Item 1.01 Entry into a Material Definitive Agreement.
Loan Agreement with Subsidiary of Changyou.com Limited
On October 24, 2016, Beijing Sohu New Media Information Technology Co., Ltd. (
Sohu Media
), a Peoples Republic of China
(
PRC
) company that is an indirect wholly-owned subsidiary of the registrant, entered into a loan agreement (the
Loan Agreement
) with Beijing AmazGame Age Internet Technology Co., Ltd.
(
AmazGame
), a PRC company that is an indirect wholly-owned subsidiary of the registrants indirect majority-owned subsidiary Changyou.com Limited (
Changyou
), a Cayman Islands company, pursuant to which Sohu
Media may borrow from time to time from AmazGame up to RMB1.0 billion (or approximately US$148.64 million).
The first request for an
advance under the Loan Agreement must be made on or prior to December 31, 2016, and requests for further advances may be made for one year following the initial advance. Such one-year request period may be extended for another one-year period with
the consent of AmazGame. Principal amounts outstanding under the Loan Agreement will bear interest at an annual rate of 6%. The maturity date for principal and accrued interest for each advance under the Loan Agreement will be one year from the
date of each such advance, subject to extension of the date for repayment of principal for one additional year with the consent of AmazGame. Interest accrued on each advance will be due on the applicable initial one-year maturity date without regard
to whether the principal maturity date is extended, and interest accrued following any extension of the maturity date for an advance will be due, together with principal, upon the extended maturity date of such advance.
The Loan Agreement includes customary events of default, including Sohu Medias failure to pay any principal or interest when due,
becoming insolvent, or ceasing operations, or if there is a material adverse change in the assets, business, commitments, or prospects of Sohu Media. Upon AmazGames declaration of an event of default under the Loan Agreement, AmazGame may
refuse to make further advances under the Loan Agreement and demand payment in full of all outstanding principal and accrued interest, and Changyou may elect to execute its right under the Share Pledge Agreement, as described below in this report,
to apply the outstanding amounts of principal and interest to repurchase Class B ordinary shares of Changyou.
The registrant intends to
use amounts drawn down under the Loan Agreement to finance the registrants operations, excluding the operations of Changyou and of the registrants subsidiary Sogou Inc.
The foregoing summary is not intended to be complete and is qualified in its entirety by reference to the Loan Agreement, an English
translation of which is filed herewith as Exhibit 10.1 and incorporated herein by reference.
Share Pledge Agreement
Also on October 24, 2016, Sohu.com (Game) Limited (
Sohu Game
), a Cayman Islands company that is an indirect wholly-owned
subsidiary of the registrant and is the direct parent of Changyou, and Changyou entered into a share pledge agreement (the
Share Pledge Agreement
) pursuant to which Sohu Game pledged to Changyou 11,386,228 Class B ordinary shares
of Changyou held by Sohu Game, to secure Sohu Medias obligations under the Loan Agreement. While any principal or interest is outstanding under the Loan Agreement, the number of Class B ordinary shares pledged by Sohu Game to Changyou
under the Share Pledge Agreement is subject to upward adjustment from time to time the price of Changyous American depositary shares (
ADSs
) on the Nasdaq Global Select Market drops for at least 10 consecutive trading days by
an amount of 20% or more from such price as of the date of the Share Pledge Agreement, and is subject to further upward adjustment in the event of any additional incremental drops of 20% or more in the price of Changyous ADSs during 10
consecutive trading days.
If there is an event of default under the Loan Agreement, Changyou may, at its election, apply all of the unpaid
principal and accrued interest under the Loan Agreement to the repurchase from Sohu Game of Class B ordinary shares of Changyou pledged under the Pledge Agreement at a price equal to the lesser of (i) one-half of the average of the closing
prices of one Changyou ADS on the Nasdaq Global Select Market for the 30 trading days preceding the date of the Pledge Agreement, or (ii) one-half of the average of the closing prices of one Changyou ADS on the Nasdaq Global Select Market for
the 30 trading days preceding the date of the occurrence of the event of default.
2
The foregoing summary is not intended to be complete and is qualified in its entirety by
reference to the Share Pledge Agreement, a copy of which is filed herewith as Exhibit 10.2 and incorporated herein by reference.