Explanatory Notes to the Agenda for the Extraordinary General Meeting of Shareholders of Funcom N.V
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Explanatory notes to the agenda for the Extraordinary General Meeting of Shareholders of Funcom N.V. of 24 April 2013 (the “Meeting”) 1. Opening. (discussion) The chairman will open the meeting at 11.00 am local time. 2. Proposal to approve certain amendments to the loan agreement with warrants dated 29 December 2010 as entered into by and between Funcom N.V. and the lenders. (vote) Mr. Hans Peter Jebsen controls the company Kristian Gerhard Jebsen Group Ltd. that in turn controls the companies Stelt Holding N.V. and KGJ Investments S.A., SICAV-SIF. As part of an internal reorganization within the Jebsen Group, the warrants under the warrant agreement dated 29 December 2010 have been transferred on 5 December 2012 from Stelt Holding N.V. to KGJ Investments S.A., SICAV-SIF. The proposal represents an inseparable part of a comprehensive loan restructuring plan as announced by Funcom N.V. on 28 February 2013. The objective of the plan is to provide cash relief to Funcom N.V. to complete the business restructuring process and to secure working capital for the development of the online multiplayer game based on the LEGO® Minifigure line and the establishment of the new Mobile and Online services departments. Currently KGJ Investments S.A., SICAV-SIF holds 5,000,000 (five million) warrants. The proposed amendments concern – amongst others – changes of the conditions of the exercise of these 5,000,000 (five million) warrants. The proposal is to approve the following proposed material amendments to the loan agreement with warrants dated 29 December 2010 as entered into by and between Funcom N.V. and the lenders: A. A change of the maturity date, for the entire (principal) amount of the loan from 30 December 2013, when the full face amount of the loan was due, to four installment payments with the following maturities: USD 1,500,000 - 30 March 2013 USD 500,000 - 30 June 2013 USD 4,000,000 - 30 December 2014 USD 4,000,000 - 31 July 2015 This is to provide cash relief to Funcom N.V. to complete the business restructuring process and to secure working capital for the development of the online multiplayer game based on the LEGO® Minifigure line and the establishment of the new Mobile and Online services departments. B. A change of the exercise price of the warrants, from USD 1.67 to USD 0.37 per warrant. This is considered reasonably aligned with the current price level for Funcom N.V. shares. C. An extension of the exercise period of the warrants, from 30 March 2014 to 30 December 2015 as final date of the exercise period. 1 The proposed new date aligns better with the last loan repayment installment which, under the new terms, is to occur on 31 July 2015. D. An increase of the number of warrants to be issued to the lender from 5,000,000 to 15,000,000 This is to compensate KGJ Investments S.A., SICAV-SIF for the deferral of loan maturity and for their continued support to Funcom N.V. The 10,000,000 (ten million) new warrants are proposed to be issued under the same (updated) conditions as proposed for the current 5,000,000 (five million) warrants, i.e. – amongst other conditions– with an exercise price of USD 0.37 and an exercise period of the warrants that expires on 30 December 2015. The interest percentage of the loan agreement with warrants will remain unchanged. The proposal also includes (to the extent necessary and required) the authorization of the Board of Supervisory Directors to make corresponding amendments of the conditions of the 5,000,000 (five million) warrants previously issued by Funcom N.V. and the granting of all necessary powers to the Board of Supervisory Directors to do so. 3. Proposal to approve certain amendments to the bond agreement entered into by and between Funcom N.V. and Norsk Tillitsmann ASA dated 21 December 2011 (the “Bond Agreement”). (vote) Mr. Hans Peter Jebsen controls the company Kristian Gerhard Jebsen Group Ltd. that in turn controls the companies Stelt Holding N.V. and KGJ Investments S.A., SICAV-SIF. As part of an internal reorganization within the Jebsen Group, the bonds under the bond agreement dated 21 December 2011 have been transferred on 5 December 2012 from Stelt Holding N.V. to KGJ Investments S.A., SICAV-SIF. The proposal represents an inseparable part of a comprehensive loan restructuring plan as announced by Funcom N.V. on 28 February 2013. The objective of the plan is to provide cash relief to Funcom N.V. to complete the business restructuring process and to secure working capital for the development of the online multiplayer game based on the LEGO® Minifigure line and the establishment of the new Mobile and Online services departments. The proposal is to approve the following proposed material amendments to the Bond Agreement: A. Conversion Price and Conversion Right Under the new terms the Conversion Price will be USD 0.37 per share (which currently is USD 1.37) and is considered reasonably aligned with the current price level for Funcom N.V. shares. Based on the new conversion price (which new conversion price will be subject to the customary adjustment provisions of the Bond Agreement), each bond will convert to 270,270.2703 shares. However the number of shares shall be rounded down to the nearest whole share. 