grant date fair value of the award and recognized as compensation expense based on the
straight-line vesting method, net of estimated forfeitures, over the requisite service period, with a corresponding impact reflected in additional paid-in
capital. The fair value of RSUs was based on the fair value of our underlying ordinary shares on the grant date. We granted no RSUs prior to 2014.
The following table sets forth certain information regarding the RSUs granted to our employees since January 1, 2014, with share and per share
information.
February 27, 2014
May 14, 2014
June 25, 2014
November 3, 2014
February 27, 2015
April 13, 2015
May 22, 2015
August 6, 2015
August 24, 2015
November 23, 2015
Number of
RSUs Granted
Fair Value per
Ordinary Share as of
the Grant Date
US$
Type/Methodology
of Valuation
59,400
113,800
383,000
392,400
392,308
432,000
143,986
1,050,578
3,427,590
225,598
75
21.000 Contemporaneous/ Stock Price (1)
19.260 Contemporaneous/ Stock Price (1)
22.950 Contemporaneous/ Stock Price (1)
19.840 Contemporaneous/ Stock Price (1)
20.840 Contemporaneous/ Stock Price (1)
25.415 Contemporaneous/ Stock Price (1)
39.555 Contemporaneous/ Stock Price (1)
28.570 Contemporaneous/ Stock Price (1)
21.400 Contemporaneous/ Stock Price (1)
26.530 Contemporaneous/ Stock Price (1)
Note:
(1) The fair values of restricted share units are based on stock price of our company on grant dates.
In March 2015, in connection with our acquisition of Anjuke, we issued 248,216 fully vested RSUs of our company to former Anjuke employees
as part of the share consideration. In August 2015, in connection with our strategic investment in Ganji, we issued 4,449,002 fully vested RSUs of our
company to former Ganji employees as part of the share consideration.
In February 2016, our board of directors approved the grant of 152,240 restricted share units to employees of our company under the 2013 Plan.
Restricted shares of 58 Home
In February 2015, 58 Home granted 9,100,000 restricted shares to selected management members of 58 Home. In April 2015, 58 Home further
granted 1,880,000 restricted shares to an executive officer of our company. All these restricted shares were granted under the 58 Home 2015 Plan and were
fully vested on the respective grant dates.
Fair Value of Our Ordinary Shares
Prior to our initial public offering, we were a private company with no quoted market prices for our ordinary shares. We therefore needed to make
estimates of the fair value of our ordinary shares at various dates for the purpose of determining the fair value of our ordinary shares at the date of the grant
of a share-based compensation award to our employees as one of the inputs into determining the grant date fair value of the award.
The following table sets forth the fair value of our ordinary shares estimated at different times since January 1, 2013 and prior to our initial public
offering with the assistance from an independent valuation firm.
Date
January 1, 2013
July 31 and September 17, 2013
October 14, 2013
October 30, 2013
Equity
Value
(US$’000)
Fair Value
Per Share
(US$)
375,532
728,321
885,777
1,120,402
2.484
5.286
6.720
8.500
DLOM
Discount
Rate
Type of
Valuation
20%
9%
4%
—
22.0% Contemporaneous
19.0% Contemporaneous
N/A Contemporaneous
N/A Contemporaneous
We applied the income approach/discounted cash flow, or DCF, analysis based on our projected cash flow using management’s best estimate as of
the valuation date. The determination of the fair value of our ordinary shares requires complex and subjective judgments to be made regarding our projected
financial and operating results, our unique business risks, the liquidity of our shares and our operating history and prospects at the time of valuation.
The major assumptions used in calculating the fair value of ordinary shares include:
Weighted average cost of capital, or WACC: WACCs of 22.0% and 19.0% were used for dates as of January 2013 and July 2013, respectively.
The WACCs were determined based on a consideration of the factors including risk-free rate, comparative industry risk, equity risk membership,
company size and nonsystematic risk factors.
Comparable companies: In deriving the WACCs, which are used as the discount rates under the income approach, four publicly traded companies
in China online marketing industry and two publicly traded companies in the U.S. online marketing industry were selected for reference as our
guideline companies.
76
Discount for lack of marketability, or DLOM: DLOM was quantified by the Black-Scholes option pricing model. Under this option-pricing
method, the cost of the put option, which can hedge the price change before the privately held shares can be sold, was considered as a basis to
determine the DLOM. This option pricing method is one of the methods commonly used in estimating DLOM as it can take into consideration
factors like timing of a liquidity event, such as an IPO, and estimated volatility of our shares. The farther the valuation date is from an expected
liquidity event, the higher the put option value and thus the higher the implied DLOM. The lower DLOM is used for the valuation, the higher is
the determined fair value of the ordinary shares. DLOM remained in the range of 4.0% to 21.0% in the period from 2012 to 2013.
The income approach involves applying appropriate discount rates to estimated cash flows that are based on earnings forecasts. Our revenues and
earnings growth rates, as well as major milestones that we have achieved, contributed significantly to the increase in the fair value of our ordinary
shares from April 2012 to October 2013. However, these fair values are inherently uncertain and highly subjective. The assumptions used in
deriving the fair values are consistent with our business plan. These assumptions include: no material changes in the existing political, legal and
economic conditions in China; our ability to retain competent management, key personnel and staff to support our ongoing operations; and no
material deviation in market conditions from economic forecasts. These assumptions are inherently uncertain. The risk associated with achieving
our forecasts were assessed in selecting the appropriate discount rates, which ranged from 19.0% to 22.0%.
Option-pricing method was used to allocate enterprise value to preference and ordinary shares, taking into account the guidance prescribed by the
AICPA Audit and Accounting Practice Aid, “Valuation of Privately-Held Company Equity Securities Issued as Compensation,” or the Practice
Aid. The method treats ordinary share and preference share as call options on the enterprise’s value, with exercise prices based on the liquidation
preference of the preference share.
The option-pricing method involves making estimates of the anticipated timing of a potential liquidity event, such as a sale of our company or an
initial public offering, and estimates of the volatility of our equity securities. The anticipated timing is based on the plans of our board of directors
and management. Estimating the volatility of the share price of a privately held company is complex because there is no readily available market
for the shares. We estimated the volatility of our shares to range from 54.1% to 69.5% based on the historical volatilities of comparable publicly
traded companies engaged in similar lines of business. Had we used different estimates of volatility, the allocations between preference and
ordinary shares would have been different.
Recent Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” This guidance supersedes current
guidance on revenue recognition in Topic 605, “Revenue Recognition.” In addition, there are disclosure requirements related to the nature, amount, timing,
and uncertainty of revenue recognition. This guidance will be effective for annual reporting periods beginning after December 15, 2016, including interim
reporting periods, and will be required to be applied retrospectively. Early application of the guidance is not permitted. In August 2015, the FASB issued
ASU No. 2015-14 to defer the effective date of ASU No. 2014-09 for all entities by one year. We are in the process of evaluating the impact of the standard
on our consolidated financial statements.
In June 2014, the FASB issued ASU No. 2014-12, “Accounting for Share-Based Payments When the Terms of an Award Provide That a
Performance Target Could Be Achieved after the Requisite Service Period”. The new standard requires that a performance target that affects vesting and
that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic
718, Compensation-Stock Compensation, as it relates to awards with performance conditions that affect vesting to account for such awards. The
performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in
which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which
the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period,
the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of
compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be
adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to
vest in the award if the performance target is achieved. The amendments in this ASU are effective for annual periods and interim periods within those
annual periods beginning after December 15, 2015. Earlier adoption is permitted. The implementation of this update is not expected to have any material
impact on our consolidated financial statements.
77
In August 2014, FASB issued ASU No. 2014-15, “Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of
Uncertainties about an Entity’s Ability to Continue as a Going Concern.” The new standard addresses management’s responsibility to evaluate whether
there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. Management’s evaluation
should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued. The new
standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2016. Early adoption is permitted. We
are currently evaluating the impact of this guidance.
In February 2015, the FASB issued Consolidation (Topic 810) —Amendments to the Consolidation Analysis. The amendments in Topic 810
respond to stakeholders’ concerns about the current accounting for consolidation of variable interest entities, by changing aspects of the analysis that a
reporting entity must perform to determine whether it should consolidate such entities. Under the amendments, all reporting entities are within the scope of
Subtopic 810-10, Consolidation—Overall, including limited partnerships and similar legal entities, unless a scope exception applies. The amendments are
intended to be an improvement to current U.S. GAAP, as they simplify the codification of FASB Statement No. 167, Amendments to FASB Interpretation
No. 46(R), with changes including reducing the number of consolidation models through the elimination of the indefinite deferral of Statement 167 and
placing more emphasis on risk of loss when determining a controlling financial interest. The amendments are effective for publicly-traded companies for
fiscal years beginning after December 15, 2015, and for interim periods within those fiscal years. Earlier adoption is permitted. We have early adopted the
guidance and considered there is no material impact on our consolidated financial statements.
In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments, which eliminates the
requirement for acquirers in a business combination to account for measurement-period adjustments retrospectively. Instead, acquirers must recognize
measurement-period adjustments during the period in which they determine the amounts, including the effect on earnings of any amounts that would have
been recorded in previous periods if the accounting had been completed at the acquisition date. This update is effective for interim and annual periods
beginning after December 15, 2015, with early adoption permitted. The implementation of this update is not expected to have any material impact on our
consolidated financial statements.
In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which
simplifies the presentation of deferred income taxes by requiring deferred tax assets and liabilities be classified as noncurrent on the balance sheet. The
amendments in this update are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within
those annual periods. We are currently evaluating the effect of adoption of this ASU and expect that it will have an impact on our consolidated balance
sheets, as current deferred tax assets were US$86 thousand and non-current deferred tax liabilities were US$66.2 million as of December 31, 2015.
In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which provides
guidance for the recognition, measurement, presentation, and disclosure of financial assets and liabilities. The guidance will be effective for the fiscal year
beginning after December 15, 2017, including interim periods within that year. We are in the process of evaluating the impact of the adoption of this ASU.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which amends the existing accounting standards for lease accounting.
This update requires lessees to recognize a right-of-use asset and lease liability for all leases with terms of more than twelve months. Lessees are permitted
to make an accounting policy election to not recognize the asset and liability for leases with a term of twelve months or less. The update does not
significantly change the lessees’ recognition, measurement and presentation of expenses and cash flows from the previous accounting standard. The
amendments in this Update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are
currently assessing the potential effects this update may have on our consolidated financial statements and related disclosures.
78
In March 2016, the FASB issued ASU 2016-09, which is intended to improve the accounting for employee share-based payments. This standard
will be effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, with early adoption permitted. We
are currently evaluating the impact that this new guidance will have on our consolidated financial statements.
Results of Operations
The following table sets forth our consolidated results of operations for the periods indicated. Our business has experienced rapid growth since
inception. We expect our growth to continue as we grow our user base and explore new market opportunities. However, due to our limited operating
history, our historical growth rate may not be indicative of our future performance. Therefore, we believe that period-to-period comparison of our results of
operation should not be relied upon as indicative of future performance.
2013
For the Year Ended December 31,
2014
(in thousands of US$)
2015
Revenues
Cost of revenues(1)
Gross profit
Operating expenses(1):
Sales and marketing expenses
Research and development expenses
General and administrative expenses
Total operating expenses
Income/(loss) from operations
Other income/(expenses), net
Income/(loss) before tax
Income taxes benefits/(expenses)
Net income/(loss)
Note:
145,747
(8,471)
137,276
(84,534)
(25,138)
(12,983)
(122,655)
14,621
4,936
19,557
—
19,557
264,978
(13,844)
251,134
(180,148)
(43,676)
(20,633)
(244,457)
6,677
22,153
28,830
(6,186)
22,644
714,836
(51,268)
663,568
(689,014)
(121,404)
(105,049)
(915,467)
(251,899)
(19,009)
(270,908)
7,952
(262,956)
(1) Share-based compensation expenses were allocated in cost of revenues and operating expenses as follows:
Cost of revenues
Sales and marketing expenses
Research and development expenses
General and administrative expenses
Total
36
445
996
1,388
2,865
18
1,395
2,403
2,357
6,173
121
6,997
9,432
11,510
28,060
79
2013
For the Year Ended December 31,
2014
(in thousands of US$)
2015
The following table sets forth the results of operations for the periods indicated, as percentages of revenues.
2013
For the Year Ended December 31,
2014
(% of revenues)
2015
Revenues
Cost of revenues
Gross profit
Operating expenses:
Sales and marketing expenses
Research and development expenses
General and administrative expenses
Total operating expenses
Income/(loss) from operations
Other income/(expenses), net
Income/(loss) before tax
Income taxes benefits/(expenses)
Net income/(loss)
100.0%
(5.8)
94.2
(58.0)
(17.2)
(8.9)
(84.1)
10.1
3.4
13.5
—
13.5
100.0%
(5.2)
94.8
(68.0)
(16.5)
(7.8)
(92.3)
2.5
8.4
10.9
(2.3)
8.6
100.0%
(7.2)
92.8
(96.4)
(17.0)
(14.7)
(128.1)
(35.3)
(2.7)
(38.0)
1.1
(36.9)
Comparison of the Years Ended December 31, 2013, 2014 and 2015
Revenues
The following table sets forth the principal components of our revenues, both as absolute amounts and as percentages of total revenues, for the
periods indicated.
2013
For the Year Ended December 31,
2014
2015
US$
% of
revenues
US$
% of
revenues
US$
% of
revenues
Membership
Online marketing services
E-commerce services
Other services
Total revenues
Membership
85,725
58,457
—
1,565
145,747
58.8
40.1
—
1.1
(in thousands of US$, except for % data)
52.6
47.2
—
0.2
100.0
139,490
125,033
—
455
264,978
100.0
297,150
385,543
23,046
9,097
714,836
41.6
53.9
3.2
1.3
100.0
Membership revenues were US$85.7 million, US$139.5 million and US$297.2 million, representing 58.8%, 52.6% and 41.6% of revenues in
2013, 2014 and 2015, respectively. The increase in our membership revenues was primarily attributable to the increase in the number of our paying
merchant members, as a result of our stronger focus on acquiring and serving paying merchant members. Our average quarterly paying membership
accounts on 58 platform in 2013, 2014 and 2015, were approximately 323,000, 529,000 and 827,000, respectively. Our Ganji and Anjuke businesses also
contributed additional growth in the number of paying membership accounts in 2015. See “Item 4. Information on the Company — B. Business Overview
— Service offerings – Memberships” for details of subscription based paying membership accounts. We expect our membership revenues will continue to
grow as we continue to expand our paying merchant member base in the existing and new cities. Our field sales teams, who cover 39 cities, and our sales
agency teams, who cover another approximately 330 cities, will continue to attract new paying merchant members. Our dedicated customer service team
will continue to contribute to membership revenues by retaining existing merchants through helping them to optimize their marketing effectiveness.
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Furthermore, paying merchant members also purchase our online marketing services that are not included in the basic membership, to enhance
their marketing effectiveness especially after they have experienced the benefits of our membership. These revenues will be recorded under online
marketing services revenues. We believe that the continued increase in the number of our paying merchant members and their spending will contribute to
the growth of our online marketing services revenue, which in turn will drive our overall revenue growth.
2015 compared to 2014. Our membership revenues increased from US$139.5 million in 2014 to US$297.2 million in 2015, representing an
increase of 113.0%. The increase was driven by the addition of revenues from Ganji and Anjuke as well as the organic growth of our 58 platform. On our
58 platform, the increase in membership revenues was primarily due to the increase in average quarterly paying membership accounts from approximately
529,000 in 2014 to approximately 827,000 in 2015. We experienced significant growth across multiple content categories, particularly in our real estate and
jobs categories, in 2014 and 2015. We did not experience significant price increases for the membership packages during the same periods.
2014 compared to 2013. Our membership revenues increased from US$85.7 million in 2013 to US$139.5 million in 2014, representing an increase
of 62.7%. The increase in membership revenues was primarily due to the increase in the number of our average quarterly paying membership accounts
from approximately 323,000 in 2013 to approximately 529,000 in 2014. We experienced significant growth across multiple content categories, particularly
in our real estate and jobs categories, in 2014. We did not experience significant price increases for the membership packages during the same periods.
Online Marketing Services
Revenues from online marketing services were US$58.5 million, US$125.0 million and US$385.5 million, representing 40.1%, 47.2% and 53.9%
of our revenues in 2013, 2014 and 2015, respectively. We continue to enhance our ability to more efficiently monetize our substantial traffic. For instance,
in early 2015, we upgraded our real-time bidding system from a time-based (daily) bidding to click-based bidding (CPC), which allows merchants to bid
more extensively on our platforms. This also enables us to generate higher revenues from the same amount of listings. These services have continued to
attract more merchants and increase average spend per merchant. We expect our online marketing services revenues will continue to grow as we further
develop our online marketing services, accumulate operational experience and increase our customer engagement.
2015 compared to 2014. Our online marketing services revenues increased from US$125.0 million in 2014 to US$385.5 million in 2015,
representing an increase of 208.4%. The increase was mostly driven by the organic growth of our 58 platform, as well as the consolidation of Ganji’s and
Anjuke’s financials. The newly consolidated Ganji and Anjuke platforms also have online marketing services but a lower percentage of their paying
customers purchase bidding services due to their lack of experience in this area. We are working to transfer the requisite knowledge and systems to the
Ganji and Anjuke platforms.
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2014 compared to 2013. Our online marketing services revenues increased from US$58.5 million in 2013 to US$125.0 million in 2014,
representing an increase of 113.9%. The increase was mostly driven by the increases in paying customers for online marketing customer services. While the
subscription-based payment membership accounts increased, our customer services teams continued to successfully upsell online marketing services to
more members.
E-commerce Services
Revenues from e-commerce services were US$23.0 million, representing approximately 3.2% of our revenues in 2015, all of which was
contributed by the Anjuke business that we acquired in March 2015.
Other Services
Revenues from other services were US$1.6 million, US$0.5 million and US$9.1 million, representing approximately 1.1%, 0.2% and 1.3% of our
revenues in 2013, 2014 and 2015, respectively. In 2013 and 2014, revenues from other services mainly related to group buying services. We exited from
the group buying services in the second half of 2014. In 2015, revenues from other services mainly related to Guazi C2C services and offline recruitment
services.
Cost of Revenues
Cost of revenues consists primarily of business taxes and surcharges, bandwidth costs, rental costs, equipment depreciation associated with
website operation, and salaries, benefits and share-based compensation for our personnel responsible for website maintenance and operation. It also
includes the traffic acquisition costs (TAC) paid to our advertising union partners who displayed our merchants’ marketing information on their websites or
mobile applications. We expect that our cost of revenues will increase in absolute amounts as we further grow our user base and expand our revenue-
generating services. For the share-based compensation charges included in cost of revenues, see “— Critical Accounting Policies — Share-Based
Compensation” for more information.
2015 compared to 2014. Our cost of revenues was US$51.3 million in 2015, an increase of 270.3% from US$13.8 million in 2014. The year-over-
year increase in cost of revenues was primarily driven by our consolidation of Ganji’s and Anjuke’s financials, the organic growth of our 58 platform and
an increase in traffic acquisition costs paid to 58’s advertising union partners, as well as other types of PC and mobile platform maintenance related costs
such as short message service (SMS) costs, bandwidth fees and depreciation expenses.
2014 compared to 2013. Our cost of revenues was US$13.8 million in 2014, an increase of 63.4% from US$8.5 million in 2013. The year-over-
year increase in cost of revenues was primarily driven by the increase in bandwidth fees, SMS costs and depreciation expenses.
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Gross Profit
We expect our gross profit to increase as our revenues grow. The following table sets forth our gross profit and gross margin for the periods
indicated.
Gross profit
Gross margin
2013
For the Year Ended December 31,
2014
(in thousands of US$, except for % data)
137,276
251,134
2015
94.2%
94.8%
663,568
92.8%
2015 compared to 2014. Our gross profit increased from US$251.1 million in 2014 to US$663.6 million in 2015, representing an increase of
164.2%. The increase in gross profit was primarily attributable to the significant increase in membership revenues as well as online marketing services
revenues from our core classified business and the consolidation of financials of Ganji and Anjuke . Gross margin decreased from 94.8% to 92.8% during
the same period. The decrease in gross margin was primarily driven by the growth of our advertising union business, which has a lower gross margin than
our core classifieds business.
2014 compared to 2013. Our gross profit increased from US$137.3 million in 2013 to US$251.1 million in 2014, representing an increase of
82.9%. Gross margin increased from 94.2% to 94.8% during the same period. The increase in gross profit was primarily attributable to the significant
increase in membership revenues as well as online marketing services revenues during the same period.
Operating Expenses
Our operating expenses consist of sales and marketing expenses, research and development expenses and general and administrative expenses. The
following table sets forth our operating expenses, both as absolute amounts and as percentages of our revenues, for the periods indicated.
2013
For the Year Ended December 31,
2014
2015
Sales and marketing expenses
Research and development expenses
General and administrative expenses
Total operating expenses
US$
84,534
25,138
12,983
122,655
% of
revenues
US$
% of
revenues
US$
% of
revenues
(in thousands of US$, except for % data)
68.0
16.5
7.8
92.3
180,148
43,676
20,633
244,457
58.0
17.2
8.9
84.1
689,014
121,404
105,049
915,467
96.4
17.0
14.7
128.1
Our sales and marketing expenses, research and development expenses and general and administrative expenses include share-based compensation
charges. See “— Critical Accounting Policies — Share-Based Compensation” for more information.
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Sales and Marketing Expenses
Sales and marketing expenses consist primarily of brand advertising, PC and mobile traffic acquisition expenses, salaries, benefits, commissions
and share-based compensation for our sales, customers services and marketing personnel, promotion expenses and other operating expenses that are
associated with sales and marketing activities.
We believe there is still a lot of room to grow classifieds user penetration, particularly on the mobile internet in China. Therefore, we have
invested heavily in brand promotion and traffic acquisition, particularly on mobile. We engaged third parties to promote our brand image through various
advertising channels, including advertising on internet search engines, websites and traditional offline media. Since 2013, the number of mobile internet
users has been growing very rapidly in China as many users have switched from features phones to smart phones offering a much better mobile internet
user experience. Therefore, we have increased our advertising expenses in mobile internet significantly since 2014. Since the Anjuke acquisition in March
2015, we also increased traffic acquisition for our Anjuke platform to gain more market share while the underlying real estate market started to recover.
Since the August 2015 integration of Ganji, we have been rationalizing our advertising spending on various platforms and trying to optimizing the
efficiency of this spending.
Similarly, paying merchant penetration in key categories such as blue collar jobs, local services and used cars continues to be low. Therefore, we
continued to expand our field sales teams and sales agency network to attract more paying merchant members. We increased the size of our field sales
teams in 2014 to gain more merchant market share, but slowed down the sales teams’ headcount increase in late 2015 to focus more on increasing operating
efficiency by leveraging more training, better internal systems and management ability. Our centralized customer services center, which we established in
2012, has played a key role in improving merchant customer service satisfaction and upselling online marketing services. This team has been growing as
well but overall remains highly efficient as measured by the number of customers they serve and the online marketing services revenue they generate.
We expect our sales and marketing expenses will increase going forward as we continue to see opportunity in attracting more users, particularly on
mobile internet and merchants through our advertising campaign and bigger and more efficient sales and customer services teams.
The following table sets forth our advertising expenses, sales and marketing expenses excluding advertising expenses and total sales and
marketing expenses, both as absolute amounts and as percentages of our revenues, for the periods indicated.
2013
For the Year Ended December 31,
2014
2015
US$
% of
revenues
US$
% of
revenues
US$
% of
revenues
Advertising expenses
Sales and marketing expenses excluding
advertising expenses
Total sales and marketing expenses
22,703
61,831
84,534
(in thousands of US$, except for % data)
27.7
73,435
15.6
42.4
58.0
106,713
180,148
40.3
68.0
84
289,069
399,945
689,014
40.4
56.0
96.4
2015 compared to 2014. Our sales and marketing expenses increased from US$180.1 million in 2014 to US$689.0 million in 2015, representing
an increase of 282.5%. Our advertising expenses increased from US$73.4 million in 2014 to US$289.1 million in 2015, representing an increase of 293.6%.
The increase was primarily a result of increase from the consolidation of Ganji and Anjuke’s financials. Within Ganji’s numbers, Guazi contributed more of
the increase in advertising expenses than did Ganji’s own core classifieds business. We also stepped up Anjuke’s advertising expenses after the acquisition
along with what we perceived as the recovering China real estates market. The year-over-year increase in advertising expenses for our 58 platform in
response to increasing competition was also very significant, especially during the first half of 2015, but following the consolidation of Ganji that took
place in August 2015, the expenses have been scaled back. The increase in other sales and marketing expenses excluding advertising expenses was driven
by both the consolidation of Ganji’s and Anjuke’s financials and the organic growth in our 58 platform. The increase in 58 businesses was attributable to
subsidies paid to service providers on the 58 Home platforms, as well as increased salaries, benefits and commissions as a result of the increased headcount
of sales and marketing personnel in response to increased competition with Ganji prior to our consolidation of Ganji.
2014 compared to 2013. Our sales and marketing expenses increased from US$84.5 million in 2013 to US$180.1 million in 2014, representing an
increase of 113.1%, but our advertising expenses increased significantly from US$22.7 million in 2013 to US$73.4 million in 2014. The increase in
advertising expenses was primarily due to expenses associated with the marketing of our mobile platforms and the acquisition of PC Traffic. Our monthly
unique visitors approached 300 million for the first time since our inception in January 2015. The increase in other sales and marketing expenses excluding
advertising expenses was primarily driven by increased salaries, benefits and commissions for our sales, customer service and marketing teams as a result
of higher compensation levels and an approximately 22.0% increase in monthly average headcount of sales and marketing personnel. It was also driven by
the increased marketing and promotional activities.
Research and Development Expenses
Research and development expenses mainly consist of salaries, benefits and share-based compensation for product development and engineering
personnel and other operating expenses such as rental and depreciation of equipment that are associated with product development and engineering
activities. We expect our research and development expenses to increase on an absolute basis as we intend to hire additional research and development
personnel to develop new features, applications and services for our online platforms and further improve our technologies and infrastructure.
2015 compared to 2014. Research and development expenses increased from US$43.7 million in 2014 to US$121.4 million in 2015, representing
an increase of 178.0%. The increase was primarily due to an increase in research and development expenses associated with our 58 platform, as well as
those from our Ganji and Anjuke platforms. The increase was primarily due to increased costs associated with the hiring of additional research and
development personnel for the development of new features and services.
85
2014 compared to 2013. Research and development expenses increased from US$25.1 million in 2013 to US$43.7 million in 2014, representing
an increase of 73.7%. The increase was primarily due to increased salaries, employee benefits and rental expenses as a result of an approximately 50.1%
increase in monthly average headcount of research and development personnel for the development of new features and services.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries, benefits and share-based compensation for our general and administrative
personnel, general office expenses and fees and expenses for third-party professional services. We expect our general and administrative expenses to
increase in the future on an absolute basis as our business grows.
2015 compared to 2014. Our general and administrative expenses increased from US$20.6 million in 2014 to US$105.0 million in 2015,
representing an increase of 409.1%. This increase was primarily due to share-based compensation expenses and approximately US$34.7 million in
professional fees associated with our strategic investment in Ganji. The increase was also partially due to an increase in the number of support staff hired to
support the expansion of our sales teams.
2014 compared to 2013. Our general and administrative expenses increased from US$13.0 million in 2013 to US$20.6 million in 2014,
representing an increase of 58.9%. Such increase was primarily due to increase in personnel related expenses, including share-based compensation
expenses as a result of an approximately 13.3% increase in monthly average headcount of administrative personnel and professional fees associated with
being a public company.
Seasonality
Our results of operations are subject to seasonal fluctuations. For example, our revenues are typically lower during the holidays in China,
particularly during the Chinese New Year period, which occurs in the first quarter of the year. Many businesses are either closed or substantially reduce
their activities, including hiring and marketing, during the Chinese New Year holiday. However, the impact on our first quarter may be tempered by the
tendency for brand advertising to be quite concentrated both during and after the Chinese New Year period, as advertisers seek to reach a broader audience
during the holiday season. Aside from the impact of seasonality on the first quarter, certain business activities such as recruitment tend to slow down
towards the year end, which might impact our revenues in the fourth quarter of the year. Historically, seasonality has not been readily apparent in our
results of operations due to the rapid growth in revenues that we experienced in recent years, but we may experience reductions in growth on a successive
quarter basis due to these seasonal factors or due to other factors .
Our results of operations for the first quarter of 2016 may be affected by similar trends and key factors that affected our previous first quarters in
the past. For the first quarter of 2016, we have experienced similar seasonal impact on our estimated revenue for the quarter, and we have also incurred
increased sales and marketing expenses due to marketing campaigns conducted during this period.
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Inflation
Since our inception, inflation in China has not materially impacted our results of operations. According to the National Bureau of Statistics of
China, the year-over-year percent changes in the consumer price index for December 2013, 2014 and 2015 were increases of 2.5%, 1.5% and 1.6%,
respectively. Although we have not been materially affected by inflation in the past, we can provide no assurance that we will not be affected in the future
by higher rates of inflation in China. For example, certain operating costs and expenses such as employee compensation and office operating expenses may
increase as a result of higher inflation. Additionally, because a substantial portion of our assets consists of cash and cash equivalents, term deposits and
short-term investments, high inflation could significantly reduce the value and purchasing power of these assets. We are not able to hedge our exposure to
higher inflation in China.
Impact of Foreign Currency Fluctuation
See “Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in China — Fluctuations in exchange rates could have a
material adverse effect on our results of operations and the value of your investment.” and “Item 11. Quantitative and Qualitative Disclosures About Market
Risk — Foreign Exchange Risk.”
Impact of Governmental Policies
See “Item 3. Key Information — D. Risk Factors — Risks Related to Doing Business in China” and “Item 4. Information on the Company — B.
Business Overview — Regulation.”
B. Liquidity and Capital Resources
Cash Flows and Working Capital
Our principal sources of liquidity have been financing activities and operating activities.
In November 2013, we raised an aggregate of approximately US$215.0 million in net proceeds from our initial public offering and concurrent
private placement. In April 2014, we raised an additional US$73.0 million from a follow-on public offering of ADSs by us and certain selling shareholders.
In June 2014, Tencent invested US$736.1 million in our company, of which we used US$552.1 million to repurchase our ordinary shares from certain pre-
IPO shareholders. In April 2015, Tencent purchased an additional US$400.0 million of newly issued ordinary shares from us. In July 2015, we obtained a
loan from Tencent in an aggregate principal amount of US$400.0 million. In December 2015, we and Tencent entered into an amendment to the loan
agreement, pursuant to which we issued 4,267,344 Class A ordinary shares to Tencent and the principal amount of the loan under the loan agreement was
reduced to US$275 million. In April 2016, we obtained a secured loan of US$275 million from China Merchants Bank Co., Ltd. and used the proceeds
from this loan to repay our amended loan from Tencent.
Additionally, in November 2015, 58 Home raised US$300.0 million in a Series A equity funding round, of which US$10.0 million was
contributed by 58.com Inc.
87
We had net cash provided by operating activities of US$66.3 million, US$98.6 million and US$10.8 million in 2013, 2014 and 2015, respectively.
The decrease in net cash provided by operating activities in 2015 was due in part to professional fees associated with our strategic investment in Ganji that
year.
As of December 31, 2015, we had cash and cash equivalents and short-term investments totaling US$524.5 million. These included (i) US$483.3
million in cash and cash equivalents, which primarily consisted of cash, demand deposits and highly liquid investments placed with banks or other financial
institutions that have original maturities of three months or less, (ii) US$41.2 million in short-term investments, representing US$29.3 million investment
funds placed with banks with terms shorter than three months and (iii) US$11.9 million in available-for-sale securities in a public company. As of
December 31, 2015, our current liabilities exceeded our current assets by US$499.8 million. Our ability to continue as a going concern is dependent on our
ability to successfully execute our business plan, which includes increasing revenues while controlling operating expenses, as well as generating cash flows
from operating activities and continuing to gain support from outside sources of financing. We can adjust the pace of our operation expansion and control
our operating expenses. Based on the above considerations, we believe that we have sufficient funds to meet our working capital requirements and debt
obligations in the ordinary course of business for the next twelve months.
Although we consolidate the results of our consolidated affiliated entities and their subsidiaries, our access to cash balances or future earnings of
these entities is only through our contractual arrangements with them and their shareholders. See “Item 4. Information on the Company — C.
Organizational Structure — Our Contractual Arrangements.”
Cash Flow
The following table sets forth a summary of our cash flows for the periods indicated.
2013
For the Year Ended December 31,
2014
(in thousands of US$)
2015
Net cash provided by/(used in):
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
66,304
(230,046)
213,343
224
49,825
98,585
(305,272)
257,430
139
50,882
10,785
(443,181)
804,993
(668)
371,929
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Operating Activities
Net cash provided by operating activities was US$10.8 million in 2015. Our net cash provided by operating activities in 2015 reflected a net loss
of US$263.0 million, adjusted for non-cash items of US$109.4 million and changes in operating assets and liabilities of US$164.4 million. Non-cash
reconciling items mainly included investment loss of US$149.0 million, gain on deconsolidation and disposal of businesses of US$119.2 million,
depreciation and amortization expenses of US$33.2 million and share-based compensation expenses of US$28.1 million. Changes in operating assets and
liabilities mainly represented an increase in customer advances and deposits of US$70.4 million, an increase in deferred revenues of US$46.7 million, an
increase in accounts payable of US$41.9 million, an increase in accrued expenses and other current liabilities of US$23.8 million and an increase in salary
and welfare payable of US$22.5 million, partially offset by an increase in accounts receivable of US$24.2 million and an increase in prepayments and other
current assets of US$16.8 million. Deferred revenues and customer advances and deposits increased as the collection of our membership services and
online marketing services grew rapidly as a result of rapid growth in the number of paying membership accounts. The increase in accounts payable was
primarily due to our consolidation of the financial statements of Ganji and Anjuke, and the year-over-year increase in advertising expenses for the 58.com
platforms primarily resulted from increasing competition. The increase in accounts receivable was primarily due to our consolidation of Anjuke’s
financials.
Net cash provided by operating activities was US$98.6 million in 2014. Our net cash provided by operating activities in 2014 reflected a net
income of US$22.6 million, adjusted for non-cash items of US$12.2 million and changes in operating assets and liabilities of US$63.8 million. Non-cash
reconciling items mainly included depreciation and amortization expenses of US$5.6 million and share-based compensation expenses of US$6.2 million.
Changes in operating assets and liabilities mainly represented an increase in deferred revenues of US$40.2 million, increase in customer advances and
deposits of US$14.6 million, increase in salary and welfare payable of US$10.8 million, an increase in accounts payable of US$6.0 million and an increase
in accrued expenses and other current liabilities of US$5.0 million, partially offset by an increase in prepayments and other current assets of US$16.0
million. Deferred revenues and customer advances and deposits increased as the collection of our membership services and online marketing services grew
rapidly.
Net cash provided by operating activities was US$66.3 million in 2013. Our net cash provided by operating activities in 2013 reflected a net
income of US$19.6 million, adjusted for non-cash items of US$7.0 million and changes in operating assets and liabilities of US$39.7 million. Non-cash
reconciling items mainly included depreciation and amortization expenses of US$4.7 million and share-based compensation expenses of US$2.9 million.
Changes in operating assets and liabilities mainly represented an increase in deferred revenues of US$26.1 million, increase in customer advances and
deposits of US$10.3 million, an increase in accrued expenses and other current liabilities of US$3.4 million, partially offset by a decrease in accounts
payable of US$2.6 million and increase in accounts receivable of US$1.1 million. Deferred revenues and customer advances and deposits increased as the
collection of our membership services and online marketing services grew rapidly.
Investing Activities
Net cash used in investing activities primarily consists of capital expenditures, mainly for purchases of servers and other equipment, investment in
short-term financial instruments and term deposits to increase the interest income for our excess cash, purchase of office space, long-term investments and
business acquisitions. We expect that our capital expenditures will increase as we purchase additional equipment and servers and expand our technology
infrastructure to support the growth of our business.
89
Our net cash used in investing activities was US$230.0 million, US$305.3 million and US$443.2 million in 2013, 2014 and 2015, respectively.
Our cash used in investing activities in 2015 was primarily due to cash paid for investment in Ganji of US$534.5 million, and acquisition of Anjuke of
US$124.6 million. In 2014 and 2015, we paid US$16.8 million and US$168.6 million for purchase of office space in Beijing and Tianjin headquarters. In
2013, 2014 and 2015, cash used in investing activities included US$397.3 million, US$652.9 million and US$471.8 million that we used to purchase short-
term financial instruments, which was partially offset by US$323.6 million, US$535.3 million and US$709.4 million of proceeds from maturity of short-
term investments, respectively. We purchased term deposits of US$20 million, offset by US$324.6 million of proceeds from maturity of term deposits in
2015 with maturity over three months. We also used US$4.2 million, US$15.7 million and US$26.8 million to purchase other property and equipment in
2013, 2014 and 2015, respectively.
Financing Activities
Net cash provided by financing activities primarily consists of net proceeds from the issuance of ordinary and preference shares as well as
borrowing from an existing shareholder.
Our net cash provided by financing activities in 2015 was US$805.0 million, primarily attributable to the proceeds from borrowing of short-term
loans of US$401.6 million, and the proceeds from issuance of ordinary shares to Tencent of US$400.0 million. Our net cash provided by financing
activities in 2014 was US$257.4 million, primarily attributable to the net proceeds from our follow-on public offering and the investment by Tencent. Our
net cash provided by financing activities in 2013 was US$213.3 million, primarily attributable to the net proceeds from our initial public offering.
Holding Company Structure
We are a holding company with no material operations of our own. We conduct our operations primarily through our wholly owned subsidiaries
and consolidated affiliated entities in China. As a result, our ability to pay dividends to our shareholders depends upon dividends paid by our PRC
subsidiaries. If our PRC subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay
dividends to us. In addition, our PRC subsidiaries are permitted to pay dividends to us only out of their retained earnings, if any, as determined in
accordance with PRC accounting standards and regulations. Under PRC law, each of our subsidiaries and our consolidated variable interest entities in
China is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50%
of its registered capital. In addition, each of our subsidiaries and consolidated affiliated entities in China may allocate a portion of its after-tax profits based
on PRC accounting standards to staff welfare and bonus funds at its discretion. These reserve funds and staff welfare and bonus funds are not distributable
as cash dividends. Most of our PRC subsidiaries and consolidated affiliated entities have incurred accumulated losses. Our PRC subsidiaries have never
paid dividends and do not plan to pay dividends until they generate accumulated profits and meet the requirements for statutory reserve funds.
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Capital Expenditures
We had capital expenditures of US$4.2 million, US$32.5 million and US$196.9 million in 2013, 2014 and 2015, respectively, representing 2.9%,
12.3% and 27.5% of our total revenues for such years. Our capital expenditures were primarily for the purchase of servers, other equipment and office
buildings. In 2014 and 2015, we prepaid US$16.8 million and US$168.6 million for the purchase of new office spaces. Our capital expenditures have been
primarily funded by net cash provided by financing activities and net cash provided by operating activities.
C. Research and Development
As of December 31, 2015, we had 2,744 product development and engineering professionals who focus on developing products to deliver and
enhance user experience. We have developed a robust technology platform capable of efficiently processing large amounts of data, screening the relevance
and credibility of information, and delivering a superior search indexing function. Our system is built on a distributed, load balanced computing
infrastructure, which is highly scalable and reliable. This allows us to expand processing capacity and add new features and functionalities efficiently
without incurring significant additional costs.
Our success and ability to compete depend, in part, upon our ability to establish and adequately protect our intellectual property rights. In this
regard, we rely primarily on a combination of patent, copyright, software registration, trademark, trade secret and unfair competition laws and contractual
rights, such as confidentiality and license agreements with our employees, partners and others. As of March 31, 2016, we held 16 patents and had applied
for the registration of 111 other patents, which cover a variety of technologies, including those relating to data processing, search, distribution and
publishing. As of March 31, 2016, we had registered 166 computer software copyrights and 49 artwork copyrights in China, and had registered 35 domain
names that are material to our business, including www.58.com, www.58.com.cn, www.anjuke.com and www.anjuke.cn, and 136 trademarks, including
,
and
, in China, excluding those relating to 58 Home. As of March 31,2016, Ganji had registered 31 computer software copyrights
and 1 artwork copyright in China and had registered 4 domain names that are material, including www.ganji.com and www.ganji.com.cn, as well as 249
trademarks.
D. Trend Information
Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the
period since January 1, 2015 that are reasonably likely to have a material adverse effect on our net revenues, income, profitability, liquidity or capital
resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.
E. Off-Balance Sheet Arrangements
We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not
entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our consolidated
financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit,
liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market
risk or credit support to us or engages in leasing, hedging or product development services with us.
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F. Tabular Disclosure of Contractual Obligations
We lease our facilities and offices under non-cancelable operating lease agreements. Certain of these arrangements have renewal or expansion
options and adjustments-for-market provisions, such as free or escalating base monthly rental payments.
We use third-party services for server custody and bandwidth. The contracts are typically 12 months in duration. We typically contract these
services according to the traffic level of our online platforms and the respective server storage and bandwidth required to support the traffic.
The following table sets forth our contractual obligations and commercial commitments as of December 31, 2015:
Operating lease commitment
Server custody fee commitment
Advertising commitment
Amended Convertible Note issued to Tencent
Total
Total
Less than
1 year
Payment Due by Period
1–3 years
(in thousands of US$)
3–5 years
More than
5 years
49,055
6,448
150,165
283,679
489,347
20,047
3,240
150,165
283,679
457,131
28,090
3,208
—
—
31,298
316
—
—
—
316
602
—
—
—
602
In April 2016, we obtained a secured loan of US$275 million from China Merchants Bank Co., Ltd. The loan is interest bearing and has a 13-
month tenor. The proceeds from this loan have been used to repay our amended loan from Tencent. The outstanding amount of the loan from China
Merchants Bank Co., Ltd. is US$275 million as of the date of this annual report. According to the loan agreement, the principal amount will be repaid in
four installments, with three installments totaling US$167.5 million due in 2016 and the fourth installment of US$107.5 million due on April 21, 2017.
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G. Safe Harbor
This annual report on Form 20-F contains forward-looking statements. These statements are made under the “safe harbor” provisions of Section
21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements can be identified by terminology such as “will,” “expects,”
“anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “confident” and similar statements. Among other things, the sections titled “Item 3. Key
Information — D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating and Financial Review and Prospects” in this annual report
on Form 20-F, as well as our strategic and operational plans, contain forward-looking statements. We may also make written or oral forward-looking
statements in our filings with the SEC, in our annual report to shareholders, in press releases and other written materials and in oral statements made by our
officers, directors or employees to third parties. Statements that are not historical facts, including statements about our beliefs and expectations, are
forward-looking statements and are subject to change, and such change may be material and may have a material and adverse effect on our financial
condition and results of operations for one or more prior periods.
Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially
from those contained, either expressly or impliedly, in any of the forward-looking statements in this annual report on Form 20-F. Potential risks and
uncertainties include, but are not limited to, our goals and strategies, our future business development, financial condition and results of operations, ability
to retain and grow our user base and network of local merchants for our online platforms, the growth of, and trends in, the markets for our services in
China, the demand for and market acceptance of our brand and services, competition in our industry in China, our ability to maintain the network
infrastructure necessary to operate our website and mobile applications, relevant government policies and regulations relating to the corporate structure,
business and industry, and our ability to protect its users’ information and adequately address privacy concerns. All information provided in this annual
report on Form 20-F and in the exhibits is as of the date of this annual report on Form 20-F, and we do not undertake any obligation to update any such
information, except as required under applicable law.
ITEM 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Senior Management
The following table sets forth information regarding our executive officers and directors as of the date of this annual report.
Directors and Executive Officers
Jinbo Yao
Xiaoguang Wu
Dong Yang
Frank Lin
Herman Yu
Chi (Eric) Zhang
Hao Zhou
Xiaohua Chen
Hongyu Xing
Jiandong Zhuang
Chuan Zhang
Age
39
40
44
51
45
40
39
34
43
47
40
Position/Title
Chairman and Chief Executive Officer
Director
Independent Director
Independent Director
Independent Director
Independent Director
Chief Financial Officer
Chief Strategic Officer; Chief Executive Officer of 58 Home
Chief Technology Officer
Executive Vice President of Housing Business Group (HBG)
Executive Vice President of Listing Business Group (LBG)
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Mr. Jinbo Yao is our founder and has served as chairman of our board of directors and chief executive officer of our company since our inception.
Mr. Yao is a pioneer in the PRC internet industry. Before founding our company, in 2000, Mr. Yao founded domain.cn, a domain name transaction and
value-added service website in China. After domain.cn was acquired by net.cn in September 2000, Mr. Yao served various managerial roles at net.cn
including vice president of sales until 2005. Mr. Yao currently serves on the board of directors of Xueda Education Group, a company he co-founded and
listed on the NYSE and Noah Holdings Limited, a company listed on the NYSE. Mr. Yao received bachelor’s degrees in computer science and chemistry
from Ocean University of China (formerly known as Ocean University of Qingdao) in 1999.
Mr. Xiaoguang Wu has served as our director since August 2014. Mr. Wu has served as a senior executive vice president at Tencent. Mr. Wu
joined Tencent in 1999 to lead development and product planning for Tencent’s core product QQ instant messaging. He served successively as project
manager for QQ’s research and development team, general manager for IM Products, and general manager for internet business division. Mr. Wu was
promoted to senior vice president of Internet Services Division and chief executive officer of Tencent E-Commerce Holdings Limited. Mr. Wu also serves
on the board of directors of eLong, Inc., a NASDAQ-listed company, Wanda Electronic Commerce Technology Co., Ltd., Shanghai New Feifan E-
commerce Co., Ltd., Okay Buy (China) Holding Inc., Nanjing Wangdian Technology Co., Ltd. and Yixun.com. Mr. Wu received his bachelor’s degree in
weather dynamics from Nanjing University in 1996 and an EMBA degree from China Europe International Business School (CEIBS) in 2008.
Mr. Dong Yang has served as our director since August 2006. Mr. Yang is a general partner of SAIF Partners, a private equity firm. Prior to
becoming a general partner in 2004, he served as a director at SAIF Partners from 2001 to 2004. From 2000 to 2001, he was an investment officer and
director at Softbank China Venture Capital. Mr. Yang currently serves on the board of directors of several companies, including MOBI Development C.,
Ltd., a HKSE-listed company. Mr. Yang received his bachelor’s degree in computer science from Tsinghua University in 1995, and his master’s degree in
accounting from University of Southern California in 1997. Mr. Yang is a Chartered Financial Analyst.
Mr. Frank Lin has served as our director since March 2010. Mr. Lin is a general partner of DCM, an early stage technology venture capital firm.
Prior to joining DCM in 2006, Mr. Lin was chief operating officer of SINA Corporation, a NASDAQ-listed company. He co-founded sina.com’s
predecessor company, SinaNet, in 1995 and later guided the company through its listing on NASDAQ. Prior to founding SinaNet, Mr. Lin was a consultant
at Ernst & Young Management Consulting Group. He had also held various marketing, engineering and managerial positions at Octel Communication Inc.
and NYNEX. Mr. Lin currently serves on the board of directors of numerous companies invested by DCM, including Vipshop Holdings Limited, a NYSE-
listed company, and Tuniu Corporation, a NASDAQ-listed company. Mr. Lin received his bachelor’s degree in engineering from Dartmouth College and a
master’s degree in business administration from Stanford University.
Mr. Herman Yu has served as our director and chair of the audit committee of our board of directors since October 2013. Mr. Yu has been the
chief financial officer of Weibo Corporation (Weibo), a NASDAQ-listed company, since March 2015. Prior to that, Mr. Yu worked at SINA Corporation
(SINA), which is listed on NASDAQ, as chief financial officer from August 2007 to March 2015, as acting chief financial officer from May 2006 to
August 2007 and as vice president and corporate controller from September 2004 to May 2006. Prior to joining SINA, Mr. Yu worked at Adobe Systems
from January 1999 to September 2004, in the positions of chief auditor and corporate marketing controller. Mr. Yu also held various finance and
accounting management positions at Cadence Design Systems, Inc. and VeriFone, Inc. Mr. Yu began his career with Arthur Andersen and is a California
Certified Public Accountant. Mr. Yu is currently a director of Tiange, a live, social video platform company listed on the HKSE. Mr. Yu holds a master’s
degree in Accountancy from the University of Southern California and a bachelor’s degree in economics from the University of California, Santa Cruz.
Mr. Chi (Eric) Zhang has served as our director and a member of the nominating and corporate governance committee of our board of directors
since November 2015. From 2006 to May 2016, Mr. Zhang served as a managing director of Carlyle where he focused on Asia buyout opportunities. Mr.
Zhang also serves as Co-Chairman of Crystal Orange Hotel Group and as Vice Chairman of Plateno Group Holdings (previously 7 Days Group Holdings
Limited), and is a member of the board of directors of SouFun Holdings Limited, a NYSE-listed company, China Reading Group Limited, AnNeng
Logistics Group, Kaiyuan Hotel Group, and New Century Asset Management Co. Ltd. Before joining Carlyle, Mr. Zhang was a vice president in the M&A
group at Credit Suisse in Hong Kong. Prior to that, he was a vice president of the investment banking department at China International Capital Corporate
Limited (CICC) in Beijing where he worked for six years. Mr. Zhang received his master’s degree in economics from the Shanghai University of Finance
and Economics in China.
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Mr. Hao Zhou has served as our chief financial officer since May 2011. Prior to joining our company, Mr. Zhou was chief financial officer in
CITIC Pharmaceutical Co., Ltd. since September 2010. From May 2009 to September 2010, Mr. Zhou held two senior management positions at Wuxi
PharmaTech (Cayman) Inc., a NYSE-listed company, with the latest position as the chief financial officer. From 1998 to 2009, Mr. Zhou held various
senior finance managerial positions at General Electric Company and served as the senior finance manager of Greater China from 2007 to 2009. Mr. Zhou
received his bachelor’s degree from Shanghai International Studies University in 1998.
Mr. Xiaohua Chen has served as our chief strategic officer since August 2014 and the chief executive officer of 58 Home since May 2014. Mr.
Chen served as our senior vice president of product management and website operation from December 2007 to August 2014. From June to December
2007, Mr. Chen served as head of product department at ganji.com responsible for product management and customer experience. Prior to joining
ganji.com, he was the senior project manager and chief editor at Xiamen Haowei Network Technology Co., Ltd. Mr. Chen is a co-founder of dunsh.org, a
nonprofit search engine optimization website in China. While in college, Mr. Chen co-founded 0755.org.cn, one of the earliest online classifieds providers
in China. Mr. Chen received a bachelor’s degree in material formation from Xiangtan University in 2004.
Mr. Hongyu Xing has served as our chief technology officer since March 2016. Mr. Xing has more than 10 years of experience in the internet
industry. Mr. Xing joined us in February 2015 as a senior vice president. Prior to joining us, Mr. Xing held various positions at Tencent including general
manager in charge of search products, network and media products and microblogs from June 2005 to February 2015. Prior to that, Mr. Xing worked at
IBM China’s Research Center from April 1999 to March 2000. Mr. Xing received a master’s degree in electronics engineering from Tsinghua University in
1999.
Mr. Jiandong Zhuang has served as the Executive Vice President of Housing Business Group (HBG) since March 2015. Prior to that, Mr. Zhuang
served as our senior vice president of sales from September 2007. From January 2005 to January 2007, Mr. Zhuang founded and managed Beijing Yingpu
Bailian Technology Trading Co., Ltd., a SMS website and wireless service operator. Prior to founding his own company, Mr. Zhuang managed the China
Unicom CDM operation and sales at Beijing Lianyin Investment Co., Ltd from May 2003 to December 2004. Mr. Zhuang received a bachelor’s degree in
chemistry from Capital Normal University in 1991.
Mr. Chuan Zhang has served as executive vice president of Listing Business Group (LBG) since March 2015. Prior to that, Mr. Zhang served as
senior vice president of product management from August 2014. Mr. Zhang served as our vice president of product management from September 2011 to
August 2014. From July 2006 to September 2011 Mr. Zhang served as head of Baidu Union product department at Baidu Inc. responsible for Baidu Union
product development and operation. Mr. Zhang served as the senior product manager at the mobile department of UFIDA Software Co. Ltd. from May
2005 to July 2006. Prior to joining UFIDA, Mr. Zhang was a product development manager at the Planning Board for the Center of Information at the
Ministry of Education. Mr. Zhang is currently an executive director of Hangzhou Lianqiao Network technology Co., Ltd. and a director of Beijing
Xinchong Partners Information technology Co., Ltd. Mr. Zhang received a bachelor’s degree in mathematics from Beijing Normal University in 1997 and
an MBA degree from Tsinghua University in 2003.
B. Compensation
We paid an aggregate of approximately RMB11.7 million (US$1.8 million) in cash to our executive officers in 2015, and we paid approximately
US$35 thousand in cash compensation to our independent directors.
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Employment Agreements and Indemnification Agreements
We have entered into employment agreements with each of our executive officers. We may terminate an executive officer’s employment for cause
at any time without advance notice or remuneration for certain acts of the officer, such as conviction or guilty plea to a felony or any crime involving moral
turpitude, negligent or dishonest acts to our detriment, or misconduct or a failure to perform agreed duties. We may also terminate an executive officer’s
employment without cause by giving one-month advance written notice. In such case of termination by us, we will provide severance payments to the
executive officer as expressly required by applicable law of the jurisdiction where the executive officer is based. An executive officer may resign at any
time by giving one-month advance written notice.
Each executive officer has agreed to hold, both during and after the termination or expiry of his or her employment agreement, in strict confidence
and not to use, except as required in the performance of his or her duties in connection with the employment or pursuant to applicable law, any of our
confidential information or trade secrets, any confidential information or trade secrets of our clients or prospective clients, or the confidential or proprietary
information of any third party received by us and for which we have confidential obligations. The executive officers have also agreed to disclose in
confidence to us all inventions, designs and trade secrets which they conceive, develop or reduce to practice during the executive officer’s employment
with us and to assign all right, title and interest in them to us, and assist us in obtaining and enforcing patents, copyrights and other legal rights for these
inventions, designs and trade secrets.
In addition, each executive officer has agreed to be bound by non-competition and non-solicitation restrictions during the term of his or her
employment and typically for one year following the last date of employment. Specifically, each executive officer has agreed not to (i) approach our
suppliers, clients, customers or contacts or other persons or entities introduced to the executive officer in his or her capacity as a representative of us for the
purpose of doing business with such persons or entities that will harm our business relationships with these persons or entities; (ii) assume employment
with or provide services to any of our competitors, or engage, whether as principal, partner, licensor or otherwise, any of our competitors, without our
express consent; or (iii) seek directly or indirectly, to solicit the services of any of our employees who is employed by us on or after the date of the
executive officer’s termination, or in the year preceding such termination, without our express consent.
We have also entered into indemnification agreements with each of our directors and executive officers. Under these agreements, we agree to
indemnify our directors and executive officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of
their being a director or officer of our company.
Share Incentive Plans
We have adopted two share incentive plans, namely, the 2010 Plan and the 2013 Plan. The purpose of these two share incentive plans is to attract,
motivate and retain the best available personnel by linking their personal interests to the success of our business. As of February 29, 2016, options and
restricted share units to purchase 4,872,214 ordinary shares were issued and outstanding under the 2010 Plan, and 12,389,414 ordinary shares were issued
and outstanding under the 2013 Plan.
The 2010 Employee Stock Option Plan
The maximum number of shares in respect of which share awards may be granted under the 2010 Plan is 20,173,225. The following paragraphs
summarize the terms of the 2010 Plan.
Plan Administration. The plan administrator is our board of directors, or one or more committees designated by our board of directors. The plan
administrator will determine the provisions and terms and conditions of each grant.
Award Agreement. Options granted under the plan are evidenced by an award agreement that sets forth the terms, conditions and limitations for
each grant.
96
Option Exercise Price. The exercise price subject to an option shall be determined by the plan administrator and set forth in the award agreement.
The exercise price may be amended or adjusted by the administrator for the benefit of any eligible person.
Eligibility. We may grant awards to our directors, officers, employees and consultants of our company or any of our subsidiaries.
Term of the Awards. The term of each option grant shall not exceed 10 years from the date of the grant.
Vesting Schedule. In general, the plan administrator determines the vesting schedule or conditions, which is set forth in the award agreement.
Transfer Restrictions. Awards for options may not be transferred in any manner by the award holders and may be exercised only by such holders,
subject to limited exceptions. However, the award holder shall be permitted to transfer options to a trust controlled by such award holder during his or her
lifetime for estate planning purposes.
Termination of Employment or Service. In the event that an award recipient ceases employment with us or ceases to provide services to us, any
vested options will generally terminate after a period of time following the termination of employment if the award recipient does not exercise the options
during this period.
Termination and Amendment of the Plan. Unless terminated earlier, the 2010 Plan will terminate automatically in 2020. Our board of directors
has the authority to amend or terminate the plan subject to shareholder approval with respect to certain amendments. However, no such action may
adversely affect in any material way any awards previously granted unless agreed by the recipient.
The 2013 Share Incentive Plan
We adopted the 2013 Plan in September 2013. The maximum aggregate number of shares which may be issued pursuant to all awards under the
2013 Plan was 2,800,000 Class A ordinary shares as of the date of its adoption. The 2013 Plan contains an evergreen provision, pursuant to which the
number of shares reserved for future issuances under the 2013 Plan will be increased by a number equal to 1.5% of the total number of outstanding shares
on the last day of the immediately preceding calendar year, on the first day of each calendar year during the term of the 2013 Plan beginning in 2015, or
such lesser number of Class A ordinary shares as determined by our board of directors. As a result, at the beginning of 2015, the maximum aggregate
number of shares which may be issued pursuant to all awards under the 2013 Plan increased by 2,645,628 Class A ordinary shares to 5,445,628 Class A
ordinary shares. In addition, in connection with our acquisition of a strategic stake in Ganji in April 2015, our board of directors further increased the
maximum aggregate number of shares which may be issued pursuant to all awards under the 2013 Plan by an additional 7,000,000 Class B ordinary shares,
reserved for future grants. With the approval of shareholders at the annual general meeting held on December 17, 2015, the maximum aggregate number of
shares which may be issued pursuant to all awards under the 2013 Plan increased further by 1,240,500 Class A ordinary shares to a total of 13,686,128
ordinary shares, consisting of 6,686,128 Class A ordinary shares and 7,000,000 Class B ordinary shares, plus any applicable annual increase pursuant to the
evergreen provision under the 2013 Plan beginning in 2016. Taking into account the annual increase at the beginning of 2016 pursuant to the evergreen
provision, the maximum aggregate number of shares which may be issued pursuant to all awards under the 2013 Plan increased by 4,246,030 Class A
ordinary shares to a total of 17,932,158 ordinary shares, consisting of 10,932,158 Class A ordinary shares and 7,000,000 Class B ordinary shares, as of the
date of this annual report.
The following paragraphs describe the principal terms of the 2013 Plan.
Types of Awards. The 2013 Plan permits the awards of options, restricted shares, restricted share units or any other type of awards that the
committee or the board decides.
Plan Administration. Our board of directors, our compensation committee or a committee designated by our board will administer the 2013 Plan.
The committee or the full board of directors, as applicable, will determine the participants to receive awards, the type and number of awards to be granted
to each participant, and the terms and conditions of each award grant.
97
Award Agreement. Awards granted under the 2013 Plan are evidenced by an award agreement that sets forth terms, conditions and limitations for
each award, which may include the term of the award, the provisions applicable in the event of the grantee’s employment or service terminates, and our
authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind the award.
Eligibility. We may grant awards to our employees, directors and consultants of our company. However, we may grant options that are intended
to qualify as incentive share options only to our employees and employees of our parent companies and subsidiaries.
Acceleration of Awards upon Change in Control. If a change in control of our company occurs, the plan administrator may, in its sole discretion,
provide for (i) all awards outstanding to terminate at a specific time in the future and give each participant the right to exercise the vested portion of such
awards during a specific period of time, or (ii) the purchase of any award for an amount of cash equal to the amount that could have been attained upon the
exercise of such award, or (iii) the replacement of such award with other rights or property selected by the plan administrator in its sole discretion, or (iv)
payment of award in cash based on the value of ordinary shares on the date of the change-in-control transaction plus reasonable interest.
Vesting Schedule. In general, the plan administrator determines the vesting schedule, which is specified in the relevant award agreement.
Exercise of Options. The plan administrator determines the exercise price for each award, which is stated in the award agreement. The vested
portion of option will expire if not exercised prior to the time as the plan administrator determines at the time of its grant. However, the maximum
exercisable term is the tenth anniversary after the date of a grant.
Transfer Restrictions. Awards may not be transferred in any manner by the recipient other than by will or the laws of descent and distribution,
except as otherwise provided by the plan administrator.
Termination of the 2013 Plan. Unless terminated earlier, the 2013 Plan will terminate automatically in 2023. Our board of directors has the
authority to amend or terminate the plan subject to shareholder approval or home country practice.
The 58 Home 2015 Share Incentive Plan
58 Home adopted the 58 Home 2015 Plan in February 2015. The maximum aggregate number of shares which may be issued pursuant to all
awards under the 58 Home 2015 Plan is 20,000,000 ordinary shares of 58 Home. In connection with the Series A round of equity financing that closed in
November 2015, the maximum aggregate number of shares which may be issued under the 58 Home 2015 Plan was increased by 2,000,000 ordinary shares
of 58 Home. The 58 Home 2015 Plan permits the awards of options, restricted shares and restricted share units. Unless terminated earlier, the 58 Home
2015 Plan will terminate automatically in 2025.
The following table summarizes, as of February 29, 2016, outstanding options and restricted share units held by our executive officers and
directors under our 2010 Plan and 2013 Plan.
98
Name
Jinbo Yao
Hao Zhou
Xiaohua Chen
Hongyu Xing
Jiandong Zhuang
Chuan Zhang
Herman Yu
Ordinary shares
Underlying
Options Awarded
and Restricted
Share Units
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Exercise
Price
(US$/Share)
0
2.220
2.500
5.600
0
20.980
2.500
5.600
0
18.675
20.980
0
0
2.300
2.300
2.500
5.600
0
20.980
8.500
Date of Grant
August 24, 2015
May 31, 2011
July 31, 2013
October 14, 2013
August 24, 2015
August 24, 2015
July 31, 2013
October 14, 2013
February 27, 2015
February 27, 2015
August 24, 2015
April 13, 2015
August 24, 2015
November 30, 2011
May 31, 2012
July 31, 2013
October 14, 2013
August 24, 2015
August 24, 2015
October 30, 2013
Date of Expiration
August 23, 2025
May 30, 2021
July 30, 2023
October 13, 2023
August 23, 2025
August 23, 2025
July 30, 2023
October 13, 2023
February 26, 2025
February 26, 2025
August 23, 2025
April 13, 2025
August 23, 2025
November 29, 2021
May 30, 2022
July 30, 2023
October 13, 2023
August 23, 2025
August 23, 2025
October 29, 2023
*
Less than one percent of our total outstanding share capital.
As of February 29, 2016, other employees as a group held options and restricted share units to purchase 12,906,630 ordinary shares of our
company, with exercise prices ranging from nil to US$38.14 per ordinary share.
In February and April 2015, 58 Home granted options to purchase an aggregate of 8,921,000 ordinary shares of 58 Home to its employees and to
the employees of certain other subsidiaries and affiliated companies of our company. In February 2015, 58 Home granted 9,100,000 restricted shares to
selected management members of 58 Home. In April 2015, 58 Home further granted 1,880,000 restricted shares of 58 Home to an executive officer of our
company.
C. Board Practices
Our board of directors currently consists of seven directors. A director is not required to hold any shares in our company to qualify to serve as a
director. A director may vote with respect to any contract, proposed contract, or arrangement in which he or she is materially interested. A director may
exercise all the powers of the company to borrow money, mortgage its business, property and uncalled capital and issue debentures or other securities
whenever money is borrowed or as security for any obligation of the company or of any third party.
Committees of the Board of Directors
We have three committees of the board of directors: the audit committee, the compensation committee and the nominating and corporate
governance committee. We have adopted a charter for each of the three committees. Each committee’s members and functions are described below.
Audit Committee. Our audit committee consists of Herman Yu, Frank Lin and Dong Yang, and is chaired by Herman Yu. Messrs. Yu, Lin and
Yang satisfy the “independence” requirements of Section 303A of the Corporate Governance Rules of the New York Stock Exchange and meet the
independence standards under Rule 10A-3 under the Exchange Act. We have determined that Herman Yu qualifies as an “audit committee financial
expert.” The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company. The
audit committee is responsible for, among other things:
selecting the independent registered public accounting firm and pre-approving all auditing and non-auditing services permitted to be performed by
the independent registered public accounting firm;
reviewing with the independent registered public accounting firm any audit problems or difficulties and management’s response;
99
reviewing and approving all proposed related party transactions;
discussing the annual audited financial statements with management and the independent registered public accounting firm;
reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of material control deficiencies;
meeting separately and periodically with management and the independent registered public accounting firm; and
monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to
ensure proper compliance.
Compensation Committee. Our compensation committee consists of Dong Yang, Herman Yu and Frank Lin, and is chaired by Dong Yang.
Messrs. Yang, Yu and Lin satisfy the “independence” requirements of Section 303A of the Corporate Governance Rules of the New York Stock Exchange.
The compensation committee assists the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our
directors and executive officers. Our chief executive officer may not be present at any committee meeting during which his compensation is deliberated
upon. The compensation committee is responsible for, among other things:
reviewing and approving, or recommending to the board for its approval, the compensation for our chief executive officer and other executive
officers;
reviewing and recommending to the board for determination with respect to the compensation of our non-employee directors;
reviewing periodically and approving any incentive compensation or equity plans, programs or similar arrangements; and
selecting compensation consultant, legal counsel or other adviser only after taking into consideration all factors relevant to that person’s
independence from management.
Nominating and Corporate Governance Committee. Our nominating and corporate governance committee consists of Frank Lin, Herman Yu and
Eric Zhang, and is chaired by Frank Lin. Messrs. Lin, Yu and Zhang satisfy the “independence” requirements of Section 303A of the Corporate
Governance Rules of the New York Stock Exchange. The nominating and corporate governance committee assists the board in selecting individuals
qualified to become our directors and in determining the composition of the board and its committees. The nominating and corporate governance committee
is responsible for, among other things:
recommending nominees to the board for election or re-election to the board, or for appointment to fill any vacancy on the board;
reviewing annually with the board the current composition of the board with regards to characteristics such as independence, skills, experience,
expertise and diversity;
selecting and recommending to the board the names of directors to serve as members of the audit committee and the compensation committee, as
well as of the nominating and corporate governance committee itself;
developing and reviewing the corporate governance principles adopted by the board and advising the board with respect to significant
developments in the law and practice of corporate governance and our compliance with such laws and practices; and
evaluating the performance and effectiveness of the board as a whole.
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Duties of Directors
Under Cayman Islands law, our directors have a duty of loyalty to act honestly in good faith with a view to our best interests. Our directors also
have a duty to exercise the skill they actually possess and such care and diligence that a reasonably prudent person would exercise in comparable
circumstances. In fulfilling their duty of care to us, our directors must ensure compliance with our memorandum and articles of association. A shareholder
may have the right to seek damages in our name if a duty owed by our directors is breached.
Terms of Directors and Officers
Our officers are elected by and serve at the discretion of the board. Our directors are not subject to a term of office and hold office until such time
as they resign or are removed from office by an ordinary resolution of our shareholders. A director will vacate office automatically if, among other things,
the director (1) becomes bankrupt or suspends payments or compounds with his creditors; or (2) dies or becomes of unsound mind.
D. Employees
The following table sets forth the numbers of our employees, categorized by function, as of December 31, 2013, 2014 and 2015, which exclude the
employees of 58 Home:
Function
Sales, customer service and marketing
among which, field sales
Research and development
Website operations
Management and administrative positions
Total
2013
As of December 31,
2014
2015
4,542
3,967
697
83
331
5,653
7,485
6,337
1,354
93
467
9,399
16,323
11,934
2,744
533
1,105
20,705
Our success depends on our ability to attract, retain and motivate qualified personnel. We believe we offer our employees competitive
compensation packages and an environment that encourages initiative and meritocracy, and as a result, we have generally been able to attract and retain
qualified personnel and maintain a stable core management team. We design and implement in-house training programs tailored to each job function and a
set of responsibilities to enhance performance. Specific training is provided to new employees at orientation to familiarize them with our working
environment and operational procedures.
As required by PRC regulations, we participate in various statutory employee benefit plans, including pension, unemployment insurance,
childbirth insurance, work-related injury insurance, medical insurance and housing insurance. We are required under PRC law to make contributions to
employee benefit plans at specified percentages of the salaries, bonuses and certain allowances of our employees, up to a maximum amount specified by
the local government from time to time.
E. Share Ownership
Please refer to “Item 7. Major Shareholders and Related Party Transactions — A. Major Shareholders.”
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders
The following table sets forth information concerning the beneficial ownership of our ordinary shares as of the date of this annual report by:
each of our directors and executive officers; and
each person known to us to beneficially own more than 5% of our ordinary shares.
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The calculations in the table below assume that there are 283,157,733 ordinary shares outstanding as of February 29, 2016, comprising
219,902,820 Class A ordinary shares and 63,254,913 Class B ordinary shares and excluding 1,396,590 Class A ordinary shares issued to our depositary and
reserved for future exercise of vested options and RSUs under our share incentive plans by our management and other employees, which are not deemed as
outstanding for the purpose of calculating the beneficial ownership in the following table.
Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially
owned by a person and the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days, including
through the exercise of any option, warrant, or other right or the conversion of any other security. These shares, however, are not included in the
computation of the percentage ownership of any other person.
Directors and Executive Officers:**
Jinbo Yao
Xiaoguang Wu(3)
Dong Yang(4)
Frank Lin(5)
Herman Yu(6)
Eric Zhang(7)
Hao Zhou
Xiaohua Chen(8)
Hongyu Xing
Jiandong Zhuang(9)
Chuan Zhang
All directors and executive officers as a group
Principal Shareholders:
Tencent Holdings Limited
Nihao China Corporation
FMR LLC
Mark Haoyong Yang
Notes:
Number
%(1)
31,991,600(2)
—
*
—
*
—
*
*
*
*
*
33,763,718
64,849,494(10)
29,418,640(11)
18,414,210(12)
22,575,290(13)
11.30
—
*
—
*
—
*
*
*
*
*
11.85
22.90
10.39
6.50
7.95
*
Less than one percent of our total outstanding capital.
** Except for Mr. Xiaoguang Wu, Mr. Dong Yang, Mr. Frank Lin, Mr. Herman Yu and Mr. Eric Zhang, the business address of our directors and
executive officers is c/o Block E, the North American International Business Center, Yi 108 Beiyuan Road, Chaoyang District, Beijing 100101, the
People’s Republic of China.
(1) The number of ordinary shares outstanding in calculating the percentages for each listed person or group includes the ordinary shares underlying the
options held by such person or group exercisable within 60 days of February 29, 2015. Percentage of beneficial ownership of each listed person or
group is based on (1) 283,157,733 ordinary shares outstanding as of February 29, 2016, and (2) the number of ordinary shares underlying options
exercisable by such person or group within 60 days of February 29, 2016.
(2) Consists of 28,587,204 Class B ordinary shares and 415,718 ADSs (representing 831,436 Class A ordinary shares) held by Nihao China Corporation, a
British Virgin Islands company beneficially owned by Mr. Yao through a trust, and 2,572,960 Class B ordinary shares beneficially owned by certain of
our executive officers and employees who acquired the ownership of these shares pursuant to our employee stock option plan and who authorize Mr.
Yao to vote these shares on their behalf under power of attorney. Such individuals include all executive officers and employees who became our
ordinary shareholders through our employee stock option plan.
(3) The business address of Mr. Wu is 39/F, Tencent Building, Kejizhong Avenue, High Tech Park, Nanshan District, Shenzhen, P. R. China.
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(4) The business address of Mr. Yang is 18/F Tower C, Central International Trade Center, 6A Jianguomenwai Avenue, Chaoyang District, Beijing
100022, P. R. China.
(5) The business address of Mr. Lin is Unit 1, Level 10, Tower W2, Oriental Plaza, Dong Cheng District, Beijing 100738, P. R. China.
(6) The business address of Mr. Yu is 20/F, Beijing Ideal International Plaza, No. 58 Northwest 4th Ring Road, Haidian District, Beijing 100080, P. R.
China.
(7) The business address of Mr. Zhang is Suite 2801, Two Pacific Place, Hong Kong.
(8) Mr. Chen has authorized Mr. Jinbo Yao under power of attorney to vote the ordinary shares that Mr. Chen currently owns through Trumpway Limited,
a British Virgin Islands company wholly owned by Mr. Chen.
(9) Mr. Zhuang has authorized Mr. Jinbo Yao under power of attorney to vote the ordinary shares that Mr. Zhuang currently owns through Magic Mirror
Holdings Limited, a British Virgin Islands company wholly owned by Mr. Zhuang.
(10) Consists of 41,419,336 Class A ordinary shares and 14,722,000 Class B ordinary shares directly held by Ohio River Investment Limited and 4,354,079
ADSs (representing 8,708,158 Class A ordinary shares) directly held by THL E Limited as reported in a Schedule 13D/A filed on December 15, 2015.
Tencent Holdings Limited is reported as the beneficial owner of the aforementioned shares. The business address of Ohio River Investment Limited
and THL E Limited is c/o Tencent Holdings Limited, 29/F., Three Pacific Place, No. 1 Queen’s Road East, Wanchai, Hong Kong.
(11) Consists of 28,587,204 Class B ordinary shares and 415,718 ADSs (representing 831,436 Class A ordinary shares) held by Nihao China Corporation, a
British Virgin Islands company beneficially owned by Mr. Yao through a trust. Nihao China Corporation has pledged 9,080,004 Class B ordinary
shares as security for a loan extended to Mr. Yao by UBS AG, London Branch in December 2015, and pledged 12,400,000 Class B ordinary shares as
security for a loan extended to us by China Merchants Bank Co., Ltd. in April 2016.
(12) Represents 18,414,210 Class A ordinary shares in the form of ADSs held by FMR LLC, as reported on Schedule 13G filed by FMR LLC on
February 12, 2016. The percentage of beneficial ownership was calculated based on the total number of our ordinary shares outstanding as of
February 29, 2016. The address of FMR LLC is 245 Summer Street, Boston, Massachusetts 02210, U.S.A.
(13) Represents (i) 12,884,037 Class A ordinary shares and 5,641,119 Class B ordinary shares held by Trinityville Profit Limited, a British Virgin Islands
company affiliated with Mr. Mark Haoyong Yang, (ii) 1,573,534 Class A ordinary shares and 1,573,534 Class B ordinary shares held by Sunshine
Spring Limited, a Guernsey company controlled by Mr. Mark Haoyong Yang, and (iii) 903,066 RSUs that will become vested within 60 days after
February 29, 2016. Mr. Mark Haoyong Yang is our former co-chairman of board of directors and former co-chief executive officer, and he currently
serves as chairman and chief executive officer of Guazi.
To our knowledge, as of February 29, 2016, a total of 118,941,379 Class A ordinary shares were held by three record holders in the United States,
representing approximately 42.0% of our total outstanding shares on an as-converted basis. One of these holders is the depositary of our ADS program,
which held 118,059,026 Class A ordinary shares on record (including the 1,396,590 Class A ordinary shares issued to our depositary and reserved for
future exercise of vested options and RSUs under our share incentive plans by our management and other employees), representing approximately 41.7% of
our total outstanding shares on record as of February 29, 2016. None of our outstanding Class B ordinary shares were held by record holders in the United
States as of February 29, 2016. The number of beneficial owners of our ADSs in the United States is likely to be much larger than the number of record
holders of our ordinary shares in the United States.
Our ordinary shares are divided into Class A ordinary shares and Class B ordinary shares. Holders of Class A ordinary shares are entitled to one
vote per share, while holders of Class B ordinary shares are entitled to ten votes per share. Holders of Class A and Class B ordinary shares vote together as
one class on all matters subject to a shareholders’ vote. Each Class B ordinary share is convertible into one Class A ordinary share at any time by the holder
thereof, while Class A ordinary shares are not convertible into Class B ordinary shares under any circumstance. All options, regardless of grant dates, will
entitle holders to the equivalent number of Class A ordinary shares once the vesting and exercising conditions on such share-based compensation awards
are met. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.
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B. Related Party Transactions
Contractual Arrangements with Our Consolidated Variable Interest Entities
PRC law currently limits direct foreign equity ownership of business entities providing value-added telecommunications services. As a result of
these foreign ownership restrictions requirements, we conduct substantially all of our businesses in China through a series of contractual arrangements with
our consolidated affiliated entities and their shareholders. For a description of these contractual arrangements, see “Item 4. Information on the Company —
C. Organizational Structure — Our Contractual Arrangements.”
Registration Rights
Pre-IPO Shareholders Agreement
Pursuant to our shareholders agreement dated August 4, 2011 that we entered into with all our then shareholders in connection with our issuance
of preference shares prior to our initial public offering, we have granted certain registration rights to our shareholders. Set forth below is a description of the
registration rights granted under the agreement.
Demand Registration Rights. At any time beginning six months after the completion of our initial public offering on November 5, 2013, upon a
written request from the holders of at least 20% of the registrable securities held by holders of our ordinary shares converted from preference shares, we
must file a registration statement covering the offer and sale of the registrable securities held by the requesting shareholders and other holders of registrable
securities who choose to participate in the offering. Registrable securities include, among others, our ordinary shares not previously sold to the public and
ordinary shares issued upon conversion of the preference shares.
However, we are not obligated to proceed with a demand registration if we have, within the six-month period preceding the date of such request,
already effected a registration under the Securities Act pursuant to the exercise of the holders’ demand registration rights. We have the right to defer filing
of a registration statement for up to 90 days if our board of directors determines in good faith that the filing of a registration statement would be materially
detrimental to us, but we cannot exercise the deferral right more than once in any 12-month period.
Form F-3 Registration Rights. When we are eligible for registration on Form F-3, upon a written request from our the holders of at least 20% of
the registrable securities held by holders of our ordinary shares converted from preference shares, we must file a registration statement on Form F-3
covering the offer and sale of the registrable securities.
We are not obligated to effect a Form F-3 registration, among other things, if we have already effected two registrations on Form F-3 in any 12-
month period. We have the right to defer filing of a registration statement for up to 90 days if our board of directors determines in good faith that the filing
of a registration statement would be materially detrimental to us, but we cannot exercise the deferral right more than once in any 12-month period.
Piggyback Registration Rights. If we propose to file a registration statement for a public offering of our ordinary shares on a form that would be
suitable only for registrable securities, we must offer holders of registrable securities an opportunity to include in that registration all or any part of their
registrable securities. The underwriters of any underwritten offering have the right to limit the number of shares with registration rights to be included in
the registration statement, subject to certain limitations.
Expenses of Registration. We will pay all expenses relating to any demand, Form F-3, or piggyback registration.
104
Termination of Obligations. We shall have no obligation to effect any demand, Form F-3, or piggyback registration on the earlier of (a) the date
that is five years after the completion of our initial public offering on November 5, 2013, or (b) as to any holder of registrable securities, the time when all
registrable securities held by such holder may be sold in any three-month period without registration pursuant to Rule 144 under the Securities Act.
Investor Rights Agreement with Tencent
Pursuant to an investor rights agreement dated June 30, 2014 that we entered into with Tencent, we have granted certain registration rights to
Tencent. Set forth below is a description of the registration rights granted under the agreement.
Demand Registration Rights. Upon a written request from Tencent, we must use all reasonable efforts to effect the registration under the
Securities Act of all registrable securities Tencent requests to be registered . Registrable securities include, subject to limitation, ordinary shares of our
company Tencent acquired in June 2014 and any other ordinary shares of our company owned or acquired by Tencent thereafter.
However, we are not obligated to proceed with a demand registration if we have, within the six-month period preceding the date of such request,
already effected a registration under the Securities Act pursuant to the exercise of the holders’ demand registration rights. We have the right to defer filing
of a registration statement for up to 90 days if our board of directors determines in good faith that the filing of a registration statement would be materially
detrimental to us, but we cannot exercise the deferral right more than once in any 12-month period.
Form F-3 Registration Rights. When we are eligible for registration on Form F-3, upon a written request from an investor party to the agreement,
we must effect such registration to permit or facilitate the sale and distribution of all or such portion of the investor’s registrable securities as are specified
in such request.
We are not obligated to effect a Form F-3 registration, among other things, if we have already effected two registrations on Form F-3 in any 12-
month period. We have the right to defer filing of a registration statement for up to 90 days if our board of directors determines in good faith that the filing
of a registration statement would be materially detrimental to us, but we cannot exercise the deferral right more than once in any 12-month period.
Piggyback Registration Rights. If we propose to file a registration statement for a public offering of our securities, we must offer Tencent an
opportunity to include in that registration all or any part of its registrable securities. The underwriters of any underwritten offering have the right to limit the
number of shares with registration rights to be included in the registration statement, subject to certain limitations.
Expenses of Registration. We will pay all expenses relating to any demand, Form F-3, or piggyback registration.
Termination of Obligations. We shall have no obligation to effect any demand, Form F-3, or piggyback registration on the earlier of (a) the date
that is five years after the date of the agreement, or (b) as to any holder of registrable securities, the time when all registrable securities held by such holder
may be sold in any ninety-day period without registration pursuant to Rule 144 under the Securities Act.
Registration Rights Agreement with Former Ganji Shareholders
Pursuant to a registration rights agreement dated April 20, 2015 that we entered into with certain new shareholders in connection with our issuance
of new Class A ordinary shares as share portion of the purchase price for our acquisition of Ganji shares from the selling shareholders, we have granted
certain registration rights to such new shareholders. Set forth below is a description of the registration rights granted under the agreement.
Demand Registration Rights. Upon a written request from the holders of at least a majority of the registrable securities held by holders of the
registrable securities, we must use all reasonable efforts to effect the registration under the Securities Act of all registrable securities held by the requesting
shareholders and other holders of registrable securities who choose to participate in the offering. Registrable securities include, subject to limitation, new
Class A ordinary shares as share portion of the purchase price for our acquisition of Ganji.com shares from the selling shareholders.
105
However, we are not obligated to proceed with a demand registration if we have, within the six-month period preceding the date of such request,
already effected a registration under the Securities Act pursuant to the exercise of the holders’ demand registration rights. We have the right to defer filing
of a registration statement for up to 90 days if our board of directors determines in good faith that the filing of a registration statement would be materially
detrimental to us, but we cannot exercise the deferral right more than once in any 12-month period.
Form F-3 Registration Rights. When we are eligible for registration on Form F-3, upon a written request from an investor party to the agreement,
we must effect such registration to permit or facilitate the sale and distribution of all or such portion of the investor’s registrable securities as are specified
in such request, together with all or such portion of the registrable securities of any other investor or investors joining such request.
We are not obligated to effect a Form F-3 registration, among other things, if we have already effected two registrations on Form F-3 in any 12-
month period. We have the right to defer filing of a registration statement for up to 90 days if our board of directors determines in good faith that the filing
of a registration statement would be materially detrimental to us, but we cannot exercise the deferral right more than once in any 12-month period.
Piggyback Registration Rights. If we propose to file a registration statement for a public offering of our ordinary shares on a form that would be
suitable only for registrable securities, we must offer holders of registrable securities an opportunity to include in that registration all or any part of their
registrable securities. The underwriters of any underwritten offering have the right to limit the number of shares with registration rights to be included in
the registration statement, subject to certain limitations.
Expenses of Registration. We will pay all expenses relating to any demand, Form F-3, or piggyback registration.
Termination of Obligations. We shall have no obligation to effect any demand, Form F-3, or piggyback registration on the earlier of (a) the date
that is five years after the date of the agreement, or (b) as to any holder of registrable securities, the time when all registrable securities held by such holder
may be sold in any ninety-day period without registration pursuant to Rule 144 under the Securities Act.
Investment by Tencent and Share Repurchase from Certain Pre-IPO Shareholders
In June 2014, we entered into an investment agreement with Tencent, pursuant to which Tencent invested US$736.1 million in exchange for
approximately 19.9% equity interest in 58.com Inc. on a fully-diluted basis. Tencent purchased 36,805,000 Class A and B ordinary shares of our company
at a purchase price of US$20.00 per ordinary share, corresponding to US$40.00 per ADS. We applied US$552.1 million of the proceeds from this
transaction to repurchase 27,603,750 Class B ordinary shares of our company from certain pre-IPO shareholders. Participants in the share repurchase
include DCM Affiliates Fund V, L.P., DCM V, L.P., SB Asia Investment Fund II L.P., Dong Yang, and WP X Asia Online Investment Holdings Limited,
from which we purchased 186,720, 7,652,229, 8,537,341, 862,291 and 10,365,169 Class B ordinary shares, respectively. Mr. Dong Yang is a director and a
member of the audit committee of our board of directors.
Concurrent with our acquisition of a strategic stake in Ganji in April 2015 and incremental to its then existing share ownership of our company,
Tencent purchased an additional approximately US$400.0 million of newly issued ordinary shares from us at a purchase price of US$26.00 per ordinary
share, equivalent to US$52.00 per ADS. In July 2015, we entered into a loan agreement with Tencent whereby we obtained a loan from Tencent in an
aggregate principal amount of US$400.0 million. The loan bore interest at a base rate of 5% per annum and had a maturity date of December 20, 2015. If
we had failed to repay the loan together with all interest accrued but unpaid thereon by the maturity date, Tencent would have had the right to deliver a
conversion notice to us requiring us to convert all or a portion of the amount due and payable under the loan agreement into a corresponding number of our
Class A ordinary shares. In December 2015, we and Tencent entered into an amendment to the loan agreement, pursuant to which we issued and allotted
4,267,344 Class A ordinary shares to Tencent to early repay US$125 million principal amount and accrued but unpaid interest expense amounting to
US$7.3 million. The principal amount of the amended loan agreement was US$275 million, the interest rate of the amended loan was 6% per annum and
the maturity date of the amended loan was June 20, 2016. The amended loan was fully paid off in April 2016.
106
We have not entered into any significant transaction with Tencent outside of the ordinary course of business.
Spin-off of Guazi
On December 31, 2015, following an independent third-party valuation assessment, we divested a controlling ownership stake in Guazi to Mr.
Mark Haoyong Yang, co-chairman of our board of directors at the time, in exchange for US$50 million in cash from Mr. Yang. We concurrently used the
proceeds to invest in a US$50 million non-interest bearing convertible note issued by Guazi. The note was convertible into preference shares of Guazi to be
issued in Guazi’s subsequent round of financing at the same price to be paid by other investors. Immediately after the spinoff was closed on December 31,
2015, we had approximately a 45.6% stake in Guazi. Mr. Yang resigned from his position as our co-chief executive officer and serves as chairman and
chief executive officer of Guazi. In March 2016, Guazi closed a new US$204.5 million round of equity financing with participation from a number of
globally recognized institutional investors and we converted the note into preference shares of Guazi.
Employment Agreements and Indemnification Agreements
See “Item 6. Directors, Senior Management and Employees — B. Compensation — Employment Agreements and Indemnification Agreements.”
Stock Incentive Plans
See “Item 6. Directors, Senior Management and Employees — B. Compensation — Share Incentive Plans.”
C.
Interests of Experts and Counsel
Not applicable.
ITEM 8.
FINANCIAL INFORMATION
A. Consolidated Statements and Other Financial Information
Please refer to Item 18.
Legal Proceedings
From time to time, we have become and may in the future become a party to various legal or administrative proceedings arising in the ordinary
course of our business. Internet companies are frequently involved in litigation based on allegations of infringement or other violations of intellectual
property rights and other allegations in connection with the content available on their websites or services they provide. We are currently not involved in
any legal or administrative proceedings that would materially and adversely affect our business.
On October 19, 2013, Mr. Xuanfu Liu filed a complaint with a local court in Hubei Province in China against (1) Mr. Handong Cheng, legal
representative of Business Opportunity Online (Beijing) Network Technology Co., Ltd., or Shangji, a PRC company, (2) Shangji, and (3) Mr. Jinbo Yao,
our chairman and chief executive officer. Mr. Liu purported to be a 36% minority shareholder of Shangji. The complaint claimed that Shangji had enjoyed
a right to 17.5% of the equity interest in Beijing 58 held by Mr. Yao as Shangji’s nominee prior to December 2009, and alleged that Mr. Cheng had entered
into an agreement on behalf of Shangji with Mr. Yao in December 2009 terminating Shangji’s right to the 17.5% equity interest in Beijing 58 without prior
consultation with or notice to Mr. Liu. Mr. Liu sought the court’s ruling that the termination agreement was invalid and that Mr. Liu be entitled to a 6.3%
equity interest in Beijing 58, equivalent to what he believed was his indirect pro rata share of Beijing 58. After contestation and appeal by Mr. Yao to the
appellate court in Hubei for lack of jurisdiction of the local court, the appellate court ruled in favor of Mr. Yao and ruled that the case should be transferred
to a local court in Beijing. After the case was transferred to the local court in Beijing, Mr. Liu filed a motion to withdraw the lawsuit, and the court granted
the motion to dismiss in December 2014. Since Mr. Liu withdrew his complaint, he has not initiated any new proceeding relating to the same matter.
However, there is uncertainty as to whether Mr. Liu will file a new complaint.
107
We and Mr. Yao believe that Mr. Liu’s claim that the termination agreement is invalid and his claim to be registered as a shareholder of Beijing 58
are baseless and without merit and intend to continue to contest new claims, if any, vigorously. Our PRC counsel, Han Kun Law Offices, advises us that
based on the evidence presented in the aforementioned complaint, and applicable PRC law, including the PRC judicial interpretation, there are meritorious
defenses to Mr. Liu’s claims.
On October 21, 2015, Shangji filed a complaint with a local district court in Beijing against Beijing 58, with Mr. Jinbo Yao and other shareholders
of Beijing 58 being joined as third parties. Shangji sought the court’s ruling that Shangji is a shareholder of Beijing 58 owning 17.5% equity interest in
Beijing 58, and Beijing 58 has the 17.5% equity interest registered under the name of Mr. Jinbo Yao transferred to and registered under Shangji. Beijing 58
and the third parties, including Mr. Yao, contested these claims before the district court. On January 20, 2016, the district court dismissed all of Shangji’s
claims. Shangji has appealed to the appellate court in Beijing. We believe that Shangji’s claim that it is entitled to 17.5% equity interest of Beijing 58 is
baseless and without merit, and we intend to continue to contest any claim that Shangji files with the appellate court. However, there is no assurance that
the appellate court will rule in our favor.
Dividend Policy
We have not previously declared or paid cash dividends and we have no plan to declare or pay any dividends in the near future on our shares or
ADSs. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.
We are a holding company incorporated in the Cayman Islands. We rely principally on dividends from our PRC subsidiaries for our cash
requirements, including any payment of dividends to our shareholders. PRC regulations may restrict the ability of our PRC subsidiaries to pay dividends to
us. See “Item 4. Information on the Company — B. Business Overview — Regulation — Regulations on Foreign Currency Exchange.”
Our board of directors has discretion as to whether to distribute dividends, subject to applicable laws. Even if our board of directors decides to pay
dividends, the form, frequency and amount will depend on our future operations and earnings, capital requirements and surplus, general financial condition,
contractual restrictions and other factors that our board of directors may deem relevant. If we pay any dividends, we will pay our ADS holders to the same
extent as holders of our ordinary shares, subject to the terms of the deposit agreement, including the fees and expenses payable thereunder. Cash dividends
on our ordinary shares, if any, will be paid in U.S. dollars.
B. Significant Changes
We have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual report.
ITEM 9.
THE OFFER AND LISTING
A. Offering and Listing Details
See “— C. Markets.”
108
B. Plan of Distribution
Not applicable.
C. Markets
Our ADSs, each representing two of our Class A ordinary shares, have been listed on the NYSE since October 31, 2013. Our ADSs trade under
the symbol “WUBA.” The following table provides the high and low trading prices for our ADSs on the NYSE since the date of our initial public offering.
The last reported trading price for our ADSs on May 12, 2016 was US$50.43 per ADS.
Market Price
(US$)
High
Low
39.83
58.89
83.71
58.89
56.50
57.50
49.75
54.39
83.71
69.00
70.27
65.33
61.59
61.54
70.27
65.33
56.86
60.10
61.59
54.64
21.00
31.60
37.15
31.60
35.75
34.70
34.64
37.15
49.80
37.72
43.82
42.57
49.92
50.72
59.81
50.69
42.57
52.18
53.96
49.92
Annual High and Low
Fiscal Year 2013 (from October 31, 2013)
Fiscal Year 2014
Fiscal Year 2015
Quarterly Highs and Lows
First Fiscal Quarter of 2014
Second Fiscal Quarter of 2014
Third Fiscal Quarter of 2014
Fourth Fiscal Quarter of 2014
First Fiscal Quarter of 2015
Second Fiscal Quarter of 2015
Third Fiscal Quarter of 2015
Fourth Fiscal Quarter of 2015
First Fiscal Quarter of 2016
Second Fiscal Quarter of 2016 (through May 12, 2016)
Monthly Highs and Lows
November 2015
December 2015
January 2016
February 2016
March 2016
April 2016
May 2016 (through May 12, 2016)
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
109
ITEM 10.
ADDITIONAL INFORMATION
A. Share Capital
Not applicable.
B. Memorandum and Articles of Association
We are a Cayman Islands company and our affairs are governed by our amended and restated memorandum and articles of association, as
amended from time to time, and the Companies Law of the Cayman Islands, which is referred to below as the Companies Law.
The following are summaries of the material provisions of our amended and restated memorandum and articles of association and the Companies
Law insofar as they relate to the material terms of our ordinary shares. This summary is not complete, and you should read our third amended and restated
memorandum and articles of association, which has been filed as Exhibit 3.2 to our Form F-1 (File No. 333-191424) filed with the SEC on September 27,
2013.
Registered Office and Objects
Our registered office in the Cayman Islands is located at Codan Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, P.O. Box
2681, Grand Cayman KY1-1111, Cayman Islands. As set forth in clause 3 of our amended and restated memorandum of association, the objects for which
our company is established are unrestricted.
Board of Directors
See “Item 6. Directors, Senior Management and Employees — C. Board Practices — Committees of the Board of Directors” and “Item 6.
Directors, Senior Management and Employees — C. Board Practices — Terms of Directors and Officers.”
Ordinary Shares
General. Holders of Class A ordinary shares and Class B ordinary shares have the same rights except for voting and conversion rights. All of our
outstanding ordinary shares are fully paid and non-assessable. Certificates representing the ordinary shares are issued in registered form. Our shareholders
who are non-residents of the Cayman Islands may freely hold and transfer their ordinary shares.
Dividends. The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors. Our articles of
association provide that dividends may be declared and paid out of our profits, realized or unrealized, or from any reserve set aside from profits which our
board of directors determine is no longer needed. Dividends may also be declared and paid out of share premium account or any other fund or account
which can be authorized for this purpose in accordance with the Companies Law. Holders of Class A ordinary shares and Class B ordinary shares will be
entitled to the same amount of dividends, if declared.
Voting Rights. In respect of all matters subject to a shareholders’ vote, each Class A ordinary share is entitled to one vote, and each Class B
ordinary share is entitled to ten votes, voting together as one class. Voting at any meeting of shareholders is by show of hands unless a poll is demanded. A
poll may be demanded by the chairman of such meeting or any one or more shareholders who together hold not less than 10% of the nominal value of the
total issued voting shares of our company present in person or by proxy. Each holder of our ordinary shares is entitled to have one vote for each ordinary
share registered in his or her name on our register of members.
A quorum required for a meeting of shareholders consists of one or more shareholders who hold at least one-third of all voting power of our share
capital in issue at the meeting present in person or by proxy or, if a corporation or other non-natural person, by its duly authorized representative.
Shareholders’ meetings may be held annually. Each general meeting, other than an annual general meeting, shall be an extraordinary general meeting.
Extraordinary general meetings may be called by a majority of our board of directors or our chairman or upon a requisition of shareholders holding at the
date of deposit of the requisition not less than one-third of the aggregate voting power of our company. Advance notice of at least ten clear days is required
for the convening of our annual general meeting and other general meetings.
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An ordinary resolution to be passed at a meeting by the shareholders requires the affirmative vote of a simple majority of the votes attaching to the
ordinary shares cast at a meeting, while a special resolution requires the affirmative vote of no less than two-thirds of the votes cast attaching to the
outstanding ordinary shares at a meeting. A special resolution will be required for important matters such as a change of name or making changes to our
memorandum and articles of association.
Conversion. Each Class B ordinary share is convertible into one Class A ordinary share at any time by the holder thereof. Class A ordinary shares
are not convertible into Class B ordinary shares under any circumstances. Upon any transfer of Class B ordinary shares by a holder to any person or entity
which is not an affiliate of such holder, such Class B ordinary shares shall be automatically and immediately converted into the equivalent number of Class
A ordinary shares. In addition, if at any time, Mr. Jinbo Yao and his affiliates collectively own less than 5% of the total number of the issued and
outstanding Class B ordinary shares, each issued and outstanding Class B ordinary share will be automatically and immediately converted into one Class A
ordinary share, and we will not issue any Class B ordinary shares thereafter.
Transfer of Ordinary Shares. Subject to the restrictions set out below and the provisions above in respect of Class B ordinary shares, any of our
shareholders may transfer all or any of his or her ordinary shares by an instrument of transfer in the usual or common form or any other form approved by
our board of directors.
Our board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share which is not fully paid up or on which
we have a lien. Our board of directors may also decline to register any transfer of any ordinary share unless:
the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates and such other evidence as
our board of directors may reasonably require to show the right of the transferor to make the transfer;
the instrument of transfer is in respect of only one class of ordinary shares;
the instrument of transfer is properly stamped, if required;
in the case of a transfer to joint holders, the number of joint holders to whom the ordinary share is to be transferred does not exceed four; and
a fee of such maximum sum as the NYSE may determine to be payable or such lesser sum as our directors may from time to time require is paid to
us in respect thereof.
If our directors refuse to register a transfer they shall, within three months after the date on which the instrument of transfer was lodged, send to
each of the transferor and the transferee notice of such refusal.
The registration of transfers may, after compliance with any notice required of the NYSE, be suspended and the register closed at such times and
for such periods as our board of directors may from time to time determine, provided, however, that the registration of transfers shall not be suspended nor
the register closed for more than 30 days in any year as our board may determine.
Liquidation. On a return of capital on winding up or otherwise (other than on conversion, redemption or purchase of ordinary shares), assets
available for distribution among the holders of ordinary shares shall be distributed among the holders of the ordinary shares on a pro rata basis. If our assets
available for distribution are insufficient to repay all of the paid-up capital, the assets will be distributed so that the losses are borne by our shareholders
proportionately. Any distribution of assets or capital to a holder of a Class A ordinary share and a holder of a Class B ordinary share will be the same in any
liquidation event.
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Calls on Ordinary Shares and Forfeiture of Ordinary Shares. Our board of directors may from time to time make calls upon shareholders for
any amounts unpaid on their ordinary shares in a notice served to such shareholders at least 14 clear days prior to the specified time of payment. The
ordinary shares that have been called upon and remain unpaid are subject to forfeiture.
Redemption of Ordinary Shares. The Companies Law and our articles of association permit us to purchase our own shares. In accordance with
our articles of association and provided the necessary shareholders or board approval have been obtained, we may issue shares on terms that are subject to
redemption, at our option or at the option of the holders of these shares, on such terms and in such manner, including out of capital, as may be determined
by our board of directors.
Variations of Rights of Shares. All or any of the special rights attached to any class of shares may, subject to the provisions of the Companies
Law, be varied with the written consent of the holders of a majority of the issued shares of that class or with the sanction of a special resolution passed at a
general meeting of the holders of the shares of that class. The rights conferred upon the holders of the shares of any class issued shall not, unless otherwise
expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu with
such existing class of shares.
Inspection of Books and Records. Holders of our ordinary shares have no general right under Cayman Islands law to inspect or obtain copies of
our list of shareholders or our corporate records. However, we will provide our shareholders with annual audited financial statements. See “— H.
Documents on Display.”
Issuance of Additional Shares. Our memorandum of association authorizes our board of directors to issue additional ordinary shares from time to
time as our board of directors shall determine, to the extent of available authorized but unissued shares.
Our memorandum of association also authorizes our board of directors to establish from time to time one or more series of preference shares and
to determine, with respect to any series of preference shares, the terms and rights of that series, including:
the designation of the series;
the number of shares of the series;
the dividend rights, dividend rates, conversion rights, voting rights; and
the rights and terms of redemption and liquidation preferences.
Our board of directors may issue preference shares without action by our shareholders to the extent authorized but unissued. Issuance of these
shares may dilute the voting power of holders of ordinary shares.
Anti-Takeover Provisions. Some provisions of our memorandum and articles of association may discourage, delay or prevent a change of control
of our company or management that shareholders may consider favorable, including provisions that authorize our board of directors to issue preference
shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preference shares without any further vote or
action by our shareholders.
Exempted Company. We are an exempted company with limited liability under the Companies Law. The Companies Law distinguishes between
ordinary resident companies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outside of the
Cayman Islands may apply to be registered as an exempted company. The requirements for an exempted company are essentially the same as for an
ordinary company except that an exempted company:
does not have to file an annual return of its shareholders with the Registrar of Companies;
is not required to open its register of members for inspection;
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does not have to hold an annual general meeting;
may issue negotiable or bearer shares or shares with no par value;
may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the first instance);
may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;
may register as a limited duration company; and
may register as a segregated portfolio company.
“Limited liability” means that the liability of each shareholder is limited to the amount unpaid by the shareholder on the shares of the company.
Limitations on the Right to Own Shares. There are no limitations on the right to own our ordinary shares.
C. Material Contracts
We have not entered into any material contracts other than in the ordinary course of business and other than those described in “Item 4.
Information on the Company” or elsewhere in this annual report.
D. Exchange Controls
The Cayman Islands currently has no exchange control restrictions. See also “Item 4. Information on the Company — B. Business Overview —
Regulation — Regulations on Foreign Currency Exchange” and “Item 4. Information on the Company — B. Business Overview — Regulation —
Regulations on Offshore Financing.”
E. Taxation
The following summary of the material Cayman Islands, People’s Republic of China and United States federal income tax consequences of an
investment in our ADSs or ordinary shares is based upon laws and relevant interpretations thereof in effect as of the date of this annual report, all of which
are subject to change. This summary does not deal with all possible tax consequences relating to an investment in our ADSs or ordinary shares, such as the
tax consequences under state, local and other tax laws.
Cayman Islands Taxation
The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no
taxation in the nature of inheritance tax or estate duty. There are no other taxes levied by the Government of the Cayman Islands that are likely to be
material to holders of ADSs or ordinary shares. The Cayman Islands is not party to any double tax treaties except for a double tax treaty entered into with
the United Kingdom in 2010. There are no exchange control regulations or currency restrictions in the Cayman Islands.
Pursuant to Section 6 of the Tax Concessions Law (1999 Revision) of the Cayman Islands, we have obtained an undertaking from the Governor-
in-Council:
(i)
that no law which is enacted in the Cayman Islands imposing any tax to be levied on profits or income or gains or appreciation shall apply to us or
our operations; and
(ii) that the aforesaid tax or any tax in the nature of estate duty or inheritance tax shall not be payable on our shares, debentures or other obligations.
The undertaking for us is for a period of twenty years from June 14, 2011.
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People’s Republic of China Taxation
Under the Enterprise Income Tax Law, an enterprise established outside the PRC with “de facto management bodies” within China is considered a
“resident enterprise” for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income.
Under the implementation rules to the Enterprise Income Tax Law, a “de facto management body” is defined as a body that has material and overall
management and control over the manufacturing and business operations, personnel and human resources, finances and properties of an enterprise. In
addition, SAT Circular 82, issued by the State Administration of Taxation in April 2009 and amended in January 2014, specifies that certain offshore
incorporated enterprises controlled by PRC enterprises or PRC enterprise groups will be classified as PRC resident enterprises if the following are located
or resident in China: senior management personnel and departments that are responsible for daily production, operation and management; financial and
personnel decision making bodies; key properties, accounting books, company seal, minutes of board meetings and shareholders’ meetings; and half or
more of the senior management or directors having voting rights. Further to SAT Circular 82, the State Administration of Taxation issued the SAT Bulletin
45, which took effect in September 2011, to provide more guidance on the implementation of SAT Circular 82. SAT Bulletin 45 provides for procedures
and administration details of determination on resident status and administration on post-determination matters. We do not believe that 58.com Inc., or
China Classified Network Corporation or China Classified Information Corporation Limited meet all of the conditions above or are PRC resident
enterprises. If the PRC tax authorities determine that our Cayman Islands holding company is a PRC resident enterprise for PRC enterprise income tax
purposes, a number of unfavorable PRC tax consequences could follow. One example is that a 10% withholding tax would be imposed on dividends we pay
to our non-PRC enterprise shareholders and with respect to gains derived by our non-PRC enterprise shareholders from transferring our shares or ADSs and
potentially a 20% of withholding tax would be imposed on dividends we pay to our non-PRC individual shareholders and with respect to gains derived by
our non-PRC individual shareholders from transferring our shares or ADSs.
It is unclear whether, if we are considered a PRC resident enterprise, holders of our shares or ADSs would be able to claim the benefit of income
tax treaties or agreements entered into between China and other countries or areas. See “Item 3. Key Information — D. Risk Factors — Risk Factors
Related to Doing Business in China — Under the Enterprise Income Tax Law, we may be classified as a PRC ‘resident enterprise’ for PRC enterprise
income tax purposes. Such classification would likely result in unfavorable tax consequences to us and our non-PRC shareholders and have a material
adverse effect on our results of operations and the value of your investment.”
The Enterprise Income Tax Law and the implementation rules provide that an income tax rate of 10% will normally be applicable to dividends
payable to investors that are “non-resident enterprises,” and gains derived by such investors, which (1) do not have an establishment or place of business in
China or (2) have an establishment or place of business in China, but the relevant income is not effectively connected with the establishment or place of
business to the extent such dividends and gains are derived from sources within China. The PRC State Council or an applicable tax treaty between the PRC
and the jurisdictions in which the non-PRC investors reside may reduce such income tax rate. Pursuant to an Arrangement Between the Mainland of China
and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation on Income, or the Double Tax Avoidance Arrangement, and
other applicable PRC laws, if a Hong Kong resident enterprise is determined by the relevant PRC tax authority to have satisfied the relevant conditions and
requirements under the Double Tax Avoidance Arrangement and other applicable laws, the 10% withholding tax on the dividends the Hong Kong resident
enterprise receives from a PRC resident enterprise may be reduced to 5%. However, based on SAT Circular 81 issued by the State Administration of
Taxation in February 2009, if the relevant PRC tax authorities determine, in their discretion, that a company benefits from such reduced income tax rate due
to a structure or arrangement that is primarily tax-driven, the PRC tax authorities may adjust the preferential tax treatment. Pursuant to SAT Circular 601
issued by the State Administration of Taxation in October 2009, conduit companies, which are established for the purpose of evading or reducing tax, or
transferring or accumulating profits, may not be recognized as beneficial owners and thus are not entitled to the above-mentioned reduced income tax rate
of 5% under the Double Tax Avoidance Arrangement. In August 2015, the State Administration of Taxation promulgated the Administrative Measures for
Non-Resident Taxpayers to Enjoy Treatments under Tax Treaties, or SAT Circular 60, which became effective on November 1, 2015. SAT Circular 60
provides that non-resident enterprises are not required to obtain pre-approval from the relevant tax authority in order to enjoy the reduced withholding tax
rate. Instead, non-resident enterprises and their withholding agents may, by self-assessment and upon their confirmation that the prescribed criteria are met,
directly apply the reduced withholding tax rate, and file the necessary forms and supporting documents when conducting tax filings, which will be subject
to post-filing examinations by the relevant tax authorities. None of our Hong Kong subsidiaries has applied for the approval for a withholding tax rate of
5% from local tax authority prior to SAT Circular 60, nor has any of our PRC subsidiaries applied the 5% tax rate directly to any dividend payment after
the SAT Circular 60, as our PRC subsidiaries have not paid dividends to us.
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In January 2009, the State Administration of Taxation promulgated the Provisional Measures for the Administration of Withholding of Enterprise
Income Tax for Non-resident Enterprises, pursuant to which the entities that have the direct obligation to make certain payments to a non-resident
enterprise should be the relevant tax withholders for the non-resident enterprise, and such payments include: income from equity investments (including
dividends and other return on investment), interest, rents, royalties and income from assignment of property as well as other incomes subject to enterprise
income tax received by non-resident enterprises in China. Further, the measures provide that in case of an equity transfer between two non-resident
enterprises which occurs outside China, the non-resident enterprise which receives the equity transfer payment must, by itself or engage an agent to, file tax
declaration with the PRC tax authority located at place of the PRC company whose equity has been transferred, and the PRC company whose equity has
been transferred should assist the tax authorities to collect taxes from the relevant non-resident enterprise.
The State Administration of Taxation issued SAT Circular 59 together with the Ministry of Finance in April 2009 and SAT Circular 698 in
December 2009. Both Circular 59 and Circular 698 became effective retroactively as of January 1, 2008. On February 3, 2015, the State Administration of
Taxation issued SAT Notice 7. By promulgating and implementing these circulars, the PRC tax authorities have enhanced their scrutiny over the direct or
indirect transfer of equity interests or other taxable assets in a PRC resident enterprise by a non-resident enterprise. Under SAT Notice 7, where a non-
resident enterprise transfers the equity interests or other taxable assets of a PRC “resident enterprise” indirectly by disposition of the equity interests of an
overseas holding company, the non-resident enterprise, being the transferor, or the transferee, or the PRC entity which directly owned the taxable assets
may report to the relevant tax authority this “indirect transfer”. Using a “substance over form” principle, the PRC tax authority may re-characterize such
indirect transfer as a direct transfer of the equity interests in the PRC tax resident enterprise and other properties in China. As a result, gains derived from
such indirect transfer may be subject to PRC tax at a rate of up to 10%. We face uncertainties on the reporting and consequences on private equity financing
transactions, share exchange or other transactions involving the transfer of shares in our company by investors that are non-PRC resident enterprises, or sale
or purchase of shares in other non-PRC resident companies or other taxable assets by us. We and our non-resident investors may be at risk of being
required to file a return and being taxed under SAT Circular 698 and SAT Notice 7, and we may be required to expend valuable resources to comply with
SAT Circular 698 and SAT Notice 7 or to establish that we should not be taxed under these circulars.
United States Federal Income Tax Considerations
The following is a discussion of the principal United States federal income tax consequences of the ownership and disposition of our ADSs or
Class A ordinary shares by a U.S. Holder, as defined below, that holds our ADSs or Class A ordinary shares as “capital assets” (generally, property held for
investment) under the United States Internal Revenue Code of 1986, as amended (the “Code”). This discussion is based upon existing United States federal
income tax law, which is subject to differing interpretations or change, possibly with retroactive effect. No ruling has been sought from the Internal
Revenue Service (the “IRS”) with respect to any United States federal income tax consequences described below, and there can be no assurance that the
IRS or a court will not take a contrary position. This discussion does not address all aspects of United States federal income taxation that may be important
to particular investors in light of their individual investment circumstances, including investors subject to special tax rules (such as, for example, certain
financial institutions, insurance companies, regulated investment companies, real estate investment trusts, broker-dealers, traders in securities that elect
mark-to-market treatment, partnerships and their partners, tax-exempt organizations (including private foundations), investors who are not U.S. Holders,
investors that own (directly, indirectly, or constructively) 10% or more of our voting stock, investors that hold their ADSs or Class A ordinary shares as
part of a straddle, hedge, conversion, constructive sale or other integrated transaction, or investors that have a functional currency other than the United
States dollar) all of whom may be subject to tax rules that differ significantly from those summarized below. In addition, this discussion does not address
any state, local, or non-United States tax considerations. Each potential investor is urged to consult its tax advisor regarding the United States federal, state,
local and non-United States income and other tax considerations of an investment in our ADSs or Class A ordinary shares.
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General
For purposes of this discussion, a “U.S. Holder” is a beneficial owner of our ADSs or Class A ordinary shares that is, for United States federal
income tax purposes, (i) an individual who is a citizen or resident of the United States, (ii) a corporation (or other entity treated as a corporation for United
States federal income tax purposes) created in, or organized under the law of, the United States or any state thereof or the District of Columbia, (iii) an
estate the income of which is includible in gross income for United States federal income tax purposes regardless of its source, or (iv) a trust (A) the
administration of which is subject to the primary supervision of a United States court and which has one or more United States persons who have the
authority to control all substantial decisions of the trust or (B) that has otherwise elected to be treated as a United States person under the Code.
If a partnership (or other entity treated as a partnership for United States federal income tax purposes) is a beneficial owner of our ADSs or Class
A ordinary shares, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership.
Partnerships and partners of a partnership holding our ADSs or Class A ordinary shares are urged to consult their tax advisors regarding an investment in
our ADSs or Class A ordinary shares.
Based in part on certain representations from the depositary bank, a U.S. Holder of ADSs will be treated as the beneficial owner for United States
federal income tax purposes of the underlying shares represented by the ADSs.
Passive Foreign Investment Company Considerations
A non-United States corporation, such as our company, will be a “passive foreign investment company,” or PFIC, for United States federal income
tax purposes for any taxable year, if either (i) 75% or more of its gross income for such year consists of certain types of “passive” income or (ii) 50% or
more of the value of its assets (determined on the basis of a quarterly average) during such year produce or are held for the production of passive income
(the “asset test”). Passive income generally includes dividends, interest, royalties, rents, annuities, net gains from the sale or exchange of property
producing such income and net foreign currency gains. For this purpose, cash and assets readily convertible into cash are categorized as passive assets and
the company’s unbooked goodwill are taken into account for determining the value of its assets. We will be treated as owning a proportionate share of the
assets and earning a proportionate share of the income of any other corporation in which we own, directly or indirectly, more than 25% (by value) of the
stock.
Although the law in this regard is not entirely clear, we treat Beijing 58 and other consolidated affiliated entities as being owned by us for United
States federal income tax purposes, because we control their management decisions and are entitled to substantially all of their economic benefits, and, as a
result, we consolidate their results of operations in our consolidated U.S. GAAP financial statements. If it were determined, however, that we are not the
owner of Beijing 58 and other consolidated affiliated entities for United States federal income tax purposes, we would likely be treated as a PFIC for our
current taxable year and any subsequent taxable year.
Assuming that we are the owner of Beijing 58 and other consolidated affiliated entities for United States federal income tax purposes, we believe
that we primarily operate as an active provider of online marketing services. Based on our current income and assets and projections as to the value of our
assets based, in part, on the market value of our ADSs and outstanding Class A ordinary shares, we do not believe that we were a PFIC for our taxable year
ended December 31, 2015 and, although no assurances can be made in this regard, we do not expect to be a PFIC for the current taxable year or any
subsequent taxable year. While we do not anticipate becoming a PFIC, because our value of the assets for purpose of the asset test may be determined by
reference to the market price of our ADSs or ordinary shares, fluctuations in the market price of our ADSs or Class A ordinary shares may cause us to
become a PFIC for the current or subsequent taxable years. Under circumstances where revenues from activities that produce passive income significantly
increase relative to our revenues from activities that produce non-passive income, or where we determine not to deploy significant amounts of cash for
active purposes, our risk of becoming classified as a PFIC may substantially increase.
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Furthermore, because there are uncertainties in the application of the relevant rules, it is possible that the IRS may challenge our classification of
certain income and assets as non-passive or our valuation of our tangible and intangible assets, each of which may result in our becoming a PFIC for the
current or subsequent taxable years. Because PFIC status is a fact-intensive determination made on an annual basis and will depend upon the composition
of our assets and income and the value of our tangible and intangible assets from time to time, no assurance can be given that we will not become a PFIC in
a subsequent taxable year. In particular, if we are a PFIC for any year during which a U.S. Holder holds our ADSs or Class A ordinary shares, we generally
will continue to be treated as a PFIC with respect to such U.S. Holder for all succeeding years during which such U.S. Holder holds our ADSs or Class A
ordinary shares unless we cease to be a PFIC and the U.S. Holder makes a “deemed sale” election with respect to the ADSs or Class A ordinary shares.
The discussion below under “Dividends” and “Sale or Other Disposition of ADSs or Class A Ordinary Shares” assumes that we will not be a PFIC
for U.S. federal income tax purposes. The United States federal income tax rules that apply if we are a PFIC for the current or any subsequent taxable year
are generally discussed below under “Passive Foreign Investment Company Rules.”
Dividends
Any cash distributions (including the amount of any PRC tax withheld) paid on our ADSs or Class A ordinary shares out of our current or
accumulated earnings and profits, as determined under United States federal income tax principles, will generally be includible in the gross income of a
U.S. Holder as dividend income on the day actually or constructively received by the U.S. Holder, in the case of Class A ordinary shares, or by the
depositary bank, in the case of ADSs. Because we do not intend to determine our earnings and profits on the basis of United States federal income tax
principles, any distribution paid will generally be treated as a “dividend” for United States federal income tax purposes. A non-corporate recipient of
dividend income generally will be subject to tax on dividend income from a “qualified foreign corporation” at a lower applicable capital gains rate rather
than the marginal tax rates generally applicable to ordinary income provided that certain holding period and other requirements are met. We generally will
be considered to be a qualified foreign corporation (i) with respect to any dividend we pay on our ADSs or Class A ordinary shares that are readily tradable
on an established securities market in the United States, or (ii) if we are eligible for the benefits of a comprehensive tax treaty with the United States that
the Secretary of Treasury of the United States determines is satisfactory for this purpose and includes an exchange of information program. Because our
ADSs (but not our Class A ordinary shares) are listed on the NYSE, we believe that the ADSs are readily tradable on an established securities market in the
United States and that we are a qualified foreign corporation with respect to dividends paid on our ADSs, but not with respect to dividends paid on our
Class A ordinary shares. In the event we are deemed to be a resident enterprise under the PRC Enterprise Income Tax Law, we may be eligible for the
benefits of the United States-PRC income tax treaty (which the U.S. Treasury Department has determined is satisfactory for this purpose) and we would be
treated as a qualified foreign corporation with respect to dividends paid on our Class A ordinary shares or ADSs. U.S. Holders should consult their tax
advisors regarding the availability of the reduced tax rate on dividends in their particular circumstances. Dividends received on our ADSs or Class A
ordinary shares will not be eligible for the dividends received deduction allowed to corporations.
For United States foreign tax credit purposes, dividends paid on our ADSs or Class A ordinary shares generally will be treated as income from
foreign sources and generally will constitute passive category income. In the event that we are deemed to be a PRC resident enterprise under the PRC
Enterprise Income Tax Law, a U.S. Holder may be subject to PRC withholding taxes on dividends paid, if any, on our ADSs or Class A ordinary shares. A
U.S. Holder may be eligible, subject to a number of complex limitations, to claim a foreign tax credit in respect of any foreign withholding taxes imposed
on dividends received on our ADSs or Class A ordinary shares. A U.S. Holder who does not elect to claim a foreign tax credit for foreign tax withheld may
instead claim a deduction for United States federal income tax purposes in respect of such withholding, but only for a year in which such holder elects to do
so for all creditable foreign income taxes. The rules governing the foreign tax credit are complex. U.S. Holders are urged to consult their tax advisors
regarding the availability of the foreign tax credit under their particular circumstances.
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Sale or Other Disposition of ADSs or Class A Ordinary Shares
A U.S. Holder will generally recognize capital gain or loss, if any, upon the sale or other disposition of ADSs or Class A ordinary shares in an
amount equal to the difference between the amount realized upon the disposition and the holder’s adjusted tax basis in such ADSs or Class A ordinary
shares. Any capital gain or loss will be long-term gain or loss if the ADSs or Class A ordinary shares have been held for more than one year and will
generally be United States source gain or loss for United States foreign tax credit purposes. In the event that we are deemed to be a PRC resident enterprise
under the PRC Enterprise Income Tax Law, and gain from the disposition of the ADSs or Class A ordinary shares is subject to tax in China, such gain may
be treated as PRC source gain for foreign tax credit purposes under the United States-PRC income tax treaty. The deductibility of a capital loss may be
subject to limitations. U.S. Holders are urged to consult their tax advisors regarding the tax consequences if a foreign tax is imposed on a disposition of our
ADSs or Class A ordinary shares, including the availability of the foreign tax credit under their particular circumstances.
Passive Foreign Investment Company Rules
If we are a PFIC for any taxable year during which a U.S. Holder holds our ADSs or Class A ordinary shares, unless the U.S. Holder makes a
mark-to-market election (as described below), the U.S. Holder will generally be subject to special tax rules that have a penalizing effect, regardless of
whether we remain a PFIC, on (i) any excess distribution that we make to the U.S. Holder (which generally means any distribution paid during a taxable
year to a U.S. Holder that is greater than 125% of the average annual distributions paid in the three preceding taxable years or, if shorter, the U.S. Holder’s
holding period for the ADSs or Class A ordinary shares), and (ii) any gain realized on the sale or other disposition, including, under certain circumstances,
a pledge, of ADSs or Class A ordinary shares. Under the PFIC rules:
the excess distribution and/or gain will be allocated ratably over the U.S. Holder’s holding period for the ADSs or Class A ordinary shares;
the amount allocated to the current taxable year and any taxable years in the U.S. Holder’s holding period prior to the first taxable year in which
we are a PFIC, or pre-PFIC year, will be taxable as ordinary income; and
the amount allocated to each prior taxable year, other than the current taxable year or a pre-PFIC year, will be subject to tax at the highest tax rate
in effect applicable to the individuals or corporations, as appropriate, for that year and will be increased by an additional tax equal to interest on
the resulting tax deemed deferred with respect to each such other taxable year.
If we are a PFIC for any taxable year during which a U.S. Holder holds our ADSs or Class A ordinary shares and any of our non-United States
subsidiaries is also a PFIC, such U.S. Holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC and would
be subject to the rules described above on certain distributions by a lower-tier PFIC and a disposition of shares of a lower-tier PFIC even though such U.S.
Holder would not receive the proceeds of those distributions or dispositions. U.S. Holders should consult their tax advisors regarding the application of the
PFIC rules to any of our subsidiaries.
As an alternative to the foregoing rules, if we are a PFIC, a U.S. Holder of “marketable stock” may make a mark-to-market election with respect to
our ADSs, but not our Class A ordinary shares, provided that the ADSs continue to be listed on the NYSE and continue to be regularly traded. If a U.S.
Holder makes this election, the holder will generally (i) include as ordinary income for each taxable year that we are a PFIC the excess, if any, of the fair
market value of ADSs held at the end of the taxable year over the adjusted tax basis of such ADSs and (ii) deduct as an ordinary loss the excess, if any, of
the adjusted tax basis of the ADSs over the fair market value of such ADSs held at the end of the taxable year, but such deduction will only be allowed to
the extent of the net amount previously included in income as a result of the mark-to-market election. The U.S. Holder’s adjusted tax basis in the ADSs
would be adjusted to reflect any income or loss resulting from the mark-to-market election. If a U.S. Holder makes a mark-to-market election and we cease
to be a PFIC, the holder will not be required to take into account the mark-to-market gain or loss described above during any period that we are not a PFIC.
If a U.S. Holder makes a mark-to-market election, any gain such U.S. Holder recognizes upon the sale or other disposition of our ADSs in a year when we
are a PFIC will be treated as ordinary income and any loss will be treated as ordinary loss, but such loss will only be treated as ordinary loss to the extent of
the net amount previously included in income as a result of the mark-to-market election. In the case of a U.S. Holder who has held ADSs or Class A
ordinary shares during any taxable year in respect of which we were classified as a PFIC and continues to hold such ADSs or Class A ordinary shares (or
any portion thereof) and has not previously determined to make a mark-to-market election, and who is now considering making a mark-to-market election,
special tax rules may apply relating to purging the PFIC taint of such ADSs or Class A ordinary shares.
118
Because, as a technical matter, a mark-to-market election cannot be made for any lower-tier PFICs that we may own, a U.S. Holder may continue
to be subject to the PFIC rules with respect to such U.S. Holder’s indirect interest in any investments held by us that are treated as an equity interest in a
PFIC for United States federal income tax purposes.
We do not intend to provide information necessary for U.S. Holders to make qualified electing fund elections, which, if available, would result in
tax treatment different from the general tax treatment for PFICs described above.
If a U.S. Holder owns our ADSs or Class A ordinary shares during any taxable year that we are a PFIC, the holder must file an annual report with
the U.S. Internal Revenue Service. Each U.S. Holder is urged to consult its tax advisor concerning the United States federal income tax consequences of
purchasing, holding, and disposing ADSs or Class A ordinary shares if we are or become a PFIC, including the possibility of making a mark-to-market
election and the unavailability of the qualified electing fund election.
Medicare Tax
Recently enacted legislation generally imposes a 3.8% Medicare tax on a portion or all of the net investment income of certain individuals with a
modified adjusted gross income of over $200,000 (or $250,000 in the case of joint filers or $125,000 in the case of married individuals filing separately)
and on the undistributed net investment income of certain estates and trusts. For these purposes, “net investment income” generally includes interest,
dividends (including dividends paid with respect to our ADSs or Class A ordinary shares), annuities, royalties, rents, net gain attributable to the disposition
of property not held in a trade or business (including net gain from the sale, exchange or other taxable disposition of an ADS or Class A ordinary share) and
certain other income, reduced by any deductions properly allocable to such income or net gain. U.S. holders are urged to consult their tax advisors
regarding the applicability of the Medicare tax to their income and gains in respect of their investment in the ADSs or Class A ordinary shares.
Information Reporting and Backup Withholding
Pursuant to the Hiring Incentives to Restore Employment Act enacted on March 18, 2010, in tax years beginning after the date of enactment, an
individual U.S. Holder and certain entities may be required to submit to the IRS certain information with respect to his or her beneficial ownership of the
ADSs or Class A ordinary shares, if such ADSs or Class A ordinary shares are not held on his or her behalf by a U.S. financial institution. This new law
also imposes penalties if an individual U.S. Holder is required to submit such information to the IRS and fails to do so.
In addition, dividend payments with respect to the ADSs or Class A ordinary shares and proceeds from the sale, exchange or redemption of the
ADSs or Class A ordinary shares may be subject to information reporting to the IRS and United States backup withholding. Backup withholding will not
apply, however, to a U.S. Holder who furnishes a correct taxpayer identification number and makes any other required certification, or who is otherwise
exempt from backup withholding. U.S. Holders should consult their tax advisors regarding the application of the United States information reporting and
backup withholding rules. Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against a U.S. Holder’s
United States federal income tax liability, and a U.S. Holder generally may obtain a refund of any excess amounts withheld under the backup withholding
rules by filing the appropriate claim for refund with the Internal Revenue Service and furnishing any required information.
119
F. Dividends and Paying Agents
Not applicable.
G. Statements by Experts
Not applicable.
H. Documents on Display
We previously filed with the SEC our registration statement on Form F-1 (Registration No. 333-191424), as amended, including the prospectus
contained therein, to register our ordinary shares in relation to our initial public offering and our registration statement on Form F-1 (File Number: 333-
194610), as amended, including the prospectus contained therein, to register our ordinary shares in relation to a follow-on public offering. We have also
filed with the SEC a related registration statement on F-6 (Registration No. 333-191776) to register the ADSs.
We are subject to the periodic reporting and other informational requirements of the Securities Exchange Act of 1934, as amended, or the
Exchange Act. Under the Exchange Act, we are required to file reports and other information with the SEC, including filing annually a Form 20-F within
four months after the end of each fiscal year, which is December 31. Copies of reports and other information, when so filed, may be inspected without
charge and may be obtained at prescribed rates at the public reference facilities maintained by the Securities and Exchange Commission at 100 F Street,
N.E., Room 1580, Washington, D.C. 20549. The public may obtain information regarding the Washington, D.C. Public Reference Room by calling the
Commission at 1-800-SEC-0330. The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements, and other
information regarding registrants that make electronic filings with the SEC using its EDGAR system. As a foreign private issuer, we are exempt from the
rules under the Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements, and officers, directors and principal
shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.
We will furnish Citibank, N.A., the depositary of our ADSs, with our annual reports, which will include a review of operations and annual audited
consolidated financial statements prepared in conformity with U.S. GAAP, and all notices of shareholders’ meetings and other reports and communications
that are made generally available to our shareholders. The depositary will make such notices, reports and communications available to holders of ADSs
and, upon our written request, will mail to all record holders of ADSs the information contained in any notice of a shareholders’ meeting received by the
depositary from us.
I.
Subsidiary Information
Not applicable.
ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Exchange Risk
Our operating transactions and assets and liabilities are mainly denominated in Renminbi. The Renminbi is not freely convertible into foreign
currencies for capital account transactions. The value of the RMB against the U.S. dollar and other currencies is affected by changes in China’s political
and economic conditions and by China’s foreign exchange policies, among other things. In July 2005, the PRC government changed its decades-old policy
of pegging the value of the RMB to the U.S. dollar, and the RMB appreciated more than 20% against the U.S. dollar over the following three years.
Between July 2008 and June 2010, this appreciation halted and the exchange rate between the RMB and the U.S. dollar remained within a narrow band.
Since June 2010, the RMB has fluctuated against the U.S. dollar, at times significantly and unpredictably. It is difficult to predict how market forces or
PRC or U.S. government policy may impact the exchange rate between the RMB and the U.S. dollar in the future. The net foreign exchange loss
recognized in 2015 was insignificant. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency
exchange risk.
120
Interest Rate Risk
Our exposure to interest rate risk primarily relates to excess cash invested in fixed rate term deposits and variable rate short-term financial
products with original maturities of less than a year. Investments in both fixed rate and variable rate interest-earning instruments carry a degree of interest
rate risk. Fixed rate instruments may have their fair market value adversely impacted due to a rise in interest rates, while variable rate instruments may
produce less income than expected if interest rates fall. Due in part to these factors, our future interest income and investment income may fall short of
expectations due to changes in market interest rates. We have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in
market interest rates, and therefore have not used any derivative financial instruments to manage our interest risk exposure.
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A. Debt Securities
Not applicable.
B. Warrants and Rights
Not applicable.
C. Other Securities
Not applicable.
D. American Depositary Shares
Fees and Charges Our ADS Holders May Have to Pay
Holders of our ADSs will be required to pay the following service fees to the depositary bank:
Issuance of ADSs
Cancellation of ADSs
Service
Distribution of cash dividends or other cash distributions
Distribution of ADSs pursuant to stock dividends, free stock distributions
or exercise of rights.
Distribution of securities other than ADSs or rights to purchase additional
ADSs
Fees
Up to U.S. 5¢ per ADS issued
Up to U.S. 5¢ per ADS canceled
Up to U.S. 5¢ per ADS held
Up to U.S. 5¢ per ADS held
Up to U.S. 5¢ per ADS held
Depositary Services
Up to U.S. 5¢ per ADS held on the applicable record date(s) established
by the depositary bank
Holders of our ADSs will also be responsible to pay certain fees and expenses incurred by the depositary bank and certain taxes and governmental
charges such as:
fees for the transfer and registration of ordinary shares charged by the registrar and transfer agent for the ordinary shares in the Cayman Islands
(i.e., upon deposit and withdrawal of ordinary shares);
expenses incurred for converting foreign currency into U.S. dollars;
expenses for cable, telex and fax transmissions and for delivery of securities;
taxes and duties upon the transfer of securities (i.e., when ordinary shares are deposited or withdrawn from deposit); and
121
fees and expenses incurred in connection with the delivery or servicing of ordinary shares on deposit.
Depositary fees payable upon the issuance and cancellation of ADSs are typically paid to the depositary bank by the brokers (on behalf of their
clients) receiving the newly issued ADSs from the depositary bank and by the brokers (on behalf of their clients) delivering the ADSs to the depositary
bank for cancellation. The brokers in turn charge these fees to their clients. Depositary fees payable in connection with distributions of cash or securities to
ADS holders and the depositary services fee are charged by the depositary bank to the holders of record of ADSs as of the applicable ADS record date.
The depositary fees payable for cash distributions are generally deducted from the cash being distributed. In the case of distributions other than
cash (i.e., stock dividend, rights), the depositary bank charges the applicable fee to the ADS record date holders concurrent with the distribution. In the case
of ADSs registered in the name of the investor (whether certificated or uncertificated in direct registration), the depositary bank sends invoices to the
applicable record date ADS holders. In the case of ADSs held in brokerage and custodian accounts (via DTC), the depositary bank generally collects its
fees through the systems provided by DTC (whose nominee is the registered holder of the ADSs held in DTC) from the brokers and custodians holding
ADSs in their DTC accounts. The brokers and custodians who hold their clients’ ADSs in DTC accounts in turn charge their clients’ accounts the amount
of the fees paid to the depositary banks.
In the event of refusal to pay the depositary fees, the depositary bank may, under the terms of the deposit agreement, refuse the requested service
until payment is received or may set off the amount of the depositary fees from any distribution to be made to the ADS holder.
The fees and charges holders of our ADSs may be required to pay may vary over time and may be changed by us and by the depositary bank.
Holders of our ADSs will receive prior notice of such changes.
Fees and Other Payments Made by the Depositary to Us
The depositary bank may reimburse us for certain expenses incurred by us in respect of the ADR program established pursuant to the deposit
agreement, by making available a portion of the depositary fees charged in respect of the ADR program or otherwise, upon such terms and conditions as we
and the depositary bank may agree from time to time. We did not receive any reimbursement from the depository in 2015.
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ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
PART II
None.
ITEM 14.
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Material Modifications to the Rights of Security Holders
See “Item 10. Additional Information — B. Memorandum and Articles of Association — Ordinary Shares” for a description of the rights of
securities holders, which remain unchanged.
Use of Proceeds
The following “Use of Proceeds” information relates to the registration statement on Form F-1, as amended (File Number: 333-191424), which
became effective on October 30, 2013.
We received net proceeds of approximately US$200.0 million from our initial public offering. These net proceeds were used in following
investing activities:
approximately US$185.4 million for the purchase of new office buildings; and
the remainder for the purchase of long-term investments.
ITEM 15.
CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management, under the supervision and with the participation of our chief executive officer and chief financial officer, evaluated the
effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(f) under the Securities Exchange Act of 1934, as amended) as of
December 31, 2015, the end of the period covered by this annual report, and has concluded that, as of such date, our disclosure controls and procedures
were ineffective due to the material weakness that existed in our disclosure controls and procedures described below in “Management’s Annual Report on
Internal Control over Financial Reporting.”
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule
13a-15(f) under the Exchange Act, for our Company. Internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of consolidated financial statements in accordance with generally accepted accounting
principles, including those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of a company’s assets, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
consolidated financial statements in accordance with generally accepted accounting principles, and that a company’s receipts and expenditures are being
made only in accordance with authorizations of a company’s management and directors, and (3) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of a company’s assets that could have a material effect on the consolidated financial
statements.
Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance with respect to
consolidated financial statement preparation and presentation and may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
As required by Section 404 of the Sarbanes-Oxley Act of 2002 and related rules promulgated by the Securities and Exchange Commission, our
management, including our chief executive officer and chief financial officer, assessed the effectiveness of internal control over financial reporting as of
December 31, 2015 using the criteria set forth in the report “Internal Control — Integrated Framework (2013)” published by the Committee of Sponsoring
Organizations of the Treadway Commission (known as COSO). When our management was assessing the effectiveness of internal control over financial
reporting as of December 31, 2015, we had excluded Falcon View Technology and Beijing 58 Auto Technology Co., Ltd. (formerly known as Beijing
Leftbrain Network Technology Co., Ltd.), which were consolidated by us during 2015. The total assets and total revenues of Falcon View Technology
represent 3.3% and 10.3%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2015. The total
assets and total revenues of Beijing 58 Auto Technology Co., Ltd. represent 0.7% and 0.2%, respectively, of the related consolidated financial statement
amounts as of and for the year ended December 31, 2015.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable
possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. As a
result of management’s evaluation of our internal control over financial reporting, the following material weakness in our internal control over financial
reporting was identified as of December 31, 2015.
We did not have adequate resources with an appropriate level of knowledge in U.S. GAAP to properly account for significant complex
transactions under U.S. GAAP. As a result, certain significant complex transactions were not initially accounted for properly.
123
Because of the material weakness described above, our management has concluded that we did not maintain effective internal control over
financial reporting as of December 31, 2015, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2015 has been audited by
PricewaterhouseCoopers Zhong Tian LLP, an independent registered public accounting firm, as stated in their report which is included in Item 18 of this
Annual Report.
Remediation of Material Weaknesses in Internal Control over Financial Reporting Reported in 2014
We believe as of December 31, 2015, we had effectively remediated the material weakness in internal control over financial reporting that was
included in "Management's Annual Report on Internal Control over Financial Reporting" in "Item 15—Controls and Procedures" contained in our Annual
Report on Form 20-F for the fiscal year ended December 31, 2014:
Lack of sufficient accounting personnel to perform the reconciliation controls over advertising expenses related accounts.
During 2015, we designed and implemented remediation measures to address the material weakness listed above. As described in our Annual
Report on Form 20-F for fiscal year 2014, the remediation measures included (1) hiring additional qualified staff to perform the account balance
reconciliation for the advertising expenses related accounts; (2) allocating additional review resources to review the account reconciliations and other
controls for the advertising expense related accounts, and (3) adding additional detective controls such as confirming the material advertising expense
related account balance at quarter end with third parties and an additional review performed by a separate team in the finance department for key
advertising expenses accounts.
Management’s Plan for Remediation of Material Weakness
Our management has been engaged in, and continues to be engaged in making necessary changes and improvements to the overall design of our
control environment to address the material weakness in internal control over financial reporting and the ineffectiveness of our disclosure controls and
procedures described above.
To remediate the material weakness described above with respect to controls over significant complex transactions, we plan to continue to: (1) hire
additional accounting personnel with appropriate knowledge and experience; (2) provide more comprehensive training on knowledge of U.S. GAAP and
controls over financial reporting to our accounting team and other relevant personnel, and encourage them to fulfill annual continuing professional
education requirements; and (3) enhance our accounting manual to provide our accounting team with more comprehensive guidelines on the accounting
policies under U.S. GAAP and SEC rules and requirements.
We consider that the actions, as listed above, will remediate the material weakness referred to above, and help strengthen our general internal
controls and procedures over financial reporting. However, the process of designing and implementing an effective financial reporting system represents a
continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant
resources to maintain a financial reporting system that is adequate to satisfy our reporting obligations. While we have developed a remediation plan to
address this material weakness, this remediation plan or any additional plan we decide to implement may be insufficient to address our current material
weakness and any additional material weaknesses that may be discovered in the future.
Changes in Internal Control over Financial Reporting
During 2015, we have done the following with respect to improving internal controls over financial reporting: (1) we continue to hire additional
finance staff with experiences in big 4 public accounting companies and multinational corporations; (2) we continue to review, test and enhance our
internal controls for the business; and (3) we continue to engage an external consulting firm to assist us to assess Sarbanes-Oxley compliance.
Other than as described above, there were no major changes in our internal controls over financial reporting that occurred during the period
covered by this annual report that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
ITEM 16A.
AUDIT COMMITTEE FINANCIAL EXPERT
Our board of directors has determined that Herman Yu qualifies as an audit committee financial expert and that Herman Yu qualifies as an
independent director (under the standards set forth under Section 303A of the Corporate Governance Rules of the New York Stock Exchange and Rule
10A-3 under the Exchange Act).
ITEM 16B.
CODE OF ETHICS
Our board of directors adopted a code of business conduct and ethics that applies to our directors, officers, employees and advisors, which became
effective in November 2013. We have posted a copy of our code of business conduct and ethics on our website at www.58.com.
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ITEM 16C.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following tables sets forth the aggregate fees by the categories specified below in connection with certain professional services rendered by
PricewaterhouseCoopers Zhong Tian LLP, our independent registered public accounting firm for the years ended December 31, 2014 and 2015. We did not
pay any other fees to our auditors during the periods indicated below.
Audit fees(1)
Tax fees(2)
Other fees(3)
2014
2015
(in thousands of US$)
1,409
—
335
3,319
51
298
(1) “Audit fees” represent the aggregate fees for professional services rendered by our principal auditors for the audit of our annual consolidated financial
statements.
(2) “Tax fees” represent the aggregate fees for professional services rendered by our principal auditors for tax compliance, tax advice and tax planning.
(3) “Other fees” represent the aggregate fees for services rendered other than services reported under “Audit fees”, “Audit-related fees” and “Tax fees”
provided by our principal auditors.
The policy of our audit committee is to pre-approve all audit and non-audit services to be provided by PricewaterhouseCoopers Zhong Tian LLP,
including audit services, audit-related services, tax services and other services are described above, other than those for de minimis services which are
approved by the audit committee prior to the completion of the audit.
ITEM 16D.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Not applicable.
ITEM 16F.
CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 16G.
CORPORATE GOVERNANCE
As a Cayman Islands company listed on the NYSE, we are subject to the NYSE corporate governance listing standards. Among other things,
Section 303A.08 of the NYSE Listed Company Manual requires shareholder approval of material revisions to equity-compensation plans and Section
312.03(c) of the NYSE Listed Company Manual requires shareholder approval of new share issuances above the 20% threshold specified therein. However,
NYSE rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices
in the Cayman Islands, which is our home country, differ significantly from the NYSE corporate governance listing standards. We have elected to follow
the Cayman Islands practices with respect to the amendment of our 2013 Plan to increase the total number of ordinary shares that may be issued pursuant to
awards granted under the plan by 7,000,000 Class B ordinary shares in April 2015. In addition, we have also elected to follow the Cayman Islands practices
with respect to the issuance of new ordinary shares above the 20% threshold to Tencent and former shareholders of Ganji in April 2015 and the issuance of
new ordinary shares above the 20% threshold to certain private equity funds and issuance of a convertible promissory note to Tencent in July 2015, as
specified in Section 312.03(c). We have followed the home country practice and obtained the board approval but not shareholder approval for amending
our 2013 Plan and the share issuances as described above.
125
Other than the two matters described above, there are no significant differences between our corporate governance practices and those followed by
U.S. domestic companies under the NYSE Listed Company Manual.
ITEM 16H.
MINE SAFETY DISCLOSURE
Not applicable.
ITEM 17.
FINANCIAL STATEMENTS
We have elected to provide financial statements pursuant to Item 18.
ITEM 18.
FINANCIAL STATEMENTS
PART III
The consolidated financial statements of 58.com Inc. are included at the end of this annual report.
ITEM 19.
EXHIBITS
Exhibit
Number
1.1
2.1
2.2
2.3
2.4
4.1
4.2
4.3
Description of Document
Third Amended and Restated Memorandum and Articles of Association of the Registrant (incorporated herein by reference to Exhibit 3.2 to
the registration statement on Form F-1 (File No. 333-191424), as amended, initially filed with the Security and Exchange Commission on
September 27, 2013).
Registrant’s Specimen American Depositary Receipt (incorporated herein by reference to Exhibit 4.3 to the registration statement on Form
F-1 (File No. 333-191424), as amended, initially filed with the Security and Exchange Commission on September 27, 2013).
Registrant’s Specimen Certificate for Class A Ordinary Shares (incorporated herein by reference to Exhibit 4.2 to the registration statement
on Form F-1 (File No. 333-191424), as amended, initially filed with the Security and Exchange Commission on September 27, 2013).
Deposit Agreement dated October 31, 2013, among the Registrant, the depositary and holders of the American Depositary Receipts
(incorporated herein by reference to Exhibit 4.3 to the registration statement on Form S-8 (File No. 333-194873), initially filed with the
Security and Exchange Commission on March 28, 2014).
Amended and Restated Shareholders’ Agreement dated as of August 4, 2011 among the Registrant, its ordinary shareholders and preference
shareholders (incorporated herein by reference to Exhibit 4.5 to the registration statement on Form F-1 (File No. 333-191424), as amended,
initially filed with the Security and Exchange Commission on September 27, 2013).
2010 Employee Stock Option Plan (incorporated herein by reference to Exhibit 10.1 to the registration statement on Form F-1 (File No.
333-191424), as amended, initially filed with the Security and Exchange Commission on September 27, 2013).
2013 Share Incentive Plan (incorporated herein by reference to Exhibit 10.2 to the registration statement on Form F-1 (File No. 333-
191424), as amended, initially filed with the Security and Exchange Commission on September 27, 2013).
Form of Indemnification Agreement with the Registrant’s directors and executive officers (incorporated herein by reference to Exhibit 10.3
to the registration statement on Form F-1 (File No. 333-191424), as amended, initially filed with the Security and Exchange Commission on
September 27, 2013).
4.4
Form of Employment Agreement between the Registrant and an executive officer of the Registrant (incorporated herein by reference to
Exhibit 10.4 to the registration statement on Form F-1 (File No. 333-191424), as amended, initially filed with the Security and Exchange
Commission on September 27, 2013).
4.5
English translation of the Amended and Restated Exclusive Business Cooperation Agreement between Beijing Chengshi Wanglin
Information Technology Co., Ltd. and Beijing 58 Information Technology Co., Ltd. dated October 10, 2011 (incorporated herein by
reference to Exhibit 10.5 to the registration statement on Form F-1 (File No. 333-191424), as amended, initially filed with the Security and
Exchange Commission on September 27, 2013).
126
Exhibit
Number
4.6
English translation of the Equity Interest Pledge Agreements, as amended and restated, among Beijing Chengshi Wanglin Information
Technology Co., Ltd., Beijing 58 Information Technology Co., Ltd. and each of the shareholders of Beijing 58 Information Technology
Co., Ltd. dated June 28, 2013 (incorporated herein by reference to Exhibit 10.6 to the registration statement on Form F-1 (File No. 333-
191424), as amended, initially filed with the Security and Exchange Commission on September 27, 2013).
Description of Document
4.7
English translation of the Exclusive Option Agreements, as amended and restated, among Beijing Chengshi Wanglin Information
Technology Co., Ltd., Beijing 58 Information Technology Co., Ltd. and each of the shareholders of Beijing 58 Information Technology
Co., Ltd. dated June 28, 2013 (incorporated herein by reference to Exhibit 10.7 to the registration statement on Form F-1 (File No. 333-
191424), as amended, initially filed with the Security and Exchange Commission on September 27, 2013).
4.8
English translation of Power of Attorney issued by each of the shareholders of Beijing 58 Information Technology Co., Ltd. dated June 28,
2013 (incorporated herein by reference to Exhibit 10.8 to the registration statement on Form F-1 (File No. 333-191424), as amended,
initially filed with the Security and Exchange Commission on September 27, 2013).
4.9
English translation of Loan Agreements between Beijing Chengshi Wanglin Information Technology Co., Ltd. and each of the individual
4.10
4.11
shareholders of Beijing 58 Information Technology Co., Ltd. (incorporated herein by reference to Exhibit 10.9 to the registration statement
on Form F-1 (File No. 333-191424), as amended, initially filed with the Security and Exchange Commission on September 27, 2013).
Investment Agreement, dated June 27, 2014, between the Registrant and Ohio River Investment Limited (incorporated herein by reference
to Exhibit 4.13 of the Registrant’s Annual Report on Form 20-F filed with the Securities and Exchange Commission on April 29, 2015).
Investor Rights Agreement, dated June 30, 2014, between the Registrant, Ohio River Investment Limited, Nihao China Corporation and
Jinbo Yao (incorporated herein by reference to Exhibit 4.14 of the Registrant’s Annual Report on Form 20-F filed with the Securities and
Exchange Commission on April 29, 2015).
4.12
Form of Share Repurchase Agreement, dated June 27, 2014, between the Registrant and each of DCM Affiliates Fund V, L.P., DCM V,
L.P., SB Asia Investment Fund II L.P., Dong Yang, and WP X Asia Online Investment Holdings Limited, respectively (incorporated herein
by reference to Exhibit 4.15 of the Registrant’s Annual Report on Form 20-F filed with the Securities and Exchange Commission on April
29, 2015).
4.13*
English Summary of Cooperation Agreement, dated September 25, 2014, by and between Beijing Electronics Zone Investment and
Development Co., Ltd. and Beijing Chengshi Wanglin Information Technology Co., Ltd.
4.14*
4.15*
4.16*
4.17
4.18*
Share Purchase Agreement, dated February 28, 2015, by and among the Registrant, Anjuke Inc. and the other parties named therein.
Share Purchase Agreement, dated April 17, 2015, by and among the Registrant and certain selling shareholders of Falcon View Technology.
Registration Rights Agreement, dated April 20, 2015, by and among the Registrant and parties set forth in Schedule 1 thereto.
Investment Agreement, dated April 17, 2015, between the Registrant and Ohio River Investment Limited (incorporated herein by reference
to Exhibit 99.1 of the Schedule 13D/A (File No. 005-87683) filed with the Securities and Exchange Commission on April 20, 2015).
Xiaoxiang International Technology Venture Capital LP Subscription Agreement, dated July 29, 2015, between Dream Wizard Inc. and
Xiaoxiang International Technology Venture Capital LP
4.19*
Goliath Internet Opportunities, L.P. Subscription Agreement, dated July 31, 2015, between Dream Wizard Inc. and Goliath Internet
Opportunities, L.P.
4.20*
Zero2IPO Partners I, L.P. Subscription Agreement, dated August 3, 2015, between Dream Wizard Inc. and Zero2IPO Partners I, L.P.
127
Exhibit
Number
4.21
Bridge Loan Agreement, dated July 31, 2015, between the Registrant and Ohio River Investment Limited (incorporated herein by reference
Description of Document
4.22
to Exhibit 1 of the Schedule 13D/A (File No. 005-87683) filed with the Securities and Exchange Commission on August 5, 2015).
Convertible Promissory Note, dated July 31, 2015, issued to Ohio River Investment Limited by the Registrant (incorporated herein by
reference to Exhibit 2 of the Schedule 13D/A (File No. 005-87683) filed with the Securities and Exchange Commission on August 5, 2015).
4.23
Amendment to Bridge Loan Agreement, dated December 11, 2015, between the Registrant and Ohio River Investment Limited
(incorporated herein by reference to Exhibit 1 of the Schedule 13D/A (File No. 005-87683) filed with the Securities and Exchange
Commission on December 15, 2015).
4.24
Convertible Promissory Note, dated December 11, 2015, issued to Ohio River Investment Limited by the Registrant (incorporated herein by
reference to Exhibit 2 of the Schedule 13D/A (File No. 005-87683) filed with the Securities and Exchange Commission on December 15,
2015).
4.25*
Series A Preferred Shares Subscription Agreement, dated October 12, 2015, by and among the Registrant, 58 Daojia Inc. and other parties
named therein.
4.26*
English translation of the Exclusive Business Cooperation Agreement between Beijing 58 Daojia Information Technology Co., Ltd. and
Tianjin 58 Daojia Home Services Co., Ltd. dated August 5, 2015.
4.27*
English translation of the Equity Interest Pledge Agreements among Beijing 58 Daojia Information Technology Co., Ltd., Tianjin 58 Daojia
Home Services Co., Ltd. and each of the shareholders of Tianjin 58 Daojia Home Services Co., Ltd. dated August 5, 2015.
4.28*
English translation of the Exclusive Option Agreements among Beijing 58 Daojia Information Technology Co., Ltd., Tianjin 58 Daojia
Home Services Co., Ltd. and each of the shareholders of Tianjin 58 Daojia Home Services Co., Ltd. dated August 5, 2015.
4.29*
English translation of Power of Attorney issued by each of the shareholders of Tianjin 58 Daojia Home Services Co., Ltd. dated August 5,
2015.
4.30*
English translation of Loan Agreements between Beijing 58 Daojia Information Technology Co., Ltd. and each of the shareholders of
Tianjin 58 Daojia Home Services Co., Ltd. dated August 5, 2015.
4.31*
English translation of the Exclusive Business Cooperation Agreement between Beijing Yangguang Gudi Science Development Co., Ltd.
and Beijing Shanjing Kechuang Network Technology Co., Ltd. dated August 6, 2015.
4.32*
English translation of the Equity Interest Pledge Agreements among Beijing Yangguang Gudi Science Development Co., Ltd., Beijing
Shanjing Kechuang Network Technology Co., Ltd. and each of the shareholders of Beijing Shanjing Kechuang Network Technology Co.,
Ltd. dated August 6, 2015.
4.33*
English translation of the Exclusive Option Agreements among Beijing Yangguang Gudi Science Development Co., Ltd., Beijing Shanjing
Kechuang Network Technology Co., Ltd. and each of the shareholders of Beijing Shanjing Kechuang Network Technology Co., Ltd. dated
August 6, 2015.
4.34*
English translation of Power of Attorney issued by each of the shareholders of Beijing Shanjing Kechuang Network Technology Co., Ltd.
dated August 6, 2015.
4.35*
English translation of Loan Agreements between Beijing Yangguang Gudi Science Development Co., Ltd. and each of the shareholders of
Beijing Shanjing Kechuang Network Technology Co., Ltd. dated August 6, 2015.
8.1*
11.1
Principal subsidiaries of the Registrant
Code of Business Conduct and Ethics of the Registrant (incorporated herein by reference to Exhibit 99.1 to the registration statement on
Form F-1 (File No. 333-191424), as amended, initially filed with the Security and Exchange Commission on September 27, 2013).
12.1*
12.2*
Certification by Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification by Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
128
Exhibit
Number
13.1**
13.2**
15.1*
15.2*
Certification by Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certification by Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Consent of PricewaterhouseCoopers Zhong Tian LLP, Independent Registered Public Accounting Firm
Consent of Han Kun Law Offices
Description of Document
101.INS* XBRL Instance Document
101.SCH* XBRL Taxonomy Extension Schema Document
101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF* XBRL Taxonomy Extension Definition Linkbase Document
101.LAB* XBRL Taxonomy Extension Labels Linkbase Document
101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document
*
Filed herewith
** Furnished herewith
129
The registrant hereby certifies that it meets all of the requirements for filing its annual report on Form 20-F and that it has duly caused and
authorized the undersigned to sign this annual report on its behalf.
SIGNATURES
58.com Inc.
By:
/s/ Jinbo Yao
Name:
Title:
Jinbo Yao
Chairman and Chief Executive Officer
Date: May 13, 2016
130
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2014 and 2015
Consolidated Statements of Comprehensive Income/(Loss) for the Years Ended December 31, 2013, 2014 and 2015
Consolidated Statements of Changes in Shareholders’ Equity/(Deficit) for the Years Ended December 31, 2013, 2014 and 2015
Consolidated Statements of Cash Flows for the Years Ended December 31, 2013, 2014 and 2015
Notes to the Consolidated Financial Statements
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-1
To the Board of Director and Shareholders of 58.com Inc.:
Report of Independent Registered Public Accounting Firm
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of comprehensive income/(loss), of changes in
shareholders’ equity/(deficit) and of cash flows present fairly, in all material respects, the financial position of 58.com Inc. and its subsidiaries at December
31, 2015 and December 31, 2014, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015
in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company did not maintain, in all
material respects, effective internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control —
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) because a material weakness in
internal control over financial reporting relating to the lack of adequate resources with an appropriate level of knowledge in U.S. GAAP to properly account
for significant complex transactions under U.S. GAAP, existed as of that date. A material weakness is a deficiency, or a combination of deficiencies, in
internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements
will not be prevented or detected on a timely basis. The material weakness referred to above is described in Management’s Annual Report on Internal
Control over Financial Reporting included in Item 15 of this Annual Report on Form 20-F. We considered this material weakness in determining the nature,
timing, and extent of audit tests applied in our audit of the 2015 consolidated financial statements, and our opinion regarding the effectiveness of the
Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements. The Company's management is
responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in management’s report referred to above. Our responsibility is to express opinions on these financial
statements and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the
standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting
was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall
financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits
provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
As described in Management’s Annual Report on Internal Control over Financial Reporting included in Item 15 of this Annual Report on Form 20-F,
management has excluded Falcon View Technology and Beijing 58 Auto Technology Co., Ltd. (formerly known as Beijing Leftbrain Network Technology
Co., Ltd.) from its assessment of internal control over financial reporting as of December 31, 2015 because they were consolidated by the Company during
2015. We have also excluded Falcon View Technology and Beijing 58 Auto Technology Co., Ltd., subsidiaries of the Company, from our audit of internal
control over financial reporting. The total assets and total revenues of Falcon View Technology represent 3.3% and 10.3%, respectively, of the related
consolidated financial statement amounts as of and for the year ended December 31, 2015. The total assets and total revenues of Beijing 58 Auto
Technology Co., Ltd. represent 0.7% and 0.2%, respectively, of the related consolidated financial statement amounts as of and for the year ended December
31, 2015.
We do not express an opinion or any other form of assurance on management’s statements referring to management’s actions and plans of remediation of
the identified material weakness included in the Management’s Annual Report on Internal Control over Financial Reporting.
/s/ PricewaterhouseCoopers Zhong Tian LLP
Beijing, the People’s Republic of China
May 13, 2016
F-2
58.com Inc.
CONSOLIDATED BALANCE SHEETS
As of December 31, 2014 and 2015
(U.S. dollars in thousands, except share data and per share data, unless otherwise noted)
ASSETS
Current assets:
Cash and cash equivalents
Restricted cash
Term deposits
Short-term investments
Accounts receivable (net of allowance for doubtful accounts of US$ nil and US$5,885 as of December 31, 2014
and 2015, respectively)
Prepayments and other current assets
Total current assets
Non-current assets:
Property and equipment, net
Intangible assets, net
Land use rights, net
Goodwill
Long-term investments
Long-term prepayments and other non-current assets
Total non-current assets
Total assets
LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term loans
Accounts payable (including accounts payable of the consolidated variable interest entities (“VIEs”) without
recourse to the Company of US$6,698 and US$25,261 as of December 31, 2014 and 2015, respectively)
Deferred revenues (including deferred revenues of the consolidated VIEs without recourse to the Company of
US$62,455 and US$115,498 as of December 31, 2014 and 2015, respectively)
Customer advances and deposits (including customer advances and deposits of the consolidated VIEs without
recourse to the Company of US$10,095 and US$58,268 as of December 31, 2014 and 2015, respectively)
Taxes payable (including taxes payable of the consolidated VIEs without recourse to the Company of US$1,637
and US$2,690 as of December 31, 2014 and 2015, respectively)
Salary and welfare payable (including salary and welfare payable of the consolidated VIEs without recourse to the
Company of US$11,343 and US$38,781 as of December 31, 2014 and 2015, respectively)
Accrued expenses and other current liabilities (including accrued expenses and other current liabilities of the
consolidated VIEs without recourse to the Company of US$6,681 and US$12,168 as of December 31, 2014 and
2015, respectively)
Total current liabilities
Non-current liabilities:
Deferred tax liabilities (including deferred tax liabilities of the consolidated VIEs without recourse to the Company
of US$ nil and US$58,041 as of December 31, 2014 and 2015, respectively)
Other non-current liabilities (including other non-current liabilities of the consolidated VIEs without recourse to
the Company of US$ nil and US$308 as of December 31, 2014 and 2015, respectively)
Total non-current liabilities
Total liabilities
Commitments and contingencies (Note 24)
Mezzanine equity:
Mezzanine classified noncontrolling interests
Total mezzanine equity
Shareholders’ equity:
58.com Inc. shareholders’ equity
Ordinary shares (US$0.00001 par value, 5,000,000,000 and 5,000,000,000 (including 4,800,000,000 Class A and
200,000,000 Class B) shares authorized, 176,375,211 (including 101,574,732 Class A and 74,800,479 Class B) and
283,068,677 (including 219,413,764 Class A and 63,654,913 Class B) shares issued and outstanding as of
December 31, 2014 and 2015, respectively)
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss
Total 58.com Inc. shareholders’ equity
Noncontrolling interests
Total shareholders’ equity
Total liabilities, mezzanine equity and shareholders’ equity
The accompanying notes are an integral part of these consolidated financial statements.
F-3
As of December 31
2014
2015
111,376
1,314
281,513
216,146
6,282
24,131
640,762
17,899
460
—
—
23,784
21,027
63,170
703,932
—
16,029
95,336
35,983
7,392
28,804
483,305
4,841
—
41,218
54,031
76,878
660,273
123,093
271,457
592
2,461,193
391,261
159,324
3,406,920
4,067,193
275,000
101,635
207,059
151,138
10,216
79,115
13,071
196,615
335,901
1,160,064
—
66,238
—
—
196,615
3,992
70,230
1,230,294
—
—
15,038
15,038
2
624,381
(115,775)
(1,291)
507,317
—
507,317
703,932
3
3,353,411
(365,811)
(172,828)
2,814,775
7,086
2,821,861
4,067,193
58.com Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
For the Years Ended December 31, 2013, 2014 and 2015
(U.S. dollars in thousands, except share, per share and per ADS data, unless otherwise noted)
Revenues:
Membership
Online marketing services
E-commerce services
Other services
Total revenues
Cost of revenues(1)
Gross profit
Operating expenses(1):
Sales and marketing expenses
Research and development expenses
General and administrative expenses
Total operating expenses
Income/(loss) from operations
Other income/(expenses):
Interest income
Interest expense
Investment income/(loss), net
Gain on deconsolidation and disposal of businesses
Foreign currency exchange gain/(loss), net
Others, net
Income/(loss) before tax
Income tax benefits/(expenses)
Net income/(loss)
Add: Net loss attributable to noncontrolling interests
Less: Deemed dividend to mezzanine classified noncontrolling interests
Accretion to preference shares redemption values
Income attributable to preference shareholders
Net income/(loss) attributable to 58.com Inc.
