UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13E-3
RULE 13e-3 TRANSACTION
STATEMENT
(Pursuant to Section
13(e) of the Securities Exchange Act of 1934)
MECOX LANE LIMITED
(Name of the Issuer)
Mecox Lane Limited
CNshangquan Limited
Cnshangquan E-Commerce Co., Ltd.
Sanpower Group Co., Ltd
Yafei Yuan
ChinaEquity USD Fortune Co., Ltd.
ChinaEquity USD Fund I L.P.
ChinaEquity USD Investment GP L.P.
ChinaEquity USD Investment Management
Co.
ChinaEquity Global Holding Co., Ltd.
Chaoyong Wang
Xu Wang
Chinaequity Capital Investments Co.,
Limited
Chinaequity Investment Co., LTD (北京信中利投资股份有限公司)
MINAT ASSOCIATED CO., LTD.
ChinaEquity Alliance Victory Co., Ltd.
(Names of Persons Filing Statement)
Ordinary Shares, par value $0.0001 per
share
American Depositary Shares, each representing
thirty-five Ordinary Shares
(Title of Class of Securities)
58403M201
(CUSIP Number)1
Mecox Lane Limited
Room 302, Qilai Building,
No. 889, Yishan Road
Shanghai 200233
People’s Republic of China
Telephone: +86 21 3108-1111 |
|
MINAT ASSOCIATED CO., LTD
ChinaEquity Alliance Victory
Co., Ltd.
3rd Floor, Building C, Shou
Kai Xing Fu Square,
Xin Dong Road, Chaoyang District
Beijing 100000
People’s Republic of China
Telephone: +86 10 8555-0508
Fax: +86 10 8555-0509 |
CNshangquan Limited
Unit 8, 3/F.
Qwomar Trading Complex
Blackburne Road, Port Purcell
Road Town, Tortola
BVI, VG1110
Cnshangquan E-Commerce Co.,
Ltd.
9th floor, International
Financial Center
No.1 Hanzhong Road, Nanjing
Jiangsu Province, People’s
Republic of China
Telephone: +86 25 8327-4816
Sanpower Group Co., Ltd
Yafei Yuan
68 Software Avenue, Nanjing,
Jiangsu Province, People’s Republic of China
Telephone: +86 25 8327-4969
|
|
ChinaEquity USD Fortune Co.,
Ltd.
ChinaEquity USD Fund I L.P.
ChinaEquity USD Investment GP
L.P.
ChinaEquity USD Investment Management
Co.
ChinaEquity Global Holding Co.,
Ltd.
Chinaequity Capital Investment
Co., Limited
Chinaequity Investment Co.,
LTD
(北京信中利投资股份有限公司)
Chaoyong Wang
Xu Wang
3rd Floor, Building C, Shou
Kai Xing Fu Square,
Xin Dong Road, Chaoyang District
Beijing 100000
Telephone: +86 10 8555-0508
Fax: +86 10 8555-0509 |
(Name, Address
and Telephone Number of Person Authorized to Receive Notices and Communications)
With copies
to:
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, People’s
Republic of China
Telephone: +86 10 6535-5500 |
|
Fang Xue, Esq.
Gibson Dunn & Crutcher LLP
Unit 1301, Tower 1, China Central
Place
No. 81 Jianguo Road, Beijing
100025
People’s Republic of China
Telephone: +86 21 6109-7000 |
This statement is filed in connection with (check the appropriate
box):
| |
|
|
|
|
| a |
|
¨ |
|
The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14-C or Rule 13e-3(c) under the Securities Exchange Act of 1934. |
| |
|
|
| b |
|
¨ |
|
The filing of a registration statement under the Securities
Act of 1933. |
| |
|
|
| c |
|
¨ |
|
A tender offer |
| |
|
|
| d |
|
x |
|
None of the above |
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
| Transactional
Valuation* |
Amount
of Filing Fee** |
| US$14,614,101.07 |
US$1,471.64 |
| * |
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 the aggregate cash payment for the proposed per share cash payment of US$0.114 for 128,193,869 issued and outstanding ordinary
shares of the issuer (including shares represented by the American depositary shares) subject to the transaction (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 2016, was calculated by
multiplying the Transaction Valuation by 0.0001007. |
| ¨ |
Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting of the 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: |
Filing Party: |
| |
|
| Form or Registration
No.: |
Date Filed: |
| 1 |
This CUSIP applies to the American Depositary Shares, evidenced by American Depositary Receipts,
each representing thirty-five ordinary shares. |
TABLE OF CONTENTS
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)
Mecox Lane Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands (the “Company”),
the issuer of the ordinary shares, par value US$0.0001 per share (the “Shares” and each a “Share”), including
the Shares represented by the American depositary shares (“ADSs”), each representing thirty-five Shares of the Company,
that is subject to the transaction pursuant to Rule 13e-3 under the Exchange Act; (b) Cnshangquan E-Commerce Co., Ltd., a company
incorporated under the laws of the People’s Republic of China; (c) CNshangquan Limited., a limited liability company incorporated
under the laws of the British Virgin Islands (“CNshangquan”); (d) Sanpower Group Co., Ltd, a company incorporated
under the laws of the People’s Republic of China; (e) Yafei Yuan, a citizen of the People’s Republic of China; (f)
ChinaEquity USD Fortune Co., Ltd., a limited liability company incorporated under the laws of the British Virgin Islands (“ChinaEquity”,
together with CNshangquan, the “Rollover Shareholders”); (g) ChinaEquity USD Fund I L.P., a limited partnership formed
under the laws of the Cayman Islands; (h) ChinaEquity USD Investment GP L.P., a limited partnership formed under the laws of the
Cayman Islands; (i) ChinaEquity USD Investment Management Co., an exempted company with limited liability incorporated under the
laws of the Cayman Islands; (j) ChinaEquity Global Holding Co., Ltd., a limited liability company incorporated under the laws
of the British Virgin Islands; (k) Chaoyong Wang, a citizen of the People’s Republic of China; (l) Xu Wang, a citizen of
the People’s Republic of China; (m) Chinaequity Capital Investments Co., Limited, a limited liability company incorporated
under the laws of Hong Kong; (n) Chinaequity Investment Co., LTD (北京信中利投资股份有限公司,)
a company incorporated under the laws of the People’s Republic of China; (o) MINAT ASSOCIATED CO., LTD., a business company
incorporated under the laws of the British Virgin Islands (“Parent”); and (p) ChinaEquity Alliance Victory Co., Ltd.,
an exempted company with limited liability incorporated under the laws of the Cayman Islands and a wholly owned subsidiary of
Parent (“Merger Sub”).
On December 22, 2015, Parent, Merger Sub and the Company entered
into an agreement and plan of merger (the “Merger Agreement”). Subject to the terms and conditions set forth in the
Merger Agreement, Merger Sub will be merged with and into the Company, with the Company continuing as the surviving company and
a wholly owned subsidiary of Parent (the “Merger”).
Pursuant to the Merger Agreement, at the effective time of
the Merger (the “Effective time”), each of the Shares issued and outstanding immediately prior to the Effective Time
will be cancelled and cease to exist in exchange for the right to receive US$0.114 in cash without interest, and each of the ADSs
will be cancelled in exchange for the right to receive US$4.00 in cash without interest, except for (a) Shares, including such
Shares represented by the ADSs, held by the Rollover Shareholders that will be rolled over, or held by Parent, the Company or
any of their subsidiaries, which Shares will be cancelled and cease to exist and no payment or distribution will be made with
respect thereto, and (b) Shares held by shareholders who have validly exercised and not effectively withdrawn or lost their rights
to dissent from the Merger pursuant to Section 238 of the Companies Law of the Cayman Islands (the “Dissenting Shares”),
which will be cancelled and cease to exist in exchange for the right to receive the payment of fair value of the Dissenting Shares
in accordance with Section 238 of the Companies Law of the Cayman Islands.
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 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, must be authorized and approved by a special resolution
of the Company passed by an affirmative vote of holders of Shares representing two-thirds or more of 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. Pursuant to support agreements entered into by
and between the Rollover Shareholders and Parent, the Rollover Shareholders have agreed to vote all of the Shares beneficially
owned by them in favor of the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, which Shares represent
approximately 71.84% of the total number of votes represented by the Company’s issued and outstanding Shares. A vote by
a majority of the Shares held by unaffiliated holders is not required to approve the Merger, the Merger Agreement, or the Plan
of Merger.
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, has supplied any information
with respect to any other Filing Person.
| Item 1 | Summary
of 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: |
| • | “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 caption 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 caption 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 caption is incorporated herein by reference: |
| • | “Transactions in Shares and ADSs—Prior Public
Offerings” |
| (f) | Prior Stock Purchases. The information set forth in the Proxy
Statement under the following caption is incorporated herein by reference: |
| • | “Transactions in Shares and ADSs” |
| Item 3 | Identity
and Background of Filing Persons |
| (a) | Name and Address. Mecox Lane 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 E—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 E—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 E—Directors and Executive Officers of
Each Filing Person” |
| Item 4 | Terms
of the Transaction |
| (a)-(1) | Material Terms—Tender Offers. Not applicable. |
| (a)-(2) | Material Terms—Merger 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” |
| • | “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—Financing of the Merger” |
| • | “Special Factors—Support Agreements” |
| • | “Special Factors—Consortium Agreement” |
| • | “Special Factors—Interests of Certain Persons
in the Merger” |
| • | “Special Factors—U.S. Federal Income Tax Consequences” |
| • | “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: |
| • | “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— Dissenters’ Rights
of Shareholders and ADS Holders” |
| • | “Questions and Answers about the Extraordinary General
Meeting and the Merger” |
| • | “Annex D—Cayman 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 of Listing or Trading. Not applicable. |
| Item 5 | Past
Contracts, Transactions, Negotiations and Agreements |
| (a) | Transactions. The information set forth in the Proxy Statement
under the following captions is incorporated herein by reference: |
| • | “Special Factors—Interests of Certain Persons
in the Merger” |
| • | “Special Factors—Related-Party Transactions” |
| • | “Transactions in Shares and ADSs” |
| (b) | Significant Corporate Events. 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—Interests of Certain Persons in the Merger” |
| • | “Annex
A—Agreement and Plan of Merger” |
| • | “Annex
B—Plan of Merger” |
| (c) | 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—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: |
| • | “Summary
Term Sheet—Plans for the Company after the Merger” |
| • | “Summary
Term Sheet—Financing of the Merger” |
| • | “Summary
Term Sheet—Support Agreements” |
| • | “Summary
Term Sheet—Consortium Agreement” |
| • | “Special
Factors—Background of the Merger” |
| • | “Special
Factors—Plans for the Company after the Merger” |
| • | “Special
Factors—Financing of the Merger” |
| • | “Special
Factors—Support Agreements” |
| • | “Special
Factors—Consortium Agreement” |
| • | “Special Factors—Interests of Certain Persons
in the Merger” |
| • | “Special
Factors—Voting by the Buyer Group 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” |
| • | “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: |
| • | “Summary
Term Sheet—The Merger” |
| • | “Summary
Term Sheet—Purposes and Effects of the Merger” |
| • | “Summary
Term Sheet—Plans for the Company after the Merger” |
| • | “Summary
Term Sheet—Financing of the Merger” |
| • | “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—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: |
| • | “Summary Term Sheet—Purposes and Effects of the
Merger” |
| • | “Summary Term Sheet—Plans for the Company after
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” |
| (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—Alternatives to the Merger” |
| • | “Special Factors—Effects on the Company if the
Merger is not Completed” |
| (c) | Reasons. The information set forth in the Proxy Statement under
the following captions is incorporated herein by reference: |
| • | “Summary Term Sheet—Purposes and Effects of 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—Purposes of and Reasons for
the Merger” |
| • | “Special Factors—Effects of the Merger on the
Company” |
| (d) | Effects. The
information set forth in the Proxy Statement under the following captions is incorporated
herein by reference: |
| • | “Summary Term Sheet—Purposes and Effects of 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—Effects of the Merger on the Company” |
| • | “Special
Factors—Plans for the Company after the Merger” |
| • | “Special
Factors—Effects on the Company if the Merger is not Completed” |
| • | “Special
Factors—Interests of Certain Persons in the Merger” |
| • | “Special
Factors—U.S. Federal Income Tax Consequences” |
| • | “Special
Factors—PRC Income Tax Consequences” |
| • | “Special
Factors—Cayman Islands Tax Consequences” |
| • | “Annex
A—Agreement and Plan of Merger” |
| • | “Annex
B—Plan of Merger” |
| 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 of the Merger” |
| • | “Summary
Term Sheet—Opinion of Houlihan Lokey (China) Limited, 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—Opinions of the Special Committee’s Financial Advisor” |
| • | “Special
Factors—Interests of Certain Persons in the Merger” |
| • | “Annex
C—Opinion of Houlihan Lokey (China) Limited 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: |
| • | “Summary
Term Sheet—Shareholder Vote Required to Authorize and Approve the Merger Agreement
and the Plan of Merger” |
| • | “Questions
and Answers about the Extraordinary General Meeting and the Merger” |
| • | “The Extraordinary General Meeting—Vote Required” |
| (d) | Unaffiliated Representative. 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—Opinion of the Special Committee’s
Financial Advisor” |
| • | “Annex C—Opinion of Houlihan Lokey (China) Limited
as Financial Advisor” |
| (e) | 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” |
| • | “Special Factors—Background of the Merger” |
| • | “Special Factors—Reasons for the Merger and Recommendation
of the Special Committee and the Board” |
| (f) | Other Offers. 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” |
| Item 9 | Reports,
Opinions, Appraisals and Negotiations |
| (a) | 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 Houlihan Lokey
(China) Limited, the Special Committee’s Financial Advisor” |
| • | “Special Factors—Background of the Merger” |
| • | “Special Factors—Opinion of the Special Committee’s
Financial Advisor” |
| • | “Annex C—Opinion of Houlihan Lokey (China) Limited
as Financial Advisor” |
| (b) | 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: |
| • | “Special
Factors—Background of the Merger” |
| • | “Special Factors—Opinion of the Special Committee’s
Financial Advisor” |
| • | “Annex C—Opinion of Houlihan Lokey (China) Limited
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 the Shares and ADSs or his, her or its representative who has been so designated in writing.
| Item 10 | Source
and Amount of Funds or Other Consideration |
| (a) | Source of Funds.
The information set forth in the Proxy Statement under the following captions is incorporated
herein by reference: |
| • | “Summary
Term Sheet—Financing of the Merger” |
| • | “Special
Factors—Financing of the Merger” |
| • | “Annex
A—Agreement and Plan of Merger” |
| • | “Annex
B—Plan of Merger” |
| (b) | Conditions. The
information set forth in the Proxy Statement under the following captions is incorporated
herein by reference: |
| • | “Summary
Term Sheet—Financing of the Merger” |
| • | “Special
Factors—Financing of the Merger” |
| (c) | Expenses. The
information set forth in the Proxy Statement under the following caption is incorporated
herein by reference: |
| • | “Special
Factors—Fees and Expenses” |
| (d) | Borrowed Funds.
The information set forth in the Proxy Statement under the following captions is incorporated
herein by reference: |
| • | “Summary
Term Sheet—Financing of the Merger” |
| • | “Special
Factors—Financing of the Merger” |
| Item 11 | Interest
in Securities of the Subject Company |
| (a) | Securities Ownership.
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” |
| • | “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 caption 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—Interests of the Company’s Executive Officers and Directors in
the Merger” |
| • | “Summary
Term Sheet—Support Agreements” |
| • | “Summary
Term Sheet—Consortium Agreement” |
| • | “Questions
and Answers about the Extraordinary General Meeting and the Merger” |
| • | “Special
Factors—Support Agreements” |
| • | “Special
Factors—Consortium Agreement” |
| • | “Special
Factors—Voting by the Buyer Group 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 of the Merger” |
| • | “Summary
Term Sheet—Support Agreements” |
| • | “Summary
Term Sheet—Consortium Agreement” |
| • | “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—Support Agreements” |
| • | “Special
Factors—Consortium Agreement” |
| • | “The
Extraordinary General Meeting—the Board’s Recommendation” |
| 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 29, 2015 (see page F-1 and
following pages). |
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) | Solicitation
or Recommendations. The information set forth in the Proxy Statement under the following
caption is incorporated herein by reference: |
| • | “The
Extraordinary General Meeting—Solicitation of Proxies” |
| (b) | 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” |
| • | “Special
Factors—Interests of Certain Persons in the Merger” |
| • | “Annex
E—Directors and Executive Officers of Each Filing Person” |
| Item 15 | Additional
Information |
| (b) | Other Material
Information. The information contained in the Proxy Statement, including all annexes
thereto, is incorporated herein by reference. |
| (a)-(1) | Preliminary Proxy Statement of the Company dated _______________,
2016 (the “Proxy Statement”). |
| (a)-(2) | Notice of Extraordinary General Meeting of Shareholders
of the Company, incorporated herein by reference to the Proxy Statement. |
| (a)-(3) | Form of Proxy Card, incorporated herein by reference to
Annex F to the Proxy Statement. |
| (a)-(4) | Form of ADS Voting Instruction Card, incorporated herein
by reference to Annex G to the Proxy Statement. |
| (a)-(5) | Press Release issued by the Company, dated December 22,
2015, incorporated herein by reference to Exhibit 99.1 to the Report on Form 6-K furnished
by the Company to the SEC on December 22, 2015. |
| (a)-(6) | Annual Report on Form 20-F for the year ended December 31,
2014, filed by the Company with the SEC on April 29, 2015 (File Number: 001-34904 ),
which is incorporated herein by reference. |
| (c)-(1) | Opinion of Houlihan Lokey (China) Limited, dated December
22, 2015, incorporated herein by reference to Annex C to the Proxy Statement. |
| (c)-(2) | Discussion Materials prepared by Houlihan Lokey (China)
Limited for discussion with the special committee of the board of directors of the Company,
dated December 22, 2015. |
| (d)-(1) | Agreement and Plan of Merger, dated as of December 22, 2015,
among the Company, Parent and Merger Sub, incorporated herein by reference to Annex A
to the Proxy Statement. |
| (d)-(2) | Limited Guarantee, dated as of December 22, 2015, by ChinaEquity
USD Fortune Co., Ltd. in favor of the Company, incorporated herein by reference to Exhibit
99.2 to the Report on Form 6-K furnished by the Company to the SEC on December 22, 2015. |
| (d)-(3) | Support Agreement, dated as of December 22, 2015, by and
between Parent and CNshangquan Limited, incorporated herein by reference to Exhibit 11
to Schedule 13D, as amended, filed with the SEC by CNshangquan Limited, Cnshangquan E-Commerce
Co., Ltd., Sanpower Group Co., Ltd and Yafei Yuan on December 23, 2015. |
| (d)-(4) | Support Agreement, dated as of December 22, 2015 by and
between Parent and ChinaEquity USD Fortune Co., Ltd., incorporated herein by reference
to Exhibit 8 to Schedule 13D, as amended, filed with the SEC by ChinaEquity USD Fortune
Co., Ltd., ChinaEquity USD Fund I L.P., ChinaEquity USD Investment GP L.P., ChinaEquity
USD Investment Management Co., ChinaEquity Global Holding Co., Ltd., Chaoyong Wang and
Xu Wang on December 23, 2015. |
| (d)-(5) | Equity Commitment Letter, dated as of December 22, 2015,
delivered by Chinaequity Investment Co., LTD (北京信中利投资股份有限公司)
to MINAT ASSOCIATED CO, LTD., incorporated herein by and reference to Exhibit
7 to Schedule 13D, as amended, filed with the SEC by ChinaEquity USD Fortune Co., Ltd.,
ChinaEquity USD Fund I L.P., ChinaEquity USD Investment GP L.P., ChinaEquity USD Investment
Management Co., ChinaEquity Global Holding Co., Ltd., Chaoyong Wang and Xu Wang on December
23, 2015. |
| (d)-(6) | Consortium Agreement, dated as of July 21, 2015, by and
among CNshangquan Limited and Leading Capital Co., Ltd., incorporated herein by reference
to Exhibit 3 to Schedule 13D, as amended, filed with the SEC by CNshangquan Limited,
Cnshangquan E-Commerce Co., Ltd., Sanpower Group Co., Ltd and Yafei Yuan on July 22,
2015. |
| (d)-(7) | Amended and Restated Consortium Agreement, dated as of October
26, 2015, by and among CNshangquan Limited, Leading Capital Co., Ltd. and ChinaEquity
USD Fortune Co., Ltd., incorporated herein by reference to Exhibit 3 to Schedule 13D,
as amended, filed with the SEC by ChinaEquity USD Fortune Co., Ltd., ChinaEquity USD
Fund I L.P., ChinaEquity USD Investment GP L.P., ChinaEquity USD Investment Management
Co., ChinaEquity Global Holding Co., Ltd., Chaoyong Wang and Xu Wang on November 2, 2015. |
| (d)-(8) | Second Amended
and Restated Consortium Agreement, dated as of December 17, 2015, by and among CNshangquan
Limited, Chinaequity Capital Investments Co., Limited and ChinaEquity USD Fortune Co.,
Ltd., incorporated herein by reference to Exhibit 4 to Schedule 13D, as amended, filed
with the SEC by ChinaEquity USD Fortune Co., Ltd., ChinaEquity USD Fund I L.P., ChinaEquity
USD Investment GP L.P., ChinaEquity USD Investment Management Co., ChinaEquity Global
Holding Co., Ltd., Chaoyong Wang and Xu Wang on December 17, 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. |
SIGNATURES
After due inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete and correct.
Date: January 8, 2016
| |
Mecox Lane Limited |
| |
|
|
| |
By |
/s/ Xiongsheng Yang |
| |
Name: |
Xiongsheng Yang |
| |
Title: |
Chairman of the Special Committee |
SIGNATURES
After due inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete and correct.
Date: January 8, 2016
| |
|
| |
MINAT
ASSOCIATED CO., LTD. |
| |
|
|
| |
By |
/s/ Dan Chen |
| |
Name: |
Dan Chen |
| |
Title: |
Director |
| |
|
|
| |
|
|
| |
ChinaEquity
Alliance Victory Co., Ltd. |
| |
|
|
| |
By |
/s/ Xu Wang |
| |
Name: |
Xu Wang |
| |
Title: |
Director |
SIGNATURES
After due inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete and correct.
Date: January 8, 2016
| |
CNshangquan
Limited |
| |
|
|
| |
By |
/s/ Wei Zhu |
| |
Name: |
Wei Zhu |
| |
Title: |
Authorized Signatory |
| |
|
|
| |
Cnshangquan
E-Commerce Co., Ltd. |
| |
|
|
| |
By |
/s/ Wei Zhu |
| |
Name: |
Wei Zhu |
| |
Title: |
Authorized Signatory |
| |
|
|
| |
Sanpower
Group Co., Ltd |
| |
|
|
| |
By |
/s/ Wei Zhu |
| |
Name: |
Wei Zhu |
| |
Title: |
Authorized Signatory |
| |
|
|
| |
|
| |
Yafei
Yuan |
| |
/s/ Yafei Yuan |
SIGNATURES
After due inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete and correct.
Date: January 8, 2016
| |
ChinaEquity USD Fortune Co., Ltd. |
| |
|
|
| |
By |
/s/ Chaoyong Wang |
| |
Name: |
Chaoyong Wang |
| |
Title: |
Director |
| |
|
| |
ChinaEquity USD Fund I L.P. |
| |
|
|
| |
By |
/s/ Chaoyong Wang |
| |
Name: |
Chaoyong Wang |
| |
Title: |
Duly authorized signatory under Power of Attorney effective as of October 15, 2013 |
| |
|
| |
ChinaEquity USD Investment GP L.P. |
| |
|
|
| |
By |
/s/ Chaoyong Wang |
| |
Name: |
Chaoyong Wang |
| |
Title: |
Duly authorized signatory under Power of Attorney effective as of October 15, 2013 |
| |
|
| |
ChinaEquity USD Investment Management Co. |
| |
|
| |
By: |
/s/ Chaoyong Wang |
| |
Name: |
Chaoyong Wang |
| |
Title: |
Director |
| |
|
| |
|
| |
ChinaEquity Global Holding Co., Ltd. |
| |
|
| |
By: |
/s/ Xu Wang |
| |
Name: |
Xu Wang |
| |
Title: |
Director |
| |
|
|
| |
|
| |
Chaoyong Wang |
| |
/s/ Chaoyong Wang |
| |
|
| |
Xu Wang |
| |
/s/ Xu Wang |
| |
Chinaequity Capital Investments Co., Limited |
| |
|
| |
|
| |
By: |
/s/ Chaoyong Wang |
| |
Name: |
Chaoyong Wang |
| |
Title: |
Authorized Signatory |
| |
|
|
| |
北京信中利投资股份有限公司 |
| |
|
| |
By: |
/s/ Chaoyong Wang |
| |
Name: |
Chaoyong Wang |
| |
Title: |
Authorized Signatory |
EXHIBIT INDEX
| (a)-(1) | Preliminary Proxy Statement of the Company dated , 2016
(the “Proxy Statement”). |
| (a)-(2) | Notice of Extraordinary General Meeting of Shareholders
of the Company, incorporated herein by reference to the Proxy Statement. |
| (a)-(3) | Form of Proxy Card, incorporated herein by reference to
Annex F to the Proxy Statement. |
| (a)-(4) | Form of ADS Voting Instruction Card, incorporated herein
by reference to Annex G to the Proxy Statement. |
| (a)-(5) | Press Release issued by the Company, dated December 22,
2015, incorporated herein by reference to Exhibit 99.1 to the Report on Form 6-K furnished
by the Company to the SEC on December 22, 2015. |
| (a)-(6) | Annual Report on Form 20-F for the year ended December 31,
2014, filed by the Company with the SEC on April 29, 2015 (File Number: 001-34904 ),
which is incorporated herein by reference. |
| (c)-(1) | Opinion of Houlihan Lokey (China) Limited, dated December
22, 2015, incorporated herein by reference to Annex C to the Proxy Statement. |
| (c)-(2) | Discussion Materials prepared by Houlihan Lokey (China)
Limited for discussion with the special committee of the board of directors of the Company,
dated December 22, 2015. |
| (d)-(1) | Agreement and Plan of Merger, dated as of December 22, 2015,
among the Company, Parent and Merger Sub, incorporated herein by reference to Annex A
to the Proxy Statement. |
| (d)-(2) | Limited Guarantee, dated as of December 22, 2015, by ChinaEquity
USD Fortune Co., Ltd. in favor of the Company, incorporated herein by reference to Exhibit
99.2 to the Report on Form 6-K furnished by the Company to the SEC on December 22, 2015. |
| (d)-(3) | Support Agreement, dated as of December 22, 2015, by and
among Parent and CNshangquan Limited, incorporated herein by reference to Exhibit 11
to Schedule 13D, as amended, filed with the SEC by CNshangquan Limited, Cnshangquan E-Commerce
Co., Ltd., Sanpower Group Co., Ltd and Yafei Yuan on December 23, 2015. |
| (d)-(4) | Support Agreement, dated as of December 22, 2015 by and
among Parent and ChinaEquity USD Fortune Co., Ltd., incorporated herein by reference
to Exhibit 8 to Schedule 13D, as amended, filed with the SEC by ChinaEquity USD Fortune
Co., Ltd., ChinaEquity USD Fund I L.P., ChinaEquity USD Investment GP L.P., ChinaEquity
USD Investment Management Co., ChinaEquity Global Holding Co., Ltd., Chaoyong Wang and
Xu Wang on December 23, 2015. |
| (d)-(5) | Equity Commitment Letter, dated as of December 22, 2015,
delivered by Chinaequity Investment Co., LTD (北京信中利投资股份有限公司)
to MINAT ASSOCIATED CO, LTD., incorporated herein by and reference to Exhibit 7 to Schedule
13D, as amended, filed with the SEC by ChinaEquity USD Fortune Co., Ltd., ChinaEquity
USD Fund I L.P., ChinaEquity USD Investment GP L.P., ChinaEquity USD Investment Management
Co., ChinaEquity Global Holding Co., Ltd., Chaoyong Wang and Xu Wang on December 23,
2015. |
| (d)-(6) | Consortium Agreement, dated as of July 21, 2015, by and
among CNshangquan Limited and Leading Capital Co., Ltd., incorporated herein by reference
to Exhibit 3 to Schedule 13D, as amended, filed with the SEC by CNshangquan Limited,
Cnshangquan E-Commerce Co., Ltd., Sanpower Group Co., Ltd and Yafei Yuan on July 22,
2015. |
| (d)-(7) | Amended and Restated Consortium Agreement, dated as of October
26, 2015, by and among CNshangquan Limited, Leading Capital Co., Ltd. and ChinaEquity
USD Fortune Co., Ltd., incorporated herein by reference to Exhibit 3 to Schedule 13D,
as amended, filed with the SEC by ChinaEquity USD Fortune Co., Ltd., ChinaEquity USD
Fund I L.P., ChinaEquity USD Investment GP L.P., ChinaEquity USD Investment Management
Co., ChinaEquity Global Holding Co., Ltd., Chaoyong Wang and Xu Wang on November 2, 2015. |
| (d)-(8) | Second Amended and Restated Consortium Agreement,
dated as of December 17, 2015, by and among CNshangquan Limited, Chinaequity Capital
Investments Co., Limited and ChinaEquity USD Fortune Co., Ltd., incorporated herein by
reference to Exhibit 4 to Schedule 13D, as amended, filed with the SEC by ChinaEquity
USD Fortune Co., Ltd., ChinaEquity USD Fund I L.P., ChinaEquity USD Investment GP L.P.,
ChinaEquity USD Investment Management Co., ChinaEquity Global Holding Co., Ltd., Chaoyong
Wang and Xu Wang on December 17, 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. |
Exhibit (a)-(1)
PRELIMINARY PROXY STATEMENT OF THE COMPANY
___________, 2016
Shareholders of Mecox Lane Limited
Re: Notice of Extraordinary General Meeting of Shareholders
Dear Shareholder:
You are cordially invited to attend an extraordinary general
meeting of shareholders of Mecox Lane Limited, an exempted company with limited liability incorporated under the laws of the Cayman
Islands (the “Company”), to be held on ___________, 2016 at _______ a.m. (Beijing time). The meeting will be held
at _____. The accompanying notice of the extraordinary general meeting and proxy statement provide information regarding the matters
to be considered and voted on at the extraordinary general meeting, including at any adjournment thereof.
On December 22, 2015, the Company entered into an Agreement
and Plan of Merger (the “Merger Agreement”) with MINAT ASSOCIATED CO., LTD., a business company incorporated under
the laws of the British Virgin Islands (“Parent”), and ChinaEquity Alliance Victory Co., Ltd., an exempted company
with limited liability incorporated under the laws of the Cayman Islands and a wholly owned subsidiary of Parent (“Merger
Sub”), pursuant to which Merger Sub will be merged with and into the Company and cease to exist, with the Company continuing
as the surviving company and becoming a wholly owned subsidiary of Parent (the “Merger”). 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.
At the effective time of the Merger (the “Effective Time”),
Parent will be beneficially owned by a consortium consisting of CNshangquan Limited (“CNshangquan”), ChinaEquity USD
Fortune Co., Ltd. (“ChinaEquity”, together with CNshangquan, the “Rollover Shareholders”), and Chinaequity
Capital Investment Co., Limited, an affiliate of ChinaEquity (“Chinaequity HK”, together with the Rollover Shareholders,
the “Consortium”). The Consortium, Parent and Merger Sub are collectively referred to herein as the “Buyer Group.”
As of the date of the accompanying proxy statement, the Buyer Group collectively beneficially owns approximately 71.84% of the
Company’s issued and outstanding ordinary shares, par value US$0.0001 per share (each, a “Share” and collectively,
the “Shares”). If the Merger is completed, the Company will continue its operations as a privately held company and
will be beneficially owned by the Consortium, and, as the result of the Merger, the Company’s American depositary shares
(“ADSs”), each representing thirty-five Shares of the Company, will no longer be listed on the NASDAQ Global Market
(the “NASDAQ”) and the ADS program for the Shares will terminate.
If the Merger is completed, at the Effective Time, 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$0.114 and each ADS issued and outstanding will be cancelled in exchange for the right
to receive US$4.00 (less a US$0.05 per ADS cancellation fee pursuant to the terms of the deposit agreement, as amended, dated
as of October 26, 2010, by and among the Company, JPMorgan Chase Bank, N.A. (the “ADS Depositary”) and all holders
and beneficial owners of ADSs issued thereunder (the “Deposit Agreement”)), 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) | 327,029,417 Shares held by the Rollover Shareholders (the “Rollover
Shares”), the Shares held by the ADS Depositary that are not represented by ADSs
and the Shares held by Parent, the Company or any of their subsidiaries (including such
Shares represented by ADSs) immediately prior to the Effective Time, which will be cancelled
and cease to exist 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 rights to dissent from the Merger (the “Dissenting
Shares”) in accordance with Section 238 of 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 cease to exist in accordance with the procedures
set out in Section 238 of the Cayman Islands Companies Law, and from the Effective Time
such dissenting shareholders shall cease to have any of the rights of a shareholder of
the Company except for the right to be paid the fair value of such Shares. |
The Buyer Group intends to fund the merger consideration through
a cash contribution from Chinaequity Investment Co., LTD (北京信中利投资股份有限公司),
a company organized and existing under the laws of the People’s Republic of China and an affiliate of ChinaEquity (the “Sponsor”)
pursuant to an equity commitment letter entered by and between Parent and the Sponsor dated as of December 22, 2015.
A special committee of the board of directors of the Company
(the “Special Committee”), composed solely of independent and disinterested directors who are unaffiliated with any
member of the Buyer Group or 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 (a)
determined 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 shareholders and ADS holders, other than shareholders and ADS holders who are affiliates of the
Company, including members of the Buyer Group (such unaffiliated shareholders and ADS holders are referred to herein as the “Unaffiliated
Security Holders”), (b) declared advisable the Merger Agreement, the Plan of Merger and the Transactions, including the
Merger, and (c) recommended that the board of directors of the Company (the “Board”) authorize and approve the Merger
Agreement, the Plan of Merger and the Transactions, including the Merger.
On December 22, 2015, the Board, after carefully considering
all relevant factors, including the unanimous recommendation of the Special Committee, unanimously (a) determined that the Merger
as contemplated in the Merger Agreement and the Plan of Merger is fair to and in the best interests of the Company and the Unaffiliated
Security Holders and it is advisable for the Company to enter into the Merger Agreement, the Plan of Merger and the Transactions,
including the Merger; (b) authorized and approved the Merger Agreement, the Plan of Merger, the consummation of the Transactions,
including the Merger, and the limited guarantee by ChinaEquity (the “Guarantor”) in favor of the Company pursuant
to which the Guarantor would guarantee certain obligations of Parent and Merger Sub under the Merger Agreement (the “Limited
Guarantee”) and (c) resolved to recommend the approval and authorization of the Merger Agreement, the Plan of Merger and
the Transactions, including the Merger, to the shareholders of the Company and directed that the Merger Agreement, the Plan of
Merger and the Transactions, including the Merger, be submitted to the shareholders of the Company for authorization and approval.
The Board recommends that you vote FOR the proposal to authorize
and approve the Merger Agreement, the Plan of Merger, the Transactions, including the Merger, the variation of the authorized
share capital of the Company from US$1,000,000 divided into 10,000,000,000 ordinary shares of a par value of US$0.0001 each to
US$50,000 divided into 50,000 ordinary shares of a par value of US$1.00 each, and the amendment and restatement of the existing
memorandum and articles of association by their deletion in their entirety and the substitution in their place of the new memorandum
and articles of association in the form attached as Appendix II to the Plan of 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 special
resolutions to be proposed at the extraordinary general meeting.
Each of the Rollover Shareholders has entered into with Parent
a support agreement, dated as of December 22, 2015 (collectively the “Support Agreements”), which provided that, among
other things, (a) each Rollover Shareholder will vote (or cause to be voted) all of the Shares (including Shares represented by
ADSs) beneficially owned by such Rollover Shareholder 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 Shares will, at the Effective Time, be cancelled
for no consideration in the Merger.
