EX-99.4 5 tv494003_ex99-4.htm EXHIBIT 99.4

 

Exhibit 99.4

 

Note:

 

This offering circular dated May 14, 2018, amends and restates, in its entirety, the offering circular dated April 30, 2018.

 

Renren has changed the record date for the cash dividend from May 18, 2018, to June 14, 2018. In addition, Renren has designated a payment date for the cash dividend, which will be June 21, 2018. Renren has adopted these changes to make it possible for the NYSE to establish an ex-dividend date and facilitate orderly trading in Renren’s ADSs. According to the NYSE, the ex-dividend date for Renren’s ADSs for NYSE trading will be June 22, 2018.

 

Because OPI will only accept a waiver of the cash dividend as valid payment for the shares of OPI being offered in the private placement, OPI has amended and restated its offering circular to reflect the change in procedure as well as to update certain financial information. The updates relate primarily to the following sections:

 

1. The overview of the offering on pages 1, 2, 3, 4 and 5.

 

2. “Definitions” on pages 10, 11 and 12.

 

3. “Expected Timeline” on page 14.

 

4. FAQ #31 on page 23 with regards to the timing of the effect of the Transaction on Renren’s ADS price.

 

5. “Selected Financial Information of the ZenZone Business” on pages 48 to 49, which has been updated to include unaudited full year 2017 financial results.

 

6. “Selected Financial Information for the Investments” on page 50, where the book value for each investment has been updated to December 31, 2017.

 

7. “How to Accept the Offer” on pages 100, 101 and 102.

 

8. Annexes M (Amended and Restated Offer Acceptance Form), N (Amended and Restated DTC Cash Waiver Election Form), O (Amended and Restated Non-DTC Cash Waiver Election Form) and P (Amended and Restated Ordinary Share Cash Waiver Election Form).

 

All defined terms used in this cover note shall have the meanings ascribed to them in the amended and restated offering circular.

 

 

 

 

Offering Circular May 14, 2018

 

Class A Ordinary Shares and
Class B Ordinary Shares of

 

OAK PACIFIC INVESTMENT

 

Oak Pacific Investment (“OPI”), a newly formed Cayman Islands exempted corporation which is currently a wholly-owned subsidiary of Renren Inc. (“Renren”), is offering Class A ordinary shares and Class B ordinary shares to shareholders of Renren who are “Eligible Shareholders” (as defined below).

 

We refer to the Class A ordinary shares and Class B ordinary shares of OPI collectively as the “OPI Shares”. There is no public market for the OPI Shares and there are no plans for the OPI Shares to be listed on any stock exchange or quoted on the OTC marketplace.

 

This offer (the “Offer”) is being made only to shareholders of Renren (including holders of Renren’s American depositary shares (“ADSs”)) as of 5:00 p.m. Eastern time on June 14, 2018 (the “Record Date”) who satisfy all three of the following criteria: (1) the shareholder is an “accredited investor,” as such term is defined under the U.S. Securities Act of 1933, as amended (the “Securities Act”), (2) the shareholder is a “qualified purchaser,” as such term is defined under the U.S. Investment Company Act of 1940, as amended (the “Investment Company Act”), and (3) the shareholder is not a resident of an “Excluded Jurisdiction” (as defined below). A shareholder of Renren that meets all three of these criteria is referred to herein as an “Eligible Shareholder.”

 

An Eligible Shareholder may accept the Offer prior to 5:00 p.m. Eastern time on June 8, 2018 (the “Acceptance Deadline”) with respect to all, some or none of the ordinary shares of Renren that the Eligible Shareholder will hold as of the Record Date, subject to certain limitations. To validly accept the offer, you must continue to hold your Renren shares and ADSs as of the Record Date. See “How to Accept the Offer.

  

Each Eligible Shareholder that validly accepts the Offer will receive (1) one Class A ordinary share of OPI for each Class A ordinary share of Renren held by that Eligible Shareholder as of the Record Date with respect to which the Offer is validly accepted (including 15 Class A ordinary shares of OPI for each Renren ADS, as each Renren ADS represents the right to receive 15 Renren Class A ordinary shares) and (2) one Class B ordinary share of OPI for each Class B ordinary share of Renren held by that Eligible Shareholder as of the Record Date with respect to which the Offer is validly accepted. However, if any person who validly accepts the Offer would receive OPI Shares that would cause that person to hold more than 49.9% of the total voting power in OPI (including shares that may be obtained by the exercise of vested share incentive grants), that person will receive Class A ordinary shares instead of Class B ordinary shares to the extent necessary for that person’s voting power in OPI (including shares that may be obtained by the exercise of vested share incentive grants) not to exceed 49.9%.

 

 1 

 

  

Renren has declared a cash dividend (the “Cash Dividend”) payable to all shareholders of Renren (including holders of Renren’s ADSs) as of the Record Date, in an amount per ordinary share (including Class A ordinary shares that are represented by ADSs) that will be equal to (1) the OPI Value of US$500 million (as defined further below) divided by (2) the total number of OPI Shares issued to Eligible Shareholders who validly accept the Offer, rounded down to the nearest hundredth of a cent. The determination of the amount of the Cash Dividend and the date for its distribution are explained further below. Any Eligible Shareholder who accepts the Offer must waive the right to receive the Cash Dividend that is otherwise payable to it in respect of the corresponding Renren shares or ADSs. No other form of payment will be accepted for OPI Shares in the Offer. Renren shareholders who do not validly accept the Offer (whether because they choose not to accept the Offer or because they are not Eligible Shareholders) will receive the Cash Dividend, which is intended to convey value (per share of Renren) equal to the value of the OPI Shares received (per share of Renren) by those Eligible Shareholders that validly accepted the Offer. See “Background and Fairness” and “Valuation”.

 

The purchase of OPI Shares involves material risks. See “Risk Factors” beginning on page 26 of this Offering Circular to read about important factors you should consider before accepting the Offer.

 

We refer to this offering of the OPI Shares as the “Private Placement”. The Private Placement is part of an integrated series of transactions involving the Separation (as defined further below), the Cash Dividend and the Private Placement which Renren and OPI are conducting contemporaneously, and which we refer to collectively as the “Transaction”.

 

The Transaction is being effected to address the risk that Renren could be deemed to be an “investment company” under the Investment Company Act and to unlock potential in Renren’s ZenZone advertising agency business by separating it from Renren’s social networking, used automobile and other operating businesses. To achieve these goals, Renren has transferred the following assets to OPI: (1) the ZenZone business; (2) minority interests in 44 portfolio companies (collectively, the “Portfolio Companies”); and (3) interests in 6 investment funds (collectively, the “Funds” and, together with the Portfolio Companies, the “Investments”). Renren has opted to retain minority interests in another 6 portfolio companies that have especially strong synergies with Renren’s business, are insignificant in value or are structured in such a way that the benefits of transferring the interest would be outweighed by the cost or difficulty of transferring it. Renren has also transferred certain related debt liabilities to OPI and OPI has taken on certain additional liabilities, as more fully described herein.

 

Upon completion of the Transaction:

 

·     all OPI Shares will be owned by Eligible Shareholders that validly elect to acquire OPI Shares in the Private Placement in exchange for the waiver of the Cash Dividend otherwise payable to them in respect of the corresponding Renren shares or ADSs;

 

·     OPI will be exempt from the registration requirements of the Investment Company Act by virtue of restricting ownership of OPI Shares solely to “qualified purchasers” or “knowledgeable employees” of OPI, each as defined under the Investment Company Act; and

 

·     OPI’s operations will primarily consist of managing its holdings in 44 Portfolio Companies and 6 Funds and operating the ZenZone business.

 

 2 

 

 

Neither OPI nor Renren will receive any cash proceeds from the Private Placement.

 

The total number of OPI Shares to be issued in the Private Placement cannot be determined until after the Record Date has passed, and thus the final amount of the Cash Dividend will remain unknown until that time. However, as of April 1, 2018, Renren had 1,034,929,113 outstanding shares (comprised of 729,540,663 Class A ordinary shares and 305,388,450 Class B ordinary shares), and Renren has already received contractual commitments (the “Contractual Commitments”) from Eligible Shareholders holding an aggregate of 820,273,132 ordinary shares of Renren (or approximately 79.3% of Renren’s outstanding shares as of April 1, 2018) to acquire an equivalent number of OPI Shares in the Private Placement in exchange for waiving their Cash Dividend. We refer to the Eligible Shareholders who have entered into the Contractual Commitments as the “Committed Shareholders”. Pursuant to the Contractual Commitments, the Committed Shareholders have each agreed to accept the Offer in full, not to transfer their Renren shares prior to the completion of the Private Placement and to acquire OPI Shares in exchange for their waiving the Cash Dividend otherwise payable in respect of the corresponding Renren shares. The Committed Shareholders include, among others, SB Pan Pacific Corporation, which is Renren’s largest shareholder by number of shares and a wholly-owned subsidiary of SoftBank Group Corp.; Mr. Joseph Chen, who is Renren’s founder, chairman and chief executive officer and Renren’s largest shareholder by vote; DCM Ventures (“DCM”), which is one of Renren’s largest shareholders by number of shares; Mr. James Jian Liu, who is Renren’s executive director and chief operating officer; and Mr. David Chao, who is a Renren director and a founder of DCM.

  

Based on the figures above, and before deducting any fees payable to Citibank, N.A. as depositary for Renren’s ADR program (the “Depositary”), we believe that:

 

·the Cash Dividend will range from US$0.4831 per share (or US$7.2465 per ADS), if all shareholders of Renren (including holders of ADSs) are Eligible Shareholders and validly elect to waive the Cash Dividend in respect of all of their Renren shares and ADSs, to US$0.6096 per share (or US$9.1440 per ADS), if no additional shareholders beyond the Committed Shareholders elect to waive the Cash Dividend in respect of any of their Renren shares or ADSs; and

 

·the aggregate dollar amount of the Cash Dividend to be paid by Renren in the Transaction will range from zero, if all shareholders of Renren (including holders of ADSs) are Eligible Shareholders and validly elect to waive the Cash Dividend in respect of all of their Renren shares and ADSs, to approximately US$131 million, if no additional shareholders beyond the Committed Shareholders elect to waive the Cash Dividend in respect of any of their Renren shares or ADSs.

 

The Depositary will charge holders of ADSs as of the Record Date a fee of US$0.02 per ADS in respect of which the Cash Dividend is paid, and a fee of US$0.05 per ADS in respect of which the Cash Dividend is waived and OPI Shares are issued. You will not owe any fees to the Depositary in connection with either the Cash Dividend or the OPI Shares to the extent that you hold ordinary shares directly on Renren’s register of members.

 

 3 

 

 

Aside from the Committed Shareholders, we do not know at this time how many other Renren shareholders will qualify as Eligible Shareholders, waive the Cash Dividend and validly accept the Offer. As a result, the total number of OPI Shares to be issued in the Private Placement and the final dollar amount of the Cash Dividend (on a per share and per ADS basis) are both unknown at this time, and the ranges given above for the per share (and per ADS) amount and the aggregate dollar amount of the Cash Dividend are merely indicative.

 

Immediately following the Private Placement, OPI will issue approximately 6.3 million restricted OPI Class A ordinary shares and options to acquire approximately 136.8 million OPI Class A ordinary shares. The incentive share grants exactly correspond to the number of restricted shares and share options that the recipients hold in Renren. Restricted shares have no exercise price and will become unrestricted upon vesting. The exercise price for the OPI share options will be the lower of the exercise price of the corresponding option held by the holder in Renren or the per share value of OPI used in calculating the amount of the Cash Dividend, provided that among the options to be granted to Mr. Joseph Chen, 39,752,430 share options will be granted with an initial exercise price of twice the per share value of OPI. At the time of their issuance, the majority of the OPI share options will have exercise prices that are lower than the per share value of OPI. Furthermore, each time OPI distributes cash or other assets to its shareholders, other than pursuant to certain shareholders’ special distribution rights, the exercise price on each outstanding OPI share option (whether vested or unvested) generally will be reduced on a per share basis by the per share amount of value distributed until the exercise price has reached zero. These restricted shares and options to be issued by OPI, which do not impact the calculation of the amount of the Cash Dividend, could significantly reduce the returns that you receive on your OPI Shares.

 

Renren’s ADSs trade on The New York Stock Exchange (the “NYSE”) under the ticker symbol “RENN”. As of May 11, 2018 (the last NYSE trading day prior to the date of this Offering Circular), the closing price per ADS was US$8.78. Renren expects that trading for its ADSs will be extremely volatile, particularly given the complexity of the Transaction, the size of the OPI Value compared to Renren’s market capitalization and the uncertainty over the final amount of the Cash Dividend on a per share and per ADS basis. In particular, volatility is expected to be high on and around June 21, 2018, which is the last date on which purchasers of ADSs on the NYSE will obtain the right to receive the Cash Dividend with respect to those newly purchased ADSs. According to the NYSE, the ex-dividend date for NYSE trading will be June 22, 2018. The ex-dividend date is the date on which the NYSE will reset the opening trading price of the Renren ADSs to reflect the payment of the Cash Dividend. On and after the ex-dividend date, purchasers of ADSs will have no right to receive the Cash Dividend with respect to those newly purchased ADSs. The trading price for Renren’s ADSs on the ex-dividend date is expected to be much lower than the closing price on the last trading date before the ex-dividend date, to reflect the amount of the Cash Dividend.

 

To the extent that Renren’s ADSs trade below US$1.00 per ADS for an extended period of time, or at or below US$0.16 per ADS for any period of time, Renren’s ADSs may be suspended from trading on the NYSE and ultimately delisted. To assist in stabilizing the ADS trading price and to address this risk, Renren has adopted an ADS repurchase program to be effected on the open market at prevailing market prices from time to time as market conditions warrant in accordance with the applicable requirements of Rule 10b5-1 and Rule 10b-18 under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

 4 

 

 

For more information on the effect of the Transactions on Renren, including pro forma financial statements of Renren, see the report on Form 6-K that is being filed by Renren with the U.S. Securities and Exchange Commission (the “SEC”) on May 14, 2018.

 

As further described herein, the Offer is subject to the following terms, restrictions and limitations:

 

PAYMENT FOR OPI SHARES WILL ONLY BE ACCEPTED IN THE FORM OF A WAIVER OF THE CASH DIVIDEND.

 

In order for your acceptance to be valid, Renren, OPI and the Verification Agent (as defined below) must have received all of the required forms and information from you no later than the Acceptance Deadline. In addition, you must continue to hold your Renren shares or ADSs as of the Record Date, which will be after the Acceptance Deadline. Your acceptance of the Offer will be rejected to the extent you do not still hold the Renren shares or ADSs for which you accepted the Offer as of the Record Date. Please see “How to Accept the Offer” and “The Verification Process” for further details.

 

Renren will calculate the dollar amount of the Cash Dividend (in the aggregate and on a per share and per ADS basis) after the Acceptance Deadline has passed and after the Verification Agent has completed verification of all information that was timely submitted by the Acceptance Deadline. Renren will announce the result of that calculation.promptly after the Record Date.

 

If Renren determines that you have validly waived the Cash Dividend and OPI determines that you have validly accepted the Offer, then your waiver of the Cash Dividend will be immediately effective upon the issuance of the OPI Shares, and you will be notified by e-mail that the applicable number of OPI Shares has been issued to you. If for any reason Renren determines that you have not validly waived the Cash Dividend or OPI determines that you have not validly accepted the Offer, including because the forms you submitted are incomplete or illegible, you will not receive OPI Shares but you will receive the Cash Dividend.

 

A shareholder of Renren as of the Record Date who takes no action will receive the Cash Dividend.

 

Renren expects to deliver the OPI Shares on June 21, 2018 (the “Share Delivery Date”) to the Eligible Shareholders who have validly accepted the Offer. Renren also expects to distribute the Cash Dividend on June 21, 2018 (the “Cash Delivery Date”).

 

Renren will pay the fees and expenses of Renren and OPI in connection with this offering and the related transactions, including legal and accounting fees. However, fees charged by the Depositary to holders of ADSs as of the Record Date, including the US$0.02 per ADS Depositary fee payable in connection with receipt of the Cash Dividend and the US$0.05 per ADS Depositary fee payable in connection with the waiver of the Cash Dividend and receipt of OPI Shares, will be borne by the holders of ADSs.

 

 5 

 

 

The Renren board of directors formed a special committee (the “Special Committee”) to evaluate the terms of the Transaction. The terms of the Transaction have been approved by the Special Committee. In accordance with Renren’s articles of association, the approval of SoftBank Group Corp., the parent company of SB Pan Pacific Corporation (Renren’s largest shareholder by number of shares), was also necessary, and the Transaction has been approved by SoftBank Group Corp.

 

The Special Committee may amend or modify the Transaction for any reason at any time prior to the issuance of the OPI Shares to the purchasers in the Private Placement, including by extending the Acceptance Deadline or by postponing the Share Delivery Date and/or Cash Delivery Date, and the Transaction may be cancelled for any reason at any time prior to the Share Delivery Date. If the Private Placement is cancelled, the Cash Dividend will also be cancelled.

 

None of Renren’s board of directors, the Special Committee, OPI’s board of directors nor SoftBank is making any recommendation regarding your waiver of the Cash Dividend and acquisition of OPI Shares. You should read this Offering Circular and the annexes to it thoroughly and carefully consider whether or not to accept the Offer. You may not revoke or amend your acceptance of the Offer once made.

 

If you have any questions or need further information about the Offer or the Transaction in general, please contact Georgeson LLC, the information agent, at (800) 509-1078 or by e-mail at Renren@georgeson.com.

 

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Notices

 

The Offer is personal to each Eligible Shareholder of Renren as of the Record Date. This Offering Circular may not be transmitted to any other person.

 

Nothing in this Offering Circular constitutes an offer of securities for sale, or the solicitation of an offer to buy or subscribe for securities, in any jurisdiction where it is unlawful to make or solicit such an offer. The Offering Circular has not been filed with or approved by any securities regulatory or governmental authorities in any jurisdiction. The Offer has not been and will not be registered as a public offering in any jurisdiction. This Offering Circular will not be transmitted to any resident of Japan or any other jurisdiction where the Offer would be prohibited (the “Excluded Jurisdiction”). Shareholders of Renren (including holders of ADSs) as of the Record Date who are residents of an Excluded Jurisdiction are not eligible to accept the Offer and each shareholder that wishes to accept the Offer will be required to confirm that it is not a resident of a jurisdiction where the Offer would be prohibited. You should consult your own professional advisers as to whether you require any governmental or other consents or need to observe any other formalities to enable you to acquire the OPI Shares.

 

THE OFFER HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR UNDER ANY SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION. THIS OFFER IS MADE PURSUANT TO RULE 506(c) OF REGULATION D UNDER SECTION 4(a)(2) OF THE SECURITIES ACT, WHICH EXEMPTS TRANSACTIONS NOT INVOLVING A PUBLIC OFFERING FROM SUCH REGISTRATION. OPI SHARES MAY ONLY BE ACQUIRED BY INVESTORS WHO MEET THE QUALIFICATIONS DESCRIBED HEREIN.

 

THE OPI SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR UNDER ANY SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR THE LAWS OF ANY OTHER JURISDICTION AND CANNOT BE SOLD IN ANY JURISDICTION UNLESS THEY ARE SUBSEQUENTLY REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. OPI HAS NO OBLIGATION TO REGISTER THE OPI SHARES UNDER THE SECURITIES ACT OR UNDER ANY SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR THE LAWS OF ANY OTHER JURISDICTION. TRANSFER OF THE OPI SHARES IS ALSO SUBJECT TO RESTRICTIONS UNDER THE ARTICLES OF ASSOCIATION OF OPI. CONSEQUENTLY, AN INVESTOR SHOULD BE PREPARED TO BEAR THE ECONOMIC RISK OF AN INVESTMENT IN THE OPI SHARES FOR AN INDEFINITE PERIOD OF TIME.

 

The contents of this document have not been reviewed by any regulatory authority in Hong Kong or elsewhere. You are advised to exercise caution in relation to the Offer. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice.

 

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Forward-looking Statements

 

This Offering Circular contains forward-looking statements that involve risks and uncertainties. All statements other than statements of current or historical facts are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause OPI’s actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.

 

You can identify these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “likely to” or other similar expressions. OPI has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that we believe may affect OPI’s financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, but are not limited to, statements about:

 

·OPI’s goals and strategies, including its strategies for managing and disposing of the Investments;

 

·OPI’s plans for distributing any returns realized on the Investments or any profits earned by the ZenZone business;

 

·the future development, financial condition and results of operations of the ZenZone business;

 

·expected changes in OPI’s or ZenZone’s revenues, costs or expenditures; or

 

·Renren’s status and prospects after the Transaction is completed, including its plans to remain listed on the NYSE.

 

You should read this Offering Circular and the annexes to it thoroughly, with the understanding that OPI’s actual future results may be materially different from and worse than what we expect. New risk factors and uncertainties emerge from time to time and it is not possible for us to predict all risk factors and uncertainties, nor can we assess the impact of all factors on OPI 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 statements. OPI qualifies all of its forward-looking statements by these cautionary statements.

 

You should not rely upon forward-looking statements as predictions of future events. Neither OPI nor Renren undertakes any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

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Table of Contents

 

Notices 7
Forward-looking Statements 8
Table of Contents 9
Definitions 10
Expected Timeline 14
Questions and Answers 15
Risk Factors 24
Assets and Liabilities 37
Corporate Structure 38
Business 40
Selected Financial Information of the ZenZone Business 48
Selected Financial Information for the Investments 50
Debts and Warrant 51
Distribution Rights 56
Priority of Payments 58
Reserved Matters 60
Background and Fairness 64
Valuation 72
Cash Dividend 81
Directors, Senior Management and Employees 83
Description of the OPI Shares 88
United States Federal Income Tax Consequences to U.S. Holders 94
How To Accept The Offer 100
Definitions of Accredited Investor and Qualified Purchaser 103
The Verification Process 106
Where You Can Find Additional Information 107
Index of Annexes 108

 

Annex A. Form of OPI Memorandum and Articles of Association
Annex B. Form of OPI Shareholders Agreement
Annex C. Form of Renren Lianhe Shareholders Agreement
Annex D. Form of Renren Lianhe Memorandum and Articles of Association
Annex E. Form of Separation and Distribution Agreement
Annex F. Form of Services Agreement
Annex G. Senior Secured Promissory Note (Clear Light Ventures Limited)
Annex H. Warrant (Clear Light Ventures Limited)
Annex I. Form of Secured Promissory Note (SoftBank)
Annex J. Form of Secured Promissory Note (Renren)
Annex K. Tripartite Deed of Subordination
Annex L. Fairness Opinion
Annex M. Amended and Restated Offer Acceptance Form
Annex N. Amended and Restated DTC Cash Dividend Waiver Election Form
Annex O. Amended and Restated Non-DTC Cash Dividend Waiver Election Form
Annex P. Amended and Restated Ordinary Share Cash Dividend Waiver Election Form
Annex Q. Form of Share Incentive Plan

 

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Definitions

 

Acceptance Deadline

5:00 p.m. Eastern time on June 8, 2018, the deadline by which:

 

·      Renren must have received an original signed Cash Dividend Waiver Election Form from you,

 

·      OPI must have received an original signed Amended and Restated Offer Acceptance Form from you,

 

·      the Verification Agent must have received all of the information it requires from you to verify you as an accredited investor, and

 

·      the Depositary must have received confirmation of your valid Cash Dividend Waiver Election via DTC’s ATOP system (if you hold your Renren ADSs in a bank, custodian or brokerage account).

   
Accredited Investor See the section entitled “Definitions of Accredited Investor and Qualified Purchaser” for the definition of “accredited investor” as such term is defined under the Securities Act.
   
ADSs American depositary shares of Renren, each representing 15 Class A ordinary shares of Renren.
   

Amended and Restated Offer Acceptance Form

The form that you must fill out to accept the Offer, attached to this Offering Circular as Annex M.

   
Cash Delivery Date The date on which the Cash Dividend will be distributed, which is expected to be on June 21, 2018.
   
Cash Dividend The cash dividend declared by Renren, to be payable to all shareholders of Renren (including holders of Class A ordinary shares represented by ADSs) as of the Record Date, which will be waived by each purchaser of OPI Shares in the Private Placement as payment for such OPI Shares.
   
Cash Dividend Waiver Election Form The form that you must fill out to waive the Cash Dividend, which is one of the requirements for accepting the Offer. There are three versions of this form, attached (as amended and restated) to this Offering Circular as Annexes N, O and P.
   
Committed Shareholders SB Pan Pacific Corporation, Joseph Chen, DCM, James Jian Liu, David Chao, Shoa-Kai Liu and Greswell Management Limited.
   
Contractual Commitment The contractual commitment by each of the Committed Shareholders to accept the Offer, to waive the Cash Dividend and not to transfer any of their Renren shares before the Share Delivery Date.
   
Depositary Citibank, N.A., the depositary for Renren’s ADR program.
   
DTC The Depository Trust Company.
   
Duff & Phelps Duff & Phelps, LLC, the independent financial advisor to the Special Committee.

 

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Eligible Shareholder A shareholder of Renren (including a holder of ADSs) as of the Record Date who satisfies all three of the following criteria: (1) the shareholder is an “accredited investor,” as such term is defined under the Securities Act, (2) the shareholder is a “qualified purchaser,” as such term is defined under the Investment Company Act, and (3) the shareholder is not a resident of an Excluded Jurisdiction.
   
Everbright Loan A loan from Clear Light Ventures Limited, an affiliate of China Everbright Group, originally incurred by Renren in connection with Renren’s purchase of 9,507,933 shares of Series F Preferred Stock of SoFi in October 2015, subsequently transferred to Renren Lianhe. The principal amount of the debt is US$59,260,000, the interest rate is 9% per year, and the original maturity date is October 22, 2018.
   
Everbright Loan Documents (i) The subscription agreement dated April 30, 2018 entered into by and among Renren, OPI, Renren Lianhe, Renren SF and Clear Light Ventures Limited, (ii) the promissory note dated April 30, 2018 issued by Renren Lianhe to Clear Light Ventures Limited, (iii) the warrant dated April 30, 2018 issued by Renren SF to Clear Light Ventures Limited, (iv) the equitable mortgage dated April 30, 2018 by and between Renren SF and Clear Light Ventures Limited, and (v) the Tripartite Deed of Subordination.
   
Excluded Jurisdictions Japan, and any other jurisdiction where the Offer would be prohibited.
   
Investments The Portfolio Companies and Funds transferred to OPI in the Separation. See “Business—Overview” and “—The Investments” and “Selected Financial Information for the Investments.”
   
Offer The offering of OPI Shares by OPI in the Private Placement pursuant to this Offering Circular.
   
OPI Oak Pacific Investment, a newly formed Cayman Islands exempted corporation, the issuer of the OPI Shares being offered in the Private Placement pursuant to this Offering Circular.
   
OPI Shareholders Agreement Agreement among OPI, SoftBank Group Capital, DCM, Mr. Joseph Chen and Mr. James Jian Liu, which will become effective upon the issuance of the ordinary shares of OPI on the Share Delivery Date, the form of which is attached to this Offering Circular as Annex B.
   
OPI Shares The ordinary shares of OPI, par value US$0.001 per share, divided into Class A ordinary shares and Class B ordinary shares.

 

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OPI Value US$500 million, being the value of OPI as established by the Special Committee for purposes of calculating the Cash Dividend. See “Background and Fairness” and “Valuation”.
   
Private Placement The offering and issuance of OPI Shares by OPI pursuant to this Offering Circular.
   
Qualified Purchaser See the section entitled “Definitions of Accredited Investor and Qualified Purchaser” for the definition of “qualified purchaser” as such term is defined under the Investment Company Act.
   
Record Date 5:00 p.m. Eastern time on June 14, 2018, being the record date for both the Private Placement and the Cash Dividend.
   
Renren Renren Inc., the 100% owner of OPI as of the date of this Offering Circular.
   
Renren Lianhe Renren Lianhe Holdings, a direct wholly-owned subsidiary of OPI as of the date of this Offering Circular.
   
Renren Lianhe Shareholders Agreement Agreement among OPI, Renren Lianhe, Mr. Joseph Chen and Mr. James Jian Liu, which will become effective upon the issuance of the ordinary shares of OPI on the Share Delivery Date, the form of which is attached to this Offering Circular as Annex C.
   
Renren Note The note issued to Renren in respect of a liability that OPI will owe Renren after the Transaction. The principal amount of the debt will be US$90,000,000, the interest rate will be 8% per year, and the term will be the earlier of five years and the date upon which OPI and its subsidiaries no longer hold any SoFi shares. See “Debts and Warrant” and Annex J for more details.
   
Renren Note Documents (i) The Renren Note, (ii) the stock pledge agreement to be entered into by and between Renren and Renren SF on or prior to the Share Delivery Date, and (iii) the Tripartite Deed of Subordination.
   
Renren SF Renren SF Holdings Inc., a direct wholly-owned subsidiary of Renren Lianhe as of the date of this Offering Circular.
   
Separation Renren’s transfer to OPI of various assets (including the Investments and the ZenZone business) and related liabilities pursuant to the Separation and Distribution Agreement attached hereto as Annex E.
   
Share Delivery Date The date on which the OPI Shares will be delivered to the Eligible Shareholders who have validly accepted the Offer, which is expected to be on June 21, 2018.

 

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SoFi Social Finance, Inc.
   
SoftBank SoftBank Group Corp., SB Pan Pacific Corporation and/or SoftBank Group Capital Limited, as applicable.
   
SoftBank Loan The loan from SoftBank to Renren Lianhe in connection with the Transaction. The principal amount of the debt will be US$60 million, the interest rate will be 8% per year, and the term will be the earlier of three years and the date upon which OPI and its subsidiaries no longer hold any SoFi shares. See “Debts and Warrant” and Annex I for more details.
   
SoftBank Loan Documents (i) The promissory note to be issued by Renren Lianhe to SoftBank on the Share Delivery Date, (ii) the stock pledge agreement to be entered into by and between SoftBank and Renren SF on the Share Delivery Date, and (iii) the Tripartite Deed of Subordination.
   
Special Committee A special committee of the board of directors of Renren, comprised of Mr. Tianruo Pu, Mr. Stephen Tappin and Ms. Hui Huang, which was formed on December 22, 2016, to evaluate the terms of the Transaction and any related or alternative transactions.
   
Transaction The Separation, the Private Placement and the Cash Dividend, and any ancillary actions, taken as a whole.
   
Tripartite Deed of Subordination The tripartite deed of subordination to be entered into by and between Clear Light Ventures Limited, SoftBank, Renren, Renren Lianhe and OPI on or prior to the Share Delivery Date. See “Debts and Warrant” and Annex K for more details.
   
Verification Agent VerifyInvestor.com

 

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Expected Timeline

 

Acceptance Deadline 5:00 p.m. Eastern time on June 8, 2018
   
Record Date 5:00 p.m. Eastern time on June 14, 2018
   
Share Delivery Date June 21, 2018
   
Cash Delivery Date June 21, 2018

  

The Special Committee may amend or modify the Transaction for any reason at any time prior to the issuance of the OPI Shares to the purchasers in the Private Placement, including by extending the Acceptance Deadline or by postponing the Share Delivery Date and/or Cash Delivery Date, and the Transaction may be cancelled for any reason at any time prior to the Share Delivery Date. If the Private Placement is cancelled, the Cash Dividend will also be cancelled.

 

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Questions and Answers

 

1.How many OPI Shares will I receive if I validly accept the Offer?

 

If you validly accept the Offer, you will receive one Class A ordinary share of OPI for each Class A ordinary share of Renren that you hold as of the Record Date with respect to which the Offer is validly accepted, including Class A ordinary shares that are represented by ADSs. Since each ADS of Renren represents 15 Class A ordinary shares of Renren, you will receive 15 Class A ordinary shares of OPI for each ADS that you hold as of the Record Date and with respect to which the Offer is validly accepted. If you validly accept the Offer, you will also receive one Class B ordinary share of OPI for each Class B ordinary share of Renren that you hold as of the Record Date with respect to which the Offer is validly accepted. However, if you would receive OPI Shares in the Private Placement that would cause you to hold more than 49.9% of the total voting power in OPI (including shares that you can obtain by the exercise of vested share incentive grants), you will receive Class A ordinary shares instead of Class B ordinary shares to the extent necessary for your voting power in OPI (including shares that you can obtain by the exercise of vested share incentive grants) not to exceed 49.9%.

 

2.What happens if I don’t validly accept the Offer?

 

You will receive the per share amount of the Cash Dividend for each ordinary share of Renren that you hold as of the Record Date with respect to which you did not validly accept the Offer. If you wish to receive the Cash Dividend, no action is required on your part.

 

3.How large will the Cash Dividend be?

 

Until the Private Placement is completed, we will not know the size of the Cash Dividend, either in the aggregate or on a per Renren share (or per Renren ADS) basis. The Cash Dividend payable per ordinary share of Renren will be equal to (1) the OPI Value of US$500 million (established by the Special Committee on April 23, 2018) divided by (2) the total number of OPI Shares issued to Eligible Shareholders in the Private Placement, rounded down to the nearest hundredth of a cent. In other words, the Cash Dividend per ordinary share of Renren outstanding on the Record Date will be equal to the OPI Value per OPI Share issued and sold in the Private Placement. Since each ADS represents 15 ordinary shares of Renren, the Cash Dividend payable per ADS of Renren will be 15 times larger, subject to the Depositary’s fees of US$0.02 per ADS held (and in respect of which the Offer is not validly accepted).

 

Based on the Contractual Commitments that Renren and OPI have received, we believe that the Cash Dividend will range from US$0.4831 per share of Renren (or US$7.2465 per ADS), if all shareholders of Renren are Eligible Shareholders and validly elect to waive the Cash Dividend in respect of all of their Renren shares and ADSs, to US$0.6096 per share of Renren (or US$9.1440 per Renren ADS), if no additional shareholders beyond those who have entered into the Contractual Commitments elect to waive the Cash Dividend in respect of any of their Renren shares or ADSs, before deducting any fees payable to the Depositary in connection with the payment of the Cash Dividend to holders of ADSs.

 

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4.Why is Renren disposing of OPI?

 

Renren was contacted by the staff of the SEC regarding the possibility that Renren could be deemed to be an “investment company” under the Investment Company Act. If Renren were deemed to be an investment company, it would be unable to register with the SEC as an investment company and meet its related U.S. disclosure obligations and its ADSs would be delisted from the NYSE, and it may become subject to SEC enforcement action, among other things. After correspondence and discussions with the SEC staff, Renren undertook to reduce the aggregate value on its balance sheet of the shares in companies that it does not control in order to ensure that it would not be deemed to be an investment company. The Private Placement is also being undertaken to unlock potential in Renren’s advertising agency business by separating it from Renren’s social networking, used automobile and other operating businesses.

 

5.Why doesn’t Renren sell its investments and distribute all the cash to its shareholders in a dividend?

 

As described more fully below in “Background and Fairness,” Renren considered this option but determined that it was not practicable. With limited exceptions, Renren’s investments are in privately held companies or investment funds that generally are not well known and do not trade on any established market. The portfolio was also assembled in part for the potential synergies that the underlying businesses offered Renren’s businesses rather than to constitute an investment portfolio that would attract potential investors. Piecemeal sales of its investments would incur high transaction costs, and there is no guarantee that Renren could have found buyers for all the individual assets at reasonable prices, or for enough of the individual assets to ensure that the Investment Company Act issue would have been resolved. Although Renren’s efforts to find a purchaser for its portfolio were unsuccessful, Renren did sell a portion of its SoFi holdings for US$91.9 million in April 2017 in a transaction that was organized by SoFi. However, Renren was unsuccessful in identifying a purchaser for its broader portfolio or additional purchasers for its SoFi shares on acceptable commercial terms (including price and size of transaction).

 

6.Why doesn’t Renren distribute its investments to its shareholders pro rata in a dividend?

 

As described in greater detail under “Background and Fairness,” Renren is a public company with a large number of shareholders, while its investments (with limited exceptions) consist of privately held companies or private investment funds. Any distribution by Renren of its investments on a pro rata basis to its shareholders (even if permitted by the related investment terms) would subject the private companies and funds to reporting obligations under the Exchange Act for which they are not prepared and which could damage the value of the investments. Also, Renren’s shareholders would receive shares of a large number of small companies which would be difficult to sell and which would require a significant investment of time and energy to manage properly.

 

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7.Why didn’t Renren incorporate OPI in the United States and register it under the Investment Company Act?

 

As described in greater detail under “Background and Fairness,” the operational, governance and other restrictions under the Investment Company Act make registering OPI as an investment company impracticable.

 

8.Will there be a shareholder meeting to approve the Transaction? Is the approval of the shareholders of Renren required for the Transaction to be carried out?

 

Under Cayman Islands law, shareholder approval is not required for the Transaction or any part thereof, and no shareholder meeting is planned. However, under the terms of Renren’s articles of association that have been in effect since Renren’s initial public offering in 2011, the consent of SoftBank Group Corp. is required to effect the Transaction. SoftBank Group Corp. is the parent company of SB Pan Pacific Corporation, Renren’s single largest shareholder by number of shares, holding approximately 42.9% of Renren’s outstanding shares by vote and approximately 39.2% by number of shares. SoftBank Group Corp. has given its consent to the Transaction.

 

9.What is the role of the Special Committee in the Transaction?

 

The Special Committee was formed by the board of directors of Renren on December 22, 2016, to evaluate the terms of the Transaction and any related or alternative transactions. The Special Committee includes two independent directors, Mr. Tianruo Pu and Mr. Stephen Tappin, and Renren’s former chief financial officer, Ms. Hui Huang. None of the members of the Special Committee has an interest in the Transaction different from the holders of Renren shares and ADSs (except for compensation received for serving as a Special Committee member, which is not contingent on the completion of the Transaction or any alternative transaction, and their indemnification rights as Renren directors). The Special Committee was given full power to hire legal and financial advisors, to conduct negotiations on behalf of Renren on the terms of the Transaction, and ultimately to approve or not approve the Transaction and any related or alternative transactions. The Transaction has been approved by the Special Committee.

 

10.How was the OPI Value determined?

 

The OPI Value (which is US$500 million) was established by the Special Committee on April 23, 2018 after considering a number of factors including (1) the various ranges for the value of OPI at the time of the Transaction as presented by Duff & Phelps during its presentation to the board of directors on April 23, 2018, (2) the anticipated financial condition of Renren after giving effect to the Transaction and (3) Renren’s current liquidity, including its cash position and projected cash position after taking into account the Transaction and anticipated cash needs (including funding potential future Renren operating losses and the planned ADS buyback in response to an anticipated drop in the trading price of Renren’s ADSs when Renren’s ADSs begin trading on an ex-dividend basis).

 

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Upon the completion of the Transaction, OPI’s assets will include (1) the Investments (including the shares of SoFi as well as other securities), (2) the ZenZone business and (3) approximately US$35 million in cash (excluding cash attributable to the ZenZone business). The Investments and the ZenZone business have been transferred to OPI by Renren as part of the Separation. The cash reflects the proceeds of the SoftBank Loan, US$25 million to be paid by OPI to Renren in connection with the Separation to help fund the Cash Dividend. Other than cash attributable to the ZenZone business, Renren will transfer no cash to OPI as part of the Transaction.

 

OPI’s liabilities include the US$59.26 million Everbright Loan, the US$60 million SoftBank Loan and the US$90 million Renren Note. In addition, the net present value of the operating expenses that OPI will incur after it becomes a stand-alone company have been estimated to be between US$5 million and US$9 million.

 

See “Background and Fairness,” “Valuation” and “Debts and Warrant.”

 

11.Is the Transaction fair to Renren’s shareholders acquiring OPI Shares in the Private Placement or receiving the Cash Dividend?

 

No determination has been or will be made with respect to the fairness of the Transaction to Eligible Shareholders who waive the Cash Dividend and elect to receive shares of OPI in the Private Placement. The Special Committee, however, has determined that the Transaction is fair to Renren’s shareholders and ADS holders who receive the Cash Dividend.

 

12.What factors did the Special Committee consider when making the fairness determination with respect to Renren shareholders receiving the Cash Dividend?

 

See “Background and Fairness” for a discussion of various factors considered by the Special Committee in reaching its determination that the Transaction is fair to the Renren shareholders and ADS holders receiving the Cash Dividend. These factors include (1) the need for Renren to timely address the risk that it might be deemed an investment company under the Investment Company Act and (2) Duff & Phelps’s opinion that the OPI Value is fair from a financial point of view to the Renren shareholders and ADS holders receiving the Cash Dividend.

 

13.How will Renren fund the Cash Dividend?

 

Renren will fund the Cash Dividend primarily from cash on hand, as well as from US$25 million in cash which OPI will transfer to Renren upon its receipt of the SoftBank Loan. Renren had US$128.8 million of cash and cash equivalents as of December 31, 2017. See “Debts and Warrant.”

 

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14.How did Renren decide which investments to include in OPI?

 

In order to effectively address the risk that Renren could be deemed to be an investment company under the Investment Company Act, Renren has transferred the minority interests that it holds in the 44 Portfolio Companies together with its interests in the 6 Funds to OPI. Renren will only retain a minority interest in another 6 entities which either have especially strong synergy with Renren in their business or which are insignificant in value and would be costly and difficult to transfer due to the way the investment was structured.

 

15.What are the U.S. federal income tax consequences to me if I don’t accept the Offer?

 

Your receipt of the Cash Dividend as a shareholder of Renren will generally be a taxable transaction to you for U.S. federal income tax purposes. As a result of Renren’s expected classification as a passive foreign investment company (a “PFIC”) for U.S. federal income tax purposes, you may be subject to an additional penalizing tax under the PFIC rules on receipt of the Cash Dividend. In addition, if Renren is classified as a PFIC, the Cash Dividend will not be eligible for the special reduced tax rate available to individuals on “qualified dividend income.” For more information, see “United States Federal Income Tax Consequences to U.S. Holders.” You should consult your tax advisor to determine the particular tax consequences to you of not accepting the Offer.

 

16.What are the U.S. federal income tax consequences to U.S. holders who accept the Offer?

 

In connection with the Private Placement, Renren expects to receive an opinion from Skadden, Arps, Slate, Meagher & Flom LLP (“Skadden”) to the effect that the transfer of OPI Shares pursuant to the Private Placement should qualify as a tax-free distribution under Section 355 of the Internal Revenue Code of 1986, as amended. Assuming that the Private Placement so qualifies, a U.S. Holder (defined below in the section entitled “United States Federal Income Tax Consequences to U.S. Holders”) who accepts the Offer will not be required, for U.S. federal income tax purposes, to recognize any gain or loss or to include any amount in income upon the receipt of OPI Shares pursuant to the Private Placement.

 

If the Private Placement does not qualify as a tax-free distribution for U.S. federal income tax purposes, the receipt by a U.S. Holder of OPI Shares pursuant to the Private Placement would generally be treated as a taxable distribution in an amount equal to the total fair market value of the OPI Shares received and may be subject to an additional penalizing tax under the PFIC rules.

