UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Amendment No. 2)
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of
the Securities Exchange Act of 1934
Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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Fushi Copperweld, Inc.
(Name of Registrant as Specified In Its
Charter)
(Name of Person(s) Filing Proxy Statement,
if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate
box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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Common stock, par value $0.006 per share, of Fushi Copperweld, Inc. (“Common
Stock”)
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(2)
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Aggregate number of securities to which transaction applies:
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As of October 8, 2012: (A) 38,406,347 shares of Common Stock, (B) options to purchase
448,345 shares of Common Stock at an exercise price less than $9.50 and (C) 72,667 nonvested shares of Common Stock which
will vest at the effective time of the merger
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act
Rule 0-11(b)(1) (set forth the amount on which the filing fee is calculated and state how it was determined):
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The maximum aggregate value was determined for purposes of calculating
the filing fee only based upon the sum of (A) 27,135,641 shares of Common Stock multiplied by $9.50 per share, (B) options
to purchase 448,345 shares of Common Stock with an exercise price less than $9.50 multiplied by $1.77 (which is the difference
between $9.50 and the weighted average exercise price of such options of $7.73 per share), (C) 72,667 nonvested shares of
Common Stock which will vest at the effective time of the merger multiplied by $9.50 per share, and (D) 11,270,706 shares
of Common Stock multiplied by $9.50 per share, representing shares of Common Stock to be contributed to the acquiring entity
in the transactions described on this schedule. The filing fee was calculated by multiplying this aggregate value by 0.00011460.
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(4)
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Proposed maximum aggregate value of transaction:
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$366,344,204
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(5)
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Total fee paid:
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$41,983.05
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
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(1)
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Amount Previously Paid: $41,970
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(2)
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Form, Schedule or Registration Statement No.: Schedule 14A
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(3)
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Filing Party: Fushi Copperweld, Inc.
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(4)
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Date Filed: August 13, 2012
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PRELIMINARY
PROXY STATEMENT–SUBJECT TO COMPLETION, DATED OCTOBER 9, 2012
[●], 2012
Dear Stockholder:
You are cordially
invited to attend a special meeting of stockholders, which we refer to as the special meeting, of Fushi Copperweld, Inc., which
we refer to as the Company or Fushi, to be held on _________, 2012, at ______a.m./p.m. (local time). The meeting will be held
at [●].
On June 28, 2012,
the Company entered into an agreement and plan of merger, which we refer to as the merger agreement, with (1) Green Dynasty Holdings
Limited, or Holdco, a Cayman Islands entity currently wholly owned by Mr. Li Fu, the Company’s Chairman and Co-Chief Executive
Officer, (2) Green Dynasty Limited, or Parent, a Cayman Islands exempted company wholly owned by Holdco, and (3) Green Dynasty
Acquisition, Inc., or Merger Sub, a Nevada corporation wholly owned by Parent. Pursuant to the merger agreement, Merger Sub will
merge with and into the Company, and the Company will continue as the surviving corporation and a wholly owned subsidiary of Parent.
At the special meeting, you will be asked to consider and vote upon a proposal to approve the merger agreement.
If the merger contemplated
by the merger agreement is completed, you will be entitled to receive $9.50 in cash, without interest, for each share of our common
stock, par value $0.006 per share (which we refer to as “our common stock” or “Company common stock”),
that you own. Shares held in the treasury of the Company or owned, directly or indirectly, by Parent, Merger Sub, or any wholly
owned subsidiary of the Company immediately prior to the effective time of the merger will be cancelled without consideration.
Shares of our common stock beneficially owned by Mr. Fu and his affiliates and affiliates of Abax Global Capital, which we refer
to as Abax, will be cancelled for no consideration, because these parties are contributing their shares to Parent in exchange
for ownership interests in Holdco, as part of what we refer to as the rollover transactions. In this proxy statement, we refer
collectively to Parent, Merger Sub, Holdco, Mr. Fu, Wise Sun Investments Limited, Ms. Xin Liu, Ms. Yuyan Zhang, Abax, Abax Global
Capital (Hong Kong) Limited, Abax Arhat Fund, Abax Upland Fund LLC, Abax Claremont Ltd., Abax Global Opportunities Fund, Abax
Lotus Ltd., AGC Asia 6 Ltd., AGC China Ltd. and Mr. Xiang Dong Yang as the buyer group.
If the merger is completed,
the Company will continue its operations as a privately held company beneficially owned by the buyer group. As promptly as practicable
following the effective time of the merger, the Company’s shares will no longer be listed on the NASDAQ Global Select Market.
Our board of directors
has adopted, approved, and declared advisable the execution of the merger agreement, directed it be submitted to stockholders,
and recommends that they approve it. Our board of directors made its determination after careful consideration of factors more
fully described in this proxy statement, including the unanimous recommendation of an independent special committee of the board
of directors, which we refer to as the Special Committee, that was formed to consider the merger agreement, the transactions contemplated
by the merger agreement, and other strategic alternatives.
Our board of directors recommends that you vote “FOR”
the proposal to approve the merger agreement, “FOR” the proposal to approve, on a non-binding advisory basis,
the compensation that may be payable to the Company’s named executive officers in connection with the merger, and “FOR”
the proposal to adjourn the special meeting in order to take such actions as our board of directors determines are necessary or
appropriate, including to solicit additional proxies, if there are insufficient votes at the time of the special meeting to adopt
the proposal to approve the merger agreement.
Your vote is very
important.
The merger cannot be completed unless the Company obtains with respect to the proposal to approve the merger agreement
(i) the affirmative vote of holders of at least a majority of the combined voting power of the outstanding shares of our common
stock, and (ii)
the affirmative vote of holders of at least 60% of the combined voting power of the outstanding shares of our
common stock not beneficially owned by the buyer group or any affiliate of any buyer group member
. For purposes of the merger
agreement, affiliates of the buyer group include any person that the Special Committee reasonably believes has reached an agreement
or understanding with the buyer group to receive, in connection with the consummation of the merger, some benefit or value other
than, and in addition to, the merger consideration to be received for such person’s shares. In this proxy statement, we
refer to both approval requirements together as the “stockholder approval.” Please note that failing to vote has the
same effect as a vote “AGAINST” the proposal to approve the merger agreement.
Whether or not you
plan to attend the special meeting, please complete, date, sign, and return, as promptly as possible, the enclosed proxy card
in the accompanying prepaid reply envelope, or submit your proxy by telephone or the Internet. If you attend the special meeting
and vote in person, your vote by ballot will revoke any proxy previously submitted. In order to be counted at the special meeting,
your proxy card or electronic vote must be
received
by 11:59 p.m. (U.S. Eastern time) on
, 2012. Each stockholder is entitled to one vote for each share held as of the close of business on [ ],
2012.
If your shares of
our common stock are held in “street name” by your bank, broker, or other nominee, your bank, broker, or other nominee
will be unable to vote your shares of our common stock without instructions from you. You should instruct your bank, broker, or
other nominee to vote your shares of our common stock in accordance with the procedures provided by your bank, broker, or other
nominee.
The failure to instruct your bank, broker, or other nominee to vote your shares of our common stock “FOR”
the proposal to approve the merger agreement will have the same effect as a vote “AGAINST” the proposal to approve
the merger agreement.
This proxy statement
provides a detailed description of the merger agreement and the proposed merger. In addition, it contains important information
regarding the special meeting. A copy of the merger agreement is attached as Annex A.
We urge you to read carefully this entire
proxy statement, its annexes, and all of the documents incorporated into this proxy statement by reference, including the merger
agreement.
You may also obtain additional information about the Company from documents we have filed with the United States
Securities and Exchange Commission, which we refer to as the SEC, which are available for free without charge at the SEC’s
website www.sec.gov.
PLEASE DO NOT SEND
YOUR STOCK CERTIFICATES AT THIS TIME. IF THE MERGER IS COMPLETED, YOU WILL RECEIVE INSTRUCTIONS REGARDING THE SURRENDER OF YOUR
STOCK CERTIFICATES.
If you have any questions
or need assistance voting your shares, please call MacKenzie Partners, Inc., or MacKenzie, our proxy solicitor, collect at +1
(212) 929-5500 or toll-free at +1 (800) 322-2885 in the United States.
Thank you in advance
for your cooperation and continued support.
Sincerely,
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Jack Perkowski
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Li Fu
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Chairman of the Special Committee
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Chairman of the Board
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This proxy statement
is dated [●], 2012, and is first being mailed to the stockholders on or about [●], 2012.
NEITHER THE SEC NOR
ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE MERGER, PASSED UPON THE MERITS OR FAIRNESS OF THE MERGER
OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THIS LETTER OR IN THE ACCOMPANYING NOTICE OF THE SPECIAL MEETING
OR PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Fushi Copperweld, Inc
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TYG Center Tower B, Suite 2601
Dongsanhuan Bei Lu, Bing 2
Beijing, P.R. China 100027
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON [ ● ], 2012
Notice is hereby given
that a special meeting of the stockholders of Fushi Copperweld, Inc. (which we refer to as the Company or Fushi), will be held
on ____________, 2012, at _________ a.m./p.m. (local time) at [●] for the following purposes:
1. To
consider and vote on a proposal to approve the Agreement and Plan of Merger, dated as of June 28, 2012, as it may be amended
from time to time, among the Company, Green Dynasty Holdings Limited, or Holdco, a Cayman Islands entity currently wholly owned
by Mr. Li Fu, the Company’s Chairman and Co-Chief Executive Officer, Green Dynasty Limited, or Parent, a Cayman Islands
exempted company wholly owned by Holdco, and Green Dynasty Acquisition, Inc., or Merger Sub, a Nevada corporation wholly owned
by Parent, pursuant to which Merger Sub will merge with and into the Company, and the Company will continue as the surviving corporation
and a wholly owned subsidiary of Parent. A copy of the merger agreement is attached as Annex A to the accompanying proxy statement.
2. To
consider and vote on a proposal to approve the following non-binding resolution:
“RESOLVED, that
the compensation that may be paid or become payable to the Company’s named executive officers in connection with the merger,
as disclosed pursuant to Item 402(t) of Regulation S-K in the section titled “Special Factors—Compensation in Connection
with the Merger,” and the agreements or understandings pursuant to which such compensation may be paid or become payable,
are hereby APPROVED.”
Section 14A of the
Securities Exchange Act of 1934, as amended, or the Exchange Act, requires that the Company provide its stockholders with the
opportunity to approve, on a non-binding advisory basis, the compensation that may be payable to the Company’s named executive
officers in connection with the merger, as disclosed in the accompanying proxy statement. In accordance with Section
14A of the Exchange Act, our stockholders are being asked to approve the foregoing non-binding resolution at the special meeting.
3. To
consider and vote on a proposal to adjourn the special meeting in order to take such actions as our board of directors determines
are necessary or appropriate, including, without limitation, to solicit additional proxies, if there are insufficient votes at
the time of the special meeting, to adopt the proposal to approve the merger agreement.
Any other business
that may properly come before the special meeting, or at any adjournment or postponement of the special meeting, by or at the
direction of the board of directors of the Company, will also be transacted at the special meeting.
The merger agreement
must be approved by the holders of (i) at least a majority of the combined voting power of the outstanding shares of our common
stock, and (ii) at least 60% of the combined voting power of the outstanding shares of our common stock not beneficially
owned by the buyer group, which is comprised of Parent, Merger Sub, Holdco, Mr. Fu, Wise Sun Investments Limited, Ms. Xin Liu,
Ms. Yuyan Zhang, Abax, Abax Global Capital (Hong Kong) Limited, Abax Arhat Fund, Abax Upland Fund LLC, Abax Claremont Ltd., Abax
Global Opportunities Fund, Abax Lotus Ltd., AGC Asia 6 Ltd., AGC China Ltd. and Mr. Xiang Dong Yang, or by any affiliate of any
buyer group member. For purposes of the merger agreement, affiliates of the buyer group include any person that the Special Committee
reasonably believes has reached an agreement or understanding with the buyer group to receive, in connection with the consummation
of the merger, some benefit or value other than, and in addition to, the merger consideration to be received for such person’s
shares.
The proposal to approve
the compensation that may be received by the Company’s named executive officers in connection with the merger will be approved
if a majority of the votes cast on such proposal in person or by proxy vote “FOR” the proposal (assuming the presence
of a quorum at the special meeting). Approval of this proposal is not a condition to the completion of the merger, and the vote
with respect to this proposal is advisory only. Because the vote is advisory in nature, it will not be binding on either the Company
or Parent regardless of whether or not the merger agreement is approved.
Approval of a proposal
to adjourn the special meeting requires an affirmative vote of a majority of the votes cast with respect to the proposal.
Only stockholders
of record as of the close of business (U.S. Eastern time) on [ ], 2012, the
record date for the special meeting, are entitled to notice of and to vote at the special meeting and any adjournments or postponements
of the special meeting. Stockholders do not have statutory appraisal or dissenter’s rights with respect to the merger and
the merger agreement.
Please read the attached
proxy statement carefully.
OUR BOARD OF DIRECTORS
RECOMMENDS THAT YOU VOTE “FOR” THE PROPOSAL TO APPROVE THE MERGER AGREEMENT, “FOR” THE PROPOSAL TO APPROVE,
ON A NON-BINDING ADVISORY BASIS, THE COMPENSATION THAT MAY BE PAYABLE TO THE COMPANY’S NAMED EXECUTIVE OFFICERS IN CONNECTION
WITH THE MERGER, AND “FOR” THE PROPOSAL TO ADJOURN THE SPECIAL MEETING IN ORDER TO TAKE SUCH ACTIONS AS OUR BOARD
OF DIRECTORS DETERMINES ARE NECESSARY OR APPROPRIATE, INCLUDING TO SOLICIT ADDITIONAL PROXIES, IF THERE ARE INSUFFICIENT VOTES
AT THE TIME OF THE SPECIAL MEETING TO ADOPT THE PROPOSAL TO APPROVE THE MERGER AGREEMENT.
It is important
that your shares are represented and voted, whether or not you plan to attend the special meeting in person. Even if you plan
to attend the special meeting in person, we request that you complete, sign, date and return the enclosed proxy as promptly as
possible. In order to be counted at the special meeting, your proxy card or electronic vote must be
received
by 11:59
p.m. (U.S. Eastern time) on
, 2012. You also may use the means of electronic communication set forth under the caption “The Special Meeting—Voting
Procedures,” beginning on page 73 to vote by proxy. Your vote is very important to us regardless of the number of shares
of our common stock you own. If you are a stockholder of record, voting in person at the meeting will revoke any proxy previously
submitted. If your shares of our common stock are held in “street name” by your bank, broker, or other nominee, your
bank, broker, or other nominee will be unable to vote your shares of our common stock without instructions from you. You should
instruct your bank, broker, or other nominee to vote your shares of our common stock in accordance with the procedures provided
by your bank, broker, or other nominee. Submitting a proxy by mailing the enclosed proxy card in a timely manner will ensure your
shares are represented at the special meeting. Please review the instructions in the accompanying proxy statement and the enclosed
proxy card or the information forwarded by your bank, broker, or other nominee regarding the voting of your shares.
PLEASE DO NOT SEND
YOUR STOCK CERTIFICATES AT THIS TIME. IF THE MERGER IS COMPLETED, YOU WILL RECEIVE INSTRUCTIONS REGARDING THE SURRENDER OF YOUR
STOCK CERTIFICATES.
If you have any questions
or need assistance voting your shares, please call MacKenzie Partners, Inc., our proxy solicitor, collect at +1 (212) 929-5500
or toll-free in the U.S. at +1 (800) 322-2885.
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BY ORDER OF THE BOARD OF DIRECTORS,
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Li Fu
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Co-Chief Executive Officer and Chairman of the Board
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,
2012
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TABLE OF CONTENTS
SUMMARY TERM SHEET
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1
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Parties Involved in the Merger
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1
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Structure and Effects of the Merger
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2
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Merger Consideration
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2
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Date, Time, and Place of the Special Meeting
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2
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Purpose of the Special Meeting
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2
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Recommendation of the Special Committee and Board of Directors
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3
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Record Date
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3
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Quorum
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3
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Voting Procedures
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3
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Revocation of Proxies
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4
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Vote Required
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4
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Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated
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4
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Position of the Buyer Group Regarding the Fairness of the Merger
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5
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Financing of the Merger
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5
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Limited Guarantee
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5
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Interests of Certain Persons in the Merger
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5
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Acquisition Proposals
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6
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Conditions to the Merger
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6
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Termination of the Merger Agreement
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6
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Termination Fees
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8
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Remedies; Specific Performance
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8
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Dissenter’s Rights
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8
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Certain Material U.S. Federal Income Tax Consequences of the Merger for U.S. Holders
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8
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Regulatory Approvals
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9
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Delisting and Deregistration of the Company Common Stock
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9
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Litigation Relating to the Merger
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9
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SPECIAL FACTORS
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10
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Merger Consideration
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10
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Background of the Merger
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10
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Recommendation of the Special Committee and Board of Directors and Their Reasons for the Merger
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21
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Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated
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25
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Management’s Projected Financial Information
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30
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Purposes and Reasons of the Buyer Group for the Merger
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39
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Position of the Buyer Group Regarding the Fairness of the Merger
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39
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Nature of Business Conducted
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42
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Plans for the Company after the Merger
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43
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Financing of the Merger
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43
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Limited Guarantee
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46
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Voting Agreement
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46
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Closing and Effective Time of the Merger
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46
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Payment of Merger Consideration and Surrender of Stock Certificates
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47
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Interests of Certain Persons in the Merger
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47
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Compensation in Connection with the Merger
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51
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Estimated Fees and Expenses
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52
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Certain Material PRC Tax Consequences of the Merger for U.S. Holders
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53
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Certain Material U.S. Federal Income Tax Consequences of the Merger for U.S. Holders
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54
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Regulatory Approvals and Notices
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56
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Delisting and Deregistration of the Company’s Common Stock
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56
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Provisions for Unaffiliated Stockholders
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56
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Litigation Related to the Merger
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57
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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING
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59
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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
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66
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PARTIES INVOLVED IN THE MERGER
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67
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The Company
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67
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Parent, Merger Sub and Holdco
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67
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Mr. Li Fu and Certain of his Affiliates
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67
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Abax and Certain of its Affiliates
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68
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THE SPECIAL MEETING
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70
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General Information
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70
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Date, Time, and Place of the Special Meeting
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70
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Purpose of the Special Meeting
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70
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Record Date; Voting
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70
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Quorum
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71
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Recommendation of the Special Committee
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71
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Recommendation of the Company’s Board of Directors
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71
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Attendance
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71
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Vote Required
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72
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Abstentions and Broker Non-Votes
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72
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Stock Ownership and Interests of Certain Persons
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73
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Voting Procedures
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73
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Other Business
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74
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Revocation of Proxies
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74
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Adjournments and Postponements
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75
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Anticipated Date of Completion of the Merger
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75
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Rights of Dissenting Stockholders
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75
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Solicitation of Proxies
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75
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Availability of Documents Incorporated by Reference
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75
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Questions and Additional Information
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75
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THE MERGER AGREEMENT
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76
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Explanatory Note Regarding the Merger Agreement
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76
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Effects of the Merger; Directors and Officers; Articles of Incorporation; Bylaws
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76
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Closing and Effective Time of the Merger
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77
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Treatment of Company Common Stock, Stock Options, and Restricted Shares
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77
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Exchange and Payment Procedures
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78
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Financing Covenant; Company Cooperation
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79
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Representations and Warranties
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80
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Conduct of Our Business Pending the Merger
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83
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Acquisition Proposals
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85
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Stockholders Meeting
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87
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Further Action; Efforts
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87
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Indemnification; Directors’ and Officers’ Insurance
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88
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Conditions to the Merger
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89
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Termination
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90
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Termination Fees
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91
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Expenses
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92
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Remedies
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93
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Access
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93
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Amendment; Waiver
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93
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DISSENTER’S RIGHTS
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94
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ADVISORY VOTE ON COMPENSATION IN CONNECTION WITH THE MERGER
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95
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Background
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95
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Vote Required and Board Recommendation
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95
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IMPORTANT INFORMATION REGARDING THE COMPANY
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96
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Directors and Executive Officers of the Company
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96
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Use of Officers, Employees, and Corporate Assets in Connection with the Transaction
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98
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Historical Selected Financial Data
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98
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Net Book Value Per Share
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99
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Transactions in Common Stock
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100
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Ownership of Common Stock by Certain Beneficial Owners and Directors and Executive Officers
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100
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Market Price of the Company’s Common Stock and Dividend Information
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102
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Delisting and Deregistration of the Company’s Common Stock
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102
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OTHER MATTERS
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103
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Other Matters for Action at the Special Meeting
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103
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Future Stockholder Proposals in the Event the Merger is Not Consummated
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103
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Stockholders Sharing the Same Address
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103
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WHERE YOU CAN FIND MORE INFORMATION
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103
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ANNEX A
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AGREEMENT AND PLAN OF MERGER
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A-1
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ANNEX B
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LIMITED GUARANTEE
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B-1
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ANNEX C
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VOTING AGREEMENT
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C-1
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ANNEX D
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CONTRIBUTION AGREEMENT
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D-1
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ANNEX E
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ABAX EQUITY COMMITMENT LETTER
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E-1
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ANNEX F
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CHAIRMAN EQUITY COMMITMENT LETTER
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F-1
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ANNEX G
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OPINION OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
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G-1
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SUMMARY TERM SHEET
The following summary
term sheet highlights selected information in this proxy statement and may not contain all the information that may be important
to you. Accordingly, we encourage you to read carefully this entire proxy statement, its annexes, and the documents
referred to and incorporated by reference in this proxy statement. Each item in this summary term sheet includes a
page reference directing you to a more complete description of that topic. You may obtain the information incorporated
by reference in this proxy statement without charge by following the instructions in the section titled “Where You Can Find
More Information,” beginning on page 103. For purposes of this proxy statement, “Fushi,” the “Company,”
“we,” or “us” refers to Fushi Copperweld, Inc.
Parties Involved in the Merger (see
page 67)
Fushi Copperweld,
Inc.
, a Nevada corporation, principally through its wholly owned subsidiaries, Fushi International (Dalian) Bimetallic Cable
Co. Ltd., located in the People’s Republic of China (PRC), and Copperweld Bimetallics LLC, located in the United States,
is a leading manufacturer and innovator of copper-clad bimetallic engineered conductor products for electrical, telecommunications,
transportation, utilities and industrial applications. The Company’s common stock is publicly traded on the NASDAQ Global
Select Market.
Mr. Li Fu
,
is the chairman and co-chief executive officer of the Company. In this proxy statement, we refer collectively to Parent, Holdco,
Merger Sub, Mr. Fu, Wise Sun Investments Limited (“Wise Sun”), Ms. Xin Liu, Ms. Yuyan Zhang, Abax, Abax Global Capital
(Hong Kong) Limited (“Abax (Hong Kong)”), Abax Arhat Fund, Abax Upland Fund LLC, Abax Claremont Ltd., Abax Global
Opportunities Fund, Abax Lotus Ltd., AGC Asia 6 Ltd., AGC China Ltd. and Mr. Xiang Dong Yang, as the buyer group. Mr. Fu, Wise
Sun, Ms. Liu, Ms. Zhang, and Abax Lotus Ltd. have agreed to contribute their shares, which we refer to as the Rollover Shares,
of Company common stock to Parent in exchange for equity in Holdco, as part of what we refer to in this proxy statement as the
rollover transactions. These members of the buyer group, sometimes referred to as the Rollover Holders, will remain indirect owners
of the surviving company after the merger.
Green Dynasty Holdings
Limited
, or Holdco, was formed under the laws of the Cayman Islands by Mr. Fu solely for the purpose of owning Parent and
arranging the financing of the merger. Mr. Fu is currently the sole beneficial owner of Holdco. Prior to the closing of the merger,
each of Mr. Fu, Wise Sun, Ms. Liu, Ms. Zhang, and Abax Lotus Ltd. will receive equity in Holdco in exchange for contributing their
Rollover Shares to Parent as part of the rollover transactions, and Mr. Fu, Abax Lotus Ltd. and AGC Asia 6 Ltd. will receive additional
equity in Holdco in exchange for their equity contributions pursuant to their respective equity commitments. Holdco has not engaged
in any business, except for activities incidental to its formation and in connection with the transactions contemplated by the
merger agreement, including the merger and related financing transactions.
Green Dynasty Limited
,
or Parent, was formed under the laws of the Cayman Islands by Mr. Fu solely for the purpose of owning the Company after the merger
and arranging the financing for the merger. Parent is a wholly owned subsidiary of Holdco. Parent has not engaged in any business,
except for activities incidental to its formation and in connection with the transactions contemplated by the merger agreement,
including the merger and related financing transactions. Upon completion of the merger, the Company, as the surviving company
in the merger, will be a direct wholly owned subsidiary of Parent.
Green Dynasty Acquisition,
Inc.
, or Merger Sub, was formed under the laws of the State of Nevada by Parent solely for the purpose of effecting the merger.
Merger Sub is a wholly owned subsidiary of Parent. Merger Sub has not engaged in any business, except for activities incidental
to its formation and in connection with the transactions contemplated by the merger agreement, including the merger. Upon completion
of the merger, Merger Sub will no longer exist. The Company will be the surviving company in the merger and will continue to exist
as a direct wholly owned subsidiary of Parent.
Abax Global Capital
,
or Abax, is an investment manager focused on Asian private and public investments, with an emphasis on Greater China. Abax Lotus
Ltd. is a special purpose vehicle wholly owned by Abax Global Opportunities Fund, one of the affiliated funds through which Abax
manages its investments. Abax Arhat Fund and Abax Upland Fund LLC together hold 100% of Abax Global Opportunities Fund. Abax is
the managing shareholder of Abax Arhat Fund and the sole shareholder of Abax (Hong Kong), while Abax Claremont Ltd. is the managing
member of Abax Upland Fund LLC. Abax (Hong Kong) is the investment advisor to Abax, and Abax is the investment manager to Abax
Arhat Fund, Abax Upland Fund LLC and Abax Global Opportunities Fund. Abax (Hong Kong) is also the investment advisor to AGC China
Ltd., and AGC China Ltd. is the investment manager to AGC Asia 6 Ltd.
In this proxy statement,
we refer to the Agreement and Plan of Merger, dated as of June 28, 2012, as it may be amended from time to time, among the Company,
Holdco, Parent, and Merger Sub, as the merger agreement, and the contemplated merger of Merger Sub with and into the Company as
the merger.
Structure and Effects of the Merger
(see page
76
)
The merger agreement
provides that Merger Sub will merge with and into the Company on the terms and subject to the conditions in the merger agreement.
After the merger, Merger Sub will no longer exist. The Company will be the surviving corporation and will continue to exist as
a wholly owned subsidiary of Parent. Upon completion of the merger, the Company will cease to be a publicly traded company. You
will not own any shares of capital stock of the surviving corporation, and you will cease to have any rights in the Company as
a stockholder. We have attached the merger agreement to this proxy statement as Annex A. We encourage you to read the entire merger
agreement carefully, because it is the legal document that governs the merger.
Merger Consideration (see page
10)
At the
effective time of the merger, each share of Company common stock issued and outstanding immediately prior to the effective
time will no longer be outstanding and will be cancelled and cease to exist and will be converted automatically into the
right to receive the merger consideration of $9.50 in cash, without interest, which we refer to as the per share merger
consideration, other than shares held in the treasury of the Company or owned, directly or indirectly, by Parent, Holdco,
Merger Sub, or any wholly owned subsidiary of the Company. No merger consideration will be paid for shares owned by members
of the buyer group that are contributed to Parent as part of the rollover transactions. For a discussion of the treatment of
stock options and restricted shares in the merger, see “The Merger Agreement—Treatment of Company Common Stock,
Stock Options and Restricted Shares,” beginning on page 77.
Date, Time, and Place of the Special
Meeting (see page 70)
The special meeting
is scheduled to be held at [●] on [●], 2012, at [●] a.m./p.m. (local time).
Purpose of the Special Meeting
(see page 70)
At the special meeting,
you will be asked:
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to
consider and vote
on a proposal to
approve the merger
agreement, pursuant
to which Merger
Sub will be merged
with and into the
Company, with the
Company as the surviving
corporation, as
further described
in the sections
titled “Special
Factors,”
beginning on page
10, and “The
Merger Agreement,”
beginning on page
76;
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to
consider
and vote
on a proposal
to approve,
on a non-binding
advisory
basis, the
compensation that may
be payable
to the
Company’s
named executive
officers
in connection
with the
merger; and
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to
consider
and vote
on a proposal
to adjourn
the special
meeting in
order to
take such
actions as
our board
of directors
determines
are necessary
or appropriate,
including
to solicit
additional
proxies,
if there
are insufficient
votes at
the time
of the special
meeting to
adopt the
proposal
to approve
the merger
agreement.
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Any other business that may properly come
before the special meeting, or any adjournment or postponement of the special meeting, by or at the direction of the board of
directors of the Company, will also be transacted at the special meeting.
A copy of the merger
agreement is attached as Annex A to this proxy statement.
Recommendation of the Special Committee
and Board of Directors (see page 21)
After consideration
of various factors described in the section titled “Special Factors—Recommendation of the Special Committee and the
Board of Directors and Their Reasons for the Merger,” the Special Committee unanimously (i) determined that the merger
agreement and the transactions contemplated thereby, including the merger, are advisable to, and in the best interests of, the
unaffiliated stockholders, and (ii) recommended that the board of directors (1) approve and declare advisable the merger
agreement and the transactions contemplated thereby, including the merger, (2) direct that the merger agreement be submitted to
the Company’s stockholders, and (3) recommend that the unaffiliated stockholders approve the merger agreement.
After carefully considering
the unanimous recommendation of the Special Committee, our board of directors, with directors Mr. Fu, Mr. Joseph J. Longever,
and Mr. Wenbing Christopher Wang abstaining from voting, (i) adopted the merger agreement and authorized and approved the merger
and other transactions contemplated by the merger agreement, (ii) determined that the merger and the merger agreement, including
the merger consideration payable pursuant thereto, are fair to and in the interests of the Company and its unaffiliated stockholders
and declared advisable the execution of the merger agreement and consummation of the transactions contemplated thereby, including
the merger, and (iii) directed that the merger agreement be submitted to stockholders and recommended that they approve the merger
agreement.
Our board of directors recommends that you vote “FOR”
the proposal to approve the merger agreement, “FOR” the proposal to approve, on a non-binding advisory basis the compensation
that may be payable to the Company’s named executive officers in connection with the merger, and “FOR” the proposal
to adjourn the special meeting in order to take such actions as our board of directors determines are necessary or appropriate,
including to solicit additional proxies, if there are insufficient votes at the time of the special meeting to adopt the proposal
to approve the merger agreement.
Record Date (see page 70)
You are entitled
to vote at the special meeting if you owned shares of our common stock at the close of business (U.S. Eastern time) on [ ],
2012, which we have set as the record date for the special meeting and which we refer to as the record date. You may cast one
vote for each share of our common stock that you owned as of the record date.
Quorum (see page 71)
The presence, in person
or by proxy, of stockholders holding at least a majority of the shares of our common stock issued, outstanding, and entitled to
vote at the special meeting constitutes a quorum for purposes of the special meeting. At the close of business on the record date
for the special meeting, there were [ ] shares of our common
stock issued and outstanding and entitled to vote. Thus, [ ]
shares must be represented by proxy or by stockholders present and entitled to vote at the special meeting to have a quorum.
Voting Procedures (see page
73)
Any stockholder of
record entitled to vote at the special meeting may submit a proxy by telephone, over the Internet, or by returning the enclosed
proxy card in the accompanying prepaid reply envelope, or may vote in person by appearing at the special meeting. If
your shares of Company common stock are held in “street name” through a bank, broker, or other nominee, you should
instruct your bank, broker, or other nominee on how to vote your shares of our common stock using the instructions provided by
your bank, broker, or other nominee. If you fail to submit a proxy or to vote in person at the special meeting, or
do not provide your bank, broker, or other nominee with voting instructions, as applicable, your shares of our common stock will
not be voted on the proposal to approve the merger agreement, which will have the same effect as a vote “AGAINST”
the proposal to approve the merger agreement, and your shares of our common stock will not have an effect on the proposal to approve,
on a non-binding advisory basis, the compensation that may be payable to the Company’s named executive officers in connection
with the merger, assuming a quorum is present, or on approval of the proposal to adjourn the special meeting in order to take
such actions as our board of directors determines are necessary or appropriate, including to solicit additional proxies, if there
are insufficient votes at the time of the special meeting to adopt the proposal to approve the merger agreement.
Revocation of Proxies (see
page 74)
You have the right
to revoke a proxy by submitting a new proxy at a later date, by attending the special meeting and voting in person, or by giving
written notice of revocation to our Secretary. Attending the special meeting without taking one of the other actions described
in the preceding sentence will not in itself revoke your proxy. Please note that, to be effective, your new proxy card, Internet
or telephonic voting instructions, or written notice of revocation, must be received by us by 11:59 p.m. (U.S. Eastern time) on
, 2012
Vote Required (see page
72)
Approval of the merger
agreement by our stockholders requires the affirmative vote of both:
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the
holders of
at least
a majority
of the combined
voting power
of the outstanding
shares of
our common
stock; and
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the
holders of at least
60% of the combined
voting power of
the outstanding
shares of our common
stock not beneficially
owned by the buyer
group or any affiliate
of any buyer group
member. For purposes
of the merger agreement,
affiliates of the
buyer group include
any person who the
Special Committee
reasonably believes
has reached an agreement
or understanding
with the buyer group
to receive, in connection
with the consummation
of the merger, some
benefit or value
other than and in
addition to the
merger consideration
to be received for
such person’s
shares. At all times
until the completion
of the special meeting,
the Special Committee
intends promptly
to review any information
that may come to
the attention of
it or its advisors
that might indicate
the existence of
any such agreement
or understanding
and make a final
determination regarding
the matter consistent
with the terms of
the merger agreement.
No such additional
person has been
identified by the
Special Committee
as of the date of
this proxy statement,
and the buyer group
has indicated that
it does not intend
to enter into any
such agreement or
understanding prior
to completion of
the merger.
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As of the
record date for the special meeting, members of the buyer group together beneficially owned approximately 29.4% of the
Company’s outstanding shares of common stock. Certain members of the buyer group have entered into a voting
agreement in which they agreed to vote all of their shares in favor of approval of the merger agreement at the special
meeting. Please see the section titled “Special Factors—Voting Agreement,” beginning on page 46
for additional information.
The proposal to approve,
on a non-binding advisory basis, the compensation that may be payable to the Company’s named executive officers in connection
with the merger will be approved if a majority of the votes cast on such proposal in person or by proxy vote “FOR”
the proposal (assuming the presence of a quorum at the special meeting). A motion to adjourn the special meeting in
order to take such actions as our board of directors determines are necessary or appropriate, including to solicit additional
proxies if there are insufficient votes at the time of the special meeting to adopt the proposal to approve the merger agreement,
requires a majority of the votes cast with respect to the proposal.
Opinion of Merrill Lynch, Pierce,
Fenner & Smith Incorporated (see page 25)
In connection with
the merger, Merrill Lynch, Pierce, Fenner & Smith Incorporated (“BofA Merrill Lynch”), financial advisor to the
Special Committee, delivered to the Special Committee a written opinion, dated June 26, 2012, as to the fairness, from a
financial point of view as of the date of the opinion, of the $9.50 per share consideration to be received in the merger by holders
of shares of the Company’s common stock (other than Holdco, Parent, Merger Sub, and the Rollover Holders). The full text
of the written opinion of BofA Merrill Lynch, which describes, among other things, the assumptions made, procedures followed,
factors considered and limitations on the review undertaken, is attached as Annex G to this document and is incorporated by reference
herein in its entirety. BofA Merrill Lynch provided its opinion to the Special Committee (in its capacity as such) for the benefit
and use of the Special Committee in connection with and for purposes of its evaluation of the merger consideration from a financial
point of view. BofA Merrill Lynch’s opinion does not address any other aspect of the merger, and no opinion or view was
expressed as to the relative merits of the merger in comparison to other strategies or transactions that might be available to
the Company or in which the Company might engage or as to the underlying business decision of the Company to proceed with or effect
the merger. BofA Merrill Lynch’s opinion does not constitute a recommendation to any stockholder as to how to vote or act
in connection with the proposed merger or any related matter.
Position of the Buyer Group Regarding
the Fairness of the Merger (see page 39)
Each member of
the buyer group believes that the merger is fair to the unaffiliated stockholders. Their belief is based upon the factors discussed
under the caption “Special Factors—Position of the Buyer Group Regarding the Fairness of the Merger,” beginning
on page 39.
Financing of the Merger
(see page 43)
The buyer group
estimates that the total amount of funds required to consummate the merger and related transactions, including payment of fees
and expenses in connection with the merger, will be approximately $260 million. The buyer group expects to fund this amount through
a combination of equity financing from Mr. Fu of up to $45 million, equity financing from entities affiliated with Abax of up
to $30 million, and debt financing of up to $185 million from China Development Bank Corporation Hong Kong Branch (“CDB”),
which we refer to as the CDB Loan. Please see “Special Factors—Financing of the Merger,” beginning on page 43,
for additional information.
Limited Guarantee (see page
46)
On June 28, 2012,
Mr. Fu and two affiliates of Abax – Abax Lotus Ltd. and AGC Asia 6 Ltd. – delivered a limited guarantee in which they
agreed to guarantee the obligations of Parent and Merger Sub to pay certain fees and reimburse certain expenses, including the
$22 million termination fee, which we refer to as the Parent termination fee, that may become payable to the Company by Parent
under circumstances set forth in the merger agreement. Please see “Special Factors—Limited Guarantee,” beginning
on page 46, and “The Merger Agreement—Termination Fees,” beginning on page 91, for additional information.
Interests of Certain Persons in
the Merger (see page 47)
Aside from their interests
as Company stockholders, our directors and executive officers have interests in the merger that are different from those of other
stockholders. Among other things, while evaluating and negotiating the merger agreement and the merger, and determining to recommend
to our stockholders that the merger agreement be approved, our board of directors was aware of and considered Holdco’s and
Parent’s agreement to indemnify the Company’s directors and officers against certain claims and liabilities arising
from the actions of our directors and officers taken prior to the effective time of the merger and to provide directors’
and officers’ coverage, for six years following the effective time of the merger. In addition, all stock options and restricted
shares held by our directors and executive officers will be cashed out in the merger. Also, certain of our directors or executive
officers will remain directors and officers of the surviving corporation following the merger.
You should also
be aware that, concurrently with the execution and delivery of the merger agreement, Parent delivered to us a contribution agreement
executed by the Rollover Holders, including Mr. Fu, Wise Sun, Ms. Liu, Ms. Zhang and Abax Lotus Ltd. These members of the buyer
group have agreed, among other things, to contribute the shares of our common stock owned by them to Parent in exchange for newly
issued ordinary shares of Holdco. The effect of these transactions will be to allow such members of the buyer group to remain
indirect owners of the Company after the merger is completed. Because of their equity ownership of Holdco, each such member of
the buyer group will enjoy the benefits from any future earnings and growth of the Company after the merger and will also bear
the corresponding risks of any possible decreases in future earnings, growth, or value. Such members of the buyer group may also
benefit after the merger from the elimination of expenses associated with public company reporting and compliance requirements
and increased flexibility as a private rather than a publicly traded company. Please see the section titled “Special Factors—Interests
of Certain Persons in the Merger,” beginning on page 47, for additional information.
Acquisition Proposals (see
page 85)
At any time from
and after the date of the merger agreement
and until the effective time of
the merger or, if earlier, the termination of the merger agreement, we are not permitted to initiate, solicit, knowingly encourage,
or facilitate any inquiry or the making of any acquisition proposals or engage in any negotiations or discussions with any person
relating to an acquisition proposal. Notwithstanding these restrictions, under certain circumstances, we may, prior to the time
our stockholders approve the merger agreement, respond to a bona fide written acquisition proposal or engage in discussions or
negotiations with the person making such an acquisition proposal that did not result from a material breach of the provisions
of the merger agreement that govern acquisition proposals. At any time before the merger agreement is approved by our stockholders,
we may, under certain circumstances, terminate the merger agreement and enter into an alternative acquisition agreement with respect
to a superior proposal, so long as we comply with certain terms of the merger agreement, including paying an $11 million termination
fee to Parent. We must notify Parent at least 3 business days prior to effecting a change of recommendation in connection with
a superior proposal or terminating the merger agreement in order to enter into an alternative acquisition agreement with respect
to a superior proposal. We must then negotiate in good faith with Parent and Merger Sub (to the extent Parent and Merger Sub desire
to negotiate) during such period to make adjustments in the terms and conditions of the merger agreement and the financing documents
so that the superior proposal ceases to be a superior proposal
. Please see the section titled “The Merger Agreement—Acquisition
Proposals,” beginning on page 85, for additional information.
Conditions to the Merger
(see page 89)
The obligations of
the Company, Parent, and Merger Sub to consummate the merger are subject to the satisfaction or waiver of certain conditions,
including (i) receipt of the stockholder approval (including approval by holders of at least 60% of the combined voting power
of the outstanding shares of our common stock not beneficially owned by the buyer group or any affiliate of any buyer group member,
including any person who the Special Committee reasonably believes has reached an agreement or understanding with the buyer group
to receive, in connection with the consummation of the merger, some benefit or value other than, and in addition to, the merger
consideration to be received for such person’s shares), (ii) the absence of any law (whether temporary, preliminary or permanent)
by any court or governmental entity of competent jurisdiction that restrains, enjoins or otherwise prohibits consummation of the
merger, (iii) the accuracy of the representations and warranties of the parties, (iv) compliance by the parties with their
respective obligations under the merger agreement, and (v) the absence of a material adverse effect on the Company.
Termination of the Merger Agreement
(see page 90)
We, by action of the Special Committee,
and Parent may, by mutual written consent, terminate the merger agreement and abandon the merger at any time prior to the effective
time of the merger, whether before or after approval of the merger agreement by our stockholders.
The merger agreement may also be terminated
and the merger abandoned at any time prior to the effective time of the merger as follows:
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by either
Parent or
the Company,
if:
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the
merger
has
not
been
consummated
by
June
27,
2013,
which
we
refer
to
as
the
termination
date;
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our
stockholders
meeting
has
been
held
and
completed,
and
our
stockholders
have
not
approved
the
merger
agreement
at
such
meeting
or
any
adjournment
or
postponement
of
such
meeting;
or
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an
order
permanently
restraining,
enjoining
or
otherwise
prohibiting
consummation
of
the
merger
has
become
final
and
non-appealable.
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at
any
time
prior
to
the
approval
of
the
merger
agreement
by
our
stockholders,
(i) our
board
of
directors
(acting
upon
the
recommendation
of
the
Special
Committee)
authorizes
the
Company
to
enter
into
an
alternative
acquisition
agreement
with
respect
to
a
superior
proposal,
(ii) immediately
prior
to
or
substantially
concurrently
with
the
termination
of
the
merger
agreement,
we
enter
into
an
alternative
acquisition
agreement
with
respect
to
a
superior
proposal,
and
(iii) we
pay
Parent
the
termination
fee
discussed
under
“The
Merger
Agreement—Termination
Fees,”
beginning
on
page
91;
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there
has
been
a
breach
of
a
representation,
warranty,
covenant
or
agreement
made
by
Holdco,
Parent,
or
Merger
Sub
in
the
merger
agreement,
or
any
such
representation
and
warranty
becomes
untrue
after
the
date
of
the
merger
agreement,
which
breach
or
failure
to
be
true
would
give
rise
to
the
failure
of
the
condition
to
the
closing
of
the
merger
relating
to
the
accuracy
of
the
representations
and
warranties
of
Parent
and
Merger
Sub
or
compliance
by
Parent
and
Merger
Sub
with
their
obligations
under
the
merger
agreement,
and
such
breach
or
failure
to
be
true
is
not
curable
or,
if
curable,
is
not
cured
prior
to
the
earlier
of
(i) 30
calendar
days
after
written
notice
thereof
is
given
by
the
Company
to
Parent
and
(ii) the
date
that
is
five
business
days
prior
to
the
termination
date
(provided
that
we
will
not
have
this
right
to
terminate
if
we
are
then
in
material
breach
of
any
of
our
representations,
warranties,
covenants,
or
other
agreements
that
would
result
in
the
conditions
to
the
obligation
of
Parent
and
Merger
Sub
to
consummate
the
merger
to
be
incapable
of
being
satisfied);
or
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the
conditions
to
the
obligations
of
Holdco,
Parent
and
Merger
Sub
to
close
have
been
and
continue
to
be
satisfied
(other
than
those
conditions
that
by
their
nature
cannot
be
satisfied
other
than
at
the
closing
of
the
merger),
we
have
irrevocably
confirmed
by
notice
to
Parent
that
the
conditions
to
the
obligations
of
the
Company
have
been
satisfied
or
will
be
waived,
and
the
merger
is
not
consummated
within
three
business
days
of
delivery
of
such
notice.
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the board of directors (acting with the affirmative
vote of at least one member of the Special Committee or acting on the recommendation of the Special Committee) or the Special
Committee (i) makes a change of recommendation or (ii) fails to include in this proxy statement, when mailed, its recommendation
with respect to the merger; or
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there
has
been
a
breach
of
a
representation,
warranty,
covenant,
or
agreement
made
by
the
Company
in
the
merger
agreement,
or
any
such
representation
and
warranty
becomes
untrue
after
the
date
of
the
merger
agreement,
which
breach
or
failure
to
be
true
would
give
rise
to
the
failure
of
the
condition
to
closing
of
the
merger
relating
to
the
accuracy
of
the
representations
and
warranties
of
the
Company
or
compliance
by
it
with
its
obligations
under
the
merger
agreement,
and
such
breach
or
failure
to
be
true
cannot
be
cured
or,
if
curable,
is
not
cured
prior
to
the
earlier
of
(i) 30
calendar
days
after
written
notice
thereof
is
given
by
Parent
to
the
Company
and
(ii) the
date
that
is
five
business
days
prior
to
the
termination
date
(provided
that
Parent
will
not
have
this
right
to
terminate
if
it
is
then
in
material
breach
of
any
of
its
representations,
warranties,
covenants,
or
other
agreements
that
would
result
in
the
conditions
to
the
obligation
of
the
Company
or
of
either
party
to
consummate
the
merger
to
be
incapable
of
being
satisfied).
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Termination Fees (see page
91)
If either we or
Parent terminate the merger agreement under certain circumstances described in the section titled “The Merger Agreement—Termination
Fees,” beginning on page 91, then:
|
·
|
we
may be obligated
to pay to
Parent a
termination
fee of $11
million;
or
|
|
·
|
Parent
may be obligated
to pay us
a Parent
termination
fee of $22
million.
Mr. Fu and
certain affiliates
of Abax who
are party
to the limited
guarantee
have agreed
to guarantee
the obligation
of Parent
to pay this
Parent termination
fee should
it become
payable.
|
Remedies; Specific Performance
(see page 93)
Subject to our right
to specific performance (described below), our right to terminate the merger agreement and receive the Parent termination fee
of $22 million is our sole and exclusive remedy against Parent, Merger Sub, any of the guarantors, and certain related parties
for any loss suffered as a result of any breach of any covenant or agreement in the merger agreement or the failure of the merger
to be consummated. Subject to Parent’s right to specific performance (described below), Parent’s receipt of the termination
fee of $11 million from us is the sole and exclusive remedy of Holdco, Parent, Merger Sub, the guarantors and their respective
affiliates against the Company, its subsidiaries and certain of their related parties for any loss suffered as a result of any
breach of any covenant or agreement in the merger agreement or the failure of the merger to be consummated.
The parties are
entitled to an injunction, specific performance and other equitable relief to prevent breaches of the merger agreement and to
enforce specifically the terms of the merger agreement in addition to any other remedy to which they are entitled at law or in
equity. However, our ability to seek specific performance of Holdco’s, Parent’s and Merger Sub’s obligation
to draw down the equity financing for the merger and to cause Holdco, Parent and Merger Sub to effect the closing is subject to
the requirements that (i) all the conditions to the obligations of Holdco, Parent and Merger Sub to effect the merger described
under “The Merger Agreement—Conditions to the Merger,” beginning on page 89, have been satisfied, other than
those conditions that by their nature are to be satisfied at the closing of the merger, (ii) Parent and Merger Sub have failed
to complete the closing of the merger by the date they are required to close as described under “The Merger Agreement–Closing
and Effective Time of Merger,” beginning on page 77, (iii) the debt financing (or alternative financing) for the merger
has been funded or will be funded if the equity financing is funded at the closing of the merger, and (iv) we irrevocably confirm
that if such specific performance is granted and the equity and debt financing are funded then we are prepared to close the merger.
Dissenter’s Rights
(see page 94)
You are not entitled
to dissenter’s rights or other statutory rights of objection in connection with the merger under Nevada law. Section 92A.390
of the Nevada Revised Statutes, or the NRS, does not provide any right of dissent with respect to a plan of merger under criteria
described in that section of the NRS, which the Company satisfies.
Certain Material U.S. Federal
Income Tax Consequences of the Merger for U.S. Holders (see page 54)
The receipt
of merger consideration in exchange for our common stock will be a taxable transaction to you for U.S. federal income tax
purposes, if you are a U.S. holder (as defined below in the section titled “Special Factors—Certain Material U.S.
Federal Income Tax Consequences of the Merger for U.S. Holders,” beginning on page 54). A U.S. holder who receives cash
in exchange for shares of our common stock pursuant to the merger will recognize gain or loss for U.S. federal income tax
purposes equal to the difference, if any, between the amount of cash received and the U.S. holder’s adjusted tax basis
in the stock surrendered for cash pursuant to the merger. If the shares surrendered are held as capital assets, such gain or
loss will be capital gain or loss, and will be long-term capital gain or loss, if the U.S. holder’s holding period for
such stock is more than one year at the time of completion of the merger. The payment of cash to a U.S. holder in connection
with the merger generally will be subject to information reporting and may be subject to backup withholding, currently at a
28% rate, if the U.S. holder fails to furnish a correct taxpayer identification number or otherwise fails to comply with
applicable backup withholding rules and certification requirements. The tax consequences of the merger to you may be complex
and will depend upon your particular circumstances. You should consult your own tax advisor for a full understanding of the
tax consequences of the merger to you under federal, state, local, and foreign income and other tax laws. Please see the
section titled “Special Factors—Certain Material U.S. Federal Income Tax Consequences of the Merger for U.S.
Holders,” beginning on page 54, for additional information.
Regulatory Approvals (see
page 56)
None of the parties
is aware of any regulatory approvals or filings required for the completion of the merger, other than filing the Articles of the
Merger with the Nevada Secretary of State and complying with the SEC proxy filing requirements.
Delisting and Deregistration of
the Company Common Stock (see page 56)
As soon as practicable
following the effective time of the merger, Parent will cause our common stock to be delisted from the NASDAQ Global Select Market and
deregistered under the Exchange Act.
Litigation Relating to the Merger
(see page 57)
Twelve stockholder
class action lawsuits were filed against the Company and/or certain officers and the members of its board of directors in connection
with the November 3, 2010 non-binding proposal made by Mr. Fu and Abax (Hong Kong) to acquire all of the outstanding shares
of the Company’s common stock not currently owned by Mr. Fu, Abax and their respective affiliates for $11.50 per share in
cash (the “November 2010 Proposal”). Nine actions were filed in Nevada state court (Carson City, Clark County, and
Washoe County); two actions were filed in Nevada federal district court; and one action was filed in Tennessee state court. All
of the actions assert claims against the Company, members of the board and officers for alleged breaches of fiduciary duties in
connection with the November 2010 Proposal, as described further below.
On or about November
5, 2010, the Company became aware that the first of the putative stockholder class actions had been filed against the Company
and the board of directors in connection with the November 2010 Proposal. Plaintiffs allege, among other things, that the proposed
buyout price and the process of evaluating the November 2010 Proposal are unfair and inadequate. Plaintiffs seek, among other
relief, to enjoin defendants from consummating the November 2010 Proposal and to direct defendants to exercise their fiduciary
duties to negotiate a transaction that is in the best interests of the Company’s stockholders.
To date, the two actions
brought in Nevada federal district court have been dismissed. Eight Nevada state court actions have been consolidated into a single
action, and one Nevada state court action has been voluntarily dismissed. The motion to dismiss the Tennessee state court action
remains pending.
The Company intends
to deny these allegations and to vigorously defend itself and its directors. Please see the section titled “Special Factors—Litigation
Related to the Merger,” beginning on page 57, for additional information regarding the litigation.
SPECIAL FACTORS
Merger Consideration
At the
effective time of the merger, each share of Company common stock issued and outstanding immediately prior to the effective
time will no longer be outstanding and will be cancelled and cease to exist and will be converted automatically into the
right to receive the merger consideration of $9.50 in cash, without interest, other than shares held in the treasury of the
Company or owned, directly or indirectly, by Parent, Holdco, Merger Sub, or any wholly owned subsidiary of the Company. No
merger consideration will be paid for shares owned by members of the buyer group that are contributed to Parent as part of
the rollover transactions. For a discussion of the treatment of stock options and restricted shares in the
merger, please see the section titled “The Merger Agreement—Treatment of Company Common Stock, Stock Options and
Restricted Shares,” beginning on page 77.
Background of the Merger
Events leading to the execution of the
definitive merger agreement described in this Background of the Merger occurred in Beijing, Hong Kong and New York. For consistency,
the U.S. Eastern time zone is generally used for all dates and times given herein.
Our board of directors and senior management
periodically review the Company’s long-term strategic plans with the goal of enhancing stockholder value. As part of this
ongoing process, our board of directors and senior management, from time to time, have considered strategic alternatives that
may be available to the Company.
Beginning in October 2010, Mr. Fu started
to contemplate the possibility of a going private transaction in general terms as one of his personal alternatives relating to
his approximately 28.9% interest in the Company's common stock. In October 2010, while no details regarding the transaction or
timing were discussed, Abax expressed interest in proceeding with a transaction. Immediately thereafter, Mr. Fu began to actively
explore the feasibility of a going-private transaction. In the context of discussions between Mr. Donald Yang, Managing Partner
of Abax and Mr. Fu regarding the potential transaction, Mr. Fu engaged Skadden, Arps, Slate, Meagher & Flom LLP (“Skadden”)
as his legal counsel for the possible transaction. Shortly thereafter, Abax, on behalf of Mr. Fu, contacted Deutsche Bank AG (“DB”)
regarding the possibility of its acting as financial advisor, and also a source of financing. Discussions continued with DB over
the ensuing weeks, and on November 3, 2010, Mr. Fu and Abax engaged DB as the financial advisor to and lead arranger of financing
for Mr. Fu and Abax in the transaction.
On November 3, 2010, after taking into
consideration the status of the discussions with DB regarding the financing of the transactions, Mr. Fu and Abax delivered to
the board of directors a preliminary, non-binding proposal to acquire all of the outstanding shares of the Company’s common
stock not owned by Mr. Fu, Abax and their respective affiliates in a going private transaction for $11.50 per share in cash (the
“Initial Fu-Abax Proposal”). The Initial Fu-Abax Proposal represented a premium of 26.4% to the Company’s closing
price on November 2, 2010 and a premium of 30.8% to the volume-weighted average closing price (“VWAP”) for the prior
sixty (60) days.
Also on November 3, 2010, Mr. Fu and Abax
entered into a consortium agreement (the “Consortium Agreement”) providing that they would work with each other on
an exclusive basis to negotiate and consummate a proposed acquisition of all of the outstanding shares of the Company’s
common stock not held by Mr. Fu, Abax and their respective affiliates in a going-private transaction. As of November 3, 2010,
Mr. Fu and Abax owned, directly or indirectly, approximately 28.9% and 0.5% of the Company’s common stock, respectively.
The Initial Fu-Abax Proposal indicated
that Mr. Fu and Abax intended to finance the acquisition with a combination of debt and equity capital, and indicated that they
expected the commitment for the debt financing to be in place when the definitive merger agreement was signed. The proposal was
also subject to the completion of due diligence and the negotiation of definitive merger documentation. DB issued a letter to
Mr. Fu and Abax, dated November 3, 2010 (the “DB Letter”), stating DB’s preliminary indication of interest to
potentially provide debt financing as specified in the DB Letter to finance the acquisition. In the DB Letter, DB stated
that it was highly confident that the arranging of this financing could be done subject to satisfaction of the terms specified
therein.
Subsequently, on November 3, 2010, the
Company’s board of directors, including Mr. Fu, met, along with members of the Company’s management and representatives
of Loeb & Loeb LLP (“Loeb”), the Company’s outside legal counsel. At the meeting, Mr. Fu discussed with
the other directors the Initial Fu-Abax Proposal delivered to the board members earlier that day. A representative of Loeb then
discussed with the directors the board of directors’ responsibilities and obligations with respect to the Initial Fu-Abax
Proposal and an overview of the steps necessary to evaluate the Initial Fu-Abax Proposal, including the need to designate a special
committee comprised solely of independent and disinterested directors. Following a discussion, the Company’s board of directors
designated the Special Committee, comprised solely of independent and disinterested directors―Jack Perkowski, Feng Bai and
Barry Raeburn―to evaluate and respond to the Initial Fu-Abax Proposal. Messrs. Perkowski and Bai remain as members of the
Special Committee as of the date of this proxy statement, and Mr. Raeburn’s membership on the Special Committee ended on
June 28, 2012, when his term as member of the Company’s board of directors ended at the 2012 annual meeting of stockholders.
Later, on November 3, 2010, the Company
issued a press release announcing receipt of the Initial Fu-Abax Proposal and the formation of the Special Committee. The Company's
board of directors delegated to the Special Committee the power and authority (1) to consider, evaluate and respond to the Initial
Fu-Abax Proposal and any amendments thereto, (2) if deemed advisable by the Special Committee, to negotiate the principal terms
of the Initial Fu-Abax Proposal and any amendments thereto relevant to the Company's unaffiliated stockholders, (3) to consider
the fairness of the Initial Fu-Abax Proposal and any amendments thereto to the Company's unaffiliated stockholders, and (4) to
recommend to the Company's board of directors what action to take with respect to the Initial Fu-Abax Proposal and any amendments
thereto. The Company's board of directors further delegated to the Special Committee the power and authority to consider such
other strategic alternatives to the Initial Fu-Abax Proposal as the Special Committee deemed appropriate, including any other
acquisition proposal that may be submitted to the Company, or that the Company remain independent; in the Special Committee's
discretion, to solicit bids for alternatives to the Initial Fu-Abax Proposal; and to consider the fairness to the Company's unaffiliated
stockholders of any such alternative and recommend to the Company's board of directors what action to take with respect to any
such alternative.
In November 2010, the Special Committee
elected Mr. Perkowski chair of the Special Committee. Following interviews of a number of law firms, the Special Committee resolved
to engage Gibson, Dunn & Crutcher LLP (“Gibson Dunn”) as its outside legal counsel. The Special Committee also
interviewed in November 2010 a number of financial advisors, including BofA Merrill Lynch.
During the months of November and December
2010, representatives of Gibson Dunn, under the direction of the Special Committee, engaged in a number of discussions with counsel
to Mr. Fu and Abax regarding whether the Nevada Business Combination Statute, which generally imposed a mandatory three-year waiting
period for certain acquisition transactions with interested stockholders, could have any effect on the Initial Fu-Abax proposal.
Among other things, legal counsel to the Special Committee, Mr. Fu and Abax discussed the possibility that the execution of the
Consortium Agreement could have potentially triggered a mandatory three-year waiting period under the Nevada Business Combination
Statute with respect to certain possible acquisition structures involving Abax, and, if so, whether the proposed transaction could
be alternatively structured to avoid such a waiting period. During these discussions, representatives of Mr. Fu conveyed to representatives
of the Special Committee Mr. Fu’s belief that Abax’s continuing involvement in the transaction would provide the best
route to a successful transaction on terms favorable to the unaffiliated stockholders, given Abax’s history as an investor
in the Company and its reputation and extensive experience as an investor in China-based companies.
On January 4, 2011, the Special Committee
met, along with representatives of Gibson Dunn, to discuss, among other things, a potential transaction structure proposed by
Mr. Fu and Abax. At that meeting, the Special Committee agreed to engage BofA Merrill Lynch as the Special Committee’s independent
financial advisor to commence a preliminary financial analysis of the Company and to assist the Special Committee in its review
of the Initial Fu-Abax Proposal and other strategic alternatives that could be available to the Company. The Special Committee
selected BofA Merrill Lynch to act as its financial advisor in connection with the merger on the basis of BofA Merrill Lynch’s
experience in transactions similar to the proposed merger, its reputation in the investment community and its familiarity with
the Company.
On January 26, 2011, the Special Committee
met, along with representatives of BofA Merrill Lynch and Gibson Dunn, to discuss, among other things, the conditions under which
Mr. Fu, in his capacity as a member of the buyer group, Abax and their advisors and financing sources would be granted access
to material non-public information, while the Special Committee reviewed alternative courses of action to maximize value to the
Company’s unaffiliated stockholders. Representatives of BofA Merrill Lynch and Gibson Dunn discussed with the Special Committee
various procedural safeguards the Special Committee could seek to obtain from Mr. Fu and Abax, including confidentiality and standstill
agreements from each of Mr. Fu and Abax, and insisting on the termination of the Consortium Agreement and the exclusivity provision
contained therein (which exclusivity provision could potentially deter other third parties from submitting an indication of interest
for the Company in light of Mr. Fu’s substantial ownership of Company common stock).
From January 27, 2011 through February
23, 2011, representatives of Gibson Dunn and Skadden negotiated the terms upon which the Special Committee would permit Mr. Fu
and Abax to receive the Company’s non-public information and conduct due diligence.
On February 24, 2011, the Special Committee
met, along with representatives of BofA Merrill Lynch and Gibson Dunn. Representatives of Gibson Dunn updated the Special Committee
regarding discussions that had occurred with Skadden since the last Special Committee meeting and summarized the terms of the
confidentiality agreements that had been negotiated. Such terms included (1) an 18 month standstill from each of Mr. Fu and Abax,
(2) the immediate termination of the Consortium Agreement (along with the exclusivity provision contained therein), (3) Mr. Fu’s
and Abax’s agreement that they would not allow any financing sources to work with them on an exclusive basis, (4) Mr. Fu’s
agreement to promptly inform the Special Committee (but not Abax) of any acquisition proposal he were to receive from any third
party, (5) Mr. Fu’s covenant to cooperate with all due diligence needs of the Special Committee and its advisors, and (6)
a limit on Abax’s investment capped at 9.9% of the common equity of the acquisition vehicle. In light of the foregoing concessions,
the Special Committee agreed to Mr. Fu’s and Abax’s request that the Special Committee adopt resolutions permitting
the submission of a proposal by Mr. Fu and Abax which would generally exempt, for 18 months, future actions that may be undertaken
by Mr. Fu and Abax from the Nevada Business Combination Statute in order to facilitate discussions between Mr. Fu and Abax without
the potential of triggering the statutory waiting period. The Special Committee, with the advice of its financial and legal advisors,
concluded that the foregoing procedural safeguards would facilitate the Special Committee’s review of strategic alternatives
available to the Company, while enabling further development of the proposal submitted by Mr. Fu and Abax.
On February 28, 2011, (i) the Special Committee
and the Company entered into confidentiality and standstill agreements with each of Mr. Fu and Abax (the “Confidentiality
Agreements”), and (ii) Mr. Fu and Abax entered into an agreement providing for the termination of the Consortium Agreement.
On March 1, 2011, the Company issued a
press release announcing that the Special Committee had retained BofA Merrill Lynch and Gibson Dunn as financial advisor and legal
advisor, respectively.
On March 17, 2011, the Company filed a
Form 12b-25 with the SEC disclosing that the Company’s 2010 Form 10-K could not be filed within the prescribed time period
due to the fact that the Company was unable to finalize its financial results as well as the disclosure requirements of Form 10-K
without unreasonable expense or effort.
On March 24, 2011, the Company announced
that the audit committee of the board of directors concluded that the Company’s previously issued financial statements for
the years ended December 31, 2009, 2008 and 2007, and its unaudited interim financial statements for the quarters ended March
31, 2010, June 30, 2010 and September 30, 2010 should no longer be relied upon and should be restated, due to two errors in the
application of U.S. GAAP regarding (i) the accounting for cross-currency interest swap derivatives and (ii) the acquisitions of
Dalian Jinchuan Electric Cable Co., Ltd. and Shanghai Hongtai Industrial Co., Ltd. The Company’s restated financial statements
for the relevant periods were subsequently filed with the SEC on April 4, 2011.
On April 4, 2011, the Special Committee
met, along with representatives of BofA Merrill Lynch and Gibson Dunn. Representatives of BofA Merrill Lynch discussed with the
Special Committee, among other things, the status of the due diligence process being conducted by Mr. Fu and Abax, including the
impact that the delay in filing the Company’s Form 10-K had on the overall timing of such process.
On May 5, 2011, the Special Committee met,
along with representatives of BofA Merrill Lynch and Gibson Dunn. Representatives of BofA Merrill Lynch discussed with the directors:
the status of the due diligence review of the Company by the buyer group and its advisors; their preliminary financial analysis
of the Company, based on information that had been provided by Company management; possible alternatives to an acquisition by
Mr. Fu and Abax, including staying independent, a recapitalization, an acquisition or joint venture, a sale of the Company to
a person other than Mr. Fu and Abax, and a re-listing of the Company’s stock in China; other potential buyers of the Company,
including the potential level of interest such parties might have in completing an acquisition of the Company; and the fact that
they had not received any inbound inquiries regarding a transaction with the Company since the issuance of the press release announcing
the retention of legal and financial advisors by the Special Committee on March 1, 2011.
On May 25, 2011, the Special Committee
met, along with representatives of BofA Merrill Lynch and Gibson Dunn. Representatives of BofA Merrill Lynch discussed with the
Special Committee the progress of the due diligence review of the Company by Mr. Fu and Abax. Representatives of Gibson Dunn and
BofA Merrill Lynch then discussed with the Special Committee the possibility of conducting an active pre-signing market check
prior to the submission of a definitive bid by Mr. Fu and Abax, and how such a process could be facilitated at that time by the
availability of management forecasts and other due diligence items that had been recently provided by Company management to the
Special Committee and its advisors. The Special Committee discussed with its advisors how such pre-signing market check could
create a competitive bidding environment and help ensure the Company’s unaffiliated stockholders receive the highest value
attainable for their shares in any transaction. Representatives of BofA Merrill Lynch then discussed in detail with the Special
Committee potential buyers of the Company, including potential buyers based in the U.S., China, Japan and Europe, noting that
the universe of potential buyers was limited due to the Company’s industry and the fact that the Company is headquartered
in China. Representatives of BofA Merrill Lynch and Gibson Dunn also discussed with the Special Committee the challenges that
would be faced by a Chinese buyer due to regulatory and structuring issues. The Special Committee also discussed with representatives
of BofA Merrill Lynch the advisability of contacting private equity firms as part of a pre-signing market check and the likelihood
of a financial sponsor submitting a superior offer without the support of Mr. Fu, who would likely not have a financial incentive
to support any such competing offer at a higher price, given that, as a member of any private equity buyer group, a competing
offer at a higher price would increase the amount Mr. Fu would have to pay in order to take the Company private. Following the
discussion, the Special Committee authorized BofA Merrill Lynch to contact the potential strategic buyers that had been discussed
with the Special Committee to assess their level of interest in effecting a transaction with the Company.
On May 27, 2011, the Special Committee
issued a press release announcing that (i) the Special Committee continued to facilitate the due diligence investigation of the
Company by Mr. Fu and Abax so that they could be in a position to submit a firm, fully financed offer to the Special Committee,
and (ii) the Special Committee, with the assistance of its advisors, was also considering other strategic alternatives, including
any other acquisition proposal that may be submitted to the Company or to the Special Committee or remaining an independent public
company.
In late May 2011, Mr. Fu and Abax met with
representatives of China Development Bank Corporation Hong Kong Branch (“CDB”) to discuss the possibility of CDB providing
financing to Mr. Fu for the transaction. No details regarding the terms or timing of the possible transaction were discussed.
On June 10, 2011, representatives of Gibson
Dunn sent representatives of Skadden a draft merger agreement.
On June 11, 2011, representatives of TPG
Capital, L.P. (“TPG”) sent a letter to the Special Committee expressing an interest in acquiring the Company at a
per share price in the range of $8.00 to $9.00 (the “TPG Proposal”). The letter stated that the TPG Proposal was contingent
on customary due diligence on the Company and the negotiation of satisfactory definitive agreements. The TPG Proposal noted that
TPG anticipated that as it discussed the terms and structure of the acquisition with the Special Committee, it would also need
to reach an agreement with Mr. Fu pursuant to which Mr. Fu would agree to support the acquisition. Therefore, TPG requested that
the Special Committee authorize Mr. Fu to enter into discussions regarding the acquisition with TPG at the appropriate time in
advance of the execution of definitive agreements.
On June 15, 2011, representatives of BofA
Merrill Lynch, at the direction of the Special Committee, sent a bid instruction letter to Mr. Fu instructing him to submit
a revised, fully-financed offer to purchase the Company’s outstanding stock by June 28, 2011.
On June 19, 2011, the Special Committee
met, along with representatives of BofA Merrill Lynch and Gibson Dunn. Among other things, representatives of BofA Merrill Lynch
updated the Special Committee as to the status of discussions with Mr. Fu and Abax, including their due diligence review. Representatives
of BofA Merrill Lynch and Gibson Dunn also discussed with the Special Committee (1) the TPG Proposal and (2) the status of the
market check being conducted by BofA Merrill Lynch with respect to potential buyers of the Company, noting that as of that time
two potential bidders (other than TPG) had executed confidentiality agreements. Following a discussion, the Special Committee
authorized (x) the execution of a confidentiality agreement with TPG and (y) for BofA Merrill Lynch to provide TPG with the financial
forecasts prepared by the Company’s management and to seek a revised indication of interest from TPG. Finally, in light
of the TPG Proposal, the Special Committee also discussed with representatives of BofA Merrill Lynch the advisability of contacting
additional private equity firms. The Special Committee concluded that while some private equity firms might be interested in the
Company if contacted, such a process was unlikely to lead to value enhancement for the Company’s unaffiliated stockholders
given that a private equity firm interested in the Company would most likely seek to partner with Mr. Fu.
On June 27, 2011, the Special Committee
received a joint letter from Mr. Fu and Abax, which stated Mr. Fu’s and Abax’s continuing commitment to pursuing the
acquisition. The letter also summarized the remaining outstanding due diligence items Mr. Fu and Abax needed in order to submit
a revised, fully financed offer to purchase the Company, and noted that they would not be able to submit such a proposal by the
June 28, 2011 deadline that had been imposed by the Special Committee.
On June 28, 2011, the Special Committee
received a letter from TPG reaffirming its interest in acquiring the Company in an all-cash transaction between $8.00 and $9.00
per share. The proposal was contingent upon the Special Committee authorizing Mr. Fu to enter into discussions regarding the acquisition
with TPG. Further, TPG requested that the Special Committee authorize Abax to enter into discussions regarding the acquisition
with TPG.
On July 10, 2011, the Special Committee
met, along with representatives of BofA Merrill Lynch and Gibson Dunn. Among other things, representatives of BofA Merrill Lynch
discussed with the Special Committee the results of the calls they had made to potential buyers of the Company; of the 15 potential
buyers contacted, three initially expressed interest in the Company and had executed confidentiality agreements, but, after receiving
supplemental information packages, all had decided against submitting proposals to purchase the Company, with the majority indicated
that they were not interested in a transaction due to either financial considerations or a lack of strategic fit. The Special
Committee then discussed with representatives of BofA Merrill Lynch and Gibson Dunn the timing of a firm, fully financed offer
by Mr. Fu and Abax. Representatives of BofA Merrill Lynch and Gibson Dunn also discussed with the Special Committee the request
from TPG to meet with Mr. Fu and Abax to discuss a joint proposal to purchase the Company’s outstanding stock and the fact
that it would not be appropriate to permit TPG to have such discussions given that the TPG Proposal proposed an $8.00-$9.00 purchase
price, which was lower than the $11.50 per share purchase price under discussion with Mr. Fu and Abax. Following such discussion,
Joseph Longever, Co-Chief Executive Officer of the Company, and Nathan Anderson, Vice President of the Company, joined the meeting
to discuss the status of Mr. Fu’s and Abax’s due diligence process and were instructed by the Special Committee to
facilitate the completion of the due diligence review by Mr. Fu and Abax.
On July 14, 2011, Mr. Perkowski, chairman
of the Special Committee, met with Mr. Fu, Mr. Wenbing Christopher Wang, the Company’s President, and Mr. Donald Yang, Managing
Partner of Abax, to discuss the status of the going private proposal. Among other things, Messrs. Fu and Yang expressed their
strong preference to have CDB act as lender in the transaction, and stated their belief that the ability to work with CDB would
be likely to positively impact the price that Mr. Fu and Abax could offer to buy out the unaffiliated stockholders due to the
likelihood of securing favorable terms from CDB for the financing, based on Abax’s familiarity with the debt markets in
Asia, financing terms generally available for transactions of this type and prior experience with CDB. Mr. Yang also indicated
that it was important for the CDB process for Abax’s outside consultants, including accountants and industry experts, to
complete their diligence reports on the basis of the additional diligence materials that had been requested in the June 27, 2011
letter.
Effective October 1, 2011, the Nevada Business
Combination statute was amended such that a 60% vote of the shares owned by the Company’s unaffiliated stockholders would
avoid any concern that the Consortium Agreement might otherwise have caused for the transaction under discussion. On August 5,
2011, a representative of Weil Gotshal & Manges LLP (“Weil Gotshal”), counsel to Abax, contacted a representative
of Gibson Dunn to indicate that, in light of those anticipated changes to the Nevada Business Combination Statute, Mr. Fu and
Abax were requesting an amendment to their confidentiality agreements that would permit Abax to invest in any combination of securities
(including any amount of common equity), and not be limited to 9.9% common equity as provided in the agreements in effect.
On August 7, 2011, the Special Committee
met, along with representatives of BofA Merrill Lynch and Gibson Dunn. Representatives of BofA Merrill Lynch discussed with the
Special Committee the progress of Mr. Fu’s and Abax’s due diligence review. Representatives of BofA Merrill Lynch
stated that they were informed by DB that CDB had expressed a continuing interest in financing a bid by Mr. Fu and Abax, but had
not yet provided a firm debt financing commitment. Representatives of Gibson Dunn then discussed with the Special Committee the
changes to the Nevada Business Combination Statute taking effect October 1, 2011 and how those changes could affect the structure
of the potential bid to purchase the Company by Mr. Fu and Abax. Representatives of Gibson Dunn and the Special Committee discussed
the advisability of executing an amendment to the Confidentiality Agreements between the Special Committee, the Company and each
of Mr. Fu and Abax that would permit submission by Mr. Fu and Abax of a bid that would contemplate an investment by Abax in any
combination of securities (including any amount of common equity). Following a discussion, in light of the discussions which had
previously occurred with Mr. Fu and Abax, the desirability of completing those discussions in the most favorable terms to the
unaffiliated stockholders and Abax’s expressed interest in participating in the transaction by means of investment that
could include any amount of common equity, among other things, the Special Committee approved such amendments to the Confidentiality
Agreements.
On or about August 24, 2011, DB confirmed
that Mr. Fu’s and Abax’s legal due diligence was substantially complete and their third party advisors and consultants
had completed their due diligence reports. DB also indicated that CDB had issued a preliminary commitment letter to Abax for the
debt financing of the transaction.
On September 17, 2011, a representative
of Weil Gotshal sent Gibson Dunn revised drafts of the proposed merger agreement previously distributed by Gibson Dunn. Among
other things, the revised draft eliminated the proposed go shop period, and reduced the proposed Parent termination fee.
On September 26, 2011, the Special Committee
met, along with representatives of BofA Merrill Lynch and Gibson Dunn. Representatives of BofA Merrill Lynch discussed with the
Special Committee: the delay in Mr. Fu’s and Abax’s efforts to secure firm debt commitments to finance a bid to purchase
the Company and related recent conversations held between BofA Merrill Lynch and DB representatives; DB’s indication that
CDB continued to express an interest in financing up to $250 million in debt, but had not yet provided a firm commitment letter;
and that based on their recent discussions with DB, assuming CDB provided debt financing of $250 million and Mr. Fu and Abax provided
equity financing of $150 million as they had previously indicated, Mr. Fu and Abax would still need to obtain additional financing
to consummate an acquisition of the Company. The Special Committee then discussed with representatives of BofA Merrill Lynch and
Gibson Dunn other possible potential sources of financing for Mr. Fu and Abax, including mezzanine lenders and other equity financing
sources. Following a discussion, the Special Committee authorized BofA Merrill Lynch to contact DB to request that Mr. Fu and
Abax disclose in writing the status of their financing and their proposed plan to secure any additional funds necessary to support
their offer, including (i) a detailed “Sources and Uses” schedule and (ii) all supporting documentation related to
CDB’s debt financing commitment, which BofA Merrill Lynch did following the meeting. Representatives of Gibson Dunn then
discussed with the Special Committee the revised draft merger agreement received from the buyer group.
Beginning in October 2011, Mr. Fu, Abax
and TPG held preliminary discussions regarding TPG’s participation in the buyer group.
On October 5, 2011, Mr. Fu and Abax jointly
sent a letter to the Special Committee in response to the Special Committee’s request for an update of the transaction status.
Mr. Fu and Abax confirmed that their advisors were able to finalize their due diligence reports. They also indicated that they
had made significant progress in arranging the financing for the transaction. In particular, the letter indicated that CDB had
assured Mr. Fu and Abax that it intended to provide financing, but the process had been delayed. The letter also noted that the
buyer group could require mezzanine debt but, if required, it should not delay the process. Mr. Fu and Abax committed to continue
to work towards submitting a firm offer as expeditiously as possible, targeting November 2011.
On October 17, 2011, the Special Committee
met, along with representatives of BofA Merrill Lynch and Gibson Dunn. Mr. Longever and Mr. Anderson also joined for a portion
of the meeting. The Special Committee discussed with representatives of BofA Merrill Lynch and Gibson Dunn the status of Mr. Fu’s
and Abax’s attempts to secure financing for an acquisition of the Company and the October 5, 2011 letter from Mr. Fu and
Abax. Following the discussion, Mr. Longever and Mr. Anderson joined the meeting and discussed with the Special Committee the
effect of the uncertainty surrounding the offer from Mr. Fu and Abax to acquire the Company on the Company’s investors,
business and employees.
On October 31, 2011, the Special Committee
sent to Mr. Fu and Abax a letter noting the Special Committee’s disappointment at Mr. Fu’s and Abax’s failure
to address all of the concerns and documentation that the Special Committee had previously requested. The Special Committee requested
that Mr. Fu and Abax deliver a final binding proposal no later than November 17, 2011.
On November 4, 2011, a representative of
Gibson Dunn sent a revised draft merger agreement to representatives of Weil Gotshal and Skadden.
On November 15, 2011, Mr. Wang, on behalf
of Mr. Fu, met with Mr. Perkowski to update him regarding the status of the buyout proposal. Mr. Wang communicated to Mr. Perkowski
Mr. Fu’s and Abax’s intent to lower their offer to $9.00 per share, and the possibility, based on preliminary discussions
held among Mr. Fu, Abax and TPG, of adding TPG to the buyer group.
Later on November 15, 2011, the Special
Committee delivered a letter to Mr. Fu and Abax reminding them of the Special Committee’s instructions not to engage in
discussions with other potential co-bidders. The Special Committee also reiterated that in the last year it had been proceeding
on the assumption that Mr. Fu and Abax intended to submit a fully financed offer to purchase the Company at a price of no less
than $11.50 per share.
On November 17, 2011, Mr. Fu and Abax sent
the Special Committee a letter with an expiration date of December 2, 2011, offering to acquire all of the Company’s common
stock not owned by Mr. Fu, Abax and their respective affiliates for $9.25 per share in cash (the “November 2011 Fu-Abax
Proposal”). This revised proposal represented a premium of 18% to the Company’s closing price on November 16, 2011,
the last trading day prior to the submission of the offer, a premium of 42.8% to the VWAP for the prior three months, and a premium
of 44.9% to the VWAP for the prior six months. The letter noted that Mr. Fu’s and Abax’s proposal had been revised
downwards due to several factors, including the following: (1) the Company had produced weaker than projected earnings in respect
of both annual 2010 and first nine months of 2011; (2) the buyer group’s view that the Company faced increasingly challenging
macro-economic trends -- including lower global economic growth, weaker commodity (and particularly copper) prices and slower
roll-out of 3G networks in China -- which clouded future prospects of the Company’s business operations; (3) the buyer group’s
due diligence findings, particularly in relation to the Company’s variable interest entity (VIE) structure (which are commonly
used to comply with foreign ownership restrictions in the PRC) in place with respect to a subsidiary holding certain land use
rights and the title to an office building and the projected costs of eliminating such structure post-privatization which would
provide greater flexibility in the post-closing ownership structure; (4) the general deterioration in the global credit market,
driven by the European debt crisis and macro tightening in China credit over the past year, had impacted the ability to raise
the amount of debt anticipated by the buyer group’s November 2010 letter, which had a negative effect on their valuation;
and (5) a much weakened global equity market and a decline in the Company’s stock price. The letter indicated that Abax
had obtained all internal approvals and that due diligence was complete. Mr. Fu and Abax also sent the Special Committee a copy
of an unexecuted draft debt commitment letter for $200 million from CDB, the terms of which were not in the Special Committee’s
view customary for a going-private transaction of the type being contemplated, and an executed copy of which was delivered on
November 21, 2011. In that regard, the draft debt commitment provided by CDB confirmed that CDB had “an interest”
in providing financing for the proposed transaction, but it did not include a firm commitment to provide such financing. Attached
to the revised proposal was also (1) an executed commitment letter from Abax providing for proceeds from equity investment and
mezzanine debt financings in the aggregate amount of $50 million from certain investment funds managed, advised and/or appointed
by Abax and (2) draft transaction documents, including a revised merger agreement, limited guarantee and voting agreement.
On November 19, 2011, the Special Committee
met, along with representatives of BofA Merrill Lynch and Gibson Dunn, to discuss the November 2011 Fu-Abax Proposal. Representatives
of Gibson Dunn and BofA Merrill Lynch discussed with the Special Committee the high degree of conditionality of the November 2011
Fu-Abax Proposal. Representatives of BofA Merrill Lynch indicated that they were expecting revised management forecasts within
the next 48 hours and that BofA Merrill Lynch would perform additional financial analyses with respect to the November 2011 Fu-Abax
Proposal after reviewing such forecasts. Representatives of Gibson Dunn then reviewed with the Special Committee certain issues
presented by the drafts of the transaction documents submitted by Mr. Fu and Abax with their offer letter, particularly with respect
to transaction conditionality.
On November 21, 2011, the Special Committee
issued a press release announcing receipt of the November 2011 Fu-Abax Proposal.
On November 23, 2011, the Special Committee
met, along with representatives of BofA Merrill Lynch and Gibson Dunn. Representatives of Gibson Dunn provided the Special Committee
with updates regarding the status of discussions with Mr. Fu and Abax. Mr. Longever joined a portion of the meeting to discuss
with the Special Committee management’s most recent forecasts, which had been delivered to BofA Merrill Lynch prior to the
meeting, including with respect to the amount of cash that was projected on the Company’s balance sheet and management’s
proposed use of such cash. The Special Committee instructed Company management to revise its latest forecasts to more accurately
reflect the potential upside of several planned growth initiatives that had been developed by management, which management planned
to fund out of the Company’s cash balances
.
On November 30, 2011, the Special Committee
met, along with representatives of BofA Merrill Lynch and Gibson Dunn. Mr. Longever, Mr. Anderson, Craig Studwell, the Company’s
Chief Financial Officer and Gary Xue, the Company’s Controller, joined for a portion of the meeting. Representatives of
BofA Merrill Lynch discussed in detail with the Special Committee possible strategic alternatives to the proposed transaction
with Mr. Fu and Abax (including a potential recapitalization), the feasibility of consummating such alternatives and certain relevant
financial considerations. The Special Committee and management discussed in detail the revised forecast of the Company’s
future financial performance that had been delivered by management to the Special Committee and BofA Merrill Lynch prior to the
meeting.
On December 1, 2011, as instructed by the
Special Committee, representatives of BofA Merrill Lynch contacted representatives of DB to discuss the November 2011 Fu-Abax
Proposal. Representatives of BofA Merrill Lynch subsequently provided representatives of DB, at their request, with the revised
forecast prepared by the Company’s management and arranged for a conference call between representatives of DB and the Company’s
management to discuss such forecast. As instructed by the Special Committee, BofA Merrill Lynch requested that Mr. Fu and Abax
submit a “best and final” offer following the review of the revised management forecasts.
On December 4, 2011, the Special Committee
met, along with representatives of BofA Merrill Lynch and Gibson Dunn, to discuss the conversation between representatives of
BofA Merrill Lynch and DB on December 3, 2011.
On December 7, 2011, Mr. Yang contacted
Mr. Perkowski to request permission for Mr. Fu and Abax to engage in discussions with TPG regarding a potential transaction in
which TPG or its affiliates would provide mezzanine debt or other financing in connection with the buyout proposal.
On December 8, 2011, the Special Committee
met, along with representatives of BofA Merrill Lynch and Gibson Dunn, to discuss the conversation between Mr. Perkowski and Mr.
Wang on December 7, 2011. At that meeting, the Special Committee determined to grant a limited waiver to allow Mr. Fu, Abax and
TPG to engage in discussions regarding an acquisition of the Company until December 31, 2011, in order to facilitate an increase
in the per share merger consideration and delivery of a “best and final” offer by year end.
On December 17, 2011, a representative
of Gibson Dunn delivered to representatives of Weil Gotshal and Skadden revised drafts of the merger agreement and ancillary documents.
On December 28, 2011, a representative
of Weil Gotshal delivered to representatives of Gibson Dunn and BofA Merrill Lynch a letter from Mr. Fu, Abax and TPG offering
to acquire all of the Company’s common stock not owned by Mr. Fu, Abax and their respective affiliates for $9.50 per share
in cash (the “Fu-Abax-TPG Proposal”), along with revised drafts of the merger agreement, limited guarantee, equity
commitment letter to be delivered by Abax, and a commitment letter to be delivered by TPG. The revised offer represented a premium
of 26.3% to the closing price of the Company’s common shares on December 27, 2011, a premium of 38.2% to the VWAP for the
prior three months, and a premium of 40.1% to the VWAP for the prior six months. The letter noted that the buyer group intended
to fund the transaction through a combination of a loan from CDB and the proceeds from an equity investment from certain investment
funds managed, advised and/or appointed by Abax and an equity investment and/or mezzanine debt financing from certain investment
funds affiliated with TPG. The letter stated that the Fu-Abax-TPG Proposal was conditioned on, among other things (1) execution
of a debt facility agreement with CDB and (2) completion of a due diligence review of the Company by TPG. The letter also indicated
that while the buyer group had made significant progress with CDB, the nature of the lengthy bank approval process in China was
such that it was unable to submit the draft facility agreement for the CDB loan with its proposal. The buyer group stated that
it expected to receive a draft of the CDB facility agreement in late January 2012, which it expected would enable it to provide
a fully negotiated facility agreement to the Special Committee for its review during the second week of February 2012. The buyer
group also asked that the Special Committee extend the period during which Abax, Mr. Fu and TPG could continue to discuss a joint
bid until at least February 29, 2012.
Later on December 28, 2011, the Special
Committee issued a press release announcing its receipt of the Fu-Abax-TPG Proposal.
On January 4, 2012, the Special Committee
met, along with representatives of BofA Merrill Lynch and Gibson Dunn, to discuss the Fu-Abax-TPG Proposal, including the financial
terms of the proposal and the terms of the revised merger agreement and other transaction documentation delivered by the buyer
group. The Special Committee also reviewed with its advisors potential alternatives to the Fu-Abax-TPG Proposal that the Company
could pursue. Such alternatives included a debt financed share repurchase or special dividend. The Special Committee also discussed
the potentially significant negative impact on the Company’s stock price of the withdrawal of the buyout proposal, particularly
in light of the Company’s recent performance, as well as the effect of the restrictions on distributing cash from China
to the United States on the value of the Company’s common stock. At the conclusion of the meeting, the Special Committee
determined to further negotiate the buyout proposal with Mr. Fu, Abax and TPG to, among other things, reduce the transaction conditionality
and explore the possibility of an increase in the purchase price.
On January 8, 2012, the Special Committee
met, along with representatives of BofA Merrill Lynch and Gibson Dunn. Among other things, BofA Merrill Lynch reported on discussions
that had occurred with DB since the last Special Committee meeting during which DB (1) reported that the buyer group was not likely
to increase the price it was prepared to offer for the Company, and (2) communicated Abax’s request to meet with Mr. Perkowski
to discuss the status of the offer.
On January 9, 2012, Mr. Perkowski had discussions
with representatives of the buyer group, during which it was confirmed to him that $9.50 per share was the highest price the buyer
group was willing to pay for the Company.
On January 10, 2012, the Special Committee
met, along with representatives of BofA Merrill Lynch and Gibson Dunn to discuss Mr. Perkowski’s conversation with representatives
of the buyer group. After careful deliberation and consideration, the Special Committee determined to allow the buyer group to
finalize its financing commitments with CDB. The Special Committee agreed to allow TPG to begin its due diligence process only
after such definitive debt financing commitments were delivered, and if TPG’s participation was deemed appropriate at that
time. The Special Committee also agreed to extend the waiver allowing Mr. Fu and Abax to engage in conversations with TPG regarding
the buyout proposal. This waiver expired on February 29, 2012.