The Merger cannot be completed unless the Merger Agreement,
the Plan of Merger and the Transactions, including the Merger, are authorized and approved by a special resolution (as defined
in the Cayman Islands Companies Law) of the Company passed by an affirmative vote of holders of Shares representing two-thirds
or more of the Shares present and voting in person or by proxy as a single class at the extraordinary general meeting. The Rollover
Shareholders, as a group, beneficially own approximately 71.84% of the Company’s total outstanding Shares as of the date
of this proxy statement. Accordingly, based on the number of Shares expected to be issued and outstanding on_______, 2016, the
record date for voting Shares at the extraordinary general meeting (the “Share Record Date”) and the shareholdings
of the Rollover Shareholders as of the date of this proxy statement, and assuming each of the Rollover Shareholders complies with
the terms of the Second Amended and Restated Consortium Agreement and the Support Agreements, a quorum will be present at the
extraordinary general meeting and sufficient votes will be cast to authorize and approve the Merger Agreement, the Plan of Merger
and the Transactions, including the Merger, without any further vote of any other shareholder.
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 www.sec.gov.
Voting at the extraordinary general meeting will take place
by poll voting, as required by the Company's articles of association. 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________, 2016 at 12:00 p.m. (Beijing time). Each holder has one vote for
each Share held as of the close of business in the Cayman Islands on the Share Record Date.
If you own ADSs as at the close of business in New York City
on ________, 2016 (the “ADS Record Date”), you may instruct the ADS Depositary, as the holder of the Shares underlying
the ADSs, how to vote the Shares underlying your ADSs. However, you cannot vote at the extraordinary general meeting directly.
As the holder of record for all the Shares represented by the ADSs, only the ADS Depositary (or its nominee) may vote those Shares
at the extraordinary general meeting. The ADS Depositary must receive such instructions no later than 12:00 p.m. (New York
City time) on ______, 2016 in order to vote the Shares underlying your ADSs at the extraordinary general meeting. The ADS Depositary
will not vote or attempt to exercise the right to vote the Shares underlying your ADSs other than in accordance with those instructions.
If you hold your Shares or ADSs through a financial intermediary
such as a broker, bank or nominee, you must rely on the procedures of the financial intermediary through which you hold your Shares
or ADSs if you wish to vote at the extraordinary general meeting.
Shareholders who elect to dissent from the Merger will have
the right to receive payment of the fair value of their Shares in accordance with Section 238 of the Cayman Islands Companies
Law if the Merger is completed, but only if they deliver to the Company, before the vote to authorize and approve 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 for the exercise of dissenters’ rights, a copy of which
is attached as Annex D to the accompanying proxy statement. The fair value of your Shares as determined under the Cayman Islands
Companies Law 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 EXERCISE OR 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 5:00 P.M. (NEW
YORK CITY TIME) ON _______, 2016, AND BECOME REGISTERED HOLDERS OF SHARES BEFORE THE VOTE TO AUTHORIZE AND APPROVE THE MERGER
IS TAKEN AT THE EXTRAORDINARY GENERAL MEETING. 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 THE NASDAQ. SHARES ARE NOT LISTED AND CANNOT BE TRADED ON ANY STOCK EXCHANGE OTHER THAN THE 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 our Investor Relations Department at +86-21-3108-1111, Ext. 8161.
Thank you for your cooperation and continued support.
| Sincerely, |
|
Sincerely, |
| |
|
|
| |
|
|
| Xiongsheng Yang |
|
Fan Zhang |
| Chairman of the Special Committee |
|
Chairman of the Board |
The accompanying proxy statement is dated ______, 2016,
and is first being mailed to the Company’s shareholders and ADS holders on or about ______, 2016.
MECOX LANE LIMITED
NOTICE OF EXTRAORDINARY GENERAL MEETING
OF SHAREHOLDERS TO BE HELD ON ______, 2016
Dear Shareholder:
Notice is hereby given that an extraordinary general meeting
of the shareholders of Mecox Lane Limited (referred to herein alternately as “the Company,” “us,” “we”
or other terms correlative thereto), will be held on ______, 2016 at _____ a.m. (Beijing time) at ____.
Only registered holders of ordinary shares of the Company,
par value US$0.0001 per share (each, a “Share” and collectively, the “Shares”), at the close of business
in the Cayman Islands on ______, 2016 (the “Share Record Date”) or their proxy holders are entitled to attend or 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:
THAT the Agreement and Plan of Merger, dated as of December
22, 2015 (the “Merger Agreement”), among MINAT ASSOCIATED CO., LTD., a business company with limited liability incorporated
under the laws of the British Virgin Islands (“Parent”), ChinaEquity Alliance Victory Co., Ltd., 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, pursuant to which Merger Sub will
be merged with and into the Company and cease to exist, with the Company surviving as the surviving company and 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 variation of the
authorized share capital of the Company from US$1,000,000 divided into 10,000,000,000 ordinary shares of a par value of US$0.0001
each to US$50,000 divided into 50,000 ordinary shares of a par value of US$1.00 each (the “Variation of Capital”),
and (iii) the amendment and restatement of the existing memorandum and articles of association of the Company by their deletion
in their entirety and the substitution in their place of the new amended and restated memorandum and articles of association in
the form attached as Appendix II to the Plan of Merger (the “Adoption of Amended M&A”), be authorized, approved
and adopted;
THAT each of 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,
the Variation of Capital and the Adoption of Amended M&A; and
| · | if necessary, as
an ordinary resolution: |
THAT the extraordinary general meeting be adjourned
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 special 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 Room 302, Qilai Building, No. 889, Yishan Road, Shanghai 200233, People’s Republic of China, during ordinary
business hours for the two business days immediately prior to the extraordinary general meeting.
Each of CNshangquan Limited (“CNshangquan”) and
ChinaEquity USD Fortune Co., Ltd. (“ChinaEquity”, together with CNshangquan, the “Rollover Shareholders”)
has entered into a support agreement, dated as of December 22, 2015 (collectively, the “Support Agreements”), with
Parent. Pursuant to the Support Agreements, the Rollover Shareholders have agreed, among other things, that: (a) the Rollover
Shareholders will vote all of the Shares (including the Shares represented by the Company’s American depositary shares (“ADSs”))
beneficially owned by them respectively in favor of the authorization and approval of the Merger Agreement, the Plan of Merger
and the Transactions, including the Merger, and (b) 327,029,41 Shares (the “Rollover Shares”) held by them will, at
the Effective Time, be cancelled and cease to exist for no consideration in the Merger. As of the date of the accompanying proxy
statement, the Rollover Shareholders beneficially own approximately 71.84% of the total number of issued and outstanding Shares
in the Company. The Rollover Shareholders and Chinaequity Capital Investment Co., Limited, an affiliate of ChinaEquity (“Chinaequity
HK”), comprise a consortium (the “Consortium”) which will beneficially own the Company through Parent immediately
following the consummation of the Merger. The Consortium, Parent and Merger Sub are collectively referred to herein as the “Buyer
Group”.
After careful consideration and upon the unanimous recommendation
of a special committee of the board of directors of the Company (the “Special Committee”), composed solely of directors
who are unaffiliated with any member of the Buyer Group or the management of the Company, the board of directors of the Company
(the “Board”) unanimously (a) determined that the Merger as contemplated in the Merger Agreement and the Plan of Merger
is fair to and in the best interests of the Company and the shareholders and ADS holders of the Company, other than shareholders
and ADS holders who are affiliates of the Company, including members of the Buyer Group (such unaffiliated shareholders and ADS
holders are referred to herein as the “Unaffiliated Security Holders”) and it is advisable for the Company to enter
into the Merger Agreement and the Plan of Merger and to consummate the Transactions, including the Merger; (b) authorized and
approved the Merger Agreement, the Plan of Merger, the Transactions, including the Merger, and the limited guarantee by ChinaEquity
(the “Guarantor”) in favor of the Company pursuant to which the Guarantor would guarantee certain obligations of Parent
and Merger Sub under the Merger Agreement (the “Limited Guarantee”) and (c) resolved to recommend the approval and
authorization of the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, to the shareholders of the
Company and directed that the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, be submitted to
a vote of the shareholders of the Company for authorization and approval. The Board recommends that you vote FOR the proposal
to authorize and approve the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, the Variation of
Capital, and the Adoption of Amended M&A, 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, the Variation of Capital, and the Adoption
of Amended M&A, 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 special resolutions to be proposed at the extraordinary general meeting.
The Merger cannot be completed unless the Merger Agreement,
the Plan of Merger and the Transactions, including the Merger, are authorized and approved by a special resolution (as defined
in the Cayman Islands Companies Law) of the Company passed by an affirmative vote of holders of Shares representing two-thirds
or more of the Shares present and voting in person or by proxy as a single class at the extraordinary general meeting. The Rollover
Shareholders, as a group, beneficially own approximately 71.84% of the total voting rights in the Company. Accordingly, based
on the number of Shares expected to be issued and outstanding on the Share Record Date and the shareholdings of the Rollover Shareholders
as of the date of this proxy statement, and assuming each of the Rollover Shareholders complies with the terms of the Support
Agreements, a quorum will be present at the extraordinary general meeting and sufficient votes will be cast to authorize and approve
the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, without any further vote of any other shareholder.
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 (to the attention
of: Investors Relations Department) at Room 302, Qilai Building, No. 889, Yishan Road, Shanghai 200233, People’s Republic
of China, no later than ______, 2016 at 12:00 p.m. (Beijing time). The proxy card is the “instrument of proxy” and
the “instrument appointing a proxy” as referred to in the Company’s articles of association. Voting at the extraordinary
general meeting will take place by poll voting, as required by the Company’s articles of association. Each shareholder has
one vote for each Share held as of the close of business in the Cayman Islands on the Share Record Date. 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 ______, 2016 (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
JP Morgan 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
12:00 p.m. (New York City time) on ______, 2016 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 rely on 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
______, 2016, 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 the close of business in New York City on ______,
2016 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, dated as of October 26, 2010, among the Company, the ADS Depositary and the holders and beneficial owners 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 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.
Shareholders who dissent from the Merger will have the right
to receive payment of the fair value of their Shares in accordance with Section 238 of the Cayman Islands Companies Law Cap. 22
(Law 3 of 1961, as consolidated and revised) (the “Cayman Islands Companies Law”) if the Merger is completed, but
only if they deliver to the Company, before the vote to authorize and approve 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 for the exercise of dissenters’ rights, a copy of which is attached as Annex D to the accompanying
proxy statement. The fair value of their Shares as determined under the Cayman Islands Companies Law 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 EXERCISE OR 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 5:00 P.M. (NEW
YORK CITY TIME) ON ______, 2016, AND BECOME REGISTERED HOLDERS OF SHARES BEFORE THE VOTE TO AUTHORIZE AND APPROVE THE MERGER IS
TAKEN AT THE EXTRAORDINARY GENERAL MEETING. 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 THE NASDAQ. SHARES ARE NOT LISTED AND CANNOT BE TRADED ON ANY STOCK EXCHANGE OTHER THAN THE 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 AT THIS TIME. IF
THE MERGER IS COMPLETED, YOU WILL BE SENT INSTRUCTIONS REGARDING THE SURRENDER OF YOUR SHARE CERTIFICATES.
If you have any questions or need assistance voting your Shares,
please call our Investor Relations Department at +86-21-3108-1111, Ext. 8161.
The Merger Agreement, the Plan of Merger and 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 Board hereby direct that a proxy card must be deposited in the
manner set out in the notice of the extraordinary general meeting, and 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 Room 302, Qilai Building, No. 889, Yishan Road, Shanghai 200233, People’s Republic
of China, Attention: Investor Relations Department, before the commencement of the extraordinary
general meeting, or adjourned meeting at which such proxy is used. |
| |
BY ORDER OF THE BOARD OF
DIRECTORS, |
| |
|
| |
|
| |
Fan Zhang |
| |
Chairman of the Board |
| |
|
| |
_______, 2016 |
PROXY STATEMENT
Dated ______, 2016
SUMMARY VOTING INSTRUCTIONS
Ensure that your shares of Mecox Lane 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 in accordance with your instructions.
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, unless you appoint a person other than the chairman of the meeting as proxy, in which case the shares represented by
your proxy will be voted (or not submitted for voting) as your proxy determines.
If you have any questions, require assistance
with voting your proxy card, or need additional copies of proxy material, please contact our Investor Relations Department at
+86-21-3108-1111, Ext. 8161.
TABLE OF CONTENTS
| |
Page |
| |
|
| SUMMARY TERM SHEET |
3 |
| QUESTIONS AND ANSWERS
ABOUT THE EXTRAORDINARY GENERAL MEETING AND THE MERGER |
17 |
| SPECIAL FACTORS |
26 |
| MARKET PRICE OF THE
COMPANY’S ADSs, DIVIDENDS AND OTHER MATTERS |
67 |
| THE EXTRAORDINARY GENERAL
MEETING |
69 |
| THE MERGER AGREEMENT |
75 |
| PROVISIONS FOR UNAFFILIATED
SECURITY HOLDERS |
93 |
| DISSENTERS’ RIGHTS |
94 |
| FINANCIAL INFORMATION |
96 |
| TRANSACTIONS IN SHARES
AND ADSs |
98 |
| SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF THE COMPANY |
99 |
| FUTURE SHAREHOLDER PROPOSALS |
101 |
| CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS |
102 |
| WHERE YOU CAN FIND MORE
INFORMATION |
103 |
| ANNEX A: AGREEMENT AND
PLAN OF MERGER |
A-1 |
| ANNEX B: PLAN OF MERGER |
B-1 |
| ANNEX C: OPINION OF
HOULIHAN LOKEY (CHINA) LIMITED AS FINANCIAL ADVISOR |
C-1 |
| ANNEX D: CAYMAN COMPANIES
LAW CAP. 22 (LAW 3 OF 1961, AS CONSOLIDATED AND REVISED) – SECTION 238 |
D-1 |
| ANNEX E: DIRECTORS AND
EXECUTIVE OFFICERS OF EACH FILING PERSON |
E-1 |
| ANNEX F: FORM OF PROXY
CARD |
F-1 |
| ANNEX G: FORM OF ADS
VOTING INSTRUCTION CARD |
G-1 |
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 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 103. In this proxy statement, the terms “the Company,” “us,”
“we” or other terms correlative thereto refer to Mecox Lane 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 Parties Involved in the Merger
The Company
We are a multi-brand and multi-channel retailer in China specialized
in health, beauty and lifestyle products. We primarily offer health, beauty and lifestyle products under our own proprietary brands
and of third-party brands through our call center as well as other e-commerce channels in supplement, including our online store,
WM18.com, third party e-commerce websites, mobile platforms, WeChat and other social media networks in China. We are an exempted
company with limited liability incorporated under the laws of the Cayman Islands. Our principal executive office is located at
Room 302, Qilai Building, No. 889, Yishan Road, Shanghai 200233, People’s Republic of China. Our telephone number at this
address is +86-21-3108-1111.
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 United States
Securities and Exchange Commission (the “SEC”) on April 29, 2015, which is incorporated herein by reference. See “Where
You Can Find More Information” beginning on page 103 for a description of how to obtain a copy of our Annual Report.
Parent
Minat
Associated Co., Ltd. (“Parent”) is a business company incorporated under the
laws of the British Virgin Islands wholly owned by Chinaequity Capital Investments Co., Limited. Parent was acquired by the Consortium
(as defined below) solely for the purpose of holding the equity interest in Merger Sub (as defined below) and arranging, entering
into and completing the transactions contemplated by the Merger Agreement and the Plan of Merger (collectively, the “Transactions”),
including the Merger. The business address of Parent is located at 3rd Floor, Building C, Shou Kai Xing Fu Square,
Xin Dong Road, Chaoyang District, Beijing, People’s Republic of China. The telephone number at this address is +86-10-8555-0508.
Merger Sub
ChinaEquity Alliance Victory
Co., Ltd. is an exempted company with limited liability incorporated under the laws of the Cayman Islands and a wholly owned subsidiary
of Parent (“Merger Sub”). Merger Sub was acquired by Parent solely for the purpose of effecting the Merger. The business
address of Merger Sub is located at 3rd Floor, Building C, Shou Kai Xing Fu Square, Xin Dong
Road, Chaoyang District, Beijing, People’s Republic of China. The telephone number at this address is +86-10-8555-0508.
CNshangquan Limited
CNshangquan Limited (“CNshangquan”) is a business
company incorporated under the laws of the British Virgin Islands. The principal business of CNshangquan is to hold the relevant
Rollover Shares. CNshangquan is wholly owned by Cnshangquan E-Commerce Co., Ltd. . The business address of CNShangquan is located
at Unit 8, 3/F., Qwomar Trading Complex, Blackburne Road, Port Purcell, Road Town, Tortola, British Virgin Islands VG1110.
Cnshangquan E-Commerce Co., Ltd.
Cnshangquan E-Commerce Co., Ltd. (“Cnshangquan E-Commerce”)
is a company incorporated under the laws of the People’s Republic of China. The principal business of Cnshangquan E-Commernce
is to provide integrated marketing platforms for the development of O2O e-commerce services and solutions for businesses and consumers.
Cnshangquan E-Commerce is controlled by Sanpower Group Co., Ltd. The business address of Cnshangquan E-Commerce is located at
9th floor, International Financial Center, No.1 Hanzhong Road, Nanjing, Jiangsu Province, People’s Republic of China. The
telephone number at this address is +86-25-8327-4816.
Sanpower Group Co., Ltd
Sanpower Group Co., Ltd (“Sanpower”) is a company
incorporated under the laws of the People’s Republic of China. The principal business of Sanpower is operation in the business
segments including retail, media and content, information services, healthcare, real estate and financial investment. The business
address of Sanpower is located at 68 Software Avenue, Nanjing, Jiangsu Province, People’s Republic of China. The telephone
number at this address is +86-25-8327-4969.
Yafei Yuan
Mr. Yafei Yuan is the chairman of the board of director and
the controlling shareholder of Sanpower. The principal occupation of Mr. Yafei Yuan is an entrepreneur and a professional investment
manager. The business address of Mr. Yafei Yuan is located at 8/F, 68 Software Avenue, Nanjing, Jiangsu Province, People’s
Republic of China. The telephone number at this address is +86-25-8327-4969.
ChinaEquity USD Fortune Co., Ltd.
ChinaEquity USD Fortune Co.,
Ltd. (“ChinaEquity ”) is a business company incorporated under the laws of the British Virgin Islands. The principal
business of ChinaEquity is China-focused venture capital and private equity investment. ChinaEquity is wholly owned by ChinaEquity
USD Fund I L.P. The business address of ChinaEquity is located at 3rd Floor, Building C, Shou Kai Xing Fu Square,
Xin Dong Road, Chaoyang District, Beijing, People’s Republic of China. The telephone number at this address is +86-10-8555-0508.
ChinaEquity USD Fund I L.P.
ChinaEquity USD Fund I L.P.,
is a limited partnership organized under the laws of Cayman Islands. The principal business of ChinaEquity USD Fund I L.P. is
China-focused venture capital and private equity investment. ChinaEquity USD Fund I L.P. is controlled by ChinaEquity USD Investment
GP L.P. The business address of ChinaEquity USD Fund I L.P. is located at 3rd Floor, Building C, Shou Kai Xing Fu Square,
Xin Dong Road, Chaoyang District, Beijing, People’s Republic of China. The telephone number at this address is +86-10-8555-0508.
ChinaEquity USD Investment GP L.P.
ChinaEquity USD Investment GP
L.P., is a limited partnership organized under the laws of Cayman Islands. The principal business of ChinaEquity USD Investment
GP L.P. is China-focused venture capital and private equity investment. ChinaEquity USD Investment GP L.P. is controlled by ChinaEquity
USD Investment Management Co. The business address of ChinaEquity USD Investment GP L.P. is located at 3rd Floor, Building C,
Shou Kai Xing Fu Square, Xin Dong Road, Chaoyang District, Beijing, People’s Republic
of China. The telephone number at this address is +86-10-8555-0508.
ChinaEquity USD Investment Management Co.
ChinaEquity USD Investment Management
Co., is a company organized under the laws of Cayman Islands. The principal business of ChinaEquity USD Investment Management
Co. is China-focused venture capital and private equity investment. ChinaEquity USD Investment Management Co. is wholly owned
by ChinaEquity Global Holding Co., Ltd. The business address of ChinaEquity USD Investment Management Co. is located at 3rd Floor,
Building C, Shou Kai Xing Fu Square, Xin Dong Road, Chaoyang District, Beijing, People’s
Republic of China. The telephone number at this address is +86-10-8555-0508.
ChinaEquity Global Holding Co., Ltd.
ChinaEquity Global Holding Co.,
Ltd., is a company organized under the laws of the British Virgin Islands. The principal business of ChinaEquity Global Holding
Co., Ltd. is China-focused venture capital and private equity investment. ChinaEquity Global Holding Co., Ltd. is wholly owned
by Mr. Xu Wang. The business address of ChinaEquity Global Holding Co., Ltd. is located at 3rd Floor, Building C, Shou Kai Xing
Fu Square, Xin Dong Road, Chaoyang District, Beijing, People’s Republic of China. The
telephone number at this address is +86-10-8555-0508.
Chaoyong Wang
Mr. Chaoyong Wang is the sole
director and officer of each of ChinaEquity USD Fortune Co., Ltd., ChinaEquity USD Fund I L.P., ChinaEquity USD Investment GP
L.P., and ChinaEquity USD Investment Management Co. The principal occupation of Mr. Chaoyong Wang is venture capital and private
equity investment and portfolio management. The business address of Mr. Chaoyong Wang is located at 3rd Floor, Building C, Shou
Kai Xing Fu Square, Xin Dong Road, Chaoyang District, Beijing, People’s Republic of
China. The telephone number at this address is +86-10-8555-0508.
Xu Wang
Mr. Xu Wang is the sole shareholder,
sole director and officer of ChinaEquity Global Holding Co., Ltd. The principal occupation of Mr. Xu Wang is venture capital and
private equity investment and portfolio management. The business address of Mr. Xu Wang is located at 3rd Floor, Building C, Shou
Kai Xing Fu Square, Xin Dong Road, Chaoyang District, Beijing, People’s Republic of
China. The telephone number at this address is +86-10-8555-0508.
Chinaequity Capital Investments Co., Limited
Chinaequity Capital Investments
Co., Limited (“Chinaequity HK”) is a limited liability company incorporated under the laws of Hong Kong. The principal
business of Chinaequity HK is China-focused venture capital and private equity investment. Chinaequity HK is wholly owned by Chinaequity
Investment Co., LTD (北京信中利投资股份有限公司).
The business address of Chinaequity HK is located at 3rd Floor, Building C, Shou Kai Xing Fu Square,
Xin Dong Road, Chaoyang District, Beijing, People’s Republic of China. The telephone number at this address is +86-10-8555-0508.
Chinaequity Investment Co., LTD (北京信中利投资股份有限公司)
Chinaequity Investment Co., LTD
(北京信中利投资股份有限公司)
(the “Sponsor”) is a company incorporated under the laws of the People’s Republic of China. The principal business
of the Sponsor is private investment, investment bank and fund management. The Sponsor is a joint-stock company listed on the
National Equities Exchange and Quotations of the People’s Republic of China. The business address of the Sponsor is located
at 3rd Floor, Building C, Shou Kai Xing Fu Square, Xin Dong Road, Chaoyang District, Beijing,
People’s Republic of China. The telephone number at this address is +86-10-8555-0508.
Throughout this proxy statement, CNshangquan and ChinaEquity
are collectively referred to herein as the “Rollover Shareholders.” Chinaequity HK and the Rollover Shareholders are
collectively referred to as the “Consortium.” Parent, Merger Sub and the Consortium are collectively referred to herein
as the “Buyer Group”.
During the last five years, none of the persons referred to
above under the heading “The Parties Involved in the Merger”, or the respective directors or executive officers of
the Company, members of the Buyer Group and their affiliates as listed in Annex E of this proxy statement 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, 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 Merger (Page 75)
You are being asked to vote to authorize and approve the agreement
and plan of merger dated as of December 22, 2015 among the Company, Parent and Merger Sub (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”), pursuant to which, once the Merger Agreement and the Plan of
Merger are approved and authorized 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 are satisfied or waived in accordance with the terms of the Merger Agreement,
Merger Sub will be merged with and into the Company and cease to exist, with the Company continuing as the surviving company (the
“Surviving Company”) (the “Merger”). The Surviving Company will be wholly owned by Parent (which will
be beneficially owned by the Consortium), and will continue to do business under the name “Mecox Lane Limited” following
the Merger. If the Merger is completed, the Company will cease to be a publicly traded company and the Company’s ADSs will
cease to be listed on the NASDAQ Global Select Market (the “NASDAQ”), and price quotations with respect to sales of
the ADSs in the public market will no longer be available. In addition, ninety (90) days after the filing of Form 15 in connection
with the completion of the Merger or such longer period as may be determined by the SEC, registration of the ADSs under the Securities
Exchange Act of 1934 (as amended, and the rules and regulations promulgated thereunder, the “Exchange Act”) will be
terminated. After the effective time of the Merger (the “Effective Time”), the Company will no longer be required
to file periodic reports with the SEC or otherwise be subject to the United States federal securities laws, including the Sarbanes-Oxley
Act of 2002, applicable to public companies, and our shareholders will no longer enjoy the rights or protections that the United
Sates federal securities laws provide, including reporting obligations for directors, officers and principal securities holders
of the 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 75)
Under the terms of the Merger Agreement, at the Effective Time,
each ordinary share of the Company, par value US$0.0001 per share (each a “Share” and, collectively, the “Shares”)
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$0.114 (the “Per Share Merger Consideration”) and each ADS issued and outstanding
will be cancelled in exchange for the right to receive US$4.00 (the “Per ADS Merger Consideration”), in each case,
in cash, without interest and net of any applicable withholding taxes. The holders of ADSs will bear any applicable fees, charges
and expenses of JP Morgan Chase Bank, N.A, in its capacity as the ADS depositary (the “ADS Depositary”) in connection
with the distribution of the merger consideration to holders of ADSs, including applicable ADS cancellation fees pursuant to the
terms of the deposit agreement, dated as of October 26, 2010, by and among the Company, the ADS Depositary and all holders and
beneficial owners of ADSs issued thereunder (the “Deposit Agreement”). 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) | 327,029,417 Shares held by the Rollover Shareholders (the
“Rollover Shares”) , the Shares held by the ADS Depositary that are not represented
by ADSs and the Shares held by Parent, the Company or any of their subsidiaries including
such Shares represented by ADSs immediately prior to the Effective Time (collectively,
the “Excluded Shares”), which will be cancelled and cease to exist 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 rights to dissent from the Merger (the “Dissenting
Shares”) in accordance with Section 238 of 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 cease to exist in accordance with the procedures
set out in Section 238 of the Cayman Islands Companies Law, and from the Effective Time
such dissenting shareholders shall cease to have any of the rights of a shareholder the
Company except for the right to be paid the fair value of such Shares. |
Treatment of Company Share Awards (Page 76)
As of the date of this proxy statement, there are no outstanding
restricted share units, options or share appreciation rights or any other awards granted under the 2006 Stock Option Plan, the
2008 Stock Option Plan, the 2011 Share Incentive Plan, and the 2012 Share Incentive Plan (collectively, the “Company Incentive
Plans”). Under the terms of the Merger Agreement, the Company Incentive Plans will be terminated at or prior to the Effective
Time.
Record Date and Voting (Page 70)
You are entitled to vote at the extraordinary general meeting
if you have Shares registered in your name at the close of business in the Cayman Islands on _______, 2016, the record date for
voting Shares at the extraordinary general meeting (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 ______, 2016 at 12:00
p.m. (Beijing time).
If you own ADSs as of the close of business in New York City
on______, 2016 (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 the ADS depositary
in its capacity as 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 12:00 p.m. (New York City time) on ______, 2016 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 rely on 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 ______, 2016, the Share Record Date. Each holder has one vote for each
Share held as of the close of business in the Cayman Islands on the Share Record Date. We expect that, as of the Share Record
Date, there will be 455,227,428 Shares entitled to be voted at the extraordinary general meeting. See “Summary Term Sheet—Voting
Information” below.
Shareholder Vote Required to Authorize and Approve the Merger
Agreement and Plan of Merger (Page 70)
In order for the Merger to be completed, the Merger Agreement,
the Plan of Merger and the Transactions, including the Merger, must be authorized and approved by a special resolution (as defined
in the Cayman Islands Companies Law) of the Company’s shareholders, passed by an affirmative vote of holders of Shares representing
two-thirds or more of the Shares present and voting in person or by proxy as a single class at the extraordinary general meeting
(the “Company Shareholder Approval”).
As of the date of this proxy statement, the Rollover Shareholders
beneficially own an aggregate of 327,029,417 Shares (including Shares represented by ADSs), which represents approximately 71.84%
of the total issued and outstanding Shares as of the date of this proxy statement. See “Security Ownership of Certain Beneficial
Owners and Management of the Company” beginning on page 99 for additional information. Pursuant to the terms of the Support
Agreements, these Shares (including such Shares represented by ADSs) 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.
Based on the number of Shares expected to be issued and outstanding on the Share Record Date and the shareholdings of the Rollover
Shareholders as of the date of this proxy statement, and assuming each of the Rollover Shareholders complies with the terms of
the Support Agreements, a quorum will be present at the extraordinary general meeting and sufficient votes will be cast to authorize
and approve the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, without any further vote of any
other shareholder.
Voting Information (Page 70)
Before voting your Shares, we encourage you to read this proxy
statement in its entirety, including all of the annexes, attachments, exhibits and materials incorporated by reference, and carefully
consider how the Merger will affect you. To ensure that your Shares can be voted at the extraordinary general meeting, please
complete the accompanying proxy card in accordance with the instructions set forth on the proxy card as soon as possible. The
deadline for you to lodge your proxy card is ______, 2016, at 12:00 p.m. (Beijing Time). If a broker, bank or other nominee holds
your Shares in “street name,” your broker, bank or other nominee should provide you with instructions on how to vote
your Shares. Your broker, bank or other nominee will not vote your Shares in the absence of specific instructions from you. These
non-voted Shares are referred to as “broker non-votes.”
If you own ADSs as of the close of business in New York City
on ______, 2016, 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 ______, 2016 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. The ADS Depositary has, however, advised us that, pursuant to Section 12 of the Deposit
Agreement, it will not vote or attempt to exercise the right to vote any Shares other than in accordance with signed voting instructions
from the relevant ADS holder, and accordingly, Shares represented by ADSs for which no timely voting instructions are received
by the ADS Depositary will not be voted. If you hold your ADSs in a brokerage, bank or other nominee account, you must rely on
the procedures of the broker, bank or other nominee through which you hold your ADSs if you wish to vote.
Dissenters’ Rights of Shareholders and ADS Holders
(Page 94)
Shareholders who elect to dissent from the Merger will have
the right to receive payment of the fair value of their Shares in accordance with Section 238 of the Cayman Islands Companies
Law if the Merger is completed, but only if they deliver to the Company, before the vote to authorize and approve 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 for the exercise of dissenters’ rights, which is attached
as Annex D to this proxy statement. The fair value of your Shares as determined under the Cayman Islands Companies Law 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 EXERCISE OR 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 5:00 P.M. (NEW
YORK CITY TIME) ON ______, 2016, AND BECOME REGISTERED HOLDERS OF SHARES BEFORE THE VOTE TO AUTHORIZE AND APPROVE THE MERGER IS
TAKEN AT THE EXTRAORDINARY GENERAL MEETING. 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.
We encourage you to read the section of this proxy statement
entitled “Dissenters’ Rights” as well as Annex D to this proxy statement carefully and to consult your Cayman
Islands legal counsel if you desire to exercise your dissenters’ rights.
Purposes and Effects of the Merger (Page 52)
The purpose of the Merger is to enable Parent to acquire 100%
ownership and control of the Company in a transaction in which the Company’s shareholders and ADS holders, other than shareholders
and ADS holders who are affiliates of the Company, including members of the Buyer Group (such unaffiliated shareholders and ADS
holders are referred to herein as the “Unaffiliated Security Holders”), 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 52 for additional information.
ADSs representing Shares are currently listed on the NASDAQ
under the symbol “MCOX.” 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 Consortium. Following the completion
of the Merger, ADSs will no longer be listed on any securities exchange or quotation system, including the NASDAQ, and price quotations
with respect to sales of the ADSs in the public market will no longer be available. In addition, registration of Shares under
the Exchange Act may be terminated upon the Company’s application to the SEC if Shares are not listed on a national securities
exchange and there are fewer than 300 record holders of Shares. 90 days after the filing of Form 15 in connection with the completion
of the Merger or such longer period as may be determined by the SEC, registration of the Shares under the Exchange Act will be
terminated and 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. Following 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 to shareholders of public companies, including reporting obligations for directors, officers and principal securities
holders of the Company. Furthermore, following the completion of the Merger, the ADS program for Shares will terminate. See “Special
Factors—Effects of the Merger on the Company” beginning on page 52 for additional information.
Plans for the Company after the Merger (Page 55)
Following the consummation of the Merger, Parent will own 100%
of the equity interests in the Surviving Company. 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 a wholly owned subsidiary of Parent.
Recommendations of the Special Committee and the Board (Page
31)
A special committee of the Board (the “Special Committee”),
composed solely of independent and disinterested directors who are unaffiliated with any member of the Buyer Group or 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 (a) determined 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
Security 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 the Merger as contemplated in the Merger Agreement and the Plan of Merger is
fair to and in the best interests of the Company and the Unaffiliated Security Holders and it is advisable for the Company to
enter into the Merger Agreement, the Plan of Merger and the Transactions, including the Merger; (b) authorized and approved the
Merger Agreement, the Plan of Merger, the consummation of the Transactions, including the Merger, and the limited guarantee by
ChinaEquity (the “Guarantor”) in favor of the Company pursuant to which the Guarantor would guarantee certain obligations
of Parent and Merger Sub under the Merger Agreement (the “Limited Guarantee”) and (c) resolved to recommend the approval
and authorization 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, the Limited Guarantee and the consummation
of the Transactions, including the Merger, be submitted to a vote of the shareholders of the Company for authorization and approval.
ACCORDINGLY, THE BOARD RECOMMENDS THAT YOU VOTE FOR
the proposal to authorize and approve the Merger Agreement, the Plan of Merger, the Transactions, including the Merger, the VARIATION
of the authorized share capital of the Company from US$1,000,000 divided into 10,000,000,000 ordinary shares of a par value of
US$0.0001 each to US$50,000 divided into 50,000 ordinary shares of a par value of US$1.00 each, and the amendment and restatement
of the existing memorandum and articles of association OF THE COMPANY by their deletion in their entirety and the substitution
in their place of the new memorandum and articles of association in the form attached as Appendix II to the Plan of 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 special 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 approval of the
Transactions, including the Merger, and in determining that the Merger is fair to and in the best interest of the Company and
the Unaffiliated Security Holders, see “Special Factors—Reasons for the Merger and Recommendation of the Special Committee
and the Board” beginning on page 31 and “Special Factors—Effects of the Merger on the Company—Primary
Benefits and Detriments of the Merger” beginning on page 53 for additional information. The foregoing summary is qualified
in its entirety by reference to these sections.
Position of the Buyer Group as to Fairness of the Merger
(Page 37)
Each member of the Buyer Group believes that the Merger is
fair to the Unaffiliated Security Holders. Their 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 37.
Each member of the Buyer Group is making the statements included
in this paragraph solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange
Act. The views of each member 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 as to how that shareholder should vote on the proposal to authorize and
approve the Merger Agreement, the Plan of Merger and the Transactions, including the Merger.
Financing of the Merger (Page 56)
The Buyer Group estimates that the total amount of funds necessary
to consummate the Merger and related transactions will be approximately US$14.7 million, assuming no exercise of dissenters’
rights by shareholders of the Company. In calculating this amount, the Buyer Group do not consider the value of the Rollover Shares
which will, in connection with and immediately prior to the closing of the Merger, be exchanged for shares of Parent and such
Rollover Shares will, at the Effective Time, be cancelled for no consideration in the Merger. This amount is expected to be funded
by the Sponsor through equity financing of up to approximately US$14.7 million.
Limited Guarantee (Page 57)
Concurrently with the execution and delivery of the Merger
Agreement, the Guarantor has executed and delivered a limited guarantee in favor of the Company with respect to the payment obligations
of Parent under the Merger Agreement for the termination fee, certain costs and expenses, or the reimbursement for certain liabilities,
that in each case, may become payable to the Company by Parent under certain circumstances as set forth in the Merger Agreement.
See “Special Factors—Limited Guarantee” beginning on page 57 for additional information.