 

In addition, because OPI, like Renren, is expected to be treated as a PFIC, a U.S. Holder who accepts the Offer and receives OPI Shares will be subject to the same penalizing PFIC rules with respect to its OPI Shares that apply to its Renren ADSs or ordinary shares, unless such U.S. Holder makes a qualified electing fund (“QEF”) election for the first taxable year in which the U.S. Holder owns OPI Shares and in which OPI is classified as a PFIC, as described in greater detail the section entitled “United States Federal Income Tax Consequences to U.S. Holders.” U.S. Holders who accept the Offer and make a QEF election with respect to their OPI Shares may be required to recognize income or gain for U.S. federal income tax purposes as a result of sales or distributions of assets by OPI, even if such U.S. Holders do not receive any proceeds from such sales or participate in such distributions. This may occur as a result of special distribution rights that will be granted to DCM and SoftBank with respect to their pro rata share of OPI’s SoFi shares. For more information, see “Distribution Rights.”

 

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U.S. Holders are urged to read the section entitled “United States Federal Income Tax Consequences to U.S. Holders” in its entirety and to consult their tax advisors regarding the particular tax consequences to them of accepting the Offer.

 

17.What do I need to do to accept the Offer?

 

How you accept the Offer depends in part on how you hold ADSs and/or ordinary shares of Renren that are not represented by ADSs. However, each person must fill out and timely deliver an Amended and Restated Offer Acceptance Form to accept the Offer and also fill out and timely deliver one or more Cash Dividend Waiver Election Forms to waive the Cash Dividend as payment for the OPI Shares, and each person must also complete the steps to be verified as an accredited investor. See “How To Accept The Offer” and “The Verification Process” in this Offering Circular.

 

18.How do I know if I am eligible to accept the Offer?

 

The section entitled “Definitions of Accredited Investor and Qualified Purchaser” in this Offering Circular includes the definitions of “accredited investor” under the Securities Act and “qualified purchaser” under the Investment Company Act. If you wish to accept the Offer, it is your responsibility to review these definitions in light of your own qualifications to determine whether you meet the criteria. If you can certify honestly that you are an accredited investor and a qualified purchaser and that you are not a resident of the Excluded Jurisdiction, then you will be eligible to accept the Offer.

 

19.Should I fill out more than one Cash Dividend Waiver Election Form if I hold both ordinary shares and/or ADSs of Renren in more than one way?

 

It is possible that you may have to fill out more than one Cash Dividend Waiver Election Form, depending on how you hold your shareholding in Renren.

 

·If you have ordinary shares that are recorded on Renren’s register of members, then you will need to fill out an Amended and Restated Ordinary Share Cash Dividend Waiver Election Form for those shares and send it to Renren.

 

·If you have ADSs that are recorded on the books of the Depositary, then you will need to fill out a separate Amended and Restated Non-DTC Cash Dividend Waiver Election Form for those ADSs and send it to Renren.

 

·If you have ADSs that are held in a brokerage or custodian account and cleared through DTC, then you must follow the procedures established by your broker. You will also have to fill out a separate Amended and Restated DTC Cash Dividend Waiver Election Form for each account and send each of these forms to Renren.

 

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See “How to Accept the Offer” for more details.

 

20.Should I fill out more than one Amended and Restated Offer Acceptance Form if I hold both ordinary shares and/or ADSs of Renren in more than one way?

 

Provided that you hold all of the ordinary shares and/or ADSs under the same name, you only need to fill out one Amended and Restated Offer Acceptance Form, because the Amended and Restated Offer Acceptance Form does not specify how many ordinary shares and/or ADSs in respect of which you are accepting the offer or how they are held. If there is any difference at all in the name under which you hold the ordinary shares and/or ADSs, for example the presence or absence of a middle initial, then you must fill out a separate Amended and Restated Offer Acceptance Form for each version of your name. The name on the Amended and Restated Offer Acceptance Form must be an exact match to the name under which the ordinary shares and/or ADSs are held.

 

21.What if there are multiple owners of an ordinary share or ADS of Renren?

 

If there are multiple owners of an ordinary share or ADS of Renren, then each owner must sign and send Renren his, her or its own separate Cash Dividend Waiver Election Form of the appropriate type (DTC, Non-DTC or Ordinary Share) covering those ordinary shares or ADSs and each owner must sign his, her or its own separate Amended and Restated Offer Acceptance Form. The waiver and acceptance are only valid if all owners validly complete and send Renren the required forms. If multiple owners validly accept the Offer, the OPI Shares will be registered in the names of all of the owners collectively on the register of members of OPI.

 

22.Why do I have to submit my personal financial information to accept the Offer?

 

OPI is relying on Rule 506(c) of Regulation D under Section 4(a)(2) of the Securities Act as an exemption from the registration requirements of the Securities Act for the Private Placement. In order to comply with the requirements of Rule 506(c), OPI must take reasonable steps to verify that you are an “accredited investor” under the Securities Act. Rule 506(c) lists some of the ways that OPI can verify that you are an “accredited investor,” which include reviewing tax forms, bank statements, brokerage statements and other kinds of your personal financial information. Renren has hired VerifyInvestor.com as the Verification Agent to assist in this process.

 

23.How will my OPI Shares be sent to me?

 

If you accept the Offer and become a shareholder of OPI, your name and address will be registered in OPI’s register of members on the Share Delivery Date. If you request it, either in your Amended and Restated Offer Acceptance Form or by contacting OPI separately after the Private Placement, OPI will send you a certificate showing the number of OPI Shares that you hold. However, the register of members is the official record of your shareholding. The OPI Shares will not be eligible for clearance through DTC and will not be sent to your brokerage or custodian account, even if you held your Renren shares or ADSs in a brokerage or custodian account.

 

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24.What do I have to do to elect to receive the Cash Dividend?

 

If you do not validly accept the Offer, you will receive the Cash Dividend. You do not have to take any action to elect to receive the Cash Dividend.

 

25.How will the Cash Dividend be paid to me?

 

If you hold ADSs through a broker or custodian and you do not validly waive the Cash Dividend with respect to those ADSs, you will receive the Cash Dividend through DTC, the clearing system for the ADSs in the United States, in your brokerage or custodian account. If you hold ADSs outside of DTC and you do not validly waive the Cash Dividend with respect to those ADSs, the Depositary will mail you a check at the address that is recorded for you in the Depositary’s records. If you hold ordinary shares of Renren that are not represented by ADSs and you do not validly waive the Cash Dividend with respect to those ordinary shares, Renren will mail you a check at the address that is recorded for you on Renren’s register of members.

 

26.How will I pay the fees to the Depositary?

 

The Depositary will charge ADS holders a fee for the Cash Dividend of US$0.02 per ADS held and in respect of which the Offer is not validly accepted, and a distribution fee for the OPI Shares delivered in the Private Placement of US$0.05 per ADS held and in respect of which the Offer is validly accepted. The Depositary fee payable in respect of the Cash Dividend will be deducted from the Cash Dividend at the time of distribution to ADS holders. At the time that you elect to waive the Cash Dividend, you will be asked to arrange for the payment to the Depositary, directly or via your broker or custodian, of the Depositary fee payable in respect of the OPI Shares to be delivered pursuant to the Private Placement. Failure to make timely payment of the Depositary fee in respect of the OPI Shares to be delivered pursuant to the Private Placement will result the rejection of the Cash Dividend waiver, in which case you will receive the Cash Dividend (net of the Depositary fee of US$0.02 per ADS held) rather than OPI Shares. You will not owe any fees to the Depositary in connection with either the Cash Dividend or the OPI Shares to the extent that you hold ordinary shares directly on Renren’s register of members.

 

27.Will Renren receive any proceeds from the Private Placement?

 

No. The OPI Shares will only be issued to Eligible Shareholders who waive their right to receive the Cash Dividend as payment for such shares. Neither OPI nor Renren will receive any proceeds from the Private Placement.

 

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28.What will happen to OPI after the Private Placement?

 

Following the Private Placement, OPI will be a privately held company not subject to the public company reporting requirements under the Exchange Act and not listed on any stock exchange. See “Business” for disclosure on OPI’s business and assets and the strategies that it currently plans to pursue. OPI has no plans to become a public reporting company or to become listed on any securities exchange. OPI will be structured so as to have no shareholders who are not either “qualified purchasers” or “knowledgeable employees” as these terms are defined under the Investment Company Act.

 

29.What kind of information will OPI provide to its shareholders?

 

If you validly accept the Offer and become a shareholder of OPI, you will have the right to receive information about OPI to the extent provided under Cayman Islands law and in OPI’s articles of association. The articles of association of OPI that will become effective immediately prior to the closing of the Private Placement are attached to this Offering Circular as Annex A. OPI expects to provide shareholders with annual and quarterly financial statements. OPI will send information to you at the contact information that you have provided in your Amended and Restated Offer Acceptance Form. You may contact OPI directly if you have any questions or need to take any action with respect to your shareholding in OPI.

 

30.What will happen to Renren after the Private Placement?

 

Renren intends to remain a public company listed on the NYSE after the completion of the Transaction. Renren will continue to operate its social networking, used automobile and other operating businesses.

 

31.What effect will the Transaction have on Renren’s ADS price?

 

Renren’s ADSs trade on the NYSE under the ticker symbol “RENN”. As of May 11, 2018 (the last trading date prior to the date of this Offering Circular), the closing price per ADS was US$8.78. Renren expects that trading for its ADSs will be extremely volatile, particularly given the complexity of the Transaction, the size of the OPI Value compared to Renren’s market capitalization and the uncertainty over the final amount of the Cash Dividend on a per share and per ADS basis.

 

We intend to announce the exact amount of the Cash Dividend on or about June 15, 2018, the business day immediately following the Record Date, and to pay the Cash Dividend on June 21, 2018. According to the NYSE, the ex-dividend date for NYSE trading will be June 22, 2018. The ex-dividend date is the date on which the NYSE will reset the opening trading price of the Renren ADSs to reflect the payment of the Cash Dividend. On and after the ex-dividend date, purchasers of ADSs will have no right to receive the Cash Dividend with respect to those newly purchased ADSs. The trading price for Renren’s ADSs on the ex-dividend date is expected to be much lower than the closing price on the last trading date before the ex-dividend date, to reflect the amount of the Cash Dividend.

 

To the extent that Renren’s ADSs trade below US$1.00 per ADS for an extended period of time or at or below US$0.16 per ADS for any period of time, Renren’s ADSs may be suspended from trading on the NYSE and ultimately delisted. To assist in stabilizing the ADS trading price and to address this risk, Renren has adopted a share repurchase program to be effected on the open market at prevailing market prices from time to time as market conditions warrant in accordance with the applicable requirements of Rule 10b5-1 and/or Rule 10b-18 under the Exchange Act.

 

For more information on the effect of the Transactions on Renren, including pro forma financial statements of Renren, see the report on Form 6-K filed by Renren with the SEC on May 14, 2018.

 

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Risk Factors

 

An investment in the OPI Shares involves significant risks. You should carefully consider all of the information in this Offering Circular, including the risks and uncertainties described below, before deciding whether to accept the Offer. Any of the following risks could have a material adverse effect on the business, financial condition and results of operations of OPI. In any such case, the value of the OPI Shares may decline and may reach zero.

 

Risks Relating to OPI’s Assets

 

The creditors of OPI, certain shareholders of Renren and certain employees of OPI have rights that may affect the value of the OPI Shares.

 

The Offer of OPI Shares is part of a complex, integrated series of transactions which we refer to in the aggregate as the Transaction. Renren is carrying out the Transaction primarily to avoid being deemed to be an investment company. The consent and cooperation of numerous parties is required to implement the Transaction, with OPI granting a number of rights to various parties that take precedence over the rights of other OPI shareholders. These include:

 

·Rights given to Clear Light Ventures Limited in connection with the Everbright Loan, including the right to block dispositions of Investments and distribution of cash by OPI to its shareholders, as well as the right to acquire some of the SoFi shares from OPI. See “Debts and Warrant—The Everbright Loan” and “Debts and Warrant—The Everbright Warrant”.

 

·Rights given to SoftBank in connection with the SoftBank Loan, including the right to any appreciation in value from some of the SoFi shares. See “Debts and Warrant—The SoftBank Loan”.

 

·Rights given to Renren in connection with the Renren Note. See “Debts and Warrant—The Renren Note”.

 

·Preferred shares in Renren Lianhe Holdings granted to Mr. Chen and Mr. Liu that give them a 30% surplus return from Investments other than SoFi shares, subject to a preferred return and other conditions. See “Priority of Payments”.

 

·Rights given to SoftBank, Mr. Chen and Mr. Liu with regards to appointment of directors to the board of OPI. See “Directors, Senior Management and Employees—The Board of Directors”.

 

·Rights given to SoftBank and DCM to permit them to withdraw their pro rata share of unpledged shares of SoFi from OPI at a time of their own choosing, subject to the terms of the Everbright Loan Documents, SoftBank Loan Documents and Renren Note Documents. See “Distribution Rights”.

 

·Rights given to SoftBank and DCM to prevent the officers and the board of directors of OPI from taking certain enumerated actions. See “Reserved Matters”.

 

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·The award by OPI following the Private Placement of approximately 6.3 million restricted OPI Class A ordinary shares and options to acquire approximately 136.8 million OPI Class A ordinary shares. The grants correspond to the number of incentive share grants that the recipients hold in Renren. At the time of their issuance, the majority of the OPI share options will have exercise prices that are lower than the per share value of OPI, and the exercise prices will be further reduced as OPI makes distributions to shareholders. These OPI incentive grants, which do not impact the calculation of the amount of the Cash Dividend, could significantly dilute the future value of your OPI Shares. See “Directors, Senior Management and Employees—Share Incentive Plan”.

 

These rights were not considered in determining the OPI Value but they may reduce the value of the OPI Shares to shareholders who do not enjoy these rights. In addition, any exercise of DCM’s and SoftBank’s special distributions rights, pursuant to which they can withdraw their pro rata share of unpledged SoFi shares from OPI at a time of their own choosing, may result in immediate taxable income to U.S. taxpayers who have made a “QEF election” despite the absence of any corresponding distribution to them of cash or property (see “United States Federal Income Tax Consequences to U.S. Holders.”).

 

You should carefully read the terms of these rights as described in the Offering Circular and the texts of the actual agreements which are annexed to the Offering Circular to fully understand their potential impact on the value of the OPI Shares now and in the future. Your return from an investment in OPI may be deferred or substantially reduced below your expectations by the actions of creditors, other shareholders and employees of OPI.

 

The Everbright Loan will mature on October 22, 2018, and OPI does not have sufficient cash on hand to pay the principal and interest due on that date. If OPI cannot sell sufficient assets prior to October 22, 2018, and if the lender under the Everbright Loan does not agree to extend the maturity date, you may lose some or all of the value of your OPI Shares.

 

The Everbright Loan will mature on October 22, 2018, if it is not extended by mutual agreement between the lender and OPI. The aggregate amount of principal and interest due under the Everbright Loan on that date will be approximately US$70.8 million. Upon the completion of the Private Placement, OPI will have approximately US$35 million in cash, not including working capital held in cash by the ZenZone business. In order to avoid a default on the Everbright Loan, OPI must either sell assets before the maturity date or reach an agreement with the lender to extend the maturity date of the loan. Under the terms of the Everbright Loan, the lender and OPI may agree to extend the maturity date of the loan by an additional two years, but OPI does not have to power to extend the maturity date unilaterally without the agreement of the lender. While the Investments have been valued for purposes of establishing the OPI Value at a sum much larger than the amount of money that OPI would need to raise, the Investments are generally illiquid and Renren has not had success in finding buyers for the Investments at acceptable prices in the recent past. A failure by OPI to pay the amount due on the Everbright Loan at maturity would also constitute a default under the SoftBank Loan and the Renren Note, causing those obligations to accelerate and become payable immediately. If OPI declares bankruptcy or is forced into receivership by the lenders under any or all of these loans, the Investments may be sold at prices substantially below the value at which they were valued for purposes of establishing the OPI Value, and shareholders of OPI may get little or no return on their investment in OPI. To avoid bankruptcy, OPI may have to sell some of the Investments (particularly its holdings of SoFi shares) prior to October 22, 2018, at prices which Renren previously considered unacceptable, which may substantially reduce the value of OPI and the return on an investment in OPI Shares.

 

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The OPI Value was established by the Special Committee for the purpose of determining the Cash Dividend amount; the OPI Value may prove not to be reflective of the value of OPI and its assets and there are a range of values at which the Cash Dividend could be determined to be fair from a financial point of view.

 

The Special Committee obtained the fairness opinion from its financial advisor, Duff & Phelps, to assist it in determining whether the Cash Dividend to be received in the Transaction by the Renren shareholders and ADS holders (other than the Eligible Shareholders who waive the Cash Dividend and elect to receive shares of OPI in the Private Placement) is fair from a financial point of view to such holders. No determination has been or will be made with respect to the fairness of the Transaction to Eligible Shareholders who elect to receive OPI Shares in the Private Placement.

 

The Transaction is complex and there are a range of values at which the Cash Dividend could be determined to be fair from a financial point of view to those Renren shareholders and ADS holders receiving the Cash Dividend. In addition, there are a number of legal and other non-economic factors influencing the Special Committee’s decision to proceed with the Transaction and the determination that the Transaction is fair, including (1) the need for Renren to avoid the delisting of its ADSs from the NYSE if it is determined to be an investment company, (2) the lack of what the Special Committee believed to be reasonably viable alternatives to the Transaction, (3) the consent or cooperation required from various parties (including SoftBank, Clear Light Ventures Limited and DCM) to effect the Transaction and (4) liquidity limitations on Renren’s ability to fund the Cash Dividend. See “Background and Fairness.” In addition, valuations of this type are subject to numerous assumptions, limitations and uncertainties. See “Valuation.” The historical book values recorded by Renren for its interests in the 44 Portfolio Companies, the 6 Funds and the ZenZone business, each being acquired by OPI as part of the Separation, are not necessarily indicative of their fair value. With the exception of three Portfolio Companies, neither the Portfolio Companies nor the Funds are listed or traded on any stock exchange. In addition, Renren and the Special Committee have limited access to information regarding the financial results, future prospects and financial projections by which the Portfolio Companies (including SoFi) and the Funds could be analyzed. Accordingly, the Special Committee’s determination of the OPI Value, as well as the financial advisor’s valuation methodologies and analyses relating to the Portfolio Companies and the Funds underlying its fairness opinion, relied significantly on a review of historic valuations, as opposed to typical intrinsic valuation methodologies that employ forward looking information or company-specific historical financial metrics. In addition, the Investments and the ZenZone business and their related values and success are subject to numerous risks outlined below. As a result, any of these factors individually or in the aggregate could cause the aggregate and individual fair values of the Investments to vary materially.

 

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A significant proportion of the value of OPI’s assets is comprised of shares of one company, SoFi.

 

OPI’s holdings of SoFi shares include 259,348 common shares and 34,464,634 preferred shares representing approximately 14.8% of SoFi’s outstanding shares as of December 31, 2017. These shares comprise a significant portion of the value of OPI. See “Valuation.” The value of your shareholdings in OPI will be significantly affected by any events that affect the value of SoFi, including the performance of SoFi and the performance of other companies in SoFi’s industry.

 

SoFi’s co-founder and chief executive officer Michael Cagney stepped down in 2017 to pursue other opportunities. Anthony Noto became SoFi’s new chief executive officer effective March 1, 2018. The negative publicity associated with allegations against Mr. Cagney may affect SoFi’s corporate image and reputation among its customers, which may lead to a reduction of SoFi’s revenues and operating results. In addition, the change of chief executive officer may shift important company policies and affect day-to-day management of operating businesses. These changes may have a significant impact on the value of SoFi shares and as a consequence, the value of your OPI Shares.

 

SoFi is a privately held company. Although Renren successfully sold 5,719,986 shares of SoFi for approximately US$91.9 million in net proceeds in a private tender offer in April 2017, no public market exists for SoFi shares. Renren was not able to sell additional SoFi shares at the tender offer price and there is no guarantee that OPI will be able to sell the SoFi shares in the future at the tender offer price or above.

 

SoFi is not subject to the periodic reporting or other informational requirements of the Exchange Act. As a shareholder of OPI you will not have the rights to obtain information from SoFi that a shareholder of SoFi would have. If SoFi’s financial or operating results do not meet investor expectations, or if other companies in SoFi’s industry announce disappointing financial or operating results, or if SoFi encounters any unexpected legal or regulatory difficulties, then the value of your shareholding in OPI may be materially adversely affected.

 

OPI must repay its creditors before it can distribute cash to its shareholders, and the special distribution rights granted to SoftBank and DCM shift some of the risk disproportionately onto the other shareholders of OPI.

 

Upon the closing of the Transaction, OPI and its subsidiaries will owe approximately US$218 million in principal and accrued interest for the Everbright Loan, the SoftBank Loan and the Renren Note. Any cash realized from OPI’s Investments must be used to fully repay all three loans before any cash may be distributed to shareholders of OPI (except as described in “Distribution Rights” elsewhere in this Offering Circular). Furthermore, each of these loans imposes a variety of restrictions on how OPI can manage its assets. For example, as long as the Everbright Loan is outstanding, OPI may not sell any of its Investments without the consent of Clear Light Ventures Limited unless the proceeds from the sale are sufficient to repay, and are used to repay, the Everbright Loan. Therefore, with the exception of SoFi shares that are distributed to DCM and SoftBank (or the cash proceeds thereof) pursuant to their special distribution rights, the assets of OPI will remain in OPI as collateral for or be used to satisfy the outstanding loans until the loans are paid off in their entirety. In addition, under these debt documents, OPI has promised to monetize its shares of SoFi as early as possible to repay the loans, which may limit its ability to maximize the return on its investment in the SoFi shares.

 

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If the value of the SoFi shares falls, OPI may have to pledge additional SoFi shares to secure the Everbright Loan, and the number of SoFi shares that must be sold to repay those debts may exceed the number that was used in calculating the number of shares that was distributed to DCM and SoftBank pursuant to their special dividend rights. Because DCM and SoftBank are not obligated to return any of the shares of SoFi that are distributed to them, or otherwise compensate OPI, the economic loss from a decline in the value of SoFi will fall disproportionately upon the other shareholders of OPI.

 

SoftBank will receive any gain from a portion of OPI’s shares of SoFi as consideration for the SoftBank Loan.

 

The principal amount of the SoftBank Loan will be US$60 million. Under the terms of the SoftBank Loan, OPI has agreed to pay to SoftBank any future increase in the value of SoFi shares in respect of shares deemed to have a value equal to the initial principal amount of the SoftBank Loan on the Share Delivery Date. In other words, SoftBank will benefit from any appreciation on approximately 3,491,580 shares of SoFi that are held by OPI as if it had purchased those shares from OPI on the Share Delivery Date, and you will not benefit from that appreciation, if any. However, a reduction in the value of the SoFi shares does not reduce the principal or interest amounts due under the SoftBank Loan.

 

OPI’s investments may be risky, and you could lose all or part of your investment.

 

A large proportion of OPI’s assets consist of equity securities in 44 Portfolio Companies. With only two exceptions, none of the Portfolio Companies is listed or traded on any stock exchange and for the most part their shares are highly illiquid. Subject to DCM’s and SoftBank’s special distribution rights with respect to those SoFi shares that OPI has not pledged, OPI plans to hold these equity securities until there is an opportunity to dispose of them at an attractive price, for example after the Portfolio Company has completed an initial public offering or when the Portfolio Company is acquired by another company. However, such an opportunity may not present itself. Many privately held companies go out of business without ever completing an initial public offering, and many of them are sold at unattractive valuations or simply wound up when their business fails to develop. OPI also has an aggregate of approximately US$10.5 million invested in its 6 Funds which themselves are illiquid investments in relatively risky assets, and these Funds may not generate positive returns. Accordingly, an investment in OPI may present greater risk than an investment in an investment company that invests in publicly traded securities.

 

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OPI’s investments are highly concentrated in social networking and internet finance, particularly in China and the United States.

 

The Portfolio Companies comprise a large proportion of OPI’s assets. Renren invested in these companies at least in part due to potential synergies they offer with Renren’s own social networking, internet finance and other operating businesses, and not solely or even primarily for the sake of generating financial returns from those investments. The Portfolio Companies are themselves concentrated to a large degree in social networking and internet financing, and particularly in businesses that combine social networking with internet financing. A downturn in these industries or sectors would have a larger impact on OPI than it would on an investment company whose investments are diversified into more industries or sectors of the economy. In addition, most of the Portfolio Companies do business in either China or the United States, and a downturn in the economy of either or both of these countries could have a disproportionate effect on the value of the Investments. Accordingly, an investment in OPI may present greater risk than an investment in a diversified investment company.

 

A large proportion of OPI’s assets consist of equity securities for which market quotations are not readily available, and as a result there is uncertainty regarding the value of its investments.

 

With two exceptions, the Investments are not listed or traded on any stock exchange. The book values for each Investment set forth in “Selected Financial Information for the Investments” were derived from the unaudited consolidated balance sheet data of Renren. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Investments may differ significantly from the values that would have been used had a readily available market value existed for them, and the differences could be material.

 

Because the Cash Dividend is calculated without regard for dilution to shareholding in OPI by the issuance of share incentive grants under OPI’s share incentive plan, you will experience immediate and substantial dilution if you validly accept the Offer and receive ordinary shares of OPI in the Private Placement.

 

Before the Share Delivery Date, OPI’s board of directors will approve a share incentive plan for directors, officers, employees and consultants of OPI and Renren (the “Share Incentive Plan”). The maximum number of grants permitted to be made under the Share Incentive Plan will be 136,786,121 share options and 6,284,763 restricted shares. OPI will grant all of these share options and restricted shares immediately upon the adoption of the Share Incentive Plan, on or before the Share Delivery Date. The form of OPI Share Incentive Plan is attached to this Offering Circular as Annex Q.

 

The Cash Dividend payable per Renren ordinary share will be equal to the OPI Value divided by the total number of OPI Shares issued to Eligible Shareholders in the Private Placement. Because the denominator in this calculation only includes ordinary shares of OPI that are outstanding upon the closing of the Private Placement and does not include the grants that will be made under the Share Incentive Plan, the dilution to shareholders of OPI from the incentive share grants only affects the Eligible Shareholders of Renren who validly accept the Offer and receive ordinary shares of OPI and does not affect the amount of the Cash Dividend to be received by shareholders of Renren who do not accept the Offer.

 

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At the time of their issuance, the majority of the OPI share options will have exercise prices that are lower than the per share value of OPI. Furthermore, each time that OPI distributes cash or other assets to its shareholders, other than pursuant to DCM’s and SoftBank’s right to early distributions of SoFi shares in kind, the exercise price on each outstanding OPI share option (whether vested or unvested) will be reduced on a per share basis by the per share amount of value distributed until the exercise price has reached zero. Therefore, while outstanding OPI share options will not reduce the amount of cash or other assets distributed to shareholders of OPI, the amount of cash that OPI will receive upon the eventual exercise of the share options will decrease, which will affect the value of your ordinary shares in a commensurate fashion.

 

OPI’s executive officers do not have experience managing an investment fund, and they also have full-time commitments as executive officers of Renren.

 

OPI’s chief executive officer, Mr. Chen, its chief operating officer, Mr. Liu, and its chief financial officer, Mr. Thomas Jintao Ren, each hold a corresponding position at Renren. While they were involved in overseeing Renren’s investments, including the evaluation and selection of the Investments which are now held by OPI, they have no experience operating an investment fund. The challenges of managing an investment fund differ in many ways from the challenges of managing an operating company. You may disagree with how the management of OPI chooses to manage the Investments, but under OPI’s articles of association, the board of directors of OPI will consist of one appointee of Mr. Chen, one appointee of Mr. Liu and one appointee of SoftBank, and the remaining shareholders will have no say in investment decisions or management decisions. In addition, each of Mr. Chen, Mr. Liu and Mr. Ren will continue to carry out his responsibilities as an executive officer at Renren, which may detract from the time and attention that they may devote to the management of OPI.

 

Risks Relating to ZenZone’s Business

 

OPI may use returns from the Investments to subsidize losses in the ZenZone business.

 

ZenZone has incurred net losses since 2016. ZenZone incurred net losses of US$0.1 million in 2016 and US$1.4 million in 2017, and the ZenZone business may never regain profitability. OPI intends to continue to operate the ZenZone business and has no intention to discontinue or dispose of it. Pursuant to the OPI Shareholders Agreement, the parties agree that, for at least the first six years after the Share Delivery Date, the ZenZone business will not be substantially reduced and will be maintained and actively operated by a qualifying subsidiary of Beijing Zhenzhong Interactive Information Technology Co., Ltd. (“Beijing Zhenzhong”). If the ZenZone business is not successful, OPI may need to use its working capital or returns on the Investments to keep ZenZone in operation.

 

ZenZone has a limited operating history and faces significant competition in its business. If it fails to compete effectively, OPI’s business, prospects and results of operations may be materially and adversely affected.

 

ZenZone has a limited operating history. ZenZone’s advertising agency business was only launched in 2004, and it operated as part of the internet marketing department of Renren up through December 2014. This makes it difficult to effectively assess its future prospects or forecast its future results. You should consider ZenZone’s business and prospects in light of the risks, challenges and competition that it faces in its industry. The advertising agency industry in China is fragmented and highly competitive. ZenZone’s principal competitors include other online advertising agencies, such as Hylink, Tensyn and Linksus Digiwork Marketing, as well as traditional advertising agencies, such as Ogilvy & Mather, Grey Group China and Leagas Delaney. Some of ZenZone’s competitors have longer operating histories and significantly greater financial, technical, and marketing resources and greater brand recognition than it does. Furthermore, due to restrictions under OPI’s debt documents and the OPI Shareholder Agreement, ZenZone may lack the financial resources it needs to be successful, which could ultimately have a material adverse effect on OPI’s growth and financial condition.

 

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The resignation of the chief executive officer of Beijing Zhenzhong may impair the growth prospects and performance of the ZenZone business.

 

The chief executive officer of Beijing Zhenzhong has announced his decision to resign from his responsibilities at Beijing Zhenzhong and Renren, and OPI will appoint an interim chief executive officer of Beijing Zhenzhong until a new appointment can be made. If OPI is unable to find a suitably qualified replacement, the ZenZone business may be unable to execute its business strategy effectively and its growth prospects and performance may be impaired.

 

Risks Relating to Doing Business in China

 

Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on OPI’s business and investments.

 

Substantially all of ZenZone’s operations and many of the Investments are located in China. Accordingly, OPI’s financial condition and prospects may be influenced to a significant degree by political, economic and social conditions in China generally. The Chinese 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 Chinese government has implemented measures 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 government. The Chinese government also exercises significant control over China’s economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries or companies. Furthermore, while the Chinese economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy, and the rate of growth has been slowing since 2012. Any adverse changes in economic conditions in China, in the policies of the Chinese government or in the laws and regulations in China could have a material adverse effect on OPI’s business and investments.

 

Uncertainties with respect to the PRC legal system could adversely affect the Investments.

 

New laws and regulations in China since 1979 have significantly enhanced the protections afforded to various forms of foreign investments, but these protections may still be less comprehensive than the corresponding protections in many other countries. In addition, the interpretation and enforcement of these laws and regulations involve uncertainties. A significant proportion of the Investments consists of shares in companies that are organized or have substantially all of their operations in China. Since PRC administrative and judicial authorities have significant discretion in interpreting and implementing statutory provisions and contractual terms, it may be difficult to evaluate the outcome of administrative and judicial proceedings and the level of legal protection that investors such as OPI enjoy. Furthermore, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all and may have retroactive effect. These uncertainties may affect OPI’s ability to enforce its contractual rights.

 

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Fluctuations in exchange rates could have a material and adverse effect on the value of the Investments.

 

The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions in China and by China's foreign exchange policies. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the Renminbi to the U.S. dollar, and the Renminbi 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 Renminbi and the U.S. dollar remained within a narrow band. Since June 2010, the Renminbi 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 Renminbi and the U.S. dollar in the future. ZenZone and many of the Portfolio Companies are located in China, and changes in the value of the Renminbi may have a material and adverse effect on their value as measured in U.S. dollars.

 

Risks Relating to OPI’s Structure

 

There will be no public market for OPI’s ordinary shares, and its ordinary shares will be subject to restrictions on transfer.

 

There is no public market for the OPI Shares, and there is no expectation that a liquid public market could develop for the OPI Shares. The articles of association of OPI limit shareholding to “qualified purchasers” as such term is defined under the Investment Company Act. If you wish to sell your OPI Shares in a privately negotiated transaction, the purchaser must demonstrate to OPI’s satisfaction that the purchaser is a “qualified purchaser” and an accredited investor. In addition, the articles of association of OPI restrict transfers that would cause OPI to be subject to registration under the Exchange Act. The absence of a liquid public market and the limitations on potential shareholders may make it difficult for you to find a purchaser for your OPI Shares.

 

Three shareholders of OPI have the power to nominate the directors on the board of directors, and other shareholders will have no power to change the composition of the board of directors.

 

Mr. Joseph Chen, Mr. James Jian Liu and SoftBank each have the right to nominate one director to the board of directors of OPI. Mr. Chen has the right to nominate one director to the board of directors, and he is considered to have exercised this right to appoint himself as the initial director. Mr. Liu has the right to nominate one director to the board of directors of OPI for so long as he remains an officer of OPI. SoftBank has the right to nominate one director to the board of directors of OPI for so long as it holds any shares of OPI. Furthermore, SoftBank is entitled to remove the elected directors nominated by Mr. Chen and Mr. Liu from the board, and to remove Mr. Chen and Mr. Liu from any management positions of OPI and/or its subsidiaries, and nominate replacements of its choice upon the occurrence of certain disabling conduct. See “Description of the OPI Shares—Removal of Directors” for more information. Other shareholders of OPI will have no power to change the composition of the board of directors of OPI, and as a consequence, their ability to influence the management and policies of OPI will be very limited.

 

 

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OPI’s two largest shareholders will control more than two-thirds of the voting power of OPI’s ordinary shares, which will give them the power to revise its articles of association.

 

Following the Private Placement, we expect that

 

·Mr. Joseph Chen will hold between 47.7% and 49.9% of the ordinary shares of OPI by vote and between 26.4% and 33.4% by number of shares, not including ordinary shares that he may have the right to acquire through share incentive grants, and

 

·SoftBank will hold between 42.9% and 46.1% of the ordinary shares of OPI by vote and between 39.2% and 49.4% by number of shares,

 

in each case depending on how many other shareholders of Renren choose to accept the Offer. These two shareholders have the power to appoint two of the three members of OPI’s board of directors, and if they vote together, they have to power to revise OPI’s articles of association at any time.

 

If the PRC government finds that the agreements that establish the structure for holding the majority of OPI’s investments in China do not comply with PRC governmental restrictions on foreign investment in certain businesses, or if these regulations or the interpretation of existing regulations change in the future, OPI could be subject to severe penalties or be forced to relinquish its interests in those investments.

 

Current PRC laws and regulations place certain restrictions on foreign ownership of companies that engage in certain specified types of businesses, including certain types of internet businesses as well as types of financial and banking related services.

 

OPI holds many of its investments in China through a set of contractual arrangements between its wholly-owned PRC subsidiary, Qianxiang Lianhe Technology Development (Beijing) Co., Ltd., or Qianxiang Lianhe, and its consolidated affiliated entity, Beijing Qianxiang Yixin Technology Development Co., Ltd., or Qianxiang Yixin, and Qianxiang Yixin’s shareholders. Qianxiang Yixin’s wholly-owned subsidiaries include, or Beijing Zhenzhong, which operates OPI’s ZenZone business.

 

OPI’s contractual arrangements with Qianxiang Yixin and its shareholders enable it to exercise effective control over Qianxiang Yixin and its subsidiaries, and hence OPI treats Beijing Zhenzhong as its consolidated affiliated entity and consolidates the ZenZone operation results.

 

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However, as there are substantial uncertainties regarding the interpretation and application of PRC laws and regulations, there is no assurance that the PRC government would agree that the above contractual arrangements comply with PRC licensing, registration or other regulatory requirements, with existing policies or with requirements or policies that may be adopted in the future. If the PRC government determines that OPI does not comply with applicable laws and regulations, it could revoke the operating licenses of Beijing Zhenzhong or impose additional conditions or requirements on OPI with which it may not be able to comply unless it disposes of certain of its investments in PRC.

 

ZenZone’s ability to raise funds or conduct an initial public offering may be limited by U.S. tax considerations.

 

We expect to receive an opinion from Skadden that the transfer of shares pursuant to this Offer should qualify as a tax-free distribution under Section 355 of the U.S. Internal Revenue Code. See “United States Federal Income Tax Consequences to U.S. Holders.” In order to preserve this treatment, OPI has agreed in the Separation and Distribution Agreement not to sell, distribute or otherwise dispose of the ZenZone business for a period of six years after the Share Delivery Date. The form of Separation and Distribution Agreement is included as Annex E to this Offering Circular. OPI does not intend to sell or otherwise dispose of the ZenZone business at any time in the foreseeable future. Consequently, OPI will not have complete freedom to sell ZenZone to other parties, even if OPI receives a favorable offer for it. OPI’s ability to offer shares in ZenZone to private or public investors, including in an initial public offering of ZenZone, will be limited by OPI’s obligations under the Separation and Distribution Agreement. Therefore, OPI may be unable to realize as high a rate of return on its ZenZone shares as it would if it were not subject to these restrictions.

 

Risks Relating to U.S. Federal Income Taxation

 

OPI is expected to be treated as passive foreign investment company, which could result in adverse U.S. federal income tax consequences to U.S. Holders who do not make a qualified electing fund election.

 

OPI is expected to be treated as a PFIC for the tax year that includes the Share Delivery Date. As a result, OPI Shares received by U.S. Holders pursuant to the Offer generally will continue to be treated as PFIC stock for all succeeding years during which the U.S. Holder holds such OPI Shares, unless the U.S. Holder makes a QEF election for the first taxable year in which the U.S. Holder owns OPI Shares and in which OPI is classified as a PFIC. A U.S. Holder who makes a QEF election generally must report on a current basis its share of the OPI’s net capital gain and ordinary earnings for any tax year in which OPI is a PFIC, whether or not OPI makes distributions to its shareholders. Such net capital gain may include a U.S. Holder’s proportionate share, determined based on its relative shareholding in OPI, of gain realized by OPI as result of an in-kind distribution of OPI’s equity securities in SoFi, even if such distribution is not made to the U.S. Holder, which could be substantial given that OPI’s tax basis in such equity securities for U.S. federal income tax purposes should generally be determined by reference to Renren’s tax basis in such securities prior to the Transaction. Such distributions are expected to occur shortly after the Share Delivery Date as a result of DCM’s right to request that OPI make an in-kind distribution of SoFi shares to it after such date. Similarly, at any time after the Everbright Loan has been repaid in full, SoftBank has a right to request that OPI make an in-kind distribution of SoFi shares to it. See “Distribution Rights.”

 

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Absent a QEF election, U.S. Holders would generally be subject to the same penalizing PFIC rules that currently apply to their Renren ADSs or ordinary shares. These rules, which will apply regardless of whether OPI remains a PFIC, would penalize U.S. Holders on (i) any “excess distribution” by OPI (which generally would include 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 its Renren ADSs or ordinary shares) and (ii) any gain realized on the sale or other direct or indirect disposition, including a pledge, of shares of OPI.

 

For further information concerning PFIC rules, see “United States Federal Income Tax Consequences to U.S. Holders—Passive Foreign Investment Company Considerations.”

 

The Cash Dividend and potentially the receipt of OPI Shares could result in significant tax liability to U.S. Holders.

 

As a result of Renren’s expected classification as a PFIC, U.S. Holders who do not waive the Cash Dividend may be subject to an additional penalizing tax on certain United States federal income taxes deemed deferred to the extent their receipt of the Cash Dividend is treated as an “excess distribution” under the PFIC rules (for example, if the Cash Dividend is greater than 125% of the average annual distributions paid to the U.S. Holder in the three preceding taxable years or, if shorter, the U.S. Holder’s holding period for its Renren ADSs or ordinary shares). The additional tax is generally equivalent to an interest charge on United States federal income taxes that are deemed due during the period the U.S. Holder owned the Renren ADSs or ordinary shares, computed by assuming that the excess distribution was taxed in equal portions at the highest applicable tax rate throughout the holder’s period of ownership. In addition, if Renren is classified as a PFIC, the Cash Dividend will not be eligible for the special reduced tax rate available to individuals on “qualified dividend income.”

 

In connection with the Private Placement, Renren expects to receive an opinion from Skadden, on the basis of current law and factual representations and assumptions, as well as certain undertakings made by Renren and OPI, to the effect that the transfer of OPI Shares pursuant to the Private Placement should qualify as a tax-free distribution under Section 355 of the Internal Revenue Code of 1986, as amended (the “Code”). However, no assurance can be given that the IRS will not challenge the conclusions reflected herein or in the opinion. If the IRS were to prevail in such a challenge, the tax consequences to U.S. Holders on the receipt of OPI Shares pursuant to the Offer could be significant. The assumptions, representations and undertakings on which the opinion will be based are expected to relate to, among other things, Renren’s business reasons for pursuing the Transaction, the conduct of specified business activities by Renren and OPI, and the current plans and intentions of Renren and OPI to continue conducting those business activities and not to materially modify their ownership or capital structure following the Share Delivery Date. If any of those representations or assumptions is incorrect or untrue in any material respect, or any of those undertakings is not complied with, or if the facts upon which the opinion is based are materially different from the facts that prevail on the Share Delivery Date, the conclusions reached in the opinion could be adversely affected.

 

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If the transfer of OPI Shares pursuant to the Private Placement does not qualify as a tax-free distribution, it would be treated as a taxable distribution to U.S. Holders in an amount equal to the fair market value of OPI Shares received. Such distribution could be subject to the PFIC “excess distribution” regime. See “United States Federal Income Tax Consequences to U.S. Holders.”

 

The United States federal income tax consequences of the Cash Dividend and the transfer of OPI Shares pursuant to the Private Placement are complicated and depend on your individual situation. You should consult your own tax advisor as to the specific tax consequences of the Cash Dividend and the Private Placement to you, including the effect of any U.S. federal, state or local or non-U.S. tax laws and of any changes in applicable tax laws. For further information concerning the United States federal income tax consequences of Cash Dividend and the Private Placement, see “United States Federal Income Tax Consequences to U.S. Holders.”

 

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Assets and Liabilities

 

Upon the closing of the Transaction, OPI will have three principal types of assets:

 

·Cash and cash equivalents of US$35 million, exclusive of cash held by Beijing Zhenzhong;

 

·The ZenZone business; and

 

·The Investments, which include shares (and in some cases convertible debt) in the Portfolio Companies and investments in the Funds.