Between January and April 2012, Mr.
Fu and Abax continued to negotiate a definitive debt facility agreement with CDB. On March 30, 2012, April 18, 2012 and April
19, 2012, representatives of Weil Gotshal advised representatives of Gibson Dunn that CDB’s internal approval process was
ongoing. The parties and their representatives did not engage in substantive discussions regarding the proposed transaction or
the merger agreement during this period, pending CDB’s internal approval of the debt facility agreement.
On April 6, 2012, Mr. Perkowski met with
representatives of Abax to discuss the status of the Fu-Abax-TPG Proposal and the CDB debt financing. Representatives of Abax
told Mr. Perkowski that they were awaiting final approval of the CDB facility from CDB’s headquarters and asked that the
remaining open issues in the merger agreement be resolved while awaiting such approval.
On April 10, 2012, the Special Committee
met, along with representatives of BofA Merrill Lynch and Gibson Dunn to discuss (1) Mr. Perkowski’s conversation with representatives
of Abax on April 6, 2012, (2) recent discussions between representatives of BofA Merrill Lynch and DB regarding the status of
the Fu-Abax-TPG Proposal and (3) recent discussions among legal counsel to the Special Committee, Mr. Fu and Abax regarding open
issues in the merger agreement, including the size of the Parent termination fee. The Special Committee determined that Mr. Perkowski
would meet with Mr. Fu and representatives of the buyer group to (x) communicate to them that if Mr. Fu and Abax were not able
to enter into a merger agreement immediately after CDB approved the credit facility documentation, the Special Committee would
be inclined to immediately terminate the sale process and (y) emphasize the need to bring the buyout process to a prompt resolution.
On April 13, 2012, the Special Committee
met, along with representatives of BofA Merrill Lynch and Gibson Dunn. Mr. Perkowski discussed his recent meeting with Mr. Fu
and a representative of Abax. Among other things, the Special Committee discussed with its advisors when TPG should be permitted
to begin its due diligence review of the Company.
Between April 13, 2012 and May 9, 2012,
representatives of the Special Committee, Mr. Fu and Abax continued to discuss the scope of the proposed TPG due diligence review,
as well as the open material terms of the merger agreement.
On May 10, 2012, representatives of Weil
Gotshal sent representatives of the Special Committee a letter from Mr. Fu and Abax affirming the offer first made by Mr. Fu,
Abax and TPG on December 28, 2011 to acquire all of the Company’s common stock not owned by Mr. Fu, Abax and their respective
affiliates for $9.50 per share in cash, which remained subject to (1) execution of a debt facility agreement with CDB; (2) completion
of a due diligence review of the Company by TPG and Abax; and (3) negotiation of definitive merger documentation. The $9.50 price
per share represented a premium of 39.1% to the Company’s closing price on May 8, 2012, a premium of 37.1% to the VWAP for
the prior three months, and a premium of 31.4% to the VWAP for the prior six months.
Later on May 10, 2012, Mr. Perkowski met
with Mr. Wang, to discuss the status of the Fu-Abax-TPG Proposal. Mr. Wang informed Mr. Perkowski that Mr. Fu remained committed
to completing an acquisition of the Company, even if TPG chose to withdraw from the process.
On May 11, 2012, the Special Committee
met, along with representatives of BofA Merrill Lynch and Gibson Dunn, to discuss the letter from Mr. Fu and Abax received on
May 10, 2012, and Mr. Perkowski’s discussion with Mr. Wang on May 10, 2012. The Special Committee also discussed with its
advisors the remaining material open points in the merger agreement, including the size of the Parent termination fee. After an
extensive discussion, the Special Committee determined that Gibson Dunn would prepare with the assistance of BofA Merrill Lynch
a letter to Mr. Fu, Abax and TPG responding to the May 10 letter stating that the Special Committee would be willing to permit
TPG to conduct a due diligence review of the Company for a two-week period, which would include significant participation by members
of the Company’s management. Such letter was sent on May 18, 2012, along with revised drafts of the merger agreement, limited
guarantee, equity commitment letter to be entered into by Abax, and commitment letter to be entered into by TPG.
On May 25, 2012, at which time TPG had
not been given access to additional due diligence materials, representatives of TPG delivered to representatives of the Special
Committee a letter stating that TPG was no longer interested in participating in an acquisition of the Company. On the same day,
a representative of Weil Gotshal sent representatives of the Special Committee a letter from Mr. Fu and Abax confirming Mr. Fu’s
and Abax’s offer to purchase the outstanding shares of the Company not owned by Mr. Fu, Abax and their respective affiliates
for $9.50 per share (the “Final Fu-Abax Proposal”), a due diligence request list and proposed timeline. The letter
noted that, in light of the change in the composition of the buyer group, Mr. Fu and Abax had adjusted the amounts of their respective
commitments and expected to fund the acquisition through a combination of (1) a senior term loan from CDB and (2) the proceeds
from equity investments from Mr. Fu and his affiliates and certain funds managed, advised and/or appointed by Abax and its affiliated
management companies.
On May 26, 2012, the Special Committee
met, along with representatives of BofA Merrill Lynch and Gibson Dunn, to discuss the letters received from each of Mr. Fu and
Abax, and TPG. The Special Committee directed its advisors to continue in discussions with Mr. Fu and Abax and to coordinate the
completion of bringdown diligence by Abax and finalization of the various transaction documents in order to move toward signing
of definitive documentation.
From late May 2012 until the execution
of the merger agreement, representatives of Abax engaged in a confirmatory due diligence investigation of the Company and its
operations, including numerous calls and meetings with representatives of the Company and its advisors and visits to certain of
the Company’s facilities in China. During the same period, Gibson Dunn, Loeb, Skadden and Weil Gotshal negotiated and finalized
the merger agreement and all its ancillary documents, including the disclosure schedules, voting agreement, contribution agreement,
equity commitment letters, limited guarantee and CDB facility agreement.
On June 26, 2012, the Special Committee
met, along with representatives of BofA Merrill Lynch, Gibson Dunn and Lionel Sawyer & Collins, Nevada counsel to the Special
Committee (“Lionel Sawyer”), to discuss the Final Fu-Abax Proposal. Representatives of Gibson Dunn and Lionel Sawyer
reviewed with the directors the applicable legal standards in the context of considering the Final Fu-Abax Proposal and the final
terms of the merger agreement. Also at this meeting, BofA Merrill Lynch reviewed with the Special Committee its financial analysis
of the merger consideration and delivered to the Special Committee an oral opinion, which was confirmed by delivery of a written
opinion dated June 26, 2012, to the effect that, as of that date and based on and subject to various assumptions and limitations
described in its opinion, the $9.50 per share consideration to be received in the merger by holders of the Company’s common
stock (other than Holdco, Parent, Merger Sub, and the Rollover Holders) was fair, from a financial point of view, to such holders.
Following further discussion, the Special Committee unanimously (i) determined that the merger agreement and the transactions
contemplated thereby, including the merger, are advisable to, and in the best interests of, the unaffiliated stockholders, and
(ii) recommended to the board of directors, that the board of directors (1) approve and declare advisable the merger agreement
and the transactions contemplated thereby, including the merger, (2) direct that the merger agreement be submitted to the Company’s
stockholders, and (3) recommend that the unaffiliated stockholders approve the merger agreement.
Later on June 26, 2012, the full board
of directors met in order to discuss the Final Fu-Abax Proposal. Representatives of Loeb, Gibson Dunn, BofA Merrill Lynch, as
well as certain members of the Company’s senior management attended this meeting. Representatives of Loeb described to the
board of directors the applicable legal standards in considering the Final Fu-Abax Proposal. The members of the Special Committee
discussed with the full board of directors the efforts undertaken by the Special Committee since its formation in November 2010
and then provided them with the Special Committee’s recommendation. Following a discussion of the Final Fu-Abax Proposal,
with directors Messrs. Fu, Longever and Wang abstaining from voting, the board of directors (i) adopted the merger agreement and
authorized and approved the merger and other transactions contemplated by the merger agreement, (ii) determined that the merger
and the merger agreement, including the merger consideration payable pursuant thereto, are fair to and in the interests of the
Company and its unaffiliated stockholders and declared advisable the execution of the merger agreement and consummation of the
transactions contemplated thereby, including the merger, and (iii) directed that the merger agreement be submitted to stockholders
and recommended that they approve the merger agreement.
On June 28, 2012, CDB delivered the executed
debt facility agreement and, subsequently, the parties executed the merger agreement and related transaction documents. Following
the close of market, the Company issued a press release announcing the execution of the merger agreement.
Recommendation of the Special Committee
and Board of Directors and Their Reasons for the Merger
The Special Committee
The Special Committee, acting with the
advice of outside legal counsel and financial advisors, at a meeting held on June 26, 2012, unanimously (i) determined that the
merger agreement and the transactions contemplated thereby, including the merger, are advisable to, and in the best interests
of, the unaffiliated stockholders, and (ii) recommended to the board of directors, that the board of directors (1) approve and
declare advisable the merger agreement and the transactions contemplated thereby, including the merger, (2) direct that the merger
agreement be submitted to the Company’s stockholders, and (3) recommend that the unaffiliated stockholders approve the merger
agreement.
In evaluating the merger agreement, the
merger and the other transactions contemplated by the merger agreement, the Special Committee consulted with outside legal counsel
and financial advisors, and considered a number of factors, including, but not limited to, the following material factors (not
necessarily in order of relative importance):
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the financial
presentation
and opinion,
as more fully
described
below under
the caption
“Opinion
of Merrill
Lynch, Pierce,
Fenner &
Smith Incorporated,”
beginning
on page 25,
each dated
June 26,
2012, of
BofA Merrill
Lynch to
the Special
Committee
to the effect
that, based
upon and
subject to
the qualifications,
limitations
and assumptions
stated in
the written
opinion,
as of the
date of such
opinion,
the $9.50
per share
merger consideration
to be received
by the holders
of shares
of the Company’s
common stock
in the merger
(other than
Holdco, Parent,
Merger Sub
and the Rollover
Holders)
was fair,
from a financial
point of
view, to
such holders
(which group
of holders
included
all of the
Company’s
unaffiliated
stockholders);
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among
other
things,
the
Special
Committee
noted
that
although
the
implied
per
share
equity
value
reference
range
resulting
from
BofA
Merrill
Lynch’s
discounted
cash
flow
analysis
in
the
case
where
no
adjustment
was
made
for
costs
associated
with
repatriation
of
profits
to
the
Company
yielded
a
price
higher
than
the
proposed
merger
consideration,
the
Special
Committee
believed
that
a
scenario
in
which
no
such
repatriation
costs
existed
was
highly
unlikely
given
the
laws
and
regulations
that
would
generally
apply
if
the
Company
were
to
repatriate
the
funds
held
by
its
foreign
subsidiaries;
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that
the $9.50
per share
all-cash
merger consideration
will provide
our unaffiliated
stockholders
with the
ability to
monetize
their investment
in the Company
in the near
future, while
also providing
such stockholders
with certainty
of value
for their
shares of
Company common
stock;
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that
the per share
merger consideration
represents
a premium
of approximately
37.3% to
the volume-weighted
average closing
price of
Company common
stock during
the 90 day
period prior
to June 22,
2012;
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the Special
Committee’s
belief that
the merger
is more favorable
to our unaffiliated
stockholders
than the
alternatives
to the merger,
which belief
was formed
based on
the Special
Committee’s
review, with
the assistance
of its advisors,
of potential
strategic
alternatives
available
to the Company,
including
a share buyback
program and
special cash
dividend.
In that regard,
the Special
Committee
considered,
among other
things:
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the
potential
risks
and
uncertainties
associated
with
the
future
prospects
of
the
Company,
including
uncertainties
regarding
the
valuation
of
China-based
U.S.-listed
companies,
and
the
compliance
and
other
costs
associated
with
being
a
U.S.-listed
company,
as
well
as
the
costs
associated
with
complying
with
the
regulatory
requirements
of
U.S.
governmental
agencies
;
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the
fact
that
the
outreach
to
other
potential
bidders
during
2011
did
not
result
in
any
alternative
acquisition
proposals;
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the
fact
that
the
buyer
group’s
interest
in
acquiring
the
Company
and
the
formation
of
the
Special
Committee
has
been
public
since
November
2010
and
no
party
(other
than
TPG)
made
an
alternative
acquisition
proposal
to
the
Special
Committee;
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the
fact
that
controls
on
the
convertibility
of
the
Chinese
yuan,
or
RMB,
into
foreign
currencies
make
it
difficult
for
the
Company
to
make
dividend
payments
in
U.S.
dollars
to
its
stockholders;
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the
costs
associated
with
the
repatriation
of
the
profits
of
the
Company’s
Chinese
subsidiaries
to
the
Company;
and
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the
Special
Committee’s
belief
that
a
transaction
that
did
not
involve
Mr.
Fu
would
be
challenging,
given
his
history
with
the
Company,
his
central
role
to
the
Company’s
business,
and
his
leadership
regarding
strategic
direction;
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the
fact that
the buyer
group, concurrently
with the
signing of
the merger
agreement,
executed
agreements
providing
for all of
the financing
necessary
for the merger;
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the terms
of the merger
agreement,
including:
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that
there
is
no
financing
or
due
diligence
condition
to
the
completion
of
the
merger
in
the
merger
agreement;
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our
ability,
prior
to
the
time
our
stockholders
approve
the
merger
agreement,
to
(i) consider
and
respond
to
a
bona
fide
written
acquisition
proposal,
and
(ii) provide
non-public
information
to,
and
engage
in
discussions
or
negotiations
with,
the
person
making
such
a
proposal,
if
the
Special
Committee,
prior
to
taking
any
such
actions,
determines
in
good
faith
(after
consultation
with
outside
legal
counsel
and
its
financial
advisors)
that
such
acquisition
proposal
either
constitutes
a
superior
proposal
or
may
reasonably
be
expected
to
lead
to
a
superior
proposal;
|
|
|
|
|
o
|
our
ability,
under
certain
circumstances,
to
terminate
the
merger
agreement
in
order
to
enter
into
an
agreement
providing
for
a
superior
proposal;
|
|
o
|
the
agreement
by
members
of
the
buyer
group
to
vote
their
shares
in
favor
of
approval
of
the
merger
agreement
at
the
special
meeting;
|
|
o
|
the
Company’s
ability,
under
certain
circumstances
pursuant
to
the
merger
agreement
and
the
equity
commitment
letters,
to
seek
specific
performance
of
the
equity
commitment
letters;
and
|
|
o
|
the
Company’s
ability,
pursuant
to
the
merger
agreement,
to
seek
specific
performance
to
prevent
breaches
of
the
merger
agreement
by
Holdco,
Parent,
or
Merger
Sub
and
to
enforce
specifically
the
terms
of
the
merger
agreement,
subject
to
certain
limitations;
|
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·
|
the
likelihood
that the
merger would
be completed,
and that
it would
be completed
in a reasonably
prompt time
frame, based
on the existence
of the executed
facility
agreement
with CDB,
the equity
commitment
letters,
the contribution
agreement,
the voting
agreement,
the perceived
financial
and other
commitments
of the members
of the buyer
group to
consummate
the merger,
and the absence
of any known
significant
regulatory
hurdles
;
and
|
|
·
|
the
fact that
Parent agreed
to pay the
$22 million
Parent termination
fee, if the
merger agreement
is terminated
in certain
circumstances,
and the fact
that Mr.
Fu and certain
affiliates
of Abax agreed
to guarantee
that payment
obligation.
|
The Special Committee noted that
the opinion of BofA Merrill Lynch addressed fairness with respect to the Company's stockholders other than Holdco, Parent,
Merger Sub and the Rollover Holders rather than to the Company's unaffiliated stockholders. The Special Committee also noted
that the Company's stockholders other than Holdco, Parent, Merger Sub and the Rollover Holders include all unaffiliated
stockholders and, to the extent that the Company's stockholders other than Holdco, Parent, Merger Sub and the Rollover
Holders may also include one or more affiliated stockholders, the consideration to be received by such affiliated
stockholders is identical in all respects as the consideration to be received by the unaffiliated stockholders. The Special
Committee believed that there was no meaningful distinction to be drawn between the concepts of "fairness to the
unaffiliated stockholders of the Company" and "fairness to the Company's stockholders other than Holdco, Parent,
Merger Sub and the Rollover Holders." As a result, the Special Committee believed that, even though the opinion of BofA
Merrill Lynch addressed fairness with respect to the Company's stockholders other than the Rollover Investors rather than to
the unaffiliated stockholders directly, it is still reasonable and appropriate to consider the fairness opinion of BofA
Merrill Lynch as a material factor in its determination as to the fairness of the transaction to the unaffiliated
stockholders of the Company.
The Special Committee also considered a
number of factors that are discussed below relating to the procedural safeguards that it believes were and are present to ensure
the fairness of the merger. The Special Committee believes the following factors support its determinations and recommendations
and provide assurance of the procedural fairness of the merger to the Company’s unaffiliated stockholders:
|
·
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the
requirement
that the
merger agreement
must be approved
by (i) holders
of at least
a majority
in combined
voting power
of the outstanding
shares of
Company common
stock and
(ii) holders
of at least
60% i
n
combined
voting power
of the outstanding
shares of
Company common
stock not
owned by
the buyer
group, Holdco,
Parent, Merger
Sub, or any
of their
respective
affiliates;
|
|
·
|
the
fact that
full authority
was granted
to the Special
Committee
to independently
negotiate
definitive
agreements
with respect
to the buyer
group’s
proposal
and consider
other strategic
alternatives;
|
|
·
|
the
fact that
the Special
Committee
consisted
solely of
independent
and disinterested
directors;
|
|
·
|
the
fact that
the Special
Committee
held numerous
meetings
and met regularly
to discuss
and evaluate
the buyer
group’s
proposal,
and was advised
by independent
financial
and legal
advisors,
and each
member of
the Special
Committee
was actively
engaged in
the process
on a continuous
and regular
basis;
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|
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|
|
·
|
the
terms
of
the
confidentialty
agreement
executed
by
each
of
Mr.
Fu
and
Abax
in
February
2011,
including
the
required
termination
of
the
Consortium
Agreement
and
the
exclusivity
provision
thereof,
and
Mr.
Fu’s
agreement
to
cooperate
with
the
Special
Committee’s
advisors
and
to
inform
the
Special
Committee
(but
not
Abax)
of
any
third
party
acquisition
proposal
he
received;
and
|
|
·
|
the
recognition
by the Special
Committee
that it had
no obligation
to recommend
the approval
of the merger
or any other
transaction.
|
The
Special Committee also considered a variety of potentially negative factors in its deliberations concerning the merger agreement
and the merger, including, but not limited to, the following (not necessarily in order of relative importance):
|
·
|
the
fact that
Mr. Fu and
Abax initially
proposed
merger consideration
of $11.50
per share
in November
2010, and
later revised
downward
their offer
to $9.25
in November
2011, before
raising it
to $9.50
per share
in December
2011;
|
|
·
|
the
fact that
the merger
would preclude
our unaffiliated
stockholders
from having
the opportunity
to participate
in the future
earnings
growth and
future appreciation
in the value
of Company
common stock;
|
|
·
|
the
significant
costs involved
in connection
with entering
into and
completing
the merger
and the substantial
time and
effort of
management
required
to complete
the merger
and related
disruptions
to the operation
of our business;
|
|
·
|
the
possibility
that the
$11 millio
n
termination
fee payable
by the Company,
upon the
termination
of the merger
agreement
under certain
circumstances,
could discourage
other potential
acquirers
from making
a competing
bid to acquire
the Company;
|
|
·
|
the fact
that, while
we expect
that the
merger will
be consummated,
there can
be no assurance
that all
conditions
to the parties’
obligations
to complete
the merger
will be satisfied,
and, as a
result, the
merger may
not be consummated;
|
|
·
|
the fact
that Holdco,
Parent, and
Merger Sub
are newly
formed entities
with essentially
no assets,
other than
the equity
commitments
of Mr. Fu
and affiliates
of Abax,
and that
our monetary
remedy in
the event
of the termination
of the merger
agreement
may be limited
to receipt
of the $22
million Parent
termination
fee;
|
|
·
|
the fact
that an all-cash
transaction would
be a taxable transaction
for U.S. federal
income tax purposes
to our stockholders
that are treated
as U.S. holders
(as defined below
in the section titled
“Certain Material
U.S. Federal Income
Tax Consequences
of the Merger for
U.S. Holders,”
beginning on page
54); and
|
|
·
|
the risk
that the
financing
contemplated
by the debt
financing
agreement
for the consummation
of the merger
might not
be obtained.
|
The foregoing discussion of the information
and factors considered by the Special Committee is not intended to be exhaustive, but includes the material factors considered
by the Special Committee. In view of the variety of factors considered in connection with its evaluation of the merger, the Special
Committee did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered
in reaching its determination and recommendation. In addition, individual directors may have given different weights to different
factors. The Special Committee did not undertake to make any specific determination as to whether any factor, or any particular
aspect of any factor, supported or did not support its ultimate determination. The Special Committee based its recommendation
on the totality of the information presented.
Neither
the Special Committee nor the board of directors considered the liquidation value of Company’s assets, because it considers
the Company to be a viable going concern business where value is derived from cash flows generated from its continuing operations.
In addition, the Special Committee and the board of directors believe that the value of the Company’s assets that might
be realized in a liquidation would be significantly less than its going concern value. Each of the Special Committee and the board
of directors believes the analyses and additional factors it reviewed provided an indication of our going concern value. Members
of the Special Committee and board of directors also considered the current and historical market prices of the shares of Company
common stock. Neither the Special Committee nor the board of directors considered the Company’s net book value, which is
an accounting concept defined as total assets minus total liabilities, attributable to the stockholders of the Company, as a factor.
The Special Committee and board of directors believe that net book value is not a material indicator of the value of the Company
as a going concern. The Company’s net book value per share as of March 31, 2012 was $10.50. Net book value does not take
into account the future prospects of the Company, market conditions, or trends in the industry in which the Company operates.
The Special Committee was not aware of any firm offers during the prior two years by any person for (a) the merger or consolidation
of the Company with another company, (b) the sale or transfer of all or substantially all of the Company's assets, or (c) a
purchase of the Company’s securities that would enable the holder to exercise control of the Company, except as described
in the section titled “Background of the Merger,” beginning on page 10. The Special Committee considered an
d
expressly adopted the financial analyses and the opinion of
BofA Merrill Lynch
,
among other factors considered, in reaching its determination as to the fairness of the transactions contemplated by the merger
agreement. These analyses are summarized below in the section titled “Opinion of Merrill Lynch, Pierce, Fenner
& Smith Incorporated,” beginning on page 25.
The Board of Directors
After
carefully considering the unanimous recommendation of the Special Committee, our board of directors, with directors Mr. Fu, Mr.
Joseph J. Longever, and Mr. Wenbing Christopher Wang abstaining from voting, (i) adopted the merger agreement and authorized and
approved the merger and other transactions contemplated by the merger agreement, (ii) determined that the merger and the merger
agreement, including the merger consideration payable pursuant thereto, are fair to and in the interests of the Company and its
unaffiliated stockholders and declared advisable the execution of the merger agreement and consummation of the transactions contemplated
thereby, including the merger, and (iii) directed that the merger agreement be submitted to stockholders and recommended that
they approve the merger agreement. In making its determination, our board of directors adopted the Special Committee’s analyses
and conclusion as its own.
Our board of directors
recommends that you vote “FOR” the proposal to approve the merger agreement, “FOR” the proposal to approve,
on a non-binding advisory basis, the compensation that may be payable to the Company’s named executive officers in connection
with the merger, and “FOR” the adjournment of the special meeting in order to take such actions as our board of directors
determines are necessary or appropriate, including to solicit additional proxies, if there are insufficient votes at the time
of the special meeting to adopt the proposal to approve the merger agreement
.
Opinion of Merrill Lynch, Pierce,
Fenner & Smith Incorporated
The Special Committee has retained BofA
Merrill Lynch to act as the Special Committee’s financial advisor in connection with the merger. On June 26, 2012, at a
meeting of the Special Committee held to evaluate the merger, BofA Merrill Lynch delivered to the Special Committee an oral opinion,
confirmed by delivery of a written opinion dated June 26, 2012, to the effect that, as of such date and based on and subject to
various assumptions and limitations described in its opinion, the $9.50 per share consideration to be received in the merger by
holders of shares of the Company’s common stock (other than Holdco, Parent, Merger Sub, and the Rollover Holders) was fair,
from a financial point of view, to such holders.
The full text of BofA Merrill Lynch’s
written opinion, dated June 26, 2012, to the Special Committee, which describes, among other things, the assumptions made, procedures
followed, factors considered and limitations on the
review undertaken, is attached as Annex G to this
proxy statement and is incorporated by reference herein in its entirety. The following summary of BofA Merrill Lynch’s opinion
is qualified in its entirety by reference to the
full text of the opinion.
BofA Merrill Lynch delivered its opinion
to the Special Committee for the benefit and use of the Special Committee (in its capacity as such) in connection with and for
purposes of its evaluation of the merger consideration from a financial point of view. BofA Merrill Lynch’s opinion did
not address any other aspect of the merger, and no opinion or view was expressed as to the relative merits of the merger in comparison
to other strategies or transactions that might be available to the Company or in which the Company might engage or as to the underlying
business decision of the Company to proceed with or effect the merger. BofA Merrill Lynch also expressed no opinion or recommendation
as to how any stockholder should vote or act in connection with the merger or any related matter.
In connection with its opinion, BofA Merrill
Lynch, among other things:
|
·
|
reviewed
certain publicly
available
business
and financial
information
relating
to the Company;
|
|
·
|
reviewed
certain internal
financial
and operating
information
with respect
to the business,
operations
and prospects
of the Company
furnished
to or discussed
with BofA
Merrill Lynch
by the Company’s
management,
including
certain financial
forecasts
relating
to the Company
prepared
by the Company’s
management
(such forecasts
are referred
to herein
as the Company
Forecasts),
and discussed
with the
Special Committee
certain sensitivities
to such Company
Forecasts
and costs
associated
with the
repatriation
of the profits
of the Company’s
subsidiaries
to the Company;
|
|
·
|
discussed
the past
and current
business,
operations,
financial
condition
and prospects
of the Company
with members
of the Company’s
senior management
and the Special
Committee;
|
|
·
|
reviewed
the trading
history of
the Company’s
common stock
and a comparison
of that trading
history with
the trading
histories
of other
companies
BofA Merrill
Lynch deemed
relevant;
|
|
·
|
compared
certain financial
and stock
market information
of the Company
with similar
information
of other
companies
BofA Merrill
Lynch deemed
relevant;
|
|
·
|
considered
(1) the fact
that the
Company publicly
announced
the receipt
of the November
2010 Proposal
and that
it would
form the
Special Committee
to consider
the November
2010 Proposal,
(2) the fact
that the
Company subsequently
publicly
announced
that the
Special Committee
would explore
the Company’s
strategic
alternatives,
and (3) the
results of
BofA Merrill
Lynch’s
efforts on
behalf of
the Company
to further
solicit,
at the direction
of the Special
Committee,
indications
of interest
from third
parties with
respect to
a possible
acquisition
of the Company;
|
|
·
|
discussed
with the
Company’s
management
and its legal
advisors
their assessments
as to certain
tax and other
restrictions
on the repatriation
of the profits
of the Company’s
subsidiaries
to the Company
and the financial
consequences
thereof on
the Company;
|
|
·
|
reviewed
a draft,
dated June
26, 2012,
of the merger
agreement;
and
|
|
·
|
performed
such other
analyses
and studies
and considered
such other
information
and factors
as BofA Merrill
Lynch deemed
appropriate.
|
In arriving at its opinion, BofA Merrill
Lynch assumed and relied upon, without independent verification, the accuracy and completeness of the financial and other information
and data publicly available or provided to or otherwise reviewed by or discussed with it and relied upon the assurances of the
Company’s management that they were not aware of any facts or circumstances that would make such information or data inaccurate
or misleading in any material respect. With respect to the Company Forecasts, BofA Merrill Lynch was advised by the Company, and
assumed, that they were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments
of the Company’s management as to the future financial performance of the Company. For purposes of its analyses and its
opinion, BofA Merrill Lynch also relied, at the Special Committee’s direction and without independent verification, upon
the assessments of the Company’s management and its legal advisors as to the tax and other restrictions on the repatriation
of the profits of the Company’s subsidiaries to the Company and the financial consequences thereof on the Company.
BofA Merrill Lynch did not make and was
not provided with any independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of the Company,
nor did BofA Merrill Lynch make any physical inspection of the properties or assets of the Company. BofA Merrill Lynch did not
evaluate the solvency or fair value of the Company or Parent under any state, federal or other laws relating to bankruptcy, insolvency
or similar matters. BofA Merrill Lynch assumed, at the Special Committee’s direction, that the merger would be consummated
in accordance with the terms of the merger agreement, without waiver, modification or amendment of any material term, condition
or agreement and that, in the course of obtaining the necessary governmental, regulatory and other approvals, consents, releases
and waivers for the merger, no delay, limitation, restriction or condition, including any divestiture requirements or amendments
or modifications, would be imposed that would have an adverse effect on the Company or the merger.
BofA Merrill Lynch’s opinion was
limited to the fairness, from a financial point of view, of the merger consideration to be received by holders of shares of the
Company’s common stock (other than Holdco, Parent, Merger Sub, and the Rollover Holders). BofA Merrill Lynch expressed no
view or opinion as to any terms or other aspects of the merger (other than the merger consideration to the extent expressly specified
in its opinion), including, without limitation, the form or structure of the merger or any terms, aspects or implications of any
rollover or other arrangements, agreements or understandings entered into in connection with the merger or otherwise, and no opinion
or view was expressed with respect to any consideration received in connection with the merger by the holders of any class of
securities, creditors or other constituencies of any party. In addition, no opinion or view was expressed with respect to the
fairness (financial or otherwise) of the amount, nature or any other aspect of any compensation to any of the officers, directors
or employees of any party to the merger, or class of such persons, relative to the merger consideration or otherwise. BofA Merrill
Lynch also expressed no opinion with respect to, and relied, with the consent of the Special Committee, upon the assessments of
the Company’s management regarding, legal, regulatory, accounting, tax or similar matters relating to the Company or the
merger as to which BofA Merrill Lynch understood that the Company obtained such advice as the Company deemed necessary from qualified
professionals.
BofA Merrill Lynch’s opinion was
necessarily based on financial, economic, monetary, market and other conditions and circumstances as in effect on, and the information
made available to BofA Merrill Lynch as of, the date of its opinion. The credit, financial and stock markets have been experiencing
unusual volatility, and BofA Merrill Lynch expressed no opinion or view as to any potential effects of such volatility on the
Company, Parent, their affiliates or the merger. It should be understood that subsequent developments may affect BofA Merrill
Lynch’s opinion, and BofA Merrill Lynch does not have any obligation to update, revise, or reaffirm its opinion. The issuance
of BofA Merrill Lynch’s opinion was approved by BofA Merrill Lynch’s Americas Fairness Opinion Review Committee. Except
as described in this summary, the Special Committee imposed no other instructions or limitations on the investigations made or
procedures followed by BofA Merrill Lynch in rendering its opinion.
The following represents a brief summary
of the material financial analyses presented by BofA Merrill Lynch to the Special Committee in connection with its opinion, dated
June 26, 2012.
The financial analyses summarized below include information presented in tabular format.
In order to
fully understand the financial analyses performed by BofA Merrill Lynch, the tables must be read together with the text of each
summary. The tables alone do not constitute a complete description of the financial analyses performed by BofA Merrill Lynch.
Considering the data set forth in the tables below without considering the full narrative description of the financial analyses,
including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the financial
analyses performed by BofA Merrill Lynch.
Historical Share Price Analysis
BofA Merrill Lynch reviewed the range of
closing prices of the shares of the Company’s common stock from November 3, 2010 (which was the date of the public announcement
that the Company had received the November 2010 Proposal) to June 22, 2012. During this period, the closing price of the
Company common stock ranged from $4.52 per share to $10.54 per share, and the volume-weighted average price of the Company common
stock was $7.42, compared to the merger consideration of $9.50 per share.
Selected Public Companies Analysis
BofA Merrill Lynch reviewed financial and
stock market information of the Company and, to the extent publicly available, the following nine selected publicly traded companies:
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Encore
Wire Corporation
|
|
·
|
Lihua
International
Inc.
|
|
·
|
Walsin
Technology
Corporation
|
|
·
|
Taihan
Electric
Wire Co.,
Ltd.
|
|
·
|
General
Cable Corporation
|
BofA Merrill
Lynch reviewed, among other things, per share equity values, based on closing stock prices on June 22, 2012, of the selected publicly
traded companies as a multiple of calendar years 2012 and 2013 estimated earnings per share. BofA Merrill Lynch also reviewed
enterprise values of the selected publicly traded companies, calculated as equity values based on closing stock prices on June
22, 2012, plus debt, less cash and marketable securities, as a multiple of calendar years 2012 and 2013 estimated EBITDA. Valuation
multiples were chosen based on financial and stock market information of Coleman Cable, Inc., Lihua International Inc. and Nexans
SA (collectively, the “Selected Companies”), based on BofA Merrill Lynch’s professional judgment that these
companies were the most relevant for valuation comparison purposes to the Company given some combination of the following factors,
among others: industry, products, customer base, geography and trading jurisdiction of the common stock of the Selected Companies
and the Company. These factors were reviewed by BofA Merrill Lynch with the Special Committee, and the selection of the Selected
Companies by BofA Merrill Lynch was considered by the Special Committee as part of its overall evaluation of the BofA Merrill
Lynch analyses and opinion. BofA Merrill Lynch observed the following data for Coleman Cable, Inc., Lihua International Inc. and
Nexans SA:
|
|
Coleman
Cable, Inc.
|
|
|
Lihua
International Inc.
|
|
|
Nexans
SA
|
|
Per Share Equity Values
|
|
|
$ 8.12
|
|
|
|
$5.45
|
|
|
|
$ 37.50
|
|
Enterprise Values
|
|
|
$441 million
|
|
|
|
$59 million
|
|
|
|
$1,464.3 million
|
|
CY 2012E EBITDA
|
|
|
$86.1 million
|
|
|
|
$85.6 million
|
|
|
|
$487.2 million
|
|
2012E EV/EBITDA Multiple
|
|
|
5.1x
|
|
|
|
0.7 x
|
|
|
|
3.0x
|
|
2013E P/E Multiple
|
|
|
4.8x
|
|
|
|
2.2 x
|
|
|
|
6.6 x
|
|
Based on the observed multiples of estimated earnings per share of the Selected Companies,
BofA Merrill Lynch applied representative ranges of financial multiples of estimated earnings per share of 2.5x to 6.5x to
both (i) the Company’s estimated 2013 earnings based on Wall Street consensus estimates and (ii) the Company’s
estimated 2013 earnings based on the Company Forecasts. Financial and operating data of the nine selected companies were
based on publicly available research analysts’ estimates, public filings and other publicly available information. This
analysis indicated the following approximate implied per share
equity value reference ranges for the Company, as
compared to the per share merger consideration:
Implied Per Share
Equity Value Reference Ranges Based on
|
|
|
|
|
Wall Street Estimates
|
|
Company Forecasts
|
|
|
Merger Consideration
|
|
|
|
$2.25
– $5.75
|
|
|
$3.00
– $7.50
|
|
|
|
$9.50
|
|
No company used
in this analysis is identical to the Company. Accordingly, an evaluation of the results of
this analysis is not
entirely
mathematical. Rather, this analysis involves complex considerations and judgments concerning differences in financial and
operating characteristics and other factors that could affect the public trading or other values of the companies to which the
Company was compared.
Present Value of Projected Future
Stock Price
BofA Merrill Lynch performed an illustrative
analysis of the implied present value of the future price per share of the Company’s common stock, which is designed to
provide insight into an illustrative potential future price of a company’s common equity as a function of the company’s
future earnings and an assumed stock price to next fiscal year (NFY) earnings multiple. The resulting theoretical equity value
is subsequently discounted to present value to arrive at an estimate of the company’s illustrative potential future stock
price. BofA Merrill Lynch calculated the implied values per share of the Company’s common stock for each of the calendar
years 2012, 2013 and 2014 by applying to the Company’s projected earnings per share based on the Company Forecasts the following
NFY earnings per share multiples: (i) 7.5x, based on Wall Street estimates of the Company’s 2013 earnings and its common
stock price as of June 22, 2012; (ii) 2.5x to 6.5x, based on the Selected Public Companies Analysis discussed above; and (iii)
2.8x to 4.3x, based on a hypothetical unaffected stock price analysis of the Company’s stock using stock price and earnings
data of the Selected Companies since November 2, 2010 (the day immediately prior to the date of the public announcement that the
Company had received the November 2010 Proposal). In performing the hypothetical unaffected stock price analysis referred to in
the preceding sentence, BofA Merrill Lynch calculated the percentage change in earnings per share multiples of each of the Selected
Companies from November 2, 2010 to June 22, 2012 and applied each of those percentage changes to the Company’s NFY earnings
per share multiple as of November 2, 2010. BofA Merrill Lynch then discounted to June 22, 2012 the resulting implied values per
share of the Company’s common stock for each of the calendar years 2012, 2013 and 2014 by assuming a cost of equity for
the Company of 13.5%. This analysis indicated the following approximate implied per share equity value reference ranges for the
Company, as compared to the per share merger consideration:
Implied Per Share Equity Value Reference Ranges Based on
|
|
|
|
|
Current Company P/E
Multiple
|
|
Selected Companies
P/E Multiple
|
|
|
Hypothetical Unaffected
Stock Price P/E Multiple
|
|
|
Merger Consideration
|
|
|
|
$8.75
– $10.00
|
|
|
$3.00
– $8.75
|
|
|
|
$3.25
– $5.75
|
|
|
|
$9.50
|
|
|
Discounted Cash Flow Analysis
BofA Merrill
Lynch performed a discounted cash flow analysis of the Company to calculate the estimated present value of the stand-alone, unlevered,
after-tax free cash flows that the Company was forecasted to generate based on the Company Forecasts (as more fully described
in the section titled “Management Projected Financial Information”) from the second quarter of 2012 through fiscal
year 2015. BofA Merrill Lynch also calculated terminal values for the Company by applying a perpetuity growth rate, based on its
professional judgment given the nature of the Company, its business and its industry, of 1.0% to 2.0%. The stand-alone, unlevered,
after-tax free cash flows and terminal values were discounted to present value using discount rates ranging from 12.0% to 14.0%,
which were based on a weighted average cost of capital analysis of the nine companies listed under the heading “Selected
Public Companies Analysis”. BofA Merrill Lynch considered two scenarios: (i) under the first scenario, BofA Merrill Lynch
assumed that the Company would not be assessed any penalties for the repatriation of the profits of the Company’s subsidiaries
to the Company, and (ii) under the second scenario, BofA Merrill Lynch assumed the future cash flows and the terminal value would
be subject to a 35% repatriation penalty.
Although the Special Committee believed that a scenario in which no repatriation
costs existed was highly unlikely, BofA Merrill Lynch considered this scenario for purposes of its discounted cash flow analysis
to demonstrate the magnitude of the effect of the potential repatriation penalty.
Under the zero repatriation penalty
scenario, the discounted cash flow analysis yielded a range of enterprise values of the Company of $270 million to $289 million.
BofA Merrill Lynch then calculated a range of equity values of the Company of $467 million to $587 million by adding to the foregoing
range of enterprise values $197 million of net cash, based on the Company’s public disclosure as of March 31, 2012. BofA
Merrill Lynch then calculated a range of per share equity values for the Company using the foregoing range of equity values and
a share count calculated using the treasury stock method assuming 38.299 million shares of common stock outstanding, 0.590 million
options with a weighted average strike price of $7.07 and 0.189 million non-vested shares of common stock based on the Company’s
public disclosure as of March 31, 2012.
Under the 35% repatriation penalty scenario,
the discounted cash flow analysis yielded a range of enterprise values of the Company of $176 million to $253 million. BofA Merrill
Lynch then calculated a range of equity values of the Company of $303 million to $380 million by adding to the foregoing range
of enterprise values $127 million of net cash, based on the Company’s public disclosure as of March 31, 2012, as effected
by a 35% repatriation penalty. BofA Merrill Lynch then calculated a range of per share equity values for the Company using the
foregoing range of equity values and a share count calculated using the treasury stock method assuming 38.299 million of common
stock outstanding, 0.590 million options with a weighted average strike price of $7.07 and 0.189 million non-vested shares of
common stock based on the Company’s public disclosure as of March 31, 2012.
This analysis
indicated the following approximate implied per share equity value reference ranges rounded to the nearest $0.25 for the Company
as compared to the per share merger consideration
:
Implied Per Share Equity Value Reference Ranges Based on
|
|
|
|
|
No Repatriation Adjustment
|
|
35% Repatriation Adjustment
|
|
|
Merger Consideration
|
|
|
$12.00
– $15.00
|
|
|
$7.75
– $9.75
|
|
|
|
$9.50
|
|
In connection with its discounted cash
flow analysis, BofA Merrill Lynch performed a sensitivity analysis using: (i) a range of compound annual revenue growth rates,
(which reflect the rate at which the Company's revenue will increase year over year) of 10%, 15% and 20% for the calendar years
2011 through 2015, based on BofA Merrill Lynch’s professional judgment given the recent financial performance of the Company
and the nature of the Company’s business and industry, (ii) a range of EBITDA margins of 12.5%, 15.0% and 17.8%, which were
chosen by BofA Merrill Lynch as reasonable downside cases relative to the Company Forecasts, and (iii) a range of repatriation
friction costs (as explained below) of 0% (which assumed no US taxes (assuming a 35% rate) owed on the profits of the Company’s
subsidiaries repatriated from China to the US), 9% (which assumed full credit against US taxes for foreign taxes (assuming a 26%
rate) paid on profits of the Company’s subsidiaries repatriated from China to the US) and 35% (which assumed no credit against
US taxes for foreign taxes paid on profits of the Company’s subsidiaries repatriated from China to the US).
In the No Repatriation Adjustment scenario,
the mid-point per share equity value for the discounted cash flow analysis was $13.39 per share, however, under the scenario where
the sales compound annual revenue growth rate is 15% rather than 20% and the normalized EBITDA margin is 15% rather than 17.8%,
the mid-point share price for the discounted cash flow analysis would be $9.39 per share. Under the 35% Repatriation Adjustment
scenario, the mid-point share price for the discounted cash flow analysis would be $8.71 per share, however, under the scenario
where the sales compound annual revenue growth rate is 15% rather than 20% and the normalized EBITDA margin is 15% rather than
17.8%, the mid-point share price for the discounted cash flow analysis would be $6.09 per share. This sensitivity analysis indicated
that the discounted cash flow valuation analysis is highly sensitive to the achievement of management’s estimated forecast.
Illustrative Leveraged Buyout Analysis
BofA Merrill Lynch performed a hypothetical
leveraged buyout analysis based on the Company Forecasts to determine the prices at which a financial sponsor might effect a leveraged
buyout of the Company. BofA Merrill Lynch assumed an illustrative transaction closing date of December 31, 2012. In order to simulate
an approximate three year investment period by a financial sponsor, BofA Merrill Lynch assumed a subsequent exit transaction by
the financial sponsor on December 31, 2015 with a valuation based on a range of trailing twelve month EBITDA exit multiples of
2.0x to 5.0x. Although BofA Merrill Lynch did not consider EBITDA to be a reliable valuation metric for the Company, it used an
EBITDA exit multiple in performing its hypothetical leveraged buyout analysis, due to the highly leveraged capital structure that
would result from a transaction with a financial sponsor. The implied purchase price per share paid by the financial sponsor was
based on a target internal rate of return for the financial sponsor of 22.5%, which BofA Merrill Lynch applied based on its professional
judgment as to reasonable expected internal rate of return for a financial sponsor. This analysis indicated the following approximate
implied per share equity value reference ranges for the Company as compared to the per share merger consideration:
Implied Per Share Equity Value
Reference Ranges
|
|
|
Merger Consideration
|
|
|
$5.75
– $10.25
|
|
|
|
$9.50
|
|
Other Factors
In rendering its opinion, BofA Merrill
Lynch also reviewed and considered other factors, including:
|
·
|
stock
price targets
for the Company’s
common stock
in recently
published,
publicly
available
Wall Street
research
analyst reports;
|
|
·
|
the implied
premiums of
the per share
merger consideration
of $9.50 to
the Company’s
common stock
price as of
June 22, 2012
and its historical
stock prices,
including the
41.2% premium
to the stock
price on June
22, 2012, the
40.3% premium
to the volume
weighted average
price through
June 22, 2012,
the 37.3% premium
to the 90-day
volume weighted
average price
through June
22, 2012, and
the 105.6%
premium to
the 52-week
low for the
period ending
June 22, 2012;
|
|
·
|
the multiples
of price
per earnings
and enterprise
value per
EBITDA (based
on both the
Company Forecasts
and Wall
Street estimates)
implied by
both the
Company’s
common stock
price as
of June 22,
2012 and
the per share
merger consideration
of $9.50;
|
|
·
|
the stock
price implied
by changes
to peer stock
prices since
the day prior
to the November
2010 proposal
and the stock
price implied
by changes
to peer forward
multiples of
price per earnings
since the day
prior to the
November 2010
proposal;
|
|
·
|
the results
of BofA Merrill
Lynch’s
efforts on
behalf of
the Company
to further
solicit,
at the direction
of the Special
Committee,
indications
of interest
from third
parties with
respect to
a possible
acquisition
of the Company;
and
|
|
·
|
the absence
of any business
combinations
or other
transactions
that were
deemed by
BofA Merrill
Lynch to
be relevant
for purposes
of its financial
analysis.
|
Miscellaneous
As noted above, the discussion set forth
above is a summary of the material financial analyses presented by BofA Merrill Lynch to the Special Committee in connection with
its opinion and is not a comprehensive description of all analyses undertaken or factors considered by BofA Merrill Lynch in connection
with its opinion. The preparation of a financial opinion is a complex analytical process involving various determinations as to
the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances
and, therefore, a financial opinion is not readily susceptible to partial analysis or summary description. BofA Merrill Lynch
believes that the analyses summarized above must be considered as a whole. BofA Merrill Lynch further believes that selecting
portions of its analyses considered or focusing on information presented in tabular format, without considering all analyses or
the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying BofA Merrill
Lynch’s analyses and opinion. The fact that any specific analysis has been referred to in the summary above is not meant
to indicate that such analysis was given greater weight than any other analysis referred to in the summary.
In performing its analyses, BofA Merrill
Lynch considered industry performance, general business and economic conditions and other matters, many of which are beyond the
control of the Company. The estimates of the future performance of the Company in or underlying BofA Merrill Lynch’s analyses
are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than
those estimates or those suggested by BofA Merrill Lynch’s analyses. These analyses were prepared solely as part of BofA
Merrill Lynch’s analysis of the fairness, from a financial point of view, of the merger consideration and were provided
to the Special Committee in connection with the delivery of BofA Merrill Lynch’s opinion. The analyses do not purport to
be appraisals or to reflect the prices at which a company might actually be sold or acquired or the prices at which any securities
have traded or may trade at any time in the future. Accordingly, the estimates used in, and the ranges of valuations resulting
from, any particular analysis described above are inherently subject to substantial uncertainty and should not be taken to be
BofA Merrill Lynch’s view of the actual value of the Company.
The type and amount of consideration payable
in the merger was determined through negotiations between the Special Committee, on the one hand, and the buyer group, on the
other hand, rather than by any financial advisor, and was approved by the Special Committee and the board of directors. The decision
to enter into the merger agreement was solely that of the Special Committee and the board of directors. As described above, BofA
Merrill Lynch’s opinion and analyses were only one of many factors considered by the Special Committee in its evaluation
of the merger and should not be viewed as determinative of the views of the Special Committee, the board of directors or management
with respect to the merger or the merger consideration.
BofA Merrill Lynch has acted as financial
advisor to the Special Committee in connection with the merger and the Company has agreed to pay BofA Merrill Lynch for such services
an aggregate fee of approximately $4.6 million, $250,000 of which was paid as a retainer fee, $1.25 million of which became payable
upon the delivery of BofA Merrill Lynch’s opinion, and the remainder of which is contingent upon consummation of the merger.
In addition, the Company also has agreed to reimburse BofA Merrill Lynch for certain expenses incurred by BofA Merrill Lynch in
performing its services and to indemnify BofA Merrill Lynch and related persons against liabilities, including liabilities under
the federal securities laws, arising out of its engagement.
BofA Merrill Lynch and its affiliates comprise
a full service securities firm and commercial bank engaged in securities, commodities and derivatives trading, foreign exchange
and other brokerage activities, and principal investing as well as providing investment, corporate and private banking, asset
and investment management, financing and financial advisory services and other commercial services and products to a wide range
of companies, governments and individuals. In the ordinary course of its businesses, BofA Merrill Lynch and its affiliates may
invest on a principal basis or on behalf of customers or manage funds that invest, make or hold long or short positions, finance
positions or trade or otherwise effect transactions in equity, debt or other securities or financial instruments (including derivatives,
bank loans or other obligations) of the Company, Parent, Holdco and certain of their respective affiliates.
BofA Merrill Lynch and its affiliates in
the past have provided, currently are providing, and in the future may provide, investment banking, commercial banking and other
financial services to the Company unrelated to the merger, including certain derivative products and services, and have received
or in the future may receive compensation for the rendering of these services, including aggregate fees of approximately $1 million
which it has received for the provision of derivatives products and services.
BofA Merrill Lynch is an internationally
recognized investment banking firm which is regularly engaged in providing financial advisory services in connection with mergers
and acquisitions. The Special Committee selected BofA Merrill Lynch to act as its financial advisor in connection with the merger
on the basis of BofA Merrill Lynch’s experience in similar transactions, its reputation in the investment community and
its familiarity with the Company.
Preliminary Financial Analyses
The types of preliminary financial analyses
presented by BofA Merrill Lynch to the Special Committee on May 5, 2011 were generally similar to those contained in BofA Merrill
Lynch’s final financial presentation to the Special Committee on June 26, 2012 summarized above. However, during the course
of the approximate 13 months between these two presentations, BofA Merrill Lynch refined various aspects of its financial analyses,
and the Company updated its forecasts of future performance. In addition, certain data used in, and the results of, the preliminary
financial analyses may have differed from those in BofA Merrill Lynch’s final financial presentation on June 26, 2012, given,
among other factors, the different reference dates used in the presentations for public information, changes in publicly available
information and management-prepared projections relating to the Company, market, economic and other conditions, and BofA Merrill
Lynch’s evolving understanding of the Company and its business. The preliminary financial analyses provided to the Special
Committee by BofA Merrill Lynch on May 5, 2011 did not constitute an opinion of, or recommendation by, BofA Merrill Lynch with
respect to a possible transaction or otherwise. The May 5, 2011 presentation was superseded by BofA Merrill Lynch’s final
financial presentation to the Special Committee on June 26, 2012.
The following represents a brief summary
of the results of the preliminary financial analyses presented by BofA Merrill Lynch to the Special Committee May 5, 2011.
The
preliminary financial analyses summarized below include information presented in tabular format. In order to fully understand
the preliminary financial analyses performed by BofA Merrill Lynch, the tables must be read together with the text of each summary.
The tables alone do not constitute a complete description of the preliminary financial analyses performed by BofA Merrill Lynch.
Considering the data set forth in the tables below without considering the full narrative description of the preliminary financial
analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of
the preliminary financial analyses performed by BofA Merrill Lynch.
Preliminary Historical Share Price
Analysis
BofA Merrill Lynch reviewed the range
of closing prices of the shares of the Company’s common stock from November 3, 2010 (which was the date of the public announcement
that the Company had received the November 2010 Proposal) to May 4, 2011. During this period, the closing price of the Company
common stock ranged from $7.61 per share to $10.51 per share, and the volume-weighted average price of the Company common stock
was $9.07, compared to the November 3, 2010 offer price of $11.50 per share.
BofA Merrill Lynch also reviewed the
range of closing prices of the shares of the Company’s common stock over the 52 week period ending May 4, 2011. During this
period, the closing price of the Company common stock ranged from $6.70 per share to $12.29 per share, and the volume-weighted
average price of the Company common stock was $9.12, compared to the November 3, 2010 offer price of $11.50 per share.
Preliminary Present Value of Projected
Future Stock Price
BofA Merrill Lynch performed an illustrative
analysis of the implied present value of the future price per share of the Company’s common stock, which was similar to
the “Present Value of Projected Future Stock Price” analysis described above. BofA Merrill Lynch performed the analysis
using a multiple of enterprise value to EBITDA and a NFY earnings per share multiple based on Wall Street estimates and the Company’s
then-current stock price. Although it was included in the May 5, 2011 presentation to the Special Committee, BofA Merrill Lynch
subsequently deemphasized the enterprise value to EBITDA multiple valuation approach, because in its professional judgment EBITDA
was not a reliable valuation metric for the Company. BofA Merrill Lynch calculated the implied values per share of the Company’s
common stock for each of the calendar years 2011, 2012, 2013 and 2014 by:
|
·
|
applying
to the Company’s
projected earnings per
share based on the Company
Forecasts the following
NFY earnings per share
multiples: (i) 6.9x, based
on Wall Street estimates
of the Company’s
2011 earnings and its common
stock price as of May 4,
2011; and (ii) a “hypothetical
recovery P/E multiple”
of 10.5x, based on the
average of the NFY earnings
per share multiples of
the Company from May 2007
to September 2008 (prior
to beginning of the financial
crisis in 2008); and
|
|
·
|
applying
an enterprise value to
EBITDA multiple of 2.6x
based on Wall Street estimates
of the Company’s
estimated 2011 EBITDA and
a calculated enterprise
value as of May 4, 2011
to the Company’s
estimated EBITDA based
on certain financial forecasts
relating to the Company
prepared by the Company’s
management and provided
to BofA Merrill Lynch.
Future equity value was
then calculated using the
Company’s projected
net cash position based
on certain financial forecasts
relating to the Company
prepared by the Company’s
management and provided
to BofA Merrill Lynch.
|
BofA Merrill Lynch then discounted to December 31, 2011 the resulting implied values per share of
the Company’s common stock for each of the calendar years 2011, 2012, 2013 and 2014 by assuming a cost of equity for the
Company of 14.5%. This analysis indicated the following approximate implied per share equity value reference ranges for the Company,
as compared to the November 3, 2010 offer price:
Implied Per Share
Equity
Value Reference Ranges Based on
|
|
|
|
Current Company P/E Multiple
|
|
Hypothetical Recovery P/E Multiple
|
|
Current Company EV/EBITDA Multiple
|
|
November 3, 2010 Offer Price
|
|
$6.00 – $8.25
|
|
$8.25 – $11.00
|
|
$8.25 – $9.75
|
|
|
$ 11.50
|
|
Preliminary Discounted Cash Flow
Analysis
BofA Merrill Lynch performed a discounted
cash flow analysis of the Company to calculate the estimated present value of the stand-alone, unlevered, after-tax free cash
flows that the Company was forecasted to generate from the third quarter of 2011 through fiscal year 2015 based on certain financial
forecasts relating to the Company prepared by the Company’s management and provided to BofA Merrill Lynch. This analysis
was similar to the “Discounted Cash Flow Analysis” described above, however, in its May 5, 2011 presentation BofA
Merrill Lynch performed the analysis using a terminal EBITDA multiple (in addition to a perpetuity growth rate), an approach which
BofA Merrill Lynch subsequently de-emphasized, because in its professional judgment it did not consider EBITDA to be a reliable
valuation metric for the Company. In addition, potential repatriation friction costs were not taken into account due to the preliminary
nature of the analysis at that time.
BofA Merrill Lynch calculated terminal
values for the Company by applying a perpetuity growth rate, based on its professional judgment, given the nature of the Company,
its business and its industry, of negative 0.5% to positive 0.5%. Separately, BofA Merrill Lynch calculated terminal values for
the Company by applying terminal forward multiples, based on its professional judgment, given the nature of the Company, its business
and its industry, of 2.5x to 3.5x, the
Company’s fiscal year 2015 estimated EBITDA. In each case, the stand-alone,
unlevered, after-tax free cash flows and terminal values were discounted to June 30, 2011 using discount rates ranging from 11.0%
to 13.0%, which were based on an estimate of the Company’s weighted average cost of capital. This analysis indicated the
following approximate implied per share equity value reference ranges for the Company as compared to the November 3, 2010 offer
price:
Implied Per Share
Equity
Value Reference Ranges Based on
|
|
|
|
Perpetuity Growth Method
|
|
Terminal EBITDA Multiple Method
|
|
November 3, 2010 Offer Price
|
|
$13.00 – $15.00
|
|
$10.50 – $12.00
|
|
|
$ 11.50
|
|
Preliminary Illustrative Leveraged
Buyout Analysis
BofA Merrill Lynch performed a hypothetical
leveraged buyout analysis based on certain financial forecasts relating to the Company prepared by the Company’s management
and provided to BofA Merrill Lynch to determine the prices at which a financial sponsor might effect a leveraged buyout of the
Company. BofA Merrill Lynch assumed an illustrative transaction closing date of June 30, 2011. In order to simulate an approximate
five-year investment period by a financial sponsor, BofA Merrill Lynch assumed a subsequent exit transaction by the financial
sponsor on December 31, 2015 with a valuation based on a range of trailing twelve month EBITDA exit multiples of 2.5x to 5.5x.
The implied purchase price per share paid by the financial sponsor was based on a target internal rate of return for the financial
sponsor of 15.0% to 25.0%, which BofA Merrill Lynch applied based on its professional judgment as to a reasonable expected internal
rate of return for a financial sponsor. This analysis indicated the following approximate implied per share equity value reference
ranges for the Company as compared to the November 3, 2010 offer price:
Implied Per Share
Equity
Value Reference Ranges
|
|
|
November 3, 2010 Offer Price
|
|
|
$9.00 – $11.00
|
|
|
|
$ 11.50
|
|
Management’s Projected Financial
Information
The Company does not, as a matter of course,
publicly disclose financial forecasts as to future financial performance, earnings or other results and is especially cautious
of making financial forecasts because of unpredictability of the underlying assumptions and estimates. However, in connection
with the evaluation of the buyer group’s proposal, the Special Committee and its advisors were provided with certain non-public
financial forecasts that were prepared by our management.
These financial forecasts are not being
included in this document to influence your decision whether to vote for or against the proposal to approve the merger agreement,
but are being included because these financial forecasts were made available to the Special Committee and its advisors. The buyer
group was also provided with the financial forecasts disclosed below. The inclusion of this information should not be regarded
as an indication that the Company, the Special Committee or their advisors, or any other person considered, or now considers,
such financial forecasts to be material or to be necessarily predictive of actual future results, and these forecasts should not
be relied upon as such. Our management’s internal financial forecasts, upon which the financial forecasts were based, are
subjective in many respects. There can be no assurance that these financial forecasts will be realized or that actual results
will not be significantly higher or lower than forecasted.
In addition, the financial forecasts were
not prepared with a view toward public disclosure or toward complying with generally accepted accounting principles in the United
States, which we refer to as U.S. GAAP, the published guidelines of the SEC regarding projections and the use of non-U.S. GAAP
financial measures, or the guidelines established by the American Institute of Certified Public Accountants for preparation and
presentation of prospective financial information. Neither our independent registered public accounting firm, nor any other independent
accountants, have compiled, examined or performed any procedures with respect to the financial forecasts contained herein, nor
have they expressed any opinion or any other form of assurance on such information or its achievability.
These financial forecasts were based on
numerous variables and assumptions that are inherently uncertain and may be beyond our control. We believe the assumptions that
our management used as a basis for this projected financial information were reasonable at the time our management prepared these
financial forecasts, given the information our management had at the time. Important factors that may affect actual results and
cause these financial forecasts not to be achieved include, but are not limited to, risks and uncertainties relating to our business
(including its ability to achieve strategic goals, objectives, and targets over the applicable periods), industry performance,
the regulatory environment, general business and economic conditions, and other factors described or referenced under “Cautionary
Statement Concerning Forward-Looking Information,” beginning on page 59. In addition, the forecasts also reflect assumptions
that are subject to change and do not reflect revised prospects for our business, changes in general business or economic conditions,
or any other transaction or event that has occurred or that may occur and that was not anticipated at the time the financial forecasts
were prepared. Accordingly, there can be no assurance that these financial forecasts will be realized or that our Company’s
future financial results will not materially vary from these financial forecasts.
No one has made or makes any representation
to any stockholder regarding the information included in the financial forecasts set forth below. Readers of the proxy statment
are cautioned that some or all of the assumptions which have been made regarding, among other things, the timing of certain occurrences
or impacts, may have changed since the date such forecasts were made. We have not updated and do not intend to update, or otherwise
revise the financial forecasts to reflect circumstances existing after the date when made or to reflect the occurrence of future
events, even in the event that any or all of the assumptions on which such forecasts were based are shown to be in error. We have
made no representation to Mr. Fu, Abax, Holdco, Parent, Merger Sub, or any other party to the merger agreement concerning these
financial forecasts.
The financial forecasts are forward-looking
statements. For information on factors that may cause the Company’s future financial results to materially vary, see “Cautionary
Statement Concerning Forward-Looking Information,” beginning on page 66.
Financial Projections- April 2011
The primary assumptions underlying the
projected financials provided to the Special Committee and its advisors in April 2011 (the “April 2011 Projections”)
include volume and average selling price, along with selling, general and administrative expense (“SG&A”) levels.
SG&A levels were based on historical expenses and scaled up over the five-year period accordingly based on our volume growth
assumptions. Volume assumptions can be found on the consolidated income statement. The Company also assumed GDP growth in China
remains above 8% annually for the next five years. For the April 2011 Projections, management did not factor in the costs associated
with the proposed merger transaction including fees to be paid to legal counsel, auditors and financial advisors. Neither did
management consider the impact of the merger on the Company in preparing the April 2011 Projections.
The full set of April 2011 Projections
is presented below:
Consolidated Income Statement
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
Volume shipped (Pounds)
|
|
|
91,079,623
|
|
|
|
99,000,000
|
|
|
|
109,150,000
|
|
|
|
119,457,500
|
|
|
|
125,930,375
|
|
Volume growth %
|
|
|
7.0
|
%
|
|
|
8.7
|
%
|
|
|
10.3
|
%
|
|
|
9.4
|
%
|
|
|
5.4
|
%
|
Gross Sales
|
|
|
287,089,357
|
|
|
|
302,659,098
|
|
|
|
330,721,598
|
|
|
|
367,072,677
|
|
|
|
387,151,311
|
|
Deductions
|
|
|
-
|
|
|
|
-1,092,000
|
|
|
|
-1,218,000
|
|
|
|
-1,440,000
|
|
|
|
-1,575,000
|
|
Net Sales
|
|
|
287,089,357
|
|
|
|
301,567,098
|
|
|
|
329,503,598
|
|
|
|
365,632,677
|
|
|
|
385,576,311
|
|
Net sales growth %
|
|
|
9.0
|
%
|
|
|
5.0
|
%
|
|
|
9.3
|
%
|
|
|
11.0
|
%
|
|
|
5.5
|
%
|
Material Cost
|
|
|
184,471,298
|
|
|
|
197,341,860
|
|
|
|
219,335,730
|
|
|
|
248,834,266
|
|
|
|
266,964,548
|
|
Material Margin
|
|
|
102,618,059
|
|
|
|
104,225,238
|
|
|
|
110,167,867
|
|
|
|
116,798,411
|
|
|
|
118,611,763
|
|
Mfg L&O
|
|
|
19,711,783
|
|
|
|
20,611,416
|
|
|
|
22,172,046
|
|
|
|
23,861,921
|
|
|
|
25,178,347
|
|
Cost of Sales
|
|
|
204,183,081
|
|
|
|
217,953,276
|
|
|
|
241,507,777
|
|
|
|
272,696,187
|
|
|
|
292,142,895
|
|
Gross profit
|
|
|
82,906,276
|
|
|
|
83,613,822
|
|
|
|
87,995,821
|
|
|
|
92,936,490
|
|
|
|
93,433,416
|
|
Sales and Marketing
|
|
|
4,789,055
|
|
|
|
5,083,222
|
|
|
|
5,653,092
|
|
|
|
6,518,946
|
|
|
|
6,898,520
|
|
G&A
|
|
|
14,582,527
|
|
|
|
15,767,841
|
|
|
|
17,540,183
|
|
|
|
19,308,752
|
|
|
|
20,567,835
|
|
EBIT
|
|
|
63,534,694
|
|
|
|
62,762,759
|
|
|
|
64,802,546
|
|
|
|
67,108,793
|
|
|
|
65,967,060
|
|
Interest Expense
|
|
|
156,520
|
|
|
|
216,645
|
|
|
|
190,385
|
|
|
|
164,125
|
|
|
|
137,865
|
|
Pre-tax income
|
|
|
63,378,174
|
|
|
|
62,546,114
|
|
|
|
64,612,161
|
|
|
|
66,944,668
|
|
|
|
65,829,195
|
|
Taxes
|
|
|
16,481,660
|
|
|
|
16,345,081
|
|
|
|
16,925,926
|
|
|
|
17,444,604
|
|
|
|
17,143,371
|
|
Net Income
|
|
|
46,896,514
|
|
|
|
46,201,033
|
|
|
|
47,686,236
|
|
|
|
49,500,064
|
|
|
|
48,685,824
|
|
Net income growth %
|
|
|
43.0
|
%
|
|
|
-1.5
|
%
|
|
|
3.2
|
%
|
|
|
3.8
|
%
|
|
|
-1.6
|
%
|
Consolidated Balance Sheet
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
143,697,528
|
|
|
|
150,197,530
|
|
|
|
155,442,806
|
|
|
|
201,095,450
|
|
|
|
248,716,890
|
|
Receivables-Trade
|
|
|
58,585,033
|
|
|
|
64,564,591
|
|
|
|
70,859,216
|
|
|
|
78,434,077
|
|
|
|
82,426,531
|
|
Inventories
|
|
|
19,659,045
|
|
|
|
21,579,605
|
|
|
|
24,054,242
|
|
|
|
27,504,230
|
|
|
|
29,624,628
|
|
Advances to suppliers
|
|
|
12,929,110
|
|
|
|
13,754,175
|
|
|
|
15,327,729
|
|
|
|
17,035,991
|
|
|
|
18,087,632
|
|
Prepaid / Other Current Assets
|
|
|
820,000
|
|
|
|
820,000
|
|
|
|
820,000
|
|
|
|
820,000
|
|
|
|
820,000
|
|
Current Assets
|
|
|
235,690,716
|
|
|
|
250,915,901
|
|
|
|
266,503,993
|
|
|
|
324,889,749
|
|
|
|
379,675,681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
|
|
|
168,415,430
|
|
|
|
174,310,430
|
|
|
|
182,205,430
|
|
|
|
190,100,430
|
|
|
|
199,995,430
|
|
Accumulated Depreciation
|
|
|
-50,825,254
|
|
|
|
-63,660,480
|
|
|
|
-77,005,466
|
|
|
|
-90,708,662
|
|
|
|
-104,557,298
|
|
Fixed assets, net
|
|
|
117,590,176
|
|
|
|
110,649,950
|
|
|
|
105,199,964
|
|
|
|
99,391,768
|
|
|
|
95,438,132
|
|
New investment, net
|
|
|
40,000,000
|
|
|
|
80,000,000
|
|
|
|
120,000,000
|
|
|
|
120,000,000
|
|
|
|
120,000,000
|
|
Intangibles assets, net
|
|
|
397,587
|
|
|
|
217,587
|
|
|
|
182,587
|
|
|
|
147,587
|
|
|
|
112,587
|
|
Land use right
|
|
|
12,475,508
|
|
|
|
12,155,508
|
|
|
|
11,690,508
|
|
|
|
11,225,508
|
|
|
|
10,760,508
|
|
Advances for land use right
|
|
|
9,623,181
|
|
|
|
9,623,181
|
|
|
|
9,623,181
|
|
|
|
9,623,181
|
|
|
|
9,623,181
|
|
Goodwill
|
|
|
1,669,789
|
|
|
|
1,669,789
|
|
|
|
1,669,789
|
|
|
|
1,669,789
|
|
|
|
1,669,789
|
|
Other Long-Term Assets
|
|
|
443,397
|
|
|
|
443,397
|
|
|
|
443,397
|
|
|
|
443,397
|
|
|
|
443,397
|
|
Long Term Assets
|
|
|
182,199,638
|
|
|
|
214,759,412
|
|
|
|
248,809,426
|
|
|
|
242,501,230
|
|
|
|
238,047,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
417,890,353
|
|
|
|
465,675,314
|
|
|
|
515,313,419
|
|
|
|
567,390,979
|
|
|
|
617,723,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Portion of LTD - loans
|
|
|
650,000
|
|
|
|
650,000
|
|
|
|
650,000
|
|
|
|
650,000
|
|
|
|
650,000
|
|
Trade Accounts Payable
|
|
|
8,786,652
|
|
|
|
9,794,524
|
|
|
|
10,960,578
|
|
|
|
12,694,048
|
|
|
|
13,751,053
|
|
Tax payables
|
|
|
4,672,065
|
|
|
|
4,672,065
|
|
|
|
4,672,065
|
|
|
|
4,672,065
|
|
|
|
4,672,065
|
|
Other payables and accured liability
|
|
|
5,878,133
|
|
|
|
6,118,133
|
|
|
|
6,358,133
|
|
|
|
6,598,133
|
|
|
|
6,838,133
|
|
Current Liabilities
|
|
|
19,986,850
|
|
|
|
21,234,722
|
|
|
|
22,640,776
|
|
|
|
24,614,246
|
|
|
|
25,911,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term Loan
|
|
|
5,037,500
|
|
|
|
4,387,500
|
|
|
|
3,737,500
|
|
|
|
3,087,500
|
|
|
|
2,437,500
|
|
Other Noncurrent Liabilities
|
|
|
734,596
|
|
|
|
734,596
|
|
|
|
734,596
|
|
|
|
734,596
|
|
|
|
734,596
|
|
Long Term Liabilities
|
|
|
5,772,096
|
|
|
|
5,122,096
|
|
|
|
4,472,096
|
|
|
|
3,822,096
|
|
|
|
3,172,096
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
25,758,946
|
|
|
|
26,356,818
|
|
|
|
27,112,872
|
|
|
|
28,436,342
|
|
|
|
29,083,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
228,596
|
|
|
|
228,596
|
|
|
|
228,596
|
|
|
|
228,596
|
|
|
|
228,596
|
|
Additional paid in capital
|
|
|
168,429,958
|
|
|
|
169,416,014
|
|
|
|
170,611,830
|
|
|
|
171,865,856
|
|
|
|
172,865,322
|
|
Retained Earnings
|
|
|
140,462,840
|
|
|
|
187,359,354
|
|
|
|
233,560,387
|
|
|
|
281,246,622
|
|
|
|
330,746,686
|
|
Year To Date Profit & Loss
|
|
|
46,896,514
|
|
|
|
46,201,033
|
|
|
|
47,686,236
|
|
|
|
49,500,064
|
|
|
|
48,685,824
|
|
Cumulative currency translation
|
|
|
36,113,499
|
|
|
|
36,113,499
|
|
|
|
36,113,499
|
|
|
|
36,113,499
|
|
|
|
36,113,499
|
|
Total Shareholder Equity
|
|
|
392,131,407
|
|
|
|
439,318,496
|
|
|
|
488,200,547
|
|
|
|
538,954,637
|
|
|
|
588,639,927
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES/EQUITIES
|
|
|
417,890,353
|
|
|
|
465,675,314
|
|
|
|
515,313,419
|
|
|
|
567,390,979
|
|
|
|
617,723,275
|
|
Updated Financial Projections- November 19, 2011
The Company provided updated financial
projections to the Special Committee and its financial advisors on or about November 19, 2011 (the “November 19, 2011 Projections”).
This forecast reflected (1) adjusted 2011 financial information based on actual results from January to October 2011 and (2) lower
2012 to 2015 volume projections due to (a) weaker demand in China particularly in the telecommunications sectors as a result of
the slowdown in the build-out of 3G networks and (b) weaker demand in the US and Europe due to destocking activities. Furthermore,
the Company acquired the Liege, Belgium facilities in the third quarter of 2011 and the consolidated financial projections account
for the inclusion of the results of operations from this acquisition.
The full set of November 19, 2011 Projections
is presented below:
Consolidated Income Statement
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
Volume shipped (Pounds)
|
|
|
81,643,859
|
|
|
|
87,035,700
|
|
|
|
95,756,000
|
|
|
|
104,287,100
|
|
|
|
112,377,895
|
|
Volume growth %
|
|
|
|
|
|
|
6.6
|
%
|
|
|
10.0
|
%
|
|
|
8.9
|
%
|
|
|
7.8
|
%
|
Gross Sales
|
|
|
285,549,764
|
|
|
|
358,211,090
|
|
|
|
417,919,751
|
|
|
|
455,710,079
|
|
|
|
507,630,599
|
|
Deductions
|
|
|
-782,272
|
|
|
|
-2,308,010
|
|
|
|
-2,661,050
|
|
|
|
-2,996,987
|
|
|
|
-3,286,220
|
|
Net Sales
|
|
|
284,767,492
|
|
|
|
355,903,080
|
|
|
|
415,258,701
|
|
|
|
452,713,092
|
|
|
|
504,344,379
|
|
Net sales growth %
|
|
|
|
|
|
|
25.0
|
%
|
|
|
16.7
|
%
|
|
|
9.0
|
%
|
|
|
11.4
|
%
|
Material Cost
|
|
|
188,636,780
|
|
|
|
239,181,538
|
|
|
|
286,917,562
|
|
|
|
313,478,547
|
|
|
|
352,403,753
|
|
Material Margin
|
|
|
96,130,712
|
|
|
|
116,721,541
|
|
|
|
128,341,139
|
|
|
|
139,234,545
|
|
|
|
151,940,625
|
|
Mfg L&O
|
|
|
19,591,823
|
|
|
|
35,351,312
|
|
|
|
41,032,494
|
|
|
|
46,339,586
|
|
|
|
52,607,639
|
|
Cost of Sales
|
|
|
208,228,603
|
|
|
|
274,532,850
|
|
|
|
327,950,056
|
|
|
|
359,818,132
|
|
|
|
405,011,393
|
|
Gross profit
|
|
|
76,538,889
|
|
|
|
81,370,229
|
|
|
|
87,308,645
|
|
|
|
92,894,960
|
|
|
|
99,332,986
|
|
Sales and Marketing
|
|
|
5,918,684
|
|
|
|
7,820,558
|
|
|
|
8,320,060
|
|
|
|
9,287,259
|
|
|
|
10,971,860
|
|
G&A
|
|
|
17,866,222
|
|
|
|
15,684,410
|
|
|
|
17,383,408
|
|
|
|
19,385,942
|
|
|
|
20,923,840
|
|
EBIT
|
|
|
52,753,983
|
|
|
|
57,865,262
|
|
|
|
61,605,177
|
|
|
|
64,221,759
|
|
|
|
67,437,287
|
|
Other non-operating expense
|
|
|
2,000,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Interest Expense
|
|
|
271,725
|
|
|
|
826,793
|
|
|
|
1,489,829
|
|
|
|
1,819,329
|
|
|
|
2,209,350
|
|
Pre-tax income
|
|
|
50,482,257
|
|
|
|
57,038,469
|
|
|
|
60,115,349
|
|
|
|
62,402,430
|
|
|
|
65,227,937
|
|
Taxes
|
|
|
15,348,108
|
|
|
|
15,390,177
|
|
|
|
15,609,290
|
|
|
|
16,544,123
|
|
|
|
17,113,905
|
|
Net Income
|
|
|
35,134,149
|
|
|
|
41,648,292
|
|
|
|
44,506,059
|
|
|
|
45,858,307
|
|
|
|
48,114,032
|
|
Net income growth %
|
|
|
|
|
|
|
18.5
|
%
|
|
|
6.9
|
%
|
|
|
3.0
|
%
|
|
|
4.9
|
%
|
Consolidated Balance Sheet
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
163,469,972
|
|
|
|
207,650,290
|
|
|
|
250,181,166
|
|
|
|
283,705,724
|
|
|
|
323,157,761
|
|
Receivables-Trade
|
|
|
67,256,431
|
|
|
|
79,891,823
|
|
|
|
90,925,235
|
|
|
|
101,463,722
|
|
|
|
109,858,635
|
|
Inventories
|
|
|
19,062,760
|
|
|
|
25,987,202
|
|
|
|
29,601,670
|
|
|
|
34,972,625
|
|
|
|
39,615,651
|
|
Advances to suppliers
|
|
|
12,055,022
|
|
|
|
12,594,133
|
|
|
|
14,138,003
|
|
|
|
15,613,190
|
|
|
|
17,004,616
|
|
Prepaid / Other Current Assets
|
|
|
1,350,153
|
|
|
|
2,164,900
|
|
|
|
2,164,900
|
|
|
|
2,164,900
|
|
|
|
2,164,900
|
|
Current Assets
|
|
|
263,194,338
|
|
|
|
328,288,347
|
|
|
|
387,010,974
|
|
|
|
437,920,161
|
|
|
|
491,801,563
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
|
|
|
160,630,793
|
|
|
|
167,606,385
|
|
|
|
176,489,977
|
|
|
|
185,685,345
|
|
|
|
197,151,967
|
|
Accumulated Depreciation
|
|
|
-48,280,832
|
|
|
|
-60,359,002
|
|
|
|
-72,853,172
|
|
|
|
-84,163,342
|
|
|
|
-97,117,512
|
|
Net of Fixed assets
|
|
|
112,349,961
|
|
|
|
107,247,383
|
|
|
|
103,636,805
|
|
|
|
101,522,003
|
|
|
|
100,034,455
|
|
Intangibles assets, net
|
|
|
12,873,095
|
|
|
|
12,373,095
|
|
|
|
11,873,095
|
|
|
|
11,373,095
|
|
|
|
10,873,095
|
|
Goodwill
|
|
|
1,669,789
|
|
|
|
1,669,789
|
|
|
|
1,669,789
|
|
|
|
1,669,789
|
|
|
|
1,669,789
|
|
Investment
|
|
|
397,812,858
|
|
|
|
397,812,858
|
|
|
|
397,812,858
|
|
|
|
397,812,858
|
|
|
|
397,812,858
|
|
Other Long-Term Assets
|
|
|
9,078,795
|
|
|
|
8,278,795
|
|
|
|
8,278,795
|
|
|
|
8,278,795
|
|
|
|
8,278,795
|
|
Long Term Assets
|
|
|
533,784,498
|
|
|
|
527,381,920
|
|
|
|
523,271,342
|
|
|
|
520,656,540
|
|
|
|
518,668,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
796,978,836
|
|
|
|
855,670,267
|
|
|
|
910,282,316
|
|
|
|
958,576,701
|
|
|
|
1,010,470,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Portion of LTD - loans
|
|
|
1,404,489
|
|
|
|
12,850,933
|
|
|
|
17,910,447
|
|
|
|
17,972,312
|
|
|
|
17,972,312
|
|
Trade Accounts Payable
|
|
|
9,002,873
|
|
|
|
13,434,067
|
|
|
|
17,159,162
|
|
|
|
18,617,221
|
|
|
|
21,318,182
|
|
Accrued Payables (Jinchuan)
|
|
|
11,200,808
|
|
|
|
12,030,254
|
|
|
|
12,805,819
|
|
|
|
13,117,946
|
|
|
|
13,847,342
|
|
Current Liabilities
|
|
|
21,608,170
|
|
|
|
38,315,254
|
|
|
|
47,875,428
|
|
|
|
49,707,479
|
|
|
|
53,137,836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term Loan
|
|
|
7,727,300
|
|
|
|
7,077,300
|
|
|
|
6,427,300
|
|
|
|
5,777,300
|
|
|
|
5,127,300
|
|
Other Noncurrent Liabilities
|
|
|
14,661,011
|
|
|
|
14,661,011
|
|
|
|
14,661,011
|
|
|
|
14,661,011
|
|
|
|
14,661,011
|
|
Long Term Liabilities
|
|
|
22,388,311
|
|
|
|
21,738,311
|
|
|
|
21,088,311
|
|
|
|
20,438,311
|
|
|
|
19,788,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
43,996,481
|
|
|
|
60,053,565
|
|
|
|
68,963,739
|
|
|
|
70,145,790
|
|
|
|
72,926,147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
228,596
|
|
|
|
228,596
|
|
|
|
228,596
|
|
|
|
228,596
|
|
|
|
228,596
|
|
Additional paid in capital
|
|
|
310,058,235
|
|
|
|
311,044,291
|
|
|
|
312,240,106
|
|
|
|
313,494,133
|
|
|
|
314,493,599
|
|
Retained Earnings
|
|
|
335,407,383
|
|
|
|
370,541,532
|
|
|
|
412,189,824
|
|
|
|
456,695,882
|
|
|
|
502,554,190
|
|
Year To Date Profit & Loss
|
|
|
35,134,149
|
|
|
|
41,648,292
|
|
|
|
44,506,059
|
|
|
|
45,858,307
|
|
|
|
48,114,032
|
|
Cumulative currency translation
|
|
|
72,153,993
|
|
|
|
72,153,993
|
|
|
|
72,153,993
|
|
|
|
72,153,993
|
|
|
|
72,153,993
|
|
Total Shareholder Equity
|
|
|
752,982,356
|
|
|
|
795,616,704
|
|
|
|
841,318,578
|
|
|
|
888,430,912
|
|
|
|
937,544,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES/EQUITIES
|
|
|
796,978,837
|
|
|
|
855,670,268
|
|
|
|
910,282,317
|
|
|
|
958,576,702
|
|
|
|
1,010,470,556
|
|
Updated Financial Projections- November 25, 2011
The Company provided updated financial
projections to the Special Committee and its financial advisors on November 25, 2011 (the “November 25, 2011 Projections”).
This forecast reflected the inclusion of the results of operations of the Company’s Jiangsu facility into the consolidated
projections for 2014 and 2015, based on the assuption that the Company would obtain the land use right in connection with this
facility in late 2012 or early 2013, and would commence operations and generate revenues from this facility in 2014.
The full set of November 25, 2011 Projections
is presented below:
Consolidated Income Statement
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
Volume shipped (Pounds)
|
|
|
81,643,859
|
|
|
|
87,035,700
|
|
|
|
95,756,000
|
|
|
|
130,084,400
|
|
|
|
139,861,780
|
|
Volume growth %
|
|
|
|
|
|
|
6.6
|
%
|
|
|
10.0
|
%
|
|
|
35.8
|
%
|
|
|
7.5
|
%
|
Gross Sales
|
|
|
285,549,764
|
|
|
|
358,211,090
|
|
|
|
417,919,751
|
|
|
|
540,841,169
|
|
|
|
599,701,614
|
|
Deductions
|
|
|
-782,272
|
|
|
|
-2,308,010
|
|
|
|
-2,661,050
|
|
|
|
-2,996,987
|
|
|
|
-3,286,220
|
|
Net Sales
|
|
|
284,767,492
|
|
|
|
355,903,080
|
|
|
|
415,258,701
|
|
|
|
537,844,182
|
|
|
|
596,415,394
|
|
Net sales growth %
|
|
|
|
|
|
|
25.0
|
%
|
|
|
16.7
|
%
|
|
|
29.5
|
%
|
|
|
10.9
|
%
|
Material Cost
|
|
|
188,636,780
|
|
|
|
239,181,538
|
|
|
|
286,917,562
|
|
|
|
372,218,999
|
|
|
|
415,932,754
|
|
Material Margin
|
|
|
96,130,712
|
|
|
|
116,721,541
|
|
|
|
128,341,139
|
|
|
|
165,625,183
|
|
|
|
180,482,640
|
|
Mfg L&O
|
|
|
19,591,823
|
|
|
|
35,351,312
|
|
|
|
41,032,494
|
|
|
|
51,447,451
|
|
|
|
58,131,900
|
|
Cost of Sales
|
|
|
208,228,603
|
|
|
|
274,532,850
|
|
|
|
327,950,056
|
|
|
|
423,666,450
|
|
|
|
474,064,654
|
|
Gross profit
|
|
|
76,538,889
|
|
|
|
81,370,229
|
|
|
|
87,308,645
|
|
|
|
114,177,732
|
|
|
|
122,350,740
|
|
Sales and Marketing
|
|
|
5,918,684
|
|
|
|
7,920,558
|
|
|
|
8,420,060
|
|
|
|
11,075,012
|
|
|
|
13,360,951
|
|
G&A
|
|
|
17,866,222
|
|
|
|
15,884,410
|
|
|
|
17,683,408
|
|
|
|
22,706,054
|
|
|
|
24,514,609
|
|
EBIT
|
|
|
52,753,983
|
|
|
|
57,565,262
|
|
|
|
61,205,177
|
|
|
|
80,396,666
|
|
|
|
84,475,180
|
|
Other non-operating expense
|
|
|
2,000,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Interest Expense
|
|
|
271,725
|
|
|
|
826,793
|
|
|
|
1,489,829
|
|
|
|
1,819,329
|
|
|
|
2,320,350
|
|
Pre-tax income
|
|
|
50,482,257
|
|
|
|
56,738,469
|
|
|
|
59,715,349
|
|
|
|
78,577,337
|
|
|
|
82,154,830
|
|
Taxes
|
|
|
15,348,108
|
|
|
|
15,315,177
|
|
|
|
15,509,290
|
|
|
|
20,587,849
|
|
|
|
21,487,278
|
|
Net Income
|
|
|
35,134,149
|
|
|
|
41,423,292
|
|
|
|
44,206,059
|
|
|
|
57,989,488
|
|
|
|
60,667,551
|
|
Net income growth %
|
|
|
|
|
|
|
17.9
|
%
|
|
|
6.7
|
%
|
|
|
31.2
|
%
|
|
|
4.6
|
%
|
Consolidated Balance Sheet
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
163,469,972
|
|
|
|
147,425,290
|
|
|
|
127,428,732
|
|
|
|
138,105,667
|
|
|
|
194,663,116
|
|
Receivables-Trade
|
|
|
67,256,431
|
|
|
|
79,891,823
|
|
|
|
93,066,342
|
|
|
|
129,840,752
|
|
|
|
140,548,973
|
|
Inventories
|
|
|
19,062,760
|
|
|
|
25,987,202
|
|
|
|
31,687,998
|
|
|
|
45,614,011
|
|
|
|
51,124,528
|
|
Advances to suppliers
|
|
|
12,055,022
|
|
|
|
12,594,133
|
|
|
|
14,138,003
|
|
|
|
26,254,576
|
|
|
|
28,513,493
|
|
Prepaid / Other Current Assets
|
|
|
1,350,153
|
|
|
|
2,164,900
|
|
|
|
2,164,900
|
|
|
|
2,164,900
|
|
|
|
2,164,900
|
|
Current Assets
|
|
|
263,194,338
|
|
|
|
268,063,347
|
|
|
|
268,485,975
|
|
|
|
341,979,906
|
|
|
|
417,015,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
|
|
|
160,630,793
|
|
|
|
227,606,385
|
|
|
|
296,489,977
|
|
|
|
313,390,345
|
|
|
|
324,856,967
|
|
Accumulated Depreciation
|
|
|
-48,280,832
|
|
|
|
-60,359,002
|
|
|
|
-74,853,172
|
|
|
|
-95,843,342
|
|
|
|
-117,253,112
|
|
Net of Fixed assets
|
|
|
112,349,961
|
|
|
|
167,247,383
|
|
|
|
221,636,805
|
|
|
|
217,547,003
|
|
|
|
207,603,855
|
|
Intangibles assets, net
|
|
|
12,873,095
|
|
|
|
12,373,095
|
|
|
|
11,873,095
|
|
|
|
11,373,095
|
|
|
|
10,873,095
|
|
Goodwill
|
|
|
1,669,789
|
|
|
|
1,669,789
|
|
|
|
1,669,789
|
|
|
|
1,669,789
|
|
|
|
1,669,789
|
|
Investment
|
|
|
397,812,858
|
|
|
|
458,812,858
|
|
|
|
518,812,858
|
|
|
|
552,812,858
|
|
|
|
552,812,858
|
|
Other Long-Term Assets
|
|
|
9,078,795
|
|
|
|
8,278,795
|
|
|
|
8,278,795
|
|
|
|
8,278,795
|
|
|
|
8,278,795
|
|
Long Term Assets
|
|
|
533,784,498
|
|
|
|
648,381,920
|
|
|
|
762,271,342
|
|
|
|
791,681,540
|
|
|
|
781,238,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
796,978,836
|
|
|
|
916,445,267
|
|
|
|
1,030,757,317
|
|
|
|
1,133,661,446
|
|
|
|
1,198,253,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Portion of LTD - loans
|
|
|
1,404,489
|
|
|
|
12,850,933
|
|
|
|
17,910,447
|
|
|
|
17,972,312
|
|
|
|
17,972,312
|
|
Trade Accounts Payable
|
|
|
9,002,873
|
|
|
|
13,434,067
|
|
|
|
17,159,162
|
|
|
|
20,390,785
|
|
|
|
23,236,328
|
|
Accrued Payables (Jinchuan)
|
|
|
11,200,808
|
|
|
|
12,030,254
|
|
|
|
12,805,819
|
|
|
|
16,117,946
|
|
|
|
16,847,342
|
|
Current Liabilities
|
|
|
21,608,170
|
|
|
|
38,315,254
|
|
|
|
47,875,428
|
|
|
|
54,481,044
|
|
|
|
58,055,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term Loan
|
|
|
7,727,300
|
|
|
|
7,077,300
|
|
|
|
6,427,300
|
|
|
|
9,482,300
|
|
|
|
8,832,300
|
|
Other Noncurrent Liabilities
|
|
|
14,661,011
|
|
|
|
14,661,011
|
|
|
|
14,661,011
|
|
|
|
14,661,011
|
|
|
|
14,661,011
|
|
Long Term Liabilities
|
|
|
22,388,311
|
|
|
|
21,738,311
|
|
|
|
21,088,311
|
|
|
|
24,143,311
|
|
|
|
23,493,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
43,996,481
|
|
|
|
60,053,565
|
|
|
|
68,963,739
|
|
|
|
78,624,355
|
|
|
|
81,549,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
228,596
|
|
|
|
228,596
|
|
|
|
228,596
|
|
|
|
228,596
|
|
|
|
228,596
|
|
Additional paid in capital
|
|
|
310,058,235
|
|
|
|
372,044,291
|
|
|
|
433,240,106
|
|
|
|
468,494,133
|
|
|
|
469,493,599
|
|
Retained Earnings
|
|
|
335,407,383
|
|
|
|
370,541,532
|
|
|
|
411,964,824
|
|
|
|
456,170,882
|
|
|
|
514,160,370
|
|
Year To Date Profit & Loss
|
|
|
35,134,149
|
|
|
|
41,423,292
|
|
|
|
44,206,059
|
|
|
|
57,989,488
|
|
|
|
60,667,551
|
|
Cumulative currency translation
|
|
|
72,153,993
|
|
|
|
72,153,993
|
|
|
|
72,153,993
|
|
|
|
72,153,993
|
|
|
|
72,153,993
|
|
Total Shareholder Equity
|
|
|
752,982,356
|
|
|
|
856,391,704
|
|
|
|
961,793,578
|
|
|
|
1,055,037,092
|
|
|
|
1,116,704,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES/EQUITIES
|
|
|
796,978,837
|
|
|
|
916,445,268
|
|
|
|
1,030,757,317
|
|
|
|
1,133,661,446
|
|
|
|
1,198,253,402
|
|
Updated Financial Projections- June 11, 2012
On June 11, 2012, the Company provided
updated financial projections to the Special Committee and its financial advisors (the “June 2012 Projections”). The
June 2012 Projections included actual results from January to May 2012 for the 2012 projections; however the remaining projections
for 2013 through 2015 remained unchanged from the November 25 Financial Projections.