Support Agreements (Page 57)
Concurrently with the execution and delivery of the Merger
Agreement, each of the Rollover Shareholders entered into a Support Agreement (collectively the “Support Agreements”)
with Parent. Pursuant to the Support Agreements, among other things: (a) each Rollover Shareholder will vote all of the Shares
(including Shares represented by ADSs) beneficially owned by such Rollover Shareholder 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 Shares will, at the
Effective Time, be cancelled for no consideration in the Merger. As of the date of the proxy statement, the Rollover Shareholders
collectively beneficially own approximately 71.84% of the total number of issued and outstanding Shares.
Consortium Agreement (Page 58)
On July 21, 2015, CNshangquan and Leading Capital Co., Ltd.
(“Leading Capital”) entered into a consortium agreement (the “Consortium Agreement”), and ChinaEquity
became a member of the Consortium by entering into an amended and restated consortium agreement with CNshangquan and Leading Capital
on October 26, 2015. On December 15, 2015, Leading Capital delivered a written notice to withdraw from the Transaction, while
Chinaequity HK intended to participate in the Transaction with CNshangquan and ChinaEquity. On December 17, 2015, CNshangquan,
ChinaEquity and Chinaequity HK entered into a second amended and restated consortium agreement (the “Second Amended and
Restated Consortium Agreement”), pursuant to which each party to the Second Amended and Restated Consortium Agreement agreed,
among other things, to form a consortium to (i) participate in the transactions to acquire the Company that would result in a
delisting of the Company from NASDAQ and its equity securities to be eligible for termination of registration under the Exchange
Act, (ii) work exclusively with each other with respect to the transactions to acquire the Company for 12 months after the date
of the Second Amended and Restated Consortium Agreement, and (iii) vote, or cause to be voted at every shareholder or stakeholder
meeting all securities beneficially owned by such party in favor of the Transactions and against any competing proposal or matter
that would facilitate a competing proposal.
Opinion of Houlihan Lokey (China) Limited (“Houlihan
Lokey”), the Special Committee’s Financial Advisor (Page 43)
On December 22, 2015, Houlihan Lokey rendered an oral opinion
to the Special Committee (which was confirmed in writing by delivery of Houlihan Lokey’s written opinion dated the same
day), as to the fairness, from a financial point of view, of the Per Share Merger Consideration and the Per ADS Merger Consideration,
as applicable, to be received in the merger by holders of the Shares and the ADSs, as applicable (other than holders of the Excluded
Shares, including Excluded Shares represented by ADSs, and the Dissenting Shares), as of December 22, 2015, based upon and subject
to the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered
by Houlihan Lokey in preparing its opinion.
Houlihan Lokey’s opinion was directed to the Special
Committee and only addressed the fairness from a financial point of view of the Per Share Merger Consideration and the Per ADS
Merger Consideration, as applicable, to be received in the merger by holders of the Shares and ADSs, as applicable (other than
holders of the Excluded Shares, including Excluded Shares represented by ADSs, and the Dissenting Shares), and does not address
any other aspect or implication of the merger. The summary of Houlihan Lokey’s opinion in this proxy statement is qualified
in its entirety by reference to the full text of its written opinion, which is included as Annex C to this proxy statement and
sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters
considered by Houlihan Lokey in preparing its opinion. However, neither Houlihan Lokey’s opinion nor the summary
of its opinion and the related analyses set forth in this proxy statement are intended to be, and do not constitute advice or
a recommendation to the Special Committee or any shareholder as to how to act or vote with respect to the merger
or related matters.
See “Special Factors—Opinion of the Special Committee’s
Financial Advisor” beginning on page 43 for additional information.
Interests of the Company’s Executive Officers and
Directors in the Merger (Page 59)
In considering the recommendations of the Board, the Company’s
shareholders should be aware that certain of the Company’s directors and executive officers 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 potential
enhancement or decline of share value for Parent, which will be beneficially owned by
the Consortium upon the completion of the Merger, as a result of the Merger and future
performance of the Surviving Company; |
| · | continued indemnification
rights, rights to advancement of fees and directors and officers liability insurance
to be provided by the Surviving Company to former directors and officers of the Company; |
| · | the compensation
of members of the Special Committee in exchange for their services in such capacity at
a rate of US$8,000 and US$5,000 per month for the chairman and the members of the Special
Committee, respectively, 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; and |
| · | the continuation
of service of the executive officers of the Company with the Surviving Company in positions
that are substantially similar to their current positions, allowing them to benefit from
remuneration arrangements, including equity compensation, with the Surviving Company. |
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 59 for additional information.
No Solicitation of Competing Transactions (Page 83)
The Merger Agreement restricts our ability, 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”). See and read carefully “The Merger Agreement—No Solicitation of Competing Transactions”
and “The Merger Agreement—No Change of Recommendation” beginning on page 83 and page 85, respectively.
Conditions to the Merger (Page 89)
The obligations of each party to consummate the Transactions,
including the Merger, are subject to the satisfaction of the following conditions:
| · | the Merger
Agreement, the Plan of Merger and the Transactions, including the Merger, being authorized
and approved by the shareholders at the extraordinary general meeting; and |
| · | no governmental
entity of competent jurisdiction having enacted, issued, promulgated, enforced or entered
any law or order which is then in effect and has the effect of enjoining, restraining,
prohibiting or otherwise making illegal the consummation of the Transactions. |
The obligations of Parent and Merger Sub to consummate the
Merger are also subject to the satisfaction, or waiver by Parent, of the following conditions:
| · | (i)
certain representations and warranties of the Company (without giving effect to any limitation
as to “materiality” or “Company Material Adverse Effect” as set
forth therein) being true and correct in all respects (except for de minimus inaccuracies)
and (ii) certain other representations and warranties of the Company contained in the
Merger Agreement (without giving effect to any limitation as to “materiality”
or “Company Material Adverse Effect” set forth therein) being true and correct
except where the failure of such representations and warranties of the Company to be
so true and correct, individually or in the aggregate, would not constitute a Company
Material Adverse Effect, in each case as of the date of this Agreement and as of the
Effective Time, 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); |
| · | the Company
having performed in all material respects all obligations required to be performed by
it under the Merger Agreement at or prior to the Effective Time; |
| · | since the date
of the Merger Agreement, there having not been a Company Material Adverse Effect; and |
| · | the Company
having delivered to Parent a certificate, dated the closing date of the Merger, signed
by an executive officer of the Company, certifying as to the fulfillment of the above
conditions. |
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 contained in the Merger Agreement being true
and correct (without giving effect to any limitation as to “materiality”
set forth therein), in each case as of the date of the Merger Agreement and as of the
Effective Time, 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 where
the failure of such representations and warranties of the Company to be so true and correct,
individually or in the aggregate, have not and would not prevent, materially delay or
materially impede the impair the ability of Parent and Merger Sub to consummate the Merger; |
| · | Parent and
Merger Sub having performed in all material respects all obligations required to be performed
by them under the Merger Agreement at or prior to the Effective Time; and |
| · | Parent and
Merger Sub having each delivered to the Company a certificate, dated the closing date
of the Merger, signed by a director of Parent and Merger Sub, respectively certifying
as to the fulfillment of the above conditions. |
Termination of the Merger Agreement (Page 89)
The Merger Agreement may be terminated at any time prior to
the Effective Time:
| (a) | by mutual written consent of Parent and the Company; |
| (b) | by either Parent or the Company (provided that this termination
right is not available to either Parent or the Company, as applicable, whose failure
to fulfill any obligation under the Merger Agreement or other intentional breach has
been the primary cause of, or resulted in, the failure of the applicable condition(s)
being satisfied), if: |
| · | the Merger
is not consummated by September 22, 2016 (the “End Date”); |
| · | any law, rule,
regulation or order enjoining, restraining, prohibiting or otherwise making illegal the
consummation of the Merger being in effect and having become final and non-appealable;
or |
| · | the Company’s
shareholders do not authorize and approve the Merger Agreement, the Plan of Merger or
the Transactions at the extraordinary general meeting or any adjournment thereof; |
| · | upon a breach
by Parent or Merger Sub of any representation, warranty, covenant or agreement set forth
in the Merger Agreement, or if any representation or warranty of Parent and Merger Sub
has become untrue, in either case such that the corresponding closing conditions would
not be satisfied prior to the End Date and such breach would not be curable or, if curable
has not been cured within the earlier of (i) 30 calendar days following receipt of written
notice by Parent from the Company of such breach and (ii) any shorter period of time
that remains between the date the Company provides written notice of such breach and
the End Date, provided that the Company is not then in material breach of any representations
and warranties, covenants or agreements set forth in the Merger Agreement that would
result in certain closing conditions not being satisfied; |
| · | if (a) all
the conditions to closing for the obligations of Parent and Merger Sub to consummate
the Merger have been satisfied or waived by Parent and Merger Sub, and (b) Parent fails
to complete the closing of the Merger within ten business days following the date on
which the closing of the Merger should have occurred, provided that the Company has delivered
to Parent an irrevocable commitment in writing that it is ready, willing and able to
consummate the Transactions during such period; |
| · | prior to receipt
of the Company Shareholder Approval, in order to enter into an Alternative Acquisition
Agreement (as defined in the section entitled “The Merger Agreement—No Change
of Recommendation”) with respect to a Superior Proposal (as defined in the section
entitled “The Merger Agreement—Competing Transactions”) in accordance
with the terms of the Merger Agreement, provided that within five business days after
such termination, the Company pays the termination fee payable pursuant to the Merger
Agreement; or |
| · | the Board (or
the Special Committee) has changed, withheld, amended or modified its recommendation
to the shareholders of the Company with respect to a Superior Proposal in accordance
with the terms of the Merger Agreement, provided that within five business days after
such termination, the Company pays the termination fee payable pursuant to the Merger
Agreement. |
| · | upon a breach
by the Company of any representation, warranty, covenant or agreement set forth in the
Merger Agreement, or if any representation or warranty of the Company has become untrue,
in either case such that the corresponding conditions to closing would not be satisfied
prior to the End Date and such breach would not be curable or, if curable, has not been
cured within the earlier of (a) thirty calendar days following receipt of written notice
by the Company from Parent of such breach and (b) any shorter period of time that remains
between the date Parent provides written notice of such breach and the End Date, provided
that Parent is not then in material breach of any representations and warranties, covenants
or agreements set forth in the Merger Agreement that would result in certain closing
conditions not being satisfied; |
| · | if the Board
(or any committee thereof) has changed, withheld, amended or modified its recommendation
to the shareholders of the Company in a manner adverse to Parent; or |
| · | if the Board
has (a) failed to include its recommendation in this proxy statement; (b) failed to publicly
reaffirm its recommendation within three business day after Parent so requests in writing;
(c) recommended to the shareholders of the Company a Competing Transaction; (d) failed
to recommend against any Competing Transaction within ten business days; or (e) entered
into any letter of intent, memorandum of understanding or other document or contract
relating to any Competing Transaction; |
| · | if the Company
has failed to hold the shareholders’ meeting of the Company according to the Merger
Agreement, and failed to remedy such breach within 30 calendar days following receipt
of the written request by Parent; or |
| · | if the Company
has failed to comply with the no-shop undertakings set forth in the Merger Agreement
in any material respect, and failed to remedy such breach within 30 calendar days following
receipt of the written request by Parent. |
Termination Fees and Reimbursement of Expenses (Page 91)
The Company is required to pay Parent a termination fee of
US$1.1 million if the Merger Agreement is terminated:
| · | by Parent if
(a) the Company breaches its representations, warranties, covenants or agreements under
the Merger Agreement (and such breach remains uncured); (b) the Board changes its recommendation
in favor of the Merger; (c) the Board (V) fails to included its recommendation in this
proxy statement; (W) fails to publicly reaffirm its recommendation within three business
day after Parent so requests in writing; (X) recommends to the shareholders of the Company
a Competing Transaction; (Y) fails to recommend against any Competing Transaction within
ten business days; or (Z) enters into any letter of intent, memorandum of understanding
or other document or contract relating to any Competing Transaction, (d) if the Company
has failed to hold the shareholders’ meeting of the Company according to the Merger
Agreement, and failed to remedy such breach within 30 calendar days following receipt
of the written request by Parent, or (e) if the Company has failed to comply with the
no-shop undertakings set forth in the Merger Agreement in any material respect, and failed
to remedy such breach within 30 calendar days following receipt of the written request
by Parent; |
| · | by the Company
(a) in order to enter into an alternative agreement with respect to a Superior Proposal;
or (b) in the event that the Board changes its recommendation with respect to a Superior
Proposal; and |
| · | by either of
the Company or Parent due to (a) the Merger is not completed by the End Date or the failure
of the Company’s shareholders to approve the Transactions, and (b) within 12 months
following the termination of the Merger Agreement, the Company consummates a Competing
Transaction or enters into a definitive agreement for a Competing Transaction. |
Parent is required to pay the Company a termination fee of
US$2.2 million if the Merger Agreement is terminated:
| · | by the Company
due to a breach by Parent or Merger Sub of its representations, warranties, covenants
or agreements under the Merger Agreement (and such breach remains uncured); or |
| · | by the Company
due to the failure of Parent to complete the Merger within ten business days following
the date on which the closing should have occurred pursuant to the Merger Agreement and
(a) all of the conditions to the obligations of Parent and Merger Sub to consummate the
Merger have been satisfied (or waived by Parent and Merger Sub) and (b) the Company has
delivered to Parent an irrevocable commitment in writing that it is ready, willing and
able to consummate the closing. |
In the event that the Company or Parent fails to pay the termination
fee when due and in accordance with the requirements of the Merger Agreement, the Company or Parent, as the case may be, will
be 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, together with accrued interest on
such unpaid termination fee.
U.S. Federal Income Tax Consequences (Page 62)
The receipt of cash pursuant to the Merger or through the exercise
of dissenters’ rights in connection with the Merger will be a taxable transaction for U.S. federal income tax purposes and
may also be a taxable transaction under applicable state, local and other tax laws. See “Special Factors—U.S. Federal
Income Tax Consequences” beginning on page 62. The tax consequences of the Merger or the exercise of dissenters’
rights to you will depend upon your personal circumstances. You should consult your tax advisors for a full understanding of the
U.S. federal, state, local, foreign and other tax consequences of the Merger to you.
PRC Income Tax Consequences (Page 65)
The Company does not believe that it should be considered a
resident enterprise under the PRC Enterprise Income Tax Law (the “EIT Law”) or that the gain recognized on the receipt
of cash for the Company’s Shares or ADSs should otherwise be subject to PRC tax to holders of such Shares or ADSs that are
not PRC tax residents. However, there is uncertainty regarding whether the PRC tax authorities would deem the Company to be a
resident enterprise or that PRC tax would otherwise apply. If the PRC tax authorities were to determine that the Company should
be considered a resident enterprise then the gain recognized on the receipt of cash for the Company’s Shares or ADSs by
the holders of such ADSs or Shares that are not PRC tax residents could be treated as PRC-source income that would be subject
to PRC income tax at a rate of 10% in the case of enterprises or 20% in the case of individuals (subject to applicable tax treaty
relief, if any), and, even in the event that the Company is not considered a resident enterprise, gain recognized on the receipt
of cash for Shares or ADSs is subject to PRC tax if the holders of such Shares or ADSs are PRC resident individuals. Neither Parent
nor Merger Sub intends to withhold any PRC taxes on the consideration provided to non-PRC-resident shareholders of the Company
in connection with the merger. 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. Please see “Special Factors—PRC Income Tax Consequences”
beginning on page 65 for additional information..
Cayman Islands Tax Consequences (Page 66)
The Cayman Islands currently has 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 under the terms of the Merger Agreement. This is subject to the
qualification that (a) Cayman Islands stamp duty may be payable if any original transaction documents are brought to or executed
or produced before a court in the Cayman Islands (for example, for enforcement), (b) registration fees will be payable to the
Cayman Registrar to register the Plan of Merger and (c) fees payable to the Cayman Islands Government Gazette Office to publish
the notice of the Merger in the Cayman Islands Government Gazette, if any. See “Special Factors—Cayman Islands Tax
Consequences” beginning on page 66 for additional information.
Regulatory Matters (Page 62)
The Company does not believe that any material U.S. federal
or state, or foreign, regulatory approvals, filings or notices are required in connection with effecting the Merger other than
the approvals, filings or notices required under the U.S. 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 Government Gazette.
Litigation Related to the Merger (Page 62)
We are not aware of any lawsuit that challenges the Merger,
the Merger Agreement or any of the transactions contemplated thereby.
Accounting Treatment of the Merger (Page 62)
The Merger is expected to be accounted for, at historical cost,
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 67)
The closing price of ADSs on the NASDAQ on July 20, 2015, the
last trading date immediately prior to the Company’s announcement on July 21, 2015 that it had received a going-private
proposal, was US$3.40 per ADS. The consideration of US$4.00 per ADS to be paid in the Merger represents a premium of approximately
17.65% over that closing price.
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: | Why am
I receiving this proxy statement? |
| A: | On December 22, 2015, we entered into the Merger Agreement with
Parent and Merger Sub. You are receiving this proxy statement in connection with the
solicitation of proxies by the Board in favor of the proposal to authorize and approve
the Merger Agreement, the Plan of Merger and the Transactions, including the Merger,
at an extraordinary general meeting or at any adjournment of such extraordinary general
meeting. |
| Q: | When and
where will the extraordinary general meeting be held? |
| A: | The extraordinary general meeting will take place on _______, 2016,
at ______ a.m. (Beijing time) at ______________. |
| Q: | What am
I being asked to vote on? |
| A: | You will be asked
to consider and vote on the following proposals: |
| · | as a special
resolution, that the Merger Agreement, the Plan of Merger and the Transactions, including
the (i) Merger, (ii) the variation of the authorized share capital of the Company from
US$1,000,000 divided into 10,000,000,000 ordinary shares of a par value of US$0.0001
each to US$50,000 divided into 50,000 ordinary shares of a par value of US$1.00 each
(the “Variation of Capital”), and (iii) the amendment and restatement of
the existing memorandum and articles of association of the Company by their deletion
in their entirety and the substitution in their place of the new amended and restated
memorandum and articles of association in the form attached as Appendix II to the Plan
of Merger (the “Adoption of Amended M&A”), be authorized, approved and
adopted; |
| · | as a special
resolution, that each of 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, the Variation of Capital and the Adoption of Amended M&A; and |
| · | if necessary,
as an ordinary resolution, that the extraordinary general meeting be adjourned 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 special
resolutions to be proposed at the extraordinary general meeting. |
| A: | The Merger is a going-private transaction pursuant to which the
Buyer Group will acquire the Company. Once the Merger Agreement and the Plan of Merger
are approved and authorized by the Company’s shareholders and the other closing
conditions under the Merger Agreement have been satisfied or waived, Merger Sub will
merge with and into the Company, with the Company continuing as the Surviving Company
after the Merger. If the Merger is consummated, the Company will continue its operations
as a privately held company beneficially owned by the Consortium and, as a result of
the Merger, ADSs will no longer be listed on NASDAQ and the ADS program for the Shares
will terminate. |
| Q: | What will I receive in the Merger if I own Shares or
ADSs (that are not Excluded Shares)? |
| A: | If you own Shares immediately prior to the Effective Time (that
are not Excluded Shares), at the Effective Time, you will be entitled to receive the
Per Share Merger Consideration, in cash, without interest and net of any applicable withholding
taxes, for each Share you own immediately prior to the Effective Time (unless you validly
exercise and have not effectively withdrawn or lost your dissenters’ rights under
Section 238 of the Cayman Islands Companies Law, a copy of which is attached as Annex
D to this proxy statement, with respect to the Merger, in which event you will be entitled
to receive the fair value of each Share as determined pursuant to Section 238 of the
Cayman Islands Companies Law). |
| | If you own ADSs (that are not ADSs representing Excluded Shares)
immediately prior to the Effective Time, at the Effective Time, you will be entitled
to receive the Per ADS Merger Consideration in cash, without interest and net of any
applicable withholding taxes, for each ADS you own immediately prior to the Effective
Time. You will pay any applicable fees, charges and expenses of the ADS Depositary in
connection with the distribution of the merger consideration to you, including applicable
ADS cancellation fees. |
| | See “Special Factors—U.S. Federal Income Tax Consequences”,
“Special Factors—PRC Income Tax Consequences” and “Special Factors—Cayman
Islands Tax Consequences” beginning on page 62, page 65 and page 66 for a more
detailed description of the tax consequences of the Merger. You should consult your own
tax advisor for a full understanding of how the Merger will affect your U.S. federal,
state, local, non-U.S. and other taxes. |
| Q: | How will the Company Share Awards be treated in the
Merger? |
| A: | As of the date of this proxy statement, there are no outstanding
restricted share units, options, share appreciation rights or any other awards granted
under the Company Incentive Plans. If the Merger is completed, the Company Incentive
Plans and any relevant awards agreements applicable to the Company Incentive Plans will
be terminated. |
| Q: | What effects will the Merger have on the Company? |
| A: | As a result of the Merger, the Company will cease to be a publicly-traded
company and will be beneficially owned by the Consortium. You will no longer have any
interest in the future earnings or growth of the Company. Following the consummation
of the Merger, the registration of the Shares and the reporting obligations with respect
to the Shares under the Exchange Act will be terminated upon application to the SEC.
In addition, upon the consummation of the Merger, the ADSs will no longer be listed or
traded on any stock exchange, including NASDAQ, and the ADS program for the Shares will
terminate. |
| Q: | When do you expect the Merger to be completed? |
| A: | We are working toward consummating the Merger as quickly as possible
and currently expect the Merger to consummate during the second quarter of 2016, after
all conditions to the Merger have been satisfied or waived. In order to consummate the
Merger, we must obtain the shareholders’ approval 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 consummated for any other reason, the Company’s shareholders
will not receive any payment for their Shares or ADSs 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 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 Shares and
ADSs. |
| | Under certain specified circumstances under the Merger Agreement,
the Company may be required to pay Parent or its designees a termination fee and reimburse
Parent for its expenses in connection with enforcing the payment of such termination
fee, or Parent may be required to pay the Company a termination fee and reimburse the
Company for its expenses in connection with enforcing the payment of such termination
fee, in each case, as described in “The Merger Agreement—Termination Fee”
beginning on page 91. |
| Q: | After the Merger is consummated, how will I receive
the merger consideration for my Shares? |
| A: | If you are a registered holder of Shares (that are not Excluded
Shares) immediately prior to the Effective Time, and if you have not exercised dissenter
rights in respect of your Shares, promptly after the Effective Time (and in any event
no more than three business days after the Effective Time), a paying agent appointed
by Parent will mail you (a) a letter of transmittal for the purpose of specifying how
the delivery of the merger consideration to you is to be effected and (b) instructions
for effecting the surrender of any issued share certificates representing Shares (or
affidavits and indemnities of loss in lieu of share certificates) in exchange for the
merger consideration. Upon your surrender of the share certificates (or an affidavit
and indemnity of loss in lieu of the share certificates) together with a duly completed
letter of transmittal, you will receive an amount equal to the number of your Shares
represented by such share certificate (or affidavits and indemnities of loss in lieu
of share certificates) or the number of uncertificated Shares multiplied by the Per Share
Merger Consideration in cash, without interest and net of any applicable withholding
tax, in exchange for the cancellation of your Shares. |
| | In the event of a transfer of ownership of Shares that is not registered
in the register of members of the Company, a cheque for any cash to be exchanged upon
due surrender of the share certificate may be issued to such transferee if the share
certificate which 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 has
been paid or are not applicable. |
| | The Per Share Merger Consideration may be subject to backup withholding
taxes if the paying agent has not received from you a properly completed and signed U.S.
Internal Revenue Service Form W-8 or W-9, as applicable. |
| | If your Shares are held in “street name” by your broker,
bank or other nominee, you will receive instructions from your broker, bank or other
nominee on how to surrender your Shares and receive the merger consideration for those
Shares. |
| Q: | After the Merger is consummated, how will I receive
the merger consideration for my ADSs? |
| A: | If you are a registered holder of ADSs (that are not ADSs representing
Excluded Shares) that are evidenced by certificates, also referred to as American depositary
receipts (“ADRs”), unless you have surrendered your ADRs to the ADS Depositary
for cancellation prior to the Effective Time, upon your surrender of the ADRs (or an
affidavit and indemnity of loss in lieu of the ADRs) together with a duly completed letter
of transmittal (which will be supplied to you by the ADS Depositary after the Effective
Time), the ADS Depositary will send you a check for the Per ADS Merger Consideration,
without interest and net of any applicable withholding taxes, for each ADS represented
by the ADRs, in exchange for the cancellation of your ADRs after the consummation of
the Merger. If you hold your ADSs (that are not ADSs representing Excluded Shares) in
un-certificated form (that is, without an ADR), unless you have surrendered your ADSs
to the ADS Depositary for cancellation prior to the Effective Time, the ADS Depositary
will automatically send you a check for the Per ADS Merger Consideration, without interest
and net of any applicable withholding taxes, in exchange for the cancellation of each
of your ADSs after the consummation of the Merger. You will pay any applicable fees,
charges and expenses of the ADS Depositary in connection with the distribution of the
merger consideration to you, including ADS cancellation fees. |
In the event of a transfer of ownership of ADSs
that is not registered in the register of ADS holders maintained by the ADS Depositary, the check for any cash to be exchanged
upon cancellation of the ADSs will be issued to such transferee only if the ADRs, if applicable, are presented to the ADS Depositary,
accompanied by all documents reasonably required to evidence and effect such transfer and to evidence that any applicable ADS
transfer taxes have been paid or are not applicable.
The Per ADS Merger Consideration may be subject
to backup withholding taxes if the ADS Depositary has not received from you a properly completed and signed U.S. Internal Revenue
Service Form W-8 or W-9, as applicable.
If your ADSs are held in “street name”
by your broker, bank or other nominee at the Depository Trust Company (“DTC”), you will not be required to take any
action to receive the merger consideration for your ADSs as the ADS Depositary will arrange for the surrender of the ADSs and
the remittance of the merger consideration to DTC (the clearance and settlement system for the ADSs) for distribution by DTC to
your broker, bank or other nominee on your behalf. If you have any questions concerning the receipt of the merger consideration,
please contact your broker, bank or other nominee.
| 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 consummated, the Merger Agreement,
the Plan of Merger and the Transactions, including the Merger, must be authorized and
approved by a special resolution (as defined in the Cayman Islands Companies Law) of
the Company’s shareholders, passed by an affirmative vote of holders of Shares
representing two-thirds or more of the Shares present and voting in person or by proxy
as a single class at the extraordinary general meeting. |
| | At the close of business in the Cayman Islands on ______, 2016, the
Share Record Date for the extraordinary general meeting, 455,227,428 Shares are expected
to be issued and outstanding at the extraordinary general meeting. |
Pursuant to the Support Agreements, (a) the Rollover
Shareholders will vote (or cause to be voted) all of the Shares (including the Shares represented by ADSs) beneficially owned
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 Shares will, at the Effective Time, be cancelled for no consideration in the Merger.
Given the Rollover Shareholders’ shareholding
as described above and assuming their compliance with their voting obligations under the Second Amended and Restated Consortium
Agreement and the Support Agreements, based on the number of Shares expected to be issued and outstanding on the Share Record
Date, a quorum will be present at the extraordinary general meeting and sufficient votes will be cast to authorize and approve
the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, without any further vote of any other shareholder.
| 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 in the event that there are insufficient proxies received
at the time of the extraordinary general meeting to pass the special resolutions to be
proposed at the extraordinary general meeting, must be authorized and approved by an
affirmative vote of holders of Shares representing a majority of the Shares present and
voting in person or by proxy as a single class at the extraordinary general meeting. |
| Q: | How does the Board recommend that I vote on the proposals? |
| A: | After careful consideration and upon the unanimous recommendation
of the Special Committee, the Board by a unanimous vote recommends that you vote: |
| · | FOR the proposal
to authorize and approve the Merger Agreement, the Plan of Merger and the Transactions,
including the Merger, the Variation of Capital and the Adoption of Amended M&A; |
| · | 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, the Variation of Capital and the Adoption of Amended M&A; 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 special 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 31 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 and executive officers 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 59.
| Q: | Who is entitled to vote at the extraordinary general
meeting? |
| A: | The Share Record Date is ______, 2016. 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 ADS Record Date is ______, 2016. Only
ADS holders of the Company at the close of business in New York City on the ADS Record
Date are entitled to instruct the ADS Depositary to vote at the extraordinary general
meeting. Alternatively, you may vote at the extraordinary general meeting if you convert
your ADSs into Shares by the close of business in New York City on ______, 2016 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, in person or by proxy (or in the case of a shareholder
being a corporation, by its duly authorized corporate representative), of shareholders
holding not less than an aggregate of one-third of all voting share capital of the Company
on the Share Record Date will constitute a quorum for the extraordinary general meeting. |
| Q: | How will our directors and executive officers vote on
the proposal to authorize and approve the Merger Agreement? |
| A: | Pursuant to the Second Amended and Restated Consortium Agreement
and the Support Agreements, the Rollover Shareholders agreed to vote (or cause to be
voted) all of the Shares (including the Shares represented by ADSs) beneficially owned
by them 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 beneficially own approximately 71.84% of the entire issued
and outstanding Shares. See “Security Ownership of Certain Beneficial Owners and
Management of the Company” beginning on page 99 for additional information. |
| Q: | Do any of the Company’s directors or executive
officers have interests in the Merger that may differ from those of other shareholders? |
| A: | Yes. Some of the Company’s directors or executive officers
have interests in the Merger that may differ from those of other shareholders. See “Special
Factors—Interests of Certain Persons in the Merger” beginning on page 59
for a more detailed discussion of how 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 Company’s shareholders generally. |
| Q: | How do I vote if my Shares are registered in my name? |
| A: | If Shares are registered in your name (that is, you do not hold
ADSs or otherwise hold through a bank or broker) as of the Share Record Date, 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 so that it is received by
the Company no later than ______, 2016 at 12:00 p.m. (Beijing time), the deadline to
lodge your proxy card, so that your Shares may be represented and voted at the extraordinary
general meeting. |
| | Alternatively, you can attend the extraordinary general meeting and
vote in person. To attend the extraordinary general meeting, you must present certain
documents to verify your identities, such as your identification card or passport and
your share certificate. 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 amend and restate the memorandum and articles
of association of the Company in the form attached as Appendix II to the Plan of Merger
upon the Effective Date, 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 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 special 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 convert 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 ______, 2016 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. The ADS Depositary has, however,
advised us that, pursuant to Section 12 of the American Depositary Receipt evidencing
your ADSs, it will not vote or attempt to exercise the right to vote any Shares other
than in accordance with signed voting instructions from the relevant ADS holder and,
accordingly, Shares represented by ADSs for which no timely voting instructions are received
by the ADS Depositary will not be voted. If you hold your ADSs in a brokerage, bank or
other nominee account, you must rely on 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 convert 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 convert your ADSs for the purpose of voting the corresponding Shares, you need to
make arrangements to deliver your ADSs to the ADS Depositary for cancellation before
the close of business in New York City on ______, 2016 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$5.00 for each 100 ADSs
(or portion thereof) to be cancelled pursuant to the terms of the Deposit Agreement),
which will not be borne by the Surviving Company, 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 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 conversion of the ADSs, the
ADS Depositary will arrange for J.P. Morgan 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 request the Cayman Registrar of Shares, Maples Fund Services (Cayman)
Limited, to issue and mail a certificate to your attention. If the Merger is not consummated,
the Company will continue to be a public company in the United States and ADSs will continue
to be listed on NASDAQ. As a result, if you have converted your ADSs to attend the extraordinary
general meeting and you wish to be able to sell your Shares on a stock exchange, you
will 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 (US$5.00 for each 100 ADSs (or portion
thereof) issued) 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; provided that if you are a holder
of Shares and 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 amend and restate the memorandum and articles of association
of the Company in the form attached as Appendix II to the Plan of Merger upon the Effective
Date, 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 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 special 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 the shares
represented by your proxy will be voted (or not submitted for voting) as your proxy determines. |
| 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 before the commencement of the extraordinary general meeting. Any written
notice revoking a proxy should also be sent to the Company’s offices at Room 302,
Qilai Building, No. 889 Yishan Road, Shanghai 200233, People’s Republic of China,
Attention: Investor Relations Department, before the commencement of the extraordinary
general meeting. |
| · | 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 so that it is received by the Company no later than
12:00 p.m. (Beijing time) on ______, 2016, which is the deadline to lodge your proxy
card. |
| · | 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 ______, 2016. A holder
of ADSs can do this in one of two ways:
| · | First, a holder
of ADSs can revoke its voting instructions by written notice of revocation timely delivered
to the ADS Depositary. |
| · | Second, a holder
of ADSs can complete, date and submit 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.
| 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: | If I am a holder of certificated Shares or ADRs, should
I send in my Share certificates or my ADRs now? |
| A: | No. After the Merger is consummated, 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 consummated, 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 consummated 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 consummated. 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 merger consideration to such person, so long as such person is registered as the
owner of such Shares when the Merger is consummated. |
The ADS Record Date is the close of business in New
York City on ______, 2016. 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 merger consideration to the person to whom you transfer your ADSs, so long as such person owns such ADSs when the
Merger is consummated.
| 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 in accordance with Section 238 of the
Cayman Islands Companies Law if the Merger is consummated, but only if they deliver to
the Company, before the vote to authorize and approve 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 for the exercise
of dissenters’ rights, a copy of which is attached as Annex D to this proxy statement.
The fair value of each of their Shares as determined under the Cayman Islands Companies
Law 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 exercise or 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
for conversion into Shares, 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 hold the ADSs
as of the ADS Record Date and have not given, and will not give, voting instructions as to their ADS before 5:00 p.m. (New York
City Time) on ______, 2016, 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 consummated, the
Company will continue to be a public company in the United States and ADSs will 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 converted his, her or its ADSs to exercise dissenters’ rights and the Merger is not consummated
and such former ADS holder wishes to be able to sell his, her or its Shares on a stock exchange, such former ADS holder will 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 (US$5.00 for each 100 ADSs (or portion thereof) issued) 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 94 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: | 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: | Will any proxy solicitors be used in connection with
the extraordinary general meeting? |
| A: | We have not retained a third-party service provider to assist in
the solicitation process. We will ask banks, brokers and other custodians, nominees and
fiduciaries to forward our proxy solicitation materials to the beneficial owners of Shares
or ADSs registered in the name of such nominee holders. In addition, proxies may be solicited
by mail, in person, by telephone, by internet or by facsimile by certain of our 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 pay all
expenses of filing, printing and mailing this proxy statement. |
| 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 our
Investor Relations Department at +86-21-3108-1111, Ext. 8161. |
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 ten days prior to the date of the extraordinary general meeting.
SPECIAL FACTORS
Background of the Merger
Most of the events leading to the execution of the Merger Agreement
described in this “Background of the Merger” occurred in the PRC. As a result, all dates and times referenced in this
Background of the Merger refer to China Standard Time.
The Board and senior management of the Company have been reviewing
periodically the Company’s long-term strategic plan with the goal of maximizing shareholder value. As part of this ongoing
process, the Board and senior management also have periodically reviewed strategic alternatives that may be available to the Company.
CNshangquan and Leading Capital started to discuss the possibility
of privatizing the Company in early July. On July 21, 2015, CNshangquan and Leading Capital entered into a consortium
agreement, which provides for, among other things, good faith cooperation by the parties in connection with the proposed transaction
(as defined below).
On July 21, 2015, CNshangquan and Leading Capital jointly submitted
a preliminary non-binding proposal letter to the Board (the “Proposal”) to acquire all of the outstanding shares of
the Company not already owned by CNshangquan in a going private transaction for US$4.00 per ADS or approximately US$0.114 per
Share in cash (the “proposed transaction”), subject to certain conditions. CNshangquan also stated in the Proposal
that it was interested only in the proposed transaction and was not interested in selling its shares in any other transaction
involving the Company. They intended to finance the transactions contemplated under the Proposal through a combination of cash
and rollover equity and additional equity financing from any investor who may be admitted to the buyer group. They also engaged
Gibson Dunn & Crutcher LLP (“GDC”) as their international legal counsel.
Later on that day, the Company issued a press release regarding
its receipt of the Proposal, and on July 22, 2015, furnished the press release as an exhibit to its current report on Form 6-K
with the SEC.
On July 22, 2015, CNshangquan filed an amendment to the Schedule
13D with the SEC in connection with the Proposal.