 

For the balance sheet of Beijing Zhenzhong (which holds the ZenZone business) as of December 31, 2017, see “Selected Financial Information of the ZenZone Business.”

 

For a list of the Investments and their book value as of December 31, 2017, see “Selected Financial Information for the Investments.”

 

Upon the closing of the Transaction, OPI will have debts to three parties, namely Clear Light Ventures Limited, SoftBank and Renren, as well as a warrant outstanding to one party, namely Clear Light Ventures Limited. For more information see “Debts and Warrant.”

 

For a discussion of the value of OPI, see “Valuation.”

 

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Corporate Structure

 

The following diagram illustrates the principal entities in OPI’s corporate structure and its principal shareholders immediately after the completion of the Transaction:

 

 

The percentage of OPI to be held by each shareholder will depend on the number of ordinary shares of Renren held by Eligible Shareholders who validly accept the Offer and will not be known until after the Acceptance Deadline has passed. The shareholding percentages in the Investments in the offshore portfolio and the onshore portfolio vary depending upon the Portfolio Company or Fund in question. See “Selected Financial Information for the Investments.”

 

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Contractual Arrangements with OPI’s Consolidated Affiliated Entity

 

PRC laws and regulations currently restrict foreign ownership of entities that conduct certain specified types of businesses, including operating certain types of internet businesses as well as providing certain types of financial and banking related services in China. To comply with these foreign ownership restrictions, OPI’s wholly-owned subsidiary Qianxiang Lianhe has entered into a set of contractual arrangements with Qianxiang Yixin and its shareholders, which enable OPI to:

 

·exercise effective control over Qianxiang Yixin and its subsidiaries through powers of attorney and a business operations agreement;

 

·receive substantially all of the economic benefits of Qianxiang Yixin and its subsidiaries in the form of service and license fees in consideration for the technical services provided, and the intellectual property rights licensed, by Qianxiang Lianhe; and

 

·have an exclusive option to purchase all of the equity interests in Qianxiang Yixin when and to the extent permitted under PRC laws, regulations and legal procedures.

 

Qianxiang Yixin is 99% owned by Ms. Jing Yang, who is the wife of Mr. Joseph Chen, OPI’s chairman and chief executive officer, and 1% owned by Mr. James Jian Liu, OPI’s chief operating officer. Both Ms. Yang and Mr. Liu are PRC citizens.

 

Beijing Zhenzhong is a wholly-owned subsidiary of Qianxiang Yixin and the operator of the ZenZone business.

 

Qianxiang Yixin also holds all of the Investments that are incorporated or organized in the PRC, either directly or through two wholly-owned subsidiaries, Beijing Qianxiang Wanxin Technology Development Co., Ltd. and Tianjin Zhenzhong Interactive Information Technology Co., Ltd.

 

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Business

 

Overview

 

OPI was incorporated in the Cayman Islands on September 14, 2017, as a direct wholly-owned subsidiary of Renren, to serve as the vehicle for the disposition of the Investments and the ZenZone business.

 

ZenZone is an online advertising agency focusing on youth marketing in China. See “—ZenZone” below for a description of ZenZone’s history, operations and management and “Selected Financial Information of the ZenZone Business” in this Offering Circular for information about ZenZone’s financial performance and condition.

 

OPI holds investments in 44 Portfolio Companies and 6 Funds. We refer to the Portfolio Companies and the Funds collectively as the Investments. See “—The Investments” below for a description of the most significant Portfolio Companies and “Selected Financial Information for the Investments” for a complete list of the Investments and their book values. For a discussion of a range of potential fair values for OPI’s SoFi holdings and the other Investments, see “Valuation.”

 

Upon the closing of the Transaction, OPI will have cash and cash equivalents of US$35 million (exclusive of cash held by ZenZone) and will owe approximately US$218 million in principal and accrued interest for the Everbright Loan, the SoftBank Loan and the Renren Note. See “Debts and Warrant”.

 

As part of its Separation and Distribution Agreement with Renren, OPI has promised not to sell, distribute or otherwise dispose of the ZenZone business for a period of six years after the Share Delivery Date. The form of Separation and Distribution Agreement is included as Annex E to this Offering Circular. OPI does not intend to sell or otherwise dispose of the ZenZone business at any time in the foreseeable future.

 

OPI has no plans to use returns on Investments to fund the growth or operations of the ZenZone business, though returns on Investments would be available to meet any liabilities of the ZenZone business as necessary. OPI expects to fund the ZenZone business through a combination of OPI’s working capital, ZenZone’s own revenue and new third-party investments.

 

Investments. OPI will attempt to dispose of all of the Investments over an extended period of time in a way that is consistent with maximizing the returns to its shareholders. However, OPI intends to dispose of its holdings of SoFi shares as soon as possible to achieve maximum profit for the shareholders of OPI, in accordance with the terms of the OPI Shareholders Agreement.

 

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The Investments include shares (or the right to acquire shares) in 44 Portfolio Companies. None of the Portfolio Companies have a long history of business operations. Some of them have not yet begun to generate revenues. Many of them do not have an established track record of revenue growth or positive earnings. One of the Portfolio Companies is listed on the National Equities Exchange and Quotations System in China, and one is listed on the Tokyo Stock Exchange in Japan, but there is no established market for buying and selling shares of any of the other Portfolio Companies. OPI may seek to sell its shares in some of the Portfolio Companies in privately negotiated transactions. However, if OPI cannot find buyers at prices that OPI believes fairly reflect the future growth prospects of the Portfolio Companies, OPI may hold its shares in those companies in anticipation of their eventually conducting an initial public offering and becoming listed companies. In the event that they are successful, OPI may sell some of its shares in the initial public offering, depending on market conditions, or it may wait for a market in those shares to develop after the initial public offering. Some Portfolio Companies may be acquired by other companies, in which case OPI would receive the consideration that is offered by the acquiror, which may be in the form of cash or other assets, including shares of the acquiror.

 

Some Portfolio Companies may never become successful and may go out of business without OPI having realized anything on its investment in them. Even where Portfolio Companies are relatively successful in building their businesses, it still may take a number of years before OPI is able to realize a return on its investments in those Portfolio Companies. Other than the investment in SoFi, OPI intends to take a relatively long-term and patient approach to its management of the investments in the Portfolio Companies and not to dispose of them prematurely if it believes that they have long-term potential.

 

The Investments also include limited partnership interests in six Funds. OPI does not have a right to demand a return of its investments from the Funds except in accordance with the limited partnership agreement or other applicable contractual document. The Funds have terms of five to twelve years and have scheduled termination dates ranging from 2019 to 2027. OPI intends to hold its interests in the Funds until their scheduled termination and does not expect to seek an early exit from them.

 

OPI has outstanding capital commitments to some of the Funds, and in addition, it may use some of its cash to make additional investments in its Portfolio Companies, whether to increase its shareholding interest or to offset dilution of its shareholding interest. OPI may also make loans to some of its Portfolio Companies. All such investments, however, are subject to restrictions under the Everbright Loan Documents, the SoftBank Loan Documents and the Renren Note Documents, and the aggregate of such capital commitments and additional investments is limited to US$5 million pursuant to the OPI Shareholders Agreement.

 

The acquisition, disposition or restructuring of assets, including the Investments, is subject to a board approval requirement until such time as OPI has completely disposed of the SoFi investment. See “Reserved Matters”.

 

Subject to the rights of DCM and SoftBank described below, when OPI disposes of shares in Portfolio Companies or receives a return of capital and/or distribution of profits from Funds, it must use the proceeds to pay the Everbright Loan, the SoftBank Loan and the Renren Note, in that order. See “Debts and Warrant” and “Priority of Payments”. After these three debts have been completely repaid, OPI plans to distribute cash to its shareholders in the form of dividends, subject to OPI’s own cash needs (current and projected) at that time. As described above, OPI has no plans to make additional investments in funds or to make new investments in companies that are not among OPI’s current Portfolio Companies. Furthermore, OPI has no plans to use returns on Investments to fund the growth or operations of the ZenZone business. However, the board of directors of OPI has complete discretion to use any cash for any purposes allowed under OPI’s articles of association, which may include making new investments or supporting or expanding the operations of the ZenZone business.

 

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While OPI will normally hold Investments until it can realize cash from them, it may choose to distribute Investments to its shareholders pro rata in the form of a dividend, particularly in the case of assets that are relatively liquid, such as shares in Portfolio Companies that have completed their initial public offering and are listed on a stock exchange.

 

Relationship with Renren

 

Following the completion of the Transaction, Renren will no longer hold any shares of OPI. OPI will be wholly owned by purchasers in the Private Placement, including the Eligible Shareholders who have made the Contractual Commitment prior to the Transaction.

 

Immediately following the completion of the Transaction, Renren and OPI will have the same chief executive officer (Mr. Chen), the same chief operating officer (Mr. Liu) and the same chief financial officer (Mr. Thomas Jintao Ren). Certain members of Renren’s financial and legal staff will provide services to OPI under the services agreement (the “Services Agreement”) described below. The employees of OPI who manage the Investments and the officers and employees of Beijing Zhenzhong will cease to be employees of Renren following the completion of the Transaction.

 

Renren and OPI will enter into a Services Agreement, pursuant to which Renren will continue to provide the following services to OPI after the Separation:

 

·Operational support services, including but not limited to services with respect to the operation of sales and marketing, product development, customer service and general administration support services;

 

·Administrative support services, including but not limited to secretarial support, event management, conference management, and other day-to-day office support services;

 

·Legal support services, including but not limited to support services in respective of contract support services, risk control, compliance and other corporate legal matters;

 

·Human resources support services, including but not limited to recruitment, employee service center, workforce support services, employee data management, payroll and other employment-related matters;

 

·Accounting, internal control and internal audit support services; and

 

·Provision of a non-exclusive license to software and technologies that either party reasonably identifies as reasonably necessary for recipient to operate its business in the ordinary course, but are owned by the provider, to use such software and technologies for the purpose of operating recipient’s business in the ordinary course.

 

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The Services Agreement will have a term of one year. The services provided by Renren to OPI pursuant to the terms of the Services Agreement will be charged at market price on an arm’s-length basis.

 

Renren and OPI have also entered into a Separation and Distribution Agreement, which governs their relationship in the Transaction and in some respects after it. In particular, OPI releases Renren from all liabilities relating to OPI’s business and assets and from all liabilities arising from or in connection with the Separation and the Transaction, and similarly, Renren releases OPI from all liabilities relating to Renren’s remaining business and assets that have not been transferred to OPI and from all liabilities arising from or in connection with the Separation and the Transaction. In addition, OPI has undertaken for a period of six years after the Share Delivery Date not to sell, distribute, transfer or dispose of the ZenZone business, or substantially reduce the activities of that business, and to fund the ZenZone business to the extent necessary for the ZenZone business to remain solvent over that six-year period. The form of Separation and Distribution Agreement is included as Annex E to this Offering Circular.

 

In connection with the Contractual Commitments, Renren has made certain representations and warrantees to five of the seven Committed Shareholders and has agreed to indemnify three of them against certain risks.

 

ZenZone

 

Overview

 

ZenZone is an online advertising agency focusing on youth marketing in China. ZenZone has differentiated itself from traditional advertising agencies by adopting the concept of crowdsourcing in the advertising value chain, from audience insights and creative strategies to planning and execution, content generation and media publishing. ZenZone offers integrated marketing solutions for its clients by connecting brands with the young generation through its online platforms, including Fresh People, a crowdsourcing advertising platform with thousands of young advertising designers, and Youth Alliance, a youth marketing business coalition founded by Renren with other advertising agencies in 2014. In 2015, 2016 and 2017, ZenZone generated total revenues of US$10.0 million, US$5.0 million and US$5.1 million, respectively, including internet value-added services and advertising revenues, and had a net income of US$0.7 million, a net loss of US$0.1 million and a net loss of US$1.4 million, respectively.

 

Fresh People (新鲜人)

 

Fresh People is a crowdsourcing advertising platform where brand advertisers can connect with thousands of young advertising designers. Brand advertisers can initiate a bidding process for advertising campaigns or products on the platform, or sponsor advertising competitions on selected themes. Brand advertisers can also customize their marketing solutions by working with certain selected leading young advertising professionals on the platform. User-generated content from Fresh People includes graphic designs, videos and photographs, music and lyrics, copywriting, and marketing solutions.

 

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As of December 31, 2017, over 20 campaigns had been completed on Fresh People, including a package design for Durex, a karaoke poster design for Harbin Beer, and an Adidas Original marketing campaign. As of December 31, 2017, over 2,000 users had submitted their creative content on Fresh People.

 

Youth Coalition (年轻盟)

 

Youth Coalition is a youth marketing business coalition founded by Renren with other advertising agencies in 2014. The members include AdMaster, AIESEC, Nielsen China and other advertising and marketing agencies in China. Youth Coalition has held annual youth marketing campaigns since 2014, conducted marketing research and published research reports on youth marketing in China. The goal of this coalition is to uncover trends in the younger generation and create synergy for brands in order to provide integrated marketing solutions targeting the young demographic in China.

 

Major Clients

 

Since its inception in 2014, ZenZone has helped to build some of the most recognizable brands for the young population in China. It has worked with major clients across various industries, including Mengniu, Kellogg’s, vivo, Huawei, Arawana, Coca Cola, L’Oréal and Yili. As of December 31, 2017, ZenZone had worked with approximately 30 brands in China.

 

Licenses and Permits

 

The approved business scope of Beijing Zhenzhong Interactive Information Technology Co., Ltd., the company operating the ZenZone business, includes the provision of internet information, internet advertising and advertising agency services. As part of its compliance process, ZenZone applied for a value-added telecommunication service license, commonly known as an ICP license, with the Beijing Communication Administration in late 2017. However, ZenZone was informed at that time that its business does not constitute value-added telecommunications services, and thus that it does not require an ICP license. ZenZone has not changed its business scope since then and will apply for an ICP license in future if its business scope expands to include value-added telecommunications services.

 

Competition

 

The advertising agency industry in China is fragmented and highly competitive. ZenZone primarily competes with other online advertising agencies, such as Hylink, Tensyn and Linksus Digiwork Marketing, as well as traditional advertising agencies in China, such as Ogilvy & Mather, Grey Group China and Leagas Delaney. In addition, ZenZone competes with large internet companies that provide advertising services, such as Tencent.

 

Corporate History

 

ZenZone is operated by Beijing Zhenzhong Interactive Information Technology Co., Ltd., which was incorporated in December 2014 and is a wholly-owned subsidiary of one of the consolidated affiliated entities of Renren. Prior to that, the advertising agency business that is now operated by ZenZone had been operated since 2004 by the internet marketing department of Renren.

 

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Management and Employees

 

As of March 31, 2018, ZenZone had offices in Beijing, Shanghai and Guangzhou and had a total of 41 employees. The chief executive officer of Beijing Zhenzhong has announced his decision to resign from his responsibilities at Beijing Zhenzhong and Renren, and OPI will appoint an interim chief executive officer of Beijing Zhenzhong until a new appointment can be made.

 

The Investments

 

OPI’s most significant Investments are described below. For a list of all of the Investments, see “Selected Financial Information for the Investments,” and for a discussion of the range of fair value of Sofi and the other Investments as of April 23, 2018, see “Valuation.”

 

Social Finance, Inc. (“SoFi”) is a finance company that offers student loan refinancing, mortgages, mortgage loan refinancing, personal loans, parent loans and parent PLUS loan refinancing for borrowers as well as investment products and wealth management services for investors. SoFi was founded in 2011 and is based in San Francisco. The board of directors of SoFi includes David Chao, a co-founder and general partner of DCM and a member of Renren’s board of directors; David Thévenon, a partner at SoftBank Investment Advisers and SoftBank’s nominee for director of OPI; and Joseph Chen, Renren’s and OPI’s chairman and chief executive officer.

 

SoFi began its operations as a peer-to-peer lending platform focused on student loan refinancing. It matched students at elite colleges with funds raised from alumni. The government has historically been the largest provider of student loans in the United States, but it does not price discriminate based on the creditworthiness of the borrowers it serves. SoFi takes into account such factors as employment history, education background and financial history when extending credit. SoFi’s so-called “value capture model” incorporates a price discrimination method and its proprietary credit scoring algorithm, which is designed to attract creditworthy customers with lower interest rates. SoFi has now expanded its target customers beyond students to include young professionals in the early stage of their careers. It has also expanded its product offerings beyond student loans to mortgages, wealth management and life insurance.

 

SoFi has introduced the concept of social networking to its financing platform. SoFi provides a variety of personalized services to the borrowers on its platform, whom it refers to as “members,” such as career counseling and start-up mentoring. SoFi organizes social events to connect its members with each other and operates a user forum to assist members in ways that will help them to repay their loans, for example by sharing job opportunities for members.

 

SoFi does not charge an application or origination fee. SoFi generates revenues predominantly from the monthly repayments from students at the designated rate they were charged, and to a lesser extent, from fees charged to lenders on their platform. SoFi provides a user-friendly interface and a simple application process electronically on its platform. SoFi utilizes their its data analytics and algorithm to offer credit decisions in a shorter amount of time than traditional financial institutions. SoFi also offers a single platform to make repayments with the option to make them automatically.

 

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SoFi’s co-founder and chief executive officer Michael Cagney stepped down in 2017 to pursue other opportunities. Anthony Noto became SoFi’s new chief executive officer effective March 1, 2018. The negative publicity associated with allegations against Mr. Cagney may affect SoFi’s corporate image and reputation among its customers, which may lead to a reduction of SoFi’s revenues and operating results. In addition, the change of chief executive officer may shift important company policies and affect day-to-day management of operating businesses.

 

OPI currently has the right to designate one director to SoFi’s board of directors. Mr. Joseph Chen, Renren’s and OPI’s chairman and chief executive officer, is a member of SoFi’s board of directors. In addition, both SoftBank and DCM are large shareholders of SoFi with directors nominees sitting on the board of directors of SoFi.

 

LendingHome Corporation (“LendingHome”) is a mortgage marketplace lender that was founded in 2013 and is based in San Francisco. LendingHome sources creditworthy real estate professionals looking for short-term mortgages of 12 months or less to be used for purchasing and rehabilitating residential real estate properties. These mortgages are backed by the underlying value of the properties that they fund. At the same time, LendingHome serves institutional and individual investors looking for access to high-yield real estate assets. LendingHome attracts investments from institutional investors including credit funds, private equity firms, hedge funds and university endowments. In 2016, LendingHome also launched an investor platform for individuals that gives accredited investors access to a marketplace with the same short-term, high-yield real estate assets that were previously only available to its institutional investors. LendingHome’s investor platform allows individuals to browse the marketplace and select individual investments to build their own portfolio, or set criteria and diversify automatically through an auto-invest feature. OPI currently has the right to designate one of LendingHome’s seven directors. Mr. Joseph Chen, Renren’s and OPI’s chairman and chief executive officer, is a member of LendingHome’s board of directors.

 

Loadstar Capital K.K. (“Loadstar”) was founded in March 2012 and successfully completed a listing on the Tokyo Stock Exchange in September 2017. In 2014, Loadstar launched OwnersBook, crowd funding platform focused on real estate investments in Japan. OwnersBook allows numerous individual investors to invest in real estate over the internet, even with relatively small amounts of money. A portion of the income from the residential properties, office buildings, and commercial facilities invested in is then returned as dividends. Loadstar opens up real estate investment, which had been regarded as a preserve of professionals and the wealthy, to ordinary people and investors in Japan. OwnersBook also provides social networking service functions, enabling close communication and sharing of information and experience among individual investors.

 

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Eall Technology Limited and Eall (Tianjin) Network Technology Co., Ltd. (collectively, “Eall”) is the largest dedicated enterprise resource planning provider for real estate agencies in China, headquartered in Tianjin. Founded in 2004, Eall provides state-of-the-art verticalized solutions in information provision, data insights, ERP solution suites, systems integration, and other services to real estate companies. With IT services as its core, Eall is a scalable and comprehensive solutions provider for its partners across the entire real estate ecosystem, including developers, brokers, agents, sellers, and consumers. Eall Technology Limited completed a restructuring in 2016, transferring most of its operating business to a new onshore China entity, Eall (Tianjin) Network Technology Co., Ltd. Renren’s initial investment was in the offshore entity, Eall Technology Limited, prior to its restructuring. As of March 31, 2018, Renren holds a 20.4% equity interest in Eall. OPI currently has the right to designate one director to Eall Technology Limited’s board of directors. Mr. Joseph Chen, Renren’s and OPI’s chairman and chief executive officer, is a member of Eall Technology Limited’s board of directors.

 

Rise Companies Corp. (“Rise”) operates Fundrise, which is a direct-to-investor alternative investment model with a mission to deliver better overall, stable returns by using a vertically integrated web-based technology platform and new regulations to allow retail investors to invest in real estate. Rise has originated more than US$250 million in both equity and debt investments deployed across more than approximately US$1.4 billion of real estate property, while collecting and processing more than 230,000 investor dividends, distributions, investments and principal re-payments since it sponsored its first online investment in 2012. Rise files semi-annual reports with the SEC under Regulation A and these reports and other information may be found on the SEC’s Edgar system. OPI currently has the right to designate one director to Rise’s board of directors. Mr. Joseph Chen, Renren’s and OPI’s chairman and chief executive officer, is a member of Rise’s board of directors.

 

Omni Prime Inc. (“Omni Prime”) is a financial technology company in China that focuses on installment plan loan and micro loan services for young blue collar workers in China’s third- and fourth-tier cities who lack credit cards or sufficient credit. When a user of Omni Prime’s Paymax mobile phone app walks into a participating store, the app alerts both the user and the store salesperson about the availability of credit for that user for products in that store. The app is thus somewhat like having a virtual credit card loaded on a mobile phone that is keyed to participating stores and their products. Omni Prime was founded in 2014 and is headquartered in Shanghai. OPI currently has the right to designate one director to Omni Prime’s board of directors. Mr. Joseph Chen, Renren’s and OPI’s chairman and chief executive officer, is a member of Omni Prime’s board of directors.

 

Aspiration Partners LLC (“Aspiration”) is a socially conscious and eco-friendly online financial firm that offers retail banking and investing services in the United States. Aspiration trusts customers to pay what they think is fair, donates 10% of all its revenue to microloans and mentoring for low-income Americans, and makes it easy for customers to give to the charitable cause of their choice. Aspiration was founded in 2014 in Los Angeles, California.

 

Snowball Finance Inc. (“Snowball”) is an internet financial information service provider that is focused on investment solutions. Snowball’s investment and communication platform xueqiu.com provides investors with cross-market and cross-species data query, newsletter subscriptions, and interactive communication services. Snowball delivers business and market news, data, analysis and reports on bonds, trusts and funds in the U.S., Hong Kong, and Chinese finance markets. In addition, Snowball has developed a broker system that allows members to buy and sell stocks on its website and apps. Snowball was founded in 2010 and is headquartered in Beijing. OPI currently has the right to designate one director to Snowball’s board of directors. Mr. Joseph Chen, Renren’s and OPI’s chairman and chief executive officer, is a member of Snowball’s board of directors.

 

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Selected Financial Information of the ZenZone Business

 

The following summary consolidated statement of operations data for the years ended December 31, 2015, 2016, and 2017, is derived from the unaudited consolidated statement of operations of Beijing Zhenzhong Interactive Information Technology Co., Ltd.

 

Summary Consolidated Statement of 

Year ended December 31,

 
Operations Data  2015   2016   2017 
   (US$ thousands) 
Revenue:               
Advertising   7,463    1,057    119 
Others   2,510    3,895    4,987 
Total revenue   9,973    4,952    5,106 
Total cost of revenue   1,971    1,669    3,820 
Gross profit   8,002    3,283    1,286 
Operating expenses:               
Selling and marketing   5,323    3,152    2,424 
Research and development       1    18 
General and administrative   922    315    332 
Total operating expenses   6,245    3,468    2,774 
Gain (loss) from operations   1,757    (185)   (1,488)
Other (loss) income   (104)       11 
Interest income   22    84    38 
Income (loss) before provision for income tax   1,675    (101)   (1,439)
Income tax expense   942         
Net income (loss)   733    (101)   (1,439)

 

 

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The following summary consolidated balance sheet data as of December 31, 2015, 2016 and 2017, is derived from the unaudited consolidated balance sheet of Beijing Zhenzhong Interactive Information Technology Co., Ltd.

 

  

As of December 31, 

 
Summary Consolidated Balance Sheet Data  2015   2016   2017 
   (US$ thousands) 
ASSETS               
Cash and cash equivalents   3,656    3,954    2,955 
Accounts receivable, net   2,600    1,434    162 
Prepaid expenses and other current assets   760    84    1,469 
Amounts due from related parties   252    214    1,298 
Total current assets   7,268    5,686    5,884 
Property and equipment, net   22    2    16 
Other non-current assets   62        22 
Total non-current assets   84    2    38 
TOTAL ASSETS   7,352    5,688    5,922 
LIABILITIES AND EQUITY (DEFICIT)               
Accounts payable   1,094    283    951 
Accrued expenses and other current liabilities   1,503    1,005    1,805 
Amounts due to related parties   15    29    15 
Deferred revenue and advance from customers   33    64    56 
Income tax payable   929    867    925 
Total current liabilities   3,574    2,248    3,752 
TOTAL LIABILITIES   3,574    2,248    3,752 
Additional paid-in capital   3,087    3,087    3,087 
Accumulated earnings (deficit)   733    632    (807)
Cumulative translation adjustments   (42)   (279)   (110)
Total shareholder's equity (deficit)   3,778    3,440    2,170 
TOTAL EQUITY (DEFICIT)   3,778    3,440    2,170 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   7,352    5,688    5,922 

 

 

 49 

 

 

Selected Financial Information for the Investments

 

As of the date of this Offering Circular, OPI holds interests in the following entities. Ownership is given on a fully diluted basis. Book value is given as of December 31, 2017. The book value is derived from the unaudited consolidated balance sheet data of Renren. The book value of the Investments does not necessarily represent the fair value, and such historical results are not necessarily indicative of OPI’s financial position expected for any future periods. For a discussion of a range of fair values of these investments as of April 23, 2018, see “Valuation”.

 

Name of Investee  Ownership(1)   Book Value 
   (%)   (US$ millions) 
11.2 Capital I, L.P.   Fund     1.31 
268V Limited   20.00    12.21 
Arbor Venture Fund I, L.P.    Fund     1.56 
Aspiration Partners LLC   8.63    7.00 
AutoGo Inc.   17.72    7.40 
BacklotCars, Inc.   20.07    1.93 
Beijing Cai Qiu Shi Ji Technology Development Co., Ltd.   15.00    4.63 
Beijing Da Zhang Fang Internet Technology Co., Ltd.   4.90    2.92 
Beijing Qingting Technology Development Co., Ltd.   31.77     
Beijing Wan Men Education Technology Co., Ltd.   29.40    2.62 
Beijing Yi Rong De Li Internet Technology Co., Ltd.   20.00     
BlueBoard Inc.    Debt     1.50 
Business Connect China Company    5.76 + Debt     4.74 
Credit Shop, Incorporated   35.30     
Crystal Company   25.73    11.75 
Domeyard, LP   15.92     
Eall Technology Limited   20.40    2.89 
Eall (Tianjin) Network Technology Co., Ltd.   20.40    18.46 
Effective Space Solution Ltd.   38.03     
Eunke Technology Ltd.   19.29    13.44 
Exchange Corporation Holdings Limited   1.12    0.21 
FiscalNote, Inc.   7.45    7.52 
Future Capital Discovery Fund I, L.P.    Fund     1.60 
Gaoxue Internet Technology (Shanghai) Co., Ltd.   30.00     
GoGo Tech Holdings Limited   10.48    11.13 
Green Visor Capital I, LP    Fund     2.00 
IDC Investdotcom Holdings Limited   29.16     
KoolRay Vision Inc.   39.06     
LendingHome Corporation   11.22    65.84 
Loadstar Capital K.K.   36.56    14.50 
Mei Li Chuan Shuo Co., Ltd.   7.50    0.27 
Motif Investing, Inc.   9.98    5.47 
Omni Prime Inc.   10.64    27.64 
Rise Companies Corp.   26.37    12.27 
Shanghai Sinceme Networking and Technology Co. Ltd   5.00    3.14 
Shenzhen Jinfuzi Internet Technology Co., Ltd.   25.98    14.27 
Shenzhen Piao Ju Bao Financial Services Co., Ltd.   11.43    5.27 
Shenzhen Xing Tu Zhi Kong Technology Co., Ltd.   18.67    5.66 
Shiftgig, Inc.   9.14    9.00 
Singulariteam Fund II L.P.    Fund     3.12 
Sirin SARL   4.63     
Snowball Finance Inc   20.58    26.07 
Social Finance, Inc.(2)   13.06    208.69 
Social Leverage Capital Fund II, L.P.    Fund     0.84 
Stocktwits, Inc.   2.79    0.30 
StoreDot Ltd.   4.78    10.00 
Talech Inc.   14.79    1.20 
WiseBanyan Holdings, Inc.   19.85     
XtalPi International Inc.   8.55    0.25 
Zhu Chao Holdings Company Limited   35.36     
TOTAL        530.62 

 

_____________

Notes:
(1)Ownership percentages are not given for investment funds or for investments which consist of convertible debt.
(2)Certain of the SoFi shares have been pledged to secure obligations of OPI, and part of any appreciation in their value will be paid to other parties and will not benefit the shareholders of OPI in general. See “Debts and Warrant” for more details.

 

 50 

 

 

Debts and Warrant

 

Upon the closing of the Transaction, OPI and its subsidiaries will owe approximately US$218 million in principal and accrued interest for the Everbright Loan, the SoftBank Loan and the Renren Note. We refer to these obligations in the aggregate as the “Debt”. Renren SF also has issued the Everbright Warrant to Clear Light Ventures Limited in connection with the Everbright Loan. OPI plans to repay this debt as soon as practicable with the proceeds from the sales of assets. The subordination and priority arrangements relating to the debt are described in brief below and set out in full in the Tripartite Deed of Subordination, the complete text of which is included herein as Annex K.

 

The Everbright Loan

 

In connection with its purchase of 9,507,933 shares of Series F Preferred Stock of SoFi in October 2015, Renren borrowed US$59,260,000 from Clear Light Ventures Limited, an affiliate of China Everbright Group. This debt has been transferred to Renren Lianhe together with the transfer to Renren SF of the SoFi shares that secured it (such debt, as transferred to Renren Lianhe, the “Everbright Loan”).

 

The Everbright Loan is governed by a Senior Secured Promissory Note between Renren Lianhe and Clear Light Ventures Limited dated April 30, 2018. The principal amount of the debt is US$59,260,000, the interest rate is 9% per year, and the original maturity date is October 22, 2018. The Everbright Loan is senior to the SoftBank Loan and the Renren Note.

 

The original interest rate under the debt incurred by Renren in October 2015 was 6% per annum. Under the Senior Secured Promissory Note, the interest rate on the debt between October 22, 2015, and the issue date of the Senior Secured Promissory Note is deemed retroactively to be 6%. If Renren Lianhe repays the Everbright Loan on or before the date falling three months after the issue date of the Senior Secured Promissory Note, the interest rate between the issue date of the Senior Secured Promissory Note and the date of repayment will be 6% rather than 9%. In the event that the Everbright Warrant is not exercised on or before October 22, 2020, additional interest will be payable such that the total interest payable on the Everbright Loan from October 22, 2015 to October 22, 2020 would be equal to an internal rate of return on the Everbright Loan of 10% per annum. The interest rate increases to 20% in the event of a default for the duration of that default. In the event that Renren Lianhe wishes to repay all or part of the Everbright Loan before the maturity date, the total interest payable from October 22, 2015 to the repayment date on the portion of the principal subject to repayment would be equal to an internal rate of return on the Everbright Loan of 10% per annum and OPI must reimburse the holders of the Everbright Loan for certain break costs.

 

Under certain conditions and by the mutual agreement of Renren Lianhe and Clear Light Ventures Limited, the maturity date may be extended to October 22, 2020.

 

 51 

 

 

As security for its obligations under the Everbright Loan and the Everbright Warrant, Renren SF has executed an equitable mortgage in favor of Clear Light Ventures Limited over 7,512,535 shares of Series F Preferred Stock of SoFi. At an assumed valuation of US$15.7763 per share, which was the price paid by Renren when it purchased the Series F Preferred Stock of SoFi in October 2015, this represents 200% of the value of the principal amount of US$59,260,000. Under certain conditions where an updated valuation of SoFi can be established, for example in the event of a private placement or public offering by SoFi, Renren SF must execute an additional mortgage over a proportionately greater number of shares of SoFi if and to the extent that the updated valuation of SoFi falls below US$3.2 billion. Once the Everbright Loan is repaid, Clear Light Ventures Limited will retain security over 1,690,321 shares of Series F Preferred Stock, which is the number of shares which Renren SF may have to deliver if required under the Everbright Warrant. OPI has provided a guarantee to Clear Light Ventures Limited in respect of all amounts owing under the Everbright Loan Documents.

 

While the Everbright Loan is outstanding, except with the prior written approval of the holders of a majority of the Everbright Loan, OPI and its subsidiaries may not:

 

·enter into any transaction not at arm’s length;

 

·make any loans other than (i) to OPI (with certain limitations) or to a subsidiary of OPI or (ii) a loan or loans approved by the board of directors of OPI, the total principal amount of which does not exceed US$25 million;

 

·assume any debt other than the Everbright Loan, the SoftBank Loan and the Renren Note;

 

·in relation to OPI, Renren Lianhe and Renren SF only, assume any obligation to pay money that ranks or would rank senior to or pari passu with their respective obligations under the Everbright Loan;

 

·enter into any business other than the ZenZone business as currently operated in the PRC or the business of passive investment management;

 

·create or agree to create or permit to subsist any encumbrance over or in respect of any Investments, OPI or any subsidiaries of OPI, save pursuant to the Everbright Loan Documents, SoftBank Loan Documents or Renren Note Documents;

 

·pay any dividends in cash or distribute any assets to its shareholders; or

 

·dispose of any Investments unless (i) the net proceeds of such disposal are applied in repayment in full of the Everbright Loan or (ii) the net proceeds are applied in repayment in part of the Everbright Loan and the holders of a majority of the Everbright Loan have given prior written approval of the consideration for such disposal.

 

The complete text of the Senior Secured Promissory Note is included herein as Annex G.

 

The Everbright Warrant

 

In connection with the incurrence of the original debt incurred by Renren to Clear Light Ventures Limited in October 2015, Renren granted Clear Light Ventures Limited the option to purchase shares of Series F Preferred Stock of SoFi. Renren SF has granted a similar right to Clear Light Ventures Limited in connection with the transfer of the Series F Preferred Stock of SoFi from Renren to Renren SF (the “Everbright Warrant”).

 

 52 

 

 

The Everbright Warrant is governed by a warrant agreement dated April 30, 2018, between Renren SF and Clear Light Ventures Limited.

 

Clear Light Ventures Limited has the right under the warrant agreement to purchase 1,690,321 shares of Series F Preferred Stock of SoFi at a price of US$15.7763 per share, subject to customary anti-dilution provisions, any time up to and including October 22, 2020. These 1,690,321 shares represent 22.5% of the number of shares of Series F Preferred Stock that Renren purchased in 2015 with the proceeds from the loan that was the predecessor to the Everbright Loan. For as long as this right is still outstanding, Renren SF must retain at least 1,690,321 shares of Series F Preferred Stock in its possession and free from encumbrance.

 

Clear Light Ventures Limited may elect:

 

·to purchase the 1,690,321 shares of Series F Preferred Stock from OPI at a price of US$15.7763 per share,

 

·to receive the value of the 1,690,321 shares of Series F Preferred Stock in the form of cash to the extent that the value exceeds US$15.7763 per share, or

 

·to receive the value of the 1,690,321 shares of Series F Preferred Stock in the form of shares of Series F Preferred Stock to the extent that the value exceeds US$15.7763 per share.

 

The complete text of the warrant agreement is included herein as Annex H.

 

The SoftBank Loan

 

As part of the reorganization in preparation for the Transaction, Renren Lianhe has secured a commitment from SoftBank Group Capital Limited to provide a loan to OPI (the “SoftBank Loan”). Prior to the completion of the Transaction, OPI will declare a dividend of US$25 million to Renren payable from the proceeds of this loan, in order to ensure that Renren has sufficient funds to pay the Cash Dividend if few shareholders other than those who have made the Contractual Commitment choose to accept the Offer. Renren Lianhe will use the remainder of the proceeds from the SoftBank loan for general working capital purposes or for a loan or loans approved by the board of directors of OPI the total principal amount of which does not exceed US$25 million.

 

The SoftBank Loan will be governed by a Secured Promissory Note between Renren Lianhe and SoftBank Group Capital Limited. The principal amount of the debt will be US$60 million, the interest rate will be 8% per year, and the term will be the earlier of three years and the date upon which OPI and its subsidiaries no longer hold any SoFi shares. The interest rate increases to 9% in the event of a default for the duration of that default. The SoftBank Loan is subordinated to the Everbright Loan and senior to the Renren Note.

 

 53 

 

 

If Renren Lianhe receives any net proceeds from the disposition of shares of SoFi, it must first apply them to repaying the Everbright Loan. If any net proceeds still remain, they must be applied to repaying the SoftBank Loan. While the principal amount of the SoftBank Loan is fixed, the amount by which any repayment of the SoftBank Loan reduces the outstanding principal amount of the debt is reduced to the extent that the price per share at which OPI disposed of the shares of SoFi exceeds US$17.1842 per share. That is, the amount by which the outstanding principal amount of the SoftBank Loan is reduced is equal to the amount of the net proceeds multiplied by US$17.1842 and divided by the price per share at which OPI disposed of the shares of SoFi, if the price per share was greater than US$17.1842. For example, if OPI disposes of 100,000 shares of SoFi for net proceeds of US$2,000,000, then the per share value is US$20.00, and if OPI applies the entire US$2,000,000 to the repayment of the principal amount of the SoftBank Loan, then the principal amount of the SoftBank Loan is reduced by only US$1,718,422 (because US$2,000,000 × 17.1842/20 = US$1,718,422), not by the full amount of the US$2,000,000 repaid by OPI in this hypothetical. The effect of this is to transfer all of the value of the appreciation of approximately 3,491,580 shares of SoFi above US$17.1842 to SoftBank. If OPI disposes of any shares of SoFi for net proceeds of less than US$17.1842 per share, then the principal amount of the SoftBank Loan is only reduced by the amount of the net proceeds that are applied to the repayment of it. Payments of interest are not affected by the value of the SoFi shares.

 

If the SoftBank Loan matures and there is no simultaneous disposal of SoFi shares, then their value is deemed to be their value in the last round of equity financing conducted by SoFi before the maturity date, or if SoFi is listed on a stock exchange at that time, the trading price on that stock exchange, and the principal reduction formula is applied using that value.

 

As security for its obligations under the SoftBank Loan, Renren SF will execute a stock pledge agreement in favor of SoftBank Group Capital Limited over certain shares of preferred stock in SoFi. On the Share Delivery Date, this security will be over 11,823,338 shares of preferred stock in SoFi. After the Everbright Loan is repaid, this security will be over 14,238,847 shares of preferred stock in SoFi. Renren will have second ranking security over these same shares.

 

Under the Secured Promissory Note, Renren Lianhe and its subsidiaries are obliged, among other things:

 

·to manage the SoFi shares with a view to monetizing them as soon as practicable;

 

·not to assume any debt other than the Everbright Loan, the SoftBank Loan, the Renren Note and loans between OPI and its subsidiaries;

 

·not to enter into any business other than those businesses in which it is engaged on the date of the Secured Promissory Note or which are reasonably related to those businesses; and

 

·not to enter into material transactions with SoFi, Renren, DCM, Mr. Chen, Mr. Liu, or any of their respective affiliates other than as expressly permitted.

 

The complete text of the Secured Promissory Note is included herein as Annex I.

 

 54 

 

 

The Renren Note

 

As part of the reorganization in preparation for the Transaction, OPI incurred a debt to Renren. No cash was advanced by Renren in connection with this debt, which reduces the net value of the assets being transferred from Renren to OPI while still transferring substantially all of the Investments to OPI.

 

OPI’s obligation to Renren will be governed by a Secured Promissory Note between OPI and Renren (the “Renren Note”). The principal amount of the debt will be US$90,000,000, the interest rate is 8% per year, and the term is the earlier of five years and the date upon which OPI and its subsidiaries no longer hold any SoFi shares. The interest rate increases to 13% in the event of a default for the duration of that default. The Renren Note is subordinated to the Everbright Loan and the SoftBank Loan.

 

Under the Renren Note, OPI has undertaken, among other things:

 

·to manage the SoFi shares with a view to monetizing them as soon as practicable;

 

·not to assume any debt other than the Everbright Loan, the SoftBank Loan and debt between OPI and its subsidiaries;

 

·not to enter into any business, directly or indirectly, which is in direct competition with any business of Renren;

 

·not to enter into material transactions with SoFi, Clear Light Ventures Limited, SoftBank Group Capital Limited, DCM, Mr. Chao, Mr. Chen, Mr. Liu, or any of their respective affiliates other than as expressly permitted; and

 

·at any time when the aggregate value of all SoFi shares held by OPI and its subsidiaries is less than US$150 million, not to directly or indirectly make any investment other than investments expressly permitted.

 

As security for its obligations under the Renren Note, Renren SF will execute a stock pledge agreement in favor of Renren over certain shares of preferred stock in SoFi. On the Share Delivery Date, this security will be over 16,262,185 shares of preferred stock in SoFi. After the Everbright Loan is repaid, this security will be over 14,238,847 shares of preferred stock in SoFi. After the SoftBank Loan is repaid, this security will be over 10,638,395 shares of preferred stock in SoFi. Until the Everbright Loan and the SoftBank Loan are repaid, Renren’s security in each case is not first ranking and is subordinated to both Clear Light Ventures Limited and SoftBank Group Capital Limited.

 

The complete text of the Renren Note is included herein as Annex J.

 

 55 

 

 

Distribution Rights

 

DCM and SoftBank, two of the Committed Shareholders who will hold OPI Shares after the Transaction, will have the right to receive special distributions of SoFi shares in cash or in kind, in respect of their OPI Shares, either before or at the same time when OPI otherwise disposes of SoFi shares and pays cash dividends to its shareholders from the proceeds. By exercising this right, DCM and SoftBank will waive their right to receive the corresponding portion of any distributions relating to the SoFi shares made by OPI on the same or at a later date. The terms of this right are described below.

 

OPI currently holds 34,723,982 SoFi shares. At any time on or after the Share Delivery Date, DCM has the right to request that OPI make an in-kind distribution of 1,283,710 SoFi shares, or approximately 3.7% of the total, to DCM. At any time after the Everbright Loan has been repaid in full, SoftBank has the right to request that OPI make an in-kind distribution of 5,918,366 SoFi shares, or approximately 17.0% of the total, to SoftBank. In addition, Mr. Chen has the right under the OPI Shareholders Agreement to request a special distribution of SoFi shares for himself at the same time when SoftBank receives its first distribution of SoFi shares, if and solely to the extent that the distribution to DCM and/or SoftBank causes him additional tax liability.