Net income/(loss)
Other comprehensive income/(loss):
Foreign currency translation adjustment, net of nil tax
Unrealized gain/(loss) on available-for-sale securities
Total comprehensive income/(loss)
Net income/(loss) per ordinary share attributable to ordinary shareholders - basic
Net income/(loss) per ordinary share attributable to ordinary shareholders - diluted
Net income/(loss) per ADS attributable to ordinary shareholders - basic (One ADS represents
two ordinary shares)
Net income/(loss) per ADS attributable to ordinary shareholders - diluted (One ADS represents
two ordinary shares)
Weighted average number of ordinary shares used in computing basic earnings/(losses) per
share
Weighted average number of ordinary shares used in computing diluted earnings/(losses) per
share
Note:
(1)
For the Year Ended December 31,
2014
2015
2013
85,725
58,457
—
1,565
145,747
(8,471)
137,276
(84,534)
(25,138)
(12,983)
(122,655)
14,621
603
—
2,728
—
548
1,057
19,557
—
19,557
—
—
(9,134)
(1,230)
9,193
19,557
(570)
—
18,987
0.14
0.13
0.29
0.27
139,490
125,033
—
455
264,978
(13,844)
251,134
(180,148)
(43,676)
(20,633)
(244,457)
6,677
8,527
—
10,245
—
(2,510)
5,891
28,830
(6,186)
22,644
—
—
—
—
22,644
22,644
396
(1,111)
21,929
0.13
0.13
0.27
0.26
297,150
385,543
23,046
9,097
714,836
(51,268)
663,568
(689,014)
(121,404)
(105,049)
(915,467)
(251,899)
4,180
(8,191)
(139,779)
119,238
(1,743)
7,286
(270,908)
7,952
(262,956)
12,920
(898)
—
—
(250,934)
(262,956)
(174,419)
2,978
(434,397)
(1.07)
(1.07)
(2.14)
(2.14)
63,717,007
168,589,273
234,811,986
69,159,524
174,024,997
234,811,986
Share-based compensation expenses were allocated in cost of revenues and operating expenses as follows:
Cost of revenues
Sales and marketing expenses
Research and development expenses
General and administrative expenses
36
445
996
1,388
18
1,395
2,403
2,357
121
6,997
9,432
11,510
The accompanying notes are an integral part of these consolidated financial statements.
F-4
58.com Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY/(DEFICIT)
For the Years Ended December 31, 2013, 2014 and 2015
(U.S. dollars in thousands, except share data and per share data, unless otherwise noted)
Ordinary shares
Shares*
Amount
Additional
paid-in
capital
Accumulated
deficit
income/(loss)
Accumulated
other
comprehensive Noncontrolling
Total
shareholders’
Balance as of December 31, 2012
Share-based compensation
Exercise of share options
Preference shares accretions
Net income
Foreign currency translation adjustment, net of nil tax
Issuance of ordinary shares upon initial public offering (“IPO”), net of issuance
costs of US$4,575
Conversion of preference shares upon IPO
Balance as of December 31, 2013
Share-based compensation
Exercise of share options
Net income
Foreign currency translation adjustment, net of nil tax
Unrealized loss on available-for-sale securities
Issuance of ordinary shares upon follow-on offering, net of issuance costs of
US$1,253
Issuance of ordinary shares to Tencent Holdings Limited (“Tencent”), net of
issuance costs of US$104
Repurchase of ordinary shares from pre-IPO shareholders
Balance as of December 31, 2014
Share-based compensation
Exercise of share options and restricted share units
Net loss
Foreign currency translation adjustment, net of nil tax
Unrealized gain on available-for-sale securities
Issuance of ordinary shares to Tencent
Equity consideration for acquisition of Anjuke Inc. (“Anjuke”)
Equity consideration for equity investment in Falcon View Technology (“Ganji”)
Equity consideration for step acquisition of Ganji
Subsequent settlement of receivables from option holders
Deconsolidation of 58 Daojia Inc. (“58 Home”)
Deemed dividend to mezzanine classified noncontrolling interests
Acquisition of noncontrolling interests in subsidiaries
Compensation to noncontrolling shareholders resulting from waiver of receivables
from 58 Home
Other
Balance as of December 31, 2015
44,245,388
—
—
—
—
—
27,064,706
87,566,599
158,876,693
—
4,297,268
—
—
—
4,000,000
36,805,000
(27,603,750)
176,375,211
—
1,657,086
—
—
—
19,651,960
4,839,372
34,039,136
46,505,912
—
—
—
—
1
—
—
—
—
—
—
1
2
—
—
—
—
—
—
—
—
2
—
—
—
—
—
—
—
—
1
—
—
—
—
—
2,865
557
(3,217)
—
—
210,421
148,650
359,276
6,173
3,304
—
—
—
(152,059)
—
—
(5,917)
19,557
—
—
—
(138,419)
—
—
22,644
—
—
(6)
—
—
—
—
(570)
—
—
(576)
—
—
—
396
(1,111)
71,707
—
—
735,996
(552,075)
624,381
27,762
3,460
—
—
—
532,288
93,957
911,244
1,161,656
173
—
(898)
—
—
—
(115,775)
—
—
(250,036)
—
—
—
—
—
—
—
—
—
—
—
—
(365,811)
—
—
(1,291)
—
—
—
(174,515)
2,978
—
—
—
—
—
—
—
—
—
—
(172,828)
—
—
283,068,677
—
—
(612)
—
3 3,353,411
* Ordinary shares include Class A ordinary shares and Class B ordinary shares, please refer to Note 21.
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Interest
equity/(deficit)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
298
—
(12,920)
96
—
—
—
—
—
—
(600)
—
7,453
12,147
612
7,086
(152,064)
2,865
557
(9,134)
19,557
(570)
210,421
148,651
220,283
6,173
3,304
22,644
396
(1,111)
71,707
735,996
(552,075)
507,317
28,060
3,460
(262,956)
(174,419)
2,978
532,288
93,957
911,244
1,161,657
173
(600)
(898)
7,453
12,147
—
2,821,861
58.com Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2013, 2014 and 2015
(U.S. dollars in thousands, except share data, unless otherwise noted)
For the Year Ended December 31,
2014
2015
2013
Cash flows from operating activities:
Net income/(loss)
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating
activities:
Share-based compensation expenses
Depreciation and amortization expenses
Investment (income)/loss
Interest expense
Allowance for doubtful accounts and other current assets write-off
Compensation to noncontrolling shareholders resulting from waiver of receivables from 58
Home
Bargain purchase gain
Gain on deconsolidation and disposal of businesses
Impairment loss of long-term investment
Loss on disposal of property and equipment
Deferred income taxes
Foreign currency exchange (gain)/loss, net
Changes in operating assets and liabilities:
Accounts receivable
Prepayments and other assets
Accounts payable
Deferred revenues
Customer advances and deposits
Salary and welfare payable
Taxes payable
Accrued expenses and other current liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Purchase of property and equipment
Purchase of intangible assets
Cash received for disposal of property and equipment
Purchase of land use rights
Purchase of long-term investments
Purchase of term deposits
Proceeds from maturity of term deposits
Purchase of short-term investments
Proceeds from maturity of short-term investments
Cash paid for acquisition of Anjuke, net of acquisition of cash
Cash paid for equity investment in Ganji
Cash paid for step-acquisition of Ganji, net of acquisition of cash
Cash received/(paid) for acquisitions of other subsidiaries, net of acquisition of cash
Net cash received upon deconsolidation and disposal of businesses
Purchase of convertible note issued by Guazi.com Inc. (“Guazi”)
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from exercise of share options
Proceeds from short-term loans
Proceeds from issuance of 25,300,000 Class A ordinary shares in IPO
Proceeds from issuance of 1,764,706 Class A ordinary shares in the private placement to DCM
Hybrid RMB Fund concurrently with IPO
Proceeds from issuance of 4,000,000 Class A ordinary shares in follow-on offering
Proceeds from issuance of ordinary shares to Tencent
Payments for repurchase of ordinary share from pre-IPO shareholders
Payment for issuance expenses
Net cash provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Supplemental disclosure of cash flow information:
Income tax paid/(refund), net
Supplemental disclosure of non-cash activities:
Property and equipment in accounts payable
Accretions to preference shareholders redemption values
Deemed dividend to mezzanine classified noncontrolling interests
Equity consideration for acquisition of Anjuke
Equity consideration for equity investment in Ganji
Equity consideration for step acquisition of Ganji
19,557
22,644
(262,956)
2,865
4,657
—
—
—
—
—
—
—
—
—
(548)
(1,097)
(2,318)
(2,647)
26,145
10,329
5,549
387
3,425
66,304
(4,177)
—
—
—
—
(152,190)
—
(397,266)
323,587
—
—
—
—
—
—
(230,046)
557
—
199,954
15,000
—
—
—
(2,168)
213,343
224
49,825
10,669
60,494
—
28
9,134
—
—
—
—
6,173
5,607
(2,146)
—
—
—
—
—
—
40
—
2,510
(1,990)
(16,000)
6,021
40,229
14,615
10,785
5,128
4,969
98,585
(32,476)
—
44
—
(23,781)
(382,552)
250,907
(652,892)
535,322
—
—
—
156
—
—
(305,272)
3,286
—
—
—
72,960
736,100
(552,075)
(2,841)
257,430
139
50,882
60,494
111,376
1,194
1,813
—
—
—
—
—
28,060
33,166
149,003
8,191
1,877
12,147
(1,650)
(119,238)
949
593
(5,465)
1,743
(24,163)
(16,753)
41,888
46,668
70,408
22,459
61
23,797
10,785
(195,446)
(883)
229
(596)
(81,307)
(20,000)
324,616
(471,751)
709,350
(124,646)
(289,824)
(244,645)
(42,793)
44,515
(50,000)
(443,181)
3,430
401,563
—
—
—
400,000
—
—
804,993
(668)
371,929
111,376
483,305
(1,119)
6,537
—
898
93,957
911,244
1,161,657
Cash consideration payable for acquisition of Anjuke
Cash consideration payable for equity investment in Ganji
Cash consideration payable for step acquisition of Ganji
Early repayment of convertible note by issuance of ordinary share to Tencent
—
—
—
—
—
—
28,962
122,413
151,368
132,288
The accompanying notes are an integral part of these consolidated financial statements.
F-6
58.com Inc.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share, per share and per ADS data, unless otherwise noted)
1. Organization and principal activities
a. Background
58.com Inc. (the "Company"), through its consolidated subsidiaries, including wholly-foreign owned enterprises (“WFOEs”), variable interest
entities ("VIEs") and VIEs’ subsidiaries (collectively, the "Group"), is primarily engaged in the operation of an online marketplace serving local merchants
and consumers in the People's Republic of China (the "PRC" or "China") through its website 58.com.
b. History of the Group and basis of presentation
The Company (formerly known as "China Classified Network (Cayman) Corporation") was incorporated as a limited liability company in the
Cayman Islands in May 2011. Through a share exchange in July 2011, all the shareholders of China Classified Network Corporation ("CCNC BVI")
exchanged all of their outstanding ordinary and preference shares of CCNC BVI for ordinary and preference shares of the Company on a one-for-one basis.
As a result, CCNC BVI became a wholly owned subsidiary of the Company. Given there was no change in each shareholder's proportionate shareholdings
and respective rights and obligations before and after the share exchange, the transaction was accounted for in a manner similar to a pooling-of-interest with
the assets and liabilities stated at their historical amounts in the Company's consolidated financial statements.
The Group began its operations in China in December 2005 through Beijing 58, a PRC limited liability company founded by Mr. Jinbo Yao, the
CEO of the Group, and several angel investors (collectively, “the Founding Shareholders”). Other entities within the Group listed above were established
by the shareholders of the Company to facilitate the Group to conduct overseas financing and in anticipation of the Company’s initial public offering
overseas.
Through a series of contemplated transactions in July 2006, Chengshi Wangxun (Beijing) Information Technology Co., Ltd., or Wangxun, was
established to control Beijing 58 through contractual arrangements and to receive overseas financing from SB Asia Investment Fund II L.P. ("SAIF").
Through another series of contemplated transactions in 2010, CCNC BVI became the parent company of the Group and received additional overseas
financing from DCM V.L.P. and DCM Affiliates Fund V.L.P. (collectively, the "DCM") via (i) the establishment of CCNC BVI, (ii) the repurchase and
issuance of shares by CCNC BVI to provide shareholders with their prior proportionate equity interests in the Group, (iii) the establishment of subsidiaries
CCIC HK and Wanglin, (iv) a change in Beijing 58's primary beneficiary from Wangxun to Wanglin, and (v) the issuance of preference shares to DCM.
Throughout these reorganization transactions, the Group's business continued to be carried out by Beijing 58 without changes in senior management or
changes in control of Beijing 58. Accordingly, pursuant to the guidance in ASC 805, "Business Combinations", the new entities that were established to
consolidate Beijing 58 were identified as the acquirees for accounting purposes and there was no change in financial statements preparation basis as the
result of these reorganization transactions.
On October 31, 2013, the Company’s ADSs commenced trading on the New York Stock Exchange. The Company completed its IPO on
November 5, 2013, and raised US$199,954 in proceeds after deducting underwriter commissions from the initial public offering of 12,650,000 ADSs,
representing 25,300,000 Class A ordinary shares, at the price of US$17.0 per ADS. Concurrently with the Company’s IPO, the Company also raised
US$15,000 from DCM Hybrid RMB Fund, L.P., a fund affiliated with DCM V, L.P., the Company’s existing shareholder, by private placement of
1,764,706 Class A ordinary shares at a price of US$8.50 per share. As a result of the initial public offering and the concurrent private placement, the
Company raised an aggregate of approximately US$214,954 in net proceeds.
Upon the completion of the IPO, all of the Company’s 87,566,599 outstanding preference shares were converted into and the 44,245,388
outstanding ordinary shares were designated as Class B ordinary shares immediately as of the same date at one-for-one basis.
Please refer to Note 21 for the dual class structure and also issuance of ordinary shares in 2014 and 2015.
F-7
c. Acquisitions and disposals in 2015
In March 2015, the Company acquired Anjuke, a major online real estate listing platform in China, through the purchase of 100% equity interest
in Anjuke Inc., a company incorporated under the laws of the Cayman Islands, for a combination of share consideration and cash, including 4,839,372
newly issued ordinary shares of the Company and US$160,198 in cash. The Company also issued 248,216 fully vested restricted share units of the
Company to former Anjuke employees as part of the share consideration.
In April 2015, the Company acquired less than 50% equity stake in Falcon View Technology, or Ganji, the holding company of the PRC entities
operating Ganji.com, a major online local services platform in China, for a combination of share consideration and cash, including 34,039,136 newly issued
ordinary shares of the Company (one American Depositary Share, or "ADS", represents two ordinary shares) and US$412,237 in cash.
Concurrent with the aforementioned acquisition of a strategic stake in Ganji and incremental to its then existing share ownership of the
Company, Tencent purchased additional newly issued ordinary shares of the Company for US$400,000 at a purchase price of US$26.00 per ordinary share,
equivalent to US$52.00 per ADS.
In August 2015, the Company, as a limited partner, committed an aggregate of 46,505,912 newly issued ordinary shares and approximately
US$406,673 in cash to several private equity funds, of which 46,505,912 ordinary shares and US$272,396 cash were contributed to the funds in August
2015. These funds are dedicated to investing in businesses in China and separately managed by different investment entities, as general partners, which are
unaffiliated with each other and unaffiliated with the Company. These funds, together with Tencent, acquired all the remaining equity interest in Ganji in
August 2015. The Company also transferred an aggregate of 4,449,002 fully vested restricted share units of the Company and approximately US$50,967 in
cash to former Ganji employees as part of the total consideration of step acquisition of Ganji. The Company considered that it has a controlling financial
interest over the equity funds under the voting interest model, and as a result has consolidated Ganji since August 6, 2015.
In addition to business acquisition of Anjuke and Ganji, in 2015, the Group additionally entered into several acquisitions. All of these
acquisitions are accounted for as business combinations because these acquisitions involved the Group obtaining control of one or more existing businesses
in exchange for cash. Therefore, the Group accounts for them as business combinations using the purchase method of accounting. This method requires the
acquisition cost to be allocated to the assets and liabilities acquired based on their fair values. The Group makes estimates and judgments in determining the
fair value of the acquired assets and liabilities, with the assistance from an independent valuation firm. See Note 4—“Business acquisitions and equity
investment transactions” for additional information.
In November 2015, the Company deconsolidated 58 Home upon the completion of issuance of Series A preference shares by 58 Home. Certain
approval rights were granted to a noncontrolling preference shareholder of 58 Home in relation to (i) annual budget and (ii) employment of certain key
management members of 58 Home, and such approval rights granted to the noncontrolling preference shareholder of 58 Home were considered as
substantive participating rights in accordance with ASC 810-10. Accordingly, the Company deconsolidated 58 Home upon completion of the transaction
and recognized a gain on deconsolidation of 58 Home of US$45,998.
In December 2015, the Company divested its controlling ownership stake in Guazi, a subsidiary that operates its consumer-to-consumer (C2C)
used car trading platform, to Mr. Mark Haoyong Yang, former co-chairman of the board of directors and co-CEO for a cash consideration of US$50,000.
Upon completion of the transaction, the Group retained approximately 45.6% equity stake in Guazi and no longer has the control of Guazi. Therefore, the
Group deconsolidated Guazi since December 31, 2015 and recognized a gain on disposal of Guazi of US$73,240.
d. Major subsidiaries and VIEs
In 2015, the Company's major subsidiaries, VIEs and VIEs’ subsidiaries are as follows:
F-8
Name
Wholly owned and majority owned subsidiaries of the Company:
China Classified Network Corporation (“CCNC BVI”)
China Classified Information Corporation Limited (“CCIC HK”)
Beijing Chengshi Wanglin Information Technology Co., Ltd.
(“Wanglin”)
58 Tongcheng Information Technology Co., Ltd. ("58 Technology")
Anjuke Inc. (“Anjuke”)
Ruiting Network Technology (Shanghai) Co., Ltd. (“Shanghai
Ruiting”)
58 Daojia Inc. (“58 Home”)
Beijing 58 Daojia Information Technology Co., Ltd. (“Beijing 58
Home”)
58.com Holdings Inc. (“58 Holdings”)
Falcon View Technology (“Ganji”)
Beijing Yangguang Gudi Science Development Co., Ltd.
(“Yangguang Gudi”)
VIEs and VIEs’ subsidiaries:
Beijing 58 Information Technology Co., Ltd. (“Beijing 58”)
58 Co., Ltd.
Shanghai Ruijia Information Technology Co., Ltd.
Tianjin 58 Daojia Life Services Co., Ltd. (“Tianjin 58 Home”)
Beijing 58 Auto Technology Co., Ltd. (formerly known as Beijing
Leftbrain Network Technology Co., Ltd. (“Leftbrain”))
Beijing Shanjing Kechuang Network Technology Co., Ltd.
(“Shanjing Kechuang”)
Date of
incorporation and
acquisition
Place of
incorporation
January 5, 2010
January 18, 2010
British Virgin Islands
Hong Kong
March 8, 2010
March 15, 2012
March 2, 2015
PRC
PRC
Cayman
March 2, 2015
January 26, 2015
PRC
British Virgin Islands
July 10, 2015
July 11, 2014
August 6, 2015
August 6, 2015
December 12, 2005
July 28, 2011
March 2, 2015
August 19, 2014
November 26, 2015
August 6, 2015
PRC
British Virgin Islands
Cayman
PRC
PRC
PRC
PRC
PRC
PRC
PRC
Percentage of
direct or
indirect
economic
ownership
100%
100%
100%
100%
100%
100%
*
*
100%
**
**
100%
100%
100%
*
70%
**
* 58 Home completed its Series A equity financing in November 2015. As certain approval rights were granted to a noncontrolling preference shareholder
and such rights were considered as substantive participating rights in accordance with ASC 810-10, accordingly, the Company deconsolidated 58 Home
and its subsidiaries and VIE upon completion of the transaction. See Note 5 for more information.
** Falcon View Technology, or Ganji, is the holding company of the PRC entities operating Ganji.com, a major online local services platform in China.
In April 2015, the Company acquired a less than 50% equity stake in Ganji. In August 2015, the Company, as a limited partner, contributed newly issued
Class A ordinary shares and cash to several private equity funds, which are managed by investment entities unaffiliated with each other and unaffiliated
with the Company. These funds, together with Tencent, acquired all the remaining equity interest in Ganji in August 2015. Since August 2015, the
Company has consolidated the financial results of Ganji in its consolidated financial statements. See Note 4(b) for more information.
e. Contractual arrangements with the Group’s VIEs
(i)
Contractual Arrangements with Beijing 58
The Company’s subsidiary Wanglin has entered into contractual arrangements with Beijing 58 and its shareholders described below, which are
referred to as the Beijing 58 Agreements. Through the Beijing 58 Agreements, the Company exercises control over the operations of Beijing 58 and
receives substantially all its economic benefits and residual returns.
Through the amended and restated exclusive business cooperation agreement between Beijing 58 and Wanglin, Wanglin agrees to provide certain
technical and business support and related consulting services to Beijing 58 in exchange for service fees. In addition, pursuant to the amended and restated
exclusive option agreement, Beijing 58 is prohibited from declaring and paying any dividends without Wanglin’s prior consent and Wanglin enjoys an
irrevocable and exclusive option to purchase Beijing 58 shareholders’ equity interests, to the extent permitted by applicable PRC laws, at a nominal price
from Beijing Wanglintong Information Technology Co., Ltd. (“Beijing Wanglintong”), which is one of the shareholders of Beijing 58, or at a specified
price equal to the loan provided by Wanglin to the individual shareholders. If the lowest price permitted under PRC law is higher than the above price, the
lowest price permitted under PRC law shall apply. Through the arrangements, the Company can obtain all of Beijing 58’s income and all of its residual
interests, such as undistributed earnings, either through dividend distribution or purchase of Beijing 58’s equity interests from its existing shareholders. As
a result of the contractual arrangements, the Company consolidates Beijing 58’s financial results in the consolidated financial statements in accordance
with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
F-9
Exclusive Business Cooperation Agreement
Under the exclusive business cooperation agreement between Beijing 58 and Wanglin, as amended and restated, Wanglin has the exclusive right to
provide, among other things, technical support and business support and related consulting services to Beijing 58 and Beijing 58 agrees to accept all the
consultation and services provided by Wanglin. Without Wanglin’s prior written consent, Beijing 58 is prohibited from engaging any third party to provide
any of the services under this agreement. In addition, Wanglin exclusively owns all intellectual property rights arising out of or created during the
performance of this agreement. Beijing 58 agrees to pay a quarterly service fee to Wanglin at an amount determined solely by Wanglin after taking into
account factors including the complexity and difficulty of the services provided, the time consumed, the seniority of the Wanglin employees providing
services to Beijing 58, the value of services provided, the market price of comparable services and the operating conditions of Beijing 58. This agreement
will remain effective unless Wanglin terminates the agreement in writing or a competent governmental authority rejects the renewal applications by either
Beijing 58 or Wanglin to renew its respective business license upon expiration. Beijing 58 is not permitted to terminate this agreement in any event unless
required by applicable laws. In 2015, Wanglin provided technical support services to Beijing 58 and its subsidiaries and collected service fee payments of
approximately US$384.
Powers of Attorney
Pursuant to the powers of attorney, the shareholders of Beijing 58 each irrevocably appointed Wanglin as the attorney-in-fact to act on their behalf
on all matters pertaining to Beijing 58 and to exercise all of their rights as a shareholder of Beijing 58, including but not limited to attend shareholders’
meetings, vote on their behalf on all matters of Beijing 58 requiring shareholders’ approval under PRC laws and regulations and the articles of association
of Beijing 58, designate and appoint directors and senior management members. Wanglin may authorize or assign its rights under this appointment to any
other person or entity at its sole discretion without prior notice to the shareholders of Beijing 58. Each power of attorney will remain in force until the
shareholder ceases to hold any equity interest in Beijing 58.
Equity Interest Pledge Agreements
Under the equity interest pledge agreements between Wanglin, Beijing 58 and the shareholders of Beijing 58, as amended and restated, the
shareholders pledged all of their equity interests in Beijing 58 to Wanglin to guarantee Beijing 58’s and Beijing 58’s shareholders’ performance of their
obligations under the contractual arrangements including, but not limited to, the payments due to Wanglin for services provided. If Beijing 58 or any of
Beijing 58’s shareholders breaches its contractual obligations under the contractual arrangements, Wanglin, as the pledgee, will be entitled to certain rights
and entitlements, including receiving proceeds from the auction or sale of whole or part of the pledged equity interests of Beijing 58 in accordance with
legal procedures. Wanglin has the right to receive dividends generated by the pledged equity interests during the term of the pledge. If any event of default
as provided in the contractual arrangements occurs, Wanglin, as the pledgee, will be entitled to dispose of the pledged equity interests in accordance with
PRC laws and regulations. The pledge will become effective on the date when the pledge of equity interests contemplated in these agreements are
registered with the relevant local administration for industry and commerce and will remain binding until Beijing 58 and its shareholders discharges all
their obligations under the contractual arrangements. These equity interest pledge agreements were registered with Chaoyang Branch of Beijing
Administration for Industry and Commerce in July 2013.
Exclusive Option Agreements
Under the exclusive option agreements among Wanglin, as amended and restated, Beijing 58 and each of the shareholders of Beijing 58, each of
the shareholders irrevocably granted Wanglin or its designated representative(s) an exclusive option to purchase, to the extent permitted under PRC law, all
or part of his, her or its equity interests in Beijing 58. In addition, Wanglin has the option to acquire all the equity interests of Beijing 58 for either a
nominal price from Beijing Wanglintong, or at a specified price equal to the loan provided by Wanglin to the individual shareholders. If the lowest price
permitted under PRC law is higher than the above price, the lowest price permitted under PRC law shall apply. Wanglin or its designated representative(s)
have sole discretion as to when to exercise such options, either in part or in full. Without Wanglin’s prior written consent, Beijing 58’s shareholders shall
not transfer, donate, pledge, or otherwise dispose any equity interests in Beijing 58. These agreements will remain effective until all equity interests held in
Beijing 58 by the Beijing 58’s shareholders are transferred or assigned to Wanglin or Wanglin’s designated representatives. At the moment, the Company
cannot exercise the exclusive option to purchase the current shareholders’ equity interests in Beijing 58 due to the PRC regulatory restrictions on foreign
ownership in the value-added telecommunications services. The Company intends to exercise such option once China opens up these industries to foreign
investment.
F-10
Loan Agreements
Pursuant to the loan agreements between Wanglin and each individual shareholder of Beijing 58, Wanglin provided interest-free loans with an
aggregate amount of approximately RMB7.8 million to the individual shareholders of Wanglin for the sole purpose of funding the capital increase of
Beijing 58. The loans can be repaid by transferring the individual shareholders’ equity interest in Beijing 58 to Wanglin or its designated person pursuant to
Exclusive Option Agreements. The term of each loan agreement is ten years from the date of the agreement expiring on December 1, 2021 and can be
extended with the written consent of both parties before expiration.
(ii)
Contractual Arrangements with Shanjing Kechuang
Ganji, through its PRC subsidiary, Yangguang Gudi, has entered into contractual arrangements with Shanjing Kechuang and its shareholders
described below, which are referred to as the Shanjing Kechuang Agreements. Through the Shanjing Kechuang Agreements, Ganji exercises control over
the operations of Shanjing Kechuang and receives substantially all its economic benefits and residual returns. Through the exclusive business cooperation
agreement between Yangguang Gudi and Shanjing Kechuang, Yangguang Gudi agrees to provide certain technical and business support and related
consulting services to Shanjing Kechuang in exchange for service fees. In addition, pursuant to the exclusive option agreements, Shanjing Kechuang is
prohibited from declaring and paying any dividends without Yangguang Gudi’s prior consent and Yangguang Gudi enjoys an irrevocable and exclusive
option to purchase Shanjing Kechuang shareholders’ equity interests, to the extent permitted by applicable PRC laws, at a specified price equal to the loan
amount provided by Yangguang Gudi to the shareholders. If the lowest price permitted under PRC law is higher than the above price, the lowest price
permitted under PRC law shall apply. Through these arrangements, Ganji can obtain all of the income and the interests of Shanjing Kechuang, such as
undistributed earnings, either through dividend distributions or purchase of equity interests of Shanjing Kechuang from its existing shareholders. As a result
of the contractual arrangements, the Company, through Ganji, consolidates the financial results of Shanjing Kechuang in its consolidated financial
statements in accordance with U.S. GAAP.
Exclusive Business Cooperation Agreement
The terms and arrangements of the exclusive business cooperation agreement between Yangguang Gudi and Shanjing Kechuang are substantially
similar to those under the Beijing 58 Agreements. In 2015, Yangguang Gudi provided technical support services to Shanjing Kechuang amounted to
US$2,008 but no service fees were collected in 2015.
Powers of Attorney
Each shareholder of Shanjing Kechuang has executed a power of attorney to irrevocably appoint Yangguang Gudi as the attorney-in-fact to act on
the shareholder’s behalf. The terms of the powers of attorney are substantially similar to those under the Beijing 58 Agreements.
Equity Interest Pledge Agreements
Yangguang Gudi, Shanjing Kechuang and each of the shareholders of Shanjing Kechuang have entered into equity interest pledge agreements with
terms and arrangements that are substantially similar to those under the Beijing 58 Agreements. These equity interest pledge agreements were registered
with Shunyi Branch of Beijing Administration for Industry and Commerce Bureau on March 18, 2016 for the three individual nominee shareholders and
April 1, 2016 for 58 Co., Ltd., respectively.
Exclusive Option Agreements
Yangguang Gudi, Shanjing Kechuang and each of the shareholders of Shanjing Kechuang have entered into exclusive option agreements with
terms and arrangements that are substantially similar to those under the Beijing 58 Agreements. At the moment, Ganji cannot exercise the exclusive options
to purchase the current shareholders’ equity interests in Shanjing Kechuang due to the PRC regulatory restrictions on foreign ownership in the value-added
telecommunications services. Ganji may exercise the options if China opens up these industries to foreign investment.
Loan Agreements
Yangguang Gudi and each shareholder of Shanjing Kechuang have entered into loan agreements with an aggregate amount of interest-free loans of
approximately RMB38.7 million. The terms of the loan agreements are substantially similar to those under the Beijing 58 Agreements and each loan
agreement expires on August 6, 2025 and can be extended with the written consent of both parties before expiration.
F-11
(iii)
58 Home’s Contractual Arrangements with Tianjin 58 Home
58 Home has through Beijing 58 Home entered into contractual arrangements with Tianjin 58 Home and its shareholders described below, which
are referred to as the Tianjin 58 Home Agreements. Through the Tianjin 58 Home Agreements, Beijing 58 Home exercises control over the operations of
Tianjin 58 Home and receives substantially all its economic benefits and residual returns. Through the exclusive business cooperation agreement between
Beijing 58 Home and Tianjin 58 Home, Beijing 58 Home agrees to provide certain technical and business support and related consulting services to Tianjin
58 Home in exchange for service fees. In addition, pursuant to the exclusive option agreements, Tianjin 58 Home is prohibited from declaring and paying
any dividends without Beijing 58 Home’s prior consent and Beijing 58 Home enjoys an irrevocable and exclusive option to purchase Tianjin 58 Home
shareholders’ equity interests, to the extent permitted by applicable PRC laws, at a specified price equal to the loan amount provided by Beijing 58 Home to
the shareholders. If the lowest price permitted under PRC law is higher than the above price, the lowest price permitted under PRC law shall apply.
Through these arrangements, 58 Home can obtain all of the income and the residual interests of Tianjin 58 Home, such as undistributed earnings, either
through dividend distributions or purchase of equity interests of Tianjin 58 Home from its existing shareholders. As a result of the contractual
arrangements, 58 Home consolidates the financial results of Tianjin 58 Home in accordance with U.S. GAAP.
Exclusive Business Cooperation Agreement
The terms and arrangements of the exclusive business cooperation agreement between Tianjin 58 Home and Beijing 58 Home under the Tianjin 58
Home Agreements are substantially similar to those under the Beijing 58 Agreements, except that Tianjin 58 Home agrees to pay a monthly service fee to
Beijing 58 Home in an amount determined by both parties after taking into account factors similar to those provided under the Beijing 58 Agreements.
Beijing 58 Home did not collect any service fee payments from Tianjin 58 Home in 2015.
Powers of Attorney
Each shareholder of Tianjin 58 Home has executed a power of attorney to irrevocably appoint Beijing 58 Home as the attorney-in-fact to act on the
shareholder’s behalf. The terms of the powers of attorney are substantially similar to those under the Beijing 58 Agreements.
Equity Interest Pledge Agreements
Beijing 58 Home, Tianjin 58 Home and each of the shareholders of Tianjin 58 Home have entered into equity interest pledge agreements with
terms and arrangements that are substantially similar to those under the Beijing 58 Agreements. These equity interest pledge agreements are registered with
the Tianjin Binhai New Area Market and Quality Supervision and Administration Bureau on September 8, 2015.
Exclusive Option Agreements
Beijing 58 Home, Tianjin 58 Home and each of the shareholders of Tianjin 58 Home have entered into exclusive option agreements with terms and
arrangements that are substantially similar to those under the Beijing 58 Agreements, except that the purchase price to be paid by Beijing 58 Home to each
shareholder by exercising its option to purchase all the equity interests held by the shareholder in Tianjin 58 Home equal to the loan amount provided by
Beijing 58 Home to the shareholder. At the moment, 58 Home cannot exercise the exclusive options to purchase the current shareholders’ equity interests
in Tianjin 58 Home due to the PRC regulatory restrictions on foreign ownership in the value-added telecommunications services. 58 Home may exercise
the options if China opens up these industries to foreign investment.
Loan Agreements
Beijing 58 Home and each shareholder of Tianjin 58 Home have entered into loan agreements with an aggregate amount of interest-free loans of
approximately RMB100 million. The terms of the loan agreements are substantially similar to those under the Beijing 58 Agreements and each loan
agreement expires on August 5, 2025 and can be extended with the written consent of both parties before expiration.
F-12
Risks in Relation to the VIE Structure
As of December 31, 2015, the aggregate accumulated losses of VIEs and VIEs’ subsidiaries were approximately US$214,571, which has been
included in the consolidated financial statements.
The following financial statement amounts and balances of the Group's VIEs and VIEs’ subsidiaries were included in the accompanying
consolidated financial statements as of December 31, 2014 and 2015 and for the three years ended December 31, 2013, 2014 and 2015:
Cash and cash equivalents
Short-term investments
Accounts receivable, net
Prepayments and other current assets
Property and equipment, net
Long-term investments
Intangible assets, net and goodwill
Long-term prepayments and other non-current assets
Total assets
Accounts payable
Deferred revenues
Customer advances and deposits
Taxes payable
Salary and welfare payable
Inter-company payable
Accrued expenses and other current liabilities
Deferred tax liabilities
Other non-current liabilities
Total liabilities
As of December 31,
2014
US$
16,296
65,053
2,978
8,180
7,043
784
19
1,942
102,295
6,698
62,455
10,095
1,637
11,343
78,992
6,681
—
—
177,901
2015
US$
69,302
15,491
26,136
18,519
14,307
7,077
2,512,817
8,639
2,672,288
25,261
115,498
58,268
2,690
38,781
127,345
12,168
58,041
308
438,360
For the year ended December 31,
2014
US$
2015
US$
2013
US$
Revenue
Net income/(loss)
Net cash provided by operating activities
Net cash (used in)/provided by investing activities
Net cash provided by financing activities
72,427
8,473
4,116
(1,555)
—
101,819
(3,944)
68,132
(56,539)
—
268,076
(137,077)
35,004
20,628
—
Under the contractual arrangements with each of the VIEs and through their respective equity interest in their subsidiaries, the Group has the
power to direct activities of the VIEs and the VIEs’ subsidiaries and direct the transfer of assets out of the VIEs and the VIEs’ subsidiaries. Therefore the
Group considers that there is no asset of the VIEs and the VIEs’ subsidiaries that can be used only to settle their obligations. As the consolidated VIEs and
VIEs’ subsidiaries are incorporated as limited liability companies under the PRC Company Law, the creditors do not have recourse to the general credit of
the Company for the liabilities of the consolidated VIEs and the VIEs’ subsidiaries.
The Group believes that the contractual arrangements among each of the VIEs, their respective shareholders and relevant WFOE are in compliance
with PRC law and are legally enforceable. However, uncertainties in the PRC legal system could limit the Company’s ability to enforce these contractual
arrangements and if the shareholders of VIEs were to reduce their interest in the Company, their interests may diverge from that of the Company and that
may potentially increase the risk that they would seek to act contrary to the contractual terms.
The Company’s ability to control the VIEs also depends on the power of attorney and the WFOEs have to vote on all matters requiring shareholder
approval in the VIEs. As noted above, the Company believes this power of attorney is legally enforceable but may not be as effective as direct equity
ownership.
F-13
It is possible that the Group’s operation of certain of its businesses through the VIEs could be found by PRC authorities to be in violation of PRC
law and regulations prohibiting or restricting foreign ownership of companies that engage in such operations and businesses. While the Group’s
management considers the possibility of such a finding by PRC regulatory authorities under current PRC law and regulations to be remote, on January 19,
2015, the Ministry of Commerce of the PRC, or (the “MOFCOM”) released on its Website for public comment a proposed PRC law (the “Draft FIE Law”)
that appears to include VIEs within the scope of entities that could be considered to be foreign invested enterprises (or “FIEs”) that would be subject to
restrictions under existing PRC law and regulations on foreign investment in certain categories of industry. Specifically, the Draft FIE Law introduces the
concept of “actual control” for determining whether an entity is considered to be an FIE. In addition to control through direct or indirect ownership or
equity, the Draft FIE Law includes control through contractual arrangements within the definition of “actual control.” If the Draft FIE Law is passed by the
People’s Congress of the PRC and goes into effect in its current form, these provisions regarding control through contractual arrangements could be
construed to apply to the Group’s VIE arrangements, and as a result the Group’s VIEs could become explicitly subject to the current restrictions on foreign
investment in certain categories of industries. The Draft FIE Law includes provisions that would exempt from the definition of foreign invested enterprises
entities where the ultimate controlling shareholders are either entities organized under PRC law or individuals who are PRC citizens. The Draft FIE Law is
silent as to what type of enforcement action might be taken against existing VIEs that operate in restricted or prohibited industries and are not controlled by
entities organized under PRC law or individuals who are PRC citizens. If a finding were made by PRC authorities, under existing law and regulations or
under the Draft FIE Law if it becomes effective, that the Group’s operation of certain of its operations and businesses through the VIEs is prohibited, the
regulatory authorities with jurisdiction over the licensing and operation of such operations and businesses would have broad discretion in dealing with such
a violation, including levying fines, confiscating the Group’s income, revoking the business or operating licenses of the affected businesses, requiring the
Group to restructure its ownership structure or operations, or requiring the Group to discontinue any or all portion of its operations. Any of these actions
could cause significant disruption to the Group’s business operations, and have a severe adverse impact on the Group’s cash flows, financial position and
operating performance.
In addition, if the legal structure and contractual arrangements were found to be in violation of any other existing PRC laws and regulations, the
PRC government could:
•
•
•
•
•
•
•
revoke the Group’s business and operating licenses;
require the Group to discontinue or restrict operations;
restrict the Group’s right to collect revenues;
block the Group’s websites;
require the Group to restructure the operations in such a way as to compel the Group to establish a new enterprise, re-apply for the
necessary licenses or relocate its businesses, staff and assets;
impose additional conditions or requirements with which the Group may not be able to comply; or
take other regulatory or enforcement actions against the Group that could be harmful to the Group’s business.
The imposition of any of these penalties may result in a material and adverse effect on the Group’s ability to conduct the Group’s business. In
addition, if the imposition of any of these penalties causes the Group to lose the right to direct the activities of any of the VIEs (through its equity interest in
its subsidiaries) or the right to receive their economic benefits, the Group would no longer be able to consolidate the relevant VIE and its subsidiaries, if
any. In the opinion of management, the likelihood of loss in respect of the Group's current ownership structure or the contractual arrangements with its
VIEs is remote.
There is no VIE for which the Company has variable interest but is not the primary beneficiary.
Currently there is no contractual arrangement that could require the Company to provide additional financial support to VIEs. As the Company is
conducting its business mainly through VIEs, the Company may provide such support on a discretionary basis in the future, which could expose the
Company to a loss.
The Company’s VIEs’ assets are comprised of recognized and unrecognized revenue-producing assets. The recognized revenue producing assets
mainly include purchased servers, which were in the line of “Property and equipment, net” in the table above. The unrecognized revenue-producing assets
mainly consist of the Internet Content Provider license (“ICP” license), trademarks, copyrights and registered patents, which have no recorded value.
F-14
As of December 31, 2015, the VIEs hold the ICP license, which is necessary for the operation of the website and provision of value-added
telecommunications services in China, and have registered 320 trademarks, including
and 54 copyrights. The VIEs also have four
registered patents and applied for the registration of 13 other patents, which cover a variety of technologies, including those relating to data processing,
search, distribution and publishing.
and
The VIEs’ business operations rely in part on the technologies covered by the registered patents to generate revenues. Such technologies include
(1) the data verification and processing technology used to verify and process local merchant information; (2) the data researching technology provided to
end-users enable them to find the exact information they want in the shortest time; (3) the data publishing technology provided to end-users or merchants to
help them to publish their service information more efficiently.
f. Liquidity
As of December 31, 2015, current liabilities of the Group exceeded its current assets by US$499,791. The Group’s ability to continue as a going
concern is dependent on management’s ability to successfully execute its business plan, which includes increasing revenues while controlling operating
expenses, as well as generating operational cash flows and continuing to gain support from outside sources of financing. Management is of the opinion
that the Group can adjust the pace of its operation expansion and control the operating expenses of the Group. In addition, the Company obtained a
secured interest-bearing loan of US$275,000 from China Merchants Bank Co., Ltd in April 2016. Pursuant to the loan repayment schedule, US$167,500
out of US$275,000 principal amount will be repaid before December 31, 2016 and the remaining US$107,500 will be due on April 21, 2017. Based on the
above considerations, the management is of the opinion that the Group has sufficient funds to meet its working capital requirements and debt obligations.
As a result, the consolidated financial statements of the Group for the year ended December 31, 2015 have been prepared on a going concern basis.
2. Principal accounting policies
(a)
Principles of consolidation
The consolidated financial statements of the Group have been prepared in accordance with U.S. GAAP. The consolidated financial statements
include the financial statements of the Company, its subsidiaries, the VIEs and VIEs’ subsidiaries for which the Company is the ultimate primary
beneficiary.
Subsidiaries are those entities in which the Company, directly or indirectly, controls more than one half of the voting power; or has the power to
govern the financial and operating policies, to appoint or remove the majority of the members of the board of directors, or to cast a majority of votes at the
meeting of directors.
A VIE is an entity in which the Company or its subsidiary, through contractual arrangements, bears the risks of, and enjoys the rewards normally
associated with, ownership of the entity, and therefore the Company or its subsidiary is the primary beneficiary of the entity.
All significant transactions and balances among the Company, its subsidiaries, the VIEs and VIEs’ subsidiaries have been eliminated upon
consolidation. The results of subsidiaries and VIEs acquired or disposed of during the year are recorded in the consolidated statement of comprehensive
income/(loss) from the effective date of acquisition or up to the effective date of disposal, as appropriate.
The Company deconsolidates its subsidiaries in accordance with ASC 810-10-40-4 as of the date the Company ceased to have a controlling
financial interest in the subsidiaries.
The Company accounts for the deconsolidation of its subsidiaries by recognizing a gain or loss in net income/(loss) attributable to the Company in
accordance with ASC 810-10-40-5. This gain or loss is measured at the date the subsidiaries are deconsolidated as the difference between (a) the aggregate
of the fair value of any consideration received, the fair value of any retained noncontrolling interest in the subsidiaries being deconsolidated, and the
carrying amount of any noncontrolling interest in the subsidiaries being deconsolidated, including any accumulated other comprehensive income/(loss)
attributable to the noncontrolling interest, and (b) the carrying amount of the assets and liabilities of the subsidiaries being deconsolidated.
F-15
(b)
Use of estimates
The preparation of the Group’s consolidated financial statements in conformity with the U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities. Actual results could differ materially
from those estimates. Significant accounting estimates reflected in the Group’s consolidated financial statements mainly include revenue recognition, the
determination of the fair value of identifiable assets and liabilities acquired through business combination, the determination of the fair value of long-term
investments, the determination of the fair value of mezzanine equity, the determination of fair value of noncontrolling interests, the valuation allowance of
deferred tax assets, the determination of uncertain tax position, the valuation and recognition of share-based compensation, impairment of long-lived assets
and the determination of the estimated useful lives of property and equipment and intangible assets.
(c)
Functional currency and foreign currency translation
The Group uses United States dollar (“US$”) as its reporting currency. The functional currency of the Company and its subsidiaries incorporated
in the BVI and Hong Kong is US$, while the functional currency of the other entities in the Group is Renminbi (“RMB”). In the consolidated financial
statements, the financial information of the Company’s PRC subsidiaries, the VIEs and VIEs’ subsidiaries, which use RMB as their functional currency,
have been translated into US$. Assets and liabilities are translated at the exchange rates on the balance sheet date; equity amounts are translated at historical
exchange rates; and revenues, expenses, gains, and losses are translated using the average rate for the year. Translation adjustments arising from these are
reported as foreign currency translation adjustments and are shown as a component of other comprehensive income or loss in the consolidated statement of
changes in shareholders’ equity/(deficit).
Foreign currency transactions denominated in currencies other than the functional currency are translated into the functional currency using the
exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into the functional
currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are included in the consolidated statements
of comprehensive income/(loss).
(d)
Fair value of financial instruments
Accounting guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or
permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers
assumptions that market participants would use when pricing the asset or liability.
Accounting guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of
input that is significant to the fair value measurement. Accounting guidance establishes three levels of inputs that may be used to measure fair value:
Level 1 — Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets
Level 2 — Include other inputs that are directly or indirectly observable in the marketplace
Level 3 — Unobservable inputs which are supported by little or no market activity
The Group’s financial instruments mainly include cash and cash equivalents, term deposits, short-term investments, accounts receivable, long-term
investments, accounts payable, deferred revenues, customer advances and deposits, and accrued liabilities and other current liabilities. The carrying value
of the Company’s short-term financial instruments approximates their fair value because of their short maturities. Please see Note 18 for additional
information.
(e)
Cash and cash equivalents
Cash and cash equivalents represent cash on hand, demand deposits and highly liquid investments placed with banks or other financial institutions,
which are unrestricted as to withdrawal or use, and which have original maturities of three months or less and are readily convertible to known amounts
of cash.
F-16
The following table sets forth a breakdown of the Group’s cash and cash equivalents by currency denomination, jurisdiction and geographical
location as of December 31, 2014 and 2015:
US$ in thousands
China
Non
Hong
VIE
Kong
43,066
108
289,522 29,459
China
VIE
2
3,511
USA
3
3,944
RMB in thousands
Total
43,179
326,436
USA
434
247,043
Hong
Kong
7
6
China
VIE
China
Non VIE
317,156 99,706
324,952 449,928
Total
417,303
1,021,929
US$ in
thousands
Total
translated
to USD
111,376
483,305
December 31, 2014…..
December 31, 2015…..
(f)
Term deposits
Term deposits represent time deposits placed with banks with original maturities of more than three months to up to one year. Interest earned is
recorded as interest income in the consolidated statements of comprehensive income /(loss) during the periods presented.
(g)
Short-term investments
Short-term investments include investments in financial instruments with a variable interest rate indexed to performance of underlying assets and
investment in available-for-sale securities of a public traded company.
The Group carries these investments at fair value. Changes in the fair value are reflected in the consolidated statements of comprehensive income/
(loss) as investment income/(loss), net. Fair value is estimated based on quoted prices of similar products provided by banks at the end of each period. The
Group classifies the valuation techniques that use these inputs as Level 2 of fair value measurements. Please see Note 18 for additional information.
The available-for-sale securities are reported at fair values with the unrealized gains or losses recorded as accumulated other comprehensive
income or loss in equity. The Group reviews its available-for-sale securities for other-than-temporary impairment (“OTTI”) based on the specific
identification method. If the cost of an investment exceeds the investment’s fair value, the Group considers quantitative and qualitative evidence including
general market conditions, expected future performance of the investees, the duration and the extent to which the fair value of the investment is less than
the cost, and the Group’s intent and ability to hold the investment in determining whether to record an OTTI.
(h)
Accounts receivable, net
The carrying value of accounts receivable is reduced by an allowance that reflects the Group’s best estimate of the amounts that will not be
collected. The Group makes estimations for the collectability of accounts receivable considering many factors including but not limited to reviewing
accounts receivable balances, historical bad debt rates, accounts aging, repayment patterns, customer credit worthiness, financial conditions of the
customers and industry trend analysis, resulting in their inability to make payments due to the Group. An accounts receivable is written off after all
collection effort has ceased. The Group recognized US$ nil and US$1,818 allowance for doubtful accounts for the years ended December 31, 2014 and
2015, respectively.
(i)
Property and equipment, net
Property and equipment are stated at cost less accumulated depreciation and impairment. Property and equipment are depreciated over the
estimated useful lives on a straight-line basis. The estimated useful lives are as follows:
Buildings
Computers and equipment
Motor vehicles
Furniture and fixtures
Leasehold improvements
Software
30-50 years
3-5 years
4-5 years
5 years
Over the shorter of lease terms or
the estimated useful lives of assets
3-5 years
Expenditures for maintenance and repairs are expensed as incurred. The gain or loss on the disposal of property and equipment is the difference
between the net sales proceeds and the carrying amount of the relevant assets and is recognized in the consolidated statements of comprehensive income/
(loss).
F-17
(j)
Intangible assets, net
Intangible assets acquired through business acquisitions are recognized as assets separate from goodwill if they satisfy either the "contractual-
legal" or "separability" criterion. Purchased intangible assets and intangible assets arising from the acquisitions of subsidiaries, VIEs and the VIEs’
subsidiaries are recognized and measured at fair value upon acquisition. Separately identifiable intangible assets that have determinable lives continue to be
amortized over their estimated useful lives using the straight-line method as follows:
Customer relationships
Domain names and trademarks
Technology
2 - 3 years
9 - 10 years
4 - 5 years
Separately identifiable intangible assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows
resulting from the use of the asset and its eventual disposition. Measurement of any impairment loss for identifiable intangible assets is based on the
amount by which the carrying amount of the assets exceeds the fair value of the asset.
(k)
Land use rights, net
Land use rights are carried at cost less accumulated amortization. Amortization is provided to write off the cost of lease prepayments on a
straight-line basis over the period of the shorter of estimated useful lives which are generally 50 years or the terms of the land use rights purchase
agreements.
(l)
Goodwill
Goodwill represents the excess of the purchase consideration over the fair value of the identifiable tangible and intangible assets acquired and
liabilities assumed of the acquired entity as a result of the Company's acquisitions of interests in its subsidiaries and VIEs. Goodwill is not amortized but
is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that it might be impaired. The Company first
assesses qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. In the qualitative
assessment, the Company considers primary factors such as industry and market considerations, overall financial performance of the reporting unit, and
other specific information related to the operations. Based on the qualitative assessment, if it is more likely than not that the fair value of each reporting
unit is less than the carrying amount, the quantitative impairment test is performed.
In performing the two-step quantitative impairment test, the first step compares the fair values of each reporting unit to its carrying amount,
including goodwill. If the fair value of each reporting unit exceeds its carrying amount, goodwill is not considered to be impaired and the second step will
not be required. If the carrying amount of a reporting unit exceeds its fair value, the second step compares the implied fair value of goodwill to the
carrying value of a reporting unit's goodwill. The implied fair value of goodwill is determined in a manner similar to accounting for a business
combination with the allocation of the assessed fair value determined in the first step to the assets and liabilities of the reporting unit. The excess of the
fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied fair value of goodwill. This allocation process is only
performed for the purposes of evaluating goodwill impairment and does not result in an entry to adjust the value of any assets or liabilities. Application of
a goodwill impairment test requires significant management judgment, including the identification of reporting units, assigning assets, liabilities and
goodwill to reporting units, and determining the fair value of each reporting unit.
The Group performs impairment tests in the fourth quarter of each year. No impairment loss was recognized for all periods presented.
(m)
Long-term investments
Long-term investments represent the Group’s investments in privately held companies.
In accordance with ASC 323 “Investment-Equity Method and Joint Ventures”, the Group applies the equity method of accounting to equity
investments, in common stock or in-substance common stock, over which it has significant influence but does not own a majority equity interest or
otherwise control. Under the equity method, the Group initially records its investment at cost. The difference between the cost of the equity investment and
the amount of the underlying equity in the net assets of the equity investee is recognized as equity method goodwill or as an intangible asset as appropriate,
which is included in the equity method investment on the consolidated balance sheets. The Group subsequently adjusts the carrying amount of the
investment to recognize the Group's proportionate share of each equity investee's net income or loss into consolidated statements of comprehensive income/
(loss) after the date of acquisition. The Group will discontinue applying equity method if an investment (and additional financial supports to the investee, if
any) has been reduced to zero.
F-18
An investment in in-substance common stock is an investment that has risk and reward characteristics that are substantially similar to that entity’s
common stock. The Group considers subordination, risks and rewards of ownership and obligation to transfer value when determining whether an
investment in an entity is substantially similar to an investment in that entity’s common stock.
For long-term investments in equity securities that are not accounted for using equity method of accounting, and have no readily determinable fair
value, the cost method of accounting is used.
The Group continually reviews its long-term investments accounted for under the cost and equity methods to determine whether a decline in fair
value to below the carrying value is other than temporary. The primary factors the Group considers in its determination are the length of time that the fair
value of the investment is below the Group’s carrying value; the financial condition, operating performance and the prospects of the equity investee; and
other company specific information such as recent financing rounds. If the decline in fair value is deemed to be other than temporary, the carrying value of
the equity investee is written down to fair value.
Impairment charges in connection with the cost method investments of US$ nil and US$949 were recorded in the consolidated statements of
comprehensive income/(loss) for the years ended December 31, 2014 and 2015, respectively. No impairment charges in connection with the equity method
investments were recorded for the years ended December 31, 2014 and 2015.
(n)
Impairment of other long-lived assets
The carrying amounts of long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of assets to
future undiscounted net cash flows expected to be generated by the assets. Such assets are considered to be impaired if the sum of the expected
undiscounted cash flow is less than the carrying amount of the assets. The impairment to be recognized is measured by the amount by which the carrying
amounts of the assets exceed the fair value of the assets. No impairment of other long-lived assets was recognized for years ended December 31, 2013,
2014 and 2015.
(o)
Customer advances and deposits
Customers pay in advance to purchase membership services, online marketing services and other services. The cash proceeds received from
customers are initially recorded as customer advances and deposits and then transferred to deferred revenues when they are used to purchase desired
services.
(p)
Revenue recognition
The Group generates revenues primarily from membership, online marketing and E-commerce services. The Group sells its services through its
direct sales teams and third party sales agencies. Under the terms of the agreement with the sales agencies, the sales agencies remit to the Group a certain
percentage of the listed sales price. The Group recognizes revenue net of the amounts retained by the sales agencies because the sales agencies will offer
discretionary discount to the customer. Additionally, the Group does not receive information from the sales agencies indicating the amount of such
discounts offered to the customers or regarding the actual cash paid by the customers to the sales agencies. As such, the Group is unable to determine the
gross amounts paid by the customers to the sales agencies. Accordingly, the Group believes that it is more appropriate to recognize revenue net of the
amounts retained by the sale agencies. Revenue is recognized when persuasive evidence of an arrangement exists, the price is fixed or determinable, service
is performed and collectability of the related fee is reasonably assured.
The Group has adopted the gross presentation for business tax and related surcharges pursuant to ASC 605-45, "Revenue Recognition: Principal
Agent Considerations". The amount of business tax and related surcharges included in cost of revenues were US$1,742, US$1,632 and US$3,674 for the
years ended December 31, 2013, 2014 and 2015, respectively. Effective January 1, 2012, the PRC Ministry of Finance and the State Administration of
Taxation launched the Value Added Tax ("VAT") Pilot Program for certain industries in certain regions. According to the implementation circulars
released by the Ministry of Finance and the State Administration of Taxation on the Pilot Program, the "Modern Service Industries" includes research,
development and technological services, information technology services, cultural innovation services, logistics support, lease of corporeal properties,
attestation and consulting services. Subsidiaries in different regions were affected at different times as the program was rolled out. Most of the Company’s
entities were subject to the VAT Pilot Program as of December 31, 2014 and 2015. With the adoption of the Pilot Program, the Group’s revenues are
subject to VAT payable on goods sold or taxable labor services provided by a general VAT taxpayer for a taxable period. VAT payable is the net balance of
the output VAT for the period after deducting the input VAT for the period. Hence, the amount of VAT payable does not result directly from output VAT
generated from goods sold or taxable labor services provided. Accordingly, the Group has adopted the net presentation of VAT.
F-19
(i)
Membership
A membership is a basic services package mainly consisting of the following services: customer certification, display of an online storefront on the
Group’s platforms, preferential listing benefits such as limited daily priority listings and higher quota for free daily listings, access to the Group’s dedicated
customer service support team and online account management system. Membership revenues are recognized ratably over the contract period when
membership services are provided.
(ii)
Online marketing services
The Group’s online marketing services include time-based services and performance-based services. Revenues from time-based services are
recognized ratably over the service period. Revenues from performance-based services are recognized when the agreed performance criteria are achieved.
For service arrangements that include multiple deliverables, revenues are allocated to each unit of accounting based on relative selling price of each unit of
accounting according to the selling price hierarchy established by ASU No. 2009–13. The Group uses (a) vendor-specific objective evidence of selling
price, if it exists, (b) otherwise, third-party evidence of selling price. If neither (a) nor (b) exists, the Group will use (c) the management’s best estimate of
the selling price for that deliverable. Selling price is generally determined by vendor specific objective evidence.
(iii)
E-commerce services
The Group enters into promotional service agreements with real estate developers pursuant to which the Group is authorized to sell discount
coupons with face value ranging from RMB2,000 to RMB100,000 to prospective home buyers. The home buyers are required to prepay the full face value
of the coupon to the Group before they can use the coupon to purchase specified properties from the real estate developers at a discount significantly
greater than the coupon value. The coupon purchased by prospective home buyers is refundable before a purchase of the specified properties prior to the
expiry date of the coupon. The Group recognizes revenues when home buyers apply the discount coupon to pay for the purchase price of the specified
properties from real estate developers. Cash received in advance of the purchase of specified properties is recorded as customer advances.
(iv)
Other services
Other services include various off-line services provided. The Group recognises other service revenue when the related service is rendered.
(q)
Cost of revenues
Costs of revenues mainly consist of costs associated with the production and operation of websites, which include fees paid to third parties for
internet connection, content and services, payroll-related expenses, equipment depreciation associated with the website production and operation, and
business taxes, etc.
(r)
Advertising expenses
Advertising costs are generally prepaid to the third parties for television, internet and outdoor advertising services. Advertising costs are expensed
as sales and marketing expenses when the services are received. For the years ended December 31, 2013, 2014 and 2015, advertising expenses recognized
in the consolidated statements of comprehensive income/(loss) were US$22,703, US$73,435 and US$289,069, respectively.
(s)
Research and development expenses
Research and development expenses mainly consist of personnel, rent and depreciation expenses associated with the development of and
enhancement to the Group’s websites and expenses associated with research and development. The research and development expenses are expensed as
incurred for all the periods presented.
Costs incurred for the preliminary project stage of internal use software are expensed when incurred in research and development expenses. Costs
incurred during the application development stage are capitalized when certain criteria are met as stated in ASC 350-40. Costs incurred during the post-
implementation-operation stage are also expensed as incurred. As the period qualified for capitalization has historically been very short and the
development costs incurred during this period have been insignificant, development costs of internal use software to date have been expensed
when incurred.
F-20
(t)
Operating leases
Leases where substantially all the rewards and risks of ownership of assets remain with the lessors are accounted for as operating leases.
Payments made under operating leases are charged to the consolidated statements of comprehensive income/(loss) on a straight-line basis over the terms of
underlying lease.
(u)
Share-based compensation
All share-based awards to employees and directors, including share options, restricted share units (“RSUs”) and restricted shares (“RSs”) are
measured at the grant date based on the fair value of the awards. Share-based compensation, net of forfeitures, is recognized as expense on a straight-line
basis over the requisite service period, which is the vesting period.
The Group uses the binominal option pricing model to determine the fair value of share options and account for share-based compensation
expenses using an estimated forfeiture rate at the time of grant and revising the rate, if necessary, in subsequent periods if actual forfeitures differ from
initial estimates. Share-based compensation expenses are recorded net of estimated forfeitures such that expenses are recorded only for those share-based
awards that are expected to vest.
See Note 22 for further information regarding share-based compensation assumptions and expenses.
(v)
Income taxes
Current income taxes are provided on the basis of net income for financial reporting purposes, adjusted for income and expense items which are
not assessable or deductible for income tax purposes, in accordance with the regulations of the relevant tax jurisdictions. Deferred income taxes are
provided using the liability method. Under this method, deferred income taxes are recognized for the tax consequences of temporary differences by
applying enacted statutory rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing
assets and liabilities. The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes. The effect on deferred taxes of a
change in tax rates is recognized in the statement of comprehensive income/(loss) in the period of change. A valuation allowance is provided to reduce the
amount of deferred tax assets if it is considered more likely than not that some portion of, or all of the deferred tax assets will not be realized.
Uncertain tax positions
The guidance prescribes a more likely than not threshold for financial statement recognition and measurement of a tax position taken or expected
to be taken in a tax return. Guidance was also provided on derecognition of income tax assets and liabilities, classification of current and deferred income
tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods, and income tax
disclosures. Significant judgment is required in evaluating the Group’s uncertain tax positions and determining its provision for income taxes. The Group
recognizes interest and penalties, if any, under accrued expenses and other current liabilities on its balance sheet and under other expenses in its statement
of comprehensive income/(loss). The Group did not have any interest or penalties associated with tax positions as of December 31, 2013, 2014 and 2015.
As of December 31, 2013, 2014 and 2015, the Group did not have any significant unrecognized uncertain tax positions.
In order to assess uncertain tax positions, the Group applies a more likely than not threshold and a two-step approach for the tax position
measurement and financial statement recognition. Under the two-step approach, the first step is to evaluate the tax position for recognition by determining
if the weight of available evidence indicates that it is more likely than not that the position will be sustained, including resolution of related appeals or
litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon
settlement.
(w)
Employee benefits
Full-time employees of the Group in mainland China are entitled to staff welfare benefits including pension, work-related injury benefits,
maternity insurance, medical insurance, unemployment benefit and housing fund plans through a PRC government-mandated defined contribution plan.
Chinese labor regulation requires that the Group makes contributions to the government for these benefits based on certain percentage of the employees’
salaries, up to a maximum amount specified by the local government. Currently, the Group is paying contributions to the social insurance plan for all full-
time employees and to the housing fund plans for some employees, but the amounts paid for these employees may not be sufficient as required by the PRC
laws and regulations, for which the Group have made provision based on its best estimate. The Group has no legal obligation for the benefits beyond the
required contributions.
F-21
The Group recorded employee benefit expenses of US$9,385, US$14,499 and US$53,969 for the years ended December 31, 2013, 2014 and 2015,
respectively.
(x)
Government grants
Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will be received and the Group
will comply with all attached conditions.
Government grants relating to costs are deferred and recognized in the consolidated statements of comprehensive income/(loss) over the period
necessary to match them with the costs that they are intended to compensate.
Government grants relating to the property, plant and equipment and other non-current assets are presented in the consolidated balance sheet by
deducting the grants in arriving at the assets carrying amount and are credited to consolidated statements of comprehensive income/(loss) on a straight-line
basis over the expected lives of the related assets.
For the years ended December 31, 2013, 2014 and 2015, the Group recognized government grants of US$982, US$5,696 and US$4,841,
respectively as other income/(expenses) in the consolidated statements of comprehensive income/(loss).
(y)
Ordinary shares
The Company accounts for repurchased ordinary shares under the cost method and includes such treasury stock as a component of the common
shareholders’ equity. Cancellation of treasury stock is recorded as a reduction of ordinary shares, additional paid-in capital and retained earnings, as
applicable. An excess of purchase price over par value is allocated to additional paid-in capital first with any remaining excess charged entirely to retained
earnings.
(z)
Business combination, noncontrolling interests and mezzanine classified noncontrolling interests
The Company accounts for its business combinations using the acquisition method of accounting in accordance with Accounting Standards
Codification ("ASC") 805 "Business Combinations" ("ASC 805"). The cost of an acquisition is measured as the aggregate of the acquisition date fair values
of the assets transferred and liabilities incurred by the Company to the sellers and equity instruments issued. Transaction costs directly attributable to the
acquisition are expensed as incurred. Identifiable assets and liabilities acquired or assumed are measured separately at their fair values as of the acquisition
date. The excess of (i) the total costs of acquisition, fair value of the noncontrolling interests and acquisition date fair value of any previously held equity
interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree is recorded as goodwill. If the cost of acquisition is less than the
fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the consolidated statements of comprehensive income/(loss).
During the measurement period, which can be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and
liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets
acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations.
In a business combination achieved in stages, the Company re-measures the previously held equity interest in the acquiree immediately before
obtaining control at its acquisition-date fair value and the re-measurement gain or loss, if any, is recognized in the consolidated statements of
comprehensive income/(loss).
For the Company's majority-owned subsidiaries and VIEs, a noncontrolling interest is recognized to reflect the portion of their equity which is not
attributable, directly or indirectly, to the Company. When the noncontrolling interest is contingently redeemable upon the occurrence of a conditional event,
which is not solely within the control of the Company, the noncontrolling interest is classified as mezzanine classified noncontrolling interest. Consolidated
net income/(loss) on the consolidated income statements includes the net income/(loss) attributable to noncontrolling interests and mezzanine equity
holders when applicable. The cumulative results of operations attributable to noncontrolling interests are also recorded as noncontrolling interests in the
Company's consolidated balance sheets. Cash flows related to transactions with noncontrolling interests are presented under financing activities in the
consolidated statements of cash flows.
(aa)
Statutory reserves
The Group’s PRC subsidiaries, the VIEs and VIEs’ subsidiaries in China are required to make appropriations to certain non-distributable
reserve funds.
F-22
In accordance with China’s Company Laws, the Company’s PRC subsidiary, the VIEs and VIEs’ subsidiaries that are Chinese companies, must
make appropriations from their after-tax profit (as determined under the Accounting Standards for Business Enterprises as promulgated by the Ministry of
Finance of the People’s Republic of China (“PRC GAAP”)) to non-distributable reserve funds including (i) statutory surplus fund and (ii) discretionary
surplus fund. The appropriation to the statutory surplus fund must be at least 10% of the after-tax profits calculated in accordance with PRC GAAP.
Appropriation is not required if the statutory surplus fund has reached 50% of the registered capital of the respective company. Appropriation to the
discretionary surplus fund is made at the discretion of the respective company.
Pursuant to the laws applicable to China’s Foreign Investment Enterprises, the Company’s subsidiaries that are foreign investment enterprises in
China have to make appropriations from their after-tax profit (as determined under PRC GAAP) to reserve funds including (i) general reserve fund,
(ii) enterprise expansion fund and (iii) staff bonus and welfare fund. The appropriation to the general reserve fund must be at least 10% of the after tax
profits calculated in accordance with PRC GAAP. Appropriation is not required if the reserve fund has reached 50% of the registered capital of the
respective company. Appropriations to the other two reserve funds are at the respective company’s discretion. The use of the general reserve fund, statutory
surplus fund and discretionary surplus fund are restricted to the offsetting of losses to increase the registered capital of the respective company. These
reserves are not allowed to be transferred out as cash dividends, loans or advances, nor can they be distributed except under liquidation.
As of December 31, 2015, the Group had statutory reserve fund amounted to US$3,930.
(ab)
Related parties
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over
the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or significant
influence of the same party, such as a family member or relative, shareholder, or a related corporation.
(ac)
Earnings/(loss) per share
Basic earnings/(loss) per share is computed by dividing net income/(loss) attributable to 58.com Inc. by the weighted average number of ordinary
shares outstanding during the period using the two-class method. Under the two-class method, net income is allocated between ordinary shares and other
participating securities based on their participating rights. Net loss is not allocated to other participating securities if based on their contractual terms they
are not obligated to share in the losses. Diluted earnings/(loss) per share is calculated by dividing net income/(loss) attributable to ordinary shareholders, as
adjusted for the accretions and allocation of net income related to the preference shares, if any, by the weighted average number of ordinary and dilutive
ordinary equivalent shares outstanding during the period. Ordinary equivalent shares consist of shares issuable upon the conversion of the preference shares
using the if-converted method, and shares issuable upon the exercise of share options using the treasury stock method. Ordinary equivalent shares are not
included in the denominator of the diluted earnings/(loss) per share calculation when inclusion of such shares would be anti-dilutive.
(ad)
Comprehensive income/(loss)
Comprehensive income/(loss) is defined as the change in equity of the Group during a period arising from transactions and other events and
circumstances excluding transactions resulting from investments by shareholders and distributions to shareholders. Comprehensive income or loss is
reported in the consolidated statements of comprehensive income/(loss). Accumulated other comprehensive income/(loss), as presented on the
accompanying consolidated balance sheets, consists of accumulated foreign currency translation adjustment and unrealized gain/(loss) on available-for-sale
securities.
(ae)
Segment reporting
Based on the criteria established by ASC 280 “Segment Reporting”, the Group’s chief operating decision maker has been identified as the Chief
Executive Officer, who reviews consolidated results when making decisions about allocating resources and assessing performance of the Group. The Group
has internal reporting of revenue by products but has internal reporting of cost and expenses that do not distinguish between segments, and costs and
expenses of the Group is reported by nature as a whole. The Group does not distinguish between markets or segments for the purpose of internal reporting.
Hence, the Group has only one operating and reportable segment. As the Group’s long-lived assets and revenue are substantially located in and derived
from the PRC, no geographical segments are presented.
F-23
(af)
Recently issued accounting pronouncements
In May 2014, the FASB issued ASU No. 2014-09, “‘Revenue from Contracts with Customers (Topic 606).”’ This guidance supersedes current
guidance on revenue recognition in Topic 605, “Revenue Recognition.” In addition, there are disclosure requirements related to the nature, amount, timing,
and uncertainty of revenue recognition. This guidance will be effective for annual reporting periods beginning after December 15, 2016, including interim
reporting periods, and will be required to be applied retrospectively. Early application of the guidance is not permitted. In August 2015, the FASB issued
ASU No. 2015-14 to defer the effective date of ASU No. 2014-09 for all entities by one year. The Group is in the process of evaluating the impact of the
standard on its consolidated financial statements.
In June 2014, the FASB issued ASU No. 2014-12, “‘Accounting for Share-Based Payments When the Terms of an Award Provide That a
Performance Target Could Be Achieved after the Requisite Service Period”’. The new standard requires that a performance target that affects vesting and
that could be achieved after the requisite service period is treated as a performance condition. A reporting entity should apply existing guidance in Topic
718, Compensation-Stock Compensation, as it relates to awards with performance conditions that affect vesting to account for such awards. The
performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in
which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which
the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period,
the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of
compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be
adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to
vest in the award if the performance target is achieved. The amendments in this ASU are effective for annual periods and interim periods within those
annual periods beginning after December 15, 2015. Earlier adoption is permitted. The implementation of this update is not expected to have any material
impact on the Group’s consolidated financial statements.
In August 2014, FASB issued ASU No. 2014-15, “‘Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of
Uncertainties about an Entity’s Ability to Continue as a Going Concern.”’ The new standard addresses management’s responsibility to evaluate whether
there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. Management’s evaluation
should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued. The new
standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The
Group is currently evaluating the impact of this guidance.
In February 2015, the FASB issued Consolidation (Topic 810)—Amendments to the Consolidation Analysis. The amendments in Topic 810
respond to stakeholders’ concerns about the current accounting for consolidation of variable interest entities, by changing aspects of the analysis that a
reporting entity must perform to determine whether it should consolidate such entities. Under the amendments, all reporting entities are within the scope of
Subtopic 810-10, Consolidation—Overall, including limited partnerships and similar legal entities, unless a scope exception applies. The amendments are
intended to be an improvement to current U.S. GAAP, as they simplify the codification of FASB Statement No. 167, Amendments to FASB Interpretation
No. 46(R), with changes including reducing the number of consolidation models through the elimination of the indefinite deferral of Statement 167 and
placing more emphasis on risk of loss when determining a controlling financial interest. The amendments are effective for publicly-traded companies for
fiscal years beginning after December 15, 2015, and for interim periods within those fiscal years. Earlier adoption is permitted. The Group has early
adopted the guidance and considered there is no material impact on the Group’s consolidated financial statements.
In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments, which eliminates the
requirement for acquirers in a business combination to account for measurement-period adjustments retrospectively. Instead, acquirers must recognize
measurement-period adjustments during the period in which they determine the amounts, including the effect on earnings of any amounts that would have
been recorded in previous periods if the accounting had been completed at the acquisition date. This update is effective for interim and annual periods
beginning after December 15, 2015, with early adoption permitted. The implementation of this update is not expected to have any material impact on the
Group’s consolidated financial statements.
In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which
simplifies the presentation of deferred income taxes by requiring deferred tax assets and liabilities to be classified as noncurrent on the balance sheet. The
amendments in this update are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within
those annual periods. The Group is currently evaluating the effect of adoption of this ASU and expects that it will have an impact on the Group’s
consolidated balance sheets, as current deferred tax assets were US$86 and current deferred tax liabilities were US$66,238 as of December 31, 2015.
F-24
In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which provides
guidance for the recognition, measurement, presentation, and disclosure of financial assets and liabilities. The guidance will be effective for the fiscal year
beginning after December 15, 2017, including interim periods within that year. The Group is in the process of evaluating the impacts of the adoption of this
ASU.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which amends the existing accounting standards for lease accounting.
This update requires lessees to recognize a right-of-use asset and lease liability for all leases with terms of more than twelve months. Lessees are permitted
to make an accounting policy election to not recognize the asset and liability for leases with a term of twelve months or less. The update does not
significantly change the lessees’ recognition, measurement and presentation of expenses and cash flows from the previous accounting standard. The
amendments in this Update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Group
is currently assessing the potential effects this update may have on its consolidated financial statements and related disclosures.
In March 2016, the FASB issued ASU 2016-09, “Compensation—Stock Compensation (Topic 718),” which intends to improve the accounting for
employee share-based payments. This standard will be effective for annual periods beginning after December 15, 2016, and interim periods within those
annual periods, with early adoption permitted. The Group is currently evaluating the impact this new guidance will have on its consolidated financial
statements.
3. Credit risks and concentration
(a)
Credit risk
The Group’s credit risk arises from cash and cash equivalents, term deposits, short-term investments, as well as credit exposures to receivables due
from its customers, related parties and other parties.
The Group believes that there is no significant credit risk associated with cash and cash equivalents and term deposits which were held by
reputable financial institutions in the jurisdictions where the Company, its subsidiaries, the VIEs and VIEs’ subsidiaries are located.
The Group has no significant concentrations of credit risk with respect to its customers, except for the accounts receivable from the internet search
companies as discussed below. The Group assesses the credit quality of and sets credit limits on its customers by taking into account their financial
position, the availability of guarantees from third parties, their credit history and other factors such as current market conditions.
(b)
Major customers
There was no customer whose revenue represented over 10% of total revenues in 2013, 2014 and 2015.
The accounts receivable from one internet search company represented approximately 45% and 13% of total accounts receivable as of December
31, 2014 and 2015, respectively. No other customer has receivables representing over 10% of total accounts receivable.
(c)
Foreign currency risk
The Group’s operating transactions are mainly denominated in RMB. RMB is not freely convertible into foreign currencies. The value of the RMB
is subject to changes by the central government policies and to international economic and political developments. In the PRC, certain foreign exchange
transactions are required by law to be transacted only by authorized financial institutions at exchange rates set by the People’s Bank of China
(the “PBOC”). Remittances in currencies other than RMB by the Group in China must be processed through the PBOC or other China foreign exchange
regulatory bodies which require certain supporting documentation in order to effect the remittance.
F-25
4. Business acquisitions and equity investment transactions
(a)
Acquisition of Anjuke Inc. (“Anjuke”)
On March 2, 2015, the Group completed the acquisition of 100% equity interest of Anjuke, a major online real estate listing platform in China
which allows potential home buyers and renters to search for primary and secondary real estate. This transaction allows the Group to create China’s largest
secondary and rental real estate platform by combining the Group’s housing content category with Anjuke’s platform. Total consideration for this
acquisition consisted of 4,839,372 newly issued ordinary shares and 248,216 fully vested restricted share units (“RSUs”) of the Company and US$160,198
in cash.
The acquisition had been accounted for as a business acquisition and the results of operations of Anjuke and its subsidiaries and affiliated
companies from the acquisition date have been included in the Group’s consolidated financial statements. The Group made estimates and judgments in
determining the fair value of acquired assets and liabilities, with the assistance of an independent valuation firm and management’s experience with similar
assets and liabilities. In performing the purchase price allocation, the Group considered the analyses of historical financial performance and estimates of
future performance of Anjuke.
F-26
The allocation of the purchase price is as follows:
Net assets acquired
Amortizable intangible assets:
Domain names and trademarks
Technology
Customer relationship
Goodwill
Deferred tax liabilities
Total
Total purchase price comprised of
-Cash consideration
-Equity consideration
Total
Amounts
US$
Amortization Years
10
5
2
6,446
27,356
9,702
2,386
218,126
(9,861)
254,155
160,198
93,957
254,155
The US$160,198 of total cash consideration less cash acquired of US$6,590 and cash consideration payable of US$28,962 resulted in a net cash
outlay of US$124,646 at the acquisition date. The excess of purchase price over net tangible assets and identifiable intangible assets acquired were recorded
as goodwill. Goodwill primarily represents the expected synergies from combining the Group’s housing content category with Anjuke’s platform. The
goodwill is not expected to be deductible for tax purposes. No subsequent purchase price adjustment has been made.
(b)
Investment and consolidation of Falcon View Technology ("Ganji")
(i) Equity investment in Ganji
On April 20, 2015, the Group acquired from Ganji’s shareholders certain number of ordinary and preference shares of Ganji which accounted for
less than 50% equity stake in Ganji, the holding company of the PRC entities operating Ganji.com, a major online local services platform in China for
consideration consisting 34,039,136 newly issued ordinary shares of the Company and US$412,237 in cash. The US$412,237 of total cash consideration
less consideration payable of US$122,413 resulted in a net cash outlay of US$289,824 upon the completion of the equity investment. (the “Transaction (i)”)
The investment in the ordinary shares of Ganji was accounted for as equity method investment based on the equity interest of 31.6% attributable to
the acquired ordinary shares of Ganji in accordance with ASC 323. During the period from April 20, 2015 to August 6, 2015, the Group recognized its
proportionate share of Ganji’s net loss, which amounted to US$103,550, into the consolidated statements of comprehensive income/(loss).
The investment in the preference shares of Ganji was accounted for as cost method investment in accordance with ASC 325-20 because the
preference shares of Ganji acquired by the Group were not in-substance common stocks and there was no readily determinable fair value of the Ganji
shares.
In accordance with Rule 4-08(g) of Regulation S-X, the Company summarized condensed financial information of Ganji for the period in which it
was accounted for by equity method.
Operating data:
Revenues
Gross profit
Loss from operations
Net loss
Net loss attributable to Ganji’s shareholders
F-27
For the period from April 20
to August 6, 2015
US$
52,400
47,507
(329,014)
(328,076)
(327,688)
Balance sheets data:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Mezzanine equity
Total shareholders’ equity
As of August 6, 2015
US$
170,558
264,502
165,459
64,211
4,926
200,464
(ii) Investment in private equity funds which invested in Ganji
On July 31, 2015, the Company issued a convertible note to Tencent for a cash consideration of US$400,000 (See Note 15). Subsequently, the
Company committed the whole US$400,000 proceeds from this transaction, together with additional cash of US$6,673 from the Company and 46,505,912
newly issued ordinary shares of the Company to several private equity funds (the “Equity Funds”) of which 46,505,912 newly issued ordinary shares and
US$272,396 cash were contributed to the funds in August, 2015.These funds are dedicated to investing in businesses in China and separately managed by
different investment entities, as general partners, and they are unaffiliated with each other and unaffiliated with the Company. These funds, together with
Tencent, acquired all the remaining equity interests in Ganji on August 6, 2015 (the “Transaction (ii)”). The Company also transferred an aggregate of
4,449,002 fully vested restricted share units of the Company and approximately US$50,967 in cash to former Ganji employees as part of the total
consideration of step acquisition of Ganji.
Upon the completion of the transactions on August 6, 2015, Ganji was directly owned by the Company as a result of the Transaction (i) and by the
Equity Funds and Tencent as a result of the Transaction (ii).
The Company decided to early adopt ASU 2015-2, which is a new consolidation standard, to account for the investment in the Equity Funds and
hence Ganji. Although the Company is a limited partner of the Equity Funds, the Company has a substantive kick-out right and holds the majority
shareholding in the Equity Funds, and there are no other limited partners holding substantive participating right to the Equity Funds. Therefore the
Company considered that it has a controlling financial interest over the Equity funds under the voting interest model, and as a result has consolidated Ganji
since August 6, 2015. The financial results of Ganji were no longer reflected in the financial statement line item of “investment income/(loss), net”. The
Company accounted for the Transaction (ii) as step acquisition of Ganji on August 6, 2015. The Group believes the investment in the Equity Funds which
acquired Ganji will allow the Group to leverage the Ganji platform and create business synergy for the Group’s online local services platform.
Because of the step acquisition, the Company became the beneficial owner of an aggregate of 99.6% equity interest in Ganji. The remaining 0.4%
interest in Ganji was owned by Tencent. In relation to this noncontrolling interest in Ganji, a put option agreement was entered into between the Company
and Tencent in 2015, where the Company has also granted to Tencent a right to sell all of Tencent’s interest in Ganji (the “Put Option”).
The Company determined that the Put Option over Tencent’s noncontrolling interest in Ganji was considered on a combined basis and was
accounted for as mezzanine classified noncontrolling interest as a whole as the noncontrolling interest can be redeemed by Tencent through exercising the
Put Option and the carrying amount of the mezzanine classified noncontrolling interest initially recognized on August 6, 2015 was accreted using effective
interest method to the accreted value pursuant to the Put Option agreement.
On the acquisition date of Ganji, the mezzanine classified noncontrolling interest is recognized and measured at fair value by the Company in
accordance with ASC 805-20-30-1 and ASC 480-10-S99-3A and the Company’s previously held interest in Ganji (i.e. the less than 50% investment as a
result of Transaction (i)) was remeasured to fair value on the same date in accordance with ASC 805-10-25-10.
By applying a market approach and an income approach, the fair value of the mezzanine classified noncontrolling interest and the fair value of
the previously held equity interest in Ganji were estimated to be US$14,140 and US$1,184,714, respectively. These fair value measurements of the
noncontrolling interest and the previously held equity interest are based on significant inputs not observable in the market, and thus represent Level 3
measurements. The Group recognized a loss of US$35,217 as a result of the remeasurement of the previously held equity interest in Ganji upon
completion of the step acquisition in Ganji.
The fair value estimates for the noncontrolling interest and the previously held equity interest are based on (1) an assumed discount rate of 15.6%,
(2) an assumed terminal growth rate of 3.0%, (3) assumed financial multiples of reporting entities deemed to be similar to Ganji, and (4) assumed
adjustments because of the lack of control or lack of marketability, as relevant, that market participants would consider when estimating the fair value of
the noncontrolling interest and the previously held equity interest in Ganji.
F-28
The Group made estimates and judgments in determining the fair value of acquired assets and liabilities, with the assistance of an independent
valuation firm and management’s experience with similar assets and liabilities. The allocation of the purchase price is as follows:
Net assets acquired
Amortizable intangible assets:
Domain names and trademarks
Technology
Mezzanine classified noncontrolling interest
Goodwill
Deferred tax liabilities
Total
Total purchase price comprised of
-Cash consideration
-Equity consideration
-Fair value of previously held equity interests
Total
Amounts
US$
Amortization
Years
9.4
4.4
12,848
234,700
24,300
(14,140)
2,611,053
(64,750)
2,804,011
457,640
1,161,657
1,184,714
2,804,011
The US$457,640 of total cash consideration less cash acquired of US$61,627 and consideration payable of US$151,368 resulted in a net cash
outlay of US$244,645 at the acquisition date. The excess of purchase price over the fair value of assets acquired and liabilities assumed of the business
acquired was recorded as goodwill. The goodwill primarily represents the expected synergies from combining the Group’s 58.com platform with Ganji’s
platform and fully integrating each service category. The goodwill is not expected to be deductible for tax purposes. No subsequent purchase price
adjustment has been made.
(c)
Other acquisitions
In 2015, the Group also completed other acquisitions that will be accounted for as business acquisitions. The Group made estimates and judgments
in determining the fair value of acquired assets and liabilities, with the assistance of an independent valuation firm and management’s experience with
similar assets and liabilities. The allocation of the purchase price of all the other acquisitions is summarized below:
Net assets acquired
Amortizable intangible assets:
Domain names and trademarks
Technology
Customer relationship
Goodwill
Deferred tax liabilities
Bargain purchase gain
Less noncontrolling interest
Total consideration in cash
F-29
Amounts
US$
Amortization
Years
9-10
4-5
2-3
25,495
8,485
853
1,674
28,582
(1,145)
(1,650)
(7,551)
54,743
The US$54,743 of total cash consideration less cash acquired of US$10,914, cash consideration payable of US$382 and consideration prepaid in
2014 of US$654 resulted in a net cash outlay of US$42,793 at the acquisition date.
(d)
Pro forma total revenue and net loss of the Group reflecting acquisitions made in 2015
The total revenue and net loss arising from acquisitions made in 2015 that are included in the Group’s consolidated statement of comprehensive
income/(loss) for the year ended December 31, 2015 are US$186,738 and US$78,661, respectively.
The following summary of unaudited pro forma results of operations of the Group for the years ended December 31, 2014 and 2015 is presented
using the assumption that the acquisitions made in 2015 were completed as of January 1, 2014. These pro forma results of the Group have been prepared
for comparative purposes only and do not purport to be indicative of the results of operations which would have resulted had the acquisitions occurred as of
January 1, 2014, nor is it indicative of future operating results. The pro forma adjustments are based upon available information and certain assumptions
that management believes are reasonable.
Pro forma total revenues
Pro forma net loss
5. Deconsolidation of 58 Home
For the year ended December 31,
2014
(unaudited)
US$
464,669
(96,917)
2015
(unaudited)
US$
835,982
(543,569)
58 Home has been the holding company of the 58 Home business and a majority owned entity of the Company since its establishment in late 2014.
The Company owned 80,000,000 ordinary shares issued by 58 Home (“58 Home Ordinary Shares”).
In February 2015, 58 Home adopted its 2015 Share Incentive Plan (“58 Home 2015 Plan”). In February 2015, 58 Home granted 9,100,000
restricted shares to the selected management members of 58 Home. In April 2015, 58 Home further granted 1,880,000 restricted shares to a senior
management member of the Company. All of these restricted shares were fully vested on the respective grant dates. Share-based compensation expense
amounted to US$1,978 was recognized for the period from respective grant dates to November 27, 2015 with respect to the grant of the restricted shares.
These holders of restricted shares are referred to as “noncontrolling interests” of 58 Home. Other share-based awards granted by 58 Home to its employees
were discussed in Note 22.
On October 12, 2015, a share subscription agreement (the “58 Home Share Subscription Agreement”) was entered into among 58 Home and
certain investors whereby 58 Home agreed to issue to the investors 40,800,000 Series A convertible preference shares (“58 Home Series A Preference
Shares”), at a price of US$7.3529 per share, amounting to an aggregate purchase price of US$300,000. Investors of the 58 Home Series A Preference
Shares included the Company who paid US$10,000 for 1,360,000 58 Home Series A Preference Shares and other new investors who paid US$290,000
aggregately to subscribe the remaining 39,440,000 58 Home Series A Preference Shares.
Before closing of the transaction, in November 2015, pursuant to the 58 Home Share Subscription Agreement, the Company unilaterally
contributed US$100,638 as additional paid-in capital to 58 Home by waiving US$100,638 receivable from 58 Home. Because the noncontrolling ordinary
shareholders of 58 Home are employees of the Group, the unilateral capital contribution by the Company resulted in the increase in the noncontrolling
interests of 58 Home by US$12,147 and the corresponding amount was recognized as employee compensation expense in the Group’s consolidated
statements of comprehensive income/(loss).
Pursuant to the Amended and Restated Memorandum of Association of 58 Home adopted on October 26, 2015, certain approval rights were
granted to a noncontrolling preference shareholder of 58 Home in relation to (i) annual budget and (ii) employment of certain key management members of
58 Home. These approval rights granted to the noncontrolling preference shareholder of 58 Home were considered as substantive participating rights in
accordance with ASC 810-10. As a result, the Group has deconsolidated 58 Home since the completion of the transaction on November 27, 2015.
F-30
On the date of deconsolidation, the Group derecognized the assets and liabilities, including allocated goodwill attributable to 58 Home, which
amounted to US$207,833, derecognized noncontrolling interests of 58 Home and recognized the investment in 58 Home Series A Preference Shares at fair
value of US$10,000, the investment in 58 Home Ordinary Shares at fair value of US$256,000, and a gain on deconsolidation of 58 Home of US$45,998.
Subsequent to the completion of the transaction, the Group continued to retain equity interest in 58 Home through its ownership of 80,000,000 58
Home Ordinary Shares, representing 87.9% ordinary share equity interest in 58 Home, and of 1,360,000 58 Home Series A Preference Shares. The
Company’s investment in 58 Home Ordinary Shares was accounted for as equity method investment in accordance with ASC 323. The Company has
shared 87.9% of net loss of 58 Home for the period from November 27, 2015 to December 31, 2015 and recorded an investment loss of US$9,288. On the
other hand, the Company’s investment in the 58 Home Series A Preference Shares was accounted for as cost method investment in accordance with ASC
325-20 because the preference shares were not considered as in-substance common stock and the shares do not have readily determinable fair value or
quoted market price.
In accordance with Rule 4-08(g) of Regulation S-X, the Company summarized the condensed financial information of 58 Home for the period in
which it was accounted for by equity method.
Operating data:
Total revenues
Gross profit
Loss from operations
Net loss
Balance sheets data:
Current assets
Non-current assets
Current liabilities
Mezzanine equity
Total shareholders’ deficit
6. Disposal of Guazi
For the period from
November 27 to December
31, 2015
US$
51
(86)
(10,856)
(10,562)
As of December 31, 2015
US$
233,665
83,303
25,452
300,000
(8,484)
As part of the acquired Ganji business, Guazi is engaged in the business of operating an online C2C platform for trading used cars and providing
relevant services.
On December 31, 2015, the following transactions were completed pursuant to a share purchase agreement, dated November 25, 2015, by and
among the Company, the entities of Guazi and Mr. Haoyong Yang, former co-chairman of the Company’s board of directors (the “Guazi Purchaser”):
The Company transferred 54.4% ownership interest in Guazi to the Guazi Purchaser in return for US$50,000 cash.
The Company concurrently used the proceeds of US$50,000 to invest in a US$50,000 non-interest bearing convertible note issued by Guazi (the
“Guazi Convertible Note”). The Guazi Convertible Note is convertible into preference shares of Guazi to be issued in Guazi’s subsequent round of
financing at the same price paid by other investors in the subsequent round of financing.
The Company retained 45.6% ownership interest in Guazi by purchasing 38,800,000 Series A convertible and redeemable preference shares of Guazi
(the “Series A Guazi Shares”) .
The negotiation and execution of the transactions mentioned above were not dependent with the acquisition of Ganji.
F-31
As a result of the Company’s loss of control over Guazi on December 31, 2015, the Company derecognized the assets and liabilities, including
allocated goodwill, attributable to Guazi, which amounted to US$27,788, and recognized the investment in Series A Guazi Shares at fair value of
US$53,684, the investment in Guazi Convertible Note at fair value of US$47,310, a gain on Guazi disposal of US$73,240 on December 31, 2015.
The Series A Guazi Shares and the Guazi Convertible Note were considered as the consideration received by the Company in return for the
disposal of Guazi. The Company assessed the fair values of the Series A Guazi Shares and Guazi Convertible Note on the disposal date with the assistance
of a third-party independent valuation specialist. The fair values were based on significant inputs not observable in the market, and thus represented Level 3
measurements.
Subsequently, the investment in Series A Guazi Shares was accounted for under cost method in accordance with ASC 325-20 as the shares held by
the Company were not considered in-substance common stock and the shares do not have readily determinable fair value. The Company also determined
that the host contract of Series A Guazi Shares is equity in nature and there were no embedded derivative that needs to be separately accounted for in
accordance with ASC 815-15-25-1.
The Company accounted for its investment in Guazi Convertible Note under ASC 310 which was carried at amortized cost using effective interest
rate method and presented it as a long term prepayment for additional shares of Guazi upon note conversion.
F-32
7. Short-term investments
Short-term investments consisted of the following:
Variable-rate financial instruments
Available-for-sale securities
Total
As of December 31,
2014
US$
207,257
8,889
216,146
2015
US$
29,351
11,867
41,218
The Group purchased stock of a US listed company in private placement in December 2014 at a cost of US$10,000 and accounted for it as
available-for-sale securities. For the year ended December 31, 2014 and 2015, approximately US$1,111 of unrealized loss and US$2,978 of unrealized gain
on available-for-sale securities was recognized in accumulated other comprehensive loss, respectively.
8. Accounts receivable, net
Accounts receivable, net, consists of the following:
Accounts receivable
Allowance of doubtful accounts
Accounts receivable, net
9. Prepayments and other current assets
The following is a summary of prepayments and other current assets:
Rental and other deposits
Prepaid advertising fees
Input VAT
Employee advances
Prepayment for service fees
Prepaid rental
Interest receivable
Note and other receivables
Others
Total
As of December 31,
2014
US$
6,282
—
6,282
2015
US$
59,916
(5,885)
54,031
As of December 31,
2014
US$
2015
US$
2,211
6,898
2,090
3,785
940
4,863
2,574
—
770
24,131
19,498
12,199
11,796
10,954
7,205
5,199
33
7,113
2,881
76,878
The prepaid advertising fees represent prepayments to third parties for advertising services, mainly through television, internet and outdoor media.
The advertising expenses are recognized in sales and marketing expenses subsequently, when the services are received.
F-33
10. Property and equipment, net
The following is a summary of property and equipment, net:
Buildings
Computers and equipment
Motor vehicles
Furniture and fixtures
Leasehold improvements
Software
Total
Less: Accumulated depreciation
Net book value
As of December 31,
2014
US$
2015
US$
—
24,335
1,098
703
5,928
1,530
33,594
(15,695)
17,899
79,973
56,076
1,236
2,333
16,855
3,515
159,988
(36,895)
123,093
Depreciation expenses for the years ended December 31, 2013, 2014 and 2015 were US$4,644, US$5,594 and US$14,604, respectively.
11. Intangible assets, net
The following is a summary of intangible assets, net:
Domain names and trademarks
Technology
Customer relationship
Total
Less: Accumulated amortization
Net book value
As of December 31,
2014
US$
504
—
—
504
(44)
460
2015
US$
252,892
33,120
3,945
289,957
(18,500)
271,457
Amortization expenses for the years ended December, 2013, 2014 and 2015 were US$13, US$13 and US$18,558, respectively. During the same
periods, no impairment was recognized in the consolidated statements of comprehensive income/(loss).
The estimated aggregate amortization expenses for each of the five succeeding fiscal years and thereafter are as follows:
For the year ending December 31, 2015
2016
2017
2018
2019
2020
Thereafter
Total
12. Goodwill
Amounts
US$
35,586
34,523
34,122
33,653
26,825
106,748
271,457
The changes in the carrying amount of goodwill for the years ended December 31, 2014 and 2015 were as follows:
Balance as of December 31, 2014
Additions
Deconsolidation and disposal of subsidiaries
Foreign currency translation adjustments
Balance as of December 31, 2015
F-34
Amounts
US$
—
2,857,761
(235,621)
(160,947)
2,461,193
In the annual impairment assessment of goodwill, the Company concluded that there was no impairment charge for the year ended December 31,
2015.
13. Long-term investments
The following is a summary of long-term investments:
Cost method investments:
Investment in Series A Guazi Shares (a)
Investee B (b)
Investee C (c)
Investee D (d)
Investment in 58 Home Series A Preference Shares (g)
Investee E (e)
Others (f)
Total cost method investments
Equity method investments:
Investment in 58 Home Ordinary Shares (g)
Others
Total equity method investments
Total long-term investments
As of December 31,
2014
US$
2015
US$
—
—
20,000
—
—
—
3,784
23,784
—
—
—
23,784
53,684
33,722
20,000
15,000
10,000
3,465
7,741
143,612
246,778
871
247,649
391,261
(a) In 2015, as a result of the disposal of Guazi (See Note 6), the Group retained certain equity interest in Guazi by investing in 38,800,000
Series A Guazi Shares. The investment in Series A Guazi Shares was measured at fair value of US$53,684 on the date of disposal and was subsequently
accounted for under cost method as the shares invested by the Group were not considered as in-substance common stock and the shares do not have readily
determinable fair value or quoted market price.
(b) In 2015, the Group acquired shares of investee B for cash consideration of US$33,722. Investee B is mainly engaged in the business of
providing home decoration and home decoration-related services (including the online information services in connection with home renovation and
decoration and building materials) through the internet. The investment is accounted for under cost method as the shares invested by the Group were not
considered as in-substance common stock and the shares do not have readily determinable fair value.
(c) In 2014, the Group acquired shares of investee C for cash consideration of US$20,000. Investee C is mainly engaged in the provision of
temporary driving services. The investment is accounted for under cost method as the Group does not have ability to exercise significant influence over
operating and financial policies of investee C and the shares do not have readily determinable fair value.
(d) In 2015, the Group acquired shares of investee D for cash consideration of US$15,000. Investee D is mainly engaged in the business of
operating a real estate internet portal. The investment is accounted for under cost method as the shares invested by the Group were not considered as in-
substance common stock and the shares do not have readily determinable fair value.
(e) In 2015, the Group acquired shares of investee E for cash consideration of US$3,465. Investee E is mainly engaged in the second-hand
automobile sales chained agency services. The investment is accounted for under the cost method as the shares invested by the Group were not considered
as in-substance common stock and the shares do not have readily determinable fair value.
F-35
(f) In 2015, the Group acquired shares of other companies for an aggregate cash consideration of US$7,741. The cash consideration paid for
each of these investments was less than US$3,000. These investments are accounted for under cost method as the shares invested by the Group were not
considered as in-substance common stock and the shares do not have readily determinable fair value.
(g) As a result of the deconsolidation of 58 Home on November 27, 2015 (as set out in Note 5), the Group continue to retain equity interest
in 58 Home through its ownership of 80,000,000 58 Home Ordinary Shares and of 1,360,000 58 Home Series A Preference Shares. The Company’s
investment in 58 Home Ordinary Shares was accounted for as equity method investment in accordance with ASC 323. For the period from November 27,
2015 to December 31, 2015, the Group recorded an investment loss of US$9,288. The Company’s investment in 58 Home Series A Preference Shares was
accounted for as cost method investment in accordance with ASC 325-20 because the 58 Home Series A Preference Shares were not considered as in-
substance common stock and the shares do not have readily determinable fair value or quoted market price.
14. Long-term prepayments
The following is a summary of long-term prepayments:
Prepayment for purchase of property and equipment
Investment in Guazi Convertible Note
Prepayment for acquisition and investments
Rental deposits
Long-term prepaid rental
Others
Total
As of December 31,
2015
2014
US$
US$
16,883
—
611
1,436
2,097
—
21,027
99,774
47,310
5,420
3,510
59
3,251
159,324
The prepayment for purchase of property and equipment mainly represented cash payment made to a third party developer in 2015 to purchase
office buildings. The buildings will be used as part of new corporate headquarters upon completion in 2016.
15. Short-term loans
On July 31, 2015, the Company issued a US$400,000 convertible note to a subsidiary of Tencent for a cash consideration of US$400,000
(“Original Convertible Note”) (See also Note 4(b)(ii)). The Original Convertible Note was issued at par, bearing a base interest rate of 5% per annum, with
December 20, 2015 being the maturity date (“Original Maturity Date”). Pursuant to the note agreement, the Company was allowed to early repay the whole
or any part of the principal amount of the note prior to the Original Maturity Date, without premium or penalty and Tencent shall have the right to convert
all or portion of the outstanding loan amount into ordinary shares of the Company at a discount if the loan together with interest accrued is not paid on the
Original Maturity Date.
On December 11, 2015, which was before the Original Maturity Date, the Company issued 4,267,344 Class A ordinary shares to Tencent to early
repay US$125,000 principal amount and settle the accrued interest of US$7,288 of the Original Convertible Note. Also on the same date, the Company and
Tencent entered into an amendment to the Original Convertible Note (the “Note Amendment”), pursuant to which the Original Convertible Note was
replaced by a new convertible note (the “Amended Convertible Note”) issued to Tencent. The principal amount of the Amended Convertible Note was
US$275,000, the interest rate was increased to 6% and the maturity date of the Amended Convertible Note was June 20, 2016.
The Company determined that the Note Amendment was accounted for as a debt modification, not a debt extinguishment because the changes of
the cash flow before and after the Note Amendment were less than 10% pursuant to ASC 470-50-40-12. Therefore, interest expense for the period from
July 31, 2015 to December 11, 2015 was recognized based on 5% per annum and principal amount of the Original Convertible Note, and subsequently,
interest expense for the period from December 12, 2015 to December 31, 2015 was recognized based on 6% per annum and the reduced principal amount
of the Amended Convertible Note.
F-36
The Company determined that the embedded features of the Original and Amended Convertible Note are not required to be bifurcated and
accounted for as derivatives because they are neither assessed to be material nor are considered clearly and closely related to the economic characteristics
and risks of the host debt contract pursuant to ASC 815-15-25-1(a) and ASC 815-15-25-42.
In April 2016, the Company early repaid the remaining US$275,000 principal amount and settled the accrued interest of US$5,063 of the
Amended Convertible Note. Please see Note 25 subsequent event for detail.
16. Accounts payable
The following is a summary of accounts payable:
Payable for advertisement fees
Rebate payable to sales agents
Payable related to purchases of property and equipment
Payable to group buying merchants
Others
Total
17. Accrued expenses and other current liabilities
The following is a summary of accrued expenses and other current liabilities:
Acquisition consideration payable
Accrued office expenses
Deposits from sales agents and others
Accrued telecom and bandwidth fees
Payable to employees for proceeds of selling their share-based awards
Accrued professional fees
Government subsidy
Payable to 58 Home service providers
Interest payable
Others
Total
18. Fair value measurements
Measured on recurring basis
As of December 31,
2015
2014
US$
US$
8,978
1,691
1,813
3,228
319
16,029
81,197
10,397
6,537
1,064
2,440
101,635
As of December 31,
2015
2014
US$
US$
—
3,916
2,179
1,654
651
1,079
456
1,812
—
1,324
13,071
295,550
13,535
6,413
3,746
3,255
2,604
1,833
—
904
8,061
335,901
The Group measured its financial assets including cash equivalents, term deposits and short-term investments at fair value on a recurring basis as
of December 31, 2014 and 2015. The following table sets forth the financial instruments, measured at fair value at recurring basis, by level within the fair
value hierarchy:
F-37
Financial instruments
Fair value hierarchy
Cash equivalents
Term deposits
Short-term investments:
- Variable-rate financial instruments
- Available-for-sale securities
Significant other observable inputs (Level 2)
Significant other observable inputs (Level 2)
Significant other observable inputs (Level 2)
Quoted Prices in Active Market for Identical Assets (Level 1)
Cash equivalents, term deposits and variable-rate financial instruments
As of December 31,
2014
US$
2015
US$
89,884
281,513
207,257
8,889
2,952
—
29,351
11,867
The Group measures cash equivalents, term deposits and variable-rate financial instruments at fair value based on the pervasive interest rates in the
market, which are also the interest rates as stated in the contracts with the banks. The Group classifies the valuation techniques that use the pervasive
interest rates input as Level 2 of fair value measurements. Generally there are no quoted prices in active markets for identical time deposits at the reporting
date. In order to determine the fair value, the Group must use the discounted cash flow method and observable inputs other than quoted prices in active
markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or
can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Available-for-sale securities
The Group measures available-for-sale securities at fair value. As the available-for-sale securities are stocks of a public traded company, the Group
determines the fair value of the available-for-sale securities according to the quoted market price at the end of each period. The Group classifies the
valuation techniques as Level 1 of fair value measurement.
The following are other financial instruments not measured at fair value in the balance sheets but for which the fair value is estimated for
disclosure purposes.
Short-term receivables and payables
Accounts receivable and prepaid expenses and other current assets are financial assets with carrying values that approximate fair value due to their
short term nature. Accounts payable and accrued expenses and other current liabilities are financial liabilities with carrying values that approximate fair
value due to their short term nature. The Group estimates fair values of short-term receivables and payables and classifies the valuation technique as Level
3 of fair value measurement, as it uses estimated cash flow input which is unobservable in the market.
Non-current assets and non-current liabilities
Non-current assets of receivables for rental deposits is a financial asset with carrying value that approximate fair value due to the change in fair
value, after considering the discount rate, being immaterial. Accrued expenses and other liabilities, non-current portion is a financial liability with carrying
value that approximate fair value due to the change in fair value, after considering the discount rate, being immaterial. The Group estimated fair values of
non-current assets and non-current liabilities using the discounted cash flow method. The Group classifies the valuation technique as Level 3 of fair value
measurement, as it uses estimated cash flow input which is unobservable in the market.
Measured on non-recurring basis
The Group’s non-financial assets, such as long-term investments, intangible assets and goodwill would be measured at fair value only if they were
determined to be impaired.
Intangible assets and Goodwill
The inputs used to measure the estimated fair value of goodwill are classified as Level 3 fair value measurement due to the significance of
unobservable inputs used such as historical financial information and assumptions about future growth rates and discount rates, which require significant
judgment and company-specific information.
F-38
Long-term investments
As of December 31, 2014 and 2015, the Group had US$23,784 and US$391,261, respectively, long-term investments in equity securities of
privately-held companies. Such investments are reviewed periodically for impairment using fair value measurement which requires significant
unobservable inputs (Level 3). An impairment charge of US$949 was recorded in the consolidated statements of comprehensive income/(loss) for the year
then ended. No impairment charges were recorded for the years ended December 31, 2013 and 2014, respectively.
19. Income taxes
The Company is registered in the Cayman Islands. The Company generated substantially all of its income/(loss) from its PRC operations for the
years ended December 31, 2013, 2014 and 2015.
Cayman Islands (“Cayman”)
Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. Additionally, upon payments of
dividends to the shareholders, no Cayman Islands withholding tax will be imposed.
British Virgin Islands (“BVI”)
The Group is exempted from income tax in the BVI on its foreign-derived income. There are no withholding taxes in the BVI.
Hong Kong
Entities incorporated in Hong Kong are subject to Hong Kong profit tax at a rate of 16.5% since January 1, 2010. The operations in Hong Kong
have incurred net accumulated operating losses for income tax purposes.
PRC
On March 16, 2007, the National People’s Congress of PRC enacted an Enterprise Income Tax Law (“EIT Law”), under which FIEs and domestic
companies would be subject to EIT at a uniform rate of 25%. The EIT law became effective on January 1, 2008.
The EIT Law and its implementing rules also permit qualified “High and New Technology Enterprises” (“HNTE”) to enjoy a preferential
enterprise income tax rate of 15% upon filing with relevant tax authorities. The qualification as a HNTE generally has a valid term of three years and the
renewal of such qualification is subject to review by the relevant authorities in China. Beijing 58 and Wanglin obtained HNTE certificates in 2012 and were
qualified as HNTE under the EIT Law. They enjoyed a preferential tax rate of 15% from 2012 to 2014 provided that they continue to be qualified as HNTE
and have taxable income during such periods. In 2015, Beijing 58 and Wanglin renewed their HNTE certificates and are entitled to preferential tax rate of
15% from 2015 to 2017 as long as they continue to be qualified as HNTE during such periods.
In addition, qualified software enterprises are exempt from the enterprise income tax for two years beginning from their first profitable year and
are entitled to a 50% tax reduction for the subsequent three years. The software enterprise qualification is subject to an annual assessment. Wanglin was
determined as a software enterprise in July 2014. In April 2015, Wanglin was granted a two-year EIT exemption and a 50% reduction on its taxable income
for the subsequent three years effective retroactively from January 1, 2014. As a qualified software enterprise, Wanglin is entitled to two-year tax holiday in
2014 and 2015 and a three-year 50% deduction on EIT rate in the subsequent years from 2016 to 2018. Wanglin prepaid income tax of approximately
US$1,194 in 2014 and received tax refund from local tax bureau in the second half of 2015.
According to a policy promulgated by the State Tax Bureau of the PRC and effective from 2008 onwards, enterprises engaging in research and
development activities are entitled to claim 150% of the research and development expenses so incurred in a year as tax deductible expenses in determining
its tax assessable profits for that year (“Super Deduction”). Wanglin, Beijing 58 and 58 Technology had claimed such Super Deduction in ascertaining its
tax assessable profits for the years ended December 31, 2013, 2014 and 2015, respectively. In 2015, the Group’s newly acquired subsidiaries Shanghai
Ruiting and Yangguang Gudi as well as its consolidated affiliated entities Leftbrain and Shanjing Kechuang also claimed Super Deduction in ascertaining
their respective tax assessable profits.
F-39
The EIT Law also provides that an enterprise established under the laws of a foreign country or region but whose “de facto management body” is
located in the PRC be treated as a resident enterprise for PRC tax purposes and consequently be subject to the PRC income tax at the rate of 25% for its
global income. The Implementing Rules of the EIT Law merely define the location of the “de facto management body” as “the place where the exercising,
in substance, of the overall management and control of the production and business operation, personnel, accounting, properties, etc., of a non-PRC
company is located.” Based on a review of surrounding facts and circumstances, the Company does not believe that it is likely that its operations outside of
the PRC should be considered a resident enterprise for PRC tax purposes.
The EIT Law also imposes a withholding income tax of 10% on dividends distributed by an FIE to its immediate holding company outside of
China, if such immediate holding company is considered as a non-resident enterprise without any establishment or place within China or if the received
dividends have no connection with the establishment or place of such immediate holding company within China, unless such immediate holding company’s
jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement. The Cayman Islands, where the Company
was incorporated, does not have such tax treaty with China. According to the arrangement between Mainland China and Hong Kong Special Administrative
Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion in August 2006, dividends paid by an FIE in China to its immediate holding
company in Hong Kong will be subject to withholding tax at a rate of no more than 5% (if the foreign investor owns directly at least 25% of the shares of
the FIE). Only a few entities including Wanglin had accumulated undistributed earnings while most of the other subsidiaries and VIEs were in accumulated
loss positions as of December 31, 2015. There Group’s subsidiaries and VIEs had not declared any dividend to their respective parent companies and had
determined that it had no plan to declare or pay any dividends to the parent companies out of the accumulated undistributed earnings as of December 31,
2015. Accordingly, no deferred income tax was accrued and required to be accrued as of December 31, 2015.
The provisions for income tax expenses are summarized as follows:
Current tax benefit/(expenses)
Deferred tax benefit
Income tax benefit/(expenses)
(4,148)
4,148
—
(8,147)
1,961
(6,186)
2,405
5,547
7,952
The following table sets forth reconciliation between the statutory EIT rate and the effective tax rate:
For the Year ended December 31,
2014
2015
2013
For the Year ended December 31,
2014
2015
2013
Statutory income tax rates
Change in valuation allowance
Permanent book-tax differences
Reversal of deferred tax liabilities
Effect of preferential tax treatment
Effective tax rate
Deferred tax assets
25.0%
(21.3)%
(3.7)%
—
—
0%
25.0%
20.7%
(9.9)%
—
(14.3)%
21.5%
25.0%
(14.0)%
(15.4)%
2.1%
5.2%
2.9%
The following table sets forth the significant components of the aggregate deferred tax assets and liabilities:
Deferred tax assets
Current:
Provision for doubtful receivables
Accrued payroll and other expenses
Less: valuation allowance
Total current deferred tax assets, net
Non-current:
Net operating loss carry forwards
Advertising expenses in excess of deduction limit
Others
Less: valuation allowance
Total non-current deferred tax assets, net
Total deferred tax assets, net
Deferred tax liabilities
Non-current:
Acquired intangible assets
Total non-current deferred tax liabilities
Total deferred tax liabilities
F-40
As of December 31,
2015
2014
US$
US$
—
7,069
(7,069)
—
4,611
21,650
45
(26,306)
—
—
—
—
—
916
—
(830)
86
20,849
63,939
—
(84,788)
—
86
66,238
66,238
66,238
The current deferred tax assets of US$86 was included in the prepayments and other current assets of the consolidated balance sheets.
The non-current deferred tax liabilities of US$66,238 as of December 31, 2015 were mainly related to the intangible assets acquired during
business acquisition in 2015 as set out in Note 4.
As of December 31, 2015, the Group had net operating loss carry forwards of US$126,314 which will expire during the period between
December 31, 2016 and December 31, 2020. There is no expiration for the advertising expenses that were in excess of annual deduction limit and
carried forward.
A valuation allowance is provided against deferred tax assets when the Group determines that it is more likely than not that the deferred tax assets
will not be utilized in the future. In making such determination, the Group evaluates a variety of factors including the Group’s operating history,
accumulated deficit, existence of taxable temporary differences and reversal periods.
The Group has incurred net accumulated operating losses for income tax purposes since its inception. The Group believes that it is more likely than
not that most of these net accumulated operating losses and other deferred tax assets will not be utilized in the future except for US$86 deferred tax assets
recognized as of December 31, 2015. Therefore, the Group had provided valuation allowances of US$27,457, US$33,375 and US$85,618 for the deferred
tax assets as of December 31, 2013, 2014 and 2015, respectively.
Movement of valuation allowance
Balance at beginning of the period
Provision
Current period reversal
Balance at the end of the period
For the years ended December 31,
2014
US$
2013
US$
2015
US$
30,580
1,740
(4,863)
27,457
27,457
12,304
(6,386)
33,375
33,375
70,044
(17,801)
85,618
The current period reversal of valuation allowance is primarily attributed to the utilization of net operating losses and deductible advertising
expenses carried forward from prior years.
As of December 31, 2015, the tax years ended December 31, 2011 through 2015 of the Company’s PRC subsidiaries and the affiliated PRC
entities are subjected to examination by the PRC tax authorities.
20. Preference shares
The Group did not authorize or issue any preference shares before 2010. Immediately prior to the IPO, the Group’s preference shares comprised
the following:
Series
A
A-1
B
B
B-1
Date of Issuance
March 2010
March 2010
December 2010
March 2011
August and
September 2011
Issue Price
Per Share
US$
Redemption Price
Per Share
US$
Shares
Authorized
Issued and
Outstanding
0.18
0.53
1.79
2.03
27,028,572
19,047,620
26,247,412
26,247,412
27,028,572
19,047,620
25,210,084
1,037,328
3.608
15,243,000
15,242,995
0.37
0.53
1.79
2.03
3.608
F-41
Carrying
Amount
US$
9,866
13,293
56,910
2,430
66,152
All of the preference shares were automatically converted to ordinary shares upon the Group’s IPO.
Prior to their automatic conversion to ordinary share upon the Group’s IPO, the preference shares were entitled to certain preferences with respect
to conversion, redemption, dividends and liquidation. The holders of Preference Shares were entitled to vote together with the holders of ordinary shares,
and not as a separate class, on all matters put before the shareholders of the Group, on an as-if-converted basis.
The Group determined that conversion and redemption features embedded in the preference shares were not required to be bifurcated and
accounted for as a derivative. The Group also determined that there was no beneficial conversion feature attributable to any of the preference shares
because the initial effective conversion prices of these preference shares were higher than the fair value of the Group's ordinary shares determined by the
Group with the assistance from an independent valuation firm.
21. Ordinary shares
The Company was incorporated in the Cayman Islands in May 2011. The Company is authorized to issue a maximum of 5,000,000,000 shares
with a par value of US$0.00001 per share, comprised of 4,912,433,396 ordinary shares and 87,566,604 Preference Shares.
On August 30, 2013, the Group's Board of Directors approved that the Group redesign the share capital and adopt a dual class ordinary share
structure immediately upon the completion of IPO. Upon completion of the Group’s IPO on November 5, 2013, the Company’s shares were divided into
Class A ordinary shares and Class B ordinary shares, at par value of US$0.00001. Holders of Class A ordinary shares and Class B ordinary shares have the
same rights except for voting and conversion rights. Holders of Class A ordinary shares are entitled to one vote per share, while holders of Class B ordinary
shares are entitled to ten votes per share, voting together as one class on all matters subject to a shareholders' vote. All of the outstanding ordinary shares
prior to this offering were redesignated as Class B ordinary shares and all of the outstanding preference shares were automatically re-designated or
converted into Class B ordinary shares on a one-for-one basis immediately upon the completion of the IPO.
As a result of the Group’s follow-on offering on April 1, 2014, the Company issued and sold 2,000,000 ADSs and the selling shareholders sold an
aggregate of 4,000,000 ADSs and 900,000 additional ADSs for the overallotment at the price of US$38.00 per ADS.
On June 30, 2014, Tencent purchased 36,805,000 ordinary shares from the Company at a purchase price of US$40.00 per ADS. The Group used
part of the proceeds from this transaction to repurchase an aggregate of 27,603,750 ordinary shares from existing pre-IPO shareholders at the price of
US$40.00 per ADS.
On March 2, 2015, the Group completed the acquisition of 100% equity interest of Anjuke. Total consideration for this acquisition consisted of
4,839,372 newly issued ordinary shares and 248,216 fully vested RSUs of the Company and US$160,198 in cash (See Note 4(a)).
On April 17, 2015, the Company entered into an investment agreement with a subsidiary of Tencent, pursuant to which Tencent purchased
15,384,616 newly issued ordinary shares of the Company for an aggregate cash consideration of US$400,000.
On April 20, 2015, the Company applied the whole US$400,000 proceeds from Tencent, together with additional cash from the Company of
US$12,237 and 34,039,136 newly issued ordinary shares of the Company, to acquire less than 50% equity interest in Ganji as mentioned in the
“Transaction (i)” (See Note 4(b)(i)).
F-42
On August 6, 2015, the Company committed cash of US$406,673 and 46,505,912 newly issued ordinary shares of the Company, to several private
equity funds of which 46,505,912 ordinary shares and US$272,396 cash were contributed to the funds in August 2015. These funds acquired the remaining
equity interest in Ganji with Tencent (See Note 4(b)(ii)).
On December 11, 2015, the Company issued 4,267,344 Class A ordinary shares to Tencent to early repay US$125,000 principal amount and settle
the accrued interest of US$7,288 of the Original Convertible Note. (See Note 15(a)).
As of December 31, 2015, 4,800,000,000 Class A ordinary shares and 200,000,000 Class B ordinary shares were authorized, 283,068,677 ordinary
shares were issued and outstanding, of which 219,413,764 were Class A ordinary shares and 63,654,913 were Class B ordinary shares.
22. Share-based compensation
In March 2010, the Group authorized an employment- related stock incentive plan (the "2010 Plan"). The 2010 Plan will terminate automatically
10 years after its adoption, unless terminated earlier at the Group's shareholders' approval. According to the resolutions of the Board of Directors of the
Group in April, November 2011 and January 2013, the number of ordinary shares available for issuance under the 2010 Plan was increased to 20,173,225.
The majority of options granted under 2010 plan were to be vested over three or four years, one fourth (1/4) of which shall vest and become exercisable
upon the first anniversary of the date of grant and the remaining shall vest monthly thereafter in 24 or 36 equal monthly installments.
The Group adopted a share incentive plan (the “2013 Plan”) on September 26, 2013. The 2013 Plan will terminate automatically 10 years after its
adoption, unless terminated earlier at the Group's shareholders' approval. The maximum aggregate number of shares which may be issued pursuant to all
awards under the 2013 Plan is 2,800,000 shares as of the date of its adoption. The number of shares reserved for future issuances under the 2013 Plan will
be increased by a number equal to 1.5% of the total number of outstanding shares on the last day of the immediately preceding calendar year, on the first
day of each calendar year during the term of the 2013 Plan beginning in 2015, or such lesser number of ordinary shares as determined by the Board of
Directors. According to the resolutions of the Board of Directors of the Group in April and December 2015, the number of ordinary shares available for
issuance under the 2013 Plan was increased to 13,686,128. The options and RSUs granted under the 2013 Plan were to be vested over 3-5 years, the
majority of which shall have one fourth (1/4) vested and exercisable upon the first anniversary of the date of grant and the remaining shall vest every six
months thereafter in equal installments.
As of December 31, 2015, the Group has reserved 709,241 ordinary shares available to be granted as share-based awards.
A summary of the Group’s share option activities for the years ended December 31, 2013, 2014 and 2015 is presented below:
Outstanding as of December 31, 2012
Granted
Forfeited and expired
Exercised
Outstanding as of December 31, 2013
Granted
Forfeited and expired
Exercised
Outstanding as of December 31, 2014
Granted
Forfeited and expired
Exercised
Outstanding as of December 31, 2015
Exercisable as of December 31, 2015
Fully vested and expected to vest as of December 31, 2015
Weighted
Average
Exercise
Price
US$
Weighted
Average
Remaining
Contractual
Life
In years
Aggregate
Intrinsic
Value
US$
1.40
3.07
2.21
1.16
2.02
18.20
4.08
0.98
4.14
20.72
7.22
3.10
8.05
3.04
8.36
7,504
8.14
7.75
7.43
6.34
7,778
168,870
67,128
112,925
27,785
175,250
110,765
Number of
Options
6,965,477
3,833,000
(520,030)
(431,774)
9,846,673
721,600
(388,260)
(3,391,943)
6,788,070
1,638,600
(279,626)
(1,118,334)
7,028,710
3,699,502
23,180,916
F-43
The weighted average grant date fair value of options granted for the years ended December 31, 2013, 2014 and 2015 was US$2.90, US$11.43 and
US$12.05 per share, respectively.
During 2012 and 2013, some employees voluntarily left the Group and exercised their vested share options in exchange for future entitlement of
the Group’s shares issuable after completion of the Group’s IPO and upon the request of these former employees. The proceeds from the exercise of these
options cannot be refunded to the former employees in any event, including the Group failed to complete an IPO. Accordingly, these share options are
considered to be exercised and contingently issuable upon the completion of the Group’s IPO. And the proceeds received have been included in additional
paid-in capital of the Group and disclosed in the consolidated statement of changes in shareholders’ equity/deficit for the years ended December 31, 2012
and 2013, respectively. The Group completed its IPO on November 5, 2013 and the 905,325 contingently issuable shares have been issued to the former
employees after the 180-day lock-up period.
There were no RSUs granted before 2014. The following table sets forth the summary of RSUs activities for the year ended December 31, 2014
and 2015:
Unvested as of December 31, 2013
Granted
Forfeited
Vested
Unvested as of December 31, 2014
Granted
Forfeited
Vested(1)
Unvested as of December 31, 2015
Note:
Number of
RSUs
—
948,600
(54,000)
—
894,600
10,369,278
(527,274)
(4,963,116)
5,773,488
Weighted
Average
Weighted
Remaining Average
Contractual Grant Date
Fair Value
Life
In years
—
US$
21.10
25.69
9.62
9.51
(1) In March 2015, in connection with the acquisition of Anjuke, the Company issued 248,216 fully vested RSUs of the Company to former
Anjuke’s employees as part of the share consideration. In August 2015, in connection with our strategic investment in Ganji, the Company issued
4,449,002 fully vested RSUs of the Company to former Ganji’s employees as part of the share consideration.
In February 2015, 58 Home, a subsidiary of the Group, adopted its 2015 Share Incentive Plan, or the 58 Home 2015 Plan. The maximum aggregate
number of shares which may be issued pursuant to all awards under the 58 Home 2015 Plan is 20,000,000 ordinary shares of 58 Home. The 58 Home 2015
Plan permits the awards of options, restricted shares and restricted share units. Unless terminated earlier, the 58 Home 2015 Plan will terminate
automatically in 2025. In connection with the Series A round of equity financing closed on November 27, 2015, the maximum aggregate number of shares
which may be issued under the 58 Home 2015 Plan was increased by 2,000,000 ordinary shares of 58 Home.
F-44
A summary of the 58 Home’s share option activities for the years ended December 31, 2015 is presented below:
Outstanding as of December 31, 2014
Granted
Forfeited
Outstanding as of December 31, 2015
Weighted
Average
Exercise
Price
US$
Weighted
Average
Remaining
Contractual
Life
In years
Aggregate
Intrinsic
Value
US$
0.11
0.13
0.11
8.99
22,780
Number of
Options
—
8,921,000
(979,000)
7,942,000
In February 2015, 58 Home granted 9,100,000 RSs to selected management members of 58 Home. In April 2015, 58 Home further granted
1,880,000 RSs to a senior management member of the Company under the 58 Home 2015 Plan. All of these RSs were fully vested on the respective grant
dates. Share-based compensation expense amounted to US$1,978 was recognized during the year ended December 31, 2015 with respect to the grant of the
RSs. These holders of RSs are referred to as “noncontrolling interests” of 58 Home. Please see Note 5 for details.
The weighted average grant date fair value of options granted for the year ended December 31, 2015 was US$0.15 per share.
Valuation Assumptions: The Group estimated the fair value of share options using the Binominal option-pricing model with the assistance from
an independent valuation firm.
The fair value of each option grant under the 2013 Plan was estimated on the date of grant with the following assumptions:
2013
2014
2015
Expected volatility
Risk-free interest rate (per annum)
Exercise multiple
Expected dividend yield
Expected term (in years)
Expected forfeiture rate (post-vesting)
Fair value of the underlying shares on the date of option grants (US$)
54.10% - 59.10% 50.80%-53.30% 48.50%-49.00%
2.67%-2.76%
2.03% - 3.10%
3.01%-3.73%
2
0.00%
10
2
0.00%
10
2-2.8
0.00%
10
1.00% - 3.30%
2.48 –8.50
0.30%-0.40%
19.26-22.95
0.17%-0.25%
10.93-24.85
The fair value of each option grant under the 58 Home 2015 Plan was estimated on the date of grant with the following assumptions:
Expected volatility
Risk-free interest rate (per annum)
Exercise multiple
Expected dividend yield
Expected term (in years)
Expected forfeiture rate (post-vesting)
Fair value of the underlying shares on the date of option grants (US$)
2015
59.40%-60.00%
2.46%-2.63%
2-2.8
0.00%
10
0.25%
0.10-0.27
The Group estimated the risk free rate based on the yield to maturity of US treasury bonds denominated in US$ at the option valuation date. The
exercise multiple is estimated as the ratio of fair value of underlying shares over the exercise price as at the time the option is exercised, based on a
consideration of research study regarding exercise pattern based on historical statistical data. Expected term is the contract life of the option. The expected
volatility at the date of grant date and each option valuation date was estimated based on the historical stock prices of comparable companies. The Group
has never declared or paid any cash dividends on its capital stock, and the Group does not anticipate any dividend payments on its ordinary shares in the
foreseeable future.
F-45
Share-based compensation expenses for the share-based awards which are based on service conditions are recognized using the straight-line
attribution approach.
For the years ended December 31, 2013, 2014 and 2015, the Group recognized share-based compensation expenses of US$2,865, US$6,173 and
US$28,060, respectively for share options and RSUs granted.
As of December 31, 2015, there was a total of US$135,174 of total unrecognized compensation expenses, adjusted for estimated forfeitures,
related to non-vested share-based compensation arrangement under the 2010 and 2013 Plan. The expense is expected to be recognized over a weighted
average period of 3.69 years. Total unrecognized compensation expenses may be adjusted for future changes in estimated forfeitures.
23. Income/(loss) per share
The following table sets forth the computation of basic and diluted net income/(loss) per share for the periods indicated:
Numerator:
Net income/(loss).
Add: Net loss attributable to noncontrolling interests
Series A-1 Preference Shares accretions
Series B Preference Shares accretions
Series B-1 Preference Shares accretions
Income allocation to participating preference shares
Deemed dividend to mezzanine classified noncontrolling interests
Numerator for basic and diluted net income/(loss) per share
Denominator:
Weighted average number of ordinary shares used in computing net income/(loss) per share—
basic
Weighted average number of ordinary shares used in computing net income/(loss) per share—
diluted
Net income/(loss) per ordinary share attributable to ordinary shareholders - basic
Net income/(loss) per ordinary share attributable to ordinary shareholders - diluted
Net income/(loss) per ADS attributable to ordinary shareholders-basic (1 ADS represents 2
ordinary shares)
Net income/(loss) per ADS attributable to ordinary shareholders -diluted (1 ADS represents 2
ordinary shares)
2013
As of December 31,
2014
2015
19,557
—
(858)
(3,831)
(4,445)
(1,230)
—
9,193
22,644
—
—
—
—
—
—
22,644
(262,956)
12,920
—
—
—
—
(898)
(250,934)
63,717,007
168,589,273
234,811,986
69,159,524
0.14
0.13
174,024,997
0.13
0.13
234,811,986
(1.07)
(1.07)
0.29
0.27
0.27
0.26
(2.14)
(2.14)
Basic net income/(loss) per share is computed using the weighted average number of the ordinary shares outstanding during the period. Diluted net
income/(loss) per share is computed using the weighted average number of ordinary shares and dilutive ordinary share equivalents outstanding during the
period. Class A and Class B ordinary shares are considered the same for the purposes of EPS calculation as they have identical earnings rights and
preferences. For the year ended December 31, 2013 and 2014, options to purchase ordinary shares included in the calculation of diluted net income per
share totaled 4,742,442 and 5,435,724, respectively. For the year ended December31, 2015, options to purchase ordinary shares that were anti-dilutive and
excluded from the calculation of diluted net loss per share totaled 7,851,775 on a weighted average basis.
Before 2013, certain employees left the Group and exercised their vested share options. Due to certain legal restrictions in China, upon the Group's
initial public offering, the Group issued 905,325 contingently issuable shares related to the exercise. The contingently issuable shares have been issued to
these ex-employees after the expiration of the 180-day lock-up period upon the completion of the initial public offering without any further consideration
paid. For the year ended December 31, 2013, the contingently issuable shares included in the calculation of diluted net income per share were 700,075.
F-46
The proceeds from the above option exercises were US$557 in 2013, which were recorded in additional paid-in capital. The contingently issuable
shares are not included in the computation of basic net income/(loss) per share as the holders do not participate in any voting and dividend rights until the
shares are actually issued, but is included in the dilutive ordinary equivalent shares using if-converted method as the conditions for issuance have been
satisfied.
24. Commitments and contingencies
(a)
Commitments
The Group leases its facilities and offices under non-cancelable operating lease agreements. The rental expenses were US$5,253, US$8,511 and
US$29,834 during the years ended December 31, 2013, 2014, and 2015, respectively, and were charged to the statement of comprehensive income/(loss)
when incurred.
Certain of these arrangements have renewal or expansion options and adjustments for market provisions, such as free or escalating base monthly
rental payments. The Group recognizes rental expense under such arrangements on the straight-line basis over the initial term of the lease. The difference
between the straight-line expense and the cash paid for rent was recorded as prepaid rent.
The Group used third party services for server custody and bandwidth. The contracts are typically 12 months in duration. The Group typically
contracts these services according to the traffic level of its online marketplace and the respective server storage and bandwidth required to support
the traffic.
The Group engaged third parties for promoting its brand image through various advertising channels, including advertising on internet search
engines, websites and other traditional off-line media. The amount of advertising commitments relates to the committed advertising services that have not
been delivered and paid.
As of December 31, 2015, future minimum commitments under non-cancelable agreements were as follows:
Operating lease commitments
Server custody and bandwidth fee
commitments
Advertising commitments
Amended Convertible Note issued to Tencent
Total
2016
US$
2017
US$
2018
US$
2019
US$
2020
US$
Thereafter
US$
Total
US$
20,047
15,176
10,437
2,477
316
602
49,055
3,240
150,165
283,679
457,131
2,026
—
—
17,202
1,182
—
—
11,619
—
—
—
2,477
—
—
—
316
—
—
—
602
6,448
150,165
283,679
489,347
Other than those shown above, the Group did not have any significant capital and other commitments, long-term obligations, or guarantees as of
December 31, 2015.
(b)
Contingencies
From time to time, the Group is involved in claims and legal proceedings that arise in the ordinary course of business. Based on currently available
information, management does not believe that the ultimate outcome of these unresolved matters, individually and in the aggregate, is likely to have a
material adverse effect on the Group’s financial position, results of operations or cash flows. However, litigation is subject to inherent uncertainties and the
Group’s view of these matters may change in the future. When an unfavorable outcome to occur, there exists the possibility of a material adverse impact on
the Group’s financial position and results of operations for the periods in which the unfavorable outcome occurs, and potentially in future periods.
25. Subsequent events
In February 2016, the Group granted 152,240 RSUs to its employees under the 2013 Share Incentive Plan.
Guazi closed a new US$204,500 round of equity financing with participation from a number of globally recognized institutional investors in Marc
The Company converted the Guazi Convertible Note into preference shares of Guazi.
The Company obtained a secured interest-bearing loan of US$275,000 from China Merchants Bank Co., Ltd. in April 2016. Pursuant to the loan
repayment schedule, US$167,500 out of the US$275,000 principal amount will be repaid before December 31, 2016 and the remaining US$107,500 will
be due on April 21, 2017. The Company used the proceeds from this loan to early repay the principal of the Amended Convertible Note borrowed from
Tencent. The Amended Convertible Note and the accrued interest have been fully paid off in April 2016.
F-47
26. Restricted net assets
PRC laws and regulations permit payments of dividends by the Company's subsidiaries, the VIEs and VIEs’ subsidiaries incorporated in the PRC
only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. In addition, the Company's
subsidiaries, the VIEs and VIEs’ subsidiaries incorporated in the PRC are required to annually appropriate 10% of their net after-tax income to the statutory
general reserve fund prior to payment of any dividends, unless such reserve funds have reached 50% of their respective registered capital. As a result of
these and other restrictions under PRC laws and regulations, the Company's subsidiaries, the VIEs and VIEs’ subsidiaries incorporated in the PRC are
restricted in their ability to transfer a portion of their net assets to the Company either in the form of dividends, loans or advances, which restricted portion
amounted to US$171,566 and US$228,557 as of December 31, 2014 and 2015, respectively. Even though the Company currently does not require any such
dividends, loans or advances from the PRC entities for working capital and other funding purposes, the Company may in the future require additional cash
resources from them due to changes in business conditions, to fund future acquisitions and development, or merely to declare and pay dividends or
distributions to its shareholders. Except for the above, there is no other restriction on the use of proceeds generated by the Company's subsidiaries, the VIEs
and VIEs’ subsidiaries to satisfy any obligations of the Company.
The Group performed a test on the restricted net assets of its consolidated subsidiaries, the VIEs and VIEs’ subsidiaries (the "restricted net assets")
in accordance with Securities and Exchange Commission Regulation S-X Rule 4-08 (e) (3), "General Notes to Financial Statements" and concluded that the
restricted net assets did not exceed 25% of the consolidated net assets of the Group as of December 31, 2015.
F-48
(Summary Translation)
Exhibit 4.13
Cooperation Agreement
for
The Project of Block A1, IT Industrial Park of Electronics Zone
Beijing Electronics Zone Investment and Development Co., Ltd.
Beijing Chengshi Wanglin Information Technology Co., Ltd.
September 25, 2014
Beijing
Party A: Beijing Electronics Zone Investment and Development Co., Ltd.
Postal Address: Building 205, Jia No. 10 Yard, North Jiuxianqiao Road, Chaoyang District,
Beijing
Zip Code: 100015
Business License Registration No.: 110000005030270
Legal Representative or Person in Charge: Wang Yan
Tel: 010-58833501
Party B: Beijing Chengshi Wanglin Information Technology Co., Ltd.
Postal Address: Suite E, North America International Business Center, Yi No. 108 Beiyuan
Road, Chaoyang District, Beijing
Zip Code: 1000010
Business License Registration No.: 110000450129310
Legal Representative or Person in Charge: Yao Jinbo
Tel: 010-51395858
WHEREAS
1
2
The number of the Certificate for Use of the State-owned Land of the land located in Zone A of the IT Industrial Park in the Electronics Zone with
an area of 69,122.42 square meters (area for exclusive use) is Jing Chao Guo Yong (2008 Chu) No. 0108; the purpose of the land specified therein
is for industrial use, and the land use right will expire on December 7, 2056. Such land use right of the State-owned land and the projects being
constructed thereon that already obtained by Party A are all free of any mortgage, litigation, arbitration or any other legal proceedings; the
buildings are originally planned to serve as the purpose of industrial facilities, and is currently under planning adjustment, and Party A will carry
out the construction subject to the planning approval and construction drawings.
After a full understanding of the relevant details of construction and situation of the IT Industrial Park of Zhongguancun Electronics Zone, Party B
decides to purchase Block 1, Zone A of the IT Industrial Park and will perform the relevant admittance approval procedures according to the
admittance conditions of Zhongguancun Electronics Zone, and further undertakes that after the entry, it will move its registered address and tax
source to IT Industrial Park of Zhongguancun Electronics Zone as soon as practicable and will not change the intended purpose of the building.
In accordance with the relevant laws and regulations and on the basis of equal, voluntary and fair negotiations, Party A and Party B hereby agree as follows
in connection with the matters of their cooperation:
Article 1 Target Building
1.1.
Scope of the Target Building
The target building in this Agreement refers to Block 1, Zone A, Jia No. 10 Yard, North Jiuxianqiao Road, Chaoyang District, Beijing, the main
structure of which is frame structure; the building has two floors underground and seven floors above ground, with the total floor area temporarily
estimated as approximately 28,169.29 square meters, of which the floor area above ground is approximately 21,405.97 square meters and the floor
area underground is approximately 6,763.32 square meters (Note: the areas provided in this paragraph are estimated areas, and the final figures
shall be subject to the surveying and mapping report after the completion.)
2
1.2.
Confirmation on Area of the Target Building
The Parties agree to confirm the areas on the basis of the floor area, and the actual aggregate floor area shall be subject to the area confirmed in the
surveying and mapping report. If the absolute value of the error ratio in respect of the total floor area falls within 3% (included), the price will be
settled based on the actual area and at the price agreed herein; if the actual total floor area is larger than the estimated floor area agreed herein, the
part of the price corresponding to the area exceeding 3% error ratio shall be borne by Party A, and such area in excess shall be owned by Party B;
if the actual total floor area is smaller than the estimated floor area agreed herein, the part of the price corresponding to the area exceeding 3%
error ratio shall be refunded by Party A to Party B in double amount.
Article 2 Price of Target Building and Payment Schedule
2.1.
Calculation Method for the Price of the Target Building:
The Parties acknowledge that the transaction price of the target building shall be calculated on the basis of RMB23,000 (twenty-three thousand)
per square meter for the total floor area.
2.2.
Estimated Price of the Target Building
According to the estimated calculation of the floor area provided in Article 1 hereof, the estimated basic price payable by Party B to Party A for
purchase of the target building shall be RMB647,893,670 (i.e. six hundred and forty-seven million eight hundred and ninety-three thousand six
hundred and seventy) (hereinafter referred to as the “Estimated Total Price”). The final price shall be adjusted and settled as agreed in Article 1.2
by refunding the amounts in excess and making up for the shortfall.
2.3.
Payment Schedule
Party B will pay the full amount of the Estimated Total Price to Party A in several instalments according to the following schedule:
2.3.1. within 20 working days after this Agreement takes effect, Party B will pay 10% of the Estimated Total Price to Party A, i.e. RMB 64,789,367
(sixty-four million seven hundred and eighty-nine thousand three hundred and sixty-seven);
2.3.2.
2.3.3.
prior to September 30, 2015, Party B will pay 40% of the Estimated Total Price to Party A, i.e. RMB 259,157,468 (two hundred and fifty-nine
million one hundred and fifty-seven thousand four hundred and sixty-eight);
prior to December 31, 2015, Party B will pay 50% of the Estimated Total Price to Party A, i.e. RMB 323,946,835 (three hundred and twenty-three
million nine hundred and forty-six thousand eight hundred and thirty-five);
3
Article 3 Delivery of Target Building
3.1.
Party A shall complete the construction, inspection and acceptance of the target building no later than December 31, 2015. Party A shall deliver
the building to Party B after Party B has made full payment of the entire Estimated Total Price.
Article 4 Ownership Certificate
4.1.
4.2.
4.3.
Party A acknowledges that after the target building has been delivered to Party B and the handover procedures in respect thereof have been
completed pursuant to Article 3, and after Party B has paid up the full price for purchase of the building in the amount adjusted pursuant to Article
2.2 hereof, Party A shall have the obligation to complete the procedures for the Building Ownership Certificate within 2 years after Party B has
provided all relevant materials that should be provided by it and paid up all relevant taxes and fees.
Both Parties agree to bear any taxes and expenses incurred arising from the handling of the building ownership certificate according to relevant
regulations of the State.
Given that the building is located within the Technical Park of Zhongguancun Electronics Zone, Party B shall not transfer the building in principle
according to the relevant regulations; in case of a transfer, Party A shall have a pre-emptive buyback right under the equivalent conditions, unless
in cases where such regulations are invalidated at the time of transfer.
Article 5 Liabilities for Breach
5.1.
Principles
The Parties shall enjoy the rights and perform the obligations provided hereunder under the principles of honesty and good faith. In cases of any
default, the defaulting Party shall assume the liabilities for breach and pay a penalty fine to the non-defaulting Party. If there is an express
provision governing the percentage of the penalty fine, such provision shall prevail. In case both Parties are in breach, the Parties shall undertake
their respective liabilities according to their respective degree of fault or level of responsibilities.
In case of breach by any Party, the non-defaulting Party shall be entitled to require the defaulting Party to rectify such breach. The legal liabilities
thus brought about shall be assumed by the defaulting Party.
5.2.
Party A’s Liabilities for Breach
If Party A fails to perform its own obligations within the period agreed herein, the following provisions shall prevail:
4
5.2.1.
5.2.2.
If Party A fails to deliver the target building to Party B by June 30, 2016 as required in Article 3.1 and Exhibit 2 for reasons attributable to Party
A, Party A shall pay 0.01% of the price already paid by Party B as penalty for each day of delay. In case such delay lasts over 90 days, Party B
shall be entitled to terminate this Agreement, in which case Party A shall refund all paid amounts to Party B within 30 days upon the date of the
termination notice, and pay 0.01% of the paid amounts as penalty to Party B for each day of delay. If Party B elects not to terminate this
Agreement, Party A shall pay 0.01% of the paid amounts as penalty to Party B for each day during the period starting from the day immediately
following the due delivery date agreed herein and ending on the actual delivery date, and this Agreement shall continue to be performed.
If Party A fails to make the initial registration for Party B within the agreed time limit, or fails to go through the procedures of the Building
Ownership Certificate for reasons attributable to Party A, Party A shall pay 0.01% of the price already paid by Party B as penalty for each day of
delay. In case such delay lasts over 90 days, Party B shall be entitled to terminate this Agreement, in which case Party A shall refund all paid
amounts to Party B within 30 days upon the date of the termination notice, and pay 0.01% of the paid amounts as penalty to Party B for each day
during the period starting from the day on which the procedures for the ownership certificate should be completed and ending on the date of
refunding.
5.2.3.
Except as agreed herein, Party A undertakes that it will not resell the building to others and that the target building is free of any security interest,
failing to comply with which Party A has to pay Party B a penalty fine equivalent to 30% of the Estimated Total Price hereunder, and the
performance of this Agreement may be continued at the election of Party B.
5.3.
Party B’s Liabilities for Breach
If Party B fails to perform its own obligations within the period agreed herein, the following provisions shall prevail:
5.3.1.
5.3.2.
5.3.3.
Party A shall be entitled to unilaterally terminate this Agreement if Party B fails to pay the first instalment of the Estimated Total Price to Party A
as agreed herein.
In case the payment is delayed for less than 90 days for reasons attributable to Party B, Party B shall pay 0.01% of the outstanding and payable
amounts as penalty to Party B for each day during the period starting from the day immediately following the due payment date agreed herein and
ending on the actual full payment date, and this Agreement shall continue to be performed.
In case the delay in payment lasts over 90 days for reasons attributable to Party B, Party A shall be entitled to terminate this Agreement and resell
the building contemplated hereunder to any third person, in which case Party B shall pay 0.01% of the outstanding and payable amounts as penalty
to Party A for each day of delay, and Party A shall refund the remaining paid amounts after deducting such penalty fine. If Party A elects not to
terminate this Agreement, Party B shall pay 0.01% of the outstanding and payable amounts as penalty to Party A for each day during the period
starting from the day immediately following the due payment date of such outstanding amounts agreed herein and ending on the actual payment
date, and this Agreement shall continue to be performed.
5
5.4.
5.5.
Except for the right of unilateral termination exercisable by the Parties pursuant to this Agreement, neither Party may terminate this Agreement
without justified reasons, and either Party that terminates this Agreement for reasons not stipulated by the law or agreed herein shall pay a penalty
fine equivalent to 30% of the Estimated Total Price to the non-defaulting Party. However, neither Party may terminate this agreement by applying
this paragraph after the other Party has performed the primary obligations hereunder. The primary obligations mentioned in this paragraph, with
respect to Party A, shall mean the obligations to deliver the building and complete the procedures for ownership transfer, and with respect to Party
B, shall mean the obligation to pay the Estimated Total Price of the building.
If either Party is required to refund amounts and/or pay penalty fine to the other Party for its default pursuant to this Agreement, the defaulting
Party shall refund the amounts as agreed and pay the penalty fine within 30 days upon the delivery of the written notice by the non-defaulting
Party to the defaulting Party, failing to do which the defaulting Party shall pay 0.01% of the Estimated Total Price for each day during the period
from the day on which the penalty fine should be paid to the day on which the penalty is actually paid in full.
Article 6 Termination of Agreement
6.1.
In case any of the following situation occurs, this Agreement will terminate:
(1)
(2)
(3)
(4)
(5)
6.2.
this Agreement will terminate earlier upon a new written agreement entered into between the Parties after negotiations;
this Agreement will terminate automatically after the Parties have completed their obligations hereunder;
where a Party is deprived of its legal capacity due to bankruptcy, closedown, revocation of business license, the other Party is entitled to terminate
this Agreement immediately upon delivery of a written notice;
upon the occurrence of a force majeure event, which renders that the purpose of this Agreement cannot be realized, either Party may terminate this
Agreement via a notice to the other Party; or
other circumstances under which this Agreement may be terminated or dissolved as provided by laws, regulations or agreed in this Agreement.
Either Party that terminates or dissolves this Agreement as provided by laws, regulations or agreed in this Agreement shall send a written notice to
the other Party to terminate or dissolve this Agreement, and this Agreement shall be terminated or dissolved upon the receipt of such written notice
by the other Party. The non-defaulting Party is entitled to claim the defaulting liabilities against the defaulting Party according to the laws,
regulations and this Agreement.
Article 7 Confidentiality
Article 8 Force Majeure
Article 9 Effectiveness and Counterparts
9.1.
This Agreement shall take effect upon being signed and stamped by the Parties and after being approved by the shareholders of Party A and the
board of directors of Party B.
6
9.2.
9.3.
This Agreement shall be made in six counterparts, three for each Party, all of which shall be equally binding.
In case of any conflicts between this Agreement and the laws and regulations of the State, the latter shall prevail.
Article 10 Dispute Resolution
10.1.
In case of any disputes between the Parties, the Parties shall first resort to amicable negotiations to resolve such disputes; if the negotiations fail,
such disputes shall be filed to the court of competent jurisdiction over the target building for resolution.
Article 11 Exhibits of the Agreement
7
(Summary Translation)
Cooperation Agreement
for
The Project of Block A5, IT Industrial Park of Electronics Zone
Beijing Electronics Zone Investment and Development Co., Ltd.
Beijing Chengshi Wanglin Information Technology Co., Ltd.
September 25, 2014
Beijing
8
Party A: Beijing Electronics Zone Investment and Development Co., Ltd.
Postal Address: Building 205, Jia No. 10 Yard, North Jiuxianqiao Road, Chaoyang District,
Beijing
Zip Code: 100015
Business License Registration No.: 110000005030270
Legal Representative or Person in Charge: Wang Yan
Tel: 010-58833501
Party B: Beijing Chengshi Wanglin Information Technology Co., Ltd.
Postal Address: Suite E, North America International Business Center, Yi No. 108 Beiyuan
Road, Chaoyang District, Beijing
Zip Code: 1000010
Business License Registration No.: 110000450129310
Legal Representative or Person in Charge: Yao Jinbo
Tel: 010-51395858
WHEREAS
1
2
The number of the Certificate for Use of the State-owned Land of the land located in Zone A of the IT Industrial Park in the Electronics Zone with
an area of 69,122.42 square meters (area for exclusive use) is Jing Chao Guo Yong (2008 Chu) No. 0108; the purpose of the land specified therein
is for industrial use, and the land use right will expire on December 7, 2056. Such land use right of the State-owned land and the projects being
constructed thereon that already obtained by Party A are all free of any mortgage, litigation, arbitration or any other legal proceedings; as of the
date of this agreement, the Parties acknowledge that Party A has obtained the 2013 Gui (Chao) Jian Zi No. 0113 Construction Engineering
Planning Permit (Jian Zi No. 110105201300273) for Block 5 from relevant governmental authority, the buildings are originally planned to serve as
the purpose of industrial facilities, and relevant construction design drawings have been completed, and Party A will carry out the construction
subject to the planning approval and construction drawings. The buildings have completed the structural roof sealing.
After a full understanding of the relevant details of construction and situation of the IT Industrial Park of Zhongguancun Electronics Zone, Party B
decides to purchase Block 5, Zone A of the IT Industrial Park and will perform the relevant admittance approval procedures according to the
admittance conditions of Zhongguancun Electronics Zone, and further undertakes that after the entry, it will move its registered address and tax
source to IT Industrial Park of Zhongguancun Electronics Zone as soon as practicable and will not change the intended purpose of the building.
In accordance with the relevant laws and regulations and on the basis of equal, voluntary and fair negotiations, Party A and Party B hereby agree as follows
in connection with the matters of their cooperation:
Article 1 Target Building
1.1.
Scope of the Target Building
The target building in this Agreement refers to Block 5, Zone A, Jia No. 10 Yard, North Jiuxianqiao Road, Chaoyang District, Beijing, the main
structure of which is frame structure; the building has seven floors above ground, with the total floor area temporarily estimated as approximately
16,745.71 square meters (Note: the areas provided in this paragraph are estimated areas, and the final figures shall be subject to the surveying and
mapping report after the completion.)
9
1.2.
Confirmation on Area of the Target Building
The Parties agree to confirm the areas on the basis of the floor area, and the actual aggregate floor area shall be subject to the area confirmed in the
surveying and mapping report. If the absolute value of the error ratio in respect of the total floor area falls within 3% (included), the price will be
settled based on the actual area and at the price agreed herein; if the actual total floor area is larger than the estimated floor area agreed herein, the
part of the price corresponding to the area exceeding 3% error ratio shall be borne by Party A, and such area in excess shall be owned by Party B;
if the actual total floor area is smaller than the estimated floor area agreed herein, the part of the price corresponding to the area exceeding 3%
error ratio shall be refunded by Party A to Party B in double amount.
Article 2 Price of Target Building and Payment Schedule
2.1.
Calculation Method for the Price of the Target Building:
The Parties acknowledge that the transaction price of the target building shall be calculated on the basis of RMB23,000 (twenty-three thousand)
per square meter for the total floor area.
2.2.
Estimated Price of the Target Building
According to the estimated calculation of the floor area provided in Article 1 hereof, the estimated basic price payable by Party B to Party A for
purchase of the target building shall be RMB385,151,330 (i.e. three hundred and eighty-five million one hundred and fifty-one thousand three
hundred and thirty) (hereinafter referred to as the “Estimated Total Price”). The final price shall be adjusted and settled as agreed in Article 1.2
by refunding the amounts in excess and making up for the shortfall.
2.3.
Payment Schedule
Party B will pay the full amount of the Estimated Total Price to Party A in several instalments according to the following schedule:
2.3.1. within 20 working days after this Agreement takes effect, Party B will pay 10% of the Estimated Total Price to Party A, i.e. RMB 38,515,133
(thirty-eight million five hundred and fifteen thousand one hundred and thirty-three);
2.3.2.
prior to March 31, 2015, Party B will pay 80% of the Estimated Total Price to Party A, i.e. RMB 308,121,064 (three hundred and eight million one
hundred and twenty-one thousand and sixty-four);
2.3.3. within 10 working days prior to the delivery of the target building, Party B will pay the remaining part of the Estimated Total Price to Party A, i.e.
RMB 38,515,133 (thirty-eight million five hundred and fifteen thousand one hundred and thirty-three);
10
Article 3 Delivery of Target Building
3.1.
Party A shall complete the construction, inspection and acceptance of the target building no later than August 31, 2015. Party A shall deliver the
building to Party B after Party B has made full payment of the entire Estimated Total Price.
Article 4 Ownership Certificate
4.1.
4.2.
4.3.
Party A acknowledges that after the target building has been delivered to Party B and the handover procedures in respect thereof have been
completed pursuant to Article 3, and after Party B has paid up the full price for purchase of the building in the amount adjusted pursuant to Article
2.2 hereof, Party A shall have the obligation to complete the procedures for the Building Ownership Certificate within 2 years after Party B has
provided all relevant materials that should be provided by it and paid up all relevant taxes and fees.
Both Parties agree to bear any taxes and expenses incurred arising from the handling of the building ownership certificate according to relevant
regulations of the State.
Given that the building is located within the Technical Park of Zhongguancun Electronics Zone, Party B shall not transfer the building in principle
according to the relevant regulations; in case of a transfer, Party A shall have a pre-emptive buyback right under the equivalent conditions, unless
in cases where such regulations are invalidated at the time of transfer.
Article 5 Liabilities for Breach
5.1.
Principles
The Parties shall enjoy the rights and perform the obligations provided hereunder under the principles of honesty and good faith. In cases of any
default, the defaulting Party shall assume the liabilities for breach and pay a penalty fine to the non-defaulting Party. If there is an express
provision governing the percentage of the penalty fine, such provision shall prevail. In case both Parties are in breach, the Parties shall undertake
their respective liabilities according to their respective degree of fault or level of responsibilities.
In case of breach by any Party, the non-defaulting Party shall be entitled to require the defaulting Party to rectify such breach. The legal liabilities
thus brought about shall be assumed by the defaulting Party.
5.2.
Party A’s Liabilities for Breach
If Party A fails to perform its own obligations within the period agreed herein, the following provisions shall prevail:
5.2.1.
If Party A fails to deliver the target building to Party B by August 31, 2015 as required in Article 3.1 and Exhibit 2 for reasons attributable to Party
A, Party A shall pay 0.01% of the price already paid by Party B as penalty for each day of delay. In case such delay lasts over 90 days, Party B
shall be entitled to terminate this Agreement, in which case Party A shall refund all paid amounts to Party B within 30 days upon the date of the
termination notice, and pay 0.01% of the paid amounts as penalty to Party B for each day of delay. If Party B elects not to terminate this
Agreement, Party A shall pay 0.01% of the paid amounts as penalty to Party B for each day during the period starting from the day immediately
following the due delivery date agreed herein and ending on the actual delivery date, and this Agreement shall continue to be performed.
11
5.2.2.
If Party A fails to make the initial registration for Party B within the agreed time limit, or fails to go through the procedures of the Building
Ownership Certificate for reasons attributable to Party A, Party A shall pay 0.01% of the price already paid by Party B as penalty for each day of
delay. In case such delay lasts over 90 days, Party B shall be entitled to terminate this Agreement, in which case Party A shall refund all paid
amounts to Party B within 30 days upon the date of the termination notice, and pay 0.01% of the paid amounts as penalty to Party B for each day
during the period starting from the day on which the procedures for the ownership certificate should be completed and ending on the date of
refunding.
5.2.3.
Except as agreed herein, Party A undertakes that it will not resell the building to others and that the target building is free of any security interest,
failing to comply with which Party A has to pay Party B a penalty fine equivalent to 30% of the Estimated Total Price hereunder, and the
performance of this Agreement may be continued at the election of Party B.
5.3.
Party B’s Liabilities for Breach
If Party B fails to perform its own obligations within the period agreed herein, the following provisions shall prevail:
5.3.1.
5.3.2.
5.3.3.
Party A shall be entitled to unilaterally terminate this Agreement if Party B fails to pay the first instalment of the Estimated Total Price to Party A
as agreed herein.
In case the payment is delayed for less than 90 days for reasons attributable to Party B, Party B shall pay 0.01% of the outstanding and payable
amounts as penalty to Party B for each day during the period starting from the day immediately following the due payment date agreed herein and
ending on the actual full payment date, and this Agreement shall continue to be performed. In case Party B fails to make payments pursuant to
Article 2.3.2, it shall pay breach penalty from the sixth working day after the last payment date as required in Article 2.3.2.
In case the delay in payment lasts over 90 days for reasons attributable to Party B, Party A shall be entitled to terminate this Agreement and resell
the building contemplated hereunder to any third person, in which case Party B shall pay 0.01% of the outstanding and payable amounts as penalty
to Party A for each day of delay, and Party A shall refund the remaining paid amounts after deducting such penalty fine. If Party A elects not to
terminate this Agreement, Party B shall pay 0.01% of the outstanding and payable amounts as penalty to Party A for each day during the period
starting from the day immediately following the due payment date of such outstanding amounts agreed herein and ending on the actual payment
date, and this Agreement shall continue to be performed.
12
5.4.
5.5.
Except for the right of unilateral termination exercisable by the Parties pursuant to this Agreement, neither Party may terminate this Agreement
without justified reasons, and either Party that terminates this Agreement for reasons not stipulated by the law or agreed herein shall pay a penalty
fine equivalent to 30% of the Estimated Total Price to the non-defaulting Party. However, neither Party may terminate this agreement by applying
this paragraph after the other Party has performed the primary obligations hereunder. The primary obligations mentioned in this paragraph, with
respect to Party A, shall mean the obligations to deliver the building and complete the procedures for ownership transfer, and with respect to Party
B, shall mean the obligation to pay the Estimated Total Price of the building.
If either Party is required to refund amounts and/or pay penalty fine to the other Party for its default pursuant to this Agreement, the defaulting
Party shall refund the amounts as agreed and pay the penalty fine within 30 days upon the delivery of the written notice by the non-defaulting
Party to the defaulting Party, failing to do which the defaulting Party shall pay 0.01% of the Estimated Total Price for each day during the period
from the day on which the penalty fine should be paid to the day on which the penalty is actually paid in full.
Article 6 Termination of Agreement
6.1.
In case any of the following situation occurs, this Agreement will terminate:
(1)
(2)
(3)
(4)
(5)
6.2.
this Agreement will terminate earlier upon a new written agreement entered into between the Parties after negotiations;
this Agreement will terminate automatically after the Parties have completed their obligations hereunder;
where a Party is deprived of its legal capacity due to bankruptcy, closedown, revocation of business license, the other Party is entitled to terminate
this Agreement immediately upon delivery of a written notice;
upon the occurrence of a force majeure event, which renders that the purpose of this Agreement cannot be realized, either Party may terminate this
Agreement via a notice to the other Party; or
other circumstances under which this Agreement may be terminated or dissolved as provided by laws, regulations or agreed in this Agreement.
Either Party that terminates or dissolves this Agreement as provided by laws, regulations or agreed in this Agreement shall send a written notice to
the other Party to terminate or dissolve this Agreement, and this Agreement shall be terminated or dissolved upon the receipt of such written notice
by the other Party. The non-defaulting Party is entitled to claim the defaulting liabilities against the defaulting Party according to the laws,
regulations and this Agreement.