On July 28, 2015, the Board held a telephonic meeting to discuss
the Proposal. After the discussion, the Board determined that it was in the best interests of the Company and its shareholders
to establish a special committee of independent and disinterested directors (the “Special Committee”) and thereafter
established the Special Committee to evaluate the Proposal, consisting of Mr. Xiongsheng Yang and Mr. Xiaohua Li, with Mr. Xiongsheng
Yang serving as chairman of the Special Committee. The Special Committee was granted, by way of unanimous written resolutions
by the Board on July 28, 2015, the power and authority to (i) evaluate, communicate and negotiate with relevant parties the terms
and conditions of the proposed transaction or any alternative transaction and, if the Special Committee deems appropriate, approve
and effectuate the proposed transaction; (ii) determine whether the proposed transaction or any alternative transaction negotiated
by the Special Committee is fair to, and in the best interests of, the Company and its shareholders (other than the members of
the Consortium and their respective affiliates and associates); (iii) determine whether proposals with respect to any alternative
transaction should be sought from third parties; (iv) report and recommend to the entire Board with respect to the proposed transaction
or any alternative transaction; (v) execute any documents for and on behalf of the Company by any member of the Special Committee
with respect to the proposed transaction; (vi) retain any advisors, including legal counsels, financial advisors and outside consultants
to assist the Special Committee in discharging its responsibilities; and (vii) exercise any other power that may be otherwise
exercised by the Board and that the Special Committee may determine is necessary or advisable to carry out and fulfill its duties
and responsibilities through abandonment or completion of the proposed transaction.
From late July 2015 to early September 2015, the Special Committee
considered proposals from and conducted interviews with multiple prospective law firms and investment banks that had expressed
interest in being considered for the roles of the U.S. legal advisor and the financial advisor to the Special Committee, respectively.
On August 24, 2015, after due consideration on the overall qualifications,
experience and other characteristics of each potential legal advisor candidate, the Special Committee retained Skadden, Arps,
Slate, Meagher & Flom LLP (“Skadden”) as its U.S. legal advisor to assist the Special Committee in evaluating
and negotiating the proposed transaction or any alternative transaction.
On September 11, 2015, after considering the experience, qualifications
and reputation of each potential financial advisor candidate, the Special Committee engaged Houlihan Lokey as its financial advisor.
The Special Commmitee noted that Houlihan Lokey had prior engagements with the Company, Cnshangquan E-Commerce and Sanpower, respectively,
for which Houlihan Lokey had received compensation, including having acted as financial advisor in: (i) advising Cnshangquan E-Commerce
in connection with its acquisition of a 63.7% interest in the Company in February 2014; (ii) advising the Company in the disposal
of its apparel business in August 2014; (iii) advising Sanpower on the acquisition of Brookstone Inc. in June 2014; and (iv) advising
Cnshangquan E-Commerce on other potential acquisition opportunities which Sanpower and Cnshangquan E-Commerce ultimately decided
to not pursue. See “Special Factors—Opinion of the Special Committee’s Financial Advisor—Other Matters”
on page 51. However, the Special Committee determined that the existence of the the prior engagements did not undermine Houlihan
Lokey’s ability to evaluate the fairness of the proposed transaction due to, among other factors: (a) as confirmed to the
Special Committee by Houlihan Lokey, each of the prior engagements had been concluded or terminated prior to Houlihan Lokey’s
engagement by the Special Committee, (b) the amount of fees Houlihan Lokey had received during the past two years for the foregoing
services, which in the aggregate amounted to US$350,000, did not appear to be material to Houlihan Lokey or its business, and
(c) Houlihan Lokey’s confirmation that it did not believe there existed a conflict of interest that would prohibit it from
serving as a financial advisor to the Special Committee in relation to the proposed transaction. Therefore, the Special Committee
selected Houlihan Lokey as its financial advisor but expressly required in the engagement letter that Houlihan Lokey was to obtain
the Special Committee’s prior written consent before entering into additional representations of, or providing services
to, any buyer group member during the term of Houlihan Lokey’s engagement with the Special Committee.
Later on that day, the Company issued a press release regarding
the Special Committee’s appointment of Skadden as its U.S. legal advisor and Houlihan Lokey as its financial advisor, and
on September 14, 2015 furnished the press release as an exhibit to its current report on Form 6-K with the SEC. The Special Committee
also retained Maples and Calder (“Maples”) on August 27, 2015, as its Cayman Islands legal advisor after considering
the relevant experience and credentials of Maples.
On September 2, 2015, Leading Capital sent a draft non-disclosure
agreement to the Special Committee.
Over the course of the next several days, Skadden and GDC negotiated
the terms of the non-disclosure agreement. On September 11, 2015, the Special Committee, on behalf of the Company, entered into
the non-disclosure agreement with Leading Capital.
On September 14, 2015, GDC sent an initial draft Merger Agreement
to Skadden.
On September 15, 2015, the Special Committee held a telephonic
meeting with Skadden and Houlihan Lokey. During the meeting, Skadden led the Special Committee in a discussion of its duties and
responsibilities as well as best practices in the context of a going-private transaction. Thereafter, Skadden and Houlihan Lokey
provided the Special Committee with a summary of the general process of a going-private transaction and the advisors’ respective
roles in assisting the Special Committee in its work. The Special Committee then engaged in a discussion with its advisors the
possible alternatives to the proposed transaction, including the possibility of continuing to operate the Company as an independent
publicly-traded entity and the possibility of selling the Company to a person unaffiliated with the buyer group. After deliberation,
the Special Committee decided that it would revisit the possible alternatives to the proposed transaction after Houlihan Lokey
conducted a preliminary due diligence investigation on the business and financial conditions of the Company. The Special Committee
then instructed the Company's management to accommodate requests for information from the Special Committee's financial advisor
for its due diligence investigation in connection with the proposed transaction. Skadden reported to the Special Committee that
it had commenced to review the draft Merger Agreement provided by GDC.
On September 24, 2015, Skadden provided an issues list covering
the key issues in the draft Merger Agreement to the Special Committee.
On September 25, 2015, the Special Committee held a telephonic
meeting with Skadden and Houlihan Lokey to discuss the initial draft Merger Agreement provided by GDC on September 14, 2015. During
the meeting, Skadden provided the Special Committee with an overview of the draft Merger Agreement and the key issues for the
Special committee to consider including (i) requiring the buyer group to bear the ADS cancellation fee; (ii) the extensiveness
of representations and warranties to be provided by the Company and the buyer group, respectively, (iii) the “no shop”
provisions, including the absence of any “go-shop” right of the Company following the execution of the Merger Agreement,
(iv) the absence of the “fiduciary out” rights (the “Fiduciary Out Rights”) that would permit the Board
to change recommendation and terminate the Merger Agreement, (v) the “force the vote” provision, pursuant to which
the buyer group would have the right to force a shareholder vote even if a change in the company recommendation was made by the
board (the “Force the Vote Provision”), (vi) the closing conditions, including the absence of a “majority of
the minority vote” requirement, and a condition for the benefit of the buyer group that shareholders representing no more
than 1% of the outstanding shares had validly serving a notice of objection under 238(2) of the CICL as dissenting shareholders,
(vii) certain trigger events for the termination of the Merger Agreement and the payment of termination fees and (viii) the buyer
group’s right to terminate the Merger Agreement notwithstanding that all closing conditions are satisfied and the prohibition
of the Company from specifically enforcing the Merger Agreement and the equity commitment in case of a breach by Parent, Merger
Sub or the Sponsor. The Special Committee also discussed with its advisors the possibility of conducting a market check. In considering
this issue, the Special Committee noted that (x) the buyer group owed approximately 63.8% of the outstanding voting power and
therefore had ability to veto any other transaction at a shareholder meeting and was clearly a controlling shareholder for any
matter that requires shareholders’ approval, including the election of the directors, (y) the buyer group had clearly indicated
that it was committed to the current proposal and not any potential proposal from a third party, and (z) no other party had expressed
an interest in a transaction with the Company since the announcement of the proposed transaction. The Special Committee concluded
that it was unlikely that a market check would result in a competing proposal from a third party that could likely be consummated,
but the Special Committee would remain open to considering alternative bids for the Company, including potentially through a “go-shop”
process. After thorough discussion and considering the views of its advisors, the Special Committee agreed on a proposed response
to the key issues.
On October 8, 2015, CNshangquan, through GDC, informed the Special
Committee and Skadden that ChinaEquity, who holds approximately 8% of the Company’s issued and outstanding ordinary shares,
had expressed an interest in joining the buyer group for the proposed transaction.
On the same day, the Special Committee held a telephonic meeting
with Skadden and Houlihan Lokey. During the meeting, Skadden explained to the Special Committee the possible implications of ChinaEquity’s
joining the buyer group, in particular that CNshangquan and ChinaEquity collectively held approximately 71.84% of the Company’s
total voting power, which had exceeded the statutory threshold for the shareholders to approve a merger under the law of the Cayman
Islands and would further enhance the buyer group’s controlling power at any shareholders’ meeting. In light of the
buyer group’s shareholding position and their expressed position not to sell their respective stakes in the Company to any
third party, the Special Committee reaffirmed its intial assessment that it is unlikely to find any party that will be able to
consummate an alternative transaction with the Company through a pre-signing market check process. Skadden then led the Special
Committee in a discussion of the updated issues list taking into account ChinaEquity’s participation in the proposed transaction.
After discussion and careful consideration, the Special Committee instructed Skadden to revise and negotiate with the buyer group
various terms of the Merger Agreement, including (i) requesting the buyer group to increase the offer price and bear the ADS cancellation
fee; (ii) streamlining the Company’s representations and warranties in light of the buyer group’s familiarity with
the Company; (iii) requesting a 60-day go-shop right of the Company following the execution of the Merger Agreement; (iv) requesting
the Fiduciary Out Rights and deleting the Force to Vote Provision; (v) requesting a closing condition of “majority of minority
vote” and deleting the condition to the obligations of Parent and Merger Sub consummate the proposed transaction that the
dissenting shares will not exceed 1% of the Company’s shares; (vi) limiting the buyer group’s right to terminate the
Merger Agreement and the triggering events for payment of the Company termination fee; (vii) requesting the Company’s right
to specifically enforce the Merger Agreement and the Equity Commitment Letter; (viii) suggesting the amount of the buyer group
termination fee be twice of the Company termination fee; and (ix) excluding from the scope of liabilities to which the Company
would be subject, any liabilities arising from any breach by the Company under the Merger Agreement which was under the direction
of the buyer group; and (x) proposing the long stop date to be on the six-month anniversary of the signing date of the Merger
Agreement (rather than on the twelve-month anniversary as proposed by the buyer group).
On October 10, 2015, GDC sent to Skadden a draft non-disclosure
agreement between the Company and ChinaEquity and the draft amended and restated non-disclosure agreement between the Company
and Leading Capital. On the same day, the Special Committee, on behalf of the Company, entered into the non-disclosure agreement
with ChinaEquity and the amended and restated non-disclosure agreement with Leading Capital to allow the buyer group members to
amend the Consortium Agreement.
On October 12, 2015, Skadden sent a revised draft of the Merger
Agreement to GDC.
On October 23, 2015, the Special Committee held a meeting with
Houlihan Lokey and Skadden. During the meeting, Houlihan Lokey updated the Special Committee on the progress of its financial
due diligence and financial analysis on the Company. The Special Committee then discussed with Houlihan Lokey whether the purchase
price paid by Cnshangquan E-Commerce in its acquisition of a 63.7% of the Shares in the Company in May 2014 (the “2014 Acquisition”)
presented a meaningful comparison for purposes of determining the fairness of the Per Share Merger Consideration. Houlihan Lokey
explained to the Special Committee that although the purchase price paid by Cnshangquan E-Commerce in the 2014 Acquisition was
a factor to be considered, a direct comparison would not be a material indicator of the present value of the Company, nor should
it be viewed as a primary benchmark for evaluating whether the Per Share Merger Consideration is fair to the Company’s shareholders
who are not affiliated with the Company because, among other reasons, the 2014 Acquisition was completed more than nineteen months
earlier and the Company’s business and financial conditions were different then from now, particularly in light of the fact
that the Company had undergone a subsequent spin-off of its apparel business in September 2014. Skadden then reviewed with the
Special Committee the remaining outstanding key issues of the Merger Agreement, the implications thereof and the positions that
the Special Committee may adopt.
On October 26, 2015, CNshangquan, Leading Capital and ChinaEquity
entered into an Amended and Restated Consortium Agreement.
On October 27, 2015, GDC delivered a revised draft of the Merger
Agreement to Skadden.
On October 30, 2015, GDC delivered initial drafts of the Support
Agreements to Skadden.
On the same day, Skadden provided the Special Committee with an
updated issues list of the Merger Agreement and the Support Agreements. The Special Committee instructed Skadden to negotiate
with GDC.
Later on that day, GDC delivered initial drafts of the Limited
Guarantee and the Equity Commitment Letter to Skadden.
On November 4, 2015, the Special Committee met with Houlihan Lokey
by conference call to follow up on questions raised during the October 23, 2015 meeting regarding, among other things, the extent
to which the purchase price paid by Cnshangquan E-Commerce in the 2014 Acquisition should be considered in evaluating the fairness
of the consideration to be paid to shareholders unaffiliated with the Company, and the historical share price performance of the
Company following the 2014 spin-off of the Company’s apparel business. In addition, Houlihan Lokey updated the Special Committee
on its financial analyses and discussed with the Special Committee potential valuation methodologies to be employed and the basis
for such methodologies, including the criteria used to select comparable companies for its selected companies analysis and the
criteria used to select precedent transactions for its selected transactions analysis.
On November 6, 2015, at the request of the Special Committee, Maples
advised the Special Committee that there is no requirement under the laws of the Cayman Islands that the merger consideration
payable in the proposed transaction must be no less than the purchase price paid in the 2014 Acquisition.
On November 9, 2015, Skadden held a telephone call with GDC to
discuss the remaining outstanding issues in the Merger Agreement, the Support Agreements, the Limited Guarantee and the Equity
Commitment Letter. GDC indicated that they would discuss in further details Skadden’s comments to the Merger Agreement and
other transaction documents with the buyer group. During the course of next two days, Skadden and GDC had a series of calls to
discuss the remaining outstanding issues. On November 12, 2015, Skadden provided the Special Committee with an updated issues
list based on its discussions with GDC.
On November 13, 2015, the Special Committee held a telephonic meeting
with Skadden. During the meeting, Skadden reported to the Special Committee that the buyer group had agreed to delete the Force
the Vote provision and the closing condition of no more than 1% dissenting shares, and made a packaged proposal to the Special
Committee that the buyer group would agree that (a) the buyer group shall not have a right to terminate the Merger Agreement if
all closing conditions are satisfied and (b) the Company shall have the right to specifically enforce the Merger Agreement, the
Equity Commitment Letter and the Support Agreements in case of a breach by the buyer group, if the Special Committee would agree
(x) the US$4 per ADS or US$0.114 per Share merger consideration, (y) the deletion of “go-shop” provision, and (z)
the ADS cancellation fees shall be borne by the holders thereof as provided in the Deposit Agreement. The Special Committee further
discussed whether it was meaningful to include a “go-shop” period after the execution of the Merger Agreement. In
light of the buyer group’s shareholding position and voting power, the Special Committee concluded that it would be unlikely
to attract any third party to make competing proposals for the Company through a “go-shop” process. The Special Committee
also noted that the majority-of-the-minority voting requirement was not a statutory requirement under the law of the Cayman Islands
and that it was not common to have such a requirement based on past going-private transactions involving Cayman Islands companies
and then concluded that it would reserve its right to revisit the shareholders’ approval requirement proposed by the buyer
group depending on the outcomes of the other negotiating points with the buyer group. After further discussion and careful consideration,
the Special Committee instructed Skadden to revise and negotiate with the buyer group the terms of the Merger Agreement, including
(i) accepting the deletion of “go-shop” provision but requesting the Company’s Fiduciary Out Rights; (ii) accepting
that the ADS cancellation fees will be borne by the holders thereof as provided in the Deposit Agreement; (iii) accepting the
long stop date being nine-month anniversary of the signing date of the Merger Agreement; (iv) requesting the buyer group to increase
offer price, (v) streamlining the Company’s representations and warranties; (vi) requesting a closing condition of “majority
of minority vote”; (vii) limiting the buyer group’s right to terminate the Merger Agreement and the triggering events
for payment of the Company termination fee; (viii) proposing a Parent termination fee in the amount of 6% of the Company's equity
value implied by the merger consideration and a Company termination fee in the amount of 3% of the Company's equity value implied
by the merger consideration; and (ix) excluding from the scope of liabilities to which the Company would be subject, any liabilities
arising from any breach by the Company under the Merger Agreement which was under the direction of the buyer group.
On November 14, 2015, Skadden sent revised drafts of the Merger
Agreement, the Limited Guarantee, the Support Agreements and the Equity Commitment Letter to GDC.
In mid November 2015, Leading Capital suspended the discussions
with CNshangquan after it re-evaluated the proposed transaction internally. It formally notified CNshangquan to withdraw from
the proposed transaction on December 15, 2015. In mid December 2015, ChinaEquity indicated interest to CNshangquan of providing
equity financing to the proposed transaction and later agreed to provide equity financing to the proposed transaction. On December
17, 2015, CNshangquan, ChinaEquity and ChinaEquity HK entered into a Second Amended and Restated Consortium Agreement.
On December 10, 2015, GDC sent further revised draft of the Merger
Agreement to Skadden, in which the buyer group (i) agreed to streamline certain representations and warranties of the Company;
(ii) agreed to exclude from the scope of liabilities to which the Company would be subject, any liabilities arising from any breach
by the Company under the Merger Agreement which was under the direction of the buyer group; (iii) rejected to increase the offer
price; (iv) rejected to include in the closing conditions of a “majority of minority vote”; (v) proposed a Parent
termination fee of US$2 million and a Company termination fee of US$1 million; (vi) rejected the Fiduciary Out Rights; and (vii)
insisted that the Company shall pay termination fee if the Company consummate a competing transaction within 12 months after the
termination of the Merger Agreement upon long stop date or upon failure to obtain the requisite shareholders’ vote for the
proposed transaction.
On December 10, 2015, Mr. Xiongsheng Yang, on behalf of the Special
Committee, discussed the outstanding issues with Skadden, and instructed Skadden to request the buyer group to formally respond
to the Special Committee’s request to increase the offer price.
On December 12, 2015, Skadden had a telephone call with GDC to
discuss the remaining outstanding issues in the Merger Agreement, including the Special Committee’s request for the buyer
group to increase the offer price. On December 13, 2015, Skadden sent a revised draft of the Merger Agreement to GDC, (i) accepting
the deletion of the “majority of minority vote”; (ii) proposing a Parent termination fee of US$2.5 million and a Company
termination fee of US$1.25 million; (iii) requesting the Fiduciary Out Rights and proposing that a change of recommendation pursuant
to the Fiduciary Out Rights (and not pursuant to a superior proposal) will not entitle the Company to terminate the Merger Agreement;
and (iv) accepting that the Company shall pay termination fee if the Company consummate a competing transaction within 12 months
after the termination of the Merger Agreement upon long stop date or upon failure to obtain the requisite shareholders’
vote for the proposed transaction, provided that all references to “20%” in the definition of “competing transaction”
shall be references to “50%”.
On December 14, 2015, GDC sent an email to Skadden expressing that
the buyer group, after deliberation among its members, would like to advise the Special Committee that they will not increase
the offer price for several reasons, including (i) the US$4.00 per ADS offer price presented a premium of approximately 17.65%
to the closing price of the Company’s ADS on the date before the announcement of the Proposal. Since announcement of the
Proposal in July, the Company’s ADSs had been trading consistently at a substantial discount to the offer price, which suggested
that the current offer price offered public shareholders a meaningful premium; (ii) the Company continued to experience weak financial
performance. Its net income in the third quarter 2015 was US$1.1 million, a decrease of 21% from the net income of US$1.4 million
in the second quarter 2015; (iii) the devaluation of RMB against USD would have further negative impact on the valuation of the
Company given the Company’s revenues came primarily from operations in China; and (iv) the growth of China’s economy
continued to slow down in the foreseeable future.
Later on that day, GDC sent revised drafts of the Limited Guarantee,
the Support Agreements and the Equity Commitment Letter to Skadden.
Between December 12, 2015 and December 21, 2015, Skadden and GDC
continued to negotiate and finalized the terms of the Merger Agreement, including reaching agreement on the Parent termination
fee of US$2.2 million and the Company termination fee of US$1.1 million, and on other transaction documents, including the Limited
Guarantee, the Equity Commitment Letter and the Support Agreements.
On December 21, 2015, at the request of the Special Committee,
the buyer group provided evidence of creditworthiness of the Sponsor to the Special Committee.
On December 22, 2015, the Special Committee convened a telephonic
meeting with Houlihan Lokey, Skadden and Maples. At the outset of the meeting, Maples reviewed with the members of the Special
Committee the fiduciary duties under the laws of the Cayman Islands in connection with their consideration of the proposed transaction.
Skadden then reviewed with the members of the Special Committee the key terms of the Merger Agreement and the related transaction
documents. Thereafter, Houlihan Lokey presented to the Special Committee its financial analysis with respect to the consideration
to be paid to the Company’s shareholders in the proposed transaction and rendered its oral opinion (which was confirmed
in writing by delivery of Houlihan Lokey’s written opinion dated the same day), to the effect that, as of December 22, 2015,
based upon and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken and
other matters considered by Houlihan Lokey in preparing its opinion, the Per Share Merger Consideration and the Per ADS Merger
Consideration to be received in the Merger by holders of the Shares and ADSs, as applicable (other than holders of the Excluded
Shares, including Excluded Shares represented by ADSs, and the Dissenting Shares), was fair, from a financial point of view, to
such holders of the Shares and ADSs. Please see “Special Factors – Opinion of the Special Committee’s Financial
Advisor” beginning on page 43 for additional information regarding the financial analysis performed by Houlihan Lokey and
the opinion rendered by Houlihan to the Special Committee. The full text of the written opinion of Houlihan Lokey to the Special
Committee, dated December 22, 2015, is attached as Annex C to this proxy statement. Following a comprehensive, detailed discussion
of the updated terms of the Merger Agreement, as well as Houlihan Lokey’s financial presentation and opinion, the Special
Committee unanimously resolved to approve and recommend that the Board approve the proposed Merger Agreement, the Plan of Merger
and the Transactions, including the merger.
On the same day following the meeting of the Special Committee,
the Board held a telephonic meeting. Ms. Yang Wang, a director of the Company who also serves as an executive vice president of
Sanpower, declared her interest in the proposed transaction before voting. All the directors of the Company, based on the unanimous
recommendation of the Special Committee, unanimously approved the proposed Merger Agreement, the Plan of Merger and the Transactions,
including the Merger, and recommended that the Company's shareholders vote to approve the Merger Agreement, the Plan of Merger
and the Transactions, including the Merger. Please see “Special
Factors—Reasons for the Merger and Recommendation of the
Special Committee and the Board” beginning on page 31 for
a description of the resolutions of the Board at this meeting.
Following the meeting of the Board, the Company, Parent, Merger
Sub, the Sponsor and other members of the Buyer Group, as applicable, executed the Merger Agreement, the Support Agreements, the
Limited Guarantee and the Equity Commitment Letter and the Company then issued a press release announcing the execution of the
Merger Agreement and the Limited Guarantee, and furnished the press release as an exhibit to its current report on Form 6-K with
the SEC.
On December 23, 2015, each of CNshangquan and ChinaEquity, together
with their respective affiliates, filed with the SEC an amendment to Schedule 13D in connection with the execution of the Merger
Agreement, the Limited Guarantee, the Support Agreements and the Equity Commitment Letter.
Reasons for the Merger and Recommendation of the Special Committee
and the Board
The Special Committee and the Board believe 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 would otherwise be considered competitively sensitive and would not be disclosed by a non-reporting company. As a result,
our actual or potential competitors, customers, lenders and vendors all have ready access to this information, which potentially
may help them compete against us or make it more difficult for us to negotiate favorable terms with them, as the case may be.
The Special Committee and the Board also believe the limited trading
volume of the Company’s ADSs on NASDAQ does not justify the costs of remaining a public company, including the costs of
complying with the Sarbanes-Oxley Act of 2002 and other U.S. federal securities laws. See “Special Factors—Effects
of the Merger on the Company—Private Ownership” for further information on the costs of the Company complying with
the U.S. federal securities laws.
At a meeting on December 22, 2015, the Special Committee, after
consultation with its financial advisor and legal counsels and due consideration, unanimously (a) determined that the Merger,
on the terms and subject to the conditions set forth in the Merger Agreement, is fair to, and in the best interests of, the Company
and its Unaffiliated Security Holders, (b) approved and declared it advisable for the Company to enter into the Merger Agreement,
the Plan of Merger, the Limited Guarantee 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.
On December 22, 2015, the Board, acting upon the unanimous recommendation
of the Special Committee and on behalf of the Company, unanimously (a) determined that the Merger as contemplated in the Merger
Agreement and the Plan of Merger is fair to and in the best interests of the Company and the Unaffiliated Security Holders and
it is advisable for the Company to enter into the Merger Agreement, the Plan of Merger and the Transactions, including the Merger,
(b) authorized and approved the execution, delivery and performance of the Merger Agreement, the Plan of Merger, the Limited Guarantee
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 respective determinations, the
Special Committee and the Board considered the following factors and potential benefits of the Merger, each of which the Special
Committee and the Board believe supported their respective decisions to recommend the Merger Agreement and that the Merger is
substantially fair to the Unaffiliated Security Holders. These factors and potential benefits, which are not listed in any relative
order of importance, are discussed below:
| · | the Special
Committee’s and the Board’s knowledge of the Company’s business, financial
condition, results of operations, prospects and competitive position and their belief
that the Merger is financially more favorable to the Unaffiliated Security Holders than
any other alternative reasonably available to the Company and the Unaffiliated Security
Holders; |
| · | estimated 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; |
| · | the current
and historical market prices of ADSs, and the fact that the Per Share Merger Consideration
of US$0.114 and the Per ADS Merger Consideration of US$4.00 offered to the Unaffiliated
Security Holders representing a premium of 17.65%, 22.70% and 4.99% to the closing price
on July 20, 2015, the last trading day prior to the Company’s announcement that
it had received a going-private proposal, July 14, 2015, one week prior to the announcement,
and June 19, 2015, one month prior to the announcement, respectively; |
| · | the limited
trading volume of the Company’s ADSs on NASDAQ; |
| · | the costs of
regulatory compliance for public companies; |
| · | the trends
in the Company’s industry, including competition; |
| · | the recognition
that, 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 recognition
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; |
| · | the recognition
that, as an SEC-reporting company, the Company is required to disclose a considerable
amount of business information to the public, some of which would otherwise be considered
competitively sensitive and would not be disclosed by a non-reporting company and which
potentially may help our actual or potential competitors, customers, lenders and vendors
compete against us or make it more difficult for us to negotiate favorable terms with
them, as the case may be; |
| · | the possible
alternatives to the Merger (including the possibility of continuing to operate the Company
as an independent publicly-traded entity and the perceived risks of that alterative),
the range of potential benefits to its shareholders of the possible alternatives and
the timing and the likelihood of accomplishing the goals of such alternatives, and the
assessment by the Special Committee that none of these alternatives was reasonably likely
to present superior opportunities for the Company or to create greater value for its
shareholders than the Merger, taking into account the likelihood of execution as well
as business, competitive, industry and market risks; |
| · | the fact that
the consideration payable in the Merger is entirely in cash, which will allow the Unaffiliated
Security Holders to immediately realize liquidity for their investment and provide them
with certainty of the value of their Shares or ADSs; |
| · | the possibility
that it could take a considerable period of time before the trading price of the ADSs
would reach and sustain at least the per ADS Merger Consideration of US$4.00, as adjusted
for present value, and the possibility that such value might never be obtained; |
| · | the negotiations
with respect to the Per Share Merger Consideration and Per ADS Merger Consideration and
the Special Committee’s determination that, following extensive negotiations with
the Buyer Group, US$0.114 per Share and US$4.00 per ADS was the highest price 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 likelihood
that the Merger would be consummated based on, among other things (not in any relative
order of importance): |
| · | the fact that
Parent had obtained an equity commitment from the Sponsor for the Transactions, including
the Merger, and the limited number and nature of the conditions to the financing and
the obligation of Parent to use its reasonable best efforts to obtain the financing,
each of which, in the reasonable judgment of the Special Committee, increases the likelihood
of such financing being completed; |
| · | the absence
of a financing condition in the Merger Agreement; |
| · | the likelihood
and anticipated timing of consummating the Merger in light of the scope of the conditions
to closing; and |
| · | the Company’s
ability, in certain circumstances as set out in the Merger Agreement, to seek specific
performance to prevent breaches of the Merger Agreement and to enforce specifically the
terms of the Merger Agreement, and cause the equity financing to be funded pursuant to
the Equity Commitment Letter; |
| · | the fact that
the Merger Agreement provides that, in the event of a failure of the Merger to be consummated
under certain circumstances, Parent will pay the Company a termination fee of US$2.2
million and the guarantee of such payment obligation by ChinaEquity to the Limited Guarantee
(see “The Merger Agreement—Termination Fee” beginning on page 91 and
“Special Factors—Limited Guarantee” beginning on page 63); |
| · | the financial
analysis reviewed by Houlihan Lokey with the Special Committee, and the oral opinion
to the Special Committee (which was confirmed in writing by delivery of Houlihan Lokey’s
written opinion dated December 22, 2015), with respect to the fairness, from a financial
point of view, of the Per Share Merger Consideration and the Per ADS Merger Consideration,
as applicable, to be received in the Merger by holders of the Shares and ADSs, as applicable
(other than holders of the Excluded Shares, including Excluded Shares represented by
ADSs, and the Dissenting Shares), as of December 22, 2015, based upon and subject to
the procedures followed, assumptions made, qualifications and limitations on the review
undertaken and other matters considered by Houlihan Lokey in preparing its opinion. (see
“Special Factors—Opinion of the Special Committee’s Financial Advisor”
beginning on page 43 for additional information); and |
| · | since the announcement
of the proposed transaction on July 21, 2015 and prior to the entry into the Merger Agreement,
no party other than the members of the Buyer Group had contacted the Company or the Special
Committee expressing an interest in exploring an alternative transaction with 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 Security
Holders and to permit the Special Committee and the Board to represent effectively the interests of such Unaffiliated Security
Holders, which procedural safeguards include the following, which are not listed in any relative order of importance:
| · | the consideration
and negotiation of the Merger Agreement was conducted entirely under the control and
supervision of the Special Committee, which consists of two independent directors, each
of whom is an outside, non-employee director, and that no limitations were placed on
the Special Committee’s authority; |
| · | in considering
the transaction with the Buyer Group, the Special Committee acted solely to represent
the interests of the Unaffiliated Security Holders, and the Special Committee had independent
control of the extensive negotiations with the Buyer Group and their respective advisors
on behalf of the Unaffiliated Security Holders; |
| · | all of the
members of Special Committee during the entire process were and are independent directors
and free from any affiliation with the Buyer Group; in addition, none of the members
of the Special Committee 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 Security Holders other than the members’
receipt of Board and Special Committee compensation (which is not contingent upon the
consummation 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; |
| · | the Special
Committee was assisted in negotiations with the Buyer Group and in its evaluation of
the Merger by Houlihan Lokey as its financial advisor and Skadden and Maples as its legal
advisors; |
| · | the Special
Committee was empowered to consider, attend to and take any and all actions in connection
with the written proposal from the Buyer Group in connection with the proposed transaction
from the date the Special Committee was established, and no evaluation, negotiation or
response regarding the proposed transaction 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 empowered to exercise the full power and authority of the Board in connection
with the proposed transaction and related process; |
| · | the Special
Committee held meetings on multiple occasions to consider and review the terms of the
Merger Agreement and the proposed transaction; |
| · | the recognition
by the Special Committee and the Board that the Special Committee had no obligation to
recommend the Merger or any other transaction; |
| · | the Company’s
ability, subject to compliance with the terms of the Merger Agreement, to terminate the
Merger Agreement prior to the receipt of the Company Shareholder Approval in order to
accept an alternative transaction proposed by a third party that constitutes a Superior
Proposal if the Board determines that its exercise of fiduciary duties requires a change
in its recommendation to its shareholders with respect to the Merger; |
| · | the ability
of the Board, under certain circumstances, to change, withhold, withdraw, qualify or
modify its recommendation that the shareholders vote to approve the Merger Agreement,
including with respect to a Superior Proposal; |
| · | the ability
of the Board to evaluate bona fide, unsolicited alternative acquisition proposals that
may arise between the date of the Merger Agreement and the date of the approval of the
Merger by the Company’s shareholders, to furnish confidential information to and
conduct negotiations with such third parties and, in certain circumstances, to terminate
the Merger Agreement, subject to the payment to Parent of a termination fee, and accept
a Superior Proposal, consistent with the Board’s fiduciary obligations; and |
| · | the availability
of dissenters’ rights to the Unaffiliated Security Holders 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
as determined by the Grand Court of the Cayman Islands. |
The Special Committee and the Board also considered a variety of
potentially negative factors concerning the Merger Agreement and the Merger, including the following, which are not listed in
any relative order of importance:
| · | approval of
the Merger Agreement is not subject to the authorization and approval of holders of a
majority of the Company’s outstanding Shares and ADSs unaffiliated with the Buyer
Group and, given that the Buyer Group has approximately 71.84% of the voting rights of
the issued and outstanding Shares, the Buyer Group has the ability to authorize and approve
the Merger Agreement, the Plan of Merger and the Transactions, including the Merger,
at the extraordinary general meeting, without any further vote of any other shareholder; |
| · | the Unaffiliated
Security 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, or to benefit from increases, if any, in the value of Shares and ADSs,
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; |
| · | the restrictions
on the conduct of the Company’s business prior to the consummation of the Merger,
which 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 the consummation of the Merger; |
| · | the highest
historical closing price of ADSs were US$86.30 per ADS and US$4.25 since the Company
became publicly listed on NASDAQ in October 2010 and the Company span off its apparel
business in September 2014, respectively; |
| · | the risks and
costs to the Company if the Merger does not consummate, 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$1.1
million in connection with a termination of the Merger Agreement; |
| · | the Company’s
remedy in the event of a breach of the Merger Agreement by Parent or Merger Sub is limited,
under certain circumstances, to receipt of a reverse termination fee of US$2.2 million,
and under certain circumstances the Company may not be entitled to a reverse termination
fee or expenses at all; |
| · | the terms of
the Buyer Group’s participation in the Merger and the fact that CNshangquan and
ChinaEquity may have interests in the Merger that are different from, or in addition
to, those of the Unaffiliated Security Holders (see “Special Factors—Interests
of Certain Persons in the Merger” beginning on page 59 for additional information); |
| · | the possibility
that the Merger might not be consummated 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 |
| · | the taxability
of an all-cash transaction to the Unaffiliated Security Holders who are U.S. Holders
(as defined under “Special Factors—U.S. Federal Income Tax Consequences”)
for U.S. federal income tax purposes, and the likely taxability of such a transaction
to the Unaffiliated Security 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 Security 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 Houlihan
Lokey. These analyses included, among others, selected companies analysis, selected transactions analysis and discounted cash
flow analysis. All of the material analyses as presented to the Special Committee on December 22, 2015 are summarized below under
the section entitled “Special Factors—Opinion of the Special Committee’s Financial Advisor” beginning
on page 43. The Special Committee expressly adopted these analyses and opinions, 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, the Special Committee and the Board believe that the value
of the Company’s assets that might be realized in a liquidation would be significantly less than its going-concern value.
Each of the Special Committee and the Board 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 our 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 67. 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. The Special Committee and the Board believe 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 or the business risks inherent in competing with larger companies in that industry. The Company’s
net book value per Share as of December 31, 2014 was US$0.115 based on 455,227,428 Shares issued and outstanding as of that date.
The Company is not aware of any firm offers made by any unaffiliated person, other than the filing persons, during the past two
years for (i) the merger or consolidation of the Company with or into another company, (ii) the sale of all or a substantial part
of the Company’s assets or (iii) the purchase of the Company’s voting securities that would enable the holder to exercise
control over the Company.
Each of the Special Committee and the Board considered the purchase
prices paid in previous purchases as described under “Transactions in Shares and ADSs” beginning on page 98.
In May 2014, CNshangquan E-Commerce completed the 2014 Acquisition.
