SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13E-3
(Amendment No. 1)
(RULE 13e-100)
RULE 13e-3 TRANSACTION STATEMENT UNDER
SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934
Shanda
Games Limited
(Name of the Issuer)
Shanda Games Limited
Yingfeng Zhang
Capitalhold Limited
Capitalcorp Limited
Ningxia Yilida Capital Investment Limited
Partnership
Yili Shengda Investment Holdings (Hong
Kong) Company Limited
Ningxia Zhengjun Equity Investment Partnership
Enterprise (Limited Partnership)
Ningxia Zhongyincashmere International
Group Co., Ltd.
Zhongrong Shengda Investment Holdings
(Hong Kong) Company Limited
Zhongrong Investment Holdings (Hong Kong)
Co., Ltd.
Ningxia Silkroad Equity Investment Partnership
Enterprise (Limited Partnership)
Ningxia Zhongrong Legend Equity Investment
Partnership Enterprise (Limited Partnership)
Shanghai Yingfeng Investment Management
Company Limited
Shaolin Liang
Orient Hongtai (Hong Kong) Limited
Orient Hongzhi (Hong Kong) Limited
Hao Ding International Limited
(Name of Persons Filing Statement)
Class A ordinary shares, par value $0.01
per share
American Depositary Shares, each representing two Class A ordinary shares
(Title of Class of Securities)
81941U105*
(CUSIP Number of Class of Securities)
Shanda Games Limited
c/o Yingfeng Zhang, Acting
Chief Executive Officer
Yingfeng Zhang
No. 1 Office Building
No. 690 Bibo Road
Pudong New Area
Shanghai 201203
The People’s Republic
of China
+86 21 5050 4740
|
Capitalhold Limited
Capitalcorp Limited
Cricket Square, Hutchins Drive, P.O.
Box 2681
Grand Cayman, KY1-1111
Cayman Islands
+86 21 5050 4740
|
|
Yili Shengda Investment Holdings (Hong
Kong) Company Limited
Room 2803-05, AXA Tower, Landmark East
100 How Ming Street, Kwun Tong Kowloon
Hong Kong
+852 8208 5118
Ningxia Yilida Capital Investment Limited
Partnership
Ningxia Zhengjun Equity Investment Partnership
Enterprise (Limited Partnership)
Ecological Textile Park
Lingwu, Ningxia 750400
The People’s Republic of China
+86 21 5050 4740
Shanghai Yingfeng Investment
Management Company Limited
Room 2055, No. 5358 Huyi Road
Jiading District, Shanghai 201806
The People’s Republic of China
+86 21 5050 4740 |
Zhongrong Investment Holdings
(Hong Kong) Co., Ltd.
Zhongrong Shengda Investment
Holdings (Hong Kong) Company Limited
Room 2803-05, AXA Tower, Landmark
East
100 How Ming Street, Kwun Tong Kowloon
Hong Kong
+852 8208 5118
Ningxia Zhongyincashmere International
Group Co., Ltd.
Ningxia Silkroad Equity Investment
Partnership Enterprise (Limited Partnership)
Ningxia Zhongrong Legend Equity
Investment Partnership Enterprise (Limited Partnership)
Ecological Textile Park
Lingwu, Ningxia 750400
The People’s Republic of China
+86 951 4038 950, extension
8969
Shaolin Liang
Sixth Floor, Heping Mansion
No. 6 Laiguangying East Road
Chaoyang District, Beijing 100102
The People’s Republic of China
+86 10 8517 1831, extension 849
|
|
Orient Hongtai (Hong Kong) Limited
Orient Hongzhi (Hong Kong) Limited
Flat 2, 19/F, Henan Building
90-92 Jaffe Road, Wanchai
Hong Kong
+86 21 6332 5888
|
Hao Ding International Limited
2810, 689 Guangdong Road
Huangpu District, Shanghai 200001
The People’s Republic of China
+86 21 2321 2232
|
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Persons Filing Statement) |
| With copies to: |
|
Robert Chu, Esq.
Sullivan & Cromwell
Level 32
101 Collins Street
Melbourne, Victoria 3000
Australia
+61 3 9635 1500
|
Chun Wei, Esq.
Sullivan & Cromwell
28th Floor
Nine Queen’s Road Central
Hong Kong
+852 2826 8688
|
Miranda So, Esq.
Davis Polk & Wardwell
The Hong Kong Club Building
3A Chater Road. Central
Hong Kong
+852 2533 3300
|
Zhan Chen, Esq.
Wilson Sonsini Goodrich & Rosati,
P.C.
Jin Mao Tower, 38F, Unit 03-04
88 Century Boulevard Shanghai 200121
The People’s Republic of China
+86 21 6167 1700 |
Peter X. Huang, Esq.
Skadden, Arps, Slate, Meagher & Flom
LLP 30/F, China World Office 2 No. 1 Jian Guo Men Wai Avenue Beijing 100004
The People’s Republic of China
+86 10 6535 5500 |
This statement is filed in connection with (check the appropriate
box):
| ¨ | The filing of solicitation materials on an information statement subject to Regulation 14A, Regulation 14C or Rule 13e-3(c)
under the Securities Exchange Act of 1934. |
| ¨ | The filing of a registration statement under the Securities Act of 1933. |
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies: £
Check the following box if the filing is a final amendment reporting
the results of the transaction: £
CALCULATION OF FILING FEE
| Transaction Valuation** |
Amount of Filing Fee*** |
| $487,088,283.00 |
$56,599.66 |
| * | This CUSIP applies to the American Depositary Shares, evidenced by American Depositary Receipts, each representing two Class
A ordinary shares. |
| ** | Calculated solely for the purpose of determining the filing fee in accordance with Rule 0-11(b)(1) under the Securities Exchange
Act of 1934, as amended. The filing fee is calculated based on the sum of (a) the aggregate cash payment for the proposed per share
cash payment of $3.55 for 131,694,256 issued and outstanding ordinary shares of the issuer (which is the total outstanding shares,
including shares represented by the American depositary shares, less the rollover shares not being acquired) subject to the transaction
plus (b) the product of 11,103,894 ordinary shares issuable under all outstanding and unexercised options multiplied by $1.5328
per share (which is the difference between $3.55 per share merger consideration and the weighted average exercise price of approximately
$2.0172 per share) plus (c) the product of 113,425 outstanding shares of company restricted stock multiplied by $3.55 per share
plus (d) the product of 653,979 outstanding company restricted stock units multiplied by $3.55 per unit ((a), (b), (c) and (d)
together, the “Transaction Valuation”). |
| *** | The amount of the filing fee, calculated in accordance with Exchange Act Rule 0-11(b)(1) and the Securities and Exchange Commission
Fee Rate Advisory #1 for Fiscal Year 2015, was calculated by multiplying the Transaction Valuation by 0.0001162. |
| ¨ | Check the box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing with which
the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule,
and the date of its filing. |
Amount Previously Paid:
Form or Registration No.:
Filing Party:
Date Filed:
Introduction
This Rule
13E-3 transaction statement on Schedule 13E-3, together with the exhibits hereto (this “Transaction Statement”),
is being filed with the Securities and Exchange Commission (the “SEC”) pursuant to Section 13(e) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), jointly by the following persons (each, a “Filing
Person,” and collectively, the “Filing Persons”): (a) Shanda Games Limited, a Cayman Islands company
(the “Company”), the issuer of the ordinary shares, par value US$0.01 per share (each, a “Share”),
including the Class A ordinary shares represented by American depositary shares (“ADSs”), each representing
two Class A Shares, that is subject to the transaction pursuant to Rule 13e-3 under the Exchange Act; (b) Mr. Yingfeng Zhang,
the chairman of the board and acting chief executive officer of the Company; (c) Capitalhold Limited (“Parent”),
an exempted company with limited liability incorporated under the laws of the Cayman Islands; (d) Capitalcorp Limited (“Merger
Sub”), an exempted company with limited liability incorporated under the laws of the Cayman Islands and a wholly owned
subsidiary of Parent; (e) Ningxia Yilida Capital Investment Limited Partnership (“Ningxia Yilida”), a limited
partnership formed under the laws of the People’s Republic of China and an affiliate of the Company’s acting chief
executive officer, Mr. Yingfeng Zhang; (f) Yili Shengda Investment Holdings (Hong Kong) Company Limited (“Yili Shengda”),
a company incorporated and existing under the laws of Hong Kong and an affiliate of Mr. Yingfeng Zhang; (g) Ningxia Zhengjun Equity
Investment Partnership Enterprise (Limited Partnership) (“Zhengjun Investment”), a limited partnership organized
and existing under the laws of the People’s Republic of China and an affiliate of Mr. Yingfeng Zhang; (h) Shanghai Yingfeng
Investment Management Company Limited (“Shanghai Yingfeng”), a limited liability company organized under the
laws of the People’s Republic of China directly and wholly owned by Mr. Yingfeng Zhang; (i) Ningxia Zhongyincashmere International
Group Co., Ltd. (“Ningxia”), a company formed under the laws of the People’s Republic of China; (j) Zhongrong
Shengda Investment Holdings (Hong Kong) Company Limited (“Zhongrong Shengda”), a company incorporated and existing
under the laws of Hong Kong and an affiliate of Ningxia; (k) Zhongrong Investment Holdings (Hong Kong) Co., Ltd. (“Zhongrong
Investment”), a company incorporated and existing under the laws of Hong Kong and an affiliate of Ningxia; (l) Ningxia
Silkroad Equity Investment Partnership Enterprise (Limited Partnership) (“Ningxia Silkroad”), a limited partnership
organized and existing under the laws of the People’s Republic of China and an affiliate of Ningxia; (m) Ningxia Zhongrong
Legend Equity Investment Partnership Enterprise (Limited Partnership) (“Zhongrong Legend”), a limited partnership
organized and existing under the laws of the People’s Republic of China and an affiliate of Ningxia; (n) Mr. Shaolin Liang,
a director of the Company and a vice general manager of Ningxia; (o) Orient Hongtai (Hong Kong) Limited (“Orient Hongtai”),
a company incorporated and existing under the laws of Hong Kong; (p) Orient Hongzhi (Hong Kong) Limited (“Orient Hongzhi”),
a company incorporated and existing under the laws of Hong Kong and an affiliate of Orient Hongtai; and (q) Hao Ding International
Limited (“Hao Ding”), a company established under the laws of the British Virgin Islands.
On April 3, 2015, Parent, Merger Sub and
the Company entered into an agreement and plan of merger (the “Merger Agreement”) providing for the merger of
Merger Sub with and into the Company (the “Merger”), with the Company continuing as the surviving corporation
and becoming a wholly owned subsidiary of Parent. At the effective time of the Merger (the “Effective Time”),
Parent will be beneficially owned by Ningxia Yilida, Ningxia, Orient Hongtai, Orient Hongzhi, Hao Ding, Zhengjun Investment, Ningxia
Silkroad and Zhongrong Legend.
If the Merger is completed, each Share
issued and outstanding immediately prior to the Effective Time will be cancelled and cease to exist and will be converted into
and exchanged for the right to receive US$3.55 and each issued and outstanding ADS will represent the right to surrender one ADS
in exchange for US$7.10 (less US$0.05 per ADS cancellation fees pursuant to the terms of the Deposit Agreement, dated as of September
24, 2009, among the Company, JPMorgan Chase Bank, N.A., as depositary, and the holders of ADSs issued thereunder), in each case,
in cash, without interest and net of any applicable withholding taxes. Notwithstanding the foregoing, if the Merger is completed,
the following Shares (including Shares represented by ADSs) will be cancelled and cease to exist at the Effective Time but will
not be converted into the right to receive the consideration described in the immediately preceding sentence:
| (a) | 48,759,187 Class B ordinary shares held by Yili Shengda, 48,759,187 Class B ordinary shares held by Zhongrong Shengda,
61,766,334 Class A ordinary shares held by Orient Hongtai, 61,766,335 Class A ordinary shares held by Orient Hongzhi,
80,577,828 Class A ordinary shares held by Zhongrong Investment, 107,438,129 Class A ordinary shares held by Hao Ding and the
Shares held by Parent, the Company or any of their subsidiaries immediately prior to the Effective Time, which will be
cancelled without payment of any consideration or distribution therefor; and |
| (b) | Shares owned by shareholders who have validly exercised and have not effectively withdrawn or lost their dissenters’
rights under the Cayman Islands Companies Law Cap. 22 (Law 3 of 1961, as consolidated and revised) (the “Cayman Islands
Companies Law”), which will be cancelled and will entitle the former holders thereof to receive the fair value thereon
in accordance with such holders’ dissenters’ rights under the Cayman Islands Companies Law. |
In addition to the foregoing, at
the Effective Time, (i) each option to purchase Shares, whether vested or unvested (“Company Options”),
that is issued and outstanding immediately prior to the Effective Time, will be cancelled and converted into the right to
receive, as soon as practicable after the Effective Time, an amount equal to the product of the total number of Shares
issuable under such Company Option immediately prior to the Effective Time multiplied by the excess of US$3.55 over the
exercise price payable per Share under such Company Option, in cash, without interest and net of any applicable withholding
taxes, and (ii) each restricted Share with respect to which the restrictions have not lapsed (“Company
Restricted Shares”) and each restricted stock unit whether or not the restrictions with respect thereto have lapsed (“Company RSUs”), in each case, that is issued and outstanding immediately
prior to the Effective Time will be cancelled and converted into the right to receive, as soon as practicable after the
Effective Time, an amount equal to US$3.55, in cash, without interest and net of any applicable withholding taxes.
Furthermore, concurrently with the execution
and delivery of the Merger Agreement, certain existing shareholders of the Company, namely Yili Shengda, Zhongrong Shengda, Orient
Hongtai, Orient Hongzhi , Zhongrong Investment and Hao Ding (collectively, the “Rollover Shareholders”), have
entered into a support agreement with Parent, pursuant to which they have agreed with Parent, among other things, that (a) they
will vote (or cause to be voted) all of the Shares (including Shares represented by ADSs) owned directly or indirectly by
them in favor of the proposal to approve and authorize the Merger Agreement, the plan of merger required to be filed with the Registrar
of Companies of the Cayman Islands in connection with the Merger (the “Plan of Merger”) and the transactions
contemplated by the Merger Agreement and the Plan of Merger (collectively, the “Transactions”), including the
Merger, and (b) the Shares (including Shares represented by ADSs) owned directly or indirectly by them will, in connection
with and at the Effective Time, be cancelled for no consideration in the Merger.
The Merger remains subject to
the satisfaction or waiver of the conditions set forth in the Merger Agreement, including obtaining the requisite approval of
the shareholders of the Company. The Merger Agreement, the Plan of Merger and the Transactions, including the Merger, must
be authorized and approved by a special resolution representing an affirmative vote of shareholders holding two-thirds or
more of the voting power represented by the Shares (including Shares represented by ADSs) present and voting in person or by
proxy as a single class at the extraordinary general meeting of the Company’s shareholders held in accordance with
its memorandum and articles of association.
The Company will make available to its
shareholders a proxy statement (the “Proxy Statement,” a preliminary copy of which is attached as Exhibit (a)(1)
to this Transaction Statement), relating to the extraordinary general meeting of the Company’s shareholders, at which the
Company’s shareholders will consider and vote upon, among other proposals, a proposal to authorize and approve the Merger
Agreement, the Plan of Merger and the Transactions, including the Merger. As of the date hereof, the Proxy Statement is in preliminary
form and is subject to completion.
The cross-references below are being supplied
pursuant to General Instruction G to Schedule 13E-3 and show the location in the Proxy Statement of the information required to
be included in response to the items of Schedule 13E-3. Pursuant to General Instruction F to Schedule 13E-3, the information contained
in the Proxy Statement, including all annexes thereto, is incorporated in its entirety herein by this reference, and the responses
to each item in this Schedule 13E-3 are qualified in their entirety by the information contained in the Proxy Statement and the
annexes thereto. Capitalized terms
used but not defined in this Transaction Statement shall have the meanings given to them in the Proxy Statement.
All information contained in this Transaction
Statement concerning each Filing Person has been supplied by such Filing Person. No Filing Person, including the Company, is responsible
for the accuracy of any information supplied by any other Filing Person.
The filing of this Transaction Statement
shall not be construed as an admission by any of the Filing Persons or by any affiliate of a Filing Person, that the Company is
“controlled” by any other Filing Person or that any Filing Person is an “affiliate” of the Company within
the meaning of Rule 13e-3 under Section 13(e) of the Exchange Act.
Item 1. Summary Term Sheet
The information set forth in the Proxy Statement under the following
captions is incorporated herein by reference:
| · | “Questions and Answers about the Extraordinary General Meeting and the Merger” |
Item 2. Subject Company Information
(a) Name and Address. The information set forth in
the Proxy Statement under the following caption is incorporated herein by reference:
| · | “Summary Term Sheet—The Parties Involved in the Merger” |
(b) Securities. The information set forth in the Proxy
Statement under the following captions is incorporated herein by reference:
| · | “Market Price of the Company’s ADSs, Dividends and Other Matters” |
| · | “The Extraordinary General Meeting—Record Date; Shares and ADSs Entitled to Vote” |
| · | “Security Ownership of Certain Beneficial Owners and Management of the Company” |
(c) Trading Market and Price. The information set
forth in the Proxy Statement under the following captions is incorporated herein by reference:
| · | “Market Price of the Company’s ADSs, Dividends and Other Matters—Market Price of ADSs” |
(d) Dividends. The information set forth in the Proxy
Statement under the following captions is incorporated herein by reference:
| · | “Market Price of the Company’s ADSs, Dividends and Other Matters—Dividend Policy” |
(e) Prior Public Offerings. The information set forth
in the Proxy Statement under the following captions is incorporated herein by reference:
(f) Prior Stock Purchases. The information set forth
in the Proxy Statement under the following captions is incorporated herein by reference:
| · | “Transactions in Shares and ADSs—Purchases by the Company” |
| · | “Transactions in Shares and ADSs—Transactions within the Buyer Group” |
| · | “Special Factors—Related-Party Transactions” |
Item 3. Identity and Background of Filing Person
(a) Name and Address. Shanda Games Limited is the
subject company. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
| · | “Summary Term Sheet––The Parties Involved in the Merger” |
| · | “Annex F—Directors and Executive Officers of Each Filing Person” |
(b) Business and Background of Entities. The information
set forth in the Proxy Statement under the following captions is incorporated herein by reference:
| · | “Summary Term Sheet––The Parties Involved in the Merger” |
| · | “Annex F—Directors and Executive Officers of Each Filing Person” |
(c) Business and Background of Natural Persons. The
information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
| · | “Summary Term Sheet––The Parties Involved in the Merger” |
| · | “Annex F—Directors and Executive Officers of Each Filing Person” |
Item 4. Terms of the Transaction
(a) Material Terms.
(1) Tender Offers. Not applicable.
(2) Mergers or Similar Transactions. The information
set forth in the Proxy Statement under the following captions is incorporated herein by reference:
| · | “Questions and Answers about the Extraordinary General Meeting and the Merger” |
| · | “The Extraordinary General Meeting” |
| · | “Annex A––Agreement and Plan of Merger” |
| · | “Annex B—Plan of Merger” |
(c) Different Terms. The information set forth in
the Proxy Statement under the following captions is incorporated herein by reference:
| · | “Questions and Answers about the Extraordinary General Meeting and the Merger” |
| · | “Special Factors––Effects of the Merger on the Company” |
| · | “Special Factors––Financing of the Merger” |
| · | “Special Factors––Interests of Certain Persons in the Merger” |
| · | “The Extraordinary General Meeting—Proposals to be Considered at the Extraordinary General Meeting” |
| · | “Annex A––Agreement and Plan of Merger” |
| · | “Annex B—Plan of Merger” |
(d) Appraisal Rights. The information set forth in
the Proxy Statement under the following captions is incorporated herein by reference:
| · | “Summary Term Sheet––Merger Consideration” |
| · | “Questions and Answers about the Extraordinary General Meeting and the Merger” |
| · | “The Extraordinary General Meeting––Rights of Shareholders Who Object to the Merger” |
| · | “The Merger Agreement––Merger Consideration” |
| · | “Annex D—Cayman Islands Companies Law Cap. 22 (Law 3 of 1961, as consolidated and revised) – Section 238” |
(e) Provisions for Unaffiliated Security Holders.
The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
| · | “Provisions for Unaffiliated Security Holders” |
(f) Eligibility for Listing or Trading. Not applicable.
Item 5. Past Contacts, Transactions, Negotiations and Agreements
(a) Transactions. The information set forth in the
Proxy Statement under the following captions is incorporated herein by reference:
| · | “Summary Term Sheet—Interests of the Company’s Executive Officers and Directors in the Merger” |
| · | “Special Factors––Interests of Certain Persons in the Merger” |
| · | “Special Factors––Related-Party Transactions” |
| · | “Transactions in Shares and ADSs” |
(b)—(c) Significant Corporate Events; Negotiations
or Contacts. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
| · | “Special Factors––Background of the Merger” |
| · | “Special Factors––Reasons for the Merger and Recommendation of the Special Committee and the Board” |
| · | “Special Factors––Position of the Buyer Group as to the Fairness of the Merger” |
| · | “Special Factors—Purposes of and Reasons for the Merger” |
| · | “Special Factors—Effects of the Merger on the Company” |
| · | “Special Factors—Plans for the Company after the Merger” |
| · | “Special Factors—Financing of the Merger” |
| · | “Special Factors—Limited Guarantees” |
| · | “Special Factors—Interests of Certain Persons in the Merger” |
| · | “Annex A––Agreement and Plan of Merger” |
| · | “Annex B—Plan of Merger” |
(e) Agreements Involving the Subject Company’s Securities.
The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
| · | “Special Factors—Plans for the Company after the Merger” |
| · | “Special Factors—Financing of the Merger” |
| · | “Special Factors—Consortium Agreement” |
| · | “Special Factors—Support Agreement” |
| · | “Special Factors—Interests of Certain Persons in the Merger” |
| · | “Special Factors—Voting by the Rollover Shareholders at the Extraordinary General Meeting” |
| · | “Transactions in Shares and ADSs” |
| · | “Annex A––Agreement and Plan of Merger” |
| · | “Annex B—Plan of Merger” |
Item 6. Purposes of the Transaction, and Plans or Proposals
(b) Use of Securities Acquired. The information set
forth in the Proxy Statement under the following captions is incorporated herein by reference:
| · | “Questions and Answers about the Extraordinary General Meeting and the Merger” |
| · | “Special Factors––Purposes of and Reasons for the Merger” |
| · | “Special Factors––Effects of the Merger on the Company” |
| · | “Special Factors––Plans for the Company after the Merger” |
| · | “Special Factors––Financing of the Merger” |
| · | “Special Factors––Interests of Certain Persons in the Merger” |
| · | “Annex A––Agreement and Plan of Merger” |
| · | “Annex B—Plan of Merger” |
(c)(1)—(8) Plans. The information set forth in
the Proxy Statement under the following captions is incorporated herein by reference:
| · | “Special Factors––Background of the Merger” |
| · | “Special Factors––Reasons for the Merger and Recommendation of the Special Committee and the Board” |
| · | “Special Factors––Position of the Buyer Group as to the Fairness of the Merger” |
| · | “Special Factors—Purposes of and Reasons for the Merger” |
| · | “Special Factors—Effects of the Merger on the Company” |
| · | “Special Factors—Plans for the Company after the Merger” |
| · | “Special Factors—Financing of the Merger” |
| · | “Special Factors—Interests of Certain Persons in the Merger” |
| · | “Annex A––Agreement and Plan of Merger” |
| · | “Annex B—Plan of Merger” |
Item 7. Purposes, Alternatives, Reasons and Effects
(a) Purposes. The information set forth in the Proxy
Statement under the following captions is incorporated herein by reference:
| · | “Special Factors––Background of the Merger” |
| · | “Special Factors––Reasons for the Merger and Recommendation of the Special Committee and the Board” |
| · | “Special Factors—Purposes of and Reasons for the Merger” |
| · | “Special Factors—Effects of the Merger on the Company” |
| · | “Special Factors—Plans for the Company after the Merger” |
| · | “Special Factors—Interests of Certain Persons in the Merger” |
(b) Alternatives. The information set forth in the
Proxy Statement under the following captions is incorporated herein by reference:
| · | “Special Factors––Background of the Merger” |
| · | “Special Factors––Reasons for the Merger and Recommendation of the Special Committee and the Board” |
| · | “Special Factors––Position of the Buyer Group as to the Fairness of the Merger” |
| · | “Special Factors—Purposes of and Reasons for the Merger” |
| · | “Special Factors—Effects on the Company if the Merger Is Not Completed” |
| · | “Special Factors—Alternatives to the Merger” |
(c) Reasons. The information set forth in the Proxy
Statement under the following captions is incorporated herein by reference:
| · | “Special Factors––Background of the Merger” |
| · | “Special Factors––Reasons for the Merger and Recommendation of the Special Committee and the Board” |
| · | “Special Factors––Position of the Buyer Group as to the Fairness of the Merger” |
| · | “Special Factors––Opinion of Merrill Lynch, the Special Committee’s Financial Advisor” |
| · | “Special Factors—Purposes of and Reasons for the Merger” |
| · | “Special Factors—Effects of the Merger on the Company” |
| · | “Special Factors––Plans for the Company After the Merger” |
(d) Effects. The information set forth in the Proxy
Statement under the following captions is incorporated herein by reference:
| · | “Questions and Answers about the Extraordinary General Meeting and the Merger” |
| · | “Special Factors––Background of the Merger” |
| · | “Special Factors––Reasons for the Merger and Recommendation of the Special Committee and the Board” |
| · | “Special Factors—Purposes of and Reasons for the Merger” |
| · | “Special Factors—Effects of the Merger on the Company” |
| · | “Special Factors––Plans for the Company After the Merger” |
| · | “Special Factors—Interests of Certain Persons in the Merger” |
| · | “Special Factors––Fees and Expenses” |
| · | “Special Factors––Material U.S. Federal Income Tax Consequences” |
| · | “Special Factors—Material PRC Income Tax Consequences” |
| · | “Special Factors—Material Cayman Islands Tax Consequences” |
| · | “The Extraordinary General Meeting––Rights of Shareholders Who Object to the Merger” |
| · | “Annex A––Agreement and Plan of Merger” |
| · | “Annex B—Plan of Merger” |
| · | “Annex D—Cayman Islands Companies Law Cap. 22 (Law 3 of 1961, as consolidated and revised) – Section 238” |
Item 8. Fairness of the Transaction
(a)—(b) Fairness; Factors Considered in Determining
Fairness. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
| · | “Summary Term Sheet—Recommendations of the Special Committee and the Board” |
| · | “Summary Term Sheet—Position of the Buyer Group as to Fairness” |
| · | “Summary Term Sheet—Opinion of Merrill Lynch, the Special Committee’s Financial Advisor” |
| · | “Summary Term Sheet—Interests of the Company’s Executive Officers and Directors in the Merger” |
| · | “Special Factors––Background of the Merger” |
| · | “Special Factors––Reasons for the Merger and Recommendation of the Special Committee and the Board” |
| · | “Special Factors—Position of the Buyer Group as to the Fairness of the Merger” |
| · | “Special Factors––Opinion of Merrill Lynch, the Special Committee’s Financial Advisor” |
| · | “Special Factors—Purposes of and Reasons for the Merger” |
| · | “Special Factors—Interests of Certain Persons in the Merger” |
| · | “Annex C––Opinion of Merrill Lynch as Financial Advisor” |
(c) Approval of Security Holders. The information
set forth in the Proxy Statement under the following captions is incorporated herein by reference:
| · | “Questions and Answers about the Extraordinary General Meeting and the Merger” |
| · | “The Extraordinary General Meeting––Record Date; Shares and ADSs Entitled to Vote” |
| · | “The Extraordinary General Meeting—Quorum” |
| · | “The Extraordinary General Meeting—Vote Required” |
The Merger does not require approval by the holders of at least
a majority of the Shares held by the Company’s unaffiliated security holders.
(d)––(e) Unaffiliated Representative; Approval
of Directors. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
| · | “Summary Term Sheet—Recommendations of the Special Committee and the Board” |
| · | “Summary Term Sheet—Opinion of Merrill Lynch, the Special Committee’s Financial Advisor” |
| · | “Special Factors––Background of the Merger” |
| · | “Special Factors––Reasons for the Merger and Recommendation of the Special Committee and the Board” |
| · | “Special Factors—Position of the Buyer Group as to the Fairness of the Merger” |
| · | “Special Factors—Interests of Certain Persons in the Merger” |
| · | “Special Factors––Opinion of Merrill Lynch, the Special Committee’s Financial Advisor” |
| · | “Annex C––Opinion of Merrill Lynch as Financial Advisor” |
(f) Other Offers. The information set forth in the
Proxy Statement under the following captions is incorporated herein by reference:
Item 9. Reports, Opinions, Appraisals and Negotiations
(a)—(b) Report, Opinion or Appraisal; Preparer and
Summary of the Report, Opinion or Appraisal. The information set forth in the Proxy Statement under the following captions
is incorporated herein by reference:
| · | “Summary Term Sheet—Opinion of Merrill Lynch, the Special Committee’s Financial Advisor” |
| · | “Special Factors––Background of the Merger” |
| · | “Special Factors––Certain Financial Projections” |
| · | “Special Factors––Opinion of Merrill Lynch, the Special Committee’s Financial Advisor” |
| · | “Annex C––Opinion of Merrill Lynch as Financial Advisor” |
(c) Availability of Documents.
The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
| · | “Where You Can Find More Information” |
The reports, opinions or appraisals referenced in this Item
9 will be made available for inspection and copying at the principal executive offices of the Company during its regular business
hours by any interested holder of Shares and ADSs or his, her or its representative who has been so designated in writing.
Item 10. Source and Amounts of Funds or Other Consideration
(a)—(b), (d) Source of Funds; Conditions; Borrowed
Funds. The information set forth in the Proxy Statement under the following caption is incorporated herein by reference:
| · | “Summary Term Sheet––Financing of the Merger” |
| · | “Summary Term Sheet––Fees and Expenses” |
| · | “Special Factors––Financing of the Merger” |
| · | “Special Factors––Limited Guarantees” |
| · | “Special Factors––Fees and Expenses” |
| · | “Annex A––Agreement and Plan of Merger” |
| · | “Annex B—Plan of Merger” |
(c) Expenses. The information set forth in the Proxy
Statement under the following captions is incorporated herein by reference:
| · | “Summary Term Sheet––Termination Fees and Reimbursement of Expenses” |
| · | “Summary Term Sheet––Fees and Expenses” |
| · | “Special Factors––Fees and Expenses” |
| · | “The Merger Agreement––Termination Fee and Reimbursement of Expenses” |
| · | “The Extraordinary General Meeting––Solicitation of Proxies” |
| · | “Annex A––Agreement and Plan of Merger” |
| · | “Annex B—Plan of Merger” |
Item 11. Interest in Securities of the Subject Company
(a) Securities Ownership. The information set forth
in the Proxy Statement under the following caption is incorporated herein by reference:
| · | “Summary Term Sheet—Interests of the Company’s Executive Officers and Directors in the Merger” |
| · | “Special Factors—Interests of Certain Persons in the Merger” |
| · | “Security Ownership of Certain Beneficial Owners and Management of the Company” |
(b) Securities Transactions. The information set forth
in the Proxy Statement under the following captions is incorporated herein by reference:
| · | “Transactions in the Shares and ADSs” |
Item 12. The Solicitation or Recommendation
(d) Intent to Tender or Vote in a Going-Private Transaction.
The information set forth in the Proxy Statement under the following captions is incorporated herein by reference:
| · | “Summary Term Sheet—Recommendations of the Special Committee and the Board” |
| · | “Summary Term Sheet—Interests of the Company’s Executive Officers and Directors in the Merger” |
| · | “Summary Term Sheet—Support Agreement” |
| · | “Questions and Answers about the Extraordinary General Meeting and the Merger” |
| · | “Special Factors––Reasons for the Merger and Recommendation of the Special Committee and the Board” |
| · | “Special Factors—Support Agreement” |
| · | “Special Factors—Voting by the Rollover Shareholders at the Extraordinary General Meeting” |
| · | “The Extraordinary General Meeting—Vote Required” |
| · | “Security Ownership of Certain Beneficial Owners and Management of the Company” |
(e) Recommendations of Others. The information set
forth in the Proxy Statement under the following captions is incorporated herein by reference:
| · | “Summary Term Sheet—Recommendations of the Special Committee and the Board” |
| · | “Summary Term Sheet—Position of the Buyer Group as to Fairness” |
| · | “Summary Term Sheet—Interests of the Company’s Executive Officers and Directors in the Merger” |
| · | “Questions and Answers about the Extraordinary General Meeting and the Merger––How does the Board recommend
that I vote on the proposals?” |
| · | “Special Factors––Reasons for the Merger and Recommendation of the Special Committee and the Board” |
| · | “Special Factors—Position of the Buyer Group as to the Fairness of the Merger” |
| · | “Special Factors—Purposes of and Reasons for the Merger” |
| · | “Special Factors—Interests of Certain Persons in the Merger” |
| · | “The Extraordinary General Meeting––Vote Required” |
| · | “Security Ownership of Certain Beneficial Owners and Management of the Company” |
Item 13. Financial Statements
(a) Financial Information. The audited
financial statements of the Company for the two years ended December 31, 2013 and 2014 are incorporated herein by
reference to the Company’s Form 20-F for the year ended December 31, 2014, originally filed on April 17, 2015 (see page
F-1 and following pages thereto). The information set forth in the Proxy Statement under the following captions is
incorporated herein by reference:
| · | “Where You Can Find More Information” |
(b) Pro Forma Information. Not applicable.
Item 14. Persons/Assets, Retained, Employed, Compensated
or Used
(a)—(b) Solicitations or Recommendations; Employees
and Corporate Assets. The information set forth in the Proxy Statement under the following captions is incorporated herein
by reference:
| · | “Summary Term Sheet—The Parties Involved in the Merger” |
| · | “Summary Term Sheet—Recommendations of the Special Committee and the Board” |
| · | “Summary Term Sheet—Position of the Buyer Group as to Fairness” |
| · | “Summary Term Sheet—Interests of the Company’s Executive Officers and Directors in the Merger” |
| · | “Summary Term Sheet––Fees and Expenses” |
| · | “Questions and Answers about the Extraordinary General Meeting and the Merger” |
| · | “Special Factors––Reasons for the Merger and Recommendation of the Special Committee and the Board” |
| · | “Special Factors—Position of the Buyer Group as to the Fairness of the Merger” |
| · | “Special Factors—Interests of Certain Persons in the Merger” |
| · | “Special Factors––Fees and Expenses” |
| · | “The Extraordinary General Meeting—Solicitation of Proxies” |
| · | “Annex F—Directors and Executive Officers of Each Filing Person” |
Item 15. Additional Information
(c) Other Material Information. The information set
forth in the Proxy Statement, including all annexes thereto, is incorporated in its entirety herein by reference.
Item 16. Exhibits
| (a)-(1) |
Preliminary Proxy Statement of the Company, dated as of [ ], 2015. |
| (a)-(2) |
Letter to Shareholders, incorporated herein by reference to the Proxy Statement. |
| (a)-(3) |
Notice of Extraordinary General Meeting of Shareholders of the Company, incorporated herein by reference to the Proxy Statement. |
| (a)-(4) |
Form of Proxy Card, incorporated herein by reference to the Proxy Statement. |
| (a)-(5) |
Form of ADS Voting Instruction Card, incorporated herein by reference to the Proxy Statement. |
| (a)-(6) |
Press Release issued by the Company, dated as of April 3, 2015, incorporated herein by reference to Exhibit 99.1 to the Report on Form 6-K furnished by the Company to the SEC on April 3, 2015. |
| (b)-(1) |
Equity Commitment Letter, dated as of April 3, 2015, by Zhongrong Legend, incorporated herein by reference to Exhibit 7.09 to Schedule 13D filed by Yili Shengda on April 6, 2015. |
| (b)-(2) |
Equity Commitment Letter, dated as of April 3, 2015, by Ningxia Silkroad, incorporated herein by reference to Exhibit 7.10 to Schedule 13D filed by Yili Shengda on April 6, 2015. |
| (b)-(3) |
Equity Commitment Letter, dated as of April 3, 2015, by Zhengjun Investment, incorporated herein by reference to Exhibit 7.11 to Schedule 13D filed by Yili Shengda on April 6, 2015. |
| (c)-(1) |
Opinion of Merrill Lynch, dated as of April 3, 2015, incorporated herein by reference to Annex C of the Proxy Statement. |
| (c)-(2) |
Presentation/discussion materials prepared by Merrill Lynch for discussion with the Special Committee and the Board, dated April 3, 2015. |
| (c)-(3) |
Presentation/discussion materials prepared by Merrill Lynch for discussion with the Special Committee, dated September 23, 2014. |
| (d)-(1) |
Agreement and Plan of Merger, dated as of April 3, 2015, among Parent, Merger Sub and the Company, incorporated herein by reference to Annex A of the Proxy Statement. |
| (d)-(2) |
Support Agreement, dated as of April 3, 2015, by and among Parent, Yili Shengda, Zhongrong Shengda, Zhongrong Investment, Orient Hongtai, Orient Hongzhi and Hao Ding, incorporated herein by reference to Annex E of the Proxy Statement. |
| (d)-(3) |
Limited Guarantee, dated as of April 3, 2015, by Zhongrong Legend, incorporated herein by reference to Exhibit 99.3 to the Report on Form 6-K furnished by the Company to the SEC on April 3, 2015. |
| (d)-(4) |
Limited Guarantee, dated as of April 3, 2015, by Ningxia Silkroad, incorporated herein by reference to Exhibit 99.4 to the Report on Form 6-K furnished by the Company to the SEC on April 3, 2015. |
| (d)-(5) |
Limited Guarantee, dated as of April 3, 2015, by Zhengjun Investment, incorporated herein by reference to Exhibit 99.5 to the Report on Form 6-K furnished by the Company to the SEC on April 3, 2015. |
| (d)-(6) |
Consortium Agreement, dated as of January 27, 2014, by and among Shanda Interactive Entertainment Limited, Primavera Capital (Cayman) Fund I L.P., Perfect World Co., Ltd. (which became a party on April 18, 2014 by entering into an adherence agreement), FV Investment Holdings (which became a party on April 25, 2014 by entering into an adherence agreement) and CAP IV Engagement Limited (which became a party on May 19, 2014 by entering into an adherence agreement), incorporated herein by reference to Exhibit 7.03 to the Schedule 13D filed by Premium Lead Company Limited, Shanda Interactive Entertainment Limited and Shanda SDG Investment Limited on January 30, 2014. |
| (d)-(7) |
Share Purchase Agreement, dated as of January 27, 2014, by and among Shanda SDG Investment Limited and Primavera Capital (Cayman) Fund I L.P., incorporated herein by reference to Exhibit 7.04 to the Schedule 13D filed by Premium Lead Company Limited, Shanda Interactive Entertainment Limited and Shanda SDG Investment Limited on January 30, 2014. |
| (d)-(8) |
Share Purchase Agreement, dated as of April 18, 2014, by and among Shanda SDG Investment Limited and Perfect World Co., Ltd., incorporated herein by reference to Exhibit 7.05 to the Schedule 13D Amendment filed by Premium Lead Company Limited, Shanda Interactive Entertainment Limited and Shanda SDG Investment Limited on April 21, 2014. |
| (d)-(9) |
Adherence Agreement, dated as of April 18, 2014, by and among Perfect World Co., Ltd., Shanda Interactive Entertainment Limited and Primavera Capital (Cayman) Fund I L.P., incorporated herein by reference to Exhibit 7.06 to the Schedule 13D Amendment filed by Premium Lead Company Limited, Shanda Interactive Entertainment Limited and Shanda SDG Investment Limited on April 21, 2014. |
| (d)-(10) |
Adherence Agreement, dated as of April 25, 2014, by and among FV Investment Holdings, Shanda Interactive Entertainment Limited, Primavera Capital (Cayman) Fund I L.P.and Perfect World Co., Ltd., incorporated herein by reference to Exhibit 7.07 to the Schedule 13D Amendment filed by Premium Lead Company Limited, Shanda Interactive Entertainment Limited and Shanda SDG Investment Limited on April 28, 2014. |
| (d)-(11) |
Adherence Agreement, dated as of May 19, 2014, by and among CAP IV Engagement Limited, Shanda Interactive Entertainment Limited, Primavera Capital (Cayman) Fund I L.P., Perfect World Co., Ltd. and FV Investment Holdings, incorporated herein by reference to Exhibit 7.08 to the Schedule 13D Amendment filed by Premium Lead Company Limited, Shanda Interactive Entertainment Limited and Shanda SDG Investment Limited on May 19, 2014. |
| (d)-(12) |
Share Purchase Agreement, dated as of August 31, 2014, by and between Shanda SDG Investment Limited and Orient Finance Holdings (Hong Kong) Limited, incorporated herein by reference to Exhibit 7.09 to the Schedule 13D Amendment filed by Premium Lead Company Limited, Shanda Interactive Entertainment Limited and Shanda SDG Investment Limited on September 3, 2014. |
| (d)-(13) |
Share Purchase Agreement, dated as of September 1, 2014, by and between Shanda SDG Investment Limited and Shanghai Buyout Fund L.P., incorporated herein by reference to Exhibit 7.10 to the Schedule 13D Amendment filed by Premium Lead Company Limited, Shanda Interactive Entertainment Limited and Shanda SDG Investment Limited on September 3, 2014. |
| (d)-(14) |
Share Purchase Agreement, dated as of September 1, 2014, by and between Shanda SDG Investment Limited and Ningxia Zhongyincashmere International Group Co., Ltd., incorporated herein by reference to Exhibit 7.11 to the Schedule 13D Amendment filed by Premium Lead Company Limited, Shanda Interactive Entertainment Limited and Shanda SDG Investment Limited on September 3, 2014. |
| (d)-(15) |
Adherence Agreement, dated as of September 1, 2014, by and among Orient Finance Holdings (Hong Kong) Limited, Shanda Interactive Entertainment Limited and Primavera Capital (Cayman) Fund I L.P., incorporated herein by reference to Exhibit 7.12 to the Schedule 13D Amendment filed by Premium Lead Company Limited, Shanda Interactive Entertainment Limited and Shanda SDG Investment Limited on September 3, 2014. |
| (d)-(16) |
Adherence Agreement, dated as of September 1, 2014, by and among Shanghai Buyout Fund L.P., Shanda Interactive Entertainment Limited and Primavera Capital (Cayman) Fund I L.P., incorporated herein by reference to Exhibit 7.13 to the Schedule 13D Amendment filed by Premium Lead Company Limited, Shanda Interactive Entertainment Limited and Shanda SDG Investment Limited on September 3, 2014. |
| (d)-(17) |
Adherence Agreement, dated as of September 1, 2014, by and among Ningxia Zhongyincashmere International Group Co., Ltd., Shanda Interactive Entertainment Limited and Primavera Capital (Cayman) Fund I L.P., incorporated herein by reference to Exhibit 7.14 to the Schedule 13D Amendment filed by Premium Lead Company Limited, Shanda Interactive Entertainment Limited and Shanda SDG Investment Limited on September 3, 2014. |
| (d)-(18) |
Withdrawal Notice, dated as of September 1, 2014, by and among Perfect World Co., Ltd., FV Investment Holdings, CAP IV Engagement Limited, Shanda Interactive Entertainment Limited and Primavera Capital (Cayman) Fund I L.P., incorporated herein by reference to Exhibit 7.15 to the Schedule 13D Amendment filed by Premium Lead Company Limited, Shanda Interactive Entertainment Limited and Shanda SDG Investment Limited on September 3, 2014. |
| (d)-(19) |
Withdrawal Notice, dated as of September 1, 2014, by and among Primavera Capital (Cayman) Fund I L.P., Shanda Interactive Entertainment Limited, Orient Finance Holdings (Hong Kong) Limited, Shanghai Buyout Fund L.P. and Ningxia Zhongyincashmere International Group Co., Ltd., incorporated herein by reference to Exhibit 7.16 to the Schedule 13D Amendment filed by Premium Lead Company Limited, Shanda Interactive Entertainment Limited and Shanda SDG Investment Limited on September 3, 2014. |
| (d)-(20) |
Share Purchase Agreement, dated as of September 1, 2014, by and among Primavera Capital (Cayman) Fund I L.P., Perfect World Co., Ltd. and Shanghai Buyout Fund L.P., incorporated herein by reference to Exhibit 7.05 to Schedule 13D filed by Perfect World Co., Ltd. on September 2, 2014. |
| (d)-(21) |
Consent and Release, dated as of September 1, 2014, by and between Shanda SDG Investment Limited, Primavera Capital (Cayman) Fund I L.P. and Perfect World Co., Ltd., incorporated herein by reference to Exhibit 7.17 to the Schedule 13D Amendment filed by Premium Lead Company Limited, Shanda Interactive Entertainment Limited and Shanda SDG Investment Limited on September 3, 2014. |
| (d)-(22) |
Exclusivity and Release, dated as of October 28, 2014, by and between Ningxia and Shanda Interactive Entertainment Limited, incorporated herein by reference to Exhibit 7.18 to Schedule 13D filed by Shanda Interactive Entertainment Limited on October 28, 2014. |
| (d)-(23) |
Share Purchase Agreement, dated as of November 25, 2014, by and among Shanda SDG Investment Limited, Ningxia, Zhongrong Shengda and Yili Shengda, incorporated herein by reference to Exhibit 7.19 to Schedule 13D filed by Shanda Interactive Entertainment Limited on November 26, 2014. |
| (d)-(24) |
Consortium Agreement, dated as of December 5, 2014, by and between Ningxia Yilida and Ningxia, incorporated herein by reference to Exhibit 7.03 to Schedule 13D filed by Yili Shengda on December 5, 2014. |
| (d)-(25) |
Consortium Agreement, dated as of March 16, 2015, by and among Ningxia Yilida, Ningxia, Orient Hongtai, Orient Hongzhi and Hao Ding, incorporated herein by reference to Exhibit 7.04 to Schedule 13D filed by Yili Shengda on March 17, 2015. |
| (d)-(26) |
Adherence Agreement, dated as of April 3, 2015, by Zhongrong Legend, incorporated herein by reference to Exhibit 7.07 to Schedule 13D filed by Yili Shengda on April 6, 2015. |
| (d)-(27) |
Adherence Agreement, dated as of April 3, 2015, by Ningxia Silkroad, incorporated herein by reference to Exhibit 7.08 to Schedule 13D filed by Yili Shengda on April 6, 2015. |
| (d)-(28) |
Adherence Agreement, dated as of April 3, 2015, by Zhengjun Investment, incorporated herein by reference to Exhibit 7.09 to Schedule 13D filed by Yili Shengda on April 6, 2015. |
| (f)-(1) |
Dissenters’ Rights, incorporated herein by reference to the section entitled “Dissenters’ Rights” in the Proxy Statement. |
| (f)-(2) |
Section 238 of the Cayman Islands Companies Law Cap. 22 (Law 3 of 1961, as consolidated and revised), incorporated herein by reference to Annex D to the Proxy Statement. |
| (g) |
Not applicable. |
SIGNATURE
After due inquiry and to the best of each
of the undersigned’s knowledge and belief, each of the undersigned certifies that the information set forth in this Transaction
Statement is true, complete and correct.
Dated as of June 11, 2015
Shanda
Games Limited
By: /s/ Li Yao
Name: Li Yao
Title: Chief Financial Officer
YINGFENG ZHANG
/s/ Yingfeng Zhang
Name: Yingfeng Zhang
Capitalhold
Limited
By: /s/ Yingfeng Zhang
Name: Yingfeng Zhang
Title: Director
Capitalcorp
Limited
By: /s/ Yingfeng Zhang
Name: Yingfeng Zhang
Title: Director
Ningxia
Yilida Capital Investment Limited Partnership
By Shanghai Yingfeng Investment
Management Company Limited, its general partner
By: /s/ Yingfeng Zhang
Name: Yingfeng Zhang
Title: Director
Yili
Shengda Investment Holdings (Hong Kong) Company Limited
By: /s/ Yingfeng Zhang
Name: Yingfeng Zhang
Title: Director
Ningxia
Zhengjun Equity Investment Partnership Enterprise (Limited Partnership)
By Shanghai Yingfeng Investment
Management Company Limited, its general partner
By: /s/ Yingfeng Zhang
Name: Yingfeng Zhang
Title: Director
SHANGHAI YINGFENG INVESTMENT MANAGEMENT COMPANY
LIMITED
By: /s/ Yingfeng Zhang
Name: Yingfeng Zhang
Title: Director
Ningxia
Zhongyincashmere International Group Co., Ltd.
By: /s/ Shengming Ma
Name: Shengming Ma
Title: Chairman
Zhongrong
Shengda Investment Holdings (Hong Kong) Company Limited
By: /s/ Shengming Ma
Name: Shengming Ma
Title: Director
Zhongrong
Investment Holdings (Hong Kong) Co., Ltd.
By: /s/ Shengming Ma
Name: Shengming Ma
Title: Director
Ningxia
Silkroad Equity Investment Partnership Enterprise (Limited Partnership)
By Ningxia Zhongyincashmere International
Group Co., Ltd., its general partner
By: /s/ Shengming Ma
Name: Shengming Ma
Title: Chairman
Ningxia
Zhongrong Legend Equity Investment Partnership Enterprise (Limited Partnership)
By Ningxia Zhongyincashmere International
Group Co., Ltd., its general partner
By: /s/ Shengming Ma
Name: Shengming Ma
Title: Chairman
SHAOLIN LIANG
/s/ Shaolin Liang
Name: Shaolin Liang
Orient
Hongtai (Hong Kong) Limited
By: /s/ Yuntao Ma
Name: Yuntao Ma
Title: Director
Orient
Hongzhi (Hong Kong) Limited
By: /s/ Yuntao Ma
Name: Yuntao Ma
Title: Director
Hao
Ding International Limited
By: /s/ Jing Liu
Name: Jing Liu
Title: Director
Exhibit (a)-(1)
PROXY STATEMENT OF THE COMPANY
[ ], 2015
Shareholders of Shanda Games Limited
Re: Notice of Extraordinary General Meeting of Shareholders
Dear Shareholder:
You are cordially invited to attend an
extraordinary general meeting of shareholders of Shanda Games Limited, an exempted company with limited liability incorporated
under the laws of the Cayman Islands (the “Company”), to be held on [ ],
2015 at [ ] a.m. (Hong Kong time). The meeting will be held at the offices of Davis
Polk & Wardwell, The Hong Kong Club Building, 3A Chater Road, Central, Hong Kong. The accompanying notice of the extraordinary
general meeting and proxy statement provide information regarding the matters to be acted on at the extraordinary general meeting,
including at any adjournment thereof.
The Company entered into an agreement and
plan of merger, dated as of April 3, 2015, with Capitalhold Limited, an exempted company with limited liability incorporated under
the laws of the Cayman Islands (“Parent”), and Capitalcorp Limited, an exempted company with limited liability incorporated
under the laws of the Cayman Islands and a wholly owned subsidiary of Parent (“Merger Sub”). Such agreement and plan
of merger, as may be amended from time to time, is referred to herein as the “Merger Agreement.” Pursuant to the Merger
Agreement, Merger Sub will be merged with and into the Company (the “Merger”), with the Company continuing as the surviving
corporation (the “Surviving Corporation”) and becoming a wholly owned subsidiary of Parent. The purpose of the extraordinary
general meeting is for you and the other shareholders of the Company to consider and vote upon a proposal to authorize and approve
the Merger Agreement and the plan of merger required to be filed with the Registrar of Companies of the Cayman Islands (the “Cayman
Registrar”) in connection with the Merger (the “Plan of Merger”), and the transactions contemplated by the Merger
Agreement and the Plan of Merger (collectively, the “Transactions”), including the Merger. Copies of the Merger Agreement
and the Plan of Merger are attached as Annex A and Annex B, respectively, to the accompanying proxy statement.
Merger Sub and Parent were
formed solely for the purpose of the Merger. At the effective time of the Merger (the “Effective Time”), Parent
will be beneficially owned by (a) Ningxia Yilida Capital Investment Limited Partnership (“Ningxia Yilida”), a
limited partnership formed under the laws of the People’s Republic of China and an affiliate of the Company’s
acting chief executive officer, Mr. Yingfeng Zhang, (b) Ningxia Zhongyincashmere International Group Co.,
Ltd. (“Ningxia”), a company formed under the laws of the People’s Republic of China, (c) Orient Hongtai
(Hong Kong) Limited (“Orient Hongtai”), a company incorporated and existing under the laws of Hong Kong and
an affiliate of Orient Securities Company Limited, (d) Orient Hongzhi (Hong Kong) Limited (“Orient Hongzhi”),
a company incorporated and existing under the laws of Hong Kong and an affiliate of Orient Securities Company Limited, (e)
Hao Ding International Limited (“Hao Ding”), a business company established under the laws of the British
Virgin Islands and an affiliate of Haitong Securities Co., Ltd., (f) Ningxia Zhengjun Equity Investment Partnership
Enterprise (Limited Partnership) (“Zhengjun Investment”), a limited partnership organized and existing under the
laws of the People’s Republic of China and an affiliate of Mr. Yingfeng Zhang, (g) Ningxia Silkroad Equity Investment
Partnership Enterprise (Limited Partnership) (“Ningxia Silkroad”), a limited partnership organized and existing
under the laws of the People’s Republic of China and an affiliate of Ningxia, and (h) Ningxia Zhongrong Legend
Equity Investment Partnership Enterprise (Limited Partnership) (“Zhongrong Legend”), a limited partnership
organized and existing under the laws of the People’s Republic of China and an affiliate of Ningxia. Unless the context
otherwise requires, Ningxia Yilida, Ningxia, Orient Hongtai, Orient Hongzhi, Hao Ding, Zhengjun Investment, Ningxia Silkroad
and Zhongrong Legend are collectively referred to herein as the “Buyer Group.”
Under our amended and restated memorandum
and articles of association, our ordinary shares, par value US$0.01 per share (each, a “Share”) are divided into Class
A ordinary shares and Class B ordinary shares. Holders of Class A ordinary shares are entitled to one vote per share, and holders
of Class B ordinary shares are entitled to 10 votes per share. Holders of our Class A ordinary shares and Class B ordinary shares
will vote as a single class on all matters described in the accompanying proxy statement. As of the date of the accompanying proxy
statement, the Buyer Group collectively beneficially owns 311,568,626 Class A ordinary shares (including Class A ordinary shares
represented by the Company’s American depositary shares (“ADSs”), each representing two Class A ordinary shares)
and 97,518,374 Class B ordinary shares, representing approximately 76.1% of the Company’s issued and outstanding Shares
and 1,286,752,366 votes, or approximately 90.9% of the total number of votes represented by the Company’s issued and outstanding
Shares, which is more than the two-thirds majority necessary to approve a special resolution of the shareholders of the Company
as required under Cayman Islands law to authorize and approve the Merger Agreement, the Plan of Merger and the Transactions, including
the Merger. If the Merger is completed, the Company will continue its operations as a privately held company and will be beneficially
owned by the Buyer Group and the Company’s ADSs will no longer be listed on the NASDAQ Global Select Market (“NASDAQ”),
and the ADS program for the Company’s Class A ordinary shares will terminate.
If the Merger is completed, each Share
issued and outstanding immediately prior to the Effective Time will be cancelled in exchange for the right to receive US$3.55 and
each issued and outstanding ADS will be cancelled in exchange for the right to receive US$7.10 (less US$0.05 per ADS cancellation
fees pursuant to the terms of the Deposit Agreement, dated as of September 24, 2009, among the Company, JPMorgan Chase Bank, N.A.
(the “ADS Depositary”) and the holders of ADSs issued thereunder (the “Deposit Agreement”)), in each case,
in cash, without interest and net of any applicable withholding taxes, other than (a) the Rollover Shares (as defined below) and
(b) the Shares held by Parent, the Company or any of their subsidiaries immediately prior to the Effective Time (collectively,
the “Excluded Shares”), which will be cancelled without payment of any consideration or distribution therefor.
In addition to the foregoing, at the Effective
Time, (a) each option to purchase Shares, whether vested or unvested (“Company Options”) and whether or not granted
under the Company’s amended and restated 2008 Equity Compensation Plan (the “Share Incentive Plan”), that is
issued and outstanding immediately prior to the Effective Time, will be cancelled and converted into the right to receive, as soon
as practicable after the Effective Time, an amount equal to the product of the total number of Shares issuable under such Company
Option immediately prior to the Effective Time multiplied by the excess of US$3.55 over the exercise price payable per Share under
such Company Option, in cash, without interest and net of any applicable withholding taxes, and (b) each restricted Share
with respect to which the restrictions have not lapsed and each restricted stock unit, whether or not the restrictions with respect
thereto have lapsed, in each case, whether or not awarded under the Share Incentive Plan, that is issued and outstanding immediately
prior to the Effective Time, will be cancelled and converted into the right to receive, as soon as practicable after the Effective
Time, an amount equal to US$3.55, in cash, without interest and net of any applicable withholding taxes.
A special committee (the “Special
Committee”) of the board of directors of the Company (the “Board”), composed solely of directors who are unaffiliated
with any member of the Buyer Group or any member of the management of the Company, reviewed and considered the terms and conditions
of the Merger Agreement, the Plan of Merger and the Transactions, including the Merger. At a meeting on April 3, 2015, the Special
Committee, after due consideration, unanimously (a) determined that the Merger Agreement, the Plan of Merger and the Transactions,
including the Merger, were fair to, and in the best interests of, the Company and its shareholders and ADS holders, other than
the members of the Buyer Group and their respective affiliates (such shareholders and ADS holders, the “Unaffiliated Holders”);
(b) declared advisable the Merger Agreement, the Plan of Merger and the Transactions, including the Merger; and (c) recommended
that the Board authorize and approve the Merger Agreement, the Plan of Merger and the Transactions, including the Merger.
At a meeting on April 3, 2015, the Board,
acting upon the unanimous recommendation of the Special Committee, unanimously (a) determined that it was fair to, advisable and
in the best interests of the Company and the Unaffiliated Holders to consummate the Transactions, including the Merger, (b) authorized
and approved the execution, delivery and performance by the Company of the Merger Agreement, the Plan of Merger and the limited
guarantees by Zhengjun Investment, Ningxia Silkroad and Zhongrong Legend in favor of the Company (the “Limited Guarantees”)
pursuant to which such guarantors have collectively guaranteed in favor of the Company the entire portion of the payment obligations
of Parent and Merger Sub under the Merger Agreement, and (c) resolved to recommend in favor of the authorization and approval
of the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger, to the shareholders
of the Company and directed that the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the
Merger, be submitted to a vote of the shareholders of the Company for authorization and approval.
The Board unanimously recommends that
you vote FOR the proposal to authorize and approve the Merger Agreement, the Plan of Merger and the Transactions, including the
Merger, FOR the proposal to authorize the directors to do all things necessary to give effect to the Merger Agreement, the Plan
of Merger and the Transactions, including the Merger, and FOR the proposal to adjourn the extraordinary general meeting in order
to allow the Company to solicit additional proxies in the event that there are insufficient proxies received at the time of the
extraordinary general meeting to pass the resolutions to be proposed at the extraordinary general meeting.
In considering the recommendation of
the Special Committee and the Board, you should be aware that some of the Company’s directors and executive officers have
interests in the Merger that are different from, or in addition to, the interests of the shareholders of the Company generally.
As of the date of the accompanying proxy statement, Mr. Yingfeng Zhang, the chairman of the Board and acting chief executive officer
of the Company, is the sole shareholder of Shanghai Yingfeng Investment Management Company Limited (“Shanghai Yingfeng”),
a limited liability company organized under the laws of the People’s Republic of China and, the general partner of Ningxia
Yilida and Zhengjun Investment. Both Ningxia Yilida and Zhengjun Investment are members of the Buyer Group and therefore, Mr.
Yingfeng Zhang has interests that are different from, or in addition to, the interests of the shareholders of the Company generally.
Mr. Shaolin Liang, a director of the Company, serves as a vice general manager of Ningxia, which is a member of the Buyer Group.
Mr. Lijun Lin, a director of the Company, served as the chief executive officer of China Universal Asset Management Co., Ltd.,
an affiliate of Orient Hongtai and Orient Hongzhi, each of which is a member of the Buyer Group, from April 2004 to April 16,
2015. Therefore, both Mr. Shaolin Liang and Mr. Lijun Lin may have interests that are different from, or in addition to, the interests
of the shareholders of the Company generally. Yili Shengda, Zhongrong Shengda, Orient Hongtai, Orient Hongzhi, Zhongrong Investment
and Hao Ding (collectively, the “Rollover Shareholders”) have executed with Parent a support agreement, dated as of
April 3, 2015 (as may be amended from time to time, the “Support Agreement”), providing that, among other things,
(a) the Rollover Shareholders will vote all of the Shares (including Shares represented by ADSs) owned directly or indirectly
by them in favor of the authorization and approval of the Merger Agreement, the Plan of Merger and the Transactions, including
the Merger, and (b) the Rollover Shareholders agree that 48,759,187 Class B ordinary shares held by Yili Shengda, 48,759,187 Class
B ordinary shares held by Zhongrong Shengda, 61,776,334 Class A ordinary shares held by Orient Hongtai, 61,776,335 Class A ordinary
shares held by Orient Hongzhi, 80,577,828 Class A ordinary shares held by Zhongrong Investment and 107,438,129 Class A ordinary
shares held by Hao Ding (collectively, the “Rollover Shares”) will, at the Effective Time, be cancelled for no consideration
in the Merger. As of the date of the accompanying proxy statement, the Rollover Shareholders beneficially own an aggregate of
311,568,626 Class A ordinary shares (including Class A ordinary shares represented by ADSs) and 97,518,374 Class B ordinary shares,
representing approximately 76.1% of the Company’s issued and outstanding Shares and 1,286,752,366 votes, or approximately
90.9% of the total number of votes represented by the Company’s issued and outstanding Shares, which is more than the two-thirds
majority necessary to approve a special resolution of the shareholders of the Company as required under Cayman Islands law to
authorize and approve the Merger Agreement, the Plan of Merger and the Transactions, including the Merger.
The accompanying proxy statement provides
detailed information about the Merger and the extraordinary general meeting. We encourage you to read the entire document and all
of the attachments and other documents referred to or incorporated by reference herein carefully. You may also obtain more information
about the Company from documents the Company has filed with the United States Securities and Exchange Commission (the “SEC”),
which are available for free at the SEC’s website at www.sec.gov.
Regardless of the number of Shares that
you own, your vote is very important. The Merger cannot be completed unless the Merger Agreement, the Plan of Merger and the Transactions,
including the Merger, are authorized, approved and adopted by a special resolution representing an affirmative vote of shareholders
holding two-thirds or more of the voting power represented by the Shares (including Shares represented by ADSs) present and voting
in person or by proxy as a single class at the extraordinary general meeting.
Voting at the extraordinary general meeting
will take place by poll voting, as the chairman of the Board has undertaken to demand poll voting at the meeting. Whether or not
you plan to attend the extraordinary general meeting, please complete the accompanying proxy card, in accordance with the instructions
set forth on the proxy card, as promptly as possible. The deadline to lodge your proxy card is [ ],
2015 at 10:00 a.m. (Hong Kong time).
Completing the proxy card in accordance
with the instructions set forth on the proxy card will not deprive you of your right to attend the extraordinary general meeting
and vote your Shares in person. Please note, however, that if your Shares are held of record by a broker, bank or other nominee
and you wish to vote at the extraordinary general meeting in person, you must obtain from the record holder a proxy issued in your
name. If you submit a signed proxy card without indicating how you wish to vote, the Shares represented by your proxy card will
be voted FOR the proposal to authorize and approve the Merger Agreement, the Plan of Merger and the Transactions, including the
Merger, FOR the proposal to authorize the directors to do all things necessary to give effect to the Merger Agreement, the Plan
of Merger and the Transactions, including the Merger, and FOR the proposal to adjourn the extraordinary general meeting in order
to allow the Company to solicit additional proxies in the event that there are insufficient proxies received at the time of the
extraordinary general meeting to pass the resolutions to be proposed at the extraordinary general meeting.
As the record holder of the Shares represented
by ADSs, the ADS Depositary will endeavor to vote (or will endeavor to cause the vote of) the Shares it holds on deposit at the
extraordinary general meeting in accordance with the voting instructions timely received from holders of ADSs at the close of business
in New York City on [ ], 2015 (the “ADS Record Date”). The
ADS Depositary must receive such instructions no later than 12:00 p.m. (New York City time) on [ ],
2015. If any holder of ADSs does not timely deliver specific voting instructions to the ADS Depositary, or if the ADS Depositary
timely receives voting instructions from an ADS that fail to specify the manner in which the ADS Depositary is to vote the Shares
represented by the holder’s ADSs, the ADS Depositary has advised the Company that it will not vote or attempt to exercise
the right to vote any Shares underlying such holder’s ADSs. If you hold your ADSs in a brokerage, bank or other nominee account,
you must follow the procedures of the broker, bank or other nominee through which you hold your ADSs if you wish to vote.
Holders of ADSs will not be able to attend
the extraordinary general meeting unless they cancel their ADSs and become holders of Shares prior to the close of business in
the Cayman Islands on [ ], 2015 (the “Share Record Date”).
An ADS holder who wishes to cancel its ADSs needs to make arrangements to deliver the ADSs (or to the extent ADSs are certificated,
the certificates evidencing such ADSs) to the ADS Depositary for cancellation before 12:00 p.m. (New York City time) on [ ],
2015 together with (a) delivery instructions for the corresponding Shares (including the name and address of the person who will
be the registered holder of such Shares), (b) payment of the ADS cancellation fees (US$0.05 per ADS to be cancelled pursuant to
the terms of the Deposit Agreement) and any applicable taxes and (c) a certification that the ADS holder either (i) held the ADSs
as of the ADS Record Date and has not given, and will not give, voting instructions to the ADS Depositary as to the ADSs being
cancelled, or has given voting instructions to the ADS Depositary as to the ADSs being cancelled but undertakes not to vote the
corresponding Shares at the extraordinary general meeting or (ii) did not hold the ADSs as of the ADS Record Date and undertakes
not to vote the corresponding Shares at the extraordinary general meeting. If you hold your ADSs in a brokerage, bank or other
nominee account, please contact your broker, bank or other nominee to find out what actions you need to take to instruct the broker,
bank or other nominee to cancel the ADSs on your behalf. Upon cancellation of the ADSs, the ADS Depositary will arrange for JPMorgan
Chase Bank, N.A., Hong Kong branch, the custodian holding the Shares, to transfer registration of the Shares to the former ADS
holder (or a person designated by the former ADS holder). If after the registration of Shares in your name you wish to receive
a certificate evidencing the Shares registered in your name, you will need to make a request to the Company’s Registered
Office at Codan Trust Company (Cayman), c/o Conyers Dill & Pearman, 2901 One Exchange Square, 8 Connaught Place, Central, Hong
Kong, to issue and mail a certificate to your attention. If the Merger is not completed, the Company would continue to be a public
company in the United States and the ADSs would continue to be listed on NASDAQ. Shares are not listed and cannot be traded on
any stock exchange other than NASDAQ, and in such case only in the form of ADSs. As a result, if you have cancelled your ADSs to
attend the extraordinary general meeting and the Merger is not completed and you wish to be able to sell your Shares on a stock
exchange, you would need to deposit your Shares into the Company’s ADS program for the issuance of the corresponding number
of ADSs, subject to the terms and conditions of applicable law and the Deposit Agreement, including, among other things, payment
of relevant fees of the ADS Depositary for the issuance of ADSs and applicable share transfer taxes (if any) and related charges
pursuant to the Deposit Agreement.
Shareholders who elect to dissent from
the Merger will have the right to receive payment of the fair value of their Shares if the Merger is completed, but only if they
deliver to the Company, before the vote for the Merger is taken at the extraordinary general meeting, a written objection to the
Merger and subsequently comply with all procedures and requirements of Section 238 of the Cayman Islands Companies Law Cap. 22
(Law 3 of 1961, as consolidated and revised) (the “Cayman Islands Company Law”) for the exercise of dissenters’
rights, which is attached as Annex D to the accompanying proxy statement. The fair value of your Shares as determined under that
statute could be more than, the same as or less than the merger consideration you would receive pursuant to the Merger Agreement
if you do not exercise dissenters’ rights with respect to your Shares.
ADS HOLDERS WILL NOT HAVE THE RIGHT
TO EXERCISE DISSENTERS’ RIGHTS AND RECEIVE PAYMENT OF THE FAIR VALUE OF THE SHARES UNDERLYING THEIR ADSs. THE ADS DEPOSITARY
WILL NOT ATTEMPT TO EXERCISE ANY DISSENTERS’ RIGHTS WITH RESPECT TO ANY OF THE SHARES THAT IT HOLDS, EVEN IF AN ADS HOLDER
REQUESTS THE ADS DEPOSITARY TO DO SO. ADS HOLDERS WISHING TO EXERCISE DISSENTERS’ RIGHTS MUST SURRENDER THEIR ADSs TO THE
ADS DEPOSITARY, PAY THE ADS DEPOSITARY’S FEES REQUIRED FOR THE CANCELLATION OF THEIR ADSs, PROVIDE INSTRUCTIONS FOR THE REGISTRATION
OF THE CORRESPONDING SHARES IN THE COMPANY’S REGISTER OF MEMBERS, CERTIFY THAT THEY HAVE NOT GIVEN, AND WILL NOT GIVE, VOTING
INSTRUCTIONS AS TO THEIR ADSs (OR, ALTERNATIVELY, THAT THEY WILL NOT VOTE THE CORRESPONDING SHARES) BEFORE 12:00 P.M. (NEW YORK
CITY TIME) ON [ ], 2015 AND BECOME REGISTERED HOLDERS OF SHARES BY THE
CLOSE OF BUSINESS IN THE CAYMAN ISLANDS ON THE SHARE RECORD DATE. THEREAFTER, SUCH FORMER ADS HOLDERS MUST COMPLY WITH THE PROCEDURES
AND REQUIREMENTS FOR EXERCISING DISSENTERS’ RIGHTS WITH RESPECT TO THE SHARES UNDER SECTION 238 OF THE CAYMAN ISLANDS COMPANIES
LAW. IF THE MERGER IS NOT COMPLETED, THE COMPANY WOULD CONTINUE TO BE A PUBLIC COMPANY IN THE UNITED STATES AND THE ADSs WOULD
CONTINUE TO BE LISTED ON NASDAQ. SHARES ARE NOT LISTED AND CANNOT BE TRADED ON ANY STOCK EXCHANGE OTHER THAN NASDAQ, AND IN SUCH
CASE ONLY IN THE FORM OF ADSs. AS A RESULT, IF A FORMER ADS HOLDER HAS CANCELLED HIS, HER OR ITS ADSs TO EXERCISE DISSENTERS’
RIGHTS AND THE MERGER IS NOT COMPLETED AND SUCH FORMER ADS HOLDER WISHES TO BE ABLE TO SELL HIS, HER OR ITS SHARES ON A STOCK EXCHANGE,
SUCH FORMER ADS HOLDER WOULD NEED TO DEPOSIT HIS, HER OR ITS SHARES INTO THE COMPANY’S ADS PROGRAM FOR THE ISSUANCE OF THE
CORRESPONDING NUMBER OF ADSs, SUBJECT TO THE TERMS AND CONDITIONS OF APPLICABLE LAW AND THE DEPOSIT AGREEMENT, INCLUDING, AMONG
OTHER THINGS, PAYMENT OF RELEVANT FEES OF THE ADS DEPOSITARY FOR THE ISSUANCE OF ADSs AND APPLICABLE SHARE TRANSFER TAXES (IF ANY)
AND RELATED CHARGES PURSUANT TO THE DEPOSIT AGREEMENT.
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 extraordinary general meeting or proxy statement.
Any representation to the contrary is a criminal offense.
If you have any questions or need
assistance voting your Shares, please call Georgeson Inc., the proxy solicitor, toll-free at +1 800 509 0983 (or +1 781 575
2137 outside of North America) or by email at ShandaGames@georgeson.com.
Thank you for your cooperation and continued
support.
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Sincerely, |
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Yingfeng Zhang |
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Chairman of the Board |
The accompanying proxy statement is
dated [ ], 2015, and is first being mailed to the Company’s shareholders and
ADS holders on or about [ ], 2015.
SHANDA GAMES LIMITED
NOTICE OF EXTRAORDINARY GENERAL MEETING
OF SHAREHOLDERS TO BE HELD ON [ ], 2015
Dear Shareholder:
Notice is hereby given that an extraordinary
general meeting of the shareholders of Shanda Games Limited (referred to herein alternately as “the Company,” “us,”
“we” or other terms correlative thereto), will be held on [ ],
2015 at [ ] a.m. (Hong Kong time) at the offices of Davis Polk & Wardwell, The Hong Kong
Club Building, 3A Chater Road, Central, Hong Kong.
Only registered holders of ordinary shares
of the Company, par value US$0.01 per share (each, a “Share”), at the close of business in the Cayman Islands on [ ],
2015 (the “Share Record Date”) or their proxy holders are entitled to vote at this extraordinary general meeting or
any adjournment thereof. At the extraordinary general meeting, you will be asked to consider and vote upon the following resolutions:
| · | as a special resolution: |
THAT the Agreement and Plan of
Merger, dated as of April 3, 2015 (as may be amended from time to time, the “Merger Agreement”), among Capitalhold
Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands (“Parent”),
Capitalcorp Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands and a wholly
owned subsidiary of Parent (“Merger Sub”), and the Company (the Merger Agreement being in the form attached as Annex
A to the accompanying proxy statement and to be produced and made available for inspection at the extraordinary general meeting),
the plan of merger (the “Plan of Merger”) required to be registered with the Registrar of Companies in the Cayman
Islands (the Plan of Merger being in the form attached as Annex B to the accompanying proxy statement and to be produced and made
available for inspection at the extraordinary general meeting) in order to give effect to the merger of Merger Sub with and into
the Company, with the Company continuing as the surviving corporation (the “Surviving Corporation”) and becoming a
wholly owned subsidiary of Parent (the “Merger”), and any and all transactions contemplated by the Merger Agreement
and the Plan of Merger (collectively, the “Transactions”), including without limitation (i) the Merger, (ii) the amendment
of the authorized share capital of the Company from US$200,000,000 divided into 16,000,000,000 Class A ordinary shares of a par
value of US$0.01 each and 4,000,000,000 Class B ordinary shares of a par value of US$0.01 each to US$1,000 divided into 100,000
ordinary shares of a par value of US$0.01 each, and (iii) the replacing of the existing memorandum and articles of association
in their entirety with a new memorandum and articles of association, a copy of which is attached as Appendix II to the Plan of
Merger, be authorized, approved and adopted; and
| · | as an ordinary resolution: |
THAT the directors of the Company be authorized
to do all things necessary to give effect to the Merger Agreement, the Plan of Merger and the Transactions, including the Merger;
and
| · | if necessary, as an ordinary resolution: |
THAT the chairman of the extraordinary general
meeting be instructed to adjourn the extraordinary general meeting in order to allow the Company to solicit additional proxies
in the event that there are insufficient proxies received at the time of the extraordinary general meeting to pass the
resolutions to be proposed at the extraordinary general meeting.
Please refer to the accompanying proxy
statement, which is attached to and made a part of this notice. A list of the Company’s shareholders will be available at
its principal executive offices at No. 1 Office Building, No. 690 Bibo Road, Pudong New Area, Shanghai 201203, the People’s
Republic of China (the “PRC”), during ordinary business hours for the two business days immediately prior to the extraordinary
general meeting.
Certain existing shareholders of the
Company, namely (a) Yili Shengda Investment Holdings (Hong Kong) Company Limited (“Yili Shengda”), a company incorporated
and existing under the laws of Hong Kong and an affiliate of the Company’s acting chief executive officer, Mr. Yingfeng
Zhang, (b) Zhongrong Shengda Investment Holdings (Hong Kong) Company Limited (“Zhongrong Shengda”), a company incorporated
and existing under the laws of Hong Kong and an affiliate of Ningxia Zhongyincashmere International Group Co., Ltd. (“Ningxia”),
a company formed under the laws of the PRC, (c) Orient Hongtai (Hong Kong) Limited (“Orient Hongtai”), a company incorporated
and existing under the laws of Hong Kong and an affiliate of Orient Securities Company Limited, (d) Orient Hongzhi (Hong Kong)
Limited (“Orient Hongzhi”), a company incorporated and existing under the laws of Hong Kong and an affiliate of Orient
Securities Company Limited, (e) Zhongrong Investment Holdings (Hong Kong) Co., Ltd. (“Zhongrong Investment”), a company
incorporated and existing under the laws of Hong Kong and an affiliate of Ningxia, and (f) Hao Ding International Limited (“Hao
Ding”), a business company established under the laws of the British Virgin Islands and an affiliate of Haitong Securities
Co., Ltd. (collectively, the “Rollover Shareholders”), have entered into a support agreement, dated as of April 3,
2015 (as may be amended from time to time, the “Support Agreement”) with Parent, pursuant to which they have agreed,
among other things, that (i) the Rollover Shareholders will vote all of the Shares (including Shares represented by the Company’s
American depositary shares (“ADSs”), each representing two Class A ordinary shares) owned directly or indirectly by
them in favor of the authorization and approval of the Merger Agreement, the Plan of Merger and the Transactions, including the
Merger, and (ii) 48,759,187 Class B ordinary shares held by Yili Shengda, 48,759,187 Class B ordinary shares held by Zhongrong
Shengda, 61,776,334 Class A ordinary shares held by Orient Hongtai, 61,776,335 Class A ordinary shares held by Orient Hongzhi,
80,577,828 Class A ordinary shares held by Zhongrong Investment and 107,438,129 Class A ordinary shares held by Hao Ding (collectively,
the “Rollover Shares”) will, at the Effective Time, be cancelled for no consideration in the Merger. As of the date
of the accompanying proxy statement, the Rollover Shareholders beneficially own an aggregate of 311,568,626 Class A ordinary shares
(including Class A ordinary shares represented by ADSs) and 97,518,374 Class B ordinary shares, representing approximately 76.1%
of the Company’s issued and outstanding Shares and 1,286,752,366 votes, or approximately 90.9% of the total number of votes
represented by the Company’s issued and outstanding Shares, which is more than the two-thirds majority necessary to approve
a special resolution of the shareholders of the Company as required under Cayman Islands law to authorize and approve the Merger
Agreement, the Plan of Merger and the Transactions, including the Merger. Immediately following the consummation of the Merger,
Parent and the Company will be beneficially owned by (a) Ningxia Yilida Capital Investment Limited Partnership (“Ningxia
Yilida”), a limited partnership formed under the laws of the PRC and an affiliate of Mr. Yingfeng Zhang, (b) Ningxia, (c)
Orient Hongtai, (d) Orient Hongzhi, (e) Hao Ding, (f) Ningxia Zhengjun Equity Investment Partnership Enterprise (Limited Partnership)
(“Zhengjun Investment”), a limited partnership organized and existing under the laws of the PRC and an affiliate of
Mr. Yingfeng Zhang, (g) Ningxia Silkroad Equity Investment Partnership Enterprise (Limited Partnership) (“Ningxia Silkroad”),
a limited partnership organized and existing under the laws of the PRC and an affiliate of Ningxia, and (h) Ningxia Zhongrong
Legend Equity Investment Partnership Enterprise (Limited Partnership) (“Zhongrong Legend”), a limited partnership
organized and existing under the laws of the PRC and an affiliate of Ningxia. Unless the context otherwise requires, Ningxia Yilida,
Ningxia, Orient Hongtai, Orient Hongzhi, Hao Ding, Zhengjun Investment, Ningxia Silkroad and Zhongrong Legend are collectively
referred to herein as the “Buyer Group.”
After careful consideration
and acting upon the unanimous recommendation of a special committee (the “Special Committee”) of the board
of directors of the Company (the “Board”), composed solely of directors who are unaffiliated with any member of
the Buyer Group or any member of the management of the Company, the Board unanimously (a) determined that it is fair to,
advisable and in the best interests of the Company, its shareholders and ADS holders, other than the members of the Buyer
Group and their respective affiliates (such shareholders and ADS holders the “Unaffiliated Holders”), to
consummate the Transactions, including the Merger, (b) authorized and approved the execution, delivery and performance by the
Company of the Merger Agreement, the Plan of Merger and the limited guarantees by Zhengjun Investment, Ningxia Silkroad and
Zhongrong Legend in favor of the Company (the “Limited Guarantees”) pursuant to which such guarantors have
collectively guaranteed in favor of the Company the entire portion of the payment obligations of Parent and Merger Sub under
the Merger Agreement, and (c) resolved to recommend in favor of the authorization and approval of the Merger Agreement, the
Plan of Merger and the consummation of the Transactions, including the Merger, to the shareholders of the Company and
directed that the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger, be
submitted to a vote of the shareholders of the Company for authorization and approval. The Board unanimously recommends that
you vote FOR the proposal to authorize and approve the Merger Agreement, the Plan of Merger and the Transactions, including
the Merger, FOR the proposal to authorize the directors to do all things necessary to give effect to the Merger Agreement,
the Plan of Merger and the Transactions, including the Merger, and FOR the proposal to adjourn the extraordinary general
meeting in order to allow the Company to solicit additional proxies in the event that there are insufficient proxies received
at the time of the extraordinary general meeting to pass the resolutions to be proposed at the extraordinary general
meeting.
Regardless of the number of Shares that
you own, your vote is very important. The Merger cannot be completed unless the Merger Agreement, the Plan of Merger and the Transactions,
including the Merger, are authorized, approved and adopted by a special resolution representing an affirmative vote of shareholders
holding two-thirds or more of the voting power represented by the Shares (including Shares represented by ADSs) present and voting
in person or by proxy as a single class at the extraordinary general meeting.
Even if you plan to attend the extraordinary
general meeting in person, we request that you submit your proxy in accordance with the instructions set forth on the proxy card
as promptly as possible. To be valid, your proxy card must be completed, signed and returned to the Company’s offices at
No. 1 Office Building, No. 690 Bibo Road, Pudong New Area, Shanghai 201203, the PRC, Attention: Investor Relations Department,
no later than [ ], 2015 at 10:00 a.m. (Hong Kong time). The proxy card
is the “instrument of proxy” as referred to in the Company’s articles of association. Voting at the extraordinary
general meeting will take place by poll voting as the chairman of the Board has undertaken to demand poll voting at the meeting.
If you receive more than one proxy card because you own Shares that are registered in different names, please vote all of your
Shares shown on each of your proxy cards in accordance with the instructions set forth on the proxy card.
Completing the proxy card in accordance
with the instructions set forth on the proxy card will not deprive you of your right to attend the extraordinary general meeting
and vote your Shares in person. Please note, however, that if your Shares are registered in the name of a broker, bank or other
nominee and you wish to vote at the extraordinary general meeting in person, you must obtain from the record holder a proxy issued
in your name.
If you abstain from voting, fail to cast
your vote in person, fail to complete and return your proxy card in accordance with the instructions set forth on the proxy card,
or fail to give voting instructions to your broker, bank or other nominee, your vote will not be counted.
When proxies are properly dated, executed
and returned by holders of Shares, the Shares they represent will be voted at the extraordinary general meeting in accordance with
the instructions of the shareholders. If no specific instructions are given by such shareholders, such Shares will be voted “FOR”
the proposals as described above, unless you appoint a person other than the chairman of the meeting as proxy, in which case the
Shares represented by your proxy card will be voted (or not submitted for voting) as your proxy determines.
If you own ADSs as of the close of business
in New York City on [ ], 2015 (the “ADS Record Date”)
(and do not cancel such ADSs and become a registered holder of the Shares underlying such ADSs as explained below), you cannot
vote at the extraordinary general meeting directly, but you may instruct JPMorgan Chase Bank, N.A., in its capacity as the ADS
depositary (the “ADS Depositary”) and the holder of the Shares underlying your ADSs how to vote the Shares underlying
your ADSs. The ADS Depositary must receive your instructions no later than 10:00 a.m. (New York City time) on [ ],
2015 in order to ensure the Shares underlying your ADSs are properly voted at the extraordinary general meeting. If you hold your
ADSs in a brokerage, bank or other nominee account, you must follow the procedures of the broker, bank or other nominee through
which you hold your ADSs if you wish to vote. Alternatively, if you own ADSs as of the close of business in New York City on the
ADS Record Date, you may vote at the extraordinary general meeting directly if you cancel your ADSs and become a registered holder
of the Shares underlying your ADSs prior to the close of business in the Cayman Islands on [ ],
2015, the Share Record Date. If you wish to cancel your ADSs for the purpose of voting Shares directly, you need to make arrangements
to deliver your ADSs to the ADS Depositary for cancellation before 12:00 p.m. (New York City time) on [ ],
2015 together with (a) delivery instructions for the corresponding Shares (including the name and address of the person who will
be the registered holder of such Shares), (b) payment of the ADS cancellation fees (US$0.05 per ADS to be cancelled pursuant to
the terms of the Deposit Agreement, dated as of September 24, 2009, among the Company, the ADS Depositary and the holders of ADSs
issued thereunder (the “Deposit Agreement”)) and any applicable taxes and (c) a certification that you either (i) held
the ADSs as of the ADS Record Date and have not given, and will not give, voting instructions to the ADS Depositary as to the ADSs
being cancelled or have given voting instructions to the ADS Depositary as to the ADSs being cancelled but undertake not to vote
the corresponding Shares at the extraordinary general meeting or (ii) did not hold the ADSs as of the ADS Record Date and undertake
not to vote the corresponding Shares at the extraordinary general meeting. If you hold your ADSs in a brokerage, bank or other
nominee account, please contact your broker, bank or other nominee to find out what actions you need to take to instruct the broker,
bank or other nominee to cancel the ADSs on your behalf.
Shareholders who dissent from the Merger
will have the right to seek payment of the fair value of their Shares if the Merger is completed, but only if they deliver to the
Company, before the vote is taken, a written objection to the Merger and subsequently comply with all procedures and requirements
of Section 238 of the Cayman Islands Companies Law for the exercise of dissenters’ rights, which is attached as Annex D to
the accompanying proxy statement. The fair value of their Shares as determined under that statute could be more than, the same
as or less than the merger consideration they would receive pursuant to the Merger Agreement if they do not exercise dissenters’
rights with respect to their Shares.
ADS HOLDERS WILL NOT HAVE THE RIGHT
TO EXERCISE DISSENTERS’ RIGHTS AND RECEIVE PAYMENT OF THE FAIR VALUE OF THE SHARES UNDERLYING THEIR ADSs. THE ADS DEPOSITARY
WILL NOT ATTEMPT TO EXERCISE ANY DISSENTERS’ RIGHTS WITH RESPECT TO ANY OF THE SHARES THAT IT HOLDS, EVEN IF AN ADS HOLDER
REQUESTS THE ADS DEPOSITARY TO DO SO. ADS HOLDERS WISHING TO EXERCISE DISSENTERS’ RIGHTS MUST SURRENDER THEIR ADSs TO THE
ADS DEPOSITARY, PAY THE ADS DEPOSITARY’S FEES REQUIRED FOR THE CANCELLATION OF THEIR ADSs, PROVIDE INSTRUCTIONS FOR THE REGISTRATION
OF THE CORRESPONDING SHARES IN THE COMPANY’S REGISTER OF MEMBERS, CERTIFY THAT THEY HAVE NOT GIVEN, AND WILL NOT GIVE, VOTING
INSTRUCTIONS AS TO THEIR ADSs (OR, ALTERNATIVELY, THAT THEY WILL NOT VOTE THE CORRESPONDING SHARES) BEFORE 12:00 P.M. (NEW YORK
CITY TIME) ON [ ], 2015 AND BECOME REGISTERED HOLDERS OF SHARES BY THE
CLOSE OF BUSINESS IN THE CAYMAN ISLANDS ON THE SHARE RECORD DATE. THEREAFTER, SUCH FORMER ADS HOLDERS MUST COMPLY WITH THE PROCEDURES
AND REQUIREMENTS FOR EXERCISING DISSENTERS’ RIGHTS WITH RESPECT TO THE SHARES UNDER SECTION 238 OF THE CAYMAN ISLANDS COMPANIES
LAW. IF THE MERGER IS NOT COMPLETED, THE COMPANY WOULD CONTINUE TO BE A PUBLIC COMPANY IN THE UNITED STATES AND THE ADSs WOULD
CONTINUE TO BE LISTED ON NASDAQ. SHARES ARE NOT LISTED AND CANNOT BE TRADED ON ANY STOCK EXCHANGE OTHER THAN NASDAQ, AND IN SUCH
CASE ONLY IN THE FORM OF ADSs. AS A RESULT, IF A FORMER ADS HOLDER HAS CANCELLED HIS, HER OR ITS ADSs TO EXERCISE DISSENTERS’
RIGHTS AND THE MERGER IS NOT COMPLETED AND SUCH FORMER ADS HOLDER WISHES TO BE ABLE TO SELL HIS, HER OR ITS SHARES ON A STOCK EXCHANGE,
SUCH FORMER ADS HOLDER WOULD NEED TO DEPOSIT HIS, HER OR ITS SHARES INTO THE COMPANY’S ADS PROGRAM FOR THE ISSUANCE OF THE
CORRESPONDING NUMBER OF ADSs, SUBJECT TO THE TERMS AND CONDITIONS OF APPLICABLE LAW AND THE DEPOSIT AGREEMENT, INCLUDING, AMONG
OTHER THINGS, PAYMENT OF RELEVANT FEES OF THE ADS DEPOSITARY FOR THE ISSUANCE OF ADSs AND APPLICABLE SHARE TRANSFER TAXES (IF ANY)
AND RELATED CHARGES PURSUANT TO THE DEPOSIT AGREEMENT.
PLEASE DO NOT SEND YOUR SHARE CERTIFICATES
OR CERTIFICATES EVIDENCING ADSs AT THIS TIME. IF THE MERGER IS COMPLETED, YOU WILL BE SENT INSTRUCTIONS REGARDING THE SURRENDER
OF YOUR SHARE CERTIFICATES OR ADRs.
If you have any questions or need
assistance voting your Shares, please call Georgeson Inc., the proxy solicitor, toll-free at +1 800 509 0983 (or +1 781
575 2137 outside of North America) or by email at ShandaGames@georgeson.com.
The Merger Agreement, the Plan of
Merger and the Transactions, including the Merger, are described in the accompanying proxy statement. Copies of the Merger
Agreement and the Plan of Merger are included as Annex A and Annex B, respectively, to the accompanying proxy statement. We
urge you to read the entire accompanying proxy statement carefully.
Notes:
| 1. | In the case of joint holders, the vote of the senior holder who tenders a vote, whether in person or by proxy, will be accepted
to the exclusion of the votes of the joint holders. For this purpose, seniority will be determined by the order in which the names
stand in the register of members of the Company. |
| 2. | The instrument appointing a proxy must be in writing under the hand of the appointer or of his or her attorney duly authorized
in writing or, if the appointer is a corporation, either under seal or under the hand of an officer or attorney duly authorized. |
| 3. | A proxy need not be a member (registered shareholder) of the Company. |
| 4. | The chairman of the extraordinary general meeting may at his or her discretion direct that a proxy card will be deemed to have
been duly deposited where sent by email or telefax upon receipt of email or telefax confirmation that the signed original thereof
has been sent. A proxy card that is not deposited in the manner permitted will be invalid. |
| 5. | Votes given in accordance with the terms of a proxy card will be valid notwithstanding the previous death or insanity of the
principal or revocation of the proxy or of the authority under which the proxy was executed, or the transfer of the Share or Shares
in respect of which the proxy is given, provided that no intimation in writing of such death, insanity, revocation or transfer
was received by the Company at the principal executive offices of the Company at No. 1 Office Building, No. 690 Bibo Road, Pudong
New Area, Shanghai 201203, the PRC at least two hours before the commencement of the extraordinary general meeting, or adjourned
meeting at which such proxy is used. |
| |
BY ORDER OF THE BOARD OF DIRECTORS, |
| |
|
| |
|
| |
Chairman of the Board |
| |
|
| |
[ ], 2015 |
PROXY STATEMENT
Dated [ ],
2015
SUMMARY VOTING INSTRUCTIONS
Ensure that your shares of Shanda Games
Limited can be voted at the extraordinary general meeting by submitting your proxy or contacting your broker, bank or other nominee.
If your shares are registered in
the name of a broker, bank or other nominee: check the voting instruction card forwarded by your broker, bank or other
nominee to see which voting options are available or contact your broker, bank or other nominee in order to obtain directions as
to how to ensure that your shares are voted at the extraordinary general meeting.
If your shares are registered in
your name: submit your proxy as soon as possible by signing, dating and returning the accompanying proxy card in the enclosed
postage-paid envelope, so that your shares can be voted at the extraordinary general meeting unless you appoint a person other
than the chairman of the meeting as proxy, in which case the shares represented by your proxy card will be voted (or not submitted
for voting) as your proxy determines.
If you submit your proxy card without indicating
how you wish to vote, the shares represented by your proxy will be voted in favor of the resolutions to be proposed at the extraordinary
general meeting.
If your ADSs are registered in the
name of a broker, bank or other nominee: check the ADS voting instructions card forwarded by your broker, bank or other
nominee to see which voting options are available or contact your broker, bank or other nominee in order to obtain directions as
to how to ensure that the shares represented by your ADSs are voted at the extraordinary general meeting.
If your ADSs are registered in your
name: submit your ADS voting instructions card as soon as possible by signing, dating and returning the enclosed ADS voting
instructions card in the enclosed postage-paid envelope, so that the shares represented by your ADSs can be voted at the extraordinary
general meeting by the ADS Depositary, as the registered holder of the shares represented by your ADSs.
If you submit your ADS voting instructions
card without indicating how you wish to vote, the shares represented by your ADSs will be voted in favor of the resolutions to
be proposed at the extraordinary general meeting.
If
you have any questions, require assistance with voting your proxy card, or need additional copies of proxy material, please
contact Georgeson Inc., the proxy solicitor, at 480 Washington Boulevard, 26th Floor, Jersey City, NJ 07310 or toll-free at +1
800 509 0983 (or +1 781 575 2137 outside of North America) or by email at
ShandaGames@georgeson.com.
TABLE
OF CONTENTS
Page
| Summary Term Sheet |
1 |
| Questions and Answers about the Extraordinary General Meeting and the Merger |
12 |
| Special Factors |
19 |
| Market Price of the Company’s ADSs, Dividends and Other Matters |
66 |
| The Extraordinary General Meeting |
68 |
| The Merger Agreement |
74 |
| Provisions for Unaffiliated Security Holders |
93 |
| Dissenters’ Rights |
94 |
| Financial Information |
96 |
| Transactions in Shares and ADSs |
99 |
| Security Ownership of Certain Beneficial Owners and Management of the Company |
101 |
| Future Shareholder Proposals |
103 |
| Cautionary Note Regarding Forward-Looking Statements |
104 |
| Where You Can Find More Information |
105 |
| ANNEX A: |
Agreement and Plan of Merger |
A-1 |
| ANNEX B: |
Plan of Merger |
B-1 |
| ANNEX C: |
Opinion of Merrill Lynch as Financial Advisor |
C-1 |
| ANNEX D: |
Cayman Islands Companies Law Cap. 22 (Law 3 of 1961, as consolidated and revised) – Section 238 |
D-1 |
| ANNEX E: |
Support Agreement |
E-1 |
| ANNEX F: |
Directors and Executive Officers of Each Filing Person |
F-1 |
FORM OF PROXY CARD
FORM OF ADS VOTING INSTRUCTIONS CARD
Summary
Term Sheet
This “Summary Term Sheet”
and the “Questions and Answers About the Extraordinary General Meeting and the Merger” highlight selected information
contained in this proxy statement regarding the Merger (as defined below) and may not contain all of the information that may be
important to your consideration of the Merger (as defined below) and other transactions contemplated by the Merger Agreement (as
defined below). You should carefully read this entire proxy statement and the other documents to which this proxy statement refers
for a more complete understanding of the matters being considered at the extraordinary general meeting. In addition, this proxy
statement incorporates by reference important business and financial information about the Company. You are encouraged to read
all of the documents incorporated by reference into this proxy statement and you may obtain such information without charge by
following the instructions in “Where You Can Find More Information” beginning on page [ ]. In this proxy
statement, the terms “the Company,” “us,” “we” or other terms correlative thereto refer to
Shanda Games Limited. All references to “dollars” and “US$” in this proxy statement are to U.S. dollars,
and all references to “RMB” in this proxy statement are to Renminbi, the lawful currency of the People’s Republic
of China (the “PRC”).
The Parties Involved in the Merger (Page [ ])
The Company
We are one of the PRC’s
leading online game companies in terms of the size and diversity of our game portfolio, our game revenues and our game player
base. Through our extensive experience in the online game industry in the PRC and in certain overseas markets, we have
created a scalable approach to develop, source and operate online games as well as to license our games to third parties. We
use multiple channels to assemble a large and diversified game portfolio of various genres. We operate a nationwide, secure
network to host hundreds of thousands of users playing simultaneously, and monitor and adjust the environment of our games to
optimize our game players’ experience. As of the date of this proxy statement, we operate 35 massively
multi-player online games (“MMO games”), and 29 mobile games and our in-house development capabilities
consist of approximately 1,350 game development personnel.
We are an exempted company with
limited liability incorporated under the laws of the Cayman Islands. Our principal executive offices are located at No. 1
Office Building, No. 690 Bibo Road, Pudong New Area, Shanghai 201203, the PRC. Our telephone number at this address is +86 21
5050 4740 and our fax number is +86 21 5050 4740 ext. 897286.
For a description of our history, development,
business and organizational structure, see our Annual Report on Form 20-F for the year ended December 31, 2014, filed with the
U.S. Securities and Exchange Commission (the “SEC”) on April 17, 2015, which is incorporated herein by reference. See
“Where You Can Find More Information” beginning on page [ ] for a description of how to obtain a copy of
our Annual Report.
Parent
Capitalhold
Limited (“Parent”), a Cayman Islands exempted company with
limited liability, is a holding company formed solely for the purpose of holding the equity interest in Merger Sub and
completing the Transactions (as defined below), including the Merger (as defined below). Each of Yili Shengda and Zhongrong
Shengda holds 50% of the outstanding shares of Parent. The business address of Parent is c/o Mr. Yingfeng Zhang, No. 1 Office
Building, No. 690 Bibo Road, Pudong New Area, Shanghai 201203, the PRC, and its business telephone number is +86 21 5050
4740.
Merger Sub
Capitalcorp
Limited (“Merger Sub”), a Cayman Islands exempted company with limited liability
wholly owned by Parent, was formed by Parent solely for the purpose of effecting the Merger. The business address of Merger Sub
is c/o Mr. Yingfeng Zhang, No. 1 Office Building, No. 690 Bibo Road, Pudong New Area, Shanghai 201203, the PRC, and its business
telephone number is +86 21 5050 4740.
Mr. Yingfeng Zhang
Mr. Yingfeng Zhang (“Mr. Zhang”)
is the chairman of the board of directors of the Company (the “Board”) and acting chief executive officer of the Company.
He has served as the acting chief executive officer and a director of the Company since October 28, 2014 and as the chairman of
the Board since November 26, 2014. Mr. Zhang served as the general counsel of Shanda Interactive
Entertainment Limited (“Shanda Interactive”) from April 4, 2008 to September 14, 2011 and as the co-general
counsel from September 15, 2011 to December 16, 2014. Mr. Zhang also served as a vice president of Shanda Interactive from August
10, 2011 to December 16, 2014. Shanda Interactive is a company organized under the laws of the Cayman Islands with its principal
business address at 8 Stevens Road 257819 Singapore. The principal business of Shanda Interactive is investment holding. Shanda
Interactive was previously a member of the Buyer Group and our indirect controlling shareholder prior to November 25, 2014, when
it ceased to own any equity securities of the Company. Mr. Zhang is a PRC citizen.
Ningxia Yilida
Ningxia Yilida Capital Investment Limited
Partnership (“Ningxia Yilida”) is a limited partnership organized under the laws of the PRC and an affiliate of Mr.
Zhang, with its principal business address at Ecological Textile Park, Lingwu, Ningxia 750400, the PRC and its business telephone
number is +86 21 5050 4740. The general partner of Ningxia Yilida is Shanghai Yingfeng.
Yili Shengda
Yili Shengda Investment Holdings (Hong
Kong) Company Limited (“Yili Shengda”) is a company organized under the laws of Hong Kong and an affiliate of Mr.
Zhang, with its principal business address at Room 2803-05, AXA Tower, Landmark East, 100 How Ming Street, Kwun Tong, Kowloon,
Hong Kong, and its business telephone number is +852 8208 5118. Yili Shengda is directly and wholly owned by Ningxia Yilida.
Zhengjun Investment
Ningxia Zhengjun Equity Investment Partnership
Enterprise (Limited Partnership) (“Zhengjun Investment”) is a limited partnership organized under the laws of the PRC
and an affiliate of Mr. Zhang, with its principal business address at Ecological Textile Park, Lingwu, Ningxia 750400, the
PRC and its business telephone number is +86 21 5050 4740. The general partner of Zhengjun Investment is Shanghai Yingfeng.
Shanghai Yingfeng
Shanghai Yingfeng Investment Management
Company Limited (“Shanghai Yingfeng”) is a company organized under the laws of the PRC with its principal business
address at Room 2055, No. 5358 Huyi Road, Jiading District, Shanghai 201806, the PRC and its business telephone number is +86
21 5050 4740. Shanghai Yingfeng is wholly and directly owned by Mr. Zhang.
Ningxia
Ningxia
Zhongyincashmere International Group Co., Ltd. (“Ningxia”) is a company organized under the laws of the PRC with
its principal business address at Ecological Textile Park, Lingwu, Ningxia 750400, the PRC and its business telephone number
is +86 951 4038 950, extension 8969. Mr. Shengguo Ma, Mr. Shengming Ma and Mr. Wei Ma collectively own 100% of the equity
interests in Ningxia.
Zhongrong Investment
Zhongrong Investment Holdings (Hong Kong)
Co., Ltd. (“Zhongrong Investment”) is a company organized under the laws of Hong Kong and an affiliate of Ningxia,
with its principal business address at Room 2803-05, AXA Tower, Landmark East, 100 How Ming Street, Kwun Tong, Kowloon, Hong Kong
and its business telephone number is +852 8208 5118. Zhongrong Investment is directly and wholly owned by Ningxia Zhongrong Culture
Industry Equity Investment Enterprise (Limited Partnership) (“Zhongrong Culture”), the general partner of which is Ningxia.
Zhongrong Shengda
Zhongrong Shengda Investment Holdings (Hong
Kong) Company Limited (“Zhongrong Shengda”) is a company organized under the laws of Hong Kong and an affiliate of
Ningxia, with its principal business address at Room 2803-05, AXA Tower, Landmark East, 100 How Ming Street, Kwun Tong, Kowloon,
Hong Kong and its business telephone number is +852 8208 5118. Zhongrong Shengda is directly and wholly owned by Ningxia Zhongrong
Shengda Equity Investment Partnership Enterprise (Limited Partnership) (“Zhongrong Equity”), the general partner of which is Ningxia.
Zhongrong Legend
Ningxia Zhongrong Legend Equity Investment
Partnership Enterprise (Limited Partnership) (“Zhongrong Legend”) is a limited partnership organized under the laws
of the PRC and an affiliate of Ningxia, with its principal business address at Ecological Textile Park, Lingwu, Ningxia 750400,
the PRC and its business telephone number is +86 951 4038 950, extension 8969. Zhongrong Legend’s general partner is Ningxia.
Ningxia Silkroad
Ningxia Silkroad Equity Investment Partnership
Enterprise (Limited Partnership) (“Ningxia Silkroad”) is a limited partnership organized under the laws of the PRC
and an affiliate of Ningxia, with its principal business address at Ecological Textile Park, Lingwu, Ningxia 750400, the PRC and
its business telephone number is +86 951 4038 950, extension 8969. Ningxia Silkroad’s general partner is Ningxia.
Mr. Shaolin Liang
Mr. Shaolin Liang (“Mr.
Liang”) is a director of the Company. He has served as a director of the Company since February 2015. Mr. Liang has
also served as a vice general manager of Ningxia since February 2015. From December 2007 to February 2015, Mr. Liang served
at Ningxia Zhongyin Cashmere Co., Ltd. (“Zhongyin Cashmere,” formerly known as Ningxia Lingwu Zhongyin Cashmere
Co., Ltd.), an affiliate of Ningxia and a company listed on the Shenzhen Stock Exchange, as a vice general manager and he
served as a member of the board of directors of Zhongyin Cashmere from December 2007 to December 2014. From 1999 to December
2007, Mr. Liang served as a vice president of Zhongyin Cashmere. The business address of Mr. Liang is Sixth Floor, Heping
Mansion, No. 6 Laiguangying East Road, Chaoyang District, Beijing 100102, the PRC and his business telephone number is +86 10
8517 1831, extension 849. Mr. Liang is a PRC citizen.
Orient Hongtai
Orient Hongtai (Hong Kong) Limited (“Orient
Hongtai”) is a company organized under the laws of Hong Kong, with its principal business address at Flat 2, 19/F, Henan
Building, 90-92 Jaffe Road, Wanchai, Hong Kong and its business telephone number is +86 21 6332 5888. Orient Hongtai was formed
for the purpose of holding interests in the Company and in Parent and completing the Transactions, including the Merger.
Orient Hongtai is directly and wholly owned
by TonSung Holdings Limited, a Hong Kong company directly and wholly owned by Orient Zhisheng Investment Center (Shanghai) L.P.,
a PRC limited partnership, whose general partners are Orient Hongtai Capital Management (Shanghai) Co., Ltd. and Orient Securities
Capital Company Limited. Orient Hongtai Capital Management (Shanghai) Co., Ltd., a PRC company, is directly and wholly owned by
Orient Ruide Capital Management (Shanghai) Co., Ltd., a PRC company, which in turn is directly and wholly owned by Orient Securities
Capital Company Limited, a PRC company directly and wholly owned by Orient Securities Company Limited (“Orient Securities”),
a PRC company listed on the Shanghai Stock Exchange.
Orient Hongzhi
Orient Hongzhi (Hong Kong) Limited (“Orient
Hongzhi”) is a company organized under the laws of Hong Kong, with its principal business address at Flat 2, 19/F, Henan
Building, 90-92 Jaffe Road, Wanchai, Hong Kong and its business telephone number is +86 21 6332 5888. Orient Hongzhi was formed
for the purpose of holding interests in the Company and in Parent and completing the Transactions, including the Merger.
Orient Hongzhi is directly and
wholly owned by HuaSung Holdings Limited, a Hong Kong company directly and wholly owned by Orient Zhihui Investment
Center (Shanghai) L.P., a PRC limited partnership, whose general partners are Orient Hongtai Capital Management (Beijing)
Co., Ltd. and Orient Securities Capital Company Limited. Orient Hongtai Capital Management (Beijing) Co., Ltd., a PRC
company, is directly and wholly owned by Orient Ruide Capital Management (Shanghai) Co., Ltd., a PRC company, which is
indirectly and wholly owned by Orient Securities. The general partners of Orient Hongtai and Orient Hongzhi are under the
common control of Orient Securities, and accordingly, Orient Hongtai and Orient Hongzhi are affiliates.
Hao Ding
Hao Ding International
Limited (“Hao Ding”) is a British Virgin Islands business company, with its principal business address at 2810,
No. 689 Guangdong Road, Huangpu District, Shanghai 200001, the PRC, and its business telephone number is +86 21 2321 2232.
Hao Ding was formed for the purpose of holding interests in the Company and in Parent and completing the Transactions,
including the Merger. Hao Ding is a direct wholly owned subsidiary of Shanghai Hai Sheng Tong Investment Co., Ltd.
(“Hai Sheng Tong”), which is controlled by Shanghai Buyout Fund L.P. (“Haitong”).
Haitong is a PRC limited
partnership, whose general partner is Haitong M&A Capital Management (Shanghai) Co., Ltd., a PRC company, of which the
controlling shareholder is Haitong Capital Investment Co., Ltd., a PRC company, which in turn is directly and wholly owned by
Haitong Securities Co., Ltd. (“Haitong Securities”), a PRC company listed on
the Shanghai Stock Exchange.
Additional information regarding the parties
to the Merger is set forth in Annex F, which is attached hereto and incorporated herein by reference.
Throughout this proxy statement, unless
the context otherwise requires, Ningxia Yilida, Ningxia, Orient Hongtai, Orient Hongzhi, Hao Ding, Zhengjun Investment, Ningxia
Silkroad and Zhongrong Legend are collectively referred to herein as the “Buyer Group.”
The Merger Agreement (Page [ ])
The Company, Parent and Merger Sub
entered into an agreement and plan of merger on April 3, 2015 (as may be amended from time to time, the “Merger
Agreement”). Pursuant to the Merger Agreement, once the Merger Agreement is approved by the requisite vote of the
shareholders of the Company and the other conditions to the completion of the transactions contemplated by the Merger
Agreement and the plan of merger (the “Plan of Merger”) required to be registered with the Registrar of Companies
of the Cayman Islands (the “Cayman Registrar”) (the “Transactions”) are satisfied or waived in
accordance with the terms thereof, Merger Sub will be merged with and into the Company (the “Merger”), with the
Company continuing as the surviving corporation (the “Surviving Corporation”). You are being asked to vote upon a
proposal to authorize and approve the Transactions, including the Merger.
Following completion, and as a result
of, the Merger, the Company, as the Surviving Corporation, will continue to do business under the name “Shanda Games Limited”
and will be a wholly owned subsidiary of Parent. If the Merger is completed, the Company will cease to be a publicly traded company.
Copies of the Merger Agreement and the
Plan of Merger are attached as Annex A and Annex B, respectively, to this proxy statement. You should read the Merger Agreement
and the Plan of Merger in their entirety because they, and not this proxy statement, are the legal documents that govern the Merger.