 

After the SoftBank Loan has been repaid in full, OPI will promptly make an additional distribution to DCM and/or SoftBank to the extent that such shareholder’s shareholding percentage in OPI on a fully diluted basis, multiplied by the sum of (i) the number of SoFi shares held by OPI that remain unpledged at that time and (ii) the number of SoFi shares sold by OPI to repay the Debt, exceeds the number of SoFi shares previously distributed to such shareholder. DCM and SoftBank each have the right to elect to receive this distribution in the form of the cash proceeds from the sale of the SoFi shares to which they are entitled.

 

As soon as practicable after the Renren Note has been repaid in full, OPI will distribute SoFi shares (or cash proceeds derived from the sale of SoFi shares) to all of its shareholders other than DCM and SoftBank until the number of SoFi shares (whether in kind or in the form of cash proceeds) received by them on a pro rata basis is equal to the number of SoFi shares previously distributed to DCM and SoftBank in accordance with the above on a pro rata basis. In other words, DCM and SoftBank will not be entitled to further distributions of SoFi shares until all other shareholders have received a pro rata allotment of distributable SoFi shares proportionately equal to the allotment of SoFi shares already distributed to DCM and SoftBank. The same would hold true for Mr. Chen, if Mr. Chen previously received distributions of SoFi shares as well.

 

After all of the above distributions have been completed and all shareholders are caught up with each other, OPI will distribute any remaining SoFi shares or the cash proceeds from the sale thereof, other than 1,690,321 SoFi shares that are pledged in relation to the Everbright Warrant, as soon as practicable to all of its shareholders (including DCM and SoftBank) on a pro rata basis.

 

 56 

 

 

Pursuant to the terms of the SoftBank Loan and the Renren Note and the terms of the OPI Shareholders Agreement, OPI intends to manage its holdings of SoFi shares with a view to monetizing them as soon as possible to achieve maximum profit for the shareholders of OPI, and it will promptly distribute to the shareholders all net proceeds in respect of the SoFi shares that are not used to meet OPI’s or Renren Lianhe’s obligations under the Everbright Loan, the SoftBank Loan and the Renren Note.

 

OPI will only distribute SoFi shares to shareholders other than DCM, SoftBank and Mr. Chen if SoFi is a public company listed on a stock exchange.

 

The exercise of the special distribution rights described above may subject U.S. Holders who have made a “QEF election” to U.S. tax liability, even if they do not receive any cash or property as a result of the exercise of such rights. See “United States Federal Income Tax Consequences to U.S. Holders.”

 

 57 

 

 

Priority of Payments

 

OPI intends to take a relatively long-term and patient approach to its management of the investments in the Portfolio Companies and not to dispose of them prematurely if it believes that they have long-term potential. However, OPI does intend to dispose of its holdings of SoFi shares as soon as possible to achieve maximum profit for the shareholders of OPI, in accordance with the terms of the OPI Shareholders Agreement.

 

Your right as a shareholder of OPI to receive dividends from OPI is subject to the terms of the Everbright Loan, the SoftBank Loan and the Renren Note, as well as to provisions in the articles of association of OPI that give certain shareholders special distribution rights. See “Debts and Warrant” and “Distribution Rights”. In addition, as explained in greater detail below, Mr. Chen and Mr. Liu will receive a 30% surplus return from Investments other than the SoFi shares, subject to certain restrictions and conditions.

 

Until the Everbright Loan, the SoftBank Loan and the Renren Note have been fully repaid, all proceeds from Investments will be paid to OPI in the form of a dividend, and subject to the rights described in “Distribution Rights,” OPI must use the proceeds in the following sequence:

 

·The proceeds must be used to repay 100% of any amounts up to the remaining balance of the principal amount of the Everbright Loan, plus any accrued or contingent and unpaid interest, to Clear Light Ventures Limited in satisfaction of the Everbright Loan; then,

 

·the remaining proceeds must be used to repay 100% of any amounts up to the remaining balance of the principal amount of the SoftBank Loan, plus any accrued and unpaid interest, to SoftBank in satisfaction of the SoftBank Loan; then,

 

·the remaining proceeds must be used to repay 100% of any amounts up to the remaining balance of the principal amount of the Renren Note, plus any accrued and unpaid interest, to Renren in satisfaction of the Renren Note.

 

After the Everbright Loan, the SoftBank Loan and the Renren Note have been fully repaid, all proceeds from the disposition of shares of SoFi will still be paid to OPI in the form of a dividend, and OPI must distribute these proceeds to its own shareholders on a pro rata basis according to the percentage of shares of OPI that these shareholders hold. To the extent that DCM, SoftBank or Mr. Chen received distributions of SoFi shares and/or proceeds from the disposition of SoFi shares prior to the repayment in full of the Renren Note, further proceeds from the disposition of SoFi shares will first be distributed to other shareholders in accordance with the “catch up” mechanism described in “Distribution Rights”.

 

After the Everbright Loan, the SoftBank Loan and the Renren Note have been fully repaid, all proceeds from Investments other than shares of SoFi will be used by Renren Lianhe in the following manner and in the following sequence:

 

 58 

 

 

·The proceeds will be distributed to OPI (as the sole holder of ordinary shares of Renren Lianhe) until the aggregate amounts received by OPI under this provision are equal to the aggregate basis of the ordinary shares of Renren Lianhe; then,

 

·the remaining proceeds will be distributed to OPI (as the sole holder of ordinary shares of Renren Lianhe) until the aggregate amounts received by OPI under this provision are sufficient to provide a cumulative and annually compounding preferred return of 5% per annum on the aggregate basis of the ordinary shares of Renren Lianhe as of the time of the distribution; then,

 

·the remaining proceeds will be distributed 20% to Mr. Chen as the holder of the Class A1 Preference Share and 10% to Mr. Liu as the holder of the Class A2 Preference Share, as a surplus return, and the remainder will be distributed to OPI (as the sole holder of ordinary shares of Renren Lianhe).

 

The “aggregate basis” of the ordinary shares of Renren Lianhe for these purposes is US$385 million. This represents the portion of the OPI Value that is attributable to the Investments other than the SoFi shares. The aggregate basis will also be increased by a fraction of all expenses incurred by Renren Lianhe or any subsidiary of Renren Lianhe not directly attributable to any Investment, where the numerator of the fraction is the aggregate basis of all of the Investments aside from SoFi and the denominator of the fraction is the aggregate basis of all of the Investments including SoFi.

 

The surplus return to Mr. Chen and Mr. Liu may be instead paid to OPI (as the sole holder of ordinary shares of Renren Lianhe) in certain circumstances, which include insolvency of Mr. Chen or Mr. Liu, fraud or gross negligence committed by Mr. Chen, Mr. Liu or their representatives, the disposal of a majority of the preference shares owned by Mr. Chen or Mr. Liu, and any material breach by Mr. Chen or Mr. Liu under any of the memorandum and articles of association of OPI, the OPI Shareholders Agreement, the Renren Lianhe Shareholders Agreement or the Services Agreement. Under these circumstances, the amount due would be paid to OPI rather than to Mr. Chen or Mr. Liu, as the case may be.

 

The surplus return to Mr. Chen and Mr. Liu is also subject to a clawback provision. On the third anniversary of the signing of the Renren Lianhe Shareholders Agreement and every three years thereafter, or at commencement of the winding-up and dissolution of OPI, if the actual amount previously received by Mr. Chen and Mr. Liu was more than it should have been, then Mr. Chen and Mr. Liu must promptly return such excess amount to Renren Lianhe. For instance, if OPI is sued or required to pay additional taxes after it has distributed the 30% surplus return to Mr. Chen and Mr. Liu, the calculation will change and the correct amount of the proceeds surplus return will be smaller.

 

Any clawback amounts will be considered reductions of the amount of the surplus return distributed to Mr. Chen and Mr. Liu with respect to Renren Lianhe as well as an increase in the amount of proceeds that otherwise has been distributed.

 

Each of the parties to the Renren Lianhe Shareholders Agreement will exercise all rights and powers available to it to procure that all proceeds received by any subsidiary of any kind in respect of any Investment are distributed by such subsidiary to its shareholders in line with the terms of the Renren Lianhe Shareholders Agreement as soon as reasonably practicable after receipt.

 

 59 

 

 

Reserved Matters

 

OPI’s articles of association place a number of significant restrictions on the discretion of the officers and board.

 

Certain matters are defined as “Board Reserved Matters” in OPI’s articles of association. Each director and each shareholder of OPI must exercise all powers and rights available to it to ensure that OPI does not undertake any of the Board Reserved Matters without the authorization of the board of directors of OPI. Until OPI has disposed of each shareholder’s pro rata share in SoFi and has completed the distribution of the proceeds of such disposal (or in-kind distribution of OPI’s equity securities in SoFi) to all shareholders to the satisfaction of SoftBank and DCM in their sole discretion, then the prior unanimous approval of the board of directors is necessary; otherwise, the prior approval of a majority of the directors then in office is required.

 

The Board Reserved Matters consist of the following:

 

(a)any acquisition, disposition or restructuring of assets (including in respect of the SoFi shares);

 

(b)the incurrence of any capital expenditure in excess of US$1 million, in a single transaction or a series of related transactions in any 12-month period;

 

(c)the provision of any loans or guarantees in excess of US$1 million, in a single transaction or a series of related transactions in any 12-month period;

 

(d)the incurrence of any debt or guarantees in excess of US$1 million, in a single transaction or a series of related transactions in any 12-month period, other than the loans obtained by the Company under the SoftBank Loan Documents and the Renren Note Documents;

 

(e)any votes to be exercised either at the board or shareholder level by OPI or any subsidiary in respect of any Portfolio Company or Fund as long as OPI’s or the relevant subsidiary’s investment in such Portfolio Company or Fund represents at least 20% of the total assets of OPI;

 

(f)any change to the distribution policy, accounting policies, valuation policy, leverage policy, risk management policies and other similar policies applicable to OPI or any subsidiary;

 

(g)the approval of OPI’s annual financial statements;

 

(h)the appointment of, and changes to the terms applicable to, significant service providers including without limitation Renren (as service provider under the Services Agreement), the auditors, tax advisors and appraisers;

 

 60 

 

 

(i)the entry into any foreign exchange contracts, interest rate swaps or other derivative instruments in excess of US$1 million, in a single transaction or a series of related transactions in any 12-month period;

 

(j)any direct or indirect transfer of shares or other equity securities (including the creation of any encumbrance or other transfer of any rights and interests or the granting of any economic participation therein) by the management;

 

(k)the initiation, withdrawal or settlement of any proceedings, except where such proceedings are not material to OPI or any of its investments, such proceedings do not involve any shareholder of OPI or of any of the Portfolio Companies or Funds, and the amount in dispute is not over US$1 million;

 

(l)any change to the composition of the senior management of OPI or their terms of employment including compensation such as grants to management under any equity incentive or compensation plan other than the adjustment of exercise price in connection with dividends and other distributions;

 

(m)any material change in the nature or scope of the business of OPI;

 

(n)any proposed listing of equity securities of OPI on any securities exchange;

 

(o)the entry into any agreement that restricts OPI or any subsidiary’s freedom to conduct its business, including with respect to its ability to freely dispose of any of its assets;

 

(p)the entry into or amendment of any other material contract including any agreement that is outside the ordinary course, not on an arm’s length basis, unusual or onerous, or contemplated to have income or payments in excess of US$1 million in the aggregate, in a single transaction or a series of related transactions in any 12-month period;

 

(q)other than (i) the security to be granted to SoftBank Group Capital Limited under the SoftBank Loan Documents and to Renren under the Renren Note Documents, (ii) any transfer of SoFi Shares pursuant to any exercise of the Everbright Warrant, (iii) any exercise by DCM of its special distribution rights with respect to SoFi shares, and (iv) any exercise by SoftBank of its special distribution rights with respect to SoFi shares, any matter or decision which relates to OPI’s investment in SoFi;

 

(r)any grant of an award, or modification of an award previously granted, pursuant to the Share Incentive Plan;

 

(s)the amendment of the memorandum and articles of association of OPI, the OPI Shareholders Agreement, the Renren Lianhe Shareholders Agreement or the Services Agreement; and

 

(t)any agreement to do any of the foregoing.

 

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However, any matter which is within the scope of the ZenZone Business shall not be a Board Reserved Matter as long as such matter does not relate to, require any action by, or otherwise affect, OPI, any subsidiary other than subsidiaries of Beijing Zhenzhong, or any Portfolio Company or Fund.

 

Certain matters are defined as “Member Reserved Matters” in OPI’s articles of association. Without the prior approval of 75% of the votes of all of the outstanding OPI Shares (or otherwise as specified in connection with the particular Member Reserved Matter), the board of directors of OPI has no authority over Member Reserved Matters and the shareholders of OPI cannot approve them. In addition, if any member of the SoftBank Group has an interest in any action that is a Member Reserved Matter and its interest is different and more favorable than the interests of the other shareholders (solely in their capacities as shareholders of OPI), then such Member Reserved Matter shall also require the prior written approval of DCM.

 

The Member Reserved Matters consist of the following:

 

(a)the adoption of, amendment of, or deviations from, the annual business plan and budget of OPI’s business;

 

(b)any merger, spinoff or any form of recapitalization, reorganization, liquidation or dissolution;

 

(c)the declaration or payment of any dividend or any other distributions in any form (except as expressly contemplated in the OPI Shareholders Agreement in respect of OPI’s investment in SoFi);

 

(d)any alteration to share capital or rights attaching to shares or the shares of any subsidiary;

 

(e)the creation, allotment, issue, repurchase or redemption of any shares or the grant of any options for the issue of any shares or issue any securities convertible into shares, except in accordance with the OPI Shareholders Agreement;

 

(f)the adoption or variation of any share option scheme;

 

(g)the creation of or permission to create or suffer to subsist any mortgage, pledge, charge or other encumbrance or third party interest on any assets;

 

(h)any change to the size, composition or compensation of the board of directors or the board of directors of any subsidiary or the delegation of any powers by the board of directors or the board of directors of any subsidiary;

 

(i)any amendment or modification of the articles or other governing documents;

 

(j)the entry by OPI, any subsidiary, any Portfolio Company or Fund or any of their respective affiliates into material transactions with SoftBank, Renren Lianhe, DCM, each of Mr. Chen and Mr. Liu or their respective affiliates;

 

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(k)any incurrence of, modification of terms of, extension of any maturity or prepayment of material indebtedness;

 

(l)any approval by OPI of any direct or indirect sale, pledge, encumbrance, assignment, transfer or other disposal of any shares of Renren Lianhe held by Mr. Chen and Mr. Liu;

 

(m)any change to the composition of senior management or other terms of employment, including compensation such as grants to management under any equity or compensation plan other than the adjustment of exercise price as allowed under the Share Incentive Plan;

 

(n)any approval by OPI of the grant of any salary or consulting fees to any employee or service provider in excess of US$500,000; and

 

(o)any agreement to do any of the foregoing.

 

In the case of a material transaction covered under item (j), any shareholders interested in the proposed transaction are not entitled to vote, and the approval required is the prior written approval from shareholders holding no less than 75% of all votes attached to all shares held by the remaining shareholders, except to the extent such transactions are contemplated under the memorandum and articles of association of OPI, the OPI Shareholders Agreement, the Renren Lianhe Shareholders Agreement or the Services Agreement.

 

Any matter which is within the scope of the ZenZone Business shall not be a Member Reserved Matter as long as such matter does not relate to, require any action by, or otherwise affect, OPI, any subsidiary other than subsidiaries of Beijing Zhenzhong, or any Portfolio Company or Fund.

 

Any Member Reserved Matter which is also a Board Reserved Matter only requires the consent of the shareholders as a Member Reserved Matter and does not also require the approval of the directors as a Board Reserved Matter.

 

The full text of the provisions governing the Board Reserved Matters and Member Reserved Matters may be found in OPI’s articles of association, which is included as Annex A to this Offering Circular. Substantially identical provisions are also included in the OPI Shareholders Agreement, which is included as Annex B to this Offering Circular.

 

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Background and Fairness 

 

Background

 

Renren is pursuing the Transaction primarily for two reasons: to address the risk that it could be deemed to be an “investment company” as defined under the Investment Company Act by disposing of most of its investment assets through the complete disposition of OPI, and to separate its ZenZone advertising agency business from its social media, internet finance and other businesses.

 

Starting in 2012, Renren began to make a series of long-term investments in privately held companies that it believed offered synergies or access to resources and know-how that would be useful to Renren in developing its own business operations, particularly in its internet finance business. Renren focused its major strategic investments in several segments of the internet finance business, including student loans and credit financing, real estate and mortgage services, and wealth management and investment brokerage services. Renren also made long-term investments in companies with other businesses. By December 2015, Renren had made long-term investments in some 55 unconsolidated subsidiaries and investment funds.

 

The Division of Investment Management of the SEC sent a letter to Renren dated December 18, 2015, asking Renren to provide a detailed written response analyzing whether it was an investment company under the Investment Company Act, and further, if Renren determined that it was an investment company, to explain why it was not required to register as an investment company or else what action it planned to take either to fall outside of that definition or to register as an investment company.

 

If Renren were deemed to be an investment company under the Investment Company Act, it would be out of compliance with its public company disclosure obligations in the United States and subject to a wide range of materially adverse consequences, including enforcement action by the SEC and delisting from the NYSE. A foreign private issuer like Renren cannot register as an investment company under the Investment Company Act without a special exemption, and the restrictions placed on investment companies by the Investment Company Act make it impractical to attempt to operate an active business within an investment company. After a long process of discussion with the staff of the Division of Investment Management, Renren undertook to dispose of enough of its assets that might be deemed to be investment securities under the Investment Company Act so as to ensure that any such remaining assets would not constitute more than 40% of Renren’s total remaining assets by value, as the relevant percentage would be calculated for purposes of the Investment Company Act.

 

Renren has given careful thought and consideration to how it might carry out the necessary disposition of assets in a way that protect shareholder value and ensure compliance with U.S. securities laws. Renren considered a number of alternatives before determining that the Transaction described in this Offering Circular would be the best means of achieving those ends.

 

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Renren considered placing its investment securities in a U.S. entity, registering that entity as an investment company and then distributing the entity’s shares to Renren’s shareholders, but it concluded that this was not a viable option either. Registered investment companies typically hold a portfolio of liquid, publicly traded securities with easily ascertainable value, unlike Renren’s minority investments in privately held unlisted companies. The Portfolio Companies were chosen in large part based on potential synergies with Renren’s other businesses rather than to constitute an investment portfolio that would attract potential investors. Most of the Portfolio Companies are still relatively unknown and have not yet generated substantial interest in the investment community. Renren judged that there were limited prospects for listing such an entity on a stock exchange or for generating sufficient trading volume to provide liquidity for investors. In addition, various operating, investment and transactional restrictions placed on registered investment companies under the Investment Company Act would have posed significant challenges to operating an entity with assets more similar to those of a private equity fund than a classic investment company. With registration of an investment company not an option, Renren was required to explore other options to successfully reduce its holdings of securities in compliance with applicable U.S. securities and investment company laws and on an efficient and economically acceptable basis.

 

Distributing Renren’s holdings in Portfolio Companies and Funds directly to Renren’s own shareholders on a pro rata basis was never a practical option. Since Renren is a public reporting company in the United States with a large number of retail investors as shareholders, distributing Renren’s holdings to those shareholders on a pro rata basis would cause each of the Portfolio Companies and Funds to become subject to the reporting requirements of the Exchange Act, simply by virtue of being held by so many shareholders. Assuming that such a distribution were even permitted under the terms of Renren’s various investments, this would damage the value of the investments in the Portfolio Companies. Most of the Portfolio Companies are unprepared and unequipped to comply with public company requirements. Some of them lack investor relations functions or even the ability to communicate effectively with shareholders in English. For each of Renren’s retail shareholders to separately manage a portfolio of small numbers of unlisted shares of some forty or fifty private companies would be extremely inefficient, and ultimately most of the value in the investments would be lost.

 

Renren made efforts to sell all or a majority of its holdings in a package deal on acceptable economic and other terms, but was unsuccessful. As mentioned above, the Portfolio Companies were chosen in large part based on potential synergies with Renren’s other businesses rather than to constitute an investment portfolio that would attract one or more purchasers. A company with a significantly different geographic and industry focus than Renren’s could not expect to achieve the same synergies and would not place the same value on the investment portfolio as a whole. The size of the investment portfolio meant that relatively few potential purchasers had the resources to contemplate a purchase on that scale. In addition, any potential purchaser would need to devote a great deal of time and effort to performing due diligence on a large number of not very well known early-stage private companies before making an offer, which posed a significant barrier to attracting interest in the investment portfolio. There was simply no serious interest from any party in purchasing a significant portion of Renren’s investments in a single transaction on reasonable terms.

 

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Renren’s SoFi holdings constitute, by value, its largest single investment, as well as the asset with the greatest potential to attract interest from potential purchasers. In April 2017, Renren was able to sell a portion of its SoFi holdings for approximately US$91.9 million in net cash proceeds in a third-party private tender offer. The tender offer was undertaken as part of SoFi’s last round of equity financing, with the new investors acquiring both newly issued shares from SoFi and existing shares from SoFi’s existing shareholders and SoFi’s management in the tender offer. Subsequent efforts by Renren to sell additional SoFi shares on acceptable terms have been unsuccessful. When approached by Renren, neither the new investors in SoFi’s last financing round nor SoftBank, which is both Renren’s and SoFi’s largest shareholder, expressed an interest in acquiring additional SoFi shares on terms comparable to the tender offer or otherwise. In September 2017, Renren received a preliminary verbal proposal from a potential investor to acquire a large block of SoFi shares at a 45% to 50% discount to the per share price paid in SoFi’s last financing round. Discussions did not proceed after the prospective investor indicated that its internal approval processes would take up to three months.

 

Given the difficulty in finding a purchaser at a reasonable price for even the most well known investment, Renren concluded that it would be very unlikely to find buyers for the lesser known investments. Without the ability to package the less well known securities together with the SoFi shares, the prospects of realizing any significant return on the other Portfolio Companies and Funds within a short period of time and under forced sale conditions appeared remote. However, selling the SoFi shares without selling the other investments in Portfolio Companies and Funds would not have reduced the percentage of problematic assets on Renren’s balance sheet below the 40% threshold required by the Investment Company Act, due to the number and value of Renren’s other investments in Portfolio Companies and Funds. Therefore, Renren concluded that attempting to sell its holdings piecemeal would not have solved the Investment Company Act issue while likely precluding other potential solutions to the issue.

 

Having considered and rejected a number of alternatives, Renren concentrated its efforts on developing a plan to remove most of the investments in Portfolio Companies and Funds from its balance sheet in a single transaction, while allowing as many of Renren’s shareholders as possible to continue to have an economic interest in those assets, subject to restrictions imposed by U.S. securities laws.

 

In December 2016, Renren announced an initial plan to minimize its Investment Company Act concerns by a proposed spin-off through a rights distribution to all its existing shareholders on a pro rata basis where such rights would be exercisable for shares in a newly formed subsidiary. These rights would have allowed Renren’s shareholders that were both “qualified purchasers” under the Investment Company Act and “accredited investors” under the Securities Act to elect to receive either shares of the new subsidiary or a cash dividend based on the value of those subsidiary shares. Renren’s non-qualified shareholders or qualified shareholders not electing to receive subsidiary shares would receive the cash dividend. To help fund payment of the cash dividend, the Renren board considered a preliminary non-binding proposal from Mr. Joseph Chen, Mr. James Jian Liu and SoftBank Group Capital Limited, each a Company affiliate, to purchase for cash those subsidiary shares not distributed to Renren’s shareholders. This plan was the direct predecessor to the current plan for the Transaction.

 

To consider this plan and alternatives to this plan, the Renren board formed the Special Committee on December 22, 2016. The Special Committee is comprised of three directors who have no interest in the Transaction different from the holders of Renren shares and ADSs (except for compensation received for serving as a Special Committee member and their indemnification rights as Renren directors). Two Special Committee members, Mr. Tianruo Pu and Mr. Stephen Tappin, are independent directors who were appointed to the Renren board before the formation of the Special Committee. The third member is Renren’s former chief financial officer, Ms. Hui Huang. Mr. Pu is the chair of the Special Committee. The compensation payable to Special Committee members for their services is US$12,000 per month, or US$15,000 per month for the Special Committee chair. These payments are not contingent upon completion of the Transaction or any alternative transaction.

 

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The decision to create the Special Committee was informed by a number of potential conflicts among members of Renren’s board of directors. Mr. Joseph Chen, Renren’s founder, chairman and chief executive officer, serves on the SoFi board of directors and will continue to serve in his current Renren roles and as an OPI senior management member after the completion of the Transaction. Mr. James Jian Liu, Renren’s executive director and chief operating officer, will continue to serve in his current Renren roles and as an OPI senior management member after the Transaction as well. Mr. David Chao, a co-founder and partner of DCM, also serves on the SoFi board, with DCM also being one of Renren’s and SoFi’s largest shareholders. Finally, SoftBank, through an affiliate, is one of Renren’s and SoFi’s largest shareholders, although SoftBank has had no representation on Renren’s board since December 2015.

 

The Special Committee was given full power to hire legal and financial advisors, to conduct negotiations on behalf of Renren, and ultimately to approve or not approve the Transaction and any related or alternative transactions, subject in each case to SoftBank’s existing consent rights under Renren’s articles of association. To assist it, the Special Committee retained Duff & Phelps as its financial advisor, O’Melveny & Myers as its U.S. counsel and Harneys as its Cayman counsel.

 

Renren’s initial plan has been modified and delayed since the December 2016 announcement. The initial plan was modified to replace the rights offering with the Private Placement. This modification and the related delay occurred after the SEC took the view that the rights offering would not be exempt from registration under the Securities Act, and the issue of Renren’s status under the Investment Company Act would have precluded Renren from registering the rights offering with the SEC. The plan was further delayed in the fall of 2017 after Renren determined it was prudent to postpone the launch of the Transaction until after the New York Department of Financial Services approved the transfer of Renren’s SoFi shares to OPI in connection with the plan. This approval is required because SoFi holds a mortgage banker license in New York State, and approval by the state regulator is required whenever there is a change in control. This approval was received in late March 2018. In addition, the sale of approximately US$91.9 million of SoFi shares in April 2017 also made it possible to eliminate any subsidiary share cash purchases by Renren’s affiliates. This modified plan, which is the form of the Transaction described in this Offering Circular, was presented to the Special Committee on April 23, 2018.

 

Fairness to Cash Dividend Recipients

 

On April 23, 2018, the Special Committee approved the Transaction and determined that the Cash Dividend to be received by the Renren shareholders and ADS holders in the Transaction is fair from a financial point of view to such holders. As purchasers of OPI Shares in the Private Placement are provided an opportunity to purchase OPI Shares on the basis of the information contained in this Offering Circular, no opinion as to fairness is being made with respect to any purchase in the Private Placement.

 

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In addition to factors described above, other factors considered by the Special Committee, which are not listed in order of importance, included the following:

 

·A considerable period of time has passed since the SEC first contacted Renren about its status under the Investment Company Act, and Renren needs to implement a plan as soon as possible to address the risks associated with it potentially being deemed an “investment company”, including the risk that Renren would be unable to meet its public company reporting obligation and that its ADSs would be delisted from the NYSE.

 

·Separating the ZenZone business from Renren’s social networking, used automobile and other operating businesses is expected to benefit the development of the ZenZone business.

 

·Renren shareholders not acquiring OPI Shares in the Private Placement (i) will receive the Cash Dividend in amount equal to the OPI Value per OPI Share issued and sold in the Private Placement and (ii) will no longer participate in potential future gains or losses in the value of OPI’s assets or its business prospects. As of the date of this Offering Circular, Renren estimates that Renren shareholders not receiving OPI Shares will receive a Cash Dividend ranging from US$0.4831 to US$0.6096 per Renren share (or US$7.2465 to US$9.1440 per ADS). The actual dollar amount of the Cash Dividend depends on the participation rate by Eligible Shareholders in the Private Placement and will be calculated by dividing (A) the OPI Value (as established by the Special Committee on April 23, 2018) by (B) the number of OPI Shares issued in the Private Placement (such formula being the “Dividend Calculation Formula”). Eligible Shareholders holding 820,273,132 ordinary shares of Renren, or approximately 79.3% of Renren’s outstanding shares as of the date of this Offering Circular, have already entered into Contractual Commitments to receive OPI Shares in exchange for waiving the Cash Dividend on all of the Renren ordinary shares that they hold on the Record Date.

 

·The OPI Value was established by the Special Committee on April 23, 2018, at US$500 million, after considering a number of factors. These factors include (1) the various ranges for the value of OPI (including ranges of value or indicated values for the related components) as of April 23, 2018 and as presented by Duff & Phelps during its presentation to the board of directors on April 23, 2018 (as described below under “Valuation”), (2) the financial condition of Renren after giving effect to the Transaction and (3) Renren’s current liquidity, including its cash position and projected cash position after taking into account the Transaction and anticipated cash needs. Renren’s anticipated cash needs include funding potential future Renren operating losses and funding the ADS repurchase program in response to an anticipated drop in the trading price of Renren’s ADSs after the ex-dividend date. The OPI Value is intended to reflect the value of OPI’s assets and liabilities as of April 23, 2018 giving effect to the Transaction but does not reflect, among other things, post-Transaction events or the impact of OPI’s post-Transaction ownership structure and compensation arrangements.

 

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·The Special Committee determined it was not feasible to structure the Transaction to permit Renren shareholders receiving the Cash Dividend to separately participate in the future appreciation in OPI’s assets and business. Among other things, such participation raises U.S. securities law (including Investment Company Act) concerns, would provide a unilateral benefit to those shareholders (because the Cash Dividend recipients would share in potential upside without sharing in potential losses) and was not supported by SoftBank.

 

·The Special Committee received a fairness opinion in the form attached as Annex L, indicating that the Cash Dividend to be received by the Renren shareholders and ADS holders (other than the Eligible Shareholders who waive the Cash Dividend and elect to receive shares of OPI in the Private Placement) in the Transaction is fair from a financial point of view to such holders.

 

  · The estimated range of the per ADS Cash Dividend represents a significant percentage of Renren’s historical NYSE trading prices (on a closing price basis). During 2017, Renren’s ADSs traded as low as US$6.02 and as high as US$11.45, with an implied market capitalization of US$412 million and US$784 million, respectively. In early January 2018, trading was extremely volatile, reflecting market rumors around Renren’s businesses unrelated to the Portfolio Companies, the Funds or ZenZone. Renren’s ADSs reached a per ADS closing price of US$18.32 on January 3, 2018. Since February 1, 2018, through the date of this Offering Circular, Renren’s ADSs have closed as low as US$8.23 and as high as US$10.38, and closed at US$10.19 per ADS on April 20, 2018 (the last trading day prior to the determination of the OIP Value), with an implied market capitalization of US$703 million.

  

·It is more practical and efficient for Renren to address its Investment Company Act concerns at one time through the Transaction, for the reasons discussed above under “—Background.”

 

·Based on Renren’s ADS trading price of US$10.18 on April 16, 2018 and total debt of US$171 million as of September 30, 2017, the implied value for all of Renren’s non-cash assets was US$632 million, which is less than the US$676 million low end in the value of ranges for OPI’s assets considered by the Special Committee in setting the OPI Value.

 

·The operational, governance and other restrictions under the Investment Company Act make registering either Renren or OPI as an “investment company” impracticable, particularly given the nature of its largest shareholders. These restrictions include (i) limitations on transactions with affiliated parties and (ii) restrictions on compensation arrangements customary for investment entities whose underlying investments consist of illiquid, minority interest investments requiring significant investment manager effort to foster success at the operating company level.

 

·In evaluating OPI’s two viable Investment Company Act exemptions following the Transaction, the unlimited number of qualified Renren shareholders that might acquire OPI Shares (so long as they are qualified purchasers or OPI knowledgeable employees) under one exemption compared favorably to the “100 holder” limitation under the other exemption.

 

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·Mr. Joseph Chen, Mr. James Jian Liu and Mr. Thomas Jintao Ren will serve as OPI’s management after the Transaction and will also continue to serve as Renren’s senior management.

 

·The consent of SoftBank is required under the terms of Renren’s articles of association to consummate the Transaction.

 

·Renren’s indebtedness for borrowed money will be reduced as a result of the Transaction due to OPI’s assumption of the Everbright Loan. In addition, OPI’s expected repayment of the Renren Note (which will have a principal amount of US$90 million) on or before June 2023 will provide Renren with additional resources for the future growth of its business.

 

·The transfer of shares pursuant to the Private Placement should qualify as a tax-free distribution under Section 355 of the Code.

 

As described elsewhere in this Offering Circular, the Committed Shareholders (including SoftBank, whose consent is required to effect the Transaction) have approved or implemented a number of arrangements with respect to the governance and management of OPI that will take effect on the Share Distribution Date. These include:

 

·Replicating Renren’s Class A and Class B dual class voting structure at OPI. Assuming no issuance of OPI Shares other than pursuant to the Contractual Commitments, OPI’s management and SoftBank would control 46.42% and 42.15%, respectively, of OPI’s voting power. See “Description of the OPI Shares”.

 

·Mr. Chen, Mr. Liu and SoftBank Group Corp. having the right to nominate one director each to OPI’s board of directors consisting of three members, with such right being personal to them without regard to their OPI shareholding levels. As a result, OPI’s other shareholders will have no power to change the composition of OPI’s board. See “Description of the OPI Shares—The Board of Directors of OPI”.

 

·SoftBank loaning US$60 million to OPI pursuant to the SoftBank Loan, with OPI in turn paying US$25 million to Renren in conjunction with the asset transfer. The cash to be paid by OPI to Renren will fund part of the Cash Dividend. Under the terms of the loan, among other things, SoftBank is entitled to participate in specified appreciation in the value a portion of the SoFi shares pledged to SoftBank as collateral. See “Debts and Warrant—The SoftBank Loan.”

 

·The ability of DCM and SoftBank to require that OPI distribute to them (or sell on their behalf) their respective pro rata shares of all of those SoFi shares that OPI has not pledged. DCM’s right is unconditional, while SoftBank’s right is subject to certain conditions, primarily repayment in full of the Everbright Loan. See “Debts and Warrant—The SoftBank Loan.”

 

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·OPI compensation arrangements. Mr. Chen, Mr. Liu and Mr. Ren will receive compensation for serving as officers of OPI after the Share Distribution Date, which will take the form of (i) the issuance of OPI options in an amount equivalent to their current Renren option holdings and (ii) subject to certain conditions, payment of a carried interest in respect of post-Transaction appreciation on OPI’s non-SoFi investments. See “Directors, Senior Management and Employees—Compensation” and “—Share Incentive Plan.”

 

Given the integrated nature of the various transactions, some of these arrangements required or may require Renren board or Special Committee approval to implement ahead of the closing of the Transaction. However, the Special Committee did not generally evaluate the fairness of these post-Transactions arrangements and no determination as to the fairness of the Private Placement to the recipients of the OPI Shares in the Private Placement was made. The Special Committee did however consider these arrangements for other purposes including, for example, evaluating Renren’s existing public company reporting obligations, disclosure obligations in the context of the Private Placement and position as an OPI creditor under the Renren Note.

 

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Valuation 

 

Pursuant to an engagement letter dated December 22, 2016, the Special Committee retained Duff & Phelps as its financial advisor to deliver a fairness opinion in connection with the Transaction. Duff & Phelps is an internationally recognized financial services firm that, among other things, is regularly engaged in the investment banking business, including the valuation of businesses and securities in connection with mergers and acquisitions, underwritings and private placements of securities, and other investment banking services.

 

At the meeting of the Special Committee on April 23, 2018, Duff & Phelps rendered its oral opinion (which was confirmed in writing later that same day) to the Special Committee that, as of such date and based upon and subject to the factors, assumptions, and limitations set forth in its opinion, the Cash Dividend to be received by the Renren shareholders and ADS holders (other than the Eligible Shareholders who waive the Cash Dividend and elect to receive shares of OPI in the Private Placement) in the Transaction is fair from a financial point of view to such holders (without giving effect to any impact of the Transaction on any particular holder of Renren’s ordinary shares or ADSs other than in their capacity as a holder of Renren’s ordinary shares or ADSs). No limitations were imposed by the Special Committee upon Duff & Phelps with respect to the investigations made or procedures followed by it in rendering its opinion.

 

The full text of the written opinion of Duff & Phelps dated April 23, 2018, which sets forth the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken, is attached hereto as Annex L and is incorporated herein by reference. The summary of the opinion set forth herein is qualified in its entirety by reference to the full text of such opinion. Holders of Renren’s ordinary shares (including ADS holders) are urged to read the opinion in its entirety. Duff & Phelps did not recommend any specific value for OPI or any specific Cash Dividend amount or conclude that the Cash Dividend amount is the appropriate amount of consideration to be received by holders of Renren’s ordinary shares and ADSs that do not acquire OPI Shares in the Private Placement. Duff & Phelps has consented to the inclusion of its opinion in its entirety and the description thereof both in this Offering Circular and in any other filing with the SEC that Renren is required to make under applicable law in connection with the Transaction.

 

In connection with its opinion, Duff & Phelps made such reviews, analyses and inquiries as it deemed necessary and appropriate under the circumstances. Duff & Phelps also took into account its assessment of general economic, market and financial conditions, as well as its experience in securities and business valuation, in general, and with respect to similar or analogous transactions, in particular. Duff & Phelps’s procedures, investigations, and financial analyses with respect to the preparation of its opinion included, but were not limited to, the items summarized below:

 

·Reviewed the following documents:

 

Renren’s annual report on Form 20-F filed with the SEC for the year ended December 31, 2016, including the audited financial statements contained therein, and Renren’s unaudited financial information for the nine months ended September 30, 2017 filed with the SEC on Form 6-K;

 

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The unaudited book values recorded by the Company for its investments in SoFi and other Portfolio Companies as of December 31, 2017;

 

Historical financial statements for SoFi and certain other Portfolio Companies, provided to Duff & Phelps by Renren management;

 

Unaudited financial statements of the ZenZone business for the years ended December 31, 2015 and December 31, 2016 and December 31, 2017;

 

A detailed financial projection model for the ZenZone business for the years ending December 31, 2018 through 2021, provided to Duff & Phelps by Renren management, upon which Duff & Phelps has relied, with Renren management’s consent, in performing its analysis (the “Management Projections”);

 

Other internal documents relating to the past and current operations, financial conditions, and possible future outlook of SoFi, the other Portfolio Companies and the ZenZone business, provided to Duff & Phelps by Renren management (which will also be OPI’s management after completion of the Transaction);

 

A letter dated April 11, 2018 from Renren’s management making certain representations as to the Management Projections and the underlying assumptions and certain other matters with respect to the Portfolio Companies, the Funds and the ZenZone business (the “Management Representation Letter”); and

 

Documents related to the Transaction, including this Offering Circular;

 

·Discussed the information referred to above and the background and other elements of the Transaction with Renren management;

 

·Discussed with Renren management (in their capacity as OPI’s post-Transaction management) their plans and intentions with respect to OPI’s management and operations and its assets, including the Portfolio Companies;

 

·Reviewed the historical trading price and trading volume of the Renren ADSs and the publicly traded securities of certain other companies that Duff & Phelps deemed relevant in connection with its analyses;

 

·Performed certain valuation and comparative analyses using generally accepted valuation and analytical techniques including a discounted cash flow analysis (with respect to the ZenZone business), an analysis of selected public companies that Duff & Phelps deemed relevant (in connection with the ZenZone business) and an analysis of selected transactions that Duff & Phelps deemed relevant (including in connection with the ZenZone business); and

 

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·Conducted such other analyses and considered such other factors as Duff & Phelps deemed necessary or appropriate.

 

In performing its analyses and rendering its opinion with respect to the Cash Dividend, Duff & Phelps, with Renren’s and the Special Committee’s consent and without independent verification (and Duff & Phelps does not assume any responsibility or liability for independently verifying any of the following):

 

1.       Relied upon the accuracy, completeness, and fair presentation of all information, data, advice, opinions and representations obtained from public sources or provided to it from private sources, including Renren management;

 

2.       Relied upon the fact that the Special Committee, Renren’s board of directors and Renren have been advised by counsel as to all legal matters with respect to the Transaction, including whether all procedures required by law to be taken in connection with the Transaction have been duly, validly and timely taken;

 

3.       Assumed that any estimates, evaluations, forecasts and projections including, without limitation, the Management Projections, furnished to Duff & Phelps were reasonably prepared and based upon the best currently available information and good faith judgment of the person furnishing the same, and Duff & Phelps expresses no view or opinion with respect to such estimates, evaluations, forecasts or projections or their underlying assumptions;

 

4.       Assumed that (i) the information relating to SoFi, the other Portfolio Companies and Funds, the ZenZone business and the Transaction provided to Duff & Phelps and (ii) the representations made by Renren management regarding SoFi, the other Portfolio Companies, the Funds, the ZenZone business and the Transaction are accurate in all material respects, and did not and do not omit to state a material fact in respect of SoFi, the other Portfolio Companies, the Funds, the ZenZone business and the Transaction necessary to make the information not misleading in light of the circumstances under which the information was provided;

 

5.       Assumed that the representations and warranties set forth in the Offering Circular and in the Management Representation Letter are true and correct and that each party to the Transaction will fully and duly perform all covenants, undertakings and obligations required to be performed by such party;

 

6.       Assumed that the final versions of all documents reviewed by Duff & Phelps in draft form, including this Offering Circular, conform in all material respects to the drafts reviewed;

 

7.       Assumed that application of the Dividend Calculation Formula is fair to the holders of Renren’s ordinary shares and ADSs (other than the Eligible Shareholders who elect to receive shares of OPI in the Private Placement);

 

8.       Assumed that there has been no material change in the assets, liabilities, financial condition, results of operations, business, or prospects of SoFi, the other Portfolio Companies or the Funds or the ZenZone business since the date of the most recent financial statements and other information made available to Duff & Phelps;

 

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9.       Assumed that all of the conditions required to implement the Transaction will be satisfied and that the Transaction will be completed in manner outlined in this Offering Circular and related disclosures filed with the SEC with respect to the Transaction without any amendments thereto or any waivers of any terms or conditions thereof, and in a manner that complies in all respects with all applicable laws; and

 

10.       Assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the Transaction will be obtained without any undue delay, limitation, restriction or condition that would have a material effect on SoFi, the other Portfolio Companies, the Funds, the ZenZone business or the contemplated benefits expected to be derived in the Transaction.