2 B. Maturity date The proposed new maturity date is 22 December 2015 (which currently is 22 December 2014) and will provide cash relief to Funcom N.V. in 2014 to allow for sufficient working capital to promote and launch the online multiplayer game based on the LEGO® Minifigure line, and to support other ongoing projects. C. Interest rate and Interest payment date Under the new terms the interest is fixed at 5 per cent per annum (which currently is 10 per cent per annum with semi-annually payments) with no payments before maturity. The accrued interest is due on the maturity date in either cash or shares of Funcom N.V. at the option of the bond holder. If the interest is due in shares, then the conversion price of USD 0.37 applies. If approved, the proposed changes are effective as of 25 April 2013 and will allow Funcom N.V. to secure working capital to complete the restructuring process in 2013 and to develop, launch and promote the online multiplayer game based on the LEGO® Minifigure line. The proposal includes (to the extent necessary and required) the confirmation that the Board of Supervisory Directors is authorized to amend the conditions of all the bonds currently outstanding and the granting of all necessary powers to the Board of Supervisory Directors to do so. 4. Proposal to designate (aanwijzen), pursuant to Section 4.9 and 4.1 of Funcom N.V.’s articles of association, the Board of Supervisory Directors (raad van commissarissen) as body (orgaan) of Funcom N.V. authorized to issue up to a maximum of 10,000,000 (ten million) shares (aandelen) in the capital of Funcom N.V., specifically including the authority to issue rights to acquire shares (rechten tot het nemen van aandelen) in the capital of Funcom N.V., and to determine the terms and conditions of each and any such issuance(s). This proposed designation of the Board of Supervisory Directors shall be valid from the date of the Meeting until the Annual General Meeting of Shareholders of Funcom N.V. to be held in the year 2013. This proposed designation of the Board of Supervisory Directors shall furthermore be in addition to – expand – the authority granted to the Board of Supervisory Directors in the Annual General Meeting of Shareholders of Funcom N.V. of 27 June 2012. This proposed designation may at all times be revoked by the general meeting of Funcom N.V. The general meeting of Funcom N.V. furthermore remains authorized to resolve on any issuance of shares (aandelen) and/or rights to acquire shares (rechten tot het nemen van aandelen) during the period of this proposed designation of the Board of Supervisory Directors. (vote) The proposed designation is intended to give the Board of Supervisory Directors the ability to issue the warrants under the proposed amendments to the loan agreement with warrants dated 29 December 2010. Furthermore reference is made to the explanatory notes under item 2 above. The general meeting of Funcom N.V. furthermore remains authorized to resolve on any issuance of shares (aandelen) and/or rights to acquire shares (rechten tot het nemen van aandelen) during the period of this proposed designation of the Board of Supervisory Directors. 5. Proposal to designate (aanwijzen), pursuant to Section 4.3 of Funcom N.V.’s articles of association, the Board of Supervisory Directors as body (orgaan) of Funcom N.V. authorized to limit or exclude the pre-emptive rights (voorkeursrecht) of the shareholders of Funcom N.V. 3 in relation to each and every issuance of shares (aandelen), or granting of rights to acquire shares (rechten tot het nemen van aandelen), in the capital of Funcom N.V., referred to under item 4 above. This proposed designation of the Board of Supervisory Directors shall also be valid from the date of the Meeting until the Annual General Meeting of Shareholders of Funcom N.V. to be held in the year 2013. This proposed designation of the Board of Supervisory Directors shall also be in addition to – expand – the authority granted to the Board of Supervisory Directors in the Annual General Meeting of Shareholders of Funcom N.V.