The full set of June 2012 Projections is
presented below:
Consolidated Income Statement
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
Volume shipped (Pounds)
|
|
|
82,933,700
|
|
|
|
95,756,000
|
|
|
|
130,084,400
|
|
|
|
139,861,780
|
|
Volume growth %
|
|
|
1.6
|
%
|
|
|
15.5
|
%
|
|
|
35.8
|
%
|
|
|
7.5
|
%
|
Gross Sales
|
|
|
345,084,690
|
|
|
|
417,919,751
|
|
|
|
540,841,169
|
|
|
|
599,701,614
|
|
Deductions
|
|
|
-2,308,010
|
|
|
|
-2,661,050
|
|
|
|
-2,996,987
|
|
|
|
-3,286,220
|
|
Net Sales
|
|
|
342,776,680
|
|
|
|
415,258,701
|
|
|
|
537,844,182
|
|
|
|
596,415,394
|
|
Net sales growth %
|
|
|
20.4
|
%
|
|
|
21.1
|
%
|
|
|
29.5
|
%
|
|
|
10.9
|
%
|
Material Cost
|
|
|
232,695,441
|
|
|
|
286,917,562
|
|
|
|
372,218,999
|
|
|
|
415,932,754
|
|
Material Margin
|
|
|
110,081,238
|
|
|
|
128,341,139
|
|
|
|
165,625,183
|
|
|
|
180,482,640
|
|
Mfg L&O
|
|
|
35,351,312
|
|
|
|
41,032,494
|
|
|
|
51,447,451
|
|
|
|
58,131,900
|
|
Cost of Sales
|
|
|
268,046,753
|
|
|
|
327,950,056
|
|
|
|
423,666,450
|
|
|
|
474,064,654
|
|
Gross profit
|
|
|
74,729,926
|
|
|
|
87,308,645
|
|
|
|
114,177,732
|
|
|
|
122,350,740
|
|
Sales and Marketing
|
|
|
7,720,558
|
|
|
|
8,420,060
|
|
|
|
11,075,012
|
|
|
|
13,360,951
|
|
G&A
|
|
|
19,705,292
|
|
|
|
17,683,408
|
|
|
|
22,706,054
|
|
|
|
24,514,609
|
|
EBIT
|
|
|
47,304,076
|
|
|
|
61,205,177
|
|
|
|
80,396,666
|
|
|
|
84,475,180
|
|
Interest Expense
|
|
|
826,793
|
|
|
|
1,489,829
|
|
|
|
1,819,329
|
|
|
|
2,320,350
|
|
Pre-tax income
|
|
|
46,477,283
|
|
|
|
59,715,349
|
|
|
|
78,577,337
|
|
|
|
82,154,830
|
|
Taxes
|
|
|
13,755,101
|
|
|
|
15,509,290
|
|
|
|
20,587,849
|
|
|
|
21,487,278
|
|
Net Income
|
|
|
32,722,182
|
|
|
|
44,206,059
|
|
|
|
57,989,488
|
|
|
|
60,667,551
|
|
Net income growth %
|
|
|
-6.9
|
%
|
|
|
35.1
|
%
|
|
|
31.2
|
%
|
|
|
4.6
|
%
|
Consolidated Balance Sheet
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
138,724,180
|
|
|
|
118,727,623
|
|
|
|
129,404,558
|
|
|
|
185,962,007
|
|
Receivables-Trade
|
|
|
79,891,823
|
|
|
|
93,066,342
|
|
|
|
129,840,752
|
|
|
|
140,548,973
|
|
Inventories
|
|
|
25,987,202
|
|
|
|
31,687,998
|
|
|
|
45,614,011
|
|
|
|
51,124,528
|
|
Advances to suppliers
|
|
|
12,594,133
|
|
|
|
14,138,003
|
|
|
|
26,254,576
|
|
|
|
28,513,493
|
|
Prepaid / Other Current Assets
|
|
|
2,164,900
|
|
|
|
2,164,900
|
|
|
|
2,164,900
|
|
|
|
2,164,900
|
|
Current Assets
|
|
|
259,362,238
|
|
|
|
259,784,866
|
|
|
|
333,278,797
|
|
|
|
408,313,901
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
|
|
|
227,606,385
|
|
|
|
296,489,977
|
|
|
|
313,390,345
|
|
|
|
324,856,967
|
|
Accumulated Depreciation
|
|
|
-60,359,002
|
|
|
|
-74,853,172
|
|
|
|
-95,843,342
|
|
|
|
-117,253,112
|
|
Net of Fixed assets
|
|
|
167,247,383
|
|
|
|
221,636,805
|
|
|
|
217,547,003
|
|
|
|
207,603,855
|
|
new investment, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangibles assets, net
|
|
|
12,373,095
|
|
|
|
11,873,095
|
|
|
|
11,373,095
|
|
|
|
10,873,095
|
|
Goodwill
|
|
|
1,669,789
|
|
|
|
1,669,789
|
|
|
|
1,669,789
|
|
|
|
1,669,789
|
|
Investment
|
|
|
458,812,858
|
|
|
|
518,812,858
|
|
|
|
552,812,858
|
|
|
|
552,812,858
|
|
Other Long-Term Assets
|
|
|
8,278,795
|
|
|
|
8,278,795
|
|
|
|
8,278,795
|
|
|
|
8,278,795
|
|
Long Term Assets
|
|
|
648,381,920
|
|
|
|
762,271,342
|
|
|
|
791,681,540
|
|
|
|
781,238,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
907,744,158
|
|
|
|
1,022,056,208
|
|
|
|
1,124,960,337
|
|
|
|
1,189,552,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Portion of LTD - loans
|
|
|
12,850,933
|
|
|
|
17,910,447
|
|
|
|
17,972,312
|
|
|
|
17,972,312
|
|
Trade Accounts Payable
|
|
|
13,434,067
|
|
|
|
17,159,162
|
|
|
|
20,390,785
|
|
|
|
23,236,328
|
|
Accrued Payables (Jinchuan)
|
|
|
12,030,254
|
|
|
|
12,805,819
|
|
|
|
16,117,946
|
|
|
|
16,847,342
|
|
Current Liabilities
|
|
|
38,315,254
|
|
|
|
47,875,428
|
|
|
|
54,481,044
|
|
|
|
58,055,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term Loan
|
|
|
7,077,300
|
|
|
|
6,427,300
|
|
|
|
9,482,300
|
|
|
|
8,832,300
|
|
Other Noncurrent Liabilities
|
|
|
14,661,011
|
|
|
|
14,661,011
|
|
|
|
14,661,011
|
|
|
|
14,661,011
|
|
Long Term Liabilities
|
|
|
21,738,311
|
|
|
|
21,088,311
|
|
|
|
24,143,311
|
|
|
|
23,493,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
60,053,565
|
|
|
|
68,963,739
|
|
|
|
78,624,355
|
|
|
|
81,549,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
228,596
|
|
|
|
228,596
|
|
|
|
228,596
|
|
|
|
228,596
|
|
Additional paid in capital
|
|
|
372,044,291
|
|
|
|
433,240,106
|
|
|
|
468,494,133
|
|
|
|
469,493,599
|
|
Retained Earnings
|
|
|
370,541,532
|
|
|
|
403,263,714
|
|
|
|
447,469,773
|
|
|
|
505,459,260
|
|
Year To Date Profit & Loss
|
|
|
32,722,182
|
|
|
|
44,206,059
|
|
|
|
57,989,488
|
|
|
|
60,667,551
|
|
Cumulative currency translation
|
|
|
72,153,993
|
|
|
|
72,153,993
|
|
|
|
72,153,993
|
|
|
|
72,153,993
|
|
Total Shareholder Equity
|
|
|
847,690,594
|
|
|
|
953,092,468
|
|
|
|
1,046,335,982
|
|
|
|
1,108,003,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES/EQUITIES
|
|
|
907,744,159
|
|
|
|
1,022,056,207
|
|
|
|
1,124,960,337
|
|
|
|
1,189,552,293
|
|
Purposes and Reasons of the Buyer
Group for the Merger
Under SEC rules governing
“going-private” transactions, each member of the buyer group is deemed to be an affiliate of the Company and required
to express its reasons for the merger to the unaffiliated stockholders. Each member of the buyer group is making the statements
included in this section solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange
Act. For the buyer group, the purpose of the merger is to enable Parent to acquire control of the Company, in a transaction in
which the unaffiliated stockholders will receive $9.50 per share of Company common stock. After shares of Company common stock
cease to be publicly traded, Parent will bear 100% of the rewards and risks of ownership of the Company. In addition, the merger
will allow members of the buyer group to maintain their investments in the Company through their respective equity investments
in Holdco, as described in this proxy statement under the section titled “Special Factors—Financing of the Merger—Rollover
Financing,” and at the same time enable Mr. Fu to maintain a leadership role with the surviving company.
The buyer group believes
that, after the Company becomes a privately-held entity, the Company’s management will have greater flexibility to focus
on improving the Company’s long-term profitability without the constraints caused by the public equity market’s valuation
of the Company and emphasis on short-term period-to-period performance. As a privately-held entity, the Company will have greater
flexibility to make decisions that might negatively affect short-term results but that could increase the Company’s value
over the long term. In contrast, as a publicly traded entity, the Company faces pressure from public stockholders and investment
analysts to make decisions that might produce improved short-term results, but which are not necessarily beneficial in the long
term.
As a privately-held
entity, the Company will be relieved of many of the other expenses, burdens, and constraints imposed on companies that are subject
to public reporting requirements under the federal securities laws of the United States, including the Exchange Act and the Sarbanes-Oxley
Act of 2002. The need for the management of the Company to be responsive to the concerns of the unaffiliated stockholders and
to engage in dialogue with the unaffiliated stockholders can also at times distract management’s time and attention from
the effective operation and improvement of the business.
The buyer group decided
to undertake the going-private transaction at this time because it wants to take advantage of the benefits to the Company of being
a privately-held company as described above and because Holdco and Parent were able to obtain debt and equity financing commitments
from CDB, Mr. Fu and affiliates of Abax in each case on terms satisfactory to the buyer group. The buyer group did not consider
any other form of transaction because the buyer group believed the merger was the most direct and effective way to enable the
buyer group to acquire 100% ownership and control of the Company.
Position of the Buyer Group Regarding
the Fairness of the Merger
Under SEC rules governing
“going-private” transactions, each member of the buyer group is deemed to be an affiliate of the Company and required
to express its beliefs as to the fairness of the proposed merger to the unaffiliated stockholders. The buyer group is making the
statements included in this section solely for the purposes of complying with the requirements of Rule 13e-3 and related rules
under the Exchange Act. The views of the buyer group as to the fairness of the proposed merger are not intended and should not
be construed as a recommendation to any stockholder of the Company as to how to vote on the proposal to approve the merger agreement.
The buyer group has interests in the merger that are different from those of the other stockholders of the Company by virtue of
their continuing interests in the surviving company after the consummation of the merger. These interests are described under
the section titled “Special Factors—Interests of Certain Persons in the Merger”.
The buyer group believes
the interests of the unaffiliated stockholders were represented by the Special Committee, which negotiated the terms and conditions
of the merger agreement with the assistance of its independent legal and financial advisors. The buyer group attempted to negotiate
a transaction that would be most favorable to them, and not to the unaffiliated stockholders and, accordingly, did not negotiate
the merger agreement with a goal of obtaining terms that were substantively and procedurally fair to such unaffiliated stockholders.
The buyer group did not participate in the deliberations of the Special Committee regarding, and did not receive any advice from
the Special Committee’s independent legal counsel or financial advisors as to, the fairness of the proposed merger to the
unaffiliated stockholders. The buyer group did not perform, or engage a financial advisor to perform, any independent valuation
or other analysis for the buyer group to assist them in assessing the substantive and procedural fairness of the proposed merger
to the unaffiliated stockholders.
Based on their knowledge
and analysis of available information regarding the Company, as well as discussions with the Company’s senior management
regarding the Company and its business and the factors considered by, and findings of, the Special Committee and the Company’s
board of directors discussed in the section titled “Special Factors—Recommendation of the Special Committee and Board
of Directors and Their Reasons for the Merger” of this proxy statement (which considerations and findings are adopted by
the buyer group solely for the purposes of making the statements in this section), the buyer group believes the proposed merger
is substantively fair to the unaffiliated stockholders based upon the following factors:
|
·
|
the
current
and historical
market prices
of the Company
common stock,
including
the fact
that the
per share
merger consideration
to be paid
to the unaffiliated
stockholders
represents
a 37.3%
premium
over the
90-trading
day volume-weighted
average
price as
of June
22, 2012;
|
|
·
|
the
Company
common stock
traded as
high as
$8.54 per
share and
as low as
$4.59 per
share during
the 52-week
period prior
to the announcement
of the execution
of the merger
agreement;
|
|
·
|
the
merger consideration
of $9.50
per share
is payable
entirely
in cash,
thus allowing
the unaffiliated
stockholders
to realize
liquidity
and a determined
value for
their investment;
|
|
·
|
the
members
of the Special
Committee
are not
officers
or employees
of the Company
and do not
have any
interests
in the proposed
merger different
from, or
in addition
to, those
of the unaffiliated
stockholders,
other than
the members’
receipt
of board
and Special
Committee
compensation
(which are
not contingent
upon the
consummation
of the proposed
merger or
the Special
Committee’s
or the board’s
recommendation
of the proposed
merger)
and their
indemnification
and liability
insurance
rights under
the merger
agreement;
|
|
·
|
the
Company’s
board of
directors,
acting upon
the unanimous
recommendation
of the Special
Committee,
determined
that the
merger agreement
and the
transactions
contemplated
by the merger
agreement,
including
the proposed
merger,
are fair
to the Company’s
unaffiliated
stockholders;
|
|
·
|
the
proposed
merger is
not conditioned
on any financing
being obtained
by Parent
or Merger
Sub, thus
increasing
the likelihood
that the
proposed
merger will
be consummated
and the
merger consideration
will be
paid to
the unaffiliated
stockholders;
|
|
·
|
Parent
has entered
into a facility
agreement
with CDB,
pursuant
to which
CDB has
agreed to
provide
debt financing,
on the terms
and conditions
set forth
in the facility
agreement,
in an aggregate
amount up
to $185
million,
to fund
the merger
and pay
certain
fees and
expenses
contemplated
by the facility
agreement
and the
merger agreement;
|
|
·
|
affiliates
of Abax
have entered
into an
equity commitment
letter pursuant
to which
they will
purchase
or cause
the purchase
of equity
interests
of Holdco,
on terms
and conditions
set forth
in the equity
commitment
letter,
for an aggregate
amount of
$30 million,
which will
be used
to fund
the merger
and pay
certain
fees and
expenses
contemplated
by the merger
agreement;
|
|
·
|
Mr.
Fu has entered
into an
equity commitment
letter pursuant
to which
he will
purchase
or cause
the purchase
of equity
interests
of Holdco,
on terms
and conditions
set forth
in the equity
commitment
letter,
for an aggregate
amount of
$45 million,
which will
be used
to fund
the merger
and pay
certain
fees and
expenses
contemplated
by the merger
agreement;
|
|
·
|
Mr.
Fu has agreed
to guarantee
82.4%, Abax
Lotus Ltd.
has agreed
to guarantee
1.1%, and
AGC Asia
6 Ltd. has
agreed to
guarantee
16.5% of
the obligations
of Parent
under the
merger agreement
to pay,
under certain
circumstances,
the Parent
termination
fee to the
Company
and reimburse
certain
expenses
of the Company;
and
|
|
·
|
the
proposed
merger will
provide
liquidity
for the
unaffiliated
stockholders
without
incurring
brokerage
and other
costs typically
associated
with market
sales.
|
The buyer group did
not consider the Company’s net book value, which is defined as total assets minus total liabilities, as a factor. The buyer
group believes that net book value, which is an accounting concept based on historical costs, is not a material indicator of the
value of the Company as a going concern, because it does not take into account the future prospects of the Company, market conditions,
trends in the industry in which the Company conducts its business, or the business risks inherent in competing with other companies
in the same industry.
The buyer group did
not consider the Company’s liquidation value to be a relevant valuation method because they consider the Company to be a
viable, going concern, and because the Company will continue to operate its business following the merger.
The buyer group did
not establish, and did not consider, a going concern value for the Company common stock as a public company to determine the fairness
of the proposed merger consideration to the unaffiliated stockholders. However, to the extent the pre-merger going concern value
was reflected in the pre-announcement price of the Company common stock, the merger consideration of $9.50 per share represented
a premium to the per share going concern value of the Company.
The buyer group is
not aware of, and thus did not consider in its fairness determination, any offers or proposals made by any unaffiliated third
parties with respect to a merger or consolidation of the Company with or into another company, a sale of all or a substantial
part of the Company’s assets, or the purchase of the Company’s voting securities that would enable the holder to exercise
control over the Company.
The buyer group did
not receive any independent reports, opinions or appraisals from any outside party related to the proposed merger, and thus did
not consider any such reports, opinions or appraisals in determining the substantive and procedural fairness of the merger to
the unaffiliated stockholders.
The buyer group believes
the proposed merger is procedurally fair to the unaffiliated stockholders based upon the following factors:
|
·
|
the
Special
Committee,
consisting
entirely
of directors
who are
not officers
or employees
of the Company
and who
are not
affiliated
with the
buyer group,
was established
and given
absolute
authority
to, among
other things,
review,
evaluate,
and negotiate
the terms
of the proposed
merger and
to decide
not to engage
in the proposed
merger;
|
|
·
|
the
members
of the Special
Committee
do not have
any interests
in the proposed
merger different
from, or
in addition
to, those
of the unaffiliated
stockholders,
other than
the members’
receipt
of board
and Special
Committee
compensation
(which are
not contingent
upon the
consummation
of the proposed
merger or
Special
Committee’s
or board’s
recommendation
of the proposed
merger)
and their
indemnification
and liability
insurance
rights under
the merger
agreement;
|
|
·
|
while
Mr. Fu is
Chairman
of the board
of directors
and Co-Chief
Executive
Officer
of the Company,
because
of his participation
in the transaction
as described
under the
section
captioned
“Special
Factors—Interests
of Certain
Persons
in the Merger,”
he did not
serve on
the Special
Committee,
nor did
any member
of the buyer
group participate
or have
any influence
over the
deliberative
process
of, or the
conclusions
reached
by, the
Special
Committee
or the negotiating
positions
of the Special
Committee;
|
|
·
|
the
Special
Committee
retained
and was
advised
by its independent
legal and
financial
advisors
who are
experienced
in advising
committees
such as
the Special
Committee
in similar
transactions;
|
|
·
|
the
Special
Committee
and the
Company’s
board of
directors
had no obligation
to recommend
the approval
of the merger
agreement
and the
transactions
contemplated
thereby,
including
the merger,
or any other
transaction;
|
|
·
|
the
merger was
unanimously
approved
by the Special
Committee;
|
|
·
|
the
merger consideration
and other
terms and
conditions
of the merger
agreement
were the
result of
extensive
negotiations
over an
extended
period of
time between
Mr. Fu,
Abax, Holdco,
Parent,
Merger Sub,
and their
legal and
financial
advisors,
on the one
hand, and
the Special
Committee
and its
legal and
financial
advisors,
on the other
hand;
|
|
·
|
approval
of the merger
agreement
is subject
to the approval
by holders
of at least
60% of the
combined
voting power
of the outstanding
shares of
Company
common stock
(not beneficially
owned by
the buyer
group members
or their
affiliates),
giving such
unaffiliated
stockholders
a meaningful
opportunity
to consider
and vote
upon the
approval
of the merger
agreement;
|
|
·
|
the
Special
Committee
received
from BofA
Merrill
Lynch, its
independent
financial
advisor
an opinion,
dated June
26, 2012,
as to the
fairness,
from a financial
point of
view, to
the unaffiliated
stockholders
of the per
share merger
consideration
of $9.50
to be received
by Company
unaffiliated
stockholders
in the proposed
merger,
based upon
and subject
to the assumptions
made, procedures
followed,
matters
considered,
and qualifications
and limitations
on the review
undertaken
in preparing
such opinion;
|
|
·
|
under
the terms
of the merger
agreement,
in certain
circumstances
prior to
obtaining
the requisite
stockholder
approvals
of the merger,
the Company
is permitted
to provide
information
to and participate
in discussions
or negotiations
with persons
making takeover
proposals,
and the
board of
directors
of the Company
is permitted
to withdraw
or modify
its recommendation
of the merger
agreement;
and
|
|
·
|
the
ability
of the Company
to terminate
the merger
agreement
(in accordance
with the
terms of
the merger
agreement)
upon acceptance
of a superior
proposal.
|
The foregoing discussion
of the information and factors considered and given weight by the buyer group in connection with their evaluation of the substantive
and procedural fairness to the unaffiliated stockholders of the merger agreement and the transactions contemplated by the merger
agreement, including the proposed merger, is not intended to be exhaustive, but is believed by the buyer group to include all
material factors considered by them. The buyer group did not find it practicable to and did not quantify or otherwise attach relative
weights to the foregoing factors in reaching their position as to the substantive and procedural fairness of the merger agreement
and the proposed merger to the unaffiliated stockholders. Rather, the buyer group made the fairness determinations after considering
all of the foregoing as a whole.
The buyer group believes
these factors provide a reasonable basis for its belief that the proposed merger is both substantively and procedurally fair to
the unaffiliated stockholders. This belief, however, is not intended to be and should not be construed as a recommendation by
the buyer group to any stockholder of the Company as to how such stockholder should vote with respect to the approval of the merger
agreement.
Nature of Business Conducted
We believe we are
one of the world’s largest producers, based on manufacturing capacity, and a leading innovator of bimetallic wire products,
principally copper-clad aluminum, or CCA, and copper-clad steel, or CCS, products. CCA and CCS conductors are generally used as
a substitute for solid copper conductors in applications for which either cost savings or specific electrical or physical attributes
are necessary. Relative to solid copper wire, our customized, engineered bimetallic wire products significantly reduce the amount
of copper metal required to manufacture a conductor, and, because copper is expensive relative to aluminum and steel, our products
significantly reduce conductor cost per unit length. Our bimetallic conductors combine the conductivity of copper with the light
weight of aluminum or the ruggedness of steel to offer favorable end-use and cost characteristics, such as weight savings, increased
flexibility of end-products, extended life, increased tensile strength, lower corrosion and oxidation and decreased theft risk,
while delivering superior signal transmission capabilities in many applications. These benefits provide for greater ease of handling
and installation, which reduce shipping and labor costs and limit waste, ultimately saving our customers money beyond our price
advantage over solid copper products. We provide additional value through our innovative design and engineering and proprietary
manufacturing processes, ultimately resulting in our superior product quality.
We sell bimetallic
wire products to a diverse base of customers worldwide that operate primarily in the telecommunications, electrical utility, and
transportation industries. Our products are sold to 429 customers in 40 countries and are marketed under the established “Copperweld
®
”,
“Fushi
TM
”, “4-Thought
TM
” and “Hide
TM
” brand names.
We believe our customers view the Copperweld
®
brand as the premium choice for bimetallic products offered internationally.
Our products become components in a wide variety of end-use products and are sold directly, or through either distributors or
sales agents, to cable manufacturers. The PRC represents the largest market for our products, accounting for approximately 80%
of our revenues for the year ended December 31, 2011, with North America, Europe and the rest of world representing 14%, 3%, and
3% of our revenues in this period, respectively. We continue our efforts to diversify our business to further reduce customer
concentration.
We operate six manufacturing
facilities, of which two are located in Dalian, Liaoning, in the PRC, one in Yixing, Jiangsu, in the PRC, one in Fayetteville,
Tennessee, in the U.S., one in Telford, England, in the U.K., and one in Liege, Belgium, in Europe. In 2010 we acquired Dalian
Jinchuan Power Cable Co. (“Jinchuan”), a manufacturer of low and medium voltage power cable in Northeastern China,
and Shanghai Hongtai Industrial Co., Ltd. (“Hongtai”), a bimetallic manufacturer of CCA and copper-clad aluminum magnesium
(“CCAM”) in Southeast PRC. Our capacity and these acquisitions have allowed us to geographically optimize our capabilities,
share technology and manufacturing best practices among our facilities, expand our product base to include higher value-added
and higher margin products, and improve profitability and delivery by eliminating third party processors.
Plans for the Company after the Merger
After the effective
time of the merger, Parent anticipates that the Company will continue its current operations, except that it will (i) cease to
be a publicly traded company and will instead be a wholly owned subsidiary of Parent and (ii) have substantially more debt than
it currently has. There are no current plans to repay the debt taken out to finance the merger, other than in accordance with
the terms of the facility agreement. After the effective time of the merger, the directors of Merger Sub immediately prior to
the effective time of the merger will become the directors of the Company, and the officers of the Company immediately prior to
the effective time of the merger will remain the officers of the Company, in each case until the earlier of their resignation
or removal or until their respective successors are duly elected or appointed and qualified, as the case may be.
Following consummation
of the merger, Parent and Holdco will directly or indirectly own 100% of our outstanding common stock and will have a corresponding
interest in our net book value and net earnings. The table below sets forth the interest in our net book value and net earnings
of members of the buyer group other than Parent and Holdco.
All dollar figures
in the chart immediately below are in thousands and rounded to the nearest dollar amount.
Ownership of the Company
Prior to the Merger
|
|
Fully Diluted Ownership of the Company
After the Merger
|
|
|
Percentage
Ownership
|
|
Net Earnings for
fiscal year ended
December 31,
2011
|
|
|
Net Book Value for
fiscal year ended
December 31, 2011
|
|
|
Percentage
Ownership
|
|
Net Earnings for
fiscal year ended
December 31,
2011
|
|
|
Net Book Value for
fiscal year ended
December 31, 2011
|
|
Mr. Li Fu
|
|
4.8%
|
|
$
|
1,538
|
|
|
$
|
19,016
|
|
|
34.2%
|
|
$
|
10,959
|
|
|
$
|
135,489
|
|
Wise Sun
|
|
20.7%
|
|
$
|
6,633
|
|
|
$
|
82,007
|
|
|
41.4%
|
|
$
|
13,267
|
|
|
$
|
164,013
|
|
Ms. Xin Liu
|
|
2.9%
|
|
$
|
929
|
|
|
$
|
11,489
|
|
|
5.8%
|
|
$
|
1,859
|
|
|
$
|
22,978
|
|
Ms. Yuyan Zhang
|
|
0.5%
|
|
$
|
160
|
|
|
$
|
1,981
|
|
|
1.0%
|
|
$
|
320
|
|
|
$
|
3,962
|
|
Abax Lotus Ltd.
|
|
0.5%
|
|
$
|
160
|
|
|
$
|
1,981
|
|
|
1.1%
|
|
$
|
353
|
|
|
$
|
4,358
|
|
AGC Asia 6 Ltd.
|
|
0%
|
|
$
|
0
|
|
|
$
|
0
|
|
|
16.5%
|
|
$
|
5,287
|
|
|
$
|
65,367
|
|
Total
|
|
29.4%
|
|
|
9,420
|
|
|
|
116,474
|
|
|
100%
|
|
|
32,045
|
|
|
|
396,167
|
|
Financing of the Merger
The buyer group estimates
that the total amount of funds necessary to consummate the merger and related transactions, including the payment of customary
fees and expenses in connection with the merger, will be approximately $260 million. Parent and Merger Sub expect this amount
to be provided through a combination of debt and equity financing. Neither Parent nor Merger Sub has entered into any alternative
financing arrangements or alternative financing plans.
Debt Financing
On June 27, 2012,
Parent entered into the facility agreement with CDB pursuant and subject to which CDB has agreed to provide the CDB Loan in an
aggregate amount of up to $185 million, to fund the merger and pay certain fees and expenses contemplated by the facility agreement
and the merger agreement.
Conditions to Financing
.
The funding of the CDB Loan is subject to the satisfaction or waiver of the following conditions:
|
·
|
receipt
by CDB of
the documentary
conditions
precedent
required under
Schedule 1
of the facility
agreement;
|
|
·
|
no major
default (as
defined in
the facility
agreement)
that is continuing
or would result
from the proposed
borrowing;
|
|
·
|
all of
the major
representations
(as defined
in the facility
agreement)
being true;
|
|
·
|
receipt
by CDB of
a certified
copy of the
register of
members of
Parent evidencing
that Holdco
is the beneficial
owner of the
entire equity
interest of
Parent and
that the shares
of Parent
issued to
Holdco have
been validly
issued and
fully paid
up;
|
|
·
|
receipt
by CDB of
(a) the relevant
bank receipt
evidencing
the irrevocable
wire transfers
by Mr. Fu
and affiliates
of Abax to
a bank account
under the
name of Parent
or the paying
agent under
the merger
agreement
and evidence
of any other
funds acceptable
to CDB, which
together evidencing
an aggregate
amount of
payments no
less than
the difference
between the
Total Commitment
(as defined
in the facility
agreement)
and the aggregate
amount of
the Acquisition
Consideration
(as defined
in the facility
agreement)
and the total
Transaction
Costs (as
defined in
the facility
agreement),
(b) a copy
of a resolution
of the board
of directors
of Holdco
distributing
the aggregate
amount contributed
to Holdco
by Mr. Fu
and affiliates
of Abax as
a capital
contribution
to Parent,
and (c) a
copy of Parent’s
instructions
to Holdco,
signed by
an authorized
signatory
of Parent,
directing
Holdco to
transfer such
amount contributed
to Mr. Fu
and affiliates
of Abax to
the paying
agent; and
|
|
·
|
receipt
by CDB of
a letter from
Parent, signed
by an authorized
signatory
of Parent,
confirming
that (a) all
of the conditions
precedent
to the merger
have been
satisfied
or waived
in accordance
with the terms
of the merger
agreement,
and the articles
of merger
have been
filed with
the Secretary
of State of
the State
of Nevada
(and attaching
the stamped
articles of
merger), (b)
the merger
agreement
remains in
full force
and effect
and has not
been rescinded
or repudiated
by any party
to it, and
(c) the effective
time of the
merger has
occurred.
|
Interest Rate
.
The interest rate of the CDB Loan is LIBOR plus 5.5% per annum at all times from and including date of utilization to and including
the date of a listing (as defined in the facility agreement) and LIBOR plus 4.5% per annum at all times thereafter.
Prepayments and
Amortization
. Parent may, if it gives CDB not less than ten business days’ prior notice, prepay the whole or any part
of the CDB Loan (but, if in part, the amount paid must be an amount that reduces the amount of the CDB Loan by at least $10 million).
Parent is required to make a mandatory prepayment upon the occurrence of any of the following:
|
·
|
a listing
(as defined
in the facility
agreement);
|
|
·
|
a change
of control
(as defined
in the facility
agreement);
|
|
·
|
a currency
event (as
defined in
the facility
agreement);
|
|
·
|
an unsuccessful
listing (as
defined in
the facility
agreement);
or
|
|
·
|
the sale
of all or
substantially
all of the
assets of
Parent and
its subsidiaries,
as a group,
or of the
Company and
its subsidiaries,
as a group
(other than
the merger).
|
Parent is required
to repay $5 million on the first anniversary of the initial drawdown. Parent is subsequently required to pay 20% of the total
outstanding principal amount of the CDB Loan on each of the second, third, fourth and fifth anniversaries of the initial drawdown,
and the balance of the outstanding principal amount on the sixth anniversary of the initial drawdown. Parent does not currently
have any plans or arrangements to refinance the CDB Loan.
Security
. The
obligations of Parent under the facility agreement will be secured by:
|
·
|
a personal
guarantee
and a deed
of undertaking
from Mr. Fu
and Ms. Liu,
Mr. Fu’s
wife;
|
|
·
|
a personal
guarantee
from Mr. Pan
Rong Feng,
Mr. Fu’s
agent and
proxy in Japan;
|
|
·
|
a pledge
of 100% of
the equity
interest of
the Parent
held by Holdco
in favor of
CDB;
|
|
·
|
a pledge
of 100% of
the equity
interest of
the surviving
corporation
held by Parent
in favor of
CDB; and
|
|
·
|
a pledge
of 100% of
the equity
interest of
Fushi Kabushiki
Kaisha held
by Daifu Kabushiki
Kaisha in
favor of CDB.
|
Other Terms
.
The facility agreement contains customary representations and warranties and customary affirmative and negative covenants, including,
among others, restrictions on indebtedness, disposal of assets, declaration of dividends and mergers and consolidations. The facility
agreement also includes customary events of default.
Equity Financing
Chairman Equity
Commitment
. On June 28, 2012, Mr. Fu entered into an equity commitment letter with Holdco pursuant to which Mr. Fu committed,
simultaneously with the closing of the merger, to purchase or cause the purchase of, at or immediately prior to the effective
time, equity interests of Holdco (or one or more affiliates of Holdco organized to consummate the merger) for $45 million, which
we refer to as the Chairman Equity Commitment. The Chairman Equity Commitment is conditioned upon the satisfaction or waiver by
Parent of each of the conditions to Parent’s and Merger Sub’s obligations to effect the merger (other than those conditions
that by their nature are to be satisfied at the closing of the merger) and the CDB Loan or alternative financing permitted under
the merger agreement having been funded in accordance with the terms of the facility agreement or will be funded at the closing
of the merger in accordance with the terms of the facility agreement, if the equity financing is funded at the closing of the
merger.
In the event that
Parent does not require the full amount of the Chairman Equity Commitment and the Abax Equity Commitment to consummate the merger,
each such equity commitment is subject to reduction, on a pro rata basis, to a level sufficient to, in combination with the other
financing arrangements contemplated by the merger agreement, consummate the transactions contemplated by the merger agreement,
including the payment of customary fees and expenses in connection with the merger. The Chairman Equity Commitment will terminate
automatically and immediately upon the earliest to occur of (a) the valid termination of the merger agreement in accordance with
its terms, (b) the closing of the merger, at which time the obligation to fund the Chairman Equity Commitment will be discharged,
provided that Mr. Fu has fully performed such obligation, (c) the Company or any of its affiliates asserting a claim against Mr.
Fu or any non-recourse party (as defined in the limited guarantee) in connection with Mr. Fu’s equity commitment letter,
the merger agreement, the limited guarantee, or any of the transactions contemplated in those documents, other than (i) a claim
against Mr. Fu under the limited guarantee (including retained claims (as defined in the limited guarantee)) or (ii) seeking specific
performance to cause Holdco, Parent and/or Merger Sub to draw down the proceeds of the Chairman Equity Commitment in accordance
with, and subject to, the limitations contained in, the second, and third sentences of section 9.10 of the merger agreement, and
(d) the termination date, if the closing of the merger does not occur by such date.
Abax Equity Commitment
.
On June 28, 2012, Abax Lotus Ltd. and AGC Asia 6 Ltd. entered into an equity commitment letter with Holdco pursuant to which Abax
Lotus Ltd. and AGC Asia 6 Ltd. committed, simultaneously with the closing of the merger, to purchase or cause the purchase of,
at or immediately prior to the effective time, equity interests of Holdco (or one or more affiliates of Holdco organized to consummate
the merger) for $30 million, which we refer to as the Abax Equity Commitment. The Abax Equity Commitment is conditioned upon the
satisfaction or waiver by Parent of each of the conditions to Parent’s and Merger Sub’s obligations to effect the
merger (other than those conditions that by their nature are to be satisfied at the closing of the merger) and the CDB Loan or
alternative financing permitted under the merger agreement having been funded in accordance with the terms of the facility agreement
or will be funded at the closing of the merger in accordance with the terms of the facility agreement, if the equity financing
is funded at the closing of the merger.
In the event that
Parent does not require the full amount of the Chairman Equity Commitment and Abax Equity Commitment to consummate the merger,
each such equity commitment is subject to reduction, on a pro rata basis, to a level sufficient to, in combination with the other
financing arrangements contemplated by the merger agreement, consummate the transactions contemplated by the merger agreement,
including the payment of customary fees and expenses in connection with the merger. The Abax Equity Commitment will terminate
automatically and immediately upon the earliest to occur of (a) the valid termination of the merger agreement in accordance with
its terms, (b) the closing of the merger, at which time the obligation to fund the Abax Equity Commitment will be discharged,
provided that Abax Lotus Ltd. and AGC Asia 6 Ltd. have fully performed such obligation, (c) the Company or any of its affiliates
asserting a claim against Abax Lotus Ltd., AGC Asia 6 Ltd., or any non-recourse party (as defined in the limited guarantee) in
connection with Abax Lotus Ltd. and AGC Asia 6 Ltd.’s equity commitment letter, the merger agreement, the limited guarantee
or any of the transactions contemplated in those documents, other than (i) a claim against Abax Lotus Ltd. and AGC Asia 6 Ltd.
under the limited guarantee (including retained claims (as defined in the limited guarantee)) or (ii) seeking specific performance
to cause Holdco, Parent, and/or Merger Sub to draw down the proceeds of the Abax Equity Commitment in accordance with, and subject
to the limitations contained in, the second and third sentences of section 9.10 of the merger agreement, and (d) the termination
date, if the closing of the merger does not occur by such date.
Rollover Transaction
.
On June 28, 2012, Mr. Fu, Wise Sun, Ms. Liu, Ms. Zhang, and Abax Lotus Ltd. entered into a contribution agreement with Parent
and Holdco pursuant to which Mr. Fu, Wise Sun, Ms. Liu, Ms. Zhang, and Abax Lotus Ltd. collectively committed to contribute, immediately
prior to the consummation of the merger, an aggregate of 11,240,206 shares of Company common stock to Parent (the equivalent of
a $106,781,957 investment based upon the per share merger consideration of $9.50) in exchange for newly issued shares of Holdco.
Limited Guarantee
On June 28, 2012,
Mr. Fu, Abax Lotus Ltd. and AGC Asia 6 Ltd. entered into a limited guarantee with the Company pursuant to which each of Mr. Fu,
Abax Lotus Ltd., and AGC Asia 6 Ltd. has agreed to guarantee 82.4%, 1.1%, and 16.5%, respectively, of the obligations of Parent
under the merger agreement to pay, under certain circumstances, the $22 million Parent termination fee to the Company and reimburse
certain costs and expenses (including reasonable attorney’s fees) incurred by the Company in connection with a Company lawsuit
that results in a judgment against Parent to recover such Parent termination fee. Each of Mr. Fu, Abax Lotus Ltd., and AGC Asia
6 Ltd. has also agreed to guarantee 82.4%, 1.1%, and 16.5%, respectively, of the obligations of Parent and Merger Sub under the
merger agreement to reimburse reasonable and documented out-of-pocket costs incurred by the Company in connection with the cooperation
provided by the Company to the buyer group in connection with the buyer group's debt financing.
Voting Agreement
Concurrently with
the execution of the merger agreement, Parent, Mr. Fu, Wise Sun, Ms. Liu, Ms. Zhang, and Abax Lotus Ltd., entered into a voting
agreement with the Company under which they have agreed to, among other things, vote an aggregate of 11,240,206 shares of Company
common stock beneficially owned by them, constituting approximately 29.4% of the Company’s outstanding shares in favor of
approval of the merger agreement. Each stockholder who is a party to the agreement has granted to Parent an irrevocable proxy
to vote their shares. The proxy granted automatically expires upon the termination of the voting agreement. The voting agreement
will terminate upon the earliest of (i) the effective time of the merger, (ii) the termination of the merger agreement in
accordance with its terms, and (iii) the written agreement of Parent and the Company (at the Special Committee’s recommendation)
to terminate the voting agreement.
Closing and Effective Time of the
Merger
The closing of the
merger will take place on the second business day following the satisfaction or waiver in accordance with the merger agreement
of all of the conditions to closing of the merger (described under the section titled “The Merger Agreement—Conditions
to the Merger” below) (other than the conditions that by their terms cannot be satisfied until the closing of the merger,
but subject to satisfaction or waiver of those conditions).
The effective time
of the merger will occur upon the filing of the articles of merger with the Secretary of State of the State of Nevada (or at such
later date and time as we and Parent may agree and specify in the articles of merger).
Payment of Merger Consideration and
Surrender of Stock Certificates
At the effective time
of the merger, each share of Company common stock issued and outstanding immediately prior to the effective time will no longer
be outstanding and will be cancelled and cease to exist and will be converted automatically into the right to receive the merger
consideration of $9.50 in cash, without interest, other than shares held in the treasury of the Company or owned, directly or
indirectly, by Parent, Holdco, Merger Sub, or any wholly owned subsidiary of the Company. No merger consideration will be paid
for shares owned by members of the buyer group that are contributed to Parent as part of the rollover transactions.
Exchange and Payment Procedures
Prior to the effective
time of the merger, Parent will enter into an agreement with a paying agent to receive the merger consideration. At or prior to
the effective time of the merger, Holdco or Parent will deposit, or will cause to be deposited, with the paying agent sufficient
funds to make payment of the merger consideration to the Company’s stockholders. With respect to shares of Company common
stock held by The Depository Trust Company, or DTC, the paying agent will transmit to DTC an amount in cash in immediately available
funds equal to the number of shares of Company common stock held of record by DTC immediately prior to the effective time of the
merger multiplied by the per share merger consideration.
Promptly, and in any
event not later than the second business day after the effective time of the merger, each record holder, as of the effective time
of the merger, of a certificate or certificates representing outstanding shares of Company common stock will be sent a letter
of transmittal describing how it may exchange its certificated shares of Company common stock for the per share merger consideration.
Promptly, and in any event not later than the second business day after the effective time of the merger, each record holder of
uncertificated shares of Company common stock represented by book-entry will be sent an amount in cash equal to the product of
the number of book-entry shares of Company common stock held by such holder multiplied by the per share merger consideration.
Payment for shares transferred
after the record date
If payment of the
merger consideration is made to a person other than the person to whom the surrendered certificate or book-entry share is registered,
it is a condition of payment that the surrendered certificate or book-entry share is properly transferred and the person requesting
payment will have paid all transfer and other taxes that may be required.
Interests of Certain Persons in the
Merger
In considering the
recommendation of the Special Committee and our board of directors with respect to the merger and the merger agreement, you should
be aware that certain of our directors, executive officers, and employees, and certain of our stockholders who are members of
the buyer group have interests in the transaction that are different from, and/or in addition to, the interests of our stockholders
generally. The Company’s board of directors and Special Committee were aware of such interests and considered
them, among other matters, in reaching their decisions to approve the merger, and to approve the merger agreement and the other
transactions contemplated thereby, and to recommend that our stockholders vote in favor of approval of the merger agreement.
Interests of Continuing
Stockholders
Following the merger
and the rollover transactions, Mr. Fu, our Chairman and Co-Chief Executive Officer, Wise Sun, Ms. Liu, Ms. Zhang, and Abax Lotus
Ltd. will indirectly hold approximately 9.4%, 41.4%, 5.9%, 0.9% and 1.1%, respectively, of the fully diluted equity of Holdco
as a result of the contribution of the Rollover Shares. Holdco owns 100% of Parent, which will own 100% of the Company immediately
following the completion of the merger. Affiliates of Abax will hold 16.5% of the fully diluted equity interest of
Holdco following the equity investment pursuant to the Abax Equity Commitment, and Mr. Fu will hold an additional 24.8% of the
fully diluted equity interest of Holdco following the equity investment pursuant to the Chairman Equity Commitment. Because
of the indirect equity ownership of these continuing stockholders in Parent, each of them will enjoy the benefits from any future
earnings and growth of the Company after the merger which, if the Company is successfully managed, could exceed the value of their
original investments in the Company, including the amount paid by Parent as merger consideration to the Company’s stockholders
who are not members of the buyer group. These continuing stockholders will also bear the corresponding risks of any
possible decreases in the future earnings, growth, or value of the Company, and they will have no certainty of any future opportunity
to sell their shares in Parent at an attractive price, or that any dividends paid by Parent will be sufficient to recover their
investment.
The merger may provide
additional means to enhance stockholder value for the continuing stockholders, including improved profitability due to the elimination
of the expenses associated with public company reporting and compliance, increased flexibility and responsiveness in management
of the business to achieve growth and respond to competition without the restrictions of short-term earnings comparisons, and
additional means for making liquidity available to them, such as through dividends or other distributions.
Stock Options and Restricted
Shares
Parent will not assume
any Company stock options in connection with the merger. Immediately prior to the effective time of the merger, each then-outstanding
option to purchase shares of our common stock granted under any equity plan, whether or not vested or exercisable, will become
fully vested and exercisable (contingent upon the occurrence of the merger) and will be converted into the right to receive, and
we will pay to each such individual holder, at or promptly after the effective time of the merger, an amount in cash equal to
the product of (i) the excess, if any, of the merger consideration of $9.50 per share over the applicable exercise price
per share of such stock option and (ii) the number of shares of our common stock such holder could have purchased had such holder
exercised such stock option in full immediately prior to the effective time of the merger.
The table below
sets forth, as of October 8, 2012, (i) the number of shares subject to Company stock options held by each of our current
directors and executive officers and one former director, and (ii) the cash payment that may be made in respect of such Company
stock options upon completion of the merger, calculated by multiplying (a) the excess of $9.50 over the per share exercise price
of each such stock option by (b) the number of shares subject to such Company stock options. All dollar amounts are gross amounts
and do not reflect deductions for income taxes and other withholdings. The information assumes that all such Company stock options
remain outstanding on the closing date of the merger.
Directors and Senior
Executives
|
|
No. of Shares
Underlying
Company Stock Options
|
|
|
Exercise Price
|
|
|
Resulting Consideration
in the Form of Cash
|
|
Li Fu
|
|
|
15,250
|
|
|
|
$4.95
|
|
|
|
$69,388
|
|
Jiping Hua
|
|
|
2,500
|
|
|
|
$4.95
|
|
|
|
$11,375
|
|
Joseph J. Longever
|
|
|
200,000
|
|
|
|
$7.93
|
|
|
|
$314,000
|
|
Jack Perkowski
|
|
|
2,500
|
|
|
|
$4.95
|
|
|
|
$11,375
|
|
Barry Raeburn (1)
|
|
|
2,500
|
|
|
|
$4.95
|
|
|
|
$11,375
|
|
Wenbing Christopher Wang
|
|
|
12,500
|
|
|
|
$4.95
|
|
|
|
$56,875
|
|
Wenbing Christopher Wang
|
|
|
30,000
|
|
|
|
$8.61
|
|
|
|
$26,700
|
|
(1) Mr. Raeburn did
not stand for re-election at the Company’s 2012 Annual Meeting of Stockholders (the “Annual Meeting”), and he
ceased being a director of the Company on June 28, 2012, the date of the Annual Meeting.
Immediately prior
to the effective time of the merger, each then-outstanding restricted share granted under any equity plan of the Company, will
vest in full, contingent upon the occurrence of the merger (and all restrictions thereon will immediately lapse), and be converted
into the right to receive at the effective time an amount in cash equal to $9.50. The table below sets forth, as of October 8,
2012 the number of nonvested restricted shares granted under any equity plan of the Company to our directors and executive officers
and the resulting consideration in the form of cash. All dollar amounts are gross amounts and do not reflect deductions for income
taxes and other withholdings.
Directors and Senior
Executives
|
|
No. of Restricted Shares
|
|
|
Resulting Consideration
in the Form of Cash
|
|
Joseph L. Longever
|
|
|
30,000
|
|
|
|
$285,000
|
|
Craig Studwell
|
|
|
24,000
|
|
|
|
$228,000
|
|
Severance Arrangements
On November 8, 2005,
Mr. Fu entered into an employment agreement with the Company (the “Fu Employment Agreement”), which provided that
Mr. Fu would serve as the Chief Executive Officer. The term of the Fu Employment Agreement is ten years, unless terminated earlier
as set forth in the Fu Employment Agreement. Mr. Fu’s salary during the term shall be $240,000 per year and may be increased
at the discretion of the compensation committee of our board of directors. The Company shall determine in its sole discretion
to pay Mr. Fu any bonus amount above the salary set forth above. The Company may terminate Mr. Fu’s employment without cause
but, in the event of such termination, the Company shall pay to Mr. Fu a lump sum equal to all remaining salary payments due under
the Fu Employment Agreement for the period beginning on the date of termination and ending on the last day of the term. For purposes
of calculating this severance payment, it shall be assumed that the salary will increase by 20% on each anniversary of the effective
date, starting from the date of termination. The severance payment shall be payable to Mr. Fu within ten business days of the
date of termination. The Fu Employment Agreement also contains covenants regarding non-competition and non-disclosure.
On November 23, 2009,
Mr. Joseph Longever entered into an Executive Employment Agreement with the Company (the “Longever Employment Agreement”),
which provided that Mr. Longever would serve as the Co-Chief Executive Officer. In accordance with the Longever Employment Agreement,
the initial term of employment is five years, unless terminated earlier, and shall be automatically extended for additional one-year
periods upon the same terms and conditions unless a written notice of non-renewal is given by either party at least ninety (90)
days before the expiration date of the then current term. Mr. Longever will receive an annual salary of no less than $225,000
per year, such salary to increase at the discretion of our board of directors. In addition to Mr. Longever’s annual
base salary, he shall be entitled to participate in an annual cash bonus plan and equity incentive plans sponsored by the Company
as may be established from time to time. If Mr. Longever is terminated without Cause (as defined in the Longever Employment Agreement,
but which definition includes occurrence of certain events within 30 days prior to or 12 months following the effective date of
a Change in Control (as defined in the Longever Employment Agreement)) or Mr. Longever terminates the Longever Employment Agreement
for Good Reason (as defined in the Longever Employment Agreement), and Mr. Longever executes and delivers a valid and effective
release of all claims against the Company in a form and format prepared by the Company, Mr. Longever shall be entitled to receive
(1) a lump sum cash payment in the amount of any accrued but unpaid salary as of his date of termination, (2) a lump sum cash
payment equal to any accrued and unpaid bonus for any prior fiscal year, and (3) an amount equal to the sum of (a) 50% of his
then current annual base salary and (b) 50% of the average annual cash bonus payments paid by the Company to Mr. Longever
during the preceding three fiscal years; Mr. Longever is also entitled to continued medical and life insurance benefits for a
period of six months following the date of termination. In the event of termination without Cause, Mr. Longever has a duty to
mitigate the Company’s obligations to him, and any amounts earned by Mr. Longever during the six months following termination
shall serve as an offset to the amounts due to him by the Company; there is no such duty to mitigate or offset the Company’s
obligations in the event of resignation for Good Reason. In the event that Mr. Longever is terminated for Cause upon thirty
days prior written notice, the Company shall pay him any accrued and unpaid salary and any accrued and unpaid bonus for any prior
fiscal year.
On July 22, 2008,
Mr. Wenbing Christopher Wang entered into an employment agreement with the Company (the “Wang Employment Agreement”),
which provided that Mr. Wang would serve as the President and Chief Financial Officer of the Company. The initial two-year term
of the Wang Employment Agreement was automatically extended for an additional two-year period. Mr. Wang’s base salary is
no less than $200,000 per year, which salary may be increased at the discretion of our board of directors but in no event shall
be decreased. If Mr. Wang is terminated without Cause (as defined in the Wang Employment Agreement) or Mr. Wang terminates
the Wang Employment Agreement for Good Reason (as defined in the Wang Employment Agreement), and Mr. Wang executes and delivers
a valid and effective release of all claims against the Company in a form and format prepared by the Company, Mr. Wang shall be
entitled to receive (1) a lump sum cash payment in the amount of any accrued but unpaid salary as of his date of termination,
(2) a lump sum cash payment equal to any accrued and unpaid bonus for any prior fiscal year, (3) a lump sum cash payment equal
to the pro rata amount of any bonus payable with respect to the fiscal year in which termination occurs and (4) an amount equal
to the sum of (a) 50% of his then current annual base salary and (b) 50% of the average annual cash bonus payments paid by the
Company to Mr. Wang during the preceding three fiscal years; Mr. Wang is also entitled to continued medical and life insurance
benefits for a period of six months following the date of termination. In the event that Mr. Wang is terminated for Cause upon
thirty days prior written notice, the Company shall pay him any accrued and unpaid salary and any accrued and unpaid bonus for
any prior fiscal year.
On October 19, 2010,
Mr. Craig H. Studwell entered into an Executive Employment Agreement with the Company (the “Studwell Employment Agreement”),
which provided that Mr. Studwell would serve as the Executive Vice President, Chief Financial Officer, for a three-year term.
Mr. Studwell’s base salary shall be no less than $180,000 per year, which salary may be increased at the discretion of the
compensation committee of our board of directors. The compensation committee of our board of directors shall review Mr. Studwell’s
compensation at least on an annual basis. If Mr. Studwell is terminated without Cause (as defined in the Studwell Employment Agreement)
or Mr. Studwell terminates the Studwell Employment Agreement for Good Reason (as defined in the Studwell Employment Agreement)
and Mr. Studwell executes and delivers a valid and effective release of all claims against the Company in a form and format prepared
by the Company, Mr. Studwell shall be entitled to receive a lump sum cash payment in the amount of (i) any accrued but unpaid
salary as of his date of termination within thirty days of the termination, (ii) any accrued and unpaid bonus for any prior fiscal
year, and (iii) an amount equal to the sum of (a) 50% of his then current annual base salary and (b) 50% of the average annual
cash bonus payments paid by the Company to Mr. Studwell during the preceding three fiscal years, and such sum shall be payable
in six substantially equal monthly payments. Mr. Studwell is also entitled to continued medical and life insurance benefits for
a period of six months following the date of termination. In the event that Mr. Studwell is terminated for Cause upon thirty days
prior written notice, the Company shall pay him any accrued and unpaid salary and any accrued and unpaid bonus for any prior fiscal
year.
Directors’ and Officers’
Indemnification and Insurance
We are required to
(and if we are unable to do so, Parent will cause the surviving corporation to) obtain and fully pay the premium for a six-year
extension of the directors’ and officers’ liability coverage of the Company’s existing directors’ and
officers’ insurance policies. Such policies must be obtained from an insurance carrier with the same or better credit rating
as our current insurance carrier with respect to directors’ and officers’ liability insurance and fiduciary liability
insurance and must have terms, conditions, retentions and limits of liability that are no less favorable, in the aggregate, than
our existing policies. This obligation is subject to a cap of 300% of the annual premium amount we are currently paying for such
insurance. Please see the section titled “The Merger Agreement—Indemnification and Insurance.”
The Special Committee
On November 3, 2010,
our board of directors established the Special Committee, composed of Messrs. Jack Perkowski, Barry Raeburn and Feng Bai, to consider
the November 2010 Proposal and to take any actions it deemed appropriate to assess the fairness and viability of the November
2010 Proposal. Other than (i) their receipt of board and Special Committee compensation (as described below), neither of
which is contingent upon the consummation of the merger or the Special Committee’s or board’s recommendation of the
merger, (ii) the indemnification and liability insurance rights under the merger agreement, and (iii) any receipt of
merger consideration for shares of the Company owned by the members of the Special Committee or any cash payment that may be made
in respect of stock options held by members of the Special Committee upon completion of the merger, none of the members of the
Special Committee has a financial interest in the proposed merger or any of transactions contemplated thereby and none of them
is related to any member of the buyer group. Our board of directors did not place any limitations on the authority of the Special
Committee regarding its investigation and evaluation of the proposed transaction.
We have compensated, and will continue
to compensate, the members of the Special Committee in exchange for their service in such capacity. Jack Perkowski, as Chairman
of the Special Committee, received a $100,000 retainer. Each of Feng Bai and Barry Raeburn received a $70,000 retainer. In addition,
the Company has agreed to pay members of the Special Committee $1,000 for each meeting attended by such member. In addition to
the retainers totalling $240,000 paid to the members of the Special Committee, as of the date of this proxy statement, the Company
has paid an aggregate of $71,000 to members of the Special Committee for the meetings to-date attended by members of the Special
Committee, comprised of $25,000 paid to Jack Perkowski for 25 meeting attended, $22,000 paid to Feng Bai for 22 meeting attended
and $24,000 paid to Barry Raeburn for 24 meetings attended.
Position with the Company
Following Consummation of the Merger
After completion of
the merger, Mr. Fu expects to continue to serve as chairman of the board of directors and co-chief executive officer of the Company.
It is anticipated that the current executive officers will continue to serve as the executive officers of the Company. The directors
of Merger Sub immediately prior to the merger will become the directors of the Company after the effective time and will hold
office until their respective successors and assigns are duly elected and qualified, or their earlier death, resignation or removal.
Total Consideration for
Our Common Stock
Our directors and
executive officers, other than those who are members of the buyer group, will receive the same per share merger consideration
for their shares of our common stock in the merger as all of our other stockholders. The estimated aggregate amount of consideration
that will be received in the merger by our directors and executive officers who are not members of the buyer group, for their
shares and Company stock options is as set forth below.
Name
|
|
Consideration for Common Stock & Stock Options
|
|
Joseph J. Longever
|
|
$
|
789,000
|
|
Craig H. Studwell
|
|
$
|
285,000
|
|
Wenbing Christopher Wang
|
|
$
|
2,344,200
|
|
Jack Perkowski
|
|
$
|
83,500
|
|
Feng Bai
|
|
$
|
83,500
|
|
Jiping Hua
|
|
$
|
79,912
|
|
|
|
$
|
3,665,112
|
|
Compensation in Connection with the
Merger
The information
below is intended to comply with Item 402(t) of Regulation S-K, which requires disclosure of information about compensation for
each “named executive officer” of the Company that is based on or otherwise relates to the merger. The compensation
payable by the Company is subject to a non-binding advisory vote of the Company’s stockholders, as described in the section
titled “Advisory Vote on Compensation in Connection with the Merger,” beginning on page 95. Other than the compensation
payable to Messrs. Fu, Wang, Longever and Studwell set forth in the table below, none of the other “named executive officers”
of the Company is receiving compensation that is based on or otherwise relates to the merger.
The following table
sets forth the cash compensation that may be paid by the Company to our named executive officers following the merger in connection
therewith.
Name
|
|
Cash
($)
|
|
|
Equity
($)
|
|
|
Pension/
NQDC
($)
|
|
|
Perquisites/
Benefits
($)
|
|
|
Tax
Reimbursement
($)
|
|
|
Other
($)
|
|
|
Total
($)
|
|
Li Fu
|
|
|
-
|
|
|
|
277,550
|
(1)
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
277,550
|
|
Wenbing Christopher Wang
|
|
|
-
|
|
|
|
2,344,200
|
(2)(3)
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
2,344,200
|
|
Joseph J. Longever
|
|
|
562,166
|
(4)(5)
|
|
|
789,000
|
(6)
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
1,351,166
|
|
Craig H. Studwell
|
|
|
300,000
|
(7)
|
|
|
285,000
|
(8)
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
585,000
|
|
(1) In January 2009,
Mr. Fu was granted a stock option to purchase 61,000 shares at an exercise price of $4.95 per share. On March 30, 2012, June 28,
2012 and September 25, 2012, Mr. Fu exercised options to purchase 15,250 shares at an exercise price of $4.95 per share, respectively.
Immediately prior to the effective time of the merger, Mr. Fu’s options to acquire Company common stock will be automatically
cancelled and converted into the right to receive an amount in cash (without interest, and subject to deduction for any required
compensation-related withholding tax) equal to the product of (i) the excess of $9.50, the merger consideration, over the exercise
price per share of his option and (ii) the number of shares subject to his option.
(2) In January 2009,
Mr. Wang was granted a stock option to purchase 50,000 shares at an exercise price of $4.95 per share and, in January 2010, he
was granted a stock option to purchase 30,000 shares at an exercise price of $8.61 per share. On March 30, 2012, June 28, 2012
and September 25, 2012, Mr. Wang exercised options to purchase 12,500 shares at an exercise price of $4.95 per share, respectively.
In January 2010, Mr. Wang was granted 20,000 nonvested restricted shares, all of which are currently vested. Immediately prior
to the effective time of the merger, (1) Mr. Wang’s options to acquire Company common stock will be automatically cancelled
and converted into the right to receive an amount in cash (without interest, and subject to deduction for any required compensation-related
withholding tax) equal to the sum of the products of (i) the excess of $9.50, the merger consideration, over the exercise price
per share of each option and (ii) the number of shares subject to such option and (2) Mr. Wang’s nonvested restricted shares
will vest in full (and all restrictions thereon will automatically lapse) and will be converted into the right to receive an amount
in cash equal to $9.50 per share.
(3) Includes 200,000
shares of Company common stock which, at the effective time of the merger, will be converted into the right to receive $9.50 per
share in cash.
(4) It has been the
practice that the compensation committee of our board of directors approves, on an annual basis, the grant of long-term incentive
equity awards to executive officers, which awards are primarily based upon the individual performance of the executive and, to
a lesser extent, Company performance. On March 26, 2012, the compensation committee of our board of directors determined to grant
Mr. Longever a $400,000 cash bonus for 2012, in lieu of an equity award, 50% payable upon award and 50% payable by year end or
upon an earlier change in control of the Company.
(5) Pursuant to the
Longever Employment Agreement, if Mr. Longever is terminated without Cause (as defined in the Longever Employment Agreement, but
which definition includes occurrence of certain events within 30 days prior to or 12 months following the effective date of a
Change in Control (as defined in the Longever Employment Agreement)) or Mr. Longever terminates the Longever Employment Agreement
for Good Reason (as defined in the Longever Employment Agreement), and Mr. Longever executes and delivers a valid and effective
release of all claims against the Company in a form and format prepared by the Company, Mr. Longever shall be entitled to receive
(1) a lump sum cash payment in the amount of any accrued but unpaid salary as of his date of termination, (2) a lump sum cash
payment equal to any accrued and unpaid bonus for any prior fiscal year, and (3) an amount equal to the sum of (a) 50% of his
then current annual base salary and (b) 50% of the average annual cash bonus payments paid by the Company to Mr. Longever during
the preceding three fiscal years.
(6) In November 2009,
Mr. Longever was granted a stock option to purchase 200,000 shares at an exercise price of $7.93 per share and 50,000 nonvested
restricted shares (20,000 of these shares have vested and 30,000 remain unvested). Immediately prior to the effective time of
the merger, (1) Mr. Longever’s options to acquire Company common stock will be automatically cancelled and converted into
the right to receive an amount in cash (without interest, and subject to deduction for any required compensation-related withholding
tax) equal to the product of (i) the excess of $9.50, the merger consideration, over the exercise price per share of his option
and (ii) the number of shares subject to his option and (2) Mr. Longever’s nonvested restricted shares will vest in full
(and all restrictions thereon will automatically lapse) and will be converted into the right to receive an amount in cash equal
to $9.50 per share.
(7) It has been the
practice that the compensation committee of our board of directors approves, on an annual basis, the grant of long-term incentive
equity awards to executive officers, which awards are primarily based upon the individual performance of the executive and, to
a lesser extent, Company performance. On March 26, 2012, the compensation committee of our board of directors determined to grant
Mr. Studwell a $300,000 cash bonus for 2012, in lieu of an equity award, 50% payable upon award and 50% payable by year end or
upon an earlier change in control of the Company.
(8) In October 2010,
Mr. Studwell was granted 30,000 nonvested restricted shares, of which 6,000 are currently vested. Immediately prior to the effective
time of the merger, Mr. Studwell’s nonvested restricted shares will vest in full (and all restrictions thereon will automatically
lapse) and will be converted into the right to receive an amount in cash equal to $9.50 per share.
Estimated
Fees and Expenses
Fees
and expenses incurred or to be incurred by the Company and the buyer group in connection with the merger are estimated at the
date of this proxy statement to be as follows:
Description
|
Amount
|
|
|
|
|
|
|
Financing fees and expenses and other
professional fees
|
|
$
|
[
|
]
|
Legal fees and expenses
|
|
$
|
[
|
]
|
Special Committee fees
|
|
$
|
[
|
]
|
Miscellaneous (including
accounting fees, filing fees, printer, proxy solicitation and mailing costs, and depositary fees and expenses)
|
|
$
|
[
|
]
|
Total
|
|
$
|
[
|
]
|
These
expenses will not reduce the merger consideration to be received by unaffiliated stockholders. If the merger is consummated, the
party incurring any costs and expenses in connection with the merger and the merger agreement shall pay such costs and expenses.
Certain Material PRC Tax Consequences
of the Merger for U.S. Holders
The following is a
summary of certain material PRC tax consequences of the merger to beneficial owners of our common stock who are U.S. holders (as
defined below in the section titled “Certain Material U.S. Federal Income Tax Consequences of the Merger for U.S. Holders”).
Under the Enterprise
Income Tax Law of the PRC (“EIT Law”), enterprises are classified as “resident enterprises” and “non-resident
enterprises.” Pursuant to the EIT Law and its implementing rules, enterprises established outside the PRC whose “de
facto management bodies” are located in the PRC are considered “resident enterprises” and subject to the uniform
25% enterprise income tax rate on worldwide income. According to the implementing rules of the EIT Law, “de facto management
body” refers to a managing body that in practice exercises overall management control over the production and business,
personnel, accounting and assets of an enterprise. Circular 82, “Issues Concerning the Identification of China–Controlled
Overseas-Incorporated Enterprises as Resident Enterprises on the Basis of the Standard of De Facto Management Bodies,” issued
by the State Administration of Taxation (“SAT”), provides that an overseas incorporated enterprise that is controlled
domestically will be recognized as a “tax-resident enterprise,” if it satisfies all of the following conditions: (i)
the senior management responsible for daily production/business operations are primarily located in the PRC, and the location(s)
where such senior management execute their responsibilities are primarily in the PRC; (ii) strategic financial and personnel decisions
are made or approved by organizations or personnel located in the PRC; (iii) major properties, accounting ledgers, company seals
and minutes of board meetings and stockholder meetings, etc., are maintained in the PRC; and (iv) 50% or more of the board members
with voting rights or senior management habitually reside in the PRC.
Given the relatively
recent enactment of the EIT Law and lack of applicable legal precedent, it remains unclear how the PRC tax authorities will determine
the PRC tax resident status of a company organized under the laws of a foreign (non-PRC) jurisdiction, such as the Company. If
the PRC tax authorities determine that we are a “resident enterprise” for PRC enterprise income tax purposes, gains
realized by investors that are not tax residents of the PRC, including U.S. holders (“non-resident investors”), may
be treated as income derived from sources within the PRC. In such event, any such gain derived by such investors on the sale or
transfer of our common stock, including pursuant to the merger, may be subject to income tax under the PRC tax laws. Under the
EIT Law and its implementing rules, non-resident investors that are enterprises (but not individuals) and that (i) do not have
an establishment or place of business in the PRC or (ii) have an establishment or place of business in the PRC but the relevant
income is not effectively connected with the establishment or place of business, generally may be subject to a 10% PRC income
tax on any gain realized on the sale or transfer of our common stock, including pursuant to the merger, if such gain is regarded
as income derived from sources within the PRC.
Additionally, if we
are determined to be a resident enterprise under the EIT Law, under the PRC Individual Income Tax Law and its implementing rules,
any gain realized on the sale or transfer of our common stock, including pursuant to the merger, by non-resident investors who
are individuals may be subject to a 20% PRC income tax if such gain is regarded as income derived from sources within the PRC.
Accordingly, if non-resident
investors, as described under the PRC tax laws (including U.S. holders), realize any gain from the sale or transfer of our common
stock pursuant to the merger, and if such gain were considered as PRC-sourced income, such non-resident investors may be responsible
for paying the applicable PRC income tax on the gain from the sale or transfer of our common stock. Under the PRC tax laws, however,
we would not have an obligation to withhold PRC income tax in respect of the gains that non-resident investors (including U.S.
holders) may realize from the sale or transfer of our common stock pursuant to the merger.
Moreover, SAT Circular
Guoshuihan No. 698 (“Circular 698”) reinforces the taxation of certain equity transfers by non-resident investors
through overseas holding vehicles. Circular 698 addresses indirect equity transfers as well as other issues. According to Circular 698,
where a non-resident investor who indirectly holds equity interests in a PRC resident enterprise through a non-PRC offshore holding
company indirectly transfers equity interests in a PRC resident enterprise by selling the equity interests of the offshore holding
company, and the latter is located in a country or jurisdiction where the actual tax burden is less than 12.5% or where the offshore
income of its residents is not taxable, the non-resident investor is required to provide the PRC tax authority in charge of that
PRC resident enterprise with certain relevant information within 30 days from the date of the execution of the equity transfer
agreement. The tax authorities in charge will evaluate the offshore transaction for tax purposes. In the event that the tax authorities
determine that such transfer is abusing forms of business organization, and a reasonable commercial purpose for the offshore holding
company other than the avoidance of PRC income tax liability is lacking, the PRC tax authorities will have the power to re-assess
the nature of the equity transfer under the doctrine of substance over form. If the SAT’s challenge of a transfer is successful,
it may deny the existence of the offshore holding company that is used for tax planning purposes and subject the non-resident
investor to PRC tax on the capital gain from such transfer. Circular 698 also provides that where a non-PRC resident enterprise
transfers its equity interests in a PRC resident enterprise to its related parties at a price lower than the fair market value,
the relevant tax authority has the power to make a reasonable adjustment to the taxable income from the transaction. Since Circular
698 has a short history, its application is uncertain. A non-resident investor may become at risk of being taxed under Circular
698 and may be required to expend valuable resources to comply with Circular 698 or to establish that such non-resident investor
should not be taxed under Circular 698, including in respect of any gain from the sale or transfer of our common stock pursuant
to the merger.
Lastly, Circular Guoshuihan
No. 24 (“Circular 24”), released on March 28, 2011, reinforces the taxation of certain equity transfers by non-resident
investors through overseas holding vehicles. Circular 24 addresses the taxation of certain equity transfers by non-resident investors,
and it is an explanation of Circular 698. According to Article 6 of Circular 24, where any non-resident investor who indirectly
holds equity interests in a PRC resident enterprise through a non-PRC offshore holding company, whether it is a controlling shareholder
or not, indirectly transfers equity interests in a PRC resident enterprise by selling the equity interests of the offshore holding
company, and the latter is located in a country or jurisdiction where the actual tax burden is less than 12.5% or where the offshore
income of its residents is not taxable, the non-resident investor shall abide by Circular 698. If there are two or more non-resident
investors, one can represent the others to submit documents to the PRC tax authorities. Also, Circular 24 clarifies that if the
payment is made in installments, then the income from the transfer shall be confirmed on the date of the execution of the transfer
agreement and the completion of the registration of the transfer.
Certain Material U.S. Federal Income
Tax Consequences of the Merger for U.S. Holders
The following is a
summary of certain material U.S. federal income tax consequences of the merger to beneficial owners of our common stock that are
U.S. holders (as described below) and whose shares are converted into the right to receive cash in the merger. This
discussion is based on provisions of the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations
thereunder, and administrative rulings and court decisions, each as in effect as of the date of this proxy statement, and all
of which are subject to change or differing interpretations. Any such change, which may or may not be retroactive,
or differing interpretation could alter the U.S. federal income tax consequences to the U.S. holders of our common stock as described
herein. Our stockholders should be aware that this summary is not comprehensive with respect to U.S. federal income tax consequences.
This summary applies
only to U.S. holders of our common stock that own such stock as capital assets within the meaning of Section 1221 of the Code
(generally, property held for investment) and does not apply to U.S. holders that are subject to special tax rules, including
but not limited to U.S. holders that:
|
·
|
are
brokers or
dealers in
securities
or currencies,
traders that
mark-to-market,
insurance
companies,
certain financial
institutions,
mutual funds,
real estate
investment
trusts, personal
holding companies,
regulated
investment
companies,
or holders
whose “functional
currency”
is not the
U.S. dollar;
|
|
·
|
are
subject to
the alternative
minimum tax
provisions
of the Code;
|
|
·
|
hold
our stock
through individual
retirement
or other
tax-deferred
accounts,
or that are
tax-exempt
organizations;
|
|
·
|
hold
their shares
through a
partnership
or through
another pass-through
entity;
|
|
·
|
acquired
our stock
in connection
with an employee
stock option
or stock
purchase
plan or other
employee
plan or compensatory
arrangement;
or
|
|
·
|
hold
our stock
as part of
an integrated
investment
(including
a “straddle,”
pledge against
currency
risk, hedge,
“constructive”
sale or “conversion”
transaction)
comprised
of shares
of our stock
and one or
more other
positions.
|
This summary also
does not address the U.S. federal income tax consequences of the merger to a U.S. holder that holds options to purchase our common
stock or that receives merger consideration as the result of the vesting and/or the deemed exercise of equity awards.
In addition, this
summary does not address the U.S. federal income tax consequences to a beneficial holder of our common stock that is not
a U.S. holder, nor does it consider the effect of any state, local, foreign, estate, gift or other tax laws.
None of the Company,
Holdco, Parent, or Merger Sub has requested a ruling from the Internal Revenue Service (“IRS”) in connection with
the merger or related transactions. Accordingly, the discussion below neither binds the IRS nor precludes it from adopting
a contrary position. Furthermore, no opinion of counsel has been or will be rendered with respect to the U.S. federal
income tax consequences of the merger or related transactions.
The U.S. federal income
tax consequences summarized below are not intended to constitute a complete description of all tax consequences relating to the
merger. Because individual circumstances may differ, you are urged to consult your own tax advisor as to the particular tax consequences
to you of the merger, including the application and effect of federal, state, local, and foreign income and estate, gift and other
tax laws, and any applicable tax treaties or tax reporting requirements.
For purposes of this
discussion, “U.S. holder” means a beneficial owner of our common stock that is, for U.S. federal income tax purposes:
|
·
|
an
individual
citizen or
resident
of the United
States;
|
|
·
|
a
corporation
(or any other
entity treated
as a corporation
for U.S.
federal income
tax purposes)
created or
organized (or
treated as
created or
organized)
in or under
the laws
of the United
States, any
state thereof,
or the District
of Columbia;
|
|
·
|
an
estate the
income of
which is
subject to
U.S. federal
income taxation
regardless
of its source;
|
|
·
|
a
trust if
(1) a U.S.
court can
exercise
primary supervision
over the
trust’s
administration,
and one or
more U.S.
persons have
the authority
to control
all substantial
decisions
of the trust,
or (2) it
has a valid
election
in effect
under applicable
U.S. Treasury
Regulations
to be treated
as a U.S.
person.
|
If a partnership (or
other entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds our common stock, the tax treatment
of its partners generally will depend on a partner’s status and the activities of the partnership. Partnerships and their
partners should consult their tax advisors regarding the tax consequences to them of the merger.
The Merger.
The receipt by a U.S. holder of cash for our common stock pursuant to the merger will be a taxable transaction for U.S. federal
income tax purposes. A U.S. holder that receives cash in exchange for our common stock pursuant to the merger will recognize gain
or loss for U.S. federal income tax purposes equal to the difference, if any, between the amount of cash received and the U.S.
holder’s adjusted tax basis in the stock surrendered for cash pursuant to the merger. Gain or loss will be determined separately
for each block of stock (that is, stock acquired at the same price per share in a single transaction) surrendered for cash pursuant
to the merger. Such gain or loss will be capital gain or loss and will be long-term capital gain or loss if the U.S. holder’s
holding period for such stock is more than one year at the time of the completion of the merger. If a U.S. holder’s holding
period for such stock is one year or less at the time of the completion of the merger, any gain or loss will be short-term capital
gain or loss. The maximum U.S. federal income tax rate on net long-term capital gain recognized by non-corporate U.S. holders
is 15% under current law. Short-term capital gains recognized by non-corporate U.S. holders that are not offset with capital losses
generally are subject to U.S. federal income tax at the same rate as ordinary income. Corporate U.S. holders will be subject to
U.S. federal income tax on capital gain recognized on our common stock at the same rate as ordinary income, regardless of how
long they have held the common stock at the time the merger is completed. The maximum U.S. federal income tax rate for U.S. corporations
is 35% under current law. There are limitations on the deductibility of capital losses. Generally, capital losses are deductible
only against capital gains and are not available to offset ordinary income; however, individual U.S. holders are allowed to offset
a limited amount of net capital loss against ordinary income and may carry forward unused capital losses indefinitely. U.S. corporations
generally may carry back capital losses up to three taxable years and generally may carry forward capital losses up to five taxable
years. All tax rates are subject to change and may depend on the stockholder’s particular circumstances.
If a PRC income tax
applies to any gain from the disposition of our common stock by a U.S. holder pursuant to the merger, such tax may be treated
as a foreign tax eligible for a deduction from such holder’s U.S. federal taxable income or a foreign tax credit against
such holder’s U.S. federal income tax liability (subject to applicable conditions and limitations). In addition, if such
PRC tax applies to any such gain, such U.S. holder may be entitled to certain benefits under the Agreement between the Government
of the United States of America and the Government of the People’s Republic of China for the Avoidance of Double Taxation
and the Prevention of Tax Evasion with Respect to Taxes on Income (the “U.S.-PRC Tax Treaty”), if such holder is considered
a resident of the United States for purposes of, and otherwise meets the requirements of, the U.S.-PRC Tax Treaty. U.S. holders
should consult their own tax advisors regarding the deduction or credit for any such PRC tax and their eligibility for the benefits
of the U.S.-PRC Tax Treaty.
Information Reporting
and Backup
Withholding
. The payment of cash to a U.S. holder in connection with the merger generally will be subject
to information reporting and, unless certain requirements are satisfied, may also be subject to “backup withholding”
for U.S. federal income tax purposes, currently at a rate of 28%. In order to avoid backup withholding, a U.S. holder should complete
an IRS Form W-9 in accordance with instructions that will be delivered to such holder by the paying agent, unless an applicable
exemption exists and is otherwise proved in a manner acceptable to the paying agent. Backup withholding is not an additional
tax. Amounts withheld as backup withholding from payments to an exchanging U.S. holder will be creditable against the
U.S. holder’s U.S. federal income tax liability or may be refundable, provided such holder timely furnishes the required
information to the IRS. U.S. holders should consult their own tax advisors as to their qualifications for exemption from
backup withholding and the procedure for obtaining such an exemption.
Regulatory Approvals and Notices
None of the parties
is aware of any regulatory approvals or filings required for the completion of the merger, other than filing the Articles of the
Merger with the Nevada Secretary of State and complying with the SEC proxy and going private filing requirements.
Delisting and Deregistration of the
Company’s Common Stock
Following the merger,
our common stock, par value $0.006 per share, will be delisted from the NASDAQ Global Select Market and deregistered under the
Exchange Act, as soon as practicable.
Provisions for Unaffiliated Stockholders
No provision has been
made to grant our unaffiliated stockholders access to the corporate files of the Company, any other party to the merger, or any
of their respective affiliates or to obtain counsel or appraisal services at the expense of the Company or any other such party
or affiliate. Furthermore, the Special Committee believes that sufficient procedural safeguards were present, and will
be present, to ensure the fairness of the merger to our unaffiliated stockholders without retaining an unaffiliated representative
to act solely on behalf of such stockholders for purposes of negotiating a transaction or preparing a report concerning the fairness
of the merger. The Special Committee believes that the independence of the members of the Special Committee and the
retention by the Special Committee of its own independent legal counsel and financial advisor permitted the Special Committee
to effectively represent the interests of the stockholders who are not members of the buyer group.
Litigation Related to the Merger
In connection with
the proposed merger, 12 stockholder class action lawsuits have been filed against the Company, members of our board of directors,
and officers in connection with the November 3, 2010 non-binding proposal made by the Company’s Chairman and Co-Chief Executive
Officer, Mr. Fu, and Abax (Hong Kong) to acquire all of the outstanding shares of the Company’s common stock not currently
owned by Mr. Fu, Abax and their respective affiliates for $11.50 per share in cash. Nine actions were filed in Nevada state court
(Carson City, Clark County, and Washoe County); two actions were filed in Nevada federal district court; and one action was filed
in Tennessee state court. All of the actions assert claims against the Company, members of the board of directors and officers
for alleged breaches of fiduciary duties in connection with the November 2010 Proposal, as described further below.
On or about November
5, 2010, the Company became aware that the first of the putative stockholder class actions had been filed against the Company
and the board in connection with the November 2010 Proposal. Plaintiffs allege, among other things, that the proposed buyout price
and the process of evaluating the November 2010 Proposal are unfair and inadequate. Plaintiffs seek, among other relief, to enjoin
defendants from consummating the November 2010 Proposal and to direct defendants to exercise their fiduciary duties to negotiate
a transaction that is in the best interests of the Company’s stockholders.
The Company has reviewed
the allegations contained in the complaints and believe they are without merit. The Company intends to defend the litigation vigorously.
To date, the two actions
pending in Nevada federal district court have been dismissed. Eight Nevada state court actions have been consolidated into a single
action, and one Nevada state court action has been voluntarily dismissed. The motion to dismiss the Tennessee state court action
remains pending.
Detailed below is
the status or disposition of each of the lawsuits concerning the November 2010 Proposal.
(1)
Arthur I. Murphy, Jr. IRA v. Fushi Copperweld Inc.,
Li Fu, Joseph J. Longever, Wenbing Christopher Wang, Barry L. Raeburn, Bai Feng, Jiping Hua, and John Francis Perkowski
, Case
No. 10OC00512 (“
Murphy
”), filed on November 4, 2010, in the First Judicial District Court of the State of Nevada
in and for Carson City. On August 1, 2011, Plaintiff Murphy voluntarily dismissed his complaint, filed prior to consolidation
of the Nevada state court actions, and this action has been consolidated into the amended shareholder action filed in Nevada state
court, captioned
In re Fushi Copperweld, Inc. Shareholder Litigation
, A-10-628936-B (the “Shareholder Litigation”).
(2)
Dean Victor v. Li Fu
, Case No. 10-OC-00534 1B (“
Victor
”),
filed on November 24, 2010, in the First Judicial District Court of the State of Nevada in and for Carson City. On August 1, 2011,
Plaintiff Victor voluntarily dismissed his complaint, filed prior to consolidation of the Nevada state court actions, and this
action has been consolidated into the Shareholder Litigation.
(3)
Brian Levy v. Fushi Copperweld, Inc., Li Fu, Joseph
J. Longever, Craig H. Studwell, Wenbing Christopher Wang, John F. Perkowski, Feng Bai, Jiping Hua, Barry L. Raeburn, and Abax
Global Capital (Hong Kong) Ltd.
, Case No. 10OC00555-1B (“
Levy
”), filed on December 7, 2010, in the First
Judicial District Court of the State of Nevada in and for Carson City. Plaintiff Levy voluntarily dismissed this action on April
29, 2011.
(4)
NVEST AB v. Fushi Copperweld, Inc.
, Case No. 10OC005591B
(“
NVEST
”), filed on December 8, 2010, in the First Judicial District Court of the State of Nevada in and for
Carson City. On August 1, 2011, Plaintiff NVEST AB voluntarily dismissed its complaint, filed prior to consolidation of the Nevada
state court actions, and this action has been consolidated into the Shareholder Litigation.
(5)
John Wilcoxon v. Fushi Copperweld, Inc., Li Fu, Joseph
J. Longever, Wenbing Christopher Wang, John Francis Perkowski, Feng Bai, Jiping Hua, and Barry L. Raeburn
, Case No. A-10-628936-C
(“
Wilcoxon
”), filed on November 8, 2010, in the Eighth Judicial District Court of the State of Nevada in and
for Clark County. This action has been consolidated into the Shareholder Litigation.
(6)
Steven Antler v. Fushi Copperweld, Inc., Li Fu, Joseph
J. Longever, Wenbing Christopher Wang, Barry L. Raeburn, Feng Bai, Jiping Hua, and John Francis Perkowski
, Case No. A-10-628962-C
(“
Antler
”), filed on November 9, 2010, in the Eighth Judicial District Court of the State of Nevada in and
for Clark County. This action has been consolidated into the Shareholder Litigation.
(7)
Arthur Gober v. Li Fu, Joseph J. Longever, Wenbing Christopher
Wang, Barry L. Raeburn, Feng Bai, Jiping Hua, John Francis Perkowski, Abax Global Capital (Hong Kong) Ltd., and Fushi Copperweld,
Inc.,
Case No. A-10-629059-C (“
Gober
”), filed on November 10, 2010, in the Eighth Judicial District Court
of the State of Nevada in and for Clark County. This action has been consolidated into the Shareholder Litigation
(8)
Leticia Tejeda v. Fushi Copperweld, Inc., Li Fu, Joseph
J. Longever, Wenbing Christopher Wang, Barry L. Raeburn, Feng Bai, Jiping Hua, and John Francis Perkowski
, Case No. A-10-629261-C
(“
Tejeda
”), filed on November 12, 2010, in the Eighth Judicial District Court of the State of Nevada in and
for Clark County. This action has been consolidated into the Shareholder Litigation
(9)
James D. Kennedy v. Fushi Copperweld, Inc., Li Fu, Joseph
J. Longever, Wenbing Christopher Wang, Barry L. Raeburn, Feng Bai, Jiping Hua, and John Francis Perkowski
, Case No. 10-03518
(“
Kennedy
”), filed on November 23, 2010, in the Second Judicial District Court of the State of Nevada in and
for Washoe County. On August 1, 2011, Plaintiff Kennedy voluntarily dismissed his complaint, filed prior to consolidation of the
Nevada state court actions, and this action has been consolidated into the Shareholder Litigation.
(10)
Mohamed Hussien vs. Fushi Copperweld, Inc., Li Fu,
Joseph J. Longever, Wenbing Christopher Wang, Barry L. Raeburn, Feng Bai, Jiping Hua, and John Francis Perkowski
, Case No.
3:10-CV-00699-LRH-RAM (“
Hussien
”), filed on November 8, 2010, in the United States District Court for the District
of Nevada. The Court dismissed the
Hussien
action on April 7, 2011.
(11)
Thomas Turner vs. Fushi Copperweld, Inc., Li Fu, Joseph
J. Longever, Wenbing Christopher Wang, Barry L. Raeburn, Feng Bai, Jiping Hua, John Francis Perkowski
, Case No. 3-10-CV-00711-RCJ-VPC
(“
Turner
”), filed on November 15, 2010, in the United States District Court for the District of Nevada. The
Court dismissed the
Turner
action on May 9, 2011.
(12)
Seth Korber vs. Li Fu, Joseph Longever, Wenbing Christopher
Wang, Barry Raeburn, Feng Bai, Jiping Hua, John Perkowski, and Fushi Copperweld, Inc.
, Case No. 13510 (“
Korber
”),
filed on December 30, 2010, in the Chancery Court for Lincoln County, Tennessee, Seventeenth Judicial District at Fayetteville.
The Company and Mr. Wang have moved to dismiss this action, which motion remains pending before the Court.
QUESTIONS AND ANSWERS ABOUT THE MERGER
AND THE SPECIAL MEETING
The following questions
and answers are intended to address commonly asked questions regarding the merger, the merger agreement, and the special meeting.