Merger Consideration (Page [ ])
Under the terms of the Merger
Agreement, at the effective time of the Merger (the “Effective Time”), each issued and outstanding Class A
ordinary share (other than (a) the Rollover Shares (as defined below) and (b) the Shares held by Parent, the Company or any
of their subsidiaries immediately prior to the Effective Time (collectively, the “Excluded Shares”), the Shares
held by shareholders who have validly exercised and not effectively withdrawn or lost their rights to dissent from the Merger
in accordance with Section 238 of the Cayman Islands Companies Law (the “Dissenting Shares”) and Class A ordinary
shares represented by American depositary shares (“ADSs”)) will be cancelled in exchange for the right to receive
consideration of US$3.55 in cash per Class A ordinary share, without interest (the “Per Share Merger
Consideration”), net of any applicable withholding taxes; each outstanding ADS (other than any ADS that represents
Excluded Shares), and the Class A ordinary shares represented by such ADS, will be cancelled in exchange for the right to
receive consideration of US$7.10 in cash per ADS, without interest (the “Per ADS Merger Consideration”) (less
US$0.05 per ADS for cancellation fees pursuant to the terms of the Deposit Agreement), net of any applicable withholding
taxes; and each Dissenting Share will be entitled to receive only the payment resulting from the procedures set forth in
Section 238 of the Cayman Islands Companies Law Cap. 22 (Law 3 of 1961, as consolidated and revised) (the “Cayman
Islands Company Law”). See “Dissenters’ Rights” beginning on page [ ] for
additional information. At the Effective Time, each issued and outstanding Excluded Share will be cancelled without payment
of any consideration or any distribution therefor.
At the Effective Time, each ordinary share,
par value US$0.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time will be converted into
one validly issued, fully paid and non-assessable ordinary share, par value US$0.01 per share, of the Surviving Corporation, and
such shares will constitute the only issued and outstanding share capital of the Surviving Corporation. As a result, current shareholders
and ADS holders of the Company, other than the members of the Buyer Group, will no longer have any equity interest in, or be shareholders
or ADS holders of, the Company upon completion of the Merger.
Treatment of Company Options (Page [ ])
At the Effective Time, each option to purchase
Shares, whether vested or unvested (“Company Option”), that is outstanding and unexercised immediately prior to the
Effective Time, whether or not vested or exercisable, will be cancelled. In exchange for a cancelled Company Option, the former
holder (or his or her designee) of such Company Option will be paid in cash, without interest and net of any applicable withholding
taxes, by the Surviving Corporation or one of its subsidiaries, as soon as practicable after the Effective Time, an amount equal
to the product of (a) the total number of ordinary shares of the Company underlying such Company Option immediately prior
to the Effective Time multiplied by (b) the excess of US$3.55 over the exercise price payable per Share under such Company
Option. If the exercise price per Share of any such Company Option is equal to or greater than US$3.55, such Company Option will
be cancelled without any payment therefor.
Treatment of Company Restricted Shares and Company RSUs (Page
[ ])
At the Effective Time,
each restricted Share with respect to which the restrictions have not lapsed (“Company Restricted Share”) and
each restricted stock unit, whether or not the restrictions with respect thereto have lapsed (“Company RSU”) that
is outstanding immediately prior to the Effective Time will be cancelled. In exchange for a cancelled Company Restricted
Share or Company RSU, each former holder (or his or her designee) of such Company Restricted Share or Company RSU will be
paid in cash, without interest and net of any applicable withholding taxes, by the Surviving Corporation or one of its
subsidiaries, as soon as practicable after the Effective Time, an amount equal to US$3.55 for each such cancelled Company
Restricted Share or Company RSU. Each Company RSU granted by the Company represents the right to receive one Class A ordinary
share of the Company. Upon vesting of any Company RSU, the Company’s practice is to promptly allocate the underlying
Class A ordinary shares to the holder of such Company RSU after which such Company RSU is no longer outstanding. As
a result of this practice, unless otherwise specifically noted, numbers of Company RSUs in this proxy statement do not
include any vested Company RSUs.
Support Agreement (Annex E)
Concurrently with the execution and
delivery of the Merger Agreement on April 3, 2015, Yili Shengda, Zhongrong Shengda, Orient Hongtai, Orient Hongzhi, Zhongrong
Investment and Hao Ding (collectively, the “Rollover Shareholders”) entered into a support agreement, dated as of
April 3, 2015 (as may be amended from time to time, the “Support Agreement”) with Parent, pursuant to which they
have agreed, among other things, that:
| · | they will vote the Shares held directly or indirectly by them in favor of the authorization and approval of the Merger Agreement,
the Plan of Merger and the Transactions, including the Merger, and |
| |
· |
the (a) 48,759,187 Class B ordinary shares held by Yili Shengda, (b) 48,759,187 Class B ordinary shares held by Zhongrong Shengda, (c) 61,776,334 Class A ordinary shares held by Orient Hongtai, (d) 61,776,335 Class A ordinary shares held by Orient Hongzhi, (e) 80,577,828 Class A ordinary shares held by Zhongrong Investment and (f) 107,438,129 Class A ordinary shares held by Hao Ding, including, in each case, such ordinary shares represented by ADSs (collectively, the “Rollover Shares”) will, at the Effective Time, be cancelled for no consideration in the Merger. A copy of the Support Agreement is attached as Annex E to this proxy statement and is incorporated herein by reference. |
Purposes and Effects of the Merger (Page [ ])
The purpose of the Merger is
to enable Parent to acquire 100% control of the Company in a transaction in which the holders of the Class A ordinary shares
of the Company and ADSs (other than Excluded Shares, ADSs representing Excluded Shares and Dissenting Shares) will be cashed
out in exchange for the Per Share Merger Consideration or the Per ADS Merger Consideration, as applicable. See “Special
Factors—Purposes of and Reasons for the Merger” beginning on page [ ] for additional information.
ADSs representing Shares are currently
listed on the NASDAQ Global Select Market (“NASDAQ”) under the symbol “GAME.” It is expected that, following
the consummation of the Merger, the Company will cease to be a publicly traded company and will instead become a private company
beneficially owned by the Buyer Group. See “Special Factors—Effects of the Merger on the Company” beginning on
page [ ] for additional information.
Plans for the Company after the Merger (Page [ ])
Following the completion of the
Merger, Parent will indirectly own 100% of the equity interest in the Surviving Corporation. The Buyer Group anticipates that
the Company will continue to conduct its operations substantially as they are currently being conducted, except that it will
cease to be a publicly traded company and will instead be an indirect wholly owned subsidiary of Parent.
Following the completion of
the Merger and the anticipated deregistration of the Class A ordinary shares of the Company and the ADSs, the Company will no
longer be subject to the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”) and
NASDAQ compliance and reporting requirements and the related direct and indirect costs and expenses.
Recommendations of the Special Committee and the Board (Page
[ ])
The special committee of the Board
(the “Special Committee”), composed solely of directors who are unaffiliated with any member of the Buyer Group
or any member of the management of the Company, reviewed and considered the terms and conditions of the Merger Agreement, the
Plan of Merger and the Transactions, including the Merger. The Special Committee, after due consideration, unanimously:
| · | determined that the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, were fair to and in the
best interests of the Company and its shareholders and ADS holders, other than the members of the Buyer Group and their respective
affiliates (such shareholders and ADS holders, the “Unaffiliated Holders”), |
| · | declared advisable the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, and |
| · | recommended that the Board authorize and approve the Merger Agreement,
the Plan of Merger and the Transactions, including the Merger. |
ACCORDINGLY, THE BOARD UNANIMOUSLY RECOMMENDS
THAT YOU VOTE FOR THE PROPOSAL TO AUTHORIZE AND APPROVE THE MERGER AGREEMENT, THE PLAN OF MERGER AND THE TRANSACTIONS, INCLUDING
THE MERGER, FOR THE PROPOSAL TO AUTHORIZE THE DIRECTORS TO DO ALL THINGS NECESSARY TO GIVE EFFECT TO THE MERGER AGREEMENT, THE
PLAN OF MERGER AND THE TRANSACTIONS, INCLUDING THE MERGER, AND FOR THE PROPOSAL TO ADJOURN THE EXTRAORDINARY GENERAL MEETING IN
ORDER TO ALLOW THE COMPANY TO SOLICIT ADDITIONAL PROXIES IN THE EVENT THAT THERE ARE INSUFFICIENT PROXIES RECEIVED AT THE TIME
OF THE EXTRAORDINARY GENERAL MEETING TO PASS THE RESOLUTIONS TO BE PROPOSED AT THE EXTRAORDINARY GENERAL MEETING.
For a detailed discussion of the material
factors considered by the Special Committee and the Board in determining to recommend the approval of the Merger Agreement and
the Plan of Merger and the approval of the Transactions, including the Merger, and in determining that the Merger is fair to, advisable
and in the best interests of the Company and the Unaffiliated Holders, see “Special Factors—Reasons for the Merger
and Recommendation of the Special Committee and the Board” beginning on page [ ] and “Special Factors—Effects
of the Merger on the Company—Primary Benefits and Detriments of the Merger” beginning on page [ ] for additional
information. The foregoing summary is qualified in its entirety by reference to these sections.
Position of the Buyer Group as to Fairness
(Page [ ])
Each member of the Buyer Group
believes that the Merger is fair to the Company’s unaffiliated security holders, as defined in Rule 13e-3 of the
Exchange Act. This belief is based upon the factors discussed under the section entitled “Special
Factors—Position of the Buyer Group as to the Fairness of the Merger” beginning on page [ ].
Financing of the Merger (Page [ ])
The Company and the Buyer Group estimate
that the total amount of funds necessary to complete the Transactions, including the Merger, will be approximately US$487 million,
assuming no exercise of dissenters’ rights by shareholders of the Company.
The Buyer Group expects this amount will
be provided through a combination of (a) the equity commitments contemplated by the equity commitment letters (the “Equity
Commitment Letters”), dated as of April 3, 2015, by and between Parent and each of Zhengjun Investment, Ningxia Silkroad
and Zhongrong Legend (the “Sponsors”) and (b) cash from the Company and its subsidiaries. See “Special Factors—Financing
of the Merger” beginning on page [ ] for additional information.
Opinion of Merrill Lynch, the Special Committee’s Financial
Advisor (Page [ ])
The Special Committee
retained Merrill Lynch (Asia Pacific) Limited (“Merrill Lynch”) to act as its independent financial advisor in
connection with the Merger. At the meeting of the Special Committee on April 3, 2015, Merrill Lynch rendered
its oral opinion, which was subsequently confirmed in writing, that, as of such date, based upon and subject to the
assumptions made, procedures followed, matters considered and qualifications and limitations on the review undertaken by
Merrill Lynch set forth in its opinion, the Per Share Merger Consideration or Per ADS Merger Consideration, as applicable, to
be received in the Merger by holders of Class A ordinary shares of the Company or ADSs (other than holders of Excluded
Shares) is fair, from a financial point of view, to such holders.
See “Special Factors—Opinion
of Merrill Lynch, the Special Committee’s Financial Advisor” beginning on page [ ] for additional information.
Interests of the Company’s Executive Officers and Directors
in the Merger (Page [ ])
In considering the recommendations of the
Board, the Company’s shareholders should be aware that certain of the Company’s directors, executive officers and employees
have interests in the transaction that are different from, and/or in addition to, the interests of the Company’s shareholders
and ADS holders generally. These interests include, among others:
| · | the beneficial ownership of Mr. Zhang, the chairman of the Board and acting chief executive officer of the Company,
in Shanghai Yingfeng, a limited liability company organized under the laws of the PRC and the general partner of Ningxia Yilida
and Zhengjun Investment, each of which is a member of the Buyer Group; |
| · | the fact that Mr. Shaolin Liang, a director of the Company, is a vice general manager of Ningxia, which is a member of
the Buyer
Group; |
| · | the fact that Mr. Zhang, the chairman of the Board and acting chief executive officer of the Company, is a director of
Merger Sub, and if he remains in such position until immediately before the Effective Time, he will become a director of the
Surviving Corporation after completion of the Merger. |
| · | the fact that Mr. Lijun Lin (“Mr. Lin”), a director of the Company, served as the chief executive officer of
China Universal Asset Management Co., Ltd., an affiliate of Orient Hongtai and Orient Hongzhi, each of which is a member of the Buyer Group, from April
2004 to April 16, 2015; |
| · | the potential enhancement or decline of share value for Parent, of which the members of the Buyer Group will be
beneficial owners upon the completion of the Merger, as a result of the Merger, and the future performance of the Surviving
Corporation; |
| · | the cash-out of in-the-money Company Options and cash-out of Company Restricted Shares and Company RSUs held by the
Company’s directors and executive officers, including members of the Special Committee; |
| · | the continued indemnification rights, rights to advancement of fees and directors and officers liability insurance to be provided
by the Surviving Corporation to current and former directors and officers of the Company; |
| · | the compensation of the members of the Special Committee in exchange for their services in such capacity at a rate of
US$10,000 per month for the chairman of the Special Committee and US$6,800 per month for each other member of the Special
Committee (in each case, the payment of which is not contingent upon the completion of the Merger or the Special
Committee’s or the Board’s recommendation of the Merger); |
| · | the potential continuation of service of the executive officers of the Company with the Surviving Corporation in positions
that are substantially similar to their current positions, allowing them to benefit from remuneration arrangements, including equity
compensation, with the Surviving Corporation; and |
| · | the contingent equity awards to be granted to certain game producers of the Company following the completion of the Merger
pursuant to the commitment letters entered into between the Company and such game producers on September 18, 2014, which awards
are subject to compliance with applicable laws, rules and regulations, the completion of the Merger and the other terms and conditions
set forth in the commitment letters. |
The Special Committee and the Board were
aware of these potential conflicts of interest and considered them, among other matters, in reaching their decisions and recommendations
with respect to the Merger Agreement and related matters. See “Special Factors—Interests of Certain Persons in the
Merger” beginning on page [ ] for additional information.
No Solicitation of Competing Transactions (Page [ ])
The Merger Agreement restricts the
ability of the Company and its subsidiaries until the Effective Time or, if earlier, the termination of the Merger Agreement,
to solicit or engage in discussions or negotiations with third parties regarding Competing Transactions (as defined in the
section entitled “The Merger Agreement—No Solicitation of Competing Transactions”). Subject to specified
conditions and prior to obtaining the required shareholder authorization and approval of the Merger Agreement, the Plan of
Merger and the Transactions, including the Merger, the Company may, however, provide information to a third party in response
to an unsolicited proposal or offer regarding a Competing Transaction from a third party if the Board (acting only upon
recommendation of the Special Committee) or the Special Committee determines in good faith (after consulting with its
financial advisor and outside legal counsel) that the proposal or offer constitutes, or could reasonably be expected to
result in, a Superior Proposal (as defined in the section entitled “The Merger Agreement—No Solicitation of
Competing Transactions”), and, in light of such Superior Proposal, that failure to do so would be inconsistent with its
fiduciary duties under applicable law. See and read carefully “The Merger Agreement—No Solicitation of Competing
Transactions” and “The Merger Agreement—No Change of Recommendation” beginning on page [ ] and
page [ ], respectively.
Conditions to the Merger (Page [ ])
The obligations of the Company, Parent
and Merger Sub to consummate the Merger are subject to the satisfaction or waiver of the following mutual conditions:
| · | the Merger Agreement, the Plan of Merger and the Transactions being authorized and approved by the holders of ordinary shares
of the Company constituting the Requisite Company Vote (as defined in “The Merger—No Solicitation of Competing Transactions”
beginning on page [ ]) at the extraordinary general meeting; and |
| · | no governmental authority of competent jurisdiction having enacted, issued, promulgated, enforced or entered any law or award,
writ, injunction, determination, rule, regulation, judgment, decree or executive order, whether temporary, preliminary or permanent,
that is in effect and has or would have the effect of enjoining, restraining, prohibiting or otherwise making illegal the consummation
of the Transactions, and the consummation of the Transactions not being subject to any requirement to obtain any regulatory approval
under the Anti-monopoly Law of the PRC. |
The obligations of Parent and Merger Sub
to consummate the Merger are also subject to the satisfaction, or waiver, of the following conditions:
| · | (a) representations and warranties of the Company in the Merger Agreement regarding the Company’s power and authority
to enter into the Merger Agreement and consummate the Transactions, the Board’s determination and recommendation with respect
to the Merger, and the vote required in connection with the Merger being true and correct in all material respects, (b) representations
and warranties of the Company in the Merger Agreement regarding the Company’s capitalization being true and correct in all
but de minimis respects, and (c) each of the other representations and warranties of the Company set forth in the Merger
Agreement being true and correct in all respects as of the date of the Merger Agreement and as of the closing date of the Merger,
as if made on such date and time, in each case without giving effect to any qualification as to “materiality” or “Company
Material Adverse Effect,” except in the case of (c) above, where the failure of such representations and warranties to be
true and correct would not constitute a Company Material Adverse Effect; |
| · | the Company having performed or complied in all material respects with all agreements and covenants required by the Merger
Agreement to be performed or complied with by it on or prior to the closing date of the Merger; |
| · | since the date of the Merger Agreement, there not having occurred a Company Material Adverse Effect (as defined below); |
| · | the Company having delivered to Parent a certificate, dated the closing date of the Merger, signed by a senior executive officer
of the Company, certifying as to the satisfaction of the above conditions; and |
| · | the holders of no more than 10% of the ordinary shares of the Company having validly exercised dissenters’ rights under
the Cayman Islands Companies Law. |
The obligations of the Company to consummate
the Merger are also subject to the satisfaction, or waiver by the Company, of the following conditions:
| · | the representations and warranties of Parent and Merger Sub in the Merger Agreement (without giving effect to qualification
by “materiality”) being true and correct in all respects as of the date of the Merger Agreement and as of the closing
date of the Merger, as if made on and at date and time (other than representations and warranties that by their terms address matters
only as of such a specified other time, which must be true and correct as of such time), except where the failure of such representations
and warranties to be true and correct, individually or in the aggregate, have not, and would not reasonably be expected to, prevent,
materially delay or materially impede or impair the ability of Parent and Merger Sub to consummate any of the Transactions; |
| · | each of Parent and Merger Sub having performed or complied in all material respects with all covenants and agreements required
to be performed or complied with by it under the Merger Agreement prior to or on the closing date of the Merger; and |
| · | Parent having delivered to the Company a certificate, dated the closing date of the Merger, signed by an executive officer
of Parent, certifying as to the fulfillment of the above conditions. |
Termination of the Merger Agreement (Page [ ])
The Merger Agreement may be terminated
at any time prior to the Effective Time:
| · | by mutual written consent of the Company and Parent with the approval of their respective boards of directors (or in the case
of the Company, acting upon the recommendation of the Special Committee); |
| · | by either the Company (acting only upon the recommendation of the Special Committee) or Parent (provided that this
termination right is not available to the party whose failure to fulfill any of its obligations under the Merger Agreement
has been a material cause of, or resulted in, the failure of any applicable condition to the Merger being satisfied), upon
(each as defined in the section entitled “The Merger Agreement—Termination of the Merger
Agreement”): |
| ○ | a Termination Date Termination Event; |
| ○ | a Permanent Order Termination Event; or |
| ○ | a No-Vote Termination Event; |
| · | by the Company (acting only upon the recommendation of the Special Committee) at any time prior to the Effective Time,
upon (each as defined in the section entitled “The Merger Agreement—Termination of the Merger
Agreement”): |
| ○ | a Parent and Merger Sub Breach Termination Event; |
| ○ | a Parent and Merger Sub Failure to Close Termination Event; or |
| ○ | a Superior Proposal Termination Event; or |
| · | by Parent, at any time prior to the Effective Time, upon (each as defined in the section entitled “The Merger Agreement—Termination
of the Merger Agreement”): |
| ○ | a Company Breach Termination Event; or |
| ○ | a Change in the Company Recommendation Termination Event. |
Termination Fees and Reimbursement of Expenses (Page [ ])
The Company is required to pay Parent a
termination fee of US$57,250,000 in the event the Merger Agreement is terminated:
| · | by either the Company or Parent if: |
| ○ | a bona fide proposal or offer with respect to a Competing Transaction has been publicly made, proposed or communicated
and not publicly withdrawn after the date of the Merger Agreement and prior to the extraordinary general meeting (or prior to the
termination of the Merger Agreement if there has been no extraordinary general meeting); |
| ○ | following the occurrence of an event described in the preceding clause, the Company or Parent terminates the Merger Agreement
due to a Termination Date Termination Event or No-Vote Termination Event; and |
| ○ | within 12 months after the termination of the Merger Agreement, the Company consummates or enters into a definitive agreement
in connection with any of the following transactions with a third party: (i) any merger, consolidation, share exchange, business
combination, scheme of arrangement, amalgamation, recapitalization, liquidation, dissolution or other similar transaction involving
the Company or any of its subsidiaries whose assets, individually or in the aggregate, constitute 50% or more of the consolidated
assets of the Company or to which 50% or more of the total revenue or net income of the Company are attributable, (ii) any
sale, lease, exchange, transfer or other disposition of assets or businesses that constitute or represent 50% or more of the total
revenue, net income or assets of the Company and its subsidiaries, taken as a whole, (iii) any sale, exchange, transfer or
other disposition of 50% or more of any class of equity securities of the Company, or securities convertible into or exchangeable
for 50% or more of any class of equity securities of the Company, (iv) any tender offer or exchange offer that, if consummated,
would result in any person beneficially owning 50% or more of any class of equity securities of the Company or (v) any combination
of the foregoing; |
| · | by Parent pursuant to a Company Breach Termination Event or Change in the Company Recommendation Termination Event; or |
| · | by the Company pursuant to a Superior Proposal Termination Event. |
Parent is required to pay the Company a
termination fee of US$114,500,000 in the event the Merger Agreement is terminated:
| · | by the Company pursuant to a Parent and Merger Sub Breach Termination Event; or |
| · | by the Company pursuant to a Parent and Merger Sub Failure to Close Termination Event. |
Additionally, (a) in the event the Merger
Agreement is terminated by the Company pursuant to a Parent and Merger Sub Breach Termination Event or a Parent and Merger Sub
Failure to Close Termination Event, then Parent must pay to the Company, as promptly as possible (but in any event within three
business days) following the delivery by the Company of an invoice therefor, all expenses incurred by the Company and its affiliates
in connection with the Transactions, up to a maximum amount equal to US$3,000,000, and (b) in the event the Merger Agreement is
terminated by Parent pursuant to a Company Breach Termination Event or Change in the Company Recommendation Termination Event,
then the Company must pay to Parent, as promptly as possible (but in any event within three business days) following the delivery
by Parent of an invoice therefor, all expenses incurred by Parent, Merger Sub and their respective affiliates in connection with
the Transactions, including the equity financing, up to a maximum amount equal to US$3,000,000.
In the event that the Company or Parent
fails to pay the applicable termination fee or any expenses when due and in accordance with the requirements of the Merger Agreement,
the Company or Parent, as the case may be, is required to reimburse the other party for reasonable costs and expenses actually
incurred or accrued by the other party (including fees and expenses of counsel) in connection with collection of such unpaid termination
fee or any expenses, together with accrued interest on such unpaid termination fee or any expenses.
Except as described above or as otherwise
provided in the Merger Agreement, whether or not the Merger or any other Transaction is consummated, all costs and expenses incurred
in connection with the Merger Agreement and the Transactions will be paid by the party incurring such costs and expenses.
Regulatory Matters (Page [ ])
The Company does not believe that any material
federal or state regulatory approvals, filings or notices are required in connection with effecting the Merger other than the approvals,
filings or notices required under the federal securities laws and the filing of the Plan of Merger (and supporting documentation
as specified in the Cayman Islands Companies Law) with the Cayman Registrar
and, in the event the Merger becomes effective, a copy of the Certificate of Merger being given to the shareholders and creditors
of the Company and Merger Sub as at the time of the filing of the Plan of Merger and notice of Merger published in the Cayman Islands
Gazette.
Litigation Related to the Merger (Page [ ])
On October 10, 2014,
Kilometre Capital Management Cayman (“Kilometre”) issued a writ of summons endorsed with a statement of claim
against the Company from the Court of First Instance of the High Court of the Hong Kong Special Administrative Region in
connection with the proposed “going private” transaction. Kilometre seeks outstanding consulting fees in an
aggregate sum of US$25.6 million (or alternatively, damages), certain declaratory relief, interest, costs and further and/or
other relief as the court deems fit. On February 10, 2015, Kilometre amended its statement of claim to seek outstanding
consulting fees in an aggregate sum of US$44.9 million (or alternatively, damages), certain declaratory relief, interest,
costs and further and/or other relief as the court deems fit. On February 17, 2015, Kilometre applied for a summary judgment
for consulting fees of US$39,229,944.32, interest and/or other relief as the court deems fit. In April 2015, Kilometre
issued an invoice to the Company asserting an increased entitlement to US$45.8 million; however, this amount is yet to be
reflected in any further amendment to the statement of claim. The hearing for the summary judgment application is currently
scheduled to take place on July 8, 2015. The Company is vigorously defending the dispute on its merits.
In addition, Kilometre served a statutory
demand on the Company in the Cayman Islands on May 21, 2015 requesting the Company to pay a purported debt of $39,229,944.32 within
21 days. The Company intends to vigorously defend itself against all related legal actions taken by Kilometre in the Cayman Islands
on the merits.
Other than as set forth above, the Company
is not aware of any lawsuit that challenges the Merger Agreement, the Plan of Merger or any of the Transactions, including the
Merger.
Accounting Treatment of the Merger (Page [ ])
The Merger is expected to be accounted
for, at carryover basis, as a Merger of entities under common control in accordance with Accounting Standards Codification 805-50,
“Business Combinations—Related Issues.”
Market Price of the ADSs (Page [ ])
The closing price of the Company’s
ADSs as quoted by NASDAQ on January 24, 2014, the last trading day immediately prior to the Company’s announcement on January
27, 2014 that it had received the Proposal (as defined in the section entitled “Special Factors—Background of the
Merger” beginning on page [ ]), was US$5.65 per ADS. The consideration of US$7.10 per ADS to be paid in the Merger represents
a premium of approximately 25.7% over that closing price.
Fees and Expenses (Page [ ])
Whether or not the Merger is
completed, all costs and expenses incurred in connection with the Merger Agreement and the transactions contemplated thereby
will be paid by the party incurring such costs and expenses except as otherwise provided in the Merger Agreement and the
consortium agreement among Ningxia Yilida, Ningxia, Orient Hongtai, Orient Hongzhi, Hao Ding, dated as of March 16, 2015 (the
“Third Consortium Agreement,” to which each of Zhongrong Legend, Ningxia Silkroad and Zhengjun Investment
became a party by entering into an adherence agreement on April 3, 2015).
Remedies (Page [ ])
The parties to the Merger Agreement may
be entitled to the payment of a termination fee or the grant of specific performance of the terms of the Merger Agreement, including
an injunction or injunctions to prevent breaches of the Merger Agreement, in addition to any other remedy at law or equity, subject
to certain limitations as described under the section entitled “The Merger Agreement—Remedies” beginning on page
[ ].
While the parties to the Merger Agreement
may pursue both a grant of specific performance and monetary damages, upon payment of the applicable termination fee and certain
expenses, the remedy of specific performance will not be available against the party paying such amount.
Questions
and Answers about the Extraordinary General
Meeting and the Merger
The following questions and answers
address briefly some questions you may have regarding the extraordinary general meeting and the Merger. These questions and answers
may not address all questions that may be important to you as a shareholder of the Company. Please refer to the more detailed information
contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to or incorporated
by reference in this proxy statement.
| Q: | When and where will the extraordinary general meeting be held? |
| A: | The extraordinary general meeting will take place on [ ], 2015,
at [ ] a.m. (Hong Kong time) at the offices of Davis Polk & Wardwell,
The Hong Kong Club Building, 3A Chater Road, Central, Hong Kong. |
| Q: | What vote of the Company’s shareholders is required to authorize and approve the Merger Agreement and the Plan of
Merger? |
| A: | In order for the Merger to be completed, the Merger Agreement, the Plan of Merger and the Transactions, including the Merger,
must be authorized, approved and adopted by a special resolution of the Company’s shareholders, which requires an affirmative
vote of shareholders holding two-thirds or more of the voting power represented by the Shares (including Shares represented by
ADSs) present and voting in person or by proxy as a single class at the extraordinary general meeting. Under the Company’s
amended and restated memorandum and articles of association, the Shares are divided into Class A ordinary shares and Class B ordinary
shares. Holders of Class A ordinary shares are entitled to one vote per share, and holders of Class B ordinary shares are entitled
to 10 votes per share. Holders of the Company’s Class A ordinary shares and Class B ordinary shares will vote as a single
class on all matters described in the accompanying proxy statement. |
At the close of business in the Cayman Islands
on [ ], 2015 (the “Share Record Date”), the record date for
voting Shares at the extraordinary general meeting, 443,262,744 Class A ordinary shares and 97,518,374 Class B
ordinary shares are expected to be issued and outstanding and entitled to vote at the extraordinary general meeting.
Pursuant to the Support Agreement, each of the
Rollover Shareholders has agreed to vote all of the Shares (including Shares represented by ADSs) owned directly or indirectly
by it in favor of the authorization and approval of the Merger Agreement, the Plan of Merger and the Transactions, including the
Merger. As of the date of this proxy statement, the Rollover Shareholders collectively own an aggregate of 311,568,626 Class A
ordinary shares and 97,518,374 Class B ordinary shares, representing approximately 76.1% of the Company’s issued and outstanding
Shares and 1,286,752,366 votes, or approximately 90.9% of the total number of votes represented by the Company’s issued
and outstanding Shares, which is more than the two-thirds majority necessary to approve a special resolution of the shareholders
of the Company as required under Cayman Islands law to authorize and approve the Merger Agreement, the Plan of Merger and the
Transactions, including the Merger.
| Q: | What vote of the Company’s shareholders is required to approve the proposal to adjourn the extraordinary general meeting,
if necessary, to solicit additional proxies? |
| A: | The proposal to adjourn the extraordinary general meeting, if necessary, to solicit additional proxies must be
authorized and approved by an affirmative vote of shareholders
holding at least 25% of the total voting power of all shareholders of the Company having the right to vote at the
extraordinary general
meeting. Under the
Company’s amended
and restated memorandum and articles of association, the
Shares are divided into Class A ordinary shares and Class B
ordinary shares. Holders of Class A ordinary shares are entitled to one vote per share, and holders of Class B ordinary
shares are entitled to 10 votes per share. Based on the number of Class A ordinary shares and Class B ordinary shares we
expect to be issued and outstanding and entitled to vote on the Share Record Date and assuming all issued and
outstanding Shares are present in person or by proxy and voting at
the meeting, Shares representing 945,630,990 votes must be cast in favor of the proposal to
adjourn the extraordinary general meeting to allow us, if necessary, to solicit additional proxies. |
| Q: | How does the Board recommend that I vote on the proposals? |
| A: | After careful consideration and acting upon the unanimous recommendation of the Special Committee, the Board unanimously recommends
that you vote: |
| · | FOR the proposal to authorize and approve the Merger Agreement, the Plan of Merger and the Transactions, including the Merger; |
| · | FOR the proposal to authorize the directors to do all things necessary to give effect to the Merger Agreement, the Plan of
Merger and the Transactions, including the Merger; and |
| · | FOR the proposal to adjourn the extraordinary general meeting in order to allow the Company to solicit additional proxies in
the event that there are insufficient proxies received at the time of the extraordinary general meeting to pass the resolutions
to be proposed at the extraordinary general meeting. |
You should read “Special Factors—Reasons
for the Merger and Recommendation of the Special Committee and the Board” beginning on page [ ] for a discussion
of the factors that the Special Committee and the Board considered in deciding to recommend the approval of the Merger Agreement.
In addition, in considering the recommendation of the Special Committee and the Board with respect to the Merger Agreement, you
should be aware that some of the Company’s directors, executive officers and employees have interests in the Merger that
are different from, or in addition to, the interests of the Company’s shareholders generally. See “Special Factors—Interests
of Certain Persons in the Merger” beginning on page [ ] for additional information.
| Q: | Who is entitled to vote at the extraordinary general meeting? |
| A: | The Share Record Date is [ ], 2015. Only shareholders entered in
the register of members of the Company at the close of business in the Cayman Islands on the Share Record Date or their proxy holders
are entitled to vote at the extraordinary general meeting or any adjournment thereof. |
The record date with respect to ADSs is
[ ], 2015 (the “ADS Record Date”). Only ADS holders of the Company at the close of
business in New York City on the ADS Record Date are entitled to instruct JPMorgan Chase Bank, N.A. (the “ADS
Depositary”) to vote at the extraordinary general meeting. Alternatively, you may vote at the extraordinary general
meeting if you cancel your ADSs by the close of business in New York City on
[ ], 2015 and become a holder of Shares by the close of business
in the Cayman Islands on the Share Record Date.
| Q: | What constitutes a quorum for the extraordinary general meeting? |
| A: | The presence of one or more shareholders entitled to vote and present in person or by proxy representing not less than 50%
of the voting rights represented by the issued and voting Shares will constitute a quorum for the extraordinary general meeting. |
| Q: | When do you expect the Merger to be completed? |
| A: | We are working toward completing the Merger as quickly as possible and currently expect the Merger to close during the second
half of 2015, after all conditions to the Merger have been satisfied or waived. In order to complete the Merger, we must obtain
shareholder approval of the Merger at the extraordinary general meeting and the other closing conditions under the Merger Agreement
must be satisfied or waived in accordance with the Merger Agreement. |
| Q: | What happens if the Merger is not completed? |
| A: | If the Company’s shareholders do not authorize and approve the Merger Agreement, the Plan of Merger and the Transactions,
including the Merger, or if the Merger is not completed for any other reason, the Company’s shareholders will not receive
any payment for their Shares or ADSs pursuant to the Merger Agreement, nor will the holders of any Company Options, Company Restricted
Shares or Company RSUs receive payment pursuant to the Merger Agreement. In addition, the Company will remain a publicly traded
company. The ADSs will continue to be listed and traded on NASDAQ, provided that the Company continues to meet NASDAQ’s listing
requirements. In addition, the Company will remain subject to the reporting obligations of the SEC. Therefore, the Company’s
shareholders will continue to be subject to similar risks and opportunities as they currently are with respect to their ownership
of Shares and ADSs. |
Under specified circumstances, the Company may be
required to pay Parent or its designees a termination fee and/or reimburse Parent and its affiliates for their expenses in connection
with the Transactions, or Parent may be required to pay the Company a termination fee and/or reimburse the Company and its affiliates
for certain expenses in connection with the Transactions, in each case as described in “The Merger Agreement—Termination
Fee and Reimbursement of Expenses” beginning on page [ ].
| Q: | How will the Company’s directors and executive officers vote on the proposal to authorize and approve the Merger Agreement?
|
| A: | Pursuant to the Support Agreement, each of the Rollover Shareholders has agreed to vote all of the Shares and ADSs that they
directly or indirectly hold in favor of the authorization and approval of the Merger Agreement, the Plan of Merger and the Transactions,
including the Merger. |
In addition, each of the Company’s directors
who beneficially owns Shares (including Shares represented by ADSs) has informed the Company that, as of the date of this proxy
statement, he or she intends to vote all of his or her Shares in favor of approval and authorization of the Merger Agreement, the
Plan of Merger and the Transactions, including the Merger.
You should be aware that some of the
Company’s directors and executive officers have interests in the Merger that are different from, or in addition to, the
interests of the shareholders of the Company generally. As of the date of this proxy statement, Mr. Zhang, the chairman of
the Board and acting chief executive officer of the Company, is the sole shareholder of Shanghai Yingfeng, a limited
liability company organized under the laws of the PRC and the general partner of Ningxia Yilida and Zhengjun Investment. Both
Ningxia Yilida and Zhengjun Investment are members of the Buyer Group and therefore, Mr. Zhang has interests that are
different from, or in addition to, the interests of the shareholders of the Company generally. Mr. Shaolin Liang, a director
of the Company, serves as a vice general manager of Ningxia, which is a member of the Buyer Group. Mr. Lin, a director of
the Company, served as the chief executive officer of China Universal Asset Management Co., Ltd., an affiliate of Orient
Hongtai and Orient Hongzhi, each of which is a member of the Buyer Group, from April 2004 to April 16, 2015. Therefore, both
Mr. Shaolin Liang and Mr. Lin may have interests that are different from, or in addition to, the interests of the
shareholders of the Company generally. As of the date of this proxy statement, the Company’s directors and executive
officers beneficially own, in the aggregate, 5,689,313 Shares, which consist of (a) 1,320,072 issued and outstanding Class A
ordinary shares, (b) issued and unexercised Company Options to purchase 4,369,241 Class A ordinary shares issued pursuant to
the Company’s amended and restated 2008 Equity Compensation Plan (the “Share Incentive Plan”) and
exercisable within 60 days following the date of this proxy statement, (c) zero (0) Company Restricted Shares the
restrictions over which will lapse within 60 days following the date of this proxy statement, and (d) zero (0) Company RSUs
the restrictions over which will lapse within 60 days following the date of this proxy statement, which in the aggregate
represent approximately 2.1% of the total issued and outstanding Shares. See “Special Factors—Interests of
Certain Persons in the Merger” beginning on page [ ] and “Security Ownership of Certain
Beneficial Owners and Management of the Company” beginning on page [ ] for additional information.
| Q: | What do I need to do now? |
| A: | We urge you to read this proxy statement carefully, including its annexes, exhibits, attachments and the other documents referred
to or incorporated by reference herein and to consider how the Merger affects you as a shareholder. After you have done so, please
vote as soon as possible. |
| Q: | How do I vote if my Shares are registered in my name (that is, I do not hold ADSs)? |
| A: | If Shares are registered in your name (that is, you do not hold ADSs) as of the Share Record Date for shareholder voting, you
should simply indicate on your proxy card how you want to vote, and sign and mail your proxy card in the accompanying return envelope
as soon as possible. The deadline to lodge your proxy card so that your Shares may be represented and voted at the extraordinary
general meeting is [ ], 2015 at 10:00 a.m. (Hong Kong time). |
Alternatively, you can attend the extraordinary general
meeting and vote in person. If you decide to sign and send in your proxy card, and do not indicate how you want to vote, Shares
represented by your proxy will be voted FOR the proposal to authorize and approve the Merger Agreement, the Plan of Merger and
the Transactions, including the Merger, FOR the proposal to authorize the directors to do all things necessary to give effect to
the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, and FOR the proposal to adjourn the extraordinary
general meeting in order to allow the Company to solicit additional proxies in the event that there are insufficient proxies received
at the time of the extraordinary general meeting to pass the resolutions to be proposed at the extraordinary general meeting,
unless you appoint a person other than the chairman of the meeting as proxy, in which case Shares represented by your proxy card
will be voted (or not submitted for voting) as your proxy determines.
If your Shares are held by your broker, bank or other
nominee, please see below for additional information.
| Q: | How do I vote if I own ADSs? |
| A: | If you own ADSs as of the close of business in New York City on the ADS Record Date (and do not cancel such ADSs and become
a registered holder of the Shares underlying your ADSs as explained below), you cannot vote at the extraordinary general meeting
directly, but you may instruct the ADS Depositary (as the holder of Shares underlying your ADSs) how to vote the Shares underlying
your ADSs by completing and signing the ADS voting instruction card and returning it in accordance with the instructions printed
on it as soon as possible. The ADS Depositary must receive such instructions no later than 12:00 p.m. (New York City time) on [ ],
2015 in order to ensure the Shares underlying your ADSs are properly voted at the extraordinary general meeting. The ADS Depositary
will endeavor to vote (or will endeavor to cause the vote of) the Shares it holds on deposit at the extraordinary general meeting
in accordance with the voting instructions timely received from holders of ADSs. If any holder of ADSs does not timely deliver
specific voting instructions to the ADS Depositary, or if the ADS Depositary timely receives voting instructions from an ADS holder
that fail to specify the manner in which the ADS Depositary is to vote the Shares represented by the holder’s ADS, the ADS
Depositary has advised the Company that it will not vote or attempt to exercise the right to vote any Shares underlying such holder’s
ADSs. If you hold your ADSs in a brokerage, bank or other nominee account, you must follow the procedures of the broker, bank or
other nominee through which you hold your ADSs if you wish to vote. |
Alternatively, if you own ADSs as of the close of
business in New York City on the ADS Record Date, you may vote at the extraordinary general meeting directly if you cancel your
ADSs and become a holder of the Shares underlying your ADSs prior to the close of business in the Cayman Islands on the Share Record
Date. If you wish to cancel your ADSs for the purpose of voting Shares, you need to make arrangements to deliver your ADSs to the
ADS Depositary for cancellation before 12:00 p.m. in New York City on [ ],
2015 together with (a) delivery instructions for the corresponding Shares (including the name and address of the person who will
be the registered holder of such Shares), (b) payment of the ADS cancellation fees (US$0.05 per ADS to be cancelled pursuant to
the terms of the Deposit Agreement) and any applicable taxes and (c) a certification that you either (i) held the ADSs as of the
ADS Record Date and have not given, and will not give, voting instructions to the ADS Depositary as to the ADSs being cancelled,
or have given voting instructions to the ADS Depositary as to the ADSs being cancelled but undertake not to vote the corresponding
Shares at the extraordinary general meeting or (ii) did not hold the ADSs as of the ADS Record Date and undertake not to vote the
corresponding Shares at the extraordinary general meeting. If you hold your ADSs in a brokerage, bank or other nominee account,
please contact your broker, bank or other nominee to find out what actions you need to take to instruct the broker, bank or other
nominee to cancel the ADSs on your behalf. Upon cancellation of the ADSs, the ADS Depositary will arrange for JPMorgan Chase Bank,
N.A., Hong Kong branch, the custodian holding the Shares, to transfer registration of the Shares to the former ADS holder (or a
person designated by the former ADS holder). If after the registration of Shares in your name you wish to receive a certificate
evidencing the Shares registered in your name, you will need to make a request to the Company’s registered office at Codan
Trust Company (Cayman), c/o Conyers Dill & Pearman, 2901 One Exchange Square, 8 Connaught Place, Central, Hong Kong, to
issue and mail a certificate to your attention. If the Merger is not completed, the Company would continue to be a public company
in the United States and the ADSs would continue to be listed on NASDAQ. Shares are not listed and cannot be traded on any stock
exchange other than NASDAQ, and in such case only in the form of ADSs. As a result, if you have cancelled your ADSs to attend the
extraordinary general meeting and the Merger is not completed and you wish to be able to sell your Shares on a stock exchange,
you would need to deposit your Shares into the Company’s ADS program for the issuance of the corresponding number of ADSs,
subject to the terms and conditions of applicable law and the Deposit Agreement, including, among other things, payment of relevant
fees of the ADS Depositary for the issuance of ADSs and applicable share transfer taxes (if any) and related charges pursuant to
the Deposit Agreement.
| Q: | If my Shares or ADSs are held in a brokerage, bank or other nominee account, will my broker, bank or other nominee vote
my Shares or ADSs on my behalf? |
| A: | Your broker, bank or other nominee will only vote your Shares on your behalf or give voting instructions with respect to the
Shares underlying your ADSs if you instruct it how to vote. Therefore, it is important that you promptly follow the directions
provided by your broker, bank or other nominee regarding how to instruct it to vote your Shares or ADSs. If you do not instruct
your broker, bank or other nominee how to vote your Shares that it holds, those Shares or ADSs may not be voted. |
| Q: | What will happen if I abstain from voting or fail to vote on the proposal to authorize and approve the Merger Agreement?
|
| A: | If you abstain from voting, fail to cast your vote in person, fail to complete and return your proxy card in accordance with
the instructions set forth on the proxy card, or fail to give voting instructions to the ADS Depositary, your broker, bank or other
nominee, your vote will not be counted. |
| A: | Yes. If you are a holder of Shares, you may change your vote in one of the following three ways: |
| · | First, you may revoke a proxy by written notice of revocation given to the chairman of the extraordinary general meeting at
least two hours before the extraordinary general meeting commences. Any written notice revoking a proxy should be sent to Shanda
Games Limited, No. 1 Office Building, No. 690 Bibo Road, Pudong New Area, Shanghai 201203, the PRC, Attention: Investor Relations
Department; |
| · | Second, you may complete, date and submit a new proxy card bearing a later date than the proxy card sought to be revoked to
the Company no later than 10:00 a.m. (Hong Kong time) on [ ], 2015,
which is the deadline to lodge your proxy card; or |
| · | Third, you may attend the extraordinary general meeting and vote in person. Attendance, by itself, will not revoke a proxy.
It will only be revoked if the shareholder actually votes at the extraordinary general meeting. |
If you hold Shares through a broker, bank or other
nominee and have instructed the broker, bank or other nominee to vote your Shares, you must follow directions received from the
broker, bank or other nominee to change your instructions.
Holders of ADSs may revoke their voting instructions
by notification to the ADS Depositary in writing at any time prior to 12:00 p.m. (New York City time) on [ ],
2015. A holder of ADSs can do this by completing, dating and submitting a new ADS voting instruction card to the ADS Depositary
bearing a later date than the ADS voting instruction card that the ADS holder is seeking to revoke.
If you hold ADSs through a broker, bank or other
nominee and you have instructed your broker, bank or other nominee to give ADS voting instructions to the ADS Depositary, you must
follow the directions of your broker, bank or other nominee to change those instructions.
| Q: | What should I do if I receive more than one set of voting materials? |
| A: | You may receive more than one set of voting materials, including multiple copies of this proxy statement or multiple proxy
or voting instruction cards. For example, if you hold your Shares or ADSs in more than one brokerage, bank or other nominee account,
you will receive a separate voting instruction card for each brokerage, bank or other nominee account in which you hold Shares
or ADSs. If you are a holder of record and your Shares or ADSs are registered in more than one name, you will receive more than
one proxy or voting instruction card. Please submit each proxy card that you receive. |
| Q: | Should I send in my Share certificates or my American Depositary Receipts representing ADSs (“ADRs”) now? |
| A: | No. After the Merger is completed, you will be sent a form of letter of transmittal with detailed written instructions for
exchanging your Share certificates for the merger consideration. Please do not send in your certificates now. Similarly, you should
not send in the ADRs that represent your ADSs at this time. Promptly after the Merger is completed, the ADS Depositary will call
for the surrender of all ADRs for delivery of the merger consideration. ADR holders will be receiving a similar form of letter
of transmittal and written instructions from the ADS Depositary relating to the foregoing. |
All holders of uncertificated Shares and uncertificated
ADSs (i.e., holders whose Shares or ADSs are held in book entry) will automatically receive their merger consideration shortly
after the Merger is completed without any further action required on the part of such holders.
If your Shares or your ADSs are held in “street
name” by your broker, bank or other nominee you will receive instructions from your broker, bank or other nominee as to how
to effect the surrender of your Share certificates or ADRs in exchange for the merger consideration.
| Q: | What happens if I sell my Shares or ADSs before the extraordinary general meeting? |
| A: | The Share Record Date for voting at the extraordinary general meeting is earlier than the date of the extraordinary general
meeting and the date that the Merger is expected to be completed. If you transfer your Shares after the Share Record Date for voting
but before the extraordinary general meeting, you will retain your right to vote at the extraordinary general meeting unless you
have given, and not revoked, a proxy to the person to whom you transfer your Shares, but will transfer the right to receive the
Per Share Merger Consideration in cash without interest to such person, so long as such person is registered as the owner of such
Shares when the Merger is completed. In such case, your vote is still very important and you are encouraged to vote. |
The ADS Record Date is the close of business in New
York City on [ ], 2015. If you transfer your ADSs after the ADS Record
Date but before the extraordinary general meeting, you will retain your right to instruct the ADS Depositary to vote at the extraordinary
general meeting, but will transfer the right to receive the Per ADS Merger Consideration in cash and net of any applicable withholding
taxes to the person to whom you transfer your ADSs, so long as such person owns such ADSs when the Merger is completed. In such
case, your vote is still very important and you are encouraged to vote.
| Q: | Am I entitled to dissenters’ rights? |
| A: | Shareholders who dissent from the Merger will have the right to receive payment of the fair value of their Shares if the Merger
is completed, but only if they deliver to the Company, before the vote to authorize and approve the Merger is taken, a written
objection to the Merger and subsequently comply with all procedures and requirements of Section 238 of the Cayman Islands Companies
Law for the exercise of dissenters’ rights, which is attached as Annex D to this proxy statement. The fair value of their
Shares as determined under that statute could be more than, the same as, or less than the Per Share Merger Consideration they would
receive pursuant to the Merger Agreement if they do not exercise dissenters’ rights with respect to their Shares. |
ADS holders will not have the right to exercise dissenters’
rights and receive payment of the fair value of the Shares underlying their ADSs. The ADS Depositary will not attempt to exercise
any dissenters’ rights with respect to any of the Shares that it holds, even if an ADS holder requests the ADS Depositary
to do so. ADS holders wishing to exercise dissenters’ rights must surrender their ADSs to the ADS Depositary, pay the ADS
Depositary’s fees required for the cancellation of their ADSs, provide instructions for the registration of the corresponding
Shares in the Company’s register of members, and certify that they have not given, and will not give, voting instructions
as to their ADSs (or, alternatively, that they will not vote the corresponding Shares) before 12:00 p.m. (New York City time) on
[ ], 2015, and become registered holders of Shares by the close of business in the
Cayman Islands on the Share Record Date. Thereafter, such former ADS holders must comply with the procedures and requirements for
exercising dissenters’ rights with respect to the Shares under Section 238 of the Cayman Islands Companies Law. If the Merger
is not completed, the Company would continue to be a public company in the United States and ADSs would continue to be listed on
NASDAQ. Shares are not listed and cannot be traded on any stock exchange other than NASDAQ, and in such case only in the form of
ADSs. As a result, if a former ADS holder has cancelled his, her or its ADSs to exercise dissenters’ rights and the Merger
is not completed and such former ADS holder wishes to be able to sell his, her or its Shares on a stock exchange, such former ADS
holder would need to deposit his, her or its Shares into the Company’s ADS program for the issuance of the corresponding
number of ADSs, subject to the terms and conditions of applicable law and the Deposit Agreement, including, among other things,
payment of relevant fees of the ADS Depositary for the issuance of ADSs and applicable Share transfer taxes (if any) and related
charges pursuant to the Deposit Agreement.
We encourage you to read the section of this proxy
statement entitled “Dissenters’ Rights” beginning on page [ ] as well as “Annex D—Cayman
Islands Companies Law Cap. 22 (Law 3 of 1961, as consolidated and revised)—Section 238” to this proxy statement carefully
and to consult your own Cayman Islands legal counsel if you desire to exercise your dissenters’ rights.
| Q: | If I own ADSs and seek to exercise dissenters’ rights, how do I convert my ADSs to Shares, and when is the deadline
for completing the conversion of ADSs to Shares? |
| A: | If you own ADSs and wish to exercise dissenters’ rights, you must deliver the ADSs (or to the extent ADSs are certificated,
the ADRs) to the ADS Depositary for cancellation before 12:00 p.m. (New York City time) on [ ],
2015 together with (a) delivery instructions for the corresponding Shares (including the name and address of the person who will
be the registered holder of such Shares), (b) payment of the ADS cancellation fees (US$0.05 per ADS to be cancelled pursuant to
the terms of the Deposit Agreement) and any applicable taxes and (c) a certification that you either (i) held the ADSs as of the
ADS Record Date and have not given, and will not give, voting instructions to the ADS Depositary as to the ADSs being cancelled,
or have given voting instructions to the ADS Depositary as to the ADSs being cancelled but undertake not to vote the corresponding
Shares at the extraordinary general meeting or (ii) did not hold the ADSs as of the ADS Record Date and undertake not to vote the
corresponding Shares at the extraordinary general meeting. |
You must become a registered holder of the Shares
underlying your ADSs and deliver to the Company, before the vote is taken at the extraordinary general meeting, a written objection
to the Merger and subsequently comply with all procedures and requirements of Section 238 of the Cayman Islands Companies Law,
which is attached as Annex D to this proxy statement, for the exercise of dissenters’ rights.
We encourage you to read the section of this proxy
statement entitled “Dissenters’ Rights” beginning on page [ ], as well as “Annex D—Cayman
Islands Companies Law Cap. 22 (Law 3 of 1961, as consolidated and revised)—Section 238” to this proxy statement carefully
and to consult your own Cayman Islands legal counsel if you desire to exercise your dissenters’ rights.
| Q: | Will any proxy solicitors or information agents be used in connection with the extraordinary general meeting? |
| A: | Yes. To assist in the solicitation of proxies, the Company has engaged Georgeson Inc. as its proxy solicitor. |
| Q: | Who can help answer my questions? |
| A: | If you have any questions about the Merger or if you need additional copies of this proxy statement or the accompanying proxy
card, you should contact Georgeson Inc., the Company’s proxy solicitor, toll-free at +1 800 509 0983 (or +1 781
575 2137 outside of North America) or by email at ShandaGames@georgeson.com. |
In order for you to receive timely delivery of any
additional copy of this proxy statement or the accompanying proxy card in advance of the extraordinary general meeting, you must
make your request no later than five business days prior to the date of the extraordinary general meeting.
Special
Factors
Background of the Merger
All dates and times referenced in this Background of the
Merger refer to China Standard Time.
The Board and senior management of the
Company periodically review the Company’s long-term strategic plans with the goal of enhancing shareholder value. As part
of this ongoing process, the Board and senior management of the Company have, from time to time, considered strategic alternatives
that may be available to the Company, including potential commercial and strategic business partnerships, acquisitions, dispositions
and new business lines.
In particular, during the course of 2012
and 2013, the Company recognized that the revenues of certain of its games and businesses were growing faster than others at the
time. With the aim of enabling the market to more accurately value the faster growing segments and facilitate the effective allocation
of management resources, certain members of the Company’s management considered splitting the Company into two entities under
three different scenarios, in accordance with which the Company would separate its businesses such that (a) one entity would own and operate
the Company’s PRC business, and the other would own and operate its overseas businesses; (b) one entity would own and operate the Company’s
two leading mature legacy games businesses, and the other would own and operate its other faster-growing games businesses; or (c) one entity
would own and operate the Company’s overseas and mobile games businesses, and the other would own and operate the remainder of its games
businesses. Although Mr. Tianqiao Chen (“Mr. Chen”), chairman of the Board at the time, Mr. Richard Wei (“Mr.
Wei”), chief financial officer of the Company at the time, and other representatives of the Company discussed and evaluated
these potential transactions, they ultimately decided not to pursue these transactions due to concerns regarding whether these
transactions would ultimately increase the valuation of the Company as a whole. In mid-2012, Mr. Chen and Mr. Wei also engaged
in preliminary discussions with a U.S. game developer with respect to a potential merger between the Company and the game developer;
however, the Company ultimately declined to pursue this transaction due to concerns regarding the financial condition of the game
developer and the value that would be assigned to the game developer relative to the Company in the transaction.
Despite these efforts, the
Company had not been able to consummate any successful strategic alternatives. Therefore, to further pursue strategic
alternatives for enhancing shareholder value, Mr. Wei met with representatives of Kilometre on December 4 and December 6,
2013 and Mr. Chen and Mr. Wei together met with representatives of Kilometre on December 9, 2013, in each case to discuss
general industry conditions and recent trends in strategic transactions by publicly listed PRC-based companies, as well as
Kilometre’s credentials with respect to potentially advising the Company on exploring strategic alternatives.
The Company subsequently retained Kilometre
as strategic execution consultant to the Company with respect to advising on and executing possible strategic transactions, including
potential minority, majority or change-of-control transactions that could enhance shareholder value.
Between December 18, 2013 and January
18, 2014, Kilometre contacted and introduced to the Company four private equity investors that might have been interested in
a potential transaction with the Company, including Primavera Capital Limited. Between December 21, 2013 and January 26,
2014, the Company entered into confidentiality agreements with these private equity investors and made due diligence
materials available to them, and members of the Company’s senior management held several meetings with
representatives of each of these private equity investors to discuss the Company’s business and operations in order to
facilitate their evaluation of a potential “going private” transaction involving the Company.
On January 27, 2014, Shanda Interactive,
the then controlling shareholder of the Company and an affiliate of Mr. Chen, and an affiliate of Primavera Capital Limited (“Primavera”)
entered into a consortium agreement (the “First Consortium Agreement”) pursuant to which they agreed, among other things,
to form a consortium (such consortium, as it exists from time to time, the “Buyer Group”) to jointly make a proposal
to the Company for a “going private” transaction, deal exclusively with each other in pursuing such transaction for
a period of nine months or until the termination of the First Consortium Agreement by all parties thereto, if earlier, and cooperate
with respect to such transaction.
On the same date, Shanda SDG Investment
Limited (“Shanda SDG”), a wholly owned subsidiary of Shanda Interactive, entered into a share purchase agreement with
Primavera to sell 28,959,276 Class A ordinary shares to Primavera for US$2.7625 per share (the “Primavera SPA”), which
sale was completed on February 17, 2014. Pursuant to the Primavera SPA, Primavera agreed that if a “going private”
transaction occurred within one year of the completion of such sale, where Primavera was a member of the buyer group with respect
to such “going private” transaction (or was not a member of the buyer group due to its own decision or election without
Shanda SDG’s written consent), and the price per share in the “going private” transaction was higher than the
price per share paid by Primavera, Primavera would pay to Shanda SDG, with respect to each share purchased by Primavera from Shanda
SDG, a “make-whole” payment equal to the difference between the price per share paid by Primavera and the price per
share paid in the “going private” transaction, the effect of which would be that Shanda SDG would receive the same
price per share for the shares sold to Primavera as would be paid in the “going private” transaction.
Also
on January 27, 2014, the Buyer Group submitted a preliminary non-binding letter (the “Proposal”) to the
Board proposing to acquire all of the shares of the Company not already owned by members of the Buyer Group for a cash
consideration of US$3.45 per Share and US$6.90 per ADS (the “Proposed Transaction”). In the Proposal,
the Buyer Group noted that the per ADS price to be paid in the Proposed Transaction represented a premium of approximately 44.4%
to the volume-weighted average price of the ADSs over the preceding 30 trading days. Moreover, the Buyer Group stated, among
other things, that its members had entered into the First Consortium Agreement pursuant to which they had agreed to work with
each other exclusively in pursuing the Proposed Transaction, and that it expected that the Proposed Transaction would be
financed with a combination of debt and equity capital and that the equity portion would be provided by members of the Buyer
Group. The Proposal also stated that the members of the Buyer Group did not intend to sell their Shares to any third
party.
On January 28, 2014, the Board met via
conference call to discuss, among other things, the Proposal. During the meeting, representatives of Davis Polk & Wardwell
(“Davis Polk”), the Company’s U.S. legal advisor, provided the Board with an overview of the substantive requirements,
processes and duties of directors under applicable law in connection with the Proposed Transaction, including various approaches
taken by boards of directors when considering similar transactions, and the desirability of establishing a committee of independent
directors to evaluate the Proposed Transaction given the conflicts of interest that may arise from the involvement of Shanda Interactive
in the Proposed Transaction.
At the meeting, the Board determined it
was in the best interests of the Company and the Unaffiliated Holders to form the Special Committee. After discussing the various
qualifications of the members of the Board to serve on the Special Committee, including whether certain directors were sufficiently
independent for purposes of serving on the Special Committee, the Board adopted resolutions to form the Special Committee, comprised
of the following three directors, whom the Board determined were sufficiently independent for purposes of serving on the Special
Committee: Mr. Lin (to serve as chairman of the Special Committee), Mr. Heng Wing Chan (“Mr. Chan”)
and Mr. Yong Gui (“Mr. Gui”).
At the same
meeting, the Board also adopted resolutions delegating to the Special Committee the appropriate power and authority of the Board
to, among other things, consider and evaluate the Proposed Transaction and determine whether it was in the best interests of the
shareholders of the Company, and make recommendations to the Board on the Proposed Transaction; negotiate on behalf of the Board
the terms of the Proposed Transaction, including the terms of the Merger Agreement and any other document to be entered into with
the Buyer Group in connection with the Proposed Transaction; consider competing proposals or offers and other strategic alternatives
and make recommendations to the Board with respect thereto (including the recommendation that the Company not enter into any transaction
and, instead, remain independent); request information and assistance from officers of the Company in connection with its consideration
of the Proposed Transaction and any other alternative proposals; retain its own independent legal and financial advisors and other
agents relating to the Proposed Transaction and enter into contracts providing for the retention and compensation of such advisors
or other agents; submit its recommendation to the Board, together with the terms of any negotiated definitive agreement pursuant
to which the “going private” transaction or any alternative transaction would be completed that would be required
to be approved by the Board; and receive any information, assistance or documents from officers, advisors and employees of the
Company that would be helpful in discharging the duties of the Special Committee. In addition, the Board resolved that each member
of the Special Committee be indemnified by the Company to the fullest extent permitted by applicable law or the Company’s
memorandum and articles of association for any loss and damage suffered because of his role on the Special Committee. On January
29, 2014, the Company issued a press release announcing the formation of the Special Committee to evaluate the Proposed Transaction.
The Board subsequently adopted resolutions
providing that each member of the Special Committee be compensated for his service. Such compensation was not and is not contingent
upon the completion of the Merger or on the Special Committee’s or the Board’s recommendation of the Merger.
Between January 28, 2014 and February
16, 2014, the Special Committee interviewed a number of prospective legal advisors, including Sullivan & Cromwell, with
respect to U.S. law; Walkers, with respect to Cayman Islands law; and Haiwen & Partners (“Haiwen”), with
respect to PRC law. Following these interviews, the Special Committee evaluated the credentials and independence of the law
firms interviewed.
On February 17, 2014, Messrs. Lin and Gui
of the Special Committee met via conference call with representatives of Sullivan & Cromwell to confirm Sullivan & Cromwell’s
engagement as the independent legal counsel to the Special Committee with respect to U.S. law and discussed the U.S. legal requirements
applicable to the Proposed Transaction as well as the process that the Special Committee should follow in evaluating the Proposed
Transaction. Later on that date, representatives of Sullivan & Cromwell called Mr. Chan to brief him on the discussion. On
February 18, 2014, the Company issued a press release regarding the Special Committee’s appointment of Sullivan & Cromwell
as its U.S. legal counsel.
Following the Company’s announcement
of its receipt of the Proposal on January 27, 2014, the Special Committee received solicited and unsolicited proposals from, and
evaluated the qualifications of, six financial advisory firms to act as independent financial advisor to the Special Committee.
On February 18, 2014, after deliberation on the experience, qualification and reputation of each of the six financial
advisory firms, the Special Committee selected Merrill Lynch as its independent
financial advisor, subject to confirmation of its independence in connection with the Proposed Transaction. The Special Committee
noted that Merrill Lynch was familiar with the Company and its industry, had substantial experience with “going private”
transactions involving U.S.-listed PRC-based companies, and had the ability to interact in both English and Chinese. Merrill Lynch
confirmed its independence on March 5, 2014, and the Special Committee executed an engagement letter with Merrill Lynch on
March 6, 2014. On the same day, the Company issued a press release regarding the Special Committee’s appointment
of Merrill Lynch as its independent financial advisor.
On February 21 and March 4, 2014, respectively,
the Special Committee retained Walkers as its independent Cayman Islands legal advisor and Haiwen as its independent PRC legal
advisor with respect to the Proposed Transaction, which engagements were confirmed in engagement letters on March 11, 2014.
On February 25, 2014, the Special Committee
held a meeting in Shanghai to consider the Proposed Transaction. Each of Messrs. Lin and Gui attended in person, and Mr. Chan
attended via telephone. Representatives of Sullivan & Cromwell and Merrill Lynch attended in person, and representatives of
Walkers attended via telephone. At the meeting, representatives of Merrill Lynch and Sullivan & Cromwell discussed the Proposed
Transaction with the Special Committee, including the composition of the Buyer Group; the structure of the Proposed Transaction;
certain considerations for the Special Committee with respect to its analysis of the value, fairness and certainty of the transaction;
the purchase price offered in the Proposed Transaction; safeguards for securing a fair deal for Unaffiliated Holders; whether a
“market check” would be likely to find competing bidders; and alternative strategic options.
Representatives of Sullivan & Cromwell
then discussed key legal considerations for the Special Committee, including the scope of authority under the Board’s resolutions;
fiduciary duty considerations for members of the Special Committee; disclosure requirements under U.S. law; and deal execution
considerations and other typical features of “going private” transactions. In particular, representatives of Sullivan
& Cromwell summarized the importance of the independence and disinterestedness of the members of the Special Committee, the
role of the Special Committee in representing the interests of Unaffiliated Holders, the importance of the Special Committee in
assuring that a fair process is undertaken with respect to the Proposed Transaction and a fair price is reached, and the importance
of considering strategic alternatives to the Proposed Transaction. Walkers also advised on the fiduciary duty considerations for
members of the Special Committee under Cayman Islands law. Over the course of the three days following the meeting, Sullivan &
Cromwell met via conference call with each member of the Special Committee to inquire as to the independence of such member, on
which conference calls each member of the Special Committee confirmed his independence for purposes of serving on the Special Committee.
Pursuant to the Special Committee’s
instructions, on March 4, 2014, Merrill Lynch presented a questionnaire to members of the Buyer Group as part of the Special Committee’s
evaluation of the Proposed Transaction, which questionnaire covered, among other things, the financing of the Proposed Transaction,
the proposed composition of the Buyer Group, the post-closing capital structure of the Company, and potential meetings between
advisors of the Special Committee and those of potential financing sources. The Buyer Group responded to Merrill Lynch on March 7, 2014.
Between
March 4, 2014 and September 30, 2014, the Special Committee regularly met via conference call with representatives of Sullivan
& Cromwell and Merrill Lynch to discuss, among other things, the status of the Proposed Transaction; Merrill Lynch’s
due diligence on the financial resources and other aspects of members of the Buyer Group; the communications and discussions between
Sullivan & Cromwell and Merrill Lynch, on the one hand, and members of the Buyer Group and their advisors, on the other; the
expected timetable of the Proposed Transaction; the due diligence process by, and negotiations of the Merger Agreement, the Equity
Commitment Letters and the Limited Guarantees (collectively, the “Transaction Documents”) with, the Buyer Group; the
status of the Company’s disclosure schedules to the Merger Agreement; updates on the financial due diligence conducted with
the management of the Company and, on September 23, 2014, a presentation on the valuation of the Company and the fairness of the
consideration to be paid by the Buyer Group to the Unaffiliated Holders in the Proposed Transaction; and additional potential
investors in the Proposed Transaction. Sullivan & Cromwell assisted the Special Committee in negotiating and concluding a
confidentiality agreement with each of the potential investors that had indicated its intention to assess the possibility of joining
the Buyer Group between February 28, 2014 and August 8, 2014.
On March 17, 2014, the Company made available
to Merrill Lynch and the Buyer Group certain financial projections, which Merrill Lynch discussed with the Special Committee on
March 25, 2014.
Also on March 17, 2014, Wilson Sonsini
Goodrich & Rosati, P.C. (“WSGR”), the Buyer Group’s U.S. legal advisor, presented to Sullivan & Cromwell
an initial draft of the Merger Agreement.
On March 25, 2014, the Special Committee
and representatives of Sullivan & Cromwell and Merrill Lynch met via conference call. Representatives of Sullivan & Cromwell
summarized the Merger Agreement received from WSGR, and discussed with the Special Committee key issues in the draft and terms
to be negotiated with the Buyer Group and its counsel.
Between March 17, 2014 and April 22,
2014, Sullivan & Cromwell also held several conference calls with Latham & Watkins, counsel to Primavera, and WSGR with
respect to the Proposed Transaction. During this period, the parties discussed the specific terms of the Merger Agreement and the
Special Committee’s position with respect thereto, and exchanged drafts of the Merger Agreement.
During this period, negotiations with respect
to the Merger Agreement included discussions of, and the drafts exchanged between the parties reflected changes to, the following
terms, among others:
| · | the circumstances under which the Board could effect a change
of recommendation to the Company’s shareholders in respect of the Proposed Transaction; |
| · | the shareholder vote required to authorize and approve the Merger
Agreement, the Plan of Merger and the Transactions, including the Merger; |
| · | the scope of debt and equity financing relating to the Proposed Transaction; |
| · | the circumstances under which each party would be able to terminate the Merger Agreement; |
| · | the circumstances under which each party would be obligated to pay the other a termination fee, and the amount and form of
such termination fee; |
| · | the level of efforts required to be undertaken by the parties to secure requisite regulatory approvals in connection with the
Proposed Transaction; |
| · | the representations and warranties made by the Company; and |
| · | the restrictions on the Company’s conduct of its business prior
to the closing of the Proposed Transaction. |
During the course of these negotiations
with WSGR and the Buyer Group, Sullivan & Cromwell, after consulting with the Special Committee, obtained certain terms of
the Merger Agreement that were more favorable to the Unaffiliated Holders than those contained in the initial draft of the Merger
Agreement, including, in particular, by (a) expanding the circumstances under which the Board would be able to effect a change
of recommendation to the Company’s shareholders in respect of the Proposed Transaction, and under which the Company would
be able to terminate the Merger Agreement in order to enter into an agreement with respect to an alternative transaction that could
be more favorable to the Company and the Unaffiliated Holders; (b) limiting the circumstances under which Parent would be able
to terminate the Merger Agreement, and requiring that members of the Buyer Group vote in favor of the authorization and approval
of the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, and therefore, in each case, increasing
the likelihood of the Merger being completed; and (c) providing that the termination fee payable by Parent would be twice that
of the termination fee payable by the Company.
On April 1, 2014, the Special
Committee and representatives of Merrill Lynch met via conference call to discuss, among other things, requesting an increase
to the merger consideration from the Buyer Group. Shortly thereafter, representatives of Merrill Lynch proposed to
representatives of the Buyer Group that the Buyer Group increase the then-current merger consideration. In the subsequent
three-week period, representatives of Merrill Lynch and representatives of the Buyer Group engaged in various discussions
concerning an increase to the merger consideration; however, representatives of the Buyer Group ultimately informed
representatives of Merrill Lynch that the Buyer Group was not prepared to increase the merger consideration.
Between January and July 2014, Primavera
led the Buyer Group’s discussions with potential additional equity investors that were considering joining the Buyer Group.
Between February 2014 and August 2014, several of these potential equity investors signed confidentiality agreements with the
Company and assessed the possibility of joining the Buyer Group.
In April and May 2014, (a)
Perfect World Co., Ltd. (“Perfect World”), (b) an affiliate of FountainVest Partners
(“FountainVest”), and (c) an affiliate of Carlyle Asia Partners IV, L.P. (“Carlyle”) each became a
party to the First Consortium Agreement and joined the Buyer Group. On April 18, 2014, Perfect World and Shanda SDG entered
into a share purchase agreement, pursuant to which Shanda SDG sold to Perfect World 30,326,005 Class A ordinary shares of the
Company at US$3.2975 per share. Perfect World also agreed to pay a “make-whole” payment to Shanda SDG on terms
substantially the same as those in the Primavera SPA. The Company issued a press release in connection with each of Perfect
World, FountainVest and Carlyle joining the Buyer Group. Although Mr. Xiangdong Zhang, chief executive officer of the Company
at the time; Mr. Tunghai Chien, president of the Company; Mr. Wei; members of the Company’s investors relations team;
and certain of the Company’s game producers met separately with two other private equity investors, one of which the
Company had previously held discussions with in January 2014, on several occasions in March and April 2014 to discuss the
Company’s business and operations in order to facilitate the evaluation by these investors of joining the Buyer Group,
these investors ultimately did not join the Buyer Group.
Between May 9, 2014 and August 31,
2014, with the objective of assessing market interest for alternative transactions, representatives of Merrill Lynch also began
conducting a “market check” by initiating discussions with other potential buyers and regularly updated the Special
Committee on the status of those discussions. In all, Merrill Lynch contacted seven potential financial sponsors and nine potential
strategic investors to assess their interest in an acquisition of the Company as an alternative to the Proposed Transaction, but
each of these parties ultimately declined to make a proposal to acquire the Company.
On July 9, 2014 and July 11, 2014, representatives
of Shanda Interactive and a Chinese bank that Shanda Interactive approached had meetings and discussions with Mr. Xiangdong Zhang,
Mr. Tunghai Chien, members of the Company’s investors relations team, and certain of the Company’s game producers to
discuss the Company’s business and operations in order to facilitate the evaluation by the Chinese bank of joining the Buyer
Group; however, after these meetings and further evaluation, the Chinese bank ultimately did not join the Buyer Group.
In July 2014 and August 2014, representatives
of Primavera, on behalf of itself, Perfect World, FountainVest and Carlyle, discussed with representatives of Shanda Interactive
the progress of securing equity financing and the possibility of allowing members of the Buyer Group to separately solicit interest
from various other potential equity investors to join the Buyer Group and facilitate the Proposed Transaction.
In August 2014, representatives
of Primavera approached representatives of Haitong, an affiliate of Haitong Securities, to solicit Haitong to join the
Buyer Group. Between August 17 and September 1, 2014, representatives of Haitong discussed with representatives of
Primavera, Perfect World and Shanda Interactive the terms, requirements and process for Haitong to purchase Class A ordinary
shares from Shanda SDG, Primavera and Perfect World and join the Buyer Group. On September 1, 2014, Haitong agreed
to purchase a total of 107,438,129 Class A ordinary shares from Shanda SDG, Primavera and Perfect World for US$3.45 per
share, and Hao Ding, an affiliate of Haitong Securities, completed such purchase on behalf of Haitong on September 23, 2014. Haitong
also agreed to pay a “make-whole” payment to each of Shanda SDG, Primavera and Perfect World on terms
substantially the same as those in the Primavera SPA.
Between August 19 and August 26, 2014,
representatives of Ningxia approached and discussed with representatives of Shanda Interactive the terms, requirements and process
for Ningxia to purchase Class A ordinary shares from Shanda SDG and join the Buyer Group. On September 1, 2014, Ningxia agreed
to purchase 80,577,828 Class A ordinary shares from Shanda SDG for US$3.45 per share, and Zhongrong Investment, an affiliate of
Ningxia, completed such purchase on behalf of Ningxia on September 23, 2014. Ningxia and Zhongrong Investment also agreed
to pay a “make-whole” payment to Shanda SDG on terms substantially the same as those in the Primavera SPA.
Between August 27 and August 31,
2014, representatives of Orient Finance Holdings (Hong Kong) Limited (“Orient Finance”), which is a direct and
wholly owned subsidiary of Orient Securities and an affiliate of Orient Hongtai and Orient Hongzhi, approached and discussed
with representatives of Shanda Interactive the terms, requirements and process for Orient Finance to purchase Class A
ordinary shares from Shanda SDG and join the Buyer Group. On August 31, 2014, Orient Finance agreed to purchase 123,552,669
Class A ordinary shares from Shanda SDG for US$3.45 per share, which purchase was completed on September 23, 2014, and
which shares were subsequently transferred by Orient Finance to Orient Hongtai and Orient Hongzhi, each of which is an
affiliate of Orient Finance, on November 24, 2014. Orient Finance also agreed to pay a “make-whole” payment to
Shanda SDG on terms substantially the same as those in the Primavera SPA.
On August 30, 2014 and August 31, 2014,
representatives of Primavera, as the lead member of the Buyer Group at the time, and representatives of Shanda Interactive discussed
the withdrawal of Primavera, Perfect World, FountainVest and Carlyle from the Buyer Group. On September 1, 2014, Perfect World,
FountainVest, Carlyle and Primavera withdrew from the Buyer Group, and Haitong, Ningxia and Orient Finance joined the Buyer Group,
after which the Buyer Group was comprised of Shanda Interactive, Haitong, Ningxia and Orient Finance. On September 2, 2014,
the Company issued a press release announcing the changes to the Buyer Group.
In light of his role as the chief
executive officer of China Universal Asset Management, an affiliate of Orient Finance, it was determined that Mr. Lin was no longer
sufficiently independent for purposes of serving on the Special Committee, and he promptly resigned from the Special
Committee. Mr. Chan was then elected by the Special Committee to serve as the chairman of the Special Committee. On September
4, 2014, the Special Committee reconfirmed Sullivan & Cromwell’s appointment as its U.S. legal counsel, Merrill
Lynch’s appointment as its financial advisor (after Merrill Lynch reconfirmed its independence), Walkers’
appointment as its Cayman Islands legal counsel and Haiwen’s appointment as its PRC legal counsel, and issued a press
release announcing that the Board had reconstituted the Special Committee formed by the Board to evaluate the
Proposed Transaction.
On September 9, 2014, the Special Committee
and representatives of Sullivan & Cromwell and Merrill Lynch met via conference call to review the status of the Proposed Transaction,
particularly with respect to the change in the composition of the Buyer Group. At this meeting, the parties discussed the status
of the negotiations with respect to the Merger Agreement and the other Transaction Documents, and the changes to the financing
proposed by the Buyer Group (specifically that debt financing was no longer necessary).
On September 11, 2014, WSGR
presented to Sullivan & Cromwell a revised draft of the Merger Agreement. During the period between September 11 and
September 22, 2014, Sullivan & Cromwell held several conference calls and corresponded with WSGR with respect to the
Proposed Transaction. On these calls and during this correspondence, Sullivan & Cromwell and WSGR discussed the
outstanding terms of the Merger Agreement and the Special Committee’s position with respect to such terms and the other
Transaction Documents, and exchanged various drafts of the Merger Agreement and the other Transaction Documents. The
negotiations with respect to the Merger Agreement and the other Transaction Documents included discussions of, and the drafts
exchanged between the parties reflected changes to, the following terms, among others: (a) the circumstances under which the
Board could effect a change of recommendation to the Company’s shareholders in respect of the Proposed Transaction, (b)
the scope and terms of the equity financing relating to the Proposed Transaction, (c) the amount of termination fees and (d)
the representations and warranties to be made by the Company.
On September
16, 2014, the Special Committee and representatives of Sullivan & Cromwell and Merrill Lynch held several conference calls
to discuss the terms of the Merger Agreement in light of the changes to the Buyer Group and the Special Committee’s position
with respect to the terms thereof and the other Transaction Documents. During the conference calls, the Special Committee consulted
Merrill Lynch on its preliminary view on the then-proposed merger consideration and market practice. After discussions regarding
negotiation tactics among the Special Committee, Sullivan & Cromwell and Merrill Lynch, the Special Committee directed Merrill
Lynch to seek to negotiate an increase in the merger consideration.
On September 17, 2014, representatives
of WSGR and Sullivan & Cromwell held a conference call to discuss certain issues with respect to the Anti-monopoly Law of the
PRC and the proposed equity financing of the Proposed Transaction.
Between September 17 and September
22, 2014, representatives of Merrill Lynch held several conference calls with representatives of the Buyer Group, on which
representatives of Merrill Lynch conveyed the Special Committee’s position with respect to an increase in the merger
consideration. On September 22, 2014, representatives of the Buyer Group indicated to representatives of Merrill Lynch that
the Buyer Group was prepared to increase the merger consideration to US$7.10 per ADS, and Merrill Lynch informed the Special
Committee of the revised proposal.
On September 23, 2014, the
Special Committee met in Shanghai with representatives of Sullivan & Cromwell, Merrill Lynch, Walkers and Haiwen attending
either in person or via conference call. Representatives of Sullivan & Cromwell reviewed the history of the transaction, after
which representatives of Walkers reviewed the fiduciary duty considerations for members of the Special Committee under Cayman
Islands law. Sullivan & Cromwell then summarized for the Special Committee the key terms and proposed resolution of all open
items in the Merger Agreement and the other Transaction Documents, as well as disclosure requirements under U.S. law, deal
execution considerations and other typical features of “going private” transactions. Representatives of Haiwen then
provided an update on certain considerations with respect to the Anti-monopoly Law of the PRC. Representatives of Merrill Lynch
then gave a presentation on the valuation of the Company and the fairness of the consideration to be paid to the Unaffiliated
Holders in the transaction. After the presentations by its advisors, the Special Committee asked questions about Merrill Lynch’s
methodology and analysis with respect to the merger consideration, and discussed the other terms of the transaction with Sullivan
& Cromwell, after which it deliberated on such terms and the negotiation strategy with respect thereto. The Special Committee
then determined that it was prepared to proceed to negotiate the Proposed Transaction with the Buyer Group on the basis of a merger
consideration of US$3.55 per Share and US$7.10 per ADS.
On September 24, 2014, the Special Committee
held a conference call with representatives of Merrill Lynch, who discussed their financial analysis.
Between September 27 and October 19,
2014, WSGR and Sullivan & Cromwell exchanged revised drafts of the Merger Agreement and the other Transaction Documents
in consideration of the Company and the Buyer Group’s desire to potentially sign the Merger Agreement on October 20,
2014, or shortly thereafter; however, on October 19, 2014, WSGR informed Sullivan & Cromwell that the Buyer Group would
not be in a position to sign the Merger Agreement on October 20, 2014. Between October 19 and October 22, 2014, WSGR conveyed
to Sullivan & Cromwell that members of the Buyer Group were continuing to discuss the Proposed Transaction among
themselves, after which discussions between representatives of the Buyer Group and representatives of the Special Committee
ceased for several weeks.
On October 27, 2014, the exclusivity period
under the First Consortium Agreement expired and members of the Buyer Group were no longer obligated to deal exclusively with each
other with respect to the Proposed Transaction. On October 28, 2014, Shanda Interactive and Ningxia entered into a letter agreement,
pursuant to which Shanda Interactive and Ningxia agreed to continue to work with each other exclusively in pursuing the Proposed
Transaction until November 25, 2014. During their subsequent discussions of the Proposed Transaction, Shanda Interactive indicated
to Ningxia that it was considering selling all of the Class B ordinary shares that it indirectly held through Shanda SDG.
On November 7, 2015, Mr. Zhang, the Company’s
acting chief executive officer, who had assisted Shanda Interactive, as one of its general counsels, over the course of its involvement
in the Proposed Transaction, contacted representatives of Ningxia to indicate his interest in purchasing Class B ordinary shares
from Shanda SDG and jointly undertaking the Proposed Transaction with Ningxia. Subsequently, Mr. Zhang and representatives of Ningxia
and Shanda Interactive discussed the potential sale of all of the Class B ordinary shares held by Shanda SDG to affiliates of Mr.
Zhang and Ningxia.
On November 19, 2014, WSGR informed Sullivan
& Cromwell that Shanda SDG intended to sell all of its Shares to affiliates of Mr. Zhang and Ningxia. On November 21, 2014,
the Special Committee and representatives of Sullivan & Cromwell and Merrill Lynch met via conference call to discuss the status
of the Proposed Transaction in light of Shanda SDG’s proposed sale and the new composition of the Buyer Group.
On November 22, 2014, representatives of
Sullivan & Cromwell, Haiwen and WSGR held a conference call to discuss Shanda SDG’s proposed sale, and the potential
implications under the Anti-monopoly Law of the PRC with respect to the Proposed Transaction in light of the composition of the
Buyer Group that would result from Shanda SDG’s proposed sale.
On November 25, 2014, Zhongrong Shengda,
an affiliate of Ningxia, and Yili Shengda, an affiliate of Mr. Zhang, each agreed to purchase 48,759,187 Class B ordinary shares
from Shanda SDG for US$5.13 per share, which purchase was completed on the same day (the “Shanda SDG Sale”). Unlike
the prior occasions when Shanda SDG converted Class B ordinary shares held by it into Class A ordinary shares and sold such Class
A ordinary shares to Primavera, Perfect World, Haitong, Ningxia and Orient Finance, or their respective affiliates, this time Zhongrong
Shengda and Yili Shengda negotiated to purchase Class B ordinary shares, which entitled their holders to 10 votes per share and,
in exchange, Shanda SDG demanded a higher price than for the Class A ordinary shares. By acquiring an aggregate of 97,518,374 Class
B ordinary shares, Zhongrong Shengda and Yili Shengda together held approximately 69% of the total voting power of the outstanding
ordinary shares, which is more than the two-thirds majority necessary to approve a special resolution of the shareholders of the
Company as required under Cayman Islands law. On November 26, 2014, WSGR was engaged as U.S. legal counsel to Ningxia and Yili
Shengda with respect to the Proposed Transaction.
Upon the completion of Shanda SDG Sale,
each of Mr. Chen, Shanda Interactive and Shanda SDG ceased to own, directly or indirectly, any equity securities of the Company
and was no longer an affiliate of the Company. None of Mr. Chen, Shanda Interactive and Shanda SDG had engaged, directly or indirectly,
in any discussion on the Proposed Transaction since November 26, 2014. Also on November 26, 2014, Mr. Chen was replaced by Mr.
Zhang as the chairman of the Board and the Company issued a press release announcing that it had been informed by Shanda Interactive
that Shanda Interactive did not intend to remain a member of the Buyer Group following the completion of the Shanda SDG Sale,
after which Shanda Interactive would no longer beneficially own any Shares, but that it had been informed by Mr. Zhang and Ningxia
that they intended to continue pursuing the Proposed Transaction, after which discussions between representatives of the Buyer
Group and representatives of the Special Committee ceased for several weeks. Although Mr. Zhang’s employment contract with
Shanda Interactive was not officially terminated until December 16, 2014 (which was his monthly payroll cutoff date at Shanda
Interactive), he had ceased to work for Shanda Interactive on November 25, 2015, the date on which the Shanda SDG Sale was agreed
and completed. Since November 25, 2016, Mr. Zhang has worked exclusively and solely for the Company.
On November 26, 2014, representatives
of Sullivan & Cromwell, WSGR and Davis Polk held a conference call to discuss the status of the Proposed Transaction in light
of the Shanda SDG Sale.
On December 5, 2014, Ningxia Yilida, an
affiliate of Mr. Zhang, and Ningxia entered into a consortium agreement (the “Second Consortium Agreement”), pursuant
to which they agreed, among other things, to form a consortium to jointly make a proposal to the Company for a “going private”
transaction, deal exclusively with each other in pursuing such transaction until February 6, 2015 or the termination of the Second
Consortium Agreement, if earlier, and cooperate with respect to such transaction. All references to “Buyer Group” or
“Buyer Group members” between December 8, 2014 and March 16, 2015 refer only to Ningxia Yilida and Ningxia.
On December 18 and December 22, 2014, representatives
of WSGR and Sullivan & Cromwell held conference calls to discuss the timing and status of the Proposed Transaction, the scope
of the equity financing relating to the Proposed Transaction and the status of the Buyer Group’s review of the Merger Agreement
and the other Transaction Documents, and WSGR conveyed that the Buyer Group intended to continue pursuing the Proposed Transaction
on the terms reflected in the Transaction Documents and previously negotiated with the Special Committee earlier in 2014. On December
23, 2014, the Special Committee and representatives of Sullivan & Cromwell and Merrill Lynch met via conference call to discuss
the same.
Between December 24 and December 26,
2014, Sullivan & Cromwell assisted the Special Committee in negotiating a confidentiality agreement to be entered into
with potential equity investors that had contacted the Buyer Group and expressed interest in assessing the possibility of
joining the Buyer Group. Although two potential investors entered into such confidentiality agreements on January 2 and
January 27, 2015, respectively, neither ultimately joined the Buyer Group.
On January 14, 2015, Ningxia retained Skadden,
Arps, Slate, Meagher & Flom LLP as its legal advisor in connection with the Proposed Transaction.
On February
17, 2015, the Special Committee and representatives of Sullivan & Cromwell and Merrill Lynch met via conference call to discuss
the status of the Proposed Transaction in light of the two new potential equity investors and a new potential debt financing source,
as well as recent news coverage relating to the China Securities Regulatory Commission’s investigation of Zhongyin Cashmere
(which investigation was not related to the Proposed Transaction), a public company listed on the Shenzhen Stock Exchange that
is an affiliate of Ningxia, after which discussions between representatives of the Buyer Group and representatives of the Special
Committee ceased for several weeks.
On March 12, 2015, representatives of Merrill
Lynch held a conference call with Mr. Zhang to discuss the composition of the Buyer Group and the scope of the equity financing
relating to the Proposed Transaction. On March 16, 2015, representatives of WSGR informed representatives of Merrill Lynch that
a new consortium agreement would be signed within the next 24 hours.
Subsequently on March 16, 2015, Ningxia
Yilida, Ningxia, Orient Hongtai, Orient Hongzhi and Hao Ding entered into the Third Consortium Agreement, pursuant to which they
agreed to form a consortium to jointly make a proposal to the Company for a “going private” transaction, deal exclusively
with each other in pursuing such transaction for a period of approximately six weeks or until the termination of the Third Consortium
Agreement by all parties thereto, if earlier, and cooperate with respect to such transaction. On April 3, 2015, each of Zhongrong
Legend, Ningxia Silkroad, and Zhengjun Investment entered into an adherence agreement, pursuant to which each of them became a
party to the Third Consortium Agreement as a Sponsor. All references to “Buyer Group” or “Buyer Group members”
after March 16, 2015 refer only to those entities that were a party to the Third Consortium Agreement as of the relevant time.
The Third Consortium Agreement also obligated the parties thereto to vote for such transaction and against any competing proposal,
and restricted transfers of shares, warrants and options of the Company and any other securities that were convertible into or
exercisable for Shares or other equity securities of the Company, including Shares and ADSs.
On March 19, 2015, representatives of Sullivan
& Cromwell and WSGR held a conference call to discuss the status and timing of the Proposed Transaction, on which call WSGR
conveyed to Sullivan & Cromwell that the Buyer Group proposed a purchase price of US$3.45 per Share and US$6.90 per ADS, but
otherwise wished to preserve the terms previously negotiated with the Special Committee during the course of 2014. Representatives
of WSGR indicated that the members of the Buyer Group had carefully considered the purchase price that they would be prepared to
pay in the Proposed Transaction. However, since such purchase price was lower than the US$3.55 per Class A ordinary share and US$7.10
per ADS that the Buyer Group had previously expressed a willingness to entertain in September 2014, the Special Committee determined
that such lowered purchase price was not acceptable and considered requiring that the Merger Agreement and Plan of Merger be subject
to approval by the Unaffiliated Holders (in addition to the approval by all shareholders at the extraordinary general meeting of
the Company).
On March 23, 2015, the Special
Committee and representatives of Sullivan & Cromwell, Merrill Lynch and Haiwen met via conference call to discuss the
offer from the Buyer Group. The Special Committee determined that it would postpone its response to the Buyer Group until it
had the opportunity to review the Company’s estimated balance sheet, income statement and statement of cash flows for
the fiscal year ended December 31, 2014. On March 24, 2015, the Company made this financial information available to the
Special Committee, which Merrill Lynch subsequently discussed with the Special Committee.
Between March 25 and April 2, 2015, Sullivan
& Cromwell and WSGR continued to negotiate the Merger Agreement and the other Transaction Documents and to exchange drafts
thereof. During this period, negotiations with respect to the Transaction Documents included discussions of, and the drafts
exchanged between the parties reflected changes to, the merger consideration, the shareholder vote required to authorize and approve
the Merger Agreement and Plan of Merger, the scope of equity financing relating to the Proposed Transaction, the amount of the
termination fees, and certain considerations with respect to the Anti-monopoly Law of the PRC.
On March 27, 2015, the Company made available
to the Special Committee certain financial projections, which Merrill Lynch subsequently discussed with the Special Committee.
On March
31, 2015, the Special Committee and representatives of Sullivan & Cromwell, Merrill Lynch and Haiwen met via conference call
to discuss the Special Committee’s response to the current proposal from the Buyer Group and Merrill Lynch’s opinion
regarding the fairness of the consideration to be paid to the Unaffiliated Holders in the transaction in light of the additional
financial information received from the Company. Merrill Lynch noted that, compared to financial projections previously made available
by the Company, the estimated revenue and net income of the Company for 2014 and the financial projections for subsequent years
were lower, and therefore, it would be unlikely for the revised financial projections to materially affect Merrill Lynch’s
analysis of the fairness of the proposed merger consideration presented on September 23, 2014 from a financial point of view.
However, after discussion among the Special Committee, Sullivan & Cromwell and Merrill Lynch of the history of the negotiations
and terms of the Shanda SDG Sale, the Special Committee instructed Sullivan & Cromwell and Merrill Lynch to propose that the
merger consideration should be increased to US$3.55 per Class A ordinary share and US$7.10 per ADS. Subsequently on March 31,
2015, representatives of Sullivan & Cromwell and Merrill Lynch communicated to representatives of WSGR and Mr. Zhang the Special
Committee’s position that the merger consideration should be increased to US$3.55 per Class A ordinary share and US$7.10
per ADS in view of the negotiations that had occurred in September 2014 and the purchase price paid to Shanda SDG in the Shanda
SDG Sale for Class B ordinary shares, and that approval of the Merger Agreement and Plan of Merger would need to be subject to
a separate approval by the Unaffiliated Holders if the merger consideration were any lower.
On April 1, 2015, representatives of Sullivan
& Cromwell, Merrill Lynch and WSGR held a conference call, on which WSGR conveyed that the Buyer Group, considering the protracted
nature of negotiations to that point, desired to maintain the then-current momentum of discussions between the parties and reach
a definitive agreement with respect to the Proposed Transaction, and therefore, had revised its proposal to reflect a merger consideration
of US$3.50 per Share and US$7.00 per ADS, on the conditions that the Merger Agreement be signed by April 3, 2015 and that approval
of the Merger Agreement and Plan of Merger not be subject to a separate approval by the Unaffiliated Holders. On the conference
call, representatives of WSGR indicated that the members of the Buyer Group had deliberated extensively on the purchase price that
they would be prepared to pay in the Proposed Transaction, and that the proposal of US$3.50 per Share and US$7.00 per ADS was the
highest price that the Buyer Group would agree to pay.
On April 2, 2015, the Special Committee
and representatives of Sullivan & Cromwell, Merrill Lynch and Haiwen met via conference call to discuss the proposal from the
Buyer Group. The Special Committee considered the revised proposal, and concluded that it was not prepared to recommend the Proposed
Transaction without a separate approval by the Unaffiliated Holders, unless the merger consideration was increased to US$3.55 per
Class A ordinary share and US$7.10 per ADS. After the conference call, representatives of Sullivan & Cromwell and Merrill Lynch
communicated the Special Committee’s position to representatives of WSGR.
On April 3, 2015, representatives of WSGR
informed representatives of Sullivan & Cromwell and Merrill Lynch that the Buyer Group was prepared to agree to pay US$3.55
per Class A ordinary share and US$7.10 per ADS, provided that the Merger Agreement and Plan of Merger would not be subject to a
separate approval by the Unaffiliated Holders.
On April 3, 2015, the Special Committee
and representatives of Sullivan & Cromwell, Merrill Lynch and Haiwen met via conference call. Following an update from Sullivan
& Cromwell on the status of negotiations with the Buyer Group, Sullivan & Cromwell summarized for the Special Committee
the key terms and proposed resolution of all open items on the Merger Agreement and the other Transaction Documents and reviewed
the fiduciary duty considerations for members of the Special Committee. Merrill Lynch then presented the Special Committee with
its financial analyses of the transaction and, following such presentation, orally rendered its opinion, which was subsequently
confirmed by it in writing and is attached hereto as Annex C, to the Special Committee to the effect that the consideration to
be paid to holders of the Class A ordinary shares and ADSs (other than (a) the holders of the Rollover Shares and (b) Parent, the
Company or any of their Subsidiaries) in the Merger, as of April 3, 2015, based upon, and subject to, the procedures followed,
assumptions made, qualifications and limitations on the review undertaken and other matters considered by Merrill Lynch in preparing
its opinion, was fair, from a financial point of view, to such holders. Haiwen then indicated that the consummation of the Transactions
should not be subject to any requirement to obtain any regulatory approval under the Anti-monopoly Law of the PRC.
After considering the proposed terms of
the Merger Agreement and the other Transaction Documents, which were amended as a result of the negotiations as described above,
and the various presentations of Sullivan & Cromwell, Merrill Lynch, Walkers and Haiwen over the course of the transaction
to date, including the receipt of Merrill Lynch’s opinion, and taking into account the other factors described below under
the heading titled “—Reasons for the Merger and Recommendation of the Special Committee and the Board,” the Special
Committee unanimously determined that the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, were
fair to, and in the best interests of, the Company and the Unaffiliated Holders, and recommended that the Board authorize and approve
the Merger Agreement, the Plan of Merger and the Transactions, including the Merger.
Following the meeting of the Special Committee,
the Board met via conference call on April 3, 2015, with representatives of Merrill Lynch, Davis Polk and Sullivan & Cromwell.
The Board, acting upon the unanimous recommendation of the Special Committee, unanimously (a) determined that it was fair to, advisable
and in the best interests of the Company and the Unaffiliated Holders to consummate the Transactions, including the Merger;
(b) authorized and approved the execution, delivery and performance by the Company of the Merger Agreement, the Plan of Merger
and the Limited Guarantees and the consummation of the Transactions, including the Merger; and (c) resolved to recommend in favor
of the authorization and approval of the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including
the Merger, to the shareholders of the Company and directed that the Merger Agreement, the Plan of Merger and the consummation
of the Transactions, including the Merger, be submitted to a vote of the shareholders of the Company for authorization and approval.
Later in the evening on April 3, 2015,
the Company, Parent and Merger Sub executed the Merger Agreement and the other Transaction Documents, and the Company issued a
press release announcing the execution thereof.
Reasons for the Merger and Recommendation of the Special
Committee and the Board
The Board, acting upon the unanimous recommendation
of the Special Committee, which Special Committee acted with the advice and assistance of the Company’s management and its
independent financial and outside legal advisors, evaluated the Merger Agreement, the Plan of Merger and the Transactions.
In general, the Board believes that, as
a privately held entity, the Company’s management may have greater flexibility to focus on improving the Company’s
long-term financial performance without the pressures created by the public equity market’s emphasis on short-term period-to-period
financial performance.
In
addition, as an SEC-reporting company, the Company’s management and accounting staff, which comprises a relatively small
number of individuals, must devote significant time to SEC reporting and compliance. The Company is also required to disclose a
considerable amount of business information to the public, some of which is commercially sensitive and would not be disclosed by
a non-reporting company. As a result, the Company’s actual or potential competitors, customers, lenders, intellectual property
licensors and other vendors all have ready access to this information, which may help them compete against the Company or make
it more difficult for the Company to negotiate favorable terms with them, as the case may be.
The Special Committee met regularly
with its advisors between January 2014 and April 2015 to consider and review, among other things, any possible strategic alternatives
to the Proposed Transaction and the terms of the Proposed Transaction, and to review, consider, discuss with its advisors regarding
and give its advisors instructions on the status and tactics of negotiations with the Buyer Group on the proposed merger consideration
and other terms of the Proposed Transaction. These efforts are described in greater detail under the section entitled “—Background
of the Merger”. At a meeting on April 3, 2015, the Special Committee reviewed and considered the terms and conditions of
the Merger Agreement, the Plan of Merger and the Transactions, including the Merger. The Special Committee, after due consideration,
unanimously (a) determined that the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, were fair
to, and in the best interests of, the Company and the Unaffiliated Holders; (b) declared advisable the Merger Agreement, the Plan
of Merger and the Transactions, including the Merger; and (c) recommended that the Board authorize and approve the Merger Agreement,
the Plan of Merger and the Transactions, including the Merger.
At a meeting on April 3, 2015, the Board,
acting upon the unanimous recommendation of the Special Committee, unanimously (a) determined that it was fair to, advisable and
in the best interests of the Company and the Unaffiliated Holders to consummate the Transactions, including the Merger; (b) authorized
and approved the execution, delivery and performance by the Company of the Merger Agreement, the Plan of Merger and the Limited
Guarantees and the consummation of the Transactions, including the Merger; and (c) resolved to recommend in favor of the authorization
and approval of the Merger Agreement, the Plan of Merger and the consummation of the Transactions, including the Merger, to the
shareholders of the Company and directed that the Merger Agreement, the Plan of Merger and the consummation of the Transactions,
including the Merger, be submitted to a vote of the shareholders of the Company for authorization and approval.
In the course of reaching their determinations,
each of the Special Committee and the Board considered the following substantive factors and potential benefits of the Merger,
which are not listed in any relative order of importance, each of which the Special Committee and the Board believed supported
their decisions:
| · | the Special Committee and the Board had knowledge of the Company’s business, financial condition, results of operations,
prospects and competitive position and believed that the Merger would be financially more favorable to the Unaffiliated Holders
than any alternative reasonably available to the Company and the Unaffiliated Holders; |
| · | the consideration of US$7.10 per ADS offered to the Unaffiliated Holders in the Merger represents a premium of approximately
25.7% over the Company’s closing price as quoted by NASDAQ on January 24, 2014, the last trading day immediately prior to
the Company’s announcement on January 27, 2014 that it had received the Proposal, and a premium of approximately 46.5% and
53.8%, respectively, over the Company’s 30- and 60-trading day volume-weighted average price as quoted by NASDAQ prior to,
and including, January 24, 2014; |
| · | it could take a considerable period of time, if ever, before the trading price of the ADSs would reach and sustain a level
equal to or greater than the merger consideration of US$7.10 per ADS, as adjusted for present value; |
| · | the Special Committee determined that, following extensive negotiations with the Buyer Group, US$3.55 per Share and US$7.10
per ADS were the highest price per Share and per ADS that the Buyer Group would agree to pay, with the Special Committee basing
its belief on a number of factors, including the duration and tenor of negotiations and the experience of the Special Committee
and its advisors; |
| · | the all-cash merger consideration allows the Unaffiliated Holders to immediately realize liquidity for their investment and
provides them with a specific amount of cash consideration for, and corresponding certainty of the value of, their Shares and/or
ADSs; |
| · | following its formation, the Special Committee had independent control of the sale process with the advice and assistance of
Merrill Lynch as its independent financial advisor and Sullivan & Cromwell, Walkers and Haiwen as its independent legal advisors,
which, in each case, reported solely to the Special Committee; |
| · | the Special Committee reviewed and discussed with Merrill Lynch its financial analysis, and Merrill Lynch rendered an opinion
to the Special Committee on April 3, 2015 that the consideration to be paid to holders of the Class A ordinary shares and ADSs
(other than (a) the Excluded Shares and (b) ADSs representing Excluded Shares) in the Merger, as of April 3, 2015, based upon,
and subject to, the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters
considered by Merrill Lynch in preparing its opinion, was fair, from a financial point of view (see “—Opinion of Merrill
Lynch, the Special Committee’s Financial Advisor” beginning on page [ ] for additional information); |
| · | the forecasts of the Company’s future financial performance prepared by the Company’s management, together with
the Company’s management’s view of the Company’s financial condition, results of operations, business, prospects
and competitive position, were made available to the Special Committee; |
| · | the Company’s revenues are highly concentrated in a small number of mobile games and MMO games (which include massively
multi-player online role-playing games (“MMORPGs”) and advanced casual games), and there can be no certainty that MMO games and/or
MMORPGs will remain popular or that the Company will be able to introduce new games that are comparably successful due to the risks
faced by the Company, including, in particular, that: |
| ○ | the Company is currently dependent on three MMORPGs for approximately 53.3% of its net revenues, the popularity of which is
unpredictable and may not remain for the duration anticipated by the Company; |
| ○ | the Company may not be able to develop commercially successful games or expansion packs for existing games according to its
timetable or at all; |
| ○ | the Company may not be able to continue to create successful mobile games, which have a lower operating margin than MMO games;
and |
| ○ | the Company’s item-based revenue model, which allows players to play the basic features of each game for free and relies
on players purchasing virtual items to generate revenues, may not be successful; |
| · | members of the Buyer Group together hold approximately 90.9% of the total voting power of the outstanding ordinary shares,
more than the two-thirds majority necessary to approve a special resolution of the shareholders of the Company, and have agreed
not to sell their respective Shares and/or ADSs to any third party; |
| · | the Special Committee considered factors of the transaction that could impact deal certainty, including: |
| ○ | the fact that Parent and Merger Sub have obtained committed equity financing necessary to complete the Merger, and Merrill
Lynch has performed due diligence on the financial resources of the equity investors; and |
| ○ | the Merger Agreement contains a limited scope of conditions to closing; |
| · | the Merger Agreement provides that, in the event of the failure of the Merger to be completed under certain circumstances,
Parent will pay the Company a termination fee of US$114,500,000 (see “The Merger Agreement—Termination Fee and Reimbursement
of Expenses” beginning on page [ ] for additional information); |
| · | Merrill Lynch, under the direction of the Special Committee, conducted a “market check” of parties deemed to be potentially interested
in and capable of acquiring the Company, and all such parties ultimately declined to engage in discussions with the Special Committee
regarding such acquisition or any alternative transaction; |
| · | since the announcement of the Proposal on January 27, 2014, no party other than the Buyer Group, as it existed from time
to time, had made any proposal to the Company or the Special Committee with respect to any alternative transaction with the Company;
and |
| · | the Special Committee believed that it was unlikely that any transaction with a third party could be completed given that the
Third Consortium Agreement (as further discussed under the section entitled “—Background of the Merger”) provides
that, subject to the terms and conditions set forth therein, the Buyer Group members that are a party thereto, which beneficially
own an aggregate of 311,568,626 Class A ordinary shares (including Class A ordinary shares represented by ADSs) and 97,518,374
Class B ordinary shares, representing approximately 76.1% of the Company’s issued and outstanding Shares and approximately
90.9% of the total number of votes represented by the Company’s issued and outstanding Shares, will only vote in favor of
the Merger and will vote against any transaction involving a third party, in each case in their capacities as shareholders of the
Company. |
In addition, the Special Committee and
the Board believed that sufficient procedural safeguards were and are present to ensure that the Merger is procedurally fair to
the Unaffiliated Holders and to permit each of the Special Committee and the Board to represent effectively the interests of such
Unaffiliated Holders. The procedural safeguards, which are not listed in any relative order of importance, include the following:
| · | in considering the transaction with the Buyer Group, the Special Committee acted solely to represent the interests of the Unaffiliated
Holders, and the Special Committee had independent control of its legal and financial advisors; |
| · | the consideration and negotiation of the Merger Agreement were conducted under the control and supervision of the Special Committee,
and all of the members of the Special Committee that recommended authorization and approval of the Merger Agreement, the Plan of
Merger and the Transactions, including the Merger, during the entire process were and are independent directors and free from any
affiliation with the Buyer Group; none of the members of the Special Committee that recommended approval of the Merger Agreement,
the Plan of Merger and the consummation of the Transactions is or ever was an employee of the Company or any of its subsidiaries
or affiliates and none of such members has any financial interest in the Merger that is different from that of the Unaffiliated
Holders other than the cash-out of Company Restricted Shares and Company RSUs held by such members, such members’ receipt
of Board and Special Committee compensation (which was not and is not contingent upon the completion of the Merger, or the Special
Committee’s or the Board’s recommendation of the Merger) and their indemnification and liability insurance rights under
the Merger Agreement and the Company’s memorandum and articles of association; during all dealings as a member of the
Special Committee prior to his resignation on September 4, 2014, Mr. Lin was also an independent director and free from
any affiliation with the Buyer Group as it was composed prior to the addition of Orient Finance to the Buyer Group on September 1,
2014; and, finally, Mr. Lin resigned as a member of the Special Committee following the addition of Orient Finance to the
Buyer Group on September 1, 2014 (see “—Background of the Merger” beginning on page [ ] for additional information); |
| · | the Special Committee was assisted in negotiations with the Buyer Group and in its evaluation of the Merger by Merrill Lynch
as its independent financial advisor and Sullivan & Cromwell, Walkers and Haiwen as its independent legal advisors; |
| · | the Special Committee was broadly empowered to consider, attend to and take any and all actions in connection with the Proposal
from the Buyer Group in relation to the Merger Agreement, the Plan of Merger and the Transactions from the date the Special Committee
was established, and no evaluation, negotiation or response regarding the Merger Agreement, the Plan of Merger and the Transactions
in connection therewith from that date forward was considered by the Board for approval until the Special Committee had recommended
such action to the Board; |
| · | the terms and conditions of the Merger Agreement were the product of extensive negotiations between the Special Committee and
its advisors, on the one hand, and the Buyer Group and its advisors, on the other hand; |
| · | the Special Committee was broadly empowered to exercise the full power and authority of the Board in relation to the
negotiation of the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, and related
process; |
| · | the Special Committee met regularly to consider and review the terms of the Merger Agreement, the Plan of Merger and the
Transactions, including the Merger; |
| · | the Special Committee and the Board recognized that the Special Committee had no obligation to recommend the Merger or any
other transaction; |
| · | the Special Committee and the Board recognized that, under the terms of the Merger Agreement, prior to the approval and adoption
of the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, by the shareholders of the Company, the Special Committee has the ability to consider any
acquisition proposal reasonably likely to lead to a Superior Proposal; |
| · | the Company has the ability, subject to compliance with the terms and conditions of the Merger Agreement and prior to the approval
and adoption of the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, by the shareholders of the Company, to terminate the Merger Agreement in order
to enter into an agreement with respect to a Superior Proposal; |
| · | the Board and the Special Committee have the ability, under certain circumstances, to change, withhold, withdraw, qualify or
modify the Company Recommendation (as defined in the section entitled “Merger Agreement—No Solicitation of Competing
Transactions” beginning on page [ ]) that the Company’s shareholders vote to approve and adopt the Merger Agreement,
Plan of Merger and the Transactions, including the Merger; and |
| · | dissenters’ rights are available to the shareholders who comply with all of the required procedures under the Cayman
Islands Companies Law for exercising dissenters’ rights, which allow such shareholders to receive payment of the fair value
of their Shares. |
Each of the Special Committee and the Board
also considered a variety of potentially negative factors concerning the Merger Agreement, the Plan of Merger and the Transactions,
including the Merger, including the following, which are not listed in any relative order of importance:
| · | the Unaffiliated Holders will have no on-going equity participation in the Company following the Merger, and they will cease
to participate in the Company’s future earnings or growth, if any, and to benefit from increases, if any, in the value of
the Company’s equity, and will not participate in any potential future sale of the Company to a third party or any potential
recapitalization of the Company, which could include a dividend to shareholders; |
| · | approval of the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, is not subject to a separate approval by the Unaffiliated Holders and,
given that the Buyer Group has, in the aggregate, approximately 90.9% of the voting power of the outstanding Shares, the Buyer
Group has the ability to determine the authorization and approval of the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, at the extraordinary
general meeting; |
| · | the restrictions on the conduct of the Company’s business prior to the completion of the Merger may delay or prevent
the Company from undertaking business opportunities that may arise or any other action it would otherwise take with respect to
the operations of the Company pending completion of the Merger; |
| · | since the Company became publicly listed on NASDAQ on September 25, 2009, the highest historical closing price of ADSs
(US$13.00 per ADS in September 2009) exceeds the consideration of US$7.10 per ADS to be paid in the Merger, although the ADSs have
not had a closing price above US$7.10 per ADS since June 2, 2011; |
| · | there are risks and costs to the Company if the Merger does not close, including the diversion of management and employee attention,
potential employee attrition and the potential disruptive effect on the Company’s business and customer relationships; |
| · | the Company may be required, under certain circumstances, to pay Parent a termination fee of US$57,250,000 in connection with
the termination of the Merger Agreement; |
| · | the Company’s remedy in the event of breach of the Merger Agreement by Parent or Merger Sub is limited, under certain
circumstances, to the receipt of a reverse termination fee of US$114,500,000, and under certain circumstances the Company may not
be entitled to a reverse termination fee or expenses at all; |
| · | the Buyer Group has interests in the Merger that are different from, or in addition to, those of the Unaffiliated Holders (see
“—Interests of Certain Persons in the Merger” beginning on page [ ] for additional information), particularly
in light of the terms of the Buyer Group’s participation in the Merger; |
| · | it is possible that the Merger might not be completed and the negative impact of such a public announcement on the Company’s
sales and operating results, and the Company’s ability to attract and retain key management, marketing and technical personnel;
and |
| · | an all-cash transaction is taxable to the Unaffiliated Holders who are U.S. Holders (as defined under “—Material
U.S. Federal Income Tax Consequences”) for U.S. federal income tax purposes, and is likely taxable to the Unaffiliated Holders
in other jurisdictions. |
The foregoing discussion of information
and factors considered by the Special Committee and the Board is not intended to be exhaustive, but includes a number of the factors
considered by the Special Committee and the Board. In view of the wide variety of factors considered by the Special Committee and
the Board, neither the Special Committee nor the Board found it practicable to quantify or otherwise assign relative weights to
the foregoing factors in reaching its conclusions. In addition, individual members of the Special Committee and the Board may have
given different weights to different factors and may have viewed some factors more positively or negatively than others. The Special
Committee recommended that the Board authorize and approve, and the Board authorized and approved, the Merger Agreement, the Plan
of Merger and the Transactions, including the Merger, based upon the totality of the information presented to and considered by
it.