13
Article 7 Confidentiality
Article 8 Force Majeure
Article 9 Effectiveness and Counterparts
9.1.
9.2.
9.3.
This Agreement shall take effect upon being signed and stamped by the Parties and after being approved by the shareholders of Party A and the
board of directors of Party B.
This Agreement shall be made in six counterparts, three for each Party, all of which shall be equally binding.
In case of any conflicts between this Agreement and the laws and regulations of the State, the latter shall prevail.
Article 10 Dispute Resolution
10.1.
In case of any disputes between the Parties, the Parties shall first resort to amicable negotiations to resolve such disputes; if the negotiations fail,
such disputes shall be filed to the court of competent jurisdiction over the target building for resolution.
Article 11 Exhibits of the Agreement
14
Exhibit 4.14
EXECUTION COPY
SHARE PURCHASE AGREEMENT
BY AND AMONG
58.COM INC.
ANJUKE INC.
THE FOUNDERS NAMED HEREIN
and
THE SELLING SHAREHOLDERS NAMED HEREIN
Dated as of February 28, 2015
TABLE OF CONTENTS
Article I Definitions
Section 1.1
Section 1.2
Certain Definitions
Interpretation and Rules of Construction
ARTICLE II Sale and Purchase of Shares
Section 2.1
Section 2.2
Section 2.3
Section 2.4
Section 2.5
Section 2.6
Section 2.7
Section 2.8
Section 2.9
Sale and Purchase of Shares
Purchase Price
Closing Date
Closing Deliveries by the Company
Closing Deliveries by the Selling Shareholders
Closing Deliveries by the Purchaser
Conversion of Purchased Shares
Breaching Selling Shareholder
Treatment of Company Share Awards
ARTICLE III Representations and Warranties With Respect to Group Companies
Section 3.1
Section 3.2
Section 3.3
Section 3.4
Section 3.5
Section 3.6
Section 3.7
Section 3.8
Section 3.9
Section 3.10
Section 3.11
Section 3.12
Section 3.13
Section 3.14
Section 3.15
Section 3.16
Section 3.17
Section 3.18
Section 3.19
Section 3.20
Section 3.21
Section 3.22
Section 3.23
Section 3.24
Organization and Good Standing
Authorization
Conflicts; Consents of Third Parties
Capitalization
Group Companies
Corporate Books and Records
Financial Statements
Certain Operating Metrics
Absence of Certain Changes
Litigation
Title to Properties; Liens and Encumbrances
Intellectual Property
Taxes
Material Contracts
Compliance with Laws and Other Instruments
Employee Matters
Transactions with Related Parties
Material Licenses
Entire Business
Office or Branch Locations
Full Disclosure
Brokers
Amount Due to Option Holders
No Other Representations or Warranties
ARTICLE IV Representations and Warranties with Respect to Selling Shareholders
Section 4.1
Section 4.2
Section 4.3
Section 4.4
Capacity
Authorization
Conflicts; Consents of Third Parties
Ownership and Transfer of Shares
i
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Section 4.5
Section 4.6
Section 4.7
Section 4.8
No Undisclosed Interest
Brokers
Board Observer
No Other Representations or Warranties
ARTICLE V Representations and Warranties of Purchaser
Organization and Good Standing
Authorization
Conflicts
Brokers
SEC Reports
Share Capital
Funding
Compliance with Laws
Full Disclosure
No Other Representations or Warranties
Section 5.1
Section 5.2
Section 5.3
Section 5.4
Section 5.5
Section 5.6
Section 5.7
Section 5.8
Section 5.9
Section 5.10
ARTICLE VI Covenants
Section 6.1
Section 6.2
Section 6.3
Section 6.4
Section 6.5
Section 6.6
Section 6.7
Section 6.8
Section 6.9
Section 6.10
Section 6.11
Section 6.12
Section 6.13
Section 6.14
Section 6.15
Section 6.16
Section 6.17
Section 6.18
Section 6.19
Section 6.20
Section 6.21
Section 6.22
Section 6.23
Access to Information
Notice of Developments
Conduct of the Business Pending the Closing
[Intentionally Left Blank.]
Further Assurances
Confidentiality and Publicity
No Promotion
Exclusivity
Tax Filing.
Consent and Waiver
Mutual Release and Discharge
Termination of Prior Agreements
SAFE Regulations
Pre-Closing Notifications
[Intentionally Left Blank]
Registrations and Filings
Non-Compete; Non-solicitation
US$10 Million RSUs
Resignation as CEO
Indemnity of Officers and Directors
Lock-up
Amount Owed due to CTO Cashless Exercise
Departing Employees
ARTICLE VII Conditions to Closing
Section 7.1
Section 7.2
Section 7.3
Section 7.4
Conditions Precedent to Obligations of Each Party
Conditions Precedent to Obligations of the Purchaser
Conditions Precedent to Obligations of the Company
Conditions Precedent to Obligations of the Selling Shareholders
ARTICLE VIII Termination
Section 8.1
Section 8.2
Termination of Agreement
Procedure Upon Termination
ii
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Section 8.3
Effect of Termination
ARTICLE IX INDEMNIFICATION
Section 9.1
Section 9.2
Section 9.3
Section 9.4
Section 9.5
Section 9.6
Survival of Representations, Warranties and Covenants
Indemnification
Certain Limitations
Mitigation; No Double Dip.
Tax Treatment of Indemnification Payments
Deduction and Release of Withheld Funds
ARTICLE X Miscellaneous
Section 10.1
Section 10.2
Section 10.3
Section 10.4
Section 10.5
Section 10.6
Section 10.7
Section 10.8
Section 10.9
Section 10.10
Expenses
[Intentionally Left Blank]
Governing Law
Arbitration
Entire Agreement; Amendments and Waivers
Specific Performance
Notices
Severability
Binding Effect; Assignment
Counterparts
iii
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58
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This SHARE PURCHASE AGREEMENT (this “Agreement”), dated as of February 28, 2015, is entered into by and among (i) 58.com Inc., an exempted
company incorporated under the Laws of the Cayman Islands (the “Purchaser”), (ii) Anjuke Inc., an exempted company incorporated under the Laws of the
Cayman Islands (the “Company”), (iii) the Founders (as defined in this Agreement) and (iv) the Persons set forth in Schedule A hereto (collectively, the
“Selling Shareholders” and individually a “Selling Shareholder”).
SHARE PURCHASE AGREEMENT
WITNESSETH:
online services for real estate agents and agencies in the PRC;
WHEREAS, the Company and the other Group Companies (as defined below) collectively are engaged in the business of providing
Shareholder’s name in Schedule A under the heading “Current Ownership/Purchased Shares”;
WHEREAS, each Selling Shareholder owns the number and type of Shares (as defined below) as set forth opposite such Selling
WHEREAS, each Selling Shareholder desires to sell to the Purchaser, and the Purchaser desires to purchase from each Selling
Shareholder, on the terms and subject to the conditions set forth herein, all of the Shares owned by such Selling Shareholder as set forth opposite such
Selling Shareholder’s name in Schedule A under the heading “Current Ownership/Purchased Shares”; and
(as defined below), will be converted into Ordinary Shares, on the terms and subject to the conditions set forth herein;
WHEREAS, concurrently with the sale and purchase of the Shares as contemplated above, such Shares, to the extent not Ordinary Shares
be legally bound, the Parties hereby agree as follows:
NOW, THEREFORE, in consideration of the promises and the mutual covenants and agreements hereinafter contained, and intending to
Article I
Definitions
Section 1.1:
Section 1.1 Certain Definitions. For purposes of this Agreement, the following terms shall have the meanings specified in this
“Amount Owed due to CTO Cashless Exercise” has the meaning ascribed to it in Section 3.23.
“Affiliate” means any other Person that directly or indirectly through one or more intermediaries, Controls, or is Controlled by, or is
under common Control with, such Person, including without limitation, with respect to any Person that is an individual, his or her Immediate Family
Members. For the avoidance of doubt, in the case of any Selling Shareholder, the term “Affiliate” includes (i) any of such Selling Shareholder’s
shareholders, general partners or limited partners, or the general partners or limited partners of such Selling Shareholder’s shareholders (ii) the fund
manager managing or advising such Selling Shareholder (and general partners, limited partners and officers thereof) and other funds managed or advised by
such fund manager, and (iii) trusts Controlled by or for the benefit of any such Person referred to in (i) or (ii), and (iv) any fund or holding company formed
for investment purposes that is promoted, sponsored, managed, advised or serviced by such Selling Shareholder which, in each case of (i), (ii), (iii) and (iv),
Controls, or is Controlled by, or is under common Control with, such Selling Shareholder.
1
“Aggregate Purchase Price” has the meaning ascribed to it in Section 2.2.
“Agreement” has the meaning ascribed to it in the Preamble.
immediately upon the Closing, in the form attached hereto as Exhibit A.
“Amended Articles” means the fifth amended and restated memorandum and articles of association of the Company to become effective
“Applicable Accounting Standard” means the United States generally accepted accounting principles or other accounting standards
adopted by, as applicable, (i) the Company and applied consistently throughout the Financial Statements or (ii) the Purchaser and applied consistently
throughout the Purchaser Financial Statements.
“Awards” has the meaning ascribed to it in Section 6.18.
“Baidu” means Baidu Holdings Limited, a Selling Shareholder.
“Balance Sheet Date” has the meaning ascribed to it in Section 3.7(a).
“Benefit Plan” has the meaning ascribed to it in Section 3.16.
“Breach of Non-Compete” has the meaning ascribed to it in Section 9.6(b)(vi).
“Breach of Non-Solicitation” has the meaning ascribed to it in Section 9.6(b)(v).
“Breaching Selling Shareholder” has the meaning ascribed to it in Section 2.8.
“Business” means, in respect of a Group Company, the business as it currently conducts and, in respect of the Group Companies, the
business as the Group Companies, taken as a whole, currently conduct, excluding the Carved-out Business (as defined in Section 3.9 of the Disclosure
Schedule).
Cayman Islands are required or authorized to be closed.
“Business Day” means a day that is not a Saturday or Sunday or any other day on which banks in the PRC, Hong Kong, New York or the
“Business Plan” has the meaning ascribed to it in Section 3.7(d).
“Cash Portion of Purchase Price” has the meaning ascribed to it in Section 2.2.
“Circular 37” means the Circular No. 37 (汇发[2014]37号) issued by the PRC State Administration of Foreign Exchange on July 4, 2014,
titled “Notice on Relevant Issues Concerning Foreign Exchange Administration for Domestic Residents to Engage in Overseas Investment and Financing
and Round Trip Investment via Special Purpose Companies (国家外汇管理局关于境内居民通过特殊目的公司境外投融资及返程投资外汇管理有关问
题的通知)”, including any amendment, implementing rules, or official interpretation thereof or any replacement, successor or alternative legislation having
the same subject matter thereof.
2
“Circular 7” means Circular No. 7 on Several Issues of Enterprise Income Tax on Income Arising from Indirect Transfers of Property by
Non-resident Enterprises (SAT Bulletin [2015] No. 7) (关于非居民企业间接转让财产企业所得税若干问题的公告(国家税务总局公告2015年第7号 )),
dated February 3, 2015 and effective as of the same date, including any amendment, implementing rules, or official interpretation thereof or any
replacement, successor or alternative legislation having the same subject matter thereof.
“Closing” has the meaning ascribed to it in Section 2.3.
“Closing Date” has the meaning ascribed to it in Section 2.3.
“Company” has the meaning ascribed to it in the Preamble.
“Company Fundamental Warranties” has the meaning ascribed to it in Section 7.2(a).
Shares upon the vesting of such award.
“Company Options” means option awards granted under the Company Share Incentive Plan that entitles the holder thereof to purchase
“Company Release” has the meaning ascribed to it in Section 6.11(c).
“Company Released Persons” has the meaning ascribed to it in Section 6.11(c).
“Company Releasing Persons” has the meaning ascribed to it in Section 6.11(c).
“Company Security Holder” has the meaning ascribed to it in Section 3.15(e).
“Company Share Award Disclosure Schedule” has the meaning ascribed to it in Section 3.4(c).
substantially in the form as set forth in Schedule B.
“Company Share Award Settlement Schedule” means a schedule, dated as of the date hereof, furnished by the Company to the Purchaser
Options.
“Company Share Awards” means the share-based awards granted under the Company Share Incentive Plan, including the Company
“Company Share Incentive Plan” means the 2008 Equity Incentive Plan of the Company, first adopted by the board of directors of the
Company and by written resolutions of the shareholders of the Company on December 19, 2007 and last amended in March 2013 and approved by the
board of directors of the Company and the shareholders of the Company in May 2013.
or oral).
“Contract” means any contract, agreement, indenture, note, bond, mortgage, loan, instrument, lease, franchise or license (whether written
3
“Control” of a given Person means the power or authority, whether exercised or not, to direct the business, management and policies of
such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, which power or authority shall
conclusively be presumed to exist upon possession of beneficial ownership or power to direct the vote of more than fifty percent (50%) of the votes entitled
to be cast at a meeting of the members or shareholders of such Person or power to control the composition of a majority of the board of directors (or similar
governing body) of such Person; the term “Controlled” has the meaning correlative to the foregoing.
“Control Documents” means the Contracts and other documents set forth in Schedule E hereto.
“Disclosure Schedule” means the disclosure schedule dated as of the date hereof and attached to this Agreement as Schedule D.
“Domestic Company” means上海瑞家信息技术有限公司, a limited liability company organized and existing under the Laws of the
PRC.
“Domestic Subsidiaries” means the WFOE and Tianjin Ruiting.
“Equity Securities” means, with respect to any Person that is a legal entity, any and all shares of capital stock, membership interests,
units, profits interests, ownership interests, equity interests, registered capital, and other equity securities of such Person, and any right, warrant, option,
call, commitment, conversion privilege, pre-emptive right or other right to acquire any of the foregoing, or security convertible into, exchangeable or
exercisable for any of the foregoing, or any Contract providing for the acquisition of any of the foregoing.
“Estimated Selling Expenses” has the meaning ascribed to it in Section 6.14(a).
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
resolutions dated February 28, 2011.
“Existing Articles” means the fourth amended and restated memorandum and articles of association of the Company adopted by special
“Existing Shareholders Agreements” means, collectively, the Amended and Restated Shareholders Agreement, dated as of February 28,
2011, by and among the Company, its shareholders and the other parties thereto, and the Amended and Restated Investors’ Rights Agreement, dated as of
February 28, 2011, by and among the Company and certain of its shareholders.
“FBH” means FBH PARTNERS LIMITED, a Selling Shareholder.
“Financial Statements” has the meaning ascribed to it in Section 3.7(a).
“Founder Selling Shareholder” means the Selling Shareholder that is Controlled by any of the Founders.
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“Founders” means Mr. Liang Weiping (梁伟平), Mr. Jia Yitian (贾逸恬), Mr. Zhang Jinzhu (张晋珠) and Mr. Cheng Shu (程舒).
“GL” means GL AJK Holdings Ltd., a Selling Shareholder.
Company. For the avoidance of doubt, each of the Domestic Company and the Domestic Subsidiaries shall be deemed a Group Company.
“Group Companies” means the Company and any Person (other than a natural person) that is directly or indirectly Controlled by the
“Government Authority” means supranational, national, federal, state, municipal or local court, administrative body or other
governmental or quasi-governmental entity or authority with competent jurisdiction exercising legislative, judicial, regulatory or administrative functions of
or pertaining to supranational, national, federal, state, municipal or local government, including any department, commission, board, agency, bureau,
subdivision, instrumentality or other regulatory, administrative, judicial or arbitral authority, and any securities exchange on which the securities of any
Party or its Affiliates are listed.
“HK Subsidiaries” means Anjuke Hong Kong Limited and Champs Elysees Limited, both incorporated in Hong Kong.
“HKIAC Rules” has the meaning ascribed to it in Section 10.4(a).
“Hong Kong” means the Hong Kong Special Administrative Region of the People’s Republic of China.
“Immediate Family Members” means, with respect to any natural Person, (a) such Person’s spouse, parents, children (in each case
whether adoptive or biological), (b) spouses of such Person’s children (in each case whether adoptive or biological) and (c) estates, trusts and partnerships
which directly or indirectly through one or more intermediaries are Controlled by the foregoing.
“Indebtedness” of any Person means, without duplication, (i) the principal, accreted value, accrued and unpaid interest, prepayment,
breakage and redemption costs, premiums or penalties, unpaid fees or expenses and other monetary obligations in respect of (A) indebtedness of such
Person for borrowed money and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person
is responsible or liable; (ii) all obligations (contingent or otherwise) of such Person issued or assumed as the deferred purchase price of property or services,
all conditional sale obligations of such Person and all obligations of such Person under any title retention the ordinary course of business consistent with the
past practice of such Person; (iii) all capitalized lease obligations; (iv) all obligations and Liabilities payable upon termination of interest rate protection
agreements, foreign currency exchange agreements or other interest rate or exchange rate hedging or swap arrangements; (v) all obligations of the type
referred to in clauses (i) through (iv) of any Persons the payment of which such Person is responsible or liable, directly or indirectly, as obligor, guarantor,
surety or otherwise; and (vi) all obligations of the type referred to in clauses (i) through (v) of other Persons secured by any Lien on any property or asset of
such Person (whether or not such obligation is assumed by such Person).
“Indemnification Covering Selling Shareholders” means the Selling Shareholders excluding Baidu, GL and FBH.
5
“Indemnification Pro Rata Portion” means, with respect to any Indemnification Covering Selling Shareholder, a fraction, the numerator
of which is the Purchase Price for such Indemnification Covering Selling Shareholder and the denominator of which is the Aggregate Purchase Price for all
Indemnification Covering Selling Shareholders.
“Indemnified Party” has the meaning ascribed to it in Section 9.2(d)(i).
“Indemnifying Party” has the meaning ascribed to it in Section 9.2(d)(i).
“Intellectual Property” means all U.S. and non-U.S. intellectual property, including (i) all intellectual property rights in inventions,
discoveries, and processes, and all patents, and patent disclosures, (ii) all trademarks, service marks, trade names, brand names, trade dress rights, logos,
Internet domain names and corporate names, and, to the extent recognized under applicable Law, other source indicators, and the goodwill of the business
symbolized thereby, (iii) all copyrights and works of authorship in any media, including all designs, (iv) all computer software, databases and programs, (v)
all trade secrets, know-how, and other proprietary or confidential information and (vi) all applications, registrations, renewals, foreign counterparts,
extensions, continuations, continuations-in-part, re-examinations, reissues, and divisionals of the foregoing.
“Management Accounts” has the meaning ascribed to it in Section 3.7(a).
“Key Persons” means the employees of the Group Companies with the title of director (总监) or above.
after due inquiry of all people who directly report to such individual.
“Knowledge of the Company” means the knowledge actually possessed, or should have been possessed by the Founders and Key Persons
any Government Authority or jurisdiction.
“Law” means any foreign, federal, state, municipal or local law, statute, code, ordinance, rule, decree, regulation or any common law of
judicial or administrative, at law or in equity, or public or private) by or before a Government Authority.
“Legal Proceeding” means any judicial, administrative or arbitral actions, suits, proceedings or investigations (whether civil or criminal,
“Liability” means any indebtedness, liability or obligation (whether direct or indirect, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated, or due or to become due), including those arising under any Law, Order, Legal Proceeding or Contract and including all costs
and expenses relating thereto.
lease, charge, option, restrictive covenant, right of first refusal, right of first offer, easement, servitude or other restriction having similar effect.
“Lien” means any lien (including, without limitation, tax lien), encumbrance, pledge, mortgage, deed of trust, security interest, claim,
“Locked-up Selling Shareholders” has the meaning ascribed to it in Section 6.21.
“Long Stop Date” means April 15, 2015.
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“Management Rights Letters” means, collectively, (i) three Management Right Letters between the Company and Matrix Partners VIII,
L.P., dated November 22, 2007, October 30, 2008 and July 30, 2009, respectively, (ii) the Management Right Letter between the Company and each of
Matric Partners China I, L.P. and Matrix partners China I-A, L.P., dated November 5, 2008, and (iii) the Management Right Letter between the Company
and GL AJK HK, Limited, dated February 28, 2011.
“Material Adverse Effect” means any change, circumstance, event or effect that, individually or in the aggregate, is or would be
materially adverse to (a) the business, operations, assets, Liabilities, condition (financial or otherwise) or results of operations of the Group Companies,
taken as a whole; or (b) the ability of the Company or any Selling Shareholder to consummate the transactions contemplated by this Agreement and to
perform its obligations hereunder and under any other Transaction Documents, provided, however, that none of the following, either alone or in
combination, shall be considered in determining whether there has been a breach of a representation, warranty, covenant or agreement that is qualified by
the term of ‘Material Adverse Effect’: (a) events, circumstances, changes or effects that generally affect the industries in which the Business operates
(including legal and regulatory changes), (b) general economic or political conditions or events, circumstances, changes or effects affecting the markets
generally, (c) changes arising from the consummation of the transactions contemplated by, or the announcement of the execution of, this Agreement,
including (i) any actions of competitors, (ii) any actions taken by or losses of employees or (iii) any delays or cancellations of orders for services; (d) any
reduction in the price of services offered by the Business in response to the reduction in price of comparable services offered by a competitor, (e) any
circumstance, change or effect that results from any action taken pursuant to or in accordance with this Agreement or at the request of or the permission by
the Purchaser, including without limitation any action taken for the purpose of carving out the Carved-out Business, and (f) changes caused by a material
worsening of current conditions caused by acts of terrorism or war (whether or not declared) occurring after the date hereof, provided, further, that any fact,
circumstance, event, change, effect or occurrence referred to in clauses (a), (b), and (f) above may be taken into account in determining whether or not there
has been or will be a Material Adverse Effect to the extent, but only to the extent, that the Company is disproportionately affected thereby as compared to
other participants in the industry or markets in which the Company operates.
“Material Contract” has the meaning ascribed to it in Section 3.14(a).
Government Authority that are, individually or in the aggregate, material for the conduct of the Business of the Group Companies, taken as a whole.
“Material License” means all franchises, permits, licenses, approvals, authorizations and any similar document issued or granted by any
“Non-Founder Selling Shareholders” means the Selling Shareholders excluding the Founder Selling Shareholders, Baidu, GL and FBH.
Government Authority.
“Order” means any written order, injunction, judgment, decree, legally binding notice, ruling, writ, assessment or arbitration award of a
“Ordinary Shares” means the ordinary shares, par value US$0.0001 per share, in the capital of the Company.
7
“Outgoing Directors” means the individuals indicated as an “Outgoing Director” in Schedule C hereto.
“Outgoing Domestic Company Shareholders” means all of the shareholders of the Domestic Company as of the date of this Agreement.
“Purchaser Financial Statements” has the meaning set ascribed to it in Section 5.5(c).
“Party” means a party to this Agreement.
“Permit” means any approval, authorization, consent, license, permit or certificate of or issued by a Government Authority.
trust, unincorporated organization or other entity.
“Person” means any individual, corporation, partnership, limited liability company, firm, joint venture, association, joint-stock company,
Administrative Region of the People’s Republic of China and Taiwan.
“PRC” or “China” means the People’s Republic of China, excluding, for purposes of this Agreement, Hong Kong, the Macau Special
and the Series C Preference Shares.
“Preference Shares” means, collectively, the Series A Preference Shares, the Series B Preference Shares, the Series B-1 Preference Shares
“Prohibited Payment” has the meaning ascribed to it in Section 3.15(b).
“Proposed Releasing Selling Shareholder(s)” has the meaning ascribed to it in Section 9.6(e).
“Purchase Price” has the meaning ascribed to it in Section 2.2.
“Purchased Shares” has the meaning ascribed to it in Section 2.1.
“Purchaser Director” in Schedule C hereto.
“Purchaser Director” means the individual appointed by the Purchaser to the board of directors of the Company and indicated as a
“Purchaser Domestic Company Shareholder” means Beijing 58 Information Technology Co., Ltd.
“Purchaser Fundamental Warranties” has the meaning ascribed to it in Section 7.3(a).
“Purchaser Indemnitee” has the meaning ascribed to it in Section 9.2(a).
“Purchaser Losses” has the meaning ascribed to it in Section 9.2(a).
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“Purchaser Material Adverse Effect” means any change, event, development, condition, occurrence or effect that is or is reasonably likely
to be material and adverse to the financial condition, businesses or results of operations of the Purchaser; provided, however, that none of the following,
either alone or in combination, shall be considered in determining whether there has been a breach of a representation, warranty, covenant or agreement that
is qualified by the term of ‘Purchaser Material Adverse Effect’: (a) events, circumstances, changes or effects that generally affect the industries in which
the Purchaser’s business operates (including legal and regulatory changes), (b) general economic or political conditions or events, circumstances, changes
or effects affecting the markets generally, (c) changes arising from the consummation of the transactions contemplated by, or the announcement of the
execution of, this Agreement, including (i) any actions of competitors, (ii) any actions taken by or losses of employees or (iii) any delays or cancellations of
orders for services; (d) any reduction in the price of services offered by the Purchaser’s business in response to the reduction in price of comparable
services offered by a competitor, (e) any circumstance, change or effect that results from any action taken pursuant to or in accordance with this Agreement
or at the request of the Company or any Selling Shareholder and (f) changes caused by a material worsening of current conditions caused by acts of
terrorism or war (whether or not declared) occurring after the date hereof; provided, further, that any fact, circumstance, event, change, effect or occurrence
referred to in clauses (a), (b), and (f) above may be taken into account in determining whether or not there has been or will be a Purchaser Material Adverse
Effect to the extent, but only to the extent, that the Company is disproportionately affected thereby as compared to other participants in the industry or
markets in which the Company operates.
thereof to receive Purchaser Shares upon the vesting of such award.
“Purchaser RSUs” means restricted share unit awards granted under the Purchaser’s applicable share incentive plan that entitle the holder
“Purchaser Shares” means the Class A ordinary shares, par value US$0.00001 per share, in the capital of the Purchaser.
“Related Party” or “Related Parties” means (i) any member, shareholder or equity interest holder who, together with its Affiliates,
directly or indirectly holds no less than 10% of the total outstanding share capital of any Group Company, (ii) any director (董事) or Key Persons of any
Group Company, and (iii) the Affiliates of the Persons enumerated under (i) and (ii), in each case of (i), (ii) and (iii), excluding any Group Company.
“Related Party Contracts” has the meaning ascribed to it in Section 3.17(a).
“Released Claims” has the meaning ascribed to it in Section 6.11(a).
“Relevant PRC Tax Authority” has the meaning ascribed to it in Section 6.9(b).
“SAFE Regulations” has the meaning ascribed to it in Section 3.15(e).
“Sanctions” has the meaning ascribed to it in Section 3.15(f).
“SEC” means the United States Securities and Exchange Commission.
“SEC Reports” has the meaning ascribed to it in Section 5.5(a).
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
9
foreign securities laws.
“Securities Laws” means, collectively, the Securities Act, the Exchange Act and any state securities and “blue sky” laws and applicable
“Selling Shareholder” has the meaning ascribed to it in the Preamble.
“Selling Shareholder Bank Account” has the meaning ascribed to it in Section 6.14(b).
“Selling Shareholder Fundamental Warranties” has the meaning ascribed to it in Section 7.2(a).
“Selling Shareholder Indemnitees” has the meaning ascribed to it in Section 9.2(c).
“Selling Shareholder Losses” has the meaning ascribed to it in Section 9.2(c).
“Senior Managers” means the employees of the Group Companies with the title of senior managers (高级经理) or above.
“Series A Preference Shares” means the Series A Preference Shares, par value US$0.0001 per share, in the capital of the Company.
“Series B Preference Shares” means the Series B Preference Shares, par value US$0.0001 per share, in the capital of the Company.
“Series B-1 Preference Shares” means the Series B-1 Preference Shares, par value US$0.0001 per share, in the capital of the Company.
“Series C Preference Shares” means the Series C Preference Shares, par value US$0.0001 per share, in the capital of the Company.
“Share Portion of Purchase Price” has the meaning ascribed to it in Section 2.2.
“Shareholder Release” has the meaning ascribed to it in Section 6.11(a).
“Shareholder Released Persons” has the meaning ascribed to it in Section 6.11(a).
“Shareholder Releasing Persons” has the meaning ascribed to it in Section 6.11(a).
“Shares” means the shares in the capital of the Company, being the Ordinary Shares and the Preference Shares.
“Straddle Period” means any taxable period that begins on or before and ends after the Closing Date.
“Subsidiary” of a Person means any entity in which such Person owns, directly or indirectly, at least a majority of capital stock, holds at
least a majority of equity or similar interest, or controls, directly or indirectly, through contractual agreements and includes, where applicable, any
subsidiary of such Person formed or acquired after the date hereof.
10
“Tax” or “Taxes” means (i) in the PRC: (a) any national, provincial, municipal, or local taxes, charges, fees, levies, or other assessments,
including, without limitation, all net income (including enterprise income tax and individual income withholding tax), turnover (including value-added tax,
business tax, and consumption tax), resource (including urban and township land use tax), special purpose (including land value-added tax, urban
maintenance and construction tax, and additional education fees), property (including urban real estate tax and land use fees), documentation (including
stamp duty and deed tax), filing, recording, tariffs (including import duty and import value-added tax), and other taxes, charges, fees, levies, or other
assessments of any kind whatsoever as applicable, (b) all interest, penalties (administrative, civil or criminal), or additional amounts imposed by any
Government Authority in connection with any item described in clause (a) above, and (c) any form of transferor liability imposed by any Government
Authority in connection with any item described in clauses (a) and (b) above, and (ii) in any jurisdiction other than the PRC: all similar liabilities as
described in clause (i) above.
“Tax Return” means any return, report or statement required to be filed with respect to any Tax (including any attachments thereto, and
any amendment thereof), including any information return, claim for refund, amended return or declaration of estimated Tax, and including, where
permitted or required, combined, consolidated or unitary returns for any group of entities that includes any Group Company.
“Taxing Authority” means any Government Authority responsible for the administration of any Tax.
“Third Party Claim” has the meaning ascribed to it in Section 9.2(d)(ii).
“Tianjin Ruiting” means 天津瑞庭房地产经纪有限公司, a limited liability company organized and existing under the Laws of the PRC.
and/or delivered by any Party in connection with the consummation of the transactions contemplated by this Agreement.
“Transaction Documents” means this Agreement, the Amended Articles and other agreements or documents required to be executed
“Transaction Expenses” has the meaning ascribed to it in Section 10.1.
“Transfer” has the meaning ascribed to it in Section 6.21.
“Unaudited Financial Statements” has the meaning ascribed to it in Section 3.7(a).
“Warrantors” means the Company and the Founders.
“WFOE” means瑞庭网络技术(上海)有限公司, a limited liability company organized and existing under the Laws of the PRC.
“Withheld Amount” has the meaning ascribed to it in Section 2.6(a).
“Withheld Funds” has the meaning ascribed to it in Section 9.6(a).
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“Withhold Expiration Date” has the meaning ascribed to it in Section 9.6(a).
Section 1.2 Interpretation and Rules of Construction.
(a) Unless otherwise expressly provided, for purposes of this Agreement, the following rules of interpretation shall apply:
(i) the provision of a Table of Contents, the division of this Agreement into Articles, Sections and other subdivisions and
the insertion of headings are for convenience of reference only and shall not affect or be utilized in construing or interpreting this
Agreement;
(ii) any reference in this Agreement to an Article, Section, Exhibit or Schedule, such reference is to an Article or Section of,
or a Schedule or Exhibit to, this Agreement, unless otherwise indicated. All Exhibits and Schedules hereto or referred to herein are hereby
incorporated in and made a part of this Agreement as if set forth in full herein;
(iii) any reference in this Agreement to gender shall include all genders, and words imparting the singular number only shall
include the plural and vice versa;
(iv) the word “including” or any variation thereof means (unless the context of its usage otherwise requires) “including,
without limitation” and shall not be construed to limit any general statement that it follows to the specific or similar items or matters
immediately following it;
(v) words such as “herein,” “hereinafter,” “hereof” and “hereunder” refer to this Agreement as a whole and not merely to a
subdivision in which such words appear unless the context otherwise requires;
(vi) when calculating the period of time before which, within which or following which any act is to be done or step taken
pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded;
(vii) the term “non-assessable,” when used with respect to any Shares, means that no further sums are required to be paid by
the holders thereof in connection with the issue thereof; and
(viii) except as otherwise provided herein, any reference in this Agreement to $ or US$ means U.S. dollars, the lawful
currency of the United States.
disfavoring any Party by virtue of the authorship of any provision of this Agreement.
(b) In the event an ambiguity or question of intent or interpretation arises, no presumption or burden of proof shall arise favoring or
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ARTICLE II
Sale and Purchase of Shares
Section 2.1 Sale and Purchase of Shares. Upon the terms and subject to the conditions contained herein, at the Closing, each Selling
Shareholder shall sell to the Purchaser, and the Purchaser shall purchase from each Selling Shareholder, such number and type of Shares set forth opposite
such Selling Shareholder’s name under the heading “Current Ownership/Purchased Shares” in Schedule A (the “Purchased Shares” of such Selling
Shareholder), free and clear of all Liens.
Section 2.2 Purchase Price. The aggregate purchase price for all Purchased Shares of all Selling Shareholders (the “Aggregate
Purchase Price”) shall be US$253,578,498.56, consisting of an aggregate of US$151,951,728.56 in cash and an aggregate of 4,839,370 Purchaser Shares to
be issued by the Purchaser at the Closing. With respect to each Selling Shareholder, the aggregate purchase price for all Purchased Shares of such Selling
Shareholder (the “Purchase Price” for such Selling Shareholder) is in such amount, consisting of such amount of cash (the “Cash Portion of Purchase
Price”) and such number of Purchaser Shares (the “Share Portion of Purchase Price”), as set forth opposite such Selling Shareholder’s name under the
heading “Purchase Price” in Schedule A.
Section 2.3 Closing Date. Subject to the terms and conditions of this Agreement, the sale and purchase of all Purchased Shares of
all Selling Shareholders as contemplated by this Agreement (the “Closing”) shall take place via the remote exchange of electronic documents and
signatures on a date that is no later than the third (3rd) Business Day after the satisfaction or valid waiver of each of the conditions set forth in Article VII
(other than conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions at such time) (the
date on which the Closing occurs, the “Closing Date”), unless another time, date or place is agreed to in writing by the Purchaser, the Company and the
Selling Shareholders.
Section 2.4 Closing Deliveries by the Company. At the Closing, the Company shall deliver or cause to be delivered:
(a) to the Purchaser:
(i) a copy of the register of members of the Company, dated as of the Closing Date and duly certified by the registered
office provider of the Company, evidencing the ownership by the Purchaser of all of the Purchased Shares (which shall have been
converted into Ordinary Shares pursuant to Section 2.7, as applicable) of all Selling Shareholders, free and clear of all Liens;
(ii) a copy of the share certificate in the name of the Purchaser, dated as of the Closing Date, evidencing the ownership by
the Purchaser of all of the Purchased Shares (which shall have been converted into Ordinary Shares pursuant to Section 2.7, as applicable)
of all Selling Shareholders (the original duly executed copy of which shall be delivered to the Purchaser within five (5) Business Days
after the Closing);
(iii) a copy of the register of directors of the Company, dated as of the Closing Date and duly certified by the registered
office provider of the Company, evidencing the resignation of each of the Outgoing Directors as directors of the Company and the
appointment of the Purchaser Director as the sole director of the Company;
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(iv) (A) equity transfer agreements, dated as of the Closing Date, duly executed and delivered by each of the Outgoing
Domestic Company Shareholders transferring their entire entity interests in the Domestic Company to the Purchaser Domestic Company
Shareholder, (B) an amendment to the existing articles of association of the Domestic Company to reflect the transfer of equity interests
and amendment of the articles of association, (C) a resolution or written decision from the shareholders of the Domestic Company
approving the change of shareholders and amendment of the articles of association of the Domestic Company, (D) application documents
and form(s) required by, and reasonably obtainable from, the local counterpart of State Administration of Industry and Commerce for the
change of shareholders and the amendment to the articles of association, duly executed by the Domestic Company’s existing legal
representative and affixed with its company seal, (E) termination agreement, dated as of the Closing Date, duly executed and delivered by
each of the Outgoing Domestic Company Shareholders, the Domestic Company and the WFOE terminating the Control Documents to
which any of the Outgoing Domestic Company Shareholders is a party, (F) a shareholder resolution of the Domestic Company and the
WFOE approving the termination of the Control Documents, and (G) application documents and form(s) required by, and reasonably
obtainable from, the local counterpart of the State Administration of Industry and Commerce for de-registration of equity interest pledge
contemplated under the Control Documents, duly executed by each of the existing shareholders of the Domestic Company.
(v) duly executed resignation and release letters, dated as of the Closing Date and in the form of Exhibit B, of each of the
Outgoing Directors evidencing their resignation as members of the board of directors of the Company (and as officer, director, supervisor
and/or observer of all other Group Companies if such Outgoing Director also serves any such position);
(vi) duly executed resignation and release letters, dated as of the Closing Date and in the form of Exhibit B, of each of the
existing directors of the HK Subsidiaries evidencing their resignation as members of the board of directors of the HK Subsidiaries (and as
officer, director, supervisor and/or observer of all other Group Companies if such person also serves any such position);
(vii) with respect to each Domestic Subsidiary and the Domestic Company, (A) signed resignation letter from the existing
legal representative, the existing board chairman and the existing directors (or the existing executive director) and the existing supervisor
of such Person, expressed to take effect from the Closing; (B) a resolution or written decision from the shareholder(s) of each such Person
approving (i) the removal of the existing legal representative, chairman of the board of directors and directors (or executive director), and
supervisor of such Person; and (ii) the appointment of the Purchaser’s nominees as the legal representative, the board chairman, the
directors, and the supervisor of such Person, expressed to take effect from the Closing; and (C) application documents and form(s)
required by, and reasonably obtainable from, the local counterpart of the Ministry of Commerce (as applicable) and the State
Administration of Industry and Commerce for the change of legal representative, board chairman and directors (or executive director) and
supervisor, the amendment to the articles of association, signed by its existing legal representative and affixed with its company seal;
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(viii) a copy of the resolutions duly and validly adopted by the board of directors of the Company and certified by a director
of the Company, evidencing the authorization or acknowledgement (as applicable) by the board of directors of the Company of the
execution and delivery of this Agreement and the other Transaction Documents to which the Company is a party and the consummation
of the transactions contemplated hereby and thereby, including (A) the adoption of the Amended Articles (subject to the approval of the
shareholders of the Company); (B) the resignation or removal (as applicable) of the Outgoing Directors; (C) the appointment of the
Purchaser Director; (D) the transfer and conversion of the Purchased Shares of all of the Selling Shareholders as contemplated by this
Agreement; in each case of (A) through (D), effective as of the Closing;
(ix) a copy of the resolutions duly and validly adopted by the shareholders of the Company and certified by a director of the
Company, evidencing the shareholders’ authorization of the execution and delivery of this Agreement and the other Transaction
Documents to which the Company is a party and the consummation of the transactions contemplated hereby and thereby, including (A)
the adoption of the Amended Articles, (B) the removal (if necessary) of the Outgoing Directors; (C) the appointment of the Purchaser
Director; (D) the transfer and conversion of the Purchased Shares of all of the Selling Shareholders as contemplated by this Agreement, in
each case of (A) through (D), effective as of the Closing;
(x) a certificate of good standing of the Company, dated as of a date no earlier than ten (10) Business Days prior to the
Closing Date, issued by the Registrar of Companies of the Cayman Islands; and
(xi) the closing certificate of the Company as contemplated by Section 7.2(d).
Section 2.5 Closing Deliveries by the Selling Shareholders. At the Closing, each Selling Shareholder shall deliver or cause to be
delivered:
(a) to the Company:
(i) an instrument of transfer in the form of Exhibit C hereto with respect to the Purchased Shares of such Selling
Shareholder, duly executed by such Selling Shareholder; and
(ii) the original share certificate(s) representing the Purchased Shares of such Selling Shareholder or, if such original share
certificate(s) could not be returned to the Company at the Closing, an affidavit and indemnity for lost share certificate in form and
substance reasonably acceptable to the registered office provider of the Company and the Purchaser in respect of the Purchased Shares of
such Selling Shareholder; and
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(b) to the Purchaser:
(i) where such Selling Shareholder is a Founder or an entity Controlled by any Founder, a copy of the resolutions or other
internal authorizations duly and validly adopted by the board of directors and shareholders of such Selling Shareholder and certified by a
duly authorized signatory of such Selling Shareholder evidencing its authorization of the execution and delivery of this Agreement and
the other Transaction Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby; and
(ii) the closing certificate of each Selling Shareholder as contemplated by Section 7.2(d).
Section 2.6 Closing Deliveries by the Purchaser. At the Closing, the Purchaser shall deliver or cause to be delivered:
(a) to each Selling Shareholder:
(i) an amount equal to (A) the Cash Portion of Purchase Price for such Selling Shareholder, less (B) the sum of (x) the
amount set forth opposite such Selling Shareholder’s name under the heading “Withheld Amount” in Schedule A hereto (the “Withheld
Amount” for such Selling Shareholder), and (y) such Selling Shareholder’s Estimated Selling Expenses, if applicable, as set forth
opposite such Selling Shareholder’s name under the heading “Estimated Selling Expenses” in Schedule A hereto, by wire transfer of
immediately available funds in US$ to the Selling Shareholder Bank Account of such Selling Shareholder;
(ii) a copy of the register of members of the Purchaser, dated as of the Closing Date and duly certified by the registered
office provider of the Purchaser, evidencing the ownership by such Selling Shareholder of the Share Portion of Purchase Price;
(iii) a copy of the share certificate in the name of such Selling Shareholder, dated as of the Closing Date, evidencing the
ownership by such Selling Shareholder of the Share Portion of Purchase Price (the original duly executed copy of which shall be
delivered to each Selling Shareholder within five (5) Business Days after the Closing); and
(b) to the Company:
(i) an instrument of transfer in the form of Exhibit C hereto with respect to the Purchased Shares of each Selling
Shareholder, duly executed by the Purchaser; and
(ii) written consent by the Purchaser Director to act as a director of the Company.
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Section 2.7 Conversion of Purchased Shares. At the Closing, each Purchased Share that is not an Ordinary Share shall be converted
pursuant to the Existing Articles into such number of Ordinary Shares into which it would have been convertible in connection with a conversion of such
Purchased Share pursuant to the Existing Articles. Assuming the accuracy of the representation and warranty set forth in Section 3.4(b), such conversion
shall be on a 1:1 basis. Each Selling Shareholder hereby irrevocably requests that the Company effect, and hereby irrevocably consents to, the conversion
as contemplated by this Section 2.7, and such request and consent shall for purposes of the Existing Articles and the Existing Shareholders Agreement be
deemed to constitute the request, consent and/or the affirmative vote, as applicable or necessary to give effect to this Section 2.7, by such Selling
Shareholder for the conversion of all of the Preference Shares held by it into Ordinary Shares, immediately prior to and conditioned upon Closing.
obligations set forth in Section 2.5 (each a “Breaching Selling Shareholder”):
Section 2.8 Breaching Selling Shareholder. If, at the Closing, any Selling Shareholder fails to fully comply with any of its
elect to (without prejudice to any other rights and remedies that may be available to the Purchaser):
(a) The Purchaser shall be entitled to, at its sole discretion and by written notice to the Company and the Selling Shareholders,
(i) proceed to the Closing so far as practicable and consummate the sales and purchases of the Purchased Shares of the
Selling Shareholders other than the Breaching Selling Shareholders;
(ii) defer the Closing to a date not more than twenty (20) Business Days after the originally scheduled Closing Date; or
(iii) immediately terminate this Agreement, but only if the shares in the Company held by such Breaching Selling
Shareholder(s) account for no less than 10% of the share capital of the Company on as converted basis immediately prior to the Closing.
(b) In the event that the Purchaser elects to proceed under Section 2.8(a)(i), this Agreement shall be deemed to have been duly
amended and modified to the extent necessary to exclude the sale and purchase of the Purchased Shares of the Breaching Selling Shareholder(s) from the
transactions contemplated hereby, provided, however, that upon the consummation of the sale and purchase of the Shares of any Selling Shareholder, the
Purchased Shares (including those of the Breaching Selling Shareholder(s), and irrespective of whether such Purchased Shares are actually purchased and
transferred or otherwise), to the extent not Ordinary Shares, shall in any event be converted into Ordinary Shares pursuant to Section 2.7.
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(c) Each Selling Shareholder hereby agrees that, to the extent such Selling Shareholder is a Breaching Selling Shareholder, the
Purchaser shall have the right (but not the obligation) to purchase, at any time after the consummation of the sale and purchase contemplated by Section
2.8(b), the Purchased Shares of such Selling Shareholder for an aggregate purchase price equal to the Purchase Price for such Selling Shareholder (without
interest), and otherwise on the terms and conditions (including the arrangements with respect to representations and warranties, covenants, and
Transaction Expenses in this Agreement) that would have been applicable to the sale and purchase of the Purchased Shares of such Selling Shareholder if
such sale and purchase had occurred at the Closing.
Section 2.9 Treatment of Company Share Awards. As soon as practicable after the date hereof, the Company and the Purchaser
shall each (or, as applicable, the boards of directors of the Company and the Purchaser shall, and the Selling Shareholders shall cause the board of directors
of the Company to) take such action as may be necessary (including to obtain any applicable consents and/or amendments) to effect the following
provisions of this Section 2.9.
(a) As set forth and more fully described in Schedule B, with respect to each holder of Company Options, the Company Options
set forth opposite such holder’s name in Schedule B under the heading “Paid-out Company Options” (each of which Company Options, for the avoidance
of doubt, shall have become vested in accordance with his vesting schedule provided for under the applicable award agreement(s)) shall be cancelled and
converted into the right to receive from the Purchaser, and
(i) the Purchaser shall pay to such holder, as soon as reasonably practicable after Closing Date (but in any event no later
than (A) three (3) months after the Closing for such holder whose bank account information has been set out on Schedule B under the
heading “Bank Account of Option Holder” or (B) three (3) months after the date such holder has provided the Purchaser with his or her
bank account information if the holder’s bank account information has not been set out on Schedule B), such amount of cash set forth
opposite such holder’s name on Schedule B under the heading “Cash Amount Payable by Purchaser” less any withholding or deduction
required by (and otherwise in accordance with) Section 2.9(b), by wire transfer of immediately available funds to an account designated
by such holder set forth opposite such holder’s name on Schedule B under the heading “Bank Account of Option Holder” or otherwise
notified to the Purchaser in writing if such holder’s bank account information has not been set out on Schedule B; and
(ii) the Purchaser shall grant to such holder, as soon as reasonably practicable after the Closing (but in any event no later
than three (3) months after the Closing, provided that such holder is available to enter into the Purchaser’s standard RSU grant agreement
with the Purchaser within such three-month period), such number of Purchaser RSUs as set forth opposite such holder’s name on
Schedule B under the heading “Paid-Out Purchaser RSUs” less any withholding or deduction required by (and otherwise in accordance
with) Section 2.9(b). Each such Purchaser RSU so granted shall become fully vested and each Purchaser Share issuable upon the exercise
of such Purchaser RSUs shall be freely transferable after six (6) months following the Closing Date, and each such Purchaser RSU shall
otherwise be subject to the same terms and conditions of the Purchaser Share Incentive Plan effective as of the Closing.
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(iii) Notwithstanding anything to the contrary in Section 2.9(a)(i) or (ii), for any holder who has not provided the Purchaser
with his or her bank account information or made himself or herself available to execute an RSU grant agreement with the Purchaser
within six (6) months after the Closing, the Purchaser’s obligations under Section 2.9(a)(i) or (ii), as applicable, shall automatically cease
with respect to such holder at the expiration of the six-month period and no Person shall have any rights or claims against the Purchaser
in this regard thereafter.
(b) the Purchaser shall be entitled to withhold an amount up to the sum of (i) the amount of Taxes that should be withheld from or
paid by such holder in connection with the vesting or exercise of such holder’s Company Share Awards from the amounts otherwise payable to such
holder thereunder, and (ii) the amount of Taxes that should have been withheld from or paid by such holder in connection with the prior vesting or
exercise of such holder’s Company Share Awards, to the extent not already withheld or paid, from the amounts otherwise payable to such holder
thereunder. The Purchaser shall, within such period of time that is required by applicable Taxing Authority, pay or cause the applicable Group Company
to pay, the withheld amount on behalf of each such holder to the applicable Taxing Authority, and shall obtain a confirmation or other written proof that
the withholding Tax has been duly paid by the Purchaser (or the relevant Group Company) on behalf of each such holder. To the extent that there is any
residual amount after such Tax payment, the Purchaser shall as soon as reasonably practicable after obtaining such confirmation or other proof reasonably
obtainable from the Taxing Authority (but in any event no later than twenty (20) Business Days after obtaining such confirmation or other proof), return
such residual amount, together with interest accrued thereon, if any, to such holder by wire transfer of immediately available funds to the account
designated by such holder set forth opposite such holder’s name on Schedule B under the heading “Bank Account of Option Holder” or otherwise notified
to the Purchaser in writing if such holder’s bank account information has not been set out on Schedule B.
(c) The Company shall take all actions necessary to ensure that (i) the Company Share Incentive Plan, all the Company Share
Awards, whether vested or unvested, and corresponding award agreements, shall terminate as of the Closing, and (ii) from and after the Closing neither
the Purchaser nor the Company will be required to issue Company Shares, other share capital of the Company or any other consideration (other than as
required by this Section 2.9) to any Person pursuant to or in settlement of Company Share Awards.
(d) Each holder of Company Share Awards is expressly made a third party beneficiary to Sections 2.9(a) and Section 2.9(b), and
shall have the right to enforce the provisions of Sections 2.9(a) and Section 2.9(b) directly to the extent such holder may deem such enforcement necessary
or advisable to protect his or her rights hereunder.
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ARTICLE III
Representations and Warranties With Respect to Group Companies
The Warrantors shall jointly and severally represent and warrant to the Purchaser that the statements contained in this Article III are true,
correct and complete as of the date hereof and as of the Closing Date (unless any representations and warranties expressly relate to another date, in which
case as of such other date).
Section 3.1 Organization and Good Standing. The Company is an exempted company duly organized, validly existing and in good
standing under the Laws of the Cayman Islands and has all requisite corporate power and authority to own, lease and operate its properties and to carry on
its business as now conducted. The Company is duly qualified or authorized to do business as now conducted and is in good standing under the Laws of
each jurisdiction in which such qualification or authorization is required. Complete and correct copies of the Existing Articles, which are in full force and
effect as of the date hereof and as of immediately prior to the Closing, have been made available to the Purchaser.
Section 3.2 Authorization. The Company has all requisite power and authority to execute and deliver this Agreement and the other
Transaction Documents to which the Company is a party, to perform its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement and the other Transaction Documents to which the Company is a party and
the consummation of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of the
Company. This Agreement has been, and each of the other Transaction Documents to which the Company is a party will be at or prior to the Closing, duly
and validly executed and delivered by the Company and (assuming the due authorization, execution and delivery by the other parties hereto and thereto)
this Agreement constitutes, and the other Transaction Documents to which the Company is a party will constitute, the legal, valid and binding obligations
of the Company, enforceable against it in accordance with their respective 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 and similar Law affecting creditors’ rights and remedies
generally.
Section 3.3 Conflicts; Consents of Third Parties.
(a) Except as may result from any facts or circumstances relating solely to the Purchaser or any of its Affiliates (including revenues
thereof), or except as contemplated by this Agreement, none of the execution, delivery and performance by the Company of this Agreement or the other
Transaction Documents to which the Company is a party, the consummation of the transactions contemplated hereby or thereby, or compliance by the
Company with any of the provisions hereof or thereof will breach or conflict with, or result in any violation of or default (with or without notice or lapse of
time, or both) or loss of a benefit under, or give rise to a right of termination, consent or cancellation or increase in any fee, liability or obligation under, any
provision of (i) the Existing Articles or the memorandum and articles of association or comparable organizational documents of any other Group Company;
(ii) any Material Contract or Material License (other than those relating to the Carved-out Business); (iii) any Order applicable to any Group Company or
by which any of the properties or assets of any Group Company are bound; or (iv) any applicable Law, except, in the case of this Section 3.3(a)(iii) and
(iv), as would not materially and adversely affect the liability of the Company to carry out its obligations under, and to consummate the transactions
contemplated by, this Agreement and the other Transaction Documents.
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(b) No consent, waiver, approval, Order, Permit or authorization of, or declaration or filing with, or notification to, any Government
Authority or any other Person is required to be obtained or completed by the Group Companies in connection with the execution and delivery of this
Agreement or the other Transaction Documents or the compliance by the Company with any of the provisions hereof or thereof, or the consummation of
the transactions contemplated hereby or thereby, except (y) where failure to obtain such consent, waiver, approval, Order, Permit or authorization, or make
such declaration or filing, would not prevent or materially delay the consummation by the Company of the transactions contemplated by this Agreement
and the other Transaction Documents to which the Company is a party or (z) as may be necessary as a result of any facts or circumstances relating solely to
any party hereof or any of its Affiliates.
Section 3.4 Capitalization.
(a) The entire share capital of the Company consists of
(i) 200,000,000 authorized Preference Shares, of which (A) 10,750,000 shares are designated as Series A Preference
Shares, 9,814,163 of which are issued and outstanding; (B) 8,672,500 shares of which are designated as Series B Preference Shares,
8,435,565 of which are issued and outstanding, (C) 1,692,875 shares are designated as Series B-1 Preference Shares, 1,692,875 of which
are issued and outstanding, and (D) 4,091,976 shares are designated as Series C Preference Shares, 4,091,976 of which are issued and
outstanding, in each case of (A) through (D), having the rights, privileges and preferences as set forth in the Existing Articles.
(ii) 300,000,000 authorized Ordinary Shares, of which (A) 10,729,976 Ordinary Shares are issued and outstanding, (B)
9,814,163 Ordinary Shares are reserved for issuance upon conversion of the Series A Preference Shares, (C) 8,435,565 Ordinary Shares
are reserved for issuance upon conversion of the Series B Preference Shares, (D) 1,692,875 Ordinary Shares are reserved for issuance
upon conversion of the Series B-1 Preference Shares, (E) 10,729,976 Ordinary Shares are reserved for issuance upon conversion of the
Series C Preference Shares, and (F) 9,143,000 Ordinary Shares are reserved for issuance pursuant to the Company Share Incentive Plan.
(b) All of the issued and outstanding Preference Shares and Ordinary Shares are duly authorized, validly issued, fully paid and non-
assessable. Section 3.4(b) of the Disclosure Schedule sets forth a complete and accurate list of all of the record and beneficial holders of the Preference
Shares and Ordinary Shares and the respective numbers and series of Preference Shares and the respective number of Ordinary Shares held thereby. The
ratio of conversion into Ordinary Shares for each of the Series A Preference Shares, the Series B Preference Shares, the Series B-1 Preference Shares and
the Series C Preference Shares is 1:1.
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(c) Section 3.4(c) of the Disclosure Schedule sets forth a complete and accurate list of all of the holders of any issued and
outstanding Company Share Award as of the date hereof, indicating the total issued and outstanding Company Share Awards as of the date hereof and, for
each such holder, the name, number, type, applicable vesting information and exercise price of the Company Share Awards of such holder (the “Company
Share Award Disclosure Schedule”). Except as described in Section 3.4(a), the Existing Articles, the Existing Shareholders Agreement and except as set
forth in the Company Share Award Disclosure Schedule, there are no outstanding Ordinary Shares, Preference Shares, any other shares or equity of the
Company, or any securities convertible into or exercisable or exchangeable for any of the foregoing, or any other options, warrants, rights (including
conversion or preemptive rights and rights of first refusal), subscriptions, or other rights, proxy or shareholders agreements or Contracts of any kind, either
directly or indirectly, entitling the holder thereof to purchase or otherwise acquire or to compel the Company to issue, repurchase or redeem any share or
other securities of the Company. Except as contemplated by the Transaction Documents, the Existing Shareholders Agreements, the Existing Articles and
the Control Documents, (i) none of the Group Companies is under any obligation to register any of its currently outstanding securities or any securities
issuable upon exercise or conversion of its currently outstanding securities under the Securities Act, nor is any Group Company obligated to register or
qualify any such securities under the securities laws of any state of the United States or to list any of such securities in the Cayman Islands, Hong Kong or
any other jurisdiction; and (ii) none of the Group Companies is a party or subject to any Contract that affects or relates to the voting or giving of consents
with respect to, its currently outstanding securities or any securities issuable upon exercise or conversion of its currently outstanding securities.
Section 3.5 Group Companies.
(a) Section 3.5(a) of the Disclosure Schedule sets forth a complete and accurate list of the Group Companies (other than the
Company) and, for each such Group Company, its name, the jurisdiction in which it is incorporated or organized, the names of its shareholders and the
amount of share capital or other equity interest in such Group Company held by each such shareholder. Except as set forth in Section 3.5(a) of the
Disclosure Schedule, each such Group Company (i) is a duly organized and validly existing company or other entity and, where applicable, in good
standing under the Laws of the jurisdiction of its incorporation or organization; (ii) is duly qualified or authorized to do business and, where applicable, is
in good standing under the Laws of each jurisdiction in which the conduct of its business or the ownership of its properties requires such qualification or
authorization, except to the extent that the failure to be so licensed, qualified or in good standing would not adversely affect the ability of the Company to
carry out its obligations under, and to consummate the transactions contemplated by, this Agreement and the other Transaction Documents; and (iii) has all
requisite corporate or entity power and authority to own, lease and operate its properties and carry on its business as now conducted. None of the Group
Companies is a participant in any joint venture, partnership or other similar arrangement, or otherwise owns or Controls (directly or indirectly) any share or
interest in any Person.
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(b) All the outstanding share capital, registered capital or other equity interest of each Group Company is validly issued, fully paid
and non-assessable and are owned free and clear of all Liens (other than any Liens created under the Control Documents by the Persons and in such
amounts as indicated in Section 3.5(a) of the Disclosure Schedule. Except as contemplated by the Transaction Documents, as provided in the Existing
Articles, the Existing Shareholders Agreements or the Control Documents, there are no outstanding options, warrants, rights (including conversion or
preemptive rights and rights of first refusal), subscriptions, or other rights, proxy or shareholders agreements or Contracts of any kind, either directly or
indirectly, entitling the holder thereof to purchase or otherwise acquire or to compel any of the Group Companies (other than the Company) to issue,
repurchase or redeem any share or other securities of any Group Company. Except as pursuant to the Transaction Documents, the Existing Articles, the
Existing Shareholders Agreements and the Control Documents, no Group Company is a party or subject to any Contract that affects or relates to the voting
or giving of written consents with respect to, or the right to cause the registration of, any share or other securities of any Group Company.
(c) The Company has effective Control of the Domestic Company and is the sole beneficiary of the Domestic Company. Based on
the good faith judgment of the Company and subject to the Laws of the PRC as of the date hereof and as of the Closing Date, the Control Documents are
adequate to establish and maintain the intended captive structure, under which the financial statements of the Domestic Company will be consolidated with
those of the other Group Companies in accordance with the Applicable Accounting Standard. The pledge over the entire equity interests of the Domestic
Company in favor of the applicable Group Company (other than the Domestic Company) has been duly registered with the competent Government
Authority.
is an employee of the Group Companies.
(d) Other than the Outgoing Directors, each Person serving as a director, supervisor or legal representative of any Group Company
Section 3.6 Corporate Books and Records. Each Group Company has provided to the Purchaser or its counsels a copy of its minute
books. Except as disclosed in Section 3.6 of the Disclosure Schedule, such copy is true, correct and complete in all material respects, and contains all
material amendments and all minutes of meetings and actions taken by the applicable Group Company’s shareholders and directors since the time of
incorporation through the date hereof, and reflects all transactions referred to in such minutes accurately in all material respects. All board and shareholder
resolutions, charter documents (and any amendments thereto) and any other filings of the Group Companies, if required to be filed under applicable Law,
have been duly filed with the relevant Government Authority within the required deadlines, except to the extent that the failure to be duly filed would not
materially and adversely affect the liability of the Company to carry out its obligations under, and to consummate the transactions contemplated by, this
Agreement and the other Transaction Documents.
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Section 3.7 Financial Statements.
(a) True and complete copies of (i) the unaudited consolidated balance sheet of the Company for each of the two fiscal years ended
December 31, 2012 and 2013, and the related unaudited consolidated statements of income, retained earnings, shareholders’ equity and changes in financial
position of the Company, together with all related notes and schedules thereto (collectively referred to herein as the “Unaudited Financial Statements”), and
(ii) the management accounts of the Group Companies for the period from January 1, 2014 to December 31, 2014 (December 31, 2014 is hereinafter
referred to as the “Balance Sheet Date”) (collectively referred to herein as the “Management Accounts” and, collectively with the Unaudited Financial
Statements, the “Financial Statements”) have been delivered by the Company to the Purchaser. The Financial Statements (i) were prepared in accordance
with the books of account and other financial records of the Group Companies, (ii) present fairly the consolidated financial condition and results of
operations of the Group Companies as of the dates thereof and for the periods covered thereby, (iii) have been prepared in accordance with the Applicable
Accounting Standard applied on a basis consistent with the past practices of the Group Companies, and (iv) include all adjustments (consisting only of
normal recurring accruals) that are necessary for a fair presentation of the consolidated financial condition of the Group Companies and the results of the
operations of the Group Companies as of the dates thereof and for the periods covered thereby, clauses (ii), (iii) and (iv) of this sentence being subject, in
the case of the Unaudited Financial Statements, to normal year-end adjustments and the absence of notes.
(b) All of the accounts receivable owing to any of the Group Companies, including without limitation all accounts receivable set
forth on the Financial Statements, constitute valid and enforceable claims and are good and collectible in the ordinary course of business in all material
respects, and reserves therefor shown on the Financial Statements are, based on the good faith judgment of the Company, adequate and on a basis
consistent with the Applicable Accounting Standard. To the Knowledge of the Company, there are no material contingent or asserted claims, refusals to
pay, or other rights of set-off with respect to any of the Group Companies.
(c) No Group Company has any Liabilities other than (i) Liabilities reflected or reserved in the Financial Statements, and (ii)
Liabilities incurred in the ordinary course of business after the Balance Sheet Date which do not and could not, individually or in the aggregate, reasonably
be expected to result in a Material Adverse Effect.
(d) The Company has furnished to the Purchaser a business plan and forecast for 2015 (the “Business Plan”). The projected
financial information contained in the Business Plan was prepared in good faith, and is based upon assumptions that the Company believes are reasonable
in the context in which such projection is made. The Purchaser acknowledges that the projected financial information is not a guarantee of the Company’s
future performance. Apart from the foregoing, no representation, warranty or undertaking, express or implied, is made as to, and no reliance may be placed
on, the completeness, accuracy, correctness or fairness of the information or opinions contained in the Business Plan.
Section 3.8 Certain Operating Metrics. The results of operation of the Group Companies as measured by certain operating metrics
(as such operating metrics are defined in Section 3.8 of the Disclosure Schedule) that have been provided to the Purchaser are in all material respects true,
accurate and not misleading.
Section 3.9 Absence of Certain Changes. Except as specifically contemplated by the Transaction Documents and except as
disclosed in Section 3.9 of the Disclosure Schedule, since the Balance Sheet Date, each Group Company has operated its businesses and assets in the
ordinary course consistent with past practice and none of the Group Companies has:
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material changes in the customary methods of operations of any Group Company;
(a) entered into any material transaction that was not in the ordinary course of business consistent with past practice; or made any
(b) acquired, sold, transferred, leased, subleased, licensed or otherwise disposed of any material properties or assets, or permitted or
allowed any material assets to be subject to any Liens (other than Liens for Taxes in the ordinary course of business consistent with past practice that are
not yet due and payable), or, except in the ordinary course of business consistent with past practice, discharged or otherwise obtained the release of Liens
related to any Group Company or paid or otherwise discharged any Liability;
(c) written down or written up (or failed to write down or write up in accordance with the Applicable Accounting Standard
consistent with past practice) the value of any accounts receivable or revalued any of the assets of the Group Companies, other than in the ordinary course
of business consistent with past practice and in accordance with the Applicable Accounting Standard;
changes required by the Applicable Accounting Standard;
(d) made any change in any method of accounting or accounting practice or policy used by any Group Company, other than such
of value to any Group Company;
(e) amended, terminated, cancelled or compromised any material claim of any Group Company or waived any other material right
(f) issued or sold any equity or debt securities, or any option, warrant or other right to acquire the same, of any Group Company; or
redeemed any equity interest in any Group Company or declared, made or paid any dividends or other distributions (whether in cash, securities or other
property) to the holders of equity interests in any Group Company;
another currency) individually or US$1,000,000 (or the equivalent thereof in another currency) in the aggregate;
(g) made any capital expenditure or commitment for any capital expenditure in excess of US$500,000 (or the equivalent thereof in
Taxes of any Group Company;
(h) made, revoked or changed any Tax election or method of Tax accounting or settled or compromised any Liability with respect to
(i) incurred any Indebtedness; failed to pay any creditor any amount owed to such creditor when due; or incurred any Liability
except (A) Liabilities incurred in the ordinary course of business consistent with past practice or (B) Liabilities that do not exceed US$500,000 individually
(or the equivalent thereof in another currency) or US$1,000,000 (or the equivalent thereof in another currency) in the aggregate;
travel advances and other advances made to employees in the ordinary course of business consistent with past practice;
(j) made any loan to, guaranteed any Indebtedness of or otherwise incurred any Indebtedness on behalf of any Person, other than
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(k) made any material change in any compensation or benefit arrangement or agreement with any Senior Managers; or made any
amendments or modifications to any Company Share Incentive Plan or issued any Company Share Award thereunder, except as expressly contemplated by
this Agreement and the other Transaction Documents;
(l) entered into any transaction with any Related Party other than in the ordinary course of business on arm’s-length basis;
(m) terminated the employment of, or received any resignation from, any Senior Managers;
(n) suffered any labor dispute involving any Group Company or any of its respective employees;
entered into any Material Contract;
(o) amended, modified or consented to the termination of any Material Contract or the Group Companies’ rights thereunder, or
(p) amended or restated the memorandum and articles of association (or equivalent organizational documents) of any Group
Company;
(q) suffered any Material Adverse Effect; or
(r) agreed, whether in writing or otherwise, to take any of the actions specified in this Section 3.9 or granted any options to
purchase, rights of first refusal, rights of first offer or any other similar rights or commitments with respect to any of the actions specified in this Section
3.9, except as expressly contemplated by this Agreement and the other Transaction Documents.
Section 3.10 Litigation. Except as disclosed in Section 3.10 of the Disclosure Schedule, there are no Legal Proceedings against any
Group Company, or to the Knowledge of the Company, against any employee, officer or director of any Group Company in connection with their
relationship with the Group Companies pending or, to the Knowledge of the Company, threatened in writing, including but not limited to any Legal
Proceeding that questions the validity of the Transaction Documents, the right of the Company to enter into the Transaction Documents to which the
Company, the rights and obligations of the Company to consummate the transactions contemplated by such Transaction Documents. There is no Order in
effect against the Company. There is no Legal Proceeding initiated by any Group Company pending or which any of them intends to initiate.
Section 3.11 Title to Properties; Liens and Encumbrances. Each Group Company leases all properties and assets necessary to
conduct the Business, and none of such leased properties or assets is owned by the Founders or any other Related Party that is not entered into in the
ordinary course of business and not on arm’s length basis. Each Group Company has good and marketable title to all its properties and assets, including
without limitation all properties and assets set forth on the Financial Statements, and has good title to all its leasehold interests, in each case not being
subject to any Liens, except for Liens which (i) have been set forth in Section 3.11 of the Disclosure Schedule; (ii) are created during the ordinary and usual
course of business of such Group Company; or (iii) are Liens for Taxes, assessments or other expenses to any Governmental Authority which are not due in
payment or in default, or which are in contest with any Taxing Authority in good faith. With respect to leased properties and assets, each Group Company
is in compliance in all material respects with all applicable leases. All properties and assets of each Group Company are in a good state of repair and in
good working condition other than any normal wear and tear. None of the assets of any Group Company is a state-owned asset.
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Section 3.12 Intellectual Property.
(a) Each Group Company owns, has the sufficient rights (including but not limited to the rights of development, maintenance,
licensing and sale) to, or otherwise has the licenses to use all Intellectual Property necessary to conduct the Business without conflicting with or infringing
upon the rights of any other Person in any material respect. No written claims have been asserted against any Group Company and remain unresolved nor,
to the Knowledge of the Company, any threatened claim or demand in writing, by any other Person (i) challenging or questioning any Group Company’s
validity, enforceability, ownership, right to, or use of any of the Intellectual Property owned or used by any Group Company, or in which any Group
Company possess legal rights, or the validity or effectiveness of any license or similar agreement with respect thereto, (ii) alleging any interference,
infringement, misappropriation or other violation of the Intellectual Property rights of other Persons, or (iii) alleging any unfair competition or trade
practices. No Group Company has received any written communication alleging that such Group Company has violated or, by conducting its business as
proposed, would violate any intellectual property rights of other Persons.
Company. All of such registered Intellectual Property are owned by, registered or applied for solely in the name of the Group Companies.
(b) Section 3.12(b) of the Disclosure Schedule sets forth a complete list of all registered Intellectual Property of each Group
(c) Each Group Company has taken all commercially reasonable steps and measures to establish and preserve ownership of, or
legally sufficient right to, all Intellectual Property material to the Business; and each Group Company has taken all commercially reasonable steps to
register, protect, maintain, and safeguard the Intellectual Property material to the Business, including any Intellectual Property for which improper or
unauthorized disclosure would impair its value or validity and, except as disclosed in Section 3.12(c) of the Disclosure Schedule, had executed appropriate
nondisclosure and confidentiality agreements and made all appropriate filings, registrations and payments of fees in connection with the foregoing. Except
as disclosed in Section 3.12(c) of the Disclosure Schedule, to the Knowledge of the Company, there is no infringement, misappropriation or other violation
by any other Person of any Intellectual Property of any Group Company.
(d) Each Group Company owns all rights in and to any and all Intellectual Property currently used by such Group Company, or
covering or embodied in any past, current or planned activity, service or product of such Group Company, which Intellectual Property was made,
developed, conceived, created or written by any consultant retained, or any employee employed, at any time, by such Group Company. To the Knowledge
of the Company, no former or current employee, and no former or current consultant, of any Group Company has any rights in any of the Group
Companies’ Intellectual Property. Each current employee and current consultant engaged by any Group Company as of the Closing has executed a
confidential information and invention assignment in a form which has been provided to the Purchaser. To the Knowledge of the Company, none of the
Senior Managers, employees, or consultants, currently employed or otherwise engaged by any Group Company, is in violation thereof. No Group Company
is using any inventions of any of its employees made prior to or outside the scope of their employment by any Group Company.
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(e) No Intellectual Property owned by any Group Company, or in which any Group Company possesses legal rights, and material to
the operation of the Business, is the subject of any Lien, except for Liens which (i) are created during the ordinary and usual course of business of such
Group Company; or (ii) are Liens for Taxes, assessments or other expenses to any Governmental Authority which are not due in payment or in default, or
which are in contest with any Taxing Authority in good faith. No Group Company has (i) transferred or assigned, (ii) granted a license to, or (iii) provided
or licensed in source code form, any Intellectual Property material to the Business, owned by any Group Company, or in which any Group Company
possesses legal rights, to any Person.
(f) Each of the Founders has assigned and transferred to the Company or another Group Company all of the Intellectual Property
previously owned by him, if any, that relates to the Business.
Section 3.13 Taxes.
(a) Each Group Company has duly and timely filed (taking into account any extension of time within which to file) all material Tax
Returns as required by applicable Law to have been filed by it and all such Tax Returns are true, correct, and complete in all material respects. Each Group
Company has paid in full all Taxes required to be paid by it and no Tax Liens (other than for current Taxes not yet due or payable or which are in contest
with any Taxing Authority in good faith) are currently in effect against any of the assets of any Group Company. The provisions for Taxes in the Financial
Statements fully reflect all material unpaid Taxes of each Group Company, whether or not assessed or disputed as of the date of the applicable Financial
Statements.
(b) No examination or audit of any Tax Returns of any Group Company by any Government Authority is currently in progress or, to
the Knowledge of the Company, is threatened in writing. None of the Group Companies is subject to any waivers or extensions of applicable statutes of
limitations imposed by any Governmental Authority with respect to Taxes for any past years. Since the Balance Sheet Date, none of the Group Companies
has incurred any Taxes other than in the ordinary course of business or in connection with any transactions contemplated under any Transaction Document.
None of the Group Companies has received any written claim from a Government Authority in a jurisdiction where a Group Company does not file Tax
Returns that such Group Company is or may be subject to taxation by that jurisdiction. None of the Group Companies is treated as a resident for Tax
purposes of, or is otherwise subject to income Tax in, a jurisdiction other than the jurisdiction in which it has been established.
amounts due, owing to or paid to any Person.
(c) Each Group Company has withheld and paid all Taxes required to have been withheld and paid in connection with any material
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(d) Each Group Company is in compliance in all material respects with all terms, conditions and formalities necessary for the
continuance of any Tax exemption, Tax holiday, Tax credit, Tax incentive, Tax refund or other Tax reduction agreement or order available under any
applicable Tax Law. Except as disclosed in Section 3.13(d) of the Disclosure Schedule, no Group Company has received any written notice of, or has
reasonable grounds to believe there is, any planned or threatened cancellation or termination of any such Tax exemption, Tax holiday, Tax credit, Tax
incentive, Tax refund or other Tax reduction agreement. To the Knowledge of the Company, each Group Company is in compliance in all material respects
with transfer pricing requirements in all jurisdictions in which they are required to comply with applicable transfer pricing regulations, and all the
transactions between any Group Company and other related Persons (including any Group Company) have been effected on an arm’s length basis. Except
as disclosed in Section 3.13(d) of the Disclosure Schedule, all exemptions, reductions and rebates of Taxes granted to any Group Company by a
Government Authority are in full force and effect and have not been terminated, except for any termination that would not have a Material Adverse Effect.
None of the Group Companies is responsible for Taxes of any other Person by reason of contract, successor liability, operation of Law or otherwise.
(e) The Group Companies have no plan to change method of accounting prior to the Closing Date. The transactions contemplated
under this Agreement and the other Transaction Documents to which a Group Company is a party will not result in any Tax exemption, Tax holiday, Tax
credit, Tax incentive, Tax refund being revoked, cancelled or terminated or trigger any Tax liability for the Group Companies.
Section 3.14 Material Contracts.
(a) Section 3.14(a) of the Disclosure Schedule lists each of the following currently effective Contracts (other than the Transaction
Documents or any document related to the Carved-out Business) to which a Group Company is a party or by which a Group Company is otherwise bound
(each such Contract, a “Material Contract”) that:
(i) involves payments (or a series of payments), contingent or otherwise, of US$100,000 (or the equivalent thereof in
another currency) or more individually, in cash, property or services, or extends for more than one year beyond the date of this
Agreement;
(ii) is with a Government Authority;
(iii) limits or restricts any Group Company’s ability to compete or otherwise conduct the Business in any manner, time or
place, or that contains any exclusivity or change in control provision;
(iv) grants a power of attorney, agency or similar authority, except in the ordinary course of business consistent with past
practice;
(v) relates to Indebtedness, provides for an extension of credit, provides for indemnification or any guaranty, or provides for
a “keep well” or other agreement to maintain any financial statement condition of another Person;
(vi) relates to any material Intellectual Property, other than “shrink-wrap” or “off-the-shelf” commercially available
software;
(vii) is a Control Document;
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(viii) is a Related Party Contract that was not entered into in the ordinary course of business or on arm’s-length basis;
(ix) is a material lease;
(x) is outside the ordinary course of business of any Group Company involving an amount of more than US$50,000; or
(xi) is otherwise material to any Group Company or is a Contract on which any Group Company is substantially dependent.
(b) Each Material Contract is a valid and binding agreement of the Group Company that is a party thereto, the performance of which
does not and will not violate any applicable Law or Order in any material respect, and is in full force and effect and enforceable in accordance with its
terms. Such Group Company has duly performed in all material respects all of its obligations under each Material Contract to the extent that such
obligations to perform have accrued, and no breach or default, alleged breach or alleged default, or event which would (with the passage of time, notice or
both) constitute a material breach or default thereunder by such Group Company or any other party or obligor with respect thereto, has occurred, or as a
result of the execution, delivery, and performance of the Transaction Documents will occur. No Group Company has given written notice that it intends to
terminate a Material Contract or that any other party thereto has breached, violated or defaulted under any Material Contract. No Group Company has
received any written notice that it has breached, violated or defaulted under any Material Contract or that any other party thereto intends to terminate such
Material Contract.
Section 3.15 Compliance with Laws and Other Instruments.
applicable to it or to the conduct or operation of the Business or the ownership or use of any of its properties, assets and Intellectual Property.
(a) Each Group Company is, and at all times has been, in compliance in all material respects with all Laws and Orders that are
(b) None of any Group Company nor, to the Knowledge of the Company, any of their respective officers, employees, directors,
representatives, distributors or agents, has made, offered, promised, authorized or condoned, or shall make, offer, promise, authorize or condone any
Prohibited Payment (as defined below) in connection with the activities of the Company or the negotiation, approval or performance of the Transaction
Documents. A “Prohibited Payment” means any gift, transfer or payment of any thing of value that is (A) made in violation of the United States Foreign
Corrupt Practices Act, the anti-corruption laws of the PRC or other applicable laws, (B) made to any Government Official with the intent or purpose of: (w)
influencing any act or decision of such Government Official in his official capacity, (x) inducing such Government Official to do or omit to do any act in
violation of the lawful duty of such Government Official, (y) securing any improper advantage, or (z) inducing such Government Official to use his
influence with a government or instrumentality thereof, political party or international organization to affect or influence any act or decision of such
government or instrumentality, political party or international organization, in order to assist the Company or any of the Group Companies in obtaining or
retaining business for or with, or directing business to, any Person, or (C) made to any Person while aware of a high probability that all or any portion of
such thing of value would be paid, promised, offered or give to any Government Official with the intent or purpose described in subsection (B). Prohibited
Payment shall not include any gift, transfer or payment of anything of value that is expressly permitted by the applicable Laws of the recipient’s country.
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association or articles of association, as appropriate, or equivalent constitutive documents as in effect.
(c) None of the Group Companies is in material violation of its business license, nor is in violation of its memorandum of
(d) The Group Companies have obtained all material approvals and authorizations (including any and all amendments to such
approvals and authorizations) from the relevant Government Authorities and have fulfilled any and all material fillings and registration requirements
(including any and all amendment requirements) with the relevant Government Authorities required for the operations of the Group Companies. All
material filings and registrations with the relevant Government Authorities required in respect of the Group Companies, including but not limited to the
registrations with the Ministry of Commerce (or any predecessors), the Ministry of Industry and Information Technology, the State Administration of
Industry and Commerce, the State Administration of Foreign Exchange, and tax bureau and the local counterpart of each of the aforementioned PRC
Government Authorities, as applicable, have been duly completed in accordance with the relevant Laws. No Group Company has received any written
letter or notice from any relevant Government Authority notifying it of the revocation of any material authorization of any Government Authority, permit
or license issued to it for material non-compliance or the need for compliance or remedial actions in respect of the activities carried out directly or
indirectly by any Group Company. Each Group Company has been conducting its business activities within the permitted scope of business in all material
respects and is operating its businesses in compliance with all relevant Laws and Orders in all material respects.
(e) Each holder or beneficiary owner of shares or convertible securities of the Company, including, without limitation, Ordinary
Shares and Preference Shares (other than the Purchaser) (each, a “Company Security Holder”), who is subject to any of the registration or reporting
requirements of Circular 37 has been in compliance in all material respects with such reporting and/or registration requirements under Circular 37 and any
other then applicable SAFE Regulations (collectively, the “SAFE Regulations”). To the Knowledge of the Company, none of the Company Security
Holders and the Group Companies has received any written inquiries, notifications, orders or any other written forms of official correspondence from
SAFE or any of its local branches with respect to any actual or alleged material non-compliance with the SAFE Regulations and the Company and, to the
Knowledge of the Company, the Company Security Holders have made all written filings, registrations, reporting or any other oral or written
communications required by SAFE or any of its local branches.
(f) (i) Neither any Group Company nor any director, officer or employee or, to the Knowledge of the Company, any agent or
representative of any Group Company, is an individual or entity that is, or is owned or controlled by a Person that is: (A) the subject of any sanctions
administered or enforced by the U.S. Department of Treasury’s Office of Foreign Assets Control, the United Nations Security Council, the European
Union, Her Majesty’s Treasury, or other relevant sanctions authority (collectively, “Sanctions”), nor (B) located, organized or resident in a country or
territory that is the subject of Sanctions (including, without limitation, Cuba, Iran, North Korea, Sudan and Syria) and (ii) for the past five years none of the
Group Companies has knowingly engaged in, is now knowingly engaged in, and will engage in, any dealings or transactions with any Person, or in any
country or territory, that at the time of the dealing or transaction is or was the subject of Sanctions.
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Section 3.16 Employee Matters. Section 3.16 of the Disclosure Schedule contains a complete and correct list of all Senior Managers
of the Group Companies as of the date hereof. To the Knowledge of the Company, all Senior Managers and all other full time employees of each Group
Compare are devoting their full professional time to the Group Company. To the Knowledge of the Company, no employee of any Group Company is in
material violation of any Law or Order, or any provision of any Contract, relating to such employee’s relationship with the Group Companies. Except for
the Company Share Incentive Plan, or as required by applicable Law, or other standard employee benefits, none of the Group Companies has any Benefit
Plan. For purposes hereof, “Benefit Plan” means any plan, Contract or other arrangement, formal or informal, whether oral or written, providing any benefit
to any present or former officer, director or employee, or dependent or beneficiary thereof, including any employment agreement or profit sharing, deferred
compensation, share option, performance share, employee share purchase, severance, retirement, health or insurance plan. To the Knowledge of the
Company, no Senior Manager has tendered any resignation notice to any Group Company, and none of the Group Companies has a present intention to
terminate the employment of any of the Senior Managers, except for the Persons named in a list separately provided to the Purchaser. There is no labor
strike, labor slow down, labor claim, labor dispute or labor union organization activities or, to the Knowledge of the Company, threatened in writing
between any Group Company and its employees. Each Group Company has complied in all material respects with all applicable Laws related to
employment and related to the Benefit Plans (including Laws related to the contribution of social insurance and related benefits), employment practices
generally applied to other entities in similar industry as such Group Company in the jurisdiction where such Group Company is incorporated, and the terms
and conditions of employment, in each case, with respect to its employees; (b) has paid all material wages, benefits and other required payments in the
ordinary course of business; (c) is not materially liable for any arrears of wages or any Taxes or any penalty for failure to comply with any of the foregoing;
and (d) other than as required by applicable Law, is not materially liable for any payment to any trust or other fund governed by or maintained by or on
behalf of any Government Authority, with respect to unemployment compensation benefits, social security or other benefits or obligations for employees.
No complaint or grievance relating to the labor practices of any of the Group Companies is pending or, to the Knowledge of the Company, threatened in
writing against any of the Group Companies, and no material charges are pending or, to the Knowledge of the Company, threatened in writing before any
Government Authority responsible for the prevention of unlawful employment practices with respect to any of the Group Companies.
Section 3.17 Transactions with Related Parties.
(a) Other than Contracts not entered into in the ordinary course of business, all Contracts (other than (A) the Transaction
Documents, (B) the employment agreements, (C) the confidential information, invention assignment, non-compete and non-solicitation agreements, and
(D) the award agreements entered into pursuant to the Company Share Incentive Plan) to or by which any Group Company, on the one hand, and any
Related Party, on the other hand, are or have been a party or otherwise bound or affected (the “Related Party Contracts”) are set forth in Section 3.17(a) of
the Disclosure Schedule. Each Related Party Contract was made on terms and conditions as favorable to such Group Company as would have been
obtainable by it at the time in a comparable arm’s-length transaction with an unrelated party.
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(a) No Related Party has any direct or indirect ownership in any Person with which any Group Company has a business relationship,
or any Person that competes with or could reasonably be expected to compete with any Group Company, except for ownership of less than one
percent (1%) of any class or other equity of publicly traded companies. Except for transactions in the ordinary course of the business of a Group
Company on terms and conditions as favorable to the Group Companies as would have been obtainable by them at the time in a comparable arm’s-
length transaction with an unrelated party, no Related Party has any Contract with, proposed transaction with, or is indebted to, any Group
Company, nor is any Group Company indebted (or committed to make loans or extend or guarantee credit) to any of them (other than for accrued
salaries, reimbursable expenses or other standard employee benefits). No Related Party has had, either directly or indirectly, a material interest in:
(i) any Person which purchases from or sells, licenses or furnishes to a Group Company any goods, property, intellectual or other property rights
or services; or (ii) any Contract to which a Group Company is a party or by which it may be bound or affected.
Section 3.18 Material Licenses. Each Group Company has all the Material Licenses for the conduct of the Business as now being
conducted, and the Group Companies reasonably believe that they could obtain all the Material Licenses for the conduct of Business as currently proposed
to be conducted. Section 3.18 of the Disclosure Schedule contains a complete and correct list of all Material Licenses held by each Group Company and the
termination date of each such Material License. The Material Licenses currently held by the Group Company are in full force and effect for not less than
one (1) year after the Closing. No other Material License is necessary for, or otherwise material to, the conduct of the Business by any such Person. The
consummation of the transactions contemplated under the Transaction Documents will not result in the termination or revocation of any of the Material
Licenses. None of the Group Companies is in material default under any of its Material Licenses and has not received any written notice relating to the
suspension, revocation or modification of any such Material Licenses.
other Group Company), which are used in connection with the Business of the Group Companies.
Section 3.19 Entire Business. There are no facilities, services, assets or properties shared with any other Person (other than with any
not maintain any office or branch.
Section 3.20 Office or Branch Locations. Except as disclosed in Section 3.20 of the Disclosure Schedule, the Group Companies do
Section 3.21 Full Disclosure. Neither information provided by the Warrantors in this Agreement nor in any Exhibit or Schedule
hereto contains any untrue statement of any material fact or omits to state any material fact necessary in order to make the statements contained herein or
therein not misleading.
Section 3.22 Brokers. Except as disclosed in Section 3.22 of the Disclosure Schedule, no broker, finder or investment banker is
entitled to receive from any Group Company any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this
Agreement or any other Transaction Document based upon arrangements made by or on behalf of any Group Company.
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Section 3.23 Amount Due to Option Holders. The Group Companies have no outstanding payment obligations to any former or
current holders of Company Share Awards due to their exercise of the Company Share Awards, through cashless exercise or other manner, or repurchase of
Company Share Awards or others permitted under the Company Share Incentive Plan, other than US$2,990,000 owed to Mr. NI Jun, the chief technology
officer of the Company, due to his cashless exercise of Company Share Awards pursuant to an option exercise agreement dated February 21, 2014 between
the Company, Mr. NI Jun and Force Fame Limited, a holding company wholly owned by Mr. NI Jun (the “Amount Owed due to CTO Cashless Exercise”).
Section 3.24 No Other Representations or Warranties. Except for the representations and warranties contained in this Article III,
none of the Warrantors makes any representation or warranty, express or implied, at law or in equity, with respect to any Group Company or their business,
assets or properties, employees, agents, or any other information provided to the Purchaser, its Affiliates or their representatives in connection with the
transactions contemplated hereby. None of the Warrantors will have or be subject to any liability or indemnification obligation to the Purchaser, its
Affiliates or their representatives resulting from the distribution, or making available, to such persons, or such persons’ use of, any such information,
including any documents, projections, forecasts or other materials made available to the Purchaser, its Affiliates or their representatives in connection with
the transactions contemplated hereby. The Purchaser agrees that none of the Warrantors is making any representation or warranty, expressed or implied,
with respect to the result of or consequences related to or arising out of the operation of the Group Companies by the Purchaser after the Closing Date.
ARTICLE IV
Representations and Warranties with Respect to Selling Shareholders
Each Selling Shareholder represents and warrants, severally and not jointly, to the Purchaser that the statements contained in this Article
IV (other than Section 4.5 and Section 4.7) with respect only to such Selling Shareholder, each of the Founders represents and warrants, severally and not
jointly, to the Purchaser that the statements contained in Section 4.5 with respect only to such Founder, and Baidu Holdings Limited represents and
warrants to the Purchaser that the statements contained in Section 4.7, are true, correct and complete as of the date hereof and as of the Closing Date (unless
any representations and warranties expressly relate to another date, in which case as of such other date).
Section 4.1 Capacity.
(a) If such Selling Shareholder is a natural person, such Selling Shareholder is of sound mind, has the legal capacity to enter into
this Agreement and the other Transaction Documents to which he or she is a party, has entered into or will enter into this Agreement and the other
Transaction Documents to which he or she is a party on his or her own will, and understands the nature of the obligations to be assumed by him or her
under this Agreement and the other Transaction Documents to which he or she is a party.
(b) If such Selling Shareholder is not a natural person, such Selling Shareholder is duly organized, validly existing and in good
standing under the Laws of the place of its incorporation or formation, and has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now conducted.
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Section 4.2 Authorization. Such Selling Shareholder has all requisite power and authority to execute and deliver this Agreement
and the other Transaction Documents to which such Selling Shareholder is a party, to perform its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby. If such Selling Shareholder is not a natural person, the execution and delivery of this Agreement and the
other Transaction Documents to which such Selling Shareholder is a party and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by all requisite corporate action on the part of such Selling Shareholder. This Agreement has been, and each of the other Transaction
Documents to which such Selling Shareholder is a party will be at or prior to the Closing, duly and validly executed and delivered by such Selling
Shareholder and (assuming the due authorization, execution and delivery by the other parties hereto and thereto) this Agreement constitutes, and the other
Transaction Documents to which such Selling Shareholder is a party will constitute, the legal, valid and binding obligations of such Selling Shareholder,
enforceable against it in accordance with their respective 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 and similar Law affecting creditors’ rights and remedies generally.
Section 4.3 Conflicts; Consents of Third Parties.
(a) None of the execution, delivery and performance by such Selling Shareholder of this Agreement or the other Transaction
Documents to which such Selling Shareholder is a party, the consummation of the transactions contemplated hereby or thereby, or compliance by such
Selling Shareholder with any of the provisions hereof or thereof will breach or conflict with, or result in any violation of or default under (with or without
notice or lapse of time, or both), any provision of (i) the memorandum and articles of association or comparable organizational documents of such Selling
Shareholder (if such Selling Shareholder is not a natural person) or (ii) any Law or Order applicable to such Selling Shareholder; in each case of (i) and (ii),
except as would not, individually or in the aggregate, materially and adversely affect the ability of such Selling Shareholder to carry out its obligations
hereunder and under the other Transactions Documents to which it is a party and to consummate the transactions contemplated hereby and thereby.
(b) No consent, waiver, approval, Order, Permit or authorization of, or declaration or filing with, or notification to, any Government
Authority or any other Person is required to be obtained or completed by such Selling Shareholder in connection with the execution and delivery of this
Agreement or the other Transaction Documents or the compliance by such Selling Shareholder with any of the provisions hereof or thereof, or the
consummation of the transactions contemplated hereby or thereby, except (y) where failure to obtain such consent, waiver, approval, Order, Permit or
authorization, or make such declaration or filing, would not prevent or materially delay the consummation by such Selling Shareholder of the transactions
contemplated by this Agreement and the other Transaction Documents to which such Selling Shareholder is a party or (z) as may be necessary as a result of
any facts or circumstances relating solely to the Purchaser or any of its Affiliates (including revenues thereof).
Section 4.4 Ownership and Transfer of Shares. Such Selling Shareholder is the record and beneficial owner of the Purchased Shares
of such Selling Shareholder, free and clear of all Liens. Such Selling Shareholder has the power to sell, transfer, assign and deliver its Purchased Shares as
provided in this Agreement and, upon transfer and delivery of the Purchased Shares to the Purchaser and payment therefor in accordance with this
Agreement and entry of the name of the Purchaser as the holder of the Purchased Shares in the register of members of the Company, such transfer and
delivery will convey to the Purchaser good and marketable title to such Shares, free and clear of all Liens. Each Purchased Share of such Selling
Shareholder is duly authorized, validly issued, fully paid and non-assessable.
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Section 4.5 No Undisclosed Interest. None of the Founders and his Affiliates is, a direct or indirect participant in any joint venture,
partnership or other similar arrangement, or otherwise owns or Controls (directly or indirectly) any equity interest in any Person, other than such equity
interests as set forth in Section 3.4(b) or Section 3.5(a) of the Disclosure Schedule and equity interest representing no more than 1% of the issued and
outstanding share capital of any Person whose shares are listed for trading on a national or international stock exchange.
Section 4.6 Brokers. Except as disclosed in Section 3.22 of the Disclosure Schedule, no broker, finder or investment banker is
entitled to receive from any Group Company any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this
Agreement or any other Transaction Document based upon arrangements made by or on behalf of such Selling Shareholder.
directors of the Company will terminate, effective as of and conditional upon the Closing.
Section 4.7 Board Observer. Baidu Holdings Limited represents and warrants that its right to appoint an observer to the board of
Section 4.8 No Other Representations or Warranties. Except for the representations and warranties contained in this Article IV,
none of the Selling Shareholders makes any representation or warranty, express or implied, at law or in equity, with respect to any of them or their business,
assets or properties, employees, agents, or any other information provided to the Purchaser, its Affiliates or their representatives in connection with the
transactions contemplated hereby. None of the Selling Shareholders will have or be subject to any liability or indemnification obligation to the Purchaser,
its Affiliates or their representatives resulting from the distribution, or making available, to such persons, or such persons’ use of, any such information,
including any documents, projections, forecasts or other materials made available to the Purchaser, its Affiliates or their representatives in connection with
the transactions contemplated hereby. The Purchaser agrees that none of the Selling Shareholders is making any representation or warranty, expressed or
implied, with respect to the result of or consequences related to or arising out of the operation of the Group Companies by the Purchaser after the Closing
Date.
ARTICLE V
Representations and Warranties of Purchaser
Except as disclosed in the SEC Reports filed with, or furnished to, the SEC prior to the date hereof (other than disclosure in the SEC
Reports contained in the “Risk Factors” and “Forward-Looking Statements” sections thereof or any other disclosures of risks or uncertainties in the SEC
Reports which are nonspecific, cautionary, predictive or forward-looking in nature), the Purchaser represents and warrants to the Warrantors and the Selling
Shareholders that the statements contained in this Article V are true and correct as of the date hereof and as of the Closing Date (unless any representations
and warranties expressly relate to another date, in which case as of such other date):
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Section 5.1 Organization and Good Standing. The Purchaser is duly organized, validly existing and in good standing under the
Laws of the Cayman Islands, and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now
conducted.
Section 5.2 Authorization. The Purchaser has all requisite power and authority to execute and deliver this Agreement and the other
Transaction Documents to which the Purchaser is a party, to perform its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement and the other Transaction Documents to which the Purchaser is a party and
the consummation of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of the
Purchaser. This Agreement has been, and each of the other Transaction Documents to which the Purchaser is a party will be at or prior to the Closing, duly
and validly executed and delivered by the Purchaser and (assuming the due authorization, execution and delivery by the other parties hereto and thereto)
this Agreement constitutes, and the other Transaction Documents to which the Purchaser is a party will constitute, the legal, valid and binding obligations
of the Purchaser, enforceable against it in accordance with their respective 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 and similar Law affecting creditors’ rights and remedies
generally.
Section 5.3 Conflicts.
(a) Except as may result from any facts or circumstances relating solely to the Company or any of its Affiliates (including revenues
thereof), or except as contemplated by this Agreement, none of the execution, delivery and performance by the Purchaser of this Agreement or the other
Transaction Documents to which the Purchaser is a party, the consummation of the transactions contemplated hereby or thereby, or compliance by the
Purchaser with any of the provisions hereof or thereof will breach or conflict with, or result in any violation of or default under (with or without notice or
lapse of time, or both), any provision of (i) the memorandum and articles of association of the Purchaser; (ii) any Order or Law applicable to the Purchaser,
(iii) any material Contract or material license of the Purchaser; or (iv) any Order applicable to the Purchaser or by which any of the properties or assets of
the Purchaser are bound; in each case of (i) to (iv), except as would not, individually or in the aggregate, materially and adversely affect the ability of the
Purchaser to carry out its obligations hereunder and under the other Transactions Documents to which it is a party and to consummate the transactions
contemplated hereby and thereby.
(b) No consent, waiver, approval, Order, Permit or authorization of, or declaration or filing with, or notification to, any Government
Authority or any other Person is required to be obtained or completed by the Purchaser in connection with the execution and delivery of this Agreement or
the other Transaction Documents or the compliance by the Purchaser with any of the provisions hereof or thereof, or the consummation of the transactions
contemplated hereby or thereby, except (i) where failure to obtain such consent, waiver, approval, Order, Permit or authorization, or make such declaration
or filing, would not prevent or materially delay the consummation by the Purchaser of the transactions contemplated by this Agreement and the other
Transaction Documents to which the Purchaser is a party or (ii) as may be necessary as a result of any facts or circumstances relating solely to any party
hereof or any of its Affiliates.
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Section 5.4 Brokers. No broker, finder or investment banker is entitled to receive from any Group Company any brokerage, finder’s
or other fee or commission in connection with the transactions contemplated by this Agreement or any other Transaction Document based upon
arrangements made by or on behalf of the Purchaser.
Section 5.5 SEC Reports.
(a) The Purchaser has timely filed or furnished, as applicable, all forms, reports and documents required to be filed or furnished by
it with the SEC since November 1, 2013 pursuant to the Securities Act or the Securities Exchange Act (such forms, reports and documents so filed,
furnished or provided, including any amendment thereto, collectively, the “SEC Reports”). As of their respective dates of filing (and as of the date of any
amendment or incorporation by reference), each of the SEC Reports (i) complied in all material respects with the applicable requirements of the Securities
Act and the Exchange Act, each as in effect on the dates of such SEC Report and (ii) did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made,
not misleading.
(b) Since the date of the latest SEC Report, (i) the Purchaser and its Subsidiaries have operated their respective businesses in all
material respects in the ordinary course of business consistent with past practice and (ii) no fact or event has occurred or circumstance or change has arisen
that, individually or in the aggregate, has had or would reasonably be likely to have a Purchaser Material Adverse Effect.
(c) The financial statements (including the related notes and schedules) of the Purchaser and its consolidated Subsidiaries (the
“Purchaser Financial Statements”) included in the SEC Reports (i) have been prepared in accordance with Applicable Accounting Standard applied on a
consistent basis during the periods involved and (ii) fairly present in all material respects the consolidated financial position of the Purchaser and its
consolidated Subsidiaries as of the dates thereof and the consolidated results of operations, shareholders’ equity and cash flows of the Purchaser and its
consolidated Subsidiaries for the periods then ended.
(d) The Purchaser and its Subsidiaries have no Liabilities that would have a Purchaser Material Adverse Effect other than (i)
Liabilities reflected, accrued or reserved in the most recent audited balance sheet included in the Purchaser Financial Statements as of the date hereof, (ii)
Liabilities incurred by the Purchaser or any of its Subsidiaries after the most recent audited balance sheet included in the Purchaser Financial Statements in
the ordinary course of business consistent with past practice or otherwise disclosed in the SEC Reports, and (iii) Liabilities incurred in connection with this
Agreement or other Transaction Documents.
Section 5.6 Share Capital. The authorized share capital of the Purchaser consists of 4,800,000,000 Purchaser Shares and
200,000,000 Class B ordinary shares, par value US$0.00001 per share. As of the date hereof, 176,375,211 ordinary shares of the Purchaser are issued and
outstanding. Since the date of the latest SEC Report, the Purchaser has not issued or sold any equity securities or any rights, warrants, convertible
instruments in any form or by any nature which could directly or indirectly be convertible into or exchangeable for equity securities of the Purchaser,
except for options, restricted share units or other awards granted under the Purchaser Share Incentive Plan that entitle the holders thereof to receive
Purchaser Shares upon the vesting or exercising of such awards and Purchaser Shares issued pursuant to the awards granted under the Purchaser Share
Incentive Plan. The Share Portion of Purchase Price, when issued in accordance with the terms hereof and entered in the register of members of the
Purchaser, shall be duly authorized, validly issued, fully paid and non-assessable and free from any Liens, except for any transfer restrictions imposed
under Rule 144 under the Securities Act and other applicable Securities Laws and Section 6.21 of this Agreement. The holding period applicable to the
Share Portion of Purchase Price held by a Selling Shareholder, if such Selling Shareholder is not an Affiliate of the Purchaser, under Rule 144 shall be no
more than six (6) months after the date of issuance by the Purchaser. Assuming there is no issuance of any equity securities or any rights, warrants,
convertible instruments in any form or by any nature which could directly or indirectly be converted into or exchanged for equity securities of the Purchaser
after the date hereof other than expressly contemplated hereunder, the Share Portion of Purchase Price represents in aggregate 2.7% of the Purchaser’s total
outstanding ordinary shares immediately after the Closing.
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other amounts required to be paid at or after Closing in connection with the consummation of the transactions contemplated hereby.
Section 5.7 Funding. The Purchaser has sufficient funds to pay the Cash Portion of Purchase Price as of the Closing Date and any
Section 5.8 Compliance with Laws. Each of Purchaser and its consolidated Subsidiaries: (i) is conducting its business in
compliance with Laws and governmental Orders, in each case to the extent applicable to Purchaser and its Subsidiaries, in all material respects; and (ii) has
and is in all material respects in compliance with all governmental authorizations necessary to permit it to lawfully conduct its business as presently
conducted, and has made all filings, applications and registrations with all Governmental Authorities that are required in order to own or lease their
properties and to lawfully operate its business as presently conducted.
Section 5.9 Full Disclosure. Neither information provided by the Purchaser in this Agreement nor in any Exhibit or Schedule hereto
contains any untrue statement of any material fact or omits to state any material fact necessary in order to make the statements contained herein or therein
not misleading.
Section 5.10 No Other Representations or Warranties. Except for the representations and warranties contained in this Article V, the
Purchaser makes no representation or warranty, express or implied, at law or in equity, with respect to it or its business, assets or properties, employees,
agents, or any other information provided to the Warrantors and the Selling Shareholders, their Affiliates or their representatives in connection with the
transactions contemplated hereby. The Purchaser will not have or be subject to any liability or indemnification obligation to the Warrantors or the Selling
Shareholders, their Affiliates or their representatives resulting from the distribution, or making available, to such persons, or such persons’ use of, any such
information, including any documents, projections, forecasts or other materials made available to the Warrantors and the Selling Shareholders, its Affiliates
or their representatives in connection with the transactions contemplated hereby.
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ARTICLE VI
Covenants
Section 6.1 Access to Information. Following the date hereof until the earlier of (a) the Closing and (b) the termination of this
Agreement pursuant to Section 8.1, subject to applicable Law or the terms of any Contract to which any Group Company is subject, the Purchaser shall be
entitled to make, during normal business hours, such investigation of the properties, assets, businesses and operations of the Group Companies and such
examination of the books and records of the Group Companies as it may reasonably request from time to time upon reasonable advance notice to the
relevant Group Company and to make extracts and copies of such books and records, provided that the Company or the other Warrantors shall not be
required to (A) take or allow actions that would unreasonably interfere with the operation of the business of any Group Company, or (B) provide access to
or furnish any information if the Company reasonably believes that refusal to provide access or furnish information is necessary to preserve the attorney-
client privilege, to protect highly confidential proprietary information or core or sensitive operating data or for other similar reasons. Subject to the
Purchaser’s compliance with the preceding sentence, the Company and the other Warrantors shall cause the Group Companies and each of the Group
Companies’ respective Senior Managers, directors, accountants, attorneys and other representatives to: (a) afford the officers, accountants, attorneys and
other representatives of the Purchaser access, during regular business hours, to the offices, properties, facilities, books and records of each Group Company,
and (b) furnish to the officers, accountants, attorneys and other representatives of the Purchaser such additional financial data and other information
regarding the assets, properties, liabilities and goodwill of each Group Company as the Purchaser may from time to time request.
Section 6.2 Notice of Developments.
(a) Following the date hereof until the earlier of (a) the Closing and (b) the termination of this Agreement pursuant to Section 8.1,
each Selling Shareholder and the Warrantors shall promptly notify the Purchaser in writing of all events, circumstances, facts and occurrences arising
subsequent to the date of this Agreement which could result in any breach of a representation or warranty or covenant or agreement of such Selling
Shareholder or the Warrantors in this Agreement, as the case may be, which could have the effect of making any representation or warranty of such Selling
Shareholder or the Warrantors, as the case may be, untrue or incorrect in any respect, or which could result in any of the conditions set forth in Section 7.1
and Section 7.2 not to be satisfied on or before the Long Stop Date. Following the date hereof until the earlier of (a) the Closing and (b) the termination of
this Agreement pursuant to Section 8.1, the Warrantors shall promptly notify the Purchaser in writing of all other material developments affecting the
assets, Liabilities, business, financial condition, operations, result of operations, client relationships, employee relations, projections or prospects of any
Group Company.
(b) Following the date hereof until the earlier of (a) the Closing and (b) the termination of this Agreement pursuant to Section 8.1,
the Purchaser shall promptly notify the Selling Shareholders and the Warrantors in writing of all events, circumstances, facts and occurrences arising
subsequent to the date of this Agreement which could result in any breach of a representation or warranty or covenant or agreement of the Purchaser in this
Agreement, which could have the effect of making any representation or warranty of the Purchaser untrue or incorrect in any respect, or which could result
in any of the conditions set forth in Section 7.1 and Section 7.3 not to be satisfied on or before the Long Stop Date.
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Section 6.3 Conduct of the Business Pending the Closing. Between the date hereof and the earlier of (a) the Closing and (b) the
termination of this Agreement pursuant to Section 8.1, except (x) as required by applicable Law, (y) as otherwise required by this Agreement or at the
Purchaser’s request or with the Purchaser’s permission, including without limitation any action taken for the purpose of carving out the Carved-out
Business, or (z) with the prior written consent of the Purchaser, the Company shall, and shall cause the other Group Companies to, and the Warrantors shall
cause the Company and the other Group Companies to:
past practice;
(a) conduct the respective Businesses of the Group Companies in the ordinary course and consistent with the Group Companies’
(b) not increase its indemnification protection currently available to the directors and officers of the Group Companies;
(c) use their commercially reasonable efforts to (i) preserve the present business operations, organization and goodwill of the Group
Companies, (ii) keep available the services of its current officers and employees, (iii) preserve the present relationships with clients of the Group
Companies, and (iv) not engage in any practice, take any action, fail to take any action or enter into any transaction which could cause any representation or
warranty of the Warrantors or the Selling Shareholders in this Agreement to be untrue or result in a breach of any covenant made by the Warrantors or any
Selling Shareholder in this Agreement; and
(d) not take any of the actions enumerated in Section 3.9.
Section 6.4 [Intentionally Left Blank.]
Section 6.5 Further Assurances. Each Party shall use (and the Company shall cause each other Group Company to use) its
commercially reasonable efforts to (a) take all actions necessary or appropriate and do all things (including to execute and deliver documents and other
papers) necessary, proper or advisable to consummate the transactions contemplated by this Agreement and (b) cause the fulfillment at the earliest
practicable date of all of the conditions to their respective obligations to consummate the transactions contemplated by this Agreement.
Section 6.6 Confidentiality and Publicity.
(a) Each Party agrees to, and shall cause its agents, representatives, Affiliates, employees, officers and directors to treat and hold as
confidential (and not disclose or provide access to any Person to) all confidential or proprietary information with respect to the other parties, the Business
or the Group Companies or relating to the transactions contemplated hereby; provided, however, that this Section 6.6(a) shall not apply to (i) any
information that, at the time of disclosure, is in the public domain and was not disclosed in breach of this Agreement by any Party or any of its agents,
representatives, Affiliates, employees, officers or directors, or (ii) any information that is required to be disclosed by Law or Government Authority,
provided that in such event (except that information is required to be disclosed in the Purchaser’s filing or reporting with the SEC as required under
applicable securities law, including the Purchaser’s annual report on Form 20-F) the Party being required to make such disclosure shall provide the other
Parties with prompt written notice of such requirement so that such other Party or Parties may seek a protective order or other remedy or waive compliance
with this Section 6.6(a) and, in the event that such protective order or other remedy is not obtained, or such other Party or Parties waive compliance with
this Section 6.6(a), the Party being required to make such disclosure shall furnish only that portion of such confidential information which is legally
required to be provided and exercise its commercially reasonable efforts to obtain assurances that confidential treatment will be accorded such information.
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(b) No Party shall make, or cause to be made, any press release or public announcement in respect of this Agreement or the
transactions contemplated hereby or otherwise communicate with any news media without the prior written consent of the Purchaser (in the case of a
proposed release or announcement by any Selling Shareholder or the Company) or of the Company and the Selling Shareholders holding at least a majority
of interest in the share capital of the Company on a fully diluted and as converted basis (in the case of a proposed release or announcement by the
Purchaser), unless otherwise required by Law or Government Authority.
Section 6.7 No Promotion. Without the prior written consent of or otherwise agreed in writing to by the other relevant Party and, in
the case of the Purchaser being the other relevant Party, whether or not the Purchaser is then a shareholder of the Company and whether or not the Closing
is consummated, no Party shall and shall cause its Affiliates not to:
(a) use in advertising, publicity, announcements, or otherwise, the name of such other relevant Party, either alone or in combination
of, including, in the case of Purchaser being the other relevant Party, “58.com”, “58同城”, the associated devices and logos of the above brands, or
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
(b) represent, directly or indirectly, that any product or services provided by any such Party has been approved or endorsed by the
other relevant Party or any of its Affiliates.
Section 6.8 Exclusivity. Between the date of this Agreement and the earlier of (a) the Closing and (b) the termination of this
Agreement pursuant to Section 8.1, none of the Warrantors or any of their respective Affiliates, officers, directors, representatives or agents shall, and the
Warrantors shall cause the other Group Companies and their respective Affiliates, officers, directors, representatives and agents to not, (i) solicit, initiate,
consider, encourage or accept any other proposals or offers from any Person (A) relating to any acquisition or purchase of all or any portion of the equity
interests in the Company or any other Group Company or all or any material portion of the assets of the Group Companies, or (B) to enter into any merger,
consolidation, business combination, recapitalization, reorganization or other extraordinary business transaction involving or otherwise relating to any
Group Company, or (ii) participate in any discussions, conversations, negotiations and other communications regarding, or furnish to any other Person any
information with respect to, or otherwise cooperate in any way, assist or participate in, facilitate or encourage any effort or attempt by any other Person to
seek to do any of the foregoing. The Warrantors immediately shall, and the Warrantors immediately shall cause the other Group Companies to, cease and
cause to be terminated all existing discussions, conversations, negotiations and other communications with any Persons conducted heretofore with respect
to any of the foregoing. The Warrantors shall notify the Purchaser promptly if any such proposal or offer, or any inquiry or other contact with any Person
with respect thereto, is made and shall, in any such notice to the Purchaser, indicate in reasonable detail the identity of the Person making such proposal,
offer, inquiry or contact and the terms and conditions of such proposal, offer, inquiry or other contact. The Warrantors agree not to, and the Warrantors
shall cause the other Group Companies not to, without the prior written consent of the Purchaser, release any Person from, or waive any provision of, any
confidentiality or standstill agreement to which any Warrantor or Group Company is a party.
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Section 6.9 Tax Filing.
(a) The Parties hereby acknowledge, covenant and agree that, subject to Section 6.9(c), (i) the Purchaser shall have no obligation to
pay any Tax of any nature that is required by applicable Law to be paid by any Selling Shareholder or its Affiliates or their respective direct and indirect
partners, members and shareholders arising out of the transactions contemplated by this Agreement and the other Transaction Documents; and (ii) each
Selling Shareholder agrees to bear and pay any Tax of any nature that is required by applicable Laws to be paid by it arising out of the transactions
contemplated by this Agreement and the other Transaction Documents.
(b) Each of the Selling Shareholders shall, at their own expenses, as soon as possible within thirty (30) days following the Closing
Date (and in any event within the period required by Circular 7), and the Purchaser shall assist each Selling Shareholder to, duly and properly make with
the applicable PRC Taxing Authority (being the PRC Taxing Authority to which such filings are to be made pursuant to applicable Law) (the “Relevant
PRC Tax Authority”) the relevant Tax filings and disclosures that are required by (and shall make such filings and disclosures in accordance with the
requirements of) applicable Law (including Circular 7) in connection with the transactions contemplated hereby. After such Tax filing, each Selling
Shareholder agrees to use its commercially reasonable efforts to promptly submit all documents supplementally requested by the Relevant PRC Tax
Authority in connection with such Tax filing, and give regular updates to the Purchaser and the Company as to the determination (and delivers to the
Purchaser and the Company assessment notices, if any, issued by the Relevant PRC Tax Authority in connection with such determination).
(c) To the extent that any Selling Shareholder is determined by the Relevant PRC Tax Authority to be required by applicable Law
(including Circular 7) to pay Taxes in connection with the transactions contemplated by this Agreement, the Purchaser shall, within such period of time as
required by the Relevant PRC Tax Authority, pay such Taxes out of the Withheld Amount for such Selling Shareholder in the Withheld Funds, and shall
provide such Selling Shareholder, as soon as reasonably practicable, with evidence that such Taxes have been paid in the form of a receipt of payment
issued by the Relevant PRC Tax Authority, and the Withheld Amount for each Selling Shareholder in the Withheld Funds shall be deemed to have been
reduced by the amount of Taxes paid for such Selling Shareholder.
(d) The Purchaser shall indemnify and hold harmless such Selling Shareholder damages, costs, expenses, or liabilities arising out of,
resulting from or in connection with the delay or failure of the Purchaser to pay Taxes out of the Withheld Amount for such Selling Shareholder as a result
of the Purchaser’s willful act or gross negligent under Section 6.9(c) on behalf of such Selling Shareholder.
(e) Notwithstanding anything in this Agreement to the contrary, each Founder shall cooperate with the Company as and to the
extent reasonably requested by the Company in connection with the filing of any Tax Returns and in any threatened or actual proceeding with respect to
Taxes, including the retention and (upon request) the provision of records.
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Section 6.10 Consent and Waiver.
(a) The Company and each Selling Shareholder hereby irrevocably consents to the transactions contemplated hereby and by the
other Transaction Documents, and the Carve-Out Plan and hereby irrevocably waives, subject to the Closing taking place, any protective provision, veto
rights, right of first refusal, right of first offer, pre-emptive right, co-sale right, or any similar rights that the Company or such Selling Shareholder, as
applicable, may have, whether pursuant to the Existing Shareholders Agreements or the Existing Articles or otherwise, in respect of the transactions
contemplated hereby and by the other Transaction Documents.
(b) Each Selling Shareholder hereby irrevocably consents to the conversion, effective as of and conditional upon the Closing, of
each of its Purchased Shares (to the extent not already an Ordinary Share) into Ordinary Shares as contemplated by Section 2.7 (including, if such Selling
Shareholder is a Breaching Selling Shareholder, the conversion contemplated by Section 2.8(b)).
(c) Each Selling Shareholder hereby irrevocably consents to the allocation of the Aggregate Purchase Price among the Selling
Shareholders and the Purchase Price for their respective Purchased Shares as contemplated by Schedule A, and agrees that such allocation is consistent with
the provisions of the Existing Shareholders Agreements and/or the Existing Articles.
Section 6.11 Mutual Release and Discharge.
(a) Effective as of and contingent upon the Closing, to the fullest extent permitted by applicable Law, each of the Selling
Shareholders and Founders, on behalf of itself and on behalf of its shareholders or members, as applicable, assigns and beneficiaries (collectively, the
“Shareholder Releasing Persons”), hereby knowingly, voluntarily, unconditionally and irrevocably waives, fully and finally releases, acquits and forever
discharges each Group Company, as applicable, assigns and beneficiaries (collectively, the “Shareholder Released Persons”) from any and all actions,
causes of action, suits, debts, accounts, bonds, bills, covenants, contracts, controversies, obligations, claims, counterclaims, debts, demands, damages, costs,
expenses, compensation or liabilities of every kind and any nature whatsoever (“Released Claims”), which such Shareholder Releasing Persons, or any of
them, had, has, or may have had arising from, connected or related to, or caused by any event, occurrence, cause or thing, of any type whatsoever, or
otherwise, arising or existing, or occurring, in whole or in part, at any time in the past until and including the Closing against any of the Shareholder
Released Persons with respect to any Group Company, in each case arising out of, relating to or in connection with such Selling Shareholder’s investment
in securities in any Group Company, the Existing Articles and/or the Existing Shareholders Agreements (the “Shareholder Release”). The Shareholder
Release shall be effective as a full, final and irrevocable accord and satisfaction and release of all of the Released Claims.
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(b) Effective as of and contingent upon the Closing, each of the Shareholder Releasing Persons hereby irrevocably and
unconditionally covenants to refrain from, directly or indirectly, asserting any claim or demand, or commencing, instituting or causing to be commenced,
any proceeding of any kind against any Shareholder Released Person, based upon the Shareholder Release or to seek to recover any amounts in connection
therewith or thereunder from and after the Closing. Any Shareholder Released Person may plead this Release as a complete bar to any Released Claims
brought in derogation of this covenant not to sue.
(c) Effective as of and contingent upon the Closing, to the fullest extent permitted by applicable Law, each of the Company (on
behalf of itself and the other Group Companies) and the Purchaser, on behalf of itself and on behalf of its shareholders or members (other than, for the
avoidance of doubt, the Shareholder Releasing Persons), as applicable, assigns and beneficiaries (collectively, the “Company Releasing Persons”), hereby
knowingly, voluntarily, unconditionally and irrevocably waives, fully and finally releases, acquits and forever discharges each Shareholder Releasing
Person and its shareholders or members, as applicable, assigns and beneficiaries (collectively, the “Company Released Persons”) from any and all Released
Claims, which such Company Releasing Persons, or any of them, had, has, or may have had arising from, connected or related to, or caused by any event,
occurrence, cause or thing, of any type whatsoever, or otherwise, arising or existing, or occurring, in whole or in part, at any time in the past until and
including the Closing against any of the Company Released Persons with respect to any Shareholder Releasing Person, including such Shareholder
Releasing Person’s investment in securities in any Group Company or arising out of, relating to or in connection with the Existing Articles and/or the
Existing Shareholders Agreements (the “Company Release”). The Company Release shall be effective as a full, final and irrevocable accord and
satisfaction and release of all of the Released Claims.
(d) Effective as of and contingent upon the Closing, each of the Company (on behalf of itself and the other Group Companies) and
the Purchaser hereby irrevocably and unconditionally covenants to refrain from, directly or indirectly, asserting any claim or demand, or commencing,
instituting or causing to be commenced, any proceeding of any kind against any Company Released Person, based upon the Company Release or to seek to
recover any amounts in connection therewith or thereunder from and after the Closing. Any Company Released Person may plead this Company Release
as a complete bar to any Released Claims brought in derogation of this covenant not to sue.
(e) Each of the Shareholder Releasing Persons, the Company (on behalf of itself and the other Group Companies) and the Purchaser,
agrees that if it violates any provision of this Section 6.11, it will pay the costs and expenses of defending against any related or resulting Legal Proceedings
incurred by the none-breaching parties, including attorney’s fees.
Section 6.12 Termination of Prior Agreements. Each of the Company and the Selling Shareholders acknowledge and agree that, as
of the Closing, the Existing Shareholders Agreements and the Management Rights Letters (which the Selling Shareholders agree to be all the management
rights letters or agreements providing them with information rights or management rights by the Company) shall immediately terminate and cease to have
any force or effect, without the need for any further action by any party thereto to effect or evidence such termination and without any Liabilities to any
Group Company.
Section 6.13 SAFE Regulations. Each Warrantor (other than the Company), to the extent it is subject to or under the jurisdiction of
the SAFE Regulations, hereby undertakes to the Company and the Purchaser that it will, and each Warrantor hereby undertakes to the Purchaser to procure
that each other shareholder of the Company and holder of any Company Share Award will, comply in all material respects with the requirements of the
SAFE Regulations in connection with the transactions contemplated hereby, including to timely and properly make all such filings and registrations, or
amend the applicable existing filings and registrations, as applicable, required under Circular 37 in connection with the transactions contemplated hereby.
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Section 6.14 Pre-Closing Notifications.
(a) Within one (1) day following the date of this Agreement, the Company shall deliver to the Purchaser a written statement, duly
executed by an authorized signatory of the Company, setting forth the Company’s good faith calculation of the fees and expenses of the external advisors of
the Company in connection with the transactions contemplated hereby and by the other Transaction Documents that have been or will be paid by the
Company (the “Estimated Selling Expenses”), including reasonable details of such calculation, and invoice issued by or written confirmation from the
external advisors confirming the amount of fees and expenses payable to them by the Company. To the extent that the Purchaser has deducted the
Estimated Selling Expenses from the Cash Portion of Purchase Price pursuant to Section 2.6(a), the Purchaser shall pay in full the Estimated Selling
Expenses to each external advisor pursuant to such written statement and evidence within five (5) Business Days after the Closing or such shorter period as
provided by the agreement signed by such external advisor and the Company. Each external advisor set forth in such written statement shall be third party
beneficiary to this Section 6.14(a), and shall have the right to enforce the provisions of this Section 6.14(a) directly to the extent such external advisor may
deem such enforcement necessary or advisable to protect its rights hereunder.
(b) Within one (1) day following the date of this Agreement, the Company shall deliver to the Purchaser a written statement, duly
executed by an authorized signatory of the Company, setting forth with respect to each Selling Shareholder, details of a bank account or bank accounts
designated by such Selling Shareholder at a bank or banks outside the PRC (or a bank account or bank accounts designated by such Selling Shareholder at a
bank or banks within the PRC capable of receiving international wires in US$) for purposes of receiving the payment of the Cash Portion of Purchase Price
for such Selling Shareholder at the Closing (the “Selling Shareholder Bank Account” of such Selling Shareholder). Each Selling Shareholder hereby agrees,
acknowledges and confirms that any amount of payment by or on behalf of the Purchaser into the Selling Shareholder Bank Account of such Selling
Shareholder shall constitute full performance and discharge of the Purchaser’s obligation, as applicable, to pay such amount to such Selling Shareholder
under this Agreement.
Section 6.15 [Intentionally Left Blank]
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Section 6.16 Registrations and Filings. Immediately after the Closing and in no event later than three (3) months after the Closing,
each Outgoing Domestic Company Shareholder shall, and shall cause the existing legal representative, directors (or executive director) and supervisor of
each of the Domestic Subsidiaries and the Domestic Company to, take all actions and execute all documents as reasonably required by the Purchaser for (i)
the de-registration of the equity pledge as contemplated under the Control Documents with the local counterpart of the State Administration for Industry
and Commerce, (ii) the registration with the local counterpart of the State Administration for Industry and Commerce of the transfer of all equity interests
of the Domestic Company from the Outgoing Domestic Company Shareholders to the Purchaser Domestic Company Shareholder, amendment of the
articles of association of the Domestic Company, and change of the legal representative, board chairman, directors and supervisor of the Domestic
Company; and (iii) the filing and registration with the local counterpart of each of the Ministry of Commerce and the State Administration for Industry and
Commerce of the change of the legal representative, board chairman, directors and supervisor of each Domestic Subsidiary. The Purchaser shall indemnify
and hold harmless each Outgoing Domestic Company Shareholder, its assigns and beneficiaries, against any Tax liability arising from the transfer of all
equity interests of the Domestic Company from the Outgoing Domestic Company Shareholders to the Purchaser Domestic Company Shareholder, to the
extent that the total amount of such Tax liability does not exceed RMB800,000.
Section 6.17 Non-Compete; Non-solicitation.
(a) Each of the Founders undertakes to the Purchaser that he will not, and he will procure that none of his Affiliates will, for a
period of two (2) years starting from the Closing Date, directly or indirectly: (i) participate, assist, engage or be interested in, any business or entity in any
manner, which is in competition with the business of listing advertisement for realtor and realtor firms, and advertisement for newly developed properties
or (ii) solicit in any manner any person who is or has been a customer or client of any Group Company for the purpose of offering to such person any goods
or services competing with any of the businesses conducted by any Group Company at any time prior to the Closing, provided, however, that the following
shall not constitute a breach of this Section 6.17(a): (i) holding ownership of less than one percent (1%) of any class or other equity of publicly traded
companies whose business is in competition with the business carried on by any Group Company, (ii) holding the Purchaser Shares, and (iii) the business of
providing mobile platform based real estate transaction O2O services that do not include the business of listing advertisement for realtor and realtor firms
and advertisement for newly developed properties.
(b) Each of the Founders undertakes to the Purchaser that he will not, and he will procure that none of his Affiliates will, (i) solicit
or entice away, or endeavor to solicit or entice way, or actually employ (including part time) any employees of the Group Companies with a title of vice
president or above, within two years starting from the Closing Date, unless otherwise agreed to in writing by the Purchaser, or (ii) solicit or entice away, or
endeavor to solicit or entice way, or actually employ (including part time) any other employees of the Group Companies within twelve (12) months starting
from the Closing Date. For the avoidance of doubt, hiring of (i) any employee of any Group Company with a title below vice president after twelve (12)
months following the Closing Date, or (ii) any Person named in a list separately provided to the Purchaser under Section 3.16, shall not constitute a breach
of this Section 6.17(b).
Section 6.18 US$10 Million RSUs. Within three (3) months following the Closing Date, the Purchaser shall grant restricted share
units (“Awards”) with an aggregate value of US$10,000,000 determined based on the closing price of the Purchaser Shares as quoted on the New York
Stock Exchange on the grant date to the full-time employees of Group Companies, to be determined by the board of directors of the Purchaser acting in
good faith, with the terms and conditions of the Awards being subject to the Purchaser Share Incentive Plan effective at the time. The board of directors of
the Purchaser shall have the discretion to determine, subject to the Purchaser Share Incentive Plan effective at the time, the number of Awards to be granted
to each awardee, and other terms and conditions of any Award granted, provided, however, that the vesting schedule and exercise mechanism shall be
determined based on the same standards, procedures and conditions that are applicable to the Purchaser’s other employees in same or similar positions,
treading all holders of Purchaser RSUs fairly.
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executive officer of the Company.
Section 6.19 Resignation as CEO. As soon as practicable after the Closing, Mr. Liang Weiping shall resign from the position of chief
Section 6.20 Indemnity of Officers and Directors. The Purchaser shall, and shall cause the Company and its Subsidiaries to, comply
with the protection and indemnification obligations currently afforded to the directors and officers of the Group Companies, as provided for in the
organizational documents of the Company and its Subsidiaries and any indemnification agreements in effect as of the date hereof (to the extent consistent
with applicable Law).
Section 6.21 Lock-up. Each of the Selling Shareholders who will receive Purchaser Shares as part or all of the Purchase Price for the
Purchased Shares of such Selling Shareholder at the Closing (the “Locked-up Selling Shareholders”) shall not directly or indirectly sell, transfer, pledge,
encumber, assign, loan, or otherwise dispose of (any of the foregoing, a “Transfer”) any portion or interest of the Purchaser Shares acquired hereunder,
without the prior written consent of the Purchaser for a period of six (6) months following the Closing Date, other than to any Affiliate of Locked-up
Selling Shareholders, provided, however, that in such case, it shall be a condition to the Transfer that the transferee execute an agreement stating that the
transferee is receiving and holding such Locked-up Selling Shareholder’s Purchaser Shares subject to the provisions of this lock-up provision and there
shall be no further Transfer except in accordance with this lock-up provision. Any purported sell, transfer, pledge, encumber, assign, loan, or disposal of the
Purchaser Shares in violation of the foregoing sentence without prior written consent of the Purchaser shall be null and void.
Section 6.22 Amount Owed due to CTO Cashless Exercise. The Purchaser shall pay to Mr. NI Jun an amount equal to (A)
US$2,990,000 less (B) the amount of Taxes that should be withheld from or paid by such holder in connection with his cashless exercise of Company Share
Awards pursuant to the option exercise agreement dated February 21, 2014, to the extent not already withheld or paid, on the Closing Date by wire transfer
of immediately available funds in US$ to a bank account designated by him in writing at least three (3) Business Days prior to the Closing. Mr. NI Jun is
expressly made a third party beneficiary to this Section 6.22, and shall have the right to enforce the provisions of this Section 6.22 directly to the extent he
may deem such enforcement necessary or advisable to protect his rights hereunder. The Purchaser shall, within such period of time that is required by
applicable Taxing Authority, pay or cause the applicable Group Company to pay, the withheld amount on behalf of Mr. NI Jun to the applicable Taxing
Authority with respect to the Amount Owed due to CTO Cashless Exercise, and shall obtain a confirmation or other written proof that the withholding Tax
has been duly paid by the Purchaser (or the relevant Group Company) on behalf of Mr. NI Jun. To the extent that there is any residual amount after such
Tax payment, the Purchaser shall as soon as reasonably practicable after obtaining such confirmation or other proof from the Taxing Authority (but in any
event no later than twenty (20) Business Days after receiving such confirmation or proof), return such residual amount, together with interest accrued
thereon, if any, to Mr. NI Jun by wire transfer of immediately available funds to the account designated by Mr. NI Jun and notified to the Purchaser in
writing at least three (3) Business Days prior to the Closing.
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in a list separately provided to the Purchaser to resign from the relevant Group Companies.
Section 6.23 Departing Employees. Within three (3) days after the Closing, the Warrantors shall have caused all the Persons named
ARTICLE VII
Conditions to Closing
Section 7.1 Conditions Precedent to Obligations of Each Party. The respective obligations of each Party to consummate the
transactions contemplated by this Agreement is subject to the fulfillment, on or prior to the Closing Date, of each of the following conditions (any or all of
which may be waived by such Party, in its sole discretion, in whole or in part to the extent permitted by applicable Law):
(a) there shall not be in effect any Law or Order by a Government Authority of competent jurisdiction restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated hereby; and
(b) no Legal Proceeding shall have been commenced by or before any Government Authority against such Party seeking to restrain
or materially and adversely alter the transactions contemplated by this Agreement which would render it impossible or unlawful to consummate
such transactions, provided, however, that the provisions of this Section 7.1(b) shall not apply if such Party has directly or indirectly solicited or
encouraged any such Legal Proceeding.
Section 7.2 Conditions Precedent to Obligations of the Purchaser. The obligation of the Purchaser to consummate the transactions
contemplated by this Agreement is subject to the fulfillment, on or prior to the Closing Date, of each of the following additional conditions (any or all of
which may be waived by the Purchaser, in its sole discretion, in whole or in part to the extent permitted by applicable Law):
(a) (i) the representations and warranties in Section 3.1, Section 3.2, Section 3.3(a), Section 3.3(b), Section 3.5(a) and Section 3.5(b)
(the foregoing representations and warranties, collectively, the “Company Fundamental Warranties”) and the representations and warranties in
Section 4.1, Section 4.2, Section 4.3(a) and Section 4.4 (the foregoing representations and warranties, collectively, the “Selling Shareholder
Fundamental Warranties”) shall be true and correct in all respects when made and as of the Closing with the same force and effect as if made as of
the Closing, except to the extent such representations and warranties relate to another date (in which case such representations and warranties shall
be true and correct in all respects as of such other date with the same force and effect as if made as of such other date), and (ii) the representations
and warranties set forth in Article III and Article IV (other than those representations and warranties enumerated in this Section 7.2(a)(i)) (A) that
are not qualified by “materiality”, “Material Adverse Effect” or similar qualifiers shall have been true and correct in all respects when made and
shall be true and correct in all material respects as of the Closing with the same force and effect as if made as of the Closing, and (B) that are
qualified by “materiality”, “Material Adverse Effect” or similar qualifiers shall have been true and correct in all respects when made and as of the
Closing with the same force and effect as if made as of the Closing, in each case of (A) and (B), other than such representations and warranties that
relate to another date (in which case such representations and warranties shall be true and correct in all respects as of such other date with the same
force and effect as if made as of such other date);
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(b) (i) the Company shall have performed and complied with, or caused the performance of and compliance with, the obligations
under the Carve-out Plan to be performed or complied with on or prior to the Closing Date, and (ii) each of the Company and the Selling
Shareholders shall have performed and complied with, in all material respects, each of the obligations and agreements required by this Agreement
to be performed or complied with by such Party on or prior to the Closing Date;
(c) from and after the date hereof, there shall have been no change, event, effect or circumstance that, individually or in the
aggregate, has had or would reasonably be expected to have a Material Adverse Effect;
(d) the Purchaser shall have received a certificate signed by an authorized signatory of the Company and each Selling Shareholder,
dated the Closing Date, certifying that the conditions set forth in Section 7.2(a), Section 7.2(b) and Section 7.2(c) have been satisfied;
(e) the memorandum and articles of association of the Company shall have been duly amended and restated in the form of the
Amended Articles;
(f) each Outgoing Director shall have resigned as a member of the board of directors of the Company (and as officer, director,
and/or supervisor of all other Group Companies if such Outgoing Director also serves any such position), and the Purchaser Director shall have
been duly appointed to the board of directors of the Company;
(g) the Purchaser shall have received duly executed resignation and release letters, dated as of the Closing Date and in the form of
Exhibit B, duly executed by each of the existing directors of the HK Subsidiaries evidencing their resignation as members of the board of directors
of the Company (and as officer, director, supervisor and/or observer of all other Group Companies if such person also serves any such position);
(h) the Purchaser shall have received (A) equity transfer agreements, dated as of the Closing Date, duly executed and delivered by
each of the Outgoing Domestic Company Shareholders transferring their entire entity interests in the Domestic Company to the Purchaser
Domestic Company Shareholder, (B) an amendment to the existing articles of association of the Domestic Company to reflect the transfer of
equity interests, (C) a resolution or written decision from the shareholder(s) of the Domestic Company approving the change of shareholders and
amendment of the articles of association, (D) application form(s) issued by and reasonably obtainable from the local counterpart of State
Administration of Industry and Commerce for the change of shareholders, and the amendment to the articles of association, duly executed by the
Domestic Company’s existing legal representative and affixed with its company seal, (E) termination agreement, dated as of the Closing Date,
duly executed and delivered by each of the Outgoing Domestic Company Shareholders, the Domestic Company and the WFOE terminating the
Control Documents to which any of the Outgoing Domestic Company Shareholders is a party, (F) a resolution or written decision from the
shareholders of each of the Domestic Company and the WFOE approving the termination of the Control Documents, and (G) application
documents and form(s) required by and reasonably obtainable from the local counterpart of the State Administration of Industry and Commerce
for de-registration of equity interest pledge contemplated under the Control Documents, duly executed by each of the existing shareholders of the
Domestic Company.
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(i) the Purchaser shall have received, with respect to each Domestic Subsidiary and the Domestic Company, (A) signed resignation
letter from the existing legal representative, the existing board chairman and the existing directors(or the existing executive director) and the
existing supervisor of such Person, expressed to take effect from the Closing; (B) a resolution or written decision from the shareholder(s) of each
such Person approving (i) the removal of the existing legal representative, chairman of the board of directors and directors (or executive director),
and supervisor of such Person; and (ii) the appointment of the Purchaser’s nominees as the legal representative, the board chairman, the directors,
and the supervisor of such Person, expressed to take effect from the Closing; and (C) application documents and form(s) required by and
reasonably obtainable from the local counterpart of the Ministry of Commerce (as applicable) and the State Administration of Industry and
Commerce for the change of legal representative, board chairman and directors (or executive director) and supervisor, the amendment to the
articles of association, signed by its existing legal representative and affixed with its company seal;
(j) the Purchaser shall have received (i) from Conyers Dill & Pearman, Cayman Islands counsel to the Company and the Selling
Shareholders, a legal opinion in form and substance reasonably satisfactory to the Purchaser; and (ii) from Fangda Partners, PRC counsel to the
Company and the Selling Shareholders, a legal opinion in form and substance reasonably satisfactory to the Purchaser, in each case of (i) and (ii),
addressed to the Company and dated as of the Closing Date;
(k) the Purchaser shall have received a written confirmation from each of the Persons that transferred any of the equity interests in
the Domestic Company (other than Mr. Chen Weixing in connection with the transfer of equity interest in the Domestic Company held by him
pursuant to a transfer agreement dated as of August 10, 2007 and a transfer agreement dated as of August 24, 2007, in each case by and between
Mr. Chen Weixing and Mr. Liang Weiping) to any other Person prior to the date hereof, acknowledging that the consideration payable to him/her
for the transfer of such equity interests have been waived by him/her and he has no rights in or claim to such transferred equity interests; and
(l) all domain names set forth under Schedule F shall have been transferred to a Group Company without consideration.
Section 7.3 Conditions Precedent to Obligations of the Company. The obligations of the Company to consummate the transactions
contemplated by this Agreement are subject to the fulfillment, prior to or on the Closing Date, of each of the following additional conditions (any or all of
which may be waived by the Company in its sole discretion in whole or in part to the extent permitted by applicable Law):
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(a) the representations and warranties in Section 5.1, Section 5.2, Section 5.3(a) and Section 5.6 (the foregoing representations and
warranties, collectively, the “Purchaser Fundamental Warranties”) shall be true and correct in all respects when made and as of the Closing with
the same force and effect as if made as of the Closing, and (ii) the representations and warranties of the Purchaser set forth in this Agreement
(other than the Purchaser Fundamental Warranties) shall have been true and correct in all respects when made and shall be true and correct in all
material respects as of the Closing with the same force and effect as if made as of the Closing; and
(b) the Purchaser shall have performed and complied with, in all material respects, each of the obligations and agreements required
by this Agreement to be performed or complied with by the Purchaser on or prior to the Closing Date.
Section 7.4 Conditions Precedent to Obligations of the Selling Shareholders. The obligations of the Selling Shareholders to
consummate the transactions contemplated by this Agreement are subject to the fulfillment, prior to or on the Closing Date, of each of the following
additional conditions (any or all of which may be waived by the Selling Shareholders in whole or in part to the extent permitted by applicable Law):
(a) the Purchaser Fundamental Warranties shall be true and correct in all respects when made and as of the Closing with the same
force and effect as if made as of the Closing, and (ii) the representations and warranties of the Purchaser set forth in this Agreement (other than the
Purchaser Fundamental Warranties ) shall have been true and correct in all respects when made and shall be true and correct in all material
respects as of the Closing with the same force and effect as if made as of the Closing; and
(b) the Purchaser shall have performed and complied with, in all material respects, each of the obligations and agreements required
by this Agreement to be performed or complied with by the Purchaser on or prior to the Closing Date.
ARTICLE VIII
Termination
Section 8.1 Termination of Agreement. This Agreement may be terminated at any time prior to the Closing as follows:
(a) by the Purchaser if, between the date hereof and the Closing, (i) there is a breach of any representation or warranty or failure to
perform any covenant or agreement set forth in this Agreement on the part of the Company or any Selling Shareholder set forth in this Agreement and (ii)
such breach or failure to perform would cause any of the conditions set forth in Section 7.1 or Section 7.2 not to be satisfied on or before the Long Stop
Date and cannot be cured, or if curable, is not cured within twenty (20) days after written notice of such breach is given to the Company or the Selling
Shareholders by the Purchaser;
(b) by the Company if, between the date hereof and the Closing, there is a breach of any representation or warranty or failure to
perform any covenant or agreement on the part of the Purchaser set forth in this Agreement, which breach or failure to perform would cause any of the
conditions set forth in Section 7.1 or Section 7.3 not to be satisfied on or before the Long Stop Date and cannot be cured, or if curable, is not cured within
twenty (20) days after written notice of such breach is given to the Purchaser by the Company;
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(c) by the Selling Shareholders if, between the date hereof and the Closing, there is a breach of any representation or warranty or
failure to perform any covenant or agreement on the part of the Purchaser set forth in this Agreement, which breach or failure to perform would cause any
of the conditions set forth in Section 7.1 or Section 7.4 not to be satisfied on or before the Long Stop Date and cannot be cured, or if curable, is not cured
within twenty (20) days after written notice of such breach is given to the Purchaser by the Selling Shareholders;
(d) by the Purchaser on or after the Long Stop Date if the Closing shall not have occurred by the close of business on the Long Stop
Date, provided that the right to terminate this Agreement pursuant to this Section 8.1(d) shall not be available to the Purchaser if its failure to perform any
of its obligations under this Agreement shall have resulted in the failure of the Closing to be consummated by the Long Stop Date;
(e) by the Company and the Selling Shareholders, acting jointly, on or after the Long Stop Date if the Closing shall not have
occurred by the close of business on the Long Stop Date, provided that the right to terminate this Agreement pursuant to this Section 8.1(e) shall not be
available to the Company and the Selling Shareholders if the failure by the Company or any Selling Shareholder to perform any of its obligations under this
Agreement shall have resulted in the failure of the Closing to be consummated by the Long Stop Date;
(f) by the Purchaser pursuant to Section 2.8(a)(iii); or
(g) by mutual written consent of the Company, the Selling Shareholders and the Purchaser.
Section 8.2 Procedure Upon Termination. In the event of termination by the Purchaser, the Company or the Selling Shareholders
pursuant to Section 8.1 hereof, written notice of such termination shall forthwith be given to the other Parties, and this Agreement shall thereupon terminate
without further action by any Party.
Section 8.3 Effect of Termination. In the event that this Agreement is validly terminated in accordance with Section 8.1 and Section
8.2, each of the Parties shall be relieved of their duties and obligations arising under this Agreement after the date of such termination and such termination
shall be without liability to any Party; provided, that no such termination shall relieve any Party hereto from liability for a breach of any of its covenants or
agreements or its representations and warranties contained in this Agreement prior to the date of termination, and provided, further, that Article I, Section
6.6, Section 6.7, this Section 8.3, and Article X shall survive any such termination.
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ARTICLE IX
INDEMNIFICATION
Section 9.1 Survival of Representations, Warranties and Covenants. The representations and warranties of each Party contained in
this Agreement shall survive the Closing until the date that is eighteen (18) months following the Closing Date; provided, however, the Company
Fundamental Warranties, the Selling Shareholder Fundamental Warranties and the Purchaser Fundamental Warranties shall survive the Closing
indefinitely, and the representations and warranties set forth in Section 3.13 (Taxes) shall survive the Closing until sixty (60) days after the applicable
statute of limitations governing claims arising thereunder. Notwithstanding the foregoing, the covenants or other agreements of the Company, the Selling
Shareholders and/or the Purchaser contained in this Agreement that by their terms are to be performed after the Closing shall survive the Closing in
accordance with their terms, unless and only to the extent that non-compliance with such covenants or agreements is waived in writing by the Party that is
the beneficiary of such covenants or agreements. If written notice of a claim for indemnification has been given in accordance with Section 9.2 prior to the
expiration of the applicable representations, warranties or covenants, then the relevant representations, warranties or covenants shall survive as to such
claim, until such claim has been finally resolved.
Section 9.2 Indemnification.
(a) Indemnification by Selling Shareholders. From and after the Closing, each of the Selling Shareholders shall, severally and not
jointly, indemnify, defend and hold harmless the Purchaser and its Affiliates (including, for the avoidance of doubt, the Group Companies from and after
the Closing) and their respective officers, directors, employees, agents, successors and permitted assigns (collectively, the “Purchaser Indemnitees”) from
and against all Liabilities, losses, damages, diminution in value, claims, costs and expenses (including reasonable attorneys’ fees and expenses incurred in
connection with the investigation or defense of any of the same or in responding to or cooperating with any governmental investigation), interest, awards,
judgments, fines and penalties actually suffered or incurred by the Purchaser Indemnitees (in each case, whether absolute, accrued, conditional or otherwise
and whether or not resulting from Third Party Claims) (hereinafter “Purchaser Losses”) directly arising out of or relating to:
(i) any untrue representation or warranty or breach thereof set forth in Article IV by such Selling Shareholder under this
Agreement; or
(ii) any breach or non-fulfillment of any covenant or obligation to be performed by any Selling Shareholder under this
Agreement.
(b) Indemnification by Warrantors. From and after the Closing, each of the Warrantors shall, severally and jointly, indemnify,
defend and hold harmless (to the fullest extent permitted by applicable Law) the Purchaser Indemnitees from and against all Purchaser Losses directly
arising out of or relating to:
(i) any untrue representation or warranty or breach thereof set forth in Article III;
(ii) any breach or non-fulfillment of any covenant or obligation to be performed by any Warrantor under this Agreement;
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(iii) any Tax obligations of the Group Companies for all taxable periods ending on or before the Closing Date and the
portion of any Straddle Period through the end of the Closing Date, except to the extent that such Taxes are reserved in the Financial
Statements; provided that, in the case of any Straddle Period, (A) the amount of any Taxes of the Group Companies based upon or
measured by net income or gain which relate to the portion of the Straddle Period through the end of the Closing Date will be determined
based on an interim closing of the books as of the close of business on the Closing Date, and (B) the amount of any other Taxes of the
Group Companies which relate to the portion of the Straddle Period through the end of the Closing Date will be determined according to
an interim closing of the books to the greatest extent possible, and otherwise shall be deemed to be the amount of such Tax for the entire
Straddle Period (except to the extent that such Taxes are reserved for in the Financial Statements) multiplied by a fraction, the numerator
of which is the number of days in the portion of the Straddle Period through the end of the Closing Date and the denominator of which is
the number of days in such Straddle Period; or
(iv) any payment obligations and commitments that are outside of the Group Companies’ ordinary course of business and
have not been disclosed or included in the Company’s Financial Statements as of December 31, 2014, including approximately
RMB350,000, being the fees and expenses payable to external advisors in connection with the Company’s preparation for its proposed
initial public offering and its historical equity financings before the Closing that have not been reflected in the Company’s Financial
Statements as of December 31, 2014.
above shall not be affected or prejudiced by the fact that such matter may be disclosed to the Purchaser in the Disclosure Schedule or otherwise.
For the avoidance of doubt, the indemnity obligation of each Warrantor towards any Purchaser Indemnitees with respect to Item (iii)
(c) Indemnification by the Purchaser. From and after the Closing, the Purchaser shall indemnify, defend and hold harmless each
Selling Shareholder and its Affiliates, and their respective officers, directors, agents, employees, successors and permitted assigns (collectively, the “Selling
Shareholder Indemnitees”) from and against all Liabilities, losses, damages, diminution in value, claims, costs and expenses (including reasonable
attorneys’ fees and expenses incurred in connection with the investigation or defense of any of the same or in responding to or cooperating with any
governmental investigation), interest, awards, judgments, fines and penalties actually suffered or incurred by the Selling Shareholder Indemnitees (in each
case, whether absolute, accrued, conditional or otherwise and whether or not resulting from Third Party Claims) (hereinafter “Selling Shareholder Losses”)
directly arising out of or relating to
(i) any untrue representation or warranty or breach thereof set forth in Article V; or
(ii) any breach or non-fulfillment of any covenant or obligation to be performed by the Purchaser under this Agreement.
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(d) Procedures Relating to Indemnification.
(i) Any Party seeking indemnification under this Section 9.2 (an “Indemnified Party”) shall promptly give the Party from
whom indemnification is being sought (an “Indemnifying Party”) notice of any matter which such Indemnified Party has determined has
given or could reasonably be expected to give rise to a right of indemnification under this Agreement stating in reasonable detail the
nature of the claim, and containing a reference to the provisions of this Agreement in respect of which such right of indemnification is
claimed or arises; provided, however, that the failure to provide such notice shall not release the Indemnifying Party from any of its
obligations under this Section 9.2 except to the extent the Indemnifying Party is materially prejudiced by such failure. With respect to any
recovery or indemnification sought by an Indemnified Party from the Indemnifying Party that does not involve a Third Party Claim, if the
Indemnifying Party does not notify the Indemnified Party within thirty (30) days from its receipt of the notice from the Indemnified Party
that the Indemnifying Party disputes such claim, the Indemnifying Party shall be deemed to have accepted and agreed with such claim. If
the Indemnifying Party has disputed a claim for indemnification (including any Third Party Claim), the Indemnifying Party and the
Indemnified Party shall proceed in good faith to negotiate a resolution to such dispute. If the Indemnifying Party and the Indemnified
Party cannot resolve such dispute in thirty (30) days after delivery of the dispute notice by the Indemnifying Party, such dispute shall be
resolved by arbitration pursuant to Section 10.4.
(ii) If an Indemnified Party shall receive notice of any Legal Proceeding, audit, demand or assessment (each, a “Third Party
Claim”) against it or which may give rise to a claim for Purchaser Loss or Selling Shareholder Loss under this Section 9.2, within 30 days
of the receipt of such notice, the Indemnified Party shall give the Indemnifying Party notice of such Third Party Claim; provided,
however, that the failure to provide such notice shall not release the Indemnifying Party from any of its obligations under this Section 9.2
except to the extent that the Indemnifying Party is materially prejudiced by such failure. If the Indemnifying Party acknowledges in
writing its obligation to indemnify the Indemnified Party hereunder against any Purchaser Losses or Selling Shareholder Losses, as
applicable, that may result from such Third Party Claim, then the Indemnifying Party shall be entitled to assume and control the defense
of such Third Party Claim at its expense and through counsel of its choice if it gives notice of its intention to do so to the Indemnified
Party within five days of the receipt of such notice from the Indemnified Party; provided, however, that if there exists or is reasonably
likely to exist a conflict of interest that would make it inappropriate in the judgment of the Indemnified Party in its sole and absolute
discretion for the same counsel to represent both the Indemnified Party and the Indemnifying Party, then the Indemnified Party shall be
entitled to retain its own counsel in each jurisdiction for which the Indemnified Party determines counsel is required, at the Indemnifying
Party’s expense. In the event that the Indemnifying Party exercises the right to undertake any such defense against any such Third Party
Claim as provided above, the Indemnified Party shall cooperate with the Indemnifying Party in such defense and make available to the
Indemnifying Party, at the Indemnifying Party’s expense, all witnesses, pertinent records, materials and information in the Indemnified
Party’s possession or under the Indemnified Party’s control relating thereto as is reasonably required by the Indemnifying Party.
Similarly, in the event the Indemnified Party is, directly or indirectly, conducting the defense against any such Third Party Claim, the
Indemnifying Party shall cooperate with the Indemnified Party in such defense and make available to the Indemnified Party, at the
Indemnifying Party’s expense, all such witnesses, records, materials and information in the Indemnifying Party’s possession or under the
Indemnifying Party’s control relating thereto as is reasonably required by the Indemnified Party. No such Third Party Claim may be
settled by the Indemnifying Party without the prior written consent of the Indemnified Party.
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Section 9.3 Certain Limitations. The indemnification provided for in Section 9.2 shall be subject to the following limitations:
(a) Minimum Claims. None of the Indemnifying Parties shall be liable under this Agreement in respect of any claim for any untrue
representation or warranty made by any Party unless (i) the liability of the Indemnifying Party agreed or determined in respect of any individual claim (or
series of related claims with respect to related facts or circumstances) exceeds US$200,000, and (ii) the aggregate amount of all claims for which the
Indemnifying Party would otherwise be liable under this Agreement exceeds US$2,000,000. Where the amount agreed or determined in respect of all
claims referred to in the immediately foregoing sentence exceeds US$2,000,000, the liability of the Indemnifying Party shall be the full amount of all such
claims and not only the amount by which US$2,000,000 is exceeded. Notwithstanding anything to the contrary in this Section 9.3(a), claims for Losses
arising out of any untrue Company Fundamental Warranties, Selling Shareholder Fundamental Warranties or Purchaser Fundamental Warranties, or any
breach thereof, as applicable, and indemnification pursuant to Section 9.2(b)(iii) and Section 9.2(b)(iv), shall not be subject to this Section 9.3(a).
(b) Maximum Liability.
(i) The aggregate liability of the Warrantors towards Purchaser Indemnitees in respect of breach of representations and
warranties in Article III (other than the Company Fundamental Warranties and the representations and warranties set for in Section 3.13)
shall not exceed the Aggregate Purchase Price.
(ii) The aggregate liability of each Selling Shareholder towards Purchaser Indemnitees in respect of breach of
representations and warranties in Article IV (other than the Selling Shareholder Fundamental Warranties) shall not exceed the Aggregate
Purchase Price actually received by such Selling Shareholder.
(iii) The aggregate liability of the Purchaser towards the Selling Shareholder Indemnitees in respect of breach of
representations and warranties in Article V (other than the Purchaser Fundamental Warranties) shall not exceed the Aggregate Purchase
Price.
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(c) No Warrantor shall be entitled to claim against any Group Company for contribution, reimbursement, indemnification or other
participation in respect of or arising out of any indemnification obligation of the Warrantors hereunder, and each Warrantor hereby irrevocably and
unconditionally waives any such claim it may have against the Group Companies. Each Warrantor is entitled to claim against any other Warrantor (other
than the Company) for contribution, reimbursement, indemnification and other participation.
punitive, incidental, consequential, special or indirect damages.
(d) In no event shall any Indemnifying Party be liable to any Indemnified Party for indemnification under Section 9.2 for any
(e) Notwithstanding anything in this Agreement to the contrary, the limitations on indemnification and liability set forth in Sections
9.3(a) and (b) shall not apply to a claim for Purchaser Losses or Selling Shareholder Losses, as applicable, arising out of fraud or willful misconduct by any
Party.
Section 9.4 Mitigation; No Double Dip.
(a) The Indemnifying Parties shall not be liable under Section 9.2 for any Purchaser Losses or Selling Shareholder Losses, as
applicable, relating to any matter to the extent that (i) the Indemnified Party has otherwise been compensated for such losses (including recovery under an
insurance policy), (ii) in the case of Purchaser Indemnitees being the Indemnified Parties, such losses have been reserved for in the Financial Statements, to
the extent of such reserve (iii) the Indemnified Party has recovered for such losses under another provision of this Agreement, or (iv) the Indemnified Party
has taken action (or caused action to be taken) to accelerate the time period in which such matter is asserted or payable for the purpose of being entitled to
indemnification for such matter.
(b) Each Indemnified Party shall use commercially reasonably efforts to mitigate any losses for which such Indemnified Party may
seek indemnification under this Agreement, including taking, at the sole cost and expense of the Indemnifying Party, any actions reasonably requested by
the Indemnifying Person for such purpose, and no Indemnifying Party shall be liable to any Indemnified Party for any losses to the extent arising from or
aggravated by such Indemnified Party’s failure to use such efforts to mitigate or take such other action reasonably requested by such Indemnifying Party. If
such Indemnified Party mitigates its losses after the Indemnifying Party has paid the Indemnified Party under any indemnification provision of this
Agreement in respect of such losses, the Indemnified Party must notify the Indemnifying Party and pay to the Indemnifying Party the extent of the value of
the benefit to the Indemnified Party of that mitigation (less the Indemnified Party’s reasonable costs of mitigation) promptly after the benefit is received.
(c) Notwithstanding anything to the contrary contained herein, in no event shall an Indemnified Party be entitled to any payment,
adjustment or indemnification more than once with respect to the same matter. For the avoidance of doubt, subject to Section 9.6(d), the Purchaser’s
exercise of its rights to deduct from the Withheld Funds pursuant to Section 9.6 should not affect its ability to seek indemnification under Section 9.1 to
Section 9.5 if the Withheld Funds are not sufficient to cover the Purchaser’s Losses occurred under Section 9.6(b)(ii), (iii) and (vi), provided that, in the
case of such insufficiency, the Purchaser shall only seek indemnification pursuant to this Agreement from the Founder Selling Shareholders or the
Warrantors, not Non-Founder Selling Shareholders, regarding the unrecovered portion of such Purchaser’s Losses.
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Section 9.5 Tax Treatment of Indemnification Payments. All indemnification payments made under this Article IX shall be treated
as adjustments to the Aggregate Purchase Price and the Purchase Price for the applicable Selling Shareholder for Tax purposes, unless otherwise required
by applicable Law.
Section 9.6 Deduction and Release of Withheld Funds.
(a) Without limiting the generality of the foregoing, the Purchaser shall withhold such amount as set forth in Schedule A, which
shall equal 10% of the Purchase Price for each of the Non-Founder Selling Shareholders, 10% of the Purchase Price for each of Baidu, GL and FBH, and
15% of the Purchase Price for each of the Founder Selling Shareholders, from the Purchase Price payable to each such Selling Shareholder and set aside
such amounts as a separate pool of funds (the “Withheld Funds”) for the purposes set forth in this Section 9.6. The Withheld Funds for the Indemnification
Covering Selling Shareholders shall be withheld by the Purchaser for a period that ends on the second (2nd) anniversary of the Closing Date (the “Withhold
Expiration Date”). The Withheld Funds for Baidu, GL or FBH shall be withheld by the Purchaser until the Tax obligations of Baidu, GL or FBH, as
applicable, have been fully settled pursuant to Section 6.9(c). The Purchaser shall maintain, and provide each Selling Shareholder a copy of, a ledger for the
Withheld Funds showing the aggregate amount of the Withheld Funds and the allocation of the Withheld Funds among each Selling Shareholder. Unless
expressly permitted hereunder, the Purchaser shall not utilize any of such funds without the prior written approval by the relevant Selling Shareholder. The
initial allocation of the Withheld Funds among each Selling Shareholder shall be identical to the Withheld Amounts for the Selling Shareholders.
(b) The Withheld Funds shall be released to the Purchaser for the purposes and following the procedures as specified below:
(i) Selling Shareholders’ Tax Obligation under Circular 7. The Parties shall comply with Section 6.9(c).
(ii) Group Companies’ Tax Obligations. Subject to the procedures set forth in Section 9.6(e), the amount of the following
shall be deducted from the Withheld Funds and released to the Purchaser, and the Withheld Amount for each Indemnification Covering
Selling Shareholder shall be deemed to have been reduced by such Selling Shareholder’s Indemnification Pro Rata Portion of the amount
of such release: (a) any Tax obligations of the Group Companies that are required to be indemnified under Section 9.2(b)(iii) and it being
understood that for the purpose of this Section 9.6(b)(ii) any obligations of the Warrantors pursuant to Section 9.2(b)(iii) shall be deemed
to be obligations of the Indemnification Covering Selling Shareholder; or (b) any Tax obligations and Losses incurred by the Group
Companies arising from any failure by any Group Company to pay to any Taxing Authority amounts required to be paid pursuant to
applicable Laws before the Closing, or any failure to properly withhold and pay to any Taxing Authority amounts required to be withheld
and paid pursuant to applicable Laws before the Closing, in either case not reserved in the Financial Statements; provided, however, with
respect to each of (a) or (b) above, no amount shall be deducted from the Withheld Funds unless the obligation or Loss exceeds
RMB250,000 individually.
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(iii) Off-Balance Sheet Liabilities. Subject to the procedures set forth in Section 9.6(e), the amount of any payment
obligations and commitments that are required to be indemnified under Section 9.2(b)(iv) and it being understood that for the purpose of
this Section 9.6(b)(iii) any obligations of the Warrantors pursuant to Section 9.2(b)(iv) shall be deemed to be obligations of the
Indemnification Covering Selling Shareholder, shall be deducted from the Withheld Funds and released to the Purchaser, and the
Withheld Amount for each Indemnification Covering Selling Shareholder shall be deemed to have been reduced by such Selling
Shareholder’s Indemnification Pro Rata Portion of the amount of such release, and the Purchaser shall promptly notify the
Indemnification Covering Selling Shareholders in writing that such deduction and amount have been made and the remaining Withheld
Amount for each such Selling Shareholder in the Withheld Funds.
(iv) Tax relating to the Change of Shareholders of Domestic Company. If there is adequate, undisputed proof that the Tax
obligations in connection with the transfer of the entire equity interests in the Domestic Company from the Outgoing Domestic Company
Shareholders to the Purchaser Domestic Company Shareholder is in excess of RMB800,000, such excess portion shall be deducted from
the Withheld Funds and released to the Purchaser, and the Withheld Amount for each Indemnification Covering Selling Shareholder shall
be deemed to have been reduced by such Selling Shareholder’s Indemnification Pro Rata Portion of the amount of such release, and the
Purchaser shall promptly notify the Indemnification Covering Selling Shareholders in writing that such deduction and amount have been
made and the remaining Withheld Amount for each such Selling Shareholder in the Withheld Funds.
(v) Violation of Non-Solicitation. If there is adequate, undisputed proof that any of the Founders breaches the non-
solicitation obligations as provided for under Section 6.17(b) (“Breach of Non-Solicitation”), an amount equal to the sum of (A)
US$500,000 multiplied by the number of employees with the position of vice president or above who terminate their employment
relationship with the Group Companies due to the Founder’s Breach of Non-Solicitation, and (B) US$200,000 multiplied by the number
of employees with the position of senior manager (高级经理) or above but below vice president who terminate their employment
relationship with the Group Companies due to the Founder’s Breach of Non-Solicitation, shall be deducted from the Withheld Funds and
released to the Purchaser, and the Withheld Amount for the Founder Selling Shareholder Controlled by the breaching Founder shall be
deemed to have been reduced by the amount of such release, and the Purchaser shall promptly notify the breaching Founder in writing
that such deduction and amount have been made and the remaining Withheld Amount for the Founder Selling Shareholder Controlled by
the breaching Founder.