The Special Committee undertook comprehensive discussions with its advisors as described in detail under “Special Factors—Background
of the Merger” and determined that the purchase price paid in the 2014 Acquisition is not a primary benchmark for evaluation
whether the merger consideration is fair to the Unaffiliated Security Holders for reasons including (i) the 2014 Acquisition was
completed more than nineteen months ago, (ii) the Company’s business and financial conditions was different then from now,
particularly in light of the fact that the Company had undergone a subsequent spin-off of its apparel business in September 2014,
and (iii) there is no requirement under the laws of the Cayman Islands that the merger consideration must be no less than the
purchase price paid in the 2014 Acquisition.
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
Security Holders and its decision to authorize and approve the Merger Agreement, the Plan of Merger and the Transactions, including
the Merger, and recommend the authorization and approval of 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 “Special
Factors— Background of the Merger,” and adopted such recommendations and analysis. During its consideration of the
Merger Agreement and the Transactions, including the Merger, the Board was also aware that some of the Company’s shareholders,
including CNshangquan and ChinaEquity, and certain directors and employees of the Company, have interests with respect to the
Merger that are, or may be, different from, or in addition to those of the Company’s Unaffiliated Security Holders generally,
as described under the section entitled “Special Factors—Interests of Certain Persons in the Merger” beginning
on page 59.
Except as set forth under “Special Factors—Background
of the Merger” beginning on page 26, “Special Factors—Reasons for the Merger and Recommendation of the Special
Committee and the Board” beginning on page 31 and “Special Factors—Opinion of the Special Committee’s
Financial Advisor” beginning on page 43, 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 Transaction
and/or preparing a report concerning the fairness of the Transaction.
For the foregoing reasons, the Special Committee and the Board
believe 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 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 may be deemed to be an affiliate of the Company, and therefore, required to express its belief as to the fairness
of the Merger to the Unaffiliated Security Holders. 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 views of
the Buyer Group as to the fairness of the Merger are not intended and should not be construed as a recommendation to any holder
of Shares or 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 in addition to, those of the Unaffiliated
Security Holders by virtue of their continuing interests in the Surviving Company after the consummation of the Merger. See “Special
Factors—Interests of Certain Persons in the Merger” beginning on page 59 for additional information.
The Buyer Group believes the interests of the Unaffiliated Security
Holders were represented by the Special Committee, which negotiated the terms and conditions of the Merger Agreement with the
assistance of its legal and financial advisors. The Buyer Group attempted to negotiate a transaction that would be most favorable
to them, rather than to the Unaffiliated Security Holders and, accordingly, did not negotiate the Merger Agreement with a goal
of obtaining terms that were substantively and procedurally fair to such holders. No member of the Buyer Group participated in
the deliberations of the Special Committee regarding, and did not receive any advice from the Special Committee’s legal
or financial advisors as to, the fairness of the Merger to the Unaffiliated Security Holders. Furthermore, the members of the
Buyer Group did not engage a financial advisor for the purpose of performing any independent valuation or other analysis to assist
them in assessing the fairness of the Per Share Merger Consideration or Per ADS Merger Consideration, as applicable, to the Company’s
Unaffiliated Security Holders.
Based on their knowledge and analysis of available information
regarding the Company, as well as the factors considered by, and the analysis and resulting conclusions of, the Special Committee
and the Board discussed in “Special Factors—Reasons for the Merger and Recommendation of the Special Committee and
the Board” beginning on page 31, the Buyer Group believes the Merger is substantively and procedurally fair to the Unaffiliated
Security Holders. In particular, the Buyer Group’s belief is based on the consideration of the following factors, which
are not listed in any relative order of importance:
| · | the Per ADS
Merger Consideration of US$4.00 represents a premium of 17.65%, 22.70% and 4.99% to the
closing price on July 20, 2015, the last trading day prior to the Company’s announcement
that it had received a going-private proposal, July 14, 2015, one week prior to the announcement,
and June 19, 2015, the last trading day one month prior to the announcement, respectively; |
| · | the Company’s
ADSs traded as low as US$3.03 per ADS during the 52-week period prior to the announcement
of the execution of the Merger Agreement; |
| · | the recognition
of the potential disadvantages that the Company would continue to face as an SEC-reporting
public company, including continuing to be subject to the (i) increased costs of regulatory
compliance; (ii) requirement to disclose a considerable amount of business information
to the public, some of which would otherwise be considered competitively sensitive and
would not be disclosed by a non-reporting company and which potentially may help the
Company’s actual or potential competitors, lenders and vendors compete against
the Company or make it more difficult for the Company to negotiate favorable terms with
them, as the case may be and (iii) the limited trading volume of the Company’s
ADSs on NASDAQ; |
| · | the Special
Committee consists solely of directors who are unaffiliated with any member of the Buyer
Group or any officer or employee of the Company and do not have any interests in the
Merger different from, or in addition to, those of the Unaffiliated Security Holders,
other than (i) the directors’ receipt of Board compensation in the ordinary course,
(ii) Special Committee members’ compensation in connection with its evaluation
of the Merger (which is not contingent upon the consummation of the Merger or the Special
Committee’s or Board’s recommendation of the Merger) and (iii) the directors’
indemnification and liability insurance rights under the Merger Agreement; |
| · | the Special
Committee was established and given authority to, among other things, review, evaluate
and negotiate the terms of the Merger and to recommend to the Board what action should
be taken by the Company, including not to engage in the Transactions, including the Merger; |
| · | the Special
Committee and, acting upon the unanimous recommendation of the Special Committee, the
Board unanimously determined that the Merger Agreement, the Plan of Merger and the Transactions,
including the Merger, are in the best interests of the Unaffiliated Security Holders; |
| · | the Buyer Group
did not participate in or seek to influence the deliberative process of, or the conclusions
reached by, the Special Committee or the negotiating positions of the Special Committee; |
| · | the Special
Committee and the Board had no obligation to recommend the authorization and the approval
of the Merger Agreement, the Plan of Merger and the Transactions, including the Merger; |
| · | the Special
Committee retained and was advised by an independent legal counsel and independent financial
advisor, each of whom are experienced in advising committees such as the Special Committee
in similar transactions; |
| · | the Per Share
Merger Consideration and the Per ADS Merger Consideration, and other terms and conditions
of the Merger Agreement, the Plan of Merger and the Transactions were the result of robust
negotiations between the Buyer Group and the Special Committee and their respective legal
and financial advisors; |
| · | under the terms
of the Merger Agreement, in certain circumstances relating to an unsolicited bona fide
proposal which constitutes, or would reasonably be expected to lead to a Superior Proposal
(as defined in the section entitled “The Merger Agreement Competing Transactions”),
prior to obtaining the Company Shareholder Approval of the Merger, the Company is permitted
(subject to certain limitations and restrictions set forth in the Merger Agreement) to
furnish information to and participate in discussions or negotiations with persons making
such proposal and the Board is permitted to withhold, withdraw, amend or modify its recommendation
of the Merger Agreement if the failure to make a change in the Company’s recommendation
would violate the directors’ fiduciary duties (subject to certain other conditions,
limitations and restrictions set forth in the Merger Agreement); |
| · | the ability
of the Company to terminate the Merger Agreement under the terms of the Merger Agreement
to enter into a Superior Proposal or upon a Change in the Company Recommendation (as
defined in the section entitled “The Merger Agreement—No Change of Recommendation”)
under certain circumstances, subject to compliance with the terms and conditions of the
Merger Agreement; |
| · | the termination
fee payable by the Company to Parent if the Merger Agreement is terminated under certain
circumstances is US$1.1 million, or approximately 2.1% of the Company’s total equity
value implied by the Per Share Merger Consideration, while the termination fee payable
by Parent to the Company if the Merger Agreement is terminated under certain circumstances
is US$2.2 million, or approximately 4.2% of the Company’s total equity value implied
by the Per Share Merger Consideration, which is twice the amount of the termination fee
payable by the Company to Parent if the Merger Agreement is terminated under certain
circumstances; |
| · | the Guarantor
has agreed to guarantee the obligations of Parent under the Merger Agreement to pay the
termination fee to the Company and reimburse or pay certain costs and expenses, or liabilities,
of the Company in relation to such termination fee; |
| · | the Company
has the ability to specifically enforce the terms of the Merger Agreement under certain
circumstances, and is a third party beneficiary under the Support Agreements and the
Equity Commitment Letter with ability to specifically enforce the terms thereof; |
| · | notwithstanding
that the Buyer Group may not rely upon the opinion provided by the financial advisor
to the Special Committee, the Special Committee received from its financial advisor an
oral opinion (which was confirmed in writing by delivery of Houlihan Lokey’s written
opinion dated December 22, 2015) with respect to the fairness, from a financial point
of view, of the Per Share Merger Consideration and the Per ADS Merger Consideration,
as applicable, to be received in the Merger by holders of the Shares and ADSs, as applicable
(other than holders of the Excluded Shares, including Excluded Shares represented by
ADSs, and the Dissenting Shares), as of December 22, 2015, based upon and subject to
the procedures followed, assumptions made, qualifications and limitations on the review
undertaken and other matters considered by Houlihan Lokey in preparing its opinion; |
| · | the availability
of dissenters’ rights to the Unaffiliated Security Holders (and any ADS holder
who elects to first convert his or her ADSs for the Shares) who comply with the required
procedures under Section 238 of the Cayman Islands Companies Law for exercising dissenters’
rights, which allow such holders to seek appraisal of the fair value of their Shares
as determined by the Grand Court of the Cayman Islands; |
| · | the consideration
to be paid to the Unaffiliated Security Holders in the Merger is all cash, allowing the
Unaffiliated Security Holders to immediately realize certainty of value and liquidity
for all of their Shares or ADSs, without incurring brokerage and other costs typically
associated with market sales; |
| · | Parent has
obtained an equity commitment for the Transactions pursuant to the Equity Commitment
Letter; and |
| · | the Board was
fully informed about the extent to which the interests of the Rollover Shareholders in
the Merger differed from those of the Unaffiliated Security Holders. |
In its consideration of the procedural fairness of the Merger,
the Buyer Group noted that the authorization and approval of the Merger Agreement, the Plan of Merger and the Transactions, including
the Merger, is not subject to a majority-of-the-minority requirement.
Nevertheless, the Buyer Group believes the Merger is procedurally
fair to the Unaffiliated Security Holders because (i) the Cayman Islands laws do not require a merger to be conditioned upon a
majority-of-the-minority voting requirement and this condition is not customary in going-private transactions involving Cayman
Islands companies and (ii) various safeguards and protective steps have been adopted to ensure the procedural fairness of the
Transactions, including without limitation (a) the formation of and the broad authorities granted to the Special Committee in
reviewing, evaluating and negotiating (and ultimately authorizing and approving) the terms of the Merger Agreement, (b) the Special
Committee retained and was advised by competent and experienced independent legal counsels and an independent financial advisor,
(c) the rights of the Company with regard to an unsolicited bona fide written Superior Proposal and (d) the availability of dissenters’
rights to the Unaffiliated Security Holders.
The Buyer Group did not consider the Company’s net book value,
which is an accounting concept based on historical costs, as a factor because it believed that net book value is not a material
indicator of the Company’s value as a going concern but rather is indicative of historical costs.
In its consideration of the fairness of the Merger, the Buyer Group
did not undertake an appraisal of the assets of the Company to determine the Company’s liquidation value for the Unaffiliated
Security Holders due to the impracticability of determining a liquidation value given the significant execution risk involved
in any breakup. In addition, the Buyer Group did not consider the Company’s liquidation value to be a relevant valuation
method because they consider the Company to be a viable going concern where value is derived from cash flows generated from its
continuing operations, and because the Company will continue to operate its business following the Merger.
The Buyer Group did not seek to establish a pre-Merger going concern
value for the Company’s Shares and ADSs to determine the fairness of the merger consideration to the Unaffiliated Security
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 ADSs, the merger consideration represented
a premium to the going concern value of the Company.
Members of the Buyer Group were not aware of, and thus did not
consider in their fairness determination, any offers or proposals made by any unaffiliated third parties with respect to (a) a
merger or consolidation of the Company with or into another company, (b) a sale of all or a substantial part of the Company’s
assets or (c) the purchase of the Company’s voting securities that would enable the holder to exercise control over the
Company.
Other than the 2014 Acquistion by Cnshangquan E-Commerce completed
in May 2014 pursuant to which CNshangquan became a majority shareholder of the Company, no member of the Buyer Group purchased
any Shares or ADSs during the past two years. The Buyer Group did not consider such share purchase in considering the fairness
of the Merger primarily because such share purchase was conducted more than nineteen months ago, there has been a spin-off of
apparel business from the Company following such share purchase in September 2014 and the Company’s financial and business
conditions have been changed since then.
The foregoing discussion of the information and factors considered
and given weight by the Buyer Group in connection with its evaluation of the substantive and procedural fairness of the Merger
to the Unaffiliated Security Holders is not intended to be exhaustive, but is believed to include all material factors considered.
The Buyer Group found it impracticable to assign, and did not assign, relative weights to the foregoing factors considered in
reaching its conclusions as to the substantive and procedural fairness of the Merger to the Unaffiliated Security Holders. Rather,
the Buyer Group made the fairness determinations after considering 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 or ADS holder
of the Company to authorize and approve the Merger Agreement, the Plan of Merger and the Transactions, including the Merger. The
Buyer Group does not make any recommendation as to how such shareholders or ADS holders should vote relating to the proposal to
authorize and approve the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, at the extraordinary
general meeting.
Certain Financial Projections
The Company’s management does not, as a matter of course,
make available to the public future financial projections. However, the Company’s management prepared certain financial
projections for the Special Committee and its financial advisor in connection with the financial analysis of the Merger. These
financial projections, which were based on our management’s projection of our future financial performance as of the date
provided, were prepared by the Company’s management for internal use and for use by the Special Committee’s financial
advisor 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.
The financial projections are not a guarantee of performance. In
compiling the projections, the Company’s management took into account historical performance, combined with estimates regarding
gross revenues, gross profit, adjusted 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 our management that our 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 our
existing and new products, 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 our 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 our 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 our independent registered public accounting firm, Deloitte
Touche Tohmatsu Certified Public Accountants LLP (“Deloitte”), 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,
and assume no responsibility for, and disclaim any association with, the prospective financial information. Deloitte’s report
accompanying our 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 Special Committee’s 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 pursuant
to Section 238 of the Cayman Islands Companies Law.
The following table summarizes the financial projections prepared
by our management and considered by the Special Committee in connection with their analysis of the Merger and Houlihan Lokey in
connection with their delivery of the fairness opinion:
| Five Years Financial Projections By Management |
| |
| P&L SUMMARY | |
| | |
| | |
| | |
| | |
| |
| (RMB in thousands) | |
Fiscal Year Ending December
31, | |
| | |
2015 | | |
2016 | | |
2017 | | |
2017 | | |
2019 | |
| Net Sales | |
| 356,386 | | |
| 401,558 | | |
| 463,114 | | |
| 523,055 | | |
| 583,298 | |
| Other Revenue | |
| 4,226 | | |
| 4,648 | | |
| 5,113 | | |
| 5,624 | | |
| 6,187 | |
| Total Revenue | |
| 360,612 | | |
| 406,206 | | |
| 468,228 | | |
| 528,679 | | |
| 589,485 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total Cost os Sales | |
| 126,454 | | |
| 146,501 | | |
| 172,543 | | |
| 197,757 | | |
| 223,573 | |
| Gross Profit | |
| 234,158 | | |
| 259,705 | | |
| 295,684 | | |
| 330,922 | | |
| 365,913 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Operating Expenses of Channel | |
| | | |
| | | |
| | | |
| | | |
| | |
| Occupancy | |
| 7,645 | | |
| 8,010 | | |
| 8,651 | | |
| 9,358 | | |
| 10,526 | |
| Personnel | |
| 124,015 | | |
| 137,709 | | |
| 157,395 | | |
| 172,045 | | |
| 191,368 | |
| Depr & Amort | |
| 1,845 | | |
| 3,108 | | |
| 3,519 | | |
| 3,519 | | |
| 3,519 | |
| Office & Admin | |
| 7,823 | | |
| 8,369 | | |
| 9,221 | | |
| 10,091 | | |
| 10,965 | |
| Shipping & Handling | |
| 3,461 | | |
| 4,016 | | |
| 5,094 | | |
| 6,033 | | |
| 7,092 | |
| Catalog Expenses | |
| 1,100 | | |
| 1,165 | | |
| 1,343 | | |
| 1,517 | | |
| 1,692 | |
| Advertising & Marketing | |
| 13,102 | | |
| 23,692 | | |
| 26,861 | | |
| 28,768 | | |
| 32,081 | |
| Other Operating Expenses | |
| 1,789 | | |
| 2,016 | | |
| 2,325 | | |
| 2,626 | | |
| 2,929 | |
| Total Operating Expenses of Channel | |
| 160,782 | | |
| 188,084 | | |
| 214,409 | | |
| 233,957 | | |
| 260,172 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Channel Operating Income | |
| 73,377 | | |
| 71,621 | | |
| 81,275 | | |
| 96,966 | | |
| 105,741 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Indirect Selling Expenses | |
| | | |
| | | |
| | | |
| | | |
| | |
| Occupancy | |
| 1,668 | | |
| 609 | | |
| 645 | | |
| 698 | | |
| 744 | |
| Personnel | |
| 4,680 | | |
| 5,107 | | |
| 5,573 | | |
| 7,772 | | |
| 10,071 | |
| Depr & Amort | |
| 13,035 | | |
| 12,966 | | |
| 12,966 | | |
| 12,966 | | |
| 12,966 | |
| Office & Admin | |
| 456 | | |
| 475 | | |
| 495 | | |
| 523 | | |
| 552 | |
| Other Operating Expenses | |
| 550 | | |
| 588 | | |
| 629 | | |
| 667 | | |
| 707 | |
| Total Indirect Selling Expenses | |
| 20,390 | | |
| 19,744 | | |
| 20,308 | | |
| 22,625 | | |
| 25,039 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Operating Income Before G&A | |
| 52,987 | | |
| 51,877 | | |
| 60,967 | | |
| 74,340 | | |
| 80,702 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| G&A Expenses | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total Facility | |
| 1,424 | | |
| 1,492 | | |
| 1,611 | | |
| 1,743 | | |
| 1,960 | |
| Total Personnel | |
| 7,582 | | |
| 8,275 | | |
| 9,031 | | |
| 9,860 | | |
| 10,661 | |
| Total Office & Admin | |
| 17,636 | | |
| 17,636 | | |
| 17,988 | | |
| 18,348 | | |
| 18,348 | |
| Total Depr & Amort | |
| 1,976 | | |
| 1,776 | | |
| 1,776 | | |
| 1,776 | | |
| 1,776 | |
| Total G&A Expenses | |
| 28,618 | | |
| 29,178 | | |
| 30,407 | | |
| 31,727 | | |
| 32,745 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Operating Income | |
| 24,369 | | |
| 22,698 | | |
| 30,560 | | |
| 42,613 | | |
| 47,956 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total Non Operating Income/(Expenses) | |
| (3,457 | ) | |
| 1,950 | | |
| 2,249 | | |
| 2,540 | | |
| 2,833 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Income Before Tax | |
| 20,912 | | |
| 24,648 | | |
| 32,809 | | |
| 45,153 | | |
| 50,789 | |
| Income Tax Expenses | |
| - | | |
| 3,967 | | |
| 7,112 | | |
| 9,667 | | |
| 10,504 | |
| Net Profit - Non GAAP | |
| 20,912 | | |
| 20,681 | | |
| 25,697 | | |
| 35,486 | | |
| 40,285 | |
| Net Profit - GAAP | |
| 20,912 | | |
| 20,681 | | |
| 25,697 | | |
| 35,486 | | |
| 40,285 | |
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.
The financial projections are forward-looking statements. For information
on factors that may cause our future financial results to materially vary, see “Cautionary Note Regarding Forward-Looking
Statements” beginning on page 102 and “Item 3. Key Information—D. Risk Factors” included in our Annual
Report on Form 20-F for the fiscal year ended December 31, 2014, incorporated by reference into this proxy statement.
Opinion of the Special Committee’s Financial Advisor
On December 22, 2015, Houlihan Lokey rendered an oral opinion to
the Special Committee (which was confirmed in writing by delivery of Houlihan Lokey’s written opinion dated the same
day), to the effect that, as of December 22, 2015, based upon and subject to the procedures followed, assumptions made,
qualifications and limitations on the review undertaken and other matters considered by Houlihan Lokey in preparing its opinion,
the Per Share Merger Consideration and the Per ADS Merger Consideration, as applicable, to be received in the merger by holders
of the Shares and ADSs, as applicable (other than holders of the Excluded Shares, including Excluded Shares represented by ADSs,
and the Dissenting Shares), was fair, from a financial point of view, to such holders of the Shares and ADSs.
Houlihan Lokey’s opinion was directed to the Special Committee
and only addressed the fairness from a financial point of view of the Per Share Merger Consideration and the Per ADS Merger Consideration,
as applicable, to be received in the merger by holders of the Shares and ADSs, as applicable (other than holders of the Excluded
Shares, including Excluded Shares represented by ADSs, and the Dissenting Shares), and does not address any other aspect or implication
of the merger. The summary of Houlihan Lokey’s opinion in this proxy statement is qualified in its entirety by reference
to the full text of its written opinion, which is included as Annex C to this proxy statement and sets forth the procedures followed,
assumptions made, qualifications and limitations on the review undertaken and other matters considered by Houlihan Lokey in preparing
its opinion. However, neither Houlihan Lokey’s opinion nor the summary of its opinion and the related analyses set
forth in this proxy statement are intended to be, and do not constitute advice or a recommendation to the Special Committee or
any shareholder as to how to act or vote with respect to the merger or related matters.
In arriving at its opinion, Houlihan Lokey, among other things:
| · | reviewed the
draft, dated December 22, 2015, of the merger agreement; |
| · | reviewed certain
publicly available business and financial information relating to the Company that Houlihan
Lokey deemed to be relevant; |
| · | reviewed certain
information relating to the historical, current and future operations, financial condition
and prospects of the Company made available to Houlihan Lokey by the Company, including
financial projections prepared by the management of the Company relating to the Company
for the calendar years ending 2015 through 2019 (the “Management Projections”); |
| · | spoke with
certain members of the management of the Company and certain of its representatives and
advisors regarding the business, operations, financial condition and prospects of the
Company, the merger and related matters; |
| · | compared the
financial and operating performance of the Company with that of other public companies
that Houlihan Lokey deemed to be relevant; |
| · | considered
the publicly available financial terms of certain transactions that Houlihan Lokey deemed
to be relevant; |
| · | reviewed the
current and historical market prices and trading volume for certain of the Company’s
publicly traded securities, and the current and historical market prices and trading
volume of the publicly traded securities of certain other companies that Houlihan Lokey
deemed to be relevant; and |
| · | conducted such
other financial studies, analyses and inquiries and considered such other information
and factors as Houlihan Lokey deemed appropriate. |
Houlihan Lokey relied upon and assumed, without independent verification,
the accuracy and completeness of all data, material and other information furnished, or otherwise made available to Houlihan Lokey,
discussed with or reviewed by Houlihan Lokey, or publicly available, and did not assume any responsibility with respect to such
data, material and other information. In addition, management of the Company advised Houlihan Lokey, and Houlihan Lokey assumed,
that the Management Projections reviewed by Houlihan Lokey were reasonably prepared in good faith on bases reflecting the best
currently available estimates and judgments of such management as to the future financial results and condition of the Company,
and Houlihan Lokey expressed no opinion with respect to such projections or the assumptions on which they were based. Houlihan
Lokey relied upon and assumed, without independent verification, that there had been no change in the business, assets, liabilities,
financial condition, results of operations, cash flows or prospects of the Company since the respective dates of the most recent
financial statements and other information, financial or otherwise, provided to Houlihan Lokey that would be material to Houlihan
Lokey’s analyses or its opinion, and that there was no information or any facts that would make any of the information reviewed
by Houlihan Lokey incomplete or misleading. Further, management of the Company advised Houlihan Lokey that (i) the Management
Projections provided to Houlihan Lokey were the only projections prepared by management of the Company (or any affiliated entity)
in connection with the merger, (ii) they had not received, reviewed, approved, commented on or otherwise contributed to any other
projections or similar information prepared by any other party in connection with the merger, nor had they updated or otherwise
revised the Management Projections since the last date they were provided to Houlihan Lokey and (iii) to the best of their knowledge
and belief, no other projections or similar information had been provided to any party involved in the merger, and the Special
Committee had received all projections and/or similar information that had been received by any other party involved in the merger.
Houlihan Lokey understood that the Rollover Shareholders had indicated
that they were only willing to consider entering into an agreement with Parent and amongst themselves in relation to the merger
and had no interest in entering into any agreement, arrangement or understanding with other parties as an alternative thereto.
Houlihan Lokey relied upon and assumed, without independent verification,
that (a) the representations and warranties of all parties to the merger agreement and all other related documents and instruments
that are referred to therein are true and correct, (b) each party to the merger agreement and such other related documents and
instruments will fully and timely perform all of the covenants and agreements required to be performed by such party, (c) all
conditions to the consummation of the merger will be satisfied without waiver thereof, and (d) the merger will be consummated
in a timely manner in accordance with the terms described in all such agreements and other related documents and instruments,
without any amendments or modifications thereto. Houlihan Lokey also relied upon and assumed, without independent verification,
that (i) the merger will be consummated in a manner that complies in all respects with all applicable international, federal and
state statutes, rules and regulations, and (ii) all governmental, regulatory, and other consents and approvals necessary for the
consummation of the merger will be obtained and that no delay, limitations, restrictions or conditions will be imposed or amendments,
modifications or waivers made that would have an effect on the merger or the Company that would be material to Houlihan Lokey’s
analyses or its opinion. In addition, Houlihan Lokey relied upon and assumed, without independent verification, that the final
form of the merger agreement, including, without limitation, the Per Share Merger Consideration and the Per ADS Merger Consideration,
will not differ in any material respect from the draft of the merger agreement identified above.
Furthermore, in connection with its opinion, Houlihan Lokey was
not requested to make, and did not make, any physical inspection or independent appraisal or evaluation of any of the assets,
properties or liabilities (fixed, contingent, derivative, off-balance-sheet or otherwise) of the Company or any other party, nor
was Houlihan Lokey provided with any such appraisal or evaluation. Houlihan Lokey did not estimate, and expressed no opinion regarding,
the liquidation value of any entity or business. Houlihan Lokey did not undertake any independent analysis of any potential or
actual litigation, regulatory action, possible unasserted claims or other contingent liabilities, to which the Company is or may
be a party or is or may be subject, or of any governmental investigation of any possible unasserted claims or other contingent
liabilities to which the Company is or may be a party or is or may be subject.
Houlihan Lokey was directed by the Special Committee not to and,
therefore, Houlihan Lokey did not (a) initiate or participate in any negotiations with (other than participating in negotiations
with the parties to the merger), or solicit any indications of interest from, third parties with respect to the merger, the securities,
assets, businesses or operations of the Company or any other party, or any alternatives to the merger, or (b) advise the Speccial
Committee, the Board or any other party with respect to alternatives to the merger.
The opinion rendered by Houlihan Lokey was necessarily based on
financial, economic, market and other conditions as in effect on, and the information made available to Houlihan Lokey as of,
the date of the opinion. Houlihan Lokey did not undertake, and is under no obligation, to update, revise, reaffirm or withdraw
its opinion, or otherwise comment on or consider events occurring or coming to its attention after the date of the opinion.
The opinion rendered by Houlihan Lokey was furnished for the use
of the Special Committee (solely in its capacity as such) in connection with its evaluation of the merger and may not be used
for any other purpose without Houlihan Lokey’s prior written consent. The opinion should not be construed as creating any
fiduciary duty on Houlihan Lokey’s part to any party. The opinion was not intended to be, and does not constitute, a recommendation
to the Special Committee, the Board, any security holder or any other person as to how to act or vote with respect to any matter
relating to, or whether to tender Shares in connection with, the merger or otherwise.
Houlihan Lokey was not requested to opine as to, and its opinion
did not express an opinion as to or otherwise address, among other things: (i) the underlying business decision of the Special
Committee, the Board, the Company, its security holders or any other party to proceed with or effect the merger, (ii) the terms
of any arrangements, understandings, agreements or documents related to, or the form, structure or any other portion or aspect
of, the merger or otherwise (other than the Per Share Merger Consideration and the Per ADS Merger Consideration to the extent
expressly specified herein), (iii) the fairness of any portion or aspect of the merger to the holders of any class of securities,
creditors or other constituencies of the Company, or to any other party, except if and only to the extent expressly set forth
in the last sentence of its opinion, (iv) the relative merits of the merger as compared to any alternative business strategies
that might exist for the Company or any other party or the effect of any other transaction in which the Company or any other party
might engage, (v) the fairness of any portion or aspect of the merger to any one class or group of the Company’s or any
other party’s security holders or other constituents vis-à-vis any other class or group of the Company’s or
such other party’s security holders or other constituents (including, without limitation, the allocation of any consideration
amongst or within such classes or groups of security holders or other constituents), (vi) whether or not the Company, its security
holders or any other party is receiving or paying reasonably equivalent value in the merger, (vii) the solvency, creditworthiness
or fair value of the Company or any other participant in the merger, or any of their respective assets, under any applicable laws
relating to bankruptcy, insolvency, fraudulent conveyance or similar matters, or (viii) the fairness, financial or otherwise,
of the amount, nature or any other aspect of any compensation to or consideration payable to or received by any officers, directors
or employees of any party to the merger, any class of such persons or any other party, relative to the Per Share Merger Consideration,
the Per ADS Merger Consideration or otherwise. Furthermore, no opinion, counsel or interpretation is intended in matters that
require legal, regulatory, accounting, insurance, tax or other similar professional advice. It is assumed that such opinions,
counsel or interpretations have been or will be obtained from the appropriate professional sources. Furthermore, Houlihan Lokey
relied, with the consent of the Special Committee, on the assessments by the Special Committee, the Board, the Company and their
respective advisors, as to all legal, regulatory, accounting, insurance and tax matters with respect to the Company and the merger
or otherwise.
In preparing its opinion to the Special Committee, Houlihan Lokey
performed a variety of analyses, including those described below. The summary of Houlihan Lokey’s analyses is not a complete
description of the analyses underlying Houlihan Lokey’s opinion. The preparation of a fairness opinion is a complex process
involving various quantitative and qualitative judgments and determinations with respect to the 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 a fairness opinion nor its underlying analyses is readily susceptible to summary description. Houlihan
Lokey 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. Accordingly, Houlihan Lokey believes
that its analyses and the following summary must be considered as a whole and that selecting portions of its analyses, methodologies
and factors or focusing on information presented in tabular format, without considering all analyses, methodologies and factors
or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying Houlihan
Lokey’s analyses and opinion. Each analytical technique has inherent strengths and weaknesses, and the nature of the available
information may further affect the value of particular techniques.
In performing its analyses, Houlihan Lokey 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. Houlihan Lokey’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 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 Houlihan Lokey’s analyses for comparative purposes is identical to
the Company or the proposed merger and an evaluation of the results of those analyses is not entirely mathematical. Houlihan
Lokey believes that mathematical derivations (such as determining average and median) of financial data are not by themselves
meaningful and should be considered together with qualities, judgments and informed assumptions. The estimates contained in the
Company’s analyses and the implied reference range values indicated by Houlihan Lokey’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, 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 our company. Much of the information used in, and accordingly the results
of, Houlihan Lokey’s analyses are inherently subject to substantial uncertainty.
Houlihan Lokey’s opinion was provided to the Special Committee
in connection with its evaluation of the proposed merger and was only one of many factors considered by the Special Committee
in evaluating the proposed merger. Neither Houlihan Lokey’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 or 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 decision to enter into the merger was solely that of the Special Committee and the Board.
The following is a summary of the material analyses reviewed by
Houlihan Lokey with the Special Committee in connection with Houlihan Lokey’s opinion rendered on December 22, 2015. The
order of the analyses does not represent relative importance or weight given to those analyses by Houlihan Lokey. The analyses
summarized below include information presented in tabular format. The tables alone do not constitute a complete description of
the analyses. Considering the data in the tables below 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 Houlihan Lokey’s analyses.
For purposes of its analyses, Houlihan Lokey reviewed a number
of financial metrics, including:
| · | Enterprise
Value, calculated as the value of the relevant company’s outstanding equity securities
(taking into account its outstanding options, warrants and other convertible securities)
based on the relevant company’s closing stock price, or equity value, plus net
debt (calculated as outstanding indebtedness, preferred stock. derivative liabilities
and minority interests less the amount of cash on its balance sheet and short term investments),
as of a specified date. |
| · | Earnings before
interest, taxes, depreciation, and amortization, or EBITDA |
Unless the context indicates otherwise, enterprise values and equity
values derived from the selected companies analysis described below were calculated using the closing price of our common stock
and the common stock of the selected health, beauty and lifestyle products companies listed below as of December 17, 2015, and
transaction values for the target companies derived from the selected transactions analysis described below were calculated as
of the public announcement date of the relevant transaction based on the estimated purchase prices paid in the selected
transactions. Accordingly, this information may not reflect current or future market conditions. Estimates of 2015 and 2016 EBITDA
for the Company were based on estimates provided by our management. Estimates of 2015 and 2016 EBITDA for the selected health,
beauty and lifestyle products companies listed below were based on certain publicly available research analyst estimates for those
companies.
Selected Companies Analysis.
Houlihan Lokey calculated multiples of enterprise value based on
certain financial data for the Company and the following selected health, beauty and lifestyle products companies:
| · | Nu Skin Enterprises,
Inc.; |
| · | Amway (Malaysia)
Holdings Berhad; |
| · | Lifevantage
Corporation; |
| · | Mannatech,
Incorporated. |
The calculated multiples included:
| · | enterprise
value as a multiple of the EBITDA of the latest twelve months (“LTM”) for
which public information was available; |
| · | enterprise
value as a multiple of the estimated 2015 EBITDA; and |
| · | enterprise
value as a multiple of the estimated 2016 EBITDA. |
The table below sets forth a summary of relevant information reviewed
by Houlihan Lokey for conducting its selected companies analysis. Although none of the companies under the selected companies
analysis is directly comparable to the Company, the selected companies are health, beauty and lifestyle products companies with
operations and/or other criteria, such as lines of business, markets, business risks, growth prospects, maturity of business and
size and scale of business that, for the purposes of its analysis, Houlihan Lokey and the management of the Company considered
generally relevant in evaluating the Company. The foregoing criteria were consistently applied to all selected companies. Information
for each of the selected companies was based on each company’s most recent publicly available financial information and
closing share prices as of December 17, 2015.