In reaching its conclusion regarding the
fairness of the Merger to the Unaffiliated Holders and its decision to recommend the authorization and approval of the Merger Agreement,
the Plan of Merger and the Transactions, including the Merger, the Special Committee considered financial analyses presented by
Merrill Lynch as an indication of the going-concern value of the Company. These analyses included, among others, a historical trading
range analysis, broker target price analysis, selected comparable public companies analysis, discounted cash flow analysis and
premiums paid analysis. All of the material analyses as presented to the Special Committee on April 3, 2015 are summarized below
under the section entitled “—Opinion of Merrill Lynch, the Special Committee’s Financial Advisor” beginning
on page [ ]. The Special Committee expressly adopted these analyses and the opinion of Merrill Lynch, among other factors considered,
in reaching its determination as to the fairness of the Transactions, including the Merger.
Neither the Special Committee nor the Board
considered the liquidation value of the Company’s assets because each considers the Company to be a viable going-concern
business where value is derived from cash flows generated from its continuing operations. In addition, each of the Special Committee
and the Board believes 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 believes the analyses and additional factors it
reviewed provided an indication of the Company’s going-concern value. Each of the Special Committee and the Board also considered
the historical market prices of the ADSs as described under the section entitled “Market Price of the Company’s ADSs,
Dividends and Other Matters—Market Price of the ADSs” beginning on page [ ]. Each of the Special Committee and
the Board considered the purchase prices paid in previous purchases as described under “Transactions in Shares and ADSs.”
Neither the Special Committee nor the Board, however, considered the Company’s net book value, which is defined as total
assets minus total liabilities, attributable to the Company’s shareholders, as a factor. Each of the Special Committee and
the Board believes that net book value is not a material indicator of the value of the Company as a going concern as it does not
take into account the future prospects of the Company, market conditions, trends in the industry related to the development and
marketing of MMO games and mobile games or the business risks inherent in competing with other companies in that industry. The
Board and the Special Committee note, however, that the merger consideration of US$3.55 per Share and US$7.10 per ADS is in each
case substantially higher than the Company’s net book value per Share of US$0.57 as of December 31, 2014 (based on
the weighted average number of issued and outstanding Shares during 2014).
In reaching its determination that the
Merger Agreement, the Plan of Merger and the Transactions, including the Merger, are fair to, and in the best interests of, the
Company and the Unaffiliated Holders, and its decision to authorize and approve the Merger Agreement, the Plan of Merger and the
Transactions, including the Merger, and its recommendation to authorize and approve the Merger Agreement, the Plan of Merger and
the Transactions, including the Merger, by the Company’s shareholders, the Board, on behalf of the Company, considered the
analysis and recommendation of the Special Committee and the factors examined by the Special Committee as described above under
this section and under “—Background of the Merger,” and adopted such recommendations and analysis.
In addition, the Special Committee
and the Board considered that it is appropriate for the Company to undertake the Transactions at this time after considering (a)
the uncertainties in the Company’s future financial performance and the risks that such uncertainties pose to the Unaffiliated
Holders, based on the Company’s past financial performance and projections and, in particular, that (i) the estimated revenue
and net income of the Company for 2014 and the financial projections for subsequent years were lower than previously estimated
and (ii) based on the Company’s projections, the Company’s revenue and net income will not be higher than those for
2012 until 2018; (b) the prospect that it could take a considerable period of time, if ever, before the trading price of the ADSs
would reach and sustain a level equal to or greater than the merger consideration of US$7.10 per ADS, as adjusted for present
value; (c) the Company’s ongoing dependence on mobile games and MMO games and the risks associated with such dependence
and, in particular, the Company’s dependence on three MMORPGs for 53.3% of its net revenue in 2014, two of which were released
over ten years ago, together with the fact that all games have finite commercial lifespans notwithstanding the Company’s
efforts to extend these commercial lifespans; (d) the consideration and evaluation of alternative strategic options by the Company’s
senior management in 2012 and 2013, and the failure of such efforts to produce any successful strategic alternatives due to concerns
relating to valuation; and (e) the fact that the merger consideration proposal of the Buyer Group on April 3, 2015 was the highest
proposal by the Buyer Group (as it existed with various members from time to time) since the Buyer Group was first formed on January
27, 2014 and not to be subsequently aborted by the Buyer Group (the earlier proposal by the Buyer Group on September 22, 2014,
though it had the same merger consideration, was aborted by the Buyer Group on October 19, 2014).
During its consideration of the Merger
Agreement and the Transactions, including the Merger, the Board was also aware that some of the Company’s directors and shareholders,
including Mr. Zhang, the chairman of the Board and acting chief executive officer of the Company, Mr. Chen, the former chairman
of the Board, and other employees of the Company, have, or had at times during the negotiation of the Merger Agreement, interests
with respect to the Merger that are or may be, or were or may have been, different from or in addition to those of the Unaffiliated Holders generally, as described under the section entitled “—Interests of Certain Persons in the Merger”
beginning on page [ ].
For the foregoing reasons, the Company
believes that the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, are fair to, and in the best
interests of, the Company and its unaffiliated security holders.
Position of the Buyer Group as to 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 is required to express
its beliefs as to the fairness of the Merger to the Company’s unaffiliated security holders, as defined in Rule 13e-3 of
the Exchange Act. 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. The Buyer Group does not rely on or adopt the analysis
of the Special Committee or Merrill Lynch in considering the fairness of the Merger to the Unaffiliated Holders. The views of the
Buyer Group as to the fairness of the Merger are not intended to be and should not be construed as a recommendation to any shareholder
of the Company or holder of ADSs as to how to vote on the proposal to authorize and approve the Merger Agreement, the Plan of Merger
and the Transactions, including the Merger. The Buyer Group has interests in the Merger that are different from, and/or in addition
to, those of the Unaffiliated Holders of the Company by virtue of its continuing interests in the Surviving Corporation after the
consummation of the Merger. These interests are described under the caption “—Interests of Certain Persons in the Merger—Interests
of the Buyer Group” beginning on page [ ].
The Buyer
Group believes the interests of the Unaffiliated Holders were represented by the Special Committee, which negotiated the terms
and conditions of the Merger Agreement with the assistance of its independent legal counsel and independent financial advisor.
The Buyer Group attempted to negotiate a transaction that would be most favorable to it, and not to the Unaffiliated Holders and,
accordingly, did not negotiate the Merger Agreement with a goal of obtaining terms that were substantively or procedurally fair
to such Unaffiliated Holders. 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 Merger to the Unaffiliated Holders. Furthermore, the members of the Buyer Group did not themselves undertake a formal evaluation
of the fairness of the Merger and did not receive any independent reports, opinions or appraisals
from any third party related to the 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 Holders.
Based on its 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 Board discussed
under the caption “—Reasons for the Merger and Recommendation of the Special Committee and the Board”
beginning on page [ ] (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 that the Merger is both substantively and procedurally fair
to the Company’s Unaffiliated Holders based on the following factors, which are not listed in any relative order of
importance:
| · | none of the members of the Special Committee that recommended the authorization and approval of the Merger Agreement,
the Plan of
Merger
and the Transactions, including the Merger, is or ever was an employee of the Company or any of its subsidiaries or
affiliates and
none of such members has any financial interest in the Merger that is different from that of the Unaffiliated Holders
other than the cash-out of Company Restricted Shares and Company RSUs held by such members, such members’ receipt of
Board and Special Committee compensation (which was not and is not contingent upon the completion of the Merger, or the
Special Committee’s or the Board’s recommendation of the Merger) and their indemnification and liability
insurance rights under the Merger Agreement and the Company’s memorandum and articles of association; |
| · | the Special Committee and the Board had no obligation to recommend the authorization and approval of the Merger Agreement,
the Plan of Merger and the Transactions, including the Merger; |
| · | the Special Committee retained Merrill Lynch as its independent financial advisor and Sullivan
& Cromwell, Walkers and Haiwen as its independent legal advisors, each of whom is experienced in advising committees such as
the Special Committee in similar transactions; with the advice and assistance of such advisors, the Special Committee had
independent control of the sale process; |
| · | the Buyer Group did not participate in 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 consideration of US$7.10 per ADS offered to the Unaffiliated Holders in the Merger represents a 25.7% premium over the
Company’s closing price as quoted by NASDAQ on January 24, 2014, the last trading day immediately prior to the Company’s
announcement on January 27, 2014 that it had received the Proposal, and a premium of approximately 46.5% and 53.8%, respectively,
over the Company’s 30- and 60-trading day volume-weighted average price as quoted by NASDAQ prior to, and including, January
24, 2014; |
| · | the lowest closing price of the Company’s ADSs was US$2.74 per ADS during the 52-week period prior to the announcement
of the Company’s receipt of the Proposal; |
| · | notwithstanding that the Buyer Group may not rely upon the opinion provided by Merrill Lynch to the Special Committee on April
3, 2015, the Special Committee received an opinion from Merrill Lynch stating that, as of the date of the Merger Agreement, and
based upon and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken and
other matters considered by Merrill Lynch in preparing its opinion, the Per Share Merger Consideration and Per ADS Merger Consideration
to be received by holders of the Class A ordinary shares and ADSs (other than the Excluded Shares and ADSs representing Excluded
Shares) in the Merger were fair, from a financial point of view, to such holders; |
| · | the Special Committee unanimously (a) determined that the Merger Agreement, the Plan of Merger and the Transactions, including
the Merger, were fair to, and in the best interests of, the Company and the Unaffiliated Holders; (b) declared advisable the Merger
Agreement, the Plan of Merger and the Transactions, including the Merger; and (c) recommended that the Board authorize and approve
the Merger Agreement, the Plan of Merger and the Transactions, including the Merger; |
| · | the Board, acting upon the unanimous recommendation of the Special Committee, unanimously (a) determined that it was
fair to, advisable and in the best interests of the Company and the Unaffiliated Holders to consummate the Transactions,
including the Merger; (b) authorized and approved the execution, delivery and performance by the Company of the Merger
Agreement, the Plan of Merger and the Limited Guarantees and the consummation of the Transactions, including the Merger; and
(c) resolved to recommend in favor of the authorization and approval of the Merger Agreement, the Plan of Merger and the
consummation of the Transactions, including the Merger, to the shareholders of the Company; |
| · | the Company has the ability, under certain circumstances, to specifically enforce the terms of the Merger Agreement; |
| · | under the terms of the Merger Agreement, in certain circumstances prior to obtaining shareholder approval of the Merger, the
Company is permitted to furnish information to and participate in discussions or negotiations with persons making acquisition proposals
and the Board and the Special Committee have the ability to change, withhold, withdraw, qualify or modify their recommendations
to approve the Merger Agreement; |
| · | the Company may terminate the Merger Agreement under the terms of the Merger Agreement upon acceptance of a Superior Proposal,
subject to compliance with the terms and conditions of the Merger Agreement; |
| · | the Merger is not conditioned on any financing being obtained by Parent or Merger Sub, thus increasing the likelihood that
the Merger will be consummated and the Per Share Merger Consideration and Per ADS Merger Consideration will be paid to the Unaffiliated
Holders; |
| · | the consideration to be paid to the Unaffiliated Holders in the Merger is all cash, allowing the Unaffiliated Holders to immediately
realize a certain and fair value for all of their Shares and ADSs, without incurring brokerage and other costs typically associated
with market sales; and |
| · | dissenters’ rights are available to the shareholders who comply with all of the required procedures under the Cayman
Islands Companies Law for exercising dissenters’ rights, which allow such shareholders to receive payment of the fair value
of their Shares. |
The Buyer Group did not consider the Company’s
liquidation value to be a relevant valuation method because it considers the Company to be a viable going concern and because the
Company will continue to operate its business following the Merger. The Buyer Group views the trading history of the ADSs as an
indication of the Company’s going concern value, and, accordingly, did not believe liquidation value to be relevant to a
determination as to the fairness of the Merger.
The Buyer Group did not consider the Company’s
net book value, which is defined as total assets minus total liabilities, attributable to the Company’s shareholders, as
a factor. The Buyer Group believes that net book value, as 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 quality of earnings, cash generation capability,
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 but rather is indicative of historical costs. Therefore,
the Buyer Group does not believe that net book value is a relevant measure in the determination as to the fairness of the Merger.
The Buyer Group notes, however, that the merger consideration of US$3.55 per Class A ordinary share and US$7.10 per ADS are substantially
higher than the Company’s net book value per Share of US$0.57 as of December 31, 2014 (based on the weighted average
number of issued and outstanding Shares during 2014).
The Buyer Group did not establish, and
did not consider, a going concern value for the Company as a public company to determine the fairness of the merger consideration
to the Unaffiliated Holders because, following the Merger, the Company will have a significantly different capital structure. However,
to the extent the pre-Merger going concern value was reflected in the pre-announcement price of the Company’s ADSs, the merger
consideration of US$7.10 per ADS represents a premium to the going concern value of the Company.
Other than the intra-group transactions
among the current and former members of the Buyer Group as described under the caption “Transactions in Shares and ADSs—Transactions
within the Buyer Group” beginning on page [ ], no member of the Buyer Group purchased any Share or ADS during
the past two years. The Buyer Group did not consider these intra-group transfers in considering the fairness of the Merger primarily
because of the following reason. The Buyer Group considers that the higher price of US$5.13 per share paid by Yili Shengda and
Zhongrong Shengda for the Class B ordinary shares in the Shanda SDG Sale reflected a control premium as such Class B ordinary shares,
unlike Class A ordinary shares and ADSs held by the Unaffiliated Holders, collectively represented approximately 69% of the total
voting power represented by the Company’s outstanding ordinary shares, more than the two-thirds majority necessary to approve
a special resolution of the shareholders of the Company as required under Cayman Islands law. The Buyer Group notes that the price
per share for the Class A ordinary shares in the intra-group transfers will equal the Per Share Merger Consideration after “make-whole”
payments pursuant to the terms of the relevant share purchase agreements.
The members of the Buyer Group are not
aware of, and thus did not consider, any offers or proposals made by any unaffiliated person during the past two years for (a)
a 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) the purchase of all or a substantial portion of the Shares that would enable such person to exercise control of or
significant influence over the Company.
Although Cayman Islands law does not require,
and the Merger Agreement is not subject to, approval by a majority of the unaffiliated shareholders of the Company, as a result
of the procedural safeguards described above, the Buyer Group concluded that the Merger is procedurally fair to the Unaffiliated
Holders.
The foregoing is a summary of the information
and factors considered and given weight by the Buyer Group in connection with its evaluation of the fairness of the Merger to the
Unaffiliated Holders, which is not intended to be exhaustive, but is believed by the Buyer Group to include all material factors
considered by it. The Buyer Group did not find it practicable to assign, and did not assign, relative weights to the individual
factors considered in reaching their conclusion as to the fairness of the Merger to the Unaffiliated Holders. Rather, its fairness
determination was made after consideration of all of the foregoing factors as a whole.
The Buyer Group believes these
factors provide a reasonable basis for its belief that the Merger is both substantively and procedurally fair to the
unaffiliated security holders. This belief, however, is not intended to be and should not be construed as a recommendation by
the Buyer Group to any shareholder of the Company as to how such shareholder should vote with respect to the approval of the
Merger Agreement, the Plan of Merger and the Transactions, including the Merger.
Certain Financial Projections
Other than guidance on the coming quarter
provided in earnings releases and on earnings conference calls for quarterly periods prior to the third quarter of 2013, the Company’s
management does not, as a matter of course, make available to the public future financial projections. However, in connection with
the Buyer Group’s due diligence review of the Company, the Company’s management provided financial projections for
the fiscal year ended December 31, 2013 through the fiscal year ending December 31, 2018 and for the fiscal year ended December
31, 2014 through the fiscal year ending December 31, 2019 to the Buyer Group in March 2014 and March 2015, respectively, and in
connection with Merrill Lynch’s financial analysis of the consideration to be paid in the Merger, the Company’s management
provided financial projections for the fiscal year ended December 31, 2013 through the fiscal year ending December 31, 2018 and
for the fiscal year ended December 31, 2014 through the fiscal year ending December 31, 2019 to Merrill Lynch, as the financial
advisor to the Special Committee, on March 17, 2014 and March 27, 2015, respectively. See “—Background of the Merger”
beginning on page [ ] for additional information. These financial projections, which were based on management’s
projection of the Company’s future financial performance as of the date provided, were prepared by the Company’s management
for internal use and for use by Merrill Lynch in its financial analyses, and were not prepared with a view toward public disclosure
or compliance with published guidelines of the SEC regarding forward-looking information or the guidelines established by the American
Institute of Certified Public Accountants for preparation and presentation of financial forecasts or U.S. generally accepted accounting
principles (“U.S. GAAP”).
The financial projections are not a guarantee
of performance. In compiling the projections, the Company’s management took into account historical performance of legacy
games, projected launch dates of new games in the Company’s pipeline, and projected revenues for each new game, combined
with estimates regarding gross margin, operating expenses, tax rates, capital expenditure, EBITDA and net income. Although the
projections are presented with numerical specificity, they were based on numerous assumptions and estimates as to future events
made by management that management believed were reasonable at the time the projections were prepared. This information is not,
however, fact and should not be relied upon as being necessarily indicative of actual future results. In addition, factors such
as industry performance, the market for the Company’s existing and new games, gamers’ behavior and preferences, the
competitive environment, expectations regarding future acquisitions or any other transaction and general business, economic, regulatory,
market and financial conditions, all of which are difficult to predict and beyond the control of management, may cause actual future
results to differ materially from the results forecasted in these financial projections. In addition, the projections do not take
into account any circumstances or events occurring after the date that they were prepared. For instance, the projections do not
give effect to the Merger or any changes to the Company’s operations or strategy that may be implemented after the time the
projections were prepared. We cannot assure you that the projections will be realized or that actual results will not be significantly
different from those contained in the projections.
Neither the Company’s independent
registered public accounting firm, PricewaterhouseCoopers Zhong Tian LLP (“PwC”), nor any other independent accountants
have examined, compiled or performed any procedures with respect to the financial projections or any amounts derived therefrom
or built thereupon and, accordingly, they have not expressed any opinion or given any form of assurance on the financial projections
or their achievability. The PwC report accompanying the Company’s audited consolidated financial statements included in the
Company’s Annual Report on Form 20-F for the year ended December 31, 2014 incorporated by reference in this proxy statement
refers exclusively to the Company’s historical information and does not cover any other information in this proxy statement
and should not be read to do so. The financial projections included in this proxy statement are included solely to give shareholders
access to certain information that was made available to the financial advisor and are not included for the purpose of influencing
any shareholder to make any investment decision with respect to the Merger, including whether or not to seek appraisal for his,
her or its Shares.
The following table summarizes the financial
projections provided by management to the Buyer Group and Merrill Lynch in March 2014:
| | |
Management Projections | |
| | |
Fiscal Year Ending December 31, | |
| | |
2013E(1) | | |
2014E | | |
2015E | | |
2016E | | |
2017E | | |
2018E | |
| | |
(RMB in millions)(2) | |
| Total Net Revenues | |
| 4,346 | | |
| 4,210 | | |
| 5,222 | | |
| 6,228 | | |
| 6,976 | | |
| 7,589 | |
| Growth | |
| -7.9 | % | |
| -3.1 | % | |
| 24.0 | % | |
| 19.3 | % | |
| 12.0 | % | |
| 8.8 | % |
| Gross Profit | |
| 3,210 | | |
| 3,146 | | |
| 3,852 | | |
| 4,555 | | |
| 5,098 | | |
| 5,461 | |
| Gross Margin | |
| 73.9 | % | |
| 74.7 | % | |
| 73.8 | % | |
| 73.1 | % | |
| 73.1 | % | |
| 72.0 | % |
| Total Operating Expenses | |
| 1,481 | | |
| 1,561 | | |
| 1,895 | | |
| 2,213 | | |
| 2,427 | | |
| 2,615 | |
| Income from Operations | |
| 1,729 | | |
| 1,585 | | |
| 1,957 | | |
| 2,342 | | |
| 2,671 | | |
| 2,847 | |
| Operating Margin | |
| 39.8 | % | |
| 37.6 | % | |
| 37.5 | % | |
| 37.6 | % | |
| 38.3 | % | |
| 37.5 | % |
| Net Income attributable to Shanda Games Limited | |
| 1,589 | | |
| 1,326 | | |
| 1,648 | | |
| 1,972 | | |
| 2,206 | | |
| 2,385 | |
| (1) | These projections were prepared by
the Company’s management during the first quarter of 2014. At the time these projections
were prepared, the audit for the fiscal year ended December 31, 2013 had not been completed.
Accordingly, management estimates for fiscal year 2013 may vary materially from the Company’s
audited financial statements. |
| (2) | Financial projections were prepared
and provided in RMB. |
The following table summarizes the financial
projections provided by management to the Buyer Group and the Merrill Lynch in March 2015:
| | |
Management Projections | |
| | |
Fiscal Year Ending December 31, | |
| | |
2014E(1) | | |
2015E | | |
2016E | | |
2017E | | |
2018E | | |
2019E | |
| | |
(RMB in millions)(2) | |
| Total Net Revenues | |
| 3,717 | | |
| 3,591 | | |
| 4,700 | | |
| 5,662 | | |
| 6,465 | | |
| 7,661 | |
| Growth | |
| -14.5 | % | |
| -3.4 | % | |
| 30.9 | % | |
| 20.5 | % | |
| 14.2 | % | |
| 18.5 | % |
| Gross Profit | |
| 2,777 | | |
| 2,723 | | |
| 3,463 | | |
| 4,066 | | |
| 4,548 | | |
| 5,491 | |
| Gross Margin | |
| 74.7 | % | |
| 75.8 | % | |
| 73.7 | % | |
| 71.8 | % | |
| 70.3 | % | |
| 71.7 | % |
| Total Operating Expenses | |
| 1,594 | | |
| 1,386 | | |
| 1,799 | | |
| 2,105 | | |
| 2,323 | | |
| 2,826 | |
| Income from Operations | |
| 1,183 | | |
| 1,337 | | |
| 1,663 | | |
| 1,961 | | |
| 2,225 | | |
| 2,665 | |
| Operating Margin | |
| 31.8 | % | |
| 37.2 | % | |
| 35.4 | % | |
| 34.6 | % | |
| 34.4 | % | |
| 34.8 | % |
| Net Income attributable to Shanda Games Limited | |
| 1,040 | | |
| 1,234 | | |
| 1,462 | | |
| 1,602 | | |
| 1,848 | | |
| 1,902 | |
| (1) | These projections were prepared by
the Company’s management during the first quarter of 2015. At the time these projections
were prepared, the audit for the fiscal year ended December 31, 2014 had not been completed.
Accordingly, management estimates for fiscal year 2014 may vary materially from the Company’s
audited financial statements. |
| (2) | Financial projections were prepared
and provided in RMB. |
In
preparing these projections, the Company’s management necessarily made certain assumptions about future financial factors
affecting the Company’s business, including, primarily, that (a) material costs and expenses would increase in line with
the Company’s revenue increase, (b) the growth of personal computer and smartphone markets in the PRC and elsewhere would
continue in line with management’s expectation, (c) the Company would be able to successfully develop or license new MMORPGs
that attract and retain new and existing players and result in online game revenues consistent with management’s expectations,
(d) the popularity of MMORPGs would remain stable in the geographic markets in which the Company operates, and (e) the Company
would be able to further expand its small but growing mobile game business by developing and licensing more successful mobile
games. The Company’s management also assumed that the overall economy in the PRC will remain stable, and that there will
be no material change in competition affecting the Company.
For the reasons discussed in this proxy
statement, including the bases and assumptions on which the financial projections and forecasts were compiled, the inclusion of
specific portions of the financial projections and forecasts in this proxy statement should not be regarded as an indication that
the Company, the Special Committee or the Board considers such financial projections or forecasts to be an accurate prediction
of future events, and the projections and forecasts should not be relied on as such an indication. No one has made any representation
to any shareholders of the Company or anyone else regarding the information included in the financial projections and forecasts
discussed above.
The financial projections and forecasts
included in this proxy statement should not be considered in isolation or in lieu of the Company’s operating and other financial
information prepared in accordance with U.S. GAAP (see “Financial Information—Selected Historical Financial Information”
beginning on page [ ] for additional information).
The financial projections are forward-looking
statements. For information on factors that may cause the Company’s future financial results to materially vary, see “Cautionary
Note Regarding Forward-Looking Statements” beginning on page [ ] and “Item 3. Key Information—D. Risk
Factors” included in the Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2014, incorporated
by reference into this proxy statement.
Merrill Lynch reviewed certain financial analyses that were based, in part, on the financial projections above. For additional information regarding
the Merrill Lynch’s analysis, see “Presentation/discussion materials prepared by Merrill Lynch for discussion with
the Special Committee and the Board, dated April 3, 2015” and “Presentation/discussion materials prepared by Merrill
Lynch for discussion with the Special Committee, dated September 23, 2014,” filed as Exhibit (c)-(2) and Exhibit (c)-(3),
respectively, to the Company’s transaction statement on Schedule 13E-3 and “—Opinions of Merrill Lynch, the Special
Committee’s Financial Advisor” beginning on page [ ].
NONE OF THE COMPANY OR ITS AFFILIATES,
ADVISORS, OFFICERS, DIRECTORS OR REPRESENTATIVES HAS MADE OR MAKES ANY REPRESENTATION TO ANY SHAREHOLDER OR OTHER PERSON REGARDING
THE ULTIMATE PERFORMANCE OF THE COMPANY COMPARED TO THE INFORMATION CONTAINED IN THE PROJECTIONS OR THAT PROJECTED RESULTS WILL
BE ACHIEVED.
BY INCLUDING IN THIS PROXY STATEMENT A
SUMMARY OF ITS INTERNAL FINANCIAL PROJECTIONS, THE COMPANY UNDERTAKES NO OBLIGATIONS TO UPDATE, OR PUBLICLY DISCLOSE ANY UPDATE
TO, THESE FINANCIAL PROJECTIONS TO REFLECT CIRCUMSTANCES OR EVENTS, INCLUDING UNANTICIPATED EVENTS, THAT MAY HAVE OCCURRED OR THAT
MAY OCCUR AFTER THE PREPARATION OF THESE PROJECTIONS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING THE FINANCIAL
PROJECTIONS ARE SHOWN TO BE IN ERROR OR CHANGE, EXCEPT TO THE EXTENT REQUIRED BY APPLICABLE FEDERAL SECURITIES LAW.
Opinion of Merrill Lynch, the Special Committee’s Financial
Advisor
Merrill Lynch was retained by the Special
Committee to act as its financial advisor in connection with the Proposed Transaction. At the meeting of the Special Committee
on April 3, 2015, Merrill Lynch orally rendered its opinion, which was subsequently confirmed by it in writing, that, as of such
date, based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations
on the review undertaken by Merrill Lynch set forth in the opinion, the Per Share Merger Consideration or Per ADS Merger Consideration,
as applicable, to be received in the Merger by holders of the Class A ordinary shares of the Company or ADSs (other than holders
of Excluded Shares) is fair, from a financial point of view, to such holders.
The full text of Merrill Lynch’s
written opinion, dated April 3, 2015, is attached to this proxy statement as Annex C. You should read the opinion in its entirety
for a discussion of the assumptions made, procedures followed, matters considered and qualifications to and limitations on the
review undertaken by Merrill Lynch in rendering the opinion. The following summary is qualified in its entirety by reference to
the full text of such opinion.
In arriving at its opinion, Merrill Lynch,
among other things:
| · | reviewed certain publicly available business and financial information relating to the Company that Merrill Lynch deemed to
be relevant, including certain public research analyst estimates with respect to the future financial performance of 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 Merrill Lynch by the management of the Company, including certain financial forecasts relating
to the Company prepared by the management of the Company (such forecasts, the “Management Forecasts”); |
| · | discussed the past and current business, operations, financial condition and prospects of the Company with members of senior
management of the Company; |
| · | reviewed the trading history for the ADSs and compared that trading history with the trading histories of certain other publicly
traded companies Merrill Lynch deemed relevant; |
| · | compared certain financial and stock market information of the Company with similar information of certain other publicly traded
companies Merrill Lynch deemed relevant; |
| · | compared certain financial terms of the Merger to financial terms, to the extent publicly available, of other transactions
Merrill Lynch deemed relevant; |
| · | reviewed drafts dated April 3, 2015 of the Merger Agreement, Equity Commitment Letters, Limited Guarantees and Support Agreement;
and |
| · | performed such other analyses and studies and considered such other information and factors as Merrill Lynch deemed appropriate,
including its assessment of general economic, market and monetary conditions. |
In arriving at its opinion, 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 Merrill Lynch and relied upon the assurances
of the management of the Company 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 Management Forecasts, Merrill Lynch was advised by
the Company, and assumed, that such forecasts were reasonably prepared on bases reflecting the best available estimates and good
faith judgments of the management of the Company as to the future financial performance of the Company. 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 it make any physical inspection of the properties or assets of the Company. Merrill Lynch did not evaluate the
solvency or fair value of the Company under any U.S. state, U.S. federal or other laws relating to bankruptcy, insolvency or other
similar matters. Merrill Lynch assumed, at the direction of the Company, that the Merger Agreement did not differ in any material
respect from the draft dated April 3, 2015 reviewed by Merrill Lynch. Merrill Lynch also assumed, at the direction of the Company,
that the Merger will be consummated in accordance with its terms, without waiver, modification or amendment of any material term
or condition 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 the Company or the contemplated benefits of the
Merger.
Merrill Lynch did not express any view
or opinion as to any terms or other aspects of the Merger other than the Per Share Merger Consideration and the Per ADS Merger
Consideration, including, without limitation, the form or structure of the Merger. Merrill Lynch’s opinion was limited to
the fairness, from a financial point of view, of the Per Share Merger Consideration and the Per ADS Merger Consideration, as applicable,
to the holders of the Shares or ADSs (other than holders of Excluded Shares). No opinion or view was expressed with respect to
any consideration received in connection with the Merger by the holders of any other 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 Per Share Merger Consideration or the Per ADS Merger Consideration. Furthermore, 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. In addition, Merrill Lynch expressed no opinion or recommendation as to how any security holder should vote
or act in connection with the Merger or any related matter.
Merrill Lynch’s opinion is necessarily
based on financial, economic, monetary, market and other conditions and circumstances as in effect on, and the information made
available to Merrill Lynch as of April 3, 2015, the date of its opinion. Merrill Lynch does not have any obligation to update,
revise, or reaffirm its opinion.
The following is a summary of the material
analyses performed by Merrill Lynch in connection with its opinion rendered to the Special Committee. The financial analyses summarized
below include information presented in tabular format. In order to fully understand the financial analyses used by 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 and the order of the analyses does not represent relative importance or weight given to those analyses by Merrill
Lynch. The analyses listed in the tables and described below must be considered as a whole; considering any portion of such analyses
and of the factors discussed, without considering the full narrative description of the analyses, as well as the methodologies
underlying, and the assumptions, qualifications and limitations affecting, each analysis, could create a misleading or incomplete
view of the process underlying Merrill Lynch’s analyses.
Historical Trading
Range Analysis
Merrill Lynch reviewed the trading performance
of the ADSs on NASDAQ in the 52-week period prior to January 24, 2014, the last trading day before the Company announced it received
the Proposal. Merrill Lynch observed that the low and high closing prices quoted by NASDAQ for the ADSs in the 52-week period prior
to January 24, 2014 were US$2.74 per ADS and US$6.25 per ADS, respectively. Merrill Lynch further observed that the merger consideration
of US$7.10 per ADS was above the range of such 52-week low and high closing prices.
Broker Target Price
Analysis
Merrill Lynch reviewed the price targets
for the ADSs prepared and published by brokers before the Company announced on January 27, 2014 that it had received the Proposal.
These targets reflected each broker’s estimate of the future public market trading price of the ADSs and were not discounted
to reflect present value. The range of undiscounted price targets for the ADSs as of January 24, 2014, the last trading day prior
to the announcement of the Proposal, was US$3.50 to US$6.50 per ADS.
The public market trading price targets
published by brokers do not necessarily reflect current market trading prices for the ADSs and these estimates are subject to uncertainties,
including the future financial performance of the Company and future financial market conditions.
Selected Comparable
Public Companies Analysis
Using publicly available financial and
stock market information, Merrill Lynch compared selected financial data of the Company with financial and trading data of selected
publicly traded comparable companies, producing valuation multiples of selected financial metrics that Merrill Lynch utilized to
estimate the implied value for the Company. The companies included in the selected comparable public company analysis were chosen
based upon the experience and judgment of Merrill Lynch and did not include all publicly traded online gaming companies. Merrill
Lynch selected companies that are currently (or were at the time they were taken private) U.S.-listed publicly traded PRC-based
gaming companies that focused on client- or web-based games similar to the business focus of the Company. Merrill Lynch excluded
gaming companies that focus on mobile games, rather than client-based or PC games, and that had a short track record as publicly
traded companies. For the purposes of its analysis, Merrill Lynch reviewed and compared certain financial information, ratios and
available public market multiples relating to the Company, some of which were publicly available and others of which were based
on internal information, including the Management Forecasts, to corresponding financial data for selected publicly traded companies.
The companies selected for the analysis were:
| · | Perfect World Co. Limited; and |
| · | Giant Interactive Group Inc. |
Merrill Lynch analyzed the following statistics
for comparative purposes:
| · | the ratio of price to estimated earnings per ADS for calendar year 2015, referred
to as P/E; |
| · | the ratio of price to estimated earnings per ADS for calendar year 2016 (“2016 price-to-earnings multiple”), referred
to as P/E; |
| · | the ratio of adjusted price, defined as price per ADS plus total debt per ADS and minority interests per ADS less cash and
cash equivalents per ADS (“Adjusted Price”), to estimated earnings per ADS for calendar year 2015, referred to as Adjusted
P/E; and |
| · | the ratio of Adjusted Price to estimated earnings per ADS for calendar year 2016, referred to as Adjusted P/E. |
Merrill Lynch used the following metrics
for each comparable company for the purpose of its analyses:
| | |
P/E | | |
Adjusted
P/E | | |
EV/EBITDA(1) | | |
PEG(1) | |
Company | |
2014E(1) | | |
2015E | | |
2016E | | |
2014E(1) | | |
2015E | | |
2016E | | |
2014E | | |
2015E | | |
2016E | | |
2014E | | |
2015E | | |
2016E | |
| Giant
Interactive Going-Private Proposal |
| Broker
Consensus | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Giant Interactive
(Pre-Offer) | |
| 9.7 | x | |
| 9.0 | x | |
| 9.8 | x | |
| 7.7 | x | |
| 7.2 | x | |
| 7.8 | x | |
| 7.0 | x | |
| 6.0 | x | |
| 7.1 | x | |
| 0.8 | x | |
| 0.7 | x | |
| 0.9 | x |
| Giant Interactive (First Offer) | |
| 11.3 | | |
| 10.5 | | |
| 11.4 | | |
| 8.5 | | |
| 7.9 | | |
| 8.6 | | |
| 7.7 | | |
| 6.6 | | |
| 8.7 | x | |
| 0.9 | | |
| 0.8 | | |
| 1.0 | |
| Giant Interactive (Final Offer) | |
| 11.5 | | |
| 10.7 | | |
| 11.6 | | |
| 8.7 | | |
| 8.1 | | |
| 8.8 | | |
| 7.9 | | |
| 6.8 | | |
| 8.9 | x | |
| 0.9 | | |
| 0.9 | | |
| 1.0 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Management
Projections | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Giant Interactive (Pre-Offer) | |
| 9.8 | x | |
| 8.3 | x | |
| 7.6 | x | |
| 7.8 | x | |
| 6.6 | x | |
| 6.1 | x | |
| 7.1 | x | |
| 5.5 | x | |
| 4.7 | x | |
| 0.8 | x | |
| 0.7 | x | |
| 0.6 | x |
| Giant Interactive (First Offer) | |
| 11.4 | | |
| 9.6 | | |
| 8.8 | | |
| 8.6 | | |
| 7.3 | | |
| 6.7 | | |
| 7.8 | | |
| 6.0 | | |
| 5.1 | | |
| 0.9 | | |
| 0.8 | | |
| 0.7 | |
| Giant Interactive (Final Offer) | |
| 11.6 | | |
| 9.8 | | |
| 9.0 | | |
| 8.8 | | |
| 7.5 | | |
| 6.9 | | |
| 8.0 | | |
| 6.2 | | |
| 5.3 | | |
| 0.9 | | |
| 0.8 | | |
| 0.7 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Perfect
World Going-Private Proposal | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
|
|
|
| Broker
Consensus | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Perfect World (Pre-Offer)(2) | |
| 8.1 | x | |
| 7.1 | x | |
| 6.0 | x | |
| 3.5 | x | |
| 3.1 | x | |
| 2.5 | x | |
| 3.1 | x | |
| 2.5 | x | |
| 2.1 | x | |
| 0.5 | x | |
| 0.5 | x | |
| 0.4 | x |
| Perfect World (At Offer)(2) | |
| 10.3 | | |
| 9.0 | | |
| 7.6 | | |
| 6.1 | | |
| 5.4 | | |
| 4.4 | | |
| 5.4 | | |
| 4.4 | | |
| 3.6 | | |
| 0.7 | | |
| 0.6 | | |
| 0.5 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Public
Comparables | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
|
|
|
|
| Broker
Consensus | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Netease(3) | |
| 17.9 | x | |
| 15.5 | x | |
| 13.1 | x | |
| 13.0 | x | |
| 11.4 | x | |
| 9.7 | x | |
| 12.6 | x | |
| 10.5 | x | |
| 8.8 | x | |
| 1.2 | x | |
| 1.0 | x | |
| 0.9 | x |
| Changyou(4) | |
| nm | | |
| 9.9 | | |
| 9.4 | | |
| nm | | |
| 8.2 | | |
| 7.9 | | |
| nm | | |
| 7.3 | | |
| 6.7 | | |
| nm | | |
| nm | | |
| 1.6 | |
| (1) | The following statistics, which are provided in the table above, are provided for
informational purposes only
and were not used for comparative purposes: (a) the ratio of price to estimated
earnings per ADS for calendar year 2014 (“2014 price-to-earnings multiple”);
(b) the ratio of Adjusted Price to estimated earnings per ADS for calendar year 2014;
(c) the ratios of enterprise value, defined as fully diluted market value plus total
debt and minority interests less cash and cash equivalents (“EV”), as of
March 27, 2015, to estimated calendar years 2014, 2015 and 2016 EBITDA; and (d) the ratios
of 2014, 2015 and 2016 price-to-earnings multiple to estimated long-term earnings per
ADS growth rate (“PEG”). |
| (2) | Perfect World’s cash balance
adjusted for US$3.6 million paid to acquire Digital Extremes. |
| (3) | Netease’s cash balance adjusted
for dividend declared and unpaid of US$0.39/ADS for the fourth quarter of 2014, to be
paid on March 6, 2015, assuming that dividends accrue to unvested restricted share units.
Netease’s net debt excludes (US$5.7 million) deficit minority interest, which is
a result of retrospective presentation and disclosure requirements on the noncontrolling
interest which became effective for fiscal years beginning on or after December 31, 2008.
The noncontrolling interest will continue to be attributed its share of losses even if
that attribution results in a deficit noncontrolling interest balance. |
Based on the analysis of the relevant metrics
for each of the comparable public companies, Merrill Lynch selected a representative range of financial multiples of the comparable
public companies and applied this range of multiples to the relevant Company financial statistic.
The value of the range of multiples selected
by Merrill Lynch was in some cases lower than the value of the P/E multiples and Adjusted P/E multiples of individual comparable
public companies set forth above. Mathematical analysis (such as determining the mean or median) is not in itself a meaningful
method of using comparable public company data. No company utilized in the comparable-company analysis is identical to the Company.
In evaluating comparable public companies and determining the implied multiple range, Merrill Lynch made complex considerations,
judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and
other matters, which could affect the public trading or other values of the companies to which the Company was compared.
The following table reflects the results
of the analysis and the corresponding representative multiples for the comparable companies:
Calendar Year Financial | |
| Representative Range | | |
| Implied Per ADS Value | |
| Price to Estimated 2015 Earnings per ADS | |
| 8.5x – 9.5x | | |
| US$6.29 – US$7.03 | |
| Price to Estimated 2016 Earnings per ADS | |
| 8.0x – 9.0x | | |
| US$7.04 – US$7.92 | |
| Adjusted Price to Estimated 2015 Earnings per ADS | |
| 7.5x – 8.5x | | |
| US$5.83 – US$6.57 | |
| Adjusted Price to Estimated 2016 Earnings per ADS | |
| 7.0x – 8.0x | | |
| US$6.42 – US$7.30 | |
Discounted Cash
Flow Analysis
Merrill Lynch conducted a discounted cash
flow analysis for the purpose of determining an illustrative range of implied equity value per ADS. A discounted cash flow analysis
is a method of evaluating an asset using estimates of the unlevered, after-tax free cash flows generated by the asset and taking
into consideration the time value of money with respect to those future cash flows by calculating their “present value.”
“Present value” refers to the current value of one or more future cash payments from the asset, which is referred to
as that asset’s cash flows, and is obtained by discounting those cash flows back to the present using a discount rate that
takes into account macroeconomic assumptions and estimates of risk, the opportunity cost of capital, capitalized returns and other
appropriate factors. “Terminal value” refers to the capitalized value of all cash flows from an asset for periods beyond
the final forecast period. For purposes of its discounted cash flow analysis, Merrill Lynch utilized the Management Forecasts,
which can be found under the caption “—Certain Financial Projections” beginning on page [ ].
Merrill Lynch calculated ranges of the
estimated net present values of the Company’s unlevered, after-tax free cash flows that the Company was forecasted to generate
from 2015 to 2019 based on Management’s Forecasts. Merrill Lynch calculated the estimated net present value of unlevered,
after-tax cash flows that the Company was forecasted to generate after fiscal year 2019 (the “Terminal Value”) using
a perpetual growth rate range of 1.0% to 2.0%. Merrill Lynch selected this perpetual growth rate range based on its experience
and judgment.
The projected unlevered, after-tax free
cash flows the Company forecasted to generate from 2015 to 2019 and the Terminal Value were discounted at a rate ranging from 16.0%
to 18.0%. In selecting this discount range, Merrill Lynch took into account, among other things: (a) a weighted average cost of
capital calculation based on factors commonly considered for purposes of calculating an estimated weighted average cost of capital,
including a market risk premium based on Bloomberg; (b) the risk-free rate (based on the spot rate for 10-year PRC treasury as of March 27, 2015); (c) an estimated beta for the ADSs (based on peer companies’ average trading volatility
of ADSs relative to the overall market, adjusted for the Company’s capital structure); and (d) a size premium based
on market capitalization of the Company.
Merrill Lynch then, based upon certain
assumptions described by and discussions held with the management of the Company, adjusted the ranges of the estimated net present
values of the Company’s unlevered free cash flows and the Terminal Value by:
| · | subtracting (i) the Company’s cash and cash equivalents as at December 31, 2014 of US$130.8 million and (ii) the Company’s
available short-term investments at December 31, 2014 of US$47.5 million; |
| · | adding (i) the Company’s short-term borrowings and long-term borrowings (excluding the amounts which were secured by
the Company’s short-term investments) as at December 31, 2014, each of which was nil and (ii) the Company’s dividends
payable of US$0.3 million as at December 31, 2014; and |
| · | adding the Company’s non-controlling interests of US$46.7 million as at December 31, 2014. These analyses resulted in
a range of implied enterprise values for the Company of US$1,638 million to US$1,963 million and a range of implied prices of US$6.50
to US$7.69 per ADS of the Company, in each case as of March 27, 2015. |
Premiums Paid Analysis
Merrill Lynch compared the premiums paid
in the going-private transactions of 12 U.S.-listed PRC-based companies and 17 U.S.-listed non-PRC-based companies that were
announced since 2009, where the acquiror owned over 50% of the target prior to the transaction with a transaction value inclusive
of the acquiror’s stake that was between US$100 million and US$3 billion based on final offer price. Merrill Lynch selected
transactions that, based on its experience and judgment, were similar to the Merger. Merrill Lynch excluded transactions involving
minority strategic investments, as well as announced transactions that were terminated. For each of these transactions, Merrill
Lynch reviewed the premium paid to the target company’s closing stock price for the one day, one week and one month prior
to the announcement date of each transaction. The relevant metrics for each of the selected going-private transactions are set
out below.
| | |
Final Offer
Over Trading Price Premium Prior to Announcement | |
| Target Company | |
1 Day (%) | | |
1 Week (%) | | |
1 Month (%) | |
| U.S.-Listed PRC-based Companies | |
| | | |
| | | |
| | |
| Perfect World | |
| 26.9 | % | |
| 26.3 | % | |
| 22.9 | % |
| Noah Education Holdings | |
| 24.4 | % | |
| 22.3 | % | |
| 16.2 | % |
| Charm Communications | |
| 17.2 | % | |
| 7.3 | % | |
| 17.2 | % |
| ShangPharma Corp | |
| 30.8 | % | |
| 32.2 | % | |
| 48.5 | % |
| China Nuokang Bio-Pharmaceutical | |
| 56.8 | % | |
| 57.6 | % | |
| 59.8 | % |
| Winner Medical Group | |
| 32.3 | % | |
| 42.9 | % | |
| 21.6 | % |
| China Real Estate Information Corp | |
| 25.3 | % | |
| 35.9 | % | |
| 37.0 | % |
| Shanda Interactive Entertainment | |
| 23.5 | % | |
| 27.7 | % | |
| 16.7 | % |
| Tiens Biotech Group (USA) | |
| 67.0 | % | |
| 63.8 | % | |
| 30.2 | % |
| Funtalk China Holdings | |
| 17.1 | % | |
| 25.7 | % | |
| 43.1 | % |
| Chemspec International | |
| 28.2 | % | |
| 22.2 | % | |
| 30.6 | % |
| Tongjitang Chinese Medicines | |
| 19.0 | % | |
| 20.3 | % | |
| 17.8 | % |
| U.S.-Listed Non-PRC-based Companies | |
| | | |
| | | |
| | |
| Brookfield Residential Properties | |
| 27.5 | % | |
| 33.5 | % | |
| 23.6 | % |
| PAA Natural Gas Storage | |
| 9.1 | % | |
| 10.8 | % | |
| 3.9 | % |
| Pioneer Southwest Energy Partners | |
| 19.4 | % | |
| 18.5 | % | |
| 24.5 | % |
| Cornerstone Therapeutics | |
| 72.7 | % | |
| 76.6 | % | |
| 70.3 | % |
| BBX Capital Corp | |
| (8.8 | %) | |
| (3.4 | %) | |
| 40.6 | % |
| Bluegreen Corp | |
| 73.6 | % | |
| 71.8 | % | |
| 58.7 | % |
| Stream Global Services | |
| 1.6 | % | |
| (0.9 | %) | |
| (1.8 | %) |
| Venoco | |
| 39.2 | % | |
| 45.5 | % | |
| (1.7 | %) |
| C&D Technologies | |
| 18.3 | % | |
| 17.5 | % | |
| 22.3 | % |
| Duncan Energy Partners | |
| (32.2 | %) | |
| (32.2 | %) | |
| (31.3 | %) |
| XO Holdings | |
| 84.2 | % | |
| 93.1 | % | |
| 102.9 | % |
| Caraco Pharmaceutical Laboratories | |
| 16.4 | % | |
| 18.2 | % | |
| 19.3 | % |
| CNA Surety Corp | |
| 37.9 | % | |
| 37.7 | % | |
| 46.9 | % |
| Cascal NV | |
| (11.3 | %) | |
| (7.0 | %) | |
| 0.2 | % |
| Landry’s Restaurants | |
| 127.7 | % | |
| 116.0 | % | |
| 138.3 | % |
| OSG America | |
| 41.4 | % | |
| 56.5 | % | |
| 54.1 | % |
| Cox Radio | |
| 45.5 | % | |
| 47.7 | % | |
| (6.3 | %) |
The precedent going-private transactions
premiums analysis indicated the following minimums, maximums, means and medians:
| | |
Final Offer
Over Trading Price Premium Prior to Announcement | |
| | |
1 Day (%) | | |
1 Week (%) | | |
1 Month (%) | |
| U.S.-Listed PRC-based Companies | |
| | | |
| | | |
| | |
| Minimum | |
| 17.1 | % | |
| 7.3 | % | |
| 16.2 | % |
| Maximum | |
| 67.0 | % | |
| 63.8 | % | |
| 59.8 | % |
| Mean | |
| 30.7 | % | |
| 32.0 | % | |
| 30.1 | % |
| Median | |
| 26.1 | % | |
| 27.0 | % | |
| 26.6 | % |
| | |
| | | |
| | | |
| | |
| U.S.-Listed Non-PRC-based Companies | |
| | | |
| | | |
| | |
| Minimum | |
| (32.2 | %) | |
| (32.2 | %) | |
| (31.3 | %) |
| Maximum | |
| 127.7 | % | |
| 116.0 | % | |
| 138.3 | % |
| Mean | |
| 33.1 | % | |
| 35.3 | % | |
| 33.2 | % |
| Median | |
| 27.5 | % | |
| 33.5 | % | |
| 23.6 | % |
| | |
| | | |
| | | |
| | |
| All Companies | |
| | | |
| | | |
| | |
| Minimum | |
| (32.2 | %) | |
| (32.2 | %) | |
| (31.3 | %) |
| Maximum | |
| 127.7 | % | |
| 116.0 | % | |
| 138.3 | % |
| Mean | |
| 32.1 | % | |
| 33.9 | % | |
| 31.9 | % |
| Median | |
| 26.9 | % | |
| 27.7 | % | |
| 23.6 | % |
Merrill Lynch observed that the merger
consideration of US$7.10 per ADS represented a one-day, one-week and one-month premium of approximately 25.7%, 48.8% and 57.6%,
respectively, over the applicable closing prices of the ADSs as quoted by NASDAQ measured from January 24, 2014, the last trading
day before the Company announced it had received the Proposal.
The precedent going-private transactions
premiums analysis indicated the following implied price per ADS for the Company, in each case, using a premium range of 20% to
40%:
| |
|
|
Price per ADS |
|
| |
|
|
Closing Price |
|
|
|
Implied Price |
|
| 1-Day |
|
|
US$5.65 |
|
|
|
US$6.78 – US$7.91 |
|
| 1-Week |
|
|
US$4.77 |
|
|
|
US$5.72 – US$6.68 |
|
| 1-Month |
|
|
US$4.48 |
|
|
|
US$5.38 – US$6.27 |
|
None of the selected precedent transactions
analyzed by Merrill Lynch is identical to the Merger. Accordingly, a complete analysis of the results of the foregoing calculations
cannot be limited to a quantitative review of the results and involves complex qualitative considerations and judgments.
General
In preparing its opinion to the Special
Committee, Merrill Lynch performed a variety of analyses, including those described above. The summary of Merrill Lynch’s
analyses above does not purport to be a complete description of the analyses performed by Merrill Lynch. The preparation of a fairness
opinion is a complex analytic process involving various quantitative and qualitative judgments and determinations as to the most
appropriate and relevant financial, comparative and other analytical methods employed and the adaptation and application of these
methods to the unique facts and circumstances presented. As a consequence, neither the opinion nor its underlying analyses is readily
susceptible to partial analysis or summary description. Merrill Lynch arrived at its opinion based on the results of all analyses
undertaken by it and assessed as a whole and did not draw, in isolation, conclusions from or with regard to any individual analysis,
methodology or factor. Each analytical technique has inherent strengths and weaknesses, and the nature of the available information
may further affect the value of particular techniques. The analyses performed by Merrill Lynch include analyses based upon forecasts
of future results, which results may be significantly more or less favorable than the actual results or any results suggested by
Merrill Lynch’s analyses.
In performing its analyses, Merrill Lynch
considered general business, economic, industry and market conditions, financial and otherwise, and other matters as they existed
on, and could be evaluated as of, the date of the opinion. The analyses were prepared solely for the purposes of Merrill Lynch
rendering its opinion to the Special Committee. Merrill Lynch’s analyses involved judgments and assumptions with regard to
industry performance, general business, economic, regulatory, market and financial conditions and other matters, many of which
are beyond the control of the Company, such as the impact of competition on the business of the Company and on the industry generally,
industry growth and the absence of any adverse material change in the financial condition and prospects of the Company or the industry
or in the markets generally. No company, transaction or business used in Merrill Lynch’s analyses for comparative purposes
is identical to the Company or the Merger, as applicable, and an evaluation of the results of those analyses is not entirely mathematical.
Merrill Lynch believes that mathematical derivations (such as determining average and median) of financial data are not by themselves
meaningful and should be considered together with qualitative factors, judgments and informed assumptions. The estimates contained
in the Company’s analyses and the implied reference range values indicated by Merrill Lynch’s analyses are not necessarily
indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those
suggested by the analyses. In addition, any analyses relating to the value of assets, companies, businesses or securities do not
purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold, which may depend on a
variety of factors, many of which are beyond the control of the Company. Much of the information used in, and accordingly the results
of, Merrill Lynch’s analyses are inherently subject to substantial uncertainty.
Merrill Lynch’s opinion was provided
to the Special Committee in connection with its consideration of the Proposed Transaction and was only one of many factors considered
by the Special Committee in evaluating the Merger and the fairness of the merger consideration. Neither Merrill Lynch’s opinion
nor its analyses were determinative of the merger consideration or of the views of the Special Committee or management with respect
to the Merger Agreement, the Plan of Merger and the Transactions, including the merger consideration. The type and amount of consideration
payable in the Merger were determined through negotiation between the Special Committee and the Buyer Group, and the recommendation
that the Board authorize and approve the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, was solely
that of the Special Committee.
Merrill Lynch has acted as financial advisor
to the Special Committee in connection with the Proposed Transaction and provided financial advisory services, including an opinion
to the Special Committee regarding the fairness, from the financial point of view, of the Per Share Merger Consideration
and the Per ADS Merger Consideration, as applicable, to the holders of the Shares or ADSs (other than holders of Excluded Shares),
based upon and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken and
other matters considered by Merrill Lynch in preparing its opinion. Under the terms of its engagement, the Company has agreed to
pay Merrill Lynch a fee of US$1,400,000 due upon delivery of Merrill Lynch’s opinion, regardless of the conclusions reached
therein. In addition, the Company may, at its sole discretion, pay an additional US$600,000 to Merrill Lynch immediately prior
to or upon consummation of the Merger. In addition, the Company has agreed to reimburse Merrill Lynch’s expenses and indemnify
Merrill Lynch, its affiliates and certain related parties against certain liabilities arising out of the engagement.
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, 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 and certain of its affiliates.
Merrill Lynch and its affiliates in the
past have provided, and in the future may provide, investment banking, commercial banking and other financial services to the Company
and certain of its current, former or future affiliates, including acting as financial advisor to the special committee of the
board of directors of Shanda Interactive in a “going-private” proposal until the completion of
that role on February 14, 2012 and acting as Joint Bookrunner in connection with the proposed Initial Public Offering of Cloudary
Corporation until the termination of that role prior to July 12, 2011. Merrill Lynch has, and in the future may, receive compensation
for rendering investment banking, commercial banking or other financial services to the Company and its affiliates.
For additional information on Merrill Lynch’s
analysis, please see “Presentation/discussion materials prepared by Merrill Lynch for discussion with the Special Committee
and the Board, dated April 3, 2015” and “Presentation/discussion materials prepared by Merrill Lynch for discussion
with the Special Committee, dated September 23, 2014,” filed as Exhibit (c)-(2) and Exhibit (c)-(3), respectively, to the
Company’s transaction statement on Schedule 13E-3.
Copies of Merrill Lynch’s opinion
dated April 3, 2015 and written presentations to the Special Committee on September 23, 2014 and April 3, 2015, are available for
inspection and copying at the principal executive offices of the Company during regular business hours by any interested stockholder
of the Company or representative who has been so designated in writing.
Purposes of and Reasons for the Merger
The Buyer Group
Under a possible interpretation of the
SEC rules governing “going private” transactions, each member of the Buyer Group may be deemed to be engaged in a “going
private” transaction and, therefore, required to express its reasons for the Merger to the Company’s unaffiliated security
holders, as defined in Rule 13e-3 of the Exchange Act. 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 100% control of the Company, in a transaction in which the
holders of the Class A ordinary shares of the Company and the ADSs (other than the Excluded Shares, the Dissenting Shares and ADSs
representing the Excluded Shares) will be cashed out in exchange for US$3.55 per Class A ordinary share or US$7.10 per ADS (less
US$0.05 per ADS cancellation fees pursuant to the terms of the Deposit Agreement), respectively, without interest and net of any
applicable withholding taxes, so Parent will bear the rewards and risks of the sole ownership of the Company after the ADSs and
Shares are cancelled, including any increases in value of the Company as a result of improvements to the Company’s operations
or acquisitions of other businesses.
The Buyer Group believes the operating
environment has changed in a significant manner since the Company’s initial public offering. There is greater domestic competition
in many of the segments in which the Company operates. These changes have increased the uncertainty and volatility inherent in
the business models of companies similar to the Company. As a result, the Buyer Group is of the view that there is potential for
considerably greater short- and medium-term volatility in the Company’s earnings. Responding to current market challenges
will require tolerance for volatility in the performance of the Company’s business and a willingness to make business decisions
focused on improving the Company’s long-term profitability. The Buyer Group believes that these strategies would be most
effectively implemented in the context of a private company structure. As a privately held entity, the Company’s management
will have greater flexibility to focus on improving long-term profitability without the pressures exerted by the public market’s
valuation of the Company and its emphasis on short-term period-to-period performance.
Further, as a privately held company, the
Company will be relieved of many of the expenses, burdens and constraints imposed on companies that are subject to the public reporting
requirements under the U.S. federal securities laws, including the Exchange Act and the Sarbanes-Oxley Act of 2002.
The Buyer Group decided to undertake the
“going private” transaction at this time because it wants to take advantage of the benefits of the Company being a
privately held company as described above and because Merger Sub was able to obtain equity financing in connection with the Merger.
In the course of considering the “going private” transaction, the Buyer Group did not consider alternative transaction
structures because the Buyer Group believed the Merger was the most direct and effective way to enable the Buyer Group to acquire
ownership and control of the Company.
The Company
The Company’s purpose for engaging
in the Merger is to enable its shareholders and ADS holders to receive US$3.55 per Share and US$7.10 per ADS in cash, without interest
and net of any applicable withholding taxes, which represents (a) approximately a 25.7% premium over the closing price of the ADSs
as quoted by NASDAQ on January 24, 2014, the last trading day immediately prior to the Company’s announcement on January
27, 2014 that it had received the Proposal and (b) approximately a 46.5% premium over the volume-weighted average trading price
of the ADSs during the 30 trading days prior to, and including, January 24, 2014. The Company believes its long-term objectives
can best be pursued as a private company.
The Company has determined to undertake
the Merger at this time based on the analyses, determinations and conclusions of the Special Committee and the Board described
in detail above under “—Reasons for the Merger and Recommendation of the Special Committee and the Board.”
Effects of the Merger on the Company
Private Ownership
The Company’s ADSs are currently
listed on NASDAQ under the symbol “GAME.” It is expected that, immediately following the completion of the Merger,
the Company will cease to be a publicly traded company and will instead become a privately held company owned directly by Parent
and indirectly by the Buyer Group. Following the completion of the Merger, the ADSs will cease to be listed on NASDAQ, and price
quotations with respect to sales of the ADSs in the public market will no longer be available. In addition, registration of the
Company’s ADSs and the underlying Class A ordinary shares under the Exchange Act may be terminated upon the Company’s
application to the SEC if such shares are not listed on a national securities exchange and there are fewer than 300 record holders
of such shares. Ninety days after the filing of Form 15 in connection with the completion of the Merger or such shorter period
as may be determined by the SEC, registration of the ADSs and the underlying Class A ordinary shares under the Exchange Act will
be terminated. At such time, the Company will no longer be required to file periodic reports with the SEC or otherwise be subject
to the U.S. federal securities laws, including the Sarbanes-Oxley Act of 2002, applicable to public companies. After the completion
of the Merger, the Company’s shareholders will no longer enjoy the rights or protections that the U.S. federal securities
laws provide. Furthermore, the ADS program for Class A ordinary shares of the Company will terminate.
Upon completion of the Merger, each issued
and outstanding Class A ordinary share and ADS, other than the Excluded Shares, ADSs representing the Excluded Shares and the Dissenting
Shares (please see “—Dissenters’ Rights” below), will be cancelled in exchange for the right to
receive US$3.55 per Class A ordinary share and US$7.10 per ADS (less US$0.05 per ADS cancellation fees pursuant to the terms of
the Deposit Agreement), respectively, in cash, without interest and net of any applicable withholding taxes. At the Effective Time,
the Excluded Shares will be cancelled for no consideration. At the Effective Time, each ordinary share of Merger Sub issued and
outstanding immediately prior to the Effective Time will be converted into one fully paid and non-assessable ordinary share of
the Surviving Corporation. As a result, current shareholders and ADS holders of the Company, other than the members of the Buyer
Group, will no longer have any equity interest in, or be shareholders or ADS holders of, the Company upon completion of the Merger.
Consequently, the Company’s shareholders and ADS holders, other than the members of the Buyer Group, will not have the opportunity
to participate in the earnings and growth of the Company and they will not have the right to vote on corporate matters. Similarly,
the Company’s current shareholders and ADS holders, other than the members of the Buyer Group, will not be exposed to the
risk of loss in relation to their investment in the Company.
At the Effective Time, each Company Option
that is then outstanding and unexercised, whether or not vested or exercisable, will be cancelled and converted into the right
to receive a cash amount equal to (a) the total number of Shares issuable under such Company Option immediately prior to the Effective
Time multiplied by (b) the excess of US$3.55 over the exercise price payable per Share under such Company Option, without interest
and net of any applicable withholding taxes. If the exercise price per Share of a Company Option is equal to or greater than US$3.55,
such Company Option will be cancelled without any payment.
At the Effective Time, each Company Restricted
Share that is then outstanding will be cancelled and converted into the right to receive a cash amount equal to US$3.55, without
interest and net of any applicable withholding taxes.
At the Effective Time, each Company RSU
that is then outstanding will be cancelled and converted into the right to receive a cash amount equal to US$3.55, without interest
and net of any applicable withholding taxes.
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.
Directors and Management of the Surviving Corporation
If the Merger is completed, the current
memorandum of association and articles of association of the Company will be replaced in their entirety by the memorandum of association
and articles of association of Merger Sub, as in effect immediately prior to the Effective Time (except that, at the Effective
Time, Article I of the articles of association of the Surviving Corporation will be amended to read as follows: “The name
of the corporation is “Shanda Games Limited”.”). In addition, the directors of Merger Sub immediately prior to
the Effective Time (identified below in “Annex F—Directors and Executive Officers of Each Filing Person”) will
become the directors of the Surviving Corporation and the officers of the Company will remain the officers of the Surviving Corporation,
in each case unless otherwise determined by Parent prior to the Effective Time.
Primary Benefits and Detriments of the Merger
The primary benefits of the Merger to the
Unaffiliated Holders include the following:
| · | the receipt by Unaffiliated Holders of a merger consideration of US$3.55 per Class A ordinary share or US$7.10 per ADS represents
a premium of approximately 46.5% and 53.8%, respectively, over the volume-weighted average trading prices of the Company’s
ADSs as quoted by NASDAQ during the 30 and 60 trading days prior to January 24, 2014, the last trading day prior to the Company’s
announcement on January 27, 2014 that it had received the Proposal and an approximately 9.2% premium over the Company’s closing
price as quoted by NASDAQ on January 27, 2014; and |
| · | risks to Unaffiliated Holders in connection with any possible decrease in the Company’s future revenues, free cash flow,
growth or value following the Merger will be avoided. |
The primary detriments of the Merger to
the Unaffiliated Holders include the following:
| · | Unaffiliated Holders will no longer benefit from possible increases in the future revenues and free cash flow, growth or value
of the Company or payment of dividends, if any; and |
| · | in general, the receipt of cash pursuant to the Merger or through the exercise of dissenters’ rights will be a taxable
transaction for U.S. federal income tax purposes and may also be a taxable transaction under other applicable tax laws. See “—Material
U.S. Federal Income Tax Consequences” and “—Material PRC Income Tax Consequences” beginning on page [ ]
for additional information. |
The primary benefits of the Merger to the
Buyer Group include the following:
| · | if the Company is managed and executes its business strategies successfully, the value of the Buyer Group’s equity interests
in the Company could increase due to possible increases in future revenues, free cash flow and the underlying value of the Company
or the payment of dividends, if any, that will accrue to Parent; |
| · | the Company will be relieved from pressure exerted by the public market’s valuation and the emphasis on short-term period-to-period
performance, which may not maximize the long-term equity value of the Company, and as a result the Company’s management will
have greater flexibility to focus on long-term strategic planning in a highly competitive business and on improving long-term profitability; |
| · | the Company’s management will have more freedom to change the capital spending strategies without public market scrutiny
or analysts’ quarterly expectations; |
| · | the Company will be able to develop and introduce new products and services or change its pricing strategies to attract customers
without public market scrutiny or the pressure to meet short-term forecasts; and |
| · | the costs and administrative burden resulting from operating the Company as a publicly traded company will be reduced, including
the costs in connection with regulatory filings and compliance requirements. |
The primary detriments of the Merger to
the Buyer Group include the following:
| · | all of the risks associated with any possible decrease in the Company’s revenues, free cash flow or value following the
Merger will be borne by Parent; |
| · | the business risks facing the Company such as increased competition will be borne by Parent; and |
| · | following the Merger, there will be no trading market for the Surviving Corporation’s equity securities and Parent’s
equity investment in the Surviving Corporation following the Merger will bear material risks resulting from such limited liquidity. |
In connection with the Merger, some of
the Company’s directors and executive officers have interests in the Merger that are different from, or in addition to, the
interests of the shareholders of the Company generally, as described in more detail under “—Interests of Certain Persons
in the Merger” beginning on page [ ].
The Company’s Net Book Value and
Net Earnings
After the closing of the Merger, each member
of the Buyer Group will have an indirect interest in the Company’s net book value and net earnings in proportion to such
member’s ownership interest in Parent, which will wholly own the Surviving Corporation. The Company’s net income attributable
to its shareholders for the fiscal year ended December 31, 2014 was approximately US$167.7 million and its net book value as of
December 31, 2014 was approximately US$306.0 million.
The table below sets forth the indirect
beneficial interest in the Company’s net book value and net earnings for each member of the Buyer Group before and after
the Merger, based on the historical net book value and net earnings of the Company as of and for the year ended December 31, 2014.
| | |
Ownership Prior to the Merger(1) | | |
Ownership After the Merger(2) | |
| | |
Net Book Value | | |
Earnings | | |
Net Book Value | | |
Earnings | |
| Name | |
US$’000 | | |
% | | |
US$’000 | | |
% | | |
US$’000 | | |
% | | |
US$’000 | | |
% | |
| Ningxia Yilida | |
| 27,595 | | |
| 9.0 | | |
| 15,122 | | |
| 9.0 | | |
| 27,595 | | |
| 9.0 | | |
| 15,122 | | |
| 9.0 | |
| Ningxia | |
| 73,198 | | |
| 23.9 | | |
| 40,113 | | |
| 23.9 | | |
| 73,198 | | |
| 23.9 | | |
| 40,113 | | |
| 23.9 | |
| Hao Ding | |
| 60,804 | | |
| 19.9 | | |
| 33,321 | | |
| 19.9 | | |
| 60,804 | | |
| 19.9 | | |
| 33,321 | | |
| 19.9 | |
| Orient Hongtai | |
| 34,962 | | |
| 11.4 | | |
| 19,160 | | |
| 11.4 | | |
| 34,962 | | |
| 11.4 | | |
| 19,160 | | |
| 11.4 | |
| Orient Hongzhi | |
| 34,962 | | |
| 11.4 | | |
| 19,160 | | |
| 11.4 | | |
| 34,962 | | |
| 11.4 | | |
| 19,160 | | |
| 11.4 | |
| Ningxia Silkroad | |
| — | | |
| — | | |
| — | | |
| — | | |
| 37,925 | | |
| 12.2 | | |
| 20,783 | | |
| 12.2 | |
| Zhengjun Investment | |
| — | | |
| — | | |
| — | | |
| — | | |
| 18,963 | | |
| 6.1 | | |
| 10,392 | | |
| 6.1 | |
| Zhongrong Legend | |
| — | | |
| — | | |
| — | | |
| — | | |
| 17,597 | | |
| 6.0 | | |
| 9,643 | | |
| 6.0 | |
| (1) | Ownership percentages are based on Shares outstanding as of April 3, 2015, the date of the Merger Agreement. |
| (2) | Ownership percentages after the Merger are based on all Excluded Shares being cancelled without payment of any consideration
and all other ordinary shares (including Class A ordinary shares represented by ADSs) and Company Options, Company Restricted Shares
and Company RSUs being cancelled in exchange for the Per Share Merger Consideration and Per ADS Merger Consideration and other
amounts due pursuant to the terms of the Merger Agreement, as applicable. Further, such percentages are subject to adjustment pursuant
to the terms and conditions of the Merger Agreement, the Equity Commitment Letters and the Support Agreement. |
Plans for the Company after the Merger
Following the completion of the Merger,
Parent will own 100% of the equity interest in the Surviving Corporation. The Buyer Group anticipates that the Company will continue
to conduct its operations substantially as they are currently being conducted, except that the Company will cease to be a publicly
traded company and will instead be a wholly owned subsidiary of Parent.
Except as set forth in this proxy statement
and transactions already under consideration by the Company, the Buyer Group does not have any current plans, proposals or negotiations
that relate to or would result in any of the following:
| · | an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Company or any of its
subsidiaries; |
| · | the sale or transfer of a material amount of the assets of the Company or any of its subsidiaries; or |
| · | any other material changes in the Company, including with respect to the Company’s corporate structure or business.
|
However, Parent will continue to evaluate
the Company’s entire business and operations from time to time, and may propose or develop plans and proposals which it considers
to be in the best interests of the Company and its shareholders, including the disposition or acquisition of material assets or
other extraordinary transactions, including the possibility of relisting the Company or a substantial part of its business on another
internationally recognized stock exchange. Subsequent to the completion of the Merger and the anticipated deregistration
of the Company’s Class A ordinary shares and ADSs, the Company will no longer be subject to the Exchange Act and NASDAQ compliance
and reporting requirements and the related direct and indirect costs and expenses, and may experience positive effects on profitability
as a result of the elimination of such costs and expenses.
Alternatives to the Merger
The Special Committee was formed following
a Board meeting on January 28, 2014 in response to the receipt of the Proposal from the Buyer Group (which at the time was
comprised of Primavera and Shanda Interactive) on January 27, 2014. The Special Committee was reconstituted on September 4, 2014
as further discussed in “—Background of the Merger” beginning on page [ ].
In light of the following factors, the
Special Committee determined that there was no viable alternative to the proposed sale of the Company to the Buyer Group:
| (i) | the express intention of the members of the Buyer Group (which as of the date of this proxy statement is comprised of
Ningxia Yilida, Ningxia, Orient Hongtai, Orient Hongzhi, Hao
Ding, Zhengjun Investment, Ningxia Silkroad and Zhongrong Legend) not to
sell their Shares and/or ADSs to any third party, and the Buyer Group’s aggregate beneficial ownership of
approximately 76.1% of the Company’s issued and
outstanding Shares and control of approximately 90.9% of the total number of votes
represented by the Company’s issued and outstanding Shares (as of the date of this proxy statement); |
| (ii) | the fact that, in the “market check” Merrill Lynch conducted under the direction of the Special Committee, all the parties deemed
to be potentially interested in and capable of acquiring the Company and contacted by Merrill Lynch declined to engage in discussions
with the Special Committee regarding any such acquisition; and |
| (iii) | the fact that, since the announcement of the Proposal on January 27, 2014, no party other than the members of the Buyer
Group has made any proposal to the Company or the Special Committee with respect to any alternative transaction with the Company. |
In addition, the Special Committee and
the Board considered, as an alternative to the Merger, that the Company remain as a public company. However, based on the considerations
set forth in the section entitled “—Reasons for the Merger and Recommendation of the Special Committee and the Board”
beginning on page [ ], the Special Committee and the Board have concluded that it is more beneficial to the Unaffiliated
Holders for the Company to enter into the Merger Agreement and pursue the consummation of the Transactions, including the Merger, rather than to remain a public company. The Special Committee also took into account that, prior to
the receipt of shareholder approval, the Company, subject to compliance with the terms and conditions of the Merger Agreement,
can terminate the Merger Agreement in order to accept an alternative transaction proposed by a third party that is a Superior Proposal,
subject to the payment of a termination fee of US$57,250,000, as provided in the Merger Agreement. In this regard, the Special
Committee recognized that it has flexibility under the Merger Agreement to respond to an alternative transaction proposed by a
third party that is or is reasonably likely to result in a Superior Proposal, including the ability to provide information to,
and engage in discussions and negotiations with, such party (and, if such proposal is a Superior Proposal, recommend such proposal
to the Company’s shareholders).
Effects on the Company if the Merger Is Not Completed
If the Merger Agreement is not authorized,
approved and adopted by the shareholders or if the Merger is not completed for any other reason, the shareholders will not receive
any payment for their Shares and/or ADSs in connection with the Merger nor will the holders of any options, Company Restricted
Shares or Company RSUs receive payment pursuant to the Merger Agreement. Instead, the Company will remain a publicly traded company,
the ADSs will continue to be listed and traded on NASDAQ, provided that the Company continues to meet NASDAQ’s listing requirements,
and the Company will remain subject to SEC reporting obligations. Therefore, the Company’s shareholders will continue to
be subject to similar risks and opportunities as they currently are with respect to their ownership of the Shares and/or ADSs.
Accordingly, if the Merger is not completed, we cannot assure you as to the effect of these risks and opportunities on the future
value of the Shares or ADSs, including the risk that the market price of the ADSs may decline to the extent that the current market
price reflects a market assumption that the Merger will be completed.
Under specified circumstances, the Company
may be required to pay Parent or its designees a termination fee of US$57,250,000 and reimburse Parent for its expenses in connection
with the Merger up to US$3,000,000, or Parent may be required to pay the Company a termination fee of US$114,500,000 and reimburse
the Company for certain expenses in connection with the Merger up to US$3,000,000, in each case as described in the section entitled
“The Merger Agreement—Termination Fee and Reimbursement of Expenses” beginning on page [ ]. If the Merger
is not completed, the Board will, from time to time, evaluate and review, among other things, the business, operations, dividend
policy and capitalization of the Company and make such changes as are deemed appropriate, and continue to seek to identify strategic
alternatives to enhance shareholder value. If the Merger Agreement is not approved by the shareholders or if the Merger is not
completed for any other reason, we cannot assure you that any other transaction acceptable to the Company will be offered, or that
the business, prospects or results of operations of the Company will not be adversely impacted.
Financing of the Merger
The Buyer Group estimates that the total
amount of funds necessary to complete the Transactions, including the Merger, will be approximately US$487 million, assuming no
exercise of dissenters’ rights by shareholders of the Company. This amount includes the cash to be paid to the Unaffiliated
Holders and holders of Company Options, Company Restricted Shares and Company RSUs, as well as the related costs and expenses,
in connection with the Merger and the other Transactions. It does not consider the value of the Excluded Shares, which will be
cancelled for no consideration in the Merger. For additional information regarding such cancellation, please see “The Merger
Agreement—Merger Consideration” beginning on page [ ].
The total amount of funds necessary to
complete the Merger and the other Transactions is expected to be provided through a combination of (a) aggregate equity commitments
of US$467,217,590.95, which are discussed below, and (b) cash from the Company and its subsidiaries. As of the date of this proxy
statement, there are no alternative financing arrangements or plans in place to acquire the funds necessary for the Merger and
the other Transactions.
The Merger and the other Transactions are
expected to be funded primarily through cash contributions contemplated by the Equity Commitment Letters, by and between Parent
and each of Ningxia Silkroad, Zhengjun Investment and Zhongrong Legend. Under the terms and subject to the
conditions of the Equity Commitment Letters, Ningxia Silkroad, Zhengjun Investment and Zhongrong Legend will provide equity financing
in an aggregate amount of US$467,217,590.95 to Parent to complete the Merger. The remaining funds necessary to complete the Merger
and the other Transactions are expected to be provided by cash from the Company and its subsidiaries.
Pursuant to these Equity
Commitment Letters, each of Ningxia Silkroad, Zhengjun Investment and Zhongrong Legend has committed to purchase, or cause
the purchase of, for cash, subject to the terms and conditions therein, equity securities of Parent, immediately prior to the
Effective Time, in an amount of US$234,542,965.55 by Ningxia Silkroad, in an amount of US$117,271,481.00 by Zhengjun
Investment and in an amount of US$115,403,144.40 by Zhongrong Legend. Such funds are to be used solely for the purpose of
completing the Merger and the other Transactions in accordance with the Merger Agreement. Parent may, upon subsequent
agreement with the applicable Sponsor, amend or modify the Equity Commitment Letters so long as (a) the aggregate
proceeds of the Equity Commitment Letters (as amended or modified) will be sufficient for Parent and the Surviving
Corporation to pay (i) the Merger Consideration and (ii) any other amounts required to be paid in connection with the
consummation of the Transactions upon the terms and conditions contemplated in the Merger Agreement; and (b) such amendment
or modification would not prevent, materially delay or materially impede or impair (i) the ability of Parent and Merger Sub
to consummate the Transactions or (ii) the rights and benefits of the Company under the Equity Commitment Letters.
Each Sponsor’s commitment under its
Equity Commitment Letter is conditioned upon (a) the satisfaction or waiver of the conditions to Parent and Merger Sub’s
obligations to complete the Merger under the Merger Agreement; and (b) the substantially contemporaneous consummation of the closing
of the Merger.
The obligation of each of the Sponsors
to fund the equity commitment under its Equity Commitment Letter 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 such obligation will be discharged, but subject to the performance of such obligation; and (c) the Company or any of
its affiliates asserting a claim that would make the relevant Limited Guarantee terminable in accordance with the terms thereof.
The Company is an express third-party beneficiary
of each of the Equity Commitment Letters to the extent of its right to seek specific performance of each of the equity commitments
under the circumstances in which the Company would be permitted by the Merger Agreement to obtain specific performance requiring
Parent and Merger Sub to enforce the equity commitments. Each of the Sponsors may assign or delegate all or a portion of its obligations
to fund its equity commitment to any of its affiliates or any other investment fund advised or managed by such affiliate so long
as such Sponsor remains liable for the obligations under its Equity Commitment Letter.
Pursuant to the Merger Agreement, each
of Parent and Merger Sub is required to use its reasonable best efforts to (a) obtain financing on the terms and conditions described
in the Equity Commitment Letters; (b) maintain in effect the Equity Commitment Letters until the Merger is consummated; (c) satisfy,
or cause to be satisfied, on a timely basis all conditions to the closing of and funding under the Equity Commitment Letters applicable
to Parent and/or Merger Sub that are within its control; (d) consummate the financing at or prior to the Effective Time; and
(e) enforce the relevant parties’ funding obligations and the rights of Parent and Merger Sub under the Equity Commitment
Letters to the extent necessary to fund the Merger Consideration.
Consortium Agreement
On March 16, 2015, Ningxia
Yilida, Ningxia, Orient Hongtai, Orient Hongzhi and Hao Ding entered into the Third Consortium Agreement. Under the
Third Consortium Agreement, the consortium members agreed, among other things, (a) to form a consortium to jointly make a
proposal to acquire the Company in a “going private” transaction; (b) to deal exclusively with each other with
respect to such “going private” transaction until the earlier of (i) April 30, 2015 and (ii) termination of the
Third Consortium Agreement; and (c) to cooperate and proceed in good faith to negotiate and consummate the “going
private” transaction. On April 3, 2015, each of Zhongrong Legend, Ningxia Silkroad and Zhengjun Investment entered into
an adherence agreement, pursuant to which each of Zhongrong Legend, Ningxia Silkroad and Zhengjun Investment became a party
to the Third Consortium Agreement as a sponsor.
The Third Consortium Agreement provides
that, concurrently with the execution of the Merger Agreement, Ningxia Yilida, Ningxia, Orient Hongtai, Orient Hongzhi and Hao
Ding would enter into or cause its affiliates to enter into, as applicable, a support agreement with Parent, pursuant to which
they or their affiliates, as applicable, would contribute all of their Shares of the Company (including Shares represented by ADSs), in exchange for the same number and class of shares of the Parent, at the closing of the “going private”
transaction. In addition, the Third Consortium Agreement obligates the parties thereto to vote against any competing proposal and
restrict transfers of Shares of the Company.
Certain consortium members and/or their
affiliated entities had previously entered into the First Consortium Agreement and the Second Consortium Agreement. These previous
consortium agreements had terms and conditions, including obligations to deal with each other exclusively, similar to those of
the Third Consortium Agreement; however, the exclusivity periods under these two previous consortium agreements had both expired
at the time that the Third Consortium Agreement was entered into. See “—Background of the Merger” beginning on
page [ ] for additional information.
Limited Guarantees
Concurrently with the execution and delivery
of the Merger Agreement on April 3, 2015, each of the Guarantors, namely Zhongrong Legend, Ningxia Silkroad and Zhengjun Investment
executed and delivered the Limited Guarantees. Under the Limited Guarantees, the Guarantors have collectively guaranteed in favor
of the Company the entire portion of the payment obligations of Parent and Merger Sub under the Merger Agreement.
Support Agreement
Concurrently with the execution and delivery
of the Merger Agreement on April 3, 2015, the Rollover Shareholders entered into the Support Agreement with Parent, pursuant to
which they agreed, among other things, that, from the date of the Support Agreement until the termination of the Support Agreement
in accordance with its terms (a) each Rollover Shareholder would appear at any shareholders’ meeting of the Company
or otherwise cause the Shares held by such Rollover Shareholder to be counted as present for the purposes of establishing a quorum
and vote or cause to be voted such Shares (i) in favor of the authorization and approval of the Merger Agreement, the Plan
of Merger and the Transactions, including the Merger and (ii) against any Competing Transaction; and (b) the Rollover Shares (including
Rollover Shares represented by ADSs) will, at the Effective Time, be cancelled for no consideration in the Merger. A copy of the
Support Agreement is attached as Annex E to this proxy statement and is incorporated herein by reference.
Remedies
The parties to the Merger Agreement may
be entitled to the payment of a termination fee or the grant of specific performance of the terms of the Merger Agreement, including
an injunction or injunctions to prevent breaches of the Merger Agreement, in addition to any other remedy at law or equity, subject
to certain limitations as described under the section entitled “The Merger Agreement—Remedies” beginning on page
[ ].
Interests of Certain Persons in the Merger
In considering the recommendation of the
Special Committee and the Board with respect to the Merger, you should be aware that each member of the Buyer Group has interests
in the transaction that are different from, and/or in addition to, the interests of the Company’s shareholders generally.
The Board and Special Committee were aware of such interests and considered them, among other matters, in reaching their decisions
to authorize and approve the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, and recommend that
the Company’s shareholders vote in favor of authorizing and approving the Merger Agreement, the Plan of Merger and the Transactions,
including the Merger. Except as set forth under “—Background of the Merger,” no director who is not an employee
of the Company has retained an unaffiliated representative to act solely on behalf of unaffiliated security holders for purposes
of negotiating the terms of the Transactions and/or preparing a report concerning the fairness of the Transactions.
Interests of the Buyer Group
In considering the recommendation of the
Special Committee and the Board with respect to the Merger, you should be aware that each member of the Buyer Group has interests
in the transaction that are different from, and/or in addition to, the interests of the Company’s shareholders generally.
The Special Committee and the Board were aware of such interests and considered them, among other matters, in reaching their decisions
to approve the Merger Agreement.
As a result of the Merger, Parent
will own 100% of the equity interest in the Surviving Corporation immediately following the completion of the Merger. Ningxia,
Hao Ding, Ningxia Silkroad, Orient Hongtai, Orient Hongzhi, Ningxia Yilida, Zhengjun Investment and Zhongrong Legend
will beneficially hold 23.9%, 19.9%, 12.2%, 11.4%, 11.4%, 9.0%, 6.1% and 6.0%, respectively, of the entire equity
interests in Parent immediately following the completion of the Merger. Because of Parent’s equity interest in the
Surviving Corporation, each member of the Buyer Group will directly or indirectly 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. Parent will also directly bear, and each member of the Buyer Group will indirectly
bear, the corresponding risks of any possible decreases in the future earnings, growth or value of the Company.
Parent’s investment in the Surviving Corporation will be illiquid, with no public trading market for the Surviving
Corporation’s shares and no certainty that an opportunity will develop to sell its shares in the Surviving Corporation
at an attractive price, or that dividends paid by the Surviving Corporation will be sufficient to recover its investment.
The Merger may also provide additional
means to enhance shareholder value for the Buyer Group, including improved profitability due to the elimination of the expenses
associated with public company reporting and compliance requirements; 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 the Buyer Group, such as through dividends or other distributions.
Relationship Between the Buyer Group and Certain
Directors
As of the date of this
proxy statement, Mr. Zhang, the chairman of the Board and acting chief executive officer of the Company, is the sole
shareholder of Shanghai Yingfeng, which is the general partner of Ningxia Yilida and Zhengjun Investment. Both Ningxia Yilida
and Zhengjun Investment are members of the Buyer Group. In addition, Mr. Zhang is a director of Merger Sub, and the Buyer
Group expects that he will become a director of the Surviving Corporation. Therefore, Mr. Zhang has interests that are
different from, or in addition to, the interests of the shareholders of the Company generally. Mr. Shaolin Liang, a director
of the Company, serves as a vice general manager of Ningxia, which is a member of the Buyer Group. Mr. Lin, a director of
the Company, served as the chief executive officer of China Universal Asset Management Co., Ltd., an affiliate of Orient
Hongtai and Orient Hongzhi, each of which is a member of the Buyer Group, from April 2004 to April 16, 2015. Therefore, both
Mr. Shaolin Liang and Mr. Lin may have interests that are different from, or in addition to, the interests of the
shareholders of the Company generally.
Treatment of Shares, Options, Company Restricted
Shares and Company RSUs Held by Directors and Executive Officers
If the Merger is completed, at the Effective
Time, each Company Option issued and outstanding immediately prior to the Effective Time, will be cancelled and converted into
the right to receive, as soon as practicable after the Effective Time, an amount equal to the product of (a) the total number of
Shares issuable under such Company Option immediately prior to the Effective Time multiplied by (b) the excess of US$3.55 over
the exercise price payable per Share under such Company Option, in cash, without interest and net of any applicable withholding
taxes, and each Company Restricted Share and Company RSU that is outstanding immediately prior to the Effective Time will be cancelled
and converted into the right to receive, as soon as practicable after the Effective Time, an amount equal to US$3.55, in cash,
without interest and net of any applicable withholding taxes.
As of the date of this proxy statement,
the Company’s directors and executive officers (as set forth in “Security Ownership of Certain Beneficial Owners and
Management of the Company” beginning on page [ ]), as a group, beneficially own an aggregate of 3,126,195 Shares.
These consist of (a) 820,072 issued and outstanding Class A ordinary shares, (b) issued and unexercised Company Options to
purchase 2,306,123 Class A ordinary shares issued pursuant to the Share Incentive Plan and exercisable within 60 days from the
date of this proxy statement, (c) zero (0) Company Restricted Shares the restrictions over which will lapse within 60 days from
the date of this proxy statement, and (d) zero (0) Company RSUs the restrictions over which will lapse within 60 days from the
date of this proxy statement. The Company Options issued pursuant to the Share Incentive Plan and held by the Company’s directors
and executive officers have a weighted average exercise price of US$2.0075 per Share.
The following table shows, as of the date
of this proxy statement, for each director and executive officer of the Company, (a) the number and classes of Shares owned, (b)
the cash payment that will be made in respect of the Shares at the Effective Time, (c) the number of Shares underlying Company
Options to purchase Shares granted under the Share Incentive Plan, (d) the average exercise price payable per Share for the outstanding
and unexercised Company Options held by such person, (e) the cash payment that will be made in respect of the Company Options to
purchase Shares at the Effective Time, (f) the number of Company Restricted Shares held, (g) the cash payment that will be made
in respect of the Company Restricted Shares at the Effective Time, (h) the number of Company RSUs held, (i) the cash payment that
will be made in respect of the Company RSUs at the Effective Time and (j) the total cash payment such person may receive in respect
of all payments described in this table if the Merger is consummated (in all cases before applicable withholding taxes).
| |
|
Shares |
|
|
Options
to Purchase Shares |
|
|
Company
Restricted Shares |
|
|
Company
RSUs |
|
|
Total Cash Payments
(including Company Restricted |
|
| Name of Directors and
Executive Officers |
|
Shares
Beneficially Owned |
|
|
Cash
Payment Thereof (US$) |
|
|
Shares
Underlying |
|
|
Average
Exercise Price |
|
|
Cash
Payment Therefor (US$) |
|
|
Shares
Underlying |
|
|
Cash
Payment Therefor (US$) |
|
|
Shares
Underlying |
|
|
Cash
Payment Therefor (US$) |
|
|
Share
Payments that may be subject to Deferred Payment Arrangements) (US$) |
|
| Yingfeng
Zhang |
|
|
48,803,359 |
|
|
|
156,810.60 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
37,500 |
|
|
|
133,125.00 |
|
|
|
289,935.60 |
|
| Shaolin Liang |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Danian Chen |
|
|
500,000 |
|
|
|
1,775,000.00 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,775,000.00 |
|
| Li Yao |
|
|
72,300 |
|
|
|
256,665.00 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
97,500 |
|
|
|
346,125.00 |
|
|
|
602,790.00 |
|
| Lijun Lin |
|
|
25,000 |
|
|
|
88,750.00 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
88,750.00 |
|
| Heng Wing Chan |
|
|
25,000 |
|
|
|
88,750.00 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
88,750.00 |
|
| Yong Gui |
|
|
6,250 |
|
|
|
22,187.50 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
18,750 |
|
|
|
66,562.50 |
|
|
|
88,750.00 |
|
| Tunghai Chien |
|
|
230 |
|
|
|
816.50 |
|
|
|
2,536,237 |
|
|
|
1.68 |
|
|
|
4,742,763.19 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4,743,579.69 |
|
| Jisheng Zhu |
|
|
73,768 |
|
|
|
261,876.40 |
|
|
|
1,359,469 |
|
|
|
2.21 |
|
|
|
1,821,688.46 |
|
|
|
— |
|
|
|
— |
|
|
|
75,000 |
|
|
|
266,250.00 |
|
|
|
2,349,814.86 |
|
| Jin Zhang |
|
|
73,352 |
|
|
|
260,399.60 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
112,500 |
|
|
|
399,375.00 |
|
|
|
659,774.60 |
|
| Total for
All Directors and Executive Officers |
|
|
49,579,259 |
|
|
|
2,911,255.60 |
|
|
|
3,895,706 |
|
|
|
1.86 |
|
|
|
6,564,451.65 |
|
|
|
— |
|
|
|
— |
|
|
|
341,250 |
|
|
|
1,211,437.50 |
|
|
|
10,687,144.75 |
|
After the completion of the Merger, the
maximum amount of cash payments the Company’s directors and executive officers may receive in respect of their Shares, Company
Options, Company Restricted Shares and Company RSUs is approximately US$10,687,144.75, which includes (a) US$2,911,256.00 in respect
of 820,072 issued and outstanding Shares held by them as of the date of this proxy statement, (b) US$6,564,451.65 in respect of
Company Options to purchase 3,895,706 Shares granted under the Share Incentive Plan which are issued but unexercised as of the
date of this proxy statement, (c) US$0 in respect of zero (0) Company Restricted Shares held by them as of the date of this proxy
statement, and (d) US$1,211,438 in respect of 341,250 Company RSUs held by them as of the date of this proxy statement.
Indemnification; Directors’ and Officers’
Insurance
Pursuant to the terms of the Merger Agreement,
the Company’s directors and officers will be entitled to certain ongoing indemnification and coverage under directors’
and officers’ liability insurance policies from the Company. See the section entitled “The Merger Agreement—Indemnification;
Directors’ and Officers’ Insurance” beginning on page [ ] for a description of such ongoing indemnification and
coverage obligations.
The Special Committee
On January 28, 2014, the Board established
the Special Committee to, among other things, consider and evaluate the Proposed Transaction, determine whether the Proposed Transaction
was in the best interests of the Unaffiliated Holders, make recommendations to the Board on the Proposed Transaction and negotiate
the terms of the “going private” transaction on behalf of the Board, including the terms of the Merger Agreement and
any other document to be entered into with the Buyer Group in connection with the Proposed Transaction. The Special Committee was
originally composed of the following independent directors: Mr. Chan, Mr. Gui and Mr. Lin.
On August 31, 2014, Orient
Finance, which is a direct and wholly owned subsidiary of Orient Securities and an affiliate of Orient Hongtai and Orient Hongzhi,
entered into an agreement with Shanda SDG to purchase 123,552,669 Class A ordinary shares from Shanda SDG and acceded to the
Buyer Group on September 1, 2014. In light of his role as the chief executive officer of China Universal Asset Management, an
affiliate of Orient Finance, Mr. Lin resigned from the
Special Committee. See “—Background of the Merger” beginning on page [ ] for additional
information.
On September 4, 2014, following Mr.
Lin’s resignation, the Board announced the reconstitution of the Special Committee consisting of Messrs. Chan and Gui.
Accordingly, the Special Committee consisted solely of Messrs. Chan and Gui at the time that it unanimously (a) determined that
the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, were fair to, and in the best interests of,
the Company and the Unaffiliated Holders; (b) declared advisable the Merger Agreement, the Plan of Merger and the Transactions,
including the Merger; and (c) recommended that the Board authorize and approve the Merger Agreement, the Plan of Merger and the
Transactions, including the Merger.
Other than the cash-out of Company Restricted
Shares and Company RSUs held by them, their receipt of Board and Special Committee compensation (which was not and is not
contingent upon the completion of the Merger, or the Special Committee’s or the Board’s recommendation of the Merger)
and their indemnification and liability insurance rights under the Merger Agreement and the Company’s memorandum and articles
of association, neither of the members of the Special Committee as reconstituted on September 4, 2014 has a financial
interest in connection with the Merger or any of the Transactions that is different from, or in addition to, those of the Unaffiliated
Holders nor is either of them related to any member of the Buyer Group. See “—Interests of Certain Persons in the Merger”
beginning on page [ ] for additional information. The Board did not place any limitations on the authority of the Special
Committee regarding its investigation and evaluation of the Merger.
The Company has compensated, and
intends to continue to compensate, each member of the Special Committee in exchange for his service in such capacity at a rate
of US$10,000 per month for the chairman of the Special Committee and US$6,800 per month for each other member of the
Special Committee (in each case, the payment of which is not contingent upon the consummation of the Merger or the
Special Committee’s or the Board’s recommendation of the Merger).
Contingent Equity Awards to Certain Key Personnel
On September 18, 2014, the Company
entered into commitment letters with eight game producers of the Company, pursuant to which the Company committed to grant to
each such game producer, subject to compliance with applicable laws, rules and regulations, the completion of the Merger and the
other terms and conditions set forth therein, equity awards in an amount of no less than RMB80 million (US$13 million) per individual
producer (based on a valuation of the Company of 15 times its 2013 consolidated net profits) within 30 business days following
the completion of the Merger. Based on a valuation of the Company of 15 times its 2013 consolidated net profits, the value of
these equity awards range from RMB80 million (US$12.9 million) to RMB100 million (US$16.1 million) per individual producer. None
of such game producers was involved in the review, evaluation and negotiation of the Buyer Group’s “going private”
proposal, the Merger Agreement or the Company’s other strategic alternatives.
Position with the Surviving Corporation
The directors of Merger
Sub immediately prior to the Effective Time will become the directors of the Surviving Corporation, and the officers of
the Company immediately prior to the Effective Time will become the officers of the Surviving Corporation, in each case,
unless otherwise determined by Parent prior to the Effective Time. Mr. Zhang is a director of Merger Sub, and the
Buyer Group expects that he will become a
director of the Surviving Corporation.
Related-Party Transactions
We have adopted an audit committee charter,
which requires the audit committee to review and approve all related-party transactions as defined in Item 404 of Regulation S-K
on an ongoing basis. In addition to the arrangements in connection with the Merger discussed elsewhere in this proxy statement,
for a description of significant related-party transactions for the years ended December 31, 2013 and 2014, see “Item 7.
Major Shareholders and Related-Party Transactions” included in the Company’s Annual Reports on Form 20-F for the fiscal
years ended December 31, 2013 and December 31, 2014, respectively, which are incorporated by reference into this proxy statement.
See “Where You Can Find More Information” beginning on page [ ] for a description of how to obtain copies
of the Company’s Annual Reports.
Related-Party Transactions in 2014 and First
Half 2015
Acquisition of Platform and Prepaid
Card Distribution Businesses
Before August 2013, we relied
on Shanghai Shengzhan Networking Technology Co., Ltd. (“Shengzhan”), and Tianjin Shengjing Trade Co.,
Ltd. (“Shengjing”), for platform services and prepaid card distribution services, and paid them service fees
for services including online billing, user authentication, customer service, anti-fatigue compliance, data support services,
and prepaid card marketing and distribution. In July 2013, we entered into a transaction framework agreement and a series
of ancillary agreements to acquire Shengzhan and Shengjing from Shanda Interactive, and completed the acquisition in
August 2013. Both Shengzhan and Shengjing were entities under the common control of Shanda Interactive at the time of
the acquisition. The aggregate consideration for the transaction was US$812.7 million, subject to closing adjustments and
payable in a combination of cash, deferred payments and settlement of an outstanding loan receivable from Shanda Interactive.
As of December 31, 2014, the consideration has been fully paid. In addition, as a part of the Pre-IPO Reorganization,
Shengqu Information Technology (Shanghai) Co., Ltd. (“Shengqu”) entered into various variable interest entity
agreements with Shengzhan and Shengjing. See “Item 7. Major Shareholders and Related Party Transactions—B.
Related Party Transactions—Contractual Arrangements with Our VIEs and Their Shareholders” included in the
Company’s Annual Report on Form 20-F for the fiscal year ended December 31, 2014, incorporated by reference into this
proxy statement. See “Where You Can Find More Information” beginning on page [ ] for a description of
how to obtain a copy of the Company’s Annual Report.
Transactions and Agreements with Shanda
Interactive
Shanda Interactive ceased to be a shareholder
of the Company on November 25, 2014. Transactions and agreements with Shanda Interactive after November 25, 2014 will no longer
be considered related-party transactions.
Pursuant to Shanda Interactive’s
reorganization effective July 1, 2008 (the “Pre-IPO Reorganization”), Shanda Interactive transferred substantially
all of its assets and liabilities related to its online game business to us. Prior to the Pre-IPO Reorganization, the Company’s
online game business was operated by Shanda Interactive through its various subsidiaries and variable interest entities, or VIEs.
Effective July 1, 2008, pursuant to the Pre-IPO Reorganization, we assumed substantially all of the assets and liabilities related
to the online game business. As a result of the Pre-IPO Reorganization, we conduct the online game business through the Company’s
VIEs.
In connection with the Pre-IPO Reorganization,
we entered into agreements with Shanda Interactive with respect to various ongoing relationships between Shanda Interactive and
us, including but not limited to the following in 2014 and the first half of 2015. For more information, see “Related Party
Transactions—Transactions and Agreements with Shanda Interactive” included in the Company’s Annual Report on
Form 20-F for the fiscal year ended December 31, 2014, incorporated by reference into this proxy statement. See “Where You
Can Find More Information” beginning on page [ ] for a description of how to obtain a copy of the Company’s
Annual Report.
Amended and Restated Non-Compete
Agreement
Under the amended and restated non-compete
agreement between Shanda Interactive and us, Shanda Interactive has agreed, for a period of five years commencing July 1, 2013,
not to engage in the online game and mobile game business, which refers to the sourcing, development, operation and licensing of
online games and mobile games and related intellectual property rights and activities incidental to such business, anywhere in
the world, except that (a) certain of Shanda Interactive’s subsidiaries may continue to engage in third-party billing,
payment and related services; (b) Shanda Interactive may hold or acquire equity interests in a company that does not have
more than 25.0% of its gross revenues (based on the latest annual audited financial statements of the investee company) attributable
to the online game and mobile game business; (c) Shanda Interactive may make minority, passive or venture capital investments
by its private equity and venture capital funds; and (d) Shanda Interactive may operate virtual communities with certain online
game features provided that such features do not constitute the core business model of such community. In addition, the agreement
permits Shanda Interactive to acquire or invest in any third party engaging in the online game and mobile game business if, after
using its reasonable best efforts to make such investment opportunity available to the Company as required under the agreement,
we do not pursue such opportunity; provided that Shanda Interactive’s equity interest in such third party will not exceed
50%.
Furthermore, Shanda Interactive has agreed,
for a period of five years commencing July 1, 2013, not to solicit any customer, supplier or any other third party having any business
relationship with the Company or any of its employees.
Domain Names and Trademarks
License Agreement
As part of the Pre-IPO Reorganization,
Shengqu, one of the Company’s PRC subsidiaries, entered into a domain names and trademarks license agreement with Shanda
Computer (Shanghai) Co. Ltd (“Shanda Computer”), a company then under the common control of Shanda Interactive on July
1, 2008, pursuant to which Shanda Computer licensed to Shengqu nine trademarks on a nonexclusive, nontransferable and royalty-free
basis. On October 14, 2014, Shanda Computer reached a supplementary agreement with Shengqu, pursuant to which such licenses were
terminated on December 31, 2014.
On January 1, 2011, Shengqu entered into
a trademarks license agreement (the “2011 Trademarks License Agreement”) with Shanghai Shanda Networking Co., Ltd. (“Shanda
Networking”), a company then under the common control of Shanda Interactive and Shanda Computer, pursuant to which Shanda
Networking and Shanda Computer licensed to Shengqu 13 trademarks on a nonexclusive, nontransferable and royalty-free basis, including
“Shanda Games.” On October 14, 2014, Shanda Networking and Shanda Computer reached a supplementary agreement with the
Company, pursuant to which the term of the 2011 Trademarks License Agreement was extended to the later of (a) December 31, 2016
or (b) the 90th day after the earlier of (i) the Company no longer being a listed company, or (ii) Shanda Interactive
no longer holding 50% or more of the voting rights in the Company. As Shanda Interactive ceased to be a shareholder of the Company
in November 2014, the 2011 Trademarks License Agreement will terminate on December 31, 2016.
In August 2013, the Company acquired Shengzhan
and Shengjing from Shanda Interactive. As a part of the acquisition, on July 28, 2013, Shengzhan entered into two trademarks license
agreements (the “2013 Trademarks License Agreements”), with Shanda Networking and Shanda Computer, respectively, pursuant
to which Shanda Networking and Shanda Computer licensed certain trademarks to Shengzhan on an exclusive, unconditional, irrevocable
and royalty-free basis. Certain trademarks under the 2013 Trademarks License Agreements are related to the platform services and
prepaid card distribution services. On October 14, 2014, Shanda Networking and Shanda Computer each reached a supplementary agreement
with Shengzhan, pursuant to which the terms of the 2013 Trademarks License Agreements were extended to the later of (a) December
31, 2016 or (b) the 90th day after the earlier of (i) the Company no longer being a listed company, or (ii) Shanda Interactive
no longer holding 50% or more of the voting rights in the Company. As Shanda Interactive ceased to be a shareholder of the Company
in November 2014, the 2011 Trademarks License Agreement will terminate on December 31, 2016.
On October 14, 2014, Shanda Computer, Shanda
Networking, Shengqu and Shengzhan signed a trademark license agreement. Pursuant to the trademark license agreement, during and
after the process of certain trademarks being transferred from Shanda Computer to Shanda Networking, Shanda Networking, as the
transferee, will continue licensing those trademarks to the Company in accordance with the 2011 Trademarks License Agreement, as
amended, and the 2013 Trademarks License Agreements, as amended.
Lease of Office Facilities
The Company leases its office space of
approximately 19,500 square meters at No. 1 Office Building, No. 690 Bibo Road, Pudong New Area, Shanghai 201203 and No. 1, Lane
666 Zhangheng Road, Pudong New Area, Shanghai 201204, from a company controlled by Shanda Interactive. The Company incurred rental
expense of RMB18.5 million in 2013 and RMB29.2 million in 2014.
Lendings and Borrowings
Prior to the closing of the acquisition
of platform and prepaid card distribution businesses, Shengzhan and Shengjing had various intra-group loans with other entities
then under the common control of Shanda Interactive. As of December 31, 2012, Shengzhan and Shengjing extended an aggregate net
amount of RMB821.7 million to such entities. Substantially all of these intra-group loans were settled as part of the acquisition,
and the amount outstanding as of December 31, 2014 was RMB25.0 million, which represents an interest-free loan from Shengjing to
one of our billing providers, Shanghai Shengfutong Electronic Business Co., Ltd.
In July 2014, the Company extended a loan
to a company then under the common control of Shanda Interactive, the aggregate principal amount of which was RMB311.0 million
with an interest rate of 3% per year. This loan was repaid in full in September 2014.
For more details regarding interest-bearing
loans to and from Shanda Interactive or companies under its control in 2013, see Item 7.B. “Related-Party Transactions—Transactions
and Agreements with Shanda Interactive—Loans Outstanding” in the Company’s Annual Report on Form 20-F for the
year ended December 31, 2013.
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 | |
| | |
(US$ in ‘000) | |
| Professional fees and
expenses | |
| 5,137 | |
| Legal fees and expenses | |
| 12,850 | |
| Special Committee fees | |
| 310 | |
| Miscellaneous (including accounting, filing fees, printer, proxy solicitation and mailing costs) | |
| 110 | |
| ADS cancellation and surrender fees(1) | |
| 3,200 | |
| Total | |
| 21,607 | |
| (1) | Includes ADS cancellation fees for ADSs held by members of the Rollover Shareholders. |
These expenses (other than the ADS cancellation
fees and surrender fees) will not reduce the merger consideration to be received by the Company’s shareholders and ADS holders.
If the Merger is consummated, the party incurring any costs and expenses in connection with the Merger and the Merger Agreement
will pay such costs and expenses except as otherwise provided in the Merger Agreement and the Third Consortium Agreement.
Voting by the Rollover Shareholders at the Extraordinary
General Meeting
Pursuant to the Support Agreement, the
Rollover Shareholders have agreed to vote the Shares held by such Rollover Shareholders, which as of the date of this proxy represent
approximately 76.1% of the Company’s issued and outstanding Shares and 1,286,752,366 votes, or approximately 90.9% of the
total number of votes represented by the Company’s issued and outstanding Shares (excluding, for purposes of this calculation,
Shares issuable upon the exercise of Company Options, Company Restricted Shares and Company RSUs), in favor of the proposal to
authorize and approve the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, at the extraordinary
general meeting.
Voting of Unvested Company Restricted Shares
Under each restricted share award document,
the person receiving the award has granted to the Company or its representative an irrevocable proxy to vote, or to execute and
deliver written consents or otherwise act in the capacity of a shareholder with respect to, all of the Company Restricted Shares
owned by such person until the earlier of (i) the date of termination of such person’s employment with the Company and (ii)
the end of the applicable vesting period under such award document.
Litigation Related to the Merger
On October
10, 2014, Kilometre issued a writ of summons endorsed with a statement of claim against the Company from the Court of First Instance
of the High Court of the Hong Kong Special Administrative Region in connection with the proposed “going private” transaction.