These questions and answers may not address all questions that may be important to you as a Company stockholder. Please refer
to the section titled “Summary Term Sheet,” beginning on page 1, and the more detailed information contained
elsewhere in this proxy statement, the annexes to this proxy statement, and the documents referred to in this proxy statement,
all of which you should read carefully and in their entirety. You may obtain the documents incorporated by reference in this
proxy statement without charge by following the instructions in the section titled “Where You Can Find More Information,”
beginning on page 103.
|
Q.
|
When and where will the special meeting be held?
|
|
A.
|
The special meeting is scheduled to be held at [●]
on [●] at [●] a.m./p.m. (local time).
|
|
Q.
|
On what am I being asked to vote?
|
|
A.
|
At the special meeting, the Company’s stockholders
will be asked:
|
|
·
|
to consider
and vote on a proposal
to approve the merger
agreement, pursuant
to which Merger
Sub will be merged
with and into the
Company, with the
Company as the surviving
corporation and
a wholly owned subsidiary
of Parent, as further
described in the
sections titled
“Special Factors,”
beginning on page
10, and “The
Merger Agreement,”
beginning on page
76;
|
|
·
|
to consider
and vote
on a proposal
to approve,
on a non-binding
advisory
basis, the
compensation
that may
be payable
to the Company’s
named executive
officers
in connection
with the
merger; and
|
|
·
|
to consider
and vote
on a proposal
to adjourn
the special
meeting in
order to
take such
actions as
our board
of directors
determines
are necessary
or appropriate,
including
to solicit
additional
proxies,
if there
are insufficient
votes at
the time
of the special
meeting,
to adopt
the proposal
to approve
the merger
agreement.
|
Any other business that may
properly come before the special meeting, or any adjournment or postponement of the special meeting, by or at the direction of
the board of directors of the Company, will also be transacted at the special meeting.
|
Q.
|
Why am I receiving this document?
|
|
A.
|
You are receiving this proxy statement in connection with
the solicitation of proxies by the board of directors of the
Company to vote in favor of, among other things, approval
of the merger agreement. On June 28, 2012, the Company entered
into a merger agreement with Holdco, Parent and Merger Sub. A
copy of the merger agreement is attached to this proxy statement
as Annex A.
|
In order to complete the merger,
the Company stockholders must vote to approve the merger agreement. The Company is holding a special meeting of stockholders to
obtain this stockholder approval.
This proxy statement contains
important information about the merger and the special meeting of the stockholders of the Company, and you should read it carefully.
The enclosed voting materials allow you to vote your shares without attending the special meeting in person.
Your vote is extremely important.
If you do not plan on attending the special meeting and voting in person, we encourage you to vote as soon as possible. For more
information on how to vote your shares, please see the section titled “The Special Meeting,” beginning on page 70.
|
Q.
|
What vote is required to approve the merger agreement?
|
|
A.
|
The approval of the merger agreement requires the affirmative
vote of both:
|
|
·
|
the
holders of
at least
a majority
of the combined
voting power
of the outstanding
shares of
Company common
stock; and
|
|
·
|
the
holders of
60% of the
combined
voting power
of the outstanding
shares of
our common
stock, not
beneficially
owned by
the buyer
group or
any affiliate
of any buyer
group member.
For purposes
of the merger
agreement,
affiliates
of the buyer
group include,
but are not
limited to,
any person
that our
Special Committee,
upon due
inquiry,
reasonably
believes
has reached
an agreement
or understanding
with Parent
or any affiliate
of Parent,
to receive,
in connection
with the
consummation
of the merger,
some benefit
or value
other than
and in addition
to the merger
consideration
to be received
for such
person’s
shares. At
all times
until the
completion
of the special
meeting,
the Special
Committee
intends promptly
to review
any information
that may
come to the
attention
of it or
its advisors
that might
indicate
the existence
of any such
agreement
or understanding
and make
a final determination
regarding
the matter
consistent
with the
terms of
the merger
agreement.
No such additional
person has
been identified
by the special
committee
as of the
date of this
proxy statement,
and the buyer
group has
indicated
that it does
not intend
to enter
into any
such agreement
or understanding
prior to
completion
of the merger.
|
If these votes are not obtained,
the merger will not be completed. The Company may act to adjourn or postpone the special meeting in order to take such actions
as our board of directors determines are necessary or appropriate, including to solicit additional proxies, if there are insufficient
votes at the time of the special meeting, to adopt the proposal to approve the merger agreement. Adoption of a motion to adjourn
the special meeting will require a majority of the votes cast with respect to the proposal.
Please note that a failure to
vote your shares of common stock, an abstention from the vote, or a “broker non-vote” will have the same effect as
voting “AGAINST” the approval of the merger agreement. A “broker non-vote” occurs when a broker has not
received instructions from the beneficial holder as to how such holder’s shares are to be voted with respect to a particular
proposal.
|
Q.
|
What will happen in the merger?
|
|
A.
|
In the merger, Merger Sub will be merged with and into the Company.
Following the merger, the separate corporate existence of Merger Sub
will cease. The Company will continue as the surviving corporation in
the merger, as a wholly owned subsidiary of Parent. For more information,
please see the sections titled “Special Factors” and “The
Merger Agreement,” beginning on pages 10 and 76, respectively.
|
|
Q.
|
What are the rollover transactions?
|
|
A.
|
Concurrently with the execution and delivery of the merger
agreement, Holdco and Parent delivered to the Company a contribution
agreement. The parties to the contribution agreement, which include
certain members of the buyer group, have agreed, among other
things, to contribute their respective shares of Company common
stock (which we refer to as Rollover Shares) to Parent in exchange
for newly issued ordinary shares of Holdco. The effect of the
rollover transactions will be to allow members of the buyer group
who contribute their Rollover Shares to Parent to remain indirect
owners of the Company after the merger is completed.
|
|
Q.
|
What will the Company’s stockholders receive
in the merger?
|
|
A.
|
At the effective time of the merger, each share of Company
common stock issued and outstanding immediately prior to the
effective time will no longer be outstanding and will be cancelled
and cease to exist and will be converted automatically into the
right to receive the merger consideration of $9.50 in cash, without
interest, other than shares held in the treasury of the Company
or owned, directly or indirectly, by Parent, Holdco, Merger Sub,
or any wholly owned subsidiary of the Company. Any
shares held in the treasury of the Company or owned, directly
or indirectly, by Parent, Holdco, Merger Sub, or any of the Company’s
wholly owned subsidiaries immediately prior to the effective
time of the merger will be automatically cancelled and will cease
to exist, but no consideration will be delivered in exchange
for these shares. No merger consideration will be paid for shares
owned by certain members of the buyer group that are contributed
to Parent as part of the rollover transactions.
|
|
Q.
|
How will I receive the merger consideration to
which I am entitled?
|
|
A.
|
If you are a record holder of shares of Company common stock,
following the merger, and, if you hold certificated shares, after the
paying agent receives the proper documentation from you, the paying
agent will issue and deliver to you a check or wire transfer for the
amount of cash you are entitled to receive. If your shares are uncertificated
“book-entry” shares, you will be paid the merger consideration
promptly following the merger, without further action by you. Please
see the section titled “The Merger Agreement—Exchange and
Payment Procedures,” beginning on page 78.
|
If your shares of Company common
stock are held in “street name” by your bank, broker or other nominee, you will receive instructions from your bank,
broker or other nominee on any actions you may need to take to receive the merger consideration for those shares.
|
Q.
|
Am I entitled to dissenter’s rights in connection
with the merger?
|
|
A.
|
No. You do not have any dissenter’s rights or other
statutory rights of objection in connection with the merger under
Nevada law. Section 92A.390 of the NRS does not provide
for any right of dissent with respect to a plan of merger under
criteria described in that section of the NRS, which the Company
satisfies.
|
|
Q.
|
When is the merger expected to be completed?
|
|
A.
|
The merger will be completed when all of the conditions to
completion of the merger under the merger agreement have been
satisfied or, where permitted under applicable law and the merger
agreement, waived. The Company and the buyer group are working
toward satisfying these conditions and completing the merger
as quickly as possible. The Company and the buyer group currently
expect to complete the merger in the fourth quarter of 2012.
However, because the merger is subject to a number of conditions,
some of which are beyond the control of the Company and the members
of the buyer group, the exact time of the completion of the merger
cannot be predicted with certainty, and no assurances can be
given that the merger will actually be completed in the fourth
quarter of 2012.
|
|
Q.
|
Is the merger a taxable transaction to the Company’s
U.S. stockholders for U.S. federal income tax purposes?
|
|
A.
|
The receipt of cash by a U.S. holder (as defined in the section
titled “Special Factors—Certain Material U.S. Federal Income
Tax Consequences of the Merger for U.S. Holders,” beginning on
page 54) in exchange for such U.S. holder’s shares of common stock
of the Company in connection with the merger will be a taxable transaction
to such U.S. holder for U.S. federal income tax purposes. Please
see the section titled “Special Factors—Certain Material
U.S. Federal Income Tax Consequences of the Merger for U.S. Holders,”
beginning on page 54, for a more detailed description of certain material
U.S. federal income tax consequences of the merger to a U.S. holder.
|
|
Q.
|
What happens if the merger is not completed?
|
|
A.
|
If the merger agreement is not approved by the Company’s
stockholders, or if the merger is not completed for any other
reason, the Company stockholders will not receive any payment
for their shares. The members of the buyer group will
continue to collectively beneficially own approximately 29.4%
of the Company’s outstanding shares of common stock, and
the registration and trading status of the Company’s common
stock will continue unchanged.
|
|
Q.
|
Are there any other risks to me from the merger
that I should consider?
|
|
A.
|
Yes. There are risks associated with all business
combinations, including the merger. Please see the section
titled “Cautionary Statement Concerning Forward-Looking Information,”
beginning on page 66, for additional information. There is
also a risk that a U.S. holder may be subject to PRC tax on any gain
on the disposition of such U.S. holder’s Company common stock
pursuant to the merger. Please see the section titled “Special
Factors—Certain Material PRC Tax Consequences of the Merger for
U.S. Holders,” beginning on page 53, for additional information.
|
|
Q.
|
Where can I find more information about the parties
to the merger?
|
|
A.
|
You can find more information about the parties from the various
sources described in the section titled “Where You Can Find More
Information,” beginning on page 103.
|
|
Q.
|
How does the Company’s board of directors
recommend that I vote regarding the merger agreement?
|
|
A.
|
Our board of directors recommends that you vote “
FOR
”
the approval of the merger agreement.
|
You should read the section
titled “Special Factors—Recommendation of the Special Committee and Board of Directors and Their Reasons for the Merger,”
beginning on page 21 for a discussion of the factors that the Special Committee and our board of directors considered in making
their respective recommendations in connection with the merger. In addition, in considering the recommendation of our board of
directors with respect to the merger agreement, you should be aware that certain of our directors, officers, and employees have
interests in the merger that are different from, or in addition to, the interests of our stockholders generally. Please see the
section titled “Special Factors—Interests of Certain Persons in the Merger,” beginning on page 47, for a discussion
of those differences.
|
Q.
|
Why am I being asked to approve, on a non-binding
advisory basis, the compensation that may be payable to
the Company’s named executive officers in connection
with the merger?
|
|
A.
|
Section 14A of the Exchange Act requires that the Company provide
its stockholders an opportunity to approve, on a non-binding advisory
basis, the compensation that may be payable to the Company’s named
executive officers in connection with the merger. In accordance
with Section 14A of the Exchange Act, we are requesting our stockholders’
approval of a non-binding resolution described in the section titled
“Advisory Vote on Compensation in Connection with the Merger,”
beginning on page 95. The vote on this proposal is a vote
separate and apart from the vote to approve the merger agreement and
is not a condition to completion of the merger. Because the
vote is advisory, it will not be binding on either the Company or Parent,
regardless of whether or not the merger agreement is approved. The
proposal to approve, on a non-binding advisory basis, the compensation
that may be payable to the Company’s named executive officers
in connection with the merger will be approved, if a majority of the
votes cast on such proposal in person or by proxy vote “FOR”
the proposal (assuming the presence of a quorum).
|
|
Q.
|
How do the directors and executive officers of
the Company intend to vote at the special meeting?
|
|
A.
|
Our directors and executive officers have informed us that,
as of the date of this proxy statement, they intend to vote all
of their shares of Company common stock in favor of approval
of the merger agreement and the other proposals to be voted upon
at the special meeting. As of [●], 2012, the record date
for the special meeting, our directors and executive officers
owned, in the aggregate, [●] shares of Company common
stock, or, collectively, approximately [●]% of the outstanding
shares of Company common stock.
|
You should read the section
titled “Special Factors—Recommendation of the Special Committee and Board of Directors and their Reasons for the Merger,”
beginning on page 21, for a discussion of the factors that our board of directors considered in deciding to recommend the approval
of the merger agreement. In addition, in considering the recommendation of the Special Committee and the board of directors
with respect to the merger agreement, you should be aware that some of the Company’s directors, officers, and employees
may have interests in the merger that are different from, or in addition to, the interests of our stockholders generally. Please
see the section titled “Special Factors—Interests of Certain Persons in the Merger,” beginning on page 47, for
additional information.
Certain of the Company’s
directors, officers, and employees have agreed to vote all shares of Company common stock owned by them at the time of the special
meeting in favor of approval of the merger agreement and have given Parent an irrevocable proxy to vote the shares they own in
favor of approval of the merger agreement at the special meeting. Please see the section titled “Special Factors—Voting
Agreement,” beginning on page 46, for additional information. The voting agreement is attached to this proxy
statement as Annex C.
|
Q.
|
Who can vote at the special meeting?
|
|
A.
|
All of our holders of Company common stock of record as of
the close of business U.S. Eastern time on [●], 2012, the
record date for the special meeting, are entitled to receive
notice of, and to vote at, the special meeting. Each
holder of Company common stock is entitled to cast one vote on
each matter properly brought before the special meeting for each
share of Company common stock that such stockholder owned of
record, as of the record date.
|
|
Q.
|
What is the difference between holding shares as
a stockholder of record and as a beneficial owner?
|
|
A.
|
If your shares of Company common stock are registered directly
in your name with our transfer agent, Continental Stock Transfer
& Trust Company, 17 Battery Place, New York, New York 10004,
telephone number +1 (212) 509-4000, you are considered to be,
with respect to those shares of Company common stock, the “stockholder
of record.” This proxy statement and your proxy
card have been sent directly to you by the Company.
|
If your shares of Company common
stock are held through a bank, broker, or other nominee, you are considered to be the “beneficial owner” of those
shares of Company common stock, and those shares are said to be held in “street name.” In that case, this
proxy statement has been forwarded to you by your bank, broker, or other nominee, who is considered to be, with respect to those
shares of Company common stock, the stockholder of record. As the beneficial owner, you have the right to direct your
bank, broker, or other nominee how to vote your shares of Company common stock. Follow the instructions for voting
provided by such nominee. You are also invited to attend the special meeting. However, because you hold
your shares in “street name,” and are not the stockholder of record, you may not vote your shares in person at the
special meeting, unless you request and obtain a legal proxy from your broker or other agent prior to the special meeting and
present the proxy to the inspectors of election at the special meeting.
|
Q.
|
What is the procedure for voting my shares at the
special meeting?
|
|
A.
|
If you are the stockholder of record, you may vote your shares
of Company common stock at the special meeting in any of the
following ways:
|
|
·
|
in
person—you
may attend
the special
meeting and
cast your
vote there;
|
|
·
|
by
proxy—stockholders
of record
have a choice
of voting
by proxy:
|
|
o
|
by
calling
this
toll-free
number
[8●-●]
and
following
the
instructions
when
prompted;
|
|
o
|
by
accessing
this
Internet
website
and
following
the
instructions
provided
there:
[www.●.com];
or
|
|
o
|
by
filling
out,
signing
and
returning
the
enclosed
proxy
card
in
the
postage-paid
envelope
provided.
|
If you are a beneficial owner,
you will receive instructions from your bank, broker, or other nominee that you must follow to have your shares of Company common
stock voted. (Please see the preceding question to determine if you are a stockholder of record or a beneficial owner.) Those
instructions will identify which of the above choices are available to you to have your shares voted. Please note that
if you are a beneficial owner and wish to vote in person at the special meeting, you must obtain a legal proxy from your bank,
broker, or other nominee prior to the special meeting and present the proxy at the meeting.
A control number, located on
your proxy card, is used to verify your identity, to allow you to vote your shares of Company common stock, and to confirm that
your voting instructions have been properly recorded when voting over the Internet or by telephone. Please be aware
that if you vote over the Internet or by telephone, you may incur costs such as Internet access or telephone charges for which
you will be responsible.
|
Q
|
What do I need to do now?
|
|
A.
|
We urge you to read this proxy statement carefully, including
its annexes and the other documents referred to in or incorporated
by reference into this proxy statement, and to consider how the
merger affects you as a stockholder. After you have
done so, please vote as soon as possible.
|
|
Q.
|
If my bank, broker, or other nominee holds my shares
in “street name,” will it be able to vote
my shares for me without my instructions?
|
|
A.
|
No. Your bank, broker, or other nominee will only
be permitted to vote your shares of Company stock if you instruct
your bank, broker, or other nominee how to vote. You
should follow the procedures provided by your bank, broker, or
other nominee regarding the voting of your shares of Company
common stock. If you do not instruct your bank, broker,
or other nominee to vote your shares of Company common stock,
your shares of Company common stock will not be voted on any
of the proposals scheduled to come before the special meeting.
This will have the effect of a vote “AGAINST” the
proposal to approve the merger agreement, will have no effect,
assuming a quorum is present, on the proposal to approve, on
a non-binding advisory basis, the compensation that may be payable
to the Company’s named executive officers in connection
with the merger, and will have no effect on the proposal to adjourn
the special meeting in order to take such actions as our board
of directors determines are necessary or appropriate, including
to solicit additional proxies, if there are insufficient votes,
at the time of the special meeting, to adopt the proposal to
approve the merger agreement.
|
|
Q:
|
If my shares have been loaned out as of the record
date by my bank, broker, or other nominee, am I still
able to vote my shares?
|
|
A:
|
No. The right to vote shares of our stock belongs
to whomever has the shares as of the record date. If
your shares have been loaned out by your bank, broker, or other
nominee as of the record date, then the person to whom your shares
were loaned has the right to vote your shares, not you. You
can find out if your shares have been loaned out by calling and
asking your bank, broker, or other nominee.
|
|
Q:
|
What is the deadline for voting my shares at the
special meeting?
|
|
A:
|
In order to be counted at the special meeting, your proxy
card or electronic vote must be
received
by 11:59
p.m. (U.S. Eastern time) on
,
2012. You may also vote your shares in person by attending the
special meeting, in accordance with the instructions provided
elsewhere in this proxy statement. Whether or not you plan to
attend the special meeting, please complete, date, sign and return,
as promptly as possible, the enclosed proxy card in the accompanying
prepaid reply envelope, or submit your proxy by telephone or
the Internet by following the directions set forth above. If
you attend the special meeting and vote in person, your vote
by ballot will revoke any proxy previously submitted.
|
|
Q.
|
What happens if I do not vote, do not submit a
proxy, and do not instruct my bank, broker, or other nominee
to vote or abstain from voting?
|
|
A.
|
If you fail to vote, either in person or by proxy, or fail
to instruct your bank, broker, or other nominee how to vote,
or abstain from voting, it will have the same effect as a vote
cast “AGAINST” the proposal to approve the merger
agreement, it will have no effect, assuming a quorum is present,
on the proposal to approve, on a non-binding advisory basis,
the compensation that may be payable to the Company’s named
executive officers in connection with the merger, and it will
have no effect on the proposal to adjourn the special meeting
in order to take such actions as our board of directors determines
are necessary or appropriate, including to solicit additional
proxies, if there are insufficient votes at the time of the special
meeting to adopt the proposal to approve the merger agreement.
|
|
Q.
|
What should I do if I want to change my vote?
|
|
A.
|
You have the right to revoke your proxy at any time before
it is voted at the special meeting by filing with the Secretary
of the Company either a written notice of revocation or another
signed proxy bearing a later date. You may also revoke
your proxy by attending the special meeting and voting in person
(please see “What is the procedure for voting my shares
at the special meeting?” above regarding the steps necessary
to permit a beneficial owner to vote in person at the special
meeting).
|
|
Q.
|
What happens if I transfer my shares after the
record date for the special meeting?
|
|
A.
|
The record date for the special meeting is earlier than the
expected date of completion of the merger. Therefore,
if you transfer your shares of Company common stock after the
record date, but prior to completion of the merger, you will
retain your right to vote at the special meeting, but the person
to whom you transferred your shares of Company common stock will
have the right to be paid the merger consideration in respect
of those shares following completion of the merger.
|
|
Q.
|
Will any proxy solicitors be used in connection
with the special meeting?
|
|
A.
|
Yes. To assist in the solicitation of proxies,
the Company has engaged MacKenzie Partners, Inc.
|
|
Q.
|
If I have stock certificates, should I send my
stock certificates with my proxy card?
|
|
A.
|
No.
Please do not send your stock certificates
with your proxy card.
Promptly after the completion
of the merger, the paying agent will mail to you a letter of
transmittal with instructions for exchanging your Company stock
certificates for the merger consideration. If you
hold your shares of Company common stock in “street name,”
as described above under “What is the difference between
holding shares as a stockholder of record and as a beneficial
owner?”,—then your bank, broker, or other nominee
will contact you regarding payment of the merger consideration.
|
|
Q.
|
Who can help answer my questions?
|
|
A.
|
If you have more questions about the merger or the special
meeting, or desire additional copies of this proxy statement
or additional proxy cards, please contact MacKenzie, our proxy
solicitor, by calling collect +1 (212) 929-5500 or +1 (800) 322-2885
(toll-free in the United States), or emailing proxy@mackenziepartners.com.
|
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING
INFORMATION
Certain statements
in this proxy statement, the documents attached hereto and the documents incorporated by reference in this proxy statement are
forward-looking statements based on estimates and assumptions. These include statements as to such things as our financial condition,
results of operations, plans, objectives, future performance and business, as well as forward-looking statements relating to the
merger. Such forward-looking statements are based on facts and conditions as they exist at the time such statements are made.
Forward-looking statements are also based on current expectations, estimates, and projections about our business and the merger,
the accurate prediction of which may be difficult and involve the assessment of events beyond our control. The forward-looking
statements are further based on assumptions made by management, which management believes are reasonable. Forward-looking statements
can be identified by forward-looking language, including words such as “believes,” “anticipates,” “expects,”
“estimates,” “intends,” “may,” “might,” “plans,” “predicts,”
“projects,” “will,” “would,” and similar expressions, or the negative of these words. These
statements are not guarantees of the underlying expectations or future performance and involve risks and uncertainties that are
difficult to predict. Readers of this proxy statement are cautioned to consider these risks and uncertainties and not to place
undue reliance on any forward-looking statements.
The following factors,
among others, could cause actual results of matters related to the merger to differ materially from what is expressed or forecasted
in the forward-looking statements:
• the
satisfaction of the conditions to completion of the merger, including the approval of the merger agreement by our stockholders;
• the
risk that the merger may not be completed in a timely manner or at all, which may adversely affect our business and the price
of our shares;
• the
amount of the costs, fees, expenses, and charges related to the merger;
• the
occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement and, in
certain cases, the payment by us of a termination fee;
• the
effect of the pendency of the merger on our business relationships, operating results and business generally, including the potential
adverse effect on our business, properties, and operations because of certain covenants we agreed to in the merger agreement;
• diversion
of our management’s attention from our ongoing business operations;
• changes
in economic, business, competitive, technological and/or regulatory factors;
• the
effects and outcome of any legal proceedings that have been or may be instituted against us and/or others relating to the merger
agreement; and
• other
risks detailed in our Annual Report on Form 10-K for the year ended December 31, 2011 and our Quarterly Report on Form 10-Q for
the quarter ended March 31, 2012, including the information set forth in the sections “Risk Factors” and “Quantitative
and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2011, which
is incorporated herein by reference, and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, which is incorporated
herein by reference.
Please see the
section titled “Where You Can Find More Information” on page 103. You are cautioned not to place undue reliance on
forward-looking statements, which speak only as of the date of this proxy statement or as of the dates of the documents incorporated
by reference. Except as required by applicable law or regulation, we undertake no obligation to update these forward-looking statements
to reflect future events or circumstances.
PARTIES INVOLVED IN THE MERGER
The Company
The Company, a
Nevada corporation, is a holding company and, through its wholly owned subsidiaries, Fushi International (Dalian) Bimetallic Cable
Co. Ltd., and Copperweld Bimetallics LLC, is a leading manufacturer and innovator of copper-clad bimetallic engineered conductor
products for electrical, telecommunications, transportation, utilities and industrial applications. The Company’s principal
executive offices are located at TYG Center Tower B, Suite 2601, Dongsanhuan Bei Lu, Bing 2, Beijing, 100027 People’s Republic
of China, and its telephone number is +1 (615) 377-4183. Please see also the section titled “Where You Can Find More Information,”
beginning on page 103, for additional information. The Company’s common stock trades on the NASDAQ Global Select Market under
the ticker symbol “FSIN.” The closing price for shares of Company common stock on October 8, 2012 was $9.15.
As of October 8,
2012, the Company had 38,406,347 shares of common stock issued and outstanding and 473 holders of record of its common stock.
The Company has not paid any cash dividends on its common stock, and does not currently intend to pay cash dividends in the foreseeable
future.
Parent, Merger Sub and Holdco
Parent
Green Dynasty Limited
was formed under the laws of the Cayman Islands by Mr. Fu solely for the purpose of owning the Company after the merger and arranging
the financing for the merger. Parent is a wholly owned subsidiary of Holdco. Parent has not engaged in any business except for
activities incidental to its formation and in connection with the transactions contemplated by the merger agreement, including
the merger and related financing transactions. The registered office of Parent is Scotia Centre, 4th Floor, PO Box 2804, George
Town, Grand Cayman, KY1-1112, and its telephone number is (86) 411-87703333.
Merger Sub
Green Dynasty Acquisition,
Inc. was formed under the laws of the State of Nevada by Parent solely for the purpose of effecting the merger. Merger Sub is
a wholly owned subsidiary of Parent. Upon completion of the merger, Merger Sub will no longer exist. Merger Sub has not engaged
in any business except for activities incidental to its formation and in connection with the transactions contemplated by the
merger agreement, including the merger. The registered office of Merger Sub is c/o The Corporation Trust Company of Nevada, 311
S Division St., Carson City, Nevada 89703, and its telephone number is (86) 411-87703333.
Holdco
Green Dynasty Holdings
Limited was formed under the laws of the Cayman Islands by Mr. Fu solely for the purpose of owning Parent and arranging the financing
of the merger. Mr. Fu is currently the sole beneficial owner of Holdco. Prior to the closing of the merger, each of Mr. Fu, Ms.
Liu, Ms. Zhang, and Abax Lotus Ltd. will receive equity in Holdco in exchange for contributing their Rollover Shares to Parent
as part of the rollover transactions, and Mr. Fu, Abax Lotus Ltd. and AGC Asia Ltd. will receive equity in Holdco in exchange
for their equity contributions pursuant to their respective equity commitments. Holdco has not engaged in any business except
for activities incidental to its formation and in connection with the transactions contemplated by the merger agreement, including
the merger and related financing transactions. The registered office of Holdco is Scotia Centre, 4th Floor, PO Box 2804, George
Town, Grand Cayman, KY1-1112, and its telephone number is (86) 411-87703333.
During the past five
years, none of Parent, Merger Sub and Holdco, nor any of their officers or directors, has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or been a party to any judicial or administrative proceeding (except for
matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person
from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation
of federal or state securities laws.
Mr. Fu and Certain of his Affiliates
Mr. Li Fu
Mr. Fu is and has
been the chairman of the Company for the past five years. During the past five years until November 2009, he was chief executive
officer, and since then has been co-chief executive officer. Mr. Fu’s business address is c/o Fushi Copperweld, Inc.,
TYG Center Tower B, Suite 2601, Dongsanhuan Bei Lu, Bing 2, Beijing, 100027 People’s Republic of China. His telephone number
is (86) 411-87703333. He is a citizen of the PRC.
Wise Sun Investments Limited
Wise Sun Investments
Limited, or Wise Sun, was formed under the laws of the British Virgin Islands by Mr. Fu, principally to hold, transact, or
otherwise deal in the securities of the Company and other entities. Wise Sun is wholly owned by Mr. Fu. The registered office
of Wise Sun is Omar Hodge Building, 3rd Floor, PO Box 933, Road Town, Tortola, British Virgin Islands, and its telephone number
is (86) 411-87703333.
Ms. Xin Liu
Ms. Xin Liu is and
has been a full-time house wife for the past five years. The business address of Ms. Liu is c/o Fushi Copperweld, Inc., TYG
Center Tower B, Suite 2601, Dongsanhuan Bei Lu, Bing 2, Beijing, 100027 People’s Republic of China. Her telephone number
is (86) 411-87703333. She is a citizen of the PRC.
Ms. Yuyan Zhang
Ms. Yuyan Zhang is
and has been retired for the past five years. The business address of Ms. Zhang is c/o Fushi Copperweld, Inc., TYG Center Tower
B, Suite 2601, Dongsanhuan Bei Lu, Bing 2, Beijing, 100027 People’s Republic of China. Her telephone number is (86) 411-87703333.
She is a citizen of the PRC.
During the past five
years, none of Mr. Fu, Wise Sun, Ms. Liu and Ms. Zhang, nor any of Wise Sun’s officers or directors, has been convicted
in a criminal proceeding (excluding traffic violations or similar misdemeanors) or been a party to any judicial or administrative
proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final
order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws,
or a finding of any violation of federal or state securities laws.
Abax and Certain of its Affiliates
Abax Global Capital
Abax Global Capital
(which we refer to as Abax) is a Cayman Islands domiciled exempted company and is the managing shareholder of Abax Arhat Fund
and the sole shareholder of Abax (Hong Kong). Abax is also the investment manager to Abax Arhat Fund, Abax Upland Fund LLC, and
Abax Global Opportunities Fund. The business address of Abax is c/o Abax Global Capital (Hong Kong) Limited, Suite 6708, Two International
Finance Centre, 8 Finance Street, Central, Hong Kong, and its telephone number is +852-3602-1800.
The directors and
executive officers of each of Abax, Abax (Hong Kong) and AGC China Ltd. are Mr. Xiang Dong Yang (Managing Partner, Chief
Investment Officer, and Director), Mr. William Hoi Hin Chan (Partner), Mr. John Lu Goh (Managing Director) and Mr. Richard
Yee (Managing Director and General Counsel).
Abax Global
Capital (Hong Kong) Limited
Abax Global Capital
(Hong Kong) Limited (which we refer to as Abax (Hong Kong)) is a Hong Kong company and is the investment advisor to Abax and AGC
China Ltd. The business address of Abax (Hong Kong) is Suite 6708, Two International Finance Centre, 8 Finance Street, Central,
Hong Kong and its telephone number is +852-3602-1800.
Abax Arhat Fund
Abax Arhat Fund is
a Cayman Islands domiciled exempted company and, together with Abax Upland Fund LLC, owns 100% of Abax Global Opportunities Fund.
The directors of Abax Arhat Fund are Mr. Xiang Dong Yang, Mr. Richard Yee, Mr. Ron Silverton and Mr. Christopher Chang. The business
address of Abax Arhat Fund is c/o Abax Global Capital (Hong Kong) Limited, Suite 6708, Two International Finance Centre, 8 Finance
Street, Central, Hong Kong, and its telephone number is +852-3602-1800.
Abax Upland Fund LLC
Abax Upland Fund LLC
is a Delaware limited liability company and, together with Abax Arhat Fund, owns 100% of Abax Global Opportunities Fund. Abax
Claremont Ltd. is the managing member of Abax Upland Fund LLC. The business address of Abax Upland Fund LLC is c/o Abax Global
Capital (Hong Kong) Limited, Suite 6708, Two International Finance Centre, 8 Finance Street, Central, Hong Kong, and its telephone
number is +852-3602-1800.
Abax Claremont Ltd.
Abax Claremont Ltd.
is a Cayman Islands domiciled exempted company and the managing member of Abax Upland Fund LLC. The directors of Abax Claremont
Ltd. are Mr. Xiang Dong Yang, Mr. Richard Yee, Mr. Ron Silverton and Mr. Christopher Chang. The business address of Abax Claremont
Ltd. is c/o Abax Global Capital (Hong Kong) Limited, Suite 6708, Two International Finance Centre, 8 Finance Street, Central,
Hong Kong, and its telephone number is +852-3602-1800.
Abax Global Opportunities
Fund
Abax Global Opportunities
Fund is a Cayman Islands domiciled exempted company and the sole shareholder of Abax Lotus Ltd. The directors of Abax Global Opportunities
Fund are Mr. Xiang Dong Yang, Mr. Richard Yee, Mr. Ron Silverton and Mr. Christopher Chang. The business address of Abax Global
Opportunities Fund is c/o Abax Global Capital (Hong Kong) Limited, Suite 6708, Two International Finance Centre, 8 Finance Street,
Central, Hong Kong, and its telephone number is +852-3602-1800.
Abax Lotus Ltd.
Abax Lotus Ltd. is
a Cayman Islands domiciled exempted company and is a special purpose vehicle that is wholly owned by the Abax Global Opportunities
Fund, one of the affiliated funds of Abax. Abax Lotus Ltd. is a party to the limited guarantee, equity commitment letter, and
contribution agreement entered into in connection with the merger. The directors of Abax Lotus Ltd. are Mr. Xiang Dong Yang, Mr.
Richard Yee, Mr. Ron Silverton and Mr. Christopher Chang. The business address of Abax Lotus Ltd. is c/o Abax Global Capital (Hong
Kong) Limited, Suite 6708, Two International Finance Centre, 8 Finance Street, Central, Hong Kong, and its telephone number is
+852-3602-1800. Abax Lotus Ltd. currently holds 205,050 shares of Company common stock, representing approximately 0.5% of the
outstanding shares of Company common stock.
AGC Asia 6 Ltd.
AGC Asia 6 Ltd. is
a Cayman Islands domiciled exempted company and is one of the affiliated funds of Abax. Abax Global Capital (Hong Kong) Limited
is the investment advisor to AGC Asia 6 Ltd., and AGC China Ltd. is the investment manager to AGC Asia 6 Ltd. AGC Asia 6 Ltd.
is a party to the limited guarantee and equity commitment letter entered into in connection with the merger. The directors of
AGC Asia 6 Ltd. are Mr. Xiang Dong Yang and Mr. Richard Yee. The business address of AGC Asia 6 Ltd. is c/o Abax Global Capital
(Hong Kong) Limited, Suite 6708, Two International Finance Centre, 8 Finance Street, Central, Hong Kong, and its telephone number
is +852-3602-1800.
AGC China Ltd.
AGC China Ltd. is
a Cayman Islands domiciled exempted company and is the investment manager to AGC Asia 6 Ltd. The business address of AGC China
Ltd. is c/o Abax Global Capital (Hong Kong) Limited, Suite 6708, Two International Finance Centre, 8 Finance Street, Central,
Hong Kong, and its telephone number is +852-3602-1800.
Mr. Xiang Dong Yang
Mr. Xiang Dong Yang
is the ultimate controlling person of Abax and Abax Claremont Ltd. and may be deemed to beneficially own (as that term is defined
in Rule 13d-3 under the Exchange Act) all shares of Company common stock that are owned beneficially by Abax Lotus Ltd. Mr. Xiang
Dong Yang is also the ultimate controlling shareholder of Abax (Hong Kong). Mr. Xiang Dong Yang’s business address is c/o
Abax Global Capital (Hong Kong) Limited, Suite 6708, Two International Finance Centre, 8 Finance Street, Central, Hong Kong, and
his telephone number is +852-3602-1800. Mr. Xiang Dong Yang is a citizen of Hong Kong. During the past five years, Mr. Xiang Dong
Yang has not been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors), nor has he been a
party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that
resulted in a judgment, decree or final order enjoining him from future violations of, or prohibiting activities subject to, federal
or state securities laws, or a finding of any violation of federal or state securities laws.
During the past five
years, none of Abax, Abax (Hong Kong), Abax Arhat Fund, Abax Upland Fund LLC, Abax Claremont Ltd., Abax Global Opportunities Fund,
Abax Lotus Ltd., AGC Asia 6 Ltd., and AGC China Ltd., nor any of their respective officers or directors, has been convicted in
a criminal proceeding (excluding traffic violations or similar misdemeanors) or been a party to any judicial or administrative
proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final
order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws,
or a finding of any violation of federal or state securities laws.
THE SPECIAL MEETING
General Information
Our board of directors
is distributing this proxy statement to solicit proxies to be voted at the special meeting of the Company’s stockholders
described below. Your vote is very important. For this reason, our board of directors is requesting that you allow your shares
to be represented at the special meeting by the proxies named on the enclosed proxy card. The Company began mailing this proxy
statement and the form of proxy on or about [●].
Date, Time, and Place of the Special
Meeting
The special meeting
is scheduled to be held at [●] on [●] at [●] a.m./p.m. (local time).
Purpose of the Special Meeting
At the special meeting,
the Company’s stockholders will be asked:
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to
consider and vote
on a proposal to
approve the merger
agreement, pursuant
to which Merger
Sub will be merged
with and into the
Company, with the
Company as the
surviving corporation
and a wholly owned
subsidiary of Parent,
as further described
in the sections
titled “Special
Factors,”
beginning on page
10, and “The
Merger Agreement,”
beginning on page
76;
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to
consider
and vote
on a proposal
to approve,
on a non-binding
advisory
basis, the
compensation
that may
be payable
to the Company’s
named executive
officers
in connection
with the
merger;
and
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to
consider
and vote
on a proposal
to adjourn
the special
meeting
in order
to take
such actions
as our board
of directors
determines
are necessary
or appropriate,
including,
without
limitation,
to solicit
additional
proxies,
if there
are insufficient
votes at
the time
of the special
meeting
to adopt
the proposal
to approve
the merger
agreement.
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Any other business that may properly come
before the special meeting, or any adjournment or postponement of the special meeting, by or at the direction of the board of
directors of the Company, will also be transacted at the special meeting.
Record Date; Voting
Our board of directors
has fixed [●], as of the close of business (U.S. Eastern time), as the record date for the determination of stockholders
entitled to this notice and to vote at the special meeting or any adjournments or postponements thereof.
Each share of our
common stock entitles the stockholder to one vote at the special meeting.
At the close of business
on the record date for the special meeting, there were [●] shares of Company common stock issued and outstanding. As of
the record date, members of the buyer group collectively beneficially owned approximately 29.4% of the Company’s outstanding
shares of common stock.
Mr. Fu, Wise Sun,
Ms. Liu, Ms. Zhang, and Abax Lotus Ltd. have entered into a voting agreement which requires them to vote their shares in favor
of approval of the merger agreement at the special meeting. By entering into the voting agreement, they also granted Parent an
irrevocable proxy to vote their shares in favor of approval of the merger agreement at the special meeting. Please
see the section titled “Special Factors—Voting Agreement,” beginning on page 46. The voting agreement is attached
to this proxy statement as Annex C.
Quorum
The presence, in person
or by proxy, of stockholders holding at least a majority of the shares of Company common stock issued, outstanding, and entitled
to vote at the special meeting constitutes a quorum. Shares of Company common stock represented at the special meeting but not
voted, such as shares of Company common stock for which a stockholder directs an “abstention” from voting, will be
counted for purposes of establishing a quorum. A quorum is necessary to transact business at the special meeting. Once a share
of Company common stock is represented at the special meeting, it will be counted for the purpose of determining a quorum at the
special meeting and any adjournment of the special meeting, unless a new record date is required to be established. However, if
a new record date is set for the adjourned special meeting, then a new quorum will have to be established. To establish a quorum,
an aggregate of [●] shares must be represented at the special meeting either by proxy or by stockholders present and entitled
to vote.
Recommendation of the Special Committee
After consideration
of various factors described in the section entitled “Special Factors—Recommendation of the Special Committee and
the Board of Directors and Their Reasons for the Merger,” the Special Committee unanimously (i) determined that the merger
agreement and the transactions contemplated thereby, including the merger, are advisable to, and in the best interests of, the
unaffiliated stockholders, and (ii) recommended that the board of directors (1) approve and declare advisable the merger agreement
and the transactions contemplated thereby, including the merger, (2) direct that the merger agreement be submitted to the Company’s
stockholders, and (3) recommend that the unaffiliated stockholders approve the merger agreement.
Please see the section
titled “Special Factors—Recommendation of the Special Committee and Board of Directors and Their Reasons for the Merger,”
beginning on page 21 for additional information.
Recommendation of the Company’s
Board of Directors
After carefully considering
the unanimous recommendation of the Special Committee, our board of directors, with directors Mr. Fu, Mr. Joseph J. Longever,
and Mr. Wenbing Christopher Wang abstaining from voting, (i) adopted the merger agreement and authorized and approved the merger
and other transactions contemplated by the merger agreement, (ii) determined that the merger and the merger agreement, including
the merger consideration payable pursuant thereto, are fair to and in the interests of the Company and its unaffiliated stockholders
and declared advisable the execution of the merger agreement and consummation of the transactions contemplated thereby, including
the merger, and (iii) directed that the merger agreement be submitted to stockholders and recommended that they approve the merger
agreement.
Please see the section
titled “Special Factors—Recommendation of the Special Committee and Board of Directors and Their Reasons for the Merger,”
beginning on page 21, for additional information.
Attendance
Except as set forth
below, only stockholders of record or their duly authorized proxies have the right to attend the special meeting or any adjournment
or postponement thereof. To gain admittance to the special meeting, you must present valid photo identification, such as a driver’s
license or passport. If your shares of Company common stock are held through a bank, broker, or other nominee, please bring to
the special meeting a copy of your broker statement evidencing your beneficial ownership of Company common stock and photo identification;
note, however, that to vote, you will need to obtain a legal proxy from your broker or other agent. If you are the representative
of a corporate or institutional stockholder, you must present valid photo identification along with proof that you are such stockholder’s
authorized representative.
Vote Required
Approval of the merger
agreement requires the Company to obtain the affirmative vote of (a) the holders of at least a majority of the combined voting
power of the outstanding shares of Company common stock, and (b) the holders of at least 60% of the combined voting power of the
outstanding shares of our common stock not beneficially owned by the buyer group or any affiliate of any buyer group member. For
purposes of the merger agreement, affiliates of the buyer group include, but are not limited to, any person that our Special Committee
reasonably believes has reached an agreement or understanding with Parent or any affiliate of Parent, to receive, in connection
with the consummation of the merger, some benefit or value other than and in addition to the merger consideration to be received
for such person’s shares. At all times until the completion of the special meeting, the Special Committee intends promptly
to review any information that may come to the attention of it or its advisors that might indicate the existence of any such agreement
or understanding and make a final determination regarding the matter consistent with the terms of the merger agreement. No such
additional person has been identified by the special committee as of the date of this proxy statement, and the buyer group has
indicated that it does not intend to enter into any such agreement or understanding prior to completion of the merger.
On the proposal to
approve the merger agreement, you may vote “FOR” or “AGAINST,” or you may abstain from voting.
The proposal to approve,
on a non-binding advisory basis, the compensation that may be payable to the Company’s named executive officers in connection
with the merger will be approved, if a majority of the votes cast on such proposal in person or by proxy vote “FOR”
the proposal (assuming the presence of a quorum at the special meeting).
Adoption of a proposal
to adjourn the special meeting requires an affirmative vote of a majority of the votes cast with respect to the proposal.
If your shares of
Company common stock are registered directly in your name with our transfer agent, Continental Stock Transfer & Trust Company,
you are considered, with respect to those shares of Company common stock, the “stockholder of record.” This
proxy statement and proxy card have been sent directly to you by the Company.
If your shares of
Company common stock are held through a bank, broker, or other nominee, you are considered the “beneficial owner”
of shares of Company common stock held in “street name.” In that case, this proxy statement has been forwarded
to you by your bank, broker, or other nominee, and, as the beneficial owner, you have the right to direct your bank, broker, or
other nominee how to vote your shares by following their instructions for voting. You are also invited to attend the
special meeting. However, because you are not the stockholder of record, you may not vote your shares in person at
the special meeting unless you request and obtain a legal proxy from your broker or other agent.
Abstentions and Broker Non-Votes
Abstentions will not
be counted as votes cast in favor of or against the proposal to approve the merger agreement, but they will count for the purpose
of determining whether a quorum is present.
If you fail to submit a proxy and fail to vote in person at the special
meeting, or mark your proxy to abstain, the effect will be the same as a vote “AGAINST” the proposal to approve the
merger agreement; it will have no effect, assuming a quorum is present, on the proposal to approve, on a non-binding advisory
basis, the compensation that may be payable to the Company’s named executive officers in connection with the merger; and
it will have no effect on the proposal to adjourn the special meeting in order to take such actions as our board of directors
determines are necessary or appropriate, including to solicit additional proxies, if there are insufficient votes at the time
of the special meeting, to adopt the proposal to approve the merger agreement.
Under the NASDAQ rules,
banks, brokers, or other nominees who hold shares in street name for customers do not have discretionary authority to vote their
customers’ shares with respect to any of the proposals. Accordingly, if banks, brokers, or other nominees do not receive
specific voting instructions for a specific proposal(s) from the beneficial owners of such shares, they may not vote such shares
with respect to such proposal(s), which we refer to generally as broker non-votes. Only your shares of Company common
stock held in street-name that you instruct the street name holder to vote
“FOR”
approval of the merger agreement
will be counted as a “yes” vote on such proposal.
Failing to provide voting instructions to your bank,
broker, or other nominee or instructing the street name holder to abstain is the same as voting “AGAINST” the proposal
to approve the merger agreement; it will have no effect, assuming a quorum is present, on the proposal to approve, on a non-binding
advisory basis, the compensation that may be payable to the Company’s named executive officers in connection with the merger;
and it will have no effect on the proposal to adjourn the special meeting in order to take such actions as our board of directors
determines are necessary or appropriate, including to solicit additional proxies, if there are insufficient votes at the time
of the special meeting, to adopt the proposal to approve the merger agreement.
Stock Ownership and Interests of
Certain Persons
As of [●],
the record date for the special meeting, our directors and executive officers owned, in the aggregate, [●] shares of Company
common stock
,
or approximately [●]% of the outstanding shares of Company common stock. Our directors and
current executive officers have informed us that, as of the date of this proxy statement, they intend to vote all of their shares
of Company common stock in favor of the approval of the merger agreement. Mr. Fu, the Company’s Chairman and Co-Chief Executive
Officer, who is a member of the buyer group, pursuant to the terms of the voting agreement, has agreed to vote all shares owned
by him at the time of the special meeting in favor of the approval of the merger agreement and has given Parent an irrevocable
proxy to vote his shares in favor of approval of the merger agreement at the special meeting. Please see the section titled “Special
Factors—Voting Agreement,” beginning on page 46. The voting agreement is attached to this proxy statement as Annex C.
Certain members
of our management and of our board of directors have interests that may be different from, or in addition to, those of our stockholders
generally. Please see the section titled “Special Factors—Interests of Certain Persons in the Merger,”
beginning on page 47.
Voting Procedures
If you are a stockholder
of record, you may have your shares of Company common stock voted on matters presented at the special meeting in any of the following
ways (please see the section titled “The Special Meeting—Vote Required,” beginning on page 72, to determine
if you are a stockholder of record or a beneficial owner):
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in
person—you
may attend
the special
meeting and
cast your
vote there;
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by
proxy—stockholders
of record
have a choice
of voting
by proxy:
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by
calling
this
toll-free
number
[8●-●]
and
following
the
instructions
when
prompted;
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accessing
this
Internet
website
and
following
the
instructions
provided
there:
[www.●.com];
or
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filling
out,
signing,
and
returning
the
enclosed
proxy
card
in
the
postage-paid
envelope
provided.
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If you are a beneficial
owner, you will receive instructions from your bank, broker, or other nominee that you must follow in order to have your shares
of Company common stock voted at the special meeting. (Please see “The Special Meeting—Vote Required,”
beginning on page 72, to determine if you are a stockholder of record or a beneficial owner.) Please note that if you
are a beneficial owner and wish to vote in person at the special meeting, you must obtain a legal proxy from your bank, broker,
or other nominee prior to the special meeting, and present the proxy at the meeting.
A control number,
located on your proxy card, is designed to verify your identity, allow you to vote your shares of Company common stock, and confirm
that your voting instructions have been properly recorded when voting over the Internet or by telephone. Please be
aware that if you vote over the Internet or by telephone, you may incur costs such as Internet access or telephone charges for
which you will be responsible.
Please refer to the
instructions on your proxy or voting instruction card to determine the deadlines for submitting a proxy over the Internet or by
telephone.
Please do NOT send in your stock certificates with your proxy card.
If you are a holder of
stock certificates, when the merger is completed, a separate letter of transmittal will be mailed to you that will enable you
to receive the per share merger consideration in exchange for your stock certificates.
If you vote by proxy,
regardless of the method you choose to vote, the individuals named on the enclosed proxy card (or their valid designees), will
vote your shares of Company common stock in the way that you indicate. When completing the Internet or telephone voting
procedures, or filling out the proxy card, you may specify whether your shares of Company common stock should be voted for or
against, or whether you wish to abstain from voting, on all, some, or none of the specific items of business to come before the
special meeting.
If you properly sign
your proxy card, but do not mark the boxes showing how your shares of Company common stock should be voted on a matter, the shares
of Company common stock represented by your properly signed proxy will be voted “
FOR
” the proposal to approve
the merger agreement,
“FOR”
the proposal to approve, on a non-binding advisory basis, the compensation that
may be payable to the Company’s named executive officers in connection with the merger, and “
FOR
” any
proposal to adjourn the special meeting, to take such actions as our board of directors determines are necessary or appropriate,
including to solicit additional proxies, if there are insufficient votes at the time of the special meeting to adopt the proposal
to approve the merger agreement.
IT IS IMPORTANT
THAT YOU VOTE YOUR SHARES OF COMPANY COMMON STOCK PROMPTLY. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING,
PLEASE COMPLETE, DATE, SIGN, AND RETURN, AS PROMPTLY AS POSSIBLE, THE ENCLOSED PROXY CARD IN THE ACCOMPANYING PREPAID REPLY ENVELOPE,
OR SUBMIT YOUR PROXY BY INTERNET OR TELEPHONE. STOCKHOLDERS WHO ATTEND THE SPECIAL MEETING MAY REVOKE THEIR PROXIES
BY VOTING IN PERSON, IF THEY ARE STOCKHOLDERS OF RECORD OR ARE IN POSSESSION OF LEGAL PROXIES FROM A NOMINEE HOLDER
.
Other Business
As of the date of
this proxy statement, our board of directors is not aware of any business to be acted upon at the special meeting other than the
proposal to approve the merger agreement described herein, the proposal to approve, on a non-binding advisory basis, the compensation
that may be payable to the Company’s named executive officers in connection with the merger and the adjournment proposal. If,
however, other matters are properly brought before the special meeting, or when an adjourned meeting is reconvened, the persons
appointed as proxies in the proxy cards will have discretion to vote or act on such matters according to their judgment.
Revocation of Proxies
Your proxy is revocable. If
you are a registered stockholder, you can revoke your proxy at any time before it is voted at the special meeting by:
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submitting
a new proxy
with a later
date, by
using the
Internet
or telephone
voting procedures
described
above, or
by completing,
signing,
dating and
submitting
a new proxy
card by
mail to
the Company;
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attending
the special
meeting
and voting
in person;
or
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sending
written
notice of
revocation
to the Company
Secretary.
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Attending the special
meeting without taking one of the actions described above will not in itself revoke your proxy. Please note that if
you want to revoke your proxy by mailing a new proxy card to the Company or by sending a written notice of revocation to the Company’s
Secretary, you should ensure that you mail your new proxy card or written notice of revocation in sufficient time for it to be
received by the Company before the day of the special meeting.
If you hold your shares
in “street name” through a bank, broker, or other nominee, you will need to follow the instructions provided to you
by your bank, broker, or other nominee to revoke your proxy or submit new voting instructions.
Adjournments and Postponements
The Company may request
the adjournment of the special meeting, and stockholders, by a majority of votes cast with respect to the matter, may approve
any adjournment of the special meeting, whether or not a quorum exists, without further notice, other than by an announcement
made at the special meeting, including, if there are not sufficient votes at the time of the special meeting to approve the merger
agreement, to permit the further solicitation of proxies.
Under the merger agreement,
the Company is permitted to delay, postpone, or cancel the special meeting (but not beyond June 27, 2013), if, in the good faith
judgment of our board of directors, acting upon a recommendation of the Special Committee, a failure to do so would be inconsistent
with their respective fiduciary duty obligations. The Company is permitted to delay the meeting in order to allow for
completion of the proxy solicitation process.
Anticipated Date of Completion of
the Merger
The merger is anticipated
to be completed in the fourth quarter of 2012.
Rights of Dissenting Stockholders
You do not have any
dissenter’s rights or other statutory rights of objection in connection with the merger under Nevada law. Section
92A.390 of the NRS does not provide any right of dissent with respect to a plan of merger under criteria described in that section
of the NRS, which the Company satisfies.
Solicitation of Proxies
Our board of directors
is soliciting proxies to be voted at the special meeting and any reconvening of the meeting if it should be adjourned.
Proxies are being
solicited through the mail. The Company has engaged MacKenzie Partners, Inc., or MacKenzie, to assist in the solicitation
of proxies for the special meeting, for a fee of $15,000. The Company also has agreed to reimburse MacKenzie for reasonable
out-of-pocket expenses and to indemnify MacKenzie against certain losses arising out of its proxy solicitation services. The
directors, executive officers, and certain other employees of the Company may also solicit proxies personally, by telephone, fax,
e-mail, the Internet, press release, or other means, without additional compensation for such activities. The Company
will bear all expenses relating to the solicitation of proxies, except that Parent and the Company have agreed to share equally
expenses incurred in connection with filing, printing, and mailing this proxy statement.
The Company will request
banks, brokers, and other custodians, fiduciaries, and nominees to forward proxy soliciting material to the beneficial owners
who hold their shares through such banks, brokers, or nominees, and to obtain their voting instructions. The Company will reimburse
such banks, brokers, or nominees at approved rates for their reasonable expenses incurred in connection with the foregoing activities.
Availability of Documents Incorporated
by Reference
Documents incorporated
into this proxy statement by reference (excluding exhibits to those documents unless the exhibit is specifically incorporated
by reference into those documents) will be provided without charge by first class mail to each person to whom this proxy statement
is delivered upon written or oral request of such person to MacKenzie.
Questions and Additional Information
If you need assistance
in completing your proxy card or have questions regarding the merger or special meeting, or to request additional copies of the
proxy statement or the proxy card, please contact MacKenzie at +1 (212) 929-5500 (collect) or at +1 (800) 322-2885 (toll-free
in the United States), by email at proxy@mackenziepartners.com, or at 105 Madison Avenue, New York, New York 10016.
THE MERGER AGREEMENT
This section describes the material
terms of the merger agreement. The description in this section and elsewhere in this proxy statement is qualified in its entirety
by reference to the complete text of the merger agreement, a copy of which is attached as
Annex A
and is incorporated
by reference into this proxy statement. This summary does not purport to be complete and may not contain all of the information
about the merger agreement that is important to you. We encourage you to read the merger agreement carefully and in its entirety.
This section is not intended to provide you with any factual information about us. Such information can be found elsewhere in
this proxy statement and in the public filings we make with the SEC, as described in the section entitled, “Where You Can
Find More Information,” beginning on page 103.
Explanatory Note Regarding the Merger
Agreement
The merger agreement is included to provide
you with information regarding its terms. Factual disclosures about the Company contained in this proxy statement or in the Company’s
public reports filed with the SEC may supplement, update or modify the factual disclosures about the Company contained in the
merger agreement. The representations, warranties and covenants made in the merger agreement by the Company, Holdco, Parent, and
Merger Sub were qualified and subject to important limitations agreed to by the Company, Holdco, Parent, and Merger Sub in connection
with negotiating the terms of the merger agreement. In particular, in your review of the representations and warranties contained
in the merger agreement and described in this summary, it is important to bear in mind that the representations and warranties
were negotiated with the principal purposes of establishing the circumstances in which a party to the merger agreement may have
the right not to consummate the merger, if the representations and warranties of the other party prove to be untrue, because of
a change in circumstance or otherwise, and allocating risk between the parties to the merger agreement, rather than establishing
matters as facts. The representations and warranties may also be subject to a contractual standard of materiality different from
those generally applicable to stockholders and reports and documents filed with the SEC and, in some cases, were qualified by
the matters contained in the disclosure schedule that the Company delivered in connection with the merger agreement, which disclosures
were not reflected in the merger agreement. Moreover, information concerning the subject matter of the representations and warranties,
which do not purport to be accurate as of the date of this proxy statement, may have changed since the date of the merger agreement,
and subsequent developments or new information qualifying a representation or warranty may have been included in this proxy statement.
Effects of the Merger; Directors
and Officers; Articles of Incorporation; Bylaws
The merger agreement provides for the merger
of Merger Sub with and into the Company upon the terms, and subject to the conditions, set forth in the merger agreement. As the
surviving corporation, the Company will continue to exist following the merger.
The board of directors of the surviving
corporation will, from and after the effective time of the merger, consist of the directors of Merger Sub until their successors
and assigns have been duly elected and qualified or until their earlier death, resignation or removal. The officers of the Company
immediately prior to the effective time of the merger will, from and after the effective time of the merger, be the officers of
the surviving corporation, each to hold office until the earlier of the officer’s resignation or removal.
The articles of incorporation of Merger
Sub, as in effect immediately prior to the effective time of the merger will, by virtue of the merger, be the articles of incorporation
of the surviving corporation, until thereafter amended in accordance with their terms and as provided by law. The bylaws of Merger
Sub, as in effect immediately prior to the effective time of the merger will, by virtue of the merger, be the bylaws of the surviving
corporation until thereafter amended in accordance with their terms, the articles of incorporation of the surviving corporation,
and as provided by law.
Following the completion of the merger,
the Company common stock will be delisted from the NASDAQ Global Select Market and deregistered under the Exchange Act and will
cease to be publicly traded.
Closing and Effective Time of the
Merger
The closing of the merger will take place
on the second business day following the satisfaction or waiver in accordance with the merger agreement of all of the conditions
to closing of the merger (described under “Conditions to the Merger” below) (other than the conditions that by their
terms cannot be satisfied until the closing of the merger, but subject to satisfaction or waiver of those conditions).
The effective time of the merger will occur
upon the filing of the articles of merger with the Secretary of State of the State of Nevada (or at such later date as we and
Parent may agree and specify in the articles of merger).
Treatment of Company Common Stock,
Stock Options, and Restricted Shares
Common Stock
At the effective time of the merger,
each
share of Company common stock issued and outstanding immediately prior to the effective time will no longer be outstanding and
will be cancelled and cease to exist and will be converted automatically into the right to receive the merger consideration of
$9.50 in cash, without interest, which we refer to as the per share merger consideration, other than shares held in the treasury
of the Company or owned, directly or indirectly, by Parent, Holdco, Merger Sub, or any wholly owned subsidiary of the Company.
Any shares held in the treasury of the Company or owned, directly or indirectly, by Parent, Holdco, Merger Sub, or any of our
wholly owned subsidiaries immediately prior to the effective time will be automatically cancelled and will cease to exist, but
no consideration will be delivered in exchange for these shares
.
No
merger consideration will be paid for shares owned by certain members of the buyer group that are contributed to Parent as part
of the rollover transactions.
Each share of common stock of Merger Sub issued and outstanding immediately prior to the
effective time of the merger will be converted into and become one validly issued, fully paid and nonassessable share of common
stock of the surviving corporation.
Stock Options
Immediately prior to the effective time
of the merger, each then-outstanding option to purchase shares of Company common stock granted under any equity plan of the Company,
whether or not vested or exercisable, will become fully vested and exercisable (contingent upon the occurrence of the merger)
and will be converted into the right to receive, and the Company will pay to each such individual holder, at or promptly after
the effective time of the merger, an amount in cash equal to the product of (i) the excess, if any, of the merger consideration
of $9.50 per share over the applicable exercise price per share of such stock option and (ii) the number of shares of Company
common stock such holder could have purchased had such holder exercised such stock option in full immediately prior to the effective
time of the merger.
Restricted Shares
Immediately prior to the effective time
of the merger, each then-outstanding restricted share of Company common stock granted under any equity plan of the Company, will
vest in full, contingent upon the occurrence of the merger (and all restrictions thereon will immediately lapse), and be converted
at the effective time into the right to receive an amount in cash equal to $9.50.
Exchange and Payment Procedures
Prior to the effective time of the merger,
Parent will enter into an agreement with a paying agent to receive the merger consideration. At or prior to the effective time
of the merger, Holdco or Parent will deposit, or will cause to be deposited, with the paying agent sufficient funds to make payment
of the aggregate per share merger consideration to the holders of shares of Company common stock entitled to receive it. With
respect to shares of Company common stock held by The Depository Trust Company, or DTC, if the closing of the merger occurs (a)
at or prior to 11:30 a.m., U.S. Eastern time, on the date of the closing of the merger, the paying agent will transmit to DTC
an amount in cash in immediately available funds equal to the number of shares of Company common stock held of record by DTC immediately
prior to the effective time of the merger multiplied by the per share merger consideration, which we refer to as the DTC payment,
or (b) after 11:30 a.m., U.S. Eastern time, on the closing date of the merger, the paying agent will transmit the DTC payment
to DTC on the first business day after the date of the closing of the merger.
Promptly, and in any event not later than
the second business day after the effective time of the merger, each record holder, as of the effective time of the merger, of
a certificate or certificates representing outstanding shares of Company common stock will be sent a letter of transmittal describing
how such holder may exchange its certificated shares of Company common stock for the per share merger consideration. Promptly,
and in any event not later than the second business day after the effective time of the merger, each record holder of uncertificated
shares of Company common stock represented by book-entry will receive an amount in cash equal to the product of the number of
book-entry shares of Company common stock held by such holder multiplied by the per share merger consideration.
You should NOT return your stock certificates
with the enclosed proxy card, and you should NOT forward your stock certificates to the paying agent without a letter of transmittal.
If you are the record holder of certificated
shares of Company common stock, you will not be entitled to receive the per share merger consideration until you deliver a duly
completed and executed letter of transmittal to the paying agent and surrender your stock certificate or certificates to the paying
agent. If you are the record holder of uncertificated shares of Company common stock represented by book-entry, you will be paid
the per share merger consideration promptly, and in any event within two business days of completion of the merger.
No interest will be paid or accrued on
the cash payable as the merger consideration upon your surrender of your certificate or certificates. Parent, the surviving corporation,
and the paying agent will be entitled to deduct and withhold any applicable taxes from the merger consideration. Any sum that
is withheld will be treated as having been paid to the person in respect of whom it is withheld.
After the effective time of the merger,
the stock transfer books of the Company will be closed, and thereafter there will be no further registration of transfers of shares
of Company common stock that were outstanding prior to the effective time of the merger. If, after the effective time of the merger,
stock certificates are presented to the surviving corporation for transfer, such stock certificates will be cancelled and exchanged
for the merger consideration.
After the date that is six months after
the effective time of the merger, Parent may require the paying agent to deliver to it any funds (including any interest received
with respect thereto) that have not been disbursed to holders of Company common stock, and thereafter such holders will be entitled
to look to Parent and the surviving corporation (subject to abandoned property, escheat or other similar laws), only as general
creditors thereof, with respect to the merger consideration payable to them. If a record owner of shares has transferred them
to you, but the transfer is not registered in the transfer records of the Company, you will not be paid for the shares, unless
the applicable letter of transmittal is accompanied by all documents reasonably required by Parent to evidence such transfer and
to evidence that any applicable stock transfer taxes have been paid or are not applicable.
If you have lost a stock certificate,
or if it has been stolen or destroyed, then, before you will be entitled to receive the per share merger consideration, you will
have to submit an affidavit of the loss, theft or destruction, and, if required by the paying agent, post a bond in a customary
amount as indemnity against any claim that may be made against it or the surviving corporation with respect to such certificate.
These procedures will be described in the letter of transmittal that you will receive, which you should read carefully in its
entirety.
Financing Covenant; Company Cooperation
Each of Holdco and Parent will use its
commercially reasonable efforts to arrange and obtain the financing for the merger on the terms and conditions described in the
financing documents and will not permit any amendment or modification to be made to, or any waiver of any provision or remedy
under, any financing documents, provided that Holdco, Parent and Merger Sub may replace, amend or supplement the debt financing
agreement, if such replacements, amendments or supplements would not (x) expand upon the conditions precedent to the debt
financing as set forth in the debt financing agreement in any way or (y) prevent or impair the availability of the financing
or materially delay the financing under the debt financing agreement or the consummation of the transactions contemplated by the
merger agreement.
Each of Holdco and Parent will use its
commercially reasonable efforts to:
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maintain
in full force
and effect
the financing
documents
until the
transactions
contemplated
by the merger
agreement
are consummated;
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satisfy
on a timely
basis all
conditions
and covenants
applicable
to Holdco,
Parent, and
Merger Sub
in the financing
documents
(including
by consummating
the financing
pursuant
to the terms
of the equity
financing)
and otherwise
comply with
its obligations
thereunder;
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enter
into notes,
security
agreements,
guarantees
and other
definitive
agreements
as required
by the debt
financing
agreement
on the terms
and conditions
contemplated
by the debt
financing
agreement;
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consummate
the financing
at or prior
to the closing
of the merger;
and
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assuming
all terms
and conditions
in the debt
financing
agreement
have been
satisfied,
cause the
financing
sources and
other persons
providing
debt financing
to fund on
the date
of the closing
of the merger
the debt
financing
required
to consummate
the merger
and the other
transactions
contemplated
by the merger
agreement.
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Holdco, Parent, and Merger Sub acknowledge
in the merger agreement that the obtaining of any financing is not a condition to the closing of the merger, such that if any
financing (or any alternative financing) has not been obtained, Holdco, Parent, and Merger Sub will continue to be obligated,
subject to the satisfaction or waiver of the conditions to the closing of the merger specified in the merger agreement, to consummate
the merger.
If any portion of the debt financing becomes
unavailable on the terms contemplated in the debt financing agreement, Parent is required to use its commercially reasonable efforts
to arrange and obtain alternative debt financing, from alternative debt financing sources, in an amount sufficient to consummate
the transactions contemplated by the merger agreement on terms and conditions not less favorable, taken as a whole, to Holdco,
Parent, and Merger Sub than those set forth in the debt financing agreement, as promptly as practicable following the occurrence
of such event, but in no event, later than the second business day immediately prior to the closing of the merger.
We have agreed to use our commercially
reasonable efforts to provide to Parent and Merger Sub (at Parent’s sole expense) all reasonable cooperation reasonably
requested by Parent that is necessary in connection with the financing for the merger, including (i) promptly furnishing to Parent
and Merger Sub and their financing sources the financial statements required to be delivered to the lenders under the debt financing
agreement, (ii) facilitating the pledging of collateral in connection with the debt financing as reasonably requested by
Parent and its financing sources and customary for financings similar to the financing (provided that no such pledge will be effective
prior to the effective time of the merger), and (iii) facilitating the execution and delivery at the closing of the merger of
any ancillary debt agreements related to the debt financing as required by the debt financing agreement. Holdco, Parent, and Merger
Sub have agreed to indemnify us from and against any and all liabilities, losses, damages, claims, costs,
expenses, interest, awards, judgments, and penalties and to reimburse us for all documented and reasonable out-of-pocket
expenses, in each case incurred by us in connection with the arrangement of the debt financing.
Representations and Warranties
We made certain representations and warranties
in the merger agreement that are subject, in some cases, to specified exceptions and qualifications contained in the merger agreement,
certain public filings made by the Company with the SEC, and the matters contained in the disclosure schedule delivered by the
Company in connection with the merger agreement. These representations and warranties relate to, among other things:
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due organization,
existence,
and authority
to carry
on our businesses;
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our articles
of incorporation
and bylaws;
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our corporate
power and
authority
to enter
into, and
consummate
the transactions
under, the
merger agreement,
and the enforceability
of the merger
agreement
against us;
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the declaration
of advisability
of the merger
agreement
and the merger
by the board
of directors,
and the approval
of the merger
agreement
and the merger
by the board
of directors;
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the absence
of violations
of, or conflicts
with, our
governing
documents,
applicable
law and certain
agreements
as a result
of our entering
into and
performing
our obligations
under the
merger agreement;
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the governmental
consents,
approvals,
authorizations,
permits,
notices and
filings required
to complete
the merger;
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our compliance
with applicable
laws, government
orders, licenses,
permits,
and consent
decrees;
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our SEC
filings since
January 1,
2010 and
the financial
statements
included
therein;
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our compliance
with the
Sarbanes-Oxley
Act of 2002
and the listing
and corporate
governance
rules and
regulations
of NASDAQ;
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our disclosure
controls
and procedures
and internal
controls
over financial
reporting;
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the absence
of certain
undisclosed
liabilities;
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the conduct
of our business
in all material
respects
in the ordinary
course consistent
with past
practice
since December
31, 2011
through the
date of the
merger agreement;
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the absence
of a Company
material
adverse effect
(as described
below) and
the absence
of certain
other changes
or events
since December
31, 2011
through the
date of the
merger agreement;
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the absence
of legal
proceedings,
investigations,
and governmental
orders against
us or our
subsidiaries;
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employee
benefit plans;
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certain
labor and
employment
matters;
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personal
property
and assets;
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accuracy
of the information
we supplied
for inclusion
or incorporation
by reference
in this proxy
statement
and the Schedule
13E-3, and
the compliance
of those
filings with
applicable
law
;
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material
contracts
and the absence
of any default
under any
material
contract;
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certain
contracts
entered into
by our subsidiaries
that are
variable
interest
entities;
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Nevada
anti-takeover
statutes;
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the absence
of any undisclosed
material
contracts
or transactions
with executive
officers
or directors
of the Company
or any person
beneficially
owning more
than 5% of
the Company’s
common stock;
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the Special
Committee’s
receipt of
a fairness
opinion from
BofA Merrill
Lynch; and
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the absence
of any undisclosed
brokers’
or finders’
fees.
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Many of our representations and warranties
are qualified by, among other things, exceptions relating to the absence of a “material adverse effect,” which means
any development, fact, circumstance, condition, event, change, occurrence or effect, individually or in the aggregate, that would
have or would reasonably be expected to have a material adverse effect on the business, financial condition or results of operations
of the Company and its subsidiaries taken as a whole, other than any development, fact, circumstance, condition, event, change,
occurrence or effect resulting from:
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changes
in general
economic,
financial
market, business,
or geopolitical
conditions;
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changes
or developments
in any of
the industries
in which
the Company
or its subsidiaries
operate;
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changes
in any applicable
laws or applicable
accounting
regulations
or principles
or interpretations
thereof;
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any change
in the price
or trading
volume of
the shares
of Company
common stock,
in and of
itself (provided
that the
facts or
occurrence
giving rise
to or contributing
to such change
that are
not otherwise
excluded
from the
definition
of “material
adverse effect”
may be taken
into account
in determining
whether there
has been
a material
adverse effect);
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any outbreak
or escalation
of hostilities
or war or
any act of
terrorism;
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any actions
taken (or
omitted to
be taken)
pursuant
to the express
terms of
the merger
agreement
(provided
that this
exception
does not
apply to
certain specified
provisions
of the merger
agreement)
or at the
request of
Holdco, Parent
or Merger
Sub;
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any failure
by the Company
to meet any
published
analyst estimates
or expectations
of the Company’s
revenue,
earnings
or other
financial
performance
or results
of operation
for any period
or any failure
by the Company
to meet its
internal
or published
projections,
budgets,
plans or
forecasts
of the Company’s
revenue,
earnings
or other
financial
performance
or results
of operations,
in each case
in and of
itself (provided
that the
facts or
occurrence
giving rise
to or contributing
to such failure
that are
not otherwise
excluded
from the
definition
of “material
adverse effect”
may be taken
into account
in determining
whether there
has been
a material
adverse effect);
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the announcement
of the merger
agreement
and the transactions
contemplated
thereby,
including
the initiation
of litigation
by any person
with respect
to the merger
agreement,
and including
any termination
of, reduction
in or other
negative
impact on
relationships
or dealings,
contractual
or otherwise,
with any
customers,
suppliers,
distributors,
partners,
or employees
of the Company
and its subsidiaries
due to the
announcement
and performance
of the merger
agreement
or the identity
of the parties
to the merger
agreement;
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the performance
of the merger
agreement
and the transactions
contemplated
thereby,
including
compliance
with the
covenants
set forth
therein (provided
that this
exception
does not
apply to
certain specified
provisions
of the merger
agreement);
or
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any action
or omission
of the Company
or any subsidiary
taken, directly
or indirectly,
at the direction
of Mr. Fu
(with the
consent of
Abax Lotus
Ltd. and
AGC Asia
6 Ltd.) outside
the ordinary
course of
business
and not approved
by the Special
Committee.
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The first three and the fifth exceptions above do not apply,
and therefore any such development, fact, circumstance, event, change, occurrence or effect may be taken into account in determining
whether there has been a material adverse effect, to the extent such development, fact, circumstance, event, change, occurrence
or effect has a materially disproportionately adverse effect on the Company and its subsidiaries, taken as a whole, as compared
to other companies in the industries in which the Company and its subsidiaries operate.
The merger agreement also contains certain
representations and warranties made by Holdco, Parent, and Merger Sub that are subject, in some cases, to specified exceptions
and qualifications contained in the merger agreement. The representations and warranties of Holdco, Parent and Merger Sub relate
to, among other things:
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their
due organization,
existence,
good standing,
and authority
to carry
on their
businesses;
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their
corporate
power and
authority
to enter
into, and
consummate
the transactions
under, the
merger agreement,
and the enforceability
of the merger
agreement
against them;
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the absence
of violations
of, or conflicts
with, their
governing
documents,
applicable
law and certain
agreements
as a result
of their
entering
into and
performing
under the
merger agreement;
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the governmental
consents,
approvals,
authorizations,
permits,
notices,
and filings
required
to complete
the merger;
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the absence
of legal
proceedings
and investigations
against Holdco,
Parent, and
Merger Sub;
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the accuracy
of the information
supplied
for inclusion
in this proxy
statement
and the Schedule
13E-3;
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the absence
of any undisclosed
brokers’
or finders’
fees;
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validity
and enforceability
of the financing
documents
and the contribution
agreement;
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the absence
of any breach
or default
under the
financing
documents
and the contribution
agreement;
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the absence
of contingencies
related to
the funding
of the financing
other than
as set forth
in the equity
commitment
letters or
the debt
financing
agreement;
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the operations
and capitalization
of Holdco,
Parent and
Merger Sub;
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the absence
of any requirement
for any vote
or consent
by any capital
stock holder
of Holdco
or Parent,
in order
to approve
the merger
agreement
and the merger;
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solvency
of the surviving
corporation
immediately
following
consummation
of the merger;
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delivery
of the executed
limited guarantees;
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the absence
of certain
compensation
or employee
arrangements;
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the absence
of undisclosed
arrangements
among the
members of
the buyer
group; and
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Nevada
anti-takeover
statutes.
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Many of the Holdco, Parent, and Merger Sub
representations and warranties are qualified by, among other things, exceptions relating to the absence of a “Parent material
adverse effect,” which means any event, change, occurrence, or effect that would prevent, materially delay, or materially
impede the performance by Holdco, Parent, or Merger Sub of its obligations under the merger agreement or the consummation of the
transactions contemplated by the merger agreement.
The representations and warranties in the
merger agreement of each of the Company, Holdco, Parent, and Merger Sub will terminate upon the consummation of the merger or
the termination of the merger agreement pursuant to its terms.
Conduct of Our Business Pending the
Merger
Under the merger agreement, we have agreed
that, subject to certain exceptions set forth in the merger agreement or as required by law or regulation, between the date of
the merger agreement and the effective time of the merger, unless Parent gives its prior written approval (which may not be unreasonably
withheld or delayed), we and our subsidiaries will conduct our businesses in the ordinary course and will use commercially reasonable
efforts to preserve substantially intact our business organization and to preserve in all material respects our present relationships
with customers, suppliers, distributors, employees and other persons with which we have material business relations.
Subject to certain exceptions set forth
in the merger agreement or as required by law or regulation, we will not, and we will not permit our subsidiaries to, take any
of the following actions without Parent’s written approval (which may not be unreasonably withheld or delayed):
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make
changes to
the organizational
documents
of the Company
or its subsidiaries;
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issue,
deliver,
sell, pledge,
dispose of,
or encumber
shares of
capital stock,
ownership
interests,
or voting
securities
(or options,
warrants,
convertible
securities
or other
rights to
acquire or
receive shares
of capital
stock, other
ownership
interests,
or voting
securities)
of the Company
or our subsidiaries
(subject
to certain
exceptions
specified
in the merger
agreement);
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declare,
set aside,
or pay any
dividends
or other
distributions
(other than
dividends
paid by wholly
owned subsidiaries
to the Company
or to our
other wholly
owned subsidiaries);
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reclassify,
combine,
split, subdivide,
redeem, purchase,
or otherwise
acquire any
shares of
capital stock
of the Company,
subject to
certain exceptions,
or reclassify,
combine,
split, or
subdivide
any capital
stock or
other ownership
interests
of any of
the Company’s
subsidiaries;
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acquire
any corporation,
partnership,
or other
business
organization
or division
thereof,
or any material
assets, other
than purchases
of inventory
and other
assets in
the ordinary
course of
business
or pursuant
to existing
contracts
made available
to Parent;
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sell,
pledge, mortgage,
lease, license,
encumber,
transfer,
or otherwise
dispose of
any material
property
or assets
except (i)
dispositions
of obsolete,
surplus or
worn-out
assets or
assets that
are no longer
useful in
the conduct
of our business,
(ii) transfers
among the
Company and
its subsidiaries,
or (iii)
in the ordinary
course of
business;
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terminate,
cancel, transfer,
assign, license,
encumber,
or agree
to any material
change in
or waiver
under any
material
contract,
or enter
into or amend
any contract
that, if
existing
on the date
of the merger
agreement,
would be
a material
contract;
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grant
any material
licenses
of intellectual
property,
except in
the ordinary
course of
business;
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incur,
issue, renew,
prepay, syndicate,
refinance,
or modify
in any material
respect the
terms of
any indebtedness
for borrowed
money or
assume, guarantee,
or endorse,
or otherwise
as an accommodation
become responsible
for, the
obligations
of any person,
or make,
forgive,
or cancel
any loans,
advances
or capital
contributions
to, or investments
in, any other
person (other
than a wholly
owned subsidiary
or certain
permitted
acquisitions),
in each case
in an amount
in excess
of $1,000,000
individually
or $2,000,000
in the aggregate,
other than
in the ordinary
course of
business
consistent
with past
practice
(including
any borrowings
under the
Company’s
existing
credit agreements
and in respect
of letters
of credit);
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except
pursuant
to any Company
employee
benefit plan
or as required
by applicable
law, (i)
increase
the compensation
or fringe
benefits
of any of
its directors,
officers,
or employees,
other than
in the ordinary
course of
business
consistent
with past
practice,
(ii) grant
any severance
or termination
pay not provided
for under
any such
employee
benefit plan
or any retention
pay, (iii)
waive or
amend in
any material
respect any
performance
or vesting
criteria
or accelerate
vesting,
exercisability,
or funding
under any
employee
benefit plan,
(iv) enter
into any
employment,
consulting,
or severance
agreement
or arrangement
with any
of its present
directors,
officers,
employees,
or independent
consultants,
other than
in the ordinary
course of
business
consistent
with past
practice
with respect
to non-executive
officer employees,
employees
with an annual
base salary
of less than
$100,000,
and independent
consultants,
or (v) establish,
adopt, enter
into, or
amend in
any material
respect or
terminate
any employee
benefit plan,
excluding
adjustment
of performance
targets for
performance-based
awards in
a manner
permitted
under the
terms of
such awards
or in the
ordinary
course of
business;
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make
any material
change in
any financial
or tax accounting
principles,
policies,
methods,
or procedures
used by the
Company,
except as
may be required
by changes
in statutory
or regulatory
accounting
rules or
GAAP or regulatory
requirements
with respect
thereto;
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other
than in the
ordinary
course of
business
consistent
with past
practice,
(i) make,
change, or
revoke any
tax election,
(ii) enter
into any
release,
settlement,
or compromise
of any material
tax liability,
(iii) file
any amended
tax return
with respect
to any material
tax or waive
any statute
of limitations
with respect
to any material
tax claim
or assessment,
(iv) change
(or file
a request
to make such
change) any
method of
tax accounting
or any annual
tax accounting
period, (v)
enter into
or request
any closing
agreement
relating
to any tax,
(vi) surrender
any right
to claim
a tax refund,
(vii) fail
to duly and
timely file
all tax returns
and other
documents
required
to be filed
with any
taxing authority
in accordance
with past
practice
(taking into
account any
extension
of time within
which to
file such
tax return),
or (viii)
incur any
material
liability
for taxes;
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settle
or compromise
any litigation
other than
settlements
or compromises
of litigation
where the
amount paid
in settlement
or compromise,
in each case,
does not
exceed the
amount set
forth in
the disclosure
schedules;
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except
for the merger
agreement,
adopt a plan
of complete
or partial
liquidation,
dissolution,
merger, consolidation,
restructuring,
recapitalization,
or other
reorganization
of such entity
(other than
among the
Company’s
subsidiaries);
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enter
into, amend,
or modify
any union
recognition
agreement,
collective
bargaining
agreement,
or similar
agreement
with any
trade union
or representative
body;
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enter
into or modify
any affiliate
transactions;
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make
capital expenditures
that are
not budgeted
in the Company’s
current plan
approved
by our board
of directors
that was
previously
made available
to Parent,
except for
(i) other
expenditures
necessary
to maintain
existing
assets in
good repair,
consistent
with past
practice,
or (ii) any
other single
capital expenditure
not in excess
of $250,000
or capital
expenditures
for the Company
and its subsidiaries
not in excess
of $1,000,000
in the aggregate;
or
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authorize
or agree
to take any
of the foregoing
actions.
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Holdco, Parent, and Merger Sub are prohibited
from directly or indirectly taking any action that would individually or in the aggregate prevent, materially delay or materially
impede the performance by Holdco, Parent or Merger Sub of its obligations under the merger agreement or the consummation of the
merger.
Acquisition Proposals
Except as permitted by the terms of the
merger agreement described below, we have agreed in the merger agreement that the board of directors will not: (i) withdraw
or modify (or publicly propose to do the foregoing), in a manner adverse to Parent or Merger Sub, our board of directors’
recommendation with respect to the merger, or adopt, approve, or recommend (or publicly propose to do the foregoing) any acquisition
proposal (as defined below); or (ii) adopt, approve, recommend, or allow the Company or any subsidiary to execute or enter
into any alternative acquisition agreement relating to an acquisition proposal. The actions described in clause (i) above are
referred to in this proxy statement as a “change of recommendation.”
Upon execution of the merger agreement,
we were required to immediately cease any discussions or negotiations with any persons that may have been ongoing with respect
to any acquisition proposals. At any time from and after the date of the merger agreement and until the effective time of the
merger or, if earlier, the termination of the merger agreement, we and our subsidiaries may not, and we may not permit or authorize
our or their officers, directors, employees, agents, and representatives, directly or indirectly, to:
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initiate,
solicit,
or knowingly
encourage
or knowingly
facilitate
(including
by providing
non-public
information)
any inquiries
regarding,
or the making
of any, acquisition
proposals;
or
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engage
in, continue,
or otherwise
participate
in any negotiations
or discussions
(other than
to state
that we are
not permitted
to have discussions)
concerning,
or provide
or cause
to be provided
any non-public
information
or data relating
to the Company
or any subsidiary
in connection
with, an
acquisition
proposal.
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However, at any time prior to the time
our stockholders approve the merger agreement, if the Company receives a bona fide written acquisition proposal from any person,
we may, if the Special Committee, prior to our taking any such actions, determines in good faith (after consultation with outside
legal counsel and its financial advisors) that such acquisition proposal either constitutes a superior proposal or may reasonably
be expected to lead to a superior proposal (as defined below):
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furnish
information
and data
with respect
to the Company
and its subsidiaries
to the person
making such
acquisition
proposal
pursuant
to a customary
confidentiality
agreement
on terms
at least
as restrictive
as those
contained
in the confidentiality
agreements
with Mr.
Fu and Abax
but excluding
the “standstill”
provisions
thereof (except
for such
changes necessary
in order
for the Company
to be able
to comply
with its
obligations
under the
merger agreement);
and
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participate,
through the
Special Committee,
in discussions
or negotiations
with such
person and
its representatives
regarding
such acquisition
proposal.
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At any time before the merger agreement
is approved by our stockholders, we may terminate the merger agreement and enter into an alternative acquisition agreement with
respect to a superior proposal, so long as we comply with certain terms of the merger agreement, including paying a termination
fee to Parent. See the section titled “Termination Fees” below for more information. In addition, at any time prior
to the time our stockholders approve the merger agreement, our board of directors may, upon the recommendation of the Special
Committee, effect a change of recommendation, if the Special Committee determines in good faith, after consultation with its outside
legal counsel and financial advisors, that the failure to do so would be reasonably likely to be inconsistent with the discharge
or exercise of the board of directors’ fiduciary duties under applicable law.
However, prior to effecting a change of
recommendation or terminating the merger agreement in order to enter into an alternative acquisition agreement with respect to
a superior proposal, we must provide written notice to Parent and Merger Sub at least three business days in advance of such change
of recommendation or authorization to terminate the merger agreement. In addition, in the event the basis of such proposed action
is in connection with a superior proposal:
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the notice
must include
the terms
and conditions
of the superior
proposal
(including
the identity
of the person
making the
superior
proposal
and any financing
materials
related to
the superior
proposal,
if any) and
include copies
of all documents
relating
thereto;
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during
the three
business
days following
delivery
of the notice,
we must negotiate
with Parent
and Merger
Sub in good
faith (to
the extent
Parent and
Merger Sub
desire to
negotiate)
to make adjustments
in the terms
and conditions
of the merger
agreement
and the financing
documents
so that the
superior
proposal
ceases to
be a superior
proposal;
and
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following
the end of
such three
business
day period,
our board
of directors
and the Special
Committee
must determine
in good faith
after consultation
with their
outside legal
counsel and
financial
advisors,
taking into
account any
changes to
the merger
agreement
and the financing
documents
proposed
in writing
by Parent
and Merger
Sub, that
the superior
proposal
continues
to constitute
a superior
proposal.
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Nothing in the provisions of the merger
agreement relating to acquisition proposals prevents us from complying with our disclosure obligations under U.S. federal or state
law with regard to an acquisition proposal, including taking and disclosing to our stockholders a position contemplated by Rules 14d-9
and 14e-2(a) under the Exchange Act or making any similar communication to our stockholders, or making any “stop-look-and-listen”
or similar communication of the type contemplated by Rule 14d-9(f) under the Exchange Act to our stockholders, provided that
our board of directors expressly publicly reaffirms our board of directors’ recommendation with respect to the merger in
such disclosure.
In this proxy statement, an “acquisition
proposal” means any bona fide inquiry, proposal, or offer from any person or group of persons other than Holdco or one of
its subsidiaries or affiliates for, (i) a merger, reorganization, consolidation, share exchange, business combination, recapitalization,
liquidation, dissolution, or similar transaction involving an acquisition of the Company (or any subsidiary of the Company whose
business constitutes 15% or more of the net revenues, net income, or assets of the Company and its subsidiaries, taken as a whole)
or (ii) the acquisition in any manner, directly or indirectly, of over 15% of the equity securities of the Company or over 15%
of the consolidated total assets of the Company and its subsidiaries, in each case other than the merger.
In this proxy statement, a “superior
proposal” means any acquisition proposal (with the percentages set forth in the definition of such term changed from 15%
to 50%) that the Special Committee, which has full, sole, and exclusive authority to make such determination, has determined in
its good faith judgment after consultation with its outside legal counsel and financial advisors (i) is reasonably likely to be
consummated in accordance with its terms, taking into account all legal, financial, and regulatory aspects of the proposal and
the person making the proposal and (ii) if consummated, would result in a transaction more favorable to the Company’s stockholders
(other than to the Rollover Holders) from a financial point of view than the transaction contemplated by the merger agreement
(after giving effect to all adjustments to the terms thereof offered by Parent in writing).
Stockholders Meeting
We are required, as soon as reasonably
practicable following confirmation by the SEC that it has no further comments regarding this proxy statement, to take all action
necessary to duly call, give notice of, convene, and hold a meeting of our stockholders for the purpose of approving the merger
agreement and, except as described under “Acquisition Proposals” above, to include in the definitive proxy statement
our board of directors’ recommendation with respect to the merger and use our reasonable best efforts to obtain the vote
of our stockholders approving the merger. We are not required to hold the stockholders meeting if our board of directors or a
board committee has made a change of recommendation.
Further Action; Efforts
We, Holdco, Parent and Merger Sub will
use reasonable best efforts to take or cause to be taken all actions and to do or cause to be done, and cooperate with each other
in order to do, all things necessary, proper, or advisable to consummate the merger and the other transactions contemplated by
the merger agreement, as soon as practicable, including effecting the regulatory filings described under “The Merger—Regulatory
Approvals and Notices,” using reasonable best efforts to defend all lawsuits and other proceedings by or before any governmental
entity challenging the merger agreement or the consummation of the merger and resolve any objection asserted with respect to the
transactions contemplated by the merger agreement under any antitrust law raised by any governmental entity and to prevent the
entry of any court order, and to have vacated, lifted, reversed, overturned any injunction, decree, ruling, order, or other action
of any governmental entity that would prevent, prohibit, restrict, or delay the consummation of the transactions contemplated
by the merger agreement. We, Holdco, Parent, and Merger Sub will respond in good faith, as soon as reasonably practicable and
after consultation with the other parties, to any request from any governmental entity for information with respect to the merger
agreement or the transactions contemplated thereby.