 

To the extent that any of the foregoing assumptions or any of the facts on which the opinion is based prove to be untrue in any material respect, the opinion cannot and should not be relied upon for any purpose. Furthermore, in Duff & Phelps’s analysis and in connection with the preparation of its opinion, Duff & Phelps has made numerous assumptions with respect to industry performance, general business, market and economic conditions and other matters, many of which are beyond the control of any party involved in the Transaction and as to which Duff & Phelps does not express any view or opinion.

 

Duff & Phelps has prepared the opinion effective as of April 23, 2018. The opinion is necessarily based upon the information made available to Duff & Phelps as of the date thereof and market, economic, financial and other conditions as they exist and can be evaluated as of the date thereof, and Duff & Phelps disclaims any undertaking or obligation to (i) advise any person of any change in any fact or matter affecting the opinion which may come or be brought to the attention of Duff & Phelps after the date hereof or (ii) update, revise or reaffirm the opinion after the date hereof.

 

Duff & Phelps did not evaluate the solvency of Renren, OPI, SoFi or any other Portfolio Company or any Fund or the ZenZone business or conduct an independent appraisal or physical inspection of any specific assets or liabilities (contingent or otherwise) of such entity, nor was Duff & Phelps provided with any such appraisal or evaluation other than the contents of the Management Representation Letter. Duff & Phelps did not estimate, and expresses no opinion regarding, the liquidation value of any such entity or business.

 

Duff & Phelps did not evaluate or conduct any independent analysis with respect to the Dividend Calculation Formula or its underlying assumptions.

 

Duff & Phelps has not been requested to, and did not (i) initiate any discussions with, or solicit any indications of interest from, third parties with respect to the Transaction, the assets, businesses or operations of Renren, OPI, SoFi, the other Portfolio Companies, the Funds, the ZenZone business or any alternatives to the Transaction, (ii) negotiate the terms of the Transaction or (iii) advise the Special Committee or any other party with respect to alternatives to the Transaction.

 

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Duff & Phelps did not undertake an independent analysis of any potential or actual litigation, regulatory action, possible unasserted claims or other contingent liabilities, to which Renren, OPI, SoFi, the other Portfolio Companies, the Funds, or the ZenZone business is or may be a party or is or may be subject, or of any governmental investigation of any possible unasserted claims or other contingent liabilities to which such entity is or may be a party or is or may be subject.

 

Duff & Phelps is not expressing any opinion as to the market price or value of Renren’s ordinary shares or ADSs or OPI’s ordinary shares (or anything else) or the value of the equity (or anything else) of Renren, OPI, SoFi, the other Portfolio Companies, the Funds, or the ZenZone business after the announcement or the consummation of the Transaction (or any other time), and the opinion should not be construed as a valuation opinion, a credit rating, a solvency opinion, an analysis of Renren’s, OPI’s SoFi’s, any other Portfolio Company’s or any Fund’s, or the ZenZone advertising agency business’ creditworthiness, tax advice, or accounting advice. Duff & Phelps has not made, and assumes no responsibility to make, any representation, or render any opinion, as to any legal matter. Duff & Phelps expressly disclaims any responsibility or liability in this regard.

 

In rendering the opinion, Duff & Phelps is not expressing any opinion with respect to the amount or nature or any other aspect of any compensation payable to or to be received by any of the officers, directors, or employees of Renren, OPI, SoFi, the other Portfolio Companies, the Funds or the ZenZone business or any class of such persons, relative to the amount of the Cash Dividend, or with respect to the fairness of any such compensation. Duff & Phelps expresses no opinion as to the fairness of the Transaction to the Eligible Shareholders acquiring OPI Shares in the Private Placement or any post-Transaction arrangements with respect to OPI.

 

The opinion is furnished for the use and benefit of the Special Committee in connection with its consideration of the Transaction (including payment of the Cash Dividend) and is not intended to, and does not, confer any rights or remedies upon any other person, and is not intended to be used, and may not be used, by any other person or for any other purpose, without Duff & Phelps’s prior written consent. The opinion (i) does not address the merits of the underlying business decision to enter into the Transaction versus any alternative strategy or transaction; (ii) does not address any transaction related to the Transaction; (iii) is not a recommendation as to how the Special Committee, the board of directors of Renren, OPI or any other person including any holder of Renren’s ordinary shares or ADSs should act with respect to any matters relating to the Transaction (including any decision to waive the Cash Dividend and receive the OPI Shares in the Private Placement), or whether to proceed with the Transaction or any element thereof or any related transaction, and (iv) does not indicate that the amount of the Cash Dividend (the calculation of which requires application of the Dividend Calculation Formula) is the best possibly attainable under any circumstances. The decision as to whether to proceed with the Transaction or any related transaction may depend on an assessment of factors unrelated to the financial analysis on which the opinion is based. The opinion should not be construed as creating any fiduciary duty on the part of Duff & Phelps to any party.

 

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Set forth below is a summary of the material analyses performed by Duff & Phelps in connection with the delivery of its opinion to the Special Committee. This summary is qualified in its entirety by reference to the full text of the opinion, attached hereto as Annex L. While this summary describes the analyses and factors that Duff & Phelps deemed material in its presentation to the Special Committee, it is not a comprehensive description of all analyses and factors considered by Duff & Phelps. The preparation of a fairness opinion is a complex process that involves various determinations as to the most appropriate and relevant methods of financial analysis and the application of these methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to partial analysis. In arriving at its opinion, Duff & Phelps did not attribute any particular weight to any analysis or factor considered by it, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Accordingly, Duff & Phelps believes that its analyses must be considered as a whole and that selecting portions of its analyses and of the factors considered by it in rendering the fairness opinion without considering all analyses and factors could create a misleading or incomplete view of the evaluation process underlying its opinion. The conclusion reached by Duff & Phelps was based on all analyses and factors taken as a whole, and also on the application of Duff & Phelps’s own experience and judgment.

 

Valuation Summary

 

The “value of OPI” reflects the value of the assets and liabilities of OPI set forth below (each expressed as a range of value), giving effect to the Transaction as if it were consummated on April 23, 2018.

 

OPI’s principal assets are comprised of (1) Renren’s SoFi investment with a valuation range of US$269 million to US$328 million, (2) the other Investments (namely the other Portfolio Companies and the Funds) with a valuation range of US$380 million to US$412 million, and (3) the ZenZone business with a valuation range of US$27 million to US$35 million.

 

The valuation range of OPI’s principal assets is US$676 million to US$775 million.

 

In addition to OPI’s principal assets, the value of OPI also includes (1) cash of US$35 million (reflecting US$60 million to be loaned by SoftBank to OPI, net of US$25 million payable by OPI to Renren as part of the Transaction); and (2) offsetting liabilities and other amounts in respect of debts and accrued interest of US$218 million in respect of the Everbright Loan, the SoftBank Loan and the Renren Note; and (3) estimated present value of OPI post-Transaction overhead expenses of US$5 million to US$9 million.

 

Applying the foregoing, the value of OPI is US$483 million to US$587 million.

 

Valuation Methodology

 

Duff & Phelps classified the 44 Portfolio Companies (including SoFi) and 6 Funds into six categories based on various factors, including the financial performance and current financial situation of each Portfolio Company or Fund, the date of the most recent round of financing in each Portfolio Company or Fund, the type of investment, and other considerations, as described below.

 

(1) SoFi investment:

 

·In estimating the value of Renren’s SoFi investment, Duff & Phelps:

 

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Reviewed the value indications of SoFi shares from SoFi’s various rounds of financing and the April 2017 third-party tender offer and concurrent last round of financing (described above in “Background and Fairness—Background”);

 

Reviewed the value indications for SoFi shares from a recent third-party proposal;

 

Reviewed SoFi’s historical financial performance and recent developments;

 

Reviewed discounts observed in PIPE transactions and secondary market offering transactions (i.e., transactions in which the sales proceeds are paid to existing selling investors and not the company); and

 

Considered such other factors as Duff & Phelps deemed appropriate.

 

·Duff & Phelps used the price from SoFi’s most recent round of financing (conducted contemporaneously with the third-party tender offer) as a starting basis for the value of the SoFi investment.

 

·Duff & Phelps then applied a discount to this value in estimating the value of the SoFi investment, as there is typically a discount associated with purchases and sales of large blocks of stock in private companies and secondary sale transactions for private companies.

 

(2) Other Portfolio Company and Fund Investments

 

(A) Category I investments:

 

·10 investments;

 

·All investments in Category I have already been written off by Renren and the book values of these investments were zero as of December 31, 2017;

 

·For Credit Shop, Incorporated, Duff & Phelps used a range of zero (which is the current book value) at the low end to the value indicated by a valuation report issued by PwC at high end. For other investments in this category with ongoing operations and revenues, Duff & Phelps used a range of zero (which is the current book value) at the low end to 50% of the initial investment amount at the high end. Investments with no revenues or which are undergoing liquidation processes were included at their book values of zero.

 

(B) Category II investments:

 

·8 investments;

 

·Renren previously engaged various valuation firms (including the valuation arm of Duff & Phelps) to perform recent valuation analyses of these investments for financial reporting purposes;

 

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·Of the 8 Category II investments, the valuation arm of Duff & Phelps performed the valuation analyses for financial reporting purposes related to 4 investments: Omni Prime Inc., Crystal Company, SnowBall Finance Inc., and AutoGo Inc.; and

 

·Duff & Phelps reviewed the valuation reports and adopted the current book value.

 

(C) Category III investments

 

·18 investments (including 12 Portfolio Companies and 6 Funds);

 

·All investments in this category have a valuation indication from a round of financing or a net asset value report (in the case of a Fund) within approximately one year; and

 

·Duff & Phelps estimated the value of each of these investments using the valuations implied by the latest round of financing, latest transaction, latest trading price or net asset value reports, as applicable, of each Portfolio Company/Fund.

 

(D) Category IV investments

 

·5 investments;

 

·Because the investments in this category do not have a valuation indication from a recent round of financing or a recent valuation report for financial reporting purposes, Duff & Phelps applied a range of rates of return to the implied valuation from the latest round of financing in order to derive estimated valuation ranges for these investments. Based on the nature and stage of these investments, Duff & Phelps applied a range of rates of return of 20% to 30%.

 

(E) Category V investments

 

·8 investments;

 

·The investments in Category V include a convertible bond and investments in several Portfolio Companies that have had poor financial performance since the initial investments made by Renren;

 

·For BlueBoard Inc., its book value, which reflects the initial investment amount, was used for the estimated value of the investment. For KoolRay Vision Inc., a range of zero at the low end to 50% of the current book value at the high end was used to estimate the value of the equity interest component and the initial investment amount was used to estimate the convertible bond component. For other investments in this category, Duff & Phelps used a range of zero at the low end to 50% of the current book value at the high end.

 

In addition, Duff & Phelps applied an overall discount to Category I Investments, Category II Investments, Category III Investments, Category IV Investments and Category V Investments based on considerations for marketability and control, the composition of the investment portfolio and other factors.

 

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·Duff & Phelps relied on the following methodologies in estimating the appropriate discount for the above investment portfolio:

 

A review of private equity secondary market pricing data from secondary interest market intermediaries;

 

An analysis of price to net asset value (“NAV”) for listed private equity investment companies; and

 

A review of price to NAV indications for listed private equity indices.

 

·Because much of the above investment portfolio consists of early-stage or venture capital investments, Duff & Phelps focused primarily on observed discounts to NAV for venture capital funds in selecting a discount to apply to these investments.

 

·Based on the composition of the above investment portfolio and the observations and analysis referenced above (and detailed on the following pages), Duff & Phelps applied a discount to the Category I through Category V investment portfolio of 15%.

 

(3) The ZenZone business

 

For the ZenZone business, Duff & Phelps performed a discounted cash flow analysis of the estimated future unlevered free cash flows attributable to the advertising agency business for the fiscal years ending December 31, 2018 through December 31, 2021, with “free cash flow” defined as cash generated by the business that is available either to reinvest or to distribute to security holders. The discounted cash flow analysis was used to determine the net present value of estimated future free cash flows utilizing a weighted average cost of capital as the applicable discount rate. For the purposes of its discounted cash flow analysis, Duff & Phelps utilized and relied upon the Management Projections.

 

Duff & Phelps estimated the net present value of all cash flows attributable to the advertising agency business after fiscal year 2021 (the “Terminal Value”) using a perpetuity growth formula assuming a 5.5% terminal growth rate, which took into consideration an estimate of the expected long-term growth rate of the Chinese economy and the advertising agency business’s business. Duff & Phelps used discount rates ranging from 16.00% to 19.00%, reflecting Duff & Phelps’s estimate of the advertising agency business’s weighted average cost of capital, to discount the projected free cash flows and the Terminal Value. Duff & Phelps estimated the advertising agency business’s weighted average cost of capital by estimating the weighted average of the advertising agency business’s cost of equity (derived using the capital asset pricing model) and the advertising agency business’s after-tax cost of debt. Duff & Phelps believes that this range of discount rates is consistent with the rate of return that security holders could expect to realize on alternative investment opportunities with similar risk profiles.

 

Valuation Result

 

Based on the foregoing analysis, Duff & Phelps estimated the value of OPI is between US$483 million and US$587 million. Duff & Phelps’s opinion was only one of the many factors considered by the Special Committee in its evaluation and approval of the Transaction and should not be viewed as determinative of the views of the Special Committee. See “Background and Fairness.”

 

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Cash Dividend

 

Renren shareholders who opt not to acquire, or are ineligible to acquire, OPI Shares in the Private Placement will receive the Cash Dividend equal in amount to the OPI Value per OPI Share issued and sold in the Private Placement. The Cash Dividend will be payable to all holders of Renren ordinary shares (including ordinary shares represented by ADSs) as of the Record Date who do not validly waive it. The Cash Dividend has been approved by the Special Committee and will be equal, per Renren ordinary share, to (1) the OPI Value of US$500 million divided by (2) the total number of OPI Shares issued to Eligible Shareholders in the Private Placement, rounded down to the nearest hundredth of a cent. See “Valuation”.

 

At the date of this Offering Circular, the total number of OPI Shares to be issued in the Private Placement is not known and hence the amount of the Cash Dividend also remains unknown, whether in the aggregate or on a per share or per ADS basis. However, as of April 1, 2018, Renren had 1,034,929,113 outstanding shares (comprised of 729,540,663 Class A and 305,388,450 Class B ordinary shares), and Renren has already received Contractual Commitments from Eligible Shareholders holding an aggregate of 820,273,132 ordinary shares of Renren (or approximately 79.3% of Renren’s outstanding shares as of April 1, 2018) to acquire an equivalent number of OPI Shares in the Private Placement in exchange for waiving their share of the Cash Dividend. We refer to the Eligible Shareholders who have signed Contractual Commitments as the Committed Shareholders.

 

Based on the figures above, and before deducting any depositary fees payable in connection with the payment of the Cash Dividend in respect of ADSs, we believe that:

 

·the Cash Dividend will range from US$0.4831 per share (or US$7.2465 per ADS), if all shareholders (including ADS holders) of Renren validly elect to waive the Cash Dividend in respect of all of their Renren shares and ADSs, to US$0.6096 per share (or US$9.1440 per ADS), if no additional shareholders (including ADS holders) other than the Committed Shareholders validly elect to waive the Cash Dividend in respect of any of their Renren shares or ADSs; and

 

·the aggregate amount of the Cash Dividend to be paid by Renren in the Transaction will range from zero, if all shareholders (including ADS holders) of Renren validly elect to waive the Cash Dividend in respect of all of their Renren shares and ADSs, to approximately US$131 million, if no additional shareholders (including ADS holders) other than the Committed Shareholders validly elect to waive the Cash Dividend in respect of any of their Renren shares or ADSs.

 

The payment of the Cash Dividend to ADS holders is subject to a Depositary fee of US$0.02 per ADS held as of the Record Date in respect of which the Offer is not validly accepted. You will not owe any fees to the Depositary in connection with either the Cash Dividend or the OPI Shares to the extent that you hold ordinary shares directly on Renren’s register of members.

 

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Renren will make a separate announcement of the amount of the Cash Dividend payable per Renren ordinary share and the aggregate amount of the Cash Dividend to be paid by Renren in the Transaction on or before the Share Delivery Date.

 

Each shareholder of Renren that does not waive the Cash Dividend will receive an amount in the Cash Dividend equal to the number of ordinary shares of Renren (including ordinary shares represented by ADSs) held by that Eligible Shareholder as of the Record Date multiplied by the Cash Dividend payable per Renren ordinary share. In the case of a fraction, the aggregate amount payable to the shareholder will be rounded down to the nearest cent. The Cash Dividend will be paid on the Cash Delivery Date, which will be as soon as practicable after the Share Delivery Date.

 

The aggregate amount of the Cash Dividend to be paid by Renren in the Transaction will affect the trading price of Renren’s ADSs. See “Questions and Answers—31. What effect will the Transaction have on Renren’s ADS price?”

 

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Directors, Senior Management and Employees

 

The following table sets forth information regarding OPI’s directors and executive officers. Joseph Chen became a director of OPI in September 2017 and the other directors and officers will be appointed on or after the Share Delivery Date.

 

Name   Age   Position/Title
Joseph Chen   48   Chairman and Chief Executive Officer
David Thévenon   44   Director
James Jian Liu   45   Chief Operating Officer
Thomas Jintao Ren   39   Chief Financial Officer

 

Joseph Chen is the founder of Renren. Mr. Chen has served as the chairman of Renren’s board of directors and its chief executive officer since its inception. Mr. Chen is a pioneer of China’s internet industry. Before founding Renren, Mr. Chen was the co-founder, chairman and chief executive officer of ChinaRen.com, a first-generation SNS in China and one of China’s most visited websites in 1999. He served as senior vice president for Sohu.com after ChinaRen.com was acquired by Sohu.com in 2000. Mr. Chen holds a bachelor’s degree in physics from the University of Delaware, a master’s degree in engineering from the Massachusetts Institute of Technology, and an M.B.A. degree from Stanford University.

 

David Thévenon is a partner at SoftBank Investment Advisers. He is also a director of Social Finance, Inc. He has 20 years of strategy and business development experience in the United States, the United Kingdom, and France, with expertise in the technology and telecom sectors. Previously, Mr. Thévenon had a long tenure at Google, as a senior director working with business development teams that manage global partnerships for Google products. Prior to Google, Mr. Thévenon held business development and finance roles at T-Mobile, Dell and Fujitsu. Mr. Thévenon holds a Master in Management from ESCEM School of Business and Management. He currently is a board director for several other companies, including Kabbage, Inc., Grab Inc., Ola Cabs (ANI Technologies Pvt. Ltd.) and Cloudminds Inc.

 

James Jian Liu has served as Renren’s director since January 2008 and as its chief operating officer since February 2006. Before joining Renren, he was the co-founder and chief executive officer of UUMe.com, one of the earliest social networking service websites in China. He served as product management director at Fortinet in its early years and held a senior product manager role at Siebel Systems. Mr. Liu started his career as a management consultant with the Boston Consulting Group in China. Mr. Liu holds a bachelor’s degree in computer science from Shanghai Jiao Tong University and an M.B.A. degree from Stanford University, where he was an Arjay Miller Scholar.

 

Thomas Jintao Ren has served as Renren’s chief financial officer since September 2015. Prior to rejoining Renren, Mr. Ren was the chief financial officer at Chukong Technologies. Mr. Ren was previously at Renren between 2005 and 2013, where he served as senior finance director. Prior to that, Mr. Ren had worked at KPMG for five years. Mr. Ren holds a bachelor’s degree in economics from Renmin University of China. He is a certified public accountant in China and the United States and a chartered professional accountant in Canada.

 

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Share Incentive Plan

 

Before the Share Delivery Date, OPI’s board of directors will approve the Share Incentive Plan. The form of the Share Incentive Plan is attached to this Offering Circular as Annex P. Under the Share Incentive Plan, OPI may grant up to 136,786,121 share options and 6,284,763 restricted shares to directors, officers, employees and consultants of OPI and Renren. OPI will grant all of these share options and restricted shares immediately upon the approval of the Share Incentive Plan. The grantees include directors or employees of Renren who previously had been involved in the selection and/or management of the Investments at Renren or will be involved in the management of the Investments at OPI.

 

Each grantee will receive the same number and types of grants as the share incentive grants that he or she holds in Renren, and none of these grantees will receive any additional grants in excess of that number.

 

The distribution of the grants among the recipients is shown in the table below:

 

Name  Options   Restricted Shares 
Joseph Chen   111,596,121    5,643,522 
James Jian Liu   24,150,000     
David Chao   510,000    43,725 
Thomas Ren       153,780 
Li Zengxin       112,500 
Other employees   530,000    331,686 
TOTAL   136,786,121    6,284,763 

 

Since the number of shares issued by OPI to Eligible Shareholders in the Private Placement will depend on how many Eligible Shareholders accept the Offer, the dilution to shareholders of OPI from the incentive share option grants will likewise vary. If only Committed Shareholders accept the Offer, then the number of ordinary shares underlying the incentive share grants would represent approximately 14.9% of the ordinary shares of OPI on a fully diluted basis. If more Eligible Shareholders accept the Offer, then the percentage would be lower, though it would not fall below 12.1% even if every share of Renren were held by an Eligible Shareholder who accepted the Offer. The Cash Dividend payable per Renren ordinary share will be equal to the OPI Value divided by the total number of OPI Shares issued to Eligible Shareholders in the Private Placement. The denominator in this calculation only includes ordinary shares of OPI that are outstanding upon the closing of the Private Placement and does not include the grants that will be made under the Share Incentive Plan.

 

The exercise price for the share options will be the lower of the exercise price of the corresponding option held by the holder in Renren or the per share value of OPI used in calculating the amount of the Cash Dividend, provided that among the options to be granted to Mr. Joseph Chen, 39,752,430 share options will be granted with an initial exercise price of twice the per share value of OPI. At the time of their issuance, the majority of the OPI share options will have exercise prices that are lower than the per share value of OPI.

 

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Each time that OPI distributes cash or other assets to its shareholders, other than pursuant to DCM’s and SoftBank’s (and Mr. Chen’s) right to early distributions of SoFi shares in kind, the exercise price on each outstanding OPI share option (whether vested or unvested) will be reduced on a per share basis by the per share amount of value distributed until the exercise price has reached zero. However, holders of options will not receive distributions of cash and assets with respect to options that have not been exercised, even if the exercise price of the options has been reduced to zero.

 

The following paragraphs describe the principal terms of the Share Incentive Plan. However, notwithstanding the terms of the Share Incentive Plan, the grant of any options for the issue of any shares except in accordance with the OPI Shareholders Agreement, the adoption or variation of any share option scheme, and any grants to management under any equity or compensation plan other than the adjustment of exercise price as allowed under the Share Incentive Plan are Member Reserved Matters that require special shareholder approval. See “Reserved Matters”.

 

Types of Awards and Exercise Prices. The plan permits the grant of options to purchase OPI’s Class A ordinary shares, restricted shares and restricted share units or any other type of awards that the plan administrator deems appropriate.

 

·Options. Options provide for the right to purchase a specified number of OPI’s Class A ordinary shares at a specified price. Options include incentive share options, which are share options which satisfy the requirements of Section 422 of the Internal Revenue Code of 1986, and non-qualified share options, which do not satisfy these requirements.

 

·Restricted Shares. Restricted shares represent the right to receive OPI’s Class A ordinary shares at a specified date in the future. On the maturity date, OPI will transfer to the participant one unrestricted, fully transferable Class A ordinary share for each restricted share.

 

Plan Administration. OPI’s board of directors or a committee of one or more members of the board of directors will administer the Share Incentive Plan.

 

Award Agreement. Awards granted under the Share Incentive Plan will be 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 OPI’s authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind the award.

 

Vesting Schedule. The vesting schedule of the share options and restricted shares granted under this Share Incentive Plan will be the same as the vesting schedule of the corresponding share options and restricted shares granted to each such participant by Renren that remain outstanding prior to the closing of the Private Placement, which will be the effective time of the separation of OPI from Renren.

 

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Transfer Restrictions. Subject to certain exceptions, awards for incentive share options, non-qualified share options and restricted share options may not be transferred, assigned, pledged, hypothecated or otherwise conveyed or encumbered by the award holders.

 

Amendment of the Share Incentive Plan. OPI’s board of directors or the committee administering the plan has the authority to amend the plan. However, any amendment requires the prior written approval of shareholders together holding no less than 75% of all votes attached to all issued shares, and no amendment may adversely affect in any material way any awards previously granted unless agreed by the recipient.

 

The Board of Directors

 

OPI’s board of directors will consist of one director upon the completion of the Private Placement, who will be Mr. Joseph Chen. It is anticipated that two more directors will be appointed shortly after the completion of the Private Placement, pursuant to the special rights held by Mr. James Jian Liu and SoftBank. Mr. Chen has the right to nominate one director to the board of directors, and he is considered to have exercised this right to appoint himself as the initial director. Mr. Liu has the right to nominate one director to the board of directors of OPI for so long as he remains an officer of OPI. SoftBank has the right to nominate one director to the board of directors of OPI for so long as it continues to hold any shares of OPI. Furthermore, SoftBank is entitled to remove the elected directors nominated by Mr. Chen and Mr. Liu from the board, and to remove Mr. Chen and Mr. Liu from any management positions of OPI and/or its subsidiaries, and nominate replacements of its choice upon the occurrence of certain disabling conduct. See “Description of the OPI Shares—Removal of Directors” for more information. Other shareholders of OPI will have no power to change the composition of the board of directors.

 

A director is not required to hold any shares in OPI by way of qualification. A director who is in any way, whether directly or indirectly, interested in a contract or transaction or proposed contract or transaction with OPI must declare the nature of his interest at a meeting of the directors. A director may vote in respect of any contract or transaction or proposed contract or transaction notwithstanding that he may be interested therein and if he does so his vote shall be counted and he may be counted in the quorum at the relevant board meeting at which such contract or transaction or proposed contract or transaction is considered. A director may exercise all the powers of the company to borrow money, mortgage its undertaking, 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. None of OPI’s directors has a service contract with OPI that provides for benefits upon termination of employment.

 

The quorum for the transaction of business at any board meeting is two directors present at the board meeting, which will include the director nominated by SoftBank (and duly elected) until OPI has disposed of each shareholder’s pro rata share in SoFi and has completed the distribution of the proceeds of such disposal (or in-kind distribution of OPI’s equity securities in SoFi) to all shareholders to the satisfaction of SoftBank and DCM in their sole discretion. If within half an hour from the time appointed for a board meeting a quorum is not present, the meeting will be adjourned to the third business day after the date on which the original board meeting was convened at the same time and same place. If at the reconvened meeting, a quorum is not present within one hour from the time appointed for the meeting, then those directors present will constitute a quorum for the purposes of such further reconvened meeting. Directors may approve resolutions of directors in writing.

 

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The powers of the board of directors are restricted by OPI’s memorandum and articles of association and the OPI Shareholders Agreement. See “Reserved Matters”.

 

Duties of Directors

 

Cayman Islands law does not prescribe by statute the specific duties of directors of Cayman Islands companies and therefore the duties of directors are dictated by common law. OPI’s directors have certain duties of care, diligence and skill as well as a fiduciary duty to act honestly and in good faith in the best interests of the company. The directors are not required to exhibit in the performance of their duties a greater degree of skill than may reasonably be expected from persons of their knowledge and experience. The directors must exercise reasonable care and diligence but will not be liable for errors of judgment and therefore they may rely upon opinions and advice of outsiders but must still exercise their business judgment based upon such advice. The fiduciary relationship of the directors is with OPI and they owe a fiduciary duty to OPI’s shareholders as a whole but usually not to any individual shareholder. In addition, OPI’s directors have a duty to act in good faith, which means they must act bona fide in the interests of the company. The directors must also use their powers for a proper purpose. If the directors take actions which are within their powers but for purposes other than those for which such powers were conferred, they may be personally liable. The directors are also required not to put themselves into a position where there is a conflict, actual or potential, between their personal interests and their duties to OPI or between their duty to OPI and a duty owed to another person. In fulfilling their duty of care to OPI, the directors must ensure compliance with OPI’s articles of association. OPI has the right to seek damages if a duty owed by the directors is breached.

 

Terms of Directors and Officers

 

OPI’s directors are not subject to a set term of office and hold office until the next general meeting called for the election of directors and until their successor is duly elected or such time as they die, resign or are removed from office by special resolution or the unanimous written resolution of all shareholders. A director will cease to be a director automatically if, among other things, the director (i) becomes bankrupt or makes any arrangement or composition with his creditors; (ii) dies or is found by OPI to be or becomes of unsound mind; (iii) resigns his office by notice in writing to OPI; or (iv) is removed from office pursuant to any other provision of OPI’s articles of association.

 

The board of directors may appoint such officers as they may from time to time consider necessary upon such terms as to duration of office, remuneration and otherwise as they may think fit. Such officers need not be directors of OPI. Subject to applicable law, the powers and duties of the officers of OPI are determined from time to time by the board of directors. Notwithstanding the foregoing, SoftBank is entitled to remove Mr. Chen and Mr. Liu from any management positions of OPI and/or its subsidiaries and nominate replacements of its choice upon the occurrence of certain disabling conduct. See “Description of the OPI Shares—Removal of Directors” for more information.

 

Employees

 

OPI has 49 employees as of March 31, 2018, including 3 members of senior management, 5 individuals who are involved in investment management and 41 individuals who are involved in the ZenZone business. OPI’s senior management and investment management teams are based in Beijing. The employees of the ZenZone business are based in Beijing, Shanghai and Guangzhou. OPI’s chief executive officer and chief operating officer will not receive any salary from OPI.

 

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Description of the OPI Shares

 

OPI is a Cayman Islands exempted company and its affairs are governed by its memorandum and articles of association, as supplemented and amended from time to time, and the Companies Law (2016 Revision) of the Cayman Islands, as amended, which is referred to as the Companies Law below.

 

As of the date of this Offering Circular, OPI has one share issued and outstanding, which is owned by Renren. This share will be redeemed on the Share Delivery Date, simultaneously with the issuance of the ordinary shares of OPI to the Eligible Shareholders who have validly waived the Cash Dividend and elected to receive OPI Shares.

 

OPI has adopted new articles of association, which will take effect immediately prior to the issuance of the ordinary shares of OPI on the Share Delivery Date. OPI’s new articles of association are included as Annex A to this Offering Circular. All references to the articles of association of OPI in this Offering Circular are to the new articles of association.

 

The following are summaries of material provisions of OPI’s memorandum and articles of association and material provisions of the Companies Law insofar as they relate to the material terms of OPI’s ordinary shares and OPI’s memorandum and articles of association.

 

Authorized Share Capital

 

OPI’s authorized share capital consists of 3,000,000,000 Class A ordinary shares with a par value of US$0.001 each and 500,000,000 Class B ordinary shares with a par value of US$0.001 each.

 

Ordinary Shares

 

General. OPI’s ordinary shares are divided into Class A ordinary shares and Class B ordinary shares. Holders of Class A ordinary shares and Class B ordinary shares have the same rights except for voting and conversion rights.

 

Dividends and Distributions. The holders of OPI’s ordinary shares are entitled to such dividends as may be declared by OPI’s board of directors subject to the Companies Law. The Companies Law provides, in summary, that dividends may be paid out of profits and/or OPI’s share premium account provided that in the case of OPI’s share premium account, no such distribution or dividend paid to OPI’s shareholders will cause OPI to be unable to pay OPI’s debts as they fall due in the ordinary course of OPI’s business. In addition, the Companies Law prevents OPI from offering OPI’s shares or securities to individuals within the Cayman Islands, which may limit OPI’s ability to distribute a dividend comprised of OPI’s shares or other securities. Please note that dividends and other distributions of OPI are subject to the restrictions in the Everbright Loan Documents, the SoftBank Loan Documents and the Renren Note Documents as described in “Debts and Warrant”, and also subject to the payment obligations discussed under “Priority of Payments” and the distribution rights described in “Distribution Rights”.

 

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Conversion. Each Class B ordinary share is convertible into one Class A ordinary share at any time by the holder thereof. In no event shall Class A ordinary shares be convertible into Class B ordinary shares. In addition, subject to certain limited exceptions, the following Class B ordinary shares shall be automatically converted into Class A ordinary shares:

 

·any Class B ordinary shares held by Mr. Chen and Mr. Liu, if at any time Mr. Chen and Mr. Liu do not collectively hold at least 50% of the ordinary shares of OPI that they held as of the Share Delivery Date;

 

·any Class B ordinary shares held by SoftBank and all entities that it directly or indirectly controls from time to time (the “SoftBank Group”), if at any time the SoftBank Group collectively does not hold at least 50% of the ordinary shares of OPI that it held as of the Share Delivery Date;

 

·any Class B ordinary shares transferred by Mr. Chen other than to a member of his own family or to Mr. Liu;

 

·any Class B ordinary shares transferred by Mr. Liu other than to a member of his own family or to Mr. Chen;

 

·any Class B ordinary shares transferred by any member of the SoftBank Group other than to another member of the SoftBank Group;

 

·any Class B ordinary shares held by Mr. Chen or a member of his family, if at any time Mr. Chen ceases to be an officer of OPI;

 

·any Class B ordinary shares held by Mr. Liu or a member of his family, if at any time Mr. Liu ceases to be an officer of OPI;

 

·any Class B ordinary shares held by any member of the SoftBank Group, if at any time it ceases to be a member of the SoftBank Group and SoftBank has no ownership interest in such holder; and

 

·any Class B ordinary shares held by any member of the SoftBank Group, if at any time there is a change of control over SoftBank Group Corp.

 

Please see the OPI articles of association in Annex A for more details.

 

Voting Rights. In respect of matters requiring shareholders’ votes, each Class A ordinary share is entitled to one vote and each Class B ordinary share is entitled to ten votes.

 

A quorum required for a meeting of shareholders consists of at least one shareholder present in person or by proxy or, if a corporation or other non-natural person, by its duly authorized representative. Shareholders’ meetings are held annually and may be convened by any one of OPI’s directors on its own initiative or upon a request to the directors by shareholders holding in aggregate at least one-third of OPI’s voting power of OPI’s share capital. Advance notice of at least five days is required for the convening of OPI’s annual general meeting and other shareholders’ meetings.

 

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An ordinary resolution to be passed by the shareholders requires the affirmative vote of a simple majority of the votes attaching to the ordinary shares cast in a general meeting, while a special resolution requires the affirmative vote of no less than two-thirds of the votes cast attaching to the ordinary shares. A special resolution is required for important matters such as an amendment to the memorandum and articles of association. A special resolution is also required for any matters approved at a special meeting of shareholders. Holders of the ordinary shares may effect certain changes by ordinary resolution, including altering the amount of OPI’s authorized share capital, consolidating and dividing all or any of OPI’s share capital into shares of larger amount than OPI’s existing share capital, and canceling any shares.

 

Note that all directors of the board of OPI will be nominated by specific shareholders as specified in OPI’s memorandum and articles of association and in the OPI Shareholders Agreement, and that the votes cast by other shareholders will not be sufficient to block the election of those nominees or to elect other nominees in their place. See “—The Board of Directors of OPI” for further information. In addition, two of the Committed Shareholders have negotiated special rights to block actions that the board of directors or other shareholders of OPI would otherwise have been free to approve. See “Reserved Matters”.

 

Transfer of Shares. Subject to the restrictions of OPI’s memorandum and articles of association, any of OPI’s 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 OPI’s board, and we will take all steps necessary to ensure that the transferee is entered on the register of members in order for the transfer to be effective. We understand that no further approval by any authority in the Cayman Islands will be required in order for the transfer of shares to be effective.

 

OPI’s memorandum and articles of association allows OPI’s directors to decline to register a transfer of any OPI Share which is not fully paid or on which OPI has a lien and to decline to recognize an instrument of transfer should it fail to comply with the form prescribed by OPI’s board or OPI’s transfer agent. Furthermore, OPI’s memorandum and articles of association state that OPI shall not register a transfer of legal title to shares if such transfer of shares would cause OPI to be required to register under the Exchange Act or to fail to qualify for the exemption from the definition of “investment company” in Section 3(c)(7) of the Investment Company Act.

 

Share Issuance. Unless otherwise agreed by Mr. Chen, SoftBank and DCM, any new shares issued will be Class A ordinary shares.

 

Pre-emptive Rights. Subject to certain limited exceptions, if OPI proposes to issue and allot any new shares, those new shares must be offered to Mr. Chen, Mr. Liu, SoftBank and DCM or each of their respective affiliates that hold shares of OPI on the same terms and at the same price as proposed to be offered to other persons.

 

Liquidation. On a liquidation winding up, distribution or payment will be made to the holders of ordinary shares. Consideration received by holders with respect to each Class B ordinary share and Class A ordinary share should be the same in any liquidation event. Assets available for distribution among the holders of ordinary shares will be distributed among the holders of the ordinary shares on a pro rata basis. If OPI’s 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 OPI’s shareholders proportionally.

 

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Calls on Shares and Forfeiture of Shares. OPI’s board of directors may from time to time make calls upon shareholders for any amounts unpaid on their shares in a notice served to such shareholders at least 14 days prior to the specified time and place of payment. The shares that have been called upon and remain unpaid on the specified time are subject to forfeiture.

 

None of the OPI Shares issued in the Private Placement will have any amount unpaid.

 

Redemption of Shares. OPI may purchase its own shares (including any redeemable shares) in such manner and on such terms as the directors may agree with the relevant shareholder.

 

Variations of Rights of Shares. All or any of the special rights attached to any class of shares may be varied either with the written consent of the holders of two-thirds 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 will 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 in priority to or pari passu with such previously existing shares.

 

Annual Business Plan. A draft annual business plan for the coming financial year will be submitted to the shareholders no later than thirty calendar days prior to the end of each financial year of OPI. The annual business plan may be adopted by 75% of the votes attached to all outstanding shares but in addition must be approved by Mr. Chen, SoftBank and DCM. If an annual business plan is not adopted for any financial year within 30 calendar days of the start of such financial year, then the annual business plan previously adopted will continue to apply to the extent possible, and any member of the board of directors may propose changes to the annual business plan for approval by the shareholders.

 

Inspection of Books and Records. Holders of OPI’s ordinary shares will have no general right under Cayman Islands law to inspect or obtain copies of OPI’s list of shareholders or OPI’s corporate records, with the exception that, pursuant to statutory requirements, any of OPI’s creditors or shareholder may inspect OPI’s register of mortgages and charges, which includes details of any mortgage and change over OPI’s assets.

 

Removal of Directors

 

SoftBank will from time to time be entitled to remove the directors nominated by Mr. Chen and Mr. Liu from the board, and to remove Mr. Chen and Mr. Liu from any management positions of OPI and/or its subsidiaries and to nominate replacements of its choice, upon the occurrence of any of the following disabling conduct:

 

·Mr. Chen or Mr. Liu becomes insolvent or is adjudicated bankrupt;

 

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·Mr. Chen or Mr. Liu or their representative is involved in fraud, bad faith, wilful misconduct or gross negligence which has or could have an adverse effect on OPI or any of its subsidiaries or investments;

 

·Mr. Chen or Mr. Liu or their representative suffers any final conviction for any criminal conduct (other than motor vehicle violations) or for any breach of any applicable securities law provisions;

 

·Mr. Chen or Mr. Liu, or (where such breach is attributable to the action or omission of Mr. Chen or Mr. Liu) OPI or any subsidiary of OPI, commits any material breach of the memorandum and articles of association of OPI, the OPI Shareholders Agreement, the Renren Lianhe Shareholders Agreement, the Services Agreement, or the constitutional document of any subsidiary;

 

·Mr. Chen or Mr. Liu ceases to be involved with the business of OPI; or

 

·Mr. Chen or Mr. Liu disposes of a majority of the OPI Shares that he owns as of the Share Delivery Date.

 

Mr. Chen, Mr. Liu, DCM and OPI agree to exercise all rights and powers available to them to support such removal and subsequent replacement with SoftBank’s nominee.

 

OPI Shareholders Agreement

 

The form of the OPI Shareholders Agreement is included as Annex B to this Offering Circular.

 

The OPI Shareholders Agreement will terminate with the prior written consent of all parties, upon which termination the parties will be discharged from all further obligations to each other under the OPI Shareholders Agreement, except for certain surviving provisions such as distributions and confidentiality sections. Such termination does not affect any claims or liability arising prior to such termination. The OPI Shareholders Agreement will cease to have effect in relation to a party if that party and its affiliates cease to hold any shares and such cessation was in accordance with the provisions of the agreement, but the surviving provisions of the agreement will continue to have effect and any claims or liability arising prior to such cessation will not be affected.

 

Renren Lianhe Shareholders Agreement

 

Renren Lianhe, an exempted company incorporated under the laws of the Cayman Islands, is a wholly-owned subsidiary of OPI. Pursuant to the Renren Lianhe Shareholders Agreement, to be entered into among OPI, Mr. Chen, Mr. Liu and Renren Lianhe on the Share Delivery Date, OPI holds ordinary shares in Renren Lianhe and each of Mr. Chen and Mr. Liu holds preference shares in Renren Lianhe. Renren Lianhe may not allot any new preference shares or any securities convertible into or carrying the right to subscribe for any preference shares. Mr. Chen and Mr. Liu must not, directly or indirectly, sell, pledge, encumber, assign, transfer or otherwise dispose of any or all of the preference shares that they hold in Renren Lianhe without the prior written consent of OPI, SoftBank and DCM.

 

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Pursuant to the Renren Lianhe Shareholders Agreement, Mr. Chen and Mr. Liu will cumulatively receive a 30% surplus return from Investments other than SoFi shares as compensation, subject to certain restrictions and conditions. See “Priority of Payments”. Mr. Chen will initially hold one Class A1 preference share and Mr. Liu will initially hold one Class A2 preference share in Renren Lianhe. Mr. Chen and Mr. Liu may from time to time, individually or collectively and at their sole discretion, elect that Renren Lianhe distribute a portion of the Management Carried Interest that would otherwise be received by Mr. Chen and Mr. Liu to certain employees of Renren Lianhe. Such distribution to the employees will fully satisfy Renren Lianhe’s obligation to distribute such amounts to Mr. Chen and Mr. Liu.

 

The form of the Renren Lianhe Shareholders Agreement is included as Annex C to this Offering Circular, and the form of the Renren Lianhe memorandum and articles of association is included as Annex D. The Renren Lianhe memorandum and articles of association will become effective immediately prior to the issuance of the ordinary shares of OPI on the Share Delivery Date, and the Renren Lianhe Shareholders Agreement will become effective immediately upon the issuance of those ordinary shares.

 

Exempted Company

 

OPI is an exempted company duly incorporated with limited liability under the Companies Law. The Companies Law distinguishes between ordinary resident companies and exempted companies. Any company, the objects of which are to conduct 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 for the material exemptions and privileges, including (a) an exempted company does not have to file an annual return of its shareholder with the Registrar of Companies, (b) an exempted company is not required to open its register of members for inspection, (c) an exempted company does not have to hold an annual general meeting, (d) an exempted company may in certain circumstances issue no par value, negotiable or bearer shares, and an exempted company may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands. Furthermore, the Companies Law provides that the ownership of shares in Cayman Islands companies is determined by the entry of shareholders in a company’s statutory register of members.