(vi) Violation of Non-Compete. If there is adequate, undisputed proof that any of the Founders breaches the non-compete
obligations as provided for under Section 6.17(a) (“Breach of Non-Compete”), all Withheld Amount that remain in the Withheld Funds at
the time for the Founder Selling Shareholder Controlled by the breaching Founder shall be deducted from the Withheld Funds and
released to the Purchaser, and the Withheld Amount for such Founder Selling Shareholder shall be deemed to have been reduced to zero,
and the Purchaser shall promptly notify the breaching Founder in writing that such deduction and amount have been made and there is no
remaining Withheld Amount for the Founder Selling Shareholder Controlled by the breaching Founder.
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(c) (i) If there is any remaining Withheld Amount for any of the Indemnification Covering Selling Shareholders in the Withheld
Funds, the Purchaser shall, promptly after the Withhold Expiration Date but in any event no later than twenty (20) Business Days after the Withhold
Expiration Date release such remaining Withheld Amount, plus the interest accrued thereon, if any, to the applicable Selling Shareholder, by wire transfer
of immediately available funds in US$ to the Selling Shareholder Bank Account of such Selling Shareholder. Notwithstanding the preceding sentence (i), if
any residual amount is subject to dispute that is being processed pursuant to Section 9.6(e) below, the Purchaser shall be entitled to continue to withhold the
amount subject to such dispute, until such dispute has been resolved pursuant to Section 9.6(e) and, upon such resolution, the Purchaser and the relevant
Selling Shareholder shall comply with the agreement reached or outcome obtained under Section 9.6(e) with respect to the release of the residual amount
and interest thereon (if any). (ii) If there is any remaining Withheld Amount for Baidu, GL or FBH in the Withheld Funds after such Party’s Tax is fully
settled pursuant to Section 6.9(c), the Purchaser shall, promptly after receiving a formal receipt of Tax payment and full settlement issued by the Relevant
PRC Tax Authority but in any event no later than twenty (20) Business Days after it receives such receipt, release such remaining Withheld Amount, plus
the interest accrued thereon, if any, to Baidu, GL or FBH, as the case may be, by wire transfer of immediately available funds in US$ to the Selling
Shareholder Bank Account of Baidu, GL or FBH, as applicable.
(d) For each Non-Founder Selling Shareholder, its respective obligations pursuant to Section 9.6(b)(ii), (iii) and (iv) shall be capped
at the result of (i) the Withheld Amount for such Non-Founder Selling Shareholder in the Withheld Funds, minus (ii) Tax payable or paid out of the
Withheld Funds pursuant to Section 6.9(c). For the avoidance of doubt, if the Tax payable for a Non-Founder Selling Shareholder equals to or exceeds 10%
of its Purchase Price and the full amount of such Selling Shareholder’s portion of the Withheld Funds has been used to settle its Tax payable, then such
Non-Founder Selling Shareholder shall not bear additional payment obligations under Section 9.6(b)(ii), (iii) and (iv), provided that it has fully complied
with its tax payment obligations under Section 6.9(a).
(e) Procedure.
(i) If the Purchaser has identified that any of the events in Section 9.6(b)(ii) to (vi) has occurred, it shall immediately notify
the relevant Selling Shareholder(s) from whose Withheld Amount release is being sought (the “Proposed Releasing Selling Shareholder
(s)”) in writing, stating in reasonable detail the basis for the proposed release to itself and the amount proposed to be released to the
Purchaser, with evidence for the alleged breach, non-compliance or indemnification claim.
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(ii) The Proposed Releasing Selling Shareholder shall respond within ten (10) Business Days of receiving such notification,
stating whether it objects to such release and the reasons for the objection thereto.
(iii) If any Proposed Releasing Selling Shareholder failed to respond to the Purchaser within the period specified in Section
9.6(d)(ii), such Selling Shareholder shall be deemed to have consented to such allegation and the Purchaser shall be entitled to transfer to
its own account the amount stated in its notice given under Section 9.6(d)(i).
(iv) If the Proposed Releasing Selling Shareholder notifies the Purchaser within the period specified in Section 9.6(d)(ii) that
it has objections to the proposed release of the Withheld Funds, the Proposed Releasing Selling Shareholder and the Purchaser shall use
their commercially reasonable efforts to reach a mutually satisfactory solution within thirty (30) Business Days from the receipt of the
objections by the Purchaser.
(v) If the Proposed Releasing Selling Shareholder and the Purchaser cannot reach a mutually satisfactory solution within the
time period specified in Section 9.6(e)(iv), the Parties shall submit the dispute to arbitration pursuant to Section 10.4, and the arbitral
award made pursuant thereto shall be binding on both the Proposed Releasing Selling Shareholder and the Purchaser.
ARTICLE X
Miscellaneous
Section 10.1 Expenses. Except as otherwise provided in this Agreement, each Party shall bear its own costs and expenses incurred in
connection with the negotiation and execution of this Agreement and each other Transaction Document and the consummation of the transactions
contemplated hereby and thereby (the “Transaction Expenses”), provided that the Transaction Expenses incurred by the Company (which, for the
avoidance of doubt, shall include the fees and expenses of the external legal and financial advisors of the Company (including, but not limited to, the
financial advisor identified under Section 3.22 of the Disclosure Schedule) but shall exclude the fees and expense of the PRC auditor of the Company) shall
be borne by the Selling Shareholders (other than Baidu, GL and FBH).
Section 10.2 [Intentionally Left Blank]
giving effect to any choice or conflict of law provision or rule thereof.
Section 10.3 Governing Law. This Agreement will be governed by and construed in accordance with the laws of Hong Kong without
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Section 10.4 Arbitration.
(a) Any dispute arising out of or in connection with this Agreement, including any question regarding its existence, validity or
termination, shall be referred to and finally resolved by arbitration in Hong Kong in accordance with the Hong Kong International Arbitration Center
Administered Arbitration Rules (the “HKIAC Rules”) in force when the notice of arbitration is submitted in accordance with the HKIAC Rules. The
HKIAC Rules are deemed to be incorporated by reference to this clause. The tribunal shall be comprised of three arbitrators. The Purchaser, on the one
hand, and the Selling Shareholders, acting jointly, on the other hand, shall each nominate one arbitrator and the third, who shall serve as president of the
tribunal, shall be nominated by the party-nominated arbitrators. The arbitration shall be conducted in English. Each Party irrevocably and unconditionally
consents to such arbitration as the sole and exclusive method of resolving any dispute arising out of or in connection with this Agreement, including any
question regarding its existence, validity or termination, other than any proceedings to seek the remedies of specific performance as contemplated by
Section 10.6.
(b) The award of the arbitral tribunal shall be final and binding on the Parties. The Parties agree that they will not have recourse to
any judicial proceedings, in any jurisdiction whatsoever, for the purpose of seeking appeal, annulment, setting aside, modification or any diminution or
impairment of its terms or effect insofar as such exclusion can validly be made. Judgment upon any award rendered may be entered in any court having
jurisdiction thereof, or application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be.
Section 10.5 Entire Agreement; Amendments and Waivers. This Agreement (including the schedules and exhibits hereto) and the
other Transaction Documents represent the entire understanding and agreement among the Parties with respect to the subject matter hereof and thereof.
This Agreement can be amended, supplemented or changed, and any provision hereof can be waived, only by written instrument making specific reference
to this Agreement signed by the Purchaser, the Selling Shareholders and the Company (except as specifically contemplated by Section 2.8(b)). No action
taken pursuant to this Agreement, including any investigation by or on behalf of any Party, shall be deemed to constitute a waiver by the Party taking such
action of compliance with any representation, warranty, covenant or agreement contained herein. The waiver by any Party of a breach of any provision of
this Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach. No
failure on the part of any Party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of such right, power or remedy by such Party preclude any other or further exercise thereof or the exercise of any other right,
power or remedy.
Section 10.6 Specific Performance. The Parties acknowledge and agree that irreparable damage would occur if any provision of this
Agreement were not performed in accordance with the terms hereof and that, prior to the termination of this Agreement in accordance with Article VIII,
each Party shall be entitled to specific performance of the terms hereof. It is accordingly agreed that prior to such termination, each Party shall be entitled to
an injunction or injunctions to prevent such breaches of this Agreement and to enforce specifically (without proof of actual damages or harm, and not
subject to any requirement for the securing or posting of any bond in connection therewith) such terms and provisions of this Agreement, this being in
addition to any other remedy to which each Party is entitled at law or in equity.
Section 10.7 Notices. All notices and other communications under this Agreement shall be in writing and shall be deemed
effectively given (i) when delivered personally by hand (with written confirmation of receipt), (ii) when sent by fax (with written confirmation of
transmission) or (iii) two Business Days following the day sent by international overnight courier (with written confirmation of receipt), in each case at the
following addresses and facsimile numbers (or to such other address or facsimile number as a party may have specified by notice given to the other party
pursuant to this provision):
63
If to the Purchaser, to:
58.COM INC.
Block E, The North American International Business Center
Yi 108 Beiyuan Road, Chaoyang District,
Beijing 100101
People’s Republic of China
Fax: +86 10 57960999
Attention: Chief Financial Officer
With a copy to (which shall not constitute notice):
Skadden, Arps, Slate, Meagher & Flom LLP
c/o 42/F, Edinburgh Tower, The Landmark
15 Queen’s Road Central
Hong Kong
Fax: 852-3910-4863
Attention: Julie Gao
If to the Company, to:
ANJUKE INC.
Address: 浦东新区东方路1217号陆家嘴金融服务广场15楼、13楼
Tel: 021-61821155/61821159
Fax: 021-61821150/61821153/61821158
Attention: Jimbo Wan / Sherry Liu
With a copy to (which shall not constitute notice):
Fangda Partners
18F, North Tower, Beijing Kerry Centre,
1 Guanghua Road, Chaoyang District, Beijing, China, 100020
Fax: (8610) 5769 5788
Attention: Amanda Zhou
If to the Selling Shareholders, to:
Ruiting Holdings Limited/Liang Weiping
Address: 上海市业辉路555弄129号
Tel: 18602115428
Email: mikeliang777@gmail.com
Attention: Liang Weiping
Wild West Capital Limited/Jia Yitian
Tel: 1-778-385-0940
Email: evansjia@gmail.com
Contact Person: Evans Jia
64
Ruijia Holdings Limited/Zhang Jinzhu
Contact Person: Zhang Jinzhu
Tel: 13901740862
Empress Sky Management Limited/Cheng Shu
Contact Person: Cheng Shu
Tel: 13901960670
Matrix Partners China I, L.P. &
Matrix Partners China I-A, L.P.
Address: Suite 08, 20th Floor, One International Finance Centre,
1 Harbour View Street, Central, Hong Kong
Attn: Matrix Partners HK Management Limited
Yibo Shao / Michael Zuo
Tel: (852) 3960 6592
Fax: (852) 3669 8008
Email: bo.shao@matrixpartners.com.cn;
michael.zuo@matrixpartners.com.cn
Matrix Partners VIII, L.P. &
Weston & Co. VIII LLC
Matrix Partners
101 Main Street
17th Floor
Cambridge, MA 02142, USA
Tel: 1-617-494-1223
TENZING HOLDINGS LLC
mailing to:
c/o Corporate Agents N.V.
Att: Ewout Langemeijer
Schottegatweg Oost 10 Unit A1K
Willemstad, Curacao
Dutch Caribbean
Contact Person: Oleg Gorelik / Dominika Halka
Email: Oleg@tenzing.net
Dominika@tenzing.net
GL AJK Holdings Ltd.
Address: 1608, One Exchange Square, 8 Connaught Place, Central,
Hong Kong
Attn: Vincent Gao
Fax: +852-2179 1900
Email: vgao@hillhousecap.com
With a copy to:
Suite 1608, One Exchange Square, 8 Connaught Place, Central,
Hong Kong
Attn: Adam HORNUNG
Fax: +852-2179 1900
Email: ahornung@hillhousecap.com
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Baidu Holdings Limited
Address: Baidu Campus, No.10 Shangdi 10th Street, Haidian District, Beijing, 100085
Tel No.: (86)10-59929803
Fax Number: (86)10-59920021/59920022
Email: ouyangkang@baidu.com and yangliu03@baidu.com
Contact Person: OUYANG Kang, Investment,
Merger and Acquisition Department
With a copy (which shall not constitute notice) to:
Address: Baidu Campus, No.10 Shangdi 10th Street, Haidian District, Beijing, 100085
Fax Number: (86)10-59920021/59920022
Email: lihong10@baidu.com and wumengyi@baidu.com
Contact Person: LI Hong, Legal Department
FBH Partners Limited
Contact Person: Fan BAO
Tel: +86 13910088845
Section 10.8 Severability. If any term or other provision of this Agreement is invalid, illegal, or incapable of being enforced by any
law or public policy, all other terms or provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal, or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as
originally contemplated to the greatest extent possible.
Section 10.9 Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the parties and their
respective successors and permitted assigns. Nothing in this Agreement shall create or be deemed to create any third party beneficiary rights in any person
or entity not a party to this Agreement except as provided in Section 9.2 hereof. No assignment of this Agreement or of any rights or obligations hereunder
may be made by (i) any Selling Shareholder, directly or indirectly (by operation of law or otherwise), without the prior written consent of the Purchaser,
and (ii) the Purchaser directly or indirectly (by operation of law or otherwise), without the prior written consent of the Selling Shareholders, and any
attempted assignment in violation of this Section 10.9 shall be void; provided, that the Purchaser may assign its rights and obligations under this Agreement
to any of its Affiliates.
Section 10.10 Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed to be an
original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. Facsimile and e-mailed
copies of signatures shall be deemed to be originals for purposes of the effectiveness of this Agreement.
** REMAINDER OF PAGE INTENTIONALLY LEFT BLANK **
66
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written above.
58.COM INC.
By:
/s/ YAO Jinbo
Name:
Title:
[Signature Page to Share Purchase and Subscription Agreement]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written above.
ANJUKE INC.
By:
/s/ LIANG Weiping
Name:
Title:
[Signature Page to Share Purchase and Subscription Agreement]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written above.
FOUNDERS:
LIANG WEIPING
/s/ LIANG Weiping
JIA YITIAN
/s/ JIA Yitian
ZHANG JINZHU
/s/ ZHANG Jinzhu
CHENG SHU
/s/ CHENG Shu
[Signature Page to Share Purchase and Subscription Agreement]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written above.
RUITING HOLDINGS LIMITED
By:
/s/ LIANG Weiping
Name:
Title:
WILD WEST CAPITAL LIMITED
By:
/s/ Adam Carnood
/s/ Kenneth Le Claire
Name: W.S.W. Directors Limited
Title:
RUIJIA HOLDINGS LIMITED
By:
/s/ ZHANG Jinzhu
Name:
Title:
EMPRESS SKY MANAGEMENT LIMITED
By:
/s/ CHENG Shu
Name:
Title:
[Signature Page to Share Purchase and Subscription Agreement]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written above.
MATRIX PARTNERS CHINA I, L.P.
c/o Maples Corporate Services Limited
P.O. Box 309 Ugland House,
Grand Cayman, KY1-1104, Cayman Islands
By: Matrix China Management I, L.P.
its General Partner
By: Matrix China I GP GP, Ltd.
Its General Partner
By:
/s/ Authorized Signatory
Name:
Title:
MATRIX PARTNERS CHINA I-A, L.P.
c/o Maples Corporate Services Limited
P.O. Box 309 Ugland House,
Grand Cayman, KY1-1104, Cayman Islands
By: Matrix China Management I, L.P.
its General Partner
By: Matrix China I GP GP, Ltd.
Its General Partner
By:
/s/ Authorized Signatory
Name:
Title:
MATRIX PARTNERS VIII, L.P.
By: Matrix VIII US Management Co., L.L.C., its General Partner
By:
/s/ Authorized Signatory
Name:
Managing Partner
[Signature Page to Share Purchase and Subscription Agreement]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written above.
WESTON & CO. VIII LLC, AS NOMINEE
By: Matrix Partners Management Services, L.P.,
Sole Member
By: Matrix Partners Management Services GP, LLC, its General Partner
By:
/s/ Authorized Signatory
Name:
Authorized Member
TENZING HOLDINGS, LLC
By:
/s/ Authorized Signatory
Name:
Title:
[Signature Page to Share Purchase and Subscription Agreement]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written above.
GL AJK HOLDINGS LTD.
By:
/s/ Tham Zhiren
Name: Tham Zhiren
Title: Director
[Signature Page to Share Purchase and Subscription Agreement]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written above.
BAIDU HOLDINGS LIMITED
By:
/s/ LI Yanhong
Name:
Title:
[Signature Page to Share Purchase and Subscription Agreement]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written above.
FBH PARTNERS LIMITED
By:
/s/ Authorized Signatory
Name:
Title:
[Signature Page to Share Purchase and Subscription Agreement]
Exhibit 4.15
EXECUTION VERSION
SHARE PURCHASE AGREEMENT
BY AND AMONG
58.COM INC.,
and
THE SELLING SHAREHOLDERS NAMED HEREIN
Dated as of April 17, 2015
TABLE OF CONTENTS
Page
ARTICLE I Definitions
Section 1.1
Section 1.2
Certain Definitions
Interpretation and Rules of Construction
ARTICLE II Sale and Purchase of Shares
Section 2.1
Section 2.2
Section 2.3
Section 2.4
Section 2.5
Section 2.6
Section 2.7
Sale and Purchase of Shares
Purchase Price
Closing Date
Closing Deliveries by the Selling Shareholders
Closing Deliveries by the Purchaser
Breaching Selling Shareholder
Allocation of Purchase Price and Qualified Liquidation Event
ARTICLE III Representations and Warranties With Respect to Group Companies
Section 3.1
Section 3.2
Section 3.3
Section 3.4
Section 3.5
Section 3.6
Section 3.7
Section 3.8
Section 3.9
Organization and Good Standing
Capitalization
Group Companies
Financial Statements
Organization and Good Standing
Capitalization
Group Companies
Financial Statements
Compliance with Laws and Other Instruments
ARTICLE IV Representations and Warranties with Respect to Selling Shareholders
Section 4.1
Section 4.2
Section 4.3
Section 4.4
Section 4.5
Section 4.6
Section 4.7
Section 4.8
Section 4.9
Capacity
Authorization
Conflicts; Consents of Third Parties
Ownership and Transfer of Shares
No Litigation
Brokers
Accuracy of Disclosure
Private Placement; Non-U.S. Person
No Other Representation
ARTICLE V Representations and Warranties of Purchaser
Section 5.1
Section 5.2
Section 5.3
Section 5.4
Section 5.5
Section 5.6
Section 5.7
Section 5.8
Section 5.9
Organization and Good Standing
Authorization
Conflicts; Consents of Third Parties
Purchaser Shares; Valid Issuance.
Capitalization
SEC Filings; Financial Statements; Compliance.
Brokers
Shareholder Arrangements
No Other Representation
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ARTICLE VI Covenants and Additional Agreements
Section 6.1
Section 6.2
Section 6.3
Section 6.4
Section 6.5
Section 6.6
Section 6.7
Section 6.8
Section 6.9
Further Assurances
Confidentiality and Publicity
Tax Filing
Lock-up
Pre-Closing Notifications
Purchaser Board of Directors
Conduct of Business After Closing
Additional Undertakings
Shareholders Resolutions to Appoint New Director
ARTICLE VII Conditions to Closing
Section 7.1
Section 7.2
Conditions Precedent to Obligations of the Purchaser
Conditions Precedent to Obligations of the Selling Shareholders
ARTICLE VIII Indemnification
Section 8.1
Section 8.2
Section 8.3
Section 8.4
Section 8.5
Survival of Representations, Warranties and Covenants
Indemnification
Certain Limitations
Tax Treatment of Indemnification Payments
Indemnification Sole and Exclusive Remedy
ARTICLE IX Miscellaneous
Expenses
Governing Law
Arbitration
Entire Agreement; Amendments and Waivers
Specific Performance
Notices
Severability
Binding Effect; Assignment
Counterparts
Section 9.1
Section 9.2
Section 9.3
Section 9.4
Section 9.5
Section 9.6
Section 9.7
Section 9.8
Section 9.9
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This SHARE PURCHASE AGREEMENT (this “Agreement”), dated as of April 17, 2015, is entered into by and among (i) 58.com Inc.,
an exempted company incorporated under the Laws of the Cayman Islands (the “Purchaser”), (ii) the Founder (as defined in this Agreement) of Falcon
View Technology (the “Company”), and (iii) the Persons set forth in Schedule A hereto (collectively, the “Selling Shareholders” and individually a
“Selling Shareholder”).
SHARE PURCHASE AGREEMENT
WITNESSETH:
(as defined below) collectively operate an internet business providing classified advertisements in the People’s Republic of China (the “PRC”);
WHEREAS, the Company, an exempted company incorporated under the Laws of the Cayman Islands, and the other Group Companies
Shareholder’s name in Schedule A under the heading “Current Ownership”; and
WHEREAS, each Selling Shareholder owns the number and type of Shares (as defined below) set forth opposite such Selling
WHEREAS, each Selling Shareholder desires to sell to the Purchaser, and the Purchaser desires to purchase from each Selling
Shareholder, on the terms and subject to the conditions set forth herein, such number of Shares owned by each Selling Shareholder as set forth opposite
such Selling Shareholder’s name in Schedule A under the heading “Purchased Shares” and associated rights embodied therein.
be legally bound, the Parties hereby agree as follows:
NOW, THEREFORE, in consideration of the promises and the mutual covenants and agreements hereinafter contained, and intending to
ARTICLE I
Definitions
Section 1.1 Certain Definitions. For purposes of this Agreement, the following terms shall have the meanings specified in this Section 1.1:
“Affiliate” means any other Person that, directly or indirectly through one or more intermediaries, Controls, or is Controlled by, or is
under common Control with, such Person, including without limitation, with respect to any Person that is an individual, his or her Immediate Family
Members.
“Aggregate Purchase Price” has the meaning ascribed to it in Section 2.2.
“Agreement” has the meaning ascribed to it in the Preamble.
Financial Statements.
“Applicable Accounting Standards” means the accounting standards adopted by the Company and applied consistently throughout the
“Balance Sheet Date” has the meaning ascribed to it in Section 3.4.
“Breaching Selling Shareholder” has the meaning ascribed to it in Section 2.6.
business the Group Companies, taken as a whole, currently conduct.
“Business” means, in respect of a Group Company, the business it currently conducts and, in respect of the Group Companies, the
Islands or the British Virgin Islands are required or authorized to be closed.
“Business Day” means a day that is not a Saturday or Sunday or any other day on which banks in the PRC, Hong Kong, the Cayman
“Cash Portion of Purchase Price” has the meaning ascribed to it in Section 2.2.
“Circular 7” means Circular No. 7 on Several Issues of Enterprise Income Tax on Income Arising from Indirect Transfers of Property by
Non-resident Enterprises (SAT Bulletin [2015] No. 7) (关于非居民企业间接转让财产企业所得税若干问题的公告(国家税务总局公告2015 年第7 号)),
dated February 3, 2015 and effective as of the same date, including any amendment, implementing rules, or official interpretation thereof or any
replacement, successor or alternative legislation having the same subject matter thereof.
“Closing” has the meaning ascribed to it in Section 2.3.
“Closing Date” has the meaning ascribed to it in Section 2.3.
“Company” has the meaning ascribed to it in the Preamble.
or oral).
“Contract” means any contract, agreement, indenture, note, bond, mortgage, loan, instrument, lease, franchise or license (whether written
“Control” of a given Person means the power or authority, whether exercised or not, to direct the business, management and policies of
such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, which power or authority shall
conclusively be presumed to exist upon possession of beneficial ownership or power to direct the vote of more than fifty percent (50%) of the votes entitled
to be cast at a meeting of the members or shareholders of such Person or power to control the composition of a majority of the board of directors (or similar
governing body) of such Person; the term “Controlled” has the meaning correlative to the foregoing.
“Control Documents” means the Contracts and other documents set forth in Schedule B hereto.
“Current Transaction” has the meaning ascribed to it in Section 2.7(b).
“Domestic Companies” mean Shanghai Zhengqi Advertising Co., Ltd. (上海正奇广告有限公司) and Beijing Shan Jing Ke Chuang
Network Technology Co., Ltd. (山景科创网络技术 (北京) 有限公司), Beijing Zhi Mo Si Management Consulting Co., Ltd. (北京志莫斯管理咨询有限
公司 and Beijing Rui Yi Car Service Co., Ltd. (北京睿易汽车服务有限公司) and Yi Yun You Network Technology (Beijing) Co., Ltd., each a limited
liability company organized and existing under the Laws of the PRC.
“Domestic Subsidiary” means the WFOE.
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“Equity Securities” means any shares, share capital, registered capital, ownership interest, equity interest or other equity securities of the
Company, and any option, warrant or right to subscribe for, acquire or purchase any of the foregoing, or any other security or instrument convertible into or
exercisable or exchangeable for any of the foregoing, or any equity appreciation, phantom equity, equity plans (including all options and other awards of
equity securities authorized under equity plans, whether or not issued, granted or vested) or similar rights with respect to the Company, or any contract of
any kind for the purchase or acquisition from the Company of any of the foregoing, either directly or indirectly.
resolution dated July 29, 2014.
“Existing Articles” means the seventh amended and restated memorandum and articles of association of the Company adopted by special
“Financial Statements” has the meaning ascribed to it in Section 3.4.
“Founder” means Mr. Haoyong Yang.
Company. For the avoidance of doubt, each of the Domestic Companies and the Domestic Subsidiary shall be deemed a Group Company.
“Group Companies” means the Company and any Person (other than a natural person) that is directly or indirectly Controlled by the
“Government Authority” means any supranational, national, federal, state, municipal or local court, administrative body or other
governmental or quasi-governmental entity or authority with competent jurisdiction exercising legislative, judicial, regulatory or administrative functions of
or pertaining to supranational, national, federal, state, municipal or local government, including any department, commission, board, agency, bureau,
subdivision, instrumentality or other regulatory, administrative, judicial or arbitral authority, and any securities exchange on which the securities of any
Party or its Affiliates are listed.
“HKIAC Rules” has the meaning ascribed to it in Section 9.3(a).
“Immediate Family Members” means, with respect to any natural Person, (a) such Person’s spouse, parents, parents-in-law, grandparents,
children, grandchildren, siblings and siblings-in-law (in each case whether adoptive or biological), (b) spouses of such Person’s children, grandchildren and
siblings (in each case whether adoptive or biological) and (c) estates, trusts, partnerships and other Persons which directly or indirectly through one or more
intermediaries are Controlled by the foregoing.
“Indemnified Party” has the meaning ascribed to it in Section 8.2(c)(i).
“Indemnifying Party” has the meaning ascribed to it in Section 8.2(c)(i).
“Knowledge of such Selling Shareholders” means with respect to each Selling Shareholder, the knowledge actually possessed, or, to the
extent that such Selling Shareholder has a right to appoint and has appointed a director to the board of directors of the Company, that would have been
possessed after due inquiry by such Selling Shareholder with the director appointed to the board of directors of the Company, if any, by such Selling
Shareholder.
any Government Authority or jurisdiction.
“Law” means any foreign, federal, state, municipal or local law, statute, code, ordinance, rule, decree, regulation or any common law of
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judicial or administrative, at law or in equity, or public or private) by or before a Government Authority.
“Legal Proceeding” means any judicial, administrative or arbitral actions, suits, proceedings or investigations (whether civil or criminal,
“Liability” means any indebtedness, liability or obligation (whether direct or indirect, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated, or due or to become due), including those arising under any Law, Order, Legal Proceeding or Contract and including all costs
and expenses relating thereto.
lease, charge, option, restrictive covenant, right of first refusal, right of first offer, easement, servitude or other restriction having similar effect.
“Lien” means any lien (including, without limitation, tax lien), encumbrance, pledge, mortgage, deed of trust, security interest, claim,
“Liquidity Based Options” has the meaning ascribed to it in Section 6.8.
“Losses” has the meaning ascribed to it in Section 8.2(a).
“Material Adverse Effect” means any change, circumstance, event or effect (each a “Change”) that, individually or in the aggregate, is or
would be materially adverse to: (a) the business, condition (financial or otherwise) or results of operations of the Group Companies, taken as a whole; or (b)
the ability of any Selling Shareholder to consummate the transactions contemplated by this Agreement and to perform its obligations hereunder and under
any other Transaction Documents; provided that no Change (by itself or when aggregated or taken together with any and all other Changes) directly or
indirectly resulting from, relating to or arising out of any of the following shall be deemed to be or constitute a “Material Adverse Effect,” or be taken into
account when determining whether a “Material Adverse Effect” has occurred or may, would or could occur: (i) general economic conditions (or changes in
such conditions); (ii) conditions (or changes in such conditions) in the industries in which the Group Companies conduct business; (iii) political conditions
(or changes in such conditions) in the PRC; (iv) changes in Law or other legal or regulatory conditions (or the interpretation thereof) or changes in
Applicable Accounting Standards; and (v) the announcement of this Agreement or the pendency or consummation of the transactions contemplated hereby,
provided, however, that any Change referred to in clauses (i), (ii), (iii) and (iv) above may be taken into account in determining whether or not there has
been, or will, may, would or could be a Material Adverse Effect to the extent, but only to the extent, that the Company is disproportionately affected
thereby as compared to other participants in the industry or markets in which the Company operates.
“New Company Options” has the meaning ascribed to it in Section 6.8.
Authority.
“Order” means any written order, injunction, judgment, decree, notice, ruling, writ, assessment or arbitration award of a Government
“Ordinary Shares” means the ordinary shares, par value US$0.0002 per share, in the capital of the Company.
“Party” means a party to this Agreement.
“Permit” means any approval, authorization, consent, license, permit or certificate of or issued by a Government Authority.
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“Permitted Liens” means the Liens set forth pursuant to Existing Articles and the Shareholders Agreement.
trust, unincorporated organization, Government Authority or other entity.
“Person” means any individual, corporation, partnership, limited liability company, firm, joint venture, association, joint-stock company,
“PRC” or “China” means the People’s Republic of China, excluding, for purposes of this Agreement, Hong Kong, Macau and Taiwan.
Series C Preferred Shares, the Series D Preferred Shares and the Series E Preferred Shares.
“Preferred Shares” means, collectively, the Series A Preferred Shares, the Series A-1 Preferred Shares, the Series B Preferred Shares, the
“Purchase Price” has the meaning ascribed to it in Section 2.2.
“Purchased Shares” has the meaning ascribed to it in Section 2.1.
“Purchaser Indemnitee” has the meaning ascribed to it in Section 8.2(a).
“Purchaser Nominee” has the meaning ascribed to it in Section 2.4(a).
“Purchaser Losses” has the meaning ascribed to it in Section 8.2(a).
“Purchaser Shares” means (i) the Class A ordinary shares, par value US$0.00001 per share, in the capital of the Purchaser, and (ii) in the
case of Trinityville Profit Limited, the Class A ordinary shares, par value US$0.00001 per share, in the capital of the Purchaser and the Class B ordinary
shares, par value US$0.00001 per share, in the capital of the Purchaser.
“Qualified Liquidation Event” has the meaning ascribed to it in Section 2.7(b).
“Registration Rights Agreement” has the meaning ascribed to it in Section 2.4.
“Relevant PRC Tax Authority” has the meaning ascribed to it in Section 6.7(b).
“SEC Documents” has the meaning ascribed to it in Section 5.6.
“Selling Shareholder” has the meaning ascribed to it in the Preamble, except that references to the Selling Shareholders in the context of
the rights and obligations of the shareholders of the Company after Closing shall exclude the Selling Shareholders which sell all of their Shares on Closing
and are not, therefore, shareholders of the Company after Closing.
“Selling Shareholder Bank Account” has the meaning ascribed to it in Section 6.13.
“Selling Shareholder Indemnitees” has the meaning ascribed to it in Section 8.2(c).
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“Selling Shareholder Losses” has the meaning ascribed to it in Section 8.2(c).
“Series A Preferred Shares” means the Series A Preferred Shares, par value US$0.0002 per share, in the capital of the Company.
“Series A-1 Preferred Shares” means the Series A-1 Preferred Shares, par value US$0.0002 per share, in the capital of the Company.
“Series B Preferred Shares” means the Series B Preferred Shares, par value US$0.0002 per share, in the capital of the Company.
“Series C Preferred Shares” means the Series C Preferred Shares, par value US$0.0002 per share, in the capital of the Company.
“Series D Preferred Shares” means the Series D Preferred Shares, par value US$0.0002 per share, in the capital of the Company.
“Series E Preferred Shares” means the Series E Preferred Shares, par value US$0.0002 per share, in the capital of the Company.
“Shares” means the shares in the capital of the Company, being the Ordinary Shares and the Preferred Shares.
its then shareholders on August 8, 2014.
“Shareholders Agreement” means amended and restated shareholders agreement entered into by and among, inter alia, the Company and
“Shareholders Rights” has the meaning ascribed to it in Section 2.1.
“Share Portion of Purchase Price” has the meaning ascribed to it in Section 2.2.
“Tax” or “Taxes” means (i) in the PRC: (a) any national, provincial, municipal, or local taxes, charges, fees, levies, or other assessments,
including, without limitation, all net income (including enterprise income tax and individual income withholding tax), turnover (including value-added tax,
business tax, and consumption tax), resource (including urban and township land use tax), special purpose (including land value-added tax, urban
maintenance and construction tax, and additional education fees), property (including urban real estate tax and land use fees), documentation (including
stamp duty and deed tax), filing, recording, social insurance (including pension, medical, unemployment, and other social insurance withholding), housing
funds and tariffs (including import duty and import value-added tax), and other taxes, charges, fees, levies, or other assessments of any kind whatsoever as
applicable, (b) all interest, penalties (administrative, civil or criminal), or additional amounts imposed by any Government Authority in connection with any
item described in clause (a) above, and (c) any form of transferor liability imposed by any Government Authority in connection with any item described in
clauses (a) and (b) above, and (ii) in any jurisdiction other than the PRC: all similar liabilities as described in clause (i) above.
“Taxing Authority” means any Government Authority responsible for the administration of any Tax.
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“Third Party Claim” has the meaning ascribed to it in Section 8.2(c)(ii).
“Transaction Documents” means this Agreement and the Registration Rights Agreement and other agreements or documents required to
be executed and/or delivered by any Party in connection with the execution of this Agreement or the consummation of the transactions contemplated by this
Agreement.
“Transfer” means, (i) when used as a verb, to sell, assign, dispose of, transfer, exchange, pledge, encumber, hypothecate or otherwise
transfer securities, assets or other property or any participation or interest therein, whether directly or indirectly (including pursuant to a derivative
transaction, merger, recapitalization, scheme of arrangement, amalgamation or other transaction or by operation of law), or agree or commit to do any of
the foregoing and (ii) when used as a noun, a direct or indirect sale, assignment, disposition, exchange, pledge, encumbrance, hypothecation, or other
transfer of such securities, assets or other property or any participation or interest therein or any agreement or commitment to do any of the foregoing.
“WFOE” means Beijing Yangguang Gudi Science Development Co., Ltd. (北京阳光谷地科技发展有限公司), a limited liability
company organized and existing under the Laws of the PRC.
“Withheld Amount” has the meaning ascribed to it in Section 2.5.
“Withheld Funds” has the meaning ascribed to it in Section 6.6(a).
“Withhold Expiration Date” has the meaning ascribed to it in Section 6.6(a).
Section 1.2 Interpretation and Rules of Construction.
(a) Unless otherwise expressly provided, for purposes of this Agreement, the following rules of interpretation shall apply:
(i) the provision of a Table of Contents, the division of this Agreement into articles, Sections and other subdivisions and
the insertion of headings are for convenience of reference only and shall not affect or be utilized in construing or interpreting this
Agreement;
(ii) any reference in this Agreement to an Article, Section, Exhibit or Schedule, such reference is to an Article or Section
of, or a Schedule or Exhibit to, this Agreement, unless otherwise indicated. All Exhibits and Schedules hereto or referred to herein are
hereby incorporated in and made a part of this Agreement as if set forth in full herein;
(iii) any reference in this Agreement to gender shall include all genders, and words imparting the singular number only
shall include the plural and vice versa;
(iv) the word “including” or any variation thereof means (unless the context of its usage otherwise requires) “including,
without limitation” and shall not be construed to limit any general statement that it follows to the specific or similar items or matters
immediately following it;
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(v) words such as “herein,” “hereinafter,” “hereof” and “hereunder” refer to this Agreement as a whole and not merely to a
subdivision in which such words appear unless the context otherwise requires;
(vi) when calculating the period of time before which, within which or following which any act is to be done or step taken
pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded;
(vii) the term “non-assessable,” when used with respect to any Shares, means that no further sums are required to be paid
by the holders thereof in connection with the issue thereof; and
(viii) except as otherwise provided herein, any reference in this Agreement to $ or US$ means U.S. dollars, the lawful
currency of the United States.
disfavoring any Party by virtue of the authorship of any provision of this Agreement.
(b) In the event an ambiguity or question of intent or interpretation arises, no presumption or burden of proof shall arise favoring or
ARTICLE II
Sale and Purchase of Shares
Section 2.1 Sale and Purchase of Shares. Upon the terms and subject to the conditions set forth herein, at the Closing, each Selling Shareholder shall
sell to the Purchaser, and the Purchaser shall purchase from each Selling Shareholder, such number and type of Shares set forth opposite such Selling
Shareholder’s name under the heading “Purchased Shares” in Schedule A (the “Purchased Shares” of such Selling Shareholder) and all rights such Selling
Shareholder holds related thereto including without limitation those rights pursuant to the Existing Articles and Shareholders Agreement (to the extent such
rights are transferable by such Selling Shareholder)(collectively, the “Shareholder Rights”).
Section 2.2 Purchase Price. Subject to the adjustments set forth in Section 2.7, the aggregate purchase price for all Purchased Shares and the
Shareholder Rights of all Selling Shareholders (the “Aggregate Purchase Price”) shall be US$1,224,133,467, consisting of an aggregate of US$412,236,992
in cash and an aggregate of 34,039,136 Purchaser Shares to be issued by the Purchaser at the Closing. With respect to each Selling Shareholder, the
aggregate purchase price for all Purchased Shares and the Shareholder Rights of such Selling Shareholder (the “Purchase Price” for such Selling
Shareholder) shall be in such amount, consisting of such amount of cash (the “Cash Portion of Purchase Price”) and such number of Purchaser Shares (the
“Share Portion of Purchase Price”), as set forth opposite such Selling Shareholder’s name under the heading “Purchase Price” in Schedule A.
Section 2.3 Closing Date. Subject to the terms and conditions of this Agreement, the sale and purchase of all Purchased Shares and the Shareholder
Rights of all Selling Shareholders as contemplated by this Agreement (the “Closing”) shall take place within three (3) Business Days after the date hereof
subject to the satisfaction or valid waiver of each of the conditions set forth in Article VII (other than conditions that by their nature are to be satisfied at the
Closing, but subject to the satisfaction or waiver of those conditions at such time) (the date on which the Closing occurs, the “Closing Date”), unless
another time, date or place is agreed to in writing by the Purchaser and each Selling Shareholder.
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Section 2.4 Closing Deliveries by the Selling Shareholders. At the Closing, each Selling Shareholder shall deliver or cause to be delivered:
(a) to the Purchaser:
(i) a copy of the instrument of transfer in the form of Exhibit A hereto with respect to the Purchased Shares of such
Selling Shareholder, dated the Closing Date and duly executed by such Selling Shareholder (with the original(s) to be delivered to the
Purchaser within three (3) business days after the Closing);
(ii) the original certified true copy of the register of members of the Company, duly certified by the registered office
provider of the Company as of the Closing Date, evidencing the ownership by the Purchaser of the Purchased Shares;
(iv) a copy of the share certificate(s) in the name of the Purchaser, dated as of the Closing Date and duly executed on
behalf of the Company, evidencing the ownership by the Purchaser of the Purchased Shares (with the original(s) to be delivered to the
Purchaser within three (3) business days after the Closing);
(v) a copy of the register of directors of the Company, duly certified by the registered office provider of the Company as
of the Closing Date, evidencing the appointment of Mr. Jinbo Yao as a director of the Company designated by the Purchaser (the
“Purchaser Nominee”);
(vi) the registration rights agreement in the form of Exhibit B hereto (the “Registration Rights Agreement”), dated the
Closing Date and duly executed by such Selling Shareholder that receives any Share Portion of Purchase Price at the Closing;
(vii) a copy of the resolutions or other internal authorizations duly and validly adopted by the board of directors,
shareholders, partners and/or other equivalent corporate organs of such Selling Shareholder evidencing its authorization of the
execution and delivery of this Agreement and the other Transaction Documents to which it is a party and the consummation of the
transactions contemplated hereby and thereby; and
(viii) a copy of the confirmation letter in the form of Exhibit E hereto duly executed by each of the Selling Shareholders who
will receive any amount as set forth opposite such Selling Shareholder’s name under the heading “Closing Day Payment (Net of
Withheld Amount)” in Schedule A.
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Section 2.5 Closing Deliveries by the Purchaser. At the Closing, the Purchaser shall deliver or cause to be delivered to each Selling Shareholder:
(a) an amount equal to the Cash Portion of Purchase Price for such Selling Shareholder, less the amount set forth opposite such
Selling Shareholder’s name under the heading “Withheld Amount” in Schedule A hereto (the “Withheld Amount” for such Selling Shareholder), by wire
transfer of immediately available funds in US$ to the Selling Shareholder Bank Account of such Selling Shareholder, which wire transfer shall be
evidenced for purposes of Closing by delivery of a copy of irrevocable wiring instructions to the Selling Shareholder Bank Account of such Selling
Shareholder (known as “MT-103” and containing the SWIFT number of such remittances);
registered office provider of the Purchaser, evidencing the ownership by such Selling Shareholder of the Share Portion of Purchase Price;
(b) the original certified true copy of the register of members of the Purchaser, dated as of the Closing Date and duly certified by the
(c) a copy of the share certificate(s) in the name of such Selling Shareholder, dated as of the Closing Date and duly executed on
behalf of the Purchaser, evidencing the ownership by such Selling Shareholder of the Share Portion of Purchase Price (with the original(s) to be delivered
to such Selling Shareholder within three (3) business days after the Closing);
bound and become a party to the Shareholders Agreement;
(d) an assumption agreement in the form attached as Exhibit C to the Shareholders Agreement whereby the Purchaser agrees to be
(e) the Registration Rights Agreement, dated the Closing Date and duly executed by the Purchaser; and
(f) in the case of Classroom Investments Inc., a confirmation letter in the form attached hereto as Exhibit D.
Section 2.6 Breaching Selling Shareholder. If, at the Closing, any Selling Shareholder fails to fully comply with any of its obligations set forth in
Section 2.4 (a “Breaching Selling Shareholder”):
any other rights and remedies that may be available to the Purchaser):
(a) The Purchaser shall be entitled, at its sole discretion and by written notice to the Selling Shareholders, to (without prejudice to
(i) close the transactions contemplated hereby so far as practicable and consummate the sales and purchases of the
Purchased Shares and the Shareholder Rights of the Selling Shareholders other than the Breaching Selling Shareholder(s);
(ii) defer the Closing to a specified date not more than twenty (20) Business Days after the originally scheduled Closing
Date; or
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(iii) immediately terminate this Agreement (A) solely with respect to the Breaching Selling Shareholder(s) if the
aggregate remaining Selling Shareholders (other than the Breaching Selling Shareholder(s)) collectively are the shareholders of record
of thirty-five percent (35%) or more of the outstanding Shares on an as-converted basis and fifty percent (50%) or more of the
outstanding Preferred Shares or (B) with respect to all Selling Shareholders if the aggregate remaining Selling Shareholders (other than
the Breaching Selling Shareholder(s)) collectively are the shareholders of record of less than (1) thirty-five percent (35%) of the
outstanding Shares on an as-converted basis or (2) fifty percent (50%) of the outstanding Preferred Shares.
(b) In the event that the Purchaser elects to proceed under Section 2.6(a)(i) or Section 2.6(a)(iii), this Agreement shall be deemed to
have been duly amended and modified to the extent necessary to exclude the sale and purchase of the Purchased Shares and the Shareholder Rights of the
Breaching Selling Shareholder from the transactions contemplated hereby, and the Purchaser shall have no responsibility or liability with respect to any
such transaction in respect of such Breaching Selling Shareholder.
(c) Each Selling Shareholder hereby agrees that, to the extent such Selling Shareholder is a Breaching Selling Shareholder, the
Purchaser shall have the right (but not the obligation) to purchase, at any time after the consummation of the sale and purchase contemplated by Section 2.6
(b), the Purchased Shares and the Shareholder Rights of such Selling Shareholder for an aggregate purchase price equal to the Purchase Price for such
Selling Shareholder (without interest), and otherwise on the terms and conditions (including the arrangements with respect to representations and
warranties, covenants and transaction expenses in this Agreement) that would have been applicable to the sale and purchase of the Purchased Shares and
the Shareholder Rights of such Selling Shareholder if such sale and purchase had occurred at the Closing.
Section 2.7 Allocation of Purchase Price and Qualified Liquidation Event.
(a) Each Selling Shareholder hereby irrevocably consents to the allocation of the Aggregate Purchase Price among the Selling
Shareholders for their respective Purchased Shares as contemplated by Schedule A, including the adjustments to the Aggregate Purchase Price set forth in
this Section 2.7 and on Schedule A.
(b) In the event of the consummation of a transaction, or a series of transactions, that, either alone or in combination with the sale of
the Purchased Shares contemplated by this Agreement (the “Current Transaction”), would constitute a “Liquidation Event” with respect to the Company (as
such term is defined in Section 2 of Schedule A of the Existing Articles) in which the Purchaser or its Affiliate(s) participates as a buyer or to which the
Purchaser provides its consent and approval (a “Qualified Liquidation Event”), the Purchaser and each Selling Shareholder undertakes and agrees that the
distribution and payment of the Preferred Liquidation Premium (which shall be derived for the Qualified Liquidation Event in a manner consistent with the
calculation of the Preferred Liquidation Premium for the Current Transaction (as set forth on Schedule A) in the Qualified Liquidation Event) shall be
allocated among Trinityville Profit Limited (or its successors or permitted assigns or its or their designee(s)) and the other Selling Shareholders in such
Qualified Liquidation Event in a manner consistent with the allocation of the Preferred Liquidation Premium among Trinityville Profit Limited and the
other Selling Shareholders in the Current Transaction (as set forth on Schedule A).
(c) Section 2.7(b) of this Agreement shall terminate in its entirety and be of no further force and effect on the date that is twelve (12)
months following the Closing Date unless a definitive agreement has been entered into with respect to a Qualified Liquidation Event on or prior to such
date, in which case Section 2.7(b) shall continue to apply to such Qualified Liquidation Event (and any amendments thereto).
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ARTICLE III
Representations and Warranties With Respect to Group Companies
following (from Section 3.1 to Section 3.4), to the Knowledge of such Selling Shareholder:
A. Each Selling Shareholder (other than Trinityville Profit Limited), severally but not jointly, represents and warrants to the Purchaser the
Section 3.1 Organization and Good Standing. The Company is an exempted company duly organized, validly existing and in good standing under the
Laws of the Cayman Islands and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now
conducted. The Company is duly qualified or authorized to do business as now conducted and is in good standing under the laws of each jurisdiction in
which such qualification or authorization is required.
Section 3.2 Capitalization.
(a) As of the date hereof and the Closing Date, the share capital of the Company consists of:
(i) 135,680,555 authorized Preferred Shares, of which (1) 25,200,590 shares are designated as Series A Preferred Shares,
25,200,590 of which are issued and outstanding; (2) 14,616,620 shares are designated as Series A-1 Preferred Shares, 14,616,620 of
which are issued and outstanding; (3) 40,381,300 shares are designated as Series B Preferred Shares, 40,381,300 of which are issued
and outstanding; (4) 15,296,364 shares are designated as Series C Preferred Shares, 15,296,364 of which are issued and outstanding;
(5) 21,241,560 shares are designated as Series D Preferred Shares, 21,241,560 of which are issued and outstanding; and (6) 18,944,121
shares are designated as Series E Preferred Shares, 18,944,121 of which are issued and outstanding; in each case of (1) through (6),
having the rights, privileges and preferences as set forth in the Existing Articles.
(ii) 212,174,158 authorized Ordinary Shares, of which (1) 50,000,000 Ordinary Shares are issued and outstanding, (2)
25,200,590 Ordinary Shares are reserved for issuance upon conversion of the Series A Preferred Shares, (3) 14,616,620 Ordinary
Shares are reserved for issuance upon conversion of the Series A-1 Preferred Shares, (4) 40,381,300 Ordinary Shares are reserved for
issuance upon conversion of the Series B Preferred Shares, (5) 18,751,201 Ordinary Shares are reserved for issuance upon conversion
of the Series C Preferred Shares, (6) 21,241,560 Ordinary Shares are reserved for issuance upon conversion of the Series D Preferred
Shares, (7) 18,944,121 Ordinary Shares are reserved for issuance upon conversion of the Series E Preferred Shares, (8) 19,332,530
Ordinary Shares are reserved for issuance pursuant to the Company Share Incentive Plan; 12,488,605 of which have been reserved in
respect of options that have been granted and vested as of the Closing; 1,847,166 of which have been reserved in respect of options that
have been granted, vested and exercised as of the Closing; and 2,464,924 of which have been reserved in respect of options that have
been granted and are unvested as of the Closing, and (9) 3,706,236 Ordinary Shares are reserved for issuance to the chief executive
officer of the Company, all of which have been reserved in respect of options that have been granted and are unvested as of the
Closing.
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(b) As of the Closing, all of the issued and outstanding Preferred Shares and Ordinary Shares are duly authorized, validly issued,
fully paid and non-assessable. The ratio of conversion into Ordinary Shares for each of the Series A Preferred Shares, the Series A-1 Preferred Shares, the
Series B Preferred Shares, the Series D Preferred Shares and the Series E Preferred Shares is 1:1, and the ratio of conversion into Ordinary Shares for each
of the Series C Preferred Shares is 1:1.22586.
(c) Except for the Shareholders Agreement and as described in Section 3.2(a), as of the Closing, there are no outstanding Ordinary
Shares, Preferred Shares, any other shares or equity of the Company, or any securities convertible into or exercisable or exchangeable for any of the
foregoing, or any other options, warrants, subscriptions, or other rights, proxy or shareholders agreements or Contracts of any kind to which the Company
is a party, either directly or indirectly, entitling the holder thereof to purchase or otherwise acquire or to compel the Company to issue, repurchase or
redeem any shares or other securities of the Company. Except as contemplated by the Transaction Documents and the Shareholders Agreement, such
Selling Shareholder is not a party or subject to any Contract that affects or relates to the voting or giving of consents with respect to, the currently
outstanding securities of the Company or any securities issuable upon exercise or conversion of its currently outstanding securities.
Section 3.3 Group Companies. Schedule C hereto sets forth a complete and accurate list, as of August 8, 2014, of the Group Companies (other than
the Company) and, for each such Group Company, its name, the jurisdiction in which it is incorporated or organized, the names of its shareholders and the
amount of share capital or other equity interest in such Group Company held by each such shareholder.
Section 3.4 Financial Statements. True copies of the consolidated unaudited balance sheets, income statements and statements of cash flow of the
Group Companies, as provided by the Company, for the fiscal year ended December 31, 2014 (December 31, 2014 is hereinafter referred to as the “Balance
Sheet Date”) of the Company have been delivered by the Selling Shareholders to the Purchaser (the “Financial Statements”).
Section 3.5 to Section 3.9):
B. Trinityville Profit Limited and the Founder hereby jointly and severally represent and warrant to the Purchaser the following (from
Section 3.5 Organization and Good Standing. The Company is an exempted company duly organized, validly existing and in good standing under the
Laws of the Cayman Islands and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now
conducted. The Company is duly qualified or authorized to do business as now conducted and is in good standing under the laws of each jurisdiction in
which such qualification or authorization is required.
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Section 3.6 Capitalization.
(a) As of the date hereof and the Closing Date, the share capital of the Company consists of:
(i) 135,680,555 authorized Preferred Shares, of which (1) 25,200,590 shares are designated as Series A Preferred Shares,
25,200,590 of which are issued and outstanding; (2) 14,616,620 shares are designated as Series A-1 Preferred Shares, 14,616,620 of
which are issued and outstanding; (3) 40,381,300 shares are designated as Series B Preferred Shares, 40,381,300 of which are issued
and outstanding; (4) 15,296,364 shares are designated as Series C Preferred Shares, 15,296,364 of which are issued and outstanding;
(5) 21,241,560 shares are designated as Series D Preferred Shares, 21,241,560 of which are issued and outstanding; and (6) 18,944,121
shares are designated as Series E Preferred Shares, 18,944,121 of which are issued and outstanding; in each case of (1) through (6),
having the rights, privileges and preferences as set forth in the Existing Articles.
(ii) 212,174,158 authorized Ordinary Shares, of which (1) 50,000,000 Ordinary Shares are issued and outstanding, (2)
25,200,590 Ordinary Shares are reserved for issuance upon conversion of the Series A Preferred Shares, (3) 14,616,620 Ordinary
Shares are reserved for issuance upon conversion of the Series A-1 Preferred Shares, (4) 40,381,300 Ordinary Shares are reserved for
issuance upon conversion of the Series B Preferred Shares, (5) 18,751,201 Ordinary Shares are reserved for issuance upon conversion
of the Series C Preferred Shares, (6) 21,241,560 Ordinary Shares are reserved for issuance upon conversion of the Series D Preferred
Shares, (7) 18,944,121 Ordinary Shares are reserved for issuance upon conversion of the Series E Preferred Shares, (8) 19,332,530
Ordinary Shares are reserved for issuance pursuant to the Company Share Incentive Plan; 12,488,605 of which have been reserved in
respect of options that have been granted and vested as of the Closing; 1,847,166 of which have been reserved in respect of options that
have been granted, vested and exercised as of the Closing; and 2,464,924 of which have been reserved in respect of options that have
been granted and are unvested as of the Closing, and (9) 3,706,236 Ordinary Shares are reserved for issuance to the chief executive
officer of the Company, all of which have been reserved in respect of options that have been granted and are unvested as of the
Closing.
(b) As of the Closing, all of the issued and outstanding Preferred Shares and Ordinary Shares are duly authorized, validly issued,
fully paid and non-assessable. The ratio of conversion into Ordinary Shares for each of the Series A Preferred Shares, the Series A-1 Preferred Shares, the
Series B Preferred Shares, the Series D Preferred Shares and the Series E Preferred Shares is 1:1, and the ratio of conversion into Ordinary Shares for each
of the Series C Preferred Shares is 1:1.22586.
(c) Except for the Shareholders Agreement and as described in Section 3.6(a), as of the Closing, there are no outstanding Ordinary
Shares, Preferred Shares, any other shares or equity of the Company, or any securities convertible into or exercisable or exchangeable for any of the
foregoing, or any other options, warrants, subscriptions, or other rights, proxy or shareholders agreements or Contracts of any kind to which the Company
is a party, either directly or indirectly, entitling the holder thereof to purchase or otherwise acquire or to compel the Company to issue, repurchase or
redeem any shares or other securities of the Company. Except as contemplated by the Transaction Documents and the Shareholders Agreement, none of
Trinityville Profit Limited, the Founder and the Group Companies is a party or subject to any Contract that affects or relates to the voting or giving of
consents with respect to, the currently outstanding securities of the Company or any securities issuable upon exercise or conversion of its currently
outstanding securities.
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Section 3.7 Group Companies.
(a) Schedule C hereto sets forth a complete and accurate list of the Group Companies (other than the Company) and, for each such
Group Company, its name, the jurisdiction in which it is incorporated or organized, the names of its shareholders and the amount of share capital or other
equity interest in such Group Company held by each such shareholder. Each such Group Company (i) is a duly organized and validly existing company or
other entity and, where applicable, in good standing under the laws of the jurisdiction of its incorporation or organization; (ii) is duly qualified or authorized
to do business in each jurisdiction in which the conduct of its business or the ownership of its properties requires such qualification or authorization; and
(iii) has all requisite corporate or entity power and authority to own, lease and operate its properties and carry on its business as now conducted.
(b) All the outstanding share capital, registered capital or other equity interest of each Group Company is validly issued, fully paid
and non-assessable and are owned free and clear of all Liens (other than any Liens created under the Control Documents). Except pursuant to the Control
Documents, there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal), subscriptions, or other
rights, proxy or shareholders agreements or Contracts of any kind, either directly or indirectly, entitling the holder thereof to purchase or otherwise acquire
or to compel any of the Group Companies (other than the Company) to issue, repurchase or redeem any share or other securities of any Group Company
(other than the Company). Except as pursuant to the Control Documents, no Group Company (other than the Company) is a party or subject to any Contract
that affects or relates to the voting or giving of written consents with respect to, or the right to cause the registration of, any share or other securities of any
Group Company (other than the Company).
(c) (i) The Company has effective Control of the Domestic Companies and is the sole beneficiary of the Domestic Companies, (ii)
all shareholders of the Domestic Companies have been in compliance with the terms of the Control Documents, (iii) the Control Documents are adequate to
enable the financial statements of the Domestic Companies to be consolidated with those of the other Group Companies in accordance with the Applicable
Accounting Standard and (iv) other than with respect to Beijing Zhi Mo Si Management Consulting Co., Ltd. and Beijing Rui Yi Car Service Co., Ltd., the
pledge over the entire equity interests of the Domestic Companies in favor of the applicable Group Company (other than the Domestic Companies) has
been duly registered with the competent Government Authority.
Section 3.8 Financial Statements.
(a) The Financial Statements (i) were prepared in accordance with the books of account and other financial records of the Group
Companies, (ii) present fairly in all material respects the consolidated financial condition and results of operations of the Group Companies as of the dates
thereof and for the periods covered thereby and (iii) have been prepared in accordance with Applicable Accounting Standards applied on a basis consistent
with the past practices of the Group Companies subject to normal recurring year-end adjustments and the absence of notes.
15
(b) No Group Company has any Liabilities other than (i) Liabilities that are required to be and have been reflected or reserved in the
Financial Statements, and (ii) Liabilities incurred in the ordinary course of business after the Balance Sheet Date which do not and would not, individually
or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
Section 3.9 Compliance with Laws and Other Instruments.
applicable to it or to the conduct or operation of the Business or the ownership or use of any of its properties and assets.
(a) Each Group Company is, and at all times has been, in compliance in all material respects with all Laws and Orders that are
shareholders agreement, as appropriate, or equivalent constitutive documents as in effect.
(b) None of the Group Companies is in violation of its business license, memorandum of association or articles of association,
corruption (governmental or commercial), money laundering, sanctions or export controls.
(c) Each Group Company is, and at all times has been, in compliance with all applicable Laws relating to anti-bribery or anti-
ARTICLE IV
Representations and Warranties with Respect to Selling Shareholders
Selling Shareholder), to the Purchaser each of the statements contained in this Article IV.
Each Selling Shareholder represents and warrants, severally and not jointly and in respect of itself only (and not in respect of any other
Section 4.1 Capacity. Such Selling Shareholder is duly organized, validly existing and in good standing under the Laws of the place of its
incorporation or formation, and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now
conducted.
Section 4.2 Authorization. Such Selling Shareholder has all requisite power and authority to execute and deliver this Agreement and the other
Transaction Documents to which such Selling Shareholder is a party, to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the other Transaction Documents to which such Selling
Shareholder is a party and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate
action on the part of such Selling Shareholder. This Agreement has been, and each of the other Transaction Documents to which such Selling Shareholder
is a party will be at or prior to the Closing, duly and validly executed and delivered by such Selling Shareholder and (assuming the due authorization,
execution and delivery by the other parties hereto and thereto) this Agreement constitutes, and the other Transaction Documents to which such Selling
Shareholder is a party will constitute, the legal, valid and binding obligations of such Selling Shareholder, enforceable against it in accordance with their
respective 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 and similar Law affecting creditors’ rights and remedies generally.
16
Section 4.3 Conflicts; Consents of Third Parties.
(a) None of the execution, delivery and performance by such Selling Shareholder of this Agreement or the other Transaction
Documents to which such Selling Shareholder is a party, the consummation of the transactions contemplated hereby or thereby, or compliance by such
Selling Shareholder with any of the provisions hereof or thereof will breach or conflict with, or result in any violation of or default under (with or without
notice or lapse of time, or both), any provision of (i) the memorandum and articles of association or comparable organizational documents of such Selling
Shareholder, (ii) the Existing Articles or the memorandum and articles of association or comparable organizational documents of any other Group
Company, (iii) any Law or Order applicable to such Selling Shareholder or (iv) any Contract to which such Selling Shareholder is a party or by which such
Selling Shareholder or its property or assets is bound or result in the acceleration of any material obligation under any Contract.
(b) No consent, waiver, approval, Order, Permit or authorization of, or declaration or filing with, or notification to, any Government
Authority or any other Person is required in connection with the execution and delivery of this Agreement or the other Transaction Documents or the
compliance by such Selling Shareholder with any of the provisions hereof or thereof, or the consummation of the transactions contemplated hereby or
thereby.
Section 4.4 Ownership and Transfer of Shares. Such Selling Shareholder is the record and beneficial owner of the Purchased Shares of such Selling
Shareholder, free and clear of all Liens other than Permitted Liens. Such Selling Shareholder has the power to sell, transfer, assign and deliver its Purchased
Shares as provided in this Agreement and, upon transfer and delivery of such Purchased Shares to the Purchaser and payment therefor in accordance with
this Agreement, subject only to the entry of the name of the Purchaser as the holder of such Purchased Shares in the register of members of the Company,
such transfer and delivery will convey to the Purchaser good and marketable title to such Purchased Shares, free and clear of all Liens other than Permitted
Liens. Each Purchased Share of such Selling Shareholder is duly authorized, validly issued, fully paid and non-assessable.
Section 4.5 No Litigation. No Legal Proceedings are pending with respect to its Purchased Shares or such Selling Shareholder or any of its Affiliates
which questions the validity of the Transaction Documents, the right of such Selling Shareholder to enter into the Transaction Documents to which such
Selling Shareholder is a party, the rights and obligations of such Selling Shareholder to consummate the transactions contemplated by such Transaction
Documents, or which would reasonably be expected to prohibit or materially delay the consummation of the transactions contemplated by this Agreement.
Section 4.6 Brokers. No broker, finder or investment banker is entitled to receive from the Purchaser or, to the Knowledge of such Selling
Shareholder, any Group Company any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement
or any other Transaction Document based upon arrangements made by or on behalf of such Selling Shareholder.
17
Section 4.7 Accuracy of Disclosure. True and complete copies of the Existing Articles and the Shareholders Agreement, which are in full force and
effect as of the date hereof and as of immediately prior to the Closing, have been furnished to the Purchaser, and such documents have not been amended or
restated in any way since the date thereof.
Section 4.8 Private Placement; Non-U.S. Person. Such Selling Shareholder (if such Selling Shareholder will receive any Share Portion of Purchase
Price at the Closing) understands that (a) the Share Portion of Purchase Price has not been registered under the Securities Act or any state securities Law
and (b) the Share Portion of Purchase Price may not be sold unless such disposition is registered under the Securities Act and applicable state securities
Law or is exempt from registration thereunder. Such Selling Shareholder (if such Selling Shareholder will receive any Share Portion of Purchase Price at
the Closing) represents that it is either: (i) an institutional “accredited investor” (as defined in Rule 501(a) of Regulation D under the Securities Act) or (ii)
not a U.S. Person and is located outside of the United States, as such terms are defined in Rule 902 of Regulation S under the Securities Act.
Section 4.9 No Other Representation. Other than the representations and warranties explicitly set forth in Articles III and IV of this Agreement and
the representations and warranties in the other Transaction Documents, such Selling Shareholder is not making any other representations and warranties to
the Purchaser in connection with the transactions contemplated by this Agreement.
ARTICLE V
Representations and Warranties of Purchaser
The Purchaser represents and warrants to the Selling Shareholders each of the statements contained in this Article V.
Section 5.1 Organization and Good Standing. The Purchaser is duly organized, validly existing and in good standing under the Laws of the Cayman
Islands, and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now conducted.
Section 5.2 Authorization. The Purchaser has all requisite power and authority to execute and deliver this Agreement and the other Transaction
Documents to which the Purchaser is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the other Transaction Documents to which the Purchaser is a party and the consummation
of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of the Purchaser. This
Agreement has been, and each of the other Transaction Documents to which the Purchaser is a party will be at or prior to the Closing, duly and validly
executed and delivered by the Purchaser and (assuming the due authorization, execution and delivery by the other parties hereto and thereto) this
Agreement constitutes, and the other Transaction Documents to which the Purchaser is a party will constitute, the legal, valid and binding obligations of the
Purchaser, enforceable against it in accordance with their respective 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 and similar Law affecting creditors’ rights and remedies generally.
18
Section 5.3 Conflicts; Consents of Third Parties
(a) None of the execution, delivery and performance by the Purchaser of this Agreement or the other Transaction Documents to
which the Purchaser is a party, the consummation of the transactions contemplated hereby or thereby, or compliance by the Purchaser with any of the
provisions hereof or thereof will breach or conflict with, or result in any violation of or default under (with or without notice or lapse of time, or both), any
provision of (i) the memorandum and articles of association of the Purchaser (the “Purchaser Articles”), (ii) any Law or Order applicable to the Purchaser
or (iv) any Contract to which the Purchaser is a party or by which the Purchaser or its property or assets is bound or result in the acceleration of any
material obligation under any Contract except to the extent such violation or default would not have a material adverse effect on the Purchaser’s ability to
consummate the transactions contemplated herein.
(b) No consent, waiver, approval, Order, Permit or authorization of, or declaration or filing with, or notification to, any Government
Authority or any other Person is required in connection with the execution and delivery of this Agreement or the other Transaction Documents or the
compliance by the Purchaser with any of the provisions hereof or thereof, or the consummation of the transactions contemplated hereby or thereby, except
for the registration with the SEC contemplated by the Registration Rights Agreement and a supplemental listing application to the New York Stock
Exchange.
Section 5.4 Purchaser Shares; Valid Issuance. The Purchaser Shares to be issued pursuant to this Agreement will, when issued in accordance with the
provisions of this Agreement, be validly issued, fully paid and nonassessable assuming the accuracy of the representations and warranties made by the
Selling Shareholders in Section 4.8 of this Agreement and American depositary shares representing the Purchaser Shares are expected to be eligible for
trading on the New York Stock Exchange.
Section 5.5 Capitalization.
(a) As of March 31, 2015, the entire share capital of the Purchaser consists of 5,000,000,000 authorized ordinary shares, par value
US$0.00001 per share, of which (1) 4,800,000,000 shares are designated as Class A Ordinary Shares, (a) 107,140,626 of which are issued and outstanding
and (b) 25,618,853 of which are reserved for issuance pursuant to the Purchaser’s share incentive plans, 3,339,826 of which have been granted and
outstanding and are vested as of March 31, 2015, and (2) 200,000,000 shares of which are designated as Class B Ordinary Shares, 74,500,479 of which are
issued and outstanding; in either case of (1) or (2), having the rights, privileges and preferences as set forth in the Purchaser Articles. All of the issued and
outstanding ordinary shares of the Purchaser are duly authorized, validly issued, fully paid and non-assessable.
(b) As of March 31, 2015, there are no outstanding ordinary shares, preferred shares, any other shares or equity of the Purchaser, or
any securities convertible into or exercisable or exchangeable for any of the foregoing, or any other options, warrants, subscriptions, or other rights, proxy
or shareholders agreements or Contracts of any kind, either directly or indirectly, entitling the holder thereof to purchase or otherwise acquire or to compel
the Purchaser to issue, repurchase or redeem any shares or other securities of the Purchaser.
19
Section 5.6 SEC Filings; Financial Statements; Compliance.
(a) The Purchaser has filed with or furnished to the SEC, as applicable, all reports, forms and other filings required to be filed with
or furnished to the SEC by the Purchaser since November 1, 2013 pursuant to the Securities Act or the Securities Exchange Act (collectively, together with
any exhibits and schedules thereto and other information incorporated therein, the “SEC Documents”). As of the time it was filed with the SEC (or, if
amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing): (i) each of the SEC Documents complied in all
material respects with the applicable requirements of the Securities Act or the Exchange Act (as the case may be); and (ii) none of the 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.
(b) The consolidated financial statements contained in the SEC Documents: (i) complied as to form in all material respects with the
published rules and regulations of the SEC applicable thereto; (ii) were prepared in accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods covered, except as may be indicated in the notes to such financial statements and except that unaudited financial
statements may not contain footnotes and are subject to year-end audit adjustments; and (iii) fairly present in all material respects the consolidated financial
position of the Purchaser and its consolidated subsidiaries as of the respective dates thereof and the consolidated results of operations of Purchaser and its
consolidated subsidiaries for the periods covered thereby.
(c) The Purchaser is and has conducted its business (and each of its subsidiaries is and has conducted its business) in compliance
with applicable Laws relating to anti-bribery or anti-corruption (governmental or commercial), money laundering, sanctions or export controls, except as
disclosed in the SEC Documents.
Section 5.7 Brokers. No broker, finder or investment banker is entitled to receive from any Selling Shareholder or Group Company any brokerage,
finder’s or other fee or commission in connection with the transactions contemplated by this Agreement or any other Transaction Document based upon
arrangements made by or on behalf of the Purchaser.
Section 5.8 Shareholder Arrangements. Except as set forth herein or in any other Transaction Document or as otherwise disclosed to each Selling
Shareholder, neither Purchaser nor any of its Affiliates is a party to any Contract, or has made or entered into any formal or informal arrangements or other
understandings (whether or not binding), with any Selling Shareholder or any of their respective Affiliates relating to this Agreement, the Current
Transaction or any other transactions contemplated by this Agreement.
Section 5.9 No Other Representation. Other than the representations and warranties explicitly set forth in this Article V and the representations and
warranties contained in the other Transaction Documents, the Purchaser is not making any other representations and warranties to the Selling Shareholders
in connection with the transactions contemplated by this Agreement.
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ARTICLE VI
Covenants and Additional Agreements
Section 6.1 Further Assurances. Each Party shall use its reasonable best efforts to take all actions necessary or advisable and do all things (including
to execute and deliver documents and other papers) necessary or advisable to consummate the transactions contemplated by this Agreement and the other
Transaction Documents.
Section 6.2 Confidentiality and Publicity.
(a) Each Party agrees to, and shall cause its agents, representatives, Affiliates, employees, officers and directors to: (i) treat and hold
as confidential (and not disclose or provide access to any Person to) all confidential or proprietary information with respect to the other Parties, the
Business or the Group Companies or relating to the transactions contemplated hereby, (ii) in the event that any Party or any agent, representative, Affiliate,
employee, officer or director of such Party becomes legally compelled to disclose any such information (except for the information that is required to be
disclosed in the Purchaser’s filing or reporting with the SEC as required under applicable securities law, including the Purchaser’s annual report on Form
20-F), provide the relevant Party with prompt written notice of such requirement so that the relevant Party may seek a protective order or other remedy or
waive compliance with this Section 6.2(a), and (iii) in the event that such protective order or other remedy is not obtained, or the relevant Party waive
compliance with this Section 6.2(a), furnish only that portion of such confidential information which is legally required to be provided and exercise its
commercially reasonable efforts to obtain assurances that confidential treatment will be accorded such information; provided, however, that this Section 6.2
(a) shall not apply to any information that, at the time of disclosure, is in the public domain and was not disclosed in breach of this Agreement by such
Party or any of its agents, representatives, Affiliates, employees, officers or directors.
(b) No Party shall make, or cause to be made, any press release or public announcement in respect of this Agreement or the
transactions contemplated hereby or otherwise communicate with any news media without the prior written consent of the Purchaser (in the case of a
proposed release or announcement by any Selling Shareholder) or of the Selling Shareholders (in the case of a proposed release or announcement by the
Purchaser), unless otherwise required by Law or Government Authority.
Section 6.3 Tax Filing.
(a) The Purchaser shall withhold the Withheld Amount from the Purchase Price payable to the Selling Shareholders and set aside
such amount in an interest bearing account as a separate pool of funds (together with the interest earned thereon, if any, the “Withheld Funds”) for the
purposes set forth in this Section 6.3. The Purchaser shall maintain a ledger for the Withheld Funds showing the Withheld Funds for each Selling
Shareholder individually. Unless expressly permitted hereunder, the Purchaser shall not utilize any of such the Withheld Funds without the prior written
approval by the affected Selling Shareholders. The Withheld Funds shall be withheld by the Purchaser for a period that ends on the second (2nd )
anniversary of the Closing Date (the “Withhold Expiration Date”).
(b) The Parties hereby acknowledge, covenant and agree that (i) the Purchaser shall have no obligation to pay any Tax of any nature
that is required by applicable Law to be paid by any Selling Shareholder or its Affiliates or their respective direct and indirect partners, members and
shareholders arising out of the transactions contemplated by this Agreement and the other Transaction Documents, and (ii) each Selling Shareholder agrees
to bear and pay any Tax of any nature that is required by applicable Laws to be paid by it arising out of the transactions contemplated by this Agreement
and the other Transaction Documents.
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(c) Each of the Selling Shareholders shall, at its own expense, as soon as possible within thirty (30) days following the Closing Date
(and in any event within the period required by Circular 7), duly and properly make with the applicable PRC Taxing Authority (being the PRC Taxing
Authority to which such filings are to be made pursuant to applicable Law) (the “Relevant PRC Tax Authority”) the relevant Tax filings and disclosures
that are required by (and shall make such filings and disclosures in accordance with the requirements of) applicable Law (including Circular 7) in
connection with the transactions contemplated by this Agreement and the other Transaction Documents. After such Tax filing, each Selling Shareholder
agrees to use its commercially reasonable efforts to promptly submit all documents supplementally requested by the Relevant PRC Tax Authority in
connection with such Tax filing, and give regular updates to the Purchaser as to the determination (and delivers to the Purchaser assessment notices, if any,
issued by the Relevant PRC Tax Authority in connection with such determination).
(d) To the extent that any Selling Shareholder is determined by the Relevant PRC Tax Authority to be required by applicable Law
(including Circular 7) to pay Taxes in connection with the transactions contemplated by this Agreement and the other Transaction Documents (the “Selling
Taxes”), the Purchaser shall, within such period of time as required by the Relevant PRC Tax Authority, (i)(A) promptly upon receipt of a written request
from such Selling Shareholder together with reasonable supporting documentation, release an amount equal to the Selling Taxes out of the Withheld Funds
for such Selling Shareholder to pay the Relevant PRC Tax Authority or (B) if no such request is received by the Purchaser, pay such Selling Taxes out of
the Withheld Amount for such Selling Shareholder in the Withheld Funds(in each case, the paying party shall provide the other, as soon as reasonably
practicable, with evidence that such Selling Taxes have been paid in the form of a receipt of payment issued by the Relevant PRC Tax Authority), and (ii)
the Withheld Amount for such Selling Shareholder in the Withheld Funds shall be deemed to have been reduced by the amount of (x) funds released to
such Selling Shareholder for the payment of the Selling Taxes or (y) the Selling Taxes paid on behalf of such Selling Shareholder.
(e) To the extent that the Withheld Amount for any Selling Shareholder is less than the amount of the Selling Taxes that such
Selling Shareholder is required by the Relevant PRC Tax Authority to pay, such Selling Shareholder shall, within such period of time as required by the
Relevant PRC Tax Authority, pay the portion of the Selling Taxes that exceeds the Withheld Amount, and shall provide such Purchaser, as soon as
reasonably practicable, with evidence that such Selling Taxes have been paid in the form of a receipt of payment issued by the Relevant PRC Tax
Authority.
(f) (i) If the Tax obligations of a Selling Shareholder has been fully settled pursuant to Section 6.3 prior to the Withhold Expiration
Date and if there is any remaining Withheld Amount in the Withheld Funds, the Purchaser shall, promptly after receiving a formal receipt of Tax payment
and full settlement issued by the Relevant PRC Tax Authority but in any event no later than thirty (30) days after it receives such receipt, release such
relevant remaining Withheld Amount attributable to such Selling Shareholder together with interest earned thereon, if any, by wire transfer of immediately
available funds to its Selling Shareholder Bank Account; (ii) if there is any remaining Withheld Amount in the Withheld Funds as of the close of business
on the Withhold Expiration Date, the Purchaser shall, promptly after the Withhold Expiration Date but in any event no later than thirty (30) days after the
Withhold Expiration Date release such remaining Withheld Amount to such Selling Shareholder by wire transfer of immediately available funds to its
Selling Shareholder Bank Account.
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(g) For the avoidance of doubt, the foregoing provisions of Section 6.3 shall apply to the part of Preferred Liquidation Premium
paid to each of the Selling Shareholders in the case of a Qualified Liquidation Event, if any, pursuant to Section 2.7, and the Withheld Amount with respect
to such Selling Shareholder shall be updated at that time to include such amount to be withheld in the event of a Qualified Liquidation Event as set forth on
Schedule A, and the Withhold Expiration Date with respect to such part of Withheld Amount shall be the second (2nd ) anniversary of the closing date of
the Qualified Liquidation Event.
Section 6.4 Lock-up. Each of the Selling Shareholders who will receive Purchaser Shares as part or all of the Purchase Price for the Purchased Shares
and the Shareholder Rights of such Selling Shareholder at the Closing shall not, directly or indirectly, Transfer any portion or interest of the Purchaser
Shares acquired hereunder, without the prior written consent of the Purchaser for a period of twelve (12) months following the Closing Date; provided,
however, that the foregoing lock-up period for Classroom Investments Inc., Chan Kei Lim, LT Growth Investment IV Limited and Nokia Growth Partners
II L.P., who will receive at least fifty percent (50%) of the Purchase Price in immediately available funds as provided on Schedule A shall be six (6)
months. Any purported sale, transfer, pledge, encumbrance, assignment, loan or disposition of the Purchaser Shares in violation of the foregoing sentence
without the prior written consent of the Purchaser shall be null and void.
Section 6.5 Pre-Closing Notifications. Prior to the date of this Agreement, each Selling Shareholder has delivered to the Purchaser a written
statement, duly executed by an authorized signatory of such Selling Shareholder, setting forth with respect to each Selling Shareholder, details of a bank
account or bank accounts designated by such Selling Shareholder at a bank or banks capable of receiving international wires in US$ for purposes of
receiving the payment of the Purchase Price for such Selling Shareholder at the Closing (each such account, the “Selling Shareholder Bank Account” of
such Selling Shareholder). Each Selling Shareholder hereby agrees, acknowledges and confirms that any amount of payment by or on behalf of the
Purchaser into the Selling Shareholder Bank Account of such Selling Shareholder shall constitute full performance and discharge of the Purchaser’s
obligation, as applicable, to pay such amount to such Selling Shareholder under this Agreement.
Section 6.6 Purchaser Board of Directors.
(a) From and after the closing of a Liquidation Event (as such term is defined in Section 2 of Schedule A of the Exiting Articles) or
a Qualified Liquidation Event, Glee Investment Limited (“Carlyle”) shall have the right, in its sole discretion, to designate one individual (the “Carlyle
Designee”) to serve as a member of the board of directors of the Purchaser (the “Purchaser Board”). Subject to the foregoing, upon receiving a written
notice designating the Carlyle Designee from Carlyle, the Purchaser shall, by a resolution of its directors passed in accordance with the Purchaser Articles
and applicable Law, promptly cause the appointment of such Carlyle Designee to the Purchaser Board.
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(b) As long as Carlyle has the right to appoint a member to the Purchaser Board pursuant to Sections 6.6(a) and (d), in the event of
(i) the resignation, death, removal or other disqualification of the Carlyle Designee pursuant to the Purchaser Articles or (ii) the removal of the Carlyle
Designee by Carlyle pursuant to this Section 6.6, Carlyle shall have the right, in its sole discretion, to designate another individual to serve as a member of
the Purchaser Board. Upon receiving a written notice designating such replacement Carlyle Designee from Carlyle, the Purchaser shall, by a resolution of
its directors passed in accordance with the Purchaser Articles and applicable Law, promptly cause the appointment of such Carlyle Designee to the
Purchaser Board.
(c) As long as Carlyle has the right to appoint a member to the Purchaser Board pursuant to Sections 6.6(a) and (d), Carlyle shall
have the right to request the removal of the Carlyle Designee from the Purchaser Board at any time in its sole discretion. Upon receiving a written notice
requesting such removal from Carlyle, the Purchaser shall, by a resolution of its directors passed in accordance with the Purchaser Articles and applicable
Law, promptly cause the removal of such Carlyle Designee from the Purchaser Board. The Purchaser shall procure that the Carlyle Designee is not
otherwise removed from the Board except as required by the Purchaser Articles or applicable Law. The removal of a Carlyle Designee shall not affect
Carlyle’s right to designate another Carlyle Designee pursuant to this Section 6.6.
(d) The rights of Carlyle set forth in this Section 6.6 shall terminate at such time as (i) Carlyle ceases to beneficially own directly or
indirectly at least 80% of the Purchaser Shares issued by the Purchaser to Carlyle at the Closing (or American Depositary Shares representing an equivalent
number of Purchaser Shares), or (ii) Carlyle permits any issuance or direct or indirect transfer of equity interest in itself (other than to its direct shareholders
as of the date hereof).
Section 6.7 Conduct of Business After Closing.
(a) During the period from the date of the Closing and continuing until the date that is six (6) months following the Closing, except
to the extent that Selling Shareholders shall otherwise consent in writing or as specifically contemplated by this Agreement, the Purchaser shall not, directly
or indirectly, exercise any of the veto rights of the Preferred Shares set forth in Section 7.2(a) of the Shareholders Agreement or in Section 6(a) of Schedule
A to the Existing Articles.
(b) During the period from the date of the Closing and continuing until the date that is six (6) months following the Closing, except
to the extent that the Purchaser shall otherwise consent in writing or as specifically contemplated by this Agreement, the Selling Shareholders shall not, in
their capacity as shareholders of the Company or otherwise, and shall not cause or permit the Company to, directly or indirectly, authorize, do, or propose
to do, any of the following without the prior written consent of the Purchaser:
(i) conduct financing activities and/or raise money through any methods, including issuing equity, instrument convertible
or exercisable for equity, convertible debt and/or debt, through private placements, public offerings, bank or third-party financing,
capital markets transaction or any other form
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(ii) amend or alter the Shareholders Agreement in a way that is reasonably likely to dilute the Purchaser’s interest in the
Company or otherwise impacts adversely the rights and benefits of the Purchaser as a shareholder under Shareholders Agreement
(iii) adopt or propose any change to, or vote in favor of any proposal submitted to shareholders of the Company providing
for the adoption of any change to, the Company’s memorandum and articles of association, which change is reasonably likely to dilute
the Purchaser’s interest in the Company or otherwise impacts adversely the rights and benefits of the Purchaser as a shareholder of the
Company; or
(iv) take any action of any kind, including any of the matters listed in Section 6.7(b)(i), that would have the effect of
diluting the Purchaser’s equity interest in the Company (with the exception of any shares issued pursuant to the Company’s share
option plan or upon conversion of the Preferred Shares).
If the Selling Shareholders violate any of the covenants set forth in this Section 6.7(b) and fail to cure any such default within five (5)
Business Days following notice thereof, the Purchaser shall have the ability to exercise its rights under Section 6(a) of Schedule A to the Existing Articles
and Section 7(a) of the Shareholders Agreement.
(c) The Selling Shareholders hereby waive any application of the Shareholders Agreement to the transactions contemplated by this
Agreement. In addition, promptly following the Closing and in any event within fifteen (15) Business Days following the Closing, the Selling Shareholders
and the Purchaser shall take all necessary action and execute all necessary consents to amend the Shareholders Agreement to remove Section 5.7 thereof.
(d) Promptly after the Closing, each of the Selling Shareholders and the Purchaser shall (A) amend the Shareholders Agreement, (B)
adopt or propose any change to, or vote in favor of any proposal submitted to shareholders of the Company providing for the adoption of any change to, the
Existing Articles, and (C) use its reasonable best efforts to take all other actions necessary or advisable and do all other things (including to execute and
deliver documents and other papers) necessary or advisable, and cause the Company, to procure the following:
(i) the Purchaser shall have the right, in its sole discretion, to designate one individual (the “Purchaser Nominee”) to serve
as a member of the board of directors of the Company (the “Company Board”). Upon receiving a written notice designating the Purchaser
Nominee from the Purchaser, the Company shall, by a resolution of its directors passed in accordance with the Company’s memorandum
and articles and applicable Law, promptly cause the appointment of such Purchaser Nominee to the Company Board.
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(ii) in the event of (A) the resignation, death, removal or other disqualification of the Purchaser Nominee pursuant to the
Company’s memorandum and articles or (B) the removal of the Purchaser Nominee by the Purchaser pursuant to the clause (i) above, the
Purchaser shall have the right, in its sole discretion, to designate another individual to serve as a member of the Company Board. Upon
receiving a written notice designating such replacement Purchaser Nominee from the Purchaser, the Company shall, by a resolution of its
directors passed in accordance with the Company’s memorandum and articles and applicable Law, promptly cause the appointment of
such Purchaser Nominee to the Company Board.
(iii) the Purchaser shall have the right to request the removal of the Purchaser Nominee from the Company Board at any
time in its sole discretion. Upon receiving a written notice requesting such removal from the Purchaser, the Company shall, by a
resolution of its directors passed in accordance with the Company’s memorandum and articles and applicable Law, promptly cause the
removal of such Purchaser Nominee from the Company Board. The Company shall procure that the Purchaser Nominee is not otherwise
removed from the Board except as required by the Company’s memorandum and articles or applicable Law. The removal of a Purchaser
Nominee shall not affect the Purchaser’s right to designate another Purchaser Nominee pursuant to the clause (i) above.
Section 6.8 Additional Undertakings.
(a) New Company Options. Promptly following the Closing, the Selling Shareholders and the Purchaser shall take all necessary
corporate action, including the adoption of necessary board and/or shareholder resolutions and consents to cause the Company to grant Trinityville
Profit Limited additional options to purchase Ordinary Shares of the Company representing 4.5% of the fully diluted share capital of the Company
as of immediately prior to such option grant (the “New Company Options”), such New Company Options to vest upon the closing of a Qualified
Liquidation Event. In the event that Section 2.7(b) of this Agreement has terminated by its terms, the Parties agree that (i) the New Company
Options shall terminate and be of no further force and effect, and (ii) the resulting reverse dilution shall be spread pro rata among the Selling
Shareholders (including Trinityville Profit Limited) only. The Selling Shareholders and the Purchaser agree to effect such share transfers and/or
new issuances of Company Ordinary Shares as are necessary to effect the foregoing principle.
(b) Liquidity Based Options. Promptly following the Closing, the Selling Shareholders and the Purchaser shall take all necessary
corporate action, including the adoption of necessary board and/or shareholder resolutions and consents to cause the Company to effect the full
acceleration of (i) the vesting of the 3,706,236 Ordinary Shares of the Company subject to the previously granted option to the Founder (the
“Liquidity Based Options”) and (ii) the vesting of a certain portion of the 2,464,924 Ordinary Shares of the Company subject to previously granted
options to certain key management to be determined by the Founder, in each case, such acceleration to take effect upon the closing of a Qualified
Liquidation Event.
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(c) Co-Sale Rights. If, at any time within twelve (12) months after the Closing, any additional Shares are proposed to be acquired by
or on behalf of the Purchaser or any of its Affiliates (other than the Group Companies), the Purchaser or such Affiliate shall offer to purchase a pro
rata percentage of the Shares held by the Selling Shareholders after the Closing on identical terms which shall be offered to all of the Selling
Shareholders on a basis consistent with the terms and conditions for the Current Transaction, including at a purchase price which represents an
implied valuation of the Company which is not less than the equity valuation of the Company implied by the Current Transaction, and subject to
Section 2.7 of this Agreement. No Selling Shareholder may sell any Shares to the Purchaser or any of its Affiliates unless the preceding
obligations of this Section 6.8(c) have been complied with.
(d) Pledges Over Domestic Companies. Following the Closing, Trinityville Profit Limited and the Founder shall use their commercially
reasonable efforts to cause the pledges over the entire equity interests of Beijing Zhi Mo Si Management Consulting Co., Ltd. and Beijing Rui Yi
Car Service Co., Ltd. in favor of the applicable Group Company(ies) (other than the Domestic Companies) to be duly registered with the
competent Government Authority as soon as reasonably practicable.
Section 6.9 Shareholders Resolutions to Appoint New Director. The Selling Shareholders, being all the shareholders of the Company, hereby adopt
unanimous resolutions as set forth on Schedule E (the “Shareholders Resolutions”) and acknowledge and agree that their execution of this Agreement shall
be deemed as signing and adopting the Shareholders Resolutions.
ARTICLE VII
Conditions to Closing
Section 7.1 Conditions Precedent to Obligations of the Purchaser. Subject to Section 2.6, the obligation of the Purchaser to consummate the
transactions contemplated by this Agreement with respect to any particular Selling Shareholder is subject to the fulfillment, on or prior to the Closing Date,
of each of the following conditions with respect to that particular Selling Shareholder (any or all of which may be waived by the Purchaser, in its sole
discretion, in whole or in part to the extent permitted by applicable Law):
(a) the representations and warranties of the relevant Selling Shareholder set forth in Article III and Article IV shall be true and
correct in all respects as of the Closing, except to the extent such representations and warranties relate to another date (in which case such
representations and warranties shall be true and correct in all respects as of such other date with the same force and effect as if made as of such
other date); and
(b) the relevant Selling Shareholder shall have performed and complied with each of the obligations and agreements required by this
Agreement to be performed or complied with by it on or prior to the Closing Date.
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Section 7.2 Conditions Precedent to Obligations of the Selling Shareholders. The obligations of the Selling Shareholders to consummate the
transactions contemplated by this Agreement are subject to the fulfillment, prior to or on the Closing Date, of each of the following conditions (any or all of
which may be waived by each Selling Shareholder in its sole discretion in whole or in part to the extent permitted by applicable Law):
(a) the representations and warranties of the Purchaser set forth in this Agreement shall be true and correct in all respects as of the
Closing, except to the extent such representations and warranties relate to another date (in which case such representations and warranties shall be
true and correct in all respects as of such other date with the same force and effect as if made as of such other date); and
(b) the Purchaser shall have performed and complied with each of the obligations and agreements required by this Agreement to be
performed or complied with by the Purchaser on or prior to the Closing Date.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Survival of Representations, Warranties and Covenants. The representations and warranties of each Party contained in this Agreement
shall survive the Closing until the date that is twenty-four (24) months following the Closing Date. The covenants and other agreements of each Party
contained in this Agreement shall survive the Closing until fully discharged in accordance with their terms, except for those covenants and agreements
which shall be complied with or discharged prior to the Closing in accordance with the terms of this Agreement. If written notice of a claim for
indemnification has been given in accordance with Section 8.2 prior to the time at which the applicable representations, warranties, covenants or other
agreements would otherwise terminate pursuant to the foregoing, then the relevant representations, warranties, covenants or other agreements shall survive
such time as to such claim, until such claim has been finally resolved. Neither the period of survival nor the liability of the Selling Shareholders with
respect to their respective representations, warranties, covenants and agreements shall be reduced by any investigation made at any time by or on behalf of
the Purchaser.
Section 8.2 Indemnification.
(a) Indemnification by Selling Shareholders. From and after the Closing, each of the Selling Shareholders (other than Trinityville
Profit Limited) shall, severally but not jointly, indemnify, defend and hold harmless the Purchaser and its Affiliates and their respective officers, directors,
employees, agents, successors and permitted assigns (collectively, the “Purchaser Indemnitees”) from and against all Liabilities, losses, damages,
diminution in value, claims, costs and expenses (including reasonable attorneys’ fees and expenses incurred in connection with the investigation or defense
of any of the same or in responding to or cooperating with any governmental investigation), interest, awards, judgments, fines and penalties suffered or
incurred by the Purchaser Indemnitees (in each case, whether absolute, accrued, conditional or otherwise and whether or not resulting from Third Party
Claims) (hereinafter “Purchaser Losses”) arising out of or relating to:
(i) the failure of (A) any of the representations or warranties in Article III.A and Article IV made herein by such Selling
Shareholder as of the date hereof to be true and accurate when made or as of the Closing with the same force and effect as if made as of
the Closing or (B) any of the representations or warranties in Article III.A and Article IV made herein by such Selling Shareholder as
of another date herein to be true and accurate as of such date;
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(ii) any breach or violation of, or failure to perform, any covenants or agreements in Article VI made herein by such
Selling Shareholder; or
(iii) the failure to locate and deliver the original share certificate(s) representing the Purchased Shares of such Selling
Shareholder.
(b) Indemnification by Trinityville Profit Limited and the Founder. From and after the Closing, each of Trinityville Profit Limited
and the Founder shall, severally and jointly, indemnify, defend and hold harmless the Purchaser Indemnitees from and against all Purchaser Losses arising
out of or relating to:
(i) the failure of (A) any of the representations or warranties in Article III.B and Article IV made herein by Trinityville
Profit Limited and the Founder as of the date hereof to be true and accurate when made or as of the Closing with the same force and
effect as if made as of the Closing or (B) any of the representations or warranties in Article III.B and Article IV made herein by
Trinityville Profit Limited and the Founder as of another date herein to be true and accurate as of such date; or
(ii) any breach or violation of, or failure to perform, any covenants or agreements in Article VI made herein by
Trinityville Profit Limited and the Founder.
(c) Indemnification by Purchaser. From and after the Closing, the Purchaser shall indemnify, defend and hold harmless the Selling
Shareholders, their Affiliates and their respective officers, directors, employees, agents, successors and permitted assigns (collectively, the “Selling
Shareholder Indemnitees”) from and against all Liabilities, losses, damages, diminution in value, claims, costs and expenses (including reasonable
attorneys’ fees and expenses incurred in connection with the investigation or defense of any of the same or in responding to or cooperating with any
governmental investigation), interest, awards, judgments, fines and penalties suffered or incurred by the Selling Shareholder Indemnitees (in each case,
whether absolute, accrued, conditional or otherwise and whether or not resulting from Third Party Claims) (hereinafter “Selling Shareholder Losses”, and
together with Purchaser Losses, referred to herein as “Losses”) arising out of or relating to:
(i) the failure of (A) any of the representations or warranties in Article V made herein by the Purchaser as of the date
hereof to be true and accurate when made or as of the Closing with the same force and effect as if made as of the Closing, or (B) any of
the representations or warranties in Article V made herein by the Purchaser as of another date herein to be true and accurate as of such
date; or
(ii) any breach or violation of, or failure to perform, any covenants or agreements made herein by the Purchaser.
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(d) Procedures Relating to Indemnification.
(i) Any Party seeking indemnification under this Section 8.2 (an “Indemnified Party”) shall promptly give the Party from
whom indemnification is being sought (an “Indemnifying Party”) notice of any matter which such Indemnified Party has determined
has given or would reasonably be expected to give rise to a right of indemnification under this Agreement stating in reasonable detail
the nature of the claim, and containing a reference to the provisions of this Agreement in respect of which such right of indemnification
is claimed or arises; provided, however, that the failure to provide such notice shall not release the Indemnifying Party from any of its
obligations under this Section 8.2 except to the extent the Indemnifying Party is materially prejudiced by such failure. With respect to
any recovery or indemnification sought by an Indemnified Party from the Indemnifying Party that does not involve a Third Party
Claim, if the Indemnifying Party does not notify the Indemnified Party within thirty (30) days from its receipt of the notice from the
Indemnified Party that the Indemnifying Party disputes such claim, the Indemnifying Party shall be deemed to have accepted and
agreed with such claim. If the Indemnifying Party has disputed a claim for indemnification (including any Third Party Claim), the
Indemnifying Party and the Indemnified Party shall proceed in good faith to negotiate a resolution to such dispute. If the Indemnifying
Party and the Indemnified Party cannot resolve such dispute in thirty (30) days after delivery of the dispute notice by the Indemnifying
Party, such dispute shall be resolved by arbitration pursuant to Section 9.3.
(ii) If an Indemnified Party shall receive notice of any Legal Proceeding, audit, demand or assessment (each, a “Third
Party Claim”) against it or which may give rise to a claim for Loss under this Section 8.2, within 30 days of the receipt of such notice,
the Indemnified Party shall give the Indemnifying Party notice of such Third Party Claim; provided, however, that the failure to
provide such notice shall not release the Indemnifying Party from any of its obligations under this Section 8.2 except to the extent that
the Indemnifying Party is materially prejudiced by such failure. If the Indemnifying Party acknowledges in writing its obligation to
indemnify the Indemnified Party hereunder against any Losses that may result from such Third Party Claim, then the Indemnifying
Party shall be entitled to assume and control the defense of such Third Party Claim at its expense and through counsel of its choice if it
gives notice of its intention to do so to the Indemnified Party within five days of the receipt of such notice from the Indemnified Party;
provided, however, that if there exists or is reasonably likely to exist a conflict of interest that would make it inappropriate in the
judgment of the Indemnified Party in its sole and absolute discretion for the same counsel to represent both the Indemnified Party and
the Indemnifying Party, then the Indemnified Party shall be entitled to retain its own counsel in each jurisdiction for which the
Indemnified Party determines counsel is required, at the Indemnifying Party’s expense. In the event that the Indemnifying Party
exercises the right to undertake any such defense against any such Third Party Claim as provided above, the Indemnified Party shall
cooperate with the Indemnifying Party in such defense and make available to the Indemnifying Party, at the Indemnifying Party’s
expense, all witnesses, pertinent records, materials and information in the Indemnified Party’s possession or under the Indemnified
Party’s control relating thereto as is reasonably required by the Indemnifying Party. Similarly, in the event the Indemnified Party is,
directly or indirectly, conducting the defense against any such Third Party Claim, the Indemnifying Party shall cooperate with the
Indemnified Party in such defense and make available to the Indemnified Party, at the Indemnifying Party’s expense, all such
witnesses, records, materials and information in the Indemnifying Party’s possession or under the Indemnifying Party’s control relating
thereto as is reasonably required by the Indemnified Party. No such Third Party Claim may be settled by the Indemnifying Party
without the prior written consent of the Indemnified Party.
30
Section 8.3 Certain Limitations. The indemnification provided for in Section 8.2 shall be subject to the following limitations:
indemnification and other participation.
(a) Each Selling Shareholder is entitled to claim against any other Selling Shareholder for contribution, reimbursement,
(b) In no event shall any Selling Shareholder (other than Trinityville Profit Limited) (except in cases involving fraud or intentional
misconduct of such Selling Shareholder) be liable to the Purchaser in an amount greater than the sum of the Purchase Price and the Preferred Liquidation
Premium, if any pursuant to Section 2.7, actually received by such Selling Shareholder pursuant to this Agreement for all claims under this Agreement.
(c) In no event shall Trinityville Profit Limited and the Founder (except in cases involving fraud or intentional misconduct) be liable
to the Purchaser in an amount greater than the sum of the Purchase Price and the Preferred Liquidation Premium, if any pursuant to Section 2.7, actually
received by Trinityville Profit Limited pursuant to this Agreement for all claims under this Agreement.
(d) In no event shall the Purchaser be liable to any Selling Shareholder and all Selling Shareholder Indemnitees related to such
Selling Shareholder under this Agreement for an amount greater than one hundred percent (100%) of the Purchase Price actually received by such Selling
Shareholder, and in no event shall the aggregate liability of the Purchaser towards the Selling Shareholder Indemnitees under this Agreement exceed one
hundred percent (100%) of the Aggregate Purchase Price, except in cases involving fraud or intentional misconduct of the Purchaser and the payment
obligations under Section 2.2 and Section 2.7.
punitive, incidental, consequential, special or indirect damages.
(e) In no event shall any Indemnifying Party be liable to any Indemnified Party for indemnification under Section 8.2 for any
effect to any qualification contained in any representation and warranty as to materiality, including Material Adverse Effect.
(f) Notwithstanding anything in this Agreement to the contrary, any Loss under this Article VIII shall be determined without giving
Section 8.3 shall not apply to a claim for Losses arising out of fraud or willful misconduct by any Party.
(g) Notwithstanding anything in this Agreement to the contrary, the limitations on indemnification and liability set forth in this
31
(h) For the avoidance of doubt, an Indemnified Party shall be entitled to recover from the applicable Indemnifying Party under this
Article VIII for any Losses incurred by such Indemnified Party arising out of or resulting from the breach of any representation, warranty, covenant or
agreement contained herein, as applicable, whether or not such Indemnified Party (or any of its Affiliates or Representatives) had any knowledge of the
breach (or knowledge of any other facts or circumstances relating thereto) on or prior to the date hereof.
Section 8.4 Tax Treatment of Indemnification Payments. All indemnification payments made under this Article VIII shall be treated as adjustments
to the Aggregate Purchase Price and the Purchase Price for the applicable Selling Shareholder for Tax purposes, unless otherwise required by applicable
Law.
Section 8.5 Indemnification Sole and Exclusive Remedy. Following the Closing, indemnification pursuant to this Article VIII shall be the sole and
exclusive remedy of the Parties and any parties claiming by or through any Party (including the Indemnified Parties) related to or arising from any breach
of any representation, warranty, covenant or agreement contained in, or otherwise pursuant to, this Agreement, except in each case pursuant to Section 9.5
or in the case of fraud or willful misconduct.
ARTICLE IX
Miscellaneous
Section 9.1 Expenses. Except as otherwise provided in this Agreement, each Party shall bear its own costs and expenses incurred in connection with
the negotiation and execution of this Agreement and each other Transaction Document and the consummation of the transactions contemplated hereby and
thereby.
Section 9.2 Governing Law. This Agreement will be governed by and construed in accordance with the laws of Hong Kong without giving
effect to any choice or conflict of law provision or rule thereof.
Section 9.3 Arbitration.
(a) Any dispute arising out of or in connection with this Agreement, including any question regarding its existence, validity or
termination, shall be referred to and finally resolved by arbitration in Hong Kong in accordance with the Hong Kong International Arbitration Center
Administered Arbitration Rules (the “HKIAC Rules”) in force when the notice of arbitration is submitted in accordance with the HKIAC Rules. The
HKIAC Rules are deemed to be incorporated by reference to this clause. The tribunal shall be comprised of three arbitrators. The Purchaser and the Selling
Shareholders shall each nominate one arbitrator and the third, who shall serve as president of the tribunal, shall be nominated by the party-nominated
arbitrators. The arbitration shall be conducted in English. Each Party irrevocably and unconditionally consents to such arbitration as the sole and exclusive
method of resolving any dispute arising out of or in connection with this Agreement, including any question regarding its existence, validity or termination,
other than any proceedings to seek the remedies of specific performance as contemplated by Section 9.5.
32
(b) The award of the arbitral tribunal shall be final and binding on the Parties. The Parties agree that they will not have recourse to
any judicial proceedings, in any jurisdiction whatsoever, for the purpose of seeking appeal, annulment, setting aside, modification or any diminution or
impairment of its terms or effect insofar as such exclusion can validly be made. Judgment upon any award rendered may be entered in any court having
jurisdiction thereof, or application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be.
Section 9.4 Entire Agreement; Amendments and Waivers. This Agreement (including the schedules and exhibits hereto) and the other Transaction
Documents represent the entire understanding and agreement among the Parties with respect to the subject matter hereof and thereof. This Agreement can
be amended, supplemented or changed, and any provision hereof can be waived, only by written instrument making specific reference to this Agreement
signed by the Purchaser and the Selling Shareholders (except as specifically contemplated by Section 2.6(b)). No action taken pursuant to this Agreement,
including any investigation by or on behalf of any Party, shall be deemed to constitute a waiver by the Party taking such action of compliance with any
representation, warranty, covenant or agreement contained herein. The waiver by any Party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach. No failure on the part of any
Party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise
of such right, power or remedy by such Party preclude any other or further exercise thereof or the exercise of any other right, power or remedy.
Section 9.5 Specific Performance. The Parties acknowledge and agree that irreparable damage would occur if any provision of this Agreement were
not performed in accordance with the terms hereof and that, each Party shall be entitled to specific performance of the terms hereof. It is accordingly agreed
that, each Party shall be entitled to an injunction or injunctions to prevent such breaches of this Agreement and to enforce specifically (without proof of
actual damages or harm, and not subject to any requirement for the securing or posting of any bond in connection therewith) such terms and provisions of
this Agreement, this being in addition to any other remedy to which each Party is entitled at law or in equity.
Section 9.6 Notices. All notices and other communications under this Agreement shall be in writing and shall be deemed effectively given (i) when
delivered personally by hand (with written confirmation of receipt), (ii) when sent by fax (with written confirmation of transmission) or (iii) two Business
Days following the day sent by international overnight courier (with written confirmation of receipt), in each case at the addresses and facsimile numbers
set forth on Schedule D (or to such other address or facsimile number as a party may have specified by notice given to the other party pursuant to this
provision).
Section 9.7 Severability. If any term or other provision of this Agreement is invalid, illegal, or incapable of being enforced by any law or public
policy, all other terms or provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other
provision is invalid, illegal, or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as
originally contemplated to the greatest extent possible.
33
Section 9.8 Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors
and permitted assigns. Nothing in this Agreement shall create or be deemed to create any third party beneficiary rights in any Person not a party to this
Agreement except as provided in Section 8.2 hereof. No assignment of this Agreement or of any rights or obligations hereunder may be made by (i) any
Selling Shareholder, directly or indirectly (by operation of law or otherwise), without the prior written consent of the Purchaser, and (ii) the Purchaser
directly or indirectly (by operation of law or otherwise), without the prior written consent of the Selling Shareholders, and any attempted assignment in
violation of this Section 9.8 shall be void; provided, that the Purchaser may assign its rights and obligations under this Agreement to any of its Affiliates.
Section 9.9 Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed to be an original copy of
this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement.
** REMAINDER OF PAGE INTENTIONALLY LEFT BLANK **
34
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written above.
58.COM INC.
By:
/s/ Jinbo Yao
Name: Jinbo Yao
Title: Chief Executive Officer
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written above.
Trinityville Profit Limited
By:
/s/ Haoyong Yang
Name: Haoyong Yang
Title: Authorized Representative
Haoyong Yang
/s/ Haoyong Yang
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written above.
NOKIA GROWTH PARTNERS II L.P.
By:
Its:
NG Partners II L.L.C.
General Partner
/s/ John Gardner
By:
Name: John Gardner
Title: Managing Member
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written above.
SEQUOIA CAPITAL CHINA II, L.P.
/s/ Yu Shan
By:
Name: Yu Shan
Title: Authorized Signatory
SEQUOIA CAPITAL CHINA PARTNERS FUND II, L.P.
/s/ Yu Shan
By:
Name: Yu Shan
Title: Authorized Signatory
SEQUOIA CAPITAL PRINCIPALS FUND II, L.P.
/s/ Yu Shan
By:
Name: Yu Shan
Title: Authorized Signatory
SEQUOIA CAPITAL 2010 CV HOLDCO, LTD.
/s/ Yu Shan
By:
Name: Yu Shan
Title: Authorized Signatory
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written above.
CG INFO SERVICES INVESTMENT LIMITED
/s/ E-ho Mary Lam
By:
Name: E-ho Mary Lam
Title: Authorized Signatory
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written above.
CHINA RENAISSANCE HOLDINGS LIMITED
/s/ Fan Bao
By:
Name: Fan Bao
Title: CEO
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written above.
CLASSROOM INVESTMENTS INC.
/s/ Theresa Tam
By:
Name: Theresa Tam
Title: Authorized Signatory
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written above.
CHAN KEI LIM
/s/ Chan Kei Lim
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written above.
GLEE INVESTMENT LIMITED
By:
/s/ Norma Kuntz
Name: Norma Kuntz
Title: Director
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written above.
INTERNET FUND II PTE. LTD.
By:
/s/ Venkatagin Mudeliar
Name: Venkatagiri Mudeliar
Title: Director
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written above.
TIGER GLOBAL MAURITIUS FUND
By:
/s/ Moussa Taujoo
Name: Moussa Taujoo
Title: Director
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written above.
LT GROWTH INVESTMENT IV LIMITED
By:
/s/ Wenting Deng
Name: Wenting Deng
Title: Director
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written above.
BlueRun Ventures IV, L.P.
By: BRV Partners IV, L.P.
Its: General Partner
By: BRV Partners IV, Ltd.
Its: General Partner
By:
/s/ Jonathan Ebinger
Name: Jonathan Ebinger
Title: Authorized Signatory
Exhibit 4.16
Execution Version
(1)
(2)
A.
B.
C.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made as of April 20, 2015 by and among:
58.com, Inc., a company incorporated under the laws of the Cayman Islands (the “Company”); and
each of the parties set forth in Schedule 1 hereto (each, an “Investor”, and collectively, the “Investors”).
The Investors on the one hand, and the Company on the other hand, are herein referred to each as a “Party,” and collectively as the “Parties.”
RECITALS
On the date hereof, the Company and the Investors have entered into a Share Purchase Agreement (the “Share Purchase Agreement”).
In connection with the Share Purchase Agreement and in order to induce the Investors to consummate the transactions contemplated under the
Share Purchase Agreement, the Company and the Investors have agreed to enter into this Agreement.
Although this Agreement is being entered into contemporaneously with the Share Purchase Agreement, the Parties intend that the provisions of
this Agreement (except where expressly noted otherwise) shall take effect subject to and immediately upon occurrence of the Closing (as defined
under the Share Purchase Agreement) and expiration of the lock-up period under [Section 6.4] of the Share Purchase Agreement.
WITNESSETH
NOW, THEREFORE, in consideration of the premises set forth above, the mutual promises and covenants set forth herein and other good and
valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties agree as follows:
1.
Interpretation
1.1 Definitions. The following terms shall have the meanings ascribed to them below:
“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with
such Person. 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.
“Applicable Securities Laws” means the securities law of the U.S., including the Exchange Act and the Securities Act, and any applicable
securities law of any state of the U.S.
“Board” means the board of directors of the Company.
“Business Day” means any day that is not a Saturday, Sunday, public holiday or other day on which commercial banks are required or authorized
by law to be closed in the PRC, the Cayman Islands or the City of New York.
“Commission” means the Securities and Exchange Commission of the U.S. or any other federal agency at the time administering the Securities
Act.
“Company Securities” means (i) Ordinary Shares, (ii) securities convertible into or exchangeable for Ordinary Shares, (iii) any options, warrants
or other rights to acquire Ordinary Shares and (iv) any depositary receipts or similar instruments issued in respect of Ordinary Shares.
“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.
“Existing Holders” means (i) the “Holder” as set forth in Schedule 2 of the Existing Shareholders Agreement and (ii) Ohio River Investment
Limited, a company organized under the laws of the British Virgin Islands.
“Existing Shareholders Agreement” means the Amended and Restated Shareholders’ Agreement dated August 4, 2011 by and among the
Company and certain other parties named therein.
“Form F-3” means Form F-3 promulgated by the Commission under the Securities Act or any successor form or substantially similar form then in
effect.
“Governmental Authority” means any nation or government or any province or state or any other political subdivision thereof; any entity,
authority or body exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including any
government authority, agency, department, board, commission or instrumentality of the PRC or any other country, or any court, tribunal or arbitrator, and
any self-regulatory organization.
“Investor Rights Agreement” means the Investor Rights Agreement dated June 30, 2014 by and among the Company, Ohio River Investment
Limited and certain other parties named therein.
“Law” means any constitutional provision, statute or other law, rule, regulation, official policy or interpretation of any Governmental Authority
and any injunction, judgment, order, ruling, assessment or writ issued by any Governmental Authority.
“Ordinary Shares” means the Class A ordinary shares, par value US$0.00001 per share, of the Company.
2
“Person” means any individual, corporation, partnership, limited partnership, proprietorship, association, limited liability company, firm, trust,
estate or other enterprise or entity.
“PRC” means the People’s Republic of China, but solely for the purposes of this Agreement, excluding the Hong Kong Special Administrative
Region, the Macau Special Administrative Region and Taiwan.
“Registrable Securities” means the Ordinary Shares acquired by the Investors pursuant to the Share Purchase Agreement and any other Ordinary
Shares owned or hereafter acquired by the Investors. Notwithstanding the foregoing, “Registrable Securities” shall exclude any Registrable Securities sold
by a Person in a transaction in which rights under this Agreement are not assigned in accordance with this Agreement or any Registrable Securities sold in a
public offering, whether sold pursuant to Rule 144, or in a registered offering, or otherwise.
“Registration” means a registration effected by preparing and filing a Registration Statement and the declaration or ordering of the effectiveness
of that Registration Statement; and the terms “Register” and “Registered” have meanings concomitant with the foregoing.
“Registration Statement” means a registration statement prepared on Form F-1, F-3, S-1 or S-3 under the Securities Act.
“Rule 144” means Rule 144 promulgated under the Securities Act, as amended.
“Securities Act” means the U.S. Securities Act of 1933, as amended.
“Selling Expenses” means all underwriting discounts, selling commissions and fees and expenses charged by the depositary bank relating to the
issuance or transfer of American depositary shares and stock or share transfer taxes applicable to the sale of Registrable Securities pursuant to this
Agreement.
“U.S.” means the United States of America.
1.2 Interpretation. For all purposes of this Agreement, except as otherwise expressly provided, (i) the terms defined in this Clause 1 shall
have the meanings assigned to them in this Clause 1 and include the plural as well as the singular, (ii) all references in this Agreement to designated
“Clauses” and other subdivisions are to the designated Clauses and other subdivisions of the body of this Agreement, (iii) pronouns of either gender or
neuter shall include, as appropriate, the other pronoun forms, (iv) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to
this Agreement as a whole and not to any particular Clause or other subdivision, (v) all references in this Agreement to designated schedules, exhibits and
annexes are to the schedules, exhibits and annexes attached to this Agreement unless explicitly stated otherwise, (vi) “or” is not exclusive, (vii) the term
“including” will be deemed to be followed by “, but not limited to,” (viii) the terms “shall,” “will,” and “agrees” are mandatory, and the term “may” is
permissive, and (ix) the term “day” means “calendar day.”
3
2.
Registration Rights.
2.1 Demand Registration
(a)
(b)
Request by Investors. If the Company shall receive a written request from the Investors (the “Initiating Investors”) holding at least a
majority of the Registrable Securities then outstanding that the Company file a registration statement under the Securities Act covering
the registration of Registrable Securities pursuant to this Clause 2.1, then the Company shall, within ten (10) Business Days of the receipt
of such written request, give written notice of such request (“Request Notice”) to all Investors and the Existing Holders, and use all
reasonable efforts to effect, as soon as practicable, the registration under the Securities Act of all Registrable Securities that the Initiating
Investors (together with the other Investors and Existing Holders who so) request to be registered and included in such registration by
written notice given by such Initiating Investors to the Company within ten (10) Business Days after receipt of the Request Notice,
subject only to the limitations of this Clause 2.1; provided that the Company shall not be obligated to effect any such registration if the
Company has, within the six (6) month period preceding the date of such request, already effected a registration under the Securities Act
pursuant to this Clause 2.1 or Clause 2.3, or in which the Initiating Investors had an opportunity to participate pursuant to Clause 2.2,
other than a registration from which the Registrable Securities of the Initiating Investors have been excluded (with respect to all or any
portion of the Registrable Securities the Investors requested be included in such registration) pursuant to Clause 2.2(b).
Underwriting. If the Initiating Investors intend to distribute the Registrable Securities covered by their request by means of an
underwriting, then the Initiating Investors shall so advise the Company as a part of their request made pursuant to this Clause 2.1 and the
Company shall include such information in the written notice referred to in Clause 2.1(a). In such event, the right of each Initiating
Investor to include its Registrable Securities in such registration shall be conditional upon such Investor’s participation in such
underwriting and the inclusion of the Investor’s Registrable Securities in the underwriting to the extent provided herein. All Investors
proposing to distribute their securities through such underwriting shall enter into an underwriting agreement in customary form with the
managing underwriter or underwriters selected for such underwriting by such Investors and reasonably acceptable to the Company.
Notwithstanding any other provision of this Clause 2.1, if the underwriter(s) advise(s) the Company in writing that marketing factors
require a limitation of the number of securities to be underwritten then the Company shall so advise all Investors whose Registrable
Securities would otherwise be registered and underwritten pursuant hereto, and the number of Registrable Securities that may be included
in the underwriting shall be reduced as required by the underwriter(s) and allocated among each of the Investors and each of the Existing
Holders participating in such underwriting pro rata among them based on the total number of their respective Registrable Securities which
they had requested to be included in such registration and underwriting; provided, however, that the number of shares of Registrable
Securities to be included in such underwriting and registration shall not be reduced unless all other Company Securities (except for the
Company Securities held by the Existing Holders participating in such underwriting) are first entirely excluded from the underwriting and
registration. If an Investor disapproves of the terms of any such underwriting, the Investor may elect to withdraw therefrom by written
notice to the Company and the underwriter(s), delivered at least ten (10) Business Days prior to the effective date of the registration
statement. Any Registrable Securities excluded or withdrawn from such underwriting shall be excluded and withdrawn from the
registration. If the underwriter has not limited the number of Registrable Securities to be underwritten, the Company may include its
securities for its own account in such registration if the underwriter so agrees and if the number of Registrable Securities which would
otherwise have been included in such registration and underwriting will not thereby be limited.
4
(c)
Maximum Number of Demand Registrations. The Company shall be obligated to effect two (2) demand registrations for the Investors;
provided, however, that a demand registration shall not be deemed to count for purposes of this Clause 2.1(c) until such registration shall
have been effected..
(d)
Deferral. Notwithstanding the foregoing, the Company shall not be required to effect a registration pursuant to this Clause 2.1:
(i)
(ii)
(iii)
during the period starting with the date sixty (60) days prior to the Company’s good faith estimate of the date of the filing of, and
ending on a date one hundred eighty (180) days following the effective date of, a Company-initiated registration subject to
below, provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement
to become effective;
if the Initiating Investors propose to dispose of Registrable Securities that may be registered on Form S-3 or Form F-3 pursuant
to Clause 2.3; or
if the Company shall furnish to the Investors a certificate signed by the President or Chief Executive Officer of the Company
stating that in the good faith judgment of the Board, it would be materially detrimental to the Company and its shareholders for
such registration statement to be filed, then the Company shall have the right to defer such filing for a period of not more than
ninety (90) days after receipt of the request of the Initiating Investors; provided, however, that the Company may not utilize this
right more than once in any twelve (12) month period; provided further, that the Company shall not register any other Company
Securities during such twelve (12) month period. A demand right shall not be deemed to have been exercised until such deferred
registration shall have been effected.
5
2.2
(a)
Piggyback Registrations.
Piggyback Registrations. The Company shall notify all Investors in writing at least twenty (20) days prior to filing any registration
statement under the Securities Act for purposes of effecting a public offering of Company Securities (including, but not limited to,
registration statements relating to secondary offerings of Company Securities, but excluding registration statements relating to any
registration under Clause 2.1 or Clause 2.3 or to any employee benefit plan or a corporate reorganization) or registering Company
Securities on behalf of the Existing Holders and will afford each Investor an opportunity to include in such registration statement all or
any part of the Registrable Securities then held by such Investor. Each Investor shall within eighteen (18) days after receipt of the above-
described notice from the Company, so notify the Company in writing, and in such notice shall inform the Company of the number of
Registrable Securities such Investor wishes to include in such registration statement. If an Investor decides not to include all of its
Registrable Securities in any registration statement thereafter filed by the Company, such Investor shall nevertheless continue to have the
right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by the
Company with respect to offerings of Company Securities, all upon the terms and conditions set forth herein.
(b)
Right to Terminate Registration. The Company shall have the right to terminate or withdraw any registration initiated by it or any
Existing Holder under this Clause 2.2 prior to the effectiveness of such registration whether or not any Investor has elected to include its
Registrable Securities in such registration. The expenses of such withdrawn registration shall be borne by the Company in accordance
with Clause 2.4(i) hereof.
6
(c)
Underwriting. If a registration statement under which the Company gives notice under this Clause 2.2 is for an underwritten offering, then
the Company shall so advise the Investors. In such event, the right of any Investor to be included in a registration pursuant to this Clause
2.2 shall be conditional upon such Investor’s participation in such underwriting and the inclusion of such Investor’s Registrable Securities
in the underwriting to the extent provided herein. Each Investor participating in such underwriting shall enter into an underwriting
agreement in customary form with the managing underwriter or underwriters selected for such underwriting. Notwithstanding any other
provision of this Agreement, if the managing underwriter(s) determine(s) in good faith that marketing factors require a limitation of the
number of shares to be underwritten, then (1) if the registration statement relates to an offering of Company Securities by the Company,
the managing underwriter(s) may exclude up to seventy percent (70%) of the Registrable Securities from the registration and the
underwriting, and the number of shares that may be included in the registration and the underwriting shall be allocated, first to the
Company, second, to the Investors and the Existing Holders, pro rata among them based on the total number of their respective
Registrable Securities which they had requested to be included in such registration and underwriting; and third, to holders of other
Company Securities, provided, however, that the right of the underwriter(s) to exclude shares (including Registrable Securities) from the
registration and underwriting as described above shall be restricted so that (i) the number of Registrable Securities included in any such
registration is not reduced below thirty percent (30%) of the aggregate number of Registrable Securities for which inclusion has been
requested; and (ii) all shares that are not Registrable Securities and are held by any other Person, including, without limitation, any person
who is an employee, officer, consultant or director of the Company (or any Subsidiary of the Company) shall first be excluded from such
registration and underwriting before any Registrable Securities are so excluded, and (2) if the registration statement relates to an offering
of Company Securities by any Existing Holder, the managing underwriter(s) may exclude the Registrable Securities from the registration
and the underwriting, and the number of shares that may be included in the registration and the underwriting shall be allocated, first to the
Existing Holders, second, to the Investors, pro rata among them based on the total number of their respective Registrable Securities which
they had requested to be included in such registration and underwriting; third, the Company; and fourth, to holders of other Securities of
the Company, provided, however, that the right of the underwriter(s) to exclude shares (including Registrable Securities) from the
registration and underwriting as described above shall be restricted so that all shares that are not Registrable Securities and are held by
any other Person (other than an Existing Holder), including, without limitation, any person who is an employee, officer, consultant or
director of the Company (or any Subsidiary of the Company) shall first be excluded from such registration and underwriting before any
Registrable Securities are so excluded. If any Investor disapproves of the terms of any such underwriting, such Investor may elect to
withdraw therefrom by written notice to the Company and the underwriter(s), delivered at least ten (10) days prior to the effective date of
the registration statement. Any Registrable Securities excluded or withdrawn from such underwriting shall be excluded and withdrawn
from the registration. For any Investor that is a partnership, the Investor and the partners and retired partners of such Investor, or the
estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons, and
for any Investor that is a corporation, the Investor and all corporations that are Associates of such Investor, shall be deemed to be a single
“Investor” and any pro rata reduction with respect to such “Investor” shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such “Investor”, as defined in this sentence.
(d)
Not Demand Registration. Registration pursuant to this Clause 2.2 shall not be deemed to be a demand registration as described in Clause
2.1. Except as otherwise provided herein, there shall be no limit on the number of times the Investors may request registration of
Registrable Securities under this Clause 2.2.
7
2.3
Form S-3 or Form F-3 Registration.
In case the Company shall receive from an Investor a written request or requests that the Company effect a registration on Form S-3 or Form F-3
and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Investors, then the Company
will:
(a)
(b)
Notice. Promptly give written notice of the proposed registration and the Investor’s or Investors’ request therefor, and any related
qualification or compliance, to all other Investors; and
Registration. As soon as practicable, effect such registration and all such qualifications and compliances as may be so requested and as
would permit or facilitate the sale and distribution of all or such portion of the Investors’ Registrable Securities as are specified in such
request, together with all or such portion of the Registrable Securities of any other Investor or Investors joining in such request as are
specified in a written request given within ten (10) Business Days after the Company provides the notice contemplated by Clause 2.3(a),
including the filing of any prospectus supplement to facilitate the sale and distribution of all such securities (a “Shelf Takedown”);
provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance pursuant to this
Clause 2.3:
(1)
(2)
(3)
(4)
if Form S-3 or Form F-3 is not available for such offering by the Investors;
if such Investor, together with the other Investors entitled to inclusion in such registration, proposes to sell Registrable Securities
at an aggregate price to the public (net of any underwriters’ discounts or commissions) of less than US$10,000,000;
if the Company shall furnish to the Investors a certificate signed by the President or Chief Executive Officer of the Company
stating that in the good faith judgment of the Board, it would be materially detrimental to the Company and its shareholders for
such Form S-3 or Form F-3 registration to be effected at such time, in which event the Company shall have the right to defer the
filing of the Form S-3 or Form F-3 registration statement no more than once during any twelve month period for a period of not
more than ninety (90) days after receipt of the request of the Investors under this Clause 2.3; provided that the Company shall
not register any other Company Securities during such ninety (90) day period; or
if the Company has, within the twelve (12) month period preceding the date of such request, already effected two
(2) registrations under the Securities Act in which the Investors had an opportunity to participate pursuant to this Agreement,
other than a registration from which the Registrable Securities of an Investor have been excluded (with respect to all or any
portion of the Registrable Securities an Investor requested be included in such registration) pursuant to the provisions of Clause
2.1(b) or Clause 2.2(c).
8
(c)
Not Demand Registration. Form S-3 or Form F-3 registrations shall not be deemed to be demand registrations as described in Clause 2.1.
Except as otherwise provided herein, there shall be no limit on the number of times an Investor may request registration of Registrable
Securities under this Clause 2.3.
2.4 Obligations of the Company. Whenever required to effect the registration of any Registrable Securities under this Agreement, including
a Shelf Takedown, the Company shall, as expeditiously as reasonably possible:
(a)
(b)
(c)
(d)
(e)
(f)
Registration Statement. Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use all
reasonable efforts to cause such registration statement to become effective, provided, however, that the Company shall not be required to
keep any such registration statement effective for more than sixty (60) days.
Amendments and Supplements. Prepare and file with the SEC such amendments and supplements to such registration statement and the
prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such registration statement.
Prospectuses. Furnish to each Investor such number of copies of a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as it may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by it that are included in such registration.
Blue Sky. Use all reasonable efforts to register and qualify the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by an Investor, provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any
such states or jurisdictions.
Underwriting. In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement in
usual and customary form, with the managing underwriter(s) of such offering. Each of the Investors participating in such underwriting
shall also enter into and perform its obligations under such an agreement.
Notification. Notify the Investors at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the
issuance of any stop order by the SEC in respect of such registration statement, or the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then
existing.
9
(g)
(h)
(i)
Opinion and Comfort Letter. Furnish, at the request of any Investor, on the date that such Registrable Securities are delivered to the
underwriter(s) for sale, if such securities are being sold through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) a copy of an opinion, dated
as of such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily
given to underwriters in an underwritten public offering, addressed to the underwriters, and (ii) a copy of the “comfort” letter dated as of
such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters.
Notwithstanding any of the foregoing provisions, the Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to Clause 2.1 or 2.3 if the registration request is subsequently withdrawn at the request of the Investors
holding at least a majority of the Registrable Securities to be registered (in which case the participating Investors requesting for the
withdrawal shall bear such expenses), unless, in the case of a registration requested under Clause 2.1, each of the Investors agree to forfeit
such right to demand registration pursuant to Clause 2.1; provided further, however, that if at the time of such withdrawal, the Investors
requesting for the withdrawal have learnt of a material adverse change in the condition, business, or prospects of the Company not known
to such Investors at the time of their request for such registration and have withdrawn their request for registration with reasonable
promptness after learning of such material adverse change, then the Investors shall not be required to pay any of such expenses and such
registration shall not constitute the use of a demand registration pursuant to Clause 2.1.
The Company shall pay all expenses incurred in connection with each registration requested pursuant to this Agreement, including
without limitation all U.S. federal, “blue sky” and all foreign registration, filing and qualification fees, printers’ and accounting fees, and
fees and disbursements of counsel for the Company (but excluding Selling Expenses), and reasonable expenses of one legal counsel if
such counsel is for the Investors and all other Existing Holders participating in such registration.
2.5 Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Agreement
with respect to the Registrable Securities of any Investor that such Investor shall furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of such securities as shall be required to timely effect the registration of their Registrable
Securities. In connection therewith, each Investor participating in a registration shall be required to represent and warrant to the Company that all such
information which is given in writing expressly for inclusion in such registration is true and accurate in all material respects.
10
2.6 No Registration Rights to Third Parties. Without the prior consent of Investors holding at least a majority of the Registrable Securities
then outstanding, the Company covenants and agrees that it shall not grant, or cause or permit to be created, for the benefit of any person or entity any
registration rights of any kind (whether similar to the demand, “piggyback” or Form S-3 or Form F-3 registration rights described in this Agreement, or
otherwise) relating to any Company Securities, other than rights that are not senior in right to the Investors.
2.7 Assignment. The registration rights under this Agreement may be transferred or assigned by any Investor to an Affiliate or any transferee
or assignee of its Company Securities representing one percent (1%) or more of the issued share capital of the Company.
2.8 Re-sale Rights. The Company shall at its own cost use its best efforts to assist any Investors in the sale or disposition of, and to enable
any Investor to sell under Rule 144 the maximum number of, its Registrable Securities, including without limitation (a) the prompt delivery of applicable
instruction letters to the Company’s transfer agent to remove legends from such Investor’s share certificates, (b) causing the prompt delivery of appropriate
legal opinions from the Company’s counsel in forms reasonably satisfactory to such Investor’s counsel, (c) if the Company has depositary receipts listed or
traded on any exchange or inter-dealer quotation system, (i) the prompt delivery of instruction letters to the Company’s share registrar and depositary agent
to convert such Investor’s securities into depositary receipts or similar instruments to be deposited in such Investor’s brokerage account(s), (ii) the prompt
payment of all costs and fees related to such depositary facility, including conversion fees and maintenance fees for Registrable Securities held by such
Investor and (iii) taking any and all other steps necessary to facilitate the conversion into depositary receipts or similar instruments (for the avoidance of
doubt the Company shall not be obligated to pay any American depositary share issuance or transfer fees or expenses and stock transfer taxes in relation to
any sale or disposition of the Registrable Securities).
2.9 Rule 144 Reporting. The Company agrees to: (a) make and keep public information available, as those terms are understood and defined
in Rule 144, at all times; (b) file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the
Exchange Act; and (c) so long as any Investor owns any Registrable Securities, to furnish to such Investor promptly upon request (i) a written statement by
the Company as to its compliance with the reporting requirements of Rule 144, the Securities Act and the Exchange Act, or its qualification as a registrant
whose securities may be resold pursuant to Form F-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the
Company, and (iii) such other reports and documents of the Company as such Investor may reasonably request in availing itself of any rule or regulation of
the SEC that permits the selling of any such securities without registration or pursuant to Form F-3 or S-3.
2.10 Termination. Notwithstanding anything to the contrary in this Agreement, the rights of any Investor under this Agreement shall
terminate and be of no further force and effect at the earlier of (x) the fifth anniversary of the date hereof and (y) except with respect to the Company’s
obligations pursuant to Clause 2.8 and Clause 2.9, which shall survive until the fifth anniversary of the date hereof, such time at which all Registrable
Securities held by such Investor (and any Associate of such Investor with whom such Investor must aggregate its sales of Registrable Securities under Rule
144) proposed to be sold may be sold under Rule 144 in any ninety (90)-day period without registration in compliance with Rule 144.
11
3.
Indemnification
3.1 Indemnification by the Company. The Company will, and it hereby does, indemnify and hold harmless, to the extent permitted by law,
(i) the seller of any Registrable Securities or Company Securities (with respect to Existing Holders) covered by each registration statement filed by the
Company to which Clause 2 applies and (ii) an Existing Holder selling any Company Securities covered by a registration statement filed by the Company
pursuant to the Existing Shareholders Agreement or the Investor Rights Agreement, each affiliate of such seller and their respective trustees, directors, and
officers or general and limited partners (including any director, officer, affiliate, employee, representative, agent, and controlling Person of any of the
foregoing, within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), each other Person who participates as an
underwriter in the offering or sale of such securities and each other Person, if any, who controls such seller or any such underwriter within the meaning of
the Securities Act (each, a “Seller Indemnified Party”, and collectively, the “Seller Indemnified Parties”), against any and all actions or proceedings
(whether or not a Seller Indemnified Party is a party thereto), losses, claims, damages, or liabilities, joint or several, and expenses (including, without
limitation, reasonable attorney’s fees and reasonable expenses of investigation) to which such Seller Indemnified Party becomes subject under the
Securities Act, common law, or otherwise, insofar as such losses, claims, damages, liabilities, or expenses (or actions or proceedings in respect thereof,
whether or not such Seller Indemnified Party is a party thereto) arise out of, relate to, or are based upon (a) any untrue statement or alleged untrue statement
of any material fact contained in any such registration statement, any preliminary, final, or supplemental prospectus contained therein, or any amendment or
supplement thereto or any issuer free-writing prospectus relating to any sale or distribution pursuant thereto, or (b) any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in light of the
circumstances under which they were made) not misleading, and the Company will reimburse such Seller Indemnified Party for any legal or any other
expenses reasonably incurred by such Seller Indemnified Party in connection with investigating or defending against any such loss, claim, liability, action,
or proceeding; provided, that the Company shall not be liable to any Seller Indemnified Party in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof), or expense arises out of or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement or amendment or supplement thereto or in any such preliminary, final, or supplemental
prospectus or issuer free-writing prospectus in reliance upon and in conformity with written information furnished to the Company through an instrument
duly executed by such seller specifically stating that it is for use in the preparation thereof. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of the Company or any of the prospective sellers, or any of their respective affiliates, directors, officers, or
controlling Persons and shall survive the transfer of such securities by such seller.
12
3.2 Indemnification by the Investors/Existing Holders. The Company may require, as a condition to including any Registrable Securities
in any registration statement to which Clause 2 applies (or, with respect to the Existing Holders, any Company Securities in any registration statement to
which the Existing Shareholders Agreement or Investor Rights Agreement applies), that the Company shall have received an undertaking reasonably
satisfactory to it from the prospective seller of such Registrable Securities or Company Securities (as applicable) or any underwriter to indemnify and hold
harmless (in the same manner and to the same extent as set forth in Clause 3.1) the Company, its directors, officers, affiliates, employees, representatives,
agents, and controlling Persons (each, a “Company Indemnified Party,” and collectively, the “Company Indemnified Parties,” and together with the
Seller Indemnified Parties, the “Indemnified Parties” and each individually an “Indemnified Party”) with respect to any untrue statement or alleged
untrue statement in or omission or alleged omission from such registration statement, any preliminary, final or supplemental prospectus contained therein,
or any amendment or supplement, if such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company through an instrument duly executed by such seller or underwriter respectively, specifically
stating that it is for use in the preparation of such registration statement, preliminary, final, or supplemental prospectus or amendment or supplement, or a
document incorporated by reference into any of the foregoing; provided, however, that the indemnity agreement contained in this Clause 3.2 shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of such seller (which
consent shall not be unreasonably withheld or delayed). Such indemnity shall remain in full force and effect regardless of any investigation made by or on
behalf of the Company or any of the prospective sellers, or any of their respective affiliates, directors, officers, or controlling Persons and shall survive the
transfer of such securities by such Investor or Existing Holder, as the case may be.
3.3 Notices of Claims, Etc. Promptly after receipt by an Indemnified Party hereunder of written notice of the commencement of any action
or proceeding with respect to which a claim for indemnification may be sought pursuant to this Clause 3, such Indemnified Party will, if a claim in respect
thereof is to be made against an indemnifying party, give prompt written notice to the latter of the commencement of such action or proceeding; provided
that the failure of the Indemnified Party to give prompt notice as provided herein (i) shall not relieve the indemnifying party of its obligations under this
Clause 3, except to the extent that the indemnifying party is materially prejudiced by such failure to give prompt notice, and (ii) shall not, in any event,
relieve the indemnifying party from any obligations which it may otherwise have to any Indemnified Party in addition to any indemnification obligation
provided in Clauses 3.1 and 3.2. In case any such action or proceeding is brought against an Indemnified Party, unless in such Indemnified Party’s
reasonable judgment a conflict of interest between such Indemnified Party and indemnifying parties may exist in respect of such action or proceeding, the
indemnifying party will be entitled to participate in and to assume the defense thereof (at its expense), jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to such Indemnified Party, and after notice from the indemnifying party to such
Indemnified Party of its election so to assume the defense thereof, the indemnifying party will not be liable to such Indemnified Party for any legal or other
expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party will
consent to entry of any judgment or settle any action or proceeding which (i) does not include, as an unconditional term thereof, the giving by the claimant
or plaintiff to such Indemnified Party of a release from all liability in respect of such action or proceeding, and (ii) does not involve the imposition of
equitable remedies or of any obligations on such Indemnified Party and does not otherwise adversely affect such Indemnified Party, other than as a result of
the imposition of financial obligations for such Indemnified Party will be indemnified hereunder.
13
3.4
(a)
Contribution.
If the indemnification provided for in this Clause 3 from the indemnifying party is unavailable to or insufficient to fully hold harmless an
Indemnified Party hereunder in respect of any action or proceeding, losses, damages, liabilities, or expenses referred to herein, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such action or proceeding, losses, damages, liabilities, or expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and such Indemnified Party in connection with the actions which resulted in such action or
proceeding losses, damages, liabilities, or expenses, as well as any other relevant equitable considerations. The relative fault of such
indemnifying party and such Indemnified Party shall be determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made
by, or relates to information supplied by, such indemnifying party or Indemnified Parties, and the parties’ relative intent, knowledge,
access to information, and opportunity to correct or prevent such action. The amount paid or payable by a party under this Clause 3.4 as a
result of the action or proceeding, losses, damages, liabilities, and expenses referred to above shall be deemed to include any legal or
other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding.
(b)
The parties hereto agree that it would not be just and equitable if contribution pursuant to this Clause 3.4 were determined by pro rata
allocation or by any other method of allocation which does not take account of the equitable considerations referred to in Clause 3.4(a)
hereof. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent misrepresentation.
3.5 Limitation of Investor Liability. Notwithstanding any other provisions of this Agreement, the aggregate liability of an Investor or
Existing Holder under this Clause 3 shall be limited to the aggregate net proceeds received by such seller in connection with any offering to which such
registration under the Securities Act relates, unless such liability arises out of or is based on the willful misconduct or gross negligence of such Investor or
Existing Holder.
3.6 Other Indemnification. Indemnification similar to that specified in the preceding provisions of this Clause 3 (with appropriate
modifications) shall be given by the Company and each Investor in respect of Registrable Securities or Existing Holder in respect of Company Securities
(as applicable) with respect to any required registration or other qualification of securities under any federal or state law or regulation or governmental
authority other than the Securities Act.
14
3.7 Non-Exclusivity. The obligations of the parties under this Clause 3 shall be in addition to any liability which any party may otherwise
have to any other party.
3.8 Existing Holders. The Company agrees that the Existing Holders shall be third party beneficiaries of this Clause 3.
4.
Miscellaneous.
4.1 Conditions Precedent. Subject to the immediately following sentence, the Parties agree and acknowledge that the provisions of this
Agreement shall be conditional upon Closing taking place and shall come into effect upon Closing and expiration of the lock-up period under [Section 6.4]
of the Share Purchase Agreement. Notwithstanding the foregoing, this Clause 4 and those provisions of this Agreement which are necessary for the purpose
of interpretation of Clause 4 shall take effect upon the date first above written.
4.2 Governing Law. This Agreement, the rights and obligations of the parties hereto, and all claims or disputes relating hereto, shall be
governed by and construed in accordance with the law of Hong Kong, without regard to the conflicts of law rules thereunder.
4.3 Dispute Resolution. Any dispute, controversy or claim arising out of or relating to this Agreement, including, but not limited to, any
question regarding the breach, termination or invalidity thereof shall be finally resolved by arbitration in Hong Kong in accordance with the administered
rules (the “Rules”) of the Hong Kong International Arbitration Centre (the “HKIAC”) in force at the time of commencement of the arbitration, which
Rules are deemed to be incorporated by reference into this Section. The number of arbitrators shall be three and shall be selected in accordance with the
Rules. All selections shall be made within thirty (30) days after the selecting party gives or receives, as the case may be, the demand for arbitration. The
seat of the arbitration shall be in Hong Kong and the language to be used shall be English. Any arbitration award shall be (i) in writing and shall contain the
reasons for the decision, (ii) final and binding on the parties hereto and (iii) enforceable in any court of competent jurisdiction, and the parties hereto agree
to be bound thereby and to act accordingly.
4.4 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Facsimile and e-mailed copies of signatures shall be deemed to be originals for purposes of the
effectiveness of this Agreement.
4.5 Notices. All notices and other communications under this Agreement shall be in writing and shall be deemed effectively given (i) when
delivered personally by hand (with written confirmation of receipt), (ii) when sent by fax (with written confirmation of transmission) or (iii) two Business
Days following the day sent by international overnight courier (with written confirmation of receipt), in each case at the addresses and facsimile numbers
set forth on Schedule 2 (or to such other address or facsimile number as a Party may have specified by notice given to the other Parties pursuant to this
provision).
15
4.6 Entire Agreement; Amendments and Waivers. This Agreement, the Share Purchase Agreement and the other transaction documents
contemplated under the Share Purchase Agreement constitute the full and entire understanding and agreement among the Parties with regard to the subjects
hereof and thereof, and supersedes all other agreements between or among any of the Parties with respect to the subject matter hereof. Any term of this
Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of each Party.
4.7 Severability. If a provision of this Agreement is held to be unenforceable under applicable Laws, such provision shall be excluded from
this Agreement and the remainder of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with
its terms.
4.8 Further Assurances. The Parties agree to execute such further instruments and to take such further actions as may be reasonably
necessary to carry out the intent of this Agreement.
4.9 No Waiver. Failure to insist upon strict compliance with any of the terms, covenants, or conditions hereof will not be deemed a waiver of
such term, covenant, or condition, nor will any waiver or relinquishment of, or failure to insist upon strict compliance with, any right, power or remedy
power hereunder at any one or more times be deemed a waiver or relinquishment of such right, power or remedy at any other time or times.
[The remainder of this page has been intentionally left blank.]
16
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the day and year first above written.
58.COM, INC.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Chief Executive Officer
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the day and year first above written.
INVESTORS
BLUERUN VENTURES IV, L.P.
By:
Its:
By:
its:
BRV Partners IV, L.P.
General Partner
BRV Partners IV, L.P.
General Partner
/s/ Jonathan Ebinger
By:
Name: Jonathan Ebinger
Title: Authorized Signatory
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the day and year first above written.
INVESTORS
NOKIA GROWTH PARTNERS II L.P.
By:
Its:
NG Partners II L.L.C.
General Partner
By:
Name:
Title: Managing Member
/s/ John Gardner
John Gardner
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the day and year first above written.
INVESTORS
LT GROWTH INVESTMENT IV LIMITED
/s/ Wenting Deng
By:
Name: Wenting Deng
Title:
Director
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the day and year first above written.
INVESTORS
SEQUOIA CAPITAL CHINA II, L.P.
/s/ Yu Shan
By:
Name: Yu Shan
Title:
Authorized Signatory
SEQUOIA CAPITAL CHINA PARTNERS FUND II, L.P.
/s/ Yu Shan
By:
Name: Yu Shan
Title:
Authorized Signatory
SEQUOIA CAPITAL PRINCIPALS FUND II, L.P.
/s/ Yu Shan
By:
Name: Yu Shan
Title:
Authorized Signatory
SEQUOIA CAPITAL 2010 CV HOLDCO, LTD.
/s/ Yu Shan
By:
Name: Yu Shan
Title:
Authorized Signatory
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the day and year first above written.
INVESTORS
CG INFO SERVICES INVESTMENT LIMITED
/s/ E-ho Mary Lam
By:
Name: E-ho Mary Lam
Title:
Authorized Signatory
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the day and year first above written.
INVESTORS
CHINA RENAISSANCE HOLDINGS LIMITED
/s/ Fan Bao
By:
Name: Fan Bao
Title:
CEO
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the day and year first above written.
INVESTORS
CLASSROOM INVESTMENTS INC.
/s/ Theresa Tam
By:
Name: Theresa Tam
Title:
Authorized Signatory
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the day and year first above written.
INVESTORS
CHAN KEI LIM
/s/ Chan Kei Lim
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the day and year first above written.
INVESTORS
GLEE INVESTMENT LIMITED
/s/ Norma Kuntz
By:
Name: Norma Kuntz
Title:
Director
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the day and year first above written.
INVESTORS
TIGER GLOBAL MAURITIUS FUND
/s/ Moussa Taujoo
By:
Name: Moussa Taujoo
Director
Title:
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the day and year first above written.
INVESTORS
INTERNET FUND II PTE. LTD.
/s/ Venkatagiri Mudeliar
By:
Name: Venkatagiri Mudeliar
Title:
Director
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the day and year first above written.
INVESTORS
TRINITYVILE PROFIT LIMITED
/s/ Haoyong Yang
By:
Name:
Title:
[Signature Page to Registration Rights Agreement]
SCHEDULE 1
List of Investors
1. BLUERUN VENTURES IV, L.P.
2. NOKIA GROWTH PARTNERS II L.P.
3. LT GROWTH INVESTMENT IV LIMITED
4. SEQUOIA CAPITAL CHINA II, L.P.
5. SEQUOIA CAPITAL CHINA PARTNERS FUND II, L.P.
6. SEQUOIA CAPITAL PRINCIPALS FUND II, L.P.
7. SEQUOIA CAPITAL 2010 CV HOLDCO, LTD.
8. CG INFO SERVICES INVESTMENT LIMITED
9. CHINA RENAISSANCE HOLDINGS LIMITED
10. CLASSROOM INVESTMENTS INC.
11. CHAN KEI LIM
12. GLEE INVESTMENT LIMITED
13. TIGER GLOBAL MAURITIUS FUND
14. INTERNET FUND II PTE. LTD.
15. TRINITYVILE PROFIT LIMITED
XIAOXIANG INTERNATIONAL TECHNOLOGY VENTURE CAPITAL LP
SUBSCRIPTION AGREEMENT
Exhibit 4.18
Xiaoxiang International Technology Venture Capital LP
Offices of Maples Corporate Services Limited
PO Box 309, Ugland House
Grand Cayman, KY1-1104
Cayman Islands
Xiaoxiang International Capital Management Co., Ltd.
Offices of Maples Corporate Services Limited
PO Box 309, Ugland House
Grand Cayman, KY1-1104
Cayman Islands
Ladies and Gentlemen,
The undersigned investor (the “Investor”) hereby applies to become a limited partner (a “Limited Partner”) of Xiaoxiang International Technology
Venture Capital LP, a Cayman Islands exempted limited partnership (the “Fund”), on the terms and conditions set forth in these subscription documents
(which includes this Subscription Agreement, together with any amendments or supplements thereto, being herein called the “Subscription Agreement”)
(collectively, these “Subscription Documents”). Reference is made to the Amended and Restated Agreement of Exempted Limited Partnership of the Fund
(the “Partnership Agreement”) made between Xiaoxiang International Capital Management Co., Ltd., an exempted company incorporated in the Cayman
Islands, as general partner (the “General Partner”), the Cornerstone Limited Partners, the Withdrawing Limited Partner and the other Limited Partners from
time to time named on Annex A therein, which has been furnished to the Investor and is incorporated by reference in its entirety in this Subscription
Agreement and which together form one agreement. By executing this Subscription Agreement, the Investor agrees with the General Partner (for itself and
as agent and attorney for each existing Limited Partner) to be, and upon acceptance of this Subscription Agreement shall be, irrevocably bound as a Limited
Partner of the Fund by the terms, provisions and requirements applicable to Limited Partners as set forth herein and in the Partnership Agreement.
Capitalized terms used, but not defined, herein shall have the respective meanings given to them in the Partnership Agreement.
1.
Subscription.
(a) The Fund will be governed by the Partnership Agreement in the form delivered herewith, and as the same may be modified in accordance
with the terms of any amendment thereto. Xiaoxiang International Capital Management Co., Ltd., an exempted company incorporated in the Cayman
Islands, is the Fund’s General Partner.
(b) Subject to the terms and conditions of this Subscription Agreement and the Partnership Agreement:
(i)
the General Partner, on behalf of the Fund, agrees to sell to the Investor and the Investor, in reliance on the representations and
warranties of the General Partner contained in section 4 of this Subscription Agreement, irrevocably subscribes for and agrees to
purchase an Interest in the Fund;
(ii)
(iii)
the Investor, in reliance on the representations and warranties of the General Partner contained in section 4 of this Subscription
Agreement, agrees to become a limited partner of the Fund (a “Limited Partner”); and
the General Partner, on behalf of the Fund (and as agent and attorney for each existing Limited Partner), agrees that the Investor
shall be admitted as a Limited Partner, in consideration for the Investor’s agreement to be bound by the terms and provisions of
the Subscription Agreement and the Partnership Agreement, with a Capital Commitment in the amount and other consideration
equal to the amount and other consideration, as applicable, set forth on the executed signature page at the end of this
Subscription Agreement (the Investor’s “Capital Commitment”).
(c) The Investor hereby agrees to furnish the General Partner (or its designee), upon request, with all information that the General Partner
may hereafter reasonably require in order to make any tax related determination and/or to claim on behalf of the Investor certain tax benefits.
(d) The Investor hereby agrees that it will properly execute and provide to the Fund or General Partner in a timely manner any and all tax
documentation that may be reasonably required by the General Partner in connection with the Fund (including, without limitation, an IRS Form W-9 or W-
8, as applicable).
2.
Adoption of Partnership Agreement.
(a) Each of the Investor and the General Partner, on behalf of itself and the Partnership, hereby accepts, adopts, and agrees to be bound by
each and every provision contained in the Partnership Agreement, and the Investor agrees to become a Limited Partner thereunder.
(b) The obligations of each party set forth in this Subscription Agreement are separate from the rights and obligations of such party under the
Partnership Agreement and may be enforced in full in accordance with the terms of this Subscription Agreement and the Partnership Agreement.
(c) The General Partner hereby agrees, covenants and understands that (i) all documents pertaining to this investment will be made available
for inspection by the Investor, and (ii) the books and records of the Fund will be available for inspection by the Investor in accordance with the terms of the
Partnership Agreement.
3.
Certain Acknowledgments and Agreements of the Parties.
(a) The Investor hereby authorizes, and agrees to, the use of electronic mail, for the transmittal of all documents required to be delivered by,
or on behalf of, the Fund to the Investor under applicable law or regulation and pursuant to the Partnership Agreement and the Subscription Documents,
including, but not limited to, notices as contemplated by the “Notices” provision in the Partnership Agreement. The Investor acknowledges and agrees that
the General Partner will deliver documents sent by electronic mail to the address set forth in the Investor Questionnaire, unless otherwise notified by the
Investor in writing. Sections 8 and 19(3) of the Electronic Transactions Law (2003 Revision) of Cayman Islands shall not apply to this Subscription
Agreement.
(b) Subject to the provisions on indebtedness contained in the Partnership Agreement, the General Partner shall have the right, at its option,
to cause the Partnership to borrow money from any Person, or to guarantee loans or other extensions of credit for the purpose of (i) providing interim
financing to cover Partnership Expenses or (ii) providing interim financing to the extent necessary to consummate the purchase of Portfolio Investments in
either case prior to the receipt of Capital Contributions. Such Indebtedness may be secured by a pledge of the Partnership's interests in Securities or any
other investments made or other property held by the Partnership.
4.
(a)
Representations and Warranties.
The General Partner represents and warrants that each of the following shall be true and correct as of the date hereof:
(i)
(ii)
(iii)
The Partnership is duly formed and validly existing as an exempted limited partnership under the laws of the Cayman Islands
and, subject to applicable law, has all requisite partnership power and authority to carry on its business as now conducted and as
proposed to be conducted. The General Partner is duly formed and validly existing as a Cayman Islands exempted company with
limited liability and, subject to applicable law, has all requisite limited liability company power and authority to act as general
partner of the Partnership and to carry out the terms of this Subscription Agreement and the Partnership Agreement applicable to
it.
The execution and delivery of this Subscription Agreement has been authorized by all necessary action on behalf of the
Partnership and this Subscription Agreement, once executed and delivered, will be a legal, valid and binding obligation of the
Partnership, enforceable against the Partnership in accordance with its terms. The execution and delivery by the General Partner
of the Partnership Agreement has been authorized by all necessary action on behalf of the General Partner and the Partnership
Agreement, once executed and delivered, will be a legal, valid and binding agreement of the General Partner, enforceable
against the General Partner in accordance with its terms.
The execution and delivery of this Subscription Agreement and the consummation of the transactions contemplated hereby will
not conflict with or result in any violation of or default under any provision of the Partnership Agreement, or any agreement or
other instrument to which the Partnership is a party or by which it or any of its properties is bound, or any permit, franchise,
judgment, decree, statute, order, rule or regulation applicable to the Partnership or its business or properties. The execution and
delivery of the Partnership Agreement and the consummation of the transactions contemplated thereby will not conflict with or
result in any violation of or default under any provision of the memorandum and articles of association and other organizational
documents of the General Partner, or any agreement or instrument to which the General Partner is a party or by which it or any
of its properties is bound, or any permit, franchise, judgment, decree, statute, order, rule or regulation applicable to the General
Partner or its businesses or properties
(b) The Investor understands that Sidley Austin LLP acts as counsel for only the General Partner and its Affiliates, and Maples and Calder
acts as Cayman Islands counsel for only the Fund and the General Partner, and no attorney-client relationship exists between any such firm and any other
person by reason of such person making an investment in the Fund.
(c) The Investor understands and acknowledges that: the investment in the Fund is subject to restrictions on sales, transfers and withdrawals
as set forth in the Partnership Agreement and the Investor must bear the economic risk of its investment in the Interest until the termination of the Fund or
otherwise ceases to be a Limited Partner in the Fund.
(d) The Investor is aware and acknowledges that: (i) the Fund does not have any operating history as of July, 2015; (ii) the Interest involves a
substantial degree of risk of loss of the Investor’s entire investment and there is no assurance of any income from any such investment; and (iii) because
there are substantial restrictions on the transferability of the Interests it may not be possible for the Investor to liquidate such Investor’s investment readily
in any event, including in case of an emergency.
(e) The Investor has the power and authority to enter into this Subscription Agreement and each other document required to be executed and
delivered by the Investor in connection with this subscription for Interests, and to perform its obligations hereunder and thereunder and consummate the
transactions contemplated hereby and thereby and the person signing this Subscription Agreement on behalf of the Investor has been duly authorized to
execute and deliver this Subscription Agreement and each other document required to be executed and delivered by the Investor in connection with this
subscription for Interests.
(f) The Investor maintains its domicile, and is not merely a transient or temporary resident, at the residence address shown in the Investor
Questionnaire.
(g) The Investor agrees that if it determines to transfer or assign all or any portion of its Interest pursuant to the provisions hereof and subject
to the Partnership Agreement, it will cause its proposed transferee to agree to the transfer restrictions set forth herein and to make the representations set
forth herein.
(h) The Investor is a non-“United States person” as defined in Appendix A attached hereto. The Investor is not acquiring any portion of the
Interest by or on behalf of, nor will the Investor hold the Interest for the account or benefit of, directly or indirectly, or engage in any derivative transaction
relating to the Fund or the Interest with, any “United States person”.
(i) The Investor has not been solicited to purchase the Interest while present in the United States, its territories or possessions, nor have the
funds to be utilized for such purchase been obtained from any “United States person.”
5.
Payment of Subscription.
The Fund expects that the first Drawdown will occur on a date that is (x) as soon as practicable after the date hereof, and (y) on the closing date of,
and conditional upon the consummation of, the first Portfolio Investment. Subject to the terms and conditions set forth in the Partnership Agreement, the
Fund may hold a Secondary Closing and one or more Subsequent Closings from time to time not less than 9 months after the Initial Closing for the purpose
of accepting additional subscriptions for Interests from existing and/or new Limited Partners. The Fund generally expects Capital Commitments to be
drawn down from time to time, as determined by the General Partner in accordance with each Limited Partner’s Pro Rata Share.
6.
General.
This Subscription Agreement shall be binding upon the Investor and the heirs, personal representatives, successors and assigns of the Investor. The
Investor agrees that neither this Subscription Agreement nor any rights that may accrue to the Investor hereunder may be transferred or assigned without
the consent of the General Partner, which may be granted or withheld in its good faith discretion. Notwithstanding the place where this Subscription
Agreement may be executed by any of the parties, the parties expressly agree that all terms and provisions hereof shall be governed, construed and enforced
solely under the laws of the Cayman Islands without reference to any principles of conflicts of law. This Subscription Agreement shall survive the
admission of the Investor to the Fund.
7.
Jurisdiction.
The Investor irrevocably consents and agrees that any dispute or claim with respect to this Subscription Agreement and any action for enforcement
of any judgment in respect thereof (a "Dispute") will be resolved by final and binding arbitration in accordance with the Rules of Arbitration of the
International Chamber of Commerce (“ICC”) in accordance with the law and not ex aequo et bono, the number of arbitrators shall be three, the seat of the
arbitration shall be in Hong Kong and the language to be used in the arbitral proceedings shall be English. Each of the General Partner and the Advisory
Board shall be entitled to nominate one arbitrator, and the chairman shall be chosen by the two arbitrators nominated by the General Partner and the
Advisory Board. If the chairman is not chosen by the two arbitrators within 30 days of the date of appointment of the later of the two party nominated
arbitrators, the chairman shall be nominated by the ICC International Court of Arbitration (“ICC Court”). No party shall be required to give general
discovery of documents, but may be required to produce specific, identified documents which are relevant to the Dispute. Any right to refer any question of
law and any right of appeal on the law or the merits to any court is waived. Nothing in this section 8 shall be construed as preventing any party to a Dispute
from seeking interim relief in any court of competent jurisdiction. Any party shall have the right to have recourse to and shall be bound by the pre-arbitral
referee procedure of the ICC in accordance with its Rules for Pre-Arbitral Referee Procedure. By execution and delivery of this Subscription Agreement,
each Limited Partner hereby submits to and accepts for itself and in respect of its property, generally and unconditionally to the fullest extent permitted by
law, the exclusive dispute resolution jurisdiction of the arbitral body. Each party hereby irrevocably waives any objection which it may now or hereafter
have to the laying of venue of any of the aforesaid Disputes arising out of or in connection with this Subscription Agreement brought in the arbitral body
referred to above and hereby further irrevocably waives and agrees not to plead or claim in any court that any such Dispute brought in accordance with this
section 8 has been brought in an inconvenient forum. Nothing in this section shall be deemed to constitute a consent or waiver with respect to any matter
not specifically referred to herein.
8.
Disclosure Authorization; Certain Confidentiality Override.
By executing this Subscription Agreement, the Investor authorizes the Fund (or its delegate, on behalf of the Fund) to utilize and to provide
information regarding the Investor’s account, including information for reporting of tax withholding, to intermediaries, such as the General Partner and the
Fund’s legal counsel and withholding agents, or any of their respective designees, and agrees to allow each of the Fund and the General Partner to divulge
the name of such Investor or provide information with respect to such Investor if it is so required by application of law, regulation, judicial process, at the
request of a regulator, self-regulatory body or governmental entity having jurisdiction over the Fund. The Investor also expressly authorizes the Fund and
the General Partner or any of their respective designees to provide copies of any tax or tax-related documentation arising out of or related to the Investor’s
investment in the Fund (including, without limitation, returns, withholding statements, information filings or requests) to any financial advisors, investment
managers, agents, representatives, attorneys, accountants, tax advisors, consultants of the Investor or other Persons that provide services to, or otherwise
advise, the Investor on a "need to know" basis; provided that such parties shall keep such information confidential.
9.
Severability.
If any provision of this Subscription Agreement shall be found by any court or administrative body of competent jurisdiction to be invalid or
unenforceable, such invalidity or unenforceability shall not affect the other provisions of this Subscription Agreement which shall remain in full force and
effect.
10.
Certain Interpretative Matters.
Any phrase introduced by the term “including” or any similar expression shall be construed as illustrative and shall not limit the sense of the words
preceding those terms.
11.
Withholding; Information Reporting; FATCA.