We, Holdco, Parent, and Merger Sub have
agreed to keep each other apprised of the status of matters relating to the completion of the transactions contemplated by the
merger agreement and to work cooperatively in connection with obtaining any of the approvals of, or clearances from, each applicable
governmental entity, including:
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cooperating
with each
other in
connection
with filings
required
to be made
by any party
under applicable
antitrust
laws and
liaising
with each
other in
relation
to each step
of the procedure
before the
relevant
governmental
entities
and as to
the contents
of all communications
with such
governmental
entities;
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furnishing
to each other
party all
information
within its
possession
that is required
for any application
or filing
to be made
by such other
party under
applicable
laws;
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promptly
notifying
each other
of any communications
from or with
any governmental
entity with
respect to
the transactions
contemplated
by the merger
agreement
and ensuring
to the extent
permitted
by law or
governmental
entity that
each of the
parties is
entitled
to attend
any meetings
with or other
appearances
before any
governmental
entity with
respect to
the transactions
contemplated
by the merger
agreement;
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consulting
and cooperating
with one
another in
connection
with all
analyses,
appearances,
presentations,
memoranda,
briefs, arguments,
opinions,
and proposals
made or submitted
by or on
behalf of
any party
in connection
with proceedings
under or
relating
to the applicable
antitrust
laws; and
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without
prejudice
to any rights
of the parties
under the
merger agreement,
consulting
and cooperating
in all respects
with the
other in
defending
all lawsuits
and other
proceedings
by or before
any governmental
entity challenging
the merger
agreement
or the consummation
of the transactions
contemplated
thereby.
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Indemnification; Directors’
and Officers’ Insurance
From the effective time of the merger through
the sixth anniversary of the effective time of the merger, Holdco and Parent will cause the surviving corporation to indemnify
and hold harmless our and our subsidiaries’ present and former officers and directors against all claims, losses, liabilities,
damages, judgments, inquiries, fines, and reasonable fees, costs and expenses (including attorneys’ fees and disbursements)
incurred in connection with any claim, action, suit, proceeding or investigation, arising out of or pertaining to (i) the fact
that such person is or was an officer or director of the Company or any of its subsidiaries or is or was serving at the request
of the Company or any of its subsidiaries as an officer or director of another corporation, partnership, joint venture, trust,
or other enterprise or non-profit entity, (ii) matters existing or occurring at or prior to the effective time of the merger (including
the merger agreement and the transactions and actions contemplated thereby), whether asserted or claimed prior to, at, or after
the effective time of the merger, or (iii) enforcement of such rights, in each case to the fullest extent permitted under applicable
law.
We are required to (and if we are unable
to do so, Parent will cause the surviving corporation to) obtain and fully pay the premium for a six-year extension of the directors’
and officers’ liability coverage of the Company’s existing directors’ and officers’ insurance policies.
Such policies must be obtained from an insurance carrier with the same or better credit rating as our current insurance carrier
with respect to directors’ and officers’ liability insurance and fiduciary liability insurance and must have terms,
conditions, retentions and limits of liability that are no less favorable, in the aggregate, than our existing policies. This
obligation is subject to a cap of 300% of the annual premium amount we are currently paying for such insurance.
If we or the surviving corporation, as
applicable, fail to purchase such “tail” insurance policies as of the effective time of the merger, then the surviving
corporation will continue to maintain in effect, for a period of at least six years, the policies in place as of the date of the
merger agreement, or to use reasonable best efforts to purchase comparable policies for such six-year period, in each case that
are no less favorable, in the aggregate, than provided in our existing policies as of the date of the merger agreement. Parent’s
obligation to provide this insurance will be capped at 300% of the annual premium amount we are currently paying for such insurance.
If the annual premium amount for such coverage exceeds the cap, the surviving corporation must obtain a policy with the greatest
coverage available for a cost not exceeding the amount of the cap.
The present and former directors and officers
of the Company will have the right to enforce the provisions of the merger agreement relating to their indemnification and are
express third-party beneficiaries of the merger agreement for this purpose.
Delisting of Our Common Stock
Prior to the closing date of the merger,
the Company will cooperate with Parent and use reasonable best efforts to do all things reasonably necessary to enable the delisting
of our common stock from the NASDAQ Global Select Market and the deregistration of our common stock under the Exchange Act, as
promptly as practicable following the effective time of the merger.
Knowledge of Inaccuracies
Neither Holdco nor Parent will have any
right to terminate the merger agreement on the basis of, or claim any damage or seek any other remedy for, any breach of or inaccuracy
in any of our representations or warranties to the extent that Mr. Fu and Abax (Hong Kong) (or any of its affiliates) had actual
knowledge of the breach or inaccuracy as of the date of the merger agreement.
Conditions to the Merger
The respective obligations of the Company,
Holdco, Parent and Merger Sub to consummate the merger are subject to the satisfaction or waiver of the following conditions:
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the
merger agreement
must have
been duly
approved
by (i) holders
of at least
a majority
in combined
voting power
of the outstanding
shares of
Company common
stock and
(ii) holders
of at least
60% in combined
voting power
of the outstanding
shares of
Company common
stock not
beneficially
owned by
the buyer
group,or
any affiliate
of any buyer
group member;
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the
PRC anti-monopoly
bureau shall
have issued
a decision
under the
PRC anti-monopoly
law approving
the merger,
to the extent
required
by law (the
parties subsequently
determined
that such
decision
was not required);
and
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no court
or governmental
entity of
competent
jurisdiction
has enacted,
issued, promulgated,
enforced,
or entered
any law (whether
temporary,
preliminary
or permanent)
that is in
effect and
restrains,
enjoins or
otherwise
prohibits
consummation
of the merger.
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The obligations of Holdco, Parent and Merger
Sub to effect the merger are also subject to the satisfaction or waiver by Parent at or prior to the effective time of the merger
of the following additional conditions:
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our representations
and warranties
regarding
our capitalization
must be true
and correct
(except for
de minimis
inaccuracies)
as of the
date of the
merger agreement
and as of
the date
of the closing
of the merger
as if made
on and as
of such date
(except for
those representations
and warranties
that address
matters only
as of an
earlier date,
which shall
have been
true and
correct as
of such earlier
date);
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our other
representations
and warranties
that are
qualified
by reference
to material
adverse effect
must be true
and correct
as of the
date of the
merger agreement
and as of
the date
of the closing
of the merger,
as if made
on and as
of such date
(except for
those representations
and warranties
that address
matters only
as of an
earlier date,
which shall
have been
true and
correct as
of such earlier
date);
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our other
representations
and warranties
that are
not qualified
by reference
to material
adverse effect
(other than
our representations
and warranties
regarding
our capitalization)
must be true
and correct
as of the
date of the
merger agreement
and as of
the date
of the closing
of the merger
as if made
on and as
of such date
(except for
those representations
and warranties
that address
matters only
as of an
earlier date,
which shall
have been
true and
correct as
of such earlier
date), provided
that this
condition
will be deemed
to have been
satisfied,
even if any
such representations
and warranties
are not true
and correct,
unless the
failure of
such representations
and warranties
to be true
and correct,
individually
or in the
aggregate,
has a material
adverse effect;
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the Company
has performed
in all material
respects
its obligations
under the
merger agreement
at or prior
to the date
of the closing
of the merger;
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since
the date
of the merger
agreement,
there has
not occurred
a material
adverse effect;
and
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Parent
has received
a certificate
signed by
an executive
officer of
the Company
certifying
that all
of the above
conditions
with respect
to the representations
and warranties,
performance
of the obligations
of the Company,
and the absence
of a material
adverse effect
have been
satisfied.
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Our obligation to effect the merger is
subject to the satisfaction or waiver by us at or prior to the effective time of the merger of the following additional conditions:
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the representations
and warranties
of Holdco,
Parent, and
Merger Sub
set forth
in the merger
agreement
must be true
and correct
in all respects
as of the
date of the
merger agreement
and as of
the date
of the closing
of the merger,
as though
made on and
as of such
date (except
to the extent
they speak
as of an
earlier date,
in which
case they
shall be
true and
correct as
of such earlier
date), except
for such
failures
to be true
and correct
as have not
had, or would
not reasonably
be expected
to result
in, individually
or in the
aggregate,
a material
delay or
material
impediment
to the performance
by Holdco,
Parent, or
Merger Sub
of its obligations
under the
merger agreement
or the consummation
of the transactions
contemplated
by the merger
agreement;
|
|
·
|
each
of Holdco,
Parent, and
Merger Sub
has performed
in all material
respects
its obligations
under the
merger agreement
at or prior
to the date
of the closing
of the merger;
and
|
|
·
|
we have
received
a certificate
signed by
an executive
officer of
Holdco, Parent,
and Merger
Sub certifying
that all
of the above
conditions
with respect
to the representations
and warranties
and performance
of the obligations
of Holdco,
Parent, and
Merger Sub
have been
satisfied.
|
Termination
We, by action of the Special Committee,
and Parent may, by mutual written consent, terminate the merger agreement and abandon the merger at any time prior to the effective
time of the merger, whether before or after the approval of the merger agreement by our stockholders.
The merger agreement may also be terminated
and the merger abandoned at any time prior to the effective time of the merger as follows:
|
·
|
by either
Parent or
the Company,
if:
|
|
o
|
the
merger
has
not
been
consummated
by
June
27,
2013,
which
we
refer
to
as
the
termination
date;
|
|
o
|
our
stockholders
meeting
has
been
held
and
completed
and
our
stockholders
have
not
approved
the
merger
agreement
at
such
meeting
or
any
adjournment
or
postponement
of
such
meeting;
or
|
|
o
|
an
order
permanently
restraining,
enjoining
or
otherwise
prohibiting
consummation
of
the
merger
has
become
final
and
non-appealable;
|
|
o
|
at
any
time
prior
to
the
approval
of
the
merger
agreement
by
our
stockholders,
(i) our
board
of
directors
(acting
upon
the
recommendation
of
the
Special
Committee)
authorizes
the
Company,
in
compliance
with
the
merger
agreement,
to
enter
into
an
alternative
acquisition
agreement
with
respect
to
a
superior
proposal,
(ii) immediately
prior
to
or
substantially
concurrently
with
the
termination
of
the
merger
agreement,
we
enter
into
an
alternative
acquisition
agreement
with
respect
to
a
superior
proposal,
and
(iii) we
pay
Parent
the
termination
fee
discussed
under
“Termination
Fees”
below;
|
|
o
|
there
has
been
a
breach
of
a
representation,
warranty,
covenant
or
agreement
made
by
Holdco,
Parent,
or
Merger
Sub
in
the
merger
agreement,
or
any
such
representation
and
warranty
becomes
untrue
after
the
date
of
the
merger
agreement,
which
breach
or
failure
to
be
true
would
give
rise
to
the
failure
of
the
condition
to
the
closing
of
the
merger
relating
to
the
accuracy
of
the
representations
and
warranties
of
Holdco,
Parent,
and
Merger
Sub
or
compliance
by
Holdco,
Parent,
and
Merger
Sub
with
their
obligations
under
the
merger
agreement,
and
such
breach
or
failure
to
be
true
is
not
curable
or,
if
curable,
is
not
cured
prior
to
the
earlier
of
(i) 30
calendar
days
after
written
notice
thereof
is
given
by
the
Company
to
Parent
and
(ii) the
date
that
is
five
business
days
prior
to
the
termination
date
(provided
that
we
will
not
have
this
right
to
terminate
if
we
are
then
in
material
breach
of
any
of
our
representations,
warranties,
covenants
or
other
agreements
that
would
result
in
the
conditions
to
the
obligation
of
Parent
and
Merger
Sub
to
consummate
the
merger
not
being
capable
of
being
satisfied);
or
|
|
o
|
the
conditions
to
the
obligations
of
Holdco,
Parent,
and
Merger
Sub
to
close
the
merger
have
been
and
continue
to
be
satisfied
(other
than
those
conditions
that
by
their
nature
cannot
be
satisfied
other
than
at
the
closing
of
the
merger),
we
have
irrevocably
confirmed
by
notice
to
Parent
that
the
conditions
to
the
obligations
of
the
Company
to
close
the
merger
have
been
satisfied
or
will
be
waived,
and
the
merger
is
not
consummated
within
three
business
days
of
delivery
of
such
notice;
|
|
o
|
our
board
of
directors
(acting
with
the
affirmative
vote
of
at
least
one
member
of
the
Special
Committee
or
acting
on
the
recommendation
of
the
Special
Committee)
or
the
Special
Committee
(i)
makes
a
change
of
recommendation
or
(ii)
fails
to
include
in
this
proxy
statement,
when
mailed,
its
recommendation
with
respect
to
the
merger;
or
|
|
o
|
there
has
been
a
breach
of
a
representation,
warranty,
covenant,
or
agreement
made
by
the
Company
in
the
merger
agreement
or
any
such
representation
and
warranty
becomes
untrue
after
the
date
of
the
merger
agreement,
which
breach
or
failure
to
be
true
would
give
rise
to
the
failure
of
the
condition
to
closing
of
the
merger
relating
to
the
accuracy
of
the
representations
and
warranties
of
the
Company
or
compliance
by
it
with
its
obligations
under
the
merger
agreement,
and
such
breach
or
failure
to
be
true
cannot
be
cured
or,
if
curable,
is
not
cured
prior
to
the
earlier
of
(i) 30
calendar
days
after
written
notice
thereof
is
given
by
Parent
to
the
Company
and
(ii) the
date
that
is
five
business
days
prior
to
the
termination
date
(provided
that
Parent
will
not
have
this
right
to
terminate
if
it
is
then
in
material
breach
of
any
of
its
representations,
warranties,
covenants
or
other
agreements
that
would
result
in
the
conditions
to
the
obligation
of
the
Company
or
of
either
party
to
consummate
the
merger
not
being
capable
of
being
satisfied).
|
Termination Fees
Company Termination
Fee
We are required to pay Parent a termination
fee of $11 million, which we refer to as the termination fee, if all of the following circumstances occur:
|
·
|
the merger
agreement
is terminated
by us or
Parent because
of:
|
|
o
|
the
failure
to
consummate
the
merger
by
the
termination
date;
or
|
|
o
|
the
failure
of
our
stockholders
to
approve
the
merger
agreement
at
the
stockholders
meeting;
|
|
·
|
any person
makes public
and does
not withdraw
an acquisition
proposal
after the
date of the
merger agreement
and, in the
event that
the merger
agreement
is terminated
because of
the failure
to consummate
the merger
by the termination
date, prior
to such termination,
or, in the
event that
the merger
agreement
is terminated
because of
the failure
of our stockholders
to approve
the merger
agreement,
prior to
the stockholders
meeting;
and
|
|
·
|
within
12 months
following
such termination,
we consummate
an acquisition
proposal,
whether or
not such
acquisition
proposal
is the same
one referred
to in the
immediately
preceding
bullet (provided
that references
to 15% in
the definition
of “acquisition
proposal”
shall be
deemed to
be references
to 50%).
|
We are also required to pay Parent the
termination fee if any of the following circumstances occurs:
|
·
|
Parent
terminates
the merger
agreement
because our
board of
directors
(acting with
the affirmative
vote of at
least one
member of
the Special
Committee
or acting
on the recommendation
of the Special
Committee)
or the Special
Committee
(i) makes
a change
of recommendation
or (ii) fails
to include
in this proxy
statement
when mailed,
its recommendation
with respect
to the merger;
|
|
·
|
Parent
terminates
the merger
agreement
because of
a breach
of a representation,
warranty,
covenant,
or agreement
made by the
Company in
the merger
agreement,
or a failure
of any such
representation
and warranty
to be true
after the
date of the
merger agreement,
which breach
or failure
to be true
would give
rise to the
failure of
the condition
to closing
of the merger
relating
to the accuracy
of the representations
and warranties
of the Company
or compliance
by it with
its obligations
under the
merger agreement,
and such
breach or
failure to
be true cannot
be cured
or, if curable,
is not cured
prior to
the earlier
of (y) 30
calendar
days after
written notice
thereof is
given by
Parent to
the Company
and (z) the
date that
is five business
days prior
to the termination
date; or
|
|
·
|
we terminate
the merger
agreement
because,
prior to
the approval
of the merger
agreement
by our stockholders,
(x) our board
of directors
authorizes
the Company
to enter
into an alternative
acquisition
agreement
with respect
to a superior
proposal,
and (y) immediately
prior to
or substantially
concurrently
with the
termination
of the merger
agreement,
we enter
into an alternative
acquisition
agreement
with respect
to a superior
proposal.
|
Parent Termination
Fee
Parent must pay us the Parent termination
fee of $22 million in the event we terminate the merger agreement because:
|
·
|
there
has been
a breach
of a representation,
warranty,
covenant
or agreement
made by Holdco,
Parent, or
Merger Sub
in the merger
agreement
or any such
representation
and warranty
becomes untrue
after the
date of the
merger agreement,
which breach
or failure
to be true
would give
rise to the
failure of
the condition
to the closing
of the merger
relating
to the accuracy
of the representations
and warranties
of Holdco,
Parent, and
Merger Sub
or compliance
by Holdco,
Parent, and
Merger Sub
with their
obligations
under the
merger agreement,
and such
breach or
failure to
be true is
not curable
or, if curable,
is not cured
prior to
the earlier
of (x) 30
calendar
days after
written notice
thereof is
given by
the Company
to Parent
and (y) the
date that
is five business
days prior
to the termination
date; or
|
|
·
|
the conditions
to the obligations
of Holdco,
Parent, and
Merger Sub
to consummate
the merger
have been
and continue
to be satisfied
(other than
those conditions
that by their
nature cannot
be satisfied
other than
at the closing
of the merger),
we have irrevocably
confirmed
by notice
to Parent
that the
conditions
to the obligations
of the Company
have been
satisfied
or will be
waived, and
the merger
is not consummated
within three
business
days of delivery
of such notice.
|
The guarantors have agreed to guarantee
the obligation of Parent to pay the Parent termination fee and to guarantee the performance and discharge of certain expense reimbursement
and indemnification obligations of Holdco, Parent, and Merger Sub, in each case pursuant to the limited guarantee.
Expenses
Except as otherwise provided in the merger
agreement, each party to the merger agreement will bear its own expenses in connection with the merger agreement and the transactions
contemplated thereby. Expenses incurred in connection with the printing, filing, and mailing of this proxy statement and the Schedule
13E-3 will be shared equally by Parent and the Company.
Remedies
Subject to our right to specific performance
(described below), our right to terminate the merger agreement and receive the Parent termination fee of $22 million from Parent
is our sole and exclusive remedy against Parent, Merger Sub, any of the guarantors, and certain related parties for any loss suffered
as a result of any breach of any covenant or agreement in the merger agreement or the failure of the merger to be consummated.
Upon payment of such amounts, subject to certain exceptions described in the merger agreement, none of Parent, Merger Sub, any
of the guarantors, or certain related parties shall have any further liability or obligation relating to or arising out of the
merger agreement or the transactions contemplated thereby. Subject to Parent’s right to specific performance (described
below), Parent’s receipt of the termination fee of $11 million is the sole and exclusive remedy of Holdco, Parent, Merger
Sub, the guarantors, and their respective affiliates against the Company, its subsidiaries and certain of their related parties
for any loss suffered as a result of any breach of any covenant or agreement in the merger agreement or the failure of the merger
to be consummated. Upon payment of such amounts, subject to certain exceptions described in the merger agreement, none of the
Company, its subsidiaries or certain related parties shall have any further liability or obligation relating to or arising out
of the merger agreement or the transactions contemplated thereby.
The parties are entitled to
an injunction, specific performance and other equitable relief to prevent breaches of the merger agreement and to
enforce specifically the terms of the merger agreement in addition to any other remedy to which they are entitled at law or
in equity. However, our ability to seek specific performance of Holdco, Parent, and Merger Sub’s obligation to draw
down the equity financing for the merger (with respect to which we also have certain third-party beneficiary rights) and to
cause Holdco, Parent, and Merger Sub to effect the closing is subject to the requirements that (i) all the conditions to
the obligations of Holdco, Parent and Merger Sub to effect the merger described under “Conditions to the
Merger,” beginning on page 89, have been satisfied or waived, other than those conditions that by their nature are to
be satisfied at the closing of the merger, (ii) Parent and Merger Sub have failed to complete the closing of the merger
by the date they are required to close as described under “Closing and Effective Time of the Merger,” beginning
on page 77, (iii) the debt financing (or alternative financing) for the merger has been funded or will be funded if the
equity financing is funded at the closing of the merger, and (iv) we irrevocably confirm that if such specific
performance is granted and the equity and debt financing are funded then we are prepared to close the merger.
Access
Subject to certain exceptions, we will,
upon reasonable prior written notice, afford Parent and its representatives reasonable access to the Company and furnish Parent
and its representatives information concerning our business, properties, and personnel as may reasonably be requested.
Amendment; Waiver
The merger agreement
may be amended by a written agreement signed by us (by action of the Special Committee), Holdco, Parent, and Merger Sub at any
time prior to the completion of the merger, whether or not our stockholders have approved the merger agreement. However, after
approval of the merger agreement by our stockholders, no amendment that requires further approval of our stockholders will be
made without obtaining that approval. At any time prior to the completion of the merger, we, Holdco, Parent, or Merger Sub may
waive the other party’s compliance with certain provisions of the merger agreement.
DISSENTER’S RIGHTS
You are not entitled
to dissenter’s rights or other statutory rights of objection in connection with the merger under Nevada law. Section
92A.390 of the NRS does not provide any right of dissent with respect to a plan of merger under criteria described in that section
of the NRS, which the Company satisfies.
ADVISORY VOTE ON COMPENSATION IN CONNECTION
WITH THE MERGER
Background
Section 14A of the
Exchange Act requires that the Company provide its stockholders with the opportunity to approve, on a non-binding advisory basis,
the compensation that may be payable to the Company’s named executive officers in connection with the merger. In accordance
with Section 14A of the Exchange Act, we are requesting our stockholders’ approval, on a non-binding advisory basis, of
the compensation that may be payable to the Company’s named executive officers in connection with the merger. Therefore,
we are asking the Company’s stockholders to adopt the following resolution:
“RESOLVED, that
the compensation that may be paid or become payable to the Company’s named executive officers in connection with the merger,
as disclosed in the section titled “Special Factors—Compensation in Connection with the Merger,” pursuant to
Item 402(t) of Regulation S-K, and the agreements or understandings pursuant to which such compensation may be paid or become
payable, are hereby APPROVED.”
Vote Required and Board Recommendation
The vote on this proposal
is a vote separate and apart from the vote to approve the merger agreement. Accordingly, you may vote not to approve this proposal
and vote to approve the merger agreement and vice versa. Because the vote is advisory, it will not be binding on either the Company
or Parent, regardless of whether the merger agreement is approved. Approval of the non-binding advisory proposal with respect
to the compensation that may be received by the Company’s named executive officers in connection with the merger is not
a condition to completion of the merger, and failure to approve this advisory matter will have no effect on the vote to approve
the merger agreement. Because the compensation to be paid in connection with the merger is based on contractual arrangements with
the named executives, such compensation will be payable, regardless of the outcome of this advisory vote, if the merger agreement
is approved (subject only to the contractual conditions applicable thereto).
The proposal to approve
the compensation that may be received by the Company’s named executive officers in connection with the merger will be approved
if a majority of the votes cast with respect to such proposal in person or by proxy vote “FOR” the proposal (assuming
the presence of a quorum at the special meeting).
Our board of directors
recommends that you vote “FOR” the approval, on a non-binding advisory basis, of the compensation that may be received
by the Company’s named executive officers in connection with the merger.
IMPORTANT INFORMATION REGARDING THE
COMPANY
Directors and Executive Officers
of the Company
The following table
sets forth the names and ages of our current directors and executive officers, their principal offices and positions and the date
each such person became a director or executive officer. Executive officers are evaluated annually by our board of directors. Each
executive officer holds his office until he resigns, is removed by the board or his successor is elected and qualified. Directors
are elected annually by our stockholders at the annual meeting. Each director holds his office until his successor
is elected and qualified or his earlier resignation or removal.
The following persons
are the directors and executive officers of the Company:
Name of Director
|
|
Age
|
|
Position
|
|
Since
|
Li Fu
|
|
45
|
|
Co-CEO, Chairman, Director
|
|
December 13, 2005
|
Joseph Longever
|
|
59
|
|
Co-CEO, Director
|
|
June 16, 2010
|
Wenbing Christopher Wang
|
|
40
|
|
President, Director
|
|
January 21, 2008
|
Feng Bai (1) (2) (3) (4)
|
|
41
|
|
Director
|
|
June 15, 2007
|
Jiping Hua (1) (2) (3)
|
|
73
|
|
Director
|
|
June 15, 2007
|
John Francis Perkowski (1) (2) (3) (4)
|
|
63
|
|
Director
|
|
May 21, 2008
|
Chongqi Huang
|
|
77
|
|
Director
|
|
June 28, 2012
|
Craig Studwell
|
|
63
|
|
Chief Financial Officer
|
|
October 18, 2010
|
|
(1)
|
Serves as
a member of the Audit Committee.
|
|
(2)
|
Serves as
a member of the Compensation Committee.
|
|
(3)
|
Serves as
a member of the Nominating Committee.
|
|
(4)
|
Serves as
a member of the Special Committee.
|
Mr. Li Fu
was appointed our Chairman
and Chief Executive Officer on December 13, 2005. Since November 2009, Mr. Fu has served as our Co-Chief Executive Officer. Mr.
Fu is a founder of Dalian Fushi, a Company predecessor, and served as the Chief Executive Officer since Dalian Fushi commenced
operations in 2001. Mr. Fu graduated from the PLA University of Science and Technology with a degree in Engineering. Mr. Fu has
(i) extensive operating and managerial experience in domestic and international businesses, specifically wire and cable company
operations; (ii) leadership and communication skills; (iii) substantial experience in advancing growth strategies; and (iv) significant
experience involving acquisitions.
Mr. Joseph J. Longever
was
appointed as our Co-Chief Executive Officer in November 2009. He served as Chief Commercial Officer of Fushi Copperweld from July
2009 to November 2009. Prior to joining Fushi Copperweld, he ran an independent consulting service he founded in 2007. From 1999
to 2007 he held various positions in senior management, sales, marketing and operations within Copperweld Bimetallics, which we
acquired in 2007, including as vice president and Chief Operations Officer. Mr. Longever has also served as Executive Vice President
and General Manager at Crest Manufacturing Company and held sales roles at Texas Instruments. Mr. Longever graduated from Nathaniel
Hawthorne College with a bachelor of science degree in business administration. Mr. Longever has (i) extensive operating
and managerial experience in domestic and international businesses, specifically wire and cable company operations; (ii) leadership
and communication skills; (iii) substantial experience in advancing growth strategies, including acquisitions and strategic
alliances; (iv) experience with major sales channels; (v) significant experience in organizational development and talent
development; and (vi) broad experience in corporate governance. Our board of directors believes Mr. Longever provides
valuable insight and perspective on general strategic and business matters, stemming from his extensive executive and management
experience within the bimetallics industry and while at Texas Instruments, Inc.
Mr. Wenbing Christopher Wang
has
served as our President since January 21, 2008. He also served as our Chief Financial Officer from December 2005 to August 2009
and as our interim Chief Financial Officer from March 2010 to October 2010. Prior to joining the Company, Mr. Wang worked for
Redwood Capital, Inc., China Century Investment Corporation, Credit Suisse First Boston and VCChina in various capacities. Fluent
in both English and Chinese, Mr. Wang holds an MBA in Finance and Corporate Accounting from Simon Business School of the University
of Rochester and a bachelor of science degree from the University of Science and Technology, Beijing. During the past five years,
Mr. Wang has also served as a director of China Integrated Energy, Inc. (OTC Pink:CBEH), General Steel Holdings (NYSE: GSI), Orient
Paper, Inc. (NYSE Amex: ONP), Shengtai Pharmaceutical, Inc. (OTCBB: SGTI) and Energroup Holdings Corporation (OTC Pink: ENHD).
Mr. Wang has (i) a strong financial background in investment banking and investment management; (ii) leadership and communication
skills; (iii) extensive experience in advancing growth strategies, including acquisitions and strategic alliances; and (iv) broad
experience in corporate governance.
Mr. Feng Bai.
Mr. Bai founded Lighthouse
Consulting Ltd. in Hong Kong in February 2003 and has been its President since its founding. Mr. Bai has also been a Managing
Director at Peak Capital Advisory Ltd. since 2007. Mr. Bai has been active in advising foreign corporations to invest and setup
joint ventures in the PRC. Since 1999, Mr. Bai has been doing business in China mainly in consulting, investment and distribution.
From 1997 to 1999, Mr. Bai was employed by the investment banking division of Banco Santander, focusing on clients and transactions
in Asia. Mr. Bai received his MBA degree from Harvard Business School in 1997 and graduated from Babson College in 1993 with a
bachelor of science degree in Finance/Investment and International Business Administration. Mr. Feng Bai has (i) a strong
financial background in investment management; (ii) substantial experience in advancing growth strategies, including acquisitions
and strategic alliance; and (iii) broad experience in corporate governance. Mr. Bai’s experience as a director of large,
publicly traded multinational corporations enables him to provide meaningful input and guidance to our board of directors and
as Chairman of the compensation committee. Mr. Bai is also fluent in English and Chinese.
Mr. Jiping Hua
. Most recently, Mr.
Hua served as Chairman of China Optical & Electrical Cable Association, where he served since 1998 until his retirement in
2008, and is a preeminent expert in the wire and cable industry of the People’s Republic of China. Mr. Hua brings to the
Company over 40 years of experience focused on the research and development of special cable and new materials applications. Mr.
Hua was one of the major authors of the widely used textbook, “Information Transmission Line and Applications”. Over
the years, Mr. Hua has been awarded the prestigious title of “Expert with Outstanding Contributions” by the Ministry
of Electrical Industry of China and has been the recipient of National Special Allowance to Outstanding Scientists from the Chinese
government. Mr. Hua was also a member of the 10
th
Shanghai People’s Congress, former President of the 23
rd
Research Institute of Electronics Industry, Fellow of the China Institute of Electronics (CIE), Senior Member of the Institute
of Electrical and Electronics Engineers (IEEE) and Director of the Shanghai Science & Technology Veterans Association. Mr.
Hua graduated from the Shanghai Jiao Tong University in 1962 with a bachelor of science degree in Electrical Engineering. Mr.
Hua has (i) extensive experience in the wire and cable industry; (ii) substantial managerial experience; (iii) a background in
telecommunications products; and (iv) broad experience in corporate governance.
Mr. John Francis “Jack”
Perkowski
. Mr. Perkowski is currently Managing Partner at JFP Holdings, a merchant banking firm he founded in January 2009
that is focused on China. Prior to JFP Holdings, Mr. Perkowski served as Chairman and Chief Executive Officer of ASIMCO Technologies
Limited for 15 years, one of the premier automotive component companies in the PRC, which he founded in February 1994. ASIMCO
operates 17 manufacturing facilities in the PRC and has 52 sales offices throughout the country as well as regional offices in
Detroit, Michigan, Tokyo, Japan and the United Kingdom. Mr. Perkowski brings to the Company over 30 years of investment banking
experience, having held the positions of Managing Director at Paine Webber Inc., Partner at Kluge, Subotnick and Perkowski, Inc.,
an investment partnership in the United States, and Principal of Pacific Alliance Group, a hedge fund investing in Asia. Mr. Perkowski
is the author of “Managing the Dragon: How I’m Building a Billion Dollar Business in China,” a sought after
speaker on business in the PRC and author of numerous articles on the subject of the PRC and doing business in the PRC. Mr. Perkowski
received an MBA from Harvard University’s Graduate School of Business Administration, graduating with highest distinction
and named a Baker Scholar, and also graduated from Yale University, cum laude, where he was the recipient of the Gordon Brown
Memorial Prize. Mr. Perkowski has (i) a strong financial background in investment banking and investment management; (ii) leadership
and communication skills; (iii) substantial experience in advancing growth strategies, including acquisitions and strategic alliances;
(iv) broad experience in corporate governance; and (v) substantial operating and management experience in manufacturing business.
Mr. Perkowski’s extensive operational, financial, and executive management experience and understanding of corporate governance
matters have proven to be valuable to our board of directors and in his positions as Chairman of the audit committee and nominating
committee.
Mr. Chongqi Huang.
Mr. Huang currently
sits as a member of the Chinese Academy of Engineering, the national academy of the People’s Republic of China for engineering.
Mr. Huang received a life-time appointment to the Chinese Academy of Engineering as an Academician in 1997 due his significant
contributions to research and development within the wire and cable industry in China, specifically in relation to his work within
electrical conductive materials and products. Mr. Huang also currently serves as Vice General Engineer at the Shanghai Electric
Cable Research Institute (SECRI), where he has held various Engineering and Director positions since 1957. Founded in 1957, SECRI,
the national first-rate scientific research institution in China originally under the direct control of the State Council, is
now the centre of scientific research, design, testing, information and trade affairs of the China Wire & Cable Industry.
Mr. Huang received a degree from Northeastern University in Shengyang, Liaoning, where he focused his studies on non-ferrous metals.
Mr. Huang has (i) extensive scientific, commercial and managerial experience in domestic and international businesses; (ii)
leadership and collaboration skills; and (iii) a wire and cable background with broad experience in bimetallic wire and cable
products.
Mr. Craig Studwell
. Mr. Studwell
has served as our Executive Vice President and Chief Financial Officer since October 2010. Mr. Studwell brings over 35 years of
experience in banking and corporate finance in the United States, Asia, and Europe. He previously served as Senior Vice President
and Chief Financial Officer of Paramount Petroleum Company, an independent refiner and marketer of asphalt, gasoline, diesel,
military fuels and petroleum feed stocks, where he oversaw Corporate Accounting, Treasury, and Corporate Finance. Prior to that,
he served as Senior Vice President, Finance and Planning for Pacific Millennium Corporation, a multinational corporation engaged
in pulp and paper distribution, paper manufacturing, and investments where he worked extensively in China, Hong Kong, and Asia,
overseeing the firm’s Treasury, Corporate Finance and Accounting activities. Prior to that, Mr. Studwell held senior level
management positions with commercial banking institutions in Los Angeles, New York, and Milan. Mr. Studwell holds a Bachelor of
Science Degree in Finance from New York University.
Use of Officers, Employees, and Corporate
Assets in Connection with the Transaction
This proxy solicitation
is being made and paid for by us on behalf of our board of directors. In addition, we have retained MacKenzie to assist
in the solicitation, for a fee of $15,000. The Company has also agreed to reimburse MacKenzie for reasonable out-of-pocket
expenses and to indemnify MacKenzie against certain losses arising out of its proxy solicitation services. Our directors,
officers and employees may also solicit proxies by personal interview, mail, e-mail, telephone, facsimile or other means of communication.
These persons will not be paid any additional compensation for their efforts. We will also request brokers and other fiduciaries
to forward proxy solicitation material to the beneficial owners of shares of common stock that the brokers and fiduciaries hold
of record. Upon request, we will reimburse them for their reasonable out-of-pocket expenses.
Historical Selected Financial Data
The following sets
forth summary historical consolidated financial information of the Company as of the dates and for the periods indicated. The
consolidated statement of operations data for each of the years in the three-year period ended December 31, 2011 and the consolidated
balance sheet data for each of the years ended December 31, 2010 and 2011 have been derived from our audited financial statements,
which are included in our 2011 Annual Report, which is incorporated by reference into this proxy statement. The consolidated
statement of operations data for each of the six-month periods ended June 30, 2012 and 2011, and the consolidated balance sheet
data as of June 30, 2012, have been derived from our unaudited financial statements, which are included in our Second Quarter
Form 10-Q, incorporated by reference into this proxy statement, and which include, in the opinion of management, all adjustments,
consisting of normal, recurring adjustments, necessary for a fair presentation of such data. The information set forth
below is not necessarily indicative of future results and should be read in conjunction with the consolidated financial statements,
related notes, and other financial information included in our 2011 Annual Report, and our Second Quarter 10-Q.
Consolidated
Statement of Operations Data
(in thousands)
|
|
Six Months (Unaudited)
Ended June 30,
|
|
|
Year Ended December
31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
Revenue
|
|
$
|
139,450
|
|
|
|
144,879
|
|
|
$
|
287,389
|
|
|
|
264,972
|
|
|
|
182,932
|
|
Costs of revenue
|
|
$
|
103,252
|
|
|
|
106,694
|
|
|
$
|
212,433
|
|
|
|
185,684
|
|
|
|
128,122
|
|
Gross profit
|
|
$
|
36,198
|
|
|
|
38,185
|
|
|
$
|
74,956
|
|
|
|
79,288
|
|
|
|
54,810
|
|
Selling, R&D, general and administrative expenses
|
|
$
|
17,030
|
|
|
|
12,366
|
|
|
$
|
25,958
|
|
|
|
21,245
|
|
|
|
17,921
|
|
Income from operations
|
|
$
|
19,167
|
|
|
|
25,819
|
|
|
$
|
48,998
|
|
|
|
58,043
|
|
|
|
36,889
|
|
Income before income taxes
|
|
$
|
19,422
|
|
|
|
25,117
|
|
|
$
|
47,509
|
|
|
|
55,061
|
|
|
|
22,851
|
|
Net income
|
|
$
|
12,248
|
|
|
|
17,460
|
|
|
$
|
32,045
|
|
|
|
31,868
|
|
|
|
21,912
|
|
Consolidated
Balance Sheet Data
|
|
As of June 30,
2012
|
|
|
As of December 31,
|
|
(in millions)
|
|
(Unaudited)
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
203.3
|
|
|
$
|
200.5
|
|
|
$
|
123.0
|
|
Accounts receivable
|
|
$
|
73.0
|
|
|
$
|
64.0
|
|
|
$
|
65.8
|
|
Property, plant and equipment
|
|
$
|
110.0
|
|
|
$
|
117.4
|
|
|
$
|
124.2
|
|
Total assets
|
|
$
|
438.3
|
|
|
$
|
426.8
|
|
|
$
|
370.3
|
|
Short-term debt
|
|
$
|
4.2
|
|
|
$
|
0.7
|
|
|
$
|
0.7
|
|
Long-term debt
|
|
$
|
7.2
|
|
|
$
|
7.6
|
|
|
$
|
5.7
|
|
Shareholders’ equity
|
|
$
|
405.5
|
|
|
$
|
396.2
|
|
|
$
|
344.4
|
|
Ratio of Earnings to Fixed Charges
|
|
Six months
ended
June 30,
|
|
|
Years ended December 31,
|
|
|
|
2012
|
|
|
2010
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of Earnings to Fixed Charges(1)
|
|
|
33
|
|
|
|
52
|
|
|
|
43
|
|
(1)
|
In calculating the ratio of earnings to fixed charges, we used the following definitions:
|
For the years ended December
31, 2010 and 2011, and the six months ended June 30, 2012, fixed charges amounted to $1,076,201, $1,123,528, and $612,375, respectively. Consequently,
the ratios of earnings to fixed charges for the years ended December 31, 2010 and 2011, and the six months ended June 30,
2012, were 52, 43, and 33 respectively.
The Ratio of Earnings to Fixed
Charges should be read in conjunction with the consolidated financial statements, related notes and other financial information
included in our 2011 Annual Report and Second Quarter 10-Q, which are incorporated herein by reference.
Net Book Value Per Share
The net book value
per basic share of our common stock as of June 30, 2012 was $10.58.
Transactions in Common Stock
On February 1, 2010,
the Company closed a public offering of 6,500,000 shares of its common stock at a price of $8.00 per share underwritten by Jefferies
& Company, Inc. On January 28, 2010, Jefferies & Company, Inc., acting as the sole book-running manager of the offering,
exercised in full its over-allotment option to purchase an additional 975,000 shares of common stock. The exercise of the option
increased the size of the offering to an aggregate of 7,475,000 shares of common stock. The Company received proceeds, net of
offering expenses and underwriting discounts and commissions, of approximately $55.4 million.
On September 25, 2012,
Mr. Perkowski exercised options to acquire 2,500 shares of Company common stock at an exercise price of $4.95 per share.
On September 25, 2012,
Mr. Wang exercised options to acquire 12,500 shares of Company common stock at an exercise price of $4.95 per share.
On September 25, 2012,
Mr. Bai exercised options to acquire 2,500 shares of Company common stock at an exercise price of $4.95 per share.
On September 25, 2012,
Mr. Hua exercised options to acquired 2,500 shares of Company common stock at an exercise price of $4.95 per share.
On September 25, 2012,
Mr. Fu exercised options to acquire 15,250 shares of Company common stock at an exercise price of $4.95 per share.
The following table
shows purchases of the Company’s shares during the past two years effected by affiliates of Abax, showing the number of
Company shares purchased, the range of prices paid for those shares and the average price paid per quarter.
Quarter
|
|
Amount
|
|
|
Minimum
Price (US$)
|
|
|
Maximum
Price (US$)
|
|
|
Average
Price (US$)
|
|
Quarter ended September 30, 2010
|
|
|
61,300
|
|
|
$
|
7.13
|
|
|
$
|
8.54
|
|
|
$
|
8.27
|
|
Quarter ended December 31, 2010
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Quarter ended March 31, 2011
|
|
|
205,050
|
*
|
|
$
|
9.64
|
*
|
|
$
|
9.64
|
*
|
|
$
|
9.64
|
*
|
Quarter ended June 30, 2011
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Quarter ended September 30, 2011
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Quarter ended December 31, 2011
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Quarter ended March 31, 2012
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Quarter ended June 30, 2012
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Quarter ended September 30, 2012
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Quarter ended December 31, 2012**
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
* Reflects a transfer of 205,050 shares
of Company common stock between affiliates of Abax for consideration of $9.64 per share.
** Through October 8, 2012
Other than the transactions
listed above in this section, there have been no prior stock purchases by any member of the buyer group in shares of Company common
stock during the past two years.
Ownership of Common Stock by Certain
Beneficial Owners and Directors and Executive Officers
The following table
sets forth information with respect to the beneficial ownership of our shares, as of the date of this proxy statement, by:
|
·
|
each
of our directors
and executive
officers;
|
|
·
|
each
of our directors
and executive
officers
as a group;
and
|
|
·
|
each
person known
to us to
own beneficially
more than
5.0% of our
common stock
|
Unless otherwise indicated,
the address for each of the stockholders in the table below is c/o the Company, TYG Center Tower B, Suite 2601, Dongsanhuan Bei
Lu, Bing 2, Beijing, P.R. China 100027.
|
|
Common Stock
|
|
Name of Beneficial Owner
|
|
Shares
|
|
|
Percent
|
|
|
|
|
|
|
|
|
Owners of More than 5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GMT Capital Corp. (1)
|
|
|
3,651,152
|
|
|
|
9.5
|
%
|
|
|
|
|
|
|
|
|
|
Royce & Associates, Inc. (2).
|
|
|
2,048,498
|
|
|
|
5.3
|
%
|
|
|
|
|
|
|
|
|
|
Directors and Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Li Fu
|
|
|
11,065,656
|
(3)
|
|
|
28.4
|
%
|
Chairman of Board, Director and Co-CEO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph Longever
Co-CEO and Director
|
|
|
100,000
|
(4)
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Wenbing Christopher Wang
|
|
|
300,000
|
(5)
|
|
|
*
|
|
President and Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Craig H. Studwell
|
|
|
36,000
|
(6)
|
|
|
*
|
|
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Feng Bai
|
|
|
14,000
|
(7)
|
|
|
*
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jiping Hua
|
|
|
9.651
|
(7)
|
|
|
*
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Perkowski
|
|
|
14,000
|
(7)
|
|
|
*
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Directors and Executive Officers as a group (8 persons)
|
|
|
11,539,307
|
|
|
|
29.6
|
%
|
* Less than one percent
|
1)
|
The address of this beneficial owner is 2100 Riveredge Parkway, Suite 840, Atlanta, GA 30328. Information
regarding this beneficial owner is furnished in reliance upon its Schedule 13F/HR dated May 15, 2012.
|
|
2)
|
The address of this beneficial owner is 745 Fifth Avenue, New York, NY 10151. Information regarding this beneficial owner
is furnished in reliance upon its most recent Schedule 13F on file with the SEC.
|
|
3)
|
Includes (i) options to purchase 15,250 shares of Company common stock, (ii) 1,821,973 shares of Company common stock
over which Mr. Li Fu has sole voting and dispositive power, (iii) 7,930,090 shares of Company common stock directly owned
by Wise Sun, (iv) 1,118,418 shares of Company common stock directly owned by Ms. Liu, and (iv) 179,925 shares of Company common
stock directly owned by Ms. Zhang. This information has been derived from the Schedule 13D/A filed with the SEC on June
29, 2012.
|
|
4)
|
Includes options to purchase 80,000 shares of Company common stock.
|
|
5)
|
Includes options to purchase 42,500 shares of Company common stock.
|
|
6)
|
Includes options to purchase 30,000 shares of Company common stock.
|
|
7)
|
Includes options to purchase 2,500 shares of Company common stock.
|
Market Price of the Company’s
Common Stock and Dividend Information
Our common stock
trades on the NASDAQ Global Select Market under the ticker symbol “FSIN.” The following table sets forth the high
and low sales prices for our common stock from January 1, 2010 to October 8, 2012, as reported by the NASDAQ Global Select
Market. The closing price for shares of our common stock on October 8, 2012 was $9.15.
2012
|
|
High ($)
|
|
|
Low ($)
|
|
Fourth Quarter*
|
|
|
9.15
|
|
|
|
9.08
|
|
Third Quarter
|
|
|
9.11
|
|
|
|
8.73
|
|
Second Quarter
|
|
|
8.84
|
|
|
|
5.72
|
|
First Quarter
|
|
|
8.54
|
|
|
|
7.40
|
|
2011
|
|
|
|
|
|
|
Fourth Quarter
|
|
|
8.10
|
|
|
|
4.92
|
|
Third Quarter
|
|
|
8.17
|
|
|
|
4.59
|
|
Second Quarter
|
|
|
8.94
|
|
|
|
4.06
|
|
First Quarter
|
|
|
10.18
|
|
|
|
7.67
|
|
2010
|
|
|
|
|
|
|
Fourth Quarter
|
|
|
11.26
|
|
|
|
8.64
|
|
Third Quarter
|
|
|
9.21
|
|
|
|
6.70
|
|
Second Quarter
|
|
|
12.94
|
|
|
|
8.10
|
|
First Quarter
|
|
|
12.68
|
|
|
|
8.23
|
|
*
|
Through October 8, 2012.
|
Holders
of Record
As of October 8, 2012, we had 38,406,347 shares of common stock issued and outstanding held of record by 473 record holders. The
transfer agent for the common stock is Continental Stock Transfer & Trust Company, 17 Battery Place, New York, New York 10004,
telephone number +1 (212) 509-4000.
Dividends
We have not paid any
cash dividends on our common stock, and we do not currently intend to pay cash dividends in the foreseeable future.
Delisting and Deregistration of the
Company’s Common Stock
As soon as practicable
following the merger, our common stock will be de-listed from the NASDAQ Global Select Market and deregistered under the Exchange
Act.
OTHER MATTERS
Other Matters for Action at the Special
Meeting
The Company is not
aware of any matters to be presented for action at the special meeting, except matters discussed in this proxy statement. If any
other matters properly come before the special meeting, it is intended that the shares represented by proxies will be voted in
accordance with the judgment of the persons voting the proxies.
Future Stockholder Proposals in the
Event the Merger is Not Consummated
If the proposed merger
is completed, we will not have public stockholders and there will be no public participants in any future stockholders meeting. However,
if the proposed merger is not completed by June 27, 2013, stockholders of record may present a proposal for action at our 2013
Annual Meeting of Stockholders provided that we receive such proposal at our executive office no later than March 31, 2013. Stockholder
proposals intended to be included in the proxy statement for our 2013 Annual Meeting of Stockholders must be received by Company
by January 14, 2013.
Stockholders Sharing the Same Address
Only one copy of this
proxy statement will be delivered to any given address unless we have received contrary instructions from one or more of the stockholders
sharing that address indicating that they would like additional copies sent to that address. Upon written or oral request,
the Company will deliver a separate copy of this proxy statement to a stockholder at a shared address to which a single copy of
this proxy statement was delivered. If you wish to receive a separate copy of this proxy statement, please notify the
Company by calling or sending a letter to the Secretary of the Company, Fushi Copperweld, Inc., at TYG Center Tower B, Suite 2601,
Dongsanhuan Bei Lu, Bing 2, Beijing, People’s Republic of China 100027. The Company’s telephone number
is +1 (615) 377-4183.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to
the informational requirements of the Exchange Act. We file annual, quarterly and current reports, proxy statements,
and other information with the SEC. You may read and copy any document we file at the SEC’s public reference
room located at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference room. Our SEC filings are also available to the public at the SEC’s website at www.sec.gov. You
also may obtain free copies of the documents we file with the SEC on our website (www.fushicopperweld.com) under the heading “SEC
Filings,” which can be accessed by clicking on “Investors” on the home page of the site. The information provided
on our website is not part of this proxy statement, and therefore is not incorporated by reference. Any person,
including any beneficial owner, to whom this proxy statement is delivered may request copies of proxy statements and any of the
documents incorporated by reference in this document or other information concerning us, without charge, by written or telephonic
request directed to Fushi Copperweld, Inc., at TYG Center Tower B, Suite 2601, Dongsanhuan Bei Lu, Bing 2, Beijing, People’s
Republic of China 100027, Secretary, on our website at www.fushicopperweld.com, or from the SEC through the SEC’s website
at http://www.sec.gov.
Because the merger
is a “going private” transaction, the Company and the buyer group have filed with the SEC a Schedule 13E-3 with respect
to the merger. The Schedule 13E-3, including any amendments and exhibits filed or incorporated by reference therein,
is available for inspection as set forth above. The Schedule 13E-3 will be amended to report promptly any material
changes in the information set forth in the most recent Schedule 13E-3 filed with the SEC.
Statements contained
in this proxy statement regarding the contents of any contract or other document, are not necessarily complete and each such statement
is qualified in its entirety by reference to that contract or other document attached as an exhibit or annex hereto. The SEC allows
us to “incorporate by reference” information into this proxy statement. This means that we can disclose
important information by referring to another document filed separately with the SEC. The information incorporated
by reference is considered to be part of this proxy statement. This proxy statement may update and supersede the information
incorporated by reference. Similarly, any amendments to this proxy statement that we later file with the SEC may update
and supersede the information in this proxy statement. We also incorporate by reference into this proxy statement the
following documents filed by us with the SEC under the Exchange Act:
|
·
|
our
Annual Report
on Form 10-K
for the fiscal
year ended
December
31, 2011;
|
|
·
|
our
Quarterly
Report on
Form 10-Q
for the quarter
ended March
31, 2012;
|
|
·
|
our
Quarterly
Report on
Form 10-Q
for the quarter
ended June
30, 2012;
and
|
|
·
|
our
Current Reports
on Form 8-K
filed on
January 3,
2012, March
9, 2012,
May 9, 2012,
June 29,
2012 and
July 3, 2012.
|
Notwithstanding the foregoing, information
furnished under Items 2.02 and 7.01 of any Current Report on Form 8-K, including the related exhibits, is not incorporated by
reference in this proxy statement.
Requests for copies
of our SEC filings should be directed to our proxy solicitor, MacKenzie, at the address and phone numbers provided in this proxy
statement.
THIS PROXY STATEMENT
DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL
TO MAKE SUCH PROXY SOLICITATION IN THAT JURISDICTION. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROXY STATEMENT
TO VOTE YOUR SHARES AT THE SPECIAL MEETING. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM
WHAT IS CONTAINED IN THIS PROXY STATEMENT.
THIS PROXY STATEMENT
IS DATED ____ ___, 2012. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE AS OF ANY DATE
OTHER THAN THAT DATE, AND THE MAILING OF THIS PROXY STATEMENT TO STOCKHOLDERS DOES NOT CREATE ANY IMPLICATION TO THE CONTRARY.
ANNEX A
EXECUTION VERSION
AGREEMENT
AND PLAN OF MERGER
among
Green
Dynasty Limited,
Green
Dynasty Acquisition, Inc.,
Fushi
Copperweld, Inc.
and
Green
Dynasty Holdings Limited
Dated
as of June 28, 2012
TABLE
OF CONTENTS
|
Page
|
|
|
ARTICLE I THE MERGER
|
2
|
|
|
|
Section 1.1
|
The Merger
|
2
|
Section 1.2
|
Closing; Effective Time
|
2
|
Section 1.3
|
Effects of the Merger
|
2
|
Section 1.4
|
Articles of Incorporation; Bylaws
|
2
|
Section 1.5
|
Directors and Officers
|
3
|
|
|
|
ARTICLE
II EFFECTS OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS
|
3
|
|
|
|
Section 2.1
|
Conversion of Securities
|
3
|
Section 2.2
|
Stock Options and Restricted Shares
|
4
|
Section 2.3
|
Surrender of Shares
|
5
|
|
|
|
ARTICLE III REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
|
7
|
|
|
|
Section 3.1
|
Organization and Qualification
|
7
|
Section 3.2
|
Articles of Incorporation and Bylaws
|
8
|
Section 3.3
|
Capitalization
|
8
|
Section 3.4
|
Authority
|
10
|
Section 3.5
|
No Conflict; Required Filings and Consents
|
11
|
Section 3.6
|
Compliance
|
11
|
Section 3.7
|
SEC Reports; Financial Statements; Internal Controls;
No Undisclosed Liabilities
|
13
|
Section 3.8
|
Absence of Certain Changes or Events
|
15
|
Section 3.9
|
Absence of Litigation
|
15
|
Section 3.10
|
Employee Benefit Plans
|
16
|
Section 3.11
|
Labor and Employment Matters
|
17
|
Section 3.12
|
Insurance
|
17
|
Section 3.13
|
Personal Properties and Assets
|
18
|
Section 3.14
|
Real Property
|
18
|
Section 3.15
|
Tax Matters
|
19
|
Section 3.16
|
Proxy Statement and Schedule 13E-3
|
20
|
Section 3.17
|
Intellectual Property
|
21
|
Section 3.18
|
Environmental Matters
|
21
|
Section 3.19
|
Contracts
|
22
|
Section 3.20
|
VIE and VIE Contracts
|
24
|
Section 3.21
|
Nevada Takeover Statutes
|
25
|
Section 3.22
|
Affiliate Transactions
|
25
|
Section 3.23
|
Opinion of Financial Advisor
|
25
|
TABLE
OF CONTENTS
(continued)
|
|
Page
|
|
|
|
Section 3.24
|
Brokers
|
25
|
Section 3.25
|
No Other Representations or Warranties
|
25
|
|
|
|
ARTICLE IV REPRESENTATIONS AND
WARRANTIES OF HOLDCO, PARENT AND MERGER SUB
|
26
|
|
|
|
Section 4.1
|
Organization
|
26
|
Section 4.2
|
Authority
|
26
|
Section 4.3
|
No Conflict; Required Filings and Consents
|
27
|
Section 4.4
|
Absence of Litigation
|
27
|
Section 4.5
|
Proxy Statement and Schedule 13E-3
|
28
|
Section 4.6
|
Brokers
|
28
|
Section 4.7
|
Financing
|
29
|
Section 4.8
|
Operations of Parent and Merger Sub
|
30
|
Section 4.9
|
Ownership of Shares
|
30
|
Section 4.10
|
Vote/Approval Required
|
30
|
Section 4.11
|
Solvency
|
30
|
Section 4.12
|
Guarantee
|
31
|
Section 4.13
|
Absence of Certain Agreements
|
31
|
Section 4.14
|
Buyer Group Contracts
|
31
|
Section 4.15
|
Nevada Takeover Statutes
|
31
|
Section 4.16
|
No Other Representations or Warranties
|
31
|
|
|
|
ARTICLE V CONDUCT OF BUSINESS
PENDING THE MERGER
|
32
|
|
|
|
Section 5.1
|
Conduct of Business of the Company Pending the Merger
|
32
|
Section 5.2
|
Conduct of Business of Holdco, Parent and Merger
Sub Pending the Merger
|
35
|
Section 5.3
|
No Control of Other Party’s Business
|
35
|
|
|
|
ARTICLE VI ADDITIONAL AGREEMENTS
|
35
|
|
|
|
Section 6.1
|
Proxy Statement and Schedule 13E-3
|
35
|
Section 6.2
|
Stockholders Meeting
|
36
|
Section 6.3
|
Access to Information
|
36
|
Section 6.4
|
Confidentiality
|
37
|
Section 6.5
|
Acquisition Proposals
|
37
|
Section 6.6
|
[Reserved.]
|
40
|
Section 6.7
|
Directors’ and Officers’ Indemnification
and Insurance
|
40
|
Section 6.8
|
Further Action; Efforts
|
42
|
Section 6.9
|
Public Announcements
|
44
|
Section 6.10
|
Notification of Certain Matters
|
44
|
TABLE
OF CONTENTS
(continued)
|
|
Page
|
|
|
|
Section 6.11
|
Rule 16b-3
|
44
|
Section 6.12
|
Obligations of Merger Sub
|
44
|
Section 6.13
|
Financing
|
45
|
Section 6.14
|
Stock Exchange Delisting
|
47
|
Section 6.15
|
Parent Vote
|
47
|
Section 6.16
|
Reserved
|
47
|
Section 6.17
|
Knowledge of Inaccuracies
|
47
|
Section 6.18
|
Resignations
|
48
|
Section 6.19
|
Stockholder Litigation
|
48
|
Section 6.20
|
Takeover Laws
|
48
|
|
|
|
ARTICLE VII CONDITIONS OF MERGER
|
48
|
|
|
|
Section 7.1
|
Conditions to Each Party’s Obligation to Effect
the Merger
|
48
|
Section 7.2
|
Conditions to Obligations of Holdco, Parent and Merger
Sub
|
48
|
Section 7.3
|
Conditions to Obligations of the Company
|
49
|
Section 7.4
|
Frustration of Closing Conditions
|
50
|
|
|
|
ARTICLE VIII TERMINATION, AMENDMENT
AND WAIVER
|
50
|
|
|
|
Section 8.1
|
Termination by Mutual Consent
|
50
|
Section 8.2
|
Termination by Either Parent or the Company
|
50
|
Section 8.3
|
Termination by the Company
|
51
|
Section 8.4
|
Termination by Parent
|
51
|
Section 8.5
|
Effect of Termination and Abandonment
|
52
|
Section 8.6
|
Expenses
|
54
|
Section 8.7
|
Amendment
|
54
|
Section 8.8
|
Waiver
|
54
|
|
|
|
ARTICLE IX GENERAL PROVISIONS
|
55
|
|
|
|
Section 9.1
|
Non-Survival of Representations, Warranties, Covenants
and Agreements
|
55
|
Section 9.2
|
Notices
|
55
|
Section 9.3
|
Certain Definitions
|
57
|
Section 9.4
|
Severability
|
62
|
Section 9.5
|
Entire Agreement; Assignment
|
62
|
Section 9.6
|
Parties in Interest
|
63
|
Section 9.7
|
Governing Law
|
63
|
Section 9.8
|
Headings
|
63
|
Section 9.9
|
Counterparts
|
63
|
TABLE
OF CONTENTS
(continued)
|
|
Page
|
|
|
|
Section 9.10
|
Specific Performance
|
64
|
Section 9.11
|
Jurisdiction
|
65
|
Section 9.12
|
Interpretation
|
65
|
Section 9.13
|
WAIVER OF JURY TRIAL
|
65
|
INDEX OF DEFINED TERMS
Abax Confidentiality Agreement
|
Section 6.4
|
Abax Equity Financing
|
Section 4.7(a)
|
Abax Equity Financing Commitment
|
Section 4.7(a)
|
Abax Funds
|
Section 4.7(a)
|
Acquisition Proposal
|
Section 6.5(f)(i)
|
affiliate
|
Section 9.3
|
Affiliate Transactions
|
Section 3.22
|
Agreement
|
Preamble
|
Alternative Acquisition Agreement
|
Section 6.5(c)
|
Ancillary Debt Agreements
|
Section 6.13(a)
|
Antitrust Law
|
Section 9.3
|
Articles of Merger
|
Section 1.2
|
Bank Lender
|
Section 4.7(a)
|
beneficially owned
|
Section 9.3
|
Book-Entry Shares
|
Section 2.3(b)
|
Business Day
|
Section 9.3
|
Buyer Group Contracts
|
Section 4.14
|
CEO Confidentiality Agreement
|
Section 6.4
|
CEO Equity Financing
|
Section 4.7(a)
|
CEO Equity Financing Commitment
|
Section 4.7(a)
|
Certificates
|
Section 2.3(b)
|
Change of Recommendation
|
Section 6.5(c)
|
Closing
|
Section 1.2(a)
|
Closing Date
|
Section 1.2(a)
|
Code
|
Section 2.3(f)
|
Company
|
Preamble
|
Company Articles of Incorporation
|
Section 3.2(a)
|
Company Board
|
Recitals
|
Company Bylaws
|
Section 3.2(a)
|
Company Common Stock
|
Section 2.1(a)
|
Company Credit Agreements
|
Section 9.3
|
Company Disclosure Schedule
|
Article III
|
Company Employees
|
Section 3.10(a)
|
Company Licenses
|
Section 3.6(b)
|
Company Plans
|
Section 3.10(a)
|
Company Recommendation
|
Section 3.4
|
Company Requisite Vote
|
Section 9.3
|
Company Restricted Share
|
Section 2.2(b)
|
Company Securities
|
Section 3.3(b)
|
Company Stock Option
|
Section 2.2(a)
|
Company Stock Plans
|
Section 2.2(a)
|
Company Subsidiaries’ Articles of Incorporation
|
Section 3.2(b)
|
Company Subsidiaries’ Bylaws
|
Section 3.2(b)
|
Company Subsidiary
|
Section 9.3
|
Confidentiality Agreements
|
Section 6.4
|
Contract
|
Section 3.5(a)
|
Contribution
|
Section 4.7(a)
|
Contribution Agreement
|
Recitals
|
control
|
Section 9.3
|
D&O Insurance
|
Section 6.7(c)
|
Debt Financing
|
Section 4.7(a)
|
Debt Financing Agreement
|
Section 4.7(a)
|
DTC
|
Section 2.3(c)
|
DTC Payment
|
Section 2.3(c)
|
Effective Time
|
Section 1.2(b)
|
e-mail
|
Section 9.2
|
Environmental Laws
|
Section 3.18(b)(i)
|
Environmental Permits
|
Section 3.18(b)(ii)
|
Equity Financing
|
Section 4.7(a)
|
Equity Financing Commitments
|
Section 4.7(a)
|
ERISA
|
Section 3.10(a)
|
Exchange Act
|
Section 3.3(c)
|
FCPA
|
Section 3.7(e)
|
Financial Advisor
|
Section 3.23
|
Financing
|
Section 4.7(a)
|
Financing Documents
|
Section 4.7(a)
|
Financing Sources
|
Section 6.13(c)
|
Fushi International (Dalian)
|
Section 9.3
|
GAAP
|
Section 3.7(b)
|
Governmental Entity
|
Section 3.5(b)
|
Grant Date
|
Section 3.3(c)
|
Guarantees
|
Recitals
|
Guarantors
|
Recitals
|
Hazardous Materials
|
Section 3.18(b)(iii)
|
Holdco
|
Preamble
|
Indemnified Parties
|
Section 6.7(a)
|
IRS
|
Section 3.10(b)
|
knowledge
|
Section 9.3
|
law
|
Section 9.3
|
Lease Agreements
|
Section 3.19(a)(iv)
|
Leased Real Property
|
Section 3.14(b)
|
Legal Proceeding
|
Section 3.9
|
Licenses
|
Section 3.6(b)
|
Lien
|
Section 9.3
|
Material Adverse Effect
|
Section 9.3
|
Material Contract
|
Section 3.19(a)
|
Material Subsidiary
|
Section 3.2(b)
|
Measurement Date
|
Section 3.3(a)
|
Merger
|
Recitals
|
Merger Consideration
|
Section 2.1(a)
|
Merger Sub
|
Preamble
|
NASDAQ
|
Section 3.5(b)
|
NASDAQ Marketplace Rules
|
Section 9.3
|
Nevada Secretary of State
|
Section 1.2(b)
|
Nevada Takeover Laws
|
Section 9.3
|
INDEX OF DEFINED TERMS
(Continued)
Notice
|
Section 6.5(c)
|
NRS
|
Recitals
|
Order
|
Section 7.1(c)
|
Owned Real Property
|
Section 3.14(a)
|
Parent
|
Preamble
|
Parent Material Adverse Effect
|
Section 4.1(a)
|
Parent Termination Fee
|
Section 8.5(c)
|
Paying Agent
|
Section 2.3(a)
|
Permitted Liens
|
Section 9.3
|
person
|
Section 9.3
|
PRC
|
Section 9.3
|
PRC Anti-Monopoly Bureau
|
Section 9.3
|
PRC Anti-Monopoly Law
|
Section 9.3
|
PRC Subsidiary
|
Section 9.3
|
Preferred Stock
|
Section 3.3(a)
|
Proxy Statement
|
Section 3.16
|
Real Property
|
Section 3.14(c)
|
Release
|
Section 3.18(b)(iv)
|
Representatives
|
Section 9.3
|
Rollover Holders
|
Section 4.7(a)
|
Rollover Shares
|
Section 4.7(a)
|
SAFE
|
Section 9.3
|
SAFE Circular 75
|
Section 9.3
|
SAFE Circular 78
|
Section 9.3
|
Sarbanes-Oxley Act
|
Section 3.7(c)
|
Schedule 13E-3
|
Section 3.16
|
SEC
|
Section 3.7(a)
|
SEC Reports
|
Section 3.7(a)
|
Securities Act
|
Section 3.7(a)
|
Shares
|
Section 2.1(a)
|
Special Committee
|
Recitals
|
Stockholders Meeting
|
Section 6.2(a)
|
subsidiary, subsidiaries
|
Section 9.3
|
Superior Proposal
|
Section 6.5(f)(ii)
|
Surviving Corporation
|
Section 1.1
|
Tax Return
|
Section 9.3
|
Taxes
|
Section 9.3
|
Termination Date
|
Section 8.2(a)
|
Termination Fee
|
Section 8.5(b)
|
VIE
|
Section 9.3
|
VIE Contracts
|
Section 9.3
|
Voting Agreement
|
Recitals
|
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of
June 28, 2012 (this “
Agreement
”), among Green Dynasty Limited, a Cayman Islands exempted company (“
Parent
”),
Green Dynasty Acquisition, Inc., a Nevada corporation and a direct wholly owned subsidiary of Parent (“
Merger Sub
”),
Green Dynasty Holdings Limited, a Cayman Islands exempted company (“
Holdco
”), and Fushi Copperweld, Inc., a
Nevada corporation (the “
Company
”).
WITNESSETH
:
WHEREAS, the board of directors of the Company
(the “
Company Board
”), acting upon the recommendation of a special committee comprised solely of independent
directors (the “
Special Committee
”), has adopted resolutions approving the execution of this Agreement and
the consummation of the transactions contemplated hereby, including the merger of Merger Sub with and into the Company (the “
Merger
”),
directing that this Agreement be submitted to stockholders and recommending to the Company’s stockholders that they approve
this Agreement in accordance with the Nevada Revised Statutes (the “
NRS
”) on the terms and conditions set forth
herein;
WHEREAS, the respective boards of directors
of Holdco, Parent and Merger Sub, and Parent, as the sole stockholder of Merger Sub, have each approved the execution of this
Agreement and the consummation of the transactions contemplated hereby, including the Merger;
WHEREAS, concurrently with the execution
and delivery of this Agreement, and as a condition to the willingness of the Company to enter into this Agreement, each of Mr.
Li Fu, Abax Lotus Ltd. and AGC Asia 6 Ltd. (collectively, the “
Guarantors
”) is entering into a limited guarantee
with the Company (collectively, the “
Guarantees
”) pursuant to which each of the Guarantors is guaranteeing
certain obligations of Holdco, Parent and Merger Sub in connection with this Agreement; and
WHEREAS, concurrently with the execution
and delivery of this Agreement, and as a condition to the willingness of the Company to enter into this Agreement, each of (i) the
Rollover Holders has executed and delivered to Parent a contribution agreement, dated as of the date hereof, among the Rollover
Holders, Parent and Merger Sub (together with the schedules and exhibits attached thereto, the “
Contribution Agreement
”),
pursuant to which the Rollover Holders will contribute to Parent, subject to the terms and conditions therein, the Rollover Shares,
and (ii) the Rollover Holders have executed and delivered to the Company and Parent a voting agreement, dated as of the date
hereof, among such Rollover Holders and the Company (each, a “
Voting Agreement
”).
NOW, THEREFORE, in consideration of the foregoing
and the representations, warranties, covenants and agreements herein contained, and intending to be legally bound hereby, Holdco,
Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE
I
THE MERGER
Section 1.1
The
Merger
. Upon the terms and subject to the conditions set forth in this Agreement and in accordance with the NRS, at the Effective
Time Merger Sub shall be merged with and into the Company. Following the Merger, the separate corporate existence of Merger Sub
shall cease, and the Company shall continue as the surviving corporation in the Merger (the “
Surviving Corporation
”)
and a wholly owned subsidiary of Parent.
Section 1.2
Closing;
Effective Time
.
(a) Subject
to the provisions of ARTICLE VII, the closing of the Merger (the “
Closing
”) shall take place at the offices
of Weil, Gotshal & Manges, 767 Fifth Avenue, New York, New York at 10:00 a.m. local time, on the second (2nd) Business
Day after the satisfaction or waiver (to the extent permitted by applicable law) of the conditions set forth in ARTICLE VII (excluding
conditions that by their terms cannot be satisfied until the Closing, but subject to the satisfaction or waiver of those conditions),
unless another time, date or place is agreed to in writing by the parties hereto. The date on which the Closing actually occurs
is hereinafter referred to as the “
Closing Date
.”
(b) At
the Closing, the parties hereto shall cause the articles of merger (the “
Articles of Merger
”) with respect
to the Merger to be filed with the Secretary of State of the State of Nevada (the “
Nevada Secretary of State
”),
in such form as is required by, and executed in accordance with, the relevant provisions of the NRS. The Merger shall become effective
upon the filing of the Articles of Merger or on such later date and time as Parent and the Company shall agree in writing that,
in each case, shall be specified in the Articles of Merger (the date and time the Merger becomes effective being the “
Effective
Time
”).
Section 1.3
Effects
of the Merger
. The Merger shall have the effects set forth in this Agreement and in the relevant provisions of the NRS. Without
limiting the generality of the foregoing, at the Effective Time, all of the property, rights, privileges, immunities, powers and
franchises of the Company and the Merger Sub shall vest in the Surviving Corporation, and all of the debts, liabilities and duties
of the Company and the Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.
Section 1.4
Articles
of Incorporation; Bylaws
.
(a) At
the Effective Time, the articles of incorporation of the Company shall be amended and restated to be in the form of (except with
respect to the name of the Company) the articles of incorporation of Merger Sub and, as so amended, shall be the articles of incorporation
of the Surviving Corporation until thereafter amended in accordance with their terms and as provided by law.
(b) At
the Effective Time, and without any further action on the part of the Company or Merger Sub, the bylaws of Merger Sub as in effect
immediately prior to the Effective Time shall be the bylaws of the Surviving Corporation until thereafter amended in accordance
with their terms, the articles of incorporation of the Surviving Corporation and as provided by law.
Section 1.5
Directors
and Officers
. The directors of Merger Sub immediately prior to the Effective Time shall be the initial directors of the Surviving
Corporation and shall hold office until their respective successors and assigns are duly elected and qualified, or their earlier
death, resignation or removal. The officers of the Company immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, each to hold office until the earlier of his or her resignation or removal.
ARTICLE
II
EFFECTS OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS
Section 2.1
Conversion
of Securities
. At the Effective Time, by virtue of the Merger and without any action on the part of Holdco, Parent, Merger
Sub, the Company or the holders of any of the following securities:
(a) each
share of common stock, par value $0.006 per share, of the Company (the “
Company Common Stock
”) issued and outstanding
immediately prior to the Effective Time (each a “
Share
” and collectively, the “
Shares
”),
other than any Shares to be cancelled pursuant to Section 2.1(b), shall be converted into the right to receive $9.50 in cash (the
“
Merger Consideration
”) payable to the holder thereof, without interest, in the manner provided in Section
2.3. All Shares that have been converted into the right to receive the Merger Consideration as provided in this Section 2.1 shall
no longer be outstanding and shall be automatically cancelled and shall cease to exist. If, between the date of this Agreement
and the Effective Time, there is a reclassification, recapitalization, stock split, stock dividend, subdivision, combination or
exchange of shares with respect to, or rights issued in respect of, the Shares, the Merger Consideration shall be adjusted accordingly,
without duplication, to provide to the holders of Shares the same economic effect as contemplated by this Agreement prior to such
event;
(b) each
Share held in the treasury of the Company and each Share owned directly or indirectly by Holdco, Parent, Merger Sub, or any wholly
owned Company Subsidiary immediately prior to the Effective Time (including Rollover Shares, but excluding Shares held on behalf
of third parties) shall be cancelled and shall cease to exist without any conversion thereof and no payment or distribution shall
be made with respect thereto; and
(c) each
share of common stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and
become one validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation and shall constitute
the only outstanding shares of capital stock of the Surviving Corporation.
Section 2.2
Stock
Options and Restricted Shares
.
(a) Immediately
prior to the Effective Time, each then-outstanding option to purchase Shares (a “
Company Stock Option
”) granted
under any director or employee stock option or compensation plan or arrangement of the Company (collectively, the “
Company
Stock Plans
”), whether or not vested or exercisable, shall become fully vested and exercisable contingent upon the Effective
Time, and shall be converted into the right to receive, and the Company shall pay to each former holder of any such fully vested
converted Company Stock Option at or promptly after the Effective Time, an amount in cash equal to the product of (i) the
excess, if any, of the Merger Consideration over the applicable exercise price per Share of such Company Stock Option and (ii) the
number of Shares such holder could have purchased had such holder exercised such Company Stock Option in full immediately prior
to the Effective Time.
(b) Immediately
prior to the Effective Time, each then-outstanding restricted Share granted under any Company Stock Plan (a “
Company
Restricted Share
”) shall vest, contingent upon the Effective Time, in full (and all restrictions thereon shall immediately
lapse) and be converted at the Effective Time into the right to receive the Merger Consideration, as provided in Section 2.1(a).
(c) The
Company shall pay the holders of Company Stock Options the cash payments described in this Section 2.2 at or promptly after the
Effective Time, but in any event not later than the second (2nd) Business Day after the Effective Time.
(d) All
payments made pursuant to this Section 2.2 shall be subject to all applicable tax withholdings.
(e) Prior
to the Effective Time, the Company Board (or, if appropriate, any committee thereof) shall adopt such resolutions and take all
other actions necessary and appropriate to effectuate the provisions of this Section 2.2. Prior to the Effective Time, the Company
shall (i) take all necessary and appropriate actions (including providing any required termination notices to the holders of any
Company Stock Option) to terminate the Company Stock Plans and all outstanding Company Stock Options immediately prior to the
Effective Time, (ii) provide Parent with copies of all proposed documentation relating to the termination of the Company Stock
Plans, and (iii) work with Parent to ensure that the termination is properly effected prior to the Effective Time.
Section 2.3
Surrender
of Shares
.
(a) Prior
to the Effective Time, Parent shall enter into an agreement (in a form reasonably acceptable to the Company) with the Company’s
transfer agent (or other suitable financial institution reasonably acceptable to the Company) to act as agent for the stockholders
of the Company in connection with the Merger (the “
Paying Agent
”) to receive the Merger Consideration to which
the stockholders of the Company shall become entitled pursuant to Section 2.1. At or prior to the Effective Time, Holdco or Parent
shall deposit, or cause to be deposited, with the Paying Agent sufficient funds to make all payments pursuant to Section 2.1.
Such funds may be invested by the Paying Agent as directed by Parent,
provided
that (i) no such investment or losses
thereon shall affect the Merger Consideration payable to the holders of Company Common Stock, and following any losses Parent
shall promptly provide additional funds to the Paying Agent for the benefit of the stockholders of the Company in the amount of
any such losses and (ii) such investments shall be in (A) obligations with maturities of no more than 30 days of the United
States of America or guaranteed by the United States of America and backed by the full faith and credit of the United States of
America, (B) short-term commercial paper rated the highest quality by either Moody’s Investors Service, Inc. or Standard
& Poor’s Ratings Services, or (C) certificates of deposit, bank repurchase agreements or banker’s acceptances
of commercial banks with capital exceeding $1,000,000,000. Any interest or income produced by such investments will be payable
to the Surviving Corporation or Parent, as Parent directs.
(b) Promptly
after the Effective Time and in any event not later than the second (2nd) Business Day following the Effective Time, the Surviving
Corporation shall cause to be mailed to each record holder, as of the Effective Time, of an outstanding certificate or outstanding
certificates (“
Certificates
”) that immediately prior to the Effective Time represented outstanding Shares,
which have converted into the right to receive the Merger Consideration with respect thereto pursuant to Section 2.1(a), a form
of letter of transmittal (which shall be in customary form and shall specify that delivery shall be effected, and risk of loss
and title to the Certificates held by such person shall pass, only upon proper delivery of Certificates to the Paying Agent) and
instructions for use in effecting the surrender of the Certificates. Upon surrender to the Paying Agent of a Certificate, together
with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, the holder of
such Certificate shall be entitled to receive in exchange therefor the Merger Consideration for each Share formerly represented
by such Certificate, and such Certificate shall then be cancelled. Promptly after the Effective Time, and in any event not later
than the second (2nd) Business Day following the Effective Time, the Paying Agent shall issue and deliver to each holder of uncertificated
Shares represented by book-entry (“
Book-Entry Shares
”) a check or wire transfer for the amount of cash that
such holder is entitled to receive pursuant to Section 2.1(a) in respect of such Book-Entry Shares, without such holder being
required to deliver a Certificate or an executed letter of transmittal to the Paying Agent, and such Book-Entry Shares shall then
be cancelled. No interest shall be paid or accrued for the benefit of holders of the Shares on the Merger Consideration payable
in respect of the Certificates or Book-Entry Shares. In the event of a transfer of ownership of Shares that is not registered
in the transfer records of the Company, it shall be a condition of payment that such Certificate so surrendered shall be properly
endorsed or shall be otherwise in proper form for transfer or such Book-Entry Share shall be properly transferred and that the
person requesting such payment shall have paid any transfer and other Taxes required by reason of the payment of the Merger Consideration
to a person other than the registered holder of the Certificate or Book-Entry Share surrendered or shall have established to the
satisfaction of Parent that such Tax either has been paid or is not applicable. Until surrendered as contemplated by this Section
2.3(b), each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such
surrender the applicable Merger Consideration as contemplated by this ARTICLE II, without interest.
(c) Prior
to the Effective Time, Parent and the Company shall cooperate to establish procedures with the Paying Agent and the Depository
Trust Company (“
DTC
”) to ensure that (i) if the Effective Time occurs at or prior to 11:30 a.m. (New York
time) on the Closing Date, the Paying Agent will transmit to DTC or its nominees on the Closing Date an amount in cash in immediately
available funds equal to the number of Shares held of record by DTC or such nominee immediately prior to the Effective Time multiplied
by the Merger Consideration (such amount, the “
DTC Payment
”), and (ii) if the Effective Time occurs after
11:30 a.m. (New York time) on the Closing Date, the Paying Agent will transmit to DTC or its nominees on the first (1st) Business
Day after the Closing Date an amount in cash in immediately available funds equal to the DTC Payment.
(d) At
any time following the date that is six (6) months after the Effective Time, Parent shall be entitled to require the Paying Agent
to deliver to it any funds (including any interest received with respect thereto) that have been made available to the Paying
Agent and that have not been disbursed to holders of Certificates and Book-Entry Shares and thereafter such holders shall be entitled
to look to Parent and the Surviving Corporation (subject to abandoned property, escheat or other similar laws) only as general
creditors thereof with respect to the Merger Consideration payable upon due surrender of their Certificates and Book-Entry Shares.
The Surviving Corporation shall pay all charges and expenses, including those of the Paying Agent, in connection with the exchange
of Certificates and Book-Entry Shares for the Merger Consideration.
(e) The
Merger Consideration paid in respect of Shares upon the surrender for exchange of Certificates or Book-Entry Shares in accordance
with the terms of this ARTICLE II shall be deemed to have been paid in full satisfaction of all rights pertaining to the Shares
previously represented by such Certificates or Book-Entry Shares. As of the Effective Time, the stock transfer books of the Company
shall be closed and thereafter there shall be no further registration of transfers of Shares that were outstanding prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation or the Paying Agent for
transfer or transfer is sought for Book-Entry Shares, such Certificates or Book-Entry Shares shall be cancelled and exchanged
for the consideration provided for, and in accordance with the procedures set forth, in this ARTICLE II.
(f) Notwithstanding
anything in this Agreement to the contrary, Parent, the Surviving Corporation and the Paying Agent shall be entitled to deduct
and withhold from the consideration otherwise payable pursuant to this Agreement any amount as may be required to be deducted
and withheld with respect to the making of such payment under the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder (the “
Code
”), or under any provision of state, local or foreign Tax laws.
To the extent that amounts are so withheld by Parent, the Surviving Corporation or the Paying Agent, such withheld amounts shall
be treated for all purposes of this Agreement as having been paid to the holder of Shares in respect of whom such deduction and
withholding was made by Parent or the Paying Agent.
(g) In
the event that any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the
holder thereof and the holder’s compliance with the replacement requirements established by the Paying Agent, including,
if necessary, the posting by the holder of a bond in customary amount as indemnity against any claim that may be made against
it or the Surviving Corporation with respect to the Certificate, the Paying Agent will deliver in exchange for the lost, stolen
or destroyed Certificate the applicable Merger Consideration payable in respect of the Shares represented by such Certificate
pursuant to this ARTICLE II.
ARTICLE
III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the disclosure schedule
delivered by the Company to Parent and Merger Sub prior to or contemporaneously with the execution of this Agreement (the “
Company
Disclosure Schedule
”, it being agreed that disclosure of any item in any section of the Company Disclosure Schedule
shall also be deemed disclosure with respect to any other Section of this Agreement to which the relevance of such item is reasonably
apparent from the text of the disclosure made) or as disclosed in the SEC Reports filed on or after January 1, 2010 and prior
to the date of this Agreement (without giving effect to any amendment to any such SEC Report filed on or after the date hereof
and excluding any risk factor disclosures contained under the heading “Risk Factors,” any disclosure of risks included
in any “forward-looking statements” disclaimer or any other statements that are similarly cautionary, predictive or
forward-looking in nature, in each case, other than any specific factual information contained therein; it being agreed that any
information disclosed in any such SEC Report shall be deemed disclosure only with respect to a Section of this Agreement to which
the relevance of such information is reasonably apparent from the text of such information contained in such SEC Report), the
Company hereby represents and warrants to Parent and Merger Sub that:
Section 3.1
Organization
and Qualification
. Each of the Company and the Company Subsidiaries (a) is an entity duly organized and validly existing
under the laws of the jurisdiction of its organization, (b) has all requisite corporate or similar power and authority to
own, lease and operate its properties and to carry on its business as now being conducted, and (c) is duly qualified or licensed
to do business and is in good standing (with respect to jurisdictions that recognize such concept) in each jurisdiction in which
the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary,
except, with respect to clause (c), for any such failures to be so qualified or licensed or in good standing as would not, individually
or in the aggregate, have a Material Adverse Effect.
Section 3.2
Articles
of Incorporation and Bylaws
.
(a) The
Company has heretofore furnished or otherwise made available to Parent a complete and correct copy of the articles of incorporation
of the Company, as amended to date (the “
Company Articles of Incorporation
”), and the bylaws of the Company
as amended and restated to date (the “
Company Bylaws
”), as currently in effect. The Company Articles of Incorporation
and the Company Bylaws are in full force and effect and the Company is in compliance with their material terms.
(b) The
Company has heretofore furnished or otherwise made available to Parent a complete and correct copy of the articles of incorporation
or similar formation document, as amended to date (the “
Company Subsidiaries’ Articles of Incorporation
”),
and bylaws or similar governing document as amended and restated to date (the “
Company Subsidiaries’ Bylaws
”),
of each Company Subsidiary, in each case as currently in effect. The Company Subsidiaries’ Articles of Incorporation and
the Company Subsidiaries’ Bylaws of each material (as defined under Rule 1-02 of Regulation S-X of the SEC) Company Subsidiary
(each, a “
Material Subsidiary
”) are in full force and effect and each Material Subsidiary is in compliance
with the terms of its respective Company Subsidiary Articles of Incorporation and Company Subsidiary Bylaws. Without limiting
the generality of the foregoing, each of the Company Subsidiary Articles of Incorporation and the Company Subsidiary Bylaws are
valid and in full force and effect and, with respect to the PRC Subsidiaries, have been duly approved or issued (as applicable)
by competent PRC Governmental Entities.
(c) The
Company has heretofore furnished or otherwise made available to Parent complete and accurate copies of the minutes and, in the
case of action by the Company Board or the committees thereof, written consents (or, in the case of minutes or written consents
that have not yet been finalized, drafts thereof) of all meetings of the stockholders of the Company and each of the Company Subsidiaries,
the Company Board and the board of directors of each of the Company Subsidiaries and the committees of each of such board of directors
(other than the Special Committee), in each case, held since January 1, 2010.
Section 3.3
Capitalization
.
(a) The
authorized capital stock of the Company consists of 100,000,000 Shares, and 5,000,000 shares of preferred stock, par value $0.006
per share (the “
Preferred Stock
”). At the close of business on June 22, 2012 (the “
Measurement Date
”):
(i) 38,302,319.5020 Shares were issued and outstanding (of which an aggregate of 88,000 are Company Restricted Shares); (ii) no
Shares were held in treasury; (iii) no shares of Preferred Stock were outstanding; and (iv) an aggregate of 935,455
Shares were subject to outstanding Company Stock Options. From the close of business on the Measurement Date until the date of
this Agreement, no options or warrants to purchase, or other instruments convertible into, shares of Company Common Stock or Preferred
Stock have been granted and no shares of Company Common Stock or Preferred Stock have been issued, except for Shares issued pursuant
to the exercise of Company Stock Options in accordance with their terms.
(b) Except
as set forth above, as of the date of this Agreement, (i) there are no outstanding (A) shares of capital stock or other
voting securities of the Company, (B) securities of the Company convertible into or exchangeable for shares of capital stock
or voting securities of the Company or (C) options, warrants, rights or other commitments or agreements to acquire from the
Company, or obligations of the Company to issue, any capital stock, voting securities or securities convertible into or exchangeable
for capital stock or voting securities of the Company (the items in clauses (A), (B) and (C) are referred to collectively as “
Company
Securities
”) and (ii) there are no outstanding obligations of the Company to repurchase, redeem or otherwise acquire
any Company Securities. As of the date hereof, all outstanding Shares (other than Company Restricted Shares) are, and all Shares
which may be issued pursuant to the exercise of Company Stock Options outstanding will be, when issued in accordance with the
terms thereof, duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights.
(c) Section
3.3(c) of the Company Disclosure Schedule sets forth, as of the Measurement Date, a list of all holders of Company Stock Options,
the date of grant, the number of Shares subject to each such Company Stock Option and the price per share at which such Company
Stock Option may be exercised. Each grant of Company Stock Options was duly authorized no later than the date on which the grant
of such Company Stock Option was by its terms to be effective (the “
Grant Date
”) by all necessary corporate
action, including, as applicable, approval by the Company Board (or a duly constituted and authorized committee thereof) and any
required stockholder approval by the necessary number of votes or written consents; such grant was made in accordance with the
terms of the applicable Company Stock Plan, the Securities Exchange Act of 1934, as amended (the “
Exchange Act
”),
and the rules and regulations promulgated thereunder and all other applicable laws, including the NASDAQ Marketplace Rules; and
the per share exercise price of such grant was equal to or greater than the fair market value (within the meaning of Section 422
of the Code, in the case of each Company Stock Option intended to qualify as an “incentive stock option”, and within
the meaning of Section 409A of the Code, in the case of each other Company Stock Option) of a Share on the applicable Grant Date.
Each Company Stock Option may, by its terms or the terms of the Company Stock Plan pursuant to which it was issued, be treated
at the Effective Time as set forth in Section 2.2(a).
(d) Each
of the Company Subsidiaries, as of the date hereof, together with the jurisdiction of organization of each such Company Subsidiary,
is listed on Section 3.3(d) of the Company Disclosure Schedule. All of the issued and outstanding shares of capital stock or other
equity interests of each of the Company Subsidiaries are owned by the Company or another Company Subsidiary, free and clear of
all Liens except Permitted Liens. Each of the outstanding shares of capital stock or other equity interests of each of the Company
Subsidiaries (other than the PRC Subsidiaries and dormant subsidiaries without any material assets) is duly authorized, validly
issued, fully paid and nonassessable (in each case, to the extent applicable). The registered capital of each PRC Subsidiary has
been fully paid up within the prescribed time.
There are no options, warrants, convertible securities or other agreements
or commitments, in each case issued by the Company or any Company Subsidiary, relating to the issuance, transfer, sales, voting
or redemption (including any rights of conversion or exchange under any outstanding security or other instrument) for any of the
capital stock or other equity interests of, or other ownership interests in, any Company Subsidiary. As of the date of this Agreement,
except for the Company Subsidiaries, the Company does not own or control, directly or indirectly, any capital stock of or other
equity interest in, or any interest convertible into or exercisable or exchangeable for any capital stock of or other equity interest
in, any other person.
Section 3.4
Authority
.
The Company has all necessary corporate power and authority to execute and deliver this Agreement and, subject to the Company
Requisite Vote, to perform its obligations hereunder and to consummate the transactions contemplated hereby, including the Merger.
