95/264 Description of Convertible Notes On March 24, 2016, we entered into a convertible note purchase agreement, pursuant to which, on April 1, 2016, we issued and sold Convertible Notes which were guaranteed by certain of our subsidiaries to various “accredited investors” within the meaning of Rule 501(a)(1), (2), (3), or (7) under the Securities Act. The Convertible Notes were issued without registration in reliance on the exemption afforded by Rule 144A and Regulation S of the Securities Act, and Rule 506 promulgated thereunder. The Convertible Notes were issued at par and bear interest of 5.0% payment­in­kind interest increasing by 100 basis points every six months after April 1, 2018. Since a specified conversion event did not occur within the first twelve months of the issue date, the original discount of 20.0% to the per share price of our ordinary shares increased by 250 basis points on April 1, 2017 and would have increased again every six months thereafter by 250 basis points until a specified conversion event had occurred. The Convertible Notes also had change of control clauses where the noteholders had the option to convert the Convertible Notes into ordinary shares. On the maturity date, if the Convertible Notes had not been converted, exchanged, or repaid, noteholders would have received cash in an amount equal to the original principal amount plus 10% annualized return. The Convertible Notes included certain affirmative covenants typical for notes of this type, including the delivery of audited financial statements to the noteholders and certain negative covenants typical for notes of this type, including restrictions on declaring or paying dividends, redeeming, repurchasing or retiring for value equity interests, incurring additional indebtedness, entering into certain affiliate transactions, and incurring liens, among others. Certain events of default and covenants in the Convertible Notes were subject to certain thresholds and exceptions described in the agreement governing the Convertible Notes. We strived, to the extent possible, to mitigate our currency exposure in the U.S. dollar denominated Convertible Notes by matching the balance with U.S. dollar denominated cash equivalents and short term investments creating a natural hedge. In connection with the Tencent Transactions, in December 2017, certain accredited investors in the Convertible Notes exchanged $301 million of Convertible Notes for 4,800,000 ordinary shares pursuant to an exchange agreement and subsequently sold such shares to an affiliate of Tencent. Additionally, pursuant to the December Exchange, certain accredited investors in the Convertible Notes exchanged an aggregate of $110 million of Convertible Notes, plus accrued interest, for an aggregate of 1,754,960 ordinary shares. In January 2018, we entered into an exchange agreement with accredited investors holding the remaining balance of our Convertible Notes, pursuant to which the remaining $628 million of Convertible Notes, plus accrued interest, was exchanged for 9,431,960 ordinary shares. Pursuant to this exchange agreement, subject to certain conditions, if we fail to list our ordinary shares on or prior to July 2, 2018, we have agreed to offer to each noteholder the option to unwind the transaction such that we purchase back the shares that were issued to such noteholder pursuant to the exchange and we will issue such noteholder a new note that is materially identical to its note prior to the exchange. At December 31, 2017, pro forma for the January Exchange, we had no outstanding indebtedness. See “Summary—Recent Developments—Exchange of Convertible Notes. Off­balance sheet arrangements As of December 31, 2017, we do not have transactions with unconsolidated entities, such as entities often referred to as structured finance or special purpose entities, whereby we have financial guarantees, subordinated retained interests, derivative instruments, or other contingent arrangements that expose us to material continuing risks, contingent liabilities, or any other obligation under a variable interest in an unconsolidated entity that provides financing, liquidity, market risk, or credit risk support to us. 88