Kilometre seeks outstanding consulting fees in an aggregate sum of US$25.6 million (or alternatively, damages), certain declaratory
relief, interest, costs and further and/or other relief as the court deems fit. On February 10, 2015, Kilometre amended its statement
of claim to seek outstanding consulting fees in an aggregate sum of US$44.9 million (or alternatively, damages), certain declaratory
relief, interest, costs and further and/or other relief as the court deems fit .On February 17, 2015, Kilometre applied for a
summary judgment for consulting fees of US$39,229,944.32, interest and/or other relief as the court deems fit. In April 2015,
Kilometre issued an invoice to the Company asserting an increased entitlement to US$45.8 million; however, this amount is yet
to be reflected in any further amendment to the statement of claim. The hearing for the summary judgment application is currently
scheduled to take place on July 8, 2015. The Company is vigorously defending the dispute on its merits.
In addition, Kilometre served a statutory
demand on the Company in the Cayman Islands on May 21, 2015 requesting the Company to pay a purported debt of $39,229,944.32 within
21 days. The Company intends to vigorously defend itself against all related legal actions taken by Kilometre in the Cayman Islands
on the merits.
Other than as set forth above, we are not
aware of any lawsuit that challenges the Merger Agreement, the Plan of Merger or any of the Transactions, including the Merger.
Accounting Treatment of the Merger
The Merger is expected to be accounted
for, on a carryover basis, as a merger of entities under common control in accordance with Accounting Standards Codification 805-50,
“Business Combinations—Related Issues.”
Regulatory Matters
The Company does not believe that any material
federal or state regulatory approvals, filings or notices are required in connection with effecting the Merger other than the approvals,
filings or notices required under the federal securities laws and the filing of the Plan of Merger (and supporting documentation
as specified in the Cayman Islands Companies Law) with the Cayman Registrar and, in the event the Merger becomes effective, a copy
of the Certificate of Merger being given to the shareholders and creditors of the Company and Merger Sub as at the time of the
filing of the Plan of Merger and notice of Merger published in the Cayman Islands Gazette. See “The Merger Agreement—Conditions
to the Merger” beginning on page [ ] for additional information.
Dissenters’ Rights
Shareholders who exercise dissenters’
rights will have the right to receive payment of the fair value of their Shares if the Merger is completed, but only if they deliver
to the Company, before the vote is taken, a written objection to the Merger and subsequently comply with all procedures and requirements
of Section 238 of the Cayman Islands Companies Law for the exercise of dissenters’ rights, which is attached as Annex D to
this proxy statement. The fair value of their Shares as determined under that statute could be more than, the same as, or less
than the merger consideration they would receive pursuant to the Merger Agreement if they do not exercise dissenters’ rights
with respect to their Shares. These procedures are complex and you should consult your Cayman Islands legal counsel. If you do
not fully and precisely satisfy the procedural requirements of the Cayman Islands Companies Law, you may lose your dissenters’
rights (as described under the section entitled “Dissenters’ Rights” on page [ ]).
Material U.S. Federal Income Tax Consequences
The following are certain material U.S.
federal income tax consequences to a U.S. Holder described below of the exchange of the Class A ordinary shares of the Company
or ADSs for cash pursuant to the Transactions. This discussion applies only to a U.S. Holder that holds Class A ordinary shares
or ADSs as capital assets for U.S. federal income tax purposes and it does not describe all of the tax consequences that may be
relevant in light of a U.S. Holder’s particular circumstances, including alternative minimum tax or Medicare contribution
tax consequences, and tax consequences applicable to U.S. Holders subject to special rules, such as:
| · | certain financial institutions; |
| · | dealers or certain traders in securities; |
| · | persons holding Class A ordinary shares or ADSs as part of a straddle, wash sale, conversion transaction or integrated transaction,
or persons entering into a constructive sale with respect to Class A ordinary shares or ADSs; |
| · | persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar; |
| · | partnerships or other entities classified as partnerships for U.S. federal income tax purposes; |
| · | tax-exempt entities, including “individual retirement accounts” and “Roth IRAs”; |
| · | persons that own or are deemed to own Class A ordinary shares or ADSs representing ten percent or more of the voting stock
of the Company; or |
| · | persons holding Class A ordinary shares or ADSs in connection with a trade or business conducted
outside of the United States. |
If an entity that is classified as a partnership
for U.S. federal income tax purposes owns Class A ordinary shares or ADSs, the U.S. federal income tax treatment of a partner will
generally depend on the status of the partner and the activities of the partnership. Partnerships owning Class A ordinary shares
or ADSs and partners therein should consult their tax advisers as to the particular U.S. federal income tax consequences of disposing
of Class A ordinary shares or ADSs.
This discussion is based on the Internal
Revenue Code of 1986, as amended (the “Code”), administrative pronouncements, judicial decisions and final, temporary
and proposed U.S. Treasury regulations, all as of the date hereof and all of which are subject to change, possibly with retroactive
effect. U.S. Holders should consult their tax advisers concerning the U.S. federal, state, local and foreign tax consequences of
disposing of Class A ordinary shares or ADSs pursuant to the Transactions in their particular circumstances.
For purposes of this discussion, a “U.S.
Holder” is a beneficial owner of Class A ordinary shares or ADSs that is, for U.S. federal income tax purposes:
| · | a citizen or individual resident of the United States; |
| · | a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any
state therein or the District of Columbia; or |
| · | an estate or trust the income of which is subject to U.S. federal income taxation regardless
of its source. |
Exchange of Class A ordinary shares
or ADSs for Cash. The exchange of Class A ordinary shares of the Company or ADSs for cash will be a taxable transaction for
U.S. federal income tax purposes. An exchanging or dissenting U.S. Holder will recognize gain or loss on the disposition of Class
A ordinary shares or ADSs, equal to the difference between the amount of cash received and the U.S. Holder’s tax basis in
the Class A ordinary shares or ADSs disposed of. Subject to the discussion in “—Passive Foreign Investment Company”
below, any gain or loss recognized will be capital gain or loss, and will be long-term capital gain or loss if the U.S. Holder
has held the Class A ordinary shares or ADSs for more than one year. The deductibility of capital losses is subject to limitations.
As described in “—Material
PRC Income Tax Consequences,” if we were deemed to be a tax resident enterprise under PRC tax law, gains from a sale of Class
A ordinary shares of the Company or ADSs may be subject to PRC tax. U.S. Holders are entitled to use foreign tax credits to offset
only the portion of their U.S. federal income tax liability that is attributable to foreign-source income. Because under the Code
capital gains of U.S. persons generally are treated as U.S.-source income, this limitation may preclude a U.S. Holder from claiming
a credit for all or a portion of any PRC taxes imposed on any gain from the sale of Class A ordinary shares of the Company or ADSs.
However, a U.S. Holder that is eligible for the benefits of the income tax treaty between the United States and the PRC may be
able to elect to treat any such gain as foreign-source gain for foreign tax credit purposes. U.S. Holders should consult their
tax advisers regarding their eligibility for benefits under the income tax treaty between the United States and the PRC and the
creditability of any PRC tax on disposition gains in their particular circumstances.
Passive Foreign Investment Company.
Although it is not clear how the contractual arrangements between the Company and its PRC operating companies should be treated
for purposes of the passive foreign investment company (“PFIC”) rules, based on the composition of the Company’s
income and assets and the value of the Company’s assets, including goodwill, which is based, in part, on the market price
of the Company’s ADSs, the Company does not expect to be a PFIC for the current taxable year. However, because the determination
of whether a company is a PFIC is made annually after the end of each taxable year and the Company’s expectation as to its
PFIC status is based on facts that may change, the Company cannot assure you that it will not be a PFIC for the current taxable
year. In addition, as described in certain of the Company’s annual reports on Form 20-F, it is unclear whether the Company
was a PFIC for certain of its previous taxable years. If the Company was a PFIC for any previous taxable year during which a U.S.
Holder owned Class A ordinary shares of the Company or ADSs, the Company would generally continue to be treated as a PFIC with
respect to that U.S. Holder for all succeeding years during which the U.S. Holder owned the Class A ordinary shares or ADSs, even
if the Company ceased to meet the threshold requirements for PFIC status.
In general, a foreign corporation is a
PFIC for U.S. federal income tax purposes for any taxable year if (a) 75% or more of its gross income consists of passive income
(such as dividends, interest and certain rents and royalties) or (b) 50% or more of the average quarterly value of its assets consists
of assets that produce, or are held for the production of, passive income (including cash). If a corporation owns at least 25%
(by value) of the stock of another corporation, the corporation will be treated, for purposes of the PFIC tests, as owning its
proportionate share of the 25%-owned subsidiary’s assets and receiving its proportionate share of the 25%-owned subsidiary’s
income.
Generally, if the Company was a PFIC for
any taxable year during which a U.S. Holder owned Class A ordinary shares of the Company or ADSs, the amount of gain recognized
upon the disposition of Class A ordinary shares or ADSs by the U.S. Holder would be allocated ratably over the U.S. Holder’s
holding period for such shares or ADSs. The amounts allocated to the taxable year of disposition and to years before the Company
became a PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the
highest tax rate in effect for that taxable year for individuals or corporations, as appropriate, and an interest charge would
be imposed on the tax attributable to the allocated amounts. Furthermore, a U.S. Holder would be required to file IRS Form 8621
with respect to the Company, generally with the U.S. Holder’s federal income tax return for the year of the Merger. If the
Company was a PFIC for any previous taxable year in which a U.S. Holder owned Class A ordinary shares or ADSs, the amount of gain
and the manner in which it is allocated between taxable years within the U.S. Holder’s holding period may be affected by
any valid election that the U.S. Holder may have made to either mark-to-market ADSs, or be taxed on a deemed sale of the Class
A ordinary shares of the Company or ADSs. U.S. Holders should consult their tax advisers regarding the consequences of disposing
of their Class A ordinary shares or ADSs in the case that the Company was a PFIC for any taxable year, and the effect of any previous
mark-to-market or deemed sale election that they may have made.
Information Reporting and Backup Withholding.
Payments of the cash consideration for the Class A ordinary shares or ADSs that are made within the United States or through certain
U.S.-related financial intermediaries generally are subject to information reporting, and may be subject to backup withholding,
unless (a) the U.S. Holder is a corporation or other exempt recipient or (b) in the case of backup withholding, the U.S. Holder
provides a correct taxpayer identification number and certifies that it is not subject to backup withholding. Backup withholding
is not an additional tax. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against
the holder’s U.S. federal income tax liability, if any, and may entitle it to a refund, provided that the required information
is timely furnished to the Internal Revenue Service.
Material PRC Income Tax Consequences
Under the PRC Enterprise Income Tax Law
(the “EIT Law”), which took effect on January 1, 2008, enterprises established outside of the PRC whose “de facto
management bodies” are located in the PRC are considered “resident enterprises,” and thus will generally be subject
to the enterprise income tax at the rate of 25% on their global income. On December 6, 2007, the State Council of the PRC adopted
the Regulation on the Implementation of PRC Enterprise Income Tax Law, effective as of January 1, 2008, which defines the “de
facto management body” as an establishment that has substantial management and control over the business, personnel, accounts
and properties of an enterprise. The State Administration of Taxation of the PRC (the “SAT”) issued the Notice Regarding
the Determination of Chinese-Controlled Offshore Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto
Management Bodies (“Circular 82”) on April 22, 2009, with retroactive effect from January 1, 2008. Circular 82 provides
certain specific criteria for determining whether the “de facto management body” of a PRC-controlled offshore incorporated
enterprise is located in the PRC. There is no assurance that the Company will not be treated as a PRC tax resident enterprise.
Under the EIT Law and its implementation regulations, PRC income tax at a rate of 10% is applicable to any gain recognized on receipt
of consideration by a “non-resident enterprise” from transfer of its equity in a PRC resident enterprise, to the extent
such gain is derived from sources within the PRC, provided that the “non-resident enterprise” does not have a de facto
management body in the PRC and also (a) does not have an establishment or place of business in the PRC or (b) has an establishment
or place of business in the PRC, but the relevant income is not effectively connected with the establishment or place of business.
Under the Individual Income Tax Law of the PRC, an individual who disposes of a capital asset in the PRC is subject to PRC individual
income tax at the rate of 20% if the gain is from sources within the PRC. Relief from these taxes may be sought under applicable
income tax treaties with the PRC. If the Company is treated as a PRC tax resident enterprise, gain from the disposition of Class
A ordinary shares of the Company or ADSs may be treated as derived from PRC-sources and taxed as described above.
On December 10, 2009, the SAT issued the
Circular on Strengthening the Administration of Enterprises Income Tax on Non-resident Enterprises’ Equity Transfer Income
(“Circular 698”), with retroactive effect from January 1, 2008, and the Circular Concerning Various Questions on the
Administration of Enterprises Income Tax on Non-resident Enterprises (“Bulletin 24”) was issued by the SAT and became
effective as of April 1, 2011. According to Circular 698 and Bulletin 24, if any non-resident enterprise indirectly transfers
the equity of a resident enterprise, the non–resident enterprise may be subject to a 10% PRC income tax on the gain from
such equity transfer, unless such equity is to be transferred and the transfer price thereunder is determined pursuant to standard
trading rules of a public security market and not by the purchaser and the seller by mutual agreement prior to such transactions.
On February 3, 2015, the SAT further promulgated the Public Notice of State Administration of Taxation on Certain Enterprise Income
Tax Matters on Indirect Transfer of Properties by Non-resident Enterprises (“Circular 7”), effective from February 3,
2015, to replace certain provisions under Circular 698 and Bulletin 24 and to further strengthen the regulation over enterprise
income tax applicable to indirect transfer of properties by non-resident enterprises. According to Circular 7, where a non-resident
enterprise indirectly transfers equity interests in a PRC resident enterprise, properties of an establishment or place in the
PRC or immovable properties in the PRC (collectively, the “PRC Taxable Properties”), through the implementation of
a scheme, including transfer of equity interests and other similar rights of an overseas enterprise (an “Overseas Enterprise”),
without a reasonable commercial purpose and resulting in the avoidance of the enterprise income tax liability, upon review and
examination of the documents submitted, such indirect transfer may be re-characterized as a direct transfer of the PRC Taxable
Properties by the in-charge tax authorities in accordance with the EIT Law. Both parties to the indirect transfer of PRC Taxable
Properties (i.e., the transferor and the transferee) and the Chinese tax resident enterprise being indirectly transferred may
report this indirect transfer to the in-charge tax authority.
According to Circular 7, when assessing
the “reasonable commercial purpose,” a holistic approach should be used to consider all the arrangements relevant to
the indirect transfer of PRC Taxable Properties based on the actual facts and circumstances, and the following relevant factors
must be analyzed comprehensively: (a) whether the main value of the equity of the Overseas Enterprise directly or indirectly derives
from PRC Taxable Properties; (b) whether a majority of the assets of the Overseas Enterprise is directly or indirectly comprised
of investment in the PRC, or whether a majority of its income is directly or indirectly sourced from the PRC; (c) whether the actual
functions performed and risks undertaken by the Overseas Enterprise and its subsidiaries which directly or indirectly hold the
PRC Taxable Properties can substantiate the economic substance of their corporate structure; (d) the existence duration of the
shareholders, business model of the Overseas Enterprise and the relevant organizational structure; (e) overseas income taxes applicable
to the indirect transfer of PRC Taxable Properties; (f) whether the indirect investment or the indirect transfer of the PRC Taxable
Properties by the equity transferor can be substituted by a direct transfer of the PRC Taxable Properties; (g) whether tax treaties
or tax arrangements can apply to the income from indirect transfer of PRC Taxable Properties; and (h) other related factors. A
transaction will be deemed to lack a reasonable commercial purpose and thus be subject to PRC enterprise income tax under Circular
7 if all of the following conditions are satisfied, unless the safe harbor for qualifying intra-group reorganization applies: (a)
75% or more of the value of the equity interests of the Overseas Enterprise is directly or indirectly derived from the PRC Taxable
Properties; (b) at any time within one (1) year before the indirect transfer of PRC Taxable Properties, 90% or more of the total
assets of the Overseas Enterprise (not including cash) is directly or indirectly comprised of investment in the PRC, or 90% or
more of the Overseas Enterprise’s income in the year before the indirect transfer of PRC Taxable Properties is directly or
indirectly sourced from the PRC; (c) the Overseas Enterprise and its subsidiaries which directly or indirectly hold the PRC Taxable
Properties are incorporated in that country (region) to satisfy the legal requirement of the organizational format, but actually
only perform limited functions and undertake limited risks which are insufficient to substantiate their economic substance; and
(d) the overseas income tax payable for the indirect transfer of PRC Taxable Properties is less than the possible tax burden in
the PRC on the direct transfer of such PRC Taxable Properties.
Circular 7 also provides certain safe harbor
for indirect transfers of the PRC Taxable Properties. Circular 7 will not apply where the overall arrangement related to the indirect
transfer of the PRC Taxable Properties meets any one of the following conditions: (a) the non-resident enterprises deriving income
from indirect transfer of PRC Taxable Properties from the buying and selling of shares of the same listed Overseas Enterprise through
public stock exchanges; or (b) if the non-resident enterprises directly held and transferred the PRC Taxable Properties, the income
from the transfer of such property would otherwise be exempted from enterprise income tax according to the applicable tax treaty
or tax arrangement; or (c) if the indirect transfer of PRC Taxable Properties is deemed as qualified intra-group reorganization,
such indirect transfer will be exempt from PRC enterprise income tax, provided that the current indirect transfer would not result
in the reduction of the enterprise income tax burden on the gain arising on the subsequent potential indirect transfer of PRC Taxable
Properties compared to the tax that would have been imposed on the subsequent transfer had the current indirect transfer not taken
place, and provided that the consideration is paid by the transferee solely in the form of its own equity of a related enterprise
with which the transferee has a controlling relationship.
Circular 7 specifies that the date
that enterprise income tax liability arises as stipulated therein refers to the date when the relevant equity transfer
agreement takes effect and the relevant procedures for the change in equity ownership of the Overseas Enterprise are
completed. With respect to the legal consequences for failing to withhold and pay the enterprise income tax, Circular 7
specifies that the payor (which in most, but not all cases, will be the transferee), regardless of whether it is a resident
enterprise, is required to withhold tax on gains realized from an indirect transfer of PRC Taxable Properties. According to
Circular 7, in the event that the withholding agent does not withhold enterprise income tax, and the transferor does not
timely report and file the enterprise income tax due for the indirect transfer of PRC Taxable Properties or does not fully
settle its enterprise income tax liability, the in-charge tax authority, besides seeking the collection of the enterprise
income tax payable, may impose a penalty ranging from 50% to three times the amount of the unpaid taxes on the withholding
agent for its failure to withhold the capital gains tax, which may be reduced or waived if the withholding agent has reported
to the in-charge tax authorities by submitting the required documents within 30 days after the equity transfer agreement for
the indirect transfer is executed. If the withholding agent does not withhold the tax or does not withhold enough amount, the
transferor will report the transaction to the in-charge tax authority and settle the tax payments within seven days from when
the tax obligation arises. If the transferor fails to pay taxes due within the prescribed time limit, the transferor is
subject to a daily interest rate equal to the RMB lending benchmark rate published by the People’s Bank of China in
that tax year plus 5% for the period of such overdue tax payment. The additional 5% punitive interest charge will be waived
if the transferor voluntarily reports to the in-charge tax authorities within 30 days after the equity transfer agreement is
signed. It is worth noting that Circular 7 also applies to transactions that took place before its effective date (i.e.,
February 3, 2015) but for which the relevant PRC tax treatment has not been decided upon by the Chinese in-charge tax
authorities.
There is uncertainty as to the application
of Circular 7. While it appears that Circular 7 was not intended to apply to individual transferors, there is very little guidance
and practical experience regarding its application to individual transferors. Circular 7 may be determined by the tax authorities
to be applicable to the Merger where non-PRC resident corporate shareholders or ADS holders were involved, if the Company is determined
by the PRC tax authorities to lack reasonable commercial purpose. As a result, if the PRC tax authorities were to invoke Circular
7 and impose tax on the receipt of consideration for Shares or ADSs, then any gain recognized on the receipt of consideration for
such Shares or ADSs pursuant to the Merger by the Company’s shareholders who are not PRC residents could be treated as PRC-source
income that would be subject to PRC enterprise income tax at a rate of 10% (subject to applicable treaty or relief).
You should consult your own tax advisor
for a full understanding of the tax consequences of the Merger to you, including any PRC tax consequences.
Material Cayman Islands Tax Consequences
The Cayman Islands currently have no form
of income, corporate or capital gains tax and no estate duty, inheritance tax or gift tax. No taxes, fees or charges will be payable
(either by direct assessment or withholding) to the government or other taxing authority in the Cayman Islands under the laws of
the Cayman Islands in respect of the Merger or the receipt of cash for the Shares or ADSs under the terms of the Merger. This is
subject to the qualification that (a) Cayman Islands stamp duty may be payable if any transaction documents are brought to or executed
or produced before a court in the Cayman Islands; and (b) registration fees will be payable to the Cayman Registrar to register
the Plan of Merger.
Market
Price of the Company’s ADSs, Dividends and Other Matters
Market Price of the ADSs
The following table provides the
intra-period high and low prices for ADSs, each representing one Share, quoted on NASDAQ under the symbol
“GAME” for (a) each quarter of 2012, 2013 and 2014 and (b) each quarter during the current year:
| | |
Sales Price Per ADS (in US$) | |
| | |
High | | |
Low | |
| Quarterly: | |
| | | |
| | |
| 2012 | |
| | | |
| | |
| First quarter | |
| 5.39 | | |
| 3.46 | |
| Second quarter | |
| 5.92 | | |
| 3.77 | |
| Third quarter | |
| 4.05 | | |
| 3.16 | |
| Fourth quarter | |
| 3.84 | | |
| 2.71 | |
| 2013 | |
| | | |
| | |
| First quarter | |
| 3.32 | | |
| 2.88 | |
| Second quarter | |
| 4.20 | | |
| 2.68 | |
| Third quarter | |
| 6.42 | | |
| 3.79 | |
| Fourth quarter | |
| 4.98 | | |
| 3.87 | |
| 2014 | |
| | | |
| | |
| First quarter | |
| 7.00 | | |
| 4.16 | |
| Second quarter | |
| 6.78 | | |
| 6.48 | |
| Third quarter | |
| 6.75 | | |
| 5.90 | |
| Fourth quarter | |
| 6.70 | | |
| 5.67 | |
| 2015 | |
| | | |
| | |
| First quarter | |
| 6.53 | | |
| 4.91 | |
| Second quarter (through [ ], 2015) | |
| [ ] | | |
| [ ] | |
On January 24, 2014, the last trading day
immediately prior to the Company’s announcement on January 27, 2014 that it had received the Proposal, the reported closing
price of the Company’s ADSs as quoted by NASDAQ was US$5.65 per ADS. The merger consideration of US$7.10 per ADS represents
a premium of approximately 25.7% over the closing price of the Company’s ADSs as quoted by NASDAQ on January 24, 2014, and
a premium of approximately 46.5%, 53.8% and 56.2%, respectively, to the volume-weighted average trading price as quoted by NASDAQ
during the 30, 60 and 90 trading days prior to, and including, January 24, 2014, the last trading day prior to the Company’s
announcement on January 27, 2014 that it had received the Proposal. On [ ],
2015, the most recent practicable date before the printing of this proxy statement, the high and low reported sales prices of ADSs
were US$[ ] and US$[ ], respectively. You are urged to obtain
a current market price quotation for your Shares in connection with voting your Shares.
Dividend Policy
In November 2011, the Board declared a
cash dividend in the aggregate amount of approximately US$289.4 million payable to holders of Shares. As of the date of this proxy
statement, US$288.3 million was paid to shareholders of the Company, with the remaining amount payable to holders of unvested restricted
shares upon vesting.
Under the terms of the Merger Agreement,
the Company is not permitted to pay any dividends or repurchase any Shares pending consummation of the Merger.
In the event the Merger Agreement is terminated
for any reason and the Merger is not consummated, the payment of future dividends will be subject to the discretion of the Board.
Even if the Board decides to pay dividends, the form, frequency and amount will depend upon the Company’s future operations
and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the
Board may deem relevant. If the Company pays any dividends, the ADS Depositary will distribute such payments to the Company’s
ADS holders to the same extent as holders of Shares, subject to the terms of the Deposit Agreement, including the fees and expenses
payable thereunder. Cash dividends on Shares, if any, will be paid in U.S. dollars. In addition, the Company is a holding company
incorporated in the Cayman Islands. The Company’s current and future ability to pay dividends depends substantially on the
payment of dividends to the Company by its PRC subsidiaries.
The Company generates substantially all
of its revenues through contractual arrangements with its PRC operating companies. PRC governmental authorities may, however, require
the Company to amend these contractual arrangements in a manner that would materially and adversely affect the Company’s
PRC subsidiaries’ ability to pay dividends to the Company. If the Company’s PRC subsidiaries incur debt on their own
behalf in the future, the instruments governing the debt may also restrict the ability of the Company’s PRC subsidiaries
to pay dividends to the Company. Furthermore, PRC legal restrictions permit payments of dividends by the Company’s PRC subsidiaries
only out of their retained earnings, if any, determined in accordance with PRC accounting standards and regulations. There is no
significant difference between retained earnings as determined in accordance with PRC accounting standards and in accordance with
U.S. GAAP. Under PRC law, the Company’s PRC subsidiaries are also required to set aside at least 10% of their net income
each year to fund their general reserves until the cumulative amount reaches 50% of their paid-in capital. The Company’s
PRC subsidiaries may also allocate a portion of their net income to their staff welfare and bonus funds. These reserves and welfare
and bonus funds are not distributable as cash dividends to the Company. Moreover, cash transfers from the Company’s PRC subsidiaries
to the Company are subject to the PRC government’s currency conversion policy, and the Company’s PRC subsidiaries may
not be able to obtain the relevant approvals or complete the requisite registrations for distributing dividends to the Company.
Any failure by any of the Company’s shareholders or any beneficial owner of Shares who is a PRC resident to comply with the
approval or registration requirements imposed by the State Administration of Foreign Exchange with respect to their investment
in the Company could also subject the Company to legal sanctions, including a restriction on the Company’s PRC subsidiaries’
ability to distribute dividends to the Company. As a result of the foregoing restrictions on the Company’s PRC subsidiaries
and PRC operating companies, the Company’s ability to pay dividends on Shares, or indirectly on ADSs, could be significantly
limited.
The Company may be treated as a PRC resident
enterprise for PRC tax purposes and be obligated to withhold PRC income tax on payments of dividends on Shares and ADSs to investors
that are non-resident enterprises of the PRC. The withholding tax rate would generally be 10% on dividends paid to non-resident
enterprises and 20% on dividends paid to non-resident individuals, subject to applicable tax treaty reliefs. Pursuant to a tax
treaty between the PRC and the United States, a 10% rate will apply to dividends paid to non-resident individuals provided certain
conditions are met. In addition, pursuant to a tax treaty between the PRC and Hong Kong, the withholding tax rate may be lowered
to 5% if the PRC resident enterprise is at least 25% held by a Hong Kong company and other conditions set forth by the relevant
tax authorities have been met. See “Item 3. Key Information—D. Risk Factors—Risks Related to the Regulation of
Our Business—The discontinuation, reduction, delay or retroactive revocation of any of the preferential tax treatments or
the government financial incentives currently available to us in China could materially and adversely affect our business, financial
condition and results of operations,” “Item 3. Key Information—D. Risk Factors—Risks Relating to the Countries
in Which We Operate—There are significant uncertainties under the EIT Law relating to our PRC enterprise income tax liabilities”
and “Item 3. Key Information—D. Risk Factors—Risks Relating to Our ADSs—We may be required to withhold
PRC income tax on the dividends we pay you (if any), and any gain you realize on the transfer of our ordinary shares and/or ADSs
may also be subject to PRC withholding tax” in the Company’s Annual Report on Form 20-F for the year ended December
31, 2014, which is incorporated into this proxy statement by reference. See “Where You Can Find More Information” beginning
on page [ ] for a description of how to obtain a copy of the Company’s Annual Report.
The
Extraordinary General Meeting
We are furnishing this proxy statement
to you, as a holder of the Shares, as part of the solicitation of proxies by the Board for use at the extraordinary general meeting
described below.
Date, Time and Place of the Extraordinary General Meeting
The extraordinary general meeting will
be held on [ ], 2015 at [ ] a.m.
(Hong Kong time). The meeting will be held at the offices of Davis Polk & Wardwell, The Hong Kong Club Building, 3A Chater
Road, Central, Hong Kong.
Proposals to be Considered at the Extraordinary General Meeting
At the meeting, you will be asked to consider
and vote upon:
| · | as a special resolution: |
THAT the Merger Agreement, the Plan of Merger
required to be registered with the Registrar of Companies in the Cayman Islands in order to give effect to the Merger, and the
Transactions, including the Merger, be authorized, approved and adopted; and
| · | as an ordinary resolution: |
THAT the directors of the
Company be authorized to do all things necessary to give effect to the Merger Agreement, the Plan of Merger and the Transactions,
including the Merger; and
| · | if necessary, as an ordinary resolution: |
THAT the chairman of the extraordinary general
meeting be instructed to adjourn the extraordinary general meeting in order to allow the Company to solicit additional proxies
in the event that there are insufficient proxies received at the time of the extraordinary general meeting to pass the
resolutions to be proposed at the extraordinary general meeting.
At the Effective Time, all Shares will
be cancelled and cease to exist. If the Merger is completed, each issued and outstanding Share and ADS, other than the Excluded
Shares, the Dissenting Shares and ADSs representing the Excluded Shares, as the case may be, will be cancelled in exchange for
the right to receive the Per Share Merger Consideration and the Per ADS Merger Consideration (less US$0.05 per ADS cancellation
fees pursuant to the terms of the Deposit Agreement), respectively, in each case, in cash, without interest and net of any applicable
withholding taxes, in accordance with the terms and conditions set forth in the Merger Agreement. The Excluded Shares and ADSs
representing the Excluded Shares will be cancelled without payment of any consideration or distribution therefor. The Dissenting
Shares will thereafter represent only the right to receive the fair value of a Share as determined under the Cayman Islands Companies
Law.
In addition to the foregoing, at the Effective
Time,
| · | each Company Option issued and outstanding immediately prior to the Effective Time, will be cancelled and converted into
the right to receive, as soon as practicable after the Effective Time, an amount equal to the product of (a) the total number of
Shares issuable under such Company Option and (b) the excess of US$3.55 over the exercise price payable per Share under such Company
Option, in cash, without interest and net of any applicable withholding taxes; |
| · | each Company Restricted Share and each Company RSU issued and outstanding immediately prior to the Effective Time will be cancelled
and converted into the right to receive, as soon as practicable after the Effective Time, US$3.55, in cash, without interest and
net of any applicable withholding taxes; and |
| · | each ordinary share, par value US$0.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time
will be converted into one validly issued, fully paid and non-assessable ordinary share, par value US$0.01 per share, of the Surviving
Corporation. |
The Board’s Recommendation
The Board, acting upon the unanimous recommendation
of the Special Committee, unanimously:
| · | determined that it is fair to, advisable and in the best interests of the Company and the Unaffiliated Holders to consummate
the Transactions, including the Merger; |
| · | authorized and approved the execution, delivery and performance by the Company of the Merger Agreement, the Plan of Merger
and the Limited Guarantees and the consummation of the Transactions, including the Merger; and |
| · | resolved to recommend in favor of the authorization and approval of the Merger Agreement, the Plan of Merger and the consummation
of the Transactions, including the Merger, to the shareholders of the Company and directed that the Merger Agreement, the Plan
of Merger and the consummation of the Transactions, including the Merger, be submitted to a vote of the shareholders of the Company
for authorization and approval. |
Record Date; Shares and ADSs Entitled to Vote
You are entitled to attend and vote at
the extraordinary general meeting if you have Shares registered in your name at the close of business in the Cayman Islands on
the Share Record Date. If you own Shares at the close of business in the Cayman Islands on the Share Record Date, the deadline
for you to lodge your proxy card and vote is [ ], 2015 at 10:00 a.m.
(Hong Kong time).
If you own ADSs as of the close of business
in New York City on the ADS Record Date (and do not cancel such ADSs and become a registered holder of the Shares underlying such
ADSs, as explained below), you cannot vote directly nor are you able to attend the extraordinary general meeting, but you may instruct
the ADS Depositary (as the holder of the Shares underlying your ADSs) on how to vote the Shares underlying your ADSs. The ADS Depositary
must receive your instructions no later than 12:00 p.m. (New York City time) on [ ],
2015 in order to ensure the Shares underlying your ADSs are properly voted at the extraordinary general meeting.
Holders of Class A ordinary shares are
entitled to one vote per share, and holders of Class B ordinary shares are entitled to 10 votes per share. Holders of our Class
A ordinary shares and Class B ordinary shares will vote as a single class on each matter submitted to the shareholders for authorization
and approval at the extraordinary general meeting and any adjournment thereof. We expect that, as of the Share Record Date, there
will be 540,894,543 Shares entitled to be voted at the extraordinary general meeting. See “—Procedures
for Voting” below for additional information.
Quorum
A quorum of the Company’s shareholders
is necessary to have a valid shareholders’ meeting. The required quorum for the transaction of business at the extraordinary
general meeting is the presence, in person or by proxy, of one or more shareholders entitled to vote that represent not less than
50% of the voting rights represented by the issued Shares. In the event that a quorum is not present at the extraordinary general
meeting, we currently expect that we will adjourn the extraordinary general meeting to solicit additional proxies in favor of the
authorization and approval of the Merger Agreement.
Vote Required
Under the Cayman Islands Companies Law
and the Merger Agreement, in order for the Merger to be completed, the Merger Agreement and the Plan of Merger must be approved
by a special resolution passed by the affirmative vote of shareholders holding two-thirds or more of the voting power represented
by the Shares (including Shares represented by ADSs) present and voting in person or by proxy as a single class at the extraordinary
general meeting. If this vote is not obtained, the Merger will not be completed.
As of the date of this proxy statement,
there are 443,179,215 Class A ordinary shares (including Class A ordinary shares represented by ADSs) and 97,518,374 Class B ordinary
shares issued and outstanding, all of which are entitled to vote on the proposals at the extraordinary general meeting, subject
to the procedures described below under “—Procedures for Voting.” We expect that, as of the Share Record Date,
there will be 443,262,744 Class A ordinary shares (including Class A ordinary shares represented by ADSs) and 97,518,374 Class
B ordinary shares issued and outstanding, all of which will be entitled to vote on the proposals at the extraordinary general meeting,
subject to the procedures described below under “—Procedures for Voting.” Holders of Class A ordinary shares
are entitled to one vote per share, and holders of Class B ordinary shares are entitled to 10 votes per share. Based on the number
of Shares expected to be issued and outstanding and entitled to vote as of the close of business in the Cayman Islands on the Share
Record Date, [ ] votes must be cast in favor of the proposal to authorize and approve the Merger Agreement, the Plan of Merger
and the Transactions, including the Merger, in order for the proposal to be authorized, approved and adopted, assuming all shareholders
will be present and voting in person or by proxy at the extraordinary general meeting. If less than all issued and outstanding
Shares are present in person or by proxy and voting at the meeting, a smaller number of Shares will be required to approve the
Merger Agreement, the Plan of Merger and the Transactions, including the Merger.
As of the date of this proxy statement,
the Rollover Shareholders beneficially own an aggregate of 311,568,626 Class A ordinary shares and 97,518,374 Class B ordinary
shares, representing approximately 76.1% of the Company’s issued and outstanding Shares and 1,286,752,366 votes, or approximately
90.9% of the total number of votes represented by the Company’s issued and outstanding Shares. See “Security Ownership
of Certain Beneficial Owners and Management of the Company” beginning on page [ ] for additional information.
Pursuant to the terms of the Support Agreement, these Shares will be voted in favor of the authorization and approval of the Merger
Agreement, the Plan of Merger and the Transactions, including the Merger, at the extraordinary general meeting.
Procedures for Voting
Shares
Only shareholders entered in the register
of members of the Company at the close of business in the Cayman Islands on the Share Record Date will receive the final proxy
statement and proxy card directly from the Company. Shareholders registered in the register of members of the Company as of the
Share Record Date or their proxy holders are entitled to vote and may participate in the extraordinary general meeting or any adjournment
thereof. Shareholders who have acquired Shares after the close of business on the Share Record Date may not attend the extraordinary
general meeting unless they receive a proxy from the person or entity who had sold them the Shares. Holders of Class A ordinary
shares are entitled to one vote per share, and holders of Class B ordinary shares are entitled to 10 votes per share.
Shareholders wanting to vote by proxy should
simply indicate on their proxy card how they want to vote, sign and date the proxy card, and mail the proxy card in the return
envelope as soon as possible but in any event so that it is received by the Company no later than 10:00 a.m. on [ ],
2015 (Hong Kong time), the deadline to lodge the proxy card. Shareholders can also attend the extraordinary general meeting and
vote in person.
Shareholders who have questions or requests
for assistance in completing and submitting proxy cards or need additional copies of this proxy statement or the accompanying proxy
card should contact Georgeson Inc., the proxy solicitor at 480 Washington Boulevard, 26th Floor, Jersey City, NJ, 07310 or toll-free
at +1 800 509 0983 (or +1 781 575 2137 outside of North America) or by email at ShandaGames@georgeson.com.
ADSs
Holders of ADSs as of the close of
business in New York City on the ADS Record Date will receive the final proxy statement and ADS voting instruction card
either directly from the ADS Depositary (in the case of registered holders of ADSs) or from a third-party service provider
(in the case of beneficial owners of ADSs who are not registered holders of ADSs). Holders of ADSs as of the close of
business on [ ], 2015 (New York City time) (who do not cancel
such ADSs and become a registered holder of the Shares underlying such ADSs, as explained in the following paragraph) cannot
attend or vote at the extraordinary general meeting directly, but may instruct the ADS Depositary how to vote the Shares
underlying the ADSs by completing and signing an ADS voting instruction card provided by the ADS Depositary and returning it
in accordance with the instructions printed on such card. The ADS Depositary must receive the ADS voting instruction card no
later than 12:00 p.m. (New York City time) on [ ], 2015. The ADS
Depositary will endeavor, in so far as practicable, to vote or cause to be voted the Shares represented by ADSs in accordance
with your voting instructions. If any holder of ADSs does not timely deliver specific voting instructions to the ADS
Depositary, or if the ADS Depositary timely receives voting instructions from an ADS holder which fail to specify the manner
in which the ADS Depositary is to vote, the Shares represented by the holder’s ADSs, the ADS Depositary has advised the
Company that it will not vote or attempt to exercise the right to vote any Shares underlying such holder’s ADSs. If you
hold your ADSs in a brokerage, bank or other nominee account, you must follow the procedures of the broker, bank or other
nominee through which you hold your ADSs if you wish to vote.
Holders of ADSs will not be able to
attend the extraordinary general meeting unless they cancel their ADSs and become holders of Shares prior to the close of
business in the Cayman Islands on the Share Record Date. ADS holders who wish to cancel their ADSs need to make arrangements
to deliver the ADSs (or to the extent ADSs are certificated, the ADRs) to the ADS Depositary for cancellation before 12:00
p.m. (New York City time) on [ ], 2015 together with (a) delivery
instructions for the corresponding Shares (name and address of person who will be the registered holder of such Shares), (b)
payment of the ADS cancellation fees (US$0.05 per ADS to be cancelled pursuant to the terms of the Deposit Agreement) and any
applicable taxes and (c) a certification that any such ADS holder either (i) held the ADSs as of the ADS Record Date and has
not given, and will not give, voting instructions to the ADS Depositary as to the ADSs being cancelled, or has given voting
instructions to the ADS Depositary as to the ADSs being cancelled but undertakes not to vote the corresponding Shares at the
extraordinary general meeting, or (ii) did not hold the ADSs as of the ADS Record Date and undertakes not to vote the
corresponding Shares at the extraordinary general meeting. If you hold your ADSs in a brokerage, bank or other nominee
account, please contact your broker, bank or other nominee to find out what actions you need to take to instruct the broker,
bank or other nominee to cancel the ADSs on your behalf. Upon cancellation of the ADSs, the ADS Depositary will arrange for
JPMorgan Chase Bank, N.A., Hong Kong branch, the custodian holding the Shares, to transfer registration of the Shares to the
former ADS holder (or a person designated by the former ADS holder). If after the registration of Shares in your name you
wish to receive a certificate evidencing the Shares registered in your name, you will need to make a request to the
Company’s registered office at Codan Trust Company (Cayman), c/o Conyers Dill & Pearman, 2901 One Exchange Square,
8 Connaught Place, Central, Hong Kong, to issue and mail a certificate to your attention. If the Merger is not completed, the
Company would continue to be a public company in the United States and ADSs would continue to be listed on NASDAQ. Shares
are not listed and cannot be traded on any stock exchange other than NASDAQ, and in such case only in the form of ADSs. As a
result, if you have cancelled your ADSs to attend the extraordinary general meeting and the Merger is not completed and you
wish to be able to sell your Shares on a stock exchange, you would need to deposit your Shares into the Company’s ADS
program for the issuance of the corresponding number of ADSs, subject to the terms and conditions of applicable law and the
Deposit Agreement, including, among other things, payment of relevant fees of the ADS Depositary for the issuance of ADSs and
applicable share transfer taxes (if any) and related charges pursuant to the Deposit Agreement.
Persons holding ADSs in a brokerage, bank
or other nominee account should consult with their broker, bank or other nominee to obtain directions on how to provide such broker,
bank or other nominee with instructions on how to vote their ADSs.
Proxy Holders for Registered Shareholders
Shareholders registered in the register
of members of the Company as of the Share Record Date who are unable to participate in the extraordinary general meeting may appoint
as a representative another shareholder, a third party or the Company as proxy holder by completing and returning the form of proxy
in accordance with the instructions printed thereon. With regard to the items listed on the agenda and without any explicit instructions
to the contrary, the Company as proxy holder will vote in favor of the resolutions proposed at the extraordinary general meeting
according to the recommendation of the Board. If new proposals (other than those on the agenda) are put forth before the extraordinary
general meeting, the Company as proxy holder will vote in accordance with the position of the Board.
Voting of Proxies and Failure to Vote
All Shares represented by valid proxies
will be voted at the extraordinary general meeting in the manner specified by the holder. If a shareholder returns a properly signed
proxy card but does not indicate how the shareholder wants to vote, Shares represented by that proxy card will be voted FOR the
proposal to authorize and approve the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, FOR the
proposal to authorize each of the directors of the Company to do all things necessary to give effect to the Merger Agreement, the
Plan of Merger and the Transactions, including the Merger, and FOR the proposal to instruct the chairman of the extraordinary general
meeting to adjourn the extraordinary general meeting in order to allow the Company to solicit additional proxies in the event that
there are insufficient proxies received at the time of the extraordinary general meeting to pass the resolutions proposed
at the extraordinary general meeting, unless the shareholder appoints a person other than the chairman of the meeting as proxy,
in which case the Shares represented by that proxy card will be voted (or not submitted for voting) as the proxy determines. If
a shareholder fails to vote by proxy or in person, it will be more difficult for the Company to obtain the necessary quorum to
transact business at the extraordinary general meeting and to obtain the required votes described in “—Vote Required.”
Brokers, banks or other nominees who hold
Shares in “street name” for customers who are the beneficial owners of such Shares may not give a proxy to vote those
customers’ Shares in the absence of specific instructions from those customers. If proxies are properly dated, executed and
returned by holders of Shares and no specific instructions are given by such holders, such Shares will be voted “FOR”
the proposals and in the proxy holder’s discretion as to other matters that may properly come before the extraordinary general
meeting. Abstentions by holders of Shares are included in the determination of the number of Shares present and voting but are
not counted as votes for or against a proposal. If no proxy is given by such holders of Shares, broker non-votes will be counted
toward a quorum but will not be treated as voted on any proposals at the extraordinary general meeting.
If any holder of ADSs does not timely deliver
specific voting instructions to the ADS Depositary, or if the ADS Depositary timely receives voting instructions from an ADS holder
which fail to specify the manner in which the ADS Depositary is to vote the Shares represented by the holder’s ADS, the ADS
Depositary has advised the Company that it will not vote or attempt to exercise the right to vote any Shares underlying such holder’s
ADSs.
Brokers, banks and other nominees who hold
ADSs in “street name” for their customers do not have discretionary authority to provide the ADS Depositary with voting
instructions on how to vote the Shares underlying the ADSs with respect to the authorization and approval of the Merger Agreement,
the Plan of Merger and the Transactions, including the Merger. Accordingly, if banks, brokers or other nominees do not receive
specific voting instructions from the beneficial owner of ADSs, they may not provide the ADS Depositary with voting instructions
on how to vote the Shares underlying the ADSs with respect to the authorization and approval of the Merger Agreement, the Plan
of Merger and the Transactions, including the Merger.
Revocability of Proxies
Registered holders of our Shares may revoke
their proxies in one of three ways:
| · | First, a registered shareholder can revoke a proxy by written notice of revocation given to the chairman of the extraordinary
general meeting at least two hours before the extraordinary general meeting commences. Any written notice revoking a proxy should
also be sent to Shanda Games Limited, No. 1 Office Building, No. 690 Bibo Road, Pudong New Area, Shanghai 201203, the PRC, Attention:
Investor Relations Department. |
| · | Second, a registered shareholder can complete, date and submit a new proxy card bearing a later date than the proxy card sought
to be revoked to the Company no later than 10:00 a.m. (Hong Kong time) on [ ],
2015, which is the deadline for shareholders to lodge proxy cards. |
| · | Third, a registered shareholder can attend the meeting and vote in person. Attendance, by itself, will not revoke a proxy.
It will only be revoked if the registered shareholder actually votes at the extraordinary general meeting. |
If a shareholder holds Shares through a
broker, bank or other nominee and has instructed the broker, bank or other nominee to vote the shareholder’s Shares, the
shareholder must follow directions received from the broker, bank or other nominee to change those instructions.
Holders of the Company’s ADSs may
revoke their voting instructions by notification to the ADS Depositary in writing at any time prior to 12:00 p.m. (New York City
time) on [ ], 2015. A holder of ADSs can do this by completing, dating
and submitting a new ADS voting instruction card to the ADS Depositary bearing a later date than the ADS voting instruction card
sought to be revoked.
If you hold your ADSs through a broker,
bank or other nominee and you have instructed your broker, bank or other nominee to give ADS voting instructions to the ADS Depositary,
you must follow the directions of your broker, bank or other nominee to change those instructions.
Rights of Shareholders Who Object to the Merger
Shareholders who continue to hold their
Shares in their own name until the completion of the Merger will have the right to exercise dissenters’ rights and receive
payment of the fair value of their Shares if the Merger is completed, but only if they deliver to the Company, before the vote
to authorize and approve the Merger is taken, a written objection to the Merger and subsequently comply with all procedures and
requirements of Section 238 of the Cayman Islands Companies Law, which is attached as Annex D to this proxy statement, for the
exercise of dissenters’ rights. The fair value of your Shares as determined under that statute could be more than, the same
as, or less than the merger consideration you would receive pursuant to the Merger Agreement if you do not exercise dissenters’
rights with respect to your Shares.
ADS HOLDERS WILL NOT HAVE THE RIGHT TO
EXERCISE DISSENTERS’ RIGHTS AND RECEIVE PAYMENT OF THE FAIR VALUE OF THE SHARES UNDERLYING THEIR ADSs. THE ADS DEPOSITARY
WILL NOT ATTEMPT TO EXERCISE ANY DISSENTERS’ RIGHTS WITH RESPECT TO ANY OF THE SHARES THAT IT HOLDS, EVEN IF AN ADS HOLDER
REQUESTS THE ADS DEPOSITARY TO DO SO. ADS HOLDERS WISHING TO EXERCISE DISSENTERS’ RIGHTS MUST SURRENDER THEIR ADSs TO THE
ADS DEPOSITARY, PAY THE ADS DEPOSITARY’S FEES REQUIRED FOR THE CANCELLATION OF THEIR ADSs, PROVIDE INSTRUCTIONS FOR THE REGISTRATION
OF THE CORRESPONDING SHARES IN THE COMPANY’S REGISTER OF MEMBERS, AND CERTIFY THAT THEY HAVE NOT GIVEN, AND WILL NOT GIVE,
VOTING INSTRUCTIONS AS TO THEIR ADSs (OR, ALTERNATIVELY, THAT THEY WILL NOT VOTE THE CORRESPONDING SHARES) BEFORE 12:00 P.M. (NEW
YORK CITY TIME) ON [ ], 2015, AND BECOME REGISTERED HOLDERS OF SHARES
BY THE CLOSE OF BUSINESS IN THE CAYMAN ISLANDS ON THE SHARE RECORD DATE. THEREAFTER, SUCH FORMER ADS HOLDERS MUST COMPLY WITH THE
PROCEDURES AND REQUIREMENTS FOR EXERCISING DISSENTERS’ RIGHTS WITH RESPECT TO THEIR SHARES UNDER SECTION 238 OF THE CAYMAN
ISLANDS COMPANIES LAW. IF THE MERGER IS NOT COMPLETED, THE COMPANY WOULD CONTINUE TO BE A PUBLIC COMPANY IN THE UNITED STATES AND
ADSs WOULD CONTINUE TO BE LISTED ON NASDAQ. SHARES ARE NOT LISTED AND CANNOT BE TRADED ON ANY STOCK EXCHANGE OTHER THAN NASDAQ,
AND IN SUCH CASE ONLY IN THE FORM OF ADSs. AS A RESULT, IF A FORMER ADS HOLDER HAS CANCELLED HIS, HER OR ITS ADSs TO EXERCISE DISSENTERS’
RIGHTS AND THE MERGER IS NOT COMPLETED AND SUCH FORMER ADS HOLDER WISHES TO BE ABLE TO SELL HIS, HER OR ITS SHARES ON A STOCK EXCHANGE,
SUCH FORMER ADS HOLDER WOULD NEED TO DEPOSIT HIS, HER OR ITS SHARES INTO THE COMPANY’S ADS PROGRAM FOR THE ISSUANCE OF THE
CORRESPONDING NUMBER OF ADSs, SUBJECT TO THE TERMS AND CONDITIONS OF APPLICABLE LAW AND THE DEPOSIT AGREEMENT, INCLUDING, AMONG
OTHER THINGS, PAYMENT OF RELEVANT FEES OF THE ADS DEPOSITARY FOR THE ISSUANCE OF ADSs AND APPLICABLE SHARE TRANSFER TAXES (IF ANY)
AND RELATED CHARGES PURSUANT TO THE DEPOSIT AGREEMENT.
Whom to Call for Assistance
If you need assistance, including help
in changing or revoking your proxy, please contact Georgeson Inc., which is acting as the proxy solicitor in connection with the
Merger as follows:
480 Washington Boulevard, 26th Floor,
Jersey City, NJ 07310
Shareholders, Banks and Brokers may call toll-free +1 800 509 0983
(or +1 781 575 2137 outside of North America)
or email ShandaGames@georgeson.com
Solicitation of Proxies
We have engaged Georgeson Inc. to assist
in the provision of proxy solicitation information to brokerage, banks or other nominees and individual investors for the extraordinary
general meeting. We expect that fees for services provided by Georgeson Inc. will be approximately US$7,500 plus certain costs
associated with telephone solicitations, if required, and reimbursement of out-of-pocket expenses. In addition, proxies may be
solicited by mail, in person, by telephone, by internet or by facsimile by certain of the Company’s officers, directors and
employees. These persons will receive no additional compensation for solicitation of proxies but may be reimbursed for reasonable
out-of-pocket expenses. We will reimburse banks, brokers, nominees, custodians and fiduciaries for their reasonable expenses in
forwarding copies of this proxy statement to the beneficial owners of Shares and in obtaining voting instructions from those owners.
We will pay all expenses of filing, printing and mailing this proxy statement.
Other Business
We are not currently aware of any business
to be acted upon at the extraordinary general meeting other than the matters discussed in this proxy statement.
The
Merger Agreement
The following summary describes material
provisions of the Merger Agreement. This summary may not include all of the information about the Merger Agreement and the Plan
of Merger that is important to you. This summary is subject to, and qualified in its entirety by reference to, the Merger Agreement
and the Plan of Merger, which are attached as Annex A and Annex B, respectively, and incorporated by reference into
this section of this proxy statement. You are urged to read each of the Merger Agreement and the Plan of Merger carefully and in
their entirety, as they are the legal documents governing the Merger.
The summary of the Merger Agreement
below is included in this proxy statement only to provide you with information regarding the terms and conditions of the Merger
Agreement, and not to provide any other factual information regarding the Company, Parent, Merger Sub or their respective businesses.
Accordingly, the representations and warranties and other provisions of the Merger Agreement should not be read alone, but instead
should be read only in conjunction with the information provided elsewhere in this proxy statement and in the documents incorporated
by reference into this proxy statement. See “Where You Can Find More Information” beginning on page [ ].
Structure and Completion of the Merger
The Merger Agreement provides for the merger
of Merger Sub with and into the Company upon the terms, and subject to the conditions, of the Merger Agreement and the Plan of
Merger, with the Company as the surviving entity of the Merger. If the Merger is completed, the Company will cease to be a publicly
traded company and will become a wholly owned subsidiary of Parent. The closing will occur no later than the second business day
immediately after all of the closing conditions have been satisfied or waived (other than those conditions that by their nature
are to be satisfied at the closing of the Merger, but subject to the satisfaction or, if permissible, waiver of those conditions).
At the closing of the Merger, Merger Sub and the Company will sign the Plan of Merger and file the Plan of Merger and other related
documents with the Cayman Registrar. The Merger will become effective on the date specified in the Plan of Merger in accordance
with the Cayman Islands Companies Law.
We expect that the Merger will be completed
during the second half of 2015, after all conditions to the Merger have been satisfied or waived. We cannot specify when, or assure
you that, all conditions to the Merger will be satisfied or waived; however, we intend to complete the Merger as promptly as practicable.
Memorandum and Articles of Association; Directors and Officers
of the Surviving Corporation
At the Effective Time, the memorandum and
articles of association of Merger Sub, as in effect immediately prior to the Effective Time, will become the memorandum and articles
of association of the Surviving Corporation, except that at the Effective Time, the memorandum and articles of association will
be amended to (a) refer to the name of the Surviving Corporation as “Shanda Games Limited”; (b) refer to the correct
authorized capital of the Surviving Corporation as approved in the Plan of Merger (if necessary); and (c) contain provisions no
less favorable to the intended beneficiaries with respect to exculpation and indemnification of liability and advancement of expenses
than were set forth in the memorandum and articles of association of the Company on the date of the Merger Agreement in accordance
with the terms of the Merger Agreement.
The directors of Merger Sub immediately
prior to the Effective Time will become the directors of the Surviving Corporation, and the officers of the Company immediately
prior to the Effective Time will become the officers of the Surviving Corporation, in each case, unless otherwise determined by
Parent prior to the Effective Time.
Merger Consideration
At the Effective Time, each issued and
outstanding Class A ordinary share (other than the Excluded Shares, Dissenting Shares and Class A ordinary shares represented by
ADSs) will be cancelled in exchange for the right to receive the Per Share Merger Consideration, net of any applicable withholding
taxes; each outstanding ADS (other than any ADS that represents Excluded Shares), and the Class A ordinary shares represented by
such ADS, will be cancelled in exchange for the right to receive the Per ADS Merger Consideration (less US$0.05 per ADS for cancellation
fees pursuant to the terms of the Deposit Agreement), net of any applicable withholding taxes; and each Dissenting Share will be
entitled to receive only the payment resulting from the procedures set forth in Section 238 of the Cayman Islands Companies Law
(such required payments collectively, the “Merger Consideration”). See “Dissenters’ Rights” beginning
on page [ ] for additional information.
Each issued and outstanding Excluded Share
will be cancelled without payment of any consideration or any distribution therefor. See “The Merger Agreement—Treatment
of Options” and “The Merger Agreement—Treatment of Restricted Shares and Restricted Share Units” beginning
on page[s] [ ] for information regarding the treatment of Company Options, Company Restricted Shares and Company
RSUs.
At the Effective Time, each ordinary share,
par value US$0.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time will be converted into
one validly issued, fully paid and non-assessable ordinary share, par value US$0.01 per share, of the Surviving Corporation, and
such share will constitute the only issued and outstanding share capital of the Surviving Corporation.
The Merger Consideration will not be paid
to holders of Class A ordinary shares or ADSs who are untraceable unless and until they notify the paying agent appointed by Parent
for payment of Merger Consideration (the “Paying Agent”) or the ADS Depositary, as applicable, of their current contact
details. A holder of Class A ordinary shares or ADSs will be deemed to be untraceable if (a) such person has no registered
address in the register of members (or branch register) maintained by the Company or the ADS Depositary, as applicable; (b) on
the last two consecutive occasions on which a dividend has been paid by the Company a check payable to such person either (i) has
been sent to such person and has been returned undelivered or has not been cashed or (ii) has not been sent to such person
because on an earlier occasion a check for a dividend so payable has been returned undelivered, and, in any such case, no valid
claim in respect thereof has been communicated in writing to the Company or the ADS Depositary, as applicable; or (c) notice
of the extraordinary general meeting convened to vote on the Merger Agreement, the Plan of Merger to be filed with the Cayman Registrar
and the Transactions has been sent to such person and has been returned undelivered. Monies due to holders of Dissenting Shares
and holders of Class A ordinary shares of the Company who are untraceable will be returned to the Surviving Corporation on demand
and held in a non-interest-bearing bank account for the benefit of the holders of Dissenting Shares and holders of Class A ordinary
shares of the Company (including holders of ADSs) who are untraceable. Monies unclaimed after a period of seven years from the
closing date of the Merger will be forfeited and will revert to the Surviving Corporation.
Treatment of Options
At the Effective Time, each Company Option
that is outstanding and unexercised immediately prior to the Effective Time, whether or not vested or exercisable, will be cancelled.
In exchange for a cancelled Company Option, the former holder (or his or her designee) of such Company Option will be paid in cash,
without interest and net of any applicable withholding taxes, by the Surviving Corporation or one of its subsidiaries, as soon
as practicable after the Effective Time, an amount equal to the product of (a) the total number of ordinary shares of the
Company underlying such Company Option immediately prior to the Effective Time multiplied by (b) the excess of US$3.55 over
the exercise price payable per Share under such Company Option. If the exercise price per Share of any such Company Option is equal
to or greater than US$3.55, such Company Option will be cancelled without any payment therefor.
Treatment of Restricted Shares and Restricted Share Units
At the Effective Time, each Company Restricted
Share and Company RSU that is outstanding immediately prior to the Effective Time will be cancelled. In exchange for a cancelled
Company Restricted Share or Company RSU, each former holder (or his or her designee) of such Company Restricted Share or Company
RSU will be paid in cash, without interest and net of any applicable withholding taxes, by the Surviving Corporation or one of
its subsidiaries, as soon as practicable after the Effective Time, an amount equal to US$3.55 for each such cancelled Company Restricted
Share or Company RSU.
Exchange Procedures
Prior to the Effective Time, Parent will
enter into a paying agent agreement with a bank or trust company to act as paying agent for payments of Merger Consideration. At
or prior to the Effective Time, or in the case of payments related to the Dissenting Shares, when ascertained, Parent will deposit
with the Paying Agent, for the benefit of the holders of ordinary shares of the Company and ADSs, cash in an amount sufficient
for the Paying Agent to pay the Merger Consideration. Promptly after the Effective Time, the Paying Agent will deliver or mail
to each registered holder of Class A ordinary shares entitled to receive Per Share Merger Consideration (which does not include
holders of Excluded Shares, Dissenting Shares and Class A ordinary shares represented by ADSs and Company Restricted Shares) (a) a
letter of transmittal specifying the manner in which the delivery of the Merger Consideration to registered holders of the Class
A ordinary shares will be effected, and (b) instructions for effecting the surrender of any issued share certificates representing
Class A ordinary shares (or affidavits and indemnities of loss in lieu of the share certificates) or non-certificated Class A ordinary
shares represented by book-entry in exchange for the Merger Consideration. If any share certificate has been lost, stolen or destroyed,
then the person claiming such share certificate to be lost, stolen or destroyed will have to make an affidavit of loss, theft or
destruction, and, if required by the Surviving Corporation or the Paying Agent, post a bond in a reasonable amount as the Surviving
Corporation or the Paying Agent may direct, as indemnity against any claim that may be made against it with respect to such share
certificate before the Paying Agent will pay such person the Merger Consideration for the cancelled Share associated with such
share certificate. Upon the surrender of, if applicable, any share certificates (or affidavits and indemnities of loss in lieu
of the share certificates) or non-certificated Class A ordinary shares represented by book-entry, together with such other documents
as may be required pursuant to such instructions to the Paying Agent, each registered holder of Class A ordinary shares (other
than holders of Excluded Shares, Dissenting Shares and Class A ordinary shares represented by ADSs and Company Restricted Shares)
will receive a payment in an amount equal to (a) the number of Class A ordinary shares held multiplied by (b) the Per
Share Merger Consideration, without interest and net of any applicable withholding taxes. Any share certificate so surrendered
will be marked as cancelled.
Promptly after the Effective Time, the
Paying Agent will transmit to the ADS Depositary an amount in cash, without interest and net of any applicable withholding taxes,
equal to (a) the number of ADSs issued and outstanding immediately prior to the Effective Time (other than ADSs representing
Excluded Shares) multiplied by (b) the Per ADS Merger Consideration. The ADS Depositary will distribute the Per ADS Merger
Consideration to ADS holders pro rata to their holdings of ADSs (other than ADSs representing the Excluded Shares), without interest
and net of any applicable withholding taxes, upon delivery by them of the ADSs. The ADS holders will pay any applicable fees, charges
and expenses of the ADS Depositary and government charges (other than withholding taxes, if any) due to or incurred by the ADS
Depositary in connection with the cancellation of ADSs. The Surviving Corporation will pay any applicable fees, charges and expenses
of the ADS Depositary and government charges (other than withholding taxes, if any) due to or incurred by the ADS Depositary in
connection with the distribution of the Per ADS Merger Consideration to holders of ADSs and the termination of the ADS program
or facility.
In the event of a transfer of ownership
of ordinary shares of the Company that is not registered in the register of members of the Company, the Merger Consideration to
be exchanged upon due surrender of the share certificate may be paid to a person other than the person in whose name the relevant
ordinary shares are registered in the register of members of the Company only if the relevant share certificates, if any, are presented
to the Paying Agent, accompanied by all documents reasonably required to evidence and effect such transfer and to evidence that
any applicable share transfer taxes have been paid or are not applicable.
Representations and Warranties
The Merger Agreement contains representations
and warranties made by the Company to Parent and Merger Sub and representations and warranties made by Parent and Merger Sub to
the Company, in each case, as of specific dates. The statements embodied in those representations and warranties were made for
purposes of the Merger Agreement and are subject to important qualifications and limitations agreed by the parties to the Merger
Agreement in connection with negotiating the terms of the Merger Agreement (including those set forth in the disclosure schedules
delivered by the Company to, and accepted by, Parent and Merger Sub). In addition, some of those representations and warranties
may be subject to a contractual standard of materiality different from that generally applicable to shareholders and may have been
made for the principal purposes of establishing the circumstances in which a party to the Merger Agreement may have the right not
to close the Merger if the representations and warranties of the other party prove to be untrue due to a change in circumstance
or otherwise and allocating risk between the parties to the Merger Agreement rather than establishing matters as facts. Moreover,
the representations and warranties made by the Company were qualified by its public disclosure with the SEC since December 31,
2012 and prior to the date of the Merger Agreement, as well as, in some cases, to additional specified exceptions and qualifications.
The representations and warranties made
by the Company to Parent and Merger Sub include representations and warranties relating to, among other things:
| · | the Company’s and the Company’s subsidiaries’ organization, existence, good standing and authority to carry
on their respective businesses; |
| · | the memorandum and articles of association or other equivalent organizational documents, as applicable, of each of the Company
and its subsidiaries being in full force and effect; |
| · | the Company’s capitalization, the absence of subscription, repurchase or other similar rights with respect to securities
of the Company or any of its subsidiaries, or any other securities of the Company that give their holders the right to vote with
the Company’s shareholders; |
| · | the Company’s corporate power and authority to execute and deliver the Merger Agreement, to perform its obligations under
and to consummate the Transactions, and the enforceability of the Merger Agreement against the Company; |
| · | the Board’s (a) determination that the execution of the Merger Agreement and the Plan of Merger and the consummation
of the Transactions, including the Merger, are fair to, and in the best interests of, the Company and its shareholders (other than
holders of Excluded Shares); (b) approval and declaration of the advisability of the Merger Agreement, the Merger and the other
Transactions; and (c) resolution to recommend the approval and adoption of the Merger Agreement, the Plan of Merger and the Transactions
to the shareholders and direction that the Merger Agreement be submitted for approval by the shareholders of the Company at the
extraordinary general meeting, such action in each case being made upon the unanimous recommendation of the Special Committee; |
| · | the required vote of the Company’s shareholders to approve the Merger Agreement; |
| · | the absence of violations of, or conflict with, the governing documents of the Company, laws applicable to the Company and
certain agreements of the Company as a result of the Company entering into and performing under the Merger Agreement and consummating
the Merger; |
| · | compliance with applicable laws, licenses and permits, including applicable anti-corruption laws; |
| · | compliance with the applicable rules and regulations of NASDAQ; |
| · | the Company’s SEC filings since December 31, 2012 and the financial statements included therein; |
| · | the Company’s disclosure controls and procedures and internal controls over financial reporting; |
| · | the absence of undisclosed liabilities; |
| · | the absence of any “Company Material Adverse Effect” (as defined below) on the Company and certain other changes
or events since December 31, 2014; |
| · | the absence of any legal proceedings and governmental orders against the Company; |
| · | labor and employment matters, including matters relating to employee benefit plans; |
| · | material contracts and the absence of any default under, or breach or violation of, any material contract; |
| · | the receipt by the Special Committee of a fairness opinion from Merrill Lynch (Asia Pacific) Limited; |
| · | the absence of any undisclosed broker’s or finder’s fees; and |
| · | the absence of a shareholder rights agreement and the inapplicability of any anti-takeover law to the Merger. |
Many of the representations and warranties
made by the Company are qualified as to “materiality” or “Company Material Adverse Effect.” For purposes
of the Merger Agreement, a “Company Material Adverse Effect” means any fact, event, circumstance, change, condition
or effect that, individually or in the aggregate, with all other facts, events, circumstances, changes, conditions and effects,
has or would reasonably be expected to have a materially adverse effect on the business, financial condition, or results of operations
of the Company and its subsidiaries taken as a whole. However, none of the following events, either alone or in combination, will
constitute a Company Material Adverse Effect or will be taken into account in determining whether a Company Material Adverse Effect
has occurred or may, or would, occur:
| 1. | changes affecting the financial, credit or other securities or capital markets, or in general economic, business, regulatory,
legislative or political conditions in any country or region in which the Company or any of its subsidiaries conduct business,
including changes in interest rates and foreign exchange rates; |
| 2. | changes in U.S. GAAP or any interpretation thereof after the date hereof; |
| 3. | changes in applicable law, directives or policies of a governmental authority of general applicability, or any interpretation,
implementation or enforcement thereof, that are binding on the Company or any of its subsidiaries; |
| 4. | changes that are the result of factors generally affecting the industries and markets in which the Company and its subsidiaries
operate; |
| 5. | effects resulting from the announcement, pendency or consummation of the Merger Agreement or the identity of Parent and its
affiliates, including, without limitation, the initiation of litigation or other legal proceeding related to the Merger Agreement
or the Transactions, or any loss of or change in relationship with any customer, supplier, employee, vendor or other business partner
of the Company; |
| 6. | any failure by the Company or any of its subsidiaries to meet any analyst estimates or expectations of the Company’s
or such subsidiary’s revenue, earnings or other financial performance or results of operations for any period, or any failure
by the Company or any of its subsidiaries to meet its internal or published projections, estimates, budgets, plans or forecasts
of its revenues, earnings or other financial performance measures, operating statistics or results of operations (it being understood
that the facts or occurrences giving rise to or contributing to such failure that are not otherwise excluded from the definition
of “Company Material Adverse Effect” may be taken into account in determining whether there has been a Company Material
Adverse Effect); |
| 7. | natural or man-made disasters, acts of sabotage or terrorism, declarations, outbreaks or escalations of war or major hostilities,
or other force majeure events; |
| 8. | changes in the market price or trading volume of ordinary shares of the Company or ADSs (it being understood that the facts
or occurrences giving rise to or contributing to such changes that are not otherwise excluded from the definition of “Company
Material Adverse Effect” may be taken into account in determining whether there has been a Company Material Adverse Effect);
or |
| 9. | any acts or omissions of the Company or any of its subsidiaries taken, directly or indirectly, at the direction or request
of, or with the consent of, Parent or any officer or director of Parent, or at the request of Parent, |
provided that the facts, events, circumstances, developments,
conditions, changes, occurrences or effects set forth in clauses (1), (2), (3), (4) and (7) above may be taken into account in
determining whether a “Company Material Adverse Effect” has occurred or reasonably would be expected to occur if and
to the extent such facts, events, circumstances, developments, conditions, changes, occurrences or effects individually or in the
aggregate have a materially disproportionate impact on the Company and its subsidiaries, taken as a whole, relative to the other
participants in the industries in which the Company and its subsidiaries conduct their businesses.
The representations and warranties made
by Parent and Merger Sub to the Company include representations and warranties relating to, among other things:
| · | their due organization, existence and good standing and authority to carry on their businesses; |
| · | their memorandum and articles of association being in full force and effect; |
| · | their corporate power and authority to execute, deliver and perform their obligations under the Merger Agreement and to consummate
the Transactions, and the enforceability of the Merger Agreement against them; |
| · | the absence of violations of, or conflicts with, the governing documents of Parent or Merger Sub, laws applicable to Parent
or Merger Sub and certain agreements of Parent or Merger Sub as a result of Parent and Merger Sub entering into and performing
under the Merger Agreement and consummating the Transactions; |
| · | governmental consents and approvals in connection with performance under the Merger Agreement and the Transactions; |
| · | the absence of any secured creditors of Merger Sub; |
| · | capitalization of Parent and Merger Sub, Parent ownership of Merger Sub and the operations of Parent and Merger Sub; |
| · | sufficiency of funds in the financing to pay the Merger Consideration and any other amounts required to be paid in connection
with the consummation of the Transactions; |
| · | the absence of any undisclosed broker’s or finder’s fees; |
| · | the validity of the Limited Guarantees and the lack of any default thereunder; |
| · | the absence of legal proceedings against Parent or Merger Sub or any of their respective affiliates; |
| · | the absence of undisclosed ordinary shares of the Company or other securities of, any rights to acquire the ordinary shares
of the Company or other securities of, or any other economic interest in, the Company, beneficially owned by Parent or Merger Sub; |
| · | solvency of the Surviving Corporation immediately after giving effect to the Transactions; |
| · | the absence of certain agreements or arrangements among (a) Parent, Merger Sub, any Rollover Shareholder, any Sponsor or any
of their respective affiliates or (b) Parent, Merger Sub, any Rollover Shareholder, any Sponsor or any of their respective affiliates,
on the one hand, and any member of the Board, member of the Company’s management or a shareholder of the Company, on the
other hand; and |
| · | independent investigation conducted by Parent and Merger Sub of the business, operations, assets, liabilities, results of operations,
financial condition and prospects of the Company and its subsidiaries. |
Conduct of Business Prior to Closing
Under the Merger Agreement, the Company
has agreed that, subject to certain exceptions, from the date of the Merger Agreement until the Effective Time: (a) the businesses
of the Company and its subsidiaries will be conducted in the ordinary course of business and in a manner consistent with past practice;
and (b) the Company and each of its subsidiaries will use their reasonable best efforts to preserve intact their existing assets
in all material respects, preserve substantially intact their business organization, keep available the services of their current
officers and key employees, and maintain and preserve intact in all material respects their current relationships with customers,
suppliers and distributors with which the Company or any of its subsidiaries has material business relations.
In addition, from the date of the Merger
Agreement until the Effective Time, without the prior written consent of Parent, the Company will not, and will not permit any
of its subsidiaries to, among other things:
| · | amend its organizational or governing documents; |
| · | other than in connection with the exercise of any Company Options, Company Restricted Shares or Company RSUs under the Company’s
share incentive plans, issue, sell, pledge, terminate or dispose of, or grant a lien on or permit a lien to exist on (or authorize
any of the foregoing with respect to): (a) any share capital or other ownership interests of the Company or any of its subsidiaries,
or any agreement, contract or instrument amounting to control over, or enabling control of, the Company or any of its subsidiaries,
or (b) any options, warrants, convertible securities or other rights of any kind to acquire any share capital or other ownership
interest (including any phantom interest) of the Company or any of its subsidiaries; |
| · | (a) sell, pledge or dispose of, (b) grant a lien on or permit a lien to exist on, or (c) authorize the sale, pledge or disposition
of, or granting or placing of a lien on, any assets of the Company or any of its subsidiaries having a current value in excess
of US$50,000,000, except in the ordinary course of business and in a manner consistent with past practice; |
| · | declare, set aside, make or pay any dividend or other distribution, payable in cash, shares, property or otherwise, with respect
to any of its share capital, except for dividends by any of the Company’s direct or indirect wholly owned subsidiaries to
the Company or any of its other wholly owned subsidiaries; |
| · | adjust, reclassify, combine, split, subdivide or redeem, or purchase or otherwise acquire, directly or indirectly, any of its
share capital, in each case other than in connection with an acquisition in connection with the forfeiture of Company Options,
Company Restricted Shares or Company RSUs or an acquisition in connection with the net exercise of Company Options in accordance
with the terms thereof; |
| · | (a) acquire (including by merger, consolidation or acquisition of shares or assets or any other business combination) any corporation,
partnership, other business organization or any division thereof or any assets, except for any such acquisitions for consideration
not exceeding US$50,000,000; (b) incur any indebtedness or issue any debt securities or assume, guarantee or endorse, or otherwise
become responsible for, the obligations of any person, or make any loans or advances or capital contribution to, or investment
in, any person, except (i) for indebtedness the outstanding amount of which (after deducting the aggregate amount of cash and cash
equivalents held by the Company and its subsidiaries) does not exceed US$200,000,000 or its equivalent in the aggregate for the
Company and its subsidiaries or (ii) under the Company’s or any of its subsidiaries’ existing credit facilities as
in effect on the date hereof in an aggregate amount not to exceed the maximum amount authorized under the contracts evidencing
such indebtedness (including any renewal, extension, refinancing or replacement of such contracts on substantially the same or
similar terms); (c) authorize, or make any commitment with respect to, any single capital expenditure which is in excess of
US$10,000,000 or capital expenditures which are, in the aggregate, in excess of US$50,000,000 for the Company and its subsidiaries,
taken as a whole, other than expenditures necessary to maintain existing assets in good repair and working condition, consistent
with past practice; or (d) amend any contract to effect any matter set forth above; |
| · | establish any new subsidiary; |
| · | engage in the conduct of any new line of business material to the Company and its subsidiaries, taken as a whole, outside of
the Company’s existing business segments; |
| · | make any material changes with respect to accounting policies or procedures materially affecting the reported consolidated
assets, liabilities or results of operations of the Company and its subsidiaries, except as required by changes in applicable generally
accepted accounting principles or law; |
| · | settle any proceeding, other than settlements (a) in the ordinary course of business and consistent with past practice, (b)
requiring the Company and its subsidiaries to pay monetary damages not exceeding US$10,000,000, and (c) not involving the admission
of any wrongdoing by the Company or any of its subsidiaries; |
| · | enter into or materially amend or modify, terminate or consent to the termination of any material contract, or amend, waive,
modify, terminate or consent to the termination of the Company’s or any of its subsidiaries’ material rights thereunder,
other than in the ordinary course of business and consistent with past practice; |
| · | make or change any material tax election, materially amend any tax return (except as required by applicable law), enter into
any material closing agreement with respect to taxes, surrender any right to claim a material refund of taxes, settle or finally
resolve any material controversy with respect to taxes or materially change any method of tax accounting; |
| · | (a) abandon, fail to maintain, or allow to lapse, including by failure to pay the required fees in any jurisdiction, or disclaim,
dedicate to the public, sell, assign or grant any security interest in, to or under any material intellectual property used in
or necessary to conduct the business of the Company and its subsidiaries; (b) grant to any third party any license, or enter into
any covenant not to sue, with respect to any such intellectual property, except non-exclusive licenses in the ordinary course of
business consistent with past practice; (c) develop, create or invent any intellectual property jointly with any third party, except
under existing arrangements or in the ordinary course of business; (d) disclose or allow to be disclosed any material confidential
information or material confidential intellectual property used in or necessary to conduct the business of the Company and its
subsidiaries to any person, other than employees of the Company or its subsidiaries that are subject to a confidentiality or non-disclosure
covenant protecting against further disclosure thereof, except under existing arrangements or in the ordinary course of business
consistent with past practice; or (e) fail to notify Parent promptly of any material infringement, misappropriation, unauthorized
disclosure or other violation of or conflict with any material intellectual property used in or necessary to conduct the business
of the Company and its subsidiaries of which the Company or any of its subsidiaries becomes aware and to reasonably consult with
Parent regarding the actions (if any) to take to protect such intellectual property; |
| · | except as required pursuant to existing written plans or contracts in effect as of the date hereof, or as otherwise required
by applicable law or carried out in the ordinary course of business consistent with past practice, (a) enter into any new employment
or compensatory agreements (including the renewal of any consulting agreement) with any executive officer or director of the Company
or any of its wholly owned subsidiaries; (b) increase the compensation, bonus or pension, welfare, severance or other benefits
of, pay any bonus to, or make any new equity awards to any director, employee or consultant of the Company or any of its subsidiaries;
(c) establish, adopt, materially amend or terminate any material benefit or compensation plan (except as required by law)
or materially amend the terms of any outstanding equity-based awards (except as contemplated by the Merger Agreement); (d) take
any action to accelerate the vesting or payment, or fund or in any other way secure the payment, of material compensation or benefits
under any benefit or compensation plan, to the extent not already required in any such plan or contemplated by the Merger Agreement;
(e) materially change any actuarial or other assumptions used to calculate funding obligations with respect to any employee benefit
or compensation plan or to materially change the manner in which contributions to such plans are made or the basis on which such
contributions are determined, except as may be required by U.S. GAAP; (f) forgive any loans to directors, officers or employees
of the Company or any of its subsidiaries; or (g) enter into any collective bargaining agreement or similar labor agreement; |
| · | fail to keep in force material insurance policies providing insurance coverage with respect to the assets, operations and activities
of the Company or any of its subsidiaries as are currently in effect; |
| · | take any action that is intended, or would reasonably be expected, to result in any of the conditions to the closing of the
Merger not being satisfied; |
| · | fail to make in a timely manner any filings with the SEC required under the Securities Act of 1933, as amended, or the Exchange
Act, or the rules and regulations promulgated thereunder; or |
| · | agree, authorize, commit, or enter into any formal agreement to do any of the foregoing. |
No Solicitation of Competing Transactions
The Company has agreed that, until the
earlier of the Effective Time or the termination of the Merger Agreement, neither it nor any of its subsidiaries will, and the
Company will instruct and cause its and its subsidiaries’ representatives not to, directly or indirectly:
| · | solicit, initiate or purposefully encourage (including by way of furnishing nonpublic information concerning the Company or
any of its subsidiaries), or take any other action to purposefully facilitate, any inquiries or the making of any proposal or offer
that constitutes, or that in the Company’s good-faith judgment could reasonably be expected to lead to, any Competing Transaction; |
| · | enter into, maintain or continue discussions or negotiations with, or provide any non-public information concerning the Company
or any of its subsidiaries to, any third party in furtherance of such inquiries or to obtain such a proposal or offer for a Competing
Transaction, or that in the Company’s good-faith judgment could reasonably be expected to lead to a Competing Transaction; |
| · | agree to, approve, endorse, recommend or consummate any Competing Transaction or enter into any letter of intent or contract
(other than a confidentiality agreement that contains provisions that are no less favorable in the aggregate to the Company than
those contained in the existing confidentiality agreements between the Company and each of the Sponsors, which does not include
any provisions calling for any exclusive right to negotiate with such party or having the effect of prohibiting the Company from
satisfying its obligations under the Merger Agreement), or commitment contemplating or otherwise relating to any Competing Transaction; |
| · | grant any waiver, amendment or release under any standstill, confidentiality or similar agreement or anti-takeover law (and
the Company will promptly take all action necessary to terminate or cause to be terminated any such waiver previously granted with
respect to any provision of any such confidentiality, standstill or similar agreement or anti-takeover law and to enforce each
such confidentiality, standstill and similar agreement); or |
| · | authorize or permit any of the representatives of the Company or any of its subsidiaries to do any of the foregoing. |
As used herein and for purposes of the
Merger Agreement, a “Competing Transaction” means any of the following (other than the Transactions): (a) any
merger, consolidation, share exchange, business combination, scheme of arrangement, amalgamation, recapitalization, liquidation,
dissolution or other similar transaction involving the Company or any of its subsidiaries whose assets, individually or in the
aggregate, constitute 15% or more of the consolidated assets of the Company or to which 15% or more of the total revenue or net
income of the Company are attributable; (b) any sale, lease, exchange, transfer or other disposition of assets or businesses
that constitute or represent 15% or more of the total revenue, net income or assets of the Company and its subsidiaries, taken
as a whole; (c) any sale, exchange, transfer or other disposition of 15% or more of any class of equity securities of the
Company, or securities convertible into or exchangeable for 15% or more of any class of equity securities of the Company; (d) any
tender offer or exchange offer that, if consummated, would result in any person beneficially owning 15% or more of any class of
equity securities of the Company; or (e) any combination of the foregoing.
The Company has agreed to notify Parent
as promptly as practicable (and in any event within two business days after the Company has knowledge thereof) of any proposal
or offer, or any inquiry or contact with any person, regarding a Competing Transaction or that in the Company’s good-faith
judgment could reasonably be expected to lead to a Competing Transaction, specifying the material terms and conditions thereof
(including material amendments or proposed material amendments) and the identity of the party making such proposal or offer or
inquiry or contact, and providing copies of any written requests, proposals or offers, including proposed amendments, if applicable.
The Company must also keep Parent informed, on a reasonably current basis (and in any event within two business days of the occurrence
of any material changes, developments, discussions or negotiations), of the status and the terms of any such proposal, offer, inquiry,
contact or request and of any material changes in the status and terms of any such proposal, offer, inquiry, contact or request
(including the material terms and conditions thereof). The Company is required to provide Parent with 24 hours’ prior notice
(or such lesser prior notice as is provided to the directors of the Company or members of the Special Committee) of any meeting
of the Board or Special Committee at which the Board or the Special Committee, as applicable, is reasonably expected to consider
any Competing Transaction.
The Company has agreed (a) to immediately
cease and terminate all existing discussions or negotiations with any parties conducted as of the date of the Merger Agreement
with respect to a Competing Transaction and (b) not to, and will cause its subsidiaries not to, enter into any confidentiality
agreement with any third party subsequent to the date of the Merger Agreement that prohibits the Company from providing the information
discussed above to Parent.
Notwithstanding the above, prior to receipt
of the affirmative vote of shareholders holding two-thirds or more of the voting power represented by the ordinary shares of the
Company present and voting in person or by proxy as a single class at the extraordinary general meeting in favor of the Merger
Agreement and the Merger (the “Requisite Company Vote”), following the receipt of an unsolicited, written, bona
fide proposal or offer regarding a Competing Transaction that was not obtained in violation of the Company’s “no-shop”
obligations under the Merger Agreement described above (other than any immaterial non-compliance that does not adversely affect
Parent or Merger Sub), the Company and its representatives may, acting under the recommendation of the Special Committee (a) contact
the person who has made such proposal or offer to clarify and understand the terms and conditions thereof to the extent the Special
Committee has determined in good faith that such contact is necessary to determine whether such proposal or offer constitutes a
Superior Proposal (as defined below) or could reasonably be expected to result in a Superior Proposal; (b) provide information
in response to the request of the person who has made such proposal or offer if such person has executed an acceptable confidentiality
agreement satisfying the requirements of the Merger Agreement (provided that the Company will concurrently make available to Parent
any information concerning the Company and its subsidiaries that is provided to any such person and that was not previously made
available to Parent or its representatives); and (c) engage or participate in any discussions or negotiations with such person.
In each such case referred to in clauses (b) and (c) above, the Board (acting only upon recommendation of the Special
Committee) or the Special Committee must have (i) determined, in its good-faith judgment, after consultation with its financial
advisor and outside legal counsel that such proposal or offer constitutes or could reasonably be expected to result in a Superior
Proposal, (ii) determined, in its good-faith judgment, after consultation with its financial advisor and outside legal counsel,
that, in light of such Superior Proposal, failure to take such action would be inconsistent with its fiduciary duties under applicable
law, and (iii) provided written notice to Parent at least two business days prior to taking any such action.
As used herein and for purposes of the
Merger Agreement, a “Superior Proposal” means a bona fide written proposal or offer with respect to a Competing
Transaction, which was not obtained in violation of the Company’s “no-shop” obligations under the Merger Agreement
described above, that would result in any person (or its shareholders, members or other equity owners) becoming the beneficial
owner, directly or indirectly, of more than 50% of the assets (on a consolidated basis), or more than 50% of the total voting power
of the equity securities, of the Company that the Board (acting only upon the recommendation of the Special Committee) or the Special
Committee has determined in its good-faith judgment (after consultation with its financial advisor and outside legal counsel)
(a) is reasonably likely to be consummated in accordance with its terms without significant delay, taking into account all
legal, financial and regulatory aspects of the proposal (including financing, regulatory or other consents and approvals, shareholder
litigation, the identity of the person making the proposal, breakup or termination fee and expense reimbursement provisions, expected
timing, risk and likelihood of consummation and other relevant events and circumstances) and (b) would, if consummated, result
in a transaction more favorable to the Company’s shareholders (other than the Rollover Shareholders) from a financial point
of view than the Transactions; provided that no offer or proposal will be deemed to be a “Superior Proposal” if any
financing required to consummate the transaction contemplated by such offer or proposal is not fully committed or if the receipt
of any such financing is a condition to the consummation of such transaction, or if the Company’s recourse in the event such
transaction is not consummated because of the failure to obtain financing is less favorable to the Company in any material respect
than the Company’s recourse in such an event under the Merger Agreement.
No Change of Recommendation
The Board, acting upon the unanimous recommendation
of the Special Committee, has unanimously resolved to recommend in favor of the authorization and approval of the Merger Agreement,
the Plan of Merger and the consummation of the Transactions, including the Merger, to the shareholders of the Company. Under the
terms of the Merger Agreement, neither the Board nor any committee of the Board may:
| · | (a) change, withhold, withdraw, qualify or modify (or publicly propose to do so), in a manner adverse to Parent or Merger Sub,
the Board’s recommendation in favor of the proposal to authorize and approve the Merger Agreement, the Plan of Merger and
the Transactions (which is referred to as the “Company Recommendation”); (b) fail to include the Company Recommendation
in this proxy statement; (c) adopt, approve or recommend (or publicly propose to do so) a Competing Transaction to the Company’s
shareholders; (d) if a tender offer or exchange offer that constitutes a Competing Transaction is commenced, fail to publicly
recommend against acceptance of such tender offer or exchange offer by the Company shareholders (including, for these purposes,
by disclosing that it is taking no position with respect to the acceptance of such tender offer or exchange offer by its shareholders,
provided that a customary “stop, look and listen” communication by the Board or a statement that the Board has received
and is currently evaluating such Competing Transaction will not be prohibited or be deemed to be a Change in the Company Recommendation)
within 10 business days after the commencement thereof; (e) fail to recommend against any Competing Transaction subject to
Regulation 14D under the Exchange Act in a Solicitation/Recommendation Statement on Schedule 14D-9 within 10 business days after
the commencement thereof; or (f) fail to publicly reaffirm the Company Recommendation following any Competing Transaction having
been publicly made, proposed or communicated (and not publicly withdrawn) within 10 business days after Parent so requests in writing
(any of the foregoing is referred to as a “Change in the Company Recommendation”); or |
| · | cause or permit the Company or any of its subsidiaries to enter into any letter of intent, memorandum of understanding, agreement
in principle, merger agreement, acquisition agreement or other or similar document or contract with respect to any Competing Transaction,
other than an acceptable confidentiality agreement satisfying the requirements of the Merger Agreement (which is referred to as
an “Alternative Acquisition Agreement”). |
If, however, from the date of the Merger
Agreement and prior to obtaining the Requisite Company Vote, the Company receives a bona fide written proposal or offer
with respect to a Competing Transaction that was not obtained in violation of the “no-shop” obligations under the Merger
Agreement described above (other than any immaterial non-compliance that does not adversely affect Parent or Merger Sub) and the
Board (acting only upon the recommendation of the Special Committee) or the Special Committee determines in its good-faith judgment
(after consultation with its financial advisor and outside legal counsel) that such proposal or offer constitutes a Superior Proposal
and failure to make a Change in the Company Recommendation with respect to such Superior Proposal would be inconsistent with its
fiduciary duties under applicable law, the Board (acting only upon the recommendation of the Special Committee) or the Special
Committee (to the extent it is within the authority of the Special Committee) may effect a Change in the Company Recommendation
and/or authorize the Company to enter into an Alternative Acquisition Agreement with respect to the Superior Proposal, but only:
| · | if the Company has complied with the “no-shop” obligations under the Merger Agreement with respect to such proposal
or offer; |
| · | after providing at least five business days’ written notice to Parent advising Parent that the Board or the Special Committee,
as applicable, has received a Superior Proposal, specifying the material terms and conditions of such Superior Proposal (and providing
any proposed agreements related thereto), identifying the person making such Superior Proposal and indicating that the Board or
the Special Committee (to the extent it is within the authority of the Special Committee), as applicable, intends to effect a Change
in the Company Recommendation and the manner in which it intends (or may intend) to do so; |
| · | after negotiating with and causing its financial and legal advisors to negotiate with Parent, Merger Sub and their respective
representatives in good faith (to the extent Parent desires to negotiate) to make such adjustments in the terms and conditions
of the Merger Agreement and the equity financing, so that such third-party proposal or offer would cease to constitute a Superior
Proposal, and permitting Parent and its representatives to make a presentation to the Board and the Special Committee regarding
the Merger Agreement, the equity financing and any adjustments with respect thereto (to the extent Parent desires to make such
presentation); provided that any material modifications to a third-party proposal or offer that the Board or the Special Committee,
as applicable, has determined to be a Superior Proposal will be deemed a new Superior Proposal for which the Company must comply
with the notice and other obligations described above; provided further, that with respect to such new Superior Proposal, the notice
period will be deemed to be a three business day period; and |
| · | following the end of such five business day period or three business day period (as applicable), the Board (acting only upon
the recommendation of the Special Committee) or the Special Committee has determined in its good-faith judgment (after consultation
with its financial advisor and outside legal counsel), taking into account any changes to the Merger Agreement and the equity financing
proposed by Parent and Merger Sub in response to the notice of Superior Proposal or otherwise, that the proposal or offer with
respect to the Competing Transaction giving rise to the notice of Superior Proposal continues to constitute a Superior Proposal. |
In addition, the Company has agreed not
to enter into any agreement with respect to a Superior Proposal unless the Company has concurrently paid to Parent the termination
fee as described in further detail in “—Termination Fee and Reimbursement of Expenses” beginning on page [
].
The Board (acting upon the recommendation
of the Special Committee) or the Special Committee may also effect a Change in the Company Recommendation if, from the date of
the Merger Agreement and prior to obtaining the Requisite Company Vote, an Intervening Event (as defined below) occurs and the
Board or the Special Committee, as applicable, determines in its good-faith judgment upon advice of outside legal counsel engaged
by the Special Committee that the failure to take such action would reasonably be expected to breach its fiduciary duties under
applicable law.
As used herein and for purposes of the
Merger Agreement, an “Intervening Event” means a material event, development or change with respect to the Company
and its subsidiaries or the business of the Company and its subsidiaries that (a) is unknown by the Board and the Special
Committee as of or prior to the date of the Merger Agreement and (b) occurs, arises or becomes known to the Board or the Special
Committee after the date of the Merger Agreement and on or prior to the receipt of the Requisite Company Vote; provided that the
receipt by the Company of a Competing Transaction or Superior Proposal will not be deemed to constitute an Intervening Event.
Shareholders Meeting
The Company has agreed that unless the
Merger Agreement is terminated (a) the Company will duly convene and cause to occur within 30 days after the date of the mailing
of this proxy statement to the Company’s shareholders an extraordinary general meeting for the purpose of obtaining shareholder
authorization and approval of the Merger Agreement, the Plan of Merger and the Transactions, including the Merger; (b) the Board
will recommend that the Company’s shareholders vote to authorize and approve the Merger Agreement, the Plan of Merger and
the Transactions (unless, as described in “—No Change of Recommendation” on page [ ], a Change in Company
Recommendation has occurred) and such recommendation will be included this proxy statement; and (c) the Company will use its reasonable
best efforts to solicit from its shareholders proxies in favor of the proposal to authorize and approve the Merger Agreement, the
Plan of Merger and the Transactions, and take all other actions necessary or advisable to secure the required shareholder authorization
and approval.
The Company may, after consultation in
good faith with Parent, recommend the adjournment of the extraordinary general meeting to its shareholders: (a) to the extent
necessary to ensure that any required supplement or amendment to this proxy statement is provided to the holders of ordinary shares
of the Company within a reasonable amount of time in advance of the extraordinary general meeting; (b) as otherwise required
by applicable law; (c) if as of the time for which the extraordinary general meeting is scheduled as set forth in this proxy
statement, there are insufficient ordinary shares of the Company represented (in person or by proxy) to constitute a quorum necessary
to conduct the business of the extraordinary general meeting; or (d) if an Intervening Event has occurred and the Board (acting
upon the recommendation of the Special Committee) or the Special Committee determines, in its good-faith judgment upon advice by
outside legal counsel engaged by the Special Committee, that the failure to take such action would reasonably be expected to breach
its fiduciary duties under applicable law. If the extraordinary general meeting is adjourned, the Company will convene and hold
the extraordinary general meeting as soon as reasonably practicable thereafter, subject to the immediately preceding sentence;
provided that the Company will not recommend to its shareholders the adjournment of the extraordinary general meeting to a date
that is less than five business days prior to the October 3, 2015 (the “Termination Date”).
Parent may request that the Company adjourn
or postpone the extraordinary general meeting for up to 90 days (but in any event no later than five business days prior to the
Termination Date) (a) if as of the time for which the extraordinary general meeting is originally scheduled (as set forth
in this proxy statement) there are insufficient ordinary shares of the Company represented (either in person or by proxy) (i) to
constitute a quorum necessary to conduct the business of the extraordinary general meeting or (ii) voting in favor of approval
of the Merger Agreement, the Plan of Merger and the Transactions to obtain the Requisite Company Vote in favor of the Merger Agreement,
the Plan of Merger and the Transactions; or (b) in order to allow reasonable additional time for (i) the filing and mailing
of, at the reasonable request of Parent, any supplemental or amended disclosure and (ii) such supplemental or amended disclosure
to be disseminated and reviewed by the Company’s shareholders prior to the extraordinary general meeting, in which event
the Company will, in each case, cause the extraordinary general meeting to be adjourned in accordance with Parent’s request.
Indemnification; Directors’ and Officers’ Insurance
Pursuant to the Merger Agreement, Parent
and Merger Sub have agreed that:
| · | The indemnification, advancement and exculpation provisions of certain indemnification agreements by and among the Company
and its directors and certain executive officers, as in effect at the Effective Time, will survive the Merger and may not be amended,
repealed or otherwise modified for a period of six years from the Effective Time in any manner that would adversely affect the
rights thereunder of the current or former directors or officers of the Company or any of its subsidiaries. |
| · | The memorandum and articles of association of the Surviving Corporation will contain provisions no less favorable to the directors,
officers or employees of the Company with respect to exculpation and indemnification of liability and advancement of expenses than
are set forth in the memorandum and articles of association of the Company as in effect on the date of the Merger Agreement, which
provisions will not be amended, repealed or otherwise modified for a period of six years from the Effective Time in any manner
that would affect adversely the rights thereunder of individuals who, at or prior to the Effective Time, were directors, officers,
employees, fiduciaries or agents of the Company, unless such modification is required by law. |
| · | The Surviving Corporation will, and Parent will cause the Surviving Corporation to, maintain in effect for six years from the
Effective Time the current directors’ and officers’ liability insurance policies maintained by the Company with respect
to matters occurring prior to the Effective Time on terms with respect to coverage and amount no less favorable to the indemnified
parties than the existing insurance; provided that the Surviving Corporation will not be required to expend in any one year an
amount in excess of 300% of the current annual premium paid by the Company for such insurance. If the annual premium for such insurance
exceeds 300% of the current annual premium paid by the Company for such insurance, the Surviving Corporation must obtain a policy
with the greatest coverage for a cost not exceeding such amount. In addition, the Company may and, at Parent’s request, the
Company will, purchase a six-year “tail” prepaid policy prior to the Effective Time on terms, conditions, retentions
and limits of liability no less advantageous to the indemnified parties than the existing directors’ and officers’
liability insurance maintained by the Company. If a “tail” prepaid policy has been obtained by the Company prior to
the closing of the Merger, the Surviving Corporation will (and Parent will cause the Surviving Corporation to) maintain the policy
in full force and effect, and continue to honor the obligations thereunder. |
| · | From and after the Effective Time, the Surviving Corporation
will (and Parent will cause the Surviving Corporation to) comply with all of the Company’s obligations and cause its subsidiaries
to comply with their respective obligations to indemnify and hold harmless (including obligations to advance funds or expenses):
(a) the indemnified parties against all kinds of Damages (as defined in the Merger Agreement) arising out of, relating to
or in connection with (i) the fact that such party is or was a director, officer or employee of the Company or any of its
subsidiaries, or (ii) any acts or omissions occurring or alleged to have occurred prior to or at the Effective Time to the
extent provided under the Company’s or its subsidiaries’ respective organizational and governing documents or agreements
in effect on the date of the Merger Agreement and to the fullest extent permitted by the Cayman Islands Companies Law or any other
applicable law, and (b) such persons against all kinds of damages arising out of acts or omissions in such person’s
official capacity as an officer, director or other fiduciary of the Company or any of its subsidiaries if such service was at
the request or for the benefit of the Company or any of its subsidiaries. |
| · | Upon being served with any summons, citation, subpoena,
complaint, indictment, information, or other document relating to any proceeding which may result in the payment or advancement
of any amounts described above, the organizational and governing documents of the Company or any of its subsidiaries, or any existing
indemnification agreements, the person seeking indemnification must notify the Surviving Corporation no later than the earlier
of (a) five days after actual receipt, and (b) as soon as necessary after actual receipt to prevent the Surviving Corporation
or any of its subsidiaries from being materially and adversely prejudiced by late notice. The surviving company (or a subsidiary
nominated by it) will have the right to participate in any such proceeding and, at its option, assume the defense of such proceeding.
The person seeking indemnification will have the right to effectively participate in the defense and/or settlement of such proceeding,
including receiving copies of all correspondence and participating in all meetings and teleconferences concerning the proceeding.
In the event the Surviving Corporation (or a subsidiary nominated by it) assumes the defense of any proceeding, neither the Surviving
Corporation nor any of its subsidiaries will be liable to the person seeking indemnification for any fees of counsel subsequently
incurred by such person with respect to the same proceeding. |
Financing
As of the date of the Merger Agreement,
Parent has delivered to the Company true and complete copies of the executed Equity Commitment Letters from the Sponsors, pursuant
to which each of the Sponsors committed to purchase, or cause the purchase of, for cash, subject to the terms and conditions therein,
equity securities of Parent in the aggregate amount set forth therein.
Each of Parent and Merger Sub will use
their reasonable best efforts to (a) obtain the equity financing for the Merger on the terms and conditions described in the equity
commitment letters; (b) maintain in effect the equity commitment letters until the Transactions are consummated; (c) satisfy
all conditions in the equity commitment letters that are within its control on a timely basis; (d) consummate the equity financing
at or prior to the Effective Time; and (e) enforce the funding obligations under the equity commitment letters.
Parent and/or Merger Sub may amend or modify
the equity commitment letters so long as (a) the aggregate proceeds of the equity financing will be sufficient for Parent
and the Surviving Corporation to pay (i) the Merger Consideration and (ii) any other amounts required under the Merger Agreement
to be paid in connection with the consummation of the Transactions and (b) such amendment or modification would not prevent,
materially delay or materially impede or impair (i) the ability of Parent and Merger Sub to consummate the Transactions or (ii)
the rights and benefits of the Company under the equity commitment letters. Parent will deliver to the Company true and complete
copies of such amendment or modification as promptly as practicable after its execution. In the event any portion of the equity
financing becomes unavailable on the terms and conditions of the equity commitment letters, Parent will promptly notify the Company.
Parent and Merger Sub have agreed not to
amend, modify or waive any provision of the equity commitment letters, if such amendment, modification or waiver reduces (or would
reduce) the aggregate amount of the equity financing or impose new or additional conditions that would be expected to prevent or
materially delay or otherwise materially and adversely affect the ability of Parent or Merger Sub to consummate the Transactions.
Parent will give the Company prompt notice (a) upon becoming aware of any breach of any material provision of the equity commitment
letters or termination of any such equity commitment letter or (b) upon the receipt of any written notice from any party to an
equity commitment letter with respect to any threatened breach of any material provision of the equity commitment letters or threatened
termination of any such equity commitment letters.
Agreement to Use Reasonable Best Efforts
The parties (and their respective representatives)
to the Merger Agreement have agreed to coordinate with one another and use reasonable best efforts to take all appropriate actions
and do all things necessary, proper or advisable to consummate and make effective the Transactions; provided that no party will
be required to take any action if such action would have a Company Material Adverse Effect.
Certain Additional Covenants
Pursuant to the terms of the Merger Agreement,
the Company, Parent and Merger Sub have agreed to certain additional covenants related to the following:
| · | the filing of this proxy statement and the Schedule 13E-3 with the SEC (and cooperation in response to any comments from the
SEC); |
| · | access by Parent and its authorized representatives to the offices, properties, books and records of the Company or any of
its subsidiaries and other information between the date of the Merger Agreement and the earlier of the Effective Time and termination
of the Merger Agreement (subject to all applicable legal or contractual obligations and restrictions); |
| · | notification of certain events; |
| · | for Parent to take all action necessary to cause Merger Sub to perform its obligations under the Merger Agreement and to consummate
the Transactions; |
| · | participation in the defense and settlement of any shareholder litigation relating to the Merger Agreement or the Transactions; |
| · | delivery to Parent of the resignation of the directors of the Company or any of its subsidiaries designated by Parent on the
closing date of the Merger; |
| · | consultation with respect to press releases and other public announcements relating to the Merger Agreement and the Transactions; |
| · | delisting by the Surviving Corporation from the NASDAQ and the de-registration of the Class A ordinary shares and ADSs under
the Exchange Act as promptly as practicable after the Effective Time; |
| · | elimination or minimization of the effects of certain takeover statutes; |
| · | for the Company, using its commercially reasonable efforts to assist in the preparation of applications to the State Administration
of Foreign Exchange (“SAFE”) and causing its PRC subsidiaries (to the extent applicable) to comply with the requirements
of SAFE rules; and |
| · | restrictions on Parent, Merger Sub and the Parent Group (as defined in the Merger Agreement) entering into or amending, modifying,
withdrawing or terminating contracts with the Parent Group or any contract pursuant to which any management members, directors
or shareholders of the Company, or any of their respective affiliates receives any consideration or other economic value from any
person in connection with the Transactions that is not provided or expressly contemplated in existing contracts as of the date
of the Merger Agreement. |
Conditions to the Merger
The obligations of the Company, Parent
and Merger Sub to consummate the Merger are subject to the satisfaction or waiver of the following mutual conditions:
| · | the Merger Agreement, the Plan of Merger and the Transactions being authorized and approved by the holders of ordinary shares
of the Company constituting the Requisite Company Vote at the extraordinary general meeting; and |
| · | no governmental
authority of competent jurisdiction having enacted, issued, promulgated, enforced or
entered any law or award, writ, injunction, determination, rule, regulation, judgment,
decree or executive order, whether temporary, preliminary or permanent, that is in effect
and has or would have the effect of enjoining, restraining, prohibiting or otherwise
making illegal the consummation of the Transactions, and the consummation of the Transactions
not being subject to any requirement to obtain any regulatory approval under the Anti-monopoly
Law of the PRC. |
The obligations of Parent and Merger Sub
to consummate the Merger are also subject to the satisfaction, or waiver, of the following conditions:
| · | (a) representations and warranties of the Company in the Merger Agreement regarding the Company’s power and authority
to enter into the Merger Agreement and consummate the Transactions, the Board’s determination and recommendation with respect
to the Merger, and the vote required in connection with the Merger being true and correct in all material respects; (b) representations
and warranties of the Company in the Merger Agreement regarding the Company’s capitalization being true and correct in all
but de minimis respects; and (c) each of the other representations and warranties of the Company set forth in the Merger
Agreement being true and correct in all respects as of the date of the Merger Agreement and as of the closing date of the Merger,
as if made on such date and time, in each case without giving effect to any qualification as to “materiality” or “Company
Material Adverse Effect;” except in the case of (c) above, where the failure of such representations and warranties to be
true and correct would not constitute a Company Material Adverse Effect; |
| · | the Company having performed or complied in all material respects with all agreements and covenants required by the Merger
Agreement to be performed or complied with by it on or prior to the closing date of the Merger; |
| · | since the date of the Merger Agreement, there not having occurred a Company Material Adverse Effect; |
| · | the Company having delivered to Parent a certificate, dated the closing date of the Merger, signed by a senior executive officer
of the Company, certifying as to the satisfaction of the above conditions; and |
| · | the holders of no more than 10% of the ordinary shares of the Company having validly exercised dissenters’ rights under
the Cayman Islands Companies Law. |
The obligations of the Company to consummate
the Merger are also subject to the satisfaction, or waiver by the Company, of the following conditions:
| · | the representations and warranties of Parent and Merger Sub in the Merger Agreement (without giving effect to
qualification by “materiality”) being true and correct in all respects as of the date of the Merger Agreement and
as of the closing date of the Merger, as if made on and at such date and time (other than representations and warranties that
by their terms address matters only as of such a specified other time, which must be true and correct as of such time),
except where the failure of such representations and warranties to be true and correct, individually or in the aggregate,
have not, and would not reasonably be expected to, prevent, materially delay or materially impede or impair the ability of
Parent and Merger Sub to consummate any of the Transactions; |
| · | each of Parent and Merger Sub having performed or complied in all material respects with all covenants and agreements required
to be performed or complied with by it under the Merger Agreement prior to or on the closing date of the Merger; and |
| · | Parent having delivered to the Company a certificate, dated the closing date of the Merger, signed by an executive officer
of Parent, certifying as to the fulfillment of the above conditions. |
Termination of the Merger Agreement
The Merger Agreement may be terminated
at any time prior to the Effective Time:
| · | by mutual written consent of the Company and Parent with the approval of their respective boards of directors (or in the case
of the Company, acting upon the recommendation of the Special Committee); |
| · | by either the Company (acting only upon the recommendation of the Special Committee) or Parent (provided that this termination
right is not available to the party whose failure to fulfill any of its obligations under the Merger Agreement has been a material
cause of, or resulted in, the failure of any applicable condition to the Merger being satisfied), if: |
| ○ | the Merger is not completed by the Termination Date (which is referred to as a “Termination Date Termination Event”); |
| ○ | any governmental authority of competent jurisdiction having enacted, issued, promulgated, enforced or entered any final and
non-appealable law or award, writ, injunction, determination, rule, regulation, judgment, decree or executive order or taken any
other final and non-appealable action that has the effect of making consummation of the Transactions illegal or otherwise prohibiting
consummation of the Transactions (which is referred to as a “Permanent Order Termination Event”); or |
| ○ | the Requisite Company Vote is not obtained at the extraordinary general meeting or any adjournment or postponement thereof
(which is referred to as a “No-Vote Termination Event”); |
| · | by the Company (acting only upon the recommendation of the Special Committee) at any time prior to the Effective Time, if: |
| ○ | Parent or Merger Sub has breached any of its representations, warranties, covenants or agreements under the Merger Agreement,
(a) such that the conditions to the obligations of the Company to complete the Merger would not be satisfied and such condition
is incapable of being satisfied by the Termination Date and (b) which breach is incapable of being cured or, if capable of
being cured, is not cured by Parent or Merger Sub, as applicable, within 30 days following receipt of written notice of such breach
from the Company (or, if the Termination Date is less than 30 calendar days from the date of receipt of such notice, by the Termination
Date); provided that the Company will not have the right to terminate if the Company is in material breach of any representations,
warranties, agreements or covenants that would give rise to the failure of a condition to the obligations of Parent and Merger
Sub to close the Merger (which is referred to as a “Parent and Merger Sub Breach Termination Event”); |
| ○ | (a) all of the conditions to the obligations of Parent and Merger Sub to consummate the Merger have been satisfied (other than
those conditions that by their nature are to be satisfied by actions taken at the closing of the Merger); (b) the Company
has delivered to Parent an irrevocable written notice confirming that all of the conditions to the obligation of the Company to
consummate the Merger have been satisfied (or that the Company is willing to waive any unsatisfied conditions) and that it is ready,
willing and able to consummate the closing of the Merger; and (c) Parent and Merger Sub fail to complete the closing of the
Merger within five business days following the date on which the closing of the Merger should have occurred pursuant to the Merger
Agreement (which is referred to as a “Parent and Merger Sub Failure to Close Termination Event”); or |
| ○ | prior to the receipt of the Requisite Company Vote, (a) the Board (acting only upon the recommendation of the Special
Committee) or the Special Committee (to the extent it is within the authority of the Special Committee) has authorized the Company
to enter into an Alternative Acquisition Agreement with respect to a Superior Proposal in accordance with the terms of the Merger
Agreement and (b) the Company concurrently with, or immediately after, the termination of the Merger Agreement enters into
an Alternative Acquisition Agreement with respect to such Superior Proposal; provided that the Company will not be entitled to
terminate the Merger Agreement unless the Company has (i) complied in all respects with the “no-shop” obligations
under the Merger Agreement with respect to such Superior Proposal and/or Alternative Acquisition Agreement (other than immaterial
non-compliance that does not adversely affect Parent or Merger Sub) and (ii) pays in full the Company termination fee prior
to or concurrently with taking any such action and complied in all respects with the Merger Agreement with respect to the payment
of the termination fee and reimbursement of expenses (which is referred to as a “Superior Proposal Termination Event”);
or |
| · | by Parent, at any time prior to the Effective Time, if: |
| ○ | the Company has breached any of its representations, warranties, covenants or agreements under the Merger Agreement, (a) such
that the conditions to the obligations of Parent and Merger Sub to complete the Merger would not be satisfied and such condition
is incapable of being satisfied by the Termination Date and (b) which breach is incapable of being cured or, if capable of
being cured, is not cured by the Company within 30 days following receipt of written notice of such breach from Parent or Merger
Sub (or, if the Termination Date is less than 30 calendar days from the date of receipt of such notice, by the Termination Date),
provided that Parent and Merger Sub are not in material breach of any representations, warranties, covenants or agreements that
would give rise to the failure of a condition to the obligations of the Company to close (which is referred to as a “Company
Breach Termination Event”); or |
| ○ | the Board or any committee of the Board has effected a Change in the Company Recommendation (which is referred to as a “Change
in the Company Recommendation Termination Event”). |
Termination Fee and Reimbursement of Expenses
The Company is required to pay Parent a
termination fee of US$57,250,000 in the event the Merger Agreement is terminated:
| · | by either the Company or Parent if (a) a bona
fide proposal or offer with respect to a Competing Transaction has been publicly made, proposed or communicated and not publicly
withdrawn after the date of the Merger Agreement and prior to the extraordinary general meeting (or prior to the termination of
the Merger Agreement if there has been no extraordinary general meeting); (b) following the occurrence of an event described
in the preceding clause, the Company or Parent terminates the Merger Agreement due to a Termination Date Termination Event or
No-Vote Termination Event; and (c) within 12 months after the termination of the Merger Agreement, the Company consummates
or enters into a definitive agreement in connection with any of the following transactions with a third party: (i) any merger,
consolidation, share exchange, business combination, scheme of arrangement, amalgamation, recapitalization, liquidation, dissolution
or other similar transaction involving the Company or any of its subsidiaries whose assets, individually or in the aggregate,
constitute 50% or more of the consolidated assets of the Company or to which 50% or more of the total revenue or net income of
the Company are attributable; (ii) any sale, lease, exchange, transfer or other disposition of assets or businesses that
constitute or represent 50% or more of the total revenue, net income or assets of the Company and its subsidiaries, taken as a
whole; (iii) any sale, exchange, transfer or other disposition of 50% or more of any class of equity securities of the Company,
or securities convertible into or exchangeable for 50% or more of any class of equity securities of the Company; (iv) any
tender offer or exchange offer that, if consummated, would result in any person beneficially owning 50% or more of any class of
equity securities of the Company or (v) any combination of the foregoing; |
| · | by Parent pursuant to a Company Breach Termination Event or Change in the Company Recommendation Termination Event; or |
| · | by the Company pursuant to a Superior Proposal Termination Event. |
Parent is required to pay the Company a
termination fee of US$114,500,000 in the event the Merger Agreement is terminated:
| · | by the Company pursuant to a Parent and Merger Sub Breach Termination Event; or |
| · | by the Company pursuant to a Parent and Merger Sub Failure to Close Termination Event. |
Additionally, (a)
in the event the Merger Agreement is terminated by the Company pursuant to a Parent and Merger Sub Breach Termination Event or
a Parent and Merger Sub Failure to Close Termination Event, then Parent must pay to the Company, as promptly as possible (but
in any event within three business days) following the delivery by the Company of an invoice therefor, all expenses incurred by
the Company and its affiliates in connection with the Transactions, up to a maximum amount equal to US$3,000,000; and (b) in the
event the Merger Agreement is terminated by Parent pursuant to a Company Breach Termination Event or Change in the Company Recommendation
Termination Event, then the Company must pay to Parent, as promptly as possible (but in any event within three business days)
following the delivery by Parent of an invoice therefor, all expenses incurred by Parent, Merger Sub and their respective affiliates
in connection with the Transactions, including the equity financing, up to a maximum amount equal to US$3,000,000.