The Investor acknowledges and agrees that:
(a)
(b)
(c)
(d)
(e)
the Fund is required to comply with the provisions of FATCA;
it will provide, in a timely manner, such information regarding the Investor and its beneficial owners and such forms or documentation as
may be requested from time to time by the Fund (whether by the General Partner) to enable the Fund to avoid or reduce any withholding
under FATCA (or any other applicable law) and comply with the requirements and obligations imposed on it pursuant to FATCA (or any
other withholding or information reporting laws), specifically, but not limited to, forms and documentation which the Fund may require
to determine whether or not the relevant investment is a "US Reportable Account" (or equivalent under any other FATCA regime) and to
comply with the relevant due diligence procedures in making such determination;
any such forms or documentation requested by the Fund, the General Partner or any of their agents pursuant to paragraph (b), or any
financial or account information with respect to the Investor's investment in the Fund, may be disclosed to the Cayman Islands Tax
Information Authority (or any other governmental body which collects information in accordance with FATCA or any other applicable
withholding or information reporting regime) and to any withholding agent;
to the extent permitted by law, it waives, and/or shall cooperate with the Fund and the General Partner to obtain a waiver of, the
provisions of any law which:
(i)
(ii)
prohibit the disclosure by the Partnership, the General Partner or by any of their agents, of the information or documentation
requested from the Investor pursuant to paragraph (b); or
prohibit the reporting of financial or account information by the Fund, the General Partner or any of their agents required
pursuant to FATCA; or
(iii)
otherwise prevent compliance by the Fund with its obligations under FATCA;
if it provides information and documentation that is in anyway misleading, or it fails to provide the Fund, the General Partner or any of
their agents with the requested information and documentation requested pursuant to paragraph (b), the General Partner reserves the right
(whether or not such action or inaction leads to compliance failures by the Partnership, or a risk of the Partnership or its investors being
subject to withholding tax or other penalties):
(i)
(ii)
to take any action and/or pursue all remedies at its disposal including, without limitation, compulsory redemption or withdrawal
of the Investor; and
to hold back from any redemption proceeds, or to deduct from the Investor's applicable account, any liabilities, costs, expenses
or taxes caused (directly or indirectly) by the Investor's action or inaction; and
(f)
(g)
it shall have no claim against the Fund, the General Partner or any of their agents, for any form of damages or liability as a result of
actions taken or remedies pursued by or on behalf of the Fund in order to comply with FATCA.
The Investor hereby indemnifies the Fund, the General Partner and each of their respective principals, members, managers, officers,
directors, shareholders, employees and agents and agrees to hold them harmless from and against any FATCA (or other withholding or
information reporting) related liability, action, proceeding, claim, demand, costs, damages, expenses (including legal expenses) penalties
or taxes whatsoever which the Fund and/or General Partner may incur as a result of any action or inaction (directly or indirectly) of the
Investor (or any related person) described in paragraphs (b) to (f) above. This indemnification shall survive the Investor’s death or
disposition of its Interests in the Fund.
For the purposes of this provision, FATCA means:
(i)
(ii)
sections 1471 to 1474 of the U.S. Internal Revenue Code of 1986 and any associated legislation, regulations or guidance, or
similar legislation, regulations or guidance enacted in any jurisdiction which seeks to implement similar tax reporting and/or
withholding tax regimes;
any intergovernmental agreement, treaty, regulation, guidance or any other agreement between the Cayman Islands (or any
Cayman Islands government body) and the US, the UK or any other jurisdiction (including any government bodies in such
jurisdiction), entered into in order to comply with, facilitate, supplement or implement the legislation, regulations or guidance
described in paragraph (i); and
(iii)
any legislation, regulations or guidance in the Cayman Islands that give effect to the matters outlined in the preceding
paragraphs.
12.
Third Parties.
A person who is not a party to this Subscription Agreement may not, in its own right or otherwise, enforce any term of this Subscription
Agreement. Notwithstanding any other term of this Subscription Agreement, the consent of any person who is not a party to this Subscription Agreement is
not required for any amendment to, or variation, release, rescission or termination of this Subscription Agreement.
13.
AML.
The Investor represents and warrants that the Interest is to be purchased with funds that are from legitimate sources in connection with the
Investor’s regular business activities and which do not constitute the proceeds of criminal conduct or criminal property within the meaning given in the
Proceeds of Crime Law (2014 Revision) of the Cayman Islands and the Regulations or Guidance Notes issued pursuant thereto, further, the Investor
acknowledges and understands that if any person resident in the Cayman Islands knows or suspects or has reasonable grounds for knowing or suspecting
that another person is engaged in criminal conduct or is involved with terrorism or terrorist property and the information for that knowledge or suspicion
came to their attention in the course of business in the regulated sector, or other trade, profession, business or employment, the person will be required to
report such knowledge or suspicion to (i) the Financial Reporting Authority of the Cayman Islands, pursuant to the Proceeds of Crime Law (2014 Revision)
of the Cayman Islands if the disclosure relates to criminal conduct or money laundering, or (ii) a police officer of the rank of constable or higher, or the
Financial Reporting Authority, pursuant to the Terrorism Law (2011 Revision) of the Cayman Islands, if the disclosure relates to involvement with
terrorism or terrorist financing and property and any such report shall not be treated as a breach of confidence or of any restriction upon the disclosure of
information imposed by any enactment or otherwise and the fact of such disclosure shall not give rise to any liability for the disclosure.
14.
Privacy Policy
The Fund and the General Partner may obtain non-public personal information about you from this Subscription Agreement and related forms
including without limitation (i) name, address, assets, income, and investment experience; (ii) information about client and investor transactions (for
example, account activity and balances); and (iii) information from other third-party sources (which, for example, may include credit reporting agencies).
Telephone calls and other electronic communications with the Fund and the General Partner may also be monitored or recorded. No such information will
be disclosed except in the course of processing subscriptions, transfers, reports and otherwise administering the Fund, or as permitted by law, for
compliance with applicable laws, or as required by law of relevant government or administrative authority and then, to the extent reasonably possible, only
subject to customary undertakings of confidentiality. Such information may also be revealed to government agencies, as necessary and permissible under
applicable laws, in connection with legal proceedings in compliance with any applicable law, or otherwise to assert and protect legal interests or as part of a
corporate transaction with a successor or affiliate. Such information may be made available to outside service providers, outside counsel, auditors, and
other independent professionals for these purposes. Such information may be transferred internationally for these purposes, including to the US and other
countries which the European Union has deemed do not provide “adequate” protections. This same policy will apply regardless of the international transfer
or processing of such information. No such information is shared with unaffiliated third-parties for their marketing purposes.
Appropriate physical, electronic and procedural controls are maintained to safeguard such information. These standards are reasonably designed
to:
a)
ensure the security and confidentiality of your records and information;
b) protect against any anticipated threats or hazards to the security or integrity of your records and information; and
c)
protect against unauthorized access to or use of your records or information that could result in substantial harm or inconvenience to you.
Written notice and consent will be sought for any retroactive application of any material changes to this policy. You have a right to access the
personal information about them and to request the correction of any error in relation to their personal information or to object to the processing of their
personal information. You may exercise any of the above rights or obtain further information about the use of their personal information by contacting the
General Partner.
IN WITNESS WHEREOF, the undersigned Investor has executed and unconditionally delivered this Subscription Agreement as a deed on the
date set forth below.
Subscription – Xiaoxiang International Technology Venture Capital LP:
Total Capital Commitment: U.S. $204,171,484.63
Description of Other Consideration: 16,242,565 Class A ordinary shares and 14,214,653 Class B ordinary shares of 58.com Inc.
ENTITY INVESTOR:
Dream Wizard Inc.
(Print Name of Entity)
By: /s/ Jinbo Yao
(Signature)
Jinbo Yao Director
(Print Name and Title)
(Date)
WITNESSED BY:
Yi Chen
(Print Name)
/s/ Yi Chen
(Signature)
(Date)
INDIVIDUAL INVESTOR:
(Print Name)
(Signature)
(Date)
WITNESSED BY:
(Print Name)
(Signature)
(Date)
INVESTOR NAME: Dream Wizard Inc.
ACCEPTANCE OF SUBSCRIPTION
The undersigned, on behalf of the General Partner, hereby accepts the above subscription for Interests on behalf of the Fund and signs and unconditionally
delivers this Acceptance of Subscription as a deed. In doing so, the General Partner for itself and as attorney for each Limited Partner agrees with the
Investor that it shall be admitted as a Limited Partner to be bound by the terms of the Partnership Agreement.
XIAOXIANG INTERNATIONAL TECHNOLOGY VENTURE CAPITAL LP
BY: XIAOXIANG INTERNATIONAL CAPITAL MANAGEMENT CO., LTD.
By:
Name:
Title:
Date:
/s/ YAO DAYUE
YAO DAYUE
Director
July 29, 2015
Amount of Subscription Accepted: U.S. $204,171,484.63
Other Consideration Accepted: 16,242,565 Class A ordinary shares and 14,214,653 Class B ordinary shares of 58.com Inc.
WITNESSED BY:
LIU WENRUO
(Print Name)
/s/ LIU WENRUO
(Signature)
July 29, 2015
(Date)
GOLIATH INTERNET OPPORTUNITIES, L.P.
SUBSCRIPTION AGREEMENT
Exhibit 4.19
Goliath Internet Opportunities L.P.
Maples Corporate Services Limited
Ugland House
PO Box 309
South Church Street
George Town, Grand Cayman
KY1-1104, Cayman Islands
Goliath Internet Opportunities
Office of Sertus Incorporations (Cayman) Limited,
Sertus Chambers
P.O. Box 2547
Cassia Court
Camana Bay, Grand Cayman
Cayman Islands
Ladies and Gentlemen,
The undersigned investor (the “Investor”) hereby applies to become a limited partner (a “Limited Partner”) of Goliath Internet Opportunities, L.P.,
a Cayman Islands exempted limited partnership (the “Fund”), on the terms and conditions set forth in these subscription documents (which includes this
Subscription Agreement, together with any amendments or supplements thereto, being herein called the “Subscription Agreement”) (collectively, these
“Subscription Documents”). Reference is made to the Amended and Restated Agreement of Exempted Limited Partnership of the Fund (the “Partnership
Agreement”) made between Goliath Fund Management, an exempted company incorporated in the Cayman Islands, as general partner (the “General
Partner”), the Cornerstone Limited Partners, the Withdrawing Limited Partner and the other Limited Partners from time to time named on Annex A therein,
which has been furnished to the Investor and is incorporated by reference in its entirety in this Subscription Agreement and which together form one
agreement. By executing this Subscription Agreement, the Investor agrees with the General Partner (for itself and as agent and attorney for each existing
Limited Partner) to be, and upon acceptance of this Subscription Agreement shall be, irrevocably bound as a Limited Partner of the Fund by the terms,
provisions and requirements applicable to Limited Partners as set forth herein and in the Partnership Agreement. Capitalized terms used, but not defined,
herein shall have the respective meanings given to them in the Partnership Agreement.
1. Subscription.
(a) The Fund will be governed by the Partnership Agreement in the form delivered herewith, and as the same may be modified in accordance
with the terms of any amendment thereto. Goliath Fund Management, an exempted company incorporated in the Cayman Islands, is the Fund’s General
Partner.
(b) Subject to the terms and conditions of this Subscription Agreement and the Partnership Agreement:
(i) the General Partner, on behalf of the Fund, agrees to sell to the Investor and the Investor, in reliance on the representations and
warranties of the General Partner contained in section 4 of this Subscription Agreement, irrevocably subscribes for and agrees to
purchase an Interest in the Fund;
(ii) the Investor, in reliance on the representations and warranties of the General Partner contained in section 4 of this Subscription
Agreement, agrees to become a limited partner of the Fund (a “Limited Partner”); and
(iii) the General Partner, on behalf of the Fund (and as agent and attorney for each existing Limited Partner), agrees that the Investor
shall be admitted as a Limited Partner, in consideration for the Investor’s agreement to be bound by the terms and provisions of
the Subscription Agreement and the Partnership Agreement, with a Capital Commitment in the amount equal to the amount set
forth on the executed signature page at the end of this Subscription Agreement (the Investor’s “Capital Commitment”).
(c) The Investor hereby agrees to furnish the General Partner (or its designee), upon request, with all information that the General Partner
may hereafter reasonably require in order to make any tax related determination and/or to claim on behalf of the Investor certain tax benefits.
(d) The Investor hereby agrees that it will properly execute and provide to the Fund or General Partner in a timely manner any and all tax
documentation that may be reasonably required by the General Partner in connection with the Fund (including, without limitation, an IRS Form W-9 or W-
8, as applicable).
2. Adoption of Partnership Agreement.
(a) Each of the Investor and the General Partner, on behalf of itself and the Partnership, hereby accepts, adopts, and agrees to be bound by
each and every provision contained in the Partnership Agreement, and the Investor agrees to become a Limited Partner thereunder.
(b) The obligations of each party set forth in this Subscription Agreement are separate from the rights and obligations of such party under the
Partnership Agreement and may be enforced in full in accordance with the terms of this Subscription Agreement and the Partnership Agreement.
(c) The General Partner hereby agrees, covenants and understands that (i) all documents pertaining to this investment will be made available
for inspection by the Investor, and (ii) the books and records of the Fund will be available for inspection by the Investor in accordance with the terms of the
Partnership Agreement.
3. Certain Acknowledgments and Agreements of the Parties.
(a) The Investor hereby authorizes, and agrees to, the use of electronic mail, for the transmittal of all documents required to be delivered by,
or on behalf of, the Fund to the Investor under applicable law or regulation and pursuant to the Partnership Agreement and the Subscription Documents,
including, but not limited to, notices as contemplated by the “Notices” provision in the Partnership Agreement. The Investor acknowledges and agrees that
the General Partner will deliver documents sent by electronic mail to the address set forth in the Investor Questionnaire, unless otherwise notified by the
Investor in writing. Sections 8 and 19(3) of the Electronic Transactions Law (2003 Revision) of Cayman Islands shall not apply to this Subscription
Agreement.
(b) Subject to the provisions on indebtedness contained in the Partnership Agreement, the General Partner shall have the right, at its option,
to cause the Partnership to borrow money from any Person, or to guarantee loans or other extensions of credit for the purpose of (i) providing interim
financing to cover Partnership Expenses or (ii) providing interim financing to the extent necessary to consummate the purchase of Portfolio Investments in
either case prior to the receipt of Capital Contributions. Such Indebtedness may be secured by a pledge of the Partnership's interests in Securities or any
other investments made or other property held by the Partnership.
4. Representations and Warranties.
(a) The General Partner represents and warrants that each of the following shall be true and correct as of the date hereof:
(i) The Partnership is duly formed and validly existing as an exempted limited partnership under the laws of the Cayman Islands
and, subject to applicable law, has all requisite partnership power and authority to carry on its business as now conducted and as
proposed to be conducted. The General Partner is duly formed and validly existing as a Cayman Islands exempted company with
limited liability and, subject to applicable law, has all requisite limited liability company power and authority to act as general
partner of the Partnership and to carry out the terms of this Subscription Agreement and the Partnership Agreement applicable to
it.
(ii) The execution and delivery of this Subscription Agreement has been authorized by all necessary action on behalf of the
Partnership and this Subscription Agreement, once executed and delivered, will be a legal, valid and binding obligation of the
Partnership, enforceable against the Partnership in accordance with its terms. The execution and delivery by the General Partner
of the Partnership Agreement has been authorized by all necessary action on behalf of the General Partner and the Partnership
Agreement, once executed and delivered, will be a legal, valid and binding agreement of the General Partner, enforceable
against the General Partner in accordance with its terms.
(iii) The execution and delivery of this Subscription Agreement and the consummation of the transactions contemplated hereby will
not conflict with or result in any violation of or default under any provision of the Partnership Agreement, or any agreement or
other instrument to which the Partnership is a party or by which it or any of its properties is bound, or any permit, franchise,
judgment, decree, statute, order, rule or regulation applicable to the Partnership or its business or properties. The execution and
delivery of the Partnership Agreement and the consummation of the transactions contemplated thereby will not conflict with or
result in any violation of or default under any provision of the memorandum and articles of association and other organizational
documents of the General Partner, or any agreement or instrument to which the General Partner is a party or by which it or any
of its properties is bound, or any permit, franchise, judgment, decree, statute, order, rule or regulation applicable to the General
Partner or its businesses or properties
(b) The Investor understands that Sidley Austin LLP acts as counsel for only the General Partner, the Manager and their respective Affiliates,
and Maples and Calder acts as Cayman Islands counsel for only the Fund and the General Partner, and no attorney-client relationship exists between any
such firm and any other person by reason of such person making an investment in the Fund.
(c) The Investor understands and acknowledges that: the investment in the Fund is subject to restrictions on sales, transfers and withdrawals
as set forth in the Partnership Agreement and the Investor must bear the economic risk of its investment in the Interest until the termination of the Fund or
otherwise ceases to be a Limited Partner in the Fund.
(d) The Investor is aware and acknowledges that: (i) the Fund does not have any operating history as of July, 2015; (ii) the Interest involves a
substantial degree of risk of loss of the Investor’s entire investment and there is no assurance of any income from any such investment; and (iii) because
there are substantial restrictions on the transferability of the Interests it may not be possible for the Investor to liquidate such Investor’s investment readily
in any event, including in case of an emergency.
(e) The Investor has the power and authority to enter into this Subscription Agreement and each other document required to be executed and
delivered by the Investor in connection with this subscription for Interests, and to perform its obligations hereunder and thereunder and consummate the
transactions contemplated hereby and thereby and the person signing this Subscription Agreement on behalf of the Investor has been duly authorized to
execute and deliver this Subscription Agreement and each other document required to be executed and delivered by the Investor in connection with this
subscription for Interests.
(f) The Investor maintains its domicile, and is not merely a transient or temporary resident, at the residence address shown in the Investor
Questionnaire.
(g) The Investor agrees that if it determines to transfer or assign all or any portion of its Interest pursuant to the provisions hereof and subject
to the Partnership Agreement, it will cause its proposed transferee to agree to the transfer restrictions set forth herein and to make the representations set
forth herein.
(h) The Investor is a non-“United States person” as defined in Appendix A attached hereto. The Investor is not acquiring any portion of the
Interest by or on behalf of, nor will the Investor hold the Interest for the account or benefit of, directly or indirectly, or engage in any derivative transaction
relating to the Fund or the Interest with, any “United States person”.
(i) The Investor has not been solicited to purchase the Interest while present in the United States, its territories or possessions, nor have the
funds to be utilized for such purchase been obtained from any “United States person.”
5. Payment of Subscription.
The Fund expects that the first Drawdown will occur on a date that is (x) as soon as practicable after the date hereof, and (y) on the closing date of,
and conditional upon the consummation of, the first Portfolio Investment. Subject to the terms and conditions set forth in the Partnership Agreement, the
Fund may hold a Secondary Closing and one or more Subsequent Closings from time to time not less than 9 months after the Initial Closing for the purpose
of accepting additional subscriptions for Interests from existing and/or new Limited Partners. The Fund generally expects Capital Commitments to be
drawn down from time to time, as determined by the General Partner in accordance with each Limited Partner’s Pro Rata Share.
6. General.
This Subscription Agreement shall be binding upon the Investor and the heirs, personal representatives, successors and assigns of the Investor. The
Investor agrees that neither this Subscription Agreement nor any rights that may accrue to the Investor hereunder may be transferred or assigned without
the consent of the General Partner, which may be granted or withheld in its good faith discretion. Notwithstanding the place where this Subscription
Agreement may be executed by any of the parties, the parties expressly agree that all terms and provisions hereof shall be governed, construed and enforced
solely under the laws of the Cayman Islands without reference to any principles of conflicts of law. This Subscription Agreement shall survive the
admission of the Investor to the Fund.
7. Jurisdiction.
The Investor irrevocably consents and agrees that any dispute or claim with respect to this Subscription Agreement and any action for enforcement
of any judgment in respect thereof (a "Dispute") will be resolved by final and binding arbitration in accordance with the Rules of Arbitration of the
International Chamber of Commerce (“ICC”) in accordance with the law and not ex aequo et bono, the number of arbitrators shall be three, the seat of the
arbitration shall be in Hong Kong and the language to be used in the arbitral proceedings shall be English. Each of the General Partner and the Advisory
Board shall be entitled to nominate one arbitrator, and the chairman shall be chosen by the two arbitrators nominated by the General Partner and the
Advisory Board. If the chairman is not chosen by the two arbitrators within 30 days of the date of appointment of the later of the two party nominated
arbitrators, the chairman shall be nominated by the ICC International Court of Arbitration (“ICC Court”). No party shall be required to give general
discovery of documents, but may be required to produce specific, identified documents which are relevant to the Dispute. Any right to refer any question of
law and any right of appeal on the law or the merits to any court is waived. Nothing in this section 8 shall be construed as preventing any party to a Dispute
from seeking interim relief in any court of competent jurisdiction. Any party shall have the right to have recourse to and shall be bound by the pre-arbitral
referee procedure of the ICC in accordance with its Rules for Pre-Arbitral Referee Procedure. By execution and delivery of this Subscription Agreement,
each Limited Partner hereby submits to and accepts for itself and in respect of its property, generally and unconditionally to the fullest extent permitted by
law, the exclusive dispute resolution jurisdiction of the arbitral body. Each party hereby irrevocably waives any objection which it may now or hereafter
have to the laying of venue of any of the aforesaid Disputes arising out of or in connection with this Subscription Agreement brought in the arbitral body
referred to above and hereby further irrevocably waives and agrees not to plead or claim in any court that any such Dispute brought in accordance with this
section 8 has been brought in an inconvenient forum. Nothing in this section shall be deemed to constitute a consent or waiver with respect to any matter
not specifically referred to herein.
8. Disclosure Authorization; Certain Confidentiality Override.
By executing this Subscription Agreement, the Investor authorizes the Fund (or its delegate, on behalf of the Fund) to utilize and to provide
information regarding the Investor’s account, including information for reporting of tax withholding, to intermediaries, such as the General Partner, the
Manager, the Fund’s legal counsel and withholding agents, or any of their respective designees, and agrees to allow each of the Fund, the General Partner
and the Manager to divulge the name of such Investor or provide information with respect to such Investor if it is so required by application of law,
regulation, judicial process, at the request of a regulator, self-regulatory body or governmental entity having jurisdiction over the Fund. The Investor also
expressly authorizes the Fund, the General Partner and the Manager or any of their respective designees to provide copies of any tax or tax-related
documentation arising out of or related to the Investor’s investment in the Fund (including, without limitation, returns, withholding statements, information
filings or requests) to any financial advisors, investment managers, agents, representatives, attorneys, accountants, tax advisors, consultants of the Investor
or other Persons that provide services to, or otherwise advise, the Investor on a "need to know" basis; provided that such parties shall keep such information
confidential.
9. Severability.
If any provision of this Subscription Agreement shall be found by any court or administrative body of competent jurisdiction to be invalid or
unenforceable, such invalidity or unenforceability shall not affect the other provisions of this Subscription Agreement which shall remain in full force and
effect.
10. Certain Interpretative Matters.
Any phrase introduced by the term “including” or any similar expression shall be construed as illustrative and shall not limit the sense of the words
preceding those terms.
11. Withholding; Information Reporting; FATCA.
The Investor acknowledges and agrees that:
(a) the Fund is required to comply with the provisions of FATCA;
(b) it will provide, in a timely manner, such information regarding the Investor and its beneficial owners and such forms or documentation as
may be requested from time to time by the Fund (whether by the General Partner or other agents such as the Manager) to enable the Fund
to avoid or reduce any withholding under FATCA (or any other applicable law) and comply with the requirements and obligations
imposed on it pursuant to FATCA (or any other withholding or information reporting laws), specifically, but not limited to, forms and
documentation which the Fund may require to determine whether or not the relevant investment is a "US Reportable Account" (or
equivalent under any other FATCA regime) and to comply with the relevant due diligence procedures in making such determination;
(c) any such forms or documentation requested by the Fund, the General Partner or any of their agents pursuant to paragraph (b), or any
financial or account information with respect to the Investor's investment in the Fund, may be disclosed to the Cayman Islands Tax
Information Authority (or any other governmental body which collects information in accordance with FATCA or any other applicable
withholding or information reporting regime) and to any withholding agent;
(d) to the extent permitted by law, it waives, and/or shall cooperate with the Fund and the General Partner to obtain a waiver of, the
provisions of any law which:
(i) prohibit the disclosure by the Partnership, the General Partner or by any of their agents, of the information or documentation
requested from the Investor pursuant to paragraph (b); or
(ii) prohibit the reporting of financial or account information by the Fund, the General Partner or any of their agents required
pursuant to FATCA; or
(iii) otherwise prevent compliance by the Fund with its obligations under FATCA;
(e) if it provides information and documentation that is in anyway misleading, or it fails to provide the Fund, the General Partner or any of
their agents with the requested information and documentation requested pursuant to paragraph (b), the General Partner reserves the right
(whether or not such action or inaction leads to compliance failures by the Partnership, or a risk of the Partnership or its investors being
subject to withholding tax or other penalties):
(i) to take any action and/or pursue all remedies at its disposal including, without limitation, compulsory redemption or withdrawal
of the Investor; and
(ii) to hold back from any redemption proceeds, or to deduct from the Investor's applicable account, any liabilities, costs, expenses or
taxes caused (directly or indirectly) by the Investor's action or inaction; and
(f) it shall have no claim against the Fund, the General Partner or any of their agents, for any form of damages or liability as a result of
actions taken or remedies pursued by or on behalf of the Fund in order to comply with FATCA.
(g) The Investor hereby indemnifies the Fund, the General Partner, and the Manager, and each of their respective principals, members,
managers, officers, directors, shareholders, employees and agents and agrees to hold them harmless from and against any FATCA (or
other withholding or information reporting) related liability, action, proceeding, claim, demand, costs, damages, expenses (including legal
expenses) penalties or taxes whatsoever which the Fund, General Partner and/or Investment Manager may incur as a result of any action
or inaction (directly or indirectly) of the Investor (or any related person) described in paragraphs (b) to (f) above. This indemnification
shall survive the Investor’s death or disposition of its Interests in the Fund.
For the purposes of this provision, FATCA means:
(i) sections 1471 to 1474 of the U.S. Internal Revenue Code of 1986 and any associated legislation, regulations or guidance, or
similar legislation, regulations or guidance enacted in any jurisdiction which seeks to implement similar tax reporting and/or
withholding tax regimes;
(ii) any intergovernmental agreement, treaty, regulation, guidance or any other agreement between the Cayman Islands (or any
Cayman Islands government body) and the US, the UK or any other jurisdiction (including any government bodies in such
jurisdiction), entered into in order to comply with, facilitate, supplement or implement the legislation, regulations or guidance
described in paragraph (i); and
(iii) any legislation, regulations or guidance in the Cayman Islands that give effect to the matters outlined in the preceding
paragraphs.
12. Third Parties.
A person who is not a party to this Subscription Agreement may not, in its own right or otherwise, enforce any term of this Subscription
Agreement. Notwithstanding any other term of this Subscription Agreement, the consent of any person who is not a party to this Subscription Agreement is
not required for any amendment to, or variation, release, rescission or termination of this Subscription Agreement.
13. AML.
The Investor represents and warrants that the Interest is to be purchased with funds that are from legitimate sources in connection with the
Investor’s regular business activities and which do not constitute the proceeds of criminal conduct or criminal property within the meaning given in the
Proceeds of Crime Law (2014 Revision) of the Cayman Islands and the Regulations or Guidance Notes issued pursuant thereto, further, the Investor
acknowledges and understands that if any person resident in the Cayman Islands knows or suspects or has reasonable grounds for knowing or suspecting
that another person is engaged in criminal conduct or is involved with terrorism or terrorist property and the information for that knowledge or suspicion
came to their attention in the course of business in the regulated sector, or other trade, profession, business or employment, the person will be required to
report such knowledge or suspicion to (i) the Financial Reporting Authority of the Cayman Islands, pursuant to the Proceeds of Crime Law (2014 Revision)
of the Cayman Islands if the disclosure relates to criminal conduct or money laundering, or (ii) a police officer of the rank of constable or higher, or the
Financial Reporting Authority, pursuant to the Terrorism Law (2011 Revision) of the Cayman Islands, if the disclosure relates to involvement with
terrorism or terrorist financing and property and any such report shall not be treated as a breach of confidence or of any restriction upon the disclosure of
information imposed by any enactment or otherwise and the fact of such disclosure shall not give rise to any liability for the disclosure.
14. Privacy Policy
The Fund, the General Partner and the Manager may obtain non-public personal information about you from this Subscription Agreement and
related forms including without limitation (i) name, address, assets, income, and investment experience; (ii) information about client and investor
transactions (for example, account activity and balances); and (iii) information from other third-party sources (which, for example, may include credit
reporting agencies). Telephone calls and other electronic communications with the Fund, the General Partner and the Manager may also be monitored or
recorded. No such information will be disclosed except in the course of processing subscriptions, transfers, reports and otherwise administering the Fund,
or as permitted by law, for compliance with applicable laws, or as required by law of relevant government or administrative authority and then, to the extent
reasonably possible, only subject to customary undertakings of confidentiality. Such information may also be revealed to government agencies, as
necessary and permissible under applicable laws, in connection with legal proceedings in compliance with any applicable law, or otherwise to assert and
protect legal interests or as part of a corporate transaction with a successor or affiliate. Such information may be made available to outside service
providers, outside counsel, auditors, and other independent professionals for these purposes. Such information may be transferred internationally for these
purposes, including to the US and other countries which the European Union has deemed do not provide “adequate” protections. This same policy will
apply regardless of the international transfer or processing of such information. No such information is shared with unaffiliated third-parties for their
marketing purposes.
Appropriate physical, electronic and procedural controls are maintained to safeguard such information. These standards are reasonably designed
to:
a)
ensure the security and confidentiality of your records and information;
b) protect against any anticipated threats or hazards to the security or integrity of your records and information; and
c)
protect against unauthorized access to or use of your records or information that could result in substantial harm or inconvenience to you.
Written notice and consent will be sought for any retroactive application of any material changes to this policy. You have a right to access the
personal information about them and to request the correction of any error in relation to their personal information or to object to the processing of their
personal information. You may exercise any of the above rights or obtain further information about the use of their personal information by contacting the
General Partner or the Manager.
IN WITNESS WHEREOF, the undersigned Investor has executed and unconditionally delivered this Subscription Agreement as a deed on the
date set forth below.
Subscription – Goliath Internet Opportunities, L.P.:
Total Capital Commitment: U.S. $159,132,492.13
ENTITY INVESTOR:
Dream Wizard Inc.
(Print Name of Entity)
/s/ Jinbo Yao
By:
(Signature)
Jinbo Yao Director
(Print Name and Title)
(Date)
WITNESSED BY:
Yi Chen
(Print Name)
/s/ Yi Chen
(Signature)
(Date)
INDIVIDUAL INVESTOR:
(Print Name)
(Signature)
(Date)
WITNESSED BY:
(Print Name)
(Signature)
(Date)
INVESTOR NAME: Dream Wizard Inc.
ACCEPTANCE OF SUBSCRIPTION
The undersigned, on behalf of the General Partner, hereby accepts the above subscription for Interests on behalf of the Fund and signs and unconditionally
delivers this Acceptance of Subscription as a deed. In doing so, the General Partner for itself and as attorney for each Limited Partner agrees with the
Investor that it shall be admitted as a Limited Partner to be bound by the terms of the Partnership Agreement.
GOLIATH INTERNET OPPORTUNITIES, L.P.
BY: GOLIATH FUND MANAGEMENT
By:
Name:
Title:
Date:
/s/ Fabing Qu
Fabing Qu
Director
Amount of Subscription Accepted: U.S. $159,132,492.13
WITNESSED BY:
TING CHEN
(Print Name)
/s/ Ting Chen
(Signature)
(Date)
ZERO2IPO PARTNERS I, L.P.
SUBSCRIPTION AGREEMENT
Exhibit 4.20
Zero2IPO Partners I, L.P.
Offices of Maples Corporate Services Limited
Ugland House
PO Box 309
South Church Street
George Town, Grand Cayman
KY1-1104, Cayman Islands
Zero2IPO Partners I GP, Ltd.
Cricket Square, Hutchins Drive
P.O. Box 2681
Grand Cayman,
KY1-1111, Cayman Islands
Ladies and Gentlemen,
The undersigned investor (the “Investor”) hereby applies to become a limited partner (a “Limited Partner”) of Zero2IPO Partners I, L.P., a
Cayman Islands exempted limited partnership (the “Fund”), on the terms and conditions set forth in these subscription documents (which includes this
Subscription Agreement, together with any amendments or supplements thereto, being herein called the “Subscription Agreement”) (collectively, these
“Subscription Documents”). Reference is made to the Amended and Restated Agreement of Exempted Limited Partnership of the Fund (the “Partnership
Agreement”) made between Zero2IPO Partners I GP, Ltd., an exempted company incorporated in the Cayman Islands, as general partner (the “General
Partner”), the Cornerstone Limited Partners, the Withdrawing Limited Partner and the other Limited Partners from time to time named on Annex A therein,
which has been furnished to the Investor and is incorporated by reference in its entirety in this Subscription Agreement and which together form one
agreement. By executing this Subscription Agreement, the Investor agrees with the General Partner (for itself and as agent and attorney for each existing
Limited Partner) to be, and upon acceptance of this Subscription Agreement shall be, irrevocably bound as a Limited Partner of the Fund by the terms,
provisions and requirements applicable to Limited Partners as set forth herein and in the Partnership Agreement. Capitalized terms used, but not defined,
herein shall have the respective meanings given to them in the Partnership Agreement.
1.
Subscription.
(a) The Fund will be governed by the Partnership Agreement in the form delivered herewith, and as the same may be modified in accordance
with the terms of any amendment thereto. Zero2IPO Partners I GP, Ltd., an exempted company incorporated in the Cayman Islands, is the Fund’s General
Partner.
(b) Subject to the terms and conditions of this Subscription Agreement and the Partnership Agreement:
(i)
the General Partner, on behalf of the Fund, agrees to sell to the Investor and the Investor, in reliance on the representations and
warranties of the General Partner contained in section 4 of this Subscription Agreement, irrevocably subscribes for and agrees to
purchase an Interest in the Fund;
(ii)
(iii)
the Investor, in reliance on the representations and warranties of the General Partner contained in section 4 of this Subscription
Agreement, agrees to become a limited partner of the Fund (a “Limited Partner”); and
the General Partner, on behalf of the Fund (and as agent and attorney for each existing Limited Partner), agrees that the Investor
shall be admitted as a Limited Partner, in consideration for the Investor’s agreement to be bound by the terms and provisions of
the Subscription Agreement and the Partnership Agreement, with a Capital Commitment in the amount and other consideration
equal to the amount and other consideration, as applicable, set forth on the executed signature page at the end of this
Subscription Agreement (the Investor’s “Capital Commitment”).
(c) The Investor hereby agrees to furnish the General Partner (or its designee), upon request, with all information that the General Partner
may hereafter reasonably require in order to make any tax related determination and/or to claim on behalf of the Investor certain tax benefits.
(d) The Investor hereby agrees that it will properly execute and provide to the Fund or General Partner in a timely manner any and all tax
documentation that may be reasonably required by the General Partner in connection with the Fund (including, without limitation, an IRS Form W-9 or W-
8, as applicable).
2.
Adoption of Partnership Agreement.
(a) Each of the Investor and the General Partner, on behalf of itself and the Partnership, hereby accepts, adopts, and agrees to be bound by
each and every provision contained in the Partnership Agreement, and the Investor agrees to become a Limited Partner thereunder.
(b) The obligations of each party set forth in this Subscription Agreement are separate from the rights and obligations of such party under the
Partnership Agreement and may be enforced in full in accordance with the terms of this Subscription Agreement and the Partnership Agreement.
(c) The General Partner hereby agrees, covenants and understands that (i) all documents pertaining to this investment will be made available
for inspection by the Investor, and (ii) the books and records of the Fund will be available for inspection by the Investor in accordance with the terms of the
Partnership Agreement.
3.
Certain Acknowledgments and Agreements of the Parties.
(a) The Investor hereby authorizes, and agrees to, the use of electronic mail, for the transmittal of all documents required to be delivered by,
or on behalf of, the Fund to the Investor under applicable law or regulation and pursuant to the Partnership Agreement and the Subscription Documents,
including, but not limited to, notices as contemplated by the “Notices” provision in the Partnership Agreement. The Investor acknowledges and agrees that
the General Partner will deliver documents sent by electronic mail to the address set forth in the Investor Questionnaire, unless otherwise notified by the
Investor in writing. Sections 8 and 19(3) of the Electronic Transactions Law (2003 Revision) of Cayman Islands shall not apply to this Subscription
Agreement.
(b) Subject to the provisions on indebtedness contained in the Partnership Agreement, the General Partner shall have the right, at its option,
to cause the Partnership to borrow money from any Person, or to guarantee loans or other extensions of credit for the purpose of (i) providing interim
financing to cover Partnership Expenses or (ii) providing interim financing to the extent necessary to consummate the purchase of Portfolio Investments in
either case prior to the receipt of Capital Contributions. Such Indebtedness may be secured by a pledge of the Partnership's interests in Securities or any
other investments made or other property held by the Partnership.
4.
(a)
Representations and Warranties.
The General Partner represents and warrants that each of the following shall be true and correct as of the date hereof:
(i)
(ii)
(iii)
The Partnership is duly formed and validly existing as an exempted limited partnership under the laws of the Cayman Islands
and, subject to applicable law, has all requisite partnership power and authority to carry on its business as now conducted and as
proposed to be conducted. The General Partner is duly formed and validly existing as a Cayman Islands exempted company with
limited liability and, subject to applicable law, has all requisite limited liability company power and authority to act as general
partner of the Partnership and to carry out the terms of this Subscription Agreement and the Partnership Agreement applicable to
it.
The execution and delivery of this Subscription Agreement has been authorized by all necessary action on behalf of the
Partnership and this Subscription Agreement, once executed and delivered, will be a legal, valid and binding obligation of the
Partnership, enforceable against the Partnership in accordance with its terms. The execution and delivery by the General Partner
of the Partnership Agreement has been authorized by all necessary action on behalf of the General Partner and the Partnership
Agreement, once executed and delivered, will be a legal, valid and binding agreement of the General Partner, enforceable
against the General Partner in accordance with its terms.
The execution and delivery of this Subscription Agreement and the consummation of the transactions contemplated hereby will
not conflict with or result in any violation of or default under any provision of the Partnership Agreement, or any agreement or
other instrument to which the Partnership is a party or by which it or any of its properties is bound, or any permit, franchise,
judgment, decree, statute, order, rule or regulation applicable to the Partnership or its business or properties. The execution and
delivery of the Partnership Agreement and the consummation of the transactions contemplated thereby will not conflict with or
result in any violation of or default under any provision of the memorandum and articles of association and other organizational
documents of the General Partner, or any agreement or instrument to which the General Partner is a party or by which it or any
of its properties is bound, or any permit, franchise, judgment, decree, statute, order, rule or regulation applicable to the General
Partner or its businesses or properties
(b) The Investor understands that Sidley Austin LLP acts as counsel for only the General Partner and its Affiliates, and Maples and Calder
acts as Cayman Islands counsel for only the Fund and the General Partner, and no attorney-client relationship exists between any such firm and any other
person by reason of such person making an investment in the Fund.
(c) The Investor understands and acknowledges that: the investment in the Fund is subject to restrictions on sales, transfers and withdrawals
as set forth in the Partnership Agreement and the Investor must bear the economic risk of its investment in the Interest until the termination of the Fund or
otherwise ceases to be a Limited Partner in the Fund.
(d) The Investor is aware and acknowledges that: (i) the Fund does not have any operating history as of July, 2015; (ii) the Interest involves a
substantial degree of risk of loss of the Investor’s entire investment and there is no assurance of any income from any such investment; and (iii) because
there are substantial restrictions on the transferability of the Interests it may not be possible for the Investor to liquidate such Investor’s investment readily
in any event, including in case of an emergency.
(e) The Investor has the power and authority to enter into this Subscription Agreement and each other document required to be executed and
delivered by the Investor in connection with this subscription for Interests, and to perform its obligations hereunder and thereunder and consummate the
transactions contemplated hereby and thereby and the person signing this Subscription Agreement on behalf of the Investor has been duly authorized to
execute and deliver this Subscription Agreement and each other document required to be executed and delivered by the Investor in connection with this
subscription for Interests.
(f) The Investor maintains its domicile, and is not merely a transient or temporary resident, at the residence address shown in the Investor
Questionnaire.
(g) The Investor agrees that if it determines to transfer or assign all or any portion of its Interest pursuant to the provisions hereof and subject
to the Partnership Agreement, it will cause its proposed transferee to agree to the transfer restrictions set forth herein and to make the representations set
forth herein.
(h) The Investor is a non-“United States person” as defined in Appendix A attached hereto. The Investor is not acquiring any portion of the
Interest by or on behalf of, nor will the Investor hold the Interest for the account or benefit of, directly or indirectly, or engage in any derivative transaction
relating to the Fund or the Interest with, any “United States person”.
(i) The Investor has not been solicited to purchase the Interest while present in the United States, its territories or possessions, nor have the
funds to be utilized for such purchase been obtained from any “United States person.”
5.
Payment of Subscription.
The Fund expects that the first Drawdown will occur on a date that is (x) as soon as practicable after the date hereof, and (y) on the closing date of,
and conditional upon the consummation of, the first Portfolio Investment. Subject to the terms and conditions set forth in the Partnership Agreement, the
Fund may hold a Secondary Closing and one or more Subsequent Closings from time to time not less than 9 months after the Initial Closing for the purpose
of accepting additional subscriptions for Interests from existing and/or new Limited Partners. The Fund generally expects Capital Commitments to be
drawn down from time to time, as determined by the General Partner in accordance with each Limited Partner’s Pro Rata Share.
6.
General.
This Subscription Agreement shall be binding upon the Investor and the heirs, personal representatives, successors and assigns of the Investor. The
Investor agrees that neither this Subscription Agreement nor any rights that may accrue to the Investor hereunder may be transferred or assigned without
the consent of the General Partner, which may be granted or withheld in its good faith discretion. Notwithstanding the place where this Subscription
Agreement may be executed by any of the parties, the parties expressly agree that all terms and provisions hereof shall be governed, construed and enforced
solely under the laws of the Cayman Islands without reference to any principles of conflicts of law. This Subscription Agreement shall survive the
admission of the Investor to the Fund.
7.
Jurisdiction.
The Investor irrevocably consents and agrees that any dispute or claim with respect to this Subscription Agreement and any action for enforcement
of any judgment in respect thereof (a "Dispute") will be resolved by final and binding arbitration in accordance with the Rules of Arbitration of the
International Chamber of Commerce (“ICC”) in accordance with the law and not ex aequo et bono, the number of arbitrators shall be three, the seat of the
arbitration shall be in Hong Kong and the language to be used in the arbitral proceedings shall be English. Each of the General Partner and the Advisory
Board shall be entitled to nominate one arbitrator, and the chairman shall be chosen by the two arbitrators nominated by the General Partner and the
Advisory Board. If the chairman is not chosen by the two arbitrators within 30 days of the date of appointment of the later of the two party nominated
arbitrators, the chairman shall be nominated by the ICC International Court of Arbitration (“ICC Court”). No party shall be required to give general
discovery of documents, but may be required to produce specific, identified documents which are relevant to the Dispute. Any right to refer any question of
law and any right of appeal on the law or the merits to any court is waived. Nothing in this section 8 shall be construed as preventing any party to a Dispute
from seeking interim relief in any court of competent jurisdiction. Any party shall have the right to have recourse to and shall be bound by the pre-arbitral
referee procedure of the ICC in accordance with its Rules for Pre-Arbitral Referee Procedure. By execution and delivery of this Subscription Agreement,
each Limited Partner hereby submits to and accepts for itself and in respect of its property, generally and unconditionally to the fullest extent permitted by
law, the exclusive dispute resolution jurisdiction of the arbitral body. Each party hereby irrevocably waives any objection which it may now or hereafter
have to the laying of venue of any of the aforesaid Disputes arising out of or in connection with this Subscription Agreement brought in the arbitral body
referred to above and hereby further irrevocably waives and agrees not to plead or claim in any court that any such Dispute brought in accordance with this
section 8 has been brought in an inconvenient forum. Nothing in this section shall be deemed to constitute a consent or waiver with respect to any matter
not specifically referred to herein.
8.
Disclosure Authorization; Certain Confidentiality Override.
By executing this Subscription Agreement, the Investor authorizes the Fund (or its delegate, on behalf of the Fund) to utilize and to provide
information regarding the Investor’s account, including information for reporting of tax withholding, to intermediaries, such as the General Partner, the
Fund’s legal counsel and withholding agents, or any of their respective designees, and agrees to allow each of the Fund and the General Partner to divulge
the name of such Investor or provide information with respect to such Investor if it is so required by application of law, regulation, judicial process, at the
request of a regulator, self-regulatory body or governmental entity having jurisdiction over the Fund. The Investor also expressly authorizes the Fund and
the General Partner or any of their respective designees to provide copies of any tax or tax-related documentation arising out of or related to the Investor’s
investment in the Fund (including, without limitation, returns, withholding statements, information filings or requests) to any financial advisors, investment
managers, agents, representatives, attorneys, accountants, tax advisors, consultants of the Investor or other Persons that provide services to, or otherwise
advise, the Investor on a "need to know" basis; provided that such parties shall keep such information confidential.
9.
Severability.
If any provision of this Subscription Agreement shall be found by any court or administrative body of competent jurisdiction to be invalid or
unenforceable, such invalidity or unenforceability shall not affect the other provisions of this Subscription Agreement which shall remain in full force and
effect.
10.
Certain Interpretative Matters.
Any phrase introduced by the term “including” or any similar expression shall be construed as illustrative and shall not limit the sense of the words
preceding those terms.
11.
Withholding; Information Reporting; FATCA.
The Investor acknowledges and agrees that:
(a)
(b)
(c)
(d)
(e)
the Fund is required to comply with the provisions of FATCA;
it will provide, in a timely manner, such information regarding the Investor and its beneficial owners and such forms or documentation as
may be requested from time to time by the Fund (whether by the General Partner) to enable the Fund to avoid or reduce any withholding
under FATCA (or any other applicable law) and comply with the requirements and obligations imposed on it pursuant to FATCA (or any
other withholding or information reporting laws), specifically, but not limited to, forms and documentation which the Fund may require
to determine whether or not the relevant investment is a "US Reportable Account" (or equivalent under any other FATCA regime) and to
comply with the relevant due diligence procedures in making such determination;
any such forms or documentation requested by the Fund, the General Partner or any of their agents pursuant to paragraph (b), or any
financial or account information with respect to the Investor's investment in the Fund, may be disclosed to the Cayman Islands Tax
Information Authority (or any other governmental body which collects information in accordance with FATCA or any other applicable
withholding or information reporting regime) and to any withholding agent;
to the extent permitted by law, it waives, and/or shall cooperate with the Fund and the General Partner to obtain a waiver of, the
provisions of any law which:
(i)
(ii)
prohibit the disclosure by the Partnership, the General Partner or by any of their agents, of the information or documentation
requested from the Investor pursuant to paragraph (b); or
prohibit the reporting of financial or account information by the Fund, the General Partner or any of their agents required
pursuant to FATCA; or
(iii)
otherwise prevent compliance by the Fund with its obligations under FATCA;
if it provides information and documentation that is in anyway misleading, or it fails to provide the Fund, the General Partner or any of
their agents with the requested information and documentation requested pursuant to paragraph (b), the General Partner reserves the right
(whether or not such action or inaction leads to compliance failures by the Partnership, or a risk of the Partnership or its investors being
subject to withholding tax or other penalties):
(i)
(ii)
to take any action and/or pursue all remedies at its disposal including, without limitation, compulsory redemption or withdrawal
of the Investor; and
to hold back from any redemption proceeds, or to deduct from the Investor's applicable account, any liabilities, costs, expenses
or taxes caused (directly or indirectly) by the Investor's action or inaction; and
(f)
(g)
it shall have no claim against the Fund, the General Partner or any of their agents, for any form of damages or liability as a result of
actions taken or remedies pursued by or on behalf of the Fund in order to comply with FATCA.
The Investor hereby indemnifies the Fund and the General Partner and each of their respective principals, members, managers, officers,
directors, shareholders, employees and agents and agrees to hold them harmless from and against any FATCA (or other withholding or
information reporting) related liability, action, proceeding, claim, demand, costs, damages, expenses (including legal expenses) penalties
or taxes whatsoever which the Fund and/or General Partner may incur as a result of any action or inaction (directly or indirectly) of the
Investor (or any related person) described in paragraphs (b) to (f) above. This indemnification shall survive the Investor’s death or
disposition of its Interests in the Fund.
For the purposes of this provision, FATCA means:
(i)
(ii)
sections 1471 to 1474 of the U.S. Internal Revenue Code of 1986 and any associated legislation, regulations or guidance, or
similar legislation, regulations or guidance enacted in any jurisdiction which seeks to implement similar tax reporting and/or
withholding tax regimes;
any intergovernmental agreement, treaty, regulation, guidance or any other agreement between the Cayman Islands (or any
Cayman Islands government body) and the US, the UK or any other jurisdiction (including any government bodies in such
jurisdiction), entered into in order to comply with, facilitate, supplement or implement the legislation, regulations or guidance
described in paragraph (i); and
(iii)
any legislation, regulations or guidance in the Cayman Islands that give effect to the matters outlined in the preceding
paragraphs.
12.
Third Parties.
A person who is not a party to this Subscription Agreement may not, in its own right or otherwise, enforce any term of this Subscription
Agreement. Notwithstanding any other term of this Subscription Agreement, the consent of any person who is not a party to this Subscription Agreement is
not required for any amendment to, or variation, release, rescission or termination of this Subscription Agreement.
13.
AML.
The Investor represents and warrants that the Interest is to be purchased with funds that are from legitimate sources in connection with the
Investor’s regular business activities and which do not constitute the proceeds of criminal conduct or criminal property within the meaning given in the
Proceeds of Crime Law (2014 Revision) of the Cayman Islands and the Regulations or Guidance Notes issued pursuant thereto, further, the Investor
acknowledges and understands that if any person resident in the Cayman Islands knows or suspects or has reasonable grounds for knowing or suspecting
that another person is engaged in criminal conduct or is involved with terrorism or terrorist property and the information for that knowledge or suspicion
came to their attention in the course of business in the regulated sector, or other trade, profession, business or employment, the person will be required to
report such knowledge or suspicion to (i) the Financial Reporting Authority of the Cayman Islands, pursuant to the Proceeds of Crime Law (2014 Revision)
of the Cayman Islands if the disclosure relates to criminal conduct or money laundering, or (ii) a police officer of the rank of constable or higher, or the
Financial Reporting Authority, pursuant to the Terrorism Law (2011 Revision) of the Cayman Islands, if the disclosure relates to involvement with
terrorism or terrorist financing and property and any such report shall not be treated as a breach of confidence or of any restriction upon the disclosure of
information imposed by any enactment or otherwise and the fact of such disclosure shall not give rise to any liability for the disclosure.
14.
Privacy Policy
The Fund and the General Partner may obtain non-public personal information about you from this Subscription Agreement and related forms
including without limitation (i) name, address, assets, income, and investment experience; (ii) information about client and investor transactions (for
example, account activity and balances); and (iii) information from other third-party sources (which, for example, may include credit reporting agencies).
Telephone calls and other electronic communications with the Fund, the and the General Partner may also be monitored or recorded. No such information
will be disclosed except in the course of processing subscriptions, transfers, reports and otherwise administering the Fund, or as permitted by law, for
compliance with applicable laws, or as required by law of relevant government or administrative authority and then, to the extent reasonably possible, only
subject to customary undertakings of confidentiality. Such information may also be revealed to government agencies, as necessary and permissible under
applicable laws, in connection with legal proceedings in compliance with any applicable law, or otherwise to assert and protect legal interests or as part of a
corporate transaction with a successor or affiliate. Such information may be made available to outside service providers, outside counsel, auditors, and
other independent professionals for these purposes. Such information may be transferred internationally for these purposes, including to the US and other
countries which the European Union has deemed do not provide “adequate” protections. This same policy will apply regardless of the international transfer
or processing of such information. No such information is shared with unaffiliated third-parties for their marketing purposes.
Appropriate physical, electronic and procedural controls are maintained to safeguard such information. These standards are reasonably designed
to:
a)
ensure the security and confidentiality of your records and information;
b) protect against any anticipated threats or hazards to the security or integrity of your records and information; and
c)
protect against unauthorized access to or use of your records or information that could result in substantial harm or inconvenience to you.
Written notice and consent will be sought for any retroactive application of any material changes to this policy. You have a right to access the
personal information about them and to request the correction of any error in relation to their personal information or to object to the processing of their
personal information. You may exercise any of the above rights or obtain further information about the use of their personal information by contacting the
General Partner.
IN WITNESS WHEREOF, the undersigned Investor has executed and unconditionally delivered this Subscription Agreement as a deed on the
date set forth below.
Subscription – Zero2IPO Partners I, L.P.:
Total Capital Commitment: U.S. $43,368,807.37
Description of Other Consideration: 16,048,692 Class A ordinary shares of 58.com Inc.
ENTITY INVESTOR:
Dream Wizard Inc.
(Print Name of Entity)
By: /s/ Jinbo Yao
(Signature)
Jinbo Yao Director
(Print Name and Title)
(Date)
WITNESSED BY:
Yi Chen
(Print Name)
/s/ Yi Chen
(Signature)
(Date)
INDIVIDUAL INVESTOR:
(Print Name)
(Signature)
(Date)
WITNESSED BY:
(Print Name)
(Signature)
(Date)
INVESTOR NAME: Dream Wizard Inc.
ACCEPTANCE OF SUBSCRIPTION
The undersigned, on behalf of the General Partner, hereby accepts the above subscription for Interests on behalf of the Fund and signs and unconditionally
delivers this Acceptance of Subscription as a deed. In doing so, the General Partner for itself and as attorney for each Limited Partner agrees with the
Investor that it shall be admitted as a Limited Partner to be bound by the terms of the Partnership Agreement.
ZERO2IPO PARTNERS I, L.P.
BY: ZERO2IPO PARTNERS I GP, LTD.
By:
Name:
Title:
Date:
/s/ Chung Wai Chi
Chung Wai Chi
CFO
Amount of Subscription Accepted: U.S. $43,368,807.37
Other Consideration Accepted: 16,048,692 Class A ordinary shares of 58.com Inc.
WITNESSED BY:
Ng Ying
(Print Name)
/s/ Ng Ying
(Signature)
(Date)
Exhibit 4.25
EXECUTION VERSION
SERIES A PREFERRED SHARES SUBSCRIPTION AGREEMENT
THIS SERIES A PREFERRED SHARES SUBSCRIPTION AGREEMENT (the “Agreement”) is made and entered into as of October 12, 2015
by and among:
1.
2.
58 Daojia Inc., a company incorporated under the Laws (as defined in Section 3.01) of the British Virgin Islands with its registered office
located at Commerce House, Wickhams Cay 1, P.O. Box 3140, Road Town, Tortola, British Virgin Islands VG1110 (the “Company”);
58 Daojia Holdings Limited, a company incorporated under the Laws of Hong Kong with its registered office located at Suite 1203, 12/F
Ruttonjee HSE, 11 Duddell St., Central, Hong Kong (“Daojia HK”);
3. Beijing 58 Daojia Information Technology Co., Ltd (北京五八到家信息技朮有限公司), a limited liability company incorporated under the
Laws of the People’s Republic of China (not including the Hong Kong Special Administrative Region, the Macao Special Administrative
Region or Taiwan, the “PRC”) with its registered office located at D-101A-123, #B-2, Zhongguancun Dongsheng Technology Park, 66
Xixiaokou Road, Haidian District, Beijing, PRC (the “WFOE”);
4. Tianjin 58 Daojia Life Services Co., Ltd (天津五八到家生活服务有限公司), a limited liability company incorporated under the Laws of the
PRC (“Tianjin Daojia” and together with the WFOE, the “PRC Companies” and each a “PRC Company”);
5.
58.com Inc., a company incorporated under the Laws of the Cayman Islands, with its registered office located at Codan Trust Company
(Cayman) Limited, Cricket Square, P.O. Box 2681, Grand Cayman KY1-1111 (“58.com” or an “Investor” and, together with the New
Investors (as defined below), the “Investors”);
6. Chen Xiaohua (陈小华) (Chinese ID No. );
7. Bai Ou (白鸥) (Chinese ID No. );
8. Yao Jinbo (姚劲波) (Chinese ID No. );
9. Trumpway Limited, a company incorporated under the laws of the British Virgin Islands with its registered office located at P.O. Box 957,
Offshore Incorporation Centre, Road Town, Tortola, British Virgin Islands and wholly owned by Chen Xiaohua (陈小华) (“Trumpway”);
10. Cloud Knight Holdings Limited, a company incorporated under the laws of the British Virgin Islands with its registered office located at P.O.
Box 957, Offshore Incorporation Centre, Road Town, Tortola, British Virgin Islands and wholly owned by Bai Ou (白鸥) (“Cloud Knight”);
11. Nihao China Corporation, a company incorporated under the laws of the British Virgin Islands with its registered office located at Trinity
Chambers, P.O. Box 4301, Road Town, Tortola, British Virgin Islands and wholly owned by Xinyi Limited, a company incorporated under
the Laws of The Bahamas which in turn is wholly owned by Credit Suisse Trust Limited as trustee of The Xinyi Trust with Mr. Yao Jinbo as
settlor and Mr. Yao Jinbo and his family members as beneficiaries (together with Trumpway and Cloud Knight, the “SPVs”; and the SPVs,
Chen Xiaohua (陈小华), Bai Ou (白鸥) and Yao Jinbo (姚劲波) together, the “Management Shareholders” and each a “Management
Shareholder”); and
12. Persons listed on Schedule A attached hereto other than 58.com (each an “Investor” or a “New Investor”, collectively the “New Investors”).
The Company, Daojia HK, the WFOE and Tianjin Daojia are referred to collectively herein as the “Group” or the “Group Companies”, and
each, a “Group Company”.
RECITALS
A. Prior to the execution of this Agreement, the Group Companies and 58.com have adopted a plan for the spinoff of the Company from
58.com in the form attached hereto as Exhibit A (the “Spinoff Plan”);
B. Tianjin Daojia is engaged in the business of providing local life services (the “Business”);
C. The Company desires to issue and allot to the Investors, and each of the Investors desires to subscribe and pay for, a certain number of
series A convertible preferred shares, with a par value of US$0.00001 per share (the “Series A Preferred Shares”), on the terms and subject to the
conditions set forth in this Agreement; and
D. The parties desire to enter into this Agreement and make the respective representations, warranties, covenants and agreements set forth
herein on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual promises hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties intending to be legally bound hereto hereby agree as follows:
AGREEMENT
ARTICLE I
ISSUANCE AND SUBSCRIPTION
Section 1.01 Subscription of Purchased Shares.
Subject to the terms and conditions set forth in this Agreement, at the Closing (as defined in Section 1.03), the Company shall issue and allot to
each Investor, and each Investor shall, severally and not jointly, subscribe and pay for, the number of Series A Preferred Shares as set forth opposite the
name of such Investor on Schedule A attached hereto (the “Purchased Shares”), at a price of US$7.3529 for each Series A Preferred Share, amounting to
an aggregate purchase price (assuming the subscription by each Investor of its allocable Purchased Shares) of US$300,000,000 (the “Purchase Price”).
The Series A Preferred Shares shall have the rights, preferences, privileges and restrictions as set forth in the Amended and Restated Memorandum and
Articles of Association of the Company in the form attached hereto as Exhibit B (the “Restated Articles”).
2
Section 1.02 Transfer of Funds.
The Purchase Price shall be paid at Closing by wire transfer of United States dollars in immediately available funds to the account of the Company
in accordance with the wire transfer instructions set forth on Schedule E hereto.
Section 1.03 Post-Investment Capitalization Structure.
Following the closing of the issuance and subscription of the Purchased Shares pursuant to this Agreement (the “Closing”), the post-investment
capitalization structure of the Company shall be as set forth in Part II of Schedule C attached hereto.
Section 1.04 Stamp Taxes.
The Company shall bear and pay any British Virgin Islands stamp Tax, stamp duty, stamp duty reserve Tax or similar Tax (as defined in Section
3.11) due in connection with the issuance and subscription of the Purchased Shares, if any.
ARTICLE II
CLOSING; DELIVERY
Section 2.01 Closing. The Closing shall be conducted remotely by the exchange of documents and signatures as soon as practicable, but in no
event later than thirteen (13) Business Days following the satisfaction or waiver of all of the conditions set forth in Article VII and Article VIII hereof, as
confirmed in writing by the Investors and the Company, or at such other place or at such other time or on such other date as the Company and the Investors
may mutually agree in writing. The purchase of all the Purchased Shares by the Investors shall be completed simultaneously at the Closing. For the
avoidance of doubt, no Investor shall be required to consummate its purchase of any Purchased Shares (as contemplated hereunder) at the Closing unless
the other Investors also consummate their respective purchases of the Purchased Shares. “Business Day” means any calendar day other than a Saturday or
Sunday on which banks are ordinarily open for general business in: the United States of America; the Cayman Islands; the British Virgin Islands; Hong
Kong and the PRC.
Section 2.02 Delivery.
At the Closing, against payment by each Investor of its portion of the Purchase Price pursuant to Section 1.01, and in addition to any items the
delivery of which is made an express condition to the Investors’ obligations at the Closing pursuant to Article VII, the Company shall deliver to each
Investor (i) a copy of the updated register of members of the Company showing such Investor as the holder of the Purchased Shares purchased by such
Investor hereunder, duly certified by the registered agent of the Company, (ii) one or more certificates evidencing the Purchased Shares purchased by such
Investor hereunder and (iii) a copy of the updated register of directors of the Company evidencing the appointment of the directors of the Company in
accordance with Section 7.06, duly certified by the registered agent of the Company.
3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE WARRANTORS
The Group Companies and 58.com (collectively, the “Warrantors” and individually, a “Warrantor”) hereby jointly and severally represent and
warrant to each Investor, subject to the disclosures set forth in the disclosure schedule delivered to the Investors (the “Disclosure Schedule”, which
disclosures shall be deemed to be disclosed to the Investors and to qualify the representations and warranties of the Warrantors to the Investors only to the
extent that it is reasonably apparent from a reading of such disclosures that such disclosures are relevant to a particular representation and warranty and
such disclosures include sufficient details to assess the nature and scope of the matter disclosed), as of the date hereof and as of Closing (unless otherwise
specified), the following (it being understood that for purposes of the following representations and warranties, “to the knowledge of the Warrantors” or
words of similar effect shall mean the actual knowledge of, with respect to each such Warrantor, the individuals listed in Section 3.00 of the Disclosure
Schedule, and that knowledge which should have been acquired by each such individual after such due and diligent inquiries by such individual as a
prudent business person would have made or exercised in the management of his or her business affairs):
Section 3.01 Organization, Standing and Qualification.
Each Warrantor is duly organized, validly existing and in good standing (or equivalent status in the relevant jurisdiction) under, and by virtue of,
the Laws of the place of its incorporation or establishment and has all requisite legal and corporate power and authority to own, lease and operate its
properties and assets and to carry on its business as now conducted, and to perform each of its obligations hereunder and under any agreement
contemplated hereunder to which it is a party. Each Warrantor is duly qualified to do business and is in good standing (or equivalent status in the relevant
jurisdiction) in each jurisdiction where failure to be so qualified would have a material adverse effect on the condition (financial or otherwise), prospects,
assets or Liabilities (as defined below) relating to, or results of operation of or business as presently conducted and intended to be conducted of any Group
Company (a “Material Adverse Effect”). The Company was formed solely to acquire and hold equity interests in the WFOE and since its formation has
not engaged in any other business and has not incurred any Liability. “Liabilities” means, with respect to any Person, all debts, obligations, liabilities owed
by such Person of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due. The business license and articles of
association of each of the PRC Companies is in full force and effect under, and in compliance with, the Laws of the PRC. “Law” or “Laws” means any
constitutional provision, statute or other law, rule, regulation, official policy or interpretation of any Governmental Authority and any Governmental Order.
“Governmental Authority” means any nation or government or any federation, province or state or any other political subdivision thereof; any entity,
authority or body exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including any
government authority, agency, department, board, commission or instrumentality of the PRC, the Hong Kong Special Administrative Region, the Cayman
Islands, the British Virgin Islands or any other country, or any political subdivision thereof, any court, tribunal or arbitrator, and any self-regulatory
organization. “Governmental Order” means any applicable order, ruling, decision, verdict, decree, writ, subpoena, mandate, precept, command, directive,
consent, approval, award, judgment, injunction or other similar determination or finding by, before or under the supervision of any Governmental
Authority.
4
Section 3.02 Capitalization.
(a) Shares. As of the date hereof, the Company is authorized to issue a maximum of 200,000,000 ordinary shares of a single class,
with a par value of US$0.00001 per share (the “Ordinary Shares”), of which 90,980,000 Ordinary Shares are issued and outstanding. The Company will
be authorized to issue, immediately following registration of the Restated Articles (as defined below) at the BVI Registrar of Corporate Affairs prior to the
Closing, (i) 200,000,000 Class A ordinary shares, with a par value of US$0.00001 per share (the “Class A Ordinary Shares”), of which 83,100,000 will be
issued and outstanding, (ii) 200,000,000 Class B ordinary shares, with a par value of US$0.00001 per share (the “Class B Ordinary Shares”), of which
1,880,000 will be issued and outstanding, (iii) 200,000,000 Class C ordinary shares, with a par value of US$0.00001 per share (the “Class C Ordinary
Shares”), of which 6,000,000 will be issued and outstanding, and (iv) 40,800,000 Series A Preferred Shares, none of which will be issued and outstanding.
The rights, privileges and preferences of the Class A Ordinary Shares, Class B Ordinary Shares, Class C Ordinary Shares and Series A Preferred Shares are
set out in the Shareholders Agreement (as defined below) and/or the Restated Articles.
(b) Options. Except for up to 9,020,000 Ordinary Shares (and options and warrants therefor) and 11,020,000 Class A Ordinary
Shares (and options and warrants therefor) reserved as of the date hereof and immediately following the Closing, respectively, for issuance to directors,
employees and advisors of the Group Companies pursuant to the Company’s 2015 Share Incentive Plan approved by the board of directors of the Company
(the “Board”) as of February 10, 2015 and to be amended and restated on the Closing Date (the “2015 Plan”), and as contemplated hereby and by the other
Transaction Documents (as defined below) and/or the Restated Articles, there are no options, restricted stock, restricted stock units, stock appreciation
rights, phantom stock, profits interests, warrants, conversion privileges, agreements or rights of any kind (except for the Investor Rights Agreement, dated
as of June 30, 2014, by and between 58.com, Ohio River Investment Limited (“Ohio River”) and other parties thereto (the “Investor Rights Agreement”))
with respect to the issuance or purchase of, or valued by reference to, in whole or in part, the Equity Securities of the Company or any other Group
Company. Apart from the shareholders agreement to be entered into at the Closing (the “Shareholders Agreement”) in the form attached hereto as Exhibit
C, no Group Company is a party to any contract that would subject any of its Equity Securities (including the Purchased Shares and other Preferred Shares
in the case of the Company), or shares issuable upon exercise or exchange of any outstanding options or other shares issuable by such Group Company, to
any preemptive rights, rights of first refusal or other rights of any kind to purchase such shares (whether in favor of such Group Company or any other
Person). No Group Company is a party or subject to any agreement that affects or relates to the voting or giving of written consents with respect to, or the
right to cause the registration, redemption, or repurchase of, any of its outstanding Equity Securities. “Equity Securities” means, with respect to a Person,
any shares, share capital, registered capital, ownership interest, equity interest, or other securities of such Person, and any option, warrant, or right to
subscribe for, acquire or purchase any of the foregoing, or any other security or instrument convertible into or exercisable or exchangeable for any of the
foregoing, or any equity appreciation, phantom equity, equity plans or similar rights with respect to such Person, or any contract of any kind for the
purchase or acquisition from such Person of any of the foregoing, either directly or indirectly.
5
(c) Issuance and Status. All presently outstanding Equity Securities of each Group Company were duly and validly issued (or
subscribed for) in compliance with all applicable Laws, preemptive rights of any Person, and applicable contracts and are fully paid and non-assessable. All
share capital of each Group Company is and as of the Closing shall be free of any and all Encumbrances (except as provided under the Transaction
Documents and pursuant to applicable Laws). There are no (i) resolutions pending to change the share capital of any Group Company or cause the
liquidation, winding up, or dissolution of any Group Company or (ii) dividends which have accrued or been declared but are unpaid by any Group
Company. “Encumbrance” means any claim, mortgage, lien, pledge, title defect, easement, adverse claim, restrictive covenant, option, charge, security
interest, encumbrance or other similar right of any third parties or other restriction or limitation of any kind whatsoever, including any restriction on the
use, voting, transfer, receipt of income, or exercise of any attributes of ownership, whether voluntarily incurred or arising by operation of law, and includes
any agreement to grant any of the foregoing in the future.
(d) Vesting. No contract of any Group Company relating to its Equity Securities provides for acceleration of vesting (or lapse of a
repurchase right) or other changes in the vesting provisions or other terms of such agreement or understanding upon the occurrence of any event or
combination of events. No Group Company has ever adjusted or amended the exercise price of any share options previously awarded, whether through
amendment, cancellation, replacement grant, repricing, or any other means.
(e) Immediately upon the Closing, the Company’s ownership structure shall be as set forth in Part II of Schedule C attached hereto.
Section 3.03 Subsidiaries; Group Structure.
(a) As of the date hereof, except for (i) Daojia HK, 100% of the share capital of which is owned by the Company and (ii) the
WFOE, 100% of the equity interest of which is owned by Daojia HK, the Company does not own or control, directly or indirectly, any equity interest in
any other corporation, partnership, trust, joint venture, limited liability company, association or other business entity. The Company is not obligated to
make any investment in or capital contribution in or on behalf of any other Person.
(b) As of the Closing, except for (i) Daojia HK, 100% of the share capital of which is owned by the Company, (ii) the WFOE, 100%
of the equity interest of which is owned by Daojia HK and (iii) Tianjin Daojia, which will be effectively controlled by the Company prior to the Closing
pursuant to the Control Agreements, the Company does not own or control, directly or indirectly, any equity interest in any other corporation, partnership,
trust, joint venture, limited liability company, association or other business entity. “Control Agreements” means collectively, such agreements as set forth
in Section 3.02(b) of the Disclosure Schedule. As of the Closing, none of Daojia HK and the PRC Companies is obligated to make any investment in or
capital contribution in or on behalf of any other Person.
6
(c) As of the date hereof and the Closing, none of Daojia HK and the PRC Companies has any subsidiaries, owns or controls,
directly or indirectly, any interest in any other corporation, partnership, trust, joint venture, association or other entity or maintains any offices or branches
or subsidiaries except as set forth in Section 3.03 of the Disclosure Schedule.
Section 3.04 Due Authorization.
Each Warrantor has all requisite power, authority and legal capacity to execute and deliver this Agreement and each other agreement, document,
instrument or certificate contemplated by this Agreement or to be executed by any party hereto in connection with the consummation of the transactions
contemplated by this Agreement (including, without limitation, the Shareholders Agreement, the Spinoff Plan, the Business Cooperation Agreement, the
Strategic Cooperation Agreement, the 58.com Non-Compete (as defined in Section 7.21) and the Control Agreements, the “Transaction Documents”) to
the extent that it is a party and to carry out and perform its obligations thereunder. All action on the part of each Warrantor, their respective officers,
directors and shareholders necessary for (i) the authorization, execution and delivery of, and the performance of the respective obligations of such
Warrantor under the Transaction Documents to which it is a party, the Restated Articles, or the certificate of incorporation or other equivalent corporate
charter document of any of the Group Companies (collectively, and with the Restated Articles in the case of the Company, the “Constitutional
Documents”), and (ii) in the case of the Company, the authorization, issuance, reservation for issuance, sale and delivery of all of the Purchased Shares
being issued and allotted under this Agreement and of the Ordinary Shares issuable upon conversion of such Purchased Shares (the “Conversion Shares”)
has been taken or will be taken prior to the Closing. This Agreement has been duly executed and delivered by each Warrantor. Each of the Transaction
Documents and the Constitutional Documents is or will, upon its execution be a valid and binding obligation of each Warrantor that is a party thereto,
enforceable against such Warrantor in accordance with its terms, subject, as to enforcement of remedies, to applicable bankruptcy, insolvency, moratorium,
reorganization and similar Laws of general application affecting creditors’ rights generally and to general equitable remedies.
Section 3.05 Valid Issuance of Purchased Shares.
(a) The Purchased Shares when issued, allotted, delivered and paid for in accordance with the terms of this Agreement, will be duly
and validly issued, fully paid and nonassessable and will be free of any Encumbrance, other than Encumbrances under the Transaction Documents and the
Constitutional Documents and under applicable securities Laws. The Conversion Shares have been validly reserved for issuance and, upon issuance in
accordance with the terms of the Restated Articles, will be validly issued, fully paid and nonassessable and will be free of any Encumbrance, other than
Encumbrances under the Transaction Documents and the Constitutional Documents, and under applicable securities Laws. The issuance of the Purchased
Shares is not subject to any preemptive rights, rights of first refusal or similar rights.
(b) All currently outstanding capital shares of each Group Company are validly issued, fully paid and nonassessable, and all
outstanding shares, options, warrants and other securities of each Group Company have been issued in full compliance with the requirements of all
applicable securities Laws and regulations including, to the extent applicable, the registration and prospectus delivery requirements of the United States
Securities Act of 1933, as amended (the “Act”), or in compliance with applicable exemptions therefrom, and all other provisions of applicable securities
Laws and regulations, including, without limitation, anti-fraud provisions.
7
Section 3.06 Approvals.
All Approvals with respect to or on the part of any Group Company or any Management Shareholder required in connection with its valid
execution, delivery, or performance of the transactions contemplated by this Agreement or the other Transaction Documents or the offer, sale, issuance or
reservation for issuance of the Purchased Shares or Conversion Shares have been obtained or will be obtained prior to the Closing. Other than the consent
of Ohio River pursuant to Section 2.05 of the Investor Rights Agreement, there is no other consent or Approval required from any third party in order for
Alibaba to increase, nor any other restriction preventing Alibaba from increasing, its ownership interest in the Company following the Closing to 25% of
the outstanding issued shares of the Company (on a fully-diluted as converted basis) pursuant to the exercise of the right of participation of Alibaba under
the Shareholders Agreement. “Approval” means any approval, authorization, license, permit, release, order, or consent required to be obtained from, or any
registration, qualification, designation, declaration, filing, notice, statement or other communication required to be filed with or delivered to, any
Governmental Authority or any other Person, or any waiver of any of the foregoing.
Section 3.07 Offering.
The offer, sale and issuance of the Purchased Shares and the Conversion Shares, as contemplated by the Transaction Documents, are exempt from
the qualification, registration and prospectus delivery requirements of the Act and any other applicable securities Laws.
Section 3.08 Liabilities.
Except (i) as set forth in Section 3.08 of the Disclosure Schedule, (ii) as set forth in the Financial Statements (as defined in Section 3.10) that have
not been satisfied since the Statement Date (as defined in Section 3.10), and (iii) current liabilities incurred since the Statement Date in the ordinary course
of the Group’s business consistent with its past practices and which do not exceed RMB1 million in the aggregate, no Group Company has any Liabilities.
Section 3.09 Constitutional Documents.
The Constitutional Documents of each Group Company are in the form provided to the Investors. Each Group Company has made available to the
Investors or its counsel a copy of its minute books, to the extent such Group Company keeps minute books. Such copy is true, correct and complete, and
contains all amendments and all minutes of meetings and actions taken by its shareholders and directors since the time of formation through the date hereof
and reflects all transactions referred to in such minutes accurately in all material respects.
8
Section 3.10 Financial Statements.
(a) The Company has delivered to the Investors true, correct and complete copies of (i) the audited balance sheet and statement of
operations and cash flows for Tianjin Daojia as of and for the twelve-month period ending on December 31, 2014 and (ii) the unaudited consolidated
balance sheet and statement of operations and cash flows for the Group as of and for the eight-month period ending August 31, 2015 (the “Statement
Date”). The financial statements referred to in (i) above are referred herein as the “Audited Financial Statements” and the financial statements referred to
in (ii) above are referred herein as the “Unaudited Financial Statements” (together with Audited Financial Statements, the “Financial Statements”). The
Financial Statements (A) are complete and correct in all material respects, (B) have been prepared in accordance with the Books and Records (as defined in
Section 3.26) of Tianjin Daojia or the Group, as applicable and (C) were prepared in accordance with the Applicable Accounting Principles applied on a
consistent basis throughout the periods involved. Except for such line items as set forth in Part 二 of the Spinoff Plan, the Audited Financial Statements
fairly present in all material respects the financial condition and position of Tianjin Daojia as of the date indicated therein and the results of operations and
cash flows of Tianjin Daojia for the period indicated therein. Except for such line items as set forth in Part 二 of the Spinoff Plan, the Unaudited Financial
Statements fairly present in all material respects the financial condition and position of the Group as of the date indicated therein and the results of
operations and cash flows of the Group for the period indicated therein. “Applicable Accounting Principles” means, in the case of the PRC Companies,
the Accounting Standards for Business Enterprise (《企业会计准则》) promulgated by the Ministry of Finance of the PRC, and, in the case of all other
Group Companies, U.S. GAAP (as defined below). All of the accounts receivable owing to any of the Group Companies, including without limitation all
accounts receivable set forth on the Financial Statements, constitute valid and enforceable claims and are good and collectible in the ordinary course of
business, net of any reserves shown on the Financial Statements (which reserves are adequate and were calculated on a basis consistent with the Applicable
Accounting Principles), and no further goods or services are required to be provided in order to complete the sales and to entitle the applicable Group
Company to collect in full. There are no material contingent or asserted claims, refusals to pay, or other rights of set-off with respect to any accounts
receivable of the Group Companies to the knowledge of the Warrantors.
(b) The financial projections and business plan provided by the Company to the Investors (including the Business Plan) were
reasonably prepared on a basis reflecting management’s best estimates, assumptions and judgments, at the time provided to the Investors, as to the future
financial performance of the Group.
Section 3.11 Changes.
Since the Statement Date, except as expressly contemplated by this Agreement, the Control Agreements and the Spinoff Plan, the Group has
operated its business in the ordinary course consistent with its past practice, there has not been any Material Adverse Effect or any material change in the
way the Group conducts its business, no Group Company has entered into any transaction outside of the ordinary course of business consistent with its past
practice, and there has not been by or with respect to any Group Company:
(a) any purchase, acquisition, sale, lease, disposal of or other transfer of any assets that are individually or in the aggregate material
to its business, whether tangible or intangible, other than the purchase or sale of inventory in the ordinary course of business consistent with its past
practice, or any acquisition (by merger, consolidation or other combination, or acquisition of stock or assets, or otherwise) of any business or other Person
or division thereof;
9
(b) any waiver, termination, settlement or compromise of a valuable right or of a material debt;
(c) any incurrence, creation, assumption, repayment, satisfaction, or discharge of (1) any material Encumbrance or (2) any
indebtedness or guarantee in excess of RMB1 million, or the making of any loan or advance (other than reasonable and normal advances to employees for
bona fide expenses that are incurred in the ordinary course of business consistent with its past practice), or the making of any investment or capital
contribution in excess of RMB1 million;
(d) except in the ordinary course of business consistent with its past practice, any amendment to any Group Company Contract, any
entering into of any new Group Company Contract, or any termination of any contract that would have been a Group Company Contract if in effect on the
date hereof, or any amendment to any Charter Document, or any amendment to or waiver under any Charter Document, in each case except for as expressly
provided for or disclosed in this Agreement;
redemption, purchase or other acquisition of any Equity Securities;
(e) any declaration, setting aside or payment or other distribution in respect of any Equity Securities, or any direct or indirect
financial condition, operations or business (as presently conducted) of any Group Company;
(f) any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the assets, properties,
(g) any material change in accounting methods or practices or any revaluation of any of its assets;
(h) entry into any closing agreement in respect of material Taxes, settlement of any claim or assessment in respect of any material
Taxes (as defined below), or consent to any extension or waiver of the limitation period applicable to any claim or assessment in respect of any material
Taxes, entry or change of any material Tax election, change of any method of accounting resulting in a material amount of additional Tax or filing of any
material amended Tax Return (as defined below);
(i) any commencement or settlement of any material Action; or
(j) any agreement or commitment to do any of the things described in this Section 3.11.
“Tax” means (i) in the PRC: (A) any national, provincial, municipal, or local taxes, charges, fees, levies, or other assessments, including, without
limitation, all net income (including enterprise income tax and individual income withholding tax), turnover (including value-added tax, business tax, and
consumption tax), resource (including urban and township land use tax), special purpose (including land value-added tax, urban maintenance and
construction tax, and additional education fees), property (including urban real estate tax and land use fees), documentation (including stamp duty and deed
tax), filing, recording, social insurance (including pension, medical, unemployment, housing, and other social insurance withholding), tariffs (including
import duty and import value-added tax), and estimated and provisional taxes, charges, fees, levies, or other assessments of any kind whatsoever, (B) all
interest, penalties (administrative, civil or criminal), late payment surcharge or additional amounts imposed by any Governmental Authority in connection
with any item described in clause (A) above, and (C) any form of transferee liability imposed by any Governmental Authority in connection with any item
described in clauses (A) and (B) above, and (ii) in any jurisdiction other than the PRC: all similar liabilities as described in clause (i) above. “Tax Return”
means any return, report or statement showing Taxes, used to pay Taxes, or required to be filed with respect to any Tax (including any elections,
declarations, schedules or attachments thereto, and any amendment thereof), including any information return, claim for refund, amended return or
declaration of estimated or provisional Tax.
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Section 3.12 Title to Properties and Assets.
(a) Title. Except as set forth in the Spinoff Plan, each Group Company has good and marketable title to all of its assets, whether
real, personal or mixed, purported to be owned by it (including but not limited to all such assets reflected in the Financial Statements), in each case free of
any Encumbrance. The foregoing assets collectively represent in all material respects all assets, rights and properties necessary for the conduct of the
business of the Group in the manner conducted during the periods covered by the Financial Statements. Except for leased items, no Person other than a
Group Company owns any interest in any such assets. All leases of real or personal property to which a Group Company is a party are fully effective and
afford the Group Company valid leasehold possession of the real or personal property that is the subject of the lease. With respect to the material property
and assets it leases, except as set forth in Section 3.12(a) of the Disclosure Schedule, each Group Company is in compliance with such leases and such
Group Company holds valid leasehold interests in such assets free of any Encumbrance other than the existing rights of lessors of such property and assets.
(b) Real Property. No Group Company owns any real property or has any easements, licenses, rights of way, or other interests in or
to real property. All leasehold properties of the Group are held under valid, binding and enforceable leases of a Group Company. Except as set forth in the
Spinoff Plan, there are no facilities, services, assets or properties shared with any other Person which is not a Group Company, which are used in
connection with the business of the Group.
(c) Personal Property. All machinery, vehicles, equipment and other tangible personal property owned or leased by a Group
Company are (i) in good condition and repair in all material respects (reasonable wear and tear excepted) and (ii) not obsolete or in need in any material
respect of renewal or replacement, except for renewal or replacement in the ordinary course of business.
(d) Sufficiency of Assets. As of the Closing, except as set forth in the Spinoff Plan, the assets of the Group Companies will include
all assets, tangible and intangible, necessary and sufficient to conduct the Business of the Group Companies in the manner in which it is currently being
conducted and currently proposed to be conducted.
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Section 3.13 Intellectual Property.
(a) The following terms, as used herein, have the following meanings:
(i) “Intellectual Property” means all right, title and interest in or relating to intellectual property, whether protected, created or
arising under the laws of the United States or any other jurisdiction, including: (A) all patents and applications therefor,
including all continuations, divisionals, and continuations-in-part thereof and patents issuing thereon, along with all
reissues, reexaminations and extensions thereof; (B) all trademarks, service marks, trade names, service names, brand
names, d/b/a names, trade dress rights, corporate names, trade styles, logos and other source or business identifiers and
general intangibles of a like nature, together with the goodwill associated with any of the foregoing, along with all
applications, registrations, renewals and extensions thereof; (C) all Internet domain names; (D) all copyrights and all mask
work, database and design rights, whether or not registered or published, all registrations and recordations thereof and all
applications in connection therewith, along with all reversions, extensions and renewals thereof; (E) all trade secrets and
other proprietary confidential information; and (F) all other intellectual property rights arising from or relating to
Technology.
(ii) “Personal Information” means all information from or about an individual person which is used or could be used to
identify, contact or precisely locate the individual.
(iii) “Privacy Laws” means all laws in any jurisdiction governing the receipt, collection, use, storage, processing, sharing,
security, disclosure or transfer of Personal Information, including all laws governing data breach notification.
(iv) “Software” means any and all computer programs, whether in source code or object code; databases and compilations,
whether machine readable or otherwise; descriptions, flow-charts and other work product used to design, plan, organize and
develop any of the foregoing; and all documentation including user manuals and other training documentation related to any
of the foregoing.
(v) “Technology” means, collectively, designs, formulae, algorithms, procedures, methods, techniques, ideas, know-how,
results of research and development, Software, tools, data, inventions, apparatus, creations, improvements, works of
authorship and other similar materials, and all recordings, graphs, drawings, analyses, and any other embodiments of the
above, in any form whether or not specifically listed herein, and all related technology, that are used, incorporated or
embodied in or displayed by any of the foregoing or used in the design, development, reproduction, sale, marketing,
maintenance or modification of any of the foregoing.
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(b) Section 3.13(b) of the Disclosure Schedule sets forth an accurate and complete list of all registered Intellectual Property owned
by the Group Companies, 58.com or any Affiliate and used in the conduct of the Business of the Group Companies as currently conducted and as currently
proposed to be conducted (excluding know-how and trade secrets), including, for each such item of registered Intellectual Property, the registration or
application number and date (as applicable), the jurisdiction and the name of the registrant. Except as set forth under the Spinoff Plan or in Section 3.13(b)
of the Disclosure Schedule, as of the Closing, the Group Companies are (or will be) the sole and exclusive owner of, or have (or will have) valid and
continuing rights to use pursuant to a written agreement all Intellectual Property and Technology used in the conduct of the Business of the Group
Companies, free and clear of all Encumbrances or obligations to others. As of the Closing, the Intellectual Property and Technology rights of the Group
Companies will include all of the Intellectual Property and Technology rights necessary and sufficient to conduct the Business of the Group Companies in
the manner in which it is currently being conducted and currently proposed to be conducted. The registered Intellectual Property set forth on Section 3.13
(b) of the Disclosure Schedule is subsisting and, to the knowledge of the Warrantors, valid and enforceable.
(c) Except for commercial off-the-shelf Software available for an aggregate license fee of no more than US$10,000 (which
exception shall not apply to any Open Source Software (as defined below)), Section 3.13(c) of the Disclosure Schedule sets forth a complete and accurate
list of all contracts to which a Group Company, 58.com or an Affiliate is a party pursuant to which a Group Company, 58.com or an Affiliate grants or is
granted rights to, in or under any Intellectual Property or Technology used in the conduct of the Business of the Group Companies. None of the Group
Companies, 58.com nor any Affiliate is in default under any such contract, nor, to the knowledge of the Warrantors, is any other party to any such contract
in default thereunder, and no event has occurred that with the lapse of time or the giving of notice or both would constitute a default thereunder.
(d) To the knowledge of the Warrantors, none of the business and operations of the Group Companies or the Intellectual Property or
Technology owned by or licensed to the Group Companies, 58.com or an Affiliate and used in the conduct of the Business of the Group Companies
infringe, constitute an unauthorized use of, misappropriate or violate any Intellectual Property or other similar right of any Person.
(e) None of the Group Companies, 58.com or an Affiliate is the subject of any pending or, to the knowledge of the Warrantors,
threatened Action by any Person against the Group Companies, 58.com or an Affiliate which involves a claim of infringement, unauthorized use,
misappropriation, dilution or violation of Intellectual Property or challenging the ownership, use, validity or enforceability of the Intellectual Property
owned by or licensed to the Group Companies, 58.com or an Affiliate and used in the conduct of the Business of the Group Companies. None of the Group
Companies, 58.com or an Affiliate has received written notice of any such threatened claim and, to the knowledge of the Warrantors, there are no facts or
circumstances that would form the basis for any such claim or challenge.
(f) To the knowledge of the Warrantors, no Person is infringing, violating, misusing or misappropriating any Intellectual Property
owned by the Group Companies, 58.com or an Affiliate and used in the conduct of the Business of the Group Companies, and no such claims have been
made against any Person by the Group Companies, 58.com or an Affiliate.
13
(g) The Group Companies, 58.com or an Affiliate have taken adequate security measures, consistent with standard practices in the
industry in which the Group Companies operate, to protect the secrecy, confidentiality and value of all the trade secrets and any other non-public,
proprietary information included in the Intellectual Property and Technology owned by or licensed to the Group Companies, 58.com or an Affiliate and
used in the conduct of the Business of the Group Companies as currently conducted and as currently proposed to be conducted. With respect to the
Intellectual Property, trade secrets and other confidential information owned by the Group Companies and the Intellectual Property, trade secrets and other
confidential information owned by 58.com or any Affiliate and licensed by any Group Company or used in the conduct of the Business of the Group
Companies as currently conducted or as currently proposed to be conducted, the Group Companies, 58.com or an Affiliate have executed valid, written
agreements with all of their past and present employees, contractors and consultants pursuant to which such employees, contractors and consultants have:
(i) agreed to hold all such trade secrets and other confidential information in confidence both during and after their engagement and/or employment, and (ii)
presently and irrevocably assigned to the Group Companies, 58.com or an Affiliate all their rights in and to all Intellectual Property they develop or have
developed in the course of their engagement and/or employment. No confidential information owned by the Group Companies, or owned by 58.com or any
Affiliate but used in the conduct of the Business of the Group Companies as currently conducted or as currently proposed to be conducted, has been
authorized to be disclosed or, to the knowledge of the Warrantors, has been actually disclosed to any Person other than pursuant to a valid, written non-
disclosure agreement restricting the disclosure and use of such information both during and after the term of their engagement. No Person, other than the
Group Companies, 58.com or an Affiliate has any right, title or interest, directly or indirectly, in whole or in part, in any Intellectual Property used in the
conduct of the Business of the Group Companies as currently conducted or as currently proposed to be conducted and developed by such employees,
contractors or consultants.
(h) Section 3.13(h) of the Disclosure Schedule sets forth an accurate and complete list of all (i) Software owned exclusively by the
Group Companies, 58.com or an Affiliate and used in the conduct of the Business of the Group Companies as currently conducted and as currently
proposed to be conducted, (ii) other Software material to the conduct of the Business of the Group Companies that is not exclusively owned by the Group
Companies, 58.com or an Affiliate, excluding commercial-off-the-shelf Software available on reasonable terms for an aggregate license fee of no more than
$10,000, and (iii) open source Software, freeware, public library or other Software distributed under similar licensing or distribution models (collectively,
“Open Source Software”) material to the business practices, methods, products, services or operations of the Group Companies.
(i) The Software, hardware, servers, networks, interfaces databases, computer equipment and other information technology owned
or used by the Group Companies, 58.com or an Affiliate and used in the Business of the Group Companies (“Company Systems”) are adequate for the
business of the Group Companies as currently conducted and as currently proposed to be conducted. The Company Systems have not suffered any material
failure within the past three (3) years. The Group Companies maintain security, business continuity and disaster recovery plans, procedures and facilities
consistent with standard practices in the industry in which the Group Companies operate. The Group Companies, 58.com or an Affiliate has secured all
necessary license rights from third party owners of Software, Intellectual Property and Technology utilized in connection with the Company Systems
sufficient for the operation of the Company Systems as currently conducted and as currently proposed to be conducted.
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(j) Except as set forth on Section 3.13(j) of the Disclosure Schedule, no Open Source Software has been incorporated into any
material Company Systems or Software owned or licensed by the Group Companies, 58.com or an Affiliate and used in the conduct of the Business of the
Group Companies that would in any way obligate the Group Companies, 58.com or an Affiliate to disclose to any third party the source code for any such
Software. None of the Group Companies, 58.com nor an Affiliate has provided or is obligated to provide to any third party the source code for any material
Software owned or purportedly owned by the Group Companies, 58.com or any Affiliate and used in the conduct of the Business of the Group Companies.
(k) The Group Companies, 58.com or an Affiliate during the conduct of the Business of the Group Companies, has complied in all
material respects with all applicable Privacy Laws.
Section 3.14 Group Company Contracts and Obligations.
A true and complete list of the Group Company Contracts (as defined below) is set forth in Section 3.14 of the Disclosure Schedule, a true, fully-executed
copy of which (and a written summary of each non-written Group Company Contract) has been delivered to the Investors. Each Group Company Contract
is a valid and binding agreement of the Group Company that is a party thereto, the performance of which does not and will not violate any applicable Law
or Governmental Order, and is in full force and effect, and such Group Company has duly performed all of its obligations under each Group Company
Contract to the extent that such obligations to perform have accrued, and no breach or default, alleged breach or alleged default, or event which would (with
the passage of time, notice or both) constitute a breach or default thereunder by such Group Company or, to the knowledge of the Warrantors, any other
party or obligor with respect thereto, has occurred, or as a result of the execution, delivery, and performance of the Transaction Documents will occur. No
Group Company has given notice (whether or not written) that it intends to terminate a Group Company Contract or that any other party thereto has
breached, violated or defaulted under any Group Company Contract. No Group Company has received any notice (whether written or not) that it has
breached, violated or defaulted under any Group Company Contract or that any other party thereto intends to terminate such Group Company Contract. For
the purpose of this Agreement, the term “Group Company Contract” means any contract to which a Group Company is bound that (a) involves
obligations (contingent or otherwise) or payments in excess of US$500,000 individually or in the aggregate per annum or that has an unexpired term in
excess of one (1) year, (b) involves Intellectual Property that is material to a Group Company (other than generally-available “off-the-shelf” shrink-wrap
software licenses obtained by the Group on non-exclusive and non-negotiated terms), (c) restricts the ability of a Group Company to compete or to conduct
or engage in any business or activity or in any territory, (d) relates to the sale, issuance, grant, exercise, award, purchase, repurchase or redemption of any
Equity Securities other than those pursuant to the 2015 Plan, (e) involves any provisions providing exclusivity, “change in control”, “most favored nations”,
rights of first refusal or first negotiation or similar rights, or grants a power of attorney, agency or similar authority, (f) is with an officer, director,
shareholder or Affiliate (as defined in Section 9.04), (g) involves indebtedness, an extension of credit, a guaranty or assumption of any obligation in excess
of US$500,000, or the grant of an Encumbrance, (h) involves the lease, license, sale, use, disposition or acquisition of a material amount of assets or of a
business, (i) involves the waiver, compromise, or settlement of any material dispute, claim, litigation or arbitration, (j) involves the ownership or lease of,
title to, use of, or any leasehold or other interest in, any real or personal property (except for personal property leases involving payments of less than
US$500,000 per annum), (k) involves the establishment, contribution to, or operation of a partnership, joint venture or involving a sharing of profits or
losses, or any investment in, loan to or acquisition or sale of the securities, equity interests or assets of any Person, (l) is with any Persons identified in
Schedule D (each, a “Key Employee”), (m) is with a Governmental Authority or state-owned enterprise, (n) is a Control Agreement or (o) is otherwise
material to the Group taken as a whole.
15
Section 3.15 Litigation.
Unless otherwise listed in Section 3.15 of the Disclosure Schedule, there is no material notice, charge, claim, action, complaint, petition,
investigation, suit, arbitration or other proceeding, whether administrative, civil or criminal, whether at Law or in equity, and whether or not before any
mediator, arbitrator or Governmental Authority (“Action”) pending or, to the knowledge of the Warrantors, currently threatened (orally or in writing)
against any of the Group Companies with respect to any Group Company’s activities (current or proposed), properties or assets. To the knowledge of the
Warrantors, there is no Action pending or threatened (orally or in writing) against any officer, director or employee of a Group Company in connection
with such officer’s, director’s or employee’s relationship with, or actions taken on behalf of any Group Company. To the knowledge of the Warrantors,
there is no factual or legal basis for any of the foregoing, including with respect to any Action involving the prior employment of any of the employees of
any Group Company, their use in connection with such Group Company’s business of any information or techniques allegedly proprietary to any of their
former employers or their obligations under any agreements with prior employers. None of the Group Companies is a party to or subject to, and none of
their respective assets or properties is subject to, the provisions of any Governmental Order and there is no Action by any Group Company currently
pending or which it intends to initiate. No Governmental Authority has at any time challenged or questioned in writing the legal right of any Group
Company to conduct its business as presently being conducted or proposed to be conducted. No Group Company has received any opinion or memorandum
or advice from legal counsel to the effect that it is exposed, from a legal standpoint, to any liability or disadvantage which may be material to its business.
Section 3.16 Compliance with Laws.
(a) Other than as described in Section 3.16 of the Disclosure Schedule, each Group Company (including with respect to the
ownership thereof, the operation of its business and the ownership and use of its assets) is and has been in compliance with all applicable Laws in all
material respects.
(b) The business of each Group Company as now conducted and proposed to be conducted (including any business proposed to be
conducted by entities that are not currently existing as of the Closing) are in compliance with all Laws and regulations that may be applicable, including
without limitation all Laws of the PRC with respect to mergers, acquisitions, foreign investment and foreign exchange transactions in all material respects.
(c) No event has occurred and no circumstance exists that (with or without notice or lapse of time) (i) may constitute or result in a
material violation by any Group Company of, or a failure on the part of such Group Company to comply in all material respects with, any applicable Law
or (ii) may give rise to any material obligation on the part of a Group Company to undertake, or to bear all or any portion of the cost of, any material
remedial action of any nature.
16
(d) No Group Company has received any notice from any Governmental Authority regarding (i) any actual, alleged, possible or
potential material violation of, or material failure to comply with, any applicable Law or (ii) any actual, alleged, possible or potential material obligation on
the part of such Group Company to undertake, or to bear all or any portion of the cost of, any material remedial action of any nature. To the knowledge of
the Warrantors, the Company is not under investigation with respect to a violation of any applicable Law.
Section 3.17 Permits.
Each Group Company has all franchises, consents, licenses, permits, approvals, certificates, orders, authorizations or registrations, qualifications,
designations, declarations or filings by or with any governmental authority necessary for its respective business and operations as now conducted or
planned to be conducted (including any special approvals or permits required under applicable Laws, the “Permits”). Each Permit is valid and in full force
and effect. No Group Company has received any written notice from any Governmental Authority regarding any actual or possible default or violation of
any Permit. To the knowledge of the Warrantors, no suspension, cancellation or termination of any such Permits is pending, threatened or imminent.
Section 3.18 Certain Regulatory Matters.
(a) The Management Shareholders and the Group Companies have obtained any and all Approvals from applicable Governmental
Authorities and have fulfilled any and all filing and registration requirements with applicable Governmental Authorities necessary in respect of the
Management Shareholders and their investment in the Group Companies, and in respect of the Group Companies and their operations, respectively. All
filings and registrations with applicable Governmental Authorities required in respect of the Group Companies, the Management Shareholders, including
but not limited to the registrations with the Ministry of Commerce (or any predecessors), the Ministry of Information Industry, the State Administration of
Industry and Commerce, the State Administration of Foreign Exchange (“SAFE”), tax bureaus, customs authorities, product registration authorities, health
regulatory authorities and the local counterpart of each of such Governmental Authorities, as applicable, have been duly completed in accordance with
applicable Law. No Management Shareholder or Group Company has received any letter or notice from any applicable Governmental Authorities notifying
it of the revocation of any Approval issued to it or the need for compliance or remedial actions in respect of the activities carried out directly or indirectly
by any Management Shareholder or Group Company. Each Group Company has been conducting its business activities within the permitted scope of
business or is otherwise operating its businesses in full compliance in all material respects with all relevant Laws and Governmental Orders. No
Management Shareholder or Group Company has reason to believe that any Approval requisite for the conduct of any part of its business which is subject
to periodic renewal will not be granted or renewed by the relevant Governmental Authorities.
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(b) To the knowledge of the Warrantors, each holder or beneficial owner of Equity Securities of the Company (each, a “Company
Security Holder”), who is a “Domestic Resident” as defined in the Circular of the State Administration of Foreign Exchange on Relevant Issues
concerning Foreign Exchange Administration for Domestic Residents to Engage in Overseas Investment or Financing and in Return Investment via Special
Purpose Vehicles (《关于境内居民通过特殊目的公司境外投融资及返程投资外汇管理有关问题的通知》) issued by the SAFE on July 4, 2014 and
any successor rule or regulation under PRC law (“Circular 37”) has complied with any applicable reporting and/or registration requirements under Circular
37 and any other applicable SAFE rules and regulations, (collectively, the “SAFE Rules and Regulations”). Neither the Warrantors nor, to the knowledge
of the Warrantors, any of the Company Security Holders has received any oral or written inquiries, notifications, orders or any other forms of official
correspondence from SAFE or any of its local branches with respect to any actual or alleged non-compliance with the SAFE Rules and Regulations and the
Company and the Company Security Holders have made all oral or written filings, registrations, reporting or any other communications required by SAFE
or any of its local branches. The WFOE has obtained all certificates, approvals, permits, licenses, registration receipts and any similar authorization
necessary under PRC Laws to conduct foreign exchange transactions (collectively, the “Foreign Exchange Authorization”) as now being conducted by it,
and believes it can obtain, without undue burden or expense, any such Foreign Exchange Authorization for the conduct of foreign exchange transactions as
planned to be conducted. All existing Foreign Exchange Authorization held by the WFOE is valid and the WFOE is not in default under any of such
Foreign Exchange Authorization.
Section 3.19 Compliance with Other Instruments and Agreements.
(a) None of the Group Companies is or has been in, nor shall the conduct of its business as currently conducted result in, violation,
breach or default of any term of its Constitutional Documents, or material violation, breach or default of any term or provision of any Group Company
Contract or of any provision of any Governmental Order, statute, rule or regulation applicable to or binding upon such Group Company. None of the
activities, agreements, commitments or rights of any Group Company is invalid, or unauthorized.
(b) The execution, delivery and performance of and compliance with the Transaction Documents and the consummation of the
transactions contemplated hereby and thereby, will not result in (x) any such violation, breach or default, or be in conflict with or constitute, with or without
the passage of time or the giving of notice or both, a default under (i) the Constitutional Documents of any Group Company, (ii) any Contract to which a
Group Company is a party or by which it or its assets is bound or (iii) any applicable Law, except in the case of clause (ii) and (iii) such violation, breach or
default that would not be material to the Group taken as a whole, (y) the creation or imposition of any material Encumbrance upon, or with respect to, any
of the properties, assets or rights of any Group Company, or (z) any termination, modification, cancellation, or suspension of any material right of, or any
augmentation or acceleration of any material obligation of, any Group Company.
Section 3.20 Registration Rights.
Except as provided in the Shareholders Agreement and as set forth in Section 3.20 of the Disclosure Schedule, no Group Company has granted or
agreed to grant any Person any registration rights (including piggyback registration rights) with respect to, nor is the Company obliged to list, any of the
Company’s shares (or the shares of any Group Company) on any securities exchange. Except as set forth in Section 3.20 of the Disclosure Schedule or as
contemplated under the Transaction Documents, there are no voting or similar agreements which relate to the issued shares of the Company or any of the
equity interests of the Group Companies.
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Section 3.21 Financial Advisor Fees.
There exists no agreement or understanding between any Group Company and any investment bank, broker or other financial advisor under which
such Group Company may owe any brokerage, placement or other fees relating to the offer or sale of the Purchased Shares.
Section 3.22 Tax Matters.
(a) Each of the Group Companies has duly and timely filed (taking into account any extensions) all income and other material Tax
Returns with the appropriate Governmental Authority as required by applicable Law to have been filed by it and all such Tax Returns are true, correct and
complete in all respects. Each of the Group Companies has timely paid all Taxes due and payable by it to the appropriate Governmental Authority. There
are no Tax liens upon any property or assets of any of the Group Companies except for statutory liens for current Taxes not yet due and payable or for those
being diligently contested in good faith by appropriate proceedings and sufficiently reserved for on the Company’s Financial Statements in accordance with
Applicable Accounting Principles. Each of the Group Companies has made full and adequate provisions in their Books and Records and Financial
Statements for all unpaid Taxes of each Group Company (as applicable), including all Taxes which are not yet due and payable.
(b) All Taxes which any Group Company was obligated to collect, deduct or withhold from amounts paid by any customer or other
third party, or owing to any employee, creditor or other third party, have been timely collected, deducted or withheld and paid to the appropriate
Governmental Authority. The Group Companies have provided to the Investors complete copies of (i) all Tax Returns of each Group Company relating to
taxable periods ending after December 31, 2013 and (ii) any audit report issued within the last three (3) years relating to any Taxes due from or with respect
to any Group Company.
(c) No Tax examination, audit, investigation, or administrative or judicial proceedings by any Governmental Authority are currently
in progress with respect to the Group Companies. None of the Group Companies has received any (i) notice from any Governmental Authority indicating
any intent to open an audit, investigation, or administrative or judicial proceeding in respect of any Tax or Tax Return, or (ii) notice of deficiency or
proposed adjustment for any unpaid Taxes by any Governmental Authority. All deficiencies asserted or assessments made as a result of any audit or
examination by any Governmental Authority of the Tax Returns of any of the Group Companies have been fully paid.
(d) Each of the Group Companies (i) does not have, and has never had, a permanent establishment in any country other than the
country in which it is organized and resident and (ii) has never engaged in a trade or business in any country other than the country in which it is organized
and resident. None of the Group Companies has received any written claim from a Governmental Authority in a jurisdiction where a Group Company does
not file Tax Returns that such Group Company is or may be subject to taxation by that jurisdiction.
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(e) None of the Group Companies is subject to any waivers or extensions of applicable statutes of limitation with respect to Taxes.
(f) Each Group Company is in compliance in all respects with all terms, conditions and formalities necessary for the continuance of
any Tax exemption, Tax holiday, Tax credit, Tax incentive, Tax refund or other Tax reduction agreement or order available under any applicable Tax Law
and each such Tax exemption, Tax holiday, Tax credit, Tax incentive, Tax refund or other Tax reduction agreement or order is expected to remain in full
effect throughout the current effective period thereof after the Closing Date, and no Group Company has received any notice from any Governmental
Authority to the contrary. Each of the Group Companies is in compliance with all transfer pricing requirements in all jurisdictions in which it is required to
comply with applicable transfer pricing regulations, and all the transactions between any Group Company and other related persons (including any Group
Company) have been effected on an arm’s length basis. The transactions contemplated under this Agreement and the other Transaction Documents are not
in violation of any applicable Law regarding Taxes, and will not result in any Tax exemption, Tax holiday, Tax credit, Tax incentive, Tax refund or similar
item being revoked, cancelled or terminated, or trigger any Tax liability for any Group Company.
(g) None of the Group Companies (i) is subject to any waivers or extensions of applicable statutes of limitations with respect to
Taxes for any year, (ii) has any liability for the Taxes of any Person other than the Group Companies by reason of state, local or foreign Law, contract,
assumption, transferee or successor liability, operation of law or otherwise, (iii) has ever been a member of an affiliated, consolidated, combined or unitary
group filing for U.S. federal, US state or non-U.S. income Tax purposes, (iv) is party to or bound by any Tax sharing agreement, Tax indemnity or similar
agreement in favor of any person with respect to Taxes (including any advance pricing agreement or other similar agreement relating to Taxes with any
taxing authority) other than customary provisions contained commercial agreements entered into in the ordinary course of business the primary purpose of
which does not relate to Taxes, (v) is subject to any private letter ruling or any comparable Tax rulings of any Governmental Authority, (vi) has entered into
any agreement or arrangement with any Governmental Authority that requires it to take any action or to refrain from taking any action or is a party to any
agreement with any Governmental Authority that would be terminated or adversely affected as a result of the transactions contemplated by this Agreement,
(vii) will be required under applicable Tax law (A) to report any amount of taxable income for any taxable period beginning after the date on which the
Closing occurs (the “Closing Date”) which taxable income was realized (or reflects economic income arising) prior to the Closing Date or (B) to exclude
qualification for Tax exemption, Tax holiday, Tax credit, Tax incentive or Tax refund for any taxable period beginning after the Closing Date with respect
to any such qualification for Tax exemption, Tax holiday, Tax credit, Tax incentive or Tax refund that was present prior to the Closing Date as a result of a
change in a method of accounting occurring prior to the Closing Date, (viii) is a “surrogate foreign corporation” within the meaning of Section 7874(a)(2)
(B) of the Code or is treated as a U.S. corporation under Section 7874(b) of the Code, (ix) has an election in effect under Section 897(i) of the Code to be
treated as a United States corporation or (x) has incurred any Taxes after the Statement Date other than in the ordinary course of business. “Code” means
the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.
20
corporation for U.S. federal income Tax purposes.
(h) Each of the Group Companies is, and has been since its inception, treated and properly classified as an association taxable as a
(i) For the purposes of this Section 3.22, references to any Group Company shall include any entity that was merged with or
liquidated or converted into such Group Company.
Section 3.23 Interested Party Transactions.
(a) Except as otherwise disclosed in Section 3.23 of the Disclosure Schedule, no officer, director or director-level or above
employee (including the Key Employees) of any Group Company or any “Affiliate” or “Associate” (as used in this Section 3.23(a), as such terms are
defined in Rule 405 promulgated under the Act) of any such Person (each such officer, director, employee, Affiliate and Associate, an “Interested Party”)
has any agreement (whether oral or written), understanding, proposed transaction with, or is indebted to, any Group Company, nor is any Group Company
indebted (or committed to make loans or extend or guarantee credit) to any such Person (other than for accrued salaries, reimbursable expenses or other
standard employee benefits) (any such agreement, understanding, proposed transaction or indebtedness, an “Interested Party Transaction”). Each
Interested Party Transaction is on terms and conditions as favorable to the applicable Group Company as would have been obtainable by it at the time in a
comparable arm’s-length transaction with an unrelated party.
(b) No Interested Party has any direct or indirect ownership interest in, or any agreement or other arrangement or undertaking,
whether oral or written, with, any Person with which a Group Company has a material business relationship, or any Person that competes with a Group
Company. No Interested Party has or has had, either directly or indirectly, an interest in any material contract or agreement to which a Group Company is a
party or by which it may be bound or affected. None of the Group Companies is indebted, directly or indirectly, to any Interested Party, in any amount
whatsoever other than in connection with expenses or advances of expenses incurred in the ordinary course of business or relocation expenses of employees
of such Group Company. There is no agreement between any shareholder of the Company with respect to the ownership or control of any Group Company.
Section 3.24 Employee Matters.
(a) Except as set forth in Section 3.24(a) of the Disclosure Schedule, no Group Company is a party to any labor, works council or
collective bargaining agreement and there are not labor, works council or collective bargaining agreements which pertain to employees of the Group
Companies. The Group Companies have delivered or otherwise made available to the Investors true, correct and complete copies of the labor, works
council or collective bargaining agreements listed on Section 3.24(a) of the Disclosure Schedule, together with all amendments, modifications or
supplements thereto.
(b) No union organization campaign is in progress or threatened with respect to any employees of any Group Company, no labor
organization or group of employees has made a pending demand for recognition by any Group Company, and there are no representation proceedings or
petitions seeking a representation proceeding presently pending or, to the knowledge of any Group Company, threatened to be brought or filed, with any
labor relations tribunal, and no question concerning representation exists respecting such employees.
21
disputes pending or, to the knowledge of any Group Company, threatened in writing against any Group Company.
(c) There are no labor strikes, work stoppages, slowdowns, lockouts, grievances, charges, complaints or similar material labor
in compliance with applicable PRC Laws.
(d) The PRC Companies have entered into written labor contracts with all of their respective employees and such labor contracts are
(e) No employee of the Group Companies is owed any back wages or other compensation for services rendered (except for the
current pay period or as otherwise set forth on the Financial Statements). Except as disclosed in Section 3.24(e) of the Disclosure Schedule, there is no, and
there has not been in the last three (3) years, any material Action relating to the violation or alleged violation of any Law by any Group Company pertaining
to labor relations or employment matters, including any charge or complaint filed by an employee with any Governmental Authority or any Group
Company. Each Group Company has complied in all material respects with all Laws relating to employment, wages, hours, overtime, working conditions,
benefits, retirement, labor dispatch, termination, Taxes, and health and safety. Each Group Company is in compliance with each Law relating to its
provision of any form of social insurance and housing fund (“Social Insurance”), and has paid, or made provision for the payment of, all Social Insurance
contributions required under applicable Law.
(f) The Group Companies are not aware that any Key Employee intends to terminate their employment with any Group Company,
nor does any Group Company have a present intention to terminate the employment of any Key Employee. Each employee or consultant of the Group
Companies (other than the PRC Companies) is either an at-will employee or a consultant of such Group Company.
assignment of inventions pursuant to such employee’s confidentiality, non-competition and intellectual property rights agreement.
(g) No current or former employee or consultant of the Group Companies has excluded works or inventions from his or her
(h) Except (i) the 2015 Plan, (ii) as required under the applicable Laws and (iii) as otherwise disclosed in Section 3.24(h) of the
Disclosure Schedule, the Group Companies are not party to or bound by any currently effective share incentive compensation, equity-based compensation,
deferred compensation, change in control benefits, severance, tax equalization, retirement agreement, stock purchase, leave of absence, share option, profit
sharing, bonus or other employee compensation agreement.
Section 3.25 No Other Business.
The Company was formed solely to acquire and hold an equity interest in Daojia HK, and since its formation has not engaged in any business and
has not incurred any liability in the course of its business of acquiring and holding its equity interest in Daojia HK. Daojia HK was formed solely to acquire
and hold an equity interest in the WFOE and since its formation has not engaged in any business and has not incurred any liability in the course of its
business of acquiring and holding its equity interest in the WFOE. The WFOE was formed solely to control Tianjin Daojia upon the due execution of the
Control Agreements and has not incurred any liability in the course of its business of controlling Tianjin Daojia. Tianjin Daojia is engaged solely in the
Business and has no other activities.
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Section 3.26 Books and Records.
The books of account and other financial records, minute books, stock record books, and other records (the “Books and Records”) of the Group
Companies are true and complete, and each Group Company has maintained its Books and Records in the usual, regular and ordinary manner, on a basis
consistent with prior practice and in compliance with applicable Laws, and which permits its Financial Statements to be prepared in accordance with
Applicable Accounting Principles. The minute books of each Group Company contain a complete summary of all meetings and actions taken by directors
and shareholders or owners of such Group Company since its time of formation, and reflect all transactions referred to in such minutes accurately in all
material respects.
Section 3.27 Captive Structure.
Prior to the Closing, the Control Agreements will have been duly executed and delivered by the parties thereto, and constitute valid and biding
obligations of the parties thereto enforceable in accordance with their respective terms and, upon the completion of requisite government registration,
adequate to establish and maintain the intended captive structure, under which the financial statements of Tianjin Daojia can be consolidated with those of
the Company in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). None of the Warrantors has received any
oral or written inquiries, notifications or any other form of official correspondence from any government authorities challenging or questioning the legality
or enforceability of the Control Agreements.
Section 3.28 Anti-Bribery, Anti-Corruption, Anti-Money Laundering Laws.
(a) Neither any Group Company nor any of the officers, employees, directors and representatives thereof, nor, to the knowledge of
the Warrantors, agents thereof (collectively, “Representatives”), has, directly or indirectly, offered, authorized, promised, condoned, participated in,
consummated, or received notice of any allegation of, (i) payments, loans, any transfer of anything of value, or other inducements, rewards or benefits to
any Public Official (as defined herein) in order (A) to assist any Group Company to obtain or retain business for or with, or directing business to, any
Person, (B) influence any act or decision of such Public Official, (C) induce such Public Official to do or omit to do any act in violation of a lawful duty,
(D) or otherwise violate any provision of the United States Foreign Corrupt Practices Act of 1977, as amended, 15 U.S.C. §§78dd-1, et seq. (the “FCPA”),
the U.K. Bribery Act of 2010, or any other applicable anti-bribery or anti-corruption laws; (ii) bribes, payoffs, influence payments, kickbacks, unlawful
rebates or other similar unlawful payments of any nature; (iii) unlawful contributions, gifts, entertainment or other unlawful expenditures; or (iv) the
making of any false or fictitious entries in the books or records of any Group Company by any Person or the using of any assets of any Group Company for
the establishment of any unlawful or unrecorded fund of monies or other assets, or the making of any unlawful or undisclosed payment, in each case in
violation of any applicable anti-corruption, anti-money laundering, record keeping, internal control and other similar Laws.
23
(b) “Public Official” means any officer, executive, official, or employee of any non-U.S. Government, any political subdivision
thereof, any governmental authority, agency, department, or instrumentality thereof; political party or member of a political party, or a political candidate
thereof, excluding officials related to the United States; executive, employee or officer of a public international organization; or director, officer or
employee or agent of a wholly owned or partially state-owned or controlled enterprise, including a state-owned or controlled enterprise.
designed to detect and deter violations of all applicable anti-bribery and anti-corruption Laws.
(c) The Group Companies have instituted, maintain and enforce, and will continue to maintain and enforce, policies and procedures
(d) No Group Company or any of its Representatives has ever been found by a Governmental Authority to violate any criminal or
securities Law or is or was subject to any indictment or any government investigation for bribery. None of the beneficial owners of any Equity Interest in
any Group Company or the current or former Representatives of any Group Company is or was a Public Official.
Section 3.29 Compliance with Money Laundering Laws. The operations of the Group Companies are and have been conducted at all times in
compliance in all material respects with applicable financial recordkeeping and reporting requirements, including those of the Currency and Foreign
Transactions Reporting Act of 1970, as amended, the applicable money laundering statutes of all jurisdictions where the Company or any of its subsidiaries
conducts business, including the U.S. PATRIOT ACT of 2001, Her Majesty’s Treasury (HMT), the Organized and Serious Crimes Ordinance and the Anti-
Money Laundering and Counter-Terrorist Financing Ordinance of Hong Kong, and PRC anti-money laundering laws, the rules and regulations thereunder
and any related or similar rules, regulations or guidelines issued, administered or enforced by any governmental or regulatory agency (collectively, the
“Anti-Money Laundering Laws”), and no action suit or proceeding by or before any Governmental Authority or any arbitrator involving the Group
Company or any of its subsidiaries with respect to the Anti-Money Laundering Laws is pending or, to the knowledge of the Warrantors, threatened. The
directors, officers, administrators, board of directors (supervisory and management), members and employees of the Group Companies are in compliance
with, and have not previously violated, the Anti-Money Laundering Laws.
Section 3.30 Insurance.
Each Group Company has in full force and effect fire, casualty and other insurance policies, with extended coverage, sufficient in amount (subject
to reasonable deductibles) to allow it to reasonably replace any of its properties and material assets that might be damaged or destroyed and in amounts
customary for companies similarly situated. The Company has delivered true, correct and complete copies of the insurance policies maintained by each
Group Company as well as all material claims made thereunder in the past three years. There is no material claim pending thereunder as to which coverage
has been questioned, denied or disputed. All premiums due and payable under all such policies and bonds have been timely paid, and each Group Company
is otherwise in compliance in all material respects with the terms of such policies and bonds. All such policies and bonds are in full force and effect.
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Section 3.31 Internal Controls.
(a) Each Group Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i)
transactions by it are executed in accordance with management’s general or specific authorization, (ii) transactions by it are recorded as necessary to permit
preparation of financial statements in conformity with the Applicable Accounting Principles and to maintain asset accountability, (iii) access to its assets is
permitted only in accordance with management’s general or specific authorization, (iv) the recorded inventory of assets is compared with the actual existing
tangible assets at reasonable intervals and appropriate action is taken with respect to any differences, (v) segregating duties for cash deposits, cash
reconciliation, cash payment and proper approval is established, and (vi) no personal assets or bank accounts of the employees, directors and officers are
mingled with the corporate assets or corporate bank account, and no Group Company uses any personal bank accounts of any employees, directors or
officers thereof during the operation of the Business.
(b) The Company’s principal executive officer and its principal financial officer have disclosed, based on their most recent
evaluation, to the Company’s auditors and the Board(i) all significant deficiencies in the design or operation of internal controls which could adversely
affect the Group’s ability to record, process, summarize and report financial data and have identified for the Company’s auditors any material weaknesses
in internal controls and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Group’s
internal controls.
Section 3.32 OFAC Compliance.
Neither the Company nor any other Group Company, nor any directors, executive officers, or members, nor to the knowledge of the Warrantors,
any employees of the Company or any other Group Company (i) is an OFAC Sanctioned Person (as defined below) or (ii) has violated, within the last five
years, any OFAC Sanctions (as defined below). Neither the Company nor any Group Company is located, organized or resident in or conducts or, within
the past five (5) years, has conducted, business in, with, or involving any place that is subject to comprehensive OFAC Sanctions, currently: Cuba, Iran,
Sudan, Syria and the Crimea Region of Ukraine. Within the past five years, neither the Company nor any Group Company has made any voluntary
disclosures to U.S. Government authorities under U.S. economic sanctions laws or U.S. export control laws and, to the knowledge of the Warrantors,
neither the Company nor any Group Company has been the subject of any governmental investigation or inquiry regarding the compliance of any of the
Company or Group Companies with such laws or been assessed any fine or penalty under such laws. None of (i) the purchase and sale of the Purchased
Shares, or issuance of the Conversion Shares, (ii) the execution, delivery and performance of the Transaction Documents and the Constitutional
Documents, or (iii) the consummation of any transaction contemplated hereby or thereby, or the fulfillment of the terms hereof or thereof, result in a
violation of any of the OFAC Sanctions (as defined below) or of the Anti-Money Laundering Laws. The Group Company will not directly or indirectly use
the proceeds of the offering of the Securities hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture
partner or other person or entity (i) to fund or facilitate any activities of or business with any person that, at the time of such funding or facilitation, is the
subject or the target of OFAC Sanctions, (ii) to fund or facilitate any activities of or business with any OFAC Sanctioned Person, or (iii) in any other
manner that will result in a violation by any person of OFAC Sanctions (including any person participating in the transaction, whether as an investor or
otherwise).
For the purposes of this Section 3.32:
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(a) “OFAC Sanctions” means any sanctions program administered by the Office of Foreign Assets Control of the United States
Department of the Treasury (“OFAC”) under authority delegated to the Secretary of the Treasury (the “Secretary”) by the President of the United States or
provided to the Secretary by statute, and any order or license issued by, or under authority delegated by, the President or provided to the Secretary by
statute in connection with a sanctions program thus administered by OFAC. For ease of reference, and not by way of limitation, OFAC Sanctions programs
are described on OFAC’s website at www.treas.gov/ofac.
(b) “OFAC Sanctioned Person” means any government, country, corporation or other entity, group or individual with whom or
which the OFAC Sanctions prohibit a United States Person from engaging in transactions, and includes without limitation any individual or corporation or
other entity that appears on the current OFAC list of Specially Designated Nationals and Blocked Persons (the “SDN List”). For ease of reference, and not
by way of limitation, OFAC Sanctioned Persons other than government and countries can be found on the SDN List on OFAC’s website at
www.treas.gov/offices/enforcement/ofac/sdn.
(c) “United States Person” means any United States citizen, permanent resident alien, entity organized under the Laws of the
United States (including foreign branches), or any Person (individual or entity) in the United States, and, with respect to the Cuban Assets Control
Regulations, also includes any corporation or other entity that is owned or controlled by one of the foregoing, without regard to where it is organized or
doing business.
Section 3.33 Spinoff.
Except as set forth in Section 3.33 of the Disclosure Schedule, the implementation of the Spinoff is in compliance with all applicable Laws and
regulations, including, without limitation, the PRC Laws, regulations, policies and rules regarding the administration of the state-owned assets, foreign
exchange control, foreign investment in the PRC, the acquisition of domestic enterprises by foreign investors, outbound investment and tax compliance,
and each of the parties related to the Spinoff has obtained (or will obtain prior to Closing) and is and will be in compliance with all Approvals from and
filings with the competent Governmental Authorities or third parties as required by either the applicable Laws or any contractual obligation. Immediately
following the implementation of the Spinoff, the Group will have all of the assets, tangible and intangible, of any nature whatsoever, necessary to operate
the Business in the manner presently operated by the Group.
Section 3.34 Disclosure.
The Company has provided each New Investor with all the information regarding the Group Companies requested by any such New Investor for
deciding whether to purchase the Purchased Shares. No representation or warranty of the Warrantors contained in this Agreement or any certificate
furnished or to be furnished to any such New Investor at the Closing under this Agreement, when taken as a whole, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading in light of the
circumstances under which they were made. Except as set forth in this Agreement or the Disclosure Schedule, to the knowledge of the Warrantors, there is
no fact that the Company has not disclosed to the New Investors and of which any of its officers, directors or executive employees has knowledge and that
has had or would reasonably be expected to have an adverse effect upon the financial condition, operating results, assets or business prospects of any Group
Company.
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REPRESENTATIONS AND WARRANTIES OF THE MANAGEMENT SHAREHOLDERS
ARTICLE IV
Each of the Management Shareholders hereby, severally and not jointly, represents and warrants to each Investor as set forth in Sections 4.01
through 4.04. In addition, each of Chen Xiaohua and Bai Ou hereby, severally and not jointly, represents and warrants to each Investor as set forth in
Sections 4.05 through Section 4.11:
Section 4.01 Title to Shares.
The Management Shareholder is the sole registered holder of the shares of the Company as set forth opposite the name of such Management
Shareholder in Part I of Schedule C attached hereto, free and clear of any Encumbrance. Immediately following the Closing, the Management Shareholder
will be the sole registered holder of the shares of the Company as set forth opposite the name of such Management Shareholder in Part II of Schedule C
attached hereto, free and clear of any Encumbrance, except such Encumbrance imposed under the Shareholders Agreement and the Restated Articles.
Section 4.02 Due Authorization.
The Management Shareholder has all requisite power, authority and legal capacity to execute and deliver this Agreement and each other
Transaction Document to which he is a party and to carry out and perform his obligations thereunder. All action on the part of the Management Shareholder
necessary for (i) the authorization, execution and delivery of, and the performance of the Management Shareholder’s obligations under the Transaction
Documents to which he is a party, and (ii) the authorization of the transactions contemplated by the Transaction Documents has been taken or will be taken
prior to the Closing. Each of the Transaction Documents to which the Management Shareholder is a party is or will, upon its execution be a valid and
binding obligation of the Management Shareholder, enforceable against the Management Shareholder in accordance with its terms, subject, as to
enforcement of remedies, to applicable bankruptcy, insolvency, moratorium, reorganization and similar Laws of general application affecting creditors’
rights generally and to general equitable remedies.
Section 4.03 No Approvals and No Conflict.
(a) Such Management Shareholder is not required to obtain any Approval in connection with the execution, delivery and
performance by such Management Shareholder of this Agreement or the consummation by such Management Shareholder of the transactions contemplated
hereby, other than such Approvals as have been obtained or are otherwise provided in this Agreement.
(b) The execution, delivery and performance by each Management Shareholder of this Agreement, and the consummation of the
transactions contemplated hereby, do not and will not result in any violation, breach or default, or be in conflict with or constitute, with or without the
passage of time or the giving of notice or both, a default under (i) the Constitutional Documents of such Management Shareholder, (ii) any Contract to
which such Management Shareholder is a party or by which it or its properties or assets is bound or (iii) any applicable Law or order to which such
Management Shareholder or any of its properties or assets is subject.
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Section 4.04 Capitalization.
(a) Shares. As of the date hereof, the Company is authorized to issue a maximum of 200,000,000 Ordinary Shares, of which
90,980,000 Ordinary Shares are issued and outstanding. The Company will be authorized to issue, immediately following registration of the Restated
Articles at the BVI Registrar of Corporate Affairs prior to the Closing, (i) 200,000,000 Class A Ordinary Shares, of which 83,100,000 will be issued and
outstanding, (ii) 200,000,000 Class B Ordinary Shares, of which 1,880,000 will be issued and outstanding, (iii) 200,000,000 Class C Ordinary Shares, of
which 6,000,000 will be issued and outstanding, and (iv) 40,800,000 Series A Preferred Shares, none of which will be issued and outstanding. The rights,
privileges and preferences of the Class A Ordinary Shares, Class B Ordinary Shares, Class C Ordinary Shares and Series A Preferred Shares are set out in
the Shareholders Agreement (as defined below) and/or the Restated Articles.
(b) Options. Except for up to 20,000,000 Ordinary Shares (and options and warrants therefor) and 11,020,000 Class A Ordinary
Shares (and options and warrants therefor) reserved as of the date hereof and immediately following the Closing, respectively, for issuance to directors,
employees and advisors of the Group Companies pursuant to the Company’s 2015 Plan, and as contemplated hereby and by the other Transaction
Documents and/or the Restated Articles, there are no options, restricted stock, restricted stock units, stock appreciation rights, phantom stock, profits
interests, warrants, conversion privileges, agreements or rights of any kind (except for the Investor Rights Agreement, dated as of June 30, 2014, by and
between 58.com, Ohio River Investment Limited and other parties thereto) with respect to the issuance or purchase of, or valued by reference to, in whole
or in part, the Equity Securities of the Company or any other Group Company. Apart from the Shareholders Agreement, no Group Company is a party to
any contract that would subject any of its Equity Securities (including the Purchased Shares and other Preferred Shares in the case of the Company), or
shares issuable upon exercise or exchange of any outstanding options or other shares issuable by such Group Company, to any preemptive rights, rights of
first refusal or other rights of any kind to purchase such shares (whether in favor of such Group Company or any other Person). No Group Company is a
party or subject to any agreement that affects or relates to the voting or giving of written consents with respect to, or the right to cause the registration,
redemption, or repurchase of, any of its outstanding Equity Securities.
(c) Issuance and Status. All presently outstanding Equity Securities of each Group Company were duly and validly issued (or
subscribed for) in compliance with all applicable Laws, preemptive rights of any Person, and applicable contracts and are fully paid and non-assessable. All
share capital of each Group Company is and as of the Closing shall be free of any and all Encumbrances (except as provided under the Transaction
Documents and pursuant to applicable Laws). There are no (i) resolutions pending to change the share capital of any Group Company or cause the
liquidation, winding up, or dissolution of any Group Company or (ii) dividends which have accrued or been declared but are unpaid by any Group
Company.
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(d) Vesting. No contract of any Group Company relating to its Equity Securities provides for acceleration of vesting (or lapse of a
repurchase right) or other changes in the vesting provisions or other terms of such agreement or understanding upon the occurrence of any event or
combination of events. No Group Company has ever adjusted or amended the exercise price of any share options previously awarded, whether through
amendment, cancellation, replacement grant, repricing, or any other means.
Immediately upon the Closing, the Company’s ownership structure shall be as set forth in Part II of Schedule C attached hereto.
Section 4.05 Financial Statements.
(a) The Company has delivered to the Investors true, correct and complete copies of (i) the Audited Financial Statements and (ii) the
Unaudited Financial Statements. The Financial Statements (A) are complete and correct in all material respects, (B) have been prepared in accordance with
the Books and Records of Tianjin Daojia or the Group, as applicable and (C) were prepared in accordance with the Applicable Accounting Principles
applied on a consistent basis throughout the periods involved. Except for such line items as set forth in Part二 of the Spinoff Plan, the Audited Financial
Statements fairly present in all material respects the financial condition and position of Tianjin Daojia as of the date indicated therein and the results of
operations and cash flows of Tianjin Daojia for the period indicated therein. Except for such line items as set forth in Part二 of the Spinoff Plan, the
Unaudited Financial Statements fairly present in all material respects the financial condition and position of the Group as of the dates indicated therein and
the results of operations and cash flows of the Group for the periods indicated therein. All of the accounts receivable owing to any of the Group Companies,
including without limitation all accounts receivable set forth on the Financial Statements, constitute valid and enforceable claims and are good and
collectible in the ordinary course of business, net of any reserves shown on the Financial Statements (which reserves are adequate and were calculated on a
basis consistent with the Applicable Accounting Principles), and no further goods or services are required to be provided in order to complete the sales and
to entitle the applicable Group Company to collect in full. There are no material contingent or asserted claims, refusals to pay, or other rights of set-off with
respect to any accounts receivable of the Group Companies to the knowledge of the Chen Xiaohua and Bai Ou.
(b) The financial projections and business plan provided by the Company to the Investors (including the Business Plan) were
reasonably prepared on a basis reflecting management’s best estimates, assumptions and judgments, at the time provided to the Investors, as to the future
financial performance of the Group.
Section 4.06 Changes.
Since the Statement Date, except as expressly contemplated by this Agreement, the Control Agreements and the Spinoff Plan, the Group has
operated its business in the ordinary course consistent with its past practice, there has not been any Material Adverse Effect or any material change in the
way the Group conducts its business, no Group Company has entered into any transaction outside of the ordinary course of business consistent with its past
practice, and there has not been by or with respect to any Group Company:
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(a) any purchase, acquisition, sale, lease, disposal of or other transfer of any assets that are individually or in the aggregate material
to its business, whether tangible or intangible, other than the purchase or sale of inventory in the ordinary course of business consistent with its past
practice, or any acquisition (by merger, consolidation or other combination, or acquisition of stock or assets, or otherwise) of any business or other Person
or division thereof;
(b) any waiver, termination, settlement or compromise of a valuable right or of a material debt;
(c) any incurrence, creation, assumption, repayment, satisfaction, or discharge of (1) any material Encumbrance or (2) any
indebtedness or guarantee in excess of RMB1 million, or the making of any loan or advance (other than reasonable and normal advances to employees for
bona fide expenses that are incurred in the ordinary course of business consistent with its past practice), or the making of any investment or capital
contribution in excess of RMB1 million;
(d) except in the ordinary course of business consistent with its past practice, any amendment to any Group Company Contract, any
entering into of any new Group Company Contract, or any termination of any contract that would have been a Group Company Contract if in effect on the
date hereof, or any amendment to any Charter Document, or any amendment to or waiver under any Charter Document, in each case except for as expressly
provided for or disclosed in this Agreement;
redemption, purchase or other acquisition of any Equity Securities;
(e) any declaration, setting aside or payment or other distribution in respect of any Equity Securities, or any direct or indirect
financial condition, operations or business (as presently conducted) of any Group Company;
(f) any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the assets, properties,
(g) any material change in accounting methods or practices or any revaluation of any of its assets;
(h) entry into any closing agreement in respect of material Taxes, settlement of any claim or assessment in respect of any material
Taxes, or consent to any extension or waiver of the limitation period applicable to any claim or assessment in respect of any material Taxes, entry or change
of any material Tax election, change of any method of accounting resulting in a material amount of additional Tax or filing of any material amended Tax
Return;
(i) any commencement or settlement of any material Action; or
(j) any agreement or commitment to do any of the things described in this Section 4.06.
Section 4.07 Compliance with Laws.
(a) Other than as described in Section 3.16 of the Disclosure Schedule, each Group Company (including with respect to the
ownership thereof, the operation of its business and the ownership and use of its assets) is and has been in compliance with all applicable Laws in all
material respects.
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(b) The business of each Group Company as now conducted and proposed to be conducted (including any business proposed to be
conducted by entities that are not currently existing as of the Closing) are in compliance with all Laws and regulations that may be applicable, including
without limitation all Laws of the PRC with respect to mergers, acquisitions, foreign investment and foreign exchange transactions in all material respects.
(c) No event has occurred and no circumstance exists that (with or without notice or lapse of time) (i) may constitute or result in a
material violation by any Group Company of, or a failure on the part of such Group Company to comply in all material respects with, any applicable Law
or (ii) may give rise to any material obligation on the part of a Group Company to undertake, or to bear all or any portion of the cost of, any material
remedial action of any nature.
(d) No Group Company has received any notice from any Governmental Authority regarding (i) any actual, alleged, possible or
potential material violation of, or material failure to comply with, any applicable Law or (ii) any actual, alleged, possible or potential material obligation on
the part of such Group Company to undertake, or to bear all or any portion of the cost of, any material remedial action of any nature. To the knowledge of
Chen Xiaohua and Bai Ou, the Company is not under investigation with respect to a violation of any applicable Law.
(e) Neither any Group Company nor any of the officers, employees, directors and representatives thereof, nor, to the knowledge of
Chen Xiaohua and Bai Ou, agents thereof, has, directly or indirectly, offered, authorized, promised, condoned, participated in, consummated, or received
notice of any allegation of, (i) payments, loans, any transfer of anything of value, or other inducements, rewards or benefits to any Public Official in order
(A) to assist any Group Company to obtain or retain business for or with, or directing business to, any Person, (B) influence any act or decision of such
Public Official, (C) induce such Public Official to do or omit to do any act in violation of a lawful duty, (D) or otherwise violate any provision of the
United States Foreign Corrupt Practices Act of 1977, as amended, 15 U.S.C. §§78dd-1, et seq., the U.K. Bribery Act of 2010, or any other applicable anti-
bribery or anti-corruption laws; (ii) bribes, payoffs, influence payments, kickbacks, unlawful rebates or other similar unlawful payments of any nature; (iii)
unlawful contributions, gifts, entertainment or other unlawful expenditures; or (iv) the making of any false or fictitious entries in the books or records of
any Group Company by any Person or the using of any assets of any Group Company for the establishment of any unlawful or unrecorded fund of monies
or other assets, or the making of any unlawful or undisclosed payment, in each case in violation of any applicable anti-corruption, anti-money laundering,
record keeping, internal control and other similar Laws.
designed to detect and deter violations of all applicable anti-bribery and anti-corruption Laws.
(f) The Group Companies have instituted, maintain and enforce, and will continue to maintain and enforce, policies and procedures
(g) Neither any Group Company nor any of the officers, employees, directors and representatives thereof, nor, to the knowledge of
Chen Xiaohua and Bai Ou, agents thereof, has ever been found by a Governmental Authority to violate any criminal or securities Law or is or was subject
to any indictment or any government investigation for bribery. None of the beneficial owners of any Equity Interest in any Group Company or the current
or former Representatives of any Group Company is or was a Public Official.
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(h) The operations of the Group Companies are and have been conducted at all times in compliance in all material respects with
Anti-Money Laundering Laws, and no action suit or proceeding by or before any Governmental Authority or any arbitrator involving the Group Company
or any of its subsidiaries with respect to the Anti-Money Laundering Laws is pending or, to the knowledge of the Management Shareholders, threatened.
No directors, officers, administrators, board of directors (supervisory and management), members and employees of the Group Companies are in violation
of, or have previously violated, the Anti-Money Laundering Laws.
Section 4.08 Operating Metrics.
The results of operation of Tianjin Daojia, as measured by the operating metrics set forth in Section 4.08 of the Disclosure Schedule, that have
been provided in writing to the New Investors prior to the date hereof, are in all material respects true, accurate and not misleading.
Section 4.09 Certain Regulatory Matters.
(a) The Management Shareholder has obtained any and all Approvals from applicable Governmental Authorities and has fulfilled
any and all filing and registration requirements with applicable Governmental Authorities necessary in respect of the Management Shareholder and his
investment in the Group Companies. All filings and registrations with applicable Governmental Authorities required in respect of the Management
Shareholder, including but not limited to the registrations with the Ministry of Commerce (or any predecessors), the Ministry of Information Industry, the
State Administration of Industry and Commerce, SAFE, tax bureaus, customs authorities, product registration authorities, health regulatory authorities and
the local counterpart of each of such Governmental Authorities, as applicable, have been duly completed in accordance with applicable Law. The
Management Shareholder has not received any letter or notice from any applicable Governmental Authorities notifying him of the revocation of any
Approval issued to him or the need for compliance or remedial actions in respect of the activities carried out directly or indirectly by the Management
Shareholder. The Management Shareholder has no reason to believe that any Approval requisite for the conduct of any part of his business which is subject
to periodic renewal will not be granted or renewed by the relevant Governmental Authorities.
(b) The Management Shareholder, to the extent he is a “Domestic Resident” as defined in Circular 37, has complied with any
applicable SAFE Rules and Regulations. The Management Shareholder has not received any oral or written inquiries, notifications, orders or any other
forms of official correspondence from SAFE or any of its local branches with respect to any actual or alleged non-compliance with the SAFE Rules and
Regulations and the Management Shareholder has made all oral or written filings, registrations, reporting or any other communications required by SAFE
or any of its local branches.
Section 4.10 Financial Advisor Fees.
There exists no agreement or understanding between the Management Shareholder and any investment bank, broker or other financial advisor
under which the Management Shareholder may owe any brokerage, placement or other fees relating to the offer or sale of the Purchased Shares.
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Section 4.11 Disclosure.
No representation or warranty of such Management Shareholder contained in this Agreement, when taken as a whole, contains any untrue
statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein not misleading in light of the
circumstances under which they were made. Except as set forth in this Agreement or the Disclosure Schedule, to the knowledge of such Management
Shareholder, there is no fact that such Management Shareholder has not disclosed to the New Investors and of which such Management Shareholder has
knowledge and that has had or would reasonably be expected to have an adverse effect upon the financial condition, operating results, assets or business
prospects of any Group Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor hereby, severally and not jointly, represents and warrants to the Company as follows:
Section 5.01 Due Organization.
Such Investor is duly incorporated or organized, validly existing and in good standing (or equivalent status in the relevant jurisdiction) under the
Laws of the jurisdiction of its incorporation or organization.
Section 5.02 Authorization.
Such Investor has all requisite power, authority and capacity to enter into, and to perform its obligations under, this Agreement and the other
Transaction Documents to which it is a party. This Agreement has been duly authorized, executed and delivered by such Investor. This Agreement and the
other Transaction Documents to which it is a party, when executed and delivered by such Investor, will constitute valid and legally binding obligations of
such Investor, subject, as to enforcement of remedies, to applicable bankruptcy, insolvency, moratorium, reorganization and similar Laws of general
application affecting creditors’ rights generally and to general equitable remedies.
Section 5.03 No Conflicts.
The execution, delivery and performance by such Investor of this Agreement, and the consummation of the transactions contemplated hereby, do
not and will not conflict with or result in a violation or breach of or default under (with or without the giving of notice or the lapse of time or both) (a) the
Constitutional Documents of such Investor, (b) any Law or order to which such Investor or any of its properties or assets is subject, or (c) any contract,
agreement or other instrument applicable to such Investor or any of its properties or assets
Section 5.04 No Approvals.
Such Investor is not required to obtain any Approval in connection with the execution, delivery and performance by such Investor of this
Agreement or the consummation by such Investor of the transactions contemplated hereby, other than such Approvals as have been obtained or are
otherwise provided in this Agreement.
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Section 5.05 Purchase for Own Account.
The Purchased Shares and the Conversion Shares will be acquired for such Investor’s own account or the account of one or more of such
Investor’s Affiliates, not as a nominee or agent, and not with a view to or in connection with the sale or distribution of any part thereof. Such Investor does
not presently have any contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participations to any Person with respect
to the Shares.
Section 5.06 Restricted Securities.
Such Investor understands that the Purchased Shares are “restricted securities” under applicable U.S. federal securities Laws (and may be viewed
as restricted securities under the Laws of any other jurisdiction) and that, pursuant to these Laws, such Investor must hold the Purchased Shares indefinitely
unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and
qualification requirements is available.
Section 5.07 Legends.
Such Investor understands that the certificates evidencing the Purchased Shares issued pursuant to this Agreement may bear the following legend,
in addition to any legend that may be required under the Transaction Documents:
“THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF SHARES REPRESENTED HEREBY IS SUBJECT TO CERTAIN RESTRICTIONS
ON TRANSFER SET FORTH IN A SHAREHOLDERS AGREEMENT, A COPY OF WHICH MAY BE OBTAINED UPON WRITTEN REQUEST TO
THE SECRETARY OF THE COMPANY. THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “ACT”). NO SUCH TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT.”
Section 5.08 Status of Investor.
Such Investor is either (i) an “accredited investor” within the meaning of the U.S. Securities and Exchange Commission Rule 501(a) of Regulation
D, as presently in effect, under the Act, or (ii) not a “U.S. person” as defined in Rule 902 of Regulation S of the Act.
ARTICLE VI
COVENANTS
Each of the Warrantors (and where applicable, each of the Management Shareholders), jointly and severally, covenants to each Investor as
follows:
Section 6.01 Use of Proceeds.
The Company shall use the proceeds from the issuance of the Series A Preferred Shares for the operations of the Group Companies and shall only
spend such proceeds in accordance with the budget set forth in the Business Plan (as defined below) or in any business plan or budget approved by the
Board in accordance with Section 7.1 of the Shareholders Agreement after the Closing.
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Section 6.02 Executory Period Covenants.
Between the date of this Agreement and the Closing, unless the Investors consent in writing otherwise:
(a) Pre-Closing Actions. As promptly as practicable, each Warrantor shall: (i) use best efforts to take all actions required of such
party and to do all other things reasonably necessary, proper or advisable to consummate the transactions contemplated under the Transaction Documents;
(ii) file or supply, or cause to be filed or supplied, all applications, notifications and information required to be filed or supplied by such Warrantor pursuant
to Law in connection with the Transaction Documents and the issuance of the Purchased Shares pursuant hereto and the consummation of the other
transactions contemplated under the Transaction Documents; (iii) use reasonable best efforts to obtain, or cause to be obtained, all consents (including any
consents required under any contract) necessary to be obtained by such party in order to consummate the transactions contemplated pursuant to the
Transaction Documents; and (iv) coordinate and cooperate with the other parties hereto in exchanging such information and supplying such assistance as
may be reasonably requested by the other parties hereto in connection with any filings and other actions to be made or taken in order to consummate the
transactions contemplated pursuant to the Transaction Documents.
(b) Non-Violation. Pending the Closing, none of the Warrantors, without the prior written consent of the Investors, shall take any
action which (i) would render any of the representations or warranties made by the Warrantors in this Agreement untrue in any material respect if given
with reference to the facts and circumstances then existing or (ii) would result in any of the covenants contained in this Agreement becoming incapable of
performance. Each Warrantor shall promptly advise the Investors of any action or event of which such Warrantor becomes aware which would have the
effect of making incorrect in any material respect any such representations or warranties if given with reference to facts and circumstances then existing or
which has the effect of rendering any such covenants incapable of performance.
(c) Conduct of Business. Except as otherwise permitted by this Agreement or the Spinoff Plan or with the written consent of the
Investors, from the date hereof to the date of the Closing, the Warrantors shall: (i) carry on the Group’s business in the ordinary course consistent with past
practice and in substantially the same manner as conducted prior to the date hereof and use best efforts to preserve its relationships with customers,
suppliers and others having business dealings with the Group; and (ii) not do any act or thing which would require the approval of the “Requisite Holders”
or the “Requisite Directors” (as such terms are defined in the Shareholders Agreement) under the Shareholders Agreement had the transactions
contemplated hereunder been consummated.
(d) Negative Covenants. Except as otherwise expressly permitted by this Agreement or the Spinoff Plan, no Group Company shall:
(i) waive, release or assign any material right or claim;
35
(ii)
(iii)
(iv)
(v)
(vi)
take any action that would reasonably be expected to materially impair the value of the Group taken as a whole;
sell, purchase, assign, lease, transfer, pledge, encumber or otherwise dispose of any material asset;
issue, sell, or grant any Equity Security except pursuant to the 2015 Plan;
declare, issue, make, or pay any dividend or other distribution with respect to any Equity Security;
incur any indebtedness for borrowed money or capital lease commitments or assume or guarantee any indebtedness of
any Person other than in the ordinary course of business of such Group Company for working capital purposes, not
exceeding US$5 million in the aggregate, bearing an annualized interest rate of 5% per annum or less and with a term
not exceeding six months;
(vii)
make any material change in any method of accounting or accounting practice used by such Group Company, other
than any such changes required by Applicable Accounting Principles;
(viii)
enter into any contract or other transaction with an Affiliate;
(ix)
(x)
(xi)
make, change or revoke any material Tax election;
enter into, request or obtain any “closing agreement” with any taxing authority in respect of Taxes;
file any amended Tax Return;
(xii)
incur any liability for Taxes other than in the ordinary course of business;
(xiii)
consent to any extension or waiver of the limitations period applicable to any Tax claim or assessment;
(xiv)
(xv)
(xvi)
increase the level of compensation or benefits (including, without limitation, contingent separation benefits) of any
officer, director or Key Employee of the Group Companies;
increase the aggregate monthly compensation of all of the Group Companies’ employees (other than any officer,
director or Key Employee as of August 31, 2015) by more than 5% as compared with the aggregate amount of
compensation to such employees paid by the Group for the month of August 2015;
amend, modify or terminate any Benefit Plan or labor, works council or collective bargaining agreement, or enter into
any labor, works council or collective bargaining agreement or any other arrangement that would constitute a Benefit
Plan if in effect on the date hereof;
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(xvii)
engage, promote, terminate or demote any officer, director or employee of the Group Companies or engage or terminate
any individual independent contractor of the Group Companies other than in the case of employees and individual
independent contractors in the ordinary course of business of the Group consistent with past practice; or
(xviii)
authorize or commit to do any of the foregoing.
(e) Access and Information. From the date hereof until the Closing, the Warrantors shall permit each New Investor, or any
representative thereof, at its own expense, to (i) visit and inspect the properties of the Group Companies, (ii) inspect the contracts, Books and Records, and
other documents and data of the Group Companies, (iii) discuss the business, affairs, finances and accounts of the Group Companies with officers and
employees of the Group Companies, and (iv) review such other information as such New Investor reasonably requests, in each case during normal business
hours and in such a manner so as not to unreasonably interfere with the normal operations of the Group Companies. No information or knowledge obtained
pursuant to this Section or otherwise by a New Investor in connection with its due diligence will affect or be deemed to modify any representation or
warranty contained herein or the conditions to the obligations of the Parties to consummate the transactions.
(f) Financial Statements. Each Group Company shall furnish to the New Investors as soon as practicable after the end of each month
between the date hereof and the Closing, and in any event within 30 days after each such month, the unaudited financial statements of such Group
Company for the month then ended, which shall present fairly, in all material respects, the unaudited financial position of such entity as of the end of such
month and the consolidated results of such entity’s operations and cash flows for the month then ended, in conformity with Applicable Accounting
Principles consistently applied with the Financial Statements, except for noncompliance with the footnote disclosure requirements under Applicable
Accounting Principles and for year-end adjustments, and subject to such other exceptions as may be indicated in the notes thereto.
(g) Trademarks. Each of the Warrantors shall take, and shall cause Beijing 58 Information Technology Co., Ltd. (北京五八信息技
术有限公司), in its capacity as the applicant in the trademark applications, to take any and all actions and to exhaust all appeal methods that are necessary
or advisable to maintain and continue the application process that is currently under way with respect to the trademarks that are necessary for the conduct of
the Businesses of the Group Companies.
Section 6.03 Compliance with Applicable Law.
(a) The Group Companies shall, and shall cause each of the subsidiaries established or acquired by any Group Company after the
date hereof to, conduct their respective businesses in compliance with all applicable Laws (including all Laws in the PRC) in all material respects, and
promptly apply for, obtain and maintain all Approvals. In the event an Investor identifies any potential non-compliance with any applicable Laws, the
Group Companies agree that upon the request of such Investor, the Company shall discuss with such Investor to identify and evaluate mutually acceptable
solutions.
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(b) The Company (and/or any other Group Company and/or Management Shareholders, as the case may be) shall, as promptly as
practicable after the Closing, to the satisfaction of the Investors, take all requisite action to apply for and complete any necessary filing under the SAFE
Rules and Regulations.
Section 6.04 Spinoff and Strategic Cooperation Agreement.
(a) Each of the Warrantors and Management Shareholders shall (i) procure that (A) each party to the Spinoff Plan shall fulfill all of
its obligations under Part二, subsections 1A, 2.2A, 3.2.1A, 3.2.2A, 4.1A, 4.2A, 4.3A and 5A of the Spinoff Plan prior to Closing and (B) each party to the
Business Cooperation Agreement (as defined below) shall fulfill all of its obligations under the Business Cooperation Agreement, (ii) use best efforts to
procure that the Spinoff Plan shall be fully implemented no later than December 31, 2015 subject to the availability of such Approvals as set forth in the
Spinoff Plan, (iii) procure that the Spinoff Plan shall be implemented in compliance with all applicable Laws and regulations, including, without limitation,
the PRC Laws, regulations, policies and rules regarding the administration of state-owned assets, foreign exchange control, foreign investment in the PRC,
the acquisition of domestic enterprises by foreign investors, outbound investment and tax compliance (iv) procure that each party to the Spinoff Plan shall
obtain and shall be in compliance with all Approvals from and filings with the competent Governmental Authorities or third parties as required by either
applicable Laws or any contractual obligation in connection with the implementation of the Spinoff Plan and (v) procure that the Spinoff Plan shall be
implemented without material cost to the Group Companies.
(b) Each of the Management Shareholders, jointly and severally, covenants to each Investor that (i) the Strategic Cooperation
Agreement (as defined in Section 7.11) shall be implemented in compliance with all applicable Laws and regulations, including, without limitation, the
PRC Laws, regulations, policies and rules regarding the administration of the state-owned assets, foreign exchange control, foreign investment in the PRC,
the acquisition of domestic enterprises by foreign investors, outbound investment and tax compliance and (ii) each party to the Strategic Cooperation
Agreement shall obtain, prior to execution of the Strategic Cooperation Agreement, and shall be in compliance with, all Approvals from and filings with the
competent Governmental Authorities or third parties as required by either applicable Laws or any contractual obligation in connection with the execution,
delivery and performance of the Strategic Cooperation Agreement.
(c) Yao Jinbo covenants to each Investor that he will use reasonable best efforts to procure the Company and other applicable Group
Companies to perform and be in compliance with all agreements, obligations and conditions contained in the Business Cooperation Agreement and the
Control Agreements.
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Section 6.05 Consultation with New Investors.
From the date hereof until the date of completion of the Spinoff, the Group Companies, Chen Xiaohua and Bai Ou shall timely inform the New
Investors of and discuss with the New Investors on a regular and ongoing basis (a) any material developments or decisions with respect to the management
of the business and assets of the Group Companies, including, without limitation, any significant new agreements or transactions proposed to be entered
into or persons proposed to be employed or terminated in executive management positions, and any other significant developments relating to the business
or assets of the Group Companies and (b) the status of the Group Companies’ and the Management Shareholders’ progress in fulfilling the closing
conditions set forth in Article VII, including without limitation with respect to (x) obtaining all requisite approvals, consents and similar actions from
Governmental Authorities in connection with the Spinoff (whether prior to or subsequent to the Closing) and (y) consents and/or waivers of third parties.
Section 6.06 Implementation of Best Practices.
Unless the Investors consent in writing otherwise, Tianjin Daojia shall, and each of the Warrantors shall cause Tianjin Daojia to:
(a) implement as soon as practicable, and in no event later than March 31, 2016, a plan with respect to the labor dispatch
arrangement of employees of Tianjin Daojia such that the labor dispatch arrangement is in compliance with applicable PRC labor Laws and regulations in
all material respects;
(b) conduct its businesses in a manner that is in compliance in all material respects with applicable PRC Laws implemented by the
Administration for Industry and Commerce, including by applying for, obtaining and maintaining business licenses where necessary to carry on the
Business;
(c) as soon as practicable, enter into appropriate agreements with service providers so that the contractual arrangement between
such service providers and Tianjin Daojia shall be valid under applicable PRC Laws and exercise best efforts to prevent such arrangement being identified
as a labor relationship, including but not limited to:
“social insurance” and similar terms in the agreements that may imply, indicate, give rise or be interpreted to identify a labor relationship;
(i) avoiding using terms such as “employee”, “commencement/termination of employment”, “salary”, “base salary”,
(ii) specifying in the agreements that (w) the service providers are individuals or organizations entirely independent from
Tianjin Daojia, (x) they shall not be deemed as the employees or agents of Tianjin Daojia either from a legal or factual respect, (y) they shall be
liable for all the Taxes in connection with their service income and (z) Tianjin Daojia shall not be held jointly liable for any damages or losses
caused by the service providers to the customers; and
attention to such disclaimer clause in a clear and prominent manner.
(iii) properly disclaiming Tianjin Daojia’s liability for any service provider’s service or actions and drawing the customers’
forth in Exhibit L hereto.
(d) adopt by the Closing an anti-corruption and anti-bribery company-wide policy in substantially the form and substance as set
(e) refrain from conducting any nominal registration of any vehicle owned by a service provider in the “inside city transportation”
business line under the name of Tianjin Daojia or any of its branches or subsidiaries, except and only to the extent (i) it is necessary for Tianjin Daojia’s or
its branches’ or subsidiaries’ application for Road Transportation Operation License (道路运输经营许可证) and (ii) the nominal registration of vehicles
under each of the name of Tianjin Daojia or any of its branches or subsidiaries shall be no more than 10 vehicles at any time.
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Section 6.07 ICP License.
The Group Companies and the Management Shareholders shall procure that Tianjin Daojia obtains by December 31, 2015 the Internet Content
Provider License (电信与信息服务业务经营许可证) and Value-added Telecommunications Service Business Operating Permit (增值电信业务经营许可
证) issued by the Ministry of Industry and Information Technology of the PRC or its competent local office which is necessary for the conduct of the
Business.
Section 6.08 Appointment of Directors.
The Company shall duly appoint the director nominated by Taobao China Holding Limited (“Alibaba”) upon the Closing. At the election of the
Majority Series A Investor (as defined in the Shareholders Agreement) pursuant to Section 1.2(f) of the Shareholders Agreement, the Group Companies
shall provide director appointment letters to the Investors showing that the board of directors of each of Tianjin Daojia, the WFOE and Daojia HK has been
re-constituted in accordance with the Shareholders Agreement.
Section 6.09 Nominee Shareholders of Tianjin Daojia.
Each of the Warrantors and Management Shareholders agrees that upon request by Alibaba, it shall cause Tianjin Daojia to issue new equity
interest to such entity designated by Alibaba (the “Alibaba Nominee Shareholder”) so that the Alibaba Nominee Shareholder will hold the same
percentage of equity interest in Tianjin Daojia as Alibaba holds in the Company immediately following the Closing; provided that (i) the Warrantors and
Management Shareholders shall use their best efforts to procure that any such new equity issuance to the Alibaba Nominee Shareholder shall be
implemented without material cost to Alibaba or the Alibaba Nominee Shareholder and (ii) Alibaba shall procure the Alibaba Nominee Shareholder to
enter into and comply with the amended Control Agreements. The Group Companies shall provide (a) an updated company register with company stamp
and the stamp of the relevant Administration for Industry and Commerce reflecting the Alibaba Nominee Shareholder as an additional shareholder, (b) the
amended Control Agreements that reflect the change to the shareholding of Tianjin Daojia and (c) the certification documents from the relevant
Administration for Industry and Commerce reflecting that the share pledges in connection with the amended Control Agreements that reflect the change of
the shareholding of Tianjin Daojia have been duly registered promptly following such equity transfer and in any event no later than thirty (30) business
days thereafter.
ARTICLE VII
CONDITIONS TO THE INVESTORS’ OBLIGATIONS AT CLOSING
The obligation of each Investor (or New Investor, as applicable) to purchase the Purchased Shares at the Closing is subject to the fulfillment, in a
form satisfactory to such Investor (or waiver thereof by such Investor (or New Investor, as applicable)) on or prior to the Closing, of the following
conditions:
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Section 7.01 Representations and Warranties True and Correct.
Each of the representations and warranties made by the Warrantors in Article III hereof and the representations and warranties made by the
applicable Management Shareholders in Article IV hereof shall be true, correct and complete as of the date hereof and as of the Closing with the same force
and effect as if they had been made on and as of such date (except to the extent that any such representations and warranties shall have been expressly made
as of an earlier date, in which case such representations and warranties shall have been true, correct and complete only as of such earlier date).
Section 7.02 Performance of Obligations.
Each Group Company and Management Shareholder shall have performed and complied in all material respects with all agreements, obligations
and conditions contained in this Agreement and the other Transaction Documents that are required to be performed or complied with by it on or before the
Closing.
Section 7.03 Proceedings and Documents.
All corporate and other proceedings in connection with the transactions contemplated hereby and all documents and instruments incidental to such
transactions shall be satisfactory in substance and form to the New Investors, and the New Investors shall have received all such counterpart originals or
certified or other copies of such documents as they may reasonably request.
Section 7.04 Approvals and Waivers.
Any and all approvals, consents and waivers necessary for consummation of the transactions that shall be completed at or prior to the Closing as
contemplated by this Agreement and the other Transaction Documents, including, but not limited to, (i) all Approvals of any Governmental Authority, and
(ii) the waiver by the existing shareholders of the Company of any anti-dilution rights, rights of first refusal, preemptive rights and all similar rights in
connection with the issuance of the Purchased Shares at the Closing shall have been duly obtained and effective as of the Closing.
Section 7.05 Amendment to Constitutional Documents.
The Restated Articles shall have been duly adopted by the Company by all necessary corporate action of its Board and its shareholders and, shall
have been duly registered with the British Virgin Islands Registry of Corporate Affairs and shall be in full force and effect.
Section 7.06 Appointment of Directors.
The Company’s Restated Articles shall provide that the Board shall consist of individuals elected or appointed in accordance with the
Shareholders Agreement and the Restated Articles.
Section 7.07 Execution of Shareholders Agreement.
The Company shall have delivered to the Investors the Shareholders Agreement, duly executed by the Company, all other applicable Group
Companies and all other parties thereto (except for the Investors).
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Section 7.08 Indemnification Agreements.
The Company shall have entered into an indemnification agreement with each of the directors appointed or to be appointed by the Investors in the
form attached as Exhibit D hereto.
Section 7.09 Spinoff Plan; Compliance.