Selected Companies Trading
Statistics
| (dollars,
ADSs and shares in millions, except per share or per ADS values, as of 12/17/2015) |
| | |
| |
| | |
| | |
| | |
EV / Revenue | | |
EV / EBITDA | | |
P / E | |
| Company | |
Ticker | |
Stock
Price (12/17/2015) | | |
Equity
Value
(US$mm) | | |
Enterprise
Value
(US$mm) | | |
LTM
(x) | | |
NFY
(x) | | |
NFY+
1
(x) | | |
LTM
(x) | | |
NFY
(x) | | |
NFY+
1
(x) | | |
LTM
(x) | | |
NFY
(x) | | |
NFY+
1
(x) | |
| | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Avon Product | |
NYSE:AVP | |
$ | 4.03 | | |
$ | 1,754 | | |
$ | 3,457 | | |
| 0.45 | x | |
| 0.47 | x | |
| 0.49 | x | |
| 5.7 | x | |
| 5.8 | x | |
| 5.7 | x | |
| 10.3 | x | |
| 12.6 | x | |
| 8.9 | x |
| Nu Skin Enterprises | |
NYSE:NUS | |
| 37.90 | | |
| 2,235 | | |
| 2,172 | | |
| 0.95 | x | |
| 0.90 | x | |
| 0.84 | x | |
| 6.3 | x | |
| 5.4 | x | |
| 5.0 | x | |
| 14.5 | x | |
| 10.7 | x | |
| 9.4 | x |
| Amway | |
KLSE:AMWAY | |
| 2.23 | | |
| 367 | | |
| 314 | | |
| 1.38 | x | |
| 1.47 | x | |
| 1.41 | x | |
| 12.2 | x | |
| 10.1 | x | |
| 9.6 | x | |
| 19.4 | x | |
| 16.7 | x | |
| 16.0 | x |
| GS Home Shopping | |
KOSDAQ:A028150 | |
| 142.51 | | |
| 889 | | |
| 283 | | |
| 0.30 | x | |
| 0.30 | x | |
| 0.28 | x | |
| 2.7 | x | |
| 2.5 | x | |
| 2.3 | x | |
| 11.9 | x | |
| 10.6 | x | |
| 9.4 | x |
| EVINE Live | |
NasdaqGS:EVLV | |
| 1.57 | | |
| 90 | | |
| 134 | | |
| 0.20 | x | |
| 0.20 | x | |
| 0.18 | x | |
| 11.3 | x | |
| 10.7 | x | |
| 6.0 | x | |
| NMF | | |
| NA | | |
| NA | |
| Lifevantage | |
NasdaqCM:LFVN | |
| 8.30 | | |
| 118 | | |
| 121 | | |
| 0.66 | x | |
| 0.64 | x | |
| NA | | |
| 10.9 | x | |
| 7.0 | x | |
| NA | | |
| 35.3 | x | |
| 13.5 | x | |
| NA | |
| Tea Life | |
TSE:3172 | |
| 7.95 | | |
| 34 | | |
| 30 | | |
| 0.53 | x | |
| NA | | |
| NA | | |
| 7.5 | x | |
| NA | | |
| NA | | |
| 19.8 | x | |
| NA | | |
| NA | |
| Mannatech | |
NasdaqGS:MTEX | |
| 19.40 | | |
| 53 | | |
| 19 | | |
| 0.10 | x | |
| NA | | |
| NA | | |
| 1.4 | x | |
| NA | | |
| NA | | |
| 8.6 | x | |
| NA | | |
| NA | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Mean | |
| |
| | | |
| | | |
| | | |
| 0.57 | x | |
| 0.66 | x | |
| 0.64 | x | |
| 7.3 | x | |
| 6.9 | x | |
| 5.7 | x | |
| 17.1 | x | |
| 12.8 | x | |
| 10.9 | x |
| Median | |
| |
| | | |
| | | |
| | | |
| 0.49 | x | |
| 0.56 | x | |
| 0.49 | x | |
| 6.9 | x | |
| 6.4 | x | |
| 5.7 | x | |
| 14.5 | x | |
| 12.6 | x | |
| 9.4 | x |
| High | |
| |
| | | |
| | | |
| | | |
| 1.38 | x | |
| 1.47 | x | |
| 1.41 | x | |
| 12.2 | x | |
| 10.7 | x | |
| 9.6 | x | |
| 35.3 | x | |
| 16.7 | x | |
| 16.0 | x |
| Low | |
| |
| | | |
| | | |
| | | |
| 0.10 | x | |
| 0.20 | x | |
| 0.18 | x | |
| 1.4 | x | |
| 2.5 | x | |
| 2.3 | x | |
| 8.6 | x | |
| 10.6 | x | |
| 8.9 | x |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Current | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Mecox Lane | |
NasdaqGS:MCOX | |
$ | 3.58 | | |
| 47 | | |
| 26 | | |
| 0.46 | x | |
| 0.47 | x | |
| 0.42 | x | |
| 3.9 | x | |
| 4.1 | x | |
| 4.2 | x | |
| 13.3 | x | |
| 14.5 | x | |
| 14.7 | x |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Offer | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Mecox Lane | |
NasdaqGS:MCOX | |
$ | 4.00 | | |
| 52 | | |
| 32 | | |
| 0.56 | x | |
| 0.57 | x | |
| 0.51 | x | |
| 4.8 | x | |
| 5.0 | x | |
| 5.1 | x | |
| 14.9 | x | |
| 16.2 | x | |
| 16.4 | x |
Sources: Capital IQ; Company public filings;
analyst reports; Company management
Notes:
1. Equity Market Value refers to share price
* (common ADS or shares outstanding + options and warrants per the treasury stock method).
2. Enterprise Value refers to equity market
value + debt + preferred stock + derivative liabilities + minority interest – cash and short term investment.
LTM refers to the most recently completed
twelve month period for which financial information has been made public.
NFY refers to next fiscal year; NFY+1 refers
to the year after next fiscal year.
NA refers to no available figure.
No company used in this analysis for comparative
purposes is identical to the Company.
Based on Houlihan Lokey’s professional judgment and after
taking into account qualitative and quantitative factors with respect to the Company and the selected health, beauty and lifestyle
products companies, including size, growth and profitability, Houlihan Lokey applied the following selected multiple ranges derived
from the selected companies to corresponding financial data for the Company:
| Multiple
Description | |
Selected
Multiple Range | |
| Enterprise Value
as a multiple of: | |
Low | | |
High | |
| LTM (ended 9/30/2015) EBITDA | |
| 4.0 | x | |
| 6.0 | x |
| 2015E EBITDA | |
| 4.0 | x | |
| 6.0 | x |
| 2016E EBITDA | |
| 3.5 | x | |
| 5.5 | x |
The selected companies analysis indicated the following implied
per ADS reference range for the Company, as compared to the proposed Per ADS Merger Consideration:
Implied Per ADS Equity Reference Range
for
the Company | |
| Per
ADS
Merger Consideration | |
| US$3.62 - US$4.88 (based on LTM EBITDA) | |
| US$ |
4.00 | |
| US$3.52 - US$4.74 (based on 2015E EBITDA) | |
| US$ |
4.00 | |
| US$3.25 – US$4.45 (based on 2016E EBITDA) | |
| US$ |
4.00 | |
Selected Transactions Analysis.
The table below sets forth a summary of relevant information reviewed
by Houlihan Lokey for conducting its selected transactions analysis. Although none of the transactions under the selected transactions
analysis is directly comparable to the merger, the selected transactions involved transactions of health, beauty and lifestyle
products companies with operations and/or other criteria, such as lines of business, markets, business risks, growth prospects,
maturity of business and size and scale of business that, for the purposes of its analysis, Houlihan Lokey and the management
of the Company considered generally relevant in evaluating the Company. The foregoing criteria were consistently applied to all
selected transactions. Information for each of the selected transactions was based on publicly available financial information
as of the public announcement date of the relevant transaction.
Selected Transactions
Statistics
(dollars in millions)
Announcement
Date | |
Target | |
Acquiror | |
%
Sought | | |
Implied
Equity
Value | | |
Implied
EV | | |
Implied
EV /
EBITDA | | |
EBITDA
Margin
% | |
| 05/27/2015 | |
Orchard Brands Corporation | |
Bluestem Brands, Inc. | |
| 100 | % | |
$ | 410.0 | | |
$ | 410.0 | | |
| 5.8 | x | |
| 6.9 | % |
| 09/16/2014 | |
The Book People Limited | |
Endless LLP | |
| 100 | % | |
| 24.3 | | |
| 24.3 | | |
| NA | | |
| NA | |
| 03/26/2014 | |
R&Y Corporation | |
LG Household and Health Care, Ltd. | |
| 100 | % | |
| 50.7 | | |
| 50.7 | | |
| NA | | |
| NA | |
| 12/06/2013 | |
Tea Life Co., Ltd. | |
N&K Co., Ltd. | |
| 26 | % | |
| 27.3 | | |
| 11.1 | | |
| 2.1 | x | |
| 9.8 | % |
| 07/02/2013 | |
Silpada Designs, Inc. | |
Rhinestone Holdings Inc. | |
| 100 | % | |
| 85.0 | | |
| 100.0 | | |
| NA | | |
| NA | |
| 06/10/2013 | |
JIMOS Co., Ltd. | |
Nac Co., Ltd. | |
| 100 | % | |
| 60.7 | | |
| 60.7 | | |
| NA | | |
| NA | |
| 01/17/2013 | |
New Image Group Limited | |
New Image Trustee Limited | |
| 94 | % | |
| 51.3 | | |
| 42.9 | | |
| 5.3 | x | |
| 8.9 | % |
| 10/23/2012 | |
Apex Co., Ltd. | |
Tea Life Co., Ltd. | |
| 100 | % | |
| 6.0 | | |
| 6.0 | | |
| NA | | |
| NA | |
| | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
| | |
| |
| |
| | | |
| | | |
| Mean | | |
| 4.4 | x | |
| 8.6 | % |
| | |
| |
| |
| | | |
| | | |
| Median | | |
| 5.3 | x | |
| 8.9 | % |
| | |
| |
| |
| | | |
| | | |
| High | | |
| 5.8 | x | |
| 9.8 | % |
| | |
| |
| |
| | | |
| | | |
| Low | | |
| 2.1 | x | |
| 6.9 | % |
| | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | |
| 07/21/2015 | |
Mecox
Lane Limited | |
Cnshangquan
E-Commerce; ChinaEquity | |
| 28 | % | |
$ | 52.0 | | |
$ | 31.6 | | |
| 4.8 | x | |
| 11.7 | % |
Source: Capital
IQ; Mergermarket
Based on reported
metric for the most recent LTM period prior to the announcement of the transaction.
NA refers to
no available figure.
NMF refers to
no meaningful figure.
No transaction
used in this analysis for comparative purposes is identical to the Transaction.
Implied enterprise
value of target company is based on the announced transaction equity price and other public information available at the time
of the announcement.
The calculated multiples included enterprise
value as a multiple of LTM (ended September 30, 2015) EBITDA.
Based on Houlihan Lokey's professional judgment and after taking
into account qualitative and quantitative factors with respect to the Company and the selected transactions, including size, growth
and profitability, Houlihan Lokey applied the following selected multiple ranges derived from the selected transactions to corresponding
financial data for the Company:
| Multiple
Description | |
Selected
Multiple Range | |
| Enterprise
Value as a multiple of: | |
Low | | |
High | |
| LTM EBITDA | |
| 4.5 | x | |
| 5.5 | x |
The selected transactions analysis indicated the following implied
per ADS reference range for the Company, as compared to the proposed Per ADS Merger Consideration:
Implied
Per ADS
Equity Reference Range for the
Company
based on LTM EBITDA | |
Per
ADS
Merger Consideration
| |
| US$3.87
- US$4.62 | |
US$ | 4.00 | |
Discounted Cash Flow Analysis.
Houlihan Lokey performed 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 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. Houlihan
Lokey calculated the estimated net present value of the unlevered, after-tax free cash flows that the Company was forecasted to
generate through fiscal year 2019 based on internal estimates provided by the Company’s management. Houlihan Lokey calculated
terminal values for the Company by applying a range of perpetuity growth rates of 2.5% to 3.5% to the Company’s estimated
2019 unlevered free cash flows adjusted for normalized levels of long-term depreciation and amortization, capital expenditures
and changes in net working capital. The Company’s implied enterprise value was then calculated as the sum of the present
value of the cash flows and terminal values, each as derived using discount rates ranging from 14.0% to 16.0%. With the consent
of the Special Committee, a range of the Company’s implied equity values were calculated as implied enterprise values plus
the Company’s cash and cash equivalents, less net debt and noncontrolling interest, plus the estimated net present value
of the Company’s NOL tax savings. By dividing the range of implied total equity values of the Company by its total number
of outstanding ADSs, Houlihan Lokey derived the following reference range of implied value per ADS for the Company, as compared
to the proposed Per ADS Merger Consideration:
Implied
Per ADS
Equity Reference Range
for the Company | |
Per
ADS
Merger Consideration
| |
| US$3.68
- US$4.46 | |
US$ | 4.00 | |
Other
Matters
Houlihan
Lokey was engaged by the Special Committee to provide an opinion to the Special Committee regarding the fairness
from a financial point of view of the Per Share Merger Consideration and the Per ADS Merger Consideration, as applicable, to be
received in the merger pursuant by holders of the Shares and the ADSs, as applicable (other than holders of Excluded Shares, including
Excluded Shares represented by ADSs, and the Dissenting Shares). We engaged Houlihan Lokey based on Houlihan Lokey’s experience
and reputation. Houlihan Lokey is regularly engaged to provide advisory services in connection with mergers and acquisitions,
financings, and financial restructurings. Pursuant to the engagement letter between Houlihan Lokey and the Special Committee,
a fixed fee of US$250,000 was paid to Houlihan Lokey upon execution of the engagement letter, a fixed fee of US$250,000 was paid
to Houlihan Lokey upon delivery of its opinion, and a fixed fee of US$50,000 will be payable to Houlihan Lokey upon closing of
the merger. No portion of Houlihan Lokey’s fee is contingent upon any conclusions set forth in Houlihan Lokey’s
opinion. The company has also agreed to reimburse Houlihan Lokey for certain expenses and to indemnify Houlihan Lokey,
its affiliates and certain related parties against certain liabilities and expenses, including certain liabilities under the federal
securities laws arising out of or relating to Houlihan Lokey’s engagement.
In the
ordinary course of business, certain of Houlihan Lokey’s employees and affiliates, as well as investment funds in which
they may have financial interests or with which they may co-invest, may acquire, hold or sell long or short positions, or trade,
in debt, equity, and other securities and financial instruments (including loans and other obligations) of, or investments in,
the Company or any other party that may be involved in the merger and their respective affiliates or any currency or commodity
that may be involved in the merger.
Houlihan
Lokey has in the past provided investment banking, financial advisory and other financial services to certain affiliates of the
Company and Parent, for which Houlihan Lokey has received compensation, including, among other things, having acted as financial
advisor in the following: (i) advising Cnshangquan E-Commerce in connection with its acquisition of a 63.7% interest in the Company
in February 2014; (ii) advising the Company in the disposal of its apparel business in August 2014; (iii) advising Sanpower, the
controlling shareholder of Cnshangquan E-Commerce, on the acquisition of Brookstone Inc. in June 2014; and (iv) advising Cnshangquan
E-Commerce on other potential acquisition opportunities which Sanpower and Cnshangquan E-Commerce ultimately decided to not pursue.
For its services to Sanpower, Cnshangquan E-Commerce and the Company, Houlihan Lokey received aggregate fees of US$350,000 during
the last two years. Houlihan Lokey and certain of its affiliates may provide investment banking, financial advisory and other
financial services to the Company, other participants in the merger or certain of their respective affiliates in the future, for
which Houlihan Lokey and such affiliates may receive compensation. In addition, Houlihan Lokey and certain of its affiliates and
certain of their respective employees may have committed to invest in private equity or other investment funds managed or advised
by participants in the merger or certain of their respective affiliates, and in portfolio companies of such funds, and may have
co-invested with the Company, other participants in the merger or certain of their respective affiliates, and may do so in the
future. Furthermore, in connection with bankruptcies, restructurings, and similar matters, Houlihan Lokey and certain of its affiliates
may have in the past acted, may currently be acting and may in the future act as financial advisor to debtors, creditors, equity
holders, trustees and other interested parties (including, without limitation, formal and informal committees or groups of creditors)
that may have included or represented and may include or represent, directly or indirectly, or may be or have been adverse to,
the Company, other participants in the merger or certain of their respective affiliates, for which advice and services Houlihan
Lokey and such affiliates have received and may receive compensation.
Houlihan Lokey has also acted as financial advisor to the Special
Committee in connection with, and has participated in certain of the negotiations leading to, the merger and will receive a fee
for such services, a portion of which is contingent upon the consummation of the merger.
Purposes of and Reasons for the Merger
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 his or its reasons for the Merger to the Company’s Unaffiliated Security Holders. 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% ownership
and control of the Company in a transaction in which the Company’s Unaffiliated Security Holders (other than the Excluded
Shares and the Dissenting Shares) will be cashed out in exchange for the Per Share Consideration and Per ADS Merger Consideration,
as applicable, so that Parent will bear the rewards and risks of the sole ownership of the Company after the Merger, including
any future earnings and growth of the Company as a result of improvements to the Company’s operations or acquisitions of
other businesses. In addition, the Merger will allow members of the Buyer Group which are currently shareholders of the Company
to maintain a significant portion of their investment in the Company through their respective indirect ownership in Parent as
described under “Special Factors—Interests of Certain Persons in the Merger—Interests of the Buyer Group”
below and at the same time enable members of the Buyer Group to maintain their leadership role with the Company.
The Buyer Group believes the operating environment has become more
challenging due to recent operating conditions and industry trends. There is greater competition against both domestic and multinational
companies in many of the service areas 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 Parent and Merger Sub were able to obtain debt 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.
Effects of the Merger on the Company
Private Ownership
ADSs representing Shares are currently listed on NASDAQ under the
symbol “MCOX”, 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 Consortium. Following the consummation of the Merger,
ADSs will no longer be listed on any securities exchange or quotation system, including NASDAQ, and price quotations with respect
to sales of the ADSs in the public market will no longer be available. In addition, registration of Shares under the Exchange
Act may be terminated upon the Company’s application to the SEC if Shares are not listed on a national securities exchange
and there are fewer than 300 record holders of Shares. Ninety days after the filing of Form 15 in connection with the consummation
of the Merger or such longer period as may be determined by the SEC, registration of Shares under the Exchange Act will be terminated
and 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. The costs of complying with the United States
federal securities laws, including the Sarbanes-Oxley Act of 2002, totaled approximately US$1.3 million and US$1.2 million for
the years ended December 31, 2013 and December 31, 2014, respectively. After the consummation of the Merger, the Company’s
shareholders will no longer enjoy the rights or protections that the U.S. federal securities laws provide, including reporting
obligations for directors, officers and principal securities holders of the Company. Furthermore, following the consummation of
the Merger, the ADS program for the Shares will terminate.
Upon the consummation of the Merger, each issued and outstanding
Share and ADS (other than the Excluded Shares and the Dissenting Shares) will be cancelled and cease to exist in exchange for
the right to receive the Per Share Merger Consideration and the Per ADS Merger Consideration, respectively, in cash, without interest
and net of any applicable withholding taxes. At the Effective Time, (a) the Excluded Shares (including the Shares represented
by ADSs) will be cancelled and cease to exist for no consideration or distribution therefor and (b) the Dissenting Shares will
be cancelled and cease to exist in accordance with the procedures set out in Section 238 of the Cayman Islands Companies Law.
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 Company. As a result, current shareholders and
ADS holders of the Company, other than the Rollover Shareholders, will no longer have any equity interest in, or be shareholders
or ADS holders of, the Company upon the consummation of the Merger. As a result, the Company’s shareholders and ADS holders,
other than the Rollover Shareholders, 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, our current shareholders and ADS holders, other than the
Rollover Shareholders, will not be exposed to the risk of loss in relation to their investment in the Company.
As of the date of this proxy statement, there are no outstanding
restricted share units, options or share appreciation rights or any other awards granted under the Company Incentive Plans. Under
the terms of the Merger Agreement, the Company Incentive Plans and any relevant award agreements applicable to the Company Incentive
Plans will be terminated at or prior to the Effective Time.
Directors and Management of the Surviving Company
If the Merger is consummated, the current memorandum and articles
of association of the Surviving Company will be replaced in their entirety by the memorandum and articles of association of Merger
Sub, as in effect prior to the consummation of the Merger (except that, at the Effective Time, all references to the name “ChinaEquity
Alliance Victory Co., Ltd.” in the memorandum and articles of association of the Surviving Company will be amended to “Mecox
Lane Limited”) and all references to the authorized share capital of the Surviving Company will be amended as necessary
to correctly describe the authorized share capital of the Surviving Company as approved in the Plan of Merger). In addition, the
directors of Merger Sub immediately prior to the consummation of the Merger (identified below in “Annex E—Directors
and Executive Officers of Each Filing Person”) will become the directors of the Surviving Company and the officers of the
Company will remain the officers of the Surviving Company, 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 Security
Holders include the following:
| · | The receipt
by the Unaffiliated Security Holders of US$0.114 per Share or US$4.00 per ADS in cash,
representing a premium of 17.65%, 22.70% and 4.99% to the closing price on July 20, 2015,
the last trading day prior to the Company’s announcement that it had received a
going-private proposal, July 14, 2015, one week prior to the announcement, and June 19,
2015, one month prior to the announcement, respectively. |
| · | The avoidance
of the risk associated with any possible decrease in our future revenues and free cash
flow, growth or value following the Merger. |
The primary detriments of the Merger to the Unaffiliated Security
Holders include the following:
| · | Such shareholders
and ADS holders will cease to have an interest in the Company and, therefore, 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 on the Company’s ordinary shares,
if any. |
| · | 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 “Special Factors—U.S.
Federal Income Tax Consequences” beginning on page 62. |
| · | the highest
historical closing price of ADSs were US$86.30 per ADS and US$4.25 since the Company
became publicly listed on NASDAQ in October 2010 and the Company span off its apparel
business in September 2014, respectively, which exceed the Per ADS Merger Consideration. |
The primary benefits of the Merger to the Buyer Group include the
following:
| · | If
the Company successfully executes its business strategies, the value of the Buyer Group’s
equity investment could increase because of possible increases in future revenues and
free cash flow, possible increases in the underlying value of the Company or the possible
payment of dividends that will accrue to Parent. |
| · | The Company
will no longer have continued pressure to meet quarterly forecasts set by analysts. In
contrast, as a publicly-traded company, the Company currently faces pressure from public
shareholders and investment analysts to make decisions that may produce better short-term
results, but which may not maximize equity value in the long term. |
| · | The Company
will have more freedom to focus on long-term strategic planning in a highly competitive
business with increasing competition and regulation. |
| · | The Company
will have more flexibility to change its capital spending strategies without public market
scrutiny or analysts’ quarterly expectations. |
| · | The Company
will be able to 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. |
| · | There will
be a reduction of the costs and administrative burden associated with operating the Company
as a publicly-traded company, including the costs associated with regulatory filings
and compliance requirements. |
The primary detriments of the Merger to the Buyer Group include
the following:
| · | All of the
risk of any possible decrease in the revenues, free cash flow or value of the Surviving
Company following the Merger will be solely borne by Parent. |
| · | The business
risks facing the Company, including increased competition and government regulation,
will be borne by Parent. |
| · | The Buyer Group
will incur substantial fees and expenses in connection with the Merger, including without
limitation, the fees payable to the legal counsels and other advisors, and the fees payable
by the Surviving Company to the Depositary in connection with the termination of the
Company’s ADS program. |
| · | An equity investment
in the Surviving Company by Parent following the Merger will involve substantial risk
resulting from the limited liquidity of such an investment. |
| · | Following the
Merger, there will be no trading market for the Surviving Company’s equity securities. |
The primary benefits of the Merger to the Company’s directors
and executive officers include, without limitation, the following:
| · | The continuation
of service of certain executive officers of the Company with the Surviving Company in
positions that are substantially similar to their current positions; |
| · | Continued indemnification
rights, rights to advancement of fees and directors and officers liability insurance
to be provided by the Surviving Company to former directors and officers of the Company;
and |
| · | the compensation
of members of the Special Committee in exchange for their services in such capacity at
a rate of US$8,000 and US$5,000 per month for the chairman and members of the Special
Committee, respectively, the payment of which is not contingent upon the completion of
the Merger or the Special Committee’s or the Board’s recommendation of the
Merger. |
The primary detriments of the Merger to the Company’s directors
and executive officers (other than members of the Buyer Group) include, without limitation, the following:
| · | Certain director
and officers of the Company, to the extent and in their capacity as shareholders of the
Company, will no longer benefit from possible increases in the future revenues and free
cash flow, growth or value of the Company or payment of dividends on the Shares, if any. |
| · | In general,
the receipt of cash pursuant to the Merger will be a taxable transaction for U.S. federal
income tax purposes and may also be a taxable transaction under other applicable tax
laws. |
The Company’s Net Book Value and Net Earnings Buyer
Group
The table below sets out the indirect interest in the Company’s
net book value and net earnings for the Buyer Group before and after the Merger, based on the historical net book value and net
earnings of the Company as of December 31, 2014.
| | |
Ownership Prior
to the Merger(1) | |
Ownership After
the Merger |
| | |
Net Book Value | |
Earnings | |
Net Book Value | |
Earnings |
| Name | |
US$’000 | |
% | |
US$’000 | |
% | |
US$’000 | |
% | |
US$’000 | |
% |
| Buyer Group | |
52,351 | |
71.84% | |
49,609 | |
71.84% | |
52,351,154 | |
100% | |
49,609 | |
100% |
(1) Ownership percentages are based on 455,227,428 Shares issued
and outstanding as of the date of this proxy statement.
Plans for the Company after the Merger
Following the consummation of the Merger, 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 a wholly-owned subsidiary of Parent and, through Parent, beneficially
owned by the Consortium.
Subsequent to the consummation of the Merger, 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 Board did not independently determine to initiate a process
for the sale of the Company. The Special Committee was formed on July 29, 2015 in response to the receipt of the proposal letter
from CNshangquan and Leading Capital on July 21, 2015. In light of (i) the express intention of certain members of the Buyer Group
not to sell the Shares or ADSs they own to any third party and the beneficial ownership of the Buyer Group of approximately 71.84%
of the entire issued and outstanding Shares (as of the date of this proxy statement) and (ii) the fact that, since the announcement
of the proposed transaction and prior to the entry into the Merger Agreement, no party other than the members of the Buyer Group
has contacted the Company or the Special Committee expressing an interest in exploring an alternative transaction with the Company,
the Special Committee determined that there was no viable alternative to the proposed sale of the Company to the Buyer Group.
The Special Committee also took into account that, the Company,
subject to compliance with the terms and conditions of the Merger Agreement, can terminate the Merger Agreement prior to the receipt
of the Company Shareholder Approval, 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$1.1 million, as provided in the Merger Agreement. In this regard,
the Special Committee recognized that it has flexibility under the Merger Agreement (subject to the restrictions and obligations
set forth therein) 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).
In addition, the Special Committee also considered, as an alternative
available to the Company to enhance shareholder value, that the Company remain as a public company. However, the Special Committee
did not believe such options to be equally or more favorable in enhancing shareholder value, after considering factors such as
the forecasts of future financial performance prepared by management, the offer premium implied by the merger consideration, the
increased costs of regulatory compliance for public companies, the challenges to the Company’s efforts to increase shareholder
value as an independent publicly-traded company, and the requirement, as an SEC-reporting company, to disclose a considerable
amount of business information to the public which will limit the Company’s ability to compete in the market.
Except as set forth above, no other alternatives were considered
by the Special Committee.
Effects on the Company if the Merger Is Not Completed
If the Merger Agreement, the Plan of Merger and the Transactions,
including the Merger, are not authorized and approved by the shareholders of the Company or if the Merger is not consummated for
any other reason, the shareholders or ADS holders of the Company will not receive any payment for their Shares or ADSs in connection
with the Merger. 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 and ADS holders will continue to be subject to similar
risks and opportunities as they currently are with respect to their ownership of the Shares or ADSs. Accordingly, if the Merger
is not consummated, 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 consummated.
Under specified circumstances in connection with the termination
of the Merger Agreement, the Company may be required to pay Parent or its designees a termination fee of US$1.1 million and reimburse
Parent for certain expenses in the event that the Company fails to pay the applicable termination fee when due and in accordance
with the requirements of the Merger Agreement, or Parent may be required to pay the Company a termination fee of US$2.2 million
and reimburse the Company for certain expenses and liabilities in the event that the Company fails to pay the applicable termination
fee when due and in accordance with the requirements of the Merger Agreement, in each case as described in the section entitled
“The Merger Agreement—Termination Fee” beginning on page 91.
If the Merger is not consummated, 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 consummated 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$14,651,201, assuming no exercise of dissenters’
rights by holders of Shares of the Company. This amount includes the cash to be paid to the Unaffiliated Security Holders in connection
with the Merger and the other Transactions. It does not include 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 75. For a discussion of the Rollover Shares and the transactions contemplated by the Support
Agreements, please see “Special Factors—Support Agreements” beginning on page 57.
The total amount of funds necessary to consummate the Merger and
the other Transactions is expected to be provided through a cash equity commitment of up to US$14,651,201 funded by the Sponsor
pursuant to the equity commitment letter entered into by the Sponsor and Parent dated as of December 22, 2015 (the “Equity
Commitment Letter”). As of the date of this proxy statement, there are no alternative financing arrangements or plans in
place to obtain the funds necessary for the consummation of the Merger and the other Transactions.
Concurrently with the execution of the Merger Agreement, the Sponsor
entered into Equity Commitment Letter, pursuant to which the Sponsor has committed to purchase, or cause the purchase of, equity
interests of Parent, at or prior to the closing date under the Merger Agreement, in an amount of up to US$14,651,201. Such amounts
are to be used solely for the purpose of funding the Merger. In the event that Parent does not require the full amount of the
equity commitment to consummate the Merger, the amount to be funded under the Equity Commitment Letter is subject to reduction
to a level sufficient to consummate the transactions contemplated by the Merger Agreement. The equity commitment of the Sponsor
is conditioned upon (i) the satisfaction or waiver at the closing of the Merger of each of the conditions to Parent’s and
Merger Sub’s obligations to effect the Merger pursuant to the Merger Agreement (other than those conditions that by their
nature are to be satisfied at the closing) and (ii) the occurance of the closing of the Merger. The equity commitment will terminate
upon the earliest to occur of (i) the termination of the Merger Agreement in accordance with its terms, and (ii) the closing of
the Merge (subject to performance of the Sponsor’s obligations under its Equity Commitment Letter). The Company is an express
third-party beneficiary of the Equity Commitment Letter and is entitled to seek specific performance of the equity commitment.
The Sponsor may assign and/or delegate, in whole or in part, its obligations to fund the equity commitment to its affiliated entities
or any other investment fund advised or managed by such affiliated entities.
Limited Guarantee
Concurrently with the execution of the Merger Agreement, the Guarantor
and the Company entered into the Limited Guarantee, pursuant to which the Guarantor guaranteed to the Company, on the terms and
subject to the conditions set forth therein, the due and punctual payment when due of the payment obligations of Parent to the
Company with respect to (i) the Parent Termination Fee (as defined in the section entitled “The Merger Agreement—Termination
Fee”) pursuant to Section 9.03(b) of the Merger Agreement and (ii) the entire expense reimbursement pursuant Section 9.03(d)
of the Merger Agreement (collectively, the “Guaranteed Obligations”).
In addition, the Guarantor also agreed to directly pay any reasonable
and documented out-of-pocket expenses of the Company in connection with any action, pursuant to Section 1.03(c) of the Limited
Guarantee. The Guarantor’s aggregate liability under the Limited Guarantee will not exceed US$2.2 million, plus the amount
payable pursuant to Section 9.03(d) of the Merger Agreement and the amount payable under Section 1.03(c) of the Limited Guarantee.
The Limited Guarantee will terminate as of the earliest of (i)
the occurance of the closing of the Merger; (ii) the termination of the Merger Agreement in accordance with its terms by mutual
consent of the parties thereto or in circumstances where the Parent Termination Fee pursuant to the Merger Agreement would not
be payable, upon such termination; and (iii) 120 days after the termination of the Merger Agreement in accordance with its terms
in any circumstances in which the Parent Termination Fee would be payable (unless, in the case of clause (iii) above, the Company
has previously made a claim under the Limited Guarantee prior to such date, in which case the Limited Guarantee will terminate
upon the final, non-appealable resolution of such action claim and satisfaction by the Guarantor of any obligations finally determined
or agreed to be owed by the Guarantor, consistent with the terms thereof).
Support Agreements
Concurrently with the execution of the Merger Agreement, Parent
entered into the Support Agreement with the Rollover Shareholders, respectively, pursuant to which they have agreed, among other
things, to have an aggregate of 327,029,417 Shares held by them (representing approximately 71.84% of the total issued and outstanding
Shares as of the date of this proxy statement, the equivalent of an aggregate value of approximately US$37,281,353, at US$0.114
per Share) cancelled in the Merger, which Shares will not be converted into the right to receive the Merger consideration.
In addition, pursuant to the Support Agreements, the Rollover Shareholders
also agreed with Parent that (i) when a meeting of the shareholders of the Company is held, to appear at such meeting or otherwise
cause its Shares to be counted as present for purposes of calculating a quorum and (ii) to vote or otherwise cause to be voted
at such meeting all Rollover Shares (A) in favor of the authorization and approval of the Merger Agreement, the Plan of Merger
and the Transactions, including the Merger, (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 in consistent with the Transactions, including
the Merger, (C) against any other action, agreement or transaction that would impede, interfere with, delay, postpone, discourage
or adversely affect the Merger or any of the other transactions contemplated by the Merger Agreement or the Support Agreements
or the performance by such Rollover Shareholder of its obligations under the Support Agreement, (D) against any action, proposal,
transaction or agreement that would result in a breach of any covenant, representation or warranty or any other obligation or
agreement of the Company contained in the Merger Agreement, or of such Rollover Shareholder contained in the Support Agreement
or otherwise reasonably requested by Parent in order to consummate the Transactions, including the Merger, (E) in favor of any
adjournment of any shareholders’ meeting of the Company as may be requested by Parent and (F) in favor of any other matter
necessary to the consummation of the Transactions, including the Merger.
Under the terms of the Support Agreements, the Company is an express
third-party beneficiary of the Support Agreements, and will be entitled to specific performance of the terms thereof (in addition
to any other available remedy at law or in equity).
The Support Agreements will terminate immediately upon the earlier
to occur of (a) the closing of the Merger and (b) the termination of the Merger Agreement in accordance with its terms.
Consortium Agreement
Pursuant to the Second Amended and Restated Consortium Agreement,
CNshangquan, ChinaEquity HK, and ChinaEquity will cooperate in good faith in connection with the Transactions. The Second Amended
and Restated Consortium Agreement provides, among other things, for: cooperation in arranging financing; engaging advisors; cooperation
in obtaining applicable governmental, statutory, regulatory or other approvals, licenses, waivers or exemptions for the consummation
of the Transactions; and cooperation in preparing definitive documentation with respect to the Transactions. During the period
beginning on the date of the Second Amended and Restated Consortium Agreement and ending on the earlier of (i) the 12-month anniversary
of the date of the Second Amended and Restated Consortium Agreement, or (ii) the occurrence of termination events as specified
therein, members of the Consortium have agreed to work exclusively with each other with respect to the Transactions.
The Second Amended and Restated Consortium Agreement shall terminate
with respect to a party under following circumstances: (a) if the parties are unable to agree either as between themselves or
with the Special Committee regarding the material terms of the Transaction, within 180 days following the date of the Second Amended
and Restated Consortium Agreement, any party may cease its participation in the Transactions by delivery of a written notice to
the other parties and the Second Amended and Restated Consortium Agreement shall terminate with respect to such party, (b) if
a party materially breaches the terms of the Second Amended and Restated Consortium Agreement, and to the extent such breach is
remediable, fails to remedy such breach within 20 days following the written request by any non-breaching party, such non-breaching
party may cease its participation in the Transactions by delivery of a written notice to the other party and the Second Amended
and Restated Consortium Agreement shall terminate with respect to such non-breaching party, and (c) the Second Amended and Restated
Consortium Agreement shall terminate with respect to all parties upon the earliest to occur of (i) a written agreement among the
parties to terminate the Second Amended and Restated Consortium Agreement, and (ii) the consummation of the Merger.
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 and Limitations on Liability” beginning
on page 92.
While the parties may pursue both a grant of specific performance
and monetary damages until such time as the other party pays a termination fee (as applicable under the Merger Agreement), none
of them will be permitted or entitled to receive both a grant of specific performance that results in the closing of the Merger
and monetary damages.
Subject to the equitable remedies the parties may be entitled to
as discussed above, the maximum aggregate liabilities of Parent, on the one hand, and the Company, on the other hand, for monetary
damages in connection with the Merger Agreement are limited to the Parent termination fee of US$2.2 million and the Company termination
fee of US$1.1 million, respectively, and reimbursement of certain expenses in the event that Company or Parent fails to pay the
applicable termination fee when due and in accordance with the requirements of the Merger Agreement, as the case may be. Subject
to the rights to specific performance and the reimbursement obligations of Parent and the Company as described above, if (a) the
Company pays, and Parent receives, a termination fee pursuant to the Merger Agreement, then any such payment will be the sole
and exclusive remedy of Parent, Merger Sub and their respective affiliates against the Company and its subsidiaries (and other
related persons) and if (b) Parent pays, and the Company receives, a termination fee pursuant to the Merger Agreement, then any
such payment will be the sole and exclusive remedy of the Company and its affiliates against Parent, Merger Sub and their respective
affiliates (and other related persons).
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.
Interests of the Buyer Group
As the result of the Merger, Parent will own 100% of the equity
interests in the Surviving Company and the Consortium will own, through its equity interests in Parent, 100% of the equity interests
in the Surviving Company immediately following the consummation of the Merger.