In the event that the Company or Parent
fails to pay the applicable termination fee or any expenses when due and in accordance with the requirements of the Merger Agreement,
the Company or Parent, as the case may be, is required to reimburse the other party for reasonable costs and expenses actually
incurred or accrued by the other party (including fees and expenses of counsel) in connection with collection of such unpaid termination
fee or any expenses, together with accrued interest on such unpaid termination fee or any expenses.
Except as described above or as otherwise
provided in the Merger Agreement, whether or not the Merger or any other Transaction is consummated, all costs and expenses incurred
in connection with the Merger Agreement and the Transactions will be paid by the party incurring such costs and expenses.
Modification or Amendment; Waiver of Conditions
The Merger Agreement may be amended by
an instrument in writing signed by each of the parties hereto at any time prior to the Effective Time by action taken (a) with
respect to Parent and Merger Sub, by or on behalf of their respective boards of directors, and (b) with respect to the Company,
by the Board (upon recommendation of the Special Committee); provided that after the approval of the Merger Agreement and the Transactions
by the shareholders of the Company, no amendment may be made that would reduce the amount or change the type of consideration in
exchange for which each ordinary share of the Company (including ordinary shares represented by ADSs) will be cancelled upon consummation
of the Merger.
At any time prior to the Effective Time,
each of the parties (by action taken (a) with respect to Parent and Merger Sub, by or on behalf of their respective boards
of directors and (b) with respect to the Company, by action taken by or on behalf of the Special Committee) to the Merger
Agreement may, by an instrument in writing signed by the party or parties to be bound thereby, (i) extend the time for the
performance of any obligation or other act of any other party to the Merger Agreement, (ii) waive any inaccuracy in the representations
and warranties of any other party contained in the Merger Agreement or in any document delivered pursuant to the Merger Agreement
and (iii) waive compliance with any agreement of any other party or any condition to its obligations contained in the Merger
Agreement.
Remedies
The parties to the Merger Agreement may
be entitled to specific performance of the terms of the Merger Agreement, including an injunction or injunctions to prevent breaches
of the Merger Agreement, in addition to any other remedy at law or equity. The Company’s right to obtain an injunction or
injunctions, or other appropriate form of specific performance or equitable relief, to cause Parent and/or Merger Sub to cause
the equity financing from the Sponsors to be funded at any time or to effect the closing of the Merger is, however, subject to
(a) all of the conditions to Parent’s and Merger Sub’s obligations to consummate the Merger (other than those
conditions that by their nature are to be satisfied at the closing of the Merger) having been satisfied or waived, (b) Parent
and Merger Sub failing to complete the closing of the Merger by the date on which the closing should have occurred pursuant to
the Merger Agreement, and (c) the Company having irrevocably confirmed in writing that (i) all of the conditions to the
Company’s obligations to consummate the Merger have been satisfied or that it is willing to waive any of such conditions
and (ii) if specific performance is granted and the equity financing is funded, then the closing of the Merger will occur.
The maximum aggregate liabilities of Parent
and Merger Sub, on the one hand, and the Company, on the other hand, for monetary damages in connection with the Merger Agreement
or any of the Transactions are limited to (a) a termination fee of US$114,500,000 and US$57,250,000, respectively, and reimbursement
of certain expenses in the event the applicable termination fee is not paid when due and in accordance with the requirements of
the Merger Agreement; and (b) expenses of US$3,000,000 in the event the Merger Agreement is terminated under certain circumstances.
While the parties to the Merger Agreement
may pursue both a grant of specific performance and monetary damages, upon payment of the aforementioned amounts the remedy of
specific performance will not be available against the party paying such amount.
Provisions
for Unaffiliated Security Holders
No provision has been made to (a) grant
the Company’s shareholders or ADS holders access to corporate files of the Company and other parties to the Merger or any
of their respective affiliates or (b) obtain counsel or appraisal services at the expense of the Company or any other such party
or affiliate.
Dissenters’
Rights
The following is a brief summary of the
rights of holders of the Shares to object to the Merger and receive payment of the fair value of their Shares (“dissenters’
rights”). The complete text of Section 238 of the Cayman Islands Companies Law is attached as Annex D to this proxy statement.
If you are contemplating the possibility of objecting to the Merger, you should carefully review the text of Annex D, particularly
the procedural steps required to exercise dissenters’ rights. These procedures are complex and you should consult your Cayman
Islands legal counsel in respect of them. If you do not fully and precisely satisfy the procedural requirements of the Cayman Islands
Companies Law, you will lose your dissenters’ rights.
Requirements for Exercising Dissenters’ Rights
A dissenting registered shareholder of
the Company is entitled to payment of the fair value of his Shares upon dissenting from the Merger.
The exercise of your dissenters’
rights will preclude the exercise of any other rights by virtue of holding Shares in connection with the Merger including voting
at the extraordinary general meeting, other than the right to seek relief on the grounds that the Merger is void or unlawful. To
preserve your dissenters’ rights, the following procedures must be followed:
| · | you must give written notice of objection (“Notice of Objection”) to the Company prior to the vote to approve the
Merger. The Notice of Objection must include a statement that you propose to demand payment for your Shares if the Merger is authorized
by the vote at the extraordinary general meeting; |
| · | within twenty (20) days immediately following the date on which the vote approving the Merger is made, the Company must give
written notice of the authorization of the Merger (“Approval Notice”) to all shareholders who have served a Notice
of Objection (“Dissenting Shareholders”); |
| · | within twenty (20) days immediately following the date on which the Approval Notice is given (the “Dissent Period”),
the Dissenting Shareholder must give a written notice of his decision to dissent (a “Notice of Dissent”) to the Company
stating his name and address, the number and class of the Shares with respect to which he dissents and demanding payment of the
fair value of his Shares; a Dissenting Shareholder must dissent in respect of all the Shares which he holds; the Dissenting Shareholder
will cease to have any rights as a shareholder upon the giving of such Notice of Dissent, except for (a) the right to be paid the
fair value of his or her Shares, (b) the right to participate in the court proceedings to determine the fair value of his or her
Shares, and (c) the right to institute proceedings on the grounds that the Merger is unlawful or not valid; |
| · | within seven (7) days immediately following (a) the date of expiry of the Dissent Period or (b) the date on which the Plan
of Merger is filed with the Cayman Registrar, whichever is later, the Company, as the Surviving Corporation, must make a written
offer (a “Fair Value Offer”) to each Dissenting Shareholder to purchase their Shares at a price determined by the Company
to be the fair value of such Shares; |
| · | if, within thirty (30) days immediately following the date of the Fair Value Offer, the Company and the Dissenting Shareholder
fail to agree on a price at which the Company will purchase the Dissenting Shareholder’s Shares, then, within twenty (20)
days immediately following the date of the expiry of such 30-day period, the Company must, and the Dissenting Shareholder may,
file a petition with the Grand Court of the Cayman Islands (the “Grand Court”) for a determination of the fair value
of the Shares held by all Dissenting Shareholders who have served a Notice of Dissent and who have not agreed with the Company
as to fair value, the petition by the Company must be accompanied by a verified list containing the names and addresses of all
shareholders who have filed a Notice of Dissent and who have not agreed with the Company as to the fair value of the Shares; and |
| · | if a petition is timely filed and served, the Grand Court will determine at a hearing at which Dissenting Shareholders are
entitled to participate in (a) the fair value of the Shares held by those Dissenting Shareholders together with a fair rate of
interest, if any, to be paid up to the amount determined to be the fair value and (b) the costs of the proceeding and the allocation
of such costs upon the parties. |
All notices and petitions must be executed
by or for the shareholder of record, fully and correctly, as such shareholder’s name appears on the register of members of
the Company. If the Shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, these notices
must be executed by or for the fiduciary. If the Shares are owned by or for more than one person, such notices and petitions must
be executed by or for all joint owners. An authorized agent, including an agent for two or more joint owners, may execute the notices
or petitions for a shareholder of record; however, the agent must identify the record owner and expressly disclose the fact that,
in exercising the notice, he is acting as agent for the record owner. A person having a beneficial interest in Shares held of record
in the name of another person, such as a broker or nominee, must act promptly to cause the record holder to follow the steps summarized
above and in a timely manner to perfect whatever dissenters’ rights attached to the Shares.
You must be a registered holder of Shares
in order to exercise your dissenters’ rights. A holder of ADSs who wishes to dissent must surrender his or her ADSs to the
ADS Depositary and pay the fees of ADS Depositary to withdraw his or her Shares and then become a record holder of such Shares
and comply with the procedures described above in order to perfect the dissenters’ rights with respect to the Shares prior
to the extraordinary general meeting. The ADS Depositary will not exercise dissenters’ rights on behalf of a holder of ADSs,
and any Notice of Dissent delivered to the ADS depositary will not be effective under the Cayman Islands Companies Law. If you
wish to cancel your ADSs, please contact the ADS Depositary at 500 Stanton Christiana Road, Newark, DE 19713, USA, Attention: ADR
Operations, Telephone: +1 302 552 0230.
If you do not satisfy each of these requirements,
you cannot exercise dissenters’ rights and will be bound by the terms of the Merger Agreement and the Plan of Merger. Submitting
a proxy card that does not direct how the Shares represented by that proxy are to be voted will give the proxy discretion to vote
as it determines appropriate. In addition, failure to vote your Shares, or a vote against the proposal to approve and authorize
the Merger Agreement and the Plan of Merger and the Transactions (including the Merger), will not alone satisfy the notice requirement
referred to above. You must send all notices to the Company’s offices at No. 1 Office Building, No. 690 Bibo Road, Pudong
New Area, Shanghai 201203, the PRC, Attention: Investor Relations Department.
If you are considering dissenting, you
should be aware that the fair value of your Shares determined under Section 238 of the Cayman Islands Companies Law could be more
than, the same as, or less than the consideration that you would otherwise have received as consideration in the Merger. In addition,
in any proceedings for determination of the fair value of the Shares covered by a Notice of Dissent, the Company and the Buyer
Group intend to assert that the Per Share Merger Consideration is equal to the fair value of each of your Shares.
The provisions of Section 238 of the
Cayman Islands Companies Law are technical and complex. If you fail to comply strictly with the procedures set forth in
Section 238, you will lose your dissenters’ rights. You should consult your Cayman Islands legal counsel if you wish to exercise
dissenters’ rights.
Financial
Information
The functional currency of the Company
is U.S. dollars and its reporting currency is the RMB. The functional currency of the Company’s PRC subsidiaries and the
VIEs is RMB. Actoz Soft Co., Ltd. (“Actoz”) and Eyedentity Games Inc.’s (“Eyedentity”) functional
currency is the Korean Won. Actoz Soft Europe GmbH’s (“Actoz Europe”) functional currency
is the Euro (or “€”). The functional currency of the Company’s major subsidiaries other
than the PRC subsidiaries, the VIEs, Actoz, Eyedentity, and Actoz Europe is the U.S. dollar. Assets and liabilities of the Company
and its subsidiaries are translated at current exchange rates quoted by the People’s Bank of China or Seoul Money Brokerage
Services Limited in effect at the balance sheet dates. Equity accounts are translated at historical exchange rates and revenues
and expenses are translated at the average exchange rates in effect during the reporting period to RMB. Gains and losses resulting
from foreign currency translation to reporting currency are recorded in accumulated other comprehensive income (loss) in the consolidated
statements of changes in shareholders’ equity for the years presented. Transactions denominated in currencies other than
functional currencies are remeasured into the functional currencies at the exchange rates quoted by the People’s Bank of
China or Seoul Money Brokerage Services Limited prevailing at the dates of the transactions. Gains and losses resulting from foreign
currency transactions are included in the consolidated statements of operations and comprehensive income. Monetary assets and liabilities
denominated in foreign currencies are remeasured into the functional currencies using the applicable exchange rates quoted by the
People’s Bank of China or Seoul Money Brokerage Services Limited at the balance sheet dates. All such exchange gains and
losses are included in the statements of operations and comprehensive income within other income (expense), net.
This proxy statement contains translations
of RMB into U.S. dollars at specific rates solely for the convenience of the reader. Amounts in US$ are presented for the convenience
of the reader and are translated at the exchange rate of US$1.00 to RMB6.2046 as set forth in the H.10 statistical release of the
U.S. Federal Reserve Board on December 31, 2014. No representation is made that the RMB amounts could have been, or could be, converted
into US$ at such rate.
Selected Historical Financial Information
The following table sets forth the Company’s
selected consolidated financial data. The selected consolidated statements of income data and balance sheet data in the table below
have been derived from the audited financial statements of the Company for each of the two years ended December 31, 2013 and 2014,
included in the Company’s Annual Report on Form 20-F for the year ended December 31, 2014, at pages F-1 through F-[ ], in
each case prepared in accordance with U.S. GAAP. The information set forth below is not necessarily indicative of future results
and should be read in conjunction with “Item 5. Operating and Financial Review and Prospects” and the consolidated
financial statements, related notes and other financial information included in the Company’s Annual Report on Form 20-F
for the year ended December 31, 2014 and the Company’s 2015 first quarter earnings release filed under cover of Form 6-K
on [ ], 2015, which are incorporated into this proxy statement by reference. See “Where You Can Find More Information”
for a description of how to obtain a copy of such Annual Report and earnings release.
| | |
For the year ended December 31, | |
| | |
2013 | | |
2014 | | |
2014 | |
| | |
(RMB) | | |
(RMB) | | |
(US$) | |
| | |
(in millions, except earnings per share/ADS data) | |
| Net revenue: | |
| | | |
| | | |
| | |
| MMO game revenues | |
| 3,806.4 | | |
| 3,276.4 | | |
| 528.1 | |
| Mobile game revenues | |
| 482.2 | | |
| 396.4 | | |
| 63.9 | |
| Other revenue, net | |
| 56.1 | | |
| 44.5 | | |
| 7.2 | |
| Total net revenue | |
| 4,344.7 | | |
| 3,717.3 | | |
| 599.1 | |
| Cost of services | |
| (1,135.7 | ) | |
| (940.1 | ) | |
| (151.5 | ) |
| Gross profit | |
| 3,209.0 | | |
| 2,777.2 | | |
| 447.6 | |
| Operating (expenses) income | |
| | | |
| | | |
| | |
| Research and product development | |
| (714.1 | ) | |
| (657.6 | ) | |
| (106.0 | ) |
| Sales and marketing | |
| (447.4 | ) | |
| (615.0 | ) | |
| (99.1 | ) |
| General and administrative | |
| (348.7 | ) | |
| (320.6 | ) | |
| (51.7 | ) |
| Impairment of goodwill | |
| (30.8 | ) | |
| — | | |
| — | |
| | |
For the year ended December 31, | |
| | |
2013 | | |
2014 | | |
2014 | |
| | |
(RMB) | | |
(RMB) | | |
(US$) | |
| Settlement of gain contingency with former
shareholder | |
| 59.9 | | |
| — | | |
| — | |
| Total operating expenses | |
| (1,481.1 | ) | |
| (1,593.2 | ) | |
| (256.8 | ) |
| | |
| | | |
| | | |
| | |
| Income from operations | |
| 1,727.9 | | |
| 1,184.0 | | |
| 190.8 | |
| Interest income/(expenses) | |
| 77.6 | | |
| 16.6 | | |
| 2.7 | |
| Investment income/(loss) | |
| 16.3 | | |
| (0.8 | ) | |
| (0.1 | ) |
| Other income, net | |
| 136.0 | | |
| 75.8 | | |
| 12.2 | |
| Income before income tax expenses | |
| 1,957.8 | | |
| 1,275.6 | | |
| 205.6 | |
| Income tax expenses | |
| (322.3 | ) | |
| (248.6 | ) | |
| (40.1 | ) |
| Share of loss of an equity investee | |
| (7.5 | ) | |
| (30.4 | ) | |
| (4.9 | ) |
| Net income | |
| 1,628.0 | | |
| 996.6 | | |
| 160.6 | |
| Net (income)/loss attributable to noncontrolling interests | |
| (40.1 | ) | |
| 43.9 | | |
| 7.1 | |
| Net income attributable to the Company’s shareholders | |
| 1,587.9 | | |
| 1,040.5 | | |
| 167.7 | |
| Other comprehensive income (loss), net of tax | |
| | | |
| | | |
| | |
| Unrealized (loss) gain on marketable securities | |
| 15.7 | | |
| — | | |
| — | |
| Realized gain on marketable securities reclassified to investment income | |
| (20.1 | ) | |
| — | | |
| — | |
| Currency translation adjustments of the Company | |
| 122.7 | | |
| (17.7 | ) | |
| (2.9 | ) |
| Currency translation adjustments of affiliated companies/subsidiaries | |
| (94.7 | ) | |
| (10.8 | ) | |
| (1.7 | ) |
| Comprehensive income | |
| 1,651.6 | | |
| 968.1 | | |
| 156.0 | |
| Comprehensive income attributable to noncontrolling interests | |
| (49.7 | ) | |
| 48.0 | | |
| 7.8 | |
| Comprehensive income attributable to Shanda Games Limited | |
| 1,601.9 | | |
| 1,016.1 | | |
| 163.8 | |
| | |
| | | |
| | | |
| | |
| Earnings per share: | |
| | | |
| | | |
| | |
| Basic | |
| 2.96 | | |
| 1.94 | | |
| 0.31 | |
| Diluted | |
| 2.95 | | |
| 1.92 | | |
| 0.31 | |
| | |
| | | |
| | | |
| | |
| Weighted average ordinary shares: | |
| | | |
| | | |
| | |
| Basic | |
| 536,790,221 | | |
| 537,189,172 | | |
| 537,189,172 | |
| Diluted | |
| 537,395,413 | | |
| 543,196,160 | | |
| 543,196,160 | |
Consolidated Balance Sheet Data:
| In millions | |
For the year ended December 31, | |
| | |
2013 | | |
2014 | | |
2014 | |
| | |
(RMB) | | |
(RMB) | | |
(US$) | |
| Cash and cash equivalents | |
| 877.6 | | |
| 797.5 | | |
| 128.5 | |
| Total assets | |
| 5,127.4 | | |
| 3,647.5 | | |
| 587.9 | |
| Total liabilities | |
| 4,208.2 | | |
| 1,748.9 | | |
| 281.9 | |
| Redeemable non-controlling interest | |
| 13.9 | | |
| — | | |
| — | |
| Total equity | |
| 595.0 | | |
| 1,613.9 | | |
| 260.1 | |
| Non-controlling interests | |
| 310.3 | | |
| 284.7 | | |
| 45.9 | |
| Total shareholders’ equity | |
| 905.3 | | |
| 1,898.6 | | |
| 306.0 | |
Ratio of Earnings to Fixed Charges
| | |
As of December 31, | |
| | |
2012 | | |
2013 | | |
2014 | |
| | |
(unaudited) | |
| Ratio of earnings to fixed charges | |
| 19.8 | | |
| 43.8 | | |
| 31.8 | |
Net Book Value per
Share of Shares
The net book value per Share as of December
31, 2014 was US$0.57 based on the weighted average number of issued and outstanding Shares during 2014.
Transactions
in Shares and ADSs
Purchases by the Company
In June 2012, the Board approved another
share repurchase program (the “2012 Share Repurchase Program”) authorizing the Company to repurchase up to US$100 million
worth of the Company’s outstanding ADSs from time to time during the next 12 months. The Company concluded this share repurchase
program in May 2013, under which the Company had repurchased a total of approximately 14.4 million ADSs for an aggregate consideration
of US$50.3 million from the open market.
In May 2013, the Board approved another
share repurchase program (the “2013 Share Repurchase Program”) authorizing the Company to repurchase up to US$100 million
worth of the Company’s outstanding ADSs from time to time during the next 12 months. As of the date of this proxy statement,
the Company had not repurchased any ADSs from the open market under this program.
The table below sets forth the details
of the Company’s purchases of its own equity securities for each quarter during the past three years. All of the Company’s
share repurchases during the past three years have been under either the 2012 or 2013 Share Repurchase Program.
|
Period |
|
Total
Number
of ADSs
Purchased |
|
|
Range
of Prices
Paid per ADS
(US$) |
|
|
Average
Price
Paid per ADS
(US$)(1) |
|
| 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
| First quarter |
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Second quarter |
|
|
547,495 |
|
|
|
3.82 - 4.34 |
|
|
|
4.04 |
|
| Third quarter |
|
|
6,730,101 |
|
|
|
3.20 - 4.00 |
|
|
|
3.64 |
|
| Fourth quarter |
|
|
3,695,781 |
|
|
|
2.99 - 3.82 |
|
|
|
3.61 |
|
| 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
| First quarter |
|
|
1,311,503 |
|
|
|
2.95 - 3.00 |
|
|
|
2.99 |
|
| Second quarter |
|
|
2,124,032 |
|
|
|
2.72 - 3.00 |
|
|
|
2.94 |
|
| Third quarter |
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Fourth quarter |
|
|
— |
|
|
|
— |
|
|
|
— |
|
| 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
| First quarter |
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Second quarter |
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Third quarter |
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Fourth quarter |
|
|
— |
|
|
|
— |
|
|
|
— |
|
| 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
| First quarter |
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Total |
|
|
14,408,912 |
|
|
|
N/A |
|
|
|
N/A |
|
| (1) | Average price paid per ADS repurchased is the execution price, excluding commissions paid to brokers. |
All Shares underlying ADSs repurchased
by the Company were considered cancelled under Cayman Islands law, and the excess of the repurchase price over the par value of
the repurchased Shares was charged to additional paid-in capital.
Transactions within the Buyer Group
On August 31, 2014, Shanda SDG and Orient
Finance entered into a share purchase agreement (the “Orient Share Purchase Agreement”) pursuant to which Shanda SDG
agreed to sell, and Orient Finance agreed to purchase, 123,552,669 Class A ordinary shares (the “Orient Purchase Shares”)
at US$3.45 per Class A ordinary share (the “Orient Purchase Price”) subject to the terms and conditions thereof. Such
purchase was completed on September 23, 2014 and the Orient Purchase Shares were subsequently transferred by Orient Finance
to Orient Hongtai and Orient Hongzhi on November 24, 2014. Pursuant to the Orient Share Purchase Agreement, if (i) a “going
private” transaction occurs within one year of the closing date of the sale of the Orient Purchase Shares where Orient Finance
is part of the buyer consortium and the per Share “going private” price is higher than the Orient Purchase Price, or
(ii) a “going private” transaction occurs within one year of the closing date of the sale of the Orient Purchase Shares
where Orient Finance is not part of the buyer consortium due to its own decision or election without Shanda SDG’s written
consent and the per Share “going private” price is higher than the Orient Purchase Price, Orient Finance will pay Shanda
SDG, with respect to each of the Orient Purchase Shares, a “make-whole” payment equal to the difference between the
Orient Purchase Price and the price per share paid in the “going private” transaction, the effect of which would be
that Shanda SDG would receive the same price per share for the Orient Purchase Shares as would be paid in the “going private”
transaction.
On September 1, 2014, Shanda SDG and Haitong
entered into a share purchase agreement (the “Haitong Share Purchase Agreement I”) pursuant to which Shanda SDG agreed
to sell, and Haitong agreed to purchase, 48,152,848 Class A ordinary shares at US$3.45 per Class A ordinary share subject to the
terms and conditions thereof. Concurrently with the execution of the Haitong Share Purchase Agreement I, Primavera, Perfect World
and Haitong entered into a share purchase agreement (the “Haitong Share Purchase Agreement II”), pursuant to which
Haitong agreed to purchase 28,959,276 and 30,326,005 Class A ordinary shares from Primavera and Perfect World, respectively. Pursuant
to the Haitong Share Purchase Agreement I and Haitong Share Purchase Agreement II, Haitong agreed to pay a “make-whole”
payment to each of Shanda SDG, Primavera and Perfect World on terms substantially the same as those in the Orient Share Purchase
Agreement and the purchases thereunder were completed by Hao Ding, an affiliate of Haitong, on September 23, 2014.
On September 1, 2014, Shanda SDG and Ningxia
entered into a share purchase agreement (the “Ningxia Share Purchase Agreement”) pursuant to which Shanda SDG agreed
to sell, and Ningxia agreed to purchase, 80,577,828 Class A ordinary shares at US$3.45 per Class A ordinary share subject to the
terms and conditions thereof. Pursuant to the Ningxia Share Purchase Agreement, Ningxia agreed to pay a “make-whole”
payment to Shanda SDG on terms substantially the same as those in the Orient Share Purchase Agreement and the purchase thereunder
was completed by Zhongrong Investment, an affiliate of Ningxia, on September 23, 2014.
On November 25, 2014, Shanda SDG, Ningxia,
Zhongrong Shengda, and Yili Shengda entered into a share purchase agreement (the “SDG Class B Share Purchase Agreement”),
pursuant to which each of Zhongrong Shengda and Yili Shengda agreed to purchase 48,759,187 Class B ordinary shares from Shanda
SDG. The purchases under the SDG Class B Share Purchase Agreement were completed on the same day.
Prior Public Offerings
On September 30, 2009, the Company completed
its initial public offering (the “IPO”), which involved the sale by the Company and certain of its shareholders of
83,500,000 ADSs. The initial public offering price was US$12.50 per ADS. The net proceeds to the Company from the IPO, after deducting
commissions and offering expenses, were approximately US$152.5 million.
Transactions in Prior 60 Days
Except as described above and other than
the Merger Agreement and the agreements entered into in connection with the Merger Agreement, including the Support Agreement,
the Limited Guarantees and the Equity Commitment Letters, there have been no transactions in Shares or ADSs during the prior 60
days by the Company, any of the Company’s officers or directors, Parent, Merger Sub or any other person with respect to which
disclosure is provided in Annex F or any associate or majority-owned subsidiary of the foregoing.
Security
Ownership of Certain Beneficial Owners and Management of the Company
The following table sets forth information
with respect to the beneficial ownership of Shares, as of the date of this proxy statement, by:
| · | each of the Company’s directors and executive officers; |
| · | the Company’s directors and executive officers as a group; and |
| · | each person known to the Company to beneficially own more than 5.0% of the total issued and outstanding Shares. |
As of the date of this proxy statement,
we have 443,179,215 Class A ordinary shares and 97,518,374 Class B ordinary shares issued and outstanding. Beneficial ownership
is determined in accordance with the rules and regulations of the SEC. In computing the number of Shares beneficially owned by
a person and the percentage ownership of that person, we have included Shares that the person has the right to acquire within 60
days from the date of this proxy statement, including through the exercise of any option, warrant or other right, vesting of restricted
share units or the conversion of any other security. These Shares, however, are not included in the computation of the percentage
ownership of any other person.
| | |
Beneficially Owned | |
| Name | |
Number | | |
Percentage of Class A Ordinary Shares | | |
Percentage of Class B Ordinary Shares | | |
Percentage of Total Voting Power | |
| Hao Ding International Limited(1) | |
| 107,438,129 | | |
| 24.2 | % | |
| — | | |
| 7.6 | % |
| Orient Hongtai (Hong Kong) Limited(2) | |
| 61,776,334 | | |
| 13.9 | % | |
| — | | |
| 4.4 | % |
| Orient Hongzhi (Hong Kong) Limited(2) | |
| 61,776,335 | | |
| 13.9 | % | |
| — | | |
| 4.4 | % |
| Yili Shengda Investment Holdings (Hong Kong) Company Limited(3) | |
| 48,759,187 | | |
| — | | |
| 50.0 | % | |
| 34.4 | % |
| Zhongrong Shengda Investment Holdings (Hong Kong) Limited(4) | |
| 48,759,187 | | |
| — | | |
| 50.0 | % | |
| 34.4 | % |
| Zhongrong Investment Holdings (Hong Kong) Co., Ltd.(4) | |
| 80,577,828 | | |
| 18.2 | % | |
| — | | |
| 5.7 | % |
| Yingfeng Zhang(3) | |
| 48,803,359 | | |
| * | | |
| 50.0 | % | |
| 34.4 | % |
| Danian Chen | |
| * | | |
| * | | |
| — | | |
| * | |
| Li Yao | |
| * | | |
| * | | |
| — | | |
| * | |
| Shaolin Liang | |
| — | | |
| — | | |
| — | | |
| — | |
| Lijun Lin | |
| * | | |
| * | | |
| — | | |
| * | |
| Heng Wing Chan | |
| * | | |
| * | | |
| — | | |
| * | |
| Yong Gui | |
| * | | |
| * | | |
| — | | |
| * | |
| Tunghai Chien | |
| * | | |
| * | | |
| — | | |
| * | |
| Jisheng Zhu | |
| * | | |
| * | | |
| — | | |
| * | |
| Jin Zhang | |
| * | | |
| * | | |
| — | | |
| * | |
| Directors and Executive Officers as a Group | |
| 53,885,382 | | |
| * | | |
| 50.0 | % | |
| 34.6 | % |
| * | Upon exercise of all options currently exercisable or vesting within 60 days of the date of this table, would beneficially
own less than 1.0% of ordinary shares of the Company. |
| (1) | Hao Ding is a member of the Buyer
Group and an affiliate of Haitong Securities. See “Summary Term
Sheet—The Parties
Involved
in the Merger” beginning on page [ ] for additional information. |
| (2) | Orient Hongtai and Orient Hongzhi are members of the Buyer
Group and affiliates of Orient Securities. See “Summary Term
Sheet—The Parties Involved in the Merger” beginning
on page [ ] for additional information. |
| (3) | Yili Shengda is an affiliate of Ningxia Yilida, which is a PRC limited partnership whose general partner is Shanghai
Yingfeng, a PRC company whose sole shareholder is the chairman of
the Board and acting chief executive officer of the Company, Mr. Zhang. See “Summary Term Sheet—The Parties Involved in the
Merger” beginning on page [ ] for additional information. |
| (4) | Zhongrong Shengda and Zhongrong Investment are affiliates of Ningxia, which is a member of the Buyer Group. See “Summary Term Sheet—The Parties Involved in the Merger”
beginning on page [ ] for additional information. |
Future
Shareholder Proposals
If the Merger is completed, we will not
have public shareholders and there will be no public participants in any future shareholders’ meeting. If, however, the Merger
is not completed, an annual general meeting is expected to be held later in the year.
Cautionary
Note Regarding Forward-Looking Statements
Certain statements in this proxy statement,
the documents attached hereto and the documents incorporated by reference into 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. Forward-looking statements can be identified by forward-looking language, including words such as “believes,”
“anticipates,” “expects,” “estimates,” “intends,” “may,” “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 or 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 authorization and approval of the Merger Agreement
by the Company’s shareholders; |
| · | the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement; |
| · | the cash position of the Company and its subsidiaries at the Effective Time; |
| · | the effect of the announcement or pendency of the Merger on our business relationships, results of operations and business
generally; |
| · | 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 Shares and ADSs; |
| · | 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; |
| · | loss of our senior management; |
| · | the amount of the costs, fees, expenses and charges related to the Merger and the actual terms of the financings that will
be obtained for the Merger; |
| · | our failure to comply with regulations and changes in regulations; |
| · | the outcome of any legal proceedings, regulatory proceedings or enforcement matters that may be instituted against us and others
relating to the Merger; and |
| · | other risks detailed in our filings with the SEC, including the information set forth under the section entitled “Item
3D. Risk Factors” in our Annual Report on Form 20-F for the year ended December 31, 2014. See “Where You Can Find More
Information” beginning on page [ ] for additional information. |
Furthermore, the forward-looking statements
do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, collaborations, dividends
or investments made by the parties. We believe that the assumptions on which our forward-looking statements are based are reasonable.
However, forward-looking statements involve inherent risks, uncertainties and assumptions. In addition, many of the factors that
will determine our future results are beyond our ability to control or predict and we cannot guarantee any future results,
levels of activity, performance or achievements. We cannot assure you that the actual results or developments we anticipate will
be realized or, if realized, that they will have the expected effects on our business or operations. In light of the significant
uncertainties inherent in the forward-looking statements, readers should not place undue reliance on forward-looking statements,
which speak only as of the date on which the statements were made, and it should not be assumed that the statements remain accurate
as of any future date. All subsequent written and oral forward-looking statements concerning the Merger or other matters addressed
in this proxy statement and attributable to us or any person acting on our behalf are expressly qualified in their entirety by
the cautionary statements contained or referred to in this section. Further, forward-looking statements speak only as of the date
they are made, and, except as required by applicable law or regulation, we undertake no obligation to update these forward-looking
statements to reflect future events or circumstances.
Where
You Can Find More Information
We are subject to the reporting requirements
of the Exchange Act applicable to foreign private issuers and we file or furnish our annual and current reports and other information
with the SEC. You may read and copy these reports and other information at the SEC’s Public Reference Room at 100 F Street
NE, Washington, D.C. 20549 at prescribed rates. Information on the operation of the Public Reference Room may be obtained by calling
the SEC at 1-800-SEC-0330. The information we file or furnish is also available free of charge on the SEC’s website at http://www.sec.gov.
You also may obtain free copies of the
documents the Company files with the SEC by going to the “Investor Relations” section of our website at http://www.shandagames.com.
Our website address is provided as an inactive textual reference only. The information provided on our website is not part of this
proxy statement, and therefore is not incorporated by reference.
Because the Merger is a “going private”
transaction, the Company and the Buyer Group have filed with the SEC a Transaction Statement on 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 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 and the information that we later file with the SEC may
update and supersede the information incorporated by reference. Similarly, the information that we later file with the SEC
may update and supersede the information in this proxy statement. The Company’s Annual Report on Form 20-F for the year
ended December 31, 2014 filed with the SEC on April 17, 2015 is incorporated herein by reference. To the extent that any of
the periodic reports incorporated by reference in this proxy statement contain references to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995 with respect to forward-looking statements, we note that these safe
harbor provisions do not apply to any forward-looking statements we make in connection with the “going
private” transaction described in this proxy statement.
We undertake to provide without charge
to each person to whom a copy of this proxy statement has been delivered, upon request, by first-class mail or other equally prompt
means, within one business day of receipt of the request, a copy of any or all of the documents incorporated by reference into
this proxy statement, other than the exhibits to these documents, unless the exhibits are specifically incorporated by reference
into the information that this proxy statement incorporates.
Requests for copies of our filings should
be directed to our proxy solicitor, Georgeson Inc., 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 OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT TO
VOTE YOUR SHARES AT THE EXTRAORDINARY GENERAL MEETING. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT
FROM WHAT IS CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT.
THIS PROXY STATEMENT IS DATED [ ],
2015. 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 SHAREHOLDERS DOES NOT CREATE ANY IMPLICATION TO THE CONTRARY.
ANNEX A
Execution
Version
CONFIDENTIAL
AGREEMENT AND PLAN
OF MERGER
among
CAPITALHOLD
LIMITED
CAPITALCORP
LIMITED
and
SHANDA GAMES LIMITED
Dated as of April
3, 2015
TABLE OF CONTENTS
| |
Page |
| Article I THE MERGER |
A-8 |
| |
|
| Section 1.01 The Merger. |
A-8 |
| Section 1.02 Closing;
Closing Date. |
A-8 |
| Section 1.03 Effective
Time. |
A-8 |
| Section 1.04 Effects
of the Merger. |
A-8 |
| Section 1.05 Memorandum
and Articles of Association of Surviving Corporation. |
A-9 |
| Section 1.06 Directors
and Officers. |
A-9 |
| |
|
| Article II CONVERSION OF SECURITIES; MERGER
CONSIDERATION |
A-9 |
| |
|
| Section 2.01 Conversion
of Securities. |
A-9 |
| Section 2.02 Share
Incentive Plan, Outstanding Company Options, Company RS and Company RSUs. |
A-10 |
| Section 2.03 Dissenting
Shares. |
A-11 |
| Section 2.04 Exchange
of Share Certificates, etc. |
A-12 |
| Section 2.05 No Transfers. |
A-14 |
| Section 2.06 Termination
of Deposit Agreement. |
A-14 |
| Section 2.07 Agreement
of Fair Value. |
A-15 |
| |
|
| Article III REPRESENTATIONS AND WARRANTIES
OF THE COMPANY |
A-15 |
| |
|
| Section 3.01 Organization
and Qualification; Subsidiaries. |
A-15 |
| Section 3.02 Memorandum
and Articles of Association. |
A-15 |
| Section 3.03 Capitalization. |
A-16 |
| Section 3.04 Authority
Relative to This Agreement. |
A-17 |
| Section 3.05 No Conflict;
Required Filings and Consents. |
A-18 |
| Section 3.06 Permits;
Compliance. |
A-19 |
| Section 3.07 SEC Filings;
Financial Statements. |
A-20 |
| Section 3.08 No Undisclosed
Liabilities. |
A-21 |
| Section 3.09 Absence
of Certain Changes or Events. |
A-21 |
| Section 3.10 Absence
of Litigation. |
A-21 |
| Section 3.11 Employee
Benefit Plans. |
A-21 |
| Section 3.12 Labor
and Employment Matters. |
A-22 |
| Section 3.13 Real
Property. |
A-23 |
| Section 3.14 Intellectual
Property. |
A-23 |
| Section 3.15 Taxes. |
A-27 |
| Section 3.16 Environmental
Matters. |
A-28 |
| Section 3.17 Material
Contracts. |
A-28 |
| Section 3.18 Insurance. |
A-29 |
| Section 3.19 Opinion
of Financial Advisor. |
A-29 |
| Section 3.20 Brokers. |
A-30 |
| Section 3.21 Takeover
Statute. |
A-30 |
| Section 3.22 No Additional
Representations. |
A-30 |
TABLE OF CONTENTS
| |
Page |
| Article IV REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB |
A-30 |
| |
|
| Section 4.01 Corporate
Organization. |
A-30 |
| Section 4.02 Authority
Relative to This Agreement. |
A-31 |
| Section 4.03 No Conflict;
Required Filings and Consents. |
A-31 |
| Section 4.04 Capitalization. |
A-32 |
| Section 4.05 Available
Funds and Equity Financing. |
A-32 |
| Section 4.06 Brokers. |
A-33 |
| Section 4.07 Guarantees. |
A-33 |
| Section 4.08 Absence
of Litigation. |
A-34 |
| Section 4.09 Ownership
of Company Shares. |
A-34 |
| Section 4.10 Solvency |
A-34 |
| Section 4.11 Parent
Group Contracts |
A-34 |
| Section 4.12 Independent
Investigation |
A-35 |
| Section 4.13 No Additional
Representations. |
A-35 |
| |
|
| Article V CONDUCT OF BUSINESS PENDING
THE MERGER |
A-36 |
| |
|
| Section 5.01 Conduct
of Business by the Company Pending the Merger. |
A-36 |
| Section 5.02 Conduct
of Business by Parent and Merger Sub Pending the Merger. |
A-39 |
| Section 5.03 No Control
of Other Party’s Business. |
A-39 |
| |
|
| Article VI ADDITIONAL AGREEMENTS |
A-39 |
| |
|
| Section 6.01 Proxy
Statement and Schedule 13E-3. |
A-39 |
| Section 6.02 Company
Shareholders’ Meeting. |
A-41 |
| Section 6.03 Access
to Information. |
A-43 |
| Section 6.04 No Solicitation
of Transactions. |
A-43 |
| Section 6.05 Directors’
and Officers’ Indemnification and Insurance. |
A-47 |
| Section 6.06 Notification
of Certain Matters. |
A-50 |
| Section 6.07 Financing. |
A-51 |
| Section 6.08 Further
Action; Reasonable Best Efforts. |
A-51 |
| Section 6.09 Obligations
of Parent and Merger Sub. |
A-52 |
| Section 6.10 Participation
in Litigation. |
A-52 |
| Section 6.11 Resignations. |
A-53 |
| Section 6.12 Public
Announcements. |
A-53 |
| Section 6.13 Stock
Exchange Delisting. |
A-53 |
| Section 6.14 Takeover
Statutes. |
A-53 |
| Section 6.15 SAFE
Registration. |
A-54 |
| Section 6.16 No Amendment
to Parent Group Contracts or Certain Other Documents. |
A-54 |
| |
|
| Article VII CONDITIONS TO THE MERGER |
A-55 |
| |
|
| Section 7.01 Conditions
to the Obligations of Each Party. |
A-55 |
| Section 7.02 Conditions
to the Obligations of Parent and Merger Sub. |
A-55 |
| Section 7.03 Conditions
to the Obligations of the Company. |
A-56 |
| Section 7.04 Frustration
of Closing Conditions. |
A-56 |
TABLE OF CONTENTS
| |
Page |
| Article VIII
TERMINATION |
A-57 |
| |
|
| Section
8.01 Termination by Mutual Consent. |
A-57 |
| Section
8.02 Termination by Either the Company or Parent. |
A-57 |
| Section
8.03 Termination by the Company. |
A-57 |
| Section
8.04 Termination by Parent. |
A-58 |
| Section
8.05 Effect of Termination. |
A-59 |
| Section
8.06 Termination Fee and Expenses. |
A-59 |
| |
|
| Article IX GENERAL PROVISIONS |
A-62 |
| |
|
| Section
9.01 Non-Survival of Representations, Warranties and Agreements. |
A-62 |
| Section
9.02 Notices. |
A-62 |
| Section
9.03 Certain Definitions. |
A-65 |
| Section
9.04 Severability. |
A-74 |
| Section
9.05 Interpretation. |
A-74 |
| Section
9.06 Entire Agreement; Assignment. |
A-75 |
| Section
9.07 Parties in Interest. |
A-75 |
| Section
9.08 Specific Performance. |
A-75 |
| Section
9.09 Governing Law; Dispute Resolution. |
A-76 |
| Section
9.10 Amendment. |
A-77 |
| Section
9.11 Waiver. |
A-77 |
| Section
9.12 Counterparts. |
A-77 |
| |
|
| Annex A |
Plan of Merger |
AGREEMENT AND PLAN
OF MERGER, dated as of April 3, 2015 (this “Agreement”), among Capitalhold Limited, an exempted company with
limited liability incorporated under the laws of the Cayman Islands (“Parent”), Capitalcorp Limited, an exempted
company with limited liability incorporated under the laws of the Cayman Islands and a wholly-owned subsidiary of Parent (“Merger
Sub”), and Shanda Games Limited, an exempted company with limited liability incorporated under the laws of the Cayman
Islands (the “Company”).
WHEREAS, Parent and
the Company intend to enter into a transaction pursuant to which Merger Sub will be merged with and into the Company (the “Merger”),
with the Company surviving the Merger and becoming a wholly-owned Subsidiary of Parent as a result of the Merger;
WHEREAS, the board
of directors of the Company (the “Company Board”), acting upon the unanimous recommendation of the Special Committee,
has (a) determined that the execution by the Company of this Agreement and the Plan of Merger and consummation of the transactions
contemplated by this Agreement and the Plan of Merger, including the Merger (collectively, the “Transactions”),
are fair to and in the best interests of the Company and its shareholders (other than the holders of Excluded Shares), (b) approved
and declared advisable the Merger, the other Transactions, this Agreement and the Plan of Merger and (c) resolved to recommend
in favor of the authorization and approval of this Agreement, the Plan of Merger and the Transactions to the holders of Shares
and direct that this Agreement, the Plan of Merger and the Transactions be submitted to the holders of Shares for authorization
and approval;
WHEREAS, the board
of directors of each of Parent and Merger Sub has (a) approved the execution, delivery and performance by Parent and Merger Sub,
respectively, of this Agreement, the Plan of Merger and the consummation of the Transactions and (b) declared it advisable for
Parent and Merger Sub, respectively, to enter into this Agreement and the Plan of Merger;
WHEREAS, concurrently
with the execution and delivery of this Agreement, Yili Shengda, Zhongrong Shengda, Zhongrong Investment, Hongtai, Hongzhi and
Hao Ding (collectively, the “Rollover Shareholders”) and Parent have executed and delivered a support agreement,
dated as of the date hereof (the “Support Agreement”), providing that, among other things, (a) the Rollover
Shareholders will vote all Shares held directly or indirectly by them in favor of the authorization and approval of this Agreement,
the Plan of Merger and the Transactions and (b) the Rollover Shareholders agree, upon the terms and subject to the conditions in
the Support Agreement, to receive no consideration for the cancellation of the Rollover Shares in accordance with this Agreement;
and
WHEREAS, concurrently
with the execution of this Agreement, each of the Sponsors (each, a “Guarantor”, and collectively the “Guarantors”)
has executed and delivered a limited guarantee in favor of the Company with respect to certain obligations of Parent under this
Agreement (each, a “Limited Guarantee” and collectively, the “Limited Guarantees”).
NOW, THEREFORE, in
consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby,
Parent, Merger Sub and the Company hereby agree as follows:
Article
I
THE MERGER
Section 1.01 The
Merger.
Upon the terms and
subject to the conditions set forth in this Agreement, and in accordance with the Cayman Islands Companies Law Cap. 22 (Law 3 of
1961, as consolidated and revised) (the “CICL”), at the Effective Time, Merger Sub shall be merged with and
into the Company. As a result of 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”) under the Laws of the Cayman Islands
and become a wholly-owned Subsidiary of Parent.
Section 1.02 Closing;
Closing Date.
Unless otherwise unanimously
agreed in writing between the Company, Parent and Merger Sub, the closing for the Merger (the “Closing”) shall
take place at 10:00 a.m. (Beijing time) at the offices of Wilson Sonsini Goodrich & Rosati, P.C., Jin Mao Tower, 38F, Unit
3, 88 Century Blvd, Pudong, Shanghai, China as soon as practicable, but in any event no later than the second Business Day following
the day on which the last of the conditions set forth in Article VII to be satisfied or, if permissible, waived (other than those
conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or, if permissible, waiver
of those conditions) shall be satisfied or, if permissible, waived in accordance with this Agreement (such date being the “Closing
Date”).
Section 1.03 Effective
Time.
Subject to the provisions
of this Agreement, on the Closing Date, Merger Sub and the Company shall execute a plan of merger (the “Plan of Merger”)
substantially in the form set out in Annex A attached hereto and such parties shall file the Plan of Merger and other documents
required under the CICL to effect the Merger with the Registrar of Companies of the Cayman Islands as provided by Section 233 of
the CICL. The Merger shall become effective at the time specified in the Plan of Merger in accordance with the CICL (the “Effective
Time”).
Section 1.04 Effects
of the Merger.
At the Effective Time,
the Merger shall have the effects specified in the CICL. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time, the Surviving Corporation shall succeed to and assume all the rights, property of every description, including
choses in action, and the business, undertaking, goodwill, benefits, immunities and privileges, mortgages, charges or security
interests and all contracts, obligations, claims, debts and liabilities of the Company and Merger Sub in accordance with the CICL.
Section 1.05 Memorandum
and Articles of Association of Surviving Corporation.
At the Effective Time,
the memorandum and articles of association of Merger Sub, as in effect immediately prior to the Effective Time, shall be the memorandum
and articles of association of the Surviving Corporation until thereafter amended as provided by Law and such memorandum and articles
of association; provided that at the Effective Time, (a) Article I of the memorandum of association of the Surviving Corporation
shall be amended to read as follows: “The name of the corporation is “Shanda Games Limited” and the articles
of association of the Surviving Corporation shall be amended to refer to the name of the Surviving Corporation as “Shanda
Games Limited”, (b) references therein to the authorized share capital of the Surviving Corporation shall be amended to refer
to the correct authorized capital of the Surviving Corporation as approved in the Plan of Merger, if necessary, and (c) the memorandum
and articles of association of the Surviving Corporation will contain provisions no less favorable to the intended beneficiaries
with respect to exculpation and indemnification of liability and advancement of expenses than are set forth in the memorandum and
articles of association of the Company as in effect on the date hereof, in accordance with Section 6.05(a).
Section 1.06 Directors
and Officers.
The parties hereto
shall take all actions necessary so that (a) the directors of Merger Sub immediately prior to the Effective Time shall be the initial
directors of the Surviving Corporation and (b) the officers of the Company immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation, in each case, unless otherwise determined by Parent prior to the Effective Time,
and until their respective successors are duly elected or appointed and qualified or until the earlier of their death, resignation
or removal in accordance with the memorandum and articles of association of the Surviving Corporation.
Article
II
CONVERSION OF SECURITIES; MERGER CONSIDERATION
Section 2.01 Conversion
of Securities.
At the Effective Time,
by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company or the holders of any securities
of the Company:
(a) each Class A ordinary
share, par value $0.01 each, of the Company (a “Class A Share” or, collectively, the “Class A Shares”)
issued and outstanding immediately prior to the Effective Time (other than the Excluded Shares, the Dissenting Shares and Class
A Shares represented by ADSs and Company RSs) shall be cancelled in exchange for the right to receive $3.55 in cash per Class A
Share without interest (the “Per Share Merger Consideration”) payable in the manner provided in Section 2.04;
(b) each American
Depositary Share, representing two (2) Class A Shares (each, an “ADS” or collectively, the “ADSs”),
issued and outstanding immediately prior to the Effective Time (other than ADSs representing the Excluded Shares), and each Class
A Share represented by such ADSs, shall be cancelled in exchange for the right to receive $7.10 in cash per ADS without interest
(the “Per ADS Merger Consideration”) pursuant to the terms and conditions set forth in this Agreement and the
Deposit Agreement; provided that in the event of any conflict between this Agreement and the Deposit Agreement, this Agreement
shall prevail;
(c) each of the Excluded
Shares issued and outstanding immediately prior to the Effective Time, shall be cancelled without payment of any consideration
or distribution therefor;
(d) each of the Dissenting
Shares shall carry no rights other than the right to receive the applicable payments set forth in Section 2.03;
(e) each of the Company
RSs shall be cancelled in accordance with Section 2.02(a) and thereafter represent only the right to receive the applicable payments
set forth in Section 2.02(c);
(f) each of the Company
RSUs shall be cancelled in accordance with Section 2.02(a) and thereafter represent only the right to receive the applicable payments
set forth in Section 2.02(c);
(g) all Shares issued
and outstanding immediately prior to the Effective Time, including Shares represented by ADSs, shall cease to be outstanding, shall
be cancelled and shall cease to exist, and the register of members of the Company shall be amended accordingly; and
(h) each ordinary
share, par value $0.01 each, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into
and become one validly issued, fully paid and non-assessable ordinary share, par value $0.01 each, of the Surviving Corporation.
Such ordinary shares shall constitute the only issued and outstanding share capital of the Surviving Corporation, which shall be
reflected in the register of members of the Surviving Corporation.
Section 2.02 Share
Incentive Plan, Outstanding Company Options, Company RS and Company RSUs.
(a) At the Effective
Time, the Company shall (i) terminate the Company’s Share Incentive Plan and any relevant award agreements entered into under
the Share Incentive Plan, (ii) cancel each Company Option that is outstanding and unexercised, whether or not vested or exercisable,
(iii) cancel each Company RS that is outstanding and (iv) cancel each Company RSU that is outstanding.
(b) Each former holder
(or his or her designee) of a Company Option that is cancelled at the Effective Time shall, in exchange thereof, be paid by the
Surviving Corporation or one of its Subsidiaries, as soon as practicable after the Effective Time (without interest), a cash amount
equal to the product of (i) the excess, if any, of the Per Share Merger Consideration over the Exercise Price of such Company
Option and (ii) the number of Shares underlying such Company Option; provided that if the Exercise Price of any such Company
Option is equal to or greater than the Per Share Merger Consideration, such Company Option shall be cancelled without any payment
therefor.
(c) Each former holder
(or his or her designee) of a Company RS that is cancelled at the Effective Time shall, in exchange thereof, be paid by the Surviving
Corporation or one of its Subsidiaries, as soon as practicable after the Effective Time (without interest), a cash amount equal
to the Per Share Merger Consideration for each cancelled Company RS of such former holder.
(d) Each former holder
(or his or her designee) of a Company RSU that is cancelled at the Effective Time shall, in exchange thereof, be paid by the Surviving
Corporation or one of its Subsidiaries, as soon as practicable after the Effective Time (without interest), a cash amount equal
to the Per Share Merger Consideration for each cancelled Company RSU of such former holder.
(e) Any payment under
this Section 2.02 shall be subject to all applicable Taxes and Tax withholding requirements, and each former holder of Company
Options, Company RSs and Company RSUs shall be personally responsible for the proper reporting and payment of all Taxes related
to any distribution contemplated by this Section 2.02.
(f) At or prior to
the Effective Time, the Company, the Company Board or the compensation committee of the Company Board, as applicable, shall pass
any resolutions and take any actions that are reasonably necessary to effectuate the provisions of this Section 2.02. The Company
shall take all reasonable actions necessary to ensure that from and after the Effective Time neither Parent nor the Surviving Corporation
will be required to issue Shares or other share capital of the Company or the Surviving Corporation to any person pursuant to the
Share Incentive Plan or in settlement of any Company Option, Company RS or Company RSU (as applicable). Promptly following the
date hereof, the Company shall deliver written notice to each holder of Company Options, Company RSs and/or Company RSUs informing
such holder of the effect of the Merger on his or her Company Options, Company RSs and/or Company RSUs (as applicable).
Section 2.03 Dissenting
Shares.
(a) Notwithstanding
any provision of this Agreement to the contrary and to the extent available under the CICL, Shares that are issued and outstanding
immediately prior to the Effective Time and that are held by shareholders who shall have validly exercised and not effectively
withdrawn or lost their rights to dissent from the merger, or dissenter rights, in accordance with Section 238 of the CICL (collectively,
the “Dissenting Shares” and holders of Dissenting Shares collectively being referred to as “Dissenting
Shareholders”) shall not be entitled to receive the Per Share Merger Consideration and shall instead be entitled to receive
only the payment of the fair value of such Dissenting Shares held by them determined in accordance with the provisions of Section
238 of the CICL.
(b) For the avoidance
of doubt, all Shares held by Dissenting Shareholders who shall have failed to exercise or who effectively shall have withdrawn
or lost their dissenter rights under Section 238 of the CICL shall thereupon (i) not be deemed to be Dissenting Shares and (ii)
be deemed to have been converted into, and to have become exchanged for, as of the Effective Time, the right to receive the Per
Share Merger Consideration, without any interest thereon, in the manner provided in Section 2.04. Parent shall promptly deposit
or cause to be deposited with the Paying Agent any additional funds necessary to pay in full the aggregate Per Share Merger Consideration
so due and payable to such shareholders who have failed to exercise or who shall have effectively withdrawn or lost such dissenter
rights under Section 238 of the CICL.
(c) The Company shall
give Parent (i) prompt notice of any notices of objection, notices of dissent or demands for appraisal, under Section 238 of the
CICL received by the Company, attempted withdrawals of such notices or demands, and any other instruments served pursuant to applicable
Laws of the Cayman Islands and received by the Company relating to its shareholders’ rights to dissent from the Merger or
appraisal rights and (ii) the opportunity to direct all negotiations and proceedings with respect to any such notice or demand
for appraisal under the CICL. The Company shall not, except with the prior written consent of Parent, make any payment with respect
to any exercise by a shareholder of its rights to dissent from the Merger or any demands for appraisal or offer to settle or settle
any such demands or approve any withdrawal of any such demands.
(d) In the event that
any written notices of objection to the Merger are served by any shareholders of the Company pursuant to section 238(2) of the
CICL, the Company shall serve written notice of the authorization and approval of this Agreement, the Plan of Merger and the Transactions
on such shareholders pursuant to section 238(4) of the CICL within 20 days of obtaining the Requisite Company Vote at the Shareholders’
Meeting.
Section 2.04 Exchange
of Share Certificates, etc.
(a) Paying Agent.
Prior to the Effective Time, Parent shall appoint a bank or trust company selected by Parent with the Company’s prior consent
(such consent not to be unreasonably withheld, conditioned or delayed) to act as paying agent (the “Paying Agent”)
for all payments required to be made pursuant to Section 2.01(a), Section 2.01(b) and Section 2.03(b) (collectively, the “Merger
Consideration”), and Parent shall enter into a paying agent agreement with the Paying Agent in form and substance reasonably
acceptable to the Company. At or prior to the Effective Time, or in the case of payments pursuant to Section 2.03(b), when ascertained
pursuant to Section 2.03(b), Parent shall deposit, or cause to be deposited, with the Paying Agent, for the benefit of the holders
of Shares and ADSs, cash in an amount sufficient to pay the Merger Consideration (such cash being hereinafter referred to as the
“Exchange Fund”).
(b) Exchange Procedures.
Promptly after the Effective Time (and in any event within three Business Days), the Surviving Corporation shall cause the Paying
Agent to mail to each person who was, at the Effective Time, a registered holder of Shares entitled to receive the Per Share Merger
Consideration pursuant to Section 2.01(a): (i) a letter of transmittal (which shall be in customary form for a company incorporated
in the Cayman Islands reasonably acceptable to Parent and the Company, and shall specify the manner in which the delivery of the
Per Share Merger Consideration to registered holders of Shares shall be effected and contain such other provisions as Parent and
the Company may mutually agree prior to the Effective Time) and (ii) instructions for use in effecting the surrender of any issued
share certificates representing Shares (the “Share Certificates”) (or affidavits and indemnities of loss in
lieu of the Share Certificates as provided in Section 2.04(c)) or non-certificated Shares represented by book entry (“Uncertificated
Shares”) and/or such other documents as may be required in exchange for the Per Share Merger Consideration. Upon surrender
of, if applicable, a Share Certificate (or affidavit and indemnity of loss in lieu of the Share Certificate as provided in Section
2.04(c)) or Uncertificated Shares and/or such other documents as may be required pursuant to such instructions to the Paying Agent
in accordance with the terms of such letter of transmittal, duly executed in accordance with the instructions thereto, each registered
holder of Shares represented by such Share Certificate (or affidavits and indemnities of loss in lieu of the Share Certificates
as provided in Section 2.04(c)) and each registered holder of Uncertificated Shares shall be entitled to receive in exchange therefor
a check, in the amount equal to (x) the number of Shares represented by such Share Certificate (or affidavit and indemnity of loss
in lieu of the Share Certificate as provided in Section 2.04(c)) or the number of Uncertificated Shares multiplied by (y)
the Per Share Merger Consideration, and any Share Certificate so surrendered shall forthwith be marked as cancelled. Prior to the
Effective Time, Parent and the Company shall establish procedures with the Paying Agent and the Depositary to ensure that (A) the
Paying Agent will transmit to the Depositary as promptly as reasonably practicable following the Effective Time an amount in cash
in immediately available funds equal to the product of (x) the number of ADSs issued and outstanding immediately prior to the Effective
Time (other than ADSs representing Excluded Shares) and (y) the Per ADS Merger Consideration and (B) the Depositary will distribute
the Per ADS Merger Consideration to holders of ADSs pro rata to their holdings of ADSs (other than ADSs representing Excluded Shares)
upon surrender by them of the ADSs. Pursuant to the terms of the Deposit Agreement, the ADS holders will pay any applicable fees,
charges and expenses of the Depositary and government charges (other than withholding Taxes, if any) due to or incurred by the
Depositary in connection with the cancellation of their ADSs. The Surviving Corporation will pay any applicable fees, charges and
expenses of the Depositary and government charges (other than withholding Taxes, if any) due to or incurred by the Depositary in
connection with the distribution of the Per ADS Merger Consideration to ADS holders and the termination of the ADS program or facility
(other than the ADS cancellation fee, which shall be payable in accordance with the Deposit Agreement). No interest shall be paid
or will accrue on any amount payable in respect of the Shares or ADSs pursuant to the provisions of this Article II. In the event
of a transfer of ownership of Shares that is not registered in the register of members of the Company, a check for any cash to
be exchanged upon due surrender of the Share Certificate may be issued to such transferee if the Share Certificates, if any, that
immediately prior to the Effective Time represented such Shares are presented to the Paying Agent, accompanied by all documents
reasonably required to evidence and effect such transfer and to evidence that any applicable share transfer Taxes have been paid
or are not applicable.
(c) Lost Certificates.
If any Share Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Share Certificate to be lost, stolen or destroyed and, if required by the Surviving Corporation or the Paying Agent,
the posting by such person of a bond, in such reasonable amount as the Surviving Corporation or the Paying Agent may direct, as
indemnity against any claim that may be made against it with respect to such Share Certificate, the Paying Agent will pay in respect
of such lost, stolen or destroyed Share Certificate an amount equal to the Per Share Merger Consideration multiplied by
the number of Shares represented by such Share Certificate to which the holder thereof is entitled pursuant to Section 2.01(a).
(d) Untraceable
and Dissenting Shareholders. Remittances for the Per Share Merger Consideration or the Per ADS Merger Consideration, as the
case may be, shall not be sent to holders of Shares or ADSs who are untraceable unless and until, except as provided below, they
notify the Paying Agent or the Depositary, as applicable, of their current contact details. A holder of Shares or ADSs will be
deemed to be untraceable if (i) such person has no registered address in the register of members (or branch register) maintained
by the Company or the Depositary, as applicable, (ii) on the last two consecutive occasions on which a dividend has been paid by
the Company a check payable to such person either (A) has been sent to such person and has been returned undelivered or has not
been cashed or (B) has not been sent to such person because on an earlier occasion a check for a dividend so payable has been returned
undelivered, and in any such case no valid claim in respect thereof has been communicated in writing to the Company or the Depositary,
as applicable or (iii) notice of the Shareholders’ Meeting convened to vote on the Merger has been sent to such person and
has been returned undelivered. Monies due to Dissenting Shareholders and shareholders of the Company who are untraceable shall
be returned to the Surviving Corporation on demand and held in a non-interest bearing bank account for the benefit of Dissenting
Shareholders and shareholders of the Company (including holders of ADSs) who are untraceable. Monies unclaimed after a period of
seven years from the Closing Date shall be forfeited and shall revert to the Surviving Corporation.
(e) Adjustments
to Merger Consideration. The Per Share Merger Consideration and the Per ADS Merger Consideration shall be equitably adjusted
to reflect appropriately the effect of any share split, reverse share split, share dividend (including any dividend or distribution
of securities convertible into Shares), extraordinary cash dividends, reorganization, recapitalization, reclassification, combination,
exchange of shares or other like change with respect to Shares occurring on or after the date hereof and prior to the Effective
Time and to provide to the holders of Shares (including Shares represented by ADSs), Company Options, Company RSs and Company RSUs
the same economic effect as contemplated by this Agreement prior to such action.
(f) Investment
of Exchange Fund. The Exchange Fund, pending its disbursement to the holders of Shares and ADSs, shall be invested by the Paying
Agent as directed by Parent; provided that (i) Parent shall not direct the Paying Agent to make any such investments that
are speculative in nature and (ii) no such investment or losses shall affect the amounts payable to such holders and Parent shall
promptly replace or cause to be replaced any funds deposited with the Paying Agent that are lost through any investment so as to
ensure that the Exchange Fund is at all times maintained at a level sufficient for the Paying Agent to pay the Merger Consideration.
Earnings from investments shall be the sole and exclusive property of Parent and the Surviving Corporation. Except as contemplated
by Section 2.04(b) and this Section 2.04(f), the Exchange Fund shall not be used for any other purpose.
(g) Termination
of Exchange Fund. Any portion of the Exchange Fund that remains unclaimed by the holders of Shares or ADSs for six months after
the Effective Time shall be delivered to the Surviving Corporation upon demand, and any holders of Shares and ADSs who have not
theretofore complied with this Article II shall thereafter look only to the Surviving Corporation for the cash to which they are
entitled pursuant to Section 2.01(a) and Section 2.01(b).
(h) No Liability.
None of the Paying Agent, the Rollover Shareholders, the Sponsors, Parent, the Surviving Corporation or the Depositary shall be
liable to any former holder of Shares for any such Shares (including Shares represented by ADSs) (or dividends or distributions
with respect thereto) or cash properly delivered to a public official pursuant to any applicable abandoned property, bona vacantia,
escheat or similar Law. Any amounts remaining unclaimed by such holders at such time at which such amounts would otherwise escheat
to or become property of any Governmental Authority shall become, to the extent permitted by applicable Laws, the property of the
Surviving Corporation or its designee, free and clear of all claims or interest of any person previously entitled thereto.
(i) Withholding
Rights. Each of Parent, the Surviving Corporation, the Paying Agent and the Depositary shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement to any holder of Shares, ADSs, Company Options, Company RSs
or Company RSUs such amounts as it is required to deduct and withhold with respect to the making of such payment under any provision
of applicable Tax Law. To the extent that amounts are so withheld by Parent, the Surviving Corporation, the Paying Agent or the
Depositary, as the case may be, such withheld amounts shall be (i) remitted by Parent, the Surviving Corporation, the Paying Agent
or the Depositary to the applicable Governmental Authority and (ii) to the extent so remitted, treated for all purposes of
this Agreement as having been paid to the holder of the Shares, ADSs, Company Options, Company RSs or Company RSUs in respect of
which such deduction and withholding was made by Parent, the Surviving Corporation, the Paying Agent or the Depositary, as the
case may be.
Section 2.05 No
Transfers.
From and after the
Effective Time, (a) no transfers of Shares shall be effected in the register of members of the Company and (b) the holders of Shares
(including Shares represented by ADSs) issued and outstanding immediately prior to the Effective Time shall cease to have any rights
with respect to such Shares, except as otherwise provided in this Agreement or by Law. On or after the Effective Time, any Share
Certificates presented to the Paying Agent, Parent or Surviving Corporation for transfer or any other reason shall be canceled
in exchange for the right to receive the cash consideration to which the holders thereof are entitled under this Article II in
the case of Shares other than the Excluded Shares, and for no consideration in the case of Excluded Shares.
Section 2.06 Termination
of Deposit Agreement.
As soon as reasonably
practicable after the Effective Time, the Surviving Corporation shall provide notice to JPMorgan Chase Bank, N.A. (the “Depositary”)
to terminate the deposit agreement, dated September 24, 2009 between the Company, the Depositary and all holders from time to time
of ADSs issued thereunder (the “Deposit Agreement”) in accordance with its terms.
Section 2.07 Agreement
of Fair Value.
Parent, Merger Sub
and the Company respectively agree that the Per Share Merger Consideration represents the fair value of the Shares for the purposes
of Section 238(8) of the CICL.
Article
III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except (a) as set forth
in the Company Disclosure Schedule (it being understood that (1) any information set forth in one section or subsection of the
Company Disclosure Schedule shall be deemed to apply to and qualify the section or subsection of this Agreement to which it corresponds
in number and each other section or subsection of this Agreement to the extent that it is reasonably apparent that such information
is relevant to such other section or subsection, and (2) notwithstanding that any representation specifically references a section
or subsection of the Company Disclosure Schedule, each representation shall be deemed to be qualified by any information in the
Company Disclosure Schedule where it is reasonably apparent that such information is relevant to such representation), and (b)
as disclosed in the Company SEC Reports filed or furnished prior to the date of this Agreement (excluding any language in such
reports that is predictive or forward-looking, in each case other than any specific factual information contained therein), the
Company hereby represents and warrants to Parent and Merger Sub that:
Section 3.01 Organization
and Qualification; Subsidiaries.
Each of the Company
and its Subsidiaries (i) is an entity duly organized, validly existing and in good standing (with respect to jurisdictions that
recognize the concept of good standing) under the Laws of the jurisdiction of its organization and (ii) has the requisite corporate
or similar power and authority to own, lease and operate its properties and assets and to carry on its business as it is now being
conducted, except, with respect to clause (ii), where the failure to have such power and authority would not reasonably be expected
to have a Company Material Adverse Effect. The Company and each of its Subsidiaries is duly qualified or licensed as a foreign
corporation or other legal entity to do business, and is in good standing (with respect to jurisdictions that recognize the concept
of good standing), in each jurisdiction where the character of the properties or assets owned, leased or operated by it or the
nature of its business makes such qualification or licensing necessary, except where the failure to be so qualified or licensed
or in good standing would not reasonably be expected to have a Company Material Adverse Effect.
Section 3.02 Memorandum
and Articles of Association.
Except as disclosed
in Section 3.02 of the Company Disclosure Schedule, the memorandum and articles of association or other equivalent organizational
documents, as applicable, of each of the Company and its Subsidiaries are in full force and effect. Neither the Company nor any
of its Subsidiaries is in violation of any of the provisions of its memorandum and articles of association or equivalent organizational
documents, as applicable, in any material respect.
Section 3.03 Capitalization.
(a) The authorized
share capital of the Company consists of 16,000,000,000 Class A Shares and 4,000,000,000 Class B ordinary shares of a nominal or
par value of $0.01 each (“Class B Shares” and together with the Class A Shares, the “Shares”).
As of the date hereof, (i) 443,179,215 Class A Shares (which number includes 11,440,370 vested Company RSs and 768,020 vested Company
RSUs) and 97,518,374 Class B Shares are issued and outstanding, all of which are duly authorized, validly issued, fully paid and
non-assessable, (ii) 11,666,618 Shares are reserved for future issuance pursuant to outstanding Company Options, and (iii) 626,377
Shares and 136,368 Shares are reserved for future issuance pursuant to outstanding unvested Company RSUs and unvested Company RSs,
respectively. Each Company Option, Company RS and Company RSU was granted in accordance with all applicable Laws in all material
respects, all of the terms and conditions of the relevant Share Incentive Plan and in compliance with the rules and regulations
of the NASDAQ (“NASDAQ”) in all material respects. All Shares subject to issuance as aforesaid, upon issuance
on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly
issued, fully paid and non-assessable.
(b) Except for
the Company Options, Company RSs and Company RSUs referred to in Section 3.03(a)
or as disclosed in Section 3.03(b) of the Company Disclosure Schedule, there are no options, warrants, convertible debt,
other convertible instruments or other rights, agreements, arrangements or commitments of any character issued by the Company
or any of its Subsidiaries relating to the issued or unissued share capital of the Company or any of its Subsidiaries or
obligating the Company or any of its Subsidiaries to issue or sell any shares of capital stock or other securities of the
Company or any of its Subsidiaries or any securities or obligations convertible or exchangeable into or exercisable for, or
giving any person a right to subscribe for or acquire, any securities of the Company or any of its Subsidiaries and no
securities or obligations evidencing such rights are authorized, issued or outstanding. There are no outstanding contractual
obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any Shares or any share
capital or other securities of the Company or any of its Subsidiaries. As of the date of this Agreement, no bonds,
debentures, notes or other Indebtedness of the Company having the right to vote (or convertible into or exercisable for
securities having the right to vote) on any matters on which shareholders of the Company may vote are issued or
outstanding.
(c) Each outstanding
share of capital stock of, or other equity interest in, each Subsidiary wholly-owned by the Company is (i) duly authorized, validly
issued, fully paid and non-assessable (to the extent such concept is applicable in the relevant jurisdiction), (ii) owned
by the Company or another of its wholly-owned Subsidiaries free and clear of all Liens (other than Permitted Encumbrances) and
(iii) not subject to any outstanding obligations of the Company or any of its Subsidiaries requiring the registration under any
securities Law for sale of such share of capital stock or other equity interests. Each outstanding share of capital stock of or
other equity interest that is directly or indirectly owned by the Company in each Subsidiary that is not wholly-owned by the Company
is (i) duly authorized, validly issued, fully paid and non-assessable (to the extent such concept is applicable in the relevant
jurisdiction), (ii) owned by the Company or another of its Subsidiaries free and clear of all Liens (other than Permitted Encumbrances)
and (iii) not subject to any outstanding obligations of the Company or any of its Subsidiaries requiring the registration under
any securities Law for sale of such share of capital stock or other equity interest.
Section 3.04 Authority
Relative to This Agreement.
(a) The Company has
all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and, subject
to receipt of the Company Shareholder Approval, to consummate the Transactions. The execution and delivery of this Agreement by
the Company and the consummation by the Company of the Transactions have been duly and validly authorized by all necessary corporate
action, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate
the Transactions (other than, with respect to the approval of this Agreement and the Merger, obtaining the Company Shareholder
Approval). This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization,
execution and delivery by 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 bankruptcy, insolvency (including all Laws relating to fraudulent
transfers), reorganization, moratorium and similar Laws of general applicability relating to or affecting creditors’ rights
and to general equity principles (the “Bankruptcy and Equity Exception”).
(b) The Company Board,
acting upon the unanimous recommendation of the Special Committee, by resolutions duly adopted by unanimous vote of those directors
voting at a meeting duly called and held and not subsequently rescinded or modified in a manner adverse to Parent, has (i) determined
that the execution of this Agreement and the Plan of Merger and the consummation of the Transactions, including the Merger, are
fair to, and in the best interests of, the Company and its shareholders (other than holders of Excluded Shares); (ii) approved
and declared advisable the Merger, the other Transactions and this Agreement; (iii) resolved to recommend the approval and adoption
of this Agreement, the Plan of Merger and the Transactions to the holders of Shares, and directed that this Agreement be submitted
for approval by the shareholders of the Company at the Shareholders’ Meeting (the “Company Recommendation”)
and (iv) taken all such actions as may be required to enter into this Agreement and, as of the Closing Date, shall have taken all
actions as may be required to be taken by the Company to effect the Transactions, including obtaining any necessary consents in
respect of the Share Incentive Plans.
(c) The only vote
of the holders of any class or series of share capital of the Company necessary to approve and adopt this Agreement and the Merger
is the affirmative vote of shareholders holding two-thirds or more of the voting power represented by the Shares present and voting
in person or by proxy as a single class at the Shareholders’ Meeting (the “Requisite Company Vote”).
Section 3.05 No
Conflict; Required Filings and Consents.
(a) The execution
and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company and the consummation
of the Merger will not, (i) assuming the Requisite Company Vote is obtained, conflict with or violate the memorandum and articles
of association or other equivalent organizational documents of the Company or any of its Subsidiaries; (ii) assuming all consents,
approvals, authorizations and other actions described in Section 3.05(b) have been obtained or taken and all filings and obligations
described in Section 3.05(b) have been made or satisfied and that the Requisite Company Vote is obtained, conflict with or violate
any Law applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries
is bound or affected; or (iii) violate, conflict with, require consent under, result in any breach of, result in loss of benefit
under, or constitute a default (or an event that, with notice or lapse of time or both, would become a default) under, or give
to others any right of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on any property
or asset of the Company or any of its Subsidiaries (other than Permitted Encumbrances) pursuant to, any note, bond, mortgage, indenture,
deed of trust, contract, agreement, Lease, license, Company Permit or other instrument or obligation to which the Company of any
of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any of their respective assets or properties
is bound or affected, except, (1) with respect to clauses (ii) and (iii), for any such conflicts, violations, breaches, defaults
or other occurrences which would not reasonably be expected to have a Company Material Adverse Effect, and (2) with respect to
clause (iii), as disclosed in Section 3.05(a)(iii) of the Company Disclosure Schedule.
(b) Other than filings
and/or notices required for (i) compliance with the applicable requirements of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”) and the rules and regulations promulgated thereunder (including the joining of the Company
in the filing of the Schedule 13E-3, the furnishing of Form 6-K with the proxy statement relating to the Merger (including any
amendment or supplement thereto, the “Proxy Statement”), and the filing or furnishing of one or more amendments
to the Schedule 13E-3 and such Form 6-K to respond to comments of the SEC, if any, on the Schedule 13E-3 and such Form 6-K), (ii)
compliance with the rules and regulations of NASDAQ, (iii) the filing of the Plan of Merger and related documentation with the
Registrar of Companies of the Cayman Islands and the publication of notification of the Merger in the Cayman Islands Government
Gazette pursuant to the CICL, and (iv) the consent, approvals, authorizations or permits of, or filing with or notifications
to, the Governmental Authorities set forth in Section 3.05(b) of the Company Disclosure Schedule (collectively, the “Requisite
Regulatory Approvals”), no notices, reports or other filings are required to be made by the Company with, nor are any
consents, registrations, approvals, permits or authorizations required to be obtained by the Company from, any Governmental Authority
in connection with the execution, delivery and performance of this Agreement by the Company and the consummation by the Company
of the Merger and the other Transactions, except for those that the failure to make or obtain would not reasonably be expected
to have a Company Material Adverse Effect.
Section 3.06 Permits;
Compliance.
(a) Except as disclosed
in Section 3.06(a) of the Company Disclosure Schedule, (i) the business of each of the Company and its Subsidiaries is conducted
in compliance with all Laws applicable to the Company or such Subsidiary or by which any property, asset or right of the Company
or such Subsidiary is bound, (ii) the Company is in compliance with the applicable listing, corporate governance and other rules
and regulations of NASDAQ, (iii) each of the Company and its Subsidiaries is in possession of all Company Permits necessary for
the lawful conduct of its business and the ownership, use, occupancy and operation of its assets and properties, (iv) all approvals
of, and filings and registrations and other requisite formalities with, Governmental Authorities in the PRC required to be made
by the Company or its Subsidiaries in respect of the Company and the Subsidiaries and their capital structure and operations, including
registrations with the State Administration for Industry and Commerce, the State Administration of Foreign Exchange (“SAFE”)
and the State Administration of Taxation, and their respective local counterparts, have been duly completed in accordance with
applicable PRC Laws, (v) each of the Company and its Subsidiaries is in compliance with the terms of such Company Permits, and
(vi) no such Company Permit shall cease to be effective as a result of the Transactions, except, in each case, for such non-compliance,
non-possession or failure to complete or remain effective as would not reasonably be expected to have a Company Material Adverse
Effect. Without limiting the foregoing, each of the Company and its Subsidiaries is in compliance with all applicable Law relating
to: (A) the privacy of users of (including Internet users who view or interact with) the Company Products and all of the Company’s
and its Subsidiaries’ websites; and (B) the collection, use, storage, retention, disclosure, and disposal of any Personal
Information collected by the Company or any of its Subsidiaries, or, to the knowledge of the Company, by third parties acting on
the Company’s or any of its Subsidiaries’ behalf or having authorized access to the Company’s or any of its Subsidiaries’
records, except, in each case, for such non-compliance as would not reasonably be expected to have a Company Material Adverse Effect.
(b) In the past three
(3) years, except as would not reasonably be expected to have a Company Material Adverse Effect, none of the Company, any
of its Subsidiaries or any of their respective directors, officers or employees or, to the knowledge of the Company, any agent
or any other person acting for or on behalf of the Company or any of its Subsidiaries (each, a “Company Affiliate”)
has (i) made any bribe, influence payment, kickback, payoff, or any other type of payment that would be unlawful under any applicable
Law or (ii) offered, paid, promised to pay, or authorized any payment or transfer of, anything of value, directly or indirectly,
to any Government Official for the purpose of (1) improperly influencing any act or decision of such Government Official in his
official capacity, (2) improperly inducing such Government Official to do or omit to do any act in relation to his lawful duty,
(3) securing any improper advantage, or (4) inducing such Government Official to improperly influence or affect any act or decision
of any Governmental Authority, in each case, in order to assist the Company or any of its Subsidiaries in obtaining or retaining
business for or with, or in directing business to, any person.
Section 3.07 SEC
Filings; Financial Statements.
(a) The Company has
filed or furnished, as the case may be, all forms, reports, statements, schedules and other documents required to be filed with
or furnished to the Securities and Exchange Commission (the “SEC”) by it since December 31, 2012 (the “Company
SEC Reports”). The Company SEC Reports (i) at the time they were filed and, if amended, as of the date of such amendment,
complied in all material respects with all applicable requirements of the Securities Act of 1933, as amended (the “Securities
Act”) or the Exchange Act (in each case, including the rules and regulations promulgated thereunder), and (ii) did not,
at the time they were filed, and, if amended, as of the date of such amendment, contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
(b) The Company maintains
internal control over financial reporting (as defined in Rule 13a-15 or 15d-15, as applicable, of the Exchange Act) that is designed
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with GAAP.
(c) The audited consolidated
financial statements included in or incorporated by reference into the Company SEC Reports (including the related notes and schedules)
fairly present, or, in the case of Company SEC Reports filed after the date hereof, will fairly present, in all material respects,
the consolidated financial position of the Company and its consolidated Subsidiaries as of their respective dates, and the consolidated
results of operations, changes in shareholders’ equity and cash flows, as the case may be, of the Company and its consolidated
Subsidiaries for the periods set forth therein, in each case in accordance with GAAP, except to the extent that such information
has been amended or superseded by later Company SEC Reports filed prior to the date hereof.
(d) The Company has
implemented disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) that are designed to ensure that
material information relating to the Company required to be included in reports filed 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 other persons performing
similar functions), as appropriate, to allow timely decisions regarding required disclosure. Neither the Company nor, to the Company’s
knowledge, its independent registered public accounting firm, has identified or been made aware of any “significant deficiencies”
or “material weaknesses” (as defined by the Public Company Accounting Oversight Board) in the design or operation of
the internal controls and procedures of the Company which are reasonably likely to adversely affect the ability of the Company
to record, process, summarize and report financial data, in each case which has not been subsequently remediated. To the Company’s
knowledge, there is, and since December 31, 2011 there has been, no fraud, whether or not material, that involves the management
of the Company or other employees who have a significant role in the internal controls over financial reporting utilized by the
Company.
Section 3.08 No
Undisclosed Liabilities. Except as disclosed in Section 3.08 of the Company Disclosure Schedule, none of the Company
or any Subsidiary of the Company has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise)
that would be required by GAAP to be reflected on a consolidated balance sheet of the Company and its Subsidiaries, except for
liabilities or obligations (i) which have not and would not reasonably be expected to have a Company Material Adverse Effect,
(ii) reflected or reserved against in the 2014 Balance Sheet, (iii) incurred after December 31, 2014, in the ordinary course of
business consistent with past practice, or (iv) incurred pursuant to the Transactions.
Section 3.09 Absence
of Certain Changes or Events. Except as disclosed in Section 3.09 of the Company Disclosure Schedule, since December
31, 2014, (a) the Company and its Subsidiaries have conducted their respective businesses in all material respects in the ordinary
course of business consistent with past practice, and (b) there has not been (A) any Company Material Adverse Effect, (B) any
declaration, setting aside or payment of any dividend or other distribution with respect to any shares of share capital of the
Company or any of its Subsidiaries (except for dividends or other distributions by any Subsidiary of the Company to the Company
or to any other Subsidiary of the Company), (C) any adoption of, resolution to approve or petition or similar proceeding or order
in relation to, a plan of complete or partial liquidation, dissolution, scheme of arrangement, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company or any of its Subsidiaries, or (D) any receiver, trustee, administrator
or other similar person appointed in relation to the affairs of the Company or its property or any part thereof.
Section 3.10 Absence
of Litigation. Except as disclosed in Section 3.10 of the Company Disclosure Schedule, as of the date hereof, there
is no Proceeding pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries or any
property or asset of the Company or any of its Subsidiaries before any Governmental Authority that has had or would reasonably
be expected to have a Company Material Adverse Effect. None of the Company, its Subsidiaries or any material property or asset
of the Company or any of its Subsidiaries is subject to any continuing order of, consent decree, settlement agreement or other
similar written agreement with, or, to the knowledge of the Company, continuing investigation by, any Governmental Authority or
any Order of any Governmental Authority, except as would not reasonably be expected to have a Company Material Adverse Effect.
Section 3.11 Employee
Benefit Plans. True and complete copies of all material benefit and compensation plans, agreements, or arrangements,
including plans and agreements to provide severance, change-in-control or retention bonuses, profit-sharing, equity compensation
or incentives, deferred compensation, welfare benefits or fringe benefits, employment or consulting agreements (collectively,
the “Plans”) covering current or former directors, employees or consultants of the Company or any of its Subsidiaries
(or a summary thereof, if any Plan is not in writing), including all amendments thereto, have been provided or made available
to Parent and Merger Sub, and Section 3.11(a) of the Company Disclosure Schedule sets forth a complete list of the Plans; provided
that with respect to each Plan that is documented on a standard form or template, only such standard form or template is listed
in Section 3.11(a) of the Company Disclosure Schedule and only a copy of such standard form or template has been provided or made
available to Parent and Merger Sub. Except as disclosed in Section 3.11(a) of the Company Disclosure Schedule: (i) neither the
Company nor any of its Subsidiaries has made any commitment, whether legally binding or not, to create any additional Plan or
materially modify or change any existing Plan and (ii) since December 31, 2014 there has been no material change, amendment, modification
to, or adoption of, any Plan.
(b) Except as otherwise
specifically provided in this Agreement regarding the Company Options, Company RSs and Company RSUs, neither the execution and
delivery of this Agreement nor the consummation of the Transactions (either alone or in conjunction with another event, such as
a termination of employment) will (x) result in any material payment becoming due to any current or former director, employee or
consultant of the Company or any of its Subsidiaries under any of the Plans or otherwise; (y) materially increase any benefits
otherwise payable under any of the Plans; or (z) result in any acceleration of the time of payment or vesting of any such material
payments or benefits.
(c) There is no outstanding
Order against the Plans that would reasonably be expected to have a Company Material Adverse Effect. (i) Each document prepared
in connection with each Plan complies in all material respects with applicable Law; (ii) each Plan has been operated in material
compliance with its terms, applicable Law, and, to the extent applicable, in accordance with generally accepted accounting practices
in the applicable jurisdiction applied to such matters; (iii) no circumstance, fact or event exists that would result in any material
default under, or violation of, any Plan; and (iv) no material Proceeding is pending or, to the knowledge of the Company, threatened
with respect to any Plan.
(d) Except as disclosed
in Section 3.11(d) of the Company Disclosure Schedule, the Company is not obligated, pursuant to any of the Plans, to grant any
options or other rights to purchase Shares to any director, employee or, consultant of the Company or any of its Subsidiaries after
the date hereof.
Section 3.12 Labor
and Employment Matters.
(a) Neither the Company
nor any of its Subsidiaries is a party to any collective bargaining agreement applicable to persons employed by the Company or
any of its Subsidiaries. Except as would not have a Company Material Adverse Effect, (i) neither the Company nor any of its Subsidiaries
has breached or otherwise failed to comply in any respect with the provisions of any collective bargaining agreement and there
are no grievances outstanding against the Company or any of its Subsidiaries under any such agreement and (ii) there are no employment
related or unfair labor practice complaints pending against the Company or any of its Subsidiaries before any Governmental Authority.
No labor strikes, work stoppages, slowdowns or other material labor disputes are underway or have occurred or, to the knowledge
of the Company, been threatened in the past three (3) years.
(b) Except as disclosed
in Section 3.12(b) of the Company Disclosure Schedule or as would not reasonably be expected to have a Company Material Adverse
Effect, (i) the Company and its Subsidiaries are currently in compliance in all respects with all Laws relating to the employment
of labor, including those related to wages, hours, collective bargaining, retaliation, civil rights, safety and health, immigration
laws, and the payment and withholding of Taxes; and (ii) to the Company’s knowledge, there is no charge of discrimination
in employment or employment practices for any reason, including age, gender, race, religion or other legally protected category,
which has been asserted or is now pending or threatened, against the Company or any of its Subsidiaries before any Governmental
Authority in any jurisdiction in which the Company or any of its Subsidiaries has employed or currently employs any person.
Section 3.13 Real
Property.
(a) Section 3.13(a)
of the Company Disclosure Schedule sets forth all of the real property owned by the Company and its Subsidiaries that is material
to the business of the Company and its Subsidiaries taken as a whole (the “Owned Real Property”). Except as
would not reasonably be expected to have a Company Material Adverse Effect, each of the Company and its Subsidiaries has good and
marketable title to each parcel of Owned Real Property, free and clear of all Liens, except Permitted Encumbrances.
(b) The Company has
made available to Parent copies of all Leases under which the Company or any of its Subsidiaries uses or occupies or has the right
to use or occupy, now or in the future, any real property that is material to the business of the Company and its Subsidiaries
taken as a whole (the “Leased Real Property”) (and all modifications, amendments and supplements thereto). Except
as disclosed in Section 3.13(b) of the Company Disclosure Schedule or as would not reasonably be expected to have a Company Material
Adverse Effect, each of the Company and its Subsidiaries has a good and valid leasehold interest in each parcel of the Leased Real
Property, free and clear of all Liens, except Permitted Encumbrances.
(c) As of the date
of this Agreement, no third party to any such Leases has given written notice to the Company or any of its Subsidiaries or made
a written claim against the Company or any of its Subsidiaries with respect to any material breach or default thereunder.
(d) Except as would
not reasonably be expected to have a Company Material Adverse Effect, the Company and its Subsidiaries have good and marketable
title to, or a valid and binding leasehold interest in, all other properties and assets (excluding Owned Real Property, Leased
Real Property and Intellectual Property) that are material to the business of the Company and its Subsidiaries taken as a whole,
in each case free and clear of all Liens, except Permitted Encumbrances.
Section 3.14 Intellectual
Property.
(a) Section 3.14(a)
of the Company Disclosure Schedule contains a list of (i) each item of Registered IP in which the Company or any of its Subsidiaries
has or purports to have an ownership interest of any nature (whether exclusively, jointly with another person, or otherwise), (ii)
the jurisdiction in which such item of Registered IP has been registered or filed and the applicable application, registration,
or serial or other similar identification number, and (iii) any other person that, to the knowledge of the Company, has an ownership
interest in such item of Registered IP and the nature of such ownership interest.
(b) Except as would
not reasonably be expected to have a Company Material Adverse Effect or as disclosed in Section 3.14(b) of the Company Disclosure
Schedule, the Company and its Subsidiaries have valid and enforceable rights to use all Intellectual Property and Technology used
in, or necessary to conduct, the business of the Company or its Subsidiaries as it is currently conducted (the “Company
Intellectual Property”), free and clear of all Liens (other than Permitted Encumbrances).
(c) Except as would
not reasonably be expected to have a Company Material Adverse Effect, neither the Company nor any of its Subsidiaries has received
written notice of any claim that it, or the business conducted by it, is infringing, diluting, disclosing without authorization
or misappropriating or has infringed, diluted, disclosed without authorization or misappropriated any Intellectual Property right
of any person, including any demands or unsolicited offers to license any Intellectual Property. Except as would not reasonably
be expected to have a Company Material Adverse Effect, to the knowledge of the Company, neither the Company nor any of its Subsidiaries
nor the business conducted by the Company or any of its Subsidiaries infringes, dilutes, discloses without authorization or misappropriates
any Intellectual Property rights of any person or engages in unfair competition or trade practices under the Laws of any relevant
jurisdiction. Except as would not reasonably be expected to have a Company Material Adverse Effect, to the knowledge of the Company,
no third party is currently infringing, diluting, disclosing without authorization or misappropriating any Company Owned IP.
(d) Except as would
not reasonably be expected to have a Company Material Adverse Effect, there are no pending or, to the knowledge of the Company,
threatened, Proceedings by any person challenging the validity or enforceability of, or the use or ownership by the Company or
any of its Subsidiaries of, any of the Company Intellectual Property, or to the knowledge of the Company, against any Person who
may be entitled to be indemnified or reimbursed by the Company or any of its Subsidiaries with respect to such Proceeding.
(e) Except as would
not reasonably be expected to have a Company Material Adverse Effect, the Company and each of its Subsidiaries own all right, title
and interest in and to all Intellectual Property and Technology owned by, claimed or purported to be owned by, or created or developed
by, for or under the direction or supervision of, the Company or any such Subsidiary (collectively, “Company Owned IP”),
free and clear of any Liens (other than Permitted Encumbrances), and all current or former employees, consultants, or contractors
of the Company and each such Subsidiary, as applicable, who are participating or have participated in the creation or development
of any such Company Owned IP, have executed and delivered to the Company or such Subsidiary a valid and enforceable agreement (i)
providing for the non-disclosure and restricted use by such person of confidential information (ii) providing for the assignment
by such person to the Company or such Subsidiary of any Intellectual Property developed or arising out of such person’s employment
by or engagement by the Company or such Subsidiary, and (iii) providing for the waiver of any non-assignable rights, including
moral rights, to such Company Owned IP. Except as would not reasonably be expected to have a Company Material Adverse Effect, to
the knowledge of the Company, no employee of the Company or any of its Subsidiaries is (1) bound by or otherwise subject to any
Contract restricting such employee from performing their duties for the Company or any such Subsidiary or (2) in breach of any
Contract with any former employer or other person concerning Intellectual Property rights or confidentiality due to their activities
as an employee of the Company or any such Subsidiary. Except as would not reasonably be expected to have a Company Material Adverse
Effect, neither the Company nor any of its Subsidiaries has transferred ownership of (whether a whole or partial interest), or
granted any exclusive right to use, any Company Owned IP to any person.
(f) Except as disclosed
in Section 3.14(f) of the Company Disclosure Schedule, the Company and its Subsidiaries have taken all actions reasonably necessary
to maintain and protect each material item of Company Owned IP. Immediately subsequent to the Effective Time, the Company Intellectual
Property shall be owned by or available for use by the Company and its Subsidiaries on terms and conditions materially identical
to those under which the Company and its Subsidiaries owned or used the Company Intellectual Property immediately prior to the
Effective Time.
(g) Except as disclosed
in Section 3.14(g) of the Company Disclosure Schedule or as would not reasonably be expected to have a Company Material Adverse
Effect, neither the execution, delivery, or performance of this Agreement by the Company nor the consummation of the Merger will,
with or without notice or the lapse of time, result in, or give any other person the right or option to cause or declare, (i) a
loss of, or Lien on, any Company Owned IP; (ii) a breach, termination, suspension, acceleration or modification of any right or
obligation under any Company IP Contract; (iii) the release, disclosure or delivery of any Company Owned IP by or to any escrow
agent or other person; (iv) the grant, assignment or transfer by the Company or any Subsidiary to any other person of any license
or other right or interest under, to, or in any Company Intellectual Property; or (v) payment of any amount or offer of any discounts
by the Company or any Subsidiary in connection with any Company Intellectual Property to any person, in each case in a manner other
than that in which the Company or any of its Subsidiaries would be obligated had the Transactions not occurred.
(h) Except as would
not reasonably be expected to have a Company Material Adverse Effect, no funding, facilities, or personnel of any Governmental
Authority or any public or private university, college or other educational or research institution were used, directly or indirectly,
to develop or create, in whole or in part, any Company Owned IP.
(i) Section 3.14(i)
of the Company Disclosure Schedule contains a list and description of all standard-setting organizations, industry bodies and other
standards related activities in which the Company or any of its Subsidiaries has participated in or contributed to, as well as
a list of Patents which the Company or any of its Subsidiaries license as a result of its participation in such standards bodies.
(j) Except as would
not reasonably be expected to have a Company Material Adverse Effect, to the knowledge of the Company, no Software used in the
operation of the business of the Company and any of its Subsidiaries, including in or for the Company Products (collectively, “Company
Software”) contains any “back door,” “drop dead device,” “time bomb,” “Trojan
horse,” “virus,” “worm,” “spyware” or “adware” (as such terms are commonly
understood in the software industry) or any other code designed or intended to disrupt or disable the operation of, or provide
unauthorized access to, a computer system or network or compromise the privacy or data security of a user.
(k) No Source Code
for Software included in the Company Owned IP for any Company Product has been delivered, licensed, or made available to any escrow
agent or other person who is not, as of the date of this Agreement, an employee of the Company or any of its Subsidiaries. Neither
the Company nor any of its Subsidiaries has any duty or obligation (whether present, contingent or otherwise) to deliver, license,
or make available such Source Code for any Company Product to any escrow agent or other person. No event has occurred, and no circumstance
or condition exists, that (with or without notice or lapse of time) will, or would reasonably be expected to, result in the delivery,
license or disclosure of any such Source Code for any Company Product to any other person who is not, as of the date of this Agreement,
an employee of the Company or any of its Subsidiaries.
(l) No Company Software
included in the Company Owned IP is subject to any “copyleft” or other obligation or condition (including any obligation
or condition under any “open source” license such as the GNU Public License, Lesser GNU Public License, or Mozilla
Public License) that (i) could require, or could condition the use or distribution of such Company Software or portion thereof
on, (A) the disclosure, licensing or distribution of any Source Code for any portion of such Company Software, or (B) the granting
to licensees of the right to make derivative works or other modifications to such Company Software or portions thereof, (C) the
licensing under terms that allow the Company Software or portions thereof or interfaces therefor to be reverse engineered, reverse
assembled or disassembled (other than by operation of law), or (D) redistribution at no license fee or (ii) could otherwise impose
any limitation, restriction or condition on the right or ability of the Company or any of its Subsidiaries to use, distribute or
charge for any such Company Software.
(m) Except as would
not reasonably be expected to have a Company Material Adverse Effect, the Company IT Assets are adequate for, and operate and perform
in accordance with their documentation and functional specifications and otherwise as required in connection with, the operation
of the Company’s business and the Company and its Subsidiaries have implemented reasonable backup, security and disaster
recovery measures and technology consistent with industry practices in the PRC.
(n) Except as would
not reasonably be expected to have a Company Material Adverse Effect, the Company and each of its Subsidiaries maintain commercially
reasonable information security practices with respect to the collection, storage, retention, use, disclosure and disposal of Personal
Information, and there has been no unauthorized access to, or misuse of, Personal Information owned or licensed by the Company
or any of its Subsidiaries or in the Company’s or any of its Subsidiaries’ possession or control.
Section 3.15 Taxes.
(a) Except as disclosed
in Section 3.15 of the Company Disclosure Schedule or as would not reasonably be expected to have a Company Material Adverse Effect,
all Tax Returns required to be filed by or with respect to the Company or any of its Subsidiaries have been timely filed and all
such Tax Returns are true, correct, and complete in all material respects and all entitlements of Tax exemption, Tax holidays,
Tax incentive or other preferential treatments or financial subsidies enjoyed by the Company or any of its Subsidiaries have been
obtained in compliance with applicable Laws.
(b) Except as would
not reasonably be expected to have a Company Material Adverse Effect, all Taxes of the Company and its Subsidiaries due and payable
have been timely paid. The unpaid Taxes of the Company and its Subsidiaries did not, as of December 31, 2014, exceed in any material
respect the reserve for Tax liability (rather than any reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth in the 2014 Balance Sheet (including any notes thereto). Neither the Company nor any of its Subsidiaries
has incurred any material liability for Taxes since December 31, 2014 other than in the ordinary course of business consistent
with past practice. Except as would not reasonably be expected to have a Company Material Adverse Effect, there are no Tax liens
on the assets of the Company or any of its Subsidiaries other than for Taxes not yet due and payable and Taxes that are being contested
in good faith and by appropriate proceedings.
(c) Except as would
not reasonably be expected to have a Company Material Adverse Effect, each of the Company and its Subsidiaries has timely paid
or withheld all Taxes required to be paid or withheld with respect to their employees, independent contractors, creditors and other
third parties (and timely paid over such Taxes to the appropriate Governmental Authority).
(d) Neither the Company
nor any of its Subsidiaries has executed any outstanding waiver of any statute of limitations or outstanding extension of the period,
for the assessment or collection of any material Tax and there has been no request by any Governmental Authority to execute such
a waiver or extension. No audit or other examination or administrative, judicial or other proceeding of, or with respect to, any
material Tax Return or material Taxes of the Company or any of its Subsidiaries is currently in progress, and neither the Company
nor any of its Subsidiaries has been notified of any written request for, or, to the knowledge of the Company, any threat of, such
an audit or other examination or administrative, judicial or other proceeding. No deficiency for any material amount of Tax has
been asserted or assessed by any Governmental Authority against the Company or any of its Subsidiaries that has not been satisfied
by payment, settled or withdrawn. No claim has been made by any Governmental Authority in a jurisdiction where the Company or any
of its Subsidiaries does not file Tax Returns that the Company or such Subsidiary is or may be subject to taxation by such jurisdiction.
(e) Each of the Company’s
Subsidiaries formed in the PRC has, in accordance with applicable Law, duly registered with the relevant PRC Governmental Authority,
obtained and maintained the validity of all national and local Tax registration certificates and complied in all material respects
with all requirements imposed by such Governmental Authority. No submissions made by or on behalf of the Company or any of its
Subsidiaries to any Governmental Authority in connection with obtaining Tax exemptions, Tax holidays, Tax deferrals, Tax incentives
or other preferential Tax treatments or Tax rebates contained any material misstatement or omission that would have affected the
granting of such Tax exemptions, preferential treatments or rebates. No suspension, revocation or cancellation of any such Tax
exemptions, preferential treatments or rebates is pending or, to the Company’s knowledge, threatened. Except as would not
reasonably be expected to have a Company Material Adverse Effect, the Transactions will not have any adverse effect on the continued
validity and effectiveness of any such Tax exemptions, preferential treatments or rebates and will not result in the claw-back
or recapture of any such Tax exemptions, preferential treatments or rebates.
Section 3.16 Environmental
Matters.
Except as would not
reasonably be expected to have a Company Material Adverse Effect:
(a) The Company and
its Subsidiaries are in compliance with all applicable Environmental Laws. The Company and each of its Subsidiaries have obtained
and possess all permits, licenses and other authorizations currently required for their establishment and their operation under
any Environmental Law (the “Environmental Permits”), and all such Environmental Permits are in full force and
effect.
(b) To the knowledge
of the Company, neither the Company nor any of its Subsidiaries has received any written notice, demand, letter, claim or request
for information alleging that the Company or any of its Subsidiaries is in violation of or liable under any Environmental Law.
(c) Neither the Company
nor any of its Subsidiaries is subject to any Order by any Governmental Authority or agreement with any third party concerning
liability under any Environmental Law.
Section 3.17 Material
Contracts.
(a) Except (1) for
this Agreement, (2) for Contracts filed as exhibits to the Company SEC Reports or incorporated therein by reference and (3) as
disclosed in Section 3.17(a) of the Company Disclosure Schedule, as of the date hereof, none of the Company or its Subsidiaries
is a party to or bound by:
(i) any Contract
that would be required to be filed by the Company pursuant to Item 4 of the Instructions to Exhibits of Form 20-F under the Exchange
Act;
(ii) any Contract
between the Company or any of its Subsidiaries and any director or executive officer of the Company or any person beneficially
owning five percent or more of the outstanding Shares required to be disclosed pursuant to Item 7B or Item 19 of Form 20-F under
the Exchange Act;
(iii) any Contract
for the license to or from the Company or any of its Subsidiaries of any material Intellectual Property; and
(iv) any Contract
containing noncompetition or other covenants that in any way purport to restrict the Company or any of its Subsidiaries’
business or limit the freedom of the Company or any of its Subsidiaries to engage in any line of business or containing exclusivity
obligations, “most favored nation” or right of first refusal provisions.
Each such Contract
described in clauses (i) through (iv) above and each such Contract that would be a Material Contract but for the exception of being
filed as an exhibit to the Company SEC Reports is referred to herein as a “Material Contract”.
(b) The Company has
made available to Parent true and correct copies of all Material Contracts. Except as would not reasonably be expected to have
a Company Material Adverse Effect, (i) each Material Contract is a legal, valid and binding obligation of the Company or its
Subsidiaries party thereto and, to the Company’s knowledge, the other parties thereto, and enforceable against the Company
or such Subsidiary in accordance with its terms, in each case subject to the Bankruptcy and Equity Exception, (ii) neither the
Company nor any of its Subsidiaries nor, to the Company’s knowledge, any other party thereto is in breach or violation of,
or default under, any Material Contract and no event has occurred or not occurred through the Company’s or any of its Subsidiaries’
action or inaction or, to the Company’s knowledge, the action or inaction of any third party, that with notice or lapse of
time or both would constitute a breach or violation of, or default under, any Material Contract and (iii) the Company and its Subsidiaries
have not received any written claim or notice of default, termination or cancellation under any such Material Contract.
Section 3.18 Insurance.
Except as would not
reasonably be expected to have a Company Material Adverse Effect, (a) all insurance policies and all self-insurance programs and
arrangements relating to the business, assets, liabilities and operations of the Company and its Subsidiaries are in full force
and effect, and (b) the Company has no reason to believe that it or any of its Subsidiaries will not be able to (i) renew its existing
insurance policies as and when such policies expire or (ii) obtain comparable coverage from comparable insurers as may be necessary
to continue its business without a significant increase in cost.
Section 3.19 Opinion
of Financial Advisor.
The Special Committee
has received the written opinion of Merrill Lynch (Asia Pacific) Limited (the “Financial Advisor”), dated as
of the date hereof, to the effect that, as of the date of this Agreement, the Per Share Merger Consideration and Per ADS Merger
Consideration to be received by holders of Shares and ADSs (other than holders of Excluded Shares) is fair, from a financial point
of view, to such holders and a copy of such opinion will promptly be provided to Parent, solely for informational purposes, following
receipt thereof by the Special Committee. It is agreed and understood that such opinion may not be relied on by Parent or Merger
Sub.
Section 3.20 Brokers.
No broker, finder or
investment banker (other than the Financial Advisor and the Strategic Advisor) is entitled to any brokerage, finder’s or
other fee or commission in connection with the Transactions based upon arrangements made by or on behalf of the Company. The Company
has furnished to Parent a correct and complete copy of all agreements on behalf of the Company with the Financial Advisor and the
Strategic Advisor pursuant to which such firms would be entitled to any payment relating to the Transactions.
Section 3.21 Takeover
Statute.
The Company is not
a party to any shareholder rights plan or “poison pill” agreement. No “business combination”, “fair
price”, “moratorium”, “control share acquisition” or other similar anti-takeover statute or regulation
save for the CICL or any similar anti-takeover provision in the Company’s memorandum and articles of association (each, a
“Takeover Statute”) is applicable to the Company, the Shares, the Merger or the other Transactions.
Section 3.22 No
Additional Representations.
Except for the representations
and warranties made by the Company in this Article III, neither the Company nor any other person makes any other express or implied
representation or warranty with respect to the Company or any of its Subsidiaries or their respective business, operations, assets,
liabilities, condition (financial or otherwise) or prospects or any information provided to Parent, Merger Sub or any of their
Affiliates or Representatives, notwithstanding the delivery or disclosure to Parent, Merger Sub or any of their Affiliates or Representatives
of any documentation, estimates, projections, forecasts or other information in connection with the Transactions, and each of Parent
and Merger Sub acknowledges the foregoing. Neither the Company nor any other person will have or be subject to any liability or
indemnity obligations to Parent, Merger Sub or any other person resulting from the distribution or disclosure or failure to distribute
or disclose to Parent, Merger Sub or any of their Affiliates or Representatives, or their use of, any information, unless and to
the extent such information is expressly included in the representations and warranties contained in this Article III.
Article
IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub
hereby, jointly and severally, represent and warrant to the Company that:
Section 4.01 Corporate
Organization.