The necessary parties to the Spinoff Plan shall have completed all the items in Part二, subsections 1A, 2.2A, 3.2.1A,3.2.2A, 4.1A, 4.2A, 4.3A and
5A of the Spinoff Plan (the “Milestone Items”) on terms satisfactory to the New Investors, and shall have delivered evidence satisfactory to the New
Investors that the Milestone Items have been completed.
Section 7.10 Business Cooperation Agreement.
The Company and other applicable Group Companies shall have entered into a business cooperation agreement with 58.com with respect to the
Spinoff in the form attached as Exhibit E hereto (the “Business Cooperation Agreement”).
Section 7.11 Strategic Cooperation Agreement.
The Company and other applicable Group Companies shall have entered into a strategic cooperation agreement with Alibaba or an Affiliate in the
form attached as Exhibit F hereto (the “Strategic Cooperation Agreement”).
Section 7.12 Closing Certificate.
The chief executive officer of the Company shall have executed and delivered to the Investors at the Closing a certificate dated as of the Closing
(a) certifying that (i) the conditions specified in this Article VII have been fulfilled as of the Closing, (ii) all corporate and other proceedings in connection
with the transactions to be completed at the Closing and all documents incidental thereto, including without limitation written approval from all of the then
current holders of equity interests of each Group Company, as applicable, with respect to this Agreement and the other Transaction Documents, have been
completed, and each Group Company shall have delivered to the Investors all such counterpart copies of such documents as the Investors may reasonably
request, (iii) there shall have been no material adverse change in the business, affairs, prospects, operations, properties, assets, or condition of the Group
Companies since the date of this Agreement and (b) attaching thereto (x) the Constitutional Documents of the Group Companies as then in effect,
(y) copies of all resolutions adopted by the shareholders of the Company and the Board related to the transactions contemplated hereby, and (z) good
standing or equivalent certificates with respect to the Company from the applicable authority(ies) in the British Virgin Islands dated no more than five (5)
days prior to the Closing.
Section 7.13 Business Plan.
The Company shall have approved, and delivered to the Investors, the business plan and budget of the Group Companies for the remainder of
calendar year 2015 and calendar year 2016 in the form attached to the Shareholders Agreement (the “Business Plan”).
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Section 7.14 Employment Agreements.
(a) Each of Bai Ou, Li Ying and Guo Yi shall have entered into an employment agreement with the Company substantially in the form of Exhibit
G attached hereto, (b) Chen Xiaohua shall have entered into an employment agreement with the Company on terms and conditions substantially identical to
his current employment agreement with 58.com except that in the non-compete agreement the non-compete industry shall be the “life service industry (生
活服务类行业)”, and the non-compete period shall be 24 months, and the Company shall have delivered to the Investors copies of the same.
Section 7.15 No Material Adverse Effect.
There shall have been no Material Adverse Effect since the date of this Agreement.
Section 7.16 No Litigation
No Action shall have been instituted or threatened or claim or demand made against any Group Company, Management Shareholder or Investor
seeking to restrain or prohibit, or to obtain substantial damages with respect to, the consummation of the transactions contemplated by this Agreement or
any other Transaction Document, and there shall not be in effect any order by a Governmental Authority of competent jurisdiction restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated by this Agreement or any other Transaction Document.
Section 7.17 Opinions of Counsel.
The Investors shall have received:
(i) from Han Kun Law Offices, PRC counsel for the Company, an opinion, dated as of the Closing, in the form attached as Exhibit H-1
hereto; and
(ii) from Conyers Dill & Pearman, British Virgin Islands counsel for the Company, an opinion, dated as of the Closing, in the form attached
as Exhibit H-2 hereto.
Section 7.18 Approval by Investment Committee.
Each New Investor shall have received approval, if required, from its board or investment committee for entry into the transactions contemplated
hereunder.
Section 7.19 Consent and Waiver from Ohio River.
Alibaba shall have received from the Company a consent and waiver by Ohio River in substantially the form and substance of Exhibit K hereto.
Section 7.20 Compliance Policy.
The Company shall have adopted the anti-bribery and corruption policies in substantially the form and substance as set forth in Exhibit L hereto.
Section 7.21 58.com Non-Compete. 58.com shall have entered into a non-compete agreement (the “58.com Non-Compete”) with the
Company regarding the operation, by 58.com or any of its controlled Affiliates, of a transaction platform (i.e., a platform that allows for both the initiation
and settlement of transactions) in any of the following three areas: 家政, 美甲and速运, satisfactory in substance and form to the New Investors.
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ARTICLE VIII
CONDITIONS TO THE COMPANY’S OBLIGATIONS AT THE CLOSING
The obligations of the Company under this Agreement at the Closing with respect to the Investors are subject to the fulfillment, on or prior to the
Closing of the following conditions:
Section 8.01 Representations and Warranties.
The representations and warranties of the Investors contained in Article V hereof shall be true and correct as of the date hereof and as of the
Closing with the same force and effect as if they had been made on and as of such date (except to the extent that any such representations and warranties
shall have been expressly made as of an earlier date, in which case such representations and warranties shall have been true, correct and complete only as of
such earlier date).
Section 8.02 Execution of Transaction Documents.
The Investors shall have duly executed and delivered to the Group Companies and Management Shareholders the Transaction Documents to
which they are parties.
Section 8.03 Execution of the Strategic Cooperation Agreement.
Alibaba or an Affiliate shall have entered into the Strategic Cooperation Agreement with the Company and other applicable Group Companies.
ARTICLE IX
MISCELLANEOUS
Section 9.01 Indemnity.
(a) The representations and warranties of the Warrantors and the Management Shareholders contained in this Agreement shall
survive the Closing until the date that is eighteen (18) months following the date of the Closing; provided, however, that the representations and warranties
(i) of the Warrantors set forth in Sections 3.01 to 3.06 and 3.19(b), (ii) of the Management Shareholders set forth in Sections 4.01 to 4.04 shall survive the
Closing indefinitely and (iii) representations and warranties of the Warrantors set forth in Section 3.22 shall survive until sixty (60) days after the expiration
of the applicable statute of limitations. The covenants and other agreements of the Warrantors and the Management Shareholders contained in this
Agreement shall survive the Closing until fully discharged in accordance with their terms, except for those covenants and agreements which shall be
complied with or discharged prior to the Closing in accordance with the terms of this Agreement, which shall survive until the date that is eighteen (18)
months following the date of the Closing; provided that, for the avoidance of doubt, the Warrantors’ indemnification obligations in connection with any
Indemnifiable Loss resulting from any Indemnified Tax shall survive the Closing until sixty (60) days after the expiration of the applicable statute of
limitations. If a notice of a claim or potential claim with respect to a breach of any representation, warranty, covenant or agreement is asserted in writing
and delivered prior to the applicable time set forth above, such representation, warranty, covenant or agreement shall survive in connection with such claim
or potential claim until such claim or potential claim is resolved in accordance with the terms of this Article IX. Neither the period of survival nor the
liability of the Warrantors or the Management Shareholders with respect to their respective representations, warranties, covenants and agreements shall be
reduced by any investigation made at any time by or on behalf of any Investor.
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(b) The Warrantors shall jointly and severally indemnify and hold harmless the Investors, the Investors’ Representatives, Affiliates,
successors and permitted assigns (each an “Indemnitee”), from and against any and all losses, liabilities, claims, deficiencies, demands, damages
(excluding any consequential damages except to the extent such damages (x) are not based on any special circumstances of the Person entitled to
indemnification and (y) are the natural, probable and reasonably foreseeable result of the event that gave rise thereto or the matter for which
indemnification is sought hereunder, regardless of the form of action through which such damages are sought; provided, that this exclusion shall not apply
to indemnity obligations for damages that are awarded by a court of competent jurisdiction in connection with a third party claim), diminution in value,
interest, fines, awards, disbursement, expense, obligation, penalty, suit, judgment, settlement or Tax of any kind or nature, including without limitation,
reasonable legal, accounting and other professional fees and expenses incurred in the investigation, collection, prosecution and defense of claims (together,
the “Indemnifiable Losses”) suffered by such Indemnitee, directly or indirectly, as a result of, or based upon or arising from:
(i) any inaccuracy in or breach of any of the representations or warranties made by a Warrantor or a Group Company in this Agreement or
any other Transaction Document;
(ii) any breach or nonperformance of any of the covenants or agreements made by a Warrantor or a Group Company in this Agreement or any
other Transaction Document;
(iii) any payment, costs or expense actually made or paid by the Group Companies arising from or in connection with any PRC Company
failing, prior to the Closing, to establish or maintain social insurance and housing fund accounts for each of its employees or fully contribute
into such accounts the amount of social insurance and housing fund required to be paid by such PRC Group Company pursuant to applicable
PRC law;
(iv) any Indemnified Taxes; and
(v) any of the matters set forth in Schedule 9.01.
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“Indemnified Taxes” means (A) any Taxes imposed on or with respect to any Group Company in connection with the issuance of the
Purchased Shares or the Spinoff, (B) any Taxes imposed on any Group Company for any tax period ending on or before the Closing Date (or
for any portion of a Straddle Period ending on the Closing Date), (C) any Taxes resulting from any Taxes imposed on any of the Group
Companies as a result of having been a member of a consolidated, combined or unitary group on or prior to the Closing Date, or (D) any
Taxes resulting from (x) the failure of the representations and warranties contained in Section 3.22 to be true and correct in all respects
(determined without regard to any qualifications related to materiality contained therein) or (y) the failure to perform any covenant contained
in this Agreement with respect to Taxes. “Straddle Period” means any tax period beginning before and ending after the Closing Date. For
purposes of the foregoing, in the case of a Straddle Period, the amount of any Tax based on or measured by income or receipts or imposed in
connection with any transaction of any of the Group Companies that is allocable to the portion of a Straddle Period ending on the Closing
Date shall be determined based on an interim closing of the books as of the close of business on the Closing Date (and for such purpose, the
Tax period of any partnership or other pass-through entity in which any of the Group Companies holds a beneficial interest shall be deemed
to terminate at such time), and the amount of any other Tax of any of the Group Companies that is allocable to the portion of a Straddle
Period ending on the Closing Date shall be deemed to be the amount of such Tax for the entire Straddle Period multiplied by a fraction, the
numerator of which is the number of days in the portion of the Straddle Period ending on and including the Closing Date, and the
denominator of which is the total number of days in the entire Straddle Period.
(c) Each Management Shareholder shall severally and not jointly indemnify and hold harmless the Indemnitees from and against
any and all Indemnifiable Losses suffered by such Indemnitee, directly or indirectly, as a result of, or based upon or arising from any inaccuracy in or
breach or nonperformance of any of the representations, warranties, covenants or agreements in this Agreement or any other Transaction Document made
by such Management Shareholder.
(d) Subject to the last sentence of this Section 9.01(d), (i) in no event shall the aggregate liability of the Warrantors and the
Management Shareholders towards the Indemnitees under this Agreement exceed one hundred percent (100%) of the aggregate Purchase Price received by
the Company and (ii) in no event shall the aggregate liability of each Management Shareholder towards the Indemnitees under this Agreement exceed the
higher of (x) US$10 million and (y) the then Fair Market Value of one percent (1%) of the outstanding shares of the Company, as determined by the
Company’s board of directors (including the affirmative vote of the Series A Director). For purposes of the foregoing, “Fair Market Value” means the
price at which 100% of the Company’s outstanding shares are likely to be sold in an arm’s-length transaction between a willing and able buyer and a
willing and able seller, neither of which is an Affiliate of the other, based on market conditions prevailing at the time, but excluding any reference to
control premium, minority discounts or any transaction fees or expenses. Nothing in this Section 9.01(d) shall have the effect of limiting or restricting any
liability arising as a result of any fraud or willful misconduct.
(e) Each of the Warrantors agrees that in assessing the amount of Indemnifiable Loss for any inaccuracy in or breach or
nonperformance of any representation, warranty, covenant or agreement pursuant to Section 9.01(b), there shall be taken into account that an Investor shall
be entitled to be compensated for, but not limited to, the decrease in value (including loss of bargain) of all Purchased Shares held by such Investor as a
result of such inaccuracy, breach or nonperformance.
(f) Exclusive Remedy. Following the Closing, and subject to Section 9.19, the indemnification provisions of Section 9.01 shall be
the exclusive remedy for any breach of this Agreement by the Warrantors and the Management Shareholders, other than with respect to any gross
negligence, willful misconduct or fraud.
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Section 9.02 Procedure.
Any Indemnitee seeking indemnification with respect to any Indemnifiable Loss (an “Indemnified Party”) shall give notice to the party required
to provide indemnity hereunder (the “Indemnifying Party”); provided, however, that failure to so notify the Indemnifying Party shall not preclude the
Indemnified Party from any indemnification which it may claim in accordance with Section 9.01. If any claim, demand or liability is asserted by any third
party against any Indemnified Party, the Indemnifying Party shall, upon the written request of the Indemnified Party, defend actively and diligently at its
sole cost and expense any actions or proceedings brought against the Indemnified Party in respect of matters embraced by the indemnity under Section 9.01
hereof. The Indemnified Party shall have the right to participate in the defense of any such third party claim, and if in the opinion of counsel to the
Indemnified Party there is at any time a reasonable likelihood of a conflict of interest between the Indemnifying Party and the Indemnified Party, the
Indemnifying Party shall bear the reasonable costs and expenses of counsel to the Indemnified Party in connection with such third party claim. The
Indemnifying Party shall not, without the written consent of the Indemnified Party, compromise or settle any such third party claim or permit a default or
consent to entry of any judgment unless the claimant or claimants and the Indemnifying Party provide to the Indemnified Party an unqualified release from
all liability in respect of the third party claim. If, after a request to defend any action or proceeding, the Indemnifying Party neglects to defend diligently the
Indemnified Party, a recovery against the Indemnified Party and costs and expenses arising from defending such action or proceeding suffered by it, shall
be conclusive in its favor against the Indemnifying Party.
Section 9.03 Governing Law.
This Agreement shall be governed by and construed exclusively in accordance with the laws of Hong Kong without regard to principles of
conflicts of law thereunder.
Section 9.04 Successors and Assigns.
Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns,
heirs, executors and administrators of the parties hereto whose rights or obligations hereunder are affected by such provisions. Notwithstanding anything
contrary in this Agreement, this Agreement and the rights and obligations herein shall not be assigned or transferred without the mutual written consent of
the Investors and the Company; provided, however, each Investor may assign or transfer its rights and obligations herein to (A) its partners or former
partners in accordance with partnership interests, (B) a wholly-owned subsidiary or a parent corporation that owns all of the capital stock of such Investor,
(C) its members or former members in accordance with their interest in the limited liability company, or (D) any of its Affiliates; provided that in each case
the transferee will agree by executing a Deed of Adherence in the form attached hereto as Exhibit J to be subject to the terms of this Agreement to the same
extent as if it were an original Investor hereunder. For purposes of this Section 9.04, “Affiliate” shall mean, in respect of a Person, any other Person that,
directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such Person, and (a) in the case of a
natural Person, shall include, without limitation, such Person’s spouse, parents, children, siblings, mother-in-law and father-in-law and brothers and sisters-
in-law, (b) in the case of any Investor, shall include any Person who holds shares as a nominee for such Investor, and (c) in respect of any Investor, shall
also include (i) any shareholder of such Investor, (ii) any entity or individual which has a direct and indirect interest in such Investor (including, if
applicable, any general partner or limited partner) or any fund manager thereof; (iii) any Person that directly or indirectly Controls, is Controlled by, under
common Control with, or is managed by such Investor, its shareholder, the general partner or the fund manager of such Investor or its shareholder, (iv) the
relatives of any individual referred to in (ii) above, and (v) any trust Controlled by or held for the benefit of such individuals. “Person” shall mean any
individual, corporation, partnership, limited partnership, proprietorship, association, limited liability company, firm, trust, estate or other enterprise or
entity. “Control” shall mean the power or authority, whether exercised or not, to direct the business, management and policies of a Person, directly or
indirectly, whether through the ownership of voting securities, by contract or otherwise; provided, that such power or authority shall conclusively be
presumed to exist upon possession of beneficial ownership or power to direct the vote of more than fifty percent (50%) of the votes entitled to be cast at a
meeting of the members or shareholders of such Person or power to control the composition of a majority of the board of directors of such Person. The
terms “Controlled” and “Controlling” have meanings correlative to the foregoing. For the avoidance of doubt, no Investor shall be deemed to be an
Affiliate of the Company.
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Section 9.05 Entire Agreement.
This Agreement, the Shareholders Agreement, other Transaction Documents and the schedules and exhibits hereto and thereto, which are hereby
expressly incorporated herein by this reference constitute the entire understanding and agreement between the parties with regard to the subjects hereof and
thereof; provided, however, that nothing in this Agreement or related agreements shall be deemed to terminate or supersede the provisions of any
confidentiality and nondisclosure agreements executed by the parties hereto prior to the date hereof, which agreements shall continue in full force and
effect until terminated in accordance with their respective terms.
Section 9.06 Notices.
Except as may be otherwise provided herein, all notices, requests, waivers and other communications made pursuant to this Agreement shall be in
writing and shall be conclusively deemed to have been duly given (a) when hand delivered to the other party, upon delivery; (b) when sent by facsimile at
the number set forth in Exhibit J hereto, upon receipt of confirmation of error-free transmission; (c) seven (7) business days after deposit in the mail as air
mail or certified mail, receipt requested, postage prepaid and addressed to the other party as set forth in Exhibit J; or (d) three (3) business days after deposit
with an overnight delivery service, postage prepaid, addressed to the parties as set forth in Exhibit J with next business day delivery guaranteed; provided
that the sending party receives a confirmation of delivery from the delivery service provider.
Each person making a communication hereunder by facsimile shall promptly confirm by telephone to the person to whom such communication
was addressed each communication made by it by facsimile pursuant hereto but the absence of such confirmation shall not affect the validity of any such
communication. A party may change or supplement the addresses given above, or designate additional addresses, for purposes of this Section 9.06 by
giving, the other parties written notice of the new address in the manner set forth above.
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Section 9.07 Amendments.
Any term of this Agreement may be amended only with the written consent of the Company and the Investors. Notwithstanding the foregoing, no
amendment of any term of this Agreement shall adversely affect in any material way the interest of any Management Shareholder without the prior written
consent of such Management Shareholder.
Section 9.08 Delays or Omissions.
No delay or omission to exercise any right, power or remedy accruing to any Warrantor or Investor, upon any breach or default of any party hereto
under this Agreement, shall impair any such right, power or remedy of such Warrantor or Investor, nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of any similar breach of default thereafter occurring; nor shall any waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any Warrantor or Investor of any breach
of default under this Agreement or any waiver on the part of any Warrantor or Investor of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement, or by law or otherwise
afforded to the Warrantors and the Investors shall be cumulative and not alternative.
Section 9.09 Finder’s Fees.
Each party represents and warrants to the other parties hereto that it has retained no finder or broker in connection with the transactions
contemplated by this Agreement and hereby agrees to indemnify and to hold harmless the other parties hereto from and against any liability for any
commission or compensation in the nature of a finder’s fee of any broker or other person or firm (and the costs and expenses of defending against such
liability or asserted liability) for which the indemnifying party or any of its employees or representatives are responsible.
Section 9.10 Interpretation; Titles and Subtitles.
This Agreement shall be construed according to its fair language. The rule of construction to the effect that ambiguities are to be resolved against
the drafting party shall not be employed in interpreting this Agreement. The titles of the sections and subsections of this Agreement are for convenience of
reference only and are not to be considered in construing this Agreement. Unless otherwise expressly provided herein, all references to Sections and
Exhibits herein are to Sections and Exhibits of this Agreement. As used in this Agreement, the words “include” and “including”, and variations thereof,
shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “without limitation”. Any representations, warranties,
covenants or agreements by a Management Shareholder are given jointly and severally by the individual Management Shareholder and applicable SPV
owned by such individual Management Shareholder.
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Section 9.11 Counterparts.
This Agreement may be executed in one or more counterparts and may be delivered by electronic or facsimile transmission, all of which shall be
considered one and the same agreement and each of which shall be deemed an original. Facsimile, e-mail or other electronic signatures shall have the same
legal effect as original signatures.
Section 9.12 Severability.
If any provision of this Agreement is found to be invalid or unenforceable, then such provision shall be construed, to the extent feasible, so as to
render the provision enforceable and to provide for the consummation of the transactions contemplated hereby on substantially the same terms as originally
set forth herein, and if no feasible interpretation would save such provision, it shall be severed from the remainder of this Agreement, which shall remain in
full force and effect unless the severed provision is essential to the rights or benefits intended by the parties. In such event, the parties shall use best efforts
to negotiate, in good faith, a substitute, valid and enforceable provision or agreement which most nearly effects the parties’ intent in entering into this
Agreement.
Section 9.13 Confidentiality and Non-Disclosure.
(a) Disclosure of Terms. Unless disclosure to a regulatory authority is necessary or appropriate in connection with any necessary
regulatory approval or unless disclosure is required by judicial or administrative process or by other requirement of Law or the applicable requirements of
any regulatory agency or relevant stock exchange, the terms and conditions of this Agreement, all Transaction Documents and all exhibits attached to such
agreements (collectively, the “Financing Terms”) and all non-public records, books, contracts, instruments, computer data and other data and information
concerning the other parties furnished to it by such other parties or their representatives pursuant to this Agreement (together with the Financing Terms
collectively, “Confidential Information”), including their existence, shall be considered confidential information and shall not be disclosed by any party
hereto to any third party (other than the Affiliates, directors, officers, employees, advisors and other representatives of a party or its Affiliates on a need-to-
know basis) without prior written consent of the other parties except in accordance with the provisions set forth below; provided that such confidential
information shall not include any information that can be shown to have been (i) previously known by such party on a non-confidential basis, (ii) in the
public domain through no fault of such party or (iii) later lawfully acquired from other sources on a non-confidential basis by the party to which it was
furnished.
(b) Permitted Disclosures. Notwithstanding the foregoing, (i) any party may disclose any of the Financing Terms to its current or
bona fide prospective investors, employees, investment bankers, lenders, partners, accountants and attorneys, in each case only where such persons or
entities have the need to know such information and are subject to appropriate nondisclosure obligations, (ii) each Investor may disclose any of the
Financing Terms to its fund manager and the employees thereof so long as such persons are under appropriate nondisclosure obligations and (iii) the
Company may disclose any of the Financing Terms to Ohio River to the extent necessary for obtaining the consent and waiver required hereunder.
(c) Legally Compelled Disclosure. In the event that any party is requested or becomes legally compelled (including without
limitation, pursuant to securities laws and regulations) to disclose the existence of this Agreement and any other Transaction Documents, any of the exhibits
attached to such agreements, or any of the Financing Terms hereof in contravention of the provisions of this Section 9.13, such party (the “Disclosing
Party”) shall (to the extent that it is able and permitted to do so in compliance with the relevant law or requirement) within a reasonable time before
making such disclosure, promptly consult with the other parties (the “Non-Disclosing Parties”) and use all reasonable efforts (and cooperate with the other
parties’ efforts) to obtain confidential treatment of the materials so disclosed. In such event, the Disclosing Party shall furnish only that portion of the
information which is legally required to be disclosed and shall exercise reasonable efforts to keep confidential such information to the extent reasonably
requested by any Non-Disclosing Party.
50
separate nondisclosure agreement executed by any of the parties with respect to the transactions contemplated hereby.
(d) Other Information. The provisions of this Section 9.13 shall be in addition to, and not in substitution for, the provisions of any
(e) Notices. All notices required under this Section 9.13 shall be made pursuant to Section 9.06 of this Agreement.
Section 9.14 Further Assurances.
Each party shall from time to time and at all times hereafter make, do, execute, or cause or procure to be made, done and executed such further
acts, deeds, conveyances, consents and assurances without further consideration, which may reasonably be required to effect the transactions contemplated
by this Agreement.
Section 9.15 Dispute Resolution.
Agreement. If the negotiations do not resolve the dispute to the reasonable satisfaction of all parties within thirty (30) days, Section 9.15(b) shall apply.
(a) Negotiation Between Parties. The parties agree to negotiate in good faith to resolve any dispute between them regarding this
(b) Arbitration. In the event the parties are unable to settle a dispute between them regarding this Agreement in accordance with
subsection (a) above, such dispute shall he referred to and finally settled by arbitration at the Hong Kong International Arbitration Centre (the “HKIAC”)
for arbitration in Hong Kong. The arbitration shall be conducted in accordance with the HKIAC Administered Arbitration Rules in force at the time of the
initiation of the arbitration, which rules are deemed to be incorporated by reference into this subsection (b). There shall be a panel of three (3) arbitrators.
The New Investors shall appoint one (1) arbitrator, the Company shall appoint one (1) arbitrator, and the third arbitrator shall be appointed by the HKIAC.
The arbitral proceedings shall be conducted in English. The award of the arbitral tribunal shall be final and binding upon the parties thereto.
Section 9.16 Termination.
(a) Termination before the Closing. This Agreement may be terminated prior to the Closing (i) by mutual written consent of the
Company and each of the Investors or (ii) by written notice from the New Investors to the Company if there has been a material misrepresentation or
material breach of a covenant or agreement contained in this Agreement on the part of any Warrantor, Group Company or Management Shareholder, and
such breach, if curable, has not been cured within ten (10) days of such notice.
51
(b) Effects of Termination. If this Agreement is terminated as provided under this Section 9.16, this Agreement will be of no further
force or effect upon termination; provided that (i) the termination will not relieve any party from any liability for any antecedent breach of this Agreement,
and (ii) Sections 9.03, 9.12, 9.13, 9.15 and 9.17 shall survive the termination of this Agreement.
Section 9.17 Legal Fees and Expenses.
All costs and expenses incurred by any party hereto in connection with this Agreement, or any amendment or waiver hereof, and the transactions
contemplated hereby shall be paid by the party incurring such costs or expenses; provided that, in the event the Closing occurs, the Company shall bear its
own legal fees and expenses and shall pay the reasonable legal, financial and other costs and expenses in connection with the transactions contemplated by
the Transaction Documents not to exceed US$500,000 in the aggregate incurred and reasonably documented by Alibaba and WOFA Trading and Holdings
Limited, on a pro rata basis in accordance with the following ownership of the Purchased Shares immediately after the Closing as set forth on Schedule A
hereto: (a) in case of Alibaba, the ownership of the Purchased Shares of Alibaba and (b) in case of WOFA Trading and Holdings Limited, the aggregate
ownership of the Purchased Shares of WOFA Trading and Holdings Limited and Home Giant Holdings Limited.
Section 9.18 Affiliated Parties.
For purposes of determining rights pursuant to any share thresholds set forth in this Agreement, an Investor shall be entitled to aggregate all shares
held by affiliated funds and constituent partners and members.
Section 9.19 Specific Performance.
The parties acknowledge and agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance
with the terms hereof and that each party shall be entitled to specific performance of the terms hereof. It is accordingly agreed that the terms and provisions
of this agreement shall be enforceable by a decree of specific performance issued by any court of competent jurisdiction, and appropriate injunctive relief
may be applied for and granted in connection therewith. Such remedies shall, however, be cumulative and not exclusive and shall be in addition to any
other remedies which any party may have under this Agreement or otherwise.
Section 9.20 No Double Recovery.
No Indemnified Party shall be entitled to recover under this Agreement more than once in respect of the same Indemnifiable Losses suffered.
[SIGNATURES ON FOLLOWING PAGE]
52
IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the
date and year first above written.
THE COMPANY:
For and on behalf of
58 Daojia Inc.
/s/ CHEN Xiaohua
By:
Name: CHEN Xiaohua
Title: CEO
WFOE:
Daojia HK:
For and on behalf of
58 Daojia Holdings Limited
/s/ YAO Jinbo
By:
Name: YAO Jinbo
Title:
Director
Tianjin Daojia:
Beijing 58 Daojia Information Technology Co., Ltd
(北京五八到家信息技朮有限公司)
Tianjin 58 Daojia Life Services Co., Ltd.
(天津五八到家生活服务有限公司)
/s/ YAO Jinbo
By:
Name: YAO Jinbo
Title:
Director
By:
Name: YAO Jinbo
/s/ YAO Jinbo
Title:
Director
SIGNATURE PAGE TO THE SERIES A PREFERRED SHARES SUBSCRIPTION AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the
date and year first above written.
/s/ Chen Xiaohua
Chen Xiaohua
/s/ Yao Jinbo
Yao Jinbo
For and on behalf of
Trumpway Limited
/s/ Chen Xiaohua
By:
Name: Chen Xiaohua
Title: Director
For and on behalf of
Nihao China Corporation
By:
Name:
Title: Director
/s/ Jinbo Yao
Jinbo Yao
/s/ Bai Ou
Bai Ou
For and on behalf of
Cloud Knight Holdings Limited
/s/ Bai Ou
By:
Name: Bai Ou
Title: Director
SIGNATURE PAGE TO THE SERIES A PREFERRED SHARES SUBSCRIPTION AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the
date and year first above written.
For and on behalf of
58.com Inc.
By:
Name:
Title: Chairman of the Board and Chief Executive Officer
/s/ Jinbo Yao
Jinbo Yao
SIGNATURE PAGE TO THE SERIES A PREFERRED SHARES SUBSCRIPTION AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the
date and year first above written.
INVESTOR:
Taobao China Holding Limited
/s/ Timothy Alexander Steinert
By:
Name: Timothy Alexander Steinert
Title:
Authorized Signatory
SIGNATURE PAGE TO THE SERIES A PREFERRED SHARES SUBSCRIPTION AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the
date and year first above written.
INVESTOR:
WOFA Trading and Holdings Limited
/s/ Lillian Yuen Ming Leong
By:
Name: Lillian Yuen Ming Leong
Title:
Director
SIGNATURE PAGE TO THE SERIES A PREFERRED SHARES SUBSCRIPTION AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the
date and year first above written.
INVESTOR:
Pingan EPOCH Limited Partnership
/s/ Yu Le
By:
Name: YU Le
Title: Managing Director
IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representatives to execute this Agreement as of the
date and year first above written.
INVESTOR:
Home Giant Holdings Limited
/s/ Zhengyu Wu
By:
Name: ZHENGYU WU
Director
Title:
Exclusive Business Cooperation Agreement
Exhibit 4.26
This Exclusive Business Cooperation Agreement (this “Agreement”) is made and entered into by and between the following parties on August 5,
2015 in Beijing, the People’s Republic of China (“China” or the “PRC”).
Party A:
Beijing 58 Daojia Information Technology Co., Ltd.
Address:
Room D101A-123, Building B-2 of Zhongguancun Dongsheng Science Park, #66 Xixiaokou Road, Haidian District, Beijing
Party B:
Tianjin 58 Daojia Home Services Co., Ltd.
Address:
Square block -901-918 , #5 Meiyuan Road , Binhaigaoxin District, Tianjin.
Each of Party A and Party B shall be hereinafter referred to as a “Party” respectively, and as the “Parties” collectively.
Whereas,
1.
2.
3.
Party A is a wholly foreign owned enterprise established in China, and has the necessary resources to provide technical and consulting services;
Party B is a company established in China with exclusively domestic capital and is permitted to engage in home services and other business by
relevant PRC government authorities. The businesses conducted by Party B currently and any time during the term of this Agreement are collectively
referred to as the “Principal Business”;
Party A is willing to provide Party B with technical support, consulting services and other services on exclusive basis in relation to the Principal
Business during the term of this Agreement, utilizing its advantages in technology, human resources, and information, and Party B is willing to accept
such services provided by Party A or Party A’s designee(s), each on the terms set forth herein.
Now, therefore, through mutual discussion, the Parties have reached the following agreements:
1
1.
Services Provided by Party A
1.1
Party B hereby appoints Party A as Party B’s exclusive services provider to provide Party B with comprehensive technical support,
consulting services and other services during the term of this Agreement, in accordance with the terms and conditions of this Agreement,
including but not limited to the follows:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
Licensing Party B to use any software legally owned by Party A;
Development, maintenance and update of software involved in Party B’s business;
Design, installation, daily management, maintenance and updating of network system, hardware and database design;
Technical support and training for employees of Party B;
Providing business management consultation for Party B;
Providing marketing and promotion services for Party B;
Providing customer order management and customer services for Party B;
Leasing of equipment or properties; and
Other services requested by Party B from time to time to the extent permitted under PRC law.
1.2
Party B agrees to accept all the services provided by Party A. Party B further agrees that unless with Party A’s prior written consent,
during the term of this Agreement, Party B shall not directly or indirectly accept the same or any similar services provided by any third
party and shall not establish similar corporation relationship with any third party regarding the matters contemplated by this Agreement.
Party A may appoint other parties, who may enter into certain agreements described in Section 1.3 with Party B, to provide Party B with
the services under this Agreement.
1.3
Service Providing Methodology
2
1.3.1
1.3.2
1.3.3
Party A and Party B agree that during the term of this Agreement, where necessary, Party B may enter into further service
agreements with Party A or any other party designated by Party A, which shall provide the specific contents, manner, personnel,
and fees for the specific services.
To fulfill this Agreement, Party A and Party B agree that during the term of this Agreement, where necessary, Party B may enter
into equipment or property leases with Party A or any other party designated by Party A which shall permit Party B to use Party
A’s relevant equipment or property based on the needs of the business of Party B.
Party B hereby grants to Party A an irrevocable and exclusive option to purchase from Party B, at Party A’s sole discretion, any
or all of the assets and business of Party B, to the extent permitted under PRC law, at the lowest purchase price permitted by
PRC law. The Parties shall then enter into a separate assets or business transfer agreement, specifying the terms and conditions
of the transfer of the assets.
2.
The Calculation and Payment of the Service Fees
2.1
The fees payable by Party B to Party A during the term of this Agreement shall be calculated as follows:
2.1.1
Party B shall pay service fee to Party A in each month. The service fee for each month shall consist of management fee and fee
for services provided, which shall be determined by the Parties through negotiation after considering:
(1)
(2)
(3)
(4)
(5)
Complexity and difficulty of the services provided by Party A;
Title of and time consumed by employees of Party A providing the services;
Contents and value of the services provided by Party A;
Market price of the same type of services;
Operation conditions of the Party B.
3
2.1.2
If Party A transfers technology to Party B or develops software or other technology as entrusted by Party B or leases equipments
or properties to Party B, the technology transfer price, development fees or rent shall be determined by the Parties based on the
actual situations.
3.
Intellectual Property Rights and Confidentiality Clauses
3.1
3.2
Party A shall have exclusive and proprietary ownership, rights and interests in any and all intellectual properties arising out of or created
during the performance of this Agreement, including but not limited to copyrights, patents, patent applications, software, technical
secrets, trade secrets and others. Party B shall execute all appropriate documents, take all appropriate actions, submit all filings and/or
applications, render all appropriate assistance and otherwise conduct whatever is necessary as deemed by Party A at its sole discretion for
the purposes of vesting any ownership, right or interest of any such intellectual property rights in Party A, and/or perfecting the
protections for any such intellectual property rights in Party A.
The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the
Parties in connection with the preparation and performance of this Agreement are regarded as confidential information. Each Party shall
maintain confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not
disclose any relevant confidential information to any third party, except for the information that: (a) is or will be in the public domain
(other than through the receiving Party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable
laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed
by any Party to its shareholders, directors, employees, legal counsels or financial advisors regarding the transaction contemplated
hereunder, provided that such shareholders, directors, employees, legal counsels or financial advisors shall be bound by the
confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the shareholders,
director, employees of or agencies engaged by any Party shall be deemed disclosure of such confidential information by such Party and
such Party shall be held liable for breach of this Agreement.
4.
Representations and Warranties
4.1
Party A hereby represents, warrants and covenants as follows:
4
4.1.1
4.1.2
Party A is a wholly foreign owned enterprise legally established and validly existing in accordance with the laws of China; Party
A or the service providers designated by Party A will obtain all government permits and licenses for providing the service under
this Agreement before providing such services.
Party A has taken all necessary corporate actions, obtained all necessary authorizations as well as all consents and approvals
from third parties and government agencies (if required) for the execution, delivery and performance of this Agreement. Party
A’s execution, delivery and performance of this Agreement do not violate any explicit requirements under any law or regulation.
4.1.3
This Agreement constitutes Party A’s legal, valid and binding obligations, enforceable against it in accordance with its terms.
4.2
Party B hereby represents, warrants and covenants as follows:
4.2.1
4.2.2
Party B is a company legally established and validly existing in accordance with the laws of China and has obtained and will
maintain all permits and licenses for engaging in the Principal Business in a timely manner.
Party B has taken all necessary corporate actions, obtained all necessary authorizations as well as all consents and approvals
from third parties and government agencies (if required) for the execution, delivery and performance of this Agreement. Party
B’s execution, delivery and performance of this Agreement do not violate any explicit requirements under any law or regulation.
4.2.3
This Agreement constitutes Party B’’s legal, valid and binding obligations, and shall be enforceable against it in accordance with
its terms.
5.
Term of Agreement
5.1
This Agreement shall become effective upon execution by the Parties. Unless terminated in accordance with the provisions of this
Agreement or terminated in writing by Party A, this Agreement shall remain effective.
5
5.2
During the term of this Agreement, each Party shall renew its operation term prior to the expiration thereof so as to enable this Agreement
to remain effective. This Agreement shall be terminated upon the expiration of the operation term of a Party if the application for renewal
of its operation term is not approved by relevant government authorities.
5.3
The rights and obligations of the Parties under Sections 3, 6, 7 and this Section 5.3 shall survive the termination of this Agreement.
6.
Governing Law and Resolution of Disputes
6.1
6.2
6.3
The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes
hereunder shall be governed by the laws of China.
In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute
through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party’s request
to the other Party for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China
International Economic and Trade Arbitration Commission for arbitration, in accordance with its arbitration rules. The arbitration shall be
conducted in Beijing. The arbitration award shall be final and binding on both Parties.
Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration
of any dispute, except for the matters under dispute, the Parties shall continue to exercise their respective rights under this Agreement and
perform their respective obligations under this Agreement.
7.
Breach of Agreement and Indemnification
7.1
If Party B conducts any material breach of any term of this Agreement, Party A shall have right to terminate this Agreement and/or
require Party B to indemnify all damages; this Section 7.1 shall not prejudice any other rights of Party A herein.
7.2
Unless otherwise required by applicable laws, Party B shall not have any right to terminate this Agreement in any event.
6
7.3
Party B shall indemnify and hold harmless Party A from any losses, injuries, obligations or expenses caused by any lawsuit, claims or
other demands against Party A arising from or caused by the services provided by Party A to Party B pursuant this Agreement, except
where such losses, injuries, obligations or expenses arise from the gross negligence or willful misconduct of Party A.
8.
Force Majeure
8.1
8.2
In the case of any force majeure events (“Force Majeure”) such as earthquake, typhoon, flood, fire, flu, war, strikes or any other events
that cannot be predicted and are unpreventable and unavoidable by the affected Party, which directly or indirectly causes the failure of
either Party to perform or completely perform this Agreement, then the Party affected by such Force Majeure shall give the other Party
written notices without any delay, and shall provide details of such event within 15 days after sending out such notice, explaining the
reasons for such failure of, partial or delay of performance.
If such Party claiming Force Majeure fails to notify the other Party and furnish it with proof pursuant to the above provision, such Party
shall not be excused from the non-performance of its obligations hereunder. The Party so affected by the event of Force Majeure shall use
reasonable efforts to minimize the consequences of such Force Majeure and to promptly resume performance hereunder whenever the
causes of such excuse are cured. Should the Party so affected by the event of Force Majeure fail to resume performance hereunder when
the causes of such excuse are cured, such Party shall be liable to the other Party.
8.3
In the event of Force Majeure, the Parties shall immediately consult with each other to find an equitable solution and shall use all
reasonable endeavours to minimize the consequences of such Force Majeure.
9.
Notices
9.1
All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent
by registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such Party set forth
below. A confirmation copy of each notice shall also be sent by email. The dates on which notices shall be deemed to have been
effectively given shall be determined as follows:
7
9.1.1
9.1.2
Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given
on the date of receipt or refusal at the address specified for notices.
Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced
by an automatically generated confirmation of transmission).
9.2
For the purpose of notices, the addresses of the Parties are as follows:
Party A:
Beijing 58 Daojia Information Technology Co., Ltd.
Address:
Attn:
Phone:
Facsimile:
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
Party B:
Tianjin 58 Daojia Home Services Co., Ltd.
Address:
Attn:
Phone:
Facsimile:
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
9.3
Any Party may at any time change its address for notices by a notice delivered to the other Party in accordance with the terms hereof.
10.
Assignment
10.1 Without Party A’s prior written consent, Party B shall not assign its rights and obligations under this Agreement to any third party.
10.2
Party B agrees that Party A may assign its obligations and rights under this Agreement to any third party and in case of such assignment,
Party A is only required to give written notice to Party B and does not need any consent from Party B for such assignment.
8
11.
Severability
In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance
with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or
compromised in any aspect. The Parties shall negotiate in good faith to replace such invalid, illegal or unenforceable provisions with effective
provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective
provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.
12.
Amendments and Supplements
Any amendments and supplements to this Agreement shall be in writing. The amendment agreements and supplementary agreements that have
been signed by the Parties and relate to this Agreement shall be an integral part of this Agreement and shall have the same legal validity as this
Agreement.
13.
Language and Counterparts
This Agreement is written in Chinese language in two copies, each Party having one copy. The Chinese version and English version shall have
equal legal validity.
The Remainder of this page is intentionally left blank
9
IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Exclusive Business Cooperation Agreement as of the
date first above written.
Party A: Beijing 58 Daojia Information Technology Co., Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
Party B:
Tianjin 58 Daojia Home Services Co., Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
10
Equity Interest Pledge Agreement
Exhibit 4.27
This Equity Interest Pledge Agreement (this “Agreement”) has been executed by and among the following parties on August 5, 2015 in Beijing, the
People’s Republic of China (“China” or the “PRC”):
Party A:
Beijing 58 Daojia Information Technology Co., Ltd., (hereinafter “Pledgee”) a wholly foreign owned enterprise, organized and existing
under the laws of the PRC, with its address at Room D101A-123, Building B-2 of Zhongguancun Dongsheng Science Park, #66 Xixiaokou
Road, Haidian District, Beijing;
Party B:
58 Co., Ltd., (hereinafter “Pledgor”) a limited liability company organized and existing under the laws of the PRC, with its address at Room
210-03, Office Building, Nangang Industry Zone, Economic and Technological Development District, Tianjin; and
Party C:
Tianjin 58 Daojia Home Services Co., Ltd., a limited liability company organized and existing under the laws of the PRC, with its address
at Square block -901-918 , #5 Meiyuan Road , Binhaigaoxin District, Tianjin.
In this Agreement, each of Pledgee, Pledgor and Party C shall be referred to as a “Party” respectively, and they shall be collectively referred to as the
“Parties”.
Whereas:
1. Pledgor is a corporate jurisdical person of China who as of the date hereof holds 91.8% of equity interests of Party C, representing RMB91,800,000 in
the registered capital of Party C. Party C is a limited liability company registered in Tianjin, China, engaging in Internet information services and
advertising services. Party C acknowledges the respective rights and obligations of Pledgor and Pledgee under this Agreement, and intends to provide
any necessary assistance in registering the Pledge;
2. Pledgee is a wholly foreign-owned enterprise registered in China. Pledgee and Party C partially owned by Pledgor have executed an Exclusive
Business Cooperation Agreement (as defined below) in Beijing; Party C, Pledgee and Pledgor have executed an Exclusive Option Agreement (as
defined below); Pledgee and Pledgor have executed a Loan Agreement (as defined below); and Pledgor has executed a Power of Attorney to Pledgee.
3. To ensure that Party C and Pledgor fully perform their obligations under the Exclusive Business Cooperation Agreement, the Exclusive Option
Agreement, the Loan Agreement and the Power of Attorney, Pledgor hereby pledges to the Pledgee all of the equity interest he holds in Party C as
security for Party C’s and Pledgor’s obligations under the Exclusive Business Cooperation Agreements, the Exclusive Option Agreement, the Loan
Agreement and the Power of Attorney.
1
To perform the provisions of the Transaction Documents, the Parties have mutually agreed to execute this Agreement upon the following terms.
1. Definitions
Unless otherwise provided herein, the terms below shall have the following meanings:
1.1
1.2
1.3
1.4
1.5
1.6
Pledge: shall refer to the security interest granted by Pledgor to Pledgee pursuant to Article 2 of this Agreement, i.e., the right of Pledgee to be
compensated on a preferential basis with the conversion, auction or sales price of the Equity Interest.
Equity Interest: shall refer to all of the equity interest now held and hereafter acquired by Pledgor in Party C.
Term of Pledge: shall refer to the term set forth in Section 3.2 of this Agreement.
Transaction Documents: shall refer to the Exclusive Business Cooperation Agreement executed by and between Party C and Pledgee on
August 5, 2015 (the “Exclusive Business Cooperation Agreement”), the Exclusive Option Agreement executed by and among Party C, Pledgee
and Pledgor on August 5, 2015 (the “Exclusive Option Agreement”), the Loan Agreement executed by and between Pledgee and Pledgor on
August 5, 2015 (the “Loan Agreement”), Power of Attorney executed on August 5, 2015 by Pledgor (the “Power of Attorney”) and any
modification, amendment and restatement to the aforementioned documents.
Contract Obligation: shall refer to all the obligations of Pledgor under the Exclusive Option Agreement, the Power of Attorney, the Loan
Agreement and this Agreement; all the obligations of Party C under the Exclusive Business Cooperation Agreement, the Exclusive Option
Agreement and this Agreement.
Secured Indebtedness: shall refer to all the direct, indirect or derivative losses of Pledgee, including loss of expected profits, incurred as a result
of any Event of Default (as defined below). The amount of such loss shall be based on, including but not limited to the reasonable business
plan and profit forecast of Pledgee, the consulting and service fees payable to Pledgee under the Exclusive Business Cooperation Agreement
and all expenses occurred in connection with enforcement by Pledgee of Pledgor’s and/or Party C’s Contract Obligation. The anticipated
aggregate losses to be incurred hereunder are RMB1,000 million. Notwithstanding the forgoing, if the actual losses incurred exceed such
anticipated amount, the Secured Indebtedness hereunder shall be the actual amount of such losses incurred.
1.7
Event of Default: shall refer to any of the circumstances set forth in Article 7 of this Agreement.
2
1.8 Notice of Default: shall refer to the notice issued by Pledgee in accordance with this Agreement declaring an Event of Default.
2.
The Pledge
2.1
Pledgor agrees to pledge all the Equity Interest as security for performance of the Contract Obligation and payment of the Secured
Indebtedness under this Agreement. Party C hereby assents that Pledgor pledges the Equity Interest to the Pledgee pursuant to this Agreement.
2.2 During the term of the Pledge, Pledgee is entitled to receive dividends distributed on the Equity Interest. Pledgor may receive dividends
distributed on the Equity Interest only with prior written consent from Pledgee. Dividends received by Pledgor on Equity Interest shall be,
subject to requirement of Pledgee, (1) deposited into an account designated and supervised by Pledgee and used to secure the Contract
Obligations and pay the Secured Indebtedness prior and in preference to make any other payment; or (2) unconditionally give to Pledgee or any
other person designated by Pledgee to the extent permitted under applicable PRC laws.
2.3
2.4
Pledgor may subscribe for capital increase in Party C only with prior written consent of Pledgee. Any equity interest obtained by the Pledgor in
future capital increase shall be deemed as Equity Interest as well.
In the event that Party C is required by PRC law to be liquidated or dissolved, any interest distributed to Pledgor upon Party C’s dissolution or
liquidation shall be (1) deposited into an account designate and supervised by Pledgee and used to secure the Contract Obligations and pay the
Secured Indebtedness prior and in preference to make any other payment; or (2) unconditionally give to Pledgee or any other person designated
by Pledgee to the extent permitted under applicable PRC laws.
3.
Term of Pledge
3.1
The Pledge shall become effective on such date when the pledge of the Equity Interest contemplated herein has been registered with relevant
administration for industry and commerce (the “AIC”). The Pledge shall be continuously valid until all Contract Obligations and Secured
Indebtedness have been fully performed and paid. Pledgor and Party C shall (1) register the Pledge in the shareholders’ register of Party C
within 3 business days following the execution of this Agreement, and (2) submit an application to the AIC for the registration of the Pledge of
the Equity Interest contemplated herein within 30 business days following the execution of this Agreement. The parties covenant that for the
purpose of registration of the Pledge, the parties hereto and all other shareholders of Party C shall submit to the AIC this Agreement or an
equity interest pledge contract in the form required by the AIC at the location of Party C which shall truly reflect the information of the Pledge
hereunder (the “AIC Pledge Contract”). For matters not specified in the AIC Pledge Contract, the parties shall be bound by the provisions of
this Agreement. Pledgor and Party C shall submit all necessary documents and complete all necessary procedures, as required by the PRC laws
and regulations and the relevant AIC, to ensure that the Pledge of the Equity Interest shall be registered with the AIC as soon as possible after
filing.
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3.2
During the Term of Pledge, in the event Pledgor and/or Party C fails to perform the Contract Obligation or pay Secured Indebtedness, Pledgee
shall have the right, but not the obligation, to exercise the Pledge in accordance with the provisions of this Agreement.
4.
Custody of Records for Equity Interest subject to Pledge
4.1
During the Term of Pledge set forth in this Agreement, Pledgor shall deliver to Pledgee’s custody the capital contribution certificate for the
Equity Interest and the shareholders’ register containing the Pledge within one week from the execution of this Agreement. Pledgee shall have
custody of such documents during the entire Term of Pledge set forth in this Agreement.
5.
Representations and Warranties of Pledgor and Party C
As of the execution date of this Agreement, Pledgor and Party C hereby jointly and severally represent and warrant to Pledgee that:
5.1
5.2
5.3
5.4
5.5
Pledgor is the sole legal and beneficial owner of the Equity Interest.
Pledgee shall have the right to dispose of and transfer the Equity Interest in accordance with the provisions set forth in this Agreement.
Except for the Pledge, Pledgor has not placed any security interest or other encumbrance on the Equity Interest.
Pledgor and Party C have obtained any and all approvals and consents from applicable government authorities and third parties (if required)
for execution, delivery and performance of this Agreement.
The execution, delivery and performance of this Agreement will not: (i) violate any relevant PRC laws; (ii) conflict with Party C’s articles of
association or other constitutional documents; (iii) result in any breach of or constitute any default under any contract or instrument to which it
is a party or by which it is otherwise bound; (iv) result in any violation of any condition for the grant and/or maintenance of any permit or
approval granted to any Party; or (v) cause any permit or approval granted to any Party to be suspended, cancelled or attached with additional
conditions.
6.
Covenants of Pledgor and Party C
6.1
Pledgor and Party C hereby jointly and severally covenant to the Pledgee:
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6.1.1
6.1.2
Pledgor shall not transfer the Equity Interest, place or permit the existence of any security interest or other encumbrance on the Equity
Interest or any portion thereof, without the prior written consent of Pledgee, except for the performance of the Transaction
Documents;
Pledgor and Party C shall comply with the provisions of all laws and regulations applicable to the pledge of rights, and within 5 days
of receipt of any notice, order or recommendation issued or prepared by relevant competent authorities regarding the Pledge, shall
present the aforementioned notice, order or recommendation to Pledgee, and shall comply with the aforementioned notice, order or
recommendation or submit objections and representations with respect to the aforementioned matters upon Pledgee’s reasonable
request or upon consent of Pledgee;
6.1.3
Pledgor and Party C shall promptly notify Pledgee of any event or notice received by Pledgor that may have an impact on Pledgee’s
rights to the Equity Interest or any portion thereof, as well as any event or notice received by Pledgor that may have an impact on any
guarantees and other obligations of Pledgor arising out of this Agreement.
6.1.4
Party C shall complete the registration procedures for extension of the term of operation within three (3) months prior to the expiration
of such term to maintain the validity of this Agreement.
Pledgor agrees that the rights acquired by Pledgee in accordance with this Agreement with respect to the Pledge shall not be interrupted or
harmed by Pledgor or any heirs or representatives of Pledgor or any other persons through any legal proceedings.
To protect or perfect the security interest granted by this Agreement for the Contract Obligation and Secured Indebtedness, Pledgor hereby
undertakes to execute in good faith and to cause other parties who have an interest in the Pledge to execute all certificates, agreements, deeds
and/or covenants required by Pledgee. Pledgor also undertakes to perform and to cause other parties who have an interest in the Pledge to
perform actions required by Pledgee, to facilitate the exercise by Pledgee of its rights and authority granted thereto by this Agreement, and to
enter into all relevant documents regarding ownership of Equity Interest with Pledgee or designee(s) of Pledgee (natural persons/legal persons).
Pledgor undertakes to provide Pledgee within a reasonable time with all notices, orders and decisions regarding the Pledge that are required by
Pledgee.
6.2
6.3
6.4
Pledgor hereby undertakes to comply with and perform all guarantees, promises, agreements, representations and conditions under this
Agreement. In the event of failure or partial performance of its guarantees, promises, agreements, representations and conditions, Pledgor shall
indemnify Pledgee for all losses resulting therefrom.
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7.
Event of Breach
7.1
The following circumstances shall be deemed Event of Default:
7.1.1
Pledgor’s any breach to any obligations under the Transaction Documents and/or this Agreement.
7.1.2
Party C’s any breach to any obligations under the Transaction Documents and/or this Agreement.
7.2
7.3
Upon notice or discovery of the occurrence of any circumstances or event that may lead to the aforementioned circumstances described in
Section 7.1, Pledgor and Party C shall immediately notify Pledgee in writing accordingly.
Unless an Event of Default set forth in this Section 7.1 has been successfully resolved to Pledgee’s satisfaction within twenty (20) days after
the Pledgee and /or Party C delivers a notice to the Pledgor requesting ratification of such Event of Default, Pledgee may issue a Notice of
Default to Pledgor in writing at any time thereafter, demanding the Pledgor to immediately exercise the Pledge in accordance with the
provisions of Article 8 of this Agreement.
8.
Exercise of Pledge
8.1
8.2
8.3
8.4
Pledgee may issue a Notice of Default to Pledgor when exercising the Pledge.
Subject to the provisions of Section 7.3, Pledgee may exercise the right to enforce the Pledge at any time after the issuance of the Notice of
Default in accordance with Section 8.1. Once Pledgee elects to enforce the Pledge, Pledgor shall cease to be entitled to any rights or interests
associated with the Equity Interest.
After Pledgee issues a Notice of Default Pledgee in accordance with Section 8.1, Pledgee may exercise any remedy measure under applicable
PRC laws, the Transaction Documents and this Agreement, including but not limited to be compensated in priority by the conversion of the
Equity Pledge or from the proceeds from auction or sale of the Equity Interest. The Pledgee shall have no liability for any loss incurred by its
duly exercise of such rights and powers.
The proceeds from exercise of the Pledge by Pledgee shall be used to pay for tax and expenses incurred by disposing the Equity Interest and
perform Contract Obligations and pay the Secured Indebtedness prior and in preference to any other payment. After the payment of the
aforementioned amounts, the remaining balance shall be returned to Pledgor or any other person who have rights to such balance under
applicable laws or be deposited to the local notary public office where Pledgor resides, with all expense incurred being borne by Pledgor. To
the extent permitted under applicable PRC laws, Pledgor shall unconditionally give the aforementioned proceeds to Pledgee or any other
person designated by Pledgee.
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8.5
8.6
Pledgee has the right to exercise any remedy measure available simultaneously or in any order. Pledgee may exercise the right to be
compensated from in priority by the conversion of the Equity Pledge or from the proceeds from auction or sale of the Equity Interest under this
Agreement, without exercising any other remedy measure first.
Pledgee is entitled to designate an attorney or other representatives to exercise the Pledge on its behalf and Pledgor and Party C shall not raise
any objection to such exercise.
8.7 When Pledgee disposes of the Pledge in accordance with this Agreement, Pledgor and Party C shall provide necessary assistance to enable
Pledgee to enforce the Pledge in accordance with this Agreement.
9.
Breach of Agreement
9.1
9.2
If Pledgor or Party C conducts any material breach of any term of this Agreement, Pledgee shall have right to terminate this Agreement and
require Pledgor or Party C to compensate all damages; this Section 9 shall not prejudice any other rights of Pledgee herein;
If Pledgee conducts any breach of any term of this Agreement, Pledgor or Party C shall not terminate this Agreement in any event unless
otherwise required by applicable laws.
10. Assignment
10.1 Without Pledgee’s prior written consent, Pledgor shall not have the right to assign or delegate its rights and obligations under this Agreement.
10.2 This Agreement shall be binding on Pledgor and its successors and permitted assigns, and shall be valid with respect to Pledgee and each of its
successors and assigns.
10.3 At any time, Pledgee may assign any and all of its rights and obligations under the Transaction Documents to its designee(s), in which case the
assigns shall have the rights and obligations of Pledgee under this Agreement, as if it were the original party to this Agreement. When the
Pledgee assigns the rights and obligations under the Business Cooperation Agreement, upon Pledgee’s request, Pledgor and/or Party C shall
execute relevant agreements or other documents relating to such assignment.
10.4
In the event of a change in Pledgee due to an assignment, Pledgor and/or Party C shall, at the request of Pledgee, execute a new pledge
agreement with the new pledgee on the same terms and conditions as this Agreement, and register the same with the relevant AIC.
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10.5 Pledgor and Party C shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by the Parties
hereto or any of them, including the Transaction Documents, perform the obligations hereunder and thereunder, and refrain from any
action/omission that may affect the effectiveness and enforceability thereof. Any remaining rights of Pledgor with respect to the Equity Interest
pledged hereunder shall not be exercised by Pledgor except in accordance with the written instructions of Pledgee.
11. Termination
11.1 Upon the fulfillment of all Contract Obligation and the full payment of all Secured Indebtedness by Pledgor and Party C, Pledgee shall release
the Pledge under this Agreement upon Pledgor’s request as soon as reasonably practicable and shall assist Pledgor to de-register the Pledge
from the shareholders’ register of Party C and with relevant PRC local administration for industry and commerce.
11.2 The provisions under Sections 9, 13, 14 and 11.2 herein of this Agreement shall survive the expiration or termination of this Agreement.
12. Handling Fees and Other Expenses
All fees and out of pocket expenses relating to this Agreement, including but not limited to legal costs, costs of production, stamp tax and any other
taxes and fees, shall be borne by Party C.
13. Confidentiality
The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in
connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality
of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential
information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s
unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or
orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsels or
financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or financial advisors
shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff
members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which Party shall be held liable
for breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.
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14. Governing Law and Resolution of Disputes
14.1 The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes
hereunder shall be governed by the laws of China.
14.2
In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute
through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party’s request to the
other Parties for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International
Economic and Trade Arbitration Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in
Beijing, and the language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.
14.3 Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration of any
dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this
Agreement and perform their respective obligations under this Agreement.
15. Notices
15.1 All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by
registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such party set forth below. A
confirmation copy of each notice shall also be sent by E-mail. The dates on which notices shall be deemed to have been effectively given shall
be determined as follows:
15.2 Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the date of
delivery or refusal at the address specified for notices.
15.3 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an
automatically generated confirmation of transmission).
15.4 For the purpose of notices, the addresses of the Parties are as follows:
Party A:
Address:
Attn:
Phone:
Facsimile:
Beijing 58 Daojia Information Technology Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
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Party B:
Address:
Attn:
Phone:
Facsimile:
Party C:
Address:
Attn:
Phone:
Facsimile:
58 Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
Tianjin 58 Daojia Home Services Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
15.5 Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms hereof.
16. Severability
In the event that one or several of the provisions of this Contract are found to be invalid, illegal or unenforceable in any aspect in accordance with any
laws or regulations, the validity, legality or enforceability of the remaining provisions of this Contract shall not be affected or compromised in any
respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to
the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible
to the economic effect of those invalid, illegal or unenforceable provisions.
17. Attachments
The attachments set forth herein shall be an integral part of this Agreement.
18. Effectiveness
18.1 This Agreement shall become effective upon execution by the Parties.
18.2 Any amendments, changes and supplements to this Agreement shall be in writing and shall become effective upon completion of the
governmental filing procedures (if applicable) after the affixation of the signatures or seals of the Parties.
19. Language and Counterparts
This Agreement is written in Chinese and English in four copies. Pledgor, Pledgee and Party C shall hold one copy respectively and the other copy
shall be used for registration. Each copy of this Agreement shall have equal validity. In case there is any conflict between the Chinese version and the
English version, the Chinese version shall prevail.
10
The Remainder of this page is intentionally left blank
11
IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Equity Interest Pledge Agreement as of the date first
above written.
Party A:
Beijing 58 Daojia Information Technology Co., Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
Party B:
58 Co. Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Haoyong Yang
Legal Representative
Party C:
Tianjin 58 Daojia Home Services Co., Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
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Attachments:
1.
2.
3.
4.
5.
6.
Shareholders’ Register of Party C;
The Capital Contribution Certificate for Party C;
Exclusive Business Cooperation Agreement;
Loan Agreement;
Exclusive Option Agreement;
Power of Attorney.
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Equity Interest Pledge Agreement
This Equity Interest Pledge Agreement (this “Agreement”) has been executed by and among the following parties on August 5, 2015 in Beijing, the
People’s Republic of China (“China” or the “PRC”):
Party A:
Beijing 58 Daojia Information Technology Co., Ltd. (hereinafter “Pledgee”), a wholly foreign owned enterprise, organized and existing
under the laws of the PRC, with its address at Room D101A-123, Building B-2 of Zhongguancun Dongsheng Science Park, #66 Xixiaokou
Road, Haidian District, Beijing;
Party B:
Jinbo Yao (hereinafter “Pledgor”), a Chinese citizen with Chinese Identification No.: ; and
Party C:
Tianjin 58 Daojia Home Services Co., Ltd., a limited liability company organized and existing under the laws of the PRC, with its address
at Square block -901-918 , #5 Meiyuan Road , Binhaigaoxin District, Tianjin.
In this Agreement, each of Pledgee, Pledgor and Party C shall be referred to as a “Party” respectively, and they shall be collectively referred to as the
“Parties”.
Whereas:
1. Pledgor is a citizen of China who as of the date hereof holds 1.4% of equity interests of Party C, representing RMB1,400,000 in the registered capital
of Party C. Party C is a limited liability company registered in Beijing, China, engaging in residential service. Party C acknowledges the respective
rights and obligations of Pledgor and Pledgee under this Agreement, and intends to provide any necessary assistance in registering the Pledge;
2. Pledgee is a wholly foreign-owned enterprise registered in China. Pledgee and Party C partially owned by Pledgor have executed an Exclusive
Business Cooperation Agreement (as defined below) in Beijing; Party C, Pledgee and Pledgor have executed an Exclusive Option Agreement (as
defined below); Pledgee and Pledgor have executed a Loan Agreement (as defined below); and Pledgor has executed a Power of Attorney to Pledgee.
3. To ensure that Party C and Pledgor fully perform their obligations under the Exclusive Business Cooperation Agreement, the Exclusive Option
Agreement, the Loan Agreement and the Power of Attorney, Pledgor hereby pledges to the Pledgee all of the equity interest he holds in Party C as
security for Party C’s and Pledgor’s obligations under the Exclusive Business Cooperation Agreements, the Exclusive Option Agreement, the Loan
Agreement and the Power of Attorney.
To perform the provisions of the Transaction Documents, the Parties have mutually agreed to execute this Agreement upon the following terms.
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1. Definitions
Unless otherwise provided herein, the terms below shall have the following meanings:
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
Pledge: shall refer to the security interest granted by Pledgor to Pledgee pursuant to Article 2 of this Agreement, i.e., the right of Pledgee to be
compensated on a preferential basis with the conversion, auction or sales price of the Equity Interest.
Equity Interest: shall refer to all of the equity interest now held and hereafter acquired by Pledgor in Party C.
Term of Pledge: shall refer to the term set forth in Section 3.2 of this Agreement.
Transaction Documents: shall refer to the Exclusive Business Cooperation Agreement executed by and between Party C and Pledgee on
August 5, 2015 (the “Exclusive Business Cooperation Agreement”), the Exclusive Option Agreement executed by and among Party C, Pledgee
and Pledgor on August 5, 2015 (the “Exclusive Option Agreement”), the Loan Agreement executed by and between Pledgee and Pledgor on
August 5, 2015 (the “Loan Agreement”), Power of Attorney executed on August 5, 2015 by Pledgor (the “Power of Attorney”) and any
modification, amendment and restatement to the aforementioned documents.
Contract Obligation: shall refer to all the obligations of Pledgor under the Exclusive Option Agreement, the Power of Attorney, the Loan
Agreement and this Agreement; all the obligations of Party C under the Exclusive Cooperation Agreement, the Exclusive Option Agreement
and this Agreement.
Secured Indebtedness: shall refer to all the direct, indirect or derivative losses of Pledgee, including loss of expected profits, incurred as a result
of any Event of Default (as defined below). The amount of such loss shall be based on, including but not limited to the reasonable business
plan and profit forecast of Pledgee, the consulting and service fees payable to Pledgee under the Exclusive Business Cooperation Agreement
and all expenses occurred in connection with enforcement by Pledgee of Pledgor’s and/or Party C’s Contract Obligation. The anticipated
aggregate losses to be incurred hereunder are RMB1,000 million. Notwithstanding the forgoing, if the actual losses incurred exceed such
anticipated amount, the Secured Indebtedness hereunder shall be the actual amount of such losses incurred.
Event of Default: shall refer to any of the circumstances set forth in Article 7 of this Agreement.
Notice of Default: shall refer to the notice issued by Pledgee in accordance with this Agreement declaring an Event of Default.
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2.
The Pledge
2.1
2.2
2.3
2.4
Pledgor agrees to pledge all the Equity Interest as security for performance of the Contract Obligation and payment of the Secured
Indebtedness under this Agreement. Party C hereby assents that Pledgor pledges the Equity Interest to the Pledgee pursuant to this Agreement.
During the term of the Pledge, Pledgee is entitled to receive dividends distributed on the Equity Interest. Pledgor may receive dividends
distributed on the Equity Interest only with prior written consent from Pledgee. Dividends received by Pledgor on Equity Interest shall be,
subject to requirement of Pledgee, (1) deposited into an account designated and supervised by Pledgee and used to secure the Contract
Obligations and pay the Secured Indebtedness prior and in preference to make any other payment; or (2) unconditionally give to Pledgee or any
other person designated by Pledgee to the extent permitted under applicable PRC laws.
Pledgor may subscribe for capital increase in Party C only with prior written consent of Pledgee. Any equity interest obtained by the Pledgor in
future capital increase shall be deemed as Equity Interest as well.
In the event that Party C is required by PRC law to be liquidated or dissolved, any interest distributed to Pledgor upon Party C’s dissolution or
liquidation shall be (1) deposited into an account designate and supervised by Pledgee and used to secure the Contract Obligations and pay the
Secured Indebtedness prior and in preference to make any other payment; or (2) unconditionally give to Pledgee or any other person designated
by Pledgee to the extent permitted under applicable PRC laws.
3.
Term of Pledge
3.1
The Pledge shall become effective on such date when the pledge of the Equity Interest contemplated herein has been registered with relevant
administration for industry and commerce (the “AIC”). The Pledge shall be continuously valid until all Contract Obligations and Secured
Indebtedness have been fully performed and paid. Pledgor and Party C shall (1) register the Pledge in the shareholders’ register of Party C
within 3 business days following the execution of this Agreement, and (2) submit an application to the AIC for the registration of the Pledge of
the Equity Interest contemplated herein within 30 business days following the execution of this Agreement. The parties covenant that for the
purpose of registration of the Pledge, the parties hereto and all other shareholders of Party C shall submit to the AIC this Agreement or an
equity interest pledge contract in the form required by the AIC at the location of Party C which shall truly reflect the information of the Pledge
hereunder (the “AIC Pledge Contract”). For matters not specified in the AIC Pledge Contract, the parties shall be bound by the provisions of
this Agreement. Pledgor and Party C shall submit all necessary documents and complete all necessary procedures, as required by the PRC laws
and regulations and the relevant AIC, to ensure that the Pledge of the Equity Interest shall be registered with the AIC as soon as possible after
filing.
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3.2
During the Term of Pledge, in the event Pledgor and/or Party C fails to perform the Contract Obligation or pay Secured Indebtedness, Pledgee
shall have the right, but not the obligation, to exercise the Pledge in accordance with the provisions of this Agreement.
4. Custody of Records for Equity Interest subject to Pledge
4.1
During the Term of Pledge set forth in this Agreement, Pledgor shall deliver to Pledgee’s custody the capital contribution certificate for the
Equity Interest and the shareholders’ register containing the Pledge within one week from the execution of this Agreement. Pledgee shall have
custody of such documents during the entire Term of Pledge set forth in this Agreement.
5. Representations and Warranties of Pledgor and Party C
As of the execution date of this Agreement, Pledgor and Party C hereby jointly and severally represent and warrant to Pledgee that:
5.1
5.2
5.3
5.4
5.5
Pledgor is the sole legal and beneficial owner of the Equity Interest.
Pledgee shall have the right to dispose of and transfer the Equity Interest in accordance with the provisions set forth in this Agreement.
Except for the Pledge, Pledgor has not placed any security interest or other encumbrance on the Equity Interest.
Pledgor and Party C have obtained any and all approvals and consents from applicable government authorities and third parties (if required) for
execution, delivery and performance of this Agreement.
The execution, delivery and performance of this Agreement will not: (i) violate any relevant PRC laws; (ii) conflict with Party C’s articles of
association or other constitutional documents; (iii) result in any breach of or constitute any default under any contract or instrument to which it
is a party or by which it is otherwise bound; (iv) result in any violation of any condition for the grant and/or maintenance of any permit or
approval granted to any Party; or (v) cause any permit or approval granted to any Party to be suspended, cancelled or attached with additional
conditions.
6. Covenants of Pledgor and Party C
6.1
Pledgor and Party C hereby jointly and severally covenant to the Pledgee:
6.1.1
Pledgor shall not transfer the Equity Interest, place or permit the existence of any security interest or other encumbrance on the Equity
Interest or any portion thereof, without the prior written consent of Pledgee, except for the performance of the Transaction
Documents;
17
6.1.2
Pledgor and Party C shall comply with the provisions of all laws and regulations applicable to the pledge of rights, and within 5 days
of receipt of any notice, order or recommendation issued or prepared by relevant competent authorities regarding the Pledge, shall
present the aforementioned notice, order or recommendation to Pledgee, and shall comply with the aforementioned notice, order or
recommendation or submit objections and representations with respect to the aforementioned matters upon Pledgee’s reasonable
request or upon consent of Pledgee;
6.1.3
Pledgor and Party C shall promptly notify Pledgee of any event or notice received by Pledgor that may have an impact on Pledgee’s
rights to the Equity Interest or any portion thereof, as well as any event or notice received by Pledgor that may have an impact on any
guarantees and other obligations of Pledgor arising out of this Agreement.
6.1.4
Party C shall complete the registration procedures for extension of the term of operation within three (3) months prior to the expiration
of such term to maintain the validity of this Agreement.
6.2
6.3
Pledgor agrees that the rights acquired by Pledgee in accordance with this Agreement with respect to the Pledge shall not be interrupted or
harmed by Pledgor or any heirs or representatives of Pledgor or any other persons through any legal proceedings.
To protect or perfect the security interest granted by this Agreement for the Contract Obligation and Secured Indebtedness, Pledgor hereby
undertakes to execute in good faith and to cause other parties who have an interest in the Pledge to execute all certificates, agreements, deeds
and/or covenants required by Pledgee. Pledgor also undertakes to perform and to cause other parties who have an interest in the Pledge to
perform actions required by Pledgee, to facilitate the exercise by Pledgee of its rights and authority granted thereto by this Agreement, and to
enter into all relevant documents regarding ownership of Equity Interest with Pledgee or designee(s) of Pledgee (natural persons/legal persons).
Pledgor undertakes to provide Pledgee within a reasonable time with all notices, orders and decisions regarding the Pledge that are required by
Pledgee.
6.4
Pledgor hereby undertakes to comply with and perform all guarantees, promises, agreements, representations and conditions under this
Agreement. In the event of failure or partial performance of its guarantees, promises, agreements, representations and conditions, Pledgor shall
indemnify Pledgee for all losses resulting therefrom.
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7.
Event of Breach
7.4
The following circumstances shall be deemed Event of Default:
7.1.1
Pledgor’s any breach to any obligations under the Transaction Documents and/or this Agreement.
7.1.2
Party C’s any breach to any obligations under the Transaction Documents and/or this Agreement.
7.5 Upon notice or discovery of the occurrence of any circumstances or event that may lead to the aforementioned circumstances described in
Section 7.1, Pledgor and Party C shall immediately notify Pledgee in writing accordingly.
7.6 Unless an Event of Default set forth in this Section 7.1 has been successfully resolved to Pledgee’s satisfaction within twenty (20) days after
the Pledgee and /or Party C delivers a notice to the Pledgor requesting ratification of such Event of Default, Pledgee may issue a Notice of
Default to Pledgor in writing at any time thereafter, demanding the Pledgor to immediately exercise the Pledge in accordance with the
provisions of Article 8 of this Agreement.
8.
Exercise of Pledge
8.1
8.2
8.3
8.4
Pledgee may issue a Notice of Default to Pledgor when exercising the Pledge.
Subject to the provisions of Section 7.3, Pledgee may exercise the right to enforce the Pledge at any time after the issuance of the Notice of
Default in accordance with Section 8.1. Once Pledgee elects to enforce the Pledge, Pledgor shall cease to be entitled to any rights or interests
associated with the Equity Interest.
After Pledgee issues a Notice of Default Pledgee in accordance with Section 8.1, Pledgee may exercise any remedy measure under applicable
PRC laws, the Transaction Documents and this Agreement, including but not limited to be compensated in priority by the conversion of the
Equity Pledge or from the proceeds from auction or sale of the Equity Interest. The Pledgee shall have no liability for any loss incurred by its
duly exercise of such rights and powers.
The proceeds from exercise of the Pledge by Pledgee shall be used to pay for tax and expenses incurred by disposing the Equity Interest and
perform Contract Obligations and pay the Secured Indebtedness prior and in preference to any other payment. After the payment of the
aforementioned amounts, the remaining balance shall be returned to Pledgor or any other person who have rights to such balance under
applicable laws or be deposited to the local notary public office where Pledgor resides, with all expense incurred being borne by Pledgor. To
the extent permitted under applicable PRC laws, Pledgor shall unconditionally give the aforementioned proceeds to Pledgee or any other
person designated by Pledgee.
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8.5
8.6
Pledgee has the right to exercise any remedy measure available simultaneously or in any order. Pledgee may exercise the right to be
compensated from in priority by the conversion of the Equity Pledge or from the proceeds from auction or sale of the Equity Interest under this
Agreement, without exercising any other remedy measure first.
Pledgee is entitled to designate an attorney or other representatives to exercise the Pledge on its behalf and Pledgor and Party C shall not raise
any objection to such exercise.
8.7 When Pledgee disposes of the Pledge in accordance with this Agreement, Pledgor and Party C shall provide necessary assistance to enable
Pledgee to enforce the Pledge in accordance with this Agreement.
9.
Breach of Agreement
9.1 If Pledgor or Party C conducts any material breach of any term of this Agreement, Pledgee shall have right to terminate this Agreement and
require Pledgor or Party C to compensate all damages; this Section 9 shall not prejudice any other rights of Pledgee herein;
9.2 If Pledgee conducts any breach of any term of this Agreement, Pledgor or Party C shall not terminate this Agreement in any event unless
otherwise required by applicable laws.
10. Assignment
10.1 Without Pledgee’s prior written consent, Pledgor shall not have the right to assign or delegate its rights and obligations under this Agreement.
10.2 This Agreement shall be binding on Pledgor and its successors and permitted assigns, and shall be valid with respect to Pledgee and each of its
successors and assigns.
10.3 At any time, Pledgee may assign any and all of its rights and obligations under the Transaction Documents to its designee(s), in which case the
assigns shall have the rights and obligations of Pledgee under this Agreement, as if it were the original party to this Agreement. When the
Pledgee assigns the rights and obligations under the Business Cooperation Agreement, upon Pledgee’s request, Pledgor and/or Party C shall
execute relevant agreements or other documents relating to such assignment.
10.4
In the event of a change in Pledgee due to an assignment, Pledgor and/or Party C shall, at the request of Pledgee, execute a new pledge
agreement with the new pledgee on the same terms and conditions as this Agreement, and register the same with the relevant AIC.
20
10.5 Pledgor and Party C shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by the Parties
hereto or any of them, including the Transaction Documents, perform the obligations hereunder and thereunder, and refrain from any
action/omission that may affect the effectiveness and enforceability thereof. Any remaining rights of Pledgor with respect to the Equity Interest
pledged hereunder shall not be exercised by Pledgor except in accordance with the written instructions of Pledgee.
11. Termination
11.1 Upon the fulfillment of all Contract Obligation and the full payment of all Secured Indebtedness by Pledgor and Party C, Pledgee shall release
the Pledge under this Agreement upon Pledgor’s request as soon as reasonably practicable and shall assist Pledgor to de-register the Pledge
from the shareholders’ register of Party C and with relevant PRC local administration for industry and commerce.
11.2 The provisions under Sections 9, 13, 14 and 11.2 herein of this Agreement shall survive the expiration or termination of this Agreement.
12. Handling Fees and Other Expenses
All fees and out of pocket expenses relating to this Agreement, including but not limited to legal costs, costs of production, stamp tax and any other
taxes and fees, shall be borne by Party C.
13. Confidentiality
The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in
connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality
of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential
information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s
unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or
orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsels or
financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or financial advisors
shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff
members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which Party shall be held liable
for breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.
14. Governing Law and Resolution of Disputes
14.1 The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes
hereunder shall be governed by the laws of China.
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14.2
In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute
through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party’s request to the
other Parties for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International
Economic and Trade Arbitration Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in
Beijing, and the language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.
14.3 Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration of any
dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this
Agreement and perform their respective obligations under this Agreement.
15. Notices
15.1 All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by
registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such party set forth below. A
confirmation copy of each notice shall also be sent by E-mail. The dates on which notices shall be deemed to have been effectively given shall
be determined as follows:
15.2 Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the date of
delivery or refusal at the address specified for notices.
15.3 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an
automatically generated confirmation of transmission).
15.4 For the purpose of notices, the addresses of the Parties are as follows:
Party A:
Address:
Attn:
Phone:
Facsimile:
Party B:
Address:
Attn:
Phone:
Facsimile:
Beijing 58 Daojia Information Technology Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
Jinbo Yao
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
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Party C:
Address:
Attn:
Phone:
Facsimile:
Tianjin 58 Daojia Home Services Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
15.5 Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms hereof.
16.
Severability
In the event that one or several of the provisions of this Contract are found to be invalid, illegal or unenforceable in any aspect in accordance with any
laws or regulations, the validity, legality or enforceability of the remaining provisions of this Contract shall not be affected or compromised in any
respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to
the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible
to the economic effect of those invalid, illegal or unenforceable provisions.
17. Attachments
The attachments set forth herein shall be an integral part of this Agreement.
18. Effectiveness
18.1 This Agreement shall become effective upon execution by the Parties.
18.2 Any amendments, changes and supplements to this Agreement shall be in writing and shall become effective upon completion of the
governmental filing procedures (if applicable) after the affixation of the signatures or seals of the Parties.
19. Language and Counterparts
This Agreement is written in Chinese and English in four copies. Pledgor, Pledgee and Party C shall hold one copy respectively and the other copy
shall be used for registration. Each copy of this Agreement shall have equal validity. In case there is any conflict between the Chinese version and the
English version, the Chinese version shall prevail.
The Remainder of this page is intentionally left blank
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IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Equity Interest Pledge Agreement as of the date first
above written.
Party A:
Beijing 58 Daojia Information Technology Co., Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
Party B:
Jinbo Yao
By:
/s/ Jinbo Yao
Party C:
Tianjin 58 Daojia Home Services Co., Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
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Attachments:
1.
2.
3.
4.
5.
6.
Shareholders’ Register of Party C;
The Capital Contribution Certificate for Party C;
Exclusive Business Cooperation Agreement;
Loan Agreement;
Exclusive Option Agreement;
Power of Attorney.
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Equity Interest Pledge Agreement
This Equity Interest Pledge Agreement (this “Agreement”) has been executed by and among the following parties on August 5, 2015 in Beijing, the
People’s Republic of China (“China” or the “PRC”):
Party A: Beijing 58 Daojia Information Technology Co., Ltd. (hereinafter “Pledgee”), a wholly foreign owned enterprise, organized and existing
under the laws of the PRC, with its address at Room D101A-123, Building B-2 of Zhongguancun Dongsheng Science Park, #66 Xixiaokou
Road, Haidian District, Beijing;
Party B: Ou Bai (hereinafter “Pledgor”), a citizen of China with Chinese Identification No.: ; and
Party C: Tianjin 58 Daojia Home Services Co., Ltd., a limited liability company organized and existing under the laws of the PRC, with its address at
Square block -901-918 , #5 Meiyuan Road , Binhaigaoxin District, Tianjin.
In this Agreement, each of Pledgee, Pledgor and Party C shall be referred to as a "Party" respectively, and they shall be collectively referred to as the
"Parties".
Whereas:
1.
2.
3.
Pledgor is a citizen of China who as of the date hereof holds 2.3% of equity interests of Party C, representing RMB2,300,000 in the registered capital
of Party C. Party C is a limited liability company registered in Beijing, China, engaging in Internet information services and consulting services. Party
C acknowledges the respective rights and obligations of Pledgor and Pledgee under this Agreement, and intends to provide any necessary assistance in
registering the Pledge;
Pledgee is a wholly foreign-owned enterprise registered in China. Pledgee and Party C partially owned by Pledgor have executed an Exclusive
Business Cooperation Agreement (as defined below) in Beijing; Party C, Pledgee and Pledgor have executed an Exclusive Option Agreement (as
defined below); Pledgee and Pledgor have executed a Loan Agreement (as defined below); and Pledgor has executed a Power of Attorney to Pledgee.
To ensure that Party C and Pledgor fully perform their obligations under the Exclusive Business Cooperation Agreement, the Exclusive Option
Agreement, the Loan Agreement and the Power of Attorney, Pledgor hereby pledges to the Pledgee all of the equity interest he holds in Party C as
security for Party C’s and Pledgor’s obligations under the Exclusive Business Cooperation Agreements, the Exclusive Option Agreement, the Loan
Agreement and the Power of Attorney.
To perform the provisions of the Transaction Documents, the Parties have mutually agreed to execute this Agreement upon the following terms.
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1.
Definitions
Unless otherwise provided herein, the terms below shall have the following meanings:
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
Pledge: shall refer to the security interest granted by Pledgor to Pledgee pursuant to Article 2 of this Agreement, i.e., the right of Pledgee to be
compensated on a preferential basis with the conversion, auction or sales price of the Equity Interest.
Equity Interest: shall refer to all of the equity interest now held and hereafter acquired by Pledgor in Party C.
Term of Pledge: shall refer to the term set forth in Section 3.2 of this Agreement.
Transaction Documents: shall refer to the Exclusive Business Cooperation Agreement executed by and between Party C and Pledgee on
August 5, 2015 (the “Exclusive Business Cooperation Agreement”), the Exclusive Option Agreement executed by and among Party C, Pledgee
and Pledgor on August 5, 2015 (the “Exclusive Option Agreement”), the Loan Agreement executed by and between Pledgee and Pledgor on
August 5, 2015 (the “Loan Agreement”), Power of Attorney executed on August 5, 2015 by Pledgor (the “Power of Attorney”) and any
modification, amendment and restatement to the aforementioned documents.
Contract Obligation: shall refer to all the obligations of Pledgor under the Exclusive Option Agreement, the Power of Attorney, the Loan
Agreement and this Agreement; all the obligations of Party C under the Exclusive Cooperation Agreement, the Exclusive Option Agreement
and this Agreement.
Secured Indebtedness: shall refer to all the direct, indirect or derivative losses of Pledgee, including loss of expected profits, incurred as a result
of any Event of Default (as defined below). The amount of such loss shall be based on, including but not limited to the reasonable business
plan and profit forecast of Pledgee, the consulting and service fees payable to Pledgee under the Exclusive Business Cooperation Agreement
and all expenses occurred in connection with enforcement by Pledgee of Pledgor’s and/or Party C’s Contract Obligation.
Event of Default: shall refer to any of the circumstances set forth in Article 7 of this Agreement.
Notice of Default: shall refer to the notice issued by Pledgee in accordance with this Agreement declaring an Event of Default.
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2.
The Pledge
2.1
2.2
2.3
2.4
Pledgor agrees to pledge all the Equity Interest as security for performance of the Contract Obligation and payment of the Secured
Indebtedness under this Agreement. Party C hereby assents that Pledgor pledges the Equity Interest to the Pledgee pursuant to this Agreement.
During the term of the Pledge, Pledgee is entitled to receive dividends distributed on the Equity Interest. Pledgor may receive dividends
distributed on the Equity Interest only with prior written consent from Pledgee. Dividends received by Pledgor on Equity Interest shall be,
subject to requirement of Pledgee, (1) deposited into an account designated and supervised by Pledgee and used to secure the Contract
Obligations and pay the Secured Indebtedness prior and in preference to make any other payment; or (2) unconditionally give to Pledgee or any
other person designated by Pledgee to the extent permitted under applicable PRC laws.
Pledgor may subscribe for capital increase in Party C only with prior written consent of Pledgee. Any equity interest obtained by the Pledgor in
future capital increase shall be deemed as Equity Interest as well.
In the event that Party C is required by PRC law to be liquidated or dissolved, any interest distributed to Pledgor upon Party C’s dissolution or
liquidation shall be (1) deposited into an account designate and supervised by Pledgee and used to secure the Contract Obligations and pay the
Secured Indebtedness prior and in preference to make any other payment; or (2) unconditionally give to Pledgee or any other person designated
by Pledgee to the extent permitted under applicable PRC laws.
3.
Term of Pledge
3.1
The Pledge shall become effective on such date when the pledge of the Equity Interest contemplated herein has been registered with relevant
administration for industry and commerce (the “AIC”). The Pledge shall be continuously valid until all Contract Obligations and Secured
Indebtedness have been fully performed and paid. Pledgor and Party C shall (1) register the Pledge in the shareholders' register of Party C
within 3 business days following the execution of this Agreement, and (2) submit an application to the AIC for the registration of the Pledge of
the Equity Interest contemplated herein within 30 business days following the execution of this Agreement. The parties covenant that for the
purpose of registration of the Pledge, the parties hereto and all other shareholders of Party C shall submit to the AIC this Agreement or an
equity interest pledge contract in the form required by the AIC at the location of Party C which shall truly reflect the information of the Pledge
hereunder (the “AIC Pledge Contract”). For matters not specified in the AIC Pledge Contract, the parties shall be bound by the provisions of
this Agreement. Pledgor and Party C shall submit all necessary documents and complete all necessary procedures, as required by the PRC laws
and regulations and the relevant AIC, to ensure that the Pledge of the Equity Interest shall be registered with the AIC as soon as possible after
filing.
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3.2
During the Term of Pledge, in the event Pledgor and/or Party C fails to perform the Contract Obligation or pay Secured Indebtedness, Pledgee
shall have the right, but not the obligation, to exercise the Pledge in accordance with the provisions of this Agreement.
4.
Custody of Records for Equity Interest subject to Pledge
4.1
During the Term of Pledge set forth in this Agreement, Pledgor shall deliver to Pledgee's custody the capital contribution certificate for the
Equity Interest and the shareholders' register containing the Pledge within one week from the execution of this Agreement. Pledgee shall have
custody of such documents during the entire Term of Pledge set forth in this Agreement.
5.
Representations and Warranties of Pledgor and Party C
As of the execution date of this Agreement, Pledgor and Party C hereby jointly and severally represent and warrant to Pledgee that:
5.1
5.2
5.3
5.4
5.5
Pledgor is the sole legal and beneficial owner of the Equity Interest.
Pledgee shall have the right to dispose of and transfer the Equity Interest in accordance with the provisions set forth in this Agreement.
Except for the Pledge, Pledgor has not placed any security interest or other encumbrance on the Equity Interest.
Pledgor and Party C have obtained any and all approvals and consents from applicable government authorities and third parties (if required) for
execution, delivery and performance of this Agreement.
The execution, delivery and performance of this Agreement will not: (i) violate any relevant PRC laws; (ii) conflict with Party C’s articles of
association or other constitutional documents; (iii) result in any breach of or constitute any default under any contract or instrument to which it
is a party or by which it is otherwise bound; (iv) result in any violation of any condition for the grant and/or maintenance of any permit or
approval granted to any Party; or (v) cause any permit or approval granted to any Party to be suspended, cancelled or attached with additional
conditions.
6.
Covenants of Pledgor and Party C
6.1
Pledgor and Party C hereby jointly and severally covenant to the Pledgee:
6.1.1
Pledgor shall not transfer the Equity Interest, place or permit the existence of any security interest or other encumbrance on the Equity
Interest or any portion thereof, without the prior written consent of Pledgee, except for the performance of the Transaction
Documents;
29
6.1.2
Pledgor and Party C shall comply with the provisions of all laws and regulations applicable to the pledge of rights, and within 5 days
of receipt of any notice, order or recommendation issued or prepared by relevant competent authorities regarding the Pledge, shall
present the aforementioned notice, order or recommendation to Pledgee, and shall comply with the aforementioned notice, order or
recommendation or submit objections and representations with respect to the aforementioned matters upon Pledgee's reasonable
request or upon consent of Pledgee;
6.1.3
Pledgor and Party C shall promptly notify Pledgee of any event or notice received by Pledgor that may have an impact on Pledgee's
rights to the Equity Interest or any portion thereof, as well as any event or notice received by Pledgor that may have an impact on any
guarantees and other obligations of Pledgor arising out of this Agreement.
6.1.4
Party C shall complete the registration procedures for extension of the term of operation within three (3) months prior to the expiration
of such term to maintain the validity of this Agreement.
6.2
6.3
Pledgor agrees that the rights acquired by Pledgee in accordance with this Agreement with respect to the Pledge shall not be interrupted or
harmed by Pledgor or any heirs or representatives of Pledgor or any other persons through any legal proceedings.
To protect or perfect the security interest granted by this Agreement for the Contract Obligation and Secured Indebtedness, Pledgor hereby
undertakes to execute in good faith and to cause other parties who have an interest in the Pledge to execute all certificates, agreements, deeds
and/or covenants required by Pledgee. Pledgor also undertakes to perform and to cause other parties who have an interest in the Pledge to
perform actions required by Pledgee, to facilitate the exercise by Pledgee of its rights and authority granted thereto by this Agreement, and to
enter into all relevant documents regarding ownership of Equity Interest with Pledgee or designee(s) of Pledgee (natural persons/legal persons).
Pledgor undertakes to provide Pledgee within a reasonable time with all notices, orders and decisions regarding the Pledge that are required by
Pledgee.
6.4
Pledgor hereby undertakes to comply with and perform all guarantees, promises, agreements, representations and conditions under this
Agreement. In the event of failure or partial performance of its guarantees, promises, agreements, representations and conditions, Pledgor shall
indemnify Pledgee for all losses resulting therefrom.
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7.
Event of Breach
7.1
The following circumstances shall be deemed Event of Default:
7.1.1
Pledgor’s any breach to any obligations under the Transaction Documents and/or this Agreement.
7.1.2
Party C’s any breach to any obligations under the Transaction Documents and/or this Agreement.
7.2 Upon notice or discovery of the occurrence of any circumstances or event that may lead to the aforementioned circumstances described in
Section 7.1, Pledgor and Party C shall immediately notify Pledgee in writing accordingly.
7.3 Unless an Event of Default set forth in this Section 7.1 has been successfully resolved to Pledgee's satisfaction within twenty (20) days after the
Pledgee and /or Party C delivers a notice to the Pledgor requesting ratification of such Event of Default, Pledgee may issue a Notice of Default
to Pledgor in writing at any time thereafter, demanding the Pledgor to immediately exercise the Pledge in accordance with the provisions of
Article 8 of this Agreement.
8.
Exercise of Pledge
8.1
8.2
8.3
8.4
Pledgee may issue a Notice of Default to Pledgor when exercising the Pledge.
Subject to the provisions of Section 7.3, Pledgee may exercise the right to enforce the Pledge at any time after the issuance of the Notice of
Default in accordance with Section 8.1. Once Pledgee elects to enforce the Pledge, Pledgor shall cease to be entitled to any rights or interests
associated with the Equity Interest.
After Pledgee issues a Notice of Default Pledgee in accordance with Section 8.1, Pledgee may exercise any remedy measure under applicable
PRC laws, the Transaction Documents and this Agreement, including but not limited to be compensated in priority by the conversion of the
Equity Pledge or from the proceeds from auction or sale of the Equity Interest. The Pledgee shall have no liability for any loss incurred by its
duly exercise of such rights and powers.
The proceeds from exercise of the Pledge by Pledgee shall be used to pay for tax and expenses incurred by disposing the Equity Interest and
perform Contract Obligations and pay the Secured Indebtedness prior and in preference to any other payment. After the payment of the
aforementioned amounts, the remaining balance shall be returned to Pledgor or any other person who have rights to such balance under
applicable laws or be deposited to the local notary public office where Pledgor resides, with all expense incurred being borne by Pledgor. To
the extent permitted under applicable PRC laws, Pledgor shall unconditionally give the aforementioned proceeds to Pledgee or any other
person designated by Pledgee.
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8.5
8.6
Pledgee has the right to exercise any remedy measure available simultaneously or in any order. Pledgee may exercise the right to be
compensated from in priority by the conversion of the Equity Pledge or from the proceeds from auction or sale of the Equity Interest under this
Agreement, without exercising any other remedy measure first.
Pledgee is entitled to designate an attorney or other representatives to exercise the Pledge on its behalf and Pledgor and Party C shall not raise
any objection to such exercise.
8.7 When Pledgee disposes of the Pledge in accordance with this Agreement, Pledgor and Party C shall provide necessary assistance to enable
Pledgee to enforce the Pledge in accordance with this Agreement.
9.
Breach of Agreement
9.1
9.2
If Pledgor or Party C conducts any material breach of any term of this Agreement, Pledgee shall have right to terminate this Agreement and
require Pledgor or Party C to compensate all damages; this Section 9 shall not prejudice any other rights of Pledgee herein;
If Pledgee conducts any breach of any term of this Agreement, Pledgor or Party C shall not terminate this Agreement in any event unless
otherwise required by applicable laws.
10. Assignment
10.1 Without Pledgee's prior written consent, Pledgor shall not have the right to assign or delegate its rights and obligations under this Agreement.
10.2 This Agreement shall be binding on Pledgor and its successors and permitted assigns, and shall be valid with respect to Pledgee and each of its
successors and assigns.
10.3 At any time, Pledgee may assign any and all of its rights and obligations under the Transaction Documents to its designee(s), in which case the
assigns shall have the rights and obligations of Pledgee under this Agreement, as if it were the original party to this Agreement. When the
Pledgee assigns the rights and obligations under the Business Cooperation Agreement, upon Pledgee's request, Pledgor and/or Party C shall
execute relevant agreements or other documents relating to such assignment.
10.4
In the event of a change in Pledgee due to an assignment, Pledgor and/or Party C shall, at the request of Pledgee, execute a new pledge
agreement with the new pledgee on the same terms and conditions as this Agreement, and register the same with the relevant AIC.
32
10.5 Pledgor and Party C shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by the Parties
hereto or any of them, including the Transaction Documents, perform the obligations hereunder and thereunder, and refrain from any
action/omission that may affect the effectiveness and enforceability thereof. Any remaining rights of Pledgor with respect to the Equity Interest
pledged hereunder shall not be exercised by Pledgor except in accordance with the written instructions of Pledgee.
11. Termination
11.1 Upon the fulfillment of all Contract Obligation and the full payment of all Secured Indebtedness by Pledgor and Party C, Pledgee shall release
the Pledge under this Agreement upon Pledgor’s request as soon as reasonably practicable and shall assist Pledgor to de-register the Pledge
from the shareholders’ register of Party C and with relevant PRC local administration for industry and commerce.
11.2 The provisions under Sections 9, 13, 14 and 11.2 herein of this Agreement shall survive the expiration or termination of this Agreement.
12. Handling Fees and Other Expenses
All fees and out of pocket expenses relating to this Agreement, including but not limited to legal costs, costs of production, stamp tax and any other
taxes and fees, shall be borne by Party C.
13. Confidentiality
The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in
connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality
of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential
information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s
unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or
orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsels or
financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or financial advisors
shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff
members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which Party shall be held liable
for breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.
33
14. Governing Law and Resolution of Disputes
14.1 The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes
hereunder shall be governed by the laws of China.
14.2
In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute
through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party's request to the
other Parties for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International
Economic and Trade Arbitration Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in
Beijing, and the language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.
14.3 Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration of any
dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this
Agreement and perform their respective obligations under this Agreement.
15. Notices
15.1 All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by
registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such party set forth below. A
confirmation copy of each notice shall also be sent by E-mail. The dates on which notices shall be deemed to have been effectively given shall
be determined as follows:
15.2 Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the date of
delivery or refusal at the address specified for notices.
15.3 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an
automatically generated confirmation of transmission).
15.4 For the purpose of notices, the addresses of the Parties are as follows:
Party A:
Address:
Attn:
Phone:
Facsimile:
Party B:
Address:
Phone:
Facsimile:
Beijing 58 Daojia Information Technology Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
Ou Bai
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
+8610 64435588-8888
+8610-64459926
34
Party C: Tianjin 58 Daojia Home Services Co., Ltd.
Address:
Attn:
Phone:
Facsimile: +8610-64459926
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
15.5 Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms hereof.
16.
Severability
In the event that one or several of the provisions of this Contract are found to be invalid, illegal or unenforceable in any aspect in accordance with any
laws or regulations, the validity, legality or enforceability of the remaining provisions of this Contract shall not be affected or compromised in any
respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to
the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible
to the economic effect of those invalid, illegal or unenforceable provisions.
17. Attachments
The attachments set forth herein shall be an integral part of this Agreement.
18. Effectiveness
18.1 This Agreement shall become effective upon execution by the Parties.
18.2 Any amendments, changes and supplements to this Agreement shall be in writing and shall become effective upon completion of the
governmental filing procedures (if applicable) after the affixation of the signatures or seals of the Parties.
19. Language and Counterparts
This Agreement is written in Chinese and English in four copies. Pledgor, Pledgee and Party C shall hold one copy respectively and the other copy
shall be used for registration. Each copy of this Agreement shall have equal validity. In case there is any conflict between the Chinese version and the
English version, the Chinese version shall prevail.
The Remainder of this page is intentionally left blank
35
IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Equity Interest Pledge Agreement as of the date
first above written.
Party A:
Beijing 58 Daojia Information Technology Co., Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
Party B:
Ou Bai
By:
/s/ Ou Bai
Party C:
Tianjin 58 Daojia Home Services Co., Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
36
Attachments:
1.
2.
3.
4.
5.
6.
Shareholders' Register of Party C;
The Capital Contribution Certificate for Party C;
Exclusive Business Cooperation Agreement;
Loan Agreement;
Exclusive Option Agreement;
Power of Attorney.
37
Equity Interest Pledge Agreement
This Equity Interest Pledge Agreement (this “Agreement”) has been executed by and among the following parties on August 5, 2015 in Beijing, the
People’s Republic of China (“China” or the “PRC”):
Party A: Beijing 58 Daojia Information Technology Co., Ltd. (hereinafter “Pledgee”), a wholly foreign owned enterprise, organized and existing
under the laws of the PRC, with its address at Room D101A-123, Building B-2 of Zhongguancun Dongsheng Science Park, #66 Xixiaokou
Road, Haidian District, Beijing;
Party B: Xiaohua Chen (hereinafter “Pledgor”), a citizen of China with Chinese Identification No.: ; and
Party C: Tianjin 58 Daojia Home Services Co., Ltd., a limited liability company organized and existing under the laws of the PRC, with its address at
Square block -901-918 , #5 Meiyuan Road , Binhaigaoxin District, Tianjin.
In this Agreement, each of Pledgee, Pledgor and Party C shall be referred to as a "Party" respectively, and they shall be collectively referred to as the
"Parties".
Whereas:
1.
2.
3.
Pledgor is a citizen of China who as of the date hereof holds 4.5% of equity interests of Party C, representing RMB4,500,000 in the registered capital
of Party C. Party C is a limited liability company registered in Beijing, China, engaging in Internet information services and advertising services. Party
C acknowledges the respective rights and obligations of Pledgor and Pledgee under this Agreement, and intends to provide any necessary assistance in
registering the Pledge;
Pledgee is a wholly foreign-owned enterprise registered in China. Pledgee and Party C partially owned by Pledgor have executed an Exclusive
Business Cooperation Agreement (as defined below) in Beijing; Party C, Pledgee and Pledgor have executed an Exclusive Option Agreement (as
defined below); Pledgee and Pledgor have executed a Loan Agreement (as defined below); and Pledgor has executed a Power of Attorney to Pledgee.
To ensure that Party C and Pledgor fully perform their obligations under the Exclusive Business Cooperation Agreement, the Exclusive Option
Agreement, the Loan Agreement and the Power of Attorney, Pledgor hereby pledges to the Pledgee all of the equity interest he holds in Party C as
security for Party C’s and Pledgor’s obligations under the Exclusive Business Cooperation Agreements, the Exclusive Option Agreement, the Loan
Agreement and the Power of Attorney.
To perform the provisions of the Transaction Documents, the Parties have mutually agreed to execute this Agreement upon the following terms.
38
1.
Definitions
Unless otherwise provided herein, the terms below shall have the following meanings:
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
Pledge: shall refer to the security interest granted by Pledgor to Pledgee pursuant to Article 2 of this Agreement, i.e., the right of Pledgee to be
compensated on a preferential basis with the conversion, auction or sales price of the Equity Interest.
Equity Interest: shall refer to all of the equity interest now held and hereafter acquired by Pledgor in Party C.
Term of Pledge: shall refer to the term set forth in Section 3.2 of this Agreement.
Transaction Documents: shall refer to the Exclusive Business Cooperation Agreement executed by and between Party C and Pledgee on
August 5, 2015 (the “Exclusive Business Cooperation Agreement”), the Exclusive Option Agreement executed by and among Party C, Pledgee
and Pledgor on August 5, 2015 (the “Exclusive Option Agreement”), the Loan Agreement executed by and between Pledgee and Pledgor on
August 5, 2015 (the “Loan Agreement”), Power of Attorney executed on August 5, 2015 by Pledgor (the “Power of Attorney”) and any
modification, amendment and restatement to the aforementioned documents.
Contract Obligation: shall refer to all the obligations of Pledgor under the Exclusive Option Agreement, the Power of Attorney, the Loan
Agreement and this Agreement; all the obligations of Party C under the Exclusive Cooperation Agreement, the Exclusive Option Agreement
and this Agreement.
Secured Indebtedness: shall refer to all the direct, indirect or derivative losses of Pledgee, including loss of expected profits, incurred as a result
of any Event of Default (as defined below). The amount of such loss shall be based on, including but not limited to the reasonable business
plan and profit forecast of Pledgee, the consulting and service fees payable to Pledgee under the Exclusive Business Cooperation Agreement
and all expenses occurred in connection with enforcement by Pledgee of Pledgor’s and/or Party C’s Contract Obligation. The anticipated
aggregate losses to be incurred hereunder are RMB1,000 million. Notwithstanding the forgoing, if the actual losses incurred exceed such
anticipated amount, the Secured Indebtedness hereunder shall be the actual amount of such losses incurred.
Event of Default: shall refer to any of the circumstances set forth in Article 7 of this Agreement.
Notice of Default: shall refer to the notice issued by Pledgee in accordance with this Agreement declaring an Event of Default.
39
2.
The Pledge
2.1
2.2
2.3
2.4
Pledgor agrees to pledge all the Equity Interest as security for performance of the Contract Obligation and payment of the Secured
Indebtedness under this Agreement. Party C hereby assents that Pledgor pledges the Equity Interest to the Pledgee pursuant to this Agreement.
During the term of the Pledge, Pledgee is entitled to receive dividends distributed on the Equity Interest. Pledgor may receive dividends
distributed on the Equity Interest only with prior written consent from Pledgee. Dividends received by Pledgor on Equity Interest shall be,
subject to requirement of Pledgee, (1) deposited into an account designated and supervised by Pledgee and used to secure the Contract
Obligations and pay the Secured Indebtedness prior and in preference to make any other payment; or (2) unconditionally give to Pledgee or any
other person designated by Pledgee to the extent permitted under applicable PRC laws.
Pledgor may subscribe for capital increase in Party C only with prior written consent of Pledgee. Any equity interest obtained by the Pledgor in
future capital increase shall be deemed as Equity Interest as well.
In the event that Party C is required by PRC law to be liquidated or dissolved, any interest distributed to Pledgor upon Party C’s dissolution or
liquidation shall be (1) deposited into an account designate and supervised by Pledgee and used to secure the Contract Obligations and pay the
Secured Indebtedness prior and in preference to make any other payment; or (2) unconditionally give to Pledgee or any other person designated
by Pledgee to the extent permitted under applicable PRC laws.
3.
Term of Pledge
3.1
The Pledge shall become effective on such date when the pledge of the Equity Interest contemplated herein has been registered with relevant
administration for industry and commerce (the “AIC”). The Pledge shall be continuously valid until all Contract Obligations and Secured
Indebtedness have been fully performed and paid. Pledgor and Party C shall (1) register the Pledge in the shareholders' register of Party C
within 3 business days following the execution of this Agreement, and (2) submit an application to the AIC for the registration of the Pledge of
the Equity Interest contemplated herein within 30 business days following the execution of this Agreement. The parties covenant that for the
purpose of registration of the Pledge, the parties hereto and all other shareholders of Party C shall submit to the AIC this Agreement or an
equity interest pledge contract in the form required by the AIC at the location of Party C which shall truly reflect the information of the Pledge
hereunder (the “AIC Pledge Contract”). For matters not specified in the AIC Pledge Contract, the parties shall be bound by the provisions of
this Agreement. Pledgor and Party C shall submit all necessary documents and complete all necessary procedures, as required by the PRC laws
and regulations and the relevant AIC, to ensure that the Pledge of the Equity Interest shall be registered with the AIC as soon as possible after
filing.
40
3.2
During the Term of Pledge, in the event Pledgor and/or Party C fails to perform the Contract Obligation or pay Secured Indebtedness, Pledgee
shall have the right, but not the obligation, to exercise the Pledge in accordance with the provisions of this Agreement.
4.
Custody of Records for Equity Interest subject to Pledge
4.1
During the Term of Pledge set forth in this Agreement, Pledgor shall deliver to Pledgee's custody the capital contribution certificate for the
Equity Interest and the shareholders' register containing the Pledge within one week from the execution of this Agreement. Pledgee shall have
custody of such documents during the entire Term of Pledge set forth in this Agreement.
5.
Representations and Warranties of Pledgor and Party C
As of the execution date of this Agreement, Pledgor and Party C hereby jointly and severally represent and warrant to Pledgee that:
5.1
5.2
5.3
5.4
5.5
Pledgor is the sole legal and beneficial owner of the Equity Interest.
Pledgee shall have the right to dispose of and transfer the Equity Interest in accordance with the provisions set forth in this Agreement.
Except for the Pledge, Pledgor has not placed any security interest or other encumbrance on the Equity Interest.
Pledgor and Party C have obtained any and all approvals and consents from applicable government authorities and third parties (if required) for
execution, delivery and performance of this Agreement.
The execution, delivery and performance of this Agreement will not: (i) violate any relevant PRC laws; (ii) conflict with Party C’s articles of
association or other constitutional documents; (iii) result in any breach of or constitute any default under any contract or instrument to which it
is a party or by which it is otherwise bound; (iv) result in any violation of any condition for the grant and/or maintenance of any permit or
approval granted to any Party; or (v) cause any permit or approval granted to any Party to be suspended, cancelled or attached with additional
conditions.
41
6.
Covenants of Pledgor and Party C
6.1
Pledgor and Party C hereby jointly and severally covenant to the Pledgee:
6.1.1
6.1.2
Pledgor shall not transfer the Equity Interest, place or permit the existence of any security interest or other encumbrance on the Equity
Interest or any portion thereof, without the prior written consent of Pledgee, except for the performance of the Transaction
Documents;
Pledgor and Party C shall comply with the provisions of all laws and regulations applicable to the pledge of rights, and within 5 days
of receipt of any notice, order or recommendation issued or prepared by relevant competent authorities regarding the Pledge, shall
present the aforementioned notice, order or recommendation to Pledgee, and shall comply with the aforementioned notice, order or
recommendation or submit objections and representations with respect to the aforementioned matters upon Pledgee's reasonable
request or upon consent of Pledgee;
6.1.3
Pledgor and Party C shall promptly notify Pledgee of any event or notice received by Pledgor that may have an impact on Pledgee's
rights to the Equity Interest or any portion thereof, as well as any event or notice received by Pledgor that may have an impact on any
guarantees and other obligations of Pledgor arising out of this Agreement.
6.1.4
Party C shall complete the registration procedures for extension of the term of operation within three (3) months prior to the expiration
of such term to maintain the validity of this Agreement.
6.2
6.3
Pledgor agrees that the rights acquired by Pledgee in accordance with this Agreement with respect to the Pledge shall not be interrupted or
harmed by Pledgor or any heirs or representatives of Pledgor or any other persons through any legal proceedings.
To protect or perfect the security interest granted by this Agreement for the Contract Obligation and Secured Indebtedness, Pledgor hereby
undertakes to execute in good faith and to cause other parties who have an interest in the Pledge to execute all certificates, agreements, deeds
and/or covenants required by Pledgee. Pledgor also undertakes to perform and to cause other parties who have an interest in the Pledge to
perform actions required by Pledgee, to facilitate the exercise by Pledgee of its rights and authority granted thereto by this Agreement, and to
enter into all relevant documents regarding ownership of Equity Interest with Pledgee or designee(s) of Pledgee (natural persons/legal persons).
Pledgor undertakes to provide Pledgee within a reasonable time with all notices, orders and decisions regarding the Pledge that are required by
Pledgee.
6.4
Pledgor hereby undertakes to comply with and perform all guarantees, promises, agreements, representations and conditions under this
Agreement. In the event of failure or partial performance of its guarantees, promises, agreements, representations and conditions, Pledgor shall
indemnify Pledgee for all losses resulting therefrom.
42
7.
Event of Breach
7.1
The following circumstances shall be deemed Event of Default:
7.1.1
Pledgor’s any breach to any obligations under the Transaction Documents and/or this Agreement.
7.1.2
Party C’s any breach to any obligations under the Transaction Documents and/or this Agreement.
7.2
7.3
Upon notice or discovery of the occurrence of any circumstances or event that may lead to the aforementioned circumstances described in
Section 7.1, Pledgor and Party C shall immediately notify Pledgee in writing accordingly.
Unless an Event of Default set forth in this Section 7.1 has been successfully resolved to Pledgee's satisfaction within twenty (20) days after the
Pledgee and /or Party C delivers a notice to the Pledgor requesting ratification of such Event of Default, Pledgee may issue a Notice of Default
to Pledgor in writing at any time thereafter, demanding the Pledgor to immediately exercise the Pledge in accordance with the provisions of
Article 8 of this Agreement.
8.
Exercise of Pledge
8.1
8.2
8.3
8.4
Pledgee may issue a Notice of Default to Pledgor when exercising the Pledge.
Subject to the provisions of Section 7.3, Pledgee may exercise the right to enforce the Pledge at any time after the issuance of the Notice of
Default in accordance with Section 8.1. Once Pledgee elects to enforce the Pledge, Pledgor shall cease to be entitled to any rights or interests
associated with the Equity Interest.
After Pledgee issues a Notice of Default Pledgee in accordance with Section 8.1, Pledgee may exercise any remedy measure under applicable
PRC laws, the Transaction Documents and this Agreement, including but not limited to be compensated in priority by the conversion of the
Equity Pledge or from the proceeds from auction or sale of the Equity Interest. The Pledgee shall have no liability for any loss incurred by its
duly exercise of such rights and powers.
The proceeds from exercise of the Pledge by Pledgee shall be used to pay for tax and expenses incurred by disposing the Equity Interest and
perform Contract Obligations and pay the Secured Indebtedness prior and in preference to any other payment. After the payment of the
aforementioned amounts, the remaining balance shall be returned to Pledgor or any other person who have rights to such balance under
applicable laws or be deposited to the local notary public office where Pledgor resides, with all expense incurred being borne by Pledgor. To
the extent permitted under applicable PRC laws, Pledgor shall unconditionally give the aforementioned proceeds to Pledgee or any other
person designated by Pledgee.
43
8.5
8.6
Pledgee has the right to exercise any remedy measure available simultaneously or in any order. Pledgee may exercise the right to be
compensated from in priority by the conversion of the Equity Pledge or from the proceeds from auction or sale of the Equity Interest under this
Agreement, without exercising any other remedy measure first.
Pledgee is entitled to designate an attorney or other representatives to exercise the Pledge on its behalf and Pledgor and Party C shall not raise
any objection to such exercise.
8.7 When Pledgee disposes of the Pledge in accordance with this Agreement, Pledgor and Party C shall provide necessary assistance to enable
Pledgee to enforce the Pledge in accordance with this Agreement.
9.
Breach of Agreement
9.1
9.2
If Pledgor or Party C conducts any material breach of any term of this Agreement, Pledgee shall have right to terminate this Agreement and
require Pledgor or Party C to compensate all damages; this Section 9 shall not prejudice any other rights of Pledgee herein;
If Pledgee conducts any breach of any term of this Agreement, Pledgor or Party C shall not terminate this Agreement in any event unless
otherwise required by applicable laws.
10. Assignment
10.1 Without Pledgee's prior written consent, Pledgor shall not have the right to assign or delegate its rights and obligations under this Agreement.
10.2 This Agreement shall be binding on Pledgor and its successors and permitted assigns, and shall be valid with respect to Pledgee and each of its
successors and assigns.
10.3 At any time, Pledgee may assign any and all of its rights and obligations under the Transaction Documents to its designee(s), in which case the
assigns shall have the rights and obligations of Pledgee under this Agreement, as if it were the original party to this Agreement. When the
Pledgee assigns the rights and obligations under the Business Cooperation Agreement, upon Pledgee's request, Pledgor and/or Party C shall
execute relevant agreements or other documents relating to such assignment.
10.4
In the event of a change in Pledgee due to an assignment, Pledgor and/or Party C shall, at the request of Pledgee, execute a new pledge
agreement with the new pledgee on the same terms and conditions as this Agreement, and register the same with the relevant AIC.
44
10.5 Pledgor and Party C shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by the Parties
hereto or any of them, including the Transaction Documents, perform the obligations hereunder and thereunder, and refrain from any
action/omission that may affect the effectiveness and enforceability thereof. Any remaining rights of Pledgor with respect to the Equity Interest
pledged hereunder shall not be exercised by Pledgor except in accordance with the written instructions of Pledgee.
11. Termination
11.1 Upon the fulfillment of all Contract Obligation and the full payment of all Secured Indebtedness by Pledgor and Party C, Pledgee shall release
the Pledge under this Agreement upon Pledgor’s request as soon as reasonably practicable and shall assist Pledgor to de-register the Pledge
from the shareholders’ register of Party C and with relevant PRC local administration for industry and commerce.
11.2 The provisions under Sections 9, 13, 14 and 11.2 herein of this Agreement shall survive the expiration or termination of this Agreement.
12. Handling Fees and Other Expenses
All fees and out of pocket expenses relating to this Agreement, including but not limited to legal costs, costs of production, stamp tax and any other
taxes and fees, shall be borne by Party C.
13. Confidentiality
The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in
connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality
of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential
information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s
unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or
orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsels or
financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or financial advisors
shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff
members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which Party shall be held liable
for breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.
45
14. Governing Law and Resolution of Disputes
14.1 The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes
hereunder shall be governed by the laws of China.
14.2
In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute
through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party's request to the
other Parties for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International
Economic and Trade Arbitration Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in
Beijing, and the language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.
14.3 Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration of any
dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this
Agreement and perform their respective obligations under this Agreement.
15. Notices
15.1 All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by
registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such party set forth below. A
confirmation copy of each notice shall also be sent by E-mail. The dates on which notices shall be deemed to have been effectively given shall
be determined as follows:
15.2 Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the date of
delivery or refusal at the address specified for notices.
15.3 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an
automatically generated confirmation of transmission).
15.4 For the purpose of notices, the addresses of the Parties are as follows:
Party A:
Address:
Attn:
Phone:
Facsimile:
Beijing 58 Daojia Information Technology Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
46
Party B:
Address:
Phone:
Facsimile:
Party C:
Address:
Attn:
Phone:
Facsimile:
Xiaohua Chen
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
+8610 64435588-8888
+8610-64459926
Tianjin 58 Daojia Home Services Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
15.5 Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms hereof.
16.
Severability
In the event that one or several of the provisions of this Contract are found to be invalid, illegal or unenforceable in any aspect in accordance with any
laws or regulations, the validity, legality or enforceability of the remaining provisions of this Contract shall not be affected or compromised in any
respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to
the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible
to the economic effect of those invalid, illegal or unenforceable provisions.
17. Attachments
The attachments set forth herein shall be an integral part of this Agreement.
18. Effectiveness
18.1 This Agreement shall become effective upon execution by the Parties.
18.2 Any amendments, changes and supplements to this Agreement shall be in writing and shall become effective upon completion of the
governmental filing procedures (if applicable) after the affixation of the signatures or seals of the Parties.
19. Language and Counterparts
This Agreement is written in Chinese and English in four copies. Pledgor, Pledgee and Party C shall hold one copy respectively and the other copy
shall be used for registration. Each copy of this Agreement shall have equal validity. In case there is any conflict between the Chinese version and the
English version, the Chinese version shall prevail.
The Remainder of this page is intentionally left blank
47
IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Equity Interest Pledge Agreement as of the date
first above written.
Party A:
Beijing 58 Daojia Information Technology Co., Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
Party B:
Xiaohua Chen
By:
/s/ Xiaohua Chen
Party C:
Tianjin 58 Daojia Home Services Co., Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
48
Attachments:
1.
2.
3.
4.
5.
6.
Shareholders' Register of Party C;
The Capital Contribution Certificate for Party C;
Exclusive Business Cooperation Agreement;
Loan Agreement;
Exclusive Option Agreement;
Power of Attorney.
49
Exclusive Option Agreement
Exhibit 4.28
This (this "Agreement") is executed by and among the following Parties as of the 5th day of August, 2015 in Beijing, the People’s Republic of China
(“China” or the “PRC”):
Party A:
Beijing 58 Daojia Information Technology Co., Ltd., a wholly foreign owned enterprise, organized and existing under the laws of the
PRC, with its address at Room D101A-123, Building B-2 of Zhongguancun Dongsheng Science Park, #66 Xixiaokou Road, Haidian District,
Beijing;
Party B:
58 Co., Ltd., a limited liability company organized and existing under the laws of the PRC, with its address at Room 210-03, Office
Building, Nangang Industry Zone, Economic and Technological Development District, Tianjin; and
Party C:
Tianjin 58 Daojia Home Services Co., Ltd., a limited liability company organized and existing under the laws of the PRC, with its address
Square block -901-918 , #5 Meiyuan Road , Binhaigaoxin District, Tianjin.
In this Agreement, each of Party A, Party B and Party C shall be referred to as a "Party" respectively, and they shall be collectively referred to as the
"Parties".
Whereas:
1.
2.
Party B is a shareholder of Party C and as of the date hereof holds 91.8% of equity interests of Party C, representing RMB91,800,000 in the registered
capital of Party C.
Party A and Party B executed a Loan Agreement (“Loan Agreement”) on August 5, 2015, according to which Party A confirmed that it provided to
Party B a loan in amount of RMB91,800,000, to be used for the purpose of subscribing for the equity interest in Party C.
Now therefore, upon mutual discussion and negotiation, the Parties have reached the following agreement:
1.
SALE AND PURCHASE OF EQUITY INTEREST
1.1 Option Granted
In consideration of the payment of RMB10 by Party A, the receipt and adequacy of which is hereby acknowledged by Party B, Party B
hereby irrevocably grants Party A an irrevocable and exclusive right to purchase, or designate one or more persons (each, a "Designee") to
purchase the equity interests in Party C then held by Party B once or at multiple times at any time in part or in whole at Party A's sole and
absolute discretion to the extent permitted by Chinese laws and at the price described in Section 1.3 herein (such right being the "Equity Interest
Purchase Option"). Except for Party A and the Designee(s), no other person shall be entitled to the Equity Interest Purchase Option or other
rights with respect to the equity interests of Party B. Party C hereby agrees to the grant by Party B of the Equity Interest Purchase Option to
Party A. The term "person" as used herein shall refer to individuals, corporations, partnerships, partners, enterprises, trusts or non-corporate
organizations.
1
1.2
Steps for Exercise of Equity Interest Purchase Option
Subject to the provisions of the laws and regulations of China, Party A may exercise the Equity Interest Purchase Option by issuing a written
notice to Party B (the "Equity Interest Purchase Option Notice"), specifying: (a) Party A's or the Designee’s decision to exercise the Equity
Interest Purchase Option; (b) the portion of equity interests to be purchased by Party A or the Designee from Party B (the "Optioned Interests");
and (c) the date for purchasing the Optioned Interests and/or the date for transfer of the Optioned Interests.
1.3 Equity Interest Purchase Price
The purchase price of all equity interests held by Party B in Party C purchased by Party A by exercising the Equity Interest Purchase Option
shall be RMB91,800,000; if Party A exercises the Equity Interest Purchase Option to purchase part of the equity interests held by Party B in
Party C, the purchase price shall be calculated pro rata. If PRC law requires a minimum price higher than aforementioned price when Party A
exercises Equity Interest Purchase Option, the minimum price regulated by PRC law shall be the purchase price (collectively, the "Equity
Interest Purchase Price").
1.4 Transfer of Optioned Interests
For each exercise of the Equity Interest Purchase Option:
1.4.1
1.4.2
1.4.3
Party B shall cause Party C to promptly convene a shareholders’ meeting, at which a resolution shall be adopted approving Party B's
transfer of the Optioned Interests to Party A and/or the Designee(s);
Party B shall obtain written statements from the other shareholders of Party B giving consent to the transfer of the equity interest to
Party A and/or the Designee(s) and waiving any right of first refusal related thereto.
Party B shall execute an equity interest transfer contract with respect to each transfer with Party A and/or each Designee (whichever is
applicable), in accordance with the provisions of this Agreement and the Equity Interest Purchase Option Notice regarding the
Optioned Interests;
2
1.4.4
The relevant Parties shall execute all other necessary contracts, agreements or documents, obtain all necessary government licenses
and permits and take all necessary actions to transfer valid ownership of the Optioned Interests to Party A and/or the Designee(s),
unencumbered by any security interests, and cause Party A and/or the Designee(s) to become the registered owner(s) of the Optioned
Interests. For the purpose of this Section and this Agreement, "security interests" shall include securities, mortgages, third party's
rights or interests, any stock options, acquisition right, right of first refusal, right to offset, ownership retention or other security
arrangements, but shall be deemed to exclude any security interest created by this Agreement, Party B's Equity Interest Pledge
Agreement and Party B’s Power of Attorney. "Party B's Equity Interest Pledge Agreement" as used in this Agreement shall refer to the
Amended and Restated Equity Interest Pledge Agreement executed by and among Party A, Party B and Party C on the date hereof and
any modification, amendment and restatement thereto. “Party B’s Power of Attorney” as used in this Agreement shall refer to the
Power of Attorney executed by Party B on the date hereof granting Party A with power of attorney and any modification, amendment
and restatement thereto.
1.5
Payment
The Parties have agreed in the Loan Agreement that any proceeds obtained by Party B through the transfer of its equity interests in Party C
shall be used for repayment of the loan provided by Party A in accordance with the Loan Agreement. Accordingly, upon exercise of the Equity
Interest Purchase Option, Party A may elect to make payment of the Equity Interest Purchase Price through cancellation of the outstanding
amount of the loan owed by Party B to Party A, in which case Party A shall not be required to pay any additional Equity Interest Purchase
Price to Party B, unless the Total Equity Interest Purchase Price set forth herein is required to be adjusted in accordance with applicable laws
and regulations.
2. COVENANTS
2.1
Covenants regarding Party C
Party B (as the shareholders of Party C) and Party C hereby covenant as follows:
2.1.1 Without the prior written consent of Party A, they shall not in any manner supplement, change or amend the articles of association and
bylaws of Party C, increase or decrease its registered capital, or change its structure of registered capital in other manners;
2.1.2
They shall maintain Party C's corporate existence in accordance with good financial and business standards, obtain and maintain all
necessary government licenses and permits and practice by prudently and effectively operating its business and handling its affairs;
3
2.1.3 Without the prior written consent of Party A, they shall not at any time following the date hereof, sell, transfer, mortgage or dispose of
in any manner any assets of Party C or legal or beneficial interest in the business or revenues of Party C, or allow the encumbrance
thereon of any security interest;
2.1.4 Without the prior written consent of Party A, they shall not incur, inherit, guarantee or suffer the existence of any debt, except for (i)
debts incurred in the ordinary course of business other than through loans; and (ii) debts disclosed to Party A for which Party A's
written consent has been obtained;
2.1.5
They shall always operate all of Party C's businesses during the ordinary course of business to maintain the asset value of Party C and
refrain from any action/omission that may affect Party C's operating status and asset value;
2.1.6 Without the prior written consent of Party A, they shall not cause Party C to execute any major contract, except the contracts in the
ordinary course of business (for purpose of this subsection, a contract with a price exceeding RMB500,000 shall be deemed a major
contract);
2.1.7 Without the prior written consent of Party A, they shall not cause Party C to provide any person with any loan or credit;
2.1.8
They shall provide Party A with information on Party C's business operations and financial condition at Party A's request;
2.1.9
If requested by Party A, they shall procure and maintain insurance in respect of Party C's assets and business from an insurance carrier
acceptable to Party A, at an amount and type of coverage typical for companies that operate similar businesses;
2.1.10 Without the prior written consent of Party A, they shall not cause or permit Party C to merge, consolidate with, acquire or invest in
any person;
2.1.11 They shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative
proceedings relating to Party C's assets, business or revenue;
2.1.12 To maintain the ownership by Party C of all of its assets, they shall execute all necessary or appropriate documents, take all necessary
or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defenses against all claims;
4
2.1.13 Without the prior written consent of Party A, they shall ensure that Party C shall not in any manner distribute dividends to its
shareholders, provided that upon Party A's written request, Party C shall immediately distribute all distributable profits to its
shareholders; and
2.1.14 At the request of Party A, they shall appoint any persons designated by Party A as the director(s) of Party C.
2.1.15 Without Party A’s prior written consent, they shall not engage in any business in competition with Party A or its affiliates.
2.1.16 Unless otherwise required by PRC law, Party C shall not be dissolved or liquated without prior written consent by Party A.
2.2
Covenants of Party B
Party B hereby covenants as follows:
2.2.1 Without the prior written consent of Party A, Party B shall not sell, transfer, mortgage or dispose of in any other manner any legal or
beneficial interest in the equity interests in Party C held by Party B, or allow the encumbrance thereon, except for the interest placed in
accordance with Party B's Equity Interest Pledge Agreement and Party B’s Power of Attorney;
2.2.2
2.2.3
2.2.4
2.2.5
Party B shall cause the shareholders' meeting and/or the director(s) of Party C not to approve the sale, transfer, mortgage or disposition
in any other manner of any legal or beneficial interest in the equity interests in Party C held by Party B, or allow the encumbrance
thereon of any security interest, without the prior written consent of Party A, except for the interest placed in accordance with Party
B's Equity Interest Pledge Agreement and Party B’s Power of Attorney;
Party B shall cause the shareholders' meeting or the director(s) of Party C not to approve the merger or consolidation with any person,
or the acquisition of or investment in any person, without the prior written consent of Party A;
Party B shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative
proceedings relating to the equity interests in Party C held by Party B;
Party B shall cause the shareholders' meeting or the director(s) of Party C to vote their approval of the transfer of the Optioned
Interests as set forth in this Agreement and to take any and all other actions that may be requested by Party A;
5
2.2.6
To the extent necessary to maintain Party B's ownership in Party C, Party B shall execute all necessary or appropriate documents, take
all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defenses against
all claims;
2.2.7
Party B shall appoint any designee of Party A as the director(s) of Party C, at the request of Party A;
2.2.8
2.2.9
Party B hereby waives its right of first of refusal to transfer of equity interest by the other existing shareholders of Party C to Party A
(if any); and
Party B shall promptly donate any profit, interest, dividend or proceeds of liquidation to Party A or any other person designated by
Party A to the extent permitted under applicable PRC laws.
2.2.10 Party B shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by and among Party
B, Party C and Party A, perform the obligations hereunder and thereunder, and refrain from any action/omission that may affect the
effectiveness and enforceability thereof. To the extent that Party B has any remaining rights with respect to the equity interests subject
to this Agreement hereunder or under the Equity Interest Pledge Agreement among the same parties hereto or under the Power of
Attorney granted in favor of Party A, Party B shall not exercise such rights except in accordance with the written instructions of Party
A.
3. REPRESENTATIONS AND WARRANTIES
Party B and Party C hereby represent and warrant to Party A, jointly and severally, as of the date of this Agreement and each date of transfer of the
Optioned Interests, that:
3.1
They have the authority to execute and deliver this Agreement and any equity interest transfer contracts to which they are parties concerning
the Optioned Interests to be transferred thereunder (each, a "Transfer Contracts"), and to perform their obligations under this Agreement and
any Transfer Contracts. Party B and Party C agree to enter into Transfer Contracts consistent with the terms of this Agreement upon Party A’s
exercise of the Equity Interest Purchase Option. This Agreement and the Transfer Contracts to which they are parties constitute or will
constitute their legal, valid and binding obligations and shall be enforceable against them in accordance with the provisions thereof;
6
3.2
3.3
3.4
3.5
3.6
3.7
3.8
Party B and Party C have obtained any and all approvals and consents from government authorities and third parties (if required) for execution,
delivery and performance of this Agreement.
The execution and delivery of this Agreement or any Transfer Contracts and the obligations under this Agreement or any Transfer Contracts
shall not: (i) cause any violation of any applicable laws of China; (ii) be inconsistent with the articles of association, bylaws or other
organizational documents of Party C; (iii) cause the violation of any contracts or instruments to which they are a party or which are binding on
them, or constitute any breach under any contracts or instruments to which they are a party or which are binding on them; (iv) cause any
violation of any condition for the grant and/or continued effectiveness of any licenses or permits issued to either of them; or (v) cause the
suspension or revocation of or imposition of additional conditions to any licenses or permits issued to either of them;
Party B has a good and merchantable title to the equity interests in Party C he holds. Except for Party B's Equity Interest Pledge Agreement and
Party B’s Power of Attorney, Party B has not placed any security interest on such equity interests;
Party C has a good and merchantable title to all of its assets, and has not placed any security interest on the aforementioned assets;
Party C does not have any outstanding debts, except for (i) debt incurred in the ordinary course of business; and (ii) debts disclosed to Party A
for which Party A's written consent has been obtained.
Party C has complied with all laws and regulations of China applicable to asset acquisitions; and
There are no pending or threatened litigation, arbitration or administrative proceedings relating to the equity interests in Party C, assets of Party
C or Party C.
4. EFFECTIVE DATE
This Agreement shall become effective upon execution by the Parties, and remain effective until all equity interests held by Party B in Party C have
been transferred or assigned to Party A and/or any other person designated by Party A in accordance with this Agreement.
5. GOVERNING LAW AND RESOLUTION OF DISPUTES
5.1
Governing law
The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes hereunder
shall be governed by the laws of PRC.
7
5.2 Methods of Resolution of Disputes
In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through
friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party's request to the other
Parties for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and
Trade Arbitration Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in Beijing, and the
language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.
6. TAXES AND FEES
Each Party shall pay any and all transfer and registration tax, expenses and fees incurred thereby or levied thereon in accordance with the laws of
China in connection with the preparation and execution of this Agreement and the Transfer Contracts, as well as the consummation of the transactions
contemplated under this Agreement and the Transfer Contracts.
7. NOTICES
7.1
All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by
registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such Party set forth below. A
confirmation copy of each notice shall also be sent by email. The dates on which notices shall be deemed to have been effectively given shall
be determined as follows:
7.1.1
7.1.2
Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the
date of receipt or refusal at the address specified for notices.
Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an
automatically generated confirmation of transmission).
7.2
For the purpose of notices, the addresses of the Parties are as follows:
Party A:
Address:
Attn:
Phone:
Facsimile:
Beijing 58 Daojia Information Technology Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
8
Party B:
Address:
Phone:
Facsimile:
Party C:
Address:
Attn:
Phone:
Facsimile:
58 Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
+8610 64435588-8888
+8610-64459926
Tianjin 58 Daojia Home Services Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
7.3
Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms hereof.
8. CONFIDENTIALITY
The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in
connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of
all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential
information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s
unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or
orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsels or
financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or financial advisors
shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff
members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which Party shall be held liable for
breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.
9. FURTHER WARRANTIES
The Parties agree to promptly execute documents that are reasonably required for or are conducive to the implementation of the provisions and
purposes of this Agreement and take further actions that are reasonably required for or are conducive to the implementation of the provisions and
purposes of this Agreement.
10. BREACH OF AGREEMENT
10.1
If Party B or Party C conducts any material breach of any term of this Agreement, Party A shall have right to terminate this Agreement and
require the Party B or Party C to compensate all damages; this Section 10 shall not prejudice any other rights of Party A herein;
9
10.2
If Party A conducts any breach of any term of this Agreement, Party B or Party C shall not terminate this Agreement in any event unless
otherwise required by applicable laws.
11. MISCELLANEOUS
11.1
Amendment, change and supplement
Any amendment, change and supplement to this Agreement shall require the execution of a written agreement by all of the Parties.
11.2
Entire agreement
Except for the amendments, supplements or changes in writing executed after the execution of this Agreement, this Agreement shall
constitute the entire agreement reached by and among the Parties hereto with respect to the subject matter hereof, and shall supercede all
prior oral and written consultations, representations and contracts reached with respect to the subject matter of this Agreement.
11.3
Headings
The headings of this Agreement are for convenience only, and shall not be used to interpret, explain or otherwise affect the meanings of the
provisions of this Agreement.
11.4
Language
This Agreement is written in both Chinese and English language in three copies, each Party having one copy with equal legal validity; in case
there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.
11.5
Severability
In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in
accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be
affected or compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with
effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such
effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.
10
11.6
Successors
This Agreement shall be binding on and shall inure to the interest of the respective successors of the Parties and the permitted assigns of such
Parties.
11.7
Survival
11.7.1 Any obligations that occur or that are due as a result of this Agreement upon the expiration or early termination of this Agreement shall
survive the expiration or early termination thereof.
11.7.2 The provisions of Sections 5, 8, 10 and this Section 11.7 shall survive the termination of this Agreement.
11.8 Waivers
Any Party may waive the terms and conditions of this Agreement, provided that such a waiver must be provided in writing and shall require
the signatures of the Parties. No waiver by any Party in certain circumstances with respect to a breach by other Parties shall operate as a
waiver by such a Party with respect to any similar breach in other circumstances.
IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Exclusive Option Agreement as of the date first
above written.
11
Party A: Beijing 58 Daojia Information Technology Co., Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
Party B:
58 Co. Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
Party C: Tianjin 58 Daojia Home Services Co., Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
12
Exclusive Option Agreement
This (this "Agreement") is executed by and among the following Parties as of the 5th day of August, 2015 in Beijing, the People’s Republic of China
(“China” or the “PRC”):
Party A: Beijing 58 Daojia Information Technology Co., Ltd., a wholly foreign owned enterprise, organized and existing under the laws of the PRC,
with its address at Room D101A-123, Building B-2 of Zhongguancun Dongsheng Science Park, #66 Xixiaokou Road, Haidian District, Beijing;
Party B: Jinbo Yao, a Chinese citizen with Chinese Identification No.: ; and
Party C: Tianjin 58 Daojia Home Services Co., Ltd., a limited liability company organized and existing under the laws of the PRC, with its address at
Square block -901-918 , #5 Meiyuan Road , Binhaigaoxin District, Tianjin.
In this Agreement, each of Party A, Party B and Party C shall be referred to as a "Party" respectively, and they shall be collectively referred to as the
"Parties".
Whereas:
1.
2.
Party B is a shareholder of Party C and as of the date hereof holds 1.4% of equity interests of Party C, representing RMB1,400,000 in the registered
capital of Party C.
Party A and Party B executed a Loan Agreement (“Loan Agreement”) on August 5, 2015, according to which Party A confirmed that it provided to
Party B a loan in amount of RMB1,400,000, to be used for the purpose of subscribing the equity interest in Party C.
Now therefore, upon mutual discussion and negotiation, the Parties have reached the following agreement:
1.
SALE AND PURCHASE OF EQUITY INTEREST
1.1 Option Granted
In consideration of the payment of RMB10 by Party A, the receipt and adequacy of which is hereby acknowledged by Party B, Party B hereby
irrevocably grants Party A an irrevocable and exclusive right to purchase, or designate one or more persons (each, a "Designee") to purchase the
equity interests in Party C then held by Party B once or at multiple times at any time in part or in whole at Party A's sole and absolute discretion
to the extent permitted by Chinese laws and at the price described in Section 1.3 herein (such right being the "Equity Interest Purchase Option").
Except for Party A and the Designee(s), no other person shall be entitled to the Equity Interest Purchase Option or other rights with respect to
the equity interests of Party B. Party C hereby agrees to the grant by Party B of the Equity Interest Purchase Option to Party A. The term
"person" as used herein shall refer to individuals, corporations, partnerships, partners, enterprises, trusts or non-corporate organizations.
13
1.2
Steps for Exercise of Equity Interest Purchase Option
Subject to the provisions of the laws and regulations of China, Party A may exercise the Equity Interest Purchase Option by issuing a written
notice to Party B (the "Equity Interest Purchase Option Notice"), specifying: (a) Party A's or the Designee’s decision to exercise the Equity
Interest Purchase Option; (b) the portion of equity interests to be purchased by Party A or the Designee from Party B (the "Optioned Interests");
and (c) the date for purchasing the Optioned Interests and/or the date for transfer of the Optioned Interests.
1.3 Equity Interest Purchase Price
The purchase price of all equity interests held by Party B in Party C purchased by Party A by exercising the Equity Interest Purchase Option
shall be RMB1,400,000; if Party A exercises the Equity Interest Purchase Option to purchase part of the equity interests held by Party B in Party
C, the purchase price shall be calculated pro rata. If PRC law requires a minimum price higher than aforementioned price when Party A
exercises Equity Interest Purchase Option, the minimum price regulated by PRC law shall be the purchase price (collectively, the "Equity
Interest Purchase Price").
1.4 Transfer of Optioned Interests
For each exercise of the Equity Interest Purchase Option:
1.4.1
1.4.2
1.4.3
Party B shall cause Party C to promptly convene a shareholders’ meeting, at which a resolution shall be adopted approving Party B's
transfer of the Optioned Interests to Party A and/or the Designee(s);
Party B shall obtain written statements from the other shareholders of Party B giving consent to the transfer of the equity interest to
Party A and/or the Designee(s) and waiving any right of first refusal related thereto.
Party B shall execute an equity interest transfer contract with respect to each transfer with Party A and/or each Designee (whichever is
applicable), in accordance with the provisions of this Agreement and the Equity Interest Purchase Option Notice regarding the
Optioned Interests;
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1.4.4
The relevant Parties shall execute all other necessary contracts, agreements or documents, obtain all necessary government licenses
and permits and take all necessary actions to transfer valid ownership of the Optioned Interests to Party A and/or the Designee(s),
unencumbered by any security interests, and cause Party A and/or the Designee(s) to become the registered owner(s) of the Optioned
Interests. For the purpose of this Section and this Agreement, "security interests" shall include securities, mortgages, third party's
rights or interests, any stock options, acquisition right, right of first refusal, right to offset, ownership retention or other security
arrangements, but shall be deemed to exclude any security interest created by this Agreement, Party B's Equity Interest Pledge
Agreement and Party B’s Power of Attorney. "Party B's Equity Interest Pledge Agreement" as used in this Agreement shall refer to the
Equity Interest Pledge Agreement executed by and among Party A, Party B and Party C on the date hereof and any modification,
amendment and restatement thereto. “Party B’s Power of Attorney” as used in this Agreement shall refer to the Power of Attorney
executed by Party B on the date hereof granting Party A with power of attorney and any modification, amendment and restatement
thereto.
1.5
Payment
The Parties have agreed in the Loan Agreement that any proceeds obtained by Party B through the transfer of its equity interests in Party C
shall be used for repayment of the loan provided by Party A in accordance with the Loan Agreement. Accordingly, upon exercise of the Equity
Interest Purchase Option, Party A may elect to make payment of the Equity Interest Purchase Price through cancellation of the outstanding
amount of the loan owed by Party B to Party A, in which case Party A shall not be required to pay any additional Equity Interest Purchase
Price to Party B, unless the Total Equity Interest Purchase Price set forth herein is required to be adjusted in accordance with applicable laws
and regulations.
2. COVENANTS
2.1
Covenants regarding Party C
Party B (as the shareholders of Party C) and Party C hereby covenant as follows:
2.1.1 Without the prior written consent of Party A, they shall not in any manner supplement, change or amend the articles of association and
bylaws of Party C, increase or decrease its registered capital, or change its structure of registered capital in other manners;
2.1.2
They shall maintain Party C's corporate existence in accordance with good financial and business standards, obtain and maintain all
necessary government licenses and permits and practice by prudently and effectively operating its business and handling its affairs;
15
2.1.3 Without the prior written consent of Party A, they shall not at any time following the date hereof, sell, transfer, mortgage or dispose of
in any manner any assets of Party C or legal or beneficial interest in the business or revenues of Party C, or allow the encumbrance
thereon of any security interest;
2.1.4 Without the prior written consent of Party A, they shall not incur, inherit, guarantee or suffer the existence of any debt, except for (i)
debts incurred in the ordinary course of business other than through loans; and (ii) debts disclosed to Party A for which Party A's
written consent has been obtained;
2.1.5
They shall always operate all of Party C's businesses during the ordinary course of business to maintain the asset value of Party C and
refrain from any action/omission that may affect Party C's operating status and asset value;
2.1.6 Without the prior written consent of Party A, they shall not cause Party C to execute any major contract, except the contracts in the
ordinary course of business (for purpose of this subsection, a contract with a price exceeding RMB500,000 shall be deemed a major
contract);
2.1.7 Without the prior written consent of Party A, they shall not cause Party C to provide any person with any loan or credit;
2.1.8
They shall provide Party A with information on Party C's business operations and financial condition at Party A's request;
2.1.9
If requested by Party A, they shall procure and maintain insurance in respect of Party C's assets and business from an insurance carrier
acceptable to Party A, at an amount and type of coverage typical for companies that operate similar businesses;
2.1.10 Without the prior written consent of Party A, they shall not cause or permit Party C to merge, consolidate with, acquire or invest in
any person;
2.1.11 They shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative
proceedings relating to Party C's assets, business or revenue;
2.1.12 To maintain the ownership by Party C of all of its assets, they shall execute all necessary or appropriate documents, take all necessary
or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defenses against all claims;
2.1.13 Without the prior written consent of Party A, they shall ensure that Party C shall not in any manner distribute dividends to its
shareholders, provided that upon Party A's written request, Party C shall immediately distribute all distributable profits to its
shareholders; and
16
2.1.14 At the request of Party A, they shall appoint any persons designated by Party A as the director(s) of Party C.
2.1.15 Without Party A’s prior written consent, they shall not engage in any business in competition with Party A or its affiliates.
2.1.16 Unless otherwise required by PRC law, Party C shall not be dissolved or liquated without prior written consent by Party A.
2.3
Covenants of Party B
Party B hereby covenants as follows:
2.3.1 Without the prior written consent of Party A, Party B shall not sell, transfer, mortgage or dispose of in any other manner any legal or
beneficial interest in the equity interests in Party C held by Party B, or allow the encumbrance thereon, except for the interest placed in
accordance with Party B's Equity Interest Pledge Agreement and Party B’s Power of Attorney;
2.3.2
2.3.3
2.3.4
2.3.5
2.3.6
Party B shall cause the shareholders' meeting and/or the director(s) of Party C not to approve the sale, transfer, mortgage or disposition
in any other manner of any legal or beneficial interest in the equity interests in Party C held by Party B, or allow the encumbrance
thereon of any security interest, without the prior written consent of Party A, except for the interest placed in accordance with Party
B's Equity Interest Pledge Agreement and Party B’s Power of Attorney;
Party B shall cause the shareholders' meeting or the director(s) of Party C not to approve the merger or consolidation with any person,
or the acquisition of or investment in any person, without the prior written consent of Party A;
Party B shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative
proceedings relating to the equity interests in Party C held by Party B;
Party B shall cause the shareholders' meeting or the director(s) of Party C to vote their approval of the transfer of the Optioned
Interests as set forth in this Agreement and to take any and all other actions that may be requested by Party A;
To the extent necessary to maintain Party B's ownership in Party C, Party B shall execute all necessary or appropriate documents, take
all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defenses against
all claims;
17
2.3.7
Party B shall appoint any designee of Party A as the director(s) of Party C, at the request of Party A;
2.3.8
2.3.9
Party B hereby waives its right of first of refusal to transfer of equity interest by the other existing shareholders of Party C to Party A
(if any); and
Party B shall promptly donate any profit, interest, dividend or proceeds of liquidation to Party A or any other person designated by
Party A to the extent permitted under applicable PRC laws.
2.3.10 Party B shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by and among Party
B, Party C and Party A, perform the obligations hereunder and thereunder, and refrain from any action/omission that may affect the
effectiveness and enforceability thereof. To the extent that Party B has any remaining rights with respect to the equity interests subject
to this Agreement hereunder or under the Equity Interest Pledge Agreement among the same parties hereto or under the Power of
Attorney granted in favor of Party A, Party B shall not exercise such rights except in accordance with the written instructions of Party
A.
3. REPRESENTATIONS AND WARRANTIES
Party B and Party C hereby represent and warrant to Party A, jointly and severally, as of the date of this Agreement and each date of transfer of the
Optioned Interests, that:
3.1
3.2
3.3
They have the authority to execute and deliver this Agreement and any equity interest transfer contracts to which they are parties concerning
the Optioned Interests to be transferred thereunder (each, a "Transfer Contracts"), and to perform their obligations under this Agreement and
any Transfer Contracts. Party B and Party C agree to enter into Transfer Contracts consistent with the terms of this Agreement upon Party A’s
exercise of the Equity Interest Purchase Option. This Agreement and the Transfer Contracts to which they are parties constitute or will
constitute their legal, valid and binding obligations and shall be enforceable against them in accordance with the provisions thereof;
Party B and Party C have obtained any and all approvals and consents from government authorities and third parties (if required) for execution,
delivery and performance of this Agreement.
The execution and delivery of this Agreement or any Transfer Contracts and the obligations under this Agreement or any Transfer Contracts
shall not: (i) cause any violation of any applicable laws of China; (ii) be inconsistent with the articles of association, bylaws or other
organizational documents of Party C; (iii) cause the violation of any contracts or instruments to which they are a party or which are binding on
them, or constitute any breach under any contracts or instruments to which they are a party or which are binding on them; (iv) cause any
violation of any condition for the grant and/or continued effectiveness of any licenses or permits issued to either of them; or (v) cause the
suspension or revocation of or imposition of additional conditions to any licenses or permits issued to either of them;
18
3.4
3.5
3.6
3.7
3.8
Party B has a good and merchantable title to the equity interests in Party C he holds. Except for Party B's Equity Interest Pledge Agreement and
Party B’s Power of Attorney, Party B has not placed any security interest on such equity interests;
Party C has a good and merchantable title to all of its assets, and has not placed any security interest on the aforementioned assets;
Party C does not have any outstanding debts, except for (i) debt incurred in the ordinary course of business; and (ii) debts disclosed to Party A
for which Party A's written consent has been obtained.
Party C has complied with all laws and regulations of China applicable to asset acquisitions; and
There are no pending or threatened litigation, arbitration or administrative proceedings relating to the equity interests in Party C, assets of Party
C or Party C.
4. EFFECTIVE DATE
This Agreement shall become effective upon execution by the Parties, and remain effective until all equity interests held by Party B in Party C have
been transferred or assigned to Party A and/or any other person designated by Party A in accordance with this Agreement.
5. GOVERNING LAW AND RESOLUTION OF DISPUTES
5.1 Governing law
The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes hereunder
shall be governed by the laws of PRC.
5.2 Methods of Resolution of Disputes
In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through
friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party's request to the other
Parties for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and
Trade Arbitration Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in Beijing, and the
language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.
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6. TAXES AND FEES
Each Party shall pay any and all transfer and registration tax, expenses and fees incurred thereby or levied thereon in accordance with the laws of
China in connection with the preparation and execution of this Agreement and the Transfer Contracts, as well as the consummation of the transactions
contemplated under this Agreement and the Transfer Contracts.
7. NOTICES
7.1
All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by
registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such Party set forth below. A
confirmation copy of each notice shall also be sent by email. The dates on which notices shall be deemed to have been effectively given shall
be determined as follows:
7.1.1
7.1.2
Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the
date of receipt or refusal at the address specified for notices.
Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an
automatically generated confirmation of transmission).
7.2
For the purpose of notices, the addresses of the Parties are as follows:
Party A:
Address:
Phone:
Facsimile:
Party B:
Address:
Phone:
Facsimile:
Party C:
Address:
Phone:
Facsimile:
Beijing 58 Daojia Information Technology Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
+8610 64435588-8888
+8610-64459926
Jinbo Yao
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
+8610 64435588-8888
+8610-64459926
Tianjin 58 Daojia Home Services Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
+8610 64435588-8888
+8610-64459926
20
7.3
Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms hereof.
8. CONFIDENTIALITY
The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in
connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of
all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential
information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s
unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or
orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsels or
financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or financial advisors
shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff
members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which Party shall be held liable for
breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.
9. FURTHER WARRANTIES
The Parties agree to promptly execute documents that are reasonably required for or are conducive to the implementation of the provisions and
purposes of this Agreement and take further actions that are reasonably required for or are conducive to the implementation of the provisions and
purposes of this Agreement.
10. BREACH OF AGREEMENT
10.1
10.2
If Party B or Party C conducts any material breach of any term of this Agreement, Party A shall have right to terminate this Agreement and
require the Party B or Party C to compensate all damages; this Section 10 shall not prejudice any other rights of Party A herein;
If Party A conducts any breach of any term of this Agreement, Party B or Party C shall not terminate this Agreement in any event unless
otherwise required by applicable laws.
11. MISCELLANEOUS
11.1
Amendment, change and supplement
Any amendment, change and supplement to this Agreement shall require the execution of a written agreement by all of the Parties.
21
11.2
Entire agreement
Except for the amendments, supplements or changes in writing executed after the execution of this Agreement, this Agreement shall
constitute the entire agreement reached by and among the Parties hereto with respect to the subject matter hereof, and shall supersede all prior
oral and written consultations, representations and contracts reached with respect to the subject matter of this Agreement.
11.3
Headings
The headings of this Agreement are for convenience only, and shall not be used to interpret, explain or otherwise affect the meanings of the
provisions of this Agreement.
11.4
Language
This Agreement is written in both Chinese and English language in three copies, each Party having one copy with equal legal validity; in case
there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.
11.5
Severability
In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in
accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be
affected or compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with
effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such
effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.
11.6
Successors
This Agreement shall be binding on and shall inure to the interest of the respective successors of the Parties and the permitted assigns of such
Parties.
22
11.7
Survival
11.7.1 Any obligations that occur or that are due as a result of this Agreement upon the expiration or early termination of this Agreement shall
survive the expiration or early termination thereof.
11.7.2 The provisions of Sections 5, 8, 10 and this Section 11.7 shall survive the termination of this Agreement.
11.8 Waivers
Any Party may waive the terms and conditions of this Agreement, provided that such a waiver must be provided in writing and shall require
the signatures of the Parties. No waiver by any Party in certain circumstances with respect to a breach by other Parties shall operate as a
waiver by such a Party with respect to any similar breach in other circumstances.
23
IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Exclusive Option Agreement as of the date first
above written.
Party A: Beijing 58 Daojia Information Technology Co., Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
Party B:
Jinbo Yao
By:
/s/ Jinbo Yao
Party C: Tianjin 58 Daojia Home Services Co., Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
24
Exclusive Option Agreement
This (this "Agreement") is executed by and among the following Parties as of the 5th day of August, 2015 in Beijing, the People’s Republic of China
(“China” or the “PRC”):
Party A: Beijing 58 Daojia Information Technology Co., Ltd., a wholly foreign owned enterprise, organized and existing under the laws of the PRC,
with its address at Room D101A-123, Building B-2 of Zhongguancun Dongsheng Science Park, #66 Xixiaokou Road, Haidian District, Beijing;;
Party B: Ou Bai, a citizen of China with Chinese Identification No.: ; and
Party C: Tianjin 58 Daojia Home Services Co., Ltd., a limited liability company organized and existing under the laws of the PRC, with its address at
Square block -901-918 , #5 Meiyuan Road , Binhaigaoxin District, Tianjin.
In this Agreement, each of Party A, Party B and Party C shall be referred to as a "Party" respectively, and they shall be collectively referred to as the
"Parties".
Whereas:
1.
2.
Party B is a shareholder of Party C and as of the date hereof holds 2.3% of equity interests of Party C, representing RMB2,300,000 in the registered
capital of Party C.
Party A and Party B executed a Loan Agreement (“Loan Agreement”) on August 5, 2015, according to which Party A confirmed that it provided to
Party B a loan in amount of RMB2,300,000, to be used for the purpose of subscribing for the registered capital of Party C.
Now therefore, upon mutual discussion and negotiation, the Parties have reached the following agreement:
1.
SALE AND PURCHASE OF EQUITY INTEREST
1.1 Option Granted
In consideration of the payment of RMB10 by Party A, the receipt and adequacy of which is hereby acknowledged by Party B, Party B hereby
irrevocably grants Party A an irrevocable and exclusive right to purchase, or designate one or more persons (each, a "Designee") to purchase the
equity interests in Party C then held by Party B once or at multiple times at any time in part or in whole at Party A's sole and absolute discretion
to the extent permitted by Chinese laws and at the price described in Section 1.3 herein (such right being the "Equity Interest Purchase Option").
Except for Party A and the Designee(s), no other person shall be entitled to the Equity Interest Purchase Option or other rights with respect to
the equity interests of Party B. Party C hereby agrees to the grant by Party B of the Equity Interest Purchase Option to Party A. The term
"person" as used herein shall refer to individuals, corporations, partnerships, partners, enterprises, trusts or non-corporate organizations.
25
1.2
Steps for Exercise of Equity Interest Purchase Option
Subject to the provisions of the laws and regulations of China, Party A may exercise the Equity Interest Purchase Option by issuing a written
notice to Party B (the "Equity Interest Purchase Option Notice"), specifying: (a) Party A's or the Designee’s decision to exercise the Equity
Interest Purchase Option; (b) the portion of equity interests to be purchased by Party A or the Designee from Party B (the "Optioned Interests");
and (c) the date for purchasing the Optioned Interests and/or the date for transfer of the Optioned Interests.
1.3 Equity Interest Purchase Price
The purchase price of all equity interests held by Party B in Party C purchased by Party A by exercising the Equity Interest Purchase Option
shall be RMB2,300,000; if Party A exercises the Equity Interest Purchase Option to purchase part of the equity interests held by Party B in Party
C, the purchase price shall be calculated pro rata. If PRC law requires a minimum price higher than aforementioned price when Party A
exercises Equity Interest Purchase Option, the minimum price regulated by PRC law shall be the purchase price (collectively, the "Equity
Interest Purchase Price").
1.4 Transfer of Optioned Interests
For each exercise of the Equity Interest Purchase Option:
1.4.1
1.4.2
1.4.3
Party B shall cause Party C to promptly convene a shareholders’ meeting, at which a resolution shall be adopted approving Party B's
transfer of the Optioned Interests to Party A and/or the Designee(s);
Party B shall obtain written statements from the other shareholders of Party B giving consent to the transfer of the equity interest to
Party A and/or the Designee(s) and waiving any right of first refusal related thereto.
Party B shall execute an equity interest transfer contract with respect to each transfer with Party A and/or each Designee (whichever is
applicable), in accordance with the provisions of this Agreement and the Equity Interest Purchase Option Notice regarding the
Optioned Interests;
26
1.4.4
The relevant Parties shall execute all other necessary contracts, agreements or documents, obtain all necessary government licenses
and permits and take all necessary actions to transfer valid ownership of the Optioned Interests to Party A and/or the Designee(s),
unencumbered by any security interests, and cause Party A and/or the Designee(s) to become the registered owner(s) of the Optioned
Interests. For the purpose of this Section and this Agreement, "security interests" shall include securities, mortgages, third party's
rights or interests, any stock options, acquisition right, right of first refusal, right to offset, ownership retention or other security
arrangements, but shall be deemed to exclude any security interest created by this Agreement, Party B's Equity Interest Pledge
Agreement and Party B’s Power of Attorney. "Party B's Equity Interest Pledge Agreement" as used in this Agreement shall refer to the
Equity Interest Pledge Agreement executed by and among Party A, Party B and Party C on the date hereof and any modification,
amendment and restatement thereto. “Party B’s Power of Attorney” as used in this Agreement shall refer to the Power of Attorney
executed by Party B on the date hereof granting Party A with power of attorney and any modification, amendment and restatement
thereto.
1.5
Payment
The Parties have agreed in the Loan Agreement that any proceeds obtained by Party B through the transfer of its equity interests in Party C
shall be used for repayment of the loan provided by Party A in accordance with the Loan Agreement. Accordingly, upon exercise of the Equity
Interest Purchase Option, Party A may elect to make payment of the Equity Interest Purchase Price through cancellation of the outstanding
amount of the loan owed by Party B to Party A, in which case Party A shall not be required to pay any additional Equity Interest Purchase
Price to Party B, unless the Total Equity Interest Purchase Price set forth herein is required to be adjusted in accordance with applicable laws
and regulations.
2. COVENANTS
2.1
Covenants regarding Party C
Party B (as the shareholders of Party C) and Party C hereby covenant as follows:
2.1.1 Without the prior written consent of Party A, they shall not in any manner supplement, change or amend the articles of association and
bylaws of Party C, increase or decrease its registered capital, or change its structure of registered capital in other manners;
2.1.2
They shall maintain Party C's corporate existence in accordance with good financial and business standards, obtain and maintain all
necessary government licenses and permits and practice by prudently and effectively operating its business and handling its affairs;
2.1.3 Without the prior written consent of Party A, they shall not at any time following the date hereof, sell, transfer, mortgage or dispose of
in any manner any assets of Party C or legal or beneficial interest in the business or revenues of Party C, or allow the encumbrance
thereon of any security interest;
27
2.1.4 Without the prior written consent of Party A, they shall not incur, inherit, guarantee or suffer the existence of any debt, except for (i)
debts incurred in the ordinary course of business other than through loans; and (ii) debts disclosed to Party A for which Party A's
written consent has been obtained;
2.1.5
They shall always operate all of Party C's businesses during the ordinary course of business to maintain the asset value of Party C and
refrain from any action/omission that may affect Party C's operating status and asset value;
2.1.6 Without the prior written consent of Party A, they shall not cause Party C to execute any major contract, except the contracts in the
ordinary course of business (for purpose of this subsection, a contract with a price exceeding RMB500,000 shall be deemed a major
contract);
2.1.7 Without the prior written consent of Party A, they shall not cause Party C to provide any person with any loan or credit;
2.1.8
They shall provide Party A with information on Party C's business operations and financial condition at Party A's request;
2.1.9
If requested by Party A, they shall procure and maintain insurance in respect of Party C's assets and business from an insurance carrier
acceptable to Party A, at an amount and type of coverage typical for companies that operate similar businesses;
2.1.10 Without the prior written consent of Party A, they shall not cause or permit Party C to merge, consolidate with, acquire or invest in
any person;
2.1.11 They shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative
proceedings relating to Party C's assets, business or revenue;
2.1.12 To maintain the ownership by Party C of all of its assets, they shall execute all necessary or appropriate documents, take all necessary
or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defenses against all claims;
2.1.13 Without the prior written consent of Party A, they shall ensure that Party C shall not in any manner distribute dividends to its
shareholders, provided that upon Party A's written request, Party C shall immediately distribute all distributable profits to its
shareholders; and
28
2.1.14 At the request of Party A, they shall appoint any persons designated by Party A as the director(s) of Party C.
2.1.15 Without Party A’s prior written consent, they shall not engage in any business in competition with Party A or its affiliates.
2.1.16 Unless otherwise required by PRC law, Party C shall not be dissolved or liquated without prior written consent by Party A.