Because of Parent’s equity interests in the Surviving Company,
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
pursuant to the transactions contemplated by the Merger Agreement. The Buyer Group will also directly bear the corresponding risks
of any possible decreases in the future earnings, growth or value of the Company. The Buyer Group’s investment in the Surviving
Company will be illiquid, with no public trading market for the Surviving Company’s shares and no certainty that an opportunity
to sell its shares in the Surviving Company at an attractive price will arise, or that dividends paid by the Surviving Company
will be sufficient to recover its original investment pursuant to the Transactions.
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, 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.
Treatment of Company Share Awards
As of the date of this proxy statement, there are no outstanding
restricted share units, options or share appreciation rights or any other awards granted under the Company Incentive Plans. Under
the terms of the Merger Agreement, the Company Incentive Plans and any relevant award agreements applicable to the Company Incentive
Plans will be terminated at or prior to the Effective Time.
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 of such indemnified parties thereunder. |
| · | The Surviving
Company and its subsidiaries (and Parent shall cause the Surviving Company and its subsidiaries
to) honor and fulfill in all respects the obligations of the Company and its subsidiaries
under any indemnification, advancement and exculpation provisions set forth in any memorandum
and articles of association or comparable organizational documents of the Company or
any of its subsidiaries in effect on the date of the Merger Agreement and all indemnification
agreements between the Company or any of its subsidiaries and any of their respective
current or former directors and officers and any person who becomes a director or officer
of the Company or any of its subsidiaries prior to the Effective Time (the “Indemnified
Parties”). |
| · | The memorandum
and articles of association of the Surviving Company will contain provisions with respect
to exculpation and indemnification that are at least as favorable to the directors, officers
or employees of the Company as those contained 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 adversely affect the rights thereunder of the Indemnified
Parties, unless such modification is required by law. |
| · | From and after
the Effective Time, the Surviving Company will comply with all of the Company’s
obligations, and will cause its subsidiaries to comply with their respective obligations
to indemnify and hold harmless (i) the Indemnified Parties against any and all damages
arising out of, relating to or in connection with (A) the fact that an Indemnified Party
is or was a director or officer of the Company or any of its subsidiaries or (B) any
acts or omissions occurring or alleged to have occurred prior to the Effective Time,
including the approval of the Merger Agreement and actions to enforce the indemnification
or advancement right of any Indemnified Party; and (ii) such Indemnified Parties against
any and all damages arising out of any acts or omissions in connection with such Indemnified
Parties serving as a director, officer, employee or other fiduciary in any entity if
such service was at request or for the benefit of the Company or any of its subsidiaries. |
| · | The Surviving
Company will, and Parent will cause the Surviving Company 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
than the existing insurance; provided that the Surviving Company 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. The Company may purchase a six-year “tail”
prepaid policy prior to the Effective Time. If a “tail” prepaid policy has
been obtained by the Company prior to the closing of the Merger, the Surviving Company
will (and Parent will cause the Surviving Company to) maintain the policy in full force
and effect, and continue to honor the obligations thereunder. |
The Special Committee
On July 29, 2015, the Board established
a special committee of directors to consider the proposal from Cnshangquan and ChinaEquity and to take any actions it deems appropriate
to assess the fairness and viability of such proposal. The Special Committee is composed of independent and disinterested directors:
Mr. Xiongsheng Yang and Mr. Xiaohua Li. Other than their receipt of Board and Special Committee
compensation (which are not contingent upon the consummation 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, none of the
members of the Special Committee has a financial interest in the Merger or any of transactions contemplated thereby that is different
from that of the Unaffiliated Security Holders and none of them is related to any member of the Buyer Group. The Board did not
place any limitations on the authority of the Special Committee regarding its investigation and evaluation of the Merger.
We compensate the members of the Special Committee in exchange
for their service in such capacity at a rate of US$8,000 and US$5,000 per month for the chairman and members of the Special Committee,
respectively, the payment of which is not contingent upon the consummation of the Merger or the Special Committee’s or the
Board’s recommendation of the Merger.
Position with the Surviving Company
After the consummation of the Merger, it is anticipated that the
executive officers of the Company will hold positions with the Surviving Company that are substantially similar to their current
positions and that Ms. Yang Wang will remain in her position as a director of the Surviving Company.
Related-Party Transactions
We have adopted an audit committee charter, which requires the
audit committee to review and approve all related-party transactions as defined in Item 404 of Regulation S-K on an ongoing basis.
For a description of significant related-party transactions for the years ended December 31, 2013 and 2014, see “Item 7.
Major Shareholders and Related-Party Transactions” included in our Annual Report on Form 20-F for the fiscal year ended
December 31, 2014, incorporated by reference into this proxy statement. See “Where You Can Find More Information”
beginning on page 103 for a description of how to obtain a copy of our Annual Report.
Fees and Expenses
Fees and expenses incurred or to be incurred by the Company and
the Buyer Group in connection with the Merger are estimated at the date of this proxy statement to be as follows:
| Description | |
| Amount
(US$) | |
| Financing fees and expenses and other professional fees | |
| [·] | |
| Legal fees and expenses | |
| [·] | |
| Special Committee fees | |
| [·] | |
| Miscellaneous (including ADS program cancellation fees,
accounting, filing fees, printer, proxy solicitation and mailing costs) | |
| [·] | |
| Total | |
| [·] | |
These fees and expenses will not reduce the aggregate merger consideration
to be received by the Company shareholders and ADS holders. Whether or not the Merger is consummated, all costs and expenses incurred
in connection with the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, will be paid by the party
incurring such costs and expenses except as otherwise stated in the section entitled “The Merger Agreement—Termination
Fee.”
Voting by the Buyer Group at the Extraordinary General Meeting
Pursuant to the Amended and Restated Consortium Agreement and the
Support Agreements, each of the Rollover Shareholders has agreed to vote all of the Shares it beneficially owns in favor of the
authorization and approval of the Merger Agreement, the Plan of Merger and the transactions contemplated by the Merger Agreement,
including the Merger, at the extraordinary general meeting of the Company. As of the Share Record Date, we expect that the Rollover
Shareholders will beneficially own, in the aggregate, approximately 71.84% of the entire issued and outstanding Shares.
Litigation Related to the Merger
We are not aware of any lawsuit that challenges the Merger Agreement
or any of the Transactions, including the Merger.
Accounting Treatment of the Merger
The Merger is expected to be accounted for, at historical cost,
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 the Merger published in the Cayman Islands Government Gazette. See “Merger Agreement—Conditions
to the Merger” beginning on page 89 for additional information.
Dissenters’ Rights
Holders of the Shares who exercise dissenters’ rights will
have the right to receive payment of the fair value of their Shares in accordance with Section 238 of the Cayman Islands Companies
Law if the Merger is consummated, but only if they deliver to the Company, before the vote to authorize and approve 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 for the exercise of dissenters’ rights, a copy of which
is attached as Annex D to this proxy statement. The fair value of their Shares as determined under the Cayman Islands Companies
Law 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 will lose your Dissenters’ Rights (as described under the section entitled “Dissenters’ Rights”
on page 94.
U.S. Federal Income Tax Consequences
The following is a summary of U.S. federal income tax consequences
generally applicable to only U.S. Holders (as defined below) of the exchange of Shares for cash pursuant to the Merger Agreement.
For purposes of this discussion, except as otherwise noted, references to Shares include ownership interests in Shares through
ADSs. This discussion is based on the U.S. Internal Revenue Code of 1986, as amended (the “Code”), U.S. Treasury Regulations
promulgated thereunder, administrative pronouncements, and judicial decisions as of the date hereof, all of which are subject
to change, possibly on a retroactive basis, and to differing interpretation, which may result in tax consequences different from
those described below. This discussion is not binding on the U.S. Internal Revenue Service (the “IRS”), and the IRS
or a court in the event of an IRS dispute may challenge any of the conclusions set forth below.
This discussion does not address any U.S. federal estate, gift,
or other non-income tax, or any state, local, or non-U.S. tax consequences of the Merger. This discussion is a summary for general
information purposes only and does not consider all aspects of U.S. federal income taxation that may be relevant to all taxpayers
or to particular shareholders in light of their individual investment circumstances or subject to special tax rules, including
(i) holders that are banks, financial institutions, or insurance companies; regulated investment companies, cooperatives, mutual
funds, or real estate investment trusts; brokers or dealers in securities or currencies or traders in securities that elect to
apply a mark-to-market accounting method; or tax-exempt organizations (including private foundations), (ii) holders that own Shares
as part of a straddle, hedge, constructive sale, conversion transaction, or other integrated investment, (iii) holders that acquired
Shares in connection with the exercise of employee share options or otherwise as compensation for services, (iv) holders that
have a “functional currency” other than the U.S. dollar, (v) retirement plans, individual retirement accounts, or
other tax-deferred accounts, (vi) U.S. expatriates, (vii) holders that are subject to alternative minimum tax, (viii) holders
that actually or constructively own 10% or more of our voting stock or (ix) partnerships or other entities classified as partnerships
for U.S. federal income tax purposes. This discussion assumes that Shares are held as capital assets, within the meaning of Section
1221 of the Code, at all relevant times. This discussion applies only to U.S. Holders who completely terminate their interest
in the Company following the Merger, whether such interest is held directly or indirectly, including by application of attribution
rules for U.S. federal income tax purposes. Attribution rules may apply, e.g., if such U.S. Holder holds interests in Parent or
the Company indirectly through an interest owned by a family member (subject to certain exceptions and elective procedures) or
a partnership or other related entity.
As used herein, a “U.S. Holder” is any beneficial owner
of Shares that is (i) an individual citizen or resident of the United States for U.S. federal income tax purposes, (ii) a corporation
(or other entity treated as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United
States, any state thereof, or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income
taxation regardless of its source or (iv) a trust which (a) is subject to the primary jurisdiction of a court within the United
States and for which one or more U.S. persons have authority to control all substantial decisions, or (b) has a valid election
in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person for U.S. federal income tax purposes.
If a partnership (including any entity classified as a partnership
for U.S. federal income tax purposes) is a beneficial owner of Shares, the U.S. federal income tax treatment of a partner in the
partnership generally will depend on the status of the partner and the activities of the partnership. Any partner of a partnership
holding Shares is urged to consult its own tax advisor.
ALL U.S. HOLDERS OF SHARES SHOULD CONSULT THEIR TAX ADVISORS
REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE MERGER IN LIGHT OF THEIR PARTICULAR SITUATIONS, INCLUDING THE APPLICABILITY AND
EFFECT OF U.S. FEDERAL, STATE, LOCAL, NON-U.S. AND OTHER LAWS.
Consequences of Participation in the Merger or an Exercise
of Dissenters’ Rights
The receipt of cash, either as consideration in the Merger or as
a result of a U.S. Holder exercising its dissenters’ rights (as described under the section entitled “Dissenters’
Rights” beginning on page 94, will be a taxable transaction for U.S. federal income tax purposes, and a U.S. Holder who
so exchanges Shares for cash will generally recognize gain or loss in an amount equal to the difference between (i) the amount
of cash received and (ii) such U.S. Holder’s adjusted tax basis in the Shares exchanged therefor. Subject to the discussion
under “Passive Foreign Investment Company Considerations” below, such recognized gain or loss will generally be capital
gain or loss, and will constitute long-term capital gain or loss if the U.S. Holder’s holding period for the Shares exchanged
is greater than one year at the Effective Time.
Long-term capital gains of non-corporate U.S. Holders are currently
subject to U.S. federal income tax at a reduced rate. The ability to use any capital loss to offset other income or gain is subject
to certain limitations under the Code. If a U.S. Holder acquired different blocks of Shares at different times and different prices,
such U.S. Holder must determine the adjusted tax basis and holding period separately with respect to each such block of Shares.
Any gain or loss recognized by U.S. Holders will generally be treated
as U.S. source gain or loss for U.S. foreign tax credit purposes. However, in the event that we are deemed to be a PRC “resident
enterprise” under the PRC tax law and gain from the disposition of Shares is regarded as gain sourced from the PRC and is
subject to tax in the PRC (see “Special Factors—PRC Income Tax Consequences”) or you are subject to PRC income
tax pursuant to Circular 698 or Bulletin 7 as described below under the “Special Factors—PRC Income Tax Consequences,”
you may be eligible to elect to treat such gain as PRC source gain under the income tax treaty between the United States and the
PRC (the Agreement Between the Government of the United States of America and the Government of the People’s Republic of
China for the Avoidance of Double Taxation and the Prevention of Tax Evasion With Respect to Taxes on Income (the “Treaty”)).
If we are not eligible for the benefits of the Treaty or you fail to make the election to treat any gain as PRC source, then you
may not be able to use the foreign tax credit arising from any PRC tax imposed on the exchange of Shares pursuant to the Merger
Agreement unless such credit can be applied (subject to applicable limitations) against tax due on other income treated as derived
from foreign sources. U.S. Holders are urged to consult their tax advisors regarding the tax consequences if PRC tax is imposed
on gain on a disposition of the Shares, including their eligibility for the benefits of the Treaty and the availability of the
foreign tax credit under their particular circumstances.
Passive Foreign Investment Company Considerations
In general, we will be a passive foreign investment company, or
a “PFIC,” for any taxable year in which (i) at least 75% of our gross income is passive income or (ii) at least 50%
of the value of our assets (based on a quarterly value of the assets during the taxable year) is attributable to assets that produce
or are held for the production of passive income (the “asset test”). For this purpose, passive income generally includes
dividends, interest, royalties and rents. If we own, directly or indirectly, at least 25% (by value) of the stock of another corporation,
we will be treated, for purposes of the PFIC tests, as owning our proportionate share of the other corporation’s assets
and receiving our proportionate share of the other corporation’s income. For purposes of the asset test, any cash and assets
readily convertible into cash will count as producing passive income or held for the production of passive income.
Accordingly, determination of our PFIC status is based on the composition
of our income and assets and the value of our assets, including goodwill, which is based, in part, on the market price of our
ADSs. Moreover, it is unclear how the contractual arrangements between us and our PRC operating companies should be treated for
purposes of the PFIC rules. Although we do not currently expect to be a PFIC for the current taxable year, because the determination
of whether a company is a PFIC is made annually after the end of each taxable year and our PFIC status is based on facts that
may change and because the application of the PFIC rules to our facts and circumstances in uncertain in many important legal and
factual respects, we cannot assure you that we will not be a PFIC for the current taxable year. In addition, as described in certain
of our previous annual reports on Form 20-F, because of such uncertainties, it is unclear whether we were a PFIC for certain of
our previous taxable years. If we were a PFIC for any previous taxable year during which a U.S. Holder owned Shares, we 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 Shares, even if we ceased to meet the threshold requirements for PFIC status.
Generally, if we were a PFIC for any taxable year during which
a U.S. Holder owned Shares, the amount of gain recognized upon the disposition of Shares by the U.S. Holder would be allocated
ratably over the U.S. Holder’s holding period for such Shares. The amounts allocated to the taxable year of disposition
and to years before we 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 us, generally with the U.S. Holder’s federal income tax return for the year of the
merger. If we were a PFIC for any previous taxable year in which a U.S. Holder owned Shares, 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 Shares, or be taxed on a deemed sale of the Shares. U.S. Holders should
consult their tax advisers regarding the consequences of disposing of their Shares in the case that we were 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
A U.S. Holder may be subject, under certain circumstances, to information
reporting with respect to the amount of cash received in the Merger. Each U.S. Holder is advised to consult with its tax adviser
regarding the application of the United States information reporting rules to its particular circumstances.
Medicare Tax
A U.S. Holder that is an individual, estate or trust (that does
not fall into a special class of trusts that is exempt from such tax) will be subject to a 3.8% tax on the lesser of (1) such
holder’s “net investment income” (or undistributed net investment income in the case of an estate or trust)
for the relevant taxable year and (2) the excess of such holder’s modified adjusted gross income for the taxable year over
a certain threshold (which in the case of individuals will be between US$125,000 and US$250,000, depending on the individual’s
circumstances). A U.S. Holder’s net investment income will generally include gains from the sale or other disposition of
capital assets. U.S. Holders should consult their tax advisors regarding the effect, if any, of this tax on their disposition
of Shares.
PRC Income Tax Consequences
Under the EIT Law, which took effect on January 1, 2008, enterprises
established outside of China 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 adopted the Regulation on the Implementation of EIT 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 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. Circular 82 provides certain specific criteria for
determining whether the “de facto management body” of a Chinese-controlled offshore incorporated enterprise is located
in China. Under the EIT Law and its implementation regulations, the PRC income tax at the 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 if such gain is regarded as incomes derived from sources within the PRC. The term “non-resident enterprise”
means an enterprise established under the laws of a jurisdiction other than the PRC and whose actual administrative organization
is not in the PRC, which has established offices or premises in the PRC, or which has not established any offices or premises
in the PRC but has obtained income derived from sources within the PRC. Under the Individual Income Tax Law, an individual who
disposes a capital asset in China is subject to PRC individual income tax at the rate of 20%. Relief from these taxes may be sought
under an applicable income tax treaty with China.
As there has not been a definitive determination of the Company’s
status by the PRC tax authorities, the Company cannot confirm whether it would be considered a PRC resident enterprise under the
EIT Law or whether the gain recognized on the receipt of consideration for Shares would otherwise be subject to PRC tax to holders
of such Shares that are not PRC tax residents.
In addition, under the Circular on Strengthening the Administration
of Enterprises Income Tax on Non-resident Enterprises' Equity Transfer Income (“Circular 698”) issued by the State
Administration of Taxation, which became effective as of January 1, 2008, the Circular Concerning Various Questions on the Administration
of Enterprises Income Tax on Non-resident Enterprises (“Bulletin 24”) issued by the State Administration of Taxation,
which became effective as of April 1, 2011, and the Bulletin on Certain Issues Relating to Indirect Transfer of Assets by Non-resident
Enterprises (“Bulletin 7”) issued by the State Administration of Taxation, which became effective on February 3, 2015,
if any non-resident enterprise transfers 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. In addition, if a non-PRC resident enterprise indirectly transfers so-called
PRC Taxable Properties, referring to properties of an establishment or a place of business in China, real estate properties in
China and equity investments in a PRC tax resident enterprise, by disposition of the equity interests in an overseas non-public
holding company without a reasonable commercial purpose and resulting in the avoidance of PRC enterprise income tax, the transfer
will be re-characterized as a direct transfer of the PRC Taxable Properties and gains derived from the transfer may be subject
to a PRC withholding tax of up to 10%. Bulletin 7 has listed several factors to be taken into consideration by the tax authorities
in determining if an indirect transfer has a reasonable commercial purpose. However, despite these factors, an indirect transfer
satisfying all the following criteria will be deemed to lack reasonable commercial purpose and be taxable under the PRC laws:
(i) 75% or more of the equity value of the intermediary enterprise being transferred is derived directly or indirectly from PRC
Taxable Properties; (ii) at any time during the one year period before the indirect transfer, 90% or more of the asset value of
the intermediary enterprise (excluding cash) is comprised directly or indirectly of investments in the PRC, or 90% or more of
its income is derived directly or indirectly from the PRC; (iii) the functions performed and risks assumed by the intermediary
enterprise and any of its subsidiaries that directly or indirectly hold the PRC Taxable Properties are limited and are insufficient
to prove their economic substance; and (iv) the foreign tax payable on the gain derived from the indirect transfer of the PRC
Taxable Properties is lower than the potential Chinese tax on the direct transfer of those assets. Nevertheless, the indirect
transfers falling into the scope of the safe harbor under Bulletin 7 may not be subject to PRC tax. The safe harbor includes qualified
group restructurings, public market trades and exemptions under tax treaties. Circular 698 or Bulletin 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 merger is determined by the PRC tax authorities to lack reasonable commercial purpose. As a result, if PRC tax authorities
were to invoke Circular 698 or Bulletin 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 non-PRC
resident enterprises could be treated as PRC-source income and thus be subject to PRC income tax at a rate of 10% (subject to
applicable treaty relief). Neither Parent nor Merger Sub intends to withhold any PRC taxes on the consideration provided to non-PRC-resident
shareholders of the Company in connection with the merger.
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.
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 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 Shares and ADSs under the terms of the Merger. This is subject to the qualification
that (i) Cayman Islands stamp duty may be payable if any original transaction documents are brought into or executed or produced
before a court in the Cayman Islands (for example, for enforcement), (ii) registration fees will be payable to the Cayman Registrar
to register the Plan of Merger and (iii) fees payable to the Cayman Islands Government Gazette Office to publish the notice of
the Merger in the Cayman Islands Government Gazette, if any.
MARKET PRICE OF THE COMPANY’S ADSs,
DIVIDENDS AND OTHER MATTERS
Market Price of the ADSs
Prior to February 1, 2013, one ADS represented seven Shares. On
February 1, 2013, we effected a change of the ADS to ordinary share ratio from one ADS representing seven Shares to one ADS representing
thirty-five Shares. The ratio change has the same effect as a one-for-five reverse ADS split. The following table provides the
high and low sales prices for ADSs on NASDAQ under the symbol “MCOX” for (i) each quarter of 2013 and 2014 and (iii)
each of the past six months (through January 7, 2016):
| | |
Sales Price Per ADS
(in US$) | |
| | |
High | | |
Low | |
| 2013 | |
| | | |
| | |
| First quarter | |
| 3.33 | | |
| 1.67 | |
| Second quarter | |
| 7.88 | | |
| 2.21 | |
| Third quarter | |
| 7.88 | | |
| 2.21 | |
| Fourth quarter | |
| 4.85 | | |
| 3.10 | |
| 2014 | |
| | | |
| | |
| First quarter | |
| 5.32 | | |
| 3.33 | |
| Second quarter | |
| 5.78 | | |
| 3.48 | |
| Third quarter | |
| 4.75 | | |
| 3.56 | |
| Fourth quarter | |
| 4.35 | | |
| 3.00 | |
| 2015 | |
| | | |
| | |
| First quarter | |
| 4.42 | | |
| 2.88 | |
| Second quarter | |
| 4.37 | | |
| 3.01 | |
| July | |
| 4.31 | | |
| 2.60 | |
| August | |
| 3.97 | | |
| 2.95 | |
| September | |
| 3.58 | | |
| 2.95 | |
| October | |
| 3.54 | | |
| 2.83 | |
| November | |
| 3.46 | | |
| 3.12 | |
| December | |
| 4.19 | | |
| 3.20 | |
| 2016 | |
| | | |
| | |
| January (through January 7, 2016) | |
| 3.80 | | |
| 3.69 | |
The per ADS in cash, representing a premium of 17.65%, 22.70% and
4.99% to the closing price on July 20, 2015, the last trading day prior to the Company’s announcement that it had received
a going-private proposal, July 14, 2015, one week prior to the announcement, and June 19, 2015, one month prior to the announcement,
respectively
The Per ADS Merger Consideration implies a 17.65% premium over
the Company’s closing price of US$3.40 per ADS on July 20, 2015, the last trading day prior to the Company’s public
announcement that it had received a going-private proposal, a 22.70% premium over the Company’s closing price of US$3.26
per ADS on July 14, 2015, one week prior to the public announcement and a 4.99% premium over the Company’s closing price
of US$3.81 per ADS on June 19, 2015, one month prior to the public announcement. On January 7, 2016, the most recent practicable
date before the printing of this proxy statement, the high and low reported sales prices of ADSs were US$3.80 and US$3.69, respectively.
You are urged to obtain a current market price quotation for your Shares in connection with voting your Shares.
Dividend Policy
We have not paid dividend in the past and do not have any present
plan to pay any dividend in the foreseeable future. We currently intend to retain most, if not all, of our available funds and
any future earnings to operate and expand our business. As of the date of this proxy statement, we do not have any declared and
unpaid dividend.
Under the terms of the Merger Agreement, the Company is not permitted
to pay any dividends or repurchase any of the 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 and applicable
laws. Under Cayman Islands law, a Cayman Islands company may pay a dividend on its shares out of either profit or share premium
amount, provided that in no circumstances may a dividend be paid if this would result in the company being unable to pay its debts
due in the ordinary course of business. 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 the Shares, subject to the terms of the Deposit
Agreement, including the fees and expenses payable thereunder. Cash dividends on the Shares, if any, will be paid in U.S. dollars.
We are a holding company incorporated in the Cayman Islands. We
rely on dividends from our subsidiaries in the PRC to fund our payment of dividends, if any, to our shareholders. Current PRC
regulations permit our subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance
with PRC accounting standards and regulations. In addition, each of our subsidiaries in China is required to set aside a certain
amount of its accumulated after-tax profits, if any, based on PRC accounting standards each year to their general reserves until
the accumulative amount of such reserves reach a certain percent of their registered capital, to fund certain statutory reserves.
These reserves may not be distributed as cash dividends. Further, if our subsidiaries in China incur debt on their own behalf,
the instruments governing the debt may restrict their ability to pay dividends or make other payments to us. Furthermore, the
EIT Law eliminates the exemption of enterprise income tax on dividends derived by foreign investors from foreign invested enterprises
and imposes on our subsidiaries in China an obligation to withhold tax on dividend distributions to their non-PRC shareholders,
provided that such non-PRC shareholders are not classified as resident enterprises.
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 _________, 2016,
at ____ a.m. (Beijing time) at ____.
Proposals to be Considered at the Extraordinary General Meeting
At the meeting, you will be asked to consider and vote upon:
THAT the Merger Agreement, the Plan of Merger and the Transactions,
including the Merger, the Variation of Capital and the Adoption of Amended M&A, be authorized and approved;
THAT each of 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,
the Variation of Capital and the Adoption of Amended M&A; and
| · | if necessary,
as an ordinary resolution: |
THAT the extraordinary general meeting be adjourned 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 special 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 consummated, each issued and outstanding Share and ADS, other than the Excluded Shares (including such
Shares represented by ADSs) and the Dissenting Shares, will be cancelled in exchange for the right to receive the Per Share Merger
Consideration and the Per ADS Merger Consideration, 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 and cease to exist without payment of any consideration or distribution therefor.
The Dissenting Shares will thereafter represent only the right to receive the fair value of each Share as determined under Section
238 of the Cayman Islands Companies Law.
In addition to the foregoing, at the Effective Time, each ordinary
share, par value US$0.0001 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$0.0001 per share, of the Surviving Company
The Board’s Recommendation
The Board, acting upon the unanimous recommendation of the Special
Committee, unanimously:
| · | determined
that the Merger as contemplated in the Merger Agreement and the Plan of Merger is fair
to and in the best interests of the Company and the Unaffiliated Security Holders and
it is advisable for the Company to enter into the Merger Agreement, the Plan of Merger
and the Transactions, including the Merger; |
| · | authorized
and approved the execution, delivery and performance of the Merger Agreement, the Plan
of Merger, the Limited Guarantee 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 Transactions, including the Merger, to the shareholders of the Company
and directed that the Merger Agreement, the Plan of Merger and 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, you should lodge your proxy card and vote
so that the proxy card is received by the Company no later than ________, 2016 at 12:00 p.m. (Beijing time).
If you own ADSs as of the close of business in New York City on
the ADS Record Date (and do not convert 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) 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 _______, 2016 in order to ensure the Shares underlying your
ADSs are properly voted at the extraordinary general meeting.
Each holder has one vote for each Share held as of the close of
business in the Cayman Islands on the Share Record Date. We expect that, as of the Share Record Date, there will be 455,227,428
Shares entitled to be voted at the extraordinary general meeting. See “The Extraordinary General Meeting—Procedures
for Voting” below for additional information.
Quorum
A quorum of the Company’s shareholders is necessary to have
a valid shareholders’ meeting. Shareholders holding not less than an aggregate of one-third of all voting share capital
of the Company in issue on the Share Record Date present in person or by proxy or, if a corporation or other non-natural person,
by its duly authorized representative or proxy and entitled to vote, will constitute a quorum for the extraordinary general meeting.
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 consummated, the Merger Agreement and the Plan of Merger must be approved by a special resolution
(as defined in the Cayman Islands Companies Law) of the Company passed by the affirmative vote of holders of Shares representing
at least two-thirds of the Shares 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 consummated.
As of the date of this proxy statement, there are 455,227,428 Shares
issued and outstanding (including the Shares represented by ADSs), all of which are entitled to vote on the proposals at the extraordinary
general meeting, subject to the procedures described below under “Summary Term Sheet— Procedures for Voting.”
We expect that, as of the Share Record Date, there will be 455,227,428 Shares issued and outstanding (including the Shares represented
by ADSs), all of which will be entitled to vote on the proposals at the extraordinary general meeting, subject to the procedures
described below under “The Extraordinary General Meeting—Procedures for Voting.”
As of the date of this proxy statement, the Rollover Shareholders,
as a group, beneficially own 327,029,41 Shares (including the Shares represented by ADSs), which represents approximately 71.84%
of the entire issued and outstanding Shares. See “Security Ownership of Certain Beneficial Owners and Management of the
Company” beginning on page 99 for additional information. Pursuant to the terms of the Second Amended and Restated Consortium
Agreement and the Support Agreements, these Shares will be voted by the Rollover Shareholders 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. Given the Rollover Shareholders’ shareholding as described above and assuming their compliance with their voting
undertaking under the Second Amended and Restated Consortium Agreement and the Support Agreements, based on the number of Shares
expected to be issued and outstanding on the Share Record Date, a quorum will be present at the extraordinary general meeting
and sufficient votes will be cast to authorize and approve the Merger Agreement, the Plan of Merger and the Transactions, including
the Merger, without any further vote of any other shareholder.
As of the date of this proxy statement, our directors and executive
officers beneficially own, in aggregate, 1,501,570 Shares (including Shares represented by ADSs), which represent 0.33% of the
entire issued and outstanding Shares. See “Security Ownership of Certain Beneficial Owners and Management of the Company”
beginning on page 99 for additional information. These directors and executive officers have informed us that they intend, as
of the date hereof, to vote all their Shares 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 registered 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. Each holder has one vote for each
Share.
Shareholders wanting to vote by proxy should 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
so that it is received by the Company no later than 12:00 p.m. on ______, 2016 (Beijing 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 our
Investor Relations Department at +86-21-3108-1111, Ext. 8161.
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 these materials will be forwarded to them by 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
______, 2016 (New York City time) (who do not convert 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 the card. The ADS Depositary must receive
the ADS voting instruction card no later than 12:00 p.m. (New York City time) on ______, 2016. 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.
The ADS Depositary has advised us that, pursuant to Section 12 of the American Depositary Receipt evidencing your ADSs, it will
not vote or attempt to exercise the right to vote any Shares other than in accordance with signed voting instructions from the
relevant ADS holder and, accordingly, Shares represented by ADSs for which no timely voting instructions are received by the ADS
Depositary will not be voted. If you hold your ADSs in a brokerage, bank or other nominee account, you must rely on 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 convert 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 convert their ADSs need to make arrangements to deliver the ADSs to the ADS Depositary
for cancellation before the close of business in New York City on ______, 2016 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$5.00 for each 100 ADSs (or portion thereof) to be cancelled pursuant to the terms of the Deposit Agreement), which will
not be borne by the Surviving Company, 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 converted, or has given voting instructions to the ADS Depositary as to the ADSs being converted 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 conversion 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 request the Cayman Registrar of Shares, Maples Fund
Services (Cayman) Limited, to issue and mail a certificate to your attention. If the Merger is not consummated, the Company will
continue to be a public company in the United States and ADSs will 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
converted your ADSs to attend the extraordinary general meeting and the Merger is not consummated and you wish to be able to sell
your Shares on a stock exchange, you will 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 (US$5.00 for each 100 ADSs (or portion
thereof) issued) 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 chairman of the extraordinary general meeting 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 chairman of the extraordinary general meeting 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 chairman of the extraordinary general
meeting 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, the Variation of Capital and the Adoption
of Amended M&A, 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 adjourn the extraordinary
general meeting in order to allow the Company to solicit additional proxies in the event that there are insufficient proxies received
to pass the special resolutions during 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 required votes described
in “The Extraordinary General Meeting—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 holders of ADSs do not timely deliver specific voting instructions
to the ADS Depositary, the ADS Depositary has advised the Company that it will not vote or attempt to exercise the right to vote
any Shares underlying such holders’ 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 adoption of the Merger Agreement. 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 adoption of the Merger Agreement.
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 before the commencement of the extraordinary general
meeting. Any written notice revoking a proxy should also be sent to the Company’s
offices at Room 302, Qilai Building, No. 889, Yishan Road, Shanghai 200233, People’s
Republic of China, Attention: Investor Relations Department, before the commencement
of the extraordinary general meeting. |
| · | 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 so that the new proxy card is received
by the Company no later than 12:00 p.m. (Beijing time) on ______, 2016, 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 our 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 ______, 2016. A holder of ADSs can do
this in one of two ways:
| · | First, a holder
of ADSs can revoke its voting instruction by written notice of revocation timely delivered
to the ADS Depositary. |
| · | Second, a holder
of ADSs can complete, date and submit 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 Wish to Dissent from the Merger
Shareholders who continue to hold their Shares in their own name
until the vote to authorize the Merger is taken at the extraordinary general meeting will have the right to exercise dissenters’
rights and receive payment of the fair value of their Shares in accordance with Section 238 of the Cayman Islands Companies Law
if the Merger is consummated, but only if they deliver to the Company, before the vote to authorize and approve 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, 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 the Cayman Islands Companies Law 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 EXERCISE OR 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 HOLD THE ADSs AS OF THE ADS RECORD
DATE AND HAVE NOT GIVEN, AND WILL NOT GIVE, VOTING INSTRUCTIONS AS TO THEIR ADSs BEFORE 5:00 P.M. (NEW YORK CITY TIME) ON ______,
2016, AND BECOME REGISTERED HOLDERS OF SHARES BEFORE THE VOTE TO AUTHORIZE AND APPROVE THE MERGER IS TAKEN AT THE EXTRAORDINARY
GENERAL MEETING. 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 CONSUMMATED, THE
COMPANY WILL CONTINUE TO BE A PUBLIC COMPANY IN THE UNITED STATES AND ADSs WILL 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 CONVERTED HIS, HER OR ITS ADSs TO EXERCISE DISSENTERS’ RIGHTS AND THE MERGER IS NOT CONSUMMATED
AND SUCH FORMER ADS HOLDER WISHES TO BE ABLE TO SELL HIS, HER OR ITS SHARES ON A STOCK EXCHANGE, SUCH FORMER ADS HOLDER WILL 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 (US$5.00 FOR EACH 100 ADSs (OR PORTION THEREOF) ISSUED) 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 our Investor Relations Department at +86-21-3108-1111, Ext. 8161.
Solicitation of Proxies
We have not retained a third-party service provider to assist in
the solicitation process. We will ask banks, brokers and other custodians, nominees and fiduciaries to forward our proxy solicitation
materials to the beneficial owners of Shares or ADSs registered in the name of such nominee holders. In addition, proxies may
be solicited by mail, in person, by telephone, by internet or by facsimile by certain of our 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 our 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 the material provisions of the
Merger Agreement. This summary may not include all of the information about the Merger Agreement that is important to you. This
summary is subject to, and qualified in its entirety by reference to, the Merger Agreement, which is attached as Annex A, and
incorporated by reference into this section of this proxy statement. You are urged to read the Merger Agreement carefully and
in its entirety, as it, together with the Plan of Merger, 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 any other members of the Buyer Group) 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 103.
Structure and Consummation 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, with the Company as the Surviving
Company of the Merger. If the Merger is consummated, the Company will cease to be a publicly-traded company. The closing of the
Merger will occur on the second business day after all of the conditions to the Merger have been satisfied or waived. At the closing,
Merger Sub and the Company will execute and file the Plan of Merger and other related documents with the Cayman Registrar as required
by the Cayman Islands Companies Law. The Merger will become effective on the date when the Plan of Merger is registered by the
Cayman Registrar, or such subsequent date (being not more than 90 days after the date of registration of the Plan of Merger by
the Cayman Registrar) as may be specified in the Plan of Merger.
We expect that the Merger will be consummated in the second quarter
of 2016, 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 Company
At the Effective Time, the Surviving Company will adopt new memorandum
and articles of association in the form attached as Appendix II to the Plan of Merger, which are substantively identical to the
memorandum and articles of association of Merger Sub in effect immediately prior to the Effective Time, except that (a) the name
of the Surviving Company will be “Mecox Lane Limited”, (b) all references to the authorized share capital of the Surviving
Company will be amended as necessary to correctly describe the authorized share capital of the Surviving Company as approved in
the Plan of Merger, and (c) the the memorandum and articles of association of the Surviving Company will contain provisions no
less favorable to the intended beneficiaries with respect to exculpation and indemnification of liability and advancement of expenses
than as set forth in the memorandum and articles of association of the Company. The directors of Merger Sub immediately prior
to the Effective Time will become the directors of the Surviving Company and the officers of the Company immediately prior to
the Effective Time will remain the officers of the Surviving Company, unless otherwise determined by Parent prior to the Effective
Time.