The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby, including the Merger, have been duly and validly authorized by all necessary corporate action on behalf of
the Company, including the Company Board, and no other corporate proceedings on the part of the Company or any Company Subsidiary
(pursuant to the NRS or otherwise) are necessary to authorize this Agreement or to consummate the transactions so contemplated,
subject, in the case of the consummation of the Merger, to the approval of this Agreement by the Company Requisite Vote and the
filing with the Nevada Secretary of State of the Articles of Merger as required by the NRS. This Agreement has been duly and validly
executed and delivered by the Company and, assuming the due authorization, execution and delivery hereof by Holdco, Parent and
Merger Sub, constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors’ rights generally, and general equitable principles (whether considered in a proceeding
in equity or at law). As of the date hereof, the Company Board, acting upon the unanimous recommendation of the Special Committee,
at a duly called and held meeting and at which all directors were present has (a) duly approved and declared advisable this
Agreement and the transactions contemplated hereby, including the Merger, (b) directed that this Agreement be submitted to the
Company’s stockholders, and (c) recommended, subject to Section 6.5, that the stockholders of the Company approve this Agreement
(the “
Company Recommendation
”). The only vote of the stockholders of the Company required to approve this Agreement
and the transactions contemplated hereby is the Company Requisite Vote.
Section 3.5
No
Conflict; Required Filings and Consents
.
(a) The
execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated
hereby do not and will not (i) conflict with or violate the Company Articles of Incorporation, Company Bylaws, any Company
Subsidiaries’ Articles of Incorporation or Company Subsidiaries’ Bylaws, (ii) conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to the Company or any Company Subsidiary or by which any of their respective
properties are bound, assuming that all consents, approvals and authorizations contemplated by clauses (i) through (v) of
subsection (b) below have been obtained and that all filings described in such clauses have been made, or (iii) result
in any breach or violation of or constitute a default (or an event that with notice or lapse of time or both would become a default)
or result in the loss of a benefit under, or give rise to any right of termination, cancellation, amendment or acceleration of,
any note, bond, mortgage, indenture, contract, agreement, lease or other instrument or obligation (each, a “
Contract
”)
to which the Company or any Company Subsidiary is a party or by which the Company or any Company Subsidiary or any of their respective
properties are bound, except, in the case of clauses (ii) and (iii), for any such conflict, violation, breach, default,
loss, right or other occurrence that would not, individually or in the aggregate, (A) have a Material Adverse Effect or (B) prevent
or materially delay the consummation of the Merger.
(b) The
execution, delivery and performance of this Agreement by the Company, the consummation of the Merger or any other transaction
contemplated by this Agreement by the Company and the Company’s compliance with any of the provisions of this Agreement
do not and will not require (with or without notification or lapse of time, or both) any consent, approval, authorization or permit
of, action by, filing with or notification to, any United States, PRC, federal, state, local, or municipal, or foreign country
or province, or other governmental or regulatory (including any stock exchange) authority, agency, court or other judicial body,
commission or other governmental body (each, a “
Governmental Entity
”), except for (i) applicable requirements
of the Exchange Act (including the filing of the Proxy Statement and the Schedule 13E-3) and state securities, takeover and “blue
sky” laws, (ii) the filings and receipt, termination or expiration, as applicable, of such approvals or waiting periods
as may be required under the Antitrust Law, (iii) the applicable requirements of the NASDAQ Global Select Market (“
NASDAQ
”),
(iv) the filing with the Nevada Secretary of State of the Articles of Merger as required by the NRS, and (v) any such
consent, approval, authorization, permit, action, filing or notification the failure of which to make or obtain would not, individually
or in the aggregate, (A) have a Material Adverse Effect or (B) prevent or materially delay the consummation of the Merger.
Section 3.6
Compliance
.
(a) The
Company and the Company Subsidiaries are, and since January 1, 2010 have been, in compliance with all laws applicable to the Company
or any Company Subsidiary or by which any property or asset of the Company or any Company Subsidiary is bound, except for such
non-compliance that would not be material to the business, financial condition, or results of operations of the Company and the
Company Subsidiaries, taken as a whole. No investigation, charge, assertion or review by any Governmental Entity with respect
to the Company or any Company Subsidiary is pending (in each case that is material to the Company and the Company Subsidiaries
taken as a whole) or, to the knowledge of the Company, threatened, nor has any Governmental Entity alleged any material violation
of any such laws or indicated an intention to conduct any such investigation or review of the Company or any Company Subsidiary.
(b) The
Company and the Company Subsidiaries have all permits, licenses, authorizations, exemptions, certificates, orders, consents, approvals,
registrations, clearances and franchises (“
Licenses
”) from Governmental Entities necessary for the Company
and each Company Subsidiary to lawfully own, lease and operate their respective properties and assets, and to carry on and lawfully
operate their respective businesses as now being conducted (the “
Company Licenses
”), except for any such Licenses
the absence of which would not be material to the Company and the Company Subsidiaries taken as a whole. All Company Licenses
of the Company and the Company Subsidiaries are in full force and effect, except where the failure to be in full force and effect
would not be material to the Company and the Company Subsidiaries taken as a whole. Each of the Company and each Company Subsidiary
is in compliance with the terms of the Company Licenses, and all of the Company Licenses are valid and in full force and effect,
except for such non-compliance or invalidity that would not be material to the Company and the Company Subsidiaries taken as a
whole. Without limiting the generality of the foregoing, all material filings and registrations with the PRC Governmental Entities
required to be made in respect of the PRC Subsidiaries and their operations, including but not limited to the registrations with
the Ministry of Commerce, the State Administration of Industry and Commerce, the State Administration of Foreign Exchange, tax
bureau and customs authorities have been duly completed in accordance with the relevant rules and regulations.
(c) This
Section 3.6 does not relate to employee benefit matters, which are the subject of Section 3.10, or Taxes, which are the subject
of Section 3.15.
(d) To
the knowledge of the Company, each employee or affiliate of the Company that is a beneficial owner of Shares, who is a PRC resident
and is subject to any of the registration or reporting requirements of Circular 75, has complied with such reporting and/or
registration requirements under SAFE Circular 75, and the Company has complied with the reporting and/or registration requirements
under SAFE Circular 78 with respect to the Company Stock Plans, the Company Stock Options and the Company Restricted Shares.
Section 3.7
SEC
Reports; Financial Statements; Internal Controls; No Undisclosed Liabilities
.
(a) The
Company has timely filed or furnished all forms, reports, statements, certifications and other documents (together with all exhibits,
amendments and supplements thereto) required to be filed or furnished by it with the Securities and Exchange Commission (the “
SEC
”)
since January 1, 2010 (all such forms, reports, statements, certificates and other documents filed since January 1, 2010, collectively,
the “
SEC Reports
”). Each of the SEC Reports, as amended, complied as to form in all material respects with
the applicable requirements of the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the
“
Securities Act
”) or the Exchange Act, as the case may be, each as in effect on the date so filed. As of its
filing date (or, if amended or superseded by a subsequent filing prior to the date hereof, as of the date of such amendment or
superseding filing), none of the SEC Reports contained any untrue statement of a material fact or omitted to state a material
fact required to be stated or incorporated by reference therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. None of the Company Subsidiaries is currently required to file
any forms, schedules, statements, reports or other documents with the SEC. To the knowledge of the Company, as of the date of
this Agreement, none of the SEC Reports is the subject of ongoing SEC review or outstanding SEC comment.
(b) The
consolidated financial statements (including all related notes and schedules) of the Company and the Company Subsidiaries included
or incorporated by reference into the SEC Reports (as amended) present fairly in all material respects the consolidated financial
position of the Company and the Company Subsidiaries, as at the respective dates thereof, and the consolidated results of their
operations and cash flows for the respective periods then ended (subject, in the case of the unaudited statements, to normal year-end
adjustments and to any other adjustments described therein, including the notes thereto) and were prepared in all material respects
in conformity with United States generally accepted accounting principles (“
GAAP
”) (except, in the case of
the unaudited statements, as permitted by the SEC) applied on a consistent basis during the periods involved (except as may be
expressly indicated therein or in the notes thereto), except in each case to the extent that such information has been amended
or superseded by later SEC Reports filed prior to the date hereof.
(c) Since
January 1, 2010, subject to any applicable grace periods, the Company has been and is in compliance with (i) the applicable
provisions of the Sarbanes-Oxley Act of 2002 (the “
Sarbanes-Oxley Act
”) and (ii) the applicable listing
and corporate governance rules and regulations of NASDAQ. To the knowledge of the Company, the Company is not aware of any facts
or circumstances that would prevent its chief executive officer and chief financial officer from giving the certifications and
attestations required pursuant to the rules and regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act, without
qualification, when next due.
(d) The
Company and each of the Company Subsidiaries have established and maintain disclosure controls and procedures as defined in and
required by Rules 13a-15 and 15d-15 of the Exchange Act designed to ensure that information required to be disclosed by the Company
in the reports it files under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified
in the SEC’s rules and related forms, and that such information is accumulated and communicated to the Company’s chief
executive officer and chief financial officer (or persons performing similar functions), as appropriate, to allow timely decisions
regarding required disclosure. The Company has disclosed, based on the most recent evaluation of its chief executive officer and
its chief financial officer (or persons performing similar functions) prior to the date of this Agreement, to the Company’s
auditors and the audit committee of the Company Board (and made summaries of such disclosure available to Parent) (i) any
significant deficiencies and material weaknesses in the design or operation of its internal controls over financial reporting
(as defined in Rule 13a-15(f) under the Exchange Act) that are reasonably likely to adversely affect the Company’s
ability to record, process, summarize and report financial information and (ii) any fraud or allegation of fraud, to the
knowledge of the Company, whether or not material, that involves management or other employees who have a significant role in
the Company’s internal control over financial reporting.
(e) To
the knowledge of the Company, neither the Company nor any Company Subsidiary nor any director, officer, agent, employee or affiliate
of the Company or any Company Subsidiary has taken any action or failed to take any action that, directly or indirectly, (i) would
constitute a violation in any material respect by such persons of the Foreign Corrupt Practices Act of 1977, as amended, and the
rules and regulations promulgated thereunder (the “
FCPA
”), or any other applicable anti-bribery or anti-corruption
law, including making use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer,
payment, promise to pay or authorization of the payment of any money, or other property, gift, promise to give, or authorization
of the giving of anything of value to any foreign official (as such term is defined in the FCPA) or any foreign political party
or official thereof or any candidate for foreign political office, in contravention of the FCPA or any other applicable anti-bribery
or anti-corruption law, or (ii) would constitute an offer to pay, a promise to pay or a payment of money or anything else of value,
or an authorization of such offer, promise or payment, directly or indirectly, to any employee, agent or representative of another
company or entity in the course of their business dealings with the Company or any Company Subsidiary, in order to induce such
person to act against the interest of his or her employer or principal.
(f) Except
(i) as reflected, accrued or reserved against in (A) the Company’s consolidated balance sheet as of December 31, 2011
(or the notes thereto) included in the Company’s Annual Report on Form 10-K filed prior to the date of this Agreement
for the fiscal year ended December 31, 2011, and (B) the Company’s consolidated balance sheet as of March 31, 2012 (or the
notes thereto) included in the Company’s Quarterly Report on Form 10-Q filed prior to the date of this Agreement for the
fiscal quarter ended March 31, 2012, (ii) for liabilities or obligations incurred in the ordinary course of business since
March 31, 2012, (iii) for liabilities or obligations which have been discharged or paid in full prior to the date of this
Agreement, (iv) for liabilities or obligations incurred pursuant to the transactions contemplated by this Agreement, and (v) as
set forth on Section 3.7(f) of the Company Disclosure Schedule, neither the Company nor any of the Company Subsidiaries has any
liabilities, commitments or obligations, asserted or unasserted, known or unknown, absolute or contingent, whether or not accrued,
matured or un-matured or otherwise, of a nature required by GAAP to be reflected in a consolidated balance sheet or the notes
thereto that would be material to the Company and the Company Subsidiaries taken as a whole.
Section 3.8
Absence
of Certain Changes or Events
. From December 31, 2011 through the date of this Agreement, each of the Company and each of the
Company Subsidiaries has conducted its business in all material respects in the ordinary course of business consistent with past
practice, except in connection with this Agreement and the transactions contemplated herein. There has not been: (a) since
December 31, 2011, any event, change, occurrence or effect which has had or would reasonably be expected to have a Material Adverse
Effect; (b) between December 31, 2011 and the date of this Agreement, any declaration, setting aside or payment of any dividend
or other distribution in cash, stock, property or otherwise in respect of the Company’s or any of the Company Subsidiaries’
capital stock, except for any dividend or distribution by a Company Subsidiary to the Company or another Company Subsidiary; (c) between
December 31, 2011 and the date of this Agreement, any redemption, repurchase or other acquisition of any shares of capital stock
of the Company or any of the Company Subsidiaries (other than the acquisition of Shares tendered by employees or former employees
in connection with a cashless exercise of Company Stock Options or in order to pay Taxes in connection with the vesting or exercise
of any grants (including Company Stock Options and Company Restricted Shares) pursuant to the terms of a Company Stock Plan);
(d) between December 31, 2011 and the date of this Agreement, any material change by the Company in its accounting principles,
except as may be appropriate to conform to changes in statutory or regulatory accounting rules or GAAP or regulatory requirements
with respect thereto; or (e) between December 31, 2011 and the date of this Agreement, with respect to the Company or any Company
Subsidiary, any material election, change or revocation of any election relating to Taxes, any release, assignment, settlement
or compromise of any material Tax liability or surrender of any refund, or any change to any of methods of reporting income or
deductions for Tax purposes.
Section 3.9
Absence
of Litigation
. Except as set forth in Section 3.9 of the Company Disclosure Schedule, as of the date hereof, there are no
suits, claims, actions, proceedings, hearings, arbitrations, mediations, investigations, demand letters or any other judicial
or administrative proceedings, in law or equity (each, a “
Legal Proceeding
”) pending or, to the knowledge of
the Company, threatened against the Company or any Company Subsidiary (including by virtue of indemnification or otherwise) or
their respective assets or properties, or any executive officer or director of the Company or any Company Subsidiary, other than
any such Legal Proceedings which are not material to the Company and the Company Subsidiaries, taken as a whole. Neither the Company
nor any Company Subsidiary nor any of their respective properties is or are subject to any order, writ, judgment, injunction,
decree, award or regulatory restriction of a Governmental Entity, other than such orders, writs, judgments, injunctions, decrees,
awards or regulatory restrictions which are not material to the Company and the Company Subsidiaries, taken as a whole.
Section 3.10
Employee
Benefit Plans
.
(a) Section
3.10(a) of the Company Disclosure Schedule contains a true and complete list, as of the date of this Agreement, of each material
“employee benefit plan” (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended (“
ERISA
”)), and each other material director and employee plan, program, agreement or arrangement,
vacation or sick pay policy, fringe benefit plan, and compensation, severance or employment agreement contributed to, sponsored
or maintained by the Company or any Company Subsidiary as of the date of this Agreement for the benefit of any current, former
or retired employee, officer, consultant, independent contractor or director of the Company or any Company Subsidiary (collectively,
the “
Company Employees
” and such plans, programs, policies, agreements and arrangements, collectively, the
“
Company Plans
”).
(b) With
respect to each Company Plan, the Company has made available to Parent a current, accurate and complete copy thereof (or, if a
plan is not written, a written description thereof) and, to the extent applicable, (i) any related trust agreement or other
funding instrument, (ii) the most recent determination or opinion letter, if any, received from the Internal Revenue Service
(the “
IRS
”), (iii) any summary plan description, and (iv) for the most recent year (A) the Form 5500
and attached schedules, (B) audited financial statements and (C) actuarial valuation reports, if any.
(c) Each
Company Plan has been established and administered in all material respects in accordance with its terms and in compliance with
the applicable provisions of ERISA, the Code and other applicable laws, rules and regulations.
(d) Neither
the Company nor any Company Subsidiary has any obligation to contribute to any multiemployer plan (as defined in Section 3(37)
of ERISA), any plan subject to Title IV of ERISA or any other similar law.
(e) Except
as would not, individually or in the aggregate, have a Material Adverse Effect, no actions, suits or claims (other than routine
claims for benefits in the ordinary course) are pending or, to the knowledge of the Company, threatened against or with respect
to any such Company Plan, including any audit or inquiry by the IRS or United States Department of Labor or any other similar
Governmental Entity.
(f) Each
Company Plan that is intended to be qualified under Section 401(a) of the Code is so qualified and has received a determination
letter to that effect from the IRS and, to the knowledge of the Company, no circumstances exist which would reasonably be expected
to materially adversely affect such qualification or exemption.
(g) Except
as set forth on Section 3.10(g) of the Company Disclosure Schedule, no Company Plan provides benefits or coverage in the nature
of health, life or disability insurance following retirement or other termination of employment.
(h) Except
as contemplated by Section 2.2 or as set forth on Section 3.10(g) of the Company Disclosure Schedule, the execution, delivery
of and performance by the Company of its obligations under the transactions contemplated by this Agreement will not (either alone
or upon occurrence of any additional or subsequent events) (i) entitle any employee, director, officer, or independent contractor
of the Company or any Company Subsidiary to severance pay, unemployment compensation or any other payment, (ii) accelerate the
time of payment or vesting, or increase the amount of compensation due to any such employee, director, officer or independent
contractor, (iii) directly or indirectly cause the Company to transfer or set aside any assets to fund any benefits under any
Company Plan, (iv) otherwise give rise to any material liability under any Company Plan, or (v) limit or restrict the right to
amend, terminate or transfer the assets of any Company Plan on or following the Effective Time. The execution, delivery of and
performance by the Company of its obligations under the transactions contemplated by this Agreement will not (either alone or
upon occurrence of any additional or subsequent events) result in “excess parachute payments” within the meaning of
Section 280G(b)(1) of the Code.
(i) No
Company Plan requires the Company or any Company Subsidiary to pay a tax gross up payment to any current or former director, officer,
employee or individual consultant of the Company or any Company Subsidiary for Tax-related payments under Section 409A of the
Code.
Section 3.11
Labor
and Employment Matters
.
(a) Neither
the Company nor any Company Subsidiary is a party to any collective bargaining agreement with any labor organization or other
representative of any Company Employees, nor is any such agreement presently being negotiated by the Company. Except as would
not, individually or in the aggregate, have a Material Adverse Effect, (i) there are no unfair labor practice complaints
pending against the Company or any Company Subsidiary before the National Labor Relations Board or any other labor relations tribunal
or authority and (ii) there are no strikes, work stoppages, slowdowns, lockouts, material arbitrations or material grievances,
or other material labor disputes pending or, to the knowledge of the Company, threatened in writing against or involving the Company
or any Company Subsidiary.
(b) Except
as would not, individually or in the aggregate, have a Material Adverse Effect, (i) there are no complaints, charges or claims
against the Company pending or, to the knowledge of the Company, threatened that could be brought or filed with any Governmental
Entity based on, arising out of, in connection with or otherwise relating to the employment or termination of employment of or
failure to employ any individual and (ii) the Company is in compliance with all labor and employment laws, including all such
laws relating to wages, hours and any similar mass layoff law, collective bargaining, discrimination, civil rights, safety and
health, workers’ compensation and the collection and payment of withholding and/or social security taxes and any similar
tax.
Section 3.12
Insurance
.
Except as would not, individually or in the aggregate, have a Material Adverse Effect, (a) all insurance policies of the
Company and each of the Company Subsidiaries are in full force and effect and provide insurance in such amounts and against such
risks as is sufficient to comply with applicable law and (b) neither the Company nor any Company Subsidiary is in breach
or default, and neither the Company nor any Company Subsidiary has taken any action or failed to take any action which, with notice
or the lapse of time, would constitute such a breach or default, or permit termination or modification, of any of such insurance
policies.
Section 3.13
Personal
Properties and Assets
. Except as would not, individually or in the aggregate, have a Material Adverse Effect, each of the
Company and each Company Subsidiary has good title to all of their respectively owned tangible personal properties as necessary
to conduct their respective businesses as currently conducted, free and clear of all Liens (except for Permitted Liens), assuming
the timely discharge of all obligations owing under or related to the tangible personal property;
provided
that no representation
is made under this Section 3.13 with respect to any real property, intellectual property or intellectual property rights.
Section 3.14
Real
Property
.
(a) Section
3.14(a) of the Company Disclosure Schedule sets forth a true and complete list of all real property and interests in real property
owned in fee by the Company or any Company Subsidiary (collectively, the “
Owned Real Property
”) that is material
to the business of the Company and the Company Subsidiaries, taken as a whole. Except as would not, individually or in the aggregate,
have a Material Adverse Effect, the Company or a Company Subsidiary, as the case may be, holds good, valid, legal and marketable
fee title to the Owned Real Property, free and clear of all Liens, except for Permitted Liens.
(b) Section
3.14(b) of the Company Disclosure Schedule sets forth a true and complete list of all real property leased, subleased, licensed,
or otherwise occupied by the Company or any Company Subsidiary (collectively, the “
Leased Real Property
”) that
is material to the business of the Company and the Company Subsidiaries, taken as a whole. Except as would not individually or
in the aggregate have a Material Adverse Effect, (i) each of the Company and the Company Subsidiaries has valid leasehold interests,
land-use rights or building ownership rights, as applicable, in all of their respective Leased Real Property, free and clear of
all Liens, except for Permitted Liens, and (ii) any and all land grant premiums required under applicable laws or any relevant
Lease Agreements have been fully paid.
(c) The
Owned Real Property and the Leased Real Property are referred to collectively herein as the “
Real Property
”.
Except as would not, individually or in the aggregate, have a Material Adverse Effect, (i) to the knowledge of the Company, each
parcel of Real Property is in compliance with all existing laws applicable to such Real Property, (ii) neither the Company nor
any Company Subsidiary has received written notice of any proceedings in eminent domain, condemnation or other similar proceedings
that are pending and, to the knowledge of the Company, there are no such proceedings threatened, affecting any portion of the
Real Property, and (iii) neither the Company nor any Company Subsidiary has received written notice of the existence of any outstanding
writ, injunction, decree, order or judgment or of any pending proceeding, and, to the knowledge of the Company, there is no such
writ, injunction, decree, order, judgment or proceeding threatened, relating to the ownership, lease, use, occupancy or operation
by any person of the Real Property.
Section 3.15
Tax
Matters
.
(a) Except
as set forth in Section 3.15(a) of the Company Disclosure Schedule, (i) all material Tax Returns required to be filed by the Company
and each of the Company Subsidiaries through the date hereof have been timely filed (taking into account valid extensions of time
within which to file), (ii) all such filed Tax Returns (taking into account all amendments thereto) are true, correct and complete
in all material respects, (iii) the Company and the Company Subsidiaries have complied with all applicable laws relating to the
payment and withholding of all material amounts of Tax and all material amounts of Tax required to be withheld by the Company
or any Company Subsidiary have been timely withheld and paid over to the appropriate Governmental Entity, (iv) all material amounts
of Taxes due and owing by any of the Company or any Company Subsidiary (whether or not shown on any Tax Return) have been timely
paid, other than such Taxes that are being contested in good faith, have not been finally determined or have been adequately reserved
against in accordance with GAAP on the face of the balance sheets (rather than in any notes thereto) contained in the most recent
financial statements included in the SEC Reports filed prior to the date hereof, (v) the unpaid Taxes of the Company and the Company
Subsidiaries did not, as of the dates of the SEC Reports, exceed the reserve for Tax liability (excluding any reserve for deferred
Taxes established to reflect timing differences between book and Tax income) set forth on the face of the balance sheets (rather
than in any notes thereto) contained in the SEC Reports, and (vi) there are no Liens for material Taxes (other than Taxes not
yet due and payable or Taxes being contested in good faith) upon any of the assets of the Company or any Company Subsidiary.
(b) No
material deficiencies for Taxes against the Company or any Company Subsidiary have been claimed, proposed or assessed by any Governmental
Entity in writing or, to the knowledge of the Company, otherwise, and there are no pending, nor has the Company or any Company
Subsidiary received written notice of the expected commencement of any, audits, examinations, investigations, claims or other
proceedings in respect of a material amount of Taxes of the Company or any Company Subsidiary.
(c) Neither
the Company nor any Company Subsidiary has waived any statute of limitations in respect of any material amount of Tax or agreed
to any extension of time with respect to any material Tax assessment or deficiency (other than pursuant to extensions of time
to file Tax Returns obtained in the ordinary course).
(d) No
Tax rulings, requests for rulings, closing agreements, private letter rulings, technical advice memoranda or other similar agreements
or rulings (including any application for a change in accounting method under Section 481 of the Code) have been entered into
with, issued by, or filed with any Governmental Entity with respect to or relating to the Company or any Company Subsidiary that
could affect material Tax Returns or material Taxes of the Company or any Company Subsidiary for taxable periods or portions thereof
beginning on or after the Closing Date.
(e) Neither
the Company nor any Company Subsidiary (i) has been a member of an affiliated group filing a consolidated, combined or unitary
income Tax Return (other than a group the common parent of which was the Company), (ii) has any material liability for the
Taxes of any person (other than the Company, or any Company Subsidiary) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law) or (iii) is a party to or is bound by any Tax sharing, allocation or indemnification
agreement or arrangement (other than such an agreement or arrangement the parties to which consist exclusively of the Company
and a Company Subsidiary).
(f) Neither
the Company nor any Company Subsidiary has (i) engaged in any “intercompany transactions” in respect of which gain
was and continues to be deferred pursuant to Treasury Regulations Section 1.1502-13 or any analogous or similar provision of law
or (ii) has any “excess loss accounts” in respect of the stock of any Company Subsidiary pursuant to Treasury Regulations
Section 1.1502-19, or any analogous or similar provision of law.
(g) The
Company and the Company Subsidiaries have disclosed on their U.S. federal income Tax Returns all positions taken therein that
could give rise to substantial understatement of federal income tax within the meaning of Section 6662 of the Code. Neither the
Company nor any Company Subsidiary has entered into any transaction identified as a “listed transaction” for purposes
of Treasury Regulations Sections 1.6011-4(b)(2), failed to disclose any “reportable transaction” for purposes of Treasury
Regulations Section 1.6011-4(b)(1), or participated in any “nondisclosed noneconomic substance transaction” within
the meaning of Section 6662(i)(2) of the Code.
Section 3.16
Proxy
Statement and Schedule 13E-3
. None of the information supplied or to be supplied by the Company for inclusion or incorporation
by reference in (a) the proxy statement to be sent to the stockholders of the Company in connection with the Stockholders
Meeting (such proxy statement, as amended or supplemented, the “
Proxy Statement
”) or (b) the Exchange
Act Rule 13e-3 transaction statement on Schedule 13E-3 (as amended or supplemented from time to time, the “
Schedule 13E-3
”)
will contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances under which they are made, not misleading, with respect
to the Proxy Statement, on the date the Proxy Statement is first mailed to the stockholders of the Company and at the time of
the Stockholders Meeting, and with respect to the Schedule 13E-3, on the date the Schedule 13E-3 (including any amendments or
supplements thereto) is filed with the SEC. Each of the Proxy Statement and the Schedule 13E-3 will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and regulations promulgated thereunder. Notwithstanding the foregoing,
the Company makes no representation or warranty with respect to any information supplied by Holdco, Parent or Merger Sub or any
of their respective affiliates or Representatives for inclusion or incorporation by reference in the Proxy Statement or the Schedule
13E-3.
Section 3.17
Intellectual
Property
. Section 3.17 of the Company Disclosure Schedule sets forth an accurate and complete list of all patents, registered
copyrights and registered trademarks (including trademarks, service marks, trade names or trade dress, to the extent registered),
registered domain names and all pending applications with respect to any of the foregoing, either (1) that are owned by the Company
or any Company Subsidiary or (2) that are material to the respective businesses of the Company and the Company Subsidiaries, taken
as a whole, as conducted as of the date hereof. Except as would not, individually or in the aggregate, have a Material Adverse
Effect, (a) to the knowledge of the Company, the Company or a Company Subsidiary owns or has a valid right or license to
use (in the manner in which the same is being used on the date hereof), all intellectual property that the Company or any Company
Subsidiary is using in the conduct of their respective businesses as currently conducted, in the case of intellectual property
owned by the Company or any Company Subsidiary, free and clear of all Liens, except Permitted Liens, (b) there are no pending
or, to the knowledge of the Company, threatened Legal Proceedings by any person alleging infringement or misappropriation by the
Company or any Company Subsidiary of the intellectual property rights of such person or challenging the validity, enforceability
or ownership of, or the right to use, any intellectual property owned by the Company or any Company Subsidiary, (c) to the
knowledge of the Company, the conduct of the businesses of the Company and each of the Company Subsidiaries as currently conducted
does not infringe or misappropriate any intellectual property rights of any person, (d) to the knowledge of the Company,
no person is infringing or misappropriating any intellectual property owned by the Company or any Company Subsidiary, (e) the
Company and the Company Subsidiaries have taken reasonable steps to protect the confidentiality of their trade secrets, and (f) no
intellectual property owned by the Company or any Company Subsidiary is subject to any outstanding order, judgment or decree restricting
or limiting the use or licensing thereof by the Company or any Company Subsidiary.
Section 3.18
Environmental
Matters
.
(a) Except
as would not, individually or in the aggregate, have a Material Adverse Effect, (i) the Company and each of the Company Subsidiaries
are now and have been in compliance with all applicable Environmental Laws, and possess and are now and have been since January
1, 2010 in compliance with all applicable Environmental Permits necessary to operate the business as presently operated, (ii) to
the knowledge of the Company, there have been no releases of Hazardous Materials at or on any property owned or operated by the
Company or any Company Subsidiary, (iii) neither the Company nor any Company Subsidiary has received from a Governmental
Entity a request for information pursuant to section 104(e) of the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 or similar state or foreign statute, or any written notification alleging that it is liable for any release
or threatened release of Hazardous Materials at any location, except with respect to any such notification or request for information
concerning any such release or threatened release, to the extent such matter has been resolved with the appropriate foreign, federal,
state or local regulatory authority or otherwise, and (iv) neither the Company nor any Company Subsidiary has received any
written claim or complaint, or is presently subject to any Legal Proceeding, relating to non-compliance with Environmental Laws
or any other liabilities pursuant to Environmental Laws, and to the knowledge of the Company, no such matter has been threatened
in writing.
(b) For
purposes of this Agreement, the following terms shall have the meanings assigned below:
(i) “
Environmental
Laws
” means all foreign, federal, state, or local laws, statutes, regulations, ordinances, codes, or decrees relating
to (A) Releases or threatened Releases or Hazardous Materials, (B) the manufacture, handling, transport, use, treatment, storage
or disposal of Hazardous Materials, (C) the environment, or (D) the protection of human health and safety.
(ii) “
Environmental
Permits
” means all permits, licenses, registrations, approvals, and other authorizations required under applicable Environmental
Laws.
(iii) “
Hazardous
Materials
” means any substance or waste defined and regulated as hazardous, acutely hazardous, or toxic under applicable
Environmental Laws.
(iv) “
Release
”
means any release, spill, emission, leaking, pumping, pouring, injection, deposit, dumping, emptying, disposal, discharge, dispersal,
leaching or migration into the indoor or outdoor environment, or into or out of any property.
Section 3.19
Contracts
.
(a) Section
3.19(a) of the Company Disclosure Schedule sets forth a list of all Material Contracts as of the date of this Agreement, and the
Company has made available to Parent true and correct copies of all Material Contracts. For purposes of this Agreement, “
Material
Contract
” means all Contracts to which the Company or any Company Subsidiary is a party or by which the Company, any
Company Subsidiary or any of their respective properties or assets is bound that:
(i) are
required to be filed by the Company as a “material contract” pursuant to Item 601(b)(10) of Regulation S-K of the
SEC;
(ii) with
respect to a joint venture, partnership, limited liability company or other similar agreement or arrangement, or relate to the
formation, creation, operation, management or control of any partnership or joint venture, in each case, that is material to the
business of the Company and the Company Subsidiaries, taken as a whole;
(iii) relate
to indebtedness for borrowed money having an outstanding amount in excess of $2,000,000, other than any indebtedness between or
among any of the Company and any Company Subsidiary;
(iv) constitutes
a lease, sublease, license agreement, occupancy agreement, land grant contract or other Contract with respect to any Leased Real
Property that is material to the Company and the Company Subsidiaries taken as a whole (“
Lease Agreements
”);
(v) involve
the acquisition from another person or disposition to another person, directly or indirectly (by merger, license or otherwise),
of assets or capital stock or other equity interests of another person (A) for aggregate consideration under such Contract (or
series of related Contracts) in excess of $250,000 or (B) that contain representations, warranties, covenants, indemnities or
other obligations (including indemnification, “earn-out” or other contingent obligations) that are still in effect
and, individually, could reasonably be expected to result in payments by the Company or any Company Subsidiary in excess of $250,000
(in the case of each of clauses (A) and (B), other than acquisitions or dispositions of inventory, properties and other assets
in the ordinary course of business);
(vi) prohibits
the payment of dividends or distributions in respect of the capital stock of the Company or any of its wholly owned Company Subsidiaries,
prohibits the pledging of the capital stock of the Company or any wholly owned Company Subsidiary or prohibits the issuance of
any guaranty by the Company or any wholly owned Company Subsidiary;
(vii) are
license agreements that are material to the business of the Company and the Company Subsidiaries, taken as a whole, pursuant to
which the Company or any of the Company Subsidiaries licenses in intellectual property or licenses out intellectual property owned
by the Company or the Company Subsidiaries (other than license agreements for commercially available software on standard terms);
or
(viii) contain
provisions that prohibit the Company or any Company Subsidiary or any person that controls, or is under common control with, the
Company from competing in any material line of business or grant a right of exclusivity to any person which prevents the Company
or a Company Subsidiary from entering any territory, market or field anywhere in the world.
(b) Except
as would not, individually or in the aggregate, have a Material Adverse Effect, (i) each Material Contract is valid and binding
on the Company or a Company Subsidiary and in full force and effect (except to the extent that any Material Contract expires in
accordance with its terms), (ii) the Company and each of the Company Subsidiaries have performed all obligations required
to be performed by them to date under each Material Contract, (iii) no event or condition exists which constitutes, or after
notice or lapse of time or both would constitute, a default on the part of the Company or any Company Subsidiary under any Material
Contract, (iv) no other party to such Material Contract is, to the knowledge of the Company, in default in any respect thereunder,
and (v) to the knowledge of the Company, the Company has not received, as of the date of this Agreement, any notice in writing
from any person that such person intends to terminate any Material Contract.
Section 3.20
VIE
and VIE Contracts
.
(a) No
approvals from any Governmental Entity, other than those already obtained, are required to be obtained for the performance by
the respective parties to the VIE Contracts of their obligations and the transactions contemplated under the VIE Contracts.
(b) The
execution, delivery and performance by each of the relevant parties to the VIE Contracts of their respective obligations, and
the consummation of the transactions contemplated thereunder, did not and do not (i) result in any violation of their respective
articles of association, their respective business licenses or constitutive documents, (ii) result in any violation of any applicable
PRC laws or (iii) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default
under, any agreement, instrument, arbitration award or judgment, order or decree of any court of the PRC having jurisdiction over
the relevant parties to the VIE Contracts, as the case may be, or any agreement with, or instrument to which any of them is expressed
to be a party or which is binding on any of them.
(c) Each
of the VIE Contracts constitutes a valid and legally binding obligation of the parties thereto, enforceable in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors’ rights generally, and general equitable principles (whether considered in a proceeding
in equity or at law).
(d) The
ownership structure of VIE and the ownership structure of the VIE’s shareholders as described in the SEC Reports comply
with all applicable PRC laws in all material respects, and do not violate, breach, or otherwise conflict with any applicable PRC
laws in any material respect. As of the date hereof, the Company possesses, directly or indirectly, the power to direct
or cause the direction of the management and policies of VIE, through, among other things, its rights to direct the shareholders
of VIE as to the exercise of their voting rights. As of the date of this Agreement, there have been no disputes, disagreements,
claims or any Legal Proceedings of any nature raised by any Governmental Entity or any other party, pending or, to the Company’s
knowledge, threatened against or affecting any of the Company, the Company Subsidiaries or VIE that (i) challenge the validity
or enforceability of any part or all of the VIE Contracts, (ii) challenge the VIE structure or the ownership structure as set
forth in the VIE Contracts and described in the SEC Reports, (iii) claim any ownership, share, equity or interest in VIE, or claim
any compensation for not being granted any ownership, share, equity or interest in VIE, or (iv) claim any of the VIE Contracts
or the ownership structure thereof or any arrangements or performance of or in accordance with the VIE Contracts was in violation
of, or is or will, violate any PRC laws.
Section 3.21
Nevada
Takeover Statutes
. Assuming (i) the representations in Section 4.15 are true and correct and (ii) the Company Requisite
Vote has been obtained, the Company has no reason to believe that any of the requirements or restrictions of the Nevada Takeover
Laws would apply to prevent the consummation of any of the transactions contemplated hereby, including the Merger.
Section 3.22
Affiliate
Transactions
. There are no Material Contracts, transactions, indebtedness or other agreements or arrangements (including
any direct or indirect ownership interest in any property or assets used in or necessary for use in the conduct of business by
the Company), between the Company or any Company Subsidiary, on the one hand, and (a) any officer or director of the Company,
(b) any record or beneficial owner of five percent (5%) or more of the voting securities of the Company, or (c) any affiliate
or family member of any such officer, director or record or beneficial owner, on the other hand, in each case, that would be required
to be disclosed under Item 404 of Regulation S-K promulgated under the Securities Act (collectively, “
Affiliate Transactions
”).
Section 3.23
Opinion
of Financial Advisor
. Merrill Lynch, Pierce, Fenner & Smith Incorporated (the “
Financial Advisor
”)
has delivered to the Special Committee its written opinion (or oral opinion to be confirmed in writing), dated as of June 26,
2012, to the effect that, as of such date, the Merger Consideration to be received by the holders of the Shares in the Merger
(other than the Rollover Holders, Holdco, Parent, or Merger Sub) is fair, from a financial point of view, to such holders. A
copy of such written opinion has been or will be delivered to Parent promptly following receipt thereof by the Special Committee,
for informational purposes only.
Section 3.24
Brokers
. Except
for the Company’s obligations to the Financial Advisor, the fees and expenses of which will be paid by the Company, no broker,
finder or investment banker is entitled to any brokerage, finder’s, advisory or other fee or commission, or the reimbursement
of expenses, in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of
the Company or any Company Subsidiary.
Section 3.25
No
Other Representations or Warranties
. Except for the representations and warranties contained in this ARTICLE III,
each of Holdco, Parent and Merger Sub acknowledges that neither the Company nor any other person on behalf of the Company makes
any other express or implied representation or warranty with respect to the Company or any Company Subsidiary with respect to
any other information provided to Holdco, Parent or Merger Sub in connection with the transactions contemplated by this Agreement. Neither
the Company nor any other person will have or be subject to any liability to Holdco, Parent, Merger Sub or any other person resulting
from the distribution to Holdco, Parent or Merger Sub, or Holdco’s, Parent’s or Merger Sub’s use of, any such
information, including any information, documents, projections, forecasts or other material made available to Holdco, Parent or
Merger Sub in certain “data rooms” or management presentations in expectation of the transactions contemplated by
this Agreement.
ARTICLE
IV
REPRESENTATIONS AND WARRANTIES OF HOLDCO, PARENT
AND MERGER SUB
Holdco, Parent and Merger Sub hereby, jointly
and severally, represent and warrant to the Company that:
Section 4.1
Organization
.
(a) Each
of Holdco, Parent and Merger Sub (i) is a corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is incorporated and (ii) has the requisite corporate power and authority to own, operate
and lease its properties and to carry on its business as it is now being conducted, except where the failure to have such power
or authority would not, individually or in the aggregate, have a Parent Material Adverse Effect. For purposes of this
Agreement, a “
Parent Material Adverse Effect
” means any event, change, occurrence or effect that would prevent,
materially delay or materially impede the performance by Holdco, Parent or Merger Sub of its obligations under this Agreement
or the consummation of the transactions contemplated by this Agreement. The organizational or governing documents of
Holdco, Parent and Merger Sub, as previously provided to the Company, are in full force and effect.
(b) Parent
owns beneficially and of record all of the outstanding capital stock of Merger Sub free and clear of all Liens.
(c) Holdco
owns beneficially and of record all of the outstanding capital stock of Parent free and clear of all Liens.
Section 4.2
Authority
. Each
of Holdco, Parent and Merger Sub has all necessary corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated hereby, including the Merger. The execution,
delivery and performance of this Agreement by each of Holdco, Parent and Merger Sub and the consummation by each of Holdco, Parent
and Merger Sub of the transactions contemplated hereby, including the Merger, have been duly and validly authorized by all necessary
corporate action by the boards of directors of Holdco, Parent and Merger Sub, and have been duly and validly authorized by all
necessary actions by Parent as the sole stockholder of Merger Sub, and no other corporate proceedings on the part of Holdco, Parent
or Merger Sub are necessary to authorize this Agreement, to perform their respective obligations hereunder, or to consummate the
transactions contemplated hereby (other than the filing with the Nevada Secretary of State of the Articles of Merger as required
by the NRS). This Agreement has been duly and validly executed and delivered by Holdco, Parent and Merger Sub and,
assuming due authorization, execution and delivery hereof by the Company, constitutes a legal, valid and binding obligation of
each of Holdco, Parent and Merger Sub enforceable against each of Holdco, Parent and Merger Sub in accordance with its terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating
to or affecting creditors’ rights generally, or general equitable principles (whether considered in a proceeding in equity
or at law).
Section 4.3
No
Conflict; Required Filings and Consents
.
(a) The
execution, delivery and performance of this Agreement by Holdco, Parent and Merger Sub do not and will not (i) conflict with
or violate the respective certificates of incorporation or bylaws (or similar organizational documents) of Holdco, Parent or Merger
Sub, (ii) assuming that all consents, approvals and authorizations contemplated by clauses (i) through (iv) of
subsection (b) below have been obtained, and all filings described in such clauses have been made, conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to Holdco, Parent or Merger Sub or by which either of them or any
of their respective properties are bound, or (iii) result in any breach or violation of or constitute a default (or an event
which with notice or lapse of time or both would become a default) or result in the loss of a benefit under, or give rise to any
right of termination, cancellation, amendment or acceleration of, any Contracts to which Holdco, Parent or Merger Sub is a party
or by which Holdco, Parent or Merger Sub or any of their respective properties are bound, except, in the case of clauses (ii) and
(iii), for any such conflict, violation, breach, default, acceleration, loss, right or other occurrence which would not, individually
or in the aggregate, have a Parent Material Adverse Effect.
(b) The
execution, delivery and performance of this Agreement by each of Holdco, Parent and Merger Sub and the consummation of the transactions
contemplated hereby by each of Holdco, Parent and Merger Sub do not and will not require any consent, approval, authorization
or permit of, action by, filing with or notification to, any Governmental Entity, except for (i) the applicable requirements,
if any, of the Exchange Act and the rules and regulations promulgated thereunder, and state securities, takeover and “blue
sky” laws, (ii) the filings and receipt, termination or expiration, as applicable, of such approvals or waiting periods
as may be required under any Antitrust Law, (iii) the filing with the Nevada Secretary of State of the Articles of Merger as required
by the NRS, and (iv) any such consent, approval, authorization, permit, action, filing or notification the failure of which
to make or obtain would not, individually or in the aggregate, have a Parent Material Adverse Effect.
Section 4.4
Absence
of Litigation
. As of the date of this Agreement, there is no Legal Proceeding pending or, to the knowledge of Holdco,
Parent or Merger Sub, threatened against Holdco, Parent, Merger Sub or any of their subsidiaries, other than any such Legal Proceeding
that would not, individually or in the aggregate, have a Parent Material Adverse Effect. As of the date of this Agreement,
neither Holdco, Parent, Merger Sub nor any of their subsidiaries nor any of their respective properties is or are subject to any
order, writ, judgment, injunction, decree or award that would, individually or in the aggregate, have a Parent Material Adverse
Effect.
Section 4.5
Proxy
Statement and Schedule 13E-3
. None of the information supplied or to be supplied by Holdco, Parent, Merger Sub
or any of their respective affiliates for inclusion or incorporation by reference in the Proxy Statement or the Schedule 13E-3
will contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under which they are made, not misleading, with respect
to the Proxy Statement, on the date the Proxy Statement is first mailed to the stockholders of the Company, and with respect to
the Schedule 13E-3, on the date the Schedule 13E-3 (including any amendments or supplements thereto) is filed with the SEC. Notwithstanding
the foregoing, neither Holdco, Parent nor Merger Sub makes any representations or warranties with respect to any information supplied
by the Company or any of the Company’s Representatives for inclusion or incorporation by reference in the Proxy Statement
or the Schedule 13E-3.
Section 4.6
Brokers
. Except
for Parent’s obligations to Deutsche Bank AG, Parent’s financial advisor, no broker, finder or investment banker is
entitled to any brokerage, finder’s, advisory or other fee or commission, or the reimbursement of expenses, in connection
with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Holdco, Parent or Merger
Sub, or any of their respective affiliates.
Section 4.7
Financing
.
(a) Parent
has delivered to the Company a true, complete and correct copy of an executed Facility Agreement, dated as of June 27, 2012 (
the “
Debt Financing Agreement
”), between Parent and China Development Bank Corporation Hong Kong Branch (the
“
Bank Lender
”) pursuant to which the Bank Lender has agreed, subject to the terms and conditions set forth
therein, to provide the loans described therein (the “
Debt Financing
”) for the purposes of financing the transactions
contemplated by this Agreement and related fees and expenses. Parent has delivered to the Company true, complete and
correct copies of (i) an executed equity commitment letter (the “
Abax Equity Financing Commitment
”) pursuant
to which Abax Lotus Ltd. and AGC Asia 6 Ltd. (collectively, the “
Abax Funds
”) have committed, subject to the
terms and conditions set forth therein, to invest in Holdco, the cash amounts set forth therein (the “
Abax Equity Financing
”),
and (ii) an executed equity commitment letter (the “
CEO Equity Financing Commitment
”, and together with the
Abax Equity Financing Commitment, the “
Equity Financing Commitments
”) pursuant to which Mr. Li Fu has committed,
subject to the terms and conditions set forth therein, to invest in Holdco the cash amounts set forth therein (the “
CEO
Equity Financing
” and, together with the Abax Equity Financing, the “
Equity Financing
”). The
Equity Financing Commitments and the Debt Financing Agreement are together referred to herein as the “
Financing Documents
”
and the Equity Financing together with the Debt Financing are referred to herein as the “
Financing
”. Parent
has delivered to the Company a true, complete and correct copy of the executed Contribution Agreement, pursuant to which Abax
Lotus Ltd., Mr. Li Fu and the other stockholders named therein (collectively, the “
Rollover Holders
”) have
agreed, subject to the terms and conditions set forth therein, to contribute some or all of the Shares owned by them (the “
Rollover
Shares
”) to Parent in exchange for newly issued shares of Holdco prior to the consummation of the Merger (the “
Contribution
”). None
of the Financing Documents or the Contribution Agreement has been amended or modified prior to the date of this Agreement, no
such amendment or modification is contemplated, and the respective commitments contained in the Financing Documents and the Contribution
Agreement have not been withdrawn or rescinded in any respect (
provided
,
however
, that Holdco, Parent and Merger
Sub may replace, amend or supplement the Financing Documents or the Contribution Agreement to the extent permitted by Section
6.13). There are no side letters or other agreements to which Holdco, Parent or Merger Sub is a party related to the
Contribution or issuance of new shares of Holdco other than as expressly set forth in the Contribution Agreement and there are
no side letters or other agreements to which Holdco, Parent or Merger Sub or any of their respective affiliates is a party related
to the funding or investing, as applicable, of the full amount of the Debt Financing. Parent has fully paid any and
all commitment fees or other fees in connection with the Financing Documents that are payable on or prior to the date hereof,
and the Financing Documents and the Contribution Agreement are in full force and effect and are the legal, valid, binding and
enforceable obligations of Holdco, Parent and Merger Sub, as the case may be, and, to the knowledge of Parent, each of the other
parties thereto, in accordance with the terms and conditions thereof, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, and
general equitable principles (whether considered in a proceeding in equity or at law). As of the date of this Agreement,
no event has occurred which, with or without notice, lapse of time or both, would or would reasonably be expected to constitute
a default or breach on the part of Holdco, Parent or Merger Sub or, to the knowledge of Holdco, Parent or Merger Sub, any other
party thereto under any of the Financing Documents or the Contribution Agreement or that would otherwise result in the Financing
not becoming available in order to consummate the transactions contemplated hereunder. The Financing Documents contain
all of the conditions precedent to the obligations of the parties thereunder to make the Financing available to Holdco and Parent,
as applicable, on the terms therein and the Contribution Agreement contains all of the conditions precedent to the obligations
of the parties thereunder to make the Contribution to Holdco described therein. Assuming satisfaction of the conditions
set forth in Sections 7.1 and 7.2, Parent has no reason to believe that any of the conditions in the Financing Documents or the
Contribution Agreement will not be satisfied on or prior to the Closing Date.
(b) Assuming
(i) the Financing is funded in accordance with the Financing Documents, (ii) the Contribution contemplated by the Contribution
Agreement is made in accordance with the terms of the Contribution Agreement and (iii) Parent and Merger Sub are obligated to
close pursuant to Section 1.2, Parent and Merger Sub will have at and after the Closing funds sufficient to (A) pay the Merger
Consideration, (B) pay any and all fees and expenses required to be paid by Holdco, Parent, Merger Sub and the Surviving Corporation
in connection with the Merger and the Financing, and (C) satisfy all of the other payment obligations of Holdco, Parent, Merger
Sub and the Surviving Corporation contemplated hereunder.
Section 4.8
Operations
of Parent and Merger Sub
. Each of Holdco, Parent and Merger Sub has been formed solely for the purpose of engaging
in the transactions contemplated hereby and prior to the Effective Time will have engaged in no other business activities and
will have incurred no liabilities or obligations other than as contemplated herein. The authorized capital stock of
Merger Sub consists of 1,000 shares of common stock, no par value per share, of which 100 shares are validly issued and outstanding. All
of the issued and outstanding capital stock of Merger Sub is, and at the Effective Time will be, owned by Parent, free and clear
of all Liens. All of the issued and outstanding capital stock of Parent is, and as of the Effective Time will be, owned
by Holdco, free and clear of all Liens. All of the issued and outstanding capital stock of Holdco is, and as of the
Effective Time will be, owned by Mr. Li Fu and/or the Abax Funds, subject to their rights to fund the Equity Financing Commitments
through one or more affiliates, free and clear of all Liens.
Section 4.9
Ownership
of Shares
. Except as set forth in Section 4.9 of the disclosure schedule delivered by Parent to the Company prior
to or contemporaneously with the execution of this Agreement, none of Holdco, Parent, Merger Sub, Mr. Li Fu or their respective
affiliates owns (directly or indirectly, beneficially or of record) any Shares and none of Holdco, Parent, Merger Sub or their
respective affiliates holds any rights to acquire or vote any Shares except pursuant to this Agreement and the Voting Agreement.
Section 4.10
Vote/Approval
Required
. No vote or consent of the holders of any class or series of capital stock of Holdco or Parent is necessary
to approve this Agreement or the transactions contemplated hereby, including the Merger.
Section 4.11
Solvency
. Assuming
(a) satisfaction of the conditions set forth in Sections 7.1 and 7.2 and (b) accuracy of the representations and warranties of
the Company set forth in Article III, as of the Effective Time, immediately after giving effect to the transactions contemplated
by this Agreement (including the Merger, the Financing (or any alternative financing), the payment of the aggregate Merger Consideration,
any repayment of existing indebtedness contemplated by this Agreement or the Financing Documents and the payment of all related
fees and expenses), each of Holdco, Parent and the Surviving Corporation will be Solvent. With respect to each person,
“Solvent” means that, as of any date of determination, (i) the amount of the “fair saleable value” of
the assets of such Person and its subsidiaries, taken as a whole, exceeds, as of such date, the sum of all “debts”
of such Person and its subsidiaries, taken as a whole, including contingent liabilities, as such quoted term is generally determined
in accordance with applicable law governing determinations of the insolvency of debtors; (ii) such Person will not have, as of
such date, an unreasonably small amount of capital for the operation of the business in which it is engaged as such business is
now conducted and is proposed to be engaged following the Closing Date; and (iii) such Person will be able to pay its debts, including
contingent liabilities, as they mature.
Section 4.12
Guarantee
. Concurrently
with the execution of this Agreement, the Guarantors
have delivered to the Company the duly executed Guarantees. The
Guarantees are in full force and effect and are valid, binding and enforceable obligations of the Guarantors subject to the effects
of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’
rights generally, and general equitable principles (whether considered in a proceeding in equity or at law). No event
has occurred, which, with or without notice, lapse of time or both, would constitute a default on the part of the Guarantors under
the Guarantees.
Section 4.13
Absence
of Certain Agreements
. Other than the Contribution Agreement, the Voting Agreement and the Equity Financing Commitments,
as of the date hereof, none of Holdco, Parent nor any affiliate of Holdco or Parent has entered into any agreement, arrangement
or understanding (in each case, whether oral or written), or authorized, committed or agreed to enter into any agreement, arrangement
or understanding (in each case, whether oral or written), pursuant to which: (i) any stockholder of the Company would be entitled
to receive consideration of a different amount or nature than the Merger Consideration or pursuant to which any stockholder of
the Company agrees to vote to adopt this Agreement or agrees to vote against any Superior Proposal; (ii) any person has agreed
to provide, directly or indirectly, equity capital to Holdco, Parent, Merger Sub or the Company to finance in whole or in part
the Merger; or (iii) any current employee of the Company has agreed to (x) remain as an employee of the Company or any of the
Company Subsidiaries following the Effective Time at compensation levels in excess of levels currently in effect (other than pursuant
to any employment Contracts with the Company and its subsidiaries in effect as of the date hereof), (y) contribute or roll-over
any portion of such employee’s Shares, Company Stock Options, or other equity awards to the Company or its subsidiaries
or Parent or any of its affiliates, or (z) receive any capital stock or equity securities of the Company or any of the Company
Subsidiaries, Holdco, Parent or any affiliate of Holdco or Parent.
Section 4.14
Buyer
Group Contracts
. Parent has delivered to the Company a true, correct and complete copy of: (a) the Contribution
Agreement; (b) the Voting Agreement; and (c) the Equity Financing Commitments (collectively, the “
Buyer Group
Contracts
”). As of the date hereof, other than the Buyer Group Contracts, there are no side letters or other
oral or written contracts relating to the transactions contemplated by this Agreement between two or more of the following persons:
each of the Rollover Holders, the Guarantors and any of their respective affiliates.
Section 4.15
Nevada
Takeover Statutes
. As of the date hereof, assuming the representations in Section 3.4 are true and correct, neither
Holdco, Parent nor Merger Sub has any reason to believe that any of the requirements or restrictions of the Nevada Combinations
With Interested Stockholders Law, NRS 78.411-78.444, enacted in Nevada, applies to this Agreement or to any of the transactions
contemplated hereby, including the Merger.
Section 4.16
No
Other Representations or Warranties
. Except for the representations and warranties contained in this ARTICLE IV,
the Company acknowledges that none of Holdco, Parent, Merger Sub or any other person on behalf of Holdco, Parent or Merger Sub
makes any other express or implied representation or warranty with respect to Holdco, Parent or Merger Sub or with respect to
any other information provided to the Company.
ARTICLE
V
CONDUCT OF BUSINESS PENDING THE MERGER
Section 5.1
Conduct
of Business of the Company Pending the Merger
. The Company covenants and agrees that, during the period from the
date hereof until the Effective Time, except as expressly contemplated or expressly permitted by this Agreement, as set forth
in Section 5.1 of the Company Disclosure Schedule or as required by law or regulation, or unless Parent shall otherwise consent
in writing (which consent shall not be unreasonably withheld or delayed), the Company shall, and shall cause each Company Subsidiary
to, conduct its business in the ordinary course of business consistent with past practice, and use its commercially reasonable
efforts to preserve substantially intact its and each of the Company Subsidiaries’ business organizations, and to preserve
in all material respects its present relationships with customers, suppliers, distributors, employees and other persons with which
the Company or the Company Subsidiaries have material business relations;
provided
,
however
, that no action by the
Company or the Company Subsidiaries with respect to matters specifically addressed by subparagraphs (a) through (q) below shall
be deemed a breach of this Section 5.1 unless such action constitutes a breach of such subparagraphs (a) through (q). Except
as otherwise expressly contemplated or expressly permitted by this Agreement, as set forth in Section 5.1 of the Company Disclosure
Schedule or as required by law or regulation, or unless Parent shall otherwise consent in writing (which consent shall not be
unreasonably withheld or delayed), the Company shall not, and shall not permit any Company Subsidiary to, between the date of
this Agreement and the Effective Time, directly or indirectly, do any of the following:
(a) amend
or otherwise change the Company Articles of Incorporation, Company Bylaws, Company Subsidiaries’ Articles of Incorporation
or Company Subsidiaries’ Bylaws or any similar governing instruments;
(b) issue,
deliver, sell, pledge, dispose of, transfer, subject to any Lien or encumber any shares of capital stock, ownership interests
or voting securities, or any options, warrants, convertible securities or other rights of any kind to acquire or receive any shares
of capital stock, any other ownership interests or any voting securities (including but not limited to stock appreciation rights,
phantom stock or similar instruments) of the Company or any Company Subsidiary (in each case except for (i) the issuance
of Shares upon the exercise of Company Stock Options outstanding on the date hereof, in accordance with the terms of any Company
Plan, (ii) the grant of Company Restricted Shares and Company Stock Options (and issuances of Shares pursuant thereto) made
in the ordinary course of business consistent with past practice, or (iii) the issuance of shares by a Company Subsidiary
to the Company or another Company Subsidiary);
(c) declare,
set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any
of the capital stock of the Company or any Company Subsidiary (except for any dividend or distribution by a Company Subsidiary
to the Company or another Company Subsidiary) or enter into any agreement with respect to the voting or registration of its capital
stock;
(d) reclassify,
combine, split, subdivide or amend the terms of, or redeem, purchase or otherwise acquire, directly or indirectly, any shares
of capital stock of the Company (other than the acquisition of Shares tendered by employees or former employees in connection
with a cashless exercise of Company Stock Options or in order to pay Taxes in connection with the vesting or exercise of any grants
(including Company Stock Options and Company Restricted Shares) pursuant to the terms of a Company Plan or a Company Stock Plan),
or reclassify, combine, split or subdivide or amend the terms of any capital stock or other ownership interests of any of the
Company Subsidiaries;
(e) (i)
directly or indirectly acquire (whether by merger, consolidation or acquisition of stock or assets or otherwise) in one transaction
or any series of related transactions any equity interests in any corporation, partnership or other business organization or division
thereof or any material assets, other than purchases of inventory and other assets in the ordinary course of business or pursuant
to existing Contracts or (ii) sell, pledge, mortgage, lease, license, subject to any Lien, transfer or otherwise dispose
of (whether by merger, consolidation or acquisition of stock or assets or otherwise) any of the material property or assets of
the Company or any Company Subsidiary, except (A) dispositions of obsolete, surplus or worn-out assets or assets that are no longer
useful in the conduct of the business of the Company and the Company Subsidiaries, (B) transfers among the Company and the Company
Subsidiaries or (C) in the ordinary course of business consistent with past practice (which for the avoidance of doubt and without
limitation to the foregoing shall be deemed to include the sale or other disposition of supply or inventory in the ordinary course
of business);
(f) terminate,
cancel, transfer, assign, license, encumber or agree to any material change in or waiver under any Material Contract, or enter
into or amend any Contract that, if existing on the date hereof, would be a Material Contract;
(g) grant
any material licenses of intellectual property to third parties except in the ordinary course of business;
(h) incur,
issue, renew, prepay, syndicate, refinance or modify in any material respect the terms of any indebtedness for borrowed money,
or assume, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations of any person, or make,
forgive or cancel any loans, advances or capital contributions to, or investments in, any other person (other than a wholly owned
Company Subsidiary or acquisitions permitted by subparagraph (e)(i) above), in each case in an amount in excess of $1,000,000
individually or $2,000,000 in the aggregate, other than in the ordinary course of business consistent with past practice (including
any borrowings under the Company Credit Agreements and in respect of letters of credit);
(i) except
pursuant to any Company Plan or as required by applicable law, (i) increase the compensation or fringe benefits of any of
its directors, officers or employees, other than in the ordinary course of business consistent with past practice, (ii) grant
any severance or termination pay not provided for under any Company Plan, or any retention pay, (iii) waive or amend in any material
respect any performance or vesting criteria or accelerate vesting, exercisability or funding under any Company Plan, (iv) enter
into any employment, consulting or severance agreement or arrangement with any of its present directors, officers, employees or
independent consultants, other than in the ordinary course of business consistent with past practice with respect to non-executive
officer employees, employees with an annual base salary of less than $100,000 and independent consultants, or (v) establish,
adopt, enter into or amend in any material respect or terminate any Company Plan, excluding adjustment of performance targets
for performance-based awards in a manner permitted under the terms of such awards or in the ordinary course of business;
(j) make
any material change in any financial or tax accounting principles, policies, methods or procedures used by the Company, except
as may be required by changes in statutory or regulatory accounting rules or GAAP or regulatory requirements with respect thereto;
(k) other
than in the ordinary course of business consistent with past practice, (i) make, change or revoke any Tax election, (ii) enter
into any release, settlement or compromise of any material Tax liability, (iii) file any amended Tax Return with respect
to any material Tax or waive any statute of limitations with respect to any material Tax claim or assessment, (iv) change
(or file a request to make such change) any method of Tax accounting or any annual Tax accounting period, (v) enter into
or request any closing agreement relating to any Tax, (vi) surrender any right to claim a Tax refund, (vii) fail to duly
and timely file all Tax Returns and other documents required to be filed with any taxing authority in accordance with past practice
(taking into account any extension of time within which to file such Tax Return), or (viii) incur any material liability for Taxes;
(l) settle
or compromise any litigation other than settlements or compromises of litigation where the amount paid in settlement or compromise,
in each case, does not exceed the amount set forth in Section 5.1(l) of the Company Disclosure Schedule;
(m) except
for this Agreement, adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization
or other reorganization of such entity (other than among the Company Subsidiaries);
(n) enter
into, amend or modify any union recognition agreement, collective bargaining agreement or similar agreement with any trade union
or representative body;
(o) enter
into, amend or modify any Affiliate Transactions;
(p) make
capital expenditures that are not budgeted in the Company’s current plan approved by the Company Board that was heretofore
made available to Parent, as set forth in Section 5.1(p) of the Company Disclosure Schedule, except for (i) other expenditures
necessary to maintain existing assets in good repair, consistent with past practice or (ii) any other single capital expenditure
not in excess of $250,000 or capital expenditures for the Company and the Company Subsidiaries not in excess of $1,000,000 in
the aggregate; or
(q) authorize
or agree to take any of the actions described in Section 5.1(a)-(p).
Section 5.2
Conduct
of Business of Holdco, Parent and Merger Sub Pending the Merger
. Subject to the express conditions of this Agreement
and the express rights of Parent and Merger Sub hereunder, between the date of this Agreement and the Effective Time, Holdco,
Parent and Merger Sub shall not, directly or indirectly, take any action that would individually or in the aggregate, have a Parent
Material Adverse Effect.
Section 5.3
No
Control of Other Party’s Business
. Nothing contained in this Agreement shall give Holdco or Parent, directly
or indirectly, the right to control or direct the Company’s or the Company Subsidiaries’ operations prior to the Effective
Time, and nothing contained in this Agreement shall give the Company, directly or indirectly, the right to control or direct Parent’s
or its subsidiaries’ operations prior to the Effective Time. Prior to the Effective Time, each of the Company
and Parent shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its
and its subsidiaries’ respective operations.
ARTICLE
VI
ADDITIONAL AGREEMENTS
Section 6.1
Proxy
Statement and Schedule 13E-3
. As soon as reasonably practicable following the date of this Agreement, the Company
shall, with the assistance of Parent, prepare and file the Proxy Statement with the SEC. Concurrently with filing the
Proxy Statement with the SEC, the Company and Parent shall prepare and file the Schedule 13E-3 with the SEC. Holdco,
Parent, Merger Sub and the Company will cooperate with each other in the preparation of the Proxy Statement and the Schedule 13E-3. Without
limiting the generality of the foregoing, each of Holdco, Parent and Merger Sub will furnish to the Company the information relating
to it required by the Exchange Act to be set forth in each of the Proxy Statement and the Schedule 13E-3. Each of Holdco,
Parent, Merger Sub and the Company shall use its commercially reasonable efforts to resolve all SEC comments with respect to the
Proxy Statement and the Schedule 13E-3 as promptly as reasonably practicable after receipt thereof. Each of Holdco,
Parent, Merger Sub and the Company agrees to correct any information provided by it for use in the Proxy Statement and the Schedule
13E-3 which shall have become false or misleading. The Company shall as soon as reasonably practicable notify Parent
and Merger Sub of the receipt of any comments from the SEC with respect to the Proxy Statement and the Schedule 13E-3 and any
request by the SEC for any amendment to the Proxy Statement or the Schedule 13E-3 or for additional information in connection
therewith. The Company will promptly provide Parent with copies of all correspondence between the Company and the SEC
with respect to the Proxy Statement and Schedule 13E-3, and Parent will promptly provide the Company with copies of all correspondence
between Parent and the SEC with respect to the Schedule 13E-3. Prior to filing or mailing (as applicable) the Proxy
Statement and Schedule 13E-3 (or any amendment or supplement thereto) or responding to any comments from the SEC with respect
thereto, Parent and its counsel, with respect to the Proxy Statement, and the Company and the Special Committee and their respective
counsel, with respect to the Schedule 13E-3, shall be given, to the extent practicable, three (3) Business Days to review and
comment on the Proxy Statement, Schedule 13E-3 and any proposed responses to any SEC comments or communications, as applicable,
and the Company and Parent shall consider all additions, deletions or changes suggested thereto in good faith by Parent and its
counsel, with respect to the Proxy Statement, and the Company and the Special Committee and their respective counsel, with respect
to the Schedule 13E-3.
Section 6.2
Stockholders
Meeting
.
(a) As
soon as reasonably practicable following confirmation by the SEC that it has no further comments on the Proxy Statement and the
Schedule 13E-3, the Company, acting through the Company Board (or a committee thereof), shall (i) take all action necessary
to duly call, give notice of, convene and hold a meeting of its stockholders for the purpose of approving this Agreement (the
“
Stockholders Meeting
”) and (ii) subject to Section 6.5(c), include in the Proxy Statement the Company
Recommendation and use its reasonable best efforts to obtain the Company Requisite Vote;
provided
,
however
, that
the Company shall be permitted to delay or postpone convening the Stockholders Meeting (but not beyond the Termination Date) if
in the good faith judgment of the Company Board (acting on the recommendation of the Special Committee and after consultation
with its outside legal counsel) the failure to do so would be inconsistent with the Company Board’s fiduciary duties under
applicable law.
(b) Notwithstanding
anything to the contrary contained in this Agreement, the Company shall not be required to hold the Stockholders Meeting if a
Change of Recommendation has occurred.
Section 6.3
Access
to Information
. From the date of this Agreement to the Effective Time or the earlier termination of this Agreement
in accordance with its terms, upon reasonable prior written notice, the Company shall, and shall use its reasonable best efforts
to cause the Company Subsidiaries and its and their Representatives to, afford Parent and its Representatives reasonable access
during normal business hours, consistent with applicable law, to its officers, personnel, employees, systems, properties, offices
and other facilities and to all books and records (including Tax Returns), and to furnish Parent with all financial, operating
and other data, analyses, projections and plans, as Parent, through its Representatives, may from time to time reasonably request
in writing (it being agreed, however, that the foregoing shall not permit Parent or its Representatives to conduct any environmental
testing or sampling). Notwithstanding the foregoing, any such investigation or consultation shall be conducted in such
a manner as not to interfere unreasonably with the business or operations of the Company or the Company Subsidiaries or otherwise
result in any significant interference with the prompt and timely discharge by such employees of their normal duties. Neither
the Company nor any of the Company Subsidiaries shall be required to provide access to or to disclose information where such access
or disclosure would violate or prejudice the rights of its clients, jeopardize the attorney-client privilege of the Company or
any of the Company Subsidiaries or contravene any law, rule, regulation, order, judgment, decree or binding agreement entered
into prior to the date of this Agreement.
Section 6.4
Confidentiality
. Prior
to the Effective Time, each of Holdco, Parent and Merger Sub will hold and treat and will cause its Representatives to hold and
treat in confidence all documents and information concerning the Company and the Company Subsidiaries furnished to Holdco, Parent
or Merger Sub in connection with the transactions contemplated by this Agreement in accordance with (i) the Confidentiality
Agreement, dated February 28, 2011, as amended (the “
CEO Confidentiality Agreement
”), among the Company, the
Special Committee and Mr. Li Fu, and (ii) the Confidentiality Agreement, dated February 28, 2011, as amended (the “
Abax
Confidentiality Agreement
”and, together with the CEO Confidentiality Agreement, the “
Confidentiality Agreements
”)
among the Company, the Special Committee and Abax Global Capital (Hong Kong) Limited, which Confidentiality Agreements shall remain
in full force and effect in accordance with their terms.
Section 6.5
Acquisition
Proposals
.
(a) Except
as otherwise set forth in this Section 6.5, from and after the date of this Agreement, the Company agrees that neither it, nor
any of the Company Subsidiaries shall, and that it shall not authorize or permit its and their respective Representatives retained
by the Company or any Company Subsidiary to, directly or indirectly, (i) initiate, solicit, knowingly encourage, or knowingly
facilitate (including by providing non-public information) any inquiries regarding, or the making of any, proposals or offers
that constitute or could reasonably be expected to lead to an Acquisition Proposal, or (ii) engage in, continue, or otherwise
participate in any negotiations or discussions (other than to state that it is not permitted to have discussions) concerning,
or provide or cause to be provided any non-public information or data relating to the Company or any of the Company Subsidiaries
in connection with, an Acquisition Proposal;
provided
,
however
, it is understood and agreed that any determination
or action by the Company, the Special Committee, or the Company Board permitted under Section 6.5(b), Section 6.5(c) or Section
8.3(a) shall not be deemed to be a breach of this Section 6.5(a). Upon the execution of this Agreement, the Company
agrees, and the Special Committee will direct, that the Company and the Company Subsidiaries and its and their Representatives
will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any persons conducted
heretofore with respect to any Acquisition Proposal.
(b) Notwithstanding
anything to the contrary in Section 6.5(a), at any time after the date of this Agreement and prior to obtaining the Company Requisite
Vote, the Company may, in response to a bona fide written Acquisition Proposal that did not result from a material breach of Section
6.5(a) and that the Special Committee, which shall have full, sole, and exclusive authority to make such decision determines,
in its good faith judgment, after consultation with its outside legal counsel and financial advisors, constitutes or may reasonably
be expected to lead to a Superior Proposal, (i) furnish information and data with respect to the Company and the Company Subsidiaries
to the person making such Acquisition Proposal pursuant to a customary confidentiality agreement on terms at least as restrictive
as those contained in the Confidentiality Agreements but excluding the “standstill” provisions thereof (except for
such changes necessary in order for the Company to be able to comply with its obligations under this Agreement), and (ii) participate,
through the Special Committee, in discussions or negotiations with such person and its Representatives regarding such Acquisition
Proposal;
provided
,
however
, that the Company shall promptly (and in any event, within 48 hours) provide or make
available to Parent any material non-public information concerning the Company or any of the Company Subsidiaries that is provided
to the person making such Acquisition Proposal or its Representatives which was not previously or concurrently provided or made
available to Parent.
(c) In
all cases, subject to the permitted actions contemplated by Section 8.3(a) and the next sentence of this Section 6.5(c), neither
the Company Board nor any committee thereof shall (i) withdraw or modify in a manner adverse to Parent or Merger Sub, or publicly
propose to withdraw or modify in a manner adverse to Parent or Merger Sub, the Company Recommendation, (ii) adopt, approve or
recommend, or publicly propose to adopt, approve or recommend, any Acquisition Proposal (any of such actions described in clauses
(i) or (ii) being referred to as a “
Change of Recommendation
”), or (iii) adopt, approve or recommend,
or allow the Company or any Company Subsidiary to execute or enter into, any letter of intent, memorandum of understanding, agreement
in principle, merger agreement, acquisition agreement, option agreement or other similar agreement constituting, or that would
reasonably be expected to result in, any Acquisition Proposal (other than a confidentiality agreement in accordance with Section
6.5(b)) (each, an “
Alternative Acquisition Agreement
”). Notwithstanding anything to the contrary
in this Section 6.5, if, prior to obtaining the Company Requisite Vote, (A) the Special Committee, which shall have full, sole,
and exclusive authority to make such decision, determines in good faith, after consultation with its outside legal counsel and
financial advisors, that the failure to do so would be reasonably likely to be inconsistent with the discharge or exercise of
the Company Board’s fiduciary duties under applicable law, it may recommend a Change of Recommendation to the Company Board,
which, upon receiving such recommendation from the Special Committee, may effect a Change of Recommendation in accordance with
this Section 6.5(c), and/or (B) the Company receives a written bona fide Acquisition Proposal that did not result from a material
breach of Section 6.5(a) and that the Special Committee, which shall have full, sole, and exclusive authority to make such decision,
determines in good faith, after consultation with its outside legal counsel and financial advisors, constitutes a Superior Proposal,
then (i) the Company Board may make a Change of Recommendation and/or authorize the Company to terminate this Agreement pursuant
to Section 8.3(a), and (ii) the Company, upon receiving such authorization from the Company Board, may enter into an Alternative
Acquisition Agreement with respect to such Superior Proposal if, with respect to this clause (ii), the Company concurrently terminates
this Agreement pursuant to Section 8.3(a). The Company Board shall not be entitled to effect a Change of Recommendation
or authorize the termination of this Agreement pursuant to Section 8.3(a) (and, for the avoidance of doubt, the Company shall
not be entitled to terminate this Agreement pursuant to Section 8.3(a)) unless the Company has provided written notice (a “
Notice
”)
at least three (3) Business Days in advance of such Change of Recommendation or authorization to Parent and Merger Sub advising
Parent that the Special Committee has determined in good faith, after consultation with its outside legal counsel and financial
advisors, that the failure to make a Change of Recommendation or to authorize termination of this Agreement, as applicable, would
be reasonably likely to be inconsistent with the discharge or exercise of its fiduciary duties under applicable law. For
the avoidance of doubt, any purported termination of this Agreement pursuant to Section 8.3(a) shall be void and of no force and
effect unless the Company complies with this Section 6.5(c) and pays the Termination Fee in accordance with Section 8.5(b) prior
to or substantially concurrently with such termination. In the event that the basis of such proposed action by the
Special Committee, the Company Board and/or the Company is in connection with a Superior Proposal, (x) the Notice shall include
the terms and conditions of such Superior Proposal (including the identity of the third party making the Superior Proposal and
any financing materials related thereto, if any) and include with it copies of any proposed transaction documents with respect
to such Superior Proposal, (y) during the three (3) Business Day period following receipt by Parent and Merger Sub of the Notice,
the Company shall, and shall cause its Representatives to, negotiate with Parent and Merger Sub in good faith (to the extent Parent
and Merger Sub desire to negotiate) to make such adjustments in the terms and conditions of this Agreement and the Financing Documents
so that such Superior Proposal ceases to constitute a Superior Proposal, and (z) following the end of the three (3) Business
Day period, the Company Board and the Special Committee shall have determined in good faith after consultation with their outside
legal counsel and financial advisors, taking into account any changes to this Agreement and the Financing Documents proposed in
writing by Parent and Merger Sub in response to the Notice or otherwise, that the Superior Proposal giving rise to the Notice
continues to constitute a Superior Proposal. Any material amendment to the financial terms or any other material amendment
of such Superior Proposal shall require a new Notice and the Company shall be required to comply again with the requirements of
this Section 6.5(c),
provided
that, for purposes of complying with the requirements of this sentence, the three (3) Business
Day period described above in this Section 6.5(c) shall be reduced to two (2) Business Days.
(d) The
Company shall promptly (and in any event within 48 hours of knowledge thereof) notify Parent in writing of (i) any written Acquisition
Proposal received by the Company, (ii) any request for non-public information relating to the Company or the Company Subsidiaries,
other than requests for information not reasonably expected to be related to an Acquisition Proposal, and (iii) any inquiry or
request for discussion or negotiation regarding an Acquisition Proposal, including in each case the identity of the person making
any such Acquisition Proposal, inquiry or request and the material terms of any such Acquisition Proposal, inquiry or request;
provided
, in each case, that such Acquisition Proposal, request or inquiry is received by the Company Board or the Special
Committee, its agents or its advisors. The Company shall (A) keep Parent informed in all material respects of the status and details
(including material amendments to the terms thereof) of such Acquisition Proposal, inquiry or request and (B) provide to Parent
as soon as practicable after receipt thereof copies of all material written correspondence relating to such Acquisition Proposal
or request exchanged between the Company or any of the Company Subsidiaries, on the one hand, and the person making such Acquisition
Proposal or request, on the other hand, concerning the material terms and conditions thereof;
provided
that this obligation
shall be excused if and to the extent that the Company Board or Special Committee and its Representatives shall be unaware of
such information and documents.
(e) Nothing
set forth in this Agreement shall be deemed to prohibit the Company Board, after consultation with the Special Committee, or the
Special Committee, after providing prior notice to the Company Board, from taking and disclosing to the Company’s stockholders
a position contemplated by Rule 14e-2(a), Rule 14d-9 or Item 1012(a) of Regulation M-A promulgated under the Exchange Act (or
any similar communication to stockholders in connection with the making or amendment of a tender offer or exchange offer),
provided
that the Company Board shall expressly reaffirm the Company Recommendation in such disclosure. The parties agree
and acknowledge that, for purposes of this Agreement, a factually accurate public statement by the Company that describes the
Company’s receipt of an Acquisition Proposal and the operation of this Agreement with respect thereto shall not in and of
itself be deemed a Change of Recommendation.
(f) Definitions. For
purposes of this Agreement:
(i) “
Acquisition
Proposal
” means any bona fide inquiry, proposal or offer from any person or group of persons other than Holdco or one
of its subsidiaries or affiliates for (a) a merger, reorganization, consolidation, share exchange, business combination,
recapitalization, liquidation, dissolution or similar transaction involving an acquisition of the Company (or any Company Subsidiaries
whose business constitutes 15% or more of the net revenues, net income or assets of the Company and the Company Subsidiaries,
taken as a whole) or (b) the acquisition in any manner, directly or indirectly, of over 15% of the equity securities of the
Company or over 15% of the consolidated total assets of the Company and the Company Subsidiaries, in each case other than the
Merger.
(ii) “
Superior
Proposal
” means any bona fide written Acquisition Proposal (with the percentages set forth in the definition of such
term changed from 15% to 50%), that the Special Committee, which shall have full, sole, and exclusive authority to make such determination,
has determined in its good faith judgment after consultation with its outside legal counsel and financial advisors (A) is reasonably
likely to be consummated in accordance with its terms, taking into account all legal, financial and regulatory aspects of the
proposal and the person making the proposal and (B) if consummated, would result in a transaction more favorable to the Company’s
stockholders (other than to Rollover Holders) from a financial point of view than the transaction contemplated by this Agreement
(after giving effect to all adjustments to the terms thereof which may be offered by Parent in writing (including pursuant to
Section 6.5(c)).
Section 6.6
[Reserved.]
.
Section 6.7
Directors’
and Officers’ Indemnification and Insurance
.
(a) Without
limiting any additional rights that any employee may have under any employment agreement or Company Plan, from the Effective Time
through the sixth (6th) anniversary of the date on which the Effective Time occurs, each of Holdco and Parent shall or shall cause
the Surviving Corporation to, indemnify and hold harmless each present (as of the Effective Time) and former officer and director
of the Company and the Company Subsidiaries (the “
Indemnified Parties
”), against all claims, losses, liabilities,
damages, judgments, inquiries, fines and reasonable fees, costs and expenses, including attorneys’ fees and disbursements,
incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative,
arising out of or pertaining to (i) the fact that an Indemnified Party is or was an officer or director of the Company or
any of the Company Subsidiaries or is or was serving at the request of the Company or any of the Company Subsidiaries as a director
or officer of another corporation, partnership, joint venture, trust or other enterprise or non-profit entity, (ii) matters
existing or occurring at or prior to the Effective Time (including this Agreement and the transactions and actions contemplated
hereby), whether asserted or claimed prior to, at or after the Effective Time or (iii) enforcement of this Section 6.7(a) if such
officer or director prevails with respect to such enforcement, in each case to the fullest extent permitted under applicable law. In
the event of any such claim, action, suit, proceeding or investigation or in enforcing this Section 6.7(a), (A) each Indemnified
Party will be entitled to advancement of expenses incurred in the defense of any claim, action, suit, proceeding or investigation
from the Surviving Corporation within ten (10) Business Days of receipt by the Surviving Corporation from the Indemnified Party
of a request therefor;
provided
that any person to whom expenses are advanced provides an undertaking, if and only to the
extent then required by the NRS, to repay such advances if it is ultimately determined that such person is not entitled to such
indemnification, (B) neither Holdco, Parent nor the Surviving Corporation shall settle, compromise or consent to the entry
of any judgment in any proceeding or threatened action, suit, proceeding, investigation or claim (and in which indemnification
could be sought by such Indemnified Party hereunder), unless such settlement, compromise or consent includes an unconditional
release of such Indemnified Party from all liability arising out of such action, suit, proceeding, investigation or claim or such
Indemnified Party otherwise consents, and (C) the Surviving Corporation shall cooperate in the defense of any such matter.
(b) The
articles of incorporation and bylaws of the Surviving Corporation shall contain provisions no less favorable with respect to indemnification,
advancement of expenses and exculpation of former or present directors and officers than are presently set forth in the Company
Articles of Incorporation and Company Bylaws, which provisions shall not be amended, repealed or otherwise modified for a period
of six (6) years from the Effective Time in any manner that would adversely affect the rights thereunder of any such individuals.
(c) Prior
to the Effective Time, the Company shall and, if the Company is unable to, Parent shall cause the Surviving Corporation as of
the Effective Time to, obtain and fully pay the premium for the extension of the directors’ and officers’ liability
coverage of the Company’s existing directors’ and officers’ insurance policies, for a claims reporting or discovery
period of at least six (6) years from and after the Effective Time from an insurance carrier with the same or better credit rating
as the Company’s current insurance carrier with respect to directors’ and officers’ liability insurance and
fiduciary liability insurance (collectively, “
D&O Insurance
”) with terms, conditions, retentions and limits
of liability that are at least as favorable as provided in the Company’s existing policies as of the date hereof;
provided
,
however
, that in no event shall the Company or the Surviving Corporation expend for such policies pursuant to this sentence
an annual premium amount in excess of 300% of the annual premiums currently paid by the Company for such insurance. If
the Company and the Surviving Corporation for any reason fail to obtain such “tail” insurance policies as of the Effective
Time, the Surviving Corporation shall, and Parent shall cause the Surviving Corporation to, continue to maintain in effect for
a period of at least six (6) years from and after the Effective Time the D&O Insurance in place as of the date hereof with
terms, conditions, retentions and limits of liability that are at least as favorable as provided in the Company’s existing
policies as of the date hereof, or the Surviving Corporation shall, and Parent shall cause the Surviving Corporation to, use reasonable
best efforts to purchase comparable D&O Insurance for such six (6) year period with terms, conditions, retentions and limits
of liability that are at least as favorable as provided in the Company’s existing policies as of the date hereof;
provided
,
however
, that in no event shall Parent or the Surviving Corporation be required to expend for such policies pursuant to
this sentence an annual premium amount in excess of 300% of the annual premiums currently paid by the Company for such insurance;
and
provided
,
further
, that if the annual premiums of such insurance coverage exceed such amount, the Surviving
Corporation shall obtain a policy with the greatest coverage available for a cost not exceeding such amount.
(d) Notwithstanding
anything herein to the contrary, if any claim, action, suit, proceeding or investigation (whether arising before, at or after
the Effective Time) is made against any Indemnified Party on or prior to the sixth (6th) anniversary of the Effective Time, the
provisions and benefits of this Section 6.7 shall continue in full effect until the final disposition of such claim, action, suit,
proceeding or investigation.
(e) The
covenants contained in this Section 6.7 are intended to be for the benefit of, and shall be enforceable by, each of the Indemnified
Parties and their respective heirs and legal representatives. The indemnification provided for herein shall not be
deemed exclusive of any other rights to which an Indemnified Party is entitled, whether pursuant to law, contract or otherwise.
(f) In
the event that the Surviving Corporation or Parent or any of their respective successors or assigns (i) consolidates with
or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation, conversion
or merger or (ii) transfers or conveys all or a majority of its properties and assets to any person, then, and in each such
case, proper provision shall be made so that the successors and assigns of the Surviving Corporation or Parent, as the case may
be, shall succeed to the obligations set forth in this Section 6.7.
(g) This
Section 6.7 shall not be amended in a manner adverse to the Indemnified Parties without the written consent of each of the Indemnified
Parties.
Section 6.8
Further
Action; Efforts
.
(a) Upon
the terms and subject to the conditions of this Agreement, each of the parties shall use its reasonable best efforts to (i) take,
or cause to be taken, all actions and to do, or cause to be done, and cooperate with each other in order to do, all things necessary,
proper or advisable (including under any Antitrust Law) to consummate the transactions contemplated by this Agreement as soon
as practicable and (ii) do all things necessary, proper or advisable under applicable laws and regulations to consummate
the Merger and the other transactions contemplated by this Agreement at the earliest practicable date, including: (A) causing
the preparation and filing of all forms, registrations and notices required to be filed to consummate the Merger and the taking
of such actions as are necessary to obtain any requisite consent, (B) using reasonable best efforts to defend all lawsuits
and other legal proceedings by or before any Governmental Entity challenging this Agreement or the consummation of the Merger,
and (C) using reasonable best efforts to resolve any objection asserted with respect to the transactions contemplated under
this Agreement under any Antitrust Law raised by any Governmental Entity and to prevent the entry of any court order, and to have
vacated, lifted, reversed or overturned any injunction, decree, ruling, order or other action of any Governmental Entity that
would prevent, prohibit, restrict or delay the consummation of the transactions contemplated by this Agreement.
(b) In
furtherance and not in limitation of the provisions of Section 6.8(a), to the extent required by PRC law, each of the parties,
as applicable, agrees to prepare and file as promptly as practicable, and in any event by no later than fifteen (15) Business
Days from the date of this Agreement an initial filing with the PRC Anti-Monopoly Bureau pursuant to the PRC Anti-Monopoly Law. Parent
shall pay all filing fees and other charges for the filings required under the PRC Anti-Monopoly Law by the Company and Parent.
(c) If
a party receives a request for information or documentary material from any Governmental Entity with respect to this Agreement
or any of the transactions contemplated hereby then such party shall in good faith make, or cause to be made, as soon as reasonably
practicable and after consultation with the other party, a response which is, at a minimum, in substantial compliance with such
request.
(d) The
parties shall keep each other apprised of the status of matters relating to the completion of the transactions contemplated by
this Agreement and work cooperatively in connection with obtaining the approvals of or clearances from each applicable Governmental
Entity, including:
(i) cooperating
with each other in connection with filings required to be made by any party (including under any Antitrust Law) and liaising with
each other in relation to each step of the procedure before the relevant Governmental Entities and as to the contents of all communications
with such Governmental Entities. In particular, to the extent permitted by law or Governmental Entity, no party will
make any notification in relation to the transactions contemplated hereunder without first providing the other party with a copy
of such notification in draft form and giving such other party a reasonable opportunity to discuss its content before it is filed
with the relevant Governmental Entities, and such first party shall consider and take account of all reasonable comments timely
made by the other party in this respect;
(ii) furnishing
to each other party all information within its possession that is required for any application or other filing to be made by the
other party pursuant to applicable law in connection with the transactions contemplated by this Agreement;
(iii) promptly
notifying each other of any communications from or with any Governmental Entity with respect to the transactions contemplated
by this Agreement and ensuring to the extent permitted by law or Governmental Entity that each of the parties is entitled to attend
any meetings with or other appearances before any Governmental Entity with respect to the transactions contemplated by this Agreement;
(iv) consulting
and cooperating with each other in connection with all analyses, appearances, presentations, memoranda, briefs, arguments, opinions
and proposals made or submitted by or on behalf of any party hereto in connection with proceedings under or relating to the Antitrust
Laws; and
(v) without
prejudice to any rights of the parties hereunder, consulting and cooperating in all respects with each other in defending all
lawsuits and other proceedings by or before any Governmental Entity challenging this Agreement or the consummation of the transactions
contemplated by this Agreement.
(e) Notwithstanding
the foregoing, commercially and/or competitively sensitive information and materials of a party will be provided to the other
party on an outside-counsel-only basis while, to the extent feasible, making a version in which the commercial and/or competitively
sensitive information has been redacted available to the other party.
Section 6.9
Public
Announcements
. Unless and until a Change of Recommendation has occurred or, if earlier, the termination of this
Agreement in accordance with its terms, the Company, Holdco, Parent and Merger Sub will consult with and provide to each other
party the reasonable opportunity to review and comment upon any press release or other public statement or comment prior to the
issuance of such press release or other public statement or comment relating to this Agreement or the transactions contemplated
herein and shall not issue any such press release or other public statement or comment prior to such consultation except as may
be required by applicable law or by obligations pursuant to any listing agreement with any national securities exchange. The
Company and Parent agree that the press release announcing the execution and delivery of this Agreement shall be a joint release
of Parent and the Company.