 

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United States Federal Income Tax Consequences to U.S. Holders

 

The following is a discussion of the principal United States federal income tax consequences of the Private Placement and Cash Dividend to U.S. Holders (defined below). This discussion is based upon the Internal Revenue Code of 1986, as amended (the “Code”), its legislative history, existing, temporary and proposed Treasury regulations thereunder, published positions of the Internal Revenue Service (the “IRS”), judicial decisions and other applicable authorities, all as currently in effect, and all of which are subject to change or differing interpretations, possibly with retroactive effect. Any such change could affect the accuracy of this discussion. The discussion does not address the effects of the Private Placement or Cash Dividend under any state, local, or foreign tax laws.

 

For purposes of this discussion, a “U.S. Holder” is a beneficial owner of ADSs or ordinary shares that is, for United States federal income tax purposes:

 

·an individual who is a citizen or resident of the United States;

 

·a corporation (or other entity treated as a corporation for United States federal income tax purposes) created in, or organized under the laws of, the United States or any state thereof or the District of Columbia;

 

·an estate the income of which is includible in gross income for United States federal income tax purposes regardless of its source; or

 

·a trust (i) 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 (ii) that has otherwise validly 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 Renren ADSs or 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 or partners in a partnership holding Renren ADSs or ordinary shares should consult their own tax advisors regarding the tax consequences of the Private Placement to them.

 

This discussion assumes that all U.S. Holders hold their Renren ADSs or ordinary shares, and, if applicable, will hold OPI Shares, as capital assets within the meaning of Section 1221 of the Code. Further, this discussion does not constitute tax advice and does not address all aspects of United States federal income taxation that may be relevant to a particular shareholder in light of such shareholder’s personal investment circumstances or to shareholders subject to special treatment under the United States federal income tax laws, such as:

 

·banks, insurance companies, broker-dealers or other financial institutions;

 

·regulated investment companies, real estate investment trusts or grantor trusts;

 

·tax-exempt organizations;

 

·dealers in stocks or securities;

 

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·cooperatives;

 

·persons who acquired Renren ADSs or ordinary shares through the exercise of options or otherwise as compensation or through a tax-qualified retirement plan;

 

·persons that hold Renren ADSs or ordinary shares as part of a hedge, straddle, constructive sale or conversion transaction or other risk reduction or integrated investment transaction;

 

·persons who have a functional currency other than the United States dollar; or

 

·individuals who are not citizens or residents of the United States, foreign corporations and other foreign entities.

 

ALL HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE PRIVATE PLACEMENT AND CASH DIVIDEND TO THEM, INCLUDING THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS AND REPORTING REQUIREMENTS IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, AND THE EFFECT OF POSSIBLE CHANGES IN LAW THAT MIGHT AFFECT THE TAX CONSEQUENCES DESCRIBED HEREIN.

 

In connection with the Private Placement, Renren expects to receive an opinion from Skadden to the effect that the transfer of shares pursuant to the Private Placement should qualify as a tax-free distribution under Section 355 of the Code. The opinion will be based on, among other things, current law and factual representations and assumptions, as well as certain undertakings made by Renren and OPI. The failure of any of those representations or assumptions to be true, correct and complete in any material respect or the failure to comply with any undertaking, could adversely affect the conclusions therein. Opinions of counsel are not binding on the IRS or courts, and the IRS and applicable courts may not agree with the judgment, opinion or conclusions reached in the opinion. No assurance can be given that the IRS will not challenge the conclusions reflected herein or in the opinion or that a court would not sustain such a challenge.

 

Consequences of Accepting the Offer

 

Subject to the assumptions, limitations and qualifications referred to herein, if the Private Placement qualifies as a tax-free distribution under Section 355 of the Code, U.S. Holders who accept the Offer and receive OPI Shares generally should have the following United States federal income tax consequences upon receipt of such OPI Shares:

 

·no gain or loss should be recognized by such U.S. Holders;

 

·the aggregate tax basis of Renren ADSs or ordinary shares and OPI Shares in the hands of such U.S. Holders immediately after the Share Delivery Date should be the same as the tax basis of the Renren ADSs or ordinary shares immediately before the Share Delivery Date, allocated between the Renren ADSs or ordinary shares, on the one hand, and OPI Shares, on the other, in proportion to the fair market value of each on the Share Delivery Date; and

 

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·the holding period of the OPI Shares received by U.S. Holders should include the holding period for the Renren ADSs or ordinary shares on which the OPI Shares are delivered;

 

U.S. Holders who have acquired different blocks of Renren ADSs or ordinary shares at different times or at different prices are urged to consult their tax advisors regarding the allocation of their aggregate adjusted tax basis among, and the holding period of, the Renren ADSs or ordinary shares and OPI Shares.

 

If the Receipt of OPI Shares Does Not Qualify as a Tax-Free Distribution

 

If the Private Placement does not qualify as a tax-free distribution, each U.S. Holder who receives OPI Shares in the Private Placement would generally be treated as a taxable distribution includible in the gross income of such U.S. Holder in an amount equal to the fair market value of the OPI Shares received. As discussed below, it is currently expected that Renren will be treated as a PFIC for the year of the Private Placement. In light of such treatment and Renren’s lack of dividend payments in prior years, U.S. Holders who have not a made a timely “qualified electing fund” election, or “QEF election,” or “mark-to-market” election would likely be subject to the PFIC “excess distribution” regime described below under “Passive Foreign Investment Company Considerations” with respect to the receipt of OPI Shares if the transfer of OPI Shares pursuant to the Private Placement does not qualify as a tax-free distribution.

 

Passive Foreign Investment Company Considerations

 

A non-United States corporation, such as OPI, will be a 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. Passive income is any income that would be foreign personal holding company income under the Code, including dividends, interest, royalties, rents, annuities, net gains from the sale or exchange of property producing such income, net gains from commodity transactions, net foreign currency gains and income from notional principal contracts. A company 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 it owns, directly or indirectly, more than 25% (by value) of the stock.

 

OPI is expected to be treated as a PFIC for the tax year that includes the Share Delivery Date and subsequent years, and the rest of this discussion assumes such treatment. As a result of OPI’s PFIC status, OPI Shares held by U.S. Holders generally will continue to be treated as PFIC stock for all succeeding years during which the U.S. Holder holds such shares, unless the U.S. Holder makes a QEF election for the first taxable year in which the U.S. Holder owns OPI Shares and in which OPI is classified as a PFIC or a valid “mark-to-market” election is in effect. However, the mark-to-market election will not be available for so long as OPI Shares are not regularly traded on a qualifying stock exchange.

 

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Absent a timely QEF election, U.S. Holders would generally be subject to special United States federal income tax rules that have a penalizing effect, regardless of whether OPI remains a PFIC, on (i) any “excess distribution” to U.S. Holders (which generally includes 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 OPI Shares) and (ii) any gain realized on the sale or other direct or indirect disposition, including a pledge, of OPI Shares. Under these special rules:

 

·the excess distribution or gain would be allocated ratably over the U.S. Holder’s holding period for the OPI Shares;

 

·the amount allocated to the current taxable year would be taxable as ordinary income; and

 

·the amounts allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for such year and would be increased by an additional tax equal to interest on the resulting tax deemed deferred with respect to each such other taxable year.

 

To the extent distributions from OPI are not considered “excess distributions,” U.S. Holders will be required to include the amount of such distribution in gross income as a dividend to the extent of the U.S. Holder’s pro rata share of OPI’s current or accumulated earnings and profits, as determined under United States federal income tax principles. Such dividends will not be eligible for the reduced rate for qualified dividend income. To the extent cash received exceeds a U.S. Holder’s pro rata share of such current or accumulated earnings and profits, such amount will be treated first as a non-taxable return of capital, reducing the U.S. Holder’s tax basis in the OPI Shares to the extent of such basis, and thereafter as capital gain.

 

In addition, if any of OPI’s non-United States subsidiaries is also a PFIC, U.S. Holders would be treated as owning a proportionate amount (by value) of the shares of each such non-United States subsidiary (a “lower-tier PFIC”) and would be subject to the rules described above on certain distributions by and dispositions of lower-tier PFICs, even if such U.S. Holders do not receive the proceeds of those distributions or dispositions.

 

The adverse tax consequences described above may be mitigated if a U.S. Holder makes a timely QEF election with respect to its OPI Shares. If a U.S. Holder makes a timely QEF election, such U.S. Holder must include in income for each taxable year for which OPI is a PFIC that ends with or within the U.S. Holder’s taxable year its pro rata share of OPI’s ordinary earnings and net capital gain, if any, whether or not the ordinary earnings or net capital gain are distributed. Undistributed net capital gain may arise as a result of in-kind distributions of OPI’s equity securities in SoFi to DCM or SoftBank pursuant to special distribution rights described above under the section entitled “Distribution Rights,” as OPI will generally be required to recognize gain to the extent the fair market value of property distributed (including equity securities in SoFi) exceeds OPI’s tax basis in such property. OPI’s tax basis in property received from Renren pursuant to the Transaction should generally be determined by reference to Renren’s tax basis in such properties prior to the Transaction, adjusted for any gain required to be recognized on the transfer of such assets to OPI. An electing U.S. Holder’s basis in its OPI Shares will be increased to reflect the amount of any taxed but undistributed income. Distributions of income previously subject to tax will result in a corresponding reduction in the U.S. Holder’s adjusted basis in the OPI Shares and will not be subject to tax again once distributed. A U.S. Holder that has made a timely QEF election generally will recognize capital gain or loss on the sale, exchange, or other disposition of OPI Shares. Gain or loss recognized on such sale, exchange or other disposition generally will be long-term capital gain or loss if, at the time of the sale or other disposition, the U.S. Holder’s holding period for such shares is more than one year. Preferential tax rates apply to long-term capital gain of a U.S. Holder that is an individual, estate, or trust that has made a QEF election.

 

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A U.S. Holder makes a QEF election with respect to any year that OPI is a PFIC by filing IRS Form 8621 with its U.S. federal income tax return. A QEF election made with respect to OPI will not apply to any subsidiary of OPI that is a PFIC – a QEF election must be made separately for each subsidiary. A U.S. Holder’s QEF election will not be effective unless OPI agrees to supply annually to the U.S. Holder a “PFIC Annual Information Statement” and permit the U.S. Holder access to certain information in the event of an audit by the IRS. OPI intends to make this statement available to U.S. Holders upon request and will permit access to such information.

 

U.S. Holders are urged to consult their tax advisors regarding the specific tax consequences of participating in the Private Placement, including the application of the PFIC rules and any information reporting obligations.

 

Consequences of the Cash Dividend

 

The receipt of the Cash Dividend by shareholders of Renren will generally be a taxable transaction to U.S. Holders for U.S. federal income tax purposes. We believe Renren was a PFIC for the past five taxable years ending on December 31st. Renren’s PFIC status for the current taxable year will not be determinable until after the close of the current taxable year. Because Renren currently holds a substantial amount of cash and other assets treated as passive for PFIC purposes, Renren expects to be treated as a PFIC for the current taxable year. Assuming such treatment and in light of Renren’s lack of dividend payments in prior years, for U.S. Holders who have not made a timely QEF or mark-to-market election:

 

·Cash received by U.S. Holders should be treated as an “excess distribution” as described above under “Passive Foreign Investment Company Considerations,” provided the cash is not received with respect to Renren ADSs or ordinary shares acquired during the year of the Cash Dividend. As explained above, amounts allocated to the taxable year that includes the Cash Dividend and any taxable year prior to the first taxable year in which Renren is classified as a PFIC will be included in ordinary income. Amounts allocated to each of the other taxable years will be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for such year and will be increased by an additional tax equal to the interest on the resulting tax deemed deferred with respect to each such other taxable year.

 

·Cash received by a U.S. Holder with respect to Renren ADSs or ordinary shares acquired during the year of the Cash Dividend will be included in ordinary income as dividend income to the extent of the U.S. Holder’s pro rata share of Renren’s current or accumulated earnings and profits, as determined under United States federal income tax principles. Because Renren does not intend to calculate earnings and profits on the basis of United States federal income tax principles, such amounts will generally be treated as dividends for United States federal income tax purposes. Due to Renren’s PFIC status, such dividends will not be eligible for the reduced rate for qualified dividend income. To the extent cash received exceeds a U.S. Holder’s pro rata share of such current or accumulated earnings and profits, such amount will be treated first as a non-taxable return of capital, reducing the U.S. Holder’s tax basis in the Renren ADSs or ordinary shares to the extent of such basis, and thereafter as capital gain.

 

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·U.S. Holders who do not accept the Offer with respect to all of their Renren ADSs or Ordinary Shares should also be treated as indirectly disposing of their pro rata share of OPI Shares held by Renren immediately before the Share Delivery Date. For example, a U.S. Holder who owns 1% of the Renren ordinary shares (including Renren ordinary shares represented by ADSs) and does not waive any portion of the Cash Dividend should be treated as having indirectly disposed of 1% of the total OPI Shares as a result of the Private Placement. Under the rules applicable to dispositions of lower-tier PFICs described above under “Passive Foreign Investment Company Considerations,” such U.S. Holders should recognize an amount of gain equal to their pro rata portion of the gain that would be recognized by Renren if Renren sold all of its OPI Shares to a third-party for full fair market value immediately before the Share Delivery Date. Renren will make this information available to U.S. shareholders upon request.

 

U.S. Holders who have made a timely QEF or mark-to-market election will not be subject to the PFIC “excess distribution” regime on their receipt of the Cash Dividend. In addition, U.S. Holders who have made a timely QEF election will not be subject to tax on any portion of the Cash Dividend that represents earnings that were previously taxed under the QEF rules.

 

Information Reporting and Backup Withholding

 

U.S. Holders who receive cash pursuant to the Cash Dividend as an excess distribution will be required to report such excess distributions and any gain from the indirect disposition of OPI Shares on IRS Form 8621. U.S. Holders who accept the offer and receive OPI Shares pursuant to the Private Placement will be required to file an annual IRS Form 8621 with respect to such OPI Shares and other forms as may be required by the United States Treasury Department. Noncorporate U.S. Holders will also generally be subject to information reporting with respect to the Cash Dividend on IRS Form 1099 and may be subject to backup withholding. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification number and makes other required certifications, or who is otherwise exempt from backup withholding. U.S. Holders that are required to establish their exempt status generally must provide such certification on an IRS Form W-9.

 

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 timely filing the appropriate claim for refund with the IRS and furnishing any required information.

 

THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. YOU ARE URGED TO CONSULT YOUR TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO YOU OF THE PRIVATE PLACEMENT, INCLUDING THE APPLICABILITY AND EFFECT OF U.S. FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.

 

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How To Accept The Offer

 

If you hold ADSs through a broker or custodian that is a DTC Participant.

 

If you are an Eligible Shareholder and hold ADSs through a broker or custodian that is a participant in DTC (“DTC Participant”) and you want to accept the Offer, you will have to do each of the following no later than the Acceptance Deadline, which is 5:00 p.m. Eastern time on June 8, 2018:

 

1.       Instruct the DTC Participant to make a valid and timely Cash Dividend Waiver Election via DTC’s ATOP system and to make payment of the applicable Depositary fee of US$0.05 per ADS held as of the Record Date.

 

2.       Complete and sign the Amended and Restated Offer Acceptance Form and send the original signed form to OPI at the address provided in the form. A copy of the Amended and Restated Offer Acceptance Form is attached to this Offering Circular as Annex M.

 

3.       Complete and sign the Amended and Restated DTC Cash Dividend Waiver Election Form and send the original signed form to Renren at the address provided in the form. A copy of the Amended and Restated DTC Cash Dividend Waiver Election Form is attached to this Offering Circular as Annex N.

 

4.       Upload the personal financial information that is required by the Verification Agent to the Verification Agent’s website. Please note that you will not be able to complete this step until after the Verification Agent contacts you. See “The Verification Process” below for details on how to complete this procedure.

 

ALL OF THE ABOVE FORMS MUST BE RECEIVED AND ALL OF THE ABOVE STEPS MUST BE COMPLETED BEFORE THE ACCEPTANCE DEADLINE

 

In order for your acceptance of the Offer to be valid, you must continue to hold your ADSs as of the Record Date, which is after the Acceptance Deadline. Your acceptance of the Offer will be rejected to the extent you do not hold the Renren ADSs for which you accepted the Offer as of the Record Date.

 

To expedite the verification process, you may send a scan of your signed Amended and Restated DTC Cash Dividend Waiver Election Form in PDF form to Renren and a scan of your signed Amended and Restated Offer Acceptance Form in PDF form to OPI at the e-mail address provided in each form. However, Renren and OPI must still receive the original signed forms by the deadline, even if you have also sent PDFs.

 

The Depositary has arranged with DTC to establish the procedures through DTC’s ATOP corporate actions processing system for the Cash Dividend to be waivable upon election by DTC Participants on your behalf with respect to some or all of the ADSs you hold through DTC. When your DTC Participant makes an election via ATOP to waive the Cash Dividend as to any ADSs you hold, such ADSs will be immobilized in your brokerage or custodian account. The ATOP election is irrevocable once made. Once immobilized, your ADSs will not be available for settlement of any ADS sales you may enter into or any ADS cancellations. Any ADSs you purchase and that settle into your brokerage or custodian account after you make the ATOP election will not be included in the number of ADSs for which you have waived the Cash Dividend. A Depositary fee of US$0.05 per ADS held and in respect of which you make a valid acceptance of the Offer will be charged to your brokerage or custodian account.

  

CASH DIVIDEND WAIVER ELECTIONS AT DTC MUST BE SUBMITTED ON BEHALF OF EACH BENEFICIAL OWNER INDIVIDUALLY AND CANNOT BE AGGREGATED ACROSS CLIENTS OF DTC PARTICIPANTS.

 

OPI has arranged with the Verification Agent to contact you to verify your status as “accredited investor” upon OPI’s receipt of the Amended and Restated Offer Acceptance Form. If the Verification Agent is not able to verify your “accredited investor” status, your acceptance of the Offer and your Cash Dividend Waiver Election will be rejected.

 

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If you hold ADSs other than through a DTC Participant.

 

If you are an Eligible Shareholder that is a registered holder of ADSs as of the Record Date and you want to accept the Offer, you will have to do each of the following no later than the Acceptance Deadline, which is 5:00 p.m. Eastern time on June 8, 2018:

 

1.       Complete and sign the Amended and Restated Offer Acceptance Form and send the original signed form to OPI at the address provided in the form. A copy of the Amended and Restated Offer Acceptance Form is attached to this Offering Circular as Annex M.

 

2.       Complete and sign the Amended and Restated Non-DTC Cash Dividend Waiver Election Form and send the original signed form to Renren at the address provided in the form. A copy of the Amended and Restated Non-DTC Cash Dividend Waiver Election Form is attached to this Offering Circular as Annex O.

 

3.       Upload the personal financial information that is required by the Verification Agent to the Verification Agent’s website. Please note that you will not be able to complete this step until after the Verification Agent contacts you. See “The Verification Process” below for details on how to complete this procedure.

 

4.       Pay the Depositary the applicable Depositary fee of US$0.05 per ADS held as of the Record Date in respect of which you accept the Offer via wire transfer to the following account of the Depositary:

 

Citibank

ABA 021000089

DDA 30515291

NY Dividend Master

Reference: Renren Optional Dividend

Attn: Jayne Whalen

 

ALL OF THE ABOVE FORMS MUST BE RECEIVED AND ALL OF THE ABOVE STEPS MUST BE COMPLETED BEFORE THE ACCEPTANCE DEADLINE

 

In order for your acceptance of the Offer to be valid, you must continue to hold your ADSs as of the Record Date, which is after the Acceptance Deadline. Your acceptance of the Offer will be rejected to the extent you do not hold the Renren ADSs for which you accepted the Offer as of the Record Date. Any ADSs registered in your name after you elect to waive the Cash Dividend will not be included in the number of ADSs for which you waived the Cash Dividend.

 

To expedite the verification process, you may send a scan of your signed Amended and Restated Non-DTC Cash Dividend Waiver Election Form in PDF form to Renren and a scan of your signed Amended and Restated Offer Acceptance Form in PDF form to OPI at the e-mail address provided in each form. However, Renren and OPI must still receive the original signed forms by the deadline, even if you have also sent PDFs.

 

Partial elections are permitted only with respect to whole ADSs held as of the Record Date. The Depositary will establish procedures for you to be able to elect to waive the Cash Dividend with respect to all or some of the ADSs you hold as of the Record Date. If you decide to accept the Offer as to some but not all of the ADSs you hold other than through a DTC Participant, you must specify the number of such ADS you hold as of the Record Date in respect of which you elect to accept the Offer and waive the Cash Dividend.

 

OPI has arranged with the Verification Agent to contact you to verify your status as “accredited investor” upon OPI’s receipt of the Amended and Restated Offer Acceptance Form. If the Verification Agent is not able to verify your “accredited investor” status, your acceptance of the Offer and your Cash Dividend Waiver Election will be rejected.

 

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If you hold ordinary shares of Renren that are not represented by ADSs

 

If you are an Eligible Shareholder that holds ordinary shares of Renren not represented by ADSs and you want to accept the Offer, you will have to do each of the following no later than the Acceptance Deadline, which is 5:00 p.m. Eastern time on June 8, 2018:

 

1.       Complete and sign the Amended and Restated Offer Acceptance Form and send the original signed form to OPI at the address provided in the form. A copy of the Amended and Restated Offer Acceptance Form is attached to this Offering Circular as Annex M.

 

2.       Complete and sign the Amended and Restated Ordinary Share Cash Dividend Waiver Election Form and send the original signed form to Renren at the address provided in the form. A copy of the Amended and Restated Ordinary Share Cash Dividend Waiver Election Form is attached to this Offering Circular as Annex P.

 

3.       Upload the personal financial information that is required by the Verification Agent to the Verification Agent’s website. Please note that you will not be able to complete this step until after the Verification Agent contacts you. See “The Verification Process” below for details on how to complete this procedure.

 

ALL OF THE ABOVE FORMS MUST BE RECEIVED AND ALL OF THE ABOVE STEPS MUST BE COMPLETED BEFORE THE ACCEPTANCE DEADLINE

 

In order for your acceptance of the Offer to be valid, you must continue to hold your ordinary shares as of the Record Date, which is after the Acceptance Deadline. Your acceptance of the Offer will be rejected to the extent you do not hold the Renren shares for which you accepted the Offer as of the Record Date. Any ordinary shares registered in your name after you elect to waive the Cash Dividend will not be included in the number of ordinary shares for which you waived the Cash Dividend.

 

To expedite the verification process, you may send a scan of your signed Amended and Restated Ordinary Share Cash Dividend Waiver Election Form in PDF form to Renren and a scan of your signed Amended and Restated Offer Acceptance Form in PDF form to OPI at the e-mail address provided in each form. However, Renren and OPI must still receive the original signed forms by the deadline, even if you have also sent PDFs.

 

If you hold ordinary shares of Renren not represented by ADSs, you may accept the Offer and waive the Cash Dividend with respect to all or some of the ordinary shares you hold as of the Record Date, in which case you must specify the number of ordinary shares you hold as of the Record Date in respect of which you elect to accept the Offer and waive the Cash Dividend.

 

OPI has arranged with the Verification Agent to contact you to verify your status as “accredited investor” upon OPI’s receipt of the Amended and Restated Offer Acceptance Form. If the Verification Agent is not able to verify your “accredited investor” status, your acceptance of the Offer and your Cash Dividend Waiver Election will be rejected.

 

If you hold ADSs and/or ordinary shares in different places or different ways

 

If you have ADSs and/or ordinary shares that you hold in different places or in different ways and you wish to accept the Offer, you must follow the procedure applicable to each set of ADSs and/or ordinary shares that you hold, as described above.

 

If there are multiple owners of ordinary shares or ADSs of Renren

 

If there are multiple owners of an ordinary share or ADS of Renren, then each owner must sign and send Renren his, her or its own separate Cash Dividend Waiver Election Form of the appropriate type (as detailed above) covering those ordinary shares or ADSs and each owner must sign his, her or its own separate Amended and Restated Offer Acceptance Form. The waiver and acceptance are only valid if all owners validly complete and send Renren the required forms. If multiple owners validly accept the Offer, the OPI Shares will be registered in the names of all of the owners collectively on the register of members of OPI.

 

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Definitions of Accredited Investor and Qualified Purchaser

 

The term “accredited investor” is defined in Rule 501(a) under the Securities Act of 1933 as follows:

 

(a) Accredited investor. Accredited investor shall mean any person who comes within any of the following categories, or who the issuer reasonably believes comes within any of the following categories, at the time of the sale of the securities to that person:

 

(1) Any bank as defined in section 3(a)(2) of the Act, or any savings and loan association or other institution as defined in section 3(a)(5)(A) of the Act whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934; any insurance company as defined in section 2(a)(13) of the Act; any investment company registered under the Investment Company Act of 1940 or a business development company as defined in section 2(a)(48) of that Act; any Small Business Investment Company licensed by the U.S. Small Business Administration under section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in section 3(21) of such act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors;

 

(2) Any private business development company as defined in section 202(a)(22) of the Investment Advisers Act of 1940;

 

(3) Any organization described in section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000;

 

(4) Any director, executive officer, or general partner of the issuer of the securities being offered or sold, or any director, executive officer, or general partner of a general partner of that issuer;

 

(5) Any natural person whose individual net worth, or joint net worth with that person's spouse, exceeds $1,000,000.

 

(i) Except as provided in paragraph (a)(5)(ii) of this section, for purposes of calculating net worth under this paragraph (a)(5):

 

(A) The person's primary residence shall not be included as an asset;

 

(B) Indebtedness that is secured by the person's primary residence, up to the estimated fair market value of the primary residence at the time of the sale of securities, shall not be included as a liability (except that if the amount of such indebtedness outstanding at the time of sale of securities exceeds the amount outstanding 60 days before such time, other than as a result of the acquisition of the primary residence, the amount of such excess shall be included as a liability); and

 

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(C) Indebtedness that is secured by the person's primary residence in excess of the estimated fair market value of the primary residence at the time of the sale of securities shall be included as a liability;

 

(ii) Paragraph (a)(5)(i) of this section will not apply to any calculation of a person's net worth made in connection with a purchase of securities in accordance with a right to purchase such securities, provided that:

 

(A) Such right was held by the person on July 20, 2010;

 

(B) The person qualified as an accredited investor on the basis of net worth at the time the person acquired such right; and

 

(C) The person held securities of the same issuer, other than such right, on July 20, 2010.

 

(6) Any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year;

 

(7) Any trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in § 230.506(b)(2)(ii); and

 

(8) Any entity in which all of the equity owners are accredited investors.

 

The term “qualified purchaser” is defined under Section 2(a)(51) of the Investment Company Act as follows:

 

(A) “Qualified purchaser” means—

 

(i) any natural person (including any person who holds a joint, community property, or other similar shared ownership interest in an issuer that is excepted under section 80a-3(c)(7) of this title with that person’s qualified purchaser spouse) who owns not less than $5,000,000 in investments, as defined by the Commission;

 

(ii) any company that owns not less than $5,000,000 in investments and that is owned directly or indirectly by or for 2 or more natural persons who are related as siblings or spouse (including former spouses), or direct lineal descendants by birth or adoption, spouses of such persons, the estates of such persons, or foundations, charitable organizations, or trusts established by or for the benefit of such persons;

 

(iii) any trust that is not covered by clause (ii) and that was not formed for the specific purpose of acquiring the securities offered, as to which the trustee or other person authorized to make decisions with respect to the trust, and each settlor or other person who has contributed assets to the trust, is a person described in clause (i), (ii), or (iv); or

 

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(iv) any person, acting for its own account or the accounts of other qualified purchasers, who in the aggregate owns and invests on a discretionary basis, not less than $25,000,000 in investments.

 

(B) The Commission may adopt such rules and regulations applicable to the persons and trusts specified in clauses (i) through (iv) of subparagraph (A) as it determines are necessary or appropriate in the public interest or for the protection of investors.

 

(C) The term “qualified purchaser” does not include a company that, but for the exceptions provided for in paragraph (1) or (7) of section 80a-3(c) of this title, would be an investment company (hereafter in this paragraph referred to as an “excepted investment company”), unless all beneficial owners of its outstanding securities (other than short-term paper), determined in accordance with section 80a-3(c)(1)(A) of this title, that acquired such securities on or before April 30, 1996 (hereafter in this paragraph referred to as “pre-amendment beneficial owners”), and all pre-amendment beneficial owners of the outstanding securities (other than short-term paper) of any excepted investment company that, directly or indirectly, owns any outstanding securities of such excepted investment company, have consented to its treatment as a qualified purchaser. Unanimous consent of all trustees, directors, or general partners of a company or trust referred to in clause (ii) or (iii) of subparagraph (A) shall constitute consent for purposes of this subparagraph.

 

Please consult your legal advisor if you are unclear about the meanings of these definitions.

 

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The Verification Process

 

OPI is offering the OPI Shares to prospective investors pursuant to Rule 506(c) of Regulation D under the Securities Act, which permits OPI to utilize general solicitation and general advertising for the offering. Under the requirements of Rule 506(c), all purchasers of the OPI Shares must be “accredited investors” as defined in Regulation D and OPI must take all reasonable steps to verify that all such purchasers are accredited investors. As a result, you must provide sufficient financial information for OPI to have a reasonable basis to believe that you are an accredited investor.

 

In order to assist OPI in verifying your accredited investor status, OPI has engaged VerifyInvestor.com, an independent, third-party verification service, to serve as the Verification Agent and conduct the accredited investor verification review on OPI’s behalf.

 

You must fill out and sign the applicable Cash Dividend Waiver Election Form and send the original signed form to Renren at the address provided in the instructions. In addition, you may send a scan of the signed Cash Dividend Waiver Election Form in PDF form to Renren at the e-mail address provided in the form to expedite the process, but you must still send the original signed form as well.

 

After Renren receives your signed Cash Dividend Waiver Election Form, it will provide your e-mail address to the Verification Agent. You will receive an e-mail from the Verification Agent to the e-mail address indicated in your Cash Dividend Waiver Election Form, directing you to the Verification Agent’s website at VerifyInvestor.com where you will be asked certain questions which may require you to disclose certain personal or corporate financial or other information. The e-mail will come from support@verifyinvestor.com with the subject heading “Verification requested by Oak Pacific Investment”. Please do NOT ignore this e-mail or you will be unable to purchase the OPI Shares. If you do not receive this e-mail within 24 hours after your Cash Dividend Waiver Election Form has reached Renren, please check your spam filter and if necessary contact the Information Agent.

 

After you have uploaded the information requested by the Verification Agent to its website, the Verification Agent will review the information and verify your status to OPI. OPI will not review your information directly itself.

 

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Where You Can Find Additional Information

 

Renren is subject to the periodic reporting and other informational requirements of the Exchange Act and to the rules of the New York Stock Exchange. Renren’s public announcements regarding the Transaction will be furnished to the SEC on Form 6-K and may be accessed at www.sec.gov or on Renren’s investor relations website at ir.renren-inc.com. This Offering Circular, including the annexes, has been posted on Renren’s website at ir.renren-inc.com. The information on Renren’s website is not part of this Offering Circular.

 

OPI is not subject to periodic reporting or other informational requirements imposed by any securities regulator or stock exchange. If you become a shareholder of OPI, you may contact OPI at the contact information that will be provided to you after your shares have been issued.

 

If you have any questions or need further information about the Offer or the Transaction in general, please contact Georgeson LLC, the information agent, at (800) 509-1078 or by e-mail at Renren@georgeson.com.

 

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Index of Annexes

 

The following documents are included as annexes to this Offering Circular.

 

Annex   Document
A   Form of OPI Memorandum and Articles of Association
B   Form of OPI Shareholders Agreement
C   Form of Renren Lianhe Shareholders Agreement
D   Form of Renren Lianhe Memorandum and Articles of Association
E   Form of Separation and Distribution Agreement
F   Form of Services Agreement
G   Senior Secured Promissory Note (Clear Light Ventures Limited)
H   Warrant (Clear Light Ventures Limited)
I   Form of Secured Promissory Note (SoftBank)
J   Form of Secured Promissory Note (Renren)
K   Tripartite Deed of Subordination
L   Fairness Opinion
M   Amended and Restated Offer Acceptance Form
N   Amended and Restated DTC Cash Dividend Waiver Election Form
O   Amended and Restated Non-DTC Cash Dividend Waiver Election Form
P   Amended and Restated Ordinary Share Cash Dividend Waiver Election Form
Q   Form of Share Incentive Plan

 

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Annex A

 

Form of

 

THE COMPANIES LAW (AS REVISED)

 

Amended and Restated

 

MEMORANDUM

 

AND

 

ARTICLES OF ASSOCIATION

 

OF

 

OAK PACIFIC INVESTMENT

 

(as amended and restated by Special Resolution dated April 27, 2018 and effective conditional and immediately prior to the completion of the Company-Renren Separation)

 

 

 

 

THE COMPANIES LAW (AS REVISED)

 

Amended and Restated

 

MEMORANDUM OF ASSOCIATION

 

OF

 

OAK PACIFIC INVESTMENT

 

(as amended and restated by Special Resolution dated April 27, 2018 and effective conditional and immediately prior to the completion of the Company-Renren Separation)

 

1The name of the Company is Oak Pacific Investment.

 

2The registered office will be situated at the offices of Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman KY1-1104, Cayman Islands, or at such other place in the Cayman Islands as the Directors may from time to time decide.

 

3Subject to the Shareholders Agreement, the only business of the Company shall be to conduct the Business (as defined in the Articles).

 

4The Company shall have and be capable of exercising all the powers of a natural person of full capacity as provided by law.

 

5The liability of the Members is limited to the amount (if any) unpaid on their shares.

 

6The authorised share capital of the Company is USD 3,500,000 divided into 3,500,000,000 ordinary shares of par value USD 0.001 each (Ordinary Shares), of which 3,000,000,000 are designated as Class A Ordinary Shares and 500,000,000 are designated as Class B Ordinary Shares.

 

7The Company has power to register by way of continuation as a body corporate limited by shares under the laws of any jurisdiction outside the Cayman Islands and to apply for deregistration in the Cayman Islands.

 

8Capitalised terms that are not defined herein bear the same meaning given to them in the Articles of Association of the Company.

 

 

 

 

TABLE OF CONTENTS

 

  Page
   
INTERPRETATION 1
REGISTERED AND OTHER OFFICES 11
SERVICE PROVIDERS 11
ISSUE OF SHARES 11
PREEMPTIVE RIGHTS 11
SHARE RIGHTS 12
REGISTER OF MEMBERS 15
RECORD DATE 15
SHARE CERTIFICATES 15
TRANSFER OF SHARES 16
TRANSMISSION OF SHARES 17
REDEMPTION AND PURCHASE OF SHARES 17
VARIATION OF SHARE RIGHTS 18
NON-RECOGNITION OF TRUSTS 18
LIEN 18
CALLS ON SHARES 19
FORFEITURE OF SHARES 20
INCREASE OF CAPITAL 21
ALTERATION OF CAPITAL 21
GENERAL MEETINGS 21
NOTICE OF GENERAL MEETINGS 22
PROCEEDINGS AT GENERAL MEETINGS 22
VOTING 23
PROXIES AND CORPORATE REPRESENTATIVES 24
ELECTION AND REMOVAL OF DIRECTORS 26
RESIGNATION AND DISQUALIFICATION OF DIRECTORS 27
POWERS AND DUTIES OF DIRECTORS 27
PROCEEDINGS OF DIRECTORS 29
DIRECTORS' INTERESTS 31
DELEGATION OF DIRECTORS' POWERS 32
DIRECTORS' AND MANAGEMENT REMUNERATION 33
SEALS AND DEEDS 33
DIVIDENDS 33
RESERVES 36
CAPITALISATION OF PROFITS 36
SHARE PREMIUM ACCOUNT 37
ACCOUNTING RECORDS 37
SERVICE OF NOTICES AND DOCUMENTS 38
WINDING UP 39
INDEMNITY AND INSURANCE 39
CONTINUATION 40
AMENDMENT OF MEMORANDUM AND ARTICLES 40
   
Schedule 1 41
Schedule 2 42

 

 

 

 

THE COMPANIES LAW (AS REVISED)

 

AMENDED AND RESTATED

ARTICLES OF ASSOCIATION

 

OF

 

OAK PACIFIC INVESTMENT

 

(as amended and restated by Special Resolution dated ____________, 2018)

 

INTERPRETATION

 

1.Table A of the First Schedule to the Law shall not apply to the Company.

 

2.In these Articles, the following terms shall have the following meanings unless the context otherwise requires:

 

Affiliate: with respect to any specified Person, any other Person that directly or indirectly, whether or not through one or more intermediaries, controls, is controlled by, or is under common control with, the Person specified, including any investment fund in respect of which the specified Person or a Person controlling or under common control with such Person directly or indirectly controls, manages or advises or acts as a general partner or managing partner or in any similar capacity. For the purposes of these Articles, 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, an investment management mandate, or otherwise, and the terms controlling and controlled have meanings correlative to the foregoing. For the purposes of these Articles, David Chao shall be considered an Affiliate of DCM;

 

Annual Business Plan: the annual business plan and budget of the Company in respect of the Business (except the ZenZone Business), as revised from time to time in accordance with Article 116;

 

Articles: these amended and restated articles of association of the Company as amended or supplemented from time to time by Special Resolution;

 

Auditors: the auditors for the time being of the Company (if any);

 

Board: the board of directors of the Company;

 

Board Meeting: a meeting of the Board that is duly convened and held in accordance with these Articles;

 

Board Reserved Matter: any of the following:

 

(a)any acquisition, disposition or restructuring of assets (including in respect of the SoFi Investment);

 

(b)the incurrence of any capital expenditure in excess of USD 1 million in a single transaction or a series of related transactions in any 12-month period;

 

(c)the provision of any loans or guarantees in excess of USD 1 million, in a single transaction or a series of related transactions in any 12-month period;

 

(d)the incurrence of any debt or guarantees in excess of USD 1 million, in a single transaction or a series of related transactions in any 12-month period, other than the loans obtained by the Company under the SB Loan Documents and the Renren Loan Documents;

 

 1 

 

 

(e)any votes to be exercised either at the board or shareholder level by the Company or any Subsidiary in respect of any Portfolio Company as long as the Company or relevant Subsidiary's investment in such Portfolio Company represents at least 20% of the total assets of the Company;

 

(f)any change to the distribution policy, accounting policies, valuation policy, leverage policy, risk management policies and other similar policies applicable to the Company or any Subsidiary;

 

(g)the approval of the Company's annual financial statements;

 

(h)the appointment of, and changes to the terms applicable to, significant service providers including without limitation Renren (as service provider under the Services Agreement), the Auditors, tax advisors and appraisers;

 

(i)the entry into any foreign exchange contracts, interest rate swaps or other derivative instruments in excess of USD 1 million in a single transaction or a series of related transactions in any 12-month period;

 

(j)any direct or indirect transfer of Shares or other equity securities (including the creation of any Encumbrance or other transfer of any rights and interests or the granting of any economic participation therein) by the Management (any transfer in contravention of this provision shall be void, and the Board and the Company shall not register such transfer);

 

(k)the initiation, withdrawal or settlement of any Proceedings, except where (i) such Proceedings are not material to the Company or any of its investments, (ii) such Proceedings do not involve any Member or shareholder of any of the Company's Portfolio Companies, and (iii) the amount in dispute is not over USD 1 million;

 

(l)any change to the composition of senior management or their terms of employment including compensation such as grants to management under any equity incentive or compensation plan other than the adjustment of exercise price pursuant to clause 11.4 of the Shareholders Agreement;

 

(m)any material change in the nature or scope of the Business;

 

(n)any proposed listing of equity securities of the Company on any securities exchange;

 

(o)the entry into any agreement that restricts the Company or any Subsidiary's freedom to conduct its business, including with respect to its ability to freely dispose of any of its assets;

 

(p)the entry into or amendment of any other material contract including any agreement that is (i) outside the ordinary course, (ii) not on an arm's length basis, (iii) unusual or onerous, or (iv) contemplated to have income or payments in excess of USD 1 million in the aggregate, in a single transaction or a series of related transactions in any 12-month period;

 

(q)other than (i) the security to be granted to SBGCL under the SB Loan Documents and to Renren under the Renren Loan Documents, (ii) any transfer of SoFi Shares pursuant to any exercise of the EB Warrant, (iii) any exercise by DCM of its rights under Article 101.1 in accordance with the terms of Article 101.1, and (iv) any exercise by SB of its rights under Article 101.2 in accordance with the terms of Article 101.2, any matter or decision which relates to the Company's investment in SoFi, including but not limited to any exercise of voting or other rights and powers by the Company or any of its Subsidiaries, either in its capacity as a SoFi shareholder or acting through its representative on SoFi's board of directors, in respect of the Company's investment in SoFi, any direct or indirect dealing by the Company of its investment in SoFi, the creation of any Encumbrance over the Company's investment in SoFi, and any distribution of any SoFi equity securities or the distribution of any proceeds from any dealing by the Company of its investment in SoFi;

 

 2 

 

 

(r)any grant of an award, or modification of an award previously granted, pursuant to the Share Option Plan;

 

(s)the amendment of any Transaction Documents; and

 

(t)any agreement to do any of the foregoing,

 

provided that (a) any matter which is within the scope of the ZenZone Business shall not be a Board Reserved Matter as long as such matter does not relate to, require any action by, or otherwise affect, the Company, any Subsidiary other than the Zhenzhong Subsidiaries, SoFi (as applicable) or any Portfolio Company, and (b) any Board Reserved Matter which is also a Member Reserved Matter shall only require the Reserved Matter Consent and shall not also require approval of the Directors in accordance with Article 77.