Each of Parent and
Merger Sub is an exempted company duly incorporated, validly existing and in good standing under the Laws of the Cayman Islands
and has the requisite corporate power and authority and all necessary governmental approvals to own, lease and operate its properties
and to carry on its business as it is now being conducted, except where the failure to be so organized, existing or in good standing
or to have such power, authority and governmental approvals would not, individually or in the aggregate, prevent or materially
delay consummation of any of the Transactions by Parent or Merger Sub or otherwise be materially adverse to the ability of Parent
or Merger Sub to perform their material obligations under this Agreement. Parent has heretofore made available to the Company complete
and correct copies of the memorandum and articles of association of Parent and Merger Sub, each as amended to date, and each as
so delivered is in full force and effect.
Section 4.02 Authority
Relative to This Agreement.
Each of 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. The execution and delivery of this Agreement by Parent and Merger Sub and the consummation
by Parent and Merger Sub of the Transactions have been duly and validly authorized by all necessary corporate action, and no other
corporate proceedings on the part of Parent or Merger Sub are necessary to authorize this Agreement and the Plan of Merger or to
consummate the Transactions (other than the filings, notifications and other obligations and actions described in Section 4.03(b)).
This Agreement has been duly and validly executed and delivered by Parent and Merger Sub and, assuming due authorization, execution
and delivery by the Company, constitutes a legal, valid and binding obligation of each of Parent and Merger Sub, enforceable against
each of Parent and Merger Sub in accordance with its terms, subject to the Bankruptcy and Equity Exception.
Section 4.03 No
Conflict; Required Filings and Consents.
(a) The execution
and delivery of this Agreement and the Plan of Merger by Parent and Merger Sub do not, and the performance of this Agreement and
the Plan of Merger by Parent and Merger Sub will not, (i) conflict with or violate the memorandum and articles of association of
either Parent or Merger Sub, (ii) assuming that all consents, approvals, authorizations and other actions described in Section
4.03(b) have been obtained and all filings and obligations described in Section 4.03(b) have been made, conflict with or violate
any Law applicable to Parent or Merger Sub or by which any property or asset of either of them is bound or affected, or (iii) result
in any breach of, or constitute a default (or an event that, 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
any property or asset of Parent or Merger Sub pursuant to, any Contract or obligation to which Parent or Merger Sub is a party
or by which Parent or Merger Sub or any property or asset of either of them is bound or affected, except, with respect to clauses
(ii) and (iii), for any such conflicts, violations, breaches, defaults or other occurrences that would not, individually or in
the aggregate, prevent or materially delay consummation of any of the Transactions by Parent or Merger Sub or otherwise be materially
adverse to the ability of Parent and Merger Sub to perform their material obligations under this Agreement.
(b) The execution
and delivery of this Agreement by Parent and Merger Sub do not, and the performance of this Agreement by Parent and Merger Sub
and the consummation by Parent and Merger Sub of the Transactions will not, require any consent, approval, authorization or permit
of, or filing with or notification to, any Governmental Authority, except (i) for the filings and/or notices pursuant to Section
13 of the Exchange Act and the rules and regulations thereunder, (ii) for compliance with the rules and regulations of NASDAQ,
(iii) for the filing of the Plan of Merger and related documentation with the Registrar of Companies of the Cayman Islands
and publication of notification of the Merger in the Cayman Islands Government Gazette pursuant to the CICL and (iv) for the Requisite
Regulatory Approvals.
(c) Merger Sub has
no secured creditors holding a fixed or floating security interest.
Section 4.04 Capitalization.
(a) The authorized
share capital of Parent consists solely of 1,000,000,000 ordinary shares, consisting of 800,000,000 class A ordinary shares and
200,000,000 class B ordinary shares, par value $0.000001 each. As of the date hereof, (i) no class A ordinary shares of Parent
are issued and outstanding and (ii) 10 class B ordinary shares of Parent are issued and outstanding, which are duly authorized,
validly issued, fully paid and non-assessable, half of which are owned by each of Yili Shengda and Zhongrong Shengda. As of the
Effective Time, (i) approximately 443,179,215 class A ordinary shares of Parent shall be issued and outstanding, which shall be
duly authorized, validly issued, fully paid and non-assessable, approximately 61,776,334, 61,776,335, 80,577,828, 107,438,129,
33,034,220 and 66,068,441 of which shall be owned by Hongtai, Hongzhi, Zhongrong Investment, Hao Ding, Zhengjun Investment and
Ningxia Silkroad, respectively, and the remainder of which shall be owned by Zhongrong Legend; and (ii) 97,518,374 class B ordinary
shares of Parent shall be issued and outstanding, which shall be duly authorized, validly issued, fully paid and non-assessable,
half of which shall be owned by each of Yili Shengda and Zhongrong Shengda. Parent was formed solely for the purpose of engaging
in the transactions contemplated by this Agreement, and it has not conducted any business prior to the date hereof and has no,
and prior to the Effective Time will have no, assets, liabilities or obligations of any nature other than the Equity Commitment
Letters and those incident to its formation and capitalization pursuant to this Agreement and the Transactions.
(b) The authorized
share capital of Merger Sub consists solely of 100,000 ordinary shares, par value $0.01 each. As of the date hereof and as of immediately
prior to the Effective Time, one ordinary share of Merger Sub is and shall be issued and outstanding, which is and shall be duly
authorized, validly issued, fully paid and non-assessable and is and shall be owned by Parent. Merger Sub was formed solely for
the purpose of engaging in the Transactions, and it has not conducted any business prior to the date hereof and has no, and prior
to the Effective Time will have no, assets, liabilities or obligations of any nature other than those incident to its formation
and capitalization and pursuant to this Agreement and the Transactions.
Section 4.05 Available
Funds and Equity Financing.
(a) Parent has delivered
to the Company true and complete copies of executed equity commitment letters from the Sponsors (the “Equity Commitment
Letters”) pursuant to which each of the Sponsors has committed to purchase, or cause the purchase of, for cash, subject
to the terms and conditions thereof, equity securities of Parent, up to the aggregate amount set forth in its Equity Commitment
Letter (the “Equity Financing”). The proceeds of the Equity Financing shall be used to finance the consummation
of the Transactions.
(b) As of the date
hereof, (i) each of the Equity Commitment Letters is in full force and effect and is a legal, valid and binding obligation of Parent
and/or Merger Sub (as applicable and subject to the Bankruptcy and Equity Exception) and, to the knowledge of Parent, the other
parties thereto (subject to the Bankruptcy and Equity Exception) and (ii) none of the Equity Commitment Letters has been amended
or modified and no such amendment or modification (other than as permitted by Section 6.07 or this Section 4.05) is contemplated,
and the respective commitments contained in the Equity Commitment Letters have not been withdrawn or rescinded in any material
respect (other than as permitted by Section 6.07 or this Section 4.05). Assuming (A) the Equity Financing is funded in accordance
with the Equity Commitment Letters and (B) the satisfaction of the conditions to the obligation of Parent and Merger Sub to consummate
the Merger as set forth in Section 7.01 and Section 7.02 or the waiver of such conditions, as of the date hereof, the net proceeds
of the Equity Financing contemplated by the Equity Commitment Letters will be sufficient for Parent and the Surviving Corporation
to pay (1) the Merger Consideration and (2) any other amounts required to be paid in connection with the consummation of the
Transactions upon the terms and conditions contemplated hereby and all related fees and expenses associated therewith. The Equity
Commitment Letters contain all of the conditions precedent to the obligations of the parties thereunder to make the Equity Financing
available to Parent or Merger Sub on the terms and conditions contained therein. As of the date hereof, there are no side letters
or other agreements, Contracts or arrangements (whether written or oral) to which Parent or any of its Affiliates is a party related
to the funding or investing, as applicable, of the full amount of the Equity Financing other than as expressly set forth in the
Equity Commitment Letters. As of the date hereof, no event has occurred that, with or without notice, lapse of time or both, would
constitute a default or breach under the Equity Commitment Letters on the part of Parent or Merger Sub or, to the knowledge of
Parent, any other parties thereto.
Section 4.06 Brokers.
No broker, finder or
investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Transactions based
upon arrangements made by or on behalf of Parent or Merger Sub.
Section 4.07 Guarantees.
Assuming the due authorization,
execution and delivery by the Company, each Limited Guarantee is in full force and effect and is a legal, valid and binding obligation
of the Guarantor that executed it, subject to the Bankruptcy and Equity Exception, and no event has occurred that, with or without
notice, lapse of time or both, would constitute a default on the part of such Guarantor under such Limited Guarantee.
Section 4.08 Absence
of Litigation.
To the knowledge of
Parent and Merger Sub, as of the date hereof, (a) there is no material Proceeding pending or threatened against Parent or Merger
Sub or any of their respective Affiliates before any Governmental Authority and (b) neither Parent nor Merger Sub nor any of their
Affiliates is subject to any continuing order of, consent decree, settlement agreement or other similar written agreement with,
or continuing investigation by, any Governmental Authority, or any order, writ, judgment, injunction, decree, determination or
award of any Governmental Authority, in each case that seeks to, or would reasonably be expected to, prevent or materially impair
or delay the consummation of the Merger or other Transactions.
Section 4.09 Ownership
of Company Shares.
As of the date hereof,
other than the Rollover Shares, each of which shall be cancelled without payment of any consideration or distribution therefor
at the Effective Time, none of Parent, Merger Sub, the Rollover Shareholders and the Sponsors nor any of their respective Affiliates
beneficially own (as such term is used in Rule 13d-3 promulgated under the Exchange Act) any Shares or other securities or any
other economic interest (through derivative securities or otherwise) of the Company or any options, warrants or other rights to
acquire Shares or other securities of, or any other economic interest (through derivative securities or otherwise) in the Company.
Section 4.10 Solvency.
Neither Parent nor
Merger Sub is entering into the Transactions contemplated hereby with the intent to hinder, delay or defraud either present or
future creditors. Immediately after giving effect to all of the Transactions contemplated hereby, including the Equity Financing
and the payment of the Merger Consideration and all other amounts required to be paid in connection with the consummation of the
Transactions assuming (a) satisfaction of the conditions to the obligation of Parent and Merger Sub to consummate the Merger as
set forth herein, or the waiver of such conditions and (b) the accuracy of the representations and warranties of the Company set
forth in Article III (for such purposes, the representations and warranties that are qualified as to materiality or “Company
Material Adverse Effect” shall be true and correct in all respects and those not so qualified shall be true and correct in
all material respects), the Surviving Corporation will be solvent (as such term is used under the Laws of the Cayman Islands) at
and immediately after the Effective Time.
Section 4.11 Parent
Group Contracts.
Parent has delivered
to the Company and the Special Committee a true and complete copy of each of: (a) the Consortium Agreement, (b) the Equity Commitment
Letters, (c) the Support Agreement, and (d) the Limited Guarantees (collectively, the “Parent Group Contracts”),
including all amendments thereto or modifications thereof, if any. Other than the Parent Group Contracts, there are no side letters
or other oral or written Contracts, agreements, arrangements or understandings (whether or not legally enforceable) (i) relating
to or entered into in connection with the Transactions between or among Parent, Merger Sub, any Rollover Shareholder, any Sponsor
or any of their respective Affiliates (excluding any agreements among any one or more of the foregoing solely relating to the Surviving
Corporation following the Effective Time), (ii) relating to or entered into in connection with the Transactions between or among
Parent, Merger Sub, any Rollover Shareholder, any Sponsor or any of their respective Affiliates, on the one hand, and any member
of the Company’s management, any members of the Company Board or any of the Company’s shareholders in their capacities
as such, on the other hand, (iii) relating to the operation, governance or management of the Company between or among Parent, Merger
Sub, any Rollover Shareholder, any Sponsor or any of their respective Affiliates, and there have been no such Contracts, agreements,
arrangements or understanding prior to the date of this Agreement, or (iv) pursuant to which any shareholder of the Company would
be entitled to receive consideration of a different amount or nature than the Per Share Merger Consideration or the Per ADS Merger
Consideration or pursuant to which any shareholder of the Company has agreed to vote to approve this Agreement or the Merger or
has agreed to vote against any Superior Proposal and to which, in each case, Parent, Merger Sub, any Rollover Shareholder, any
Sponsor or any of their respective Affiliates is a party.
Section 4.12 Independent
Investigation.
Parent and Merger Sub
have conducted their own independent investigation, review and analysis of the business, operations, assets, liabilities, results
of operations, financial condition and prospects of the Company and its Subsidiaries, which investigation, review and analysis
were performed by Parent, Merger Sub, their respective Affiliates and Representatives. Each of Parent and Merger Sub acknowledges
that as of the date hereof, it, its Affiliates and their respective Representatives have been provided adequate access to the personnel,
properties, facilities and records of the Company and its Subsidiaries for such purpose. In entering into this Agreement, each
of Parent and Merger Sub acknowledges that it has relied solely upon the aforementioned investigation, review and analysis and
not on any statements, representations or opinions of any of the Company, its Affiliates or their respective Representatives (except
for the representations and warranties of the Company set forth in this Agreement and in any certificate delivered pursuant to
this Agreement).
Section 4.13 No
Additional Representations.
Except for the representations
and warranties set forth in this Article IV, neither Parent nor Merger Sub nor any other person on behalf of either of them makes
any other express or implied representation or warranty with respect to Parent or Merger Sub, or their respective business, operations,
assets, liabilities, condition (financial or otherwise) or prospects, notwithstanding the delivery or disclosure to the Company
or any of its Affiliates or Representatives of any documentation, forecasts or other information with respect to any one or more
of the foregoing, and the Company acknowledges the foregoing.
Article
V
CONDUCT OF BUSINESS PENDING THE MERGER
Section 5.01 Conduct
of Business by the Company Pending the Merger.
(a) The Company covenants
and agrees that, between the date of this Agreement and the Effective Time, except (i) as required by applicable Law, (ii) as set
forth in Section 5.01 of the Company Disclosure Schedule, (iii) as expressly contemplated or permitted by any other provision of
this Agreement or (iv) with the prior written consent of Parent (which consent shall not be unreasonably withheld, conditioned,
or delayed), the businesses of the Company and its Subsidiaries shall be conducted in the ordinary course of business and in a
manner consistent with past practice and the Company and each of its Subsidiaries shall use their reasonable best efforts to (A)
preserve intact their existing assets in all material respects, (B) preserve substantially intact their business organization,
(C) keep available the services of their current officers and key employees and (D) maintain and preserve intact in all material
respects their current relationships with customers, suppliers and distributors with which the Company or any of its Subsidiaries
has material business relations.
(b) By way of amplification
and not limitation, except (i) as set forth in Section 5.01 of the Company Disclosure Schedule, (ii) as required by applicable
Law, (iii) as expressly contemplated or permitted by any other provision of this Agreement or (iv) with the prior written
consent of Parent (which consent shall not be unreasonably withheld, conditioned, or delayed), the Company will not and will not
permit its Subsidiaries to:
(i) amend or otherwise
change its memorandum and articles of association or other equivalent organizational documents;
(ii) other than
in connection with the exercise of any Company Options, Company RSs or Company RSUs in accordance with the Share Incentive Plan,
(A) issue, sell, pledge, terminate or dispose of, (B) grant a Lien on or permit a Lien to exist on, or (C) authorize the issuance,
sale, pledge, termination or disposition of, or granting or placing of a Lien on, any share capital or other ownership interests
of the Company or any of its Subsidiaries, or any agreement, contract or instrument amounting to control over, or enabling control
of, the Company or any of its Subsidiaries, or any options, warrants, convertible securities or other rights of any kind to acquire
any share capital or other ownership interest (including any phantom interest) of the Company or any of its Subsidiaries;
(iii) (A) sell,
pledge or dispose of, (B) grant a Lien on or permit a Lien to exist on, or (C) authorize the sale, pledge or disposition of, or
granting or placing of a Lien on, any assets of the Company or any of its Subsidiaries having a current value in excess of $50,000,000,
except in the ordinary course of business and in a manner consistent with past practice;
(iv) declare, set
aside, make or pay any dividend or other distribution, payable in cash, share, property or otherwise, with respect to any of its
share capital, except for dividends by any of the Company’s direct or indirect wholly-owned Subsidiaries to the Company or
any of its other wholly-owned Subsidiaries;
(v) adjust, reclassify,
combine, split, subdivide or redeem, or purchase or otherwise acquire, directly or indirectly, any of its share capital, in each
case other than in connection with (A) acquisition in connection with the forfeiture of Company Options, Company RSs or Company
RSUs or (B) acquisition in connection with the net exercise of Company Options in accordance with the terms thereof;
(vi) (A)
acquire (including by merger, consolidation or acquisition of share or assets or any other business combination) any corporation,
partnership, other business organization or any division thereof or any assets, except for any such acquisitions for consideration
not exceeding $50,000,000; (B) incur any Indebtedness or issue any debt securities or assume, guarantee or endorse, or otherwise
become responsible for, the obligations of any person, or make any loans or advances or capital contribution to, or investment
in, any person, except (1) for Indebtedness the outstanding amount of which (after deducting the aggregate amount of cash and cash
equivalents held by the Company and its Subsidiaries), does not exceed $200,000,000 or its equivalent in the aggregate for the
Company and its Subsidiaries or (2) under the Company’s or any of its Subsidiaries’ existing credit facilities as in
effect on the date hereof in an aggregate amount not to exceed the maximum amount authorized under the Contracts evidencing such
Indebtedness (including any renewal, extension, refinancing or replacement of such Contracts on substantially the same or similar
terms); (C) authorize, or make any commitment with respect to, any single capital expenditure which is in excess of $10,000,000
or capital expenditures which are, in the aggregate, in excess of $50,000,000 for the Company and its Subsidiaries taken as a whole,
other than expenditures necessary to maintain existing assets in good repair and working condition, consistent with past practice;
or (D) amend any Contract to effect any matter set forth in this Section
5.01(b)(vi);
(vii) establish
any new Subsidiary;
(viii) engage in
the conduct of any new line of business material to the Company and its Subsidiaries, taken as a whole, outside of the Company’s
existing business segments;
(ix) make any material
changes with respect to accounting policies or procedures materially affecting the reported consolidated assets, liabilities or
results of operations of the Company and its Subsidiaries, except as required by changes in applicable generally accepted accounting
principles or Law;
(x) settle any
Proceeding, other than settlements (A) in the ordinary course of business and consistent with past practice, (B) requiring the
Company and its Subsidiaries to pay monetary damages not exceeding $10,000,000, and (C) not involving the admission of any wrongdoing
by the Company or any of its Subsidiaries;
(xi) enter into
or materially amend or modify, terminate or consent to the termination of any Material Contract (or any Contract that would be
a Material Contract if such Contract had been entered into prior to the date of this Agreement), or amend, waive, modify, terminate
or consent to the termination of the Company’s or any of its Subsidiaries’ material rights thereunder, other than in
the ordinary course of business and consistent with past practice;
(xii) make or change
any material Tax election, materially amend any Tax Return (except as required by applicable Law), enter into any material closing
agreement with respect to Taxes, surrender any right to claim a material refund of Taxes, settle or finally resolve any material
controversy with respect to Taxes or materially change any method of Tax accounting;
(xiii) (A) abandon,
fail to maintain, or allow to lapse, including by failure to pay the required fees in any jurisdiction, or disclaim, dedicate to
the public, sell, assign or grant any security interest in, to or under any material Company Intellectual Property; (B) grant to
any third party any license, or enter into any covenant not to sue, with respect to any material Company Intellectual Property,
except non-exclusive licenses in the ordinary course of business consistent with past practice; (C) develop, create or invent any
Intellectual Property jointly with any third party, except under existing arrangements or in the ordinary course of business; (D) disclose
or allow to be disclosed any material confidential information or material confidential Company Intellectual Property to any person,
other than employees of the Company or its Subsidiaries that are subject to a confidentiality or non-disclosure covenant protecting
against further disclosure thereof, except under existing arrangements or in the ordinary course of business consistent with past
practice; or (D) fail to notify Parent promptly of any material infringement, misappropriation, unauthorized disclosure or
other violation of or conflict with any material Company Intellectual Property of which the Company or any of its Subsidiaries
becomes aware and to reasonably consult with Parent regarding the actions (if any) to take to protect such Company Intellectual
Property;
(xiv) except as
required pursuant to existing written plans or Contracts in effect as of the date hereof, or as otherwise required by applicable
Law or carried out in the ordinary course of business consistent with past practice, (A) enter into any new employment or compensatory
agreements (including the renewal of any consulting agreement) with any executive officer or director of the Company or any of
its wholly-owned Subsidiaries, (B) increase the compensation, bonus or pension, welfare, severance or other benefits of, pay
any bonus to, or make any new equity awards to any director, employee or consultant of the Company or any of its Subsidiaries,
(C) establish, adopt, materially amend or terminate any Plan (except as required by Law) or materially amend the terms of any outstanding
equity-based awards (except as contemplated by this Agreement), (D) take any action to accelerate the vesting or payment, or fund
or in any other way secure the payment, of material compensation or benefits under any Plan, to the extent not already required
in any such Plan or contemplated by this Agreement, (E) materially change any actuarial or other assumptions used to calculate
funding obligations with respect to any Plan or to materially change the manner in which contributions to such plans are made or
the basis on which such contributions are determined, except as may be required by GAAP, (F) forgive any loans to directors, officers
or employees of the Company or any of its Subsidiaries, or (G) enter into any collective bargaining agreement or similar labor
agreement;
(xv) fail to keep
in force material insurance policies providing insurance coverage with respect to the assets, operations and activities of the
Company or any of its Subsidiaries as are currently in effect;
(xvi) take any
action that is intended, or would reasonably be expected to, result in any of the conditions to the Merger set forth in Article
VII not being satisfied;
(xvii) fail to
make in a timely manner any filings with the SEC required under the Securities Act or the Exchange Act or the rules and regulations
promulgated thereunder; or
(xviii) agree,
authorize, commit, or enter into any formal agreement to do any of the foregoing.
Section 5.02 Conduct
of Business by Parent and Merger Sub Pending the Merger.
Each
of Parent and Merger Sub agrees that, from the date hereof until the earlier of the Effective Time and termination of this Agreement
pursuant to Article VIII, it shall not: (a) take any action that
is intended to or would reasonably be likely to result in any of the conditions to effecting the Merger becoming incapable of being
satisfied; or (b) take any action or fail to take any action that would, or would be reasonably likely to, individually or in the
aggregate, prevent, materially delay or materially impede the ability of Parent or Merger Sub to consummate the Merger or the other
Transactions in accordance with the terms of this Agreement.
Section 5.03 No
Control of Other Party’s Business.
Except as otherwise
expressly provided herein, nothing contained in this Agreement is intended to give Parent or Merger Sub, directly or indirectly,
the right to control or direct the Company’s or the Company’s Subsidiaries’ operations prior to the Effective
Time, and nothing contained in this Agreement is intended to give the Company, directly or indirectly, the right to control or
direct Parent’s or Merger Sub’s operations. Prior to the Effective Time, each of Parent, Merger Sub and the Company
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 6.01 Proxy
Statement and Schedule 13E-3.
(a) As soon as practicable
following the date hereof, the Company with the assistance of Parent and Merger Sub, shall prepare the Proxy Statement. Concurrently
with the preparation of the Proxy Statement, the Company, Parent and Merger Sub shall jointly prepare and cause to be filed with
the SEC a Rule 13e-3 transaction statement on Schedule 13E-3 relating to the authorization and approval of this Agreement, the
Plan of Merger and the Transactions by the shareholders of the Company (such Schedule 13E-3, as amended or supplemented, being
referred to herein as the “Schedule 13E-3”). Each of the Company, Parent and Merger Sub shall use its reasonable
best efforts to ensure that the Proxy Statement and the Schedule 13E-3 comply in all material respects with the requirements of
the Exchange Act and the rules and regulations promulgated thereunder. Each of the Company, Parent and Merger Sub shall use its
reasonable best efforts to respond promptly to any comments of the SEC with respect to the Proxy Statement and the Schedule 13E-3.
Each of Parent and Merger Sub shall provide reasonable assistance and cooperation to the Company in the preparation, filing and
distribution of the Proxy Statement, the Schedule 13E-3 and the resolution of comments from the SEC. Upon its receipt of any comments
from the SEC or its staff or any request from the SEC or its staff for amendments or supplements to the Proxy Statement and the
Schedule 13E-3, the Company shall promptly notify Parent and Merger Sub and in any event within 24 hours and shall provide Parent
with copies of all correspondence between the Company and its representatives, on the one hand, and the SEC and its staff, on the
other hand. Prior to filing the Schedule 13E-3 or mailing the Proxy Statement (or in each case, any amendment or supplement thereto)
or responding to any comments of the SEC with respect thereto, the Company (i) shall provide Parent and Merger Sub with a reasonable
period of time to review and comment on such document or response and (ii) shall consider in good faith all additions, deletions
or changes reasonably proposed by Parent in good faith. If at any time prior to the Shareholders’ Meeting, any information
relating to the Company, Parent, Merger Sub or any of their respective Affiliates, officers or directors, is discovered by the
Company, Parent or Merger Sub that should be set forth in an amendment or supplement to the Proxy Statement and/or the Schedule
13E-3 so that the Proxy Statement and/or Schedule 13E-3 shall not 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, the party that discovers such information shall promptly notify the other
parties hereto and the Company shall file an appropriate amendment or supplement describing such information with the SEC and,
to the extent required by applicable Law, disseminate to the shareholders of the Company.
(b) Each of Parent,
Merger Sub and the Company agrees, as to itself and its respective Affiliates or Representatives, that none of the information
supplied or to be supplied by Parent, Merger Sub or the Company, as applicable, expressly for inclusion or incorporation by reference
in the Proxy Statement, the Schedule 13E-3 or any other documents filed or to be filed with the SEC in connection with the Transactions,
will, as of the time such documents (or any amendment thereof or supplement thereto) are mailed to the holders of Shares and at
the time of the Shareholders’ Meeting, contain any untrue statement of a material fact, or omit to state any material fact
required to be stated therein in order to make the statements therein, in light of the circumstances under which they were made,
not misleading. Each of Parent, Merger Sub and the Company further agrees that all documents that such party is responsible for
filing with the SEC in connection with the Merger will comply as to form and substance in all material respects with the applicable
requirements of the Securities Act, the Exchange Act and any other applicable Laws and that all information supplied by such party
for inclusion or incorporation by reference in such document will not contain any untrue statement of a material fact, or omit
to state any material fact required to be stated therein in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. If at any time prior to the Effective Time, any event or circumstance relating to Parent,
Merger Sub or the Company, or their respective officers or directors, should be discovered that should be set forth in an amendment
or a supplement to the Proxy Statement or the Schedule 13E-3 so that such document would not include any misstatement of a material
fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they
are made, not misleading, the party discovering such event or circumstance shall promptly inform the other parties and an appropriate
amendment or supplement describing such event or circumstance shall be promptly filed with the SEC and disseminated to the shareholders
of the Company to the extent required by Law; provided that prior to such filing, the Company and Parent, as the case may
be, shall consult with each other with respect to such amendment or supplement and shall afford the other party and their Representatives
a reasonable opportunity to comment thereon.
(c) At the Shareholders’
Meeting, and any other meeting of the shareholders of the Company called to seek the Company Shareholder Approval or in any other
circumstances upon which a vote, consent or other approval (including by written consent) with respect to this Agreement, the Plan
of Merger or the Transactions contemplated herein is sought, Parent shall vote, and shall cause the Rollover Shareholders and their
respective Affiliates to vote, or cause to be voted, all Shares held directly or indirectly by the Rollover Shareholders and their
respective Affiliates as of the date hereof in favor of the authorization and approval of this Agreement, the Plan of Merger and
the Transactions.
Section 6.02 Company
Shareholders’ Meeting.
(a) As soon as practicable
after the SEC confirms that it has no further comments on the Schedule 13E-3 but in any event no later than five days after such
confirmation, the Company shall (i) establish a record date for determining shareholders of the Company entitled to vote at the
Shareholders’ Meeting (the “Record Date”) and shall not change such Record Date or establish a different
record date for the Shareholders’ Meeting without the prior written consent of Parent, unless required to do so by applicable
Laws; and in the event that the date of the Shareholders’ Meeting as originally called is for any reason adjourned or postponed
or otherwise delayed, the Company agrees that unless Parent shall have otherwise approved in writing or as required by applicable
Laws or stock exchange requirement, the Company shall, if possible, implement such adjournment or postponement or other delay in
such a way that the Company does not establish a new Record Date for the Shareholders’ Meeting, as so adjourned, postponed
or delayed, (ii) mail or cause to be mailed the Proxy Statement to the holders of Shares (and concurrently furnish the Proxy Statement
under Form 6-K), including Shares represented by ADSs, as of the Record Date, for the purpose of voting upon the authorization
and approval of this Agreement, the Plan of Merger and the Transactions and (iii) instruct the Depositary to (A) fix the Record
Date as the record date for determining the holders of ADSs who shall be entitled to give instructions for the exercise of the
voting rights pertaining to the Shares represented by ADSs (the “Record ADS Holders”), (B) provide all proxy
solicitation materials to all Record ADS Holders and (C) vote all Shares represented by ADSs in accordance with the instructions
of such corresponding Record ADS Holders. Subject to Section 6.02(b), without the consent of Parent, the authorization and approval
of this Agreement, the Plan of Merger and the Transactions, are the only matters (other than procedural matters) that shall be
proposed to be voted upon by the shareholders of the Company at the Shareholders’ Meeting.
(b) No later than
30 days after the date of mailing the Proxy Statement, the Company shall hold the Shareholders’ Meeting. Subject to Section
6.04, (i) the Company Board shall recommend to holders of the Shares that they authorize and approve this Agreement, the Plan of
Merger and the Transactions, and shall include such recommendation in the Proxy Statement and (ii) the Company shall use its reasonable
best efforts to solicit from its shareholders proxies in favor of the authorization and approval of this Agreement, the Plan of
Merger and the Transactions and shall take all other action necessary or advisable to secure the Requisite Company Vote. Notwithstanding
anything to the contrary contained in this Agreement, unless this Agreement is validly terminated in accordance with Section 8.03(c),
the Company’s obligations pursuant to this Section 6.02 shall not be limited or otherwise affected by the commencement, public
proposal, public disclosure or communication to the Company or any other person of any Competing Transaction or by any Change in
the Company Recommendation.
(c) Notwithstanding
Section 6.02(b), after consultation in good faith with Parent, the Company may recommend the adjournment of the Shareholders’
Meeting to its shareholders (i) to the extent necessary to ensure that any required supplement or amendment to the Proxy Statement
is provided to the holders of Shares within a reasonable amount of time in advance of the Shareholders’ Meeting, (ii) as
otherwise required by applicable Law, (iii) if as of the time for which the Shareholders’ Meeting is scheduled as set forth
in the Proxy Statement, there are insufficient Shares represented (in person or by proxy) to constitute a quorum necessary to conduct
the business of the Shareholders’ Meeting or (iv) if an Intervening Event has occurred and the Company Board (acting upon
the recommendation of the Special Committee) or the Special Committee determines, in its good faith judgment upon advice by outside
legal counsel engaged by the Special Committee, that the failure to take such action would reasonably be expected to breach its
fiduciary duties under applicable Law. If the Shareholders’ Meeting is adjourned, the Company shall convene and hold the
Shareholders’ Meeting as soon as reasonably practicable thereafter, subject to the immediately preceding sentence; provided
that the Company shall not recommend to its shareholders the adjournment of the Shareholders’ Meeting to a date that is less
than five Business Days prior to the Termination Date.
(d) Parent may request
that the Company adjourn or postpone the Shareholders’ Meeting for up to 90 days (but in any event no later than five Business
Days prior to the Termination Date), (i) if as of the time for which the Shareholders’ Meeting is originally scheduled (as
set forth in the Proxy Statement) there are insufficient Shares represented (either in person or by proxy) (A) to constitute a
quorum necessary to conduct the business of the Shareholders’ Meeting or (B) voting in favor of approval of this Agreement
and the Transactions to obtain the Requisite Company Vote, or (ii) in order to allow reasonable additional time for (A) the filing
and mailing of, at the reasonable request of Parent, any supplemental or amended disclosure and (B) such supplemental or amended
disclosure to be disseminated and reviewed by the Company’s shareholders prior to the Shareholders’ Meeting, in which
event the Company shall, in each case, cause the Shareholders’ Meeting to be postponed or adjourned in accordance with Parent’s
request.
Section 6.03 Access
to Information.
(a) From the date
hereof until the earlier of the Effective Time and termination of this Agreement pursuant to Article VIII and subject to applicable
Law and the Confidentiality Agreements, upon reasonable advance notice from Parent, the Company shall (i) provide to Parent (and
Parent’s officers, directors, employees, accountants, consultants, financial and legal advisors, agents, financing sources
(including potential sources) and other authorized representatives of Parent and such other parties, collectively, “Representatives”)
reasonable access during normal business hours to the offices, properties, books and records of the Company or any of its Subsidiaries,
(ii) furnish to Parent and its Representatives such existing financial and operating data and other existing information as such
persons may reasonably request in writing and (iii) instruct its and its Subsidiaries’ employees, legal counsel, financial
advisors, auditors and other Representatives to reasonably cooperate with Parent and its Representatives in their investigation.
Notwithstanding the foregoing, any such investigation shall be conducted in such a manner as not to interfere unreasonably with
the business or operations of the Company or its Subsidiaries or otherwise result in any significant interference with the timely
discharge by the employees of the Company or its Subsidiaries of their duties.
(b) Notwithstanding
anything to the contrary in Section 6.03(a), nothing in this Agreement shall require the Company or any of its Subsidiaries to
provide Parent or any of its Representatives with access to any books, records, documents or other information to the extent that
(i) such books, records, documents or other information is subject to any confidentiality agreement with a Third Party; provided
that at the request of Parent, the Company shall use its reasonable best efforts to obtain a waiver from such Third Party, (ii)
the disclosure of such books, records, documents or other information would result in the loss of attorney-client or other legal
privilege or (iii) the disclosure of such books, records, documents or other information is prohibited by applicable Law.
(c) All information
provided or made available pursuant to this Section 6.03 to Parent or its Representatives shall be subject to the Confidentiality
Agreements.
(d) No investigation
pursuant to this Section 6.03 shall affect any representation or warranty in this Agreement of any party hereto or any condition
to the obligations of the parties hereto.
Section 6.04 No
Solicitation of Transactions.
(a) Until the earlier
of the Effective Time and termination of this Agreement pursuant to Article VIII, except as set forth in Section 6.04(b), the Company
agrees that neither it nor any of its Subsidiaries, and that it will cause its and its Subsidiaries’ Representatives (including
any investment banker, attorney or accountant retained by the Company or any of its Subsidiaries), not to, in each case, directly
or indirectly, (i) solicit, initiate or purposefully encourage (including by way of furnishing nonpublic information concerning
the Company or any of its Subsidiaries), or take any other action to purposefully facilitate, any inquiries or the making of any
proposal or offer (including any proposal or offer to its shareholders) that constitutes, or that in the Company’s good faith
judgment could reasonably be expected to lead to, a Competing Transaction, (ii) enter into, maintain or continue discussions or
negotiations with, or provide any nonpublic information concerning the Company or any of its Subsidiaries to, any Third Party in
furtherance of such inquiries or to obtain such proposal or offer for a Competing Transaction or any proposal or offer that in
the Company’s good faith judgment could reasonably be expected to lead to a Competing Transaction, (iii) agree to, approve,
endorse, recommend or consummate any Competing Transaction or enter into any letter of intent or Contract (other than an Acceptable
Confidentiality Agreement) or commitment contemplating or otherwise relating to any Competing Transaction, (iv) grant any waiver,
amendment or release under any standstill, confidentiality or similar agreement or Takeover Statutes (and the Company shall promptly
take all action necessary to terminate or cause to be terminated any such waiver previously granted with respect to any provision
of any such confidentiality, standstill or similar agreement or Takeover Statute and to enforce each such confidentiality, standstill
and similar agreement) or (v) authorize or permit any of the Representatives of the Company or any of its Subsidiaries to
take any action set forth in clauses (i) – (iv) of this Section 6.04(a). The Company shall notify Parent as promptly as practicable
(and in any event within two Business Days after the Company has knowledge thereof), orally and in writing, of any proposal or
offer, or any inquiry or contact with any person, regarding a Competing Transaction or that in the Company’s good faith judgment
could reasonably be expected to lead to a Competing Transaction, specifying (x) the material terms and conditions thereof (including
material amendments or proposed material amendments) and providing, if applicable, copies of any written requests, proposals or
offers, including proposed agreements, and (y) the identity of the party making such proposal or offer or inquiry or contact. The
Company shall keep Parent informed, on a reasonably current basis (and in any event within two Business Days of the occurrence
of any material changes, developments, discussions or negotiations) of the status and terms of any such proposal, offer, inquiry,
contact or request and of any material changes in the status and terms of any such proposal, offer, inquiry, contact or request
(including the material terms and conditions thereof). Without limiting the foregoing, the Company shall provide Parent with 24
hours prior notice (or such lesser prior notice as is provided to the members of the Company Board or members of the Special Committee)
of any meeting of the Company Board or Special Committee at which the Company Board or Special Committee, as applicable, is reasonably
expected to consider any Competing Transaction. The Company shall, and shall cause its Subsidiaries and the Representatives of
the Company and its Subsidiaries to, immediately cease and terminate all existing discussions or negotiations with any parties
conducted heretofore with respect to a Competing Transaction. The Company shall not, and shall cause its Subsidiaries not to, enter
into any confidentiality agreement with any Third Party subsequent to the date hereof which prohibits the Company from providing
such information to Parent.
(b) Notwithstanding
anything to the contrary in Section 6.04(a), at any time prior to the receipt of the Requisite Company Vote, following the receipt
of an unsolicited, written, bona fide proposal or offer regarding a Competing Transaction that was not obtained in violation of
this Section 6.04 (other than any immaterial non-compliance that does not adversely affect Parent or Merger Sub), the Company and
its Representatives may, with respect to such proposal or offer and acting only upon the recommendation of the Special Committee:
(i) contact the
person who has made such proposal or offer to clarify and understand the terms and conditions thereof to the extent the Special
Committee shall have determined in good faith that such contact is necessary to determine whether such proposal or offer constitutes
a Superior Proposal or could reasonably be expected to result in a Superior Proposal;
(ii) provide information
in response to the request of the person who has made such proposal or offer, if and only if, prior to providing such information,
the Company has received from the person so requesting such information an executed Acceptable Confidentiality Agreement; provided
that the Company shall concurrently make available to Parent any information concerning the Company and the Subsidiaries that is
provided to any such person and that was not previously made available to Parent or its Representatives; and
(iii) engage or
participate in any discussions or negotiations with the person who has made such proposal or offer;
provided that
prior to taking any actions described in clause (ii) or (iii), the Company Board (acting only upon recommendation of the Special
Committee) or the Special Committee, has (A) determined, in its good faith judgment, after consultation with its financial
advisor and outside legal counsel, that such proposal or offer constitutes or could reasonably be expected to result in a Superior
Proposal, (B) determined, in its good faith judgment, after consultation with its financial advisor and outside legal counsel,
that, in light of such Superior Proposal, failure to take such action would be inconsistent with its fiduciary duties under applicable
Law and (C) provided written notice to Parent at least two Business Days prior to taking any such action.
(c) Except as set
forth in Section 6.04(d), neither the Company Board nor any committee thereof shall (i) (A) change, withhold, withdraw, qualify
or modify (or publicly propose to change, withhold, withdraw, qualify or modify), in a manner adverse to Parent or Merger Sub,
the Company Recommendation, (B) fail to include the Company Recommendation in the Proxy Statement, (C) adopt, approve or recommend,
or publicly propose to adopt, approve or recommend to the shareholders of the Company, a Competing Transaction, (D) if a tender
offer or exchange offer that constitutes a Competing Transaction is commenced, fail to publicly recommend against acceptance of
such tender offer or exchange offer by the Company shareholders (including, for these purposes, by disclosing that it is taking
no position with respect to the acceptance of such tender offer or exchange offer by its shareholders, which shall constitute a
failure to recommend against acceptance of such tender offer or exchange offer; provided that a customary “stop, look
and listen” communication by the Company Board pursuant to Rule 14d−9(f) of the Exchange Act or a statement that the
Company Board has received and is currently evaluating such Competing Transaction shall not be prohibited or be deemed to be a
Change in the Company Recommendation) within 10 Business Days after the commencement thereof, (E) fail to recommend against any
Competing Transaction subject to Regulation 14D under the Exchange Act in a Solicitation/Recommendation Statement on Schedule 14D-9
within 10 Business Days after the commencement thereof or (F) fail to publicly reaffirm the Company Recommendation following
any Competing Transaction having been publicly made, proposed or communicated (and not publicly withdrawn) within 10 Business Days
after Parent so requests in writing; provided that Parent may not make such request more than one time with respect to any
given Competing Transaction unless there shall have been an additional public announcement with respect to such Competing Transaction
(any of the foregoing, a “Change in the Company Recommendation”) or (ii) cause or permit the Company or any
of its Subsidiaries to enter into any letter of intent, memorandum of understanding, agreement in principle, merger agreement,
acquisition agreement or other or similar document or Contract with respect to any Competing Transaction other than an Acceptable
Confidentiality Agreement entered into in compliance with Section 6.04(b) (an “Alternative Acquisition Agreement”).
(d) Notwithstanding
anything to the contrary set forth in this Agreement, from the date hereof and at any time prior to the receipt of the Requisite
Company Vote, if the Company has received a bona fide written proposal or offer with respect to a Competing Transaction that was
not obtained in violation of Section 6.04 (other than any immaterial non-compliance that does not adversely affect Parent or Merger
Sub) and the Company Board (acting only upon the recommendation of the Special Committee) or the Special Committee determines in
its good faith judgment (after consultation with its financial advisor and outside legal counsel), that such proposal or offer
constitutes a Superior Proposal and failure to make a Change in the Company Recommendation with respect to such Superior Proposal
would be inconsistent with its fiduciary duties under applicable Law, the Company Board (acting only upon the recommendation of
the Special Committee) or the Special Committee (to the extent it is within the authority of the Special Committee) may effect
a Change in the Company Recommendation and/or authorize the Company to enter into an Alternative Acquisition Agreement with respect
to such Superior Proposal but only (i) if the Company shall have complied with the requirements of Section 6.04(a) and Section
6.04(b) with respect to such proposal or offer (ii) after (A) providing at least five Business Days’ (the “Superior
Proposal Notice Period”) written notice to Parent (a “Notice of Superior Proposal”) advising Parent
that the Company Board or the Special Committee, as applicable, has received a Superior Proposal, specifying the material terms
and conditions of such Superior Proposal (and providing any proposed agreements related thereto), identifying the person making
such Superior Proposal and indicating that the Company Board or the Special Committee (to the extent it is within the authority
of the Special Committee), as applicable, intends to effect a Change in the Company Recommendation and the manner in which it intends
(or may intend) to do so; it being understood that the Notice of Superior Proposal or any amendment or update thereto or the determination
to so deliver such notice shall not constitute a Change in the Company Recommendation, (B) negotiating with and causing its financial
and legal advisors to negotiate with Parent, Merger Sub and their respective Representatives in good faith (to the extent Parent
desires to negotiate) to make such adjustments in the terms and conditions of this Agreement and the Equity Financing, so that
such Third-Party proposal or offer would cease to constitute a Superior Proposal, and (C) permitting Parent and its Representatives
to make a presentation to the Company Board and the Special Committee regarding this Agreement, the Equity Financing and any adjustments
with respect thereto (to the extent Parent desires to make such presentation); provided that any material modifications
to such Third-Party proposal or offer that the Company Board or the Special Committee, as applicable, has determined to be a Superior
Proposal shall be deemed a new Superior Proposal and the Company shall be required to again comply with the requirements of this
Section 6.04, provided, further, that with respect to such new Superior Proposal, the Superior Proposal Notice Period shall
be deemed to be a three Business Day period rather than the five Business Day period first described above and (iii) following
the end of such five Business Day period or three Business Day period (as applicable), the Company Board (acting only upon the
recommendation of the Special Committee) or the Special Committee shall have determined in its good faith judgment (after consultation
with its financial advisor and outside legal counsel) that taking into account any changes to this Agreement and the Equity Financing
proposed by Parent and Merger Sub in response to the Notice of Superior Proposal or otherwise, that the proposal or offer with
respect to the Competing Transaction giving rise to the Notice of Superior Proposal continues to constitute a Superior Proposal.
(e) Notwithstanding
anything to the contrary set forth in this Agreement, from the date hereof and at any time prior to the receipt of the Requisite
Company Vote, if an Intervening Event has occurred and the Company Board (acting upon the recommendation of the Special Committee)
or the Special Committee determines, in its good faith judgment upon advice by outside legal counsel engaged by the Special Committee,
that the failure to take such action would reasonably be expected to breach its fiduciary duties under applicable Law, the Company
Board (acting upon the recommendation of the Special Committee) or the Special Committee may effect a Change in the Company Recommendation.
(f) A “Competing
Transaction” means any of the following (other than the Transactions): (i) any merger, consolidation, share exchange,
business combination, scheme of arrangement, amalgamation, recapitalization, liquidation, dissolution or other similar transaction
involving the Company or any of its Subsidiaries whose assets, individually or in the aggregate, constitute 15% or more of the
consolidated assets of the Company or to which 15% or more of the total revenue or net income of the Company are attributable,
(ii) any sale, lease, exchange, transfer or other disposition of assets or businesses that constitute or represent 15% or more
of the total revenue, net income or assets of the Company and its Subsidiaries, taken as a whole, (iii) any sale, exchange,
transfer or other disposition of 15% or more of any class of equity securities of the Company, or securities convertible into or
exchangeable for 15% or more of any class of equity securities of the Company, (iv) any tender offer or exchange offer that, if
consummated, would result in any person beneficially owning 15% or more of any class of equity securities of the Company, (v) any
combination of the foregoing.
(g) An “Intervening
Event” means a material event, development or change with respect to the Company and its Subsidiaries or the business
of the Company and its Subsidiaries, that (i) is unknown by the Company Board and the Special Committee as of or prior to the date
hereof and (ii) occurs, arises or becomes known to the Company Board or the Special Committee after the date hereof and on or prior
to the receipt of the Requisite Company Vote; provided that the receipt by the Company of a Competing Transaction or Superior
Proposal will not be deemed to constitute an Intervening Event.
(h) A “Superior
Proposal” means a bona fide written proposal or offer with respect to a Competing Transaction, which was not obtained
in violation of Section 6.04, that would result in any person (or its shareholders, members or other equity owners) becoming the
beneficial owner, directly or indirectly, of more than 50% of the assets (on a consolidated basis), or more than 50% of the total
voting power of the equity securities, of the Company that the Company Board (acting only upon the recommendation of the Special
Committee) or the Special Committee has determined in its good faith judgment (after consultation with its financial advisor and
outside legal counsel): (A) is reasonably likely to be consummated in accordance with its terms without significant delay, taking
into account all legal, financial and regulatory aspects of the proposal (including financing, regulatory or other consents and
approvals, shareholder litigation, the identity of the person making the proposal, breakup or termination fee and expense reimbursement
provisions, expected timing, risk and likelihood of consummation and other relevant events and circumstances) and (B) would, if
consummated, result in a transaction more favorable to the Company’s shareholders (other than the Rollover Shareholders)
from a financial point of view than the Transactions; provided that no offer or proposal shall be deemed to be a “Superior
Proposal” if any financing required to consummate the transaction contemplated by such offer or proposal is not fully committed
or if the receipt of any such financing is a condition to the consummation of such transaction, or if the Company’s recourse
in the event such transaction is not consummated because of the failure to obtain financing is less favorable to the Company in
any material respect than the Company’s recourse in such an event hereunder.
(i) Prior to the termination
of this Agreement pursuant to Article VIII, the Company shall not submit to the vote of its shareholders any Competing Transaction
or enter into any Alternative Acquisition Agreement or propose to do so.
(j) Nothing contained
in this Section 6.04 shall be deemed to prohibit the Company, the Company Board or the Special Committee from (i) complying with
its disclosure obligations under U.S. federal or state or non-U.S. Law, including (A) disclosure of factual information regarding
the business, financial condition or results of operations of the Company or (B) taking and disclosing to its shareholders 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 shareholders in connection with the making or amendment of a tender offer or exchange offer); provided
that any such disclosure (other than a “stop, look and listen” communication of the type contemplated by Rule 14d-9(f)
under the Exchange Act or a statement that the Company Board or the Special Committee has received and is currently evaluating
such Competing Transaction) that does not include an express rejection of any applicable Competing Transaction or an express reaffirmation
of its recommendation in favor of the transactions contemplated by this Agreement shall be deemed to be a Change in the Company
Recommendation or (ii) making any “stop-look-and-listen” communication of the type contemplated by Rule 14d-9(f) under
the Exchange Act.
Section 6.05 Directors’
and Officers’ Indemnification and Insurance.
(a) The indemnification,
advancement and exculpation provisions of the indemnification agreements by and among the Company and its directors and certain
executive officers as in effect at the Effective Time shall survive the Merger and shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that would adversely affect the rights thereunder of the
current or former directors or officers of the Company or any of its Subsidiaries. The memorandum and articles of association of
the Surviving Corporation shall contain provisions no less favorable to the intended beneficiaries with respect to exculpation
and indemnification of liability and advancement of expenses than are set forth in the memorandum and articles of association of
the Company as in effect on the date hereof, and Parent shall cause such provisions not be amended, repealed or otherwise modified
for a period of six years from the Effective Time in any manner that would affect adversely the rights thereunder of individuals
who, at or prior to the Effective Time, were directors, officers, employees, fiduciaries or agents of the Company, unless such
modification shall be required by Law. From and after the Effective Time, any agreement of any Indemnified Party with the Company
or any of its Subsidiaries regarding exculpation or indemnification of liability or advancement of expenses shall be assumed by
the Surviving Corporation, shall survive the Merger and shall continue in full force and effect in accordance with its terms.
(b) The Surviving
Corporation shall, and Parent shall cause the Surviving Corporation to, maintain in effect for six years from the Effective Time
the current directors’ and officers’ liability insurance policies maintained by the Company with respect to matters
occurring prior to the Effective Time, including acts or omissions occurring in connection with this Agreement and the consummation
of the Transactions (the parties covered thereby, the “Indemnified Parties”) on terms with respect to coverage
and amount no less favorable to the Indemnified Parties than those in effect as of the Effective Time; provided that the
Surviving Corporation may substitute therefor policies of at least the same coverage containing terms, conditions, retentions and
limits of liability that are no less favorable than those provided under the Company’s current policies; provided,
further, that in no event shall the Surviving Corporation be required to expend pursuant to this Section 6.05(b) more than an amount
per year equal to 300% of current annual premiums paid by the Company for such insurance, and if the cost of such insurance policy
exceeds such amount, then the Surviving Corporation shall obtain a policy with the greatest coverage for a cost not exceeding such
amount. In addition, the Company may and, at Parent’s request, the Company shall, purchase a six-year “tail”
prepaid policy prior to the Effective Time on terms, conditions, retentions and limits of liability no less advantageous to the
Indemnified Parties than the existing directors’ and officers’ liability insurance maintained by the Company. If such
“tail” prepaid policies have been obtained by the Company prior to the Effective Time, the Surviving Corporation shall,
and Parent shall cause the Surviving Corporation to, maintain such policies in full force and effect, and continue to honor the
respective obligations thereunder, and all other obligations of Parent or Surviving Corporation under this Section 6.05(b) shall
terminate.
(c) Subject to the
terms and conditions of this Section 6.05, from and after the Effective Time, the Surviving Corporation shall comply, and Parent
shall cause the Surviving Corporation to comply, with all of the Company’s obligations, and each of the Surviving Corporation
and Parent shall cause its Subsidiaries to comply with their respective obligations to indemnify and hold harmless (including any
obligations to advance funds for expenses) (i) the Indemnified Parties against any and all costs or expenses (including reasonable
attorneys’ fees and expenses), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection
with any actual or threatened claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative
(“Damages”), arising out of, relating to or in connection with (A) the fact that an Indemnified Party is or
was a director, officer or employee of the Company or any of its Subsidiaries or (B) any acts or omissions occurring or alleged
to have occurred (including acts or omissions with respect to the approval of this Agreement or the Transactions or arising out
of or pertaining to the Transactions and actions to enforce this provision or any other indemnification or advancement right of
any Indemnified Party) prior to or at the Effective Time, to the extent provided under the Company’s or such Subsidiaries’
respective organizational and governing documents or agreements in effect on the date hereof (true and complete copies of which
shall have been delivered to Parent prior to the date hereof) and to the fullest extent permitted by the CICL or any other applicable
Law; provided that such indemnification shall be subject to any limitation imposed from time to time under applicable Law
and (ii) such persons against any and all Damages arising out of acts or omissions in such persons’ official capacity as
an officer, director or other fiduciary of the Company or any of its Subsidiary if such service was at the request or for the benefit
of the Company or any of its Subsidiaries.
(d) Upon being served
with any summons, citation, subpoena, complaint, indictment, information, or other document relating to any Proceeding which may
result in the payment or advancement of any amounts under Section 6.05(c), the organizational and governing documents of the Company
or any of its Subsidiaries, or any existing indemnification agreements, the person seeking indemnification shall notify the Surviving
Corporation promptly, but in all events no later than the earlier of (i) five days after actual receipt, and (ii) as soon as necessary
after actual receipt to prevent the Surviving Corporation or any of its Subsidiaries from being materially and adversely prejudiced
by late notice. The Surviving Corporation (or a Subsidiary nominated by it) shall have the right to participate in any such Proceeding
and, at its option, assume the defense of such Proceeding. The person seeking indemnification shall have the right to effectively
participate in the defense and/or settlement of such Proceeding, including receiving copies of all correspondence and participating
in all meetings and teleconferences concerning the Proceeding. In the event the Surviving Corporation (or a Subsidiary nominated
by it) assumes the defense of any Proceeding pursuant to this Section 6.05(d), neither the Surviving Corporation nor any of its
Subsidiaries shall be liable to the person seeking indemnification for any fees of counsel subsequently incurred by such person
with respect to the same Proceeding.
(e) In the event the
Company or the Surviving Corporation 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 or merger or (ii) transfers
all or substantially all 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 Company or the Surviving Corporation, as the case may be, or at Parent’s option,
Parent, shall assume the obligations set forth in this Section 6.05.
(f) The agreements
and covenants contained in this Section 6.05 shall be in addition to any other rights an Indemnified Party may have under the memorandum
and articles of association of the Company or any of its Subsidiaries (or equivalent constitutional documents), or any agreement
between an Indemnified Party and the Company or any of its Subsidiaries, under the CICL or other applicable Law, or otherwise.
The provisions of this Section 6.05 shall survive the consummation of the Merger and are intended to be for the benefit of, and
shall be enforceable by, each of the Indemnified Parties and their heirs and legal representatives, each of which shall be a Third-Party
beneficiary of the provisions of this Section 6.05. The obligations of Parent and the Surviving Corporation under this Section
6.05 shall not be terminated or modified in such a manner as to adversely affect the rights of any Indemnified Party without the
consent of such Indemnified Party.
(g) Nothing in this
Agreement is intended to, shall be construed to or shall release, waive or impair any rights to directors’ and officers’
insurance claims under any policy that is or has been in existence with respect to the Company or any of its Subsidiaries or their
respective officers, directors and employees; it being understood and agreed that the indemnification provided for in this Section
6.05 is not prior to or in substitution for any such claims under any such policies.
Section 6.06 Notification
of Certain Matters.
Each of the Company
and Parent shall promptly notify the other in writing of:
(a) any notice or
other communication from any person alleging that the consent of such person is or may be required in connection with the Transactions;
(b) any notice or
other communication from any Governmental Authority in connection with the Transactions;
(c) any Proceedings
commenced or, to the knowledge of the Company or the knowledge of Parent, threatened against the Company or any of its Subsidiaries
or Parent and any of its Subsidiaries, as the case may be, that, if pending on the date hereof, would have been required to have
been disclosed by such party pursuant to any of such party’s representations and warranties contained herein, or that relate
to such party’s ability to consummate the Transactions; and
(d) if a breach of
any representation or warranty or failure to perform any covenant or agreement on the part of such party set forth in this Agreement
shall have occurred that would cause the conditions set forth in Section 7.01, Section 7.02 or Section 7.03 not to be satisfied;
together, in each case,
with a copy of any such notice, communication or Proceeding; provided that the delivery of any notice pursuant to this Section
6.06 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice; provided,
further, that failure to give prompt notice pursuant to Section 6.06(d) shall not constitute a failure of a condition to the Merger
set forth in Article VII except to the extent that the underlying breach of a representation or warranty or failure to perform
any covenant or agreement not so notified would, standing alone, constitute such a failure; provided, further, that the
Company’s unintentional failure to give notice under this Section 6.06 shall not be deemed to be a breach of covenant under
this Section 6.06 but instead shall constitute only a breach of the underlying representation or warranty or covenant or condition,
as the case may be.
Section 6.07 Financing.
(a) Subject
to the terms and conditions of this Agreement, each of Parent and Merger Sub shall use its reasonable best efforts to (i) obtain
the Equity Financing on the terms and conditions described in the Equity Commitment Letters, (ii) maintain in effect the Equity
Commitment Letters until the Transactions are consummated, (iii) satisfy, or cause to be satisfied, on a timely basis all conditions
to the closing of and funding under the Equity Commitment Letters applicable to Parent and/or Merger Sub that are within its control,
(iv) consummating the Equity Financing at or prior to the Effective Time and (v) subject to Section 9.08, enforcing the parties’
funding obligations and the rights of Parent and Merger Sub under the Equity Commitment Letters to the extent necessary
to fund the Merger Consideration; provided that Parent and/or Merger Sub may amend or modify the Equity Commitment Letters
so long as (A) the aggregate proceeds of the Equity Financing (as amended or modified) will be sufficient for Parent and the Surviving
Corporation to pay (1) the Merger Consideration and (2) any other amounts required to be paid in connection with the consummation
of the Transactions upon the terms and conditions contemplated hereby and (B) such amendment or modification would not prevent,
materially delay or materially impede or impair (1) the ability of Parent and Merger Sub to consummate the Transactions or (2)
the rights and benefits of the Company under the Equity Commitment Letters. Parent shall deliver to the Company true and complete
copies of such amendment or modification as promptly as practicable after execution thereof. In the event any portion of the Equity
Financing becomes unavailable on the terms and conditions contemplated in the Equity Commitment Letters, Parent shall promptly
notify the Company.
(b) Subject
to the terms and conditions of this Agreement, Parent and Merger Sub agree not to amend, modify or waive any provision of the Equity
Commitment Letters, if such amendment, modification or waiver reduces (or would reduce) the aggregate amount of the Equity Financing
or imposes new or additional conditions or otherwise expands, amends or modifies the conditions to the Equity Financing in a manner
that, in each case, would be expected to prevent or materially delay or otherwise materially and adversely affect the ability of
Parent or Merger Sub to consummate the Transactions. Parent shall give the Company prompt notice (i) upon becoming aware
of any breach of any material provision of the Equity Commitment Letters or termination of any such Equity Commitment Letter by
any party to such Equity Commitment Letter or (ii) upon the receipt of any written notice from any party to an Equity Commitment
Letter with respect to any threatened breach of any material provision of the Equity Commitment Letters or threatened termination
of any such Equity Commitment Letters.
Section 6.08 Further
Action; Reasonable Best Efforts.
(a) Upon the terms
and subject to the conditions of this Agreement, each of the parties hereto and their respective Representatives shall (i) make
promptly its respective filings, and thereafter make any other required submissions, with each relevant Governmental Authority
with jurisdiction over enforcement of any applicable antitrust or competition Laws with respect to the Transactions, and coordinate
and cooperate fully with the other parties in exchanging such information and providing such assistance as the other parties may
reasonably request in connection therewith (including (A) obtaining consent (such consent not be unreasonably withheld, conditioned
or delayed) from the other parties promptly before making any substantive communication (whether verbal or written) with any Governmental
Authority in connection with such filings or submissions, (B) permitting the other parties to review in advance, and consulting
with the other parties on, any proposed filing, submission or communication (whether verbal or written) by such party to any Governmental
Authority and (C) giving the other parties the opportunity to attend and participate at any meeting with any Governmental
Authority in respect of any filing, investigation or other inquiry) and (ii) cooperate with the other parties hereto and use
its reasonable best efforts, and cause its Subsidiaries to use their respective reasonable best efforts, to take or cause to be
taken, all appropriate action, and to do, or cause to be done, all things necessary, proper or advisable under applicable Laws
or otherwise to consummate and make effective the Transactions, including employing such resources as are necessary to obtain the
Requisite Regulatory Approvals and taking any and all steps necessary to avoid or eliminate each and every impediment under any
antitrust or competition Law that may be asserted by any Governmental Authority so as to enable the parties hereto to expeditiously
consummate the Transactions, including committing to and effecting, by consent decree, hold separate orders, or otherwise, the
restructuring, reorganization, sale, divestiture or disposition of such of its assets, properties or businesses; provided
that no party hereto shall be required to take any such action if such action would have a Company Material Adverse Effect.
(b) Each party hereto
shall, upon request by any other party, furnish such other party with all information concerning itself, its Subsidiaries, directors,
officers and shareholders and such other matters as may be reasonably necessary or advisable in connection with the Proxy Statement,
the Schedule 13E-3, or any other statement, filing, notice or application made by or on behalf of Parent, Merger Sub, the Company
or any of their respective Subsidiaries to any Third Party and/or any Governmental Authority in connection with the Transactions.
Section 6.09 Obligations
of Parent and Merger Sub.
Parent shall take all
action necessary to cause Merger Sub to perform its obligations under this Agreement and to consummate the Transactions on the
terms and subject to the conditions set forth in this Agreement.
Section 6.10 Participation
in Litigation.
Prior to the Effective
Time, Parent shall give prompt notice to the Company, and the Company shall give prompt notice to Parent, of any Proceedings commenced
or, to the Company’s knowledge on the one hand and Parent’s knowledge on the other hand, threatened against such party
or its directors that relate to this Agreement and the Transactions. The Company shall give Parent the opportunity to participate
in the defense or settlement of any shareholder Proceeding against the Company and/or its directors relating to this Agreement
or the Transactions, and no such Proceeding shall be settled without Parent’s prior written consent (such consent not be
unreasonably withheld, conditioned or delayed); provided that the Company may, without Parent’s prior written consent,
settle Proceedings that involve only the payment of money damages not in excess of $1,000,000 in the aggregate.
Section 6.11 Resignations.
To the extent requested
by Parent in writing at least three Business Days prior to Closing, on the Closing Date, the Company shall use reasonable best
efforts to cause to be delivered to Parent duly signed resignations, effective as of the Effective Time, of the directors of the
Company or any of its Subsidiaries designated by Parent.
Section 6.12 Public
Announcements.
Except as may be required
by applicable Law, the press release announcing the execution of this Agreement shall be issued only in such form as shall be mutually
agreed upon by the Company and Parent. Thereafter, at any time prior to termination of this Agreement pursuant to Article VIII,
Parent and the Company shall consult with each other before issuing any press release, having any communication with the press
(whether or not for attribution), making any other public statement or scheduling any press conference or conference call with
investors or analysts with respect to this Agreement or the Transactions and, except in respect of any such press release, communication,
other public statement, press conference or conference call as may be required by applicable Law or rules and policies of NASDAQ,
shall not issue any such press release, have any such communication, make any such other public statement or schedule any such
press conference or conference call prior to such consultation. Notwithstanding the foregoing, the restrictions set forth in this
Section 6.12 shall not apply to any release or announcement made or proposed to be made by the Company in connection with a Change
in Company Recommendation made in compliance with this Agreement.
Section 6.13 Stock
Exchange Delisting.
Prior to the Effective
Time, 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 Class A Shares and ADSs from NASDAQ and the deregistration of the Class A Shares and ADSs
under the Exchange Act as promptly as practicable after the Effective Time.
Section 6.14 Takeover
Statutes.
If any Takeover Statute
is or may become applicable to any of the Transactions, the parties hereto shall use their respective reasonable best efforts (a)
to take all action necessary so that no Takeover Statute is or becomes applicable to any of the Transactions and (b) if any such
Takeover Statute is or becomes applicable to any of the foregoing, to take all action necessary (including, in the case of the
Company and the Company Board, grant all necessary approvals) so that the Transactions may be consummated as promptly as practicable
on the terms contemplated by this Agreement, including all actions to eliminate or lawfully minimize the effects of such Takeover
Statute on the Transactions.
Section 6.15 SAFE
Registration.
The Company shall as
soon as practicable after the date hereof, (a) use its commercially reasonable efforts to assist in the preparation of applications
to SAFE by shareholders of the Company who are PRC residents for the registration of their respective holdings of Shares (whether
directly or indirectly) in accordance with the requirements of applicable SAFE rules, including by promptly providing such shareholders
with such information relating to the Company and its Subsidiaries as is required for such application, and (b) cause its PRC Subsidiaries
(to the extent applicable) to comply with the requirements of such SAFE rules.
Section 6.16 No
Amendment to Parent Group Contracts or Certain Other Documents.
Without
the Company’s prior written consent, (a) Parent and Merger Sub shall not, and shall cause the members of the Parent Group
not to, enter into any Contract or amend, modify, withdraw or terminate any Parent Group Contract or waive any rights thereunder
in a manner that would (i) result, directly or indirectly, in any of the Rollover Shares ceasing to be treated as Excluded Shares
or change the number of Rollover Shares of Yili Shengda, Zhongrong Shengda, Zhongrong Investment, Hongtai, Hongzhi and Hao Ding,
(ii) individually or in the aggregate, prevent or materially delay the ability of Parent or Merger Sub to consummate the Merger
and the other Transactions or (iii) prevent or materially impair the ability of any management member or director of the Company,
with respect to any Superior Proposal, taking any of the actions described in Section
6.04 to the extent such actions are permitted to be taken by the Company thereunder, (b) Parent and Merger Sub shall not, and shall
cause the members of the Parent Group not to, enter into or modify any Contract pursuant to which any management members, directors
or shareholders of the Company, or any of their respective Affiliates receives any consideration or other economic value from any
person in connection with the Transactions that is not provided or expressly contemplated in the Parent Group Contracts as of the
date hereof, including any carried interest, share option, share appreciation right or other forms of equity or quasi-equity right
and (c) Parent and Merger Sub shall not, and shall cause the members of the Parent Group not to, adopt, enter into or modify
any constitutional documents of any member of the Parent Group, any Contract or any understanding that would prevent or materially
impair the satisfaction of the condition set forth in Section 7.01(b).
Within two Business Days after the execution thereof, Parent and Merger Sub shall provide the Company with a copy of any Contract
relating to the Transactions that is entered into after the date hereof and to which a member of the Parent Group is a party.
Article
VII
CONDITIONS TO THE MERGER
Section 7.01 Conditions
to the Obligations of Each Party.
The obligations of
the Company, Parent and Merger Sub to consummate the Merger are subject to the satisfaction or waiver (where permissible under
applicable Law) of the following conditions at or prior to the Closing Date:
(a) Shareholder Approval.
This Agreement, the Plan of Merger and the Transactions shall have been authorized and approved by holders of Shares constituting
the Requisite Company Vote at the Shareholders’ Meeting in accordance with the CICL and the Company’s memorandum and
articles of association.
(b) No Injunction.
No Governmental Authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Law or award,
writ, injunction, determination, rule, regulation, judgment, decree or executive order (an “Order”), whether
temporary, preliminary or permanent, that is then in effect or has the effect of enjoining, restraining, prohibiting or otherwise
making illegal the consummation of the Transactions, and the consummation of the Transactions shall not have been subject to any
requirement to make any regulatory filing or obtain any regulatory approval under the PRC Anti-Monopoly Law.
Section 7.02 Conditions
to the Obligations of Parent and Merger Sub.
The obligations of
Parent and Merger Sub to consummate the Merger are subject to the satisfaction or waiver (where permissible under applicable Law)
of the following additional conditions at or prior to the Closing Date:
(a) Representations
and Warranties. (i) The representations and warranties of the Company contained in Section
3.04 shall be true and correct in all material respects, (ii) the representations and warranties of the Company contained in
the first two sentences of Section 3.03(a) shall be true and
correct in all respects (except for de minimus inaccuracies), and (iii) each of the other representations and warranties of
the Company contained in this Agreement (without giving effect to any qualification as to “materiality” or
“Company Material Adverse Effect” set forth therein), shall be true and correct in all respects, in each case as
of the date of this Agreement and as of the Closing Date, as though made on, or at, and as of such date or time (except to
the extent expressly made as of a specific date, in which case as of such date), except in the case of clause (iii), where
the failure of such representations and warranties of the Company to be so true and correct would not constitute a Company
Material Adverse Effect.
(b) Agreements and
Covenants. The Company shall have performed or complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the Closing Date.
(c) No Material Adverse
Effect. No Company Material Adverse Effect shall have occurred since the date hereof and be continuing.
(d) Officer Certificate.
The Company shall have delivered to Parent a certificate, dated the Closing Date, signed by a senior executive officer of the Company,
certifying as to the satisfaction of the conditions specified in Section 7.02(a), Section 7.02(b) and Section 7.02(c).
(e) Dissenting Shareholders.
The holders of no more than 10% of the Shares shall have validly served a notice of dissent under Section 238(2) of the CICL.
Section 7.03 Conditions
to the Obligations of the Company.
The obligations of
the Company to consummate the Merger are subject to the satisfaction or waiver (where permissible under applicable Law) of the
following additional conditions at or prior to the Closing Date:
(a) Representations
and Warranties. The representations and warranties of Parent and Merger Sub contained in this Agreement (without giving effect
to any qualification as to “materiality” set forth therein) shall be true and correct in all respects as of the date
hereof and as of the Closing Date, as though made on and as of such date and time (other than representations and warranties that
by their terms address matters only as of a specified time, which shall be true and correct only as of such time), except where
the failure of such representations and warranties of Parent and Merger Sub to be so true and correct, individually or in the aggregate,
have not, and would not reasonably be expected to, prevent, materially delay or materially impede or impair the ability of Parent
and Merger Sub to consummate the Transactions.
(b) Agreements and
Covenants. Each of Parent and Merger Sub shall have performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or prior to the Closing Date.
(c) Officer Certificate.
Parent shall have delivered to the Company a certificate, dated the date of the Closing, signed by an executive officer of Parent,
certifying as to the satisfaction of the conditions specified in Section 7.03(a) and Section 7.03(b).
Section 7.04 Frustration
of Closing Conditions.
Prior to the Termination
Date, none of the Company, Parent or Merger Sub may rely on the failure of any condition set forth in this Article VII to be satisfied
if such failure was caused by such party’s failure to act in good faith to comply with this Agreement and consummate the
Transactions.
Article
VIII
TERMINATION
Section 8.01 Termination
by Mutual Consent.
This Agreement may
be terminated and the Transactions may be abandoned at any time prior to the Effective Time by mutual written consent of Parent
and the Company with the approval of their respective boards of directors (or in the case of the Company, acting upon the recommendation
of the Special Committee).
Section 8.02 Termination
by Either the Company or Parent.
This Agreement may
be terminated by either the Company (acting only upon the recommendation of the Special Committee) or Parent at any time prior
to the Effective Time, if:
(a) the Effective
Time shall not have occurred on or before the date falling six months from the date of this Agreement (the “Termination
Date”); or
(b) any Governmental
Authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any final and non-appealable Order
that, or taken any other final and non-appealable action that, has the effect of making consummation of the Transactions illegal
or otherwise preventing or prohibiting consummation of the Transactions; or
(c) the Requisite
Company Vote shall not have been obtained at the Shareholders’ Meeting duly convened therefor and concluded or at any adjournment
or postponement thereof;
provided that
the right to terminate this Agreement pursuant to this Section 8.02 shall not be available to any party whose failure to fulfill
any of its obligations under this Agreement has been a material cause of, or resulted in, the failure of the applicable condition(s)
being satisfied.
Section 8.03 Termination
by the Company.
This Agreement may
be terminated by the Company (acting only upon the recommendation of the Special Committee) at any time prior to the Effective
Time, if:
(a) a breach of any
representation, warranty, agreement or covenant of Parent or Merger Sub set forth in this Agreement shall have occurred, which
breach (i) would give rise to the failure of a condition set forth in Section 7.03(a) or Section 7.03(b) and as a result of such
breach, such condition would not be capable of being satisfied prior to the Termination Date and (ii) is incapable of being
cured or, if capable of being cured, is not cured by Parent or Merger Sub, as applicable, within 30 days following receipt of written
notice of such breach from the Company (or, if the Termination Date is less than 30 calendar days from the date of receipt of such
notice, by the Termination Date); provided that the Company shall not have the right to terminate this Agreement pursuant
to this Section 8.03(a) if the Company is then in material breach of any representations, warranties, agreements or covenants of
the Company hereunder that would give rise to the failure of a condition set forth in Section 7.02;
(b) (i) all of the
conditions set forth in Section 7.01 and Section 7.02 (other than those conditions that by their nature are to be satisfied by
actions taken at the Closing) have been satisfied, (ii) the Company has delivered to Parent an irrevocable written notice confirming
that all of the conditions set forth Section 7.03 have been satisfied (or that the Company is willing to waive any unsatisfied
conditions in Section 7.03) and that it is ready, willing and able to consummate the Closing and (iii) Parent and Merger Sub fail
to complete the Closing within five Business Days following the date on which the Closing should have occurred pursuant to Section
1.02; or
(c) prior
to the receipt of the Requisite Company Vote, (i) the Company Board (acting only upon the recommendation of the Special Committee)
or the Special Committee (to the extent it is within the authority of the Special Committee) has authorized the Company to enter
into an Alternative Acquisition Agreement with respect to a Superior Proposal pursuant to Section
6.04(d) and (ii) the Company concurrently with, or immediately after, the termination of this Agreement enters into the Alternative
Acquisition Agreement with respect to the Superior Proposal referred to in the foregoing clause (i); provided that the Company
shall not be entitled to terminate this Agreement pursuant to this Section 8.03(c) unless the Company has (A) complied in all respects
with the requirements of Section 6.04 with respect to such Superior Proposal and/or Alternative Acquisition Agreement (other than
immaterial non-compliance that does not adversely affect Parent or Merger Sub) and (B) complied in all respects with Section 8.06
and pays in full the Company Termination Fee prior to or concurrently with taking any action pursuant to this Section 8.03(c).
Any purported termination of this Agreement by the Company pursuant to this Section 8.03(c) shall be void and of no force or effect
if the Company shall not have paid the Company Termination Fee in accordance with this Section 8.03(c).
Section 8.04 Termination
by Parent.
This Agreement may
be terminated by Parent at any time prior to the Effective Time, if:
(a) a breach of any
representation, warranty, agreement or covenant of the Company set forth in this Agreement shall have occurred, which breach (i)
would give rise to the failure of a condition set forth in Section 7.02(a) or Section 7.02(b) and as a result of such breach, such
condition would not be capable of being satisfied prior to the Termination Date and (ii) is incapable of being cured or, if capable
of being cured, is not cured by the Company within 30 days following receipt of written notice of such breach from Parent or Merger
Sub (or, if the Termination Date is less than 30 calendar days from the date of receipt of such notice, by the Termination Date);
provided that Parent shall not have the right to terminate this Agreement pursuant to this Section 8.04(a) if either Parent
or Merger Sub is then in material breach of any representations, warranties or covenants of Parent or Merger Sub hereunder that
would give rise to the failure of a condition set forth in Section 7.03; or
(b) the Company Board
or any committee thereof shall have effected a Change in the Company Recommendation.
Section 8.05 Effect
of Termination.
In the event of the
termination of this Agreement pursuant to Article VIII, this Agreement shall forthwith become void, and there shall be no liability
under this Agreement on the part of any party hereto (or any Representative of such party); provided that the terms of Section
6.03(c), Section 6.12, Article VIII and Article IX shall survive any termination of this Agreement.
Section 8.06 Termination
Fee and Expenses.
(a) In the event that:
(i) (A) a bona
fide proposal or offer with respect to a Competing Transaction shall have been publicly made, proposed or communicated (and not
publicly withdrawn), after the date hereof and prior to the Shareholders’ Meeting (or prior to the termination of this Agreement
if there has been no Shareholders’ Meeting), (B) following the occurrence of an event described in the preceding clause (A),
this Agreement is terminated by the Company or Parent pursuant to Section 8.02(a) or Section 8.02(c) and (C) within 12 months after
the termination of this Agreement, the Company consummates, or enters into a definitive agreement in connection with, any Competing
Transaction by a Third Party (in each case whether or not the Competing Transaction was the same Competing Transaction referred
to in Clause (A)); provided that for purposes of this Section 8.06(a), all references to “15%” in the definition
of “Competing Transaction” shall be deemed to be references to “50%”);
(ii) this Agreement
is terminated by Parent pursuant to Section 8.04; or
(iii) this Agreement
is terminated by the Company pursuant to Section 8.03(c),
then the Company shall
pay to Parent or its designees an amount equal to $57,250,000 (the “Company Termination Fee”) by
wire transfer of same day funds as promptly as possible (but in any event (A) within five Business Days after such termination
in the case of a termination referred to in clause (ii), (B) within two Business Days following the consummation by the Company
of a Competing Transaction or entry by the Company into the definitive agreement in connection with a Competing Transaction in
the case of a termination referred to in clause (i) or (C) prior to or concurrently with the termination of this Agreement in the
case of a termination pursuant to clause (iii)); it being understood that in no event shall the Company be required to pay the
Company Termination Fee on more than one occasion.
(b) Parent will pay,
or cause to be paid, to the Company an amount equal to $114,500,000 (the “Parent Termination Fee”)
if this Agreement is terminated by the Company pursuant to Section 8.03(a) or Section 8.03(b), such payment to be made as promptly
as possible (but in any event within five Business Days) following such termination by wire transfer of same day funds); it being
understood that in no event shall Parent be required to pay the Parent Termination Fee on more than one occasion.
(c) In the event that
the Company shall terminate this Agreement pursuant to Section 8.03(a) or Section 8.03(b), then Parent shall pay, or caused to
be paid, to the Company by wire transfer of same day funds, as promptly as possible (but in any event within three Business Days)
following the delivery by the Company of an invoice therefor, all Expenses incurred by the Company and its Affiliates in connection
with the Transactions up to a maximum amount equal to $3,000,000.
(d) In the event that
Parent shall terminate this Agreement pursuant to Section 8.04, the Company shall pay Parent or its designees by wire transfer
of same day funds, as promptly as possible (but in any event within three Business Days) following the delivery by Parent of an
invoice therefor, all Expenses incurred by Parent, Merger Sub and their respective Affiliates in connection with the Transactions,
including the Equity Financing, up to a maximum amount equal to $3,000,000.
(e) Except as set
forth in Section 8.06(c) and Section 8.06(d), all Expenses incurred in connection with this Agreement and the Transactions shall
be paid by the party incurring such Expenses, whether or not the Merger or any other Transaction is consummated.
(f) In the event that
the Company fails to pay the Company Termination Fee or any Expenses, or Parent fails to pay the Parent Termination Fee or any
Expenses, when due and in accordance with the requirements of this Agreement, the Company or Parent, as the case may be, shall
reimburse the other party for reasonable costs and expenses actually incurred or accrued by the other party (including fees and
expenses of counsel) in connection with the collection under and enforcement of this Section 8.06, together with interest on such
unpaid Company Termination Fee or Parent Termination Fee or Expenses, as the case may be, commencing on the date that the Company
Termination Fee or Parent Termination Fee or Expenses, as the case may be, became due, at the prime rate as published in the Wall
Street Journal Table of Money Rates on such date plus 5.00%. Such collection expenses shall not otherwise diminish in any way the
payment obligations hereunder.
(g) Each of the Company,
Parent and Merger Sub acknowledges that (i) the agreements contained in this Section 8.06 are an integral part of the Transactions,
(ii) the damages resulting from termination of this Agreement under circumstances where a Company Termination Fee or Parent
Termination Fee is payable are uncertain and incapable of accurate calculation and therefore, the amounts payable pursuant to Section
8.06(a) or Section 8.06(b) are not a penalty but rather constitute amounts akin to liquidated damages in a reasonable amount that
will compensate Parent or the Company, as the case may be, for the efforts and resources expended and opportunities foregone while
negotiating this Agreement and in reliance on this Agreement and on the expectation of the consummation of the Transactions, and
(iii) without the agreements contained in this Section 8.06, the parties hereto would not have entered into this Agreement.
(h) (i) Subject
to Section 9.08, the Equity Commitment Letters or the Limited Guarantees,
in the event that Parent or Merger Sub fails to effect the Closing for any reason or no reason or they otherwise breach this Agreement
(whether willfully, intentionally, unintentionally or otherwise) or otherwise fail to perform hereunder (whether willfully, intentionally,
unintentionally or otherwise), then the Company’s right to terminate this Agreement and receive the Parent Termination Fee
pursuant to Section 8.06(b), the Expenses under Section 8.06(c) and the expenses under Section 8.06(f) and the guarantee of such
obligations pursuant to the Limited Guarantees (subject to their terms, conditions and limitations), shall be the sole and exclusive
remedy (whether at law, in equity, in contract, in tort or otherwise) of the Company or any of its Subsidiaries and all members
of the Company Group against (A) Parent, Merger Sub, the Guarantors, and the Sponsors, (B) the former, current and future holders
of any equity, partnership or limited liability company interest, controlling persons, directors, officers, employees, agents,
attorneys, Affiliates, members, managers, general or limited partners, stockholders, or assignees of Parent, Merger Sub or any
Guarantor or Sponsor, (C) any lender or prospective lender, lead arranger, arranger, agent or representative of or to Parent, Merger
Sub or any Guarantor or Sponsor, or (D) any holders or future holders of any equity, stock, partnership or limited liability company
interest, controlling persons, directors, officers, employees, agents, attorneys, Affiliates, members, managers, general or limited
partners, stockholders, assignees of any of the foregoing (clauses (A)-(D), collectively, the “Parent Group”),
for any loss or damage suffered as a result of any breach of any representation, warranty, covenant or agreement (whether willfully,
intentionally, unintentionally or otherwise) or failure to perform hereunder (whether willfully, intentionally, unintentionally
or otherwise) or other failure of the Merger or the other Transactions to be consummated (whether willfully, intentionally, unintentionally
or otherwise). For the avoidance of doubt, neither Parent nor any other member of the Parent Group shall have any liability for
monetary damages of any kind or nature or arising in any circumstance in connection with this Agreement or any of the Transactions
(including the Equity Commitment Letters and the Limited Guarantees)
other than the payment of the Parent Termination Fee pursuant to Section 8.06(b), the Expenses under Section 8.06(c) and the expenses
pursuant to Section 8.06(f), and in no event shall the Company or any of its Subsidiaries, the direct or indirect shareholders
of the Company or any of its Subsidiaries, or any of their respective Affiliates, directors, officers, employees, members, managers,
partners, representatives, advisors or agents of the foregoing (collectively, the “Company Group”) seek, or
permit to be sought, on behalf of any member of the Company Group, any monetary damages from any member of the Parent Group in
connection with this Agreement or any of the Transactions (including the Equity Commitment Letters
and the Limited Guarantees), other than (without duplication) from Parent or Merger Sub to the extent provided in Section 8.06(b),
Section 8.06(c) and Section 8.06(f), or the Guarantors to the extent provided in the relevant Limited Guarantee.
(ii) Subject to Section
9.08, Parent’s right to terminate this Agreement and receive the Company Termination Fee pursuant to Section 8.06(a), the
Expenses under Section 8.06(d) and expenses under Section 8.06(f) shall be the sole and exclusive remedy (whether at law, in equity,
in contract, in tort or otherwise) of any member of the Parent Group against any member of the Company Group for any loss or damage
suffered as a result of any breach of any representation, warranty, covenant or agreement (whether willfully, intentionally, unintentionally
or otherwise) or failure to perform hereunder (whether willfully, intentionally, unintentionally or otherwise) or other failure
of the Merger to be consummated (whether willfully, intentionally, unintentionally or otherwise). Neither the Company nor any other
member of the Company Group shall have any liability for monetary damages of any kind or nature or arising in any circumstance
in connection with this Agreement or any of the Transactions other than the payment by the Company of the Company Termination Fee
pursuant to Section 8.06(a), the Expenses under Section 8.06(d) and the expenses under Section 8.06(f), and in no event shall any
of Parent, Merger Sub or any other member of the Parent Group seek, or permit to be sought, on behalf of any member of the Parent
Group, any monetary damages from any member of the Company Group in connection with this Agreement or any of the Transactions,
other than (without duplication) from the Company to the extent provided in Section 8.06(a), Section 8.06(d) and Section 8.06(f).
Article
IX
GENERAL PROVISIONS
Section 9.01 Non-Survival
of Representations, Warranties and Agreements.
The representations,
warranties and agreements in this Agreement and in any certificate delivered pursuant hereto shall terminate at the earlier of
the Effective Time and termination of this Agreement pursuant to Article VIII, except that this Section 9.01 shall not limit any
covenant or agreement of the parties hereto that by its terms contemplates performance after the Effective Time or termination
of this Agreement, including the agreements set forth in Article I and Article II, Section 6.06 and this Article IX.
Section 9.02 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 or by international overnight courier to the respective parties at the
following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section
9.02):
if to Parent or Merger
Sub:
c/o Ningxia Yilida
Capital Investment Limited Partnership
No. 19, Lane 666, Zhangheng
Road,
Pudong New Area, Shanghai,
China
Attention: Mr. Yingfeng
Zhang
c/o Ningxia Zhongyincashmere
International Group Co., Ltd.
Zhongyin Avenue, The
Cashmere Industrial Park
Lingwu, Ningxia Province,
China
Attention: Ms. Xiaofei
Chen
Facsimile:
+86 591 4519290
with a copy to:
Wilson Sonsini Goodrich
& Rosati
Jin Mao Tower, 38F,
Unit 3
88 Century Blvd, Pudong
Shanghai 200121, China
Attention: Zhan
Chen, Esq.
Facsimile: +86 21 6165
1799
if to the Company:
Shanda Games
Limited
No. 1 Office Building
No. 690 Bibo Road
Pudong New Area
Shanghai 201203
The People’s
Republic of China
Attention: Mr. Yingfeng
Zhang
Facsimile: +86
21 5050 4740 (ext. 897286)
with a copy to:
Sullivan & Cromwell
28th Floor, Nine Queen’s
Road Central
Hong Kong
Attention: Chun
Wei, Esq.
Facsimile: +852
2522 2280
Section 9.03 Certain
Definitions.
(a) For purposes of
this Agreement:
“2014 Balance
Sheet” means the audited consolidated balance sheet of the Company and its consolidated Subsidiaries as at December 31, 2014,
including the notes thereto.
“Acceptable Confidentiality
Agreement” means a confidentiality agreement that contains provisions that are no less favorable in the aggregate to the
Company than those contained in the Confidentiality Agreements; provided that such agreement and any related agreements
(i) need not contain “standstill” provisions and (ii) shall not include any provision calling for any exclusive
right to negotiate with such party or having the effect of prohibiting the Company from satisfying its obligations under this Agreement.
“Affiliate”
of a specified person means a person who, directly or indirectly through one or more intermediaries, controls, is controlled by,
or is under common control with, such specified person.
“Business Day”
means any day other than a Saturday or Sunday or a day on which banks are required or authorized to close in New York, the Cayman
Islands, the British Virgin Islands, Hong Kong or Singapore, a public holiday in the PRC.
“Company Disclosure
Schedule” means the disclosure schedule delivered by the Company to and accepted by Parent and Merger Sub on the date hereof.
“Company IP Contract”
means any Contract, to which the Company or any of its Subsidiaries is party or by which the Company or any of its Subsidiaries
is bound, that contains any assignment or license of, or covenant not to assert or enforce, any Intellectual Property or that otherwise
relates to any Company Owned IP or Intellectual Property licensed by, with or to the Company or any of its Subsidiaries.
“Company IT Assets”
means all Software, systems, servers, computers, hardware, firmware, middleware, networks, data communications lines, routers,
hubs, switches and all other information technology equipment, and all associated documentation owned by or licensed, pursuant
to valid and enforceable license agreements, to the Company and its Subsidiaries.
“Company Material
Adverse Effect” means any fact, event, circumstance, change, condition or effect that, individually or in the aggregate with
all other facts, events, circumstances, changes, conditions and effects, has or would reasonably be expected to have a materially
adverse effect on the business, financial condition, or results of operations of the Company and its Subsidiaries taken as a whole;
provided, however, that in no event shall any of the following, either alone or in combination, constitute, or be taken
into account in determining whether there has been or would be, a Company Material Adverse Effect: (i) changes affecting the financial,
credit or other securities or capital markets, or in general economic, business, regulatory, legislative or political conditions
in any country or region in which the Company or any of its Subsidiaries conduct business, including changes in interest rates
and foreign exchange rates; (ii) changes in GAAP or any interpretation thereof after the date hereof; (iii) changes in applicable
Law, directives or policies of a Governmental Authority of general applicability, or any interpretation, implementation or enforcement
thereof, that are binding on the Company or any of its Subsidiaries; (iv) changes that are the result of factors generally affecting
the industries and markets in which the Company and its Subsidiaries operate; (v) effects resulting from the announcement,
pendency or consummation of this Agreement or the identity of Parent and its Affiliates, including, without limitation, the initiation
of litigation or other legal proceeding related to this Agreement or the Transactions, or any loss of or change in relationship
with any customer, supplier, employee, vendor or other business partner of the Company; (vi) any failure by the Company or
any of its Subsidiaries to meet any analyst estimates or expectations of the Company’s or such Subsidiary’s revenue,
earnings or other financial performance or results of operations for any period, or any failure by the Company or any of its Subsidiaries
to meet its internal or published projections, estimates, budgets, plans or forecasts of its revenues, earnings or other financial
performance measures, operating statistics or results of operations (it being understood that the facts or occurrences giving rise
to or contributing to such failure that are not otherwise excluded from the definition of “Company Material Adverse Effect”
may be taken into account in determining whether there has been a Company Material Adverse Effect); (vii) natural or manmade disasters,
acts of sabotage or terrorism, declarations, outbreaks or escalations of war or major hostilities, or other force majeure events;
(viii) changes in the market price or trading volume of Shares or ADSs (it being understood that the facts or occurrences giving
rise to or contributing to such changes that are not otherwise excluded from the definition of “Company Material Adverse
Effect” may be taken into account in determining whether there has been a Company Material Adverse Effect); (ix) any acts
or omissions of the Company or any of its Subsidiaries taken, directly or indirectly, at the direction or request of, or with the
consent of, Parent or any officer or director of Parent, or at the request of Parent; provided that facts, events, circumstances,
developments, conditions, changes, occurrences or effects set forth in clauses (i), (ii), (iii), (iv) and (vii) above may be taken
into account in determining whether a “Company Material Adverse Effect” has occurred or reasonably would be expected
to occur if and to the extent such facts, events, circumstances, developments, conditions, changes, occurrences or effects individually
or in the aggregate have a materially disproportionate impact on the Company and its Subsidiaries, taken as a whole, relative to
the other participants in the industries in which the Company and its Subsidiaries conduct their businesses.
“Company Option”
means each option to purchase Shares whether or not granted under the Share Incentive Plan on or prior to the Closing Date, whether
or not such option has become vested on or prior to the Closing Date in accordance with the terms thereof.
“Company Permits”
means all franchises, grants, authorizations, licenses, permits, easements, variances, exceptions, consents, concessions, registrations,
clearances, exemptions, certificates, approvals and orders of any Governmental Authority required under applicable Law for the
conduct of the Company’s business.
“Company Products”
means the products and services designed, developed, manufactured, offered, provided, marketed, licensed, sold, distributed or
otherwise made available by or for the Company or any of its Subsidiaries.
“Company RS”
means each share of restricted stock whether or not granted under the Share Incentive Plan on or prior to the Closing Date, the
restrictions over which have not lapsed on or prior to the Closing Date in accordance with the terms thereof.
“Company RSU”
means each restricted stock unit or other right to acquire Shares whether or not granted under the Share Incentive Plan on or prior
to the Closing Date, whether or not the restrictions over which have lapsed on or prior to the Closing Date in accordance with
the terms thereof.
“Company Shareholder
Approval” means the approval and adoption of this Agreement and the Transactions (including the Merger) at the Shareholders’
Meeting by the Requisite Company Vote.
“Confidentiality
Agreements” means the confidentiality agreements between the Company and each of the Sponsors, as amended and restated from
time to time.
“Consortium Agreement”
means the Consortium Agreement by and among Ningxia Yilida, Ningxia Zhongyincashmere, Hongtai, Hongzhi and Hao Ding dated as of
March 16, 2015, as amended and supplemented from time to time.
“Contract”
means any legally enforceable note, bond, mortgage, indenture, deed of trust, contract, agreement, lease, license, permit, franchise
or other instrument.
“control”
(including the terms “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 and policies of a person,
whether through the ownership of voting securities or the possession of voting power, as trustee or executor, by contract or credit
arrangement or otherwise.
“Environmental
Law” means any applicable PRC local, provincial or national Law relating to (a) the protection of health, safety or the environment
or (b) the handling, use, transportation, disposal, release or threatened release of any Hazardous Substance.
“Exercise Price”
means, with respect to any Company Option, the applicable exercise price per Share underlying such Company Option.
“Excluded Shares”
means, collectively, (i) the Rollover Shares and (ii) Shares held by Parent, the Company or any of their Subsidiaries.
“Expenses”
means, with respect to any party hereto, all out-of-pocket fees and expenses (including all fees and expenses of counsel, accountants,
investment banking firms and other financial institutions, experts and consultants to such party and its Affiliates) actually incurred
or accrued by such party or its Affiliates or on its or their behalf or for which it or they are liable in connection with or related
to the authorization, preparation, negotiation, execution and performance of the Transactions, the preparation, printing, filing
and mailing of the Schedule 13E-3 and the Proxy Statement, the solicitation of shareholder approvals, the filing of any required
notices under applicable Laws and all other matters related to the closing of the Merger and the other Transactions.
“Governmental
Authority” means any federal, national, foreign, supranational, state, provincial, county, local or other governmental, regulatory
or administrative authority, agency, instrumentality or commission or any court, tribunal, or judicial or arbitral body of competent
jurisdiction.
“Government Official”
means any officer, employee or other individual acting in an official capacity for a Governmental Authority or agency or instrumentality
thereof (including any state-owned or controlled enterprise).
“Hao
Ding” means Hao Ding International Limited, a company established
under the laws of the British Virgin Islands.
“Hazardous Substance”
means any chemical, pollutant, waste or substance that is (i) listed, classified or regulated under any Environmental Law
as hazardous substance, toxic substance, pollutant, contaminant or oil or (ii) any petroleum product or by product, asbestos containing
material, polychlorinated biphenyls or radioactive material.
“Hongtai”
means Orient Hongtai (Hong Kong) Limited, a company incorporated and existing under the laws of Hong Kong and
an Affiliate of Orient Securities Company Limited.
“Hongzhi”
means Orient Hongzii (Hong Kong) Limited, a company incorporated and existing under the laws of Hong Kong and
an Affiliate of Orient Securities Company Limited.
“Indebtedness”
means, with respect to any person, (i) all indebtedness of such person, whether or not contingent, for borrowed money, (ii) all
obligations of such person for the deferred purchase price of property or services, (iii) all obligations of such person evidenced
by notes, bonds, debentures or other similar instruments, (iv) all obligations of such person under currency, interest rate or
other swaps, and all hedging and other obligations of such person under other derivative instruments, (v) all indebtedness created
or arising under any conditional sale or other title retention agreement with respect to property acquired by such person (even
though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession
or sale of such property), (vi) all obligations of such person as lessee under leases that have been or should be, in accordance
with GAAP, recorded as capital leases, (vii) all obligations, contingent or otherwise, of such person under acceptance, letter
of credit or similar facilities, (viii) all Indebtedness of others referred to in clauses (i) through (vii) guaranteed directly
or indirectly in any manner by such person and (ix) all Indebtedness referred to in clauses (i) through (vii) secured by (or for
which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Liens on property (including
accounts and contract rights) owned by such person, even though such person has not assumed or become liable for the payment of
such Indebtedness.
“Intellectual
Property” means all (i) patents worldwide, including utility models, inventions and discoveries, statutory invention registrations,
mask works, invention disclosures, and industrial designs, community designs and other designs, and including all divisionals,
substitutions, continuations, continuations-in-part, continuing prosecution applications, reissues, re-examinations, renewals,
restorations, and extensions, and any counterparts worldwide claiming priority therefrom, and all rights in and to any of the foregoing
(“Patents”), including all members of (a) all Patents in the same priority chain (i.e., all Patents that claim
priority to the same non-provisional application or applications, and all Patents from which priority is claimed by the identified
Patent), (b) all corresponding foreign Patents, and (c) all Patents that are subject to a terminal disclaimer that disclaims the
term of any such Patent beyond the term of any member of the family, (ii) Trademarks, (iii) copyrights and all other rights with
respect to Works of Authorship, including moral and economic rights however denominated, design rights and database rights therein
and thereto, (iv) information and materials not generally known to the public and qualifying as a trade secret under applicable
Law, including (A) any technical, engineering, manufacturing, product, marketing, servicing, financial, supplier, and other information
and materials, and (B) any customer, vendor, and distributor lists, contact and registration information, and correspondence (“Trade
Secrets”), including rights to limit the use or disclosure thereof by any person, (v) rights of privacy and publicity,
including all rights with respect to the use of a person’s name, signature, likeness, image, photograph, voice, identity,
personality, and biographical and personal information and materials, (vi) claims and causes of action arising out of or related
to any past, current or future infringement, misappropriation, interference or violation of any of the foregoing, (vii) registrations,
applications, renewals and extensions for any of the foregoing in clauses (i)-(v), and (viii) any and all other proprietary rights
equivalent or similar to the foregoing which may exist or be created under the laws of any jurisdiction in the world.
“knowledge”
means, with respect to the Company, the actual knowledge after inquiry of such individual’s direct reports as would be usual
in connection with the ordinary course of, and consistent with the past practice of, such individual’s position at the Company,
as of the date of this Agreement, of the Chief Executive Officer, Chief Financial Officer, Chief Technology Officer and General
Counsel of the Company, and with respect to any other party hereto, the actual knowledge of any director or executive officer of
such party.
“Law” means
any federal, state, local, national, supranational, foreign or administrative law (including common law), statute, ordinance, regulation,
requirement, regulatory interpretation, rule, code or Order.
“Leases”
shall mean all leases, subleases, licenses, or other similar agreements, including all amendments, extensions, renewals, guarantees
and other agreements with respect thereto, pursuant to which the Company or any of its Subsidiaries holds any Leased Real Property,
including the right to all security deposits and other amounts and instruments deposited by or on behalf of the Company or any
of its Subsidiaries.
“Liens”
means any security interest, pledge, hypothecation, mortgage, lien (including environmental and Tax liens), violation, charge,
lease, license, encumbrance, easement, adverse claim, reversion, reverter, preferential arrangement, restrictive covenant, condition
or restriction of any kind, including any restriction on the use, voting, transfer, receipt of income or other exercise of any
attributes of ownership.
“Ningxia
Silkroad” means Ningxia Silkroad Equity Investment Partnership Enterprise (Limited Partnership), a limited partnership
formed under the laws of the People’s Republic of China and controlled
by Ningxia Zhongyincashmere.
“Ningxia
Yilida” means Ningxia Yilida Capital Investment Limited Partnership, a limited partnership formed under the laws of
the People’s Republic of China and an Affiliate of Mr. Yingfeng
Zhang.
“Ningxia Zhongyincashmere”
means Ningxia Zhongyincashmere International Group Co., Ltd., a company formed under the laws of the People’s Republic of
China.
“Permitted Encumbrances”
shall mean (i) Liens for Taxes, assessments and charges or levies by Governmental Authorities not yet due and payable or that are
being contested in good faith and by appropriate proceedings, (ii) mechanics’, carriers’, workmen’s, repairmen’s,
materialmen’s or other Liens or security interests arising or incurred in the ordinary course of business relating to obligations
as to which there is no default on the part of the Company or any of its Subsidiaries or that secure a liquidated amount, that
are being contested in good faith and by appropriate proceedings, (iii) leases, subleases and licenses (other than capital leases
and leases underlying sale and leaseback transactions), (iv) Liens imposed by applicable Law, (v) pledges or deposits to secure
obligations under workers’ compensation Laws or similar legislation or to secure public or statutory obligations, (vi) pledges
and deposits to secure the performance of bids, trade contracts, leases, surety and appeal bonds, performance bonds and other obligations
of a similar nature, in each case in the ordinary course of business, (vii) easements, covenants and rights of way (unrecorded
and of record) and other similar restrictions of record, and zoning, building and other similar restrictions, in each case that
do not adversely affect in any material respect the current use of the applicable property owned, leased, used or held for use
by the Company or any of its Subsidiaries, (viii) Liens securing indebtedness or liabilities that (A) are reflected in the Company
SEC Reports filed or furnished prior to the date hereof, or (B) have otherwise been disclosed to Parent in writing as of the date
of this Agreement, (ix) matters which would be disclosed by an accurate survey or inspection of the real property which do not
materially impair the occupancy or current use of such real property which they encumber, (x) outbound non-exclusive license agreements
and non-disclosure agreements entered into in the ordinary course of business consistent with past practice, (xi) standard survey
and title exceptions, and (xii) any other Liens that have been incurred or suffered in the ordinary course of business and
that would not have a Company Material Adverse Effect.
“person”
means an individual, corporation, partnership, limited partnership, limited liability company, syndicate, person (including a “person”
as defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision, agency
or instrumentality of a government.
“Personal Information”
means individually-identifiable information from or about an individual, including an individual’s: first and last name,
home or other physical address, including street name and city or town; telephone number, including home telephone number and mobile
telephone number; email address or other online contact information, such as a user identifier or screen name; photograph; financial
account number or credit card number; tax identification number, social security number, driver’s license number, passport
number or other government-issued identifier; employee identification number; persistent identifier, such as IP address or other
unique identifier associated with a person, device or web browser; list of contacts; physical location; or any other information
deemed to be personally identifiable information pursuant to applicable Law.
“PRC” means
the People’s Republic of China, which for the purposes of this Agreement only shall not include the Hong Kong Special Administrative
Region, the Macau Special Administrative Region and Taiwan.
“Proceeding”
means any action, suit, litigation, arbitration, proceeding (including any civil, criminal, administrative, investigative or appellate
proceeding), hearing, inquiry, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise
involving, any arbitrator, arbitration panel, court or other Governmental Authority.
“Registered IP”
means all Company Owned IP that, as of the date of this Agreement, is registered, filed or issued under the authority of, with
or by any Governmental Authority, including all Patents, registered copyrights, registered Trademarks, registered domain names,
and all applications for any of the foregoing.
“Rollover
Shares” means (i) with respect to Yili Shengda, 48,759,187
Class B Shares, (ii) with respect to Zhongrong Shengda, 48,759,187 Class B Shares, (iii) with respect to Zhongrong Investment,
80,577,828 Class A Shares, (iv) with respect to Hongtai, 61,776,334 Class A Shares, (v) with respect to Hongzhi, 61,776,335 Class
A Shares and (vi) with respect to Hao Ding, 107,438,129 Class A Shares.
“Share Incentive
Plan” means the amended and restated Shanda Games Limited 2008 Equity Compensation Plan and all amendments and modifications
thereto.
“Shareholders’
Meeting” means the meeting of the Company’s shareholders (including any adjournments or postponements thereof) to be
held to consider the authorization and approval of this Agreement, the Plan of Merger and the Transactions, including the Merger.
“Software”
means all (i) computer programs, applications, systems and software code of any nature, whether operational or under development,
including executable code, data files, rules, definitions derived from the foregoing, and any derivations, updates, enhancements
and customizations of any of the foregoing, and any related processes, know-how, APIs, user interfaces, command structures, menus,
buttons and icons, flow charts, software implementations of algorithms, models and methodologies, program interfaces, and Source
Code and object code, (ii) Internet and intranet websites, databases and compilations, including data and collections of data,
whether machine-readable or otherwise, (iii) development and design tools, library functions and compilers, (iv) technology
supporting websites, and the contents and audiovisual displays of websites and (v) media, documentation and other works of authorship,
including operating procedures, methods, tools, developers’ kits, utilities, developers’ notes, user manuals and training
materials, including comments and annotations related thereto, whether machine-readable or otherwise, relating to or embodying
any of the foregoing or on which any of the foregoing is recorded, stored, encoded or written on disk, tape, film, memory device,
paper or other media of any nature.
“Source Code”
means human-readable computer software code, including related programmer comments and annotations, build scripts, test scripts,
help text, data and data structures, instructions and other documentation for such computer software code that enables a programmer
to understand and modify such software.
“Special Committee”
means a committee of the Company Board consisting of members of the Company Board that are not affiliated with Parent or Merger
Sub and are not members of the management of the Company.
“Sponsors”
means Zhengjun Investment, Ningxia Silkroad and Zhongrong
Legend.
“Strategic Advisor”
means Kilometre Capital Management Cayman.
“Subsidiary”
means, with respect to any party, any person (i) of which such party or any other Subsidiary of such party is a general or managing
partner, (ii) of which at least a majority of the securities (or other interests having by their terms ordinary voting power to
elect a majority of the board of directors or other performing similar functions with respect to such corporation or other organization)
is, directly or indirectly, owned or controlled by such party or by any one or more of its Subsidiaries, or by such party and one
or more of its Subsidiaries or (iii) whose assets and financial results are consolidated with the net earnings of such party and
are recorded on the books of such party for financial reporting purposes in accordance with GAAP.
“Tax” or
“Taxes” means any and all taxes, fees, levies, duties, tariffs, imposts and other charges of any kind (together with
any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any Governmental
Authority or taxing authority, including: taxes or other charges on or with respect to income, franchise, windfall or other profits,
gross receipts, occupation, property, real estate, deed, land use, sales, use, capital stock, payroll, severance, wages, employment
(including withholding obligations imposed on employer/payer), social security, workers’ compensation, unemployment compensation
or net worth; taxes or other charges in the nature of excise, withholding (as payor or payee), ad valorem, stamp, transfer, value-added
or gains taxes; license, registration and documentation fees; and customers’ duties, tariffs and similar charges.
“Tax Return”
means any return, declaration, report, election, claim for refund or information return or other statement or form filed or required
to be filed with any Governmental Authority relating to Taxes, including any schedule or attachment thereto, and including any
amendment thereof.
“Technology”
means and includes diagrams, inventions (whether or not patentable), invention disclosures, protocols, layout rules, schematics,
including, build instructions, test instructions, test reports, performance data, procedures, specifications, technical data, product
roadmaps, personnel information, customer purchasing histories and any other forms of technology, in each case whether or not embodied
in any tangible form and including all tangible embodiments of any of the foregoing.
“Third Party”
means any person or “group” (as defined under Section 13(d) of the Exchange Act) of persons, other than Parent or any
of its Affiliates or Representatives.
“Trademarks”
means trademarks, service names, service marks, domain names, uniform resource locators, trade dress, trade names, geographical
indications, logos and design marks, fictitious and other business names and identifiers, brand names, collective membership marks,
certification marks, slogans, 800 numbers, social media pages or designations, hash tags and other forms of indicia of origin,
whether or not registrable as a trademark in any given jurisdiction, including the goodwill symbolized thereby or associated therewith.
“Works of Authorship”
means Software, websites, content, images, graphics, text, photographs, artwork, audiovisual works, sound recordings, graphs, drawings,
reports, analyses, writings, and other works of authorship and copyrightable subject matter, and any modifications, improvements
and derivative works of any of the foregoing.
“Yili
Shengda” means Yili Shengda Investment Holdings (Hong Kong) Company Limited, a company formed under the laws of Hong Kong
and an Affiliate of Mr. Yingfeng Zhang.
“Zhengjun
Investment” means Ningxia Zhengjun Equity Investment Partnership Enterprise (Limited Partnership), a limited partnership
formed under the laws of the People’s Republic of China and an Affiliate
of Ningxia Yilida.
“Zhongrong Investment”
means Zhongrong Investment Holdings (Hong Kong) Co., Ltd., a company organized under the laws of Hong Kong and controlled by Ningxia
Zhongyincashmere.
“Zhongrong
Legend” means Ningxia Zhongrong Legend Equity Investment Partnership Enterprise (Limited Partnership), a limited partnership
formed under the laws of the People’s Republic of China and controlled
by Ningxia Zhongyincashmere.
“Zhongrong Shengda”
means Zhongrong Shengda Investment Holdings (Hong Kong) Company Limited, a company formed under the laws of Hong Kong and controlled
by Ningxia Zhongyincashmere.