Section 6.10
Notification
of Certain Matters
. The Company shall give prompt notice to Parent, and Parent and Holdco shall give prompt notice
to the Company, of (a) any notice or other communication received by such party from any Governmental Entity in connection
with the Merger or the other transactions contemplated hereby or from any person alleging that the consent of such person is or
may be required in connection with the Merger or the other transactions contemplated hereby, if the subject matter of such communication
or the failure of such party to obtain such consent could be material to the Company, the Surviving Corporation or Parent, (b) any
Legal Proceedings commenced or, to such party’s knowledge, threatened against, relating to or involving or otherwise affecting
such party or any of its subsidiaries which relate to the Merger or the other transactions contemplated hereby, and (c) the
discovery of any fact or circumstance that, or the occurrence or non-occurrence of any event the occurrence or non-occurrence
of which, would reasonably be expected to cause or result in any of the conditions to the Merger set forth in ARTICLE VII not
being satisfied or satisfaction of those conditions being materially delayed in violation of any provision of this Agreement;
provided
,
however
, that the delivery of any notice pursuant to this Section 6.10 shall not (i) cure any breach
of, or non-compliance with, any other provision of this Agreement or (ii) limit the remedies available to the party receiving
such notice or the representations or warranties of the parties, or the conditions to the obligations of the parties hereto. The
parties agree and acknowledge that the Company’s compliance or failure of compliance with this Section 6.10 shall not be
taken into account for purposes of determining whether the condition referred to in Section 7.2(b) shall have been satisfied.
Section 6.11
Rule
16b-3
. Prior to the Effective Time, the Company shall be permitted to take such steps as may be reasonably necessary
or advisable hereto to cause dispositions of equity securities of the Company (including derivative securities) pursuant to the
transactions contemplated by this Agreement by each individual who is a director or officer of the Company to be exempt under
Rule 16b-3 promulgated under the Exchange Act.
Section 6.12
Obligations
of Merger Sub
. Parent shall take all actions necessary to cause Merger Sub and the Surviving Corporation to perform
their respective obligations under this Agreement.
Section 6.13
Financing
.
(a) Each
of Holdco and Parent shall use its commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause
to be done, all things necessary, proper or advisable to arrange and obtain the Financing on the terms and conditions described
in the Financing Documents and shall not permit any amendment or modification to be made to, or any waiver of any provision or
remedy under any Financing Document (
provided
,
however
, that Holdco, Parent and Merger Sub may replace, amend or
supplement the Debt Financing Agreement, if such replacements, amendments or supplements, individually or in the aggregate, would
not (i) expand upon the conditions precedent to the Debt Financing as set forth in the Debt Financing Agreement in any way or
(ii) prevent or impair the availability of the financing or materially delay the financing under the Debt Financing Agreement
or the consummation of the transactions contemplated by this Agreement), including using commercially reasonable efforts to (1) maintain
in full force and effect the Financing Documents until the transactions contemplated by this Agreement are consummated, (2) satisfy
on a timely basis all conditions and covenants applicable to Holdco, Parent and Merger Sub in the Financing Documents (including
by consummating the financing pursuant to the terms of the Equity Financing ) and otherwise comply with its obligations thereunder,
(3) enter into notes, security agreements, guarantees and other definitive agreements as required by the Debt Financing Agreement
(“
Ancillary Debt Agreements
”) on the terms and conditions contemplated by the Debt Financing Agreement, (4)
consummate the Financing at or prior to Closing, and (5) assuming all terms and conditions in the Debt Financing Agreement have
been satisfied, cause the Financing Sources and other persons providing Debt Financing to fund on the Closing Date the Debt Financing
required to consummate the Merger and the other transactions contemplated hereby. For purposes of this Section 6.13,
references to “Financing” shall include the financing contemplated by the Financing Documents as permitted in the
case of the Debt Financing Agreement, to be replaced, amended or supplemented by this Section 6.13(a), and references to “Financing
Documents” and “Debt Financing Agreement” shall include such documents as permitted to be replaced, amended
or supplemented by this Section 6.13(a).
(b) Without
limiting the generality of Section 6.13(a), Holdco, Parent and Merger Sub shall give the Company prompt notice: (i) of any material
breach or default (or any event or circumstance that, with or without notice, lapse of time or both, could reasonably be expected
to give rise to any breach or default) by any party to any Financing Document, or any Ancillary Debt Agreement, which would be
reasonably likely to result in any condition of the Financing Documents or any Ancillary Debt Agreement not to be satisfied or
the termination of any Financing Document, of which Holdco, Parent or Merger Sub becomes aware; (ii) of the receipt of any written
notice or other written communication from any party to any Financing Document with respect to any alleged or potential breach,
default, termination or repudiation by any party to any Financing Document or any Ancillary Debt Agreement or any provisions of
the Financing Document or any Ancillary Debt Agreement related to the Financing which could result in any condition of the Financing
Documents not to be satisfied or the termination of any Financing Document; (iii) of any material dispute or disagreement between
or among any parties to the Financing Documents; and (iv) if Holdco, Parent or Merger Sub at any time believes that it will not
be able to obtain all or any portion of the Financing on the terms, in the manner or from the sources contemplated by the Financing
Documents. As soon as reasonably practicable after the date the Company delivers to Holdco, Parent or Merger Sub a
written request therefor, Holdco, Parent and Merger Sub shall provide notice of the circumstance referred to in clause (i), (ii),
(iii) or (iv) of the immediately preceding sentence. If any portion of the Debt Financing becomes unavailable on the
terms and conditions contemplated in the Debt Financing Agreement, Parent shall use its commercially reasonable efforts to arrange
and obtain alternative debt financing from alternative debt financing sources in an amount sufficient to consummate the transactions
contemplated by this Agreement on terms and conditions not less favorable, taken as a whole, to Holdco, Parent and Merger Sub
than those in the Debt Financing Agreement as promptly as practicable following the occurrence of such event but no later than
the second Business Day immediately prior to the Closing Date. Parent shall keep the Company informed on a reasonably
current basis in reasonable detail of the status of its efforts to arrange the alternative debt financing.
(c) Prior
to the Closing, the Company shall, and shall cause the Company Subsidiaries to, use commercially reasonable efforts to provide
to Parent and Merger Sub, at Parent’s sole expense, all reasonable cooperation reasonably requested by Parent that is necessary
in connection with the Financing, including (i) promptly furnishing to Parent and Merger Sub and their Financing Sources
the financial statements required to be delivered to the lenders party thereto under the Debt Financing Agreement, (ii) facilitating
the pledging of collateral in connection with the Debt Financing as reasonably requested by Parent and its Financing Sources and
customary for financings similar to the Financing (provided that no such pledge shall be effective prior to the Effective Time),
and (iii) facilitating the execution and delivery at the Closing of the Ancillary Debt Agreements related to the Debt Financing
as required by the Debt Financing Agreement;
provided
,
however
, that, (a) irrespective of the above, no obligation
of the Company or any of the Company Subsidiaries under any Financing Document, Ancillary Debt Agreement, certificate or other
document or instrument shall be effective until the Effective Time and none of the Company or any of the Company Subsidiaries
shall be required to take any action under any Financing Document, Ancillary Debt Agreement, certificate or other document or
instrument that is not contingent upon the Closing (including the entry into any agreement that is effective before the Effective
Time) or that would be effective prior to the Effective Time, (b) nothing herein shall require such cooperation to the extent
it would interfere unreasonably with the business or operations of the Company or the Company Subsidiaries, (c) none of the
Company or any of the Company Subsidiaries shall be required to issue any offering or information document prior to the Effective
Time, and (d) none of the Company or any of the Company Subsidiaries shall be required to take any corporate action in connection
with the Financing or the Contribution. The term “
Financing Sources
” means the entities that have
committed to provide or otherwise entered into agreements in connection with the Debt Financing or other financings (other than
the Equity Financing and the Contribution Agreement) in connection with the transactions contemplated hereby, including the parties
to the Debt Financing Agreement and any joinder agreements or Ancillary Debt Agreement relating thereto. None of the
Company or any of the Company Subsidiaries shall be required to take any action that would subject it to actual or potential liability,
to bear any cost or expense or to pay any commitment or other similar fee or make any other payment (other than reasonable out-of-pocket
costs) or incur any other liability or provide or agree to provide any indemnity in connection with the Financing or any of the
foregoing prior to the Effective Time. Holdco, Parent and Merger Sub shall on a joint and several basis indemnify and
hold harmless the Company, the Company Subsidiaries and the Representatives from and against any and all liabilities, losses,
damages, claims, costs, expenses, interest, awards, judgments and penalties suffered or incurred by them in connection with the
arrangement of the Financing and the Contribution (including any action taken in accordance with this Section 6.13(c)) and any
information utilized in connection therewith (other than historical information relating to the Company provided by the Company). Holdco
and Parent shall, promptly upon request by the Company, reimburse the Company for all documented and reasonable out-of-pocket
costs incurred by the Company or the Company Subsidiaries in connection with this Section 6.13(c). In no event shall
Holdco, Parent or any of their affiliates prohibit or seek to prohibit any bank or investment bank or other potential provider
of debt or equity financing, including the Financing Sources, from providing financing or financial advisory services to any Person
in connection with a transaction relating to the Company or its subsidiaries or in connection with the Merger or the other transactions
contemplated hereby.
(d) In
no event shall Holdco, Parent or any of their affiliates (which for purposes of this Section 6.13(d) shall be deemed to include
the Guarantors and the investment funds affiliated with the Guarantors) (i) award any agent, broker, investment banker, financial
advisor or other firm or person any financial advisory role on an exclusive basis, or (ii) engage any bank or investment
bank or other potential provider of debt financing on an exclusive basis (or otherwise on terms that could reasonably be expected
to prevent such provider from providing or seeking to provide such financing to any third party in connection with a transaction
relating to the Company or its subsidiaries), in the case of clauses (i) and (ii) in connection with the Merger
or the other transactions contemplated hereby.
(e) Holdco,
Parent and Merger Sub acknowledge and agree that the obtaining of the Financing, or any alternative financing, or the Contribution,
is not a condition to Closing.
(f) Each
of Holdco and Parent shall use its commercially reasonable efforts to consummate the transactions contemplated by the Contribution
Agreement immediately prior to the Closing on the terms and conditions described in the Contribution Agreement, including using
commercially reasonable efforts to (i) maintain in full force and effect the Contribution Agreements until the transactions contemplated
by this Agreement are consummated, (ii) satisfy on a timely basis all conditions applicable to Holdco and Parent in the Contribution
Agreement, and (iii) cause the persons providing the Contribution to fund the Contribution on the Closing Date (subject to the
conditions set forth in the Contribution Agreement). Neither Holdco nor Parent shall agree to any amendment or modification to
be made to, or any waiver of any provision or remedy under, the Contribution Agreement without the prior written consent of the
Company and the Special Committee if such amendment, modification or waiver would (i) expand upon the conditions precedent to
the Contribution as set forth in the Contribution Agreement in any way or (ii) reasonably be expected to prevent or materially
delay the ability of Holdco, Parent or Merger Sub to consummate the Merger and the other transactions contemplated by this Agreement.
At least two (2) Business Days prior to the Closing, Parent shall make any Certificates evidencing Rollover Shares available in
New York, New York for inspection by counsel to the Company.
(g) The
obligations of the Company set forth in this Section 6.13 are the sole obligations of the Company with respect to the Financing
or the Contribution and no other provision of this Agreement shall be deemed to expand or modify such obligations.
Section 6.14
Stock
Exchange Delisting
. Prior to the Closing Date, the Company shall cooperate with Parent and use reasonable best efforts to
take, or cause to be taken, all actions, and do or cause to be done all things, reasonably necessary, proper or advisable on its
part under applicable laws and rules and policies of NASDAQ to enable the delisting of the Shares from NASDAQ and the deregistration
of the Shares under the Exchange Act as promptly as practicable following the Effective Time.
Section 6.15
Parent
Vote
. Parent shall vote (or consent with respect to) or cause to be voted (or a consent to be given with respect to) any Shares
beneficially owned by it or any of its subsidiaries or affiliates, or with respect to which it or any of its subsidiaries or affiliates
has the power (by agreement, proxy or otherwise) to cause to be voted (or to provide a consent), in favor of the approval of this
Agreement at any meeting of stockholders of the Company at which this Agreement shall be submitted for approval and at all adjournments
or postponements thereof (or, if applicable, by any action of the stockholders of the Company by consent in lieu of a meeting).
Section 6.16
Reserved
.
Section 6.17
Knowledge
of Inaccuracies
. It is agreed that neither Holdco nor Parent shall have any right to (a) terminate this Agreement under Section
8.4(b) or (b) claim any damage or seek any other remedy at law or in equity for any breach of or inaccuracy in any representation
or warranty made by the Company in ARTICLE III to the extent both (i) Mr. Li Fu and (ii) Abax Global Capital (Hong Kong) Limited
or any of its affiliates had actual knowledge of such breach of or inaccuracy in such representation or warranty as of the date
hereof.
Section 6.18
Resignations
.
The Company shall use commercially reasonable efforts to cause to be delivered to Parent at the Closing written evidence reasonably
satisfactory to Parent of the resignation effective as of the Effective Time of those non-management directors of the Company
and any Company Subsidiary identified by Parent in writing to the Company at least 10 days prior to the Closing. At the request
of Parent, the Company shall provide Parent with a true and accurate list of the directors of the Company and the Company Subsidiaries.
From and after the date of delivery of such list, the Company shall promptly inform Parent of changes to such list.
Section 6.19
Stockholder
Litigation
. The Company shall give Parent the opportunity to participate in the defense or settlement of any stockholder litigation
against the Company and/or its directors or officers relating to the transactions contemplated by this Agreement, and no such
settlement shall be agreed to without Parent’s prior written consent, which consent shall not be unreasonably withheld.
Section 6.20
Takeover
Laws
. If any of the Nevada Takeover Laws is or becomes applicable to this Agreement or the transactions contemplated hereby,
including the Merger, each of the Company and Parent and their respective boards of directors shall take such commercially reasonable
actions as may be necessary to render such Nevada Takeover Laws inapplicable to all of the foregoing or to ensure that the Merger
and the other transactions contemplated hereby may be consummated as promptly as practicable on the terms contemplated by this
Agreement.
ARTICLE
VII
CONDITIONS OF MERGER
Section 7.1
Conditions
to Each Party’s Obligation to Effect the Merger
. The obligation of each party to effect the Merger is subject to the
satisfaction or waiver at or prior to the Effective Time of each of the following conditions:
(a)
Stockholder
Approval
. The Company Requisite Vote shall have been obtained.
(b)
PRC
Anti-Monopoly
. To the extent required by PRC law, the PRC Anti-Monopoly Bureau shall have issued a decision under the PRC
Anti-Monopoly Law approving the Merger.
(c)
Orders
.
As of the Closing, no court or other Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced
or entered any law (whether temporary, preliminary or permanent) that is in effect and restrains, enjoins or otherwise prohibits
consummation of the Merger (collectively, an “
Order
”).
Section 7.2
Conditions
to Obligations of Holdco, Parent and Merger Sub
. The obligations of Holdco, Parent and Merger Sub to effect the Merger are
also subject to the satisfaction or waiver by Parent at or prior to the Effective Time of the following additional conditions:
(a)
Representations
and Warranties
. (i) The representations and warranties of the Company set forth in this Agreement that are qualified by reference
to Material Adverse Effect shall be true and correct as of the date of this Agreement and as of the Closing Date as though made
on and as of such date (except to the extent that any such representation and warranty expressly speaks as of an earlier date,
in which case such representation and warranty shall be true and correct as of such earlier date); (ii) the representations and
warranties of the Company set forth in this Agreement that are not qualified by reference to Material Adverse Effect (other than
the representation and warranty set forth in Section 3.3(a)) shall be true and correct as of the date of this Agreement and as
of the Closing Date as though made on and as of such date (except to the extent that any such representation and warranty expressly
speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date);
provided
,
however
, that notwithstanding anything herein to the contrary, the condition set forth in this Section
7.2(a)(ii) shall be deemed to have been satisfied even if any representations and warranties of the Company are not so true and
correct, unless the failure of such representations and warranties of the Company to be so true and correct, individually or in
the aggregate, has had a Material Adverse Effect; and (iii) the representations and warranties set forth in Section 3.3(a) shall
be true and correct (except for
de minimis
inaccuracies) as of the date of this Agreement and as of the Closing Date as
if made on and as of such date (except to the extent that any such representation and warranty expressly speaks as of an earlier
date, in which case such representation and warranty shall be true and correct as of such earlier date).
(b)
Performance
of Obligations of the Company
. The Company shall have performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date.
(c)
Material
Adverse Effect
. Since the date of this Agreement, there shall not have been any Material Adverse Effect.
(d)
Officer’s
Certificate
. Parent shall have received a certificate signed by an executive officer of the Company certifying as to the matters
set forth in Section 7.2(a), Section 7.2(b) and Section 7.2(c).
Section 7.3
Conditions
to Obligations of the Company
. The obligations of the Company to effect the Merger are also subject to the satisfaction or
waiver by the Company at or prior to the Effective Time of the following additional conditions:
(a)
Representations
and Warranties
. The representations and warranties of Holdco, Parent and Merger Sub set forth in this Agreement shall be true
and correct in all respects as of the date of this Agreement and as of the Closing Date as though made on and as of such date
(except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation
and warranty shall be true and correct as of such earlier date), except for inaccuracies of representations and warranties which
would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect.
(b)
Performance
of Obligations of Holdco, Parent and Merger Sub
. Each of Holdco, Parent and Merger Sub shall have performed in all material
respects all obligations required to be performed by it under this Agreement on or prior to the Closing Date.
(c)
Officer’s
Certificate
. The Company shall have received a certificate signed by an executive officer of Holdco, Parent and Merger Sub
certifying as to the matters set forth in Section 7.3(a) and Section 7.3(b).
Section 7.4
Frustration
of Closing Conditions
. None of the Company, Holdco, Parent or Merger Sub may rely on the failure of any condition set forth
in Section 7.2 or Section 7.3, as the case may be, to be satisfied to excuse such party’s obligation to effect the Merger
if such failure was caused by such party’s failure to use the standard of efforts required from such party to consummate
the Merger and the other transactions contemplated by this Agreement, including as required by and subject to Section 6.8 and
Section 6.13.
ARTICLE
VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.1
Termination
by Mutual Consent
. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time,
whether before or after the approval of this Agreement by the stockholders of the Company referred to in Section 7.1(a), by mutual
written consent of the Company, by action of the Special Committee, and Parent, by action of its board of directors.
Section 8.2
Termination
by Either Parent or the Company
. This Agreement may be terminated and the Merger may be abandoned by written notice at any
time prior to the Effective Time by Parent, by action of its board of directors, or the Company, at the direction of the Special
Committee, if:
(a) the
Merger shall not have been consummated by June 27, 2013, whether such date is before or after the date of approval of this Agreement
by the stockholders of the Company referred to in Section 7.1(a) (such date, as it may be extended pursuant to the provisions
hereof, the “
Termination Date
”);
provided
, that neither party shall have the right to terminate this
Agreement pursuant to this Section 8.2(a) if any action of such party or failure of such party to perform or comply with the covenants
and agreements of such party set forth in this Agreement shall have been the primary cause of, or resulted primarily in, the failure
of the Merger to be consummated by the Termination Date and such action or failure to perform constitutes a breach of this Agreement;
(b) the
Stockholders Meeting shall have been held and completed and approval of this Agreement by the stockholders of the Company referred
to in Section 7.1(a) shall not have been obtained at such Stockholders Meeting or at any adjournment or postponement thereof;
or
(c) any
Order permanently restraining, enjoining or otherwise prohibiting consummation of the Merger shall become final and non-appealable
(whether before or after the approval of this Agreement by the stockholders of the Company referred to in Section 7.1(a)),
provided
,
that the right to terminate this Agreement pursuant to this Section 8.2(c) shall not be available to any party that has breached
in any material respect its obligations under this Agreement in any manner that shall have proximately contributed to the occurrence
of the failure of a condition to the consummation of the Merger.
Section 8.3
Termination
by the Company
. This Agreement may be terminated and the Merger may be abandoned by written notice of the Company at the direction
of the Special Committee:
(a) at
any time prior to the time the Company Requisite Vote is obtained, if (i) the Company Board (acting on the recommendation
of the Special Committee) authorizes the Company, subject to complying with the terms of this Agreement, to enter into an Alternative
Acquisition Agreement with respect to a Superior Proposal, (ii) immediately prior to or substantially concurrently with the
termination of this Agreement the Company enters into an Alternative Acquisition Agreement with respect to a Superior Proposal
and (iii) the Company immediately prior to or substantially concurrently with such termination pays to Parent in immediately
available funds the Termination Fee required to be paid pursuant to Section 8.5;
(b) if
there has been a breach of any representation, warranty, covenant or agreement made by Holdco, Parent or Merger Sub in this Agreement,
or any such representation and warranty shall have become untrue after the date of this Agreement, such that the conditions set
forth in Section 7.3(a) or Section 7.3(b) would not be satisfied and such breach or condition is not curable or, if curable, is
not cured prior to the earlier of (i) thirty (30) calendar days after written notice (which shall specify the nature of such
breach and the Company’s intention to terminate this Agreement if such breach or failure is not cured) thereof is given
by the Company to Parent or (ii) five (5) Business Days prior to the Termination Date;
provided
,
however
, that
the Company is not then in material breach of this Agreement so as to cause any of the conditions set forth in Section 7.1, Section
7.2(a) or Section 7.2(b) not to be capable of being satisfied; or
(c) if
(i) all of the conditions set forth in Section 7.1 and Section 7.2 have been satisfied (other than those conditions that by their
nature cannot be satisfied other than at the Closing), (ii) the Company has irrevocably confirmed by notice to Parent that all
conditions set forth in Section 7.3 have been satisfied or that it is willing to waive any unsatisfied conditions in Section 7.3,
and (iii) the Merger shall not have been consummated within three (3) Business Days after the delivery of such notice.
Section 8.4
Termination
by Parent
. This Agreement may be terminated and the Merger may be abandoned by written notice at any time prior to the Effective
Time by Parent, by action of its board of directors:
(a) if
the Company Board (acting with the affirmative vote of at least one member of the Special Committee or acting on the recommendation
of the Special Committee), or the Special Committee shall have (i) made a Change of Recommendation or (ii) failed to include the
Company Recommendation in the Proxy Statement; or
(b) if
there has been a breach of any representation, warranty, covenant or agreement made by the Company in this Agreement, or any such
representation and warranty shall have become untrue after the date of this Agreement, such that the conditions set forth in Section
7.2(a) or Section 7.2(b) would not be satisfied and such breach or condition is not curable, or, if curable, is not cured prior
to the earlier of (i) thirty (30) calendar days after written notice (which shall specify the nature of such breach
and Parent’s intention to terminate this Agreement if such breach or failure is not cured) thereof is given by Parent to
the Company or (ii) five (5) Business Days prior to the Termination Date;
provided
,
however
, that Parent
is not then in material breach of this Agreement so as to cause any of the conditions set forth in Section 7.1, Section 7.3(a)
or Section 7.3(b) not to be capable of being satisfied.
Section 8.5
Effect
of Termination and Abandonment
.
(a) In
the event of termination of this Agreement and the abandonment of the Merger pursuant to this ARTICLE VIII, this Agreement shall
become void and of no effect with no liability to any person on the part of any party hereto (or of any of its Representatives
or affiliates);
provided
, that the provisions set forth in this Section 8.5, Section 6.9 (Public Announcements), Section
6.13(b) (with respect to Parent’s reimbursement and indemnification obligations), Section 8.6 (Expenses), Section 9.1 (Non-Survival
of Representations, Warranties, Covenants and Agreements), Section 9.2 (Notices), Section 9.5 (Entire Agreement; Assignment),
Section 9.6 (Parties in Interest), Section 9.7 (Governing Law), Section 9.11 (Jurisdiction), Section 9.13 (Waiver of Jury Trial),
the Confidentiality Agreements and the Guarantees (to the extent set forth therein) shall survive the termination of this Agreement
and abandonment of the Merger pursuant to this ARTICLE VIII.
(b) In
the event that:
(i) (A)
this Agreement is terminated by either Parent or the Company pursuant to Section 8.2(a) or Section 8.2(b), (B) an Acquisition
Proposal, whether or not conditional, shall have been made public and not withdrawn after the date hereof but prior to the termination
of this Agreement pursuant to Section 8.2(a) or, with respect to termination pursuant to Section 8.2(b), prior to the Stockholders
Meeting, and (C) after the date of this Agreement and prior to the date that is twelve (12) months following the termination of
this Agreement, the Company consummates an Acquisition Proposal (whether or not such Acquisition Proposal was the same Acquisition
Proposal referred to in the preceding clause (B)) (
provided
that for purposes of this Section 8.5(b)(i), the references
to “15%” in the definition of Acquisition Proposal shall be deemed to be references to “50%”);
(ii) this
Agreement is terminated by Parent pursuant to Section 8.4(a) or Section 8.4(b); or
(iii) this
Agreement is terminated by the Company pursuant to Section 8.3(a);
then the Company shall (x) in the case
of clause (i) above, within two (2) Business Days after the date on which the Company consummates the Acquisition Proposal referred
to in subclause (b)(i)(C) above, (y) in the case of clause (ii) above, no later than two (2) Business Days after the date
of such termination, and (z) in the case of clause (iii) above, immediately prior or substantially concurrently with such
termination, pay Parent the Termination Fee (as defined below) by wire transfer of immediately available funds (it being understood
that in no event shall the Company be required to pay the Termination Fee on more than one occasion). “
Termination Fee
”
means $11,000,000.
(c) In
the event that this Agreement is terminated pursuant to Section 8.3(b) or Section 8.3(c), then Parent shall promptly, but in no
event later than two (2) Business Days after the date of such termination, pay or cause to be paid to the Company an amount equal
to $22,000,000.00 (the “
Parent Termination Fee
”) by wire transfer of immediately available funds (it being
understood that in no event shall Parent be required to pay the Parent Termination Fee on more than one occasion).
(d) The
parties acknowledge that the agreements contained in Section 8.5 are an integral part of the transactions contemplated by this
Agreement, that the damages resulting from the termination of this Agreement under circumstances where a Termination Fee or a
Parent Termination Fee is payable are uncertain and incapable of accurate calculation and that, without these agreements, the
parties would not enter into this Agreement, and, therefore, the Termination Fee and Parent Termination Fee are not penalties,
but rather liquidated damages, and if the Company fails to promptly pay the amount due pursuant to Section 8.5(b) or Parent fails
to promptly pay the amount due pursuant to Section 8.5(c), and, in order to obtain such payment, Parent or Merger Sub, on the
one hand, or the Company, on the other hand, commences a suit that results in a judgment against the Company for the amount set
forth in Section 8.5(b) or any portion thereof or a judgment against Parent for the amount set forth in Section 8.5(c) or any
portion thereof, the Company shall pay to Parent or Merger Sub, on the one hand, or Parent shall pay to the Company, on the other
hand, its costs and expenses (including reasonable attorneys’ fees) in connection with such suit, together with interest
on such amount or portion thereof at the prime rate of Citibank N.A. in effect on the date such payment was required to be made
through the date of payment. Notwithstanding anything to the contrary in this Agreement, (A) the Company’s receipt of the
Parent Termination Fee pursuant to this Section 8.5 (including the right to enforce the Guarantees with respect thereto) shall,
subject to Section 9.10, be the sole and exclusive remedy of the Company and the Company Subsidiaries against Parent, Merger Sub,
the Guarantors and any of their respective former, current, or future general or limited partners, stockholders, managers, members,
directors, officers, affiliates, employees, representatives or agents for any loss suffered as a result of any breach of any covenant
or agreement in this Agreement or the failure of the Merger to be consummated, and upon payment of such amounts, none of Parent,
Merger Sub, the Guarantors or any of their respective former, current, or future general or limited partners, stockholders, managers,
members, directors, officers, employees, representatives, affiliates or agents shall have any further liability or obligation
relating to or arising out of this Agreement or the transactions contemplated by this Agreement (except that such parties shall
remain obligated for, and the Company and the Company Subsidiaries may be entitled to remedies with respect to, the Confidentiality
Agreements, any reimbursement obligations of Parent pursuant to the first (1st) sentence of this Section 8.5(d) and the indemnification,
reimbursement and expense obligations of Parent contained in Section 6.13(c)) and the Guarantees and (B) Parent’s receipt
of the Termination Fee from the Company pursuant to this Section 8.5 shall, subject to Section 9.10, be the sole and exclusive
remedy of Holdco, Parent, Merger Sub, the Guarantors and their respective affiliates against the Company, the Company Subsidiaries
and any of their respective former, current, or future general or limited partners, stockholders, directors, officers, managers,
members, affiliates, employees, representatives or agents for any loss suffered as a result of any breach of any covenant or agreement
in this Agreement or the failure of the Merger to be consummated, and upon payment of such amounts, none of the Company, the Company
Subsidiaries or any of their respective former, current, or future general or limited partners, stockholders, directors, officers,
managers, members, affiliates, employees, representatives or agents shall have any further liability or obligation relating to
or arising out of this Agreement or the transactions contemplated by this Agreement (except for any reimbursement and expense
obligations of the Company pursuant to the first (1st) sentence of this Section 8.5(d)).
Section 8.6
Expenses
.
Except as otherwise specifically provided herein (including Section 6.13(d)), each party shall bear its own expenses in connection
with this Agreement and the transactions contemplated hereby. Expenses incurred in connection with the printing, filing and mailing
of the Proxy Statement and the Schedule 13E-3 shall be shared equally by Parent and the Company.
Section 8.7
Amendment
.
This Agreement may be amended by the parties hereto at any time prior to the Effective Time, whether before or after adoption
of this Agreement by the stockholders of the Company, by action taken (a) with respect to Holdco, Parent and Merger Sub,
by their respective boards of directors, and (b) with respect to the Company, by the Special Committee;
provided
,
however
, that, after adoption of this Agreement by the stockholders of the Company, no amendment may be made which by law
requires the further approval of the stockholders of the Company without such further approval. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
Section 8.8
Waiver
.
At any time prior to the Effective Time, any party hereto (a) with respect to Holdco, Parent and Merger Sub, by their respective
boards of directors and (b) with respect to the Company, by the Special Committee, may (to the extent legally permitted and
except as otherwise set forth herein) (i) extend the time for the performance of any of the obligations or other acts of
the other parties hereto, (ii) waive any inaccuracies in the representations and warranties of the other parties contained
herein or in any document delivered pursuant hereto, and (iii) subject to the requirements of applicable law, waive compliance
by the other parties with any of the agreements or conditions contained herein. Any such extension or waiver shall only be valid
if set forth in an instrument in writing signed by the party or parties to be bound thereby. The failure of any party to assert
any rights or remedies shall not constitute a waiver of such rights or remedies.
ARTICLE
IX
GENERAL PROVISIONS
Section 9.1
Non-Survival
of Representations, Warranties, Covenants and Agreements
. None of the representations, warranties, covenants and agreements
in this Agreement or in any instrument delivered pursuant to this Agreement, including any rights arising out of any breach of
such representations, warranties, covenants and agreements, shall survive the Effective Time, except for those covenants and agreements
contained herein to the extent that by their terms apply or are to be performed in whole or in part after the Effective Time.
Section 9.2
Notices
.
All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by facsimile, by international overnight courier or by electronic
mail (“
e-mail
”) transmission (so long as a receipt with respect to such e-mail is requested and received) to
the respective parties at the following addresses (or at such other address for a party as shall be specified by like notice):
|
(a)
|
if to Holdco, Parent or Merger Sub:
|
|
|
|
|
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c/o Fushi Copperweld, Inc.
|
|
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TYG Center Tower B, Suite 2601
|
|
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Dongsanhuan Bei Lu, Bing 2
|
|
|
Beijing, 100027, PRC
|
|
|
Attention:
|
Li Fu
|
|
|
Facsimile:
|
+86 10 8447 8292
|
|
|
E-mail:
|
cwang@fushicopperweld.com
|
|
|
|
|
|
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and
|
|
|
|
|
|
|
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c/o Abax Global Capital (Hong Kong) Limited
|
|
|
Suite 6708, 67/F, Two International Finance Centre
|
|
|
8 Finance Street
|
|
|
Central, Hong Kong
|
|
|
Attention:
|
Donald Yang
|
|
|
Facsimile:
|
+852 3602 1700
|
|
|
E-mail:
|
donald.yang@abaxcap.com
|
|
|
with additional copies (which shall not constitute notice) to:
|
|
|
|
|
|
Skadden, Arps, Slate, Meagher & Flom LLP
|
|
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30th Floor, China World Office 2
|
|
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1 Jianguomenwai Avenue
|
|
|
Beijing 100004, PRC
|
|
|
Attention:
|
Michael V. Gisser, Esq.
|
|
|
|
Peter X. Huang, Esq.
|
|
|
Facsimile:
|
+86 10 6535 5577
|
|
|
E-mail:
|
Michael.Gisser@skadden.com
Peter.Huang@skadden.com
|
|
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and
|
|
|
|
|
|
Weil, Gotshal & Manges LLP
|
|
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29/F, Alexandra House
|
|
|
18 Chater Road Central, Hong Kong
|
|
|
Attention:
|
Akiko Mikumo, Esq.
|
|
|
Facsimile:
|
+852 3015 9354
|
|
|
E-mail:
|
akiko.mikumo@weil.com
|
|
(b)
|
if to the Company:
|
|
|
|
|
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Fushi Copperweld, Inc.
|
|
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TYG Center Tower B, Suite 2601
|
|
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Dongsanhuan Bei Lu, Bing 2
|
|
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Beijing, 100027, PRC
|
|
|
Attention:
|
Joseph J. Longever
|
|
|
Facsimile:
|
+86 10 8447 8292
|
|
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E-mail:
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jlongever@fushicopperweld.com
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with additional copies (which shall not constitute notice) to:
|
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Gibson, Dunn & Crutcher LLP
|
|
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200 Park Avenue
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New York, NY 10166
|
|
|
Attention:
|
Dennis J. Friedman, Esq.
|
|
|
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Eduardo Gallardo, Esq.
|
|
|
Facsimile:
|
+1 212-351-6201
|
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E-mail:
|
DFriedman@gibsondunn.com
|
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EGallardo@gibsondunn.com
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and
|
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Loeb & Loeb LLP
|
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345 Park Avenue
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New York, NY 10154
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|
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Attention:
|
Mitchell S. Nussbaum, Esq.
|
|
|
Facsimile:
|
+1 212-504-3013
|
|
|
E-mail:
|
mnussbaum@loeb.com
|
Section 9.3
Certain
Definitions
. For purposes of this Agreement, the terms:
(a) “
affiliate
”
of any person means any other person that directly or indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, such first person;
provided
, that for the avoidance of doubt, for all purposes under
this Agreement, Mr. Li Fu shall be deemed to be an affiliate of Parent;
provided
,
further
, that with respect to
the definition of the Company Requisite Vote, the following shall be deemed to be affiliates of Parent: (i) each officer and director
of the Company or the Company Subsidiaries who has entered into an agreement (whether written or oral) to contribute any Shares
to Parent in lieu of receiving the Merger Consideration for such Shares, (ii) all other persons who have entered into an agreement,
arrangement, or understanding (whether written or oral) with Parent or any affiliate of Parent to contribute Shares to Parent
in lieu of receiving Merger Consideration for such Shares, and (iii) all persons who the Special Committee upon due inquiry, reasonably
believes have reached an agreement or understanding (whether written or oral) with Parent or any affiliate of Parent to receive,
in connection with the consummation of the Merger, some benefit or value other than and in addition to the Merger Consideration
to be received in respect of their Shares; provided that in no event shall the continued employment of any employee of the Company
or any of the Company Subsidiaries with the Surviving Corporation or any of its subsidiaries after the Effective Time, and the
continued payment of compensation to such employee by the Surviving Corporation or any of its subsidiaries after the Effective
Time on terms substantially comparable to the compensation paid to such employee by the Company or any Company Subsidiaries as
of the date of this Agreement, alone, in and of itself, be deemed to be a benefit or value other than and in addition to the Merger
Consideration to be received in respect of Shares;
(b) “
Antitrust
Law
” means the PRC Anti-Monopoly Law, as amended, and all other federal, state and foreign, if any, statutes, rules,
regulations, orders, decrees, administrative and judicial doctrines and other laws that are designed or intended to prohibit,
restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or lessening of competition
through merger or acquisition;
(c) “
beneficially
owned
” with respect to any Shares has the meaning ascribed to such term under Rule 13d-3(a) of the Exchange
Act;
(d) “
Business
Day
” means any day on which the principal offices of the SEC in Washington, D.C. are open to accept filings or, in the
case of determining a date when any payment is due, any day on which banks are not required or authorized by law to close in (i)
New York, New York, United States of America, (ii) Hong Kong Special Administrative Region or (iii) the PRC;
(e) “
Company
Credit Agreements
”
means the Credit and Security Agreement between Copperweld Bimetallics
LLC and Regions Bank, dated August 31, 2010, and the Sales Ledger Financing Agreement between Copperweld Bimetallics UK Ltd and
Barclays Bank plc Sales Financing dated April 27, 2007.
(f) “
Company
Requisite Vote
” means the approval of this Agreement by (i) holders of at least a majority in combined voting power
of the outstanding Shares and (ii) holders of at least sixty percent (60%) in combined voting power of the outstanding Shares
not owned by the Rollover Holders, Holdco, Parent, Merger Sub, or any of their respective affiliates;
(g) “
Company
Subsidiary
” means each person which is a subsidiary of the Company (for the avoidance of doubt, Company Subsidiaries
shall include VIE and the subsidiaries of VIE);
(h) “
control
”
(including the terms “controlled,” “controlled by” and “under common control with”) means
the possession, directly or indirectly, or as trustee or executor, of the power to direct or cause the direction of the management
policies of a person, whether through the ownership of stock, as trustee or executor, by contract or credit arrangement or otherwise;
(i) “
Fushi
International (Dalian)
” means Fushi International (Dalian) Bimetallic Cable Co. Ltd.;
(j) “
knowledge
”
(i) with respect to the Company means the actual knowledge after reasonable inquiry of any of the persons listed in Section
9.3(i) of the Company Disclosure Schedule, and (ii) with respect to Holdco, Parent or Merger Sub means the actual knowledge
after reasonable inquiry of any of the officers of Holdco, Parent or Merger Sub;
(k) “
law
”
means any domestic or foreign federal, state, provincial, municipal or local law, statute, code, ordinance, rule, regulation,
order, judgment, writ, stipulation, award, injunction, decree or arbitration award or finding;
(l) “
Lien
”
means any lien, mortgage, pledge, encumbrance, restriction, option, right of first refusal, easement, security interest, deed
of trust, right-of-way, encroachment, community property interest or other claim or restriction of any nature, whether voluntarily
incurred or arising by operation of law (including any restriction on the voting of any security, any restriction on the transfer
of any security or other asset, and any restriction on the possession, exercise or transfer of any other attribute of ownership
of any asset);
(m) “
Material
Adverse Effect
” means any development, fact, circumstance, condition, event, change, occurrence or effect, individually
or in the aggregate, that would have or would reasonably be expected to have a material adverse effect on the business, financial
condition or results of operations of the Company and the Company Subsidiaries taken as a whole, other than any development, fact,
circumstance, condition, event, change, occurrence or effect resulting from (A) changes in general economic, financial market,
business or geopolitical conditions, (B) changes or developments in any of the industries in which the Company or the Company
Subsidiaries operate, (C) changes in any applicable laws or applicable accounting regulations or principles or interpretations
thereof, (D) any change in the price or trading volume of the Shares, in and of itself (
provided
, that the facts or
occurrences giving rise to or contributing to such change that are not otherwise excluded from the definition of “Material
Adverse Effect” may be taken into account in determining whether there has been a Material Adverse Effect), (E) any
outbreak or escalation of hostilities or war or any act of terrorism, (F) any actions taken (or omitted to be taken) pursuant
to the express terms of this Agreement (but, for purposes of this clause (F), excluding the obligation to comply with Section 5.1
or Section 6.8 and other than for purposes of the representations and warranties made in Section 3.5) or at the request
of Holdco, Parent or Merger Sub, (G) any failure by the Company to meet any published analyst estimates or expectations of the
Company’s revenue, earnings or other financial performance or results of operations for any period, in and of itself, or
any failure by the Company to meet its internal or published projections, budgets, plans or forecasts of its revenues, earnings
or other financial performance or results of operations, in and of itself (
provided
, that the facts or occurrences giving
rise to or contributing to such failure that are not otherwise excluded from the definition of “Material Adverse Effect”
may be taken into account in determining whether there has been a Material Adverse Effect), (H) the announcement of this Agreement
and the transactions contemplated hereby, including the initiation of litigation by any person with respect to this Agreement,
and including any termination of, reduction in or other negative impact on relationships or dealings, contractual or otherwise,
with any customers, suppliers, distributors, partners or employees of the Company and the Company Subsidiaries due to the announcement
and performance of this Agreement or the identity of the parties to this Agreement, (I) the performance of this Agreement and
the transactions contemplated hereby, including compliance with the covenants set forth herein (but, for purposes of this clause (I),
excluding the obligation to comply with Section 5.1 or Section 6.8 and other than for purposes of the representations
and warranties made in Section 3.5), or (J) any action or omission of the Company or any Company Subsidiaries taken, directly
or indirectly, at the direction of Mr. Li Fu (with the consent of the other Guarantors) outside the ordinary course of business
and not approved by the Special Committee,
provided
that any development, fact, circumstance, event, change, occurrence
or effect referred to in the foregoing clauses (A), (B), (C) and (E), may be taken into account in determining whether or not
there has been a Material Adverse Effect to the extent such development, fact, circumstance, event, change, occurrence or effect
has a materially disproportionately adverse effect on the Company and the Company Subsidiaries taken as a whole, as compared to
other companies in the industries in which the Company and the Company Subsidiaries operate;
(n) “
NASDAQ
Marketplace Rules
” means the rules concerning NASDAQ-listed companies promulgated by NASDAQ from time to time and published
in the NASDAQ Manual Online located at www.nasdaq.com;
(o) “
Nevada
Takeover Laws
” means (a) the Nevada Combinations With Interested Stockholders law, NRS 78.411-78.444 and (b) the Nevada
Control Share Act, NRS 78.378-78.3793;
(p) “
Permitted
Liens
” means (i) mechanics’, carriers’, workers’, and repairers’ Liens arising or incurred in
the ordinary course of business that are not material to the business, operations and financial condition or the property of the
Company so encumbered and that are not resulting from a breach, default or violation by the Company of any Contract or law, (ii) zoning,
entitlement and other land use and environmental regulations by any Governmental Entity, provided that such regulations have not
been materially violated, (iii) any matter listed in or referred to in any title policy, search or report which was made available
to Parent by the Company prior to the date of this Agreement, (iv) any immaterial Lien, which does not interfere with day-to-day
operations of the business of the Company and the Company Subsidiaries, (v) limitations or restrictions under any Lease Agreement
or other Contract or otherwise imposed by the law of PRC or another government or quasi-governmental agency having jurisdiction
over the Real Property and/or operations thereat and (vi) limitations or restrictions on transfers imposed by the Securities Act,
blue sky laws and comparable foreign laws governing securities,
provided
that there is no material violation thereunder
that has resulted in such limitations or restrictions;
(q) “
person
”
means an individual, corporation, partnership, limited liability company, association, trust, unincorporated organization, or
other entity;
(r) “
PRC
”
means the People’s Republic of China excluding, for the purposes of this Agreement only, the Hong Kong Special Administrative
Region, the Macau Special Administrative Region and Taiwan;
(s) “
PRC
Anti-Monopoly Bureau
” means the Anti-Monopoly Bureau of the Ministry of Commerce;
(t) “
PRC
Anti-Monopoly Law
” means the PRC Anti-Monopoly Law adopted on August 1, 2008, as amended;
(u) “
PRC
Subsidiary
” means all Company Subsidiaries organized under the laws of the PRC;
(v) “
Representatives
”
means, when used with respect to Holdco, Parent, Merger Sub, the Company or any other person, the directors, officers, employees,
consultants, financial advisors, accountants, legal counsel, investment bankers, and other agents, advisors and representatives
of Holdco, Parent, Merger Sub, the Company or any other person, as applicable, and their respective subsidiaries;
(w) “
SAFE
”
means the State Administration of Foreign Exchange of the PRC;
(x) “
SAFE
Circular 75
” means Circular 75, issued by SAFE on October 21, 2005, titled “Notice Regarding Certain Administrative
Measures on Financing and Inbound Investments by PRC residents Through Offshore Special Purpose Vehicles”, effective as
of November 1, 2005 together with its implementing rules, issued by SAFE on May 29, 2007 and effective as of the same day, titled
“Implementation Guidance Relating to Notice Regarding Certain Administrative Measures on Financing and Inbound Investments
by PRC residents Through Offshore Special Purpose Vehicles”, or any successor rule or regulation under PRC law;
(y) “
SAFE
Circular 78
” means Circular 78, issued by SAFE on March 28, 2007, titled “Notice of the SAFE on Foreign Exchange
Administration of the Involvement of Domestic Individuals in the Employee Stock Ownership Plans and Share Option Schemes of Overseas
Listed Companies”, effective as of March 28, 2007, or any successor rule or regulation under PRC law;
(z) “
subsidiary
”
or “
subsidiaries
” of the Company, the Surviving Corporation, Parent or any other person means any corporation,
partnership, joint venture or other legal entity: (i) of which voting power to elect a majority of the board of directors or others
performing similar functions with respect to such organization is held directly or indirectly by such person or by any one or
more of such person’s subsidiaries, (ii) of which at least fifty percent (50%) of the equity interests is controlled by
such person by any one or more of such person’s subsidiaries, (iii) of which such party or any subsidiary of such party
is a general partner, or (iv) that would otherwise be deemed a “subsidiary” under Rule 1.02(w) of Regulation S-X promulgated
pursuant to the Exchange Act;
(aa) “
Taxes
”
means any taxes of any kind, including, but not limited to, those on or measured by or referred to as income, gross receipts,
capital, sales, use, ad valorem, franchise, profits, license, withholding, payroll, employment, excise, severance, stamp, occupation,
premium, value added, property or windfall profits taxes, customs, duties or similar fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or additional amounts imposed by any Governmental Entity,
domestic or foreign;
(bb) “
Tax
Return
” means any return, report or statement (including information returns) required to be filed with or provided
to any Governmental Entity or other person, or maintained, with respect to Taxes, including any schedule or attachment thereto
or amendment thereof;
(cc) “
VIE
”
means Dalian Fushi Bimetallic Manufacturing Co. Ltd.; and
(dd) “
VIE
Contracts
” means the following agreements:
(i) Purchase
Agreement between Fushi International (Dalian) and VIE;
(ii) Patents
Transfer Contract between Fushi International (Dalian) and VIE;
(iii) Patent
Transfer Contract between Fushi International (Dalian) and Mr. Fu;
(iv) Entrusted
Management Agreement among Fushi International (Dalian), VIE, Dalian Fushi Enterprise Group Co., Ltd., Yue Yang, Xishan Yang and
Chunyan Xu;
(v) Shareholders’
Voting Proxy Agreement among Fushi International (Dalian), Dalian Fushi Enterprise Group Co., Ltd., Yue Yang, Xishan Yang and
Chunyan Xu;
(vi) Exclusive
Option Agreement among Fushi International (Dalian), VIE, Dalian Fushi Enterprise Group Co., Ltd., Yue Yang, Xishan Yang and Chunyan
Xu; and
(vii) Shares
Pledge Agreement among Fushi International (Dalian), Dalian Fushi Enterprise Group Co., Ltd., Yue Yang, Xishan Yang and Chunyan
Xu.
Section 9.4
Severability
.
If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate
in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to the fullest extent possible.
Section 9.5
Entire
Agreement; Assignment
. This Agreement (including the Exhibits hereto), the Company Disclosure Schedule, the Voting Agreement,
the Confidentiality Agreements, the Equity Financing Commitments, the Contribution Agreement and the Guarantees constitute the
entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and undertakings,
both written and oral, among the parties, or any of them, with respect to the subject matter hereof. This Agreement shall not
be assigned by operation of law or otherwise without the prior written consent of each of the other parties.
Section 9.6
Parties
in Interest
. Except (i) as provided in Section 6.7, (ii) with respect to the indemnification and reimbursement obligations
of Parent pursuant to Section 6.13 and (iii) only with respect to stockholders and only after the Effective Time, for the
provisions set forth in ARTICLE II, Parent and the Company hereby agree that their respective representations, warranties and
covenants set forth herein are solely for the benefit of the other parties hereto, in accordance with and subject to the terms
of this Agreement, and this Agreement is not intended to, and does not, confer upon any person other than the parties hereto any
rights or remedies hereunder, including the right to rely upon the representations and warranties set forth herein. The parties
hereto further agree that the rights of third-party beneficiaries under Section 6.7 shall not arise unless and until the Effective
Time occurs. The representations and warranties in this Agreement are the product of negotiations among the parties hereto and
are for the sole benefit of the parties hereto. Any inaccuracies in such representations and warranties are subject to waiver
by the parties hereto in accordance with Section 8.8 without notice or liability to any other person. In some instances, the representations
and warranties in this Agreement may represent an allocation among the parties hereto of risks associated with particular matters
regardless of the knowledge of any of the parties hereto. Consequently, persons other than the parties hereto may not rely upon
the representations and warranties in this Agreement as characterizations of actual facts or circumstances as of the date of this
Agreement or as of any other date.
Section 9.7
Governing
Law
. This Agreement and all disputes or controversies arising out of or relating to this Agreement or the transactions contemplated
hereby shall be governed by, and construed in accordance with, the internal laws of the State of Nevada, without regard to the
laws of any other jurisdiction that might be applied because of the conflicts of laws principles of the State of Nevada.
Section 9.8
Headings
.
The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any
way the meaning or interpretation of this Agreement.
Section 9.9
Counterparts
.
This Agreement may be executed and delivered (including by facsimile, “.pdf,” or other electronic transmission) in
one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed
to be an original, but all of which taken together shall constitute one and the same agreement.
Section 9.10
Specific
Performance
. The parties agree that irreparable damage for which monetary damages, even if available, would not be an adequate
remedy, would occur in the event that the parties hereto do not perform the provisions of this Agreement (including failing to
take such actions as are required of them hereunder in order to consummate this Agreement) in accordance with its specified terms
or otherwise breach such provisions. The parties acknowledge and agree that the parties shall be entitled to an injunction, specific
performance and other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions
hereof, this being in addition to any other remedy to which they are entitled at law or in equity. Notwithstanding anything in
this Agreement to the contrary, the parties hereby explicitly acknowledge and agree that the Company’s right, prior to the
Closing, to seek an injunction, specific performance or other equitable relief to cause Holdco, Parent and/or Merger Sub to draw
down the full proceeds of the Equity Financing and to cause Holdco, Parent or Merger Sub to effect the Closing in accordance with
Section 1.2, on the terms and subject to the conditions in this Agreement, shall be subject to the requirements that (A) all conditions
in Section 7.1 and Section 7.2 (other than those conditions that by their nature are to be satisfied at the Closing) have been
satisfied, (B) Parent and Merger Sub have failed to complete the Closing by the date the Closing is required to have occurred
pursuant to Section 1.2, (C) the Debt Financing (or, if alternative financing is being used in accordance with Section
6.13, pursuant to the commitments with respect thereto) has been funded in accordance with the terms of the Debt Financing Agreement
or will be funded at the Closing in accordance with the terms of the Debt Financing Agreement if the Equity Financing is funded
at the Closing, and (D) the Company has irrevocably confirmed in writing that if specific performance is granted and the
Equity Financing and Debt Financing are funded, then it is prepared to close. Each of the parties agrees that it will not oppose
the granting of an injunction, specific performance and other equitable relief on the basis that (x) either party has an adequate
remedy at law or (y) an award of specific performance is not an appropriate remedy for any reason at law or equity. For the avoidance
of doubt, (1) under no circumstances will the Company be entitled to monetary damages in excess of the aggregate amount of (a)
the Parent Termination Fee, (b) any reimbursement obligation of Parent pursuant to the first sentence of Section 8.5(d) and (c)
the indemnification, reimbursement and expense obligations of Parent contained in Section 6.13(b), and (2) under no circumstances
will Holdco, Parent, Merger Sub or any affiliate thereof be entitled to monetary damages in excess of the aggregate amount of
(a) the Termination Fee and (b) any reimbursement obligation of the Company pursuant to the first sentence of Section 8.5(d).
Any party seeking an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and
provisions of this Agreement shall not be required to provide any bond or other security in connection with any such order or
injunction. Until such time as Parent pays the Parent Termination Fee pursuant to Section 8.5(c), the remedies available to the
Company pursuant to this Section 9.10 shall be in addition to any other remedy to which it is entitled at law or in equity, and
the election to pursue an injunction or specific performance shall not restrict, impair or otherwise limit the Company from, in
the alternative, seeking to terminate this Agreement and collect the Parent Termination Fee under Section 8.5. Until such time
as the Company pays the Termination Fee pursuant to Section 8.5(b), the remedies available to each of Parent and Merger Sub pursuant
to this Section 9.10 shall be in addition to any other remedy to which it is entitled at law or in equity, and the election to
pursue an injunction or specific performance shall not restrict, impair or otherwise limit Parent or Merger Sub from, in the alternative,
seeking to terminate this Agreement and collect the Termination Fee under Section 8.5. This Section 9.10 shall not be deemed to
alter, amend, supplement or otherwise modify the terms of any Financing Document (including the expiration or termination provisions
thereof).
Section 9.11
Jurisdiction
.
Each of the parties irrevocably agrees that any legal action or proceeding arising out of or relating to this Agreement brought
by any party or its affiliates against any other party or its affiliates shall be brought and determined in the courts of the
State of Nevada located in Clark County, Nevada or the federal courts of the United States of America located in Nevada. Each
of the parties hereby irrevocably submits to the jurisdiction of the aforesaid courts for itself and with respect to its property,
generally and unconditionally, with regard to any such action or proceeding arising out of or relating to this Agreement and the
transactions contemplated hereby. Each of the parties agrees not to commence or maintain any action, suit or proceeding relating
thereto except in the courts described above, other than actions in any court of competent jurisdiction to enforce any judgment,
decree or award rendered by any such court in Nevada as described herein. Each of the parties further agrees that notice as provided
herein shall constitute sufficient service of process and the parties further waive any argument that such service is insufficient.
Each of the parties hereby irrevocably and unconditionally waives, and agrees not to assert, by way of motion or as a defense,
counterclaim or otherwise, in any action or proceeding arising out of or relating to this Agreement or the transactions contemplated
hereby, (a) any claim that it is not personally subject to the jurisdiction of the courts in Nevada as described herein for any
reason, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced
in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution
of judgment or otherwise), and (c) that (i) the suit, action or proceeding in any such court is brought in an inconvenient forum,
(ii) the venue of such suit, action or proceeding is improper, or (iii) this Agreement, or the subject matter hereof, may not
be enforced in or by such courts.
Section 9.12
Interpretation
.
When reference is made in this Agreement to a Section or Exhibit, such reference shall be to a Section or Exhibit of this Agreement
unless otherwise indicated. Whenever the words “include,” “includes” or “including” are used
in this Agreement, they shall be deemed to be followed by the words “without limitation”. The words “hereof,”
“herein,” “hereby” and “hereunder” and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The word “or” shall
not be exclusive. All references to “dollars” or “$” in this Agreement refer to United States dollars,
which is the currency used for all purposes in this Agreement, unless otherwise stated. This Agreement shall be construed without
regard to any presumption or rule requiring construction or interpretation against the party drafting or causing any instrument
to be drafted.
Section 9.13
WAIVER
OF JURY TRIAL
. EACH OF HOLDCO, PARENT, MERGER SUB AND THE COMPANY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT
TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF HOLDCO, PARENT, MERGER SUB OR THE COMPANY IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE AND ENFORCEMENT HEREOF.
[
Remainder
of Page Left Blank Intentionally
]
IN WITNESS WHEREOF, Parent, Merger Sub, Holdco
and the Company have caused this Agreement to be executed as of the date first written above by their respective officers thereunto
duly authorized.
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Green Dynasty Limited
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By:
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/s/ Li Fu
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Name: Li Fu
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Title: Director
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Green Dynasty Acquisition, Inc.
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By:
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/s/ Li Fu
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Name: Li Fu
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Title: Director
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Green Dynasty Holdings Limited
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By:
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/s/ Li Fu
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Name: Li Fu
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Title: Director
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Fushi Copperweld, Inc.
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By:
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/s/ Craig H. Studwell
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Name: Craig H. Studwell
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Title: Chief Financial Officer
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[SIGNATURE PAGE TO MERGER AGREEMENT]
ANNEX B
EXECUTION VERSION
LIMITED GUARANTEE
LIMITED GUARANTEE,
dated as of June 28, 2012 (this “
Limited Guarantee
”), by Mr. Li Fu (“
Mr. Fu
”), Abax Lotus
Ltd. and AGC Asia 6 Ltd. (together, “
Abax
” and, collectively with Mr. Fu, the “
Guarantors
”
and each, a “
Guarantor
”), in favor of Fushi Copperweld, Inc., a Nevada corporation (the “
Guaranteed
Party
”). Capitalized terms used but not defined herein have the meanings ascribed to them in the Merger Agreement (as
defined below).
1.
LIMITED
GUARANTEE
. To induce the Guaranteed Party to enter into an Agreement and Plan of Merger, dated as of the date hereof
(as amended, restated, supplemented or otherwise modified from time to time in accordance with its terms, the “
Merger
Agreement
”) by and among Green Dynasty Limited, a Cayman Islands exempted company (“
Parent
”), Green
Dynasty Acquisition, Inc., a Nevada corporation and a direct wholly-owned subsidiary of Parent (“
Merger Sub
”),
Green Dynasty Holdings Limited, a Cayman Islands exempted company (“
Holdco
”), and the Guaranteed Party, pursuant
to which Merger Sub will merge with and into the Guaranteed Party (the “
Merger
”), each of the Guarantors, intending
to be legally bound, hereby absolutely, unconditionally and irrevocably guarantees to the Guaranteed Party, severally but not
jointly nor jointly and severally, as a primary obligor and not merely as a surety, the due and punctual performance and discharge
as and when due of its percentage, as set forth opposite its name on Exhibit A hereto (each such Guarantor’s “
Guaranteed
Percentage
”), of (a) the payment obligations of Parent with respect to the Parent Termination Fee payable by Parent
pursuant to
Section 8.5(c)
of the Merger Agreement (subject to the terms and limitations of
Section 8.5(d)
of the
Merger Agreement) (the “
Parent Fee Obligations
”) and (b) the obligations of Parent, Merger Sub and Holdco pursuant
to the first sentence of
Section 8.5(d)
and
Section 6.13(c)
of the Merger Agreement (collectively the
“
Expense Obligations
” and, together with the Parent Fee Obligations, the “
Guaranteed Obligations
”);
provided
that in no event shall a Guarantor’s aggregate liability under this Limited Guarantee exceed such Guarantor’s
Guaranteed Percentage of an amount equal to (a) the Guaranteed Obligations minus (b) any portion of the Guaranteed Obligations
actually paid by Parent, Merger Sub or Holdco to the Guaranteed Party (such limitation on the aggregate liability of each Guarantor
for its Guaranteed Obligations being herein referred to as such Guarantor’s “
Cap
”, subject to adjustment
under the last sentence of Section 2 of this Limited Guarantee), it being understood that this Limited Guarantee may not be enforced
without giving effect to each Guarantor’s Cap (and the provisions of Section 8 and Section 9 of this Limited Guarantee).
All payments hereunder shall be made in lawful money of the United States, in immediately available funds. Each of the Guarantors
promises and undertakes to make all payments hereunder free and clear of any deduction, offset, defense, claim or counterclaim
of any kind (other than defenses to the payment of the Guaranteed Obligations that are expressly available to Parent, Merger Sub
or Holdco under the Merger Agreement or that are expressly available hereunder).
If Parent, Merger
Sub or Holdco fails to discharge their Guaranteed Obligations as and when due, then the Guarantors’ liabilities to the Guaranteed
Party hereunder in respect of such Guaranteed Obligations shall, at the Guaranteed Party’s option, become immediately due
and payable and the Guaranteed Party may at any time and from time to time, at the Guaranteed Party’s option, and so long
as Parent, Merger Sub or Holdco remains in breach of its Guaranteed Obligations, take any and all actions available hereunder
or under applicable Law to collect the Guaranteed Obligations from the Guarantors subject to each Guarantor’s Cap.
The parties hereto
acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Limited Guarantee were
not performed in accordance with its specific terms or were otherwise breached and further agree that the Guaranteed Party shall
be entitled to seek an injunction, specific performance and other equitable relief to prevent breaches of this Limited Guarantee
and to enforce specifically the terms and provisions hereof, in addition to any other remedy to which it is entitled at law or
in equity, and shall not be required to provide any bond or other security in connection with any such order or injunction. Each
Guarantor further agrees that it will not oppose the granting of any such injunction, specific performance and other equitable
relief on the basis that (x) the Guaranteed Party has an adequate remedy at law or (y) an award of an injunction, specific performance
or other equitable relief is not an appropriate remedy for any reason at law or equity (collectively, the “
Prohibited
Defenses
”).
2.
CHANGES
IN GUARANTEED OBLIGATION, CERTAIN WAIVERS
. Each Guarantor agrees that the Guaranteed Party may at any time and
from time to time, without notice to or further consent of the Guarantors, extend the time of payment discharge of any of the
Guaranteed Obligations, and may also make any agreement with Parent, Merger Sub or Holdco, for the extension, renewal, payment,
compromise, discharge or release thereof, in whole or in part, or for any modification of the terms thereof or of any agreement
between the Guaranteed Party, Parent, Merger Sub or Holdco without in any way impairing or affecting each Guarantor’s obligations
under this Limited Guarantee. Each Guarantor agrees that the obligation of such Guarantor hereunder shall not be released or discharged,
in whole or in part, or otherwise affected by (a) the failure or delay of the Guaranteed Party to assert any claim or demand or
to enforce any right or remedy against Parent, Merger Sub or Holdco, or any other Person now or hereafter liable with respect
to any of the Guaranteed Obligations or otherwise interested in the transactions contemplated by the Merger Agreement; (b) any
change in the time, place or manner of payment of any of the Guaranteed Obligations or any rescission, waiver, compromise, consolidation
or other amendment to or modification of any of the terms or provisions of the Merger Agreement made in accordance with the terms
thereof or any other agreement evidencing, securing or otherwise executed in connection with any of the Guaranteed Obligations;
(c) the addition, substitution or release of any Person now or hereafter liable with respect to any of the Guaranteed Obligations
or otherwise interested in the transactions contemplated by the Merger Agreement; (d) any change in the corporate existence, structure
or ownership of Parent, Merger Sub, Holdco or any other Person now or hereafter liable with respect to any of the Guaranteed Obligations
or otherwise interested in the transactions contemplated by the Merger Agreement; (e) any insolvency, bankruptcy, reorganization
or other similar proceeding affecting Parent, Merger Sub, Holdco or any other Person now or hereafter liable with respect to any
of the Guaranteed Obligations or otherwise interested in the transactions contemplated by the Merger Agreement or the assets of
any such Person; (f) the existence of any claim, set-off or other right which such Guarantor may have at any time against Parent,
Merger Sub, Holdco or the Guaranteed Party or any of their respective affiliates, whether in connection with the Guaranteed Obligation
or otherwise (other than defenses to the payment of the Guaranteed Obligation that are expressly available to Parent, Merger Sub
or Holdco under the Merger Agreement or that are expressly available hereunder); or (g) the adequacy of any other means the Guaranteed
Party may have of obtaining payment or discharge of any of the Guaranteed Obligations.
To the fullest extent
permitted by applicable law, each Guarantor hereby irrevocably and expressly waives any and all rights or defenses arising by
reason of any applicable law which would otherwise require any election of remedies by the Guaranteed Party.
Each Guarantor hereby
irrevocably and expressly waives promptness, diligence, notice of the acceptance of this Limited Guarantee and of the Guaranteed
Obligations, presentment, demand for payment, notice of non-performance, default, dishonor and protest, notice of any Guaranteed
Obligations incurred, notices of the creation, renewal, extension or accrual of any of the Guaranteed Obligations, notice of or
proof of reliance by the Guaranteed Party upon this Limited Guaranteed and all other notices of any kind (other than notices expressly
required to be provided to Parent, Merger Sub or Holdco pursuant to the Merger Agreement), all defenses which may be available
by virtue of any valuation, stay, moratorium law or other similar law now or hereafter in effect, any right to require the marshalling
of assets of Parent, Merger Sub or Holdco or any other Person now or hereafter liable with respect to any of the Guaranteed Obligations
or otherwise interested in the transactions contemplated by the Merger Agreement, including, without limitation, any event, condition
or circumstance that might be construed to constitute, an equitable or legal discharge of such Guarantor’s obligations hereunder
(other than defenses to the payment of the Guaranteed Obligation (x) that are expressly available to Parent, Merger Sub or Holdco
under the Merger Agreement or (y) in respect of a breach by the Guaranteed Party of this Limited Guarantee). Each Guarantor acknowledges
that it will receive substantial direct and indirect benefits from the transactions contemplated by the Merger Agreement and that
the waivers set forth in this Limited Guarantee are knowingly made in contemplation of such benefits.
The Guaranteed Party
hereby covenants and agrees that it shall not institute, and shall cause its controlled affiliates not to institute, any proceeding
or bring any other claim arising under, or in connection with, the Merger Agreement or the transactions contemplated thereby,
against (i) the Guarantors, and (ii) any of the former, current and future equity holders, controlling persons, directors, officers,
employees, agents, affiliates, members, managers, general or limited partners of the Guarantors, (iii) any former, current or
future equity holder, controlling person, director, officer, employee, general or limited partner, member, manager, affiliate,
or agent of any of the person listed in clause (ii), or (iv) any former, current or future director, officer, employee or agent
of Holdco, Parent or Merger Sub, but, in each of clauses (ii), (iii) and (iv) not including Holdco, Parent or Merger Sub (those
persons and entities described in clause (ii), (iii) and (iv) each being referred to as, a “
Non-Recourse Party
”,
provided that, for the avoidance of doubt, the term “Non-Recourse Party” shall not include any of the Guarantors,
Holdco, Merger Sub, Parent, and any other subsidiary of Holdco), except for claims (i) against the Guarantors and their respective
successors and assigns under this Limited Guarantee pursuant to the terms hereof, (ii) against Guarantors and their respective
successors and assigns under the Equity Financing Commitments pursuant to the terms thereof, (iii) for the avoidance of doubt,
against Parent, Merger Sub and Holdco and their respective successors and assigns under the Merger Agreement pursuant to the terms
thereof, and (iv) under the Confidentiality Agreements against the parties thereto in accordance with and subject to the terms
and conditions thereof ((i), (ii), (iii) and (iv) collectively, the “
Retained Claims
”). Notwithstanding anything
in this Limited Guarantee to the contrary, if any Guarantor (i) consolidates with or merges with any other Person and is not the
continuing or surviving entity of such consolidation or merger or (ii) transfers or conveys all or a substantial portion of its
properties and other assets to any Person such that the sum of such Guarantor’s remaining net assets plus uncalled capital
is less than an amount equal to such Guarantor’s Cap, the Guaranteed Party may seek recourse, whether by the enforcement
of any judgment or assessment or by any legal or equitable proceeding or by virtue of any applicable law, against such continuing
or surviving entity or such Person, as the case may be, but only to the extent of the liability of such Guarantor hereunder.
Each Guarantor hereby
covenants and agrees that it will not institute any proceeding asserting or assert as a defense in any proceeding, and will cause
its respective affiliates not to institute any proceeding asserting or assert as a defense in any proceeding with respect to the
enforcement of this Limited Guarantee, (i) the Prohibited Defenses or (ii) that this Limited Guarantee is illegal, invalid or
unenforceable in accordance with its terms.
Notwithstanding anything
to the contrary contained in this Limited Guarantee, the Guaranteed Party hereby agrees that to the extent Parent, Merger Sub
and Holdco are relieved of any of their payment obligations under the Merger Agreement, each Guarantor shall be similarly relieved
of its corresponding obligations under this Limited Guarantee.
3.
NO
WAIVER; CUMULATIVE RIGHTS
. No failure on the part of the Guaranteed Party to exercise, and no delay in exercising,
any right, remedy or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by the Guaranteed
Party of any right, remedy or power hereunder preclude any other or future exercise of any right, remedy or power hereunder. Each
and every right, remedy and power hereby granted to the Guaranteed Party or allowed it by law or other agreement shall be cumulative
and not exclusive of any other, and may be exercised by the Guaranteed Party at any time or from time to time. The
Guaranteed Party shall not have any obligation to proceed at any time or in any manner against, or exhaust any or all of the Guaranteed
Party’s rights against, Parent, Merger Sub, Holdco or any other Person liable for the Guaranteed Obligations prior to proceeding
against the Guarantors hereunder.
Each Guarantor hereby
unconditionally and irrevocably waives and agrees not to exercise any rights that it may now have or hereafter acquire against
Parent, Merger Sub, Holdco or any affiliates thereof that arise from the existence, payment, performance, or enforcement of such
Guarantor’s obligation up to its Cap under or in respect of this Limited Guarantee or any other agreement in connection
therewith, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification
and any right to participate in any claim or remedy of the Guaranteed Party against Parent, Merger Sub, Holdco or any affiliates
thereof, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without
limitation, the right to take or receive from Parent, Merger Sub, Holdco or such other Person, directly or indirectly, in cash
or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless
and until such Guarantor’s portion of the Guaranteed Obligations up to its Cap shall have been paid in full in cash and
performed in full. If any amount shall be paid to a Guarantor in violation of the immediately preceding sentence at any time prior
to the performance and payment in full in cash by such Guarantor of its portion of the Guaranteed Obligations up to its Cap (including
in the event that any payment by a Guarantor to the Guaranteed Party in respect of the Guaranteed Obligations is rescinded or
must otherwise be returned for any reason), such amount shall be received and held in trust for the benefit of the Guaranteed
Party, shall be segregated from other property and funds of such Guarantor and shall forthwith be paid or delivered to the Guaranteed
Party in the same form as so received (with any necessary endorsement or assignment) to be credited and applied to the Guaranteed
Obligations in accordance with the terms of the Merger Agreement, whether matured or unmatured, or to be held as collateral for
the Guaranteed Obligations or other amounts payable under this Limited Guarantee thereafter arising.
The Guaranteed Obligations
shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Limited Guarantee, and all negotiations
between Parent, Merger Sub, Holdco or the Guarantors, on the one hand, and the Guaranteed Party, on the other, of the terms of
the Merger Agreement, and the transactions contemplated by the Merger Agreement, shall, in each case, likewise be conclusively
presumed to have been had or consummated, as the case may be, in reliance upon this Limited Guarantee.
If any payment to
the Guaranteed Party in respect of any Guaranteed Obligations hereunder is rescinded or must otherwise be returned for any reason
whatsoever, each Guarantor shall remain liable hereunder with respect to such Guarantor’s portion of the Guaranteed Obligations
up to its Cap as if such payment had not been made so long as this Limited Guarantee has not been terminated.
4. [Reserved].
5.
REPRESENTATIONS
AND WARRANTIES
. Each Guarantor (other than, in the case of the representations and warranties contained in Section 5(a)(ii)(B)(1),
Mr. Fu) hereby represents and warrants that:
(a)
the
execution, delivery and performance of this Limited Guarantee (i) have been duly authorized by all necessary action on the part
of such Guarantor and (ii) do not (A) other than breaches, violations, defaults, losses, rights or liens that would not prevent
or delay the Guarantor’s performance of this Limited Guarantee, result in any breach or violation of, or constitute a default
(or an event that with notice or lapse of time or both would become a default) or result in the loss of a benefit under, or give
rise to any right of termination, cancellation, amendment or acceleration of any Contract to which such Guarantor or any subsidiaries
of such Guarantor is a party or result in the creation of any lien upon any of such Guarantor’s properties, assets or rights,
or (B) conflict with or result in any violation of or contravene (1) any provision of such Guarantor’s charter, partnership
agreement, operating agreement or similar organizational documents or (2) any law, regulation, rule, decree, order, judgment or
contractual restriction binding on such Guarantor or any of its property or assets;
(b)
all
consents, approvals, authorizations, permits of, filings with and notifications to, any Governmental Entity or other Person necessary
for the due execution, delivery and performance of this Limited Guarantee by such Guarantor have been obtained or made and all
conditions thereof have been duly complied with, and no other action by, and no notice to or filing with, any Governmental Entity
or other Person is required in connection with the execution, delivery or performance of this Limited Guarantee;
(c)
this
Limited Guarantee constitutes a legal, valid and binding obligation of the Guarantor and is enforceable against such Guarantor
in accordance with its terms, subject to (i) the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
or other similar laws affecting creditors’ rights generally, and (ii) general equitable principles (whether considered in
a proceeding in equity or at law); and
(d) such Guarantor
(i) is solvent and shall not be rendered insolvent as a result of its execution and delivery of this Limited Guarantee or the
performance of its obligations hereunder; (ii) has the financial capacity to pay and perform its obligations under this Limited
Guarantee, and (iii) all funds necessary for such Guarantor to fulfill its obligations (subject to its Cap) under this Limited
Guarantee shall be available to such Guarantor for so long as this Limited Guarantee shall remain in effect in accordance with
Section 8
hereof.
6.
NO
ASSIGNMENT
. Neither the Guarantors nor the Guaranteed Party may assign or delegate their respective rights, interests
or obligations hereunder to any other Person (including, without limitation, by operation of law) without the prior written consent
of the Guaranteed Party (in the case of an assignment by the Guarantors) or the Guarantors (in the case of an assignment by the
Guaranteed Party); except that if a portion of a Guarantor’s commitment under the Equity Financing Commitments is assigned
in accordance with the terms thereof, then a corresponding portion of its obligations hereunder may be assigned to the same assignee
without consent of, or notice to, the Guaranteed Party, provided that notwithstanding such assignment, such Guarantor shall not
be released from any liability or obligations hereunder.
7.
NOTICES
. All
notices, requests, claims, demands, waivers and other communications required or permitted to be given under this Limited Guarantee
shall be given in the manner specified in the Merger Agreement (and shall be deemed given as specified therein) as follows:
If to Mr. Fu, to:
c/o Fushi Copperweld, Inc.
TYG Center Tower B, Suite 2601
Dongsanhuan Bei Lu, Bing 2
Beijing, 100027, PRC
Facsimile: +86 10 8447 8292
E-mail: cwang@fushicopperweld.com
Attention: Li Fu
with copies to (which shall not
constitute notice):
Skadden, Arps, Slate, Meagher
& Flom
30
th
Floor, China World
Office 2
1 Jianguomenwai Avenue
Beijing 100004, PRC
Facsimile: +86 10 6535 5577
E-mail: Michael.Gisser@skadden.com
Peter.Huang@skadden.com
Attention: Michael V. Gisser,
Esq.
Peter X. Huang, Esq.
If to Abax, to:
c/o Abax Global Capital (Hong
Kong) Limited
Suite 6708, 67/F, Two International
Finance Center
8 Finance Street
Central, Hong Kong
Facsimile: +852 3602 1700
E-mail: donald.yang@abaxcap.com
Attention: Donald Yang
with copies to (which shall not
constitute notice):
Weil, Gotshal & Manges
29/F, Alexandra House
18 Chater Road
Central, Hong Kong
Facsimile: +852 3015 9354
E-mail: akiko.mikumo@weil.com
Attention: Akiko Mikumo
If to the Guaranteed Party, as
provided in the Merger Agreement.
8.
CONTINUING
GUARANTEE
. Unless terminated pursuant to this
Section 8
, this Limited Guarantee shall remain in full force and
effect and shall be binding on the Guarantor, its successors and assigns, and inure to the benefit of the Guaranteed Party and
the Non-Recourse Parties, until such Guarantor’s portion of the Guaranteed Obligations up to its Cap (as such Guaranteed
Obligations may be modified pursuant to the terms hereof) is satisfied in full. Notwithstanding the foregoing, this Limited Guarantee
shall terminate, other than
Section 6
through
Section 13
, all of which shall survive the termination of this Limited
Guarantee, and the Guarantors shall have no further obligation under this Limited Guarantee as of the earliest of (a) the Effective
Time, (b) the payment in full of the Guaranteed Obligations (subject to each Guarantor’s Cap), and (c) six (6) months after
the termination of the Merger Agreement in accordance with its terms if, in the case of clause (c), the Guaranteed Party has not
presented a bona fide claim for payment of any Guaranteed Obligation to Parent or Guarantor by such date (it being understood
that if the Guaranteed Party has presented such a bona fide claim by such date, this Limited Guarantee shall terminate upon the
final resolution of such claim and, if applicable, the payment in full of the Guaranteed Obligations). In the event that the Guaranteed
Party or any of its subsidiaries or affiliates institutes any suit, action or proceeding or makes any claim (A) asserting that
the provisions of Section 1 of this Limited Guarantee limiting the liability of a Guarantor’s monetary obligation to the
Cap are illegal, invalid or unenforceable in whole or in part or that any of the Guarantors is liable in excess of or to a greater
extent than its Cap (except for liabilities under the Equity Financing Commitments or the Confidentiality Agreements, in each
case in accordance with and subject to the terms and conditions thereof), (B) against any Guarantor or Non-Recourse Party asserting
that any of the provisions of this Limited Guarantee are illegal, invalid or unenforceable in whole or in part or that any of
the Guarantors is liable in excess of or to a greater extent than its Cap (except for liabilities under the Equity Financing Commitments
or the Confidentiality Agreements, in each case in accordance with and subject to the terms and conditions thereof) or (C) against
any Non-Recourse Party arising under, or in connection with, the Equity Financing Commitments, the Merger Agreement or any other
document or agreement entered into in connection with the Merger Agreement or any transactions contemplated thereby (other than
the Retained Claims), then (1) the obligations of all the Guarantors under this Limited Guarantee shall terminate ab initio and
be null and void, (2) if any of the Guarantors has previously made any payments under this Limited Guarantee, it shall be
entitled to recover such payments from the Guaranteed Party, and (3) neither the Guarantors nor any Non-Recourse Party shall have
any liability to the Guaranteed Party or any of its affiliates or any other person in any way with respect to the transactions
contemplated by the Merger Agreement, the Equity Financing Commitments or under this Limited Guarantee or any other agreement
or instrument delivered in connection with the Merger Agreement, the Equity Financing Commitments or this Limited Guarantee (
provided
,
for the avoidance of doubt, that this paragraph shall not affect the Guaranteed Party’s ability to bring claims as contemplated
by clauses (iii) and (iv) of the definition of “Retained Claims”).
9.
NO
RECOURSE
. (a) Notwithstanding anything that may be expressed or implied in this Limited Guarantee or any document
or instrument delivered contemporaneously herewith, and notwithstanding the fact that any of the Guarantors may be a partnership
or limited liability company, by its acceptance of the benefits of this Limited Guarantee, the Guaranteed Party acknowledges and
agrees that no Person other than the Guarantors (and their respective permitted successors and assigns under this Limited Guarantee
pursuant to the terms hereof) has any obligation under this Limited Guarantee and each Guarantor shall have no obligations under
or in connection with this Limited Guarantee except as expressly provided by this Limited Guarantee and subject in each case to
such Guarantor’s Cap, or for any claim based on, in respect of, or by reason of, such obligation or its creation, against,
and no personal liability shall attach to, any Non-Recourse Party, through Parent, Merger Sub, Holdco or otherwise, whether by
or through attempted piercing of the corporate veil, by or through a claim by or on behalf of the Guaranteed Party against any
Non-Recourse Party (including any claim to enforce the Equity Financing Commitments), by the enforcement of any assessment or
by any legal or equitable proceeding, by virtue of any statute, regulation or applicable law, or otherwise, except for any Retained
Claims. The Guaranteed Party acknowledges and agrees that Parent, Merger Sub and Holdco have no assets other than certain contract
rights, including the rights of each under the Merger Agreement and the Financing Commitments, and cash in a de minimis amount
and that no additional funds are expected to be contributed to Parent, Merger Sub or Holdco unless the Closing occurs. Recourse
against the Guarantors pursuant to this Limited Guarantee shall be the sole and exclusive remedy of the Guaranteed Party and all
of its affiliates against the Guarantors or any Non-Recourse Party in respect of any liabilities or obligations arising under,
or in connection with, the Merger Agreement, the Equity Financing Commitments or the transactions contemplated thereby, except
for any Retained Claims.
(b) Other
than the Non-Recourse Parties who may rely on and enforce the provisions of this Limited Guarantee, nothing set forth in this
Limited Guarantee shall confer or give or shall be construed to confer or give to any Person other than the Guaranteed Party (including
any Person acting in a representative capacity) any rights or remedies against any Person, including the Guarantors, except as
expressly set forth herein.
10.
NATURE
OF GUARANTEE
. The Guaranteed Party shall not be obligated to file any claim relating to the Guaranteed Obligation in the event
that Parent, Merger Sub or Holdco becomes subject to a bankruptcy, reorganization or similar proceeding, and the failure of the
Guaranteed Party to so file shall not affect the Guarantors’ obligation hereunder. In the event that any payment to the
Guaranteed Party in respect of any Guaranteed Obligations is rescinded or must otherwise be returned for any reason whatsoever,
each Guarantor shall remain liable hereunder with respect to such Guarantor’s portion of the Guaranteed Obligations up to
its Cap as if such payment had not been made. This Limited Guarantee is an unconditional guarantee of payment and not of collection,
and the Guaranteed Party shall not be required to initiate any legal proceedings against Parent, Merger Sub or Holdco before proceeding
against the Guarantors hereunder.
11.
GOVERNING
LAW; JURISDICTION
. This Limited Guarantee and all disputes or controversies arising out of or relating to this
Limited Guarantee or the transactions contemplated hereby shall be governed by, and construed in accordance with, the internal
laws of the State of Nevada, without regard to the laws of any other jurisdiction that might be applied because of the conflicts
of laws principles of the State of Nevada. Each of the parties irrevocably agrees that any legal action or proceeding arising
out of or relating to this Limited Guarantee brought by any party or its affiliates against any other party or its affiliates
shall be brought and determined in the courts of the State of Nevada located in Clark County, Nevada or the federal courts of
the United States of America located in Nevada. Each of the parties hereby irrevocably submits to the jurisdiction of the aforesaid
courts for itself and with respect to its property, generally and unconditionally, with regard to any such action or proceeding
arising out of or relating to this Limited Guarantee and the transactions contemplated hereby. Each of the parties agrees not
to commence or maintain any action, suit or proceeding relating thereto except in the courts described above, other than actions
in any court of competent jurisdiction to enforce any judgment, decree or award rendered by any such court in Nevada as described
herein. Each of the parties further agrees that notice as provided herein shall constitute sufficient service of process and the
parties further waive any argument that such service is insufficient. Each of the parties hereby irrevocably and unconditionally
waives, and agrees not to assert, by way of motion or as a defense, counterclaim or otherwise, in any action or proceeding arising
out of or relating to this Limited Guarantee or the transactions contemplated hereby, (a) any claim that it is not personally
subject to the jurisdiction of the courts in Nevada as described herein for any reason, (b) that it or its property is exempt
or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice,
attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise), and (c) that (i)
the suit, action or proceeding in any such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding
is improper, or (iii) this Limited Guarantee, or the subject matter hereof, may not be enforced in or by such courts.
12.
WAIVER
OF JURY TRIAL
. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
LIMITED GUARANTEE OR THE ACTIONS OF EACH OF THE PARTIES HERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT
HEREOF.
13.
COUNTERPARTS
. This
Limited Guarantee may be executed and delivered by facsimile or other electronic transmission and in one or more counterparts,
and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
14.
MISCELLANEOUS
.
(a)
This
Limited Guarantee contains the entire agreement between the parties relative to the subject matter hereof. No modification or
waiver of any provision hereof shall be enforceable unless agreed to by the Guaranteed Party and the Guarantors in writing.
(b) Any
provision hereof that is prohibited or unenforceable in any jurisdiction shall be, as to such jurisdiction, ineffective solely
to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction;
provided, however, that this Limited Guarantee may not be enforced without giving effect to each Guarantor’s Cap and to
the provisions of Section 8 and Section 9 hereof.
(c) The
descriptive headings herein are inserted for convenience of reference only and are not intended to be part of or to affect the
meaning or interpretation of this Limited Guarantee.
(d) All
parties acknowledge that each party and its counsel have reviewed this Limited Guarantee and that any rule of construction to
the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this
Limited Guarantee.
[
Remainder of Page Intentionally Left
Blank
.]
IN WITNESS WHEREOF,
the Guarantors have caused this Limited Guarantee to be executed and delivered as of the date first written above by their respective
representatives thereunto duly authorized.
|
MR. LI FU
|
|
|
|
|
|
/s/ Li Fu
|
|
|
|
|
ABAX LOTUS LTD.
|
|
|
|
|
By:
|
/s/ Xiang Dong Yang
|
|
|
Name: Xiang Dong Yang
|
|
|
Title: Director
|
|
|
|
|
AGC ASIA 6 LTD.
|
|
|
|
|
By:
|
/s/ Xiang Dong Yang
|
|
|
Name: Xiang Dong Yang
|
|
|
Title: Director
|
[SIGNATURE PAGE TO LIMITED GUARANTEE]
IN WITNESS WHEREOF,
the Guaranteed Party has caused this Limited Guarantee to be executed and delivered as of the date first written above by its
officer thereunto duly authorized.
|
FUSHI COPPERWELD, INC.
|
|
|
|
|
By:
|
/s/ Craig H. Studwell
|
|
|
Name: Craig H. Studwell
|
|
|
Title: Chief Financial Officer
|
[SIGNATURE PAGE TO LIMITED GUARANTEE]
Exhibit A
Each Guarantor’s Cap
Guarantor
|
|
Guaranteed Percentage
|
|
|
|
|
|
Mr. Li Fu
|
|
|
82.4
|
%
|
|
|
|
|
|
Abax Lotus Ltd.
|
|
|
1.1
|
%
|
|
|
|
|
|
AGC Asia 6 Ltd.
|
|
|
16.5
|
%
|
ANNEX C
EXECUTION VERSION
VOTING AGREEMENT
VOTING AGREEMENT,
dated as of June 28, 2012 (this “
Agreement
”), by and between Fushi Copperweld, Inc., a Nevada corporation
(the “
Company
”), Green Dynasty Limited, a Cayman Islands exempted company (“
Parent
”)
and the stockholders of the Company listed on Schedule A hereto (each, a “
Stockholder
” and collectively,
the “
Stockholders
”). Capitalized terms used herein but not defined shall have the meanings given to
them in the Merger Agreement (as defined below).
WITNESSETH:
WHEREAS, Parent, Green
Dynasty Acquisition, Inc., a Nevada corporation and a wholly-owned subsidiary of Parent (“
Merger Sub
”),
Green Dynasty Holdings Limited, a Cayman Islands exempted company (“
Holdco
”) and the Company are concurrently
herewith entering into an Agreement and Plan of Merger (as may be amended, supplemented or otherwise modified, the “
Merger
Agreement
”), pursuant to which at the effective time under the Merger Agreement (the “
Effective Time
”),
Merger Sub will merge with and into the Company, with the Company continuing as the surviving entity and a wholly-owned subsidiary
of Parent (the “
Merger
”);
WHEREAS, as of the
date hereof, each Stockholder Beneficially Owns the Stockholder Existing Shares (each such term as hereinafter defined); and
WHEREAS, as a condition
to the willingness of and material inducement to Parent, Merger Sub, Holdco and the Company to enter into the Merger Agreement
and to consummate the transactions contemplated thereby, including the Merger, each Stockholder has agreed to enter into this
Agreement, pursuant to which such Stockholder is agreeing, among other things, to vote all of the Securities (as hereinafter defined)
it Beneficially Owns in accordance with the terms of this Agreement.
NOW, THEREFORE, in
consideration of the foregoing and the mutual representations, warranties, covenants and agreements contained herein, and intending
to be legally bound hereby, the parties hereto hereby agree as follows:
Section
1.
Certain
Definitions
. For purposes of this Agreement:
(a)
“
Beneficially
Own
” or “
Beneficial Ownership
” with respect to any securities means having “beneficial
ownership” of such securities as determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the “
Exchange Act
”).
(b)
“
Company
Shares
” means the shares of common stock, par value $0.006 per share, of the Company.
(c)
“
Securities
”
means the Stockholder Existing Shares together with any Company Shares and other securities of the Company which the Stockholder
and/or any of its “affiliates” (as defined in the Merger Agreement as of the date hereof) acquires Beneficial Ownership
of after the date hereof and prior to the termination of this Agreement whether upon the exercise of options, warrants or rights,
the conversion or exchange of convertible or exchangeable securities, or by means of purchase, dividend, distribution, split-up,
recapitalization, combination, exchange of shares or the like, gift, bequest, inheritance or as a successor in interest in any
capacity or otherwise.
(d)
“
Stockholder
Existing Shares
” means the Company Shares as set forth on
Schedule A
hereto. In the event of a stock dividend
or distribution, or any change in the Company Shares by reason of any stock dividend, split-up, recapitalization, combination,
exchange of shares or the like other than pursuant to the Merger, the term “Stockholder Existing Shares” will be deemed
to refer to and include all such stock dividends and distributions and any shares into which or for which any or all of the Stockholder
Existing Shares may be changed or exchanged as well as the Stockholder Existing Shares that remain.
Section
2.