 

Business: (i) operating the ZenZone Business; (ii) the holding of securities in SoFi, Renren Lianhe and Portfolio Companies as identified in Schedule 1 hereto; (iii) the holding of securities issued by such other Persons as from time to time approved in accordance with the Shareholders Agreement and these Articles; provided, however, that OPI may make additional investments up to (x) US$2 million as set forth in Schedule 2, and (y) US$5 million in the aggregate including the additional investment referred to in (x), and (iv) the management and orderly distribution or disposition of investments specified in (ii) and (iii) to achieve maximum profit for the Members;

 

Business Day: a day (other than a Saturday or Sunday or other day on which commercial banks are authorised or required by law to close) on which commercial banks are open for the transaction of normal banking business in the United States, the United Kingdom, Hong Kong, Japan and the Cayman Islands;

 

Catch-Up Ratio: has the meaning given in Article 101.4.2(i);

 

Change of Control: with respect to a Person, the occurrence of any of the following, whether in a single transaction or in a series of related transactions: (A) an amalgamation, arrangement, merger, consolidation, scheme of arrangement or similar transaction (i) in which such Person is not the surviving entity, except for a transaction the principal purpose of which is to change the jurisdiction in which such Person is incorporated or (ii) as result of which the holders of the voting securities of such Person as of the date hereof do not hold more than 50% of the combined voting power of the voting securities of the surviving entity, or (B) sale, transfer or other disposition of all or substantially all of the assets of such Person (including without limitation in a liquidation, dissolution or similar proceeding); provided, however, with respect to SoftBank Group Corp., an event is not a "Change of Control Event" if after the occurrence of such event, Mr. Masayoshi Son continues to hold no less than 5% of the total issued and outstanding share capital of SoftBank Group Corp. or the surviving entity (as the case may be);

 

Class A Ordinary Shares: class A Ordinary Shares of US$0.001 par value each in the capital of the Company which carry the rights set forth in the Shareholders Agreement and these Articles;

 

Class B Ordinary Shares: class B Ordinary Shares of US$0.001 par value each in the capital of the Company which carry the rights set forth in the Shareholders Agreement and these Articles;

 

Class B Member: any holder of Class B Ordinary Shares from time to time;

 

clear days: in relation to the period of a notice that period excluding the day on which the notice is served or deemed to be served and the day for which it is given or on which it is to take effect;

 

 3 

 

 

Clear Light: Clear Light Ventures Limited (泓光創投有限公司), a British Virgin Islands business company, which is wholly owned by China Everbright Limited;

 

Company: the above named company;

 

DCM: DCM III, L.P., DCM III-A, L.P., and DCM Affiliates Fund III, L.P., all of which are companies incorporated as limited partnerships under the Laws of the state of Delaware and their Affiliates;

 

DCM Initial SoFi In-Kind Distribution: has the meaning set out in Article 101.1;

 

DCM Initial SoFi Shares: in relation to DCM, a total of 1,283,710 SoFi Shares, consisting of 182,077 Series F SoFi Shares, 29,362 Series E SoFi Shares, 138,615 Series D SoFi Shares and 933,656 Series B SoFi Shares;

 

Directors: the directors for the time being of the Company;

 

Disabling Conduct: has the meaning set out in Article 72.3;

 

Distributable Proceeds: as of any date of determination, proceeds (other than SoFi Proceeds) received by the Company in respect of a Portfolio Investment, including from the sale or other disposition of (including any recapitalization or similar transaction), or dividends, interest or other income from or in respect of, a Portfolio Investment;

 

EB Warrant: the warrant dated issued by Renren SF to Clear Light;

 

Electronic Record: has the same meaning as in the Electronic Transactions Law (as revised) of the Cayman Islands;

 

Encumbrance: (i) any mortgage, charge (whether fixed or floating), pledge, lien, hypothecation, assignment, deed of trust, title retention, security interest or other encumbrance of any kind securing, or conferring any priority of payment in respect of, any obligation of any Person, including any right granted by a transaction which, in legal terms, is not the granting of security but which has an economic or financial effect similar to the granting of security under applicable Law and (ii) any proxy, power of attorney, voting trust agreement, interest, option, right of first offer, negotiation or refusal or transfer restriction in favour of any Person;

 

Everbright Loan Documents means (i) the Subscription Agreement dated entered into by and among the Company, Renren, Renren Lianhe, Renren SF and Clear Light, (ii) the Senior Secured Promissory Note dated issued by Renren Lianhe to Clear Light, (iii) the EB Warrant dated issued by Renren SF in favour of Clear Light, (iv) the Equitable Mortgage Over Shares in Social Finance, Inc., dated by and between Renren SF and Clear Light and (v) the Subordination Deed;

 

Exchange Act: the United States Securities Exchange Act of 1934, as amended;

 

Financial Year: has the meaning set out in Article 116.2;

 

Fully Diluted Basis: when calculating the number of Shares as of a determination date, the sum of (a) the total number of issued and outstanding Ordinary Shares as of such determination date plus (b) the total number of Shares into which any outstanding (as of such determination date) preferred shares, debentures, options, warrants, convertible securities or other rights convertible, exercisable or exchangeable for Shares are convertible, exercisable or exchangeable, as the case may be;

 

Insolvency Event: a Person:

 

(a)becoming insolvent or unable to pay its debts as they fall due or being adjudicated bankrupt;

 

 4 

 

 

(b)having any judgment or order against it which is not stayed or complied with within fourteen (14) days; any execution, sequestration or other enforcement action or any analogous or similar procedure in any jurisdiction or any other form of legal process being commenced against a material part of the assets of the Person and not being discharged within seven (7) days; having any steps taken to enforce any security over any assets of the Person;

 

(c)being dissolved or entering into liquidation, provisional liquidation, administration, administrative receivership, receivership, a voluntary arrangement, a scheme of arrangement with creditors, any analogous or similar procedure in any jurisdiction or any other form of procedure relating to insolvency, reorganisation or dissolution in any jurisdiction;

 

(d)ceasing to carry on business, stopping payment of its debts or any class of them, or entering into any compromise or arrangement in respect of its debts or any class of them, or taking any step to do any of those things; or

 

(e)having all or substantially all of its assets subject to attachment, sequestration, execution or any analogous or similar procedure in any jurisdiction or any other form of procedure relating to the enforcement of legal or equitable security or charge in any jurisdiction and that procedure not being terminated or discharged within fourteen (14) days;

 

Junior Debt: has the meaning set out in Article 101.4.1;

 

Law: the Companies Law (as revised) of the Cayman Islands;

 

Management: each of Mr. Chen and Mr. Liu;

 

Management Family Members: with respect to each Management at any given time, such Management and his spouse and children at such time, collectively;

 

Member: has the same meaning as in the Law;

 

Member Reserved Matter: any of the following:

 

(a)the adoption of, amendment of, or deviations from, the Annual Business Plan;

 

(b)any merger, spinoff or any form of recapitalization, reorganization, liquidation or dissolution;

 

(c)the declaration and payment of any dividend or any other distributions in any form (except in respect of the SoFi Investment pursuant to Articles 101.1, 101.2, 101.3 and 101.4);

 

(d)any alteration to share capital or rights attaching to Shares or the shares of any Subsidiary;

 

(e)the creation, allotment, issuance, repurchase or redemption of any Shares, the grant of any options for the issuance of any Shares or the issuance of any New Securities or debt securities, except in accordance with the Shareholders Agreement;

 

(f)the adoption or variation of any share option scheme;

 

(g)the creation of or permission to create or suffer to subsist any mortgage, pledge, charge or other Encumbrance or third party interest on any assets other than the security over certain SoFi Shares created under the SB Loan Documents and the Renren Loan Documents;

 

(h)any change to the size, composition or compensation of the Board or the board of any Subsidiary or the delegation of any powers by the Board or the board of any Subsidiary;

 

(i)any amendment or modification of the Memorandum and Articles or other governing documents;

 

 5 

 

 

(j)the entry by the Company, any Subsidiary, any Portfolio Company or any of their respective Affiliates into material transactions with SB, Renren Lianhe, DCM, the Management or their respective Affiliates (for this item (j) any Members interested in the proposed transaction shall not be entitled to vote, and the Reserved Matter Consent required shall be the prior written approval from Members holding no less than 75% of all votes attached to all Shares held by the remaining Members), except to the extent such transactions are contemplated under the Shareholders Agreement or any other Transaction Document including the exercise of the rights of DCM under Article 101.1 or SB under Article 101.2, which, if exercised in accordance with the terms of Article 101.1 by DCM or Article 101.1 by SB, shall require no further action or approval of the Members under these Articles;

 

(k)any incurrence of, modification of terms of, extension of any maturity, or prepayment of material indebtedness, including under the Everbright Loan Documents, SB Loan Documents and the Renren Loan Documents, but not including mandatory prepayment of the indebtedness under the Everbright Loan Documents, SB Loan Documents and the Renren Loan Documents;

 

(l)any approval by the Company of any direct or indirect sale, pledge, encumbrance, assignment, transfer or other disposal of any shares of Renren Lianhe Holdings held by Management;

 

(m)any change to the composition of senior management or their terms of employment, including compensation such as grants to management under any equity or compensation plan other than the adjustment of exercise price pursuant to clause 11.4 of the Shareholders Agreement;

 

(n)approval by the Company of the grant of any salary or consulting fees to any employee or service provider in excess of US$500,000; and

 

(o)any agreement to do any of the foregoing;

 

provided that any matter which is within the scope of the ZenZone Business (to the extent such matter does not relate to, require any action by or otherwise affect the Company, any Subsidiary other than the Zhenzhong Subsidiaries, SoFi (as applicable), or any Portfolio Company) shall not be a Member Reserved Matter.

 

Memorandum: the amended and restated memorandum of association of the Company for the time being;

 

Month: a calendar month;

 

Mr. Chen: Mr. Joseph Chen, a citizen of the United States with passport number [x];

 

Mr. Liu: Mr. James Jian Liu, a citizen of the People's Republic of China with passport number [x];

 

New Indebtedness: indebtedness of the Company (for the avoidance of doubt, indebtedness arising pursuant to the Everbright Loan Documents, the SB Loan Documents and the Renren Loan Documents shall not be New Indebtedness);

 

New Issuance: any issuance of New Securities or incurrence of New Indebtedness;

 

New Securities: any Shares and any securities convertible, exerciseable or exchangeable into, or carrying the right to subscribe for, any Shares, and any debt, whether or not convertible or exchangeable into Shares;

 

Option: has the meaning set out in the Share Option Plan;

 

Ordinary Resolution: a resolution:

 

(a)passed by a simple majority of such Members as, being entitled to do so, vote in Person or by proxy, at a duly convened general meeting of the Company and where a poll is taken regard shall be had in computing a majority to the number of votes to which each Member is entitled; or

 

 6 

 

 

(b)a written resolution signed by all of the Members entitled to vote at a general meeting of the Company in one or more instruments each signed by one or more of the Members and the effective date of the resolution so adopted shall be the date on which the instrument, or the last of such instruments, if more than one, is executed;

 

Ordinary Share: means an ordinary share in the capital of the Company;

 

Pending Director: has the meaning set out in Article 77.2;

 

Percentage Ownership: with respect to a Person's ownership in Class B Ordinary Shares or any holder thereof, the equity interests that such Person directly or indirectly holds in such Class B Ordinary Shares or holder thereof as a percentage of all of the outstanding equity interests in such Class B Ordinary Shares or holder thereof;

 

Person: any individual, partnership, firm, corporation, limited liability company, association, trust, fund, firm, joint venture, association, unincorporated organization or other entity, as well as any syndicate or group that would be deemed to be a person under section 13(d)(3) of the Exchange Act;

 

Portfolio Company: the issuer of any Portfolio Investment;

 

Portfolio Investment: any debt or equity investment (other than the SoFi Investment) made, directly or indirectly, by the Company, including but not limited to, the equity securities in Portfolio Companies (other than SoFi) as identified in Schedule 2 hereto, and the securities issued by such other Persons as from time to time approved in accordance with these Articles;

 

Proceeding: any legal dispute, investigation, action, suit, arbitration or other proceeding, whether civil or criminal, judicial, administrative, investigative or otherwise, by or on behalf of or against any Person;

 

Pro-Rata Fully Diluted Share: in relation to a Member as of a determination date, a fraction, the numerator of which is equal to the number of issued and outstanding Shares held by such Member as of such determination date, and the denominator of which is equal to the number of Shares, on a Fully Diluted basis, as of such determination date;

 

Registered Office: the registered office for the time being of the Company in the Cayman Islands;

 

Register of Members: the register of Members to be kept in accordance with the Law and includes every duplicate Register of Members;

 

Renren: Renren Inc., an exempted company incorporated under the laws of the Cayman Islands;

 

Renren Lianhe: Renren Lianhe Holdings, an exempted company incorporated under the laws of the Cayman Islands;

 

Renren Loan Documents means, each dated as of or prior to the date hereof, (i) the Secured Promissory Note issued by the Company to Renren, (ii) the Renren Stock Pledge Agreement by and between Renren and Renren SF and (iii) the Subordination Deed;

 

Renren SF: Renren SF Holdings Inc., an exempted company incorporated under the laws of the Cayman Islands;

 

Representatives: with respect to any Person, any of such Person's Affiliates, managers, partners, shareholders, members, trustees, officers, employees, directors and any other Person who acts on behalf of or represents such Person;

 

Reserved Matter Consent: the prior written approval of Members together holding no less than 75% of all votes attached to all issued Shares or as otherwise required in respect of any individual Member Reserved Matter;

 

 7 

 

 

Resolution Proposal: has the meaning set out in Article 77.2;

 

SB: collectively, SoftBank Group Corp., a company incorporated under the Laws of Japan, and all entities directly or indirectly controlled by SoftBank Group Corp. and holding Shares from time to time, and SB Entity means any of them, which as of the date of the Shareholders Agreement includes SBGCL and SBPP;

 

SB Base Holding: 50% of that number of Ordinary Shares (irrespective of whether they are Class A Ordinary Shares or Class B Ordinary Shares) representing the sum of (1) the number of Class A Ordinary Shares that were collectively held by SB as of the date hereof and (2) the number of Class B Ordinary Shares that were collectively held by SB as of the date hereof;

 

SB Director: has the meaning set out in Article 72.1.3;

 

SB Initial SoFi Shares means: in relation to SB, a total of 5,918,366 SoFi Shares, consisting of 839,441 Series F SoFi Shares, 135,367 Series E SoFi Shares, 639,067 Series D SoFi Shares and 4,304,490 Series B SoFi Shares;

 

SB Initial SoFi In-Kind Distribution: has the meaning set out in Article 101.2;

 

SB Loan Documents means, each as of or prior to the date hereof, (i) the Secured Promissory Note entered into by and between Renren Lianhe and SBGCL, (ii) the Subordination Deed, and (iii) the SB Stock Pledge Agreement by and between SBGCL and Renren SF;

 

SBGCL: SoftBank Group Capital Limited, a company incorporated with limited liability under the laws of England and Wales with registered number 9569889 whose registered office is at 5th Floor, 6 St.Andrew's Street, London EC4A 3AE, United Kingdom;

 

SBPP: SB Pan Pacific Corporation;

 

Seal: the common seal of the Company (if any) and includes every duplicate seal;

 

Secretary: the secretary for the time being of the Company and any Person appointed to perform any of the duties of the secretary;

 

Services Agreement: the Services Agreement by and between the Company and Renren dated as of the date of the Shareholders Agreement];

 

Share Option Plan: the share option plan that was adopted by the Board on, or prior to, the date hereof;

 

Share Premium Account: the share premium account established in accordance with these Articles and the Law;

 

Shareholders Agreement: the shareholders agreement, dated on or around 2018, among SBGCL, Mr. Chen, Mr. Liu, DCM and the Company;

 

Shares: the Class A Ordinary Shares, the Class B Ordinary Shares and each other share in the capital of the Company, and Share shall mean any of them; provided that Shares shall not include any unexercised options to purchase Ordinary Shares or any unvested restriced stock units;

 

SoFi: Social Finance, Inc.;

 

SoFi Distributable Shares: with respect to a Member as of a determination date, a number of SoFi Shares, rounded down to the nearest whole share, equal to such Member's Pro Rata Fully Diluted Share multiplied by the number of SoFi Shares equal to (a) all SoFi Shares owned by the Company and its Subsidiaries as of the date hereof; minus (b) all SoFi Shares that, as of such determination date, either (i) are subject to the pledges, charges and other security interest arrangements required under and implemented pursuant to the Everbright Loan Documents , the SB Loan Documents or the Renren Loan Documents or (ii) have been sold or otherwise disposed of by the Company or its Subsidiaries, except to the extent the SoFi Proceeds from such sale or disposition have been distributed to Members in accordance with the terms hereof; minus (c) with respect to any Member that acquired Shares pursuant to the exercise of one or more Options prior to such determination date, where the exercise price of such Option(s) was adjusted pursuant to clause 11.4 of the Shareholders Agreement in connection with one or more SoFi Distributions, the aggregate SoFi Distribution Adjustment Shares. For purposes of this definition, SoFi Distribution Adjustment Shares means, with respect to a SoFi Distribution pursuant to which the exercise price of an Option was adjusted pursuant to clause 11.4 of the Shareholders Agreement, (i) if such SoFi Distribution comprised SoFi Shares distributed in kind, (1) the number of such SoFi Shares distributed in kind; divided by (2) the number of issued and outstanding Shares as of the date of such SoFi Distribution; multiplied by (3) the number of Shares underlying such Option; and (ii) if such SoFi Distribution comprised SoFi Proceeds, (1) the number of SoFi Shares sold or otherwise disposed of to receive such SoFi Proceeds; divided by (2) the number of issued and outstanding Shares as of the date of such SoFi Distribution; multiplied by (3) the number of Shares underlying such Option;

 

 8 

 

 

SoFi Distribution: a distribution of SoFi Proceeds or SoFi Shares in kind pursuant to these Articles and the Shareholders Agreement, including the DCM Initial SoFi In-Kind Distribution, the SB Initial SoFi In-Kind Distribution and all subsequent distributions of SoFi Proceeds and SoFi Shares;

 

SoFi Exit: means the disposal, in a single transaction or a series of transactions, of the SoFi Investment by the Company and the completion of the distribution of SoFi Proceeds or SoFi Shares in kind to all Members based on each Member's Pro Rata Fully Diluted Share, each on terms and conditions to the satisfaction of SB in its sole discretion;

 

SoFi Exit Date: the date on which the SoFi Exit has been achieved as notified by SB to the Company, acting in good faith;

 

SoFi Exit Shares: as of a determination date, the aggregate number of (i) SoFi Shares sold or otherwise disposed of to receive SoFi Proceeds distributed to Members, and (ii) SoFi Shares distributed in kind to Members, in each case on or prior to such determination date;

 

SoFi Investment: the Company's equity securities in SoFi;

 

SoFi Non-Pledged Share means, at any given time, any SoFi share held by the Company and/or its Subsidiaries and not subject to the pledges, charges and other security interest arrangements required under and implemented pursuant to the Everbright Loan Documents, the SB Loan Documents and the Renren Loan Documents.

 

SoFi Proceeds: proceeds or other assets received by the Company in respect of the SoFi Investment, including from (a) the sale or other disposition of SoFi Shares (including any recapitalization or similar transaction and any proceeds from the exercise of the EB Warrant), (b) dividends, interest or other income from or with respect to the SoFi Investment, and (c) any cash received from Clear Light due to the exercise of the EB Warrant;

 

SoFi Shares: each Series F share of SoFi, each Series E share of SoFi, each Series D Share of SoFi, each Series B Share of SoFi and each common share of SoFi, each of which shall, unless otherwise provided in this Agreement, be considered to be of equal value and fungible for all purposes relating to this Agreement;

 

SoFi State Regulatory Requirements: any requirements imposed by a state or other local government of the United States on the qualifications of persons who may serve as directors or officers of entities that hold an ownership interest in SoFi or any of SoFi's subsidiaries;

 

Special Resolution: a resolution that is described as such in its terms and is:

 

(a)passed by a majority of not less than two thirds of such Members as, being entitled to do so, vote in person or by proxy, at a duly convened general meeting of the Company and where a poll is taken regard shall be had in computing a majority to the number of votes to which each Member is entitled; or

 

 9 

 

 

(b)a written resolution signed by all of the Members entitled to vote at a general meeting of the Company in one or more instruments each signed by one or more of the Members and the effective date of the resolution so adopted shall be the date on which the instrument, or the last of such instruments, if more than one, is executed;

 

Subordination Deed means the Tripartite Deed of Subordination dated the date hereof entered into by and among the Company, Clear Light, SBGCL, Renren Lianhe and Renren;

 

Subordinated Debt: has the meaning set out in Article 101.4.1;

 

Subscribers: has the meaning set out in Article 8.1;

 

Subscription Period: has the meaning set out in Article 8.1.1;

 

Subsidiary: any Person directly or indirectly controlled by the Company from time to time;

 

Transaction Documents: the Shareholders Agreement, the Memorandum and Articles, and the Services Agreement to be entered into on or about the date hereof between the Company and Renren, and the shareholders' agreement among the Company, Joseph Chen, James Lian Liu and Renren Lianhe dated as of the date hereof;

 

Transfer: any sale, transfer or other disposition, whether or not for value;

 

ZenZone Business means the advertising agency business operated in the People's Republic of China by Beijing Zhenzhong Interactive Information Technology Co., Ltd. and its subsidiaries and controlled Affiliates (each a Zhenzhong Subsidiary).

 

2.1Words importing the singular number include the plural number and vice versa.

 

2.2Words importing the masculine gender include the feminine gender.

 

2.3Any reference to writing includes all modes of representing or reproducing words in a visible and legible form, including in the form of an Electronic Record.

 

2.4The word "may" shall be construed as permissive and the word "shall" shall be construed as imperative.

 

2.5Any phrase introduced by the terms "including", "include", "in particular" or any similar expression shall be merely illustrative and shall not limit the sense of the words preceding those terms.

 

2.6Where any provision of the Law is referred to, the reference is to that provision as modified by any subsequent law for the time being in force.

 

2.7Unless the context otherwise requires, words and expressions defined in the Law bear the same meanings in these Articles.

 

2.8References to days are to calendar days, unless otherwise specified.

 

2.9Headings are used for convenience only and shall not affect the construction of these Articles.

 

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REGISTERED AND OTHER OFFICES

 

3.The Registered Office of the Company shall be at such place in the Cayman Islands as the Directors shall from time to time determine. The Company, in addition to its Registered Office, may establish and maintain such other offices in the Cayman Islands or elsewhere as the Directors may from time to time determine.

 

SERVICE PROVIDERS

 

4.The Directors (acting by simple majority, subject to Article 77) may appoint any Person to act as a service provider to the Company and may delegate to any such service provider any of the functions, duties, powers and discretions available to them as Directors, upon such terms and conditions (other than the remuneration payable by the Company to the relevant service provider which must be approved by at least 75% of the Directors) and with such powers of sub-delegation, but subject to such restrictions, as they think fit (and subject, at all times, to any restrictions which would have been placed on the Directors if they had performed such role).

 

ISSUE OF SHARES

 

5.Power to issue Shares

 

5.1The Directors may (subject to the provisions of these Articles and the Law), without prejudice to any rights attached to any existing Shares, offer, allot, grant options over or otherwise dispose of the Shares with or without preferred, deferred, qualified or other special rights or restrictions, whether in regard to dividends or other forms of distribution, voting, return of capital or otherwise, and to such Persons and on such terms and conditions and for such consideration, and at such times as they think fit, provided no Share shall be issued at a discount (except in accordance with the provisions of the Law). Any Share may, with the sanction of a Special Resolution, be issued on the terms that it is, or at the option of the Company or the holder is liable, to be redeemed.

 

5.2The Directors shall designate any Share as a Class B Ordinary Share at the time of its allotment or issuance and any Share not so designated shall be Class A Ordinary Shares. Except as otherwise provided in these Articles or the terms of issuance of such Shares, all Shares shall be identical and shall entitle the holders thereof to the same rights and privileges

 

6.No Shares to bearer

 

The Company shall not issue Shares to bearer.

 

7.Fractional Shares

 

The Company may, in accordance with these Articles and the Law, issue fractions of Shares.

 

PREEMPTIVE RIGHTS

 

8.New Issues

 

8.1Subject to any required Reserved Matter Consent being obtained and Article 8.3, if the Company proposes to issue and allot any New Issuance, such New Issuance shall not be issued and allotted to any Person unless the Company has in the first instance offered it to the Management, SB and DCM or each of their respective Affiliates that hold Shares of the Company (the Subscribers) on the same terms and at the same price, if applicable, as the New Issuance is proposed to be offered to other Persons on a pari passu and pro rata basis to the number of Shares (as if the Shares constituted one and the same class) held by the Subscribers. Each Subscriber may nominate any of its Affiliates to subscribe for the New Issuance. The offer shall:

 

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8.1.1be in writing, be open for acceptance from the date of the offer to the date ten (10) Business Days after the date of the offer (inclusive) (the Subscription Period) and give (i) all relevant terms of the proposed New Issuance and (ii) a schedule of the proportion of the New Issuance to which each Subscriber is entitled; and

 

8.1.2stipulate that any Subscriber who wishes to subscribe for a portion of the New Issuance in excess of the proportion to which it is entitled shall in their acceptance state the excess amount of such New Issuance for which they are committed to subscribing.

 

8.2If, at the end of the Subscription Period:

 

8.2.1the amount of the New Issuance applied for exceeds the total amount of the New Issuance proposed to be issued, the New Issuance shall be issued and allotted to the Subscribers who have applied for the New Issuance (or their nominated Affiliates) on a pro rata basis to the amount of Shares held by such Subscribers relative to each other Subscriber who applied for the New Issuance until the total amount of the New Issuance has been issued and allotted, provided that no Subscriber shall be issued and allotted a greater portion of the New Issuance than they have applied for; and

 

8.2.2the amount of the New Issuance applied for is equal to or less than the total amount of the New Issuance, the New Issuance shall be allotted to the Subscribers (or their nominated Affiliates) in accordance with their applications, and any remaining amount of the New Issuance shall be offered to any other Person as the Board may determine at the same price and on the same terms as the offer to the Subscribers.

 

8.3The provisions of Articles 8.1 and 8.2 shall not apply to:

 

8.3.1any share options contemplated and the issuance of any Shares pursuant to the exercise of such options as contemplated in Section 11 of the Shareholders Agreement; and

 

8.3.2shares issued by the Zhenzhong Subsidiaries.

 

SHARE RIGHTS

 

9.Class A Ordinary Shares

 

9.1The Class A Ordinary Shares shall carry the following rights and restrictions:

 

9.1.1all Class A Ordinary Shares shall be identical in all respects;

 

9.2all Class A Ordinary Shares shall be entitled to dividends and distributions in accordance with Article 101;

 

9.3a holder of a Class A Ordinary Share shall be entitled to receive notice of, attend and speak at a general meeting of the Company and to vote on resolutions; and

 

9.4on a poll each holder of Class A Ordinary Shares shall have one vote for each Class A Ordinary Share held by him.

 

10.Class B Ordinary Shares

 

10.1The Class B Ordinary Shares shall carry the following rights and restrictions:

 

10.1.1all Class B Ordinary Shares shall be identical in all respects;

 

10.1.2all Class B Ordinary Shares shall be entitled to dividends and distributions in accordance with Article 101;

 

10.2A holder of a Class B Ordinary Share shall be entitled to receive notice of, attend and speak at a general meeting of the Company and to vote on resolutions; and

 

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10.3Prior to the SoFi Exit Date, on a poll each holder of Class B Ordinary Shares shall have one vote for each Class B Ordinary Share held by him.

 

10.4After the SoFi Exit Date, on a poll each holder of Class B Ordinary Shares shall have 10 votes for each Class B Ordinary Share held by him.

 

11.Conversion

 

11.1Each Class B Ordinary Share is convertible into one (1) Class A Ordinary Share at any time by the holder thereof. In no event shall Class A Ordinary Shares be convertible into Class B Ordinary Shares. A conversion of Class B Ordinary Shares to Class A Ordinary Shares shall be effected by way of compulsory repurchase by the Company of the relevant Class B Ordinary Shares for a redemption price equal to the original issue price for each Class B Ordinary Share and the issue of Class A Ordinary Shares for a subscription price equal to the redemption price for an equal number of Class B Ordinary Shares.

 

11.2Class B Ordinary Shares shall be automatically converted into Class A Ordinary Shares under the following circumstances and in the following manner:

 

11.2.1Fifty Percent Threshold. If at any time Management does not collectively hold at least fifty percent (50%) of the Ordinary Shares that were collectively held by Management at the date hereof, then all of Management's Class B Ordinary Shares shall be automatically and immediately converted into the same number of Class A Ordinary Shares. If at any time SB does not collectively hold at least the SB Base Holding, then all of SB's Class B Ordinary Shares shall be automatically and immediately converted into the same number of Class A Ordinary Shares.

 

11.2.2Transfers of Management's Class B Ordinary Shares. Upon any Transfer of either Management's Class B Ordinary Shares to a Person other than the other Management or either Management's Management Family Members, all of the Management's Class B Ordinary Shares so Transferred shall be automatically and immediately converted into an equal number of Class A Ordinary Shares; provided that if Management Family Members have an ownership interest in the Person to which the Class B Ordinary Shares were transferred, tehn only the number of Class B Ordinary Shares corresponding to the decrease in such Management Family Members' collective Percentage Ownership in the Management's Class B Ordinary Shares so Transferred (as determined in accordance with this Article 11.2.2) shall be automatically and immediately converted into an equal number of Class A Ordinary Shares and the remaining Class B Ordinary Shares so transferred shall be unaffected by this Article 11.2.2 as a result of such transfer. The number of such Management's Class B Ordinary Shares that shall be converted into Class A Ordinary Shares pursuant to the preceding sentence shall be equal to the product of:

 

11.2.2.1the total number of such Management's Class B Ordinary Shares so Transferred; and

 

11.2.2.2the difference between (a) the Management Family Members' collective Percentage Ownership in such Management's Class B Ordinary Shares so Transferred immediately prior to such Transfer and (b) the Management Family Members' collective Percentage Ownership in such Management's Class B Ordinary Shares so Transferred immediately after such Transfer.

 

11.2.3Transfers of SB's Class B Ordinary Shares. Upon any Transfer of SB's Class B Ordinary Shares to a Person other than an Affiliate of SB, all of the Class B Ordinary Shares so Transferred shall be automatically and immediately converted into an equal number of Class A Ordinary Shares; provided that if SB has a non-controlling interest in the Person to which the Class B Ordinary Shares were transferred, tehn only the number of Class B Ordinary Shares corresponding to the decrease in SB's Percentage Ownership in SB's Class B Ordinary Shares so Transferred (as determined in accordance with this Article 11.2.3) shall be automatically and immediately converted into an equal number of Class A Ordinary Shares and the remaining Class B Ordinary Shares so transferred shall be unaffected by this Article 11.2.3 as a result of such transfer. The number of SB's Class B Ordinary Shares that shall be converted into Class A Ordinary Shares pursuant to the preceding sentence shall be equal to the product of:

 

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11.2.3.1the total number of SB's Class B Ordinary Shares so Transferred; and

 

11.2.3.2the difference between (a) SB's Percentage Ownership in SB's Class B Ordinary Shares so Transferred immediately prior to such Transfer and (b) SB's Percentage Ownership in SB's Class B Ordinary Shares so Transferred immediately after such Transfer.

 

11.2.4Loss of Status as Management; Decrease of Ownership in Holder of Management's Class B Ordinary Shares. If at any time a Management is removed from the Board and/or from any management positions of the Company and/or its Subsidiaries due to Disabling Conduct, then all Class B Ordinary Shares held by such Management and such Management's Management Family Members shall be automatically and immediately converted into the same number of Class A Ordinary Shares. If at any time there is a decrease in the Management Family Members' Percentage Ownership in a holder of Class B Ordinary Shares, then a number of the Class B Ordinary Shares held by such holder (as determined in accordance with this Article 11.2.4) shall be automatically and immediately converted into an equal number of Class A Ordinary Shares. The number of such Class B Ordinary Shares that shall be converted into Class A Ordinary Shares pursuant to the preceding sentence shall be equal to the product of:

 

11.2.4.1the total number of such Management's Class B Ordinary Shares held by such holder; and

 

11.2.4.2the difference between (a) the applicable Management Family Members' Percentage Ownership in such holder immediately prior to such decrease in the applicable Management Family Members' Percentage Ownership and (b) the applicable Management's Percentage Ownership in such holder immediately after such decrease in the applicable Management's Percentage Ownership.

 

11.2.5Loss of Status as SB Affiliate; Decrease or Cessation of Ownership in Holder of SB's Class B Shares. If at any time a holder of SB's Class B Ordinary Shares ceases to be an Affiliate of SB, then (x) if at such time SB does not have an ownership interest in such holder, all Class B Ordinary Shares held by such holder shall automatically and immediately convert into the same number of Class A Ordinary Shares; and (y) if at such time SB does have an ownership interest in such holder, a percentage of the Class B Ordinary Shares held by such holder (which percentage shall be equal to SB's Percentage Ownership in such holder at the time such holder ceases to be an Affiliate of SB) shall remain Class B Ordinary Shares, and the remaining Class B Ordinary Shares held by such holder shall automatically and immediately convert into the same number of Class A Ordinary Shares. If at any time there is a decrease in SB's Percentage Ownership in a non-Affiliate holder of SB's Class B Ordinary Shares, then a number of the SB' Class B Ordinary Shares held by such holder shall be automatically and immediately converted into an equal number of Class A Ordinary Shares. The number of SB's Class B Shares that shall be converted into Class A Ordinary Shares pursuant to the preceding sentence shall be equal to the product of:

 

11.2.5.1the total number of SB's Class B Ordinary Shares held by such holder; and

 

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11.2.5.2the difference between (a) SB's Percentage Ownership in such holder immediately prior to such decrease in SB's Percentage Ownership and (b) SB's Percentage Ownership in such holder immediately after such decrease in the SB's Percentage Ownership.

 

11.2.6Change of Control of SoftBank. Upon any Change of Control Event with respect to SoftBank, all SB's Class B Ordinary Shares shall automatically and immediately convert into the same number of Class A Ordinary Shares.

 

11.3Unless otherwise agreed by each of Mr. Chen, DCM and SB, any new Shares issued shall be Class A Ordinary Shares.

 

11.4If any Member proposes to transfer more than 75% of the Shares it holds (such percentage calculated immediately prior to such transfer) to its Affiliate, such Member may elect to assign to the proposed transferee any or all of such Member's rights under these Articles.

 

REGISTER OF MEMBERS

 

12.The Directors shall establish and maintain (or cause to be established and maintained) the Register of Members at the Registered Office or at such other place determined by the Directors in the manner prescribed by the Law.

 

RECORD DATE

 

13.Power of Directors to fix record date

 

The Directors may fix in advance a date as the record date to determine the Members entitled to notice of or to vote at a meeting of the Members and, for the purpose of determining the Members entitled to receive payment of any dividend, the Directors may, at or within 90 days prior to the date of the declaration of such dividend, fix a subsequent date as the record date for such determination.

 

14.No fixed record date

 

If no such record date is fixed, the record date shall be the date on which notice of the meeting is sent or the date on which the resolution of the Directors declaring such dividend is adopted, as the case may be. A determination of Members entitled to vote at any meeting of Members in accordance with this Article, shall apply to any adjournment thereof.

 

SHARE CERTIFICATES

 

15.Issue of Share Certificates

 

Every Member shall be entitled, without payment, to a certificate of the Company specifying the Share or Shares held by him and the amount paid up thereon.

 

16.Certificates for jointly-held Shares

 

The Company shall not be bound to issue more than one certificate for Shares held jointly by more than one Person, and delivery of a certificate to one joint holder shall be sufficient delivery to all.

 

17.Replacement Share Certificates

 

If a share certificate is defaced, lost or destroyed, it may be replaced on payment of such fee (if any) and on such terms (if any) as to evidence and indemnity, and on the payment of expenses of the Company in investigating such evidence and preparing such indemnity as the Directors shall think fit and, in case of defacement, on delivery of the old certificate to the Company for cancellation.

 

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TRANSFER OF SHARES

 

18.Permitted Transfers

 

18.1Shares are freely transferable, subject to the terms of Article 18.3.

 

18.2Any Person who holds, or becomes entitled to hold, any Shares shall not transfer any of its Shares unless such transfer is carried out in accordance with the provisions of the Articles.

 

18.3The Company:

 

18.3.1shall be obliged to register any transfer of legal title to Shares required or permitted pursuant to, and in each case carried out in accordance with, the provisions of the Articles;

 

18.3.2shall not register a transfer of legal title to Shares unless such transfer of Shares is required or permitted pursuant to, and in each case carried out in accordance with, the provisions of the Articles; and

 

18.3.3shall not register a transfer of legal title to Shares if such transfer of Shares would cause the Company to (a) be required to register under the Exchange Act; or (b) fail to qualify for the exemption from the definition of "investment company" in Section 3(c)(7) of the Investment Company Act of 1940, as amended.

 

19.Instrument of transfer and procedures

 

19.1The instrument of transfer of any Share shall be executed by or on behalf of the transferor (and, if the Directors so determine, the transferee). The transferor shall be deemed to remain the holder of the Share until the name of the transferee is entered in the Register of Members in respect of such Share (as converted, if applicable). All instruments of transfer, once registered, may be retained by the Company.

 

19.2Subject to any applicable restrictions contained in these Articles, Shares shall be transferred in any usual or common form approved by the Directors.

 

19.3Upon any transfer of Shares which requires a conversion of Shares from one class of Shares to another, within ten (10) days of the transfer:

 

the transferor shall deliver the share certificates for the transferred Shares (if any) to the Company at its Registered Office together with such evidence as the Directors may reasonably require to prove good title to the transferred Shares. If the relevant share certificates are not available the transferor shall provide an indemnity for the lost share certificates; and

 

upon receipt of the documents and evidence set out in this Article 19.3, the Company shall enter, or shall procure the entry of, the transferee on the register of members of the Company as the holder of the appropriate number of the Shares and the Company shall forward a share certificate for the appropriate number of fully paid Shares to the relevant Member.

 

20.Refusal to register transfers

 

20.1The Directors shall not refuse or decline to register any transfer of any Share made in accordance with the provisions of these Articles.

 

20.2Subject to Article 20.1, the Directors may decline to register any transfer of any Share not transferred in accordance with these Articles. The Directors may require reasonable evidence to show the right of the transferor to make the transfer.

 

20.3If the Directors decline to register a transfer of Shares they shall send notice of the refusal to the transferee and the reason for such refusal within one month after the date on which the transfer was lodged with the Company.

 

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20.4Subject to Article 20.1, the Directors may also suspend the registration of the transfers at such times and for such periods as the Directors may from time to time determine.

 

TRANSMISSION OF SHARES

 

21.Transmission of Shares

 

If a Member dies, the survivor or survivors (where he was a joint holder), and the legal personal representative (where he was sole holder), shall be the only Person recognised by the Company as having any title to the Share. The estate of a deceased Member is not thereby released from any liability in respect of any Share held by him, whether solely or jointly. For the purpose of this Article, legal personal representative means the Person to whom probate or letters of administration has or have been granted in the Cayman Islands or, if there is no such Person, such other Person as the Directors may in their absolute discretion determine to be the Person recognised by the Company for the purpose of this Article.

 

22.Election by Persons entitled on transmission

 

Any Person becoming entitled to a Share in consequence of the death or bankruptcy of a Member or otherwise by operation of applicable law may elect, upon such evidence being produced as may be required by the Directors as to his entitlement, either be registered himself as a Member in respect of the Share or, instead of being registered himself, to make such transfer of the Share as the deceased or bankrupt Member could have made.

 

23.Manner of election

 

If the Person so becoming entitled elects to be registered himself, he shall deliver or send to the Company a notice in writing signed by him stating that he so elects. If he shall elect to transfer the Shares, he shall signify his election by signing an instrument of transfer of such Shares in favour of his transferee. All the limitations, restrictions and provisions of these Articles relating to the right to transfer and the registration of transfers of Shares shall be applicable to any such notice or instrument of transfer as aforesaid as if the death of the Member or other event giving rise to the transmission had not occurred and the notice or instrument of transfer was an instrument of transfer signed by such Member.

 

24.Rights of Persons entitled on transmission

 

A Person becoming entitled to a Share in consequence of the death or bankruptcy of the Member (or otherwise by operation of applicable law), upon such evidence being produced as may be required by the Directors as to his entitlement, shall be entitled to the same dividends and other monies payable in respect of the Share as he would be entitled if he were the holder of such Share. However, he shall not be entitled, until he becomes registered as the holder of such Share, to receive notices of or to attend or vote at general meetings of the Company or (except as aforesaid) to exercise any other rights or privileges of a Member. The Directors may at any time give notice requiring such Person to elect either to be registered himself or to transfer the Share and, if the notice is not complied with within sixty days, the Directors may thereafter withhold payment of all dividends and other monies payable in respect of the Shares until the requirements of the notice have been complied with.

 

REDEMPTION AND PURCHASE OF SHARES

 

25.Subject to the provisions of the Law, the Memorandum and these Articles, the Company may:

 

25.1purchase its own Shares (including any redeemable Shares) in such manner and on such terms as the Directors may agree with the relevant Member unless following such purchase there would no longer be any issued Shares and may make payment for such purchase or for any redemption of Shares in any manner authorised by the Law, including out of capital; and

 

25.2reduce its share capital and any capital redemption reserve fund in any manner whatsoever.

 

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VARIATION OF SHARE RIGHTS

 

26.Variation of class rights

 

Subject to Article 78.1, if at any time the share capital is divided into different classes of Shares, all or any of the special rights attached to any class of Shares (unless otherwise provided by the terms of issue of the Shares of that class) may be varied or abrogated with the consent in writing of the holders of not less than two thirds of the issued Shares of that class or with the sanction of a resolution passed by the holders of not less than two thirds of the issued Shares of that class as may be present in person or by proxy at a separate general meeting of the holders of the Shares of that class. To any such separate general meeting, all of the provisions of these Articles relating to general meetings shall mutatis mutandis apply, but so that the necessary quorum shall be any one or more Persons holding or representing by proxy not less than one third of the issued Shares of the class and that any holder of Shares of the relevant class present in person or by proxy may demand a poll.

 

27.Treatment of classes

 

For the purpose of a separate class meeting, the Directors may treat two or more of all classes of Shares as forming one class if they consider that such class of Shares would be affected in the same way by the proposals under consideration.

 

28.Effect of Share issue on class rights

 

The rights conferred upon the holders of any Shares shall not, unless otherwise expressly provided in the rights attaching to such Shares, be deemed to be altered by the creation or issue of further Shares ranking pari passu therewith.

 

NON-RECOGNITION OF TRUSTS

 

29.Except as required by the Law or these Articles, or under an order of a court of competent jurisdiction, the Company shall not be bound by or compelled to recognise in any way, even when notice thereof is given to it, any equitable, contingent, future or partial interest in any Share, or any other rights in respect of any Share other than an absolute right to the entirety thereof in the registered holder.

 

LIEN

 

30.Lien generally

 

The Company shall have a first and paramount lien on every Share (not being a fully paid Share) for all moneys (whether presently payable or not) called or payable at a date fixed by or in accordance with the terms of issue of such Share in respect of that Share, and the Company shall also have a first and paramount lien on every Share (other than a fully paid up Share) standing registered in the name of a Member, whether singly or jointly with any other Person for all debts and liabilities of a Member or his estate to the Company, whether the same shall have been incurred before or after notice to the Company of any interest of any Person other than such Member, and whether the time for the payment or discharge of the same shall have actually arrived or not, and notwithstanding that the same are joint debts or liabilities of such Member or his estate and any other Person, whether a Member or not. The Directors may at any time, either generally or in any particular case, waive any lien that has arisen or declare any Share to be wholly or in part exempt from the provisions of this Article. The Company's lien, if any, on a Share shall extend to all dividends payable thereon.