(b) The following
terms have the meaning set forth in the Sections set forth below:
| Defined Term |
Location of Definition |
| |
|
| ADS; ADSs |
Section 2.01(c) |
| Agreement |
Preamble |
| Alternative Acquisition Agreement |
Section 6.04(c) |
| Arbitrator |
Section 9.09(b) |
| Bankruptcy and Equity Exception |
Section 3.04(a) |
| Change in the Company Recommendation |
Section 6.04(c) |
| CICL |
Section 1.01 |
| Class A Share; Class A Shares |
Section 2.01(a) |
| Class B Shares |
Section 3.03(a) |
| Closing |
Section 1.02 |
| Closing Date |
Section 1.02 |
| Company |
Preamble |
| Company Affiliate |
Section 3.06(a)(ii) |
| Company Board |
Recitals |
| Company Group |
Section 8.06(h)(i) |
| Company Intellectual Property |
Section 3.14(a) |
| Company Owned IP |
Section 3.14(f) |
| Company Recommendation |
Section 3.04(b) |
| Company SEC Reports |
Section 3.07(a) |
| Company Software |
Section 3.14(j) |
| Company Termination Fee |
Section 8.06(a) |
| Competing Transaction |
Section 6.04(e) |
| Damages |
Section 6.05(c) |
| Deposit Agreement |
Section 2.06 |
| Depositary |
Section 2.06 |
| Dissenting Shareholders |
Section 2.03(a) |
| Dissenting Shares |
Section 2.03(a) |
| Defined Term |
Location of Definition |
| |
|
| Effective Time |
Section 1.03 |
| Environmental Permits |
Section 3.16(a) |
| Equity Commitment Letters |
Section 4.05(a) |
| Equity Financing |
Section 4.05(a) |
| Exchange Act |
Section 3.05(b) |
| Exchange Fund |
Section 2.04(a) |
| Financial Advisor |
Section 3.19 |
| GAAP |
Section 3.07(c) |
| Guarantor; Guarantors |
Recitals |
| HKIAC |
Section 9.09(b) |
| Indemnified Parties |
Section 6.05(b) |
| Leased Real Property |
Section 3.13(b) |
| Limited Guarantee; Limited Guarantees |
Recitals |
| Material Contracts |
Section 3.17(a) |
| Merger |
Recitals |
| Merger Consideration |
Section 2.04(a) |
| Merger Sub |
Preamble |
| NASDAQ |
Section 3.03(a) |
| NDA |
Section 3.17(a)(v) |
| Notice of Superior Proposal |
Section 6.04(d) |
| Order |
Section 7.01(b) |
| Owned Real Property |
Section 3.13(a) |
| Parent |
Preamble |
| Parent Group |
Section 8.06(h)(i) |
| Parent Termination Fee |
Section 8.06(b) |
| Paying Agent |
Section 2.04(a) |
| Per ADS Merger Consideration |
Section 2.01(c) |
| Per Share Merger Consideration |
Section 2.01(a) |
| Plan |
Section 3.11(a) |
| Plan of Merger |
Section 1.03 |
| Proceeding |
Section 3.10 |
| Proxy Statement |
Section 3.05(b) |
| Record ADS Holders |
Section 6.02(a) |
| Record Date |
Section 6.02(a) |
| Representatives |
Section 6.03(a) |
| Requisite Company Vote |
Section 3.04(c) |
| Requisite Regulatory Approvals |
Section 3.05(b) |
| Rollover Shareholders |
Recitals |
| SAFE |
Section 3.06 |
| Schedule 13E-3 |
Section 6.01(a) |
| SEC |
Section 3.07(a) |
| Defined Term |
Location of Definition |
| |
|
| Securities Act |
Section 3.07(a) |
| Share Certificates |
Section 2.04(b) |
| Shares |
Section 3.03(a) |
| Superior Proposal |
Section 6.04(h) |
| Superior Proposal Notice Period |
Section 6.04(d) |
| Support Agreement |
Recitals |
| Surviving Corporation |
Section 1.01 |
| Takeover Statute |
Section 3.21 |
| Termination Date |
Section 8.02(a) |
| Transactions |
Recitals |
| Uncertificated Shares |
Section 2.04(b) |
Section 9.04 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 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 a mutually acceptable manner in order that the Transactions
be consummated as originally contemplated to the fullest extent possible.
Section 9.05 Interpretation.
When a reference is
made in this Agreement to a Section, Article or Exhibit such reference shall be to a Section, Article or Exhibit of this Agreement
unless otherwise indicated. The table of contents and headings contained in this Agreement or in any Exhibit are for convenience
of reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances require. Any capitalized terms used in any Exhibit
but not otherwise defined therein shall have the meaning set forth in this Agreement. All Exhibits annexed hereto or referred to
herein are hereby incorporated in and made a part of this Agreement as if set forth herein. The word “including” and
words of similar import when used in this Agreement will mean “including, without limitation,” unless otherwise specified.
The words “hereof,” “herein” 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 definitions contained
in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute defined or referred to herein or in any agreement
or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession
of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. References to
a person are also to its permitted successors and assigns. References to clauses without a cross-reference to a Section or subsection
are references to clauses within the same Section or, if more specific, subsection. References from or through any date shall mean,
unless otherwise specified, from and including or through and including, respectively. The symbol “$” refers to United
States Dollars. All $ amounts used in Article III and Article V include the equivalent amounts denominated in other currencies.
The word “extent” in the phrase “to the extent” means the degree to which a subject or other thing extends
and such phrase shall not mean simply “if.” Reference to “day” means a calendar day unless otherwise indicated
as a “Business Day.”
Section 9.06 Entire
Agreement; Assignment.
This Agreement (including
the Exhibits and Schedules hereto), the Company Disclosure Schedule and the Confidentiality Agreements constitute the entire agreement
among the parties with respect to the subject matter hereof and supersedes 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 (whether
pursuant to a merger, by operation of Law or otherwise), except that Parent and Merger Sub may assign all or any of their rights
and obligations hereunder to any Affiliate of Parent, provided that no such assignment shall relieve the assigning party
of its obligations hereunder if such assignee does not perform such obligations.
Section 9.07 Parties
in Interest.
This Agreement shall
be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended
to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement,
other than Section 6.05 and Section 8.06(h) (which are intended to be for the benefit of the persons covered thereby and may be
enforced by such persons); provided that in no event shall any holders of Shares (including Shares represented by ADSs)
or holders of Company Options, Company RSs and Company RSUs, in each case in their capacity as such, have any right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
Section 9.08 Specific
Performance.
(a) Subject to Section
9.08(b) and Section 9.08(d), the parties hereto agree that irreparable damage would occur in the event any provision of this Agreement
were not performed in accordance with the terms hereof by the parties, and that money damages or other legal remedies would not
be an adequate remedy for such damages. Accordingly, subject to Section 9.08(b) and Section 9.08(d), the parties hereto acknowledge
and hereby agree that in the event of any breach by the Company, on the one hand, or Parent or Merger Sub, on the other hand, of
any of their respective covenants or obligations set forth in this Agreement, the Company, on the one hand, or Parent or Merger
Sub, on the other hand, shall each be entitled to specific performance of the terms hereof (including the obligation of the parties
to consummate the Merger, subject in each case to the terms and conditions of this Agreement), including an injunction or injunctions
to prevent breaches of this Agreement by any party, in addition to any other remedy at law or equity (including, subject to Section
9.08(b), the Company demanding that Parent and Merger Sub use reasonable best efforts to obtain the Equity Financing in accordance
with Section 6.07).
(b) Notwithstanding
the foregoing, the Company’s right to seek or obtain an injunction or injunctions, or other appropriate form of specific
performance or equitable relief, in each case, with respect to causing Parent and/or Merger Sub to cause the Equity Financing
to be funded at any time and/or to effect the Closing in accordance with
Section 1.02, on the terms and subject to the conditions in this Agreement, shall be subject to the satisfaction of each of the
following conditions: (i) all conditions in Section 7.01 and Section 7.02 (other than those conditions that by their terms are
to be satisfied at the Closing) have been satisfied or waived, (ii) Parent and Merger Sub fail to complete the Closing by
the date on which the Closing is required to have occurred pursuant to Section 1.02 and (iii) the Company has irrevocably confirmed
in writing that (A) all conditions set forth in Section 7.03 have been satisfied or that it is willing to waive any of the conditions
to the extent not so satisfied in Section 7.03 and (B) if specific performance is granted and the Equity Financing is funded, then
the Closing will occur.
(c) Each party (i)
waives any defenses in any action for an injunction or other appropriate form of specific performance or equitable relief, including
the defense that a remedy at law would be adequate and (ii) waives any requirement under any Law to post a bond or other security
as a prerequisite to obtaining an injunction or other appropriate form of specific performance or equitable relief.
(d) Notwithstanding
anything herein to the contrary, (i) Parent and Merger Sub, on the one hand, and the Company, on the other hand, agree that the
election to pursue an injunction or other appropriate form of specific performance or equitable relief shall not restrict, impair
or otherwise limit Parent and Merger Sub or the Company from, in the alternative, seeking to terminate the Agreement and collect
the Company Termination Fee pursuant to Section 8.06(a), Expenses under Section 8.06(d) and expenses under Section 8.06(f), by
Parent on the one hand, or the Parent Termination Fee pursuant to Section 8.06(b), Expenses under Section 8.06(c) and expenses
under Section 8.06(f), by the Company on the other hand and (ii) upon the payment of such amounts, the remedy of specific
performance shall not be available against the party making such payment and, if such party is Parent or Merger Sub, any other
member of the Parent Group or, if such party is the Company, any other member of the Company Group.
(e) This
Section 9.08 shall not be deemed to alter, amend, supplement or otherwise modify the terms of any Equity Commitment Letter
(including the expiration or termination provisions thereof).
Section 9.09 Governing
Law; Dispute Resolution.
(a) This Agreement
shall be interpreted, construed and governed by and in accordance with the Laws of the State of New York without regard to the
conflicts of Law principles thereof that would subject such matter to the Laws of another jurisdiction, except that the following
matters arising out of or relating to this Agreement shall be interpreted, construed and governed by and in accordance with the
Laws of the Cayman Islands in respect of which the parties hereto hereby irrevocably submit to the nonexclusive jurisdiction of
the courts of the Cayman Islands: the Merger, the vesting of the undertaking, property and liabilities of Merger Sub in the Surviving
Corporation, the cancellation of the Shares (including Shares represented by ADSs), the rights provided for in Section 238 of the
CICL with respect to any Dissenting Shares, the fiduciary or other duties of the Company Board and the directors of Merger Sub
and the internal corporate affairs of the Company and Merger Sub.
(b) Subject to Section
9.08 and the last sentence of this Section 9.09(b), any disputes, actions and proceedings against any party or arising out of or
in any way relating to this Agreement shall be submitted to the Hong Kong International Arbitration Centre (“HKIAC”)
and resolved in accordance with the Arbitration Rules of HKIAC in force at the relevant time (the “Rules”) and
as may be amended by this Section 9.09. The place of arbitration shall be Hong Kong. The official language of the arbitration shall
be English and the arbitration tribunal shall consist of three arbitrators (each, an “Arbitrator”). The claimant(s),
irrespective of number, shall nominate jointly one Arbitrator; the respondent(s), irrespective of number, shall nominate jointly
one Arbitrator; and a third Arbitrator will be nominated jointly by the first two Arbitrators and shall serve as chairman of the
arbitration tribunal. In the event the claimant(s) or respondent(s) or the first two Arbitrators shall fail to nominate or agree
the joint nomination of an Arbitrator or the third Arbitrator within the time limits specified by the Rules, such Arbitrator shall
be appointed promptly by the HKIAC. The arbitration tribunal shall have no authority to award punitive or other punitive-type damages.
The award of the arbitration tribunal shall be final and binding upon the disputing parties. Any party to an award may apply to
any court of competent jurisdiction for enforcement of such award and, for purposes of the enforcement of such award, the parties
irrevocably and unconditionally submit to the jurisdiction of any court of competent jurisdiction and waive any defenses to such
enforcement based on lack of personal jurisdiction or inconvenient forum.
Section 9.10 Amendment.
This Agreement may
be amended by the parties hereto at any time prior to the Effective Time by action taken (a) with respect to Parent and Merger
Sub, by or on behalf of their respective boards of directors, and (b) with respect to the Company, by the Company Board (upon recommendation
of the Special Committee); provided that after the approval of this Agreement and the Transactions by the shareholders of
the Company, no amendment may be made that would reduce the amount or change the type of consideration in exchange for which each
Share (including Shares represented by ADSs) shall be cancelled upon consummation of the Merger. This Agreement may not be amended
except by an instrument in writing signed by each of the parties hereto.
Section 9.11 Waiver.
At any time prior to
the Effective Time, any party hereto may by action taken (a) with respect to Parent and Merger Sub, by or on behalf of their
respective boards of directors and (b) with respect to the Company, by action taken by or on behalf of the Special Committee,
(i) extend the time for the performance of any obligation or other act of any other party hereto, (ii) waive any inaccuracy
in the representations and warranties of any other party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any agreement of any other party or any condition to its own obligations contained herein. Any such extension
or waiver shall be valid if set forth in an instrument in writing signed by the party or parties to be bound thereby. No failure
or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.
Section 9.12 Counterparts.
This Agreement may
be executed and delivered (including by facsimile 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.
[Remainder of Page Left
Blank Intentionally]
IN WITNESS WHEREOF,
Parent, Merger Sub and the Company have caused this Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
| |
CAPITALHOLD LIMITED |
| |
|
|
| |
By: |
/s/ Yingfeng Zhang |
| |
Name: |
Yingfeng Zhang |
| |
Title: |
Director |
| |
|
|
| |
CAPITALCORP LIMITED |
| |
|
|
| |
By: |
/s/ Yingfeng Zhang |
| |
Name: |
Yingfeng Zhang |
| |
Title: |
Director |
[Signature Page to Agreement and Plan of Merger]
IN WITNESS WHEREOF,
Parent, Merger Sub and the Company have caused this Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
| |
SHANDA GAMES
LIMITED |
| |
|
|
| |
By: |
/s/ Heng Wing Chan |
| |
Name: |
Heng Wing Chan |
| |
Title: |
Chairman |
[Signature
Page to Agreement and Plan of Merger]
ANNEX A
PLAN OF MERGER
THIS PLAN OF MERGER is
made on ________ 2014.
BETWEEN
(1) Capitalcorp
Limited, an exempted company incorporated under the laws of the Cayman Islands on September 16, 2014, with its registered office
situate at the offices of Codan Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111,
Cayman Islands (“Merger Sub”); and
(2) Shanda Games
Limited, an exempted company incorporated under the laws of the Cayman Islands on June 12, 2008, with its registered office situate
at the offices of Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands (the “Company”
or “Surviving Corporation” and together with Merger Sub, the “Constituent Companies”).
WHEREAS
(a) Merger Sub and
the Company have agreed to merge (the “Merger”) on the terms and conditions contained or referred to in an Agreement
and Plan of Merger (the “Agreement”) dated April 3, 2015, made between Capitalhold Limited, Merger Sub and the Company,
a copy of which is attached as Appendix I to this Plan of Merger and under the provisions of Part XVI of the Companies Law Cap.22
(Law 3 of 1961, as consolidated and revised) (the “Companies Law”) pursuant to which the Merger Sub will merge with
and into the Company and cease to exist and the Surviving Corporation will continue as the Surviving Corporation in the Merger.
(b) This Plan of
Merger is made in accordance with section 233 of the Companies Law.
(c) Terms used in
this Plan of Merger and not otherwise defined in this Plan of Merger shall have the meanings given to them in the Agreement.
WITNESSETH
CONSTITUENT COMPANIES
1. The constituent
companies (as defined in the Companies Law) to the Merger are Merger Sub and the Company.
NAME OF THE SURVIVING
CORPORATION
2. The name of the
surviving corporation (as defined in the Companies Law) shall be Shanda Games Limited.
REGISTERED OFFICE
3. The Surviving Corporation
shall have its registered office at the offices of Codan Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, PO Box
2681, Grand Cayman, KY1-1111, Cayman Islands.
AUTHORISED AND ISSUED
SHARE CAPITAL
4. Immediately prior
to the Effective Date (as defined below) the authorized share capital of Merger Sub was $1,000 divided into 100,000 ordinary shares
of $0.01 par value per share, of which one share has been issued.
5. Immediately prior
to the Effective Date the authorized share capital of the Company was $200,000,000 divided into 16,000,000,000 Class A ordinary
shares of a par value of $0.01 each and 4,000,000,000 Class B ordinary shares of a par value of $0.01 each, of which [·]
Class A ordinary shares and [·] Class B ordinary shares have been issued fully
paid.
6. The authorized
share capital of the Surviving Corporation shall be $1,000 divided into 100,000 ordinary shares of $0.01 par value per share.
7. On the Effective
Date, and in accordance with the terms and conditions of the Agreement:
(a) Each Share issued
and outstanding immediately prior to the Effective Time other than (i) the Excluded Shares and (ii) the Dissenting Shares shall
be cancelled in exchange for the right to receive the Per Share Merger Consideration, being US$3.55 without interest.
(b) Each of the
Excluded Shares issued and outstanding immediately prior to the Effective Time shall be cancelled without payment of any consideration
or distribution therefor.
(c) Each of the
Dissenting Shares of persons who have validly exercised and not withdrawn or lost their right to dissent from the merger pursuant
to Section 238 of the Companies Law shall be exchanged for a payment of the fair value of such shares resulting from the procedure
in Section 238 of the Companies Law.
(d) All Shares issued
and outstanding immediately prior to the Effective Time, including Shares represented by ADSs, shall cease to be outstanding, shall
be cancelled and shall cease to exist.
(e) Each ordinary
share of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into one validly issued and
fully paid share of a nominal or par value $0.01 of the Surviving Corporation.
8. On the Effective
Date, the rights and restrictions attaching to ordinary shares of the Surviving Corporation are set out in the Amended and Restated
Memorandum of Association and Articles of Association of the Surviving Corporation in the form attached as Appendix II to this
Plan of Merger.
EFFECTIVE DATE
9. The Merger shall
take effect on [●] (the “Effective Date”).
PROPERTY
10. On the Effective
Date, the rights, property of every description including choses in action, and the business, undertaking, goodwill, benefits,
immunities and privileges of each of the Constituent Companies shall immediately vest in the Surviving Corporation which shall
be liable for and subject, in the same manner as the Constituent Companies, to all mortgages, charges, or security interests and
all contracts, obligations, claims, debts and liabilities of each of the Constituent Companies.
MEMORANDUM OF ASSOCIATION
AND ARTICLES OF ASSOCIATION
11. The Memorandum
of Association and Articles of Association of the Surviving Corporation shall be amended and restated in the form attached as Appendix
II to this Plan of Merger on the Effective Date.
DIRECTORS BENEFITS
12. There are no amounts
or benefits payable to the directors of the Constituent Companies upon the Merger taking effect.
DIRECTORS OF THE SURVIVING
CORPORATION
13. The names and
addresses of the directors of the Surviving Corporation are as follows:
SECURED CREDITORS
14. Merger Sub has
no secured creditors and has granted no fixed or floating security interests that are outstanding as of immediately prior to the
Merger; and the Company has no secured creditors and has granted no fixed or floating security interests that are outstanding as
at the date of this Plan of Merger.
RIGHT OF TERMINATION
15. This Plan of Merger
may be terminated pursuant to the terms and conditions of the Agreement at any time prior to the Effective Date.
APPROVAL AND AUTHORIZATION
16. This Plan of Merger
has been approved by the board of directors of each of Merger Sub and the Company pursuant to Section 233(3) of the Companies Law.
17. This Plan of Merger
has been authorized by the shareholders of each of Merger Sub and the Company pursuant to Section 233(6) of the Companies Law.
COUNTERPARTS
18. This Plan of Merger
may be executed by facsimile and in one or more counterparts, each of which shall be deemed an original and all of which together
shall constitute one and the same instrument.
GOVERNING LAW
19. This Plan of Merger
shall be governed by and construed in accordance with the Laws of the Cayman Islands.
For and on behalf of
Capitalcorp Limited:
[Name]
Director
For
and on behalf of the Company:
[Name]
Director
APPENDIX I
(the Agreement)
APPENDIX II
(Amended and Restated
Memorandum of Association and Articles of Association of the Surviving Corporation)
ANNEX B
PLAN OF MERGER
THIS PLAN OF MERGER is
made on ________ 2014.
BETWEEN
(1) Capitalcorp
Limited, an exempted company incorporated under the laws of the Cayman Islands on September 16, 2014, with its registered office
situate at the offices of Codan Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111,
Cayman Islands (“Merger Sub”); and
(2) Shanda Games
Limited, an exempted company incorporated under the laws of the Cayman Islands on June 12, 2008, with its registered office situate
at the offices of Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands (the “Company”
or “Surviving Corporation” and together with Merger Sub, the “Constituent Companies”).
WHEREAS
(a) Merger Sub and
the Company have agreed to merge (the “Merger”) on the terms and conditions contained or referred to in an Agreement
and Plan of Merger (the “Agreement”) dated April 3, 2015, made between Capitalhold Limited, Merger Sub and the Company,
a copy of which is attached as Appendix I to this Plan of Merger and under the provisions of Part XVI of the Companies Law Cap.22
(Law 3 of 1961, as consolidated and revised) (the “Companies Law”) pursuant to which the Merger Sub will merge with
and into the Company and cease to exist and the Surviving Corporation will continue as the Surviving Corporation in the Merger.
(b) This Plan of
Merger is made in accordance with section 233 of the Companies Law.
(c) Terms used in
this Plan of Merger and not otherwise defined in this Plan of Merger shall have the meanings given to them in the Agreement.
WITNESSETH
CONSTITUENT COMPANIES
1. The constituent
companies (as defined in the Companies Law) to the Merger are Merger Sub and the Company.
NAME OF THE SURVIVING
CORPORATION
2. The name of the
surviving corporation (as defined in the Companies Law) shall be Shanda Games Limited.
REGISTERED OFFICE
3. The Surviving Corporation
shall have its registered office at the offices of Codan Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, PO Box
2681, Grand Cayman, KY1-1111, Cayman Islands.
AUTHORISED AND ISSUED
SHARE CAPITAL
4. Immediately prior
to the Effective Date (as defined below) the authorized share capital of Merger Sub was $1,000 divided into 100,000 ordinary shares
of $0.01 par value per share, of which one share has been issued.
5. Immediately prior
to the Effective Date the authorized share capital of the Company was $200,000,000 divided into 16,000,000,000 Class A ordinary
shares of a par value of $0.01 each and 4,000,000,000 Class B ordinary shares of a par value of $0.01 each, of which [·]
Class A ordinary shares and [·] Class B ordinary shares have been issued fully
paid.
6. The authorized
share capital of the Surviving Corporation shall be $1,000 divided into 100,000 ordinary shares of $0.01 par value per share.
7. On the Effective
Date, and in accordance with the terms and conditions of the Agreement:
(a) Each Share issued
and outstanding immediately prior to the Effective Time other than (i) the Excluded Shares and (ii) the Dissenting Shares shall
be cancelled in exchange for the right to receive the Per Share Merger Consideration, being US$3.55 without interest.
(b) Each of the
Excluded Shares issued and outstanding immediately prior to the Effective Time shall be cancelled without payment of any consideration
or distribution therefor.
(c) Each of the
Dissenting Shares of persons who have validly exercised and not withdrawn or lost their right to dissent from the merger pursuant
to Section 238 of the Companies Law shall be exchanged for a payment of the fair value of such shares resulting from the procedure
in Section 238 of the Companies Law.
(d) All Shares issued
and outstanding immediately prior to the Effective Time, including Shares represented by ADSs, shall cease to be outstanding, shall
be cancelled and shall cease to exist.
(e) Each ordinary
share of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into one validly issued and
fully paid share of a nominal or par value $0.01 of the Surviving Corporation.
8. On the Effective
Date, the rights and restrictions attaching to ordinary shares of the Surviving Corporation are set out in the Amended and Restated
Memorandum of Association and Articles of Association of the Surviving Corporation in the form attached as Appendix II to this
Plan of Merger.
EFFECTIVE DATE
9. The Merger shall
take effect on [●] (the “Effective Date”).
PROPERTY
10. On the Effective
Date, the rights, property of every description including choses in action, and the business, undertaking, goodwill, benefits,
immunities and privileges of each of the Constituent Companies shall immediately vest in the Surviving Corporation which shall
be liable for and subject, in the same manner as the Constituent Companies, to all mortgages, charges, or security interests and
all contracts, obligations, claims, debts and liabilities of each of the Constituent Companies.
MEMORANDUM OF ASSOCIATION
AND ARTICLES OF ASSOCIATION
11. The Memorandum
of Association and Articles of Association of the Surviving Corporation shall be amended and restated in the form attached as Appendix
II to this Plan of Merger on the Effective Date.
DIRECTORS BENEFITS
12. There are no amounts
or benefits payable to the directors of the Constituent Companies upon the Merger taking effect.
DIRECTORS OF THE SURVIVING
CORPORATION
13. The names and
addresses of the directors of the Surviving Corporation are as follows:
SECURED CREDITORS
14. Merger Sub has
no secured creditors and has granted no fixed or floating security interests that are outstanding as of immediately prior to the
Merger; and the Company has no secured creditors and has granted no fixed or floating security interests that are outstanding as
at the date of this Plan of Merger.
RIGHT OF TERMINATION
15. This Plan of Merger
may be terminated pursuant to the terms and conditions of the Agreement at any time prior to the Effective Date.
APPROVAL AND AUTHORIZATION
16. This Plan of Merger
has been approved by the board of directors of each of Merger Sub and the Company pursuant to Section 233(3) of the Companies Law.
17. This Plan of Merger
has been authorized by the shareholders of each of Merger Sub and the Company pursuant to Section 233(6) of the Companies Law.
COUNTERPARTS
18. This Plan of Merger
may be executed by facsimile and in one or more counterparts, each of which shall be deemed an original and all of which together
shall constitute one and the same instrument.
GOVERNING LAW
19. This Plan of Merger
shall be governed by and construed in accordance with the Laws of the Cayman Islands.
For and on behalf of
Capitalcorp Limited:
[Name]
Director
For
and on behalf of the Company:
[Name]
Director
APPENDIX I
(the Agreement)
APPENDIX II
(Amended and Restated
Memorandum of Association and Articles of Association of the Surviving Corporation)
ANNEX C
Opinion of Merrill Lynch as Financial
Advisor
April 3, 2015
The Special Committee of Independent Directors of the Board
Shanda Games Limited
No. 1 Office Building
No. 690 Bibo Road
Pudong New Area
Shanghai 201203
The People’s Republic of China
Members of the Special Committee of Independent Directors of
the Board:
We understand Capitalhold Limited, an exempted
company with limited liability incorporated under the laws of the Cayman Islands (“Parent”), Capitalcorp limited, an
exempted company with limited liability incorporated under the laws of the Cayman Islands and a wholly-owned subsidiary of Parent
(“Merger Sub”), and Shanda Games Limited, an exempted company with limited liability incorporated under the laws of
the Cayman Islands (the “Company” or “Shanda”) propose to enter into the Agreement (as defined below),
pursuant to which, among other things, Merger Sub will merge with and into the Company (the “Merger”) with the Company
surviving the Merger (the “Surviving Corporation”) and that,
(a) each Class A ordinary share,
par value $0.01 each, of the Company (a “Class A Share” or, collectively, the “Class A Shares”) issued
and outstanding other than the Excluded Shares (as defined below), Shares (as defined below) as to which dissenters’ rights
have been validly exercised (the “Dissenting Shares”), Class A Shares represented by ADSs (as defined below), Company
RSs (as defined below) and RSUs (as defined below), shall be cancelled in exchange for the right to receive $3.55 in cash per Class
A Share without interest (the “Per Share Merger Consideration”); and
(b) each American Depositary
Share, representing two (2) Class A Shares (each, an “ADS” or collectively, the “ADSs”), issued and outstanding
immediately prior to the Effective Time (other than ADSs representing the Excluded Shares), and each Class A Share represented
by such ADSs, shall be cancelled in exchange for the right to receive $7.10 in cash per ADS without interest (the “Per ADS
Merger Consideration”) pursuant to the terms and conditions set forth in the Agreement.
We further understand that (a)(i) the Class
B ordinary shares, par value $0.01 each, of the Company (together with the Class A Shares, the “Shares”) held by Zhongrong
Shengda Investment Holdings (Hong Kong) Company Limited and Yili Shengda Investment Holdings (Hong Kong) Company Limited, (ii)
the Class A Shares and ADSs held by Zhongrong Investment Holdings (Hong Kong) Co., Ltd., Orient Hongtai (Hong Kong) Limited, Orient
Hongzhi (Hong Kong) Limited and Hao Ding International Limited (collectively, subclauses (i) and (ii), the “Rollover Shares”),
(iii) the Shares and ADSs held by Parent, the Company or any of their subsidiaries (together with the Rollover Shares, the “Excluded
Shares”), and (iv) the Shares represented by ADSs representing such Excluded Shares, will be cancelled without payment of
any consideration and (b) Dissenting Shares, Company RSs and RSUs will be cancelled and will represent the right to receive certain
payments under the terms of the Agreement. “Company RSs” and “Company RSUs” are defined in the Agreement
as shares of restricted stock and restricted stock units respectively, granted under the Company’s Share Incentive Plan on
or prior to the Closing Date (as defined in the Agreement), the restrictions over which have not lapsed on or prior to the Closing
Date in accordance with the terms thereof. The terms and conditions of the Merger are more fully set forth in the Agreement.
The Special Committee of Independent Directors of the Board
Shanda Games Limited
Page 2
You have asked Merrill Lynch (Asia Pacific)
Limited (“Merrill Lynch”) to provide an opinion (this “Opinion”) to the Special Committee of the Independent
Directors of the Board of the Company (the “Special Committee”) as to the fairness, from a financial point of view,
to the holders of the Shares or ADSs (other than holders of Excluded Shares) of the Per Share Merger Considerations or the Per
ADS Merger Consideration, as applicable, to be received by such holders in the Merger.
In connection with this opinion, we have,
among other things:
| (1) | reviewed certain publicly available business and financial information relating to the Company
that we deemed to be relevant, including certain public research analyst estimates with respect to the future financial performance
of the Company; |
| (2) | reviewed certain internal financial and operating information with respect to the business, operations
and prospects of the Company furnished to or discussed with us by the management of the Company, including certain financial forecasts
relating to the Company prepared by the management of the Company (such forecasts, the “Management Forecasts”); |
| (3) | discussed the past and current business, operations, financial condition and prospects of the Company
with members of senior management of the Company; |
| (4) | reviewed the trading history for the ADSs and a comparison of that trading history with the trading
histories of certain other publicly traded companies we deemed relevant; |
| (5) | compared certain financial and stock market information of the Company with similar information
of certain other publicly traded companies we deemed relevant; |
| (6) | compared certain financial terms of the Merger to financial terms, to the extent publicly available,
of other transactions we deemed relevant; |
| (7) | reviewed a draft of the Agreement and Plan of Merger among Parent, Merger Sub and the Company dated
April 3, 2015 (the “Agreement”); and |
| (8) | performed such other analyses and studies and considered such other information and factors as
we deemed appropriate, including our assessment of general economic, market and monetary conditions. |
The Special Committee of Independent Directors of the Board
Shanda Games Limited
Page 3
In arriving at this 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 the Company 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 Management Forecasts, we have been advised by Company, 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 the Company as to the future financial performance of the Company. We have not made or been provided with any
independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of the Company, nor have we made any
physical inspection of the properties or assets of the Company. We have not evaluated the solvency or fair value of the Company
under any state, federal or other laws relating to bankruptcy, insolvency or similar matters. We have assumed, at the direction
of the Company, that the final executed Agreement will not differ in any material respect from the draft dated April 3, 2015 reviewed
by us. We have also assumed, at the direction of the Company, that the Merger will be consummated in accordance with its terms,
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 the Company or the contemplated benefits of the Merger.
We express no view or opinion as to any
terms or other aspects of the Merger (other than the Per Share Merger Consideration or the Per ADS Merger Consideration to the
extent specified herein), including, without limitation, the form or structure of the Merger. Our opinion is limited to the fairness,
from a financial point of view, to the Company of the Per Share Merger Consideration and the Per ADS Merger Consideration, as the
case may be, to be paid to the holders of the Shares or ADSs (other than holders of Excluded Shares), in the Merger 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 Per Share Merger Consideration or the Per ADS Merger Consideration.
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 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. 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 significant portion of which is payable
upon the completion of our work and the rendering of this Opinion. In addition, the Company 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 the Company
and certain of their respective affiliates.
We and our affiliates in the past have
provided, and in the future may provide, investment banking, commercial banking and other financial services to the Company and
certain of its affiliates, including acting as financial advisor to the Special Committee of the Independent Board of Directors
of Shanda Interactive Entertainment Limited in a “going-private” proposal until the completion of that role on February
14, 2012 and acting as Joint Bookrunner in connection with the proposed Initial Public Offering of Cloudary Corporation until the
termination of that role prior to July 12, 2011 and in the future may receive compensation for the rendering of any such investment
banking, commercial banking or any other financial services.
The Special Committee of Independent Directors of the Board
Shanda Games Limited
Page 4
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. Except to the extent legally required, this Opinion may not be disclosed, referred to, or communicated (in whole or
in part) to any third party, nor shall any public reference to us be made, for any purpose whatsoever except with our prior written
consent in each instance; provided, however, that the Company may reproduce this Opinion in full, and also may include references
to us and our Opinion, in any Schedule 13E-3, proxy statement or Schedule 14D-9 relating to the Merger that the Company is required
to file under the Exchange Act, and to distribute to its shareholders; and provided further that, all references to us or our Opinion
in any such document and the description or inclusion of our Opinion therein shall be subject to our prior written consent (such
consent not to be unreasonably withheld) as to form and substance.
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. 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 Asia Pacific and Americas Fairness
Opinion Review Committee.
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 Per Share
Merger Consideration or Per ADS Merger Consideration, as applicable, to be received in the Merger by holders of the Class A Shares
or ADSs (other than holders of Excluded Shares) is fair, from a financial point of view, to such holders.
Very
truly yours,
MERRILL LYNCH (ASIA PACIFIC)
LIMITED
ANNEX D
Cayman Islands Companies Law Cap. 22
(Law 3 of 1961, as consolidated and revised) – Section 238
Companies Law (2013 Revision)
Rights of dissenters
238. (1) A member of a constituent company incorporated
under this Law shall be entitled to payment of the fair value of his shares upon dissenting from a merger or consolidation.
(2) A member who desires to exercise
his entitlement under subsection (1) shall give to the constituent company, before the vote on the merger or consolidation, written
objection to the action.
(3) An objection under subsection (2)
shall include a statement that the member proposes to demand payment for his shares if the merger or consolidation is authorised
by the vote.
(4) Within twenty days immediately
following the date on which the vote of members giving authorisation for the merger or consolidation is made, the constituent company
shall give written notice of the authorisation to each member who made a written objection.
(5) A member who elects to dissent
shall, within twenty days immediately following the date on which the notice referred to in subsection (4) is given, give to the
constituent company a written notice of his decision to dissent, stating:
| (b) | the number and classes of shares in respect of which he dissents; |
and
| (c) | a demand for payment of the fair value of his shares. |
(6) A member who dissents shall do
so in respect of all shares that he holds in the constituent company.
(7) Upon the giving of a notice of
dissent under subsection (5), the member to whom the notice relates shall cease to have any of the rights of a member except the
right to be paid the fair value of his shares and the rights referred to in subsections (12) and (16).
(8) Within seven days immediately following
the date of the expiration of the period specified in subsection (5), or within seven days immediately following the date on which
the plan of merger or consolidation is filed, whichever is later, the constituent company, the surviving company or the consolidated
company shall make a written offer to each dissenting member to purchase his shares at a specified price that the company determines
to be their fair value; and if, within thirty days immediately following the date on which the offer is made, the company making
the offer and the dissenting member agree upon the price to be paid for his shares, the company shall pay to the member the amount
in money forthwith.
(9) If the company and a dissenting
member fail, within the period specified in subsection (8), to agree on the price to be paid for the shares owned by the member,
within twenty days immediately following the date on which the period expires:
(a) the company shall (and any dissenting
member may) file a petition with the Court for a determination of the fair value of the shares of all dissenting members; and
(b) the petition by the company shall
be accompanied by a verified list containing the names and addresses of all members who have filed a notice under subsection (5)
and with whom agreements as to the fair value of their shares have not been reached by the company.
(10) A copy of any petition filed under
subsection (9)(a) shall be served on the other party; and where a dissenting member has so filed, the company shall within ten
days after such service file the verified list referred to in subsection (9)(b).
(11) At the hearing of a petition,
the Court shall determine the fair value of the shares of such dissenting members as it finds are involved, together with a fair
rate of interest, if any, to be paid by the company upon the amount determined to be the fair value.
(12) Any member whose name appears
on the list filed by the company under subsection (9)(b) or (10) and who the Court finds are involved may participate fully in
all proceedings until the determination of fair value is reached.
(13) The order of the Court resulting
from proceeding on the petition shall be enforceable in such manner as other orders of the Court are enforced, whether the company
is incorporated under the laws of the Islands or not.
(14) The costs of the proceeding may
be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances; and upon application of
a member, the Court may order all or a portion of the expenses incurred by any member in connection with the proceeding, including
reasonable attorney’s fees and the fees and expenses of experts, to be charged pro rata against the value of all the shares
which are the subject of the proceeding.
(15) Shares acquired by the company
pursuant to this section shall be cancelled and, if they are shares of a surviving company, they shall be available for re-issue.
(16) The enforcement by a member of
his entitlement under this section shall exclude the enforcement by the member of any right to which he might otherwise be entitled
by virtue of his holding shares, except that this section shall not exclude the right of the member to institute proceedings to
obtain relief on the ground that the merger or consolidation is void or unlawful.
EXECUTION VERSION
CONFIDENTIAL
ANNEX E
Support Agreement
SUPPORT AGREEMENT
This SUPPORT AGREEMENT (this “Agreement”)
is entered into as of April 3, 2015 by and among (1) Capitalhold Limited, a Cayman Islands exempted company (“Parent”)
and (2) certain shareholders of Shanda Games Limited, a Cayman Islands exempted company (the “Company”),
listed on Schedule A hereto (each, a “Shareholder” and collectively, the “Shareholders”).
Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Merger Agreement (as defined
below).
WHEREAS, Parent, Capitalcorp Limited, a
Cayman Islands exempted company and a wholly-owned subsidiary of Parent (“Merger Sub”), and the Company have,
concurrently with the execution of this Agreement, entered into an Agreement and Plan of Merger, dated as of the date hereof (as
may be amended, supplemented or otherwise modified from time to time, the “Merger Agreement”), pursuant to which
Merger Sub will be merged with and into the Company, with the Company continuing as the surviving corporation and a wholly-owned
subsidiary of Parent (the “Merger”), upon the terms and subject to the conditions set forth in the Merger Agreement;
WHEREAS, as of the date hereof, each Shareholder
is the beneficial owner (as defined under Rule 13d-3 of the Exchange Act) of certain ordinary shares of the Company (“Shares”)
(including Shares represented by American Depositary Shares (the “ADSs”), each representing two Class A ordinary
shares of the Company, par value US$0.01 per share (“Class A Shares”)) as set forth in the column titled “Owned
Shares” opposite such Shareholder’s name on Schedule A hereto (such Shares, together with any other Shares
acquired (whether beneficially or of record) by such Shareholder after the date hereof and prior to the earlier of the Effective
Time and the termination of all of such Shareholder’s obligations under this Agreement, including any Shares acquired by
means of purchase, dividend or distribution, or issued upon the exercise of any Company Options or warrants or the conversion of
any convertible securities or otherwise, being collectively referred to herein as the “Securities”);
WHEREAS, in connection with the consummation
of the Merger, each Shareholder agrees to (a) the cancellation of the Shares (including Shares represented by ADSs) as set forth
in the column titled “Rollover Shares” opposite such Shareholder’s name on Schedule A hereto (the
“Rollover Shares”) for no consideration in the Merger, (b) subscribe for newly issued Parent Shares (as defined
below) immediately prior to the Closing, and (c) vote the Securities at the Shareholders’ Meeting in favor of the Merger,
in each case upon the terms and conditions set forth herein;
WHEREAS, receipt of the Requisite Company
Vote is a condition to the consummation of the Merger;
WHEREAS, in order to induce Parent and Merger
Sub to enter into the Merger Agreement and consummate the transactions contemplated thereby, including the Merger, the Shareholders
are entering into this Agreement;
WHEREAS, the Shareholders acknowledge that
Parent and Merger Sub are entering into the Merger Agreement in reliance on the representations, warranties, covenants and other
agreements of the Shareholders set forth in this Agreement; and
NOW, THEREFORE, in consideration of the
foregoing, the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
VOTING; GRANT AND APPOINTMENT OF PROXY
Section 1.1
Voting. From and after the date hereof until the earlier of the (x) Closing and the (y) termination of the Merger Agreement
pursuant to and in compliance with the terms therein (such earlier time, the “Expiration Time”), each Shareholder
hereby irrevocably and unconditionally agrees that at the Shareholders’ Meeting or any other annual or special meeting of
the shareholders of the Company, however called, at which any of the matters described in paragraphs (a) – (f) hereof is
to be considered (and any adjournment or postponement thereof), such Shareholder shall (i) cause its representative(s) to appear
at such meeting or otherwise cause its Securities to be counted as present thereat for purposes of determining whether a quorum
is present and (ii) vote or cause to be voted (including by proxy, if applicable) all of such Shareholder’s Securities:
(a)
for the authorization and approval of the Merger Agreement, the Plan of Merger and the Transactions,
(b)
against any Competing Transaction or any other transaction, proposal, agreement or action made in opposition to approval
of the Merger Agreement or in competition or inconsistent with the Transactions, including the Merger,
(c)
against any other action, agreement or transaction that is intended, that could reasonably be expected, or the effect of
which could reasonably be expected, to materially impede, interfere with, delay, postpone, discourage or adversely affect any of
the Transactions, including the Merger, or this Agreement or the performance by such Shareholder of its obligations under this
Agreement,
(d)
against any action, proposal, transaction or agreement that would reasonably be expected to result in a breach in any respect
of any covenant, representation or warranty or any other obligation or agreement of the Company contained in the Merger Agreement,
or of such Shareholder contained in this Agreement or otherwise reasonably requested by Parent in order to consummate the Transactions,
including the Merger,
(e)
in favor of any adjournment or postponement of the Shareholders’ Meeting or other annual or special meeting of the
shareholders of the Company, however called, at which any of the matters described in paragraphs (a) – (f) hereof is to be
considered (and any adjournment or postponement thereof) as may be reasonably requested by Parent, and
(f)
in favor of any other matter necessary to effect the Transactions, including the Merger.
Section 1.2
Grant of Irrevocable Proxy; Appointment of Proxy.
(a)
Each Shareholder 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, if applicable) such Shareholder’s Securities in
accordance with Section 1.1 above at the Shareholders’ Meeting or other annual or special meeting of the shareholders
of the Company, however called, including any adjournment or postponement thereof, at which any of the matters described in Section
1.1 above is to be considered, in each case prior to the Expiration Time. Each Shareholder represents that all proxies, powers
of attorney, instructions or other requests given by such Shareholder prior to the execution of this Agreement in respect of the
voting of such Shareholder’s Securities, if any, are not irrevocable and each Shareholder hereby revokes any and all previous
proxies, powers of attorney, instructions or other requests with respect to such Shareholder’s Securities. Each Shareholder
shall take such further action or execute such other instruments as may be necessary to effectuate the intent of this proxy.
(b)
Each Shareholder affirms that the irrevocable proxy set forth in this Section 1.2 is given in connection with the
execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of such Shareholder
under this Agreement. Each Shareholder further affirms that the irrevocable proxy is coupled with an interest and, except as set
forth in this Section 1.2, is intended to be irrevocable prior to the Expiration Time. If for any reason the proxy granted
herein is not irrevocable, then each Shareholder agrees to vote such Shareholder’s Securities in accordance with Section
1.1 above prior to the Expiration Time. The parties hereto agree that the foregoing is a voting agreement.
Section 1.3
Restrictions on Transfers. Except as provided for in Article II below or pursuant to the Merger Agreement each
Shareholder hereby agrees that, from the date hereof until the Expiration Time, such Shareholder shall not, directly or indirectly,
(a) offer for sale, sell (constructively or otherwise), transfer, assign, tender in any tender or exchange offer, pledge, grant,
encumber, hypothecate or similarly dispose of (by merger, testamentary disposition, operation of Law or otherwise) (collectively,
“Transfer”), or enter into any Contract, option or other arrangement or understanding with respect to the Transfer
of any Securities or any interest therein, including, without limitation, any swap transaction, option, warrant, forward purchase
or sale transaction, futures transaction, cap transaction, floor transaction, collar transaction or any other similar transaction
(including any option with respect to any such transaction) or combination of any such transactions, in each case involving any
Securities and (x) has, or would reasonably be expected to have, the effect of reducing or limiting such Shareholder’s economic
interest in such Securities and/or (y) grants a third party the right to vote or direct the voting of such Securities, (b) deposit
any Securities into a voting trust or enter into a voting agreement or arrangement or grant any proxy or power of attorney with
respect thereto that is inconsistent with this Agreement, (c) convert or exchange, or take any action which would result in
the conversion or exchange of, any Securities, (d) knowingly take any action that would make any representation or warranty of
such Shareholder set forth in this Agreement untrue or incorrect or have the effect of preventing, disabling, or delaying such
Shareholder from performing any of its obligations under this Agreement, or (e) agree (whether or not in writing) to take any of
the actions referred to in the foregoing clauses (a), (b), (c) or (d).
ARTICLE II
ROLLOVER SHARES
Section 2.1
Cancellation of Rollover Shares. Subject to the terms and conditions set forth herein, (a) each Shareholder agrees that
its Rollover Shares shall be cancelled at the Closing for no consideration, and (b) other than its Rollover Shares, all equity
securities of the Company held by such Shareholder, if any, shall be treated as set forth in the Merger Agreement and not be affected
by the provisions of this Agreement. Each Shareholder will take all actions necessary to cause the number of Rollover Shares opposite
such Shareholder’s name on Schedule A hereto to be treated as set forth herein.
Section 2.2
Subscription of Parent Shares. Immediately prior to the Closing, in consideration for the cancellation of the Rollover
Shares held by each Shareholder in accordance with Section 2.1, Parent shall issue to such Shareholder (or, if designated
by such Shareholder in writing, an Affiliate of such Shareholder), and such Shareholder or its Affiliate (as applicable) shall
subscribe for, the number of newly issued Class A ordinary shares of Parent, par value US$0.00001 per share (the “Class
A Parent Shares”) or Class B ordinary shares of Parent, par value US$0.00001 per share (the “Class B Parent
Shares”, together with the Class A Parent Shares, the “Parent Shares”) set forth in the column titled
“Parent Shares” opposite such Shareholder’s name on Schedule A hereto, at a consideration per share
equal to its par value. Each Shareholder hereby acknowledges and agrees that (a) delivery of such Parent Shares shall constitute
complete satisfaction of all obligations towards or sums due to such Shareholder by Parent and Merger Sub in respect of the Rollover
Shares held by such Shareholder and cancelled at the Closing as contemplated by Section 2.1 above, and (b) such Shareholder
shall have no right to any Merger Consideration in respect of the Rollover Shares held by such Shareholder.
Section 2.3
Rollover Closing. Subject to the satisfaction in full (or waiver, if permissible) of all of the conditions set forth
in Section 7.01 and Section 7.02 of the Merger Agreement (other than conditions that by their nature are to be satisfied
or waived, as applicable, at the Closing), the closing of the subscription and issuance of Parent Shares contemplated hereby shall
take place immediately prior to the Closing (the “Rollover Closing”). For the avoidance of doubt, Schedule
A sets forth opposite each Shareholder’s name the number of (a) Rollover Shares of such Shareholder, (b) Shares
owned by such Shareholder as of the date hereof and (c) Parent Shares to be issued to such Shareholder at the Rollover Closing.
Section 2.4
Deposit of Rollover Shares. No later than three (3) Business Days prior to the Closing, each Shareholder and any agent
of such Shareholder holding certificates evidencing any Rollover Shares shall deliver or cause to be delivered to Parent all certificates
representing such Rollover Shares in such person’s possession, for disposition in accordance with the terms of this Agreement;
such certificates and documents shall be held by Parent or any agent authorized by Parent until the Closing.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE SHAREHOLDERS
Section 3.1
Representations and Warranties. Each Shareholder, severally and not jointly, represents and warrants to Parent as of
the date hereof and as of the Closing:
(a)
such Shareholder has the requisite corporate power and authority to execute and deliver this Agreement, to perform such
Shareholder’s obligations hereunder and to consummate the transactions contemplated hereby;
(b)
this Agreement has been duly executed and delivered by such Shareholder and the execution, delivery and performance of this
Agreement by such Shareholder and the consummation of the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of such Shareholder and no other corporate actions or proceedings on the part of such Shareholder
are necessary to authorize this Agreement or to consummate the transactions contemplated hereby;
(c)
assuming due authorization, execution and delivery by Parent, this Agreement constitutes a legal, valid and binding agreement
of such Shareholder, enforceable against such Shareholder 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);
(d)
(i) such Shareholder (A) is and, immediately prior to the Closing, will be the record and beneficial owner of, and has and
will have good and valid title to, the Securities, free and clear of Liens other than as created by this Agreement, and (B) has
and will have sole or shared (together with Affiliates controlled by such Shareholder) voting power, power of disposition, and
power to demand dissenter’s rights, in each case with respect to all of the Securities, with no limitations, qualifications,
or restrictions on such rights, subject to applicable United States federal securities Laws, Laws of the Cayman Islands, Laws of
the People’s Republic of China and the terms of this Agreement; (ii) except pursuant hereto, there are no options, warrants
or other rights, agreements, arrangements or commitments of any character to which Shareholder is a party relating to the pledge,
disposition or voting of any of its Securities and its Securities are not subject to any voting trust agreement or other Contract
to which such Shareholder is a party restricting or otherwise relating to the voting or Transfer of such Securities other than
this Agreement; (iii) such Shareholder has not Transferred any interest in any of the Securities; (iv) as of the date hereof, other
than its Owned Shares, such Shareholder does not own, beneficially or of record, or have the right to acquire, any Shares, securities
of the Company, or any direct or indirect interest in any such securities (including by way of derivative securities); and (v)
such Shareholder has not appointed or granted any proxy or power of attorney that is still in effect with respect to any of its
Owned Shares, except as contemplated by this Agreement.
(e)
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 Authority is necessary on the part of such Shareholder for the execution,
delivery and performance of this Agreement by such Shareholder or the consummation by such Shareholder of the transactions contemplated
hereby, and (ii) neither the execution, delivery or performance of this Agreement by such Shareholder, nor the consummation by
such Shareholder of the transactions contemplated hereby, nor compliance by such Shareholder with any of the provisions hereof
shall (A) conflict with or violate any provision of the organizational documents of such Shareholder, (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 Shareholder pursuant to any Contract to which such Shareholder is a party or by which such Shareholder
or any property or asset of such Shareholder is bound or affected, or (C) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to such Shareholder or any of such Shareholder’s properties or assets;
(f)
on the date hereof, there is no Action pending against such Shareholder or, to the knowledge of such Shareholder, any other
person or, to the knowledge of such Shareholder, threatened against any such Shareholder or any other person that restricts or
prohibits (or, if successful, would restrict or prohibit) the performance by such Shareholder of its obligations under this Agreement;
(g)
such Shareholder has been afforded the opportunity to ask such questions as it has deemed necessary of, and to receive answers
from, representatives of Parent concerning the terms and conditions of the transactions contemplated hereby and the merits and
risks of owning Parent Shares and such Shareholder acknowledges that it has been advised to discuss with its own counsel the meaning
and legal consequences of such Shareholder’s representations and warranties in this Agreement and the transactions contemplated
hereby; and
(h)
such Shareholder understands and acknowledges that Parent and Merger Sub are entering into the Merger Agreement in reliance
upon such Shareholder’s execution, delivery and performance of this Agreement.
Section 3.2
Covenants. Each Shareholder hereby:
(a)
agrees, prior to the Expiration Time, not to knowingly take any action that would make any representation or warranty of
such Shareholder contained herein untrue or incorrect or have or could have the effect of preventing, impeding or interfering with
or adversely affecting the performance by such Shareholder of its obligations under this Agreement;
(b)
irrevocably waives, and agrees not to exercise, any rights of appraisal or rights of dissent from the Merger that such Shareholder
may have with respect to such Shareholder’s Securities (including without limitation any rights under Section 238 of the
CICL) prior to the Expiration Time;
(c)
agrees to permit the Company to publish and disclose in the Proxy Statement (including all documents filed with the SEC
in accordance therewith), such Shareholder’s identity and beneficial ownership of Shares or other equity securities of the
Company and the nature of such Shareholder’s commitments, arrangements and understandings under this Agreement;
(d)
agrees and covenants, severally and not jointly, that such Shareholder shall promptly 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 Shareholder, 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 after the date hereof;
(e)
agrees and covenants that each Shareholder who is, or whose ultimate shareholder is, deemed to be a resident of the PRC
under the Laws of the PRC, shall, as soon as practicable after the date hereof, use its reasonable best efforts to (i) submit an
application to the State Administration of Foreign Exchange (“SAFE”) for the registration of its holding of
Shares (whether directly or indirectly) in the Company in accordance with the requirements of SAFE Circular 75 (or any successor
Law, rule or regulation) and (ii) complete such registration prior to the Closing; and
(f)
agrees further that, upon request of Parent, such Shareholder shall execute and deliver any additional documents, consents
or instruments and take such further actions as may reasonably be deemed by Parent to be necessary or desirable to carry out the
provisions of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to each Shareholder
that as of the date hereof and as of the Closing:
(a)
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, to perform its obligations hereunder and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and delivered by Parent and the execution, delivery and
performance of this Agreement by Parent and the consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent and no other corporate actions or proceedings on the part of Parent are
necessary to authorize this Agreement or to consummate the transactions contemplated hereby. Assuming due authorization, execution
and delivery by the Shareholders, this Agreement 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)
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 Authority 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 Parent or any of its property or asset is bound or affected, or (C) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Parent or any of its properties or assets.
(c)
At and immediately after the Closing, the authorized capital stock of Parent shall consist of 1,000,000,000 Parent Shares,
of which a number of Parent Shares as set forth in Schedule A shall be issued and outstanding (collectively, the “Issued
Shares”). The Issued Shares, together with the Parent Shares to be issued to the Sponsors at the Closing pursuant to
the Consortium Agreement and the Equity Commitment Letters, shall be all of the Parent Shares outstanding at and immediately after
the Closing.
(d)
At the Closing, the Parent Shares to be issued under this Agreement shall have been duly and validly authorized and when
issued and delivered in accordance with the terms hereof, will be validly issued, fully paid and nonassessable, free and clear
of all claims, liens and encumbrances, other than restrictions arising under applicable securities Laws.
ARTICLE V
TERMINATION
This Agreement, and the obligations of the
Shareholders hereunder (including, without limitation, Section 1.2 hereof), shall terminate and be of no further force or
effect immediately upon the earlier to occur of (a) the Closing and (b) the date of termination of the Merger Agreement in accordance
with its terms; provided, that this Article V and Article VI shall survive any termination of this Agreement.
Nothing in this Article V shall relieve or otherwise limit any party’s liability for any breach of this Agreement
prior to the termination of this Agreement. If for any reason the Merger fails to occur but the Rollover Closing contemplated by
Article II has already taken place, then Parent shall promptly take all such actions as are necessary to restore each Shareholder
to the position it was in with respect to ownership of the Rollover Shares prior to the Rollover Closing.
ARTICLE VI
MISCELLANEOUS
Section 6.1
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 or by international overnight
courier to the respective parties at the address set forth on the signature pages hereto under each party’s name (or at such
other address for a party as shall be specified in a notice given in accordance with this Section 6.1).
Section 6.2
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 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 a
mutually acceptable manner in order that the Transactions be consummated as originally contemplated to the fullest extent possible.
Section 6.3
Entire Agreement. This Agreement, the Consortium Agreement and the Merger Agreement 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.
Section 6.4
Specific Performance. Each party acknowledges and agrees that monetary damages would not be an adequate remedy in the
event that any covenant or agreement in this Agreement is not performed in accordance with its terms, and therefore agrees that,
in addition to and without limiting any other remedy or right available to the parties, each party will have the right to an injunction,
temporary restraining order or other equitable relief in any court of competent jurisdiction enjoining any such breach and enforcing
specifically the terms and provisions hereof. Each party agrees not to oppose the granting of such relief in the event a court
determines that such a breach has occurred, and to waive any requirement for the securing or posting of any bond in connection
with such remedy. All rights, powers, and remedies provided under this Agreement or otherwise available in respect hereof at law
or in equity shall be cumulative and not alternative, and the exercise or beginning of the exercise of any thereof by a party shall
not preclude the simultaneous or later exercise of any other such right, power or remedy by a party.
Section 6.5
Amendments; Waivers. At any time prior to the Expiration Time, any provision of this Agreement may be amended or waived
if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by the Shareholders and Parent,
or in the case of a waiver, by the party against whom the waiver is to be effective. Notwithstanding the foregoing, no failure
or delay by a party hereto in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise of any other right hereunder.
Section 6.6
Governing Law. This Agreement shall be governed by, and construed in accordance with, the Laws of the State of New York,
without giving effect to any choice of Law or conflict of Law rules or provisions that would cause the application of the Laws
of any jurisdiction other than the State of New York.
Section 6.7
Dispute Resolution.
(a)
Any disputes, actions and proceedings against any party or arising out of or in any way relating to this Agreement shall
be submitted to the Hong Kong International Arbitration Centre (“HKIAC”) and resolved in accordance with the
Arbitration Rules of HKIAC in force at the relevant time (the “Rules”) and as may be amended by this Section
6.7. The place of arbitration shall be Hong Kong. The official language of the arbitration shall be English and the arbitration
tribunal shall consist of three arbitrators (each, an “Arbitrator”). The claimant(s), irrespective of number,
shall nominate jointly one Arbitrator; the respondent(s), irrespective of number, shall nominate jointly one Arbitrator; and a
third Arbitrator will be nominated jointly by the first two Arbitrators and shall serve as chairman of the tribunal. In the event
the claimant(s) or respondent(s) or the first two Arbitrators shall fail to nominate or agree the joint nomination of an Arbitrator
or the third Arbitrator within the time limits specified by the Rules, such Arbitrator shall be appointed promptly by the HKIAC.
The arbitration tribunal shall have no authority to award punitive or other punitive-type damages. The award of the arbitration
tribunal shall be final and binding upon the disputing parties. Any party to an award may apply to any court of competent jurisdiction
for enforcement of such award and, for purposes of the enforcement of such award, the Parties irrevocably and unconditionally submit
to the jurisdiction of any court of competent jurisdiction and waive any defenses to such enforcement based on lack of personal
jurisdiction or inconvenient forum.
(b)
Notwithstanding the foregoing, the parties hereby consent to and agree that in addition to any recourse to arbitration as
set out in this Section 6.7, any party may, to the extent permitted under the Laws of the jurisdiction where application
is made, seek an interim injunction from a court or other authority with competent jurisdiction and, notwithstanding that this
Agreement is governed by the Laws of the State of New York, a court or authority hearing an application for injunctive relief may
apply the procedural Law of the jurisdiction where the court or other authority is located in determining whether to grant the
interim injunction. For the avoidance of doubt, this Section 6.7(b) is only applicable to the seeking of interim injunctions
and does not restrict the application of Section 6.7(a) in any way.
Section 6.8
No Third Party Beneficiaries. There are no third party beneficiaries of this Agreement and nothing in this Agreement,
express or implied, is intended to confer on any person other than the parties hereto (and their respective successors, heirs and
permitted assigns), any rights, remedies, obligations or liabilities, except as specifically set forth in this Agreement.
Section 6.9
Assignment; Binding Effect. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of Law or otherwise) without the prior written consent of the other
parties, except that Parent may assign this Agreement (in whole but not in part) in connection with a permitted assignment of the
Merger Agreement by Parent, as applicable. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and permitted assigns and, in the case of each Shareholder,
his, her or its estate, heirs, beneficiaries, personal representatives and executors.
Section 6.10
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.
Section 6.11
Counterparts. This Agreement may be executed in two or more consecutive counterparts (including by facsimile or email
pdf format), each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same
instrument, and shall become effective when one or more counterparts have been signed by each of the parties and delivered (by
telecopy, email pdf format or otherwise) to the other parties; provided, however, that if any of the Shareholders
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.
[Signature Pages to
follow]
IN WITNESS WHEREOF, the parties hereto have
duly executed and delivered this Agreement as of the date and year first written above.
PARENT
CAPITALHOLD LIMITED
By: /s/ Yingfeng Zhang
Name: Yingfeng Zhang
Title: Director
Notice details:
Address: No. 19, Lane 666, Zhangheng
Road,
Pudong New Area, Shanghai, China
Attention: Yingfeng Zhang
Facsimile: +86 21 5027
0092
Address: Zhongyin Avenue, The Cashmere
Industrial Park, Lingwu, Ningxia Province, China
Attention: Xiaofei Chen
Facsimile: +86 591 4519290
with a copy to (which alone shall
not constitute notice):
Wilson Sonsini Goodrich & Rosati,
P.C. Address: Jin Mao Tower, 38F, Unit 3,
88 Century Blvd, Pudong
Shanghai 200121
Attention: Zhan Chen
Facsimile: +86 21 6165 1799
[Signature Page to Support Agreement]
SHAREHOLDERS
Yili
Shengda Investment Holdings (Hong Kong) Company Limited
By: /s/ Yingfeng Zhang
Name: Yingfeng Zhang
Title: Director
Notice details:
Address: No. 19, Lane 666, Zhangheng Road,
Pudong New Area, Shanghai, China
Attention: Yingfeng Zhang
Facsimile: +86 21 5027
0092
With a copy to (which alone
shall not constitute notice):
Wilson Sonsini Goodrich &
Rosati, P.C. Address: Jin Mao Tower, 38F, Unit 3,
88 Century Blvd, Pudong
Shanghai 200121
Attention: Zhan Chen
Facsimile: +86 21 6165 1799
[Signature Page to Support Agreement]
SHAREHOLDERS
Zhongrong
Shengda Investment Holdings (Hong Kong) Company Limited
By: /s/ Shengming Ma
Name: Shengming Ma
Title: Director
Zhongrong
Investment Holdings (Hong Kong) Co., Ltd.
By: /s/ Shengming Ma
Name: Shengming Ma
Title: Director
Notice details:
Address: Zhongyin Avenue, The
Cashmere Industrial Park, Lingwu, Ningxia Province, China
Attention: Xiaofei Chen
Facsimile: +86 591 4519290
With a copy to each of (which
shall not constitute notice):
Wilson Sonsini Goodrich &
Rosati, P.C. Address: Jin Mao Tower, 38F, Unit 3,
88 Century Blvd, Pudong
Shanghai 200121
Attention: Zhan Chen
Facsimile: +86 21 6165 1799
Skadden, Arps, Slate, Meagher
& Flom LLP
Address: 30F China World Office
2
No. 1 Jianguomenwai Avenue,
Beijing 100004
Attention: Peter Huang
Facsimile: +86 10 6535 5577
[Signature Page to Support Agreement]
SHAREHOLDERS
Orient
Hongtai (Hong Kong) Limited
By: /s/ Yuntao Ma
Name: Yuntao Ma
Title: Director
Orient
Hongzhi (Hong Kong) Limited
By: /s/ Yuntao Ma
Name: Yuntao Ma
Title: Director
Notice details:
Address: 100 Queens Road C,
Central District, Hong Kong, People’s Republic of China, SAR
Attention:
Facsimile:
With a copy to (which shall
not constitute notice):
DaCheng Law Offices LLP
Address: 2 Wall Street, 21st
Floor,
New York, NY 10005
Attention: Ling Xiao
Facsimile: +1 212 810 1995
[Signature Page to Support Agreement]
SHAREHOLDERS
Hao
Ding International Limited
By: /s/ Jing Liu
Name: Jing Liu
Title: Director
Notice details:
Address: Room 2802, No. 689 Guangdong Road, Huangpu District, Shanghai
Attention:
Facsimile:
With a copy to (which shall
not constitute notice):
DaCheng Law Offices LLP
Address: 2 Wall Street, 21st
Floor,
New York, NY 10005
Attention: Ling Xiao
Facsimile: +1 212 810 1995
[Signature Page to Support Agreement]
SCHEDULE A
Rollover Shares
| Shareholder |
Owned Shares |
Rollover Shares |
Parent Shares |
| Yili Shengda Investment Holdings (Hong Kong) Company Limited |
48,759,187 Class B Shares |
48,759,187 Class B Shares |
48,759,187 Class B Parent Shares |
| Zhongrong Shengda Investment Holdings (Hong Kong) Company Limited |
48,759,187 Class B Shares |
48,759,187 Class B Shares |
48,759,187 Class B Parent Shares |
| Zhongrong Investment Holdings (Hong Kong) Co., Ltd. |
80,577,828 Class A Shares |
80,577,828 Class A Shares |
80,577,828 Class A Parent Shares |
| Orient Hongtai (Hong Kong) Limited |
61,776,334 Class A Shares |
61,776,334 Class A Shares |
61,776,334 Class A Parent Shares |
| Orient Hongzhi (Hong Kong) Limited |
61,776,335 Class A Shares |
61,776,335 Class A Shares |
61,776,335 Class A Parent Shares |
| Hao Ding International Limited |
107,438,129 Class A Shares |
107,438,129 Class A Shares |
107,438,129 Class A Parent Shares |
[Schedule A to Support Agreement]
ANNEX F
Directors and Executive Officers of Each
Filing Person
| 1. | Directors and Executive Officers of the Company |
The Company is an exempted company with
limited liability incorporated under the laws of the Cayman Islands with its principal business address at No. 1 Office Building,
No. 690 Bibo Road, Pudong New Area, Shanghai 201203, the PRC. The telephone number of the Company’s principal executive office
is +86 21 5050 4740.
During the last five years, none of the
Company or any of its directors and executive officers has been (a) convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (b) a party to any judicial or administrative proceeding (except for matters that were dismissed
without sanction or settlement) that resulted in a judgment or 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 name, business address, present principal
employment and citizenship of each director and executive officer of the Company are set forth below. Unless otherwise indicated,
the business address of each director and executive officer is No. 1 Office Building, No. 690 Bibo Road, Pudong New Area, Shanghai
201203, the PRC.
|
Name |
Business
Address |
Present
Principal Employment |
Principal
Business of Organization |
Citizenship |
| Yingfeng Zhang |
No. 1 Office Building, No. 690 Bibo Road, Pudong New Area,
Shanghai 201203, PRC |
Acting Chief Executive Officer
Shanda Games Limited |
Online game developer, operator, publisher |
PRC |
| Shaolin Liang |
Sixth Floor, Heping Mansion, No. 6 Laiguangying East Road,
Chaoyang District, Beijing 100102, PRC |
Vice General Manager
Ningxia Zhongyincashmere
International Group Co., Ltd. |
Manufacturer of cashmere products |
PRC |
| Danian Chen |
No 1, Lane 666, Zhangheng Road
Pudong New Area
Shanghai 201203, PRC |
Chariman, Chief
Executive Officer
Shanghai Lianshang
Network Technology Ltd.
|
Technology developer |
PRC |
| Li Yao |
No 1, Lane 666, Zhangheng Road
Pudong New Area
Shanghai 201203, PRC |
Chief Financial Officer
Shanda Games Limited
|
Online game developer, operator, publisher |
PRC |
| Lijun Lin |
22/F Aurora Plaza
99 Fucheng Road, Pudong
Shanghai 200120, PRC |
Director
Shanda Games Limited |
Online game developer, operator, publisher |
PRC |
| Heng Wing Chan |
Tanglin, Singapore 248163 |
Senior advisor
Singapore Ministry of Foreign Affairs |
Government |
Singapore |
| Yong Gui |
220 Handan Road
Shanghai 200433, PRC |
Professor
Fudan University |
Education |
PRC |
| Tunghai Chien |
No. 1 Office Building, No. 690 Bibo Road, Pudong New Area,
Shanghai 201203, PRC |
President
Shanda Games Limited |
Online game developer, operator, publisher |
Republic of Korea |
| Jisheng Zhu |
No. 1 Office Building, No. 690 Bibo Road, Pudong New Area,
Shanghai 201203, PRC |
Chief Operating Officer
Shanda Games Limited |
Online game developer, operator, publisher |
PRC |
| Jin Zhang |
No. 1 Office Building, No. 690 Bibo Road, Pudong New Area,
Shanghai 201203, PRC |
Chief Administrative Officer
Shanda Games Limited |
Online game developer, operator, publisher |
PRC |
Mr. Yingfeng Zhang has served as the
chairman of the Board since November 2014 and as a director and the acting chief executive officer of the Company since
October 2014. Mr. Zhang joined Shanda Interactive in 2001 and was the head of the legal and intellectual property department
of Shanda Interactive and in charge of screening, negotiations and licensing of online games, including “Mir II.”
After the spinoff of the Company from Shanda Interactive in 2009, Mr. Zhang served as the general counsel of Shanda
Interactive from April 4, 2008 to September 14, 2011, and as
the co-general counsel of Shanda Interactive from September 15, 2011 to December 16, 2014. Mr. Zhang also served as a vice president of Shanda
Interactive from August 10, 2011 to December 16, 2014, and as was a partner of Shanda Capital Limited. On behalf of Shanda
Interactive, he was involved in the daily operations of various subsidiaries of Shanda Interactive, including Hangzhou
Bianfeng Networking Technology Co., Ltd., Haofang Co., Ltd. and us. Mr. Zhang also has extensive experience in capital
market transactions and participated in the initial public offering of Shanda Interactive and the Company, the
privatization of Shanda Interactive, and the trade sale of Hangzhou Bianfeng Networking Technology Co., Ltd. and Haofang Co.,
Ltd. Before joining Shanda Interactive, Mr. Zhang worked with Shanghai Hujiang Law Firm. Mr. Zhang holds a bachelor’s
degree in law from East China University of Political Science and Law and an LL.M. degree from SMU Dedman School of Law.
Mr. Shaolin
Liang has served as a director of the Company since February 2015. Mr. Shaolin Liang has served as a vice general manager at Ningxia
since February 2015. Mr. Liang previously served at Zhongyin Cashmere, a company listed on the Shenzhen Stock Exchange, as a vice
general manager from December 2007 to February 2015 and as a member of its board of directors from December 2007 to December 2014.
From 1999 to December 2007, he served as a vice president of Zhongyin Cashmere. From 1995 to 1999, Mr. Liang served as the section
chief of the State Post Bureau of the PRC. He worked for the State Post Bureau of the PRC and Beijing Municipal Postal Administration
from March 1986 to 1992 and from 1983 to 1986, respectively. Mr. Liang received his bachelor’s degree from Beijing University
of Posts and Telecommunications in 1982 and a master’s degree in project planning and development from the University of
Bradford in 1994.
Mr. Danian Chen has served as a
director of the Company since June 2008. Mr. Danian Chen has served as the chairman and the chief executive officer of
Shanghai Lianshang Network Technology Ltd.(上海连尚网络科技有限公司)
since October 2013. Mr. Danian Chen is one of the co-founders of Shanda Interactive. Mr. Danian Chen has served in various
capacities at Shanda Interactive, most recently as the chief operating officer from 2008 to 2012. Mr. Chen is also a member
of the board of directors of Shanda Interactive, a position which he has held since its inception in 1999, and Cloudary
Corporation. Mr. Danian Chen is the brother of Mr. Chen, a former chairman of the Board.
Mr. Li Yao has served as a director of
the Company since March 2013 and the chief financial officer of the Company since April 2015. Mr. Yao has served as a director
of Actoz since March 2013 and previously as a director and the chief financial officer of Actoz from March 2008 to March 2012 and
from March 2008 to July 2011, respectively. Mr. Yao served as Shanda Interactive’s senior vice president and head of finance
from June 2013 to April 2015, previously as a vice president and the head of finance of Shanda Interactive from November 2007 to
June 2013, and as acting chief finance officer of Ku6 Media Co., Ltd. from October 2009 to September 2010. Prior to joining Shanda
Interactive, Mr. Yao worked for over 11 years at KPMG Huazhen Certified Public Accountants (Special General Partnership). Mr. Yao
graduated from the College of International Business and Management of Shanghai University with a finance major and an executive
master of business administration degree from Fudan University. Mr. Yao is a member of the Institute of Certified Public Accountants
of the PRC.
Mr. Lin has served as a director of the
Company since May 2009. Mr. Lin previously served as the chief executive officer of China Universal Asset Management Co., Ltd.,
which is one of the largest asset managers in the PRC and an affiliate of Orient Hongtai and Orient Hongzhi, each of which is a
member of the Buyer Group, from April 2004 to April 2015. Prior to that, he served as a manager and an assistant director
of the listing department of the Shanghai Stock Exchange and served at the China Securities Regulatory Commission (“CSRC”)
as a regulator. Mr. Lin obtained a bachelor’s and a master’s degree in economics from Fudan University and a master
of business administration degree from the Harvard Business School.
Mr. Heng Wing Chan has served as a
director of the Company since June 2009. Mr. Chan currently serves as a senior advisor to the Singapore Ministry of Foreign
Affairs and is Singapore’s High Commissioner to the People’s Republic of Bangladesh, resident in Singapore. Mr.
Chan also serves as an independent director of Banyan Tree Holdings, a resort development and management group, and Fraser
Centrepoint Limited, a property development and hospitality company, each of which is listed on the Singapore Stock
Exchange. He was appointed chairman of the Asia Center of the Milken Institute in September 2013. From 2008 to 2011, he was
managing director of international relations for Temasek International Pte. Ltd. and was Temasek’s chief representative
in the PRC. Prior to that, he worked for the Ministry of Foreign Affairs and the Ministry of Information of Singapore,
including serving in Singapore’s Permanent Mission to the United Nations, as Consul-General to Hong Kong, Ambassador to
Thailand and Consul-General to Shanghai. Mr. Chan also served as the Press Secretary to Prime Minister Goh Chok Tong and head
of the Media Division in the Singapore Ministry of Information and the Arts. Mr. Chan holds a bachelor’s and
master’s degree in philosophy from the University of Singapore and a master’s degree from the Columbia Graduate
School of Journalism.
Mr. Yong Gui has served as a director
of the Company since June 2013. Mr. Gui is a deputy dean, professor and Ph.D. supervisor at Fudan
University’s Department of Sociology. He also serves in various managerial and academic roles, including as a council
member of the China Sociological Association, a deputy director of the “Economic Sociology Special Committee,” a
council member of the “Social Network and Social Capital Special Committee” of the China Sociological
Association, the vice general secretary of the Shanghai Sociology Association and the deputy director of the Shanghai
Association of Young Talent for Societal Construction. Mr. Gui received his bachelor’s and master’s degrees in
Sociology and a doctoral degree in economics from Fudan University.
Mr. Tunghai Chien has served as the Company’s
president since March 2013. Prior to becoming the Company’s president, Mr. Chien served as the Company’s assistant
vice president, vice president and senior vice president for global business development. Prior to joining the Company, Mr. Chien
served as the head of business development at leading Korean online game companies, including CJ Internet Holdings, Webzen Co.,
Ltd., Wemade Entertainment Co., Ltd., and Actoz. Mr. Chien holds a bachelor’s degree in economics from National Shinshu University
in Japan.
Mr. Jisheng Zhu has served as the
chief operating officer of the Company since November 2014. Mr. Zhu worked for the Company from April 2008 to October 2011
and rejoined the Company in October 2013 as a vice president. Prior to joining the Company, he worked with Shanda Interactive from
May 2003 to April 2008 and from October 2011 to October 2013. Prior to joining Shanda Interactive, Mr. Zhu served as the
engineering service director of Kingnet Security Inc. from 2001 to 2003 and as the product development director of
Eachnet.com from 2000 to 2001. Mr. Zhu holds a master’s degree in automatic control from East China University of
Science and Technology and an executive master of business administration degree from Peking University Guanghua School of
Business.
Ms. Jin Zhang has served as the chief
administrative officer of the Company since November 2014. Before joining the Company, Ms. Zhang was a vice president of
human resources and later a senior vice president with Shanda Interactive from June 2009 to November 2014. Before that, she
served as a vice president of Lenovo Group where she was in charge of human resources in Great China, India, Russia and other
emerging markets. From 1999 to 2002, Ms. Zhang held various positions in Lenovo Group, including, among others, manager of
planning, quality control. She holds a master’s degree in management science from Renmin University of
China.
| 2. | Directors and Executive Officers of Parent |
Parent is an exempted company with
limited liability incorporated under the laws of the Cayman Islands for the purpose of completing the Transactions, including
the Merger, with its registered office located at the offices of Codan Trust Company (Cayman) Limited, Cricket
Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands, and its business telephone number is +86 21
5050 4740. Each of Yili Shengda and Zhongrong Shengda holds 50% of the outstanding shares of Parent.
The name, business address, present principal
employment and citizenship of the sole director of Parent are set forth below. As of the date of this proxy statement, Parent does
not have any executive officers.
| Name |
Business Address |
Present Principal Employment |
Citizenship |
| Yingfeng Zhang |
No. 1 Office Building, No. 690 Bibo Road, Pudong New Area, Shanghai 201203, the PRC |
Chairman of the board and acting chief executive officer of the Company |
PRC |
During the last five (5) years, none of
Parent or its director has been (a) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors)
or (b) a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement)
that resulted in a judgment or 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.
| 3. | Directors and Executive Officers of Merger Sub |
Merger Sub is an exempted company
with limited liability incorporated under the laws of the Cayman Islands for the purpose of completing the Transactions,
including the Merger, with its registered office located at the offices of Codan Trust Company (Cayman) Limited, Cricket
Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands, and its business telephone number is +86 21
5050 4740. Merger Sub is directly and wholly owned by Parent.
The name, business address, present principal
employment and citizenship of the sole director of Merger Sub are set forth below. As of the date of this proxy statement, Merger
Sub does not have any executive officers.
| Name |
Business Address |
Present Principal Employment |
Citizenship |
| Yingfeng Zhang |
No. 1 Office Building, No. 690 Bibo Road, Pudong New Area, Shanghai 201203, the PRC |
Chairman of the board and acting chief executive officer of the Company |
PRC |
During the last five (5) years, none of
Merger Sub or its director has been (a) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors)
or (b) a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement)
that resulted in a judgment or 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.
| 4. | Directors and Executive Officers of Yili Shengda |
Yili Shengda is a company organized
under the laws of Hong Kong with its principal business address at Room 2803-05, AXA Tower, Landmark East, 100 How Ming
Street, Kwun Tong, Kowloon, Hong Kong, and its business telephone number is +852 8208 5118. The principal business of Yili
Shengda is venture capital and private equity investment and portfolio management. Yili Shengda is directly and wholly owned
by Ningxia Yilida.
The name, business address, present principal
employment and citizenship of the sole director of Yili Shengda are set forth below. As of the date of this proxy statement, Yili
Shengda does not have any executive officers.
| Name |
Business Address |
Present Principal Employment |
Citizenship |
| Yingfeng Zhang |
No. 1 Office Building, No. 690 Bibo Road, Pudong New Area, Shanghai 201203, the PRC |
Chairman of the board and acting chief executive officer of the Company |
PRC |
During the last five (5) years, none of
Yili Shengda or its director has been (a) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors)
or (b) a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement)
that resulted in a judgment or 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.
| 5. | Directors and Executive Officers of Ningxia Yilida |
Ningxia Yilida is a
limited partnership organized under the laws of the PRC with its principal business address at Ecological Textile Park,
Lingwu, Ningxia 750400, the PRC, and its business telephone number is +86 21 5050 4740. The principal business of Ningxia
Yilida is venture capital and private equity investment and portfolio management. The general partner of Ningxia Yilida is
Shanghai Yingfeng.
The name, business address, present
principal employment and citizenship of the sole representative of the general partner of Ningxia Yilida are set
forth below. As of the date of this proxy statement, Ningxia Yilida does not have any directors or other executive
officers.
| Name |
Business Address |
Present Principal Employment |
Citizenship |
| Yingfeng Zhang |
No. 1 Office Building, No. 690 Bibo Road, Pudong New Area, Shanghai 201203, the PRC |
Chairman of the board and acting chief executive officer of the Company |
PRC |
During the last five (5) years, none
of Ningxia Yilida or the sole representative of its general partner has been (a) convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or (b) a party to any judicial or
administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment
or 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.
| 6. | Directors and Executive Officers of Zhengjun Investment |
Zhengjun Investment is a limited
partnership organized under the laws of the PRC with its principal business address at Ecological Textile Park, Lingwu,
Ningxia 750400, the PRC, and its business telephone number is +86 21 5050 4740. The principal business of Zhengjun Investment is
equity investment and related investment consulting services. The general partner of Zhengjun Investment is Shanghai
Yingfeng.
The name, business address, present
principal employment and citizenship of the sole representative of the general partner of Zhengjun Investment are set forth
below. As of the date of this proxy statement, Zhengjun Investment does not have any directors or other
executive officers.
| Name |
Business Address |
Present Principal Employment |
Citizenship |
| Yingfeng Zhang |
No. 1 Office Building, No. 690 Bibo Road, Pudong New Area, Shanghai 201203, the PRC |
Chairman of the board and acting chief executive officer of the Company |
PRC |
During the last five (5) years, none of
Zhengjun Investment or its sole representative of executive partner has been (a) convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or (b) a party to any judicial or administrative proceeding (except for matters
that were dismissed without sanction or settlement) that resulted in a judgment or 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.
| 7. | Directors and Executive Officers of Shanghai Yingfeng |
Shanghai Yingfeng is a
limited liability company organized under the laws of the PRC with its principal business address at Room 2055, No. 5358 Huyi
Road, Jiading District, Shanghai 201806, the PRC, and its business telephone number is +86 21 5050 4740. Shanghai Yingfeng is
directly and wholly owned by Mr. Yingfeng Zhang. Shanghai Yingfeng’s principal business is investment management, asset
management, industry investment, enterprise management consulting, investment consulting (except for finance and securities)
and business consulting.
The name, business address, present principal
employment and citizenship of the sole director of Shanghai Yingfeng are set forth below. As of the date of this proxy statement,
Shanghai Yingfeng does not have any executive officers.
| Name |
Business Address |
Present Principal Employment |
Citizenship |
| Yingfeng Zhang |
No. 1 Office Building, No. 690 Bibo Road, Pudong New Area, Shanghai 201203, the PRC |
Chairman of the board and acting chief executive officer of the Company |
PRC |
During the last five (5) years, none of
Shanghai Yingfeng or its director has been (a) convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (b) a party to any judicial or administrative proceeding (except for matters that were dismissed without
sanction or settlement) that resulted in a judgment or 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.
| 8. | Directors and Executive Officers of Ningxia Filing
Persons |
Zhongrong Shengda is a company
organized under the laws of Hong Kong with its principal business address at Room 2803-05, AXA Tower, Landmark East, 100 How
Ming Street, Kwun Tong, Kowloon, Hong Kong, and its business telephone number is +852 8208 5118. The principal business of
Zhongrong Shengda is making investments in private and public companies. Zhongrong Shengda is directly and wholly owned by
Zhongrong Equity, the general partner of which is Ningxia.
The name, business address, present principal employment and citizenship
of the sole director of Zhongrong Shengda are set forth below. As of the date of this proxy statement, Zhongrong Shengda does not
have any executive officers.
| Name |
Business Address |
Present Principal Employment |
Citizenship |
| Shengming Ma |
Zhongyin Avenue, the
Cashmere Industrial Park, Lingwu 750400, Ningxia Province, the PRC |
Chairman of the Board and General Manager of Ningxia |
PRC |
Zhongrong Equity is a limited
partnership organized under the laws of the PRC with its principal business address at Ecological Textile Park, Lingwu 750400,
Ningxia, the PRC, and its business telephone number is +86 951 4038 950, extension 8969. The principal business of Zhongrong
Equity is making equity investments in private and public companies. The general partner of Zhongrong Equity is Ningxia.
The name, business address, present principal employment and citizenship of the sole
representative of the general partner of Zhongrong Equity are set forth below. As of the
date of this proxy statement, Zhongrong Equity does not have any directors or other executive officers.
| Name |
Business Address |
Present Principal Employment |
Citizenship |
| Shengming Ma |
Zhongyin Avenue, the
Cashmere Industrial Park, Lingwu 750400, Ningxia Province, the PRC |
Chairman of the Board and General Manager of Ningxia |
PRC |
Zhongrong Investment is a company organized
under the laws of Hong Kong with its principal business address at Room 2803-05, AXA Tower, Landmark East, 100 How Ming Street,
Kwun Tong, Kowloon, Hong Kong, and its business telephone number is +852 8208 5118. The principal business of Zhongrong Investment
is making equity investments in private and public companies. Zhongrong Investment is directly and wholly owned by Zhongrong Culture, the general partner of which is
Ningxia.
The name, business address, present principal employment and citizenship
of the sole director of Zhongrong Investment are set forth below. As of the date of this proxy statement, Zhongrong Investment
does not have any executive officers.
| Name |
Business Address |
Present Principal Employment |
Citizenship |
| Shengming Ma |
Zhongyin Avenue, the
Cashmere Industrial Park, Lingwu 750400, Ningxia Province, the PRC |
Chairman of the Board and General Manager of Ningxia |
PRC |
Zhongrong Culture Industry Equity
Investment Enterprise (Limited Partnership) (“Zhongrong Culture”) is a limited partnership organized under the
laws of the PRC with its principal business address at Ecological Textile Park, Lingwu 750400, Ningxia, the PRC and its business
telephone number is +86 951 4038 950, extension 8969. The principal business of Zhongrong Culture is making equity
investments in private and public companies. The general partner of Zhongrong Culture is Ningxia.
The name, business address, present principal employment and citizenship of the sole representative of the
general partner of Zhongrong Culture are set forth below. As of the date of this proxy statement, Zhongrong
Culture does not have any director or executive officers.
| Name |
Business Address |
Present Principal Employment |
Citizenship |
| Shengming Ma |
Zhongyin Avenue, the
Cashmere Industrial Park, Lingwu 750400, Ningxia Province, the PRC |
Chairman of the Board and General Manager of Ningxia |
PRC |
Zhongrong Legend is a limited
partnership organized under the laws of the PRC with its principal business address at Ecological Textile Park, Lingwu 750400,
Ningxia, the PRC and its business telephone number is +86 951 4038 950, extension 8969. The principal business of Zhongrong
Legend is making equity investments in private and public companies. The general partner of Zhongrong Legend is Ningxia.
The name, business address, present
principal employment and citizenship of the sole representative of the general partner of Zhongrong Legend are set forth
below. As of the date of this proxy statement, Zhongrong Legend does not have any director or other executive officers.
| Name |
Business Address |
Present Principal Employment |
Citizenship |
| Shengming Ma |
Zhongyin Avenue, the
Cashmere Industrial Park, Lingwu 750400, Ningxia Province, the PRC |
Chairman of the Board and General Manager of Ningxia |
PRC |
Ningxia Silkroad is a limited
partnership organized under the laws of the PRC with its principal business address at Ecological Textile Park, Lingwu 750400,
Ningxia, the PRC and its business telephone number is +86 951 4038 950, extension 8969. The principal business of Ningxia
Silkroad is making equity investments in private and public companies. The general partner of Zhongrong Silkroad is
Ningxia.
The name, business address, present principal employment and citizenship of the sole representative of the general partner of Ningxia Silkroad are set forth below. As of the
date of this proxy statement, Ningxia Silkroad does not have any director or other executive officers.
| Name |
Business Address |
Present Principal Employment |
Citizenship |
| Shengming Ma |
Zhongyin Avenue, the
Cashmere Industrial Park, Lingwu 750400, Ningxia Province, the PRC |
Chairman of the Board and General Manager of Ningxia |
PRC |
Ningxia is a company organized
under the laws of the PRC with its principal business address at Ecological Textile Park, Lingwu 750400, Ningxia, the PRC and its
business telephone number is +86 951 4038 950, extension 8969. Ningxia is a holding company with operating subsidiaries
engaged in the business of the production, processing and sale of cashmere wool products and is also acting as the general
partner of Zhongrong Equity, Zhongrong Culture, Zhongrong Legand and Ningxia Silkroad, whose principal business is investing
in private and public companies.
The name, business address, present principal employment and citizenship
of each director and executive officer of Ningxia are set forth below.
| Name |
Business
Address |
Present
Principal Employment |
Citizenship |
| Shengming
Ma |
Zhongyin
Avenue, the Cashmere Industrial Park, Lingwu 750400, Ningxia Province, the PRC |
Chairman
of the Board and General Manager of Ningxia |
PRC |
| Shengguo Ma |
Zhongyin Avenue, the Cashmere Industrial
Park, Lingwu 750400, Ningxia, the PRC |
Director
of Ningxia
|
PRC |
| Wei Ma |
Zhongyin Avenue,
the Cashmere Industrial Park, Lingwu 750400, Ningxia, the PRC |
Vice
Chairman of the Board of Zhongyin Cashmere
|
PRC |
| Shaolin
Liang |
Sixth Floor, Heping Mansion, No. 6
Laiguangying East Road, Chaoyang District, Beijing 100102, the PRC |
Vice
General Manager of Ningxia
|
PRC |
Mr. Wei Ma has served as a vice
chairman of the board of Zhongyin Cashmere since April 2013. From 2009 to March 2013, Mr. Wei Ma served as assistant general
manager of Zhongyin Cashmere. Zhongyin Cashmere is a company organized under the laws of the PRC with its principal business
address at Zhongyin Avenue, the Cashmere Industrial Park, Lingwu 750400, Ningxia Province, the PRC and its business telephone
number is +86 951 4038 950, extension 8000. Zhongyin Cashmere is a holding company with operating subsidiaries engaged in the
business of the production, processing and sale of cashmere wool products.
Mr. Shaolin Liang has served as a
vice general manager at Ningxia since February 2015. Mr. Liang served as a vice general manager at Zhongyin Cashmere
from December 2007 to February 2015 and a member of its board of directors from December 2007 to December 2014.
Except for Mr. Wei Ma and Mr. Shaolin Liang,
each of the persons listed above has been in his current positions for the past five years. During the last five (5) years, none
of Zhongrong Shengda, Zhongrong Equity, Zhongrong Culture, Zhongrong Investment, Zhongrong Legend, Ningxia Silkroad, Ningxia or
their respective directors, executives or representatives of executive partner (as the case may be) has been (a) convicted
in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (b) a party to any judicial or administrative
proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment or 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.
| 9. | Directors and Executive Officers of Hao Ding Filing
Persons |
Hao Ding is a British Virgin Islands
business company formed for the purpose of holding interests in the Company and completing the Transactions, including the
Merger. Hao Ding is a direct wholly owned subsidiary of, and controlled by, Hai Sheng Tong. The principal business address
and telephone number of Hao Ding are 2810, 689 Guangdong Road, Huangpu District, Shanghai 200001, the PRC, +86 21 2321 2232.
The name, business address, present principal employment and citizenship
of the sole director of Hao Ding are set forth below. As of the date of this proxy statement, Hao Ding does not have any executive
officers.
| Name |
Business Address |
Present Principal Employment |
Citizenship |
| Jing Liu |
2810, 689 Guangdong
Road, Huangpu District, Shanghai 200001, the PRC |
Deputy director of investment of Haitong GP (as defined below) |
PRC |
Mr. Jing Liu has served as the sole director
of Hao Ding since 2014. He has served as deputy director of investment of Haitong GP (as defined below) since September 2014. He
served as a senior manager and then the vice president of the merger and acquisition department of Haitong Securities from October 2011 to July 2013 and from July 2013 to September 2014, respectively. From 2010 to October 2011, Mr. Liu did
not serve at any entity.
Hai Sheng Tong is a limited liability
company organized under the laws of the PRC for the purpose of holding interests in Hao Ding and the Company and completing
the Transactions, including the Merger. Hai Sheng Tong’s sole director is designated by Haitong. Its principal business
address and telephone number is 2810, 689 Guangdong Road, Huangpu District, Shanghai 200001, the PRC, +86 21 2321 2232.
The name, business address, present principal employment
and citizenship of the sole director of Hai Sheng Tong are set forth below. As of the date of this proxy statement, Hai Sheng Tong
does not have any executive officers.
| Name |
Business Address |
Present Principal Employment |
Citizenship |
| Jing Liu |
2810, 689 Guangdong
Road, Huangpu District, Shanghai 200001, the PRC |
Deputy director of investment of Haitong GP (as defined below) |
PRC |
Haitong is a limited
partnership formed under the laws of the PRC with its principal business address at 2810, 689 Guangdong Road, Huangpu
District, Shanghai 200001, the PRC and its business telephone number is +86 21 2321 2232. The principal business of Haitong is
making equity investments in private and public companies. As of the date of this proxy statement, Haitong does not have any
directors or other executive officers, and its operation is managed by the sole representative of the executive partner,
Haitong M&A Capital Management (Shanghai) Co., Ltd. (“Haitong GP”), which is also the general partner of
Haitong. The name, business address, present principal employment and citizenship of such representative are set forth
below:
| Name |
Business Address |
Present Principal Employment |
Citizenship |
| Yanhua Yang |
2810, 689 Guangdong Road,
Huangpu District, Shanghai
200001,
the PRC |
Chairwoman of the board of Haitong GP |
PRC |
Ms. Yanhua Yang has served as the chairwoman
of the board of Haitong GP since April 2014. During the past five years, she has served as the general manager of the merger and
acquisition department of Haitong Securities.
Haitong GP is a limited liability
company organized under the laws of the PRC with its principal business address at 2810, 689 Guangdong Road, Huangpu
District, Shanghai 200001, the PRC and its business telephone number is +86 21 2321 2232. Haitong GP is the general partner of
Haitong. Haitong GP’s controlling shareholder is Haitong Capital (as defined below). Haitong GP’s principal
business is acting as the general partner of Haitong. The name, business address, present principal employment and
citizenship of each director and executive officer of Haitong GP are set forth below.
| Name |
Business Address |
Present Principal Employment |
Citizenship |
| Yanhua Yang |
2810, 689 Guangdong Road,
Huangpu District, Shanghai 200001,
the PRC |
Chairwoman of the board of Haitong GP |
PRC |
| Xiaoyue Su |
6F, 689 Guangdong Road,
Huangpu District, Shanghai
200001,
the PRC |
Assistant
general manager in the strategic development department of Haitong Securities |
PRC |
| Yiming Wang |
26F, 689 Guangdong Road,
Huangpu District, Shanghai 200001,
the PRC |
Director and general manager of Haitong Capital |
PRC |
| Daohong Zhou |
16F Jinzhong Plaza,
98 Huaihai Zhong Road, Shanghai 200021, the
PRC |
Chairman
of the board of directors of SIIC Investment (Shanghai) Co., Ltd., a PRC investment company with its business address at 16F
Jinzhong Plaza, 98 Huaihai Zhong Road, Shanghai 2000021, the PRC |
PRC |
| Kunzhang Qu |
501 Tingchao Road, Huinan Town,
Pudong New District, Shanghai 201300,
the PRC |
Chairman
of the board of directors of Shanghai Yiliu Energy (Group) Co., Ltd., a PRC fuel gas provider with its business address at
501 Tingchao Road, Huinan Town, Pudong New District, Shanghai 201300, the PRC |
PRC |
| Cengjin Wang |
5th
Floor, Building 4,
36
Caobao Road, Shanghai 200235,
the PRC |
General
manager in the asset department of Shanghai Huayi (Group) Corporation, a PRC chemical manufacturer with its business address
at 5th Floor, Building 4, 36 Caobao Road, Shanghai 200235, the PRC |
PRC |
Ms. Xiaoyue
Su has served as assistant general manager of the strategic development department of Haitong Securities since January 2013. From April 2009 to January 2013, Ms. Su served as assistant general manager of share management department
of Haitong Securities.
Mr. Yiming
Wang has served as a director and general manager of Haitong Capital (as defined below) since February 28, 2011. From May 2005
to February 2011, Mr. Wang served as head of research institute of Haitong Securities.
Haitong Capital Investment Co., Ltd.
(“Haitong Capital”) is a limited liability company organized under the laws of the PRC with its principal
business address at Room 07-12, 26F, 689 Guangdong Road, Huangpu District, Shanghai 200001, the PRC, and its business telephone
number is +86 21 6341 0311. Haitong Captial is Haitong GP’s controlling shareholder. Haitong Capital’s sole
shareholder is Haitong Securities. Haitong Capital’s principal business is making equity investments in companies and
funds and providing management and consultancy services in connection with equity investments. The name, business address,
present principal employment and citizenship of each director and executive officer of Haitong Capital are set forth
below.
| Name |
Business Address |
Present Principal Employment |
Citizenship |
| Xiangyang Zhang |
26F, 689 Guangdong Road,
Huangpu District, Shanghai 200001,
the PRC |
Assistant general manager of Haitong Securities |
PRC |
| Yiming Wang |
26F, 689 Guangdong Road,
Huangpu District, Shanghai 200001,
the PRC |
Director
and general manager of Haitong GP |
PRC |
| Meijuan Wang |
26F, 689 Guangdong Road,
Huangpu District, Shanghai 200001,
the PRC |
General manager in the audit department of Haitong Securities |
PRC |
| Xiaping Qiu |
13F, 689 Guangdong Road,
Huangpu District, Shanghai 200001,
the PRC |
General manager in the planning and finance department of Haitong Securities |
PRC |
| Rongyao Liao |
6F, 689 Guangdong Road,
Huangpu District, Shanghai 200001,
the PRC |
Deputy general manager in the strategic development department of Haitong Securities |
PRC |
| Qing Xia |
Room 07-12, 26F, 689 Guangdong Road, Huangpu
District, Shanghai 200001,
the PRC |
Deputy general manager of Haitong Capital |
PRC |
| Xumin Xiong |
Room 07-12, 26F, 689 Guangdong Road, Huangpu
District, Shanghai 200001,
the PRC |
Chief investment officer of Haitong Capital |
PRC |
Mr.
Xiangyang Zhang has served as assistant general manager of Haitong Securities since December 2014. Mr.
Zhang has also served as chairman of the board of Haitong Capital since December 2012. From October 2008 to November 2012, Mr.
Zhang served as general manager of Haitong Capital.
Mr. Yiming Wang has served as a
director and general manager of Haitong Capital since February 28, 2011. From May 2005 to February 2011, Mr. Wang served as
head of the research institute of Haitong Securities.
Ms. Meijuan Wang has served as general
manager of the audit department of Haitong Securities since March 2011. Ms. Wang served as chief auditor and
deputy general manager of risk control of Haitong Securities from September 2006 to March 2011.
Ms. Xiaping Qiu has served as general manager
of the planning and finance department of Haitong Securities since November 2014. From March 2009 to November
2014, Ms. Qiu served as deputy general manager of the planning and finance department of Haitong Securities.
Mr. Qing Xia has served as deputy
general manager of Haitong Capital since June 2011. From May 2003 to February 2011, Mr. Xia served as deputy general manager
of the investment banking department (Shenzhen) of Haitong Securities.
Haitong Securities is a
limited liability company organized under the laws of the PRC; with its principal business address at 689 Guangdong Road,
Huangpu District, Shanghai 200001, the PRC, and its business telephone number is +86 21 2321 9000. Haitong Capital is wholly owned
by Haitong Securities, a financial service firm providing securities brokerage, investment consultancy, and investment
banking services.
The name, business
address, present principal employment and citizenship of each director and executive officer of Haitong Securities are set forth
below.
| Name |
Business Address |
Present Principal Employment |
Citizenship |
| Kaiguo Wang |
689 Guangdong Road, Huangpu District,
Shanghai 200001, the PRC |
Chairman and executive director of Haitong Securities |
PRC |
| Qiuping Qu |
689
Guangdong Road, Huangpu District,
Shanghai
200001, the PRC |
Executive director and general manager of Haitong Securities |
PRC |
| Guowei Zhuang |
578 Wuzhong Road,
Shanghai 201103, the PRC |
Non-executive
director of Haitong Securities; vice president of
Bright Food (Group) Co., Ltd., a PRC food company with its business address at No. 7, Lane 263, Huashan Road, Shanghai 200040, the
PRC; chairman of the board of directors of Bright Dairy & Food Co., Ltd., a PRC dairy company with its business address
at 578 Wuzhong Road, Shanghai 201103, the PRC |
PRC |
| Chao Xu |
110 Sichuan Zhong
Road, Shanghai 200002, the PRC |
Non-executive
director of Haitong Securities; the deputy chief
economist and head of investment department of Shanghai Electric (Group) Corporation, a PRC multinational power generation
and electrical equipment manufacturing company with its business address at 110 Sichuan Zhong Road, Shanghai 200002, the PRC |
PRC |
| Hongxiang Wang |
159
Hongjing Road, Shanghai 201103,
the PRC |
Non-executive
director of Haitong Securities; deputy chief
accountant of Shenergy (Group) Company Limited, a PRC investment holding company with its busiess address at 159 Hongjing
Road, Shanghai 201103, the PRC |
PRC |
| Jianyong He |
106
Qingnian Street, Shenhe District,
Shenyang
110014, Liaoning, the PRC |
Non-executive
director of Haitong Securities; chairman of the board
of directors of Liaoning Energy Investment (Group) Co., Ltd. |
PRC |
| Cheeming Liu |
689
Guangdong Road, Huangpu District,
Shanghai
200001, the PRC |
Managing director
of Platinum Holdings Limited |
PRC |
| Suining Xiao |
689
Guangdong Road, Huangpu District,
Shanghai
200001,
the PRC |
Independent non-executive director of Haitong Securities |
PRC |
| Bin Chen |
717 Changyang Road, Shanghai
200082, the PRC |
Non-executive director
of Haitong Securities; assistant general manager
of Shanghai Haiyan Investment Management Co., Ltd. |
PRC |
| Xinmei Zhang |
36/F-40/F,
Jiushi Tower,
28
South Zhongshan Road, Shanghai
200010, the PRC |
Non-executive director
of Haitong Securities; deputy general manager of Shanghai Jiushi Corporation |
PRC |
| Guangrong Li |
689
Guangdong Road, Huangpu District,
Shanghai
200001,
the PRC |
Independent
non-executive director of Haitong Securities; executive director of the board of
directors of China Minsheng Investment Company Limited |
Hong Kong S.A.R. |
| Changjiang Lyu |
689
Guangdong Road, Huangpu District,
Shanghai
200001,
the PRC |
Independent non-executive director of Haitong Securities; professor of Fudan University |
PRC |
| Lun Feng |
689
Guangdong Road, Huangpu District,
Shanghai
200001,
the PRC |
Independent non-executive director of Haitong Securities; chairman of the board of directors of Vantone Holdings Co., Ltd. |
PRC |
| Yuguang Ji |
689
Guangdong Road, Huangpu District,
Shanghai
200001,
the PRC |
Deputy general manager of Haitong Securities |
PRC |
| Peng Ren |
689
Guangdong Road, Huangpu District,
Shanghai
200001,
the PRC |
Deputy general manager of Haitong Securities |
PRC |
| Xunlei Li |
689
Guangdong Road, Huangpu District,
Shanghai
200001, the PRC |
Deputy general manager and chief economist of Haitong Securities |
PRC |
| Miyazato Hiroki |
689
Guangdong Road, Huangpu District,
Shanghai
200001,
the PRC |
Deputy general manager of Haitong Securities |
Japan |
| Changjiang Pei |
689
Guangdong Road, Huangpu District,
Shanghai
200001,
the PRC |
Deputy general manager of Haitong Securities |
PRC |
| Jianye Wang |
689
Guangdong Road, Huangpu District,
Shanghai
200001,
the PRC |
Chief compliance officer and chief risk management officer of Haitong Securities |
PRC |
| Chuqian Li |
689
Guangdong Road, Huangpu District,
Shanghai
200001,
the PRC |
Chief financial officer and general manager in the financing plan department of Haitong Securities |
PRC |
Mr.
Kaiguo Wang has served as chairman of Haitong Securities since May 1998 and an executive director of Haitong Securities
since August 1996.
Mr. Qiuping Qu has served as an
executive director and general manager of Haitong Securities since June 2014. From August 2012 to April 2014, Mr. Qu served
as head of department of supervision of unlisted public companies of the CSRC, the main regulator of the securities industry
in China with its business address at Focus Place 19, Jin Rong Street, West District, Beijing 100032, the PRC. From December 2010
to August 2012, Mr. Qu served as head of the work coordination department of the dispatched office of the CSRC. From November
2008 to December 2010, Mr. Qu served as president and chairman of the board of directors of Bank of Shanghai, a PRC
commercial bank with its business address at No. 168 Yincheng Road Central, Pudong New District, Shanghai 200120, the PRC.
Mr. Chao Xu has served as a
non-executive director of Haitong Securities since May 2011. Mr. Xu has also served as deputy chief economist and head of
investment department of Shanghai Electric (Group) Corporation, a PRC multinational power generation and electrical equipment
manufacturing company with its business address at 110 Sichuan Zhong Road, Shanghai 200002, the PRC since December 2013. From May
2008 to December 2013, Mr. Xu served as vice president of Shanghai Electric Capital Management Co., Ltd., a PRC capital
management company with its business address at No. 110 Sichuan Zhong Road, Shanghai 200002, the PRC.
Mr. Hongxiang Wang has served as a
non-executive director of Haitong Securities since May 2011. Since December 1998, Mr. Wang has served as deputy
chief accountant of Shenergy (Group) Company Limited, a PRC investment holding company investing principally in power,
energy, natural gas and high-tech industries with its business address at 159 Hongjing Road, Shanghai 201103, the PRC.
Mr. Jianyong He has served as a
non-executive director of Haitong Securities since September 2011. Mr. He has also served as chairman of the board of
directors of Liaoning Energy Investment (Group) Co., Ltd. (“Liaoning Energy”), a PRC investment company with a
focus on infrastructure investment with its business address at 106 Qingnian Street, Shenhe District, Shenyang 110014, Liaoning
Province, the PRC since April 2011. From November 2005 to April 2011, Mr. He served as vice chairman and general manager of
Liaoning Energy.
Mr. Cheeming Liu has served as an independent
director of Haitong Securities since September 2011. Mr. Liu has also served as the managing director of Platinum Holdings Limited,
a Hong Kong corporate finance, asset management and securities brokering service provider with its business address at 21/F, LHT
Tower, 31 Queen's Road Central, Hong Kong SAR, since January 1996.
Mr. Suining Xiao has served as an
independent non-executive director of Haitong Securities since May 2013. From November 2012 to May 2013, Mr. Xiao served as a
consultant to Shenzhen Development Bank, a PRC commercial bank with its business address at 5047 E. Shennan Road,
Luohu District, Shenzhen 518001, the PRC. From February 2007 to November 2012, Mr. Xiao served as the president and chairman of
Shenzhen Development Bank.
Mr. Bin Chen has served as
a non-executive director of Haitong Securities since December 2014. Mr. Chen has served as assistant to the general
manager of Shanghai Haiyan Investment Management Company Limited (“Shanghai Haiyan”), a PRC investment company,
since April 2014 and as assistant to the head of the investment management department of Shanghai Tobacco Group Co., Ltd.
(formerly known as Shanghai Tobacco (Group) Company) (“Shanghai Tobacco”), a PRC tobacco company, since January
2010. The business address of Shanghai Haiyan and Shanghai Tobacco is 717 Changyang Road, Shanghai 200082, the PRC. Mr. Chen has also served as a non-executive director of Orient Securities since October 2014.
Ms.
Xinmei Zhang has served as a non-executive director of Haitong Securities since December 2014. Ms. Zhang has also
served as deputy general manager of Shanghai Jiushi Corporation, a PRC investment holding company with its business address
at 36/F-40/F, Jiushi Tower, 28 South Zhongshan Road, Shanghai 200010, the PRC, since December 2014. From November 2004 to December
2014, Ms. Zhang served as chief accountant of Shanghai Jiushi Corporation.
Mr. Guangrong Li has served as an
independent non-executive director of Haitong Securities since December 2014. Mr. Li has also served as an executive
director, chairman of the advisory committee to the board of China Minsheng Investment Company Limited, a PRC private
investment company with its business address at 23/F, The Bund International Plaza, 100 South Zhongshan Street, Shanghai 200010,
the PRC, since June 2014. From December 2004 to June 2014, Mr. Li served as chairman of Sinosafe General Insurance Co., Ltd.
a PRC insurance company with its business address at 3083 South Bao'an Road, Shenzhen 518001, the PRC.
Mr. Changjiang Lyu has served as an independent
non-executive director of Haitong Securities since December 2014. Mr. Lyu has also served as head, associate dean, professor and
doctoral tutor of the department of accounting of the school of management of Fudan University with its address at 220 Handan Road,
Yangpu, Shanghai 200433, the PRC, since February 2006.
Mr. Lun Feng has served as
an independent non-executive director of Haitong Securities since December 2014. Mr. Feng has also served as chairman of
the board of directors of Vantone Holdings Co., Ltd., a PRC real estate investment company with its business address at B-8,
Vantone New World Plaza, No. 2, Fuchengmenwai Street, Xicheng District, Beijing 100037, the PRC, since January 1993.
Mr. Xunlei Li has served as deputy general
manager and chief economist of Haitong Securities since March 2012. From October 2011 to March 2012, Mr. Li served as chief economist
of Haitong Securities. From 1999 to October 2011, Mr. Li served as deputy director and director of research institute and general
manager of sales and trading headquarters, assistant to president, general economist and chief economist of Guotai Junan Securities
Co., Ltd., a PRC securities company with its business address at 168 Yincheng Zhong Road, 29 Floor, Shanghai 200120, the PRC.
Mr. Miyazato Hiroki has served as deputy
general manager of Haitong Securities since March 2012. From May 2009 to March 2012, Mr. Hiroki served as general manager of international
business department, commissioner of international business coordination committee and commissioner of strategic development and
IT management committee of Haitong Securities.
Mr. Changjiang Pei has served as deputy
general manager of Haitong Securities since August 2013. From March 2003 to August 2013, Mr. Pei served as director and general
manager of Fortune SGAM Fund Management Co., Ltd., a PRC investment manager with its business address at 58/F Shanghai World Financial
Center,100 Century Road, Shanghai 200120, the PRC.
Mr. Jianye Wang has served as chief compliance
officer since July 2010 and chief risk management officer of Haitong Securities since May 2011. From June 2001 to February 2011,
Mr. Wang served as assistant to general manager of Haitong Securities.
During the last five (5) years, none of
Hao Ding, Hai Sheng Tong, Haitong, Haitong GP, Haitong Capital, Haitong Securities or any of
their respective directors, executive officers or representatives of executive partner (as the case may be) has been (a) convicted
in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (b) a party to any judicial or administrative
proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment or 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.
| 10. | Directors and Executive Officers of Orient Hongtai/Orient
Hongzhi Filing Persons |
Orient Hongtai is a company organized
under the laws of Hong Kong with its principal business address at Flat 2, 19/F, Henan Building, 90-92 Jaffe Road, Wanchai,
Hong Kong, and its business telephone number is +86 21 6332 5888. Orient Hongtai is wholly owned and controlled by TonSung
Holdings Limited (“TonSung”). Orient Hongtai’s principal business is making equity investments in private and
public companies.