2.2
Covenants of Party B
Party B hereby covenants as follows:
2.2.1 Without the prior written consent of Party A, Party B shall not sell, transfer, mortgage or dispose of in any other manner any legal or
beneficial interest in the equity interests in Party C held by Party B, or allow the encumbrance thereon, except for the interest placed in
accordance with Party B's Equity Interest Pledge Agreement and Party B’s Power of Attorney;
2.2.2
2.2.3
2.2.4
2.2.5
2.2.6
Party B shall cause the shareholders' meeting and/or the director(s) of Party C not to approve the sale, transfer, mortgage or disposition
in any other manner of any legal or beneficial interest in the equity interests in Party C held by Party B, or allow the encumbrance
thereon of any security interest, without the prior written consent of Party A, except for the interest placed in accordance with Party B's
Equity Interest Pledge Agreement and Party B’s Power of Attorney;
Party B shall cause the shareholders' meeting or the director(s) of Party C not to approve the merger or consolidation with any person,
or the acquisition of or investment in any person, without the prior written consent of Party A;
Party B shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative
proceedings relating to the equity interests in Party C held by Party B;
Party B shall cause the shareholders' meeting or the director(s) of Party C to vote their approval of the transfer of the Optioned Interests
as set forth in this Agreement and to take any and all other actions that may be requested by Party A;
To the extent necessary to maintain Party B's ownership in Party C, Party B shall execute all necessary or appropriate documents, take
all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defenses against
all claims;
29
2.2.7
Party B shall appoint any designee of Party A as the director(s) of Party C, at the request of Party A;
2.2.8
2.2.9
Party B hereby waives its right of first of refusal to transfer of equity interest by the other existing shareholders of Party C to Party A (if
any); and
Party B shall promptly donate any profit, interest, dividend or proceeds of liquidation to Party A or any other person designated by Party
A to the extent permitted under applicable PRC laws.
2.2.10 Party B shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by and among Party B,
Party C and Party A, perform the obligations hereunder and thereunder, and refrain from any action/omission that may affect the
effectiveness and enforceability thereof. To the extent that Party B has any remaining rights with respect to the equity interests subject
to this Agreement hereunder or under the Equity Interest Pledge Agreement among the same parties hereto or under the Power of
Attorney granted in favor of Party A, Party B shall not exercise such rights except in accordance with the written instructions of Party
A.
3. REPRESENTATIONS AND WARRANTIES
Party B and Party C hereby represent and warrant to Party A, jointly and severally, as of the date of this Agreement and each date of transfer of the
Optioned Interests, that:
3.1
3.2
3.3
They have the authority to execute and deliver this Agreement and any equity interest transfer contracts to which they are parties concerning
the Optioned Interests to be transferred thereunder (each, a "Transfer Contracts"), and to perform their obligations under this Agreement and
any Transfer Contracts. Party B and Party C agree to enter into Transfer Contracts consistent with the terms of this Agreement upon Party A’s
exercise of the Equity Interest Purchase Option. This Agreement and the Transfer Contracts to which they are parties constitute or will
constitute their legal, valid and binding obligations and shall be enforceable against them in accordance with the provisions thereof;
Party B and Party C have obtained any and all approvals and consents from government authorities and third parties (if required) for execution,
delivery and performance of this Agreement.
The execution and delivery of this Agreement or any Transfer Contracts and the obligations under this Agreement or any Transfer Contracts
shall not: (i) cause any violation of any applicable laws of China; (ii) be inconsistent with the articles of association, bylaws or other
organizational documents of Party C; (iii) cause the violation of any contracts or instruments to which they are a party or which are binding on
them, or constitute any breach under any contracts or instruments to which they are a party or which are binding on them; (iv) cause any
violation of any condition for the grant and/or continued effectiveness of any licenses or permits issued to either of them; or (v) cause the
suspension or revocation of or imposition of additional conditions to any licenses or permits issued to either of them;
30
3.4
3.5
3.6
3.7
3.8
Party B has a good and merchantable title to the equity interests in Party C he holds. Except for Party B's Equity Interest Pledge Agreement and
Party B’s Power of Attorney, Party B has not placed any security interest on such equity interests;
Party C has a good and merchantable title to all of its assets, and has not placed any security interest on the aforementioned assets;
Party C does not have any outstanding debts, except for (i) debt incurred in the ordinary course of business; and (ii) debts disclosed to Party A
for which Party A's written consent has been obtained.
Party C has complied with all laws and regulations of China applicable to asset acquisitions; and
There are no pending or threatened litigation, arbitration or administrative proceedings relating to the equity interests in Party C, assets of Party
C or Party C.
4. EFFECTIVE DATE
This Agreement shall become effective upon execution by the Parties, and remain effective until all equity interests held by Party B in Party C have
been transferred or assigned to Party A and/or any other person designated by Party A in accordance with this Agreement.
5. GOVERNING LAW AND RESOLUTION OF DISPUTES
5.1
Governing law
The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes hereunder
shall be governed by the laws of PRC.
5.2 Methods of Resolution of Disputes
In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through
friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party's request to the other
Parties for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and
Trade Arbitration Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in Beijing, and the
language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.
31
6. TAXES AND FEES
Each Party shall pay any and all transfer and registration tax, expenses and fees incurred thereby or levied thereon in accordance with the laws of
China in connection with the preparation and execution of this Agreement and the Transfer Contracts, as well as the consummation of the transactions
contemplated under this Agreement and the Transfer Contracts.
7. NOTICES
7.1
All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by
registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such Party set forth below. A
confirmation copy of each notice shall also be sent by email. The dates on which notices shall be deemed to have been effectively given shall
be determined as follows:
7.1.1
7.1.2
Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the
date of receipt or refusal at the address specified for notices.
Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an
automatically generated confirmation of transmission).
7.2
For the purpose of notices, the addresses of the Parties are as follows:
Party A:
Address:
Attn:
Phone:
Facsimile:
Party B:
Address:
Phone:
Facsimile:
Party C:
Address:
Attn:
Phone:
Facsimile:
Beijing 58 Daojia Information Technology Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
Ou Bai
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
+8610 64435588-8888
+8610-64459926
Tianjin 58 Daojia Home Services Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
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7.3
Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms hereof.
8. CONFIDENTIALITY
The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in
connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of
all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential
information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s
unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or
orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsels or
financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or financial advisors
shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff
members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which Party shall be held liable for
breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.
9. FURTHER WARRANTIES
The Parties agree to promptly execute documents that are reasonably required for or are conducive to the implementation of the provisions and
purposes of this Agreement and take further actions that are reasonably required for or are conducive to the implementation of the provisions and
purposes of this Agreement.
10. BREACH OF AGREEMENT
10.1
10.2
If Party B or Party C conducts any material breach of any term of this Agreement, Party A shall have right to terminate this Agreement and
require the Party B or Party C to compensate all damages; this Section 10 shall not prejudice any other rights of Party A herein;
If Party A conducts any breach of any term of this Agreement, Party B or Party C shall not terminate this Agreement in any event unless
otherwise required by applicable laws.
11. MISCELLANEOUS
11.1
Amendment, change and supplement
Any amendment, change and supplement to this Agreement shall require the execution of a written agreement by all of the Parties.
33
11.2
Entire agreement
Except for the amendments, supplements or changes in writing executed after the execution of this Agreement, this Agreement shall
constitute the entire agreement reached by and among the Parties hereto with respect to the subject matter hereof, and shall supercede all
prior oral and written consultations, representations and contracts reached with respect to the subject matter of this Agreement.
11.3
Headings
The headings of this Agreement are for convenience only, and shall not be used to interpret, explain or otherwise affect the meanings of the
provisions of this Agreement.
11.4
Language
This Agreement is written in both Chinese and English language in three copies, each Party having one copy with equal legal validity; in case
there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.
11.5
Severability
In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in
accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be
affected or compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with
effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such
effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.
11.6
Successors
This Agreement shall be binding on and shall inure to the interest of the respective successors of the Parties and the permitted assigns of such
Parties.
11.7
Survival
11.7.1 Any obligations that occur or that are due as a result of this Agreement upon the expiration or early termination of this Agreement shall
survive the expiration or early termination thereof.
34
11.7.2 The provisions of Sections 5, 8, 10 and this Section 11.7 shall survive the termination of this Agreement.
11.8 Waivers
Any Party may waive the terms and conditions of this Agreement, provided that such a waiver must be provided in writing and shall require
the signatures of the Parties. No waiver by any Party in certain circumstances with respect to a breach by other Parties shall operate as a
waiver by such a Party with respect to any similar breach in other circumstances.
IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Amended and Restated Exclusive Option
Agreement as of the date first above written.
Party A:
Beijing 58 Daojia Information Technology Co., Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
Party B:
Ou Bai
By:
/s/ Ou Bai
Party C:
Tianjin 58 Daojia Home Services Co., Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
35
Exclusive Option Agreement
This (this "Agreement") is executed by and among the following Parties as of the 5th day of August, 2015 in Beijing, the People’s Republic of China
(“China” or the “PRC”):
Party A:
Beijing 58 Daojia Information Technology Co., Ltd., a wholly foreign owned enterprise, organized and existing under the laws of the PRC,
with its address at Room D101A-123, Building B-2 of Zhongguancun Dongsheng Science Park, #66 Xixiaokou Road, Haidian District,
Beijing;
Party B:
Xiaohua Chen, a citizen of China with Chinese Identification No.: ; and
Party C:
Tianjin 58 Daojia Home Services Co., Ltd., a limited liability company organized and existing under the laws of the PRC, with its address
at Square block -901-918 , #5 Meiyuan Road , Binhaigaoxin District, Tianjin.
In this Agreement, each of Party A, Party B and Party C shall be referred to as a "Party" respectively, and they shall be collectively referred to as the
"Parties".
Whereas:
1.
2.
Party B is a shareholder of Party C and as of the date hereof holds 4.5% of equity interests of Party C, representing RMB4,500,000 in the registered
capital of Party C.
Party A and Party B executed a Loan Agreement (“Loan Agreement”) on August 5, 2015, according to which Party A confirmed that it provided to
Party B a loan in amount of RMB 4,500,000, to be used for the purpose of subscribing for the registered capital of Party C.
Now therefore, upon mutual discussion and negotiation, the Parties have reached the following agreement:
1.
SALE AND PURCHASE OF EQUITY INTEREST
1.1 Option Granted
In consideration of the payment of RMB10 by Party A, the receipt and adequacy of which is hereby acknowledged by Party B, Party B hereby
irrevocably grants Party A an irrevocable and exclusive right to purchase, or designate one or more persons (each, a "Designee") to purchase the
equity interests in Party C then held by Party B once or at multiple times at any time in part or in whole at Party A's sole and absolute discretion
to the extent permitted by Chinese laws and at the price described in Section 1.3 herein (such right being the "Equity Interest Purchase Option").
Except for Party A and the Designee(s), no other person shall be entitled to the Equity Interest Purchase Option or other rights with respect to
the equity interests of Party B. Party C hereby agrees to the grant by Party B of the Equity Interest Purchase Option to Party A. The term
"person" as used herein shall refer to individuals, corporations, partnerships, partners, enterprises, trusts or non-corporate organizations.
36
1.2 Steps for Exercise of Equity Interest Purchase Option
Subject to the provisions of the laws and regulations of China, Party A may exercise the Equity Interest Purchase Option by issuing a written
notice to Party B (the "Equity Interest Purchase Option Notice"), specifying: (a) Party A's or the Designee’s decision to exercise the Equity
Interest Purchase Option; (b) the portion of equity interests to be purchased by Party A or the Designee from Party B (the "Optioned Interests");
and (c) the date for purchasing the Optioned Interests and/or the date for transfer of the Optioned Interests.
1.3 Equity Interest Purchase Price
The purchase price of all equity interests held by Party B in Party C purchased by Party A by exercising the Equity Interest Purchase Option
shall be RMB4,500,000; if Party A exercises the Equity Interest Purchase Option to purchase part of the equity interests held by Party B in Party
C, the purchase price shall be calculated pro rata. If PRC law requires a minimum price higher than aforementioned price when Party A
exercises Equity Interest Purchase Option, the minimum price regulated by PRC law shall be the purchase price (collectively, the "Equity
Interest Purchase Price").
1.4 Transfer of Optioned Interests
For each exercise of the Equity Interest Purchase Option:
1.4.1
1.4.2
1.4.3
Party B shall cause Party C to promptly convene a shareholders’ meeting, at which a resolution shall be adopted approving Party B's
transfer of the Optioned Interests to Party A and/or the Designee(s);
Party B shall obtain written statements from the other shareholders of Party B giving consent to the transfer of the equity interest to
Party A and/or the Designee(s) and waiving any right of first refusal related thereto.
Party B shall execute an equity interest transfer contract with respect to each transfer with Party A and/or each Designee (whichever is
applicable), in accordance with the provisions of this Agreement and the Equity Interest Purchase Option Notice regarding the
Optioned Interests;
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1.4.4
The relevant Parties shall execute all other necessary contracts, agreements or documents, obtain all necessary government licenses
and permits and take all necessary actions to transfer valid ownership of the Optioned Interests to Party A and/or the Designee(s),
unencumbered by any security interests, and cause Party A and/or the Designee(s) to become the registered owner(s) of the Optioned
Interests. For the purpose of this Section and this Agreement, "security interests" shall include securities, mortgages, third party's
rights or interests, any stock options, acquisition right, right of first refusal, right to offset, ownership retention or other security
arrangements, but shall be deemed to exclude any security interest created by this Agreement, Party B's Equity Interest Pledge
Agreement and Party B’s Power of Attorney. "Party B's Equity Interest Pledge Agreement" as used in this Agreement shall refer to the
Equity Interest Pledge Agreement executed by and among Party A, Party B and Party C on the date hereof and any modification,
amendment and restatement thereto. “Party B’s Power of Attorney” as used in this Agreement shall refer to the Power of Attorney
executed by Party B on the date hereof granting Party A with power of attorney and any modification, amendment and restatement
thereto.
1.5 Payment
The Parties have agreed in the Loan Agreement that any proceeds obtained by Party B through the transfer of its equity interests in Party C
shall be used for repayment of the loan provided by Party A in accordance with the Loan Agreement. Accordingly, upon exercise of the Equity
Interest Purchase Option, Party A may elect to make payment of the Equity Interest Purchase Price through cancellation of the outstanding
amount of the loan owed by Party B to Party A, in which case Party A shall not be required to pay any additional Equity Interest Purchase
Price to Party B, unless the Total Equity Interest Purchase Price set forth herein is required to be adjusted in accordance with applicable laws
and regulations.
2. COVENANTS
2.1
Covenants regarding Party C
Party B (as the shareholders of Party C) and Party C hereby covenant as follows:
2.1.1 Without the prior written consent of Party A, they shall not in any manner supplement, change or amend the articles of association and
bylaws of Party C, increase or decrease its registered capital, or change its structure of registered capital in other manners;
2.1.2
They shall maintain Party C's corporate existence in accordance with good financial and business standards, obtain and maintain all
necessary government licenses and permits and practice by prudently and effectively operating its business and handling its affairs;
38
2.1.3 Without the prior written consent of Party A, they shall not at any time following the date hereof, sell, transfer, mortgage or dispose of
in any manner any assets of Party C or legal or beneficial interest in the business or revenues of Party C, or allow the encumbrance
thereon of any security interest;
2.1.4 Without the prior written consent of Party A, they shall not incur, inherit, guarantee or suffer the existence of any debt, except for (i)
debts incurred in the ordinary course of business other than through loans; and (ii) debts disclosed to Party A for which Party A's
written consent has been obtained;
2.1.5
They shall always operate all of Party C's businesses during the ordinary course of business to maintain the asset value of Party C and
refrain from any action/omission that may affect Party C's operating status and asset value;
2.1.6 Without the prior written consent of Party A, they shall not cause Party C to execute any major contract, except the contracts in the
ordinary course of business (for purpose of this subsection, a contract with a price exceeding RMB500,000 shall be deemed a major
contract);
2.1.7 Without the prior written consent of Party A, they shall not cause Party C to provide any person with any loan or credit;
2.1.8
They shall provide Party A with information on Party C's business operations and financial condition at Party A's request;
2.1.9
If requested by Party A, they shall procure and maintain insurance in respect of Party C's assets and business from an insurance carrier
acceptable to Party A, at an amount and type of coverage typical for companies that operate similar businesses;
2.1.10 Without the prior written consent of Party A, they shall not cause or permit Party C to merge, consolidate with, acquire or invest in
any person;
2.1.11 They shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative
proceedings relating to Party C's assets, business or revenue;
2.1.12 To maintain the ownership by Party C of all of its assets, they shall execute all necessary or appropriate documents, take all necessary
or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defenses against all claims;
39
2.1.13 Without the prior written consent of Party A, they shall ensure that Party C shall not in any manner distribute dividends to its
shareholders, provided that upon Party A's written request, Party C shall immediately distribute all distributable profits to its
shareholders; and
2.1.14 At the request of Party A, they shall appoint any persons designated by Party A as the director(s) of Party C.
2.1.15 Without Party A’s prior written consent, they shall not engage in any business in competition with Party A or its affiliates.
2.1.16 Unless otherwise required by PRC law, Party C shall not be dissolved or liquated without prior written consent by Party A.
2.2
Covenants of Party B
Party B hereby covenants as follows:
2.2.1 Without the prior written consent of Party A, Party B shall not sell, transfer, mortgage or dispose of in any other manner any legal or
beneficial interest in the equity interests in Party C held by Party B, or allow the encumbrance thereon, except for the interest placed in
accordance with Party B's Equity Interest Pledge Agreement and Party B’s Power of Attorney;
2.2.2
2.2.3
2.2.4
2.2.5
2.2.6
Party B shall cause the shareholders' meeting and/or the director(s) of Party C not to approve the sale, transfer, mortgage or disposition
in any other manner of any legal or beneficial interest in the equity interests in Party C held by Party B, or allow the encumbrance
thereon of any security interest, without the prior written consent of Party A, except for the interest placed in accordance with Party B's
Equity Interest Pledge Agreement and Party B’s Power of Attorney;
Party B shall cause the shareholders' meeting or the director(s) of Party C not to approve the merger or consolidation with any person,
or the acquisition of or investment in any person, without the prior written consent of Party A;
Party B shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative
proceedings relating to the equity interests in Party C held by Party B;
Party B shall cause the shareholders' meeting or the director(s) of Party C to vote their approval of the transfer of the Optioned Interests
as set forth in this Agreement and to take any and all other actions that may be requested by Party A;
To the extent necessary to maintain Party B's ownership in Party C, Party B shall execute all necessary or appropriate documents, take
all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defenses against
all claims;
40
2.2.7
Party B shall appoint any designee of Party A as the director(s) of Party C, at the request of Party A;
2.2.8
2.2.9
Party B hereby waives its right of first of refusal to transfer of equity interest by the other existing shareholders of Party C to Party A (if
any); and
Party B shall promptly donate any profit, interest, dividend or proceeds of liquidation to Party A or any other person designated by Party
A to the extent permitted under applicable PRC laws.
2.2.10 Party B shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by and among Party B,
Party C and Party A, perform the obligations hereunder and thereunder, and refrain from any action/omission that may affect the
effectiveness and enforceability thereof. To the extent that Party B has any remaining rights with respect to the equity interests subject
to this Agreement hereunder or under the Equity Interest Pledge Agreement among the same parties hereto or under the Power of
Attorney granted in favor of Party A, Party B shall not exercise such rights except in accordance with the written instructions of Party
A.
3. REPRESENTATIONS AND WARRANTIES
Party B and Party C hereby represent and warrant to Party A, jointly and severally, as of the date of this Agreement and each date of transfer of the
Optioned Interests, that:
3.1
They have the authority to execute and deliver this Agreement and any equity interest transfer contracts to which they are parties concerning
the Optioned Interests to be transferred thereunder (each, a "Transfer Contracts"), and to perform their obligations under this Agreement and
any Transfer Contracts. Party B and Party C agree to enter into Transfer Contracts consistent with the terms of this Agreement upon Party A’s
exercise of the Equity Interest Purchase Option. This Agreement and the Transfer Contracts to which they are parties constitute or will
constitute their legal, valid and binding obligations and shall be enforceable against them in accordance with the provisions thereof;
3.2
Party B and Party C have obtained any and all approvals and consents from government authorities and third parties (if required) for execution,
delivery and performance of this Agreement.
41
3.3
3.4
3.5
3.6
3.7
3.8
The execution and delivery of this Agreement or any Transfer Contracts and the obligations under this Agreement or any Transfer Contracts
shall not: (i) cause any violation of any applicable laws of China; (ii) be inconsistent with the articles of association, bylaws or other
organizational documents of Party C; (iii) cause the violation of any contracts or instruments to which they are a party or which are binding on
them, or constitute any breach under any contracts or instruments to which they are a party or which are binding on them; (iv) cause any
violation of any condition for the grant and/or continued effectiveness of any licenses or permits issued to either of them; or (v) cause the
suspension or revocation of or imposition of additional conditions to any licenses or permits issued to either of them;
Party B has a good and merchantable title to the equity interests in Party C he holds. Except for Party B's Equity Interest Pledge Agreement and
Party B’s Power of Attorney, Party B has not placed any security interest on such equity interests;
Party C has a good and merchantable title to all of its assets, and has not placed any security interest on the aforementioned assets;
Party C does not have any outstanding debts, except for (i) debt incurred in the ordinary course of business; and (ii) debts disclosed to Party A
for which Party A's written consent has been obtained.
Party C has complied with all laws and regulations of China applicable to asset acquisitions; and
There are no pending or threatened litigation, arbitration or administrative proceedings relating to the equity interests in Party C, assets of Party
C or Party C.
4. EFFECTIVE DATE
This Agreement shall become effective upon execution by the Parties, and remain effective until all equity interests held by Party B in Party C have
been transferred or assigned to Party A and/or any other person designated by Party A in accordance with this Agreement.
5. GOVERNING LAW AND RESOLUTION OF DISPUTES
5.1
Governing law
The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes hereunder
shall be governed by the laws of PRC.
5.2 Methods of Resolution of Disputes
In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through
friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party's request to the other
Parties for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and
Trade Arbitration Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in Beijing, and the
language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.
42
6. TAXES AND FEES
Each Party shall pay any and all transfer and registration tax, expenses and fees incurred thereby or levied thereon in accordance with the laws of
China in connection with the preparation and execution of this Agreement and the Transfer Contracts, as well as the consummation of the transactions
contemplated under this Agreement and the Transfer Contracts.
7. NOTICES
7.1
All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by
registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such Party set forth below. A
confirmation copy of each notice shall also be sent by email. The dates on which notices shall be deemed to have been effectively given shall
be determined as follows:
7.1.1
7.1.2
Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the
date of receipt or refusal at the address specified for notices.
Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an
automatically generated confirmation of transmission).
7.2
For the purpose of notices, the addresses of the Parties are as follows:
Party A:
Address:
Attn:
Phone:
Facsimile:
Party B:
Address:
Phone:
Facsimile:
Party C:
Address:
Attn:
Phone:
Facsimile:
Beijing 58 Daojia Information Technology Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
Xiaohua Chen
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
+8610 64435588-8888
+8610-64459926
Tianjin 58 Daojia Home Services Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
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7.3
Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms hereof.
8. CONFIDENTIALITY
The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in
connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of
all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential
information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s
unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or
orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsels or
financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or financial advisors
shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff
members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which Party shall be held liable for
breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.
9. FURTHER WARRANTIES
The Parties agree to promptly execute documents that are reasonably required for or are conducive to the implementation of the provisions and
purposes of this Agreement and take further actions that are reasonably required for or are conducive to the implementation of the provisions and
purposes of this Agreement.
10. BREACH OF AGREEMENT
10.1
10.2
If Party B or Party C conducts any material breach of any term of this Agreement, Party A shall have right to terminate this Agreement and
require the Party B or Party C to compensate all damages; this Section 10 shall not prejudice any other rights of Party A herein;
If Party A conducts any breach of any term of this Agreement, Party B or Party C shall not terminate this Agreement in any event unless
otherwise required by applicable laws.
44
11. MISCELLANEOUS
11.1
Amendment, change and supplement
Any amendment, change and supplement to this Agreement shall require the execution of a written agreement by all of the Parties.
11.2
Entire agreement
Except for the amendments, supplements or changes in writing executed after the execution of this Agreement, this Agreement shall
constitute the entire agreement reached by and among the Parties hereto with respect to the subject matter hereof, and shall supercede all
prior oral and written consultations, representations and contracts reached with respect to the subject matter of this Agreement.
11.3
Headings
The headings of this Agreement are for convenience only, and shall not be used to interpret, explain or otherwise affect the meanings of the
provisions of this Agreement.
11.4
Language
This Agreement is written in both Chinese and English language in three copies, each Party having one copy with equal legal validity; in case
there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.
11.5
Severability
In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in
accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be
affected or compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with
effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such
effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.
11.6
Successors
This Agreement shall be binding on and shall inure to the interest of the respective successors of the Parties and the permitted assigns of such
Parties.
45
11.7
Survival
11.7.1 Any obligations that occur or that are due as a result of this Agreement upon the expiration or early termination of this Agreement shall
survive the expiration or early termination thereof.
11.7.2 The provisions of Sections 5, 8, 10 and this Section 11.7 shall survive the termination of this Agreement.
11.8 Waivers
Any Party may waive the terms and conditions of this Agreement, provided that such a waiver must be provided in writing and shall require
the signatures of the Parties. No waiver by any Party in certain circumstances with respect to a breach by other Parties shall operate as a
waiver by such a Party with respect to any similar breach in other circumstances.
46
IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Exclusive Option Agreement as of the date first
above written.
Party A:
Beijing 58 Daojia Information Technology Co., Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
Party B:
Xiaohua Chen
By:
/s/ Xiaohua Chen
Party C:
Tianjin 58 Daojia Home Services Co., Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
47
Power of Attorney
Exhibit 4.29
We, 58 Co., Ltd., a limited liability company organized and existing under the laws of the PRC, and a holder of 91.8% of the entire registered capital
in Tianjin 58 Daojia Home Services Co., Ltd. ("Domestic Company") as of the date when the Power of Attorney is executed, hereby irrevocably authorize
Beijing 58 Daojia Information Technology Co., Ltd. ("WFOE") to exercise the following rights relating to all equity interests held by us now and in the
future (“Our Shareholding”) during the term of this Power of Attorney:
WFOE is hereby authorized to act on our behalf as our exclusive agent and attorney with respect to all matters concerning Our Shareholding,
including without limitation to: 1) attend shareholders' meetings of Domestic Company; 2) exercise all the shareholder's rights and shareholder's voting
rights we are entitled to under the laws of China and Domestic Company's Articles of Association, including but not limited to the sale or transfer or pledge
or disposition of Our Shareholding in part or in whole; and 3) designate and appoint on our behalf the legal representative, the directors, supervisors, the
chief executive officer and other senior management members of Domestic Company.
Without limiting the generality of the powers granted hereunder, WFOE shall have the power and authority to, on our behalf, execute all the
documents we shall sign as stipulated in Exclusive Option Agreement entered into by and among we, WFOE and Domestic Company on August 5, 2015
and the Equity Pledge Agreement entered into by and among we, WFOE and Domestic Company on August 5, 2015 (including any modification,
amendment and restatement thereto, collectively the “Transaction Documents”), and perform the terms of the Transaction Documents.
All the actions associated with Our Shareholding conducted by WFOE shall be deemed as our own actions, and all the documents related to Our
Shareholding executed by WFOE shall be deemed to be executed by me. We hereby acknowledge and ratify those actions and/or documents by WFOE.
WFOE is entitled to re-authorize or assign its rights related to the aforesaid matters to any other person or entity at its own discretion and without
giving prior notice to us or obtaining our consent. If required by PRC laws, WFOE shall designate a PRC citizen to exercise the aforementioned rights.
This Power of Attorney is coupled with an interest and shall be irrevocable and continuously valid from the date of execution of this Power of
Attorney, so long as we are a shareholder of Domestic Company.
During the term of this Power of Attorney, we hereby waive all the rights associated with Our Shareholding, which have been authorized to WFOE
through this Power of Attorney, and shall not exercise such rights by myself.
This Power of Attorney is written in Chinese and English; in case there is any conflict between the Chinese version and the English version, the
Chinese version shall prevail.
1
58 Co., Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
August 5, 2015
Accepted by:
Beijing 58 Daojia Information Technology Co., Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
Acknowledged by:
Tianjin 58 Daojia Home Services Co., Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
2
Power of Attorney
I, Jinbo Yao, a Chinese citizen with Chinese Identification Card No.: , and a holder of 1.4% of the entire registered capital in Tianjin 58 Daojia
Home Services Co., Ltd. ("Domestic Company") as of the date when the Power of Attorney is executed, hereby irrevocably authorize Beijing 58 Daojia
Information Technology Co., Ltd. ("WFOE") to exercise the following rights relating to all equity interests held by me now and in the future (“My
Shareholding”) during the term of this Power of Attorney:
WFOE is hereby authorized to act on behalf of myself as my exclusive agent and attorney with respect to all matters concerning My Shareholding,
including without limitation to: 1) attend shareholders' meetings of Domestic Company; 2) exercise all the shareholder's rights and shareholder's voting
rights I am entitled to under the laws of China and Domestic Company's Articles of Association, including but not limited to the sale or transfer or pledge
or disposition of My Shareholding in part or in whole; and 3) designate and appoint on behalf of myself the legal representative, the directors, supervisors,
the chief executive officer and other senior management members of Domestic Company.
Without limiting the generality of the powers granted hereunder, WFOE shall have the power and authority to, on behalf of myself, execute all the
documents I shall sign as stipulated in Exclusive Option Agreement entered into by and among I, WFOE and Domestic Company on August 5, 2015 and
the Equity Pledge Agreement entered into by and among I, WFOE and Domestic Company on August 5, 2015 (including any modification, amendment and
restatement thereto, collectively the “Transaction Documents”), and perform the terms of the Transaction Documents.
All the actions associated with My Shareholding conducted by WFOE shall be deemed as my own actions, and all the documents related to My
Shareholding executed by WFOE shall be deemed to be executed by me. I hereby acknowledge and ratify those actions and/or documents by WFOE.
WFOE is entitled to re-authorize or assign its rights related to the aforesaid matters to any other person or entity at its own discretion and without
giving prior notice to me or obtaining my consent. If required by PRC laws, WFOE shall designate a PRC citizen to exercise the aforementioned rights.
This Power of Attorney is coupled with an interest and shall be irrevocable and continuously valid from the date of execution of this Power of
Attorney, so long as I am a shareholder of Domestic Company.
During the term of this Power of Attorney, I hereby waive all the rights associated with My Shareholding, which have been authorized to WFOE
through this Power of Attorney, and shall not exercise such rights by myself.
This Power of Attorney is written in Chinese and English; in case there is any conflict between the Chinese version and the English version, the
Chinese version shall prevail.
3
Jinbo Yao
By:
/s/ Jinbo Yao
August 5, 2015
Accepted by:
Beijing 58 Daojia Information Technology Co., Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
Acknowledged by:
Tianjin 58 Daojia Home Services Co., Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
4
Power of Attorney
I, Ou Bai, a Chinese citizen with Chinese Identification Card No.: , and a holder of 2.3% of the entire registered capital in Tianjin 58 Daojia
Home Services Co., Ltd. ("Domestic Company") as of the date when the Power of Attorney is executed, hereby irrevocably authorize Beijing 58 Daojia
Information Technology Co., Ltd. ("WFOE") to exercise the following rights relating to all equity interests held by me now and in the future (“My
Shareholding”) during the term of this Power of Attorney:
WFOE is hereby authorized to act on behalf of myself as my exclusive agent and attorney with respect to all matters concerning My Shareholding,
including without limitation to: 1) attend shareholders' meetings of Domestic Company; 2) exercise all the shareholder's rights and shareholder's voting
rights I am entitled to under the laws of China and Domestic Company's Articles of Association, including but not limited to the sale or transfer or pledge
or disposition of My Shareholding in part or in whole; and 3) designate and appoint on behalf of myself the legal representative, the directors, supervisors,
the chief executive officer and other senior management members of Domestic Company.
Without limiting the generality of the powers granted hereunder, WFOE shall have the power and authority to, on behalf of myself, execute all the
documents I shall sign as stipulated in Exclusive Option Agreement entered into by and among I, WFOE and Domestic Company on August 5, 2015 and
the Equity Pledge Agreement entered into by and among I, WFOE and Domestic Company on August 5, 2015 (including any modification, amendment and
restatement thereto, collectively the “Transaction Documents”), and perform the terms of the Transaction Documents.
All the actions associated with My Shareholding conducted by WFOE shall be deemed as my own actions, and all the documents related to My
Shareholding executed by WFOE shall be deemed to be executed by me. I hereby acknowledge and ratify those actions and/or documents by WFOE.
WFOE is entitled to re-authorize or assign its rights related to the aforesaid matters to any other person or entity at its own discretion and without
giving prior notice to me or obtaining my consent. If required by PRC laws, WFOE shall designate a PRC citizen to exercise the aforementioned rights.
This Power of Attorney is coupled with an interest and shall be irrevocable and continuously valid from the date of execution of this Power of
Attorney, so long as I am a shareholder of Domestic Company.
During the term of this Power of Attorney, I hereby waive all the rights associated with My Shareholding, which have been authorized to WFOE
through this Power of Attorney, and shall not exercise such rights by myself.
This Power of Attorney is written in Chinese and English; in case there is any conflict between the Chinese version and the English version, the
Chinese version shall prevail.
5
Ou Bai
By:
/s/ Ou Bai
August 5, 2015
Accepted by:
Beijing 58 Daojia Information Technology Co., Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
Acknowledged by:
Tianjin 58 Daojia Home Services Co., Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
6
Power of Attorney
I, Xiaohua Chen, a Chinese citizen with Chinese Identification Card No.: , and a holder of 4.5% of the entire registered capital in Tianjin 58
Daojia Home Services Co., Ltd. ("Domestic Company") as of the date when the Power of Attorney is executed, hereby irrevocably authorize Beijing 58
Daojia Information Technology Co., Ltd. ("WFOE") to exercise the following rights relating to all equity interests held by me now and in the future (“My
Shareholding”) during the term of this Power of Attorney:
WFOE is hereby authorized to act on behalf of myself as my exclusive agent and attorney with respect to all matters concerning My Shareholding,
including without limitation to: 1) attend shareholders' meetings of Domestic Company; 2) exercise all the shareholder's rights and shareholder's voting
rights I am entitled to under the laws of China and Domestic Company's Articles of Association, including but not limited to the sale or transfer or pledge
or disposition of My Shareholding in part or in whole; and 3) designate and appoint on behalf of myself the legal representative, the directors, supervisors,
the chief executive officer and other senior management members of Domestic Company.
Without limiting the generality of the powers granted hereunder, WFOE shall have the power and authority to, on behalf of myself, execute all the
documents I shall sign as stipulated in Exclusive Option Agreement entered into by and among I, WFOE and Domestic Company on August 5, 2015 and
the Equity Pledge Agreement entered into by and among I, WFOE and Domestic Company on August 5, 2015 (including any modification, amendment and
restatement thereto, collectively the “Transaction Documents”), and perform the terms of the Transaction Documents.
All the actions associated with My Shareholding conducted by WFOE shall be deemed as my own actions, and all the documents related to My
Shareholding executed by WFOE shall be deemed to be executed by me. I hereby acknowledge and ratify those actions and/or documents by WFOE.
WFOE is entitled to re-authorize or assign its rights related to the aforesaid matters to any other person or entity at its own discretion and without
giving prior notice to me or obtaining my consent. If required by PRC laws, WFOE shall designate a PRC citizen to exercise the aforementioned rights.
This Power of Attorney is coupled with an interest and shall be irrevocable and continuously valid from the date of execution of this Power of
Attorney, so long as I am a shareholder of Domestic Company.
During the term of this Power of Attorney, I hereby waive all the rights associated with My Shareholding, which have been authorized to WFOE
through this Power of Attorney, and shall not exercise such rights by myself.
This Power of Attorney is written in Chinese and English; in case there is any conflict between the Chinese version and the English version, the
Chinese version shall prevail.
7
Xiaohua Chen
By:
/s/ Xiaohua Chen
August 5, 2015
Accepted by:
Beijing 58 Daojia Information Technology Co., Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
Acknowledged by:
Tianjin 58 Daojia Home Services Co., Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
8
Loan Agreement
Exhibit 4.30
This Loan Agreement (this “Agreement”) is made and entered into by and between the Parties below as of August 5, 2015 in Beijing, China:
(1) Beijing 58 Daojia Information Technology Co., Ltd. (“Lender”), a wholly foreign owned enterprise, organized and existing under the laws of
the PRC, with its address at Room D101A-123, Building B-2 of Zhongguancun Dongsheng Science Park, #66 Xixiaokou Road, Haidian District,
Beijing;
(2) 58 Co., Ltd., a limited liability company organized and existing under the laws of the PRC, with its address at Room 210-03, Office Building,
Nangang Industry Zone, Economic and Technological Development District, Tianjin.
Each of the Lender and the Borrower shall be hereinafter referred to as a “Party” respectively, and as the “Parties” collectively.
Whereas:
1. As of the date hereof, Borrower holds 91.8% of equity interests in Tianjin 58 Daojia Home Services Co., Ltd. (“Borrower Company”). All of the
equity interest now held and hereafter acquired by Borrower in Borrower Company shall be referred to as Borrower Equity Interest;
2. Lender confirms that it agrees to provide Borrower with and Borrow confirms that he/she has received a loan which equals to RMB91,800,000 to
be used for the purposes set forth under this Agreement.
After friendly consultation, the Parties agree as follows:
1
Loan
1.1
In accordance with the terms and conditions of this Agreement, Lender and Borrower hereby acknowledge that Borrower has obtained from
Lender a loan in the amount of RMB91,800,000 (the “Loan”). The term of the Loan shall be 10 years from the effective date of this
Agreement, which may be extended upon mutual written consent of the Parties. During the term of the Loan or the extended term of the Loan,
Borrower shall immediately repay the full amount of the Loan in the event any one or more of the following circumstances occur:
1.1.1
30 days elapse after Borrower receives a written notice from Lender requesting repayment of the Loan;
1.1.2
Borrower’s death, lack or limitation of civil capacity;
1.1.3
Borrower ceases (for any reason) to be an employee of Lender, Borrower Company or their affiliates;
1
1.1.4
Borrower engages in criminal act or is involved in criminal activities;
1.1.5
According to the applicable laws of China, foreign investors are permitted to invest in the Principle Business that is currently
conducted by Borrower Company in China with a controlling stake and/or in the form of wholly-foreign-owned enterprises, the
relevant competent authorities of China begin to approve such investments, and Lender exercises the exclusive option under the
Exclusive Option Agreement (the “Exclusive Option Agreement”) described in this Agreement.
1.2
1.3
1.4
1.5
1.6
1.7
The Loan provided by Lender under this Agreement shall inure to Borrower’s benefit only and not to Borrower’s successors or assigns.
Borrower agrees to accept the aforementioned Loan provided by Lender, and hereby agrees and warrants using the Loan to increase the
registered capital of Borrower Company. Without Lender’s prior written consent, Borrower shall not use the Loan for any purpose other than
as set forth herein.
Lender and Borrower hereby agree and acknowledge that Borrower’s method of repayment shall be at the sole discretion of Lender, and may at
Lender’s option take the form of Borrower’s transferring the Borrower Equity Interest in whole to Lender or Lender’s designated persons
(legal or natural persons) pursuant to the Lender’s exercise of its right to acquire the Borrower Equity Interest under the Exclusive Option
Agreement.
Lender and Borrower hereby agree and acknowledge that any proceeds from the transfer of the Borrower Equity Interest (to the extent
permissible) shall be used to repay the Loan to Lender, in accordance with this Agreement and in the manner designated by Lender.
Lender and Borrower hereby agree and acknowledge that to the extent permitted by applicable laws, Lender shall have the right but not the
obligation to purchase or designate other persons (legal or natural persons) to purchase Borrower Equity Interest in part or in whole at any
time, at the price stipulated in the Exclusive Option Agreement.
Borrower also undertakes to execute an irrevocable Power of Attorney (the “Power of Attorney”), which authorizes Lender or a legal or natural
person designated by Lender to exercise all of Borrower’s rights as a shareholder of Borrower Company.
1.8 When Borrower transfers Borrower Equity Interest to Lender or Lender’s designated person(s), in the event that the transfer price of such
equity interest equals or is lower than the principal of the Loan under this Agreement, the Loan under this Agreement shall be deemed an
interest-free loan. In the event that the transfer price of such equity interest exceeds the principal of the Loan under this Agreement, the excess
over the principal shall be deemed the interest of the Loan under this Agreement payable by Borrower to Lender.
2
2
Representations and Warranties
2.1
Between the date of this Agreement and the date of termination of this Agreement, Lender hereby makes the following representations and
warranties to Borrower:
2.1.1
Lender is a corporation duly organized and legally existing in accordance with the laws of China;
2.1.2
Lender has the legal capacity to execute and perform this Agreement. The execution and performance by Lender of this Agreement is
consistent with Lender’s scope of business and the provisions of Lender’s corporate bylaws and other organizational documents, and
Lender has obtained all necessary and proper approvals and authorizations for the execution and performance of this Agreement; and
2.1.3
This Agreement constitutes Lender’s legal, valid and binding obligations enforceable in accordance with its terms.
2.2
Between the date of this Agreement and the date of termination of this Agreement, Borrower hereby makes the following representations and
warranties:
2.2.1
Borrower has the legal capacity to execute and perform this Agreement. Borrower has obtained all necessary and proper approvals and
authorizations for the execution and performance of this Agreement;
2.2.2
This Agreement constitutes Borrower’s legal, valid and binding obligations enforceable in accordance with its terms; and
2.2.3
There are no disputes, litigations, arbitrations, administrative proceedings or any other legal proceedings relating to Borrower, nor are
there any potential disputes, litigations, arbitrations, administrative proceedings or any other legal proceedings relating to Borrower.
3
Borrower’s Covenants
3.1
As and when he becomes, and for so long as he remains a shareholder of Borrower Company, Borrower covenants irrevocably that during the
term of this Agreement, Borrower shall cause Borrower Company:
3.1.1
to strictly abide by the provisions of the Exclusive Option Agreement and the Exclusive Business Cooperation Agreement to which
the Borrower Company is a party, and to refrain from any action/omission that may affect the effectiveness and enforceability of the
Exclusive Option Agreement and Exclusive Business Cooperation Agreement.
3
3.1.2
at the request of Lender (or a party designated by Lender), to execute contracts/agreements on business cooperation with Lender (or a
party designated by Lender), and to strictly abide by such contracts/agreements;
3.1.3
to provide Lender with all of the information on Borrower Company’s business operations and financial condition at Lender’s request;
3.1.4
to immediately notify Lender of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings
relating to Borrower Company's assets, business or income;
3.1.5
at the request of Lender, to appoint any persons designated by Lender as directors of Borrower Company;
3.2
Borrower covenants that during the term of this Agreement, he shall:
3.2.1
endeavor to keep Borrower Company to engage in its Principle Businesses;
3.2.2
3.2.3
3.2.4
abide by the provisions of this Agreement, the Power of Attorney, the Equity Interest Pledge Agreement and the Exclusive Option
Agreement to which the Borrower is a party, perform his obligations under this Agreement, the Power of Attorney, the Equity Interest
Pledge Agreement and the Exclusive Option Agreement, and refrain from any action/omission that may affect the effectiveness and
enforceability of this Agreement, the Power of Attorney, the Equity Interest Pledge Agreement and the Exclusive Option Agreement;
not sell, transfer, mortgage or dispose of in any other manner the legal or beneficial interest in Borrower Equity Interest, or allow the
encumbrance thereon of any security interest or the encumbrance, except in accordance with the Equity Interest Pledge Agreement;
cause any shareholders’ meeting and/or the board of directors of Borrower Company not to approve the sale, transfer, mortgage or
disposition in any other manner of any legal or beneficial interest in Borrower Equity Interest, or allow the encumbrance thereon of
any security interest, except to Lender or Lender’s designated person;
3.2.5
cause any shareholders’ meeting and/or the board of directors of the Borrower Company not to approve the merger or consolidation of
Borrower Company with any person, or its acquisition of or investment in any person, without the prior written consent of Lender;
4
3.2.6
3.2.7
immediately notify Lender of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating
to Borrower Equity Interest;
to the extent necessary to maintain his ownership of the Borrower Equity Interest, execute all necessary or appropriate documents,
take all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defense
against all claims;
3.2.8
without the prior written consent of Lender, refrain from any action /omission that may have a material impact on the assets, business
and liabilities of Borrower Company;
3.2.9
appoint any designee of Lender as director of Borrower Company, at the request of Lender;
3.2.10
3.2.11
to the extent permitted by the laws of China, at the request of Lender at any time, promptly and unconditionally transfer all of
Borrower Equity Interest to Lender or Lender’s designated representative(s) at any time, and cause the other shareholders of Borrower
Company to waive their right of first refusal with respect to the share transfer described in this Section;
to the extent permitted by the laws of China, at the request of Lender at any time, cause the other shareholders of Borrower Company
to promptly and unconditionally transfer all of their equity interests to Lender or Lender’s designated representative(s) at any time,
and Borrower hereby waives his right of first refusal (if any) with respect to the share transfer described in this Section;
3.2.12
in the event that Lender purchases Borrower Equity Interest from Borrower in accordance with the provisions of the Exclusive Option
Agreement, use such purchase price obtained thereby to repay the Loan to Lender; and
3.2.13 without the prior written consent of Lender, not to cause Borrower Company to supplement, change, or amend its articles of
association in any manner, increase or decreases its registered capital or change its share capital structure in any manner.
4
Liability for Default
4.1
If Borrower conducts any material breach of any term of this Agreement, Lender shall have right to terminate this Agreement and require the
Borrower to compensate all damages; this Section 4.1 shall not prejudice any other rights of Lender herein.
5
4.2
4.3
If Lender conducts any breach of any term of this Agreement, Borrower shall not terminate this Agreement in any event unless otherwise
required by applicable laws.
In the event that Borrower fails to perform the repayment obligations set forth in this Agreement, Borrower shall pay overdue interest of 0.01%
per day for the outstanding payment, until the day Borrower repays the full principal of the Loan, overdue interests and other payable amounts.
5
Notices
5.1
All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by
registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such Party set forth below. A
confirmation copy of each notice shall also be sent by email. The dates on which notices shall be deemed to have been effectively given shall
be determined as follows:
5.1.1 Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the
date of delivery.
5.1.2 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an
automatically generated confirmation of transmission).
5.2
For the purpose of notices, the addresses of the Parties are as follows:
Lender:
Address:
Attn:
Phone:
Facsimile:
Borrower:
Address:
Attn:
Phone:
Facsimile:
Beijing 58 Daojia Information Technology Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
58 Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
5.3
Any Party may at any time change its address for notices by a notice delivered to the other Party in accordance with the terms hereof.
6
6
Confidentiality
The Parties acknowledge that any oral or written information exchanged among them with respect to this Agreement is confidential information. The
Parties shall maintain the confidentiality of all such information, and without the written consent of other Party, either Party shall not disclose any
relevant information to any third party, except in the following circumstances: (a) such information is or will be in the public domain (provided that
this is not the result of a public disclosure by the receiving party); (b) information disclosed as required by applicable laws or rules or regulations of
any stock exchange; or (c) information required to be disclosed by any Party to its legal counsel or financial advisor regarding the transaction
contemplated hereunder, and such legal counsel or financial advisor are also bound by confidentiality duties similar to the duties in this section.
Disclosure of any confidential information by the staff members or agency hired by any Party shall be deemed disclosure of such confidential
information by such Party, which Party shall be held liable for breach of this Agreement. This section shall survive the termination of this Agreement
for any reason.
7
Governing Law and Resolution of Disputes
7.1 The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes shall be
governed by the laws of China.
7.2 In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through
friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party’s request to the other
Party for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and
Trade Arbitration Commission for arbitration, in accordance with its then effective arbitration rules. The arbitration shall be conducted in
Beijing, and the language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.
7.3 Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration of any
dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this Agreement
and perform their respective obligations under this Agreement.
8 Miscellaneous
8.1 This Agreement should become effective upon execution by the Parties , and shall expire upon the date of full performance by the Parties of their
respective obligations under this Agreement.
8.2 This Agreement shall be written in both Chinese and English language in two copies, each Party having one copy with equal legal validity. In
case there is any conflict between the Chinese version and the English version, the Chinese version shall apply.
7
8.3 This Agreement may be amended or supplemented through written agreement by and between Lender and Borrower. Such written amendment
agreement and/or supplementary agreement executed by and between Lender and Borrower are an integral part of this Agreement, and shall have
the same legal validity as this Agreement.
8.4 In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance
with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or
compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective
provisions that accomplish to the greatest extent permitted by law the intentions of the Parties, and the economic effect of such effective
provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.
8.5 The attachments (if any) to this Agreement shall be an integral part of this Agreement and shall have the same legal validity as this Agreement.
8.6 Any obligations that occur or that are due as a result of this Agreement upon the expiration or early termination of this Agreement shall survive
the expiration or early termination thereof. The provisions of Sections 4, 6, 7 and this Section 8.6 shall survive the termination of this
Agreement.
8
IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Loan Agreement as of the date firs above written.
Lender: Beijing 58 Daojia Information Technology Co., Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
Borrower: 58 Co. Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
9
Loan Agreement
This Loan Agreement (this “Agreement”) is made and entered into by and between the Parties below as of August 5, 2015 in Beijing, China:
(1) Beijing 58 Daojia Information Technology Co., Ltd. (“Lender”), a wholly foreign owned enterprise, organized and existing under the laws of
the PRC, with its address at Room D101A-123, Building B-2 of Zhongguancun Dongsheng Science Park, #66 Xixiaokou Road, Haidian District,
Beijing;
(2) Jinbo Yao (“Borrower”), a citizen of China with Chinese Identification No.: .
Each of the Lender and the Borrower shall be hereinafter referred to as a “Party” respectively, and as the “Parties” collectively.
Whereas:
1. As of the date hereof, Borrower holds 1.4% of equity interests in Tianjin 58 Daojia Home Services Co., Ltd. (“Borrower Company”). All of the
equity interest now held and hereafter acquired by Borrower in Borrower Company shall be referred to as Borrower Equity Interest;
2. Lender confirms that it agrees to provide Borrower with and Borrow confirms that he/she has received a loan which equals to RMB1,400,000 to
be used for the purposes set forth under this Agreement.
After friendly consultation, the Parties agree as follows:
1
Loan
1.1
In accordance with the terms and conditions of this Agreement, Lender and Borrower hereby acknowledge that Borrower has obtained from
Lender a loan in the amount of RMB1,400,000 (the “Loan”). The term of the Loan shall be 10 years from the effective date of this Agreement,
which may be extended upon mutual written consent of the Parties. During the term of the Loan or the extended term of the Loan, Borrower
shall immediately repay the full amount of the Loan in the event any one or more of the following circumstances occur:
1.1.1
30 days elapse after Borrower receives a written notice from Lender requesting repayment of the Loan;
1.1.2
Borrower’s death, lack or limitation of civil capacity;
1.1.3
Borrower ceases (for any reason) to be an employee of Lender, Borrower Company or their affiliates;
10
1.1.4
Borrower engages in criminal act or is involved in criminal activities;
1.1.5
According to the applicable laws of China, foreign investors are permitted to invest in the Principle Business that is currently
conducted by Borrower Company in China with a controlling stake and/or in the form of wholly-foreign-owned enterprises, the
relevant competent authorities of China begin to approve such investments, and Lender exercises the exclusive option under the
Exclusive Option Agreement (the “Exclusive Option Agreement”) described in this Agreement.
1.2
1.3
1.4
1.5
1.6
1.7
The Loan provided by Lender under this Agreement shall inure to Borrower’s benefit only and not to Borrower’s successors or assigns.
Borrower agrees to accept the aforementioned Loan provided by Lender, and hereby agrees and warrants using the Loan to increase the
registered capital of Borrower Company. Without Lender’s prior written consent, Borrower shall not use the Loan for any purpose other than
as set forth herein.
Lender and Borrower hereby agree and acknowledge that Borrower’s method of repayment shall be at the sole discretion of Lender, and may at
Lender’s option take the form of Borrower’s transferring the Borrower Equity Interest in whole to Lender or Lender’s designated persons
(legal or natural persons) pursuant to the Lender’s exercise of its right to acquire the Borrower Equity Interest under the Exclusive Option
Agreement.
Lender and Borrower hereby agree and acknowledge that any proceeds from the transfer of the Borrower Equity Interest (to the extent
permissible) shall be used to repay the Loan to Lender, in accordance with this Agreement and in the manner designated by Lender.
Lender and Borrower hereby agree and acknowledge that to the extent permitted by applicable laws, Lender shall have the right but not the
obligation to purchase or designate other persons (legal or natural persons) to purchase Borrower Equity Interest in part or in whole at any
time, at the price stipulated in the Exclusive Option Agreement.
Borrower also undertakes to execute an irrevocable Power of Attorney (the “Power of Attorney”), which authorizes Lender or a legal or natural
person designated by Lender to exercise all of Borrower’s rights as a shareholder of Borrower Company.
1.8 When Borrower transfers Borrower Equity Interest to Lender or Lender’s designated person(s), in the event that the transfer price of such
equity interest equals or is lower than the principal of the Loan under this Agreement, the Loan under this Agreement shall be deemed an
interest-free loan. In the event that the transfer price of such equity interest exceeds the principal of the Loan under this Agreement, the excess
over the principal shall be deemed the interest of the Loan under this Agreement payable by Borrower to Lender.
11
2
Representations and Warranties
2.1
Between the date of this Agreement and the date of termination of this Agreement, Lender hereby makes the following representations and
warranties to Borrower:
2.1.1
Lender is a corporation duly organized and legally existing in accordance with the laws of China;
2.1.2
Lender has the legal capacity to execute and perform this Agreement. The execution and performance by Lender of this Agreement is
consistent with Lender’s scope of business and the provisions of Lender’s corporate bylaws and other organizational documents, and
Lender has obtained all necessary and proper approvals and authorizations for the execution and performance of this Agreement; and
2.1.3
This Agreement constitutes Lender’s legal, valid and binding obligations enforceable in accordance with its terms.
2.2
Between the date of this Agreement and the date of termination of this Agreement, Borrower hereby makes the following representations and
warranties:
2.2.1
Borrower has the legal capacity to execute and perform this Agreement. Borrower has obtained all necessary and proper approvals and
authorizations for the execution and performance of this Agreement;
2.2.2
This Agreement constitutes Borrower’s legal, valid and binding obligations enforceable in accordance with its terms; and
2.2.3
There are no disputes, litigations, arbitrations, administrative proceedings or any other legal proceedings relating to Borrower, nor are
there any potential disputes, litigations, arbitrations, administrative proceedings or any other legal proceedings relating to Borrower.
3
Borrower’s Covenants
3.1
As and when he becomes, and for so long as he remains a shareholder of Borrower Company, Borrower covenants irrevocably that during the
term of this Agreement, Borrower shall cause Borrower Company:
12
3.1.1
to strictly abide by the provisions of the Exclusive Option Agreement and the Exclusive Business Cooperation Agreement to which
the Borrower Company is a party, and to refrain from any action/omission that may affect the effectiveness and enforceability of the
Exclusive Option Agreement and Exclusive Business Cooperation Agreement.
3.1.2
at the request of Lender (or a party designated by Lender), to execute contracts/agreements on business cooperation with Lender (or a
party designated by Lender), and to strictly abide by such contracts/agreements;
3.1.3
to provide Lender with all of the information on Borrower Company’s business operations and financial condition at Lender’s request;
3.1.4
to immediately notify Lender of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings
relating to Borrower Company's assets, business or income;
3.1.5
at the request of Lender, to appoint any persons designated by Lender as directors of Borrower Company;
3.2
Borrower covenants that during the term of this Agreement, he shall:
3.2.1
endeavor to keep Borrower Company to engage in its Principle Businesses;
3.2.2
3.2.3
3.2.4
abide by the provisions of this Agreement, the Power of Attorney, the Equity Interest Pledge Agreement and the Exclusive Option
Agreement to which the Borrower is a party, perform his obligations under this Agreement, the Power of Attorney, the Equity Interest
Pledge Agreement and the Exclusive Option Agreement, and refrain from any action/omission that may affect the effectiveness and
enforceability of this Agreement, the Power of Attorney, the Equity Interest Pledge Agreement and the Exclusive Option Agreement;
not sell, transfer, mortgage or dispose of in any other manner the legal or beneficial interest in Borrower Equity Interest, or allow the
encumbrance thereon of any security interest or the encumbrance, except in accordance with the Equity Interest Pledge Agreement;
cause any shareholders’ meeting and/or the board of directors of Borrower Company not to approve the sale, transfer, mortgage or
disposition in any other manner of any legal or beneficial interest in Borrower Equity Interest, or allow the encumbrance thereon of
any security interest, except to Lender or Lender’s designated person;
3.2.5
cause any shareholders’ meeting and/or the board of directors of the Borrower Company not to approve the merger or consolidation of
Borrower Company with any person, or its acquisition of or investment in any person, without the prior written consent of Lender;
13
3.2.6
3.2.7
immediately notify Lender of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating
to Borrower Equity Interest;
to the extent necessary to maintain his ownership of the Borrower Equity Interest, execute all necessary or appropriate documents,
take all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defense
against all claims;
3.2.8
without the prior written consent of Lender, refrain from any action /omission that may have a material impact on the assets, business
and liabilities of Borrower Company;
3.2.9
appoint any designee of Lender as director of Borrower Company, at the request of Lender;
3.2.10
3.2.11
to the extent permitted by the laws of China, at the request of Lender at any time, promptly and unconditionally transfer all of
Borrower Equity Interest to Lender or Lender’s designated representative(s) at any time, and cause the other shareholders of Borrower
Company to waive their right of first refusal with respect to the share transfer described in this Section;
to the extent permitted by the laws of China, at the request of Lender at any time, cause the other shareholders of Borrower Company
to promptly and unconditionally transfer all of their equity interests to Lender or Lender’s designated representative(s) at any time,
and Borrower hereby waives his right of first refusal (if any) with respect to the share transfer described in this Section;
3.2.12
in the event that Lender purchases Borrower Equity Interest from Borrower in accordance with the provisions of the Exclusive Option
Agreement, use such purchase price obtained thereby to repay the Loan to Lender; and
3.2.13 without the prior written consent of Lender, not to cause Borrower Company to supplement, change, or amend its articles of
association in any manner, increase or decreases its registered capital or change its share capital structure in any manner.
4
Liability for Default
4.1
If Borrower conducts any material breach of any term of this Agreement, Lender shall have right to terminate this Agreement and require the
Borrower to compensate all damages; this Section 4.1 shall not prejudice any other rights of Lender herein.
14
If Lender conducts any breach of any term of this Agreement, Borrower shall not terminate this Agreement in any event unless otherwise
required by applicable laws.
In the event that Borrower fails to perform the repayment obligations set forth in this Agreement, Borrower shall pay overdue interest of
0.01% per day for the outstanding payment, until the day Borrower repays the full principal of the Loan, overdue interests and other payable
amounts.
4.2
4.3
5
Notices
5.1
All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by
registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such Party set forth below. A
confirmation copy of each notice shall also be sent by email. The dates on which notices shall be deemed to have been effectively given shall
be determined as follows:
5.1.1 Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the
date of delivery.
5.1.2 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an
automatically generated confirmation of transmission).
5.2
For the purpose of notices, the addresses of the Parties are as follows:
Lender:
Address:
Attn:
Phone:
Facsimile:
Borrower:
Address:
Attn:
Phone:
Facsimile:
Beijing 58 Daojia Information Technology Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
Jinbo Yao
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
5.3
Any Party may at any time change its address for notices by a notice delivered to the other Party in accordance with the terms hereof.
15
6
Confidentiality
The Parties acknowledge that any oral or written information exchanged among them with respect to this Agreement is confidential information. The
Parties shall maintain the confidentiality of all such information, and without the written consent of other Party, either Party shall not disclose any
relevant information to any third party, except in the following circumstances: (a) such information is or will be in the public domain (provided that
this is not the result of a public disclosure by the receiving party); (b) information disclosed as required by applicable laws or rules or regulations of
any stock exchange; or (c) information required to be disclosed by any Party to its legal counsel or financial advisor regarding the transaction
contemplated hereunder, and such legal counsel or financial advisor are also bound by confidentiality duties similar to the duties in this section.
Disclosure of any confidential information by the staff members or agency hired by any Party shall be deemed disclosure of such confidential
information by such Party, which Party shall be held liable for breach of this Agreement. This section shall survive the termination of this Agreement
for any reason.
7
Governing Law and Resolution of Disputes
7.1
7.2
7.3
The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes shall be
governed by the laws of China.
In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute
through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party’s request to the
other Party for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic
and Trade Arbitration Commission for arbitration, in accordance with its then effective arbitration rules. The arbitration shall be conducted in
Beijing, and the language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.
Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration of any
dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this
Agreement and perform their respective obligations under this Agreement.
8 Miscellaneous
8.1
8.2
This Agreement should become effective upon execution by the Parties , and shall expire upon the date of full performance by the Parties of
their respective obligations under this Agreement.
This Agreement shall be written in both Chinese and English language in two copies, each Party having one copy with equal legal validity. In
case there is any conflict between the Chinese version and the English version, the Chinese version shall apply.
16
8.3
8.4
8.5
8.6
This Agreement may be amended or supplemented through written agreement by and between Lender and Borrower. Such written amendment
agreement and/or supplementary agreement executed by and between Lender and Borrower are an integral part of this Agreement, and shall
have the same legal validity as this Agreement.
In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance
with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or
compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective
provisions that accomplish to the greatest extent permitted by law the intentions of the Parties, and the economic effect of such effective
provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.
The attachments (if any) to this Agreement shall be an integral part of this Agreement and shall have the same legal validity as this Agreement.
Any obligations that occur or that are due as a result of this Agreement upon the expiration or early termination of this Agreement shall survive
the expiration or early termination thereof. The provisions of Sections 4, 6, 7 and this Section 8.6 shall survive the termination of this
Agreement.
17
IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Loan Agreement as of the date firs above written.
Lender: Beijing 58 Daojia Information Technology Co., Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
Borrower: Jinbo Yao
By:
/s/ Jinbo Yao
18
Loan Agreement
This Loan Agreement (this “Agreement”) is made and entered into by and between the Parties below as of August 5, 2015 in Beijing, China:
(1) Beijing 58 Daojia Information Technology Co., Ltd. (“Lender”), a wholly foreign owned enterprise, organized and existing under the laws of
the PRC, with its address at Room D101A-123, Building B-2 of Zhongguancun Dongsheng Science Park, #66 Xixiaokou Road, Haidian District,
Beijing;
(2) Ou Bai (“Borrower”), a citizen of China with Chinese Identification No.: .
Each of the Lender and the Borrower shall be hereinafter referred to as a “Party” respectively, and as the “Parties” collectively.
Whereas:
1. As of the date hereof, Borrower holds 2.3% of equity interests in Tianjin 58 Daojia Home Services Co., Ltd. (“Borrower Company”). All of the
equity interest now held and hereafter acquired by Borrower in Borrower Company shall be referred to as Borrower Equity Interest;
2. Lender confirms that it agrees to provide Borrower with and Borrow confirms that he/she has received a loan which equals to RMB2,300,000 to
be used for the purposes set forth under this Agreement.
After friendly consultation, the Parties agree as follows:
1
Loan
1.1
In accordance with the terms and conditions of this Agreement, Lender and Borrower hereby acknowledge that Borrower has obtained from
Lender a loan in the amount of RMB2,300,000 (the “Loan”). The term of the Loan shall be 10 years from the effective date of this Agreement,
which may be extended upon mutual written consent of the Parties. During the term of the Loan or the extended term of the Loan, Borrower
shall immediately repay the full amount of the Loan in the event any one or more of the following circumstances occur:
1.1.1
30 days elapse after Borrower receives a written notice from Lender requesting repayment of the Loan;
1.1.2
Borrower’s death, lack or limitation of civil capacity;
1.1.3
Borrower ceases (for any reason) to be an employee of Lender, Borrower Company or their affiliates;
19
1.1.4
Borrower engages in criminal act or is involved in criminal activities;
1.1.5
According to the applicable laws of China, foreign investors are permitted to invest in the Principle Business that is currently
conducted by Borrower Company in China with a controlling stake and/or in the form of wholly-foreign-owned enterprises, the
relevant competent authorities of China begin to approve such investments, and Lender exercises the exclusive option under the
Exclusive Option Agreement (the “Exclusive Option Agreement”) described in this Agreement.
1.2
1.3
1.4
1.5
1.6
1.7
The Loan provided by Lender under this Agreement shall inure to Borrower’s benefit only and not to Borrower’s successors or assigns.
Borrower agrees to accept the aforementioned Loan provided by Lender, and hereby agrees and warrants using the Loan to increase the
registered capital of Borrower Company. Without Lender’s prior written consent, Borrower shall not use the Loan for any purpose other than
as set forth herein.
Lender and Borrower hereby agree and acknowledge that Borrower’s method of repayment shall be at the sole discretion of Lender, and may at
Lender’s option take the form of Borrower’s transferring the Borrower Equity Interest in whole to Lender or Lender’s designated persons
(legal or natural persons) pursuant to the Lender’s exercise of its right to acquire the Borrower Equity Interest under the Exclusive Option
Agreement.
Lender and Borrower hereby agree and acknowledge that any proceeds from the transfer of the Borrower Equity Interest (to the extent
permissible) shall be used to repay the Loan to Lender, in accordance with this Agreement and in the manner designated by Lender.
Lender and Borrower hereby agree and acknowledge that to the extent permitted by applicable laws, Lender shall have the right but not the
obligation to purchase or designate other persons (legal or natural persons) to purchase Borrower Equity Interest in part or in whole at any
time, at the price stipulated in the Exclusive Option Agreement.
Borrower also undertakes to execute an irrevocable Power of Attorney (the “Power of Attorney”), which authorizes Lender or a legal or natural
person designated by Lender to exercise all of Borrower’s rights as a shareholder of Borrower Company.
1.8 When Borrower transfers Borrower Equity Interest to Lender or Lender’s designated person(s), in the event that the transfer price of such
equity interest equals or is lower than the principal of the Loan under this Agreement, the Loan under this Agreement shall be deemed an
interest-free loan. In the event that the transfer price of such equity interest exceeds the principal of the Loan under this Agreement, the excess
over the principal shall be deemed the interest of the Loan under this Agreement payable by Borrower to Lender.
20
2
Representations and Warranties
2.1
Between the date of this Agreement and the date of termination of this Agreement, Lender hereby makes the following representations and
warranties to Borrower:
2.1.1
Lender is a corporation duly organized and legally existing in accordance with the laws of China;
2.1.2
Lender has the legal capacity to execute and perform this Agreement. The execution and performance by Lender of this Agreement is
consistent with Lender’s scope of business and the provisions of Lender’s corporate bylaws and other organizational documents, and
Lender has obtained all necessary and proper approvals and authorizations for the execution and performance of this Agreement; and
2.1.3
This Agreement constitutes Lender’s legal, valid and binding obligations enforceable in accordance with its terms.
2.2
Between the date of this Agreement and the date of termination of this Agreement, Borrower hereby makes the following representations and
warranties:
2.2.1
Borrower has the legal capacity to execute and perform this Agreement. Borrower has obtained all necessary and proper approvals and
authorizations for the execution and performance of this Agreement;
2.2.2
This Agreement constitutes Borrower’s legal, valid and binding obligations enforceable in accordance with its terms; and
2.2.3
There are no disputes, litigations, arbitrations, administrative proceedings or any other legal proceedings relating to Borrower, nor are
there any potential disputes, litigations, arbitrations, administrative proceedings or any other legal proceedings relating to Borrower.
3
Borrower’s Covenants
3.1
As and when he becomes, and for so long as he remains a shareholder of Borrower Company, Borrower covenants irrevocably that during the
term of this Agreement, Borrower shall cause Borrower Company:
21
3.1.1
to strictly abide by the provisions of the Exclusive Option Agreement and the Exclusive Business Cooperation Agreement to which
the Borrower Company is a party, and to refrain from any action/omission that may affect the effectiveness and enforceability of the
Exclusive Option Agreement and Exclusive Business Cooperation Agreement.
3.1.2
at the request of Lender (or a party designated by Lender), to execute contracts/agreements on business cooperation with Lender (or a
party designated by Lender), and to strictly abide by such contracts/agreements;
3.1.3
to provide Lender with all of the information on Borrower Company’s business operations and financial condition at Lender’s request;
3.1.4
to immediately notify Lender of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings
relating to Borrower Company's assets, business or income;
3.1.5
at the request of Lender, to appoint any persons designated by Lender as directors of Borrower Company;
3.2
Borrower covenants that during the term of this Agreement, he shall:
3.2.1
endeavor to keep Borrower Company to engage in its Principle Businesses;
3.2.2
3.2.3
3.2.4
abide by the provisions of this Agreement, the Power of Attorney, the Equity Interest Pledge Agreement and the Exclusive Option
Agreement to which the Borrower is a party, perform his obligations under this Agreement, the Power of Attorney, the Equity Interest
Pledge Agreement and the Exclusive Option Agreement, and refrain from any action/omission that may affect the effectiveness and
enforceability of this Agreement, the Power of Attorney, the Equity Interest Pledge Agreement and the Exclusive Option Agreement;
not sell, transfer, mortgage or dispose of in any other manner the legal or beneficial interest in Borrower Equity Interest, or allow the
encumbrance thereon of any security interest or the encumbrance, except in accordance with the Equity Interest Pledge Agreement;
cause any shareholders’ meeting and/or the board of directors of Borrower Company not to approve the sale, transfer, mortgage or
disposition in any other manner of any legal or beneficial interest in Borrower Equity Interest, or allow the encumbrance thereon of
any security interest, except to Lender or Lender’s designated person;
3.2.5
cause any shareholders’ meeting and/or the board of directors of the Borrower Company not to approve the merger or consolidation of
Borrower Company with any person, or its acquisition of or investment in any person, without the prior written consent of Lender;
22
3.2.6
3.2.7
immediately notify Lender of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating
to Borrower Equity Interest;
to the extent necessary to maintain his ownership of the Borrower Equity Interest, execute all necessary or appropriate documents,
take all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defense
against all claims;
3.2.8
without the prior written consent of Lender, refrain from any action /omission that may have a material impact on the assets, business
and liabilities of Borrower Company;
3.2.9
appoint any designee of Lender as director of Borrower Company, at the request of Lender;
3.2.10
3.2.11
to the extent permitted by the laws of China, at the request of Lender at any time, promptly and unconditionally transfer all of
Borrower Equity Interest to Lender or Lender’s designated representative(s) at any time, and cause the other shareholders of Borrower
Company to waive their right of first refusal with respect to the share transfer described in this Section;
to the extent permitted by the laws of China, at the request of Lender at any time, cause the other shareholders of Borrower Company
to promptly and unconditionally transfer all of their equity interests to Lender or Lender’s designated representative(s) at any time,
and Borrower hereby waives his right of first refusal (if any) with respect to the share transfer described in this Section;
3.2.12
in the event that Lender purchases Borrower Equity Interest from Borrower in accordance with the provisions of the Exclusive Option
Agreement, use such purchase price obtained thereby to repay the Loan to Lender; and
3.2.13 without the prior written consent of Lender, not to cause Borrower Company to supplement, change, or amend its articles of
association in any manner, increase or decreases its registered capital or change its share capital structure in any manner.
4
Liability for Default
4.1
If Borrower conducts any material breach of any term of this Agreement, Lender shall have right to terminate this Agreement and require the
Borrower to compensate all damages; this Section 4.1 shall not prejudice any other rights of Lender herein.
23
4.2
4.3
If Lender conducts any breach of any term of this Agreement, Borrower shall not terminate this Agreement in any event unless otherwise
required by applicable laws.
In the event that Borrower fails to perform the repayment obligations set forth in this Agreement, Borrower shall pay overdue interest of 0.01%
per day for the outstanding payment, until the day Borrower repays the full principal of the Loan, overdue interests and other payable amounts.
5
Notices
5.1
All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by
registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such Party set forth below. A
confirmation copy of each notice shall also be sent by email. The dates on which notices shall be deemed to have been effectively given shall
be determined as follows:
5.1.1 Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the
date of delivery.
5.1.2 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an
automatically generated confirmation of transmission).
5.2
For the purpose of notices, the addresses of the Parties are as follows:
Lender:
Address:
Attn:
Phone:
Facsimile:
Borrower:
Address:
Phone:
Facsimile:
Beijing 58 Daojia Information Technology Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
Ou Bai
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
+8610 64435588-8888
+8610-64459926
5.3
Any Party may at any time change its address for notices by a notice delivered to the other Party in accordance with the terms hereof.
24
6
Confidentiality
The Parties acknowledge that any oral or written information exchanged among them with respect to this Agreement is confidential information. The
Parties shall maintain the confidentiality of all such information, and without the written consent of other Party, either Party shall not disclose any
relevant information to any third party, except in the following circumstances: (a) such information is or will be in the public domain (provided that
this is not the result of a public disclosure by the receiving party); (b) information disclosed as required by applicable laws or rules or regulations of
any stock exchange; or (c) information required to be disclosed by any Party to its legal counsel or financial advisor regarding the transaction
contemplated hereunder, and such legal counsel or financial advisor are also bound by confidentiality duties similar to the duties in this section.
Disclosure of any confidential information by the staff members or agency hired by any Party shall be deemed disclosure of such confidential
information by such Party, which Party shall be held liable for breach of this Agreement. This section shall survive the termination of this Agreement
for any reason.
7
Governing Law and Resolution of Disputes
7.1
7.2
7.3
The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes shall be
governed by the laws of China.
In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute
through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party’s request to the
other Party for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic
and Trade Arbitration Commission for arbitration, in accordance with its then effective arbitration rules. The arbitration shall be conducted in
Beijing, and the language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.
Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration of any
dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this
Agreement and perform their respective obligations under this Agreement.
8 Miscellaneous
8.1
8.2
This Agreement should become effective upon execution by the Parties , and shall expire upon the date of full performance by the Parties of
their respective obligations under this Agreement.
This Agreement shall be written in both Chinese and English language in two copies, each Party having one copy with equal legal validity. In
case there is any conflict between the Chinese version and the English version, the Chinese version shall apply.
25
8.3
8.4
8.5
8.6
This Agreement may be amended or supplemented through written agreement by and between Lender and Borrower. Such written amendment
agreement and/or supplementary agreement executed by and between Lender and Borrower are an integral part of this Agreement, and shall
have the same legal validity as this Agreement.
In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance
with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or
compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective
provisions that accomplish to the greatest extent permitted by law the intentions of the Parties, and the economic effect of such effective
provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.
The attachments (if any) to this Agreement shall be an integral part of this Agreement and shall have the same legal validity as this Agreement.
Any obligations that occur or that are due as a result of this Agreement upon the expiration or early termination of this Agreement shall survive
the expiration or early termination thereof. The provisions of Sections 4, 6, 7 and this Section 8.6 shall survive the termination of this
Agreement.
26
IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Loan Agreement as of the date firs above written.
Lender: Beijing 58 Daojia Information Technology Co., Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
Borrower: Ou Bai
By:
/s/ Ou Bai
27
Loan Agreement
This Loan Agreement (this “Agreement”) is made and entered into by and between the Parties below as of August 5, 2015 in Beijing, China:
(1) Beijing 58 Daojia Information Technology Co., Ltd. (“Lender”), a wholly foreign owned enterprise, organized and existing under the laws of
the PRC, with its address at Room D101A-123, Building B-2 of Zhongguancun Dongsheng Science Park, 66# Xixiaokou Road, Haidian District,
Beijing;
(2) Xiaohua Chen (“Borrower”), a citizen of China with Chinese Identification No.: .
Each of the Lender and the Borrower shall be hereinafter referred to as a “Party” respectively, and as the “Parties” collectively.
Whereas:
1. As of the date hereof, Borrower holds 4.5% of equity interests in Tianjin 58 Daojia Home Services Co., Ltd. (“Borrower Company”). All of the
equity interest now held and hereafter acquired by Borrower in Borrower Company shall be referred to as Borrower Equity Interest;
2. Lender confirms that it agrees to provide Borrower with and Borrow confirms that he/she has received a loan which equals to RMB4,500,000 to
be used for the purposes set forth under this Agreement.
After friendly consultation, the Parties agree as follows:
1
Loan
1.1
In accordance with the terms and conditions of this Agreement, Lender and Borrower hereby acknowledge that Borrower has obtained from
Lender a loan in the amount of RMB4,500,000 (the “Loan”). The term of the Loan shall be 10 years from the effective date of this Agreement,
which may be extended upon mutual written consent of the Parties. During the term of the Loan or the extended term of the Loan, Borrower
shall immediately repay the full amount of the Loan in the event any one or more of the following circumstances occur:
1.1.1
30 days elapse after Borrower receives a written notice from Lender requesting repayment of the Loan;
1.1.2
Borrower’s death, lack or limitation of civil capacity;
1.1.3
Borrower ceases (for any reason) to be an employee of Lender, Borrower Company or their affiliates;
28
1.1.4
Borrower engages in criminal act or is involved in criminal activities;
1.1.5
According to the applicable laws of China, foreign investors are permitted to invest in the Principle Business that is currently
conducted by Borrower Company in China with a controlling stake and/or in the form of wholly-foreign-owned enterprises, the
relevant competent authorities of China begin to approve such investments, and Lender exercises the exclusive option under the
Exclusive Option Agreement (the “Exclusive Option Agreement”) described in this Agreement.
1.2
1.3
1.4
1.5
1.6
1.7
The Loan provided by Lender under this Agreement shall inure to Borrower’s benefit only and not to Borrower’s successors or assigns.
Borrower agrees to accept the aforementioned Loan provided by Lender, and hereby agrees and warrants using the Loan to increase the
registered capital of Borrower Company. Without Lender’s prior written consent, Borrower shall not use the Loan for any purpose other than
as set forth herein.
Lender and Borrower hereby agree and acknowledge that Borrower’s method of repayment shall be at the sole discretion of Lender, and may at
Lender’s option take the form of Borrower’s transferring the Borrower Equity Interest in whole to Lender or Lender’s designated persons
(legal or natural persons) pursuant to the Lender’s exercise of its right to acquire the Borrower Equity Interest under the Exclusive Option
Agreement.
Lender and Borrower hereby agree and acknowledge that any proceeds from the transfer of the Borrower Equity Interest (to the extent
permissible) shall be used to repay the Loan to Lender, in accordance with this Agreement and in the manner designated by Lender.
Lender and Borrower hereby agree and acknowledge that to the extent permitted by applicable laws, Lender shall have the right but not the
obligation to purchase or designate other persons (legal or natural persons) to purchase Borrower Equity Interest in part or in whole at any
time, at the price stipulated in the Exclusive Option Agreement.
Borrower also undertakes to execute an irrevocable Power of Attorney (the “Power of Attorney”), which authorizes Lender or a legal or natural
person designated by Lender to exercise all of Borrower’s rights as a shareholder of Borrower Company.
1.8 When Borrower transfers Borrower Equity Interest to Lender or Lender’s designated person(s), in the event that the transfer price of such
equity interest equals or is lower than the principal of the Loan under this Agreement, the Loan under this Agreement shall be deemed an
interest-free loan. In the event that the transfer price of such equity interest exceeds the principal of the Loan under this Agreement, the excess
over the principal shall be deemed the interest of the Loan under this Agreement payable by Borrower to Lender.
29
2
Representations and Warranties
2.1
Between the date of this Agreement and the date of termination of this Agreement, Lender hereby makes the following representations and
warranties to Borrower:
2.1.1
Lender is a corporation duly organized and legally existing in accordance with the laws of China;
2.1.2
Lender has the legal capacity to execute and perform this Agreement. The execution and performance by Lender of this Agreement is
consistent with Lender’s scope of business and the provisions of Lender’s corporate bylaws and other organizational documents, and
Lender has obtained all necessary and proper approvals and authorizations for the execution and performance of this Agreement; and
2.1.3
This Agreement constitutes Lender’s legal, valid and binding obligations enforceable in accordance with its terms.
2.2
Between the date of this Agreement and the date of termination of this Agreement, Borrower hereby makes the following representations and
warranties:
2.2.1
Borrower has the legal capacity to execute and perform this Agreement. Borrower has obtained all necessary and proper approvals and
authorizations for the execution and performance of this Agreement;
2.2.2
This Agreement constitutes Borrower’s legal, valid and binding obligations enforceable in accordance with its terms; and
2.2.3
There are no disputes, litigations, arbitrations, administrative proceedings or any other legal proceedings relating to Borrower, nor are
there any potential disputes, litigations, arbitrations, administrative proceedings or any other legal proceedings relating to Borrower.
3
Borrower’s Covenants
3.1
As and when he becomes, and for so long as he remains a shareholder of Borrower Company, Borrower covenants irrevocably that during the
term of this Agreement, Borrower shall cause Borrower Company:
3.1.1
to strictly abide by the provisions of the Exclusive Option Agreement and the Exclusive Business Cooperation Agreement to which
the Borrower Company is a party, and to refrain from any action/omission that may affect the effectiveness and enforceability of the
Exclusive Option Agreement and Exclusive Business Cooperation Agreement.
30
3.1.2
at the request of Lender (or a party designated by Lender), to execute contracts/agreements on business cooperation with Lender (or a
party designated by Lender), and to strictly abide by such contracts/agreements;
3.1.3
to provide Lender with all of the information on Borrower Company’s business operations and financial condition at Lender’s request;
3.1.4
to immediately notify Lender of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings
relating to Borrower Company's assets, business or income;
3.1.5
at the request of Lender, to appoint any persons designated by Lender as directors of Borrower Company;
3.2
Borrower covenants that during the term of this Agreement, he shall:
3.2.1
endeavor to keep Borrower Company to engage in its Principle Businesses;
3.2.2
3.2.3
3.2.4
abide by the provisions of this Agreement, the Power of Attorney, the Equity Interest Pledge Agreementand the Exclusive Option
Agreement to which the Borrower is a party, perform his obligations under this Agreement, the Power of Attorney, the Equity Interest
Pledge Agreement and the Exclusive Option Agreement, and refrain from any action/omission that may affect the effectiveness and
enforceability of this Agreement, the Power of Attorney, the Equity Interest Pledge Agreement and the Exclusive Option Agreement;
not sell, transfer, mortgage or dispose of in any other manner the legal or beneficial interest in Borrower Equity Interest, or allow the
encumbrance thereon of any security interest or the encumbrance, except in accordance with the Equity Interest Pledge Agreement;
cause any shareholders’ meeting and/or the board of directors of Borrower Company not to approve the sale, transfer, mortgage or
disposition in any other manner of any legal or beneficial interest in Borrower Equity Interest, or allow the encumbrance thereon of
any security interest, except to Lender or Lender’s designated person;
3.2.5
cause any shareholders’ meeting and/or the board of directors of the Borrower Company not to approve the merger or consolidation of
Borrower Company with any person, or its acquisition of or investment in any person, without the prior written consent of Lender;
31
3.2.6
3.2.7
immediately notify Lender of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating
to Borrower Equity Interest;
to the extent necessary to maintain his ownership of the Borrower Equity Interest, execute all necessary or appropriate documents,
take all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defense
against all claims;
3.2.8
without the prior written consent of Lender, refrain from any action /omission that may have a material impact on the assets, business
and liabilities of Borrower Company;
3.2.9
appoint any designee of Lender as director of Borrower Company, at the request of Lender;
3.2.10
3.2.11
to the extent permitted by the laws of China, at the request of Lender at any time, promptly and unconditionally transfer all of
Borrower Equity Interest to Lender or Lender’s designated representative(s) at any time, and cause the other shareholders of Borrower
Company to waive their right of first refusal with respect to the share transfer described in this Section;
to the extent permitted by the laws of China, at the request of Lender at any time, cause the other shareholders of Borrower Company
to promptly and unconditionally transfer all of their equity interests to Lender or Lender’s designated representative(s) at any time,
and Borrower hereby waives his right of first refusal (if any) with respect to the share transfer described in this Section;
3.2.12
in the event that Lender purchases Borrower Equity Interest from Borrower in accordance with the provisions of the Exclusive Option
Agreement, use such purchase price obtained thereby to repay the Loan to Lender; and
3.2.13 without the prior written consent of Lender, not to cause Borrower Company to supplement, change, or amend its articles of
association in any manner, increase or decreases its registered capital or change its share capital structure in any manner.
4
Liability for Default
4.1
If Borrower conducts any material breach of any term of this Agreement, Lender shall have right to terminate this Agreement and require the
Borrower to compensate all damages; this Section 4.1 shall not prejudice any other rights of Lender herein.
32
4.2
4.3
If Lender conducts any breach of any term of this Agreement, Borrower shall not terminate this Agreement in any event unless otherwise
required by applicable laws.
In the event that Borrower fails to perform the repayment obligations set forth in this Agreement, Borrower shall pay overdue interest of
0.04.5% per day for the outstanding payment, until the day Borrower repays the full principal of the Loan, overdue interests and other payable
amounts.
5
Notices
5.1
All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by
registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such Party set forth below. A
confirmation copy of each notice shall also be sent by email. The dates on which notices shall be deemed to have been effectively given shall
be determined as follows:
5.1.1 Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the
date of delivery.
5.1.2 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an
automatically generated confirmation of transmission).
5.2
For the purpose of notices, the addresses of the Parties are as follows:
Lender:
Address:
Attn:
Phone:
Facsimile:
Borrower:
Address:
Phone:
Facsimile:
Beijing 58 Daojia Information Technology Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
Xiaohua Chen
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
+8610 64435588-8888
+8610-64459926
5.3
Any Party may at any time change its address for notices by a notice delivered to the other Party in accordance with the terms hereof.
33
6
Confidentiality
The Parties acknowledge that any oral or written information exchanged among them with respect to this Agreement is confidential information. The
Parties shall maintain the confidentiality of all such information, and without the written consent of other Party, either Party shall not disclose any
relevant information to any third party, except in the following circumstances: (a) such information is or will be in the public domain (provided that
this is not the result of a public disclosure by the receiving party); (b) information disclosed as required by applicable laws or rules or regulations of
any stock exchange; or (c) information required to be disclosed by any Party to its legal counsel or financial advisor regarding the transaction
contemplated hereunder, and such legal counsel or financial advisor are also bound by confidentiality duties similar to the duties in this section.
Disclosure of any confidential information by the staff members or agency hired by any Party shall be deemed disclosure of such confidential
information by such Party, which Party shall be held liable for breach of this Agreement. This section shall survive the termination of this Agreement
for any reason.
7
Governing Law and Resolution of Disputes
7.1
7.2
7.3
The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes shall be
governed by the laws of China.
In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute
through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party’s request to the
other Party for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic
and Trade Arbitration Commission for arbitration, in accordance with its then effective arbitration rules. The arbitration shall be conducted in
Beijing, and the language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.
Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration of any
dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this
Agreement and perform their respective obligations under this Agreement.
8 Miscellaneous
8.1
8.2
This Agreement should become effective upon execution by the Parties , and shall expire upon the date of full performance by the Parties of
their respective obligations under this Agreement.
This Agreement shall be written in both Chinese and English language in two copies, each Party having one copy with equal legal validity. In
case there is any conflict between the Chinese version and the English version, the Chinese version shall apply.
34
8.3
8.4
8.5
8.6
This Agreement may be amended or supplemented through written agreement by and between Lender and Borrower. Such written amendment
agreement and/or supplementary agreement executed by and between Lender and Borrower are an integral part of this Agreement, and shall
have the same legal validity as this Agreement.
In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance
with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or
compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective
provisions that accomplish to the greatest extent permitted by law the intentions of the Parties, and the economic effect of such effective
provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.
The attachments (if any) to this Agreement shall be an integral part of this Agreement and shall have the same legal validity as this Agreement.
Any obligations that occur or that are due as a result of this Agreement upon the expiration or early termination of this Agreement shall survive
the expiration or early termination thereof. The provisions of Sections 4, 6, 7 and this Section 8.6 shall survive the termination of this
Agreement.
35
IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Loan Agreement as of the date firs above written.
Lender: Beijing 58 Daojia Information Technology Co., Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
Borrower: Xiaohua Chen
By:
/s/ Xiaohua Chen
36
Exclusive Business Cooperation Agreement
Exhibit 4.31
This Exclusive Business Cooperation Agreement (this “Agreement”) is made and entered into by and between the following parties on August 6,
2015 in Beijing, the People’s Republic of China (“China” or the “PRC”).
Party A:
Address:
Party B:
Address:
Beijing Yangguang Gudi Science Development Co., Ltd
Room 1811, 18/F, Buidlikng No.2. #1 Shangdi 10th Avenue, Haididan District, Beijing
Beijing Shan Jing Ke Chuang Network Techonology Co., Ltd
No. 6 Anfu Road, Houshayu Town, Shunyi District, Beijing
Each of Party A and Party B shall be hereinafter referred to as a “Party” respectively, and as the “Parties” collectively.
Whereas,
1.
2.
Party A is a wholly foreign owned enterprise established in China, and has the necessary resources to provide technical and consulting services;
Party B is a company established in China with exclusively domestic capital and is permitted to engage in home services and other business by
relevant PRC government authorities. The businesses conducted by Party B currently and any time during the term of this Agreement are
collectively referred to as the “Principal Business”;
1
3.
Party A is willing to provide Party B with technical support, consulting services and other services on exclusive basis in relation to the Principal
Business during the term of this Agreement, utilizing its advantages in technology, human resources, and information, and Party B is willing to
accept such services provided by Party A or Party A's designee(s), each on the terms set forth herein.
Now, therefore, through mutual discussion, the Parties have reached the following agreements:
1.
Services Provided by Party A
1.1
Party B hereby appoints Party A as Party B's exclusive services provider to provide Party B with comprehensive technical support,
consulting services and other services during the term of this Agreement, in accordance with the terms and conditions of this Agreement,
including but not limited to the follows:
(1)
(2)
(3)
(4)
Licensing Party B to use any software legally owned by Party A;
Development, maintenance and update of software involved in Party B’s business;
Design, installation, daily management, maintenance and updating of network system, hardware and database design;
Technical support and training for employees of Party B;
2
(5)
(6)
(7)
(8)
(9)
Providing business management consultation for Party B;
Providing marketing and promotion services for Party B;
Providing customer order management and customer services for Party B;
Leasing of equipment or properties; and
Other services requested by Party B from time to time to the extent permitted under PRC law.
1.2
Party B agrees to accept all the services provided by Party A. Party B further agrees that unless with Party A's prior written consent,
during the term of this Agreement, Party B shall not directly or indirectly accept the same or any similar services provided by any third
party and shall not establish similar corporation relationship with any third party regarding the matters contemplated by this
Agreement. Party A may appoint other parties, who may enter into certain agreements described in Section 1.3 with Party B, to provide
Party B with the services under this Agreement.
1.3
Service Providing Methodology
3
1.3.1
1.3.2
1.3.3
Party A and Party B agree that during the term of this Agreement, where necessary, Party B may enter into further service agreements
with Party A or any other party designated by Party A, which shall provide the specific contents, manner, personnel, and fees for the
specific services.
To fulfill this Agreement, Party A and Party B agree that during the term of this Agreement, where necessary, Party B may enter into
equipment or property leases with Party A or any other party designated by Party A which shall permit Party B to use Party A's relevant
equipment or property based on the needs of the business of Party B.
Party B hereby grants to Party A an irrevocable and exclusive option to purchase from Party B, at Party A’s sole discretion, any or all of
the assets and business of Party B, to the extent permitted under PRC law, at the lowest purchase price permitted by PRC law. The
Parties shall then enter into a separate assets or business transfer agreement, specifying the terms and conditions of the transfer of the
assets.
2.
The Calculation and Payment of the Service Fees
2.1
The fees payable by Party B to Party A during the term of this Agreement shall be calculated as follows:
4
2.1.1
Party B shall pay service fee to Party A in each month. The service fee for each month shall consist of management fee and fee for
services provided, which shall be determined by the Parties through negotiation after considering:
(1)
(2)
(3)
(4)
(5)
Complexity and difficulty of the services provided by Party A;
Title of and time consumed by employees of Party A providing the services;
Contents and value of the services provided by Party A;
Market price of the same type of services;
Operation conditions of the Party B.
2.1.2
If Party A transfers technology to Party B or develops software or other technology as entrusted by Party B or leases equipments or
properties to Party B, the technology transfer price, development fees or rent shall be determined by the Parties based on the actual
situations.
5
3.
Intellectual Property Rights and Confidentiality Clauses
3.1
3.2
Party A shall have exclusive and proprietary ownership, rights and interests in any and all intellectual properties arising out of or created
during the performance of this Agreement, including but not limited to copyrights, patents, patent applications, software, technical
secrets, trade secrets and others. Party B shall execute all appropriate documents, take all appropriate actions, submit all filings and/or
applications, render all appropriate assistance and otherwise conduct whatever is necessary as deemed by Party A at its sole discretion for
the purposes of vesting any ownership, right or interest of any such intellectual property rights in Party A, and/or perfecting the
protections for any such intellectual property rights in Party A.
The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the
Parties in connection with the preparation and performance of this Agreement are regarded as confidential information. Each Party shall
maintain confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not
disclose any relevant confidential information to any third party, except for the information that: (a) is or will be in the public domain
(other than through the receiving Party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable
laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed
by any Party to its shareholders, directors, employees, legal counsels or financial advisors regarding the transaction contemplated
hereunder, provided that such shareholders, directors, employees, legal counsels or financial advisors shall be bound by the
confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the shareholders,
director, employees of or agencies engaged by any Party shall be deemed disclosure of such confidential information by such Party and
such Party shall be held liable for breach of this Agreement.
6
4.
Representations and Warranties
4.1
Party A hereby represents, warrants and covenants as follows:
4.1.1
4.1.2
Party A is a wholly foreign owned enterprise legally established and validly existing in accordance with the laws of China; Party
A or the service providers designated by Party A will obtain all government permits and licenses for providing the service under
this Agreement before providing such services.
Party A has taken all necessary corporate actions, obtained all necessary authorizations as well as all consents and approvals
from third parties and government agencies (if required) for the execution, delivery and performance of this Agreement. Party
A’s execution, delivery and performance of this Agreement do not violate any explicit requirements under any law or regulation.
4.1.3
This Agreement constitutes Party A’s legal, valid and binding obligations, enforceable against it in accordance with its terms.
7
4.2
Party B hereby represents, warrants and covenants as follows:
4.2.1
4.2.2
Party B is a company legally established and validly existing in accordance with the laws of China and has obtained and will
maintain all permits and licenses for engaging in the Principal Business in a timely manner.
Party B has taken all necessary corporate actions, obtained all necessary authorizations as well as all consents and approvals
from third parties and government agencies (if required) for the execution, delivery and performance of this Agreement. Party
B’s execution, delivery and performance of this Agreement do not violate any explicit requirements under any law or regulation.
4.2.3
This Agreement constitutes Party B’'s legal, valid and binding obligations, and shall be enforceable against it in accordance with
its terms.
4.2.4 Without the consent from Party A in writing, Party B shall not change the current shareholding structure of Party B by any ways,
and shall not conduct any contractual joint venture, leasing management, merger, division, any other arrangement to change the
model of business operation, or ownership structure, and shall not dispose all or substantial parts of the assets or equity interest
of Party B by transfer, sale or equity investment or any other ways.
4.2.5
Unless the written consent from Party A is obtained, Party B shall not enter into any other agreements or arrangements which are
conflict with this agreement or may impair Party A’s rights and interests under this agreement.
8
4.2.6
In order to ensure the fulfillment of the obligations and liabilities of both Party A and Party B under this agreement as well as the
payment of all the amounts payable by Party B to Party A, Party B hereby agrees that Party B shall not conduct any transactions
which may substantially impact its assets, obligations, rights or the operation of the company, unless the prior written consent is
obtained from Party A.
5.
Term of Agreement
5.1
5.2
This Agreement shall become effective upon execution by the Parties. Unless terminated in accordance with the provisions of this
Agreement or terminated in writing by Party A, this Agreement shall remain effective.
During the term of this Agreement, each Party shall renew its operation term prior to the expiration thereof so as to enable this Agreement
to remain effective. This Agreement shall be terminated upon the expiration of the operation term of a Party if the application for
renewal of its operation term is not approved by relevant government authorities.
5.3
The rights and obligations of the Parties under Sections 3, 6, 7 and this Section 5.3 shall survive the termination of this Agreement.
9
6.
Governing Law and Resolution of Disputes
6.1
6.2
6.3
The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes
hereunder shall be governed by the laws of China.
In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute
through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party's request
to the other Party for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China
International Economic and Trade Arbitration Commission for arbitration, in accordance with its arbitration rules. The arbitration shall
be conducted in Beijing. The arbitration award shall be final and binding on both Parties.
Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration
of any dispute, except for the matters under dispute, the Parties shall continue to exercise their respective rights under this Agreement and
perform their respective obligations under this Agreement.
7.
Breach of Agreement and Indemnification
7.1
If Party B conducts any material breach of any term of this Agreement, Party A shall have right to terminate this Agreement and/or
require Party B to indemnify all damages; this Section 7.1 shall not prejudice any other rights of Party A herein.
10
7.2
7.3
Unless otherwise required by applicable laws, Party B shall not have any right to terminate this Agreement in any event.
Party B shall indemnify and hold harmless Party A from any losses, injuries, obligations or expenses caused by any lawsuit, claims or
other demands against Party A arising from or caused by the services provided by Party A to Party B pursuant this Agreement, except
where such losses, injuries, obligations or expenses arise from the gross negligence or willful misconduct of Party A.
8.
Force Majeure
8.1
In the case of any force majeure events (“Force Majeure”) such as earthquake, typhoon, flood, fire, flu, war, strikes or any other events
that cannot be predicted and are unpreventable and unavoidable by the affected Party, which directly or indirectly causes the failure of
either Party to perform or completely perform this Agreement, then the Party affected by such Force Majeure shall give the other Party
written notices without any delay, and shall provide details of such event within 15 days after sending out such notice, explaining the
reasons for such failure of, partial or delay of performance.
11
8.2
If such Party claiming Force Majeure fails to notify the other Party and furnish it with proof pursuant to the above provision, such Party
shall not be excused from the non-performance of its obligations hereunder. The Party so affected by the event of Force Majeure shall
use reasonable efforts to minimize the consequences of such Force Majeure and to promptly resume performance hereunder whenever the
causes of such excuse are cured. Should the Party so affected by the event of Force Majeure fail to resume performance hereunder when
the causes of such excuse are cured, such Party shall be liable to the other Party.
8.3
In the event of Force Majeure, the Parties shall immediately consult with each other to find an equitable solution and shall use all
reasonable endeavours to minimize the consequences of such Force Majeure.
9.
Notices
9.1
All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent
by registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such Party set forth
below. A confirmation copy of each notice shall also be sent by email. The dates on which notices shall be deemed to have been
effectively given shall be determined as follows:
9.1.1
Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given
on the date of receipt or refusal at the address specified for notices.
12
9.1.2
Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced
by an automatically generated confirmation of transmission).
9.2
For the purpose of notices, the addresses of the Parties are as follows:
Party A:
Address:
Attn:
Phone:
Facsimile:
Party B:
Address:
Attn:
Phone:
Facsimile:
Beijing Yangguang Gudi Science Development Co., Ltd
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District,
Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
Beijing Shan Jing Ke Chuang Network Techonology Co., Ltd
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District,
Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
9.3
Any Party may at any time change its address for notices by a notice delivered to the other Party in accordance with the terms hereof.
13
10.
Assignment
10.1 Without Party A's prior written consent, Party B shall not assign its rights and obligations under this Agreement to any third party.
10.2
Party B agrees that Party A may assign its obligations and rights under this Agreement to any third party and in case of such assignment,
Party A is only required to give written notice to Party B and does not need any consent from Party B for such assignment.
11.
Severability
In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance
with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or
compromised in any aspect. The Parties shall negotiate in good faith to replace such invalid, illegal or unenforceable provisions with effective
provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective
provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.
14
12.
Amendments and Supplements
Any amendments and supplements to this Agreement shall be in writing. The amendment agreements and supplementary agreements that have
been signed by the Parties and relate to this Agreement shall be an integral part of this Agreement and shall have the same legal validity as this
Agreement.
13.
Language and Counterparts
This Agreement is written in Chinese language in two copies, each Party having one copy. The Chinese version and English version shall have
equal legal validity.
The Remainder of this page is intentionally left blank
15
IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Exclusive Business Cooperation Agreement as of the
date first above written.
Party A:
Beijing Yangguang Gudi Science Development Co., Ltd
By:
/s/ Beijing Yangguang Gudi Science Development Co., Ltd
Legal Representative
Party B:
Beijing Shan Jing Ke Chuang Network Techonology Co., Ltd.
By:
/s/ Beijing Shan Jing Ke Chuang Network Techonology Co., Ltd.
Legal Representative
Equity Interest Pledge Agreement
Exhibit 4.32
This Equity Interest Pledge Agreement (this “Agreement”) has been executed by and among the following parties on August 6, 2015 in Beijing, the
People’s Republic of China (“China” or the “PRC”):
Party A:
Beijing Yangguang Gudi Science Development Co., Ltd., (hereinafter “Pledgee”) a wholly foreign owned enterprise, organized and
existing under the laws of the PRC, with its address at Room 1811, 18/F, Building No.2, #1 Shangdi 10th Avenue, Haidian District, Beijing,
PRC;
Party B:
58 Co., Ltd., (hereinafter “Pledgor”) a limited liability company organized and existing under the laws of the PRC, with its address at Room
210-03, Office Building, Nangang Industry Zone, Economic and Technological Development District, Tianjin, PRC; and
Party C:
Beijing Shan Jing Ke Chuang Network Technology Co., Ltd., a limited liability company organized and existing under the laws of the
PRC, with its address at No.6, Anfu Road, Houshayu Town, Shunyi District, Beijing, PRC.
In this Agreement, each of Pledgee, Pledgor and Party C shall be referred to as a "Party" respectively, and they shall be collectively referred to as the
"Parties".
Whereas:
1. Pledgor is a citizen of China who as of the date hereof holds 49.00% of equity interests of Party C, representing RMB18,967,742 in the registered
capital of Party C. Party C is a limited liability company registered in Beijing, China, engaging in Internet information services and advertising
services. Party C acknowledges the respective rights and obligations of Pledgor and Pledgee under this Agreement, and intends to provide any
necessary assistance in registering the Pledge;
1
2. Pledgee is a wholly foreign-owned enterprise registered in China. Pledgee and Party C partially owned by Pledgor have executed an Exclusive
Technology Consultant and Service Agreement (as defined below) in Beijing; Party C, Pledgee and Pledgor have executed an Exclusive Option
Agreement (as defined below); Pledgee and Pledgor have executed a Loan Agreement (as defined below); and Pledgor has executed a Power of
Attorney to Pledgee.
3. To ensure that Party C and Pledgor fully perform their obligations under the Exclusive Technology Consultant and Service Agreement, the Exclusive
Option Agreement, the Loan Agreement and the Power of Attorney, Pledgor hereby pledges to the Pledgee all of the equity interest he holds in Party C
as security for Party C’s and Pledgor’s obligations under the Exclusive Business Cooperation Agreements, the Exclusive Option Agreement, the Loan
Agreement and the Power of Attorney.
To perform the provisions of the Transaction Documents, the Parties have mutually agreed to execute this Agreement upon the following terms.
1. Definitions
Unless otherwise provided herein, the terms below shall have the following meanings:
1.1
Pledge: shall refer to the security interest granted by Pledgor to Pledgee pursuant to Section 2 of this Agreement, i.e., the right of Pledgee to be
compensated on a preferential basis with the conversion, auction or sales price of the Equity Interest.
1.2
Equity Interest: shall refer to all of the equity interest now held and hereafter acquired by Pledgor in Party C.
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1.3
Term of Pledge: shall refer to the term set forth in Section 3.2 of this Agreement.
1.4
1.5
1.6
Transaction Documents: shall refer to the Exclusive Technology Consultant and Service Agreement executed by and between Party C and
Pledgee on January 18, 2012 (the “Exclusive Technology Consultant Agreement”), the Exclusive Option Agreement executed by and among
Party C, Pledgee and Pledgor on August 6, 2015 (the “Exclusive Option Agreement”), the Loan Agreement executed by and between Pledgee
and Pledgor on August 6, 2015 (the “Loan Agreement”), Power of Attorney executed on August 6, 2015 by Pledgor (the “Power of Attorney”)
and any modification, amendment and restatement to the aforementioned documents.
Contract Obligation: shall refer to all the obligations of Pledgor under the Exclusive Option Agreement, the Power of Attorney, the Loan
Agreement and this Agreement; all the obligations of Party C under the Exclusive Technology Consultant Agreement, the Exclusive Option
Agreement and this Agreement.
Secured Indebtedness: shall refer to all the direct, indirect or derivative losses of Pledgee, including loss of expected profits, incurred as a result
of any Event of Default (as defined below). The amount of such loss shall be based on, including but not limited to the reasonable business plan
and profit forecast of Pledgee, the consulting and service fees payable to Pledgee under the Exclusive Technology Consultant Agreement and all
expenses occurred in connection with enforcement by Pledgee of Pledgor’s and/or Party C’s Contract Obligation.
1.7
Event of Default: shall refer to any of the circumstances set forth in Section 7 of this Agreement.
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1.8
Notice of Default: shall refer to the notice issued by Pledgee in accordance with this Agreement declaring an Event of Default.
2. The Pledge
2.1
2.2
2.3
2.4
Pledgor agrees to pledge all the Equity Interest as security for performance of the Contract Obligation and payment of the Secured Indebtedness
under this Agreement. Party C hereby assents that Pledgor pledges the Equity Interest to the Pledgee pursuant to this Agreement.
During the term of the Pledge, Pledgee is entitled to receive dividends distributed on the Equity Interest. Pledgor may receive dividends
distributed on the Equity Interest only with prior written consent from Pledgee. Dividends received by Pledgor on Equity Interest shall be,
subject to requirement of Pledgee, (1) deposited into an account designated and supervised by Pledgee and used to secure the Contract
Obligations and pay the Secured Indebtedness prior and in preference to make any other payment; or (2) unconditionally give to Pledgee or any
other person designated by Pledgee to the extent permitted under applicable PRC laws.
Pledgor may subscribe for capital increase in Party C only with prior written consent of Pledgee. Any equity interest obtained by the Pledgor in
future capital increase shall be deemed as Equity Interest as well.
In the event that Party C is required by PRC law to be liquidated or dissolved, any interest distributed to Pledgor upon Party C’s dissolution or
liquidation shall be (1) deposited into an account designate and supervised by Pledgee and used to secure the Contract Obligations and pay the
Secured Indebtedness prior and in preference to make any other payment; or (2) unconditionally give to Pledgee or any other person designated
by Pledgee to the extent permitted under applicable PRC laws.
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3. Term of Pledge
3.1
The Pledge shall become effective on such date when the pledge of the Equity Interest contemplated herein has been registered with relevant
administration for industry and commerce (the “AIC”). The Pledge shall be continuously valid until all Contract Obligations and Secured
Indebtedness have been fully performed and paid. Pledgor and Party C shall (1) register the Pledge in the shareholders' register of Party C within
3 business days following the execution of this Agreement, and (2) submit an application to the AIC for the registration of the Pledge of the
Equity Interest contemplated herein within 30 business days following the execution of this Agreement. The parties covenant that for the
purpose of registration of the Pledge, the parties hereto and all other shareholders of Party C shall submit to the AIC this Agreement or an equity
interest pledge contract in the form required by the AIC at the location of Party C which shall truly reflect the information of the Pledge
hereunder (the “AIC Pledge Contract”). For matters not specified in the AIC Pledge Contract, the parties shall be bound by the provisions of this
Agreement. Pledgor and Party C shall submit all necessary documents and complete all necessary procedures, as required by the PRC laws and
regulations and the relevant AIC, to ensure that the Pledge of the Equity Interest shall be registered with the AIC as soon as possible after filing.
3.2
During the Term of Pledge, in the event Pledgor and/or Party C fails to perform the Contract Obligation or pay Secured Indebtedness, Pledgee
shall have the right, but not the obligation, to exercise the Pledge in accordance with the provisions of this Agreement.
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4. Custody of Records for Equity Interest subject to Pledge
4.1
During the Term of Pledge set forth in this Agreement, Pledgor shall deliver to Pledgee's custody the capital contribution certificate for the
Equity Interest and the shareholders' register containing the Pledge within one week from the execution of this Agreement. Pledgee shall have
custody of such documents during the entire Term of Pledge set forth in this Agreement.
5. Representations and Warranties of Pledgor and Party C
As of the execution date of this Agreement, Pledgor and Party C hereby jointly and severally represent and warrant to Pledgee that:
5.1
Pledgor is the sole legal and beneficial owner of the Equity Interest.
5.2
Pledgee shall have the right to dispose of and transfer the Equity Interest in accordance with the provisions set forth in this Agreement.
5.3
Except for the Pledge, Pledgor has not placed any security interest or other encumbrance on the Equity Interest.
5.4
5.5
Pledgor and Party C have obtained any and all approvals and consents from applicable government authorities and third parties (if required) for
execution, delivery and performance of this Agreement.
The execution, delivery and performance of this Agreement will not: (i) violate any relevant PRC laws; (ii) conflict with Party C’s articles of
association or other constitutional documents; (iii) result in any breach of or constitute any default under any contract or instrument to which it
is a party or by which it is otherwise bound; (iv) result in any violation of any condition for the grant and/or maintenance of any permit or
approval granted to any Party; or (v) cause any permit or approval granted to any Party to be suspended, cancelled or attached with additional
conditions.
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6. Covenants of Pledgor and Party C
6.1
Pledgor and Party C hereby jointly and severally covenant to the Pledgee:
6.1.1
6.1.2
Pledgor shall not transfer the Equity Interest, place or permit the existence of any security interest or other encumbrance on the Equity
Interest or any portion thereof, without the prior written consent of Pledgee, except for the performance of the Transaction Documents;
Pledgor and Party C shall comply with the provisions of all laws and regulations applicable to the pledge of rights, and within 5 days of
receipt of any notice, order or recommendation issued or prepared by relevant competent authorities regarding the Pledge, shall present
the aforementioned notice, order or recommendation to Pledgee, and shall comply with the aforementioned notice, order or
recommendation or submit objections and representations with respect to the aforementioned matters upon Pledgee's reasonable request
or upon consent of Pledgee;
6.1.3
Pledgor and Party C shall promptly notify Pledgee of any event or notice received by Pledgor that may have an impact on Pledgee's
rights to the Equity Interest or any portion thereof, as well as any event or notice received by Pledgor that may have an impact on any
guarantees and other obligations of Pledgor arising out of this Agreement.
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6.2
6.3
6.1.4
Party C shall complete the registration procedures for extension of the term of operation within three (3) months prior to the expiration
of such term to maintain the validity of this Agreement.
Pledgor agrees that the rights acquired by Pledgee in accordance with this Agreement with respect to the Pledge shall not be interrupted or
harmed by Pledgor or any heirs or representatives of Pledgor or any other persons through any legal proceedings.
To protect or perfect the security interest granted by this Agreement for the Contract Obligation and Secured Indebtedness, Pledgor hereby
undertakes to execute in good faith and to cause other parties who have an interest in the Pledge to execute all certificates, agreements, deeds
and/or covenants required by Pledgee. Pledgor also undertakes to perform and to cause other parties who have an interest in the Pledge to
perform actions required by Pledgee, to facilitate the exercise by Pledgee of its rights and authority granted thereto by this Agreement, and to
enter into all relevant documents regarding ownership of Equity Interest with Pledgee or designee(s) of Pledgee (natural persons/legal persons).
Pledgor undertakes to provide Pledgee within a reasonable time with all notices, orders and decisions regarding the Pledge that are required by
Pledgee.
6.4
Pledgor hereby undertakes to comply with and perform all guarantees, promises, agreements, representations and conditions under this
Agreement. In the event of failure or partial performance of its guarantees, promises, agreements, representations and conditions, Pledgor shall
indemnify Pledgee for all losses resulting therefrom.
7. Event of Breach
7.1
The following circumstances shall be deemed Event of Default:
7.1.1
Pledgor’s any breach to any obligations under the Transaction Documents and/or this Agreement.
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7.1.2
Party C’s any breach to any obligations under the Transaction Documents and/or this Agreement.
7.2
7.3
Upon notice or discovery of the occurrence of any circumstances or event that may lead to the aforementioned circumstances described in
Section 7.1, Pledgor and Party C shall immediately notify Pledgee in writing accordingly.
Unless an Event of Default set forth in this Section 7.1 has been successfully resolved to Pledgee's satisfaction within twenty (20) days after the
Pledgee and /or Party C delivers a notice to the Pledgor requesting ratification of such Event of Default, Pledgee may issue a Notice of Default
to Pledgor in writing at any time thereafter, demanding the Pledgor to immediately exercise the Pledge in accordance with the provisions of
Section 8 of this Agreement.
8. Exercise of Pledge
8.1
Pledgee may issue a Notice of Default to Pledgor when exercising the Pledge.
8.2
Subject to the provisions of Section 7.3, Pledgee may exercise the right to enforce the Pledge at any time after the issuance of the Notice of
Default in accordance with Section 8.1. Once Pledgee elects to enforce the Pledge, Pledgor shall cease to be entitled to any rights or interests
associated with the Equity Interest.
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8.3
8.4
8.5
8.6
After Pledgee issues a Notice of Default Pledgee in accordance with Section 8.1, Pledgee may exercise any remedy measure under applicable
PRC laws, the Transaction Documents and this Agreement, including but not limited to be compensated in priority by the conversion of the
Equity Pledge or from the proceeds from auction or sale of the Equity Interest. The Pledgee shall have no liability for any loss incurred by its
duly exercise of such rights and powers.
The proceeds from exercise of the Pledge by Pledgee shall be used to pay for tax and expenses incurred by disposing the Equity Interest and
perform Contract Obligations and pay the Secured Indebtedness prior and in preference to any other payment. After the payment of the
aforementioned amounts, the remaining balance shall be returned to Pledgor or any other person who have rights to such balance under
applicable laws or be deposited to the local notary public office where Pledgor resides, with all expense incurred being borne by Pledgor. To the
extent permitted under applicable PRC laws, Pledgor shall unconditionally give the aforementioned proceeds to Pledgee or any other person
designated by Pledgee.
Pledgee has the right to exercise any remedy measure available simultaneously or in any order. Pledgee may exercise the right to be
compensated from in priority by the conversion of the Equity Pledge or from the proceeds from auction or sale of the Equity Interest under this
Agreement, without exercising any other remedy measure first.
Pledgee is entitled to designate an attorney or other representatives to exercise the Pledge on its behalf and Pledgor and Party C shall not raise
any objection to such exercise.
8.7 When Pledgee disposes of the Pledge in accordance with this Agreement, Pledgor and Party C shall provide necessary assistance to enable
Pledgee to enforce the Pledge in accordance with this Agreement.
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9. Breach of Agreement
9.1
9.2
If Pledgor or Party C conducts any material breach of any term of this Agreement, Pledgee shall have right to terminate this Agreement and
require Pledgor or Party C to compensate all damages; this Section 9 shall not prejudice any other rights of Pledgee herein;
If Pledgee conducts any breach of any term of this Agreement, Pledgor or Party C shall not terminate this Agreement in any event unless
otherwise required by applicable laws.
10. Assignment
10.1 Without Pledgee's prior written consent, Pledgor shall not have the right to assign or delegate its rights and obligations under this Agreement.
10.2 This Agreement shall be binding on Pledgor and its successors and permitted assigns, and shall be valid with respect to Pledgee and each of its
successors and assigns.
10.3 At any time, Pledgee may assign any and all of its rights and obligations under the Transaction Documents to its designee(s), in which case the
assigns shall have the rights and obligations of Pledgee under this Agreement, as if it were the original party to this Agreement. When the
Pledgee assigns the rights and obligations under the Business Cooperation Agreement, upon Pledgee's request, Pledgor and/or Party C shall
execute relevant agreements or other documents relating to such assignment.
10.4 In the event of a change in Pledgee due to an assignment, Pledgor and/or Party C shall, at the request of Pledgee, execute a new pledge
agreement with the new pledgee on the same terms and conditions as this Agreement, and register the same with the relevant AIC.
11
10.5 Pledgor and Party C shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by the Parties
hereto or any of them, including the Transaction Documents, perform the obligations hereunder and thereunder, and refrain from any
action/omission that may affect the effectiveness and enforceability thereof. Any remaining rights of Pledgor with respect to the Equity Interest
pledged hereunder shall not be exercised by Pledgor except in accordance with the written instructions of Pledgee.
11. Termination
11.1 Upon the fulfillment of all Contract Obligation and the full payment of all Secured Indebtedness by Pledgor and Party C, Pledgee shall release
the Pledge under this Agreement upon Pledgor’s request as soon as reasonably practicable and shall assist Pledgor to de-register the Pledge from
the shareholders’ register of Party C and with relevant PRC local administration for industry and commerce.
11.2 The provisions under Sections 9, 13, 14 and 11.2 herein of this Agreement shall survive the expiration or termination of this Agreement.
12. Handling Fees and Other Expenses
All fees and out of pocket expenses relating to this Agreement, including but not limited to legal costs, costs of production, stamp tax and any other
taxes and fees, shall be borne by Party C.
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13. Confidentiality
The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in
connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of
all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential
information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s
unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or
orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsels or
financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or financial advisors
shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff
members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which Party shall be held liable for
breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.
14. Governing Law and Resolution of Disputes
14.1 The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes hereunder
shall be governed by the laws of China.
14.2 In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through
friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party's request to the other
Parties for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and
Trade Arbitration Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in Beijing, and the
language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.
13
14.3 Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration of any
dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this
Agreement and perform their respective obligations under this Agreement.
15. Notices
15.1 All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by
registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such party set forth below. A
confirmation copy of each notice shall also be sent by E-mail. The dates on which notices shall be deemed to have been effectively given shall
be determined as follows:
15.2 Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the date of
delivery or refusal at the address specified for notices.
15.3 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an
automatically generated confirmation of transmission).
14
15.4 For the purpose of notices, the addresses of the Parties are as follows:
Party A:
Address:
Attn:
Phone:
Facsimile:
Party B:
Address:
Phone:
Facsimile:
Party C:
Address:
Attn:
Phone:
Facsimile:
Beijing Yangguang Gudi Science Development Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
58 Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
+8610 64435588-8888
+8610-64459926
Beijing Shan Jing Ke Chuang Network Technology Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
15.5 Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms hereof.
16. Severability
In the event that one or several of the provisions of this Contract are found to be invalid, illegal or unenforceable in any aspect in accordance with any
laws or regulations, the validity, legality or enforceability of the remaining provisions of this Contract shall not be affected or compromised in any
respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to
the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible
to the economic effect of those invalid, illegal or unenforceable provisions.
15
17. Attachments
The attachments set forth herein shall be an integral part of this Agreement.
18. Effectiveness
18.1 This Agreement shall become effective upon execution by the Parties.
18.2 Any amendments, changes and supplements to this Agreement shall be in writing and shall become effective upon completion of the
governmental filing procedures (if applicable) after the affixation of the signatures or seals of the Parties.
19. Language and Counterparts
This Agreement is written in Chinese and English in four copies. Pledgor, Pledgee and Party C shall hold one copy respectively and the other copy
shall be used for registration. Each copy of this Agreement shall have equal validity. In case there is any conflict between the Chinese version and the
English version, the Chinese version shall prevail.
The Remainder of this page is intentionally left blank
16
IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Equity Interest Pledge Agreement as of the date first
above written.
Party A: Beijing Yangguang Gudi Science Development Co., Ltd.
By:
Name:
Title:
/s/ Haoyong Yang
Haoyong Yang
Legal Representative
Party B:
58 Co. Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
Party C: Beijing Shan Jing Ke Chuang Network Technology Co., Ltd.
By:
Name:
Title:
/s/ Yang Liu
Yang Liu
Legal Representative
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Attachments:
1.
2.
3.
4.
5.
6.
Shareholders' Register of Party C;
The Capital Contribution Certificate for Party C;
Exclusive Technology Consultant and Service Agreement;
Loan Agreement;
Exclusive Option Agreement;
Power of Attorney.
18
Equity Interest Pledge Agreement
This Equity Interest Pledge Agreement (this “Agreement”) has been executed by and among the following parties on August 6, 2015 in Beijing, the
People’s Republic of China (“China” or the “PRC”):
Party A:
Beijing Yangguang Gudi Science Development Co., Ltd. (hereinafter “Pledgee”), a wholly foreign owned enterprise, organized and
existing under the laws of the PRC, with its address at Room 1811, 18/F, Building No.2, #1 Shangdi 10th Avenue, Haidian District, Beijing,
PRC;
Party B:
Yang Liu (hereinafter “Pledgor”), a citizen of China with Chinese Identification No.: ; and
Party C:
Beijing Shan Jing Ke Chuang Network Technology Co., Ltd., a limited liability company organized and existing under the laws of the
PRC, with its address at No.6, Anfu Road, Houshayu Town, Shunyi District, Beijing, PRC.
In this Agreement, each of Pledgee, Pledgor and Party C shall be referred to as a "Party" respectively, and they shall be collectively referred to as the
"Parties".
Whereas:
1. Pledgor is a citizen of China who as of the date hereof holds 30.69% of equity interests of Party C, representing RMB11,880,000 in the registered
capital of Party C. Party C is a limited liability company registered in Beijing, China, engaging in Internet information services and advertising
services. Party C acknowledges the respective rights and obligations of Pledgor and Pledgee under this Agreement, and intends to provide any
necessary assistance in registering the Pledge;
1
2. Pledgee is a wholly foreign-owned enterprise registered in China. Pledgee and Party C partially owned by Pledgor have executed an Exclusive
Technology Consultant Agreement (as defined below) in Beijing; Party C, Pledgee and Pledgor have executed an Exclusive Option Agreement (as
defined below); Pledgee and Pledgor have executed a Loan Agreement (as defined below); and Pledgor has executed a Power of Attorney to Pledgee.
3. To ensure that Party C and Pledgor fully perform their obligations under the Exclusive Technology Consultant Agreement, the Exclusive Option
Agreement, the Loan Agreement and the Power of Attorney, Pledgor hereby pledges to the Pledgee all of the equity interest he holds in Party C as
security for Party C’s and Pledgor’s obligations under the Exclusive Business Cooperation Agreements, the Exclusive Option Agreement, the Loan
Agreement and the Power of Attorney.
To perform the provisions of the Transaction Documents, the Parties have mutually agreed to execute this Agreement upon the following terms.
1. Definitions
Unless otherwise provided herein, the terms below shall have the following meanings:
1.1
Pledge: shall refer to the security interest granted by Pledgor to Pledgee pursuant to Article 2 of this Agreement, i.e., the right of Pledgee to be
compensated on a preferential basis with the conversion, auction or sales price of the Equity Interest.
1.2
Equity Interest: shall refer to all of the equity interest now held and hereafter acquired by Pledgor in Party C.
1.3
Term of Pledge: shall refer to the term set forth in Section 3.2 of this Agreement.
2
1.4
1.5
1.6
Transaction Documents: shall refer to the Exclusive Technology Consultant and Service Agreement executed by and between Party C and
Pledgee on January 18, 2012 (the “Exclusive Technology Consultant Agreement”), the Exclusive Option Agreement executed by and among
Party C, Pledgee and Pledgor on August 6, 2015 (the “Exclusive Option Agreement”), the Loan Agreement executed by and between Pledgee
and Pledgor on August 6, 2015 (the “Loan Agreement”), Power of Attorney executed on August 6, 2015 by Pledgor (the “Power of Attorney”)
and any modification, amendment and restatement to the aforementioned documents.
Contract Obligation: shall refer to all the obligations of Pledgor under the Exclusive Option Agreement, the Power of Attorney, the Loan
Agreement and this Agreement; all the obligations of Party C under the Exclusive Cooperation Agreement, the Exclusive Option Agreement
and this Agreement.
Secured Indebtedness: shall refer to all the direct, indirect or derivative losses of Pledgee, including loss of expected profits, incurred as a result
of any Event of Default (as defined below). The amount of such loss shall be based on, including but not limited to the reasonable business plan
and profit forecast of Pledgee, the consulting and service fees payable to Pledgee under the Exclusive Business Cooperation Agreement and all
expenses occurred in connection with enforcement by Pledgee of Pledgor’s and/or Party C’s Contract Obligation.
1.7
Event of Default: shall refer to any of the circumstances set forth in Article 7 of this Agreement.
1.8
Notice of Default: shall refer to the notice issued by Pledgee in accordance with this Agreement declaring an Event of Default.
3
2. The Pledge
2.1
2.2
2.3
2.4
Pledgor agrees to pledge all the Equity Interest as security for performance of the Contract Obligation and payment of the Secured Indebtedness
under this Agreement. Party C hereby assents that Pledgor pledges the Equity Interest to the Pledgee pursuant to this Agreement.
During the term of the Pledge, Pledgee is entitled to receive dividends distributed on the Equity Interest. Pledgor may receive dividends
distributed on the Equity Interest only with prior written consent from Pledgee. Dividends received by Pledgor on Equity Interest shall be,
subject to requirement of Pledgee, (1) deposited into an account designated and supervised by Pledgee and used to secure the Contract
Obligations and pay the Secured Indebtedness prior and in preference to make any other payment; or (2) unconditionally give to Pledgee or any
other person designated by Pledgee to the extent permitted under applicable PRC laws.
Pledgor may subscribe for capital increase in Party C only with prior written consent of Pledgee. Any equity interest obtained by the Pledgor in
future capital increase shall be deemed as Equity Interest as well.
In the event that Party C is required by PRC law to be liquidated or dissolved, any interest distributed to Pledgor upon Party C’s dissolution or
liquidation shall be (1) deposited into an account designate and supervised by Pledgee and used to secure the Contract Obligations and pay the
Secured Indebtedness prior and in preference to make any other payment; or (2) unconditionally give to Pledgee or any other person designated
by Pledgee to the extent permitted under applicable PRC laws.
4
3. Term of Pledge
3.1
The Pledge shall become effective on such date when the pledge of the Equity Interest contemplated herein has been registered with relevant
administration for industry and commerce (the “AIC”). The Pledge shall be continuously valid until all Contract Obligations and Secured
Indebtedness have been fully performed and paid. Pledgor and Party C shall (1) register the Pledge in the shareholders' register of Party C within
3 business days following the execution of this Agreement, and (2) submit an application to the AIC for the registration of the Pledge of the
Equity Interest contemplated herein within 30 business days following the execution of this Agreement. The parties covenant that for the
purpose of registration of the Pledge, the parties hereto and all other shareholders of Party C shall submit to the AIC this Agreement or an equity
interest pledge contract in the form required by the AIC at the location of Party C which shall truly reflect the information of the Pledge
hereunder (the “AIC Pledge Contract”). For matters not specified in the AIC Pledge Contract, the parties shall be bound by the provisions of this
Agreement. Pledgor and Party C shall submit all necessary documents and complete all necessary procedures, as required by the PRC laws and
regulations and the relevant AIC, to ensure that the Pledge of the Equity Interest shall be registered with the AIC as soon as possible after filing.
3.2
During the Term of Pledge, in the event Pledgor and/or Party C fails to perform the Contract Obligation or pay Secured Indebtedness, Pledgee
shall have the right, but not the obligation, to exercise the Pledge in accordance with the provisions of this Agreement.
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4. Custody of Records for Equity Interest subject to Pledge
4.1
During the Term of Pledge set forth in this Agreement, Pledgor shall deliver to Pledgee's custody the capital contribution certificate for the
Equity Interest and the shareholders' register containing the Pledge within one week from the execution of this Agreement. Pledgee shall have
custody of such documents during the entire Term of Pledge set forth in this Agreement.
5. Representations and Warranties of Pledgor and Party C
As of the execution date of this Agreement, Pledgor and Party C hereby jointly and severally represent and warrant to Pledgee that:
5.1
Pledgor is the sole legal and beneficial owner of the Equity Interest.
5.2
Pledgee shall have the right to dispose of and transfer the Equity Interest in accordance with the provisions set forth in this Agreement.
5.3
Except for the Pledge, Pledgor has not placed any security interest or other encumbrance on the Equity Interest.
5.4
5.5
Pledgor and Party C have obtained any and all approvals and consents from applicable government authorities and third parties (if required) for
execution, delivery and performance of this Agreement.
The execution, delivery and performance of this Agreement will not: (i) violate any relevant PRC laws; (ii) conflict with Party C’s articles of
association or other constitutional documents; (iii) result in any breach of or constitute any default under any contract or instrument to which it
is a party or by which it is otherwise bound; (iv) result in any violation of any condition for the grant and/or maintenance of any permit or
approval granted to any Party; or (v) cause any permit or approval granted to any Party to be suspended, cancelled or attached with additional
conditions.
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6. Covenants of Pledgor and Party C
6.1
Pledgor and Party C hereby jointly and severally covenant to the Pledgee:
6.1.1
6.1.2
Pledgor shall not transfer the Equity Interest, place or permit the existence of any security interest or other encumbrance on the Equity
Interest or any portion thereof, without the prior written consent of Pledgee, except for the performance of the Transaction Documents;
Pledgor and Party C shall comply with the provisions of all laws and regulations applicable to the pledge of rights, and within 5 days of
receipt of any notice, order or recommendation issued or prepared by relevant competent authorities regarding the Pledge, shall present
the aforementioned notice, order or recommendation to Pledgee, and shall comply with the aforementioned notice, order or
recommendation or submit objections and representations with respect to the aforementioned matters upon Pledgee's reasonable request
or upon consent of Pledgee;
6.1.3
Pledgor and Party C shall promptly notify Pledgee of any event or notice received by Pledgor that may have an impact on Pledgee's
rights to the Equity Interest or any portion thereof, as well as any event or notice received by Pledgor that may have an impact on any
guarantees and other obligations of Pledgor arising out of this Agreement.
6.1.4
Party C shall complete the registration procedures for extension of the term of operation within three (3) months prior to the expiration
of such term to maintain the validity of this Agreement.
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6.2
6.3
Pledgor agrees that the rights acquired by Pledgee in accordance with this Agreement with respect to the Pledge shall not be interrupted or
harmed by Pledgor or any heirs or representatives of Pledgor or any other persons through any legal proceedings.
To protect or perfect the security interest granted by this Agreement for the Contract Obligation and Secured Indebtedness, Pledgor hereby
undertakes to execute in good faith and to cause other parties who have an interest in the Pledge to execute all certificates, agreements, deeds
and/or covenants required by Pledgee. Pledgor also undertakes to perform and to cause other parties who have an interest in the Pledge to
perform actions required by Pledgee, to facilitate the exercise by Pledgee of its rights and authority granted thereto by this Agreement, and to
enter into all relevant documents regarding ownership of Equity Interest with Pledgee or designee(s) of Pledgee (natural persons/legal persons).
Pledgor undertakes to provide Pledgee within a reasonable time with all notices, orders and decisions regarding the Pledge that are required by
Pledgee.
6.4
Pledgor hereby undertakes to comply with and perform all guarantees, promises, agreements, representations and conditions under this
Agreement. In the event of failure or partial performance of its guarantees, promises, agreements, representations and conditions, Pledgor shall
indemnify Pledgee for all losses resulting therefrom.
7. Event of Breach
7.1
The following circumstances shall be deemed Event of Default:
7.1.1
Pledgor’s any breach to any obligations under the Transaction Documents and/or this Agreement.
7.1.2
Party C’s any breach to any obligations under the Transaction Documents and/or this Agreement.
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7.2
7.3
Upon notice or discovery of the occurrence of any circumstances or event that may lead to the aforementioned circumstances described in
Section 7.1, Pledgor and Party C shall immediately notify Pledgee in writing accordingly.
Unless an Event of Default set forth in this Section 7.1 has been successfully resolved to Pledgee's satisfaction within twenty (20) days after the
Pledgee and /or Party C delivers a notice to the Pledgor requesting ratification of such Event of Default, Pledgee may issue a Notice of Default
to Pledgor in writing at any time thereafter, demanding the Pledgor to immediately exercise the Pledge in accordance with the provisions of
Article 8 of this Agreement.
8. Exercise of Pledge
8.1
Pledgee may issue a Notice of Default to Pledgor when exercising the Pledge.
8.2
8.3
Subject to the provisions of Section 7.3, Pledgee may exercise the right to enforce the Pledge at any time after the issuance of the Notice of
Default in accordance with Section 8.1. Once Pledgee elects to enforce the Pledge, Pledgor shall cease to be entitled to any rights or interests
associated with the Equity Interest.
After Pledgee issues a Notice of Default Pledgee in accordance with Section 8.1, Pledgee may exercise any remedy measure under applicable
PRC laws, the Transaction Documents and this Agreement, including but not limited to be compensated in priority by the conversion of the
Equity Pledge or from the proceeds from auction or sale of the Equity Interest. The Pledgee shall have no liability for any loss incurred by its
duly exercise of such rights and powers.
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8.4
8.5
8.6
The proceeds from exercise of the Pledge by Pledgee shall be used to pay for tax and expenses incurred by disposing the Equity Interest and
perform Contract Obligations and pay the Secured Indebtedness prior and in preference to any other payment. After the payment of the
aforementioned amounts, the remaining balance shall be returned to Pledgor or any other person who have rights to such balance under
applicable laws or be deposited to the local notary public office where Pledgor resides, with all expense incurred being borne by Pledgor. To the
extent permitted under applicable PRC laws, Pledgor shall unconditionally give the aforementioned proceeds to Pledgee or any other person
designated by Pledgee.
Pledgee has the right to exercise any remedy measure available simultaneously or in any order. Pledgee may exercise the right to be
compensated from in priority by the conversion of the Equity Pledge or from the proceeds from auction or sale of the Equity Interest under this
Agreement, without exercising any other remedy measure first.
Pledgee is entitled to designate an attorney or other representatives to exercise the Pledge on its behalf and Pledgor and Party C shall not raise
any objection to such exercise.
8.7 When Pledgee disposes of the Pledge in accordance with this Agreement, Pledgor and Party C shall provide necessary assistance to enable
Pledgee to enforce the Pledge in accordance with this Agreement.
9. Breach of Agreement
9.1
If Pledgor or Party C conducts any material breach of any term of this Agreement, Pledgee shall have right to terminate this Agreement and
require Pledgor or Party C to compensate all damages; this Section 9 shall not prejudice any other rights of Pledgee herein;
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9.2
If Pledgee conducts any breach of any term of this Agreement, Pledgor or Party C shall not terminate this Agreement in any event unless
otherwise required by applicable laws.
10. Assignment
10.1 Without Pledgee's prior written consent, Pledgor shall not have the right to assign or delegate its rights and obligations under this Agreement.
10.2 This Agreement shall be binding on Pledgor and its successors and permitted assigns, and shall be valid with respect to Pledgee and each of its
successors and assigns.
10.3 At any time, Pledgee may assign any and all of its rights and obligations under the Transaction Documents to its designee(s), in which case the
assigns shall have the rights and obligations of Pledgee under this Agreement, as if it were the original party to this Agreement. When the
Pledgee assigns the rights and obligations under the Business Cooperation Agreement, upon Pledgee's request, Pledgor and/or Party C shall
execute relevant agreements or other documents relating to such assignment.
10.4 In the event of a change in Pledgee due to an assignment, Pledgor and/or Party C shall, at the request of Pledgee, execute a new pledge
agreement with the new pledgee on the same terms and conditions as this Agreement, and register the same with the relevant AIC.
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10.5 Pledgor and Party C shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by the Parties
hereto or any of them, including the Transaction Documents, perform the obligations hereunder and thereunder, and refrain from any
action/omission that may affect the effectiveness and enforceability thereof. Any remaining rights of Pledgor with respect to the Equity Interest
pledged hereunder shall not be exercised by Pledgor except in accordance with the written instructions of Pledgee.
11. Termination
11.1 Upon the fulfillment of all Contract Obligation and the full payment of all Secured Indebtedness by Pledgor and Party C, Pledgee shall release
the Pledge under this Agreement upon Pledgor’s request as soon as reasonably practicable and shall assist Pledgor to de-register the Pledge from
the shareholders’ register of Party C and with relevant PRC local administration for industry and commerce.
11.2 The provisions under Sections 9, 13, 14 and 11.2 herein of this Agreement shall survive the expiration or termination of this Agreement.
12. Handling Fees and Other Expenses
All fees and out of pocket expenses relating to this Agreement, including but not limited to legal costs, costs of production, stamp tax and any other
taxes and fees, shall be borne by Party C.
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13. Confidentiality
The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in
connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of
all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential
information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s
unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or
orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsels or
financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or financial advisors
shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff
members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which Party shall be held liable for
breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.
14. Governing Law and Resolution of Disputes
14.1 The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes hereunder
shall be governed by the laws of China.
14.2
In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through
friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party's request to the other
Parties for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and
Trade Arbitration Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in Beijing, and the
language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.
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14.3 Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration of any
dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this Agreement
and perform their respective obligations under this Agreement.
15. Notices
15.1 All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by
registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such party set forth below. A
confirmation copy of each notice shall also be sent by E-mail. The dates on which notices shall be deemed to have been effectively given shall
be determined as follows:
15.2 Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the date of
delivery or refusal at the address specified for notices.
15.3 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an
automatically generated confirmation of transmission).
15.4 For the purpose of notices, the addresses of the Parties are as follows:
Party A:
Beijing Yangguang Gudi Science Development Co., Ltd.
Address:
Attn:
Phone:
Facsimile:
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
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Party B:
Address:
Phone:
Facsimile:
Party C:
Address:
Attn:
Phone:
Facsimile:
Yang Liu
Beijing Shan Jing Ke Chuang Network Technology Co., Ltd.
No.6, Anfu Road, Houshayu Town, Shunyi District, Beijing, PRC
Jinbo Yao
+8610 64435588-8888
+8610-64459926
15.5 Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms hereof.
16. Severability
In the event that one or several of the provisions of this Contract are found to be invalid, illegal or unenforceable in any aspect in accordance with any
laws or regulations, the validity, legality or enforceability of the remaining provisions of this Contract shall not be affected or compromised in any
respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to
the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible
to the economic effect of those invalid, illegal or unenforceable provisions.
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17. Attachments
The attachments set forth herein shall be an integral part of this Agreement.
18. Effectiveness
18.1 This Agreement shall become effective upon execution by the Parties.
18.2 Any amendments, changes and supplements to this Agreement shall be in writing and shall become effective upon completion of the
governmental filing procedures (if applicable) after the affixation of the signatures or seals of the Parties.
19. Language and Counterparts
This Agreement is written in Chinese and English in four copies. Pledgor, Pledgee and Party C shall hold one copy respectively and the other copy shall
be used for registration. Each copy of this Agreement shall have equal validity. In case there is any conflict between the Chinese version and the
English version, the Chinese version shall prevail.
The Remainder of this page is intentionally left blank
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IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Equity Interest Pledge Agreement as of the date first
above written.
Party A:
Beijing Yangguang Gudi Science Development Co., Ltd.
By:
Name:
Title:
/s/ Haoyong Yang
Haoyong Yang
Legal Representative
Party B:
Yang Liu
By:
/s/ Yang Liu
Party C:
Beijing Shan Jing Ke Chuang Network Technology Co., Ltd.
By:
Name:
Title:
/s/ Yang Liu
Yang Liu
Legal Representative
Attachments:
1.
2.
3.
4.
5.
6.
Shareholders' Register of Party C;
The Capital Contribution Certificate for Party C;
Exclusive Technology Consultant and Service Agreement;
Loan Agreement;
Exclusive Option Agreement;
Power of Attorney.
Equity Interest Pledge Agreement
This Equity Interest Pledge Agreement (this “Agreement”) has been executed by and among the following parties on August 6, 2015 in Beijing, the
People’s Republic of China (“China” or the “PRC”):
Party A:
Beijing Yangguang Gudi Science Development Co., Ltd. (hereinafter “Pledgee”), a wholly foreign owned enterprise, organized and
existing under the laws of the PRC, with its address at Room 1811, 18/F, Building No.2, #1 Shangdi 10th Avenue, Haidian District,
Beijing, PRC;
Party B:
Chunyan Guo (hereinafter “Pledgor”), a citizen of China with Chinese Identification No.: ; and
Party C:
Beijing Shan Jing Ke Chuang Network Technology Co., Ltd., a limited liability company organized and existing under the laws of
the PRC, with its address at No.6, Anfu Road, Houshayu Town, Shunyi District, Beijing, PRC.
In this Agreement, each of Pledgee, Pledgor and Party C shall be referred to as a "Party" respectively, and they shall be collectively referred to as the
"Parties".
Whereas:
1. Pledgor is a citizen of China who as of the date hereof holds 20.00% of equity interests of Party C, representing RMB7,741,935 in the registered
capital of Party C. Party C is a limited liability company registered in Beijing, China, engaging in Internet information services and advertising
services. Party C acknowledges the respective rights and obligations of Pledgor and Pledgee under this Agreement, and intends to provide any
necessary assistance in registering the Pledge;
1
2. Pledgee is a wholly foreign-owned enterprise registered in China. Pledgee and Party C partially owned by Pledgor have executed an Exclusive
Technology Consultant Agreement (as defined below) in Beijing; Party C, Pledgee and Pledgor have executed an Exclusive Option Agreement (as
defined below); Pledgee and Pledgor have executed a Loan Agreement (as defined below); and Pledgor has executed a Power of Attorney to Pledgee.
3. To ensure that Party C and Pledgor fully perform their obligations under the Exclusive Technology Consultant Agreement, the Exclusive Option
Agreement, the Loan Agreement and the Power of Attorney, Pledgor hereby pledges to the Pledgee all of the equity interest he holds in Party C as
security for Party C’s and Pledgor’s obligations under the Exclusive Business Cooperation Agreements, the Exclusive Option Agreement, the Loan
Agreement and the Power of Attorney.
To perform the provisions of the Transaction Documents, the Parties have mutually agreed to execute this Agreement upon the following terms.
1. Definitions
Unless otherwise provided herein, the terms below shall have the following meanings:
1.1
1.2
1.3
Pledge: shall refer to the security interest granted by Pledgor to Pledgee pursuant to Article 2 of this Agreement, i.e., the right of Pledgee to be
compensated on a preferential basis with the conversion, auction or sales price of the Equity Interest.
Equity Interest: shall refer to all of the equity interest now held and hereafter acquired by Pledgor in Party C.
Term of Pledge: shall refer to the term set forth in Section 3.2 of this Agreement.
2
1.4
1.5
1.6
1.7
1.8
Transaction Documents: shall refer to the Exclusive Technology Consultant and Service Agreement executed by and between Party C and
Pledgee on January 18, 2012 (the “Exclusive Technology Consultant Agreement”), the Exclusive Option Agreement executed by and among
Party C, Pledgee and Pledgor on August 6, 2015 (the “Exclusive Option Agreement”), the Loan Agreement executed by and between Pledgee
and Pledgor on August 6, 2015 (the “Loan Agreement”), Power of Attorney executed on August 6, 2015 by Pledgor (the “Power of Attorney”)
and any modification, amendment and restatement to the aforementioned documents.
Contract Obligation: shall refer to all the obligations of Pledgor under the Exclusive Option Agreement, the Power of Attorney, the Loan
Agreement and this Agreement; all the obligations of Party C under the Exclusive Cooperation Agreement, the Exclusive Option Agreement and
this Agreement.
Secured Indebtedness: shall refer to all the direct, indirect or derivative losses of Pledgee, including loss of expected profits, incurred as a result
of any Event of Default (as defined below). The amount of such loss shall be based on, including but not limited to the reasonable business plan
and profit forecast of Pledgee, the consulting and service fees payable to Pledgee under the Exclusive Business Cooperation Agreement and all
expenses occurred in connection with enforcement by Pledgee of Pledgor’s and/or Party C’s Contract Obligation.
Event of Default: shall refer to any of the circumstances set forth in Article 7 of this Agreement.
Notice of Default: shall refer to the notice issued by Pledgee in accordance with this Agreement declaring an Event of Default.
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2. The Pledge
2.1
2.2
2.3
2.4
Pledgor agrees to pledge all the Equity Interest as security for performance of the Contract Obligation and payment of the Secured Indebtedness
under this Agreement. Party C hereby assents that Pledgor pledges the Equity Interest to the Pledgee pursuant to this Agreement.
During the term of the Pledge, Pledgee is entitled to receive dividends distributed on the Equity Interest. Pledgor may receive dividends
distributed on the Equity Interest only with prior written consent from Pledgee. Dividends received by Pledgor on Equity Interest shall be,
subject to requirement of Pledgee, (1) deposited into an account designated and supervised by Pledgee and used to secure the Contract
Obligations and pay the Secured Indebtedness prior and in preference to make any other payment; or (2) unconditionally give to Pledgee or any
other person designated by Pledgee to the extent permitted under applicable PRC laws.
Pledgor may subscribe for capital increase in Party C only with prior written consent of Pledgee. Any equity interest obtained by the Pledgor in
future capital increase shall be deemed as Equity Interest as well.
In the event that Party C is required by PRC law to be liquidated or dissolved, any interest distributed to Pledgor upon Party C’s dissolution or
liquidation shall be (1) deposited into an account designate and supervised by Pledgee and used to secure the Contract Obligations and pay the
Secured Indebtedness prior and in preference to make any other payment; or (2) unconditionally give to Pledgee or any other person designated
by Pledgee to the extent permitted under applicable PRC laws.
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3. Term of Pledge
3.1
The Pledge shall become effective on such date when the pledge of the Equity Interest contemplated herein has been registered with relevant
administration for industry and commerce (the “AIC”). The Pledge shall be continuously valid until all Contract Obligations and Secured
Indebtedness have been fully performed and paid. Pledgor and Party C shall (1) register the Pledge in the shareholders' register of Party C within
3 business days following the execution of this Agreement, and (2) submit an application to the AIC for the registration of the Pledge of the
Equity Interest contemplated herein within 30 business days following the execution of this Agreement. The parties covenant that for the purpose
of registration of the Pledge, the parties hereto and all other shareholders of Party C shall submit to the AIC this Agreement or an equity interest
pledge contract in the form required by the AIC at the location of Party C which shall truly reflect the information of the Pledge hereunder (the
“AIC Pledge Contract”). For matters not specified in the AIC Pledge Contract, the parties shall be bound by the provisions of this Agreement.
Pledgor and Party C shall submit all necessary documents and complete all necessary procedures, as required by the PRC laws and regulations
and the relevant AIC, to ensure that the Pledge of the Equity Interest shall be registered with the AIC as soon as possible after filing.
3.2
During the Term of Pledge, in the event Pledgor and/or Party C fails to perform the Contract Obligation or pay Secured Indebtedness, Pledgee
shall have the right, but not the obligation, to exercise the Pledge in accordance with the provisions of this Agreement.
5
4. Custody of Records for Equity Interest subject to Pledge
4.1
During the Term of Pledge set forth in this Agreement, Pledgor shall deliver to Pledgee's custody the capital contribution certificate for the
Equity Interest and the shareholders' register containing the Pledge within one week from the execution of this Agreement. Pledgee shall have
custody of such documents during the entire Term of Pledge set forth in this Agreement.
5. Representations and Warranties of Pledgor and Party C
As of the execution date of this Agreement, Pledgor and Party C hereby jointly and severally represent and warrant to Pledgee that:
5.1
Pledgor is the sole legal and beneficial owner of the Equity Interest.
5.2
Pledgee shall have the right to dispose of and transfer the Equity Interest in accordance with the provisions set forth in this Agreement.
5.3
Except for the Pledge, Pledgor has not placed any security interest or other encumbrance on the Equity Interest.
5.4
5.5
Pledgor and Party C have obtained any and all approvals and consents from applicable government authorities and third parties (if required) for
execution, delivery and performance of this Agreement.
The execution, delivery and performance of this Agreement will not: (i) violate any relevant PRC laws; (ii) conflict with Party C’s articles of
association or other constitutional documents; (iii) result in any breach of or constitute any default under any contract or instrument to which it
is a party or by which it is otherwise bound; (iv) result in any violation of any condition for the grant and/or maintenance of any permit or
approval granted to any Party; or (v) cause any permit or approval granted to any Party to be suspended, cancelled or attached with additional
conditions.
6
6. Covenants of Pledgor and Party C
6.1
Pledgor and Party C hereby jointly and severally covenant to the Pledgee:
6.1.1
6.1.2
Pledgor shall not transfer the Equity Interest, place or permit the existence of any security interest or other encumbrance on the Equity
Interest or any portion thereof, without the prior written consent of Pledgee, except for the performance of the Transaction Documents;
Pledgor and Party C shall comply with the provisions of all laws and regulations applicable to the pledge of rights, and within 5 days of
receipt of any notice, order or recommendation issued or prepared by relevant competent authorities regarding the Pledge, shall present
the aforementioned notice, order or recommendation to Pledgee, and shall comply with the aforementioned notice, order or
recommendation or submit objections and representations with respect to the aforementioned matters upon Pledgee's reasonable request
or upon consent of Pledgee;
6.1.3
Pledgor and Party C shall promptly notify Pledgee of any event or notice received by Pledgor that may have an impact on Pledgee's
rights to the Equity Interest or any portion thereof, as well as any event or notice received by Pledgor that may have an impact on any
guarantees and other obligations of Pledgor arising out of this Agreement.
6.1.4
Party C shall complete the registration procedures for extension of the term of operation within three (3) months prior to the expiration
of such term to maintain the validity of this Agreement.
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6.2
6.3
Pledgor agrees that the rights acquired by Pledgee in accordance with this Agreement with respect to the Pledge shall not be interrupted or
harmed by Pledgor or any heirs or representatives of Pledgor or any other persons through any legal proceedings.
To protect or perfect the security interest granted by this Agreement for the Contract Obligation and Secured Indebtedness, Pledgor hereby
undertakes to execute in good faith and to cause other parties who have an interest in the Pledge to execute all certificates, agreements, deeds
and/or covenants required by Pledgee. Pledgor also undertakes to perform and to cause other parties who have an interest in the Pledge to
perform actions required by Pledgee, to facilitate the exercise by Pledgee of its rights and authority granted thereto by this Agreement, and to
enter into all relevant documents regarding ownership of Equity Interest with Pledgee or designee(s) of Pledgee (natural persons/legal persons).
Pledgor undertakes to provide Pledgee within a reasonable time with all notices, orders and decisions regarding the Pledge that are required by
Pledgee.
6.4
Pledgor hereby undertakes to comply with and perform all guarantees, promises, agreements, representations and conditions under this
Agreement. In the event of failure or partial performance of its guarantees, promises, agreements, representations and conditions, Pledgor shall
indemnify Pledgee for all losses resulting therefrom.
7. Event of Breach
7.1
The following circumstances shall be deemed Event of Default:
7.1.1
Pledgor’s any breach to any obligations under the Transaction Documents and/or this Agreement.
7.1.2
Party C’s any breach to any obligations under the Transaction Documents and/or this Agreement.
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7.2
7.3
Upon notice or discovery of the occurrence of any circumstances or event that may lead to the aforementioned circumstances described in
Section 7.1, Pledgor and Party C shall immediately notify Pledgee in writing accordingly.
Unless an Event of Default set forth in this Section 7.1 has been successfully resolved to Pledgee's satisfaction within twenty (20) days after the
Pledgee and /or Party C delivers a notice to the Pledgor requesting ratification of such Event of Default, Pledgee may issue a Notice of Default
to Pledgor in writing at any time thereafter, demanding the Pledgor to immediately exercise the Pledge in accordance with the provisions of
Article 8 of this Agreement.
8. Exercise of Pledge
8.1
Pledgee may issue a Notice of Default to Pledgor when exercising the Pledge.
8.2
8.3
Subject to the provisions of Section 7.3, Pledgee may exercise the right to enforce the Pledge at any time after the issuance of the Notice of
Default in accordance with Section 8.1. Once Pledgee elects to enforce the Pledge, Pledgor shall cease to be entitled to any rights or interests
associated with the Equity Interest.
After Pledgee issues a Notice of Default Pledgee in accordance with Section 8.1, Pledgee may exercise any remedy measure under applicable
PRC laws, the Transaction Documents and this Agreement, including but not limited to be compensated in priority by the conversion of the
Equity Pledge or from the proceeds from auction or sale of the Equity Interest. The Pledgee shall have no liability for any loss incurred by its
duly exercise of such rights and powers.
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8.4
8.5
8.6
The proceeds from exercise of the Pledge by Pledgee shall be used to pay for tax and expenses incurred by disposing the Equity Interest and
perform Contract Obligations and pay the Secured Indebtedness prior and in preference to any other payment. After the payment of the
aforementioned amounts, the remaining balance shall be returned to Pledgor or any other person who have rights to such balance under
applicable laws or be deposited to the local notary public office where Pledgor resides, with all expense incurred being borne by Pledgor. To the
extent permitted under applicable PRC laws, Pledgor shall unconditionally give the aforementioned proceeds to Pledgee or any other person
designated by Pledgee.
Pledgee has the right to exercise any remedy measure available simultaneously or in any order. Pledgee may exercise the right to be
compensated from in priority by the conversion of the Equity Pledge or from the proceeds from auction or sale of the Equity Interest under this
Agreement, without exercising any other remedy measure first.
Pledgee is entitled to designate an attorney or other representatives to exercise the Pledge on its behalf and Pledgor and Party C shall not raise
any objection to such exercise.
8.7 When Pledgee disposes of the Pledge in accordance with this Agreement, Pledgor and Party C shall provide necessary assistance to enable
Pledgee to enforce the Pledge in accordance with this Agreement.
9. Breach of Agreement
9.1
If Pledgor or Party C conducts any material breach of any term of this Agreement, Pledgee shall have right to terminate this Agreement and
require Pledgor or Party C to compensate all damages; this Section 9 shall not prejudice any other rights of Pledgee herein;
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9.2
If Pledgee conducts any breach of any term of this Agreement, Pledgor or Party C shall not terminate this Agreement in any event unless
otherwise required by applicable laws.
10. Assignment
10.1 Without Pledgee's prior written consent, Pledgor shall not have the right to assign or delegate its rights and obligations under this Agreement.
10.2 This Agreement shall be binding on Pledgor and its successors and permitted assigns, and shall be valid with respect to Pledgee and each of its
successors and assigns.
10.3 At any time, Pledgee may assign any and all of its rights and obligations under the Transaction Documents to its designee(s), in which case the
assigns shall have the rights and obligations of Pledgee under this Agreement, as if it were the original party to this Agreement. When the
Pledgee assigns the rights and obligations under the Business Cooperation Agreement, upon Pledgee's request, Pledgor and/or Party C shall
execute relevant agreements or other documents relating to such assignment.
10.4 In the event of a change in Pledgee due to an assignment, Pledgor and/or Party C shall, at the request of Pledgee, execute a new pledge
agreement with the new pledgee on the same terms and conditions as this Agreement, and register the same with the relevant AIC.
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10.5 Pledgor and Party C shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by the Parties
hereto or any of them, including the Transaction Documents, perform the obligations hereunder and thereunder, and refrain from any
action/omission that may affect the effectiveness and enforceability thereof. Any remaining rights of Pledgor with respect to the Equity Interest
pledged hereunder shall not be exercised by Pledgor except in accordance with the written instructions of Pledgee.
11. Termination
11.1 Upon the fulfillment of all Contract Obligation and the full payment of all Secured Indebtedness by Pledgor and Party C, Pledgee shall release
the Pledge under this Agreement upon Pledgor’s request as soon as reasonably practicable and shall assist Pledgor to de-register the Pledge from
the shareholders’ register of Party C and with relevant PRC local administration for industry and commerce.
11.2 The provisions under Sections 9, 13, 14 and 11.2 herein of this Agreement shall survive the expiration or termination of this Agreement.
12. Handling Fees and Other Expenses
All fees and out of pocket expenses relating to this Agreement, including but not limited to legal costs, costs of production, stamp tax and any other
taxes and fees, shall be borne by Party C.
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13. Confidentiality
The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in
connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of
all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential
information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s
unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or
orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsels or
financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or financial advisors
shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff
members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which Party shall be held liable for
breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.
14. Governing Law and Resolution of Disputes
14.1 The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes hereunder
shall be governed by the laws of China.
14.2 In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through
friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party's request to the other
Parties for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and
Trade Arbitration Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in Beijing, and the
language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.
14.3 Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration of any
dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this
Agreement and perform their respective obligations under this Agreement.
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15. Notices
15.1 All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by
registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such party set forth below. A
confirmation copy of each notice shall also be sent by E-mail. The dates on which notices shall be deemed to have been effectively given shall
be determined as follows:
15.2 Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the date of
delivery or refusal at the address specified for notices.
15.3 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an
automatically generated confirmation of transmission).
15.4 For the purpose of notices, the addresses of the Parties are as follows:
Party A:
Address:
Attn:
Phone:
Facsimile:
Beijing Yangguang Gudi Science Development Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
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Party B:
Address:
Phone:
Facsimile:
Party C:
Address:
Attn:
Phone:
Facsimile:
Chunyan Guo
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
+8610 64435588-8888
+8610-64459926
Beijing Shan Jing Ke Chuang Network Technology Co., Ltd.
No.6, Anfu Road, Houshayu Town, Shunyi District, Beijing, PRC
Jinbo Yao
+8610 64435588-8888
+8610-64459926
15.5 Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms hereof.
16. Severability
In the event that one or several of the provisions of this Contract are found to be invalid, illegal or unenforceable in any aspect in accordance with any
laws or regulations, the validity, legality or enforceability of the remaining provisions of this Contract shall not be affected or compromised in any
respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to
the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible
to the economic effect of those invalid, illegal or unenforceable provisions.
15
17. Attachments
The attachments set forth herein shall be an integral part of this Agreement.
18. Effectiveness
18.1 This Agreement shall become effective upon execution by the Parties.
18.2 Any amendments, changes and supplements to this Agreement shall be in writing and shall become effective upon completion of the
governmental filing procedures (if applicable) after the affixation of the signatures or seals of the Parties.
19. Language and Counterparts
This Agreement is written in Chinese and English in four copies. Pledgor, Pledgee and Party C shall hold one copy respectively and the other copy shall
be used for registration. Each copy of this Agreement shall have equal validity. In case there is any conflict between the Chinese version and the
English version, the Chinese version shall prevail.
The Remainder of this page is intentionally left blank
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IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Equity Interest Pledge Agreement as of the date first
above written.
Party A:
Beijing Yangguang Gudi Science Development Co., Ltd.
By:
Name:
Title:
/s/ Haoyong Yang
Haoyong Yang
Legal Representative
Party B:
Chunyan Guo
By:
/s/ Chunyan Guo
Party C:
Beijing Shan Jing Ke Chuang Network Technology Co., Ltd.
By:
Name:
Title:
/s/ Yang Liu
Yang Liu
Legal Representative
Attachments:
1.
2.
3.
4.
5.
6.
Shareholders' Register of Party C;
The Capital Contribution Certificate for Party C;
Exclusive Technology Consultant and Service Agreement;
Loan Agreement;
Exclusive Option Agreement;
Power of Attorney.
Equity Interest Pledge Agreement
This Equity Interest Pledge Agreement (this “Agreement”) has been executed by and among the following parties on August 6, 2015 in Beijing, the
People’s Republic of China (“China” or the “PRC”):
Party A: Beijing Yangguang Gudi Science Development Co., Ltd. (hereinafter “Pledgee”), a wholly foreign owned enterprise, organized and existing
under the laws of the PRC, with its address at Room 1811, 18/F, Building No.2, #1 Shangdi 10th Avenue, Haidian District, Beijing, PRC;
Party B: Haoyong Yang (hereinafter “Pledgor”), a citizen of China with Chinese Identification No.: ; and
Party C: Beijing Shan Jing Ke Chuang Network Technology Co., Ltd., a limited liability company organized and existing under the laws of the PRC,
with its address at No.6, Anfu Road, Houshayu Town, Shunyi District, Beijing, PRC.
In this Agreement, each of Pledgee, Pledgor and Party C shall be referred to as a "Party" respectively, and they shall be collectively referred to as the
"Parties".
Whereas:
1. Pledgor is a citizen of China who as of the date hereof holds 0.31% of equity interests of Party C, representing RMB120,000 in the registered capital of
Party C. Party C is a limited liability company registered in Beijing, China, engaging in Internet information services and advertising services. Party C
acknowledges the respective rights and obligations of Pledgor and Pledgee under this Agreement, and intends to provide any necessary assistance in
registering the Pledge;
1
2. Pledgee is a wholly foreign-owned enterprise registered in China. Pledgee and Party C partially owned by Pledgor have executed an Exclusive
Technology Consultant Agreement (as defined below) in Beijing; Party C, Pledgee and Pledgor have executed an Exclusive Option Agreement (as
defined below); Pledgee and Pledgor have executed a Loan Agreement (as defined below); and Pledgor has executed a Power of Attorney to Pledgee.