 

31.Enforcement

 

The Company may sell, in such manner as the Directors think fit, any Share on which the Company has a lien, provided a sum in respect of which the lien exists is presently payable, and is not paid within fourteen days after a notice in writing has been given to the registered holder for the time being of the Share, demanding payment of the sum presently payable and giving notice of the intention to sell in default of such payment.

 

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32.Completion of sale

 

For giving effect to any such sale, the Directors may authorise any Person to transfer the Share sold to the purchaser thereof. The purchaser shall be registered as the holder of the Share comprised in any such transfer and he shall not be bound to see to the application of the purchase money, nor shall his title to the Share be affected by any irregularity or invalidity in the proceedings relating to the sale.

 

33.Application of proceeds

 

The net proceeds of such sale shall be applied in payment or discharge of the debt or liability in respect of which the lien exists and as is presently payable, and any balance shall (subject to a like lien for debts or liabilities not presently payable as existed upon the Shares prior to the sale) be paid to the Person who was the registered holder of the Share immediately before such sale.

 

CALLS ON SHARES

 

34.Calls on Shares generally

 

The Directors may from time to time make calls upon the Members in respect of any moneys unpaid on their Shares (whether in respect of the par value of the Shares or premium or otherwise and not, by the terms of issue thereof, made payable at a future date fixed by or in accordance with such terms of issue); and each Member shall (subject to the Company serving upon him at least 14 days' notice specifying the time or times and place of payment) pay to the Company at the time or times and place so specified the amount called on his Shares. A call may be revoked or postponed by the Directors wholly or in part as the Directors may determine. A call shall be deemed to have been made at the time when the resolution of the Directors authorising the call was passed.

 

35.Payment

 

35.1Payment of a call may be made by instalments on the direction of the Directors.

 

35.2If a sum called in respect of a Share is not paid before or on the day appointed for payment thereof, the Person from whom the sum is due shall pay interest on the sum from the day payment is due to the time of the actual payment at such rate as the Directors may determine, but the Directors may waive payment of such interest wholly or in part.

 

35.3Any sum payable in respect of a Share on issue or allotment or at any fixed date, whether in respect of the par value of the Share or premium or otherwise, shall be deemed to be a call and if it is not paid all the relevant provisions as to payment of interest, forfeiture or otherwise of these Articles shall apply as if such sum had become due and payable by virtue of a call duly made and notified.

 

35.4The Directors may issue Shares with different terms as to the amount and times of payment of calls.

 

36.Liability of joint holders

 

The joint holders of a Share shall be jointly and severally liable to pay calls in respect thereof.

 

37.Interest

 

The Directors may, if they think fit, receive from any Member willing to advance the same, all or any part of the moneys uncalled and unpaid upon any Shares held by him; and may (until the amount would otherwise become payable) pay interest at such rate (not exceeding six per cent without the sanction of the Company in general meeting) as may be agreed upon between the Member paying the sum in advance and the Directors.

 

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FORFEITURE OF SHARES

 

38.Notice

 

38.1If a Member fails to pay any call or instalment of a call by the date it becomes due and payable, the Directors may, at any time thereafter while such call or instalment remains unpaid, give notice to the Member requiring payment of the unpaid portion of the call or instalment, together with any accrued interest and expenses incurred by the Company by reason of such non-payment.

 

38.2The notice shall specify where and by what date (not being less than the expiration of 14 days' from the date of the notice) payment is to be made and shall state that if it is not complied with the Shares in respect of which the call was made will be liable to be forfeited. The Directors may accept the surrender of any Share liable to be forfeited hereunder and, in such case, references to these Articles to forfeiture shall include surrender.

 

39.Forfeiture for non-compliance

 

If such notice is not complied with, any Share in respect of which the notice was given may thereafter, before the payment of all calls or instalments and interest due in respect thereof has been made, be forfeited by a resolution of the Directors. Such forfeiture shall include all dividends declared, other distributions or other monies payable in respect of the forfeited Shares and not paid before the forfeiture.

 

40.Forfeited Shares

 

A forfeited Share may be sold, re-allotted or otherwise disposed of upon such terms and in such manner as the Directors shall think fit, and at any time before a sale, re-allotment or disposition, the forfeiture may be cancelled on such terms as the Directors think fit.

 

41.Continued liability for forfeited Member

 

A Person whose Shares have been forfeited shall cease to be a Member in respect of the forfeited Shares, but shall remain liable to pay to the Company all moneys which at the date of forfeiture were presently payable by him in respect of the Shares together with interest at such rate as the Directors may determine from the date of forfeiture until payment, but his liability shall cease if and when the Company receives payment in full of all amounts due in respect of the Shares. The Company may enforce payment without being under any obligation to make any allowance for the value of the Shares forfeited.

 

42.Evidence of forfeiture

 

An affidavit in writing by a Director or Secretary of the Company that a Share has been duly forfeited on a specified date, shall be conclusive evidence of the facts stated in it as against all Persons claiming to be entitled to the Share. The Company may receive the consideration, if any, given for the Share on any sale, re-allotment or disposition thereof and may authorise some Person to execute a transfer of the Share in favour of the Person to whom the Share is sold, re-allotted or otherwise disposed of, and he shall thereupon be registered as the holder of the Share, and shall not be bound to see to the application of the purchase money (if any) nor shall his title to the Share be affected by any irregularity or invalidity in the proceedings in reference to the forfeiture, sale, re-allotment or disposition of the Share.

 

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43.The provisions of these Articles as to forfeiture shall apply in the case of non-payment of any sum which, by the terms of issue of a Share, becomes payable at a fixed time, whether on account of the par value of the Share, or by way of premium or otherwise, as if the same had been made payable by virtue of a call duly made and notified to the Member.

 

INCREASE OF CAPITAL

 

44.Increase of Capital and Shares

 

44.1Subject to the requirements of Article 77 and Article 78, the Company may from time to time by Ordinary Resolution increase its share capital by such sum, to be divided into new Shares of such par value, and with such rights, priorities and privileges attached thereto as the resolution shall prescribe.

 

44.2Subject to the requirements of Article 77 and Article 78 and any directions given by the Company in a general meeting, all new Shares shall be at the disposal of the Directors in accordance with these Articles.

 

44.3The new Shares shall be subject to the same provisions of these Articles with reference to the payment of calls, lien, forfeiture, transfer, transmission and otherwise, as the Shares in the original share capital.

 

ALTERATION OF CAPITAL

 

45.Alteration by Ordinary Resolution

 

45.1Subject to the requirements of Article 77 and Article 78, the Company may from time to time by Ordinary Resolution or such greater majority as required by these Articles:

 

45.1.1consolidate and divide all or any of its share capital into Shares of larger par value than its existing Shares;

 

45.1.2sub divide its existing Shares, or any of them, into Shares of smaller par value than is fixed by the Memorandum, subject nevertheless to the provisions of section 13 of the Law;

 

45.1.3cancel any Shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any Person; and

 

45.1.4convert all or any paid up Shares into stock, and reconvert all or any stock into paid up Shares of any denomination.

 

46.Alteration by Special Resolution

 

46.1Subject to the requirements of Article 77 and Article 78, the Company may from time to time by Special Resolution or such greater majority as required by these Articles:

 

46.1.1divide its Shares into several classes and attach to such classes any preferential, deferred, or special rights or restrictions in accordance with these Articles;

 

46.1.2change the currency denomination of its share capital;

 

46.1.3reduce its share capital and any capital redemption reserve fund in any manner whatsoever; and

 

46.1.4merge or consolidate with any one or more constituent companies (as defined in the Law).

 

GENERAL MEETINGS

 

47.Convening a meeting

 

The Directors may, whenever they think fit, convene an extraordinary general meeting. If at any time there are not sufficient Directors capable of acting to form a quorum, any Director, or any one or more Members holding in the aggregate not less than one third of the total issued share capital of the Company entitled to vote, may convene an extraordinary general meeting in the same manner as nearly as possible as that in which meetings may be convened by the Directors.

 

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48.Members' requisition

 

48.1The Directors shall, upon the requisition in writing of one or more Members holding in the aggregate Shares representing not less than one tenth of such paid up capital of the Company as at the date of the requisition carries the right of voting at general meetings, convene an extraordinary general meeting. Any such requisition shall express the object of the meeting proposed to be called, and must be signed by the requisitionists and deposited at the Registered Office, and may consist of several documents in like form, each signed by one or more requisitionists.

 

If there are no Directors as at the date of the deposit of the Members' requisition or if the Directors do not convene a general meeting within 21 days from the date of the deposit referred to in Article 48.1, the requisitionists or any or any of them or any other Member or Members holding in the aggregate Shares representing not less than one tenth of such paid up capital of the Company as at the date of the requisition carries the right of voting at general meetings, may convene an extraordinary general meeting. A general meeting convened by requisitionists shall be convened in the same manner as nearly as possible as that in which general meetings are to be convened by the Directors.

 

NOTICE OF GENERAL MEETINGS

 

49.Length and form of notice

 

At least five clear days' notice shall be given of any general meeting. Every notice shall specify the place, the day and the time of meeting and, in the case of special business, the general nature of the business to be conducted at the general meeting, and shall be given in the manner provided in these Articles or in such other manner (if any) as may be prescribed by the Company, to such Persons as are entitled to receive such notices from the Company. Notwithstanding Article 48 and each other provision of these Articles, a general meeting may be convened by such shorter notice, or without notice, by a majority in number of the Members having the right to attend and vote at the meeting, being a majority together holding not less than ninety-five percent in nominal value of the Shares giving that right.

 

50.Omission or non-receipt

 

The accidental omission to give notice of a meeting to, or the non-receipt of a notice of a meeting by, any Member entitled to receive notice shall not invalidate the proceedings at any meeting.

 

PROCEEDINGS AT GENERAL MEETINGS

 

51.All business that is transacted at an extraordinary general meeting shall be deemed special.

 

52.Quorum

 

52.1No business shall be transacted at any general meeting unless a quorum of Members is present at the time that the meeting proceeds to business, but the absence of a quorum shall not preclude the appointment, choice or election of a chairman, which shall not be treated as part of the business of the Meeting. A quorum shall consist of Members holding in the aggregate not less than one third of the total paid-up share capital of the Company present in person or by proxy and entitled to vote.

 

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53.Adjournment for lack of quorum

 

If within five minutes (or such longer time as the chairman of the meeting may determine to wait) after the time appointed for the meeting, a quorum is not present, the meeting, if convened upon the requisition of Members, shall be dissolved. In any other case, it shall stand adjourned to the same day in the next week, at the same time and place, and if at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting, the Members present shall be a quorum.

 

54.Meeting by telephone or other facilities

 

54.1A meeting of the Members may be held by telephone, electronic or other communication facilities (including, without limiting the generality of the foregoing, by telephone or video conferencing) by which all Persons participating in the meeting can communicate with each other simultaneously and instantaneously, and participation in such a general meeting shall constitute presence in Person at such meeting.

 

54.2Any Director shall be entitled to attend and speak at any general meeting of the Company.

 

55.Appointment of chairman

 

The chairman (if any) of the Board of Directors shall preside as chairman at every general meeting of the Company. If there is no such chairman, or if at any meeting he is not present within five minutes after the time appointed for holding the meeting or is unwilling to act as chairman, the Directors present shall choose one of their number to act or, if only one Director is present, he shall preside as chairman if willing to act. If no Director is present, or if each of the Directors present declines to take the chair, the Members present and entitled to vote shall elect one of their number to be chairman.

 

56.Adjournment of meeting

 

The chairman may, with the consent of a meeting at which a quorum is present (and shall if so directed by the meeting) adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. When a meeting is adjourned for ten days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. Save as aforesaid, it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting.

 

VOTING

 

57.Ordinary Resolution

 

Save where a Special Resolution or other greater majority is required by the Law or these Articles, any question proposed for consideration at any general meeting shall be decided by an Ordinary Resolution.

 

58.Voting to be done by poll

 

At any general meeting, a resolution put to the vote of the meeting shall be decided by way of poll and not by show of hands.

 

59.Voting on a poll

 

59.1On a poll votes may be cast either personally or by proxy.

 

59.2A Person entitled to more than one vote on a poll need not use all his votes or cast all the votes he uses in the same way.

 

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60.Voting Rules

 

60.1In the case of joint holders of a Share, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders; and for this purpose seniority shall be determined by the order in which the names stand in the Register of Members in respect of the joint holding.

 

60.2A Member of unsound mind, or, in respect of whom an order has been made by any court having jurisdiction in lunacy, may vote, whether on a show of hands or on a poll, by his receiver, committee, curator bonis or other Person of similar nature appointed by such court, and any such receiver, committee, curator bonis or other Person may vote by proxy and may otherwise act and be treated as such Member for the purpose of the general meetings.

 

60.3No Member, unless the Directors otherwise determine, shall be entitled to vote at any general meeting, unless all calls or other sums presently payable by him in respect of Shares in the Company have been paid.

 

60.4No objection shall be raised as to the qualification of any voter or as to whether any votes have been properly counted except at the general meeting or adjourned general meeting at which the vote objected to is given or tendered and every vote not disallowed at the meeting shall be valid. Any objection made in due time and in accordance with these Articles shall be referred to the chairman whose decision shall be final and conclusive.

 

PROXIES AND CORPORATE REPRESENTATIVES

 

61.Members' attendance and voting

 

61.1Subject to these Articles, each Member entitled to attend and vote at a general meeting may attend and vote at the general meeting:

 

61.1.1in person, or where a Member is a company or non-natural person, by a duly authorised corporate representative; or

 

61.1.2by one or more proxies.

 

61.2A proxy or corporate representative need not be a Member.

 

62.Appointment of proxies

 

The instrument appointing a proxy shall be in writing under the hand of the Member or his duly authorised attorney or, if the Member is a corporation, under the hand of its duly authorised representative.

 

63.Form of proxy

 

An instrument appointing a proxy may be in any usual or common form (or such other form as the Directors may approve) and may be expressed to be for a particular meeting or any adjournment thereof or may appoint a standing proxy until notice of revocation is received at the Registered Office or at such place or places as the Directors may otherwise specify for the purpose.

 

64.Corporate representatives

 

Any corporation which is a Member of the Company may by resolution of its directors or other governing body authorise such Person as it thinks fit to act as its representative at any meeting of the Company or of any class of Members of the Company, and the Person so authorised shall be entitled to exercise the same powers on behalf of the corporation which he represents as that corporation could exercise if it were an individual Member of the Company.

 

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65.Receipt of instrument of appointment

 

65.1The instrument appointing a proxy or corporate representative, and the power of attorney (if any) under which it is signed, together with such other evidence as to its due execution as the Directors may from time to time require, shall be deposited at the Registered Office of the Company or at such other place as is specified for that purpose in the notice convening the meeting or in any notice of any adjournment or, in either case or the case of a written resolution, in any document sent therewith, not less than 24 hours (or such longer or shorter time as the Directors may determine) before the time for holding the meeting or adjourned meeting at which the Person named in the instrument proposes to vote.

 

65.2In default of any of the provisions in these Articles to deposit any instrument of proxy or authorisation at the Registered Office of the Company or at such other place as is specified for that purpose in the notice convening the meeting, the instrument of proxy or authorisation shall not be treated as valid provided that the chairman of the meeting may in his discretion accept an instrument of proxy or authorisation sent by email or fax upon receipt of email or fax confirmation that the signed original thereof has been sent.

 

66.Standing Proxy

 

The operation of a standing proxy or authorisation shall be suspended at any general meeting or adjournment thereof at which the Member is present in person or by specially appointed proxy. The Directors may require evidence as to the due execution and continuing validity of any standing proxy or authorisation and the operation of any such standing proxy or authorisation shall be deemed to be suspended until the Directors determine that they have received such satisfactory evidence.

 

67.Poll vote

 

67.1In the case of a poll taken subsequently to the date of a meeting or adjourned meeting, the instrument appointing the proxy or corporate representative referred to in these Articles shall be deposited at the Registered Office of the Company or at such other place as is specified for that purpose in the notice convening the meeting before the time appointed for the taking of the poll.

 

67.2The instrument appointing a proxy shall be deemed to confer authority to demand or join in demanding a poll, to speak at the meeting and to vote on any amendment of a written resolution or amendment of a resolution put to the meeting for which it is given as the proxy thinks fit. The instrument of proxy or authorisation shall, unless the contrary is stated therein, be valid as well for any adjournment of the meeting as for the meeting to which it relates.

 

68.Validity of votes

 

A vote given in accordance with the terms of an instrument of proxy or authorisation shall be valid notwithstanding the previous death or unsoundness of mind of the principal, or revocation of the proxy or of the corporate authority, unless notice in writing of such death, unsoundness of mind or revocation was received by the Company at the Registered Office (or such other place as may be specified for the delivery of instruments of proxy or authorisation in the notice convening the meeting or other documents sent therewith) before the commencement of the general meeting, or adjourned meeting, at which the instrument or proxy is used.

 

69.Written resolutions

 

In the case of a written resolution to be signed by a corporate representative, the instrument appointing the corporate representative shall be deposited at the Registered Office of the Company or at such other place as is specified for that purpose in the notice convening the meeting prior to the effective date of the written resolution.

 

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70.Waiver by Directors

 

Subject to the Law, the Directors may at their discretion waive any of the provisions of these Articles relating to proxies or authorisations and, in particular, may accept such verbal or other assurances as they think fit as to the right of any Person to attend, speak and vote on behalf of any Member at general meetings or to sign written resolutions.

 

ELECTION AND REMOVAL OF DIRECTORS

 

71.Number of Directors

 

The Board shall consist of up to three (3) Directors, each of whom shall satisfy the SoFi State Regulatory Requirements and be nominated in accordance with Article 72.1 below.

 

72.Election and Removal of Directors

 

72.1Subject to Article 72.3:

 

72.1.1Mr. Chen shall have the right to nominate one (1) Director and it is intended that the first Director nominated by him will be Mr. Chen, subject to his satisfaction of applicable SoFi State Regulatory Requirements;

 

72.1.2for as long as Mr. Liu continues to be an officer of the Company, he shall have the right to nominate one (1) Director and it is intended that the first Director nominated by him will be Mr. Liu, subject to his satisfaction of applicable SoFi State Regulatory Requirements; and

 

72.1.3at all times, SB shall have the right to nominate one (1) Director. Without in any way limiting SB's right under the foregoing sentence, it is intended that the first Director nominated will be David Thevenon, subject to his satisfaction of applicable SoFi State Regulatory Requirements.

 

72.2The relevant Members may exercise their Director nomination right under Article 72.1 by giving a notice in writing to the Company. Except as provided in Article 72.3, any Director nominated in accordance with Article 72.1 may only be removed with the written consent from the Member entitled to nominate such Director under Article 72.1, and such Member shall have the right to nominate any replacement Director. Each Member shall exercise its respective rights and powers in respect of its Shares and, unless inconsistent with its nominated Director's fiduciary duties, shall ensure that its respective nominated (and elected) Director will exercise his or her voting rights, in such manner to ensure that persons nominated in accordance with this article are duly elected to the Board as soon as practicable.

 

72.3Notwithstanding Article 71, Article 72.1 and Article 72.2 above, SB shall from time to time be entitled to remove the elected Directors nominated by the Management from the Board, and to remove the Management from any management positions of the Company and/or its Subsidiaries and nominate replacements of its choice upon the occurrence of the following (together the Disabling Conduct), and each Member agrees to exercise all rights and powers available to it to support such removal and subsequent replacement with SB's nominee:

 

72.3.1any of the Management suffering an Insolvency Event (while he remains involved with the business of the Company);

 

72.3.2any conduct, event or condition by or with respect to any of the Management and/or their Representatives which constitutes fraud, bad faith, wilful misconduct or gross negligence which has or could have an adverse effect on the Company or any of its Subsidiaries or investments;

 

72.3.3any final conviction for any criminal conduct (other than motor vehicle violations) or for any breach of any applicable securities law provisions by any of the Management or their Representatives (while they remain involved with the business of the Company);

 

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72.3.4any material breach by any of the Management or by the Company or any Subsidiary (only where such breach is attributable to the action or omission of any of the Management) of the Shareholders Agreement, the Memorandum and these Articles, the constitutional document of any Subsidiary or any other Transaction Document;

 

72.3.5any of the Management ceasing to be involved with the business of the Company;

 

72.3.6any of the Management disposing of a majority of the Shares he owns as of the date of the Shareholders Agreement; or

 

72.3.7any material breach by any of the Management Directors of clauses 12.1 and 12.2 of the Shareholders Agreement or the non-compete, non-solicitation and non-disparagement obligations owed to the Company or the Parties under any of the Transaction Documents or otherwise, where such breach has or could have a material adverse effect on the Company or its investments.

 

72.4No shareholding qualification shall be required for Directors unless otherwise required by the Company by Ordinary Resolution.

 

RESIGNATION AND DISQUALIFICATION OF DIRECTORS

 

73.The office of Director shall ipso facto be vacated if the Director:

 

73.1resigns his office by notice in writing to the Company;

 

73.2becomes of unsound mind and the Directors resolve that his office is vacated;

 

73.3becomes bankrupt under the laws of any country or makes any arrangement or composition with his creditors generally; or

 

73.4if he ceases to be a Director by virtue of, or becomes prohibited from being a Director by reason of, an order made under any provisions of any law or enactment.

 

POWERS AND DUTIES OF DIRECTORS

 

74.General power to manage business

 

To the extent not delegated to the Management pursuant to Article 95, the business of the Company shall be managed by the Directors, who may pay all expenses incurred in promoting and registering the Company and may exercise all such powers of the Company as are not, by the Law or these Articles, required to be exercised by the Company in general meeting, subject, nevertheless, to any clause of these Articles, to the provisions of the Law and to such regulations, being not inconsistent with the aforesaid clauses or provisions, as may be prescribed by the Company in general meeting but no regulation made by the Company in general meeting shall invalidate any prior act of the Directors which would have been valid if that regulation had not been made.

 

75.Borrowing powers

 

To the extent not delegated to the Management pursuant to Article 95, the Directors may exercise all the powers of the Company to borrow money and to mortgage or charge its undertaking, property and assets (present and future) and uncalled capital or any part thereof, to issue debentures, debenture stock and other securities whenever money is borrowed or as security for any debt, liability or obligation of the Company or of any third party.

 

76.Cheques

 

All cheques, promissory notes, drafts, bills of exchange and other instruments, whether negotiable or not, and all receipts for moneys paid to the Company shall be signed, drawn, accepted, endorsed or otherwise executed, as the case may be, in such manner as the Directors shall from time to time by resolution determine.

 

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77.Board Reserved Matters

 

77.1Each Director and each Member shall exercise all rights and powers available to it to procure that the Company (and where applicable, any Subsidiary) shall not undertake any Board Reserved Matter without (a) until and including the SoFi Exit Date, the prior unanimous approval of the Directors then in office and (b) thereafter, prior approval of the majority of Directors then in office, provided that (x) any matter which is within the scope of the ZenZone Business shall not be a Board Reserved Matter as long as such matter does not relate to, require any action by, or otherwise affect, the Company, any Subsidiary other than the Zhenzhong Subsidiaries, SoFi (as applicable) or any Portfolio Company, and (y) any Board Reserved Matter which is also a Member Reserved Matter shall only require the Reserved Matter Consent and shall not also require approval of the Directors in accordance with this Article 77.1.

 

77.2Notwithstanding the forgoing, in the event that a person nominated by a Member pursuant to Article 72 has not yet been appointed as a Director due to the applicable SoFi State Regulatory Requirements or otherwise (the "Pending Director"), the other Directors shall have the right to propose a Board Reserved Matter through either a Board Meeting or a resolution of Directors in writing, with such Board Meeting not to be held, or resolution of Directors in writing not to be passed, prior to obtaining such party's written consent. Within three (3) Business Days after a proposal is made in a Board Meeting or through a resolution of Directors in writing (the "Resolution Proposal"), the Company shall submit a copy of the Resolution Proposal to the Member which has nominated the Pending Director for review , and such Member shall notify the Directors and the Company of its rejection or acceptance of the Resolution Proposal as soon as reasonably practicable. If such Member notifies the Company of its (a) rejection of the Resolution Proposal, the Directors of the Company shall not approve the Resolution Proposal at any future Board Meeting or by a resolution of the Directors in writing (for clarity, until such party delivers any such notice, such party shall be deemed to have rejected the Resolution Proposal), or (b) acceptance of the Resolution Proposal, the Directors of the Company may proceed to hold the Board Meeting to vote on, or sign of resolution of the Directors in writing approving, the Resolution Proposal.

 

78.Member Reserved Matters

 

78.1Notwithstanding any other provision in these Articles, the Directors shall not (and shall procure that any Subsidiary shall not) undertake any Member Reserved Matter without obtaining the Reserved Matter Consent and the Board (and the board of directors of any Subsidiary) shall have no authority to deal with any such matter in the absence of a Reserved Matter Consent; provided, however, that notwithstanding the foregoing, (i) the Company (or the relevant Members, as applicable) shall provide advance written notice to DCM of any proposed approval action with respect to a Member Reserved Matter by no later than three (3) Business Days prior to the date of the proposed effectiveness of the approval of such Member Reserved Matter, and the Members shall not approve such Member Reserved Matter unless and until DCM has been provided such advance written notice and such three (3) Business Day period prior to effectiveness, unless in each case, DCM expressly waives such advance notice and/or consents in writing to a shorter period following receipt of such advance notice; and (ii) if SB or any of its Affiliates has an interest in any action that is a Member Reserved Matter to be approved hereunder, and SB or such Affiliate's interest in such action is different and more favorable than the respective interests of the other Parties hereto (solely in their capacities as Members of the Company), then such Member Reserved Matter shall also require the prior written approval of DCM in order to be approved under this Article 78.1. For the avoidance of doubt, any action that is a Member Reserved Matter and treats or affects Members of the Company differently solely on the basis of (x) their respective pro rata ownership of Shares or (y) their being a debtholder of the Company or any Subsidiary (other than in the case of modification of the terms of the SB Loan Documents or in connection with New Indebtedness), shall not be deemed to treat or affect SB or its Affiliates differently or more favorably and shall not require the prior written approval of DCM.

 

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78.2The consent of a particular Member shall be deemed given in relation to a Member Reserved Matter if that Member sends written notice to that effect to the Company, and the Company is entitled to rely on any such consent.

 

79.Authority to bind Company

 

No document or deed otherwise duly executed and delivered by or on behalf of the Company shall be regarded as invalid merely because at the date of delivery of the deed or document, the Director, Secretary or other officer or Person who shall have executed the same and/or affixed the Seal (if any) thereto as the case may be for and on behalf of the Company shall have ceased to hold such office or to hold such authority on behalf of the Company.

 

80.Executive Directors

 

The Directors may from time to time appoint one of their number to be a managing director, joint managing director or an assistant managing director or to hold any other employment or executive office with the Company for such period and upon such terms as the Directors may determine and may revoke or terminate any such appointments. Any such revocation or termination as aforesaid shall be without prejudice to any claim for damages that such Director may have against the Company or the Company may have against such Director for any breach of any contract of service between him and the Company which may be involved in such revocation or termination. Any Person so appointed shall receive such remuneration (if any) (whether by way of salary, commission, participation in profits or otherwise) as the Directors may determine, and either in addition to or in lieu of his reasonable travel expenses to attend Board meetings pursuant to Article 97.1.

 

81.Sole Director

 

Notwithstanding any provision in these Articles to the contrary, a sole Director shall be entitled to exercise all of the powers and functions of the Directors which may be imposed on them by Law or by these Articles.

 

PROCEEDINGS OF DIRECTORS

 

82.Regulating proceedings

 

The Directors may meet together (either within or without the Cayman Islands but not, for the avoidance of doubt, in Hong Kong) for the despatch of business, adjourn and otherwise regulate their meetings and proceedings, as they think fit provided that they shall meet at least once a quarter. Subject to the provision of these Articles, questions arising at any meeting shall be decided by a majority of votes. In case of an equality of votes the chairman shall not have a second or casting vote and the motion shall be deemed to have been lost.

 

83.Convening a meeting

 

83.1A Director or alternate Director may, and the Secretary on the requisition of a Director or alternate Director shall, at any time, summon a meeting of Directors by at least five (5) Business Days' notice in writing to every Director and alternate Director; provided however, that notice may be waived by all the Directors (or their alternates) either at, before or retrospectively after the meeting is held provided further that notice or waiver thereof may be given by email or fax.

 

83.2An agenda identifying in reasonable detail the issues to be considered by the Directors, together with copies of any relevant papers to be discussed, shall be distributed to all Directors at least five (5) Business Days' in advance of the Board Meeting (or, where the Board Meeting is convened on less than five (5) Business Days' notice, as soon as reasonably practicable before the meeting). Unless the Directors otherwise agree, only the matters on the agenda for a Board Meeting may be the subject of resolutions at that Board Meeting.

 

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84.Quorum

 

84.1The quorum for the transaction of business of the Directors shall be two (2) Directors, which shall include the SB Director until the SoFi Exit has occurred. An alternate appointed by a Director shall be counted in a quorum at a meeting at which the Director appointing him is not present provided always that where a Director is acting in his own right and also as an alternate he is only counted once in the quorum. A Director who ceases to be a Director at a meeting of the Directors may continue to be present and to act as a Director and be counted in the quorum until the termination of the meeting provided no other Director objects and if otherwise a quorum of Directors would not be present.

 

84.2If within half an hour from the time appointed for a Board Meeting a quorum is not present, the meeting shall be adjourned to the third (3) Business Day after the date on which the original Board Meeting was convened at the same time and same place. If at the reconvened meeting, a quorum is not present within one hour from the time appointed for the meeting, then those Directors present will constitute a quorum for the purposes of such further reconvened meeting.

 

85.Vacancies

 

The continuing Directors may act notwithstanding any vacancy in their body, but, if and so long as their number is reduced below the number fixed by or pursuant to these Articles as the necessary quorum of Directors, the continuing Directors may act for the purpose of increasing the number of Directors to that number, or of summoning a general meeting of the Company, but for no other purpose.

 

86.Chairman

 

The Directors may elect a chairman of their meetings and determine the period for which he is to hold office; but if no such chairman is elected, or if at any meeting the chairman is not present within five minutes after the time appointed for holding the same, the Directors present may choose one of their number to be chairman of the meeting.

 

87.Written resolutions of Directors

 

A resolution in writing signed by all of the Directors or all of the members of a committee of Directors for the time being entitled to receive notice of a meeting of the Directors (or by an alternate Director as provided in these Articles), including a resolution signed in counterpart and/or sent or evidenced by way of signed fax or electronic transmission, shall be as valid and effectual as if it had been passed at a meeting of the Directors or of a committee of Directors duly called and constituted.

 

88.Meeting by telephone or other facilities

 

To the extent permitted by law, a meeting of the Directors or a committee appointed by the Directors may be held by means of such telephone, electronic or other communication facilities (including, without limiting the generality of the foregoing, by telephone or by video conferencing) as permit all Persons participating in the meeting to communicate with each other simultaneously and instantaneously and participation in such a meeting shall constitute presence in person at such meeting. Such a meeting shall be deemed to take place where the largest group of those Directors participating in the meeting is physically assembled, or, if there is no such group, where the chairman of the meeting then is.

 

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89.Validity of acts in spite of defect

 

All acts done by any meeting of the Directors or of a committee of Directors, or by any Person acting as a Director shall, notwithstanding that it be afterwards discovered that there was some defect in the appointment of any such Director or Person acting as aforesaid, or that they or any of them were disqualified, be as valid as if every such Person had been duly appointed and was qualified to be a Director.

 

90.Minutes

 

90.1The Directors shall cause minutes to be made and records kept for the purpose of recording:

 

90.1.1all appointments of officers made by the Directors;

 

90.1.2the names of the Directors and other Persons present at each meeting of the Directors and of any committee of the Directors; and

 

90.1.3all resolutions and proceedings at all meetings of the Members of the Company or any class of Members and of the Directors and of committees of Directors; and the chairman of all such meetings or of any meeting confirming the minutes thereof shall sign the same.

 

DIRECTORS' INTERESTS

 

91.Interests

 

91.1A Director may hold any other office or place of profit with the Company (except that of Auditor) in conjunction with his office of Director for such period and upon such terms as to remuneration and otherwise as the Directors (acting by at least 75% of the Directors) may determine.

 

91.2A Director or officer may act by himself or his firm in a professional capacity for the Company (otherwise than as Auditor), and he or his firm shall be entitled to remuneration for professional services as if he were not a Director or officer provided that any remuneration paid must be approved by 75% of the Directors.

 

91.3No Director or officer shall be disqualified from his office or prevented by such office from holding any office or place of profit under the Company or under any company in which the Company shall be a Member or have any interest, or from contracting with the Company, either as vendor, purchaser or otherwise, nor shall any such contract or any contract or transaction entered into by or on behalf of the Company in which any Director or officer shall be in any way interested be or be liable to be avoided nor shall any Director or officer so contracting, dealing or being so interested be liable to account to the Company for any profit realised by any such contract or transaction by reason of such Director holding office or of the fiduciary relation thereby established.

 

92.Disclosure and nature of interest

 

92.1A Director (or his alternate Director in his absence) shall be at liberty to vote in respect of any contract or transaction in which he is interested provided that the nature of the interest of the Director in any such contract or transaction shall be disclosed by him at or prior to its consideration and any vote thereon.

 

92.2The nature of the interest of any Director or officer in any contract, dealing or transacting with or affecting the Company shall be disclosed by him at or prior to its consideration and any vote thereon and a general notice that a Director or officer is a shareholder of any specified firm or company and/or is to be regarded as interested in any transaction with such firm or company shall be sufficient disclosure hereunder and after such general notice it shall not be necessary to give special notice relating to any particular transaction.

 

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DELEGATION OF DIRECTORS' POWERS

 

93.Power to delegate

 

Directors may from time to time and at any time by power of attorney or otherwise appoint any company, firm or Person or fluctuating body of Persons, whether nominated directly or indirectly by the Directors, to be the attorney or attorneys of the Company for such purposes and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Directors under these Articles) and for such period and subject to such conditions as they may think fit, and any such power of attorney may contain such provisions for the protection and convenience of Persons dealing with any such attorney and of such attorney as the Directors may think fit and may also authorise any such attorney to delegate all or any of the powers, authorities and discretions vested in him.

 

94.Alternate Directors

 

94.1Any Director may by writing appoint any other Director, or other Person willing to act, to be his alternate and remove his alternate so appointed by him. Such appointment or removal shall be by notice to the Registered Office signed by the Director making or revoking the appointment or in any other manner approved by the Directors, and shall be effective on the date the notice is served and the alternate shall be notified of such appointment or revocation. Subject to the removal by the appointing Director, the alternate shall continue in office until the date on which his appointor ceases to be a Director. An alternate may also be a Director in his own right and may act as alternate to more than one Director.

 

94.2An alternate shall be entitled to receive notice of all meetings of the Directors, attend, be counted in the quorum, vote and act in such appointor's place at every such meeting at which the appointing Director is not personally present, and generally to perform all the functions of his appointor as a Director in his absence.

 

94.3These Articles (except as regards powers to appoint an alternate and remuneration) apply equally to the alternate as though he were the Director in his own right.

 

94.4An alternate Director shall be deemed for all purposes to be a Director and shall alone be responsible for his own acts and defaults and shall not be deemed to be the agent of the Director appointing him. The signature of an alternate to any resolution in writing of the Director or a committee there shall, unless the terms of the appointment provides to the contrary, be as effective as the signature of the Director or Directors to whom he is alternate.

 

95.Management

 

The day-to-day management of the business of the Company shall be conducted by the Management in accordance with the Annual Business Plan. For the avoidance of doubt, the Management shall not have the power to decide on matters that require the approval of the Members or the Board (including those matters which are Board Reserved Matters or Member Reserved Matters, whether under applicable Law, these Articles, or otherwise.

 

96.Officers

 

The Directors may appoint a Secretary and such other officers as they may from time to time consider necessary upon such terms as to duration of office, remuneration and otherwise as they may think fit. Such Secretary or other officers need not be Directors and in the case of the other officers may be ascribed such titles as the Directors may decide and the Directors may revoke or terminate any such election or appointment. Any such revocation or termination shall be without prejudice to any claim for any damages that such officer may have against the Company or the Company may have against such officer for any breach of any contract of service between him and the Company which may be involved in such revocation or termination. Save as provided in the Law or these Articles, the powers and duties of the officers of the Company shall be such (if any) as are determined from time to time by the Directors.

 

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DIRECTORS' AND MANAGEMENT REMUNERATION

 

97.Remuneration

 

97.1Directors will not receive any director's fee or other remuneration other than reimbursement of reasonable travel expenses incurred to attend Board Meetings.

 

The Management (in their capacity as officers or employees of the Company) shall not be entitled to be paid any remuneration, compensation or other fees by the Company, any Subsidiary or any Portfolio Company, including but not limited to cash compensation (for the avoidance of doubt, this restriction shall not apply to equity incentives issued under the Share Option Plan).

 

SEALS AND DEEDS

 

98.Use of Seal

 

The Directors may determine that the Company shall have a Seal, and if they so determine, shall provide for the safe custody of the Seal. The Seal shall only be used by the authority of the Directors and in the presence of a Director or the Secretary or such other Person as the Directors may by resolution appoint for this purpose, and every instrument to which the Seal affixed shall be signed by the relevant Person. Notwithstanding the above, annual returns and notices filed under the Law may be executed either as a deed or under Seal and in either case without the need for the authority of a resolution of the Directors.

 

99.Duplicate Seal

 

The Company may maintain in any place or places outside the Cayman Islands a facsimile of any Seal and such facsimile seal shall be affixed in the same way as if it were the Seal.

 

100.Execution of deeds

 

In accordance with the Law, the Company may execute any deed or other instrument (which would otherwise be required to be executed under Seal) by the signature of such deed or instrument as a deed by a Director or by the Secretary of the Company or by such other Person as the Directors may appoint or by any other Person or attorney on behalf of the Company appointed by a deed or other instrument executed as a deed by a Director or the Secretary or such other Person as aforesaid.

 

DIVIDENDS

 

101.Payment of Dividends

 

101.1DCM Initial SoFi In-Kind Distribution. Subject to the (i) receipt of applicable regulatory approvals and (ii) absence of any continuing event of default under each of the Everbright Loan Documents, the SB Loan Documents and the Renren Loan Documents, DCM shall have the right to request at any time that the Company make an in-kind distribution of the DCM Initial SoFi Shares to DCM (the DCM Initial SoFi In-Kind Distribution), subject to applicable Laws, and no Board approval as applicable pursuant to Board Reserved Matters pursuant to Article 77 or Member approval as applicable to Member Reserved Matters pursuant to Article 78 is necessary in order to take any action with regard to this Article 101.1. The Company and all Members shall use reasonable best endeavours to procure that the Company complete the DCM Initial SoFi In-Kind Distribution as soon as practicable after receiving DCM's request to conduct such DCM Initial SoFi In-Kind Distribution.

 

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101.2SB SoFi Initial SoFi In-Kind Distribution. Subject to the (i) receipt of applicable regulatory approvals and (ii) absence of any continuing event of default under each of the Everbright Loan Documents, the SB Loan Documents and the Renren Loan Documents, SB shall have the right to request at any time after the entire Principal (as defined in the Everbright Loan Documents) under the Everbright Loan Documents, and all other amounts then payable under the Everbright Loan Documents, has been repaid in full that the Company make an in-kind distribution of all of the SB Initial Shares to SB (the SB Initial SoFi In-Kind Distribution), subject to applicable Laws, and no Board approval as applicable pursuant to Board Reserved Matters pursuant to Article 77 or Member approval as applicable to Member Reserved Matters pursuant to Article 78 is necessary in order to take any action with regard to this Article 101.2. The Company and all Members shall use reasonable best endeavours to procure that the Company complete the SB Initial SoFi In-Kind Distribution as soon as practicable after receiving SB's request to conduct such SB Initial SoFi In-Kind Distribution.

 

101.3In the case of any distribution of SoFi Shares in-kind, subject to the limitations set forth in Article 101.4.1, Mr. Chen shall have the right to elect to receive a SoFi Distribution concurrent with such distribution of SoFi Shares in-kind, or to propose any alternative method of addressing any adverse tax consequences to Mr. Chen that may result from such distribution of SoFi Shares in kind, and the Board shall exercise its reasonable best endeavours to give effect to such election or proposal; provided that such SoFi Distribution is solely for the purpose of paying any taxes assessed in connection to the DCM Initial SoFi In-Kind Distribution or the SB Initial SoFi In-Kind Distribution and represents the minimum SoFi Distribution possible to satisfy such tax consequences.

 

101.4Subject in all respects to (x) the rights of DCM under Article 101.1 and SB under Article 101.2, and the completion of any SoFi Distribution that is validly requested by DCM in accordance with Article 101.1 or validly requested by SB in accordance with Article 101.2, (y) the satisfaction or waiver (if applicable) of the mandatory prepayment requirements, collateral requirements and restrictions in the Everbright Loan Documents, the SB Loan Documents and the Renren Loan Documents, and (z) applicable Law, SoFi Distributions shall be promptly distributed to the Members as follows; provided that (1) other than the DCM Initial SoFi In-Kind Distribution and the SB Initial SoFi In-Kind Distribution, which shall comprise SoFi Shares in kind as provided in Article 101.1 and 101.2 (as applicable), each SoFi Distribution to SB or DCM may, at the sole discretion of DCM or SB (as applicable), comprise SoFi Shares in kind or SoFi Proceeds (or a combination thereof); and (2) other than a SoFi Distribution to Mr. Chen pursuant to Article 101.3, each SoFi Distribution to a Member other than SB and DCM shall solely comprise SoFi Proceeds unless SoFi is publicly listed on a stock exchange in the United States at the time of the distribution

 

101.4.1Prior to Renren Repayment. If, after repayment of all Liabilities (as defined in the Subordination Deed) incurred, payable or owing by the Company or its Affiliates to SB (in each case, whether alone or jointly, or jointly and severally, with any other Person, whether actually or contingently, and whether as principal, surety or otherwise) under the SB Loan Documents (the Junior Debt), and prior to the repayment of all Liabilities (as defined in the Subordination Deed) incurred, payable or owing by the Company or its Affiliates to Renren (in each case, whether alone or jointly, or jointly and severally, with any other Person, whether actually or contingently, and whether as principal, surety or otherwise) under the Renren Loan Documents (the Subordinated Debt), (i) DCM's SoFi Distributable Shares exceeds the DCM Initial SoFi Shares, then the Company shall make a single SoFi Distribution to DCM equal to such excess (in kind or as SoFi Proceeds thereof); and (ii) SB's SoFi Distributable Shares exceeds the SB Initial SoFi Shares, then the Co