The name, business address, present principal employment and citizenship of each director of Orient Hongtai
are set forth below. As of the date of this proxy statement, Orient Hongtai does not have any executive officers.
| Name |
Business Address |
Present Principal Employment |
Citizenship |
|
Bo Chen
|
36F, Building No. 2, Orient International
Finance Center, 318 South Zhong Shan Road, Shanghai 200010, the PRC
|
Director and General Manager of Orient Capital (as defined below) |
PRC |
|
Yuntao Ma
|
36F, Building No. 2,
Orient International Finance Center, 318 South Zhong Shan Road, Shanghai 200010, the PRC |
Director and Manager of Hongtai Beijing (as defined below) |
PRC |
Mr. Bo Chen has served as a director and
the general manager of Orient Securities Capital Company Limited (“Orient Capital”) since April 1, 2013. From February
2010 to March 2013, Mr. Chen served as Orient Capital’s deputy general manager.
Mr. Yuntao Ma has served as a
director and manager of Orient Hongtai Capital Management (Beijing) Co., Ltd. (“Hongtai Beijing”) since 2014.
From 2006 to 2012, Mr. Ma served as a director of investment banking department of Orient Securities and from 2012 to 2014, a
director of equity finance department of Citi Orient Securities Company Limited (“Citi Orient”). Citi Orient is a
limited liability company organized under the laws of the PRC with its principal business address at 24F, Building No. 2,
Orient International Finance Center, 318 South Zhong Shan Road, Shanghai 200010, the PRC. Citi Orient is a financial service
firm with its principal business in providing investment banking services.
TonSung is a business company
organized under the laws of British Virgin Islands with its principal business address at Geneva Place, Waterfront Drive,
P.O. Box 3469, Road Town, Tortola, British Virgin Islands, and its business telephone number is +86 21 6332 5888. TonSung is
wholly owned and controlled by Orient Zhisheng (as defined below). TonSung’s principal business is making equity
investments in private and public companies.
The name, business address, present principal employment and citizenship of the sole
director of TonSung are set forth below. As of the date of this proxy statement, TonSung does not have any executive
officers.
| Name |
Business Address |
Present Principal Employment |
Citizenship |
| Yuntao Ma |
36F, Building No. 2,
Orient International Finance Center, 318 South Zhong Shan Road, Shanghai 200010, the PRC |
Director and Manager of Hongtai Beijing |
PRC |
Orient Zhisheng Investment
Center (Shanghai) L.P. (“Orient Zhisheng”) is a limited partnership organized under the laws of the PRC with
its principal business address at 36F, Building No. 2, Orient International Finance Center, 318 South Zhong Shan Road,
Shanghai 200010, the PRC, and its business telephone number is +86 21 6332 5888. Orient Zhisheng’s principal business is the
provision of investment management and consultancy services. Hongtai Shanghai (as defined below) and Orient Capital
are general partners of Orient Zhisheng.
The name, business address, present principal employment and citizenship of the
sole representative of both general partners of Orient Zhisheng, are set forth below. As of the date of this proxy
statement, Orient Zhisheng does not have any directors or executive officers.
| Name |
Business Address |
Present Principal Employment |
Citizenship |
| Bo Chen |
36F,
Building No. 2, Orient International Finance Center, 318 South Zhong Shan Road, Shanghai 200010, the PRC |
Director and General Manager of Orient Capital |
PRC |
Orient Hongtai Capital Management
(Shanghai) Co., Ltd. (“Hongtai Shanghai”) is a limited liability company organized under the laws of the PRC with
its principal business address at 36F, Building No. 2, Orient International Finance Center, 318 South Zhong Shan Road,
Shanghai 200010, the PRC, and its business telephone number is +86 21 6332 5888. Hongtai Shanghai is a direct wholly
owned subsidiary of Orient Ruide (as defined below). Hongtai Shanghai’s principal business is acting as a general
partner of Orient Zhisheng. The name, business address, present principal employment and citizenship of each director and
executive officer of Hongtai Shanghai are set forth below.
| Name |
Business Address |
Present Principal Employment |
Citizenship |
| Bo Chen |
36F, Building No. 2,
Orient International Finance Center, 318 South Zhong Shan Road, Shanghai 200010, the PRC |
Director and General Manager of Orient Capital |
PRC |
Orient Capital is a limited liability
company organized under the laws of the PRC with its principal business address at 36F, Building No. 2, Orient International
Finance Center, 318 South Zhong Shan Road, Shanghai 200010, the PRC, and its business telephone number is +86 21 6332 5888. Orient
Capital is a general partner of each of Orient Zhisheng and Orient Zhihui. Orient Capital is directly wholly owned and
controlled by Orient Securities. Its principal business is making equity investments in private and public companies.
The
name, business address, present principal employment and citizenship of each director and executive officer of Orient Capital
are set forth below.
| Name |
Business Address |
Present Principal Employment |
Citizenship |
| Xinjun Pan |
22F, 23F, 25-29F,
Building No. 2, Orient International Finance Center, 318 South Zhong Shan Road, Shanghai 200010, the PRC |
Chairman of the board of Orient Securities |
PRC |
| Wenzhong Jin |
22F, 23F, 25-29F,
Building No. 2, Orient International Finance Center, 318 South Zhong Shan Road, Shanghai 200010, the PRC |
President of Orient Securities |
PRC |
| Guangming Chen |
31F, Building No. 2,
Orient International Finance Center, 318 South Zhong Shan Road, Shanghai 200010, the PRC |
General Manager of Orient Securities
Asset Management Co., Ltd. (“Orient Asset”), a PRC asset management company
with its business address at 31F, Building No. 2, Orient International Finance Center, 318 South Zhong Shan
Road, Shanghai 200010, the PRC
|
PRC |
| Bo Chen |
36F, Building No. 2,
Orient International Finance Center, 318 South Zhong Shan Road, Shanghai 200010, the PRC |
Director and General Manager of Orient Capital |
PRC |
| Weihua Du |
27F, Building No. 2,
Orient International Finance Center, 318 South Zhong Shan Road, Shanghai 200010, the PRC |
Assistant to the
President of Orient Securities; General Manager of Human Resources Management Department of Orient Securities |
PRC |
Mr. Xinjun Pan has served as the chairman
of the board of Orient Securities since January 2010. From January 2010 to September 2010, Mr. Pan served as the president of Orient
Securities.
Mr. Wenzhong Jin has served as the president
of Orient Securities since September 2010. From December 1997 to September 2010, Mr. Jin served as the vice president of Orient
Securities.
Mr. Guangming Chen has served as the general manager of Orient Asset since June 2010. From January 2010 to June 2010,
Mr. Chen served as the general manager of asset management department of Orient Securities.
Mr. Weihua Du has served as assistant to
the president of Orient Securities since January 2012. Mr. Du has also served as the general manager of the human resources management
department of Orient Securities since January 2010.
Orient Hongzhi is a company
organized under the laws of Hong Kong with its principal business address at Flat 2, 19/F, Henan Building, 90-92 Jaffe Road,
Wanchai, Hong Kong, and its business telephone number is +86 21 6332 5888. Orient Hongzhi is directly and wholly owned by
HuaSung (as defined below). Orient Hongzhi’s principal business is making equity investments in private and public
companies. The name, business address, present principal employment and citizenship of each director of Orient Hongzhi are
set forth below. As of the date of this proxy statement, Orient Hongzhi does not have any executive officers.
| Name |
Business Address |
Present Principal Employment |
Citizenship |
| Bo Chen |
36F, Building No. 2, Orient International
Finance Center, 318 South Zhong Shan Road, Shanghai 200010, the PRC
|
Director and General Manager of Orient Capital |
PRC |
| Yuntao Ma |
36F, Building No. 2, Orient International Finance Center, 318 South Zhong Shan Road, Shanghai 200010, the PRC |
Director and Manager of Hongtai Beijing |
PRC |
HuaSung Holdings
Limited (“HuaSung”) is a business company organized under the laws of British Virgin Islands with its principal
business address at Geneva Place, Waterfront Drive, P.O. Box 3469, Road Town, Tortola, British Virgin Islands, and its
business telephone number is +86 21 6332 5888. HuaSung is directly and wholly owned by Orient Zhihui (as defined below).
HuaSung’s principal business is making equity investments in private and public companies.
The name, business address,
present principal employment and citizenship of the sole director of HuaSung are set forth below. As of the date of this
proxy statement, HuaSung does not have any executive officers.
| Name |
Business Address |
Present Principal Employment |
Citizenship |
| Yuntao Ma |
36F, Building No. 2, Orient International Finance Center, 318 South Zhong Shan Road, Shanghai 200010, the PRC |
Director and Manager of Hongtai Beijing |
PRC |
Orient Zhihui Investment Center
(Shanghai) L.P. (“Orient Zhihui”) is a limited partnership organized under the laws of the PRC with its principal
business address at 36F, Building No. 2, Orient International Finance Center, 318 South Zhong Shan Road, Shanghai 200010, the PRC,
and its business telephone number is +86 21 6332 5888. The principal business of Orient Zhihui is the provision of investment
management and consultancy services. Orient Zhihui’s general partners are Hongtai Beijing and Orient Capital. The name,
business address, present principal employment and citizenship of the sole representative of both general partners of Orient
Zhihui are set forth below. As of the date of this proxy statement, Orient Zhihui does not have any directors or other
executive officers.
| Name |
Business Address |
Present Principal Employment |
Citizenship |
| Bo Chen |
36F, Building No. 2, Orient International Finance Center, 318 South Zhong Shan Road, Shanghai 200010, the PRC |
Director and General Manager of Orient Capital |
PRC |
Hongtai Beijing is a limited
liability company organized under the laws of the PRC with its principal business address at 1219, Techart Plaza, 30 Xue Yuan
Road, Haidian District, Beijing 100083, the PRC, and its business telephone number is +86 21 6332 5888. The principal business of
Hongtai Beijing is making equity investments in private and public companies, as well as acting as a general partner of
Orient Zhihui. Hongtai Beijing is directly and wholly owned by Orient Ruide (as defined below).
The name, business
address, present principal employment and citizenship of each director and executive officer of Hongtai Beijing are set forth below.
| Name |
Business Address |
Present Principal Employment |
Citizenship |
| Bo Chen |
36F, Building No. 2, Orient International
Finance Center, 318 South Zhong Shan Road, Shanghai 200010, the PRC
|
Director and General Manager of Orient Capital |
PRC |
| Yuntao Ma |
36F, Building No. 2, Orient International
Finance Center, 318 South Zhong Shan Road, Shanghai 200010, the PRC
|
Director and Manager of Hongtai Beijing |
PRC |
| Jianmei Shi |
36F, Building No. 2, Orient International
Finance Center, 318 South Zhong Shan Road, Shanghai 200010, the PRC
|
Chief Risk Control
Officer of Orient Capital |
PRC |
Ms. Jianmei Shi has served as
the chief risk control officer of Orient Capital since October 2010. From January 2010 to October 2010, Ms. Shi served as
a researcher 200135 at the Shanghai Branch of CSRC, the main regular of the securities industry in China with its address at
555 Yingchun Road, Pudong New District, Shanghai, the PRC.
Orient Ruide Capital
Management (Shanghai) Co., Ltd. (“Orient Ruide”) is a limited liability company organized under the laws of the
PRC with its principal business address at 36F, Building No. 2, Orient International Finance Center, 318 South Zhong Shan
Road, Shanghai 200010, the PRC, and its business telephone number is +86 21 6332 5888. The principal business of Orient Ruide is
the provision of investment management and consultancy services. Orient Ruide is directly and wholly owned by Orient
Capital.
The name, business
address, present principal employment and citizenship of each director and executive officer of Orient Ruide are set forth
below.
| Name |
Business Address |
Present Principal Employment |
Citizenship |
| Bo Chen |
36F, Building No. 2, Orient International Finance Center, 318 South Zhong Shan Road, Shanghai |
Director and General Manager of Orient Capital |
PRC |
Orient Securities is a limited
liability company organized under the laws of the PRC with its principal business address at 22, 23, and 25-29F, Building No.
2, Orient International Finance Center, 318 South Zhong Shan Road, Shanghai 200010, the PRC, and its business telephone number is
+86 21 6332 5888. Orient Capital is directly and wholly owned by Orient Securities. Orient Securities is a
financial service firm providing securities brokerage, investment consultancy, and equity and debt financing services.
The
name, business address, present principal employment and citizenship of each director and executive officer of Orient
Securities are set forth below.
| Name |
Business Address |
Present Principal Employment |
Citizenship |
| Xinjun Pan |
22F, 23F, 25-29F, Building No. 2, Orient
International Finance Center, 318 South Zhong Shan Road, Shanghai 200010, the PRC
|
Chairman of the board of Orient Securities |
PRC |
| Jianxiong Wu |
22F, 23F, 25-29F, Building No. 2, Orient International Finance Center, 318 South Zhong Shan Road, Shanghai 200010, the PRC |
General Manager of Shenergy
(Group) Company Limited, a PRC investment holding company with its business address at 159 Hongjing Road, Shanghai 201103, the PRC
(“Shenergy Group”)
|
PRC |
| Wenzhong Jin |
22F, 23F, 25-29F, Building No. 2, Orient
International Finance Center, 318 South Zhong Shan Road, Shanghai 200010, the PRC
|
President of Orient Securities |
PRC |
| Qian Zhang |
Room
E3, 76 Ribin Road, Free-Trade Zone, Shanghai 200131, the PRC |
General Manager of Shenergy
(Group) Finance Company Limited, a PRC asset consulting company for Shenergy Group, with its business address at Room E3, 76 Ribin
Road, Free-Trade Zone, Shanghai 200131, the PRC
|
PRC |
| Junhao Wu |
159
Hongjing Road, Shanghai 201103, the PRC
|
Manager of the department of financial
management of Shenergy Group |
PRC |
| |
|
|
|
| Bin Chen |
717 Changyang Road,
Shanghai 200082, the PRC |
Assistant to the general manager
of Shanghai Haiyan
|
PRC |
| Xiang Li |
755
Weihai Road, Shanghai 200041, the PRC |
Chief of the economic management office
of Shanghai United Media Group Co., Ltd. (“SUMG”), a PRC newspaper company with
its business address at 755 Weihai Road, Shanghai 200041, the PRC
|
PRC |
| Chao Xu |
110
Sichuan Zhong Road, Shanghai 200002, the PRC |
Deputy
Chief Economist and head of investment department of Shanghai Electric (Group) Corporation, a PRC multinational power
generation and electrical equipment manufacturing company with its business address at 110 Sichuan Zhong Road,
Shanghai 20002, the PRC (“Shanghai Electric”)
|
PRC |
| Bichang Chen |
276
North Suzhou Road, Shanghai 200085, the PRC |
General Manager of Shanghai Post Co., Ltd.
(“Shanghai Post”), a PRC postal service company with its business address at
276 North Suzhou Road, Shanghai 200085, the PRC
|
PRC |
| Yao Zhou |
28 New Jinqiao Road,
Shanghai 201206, the PRC |
General Manager of project management center
of Shanghai Jinqiao Group Co., Ltd. (“Jinqiao Group”), a construction and development company with its business address
at 28 New Jinqiao Road, Shanghai 201206, the PRC
|
PRC |
| Xinyuan Chen |
777 Guoding Road,
Shanghai 200433, the PRC |
Vice President of Shanghai University of
Finance and Economics (“SUFE”), a PRC university with its address at 777
Guoding Road, Shanghai 200433, the PRC
|
PRC |
| Zhiqiang Li |
13F, 300 Middle
Huaihai Road, Shanghai 200021, the PRC |
Founding partner of Jin Mao Partners, a
PRC law firm with its business address at 13F, 300 Middle Huaihai Road, Shanghai 200021, the PRC
|
PRC |
| Guoxiang Xu |
777 Guoding Road,
Shanghai 200433, the PRC |
Professor and PhD student supervisor of SUFE |
PRC |
| Xiuming Tao |
6F, Central South
Building, 9 Finance Avenue, Beijing 100033, the PRC |
Partner of Junzejun Law Offices, a
PRC law firm with its business address at 6F, Central South Building, 9 Finance Avenue, Beijing 100033, the PRC
|
PRC |
| Anning Wei |
Room 325, Building
7, 328 Jiajian Road, Shanghai 201818, the PRC |
Chairman of the board of Shanghai Guwang
Investment Management Co., Ltd. (“Guwang”), a PRC asset management company
with its business address at Room 325, Building 7, 328 Jiajian Road, Shanghai 201818, the PRC
|
PRC |
| Guobin Wang |
22F, 23F, 25-29F, Building No. 2, Orient
International Finance Center, 318 South Zhong Shan Road, Shanghai 200010, the PRC
|
Vice President of Orient Securities |
PRC |
| Yucheng Yang |
22F, 23F, 25-29F, Building No. 2, Orient
International Finance Center, 318 South Zhong Shan Road, Shanghai 200010, the PRC
|
Vice President and Board Secretary of Orient Securities |
PRC |
| Hong Shu |
22F, 23F, 25-29F, Building No. 2, Orient
International Finance Center, 318 South Zhong Shan Road, Shanghai 200010, the PRC
|
Vice President of Orient Securities |
PRC |
| Jin’an Li |
22F, 23F, 25-29F, Building No. 2, Orient
International Finance Center, 318 South Zhong Shan Road, Shanghai 200010, the PRC
|
Chief Risk Officer and Compliance Director of Orient Securities |
PRC |
| Ji Ma |
22F, 23F, 25-29F, Building No. 2, Orient
International Finance Center, 318 South Zhong Shan Road, Shanghai 200010, the PRC
|
Director of Investment Banking of Orient Securities |
PRC |
| Jianhui Zhang |
22F, 23F, 25-29F, Building No. 2, Orient International Finance Center, 318 South Zhong Shan Road, Shanghai 200010, the PRC |
Financial Director of Orient Securities;
General Manager of fund and finance management department
|
PRC |
| Lei Qi |
22F, 23F, 25-29F, Building No. 2, Orient International Finance Center, 318 South Zhong Shan Road, Shanghai 200010, the PRC |
Chief Investment Officer of Orient
Securities; General Manager of the General Department of Securities Investment of Orient Securities |
PRC |
Mr. Junhao Wu has served as a manager of
Shenergy Group’s financial management department since April 2011. From August 2009 to April 2011, Mr. Wu served as a deputy
manager in the same department.
Mr. Bin Chen has served as assistant
to the general manager of Shanghai Haiyan since April 2014 and as assistant to the head of the investment management
department of Shanghai Tobacco since January 2010. The business address of Shanghai Haiyan and Shanghai Tobacco is 717
Changyang Road, Shanghai 200082, the PRC. Mr. Chen has also served as a non-executive director of Haitong Securities since December 2014.
Mr. Xiang Li has served as the chief
of the economic management office of SUMG since October 2013. From January 2008 to October 2013, Mr. Li served as the chief
of the economic management department of Wenhui Xinmin United Media Group Co., Ltd. (“Wenhui Xinmin”), which was
merged into SUMG in October 2013. The business address of Wenhui Xinmin is 755 Weihai Road, Shanghai 200041, the PRC.
Mr. Chao Xu has served as
deputy chief economist and head of investment department of Shanghai Electric since December 2013. From March 2012 to
December 2013, Mr. Xu served as a vice president of Shanghai Electric Assets Management Co., Ltd. (“SEAM”), a PRC
capital management company with its business address at 110 Sichuan Zhong Road, Shanghai 200002, the PRC. Mr. Xu
served as chief of financial budget department of Shanghai Electric from October 2010 to March 2012, and financial director
of SEAM from October 2006 to October 2010.
Mr. Bichang Chen has served as the general
manager of Shanghai Post since February 2011. From December 2007 to February 2011, Mr. Chen served as the general manager of Shandong
Post Co., Ltd., a PRC postal service company with its business address at 181 West Heihuquan Road,
Jinan 250011, Shandong Province, the PRC.
Mr. Yao Zhou has served as the general
manager of project management center of Jinqiao Group since August 2014. From November 2007 to August 2014, Mr. Zhou served as
a vice president of Shanghai Jinqiao Export and Process Zone Development Co., Ltd., with its business
address at 28 New Jinqiao Road, Shanghai 201206, the PRC.
Mr. Xinyuan Chen has served as a vice president
of SUFE since December 2014. From October 2000 to December 2014, Mr. Chen served as the dean of School of Accountancy of SUFE.
Mr.
Anning Wei has served as the chairman of the board of Guwang since October 2010. From August 2010 to August 2012, Mr. Wei has
also served as the chairman of the board of Shandong Yatai Zhonghui Group Co., Ltd., a PRC agricultural food production
company with its business address at 337 Xinchang Road, Changle Town, Weifang City 262400, Shandong, the PRC. From January 2007 to
July 2010, Mr. Wei served as the chief executive officer of China area of Fortis Bank (“Fortis”), a Belgium-based
bank with its Shanghai office at Room 4301-4305, Room 4311-4312, 88 Century Avenue, Shanghai 200121, the PRC. Fortis has been
merged with BNP Paribas to become BNP Paribas Fortis SA/NV.
Mr. Yucheng Yang has served as a vice president
and board secretary of Orient Securities since January 2012. From August 2009 to January 2012, Mr. Yang served as a vice president
of Orient Securities.
Mr. Hong Shu has served as a vice president
of Orient Securities since April 2014. From August 2011 to April 2014, Mr. Shu served as the director of operation of Orient Securities.
From March 2010 to August 2011, Mr. Shu served as the director of information technology of Orient Securities. From March 2010
to January 2012, Mr. Shu served as assistant to the president of Orient Securities.
Mr. Jin’an Li has served as the
chief risk officer of Orient Securities since April 2014, and the compliance director of Orient Securities since December
2008.
Mr. Ji Ma has served as the director
of investment banking of Orient Securities since October 2010. From November 2006 to October 2010, Mr. Ma served as an
assistant president and the general manager of the merger and acquisition department of Orient Securities. Mr. Ma has also
served as director, chief operating officer, chief financial officer and as a director of Citi Orient since
August 2012.
Mr. Jianhui Zhang has served as the
financial director of Orient Securities since January 2012. From May 2006, Mr. Zhang has served as the general manager of the
fund and finance management department of Orient Securities.
Ms. Lei Qi has served as the chief investment
officer of Orient Securities since May 2014 and as the general manager of the general department of securities
investment of Orient Securities from January 2010. From January 2010 to October 2014, Ms. Qi has served as the general manager
of general department of derivatives of Orient Securities.
Unless otherwise disclosed in this
Annex F, each of the persons listed above has been in his current position for the past five (5) years. During the last five
(5) years, none of Orient Hongtai, Orient Zhisheng, HuaSung, TonSung, Hongtai Shanghai, Orient Hongzhi, Orient Zhihui,
Hongtai Beijing, Orient Ruide, Orient Capital, Orient Securities or their respective directors, executive officers or
representatives of executive partner (as the case may be) has been (a) convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or (b) a party to any judicial or administrative proceeding (except for
matters that were dismissed without sanction or settlement) that resulted in a judgment or 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.
FORM OF PROXY CARD
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF
SHANDA GAMES LIMITED
FOR THE EXTRAORDINARY GENERAL MEETING
OF SHAREHOLDERS
TO BE HELD ON [ ],
2015
The undersigned shareholder
of Shanda Games Limited, a Cayman Islands company (the “Company”), hereby acknowledges receipt of the Notice of Extraordinary
General Meeting of Shareholders (the “Meeting”) and the accompanying proxy statement (the “Proxy Statement”),
each dated [ ], 2015, and hereby appoints [ ] and, if no person is specified, the chairman of the Meeting, as proxy, with full
power of substitution, on behalf and in the name of the undersigned, to represent the undersigned at the Meeting to be held on
[ ], 2015, at [ ] a.m. (Hong Kong time). The Meeting will be held at the offices of Davis Polk & Wardwell, The Hong Kong Club
Building, 3A Chater Road, Central, Hong Kong, or at any adjournment or postponement thereof, and to vote all Class A or Class B
ordinary shares of the Company which the undersigned would be entitled to vote if then and there personally present, on the matters
set forth below (i) as specified by the undersigned below and (ii) in the discretion of any proxy upon such other business as may
properly come before the Meeting, all as set forth in the Notice of the Meeting and in the Proxy Statement furnished herewith.
This proxy when properly
executed will be voted in the manner directed herein by the undersigned shareholder. If no direction is made, this proxy will be
voted FOR the following proposals:
PROPOSAL
NO. 1: As a special resolution, authorize, approve and adopt the Agreement and Plan of Merger, dated as of April 3, 2015 (as
may be amended from time to time, the “Merger Agreement”), among Capitalhold Limited, an exempted company with limited
liability incorporated under the laws of the Cayman Islands (“Parent”), Capitalcorp Limited, an exempted company with
limited liability incorporated under the laws of the Cayman Islands and a wholly owned subsidiary of Parent, and the Company (such
Merger Agreement being in the form attached to the Proxy Statement and to be produced and made available for inspection at the
extraordinary general meeting), the plan of merger (the “Plan of Merger”) required to be registered with the Registrar
of Companies in the Cayman Islands (such Plan of Merger being in the form attached to the Proxy Statement and to be produced and
made available for inspection at the extraordinary general meeting) in order to give effect to the merger of Merger Sub with and
into the Company, with the Company continuing as the surviving corporation and becoming a wholly owned subsidiary of Parent (the
“Merger”), and any and all transactions contemplated by the Merger Agreement and the Plan of Merger (collectively,
the “Transactions”), including without limitation (i) the Merger, (ii) the amendment of the authorized share capital
of the Company from [ ] to [ ], and (iii) the replacing of the existing memorandum and articles of association in their entirety
with a new memorandum and articles of association, a copy of which is attached as Appendix II to the Plan of Merger.
PROPOSAL
NO. 2: As an ordinary resolution, authorize the directors of the Company to do all things necessary to give effect to the Merger
Agreement, the Plan of Merger and the Transactions, including the Merger.
PROPOSAL
NO. 3: If necessary, as an ordinary resolution, instruct the chairman of the extraordinary general meeting to adjourn the
extraordinary general meeting in order to allow the Company to solicit additional proxies in the event that there are
insufficient proxies received at the time of the extraordinary general meeting to pass the resolutions in Proposal No. 1 and
Proposal No. 2 above to be proposed at the extraordinary general meeting.
This proxy should
be marked, dated and signed by the shareholder exactly as his or her name appears on the share certificate and be returned promptly
in the enclosed envelope. Any person signing in a fiduciary capacity should so indicate. If shares are held by joint tenants or
as community property, both should sign.
Please date, sign and mail this
proxy
card back as soon as possible.
¨ê
DETACH PROXY CARD HERE ê
-----------------------------------------------------------------------------------------------------------------------------------------
| Mark, sign, date and return this Proxy Card promptly |
|
|
| using the enclosed envelope. |
|
|
| |
|
|
| This Proxy Card must be received |
|
Votes must be indicated |
| prior to 10:00 a.m., Hong Kong time, on [ ], 2015 |
|
(x) in Black or Blue ink. |
| |
|
FOR |
|
AGAINST |
|
ABSTAIN |
|
PROPOSAL NO. 1: As a special
resolution, authorize, approve and adopt the Agreement and Plan of Merger, dated as of April 3, 2015 (as may be amended from time
to time, the “Merger Agreement”), among Capitalhold Limited, an exempted company with limited liability incorporated
under the laws of the Cayman Islands (“Parent”), Capitalcorp Limited, an exempted company with limited liability incorporated
under the laws of the Cayman Islands and a wholly owned subsidiary of Parent, and the Company (such Merger Agreement being in the
form attached to the Proxy Statement and to be produced and made available for inspection at the extraordinary general meeting),
the plan of merger (the “Plan of Merger”) required to be registered with the Registrar of Companies in the Cayman Islands
(such Plan of Merger being in the form attached to the Proxy Statement and to be produced and made available for inspection at
the extraordinary general meeting) in order to give effect to the merger of Merger Sub with and into the Company, with the Company
continuing as the surviving corporation and becoming a wholly owned subsidiary of Parent (the “Merger”), and any and
all transactions contemplated by the Merger Agreement and the Plan of Merger (collectively, the “Transactions”), including
without limitation (i) the Merger, (ii) the amendment of the authorized share capital of the Company from [ ] to [ ], and (iii)
the replacing of the existing memorandum and articles of association in their entirety with a new memorandum and articles of association,
a copy of which is attached as Appendix II to the Plan of Merger.
|
|
o |
|
o |
|
o |
|
PROPOSAL NO. 2: As an ordinary resolution,
authorize the directors of the Company to do all things necessary to give effect to the Merger Agreement, the Plan of Merger and
the Transactions, including the Merger.
|
|
o |
|
o |
|
o |
| PROPOSAL NO.
3: If necessary, as an ordinary resolution, instruct the chairman of the extraordinary general meeting to adjourn the
extraordinary general meeting in order to allow the Company to solicit additional proxies in the event that there are
insufficient proxies received at the time of the extraordinary general meeting to pass the resolutions in Proposal No. 1 and
Proposal No. 2 above to be proposed at the extraordinary general meeting. |
|
o |
|
o |
|
o |
|
This Proxy Card must be signed by the person
registered in the register of members and returned to the Company’s offices at No. 1 Office Building, No. 690 Bibo Road,
Pudong New Area, Shanghai 201203, the PRC, Attention: Investor Relations Department, no later than [ ], 2015 at 10:00 a.m. (Hong
Kong time). In the case of a corporation, this Proxy Card must be executed by a duly authorized officer or attorney of such corporation.
Capitalized terms used but not defined herein shall have the meanings ascribed to them in the proxy statement dated [ ], 2015. |
| |
|
|
| Share Owner signs here |
|
Co-Owner signs here |
|
Date: |
|
|
FORM OF ADS VOTING
INSTRUCTION CARD
SHANDA GAMES LIMITED
TO THE REGISTERED HOLDERS
OF AMERICAN DEPOSITARY RECEIPTS (“ADRs”)
REPRESENTING CLASS A ORDINARY SHARES OF
SHANDA GAMES LIMITED
(THE “COMPANY")
| Please refer to the reverse side of this card for the proposals to be voted at the Meeting. |
FOLD AND DETACH HERE
PROPOSALS
| 1. | As a special resolution, authorize, approve and adopt
the Agreement and Plan of Merger, dated as of April 3, 2015 (as may be amended from time to time, the “Merger Agreement”),
among Capitalhold Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands (“Parent”),
Capitalcorp Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands and a wholly
owned subsidiary of Parent, and the Company (such Merger Agreement being in the form attached to the Proxy Statement and to be
produced and made available for inspection at the extraordinary general meeting), the plan of merger (the “Plan of Merger”)
required to be registered with the Registrar of Companies in the Cayman Islands (such Plan of Merger being in the form attached
to the Proxy Statement and to be produced and made available for inspection at the extraordinary general meeting) in order to
give effect to the merger of Merger Sub with and into the Company, with the Company continuing as the surviving corporation and
becoming a wholly owned subsidiary of Parent (the “Merger”), and any and all transactions contemplated by the Merger
Agreement and the Plan of Merger (collectively, the “Transactions”), including without limitation (i) the Merger,
(ii) the amendment of the authorized share capital of the Company from [ ] to [ ], and (iii) the replacing of the existing memorandum
and articles of association in their entirety with a new memorandum and articles of association, a copy of which is attached as
Appendix II to the Plan of Merger. |
| 2. | As an ordinary resolution, authorize the directors of
the Company to do all things necessary to give effect to the Merger Agreement, the Plan of Merger and the Transactions, including
the Merger. |
| 3. | If necessary, as an ordinary resolution, instruct the
chairman of the extraordinary general meeting to adjourn the extraordinary general meeting in order to allow the Company to solicit
additional proxies in the event that there are insufficient proxies received at the time of the extraordinary general meeting
to pass the resolutions in Proposal No. 1 and Proposal No. 2 above to be proposed at the extraordinary general meeting. |
| Shanda Games Limited |
|
Voting
Instruction Card |
| JPMorgan Chase Bank, N.A., Depositary |
|
| P.O. Box 64507, St. Paul, MN 55164-0507 |
|
JPMorgan
Chase Bank, N.A., (the “Depositary”) has received advice that the Extraordinary General Meeting of Shareholders (the
“Meeting”) of Shanda Games Limited (the “Company”) will be held at the offices of Davis Polk & Wardwell,
The Hong Kong Club Building, 3A Chater Road, Central, Hong Kong on Xxxxday, xxxx xx, 2015 at xx:xx a.m. (Hong Kong time), for
the purposes set forth on this card.
If you are desirous of having the Depositary, through its Nominee
or Nominees, vote or execute a proxy to vote the Class A Ordinary Shares represented by your ADRs FOR or AGAINST or to ABSTAIN
from the Proposals to be proposed at the Meeting, kindly execute and forward to the Depositary the attached Voting Instruction
Card. The enclosed postage-paid envelope is provided for this purpose. This Voting Instruction Card should be executed in such
a manner as to show clearly whether you desire the Nominee or Nominees of the Depositary to vote FOR or AGAINST or to ABSTAIN
from the Proposals. The Voting Instruction Card MUST be forwarded in sufficient time to reach the Depositary before 12:00 p.m.
(New York City time), Xxxxx xx, 2015. Only the registered holders of record at the close of business on Xxxxx xx, 2015 will be
entitled to execute the attached Voting Instruction Card.
The signatory, a registered holder of ADRs representing Class A Ordinary
Shares of the Company, hereby requests and authorizes the Depositary, through its Nominee or Nominees, to vote or execute a proxy
to vote the underlying Class A Ordinary Shares of the Company represented by such ADRs registered in the name of the signatory
on the books of the Depositary at the close of business on Xxxxx xx, 2015, at the Meeting to be held on Monday, Xxxxx xx, 2015,
or at any adjournment thereof.
These instructions, when properly signed and dated, will be voted
in the manner directed herein. If you mark the box to indicate that you wish to give a discretionary proxy to a person designated
by the Company, the underlying Class A Ordinary Shares represented by your ADRs will be voted by such person in his or her discretion.
If these instructions are properly signed and dated but no direction is made, the underlying Class A Ordinary Shares represented
by such Receipts will not be voted by the Depositary at the Meeting.
NOTE: In order to have the aforesaid shares voted, this Voting Instruction
Card must be received by the Depositary before 12:00 p.m. (New York City time), Xxxxx xx, 2015.
For more information regarding the Meeting please visit the Company’s
website at http://ir.shandagames.com/egm.cfm
JPMorgan Chase Bank, N.A., Depositary
PLEASE MARK, DATE AND SIGN ON REVERSE SIDE AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
Please see reverse
side for Voting Instructions.
Exhibit (c)-(2)
April 2015 Project Shengxia CONFIDENTIAL Discussion Material Prepared for Meeting with the Special Committee of the Board of Directors of Shanda Games
“Bank of America Merrill Lynch” is the marketing name for the global banking and global markets businesses of Bank of America Co rporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., member FDIC. Securities, strategic adviso ry, and other investment banking activities are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corp., which are both registered broker dealers and members of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured * May Lose Value * Are Not Bank Guarantee d. These materials have been prepared by one or more subsidiaries of Bank of America Corporation for the client or potential cli ent to whom such materials are directly addressed and delivered (the “Company”) in connection with an actual or potential mandate or engagement and may not be used or relied upon for any purpose other than as specifically conte mpl ated by a written agreement with us. These materials are based on information provided by or on behalf of the Company and/or other potential transaction participants, from public sources or otherwise reviewed by us. We a ssu me no responsibility for independent investigation or verification of such information (including, without limitation, data from third party suppliers) and have relied on such information being complete and accurate in all m ate rial respects. To the extent such information includes estimates and forecasts of future financial performance prepared by or reviewed with the managements of the Company and/or other potential transaction participants or ob tai ned from public sources, we have assumed that such estimates and forecasts have been reasonably prepared on bases reflecting the best currently available estimates and judgments of such managements (or, with re spe ct to estimates and forecasts obtained from public sources, represent reasonable estimates). No representation or warranty, express or implied, is made as to the accuracy or completeness of such information and nothing co nta ined herein is, or shall be relied upon as, a representation, whether as to the past, the present or the future. These materials were designed for use by specific persons familiar with the business and affairs of the Company and are being furnished and should be considered only in connection with other information, oral or written, being provided by us in connection herewith. These materials are not intended to provide the sole basis for evaluating, and sho uld not be considered a recommendation with respect to, any transaction or other matter. These materials do not constitute an offer or solicitation to sell or purchase any securities and are not a commitment by Bank of A mer ica Corporation or any of its affiliates to provide or arrange any financing for any transaction or to purchase any security in connection therewith. These materials are for discussion purposes only and are subject to our revie w a nd assessment from a legal, compliance, accounting policy and risk perspective, as appropriate, following our discussion with the Company. We assume no obligation to update or otherwise revise these materials. These mat eri als have not been prepared with a view toward public disclosure under applicable securities laws or otherwise, are intended for the benefit and use of the Company, and may not be reproduced, disseminated, quoted or referred t o, in whole or in part, without our prior written consent. These materials may not reflect information known to other professionals in other business areas of Bank of America Corporation and its affiliates. Bank of America Corporation and its affiliates (collectively, the “BAC Group”) comprise a full service securities firm and co mme rcial 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 inves tme nt management, financing and strategic advisory services and other commercial services and products to a wide range of corporations, governments and individuals, domestically and offshore, from which conflicting interests or dut ies, or a perception thereof, may arise. In the ordinary course of these activities, parts of the BAC Group at any time may invest on a principal basis or manage funds that invest, make or hold long or short positions, finance pos itions or trade or otherwise effect transactions, for their own accounts or the accounts of customers, in debt, equity or other securities or financial instruments (including derivatives, bank loans or other obligations) of the Com pan y, potential counterparties or any other company that may be involved in a transaction. Products and services that may be referenced in the accompanying materials may be provided through one or more affiliates of Bank of Ameri ca Corporation. We have adopted policies and guidelines designed to preserve the independence of our research analysts. The BAC Group prohibits employees from, directly or indirectly, offering a favorable research rating o r s pecific price target, or offering to change a rating or price target to a subject company as consideration or inducement for the receipt of business or for compensation and the BAC Group prohibits research analysts from being direct ly compensated for involvement in investment banking transactions. The views expressed herein are the views solely of Global Corporate and Investment Banking, and no inference should be made that the views expressed represe nt the view of the firm’s research department. We are required to obtain, verify and record certain information that identifies the Company, which information includes the name and address of the Company and other information th at will allow us to identify the Company in accordance, as applicable, with the USA Patriot Act (Title III of Pub. L. 107 - 56 (signed into law October 26, 2001)) and such other laws, rules and regulations as applicable within and outside the United States. We do not provide legal, compliance, tax or accounting advice. Accordingly, any statements contained herein as to tax matter s w ere neither written nor intended by us to be used and cannot be used by any taxpayer for the purpose of avoiding tax penalties that may be imposed on such taxpayer. If any person uses or refers to any such tax statemen t i n promoting, marketing or recommending a partnership or other entity, investment plan or arrangement to any taxpayer, then the statement expressed herein is being delivered to support the promotion or marketing of the transaction or matter addressed and the recipient should seek advice based on its particular circumstances from an independent tax advisor. Notwithstanding anything that may appear herein or in other materials to the con trary, the Company shall be permitted to disclose the tax treatment and tax structure of a transaction (including any materials, opinions or analyses relating to such tax treatment or tax structure, but without discl osu re of identifying information or, except to the extent relating to such tax structure or tax treatment, any nonpublic commercial or financial information) on and after the earliest to occur of the date of ( i ) public announcement of discussions relating to such transaction, (ii) public announcement of such transaction or (iii) execution of a definitive agreement (with or without conditions) to enter into such transaction; provided, however, that if s uch transaction is not consummated for any reason, the provisions of this sentence shall cease to apply. Copyright 2015 Bank of America Corporation. Confidential Notice to Recipient
1. Transaction Overview 1 2. Valuation Analysis 6 Table of Contents Meeting with the Special Committee of the Board of Directors of Shanda Games Project Shengxia
1. Transaction Overview
; On January 27, 2014, Shanda Games Limited (“Shanda Games” or the “Company”) announced that its Board of Directors (the "Board ") has received a preliminary non - binding proposal letter from Shanda Interactive Entertainment Limited (“Shanda Interactive”), the controlling sh areholder of the Company, and an affiliate of Primavera Capital Limited (“Primavera”) (together, the "Consortium") to acquire all of the outstanding or din ary shares of the Company not currently owned, legally or beneficially, by the Consortium in a “going - private” transaction (the “Transaction”) ; Concurrently with the proposal, Shanda Interactive through its wholly owned entity Shanda SDG Investment Limited (“SDG”) anno unc ed it had agreed to sell to Primavera, c.29 million shares it held of the Company (representing approximately c.5.4% of the shares outstanding ) a t a price of US$2.7625 per share ; On March 6, 2014, Bank of America Merrill Lynch (“ BofAML ”) was engaged by the Special Committee of the Board of Directors (the “Special Committee”) of Shanda Games to act as financial advisor to the Special Committee in connection with the Company’s receipt of the “going priv ate ” proposal from the Consortium on January 27, 2014 ; BofAML was requested to provide an opinion to the Special Committee as to whether or not the per ADS consideration to be paid by the C onsortium in the merger was fair from a financial point of view to the holders of the ADSs (other than the Consortium) of the Company ; Subsequent to this, Perfect World Co., Ltd. (“Perfect World”), FV Investment Holdings (“ FountainVest ”, an affiliate of FountainVest Partners) and CAP IV Engagement Limited (“Carlyle”, an affiliate of Carlyle Asia Partners IV, L.P.) became parties of the Consortium by entering i nto an adherence agreement on April 18, April 25, and May 19 of 2014 respectively ; As part of this announcement, SDG agreed to sell to Perfect World, c.30 million shares it held of the Company (representing a ppr oximately c.5.5% of the shares outstanding) at a price of US$3.2975 per share ; On September 1, 2014, Orient Finance Holdings (Hong Kong) Limited (“Orient Finance”), Shanghai Buyout Fund L.P. (“ Haitong Securities”, an affiliate of Haitong Securities Co., Ltd.) and Ningxia Zhongyin Cashmere Co., Ltd. (“Ningxia”) joined the Consortium as new members through adherence agreements to become parties to the Consortium Agreement. Primavera, Perfect World, FountainVest and Carlyle withdrew from the Consortium ; On August 31, 2014, SDG and Orient Finance entered into a share purchase agreement pursuant to which SDG agreed to sell, and Ori ent Finance agreed to purchase, 123,552,669 Class A Ordinary Shares at US$3.45 per Class A Ordinary Share ; On September 1, 2014, SDG and Haitong Securities entered into a share purchase agreement, pursuant to which SDG agreed sell, and Haitong Securities agreed to purchase, 48,152,848 Class A Ordinary Shares at US$3.45 per Class A Ordinary Share ; Concurrently, Primavera, Perfect World and Haitong Securities entered into a share purchase agreement, pursuant to which Haitong Securities agreed to purchase 28,959,276 and 30,326,005 Class A Ordinary Shares from Primavera and Perfect World, respectively ; On September 1, 2014, SDG and Ningxia entered into a share purchase agreement pursuant to which SDG agreed to sell, and Ningx ia agreed to purchase, 80,577,828 Class A Ordinary Shares at US$3.45 per Class A Ordinary Shares 1 Situation Overview Transaction Overview
2 Situation Overview (Cont’d) Transaction Overview Limitations of Strategic Alternatives ; On October 27, 2014, the exclusivity period under the Consortium Agreement expired. On October 28, 2014, Shanda Interactive a nd Ningxia entered into a letter agreement (the “Exclusivity and Release Letter”) to continue to work exclusively until November 25, 2014 ; On November 25, 2014, SDG, Ningxia, Zhongrong Shengda Investment Holdings (Hong Kong) Company Limited (“ Zhongrong Shengda ”) and Yili Shengda Investment Holdings (Hong Kong) Company Limited (“ Yili Shengda ”) entered into a share purchase agreement (the “SDG Class B Share Purchase Agreement”) pursuant to which each of Zhongrong Shengda and Yili Shengda agreed to purchase 48,759,187 Class B Ordinary Shares from SDG for an aggregate consideration of approximately US$250 million. The purchase and sale under the SDG Class B Share Purchase Agreement we re completed on the same day and SDG no longer beneficially owns any ordinary shares of the Company ; On March 16, 2015, Ningxia Yilida Capital Investment Limited Partnership (“ Yilida ”, an affiliate of the Company’s acting CEO, Mr. Yingfeng Zhang), Ningxia, Orient Hongtai (Hong Kong) Limited (“ Hongtai ”, an affiliate of Orient Securities), Orient Hongzhi (Hong Kong) Limited (“ Hongzhi ”, an affiliate of Orient Securities), and Hao Ding International Limited (“ Haitong ”, an affiliate of Haitong Securities Co., Ltd) entered into a consortium agreement, pursuant to which they agreed to form a consortium . As of December 31, 2014, ; Ningxia and its affiliates collectively owned Class A Shares and Class B Shares representing approximately 24.0% of the Compa ny’ s issued and outstanding ordinary shares and approximately 40.1% of the total number of votes represented by the Company’s issued and outs tan ding ordinary shares ; Mr. Yingfeng Zhang and his affiliates collectively owned Class B Shares representing approximately 9.1% of the Company’s issued and outsta nd ing ordinary shares and approximately 34.4% of the total number of votes represented by the Company’s issued and outstanding ordi nar y shares ; Orient Securities and its affiliates collectively owned Class A Shares representing approximately 23.0% of the Company’s issu ed and outstanding ordinary shares and approximately 8.7% of the total number of votes represented by the Company’s issued and outstanding ordin ary shares ; Haitong and its affiliates collectively owned Class A Shares representing approximately 20.0% of the Company’s issued and outstanding o rdinary shares and approximately 7.6% of the total number of votes represented by the Company’s issued and outstanding ordinary shares ; The Special Committee and its advisors considered exploring potential strategic alternatives to the Consortium’s offer ; Prior to the reconstitution of the Consortium in late August - early September, the Special Committee directed BofAML to approach potential financial and strategic investors to solicit their interest in an acquisition of the Company as an alternative to the proposed Transaction; ho wever, such potential investors declined to make any proposals to acquire the Company
Acquirer ; Consortium comprised of Yilida, Ningxia, Hongtai, Hongzhi and Haitong Target ; Shanda Games Transaction Structure ; Merger of an acquisition vehicle of the Consortium (“Merger Sub”) with and into the Company Consideration ; US$7.10 per American Depositary Share (“ADS”, each ADS representing 2 Class A Ordinary Shares) or US$3.55 per Class A Ordinary Share in cash for each publicly held ADS not already owned by the Consortium Financing ; Acquisition to be financed with cash from new equity investors only Non-Solicitation ; Company prohibited from soliciting competing offers, but may engage with third parties upon receipt of unsolicited, superior proposals to the extent required to charge the Company’s board of directors’ fiduciary duties Termination Fee ; Break-Up Fee: US$57,250,000 plus up to US$3,000,000 expense reimbursement payable by the Company ; Reverse Break-Up Fee: US$114,500,000 plus up to US$3,000,000 expense reimbursement payable by Merger Sub’s parent 3 Summary of Selected Terms Transaction Overview
First FConsortium Offer Revised Consortium Offer Offer Price US$6.90 US$7.10 Price (US$) Offer Price Premium / (Discount) Current (3/27/2015) 6.48 6.5% 9.6% VWAP (Before 01/27/2014) (5) 1-Day 5.71 20.8% 24.3% 5-Day 5.26 31.1% 34.9% 30-Day 4.85 42.4% 46.5% 3-Month 4.60 49.9% 54.2% 6-Month 4.53 52.3% 56.7% 12-Month 4.33 59.5% 64.1% 4 Implied Premiums to Historical Stock Prices (4) Summary of Transaction Value (Amounts in US$ millions except per share data) Transaction Summary Transaction Overview ____________________ Source: FactSet , Bloomberg, Company SEC filings, Company model (1) Based on fully diluted number of shares from Management as of December 31, 2014. 537,832,318 ordinary shares outstanding, 14 ,953,191 vested but not exercised options outstanding and unvested options outstanding @ US$2.1/share average exercise price, and 915,730 unvested restricted s har es. Options have been treated on an as - converted basis using Treasury Stock Method (2) Includes short - term borrowings, long - term borrowings, dividend payable and other payables to related parties as of December 31, 2014 (3) Includes cash, cash equivalents, restricted cash, short - term investments and time deposits with maturity over one year as of December 31, 2014 ____________________ (4) Represents number of trading days and calendar months respectively. The time frame of VWAP refers to calendar month or the p revious trading day if the date falls on a weekend or public holiday (5) Source: VWAP based on FactSet (6) Represents FactSet consensus as of January 24, 2014 from Wall Street research estimates Offer price per ADS $6.90 $7.10 Total ADS outstanding (mm) (1) 272.3 272.4 Implied Equity Value (1) $1,878.9 $1,934.2 Adjustment for net debt: Debt (2) 13.7 13.7 Cash (3) (130.8) (130.8) Non-controlling interests 46.7 46.7 Implied Enterprise Value $1,808.4 $1,863.8 Implied Transaction Multiples Amount Multiple Multiple 2014A Net Earnings per ADS 0.63 11.0x 11.3x Broker Consensus (6) 2015E Net Earnings per ADS 0.82 8.4x 8.6x 2016E Net Earnings per ADS n.a. n.a. n.a. Management Projections 2015E Net Earnings per ADS 0.74 9.3x 9.6x 2016E Net Earnings per ADS 0.88 7.8x 8.1x
0.0 2.0 4.0 6.0 8.0 10.0 12.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 1-Jan-14 6-Mar-14 9-May-14 14-Jul-14 16-Sep-14 19-Nov-14 22-Jan-15 27-Mar-15 Volume Shanda Games NASDAQ 5 ADS Performance of Shanda Games Since January 2014 Company Overview ____________________ Source: Company filings, FactSet as of March 27, 2015, Factiva ADS Price (index rebased to Shanda Games) (US$) Volume (mm) First Offer Price of Consortium: US$6.90 Revised Offer Price of Consortium: US$7.10 April 18, 2014 Perfect World formally joined Consortium January 27, 2014 Consortium offer announced July 19, 2014 Gamblit Gaming formed partnership with the Company September 1, 2014 Orient Finance, Haitong and Ningxia joined the Consortium; Perfect World agreed to sell its entire equity interest to Haitong for US$104.6mm; Primavera, Perfect World, FountainVest and Carlyle have withdrawn from the Consortium September 4, 2014 Reconstituted the special committee of independent directors formed by the Board to evaluate the preliminary non - binding proposal dated January 27, 2014 May 19, 2014 Carlyle formally joined Consortium June 17, 2014 Announced 1Q 2014 results with net revenues of US$161.3mm April 25, 2014 FountainVest formally joined Consortium March 21, 2014 Announced 4Q 2013 and annual 2013 results August 28, 2014 Formed a strategic partnership with UOL BoaCompra September 26, 2014 Announced 2Q 2014 results with net revenues of US$156.7mm September 16, 2014 Along with Tencent Holdings Ltd., the Company invested US$4.0mm in eJiaJie, a China based location - based online - to - offline service October 28, 2014 Appointed Zhang Yingfeng as acting CEO of the Company December 08, 2014 Yili Shengda Investment Holdings (Hong Kong) Co. Ltd., an affiliate of the Company's acting CEO and certain of Yili's affiliates, formed a consortium to acquire the Company March 16, 2015 Ningxia Yilida, Ningxia, Orient Hongtai (Hong Kong) Ltd., Orient Hongzhi (Hong Kong) Ltd. and Hao Ding International Ltd. entered into a consortium agreement pursuant to which they agreed to form a consortium to acquire the Company in a going private transaction
2. Valuation Analysis
6 Methodology General Description Comments Selected Public Companies Analysis ; A method of valuing an entity relative to selected publicly traded companies that are deemed relevant based on various financial and operating characteristics ; Reviewed four public companies in the US-listed Chinese online gaming sector, including Giant Interactive, which has recently completed a take-private transaction Discounted Cash Flow Analysis ; A method of valuing an entity based on its risk-adjusted projected cash flows, discounted by its weighted average cost of capital ; Terminal values calculated using perpetuity growth rates of 1.0% to 2.0% ; Present values calculated using discount rates of 16.0%- 18.0% Premiums Paid Analysis ; A review, as an additional reference point for informational purposes, of premiums paid in selected M&A transactions with public companies ; Reviewed 12 Chinese US-listed companies’ public take- private transactions announced since 1/1/2009 ; Also reviewed 17 non-Chinese US-listed companies’ public take-private transactions announced since 1/1/2009, where the acquiror owned over 50% of the target prior to the transaction Additional Information Selected Precedent Transactions Analysis ; A method of valuing an entity relative to selected M&A transactions involving companies in the same sector ; Reviewed three selected M&A transactions announced since 2008 involving companies in the online gaming sector ; We did not include these transactions into our analysis due to the limited number of comparables Valuation Analysis Methodologies and Additional Information
7 Valuation Analysis Summary Valuation Analysis ____________________ Source: Company model, Company filings , Wall Street equity research, Bloomberg, Dealogic and Factset Note: ADS price calculated based on fully diluted number of shares from Management as of December 31, 2014. 537,832,318 ordinary shares outstanding, 14,953,191 vested but not exercised options outstanding and unvested options outstan din g @ US$2.1/share average exercise price, and 915,730 unvested restricted shares. Options have been treated on an as - converted basis using Treasury Stock Method (1) Based on US$70.4 mm net cash position as of December 31, 2014 per 2014 earnings release (2) Closing share price 52 - week high and low as of January 24, 2014 (3) Forecast financials based on management projections $6.29 $7.04 $5.83 $6.42 $6.50 $6.78 $5.72 $5.38 $3.50 $2.74 $7.03 $7.92 $6.57 $7.30 $7.69 $7.91 $6.68 $6.27 $6.50 $6.25 $2.00 $4.00 $6.00 $8.00 $10.00 (US$) Valuation Method Metrics (3) Implied Range Selected Precedent Premiums Analysis 1 - Week 1 - Day $5.65 $4.77 20% - 40 % 20% - 40 % 1 - Month $4.48 20% - 40 % Market Valuation 52 - Week High/Low (2) $2.74 – $6.25 Broker Target Price Per Broker’s Individual Metrics $3.50 - $6.50 Selected Trading Multiples Analysis 2016E P/E 2015E P/E 2015E EPS US$0.74 8.5x – 9.5x 2016E EPS US$0.88 8.0x – 9.0x 2016E Adjusted P/E (1) 2015E Adjusted P/E (1) 2015E EPS US$0.74 7.5x – 8.5x 2016E EPS US$0.88 7.0x – 8.0x Discounted Cash Flow Analysis WACC: 16.0% – 18.0% Terminal Growth Rate 1.0% – 2.0% Revised Offer Price: US$7.10 First Offer Price: US$ 6 . 9 0
Historical Management Projections 2011A 2012A 2013A 2014A 2015E 2016E 2017E 2018E 2019E Total Net Revenue 871 774 713 610 589 771 929 1,060 1,256 % Growth (11.1%) (7.9%) (14.5%) (3.4%) 30.9% 20.5% 14.2% 18.5% Gross Profit 650 585 527 456 447 568 667 746 901 % Margin 74.6% 75.5% 73.9% 74.7% 75.8% 73.7% 71.8% 70.3% 71.7% Operating Expenses (261) (236) (243) (261) (227) (295) (345) (381) (463) % of Revenue 30.0% 30.5% 34.1% 42.9% 38.6% 38.3% 37.2% 35.9% 36.9% Operating Income 389 349 284 194 219 273 322 365 437 % Margin 44.7% 45.0% 39.8% 31.8% 37.2% 35.4% 34.6% 34.4% 34.8% Net Income 341 294 267 163 202 251 288 327 379 % Margin 39.1% 38.0% 37.5% 26.8% 34.3% 32.5% 31.0% 30.8% 30.1% % Growth (13.6%) (9.2%) (39.0%) 23.7% 24.3% 14.9% 13.4% 16.0% 8 (All figures in US$ millions unless otherwise stated) Summary Overview of Management Projections Valuation Analysis ____________________ Source: Company model (1) Adjusted for acquisition of affiliates, which is not available from company filings (1)
9 Selected Public Trading Comparables Analysis Valuation Analysis ____________________ Source: FactSet, broker research, Company SEC filings. Market data as of March 27, 2015. Trading multiples calculated based o n F actSet consensus from Wall Street research estimates as of March 27, 2015 except for Shanda Games and Giant Interactive Note: “nm” refers to not meaningful, 2014 multiples for Netease , Changyou and Shanda Games refer to actual numbers (1) Enterprise Value = Market Capitalization + Total Debt + Minority Interests + Preferred Shares - Cash & Cash Equivalents (2) Calculated as share price less net cash per share divided by earnings per share (3) From company filings; PEG based on long term growth rate of 12.4% from FactSet as of November 22, 2013, one day before announ cem ent (4) Netease’s cash balance adjusted for dividend declared and unpaid of US$0.39/ADS for the fourth quarter of 2014, to be paid on March 6, 20 15, assuming that dividends accrue to unvested RSUs. Netease’s net debt excludes (US$5.7 mm) deficit minority interest, which is a result of retrospective presentation and disclosure requirements on the noncontrolling interest which became effective for fiscal years beginning on or after December 31, 2008. The noncontrolling interest will continue to be attributed its share of losses even if that attribution results in a deficit noncontrolling interest balance (5) Changyou’s 2014 multiples excluded from max, mean, median and min calculations as they are not meaningful comparison (6) Perfect World’s cash balance adjusted for US$3.6 mm paid to acquire Digital Extremes Share Price Market Cap Enterprise Value (1) Company (US$) (US$ mm) (US$ mm) 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E 2014E 2015E 2016E Giant Interactive Take-Private Proposal Broker Consensus Giant Interactive (Pre Offer) 10.13 $2,544 $2,033 9.7x 9.0x 9.8x 7.7x 7.2x 7.8x 7.0x 6.0x 7.1x 0.8x 0.7x 0.9x Giant Interactive (First Offer) 11.75 2,952 2,232 11.3 10.5 11.4 8.5 7.9 8.6 7.7 6.6 8.7x 0.9 0.8 1.0 Giant Interactive (Final Offer) 12.00 3,014 2,294 11.5 10.7 11.6 8.7 8.1 8.8 7.9 6.8 8.9x 0.9 0.9 1.0 Management Projections Giant Interactive (Pre Offer) 10.13 $2,544 $2,033 9.8x 8.3x 7.6x 7.8x 6.6x 6.1x 7.1x 5.5x 4.7x 0.8x 0.7x 0.6x Giant Interactive (First Offer) 11.75 2,952 2,232 11.4 9.6 8.8 8.6 7.3 6.7 7.8 6.0 5.1 0.9 0.8 0.7 Giant Interactive (Final Offer) 12.00 3,014 2,294 11.6 9.8 9.0 8.8 7.5 6.9 8.0 6.2 5.3 0.9 0.8 0.7 Perfect World Take-Private Proposal Broker Consensus Perfect World (Pre Offer) 15.76 $792 $316 8.1x 7.1x 6.0x 3.5x 3.1x 2.5x 3.1x 2.5x 2.1x 0.5x 0.5x 0.4x Perfect World (At Offer) 20.00 1,028 552 10.3 9.0 7.6 6.1 5.4 4.4 5.4 4.4 3.6 0.7 0.6 0.5 Shanda Games Take-Private Proposal Broker Consensus Shanda Games Ltd (Pre Offer) 5.65 $1,533 $1,462 9.0x 6.8x na 8.6x 6.5x na 6.2x 4.4x na 1.3x 1.0x 1.0x Shanda Games Ltd (First Offer) 6.90 1,879 1,808 11.0 8.4 na 10.6 8.1 na 7.7 5.4 na 1.6 1.2 na Shanda Games Ltd (Revised Offer) 7.10 1,934 1,864 11.3 8.6 na 10.9 8.3 na 7.9 5.5 na 1.7 1.3 na Management Projections Shanda Games Ltd (Pre Offer) 5.65 $1,533 $1,462 9.0x 7.6x 6.1x 8.6x 7.2x 5.8x 6.2x 5.7x 4.6x 1.1x 0.9x 0.7x Shanda Games Ltd (First Offer) 6.90 1,879 1,808 11.0 9.3 7.8 10.6 9.0 7.5 7.7 7.0 5.6 1.3 1.1 0.9 Shanda Games Ltd (Revised Offer) 7.10 1,934 1,864 11.3 9.6 8.1 10.9 9.2 7.8 7.9 7.2 5.8 1.3 1.1 1.0 Netease $103.83 $13,829 $10,041 17.9x 15.5x 13.1x 13.0x 11.4x 9.7x 12.6x 10.5x 8.8x 1.2x 1.0x 0.9x Giant Interactive (Pre Offer) 10.13 2,544 2,033 9.7 9.0 9.8 7.7 7.2 7.8 7.0 6.0 7.1 0.8 0.7 0.9 Changyou 26.84 1,486 1,220 nm 9.9 9.4 nm 8.2 7.9 nm 7.3 6.7 nm nm 1.6 Perfect World (Pre Offer) 15.76 792 316 8.1 7.1 6.0 3.5 3.1 2.5 3.1 2.5 2.1 0.5 0.5 0.5 Max 17.9x 15.5x 13.1x 13.0x 11.4x 9.7x 12.6x 10.5x 8.8x 1.2x 1.0x 1.6x Average 11.9x 10.4x 9.6x 8.1x 7.5x 7.0x 7.6x 6.6x 6.1x 0.8x 0.7x 0.9x Median 9.7x 9.5x 9.6x 7.7x 7.7x 7.9x 7.0x 6.6x 6.9x 0.8x 0.7x 0.9x Min 8.1x 7.1x 6.0x 3.5x 3.1x 2.5x 3.1x 2.5x 2.1x 0.5x 0.5x 0.5x P/E Adjusted P/E (2) EV/EBITDA PEG (3) (3) (4) (3) (3) (3) (3) (5) (6) (3) (6) (6)
10 Management Case (Amounts in US$ millions unless otherwise stated) Discounted Cash Flow Analysis Valuation Analysis ____________________ Source: Company management estimates Note: Assumes transaction date of December 31, 2014. Based on end - of - year discounting convention Year Ending December 31, Steady 2013 2014 2015 2016 2017 2018 2019 State Revenue 610 589 771 929 1,060 1,256 1,256 EBITDA 235 258 321 382 435 517 517 Less: Depreciation & Amortization (41) (39) (48) (60) (70) (80) (80) EBIT 194 219 273 322 365 437 437 Less: Taxes (49) (55) (68) (80) (91) (109) (109) Tax-Effected EBIT 146 165 205 241 274 328 328 Plus: Depreciation & Amortization 41 39 48 60 70 80 80 Plus: Change in Working Capital (28) 21 2 2 2 (4) (4) Less: Capital Expenditures (37) (34) (40) (36) (42) (39) (80) Free Cash Flows 121 191 215 267 304 366 324 A + B = C Discounted PV of Terminal Value at a Discount Cash Flows Perpetuity Growth Rate of Implied Enterprise Value Rate 2015 - 2019 1.00% 1.50% 2.00% 1.00% 1.50% 2.00% 16.00% 838 1,039 1,081 1,125 1,877 1,919 1,963 16.50% 827 984 1,022 1,063 1,812 1,850 1,890 17.00% 817 934 968 1,006 1,750 1,785 1,822 17.50% 806 886 918 953 1,692 1,724 1,759 18.00% 796 842 872 903 1,638 1,668 1,699 - D = E Implied Exit EBITDA Multiple Price Per ADS (US$) Discount 2014A Implied Equity Value Rate Net Debt 1.00% 1.50% 2.00% 1.00% 1.50% 2.00% 1.00% 1.50% 2.00% 16.00% (131) 2,008 2,049 2,093 4.2x 4.4x 4.6x 7.38 7.53 7.69 16.50% (131) 1,942 1,980 2,021 4.1x 4.2x 4.4x 7.13 7.27 7.42 17.00% (131) 1,881 1,916 1,953 4.0x 4.1x 4.3x 6.91 7.04 7.17 17.50% (131) 1,823 1,855 1,890 3.8x 4.0x 4.1x 6.70 6.81 6.94 18.00% (131) 1,769 1,799 1,830 3.7x 3.9x 4.0x 6.50 6.60 6.72
0.04 0.36 0.75 (0.04) (0.36) (0.69) (1.00) (0.50) 0.00 0.50 1.00 (1.11) (0.74) (0.37) (1.50) (1.00) (0.50) 0.00 ____________________ Source: Company management Note: Assumes valuation date as of December 31, 2014. DCF uses end of year convention (1) Calculated by sensitizing selected metric while maintaining management case assumptions for all other metrics (2) Based on WACC assumption of 17.0% and terminal growth rate of 1.5% 11 Pipeline Games Revenue Sensitivity (1) Financial Sensitivities Analysis (1) Discounted Cash Flow Analysis (Sensitivities) Valuation Analysis Value Driver Changes Considered Annually Impact on DCF Value Revenue Growth (2015 – 2019) EBITDA Margin (2015 – 2019) Capex Increase (2015 – 2019) – /+ 2.0% – /+ 2.0% +/ – 10.0% Change in Price per ADS (US$) Mid - point Implied Price per ADS: US$7.04 (2) US$6.35 US$6.68 US$6.99 US$7.78 US$7.40 US$7.08 Scenario Impact on DCF Value 10% Downside Case on Pipeline Games Revenue Between 2015 - 2019 20% Downside Case on Pipeline Games Revenue Between 2015 - 2019 30% Downside Case on Pipeline Games Revenue Between 2015 - 2019 Change in Price per ADS (US$) Mid - point Implied Price per ADS: US$7.04 (2) US$6.66 US$6.29 US$5.92
12 Selected Precedent Privatization Premiums Analysis Valuation Analysis ____________________ Source: Dealogic Note: Represents 100% acquisitions with “grossed up” deal value (i.e. inclusive of acquiror stake) between US$100 mm and US$3 bn in which the acquiror’s initial stake was above 50% (1) Represents “grossed up” deal value (i.e. inclusive of acquiror stake) (2) Represents premium over the closing price as of the trading day, 1 week and 1 month prior to announcement date ; Since 2009, a number of US - listed companies have been taken private in comparable going - private transactions ; The median premiums paid over the trading price at announcement in the selected precedent transactions involving Chinese US - listed companies have been in the 25% - 30% range ; The Consortium’s offer for Shanda (US$7.10/ADS) represented a 1 - day, 1 - week and 1 - month premium of 25.7%, 48.8% and 57.6%, respectively Selected Going - Private Transactions since January 1, 2009 with US - Listed Targets Date Deal Value (1) Final Offer Premium Prior to Announcment (2) Announced Acquiror Target (US$mm) 1 Day (%) 1 Week (%) 1 Month (%) Chinese U.S. Listed Companies 2-Jan-15 Existing Management (Michael Yufeng Chi) Perfect World Co Ltd 1,028 26.9% 26.3% 22.9% 24-Dec-13 Private Investor (Xu Dong, Tang Benguo, Wang Xiaotong); Morgan Stanley Private Equity Asia Noah Education Holdings 105 24.4% 22.3% 16.2% 30-Sep-13 Existing Management (He Dang); China Media Capital Charm Communications 198 17.2% 7.3% 17.2% 6-Jul-12 Existing Management (Mr Michael Xin Hui); TPG Ventures ShangPharma Corp 172 30.8% 32.2% 48.5% 9-May-12 Private Investor (Mr Baizhong Xue) China Nuokang Bio-Pharmaceutical 115 56.8% 57.6% 59.8% 2-Apr-12 Existing Management (Mr Jiangquan Li) Winner Medical Group 112 32.3% 42.9% 21.6% 28-Oct-11 E-House (China) Holdings China Real Estate Information Corp 956 25.3% 35.9% 37.0% 17-Oct-11 Existing Management (Tianqiao Chen, Qianqian Luo & Danian Chen) Shanda Interactive Entertainment 2,285 23.5% 27.7% 16.7% 24-Jun-11 TIENS (USA) Investment Holdings Group Overseas Tiens Biotech Group (USA) 123 67.0% 63.8% 30.2% 25-Mar-11 PAG Asia Capital; Existing Management; ARC Capital Holdings Funtalk China Holdings 460 17.1% 25.7% 43.1% 11-Nov-10 Primavera Capital Management Chemspec International 293 28.2% 22.2% 30.6% 8-Apr-10 Hanmax Investment Ltd; Shanghai Fosun Pharmaceutical (Group) Tongjitang Chinese Medicines 125 19.0% 20.3% 17.8% Mean 30.7% 32.0% 30.1% Median 26.1% 27.0% 26.6% Non-Chinese U.S. Listed Companies 23-Oct-14 Brookfield Asset Management Inc Brookfield Residential Properties Inc 2,894 27.5% 33.5% 23.6% 27-Aug-13 Plains All American Pipeline PAA Natural Gas Storage 1,988 9.1% 10.8% 3.9% 7-May-13 Pioneer Natural Resources Pioneer Southwest Energy Partners 1,112 19.4% 18.5% 24.5% 20-Feb-13 Chiesi Farmaceutici Cornerstone Therapeutics 262 72.7% 76.6% 70.3% 7-May-13 BFC Financial Corp BBX Capital Corp 197 (8.8%) (3.4%) 40.6% 15-Nov-12 BFC Financial Corp Bluegreen Corp 320 73.6% 71.8% 58.7% 31-Jan-12 Ayala Corp; Ares Management LLC; Providence Equity Partners Stream Global Services 249 1.6% (0.9%) (1.8%) 29-Aug-11 Private Investor (Timothy M. Marquez) Venoco 806 39.2% 45.5% (1.7%) 16-Jun-11 Angelo Gordon & Co C&D Technologies 148 18.3% 17.5% 22.3% 23-Feb-11 Enterprise Products Partners Duncan Energy Partners 1,353 (32.2%) (32.2%) (31.3%) 19-Jan-11 ACF Industries Holding Corp XO Holdings 255 84.2% 93.1% 102.9% 3-Dec-10 Sun Pharmaceutical Industries Caraco Pharmaceutical Laboratories 208 16.4% 18.2% 19.3% 1-Nov-10 Loews Corp CNA Surety Corp 1,205 37.9% 37.7% 46.9% 26-Apr-10 SembCorp Industries; SembCorp Utilities Cascal NV 206 (11.3%) (7.0%) 0.2% 3-Nov-09 Private Investor (Tilman J Fertitta) Landry's Restaurants 424 127.7% 116.0% 138.3% 29-Jul-09 Overseas Shipholding Group OSG America 308 41.4% 56.5% 54.1% 23-Mar-09 Cox Enterprises Cox Radio 386 45.5% 47.7% (6.3%) Mean 33.1% 35.3% 33.2% Median 27.5% 33.5% 23.6% Global Mean 32.1% 33.9% 31.9% Global Median 26.9% 27.7% 23.6% 27-Jan-14 Old Consortium @US$6.90 Shanda Games Ltd 1,879 22.1% 44.6% 53.2% 22-Sep-14 New Consortium @US$7.10 Shanda Games Ltd 1,934 25.7% 48.8% 57.6% First Offer Premium / (Discount) to China Median (4.0%) 17.6% 26.6% First Premium / (Discount) to Global Median (4.8%) 16.9% 29.5% Revised Offer Premium / (Discount) to China Median (0.4%) 21.8% 31.0% Revised Premium / (Discount) to Global Median (1.2%) 21.1% 34.0%
13 Selected Precedent Privatization Premiums Analysis (Cont’d) Valuation Analysis ____________________ Source: Dealogic, Bloomberg (1) Represents premium over the closing price as of the trading day, 1 week and 1 month prior to January 27, 2014 (2) Based on 29 selected acquisitions (as indicated on page 9) since January 2009 with “grossed up” deal value between US$100 mm and US$3 bn involving US - listed companies in which the acquiror’s initial stake was above 50% 1 - Day Premium (1) 1 - Week Premium (1) 1 - Month Premium (1) % of Deals (2) Mean: 32.1% Median: 26.9% Consortium’s Offer: 25.7% Mean: 33.9% Median: 33.5% Consortium’s Offer: 48.8% Mean: 31.9% Median: 23.6% Consortium’s Offer: 57.6% % of Deals (2) % of Deals (2) 20.0% 6.7% 13.3% 23.3% 20.0% 16.7% <10% 10%-20% 20%-30% 30%-40% 40%-50% >50% 23.3% 10.0% 13.3% 23.3% 13.3% 16.7% <10% 10%-20% 20%-30% 30%-40% 40%-50% >50% 20.0% 13.3% 10.0% 20.0% 16.7% 20.0% <10% 10%-20% 20%-30% 30%-40% 40%-50% >50%
Target Price Broker Date Rating Value (US$) Primary Valuation Methodology Morgan Stanley 28-Jan-14 Underweight NA ; N/A Credit Suisse 28-Jan-14 Underperform 4.40 ; 4.0x/3.2x 2014E/15E ex-cash P/E Macquarie 3-Sep-14 Outperform 4.60 ; PER Methodology Average Price 4.50 Premium (Discount) to Avg Price First Offer Price 6.90 53.3% Revised Offer Price 7.10 57.8% 14 Summary of Broker Research Perspectives Valuation Analysis ____________________ Source: Wall Street equity research Note: “ NA ” refers to not available Post - Announcement of the Consortium Offer Pre - Announcement of the Consortium Offer Target Price Broker Date Rating Value (US$) Primary Valuation Methodology Credit Suisse 28-Nov-13 Neutral 4.40 ; 4.0x / 3.2x 2014E/15E ex-cash P/E Barclays 27-Nov-13 Underweight 3.50 ; 4.0x 2014E non-GAAP P/E Oppenheimer 27-Nov-13 Outperform 6.50 ; ~5x 2014E EV/EBITDA Morgan Stanley 27-Nov-13 Neutral 4.50 ; DCF with 15% WACC and 1% terminal growth rate Piper Jaffray 3-Sep-13 Neutral 4.00 ; 2.5x 2014E P/E + net cash/share of US$1.83 Macquarie 30-Aug-13 Outperform 4.60 ; 5x 2014E non-GAAP P/E minus net debt per share of US$0.92 Citi 29-Aug-13 Buy 4.75 ; DCF with 15% WACC and zero terminal growth rate Nomura 29-Aug-13 Buy 6.00 ; 5.8x 2014E P/E CLSA 27-Jun-13 Underperform 4.00 ; 4x 2014E ex-cash P/E plus net cash/share of US$2 Average Price 4.69 Premium (Discount) to Avg Price First Offer Price 6.90 47.1% Revised Offer Price 7.10 51.4%
15 WACC Analysis Valuation Analysis ____________________ Source: FactSet , Bloomberg, Company SEC filings. Market data as of March 27 , 201 5 (1) Represents the weighted average interest cost of its newly acquired short term and long term borrowings in 2013, including lo ng term borrowing of US$55mm (2.75%) and short term borrowing of US$41.3mm (4.3%), US$43.0mm (2.9%), US$40.1mm (2.28%), US$43.0m m ( 2.5%), US$32.0mm (2.75%) and US$28.2mm (2.98%) (2) Represents China’s statutory tax rate (3) Source: China 10 - year government bond yield per Bloomberg as of March 27, 2015 (4) Unlevered Beta = (Levered Beta / (1 + ((1 - Tax Rate) * Net Debt/Equity)). Unlevered beta represents average of peers’ 3 - year ad justed beta benchmarked against NASDAQ Composite on a daily basis, per Bloomberg. Peers refer to Netease , Changyou and Perfect World. Beta of Netease and Changyou is as of March 27, 2015 and beta of Perfect World is as of December 31, 2014 (5) Source: China market risk premium per Bloomberg as an average for the past one year to March 27, 2015 (6) Source: Duff & Phelps 2014 Valuation Handbook - Guide to Cost of Capital. Figure represents size premium denoted as return in exce ss of CAPM for a low cap market value company (defined as companies with market value between US$636.8mm – US$2,431.2mm) (7) Levered Cost of Equity ( Ke ) = (Risk - free Rate + (Levered Beta * Market Risk Premium)) (8) WACC = ((Net Debt / Capitalization * (Cost of Debt * (1 - Tax Rate))) + (Equity / Capitalization * Levered Cost of Equity)) WACC Calculation Cost of debt (Kd) Estimated cost of debt (pre-tax) (1) 2.90% Tax rate (2) 25.00% Kd (after-tax) 2.18% Cost of equity (Ke) Risk-free rate (3) 3.53% Unlevered beta of average of Shanda Games' peers (4) 1.04 Beta levered 1.04 Market risk premium (5) 10.30% Size premium (6) 1.98% Ke (7) 16.23% Weighted Average Cost of Capital (WACC) Target debt to total capitalization 0.00% Equity to total capitalization 100.00% WACC (8) 16.23% Sensitivity Analysis Beta 16.23% 1.00 1.05 1.10 1.15 1.20 20.00% 14.6% 15.1% 15.6% 16.1% 16.6% 15.00% 14.9% 15.4% 15.9% 16.4% 16.9% 10.00% 15.2% 15.7% 16.2% 16.7% 17.2% 5.00% 15.5% 16.0% 16.5% 17.0% 17.6% 0.00% 15.8% 16.3% 16.8% 17.4% 17.9% Debt / Cap
Exhibit (c)-(3)
September 2014 Project Donghai CONFIDENTIAL Discussion Material Prepared for Meeting with the Special Committee of the Board of Directors of Shanda Games
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1. Transaction Overview 1 2. Valuation Analysis 5 Table of Contents Meeting with the Special Committee of the Board of Directors of Shanda Games Project Donghai
1. Transaction Overview
; On January 27, 2014, Shanda Games Limited (“Shanda Games” or the “Company”) announced that its Board of Directors (the "Board ") has received a preliminary non - binding proposal letter from Shanda Interactive Entertainment Limited (“Shanda Interactive”), the controlling sh areholder of the Company, and an affiliate of Primavera Capital Limited (“Primavera”) (together, the "Consortium") to acquire all of the outstanding ordina ry shares of the Company not currently owned, legally or beneficially, by the Consortium in a “going - private” transaction (the “Transaction”) ; Concurrently with the proposal, Shanda Interactive through its wholly owned entity Shanda SDG Investment Limited (“SDG”) anno unc ed it had agreed to sell to Primavera, c.29 million shares it held of the Company (representing approximately c.5.4% of the shares outstanding) a t a price of US$2.7625 per share ; On March 6, 2014, Bank of America Merrill Lynch (“ BofAML ”) was engaged by the Special Committee of the Board of Directors (the “Special Committee”) of Shanda Games to act as financial advisor to the Special Committee in connection with the Company’s receipt of the “going priv ate ” proposal from the Consortium on January 27, 2014 ; BofAML was requested to provide an opinion to the Special Committee as to whether or not the per ADS consideration to be paid by the C onsortium in the merger was fair from a financial point of view to the holders of the ADSs (other than the Consortium) of the Company ; Subsequent to this, Perfect World Co., Ltd. (“Perfect World”), FV Investment Holdings (“ FountainVest ”, an affiliate of FountainVest Partners) and CAP IV Engagement Limited (“Carlyle”, an affiliate of Carlyle Asia Partners IV, L.P.) became parties of the Consortium by entering i nto an adherence agreement on April 18, April 25, and May 19 of 2014 respectively ; As part of this announcement, SDG agreed to sell to Perfect World, c.30 million shares it held of the Company (representing a ppr oximately c.5.5% of the shares outstanding) at a price of US$3.2975 per share ; On September 1, 2014, Orient Finance Holdings (Hong Kong) Limited (“Orient Finance”), Shanghai Buyout Fund L.P. (“ Haitong ”, an affiliate of Haitong Securities Co., Ltd.) and Ningxia Zhongyin Cashmere Co., Ltd. (“Ningxia”) joined the Consortium as new members through adherence agreements to become parties to the Consortium Agreement. Primavera, Perfect World, FountainVest and Carlyle withdrew from the Consortium ; On August 31, 2014, SDG and Orient Finance entered into a share purchase agreement pursuant to which SDG agreed to sell, and Ori ent Finance agreed to purchase, 123,552,669 Class A Ordinary Shares at US$3.45 per Class A Ordinary Share ; On September 1, 2014, SDG and Haitong entered into a share purchase agreement, pursuant to which SDG agreed sell, and Haitong agreed to purchase, 48,152,848 Class A Ordinary Shares at US$3.45 per Class A Ordinary Share ; Concurrently, Primavera, Perfect World and Haitong entered into a share purchase agreement, pursuant to which Haitong agreed to purchase 28,959,276 and 30,326,005 Class A Ordinary Shares from Primavera and Perfect World, respectively ; On September 1, 2014, SDG and Ningxia entered into a share purchase agreement pursuant to which SDG agreed to sell, and Ningx ia agreed to purchase, 80,577,828 Class A Ordinary Shares at US$3.45 per Class A Ordinary Shares 1 Executive Summary Transaction Overview Situation Overview Limitations of Strategic Alternatives ; The Special Committee and its advisors considered exploring potential strategic alternatives to the Consortium’s offer ; Prior to the reconstitution of the Consortium in late August - early September, the Special Committee directed BofAML to approach potential financial and strategic investors to solicit their interest in an acquisition of the Company as an alternative to the proposed Transaction; ho wever, such potential investors declined to make any proposals to acquire the Company
Acquirer ; Consortium comprised of Shanda Interactive, Orient Finance, Haitong and Ningxia Target ; Shanda Games Transaction Structure ; Merger of an acquisition vehicle of the Consortium (“Merger Sub”) with and into the Company Consideration ; US$6.90 per American Depositary Share (“ADS”, each ADS representing 2 ordinary shares) or US$3.45 per ordinary share in cash for each publicly held ADS not already owned by the Consortium ; On September 22, the Consortium indicated a potential revised price of US$7.10 per ADS for the consideration of the Special Committee Financing ; Acquisition to be financed with new equity only Non-Solicitation ; Company prohibited from soliciting competing offers, but may engage with third parties upon receipt of unsolicited, superior proposals to the extent required to charge the Company’s board of directors’ fiduciary duties Termination Fee ; Break-Up Fee: [3%] of Company’s enterprise value plus up to US$3,000,000 expense reimbursement payable by the Company ; Reverse Break-Up Fee: [6%] of the Company’s enterprise value plus up to US$3,000,000 expense reimbursement payable by Merger Sub’s parent 2 Summary of Selected Terms Transaction Overview
First Consortium Offer Revised Consortium Offer Offer Price US$6.90 US$7.10 Price (US$) Offer Price Premium / (Discount) Current (09/19/2014) 6.39 8.0% 11.1% VWAP (Before 01/27/2014) (5) 1-Day 5.71 20.8% 24.3% 5-Day 5.26 31.1% 34.9% 30-Day 4.85 42.4% 46.5% 3-Month 4.60 49.9% 54.2% 6-Month 4.53 52.3% 56.7% 12-Month 4.33 59.5% 64.1% 3 Implied Premiums to Historical Stock Prices (4) Summary of Transaction Value (Amounts in US$ millions except per share data) Transaction Summary Transaction Overview ____________________ Source: FactSet , Bloomberg, Company SEC filings, Company model (1) Based on fully diluted number of shares from Management as of March 19, 2014. 536,608,446 ordinary shares outstanding, 11,772,829 vested but not exercised options outstanding @ US$2.080/share exercise price, 8,872,789 unvested options outstanding @ US$1.822/share exercise price and 2,459,579 unvested restricted shares. Options have been treated on an as - converted basis using Treasury Stock Method (2) Includes short - term borrowings, long - term borrowings, dividend payable and other payables due to related parties as of March 31, 2014 (3) Includes cash, cash equivalents, restricted cash, short - term investments and time deposits with maturity over one year as of March 31, 2014 ____________________ (4) Represents number of trading days and calendar months respectively. The time frame of VWAP refers to calendar month or the previous trading day if the date falls on a weekend or public holiday (5) Source: VWAP based on FactSet (6) Represents FactSet consensus as of January 24, 2014 from Wall Street research estimates Offer price per ADS $7.10 Total ADS outstanding (mm) (1) 274.1 Implied Equity Value (1) $1,946.3 Adjustment for net debt: Debt (2) 456.1 Cash (3) (535.7) Non-controlling interests 51.5 Implied Enterprise Value $1,918.2 Implied Transaction Multiples Amount Multiple Broker Consensus (6) 2014E Net Earnings per ADS 0.81 8.8x 2015E Net Earnings per ADS 0.82 8.7x Management Projections 2014E Net Earnings per ADS 0.79 8.9x 2015E Net Earnings per ADS 0.99 7.2x
0.0 2.0 4.0 6.0 8.0 10.0 12.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 19-Sep-13 30-Oct-13 10-Dec-13 20-Jan-14 28-Feb-14 10-Apr-14 21-May-14 1-Jul-14 11-Aug-14 19-Sep-14 Volume Shanda Games NASDAQ 4 Last Twelve Month ADS Performance of Shanda Games Transaction Overview ____________________ Source: Company filings, FactSet as of September 19, 2014, Factiva ADS Price (index rebased to Shanda Games) (US$) Volume (mm) November 27, 2013 Announced 3Q 2013 results October 31, 2013 Announced plans to set up a 50:50 JV in the Shanghai free trade zone (FTZ) with The Zhongqingbao Network December 3, 2013 Licensed SEGA Networks’ new mobile role - playing card game Chain Chronicle April 18, 2014 Perfect World formally joined Consortium January 27, 2014 Consortium offer announced July 19, 2014 Gamblit Gaming formed partnership with the Company September 1, 2014 Orient Finance, Haitong and Ningxia joined the Consortium; Perfect World agreed to sell its entire equity interest to Haitong for US$104.6mm; Primavera, Perfect World, FountainVest and Carlyle have withdrawn from the Consortium First Offer Price of Consortium: US$6.90 September 4, 2014 Reconstituted the special committee of independent directors formed by the Board to evaluate the preliminary non - binding proposal dated January 27, 2014 May 19, 2014 Carlyle formally joined Consortium June 17, 2014 Announced 1Q 2014 results with net revenues of US$161.3mm April 25, 2014 FountainVest formally joined Consortium March 21, 2014 Announced 4Q 2013 and annual 2013 results August 28, 2014 Formed a strategic partnership with UOL BoaCompra Revised Offer Price of Consortium: US$7.10
2. Valuation Analysis
5 Methodology General Description Comments Selected Public Companies Analysis ; A method of valuing an entity relative to selected publicly traded companies that are deemed relevant based on various financial and operating characteristics ; Reviewed four public companies in the US-listed Chinese online gaming sector, including Giant Interactive, which has recently completed a take-private transaction Premiums Paid Analysis ; A review, as an additional reference point for informational purposes, of premiums paid in selected M&A transactions with public companies ; Reviewed 11 Chinese US-listed companies’ public take- private transactions announced since 1/1/2009 ; Also reviewed 16 non-Chinese US-listed companies’ public take-private transactions announced since 1/1/2009, where the acquiror owned over 50% of the target prior to the transaction Discounted Cash Flow Analysis ; A method of valuing an entity based on its risk-adjusted projected cash flows, discounted by its weighted average cost of capital ; Terminal values calculated using perpetuity growth rates of 1.0% to 2.0% ; Present values calculated using discount rates of 16.5%- 18.5% Additional Information Selected Precedent Transactions Analysis ; A method of valuing an entity relative to selected merger and acquisition ("M&A") transactions involving companies in the same sector ; Reviewed three selected M&A transactions announced since 2008 involving companies in the online gaming sector ; We did not include these transactions into our analysis due to the limited number of comparables Valuation Analysis Methodologies and Additional Information
6 Valuation Analysis Summary Valuation Analysis ____________________ Source: Company model, Company filings , Wall Street equity research, Bloomberg, Dealogic and Factset Note: ADS price calculated based on fully diluted number of shares from Management as of March 19, 2014. 536,608,446 ordinary shares outstanding, 11,772 ,82 9 vested but not exercised options outstanding @ US$2.080/share exercise price, 8,872,789 unvested options outstanding @ US$1.822/share exercise price and 2,459,579 unvested restricted shares. Options have been treated on an as - converted basis using Treasury Stock Method (1) Based on US$28.1 mm net cash position as of March 31, 2014 per Q1’2014 earnings release (2) Closing share price 52 - week high and low as of January 24, 2014 (3) Forecast financials based on management projections $6.34 $6.90 $4.75 $4.93 $6.78 $5.72 $5.38 $6.39 $3.50 $2.74 $7.13 $7.88 $5.54 $5.91 $7.91 $6.68 $6.27 $7.58 $6.50 $6.25 $2.00 $4.00 $6.00 $8.00 $10.00 (US$) Valuation Method Metrics (3) Implied Range Selected Precedent Premiums Analysis 1 - Week 1 - Day $5.65 $4.77 20% - 40 % 20% - 40 % 1 - Month $4.48 20% - 40 % Market Valuation 52 - Week High/Low (2) $ 2.74 – $6.25 Broker Target Price Implied 2014E P/E: 4.4x – 8.2x $3.50 - $6.50 Selected Trading Multiples Analysis 2015E P/E 2014E P/E 2014E EPS US$0.79 8.0x – 9.0x 2015E EPS US$0.99 7.0x – 8.0x 2015E Adjusted P/E (1) 2014E Adjusted P/E (1) 2014E EPS US$0.79 6.0x – 7.0x 2015E EPS US$0.99 5.0x – 6.0x Discounted Cash Flow Analysis WACC: 16.5% – 18.5% Terminal Growth Rate 1.0% – 2.0% Revised Offer Price: US$7.10 First Offer Price: US$ 6 . 9 0
7 (All figures in US$ millions unless otherwise stated) Summary Overview of Management Projections Valuation Analysis ____________________ Source: Company model Note: US$1 = RMB6.0969 (1) Adjusted for acquisition of affiliates, which is not available from company filings (1) Historical Management Projections 2011A 2012A 2013A 2014E 2015E 2016E 2017E 2018E Total Net Revenue 871 774 713 690 857 1,021 1,144 1,245 % Growth (11.1%) (7.9%) (3.1%) 24.0% 19.3% 12.0% 8.8% Gross Profit 650 585 527 516 632 747 836 896 % Margin 74.6% 75.5% 73.9% 74.7% 73.8% 73.1% 73.1% 72.0% Operating Expenses (261) (236) (243) (256) (311) (363) (398) (429) % of Revenue 30.0% 30.5% 34.1% 37.1% 36.3% 35.5% 34.8% 34.5% Operating Income 389 349 284 260 321 384 438 467 % Margin 44.7% 45.0% 39.8% 37.6% 37.5% 37.6% 38.3% 37.5% Net Income 341 294 267 229 286 339 388 417 % Margin 39.1% 38.0% 37.5% 33.1% 33.4% 33.2% 33.9% 33.5% % Growth (13.6%) (9.2%) (14.4%) 25.2% 18.5% 14.4% 7.4% (1)
8 Selected Public Trading Comparables Analysis Valuation Analysis ____________________ Source: FactSet, broker research, Company SEC filings. Market data as of September 19, 2014. Trading multiples calculated bas ed on FactSet consensus from Wall Street research estimates as of September 19, 2014 except for Shanda Games and Giant Interacti ve Note: “nm” refers to not meaningful (1) Enterprise Value = Market Capitalization + Total Debt + Minority Interests + Preferred Shares - Cash & Cash Equivalents (2) Calculated as share price less net cash per share divided by earnings per share (3) Netease’s cash balance adjusted for dividend declared and unpaid of US$0.37/ADS, assuming that dividends accrue to unvested RSUs. Netease’s net debt includes (US$7.5 mm) deficit minority interest, which is a result of retrospective presentation and disclosure requirements on the noncontrolling interest which became effective for fiscal years beginning on or after December 31, 2008. The noncontrolling interest will continue to be attributed its share of losses even if that attribution results in a deficit noncontrolling interest balance (4) Changyou’s cash balance adjusted for US$91 mm investment in Mobo Tap and US$30 mm additional funding to Mobo Tap by purchasing a zero - coupon convertible bond due in five years; Changyou’s 2014 multiples excluded from max, mean, median and min calculations as they are not meaningful comparison (5) Perfect World’s cash balance adjusted for US$104.6 mm received from selling Shanda Games’ shares (6) From company filings; PEG based on long term growth rate of 12.4% from FactSet as of November 22, 2013, one day before announ cem ent Share Price Market Cap Enterprise Value (1) EV/EBITDA PEG Revenue Company (US$) (US$ mm) (US$ mm) 2014E 2015E 2014E 2015E 2014E 2015E 2014E 2015E Netease $88.84 $11,826 $8,346 14.7x 13.0x 10.6x 9.3x 10.0x 8.5x 1.2x 1.0x Changyou 24.06 1,273 907 nm 14.3 nm 12.0 nm 7.5 nm nm Perfect World 20.47 1,047 588 9.7 8.6 5.6 5.0 4.7 3.9 1.0 0.9 Max 14.7x 14.3x 10.6x 12.0x 10.0x 8.5x 1.2x 1.0x Average 12.2x 12.0x 8.1x 8.7x 7.3x 6.6x 1.1x 1.0x Median 12.2x 13.0x 8.1x 9.3x 7.3x 7.5x 1.1x 1.0x Min 9.7x 8.6x 5.6x 5.0x 4.7x 3.9x 1.0x 0.9x Giant Interactive Take-Private Proposal Broker Consensus Giant Interactive (Pre Offer) 10.13 $2,544 $2,033 9.7x 9.0x 7.7x 6.6x 7.0x 6.0x 0.8x 0.7x Giant Interactive (First Offer) 11.75 2,952 2,232 11.3 10.5 8.5 7.3 7.7 6.6 0.9 0.8 Giant Interactive (Final Offer) 12.00 3,014 2,294 11.5 10.7 8.7 7.5 7.9 6.8 0.9 0.9 Management Projections Giant Interactive (Pre Offer) 10.13 $2,544 $2,033 9.8x 8.3x 7.8x 6.6x 7.1x 5.5x 0.8x 0.7x Giant Interactive (First Offer) 11.75 2,952 2,232 11.4 9.6 8.6 7.3 7.8 6.0 0.9 0.8 Giant Interactive (Final Offer) 12.00 3,014 2,294 11.6 9.8 8.8 7.5 8.0 6.2 0.9 0.8 Shanda Games Take-Private Proposal Broker Consensus Shanda Games Ltd (Pre Offer) 5.65 $1,541 $1,512 6.9x 6.9x 6.8x 6.7x 4.7x 4.5x 1.0x 1.0x Shanda Games Ltd (First Offer) 6.90 $1,890 $1,862 8.5x 8.4x 8.4x 8.3x 5.7x 5.5x 1.2x 1.2x Shanda Games Ltd (Revised Offer) 7.10 $1,946 $1,918 8.8x 8.7x 8.6x 8.5x 5.9x 5.7x 1.3x 1.3x Management Projections Shanda Games Ltd (Pre Offer) 5.65 $1,541 $1,512 7.1x 5.7x 7.0x 5.6x 4.9x 4.1x 0.8x 0.7x Shanda Games Ltd (First Offer) 6.90 $1,890 $1,862 8.7x 7.0x 8.6x 6.9x 6.0x 5.0x 1.0x 0.8x Shanda Games Ltd (Revised Offer) 7.10 $1,946 $1,918 8.9x 7.2x 8.8x 7.1x 6.2x 5.1x 1.1x 0.9x P/E Adjusted P/E (2) (3) (6) (6) (4) (6) (6) (6) (6) (5)
9 Selected Precedent Privatization Premiums Analysis Valuation Analysis ____________________ Source: Dealogic Note: Represents 100% acquisitions with “grossed up” deal value (i.e. inclusive of acquiror stake) between US$100 mm and US$3 bn in which the acquiror’s initial stake was above 50% (1) Represents “grossed up” deal value (i.e. inclusive of acquiror stake) (2) Represents premium over the closing price as of the trading day, 1 week and 1 month prior to announcement date ; Since 2009, a number of US - listed companies have been taken private in comparable going - private transactions ; The median premiums paid over the trading price at announcement in the selected precedent transactions involving Chinese US - listed companies have been in the 25% - 30% range ; The Consortium’s revised offer for Shanda (US$7.10/ADS) represented a 1 - day, 1 - week and 1 - month premium of 25.7%, 48.8% and 57.6%, respectively Selected Going - Private Transactions since January 1, 2009 with US - Listed Targets Date Deal Value (1) Final Offer Premium Prior to Announcment (2) Announced Acquiror Target (US$mm) 1 Day (%) 1 Week (%) 1 Month (%) Chinese U.S. Listed Companies 24-Dec-13 Private Investor (Xu Dong, Tang Benguo, Wang Xiaotong); Morgan Stanley Private Equity Asia Noah Education Holdings 105 24.4% 22.3% 16.2% 30-Sep-13 Existing Management (He Dang); China Media Capital Charm Communications 198 17.2% 7.3% 17.2% 6-Jul-12 Existing Management (Mr Michael Xin Hui); TPG Ventures ShangPharma Corp 172 30.8% 32.2% 48.5% 9-May-12 Private Investor (Mr Baizhong Xue) China Nuokang Bio-Pharmaceutical 115 56.8% 57.6% 59.8% 2-Apr-12 Existing Management (Mr Jiangquan Li) Winner Medical Group 112 32.3% 42.9% 21.6% 28-Oct-11 E-House (China) Holdings China Real Estate Information Corp 956 25.3% 35.9% 37.0% 17-Oct-11 Existing Management (Tianqiao Chen, Qianqian Luo & Danian Chen) Shanda Interactive Entertainment 2,285 23.5% 27.7% 16.7% 24-Jun-11 TIENS (USA) Investment Holdings Group Overseas Tiens Biotech Group (USA) 123 67.0% 63.8% 30.2% 25-Mar-11 PAG Asia Capital; Existing Management; ARC Capital Holdings Funtalk China Holdings 460 17.1% 25.7% 43.1% 11-Nov-10 Primavera Capital Management Chemspec International 293 28.2% 22.2% 30.6% 8-Apr-10 Hanmax Investment Ltd; Shanghai Fosun Pharmaceutical (Group) Tongjitang Chinese Medicines 125 19.0% 20.3% 17.8% Mean 31.1% 32.5% 30.8% Median 25.3% 27.7% 30.2% Non-Chinese U.S. Listed Companies 27-Aug-13 Plains All American Pipeline PAA Natural Gas Storage 1,988 9.1% 10.8% 3.9% 7-May-13 Pioneer Natural Resources Pioneer Southwest Energy Partners 1,112 19.4% 18.5% 24.5% 20-Feb-13 Chiesi Farmaceutici Cornerstone Therapeutics 262 72.7% 76.6% 70.3% 7-May-13 BFC Financial Corp BBX Capital Corp 197 (8.8%) (3.4%) 40.6% 15-Nov-12 BFC Financial Corp Bluegreen Corp 320 73.6% 71.8% 58.7% 31-Jan-12 Ayala Corp; Ares Management LLC; Providence Equity Partners Stream Global Services 249 1.6% (0.9%) (1.8%) 29-Aug-11 Private Investor (Timothy M. Marquez) Venoco 806 39.2% 45.5% (1.7%) 16-Jun-11 Angelo Gordon & Co C&D Technologies 148 18.3% 17.5% 22.3% 23-Feb-11 Enterprise Products Partners Duncan Energy Partners 2,706 35.6% 35.6% 37.5% 19-Jan-11 ACF Industries Holding Corp XO Holdings 255 84.2% 93.1% 102.9% 3-Dec-10 Sun Pharmaceutical Industries Caraco Pharmaceutical Laboratories 208 16.4% 18.2% 19.3% 1-Nov-10 Loews Corp CNA Surety Corp 1,205 37.9% 37.7% 46.9% 26-Apr-10 SembCorp Industries; SembCorp Utilities Cascal NV 206 (11.3%) (7.0%) 0.2% 3-Nov-09 Private Investor (Tilman J Fertitta) Landry's Restaurants 424 127.7% 116.0% 138.3% 29-Jul-09 Overseas Shipholding Group OSG America 308 41.4% 56.5% 54.1% 23-Mar-09 Cox Enterprises Cox Radio 386 45.5% 47.7% (6.3%) Mean 37.7% 39.6% 38.1% Median 36.7% 36.7% 31.0% Global Mean 35.0% 36.7% 35.1% Global Median 28.2% 32.2% 30.2% 27-Jan-14 Consortium Shanda Games Ltd 1,890 22.1% 44.6% 53.2% 22-Sep-14 Orient Finance, Haitong Securities and Ningxia Shanda Games Ltd 1,946 25.7% 48.8% 57.6% First Offer Premium / (Discount) to China Median (3.2%) 16.9% 23.0% First Premium / (Discount) to Global Median (6.0%) 12.5% 23.0% Revised Offer Premium / (Discount) to China Median 0.4% 21.1% 27.4% Revised Premium / (Discount) to Global Median (2.5%) 16.7% 27.4%
10 Selected Precedent Privatization Premiums Analysis (Cont’d) Valuation Analysis ____________________ Source: Dealogic, Bloomberg (1) Represents premium over the closing price as of the trading day, 1 week and 1 month prior to January 27, 2014 (2) Based on 27 selected acquisitions (as indicated on page 9) since January 2009 with “grossed up” deal value between US$100 mm and US$3 bn involving US - listed companies in which the acquiror’s initial stake was above 50% 1 - Day Premium (1) 1 - Week Premium (1) 1 - Month Premium (1) % of Deals (2) Mean: 35.0% Median: 28.2% Consortium’s Offer: 25.7% Mean: 36.7% Median: 32.2% Consortium’s Offer: 48.8% Mean: 35.1% Median: 30.2% Consortium’s Offer: 57.6% % of Deals (2) % of Deals (2) 14.3% 21.4% 17.9% 17.9% 7.1% 21.4% <10% 10%-20% 20%-30% 30%-40% 40%-50% >50% 14.3% 14.3% 21.4% 14.3% 10.7% 25.0% <10% 10%-20% 20%-30% 30%-40% 40%-50% >50% 17.9% 17.9% 14.3% 14.3% 14.3% 21.4% <10% 10%-20% 20%-30% 30%-40% 40%-50% >50%
11 Management Case (Amounts in US$ millions unless otherwise stated) Discounted Cash Flow Analysis Valuation Analysis ____________________ Source: Company management estimates Note: Assumes transaction date of March 31, 2014. Based on end - of - year discounting convention (1) Refers to full year 2014 free cash flow for DCF purposes, only the Q2 - Q4’2014 free cash flow of US$144 mm is taken into account to reflect the transaction date of March 31, 2014 (1) Year Ending December 31, Steady 2013 2014 2015 2016 2017 2018 State Revenue 690 857 1,021 1,144 1,245 1,245 EBITDA 309 373 436 487 520 520 Less: Depreciation & Amortization (49) (52) (52) (49) (53) (53) EBIT 260 321 385 439 467 467 Less: Taxes (65) (80) (96) (110) (117) (117) Tax-Effected EBIT 195 241 288 329 351 350 Plus: Depreciation & Amortization 49 52 52 49 53 53 Plus: Change in Working Capital (0) 1 2 2 2 2 Less: Capital Expenditures (46) (34) (40) (36) (42) (53) Free Cash Flows 198 260 303 344 363 352 A + B = C Discounted PV of Terminal Value at a Discount Cash Flows Perpetuity Growth Rate of Implied Enterprise Value Rate 2014 - 2018 1.00% 1.50% 2.00% 1.00% 1.50% 2.00% 16.50% 895 1,069 1,110 1,154 1,964 2,005 2,049 17.00% 884 1,014 1,052 1,092 1,898 1,935 1,976 17.50% 873 962 997 1,035 1,835 1,870 1,908 18.00% 863 915 947 981 1,777 1,809 1,844 18.50% 852 870 900 932 1,722 1,752 1,784 - D = E Implied Exit EBITDA Multiple Price Per ADS (US$) Discount 2014'Q1A Implied Equity Value Rate Net Debt 1.00% 1.50% 2.00% 1.00% 1.50% 2.00% 1.00% 1.50% 2.00% 16.50% (28) 1,992 2,033 2,077 4.4x 4.6x 4.8x 7.27 7.42 7.58 17.00% (28) 1,926 1,964 2,004 4.3x 4.4x 4.6x 7.03 7.17 7.31 17.50% (28) 1,864 1,899 1,936 4.1x 4.3x 4.5x 6.80 6.93 7.07 18.00% (28) 1,805 1,838 1,872 4.0x 4.2x 4.3x 6.59 6.71 6.83 18.50% (28) 1,750 1,780 1,812 3.9x 4.0x 4.2x 6.39 6.50 6.61
____________________ Source: Company management Note: Assumes valuation date as of March 31, 2014. DCF uses end of year convention (1) Based on WACC assumption of 17.5% and terminal growth rate of 1.5% (2) Calculated by sensitizing selected metric while maintaining management case assumptions for all other metrics 12 Pipeline Games Revenue Sensitivity (2) Financial Sensitivities Analysis (2) Discounted Cash Flow Analysis (Sensitivities) Valuation Analysis Value Driver Changes Considered Annually Impact on DCF Value Revenue Growth (2014 – 2018) EBITDA Margin (2014 – 2018) Capex Increase (2014 – 2018) – /+ 2.0% – /+ 2.0% +/ – 10.0% 0.05 0.36 0.58 (0.05) (0.36) (0.54) (0.80) (0.40) 0.00 0.40 0.80 Change in Price per ADS (US$) Mid - point Implied Price per ADS: US$6.93 (1) US$6.39 US$6.56 US$6.88 US$7.50 US$7.29 US$6.97 Scenario Impact on DCF Value 10% Downside Case on Pipeline Games Revenue Between 2014 - 2018 20% Downside Case on Pipeline Games Revenue Between 2014 - 2018 30% Downside Case on Pipeline Games Revenue Between 2014 - 2018 (1.18) (0.79) (0.39) (1.50) (1.00) (0.50) 0.00 Change in Price per ADS (US$) Mid - point Implied Price per ADS: US$6.93 (1) US$6.53 US$6.14 US$5.75
Target Price Broker Date Rating Value (US$) Primary Valuation Methodology Morgan Stanley 28-Jan-14 Underweight NA ; NA Credit Suisse 28-Jan-14 Underperform 4.40 ; 4.0x/3.2x 2014E/15E ex-cash P/E Macquarie 3-Sep-14 Outperform 4.60 ; PER Methodology Average Price 4.50 Premium (Discount) to Avg Price First Offer Price 6.90 53.3% Revised Offer Price 7.10 57.8% 13 Summary of Broker Research Perspectives Valuation Analysis ____________________ Source: Wall Street equity research Note: “ NA ” refers to not available Post - Announcement of the Consortium Offer Pre - Announcement of the Consortium Offer Target Price Broker Date Rating Value (US$) Primary Valuation Methodology Credit Suisse 28-Nov-13 Neutral 4.40 ; 4.0x / 3.2x 2014E/15E ex-cash P/E Barclays 27-Nov-13 Underweight 3.50 ; 4.0x 2014E non-GAAP P/E Oppenheimer 27-Nov-13 Outperform 6.50 ; ~5x 2014E EV/EBITDA Morgan Stanley 27-Nov-13 Neutral 4.50 ; DCF with 15% WACC and 1% terminal growth rate Piper Jaffray 3-Sep-13 Neutral 4.00 ; 2.5x 2014E P/E + net cash/share of US$1.83 Macquarie 30-Aug-13 Outperform 4.60 ; 5x 2014E non-GAAP P/E minus net debt per share of US$0.92 Citi 29-Aug-13 Buy 4.75 ; DCF with 15% WACC and zero terminal growth rate Nomura 29-Aug-13 Buy 6.00 ; 5.8x 2014E P/E CLSA 27-Jun-13 Underperform 4.00 ; 4x 2014E ex-cash P/E plus net cash/share of US$2 Average Price 4.69 Premium (Discount) to Avg Price First Offer Price 6.90 47.1% Revised Offer Price 7.10 51.4%
14 WACC Analysis Valuation Analysis ____________________ Source: FactSet , Bloomberg, Company SEC filings. Market data as of September 19 , 2014 (1) Represents the weighted average interest cost of its newly acquired short term and long term borrowings in 2013, including lo ng term borrowing of US$55mm (2.75%) and short term borrowing of US$41.3mm (4.3%), US$43.0mm (2.9%), US$40.1mm (2.28%), US$43.0mm (2.5%), US$32.0mm (2.75%) and US$28.2mm (2.98%) (2) Represents China’s statutory tax rate (3) Source: China 10 - year government bond yield per Bloomberg as of September 19, 2014 (4) Unlevered Beta = (Levered Beta / (1 + ((1 - Tax Rate) * Net Debt/Equity)). Unlevered beta represents median of peers’ 5 - year adj usted beta benchmarked against NASDAQ Composite on a daily basis, per Bloomberg (5) Source: China market risk premium per Bloomberg as of September 19, 2014 (6) Source: Duff & Phelps 2014 Valuation Handbook - Guide to Cost of Capital. Figure represents size premium denoted as return in exce ss of CAPM for a low cap market value company (defined as companies with market value between US$636.8mm – US$2,431.2mm) (7) Levered Cost of Equity ( Ke ) = (Risk - free Rate + (Levered Beta * Market Risk Premium)) (8) WACC = ((Net Debt / Capitalization * (Cost of Debt * (1 - Tax Rate))) + (Equity / Capitalization * Levered Cost of Equity)) WACC Calculation Cost of debt (Kd) Estimated cost of debt (pre-tax) (1) 2.90% Tax rate (2) 25.00% Kd (after-tax) 2.18% Cost of equity (Ke) Risk-free rate (3) 4.20% Unlevered beta of average of Shanda Games' peers (4) 1.15 Beta levered 1.15 Market risk premium (5) 10.13% Size premium (6) 1.98% Ke (7) 17.81% Weighted Average Cost of Capital (WACC) Target debt to total capitalization 0.00% Equity to total capitalization 100.00% WACC (8) 17.81% Sensitivity Analysis Beta 17.81% 1.05 1.10 1.15 1.20 1.25 20.00% 15.47% 15.95% 16.43% 16.91% 17.39% 15.00% 15.80% 16.29% 16.77% 17.26% 17.75% 10.00% 16.13% 16.63% 17.12% 17.61% 18.11% 5.00% 16.47% 16.97% 17.47% 17.97% 18.47% 0.00% 16.80% 17.30% 17.81% 18.32% 18.82% Debt / Cap
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