Representations
and Warranties of Stockholder
. Each Stockholder, severally and not jointly, hereby represents and warrants to the Company
and Parent as follows:
(a)
Ownership
of Company Shares
. As of the date hereof and at all times prior to the termination of this Agreement, such Stockholder Beneficially
Owns (and will Beneficially Own, unless any Stockholder Existing Shares are transferred pursuant to
Section 6(a)
hereof)
the Stockholder Existing Shares set forth opposite such Stockholder’s name on
Schedule A
. Such Stockholder has and
will have at all times through the termination of this Agreement sole voting power, sole power of disposition, sole power to issue
instructions with respect to the matters set forth in
Section 7
hereof, and sole power to agree to all of the matters set
forth in this Agreement, in each case with respect to the Stockholder Existing Shares set forth opposite such Stockholder’s
name on
Schedule A
, with no limitations, qualifications or restrictions on such power, subject to applicable securities
laws and the terms of this Agreement. As of the date hereof, neither such Stockholder nor any of its affiliates Beneficially Owns
any Securities other than the Company Shares set forth opposite such Stockholder’s name on
Schedule A
. None of the
Stockholder Existing Shares of such Stockholder is the subject of any commitment, undertaking or agreement, contingent or otherwise,
the terms of which relate to or could give rise to the transfer of any Stockholder Existing Shares or would affect in any way
the ability of such Stockholder to perform its, his or her obligations as set out in this Agreement. Such Stockholder has not
appointed or granted any proxy inconsistent with this Agreement with respect to the Securities.
(b)
Authority
.
Such Stockholder has the requisite power to agree to all of the matters set forth in this Agreement with respect to the Securities
it Beneficially Owns and the full authority to vote, transfer and hold all the Securities it Beneficially Owns, with no limitations,
qualifications or restrictions on such power, subject to applicable securities laws and the terms of this Agreement.
(c)
Power;
Binding Agreement
. Such Stockholder has the legal capacity and authority to enter into this Agreement and to perform all of
its obligations under this Agreement. This Agreement has been duly and validly executed and delivered by such Stockholder and
constitutes a valid and binding agreement of such Stockholder, enforceable against such Stockholder in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating
to or affecting creditors’ rights and to general equity principles.
(d)
No
Conflicts
. None of the execution and delivery of this Agreement by such Stockholder, the consummation by such Stockholder
of any of the transactions contemplated hereby or compliance by such Stockholder with any of the provisions hereof (i) if such
Stockholder is not a natural person, conflicts with or results in any breach of any organizational documents applicable to such
Stockholder, (ii) violates any order, writ, injunction, decree, judgment, law, statute, rule or regulation applicable to such
Stockholder or any of such Stockholder’s properties or assets, (iii) results in or constitutes (with or without notice or
lapse of time or both) any breach of or default under, or result in the creation of any lien or encumbrance or restriction on,
such Stockholder or any of the Securities of such Stockholder, including pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation to which such Stockholder is a party or by which
the Securities of such Stockholder is bound or (iv) except for the requirements of the Exchange Act, requires any filing with,
or permit, authorization, consent or approval of, any Governmental Entity. There is no beneficiary, trustee or holder of a voting
trust certificate or other interest in such Stockholder whose consent is required for the execution and delivery of this Agreement
of the performance by such Stockholder of the obligations hereunder.
(e)
No
Encumbrance
. Except as permitted by this Agreement, such Stockholder Existing Shares are now and at all times during the term
hereof will be, and the Securities will be, held by such Stockholder, free and clear of all liens, proxies, powers of attorney,
voting trusts and voting agreements and arrangements (collectively, “
liens
”), except for any such liens
arising hereunder or under applicable federal and state securities laws and/or liens that are not material to the performance
of any of its obligations under this Agreement by such Stockholder.
(f)
No
Litigation
. There is no Legal Proceeding outstanding, pending or, to the knowledge of such Stockholder, threatened against
or affecting such Stockholder or the Securities of such Stockholder at law or in equity before or by any Governmental Entity or
any other person that could reasonably be expected to impair the ability of such Stockholder to perform his or its obligations
hereunder on a timely basis.
(g)
Opportunity
to Review; Reliance
. Such Stockholder has had the opportunity to review the Merger Agreement and this Agreement with counsel
of its own choosing. Such Stockholder understands and acknowledges that Parent, Merger Sub and the Company are entering into the
Merger Agreement in reliance upon the execution, delivery and performance of this Agreement and such Stockholder’s representations,
warranties and covenants hereunder.
Section
3.
Representations
and Warranties of the Company and Parent
.
(a)
The
Company hereby represents and warrants to Parent and each Stockholder that:
(i)
Power;
Binding Agreement
. The Company has the corporate power and authority to enter into and perform all of its obligations under
this Agreement. This Agreement has been duly and validly executed and delivered by the Company and constitutes a valid and binding
agreement of the Company, enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights
and to general equity principles.
(ii)
No
Conflicts
. None of the execution and delivery of this Agreement by the Company, the consummation by the Company of any of
the transactions contemplated hereby or compliance by the Company with any of the provisions hereof (i) conflicts with, or results
in any breach of, any provision of the certificate of incorporation or by-laws of the Company, (ii) violates any order, writ,
injunction, decree, judgment, law, statute, rule or regulation applicable to the Company, any of its subsidiaries or any of their
respective properties or assets or (iii) except for the requirements of the Exchange Act, requires any filing with, or permit,
authorization, consent or approval of, any Governmental Entity, except in the case of clauses (ii) and (iii) where such violations
or failures to make or obtain any filing with, or permit, authorization, consent or approval of, any Governmental Entity would
not, individually or in the aggregate, materially impair the ability of the Company to perform this Agreement.
(b)
Parent
hereby represents and warrants to the Company and each Stockholder that:
(i)
Power;
Binding Agreement
. Parent has the corporate power and authority to enter into and perform all of its obligations under this
Agreement. This Agreement has been duly and validly executed and delivered by Parent and constitutes a valid and binding agreement
of Parent, enforceable against Parent in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.
(ii)
No
Conflicts
. None of the execution and delivery of this Agreement by Parent, the consummation by Parent of any of the transactions
contemplated hereby or compliance by Parent with any of the provisions hereof (i) conflicts with, or results in any breach of,
any provision of the certificate of incorporation or by-laws of Parent, (ii) violates any order, writ, injunction, decree, judgment,
law, statute, rule or regulation applicable to Parent, any of its subsidiaries or any of their respective properties or assets
or (iii) except for the requirements of the Exchange Act, requires any filing with, or permit, authorization, consent or approval
of, any Governmental Entity, except in the case of clauses (ii) and (iii) where such violations or failures to make or obtain
any filing with, or permit, authorization, consent or approval of, any Governmental Entity would not, individually or in the aggregate,
materially impair the ability of Parent to perform this Agreement.
Section
4.
Disclosure
. Unless required
by law or legal process, each Stockholder shall not, and shall cause its affiliates and representatives not to, make any press
release, public announcement or other public communication that criticizes or disparages this Agreement or the Merger Agreement
or the transactions contemplated hereby or thereby, without the prior written consent of Parent and the Company. Each Stockholder
(a) consents to and authorizes the publication and disclosure by Parent or the Company of such Stockholder’s identity and
ownership of the Securities and the existence and terms of this Agreement (including, for the avoidance of doubt, the disclosure
of this Agreement) and any other information, in each case, that Parent or the Company (including the Special Committee) reasonably
determines in its good faith judgment is required to be disclosed by law (including the rules and regulations of the Securities
and Exchange Commission) in any press release, any Current Report on Form 8-K, the Proxy Statement, the Schedule 13E-3 and any
other disclosure document in connection with the Merger Agreement and any filings with or notices to any Governmental Entity in
connection with the Merger Agreement (or the transactions contemplated thereby) and (b) agrees promptly to give to Parent and
the Company any information it may reasonable request for the preparation of any such documents.
Section
5.
Additional Securities
.
Each Stockholder hereby agrees that, during the period commencing on the date hereof and continuing until this Agreement is terminated
in accordance with its terms, such Stockholder shall promptly (and in any event within twenty-four (24) hours) notify Parent and
the Company of the number of any additional Securities acquired by such Stockholder after the date hereof.
Section
6.
Transfer and Other Restrictions
.
Prior to the termination of this Agreement, each Stockholder hereby irrevocably and unconditionally agrees not to, and to cause
each of its affiliates not to, directly or indirectly:
(a)
except
pursuant to the terms of the Merger Agreement, offer for sale, sell, transfer, tender, pledge, encumber, assign or otherwise dispose
of, or enter into any contract, option or other arrangement or understanding with respect to, or consent to the offer for sale,
sale, transfer, tender, pledge, encumbrance, assignment or other disposition of, or enter into a loan of (collectively, “
transfer
”),
any or all of the Securities it Beneficially Owns or any interest therein, (i) except as provided in
Section 7
hereof or
(ii) unless each “person” (as defined in the Merger Agreement as of the date hereof) to which any of such Securities
it Beneficially Owns (or any interest in any of such Securities) is or may be transferred shall have: (A) executed a counterpart
of this Agreement and (B) agreed in writing to hold such Securities (or interest in such Securities) subject to all of the terms
and provisions of this Agreement;
(b)
grant
any proxy or power of attorney with respect to any of the Securities it Beneficially Owns, or deposit any of the Securities it
Beneficially Owns into a voting trust or enter into a voting agreement or arrangement with respect to any such Securities except
as provided in this Agreement; or
(c)
take
any other action that would prevent or materially impair the Stockholder from performing any of its obligations under this Agreement
or that would make any representation or warranty of such Stockholder hereunder untrue or incorrect or have the effect of preventing
or materially impairing the performance by the Stockholder of any of its obligations under this Agreement or that is intended,
or would reasonably be expected, to impede, frustrate, interfere with, delay, postpone, adversely affect or prevent the consummation
of the Merger or the other transactions contemplated by the Merger Agreement or this Agreement or the performance by the Company
of its obligations under the Merger Agreement or by any Stockholder of its obligations under this Agreement.
Any purported transfer in violation of this
Section 6
shall be null and void.
Section
7.
Voting of the Company Shares
.
Each Stockholder hereby irrevocably and unconditionally agrees that, during the period commencing on the date hereof and continuing
until termination of this Agreement in accordance with its terms, at any meeting (whether annual or special and whether or not
an adjourned or postponed meeting) of the holders of the Company Shares, however called, each Stockholder and each of its affiliates
that acquires Beneficial Ownership of any Securities will appear at such meeting or otherwise cause the Securities to be counted
as present thereat for purposes of establishing a quorum and vote (or cause to be voted) the Securities in favor of the approval
of the Merger Agreement and the approval of other actions contemplated by the Merger Agreement and any actions required in furtherance
thereof.
Section
8.
Proxy Card
. Each Stockholder
hereby irrevocably appoints Parent and any designee thereof as its proxy and attorney-in-fact (with full power of substitution),
to vote or cause to be voted (including by proxy or written consent, if applicable) the Securities in accordance with
Section
7
at any annual or special meeting of the stockholders of the Company, however called, including any adjournment or postponement
thereof, at which any of the matters described in
Section 7
is to be considered. Each Stockholder hereby represents that
all proxies, powers of attorney, instructions or other requests given by such Stockholder prior to the execution of this Agreement
in respect of the voting of such Stockholder’s Securities, if any, are not irrevocable and such Stockholder hereby revokes
(or causes to be revoked) any and all previous proxies, powers of attorney, instructions or other requests with respect to such
Stockholder’s Securities. Each Stockholder shall take such further action or execute such other instruments as may be necessary
to effectuate the intent of this proxy.
Section
9.
Termination
. This Agreement
shall terminate on the earliest to occur of: (a) termination of the Merger Agreement in accordance with its terms, (b) delivery
of a written agreement of Parent and, at the direction of the Special Committee, the Company to terminate this Agreement and (c)
the Effective Time;
provided
, that the provisions set forth in
Section 4
and
Section 10
shall survive the
termination of this Agreement;
provided
,
further
, that any liability incurred by any party hereto as a result of
a breach of a term or condition of this Agreement prior to such termination shall survive the termination of this Agreement.
Section
10.
Miscellaneous
.
(a)
Entire
Agreement
. This Agreement (including the documents and instruments referred to herein) constitutes the entire agreement among
the parties hereto with respect to the subject matter hereof, and supersedes all other prior agreements and understandings, both
written and oral, among the parties, with respect to the subject matter hereof.
(b)
Successors
and Assigns
. This Agreement shall not be assigned by operation of law or otherwise without the prior written consent of the
other parties hereto. This Agreement shall be binding upon, inure to the benefit of and be enforceable by each party, and each
party’s respective heirs, beneficiaries, executors, representatives, successors and assigns.
(c)
Amendment;
Modification and Waiver
. This Agreement may not be amended, altered, supplemented or otherwise modified or terminated except
upon the execution and delivery of a written agreement executed by (i) each Stockholder, (ii) the Company, but only upon the approval
of the Special Committee and (iii) Parent.
(d)
No
Ownership Interest
. Nothing contained in this Agreement shall be deemed to vest in the Company any direct or indirect ownership
or incident of ownership of or with respect to any Securities. All rights, ownership and economic benefits of and relating to
the Securities shall remain vested in and belong to each Stockholder and its respective affiliates, if any.
(e)
Interpretation
.
When a reference is made in this Agreement to sections or subsections, such reference shall be to a section or subsection of this
Agreement unless otherwise indicated. The headings contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words “include,” “includes” or
“including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”
The words “herein,” “hereof,” “hereunder” and words of similar import shall be deemed to refer
to this Agreement as a whole, including any schedules and exhibits hereto, and not to any particular provision of this Agreement.
Any pronoun shall include the corresponding masculine, feminine and neuter forms. References to “party” or “parties”
in this Agreement means each Stockholder, the Company and Parent. References to “US dollar,” “dollars,”
“US$ “ or “$ “ in this Agreement are to the lawful currency of the United States of America.
(f)
Notices
.
All notices, requests, claims, demands and other communications hereunder shall be in writing (in the English language) and shall
be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by facsimile, by registered or certified
mail (postage prepaid, return receipt requested) or by electronic email transmission (so long as a receipt of such e-mail is requested
and received) to the respective parties at the following addresses (or at such other address for a party as shall be specified
by like notice):
|
(i)
|
if to a Stockholder to such Stockholder in accordance with the contact information set forth
next to such Stockholder’s name on Schedule A, with a copy to (which shall not constitute notice):
|
Skadden, Arps, Slate, Meagher
& Flom
30
th
Floor, China World
Office 2
1 Jianguomenwai Avenue
Beijing 100004, PRC
Attention: Michael
V. Gisser, Esq.
Peter X.
Huang, Esq.
E-mail:
Michael.Gisser@skadden.com
Peter.Huang@skadden.com
Facsimile: +86
10 6535 5577
|
(ii)
|
if to the Company, to:
|
Fushi Copperweld, Inc.
TYG Center Tower B, Suite 2601
Dongsanhuan Bei Lu, Bing 2
Beijing, PRC 100027
Attention: Joseph J. Longever
E-mail: jlongever@fushicopperweld.com
Facsimile: +86 10 8447 8292
with a copy (which shall not
constitute notice) to each of:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Attention: Dennis J. Friedman,
Esq.
Eduardo Gallardo, Esq.
E-mail: DFriedman@gibsondunn.com
EGallardo@gibsondunn.com
Facsimile: +1 212-351-5245
and
Loeb & Loeb LLP
345 Park Avenue
New York, New York 10154
|
Attention:
|
Mitchell S. Nussbaum
|
|
E-mail:
|
mnussbaum@loeb.com
|
|
Facsimile:
|
+1 212-504-3013
|
(iii) if
to Parent, to:
c/o Fushi Copperweld,
Inc.
TYG Center Tower B,
Suite 2601
Dongsanhuan Bei Lu,
Bing 2
Beijing, 100027, PRC
Attention: Li Fu
E-mail: cwang@fushicopperweld.com
Facsimile: +86 10 8447
8292
with a copy to (which shall
not constitute notice):
Weil, Gotshal & Manges
29/F, Alexandra House
18 Chater Road
Central, Hong Kong
Attention: Akiko Mikumo, Esq.
E-mail: akiko.mikumo@weil.com
Facsimile: +852 3015-9354
and
Skadden, Arps, Slate, Meagher
& Flom
30
th
Floor, China World
Office 2
1 Jianguomenwai Avenue
Beijing 100004, PRC
Attention: Michael V. Gisser, Esq.
Peter X. Huang, Esq.
E-mail: Michael.Gisser@skadden.com
Peter.Huang@skadden.com
Facsimile: +86 10 6535 5577
(g)
Severability
.
In the event that any provision of this Agreement or the application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application
of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto.
The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision.
(h)
Other
Remedies; Specific Performance
. Except as otherwise provided herein, any and all remedies herein expressly conferred upon
a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party,
and the exercise by a party of any one remedy will not preclude the exercise of any other remedy. No failure or delay on the part
of any party hereto in the exercise of any right hereunder will impair such right or be construed to be a waiver of, or acquiescence
in, any breach of any representation, warranty or agreement herein, nor will any single or partial exercise of any such right
preclude other or further exercise thereof or of any other right. The parties hereto agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise
breached or threatened to be breached. It is accordingly agreed that each party shall be entitled to seek an injunction or injunctions
to prevent breaches or threatened breaches of this Agreement and to enforce specifically the terms and provisions hereof in the
federal courts of the United States of America located in Nevada, this being in addition to any other remedy to which they are
entitled at law or in equity, without the requirement to post bond or other security.
(i)
No
Survival
. None of the representations, warranties, covenants and agreements made in this Agreement shall survive the termination
of the Agreement in accordance with its terms, except for the agreements in
Section 4
and this
Section 10
.
(j)
No
Third Party Beneficiaries
. This Agreement is not intended to confer upon any person other than the parties hereto any rights
or remedies hereunder.
(k)
Governing
Law.
This Agreement and all disputes or controversies arising out of or relating to this Agreement or the transactions contemplated
hereby shall be governed by, and construed in accordance with, the internal laws of the State of Nevada, without regard to the
laws of any other jurisdiction that might be applied because of the conflicts of laws principles of the State of Nevada.
(l)
Jurisdiction
.
Each of the parties irrevocably agrees that any legal action or proceeding arising out of or relating to this Agreement brought
by any such party or its affiliates against any other such party or its affiliates shall be brought and determined in the courts
of the State of Nevada located in Clark County, Nevada or the federal courts of the United States of America located in Nevada.
Each of the parties hereby irrevocably submits to the jurisdiction of the aforesaid courts for itself and with respect to its
property, generally and unconditionally, with regard to any such action or proceeding arising out of or relating to this Agreement
and the transactions contemplated hereby. Each of the parties agrees not to commence or maintain any action, suit or proceeding
relating thereto except in the courts described above, other than actions in any court of competent jurisdiction to enforce any
judgment, decree or award rendered by any such court in Nevada as described herein. Each of the parties further agrees that notice
as provided herein shall constitute sufficient service of process and the parties further waive any argument that such service
is insufficient. Each of the parties hereby irrevocably and unconditionally waives, and agrees not to assert, by way of motion
or as a defense, counterclaim or otherwise, in any action or proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby, (i) any claim that it is not personally subject to the jurisdiction of the courts in Nevada as described
herein for any reason, (ii) that it or its property is exempt or immune from jurisdiction of any such court or from any legal
process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution
of judgment, execution of judgment or otherwise), and (iii) that (A) the suit, action or proceeding in any such court is brought
in an inconvenient forum, (B) the venue of such suit, action or proceeding is improper, or (C) this Agreement, or the subject
matter hereof, may not be enforced in or by such courts.
(m)
Waiver
of Jury Trial
. EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN
ANY JUDICIAL PROCEEDING IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
(n)
Expenses
.
All costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses.
(o)
Counterparts
.
This Agreement may be executed in one or more counterparts, and by facsimile or .pdf format, all of which shall be considered
one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and
delivered to the other party, it being understood that all parties need not sign the same counterpart; provided, however, that
if any Stockholder fails for any reason to execute, or perform its obligations under, this Agreement, this Agreement shall remain
effective as to all parties executing this Agreement.
[
Signatures appear on following page.
]
IN WITNESS WHEREOF
,
the parties hereto have signed or have caused this Agreement to be signed by their respective officers or other authorized persons
thereunto duly authorized as of the date first written above.
|
GREEN DYNASTY LIMITED
|
|
|
|
By:
|
/s/ Li Fu
|
|
Name:
|
Li Fu
|
|
Title:
|
Director
|
|
|
|
FUSHI COPPERWELD, INC.
|
|
|
|
By:
|
/s/ Craig H. Studwell
|
|
Name:
|
Craig H. Studwell
|
|
Title:
|
Chief Financial Officer
|
[SIGNATURE PAGE TO VOTING AGREEMENT]
|
STOCKHOLDERS:
|
|
|
|
By:
|
/s/ Li Fu
|
|
Li Fu
|
|
|
|
By:
|
/s/ Yuyan Zhang
|
|
Yuyan Zhang
|
|
|
|
By:
|
/s/ Xin Liu
|
|
Xin Liu
|
|
|
|
Wise Sun Investments Limited
|
|
|
|
By:
|
/s/ Li Fu
|
|
Name:
|
Li Fu
|
|
Title:
|
Director
|
|
|
|
ABAX LOTUS LTD.
|
|
|
|
By:
|
/s/ Xiang Dong Yang
|
|
Name:
|
Xiang Dong Yang
|
|
Title:
|
Director
|
[SIGNATURE PAGE TO VOTING AGREEMENT]
Schedule A
Stockholder
|
|
Company Shares
|
|
Li Fu
|
|
|
1,806,723
|
|
|
|
|
|
|
Yuyan Zhang
|
|
|
179,925
|
|
|
|
|
|
|
Xin Liu
|
|
|
1,118,418
|
|
|
|
|
|
|
Wise Sun Investments Limited
|
|
|
7,930,090
|
|
|
|
|
|
|
Abax Lotus Ltd.
|
|
|
205,050
|
|
ANNEX D
EXECUTION VERSION
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT (this “
Agreement
”)
is made and entered into as of June 27, 2012 by and among Green Dynasty Holdings Limited, a Cayman Islands exempted company (“
Holdco
”),
Green Dynasty Limited, a Cayman Islands exempted company (“
Parent
”), and the stockholders of Fushi Copperweld,
Inc., a Nevada corporation (the “
Company
”), listed on
Schedule A
(each, a “
Rollover Stockholder
”
and collectively, the “
Rollover Stockholders
”). Capitalized terms used but not defined herein shall have the
meanings ascribed to such terms in the Merger Agreement (defined below).
RECITALS
WHEREAS, concurrently herewith, Holdco,
Parent, Green Dynasty Acquisition, Inc., a Nevada corporation and wholly-owned subsidiary of Parent (“
Merger Sub
”),
and the Company are entering into an Agreement and Plan of Merger (as may be amended, supplemented or otherwise modified, the
“
Merger Agreement
”), pursuant to which Merger Sub will merge with and into the Company, with the Company continuing
as the surviving corporation (the “
Merger
”);
WHEREAS, each Rollover Stockholder is the
“beneficial owner” (within the meaning of Rule 13d-3 under the Exchange Act) of such shares of common stock, par value
$0.006 per share, of the Company (the “
Shares
”) as set forth opposite such Rollover Stockholder’s name
on
Schedule A
(with respect to each Rollover Stockholder, the “
Rollover Shares
”);
WHEREAS, in connection with the consummation
of the transactions contemplated by the Merger Agreement, the Rollover Stockholders each desire to contribute their respective
Rollover Shares to Parent in exchange for newly issued ordinary shares of Holdco (the “
Holdco Shares
”);
WHEREAS, in order to induce Holdco, Parent,
the Company and Merger Sub to enter into the Merger Agreement and consummate the transactions contemplated thereby, including
the Merger, the Rollover Stockholders are entering into this Agreement; and
WHEREAS, the Rollover Stockholders acknowledge
that Holdco, Parent, the Company and Merger Sub are entering into the Merger Agreement in reliance on the representations, warranties,
covenants and other agreements of the Rollover Stockholders set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the
foregoing and the mutual covenants and agreements contained herein, and intending to be legally bound hereby, Holdco, Parent and
the Rollover Stockholders hereby agree as follows:
1.
Contribution
of Rollover Shares
. Subject to the conditions set forth herein, immediately prior to the Closing and without further action
by the Rollover Stockholders, all of each Rollover Stockholder’s right, title and interest in and to the Rollover Shares
shall be contributed, assigned, transferred and delivered to Parent.
2.
Issuance
of Holdco Shares
. As consideration for the indirect benefit received by Holdco as a result of the contribution, assignment,
transfer and delivery of the Rollover Shares to Parent, a wholly owned Subsidiary of Holdco, pursuant to
Section 1
,
Holdco shall issue Holdco Shares in the name of each Rollover Stockholder (or, if designated by such Rollover Stockholder in writing,
in the name of an affiliate of such Rollover Stockholder) in the amount set forth opposite such Rollover Stockholder’s name
on
Schedule A
. Each Rollover Stockholder hereby acknowledges and agrees that (a) delivery of such Holdco Shares
shall constitute complete satisfaction of all obligations towards or sums due such Rollover Stockholder by Parent and Holdco with
respect to the applicable Rollover Shares, and (b) on receipt of such Holdco Shares, such Rollover Stockholder shall have no right
to any Merger Consideration with respect to the Rollover Shares contributed to Parent by such Rollover Stockholder.
3.
Closing
.
Subject to the satisfaction in full (or waiver) of all of the conditions set forth in Sections 7.1 and 7.2 of the Merger Agreement
(other than conditions that by their nature are to be satisfied at the Closing), the closing of the contribution and exchange
contemplated hereby (the “
Contribution Closing
”) shall take place within 48 hours prior to the Closing.
4.
Deposit
of Rollover Shares
. No later than three (3) Business Days prior to the Closing, the Rollover Stockholders and any agent of
the Rollover Stockholders holding certificates evidencing any Rollover Shares shall deliver or cause to be delivered to Parent
all certificates representing Rollover Shares in such Persons’ possession, (a) duly endorsed for transfer or (b) with
executed stock powers, both reasonably acceptable in form to Parent and sufficient to transfer such shares to Parent, for disposition
in accordance with the terms of this Agreement (the “
Share Documents
”). The Share Documents shall be held by
Parent or any agent authorized by Parent until the Contribution Closing.
5.
Irrevocable
Election
.
(a) The
execution of this Agreement by the Rollover Stockholders evidences, subject to
Section 9
and the proviso in
Section 23
,
the irrevocable election and agreement by the Rollover Stockholders to contribute their respective Rollover Shares in exchange
for Holdco Shares at the Contribution Closing on the terms and conditions set forth herein. In furtherance of the foregoing, each
Rollover Stockholder covenants and agrees, severally and not jointly, that from the date hereof until any termination of this
Agreement pursuant to
Section 9
, such Rollover Stockholder shall not, directly or indirectly, (i) tender any
Rollover Shares into any tender or exchange offer, (ii) sell (constructively or otherwise), transfer, pledge, hypothecate,
grant, encumber, assign or otherwise dispose of (collectively, “
Transfer
”), or enter into any contract, option
or other arrangement or understanding with respect to the Transfer of any Rollover Shares or any right, title or interest thereto
or therein (including by operation of law), (iii) deposit any Rollover Shares into a voting trust or grant any proxy or power
of attorney or enter into a voting agreement (other than that certain Voting Agreement of even date herewith by and among Parent,
the Company, and certain of the Rollover Stockholders (the “
Voting Agreement
”)) with respect to any Rollover
Shares, (iv) knowingly take any action that would make any representation or warranty of such Rollover Stockholder set forth
in this Agreement untrue or incorrect or have the effect of preventing, disabling, or delaying such Rollover Stockholder from
performing any of his, her, or its obligations under this Agreement, or (v) agree (whether or not in writing) to take any
of the actions referred to in the foregoing clauses (i) through (iv). Any purported Transfer in violation of this paragraph shall
be void.
(b) Each
Rollover Stockholder covenants and agrees, severally and not jointly, that such Rollover Stockholder shall promptly (and in any
event within 24 hours) notify Parent of any new Shares with respect to which beneficial ownership (within the meaning of Rule
13d-3 of the Exchange Act) is acquired by such Rollover Stockholder, including, without limitation, by purchase, as a result of
a stock dividend, stock split, recapitalization, combination, reclassification, exchange or change of such shares, or upon exercise
or conversion of any securities of the Company, if any, after the date hereof. Any such Shares shall automatically become subject
to the terms of this Agreement, and
Schedule A
shall be deemed amended accordingly.
6.
Representations
and Warranties of the Rollover Stockholders
. To induce Parent to accept the Rollover Shares, and Holdco to issue the Holdco
Shares, each Rollover Stockholder makes the following representations and warranties, severally and not jointly, to Parent and
Holdco, each and all of which shall be true and correct as of the date of this Agreement and as of the Contribution Closing, and
shall survive the execution and delivery of this Agreement:
(a)
Ownership
of Shares
. As of the Contribution Closing, such Rollover Stockholder (i) will be the beneficial owner of, and have good and
valid title to, the Rollover Shares, free and clear of Liens other than as created by this Agreement and the Voting Agreement;
(ii) will have sole voting power, sole power of disposition, and sole power to demand dissenter’s rights (if applicable),
in each case with respect to all of the Rollover Shares, with no limitations, qualifications, or restrictions on such rights,
subject to applicable United States federal securities laws, laws of the State of Nevada, laws of the People’s Republic
of China and the terms of this Agreement and the Voting Agreement; and (iii) will not be subject to any voting trust agreement
or other Contract to which such Rollover Stockholder is a party restricting or otherwise relating to the voting or Transfer of
the Rollover Shares other than this Agreement and the Voting Agreement. As of the date hereof, other than the Rollover Shares,
such Rollover Stockholder does not own, beneficially or of record, any Shares, securities of the Company, or any direct or indirect
interest in any such securities (including by way of derivative securities). Such Rollover Stockholder has not appointed or granted
any proxy or power of attorney that will be in effect as of the Contribution Closing with respect to any Rollover Shares, except
as contemplated by this Agreement or the Voting Agreement.
(b)
Organization,
Standing and Authority
. Each such Rollover Stockholder which is an entity is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its formation and has all requisite power and authority to execute and deliver
this Agreement and to perform its obligations hereunder. Each such Rollover Stockholder who is a natural Person has full legal
power and capacity to execute and deliver this Agreement and to perform such Rollover Stockholder’s obligations hereunder.
This Agreement has been duly and validly executed and delivered by such Rollover Stockholder and, assuming due authorization,
execution and delivery by Parent and Holdco, constitutes a legal, valid and binding obligation of such Rollover Stockholder, enforceable
against such Rollover Stockholder in accordance with its terms, except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of
equity (regardless of whether considered in a proceeding in equity or at law). If such Rollover Stockholder is married, and any
of the Rollover Shares of such Rollover Stockholder constitute community property or otherwise need spousal or other approval
for this Agreement to be legal, valid and binding, this Agreement has been duly and validly executed and delivered by such Rollover
Stockholder’s spouse and, assuming due authorization, execution and delivery by Parent and Holdco, constitutes a legal,
valid and binding obligation of such Rollover Stockholder’s spouse, enforceable against such Rollover Stockholder’s
spouse in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors’ rights generally and by general principles of equity (regardless of whether
considered in a proceeding in equity or at law).
(c)
Consents
and Approvals; No Violations
. Except for the applicable requirements of the Exchange Act, (i) no filing with, and no
permit, authorization, consent or approval of, any Governmental Entity is necessary on the part of such Rollover Stockholder for
the execution, delivery and performance of this Agreement by such Rollover Stockholder or the consummation by such Rollover Stockholder
of the transactions contemplated hereby and (ii) neither the execution, delivery or performance of this Agreement by such
Rollover Stockholder nor the consummation by such Rollover Stockholder of the transactions contemplated hereby, nor compliance
by such Rollover Stockholder with any of the provisions hereof shall (A) conflict with or violate any provision of the organizational
documents of any such Rollover Stockholder which is an entity, (B) result in any breach or violation of, or constitute a
default (or an event which, with notice or lapse of time or both, would become a default) under, or give to others any rights
of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on property or assets of such
Rollover Stockholder pursuant to any Contract to which such Rollover Stockholder is a party or by which such Rollover Stockholder
or any property or asset of such Rollover Stockholder is bound or affected, or (C) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to such Rollover Stockholder or any of such Rollover Stockholder’s properties or
assets.
(d)
Litigation
.
There is no action, suit, investigation, complaint or other proceeding pending against any such Rollover Stockholder or, to the
knowledge of such Rollover Stockholder, any other Person or, to the knowledge of such Rollover Stockholder, threatened against
any Rollover Stockholder or any other Person that restricts or prohibits (or, if successful, would restrict or prohibit) the performance
by such Rollover Stockholder of its obligations under this Agreement.
(e)
Reliance
.
Such Rollover Stockholder understands and acknowledges that Parent, Holdco and the Company are entering into the Merger Agreement
in reliance upon such Rollover Stockholder’s execution and delivery of this Agreement and the representations and warranties
of such Rollover Stockholder contained herein.
(f)
Receipt
of Information
. Such Rollover Stockholder has been afforded the opportunity to ask such questions as he, she, or it has deemed
necessary of, and to receive answers from, representatives of Parent and Holdco concerning the terms and conditions of the transactions
contemplated hereby and the merits and risks of owning the Holdco Shares. Such Rollover Stockholder acknowledges that it has been
advised to discuss with its own counsel the meaning and legal consequences of such Rollover Stockholder’s representations
and warranties in this Agreement and the transactions contemplated hereby.
7.
Representations
and Warranties of Parent
. Parent represents and warrants to each Rollover Stockholder that:
(a)
Organization,
Standing and Authority
. Parent is duly organized, validly existing and in good standing under the laws of the Cayman Islands
and has all requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This
Agreement has been duly and validly executed and delivered by Parent and, assuming due authorization, execution and delivery by
Holdco and the Rollover Stockholders (subject to the proviso in
Section 23
), constitutes a legal, valid and binding
obligation of Parent, enforceable against Parent in accordance with its terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general
principles of equity (regardless of whether considered in a proceeding in equity or at law).
(b)
Consents
and Approvals; No Violations
. Except for the applicable requirements of the Exchange Act and laws of the Cayman Islands, (i) no
filing with, and no permit, authorization, consent or approval of, any Governmental Entity is necessary on the part of Parent
for the execution, delivery and performance of this Agreement by Parent or the consummation by Parent of the transactions contemplated
hereby and (ii) neither the execution, delivery or performance of this Agreement by Parent nor the consummation by Parent
of the transactions contemplated hereby nor compliance by Parent with any of the provisions hereof shall (A) conflict with
or violate any provision of the organizational documents of Parent, (B) result in any breach or violation of, or constitute
a default (or an event which, with notice or lapse of time or both, would become a default) under, or give to others any rights
of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on such property or asset of Parent
pursuant to, any Contract to which Parent is a party or by which such Parent or any property or asset of Parent is bound or affected,
or (C) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Parent or any of Parent’s
properties or assets.
8.
Representations
and Warranties of Holdco
. Holdco represents and warrants to each Rollover Stockholder that:
(a)
Organization,
Standing and Authority
. Holdco is duly organized, validly existing and in good standing under the laws of the Cayman Islands
and has all requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This
Agreement has been duly and validly executed and delivered by Holdco and, assuming due authorization, execution and delivery by
Parent and the Rollover Stockholders (subject to the proviso in
Section 23
), constitutes a legal, valid and binding
obligation of Holdco, enforceable against Holdco in accordance with its terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general
principles of equity (regardless of whether considered in a proceeding in equity or at law).
(b)
Consents
and Approvals; No Violations
. Except for the applicable requirements of the Exchange Act and laws of the Cayman Islands, (i) no
filing with, and no permit, authorization, consent or approval of, any Governmental Entity is necessary on the part of Holdco
for the execution, delivery and performance of this Agreement by Holdco or the consummation by Holdco of the transactions contemplated
hereby and (ii) neither the execution, delivery or performance of this Agreement by Holdco nor the consummation by Holdco
of the transactions contemplated hereby nor compliance by Holdco with any of the provisions hereof shall (A) conflict with
or violate any provision of the organizational documents of Holdco, (B) result in any breach or violation of, or constitute
a default (or an event which, with notice or lapse of time or both, would become a default) under, or give to others any rights
of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on such property or asset of Holdco
pursuant to, any Contract to which Holdco is a party or by which such Holdco or any property or asset of Holdco is bound or affected,
or (C) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Holdco or any of Holdco’s
properties or assets.
(c)
Issuance
of Holdco Shares
. The Holdco Shares will be duly authorized, validly issued, fully paid and nonassessable, and free and clear
of all Liens, preemptive rights, rights of first refusal, subscription and similar rights (other than those arising under any
agreements entered into at the Contribution Closing by all of the Rollover Stockholders) when issued.
9.
Termination
.
This Agreement, and the obligation of the Rollover Stockholders to contribute, transfer, assign and deliver the Rollover Shares,
will terminate immediately upon the valid termination of the Merger Agreement in accordance with Article VIII thereof;
provided
,
however
, that the Rollover Stockholders shall continue to have liability for breaches of this Agreement occurring prior
to the termination of this Agreement. If for any reason the Merger contemplated by the Merger Agreement fails to occur but the
Contribution Closing has already taken place, then Parent shall promptly return the Share Documents to the Rollover Stockholders
at their respective addresses set forth on
Schedule A
and take all such actions as are necessary to restore each such
Rollover Stockholder to the position he, she, or it was in with respect to ownership of the Shares prior to the Contribution Closing.
10.
Further
Assurances
. Each Rollover Stockholder hereby covenants that, from time to time, such Rollover Stockholder will do, execute,
acknowledge and deliver, or will cause to be done, executed, acknowledged and delivered, such further acts, conveyances, transfers,
assignments, powers of attorney and assurances necessary to convey, transfer to and vest in Parent, and to put Parent in possession
of, all of the applicable Rollover Shares in accordance with the terms of this Agreement.
11.
Amendments
and Modification
. This Agreement may not be amended, altered, supplemented or otherwise modified except upon the execution
and delivery of a written agreement executed by each party hereto and the written consent of the Company.
12.
Waiver
.
No failure or delay of any party or of the Company in exercising any right or remedy hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce
such right or power, or any course of conduct, preclude any other or further exercise thereof or the exercise of any other right
or power. The rights and remedies of the parties and of the Company hereunder are cumulative and are not exclusive of any rights
or remedies which they would otherwise have hereunder. Any agreement on the part of a party or the Company to any such waiver
shall be valid only if set forth in a written instrument executed and delivered by such party or the Company.
13.
Survival
of Representations and Warranties
. All representations and warranties of the Rollover Stockholders or by or on behalf of Parent
or Holdco in connection with the transactions contemplated by this Agreement contained herein shall survive the execution and
delivery of this Agreement, any investigation at any time made by or on behalf of Parent, Holdco or the Rollover Stockholders,
and the issuance of the Holdco Shares.
14.
Notices
.
All notices and other communications hereunder shall be in writing (in the English language) and shall be deemed duly given (a) on
the date of delivery if delivered personally, or if by facsimile, upon written confirmation of receipt by facsimile, (b) on
the first Business Day following the date of dispatch if delivered utilizing a next-day service by a recognized next-day courier,
or (c) on the earlier of confirmed receipt or the fifth Business Day following the date of mailing if delivered by registered
or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered to the addresses set forth
below or pursuant to such other instructions as may be designated in writing by the party to receive such notice:
(i) If
to a Rollover Stockholder, in accordance with the contact information set forth next to such Rollover Stockholder’s name
on
Schedule A
.
(ii) If
to Parent or Holdco:
c/o Fushi Copperweld, Inc.
TYG Center Tower B, Suite 2601 Dongsanhuan Bei Lu,
Bing 2
Beijing
,
100027, China
Attention: Mr. Li Fu
Facsimile: +86 411 877 03333
with a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Meagher & Flom LLP
30th Floor, China World Office 2
1 Jianguomenwai Avenue
Beijing
100004, PRC
Attention: Michael V. Gisser
Peter
X. Huang
Facsimile: +86 10 6535 5577
E-mail: Michael.Gisser@skadden.com
Peter.Huang@skadden.com
and
Weil, Gotshal & Manges LLP
29/F, Alexandra House
18
Chater Road
Central, Hong Kong
Attention:
Akiko Mikumo, Esq.
Facsimile: +852
3015 9354
E-mail: akiko.mikumo@weil.com
15.
Entire
Agreement
. This Agreement (together with the Merger Agreement and the Voting Agreement to the extent referred to in this Agreement)
constitutes the entire agreement among the parties hereto with respect to the subject matter hereof, and supersedes all other
prior agreements and understandings, both written and oral, among the parties, with respect to the subject matter hereof.
16.
Third-Party
Beneficiaries
. Nothing in this Agreement, express or implied, is intended to or shall confer upon any Person other than the
parties hereto and their respective successors and permitted assigns any legal or equitable right, benefit or remedy of any nature
under or by reason of this Agreement, except as specifically set forth in this Agreement. The parties hereby agree that the Company
is an express third party beneficiary hereof and shall, and the Special Committee acting on the Company’s behalf shall,
have the right directly to enforce specifically the term and provisions on this Agreement against Parent, Holdco and the Rollover
Stockholders.
17.
Governing
Law
. This Agreement and all disputes or controversies arising out of or relating to this Agreement or the transactions contemplated
hereby shall be governed by, and construed in accordance with, the internal laws of the State of Nevada, without regard to the
laws of any other jurisdiction that might be applied because of the conflicts of laws principles of the State of Nevada.
18.
Submission
to Jurisdiction
. Each of the parties irrevocably agrees that any legal action or proceeding arising out of or relating to
this Agreement brought by any party or its Affiliates against any other party or its Affiliates, or by the Company against any
party or its Affiliates, shall be brought and determined in the courts of the State of Nevada located in Clark County, Nevada
or the federal courts of the United States of America located in Nevada. Each of the parties hereby irrevocably submits to the
exclusive jurisdiction of the aforesaid courts for itself and with respect to its property, generally and unconditionally, with
regard to any such action or proceeding arising out of or relating to this Agreement and the transactions contemplated hereby.
Each of the parties agrees not to commence or maintain any action, suit or proceeding relating thereto except in the courts described
above, other than actions in any court of competent jurisdiction to enforce any judgment, decree or award rendered by any such
court in Nevada as described herein. Each of the parties further agrees that notice as provided herein shall constitute sufficient
service of process and the parties further waive any argument that such service is insufficient. Each of the parties hereby irrevocably
and unconditionally waives, and agrees not to assert, by way of motion or as a defense, counterclaim or otherwise, in any action
or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby, (a) any claim that it
is not personally subject to the jurisdiction of the courts in Nevada as described herein for any reason, (b) that it or
its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether
through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or
otherwise), and (c) that (i) the suit, action or proceeding in any such court is brought in an inconvenient forum, (ii) the
venue of such suit, action or proceeding is improper, or (iii) this Agreement, or the subject matter hereof, may not be enforced
in or by such courts.
19.
Assignment;
Successors
. Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned or
delegated, in whole or in part, by operation of law or otherwise, by any party without the prior written consent of the other
parties, and any such assignment without such prior written consent shall be null and void. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors
and permitted assigns.
20.
Enforcement
.
The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise breached. Accordingly, each of the parties and the Company shall be
entitled to specific performance of the terms hereof, including an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this Agreement in any court of the State of Nevada located in Clark County,
Nevada or any federal court of the United State of America located in Nevada, this being in addition to any other remedy to which
such party or the Company is entitled at law or in equity. Each of the parties hereby further waives (i) any defense in any
action for specific performance that a remedy at law would be adequate, and (ii) any requirement under any law that a party
seeking equitable relief hereunder post security as a prerequisite to obtaining such equitable relief. The rights of the Company
hereunder may be enforced by the Special Committee of the Company.
21.
Severability
.
Whenever possible, each provision or portion of any provision of this Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal
or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provision or portion of any provision in such jurisdiction, and this Agreement shall be reformed, construed
and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never
been contained herein.
22.
Waiver
of Jury Trial
. EACH OF THE PARTIES TO THIS AGREEMENT AND THE COMPANY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
23.
Counterpart
.
This Agreement may be executed in two or more counterparts, and by facsimile or, pdf format, all of which shall be considered
one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and
delivered to the other party;
provided
,
however
, that if any of the Rollover Stockholders fails for any reason to
execute, or perform their obligations under, this Agreement, this Agreement shall remain effective as to all parties executing
this Agreement.
24.
Headings
.
The section headings in this Agreement are for convenience of reference only and shall not affect in any way the meaning or interpretation
of this Agreement.
25.
No
Presumption Against Drafting Party
. Each of the parties to this Agreement acknowledges that it has been represented by independent
counsel in connection with this Agreement and the transactions contemplated by this Agreement. Accordingly, any rule of law or
any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the drafting party has
no application and is expressly waived.
[
Remainder of page
intentionally left blank
]
IN WITNESS WHEREOF, Parent, Holdco and
the Rollover Stockholders have caused to be executed or executed this Agreement as of the date first written above.
Green Dynasty Holdings
Limited
|
|
|
By:
|
/s/ Li Fu
|
Name: Li Fu
|
Title: Director
|
Green Dynasty Limited
|
|
|
By:
|
/s/ Li Fu
|
Name: Li Fu
|
Title: Director
|
[S
IGNATURE
P
AGE TO
C
ONTRIBUTION
A
GREEMENT
]
|
ROLLOVER STOCKHOLDERS:
|
|
|
|
/s/ Li Fu
|
|
Li Fu
|
|
|
|
/s/ Yuyan Zhang
|
|
Yuyan Zhang
|
|
|
|
/s/ Xing Liu
|
|
Xin Liu
|
|
Wise Sun Investments Limited
|
|
|
|
By:
|
/s/ Li Fu
|
|
Name: Li Fu
|
|
Title: Director
|
|
ABAX LOTUS LTD.
|
|
|
|
By:
|
/s/ Xiang Dong Yang
|
|
Name: Xiang Dong Yang
|
|
Title: Director
|
[S
IGNATURE
P
AGE TO
C
ONTRIBUTION
A
GREEMENT
]
Schedule A
Rollover Stockholder
Name
|
|
Address
Facsimile
|
|
Rollover
Shares
|
|
Holdco
Shares
|
Li Fu
|
|
c/o Fushi Copperweld, Inc.
TYG Center Tower B, Suite 2601
Dongsanhuan Bei Lu, Bing 2
Beijing
,
100027, China
+86 411 877 03333
|
|
1,806,723
|
|
1,806,723
|
Yuyan Zhang
|
|
c/o Fushi Copperweld, Inc.
TYG Center Tower B, Suite 2601
Dongsanhuan Bei Lu, Bing 2
Beijing
,
100027, China
+86 411 877 03333
|
|
179,925
|
|
179,925
|
Xin Liu
|
|
c/o Fushi Copperweld, Inc.
TYG Center Tower B, Suite 2601
Dongsanhuan Bei Lu, Bing 2
Beijing
,
100027, China
+86 411 877 03333
|
|
1,118,418
|
|
1,118,418
|
Wise Sun Investments Limited
|
|
c/o Fushi Copperweld, Inc.
TYG Center Tower B, Suite 2601
Dongsanhuan Bei Lu, Bing 2
Beijing
,
100027, China
+86 411 877 03333
|
|
7,930,090
|
|
7,930,090
|
Abax Lotus Ltd.
|
|
c/o Abax Global Capital (Hong Kong) Limited
Attention: Donald Xiang Dong Yang
Two International Finance Centre
Suite
6708, 8 Finance St., Central, Hong Kong
+(852) 3602 1700
|
|
205,050
|
|
205,050
|
[S
CHEDULE
A
TO
C
ONTRIBUTION
A
GREEMENT
]
ANNEX E
EXECUTION VERSION
COMMITMENT LETTER
June 28, 2012
Green Dynasty Holdings Limited
c/o Fushi Copperweld, Inc.
TYG Center Tower B, Suite 2601
Dongsanhuan Bei Lu, Bing 2
Beijing, 100027, PRC
Attention: Li Fu
|
Re:
|
Abax Equity Commitment
|
Ladies and Gentlemen:
This letter agreement
sets forth the commitments of Abax Lotus Ltd. and AGC Asia 6 Ltd. (collectively, the “
Sponsor
” or “
Abax
”),
subject to the terms and conditions contained herein, to purchase equity interests of Green Dynasty Holdings Limited, a Cayman
Islands exempted company (“
Holdco
”). It is contemplated that, pursuant to that certain Agreement and Plan of
Merger, dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the “
Merger
Agreement
”), by and among Fushi Copperweld, Inc., a Nevada corporation (the “
Company
”), Green Dynasty
Limited, a Cayman Islands exempted company and a direct wholly-owned subsidiary of Holdco (“
Parent
”), Green
Dynasty Acquisition, Inc., a Nevada corporation and a direct wholly-owned subsidiary of Parent (“
Merger Sub
”),
and Holdco, Merger Sub will merge with and into the Company (the “
Merger
”), with the Company surviving the
Merger as a direct wholly-owned subsidiary of Parent. Capitalized terms used in this letter and not otherwise defined herein have
the meanings ascribed to such terms in the Merger Agreement. This letter agreement is being delivered together with the equity
commitment letter, dated as of the date hereof, from Mr. Li Fu to Holdco setting forth Mr. Li Fu’s commitment to purchase,
on the terms and subject to the conditions set forth therein, equity interests of Holdco (the “
CEO Commitment Letter
”).
1.
Equity
Commitment
.
(a) The
Sponsor hereby commits, subject to the terms and conditions set forth herein, that, simultaneous with the closing of the Merger
(the “
Closing
”), it shall purchase, or shall cause the purchase of, at or immediately prior to the Effective
Time, equity interests of Holdco (or one or more affiliates of Holdco organized to consummate the Merger) for an aggregate cash
purchase price in immediately available funds equal to $30,000,000 subject to adjustment pursuant to
Section 1(b)
below
(the “
Equity Commitment
”), which will be (i) contributed by Holdco to Parent in exchange for equity interests
of Parent, and (ii) used by Parent solely for the purpose of funding, to the extent necessary to fund, a portion of the aggregate
Merger consideration required to be paid by Parent to consummate the Merger pursuant to and in accordance with the Merger Agreement,
together with related fees and expenses.
(b) The
Sponsor may effect the funding of the Equity Commitment directly or indirectly through one or more affiliates of the Sponsor or
any other investment fund advised, managed and/or appointed by Abax Global Capital. The Sponsor will not be under any obligation
under any circumstances to contribute more than the amount of the Equity Commitment to Holdco, Parent and/or Merger Sub. In the
event Holdco and/or Parent does not require an amount equal to the sum of the Equity Commitment plus the amount of the equity
commitment under the CEO Commitment Letter in order to consummate the Merger, the amount of the Equity Commitment to be funded
under this letter agreement and the amount of the equity commitment to be funded under the CEO Commitment Letter shall be reduced
by Holdco on a pro rata basis, to the level sufficient to, in combination with the other financing arrangements contemplated by
the Merger Agreement, for Holdco, Parent and Merger Sub to consummate the transactions contemplated by the Merger Agreement.
2.
Conditions.
The Equity Commitment shall be subject only to (a) the satisfaction or waiver at or prior to the Closing of each of the
conditions set forth in
Section 7.1
and
Section 7.2
of the Merger Agreement (other than any conditions that by their
nature are to be satisfied at the Closing but subject to the prior or substantially concurrent satisfaction of such conditions),
and (b) the Debt Financing (or, if alternative financing is being used in accordance with Section 6.13 of the Merger Agreement,
pursuant to the commitments with respect thereto) having been funded in accordance with the terms of the Debt Financing Agreement
or will be funded at the Closing in accordance with the terms of the Debt Financing Agreement if the Equity Financing is funded
at the Closing.
3.
Limited
Guarantee.
The Sponsor is executing and delivering to the Company a limited guarantee related to Parent’s and Merger
Sub’s payment obligations with respect to the Parent Termination Fee under the Merger Agreement (the “
Limited Guarantee
”).
Other than with respect to Retained Claims (as such term is defined under the Limited Guarantee), the Company’s remedies
against the Sponsor under the Limited Guarantee (as set forth in and in accordance with the terms of the Limited Guarantee) shall
be, and are intended to be, the sole and exclusive direct or indirect remedies (whether at law or in equity, whether sounding
in contract, tort, statute or otherwise) available to the Company and its affiliates (or to any Person purporting to claim by
or through the Company or any of its affiliates or for the benefit of any of them) against the Sponsor and the Non-Recourse Parties
(as defined in the Limited Guarantee) in respect of any claims, liabilities or obligations arising with respect to this letter
agreement, the Merger Agreement or the Limited Guarantee and the transactions contemplated hereby and thereby, including without
limitation in the event Parent or Merger Sub breaches its obligations under the Merger Agreement, whether or not Parent’s
or Merger Sub’s breach is caused by the Sponsor’s breach of its obligations under this letter agreement.
4.
Enforceability;
Third-Party Beneficiary.
This letter agreement shall inure to the benefit of and be binding upon Holdco and the Sponsor. This
letter agreement may only be enforced (i) by Holdco at the direction of the Sponsor or (ii) by the Company to cause Holdco, Parent
and/or Merger Sub to draw down the proceeds of the Equity Commitment in accordance with, and subject to the limitations contained
in, the second and third sentences of
Section 9.10
of the Merger Agreement, and subject further to
Section 6
and
Section 7
hereof as though the Company were a party hereto. None of Holdco’s, Parent’s, Merger Sub’s
or the Company’s creditors, nor any Person claiming by or on behalf of Holdco, Parent, Merger Sub or the Company or any
affiliate of Holdco, Parent, Merger Sub or the Company shall have the right to enforce this letter agreement or to cause Holdco,
Parent, Merger Sub, the Company or any other Person to seek to enforce this letter agreement against the Sponsor. The Company
is a third-party beneficiary of this letter agreement to the extent and only to the extent that it seeks specific performance
to cause Holdco, Parent and/or Merger Sub to draw down the proceeds of the Equity Commitment in accordance with, and subject to
the limitations contained in, the second and third sentences of
Section 9.10
of the Merger Agreement. Nothing in this letter
agreement, express or implied, is intended to confer upon any person other than Holdco, the Sponsor and, to the extent provided
in this
Section 4
, the Company, any rights or remedies under, or by reason of, or any rights to enforce or cause Holdco,
Parent and/or Merger Sub to enforce, the Commitment or any provisions of this letter agreement or to confer upon any person any
rights or remedies against any person other than the Sponsor (but only at the direction of the Sponsor as contemplated hereby)
under or by reason of this letter agreement.
5.
No
Modification; Entire Agreement.
This letter agreement may not be amended or otherwise modified without the prior written consent
of Holdco, the Sponsor and the Company. Together with the Merger Agreement and the Limited Guarantee, this letter agreement constitutes
the sole agreement, and supersedes all prior agreements, understandings and statements, written or oral, between, the Sponsor
or any of its affiliates, on the one hand, and Holdco or any of its affiliates, on the other, with respect to the transactions
contemplated hereby. Each of the parties hereto agrees that the letter agreement, dated November 17, 2011, between the Sponsor
and Parent is hereby terminated and is of no further force or effect. Each of the parties acknowledges that each party and its
respective counsel have reviewed this letter agreement and that any rule of construction to the effect that any ambiguities are
to be resolved against the drafting party shall not be employed in the interpretation of this letter agreement.
6.
Governing
Law; Jurisdiction; Venue.
This letter agreement and all disputes or controversies arising out of or relating to this letter
agreement or the transactions contemplated hereby shall be governed by, and construed in accordance with, the internal laws of
the State of Nevada, without regard to the laws of any other jurisdiction that might be applied because of the conflicts of laws
principles of the State of Nevada. Each of the parties irrevocably agrees that any legal action or proceeding arising out of or
relating to this letter agreement brought by any party or its affiliates against any other party or its affiliates shall be brought
and determined in the courts of the State of Nevada located in Clark County, Nevada or the federal courts of the United States
of America located in Nevada. Each of the parties hereby irrevocably submits to the jurisdiction of the aforesaid courts for itself
and with respect to its property, generally and unconditionally, with regard to any such action or proceeding arising out of or
relating to this letter agreement and the transactions contemplated hereby. Each of the parties agrees not to commence or maintain
any action, suit or proceeding relating thereto except in the courts described above, other than actions in any court of competent
jurisdiction to enforce any judgment, decree or award rendered by any such court in Nevada as described herein. Each of the parties
further agrees that notice as provided herein shall constitute sufficient service of process and the parties further waive any
argument that such service is insufficient. Each of the parties hereby irrevocably and unconditionally waives, and agrees not
to assert, by way of motion or as a defense, counterclaim or otherwise, in any action or proceeding arising out of or relating
to this letter agreement or the transactions contemplated hereby, (a) any claim that it is not personally subject to the jurisdiction
of the courts in Nevada as described herein for any reason, (b) that it or its property is exempt or immune from jurisdiction
of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise), and (c) that (i) the suit, action or proceeding
in any such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper, or (iii)
this letter agreement, or the subject matter hereof, may not be enforced in or by such courts.
7.
Waiver
of Jury Trial.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, SUIT, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS LETTER
AGREEMENT OR THE ACTIONS OF EACH OF THE PARTIES HERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
8.
Counterparts.
This letter agreement may be executed by facsimile and in one or more counterparts, and by the different parties hereto in
separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute
one and the same agreement.
9.
Termination.
The obligation of the Sponsor to fund the Equity Commitment will terminate automatically and immediately upon the earliest
to occur of (a) the valid termination of the Merger Agreement in accordance with its terms, (b) the Closing, at which time the
obligation will be discharged but subject to the performance of such obligation, (c) the Company or any of its affiliates asserting
a claim against the Sponsor or any Non-Recourse Party in connection with this letter agreement, the Merger Agreement, the Limited
Guarantee or any of the transactions contemplated hereby or thereby or otherwise relating hereto or thereto, other than (i) a
claim against the Sponsor under the Limited Guarantee (including Retained Claims (as such term is defined under the Limited Guarantee))
or (ii) seeking specific performance to cause Holdco, Parent and/or Merger Sub to draw down the proceeds of the Equity Commitment
in accordance with, and subject to the limitations contained in, the second and third sentences of
Section 9.10
of the
Merger Agreement, and (d) the Termination Date if the Closing does not occur by such date.
10.
No
Recourse.
Notwithstanding anything that may be expressed or implied in this letter agreement or any document or instrument
delivered in connection herewith, and notwithstanding the fact that the Sponsor may be a partnership or limited liability company,
by its acceptance of the benefits of this letter agreement, Holdco acknowledges and agrees that no Person other than the Sponsor
(and its permitted successors and assigns under this letter agreement pursuant to the terms hereof) has any obligations hereunder
and that no recourse shall be had hereunder, or for any claim based on, in respect of, or by reason of, such obligations or their
creation, against, and no personal liability shall attach to, be imposed on or otherwise be incurred by any Non-Recourse Party,
through Holdco, Parent, Merger Sub or otherwise, whether by or through attempted piercing of the corporate veil, by or through
a claim by or on behalf of Holdco against any Non-Recourse Party, by the enforcement of any assessment or by any legal or equitable
proceeding, by virtue of any statute, regulation or applicable law, or otherwise.
11.
Representations
and Warranties.
The Sponsor hereby represents and warrants to Holdco that (a) the Sponsor has all limited partnership or other
organizational power and authority to execute, deliver and perform this letter agreement; (b) the execution, delivery and performance
of this letter agreement by the Sponsor has been duly and validly authorized and approved by all necessary limited partnership
or other organizational action by it; (c) this letter agreement has been duly and validly executed and delivered by the Sponsor
and (assuming due execution and delivery of this letter agreement, the Merger Agreement and the Limited Guarantee by all parties
hereto and thereto) constitutes a valid and legally binding obligation of the Sponsor, enforceable against it in accordance with
the terms of this letter agreement (subject to (i) the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws affecting creditors’ rights generally and (ii) general equitable principles (whether considered
in a proceeding in equity or at law)); (d) the Equity Commitment is less than the maximum amount that the Sponsor is permitted
to invest in any one portfolio investment pursuant to the terms of its constituent documents or otherwise; (e) the Sponsor has
uncalled capital commitments or otherwise has available funds in excess of the Equity Commitment; (f) no action by, and no notice
to or filing with, any governmental entity is required in connection with the execution, delivery or performance of this letter
agreement by the Sponsor; and (g) the execution, delivery and performance of this letter agreement by the Sponsor do not (x) violate
the organizational documents of any fund party to this letter agreement (each, a “
Fund
”), (y) violate
any applicable law binding on any Fund or the assets of any Fund, or (z) conflict with any material agreement binding on any Fund.
12.
No
Assignment.
The Sponsor’s obligation to fund the Equity Commitment may not be assigned, except that the Sponsor may
assign all or a portion of its obligations to fund the Equity Commitment to any of the Sponsor’s affiliates or any other
investment fund advised, managed and/or appointed by the Sponsor; provided, that, any such assignment shall not relieve the Sponsor
of its obligations under this letter agreement to the extent not performed by such affiliate or fund. Holdco may not assign its
rights to any of its affiliates or other entity owned directly or indirectly by the beneficial owners of Holdco, without the prior
written consent of the Sponsor and the Company (which shall be given or withheld solely in the discretion of the Sponsor and the
Company). Any transfer in violation of this section shall be null and void.
13.
Notices.
All notices, requests, claims, demands and other communications required or permitted to be given under this letter agreement
shall be given in the manner specified in the Merger Agreement (and shall be deemed given as specified therein) as follows:
If to the Sponsor:
c/o Abax Global Capital
(Hong Kong) Limited
Suite 6708, 67/F, Two
International Finance Center
8 Finance Street
Central, Hong Kong
Attention: Donald Yang
Facsimile: +852 3602
1700
E-mail: donald.yang@abaxcap.com
with a copy to (which shall not constitute notice):
Weil, Gotshal &
Manges
29/F, Alexandra House
18 Chater Road
Central, Hong Kong
Attention: Akiko Mikumo
Facsimile: +852 3015
9354
E-mail: akiko.mikumo@weil.com
if to Holdco, to:
c/o Fushi Copperweld,
Inc.
TYG Center Tower B,
Suite 2601
Dongsanhuan Bei Lu,
Bing 2
Beijing, 100027, PRC
Attention: Li Fu
Facsimile: +86 10 8447
8292
E-mail: cwang@fushicopperweld.com
with a copy to (which shall not constitute notice):
Skadden, Arps, Slate,
Meagher & Flom
30
th
Floor,
China World Office 2
1 Jianguomenwai Avenue
Beijing 100004, PRC
Attention: Michael V.
Gisser, Esq.
Peter
X. Huang, Esq.
Facsimile: +86 10 6535
5577
E-mail: Michael.Gisser@skadden.com
Peter.Huang@skadden.com
[Signature Page Follows]
Sincerely,
Abax Lotus Ltd.
Name:
|
Xiang Dong Yang
|
Title:
|
Director
|
AGC Asia 6 Ltd.
Name:
|
Xiang Dong Yang
|
Title:
|
Director
|
Agreed to and accepted:
Green Dynasty Holdings Limited
Name:
|
Li Fu
|
Title:
|
Director
|
[SIGNATURE PAGE TO COMMITMENT LETTER]
ANNEX F
EXECUTION VERSION
COMMITMENT LETTER
June 28, 2012
Green Dynasty Holdings Limited
c/o Fushi Copperweld, Inc.
TYG Center Tower B, Suite 2601
Dongsanhuan Bei Lu, Bing 2
Beijing, 100027, PRC
Attention: Li Fu
|
Re:
|
CEO Equity Commitment
|
Ladies and Gentlemen:
This letter agreement
sets forth the commitments of Mr. Li Fu (the “
Sponsor
” or “
Mr. Fu
”), subject to the terms
and conditions contained herein, to purchase equity interests of Green Dynasty Holdings Limited, a Cayman Islands exempted company
(“
Holdco
”). It is contemplated that, pursuant to that certain Agreement and Plan of Merger, dated as of the
date hereof (as amended, restated, supplemented or otherwise modified from time to time, the “
Merger Agreement
”),
by and among Fushi Copperweld, Inc., a Nevada corporation (the “
Company
”), Green Dynasty Limited, a Cayman
Islands exempted company and a direct wholly-owned subsidiary of Holdco (“
Parent
”), Green Dynasty Acquisition,
Inc., a Nevada corporation and a direct wholly-owned subsidiary of Parent (“
Merger Sub
”), and Holdco, Merger
Sub will merge with and into the Company (the “
Merger
”), with the Company surviving the Merger as a direct
wholly-owned subsidiary of Parent. Capitalized terms used in this letter and not otherwise defined herein have the meanings ascribed
to such terms in the Merger Agreement. This letter agreement is being delivered together with the equity commitment letter, dated
as of the date hereof, from Abax Lotus Ltd. and AGC Asia 6 Ltd. to Holdco setting forth the commitment of Abax Lotus Ltd. and
AGC Asia 6 Ltd. to purchase, on the terms and subject to the conditions set forth therein, equity interests of Holdco (the “
Abax
Commitment Letter
”).
1.
Equity
Commitment
.
(a) The
Sponsor hereby commits, subject to the terms and conditions set forth herein, that, simultaneous with the closing of the Merger
(the “
Closing
”), it shall purchase, or shall cause the purchase of, at or immediately prior to the Effective
Time, equity interests of Holdco (or one or more affiliates of Holdco organized to consummate the Merger) for an aggregate cash
purchase price in immediately available funds equal to $45,000,000 subject to adjustment pursuant to
Section 1(b)
below
(the “
Equity Commitment
”), which will be (i) contributed by Holdco to Parent in exchange for equity interests
of Parent, and (ii) used by Parent solely for the purpose of funding, to the extent necessary to fund, a portion of the aggregate
Merger consideration required to be paid by Parent to consummate the Merger pursuant to and in accordance with the Merger Agreement,
together with related fees and expenses.
(b) The
Sponsor may effect the funding of the Equity Commitment directly or indirectly through one or more affiliates of the Sponsor.
The Sponsor will not be under any obligation under any circumstances to contribute more than the amount of the Equity Commitment
to Holdco, Parent and/or Merger Sub. In the event Holdco and/or Parent does not require an amount equal to the sum of the Equity
Commitment plus the amount of the equity commitment under the Abax Commitment Letter in order to consummate the Merger, the amount
of the Equity Commitment to be funded under this letter agreement and the amount of the equity commitment to be funded under the
Abax Commitment Letter shall be reduced by Holdco on a pro rata basis, to the level sufficient to, in combination with the other
financing arrangements contemplated by the Merger Agreement, for Holdco, Parent and Merger Sub to consummate the transactions
contemplated by the Merger Agreement.
2.
Conditions.
The Equity Commitment shall be subject only to (a) the satisfaction or waiver at or prior to the Closing of each of the
conditions set forth in
Section 7.1
and
Section 7.2
of the Merger Agreement (other than any conditions that by their
nature are to be satisfied at the Closing but subject to the prior or substantially concurrent satisfaction of such conditions),
and (b) the Debt Financing (or, if alternative financing is being used in accordance with Section 6.13 of the Merger Agreement,
pursuant to the commitments with respect thereto) having been funded in accordance with the terms of the Debt Financing Agreement
or will be funded at the Closing in accordance with the terms of the Debt Financing Agreement if the Equity Financing is funded
at the Closing.
3.
Limited
Guarantee.
The Sponsor is executing and delivering to the Company a limited guarantee related to Parent’s and Merger
Sub’s payment obligations with respect to the Parent Termination Fee under the Merger Agreement (the “
Limited Guarantee
”).
Other than with respect to Retained Claims (as such term is defined under the Limited Guarantee), the Company’s remedies
against the Sponsor under the Limited Guarantee (as set forth in and in accordance with the terms of the Limited Guarantee) shall
be, and are intended to be, the sole and exclusive direct or indirect remedies (whether at law or in equity, whether sounding
in contract, tort, statute or otherwise) available to the Company and its affiliates (or to any Person purporting to claim by
or through the Company or any of its affiliates or for the benefit of any of them) against the Sponsor and the Non-Recourse Parties
(as defined in the Limited Guarantee) in respect of any claims, liabilities or obligations arising with respect to this letter
agreement, the Merger Agreement or the Limited Guarantee and the transactions contemplated hereby and thereby, including without
limitation in the event Parent or Merger Sub breaches its obligations under the Merger Agreement, whether or not Parent’s
or Merger Sub’s breach is caused by the Sponsor’s breach of its obligations under this letter agreement.
4.
Enforceability;
Third-Party Beneficiary.
This letter agreement shall inure to the benefit of and be binding upon Holdco and the Sponsor. This
letter agreement may only be enforced (i) by Holdco at the direction of the Sponsor or (ii) by the Company to cause Holdco, Parent
and/or Merger Sub to draw down the proceeds of the Equity Commitment in accordance with, and subject to the limitations contained
in, the second and third sentences of
Section 9.10
of the Merger Agreement, and subject further to
Section 6
and
Section 7
hereof as though the Company were a party hereto. None of Holdco’s, Parent’s, Merger Sub’s
or the Company’s creditors, nor any Person claiming by or on behalf of Holdco, Parent, Merger Sub or the Company or any
affiliate of Holdco, Parent, Merger Sub or the Company shall have the right to enforce this letter agreement or to cause Holdco,
Parent, Merger Sub, the Company or any other Person to seek to enforce this letter agreement against the Sponsor. The Company
is a third-party beneficiary of this letter agreement to the extent and only to the extent that it seeks specific performance
to cause Holdco, Parent and/or Merger Sub to draw down the proceeds of the Equity Commitment in accordance with, and subject to
the limitations contained in, the second and third sentences of
Section 9.10
of the Merger Agreement. Nothing in this letter
agreement, express or implied, is intended to confer upon any person other than Holdco, the Sponsor and, to the extent provided
in this
Section 4
, the Company, any rights or remedies under, or by reason of, or any rights to enforce or cause Holdco,
Parent and/or Merger Sub to enforce, the Commitment or any provisions of this letter agreement or to confer upon any person any
rights or remedies against any person other than the Sponsor (but only at the direction of the Sponsor as contemplated hereby)
under or by reason of this letter agreement.
5.
No
Modification; Entire Agreement.
This letter agreement may not be amended or otherwise modified without the prior written consent
of Holdco, the Sponsor and the Company. Together with the Merger Agreement and the Limited Guarantee, this letter agreement constitutes
the sole agreement, and supersedes all prior agreements, understandings and statements, written or oral, between, the Sponsor
or any of its affiliates, on the one hand, and Holdco or any of its affiliates, on the other, with respect to the transactions
contemplated hereby. Each of the parties acknowledges that each party and its respective counsel have reviewed this letter agreement
and that any rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this letter agreement.
6.
Governing
Law; Jurisdiction; Venue.
This letter agreement and all disputes or controversies arising out of or relating to this letter
agreement or the transactions contemplated hereby shall be governed by, and construed in accordance with, the internal laws of
the State of Nevada, without regard to the laws of any other jurisdiction that might be applied because of the conflicts of laws
principles of the State of Nevada. Each of the parties irrevocably agrees that any legal action or proceeding arising out of or
relating to this letter agreement brought by any party or its affiliates against any other party or its affiliates shall be brought
and determined in the courts of the State of Nevada located in Clark County, Nevada or the federal courts of the United States
of America located in Nevada. Each of the parties hereby irrevocably submits to the jurisdiction of the aforesaid courts for itself
and with respect to its property, generally and unconditionally, with regard to any such action or proceeding arising out of or
relating to this letter agreement and the transactions contemplated hereby. Each of the parties agrees not to commence or maintain
any action, suit or proceeding relating thereto except in the courts described above, other than actions in any court of competent
jurisdiction to enforce any judgment, decree or award rendered by any such court in Nevada as described herein. Each of the parties
further agrees that notice as provided herein shall constitute sufficient service of process and the parties further waive any
argument that such service is insufficient. Each of the parties hereby irrevocably and unconditionally waives, and agrees not
to assert, by way of motion or as a defense, counterclaim or otherwise, in any action or proceeding arising out of or relating
to this letter agreement or the transactions contemplated hereby, (a) any claim that it is not personally subject to the jurisdiction
of the courts in Nevada as described herein for any reason, (b) that it or its property is exempt or immune from jurisdiction
of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise), and (c) that (i) the suit, action or proceeding
in any such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper, or (iii)
this letter agreement, or the subject matter hereof, may not be enforced in or by such courts.
7.
Waiver
of Jury Trial.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, SUIT, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS LETTER
AGREEMENT OR THE ACTIONS OF EACH OF THE PARTIES HERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
8.
Counterparts.
This letter agreement may be executed by facsimile and in one or more counterparts, and by the different parties hereto in
separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute
one and the same agreement.
9.
Termination.
The obligation of the Sponsor to fund the Equity Commitment will terminate automatically and immediately upon the earliest
to occur of (a) the valid termination of the Merger Agreement in accordance with its terms, (b) the Closing, at which time the
obligation will be discharged but subject to the performance of such obligation, (c) the Company or any of its affiliates asserting
a claim against the Sponsor or any Non-Recourse Party in connection with this letter agreement, the Merger Agreement, the Limited
Guarantee or any of the transactions contemplated hereby or thereby or otherwise relating hereto or thereto, other than (i) a
claim against the Sponsor under the Limited Guarantee (including Retained Claims (as such term is defined under the Limited Guarantee))
or (ii) seeking specific performance to cause Holdco, Parent and/or Merger Sub to draw down the proceeds of the Equity Commitment
in accordance with, and subject to the limitations contained in, the second and third sentences of
Section 9.10
of the
Merger Agreement, and (d) the Termination Date if the Closing does not occur by such date.
10.
No
Recourse.
Notwithstanding anything that may be expressed or implied in this letter agreement or any document or instrument
delivered in connection herewith, and notwithstanding the fact that the Sponsor may be a partnership or limited liability company,
by its acceptance of the benefits of this letter agreement, Holdco acknowledges and agrees that no Person other than the Sponsor
(and its permitted successors and assigns under this letter agreement pursuant to the terms hereof) has any obligations hereunder
and that no recourse shall be had hereunder, or for any claim based on, in respect of, or by reason of, such obligations or their
creation, against, and no personal liability shall attach to, be imposed on or otherwise be incurred by any Non-Recourse Party,
through Holdco, Parent, Merger Sub or otherwise, whether by or through attempted piercing of the corporate veil, by or through
a claim by or on behalf of Holdco against any Non-Recourse Party, by the enforcement of any assessment or by any legal or equitable
proceeding, by virtue of any statute, regulation or applicable law, or otherwise.
11.
Representations
and Warranties.
The Sponsor hereby represents and warrants to Holdco that (a) the Sponsor has the authority to execute, deliver
and perform this letter agreement; (b) this letter agreement has been duly and validly executed and delivered by the Sponsor and
(assuming due execution and delivery of this letter agreement, the Merger Agreement and the Limited Guarantee by all parties hereto
and thereto) constitutes a valid and legally binding obligation of the Sponsor, enforceable against it in accordance with the
terms of this letter agreement (subject to (i) the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
or other similar laws affecting creditors’ rights generally and (ii) general equitable principles (whether considered in
a proceeding in equity or at law)); (c) the Sponsor has available funds in excess of the Equity Commitment; (d) no action by,
and no notice to or filing with, any governmental entity is required in connection with the execution, delivery or performance
of this letter agreement by the Sponsor; and (e) the execution, delivery and performance of this letter agreement by the Sponsor
do not violate any applicable law binding on the Sponsor or the assets of the Sponsor, or conflict with any material agreement
binding on the Sponsor.
12.
No
Assignment.
The Sponsor’s obligation to fund the Equity Commitment may not be assigned, except that the Sponsor may
assign all or a portion of its obligations to fund the Equity Commitment to any of the Sponsor’s affiliates; provided, that,
any such assignment shall not relieve the Sponsor of its obligations under this letter agreement to the extent not performed by
such affiliate. Holdco may not assign its rights to any of its affiliates or other entity owned directly or indirectly by the
beneficial owners of Holdco, without the prior written consent of the Sponsor and the Company (which shall be given or withheld
solely in the discretion of the Sponsor and the Company). Any transfer in violation of this section shall be null and void.
13.
Notices.
All notices, requests, claims, demands and other communications required or permitted to be given under this letter agreement
shall be given in the manner specified in the Merger Agreement (and shall be deemed given as specified therein) as follows:
If to the Sponsor:
c/o Fushi Copperweld,
Inc.
TYG Center Tower B,
Suite 2601
Dongsanhuan Bei Lu,
Bing 2
Beijing, 100027, PRC
Facsimile: +86 10 8447
8292
E-mail: cwang@fushicopperweld.com
Attention: Li Fu
with a copy to (which
shall not constitute notice):
Skadden, Arps, Slate,
Meagher & Flom
30
th
Floor,
China World Office 2
1 Jianguomenwai Avenue
Beijing 100004, PRC
Facsimile: +86 10 6535
5577
E-mail: Michael.Gisser@skadden.com
Peter.Huang@skadden.com
Attention: Michael V.
Gisser, Esq.
Peter
X. Huang, Esq.
if to Holdco, to:
c/o Fushi Copperweld,
Inc.
TYG Center Tower B,
Suite 2601
Dongsanhuan Bei Lu,
Bing 2
Beijing, 100027, PRC
Attention: Li Fu
Facsimile: +86 10 8447
8292
E-mail: cwang@fushicopperweld.com
with a copy to (which shall not constitute notice):
Skadden, Arps, Slate,
Meagher & Flom
30
th
Floor,
China World Office 2
1 Jianguomenwai Avenue
Beijing 100004, PRC
Attention: Michael V.
Gisser, Esq.
Peter
X. Huang, Esq.
Facsimile: +86 10 6535
5577
E-mail: Michael.Gisser@skadden.com
Peter.Huang@skadden.com
[Signature Page Follows]
Sincerely,
Agreed to and accepted:
Green Dynasty Holdings Limited
Name:
|
Li Fu
|
Title:
|
Director
|
[SIGNATURE PAGE TO COMMITMENT LETTER]
ANNEX G
[OPINION OF MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED]
[
BANK OF AMERICA MERRILL LYNCH LETTERHEAD
]
June 26, 2012
The Special Committee of the Board of Directors
Fushi Copperweld, Inc.
TYG Center Tower B, Suite 2601
Donsanhuan Bei Lu, Bing 2
Beijing, 100027, PRC
The Special Committee:
We understand that Fushi Copperweld Inc. (“Fushi”)
proposes to enter into an Agreement and Plan of Merger (the “Agreement”), among Fushi, Green Dynasty Limited (“Parent”),
Green Dynasty Acquisition, Inc., a direct wholly owned subsidiary of Parent (“Merger Sub”), and Green Dynasty Holdings
Limited (“Holdco”), pursuant to which, among other things, Merger Sub will merge with and into Fushi (the “Merger”)
and each share of the common stock, par value $0.006 per share, of Fushi (“Fushi Common Stock”) issued and outstanding
immediately prior to the time the Merger becomes effective will be converted into the right to receive $9.50 in cash (the “Consideration”).
We further understand that Abax Lotus Ltd., Mr. Li Fu and certain other holders of Fushi Common Stock (the “Rollover Holders”)
will enter into a rollover commitment to contribute some or all of their shares of Fushi Common Stock to Parent in exchange for
newly issued shares of Holdco immediately prior to the consummation of the Merger. The terms and conditions of the Merger are
more fully set forth in the Agreement.
The Special Committee of the Board of Directors of Fushi (the
“Special Committee”) has requested our opinion as to the fairness, from a financial point of view, to the holders
of Fushi Common Stock
(other than Holdco, Parent, Merger Sub, and the Rollover Holders)
of the Consideration to
be received by such holders in the Merger.
In connection with this opinion, we have, among other things:
|
(i)
|
reviewed certain publicly available business and financial
information relating to Fushi;
|
|
(ii)
|
reviewed certain internal financial and operating information
with respect to the business, operations and prospects
of Fushi furnished to or discussed with us by the management
of Fushi, including certain financial forecasts relating
to Fushi prepared by the management of Fushi (such forecasts,
“Fushi Forecasts”) and discussed with the Special
Committee certain sensitivities to such Fushi Forecasts
and costs associated with the repatriation of the profits
of Fushi’s subsidiaries to Fushi;
|
|
(iii)
|
discussed the past and current business, operations,
financial condition and prospects of Fushi with members
of senior management of Fushi and the Special Committee;
|
|
(iv)
|
reviewed the trading history for Fushi Common Stock
and a comparison of that trading history with the trading
histories of other companies we deemed relevant;
|
The Special Committee
Fushi Copperweld, Inc.
Page 2
|
(v)
|
compared certain financial and stock market information
of Fushi with similar information of other companies we
deemed relevant;
|
|
(vi)
|
considered (1) the fact that Fushi publicly announced
the receipt of an acquisition proposal from Abax Global
Capital (Hong Kong) Limited and Mr. Fu in November 2010
and that it would form the Special Committee to consider
this proposal, (2) the fact that Fushi subsequently publicly
announced that the Special Committee would explore Fushi’s
strategic alternatives, and (3) the results of our efforts
on behalf of Fushi to further solicit, at the direction
of the Special Committee, indications of interest from
third parties with respect to a possible acquisition of
Fushi;
|
|
(vii)
|
discussed with the management of Fushi and its legal
advisors their assessments as to certain tax and other
restrictions on the repatriation
of the profits of
Fushi
’s
subsidiaries to
Fushi
and the financial consequences thereof on
Fushi;
|
|
(viii)
|
reviewed a draft, dated June 26, 2012, of the Agreement
(the “Draft Agreement”); and
|
|
(ix)
|
performed such other analyses and studies and considered
such other information and factors as we deemed appropriate.
|
In arriving at our opinion, we have assumed and relied upon,
without independent verification, the accuracy and completeness of the financial and other information and data publicly available
or provided to or otherwise reviewed by or discussed with us and have relied upon the assurances of the management of Fushi
that they are not aware of any facts or circumstances that would make such information or data inaccurate or misleading in
any material respect. With respect to the Fushi Forecasts, we have been advised by Fushi, and have assumed, that they have been
reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the management of Fushi
as to the future financial performance of Fushi. For purposes of our analyses and this opinion we have also relied, at the direction
of the Special Committee and without independent verification, upon the assessments of Fushi’s management and its legal
advisors as to the tax and other restrictions on the repatriation of the profits of Fushi’s subsidiaries to Fushi and the
financial consequences thereof on Fushi. We have not made or been provided with any independent evaluation or appraisal of the
assets or liabilities (contingent or otherwise) of Fushi, nor have we made any physical inspection of the properties or assets
of Fushi.
We have not evaluated the solvency or fair value of Fushi or Parent under any state, federal or other laws relating
to bankruptcy, insolvency or similar matters. We have assumed, at the direction of the Special Committee, that the Merger will
be consummated in accordance with the terms of the Agreement, without waiver, modification or amendment of any material term,
condition or agreement and that, in the course of obtaining the necessary
governmental, regulatory and other approvals,
consents, releases and waivers for the Merger, no delay, limitation, restriction or condition, including any divestiture requirements
or amendments or modifications, will be imposed that would have an adverse effect on Fushi or the Merger. We also have assumed,
at the direction of the Special Committee, that the final executed Agreement will not differ in any material respect from the
Draft Agreement reviewed by us.
The Special Committee
Fushi Copperweld, Inc.
Page 3
We express no view or opinion as to any terms or other aspects
of the Merger (other than the Consideration to the extent expressly specified herein), including, without limitation, the form
or structure of the Merger or any terms, aspects or implications of any rollover or other arrangements, agreements or understandings
entered into in connection with the Merger or otherwise. Our opinion is limited to the fairness, from a financial point of view,
of the Consideration to be received by holders of Fushi Common Stock (other than Holdco, Parent, Merger Sub, and the Rollover
Holders) and no opinion or view is expressed with respect to any consideration received in connection with the Merger by the holders
of any class of securities, creditors or other constituencies of any party. In addition, no opinion or view is expressed with
respect to the fairness (financial or otherwise) of the amount, nature or any other aspect of any compensation to any of the officers,
directors or employees of any party to the Merger, or class of such persons, relative to the Consideration or otherwise. We also
are not expressing any view or opinion with respect to, and have relied, with the consent of the Special Committee, upon the assessments
of the management of Fushi regarding, legal, regulatory, accounting, tax or similar matters relating to Fushi or the Merger as
to which we understand that Fushi obtained such advice as Fushi deemed necessary from qualified professionals. Furthermore, no
opinion or view is expressed as to the relative merits of the Merger in comparison to other strategies or transactions that might
be available to Fushi or in which Fushi might engage or as to the underlying business decision of Fushi to proceed with or effect
the Merger. In addition, we express no opinion or recommendation as to how any stockholder should vote or act in connection with
the Merger or any related matter.
We have acted as financial advisor to the Special Committee
in connection with the Merger and will receive a fee for our services, a portion of which was paid upon entering into our engagement,
a portion of which is payable upon the rendering of this opinion, and a significant portion of which is contingent upon consummation
of the Merger. In addition, Fushi has agreed to reimburse our expenses and indemnify us against certain liabilities arising out
of our engagement.
We and our affiliates comprise a full service securities firm
and commercial bank engaged in securities, commodities and derivatives trading, foreign exchange and other brokerage activities,
and principal investing as well as providing investment, corporate and private banking, asset and investment management, financing
and financial advisory services and other commercial services and products to a wide range of companies, governments and individuals.
In the ordinary course of our businesses, we and our affiliates may invest on a principal basis or on behalf of customers or manage
funds that invest, make or hold long or short positions, finance positions or trade or otherwise effect transactions in equity,
debt or other securities or financial instruments (including derivatives, bank loans or other obligations) of Fushi, Parent, Holdco
and certain of their respective affiliates.
We and our affiliates in the past have provided, currently
are providing, and in the future may provide, investment banking, commercial banking and other financial services to Fushi and
certain of its affiliates and have received or in the future may receive compensation for the rendering of these services, including
having provided or providing certain derivatives products and services to Fushi.
It is understood that this letter is for the benefit and use
of the Special Committee (in its capacity as such) in connection with and for purposes of its evaluation of the Merger.
Our opinion is necessarily based on financial, economic, monetary,
market and other conditions and circumstances as in effect on, and the information made available to us as of, the date hereof.
As you are aware, the credit, financial and stock markets have been experiencing unusual volatility and we express no opinion
or view as to any potential effects of such volatility on Fushi, Parent, their affiliates or the Merger. It should be understood
that subsequent developments may affect this opinion, and we do not have any obligation to update, revise, or reaffirm this opinion.
The issuance of this opinion was approved by our Americas Fairness Opinion Review Committee.
The Special Committee
Fushi Copperweld, Inc.
Page 4
Based upon and subject to the foregoing, including the various
assumptions and limitations set forth herein, we are of the opinion on the date hereof that the Consideration to be received in
the Merger by holders of Fushi Common Stock (other than Holdco, Parent, Merger Sub, and the Rollover Holders) is fair, from a
financial point of view, to such holders.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
Preliminary Copy – Subject to Completion,
Dated August 13, 2012
FUSHI COPPERWELD, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON [●], 2012
The undersigned stockholder of Fushi Copperweld,
Inc., a Nevada corporation (the “
Company
“), hereby acknowledges receipt of the Notice of Special Meeting
of Stockholders and Proxy Statement and hereby appoints [●] and [●], or any of them, proxies and attorneys-in-fact,
with full power to each of substitution and revocation, on behalf and in the name of the undersigned, to represent the undersigned
at the Special Meeting of Stockholders of the Company to be held at [●] on [●], 2012 at [●] (local time), or
at any adjournment or postponement thereof, and to vote, as designated below, all shares of common stock of the Company which
the undersigned would be entitled to vote if then and there personally present, on the matters set forth below.
The Board of Directors recommends that
you vote “
FOR
“ each proposal.
1.
|
Proposal to approve the Agreement and Plan of Merger, dated as
of June 28, 2012, as it may be amended from time to time, by and among Green Dynasty Limited, Green Dynasty Acquisition, Inc.,
Fushi Copperweld, Inc. and Green Dynasty Holdings Limited.
|
|
¨
FOR
|
¨
AGAINST
|
¨
ABSTAIN
|
2.
|
Proposal to approve the following non-binding resolution:
|
|
|
|
“RESOLVED , that the compensation that may be paid or become payable to the
Company’s named executive officers in connection with the merger, as disclosed in the section entitled “Special
Factors—Golden Parachute Compensation” pursuant to Item 402(t) of Regulation S-K, including the associated narrative
discussion, and the agreements or understandings pursuant to which such compensation may be paid or become payable, are hereby
APPROVED .
|
|
¨
FOR
|
¨
AGAINST
|
¨
ABSTAIN
|
3.
|
Proposal to adjourn the Company’s
Special Meeting of Stockholders in order to take such actions as the Company’s Board of Directors
determines are necessary or appropriate, including, without limitation, to solicit additional proxies
if there are insufficient votes at the time of the Company’s Special Meeting to adopt the proposal
to approve the Agreement and Plan of Merger.
|
|
¨
FOR
|
¨
AGAINST
|
¨
ABSTAIN
|
The proxies are also authorized to vote your shares as they
deem appropriate, in their sole discretion, upon such other business as may properly be presented at the Company’s Special
Meeting of Stockholders or any adjournment or postponement thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED,
OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED “
FOR
“ EACH PROPOSAL SPECIFICALLY IDENTIFIED ABOVE.
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS.
Date: _____________, 2012
|
|
|
|
|
|
|
|
|
|
|
PLEASE DATE WHERE INDICATED AND SIGN ABOVE exactly as your name appears at the left, indicating,
where proper, official position or representative capacity. If shares are held jointly, each holder should sign.
|
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