3. To ensure that Party C and Pledgor fully perform their obligations under the Exclusive Technology Consultant Agreement, the Exclusive Option
Agreement, the Loan Agreement and the Power of Attorney, Pledgor hereby pledges to the Pledgee all of the equity interest he holds in Party C as
security for Party C’s and Pledgor’s obligations under the Exclusive Business Cooperation Agreements, the Exclusive Option Agreement, the Loan
Agreement and the Power of Attorney.
To perform the provisions of the Transaction Documents, the Parties have mutually agreed to execute this Agreement upon the following terms.
1. Definitions
Unless otherwise provided herein, the terms below shall have the following meanings:
1.1
Pledge: shall refer to the security interest granted by Pledgor to Pledgee pursuant to Article 2 of this Agreement, i.e., the right of Pledgee to be
compensated on a preferential basis with the conversion, auction or sales price of the Equity Interest.
1.2
Equity Interest: shall refer to all of the equity interest now held and hereafter acquired by Pledgor in Party C.
1.3
Term of Pledge: shall refer to the term set forth in Section 3.2 of this Agreement.
2
1.4
1.5
1.6
Transaction Documents: shall refer to the Exclusive Technology Consultant and Service Agreement executed by and between Party C and
Pledgee on January 18, 2012 (the “Exclusive Technology Consultant Agreement”), the Exclusive Option Agreement executed by and among
Party C, Pledgee and Pledgor on August 6, 2015 (the “Exclusive Option Agreement”), the Loan Agreement executed by and between Pledgee
and Pledgor on August 6, 2015 (the “Loan Agreement”), Power of Attorney executed on August 6, 2015 by Pledgor (the “Power of Attorney”)
and any modification, amendment and restatement to the aforementioned documents.
Contract Obligation: shall refer to all the obligations of Pledgor under the Exclusive Option Agreement, the Power of Attorney, the Loan
Agreement and this Agreement; all the obligations of Party C under the Exclusive Cooperation Agreement, the Exclusive Option Agreement
and this Agreement.
Secured Indebtedness: shall refer to all the direct, indirect or derivative losses of Pledgee, including loss of expected profits, incurred as a result
of any Event of Default (as defined below). The amount of such loss shall be based on, including but not limited to the reasonable business plan
and profit forecast of Pledgee, the consulting and service fees payable to Pledgee under the Exclusive Business Cooperation Agreement and all
expenses occurred in connection with enforcement by Pledgee of Pledgor’s and/or Party C’s Contract Obligation.
1.7
Event of Default: shall refer to any of the circumstances set forth in Article 7 of this Agreement.
1.8
Notice of Default: shall refer to the notice issued by Pledgee in accordance with this Agreement declaring an Event of Default.
3
2. The Pledge
2.1
2.2
2.3
2.4
Pledgor agrees to pledge all the Equity Interest as security for performance of the Contract Obligation and payment of the Secured Indebtedness
under this Agreement. Party C hereby assents that Pledgor pledges the Equity Interest to the Pledgee pursuant to this Agreement.
During the term of the Pledge, Pledgee is entitled to receive dividends distributed on the Equity Interest. Pledgor may receive dividends
distributed on the Equity Interest only with prior written consent from Pledgee. Dividends received by Pledgor on Equity Interest shall be,
subject to requirement of Pledgee, (1) deposited into an account designated and supervised by Pledgee and used to secure the Contract
Obligations and pay the Secured Indebtedness prior and in preference to make any other payment; or (2) unconditionally give to Pledgee or any
other person designated by Pledgee to the extent permitted under applicable PRC laws.
Pledgor may subscribe for capital increase in Party C only with prior written consent of Pledgee. Any equity interest obtained by the Pledgor in
future capital increase shall be deemed as Equity Interest as well.
In the event that Party C is required by PRC law to be liquidated or dissolved, any interest distributed to Pledgor upon Party C’s dissolution or
liquidation shall be (1) deposited into an account designate and supervised by Pledgee and used to secure the Contract Obligations and pay the
Secured Indebtedness prior and in preference to make any other payment; or (2) unconditionally give to Pledgee or any other person designated
by Pledgee to the extent permitted under applicable PRC laws.
4
3. Term of Pledge
3.1
The Pledge shall become effective on such date when the pledge of the Equity Interest contemplated herein has been registered with relevant
administration for industry and commerce (the “AIC”). The Pledge shall be continuously valid until all Contract Obligations and Secured
Indebtedness have been fully performed and paid. Pledgor and Party C shall (1) register the Pledge in the shareholders' register of Party C within
3 business days following the execution of this Agreement, and (2) submit an application to the AIC for the registration of the Pledge of the
Equity Interest contemplated herein within 30 business days following the execution of this Agreement. The parties covenant that for the
purpose of registration of the Pledge, the parties hereto and all other shareholders of Party C shall submit to the AIC this Agreement or an equity
interest pledge contract in the form required by the AIC at the location of Party C which shall truly reflect the information of the Pledge
hereunder (the “AIC Pledge Contract”). For matters not specified in the AIC Pledge Contract, the parties shall be bound by the provisions of this
Agreement. Pledgor and Party C shall submit all necessary documents and complete all necessary procedures, as required by the PRC laws and
regulations and the relevant AIC, to ensure that the Pledge of the Equity Interest shall be registered with the AIC as soon as possible after filing.
3.2
During the Term of Pledge, in the event Pledgor and/or Party C fails to perform the Contract Obligation or pay Secured Indebtedness, Pledgee
shall have the right, but not the obligation, to exercise the Pledge in accordance with the provisions of this Agreement.
4. Custody of Records for Equity Interest subject to Pledge
4.1
During the Term of Pledge set forth in this Agreement, Pledgor shall deliver to Pledgee's custody the capital contribution certificate for the
Equity Interest and the shareholders' register containing the Pledge within one week from the execution of this Agreement. Pledgee shall have
custody of such documents during the entire Term of Pledge set forth in this Agreement.
5
5. Representations and Warranties of Pledgor and Party C
As of the execution date of this Agreement, Pledgor and Party C hereby jointly and severally represent and warrant to Pledgee that:
5.1
Pledgor is the sole legal and beneficial owner of the Equity Interest.
5.2
Pledgee shall have the right to dispose of and transfer the Equity Interest in accordance with the provisions set forth in this Agreement.
5.3
Except for the Pledge, Pledgor has not placed any security interest or other encumbrance on the Equity Interest.
5.4
5.5
Pledgor and Party C have obtained any and all approvals and consents from applicable government authorities and third parties (if required) for
execution, delivery and performance of this Agreement.
The execution, delivery and performance of this Agreement will not: (i) violate any relevant PRC laws; (ii) conflict with Party C’s articles of
association or other constitutional documents; (iii) result in any breach of or constitute any default under any contract or instrument to which it
is a party or by which it is otherwise bound; (iv) result in any violation of any condition for the grant and/or maintenance of any permit or
approval granted to any Party; or (v) cause any permit or approval granted to any Party to be suspended, cancelled or attached with additional
conditions.
6
6. Covenants of Pledgor and Party C
6.1
Pledgor and Party C hereby jointly and severally covenant to the Pledgee:
6.1.1
6.1.2
Pledgor shall not transfer the Equity Interest, place or permit the existence of any security interest or other encumbrance on the Equity
Interest or any portion thereof, without the prior written consent of Pledgee, except for the performance of the Transaction Documents;
Pledgor and Party C shall comply with the provisions of all laws and regulations applicable to the pledge of rights, and within 5 days of
receipt of any notice, order or recommendation issued or prepared by relevant competent authorities regarding the Pledge, shall present
the aforementioned notice, order or recommendation to Pledgee, and shall comply with the aforementioned notice, order or
recommendation or submit objections and representations with respect to the aforementioned matters upon Pledgee's reasonable request
or upon consent of Pledgee;
6.1.3
Pledgor and Party C shall promptly notify Pledgee of any event or notice received by Pledgor that may have an impact on Pledgee's
rights to the Equity Interest or any portion thereof, as well as any event or notice received by Pledgor that may have an impact on any
guarantees and other obligations of Pledgor arising out of this Agreement.
6.1.4
Party C shall complete the registration procedures for extension of the term of operation within three (3) months prior to the expiration
of such term to maintain the validity of this Agreement.
7
6.2
6.3
Pledgor agrees that the rights acquired by Pledgee in accordance with this Agreement with respect to the Pledge shall not be interrupted or
harmed by Pledgor or any heirs or representatives of Pledgor or any other persons through any legal proceedings.
To protect or perfect the security interest granted by this Agreement for the Contract Obligation and Secured Indebtedness, Pledgor hereby
undertakes to execute in good faith and to cause other parties who have an interest in the Pledge to execute all certificates, agreements, deeds
and/or covenants required by Pledgee. Pledgor also undertakes to perform and to cause other parties who have an interest in the Pledge to
perform actions required by Pledgee, to facilitate the exercise by Pledgee of its rights and authority granted thereto by this Agreement, and to
enter into all relevant documents regarding ownership of Equity Interest with Pledgee or designee(s) of Pledgee (natural persons/legal persons).
Pledgor undertakes to provide Pledgee within a reasonable time with all notices, orders and decisions regarding the Pledge that are required by
Pledgee.
6.4
Pledgor hereby undertakes to comply with and perform all guarantees, promises, agreements, representations and conditions under this
Agreement. In the event of failure or partial performance of its guarantees, promises, agreements, representations and conditions, Pledgor shall
indemnify Pledgee for all losses resulting therefrom.
7. Event of Breach
7.1
The following circumstances shall be deemed Event of Default:
7.1.1
Pledgor’s any breach to any obligations under the Transaction Documents and/or this Agreement.
7.1.2
Party C’s any breach to any obligations under the Transaction Documents and/or this Agreement.
8
7.2
7.3
Upon notice or discovery of the occurrence of any circumstances or event that may lead to the aforementioned circumstances described in
Section 7.1, Pledgor and Party C shall immediately notify Pledgee in writing accordingly.
Unless an Event of Default set forth in this Section 7.1 has been successfully resolved to Pledgee's satisfaction within twenty (20) days after the
Pledgee and /or Party C delivers a notice to the Pledgor requesting ratification of such Event of Default, Pledgee may issue a Notice of Default
to Pledgor in writing at any time thereafter, demanding the Pledgor to immediately exercise the Pledge in accordance with the provisions of
Article 8 of this Agreement.
8. Exercise of Pledge
8.1
Pledgee may issue a Notice of Default to Pledgor when exercising the Pledge.
8.2
8.3
Subject to the provisions of Section 7.3, Pledgee may exercise the right to enforce the Pledge at any time after the issuance of the Notice of
Default in accordance with Section 8.1. Once Pledgee elects to enforce the Pledge, Pledgor shall cease to be entitled to any rights or interests
associated with the Equity Interest.
After Pledgee issues a Notice of Default Pledgee in accordance with Section 8.1, Pledgee may exercise any remedy measure under applicable
PRC laws, the Transaction Documents and this Agreement, including but not limited to be compensated in priority by the conversion of the
Equity Pledge or from the proceeds from auction or sale of the Equity Interest. The Pledgee shall have no liability for any loss incurred by its
duly exercise of such rights and powers.
9
8.4
8.5
8.6
The proceeds from exercise of the Pledge by Pledgee shall be used to pay for tax and expenses incurred by disposing the Equity Interest and
perform Contract Obligations and pay the Secured Indebtedness prior and in preference to any other payment. After the payment of the
aforementioned amounts, the remaining balance shall be returned to Pledgor or any other person who have rights to such balance under
applicable laws or be deposited to the local notary public office where Pledgor resides, with all expense incurred being borne by Pledgor. To the
extent permitted under applicable PRC laws, Pledgor shall unconditionally give the aforementioned proceeds to Pledgee or any other person
designated by Pledgee.
Pledgee has the right to exercise any remedy measure available simultaneously or in any order. Pledgee may exercise the right to be
compensated from in priority by the conversion of the Equity Pledge or from the proceeds from auction or sale of the Equity Interest under this
Agreement, without exercising any other remedy measure first.
Pledgee is entitled to designate an attorney or other representatives to exercise the Pledge on its behalf and Pledgor and Party C shall not raise
any objection to such exercise.
8.7 When Pledgee disposes of the Pledge in accordance with this Agreement, Pledgor and Party C shall provide necessary assistance to enable
Pledgee to enforce the Pledge in accordance with this Agreement.
9. Breach of Agreement
9.1
If Pledgor or Party C conducts any material breach of any term of this Agreement, Pledgee shall have right to terminate this Agreement and
require Pledgor or Party C to compensate all damages; this Section 9 shall not prejudice any other rights of Pledgee herein;
10
9.2
If Pledgee conducts any breach of any term of this Agreement, Pledgor or Party C shall not terminate this Agreement in any event unless
otherwise required by applicable laws.
10. Assignment
10.1 Without Pledgee's prior written consent, Pledgor shall not have the right to assign or delegate its rights and obligations under this Agreement.
10.2 This Agreement shall be binding on Pledgor and its successors and permitted assigns, and shall be valid with respect to Pledgee and each of its
successors and assigns.
10.3 At any time, Pledgee may assign any and all of its rights and obligations under the Transaction Documents to its designee(s), in which case the
assigns shall have the rights and obligations of Pledgee under this Agreement, as if it were the original party to this Agreement. When the
Pledgee assigns the rights and obligations under the Business Cooperation Agreement, upon Pledgee's request, Pledgor and/or Party C shall
execute relevant agreements or other documents relating to such assignment.
10.4 In the event of a change in Pledgee due to an assignment, Pledgor and/or Party C shall, at the request of Pledgee, execute a new pledge
agreement with the new pledgee on the same terms and conditions as this Agreement, and register the same with the relevant AIC.
10.5 Pledgor and Party C shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by the Parties
hereto or any of them, including the Transaction Documents, perform the obligations hereunder and thereunder, and refrain from any
action/omission that may affect the effectiveness and enforceability thereof. Any remaining rights of Pledgor with respect to the Equity Interest
pledged hereunder shall not be exercised by Pledgor except in accordance with the written instructions of Pledgee.
11
11. Termination
11.1 Upon the fulfillment of all Contract Obligation and the full payment of all Secured Indebtedness by Pledgor and Party C, Pledgee shall release
the Pledge under this Agreement upon Pledgor’s request as soon as reasonably practicable and shall assist Pledgor to de-register the Pledge from
the shareholders’ register of Party C and with relevant PRC local administration for industry and commerce.
11.2 The provisions under Sections 9, 13, 14 and 11.2 herein of this Agreement shall survive the expiration or termination of this Agreement.
12. Handling Fees and Other Expenses
All fees and out of pocket expenses relating to this Agreement, including but not limited to legal costs, costs of production, stamp tax and any other
taxes and fees, shall be borne by Party C.
12
13. Confidentiality
The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in
connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of
all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential
information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s
unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or
orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsels or
financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or financial advisors
shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff
members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which Party shall be held liable for
breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.
14. Governing Law and Resolution of Disputes
14.1 The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes hereunder
shall be governed by the laws of China.
14.2 In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through
friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party's request to the other
Parties for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and
Trade Arbitration Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in Beijing, and the
language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.
13
14.3 Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration of any
dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this
Agreement and perform their respective obligations under this Agreement.
15. Notices
15.1 All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by
registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such party set forth below. A
confirmation copy of each notice shall also be sent by E-mail. The dates on which notices shall be deemed to have been effectively given shall
be determined as follows:
15.2 Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the date of
delivery or refusal at the address specified for notices.
15.3 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an
automatically generated confirmation of transmission).
15.4 For the purpose of notices, the addresses of the Parties are as follows:
Party A:
Address:
Attn:
Phone:
Facsimile:
Beijing Yangguang Gudi Science Development Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
14
Party B:
Address:
Phone:
Facsimile:
Party C:
Address:
Attn:
Phone:
Facsimile:
Haoyong Yang
Beijing Shan Jing Ke Chuang Network Technology Co., Ltd.
No.6, Anfu Road, Houshayu Town, Shunyi District, Beijing, PRC
Jinbo Yao
+8610 64435588-8888
+8610-64459926
15.5 Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms hereof.
16. Severability
In the event that one or several of the provisions of this Contract are found to be invalid, illegal or unenforceable in any aspect in accordance with any
laws or regulations, the validity, legality or enforceability of the remaining provisions of this Contract shall not be affected or compromised in any
respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to
the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible
to the economic effect of those invalid, illegal or unenforceable provisions.
15
17. Attachments
The attachments set forth herein shall be an integral part of this Agreement.
18. Effectiveness
18.1 This Agreement shall become effective upon execution by the Parties.
18.2 Any amendments, changes and supplements to this Agreement shall be in writing and shall become effective upon completion of the
governmental filing procedures (if applicable) after the affixation of the signatures or seals of the Parties.
19. Language and Counterparts
This Agreement is written in Chinese and English in four copies. Pledgor, Pledgee and Party C shall hold one copy respectively and the other copy shall
be used for registration. Each copy of this Agreement shall have equal validity. In case there is any conflict between the Chinese version and the
English version, the Chinese version shall prevail.
The Remainder of this page is intentionally left blank
16
IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Equity Interest Pledge Agreement as of the date first
above written.
Party A:
Beijing Yangguang Gudi Science Development Co., Ltd.
By:
Name:
Title:
/s/ Haoyong Yang
Haoyong Yang
Legal Representative
Party B:
Haoyong Yang
By:
/s/ Haoyong Yang
Party C:
Beijing Shan Jing Ke Chuang Network Technology Co., Ltd.
By:
Name:
Title:
/s/ Yang Liu
Yang Liu
Legal Representative
Attachments:
1.
2.
3.
4.
5.
6.
Shareholders' Register of Party C;
The Capital Contribution Certificate for Party C;
Exclusive Technology Consultant and Service Agreement;
Loan Agreement;
Exclusive Option Agreement;
Power of Attorney.
Exclusive Option Agreement
Exhibit 4.33
This (this “Agreement”) is executed by and among the following Parties as of the 6th day of August, 2015 in Beijing, the People’s Republic of China
(“China” or the “PRC”):
Party A:
Party B:
Party C:
Beijing Yangguang Gudi Science Development Co., Ltd., a wholly foreign owned enterprise, organized and existing under the laws of
the PRC, with its address at Room 1811, 18/F, Building No.2, #1 Shangdi 10th Avenue, Haidian District, Beijing, PRC;
58 Co., Ltd., a limited liability company organized and existing under the laws of the PRC, with its address at Room 210-03, Office
Building, Nangang Industry Zone, Economic and Technological Development District, Tianjin, PRC; and
Beijing Shan Jing Ke Chuang Network Technology Co., Ltd., a limited liability company organized and existing under the laws of the
PRC, with its address at No.6, Anfu Road, Houshayu Town, Shunyi District, Beijing, PRC.
In this Agreement, each of Party A, Party B and Party C shall be referred to as a “Party” respectively, and they shall be collectively referred to as
the “Parties”.
Whereas:
1.
2.
Party B is a shareholder of Party C and as of the date hereof holds 49.00% of equity interests of Party C, representing RMB18,967,742 in the
registered capital of Party C.
Party A and Party B executed a Loan Agreement (“Loan Agreement”) on August 6, 2015, according to which Party A confirmed that it provided
to Party B a loan in amount of RMB18,967,742, to be used for the purpose of subscribing for the equity interest in Party C.
1
Now therefore, upon mutual discussion and negotiation, the Parties have reached the following agreement:
1.
Sale and Purchase of Equity Interest
1.1
Option Granted
In consideration of the payment of RMB10 by Party A, the receipt and adequacy of which is hereby acknowledged by Party B, Party B
hereby irrevocably grants Party A an irrevocable and exclusive right to purchase, or designate one or more persons (each, a “Designee”)
to purchase the equity interests in Party C then held by Party B once or at multiple times at any time in part or in whole at Party A’s sole
and absolute discretion to the extent permitted by Chinese laws and at the price described in Section 1.3 herein (such right being the
“Equity Interest Purchase Option”). Except for Party A and the Designee(s), no other person shall be entitled to the Equity Interest
Purchase Option or other rights with respect to the equity interests of Party B. Party C hereby agrees to the grant by Party B of the Equity
Interest Purchase Option to Party A. The term “person” as used herein shall refer to individuals, corporations, partnerships, partners,
enterprises, trusts or non-corporate organizations.
1.2
Steps for Exercise of Equity Interest Purchase Option
Subject to the provisions of the laws and regulations of China, Party A may exercise the Equity Interest Purchase Option by issuing a
written notice to Party B (the “Equity Interest Purchase Option Notice”), specifying: (a) Party A’s or the Designee’s decision to exercise
the Equity Interest Purchase Option; (b) the portion of equity interests to be purchased by Party A or the Designee from Party B (the
“Optioned Interests”); and (c) the date for purchasing the Optioned Interests and/or the date for transfer of the Optioned Interests.
2
1.3
Equity Interest Purchase Price
The purchase price of all equity interests held by Party B in Party C purchased by Party A by exercising the Equity Interest Purchase
Option shall be RMB18,967,742; if Party A exercises the Equity Interest Purchase Option to purchase part of the equity interests held by
Party B in Party C, the purchase price shall be calculated pro rata. If PRC law requires a minimum price higher than aforementioned price
when Party A exercises Equity Interest Purchase Option, the minimum price regulated by PRC law shall be the purchase price
(collectively, the “Equity Interest Purchase Price”).
1.4
Transfer of Optioned Interests
For each exercise of the Equity Interest Purchase Option:
1.4.1
1.4.2
Party B shall cause Party C to promptly convene a shareholders’ meeting, at which a resolution shall be adopted approving Party
B’s transfer of the Optioned Interests to Party A and/or the Designee(s);
Party B shall obtain written statements from the other shareholders of Party B giving consent to the transfer of the equity interest
to Party A and/or the Designee(s) and waiving any right of first refusal related thereto.
3
1.4.3
1.4.4
Party B shall execute an equity interest transfer contract with respect to each transfer with Party A and/or each Designee
(whichever is applicable), in accordance with the provisions of this Agreement and the Equity Interest Purchase Option Notice
regarding the Optioned Interests;
The relevant Parties shall execute all other necessary contracts, agreements or documents, obtain all necessary government
licenses and permits and take all necessary actions to transfer valid ownership of the Optioned Interests to Party A and/or the
Designee(s), unencumbered by any security interests, and cause Party A and/or the Designee(s) to become the registered owner
(s) of the Optioned Interests. For the purpose of this Section and this Agreement, "security interests" shall include securities,
mortgages, third party's rights or interests, any stock options, acquisition right, right of first refusal, right to offset, ownership
retention or other security arrangements, but shall be deemed to exclude any security interest created by this Agreement, Party
B's Equity Interest Pledge Agreement and Party B’s Power of Attorney. "Party B's Equity Interest Pledge Agreement" as used in
this Agreement shall refer to the Amended and Restated Equity Interest Pledge Agreement executed by and among Party A,
Party B and Party C on the date hereof and any modification, amendment and restatement thereto. “Party B’s Power of
Attorney” as used in this Agreement shall refer to the Power of Attorney executed by Party B on the date hereof granting Party
A with power of attorney and any modification, amendment and restatement thereto.
4
1.5
Payment
The Parties have agreed in the Loan Agreement that any proceeds obtained by Party B through the transfer of its equity interests in Party
C shall be used for repayment of the loan provided by Party A in accordance with the Loan Agreement. Accordingly, upon exercise of the
Equity Interest Purchase Option, Party A may elect to make payment of the Equity Interest Purchase Price through cancellation of the
outstanding amount of the loan owed by Party B to Party A, in which case Party A shall not be required to pay any additional Equity
Interest Purchase Price to Party B, unless the Total Equity Interest Purchase Price set forth herein is required to be adjusted in accordance
with applicable laws and regulations.
2.
Covenants
2.1
Covenants regarding Party C
Party B (as the shareholders of Party C) and Party C hereby covenant as follows:
2.1.1 Without the prior written consent of Party A, they shall not in any manner supplement, change or amend the articles of
association and bylaws of Party C, increase or decrease its registered capital, or change its structure of registered capital in other
manners;
2.1.2
They shall maintain Party C’s corporate existence in accordance with good financial and business standards, obtain and maintain
all necessary government licenses and permits and practice by prudently and effectively operating its business and handling its
affairs;
2.1.3 Without the prior written consent of Party A, they shall not at any time following the date hereof, sell, transfer, mortgage or
dispose of in any manner any assets of Party C or legal or beneficial interest in the business or revenues of Party C, or allow the
encumbrance thereon of any security interest;
5
2.1.4 Without the prior written consent of Party A, they shall not incur, inherit, guarantee or suffer the existence of any debt, except
for (i) debts incurred in the ordinary course of business other than through loans; and (ii) debts disclosed to Party A for which
Party A’s written consent has been obtained;
2.1.5
They shall always operate all of Party C’s businesses during the ordinary course of business to maintain the asset value of Party
C and refrain from any action/omission that may affect Party C’s operating status and asset value;
2.1.6 Without the prior written consent of Party A, they shall not cause Party C to execute any major contract, except the contracts in
the ordinary course of business (for purpose of this subsection, a contract with a price exceeding RMB500,000 shall be deemed a
major contract);
2.1.7 Without the prior written consent of Party A, they shall not cause Party C to provide any person with any loan or credit;
2.1.8
They shall provide Party A with information on Party C’s business operations and financial condition at Party A’s request;
2.1.9
If requested by Party A, they shall procure and maintain insurance in respect of Party C’s assets and business from an insurance
carrier acceptable to Party A, at an amount and type of coverage typical for companies that operate similar businesses;
6
2.1.10 Without the prior written consent of Party A, they shall not cause or permit Party C to merge, consolidate with, acquire or invest
in any person;
2.1.11 They shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative
proceedings relating to Party C’s assets, business or revenue;
2.1.12 To maintain the ownership by Party C of all of its assets, they shall execute all necessary or appropriate documents, take all
necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defenses
against all claims;
2.1.13 Without the prior written consent of Party A, they shall ensure that Party C shall not in any manner distribute dividends to its
shareholders, provided that upon Party A’s written request, Party C shall immediately distribute all distributable profits to its
shareholders; and
2.1.14 At the request of Party A, they shall appoint any persons designated by Party A as the director(s) of Party C.
2.1.15 Without Party A’s prior written consent, they shall not engage in any business in competition with Party A or its affiliates.
2.1.16 Unless otherwise required by PRC law, Party C shall not be dissolved or liquated without prior written consent by Party A.
7
2.2
Covenants of Party B
Party B hereby covenants as follows:
2.2.1 Without the prior written consent of Party A, Party B shall not sell, transfer, mortgage or dispose of in any other manner any
legal or beneficial interest in the equity interests in Party C held by Party B, or allow the encumbrance thereon, except for the
interest placed in accordance with Party B’s Equity Interest Pledge Agreement and Party B’s Power of Attorney;
2.2.2
2.2.3
2.2.4
2.2.5
Party B shall cause the shareholders’ meeting and/or the director(s) of Party C not to approve the sale, transfer, mortgage or
disposition in any other manner of any legal or beneficial interest in the equity interests in Party C held by Party B, or allow the
encumbrance thereon of any security interest, without the prior written consent of Party A, except for the interest placed in
accordance with Party B’s Equity Interest Pledge Agreement and Party B’s Power of Attorney;
Party B shall cause the shareholders’ meeting or the director(s) of Party C not to approve the merger or consolidation with any
person, or the acquisition of or investment in any person, without the prior written consent of Party A;
Party B shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative
proceedings relating to the equity interests in Party C held by Party B;
Party B shall cause the shareholders’ meeting or the director(s) of Party C to vote their approval of the transfer of the Optioned
Interests as set forth in this Agreement and to take any and all other actions that may be requested by Party A;
8
2.2.6
To the extent necessary to maintain Party B’s ownership in Party C, Party B shall execute all necessary or appropriate
documents, take all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and
appropriate defenses against all claims;
2.2.7
Party B shall appoint any designee of Party A as the director(s) of Party C, at the request of Party A;
2.2.8
2.2.9
Party B hereby waives its right of first of refusal to transfer of equity interest by the other existing shareholders of Party C to
Party A (if any); and
Party B shall promptly donate any profit, interest, dividend or proceeds of liquidation to Party A or any other person designated
by Party A to the extent permitted under applicable PRC laws.
2.2.10 Party B shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by and among
Party B, Party C and Party A, perform the obligations hereunder and thereunder, and refrain from any action/omission that may
affect the effectiveness and enforceability thereof. To the extent that Party B has any remaining rights with respect to the equity
interests subject to this Agreement hereunder or under the Equity Interest Pledge Agreement among the same parties hereto or
under the Power of Attorney granted in favor of Party A, Party B shall not exercise such rights except in accordance with the
written instructions of Party A.
9
3.
Representations and Warranties
Party B and Party C hereby represent and warrant to Party A, jointly and severally, as of the date of this Agreement and each date of transfer of the
Optioned Interests, that:
3.1
3.2
3.3
They have the authority to execute and deliver this Agreement and any equity interest transfer contracts to which they are parties
concerning the Optioned Interests to be transferred thereunder (each, a “Transfer Contracts”), and to perform their obligations under this
Agreement and any Transfer Contracts. Party B and Party C agree to enter into Transfer Contracts consistent with the terms of this
Agreement upon Party A’s exercise of the Equity Interest Purchase Option. This Agreement and the Transfer Contracts to which they are
parties constitute or will constitute their legal, valid and binding obligations and shall be enforceable against them in accordance with the
provisions thereof;
Party B and Party C have obtained any and all approvals and consents from government authorities and third parties (if required) for
execution, delivery and performance of this Agreement.
The execution and delivery of this Agreement or any Transfer Contracts and the obligations under this Agreement or any Transfer
Contracts shall not: (i) cause any violation of any applicable laws of China; (ii) be inconsistent with the articles of association, bylaws or
other organizational documents of Party C; (iii) cause the violation of any contracts or instruments to which they are a party or which are
binding on them, or constitute any breach under any contracts or instruments to which they are a party or which are binding on them; (iv)
cause any violation of any condition for the grant and/or continued effectiveness of any licenses or permits issued to either of them; or (v)
cause the suspension or revocation of or imposition of additional conditions to any licenses or permits issued to either of them;
10
3.4
3.5
3.6
3.7
3.8
Party B has a good and merchantable title to the equity interests in Party C he holds. Except for Party B's Equity Interest Pledge
Agreement and Party B’s Power of Attorney, Party B has not placed any security interest on such equity interests;
Party C has a good and merchantable title to all of its assets, and has not placed any security interest on the aforementioned assets;
Party C does not have any outstanding debts, except for (i) debt incurred in the ordinary course of business; and (ii) debts disclosed to
Party A for which Party A’s written consent has been obtained.
Party C has complied with all laws and regulations of China applicable to asset acquisitions; and
There are no pending or threatened litigation, arbitration or administrative proceedings relating to the equity interests in Party C, assets of
Party C or Party C.
4.
Effective Date
This Agreement shall become effective upon execution by the Parties, and remain effective until all equity interests held by Party B in Party C
have been transferred or assigned to Party A and/or any other person designated by Party A in accordance with this Agreement.
5.
Governing Law and Resolution of Disputes
5.1
Governing law
The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes
hereunder shall be governed by the laws of PRC.
11
5.2
Methods of Resolution of Disputes
In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute
through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party’s request
to the other Parties for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China
International Economic and Trade Arbitration Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall
be conducted in Beijing, and the language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all
Parties.
6.
Taxes and Fees
Each Party shall pay any and all transfer and registration tax, expenses and fees incurred thereby or levied thereon in accordance with the laws of
China in connection with the preparation and execution of this Agreement and the Transfer Contracts, as well as the consummation of the
transactions contemplated under this Agreement and the Transfer Contracts.
7.
Notices
7.1
All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent
by registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such Party set forth
below. A confirmation copy of each notice shall also be sent by email. The dates on which notices shall be deemed to have been
effectively given shall be determined as follows:
12
7.1.1
7.1.2
Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given
on the date of receipt or refusal at the address specified for notices.
Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced
by an automatically generated confirmation of transmission).
7.2
For the purpose of notices, the addresses of the Parties are as follows:
Party A:
Address:
Attn:
Phone:
Facsimile:
Party B:
Address:
Phone:
Facsimile:
Party C:
Address:
Attn:
Phone:
Facsimile:
Beijing Yangguang Gudi Science Development Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District,
Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
58 Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District,
Beijing
+8610 64435588-8888
+8610-64459926
Beijing Shan Jing Ke Chuang Network Technology Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District,
Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
13
7.3
Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms hereof.
8.
Confidentiality
The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in
connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain
confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant
confidential information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving
Party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock
exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal
counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or
financial advisors shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential
information by the staff members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which
Party shall be held liable for breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.
9.
Further Warranties
The Parties agree to promptly execute documents that are reasonably required for or are conducive to the implementation of the provisions and
purposes of this Agreement and take further actions that are reasonably required for or are conducive to the implementation of the provisions and
purposes of this Agreement.
14
10.
Breach of Agreement
10.1
10.2
If Party B or Party C conducts any material breach of any term of this Agreement, Party A shall have right to terminate this Agreement
and require the Party B or Party C to compensate all damages; this Section 10 shall not prejudice any other rights of Party A herein;
If Party A conducts any breach of any term of this Agreement, Party B or Party C shall not terminate this Agreement in any event unless
otherwise required by applicable laws.
11.
Miscellaneous
11.1
Amendment, change and supplement
Any amendment, change and supplement to this Agreement shall require the execution of a written agreement by all of the Parties.
11.2
Entire agreement
Except for the amendments, supplements or changes in writing executed after the execution of this Agreement, this Agreement shall
constitute the entire agreement reached by and among the Parties hereto with respect to the subject matter hereof, and shall supersede all
prior oral and written consultations, representations and contracts reached with respect to the subject matter of this Agreement.
15
11.3
Headings
The headings of this Agreement are for convenience only, and shall not be used to interpret, explain or otherwise affect the meanings of
the provisions of this Agreement.
11.4
Language
This Agreement is written in both Chinese and English language in three copies, each Party having one copy with equal legal validity; in
case there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.
11.5
Severability
In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in
accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be
affected or compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions
with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect
of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.
11.6
Successors
This Agreement shall be binding on and shall inure to the interest of the respective successors of the Parties and the permitted assigns of
such Parties.
16
11.7
Survival
11.7.1 Any obligations that occur or that are due as a result of this Agreement upon the expiration or early termination of this
Agreement shall survive the expiration or early termination thereof.
11.7.2 The provisions of Sections 5, 8, 10 and this Section 11.7 shall survive the termination of this Agreement.
11.8 Waivers
Any Party may waive the terms and conditions of this Agreement, provided that such a waiver must be provided in writing and shall
require the signatures of the Parties. No waiver by any Party in certain circumstances with respect to a breach by other Parties shall
operate as a waiver by such a Party with respect to any similar breach in other circumstances.
17
IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Exclusive Option Agreement as of the date first
above written.
Party A:
Beijing Yangguang Gudi Science Development Co., Ltd.
By:
Name:
Title:
/s/ Haoyong Yang
Haoyong Yang
Legal Representative
Party B:
58 Co., Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
Party C:
Beijing Shan Jing Ke Chuang Network Technology Co., Ltd.
By:
Name:
Title:
/s/ Yang Liu
Yang Liu
Legal Representative
Exclusive Option Agreement
This (this “Agreement”) is executed by and among the following Parties as of the 6th day of August, 2015 in Beijing, the People’s Republic of
China (“China” or the “PRC”):
Party A:
Beijing Yangguang Gudi Science Development Co., Ltd., a wholly foreign owned enterprise, organized and existing under the laws of
the PRC, with its address at Room 1811, 18/F, Building No.2, #1 Shangdi 10th Avenue, Haidian District, Beijing, PRC;
Party B:
Yang Liu, a citizen of China with Chinese Identification No.: ; and
Party C:
Beijing Shan Jing Ke Chuang Network Technology Co., Ltd., a limited liability company organized and existing under the laws of the
PRC, with its address at No.6, Anfu Road, Houshayu Town, Shunyi District, Beijing, PRC.
In this Agreement, each of Party A, Party B and Party C shall be referred to as a “Party” respectively, and they shall be collectively referred to as
the “Parties”.
Whereas:
1.
2.
Party B is a shareholder of Party C and as of the date hereof holds 30.69% of equity interests of Party C, representing RMB11,880,000 in the
registered capital of Party C.
Party A and Party B executed a Loan Agreement (“Loan Agreement”) on August 6, 2015, according to which Party A confirmed that it provided
to Party B a loan in amount of RMB11,880,000, to be used for the purpose of subscribing the registered capital of Party C.
1
Now therefore, upon mutual discussion and negotiation, the Parties have reached the following agreement:
1.
Sale and Purchase of Equity Interest
1.1
Option Granted
In consideration of the payment of RMB10 by Party A, the receipt and adequacy of which is hereby acknowledged by Party B, Party B
hereby irrevocably grants Party A an irrevocable and exclusive right to purchase, or designate one or more persons (each, a “Designee”)
to purchase the equity interests in Party C then held by Party B once or at multiple times at any time in part or in whole at Party A’s sole
and absolute discretion to the extent permitted by Chinese laws and at the price described in Section 1.3 herein (such right being the
“Equity Interest Purchase Option”). Except for Party A and the Designee(s), no other person shall be entitled to the Equity Interest
Purchase Option or other rights with respect to the equity interests of Party B. Party C hereby agrees to the grant by Party B of the Equity
Interest Purchase Option to Party A. The term “person” as used herein shall refer to individuals, corporations, partnerships, partners,
enterprises, trusts or non-corporate organizations.
1.2
Steps for Exercise of Equity Interest Purchase Option
Subject to the provisions of the laws and regulations of China, Party A may exercise the Equity Interest Purchase Option by issuing a
written notice to Party B (the “Equity Interest Purchase Option Notice”), specifying: (a) Party A’s or the Designee’s decision to exercise
the Equity Interest Purchase Option; (b) the portion of equity interests to be purchased by Party A or the Designee from Party B (the
“Optioned Interests”); and (c) the date for purchasing the Optioned Interests and/or the date for transfer of the Optioned Interests.
2
1.3
Equity Interest Purchase Price
The purchase price of all equity interests held by Party B in Party C purchased by Party A by exercising the Equity Interest Purchase
Option shall be RMB11,880,000; if Party A exercises the Equity Interest Purchase Option to purchase part of the equity interests held by
Party B in Party C, the purchase price shall be calculated pro rata. If PRC law requires a minimum price higher than aforementioned price
when Party A exercises Equity Interest Purchase Option, the minimum price regulated by PRC law shall be the purchase price
(collectively, the “Equity Interest Purchase Price”).
1.4
Transfer of Optioned Interests
For each exercise of the Equity Interest Purchase Option:
1.4.1
1.4.2
1.4.3
Party B shall cause Party C to promptly convene a shareholders’ meeting, at which a resolution shall be adopted approving Party
B’s transfer of the Optioned Interests to Party A and/or the Designee(s);
Party B shall obtain written statements from the other shareholders of Party B giving consent to the transfer of the equity interest
to Party A and/or the Designee(s) and waiving any right of first refusal related thereto.
Party B shall execute an equity interest transfer contract with respect to each transfer with Party A and/or each Designee
(whichever is applicable), in accordance with the provisions of this Agreement and the Equity Interest Purchase Option Notice
regarding the Optioned Interests;
3
1.4.4
The relevant Parties shall execute all other necessary contracts, agreements or documents, obtain all necessary government
licenses and permits and take all necessary actions to transfer valid ownership of the Optioned Interests to Party A and/or the
Designee(s), unencumbered by any security interests, and cause Party A and/or the Designee(s) to become the registered owner
(s) of the Optioned Interests. For the purpose of this Section and this Agreement, "security interests" shall include securities,
mortgages, third party's rights or interests, any stock options, acquisition right, right of first refusal, right to offset, ownership
retention or other security arrangements, but shall be deemed to exclude any security interest created by this Agreement, Party
B's Equity Interest Pledge Agreement and Party B’s Power of Attorney. "Party B's Equity Interest Pledge Agreement" as used in
this Agreement shall refer to the Equity Interest Pledge Agreement executed by and among Party A, Party B and Party C on the
date hereof and any modification, amendment and restatement thereto. “Party B’s Power of Attorney” as used in this Agreement
shall refer to the Power of Attorney executed by Party B on the date hereof granting Party A with power of attorney and any
modification, amendment and restatement thereto.
1.5
Payment
The Parties have agreed in the Loan Agreement that any proceeds obtained by Party B through the transfer of its equity interests in Party
C shall be used for repayment of the loan provided by Party A in accordance with the Loan Agreement. Accordingly, upon exercise of the
Equity Interest Purchase Option, Party A may elect to make payment of the Equity Interest Purchase Price through cancellation of the
outstanding amount of the loan owed by Party B to Party A, in which case Party A shall not be required to pay any additional Equity
Interest Purchase Price to Party B, unless the Total Equity Interest Purchase Price set forth herein is required to be adjusted in accordance
with applicable laws and regulations.
4
2.
Covenants
2.1
Covenants regarding Party C
Party B (as the shareholders of Party C) and Party C hereby covenant as follows:
2.1.1 Without the prior written consent of Party A, they shall not in any manner supplement, change or amend the articles of
association and bylaws of Party C, increase or decrease its registered capital, or change its structure of registered capital in other
manners;
2.1.2
They shall maintain Party C’s corporate existence in accordance with good financial and business standards, obtain and maintain
all necessary government licenses and permits and practice by prudently and effectively operating its business and handling its
affairs;
2.1.3 Without the prior written consent of Party A, they shall not at any time following the date hereof, sell, transfer, mortgage or
dispose of in any manner any assets of Party C or legal or beneficial interest in the business or revenues of Party C, or allow the
encumbrance thereon of any security interest;
2.1.4 Without the prior written consent of Party A, they shall not incur, inherit, guarantee or suffer the existence of any debt, except
for (i) debts incurred in the ordinary course of business other than through loans; and (ii) debts disclosed to Party A for which
Party A’s written consent has been obtained;
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2.1.5
They shall always operate all of Party C’s businesses during the ordinary course of business to maintain the asset value of Party
C and refrain from any action/omission that may affect Party C’s operating status and asset value;
2.1.6 Without the prior written consent of Party A, they shall not cause Party C to execute any major contract, except the contracts in
the ordinary course of business (for purpose of this subsection, a contract with a price exceeding RMB500,000 shall be deemed a
major contract);
2.1.7 Without the prior written consent of Party A, they shall not cause Party C to provide any person with any loan or credit;
2.1.8
They shall provide Party A with information on Party C’s business operations and financial condition at Party A’s request;
2.1.9
If requested by Party A, they shall procure and maintain insurance in respect of Party C’s assets and business from an insurance
carrier acceptable to Party A, at an amount and type of coverage typical for companies that operate similar businesses;
2.1.10 Without the prior written consent of Party A, they shall not cause or permit Party C to merge, consolidate with, acquire or invest
in any person;
2.1.11 They shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative
proceedings relating to Party C’s assets, business or revenue;
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2.1.12 To maintain the ownership by Party C of all of its assets, they shall execute all necessary or appropriate documents, take all
necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defenses
against all claims;
2.1.13 Without the prior written consent of Party A, they shall ensure that Party C shall not in any manner distribute dividends to its
shareholders, provided that upon Party A’s written request, Party C shall immediately distribute all distributable profits to its
shareholders; and
2.1.14 At the request of Party A, they shall appoint any persons designated by Party A as the director(s) of Party C.
2.1.15 Without Party A’s prior written consent, they shall not engage in any business in competition with Party A or its affiliates.
2.1.16 Unless otherwise required by PRC law, Party C shall not be dissolved or liquated without prior written consent by Party A.
2.2
Covenants of Party B
Party B hereby covenants as follows:
2.2.1 Without the prior written consent of Party A, Party B shall not sell, transfer, mortgage or dispose of in any other manner any
legal or beneficial interest in the equity interests in Party C held by Party B, or allow the encumbrance thereon, except for the
interest placed in accordance with Party B’s Equity Interest Pledge Agreement and Party B’s Power of Attorney;
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2.2.2
2.2.3
2.2.4
2.2.5
2.2.6
Party B shall cause the shareholders’ meeting and/or the director(s) of Party C not to approve the sale, transfer, mortgage or
disposition in any other manner of any legal or beneficial interest in the equity interests in Party C held by Party B, or allow the
encumbrance thereon of any security interest, without the prior written consent of Party A, except for the interest placed in
accordance with Party B’s Equity Interest Pledge Agreement and Party B’s Power of Attorney;
Party B shall cause the shareholders’ meeting or the director(s) of Party C not to approve the merger or consolidation with any
person, or the acquisition of or investment in any person, without the prior written consent of Party A;
Party B shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative
proceedings relating to the equity interests in Party C held by Party B;
Party B shall cause the shareholders’ meeting or the director(s) of Party C to vote their approval of the transfer of the Optioned
Interests as set forth in this Agreement and to take any and all other actions that may be requested by Party A;
To the extent necessary to maintain Party B’s ownership in Party C, Party B shall execute all necessary or appropriate
documents, take all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and
appropriate defenses against all claims;
2.2.7
Party B shall appoint any designee of Party A as the director(s) of Party C, at the request of Party A;
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2.2.8
2.2.9
Party B hereby waives its right of first of refusal to transfer of equity interest by the other existing shareholders of Party C to
Party A (if any); and
Party B shall promptly donate any profit, interest, dividend or proceeds of liquidation to Party A or any other person designated
by Party A to the extent permitted under applicable PRC laws.
2.2.10 Party B shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by and among
Party B, Party C and Party A, perform the obligations hereunder and thereunder, and refrain from any action/omission that may
affect the effectiveness and enforceability thereof. To the extent that Party B has any remaining rights with respect to the equity
interests subject to this Agreement hereunder or under the Equity Interest Pledge Agreement among the same parties hereto or
under the Power of Attorney granted in favor of Party A, Party B shall not exercise such rights except in accordance with the
written instructions of Party A.
3.
Representations and Warranties
Party B and Party C hereby represent and warrant to Party A, jointly and severally, as of the date of this Agreement and each date of transfer of the
Optioned Interests, that:
3.1
They have the authority to execute and deliver this Agreement and any equity interest transfer contracts to which they are parties
concerning the Optioned Interests to be transferred thereunder (each, a “Transfer Contracts”), and to perform their obligations under this
Agreement and any Transfer Contracts. Party B and Party C agree to enter into Transfer Contracts consistent with the terms of this
Agreement upon Party A’s exercise of the Equity Interest Purchase Option. This Agreement and the Transfer Contracts to which they are
parties constitute or will constitute their legal, valid and binding obligations and shall be enforceable against them in accordance with the
provisions thereof;
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3.2
3.3
Party B and Party C have obtained any and all approvals and consents from government authorities and third parties (if required) for
execution, delivery and performance of this Agreement.
The execution and delivery of this Agreement or any Transfer Contracts and the obligations under this Agreement or any Transfer
Contracts shall not: (i) cause any violation of any applicable laws of China; (ii) be inconsistent with the articles of association, bylaws or
other organizational documents of Party C; (iii) cause the violation of any contracts or instruments to which they are a party or which are
binding on them, or constitute any breach under any contracts or instruments to which they are a party or which are binding on them; (iv)
cause any violation of any condition for the grant and/or continued effectiveness of any licenses or permits issued to either of them; or (v)
cause the suspension or revocation of or imposition of additional conditions to any licenses or permits issued to either of them;
3.4
Party B has a good and merchantable title to the equity interests in Party C he holds. Except for Party B's Equity Interest Pledge
Agreement and Party B’s Power of Attorney, Party B has not placed any security interest on such equity interests;
3.5
Party C has a good and merchantable title to all of its assets, and has not placed any security interest on the aforementioned assets;
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3.6
3.7
3.8
Party C does not have any outstanding debts, except for (i) debt incurred in the ordinary course of business; and (ii) debts disclosed to
Party A for which Party A’s written consent has been obtained.
Party C has complied with all laws and regulations of China applicable to asset acquisitions; and
There are no pending or threatened litigation, arbitration or administrative proceedings relating to the equity interests in Party C, assets of
Party C or Party C.
4.
Effective Date
This Agreement shall become effective upon execution by the Parties, and remain effective until all equity interests held by Party B in Party C
have been transferred or assigned to Party A and/or any other person designated by Party A in accordance with this Agreement.
5.
Governing Law and Resolution of Disputes
5.1
Governing law
The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes
hereunder shall be governed by the laws of PRC.
5.2
Methods of Resolution of Disputes
In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute
through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party’s request
to the other Parties for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China
International Economic and Trade Arbitration Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall
be conducted in Beijing, and the language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all
Parties.
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6.
Taxes and Fees
Each Party shall pay any and all transfer and registration tax, expenses and fees incurred thereby or levied thereon in accordance with the laws of
China in connection with the preparation and execution of this Agreement and the Transfer Contracts, as well as the consummation of the
transactions contemplated under this Agreement and the Transfer Contracts.
7.
Notices
7.1
All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent
by registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such Party set forth
below. A confirmation copy of each notice shall also be sent by email. The dates on which notices shall be deemed to have been
effectively given shall be determined as follows:
7.1.1
7.1.2
Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given
on the date of receipt or refusal at the address specified for notices.
Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced
by an automatically generated confirmation of transmission).
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7.2
For the purpose of notices, the addresses of the Parties are as follows:
Party A:
Address:
Attn:
Phone:
Facsimile:
Party B:
Address:
Phone:
Facsimile:
Party C:
Address:
Attn:
Phone:
Facsimile:
Beijing Yangguang Gudi Science Development Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District,
Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
Yang Liu
Beijing Shan Jing Ke Chuang Network Technology Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District,
Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
7.3
Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms hereof.
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8.
Confidentiality
The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in
connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain
confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant
confidential information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving
Party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock
exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal
counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or
financial advisors shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential
information by the staff members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which
Party shall be held liable for breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.
9.
Further Warranties
The Parties agree to promptly execute documents that are reasonably required for or are conducive to the implementation of the provisions and
purposes of this Agreement and take further actions that are reasonably required for or are conducive to the implementation of the provisions and
purposes of this Agreement.
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10.
Breach of Agreement
10.1
10.2
If Party B or Party C conducts any material breach of any term of this Agreement, Party A shall have right to terminate this Agreement
and require the Party B or Party C to compensate all damages; this Section 10 shall not prejudice any other rights of Party A herein;
If Party A conducts any breach of any term of this Agreement, Party B or Party C shall not terminate this Agreement in any event unless
otherwise required by applicable laws.
11.
Miscellaneous
11.1
Amendment, change and supplement
Any amendment, change and supplement to this Agreement shall require the execution of a written agreement by all of the Parties.
11.2
Entire agreement
Except for the amendments, supplements or changes in writing executed after the execution of this Agreement, this Agreement shall
constitute the entire agreement reached by and among the Parties hereto with respect to the subject matter hereof, and shall supercede all
prior oral and written consultations, representations and contracts reached with respect to the subject matter of this Agreement.
11.3
Headings
The headings of this Agreement are for convenience only, and shall not be used to interpret, explain or otherwise affect the meanings of
the provisions of this Agreement.
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11.4
Language
This Agreement is written in both Chinese and English language in three copies, each Party having one copy with equal legal validity; in
case there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.
11.5
Severability
In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in
accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be
affected or compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions
with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect
of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.
11.6
Successors
This Agreement shall be binding on and shall inure to the interest of the respective successors of the Parties and the permitted assigns of
such Parties.
11.7
Survival
11.7.1 Any obligations that occur or that are due as a result of this Agreement upon the expiration or early termination of this
Agreement shall survive the expiration or early termination thereof.
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11.7.2 The provisions of Sections 5, 8, 10 and this Section 11.7 shall survive the termination of this Agreement.
11.8 Waivers
Any Party may waive the terms and conditions of this Agreement, provided that such a waiver must be provided in writing and shall
require the signatures of the Parties. No waiver by any Party in certain circumstances with respect to a breach by other Parties shall
operate as a waiver by such a Party with respect to any similar breach in other circumstances.
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IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Exclusive Option Agreement as of the date first
above written.
Party A:
Beijing Yangguang Gudi Science Development Co., Ltd.
By:
Name:
Title:
/s/ Haoyong Yang
Haoyong Yang
Legal Representative
Party B:
Yang Liu
By:
/s/ Yang Liu
Party C:
Beijing Shan Jing Ke Chuang Network Technology Co., Ltd.
By:
Name:
Title:
/s/ Yang Liu
Yang Liu
Legal Representative
Exclusive Option Agreement
This (this “Agreement”) is executed by and among the following Parties as of the 6th day of August, 2015 in Beijing, the People’s Republic of
China (“China” or the “PRC”):
Party A:
Beijing Yangguang Gudi Science Development Co., Ltd., a wholly foreign owned enterprise, organized and existing under the laws of
the PRC, with its address at Room 1811, 18/F, Building No.2, #1 Shangdi 10th Avenue, Haidian District, Beijing, PRC;
Party B:
Chunyan Guo, a citizen of China with Chinese Identification No.: ; and
Party C:
Beijing Shan Jing Ke Chuang Network Technology Co., Ltd., a limited liability company organized and existing under the laws of the
PRC, with its address at No.6, Anfu Road, Houshayu Town, Shunyi District, Beijing, PRC.
In this Agreement, each of Party A, Party B and Party C shall be referred to as a “Party” respectively, and they shall be collectively referred to as
the “Parties”.
Whereas:
1.
2.
Party B is a shareholder of Party C and as of the date hereof holds 20.00% of equity interests of Party C, representing RMB7,741,935 in the
registered capital of Party C.
Party A and Party B executed a Loan Agreement (“Loan Agreement”) on August 6, 2015, according to which Party A confirmed that it provided
to Party B a loan in amount of RMB7,741,935, to be used for the purpose of subscribing the registered capital of Party C.
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Now therefore, upon mutual discussion and negotiation, the Parties have reached the following agreement:
1.
Sale and Purchase of Equity Interest
1.1
Option Granted
In consideration of the payment of RMB10 by Party A, the receipt and adequacy of which is hereby acknowledged by Party B, Party B
hereby irrevocably grants Party A an irrevocable and exclusive right to purchase, or designate one or more persons (each, a “Designee”)
to purchase the equity interests in Party C then held by Party B once or at multiple times at any time in part or in whole at Party A’s sole
and absolute discretion to the extent permitted by Chinese laws and at the price described in Section 1.3 herein (such right being the
“Equity Interest Purchase Option”). Except for Party A and the Designee(s), no other person shall be entitled to the Equity Interest
Purchase Option or other rights with respect to the equity interests of Party B. Party C hereby agrees to the grant by Party B of the Equity
Interest Purchase Option to Party A. The term “person” as used herein shall refer to individuals, corporations, partnerships, partners,
enterprises, trusts or non-corporate organizations.
1.2
Steps for Exercise of Equity Interest Purchase Option
Subject to the provisions of the laws and regulations of China, Party A may exercise the Equity Interest Purchase Option by issuing a
written notice to Party B (the “Equity Interest Purchase Option Notice”), specifying: (a) Party A’s or the Designee’s decision to exercise
the Equity Interest Purchase Option; (b) the portion of equity interests to be purchased by Party A or the Designee from Party B (the
“Optioned Interests”); and (c) the date for purchasing the Optioned Interests and/or the date for transfer of the Optioned Interests.
2
1.3
Equity Interest Purchase Price
The purchase price of all equity interests held by Party B in Party C purchased by Party A by exercising the Equity Interest Purchase
Option shall be RMB7,741,935; if Party A exercises the Equity Interest Purchase Option to purchase part of the equity interests held by
Party B in Party C, the purchase price shall be calculated pro rata. If PRC law requires a minimum price higher than aforementioned price
when Party A exercises Equity Interest Purchase Option, the minimum price regulated by PRC law shall be the purchase price
(collectively, the “Equity Interest Purchase Price”).
1.4
Transfer of Optioned Interests
For each exercise of the Equity Interest Purchase Option:
1.4.1
1.4.2
1.4.3
Party B shall cause Party C to promptly convene a shareholders’ meeting, at which a resolution shall be adopted approving Party
B’s transfer of the Optioned Interests to Party A and/or the Designee(s);
Party B shall obtain written statements from the other shareholders of Party B giving consent to the transfer of the equity interest
to Party A and/or the Designee(s) and waiving any right of first refusal related thereto.
Party B shall execute an equity interest transfer contract with respect to each transfer with Party A and/or each Designee
(whichever is applicable), in accordance with the provisions of this Agreement and the Equity Interest Purchase Option Notice
regarding the Optioned Interests;
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1.4.4
The relevant Parties shall execute all other necessary contracts, agreements or documents, obtain all necessary government licenses and
permits and take all necessary actions to transfer valid ownership of the Optioned Interests to Party A and/or the Designee(s), unencumbered
by any security interests, and cause Party A and/or the Designee(s) to become the registered owner(s) of the Optioned Interests. For the
purpose of this Section and this Agreement, "security interests" shall include securities, mortgages, third party's rights or interests, any stock
options, acquisition right, right of first refusal, right to offset, ownership retention or other security arrangements, but shall be deemed to
exclude any security interest created by this Agreement, Party B's Equity Interest Pledge Agreement and Party B’s Power of Attorney.
"Party B's Equity Interest Pledge Agreement" as used in this Agreement shall refer to the Equity Interest Pledge Agreement executed by and
among Party A, Party B and Party C on the date hereof and any modification, amendment and restatement thereto. “Party B’s Power of
Attorney” as used in this Agreement shall refer to the Power of Attorney executed by Party B on the date hereof granting Party A with
power of attorney and any modification, amendment and restatement thereto.
1.5
Payment
The Parties have agreed in the Loan Agreement that any proceeds obtained by Party B through the transfer of its equity interests in Party C shall be
used for repayment of the loan provided by Party A in accordance with the Loan Agreement. Accordingly, upon exercise of the Equity Interest
Purchase Option, Party A may elect to make payment of the Equity Interest Purchase Price through cancellation of the outstanding amount of the
loan owed by Party B to Party A, in which case Party A shall not be required to pay any additional Equity Interest Purchase Price to Party B, unless
the Total Equity Interest Purchase Price set forth herein is required to be adjusted in accordance with applicable laws and regulations.
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2.
Covenants
2.1
Covenants regarding Party C
Party B (as the shareholders of Party C) and Party C hereby covenant as follows:
2.1.1 Without the prior written consent of Party A, they shall not in any manner supplement, change or amend the articles of association
and bylaws of Party C, increase or decrease its registered capital, or change its structure of registered capital in other manners;
2.1.2
They shall maintain Party C's corporate existence in accordance with good financial and business standards, obtain and maintain all
necessary government licenses and permits and practice by prudently and effectively operating its business and handling its affairs;
2.1.3 Without the prior written consent of Party A, they shall not at any time following the date hereof, sell, transfer, mortgage or dispose
of in any manner any assets of Party C or legal or beneficial interest in the business or revenues of Party C, or allow the encumbrance
thereon of any security interest;
2.1.4 Without the prior written consent of Party A, they shall not incur, inherit, guarantee or suffer the existence of any debt, except for (i)
debts incurred in the ordinary course of business other than through loans; and (ii) debts disclosed to Party A for which Party A's
written consent has been obtained;
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2.1.5
They shall always operate all of Party C's businesses during the ordinary course of business to maintain the asset value of Party C and
refrain from any action/omission that may affect Party C's operating status and asset value;
2.1.6 Without the prior written consent of Party A, they shall not cause Party C to execute any major contract, except the contracts in the
ordinary course of business (for purpose of this subsection, a contract with a price exceeding RMB500,000 shall be deemed a major
contract);
2.1.7 Without the prior written consent of Party A, they shall not cause Party C to provide any person with any loan or credit;
2.1.8
They shall provide Party A with information on Party C's business operations and financial condition at Party A's request;
2.1.9
If requested by Party A, they shall procure and maintain insurance in respect of Party C's assets and business from an insurance
carrier acceptable to Party A, at an amount and type of coverage typical for companies that operate similar businesses;
2.1.10 Without the prior written consent of Party A, they shall not cause or permit Party C to merge, consolidate with, acquire or invest in
any person;
2.1.11 They shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative
proceedings relating to Party C's assets, business or revenue;
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2.1.12 To maintain the ownership by Party C of all of its assets, they shall execute all necessary or appropriate documents, take all
necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defenses against
all claims;
2.1.13 Without the prior written consent of Party A, they shall ensure that Party C shall not in any manner distribute dividends to its
shareholders, provided that upon Party A's written request, Party C shall immediately distribute all distributable profits to its
shareholders; and
2.1.14 At the request of Party A, they shall appoint any persons designated by Party A as the director(s) of Party C.
2.1.15 Without Party A’s prior written consent, they shall not engage in any business in competition with Party A or its affiliates.
2.1.16 Unless otherwise required by PRC law, Party C shall not be dissolved or liquated without prior written consent by Party A.
2.2
Covenants of Party B
Party B hereby covenants as follows:
2.2.1 Without the prior written consent of Party A, Party B shall not sell, transfer, mortgage or dispose of in any other manner any legal or
beneficial interest in the equity interests in Party C held by Party B, or allow the encumbrance thereon, except for the interest placed
in accordance with Party B's Equity Interest Pledge Agreement and Party B’s Power of Attorney;
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2.2.2
2.2.3
2.2.4
2.2.5
2.2.6
Party B shall cause the shareholders' meeting and/or the director(s) of Party C not to approve the sale, transfer, mortgage or
disposition in any other manner of any legal or beneficial interest in the equity interests in Party C held by Party B, or allow the
encumbrance thereon of any security interest, without the prior written consent of Party A, except for the interest placed in
accordance with Party B's Equity Interest Pledge Agreement and Party B’s Power of Attorney;
Party B shall cause the shareholders' meeting or the director(s) of Party C not to approve the merger or consolidation with any
person, or the acquisition of or investment in any person, without the prior written consent of Party A;
Party B shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative
proceedings relating to the equity interests in Party C held by Party B;
Party B shall cause the shareholders' meeting or the director(s) of Party C to vote their approval of the transfer of the Optioned
Interests as set forth in this Agreement and to take any and all other actions that may be requested by Party A;
To the extent necessary to maintain Party B's ownership in Party C, Party B shall execute all necessary or appropriate documents,
take all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defenses
against all claims;
2.2.7
Party B shall appoint any designee of Party A as the director(s) of Party C, at the request of Party A;
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2.2.8
2.2.9
Party B hereby waives its right of first of refusal to transfer of equity interest by the other existing shareholders of Party C to Party A
(if any); and
Party B shall promptly donate any profit, interest, dividend or proceeds of liquidation to Party A or any other person designated by
Party A to the extent permitted under applicable PRC laws.
2.2.10 Party B shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by and among Party
B, Party C and Party A, perform the obligations hereunder and thereunder, and refrain from any action/omission that may affect the
effectiveness and enforceability thereof. To the extent that Party B has any remaining rights with respect to the equity interests
subject to this Agreement hereunder or under the Equity Interest Pledge Agreement among the same parties hereto or under the
Power of Attorney granted in favor of Party A, Party B shall not exercise such rights except in accordance with the written
instructions of Party A.
3.
Representations and Warranties
Party B and Party C hereby represent and warrant to Party A, jointly and severally, as of the date of this Agreement and each date of transfer of the
Optioned Interests, that:
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3.1
3.2
3.3
They have the authority to execute and deliver this Agreement and any equity interest transfer contracts to which they are parties concerning
the Optioned Interests to be transferred thereunder (each, a "Transfer Contracts"), and to perform their obligations under this Agreement and
any Transfer Contracts. Party B and Party C agree to enter into Transfer Contracts consistent with the terms of this Agreement upon Party A’s
exercise of the Equity Interest Purchase Option. This Agreement and the Transfer Contracts to which they are parties constitute or will
constitute their legal, valid and binding obligations and shall be enforceable against them in accordance with the provisions thereof;
Party B and Party C have obtained any and all approvals and consents from government authorities and third parties (if required) for
execution, delivery and performance of this Agreement.
The execution and delivery of this Agreement or any Transfer Contracts and the obligations under this Agreement or any Transfer Contracts
shall not: (i) cause any violation of any applicable laws of China; (ii) be inconsistent with the articles of association, bylaws or other
organizational documents of Party C; (iii) cause the violation of any contracts or instruments to which they are a party or which are binding on
them, or constitute any breach under any contracts or instruments to which they are a party or which are binding on them; (iv) cause any
violation of any condition for the grant and/or continued effectiveness of any licenses or permits issued to either of them; or (v) cause the
suspension or revocation of or imposition of additional conditions to any licenses or permits issued to either of them;
3.4
Party B has a good and merchantable title to the equity interests in Party C he holds. Except for Party B's Equity Interest Pledge Agreement
and Party B’s Power of Attorney, Party B has not placed any security interest on such equity interests;
3.5
Party C has a good and merchantable title to all of its assets, and has not placed any security interest on the aforementioned assets;
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3.6
3.7
3.8
Party C does not have any outstanding debts, except for (i) debt incurred in the ordinary course of business; and (ii) debts disclosed to Party A
for which Party A's written consent has been obtained.
Party C has complied with all laws and regulations of China applicable to asset acquisitions; and
There are no pending or threatened litigation, arbitration or administrative proceedings relating to the equity interests in Party C, assets of
Party C or Party C.
4.
Effective Date
This Agreement shall become effective upon execution by the Parties, and remain effective until all equity interests held by Party B in Party C have
been transferred or assigned to Party A and/or any other person designated by Party A in accordance with this Agreement.
5.
Governing Law and Resolution of Disputes
5.1
Governing law
The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes
hereunder shall be governed by the laws of PRC.
5.2 Methods of Resolution of Disputes
In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute
through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party's request to
the other Parties for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International
Economic and Trade Arbitration Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in
Beijing, and the language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.
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6.
Taxes and Fees
Each Party shall pay any and all transfer and registration tax, expenses and fees incurred thereby or levied thereon in accordance with the laws of
China in connection with the preparation and execution of this Agreement and the Transfer Contracts, as well as the consummation of the transactions
contemplated under this Agreement and the Transfer Contracts.
7.
Notices
7.1
All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by
registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such Party set forth below. A
confirmation copy of each notice shall also be sent by email. The dates on which notices shall be deemed to have been effectively given shall
be determined as follows:
7.1.1 Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the
date of receipt or refusal at the address specified for notices.
7.1.2 Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an
automatically generated confirmation of transmission).
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7.2
For the purpose of notices, the addresses of the Parties are as follows:
Party A:
Address:
Attn:
Phone:
Facsimile:
Party B:
Address:
Phone:
Facsimile:
Party C:
Address:
Attn:
Phone:
Facsimile:
Beijing Yangguang Gudi Science Development Co., Ltd.
Tower E, North America International Business Center,
#Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
Chunyan Guo
Tower E, North America International Business Center,
#Yi108, Beiyuan Road, Chaoyang District, Beijing
+8610 64435588-8888
+8610-64459926
Beijing Shan Jing Ke Chuang Network Technology Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
7.3
Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms hereof.
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8.
Confidentiality
The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in
connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality
of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential
information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s
unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or
orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsels or
financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or financial advisors
shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff
members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which Party shall be held liable
for breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.
9.
Further Warranties
The Parties agree to promptly execute documents that are reasonably required for or are conducive to the implementation of the provisions and
purposes of this Agreement and take further actions that are reasonably required for or are conducive to the implementation of the provisions and
purposes of this Agreement.
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10. Breach of Agreement
10.1
10.2
If Party B or Party C conducts any material breach of any term of this Agreement, Party A shall have right to terminate this Agreement and
require the Party B or Party C to compensate all damages; this Section 10 shall not prejudice any other rights of Party A herein;
If Party A conducts any breach of any term of this Agreement, Party B or Party C shall not terminate this Agreement in any event unless
otherwise required by applicable laws.
11. Miscellaneous
11.1
Amendment, change and supplement
Any amendment, change and supplement to this Agreement shall require the execution of a written agreement by all of the Parties.
11.2
Entire agreement
Except for the amendments, supplements or changes in writing executed after the execution of this Agreement, this Agreement shall
constitute the entire agreement reached by and among the Parties hereto with respect to the subject matter hereof, and shall supercede all
prior oral and written consultations, representations and contracts reached with respect to the subject matter of this Agreement.
11.3
Headings
The headings of this Agreement are for convenience only, and shall not be used to interpret, explain or otherwise affect the meanings of the
provisions of this Agreement.
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11.4
Language
This Agreement is written in both Chinese and English language in three copies, each Party having one copy with equal legal validity; in
case there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.
11.5
Severability
In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in
accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be
affected or compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions
with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of
such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.
11.6
Successors
This Agreement shall be binding on and shall inure to the interest of the respective successors of the Parties and the permitted assigns of
such Parties.
11.7
Survival
11.7.1 Any obligations that occur or that are due as a result of this Agreement upon the expiration or early termination of this Agreement
shall survive the expiration or early termination thereof.
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11.7.2 The provisions of Sections 5, 8, 10 and this Section 11.7 shall survive the termination of this Agreement.
11.8 Waivers
Any Party may waive the terms and conditions of this Agreement, provided that such a waiver must be provided in writing and shall require
the signatures of the Parties. No waiver by any Party in certain circumstances with respect to a breach by other Parties shall operate as a
waiver by such a Party with respect to any similar breach in other circumstances.
17
IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Exclusive Option Agreement as of the date first
above written.
Party A:
Beijing Yangguang Gudi Science Development Co., Ltd.
By:
Name:
Title:
/s/ Haoyong Yang
Haoyong Yang
Legal Representative
Party B:
Chunyan Guo
By:
/s/ Chunyan Guo
Party C:
Beijing Shan Jing Ke Chuang Network Technology Co., Ltd.
By:
Name:
Title:
/s/ Yang Liu
Yang Liu
Legal Representative
Exclusive Option Agreement
This (this "Agreement") is executed by and among the following Parties as of the 6th day of August, 2015 in Beijing, the People’s Republic of China
(“China” or the “PRC”):
Party A:
Beijing Yangguang Gudi Science Development Co., Ltd., a wholly foreign owned enterprise, organized and existing under the laws of
the PRC, with its address at Room 1811, 18/F, Building No.2, #1 Shangdi 10th Avenue, Haidian District, Beijing, PRC;
Party B:
Haoyong Yang, a citizen of China with Chinese Identification No.: ; and
Party C:
Beijing Shan Jing Ke Chuang Network Technology Co., Ltd., a limited liability company organized and existing under the laws of the
PRC, with its address at No.6, Anfu Road, Houshayu Town, Shunyi District, Beijing, PRC.
In this Agreement, each of Party A, Party B and Party C shall be referred to as a "Party" respectively, and they shall be collectively referred to as the
"Parties".
Whereas:
1.
2.
Party B is a shareholder of Party C and as of the date hereof holds 0.31% of equity interests of Party C, representing RMB120,000 in the registered
capital of Party C.
Party A and Party B executed a Loan Agreement (“Loan Agreement”) on August 6, 2015, according to which Party A confirmed that it provided to
Party B a loan in amount of RMB 120,000, to be used for the purpose of subscribing the registered capital of Party C.
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Now therefore, upon mutual discussion and negotiation, the Parties have reached the following agreement:
1. Sale and Purchase of Equity Interest
1.1
Option Granted
In consideration of the payment of RMB10 by Party A, the receipt and adequacy of which is hereby acknowledged by Party B, Party B hereby
irrevocably grants Party A an irrevocable and exclusive right to purchase, or designate one or more persons (each, a "Designee") to purchase the
equity interests in Party C then held by Party B once or at multiple times at any time in part or in whole at Party A's sole and absolute discretion
to the extent permitted by Chinese laws and at the price described in Section 1.3 herein (such right being the "Equity Interest Purchase Option").
Except for Party A and the Designee(s), no other person shall be entitled to the Equity Interest Purchase Option or other rights with respect to
the equity interests of Party B. Party C hereby agrees to the grant by Party B of the Equity Interest Purchase Option to Party A. The term
"person" as used herein shall refer to individuals, corporations, partnerships, partners, enterprises, trusts or non-corporate organizations.
1.2
Steps for Exercise of Equity Interest Purchase Option
Subject to the provisions of the laws and regulations of China, Party A may exercise the Equity Interest Purchase Option by issuing a written
notice to Party B (the "Equity Interest Purchase Option Notice"), specifying: (a) Party A's or the Designee’s decision to exercise the Equity
Interest Purchase Option; (b) the portion of equity interests to be purchased by Party A or the Designee from Party B (the "Optioned Interests");
and (c) the date for purchasing the Optioned Interests and/or the date for transfer of the Optioned Interests.
2
1.3
Equity Interest Purchase Price
The purchase price of all equity interests held by Party B in Party C purchased by Party A by exercising the Equity Interest Purchase Option
shall be RMB120,000; if Party A exercises the Equity Interest Purchase Option to purchase part of the equity interests held by Party B in Party
C, the purchase price shall be calculated pro rata. If PRC law requires a minimum price higher than aforementioned price when Party A
exercises Equity Interest Purchase Option, the minimum price regulated by PRC law shall be the purchase price (collectively, the "Equity
Interest Purchase Price").
1.4
Transfer of Optioned Interests
For each exercise of the Equity Interest Purchase Option:
1.4.1
1.4.2
1.4.3
Party B shall cause Party C to promptly convene a shareholders’ meeting, at which a resolution shall be adopted approving Party B's
transfer of the Optioned Interests to Party A and/or the Designee(s);
Party B shall obtain written statements from the other shareholders of Party B giving consent to the transfer of the equity interest to
Party A and/or the Designee(s) and waiving any right of first refusal related thereto.
Party B shall execute an equity interest transfer contract with respect to each transfer with Party A and/or each Designee (whichever is
applicable), in accordance with the provisions of this Agreement and the Equity Interest Purchase Option Notice regarding the
Optioned Interests;
3
1.4.4
The relevant Parties shall execute all other necessary contracts, agreements or documents, obtain all necessary government licenses and
permits and take all necessary actions to transfer valid ownership of the Optioned Interests to Party A and/or the Designee(s),
unencumbered by any security interests, and cause Party A and/or the Designee(s) to become the registered owner(s) of the Optioned
Interests. For the purpose of this Section and this Agreement, "security interests" shall include securities, mortgages, third party's rights
or interests, any stock options, acquisition right, right of first refusal, right to offset, ownership retention or other security arrangements,
but shall be deemed to exclude any security interest created by this Agreement, Party B's Equity Interest Pledge Agreement and Party
B’s Power of Attorney. "Party B's Equity Interest Pledge Agreement" as used in this Agreement shall refer to the Equity Interest Pledge
Agreement executed by and among Party A, Party B and Party C on the date hereof and any modification, amendment and restatement
thereto. “Party B’s Power of Attorney” as used in this Agreement shall refer to the Power of Attorney executed by Party B on the date
hereof granting Party A with power of attorney and any modification, amendment and restatement thereto.
1.5
Payment
The Parties have agreed in the Loan Agreement that any proceeds obtained by Party B through the transfer of its equity interests in Party C shall
be used for repayment of the loan provided by Party A in accordance with the Loan Agreement. Accordingly, upon exercise of the Equity
Interest Purchase Option, Party A may elect to make payment of the Equity Interest Purchase Price through cancellation of the outstanding
amount of the loan owed by Party B to Party A, in which case Party A shall not be required to pay any additional Equity Interest Purchase Price
to Party B, unless the Total Equity Interest Purchase Price set forth herein is required to be adjusted in accordance with applicable laws and
regulations.
4
2. Covenants
2.1
Covenants regarding Party C
Party B (as the shareholders of Party C) and Party C hereby covenant as follows:
2.1.1 Without the prior written consent of Party A, they shall not in any manner supplement, change or amend the articles of association and
bylaws of Party C, increase or decrease its registered capital, or change its structure of registered capital in other manners;
2.1.2
They shall maintain Party C's corporate existence in accordance with good financial and business standards, obtain and maintain all
necessary government licenses and permits and practice by prudently and effectively operating its business and handling its affairs;
2.1.3 Without the prior written consent of Party A, they shall not at any time following the date hereof, sell, transfer, mortgage or dispose of
in any manner any assets of Party C or legal or beneficial interest in the business or revenues of Party C, or allow the encumbrance
thereon of any security interest;
2.1.4 Without the prior written consent of Party A, they shall not incur, inherit, guarantee or suffer the existence of any debt, except for (i)
debts incurred in the ordinary course of business other than through loans; and (ii) debts disclosed to Party A for which Party A's
written consent has been obtained;
5
2.1.5
They shall always operate all of Party C's businesses during the ordinary course of business to maintain the asset value of Party C and
refrain from any action/omission that may affect Party C's operating status and asset value;
2.1.6 Without the prior written consent of Party A, they shall not cause Party C to execute any major contract, except the contracts in the
ordinary course of business (for purpose of this subsection, a contract with a price exceeding RMB500,000 shall be deemed a major
contract);
2.1.7 Without the prior written consent of Party A, they shall not cause Party C to provide any person with any loan or credit;
2.1.8
They shall provide Party A with information on Party C's business operations and financial condition at Party A's request;
2.1.9
If requested by Party A, they shall procure and maintain insurance in respect of Party C's assets and business from an insurance carrier
acceptable to Party A, at an amount and type of coverage typical for companies that operate similar businesses;
2.1.10 Without the prior written consent of Party A, they shall not cause or permit Party C to merge, consolidate with, acquire or invest in any
person;
2.1.11 They shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative
proceedings relating to Party C's assets, business or revenue;
6
2.1.12 To maintain the ownership by Party C of all of its assets, they shall execute all necessary or appropriate documents, take all necessary
or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defenses against all claims;
2.1.13 Without the prior written consent of Party A, they shall ensure that Party C shall not in any manner distribute dividends to its
shareholders, provided that upon Party A's written request, Party C shall immediately distribute all distributable profits to its
shareholders; and
2.1.14 At the request of Party A, they shall appoint any persons designated by Party A as the director(s) of Party C.
2.1.15 Without Party A’s prior written consent, they shall not engage in any business in competition with Party A or its affiliates.
2.1.16 Unless otherwise required by PRC law, Party C shall not be dissolved or liquated without prior written consent by Party A.
2.2
Covenants of Party B
Party B hereby covenants as follows:
2.2.1 Without the prior written consent of Party A, Party B shall not sell, transfer, mortgage or dispose of in any other manner any legal or
beneficial interest in the equity interests in Party C held by Party B, or allow the encumbrance thereon, except for the interest placed in
accordance with Party B's Equity Interest Pledge Agreement and Party B’s Power of Attorney;
7
2.2.2
2.2.3
2.2.4
2.2.5
2.2.6
Party B shall cause the shareholders' meeting and/or the director(s) of Party C not to approve the sale, transfer, mortgage or disposition
in any other manner of any legal or beneficial interest in the equity interests in Party C held by Party B, or allow the encumbrance
thereon of any security interest, without the prior written consent of Party A, except for the interest placed in accordance with Party B's
Equity Interest Pledge Agreement and Party B’s Power of Attorney;
Party B shall cause the shareholders' meeting or the director(s) of Party C not to approve the merger or consolidation with any person,
or the acquisition of or investment in any person, without the prior written consent of Party A;
Party B shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative
proceedings relating to the equity interests in Party C held by Party B;
Party B shall cause the shareholders' meeting or the director(s) of Party C to vote their approval of the transfer of the Optioned Interests
as set forth in this Agreement and to take any and all other actions that may be requested by Party A;
To the extent necessary to maintain Party B's ownership in Party C, Party B shall execute all necessary or appropriate documents, take
all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defenses against
all claims;
2.2.7
Party B shall appoint any designee of Party A as the director(s) of Party C, at the request of Party A;
8
2.2.8
2.2.9
Party B hereby waives its right of first of refusal to transfer of equity interest by the other existing shareholders of Party C to Party A
(if any); and
Party B shall promptly donate any profit, interest, dividend or proceeds of liquidation to Party A or any other person designated by
Party A to the extent permitted under applicable PRC laws.
2.2.10 Party B shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by and among Party
B, Party C and Party A, perform the obligations hereunder and thereunder, and refrain from any action/omission that may affect the
effectiveness and enforceability thereof. To the extent that Party B has any remaining rights with respect to the equity interests subject
to this Agreement hereunder or under the Equity Interest Pledge Agreement among the same parties hereto or under the Power of
Attorney granted in favor of Party A, Party B shall not exercise such rights except in accordance with the written instructions of Party
A.
3. Representations and Warranties
Party B and Party C hereby represent and warrant to Party A, jointly and severally, as of the date of this Agreement and each date of transfer of the
Optioned Interests, that:
9
3.1
3.2
3.3
They have the authority to execute and deliver this Agreement and any equity interest transfer contracts to which they are parties concerning the
Optioned Interests to be transferred thereunder (each, a "Transfer Contracts"), and to perform their obligations under this Agreement and any
Transfer Contracts. Party B and Party C agree to enter into Transfer Contracts consistent with the terms of this Agreement upon Party A’s
exercise of the Equity Interest Purchase Option. This Agreement and the Transfer Contracts to which they are parties constitute or will
constitute their legal, valid and binding obligations and shall be enforceable against them in accordance with the provisions thereof;
Party B and Party C have obtained any and all approvals and consents from government authorities and third parties (if required) for execution,
delivery and performance of this Agreement.
The execution and delivery of this Agreement or any Transfer Contracts and the obligations under this Agreement or any Transfer Contracts
shall not: (i) cause any violation of any applicable laws of China; (ii) be inconsistent with the articles of association, bylaws or other
organizational documents of Party C; (iii) cause the violation of any contracts or instruments to which they are a party or which are binding on
them, or constitute any breach under any contracts or instruments to which they are a party or which are binding on them; (iv) cause any
violation of any condition for the grant and/or continued effectiveness of any licenses or permits issued to either of them; or (v) cause the
suspension or revocation of or imposition of additional conditions to any licenses or permits issued to either of them;
3.4
Party B has a good and merchantable title to the equity interests in Party C he holds. Except for Party B's Equity Interest Pledge Agreement and
Party B’s Power of Attorney, Party B has not placed any security interest on such equity interests;
3.5
Party C has a good and merchantable title to all of its assets, and has not placed any security interest on the aforementioned assets;
10
3.6
3.7
3.8
Party C does not have any outstanding debts, except for (i) debt incurred in the ordinary course of business; and (ii) debts disclosed to Party A
for which Party A's written consent has been obtained.
Party C has complied with all laws and regulations of China applicable to asset acquisitions; and
There are no pending or threatened litigation, arbitration or administrative proceedings relating to the equity interests in Party C, assets of
Party C or Party C.
4. Effective Date
This Agreement shall become effective upon execution by the Parties, and remain effective until all equity interests held by Party B in Party C have
been transferred or assigned to Party A and/or any other person designated by Party A in accordance with this Agreement.
5. Governing Law and Resolution of Disputes
5.1
Governing law
The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes hereunder
shall be governed by the laws of PRC.
5.2 Methods of Resolution of Disputes
In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through
friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party's request to the other
Parties for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and
Trade Arbitration Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in Beijing, and the
language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.
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6. Taxes and Fees
Each Party shall pay any and all transfer and registration tax, expenses and fees incurred thereby or levied thereon in accordance with the laws of
China in connection with the preparation and execution of this Agreement and the Transfer Contracts, as well as the consummation of the transactions
contemplated under this Agreement and the Transfer Contracts.
7. Notices
7.1
All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by
registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such Party set forth below. A
confirmation copy of each notice shall also be sent by email. The dates on which notices shall be deemed to have been effectively given shall be
determined as follows:
7.1.1
7.1.2
Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the
date of receipt or refusal at the address specified for notices.
Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an
automatically generated confirmation of transmission).
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7.2
For the purpose of notices, the addresses of the Parties are as follows:
Party A:
Address:
Attn:
Phone:
Facsimile:
Party B:
Address:
Phone:
Facsimile:
Party C:
Address:
Attn:
Phone:
Facsimile:
Beijing Yangguang Gudi Science Development Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
Haoyong Yang
Beijing Shan Jing Ke Chuang Network Technology Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
7.3
Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms hereof.
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8. Confidentiality
The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in
connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of
all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential
information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s
unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or
orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsels or
financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or financial advisors
shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff
members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which Party shall be held liable for
breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.
9. Further Warranties
The Parties agree to promptly execute documents that are reasonably required for or are conducive to the implementation of the provisions and
purposes of this Agreement and take further actions that are reasonably required for or are conducive to the implementation of the provisions and
purposes of this Agreement.
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10. Breach of Agreement
10.1 If Party B or Party C conducts any material breach of any term of this Agreement, Party A shall have right to terminate this Agreement and
require the Party B or Party C to compensate all damages; this Section 10 shall not prejudice any other rights of Party A herein;
10.2 If Party A conducts any breach of any term of this Agreement, Party B or Party C shall not terminate this Agreement in any event unless
otherwise required by applicable laws.
11. Miscellaneous
11.1 Amendment, change and supplement
Any amendment, change and supplement to this Agreement shall require the execution of a written agreement by all of the Parties.
11.2 Entire agreement
Except for the amendments, supplements or changes in writing executed after the execution of this Agreement, this Agreement shall constitute
the entire agreement reached by and among the Parties hereto with respect to the subject matter hereof, and shall supercede all prior oral and
written consultations, representations and contracts reached with respect to the subject matter of this Agreement.
11.3 Headings
The headings of this Agreement are for convenience only, and shall not be used to interpret, explain or otherwise affect the meanings of the
provisions of this Agreement.
15
11.4 Language
This Agreement is written in both Chinese and English language in three copies, each Party having one copy with equal legal validity; in case
there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.
11.5 Severability
In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance
with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or
compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective
provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective
provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.
11.6 Successors
This Agreement shall be binding on and shall inure to the interest of the respective successors of the Parties and the permitted assigns of such
Parties.
11.7 Survival
11.7.1 Any obligations that occur or that are due as a result of this Agreement upon the expiration or early termination of this Agreement shall
survive the expiration or early termination thereof.
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11.7.2 The provisions of Sections 5, 8, 10 and this Section 11.7 shall survive the termination of this Agreement.
11.8 Waivers
Any Party may waive the terms and conditions of this Agreement, provided that such a waiver must be provided in writing and shall require the
signatures of the Parties. No waiver by any Party in certain circumstances with respect to a breach by other Parties shall operate as a waiver by
such a Party with respect to any similar breach in other circumstances.
17
IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Exclusive Option Agreement as of the date first
above written.
Party A:
Beijing Yangguang Gudi Science Development Co., Ltd.
By:
Name:
Title:
/s/ Haoyong Yang
Haoyong Yang
Legal Representative
Party B:
Haoyong Yang
By:
/s/ Haoyong Yang
Party C:
Beijing Shan Jing Ke Chuang Network Technology Co., Ltd.
By:
Name:
Title:
/s/ Yang Liu
Yang Liu
Legal Representative
Power of Attorney
Exhibit 4.34
We, 58 Co., Ltd., a limited liability company organized and existing under the laws of the PRC, and a holder of 49.00% of the entire registered
capital in Beijing Shan Jing Ke Chuan Network Technology Co., Ltd. ("Domestic Company") as of the date when the Power of Attorney is executed,
hereby irrevocably authorize Beijing Yangguang Gudi Science Development Co., Ltd. ("WFOE") to exercise the following rights relating to all equity
interests held by us now and in the future (“Our Shareholding”) during the term of this Power of Attorney:
WFOE is hereby authorized to act on our behalf as our exclusive agent and attorney with respect to all matters concerning Our Shareholding,
including without limitation to: 1) attend shareholders' meetings of Domestic Company; 2) exercise all the shareholder's rights and shareholder's voting
rights we are entitled to under the laws of China and Domestic Company's Articles of Association, including but not limited to the sale or transfer or pledge
or disposition of Our Shareholding in part or in whole; and 3) designate and appoint on our behalf the legal representative, the directors, supervisors, the
chief executive officer and other senior management members of Domestic Company.
Without limiting the generality of the powers granted hereunder, WFOE shall have the power and authority to, on our behalf, execute all the
documents we shall sign as stipulated in Exclusive Option Agreement entered into by and among we, WFOE and Domestic Company on August 6, 2015
and the Equity Pledge Agreement entered into by and among we, WFOE and Domestic Company on August 6, 2015 (including any modification,
amendment and restatement thereto, collectively the “Transaction Documents”), and perform the terms of the Transaction Documents.
All the actions associated with Our Shareholding conducted by WFOE shall be deemed as our own actions, and all the documents related to Our
Shareholding executed by WFOE shall be deemed to be executed by me. We hereby acknowledge and ratify those actions and/or documents by WFOE.
1
WFOE is entitled to re-authorize or assign its rights related to the aforesaid matters to any other person or entity at its own discretion and without
giving prior notice to us or obtaining our consent. If required by PRC laws, WFOE shall designate a PRC citizen to exercise the aforementioned rights.
This Power of Attorney is coupled with an interest and shall be irrevocable and continuously valid from the date of execution of this Power of
Attorney, so long as we are a shareholder of Domestic Company.
During the term of this Power of Attorney, we hereby waive all the rights associated with Our Shareholding, which have been authorized to WFOE
through this Power of Attorney, and shall not exercise such rights by myself.
This Power of Attorney is written in Chinese and English; in case there is any conflict between the Chinese version and the English version, the
Chinese version shall prevail.
2
58 Co., Ltd.
By:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
Name:
Title:
August 6, 2015
Accepted by:
Beijing Yangguang Gudi Science Development Co., Ltd.
By:
Name:
Title:
/s/ Haoyong Yang
Haoyong Yang
Legal Representative
Acknowledged by:
Beijing Shan Jing Ke Chuan Network Technology Co., Ltd.
By:
Name:
Title:
/s/ Yang Liu
Yang Liu
Legal Representative
3
Power of Attorney
I, Yang Liu, a Chinese citizen with Chinese Identification Card No.: , and a holder of 30.69% of the entire registered capital in Beijing
Shan Jing Ke Chuang Network Technology Co., Ltd. ("Shan Jing Ke Chuang") as of the date when the Power of Attorney is executed, hereby irrevocably
authorize Beijing Yangguang Gudi Science Development Co., Ltd. ("WFOE") to exercise the following rights relating to all equity interests held by me
now and in the future (“My Shareholding”) during the term of this Power of Attorney:
WFOE is hereby authorized to act on behalf of myself as my exclusive agent and attorney with respect to all matters concerning My Shareholding,
including without limitation to: 1) attend shareholders' meetings of Shan Jing Ke Chuang; 2) exercise all the shareholder's rights and shareholder's voting
rights I am entitled to under the laws of China and Shan Jing Ke Chuang's Articles of Association, including but not limited to the sale or transfer or pledge
or disposition of My Shareholding in part or in whole; and 3) designate and appoint on behalf of myself the legal representative, the directors, supervisors,
the chief executive officer and other senior management members of Shan Jing Ke Chuang.
Without limiting the generality of the powers granted hereunder, WFOE shall have the power and authority to, on behalf of myself, execute all the
documents I shall sign as stipulated in Exclusive Option Agreement entered into by and among I, WFOE and Shan Jing Ke Chuang on August 6, 2015 and
the Equity Pledge Agreement entered into by and among I, WFOE and Shan Jing Ke Chuang on August 6, 2015 (including any modification, amendment
and restatement thereto, collectively the “Transaction Documents”), and perform the terms of the Transaction Documents.
All the actions associated with My Shareholding conducted by WFOE shall be deemed as my own actions, and all the documents related to My
Shareholding executed by WFOE shall be deemed to be executed by me. I hereby acknowledge and ratify those actions and/or documents by WFOE.
1
WFOE is entitled to re-authorize or assign its rights related to the aforesaid matters to any other person or entity at its own discretion and without
giving prior notice to me or obtaining my consent. If required by PRC laws, WFOE shall designate a PRC citizen to exercise the aforementioned rights.
This Power of Attorney is coupled with an interest and shall be irrevocable and continuously valid from the date of execution of this Power of
Attorney, so long as I am a shareholder of Shan Jing Ke Chuang.
During the term of this Power of Attorney, I hereby waive all the rights associated with My Shareholding, which have been authorized to WFOE
through this Power of Attorney, and shall not exercise such rights by myself.
This Power of Attorney is written in Chinese and English; in case there is any conflict between the Chinese version and the English version, the
Chinese version shall prevail.
2
Accepted by:
Beijing Yangguang Gudi Science Development Co., Ltd.
By:
Name:
Title:
/s/ Haoyong Yang
Haoyong Yang
Legal Representative
Acknowledged by:
Beijing Shan Jing Ke Chuang Network Technology Co., Ltd.
By:
Name:
Title:
/s/ Yang Liu
Yang Liu
Legal Representative
Yang Liu
/s/ Yang Liu
By:
August 6, 2015
3
Power of Attorney
I, Chunyan Guo, a Chinese citizen with Chinese Identification Card No.: , and a holder of 20.00% of the entire registered capital in Beijing
Shan Jing Ke Chuang Network Technology Co., Ltd. ("Shan Jing Ke Chuang") as of the date when the Power of Attorney is executed, hereby irrevocably
authorize Beijing Yangguang Gudi Science Development Co., Ltd. ("WFOE") to exercise the following rights relating to all equity interests held by me
now and in the future (“My Shareholding”) during the term of this Power of Attorney:
WFOE is hereby authorized to act on behalf of myself as my exclusive agent and attorney with respect to all matters concerning My Shareholding,
including without limitation to: 1) attend shareholders' meetings of Shan Jing Ke Chuang; 2) exercise all the shareholder's rights and shareholder's voting
rights I am entitled to under the laws of China and Shan Jing Ke Chuang's Articles of Association, including but not limited to the sale or transfer or pledge
or disposition of My Shareholding in part or in whole; and 3) designate and appoint on behalf of myself the legal representative, the directors, supervisors,
the chief executive officer and other senior management members of Shan Jing Ke Chuang.
Without limiting the generality of the powers granted hereunder, WFOE shall have the power and authority to, on behalf of myself, execute all the
documents I shall sign as stipulated in Exclusive Option Agreement entered into by and among I, WFOE and Shan Jing Ke Chuang on August 6, 2015 and
the Equity Pledge Agreement entered into by and among I, WFOE and Shan Jing Ke Chuang on August 6, 2015 (including any modification, amendment
and restatement thereto, collectively the “Transaction Documents”), and perform the terms of the Transaction Documents.
All the actions associated with My Shareholding conducted by WFOE shall be deemed as my own actions, and all the documents related to My
Shareholding executed by WFOE shall be deemed to be executed by me. I hereby acknowledge and ratify those actions and/or documents by WFOE.
1
WFOE is entitled to re-authorize or assign its rights related to the aforesaid matters to any other person or entity at its own discretion and without
giving prior notice to me or obtaining my consent. If required by PRC laws, WFOE shall designate a PRC citizen to exercise the aforementioned rights.
This Power of Attorney is coupled with an interest and shall be irrevocable and continuously valid from the date of execution of this Power of
Attorney, so long as I am a shareholder of Shan Jing Ke Chuang.
During the term of this Power of Attorney, I hereby waive all the rights associated with My Shareholding, which have been authorized to WFOE
through this Power of Attorney, and shall not exercise such rights by myself.
This Power of Attorney is written in Chinese and English; in case there is any conflict between the Chinese version and the English version, the
Chinese version shall prevail.
2
Chunyan Guo
/s/ Chunyan Guo
By:
August 6, 2015
Accepted by:
Beijing Yangguang Gudi Science Development Co., Ltd.
By:
Name:
Title:
/s/ Haoyong Yang
Haoyong Yang
Legal Representative
Acknowledged by:
Beijing Shan Jing Ke Chuang Network Technology Co., Ltd.
By:
Name:
Title:
/s/ Yang Liu
Yang Liu
Legal Representative
3
Power of Attorney
I, Haoyong Yang, a Chinese citizen with Chinese Identification Card No.: [ ], and a holder of 0.31% of the
entire registered capital in Beijing Shan Jing Ke Chuang Network Technology Co., Ltd. ("Shan Jing Ke Chuang") as of the date when the Power of
Attorney is executed, hereby irrevocably authorize Beijing Yangguang Gudi Science Development Co., Ltd. ("WFOE") to exercise the following rights
relating to all equity interests held by me now and in the future (“My Shareholding”) during the term of this Power of Attorney:
WFOE is hereby authorized to act on behalf of myself as my exclusive agent and attorney with respect to all matters concerning My Shareholding,
including without limitation to: 1) attend shareholders' meetings of Shan Jing Ke Chuang; 2) exercise all the shareholder's rights and shareholder's voting
rights I am entitled to under the laws of China and Shan Jing Ke Chuang's Articles of Association, including but not limited to the sale or transfer or pledge
or disposition of My Shareholding in part or in whole; and 3) designate and appoint on behalf of myself the legal representative, the directors, supervisors,
the chief executive officer and other senior management members of Shan Jing Ke Chuang.
Without limiting the generality of the powers granted hereunder, WFOE shall have the power and authority to, on behalf of myself, execute all the
documents I shall sign as stipulated in Exclusive Option Agreement entered into by and among I, WFOE and Shan Jing Ke Chuang on August 6, 2015 and
the Equity Pledge Agreement entered into by and among I, WFOE and Shan Jing Ke Chuang on August 6, 2015 (including any modification, amendment
and restatement thereto, collectively the “Transaction Documents”), and perform the terms of the Transaction Documents.
All the actions associated with My Shareholding conducted by WFOE shall be deemed as my own actions, and all the documents related to My
Shareholding executed by WFOE shall be deemed to be executed by me. I hereby acknowledge and ratify those actions and/or documents by WFOE.
1
WFOE is entitled to re-authorize or assign its rights related to the aforesaid matters to any other person or entity at its own discretion and without
giving prior notice to me or obtaining my consent. If required by PRC laws, WFOE shall designate a PRC citizen to exercise the aforementioned rights.
This Power of Attorney is coupled with an interest and shall be irrevocable and continuously valid from the date of execution of this Power of
Attorney, so long as I am a shareholder of Shan Jing Ke Chuang.
During the term of this Power of Attorney, I hereby waive all the rights associated with My Shareholding, which have been authorized to WFOE
through this Power of Attorney, and shall not exercise such rights by myself.
This Power of Attorney is written in Chinese and English; in case there is any conflict between the Chinese version and the English version, the
Chinese version shall prevail.
2
Haoyong Yang
/s/ Haoyong Yang
By:
August 6, 2015
Accepted by:
Beijing Yangguang Gudi Science Development Co., Ltd.
By:
Name:
Title:
/s/ Haoyong Yang
Haoyong Yang
Legal Representative
Acknowledged by:
Beijing Shan Jing Ke Chuang Network Technology Co., Ltd.
By:
Name:
Title:
/s/ Yang Liu
Yang Liu
Legal Representative
3
Loan Agreement
Exhibit 4.35
This Loan Agreement (this "Agreement") is made and entered into by and between the Parties below as of August 6, 2015 in Beijing, China:
Beijing Yangguang Gudi Science Development Co., Ltd. (“Lender”), a wholly foreign owned enterprise, organized and existing under the laws
of the PRC, with its address at Room 1811, 18/F, Building No.2, #1 Shangdi 10th Avenue, Haidian District, Beijing, PRC;
58 Co., Ltd., a limited liability company organized and existing under the laws of the PRC, with its address at Room 210-03, Office Building,
Nangang Industry Zone, Economic and Technological Development District, Tianjin, PRC..
Each of the Lender and the Borrower shall be hereinafter referred to as a "Party" respectively, and as the "Parties" collectively.
Whereas:
Borrower intends to invest an amount being RMB18,967,742 to subscribing for 49.00% of equity interests in Beijing Shan Jing Ke Chuang
Network Technology Co., Ltd. (“Borrower Company”). All of the equity interest hereafter acquired by Borrower in Borrower Company shall be
referred to as Borrower Equity Interest;
Lender confirms that it agrees to provide Borrower with a loan with a principal amount of RMB18,967,742 to be used for the purposes set forth
under this Agreement.
(1)
(2)
1.
2.
After friendly consultation, the Parties agree as follows:
1
1. Loan
1.1 In accordance with the terms and conditions of this Agreement, Lender agrees to provide an interest-free loan in the amount of RMB18,967,742
(the "Loan") to Borrower. The term of the Loan shall be 10 years from the date of this Agreement, which may be extended upon mutual written
consent of the Parties. During the term of the Loan or the extended term of the Loan, Borrower shall immediately repay the full amount of the
Loan in the event any one or more of the following circumstances occur:
1.1.1
30 days elapse after Borrower receives a written notice from Lender requesting repayment of the Loan;
1.1.2
Borrower's death, lack or limitation of civil capacity;
1.1.3
Borrower ceases (for any reason) to be an employee of Lender, Borrower Company or their affiliates;
1.1.4
Borrower engages in criminal act or is involved in criminal activities;
1.1.5
Any third party filed a claim against Borrower that exceeds RMB500,000; or
1.1.6
According to the applicable laws of China, foreign investors are permitted to invest in the business of Borrower Company in China with a
controlling stake or in the form of wholly-foreign-owned enterprises, the relevant competent authorities of China begin to approve such
investments, and Lender exercises the exclusive option under the Exclusive Option Agreement (as defined below) described in this
Agreement.
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1.2 Lender agrees to remit the total amount of the Loan to the account designated by Borrower within 90 days after receiving a written notification
from the Borrower regarding the same, provided that all the conditions precedent in Section 2 are fulfilled. Borrower shall provide Lender with a
written receipt for the Loan upon receiving the Loan. The Loan provided by Lender under this Agreement shall inure to Borrower's benefit only
and not to Borrower's successors or assigns.
1.3 Borrower agrees to accept the aforementioned Loan provided by Lender, and hereby agrees and warrants to use the Loan to provide registered
capital to the Borrower Company, a domestic-funded limited liability company to be established in Beijing, China, carrying out value-added
telecommunication services. Borrower therefore shall be Borrower Company's shareholder and shall own 49% of the equity interests in Borrower
Company. Borrower agrees to complete the investment into Borrower Company in accordance with the articles of association and hold the
Borrower Equity Interest within 60 days following the date of the receipt of the Loan and provide Lender, or any person designated by the Lender,
with all of the duplicates of the registration documents at the government department for industry and commerce, the business licenses, and
articles of association. Without Lender's prior written consent, Borrower shall not use the Loan for any purpose other than as set forth herein.
1.4 Lender and Borrower hereby agree and acknowledge that Borrower's method of repayment shall be at the sole discretion of Lender, and may at
Lender's option take the form of Borrower's transferring the Borrower Equity Interest in whole to Lender or Lender's designated persons (legal or
natural persons) pursuant to the Lender's exercise of its right to acquire the Borrower Equity Interest under the Exclusive Option Agreement.
3
1.5 Lender and Borrower hereby agree and acknowledge that any proceeds from the transfer of the Borrower Equity Interest (to the extent
permissible) shall be used to repay the Loan to Lender, in accordance with this Agreement and in the manner designated by Lender.
1.6 Lender and Borrower hereby agree and acknowledge that to the extent permitted by applicable laws, Lender shall have the right but not the
obligation to purchase or designate other persons (legal or natural persons) to purchase Borrower Equity Interest in part or in whole at any time, at
the price stipulated in the Exclusive Option Agreement.
1.7 Borrower also undertakes to execute an irrevocable Power of Attorney (the "Power of Attorney"), which authorizes Lender or a legal or natural
person designated by Lender to exercise all of Borrower's rights as a shareholder of Borrower Company.
2. Conditions Precedent
The obligation of Lender to provide the Loan to Borrower contemplated in Section 1.1 shall be subject to the satisfaction of the following conditions,
unless waived in writing by Lender.
2.1 Lender receives the written notification for drawdown under the Loan sent by Borrower according to Section 1.2.
2.2 All the representations and warranties by Borrower in Section 3.2 are true, complete, correct and not misleading.
2.3 Borrower has not violated the covenants in Section 4 of this Agreement, and no event which may affect Borrower's performance of its obligations
under this Agreement has occurred or is expected to occur.
4
3. Representations and Warranties
3.1 Between the date of this Agreement and the date of termination of this Agreement, Lender hereby makes the following representations and
warranties to Borrower:
3.1.1
Lender is a corporation duly organized and legally existing in accordance with the laws of China;
3.1.2
Lender has the legal capacity to execute and perform this Agreement. The execution and performance by Lender of this Agreement is
consistent with Lender's scope of business and the provisions of Lender's corporate bylaws and other organizational documents, and
Lender has obtained all necessary and proper approvals and authorizations for the execution and performance of this Agreement; and
3.1.3
This Agreement constitutes Lender's legal, valid and binding obligations enforceable in accordance with its terms.
3.2 Between the date of this Agreement and the date of termination of this Agreement, Borrower hereby makes the following representations and
warranties:
3.2.1
Borrower has the legal capacity to execute and perform this Agreement. Borrower has obtained all necessary and proper approvals and
authorizations for the execution and performance of this Agreement;
3.2.2
This Agreement constitutes Borrower's legal, valid and binding obligations enforceable in accordance with its terms; and
5
3.2.3 There are no disputes, litigations, arbitrations, administrative proceedings or any other legal proceedings relating to Borrower, nor are there
any potential disputes, litigations, arbitrations, administrative proceedings or any other legal proceedings relating to Borrower.
4. Borrower's Covenants
4.1 As and when he becomes, and for so long as he remains a shareholder of Borrower Company, Borrower covenants irrevocably that during the term
of this Agreement, Borrower shall cause Borrower Company:
4.1.1
as soon as practicable after the date of this Agreement, to execute a Exclusive Option Agreement with Borrower and Lender, under which
Borrower shall irrevocably grant Lender an exclusive option to purchase all of the Borrower Equity Interest (the “Exclusive Option
Agreement”); to comply with certain Exclusive Technical Consulting and Services Agreement ("Exclusive Technical Consulting and
Services Agreement") dated January 18, 2012 between the Borrower Company and Lender, as amended, under which Lender, as an
exclusive service provider, agrees to provide Borrower Company with technical service and business consulting service;
4.1.2
to strictly abide by the provisions of the Exclusive Option Agreement and the Exclusive Technical Consulting and Services Agreement,
and to refrain from any action/omission that may affect the effectiveness and enforceability of the Exclusive Option Agreement and the
Exclusive Technical Consulting and Services Agreement;
6
4.1.3
at the request of Lender (or a party designated by Lender), to execute contracts/agreements on business cooperation with Lender (or a
party designated by Lender), and to strictly abide by such contracts/agreements;
4.1.4
to provide Lender with all of the information on Borrower Company's business operations and financial condition at Lender's request;
4.1.5
to immediately notify Lender of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating
to Borrower Company's assets, business or income;
4.1.6
at the request of Lender, to appoint any persons designated by Lender as directors of Borrower Company;
4.2 Borrower covenants that during the term of this Agreement, he shall:
4.2.1
4.2.2
ensure that the registered capital of Borrower Company be paid up and registered in accordance with the articles of association; Borrower
Company shall be a limited liability company without foreign investment, in which Borrower shall hold 49% of the equity interests;
pay the capital contribution in full corresponding to the Borrower Equity Interest in accordance with the laws of China, and provide
Lender with a capital contribution verification report regarding paid-in capital contributions from a qualified accounting firm;
7
4.2.3
4.2.4
4.2.5
4.2.6
endeavor to cause Borrower Company to engage in value-aded telecommunication services; the specific business scope shall be subject to
the business license of Borrower Company; Borrower shall cause Borrower Company to complete all the government approvals,
authorizations, licensing, registration and filling required for engaging in the businesses within the scope of its business license and for
owning its assets pursuant to the laws of China; Borrower shall provide Lender with the said governmental approvals documents for
verification. Endeavor to complete the registration of the paid-in registered capital after his drawing of the Loan, and shall provide Lender
with all of the duplicates of the registration documents at the government department for industry and commerce, business licenses, and
articles of association, and shall not change the business operation of Borrower Company without Lender's prior written consent;
execute an irrevocable Power of Attorney, which authorizes the Lender or a legal or natural person designated by Lender to exercise all of
Borrower's rights as a shareholder in Borrower Company, and refrain from exercising any such shareholder rights except to the extent
required under this Agreement or the Equity Interest Pledge Agreement (defined as below) or as requested by Lender;
execute the Exclusive Option Agreement with Lender and Borrower Company, under which Borrower shall irrevocably grant to Lender
an exclusive option to purchase all of the Borrower Equity Interest;
execute an Equity Interest Pledge Agreement (the "Equity Interest Pledge Agreement") with Borrower Company and Lender, under
which Borrower shall pledge the Borrower Equity Interest to Lender;
8
4.2.7
4.2.8
enter into the aforementioned Power of Attorney, Exclusive Option Agreement and Equity Interest Pledge Agreement on the date of
issuance of the business license of Borrower Company, and complete all the related governmental approvals, registrations or fillings (as
applicable);
abide by the provisions of this Agreement, the Power of Attorney, the Equity Interest Pledge Agreement and the Exclusive Option
Agreement, perform his obligations under this Agreement, the Power of Attorney, the Equity Interest Pledge Agreement and the
Exclusive Option Agreement, and refrain from any action/omission that may affect the effectiveness and enforceability of this
Agreement, the Power of Attorney, the Equity Interest Pledge Agreement and the Exclusive Option Agreement;
4.2.9
not sell, transfer, mortgage or dispose of in any other manner the legal or beneficial interest in Borrower Equity Interest, or allow the
encumbrance thereon of any security interest or the encumbrance, except in accordance with the Equity Interest Pledge Agreement;
4.2.10
cause any shareholders' meeting and/or the board of directors of Borrower Company not to approve the sale, transfer, mortgage or
disposition in any other manner of any legal or beneficial interest in Borrower Equity Interest, or allow the encumbrance thereon of any
security interest, except to Lender or Lender's designated person;
4.2.11
cause any shareholders' meeting and/or the board of directors of the Borrower Company not to approve the merger or consolidation of
Borrower Company with any person, or its acquisition of or investment in any person, without the prior written consent of Lender;
9
4.2.12
immediately notify Lender of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating to
Borrower Equity Interest;
4.2.13
to the extent necessary to maintain his ownership of the Borrower Equity Interest, execute all necessary or appropriate documents, take
all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defense against all
claims;
4.2.14 without the prior written consent of Lender, refrain from any action / omission that may have a material impact on the assets, business
and liabilities of Borrower Company;
4.2.15
appoint any designee of Lender as director of Borrower Company, at the request of Lender;
4.2.16
4.2.17
to the extent permitted by the laws of China, at the request of Lender at any time, promptly and unconditionally transfer all of Borrower
Equity Interest to Lender or Lender's designated representative(s) at any time, and cause the other shareholders of Borrower Company to
waive their right of first refusal with respect to the share transfer described in this Section;
to the extent permitted by the laws of China, at the request of Lender at any time, cause the other shareholders of Borrower Company to
promptly and unconditionally transfer all of their equity interests to Lender or Lender's designated representative(s) at any time, and
Borrower hereby waives his right of first refusal (if any) with respect to the share transfer described in this Section;
10
4.2.18
in the event that Lender purchases Borrower Equity Interest from Borrower in accordance with the provisions of the Exclusive Option
Agreement, use such purchase price obtained thereby to repay the Loan to Lender; and
4.2.19 without the prior written consent of Lender, not to cause Borrower Company to supplement, change, or amend its articles of association
in any manner, increase or decreases its registered capital or change its share capital structure in any manner.
5. Liability for Default
5.1 In the event either Party breaches this Agreement or otherwise causes the non-performance of this Agreement in part or in whole, the Party shall
be liable for such breach and shall compensate all damages (including litigation and attorneys fees) resulting therefrom. In the event that both
Parties breach this Agreement, each Party shall be liable for its respective breach.
5.2 In the event that Borrower fails to perform the repayment obligations set forth in this Agreement, Borrower shall pay overdue interest of 0.01%
per day for the outstanding payment, until the day Borrower repays the full principal of the Loan, overdue interests and other payable amounts.
11
6. Notices
6.1 All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by
registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such Party set forth below. A
confirmation copy of each notice shall also be sent by email. The dates on which notices shall be deemed to have been effectively given shall be
determined as follows:
6.1.1
6.1.2
Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the
date of delivery.
Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an
automatically generated confirmation of transmission).
6.2 For the purpose of notices, the addresses of the Parties are as follows:
Lender:
Address:
Attn:
Phone:
Facsimile:
Borrower:
Address:
Phone:
Facsimile:
Beijing Yangguang Gudi Science Development Co., Ltd.
Tower E, North America International Business Center,
#Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
58 Co., Ltd.
Tower E, North America International Business Center,
#Yi108, Beiyuan Road, Chaoyang District, Beijing
+8610 64435588-8888
+8610-64459926
12
6.3 Any Party may at any time change its address for notices by a notice delivered to the other Party in accordance with the terms hereof.
7. Confidentiality
The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in
connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of
all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential
information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s
unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or
orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsels or
financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or financial advisors
shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff
members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which Party shall be held liable for
breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.
8. Governing Law and Resolution of Disputes
8.1 The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes shall be
governed by the laws of China.
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8.2 In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through
friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party's request to the other Party
for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and Trade
Arbitration Commission for arbitration, in accordance with its then effective arbitration rules. The arbitration shall be conducted in Beijing, and
the language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.
8.3 Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration of any
dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this Agreement
and perform their respective obligations under this Agreement.
9. Miscellaneous
9.1 This Agreement shall become effective on the date thereof, and shall expire upon the date of full performance by the Parties of their respective
obligations under this Agreement.
9.2 This Agreement shall be written in both Chinese and English language in two copies, each Party having one copy with equal legal validity. In case
there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.
9.3 This Agreement may be amended or supplemented through written agreement by and between Lender and Borrower. Such written amendment
agreement and/or supplementary agreement executed by and between Lender and Borrower are an integral part of this Agreement, and shall have
the same legal validity as this Agreement.
14
9.4 In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance
with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or
compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective
provisions that accomplish to the greatest extent permitted by law the intentions of the Parties, and the economic effect of such effective provisions
shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.
9.5 The attachments (if any) to this Agreement shall be an integral part of this Agreement and shall have the same legal validity as this Agreement.
15
IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Loan Agreement as of the date first above
written.
Lender:
Beijing Yangguang Gudi Science Development Co., Ltd.
By:
Name:
Title:
/s/ Haoyong Yang
Haoyong Yang
Legal Representative
Borrower: 58 Co. Ltd.
By:
Name:
Title:
/s/ Jinbo Yao
Jinbo Yao
Legal Representative
Signature page to Loan Agreeement
Loan Agreement
This Loan Agreement (this “Agreement”) is made and entered into by and between the Parties below as of August 6, 2015 in Beijing, China:
(1) Beijing Yangguang Gudi Science Development Co., Ltd. (“Lender”), a wholly foreign owned enterprise, organized and existing under the laws
of the PRC, with its address at Room 1811, 18/F, Building No.2, #1 Shangdi 10th Avenue, Haidian District, Beijing, PRC;
(2) Yang Liu (“Borrower”), a citizen of China with Chinese Identification No.: .
Each of the Lender and the Borrower shall be hereinafter referred to as a “Party” respectively, and as the “Parties” collectively.
Whereas:
1. As of the date hereof, Borrower holds 30.69% of equity interests in Beijing Shanjing Ke Chuang Network Technology Co., Ltd. (“Borrower
Company”). All of the equity interest now held and hereafter acquired by Borrower in Borrower Company shall be referred to as Borrower Equity
Interest;
2. Lender confirms that it agrees to provide Borrower with and Borrow confirms that he/she has received a loan which equals to RMB11,880,000 to
be used for the purposes set forth under this Agreement.
After friendly consultation, the Parties agree as follows:
1
1 Loan
1.1 In accordance with the terms and conditions of this Agreement, Lender and Borrower hereby acknowledge that Borrower has obtained from
Lender a loan in the amount of RMB11,880,000 (the “Loan”). The term of the Loan shall be 10 years from the effective date of this Agreement,
which may be extended upon mutual written consent of the Parties. During the term of the Loan or the extended term of the Loan, Borrower shall
immediately repay the full amount of the Loan in the event any one or more of the following circumstances occur:
1.1.1
30 days elapse after Borrower receives a written notice from Lender requesting repayment of the Loan;
1.1.2
Borrower’s death, lack or limitation of civil capacity;
1.1.3
Borrower ceases (for any reason) to be an employee of Lender, Borrower Company or their affiliates;
1.1.4
Borrower engages in criminal act or is involved in criminal activities;
1.1.5
According to the applicable laws of China, foreign investors are permitted to invest in the Principle Business that is currently conducted
by Borrower Company in China with a controlling stake and/or in the form of wholly-foreign-owned enterprises, the relevant competent
authorities of China begin to approve such investments, and Lender exercises the exclusive option under the Exclusive Option Agreement
(the “Exclusive Option Agreement”) described in this Agreement.
2
1.2 The Loan provided by Lender under this Agreement shall inure to Borrower’s benefit only and not to Borrower’s successors or assigns.
1.3 Borrower agrees to accept the aforementioned Loan provided by Lender, and hereby agrees and warrants using the Loan to increase the registered
capital of Borrower Company. Without Lender’s prior written consent, Borrower shall not use the Loan for any purpose other than as set forth
herein.
1.4 Lender and Borrower hereby agree and acknowledge that Borrower’s method of repayment shall be at the sole discretion of Lender, and may at
Lender’s option take the form of Borrower’s transferring the Borrower Equity Interest in whole to Lender or Lender’s designated persons (legal or
natural persons) pursuant to the Lender’s exercise of its right to acquire the Borrower Equity Interest under the Exclusive Option Agreement.
1.5 Lender and Borrower hereby agree and acknowledge that any proceeds from the transfer of the Borrower Equity Interest (to the extent
permissible) shall be used to repay the Loan to Lender, in accordance with this Agreement and in the manner designated by Lender.
1.6 Lender and Borrower hereby agree and acknowledge that to the extent permitted by applicable laws, Lender shall have the right but not the
obligation to purchase or designate other persons (legal or natural persons) to purchase Borrower Equity Interest in part or in whole at any time, at
the price stipulated in the Exclusive Option Agreement.
1.7 Borrower also undertakes to execute an irrevocable Power of Attorney (the “Power of Attorney”), which authorizes Lender or a legal or natural
person designated by Lender to exercise all of Borrower’s rights as a shareholder of Borrower Company.
3
1.8 When Borrower transfers Borrower Equity Interest to Lender or Lender’s designated person(s), in the event that the transfer price of such equity
interest equals or is lower than the principal of the Loan under this Agreement, the Loan under this Agreement shall be deemed an interest-free
loan. In the event that the transfer price of such equity interest exceeds the principal of the Loan under this Agreement, the excess over the
principal shall be deemed the interest of the Loan under this Agreement payable by Borrower to Lender.
2 Representations and Warranties
2.1 Between the date of this Agreement and the date of termination of this Agreement, Lender hereby makes the following representations and
warranties to Borrower:
2.1.1
Lender is a corporation duly organized and legally existing in accordance with the laws of China;
2.1.2
Lender has the legal capacity to execute and perform this Agreement. The execution and performance by Lender of this Agreement is
consistent with Lender’s scope of business and the provisions of Lender’s corporate bylaws and other organizational documents, and
Lender has obtained all necessary and proper approvals and authorizations for the execution and performance of this Agreement; and
2.1.3
This Agreement constitutes Lender’s legal, valid and binding obligations enforceable in accordance with its terms.
2.2 Between the date of this Agreement and the date of termination of this Agreement, Borrower hereby makes the following representations and
warranties:
4
2.2.1
Borrower has the legal capacity to execute and perform this Agreement. Borrower has obtained all necessary and proper approvals and
authorizations for the execution and performance of this Agreement;
2.2.2
This Agreement constitutes Borrower’s legal, valid and binding obligations enforceable in accordance with its terms; and
2.2.3
There are no disputes, litigations, arbitrations, administrative proceedings or any other legal proceedings relating to Borrower, nor are
there any potential disputes, litigations, arbitrations, administrative proceedings or any other legal proceedings relating to Borrower.
3 Borrower’s Covenants
3.1 As and when he becomes, and for so long as he remains a shareholder of Borrower Company, Borrower covenants irrevocably that during the term
of this Agreement, Borrower shall cause Borrower Company:
3.1.1
to strictly abide by the provisions of the Exclusive Option Agreement and the Exclusive Technology Consultant and Services Agreement
to which the Borrower Company is a party, and to refrain from any action/omission that may affect the effectiveness and enforceability of
the Exclusive Option Agreement and Exclusive Technology Consultant and Services Agreement.
3.1.2
at the request of Lender (or a party designated by Lender), to execute contracts/agreements on business cooperation with Lender (or a
party designated by Lender), and to strictly abide by such contracts/agreements;
5
3.1.3
to provide Lender with all of the information on Borrower Company’s business operations and financial condition at Lender’s request;
3.1.4
to immediately notify Lender of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating
to Borrower Company's assets, business or income;
3.1.5
at the request of Lender, to appoint any persons designated by Lender as directors of Borrower Company;
3.2 Borrower covenants that during the term of this Agreement, he shall:
3.2.1
endeavor to keep Borrower Company to engage in its Principle Businesses;
3.2.2
abide by the provisions of this Agreement, the Power of Attorney, the Equity Interest Pledge Agreementand the Exclusive Option
Agreement to which the Borrower is a party, perform his obligations under this Agreement, the Power of Attorney, the Equity Interest
Pledge Agreement and the Exclusive Option Agreement, and refrain from any action/omission that may affect the effectiveness and
enforceability of this Agreement, the Power of Attorney, the Equity Interest Pledge Agreement and the Exclusive Option Agreement;
3.2.3
not sell, transfer, mortgage or dispose of in any other manner the legal or beneficial interest in Borrower Equity Interest, or allow the
encumbrance thereon of any security interest or the encumbrance, except in accordance with the Equity Interest Pledge Agreement;
6
3.2.4
3.2.5
3.2.6
3.2.7
cause any shareholders’ meeting and/or the board of directors of Borrower Company not to approve the sale, transfer, mortgage or
disposition in any other manner of any legal or beneficial interest in Borrower Equity Interest, or allow the encumbrance thereon of any
security interest, except to Lender or Lender’s designated person;
cause any shareholders’ meeting and/or the board of directors of the Borrower Company not to approve the merger or consolidation of
Borrower Company with any person, or its acquisition of or investment in any person, without the prior written consent of Lender;
immediately notify Lender of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating to
Borrower Equity Interest;
to the extent necessary to maintain his ownership of the Borrower Equity Interest, execute all necessary or appropriate documents, take
all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defense against all
claims;
3.2.8
without the prior written consent of Lender, refrain from any action /omission that may have a material impact on the assets, business and
liabilities of Borrower Company;
3.2.9
appoint any designee of Lender as director of Borrower Company, at the request of Lender;
7
3.2.10
3.2.11
to the extent permitted by the laws of China, at the request of Lender at any time, promptly and unconditionally transfer all of Borrower
Equity Interest to Lender or Lender’s designated representative(s) at any time, and cause the other shareholders of Borrower Company to
waive their right of first refusal with respect to the share transfer described in this Section;
to the extent permitted by the laws of China, at the request of Lender at any time, cause the other shareholders of Borrower Company to
promptly and unconditionally transfer all of their equity interests to Lender or Lender’s designated representative(s) at any time, and
Borrower hereby waives his right of first refusal (if any) with respect to the share transfer described in this Section;
3.2.12
in the event that Lender purchases Borrower Equity Interest from Borrower in accordance with the provisions of the Exclusive Option
Agreement, use such purchase price obtained thereby to repay the Loan to Lender; and
3.2.13 without the prior written consent of Lender, not to cause Borrower Company to supplement, change, or amend its articles of association
in any manner, increase or decreases its registered capital or change its share capital structure in any manner.
4 Liability for Default
4.1 If Borrower conducts any material breach of any term of this Agreement, Lender shall have right to terminate this Agreement and require the
Borrower to compensate all damages; this Section 4.1 shall not prejudice any other rights of Lender herein.
8
4.2 If Lender conducts any breach of any term of this Agreement, Borrower shall not terminate this Agreement in any event unless otherwise required
by applicable laws.
4.3 In the event that Borrower fails to perform the repayment obligations set forth in this Agreement, Borrower shall pay overdue interest of 0.01%
per day for the outstanding payment, until the day Borrower repays the full principal of the Loan, overdue interests and other payable amounts.
5 Notices
5.1 All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by
registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such Party set forth below. A
confirmation copy of each notice shall also be sent by email. The dates on which notices shall be deemed to have been effectively given shall be
determined as follows:
5.1.1
5.1.2
Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the
date of delivery.
Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an
automatically generated confirmation of transmission).
5.2 For the purpose of notices, the addresses of the Parties are as follows:
9
Beijing Yangguang Gudi Science Development Co., Ltd.
Tower E, North America International Business Center, #Yi108,
Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
Yang Liu
Lender:
Address:
Attn:
Phone:
Facsimile:
Borrower:
Address:
Phone:
Facsimile:
5.3 Any Party may at any time change its address for notices by a notice delivered to the other Party in accordance with the terms hereof.
6 Confidentiality
The Parties acknowledge that any oral or written information exchanged among them with respect to this Agreement is confidential information. The
Parties shall maintain the confidentiality of all such information, and without the written consent of other Party, either Party shall not disclose any
relevant information to any third party, except in the following circumstances: (a) such information is or will be in the public domain (provided that
this is not the result of a public disclosure by the receiving party); (b) information disclosed as required by applicable laws or rules or regulations of
any stock exchange; or (c) information required to be disclosed by any Party to its legal counsel or financial advisor regarding the transaction
contemplated hereunder, and such legal counsel or financial advisor are also bound by confidentiality duties similar to the duties in this section.
Disclosure of any confidential information by the staff members or agency hired by any Party shall be deemed disclosure of such confidential
information by such Party, which Party shall be held liable for breach of this Agreement. This section shall survive the termination of this Agreement
for any reason.
10
7 Governing Law and Resolution of Disputes
7.1 The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes shall be
governed by the laws of China.
7.2 In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through
friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party’s request to the other Party
for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and Trade
Arbitration Commission for arbitration, in accordance with its then effective arbitration rules. The arbitration shall be conducted in Beijing, and
the language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.
7.3 Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration of any
dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this Agreement
and perform their respective obligations under this Agreement.
8 Miscellaneous
8.1 This Agreement should become effective upon execution by the Parties , and shall expire upon the date of full performance by the Parties of their
respective obligations under this Agreement.
11
8.2 This Agreement shall be written in both Chinese and English language in two copies, each Party having one copy with equal legal validity. In case
there is any conflict between the Chinese version and the English version, the Chinese version shall apply.
8.3 This Agreement may be amended or supplemented through written agreement by and between Lender and Borrower. Such written amendment
agreement and/or supplementary agreement executed by and between Lender and Borrower are an integral part of this Agreement, and shall have
the same legal validity as this Agreement.
8.4 In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance
with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or
compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective
provisions that accomplish to the greatest extent permitted by law the intentions of the Parties, and the economic effect of such effective provisions
shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.
8.5 The attachments (if any) to this Agreement shall be an integral part of this Agreement and shall have the same legal validity as this Agreement.
8.6 Any obligations that occur or that are due as a result of this Agreement upon the expiration or early termination of this Agreement shall survive the
expiration or early termination thereof. The provisions of Sections 4, 6, 7 and this Section 8.6 shall survive the termination of this Agreement.
12
IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Loan Agreement as of the date firs above written.
Lender:
Beijing Yangguang Gudi Science Development Co., Ltd.
By:
Name:
Title:
/s/ Haoyong Yang
Haoyong Yang
Legal Representative
Borrower:
Yang Liu
By:
/s/ Yang Liu
Loan Agreement
This Loan Agreement (this "Agreement") is made and entered into by and between the Parties below as of August 6, 2015 in Beijing, China:
(1)
Beijing Yangguang Gudi Science Development Co., Ltd. (“Lender”), a wholly foreign owned enterprise, organized and existing under the laws
of the PRC, with its address at Room 1811, 18/F, Building No.2, #1 Shangdi 10th Avenue, Haidian District, Beijing, PRC;
(2)
Chunyan Guo (“Borrower”), a citizen of China with Chinese Identification No.: .
Each of the Lender and the Borrower shall be hereinafter referred to as a "Party" respectively, and as the "Parties" collectively.
Whereas:
1.
2.
Borrower intends to invest an amount being RMB7,741,935 to subscribing for 20.00% of equity interests in Beijing Shan Jing Ke Chuang
Network Technology Co., Ltd. (“Borrower Company”). All of the equity interest hereafter acquired by Borrower in Borrower Company shall be
referred to as Borrower Equity Interest;
Lender confirms that it agrees to provide Borrower with a loan with a principal amount of RMB7,741,935 to be used for the purposes set forth
under this Agreement.
After friendly consultation, the Parties agree as follows:
1
1. Loan
1.1 In accordance with the terms and conditions of this Agreement, Lender agrees to provide an interest-free loan in the amount of RMB7,741,935
(the "Loan") to Borrower. The term of the Loan shall be 10 years from the date of this Agreement, which may be extended upon mutual written
consent of the Parties. During the term of the Loan or the extended term of the Loan, Borrower shall immediately repay the full amount of the
Loan in the event any one or more of the following circumstances occur:
1.1.1
30 days elapse after Borrower receives a written notice from Lender requesting repayment of the Loan;
1.1.2
Borrower's death, lack or limitation of civil capacity;
1.1.3
Borrower ceases (for any reason) to be an employee of Lender, Borrower Company or their affiliates;
1.1.4
Borrower engages in criminal act or is involved in criminal activities;
1.1.5
Any third party filed a claim against Borrower that exceeds RMB500,000; or
1.1.6
According to the applicable laws of China, foreign investors are permitted to invest in the business of Borrower Company in China with a
controlling stake or in the form of wholly-foreign-owned enterprises, the relevant competent authorities of China begin to approve such
investments, and Lender exercises the exclusive option under the Exclusive Option Agreement (as defined below) described in this
Agreement.
2
1.2
1.3
1.4
Lender agrees to remit the total amount of the Loan to the account designated by Borrower within 90 days after receiving a written
notification from the Borrower regarding the same, provided that all the conditions precedent in Section 2 are fulfilled. Borrower shall
provide Lender with a written receipt for the Loan upon receiving the Loan. The Loan provided by Lender under this Agreement shall
inure to Borrower's benefit only and not to Borrower's successors or assigns.
Borrower agrees to accept the aforementioned Loan provided by Lender, and hereby agrees and warrants to use the Loan to provide
registered capital to the Borrower Company, a domestic-funded limited liability company to be established in Beijing, China, carrying out
value-added telecommunication services. Borrower therefore shall be Borrower Company's shareholder and shall own 20.00% of the
equity interests in Borrower Company. Borrower agrees to complete the investment into Borrower Company in accordance with the
articles of association and hold the Borrower Equity Interest within 60 days following the date of the receipt of the Loan and provide
Lender, or any person designated by the Lender, with all of the duplicates of the registration documents at the government department for
industry and commerce, the business licenses, and articles of association. Without Lender's prior written consent, Borrower shall not use
the Loan for any purpose other than as set forth herein.
Lender and Borrower hereby agree and acknowledge that Borrower's method of repayment shall be at the sole discretion of Lender, and
may at Lender's option take the form of Borrower's transferring the Borrower Equity Interest in whole to Lender or Lender's designated
persons (legal or natural persons) pursuant to the Lender's exercise of its right to acquire the Borrower Equity Interest under the Exclusive
Option Agreement.
3
1.5
1.6
1.7
Lender and Borrower hereby agree and acknowledge that any proceeds from the transfer of the Borrower Equity Interest (to the extent
permissible) shall be used to repay the Loan to Lender, in accordance with this Agreement and in the manner designated by Lender.
Lender and Borrower hereby agree and acknowledge that to the extent permitted by applicable laws, Lender shall have the right but not
the obligation to purchase or designate other persons (legal or natural persons) to purchase Borrower Equity Interest in part or in whole at
any time, at the price stipulated in the Exclusive Option Agreement.
Borrower also undertakes to execute an irrevocable Power of Attorney (the "Power of Attorney"), which authorizes Lender or a legal or
natural person designated by Lender to exercise all of Borrower's rights as a shareholder of Borrower Company.
2. Conditions Precedent
The obligation of Lender to provide the Loan to Borrower contemplated in Section 1.1 shall be subject to the satisfaction of the following conditions,
unless waived in writing by Lender.
2.1 Lender receives the written notification for drawdown under the Loan sent by Borrower according to Section 1.2.
2.2 All the representations and warranties by Borrower in Section 3.2 are true, complete, correct and not misleading.
2.3 Borrower has not violated the covenants in Section 4 of this Agreement, and no event which may affect Borrower's performance of its obligations
under this Agreement has occurred or is expected to occur.
4
3. Representations and Warranties
3.1 Between the date of this Agreement and the date of termination of this Agreement, Lender hereby makes the following representations and
warranties to Borrower:
3.1.1
Lender is a corporation duly organized and legally existing in accordance with the laws of China;
3.1.2
Lender has the legal capacity to execute and perform this Agreement. The execution and performance by Lender of this Agreement is
consistent with Lender's scope of business and the provisions of Lender's corporate bylaws and other organizational documents, and
Lender has obtained all necessary and proper approvals and authorizations for the execution and performance of this Agreement; and
3.1.3
This Agreement constitutes Lender's legal, valid and binding obligations enforceable in accordance with its terms.
3.2 Between the date of this Agreement and the date of termination of this Agreement, Borrower hereby makes the following representations and
warranties:
3.2.1
Borrower has the legal capacity to execute and perform this Agreement. Borrower has obtained all necessary and proper approvals and
authorizations for the execution and performance of this Agreement;
3.2.2
This Agreement constitutes Borrower's legal, valid and binding obligations enforceable in accordance with its terms; and
5
3.2.3
There are no disputes, litigations, arbitrations, administrative proceedings or any other legal proceedings relating to Borrower, nor are
there any potential disputes, litigations, arbitrations, administrative proceedings or any other legal proceedings relating to Borrower.
4. Borrower's Covenants
4.1 As and when he becomes, and for so long as he remains a shareholder of Borrower Company, Borrower covenants irrevocably that during the term
of this Agreement, Borrower shall cause Borrower Company:
4.1.1
as soon as practicable after the date of this Agreement, to execute a Exclusive Option Agreement with Borrower and Lender, under which
Borrower shall irrevocably grant Lender an exclusive option to purchase all of the Borrower Equity Interest (the “Exclusive Option
Agreement”); to comply with certain Exclusive Technical Consulting and Services Agreement ("Exclusive Technical Consulting and
Services Agreement") dated January 18, 2012 between the Borrower Company and Lender, as amended, under which Lender, as an
exclusive service provider, agrees to provide Borrower Company with technical service and business consulting service;
4.1.2
to strictly abide by the provisions of the Exclusive Option Agreement and the Exclusive Technical Consulting and Services Agreement,
and to refrain from any action/omission that may affect the effectiveness and enforceability of the Exclusive Option Agreement and the
Exclusive Technical Consulting and Services Agreement;
6
4.1.3
at the request of Lender (or a party designated by Lender), to execute contracts/agreements on business cooperation with Lender (or a
party designated by Lender), and to strictly abide by such contracts/agreements;
4.1.4
to provide Lender with all of the information on Borrower Company's business operations and financial condition at Lender's request;
4.1.5
to immediately notify Lender of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating
to Borrower Company's assets, business or income;
4.1.6
at the request of Lender, to appoint any persons designated by Lender as directors of Borrower Company;
4.2 Borrower covenants that during the term of this Agreement, he shall:
4.2.1
4.2.2
4.2.3
ensure that the registered capital of Borrower Company be paid up and registered in accordance with the articles of association; Borrower
Company shall be a limited liability company without foreign investment, in which Borrower shall hold 20.00% of the equity interests;
pay the capital contribution in full corresponding to the Borrower Equity Interest in accordance with the laws of China, and provide
Lender with a capital contribution verification report regarding paid-in capital contributions from a qualified accounting firm;
endeavor to cause Borrower Company to engage in value-aded telecommunication services; the specific business scope shall be subject to
the business license of Borrower Company; Borrower shall cause Borrower Company to complete all the government approvals,
authorizations, licensing, registration and filling required for engaging in the businesses within the scope of its business license and for
owning its assets pursuant to the laws of China; Borrower shall provide Lender with the said governmental approvals documents for
verification. Endeavor to complete the registration of the paid-in registered capital after his drawing of the Loan, and shall provide Lender
with all of the duplicates of the registration documents at the government department for industry and commerce, business licenses, and
articles of association, and shall not change the business operation of Borrower Company without Lender's prior written consent;
7
4.2.4
4.2.5
4.2.6
4.2.7
execute an irrevocable Power of Attorney, which authorizes the Lender or a legal or natural person designated by Lender to exercise all of
Borrower's rights as a shareholder in Borrower Company, and refrain from exercising any such shareholder rights except to the extent
required under this Agreement or the Equity Interest Pledge Agreement (defined as below) or as requested by Lender;
execute the Exclusive Option Agreement with Lender and Borrower Company, under which Borrower shall irrevocably grant to Lender
an exclusive option to purchase all of the Borrower Equity Interest;
execute an Equity Interest Pledge Agreement (the "Equity Interest Pledge Agreement") with Borrower Company and Lender, under
which Borrower shall pledge the Borrower Equity Interest to Lender;
enter into the aforementioned Power of Attorney, Exclusive Option Agreement and Equity Interest Pledge Agreement on the date of
issuance of the business license of Borrower Company, and complete all the related governmental approvals, registrations or fillings (as
applicable);
8
4.2.8
abide by the provisions of this Agreement, the Power of Attorney, the Equity Interest Pledge Agreement and the Exclusive Option
Agreement, perform his obligations under this Agreement, the Power of Attorney, the Equity Interest Pledge Agreement and the
Exclusive Option Agreement, and refrain from any action/omission that may affect the effectiveness and enforceability of this
Agreement, the Power of Attorney, the Equity Interest Pledge Agreement and the Exclusive Option Agreement;
4.2.9
not sell, transfer, mortgage or dispose of in any other manner the legal or beneficial interest in Borrower Equity Interest, or allow the
encumbrance thereon of any security interest or the encumbrance, except in accordance with the Equity Interest Pledge Agreement;
4.2.10
cause any shareholders' meeting and/or the board of directors of Borrower Company not to approve the sale, transfer, mortgage or
disposition in any other manner of any legal or beneficial interest in Borrower Equity Interest, or allow the encumbrance thereon of any
security interest, except to Lender or Lender's designated person;
4.2.11
cause any shareholders' meeting and/or the board of directors of the Borrower Company not to approve the merger or consolidation of
Borrower Company with any person, or its acquisition of or investment in any person, without the prior written consent of Lender;
9
4.2.12
immediately notify Lender of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating to
Borrower Equity Interest;
4.2.13
to the extent necessary to maintain his ownership of the Borrower Equity Interest, execute all necessary or appropriate documents, take
all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defense against all
claims;
4.2.14 without the prior written consent of Lender, refrain from any action / omission that may have a material impact on the assets, business
and liabilities of Borrower Company;
4.2.15
appoint any designee of Lender as director of Borrower Company, at the request of Lender;
4.2.16
4.2.17
to the extent permitted by the laws of China, at the request of Lender at any time, promptly and unconditionally transfer all of Borrower
Equity Interest to Lender or Lender's designated representative(s) at any time, and cause the other shareholders of Borrower Company to
waive their right of first refusal with respect to the share transfer described in this Section;
to the extent permitted by the laws of China, at the request of Lender at any time, cause the other shareholders of Borrower Company to
promptly and unconditionally transfer all of their equity interests to Lender or Lender's designated representative(s) at any time, and
Borrower hereby waives his right of first refusal (if any) with respect to the share transfer described in this Section;
10
4.2.18
in the event that Lender purchases Borrower Equity Interest from Borrower in accordance with the provisions of the Exclusive Option
Agreement, use such purchase price obtained thereby to repay the Loan to Lender; and
4.2.19 without the prior written consent of Lender, not to cause Borrower Company to supplement, change, or amend its articles of association
in any manner, increase or decreases its registered capital or change its share capital structure in any manner.
5. Liability for Default
5.1 In the event either Party breaches this Agreement or otherwise causes the non-performance of this Agreement in part or in whole, the Party shall
be liable for such breach and shall compensate all damages (including litigation and attorneys fees) resulting therefrom. In the event that both
Parties breach this Agreement, each Party shall be liable for its respective breach.
5.2 In the event that Borrower fails to perform the repayment obligations set forth in this Agreement, Borrower shall pay overdue interest of 0.01%
per day for the outstanding payment, until the day Borrower repays the full principal of the Loan, overdue interests and other payable amounts.
6. Notices
6.1 All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by
registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such Party set forth below. A
confirmation copy of each notice shall also be sent by email. The dates on which notices shall be deemed to have been effectively given shall be
determined as follows:
11
6.1.1
6.1.2
Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the
date of delivery.
Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an
automatically generated confirmation of transmission).
6.2 For the purpose of notices, the addresses of the Parties are as follows:
Lender:
Address:
Attn:
Phone:
Facsimile:
Borrower:
Address:
Phone:
Facsimile:
Beijing Yangguang Gudi Science Development Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
Chunyan Guo
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
+8610 64435588-8888
+8610-64459926
6.3 Any Party may at any time change its address for notices by a notice delivered to the other Party in accordance with the terms hereof.
12
7. Confidentiality
The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in
connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of
all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential
information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s
unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or
orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsels or
financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or financial advisors
shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff
members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which Party shall be held liable for
breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.
8. Governing Law and Resolution of Disputes
8.1 The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes shall be
governed by the laws of China.
8.2 In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through
friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party's request to the other Party
for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and Trade
Arbitration Commission for arbitration, in accordance with its then effective arbitration rules. The arbitration shall be conducted in Beijing, and
the language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.
13
8.3 Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration of any
dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this Agreement
and perform their respective obligations under this Agreement.
9. Miscellaneous
9.1 This Agreement shall become effective on the date thereof, and shall expire upon the date of full performance by the Parties of their respective
obligations under this Agreement.
9.2 This Agreement shall be written in both Chinese and English language in two copies, each Party having one copy with equal legal validity. In case
there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.
9.3 This Agreement may be amended or supplemented through written agreement by and between Lender and Borrower. Such written amendment
agreement and/or supplementary agreement executed by and between Lender and Borrower are an integral part of this Agreement, and shall have
the same legal validity as this Agreement.
14
9.4 In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance
with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or
compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective
provisions that accomplish to the greatest extent permitted by law the intentions of the Parties, and the economic effect of such effective provisions
shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.
9.5 The attachments (if any) to this Agreement shall be an integral part of this Agreement and shall have the same legal validity as this Agreement.
15
IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Loan Agreement as of the date first above written.
Lender:
Beijing Yangguang Gudi Science Development Co., Ltd.
By:
Name:
Title:
/s/ Haoyong Yang
Haoyong Yang
Legal Representative
Borrower:
Chunyan Guo
By:
/s/ Chunyan Guo
Signature Page to Loan Agreement
Loan Agreement
This Loan Agreement (this “Agreement”) is made and entered into by and between the Parties below as of August 6, 2015 in Beijing, China:
(1) Beijing Yangguang Gudi Science Development Co., Ltd. (“Lender”), a wholly foreign owned enterprise, organized and existing under the laws
of the PRC, with its address at Room 1811, 18/F, Building No.2, #1 Shangdi 10th Avenue, Haidian District, Beijing, PRC;
(2) Haoyong Yang (“Borrower”), a citizen of China with Chinese Identification No.: .
Each of the Lender and the Borrower shall be hereinafter referred to as a “Party” respectively, and as the “Parties” collectively.
Whereas:
1. As of the date hereof, Borrower holds 0.31% of equity interests in Beijing Shanjing Ke Chuang Network Technology Co., Ltd. (“Borrower
Company”). All of the equity interest now held and hereafter acquired by Borrower in Borrower Company shall be referred to as Borrower Equity
Interest;
2. Lender confirms that it agrees to provide Borrower with and Borrow confirms that he/she has received a loan which equals to RMB120,000 to be
used for the purposes set forth under this Agreement.
After friendly consultation, the Parties agree as follows:
1
1 Loan
1.1 In accordance with the terms and conditions of this Agreement, Lender and Borrower hereby acknowledge that Borrower has obtained from
Lender a loan in the amount of RMB120,000 (the “Loan”). The term of the Loan shall be 10 years from the effective date of this Agreement,
which may be extended upon mutual written consent of the Parties. During the term of the Loan or the extended term of the Loan, Borrower shall
immediately repay the full amount of the Loan in the event any one or more of the following circumstances occur:
1.1.1
30 days elapse after Borrower receives a written notice from Lender requesting repayment of the Loan;
1.1.2
Borrower’s death, lack or limitation of civil capacity;
1.1.3
Borrower ceases (for any reason) to be an employee of Lender, Borrower Company or their affiliates;
1.1.4
Borrower engages in criminal act or is involved in criminal activities;
1.1.5
According to the applicable laws of China, foreign investors are permitted to invest in the Principle Business that is currently conducted
by Borrower Company in China with a controlling stake and/or in the form of wholly-foreign-owned enterprises, the relevant competent
authorities of China begin to approve such investments, and Lender exercises the exclusive option under the Exclusive Option Agreement
(the “Exclusive Option Agreement”) described in this Agreement.
2
1.2 The Loan provided by Lender under this Agreement shall inure to Borrower’s benefit only and not to Borrower’s successors or assigns.
1.3 Borrower agrees to accept the aforementioned Loan provided by Lender, and hereby agrees and warrants using the Loan to increase the registered
capital of Borrower Company. Without Lender’s prior written consent, Borrower shall not use the Loan for any purpose other than as set forth
herein.
1.4 Lender and Borrower hereby agree and acknowledge that Borrower’s method of repayment shall be at the sole discretion of Lender, and may at
Lender’s option take the form of Borrower’s transferring the Borrower Equity Interest in whole to Lender or Lender’s designated persons (legal or
natural persons) pursuant to the Lender’s exercise of its right to acquire the Borrower Equity Interest under the Exclusive Option Agreement.
1.5 Lender and Borrower hereby agree and acknowledge that any proceeds from the transfer of the Borrower Equity Interest (to the extent
permissible) shall be used to repay the Loan to Lender, in accordance with this Agreement and in the manner designated by Lender.
1.6 Lender and Borrower hereby agree and acknowledge that to the extent permitted by applicable laws, Lender shall have the right but not the
obligation to purchase or designate other persons (legal or natural persons) to purchase Borrower Equity Interest in part or in whole at any time, at
the price stipulated in the Exclusive Option Agreement.
1.7 Borrower also undertakes to execute an irrevocable Power of Attorney (the “Power of Attorney”), which authorizes Lender or a legal or natural
person designated by Lender to exercise all of Borrower’s rights as a shareholder of Borrower Company.
3
1.8 When Borrower transfers Borrower Equity Interest to Lender or Lender’s designated person(s), in the event that the transfer price of such equity
interest equals or is lower than the principal of the Loan under this Agreement, the Loan under this Agreement shall be deemed an interest-free
loan. In the event that the transfer price of such equity interest exceeds the principal of the Loan under this Agreement, the excess over the
principal shall be deemed the interest of the Loan under this Agreement payable by Borrower to Lender.
2 Representations and Warranties
2.1 Between the date of this Agreement and the date of termination of this Agreement, Lender hereby makes the following representations and
warranties to Borrower:
2.1.1
Lender is a corporation duly organized and legally existing in accordance with the laws of China;
2.1.2
Lender has the legal capacity to execute and perform this Agreement. The execution and performance by Lender of this Agreement is
consistent with Lender’s scope of business and the provisions of Lender’s corporate bylaws and other organizational documents, and
Lender has obtained all necessary and proper approvals and authorizations for the execution and performance of this Agreement; and
2.1.3
This Agreement constitutes Lender’s legal, valid and binding obligations enforceable in accordance with its terms.
2.2 Between the date of this Agreement and the date of termination of this Agreement, Borrower hereby makes the following representations and
warranties:
4
2.2.1
Borrower has the legal capacity to execute and perform this Agreement. Borrower has obtained all necessary and proper approvals and
authorizations for the execution and performance of this Agreement;
2.2.2
This Agreement constitutes Borrower’s legal, valid and binding obligations enforceable in accordance with its terms; and
2.2.3
There are no disputes, litigations, arbitrations, administrative proceedings or any other legal proceedings relating to Borrower, nor are
there any potential disputes, litigations, arbitrations, administrative proceedings or any other legal proceedings relating to Borrower.
3 Borrower’s Covenants
3.1 As and when he becomes, and for so long as he remains a shareholder of Borrower Company, Borrower covenants irrevocably that during the term
of this Agreement, Borrower shall cause Borrower Company:
3.1.1
to strictly abide by the provisions of the Exclusive Option Agreement and the Exclusive Technology Consultant and Services Agreement
to which the Borrower Company is a party, and to refrain from any action/omission that may affect the effectiveness and enforceability of
the Exclusive Option Agreement and Exclusive Technology Consultant and Services Agreement.
3.1.2
at the request of Lender (or a party designated by Lender), to execute contracts/agreements on business cooperation with Lender (or a
party designated by Lender), and to strictly abide by such contracts/agreements;
5
3.1.3
to provide Lender with all of the information on Borrower Company’s business operations and financial condition at Lender’s request;
3.1.4
to immediately notify Lender of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating
to Borrower Company's assets, business or income;
3.1.5
at the request of Lender, to appoint any persons designated by Lender as directors of Borrower Company;
3.2 Borrower covenants that during the term of this Agreement, he shall:
3.2.1
endeavor to keep Borrower Company to engage in its Principle Businesses;
3.2.2
abide by the provisions of this Agreement, the Power of Attorney, the Equity Interest Pledge Agreementand the Exclusive Option
Agreement to which the Borrower is a party, perform his obligations under this Agreement, the Power of Attorney, the Equity Interest
Pledge Agreement and the Exclusive Option Agreement, and refrain from any action/omission that may affect the effectiveness and
enforceability of this Agreement, the Power of Attorney, the Equity Interest Pledge Agreement and the Exclusive Option Agreement;
3.2.3
not sell, transfer, mortgage or dispose of in any other manner the legal or beneficial interest in Borrower Equity Interest, or allow the
encumbrance thereon of any security interest or the encumbrance, except in accordance with the Equity Interest Pledge Agreement;
6
3.2.4
3.2.5
3.2.6
3.2.7
cause any shareholders’ meeting and/or the board of directors of Borrower Company not to approve the sale, transfer, mortgage or
disposition in any other manner of any legal or beneficial interest in Borrower Equity Interest, or allow the encumbrance thereon of any
security interest, except to Lender or Lender’s designated person;
cause any shareholders’ meeting and/or the board of directors of the Borrower Company not to approve the merger or consolidation of
Borrower Company with any person, or its acquisition of or investment in any person, without the prior written consent of Lender;
immediately notify Lender of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating to
Borrower Equity Interest;
to the extent necessary to maintain his ownership of the Borrower Equity Interest, execute all necessary or appropriate documents, take
all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defense against all
claims;
3.2.8
without the prior written consent of Lender, refrain from any action /omission that may have a material impact on the assets, business and
liabilities of Borrower Company;
3.2.9
appoint any designee of Lender as director of Borrower Company, at the request of Lender;
3.2.10
to the extent permitted by the laws of China, at the request of Lender at any time, promptly and unconditionally transfer all of Borrower
Equity Interest to Lender or Lender’s designated representative(s) at any time, and cause the other shareholders of Borrower Company to
waive their right of first refusal with respect to the share transfer described in this Section;
7
3.2.11
to the extent permitted by the laws of China, at the request of Lender at any time, cause the other shareholders of Borrower Company to
promptly and unconditionally transfer all of their equity interests to Lender or Lender’s designated representative(s) at any time, and
Borrower hereby waives his right of first refusal (if any) with respect to the share transfer described in this Section;
3.2.12
in the event that Lender purchases Borrower Equity Interest from Borrower in accordance with the provisions of the Exclusive Option
Agreement, use such purchase price obtained thereby to repay the Loan to Lender; and
3.2.13 without the prior written consent of Lender, not to cause Borrower Company to supplement, change, or amend its articles of association
in any manner, increase or decreases its registered capital or change its share capital structure in any manner.
4 Liability for Default
4.1 If Borrower conducts any material breach of any term of this Agreement, Lender shall have right to terminate this Agreement and require the
Borrower to compensate all damages; this Section 4.1 shall not prejudice any other rights of Lender herein.
8
4.2 If Lender conducts any breach of any term of this Agreement, Borrower shall not terminate this Agreement in any event unless otherwise required
by applicable laws.
4.3 In the event that Borrower fails to perform the repayment obligations set forth in this Agreement, Borrower shall pay overdue interest of 0.01%
per day for the outstanding payment, until the day Borrower repays the full principal of the Loan, overdue interests and other payable amounts.
5 Notices
5.1 All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by
registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such Party set forth below. A
confirmation copy of each notice shall also be sent by email. The dates on which notices shall be deemed to have been effectively given shall be
determined as follows:
5.1.1
5.1.2
Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the
date of delivery.
Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an
automatically generated confirmation of transmission).
9
5.2 For the purpose of notices, the addresses of the Parties are as follows:
Lender:
Address:
Attn:
Phone:
Facsimile:
Borrower:
Address:
Phone:
Facsimile:
Beijing Yangguang Gudi Science Development Co., Ltd.
Tower E, North America International Business Center, #Yi108, Beiyuan Road, Chaoyang District, Beijing
Jinbo Yao
+8610 64435588-8888
+8610-64459926
Haoyong Yang
5.3 Any Party may at any time change its address for notices by a notice delivered to the other Party in accordance with the terms hereof.
6 Confidentiality
The Parties acknowledge that any oral or written information exchanged among them with respect to this Agreement is confidential information. The
Parties shall maintain the confidentiality of all such information, and without the written consent of other Party, either Party shall not disclose any
relevant information to any third party, except in the following circumstances: (a) such information is or will be in the public domain (provided that
this is not the result of a public disclosure by the receiving party); (b) information disclosed as required by applicable laws or rules or regulations of
any stock exchange; or (c) information required to be disclosed by any Party to its legal counsel or financial advisor regarding the transaction
contemplated hereunder, and such legal counsel or financial advisor are also bound by confidentiality duties similar to the duties in this section.
Disclosure of any confidential information by the staff members or agency hired by any Party shall be deemed disclosure of such confidential
information by such Party, which Party shall be held liable for breach of this Agreement. This section shall survive the termination of this Agreement
for any reason.
10
7 Governing Law and Resolution of Disputes
7.1 The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes shall be
governed by the laws of China.
7.2 In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through
friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party’s request to the other Party
for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and Trade
Arbitration Commission for arbitration, in accordance with its then effective arbitration rules. The arbitration shall be conducted in Beijing, and
the language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.
7.3 Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration of any
dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this Agreement
and perform their respective obligations under this Agreement.
8 Miscellaneous
8.1 This Agreement should become effective upon execution by the Parties, and shall expire upon the date of full performance by the Parties of their
respective obligations under this Agreement.
11
8.2 This Agreement shall be written in both Chinese and English language in two copies, each Party having one copy with equal legal validity. In case
there is any conflict between the Chinese version and the English version, the Chinese version shall apply.
8.3 This Agreement may be amended or supplemented through written agreement by and between Lender and Borrower. Such written amendment
agreement and/or supplementary agreement executed by and between Lender and Borrower are an integral part of this Agreement, and shall have
the same legal validity as this Agreement.
8.4 In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance
with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or
compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective
provisions that accomplish to the greatest extent permitted by law the intentions of the Parties, and the economic effect of such effective provisions
shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.
8.5 The attachments (if any) to this Agreement shall be an integral part of this Agreement and shall have the same legal validity as this Agreement.
8.6 Any obligations that occur or that are due as a result of this Agreement upon the expiration or early termination of this Agreement shall survive the
expiration or early termination thereof. The provisions of Sections 4, 6, 7 and this Section 8.6 shall survive the termination of this Agreement.
12
IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Loan Agreement as of the date firs above written.
Lender:
Beijing Yangguang Gudi Science Development Co., Ltd.
By:
Name:
Title:
/s/ Haoyong Yang
Haoyong Yang
Legal Representative
Borrower: Haoyong Yang
By:
/s/ Haoyong Yang
List of Principal Subsidiaries and Consolidated Affiliated Entities of 58.com Inc.*
Exhibit 8.1
Subsidiaries:
China Classified Network Corporation
China Classified Information Corporation Limited
Beijing Chengshi Wanglin Information Technology Co., Ltd.
58 Tongcheng Information Technology Co., Ltd.
Ruiting Network Technology (Shanghai) Co., Ltd.
Anjuke Inc.
58.com Holdings Inc.
Falcon View Technology
Beijing Yangguang Gudi Science Development Co., Ltd.
Consolidated Affiliated Entities and Their Subsidiaries:
Beijing 58 Information Technology Co., Ltd.
Shanghai Ruijia Information Technology Co., Ltd.
58 Co., Ltd.
Beijing 58 Auto Technology Co., Ltd. (formerly known as Beijing Leftbrain Network Technology
Co., Ltd.)
Beijing Shanjing Kechuang Network Technology Co., Ltd.
Unconsolidated Subsidiaries and Their Controlled Affiliates**
58 Daojia Inc.
Beijing 58 Daojia Information Technology Co., Ltd.
Tianjin 58 Daojia Life Services Co., Ltd.
Place of Incorporation
British Virgin Islands
Hong Kong
PRC
PRC
PRC
Cayman Islands
British Virgin Islands
Cayman Islands
PRC
PRC
PRC
PRC
PRC
PRC
British Virgin Islands
PRC
PRC
*
The registrant has omitted from this list its other consolidated entities of the registrant that, in the aggregate, would not constitute a significant
subsidiary as defined in Rule 1-02(w) of Regulation S-X as of December 31, 2015.
** 58 Daojia Inc., or 58 Home, is the holding company of the PRC entities that operate 58 Home business. On November 27, 2015, 58 Daojia Inc.
completed a Series A equity funding round, following which the Registrant holds 87.9% of the total outstanding ordinary shares of 58 Home and
61.7% of the total outstanding shares of 58 Home on an as-converted basis. As certain rights provided to the non-controlling Series A preferred
shareholders of 58 Home would be viewed as substantive participating rights under U.S. GAAP, the Registrant has ceased consolidating the financial
results of 58 Home in its consolidated financial statements in accordance with U.S. GAAP since November 27, 2015.
Certification by the Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 12.1
I, Jinbo Yao, certify that:
1.
I have reviewed this annual report on Form 20-F of 58.com Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the company and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by
this annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial
reporting;
5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal
control over financial reporting.
Date: May 13, 2016
/s/ Jinbo Yao
By:
Name: Jinbo Yao
Title: Chief Executive Officer
Certification by the Principal Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 12.2
I, Hao Zhou, certify that:
1.
I have reviewed this annual report on Form 20-F of 58.com Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the company and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by
the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial
reporting;
5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent function):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal
control over financial reporting.
Date: May 13, 2016
/s/ Hao Zhou
By:
Name: Hao Zhou
Title: Chief Financial Officer
Certification by the Principal Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 13.1
In connection with the Annual Report of 58.com Inc. (the “Company”) on Form 20-F for the fiscal year ended December 31, 2015 as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I, Jinbo Yao, Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1)
(2)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
Date: May 13, 2016
/s/ Jinbo Yao
By:
Name: Jinbo Yao
Title: Chief Executive Officer
Certification by the Principal Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 13.2
In connection with the Annual Report of 58.com Inc. (the “Company”) on Form 20-F for the fiscal year ended December 31, 2015 as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I, Hao Zhou, Chief Financial Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1)
(2)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
Date: May 13, 2016
/s/ Hao Zhou
By:
Name: Hao Zhou
Title: Chief Financial Officer
Exhibit 15.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (File No. 333-194873 and File No. 333-205011) of 58.com
Inc. of our report dated May 13, 2016 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in
this Form 20-F.
/s/ PricewaterhouseCoopers Zhong Tian LLP
Beijing, the People’s Republic of China
May 13, 2016
[LETTERHEAD OF HAN KUN LAW OFFICES]
Exhibit 15.2
Date: May 13, 2016
58.com Inc.
Building 105, 10 Jiuxianqiao North Road Jia
Chaoyang District
Beijing 100015
People’s Republic of China
Dear Sir/Madam:
We hereby consent to the use of our name and the summary of our opinion under the captions, “Risk Factors” in Item 3, “Organizational Structure” in Item
4 and “Financial Information” in Item 8, included in the annual report of 58.com Inc. on Form 20-F for the fiscal year ended December 31, 2015 (the
“Annual Report”), which will be filed with the Securities and Exchange Commission in the month of May 2016, and further consent to the incorporation by
reference of the summaries of our opinions under these captions into Registration Statements on Form S-8 (File No. 333-194873 and File No. 333-205011)
of 58.com Inc. We also consent to the filing with the SEC of this consent letter as an exhibit to the Annual Report.
Yours Sincerely,
/s/ Han Kun Law Offices