Merger Consideration
At the Effective Time, each issued and outstanding Share of the
Company (other than the Excluded Shares, the Dissenting Shares and Shares represented by ADSs) will be cancelled and cease to
exist in exchange for the right to receive US$0.114 in cash without interest. At the Effective Time, each issued and outstanding
ADS (representing thirty-five Shares (other than any ADSs representing the Excluded Shares)) will be cancelled in exchange for
the right to receive US$4.00 in cash without interest (less a US$0.05 per ADS cancellation fee). Each of the Excluded Shares will
be cancelled and cease to exist and no payment or distribution will be made with respect thereto. Each Dissenting Share will be
cancelled and cease to exist in accordance with the procedures set out in Section 238 of the Cayman Islands Companies Law, and
from the Effective Time such dissenting shareholders shall cease to have any of the rights of a shareholder of the Company except
for the right to be paid the fair value of such Shares..
At the Effective Time, each ordinary share of Merger Sub will be
converted into one fully paid and non-assessable ordinary share of the Surviving Company. Such ordinary shares shall constitute
the only issued and outstanding share capital of the Surviving Company at the Effective Time.
Treatment of Company Share Awards
As of the date of this proxy statement, there are no outstanding
restricted share units, options or share appreciation rights or any other awards granted under the Company Incentive Plans. The
Company Incentive Plans and any relevant award agreements applicable to the Company Incentive Plans will be terminated at or prior
to the Effective Time.
Exchange Procedures
At or prior to the Effective Time, Parent will deposit, or cause
to be deposited, with a bank or trust company satisfactory to the Company to act as paying agent (the “Paying Agent”)
an amount in cash sufficient to make payments for the benefit of the holders of Shares and ADSs under the Merger Agreement (such
aggregate cash amount, the “Exchange Fund”). As promptly as practicable after the Effective Time, but in any event
no later than five business days following the Effective Time, Parent will cause the Paying Agent to mail to each registered holder
of the Shares entitled to receive the merger consideration (a) a letter of transmittal specifying the manner in which the delivery
of the Exchange Fund to registered holders of Shares (other than Excluded Shares and Dissenting Shares) will be effected and (b)
instructions for effecting the surrender of share certificates, if any (or affidavits and indemnities of loss in lieu of the share
certificates). Upon surrender of any share certificate (or affidavit and indemnity of loss in lieu of the share certificate) to
the Paying Agent in accordance with the terms of such letter of transmittal, duly executed, each registered holder of Shares represented
by such share certificate and each registered holder of Shares which are not represented by a share certificate shall be entitled
to receive a cheque 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) multiplied by (y) the Per Share Merger Consideration.
As promptly as reasonably practicable following the Effective Time,
the Paying Agent will transmit to the ADS Depositary an amount in cash equal to (a) the number of ADSs issued and outstanding
immediately prior to the Effective Time (other than ADSs representing the Excluded Shares), multiplied by (b) the Per ADS Merger
Consideration. The ADS Depositary will distribute the Per ADS Merger Consideration to the ADS holders pro rata to their holdings
of ADSs (other than ADSs representing the Excluded Shares) upon surrender by them of the ADSs, after deducting any fees, including
ADS cancellation fees, charges and expenses due to or incurred by the Depositary, and any necessary tax withholding or deductions.
The holders of ADSs will pay any applicable fees, charges and expenses of the ADS Depositary and government charges due to or
incurred by the ADS Depositary in connection with the distribution of the merger consideration to holders of ADSs, including applicable
ADS cancellation fees, and any such fees, charges and expenses incurred by the ADS Depositary will be treated for all purposes
as having been paid to the holders of ADSs.
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 in connection with negotiating the
terms of the Merger Agreement. In addition, some of those representations and warranties may be subject to a contractual standard
of materiality different from that generally applicable to shareholders, 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 consummate 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 risks 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 and filings with the SEC prior to the date of the Merger Agreement and
a disclosure schedule delivered by the Company to Parent and Merger Sub contemporaneously with the execution of the Merger Agreement.
Furthermore, the representation and warranties made by the Company were qualified by the knowledge, after reasonable inquiry,
of any director of officer of Parent, Merger Sub or any member of the Consortium as of the date of the merger agreement. It should
also be noted that information concerning the subject matter of the representations and warranties, which do not purport to be
accurate as of the date of this proxy statement, may have changed since the date of the Merger Agreement and subsequent developments
or new information qualifying a representation or warranty may have been included in this proxy statement.
The representations and warranties made by the Company to Parent
and Merger Sub include representations and warranties relating to, among other things:
| · | due organization,
valid existence and qualification, license or authority to carry on the Company’s
business; |
| · | the memorandum
and articles of association or other equivalent organizational documents of the Company
and its subsidiaries being in full force and effect; |
| · | the Company’s
capitalization, the absence of agreements, arrangements or commitments 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 share capital of the Company
or any of its subsidiaries, the absence of any securities or encumbrances on Company
securities that would give their holders the right to vote with the Company’s shareholders;
and the absence of encumbrances on the Company’s ownership of the equity interests
of its subsidiaries; |
| · | the Company’s
corporate power and authority to execute, deliver and perform its obligations and to
consummate the enforceability of the Merger Agreement against the Company; |
| · | the determination
by the Board (acting upon the unanimous recommendation of the Special Committee) that
the Merger Agreement, Plan of Merger and the Transactions, including the Merger, are
fair to, and in the best interests of, the Company and its shareholders (other than the
Rollover Shareholders) and the authorization and approval of the Merger Agreement, the
Plan of Merger and the consummation of the Transactions, including the Merger, by the
Board; |
| · | the required
vote of the Company’s shareholders to authorize, approve and adopt the Merger Agreement; |
| · | the absence
of (i) any conflict with or violation of the memorandum and articles of association or
other equivalent organizational documents of the Company or any of its subsidiaries;
(ii) any conflict with or violation of 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) any violation, conflict with, require consent under,
result in any breach of, result in loss of benefit under, 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 right of termination, amendment, acceleration or cancellation of,
or result in the creation of an encumbrance (other than permitted encumbrances) on any
property or asset of the Company or any of its subsidiaries pursuant to any note, bond,
mortgage, indenture, deed of trust, contract, agreement or Company permit or other instrument
or obligation to which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries or any of their respective asset or property is
bound or affected, except, with respect to clause (ii) to (iii), for any such conflicts,
violations, breaches, defaults or other occurrences which would not reasonably be expected
to have a Company Material Adverse Effect; |
| · | the absence
of material notices, reports or other filings that are required to be made by the Company
with, or any material 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
of the Merger and the other Transactions; |
| · | the accuracy
of the information provided in the Schedule 13E-3 and this proxy statement; |
| · | compliance
with applicable laws, licenses and permits; |
| · | the Company’s
SEC filings since October 6, 2010 and the financial statements included or incorporated
by reference in such SEC filings; |
| · | compliance
with the applicable provisions of the United States Sarbanes-Oxley Act of 2002 and the
applicable rules and regulations promulgated thereunder applicable to the Company’s
SEC reports; |
| · | the accuracy
of the information provided in the Company’s SEC filings; |
| · | the Company’s
disclosure controls and procedures and internal control over financial reporting; |
| · | the absence
of undisclosed liabilities or obligations of the Company or its subsidiaries; |
| · | the absence
of a Company Material Adverse Effect and the absence of certain other changes or events
from December 31, 2014 to the date of the Merger Agreement; |
| · | the absence
of legal proceedings and governmental orders against the Company or its subsidiaries; |
| · | employee benefits
plans and labor and employment matters; |
| · | material contracts
and the absence of any default under, breach or violation of, or termination of, any
material contract; |
| · | interested
party transactions; |
| · | the receipt
of a fairness opinion from Houlihan Lokey, as the financial advisor to the Special Committee; |
| · | the absence
of any undisclosed brokerage, finder’s or other fees or commission; |
| · | the absence
of a shareholder rights plan and the inapplicability of any anti-takeover law to the
Merger Agreement and the transactions contemplated by the Merger Agreement; and |
| · | the absence
of any other representations and warranties by the Company to Parent and Merger Sub,
other than the representations and warranties made by the Company in the Merger Agreement. |
Many of the representations and warranties in the Merger Agreement
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,
is or is reasonably likely to be materially adverse to the business, financial condition, assets, liabilities or results of operations
of the Company and its subsidiaries taken as a whole, or would prevent or materially delay consummation of the Transactions by
the Company or otherwise prevent or materially delay the Company from performing its obligations under this Agreement; provided,
however, that the following shall not be taken into account in determining whether a Company Material Adverse Effect has occurred:
| (i) | changes in general business, economic, political or financial
market conditions; |
| (ii) | changes in United States generally accepted accounting principles
(“GAAP”) or any interpretation or enforcement thereof after the date of the
Merger Agreement; |
| (iii) | changes that are the result of factors generally affecting
the principal industries in which the Company and its subsidiaries operate; |
| (iv) | the public announcement of the Merger Agreement or the consummation
of the Transactions, including any initiation of shareholder litigation or other legal
proceeding relating to the Merger Agreement or the Transactions; |
| (v) | any outbreak or escalation of hostilities, declared or undeclared
acts of war, sabotage or terrorism, act of God or natural disasters, or similar events; |
| (vi) | changes in the market price or trading volume of Shares (it
being understood that the underlying cause of such change may, except as otherwise provided
in the definition of the “Company Material Adverse Effect”, be taken into
account in determining whether a Material Adverse Effect has occurred or would reasonably
be expected to occur); |
| (vii) | actions or omissions of the Company or any of its subsidiaries
(a) that are required by the Merger Agreement, (b) taken with the consent of Parent,
Merger Sub, or any member of the Consortium, or (c) taken at the request of Parent, Merger
Sub or any member of the Consortium; |
| (viii) | any breach of the Merger Agreement by Parent or Merger
Sub; |
| (ix) | the failure by the Company or any of its subsidiaries to
meet any internal or industry estimates, expectations, forecasts, projections or budgets
for any period (it being understood that the underlying cause of such change may, except
as otherwise provided in the definition of the “Company Material Adverse Effect”,
be taken into account in determining whether a Material Adverse Effect has occurred or
would reasonably be expected to occur); or |
| (x) | any change or prospective change in the Company’s credit
ratings (it being understood that the underlying cause of such change may, except as
otherwise provided in the definition of the “Company Material Adverse Effect”,
be taken into account in determining whether a Material Adverse Effect has occurred or
would reasonably be expected to occur); |
provided, that facts, events, circumstances, developments, conditions,
changes, occurrences or effects set forth in clauses (i), (ii), (iii) and (v) above shall 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 principal industries and geographic markets 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,
valid existence and good standing and power and authority to carry on their business; |
| · | their memorandum
and articles of association being in full force and effect; |
| · | their capitalization,
ownership and structure; |
| · | their corporate
power and authority to execute, deliver and perform their obligations under and to consummate
the enforceability of the Merger Agreement against them; |
| · | the approval
and authorization by the sole director of Parent and the sole director of Merger Sub,
and by Parent as the sole shareholder of Merger Sub, of the Merger Agreement and the
consummation of the Transactions; |
| · | the absence
of any breach or violation of, or a default under, the memorandum and articles of association,
or similar governing documents, of Parent or Merger Sub, (ii) any breach or violation
of any Law applicable to Parent or Merger Sub or by which any property or asset of Parent
or Merger Sub is bound or affected, (iii) any default under any of the terms, conditions
or provisions of any contract to which Parent or Merger Sub is a party, or an acceleration
of Parent’s or Merger Sub’s obligations under any such Contract, or (iv)
the creation of any encumbrance on any properties or assets of Parent or Merger Sub,
except, in the case of clause (iii) or clause (iv), for any such default, acceleration
or creation as would not, individually or in the aggregate, reasonably be expected to
prevent or materially impair the ability of Parent or Merger Sub to consummate the Merger
and the other Transactions; |
| · | the absence
of material notices, reports or other filings that are required to be made by Parent
or Merger Sub with, or any material consents, registrations, approvals, permits or authorizations
required to be obtained by Parent or Merger Sub from, any governmental authority in connection
with the execution, delivery and performance of this Agreement by the Company and the
consummation of the Merger and the other Transactions; |
| · | the absence
of legal proceedings against Parent or Merger Sub; |
| · | the operations
of Parent and Merger Sub; |
| · | the equity
commitment letter and the absence of any default thereunder; |
| · | sufficiency
of funds in the financing contemplated by the equity commitment letter; |
| · | the Limited
Guarantee being in full force and effect and the absence of any breach or default thereunder; |
| · | the absence
of any undisclosed brokerage, finders’ or other fees or commission; |
| · | the absence
of undisclosed Shares and other securities of, or any other economic interest in, the
Company, beneficially owned by Parent, Merger Sub, the Sponsor, Rollover Shareholders
or any of their respective affiliates; |
| · | solvency of
the surviving corporation at and immediately after the Effective Time; |
| · | independent
investigation conducted by Parent and Merger Sub; |
| · | the absence
of (a) any side letters or other contracts relating to Transactions between two or more
of the following persons: Rollover Shareholders, Parent, Merger Sub, the Guarantor or
any of their respective affiliates (other than any side letter or other contract among
any one or more of the foregoing solely relating to Parent or the Surviving Company taking
effect following the Effective Time), or (b) any contracts (i) between Parent, Merger
Sub or any of their affiliates (excluding the Company and its subsidiaries), on the one
hand, and any of the Company’s or its subsidiaries’ directors, officers or
shareholders, on the other hand, that relate in any way to the Transactions, or (ii)
pursuant to which any shareholder of the Company (other than the Rollover Shareholders)
would be entitled to receive consideration of a different amount or nature than the Per
Share Merger Consideration or Per ADS Merger Consideration, or (iii) pursuant to which
any shareholder of the Company has agreed to vote to approve the Merger Agreement or
the Merger or has agreed to vote against any Superior Proposal, or (iv) pursuant to which
any person has agreed to provide, directly or indirectly, equity capital to Parent, Merger
Sub or the Company to finance in whole or in part the Merger; |
| · | the accuracy
of the information provided by Parent and Merger Sub for inclusion in the Schedule 13E-3
and this proxy statement; |
| · | no vote or
consent of the holders of any class or series of share capital of Parent being necessary
to approve the Merger Agreement, the Plan of Merger or the Transactions, including the
Merger, other than the vote or consent of Parent, as the sole shareholder of Merger Sub; |
| · | non-reliance
by Parent or Merger Sub on any estimates, forecasts, projections, plans and budget information
provided by the Company and its subsidiaries; and |
| · | the absence
of any other representations and warranties by Parent and Merger Sub to the Company,
other than the representations and warranties made by Parent and Merger Sub in the Merger
Agreement. |
Conduct of Business Prior to Closing
The Company has agreed that, between the date of the Merger Agreement
and the earlier of the Effective Time and the termination of the Merger Agreement, except (i) as set forth in the Company disclosure
schedule, (ii) as expressly contemplated or permitted by the Merger Agreement or (iii) 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 only in, and the Company and its subsidiaries shall not take any action except 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 substantially intact their existing assets, (b) preserve substantially intact their business organization, (c)
keep available the services of their current officers, employees and consultants, (d) maintain and preserve intact their current
relationships with customers, suppliers, distributors, creditors and other persons with which the Company or any of its subsidiaries
has significant business relations and (e) comply in all material respects with applicable Law.
By way of amplification and not limitation, except as set forth
in the Company disclosure schedule, as expressly contemplated or permitted by the Merger Agreement or 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, between the date of the Merger Agreement and the earlier of the Effective Time and the termination of the Merger
Agreement, to:
| · | amend or otherwise
change its memorandum and articles of association or other equivalent organizational
documents; |
| · | adopt 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 (other than the Merger); |
| · | alter through
merger, liquidation, reorganization, restructuring or in any other fashion the corporate
structure or ownership of any of its subsidiaries; |
| · | (a) issue,
sell, pledge, terminate or dispose of, (b) grant an encumbrance on or permit an encumbrance
to exist on, or (c) authorize the issuance, sale, pledge, termination or disposition
of, or granting or placing of an encumbrance 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; |
| · | (a) sell, pledge
or dispose of, (b) grant an encumbrance on or permit an encumbrance to exist on, or (c)
authorize the sale, pledge or disposition of, or granting or placing of an encumbrance
on, any material assets of the Company or any of its subsidiaries having a current value
in excess of US$1 million, 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, 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; |
| · | adjust, reclassify,
combine, split, subdivide or redeem, or purchase or otherwise acquire, directly or indirectly,
any of its share capital; |
| · | (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 material amount of assets other than those with a value or purchase price
not in excess of US$1 million in any transaction or a related series of transactions;
(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 for indebtedness
incurred in the ordinary course of business and in an amount not to exceed US$2 million
in the aggregate, including any short-term borrowings to fund working capital needs,
and such other actions taken in the ordinary course of business consistent with past
practice; (c) authorize, or make any commitment with respect to, any single capital expenditure
which is in excess of US$1 million or capital expenditures which are, in the aggregate,
in excess of US$1 million for the Company and its subsidiaries taken as a whole; or (d)
enter into or amend any contract with respect to any of the foregoing; |
| · | create any
new subsidiary; |
| · | engage in the
conduct of any new line of business material to the Company and its subsidiaries, taken
as a whole; |
| · | make any 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; |
| · | revalue in
any material respect any of its assets, including, without limitation, writing down the
value of inventory or writing-off notes or accounts receivable other than in the ordinary
and usual course of business consistent with past practice or as required by GAAP; |
| · | waive the benefits
of, or agree to modify in any manner, any standstill or similar agreement with respect
to any class of equity securities of the Company or any of its subsidiaries; |
| · | commence or
settle any action, other than settlements (a) in the ordinary course of business and
consistent with past practice and (b) requiring the Company and its subsidiaries to pay
monetary damages not exceeding US$200,000; |
| · | enter into,
amend, modify or consent to the termination of any material contract, or enter into,
amend, waive, modify 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,
disclaim, dedicate to the public, sell, assign or grant any security interest in, to
or under any material intellectual property of the Company, including failing to perform
or cause to be performed all applicable filings, recordings and other acts, or to pay
or cause to be paid all required fees and taxes, to maintain and protect its interest
in the material intellectual property of the Company; (b) grant to any third party any
license, or enter into any covenant not to sue, with respect to any material intellectual
property of the Company, 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 that have been disclosed
to Parent; (d) disclose or allow to be disclosed any confidential information or confidential
intellectual property of the Company 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 that
have been disclosed to Parent; or (e) fail to notify Parent promptly of any infringement,
misappropriation or other violation of or conflict with any material intellectual property
of the Company of which the Company or any of its subsidiaries becomes aware and to consult
with Parent regarding the actions (if any) to take to protect such intellectual property
of the Company; |
| · | except as required
pursuant to existing written plans or contracts in effect as of the date of the Merger
Agreement 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 officer or director
of the Company or any of its subsidiaries with an annual base salary in excess of US$200,000,
(b) grant or provide any severance or termination payments or benefits to service providers
in an amount in excess of US$200,000 in the aggregate, (c) increase the compensation,
bonus or pension, welfare, severance or other benefits of, pay any bonus to by an amount
in excess of US$1 million, or make any new equity awards to service providers in the
aggregate, (d) establish, adopt, amend or terminate any employee benefit plans (except
as required by laws) or amend the terms of any outstanding equity-based awards, (e) take
any action to accelerate the vesting or payment, or fund or in any other way secure the
payment, of compensation or benefits under any employee benefit plans, to the extent
not already required in any such employee benefit plans, (f) materially change any actuarial
or other assumptions used to calculate funding obligations with respect to any plan or
to 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, or (g) forgive
any loans to directors, officers or employees of the Company or any of its subsidiaries; |
| · | terminate or
cancel, let lapse, or amend or modify in any material respect, other than renewals in
the ordinary course of business, any insurance policies maintained by it which is not
promptly replaced by a comparable amount of insurance coverage; |
| · | fail to make
in a timely manner any filings with the SEC required under the Securities Act the Securities
Act of 1933 (as amended, and the rules and regulations promulgated thereunder, the “Securities
Act”) or the Exchange Act or the rules and regulations promulgated thereunder;
or |
| · | agree, authorize,
commit, announce an intention, enter into any formal or informal agreement or otherwise
make a commitment, to do any of the foregoing. |
In addition, between the date of the Merger Agreement and the Effective
Time, the Company and its subsidiaries shall (i) prepare and timely file all tax returns required to be filed in all material
respects, (ii) timely pay all taxes shown to be due and payable on such tax returns in all material respects, and (iii) promptly
notify Parent of any notice of any material suit, claim, action, investigation, audit or proceeding in respect of any tax matters
(or any significant developments with respect to ongoing suits, claims, actions, investigations, audits or proceedings in respect
of such tax matters).
Each of Parent and Merger Sub agrees that, from the date of the
Merger Agreement to the Effective Time, it shall not: (i) 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; (ii) take any action or fail to
take any action which 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.
Nothing contained in the Merger Agreement is intended to give Parent
or Merger Sub, directly or indirectly, the right to control or direct the operations of the Company or its subsidiaries prior
to the Effective Time, and nothing contained in the Merger Agreement is intended to give the Company, directly or indirectly,
the right to control or direct Parent’s or Merger Sub’s operations.
Shareholders’ Meeting
As promptly as practicable, but in any event, no later than ten
calendar days, after the SEC confirms that it has no further comments on the Schedule 13E-3 and Proxy Statement, the Company will
take all lawful action to call, give notice of, and convene a general meeting of the shareholders for the purpose of obtaining
the Company Shareholder Approval. As soon as reasonably practicable, but no later than the thirtieth calendar day after the date
on which the notice of the general meeting of the shareholders is issued, the Company will hold such general meeting in accordance
with its memorandum and articles of association. The Company may postpone or adjourn the general meeting for up to 30 calendar
days (but in any event no later than five business days prior to the End Date), (i) with the prior written consent of Parent (which
consent shall not be unreasonably withheld, conditioned or delayed); (ii) if at the time the general meeting proceeds to business
there are insufficient Shares represented (either in person or by proxy) to constitute a quorum necessary to conduct business
at the general meeting; or (iii) to allow reasonable time for the filing and mailing of any supplemental or amended disclosure
which the Board has determined in good faith after consultation with outside counsel is necessary or advisable under applicable
law and for such supplemental or amended disclosure to be disseminated and reviewed by the Company’s shareholders prior
to the general meeting.
Unless there has been a Change in the Company Recommendation (as
defined below in the section titled “No Change of Recommendation”), which change was made in accordance with the Merger
Agreement, the Board will make the recommendation that the shareholders of the Company approve and adopt the Merger Agreement
(the “Company Recommendation”) and will take all lawful actions to solicit the Company Shareholder Approval. In the
event that subsequent to the date of the Merger Agreement, the Board authorizes the Company to terminate this Agreement pursuant
to the Merger Agreement, the Company will not be required to convene a general meeting and submit the Merger Agreement to the
shareholders for approval. Upon request of Parent, the Company shall use its reasonable best efforts to advise Parent on a daily
basis on each of the last ten business days prior to the date of the Company’s general meeting, as to the aggregate tally
of the proxies received by the Company with respect to the Company Shareholder Approval.
No Solicitation of Competing Transactions
Until the earlier of the Effective Time or the termination of the
Merger Agreement, the Company agrees that neither it nor any of its subsidiaries nor any of their respective representatives will,
and that it will cause each of its subsidiaries and each of its and its subsidiaries’ representatives not to, directly or
indirectly:
| · | solicit, initiate
or knowingly encourage (including by way of furnishing nonpublic information), or knowingly
take any other action to facilitate, any inquiries or the making of any proposal or offer
(including without limitation any proposal or offer to the Company’s shareholders)
with respect to, or that may reasonably be expected to lead to, any Competing Transaction, |
| · | enter into,
maintain, continue or otherwise engage or participate in any discussions or negotiations
with, or provide any non-public information or data concerning the Company or any subsidiary
to, any person or entity in furtherance of such inquiries or to obtain a proposal or
offer with respect to a Competing Transaction or any proposal or offer that may reasonably
be expected to lead to a Competing Transaction, |
| · | agree to, approve,
endorse, recommend, execute, enter into or consummate any Competing Transaction or any
proposal or offer that may reasonably be expected to lead to a Competing Transaction,
or that requires the Company to abandon the Merger Agreement or the Merger (other than
any acceptable confidentiality agreement), |
| · | grant any waiver,
amendment or release under any standstill or confidentiality agreement or takeover statutes
(and the Company will promptly take all actions reasonably necessary to terminate or
cause to be terminated any such waiver previously granted with respect to any provision
of any such confidentiality or standstill agreement or Takeover Statute), or |
| · | resolve, propose
or agree, or authorize or permit any representative, to do any of the foregoing. |
The Company will, and will cause its subsidiaries and its subsidiaries’
representatives to, immediately cease and cause to be terminated all existing discussions or negotiations with any persons conducted
prior to the execution of the Merger Agreement by the Company, any of its subsidiaries or any of their representatives with respect
to a Competing Transaction.
As used herein and for purposes of the Merger Agreement, a “Competing
Transaction” means any transaction or series of related transactions (other than the Merger) that constitute, or may reasonably
be expected to lead to (a) any merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution
or other similar transaction involving the Company or any of its subsidiaries, whose assets, individually or in the aggregate,
constitute 20% or more of the consolidated assets of the Company or to which 20% or more of the total revenue, operating income
or EBITDA of the Company are attributable (collectively, “Key Subsidiaries”); (b) any sale, lease, license, exchange,
transfer or other disposition of, or joint venture involving, assets or businesses that constitute or represent more than 20%
of the total revenue, operating income, EBITDA or fair market value of the assets of the Company and its subsidiaries, taken as
a whole; (c) any sale, exchange, transfer or other disposition of more than 20% of any class of equity securities, or securities
convertible into or exchangeable for equity securities, of the Company or any Key Subsidiary; (d) any tender offer or exchange
offer that, if consummated, would result in any Person becoming the beneficial owner of more than 20% of any class of equity securities
of the Company or any Key Subsidiary; (e) any other transaction the consummation of which would be reasonably likely to impede,
interfere with, prevent or materially delay the Merger or any Transaction; or (f) any combination of the foregoing.
The Company will notify Parent as promptly as practicable (and
in any event within 48 hours after the Company attains knowledge thereof) after the receipt by the Company, any of its subsidiaries
or any of their respective representatives of any proposal or offer with respect to a Competing Transaction. Such notice shall
indicate the identity of the person making such proposal or offer and the material terms and conditions of such proposal or offer,
accompanied by, if applicable, copies of any written materials received by the Company in connection with any of the foregoing.
The Company agrees that it will keep Parent informed, on a reasonably prompt basis (at least within 48 hours of occurrence of
any material changes, developments, discussions or negotiations), of the status and material details of (including discussions
with respect to or amendments or proposed amendments to) any such proposal or offer.
Notwithstanding anything to the contrary in the foregoing, at any
time prior to the receipt of the Company Shareholder Approval, the Company may, subject to compliance with the Merger Agreement
and acting under the direction of the Special Committee, furnish information to, and enter into discussions or negotiations with,
a person who has made an unsolicited, written, bona fide proposal or offer with respect to a Competing Transaction that did not
arise or result from any breach of the Merger Agreement, if, prior to furnishing such information and entering into such discussions,
the Board has (i) determined, in its good faith judgment (after having received the advice of a financial advisor of internationally
recognized reputation and outside legal counsel) that (a) such proposal or offer constitutes, or would reasonably be expected
to lead to, a Superior Proposal and (b) the failure to furnish such information to, or enter into such discussions with, the Person
who made such proposal or offer would violate the Board’s fiduciary duties to the Company and its shareholders under applicable
law, (ii) provided written notice to Parent of its intent to furnish information or enter into discussions with such person at
least three business days prior to taking any such action, and (iii) obtained from such person an acceptable confidentiality agreement
(it being understood that an acceptable confidentiality agreement and any related agreements shall not include any provision granting
such person exclusive rights to negotiate with the Company or having the effect of prohibiting the Company from satisfying its
obligations under this Agreement) and, immediately upon its execution, delivered to Parent a copy of such acceptable confidentiality
agreement; provided, that the Company will promptly make available to Parent any material 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.
As used herein and for purposes of the Merger Agreement, a “Superior
Proposal” means an unsolicited written bona fide offer or proposal made by a third party with respect to a Competing Transaction
on terms and conditions that the Board determines, in its good faith judgment, after having received the advice of a financial
advisor of internationally recognized reputation and outside legal counsel, and taking into account all legal, financial and regulatory
and other aspects of the proposal and any changes to the terms of the Merger Agreement proposed by Parent in response to such
offer or proposal or otherwise (including financing, regulatory approvals, shareholder litigations, identity of the Person or
group making the offer or proposal, breakup or termination fee and expense reimbursement provisions, expected timing, risk and
likelihood of consummation and other relevant events and circumstances), to be (a) more favorable, including from a financial
point of view, to the shareholders of the Company (other than the holders of the Excluded Shares) than the Merger, (b) fully financed,
and (c) reasonably expected to be consummated; provided, however, 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 limited in any material respect.
For purposes of the definition of “Superior Proposal”, each reference to “20%” in the definition of “Competing
Transaction” shall be replaced with “50%”; provided further that no offer or proposal shall be deemed to be
a “Superior Proposal” if such offer or proposal treats the Rollover Shareholder less favorably than the other shareholders
of the Company in term of consideration and payment terms.
No Change of Recommendation
Neither the Company Board nor any committee thereof will:
| · | (a) withhold,
withdraw (or not continue to make), qualify or modify (or publicly propose or resolve
to withhold, withdraw (or not continue to make), qualify or modify), in a manner adverse
to Parent or Merger Sub or the Company Recommendation with respect to the Merger, or
(b) adopt, approve or recommend or propose to adopt, approve or recommend (publicly or
otherwise) any Competing Transaction (any action described in clauses (a) or (b), a “Change
in the Company Recommendation”), or |
| · | cause or permit
the Company or any of its subsidiaries to enter into any acquisition agreement, merger
agreement or other similar definitive agreement relating to any Competing Transaction
(an “Alternative Acquisition Agreement”). |
Notwithstanding the foregoing, if at any time prior to the receipt
of the Company Shareholder Approval, the Company has received an unsolicited, written, bona fide proposal or offer with respect
to a Competing Transaction that did not arise or result from any breach of the Merger Agreement, that is not withdrawn and that
the Board (upon recommendation of the Special Committee) determines, in its good faith judgment (after having received the advice
of a financial advisor of internationally recognized reputation and outside legal counsel) constitutes, or would reasonably be
expected to lead to, a Superior Proposal, the Board (upon recommendation of the Special Committee) may, with respect to such Superior
Proposal, make a Change in the Company Recommendation and/or authorize the Company to enter into an Alternative Acquisition Agreement
with respect to such Superior Proposal; provided, however, that the Board will not be entitled to exercise its right to make a
Change in the Company Recommendation or to authorize the Company to enter into an Alternative Acquisition Agreement unless:
| · | the Board (upon
recommendation of the Special Committee) determines in its good faith judgment (after
having received the advice of its financial advisor and outside legal counsel), that
the failure to do so would violate its fiduciary duties to the Company and its shareholders
under applicable law; |
| · | prior to effecting
a Change in the Company Recommendation or terminating the Merger Agreement to enter into
an Alternative Acquisition Agreement, the Company has provided written notice to Parent
(a “Notice of Superior Proposal”) advising Parent that the Company Board
has received a Superior Proposal promptly after the Board determines it has received
a Superior Proposal, stating that the Board intends to make a Change in the Company Recommendation
and the manner in which it intends to do so, specifying the information required to be
included in any notice required to be delivered to Parent under the Merger Agreement
and including written evidence of the determination of the Board that the Company has
received a Superior Proposal; and |
| · | Parent does
not, within five business days of receipt of the Notice of Superior Proposal (the “Notice
Period”), make an offer or proposal to revise the terms of the Merger Agreement
(any such offer, a “Revised Transaction Proposal”) in a manner that the Company
Board determines in its good faith judgment, after having received the advice of its
financial advisor and outside legal counsel, to be at least as favorable to the Company’s
shareholders (other than the holders of the Excluded Shares) as such Superior Proposal;
provided, however, that during the Notice Period the Company shall negotiate in good
faith with Parent (to the extent Parent desires to negotiate) regarding any Revised Transaction
Proposal; provided, further, that any amendment to the terms of such Superior Proposal
during the Notice Period will require a new written notice of the terms of such amended
Superior Proposal from the Company and an additional Notice Period that satisfies this
requirement under the Merger Agreement. |
Prior to obtaining the Company Shareholder Approval, if the Board
determines, in its good faith judgment upon the recommendation of the Special Committee (after having received the advice of its
financial advisor and outside legal counsel), other than in response to or in connection with a Competing Transaction, that failure
to make a Change in the Company Recommendation would be inconsistent with its fiduciary duties under applicable law, the Board
may, upon the recommendation of the Special Committee, effect a Change in the Company Recommendation; provided, that the Company
has provided Parent at least five business days’ prior written notice indicating that the Board intends to effect a Change
in the Company Recommendation. Notwithstanding the foregoing, upon Parent’s written request, the Company will convene a
general meeting promptly and submit the Merger Agreement to the shareholders to obtain the Company Shareholder Approval at a duly
convened general meeting, in each case in accordance with the terms and conditions of the Merger Agreement.
Directors’ and Officers’ Indemnification and 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 will 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 of the indemnified parties thereunder. |
| · | The Surviving
Company and its subsidiaries will honor and fulfill in all respects the obligations of
the Company and its subsidiaries under (i) any indemnification, advancement of expenses
and exculpation provision set forth in any memorandum and articles of association or
comparable organizational documents of the Company or any of its subsidiaries as in effect
on the date of the Merger Agreement and (ii) all indemnification agreements between the
Company or any of its subsidiaries and any of their respective current or former directors
and officers and any person who becomes a director or officer of the Company or any of
its subsidiaries prior to the Effective Time (the “Indemnified Parties”). |
| · | The memorandum
and articles of association of the surviving corporation will contain provisions with
respect to exculpation and indemnification that are at least as favorable to the directors,
officers or employees of the Company as those contained in the memorandum and articles
of association of the Company as in effect on the date of the Merger Agreement, except
to the extent prohibited by the Cayman Islands Companies Law or any other applicable
law, 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 adversely affect the rights
thereunder of the Indemnified Parties, unless such modification is required by law. |
| · | The Surviving
Company will comply with all of the Company’s obligations, and 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 such subsidiary or (b) any
acts or omissions occurring or alleged to occur 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 of the Merger
Agreement and to the fullest extent permitted by the Cayman Islands Companies Law or
any other applicable law, including (x) the approval of the Merger Agreement, the Merger
or the other Transactions or arising out of or pertaining to the Transactions; and (y)
actions to enforce this provision or any other indemnification or advancement right of
any Indemnified Party; provided, however, that such indemnification shall be subject
to any limitation imposed from time to time under applicable law; and (ii) such Indemnified
Parties against any and all Damages arising out of acts or omissions in connection with
such persons serving as an officer, director or other fiduciary in any entity if such
service was at the request or for the benefit of the Company or any of its subsidiaries. |
| · | The Surviving
Company will, and Parent shall cause the Surviving Company to, maintain the Company’s
and its subsidiaries’ existing directors’ and officers’ liability insurance
(including for acts or omissions occurring in connection with the Merger Agreement and
the consummation of the Transactions) covering each Indemnified Party by the Company’s
officers’ and directors’ liability insurance policy on terms with respect
to coverage and amount no less favorable than those of such policy in effect on the date
of the Merger Agreement for a period of six years after the Effective Time; provided,
however, that, subject to the immediately succeeding sentence, in no event shall the
Surviving Company 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. In addition, the Company
may at its option purchase a six year “tail” prepaid policy prior to the
Effective Time on terms and conditions providing substantially equivalent benefits as
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 closing, the Surviving Company will, and Parent shall cause the Surviving
Company to, maintain such policies in full force and effect, and continue to honor the
respective obligations thereunder. |
Agreement to Use Reasonable Best Efforts
The parties to the Merger Agreement will use their 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 law or otherwise to consummate and make effective
the Transactions, including using their reasonable best efforts to obtain, or cause to
be obtained, all permits, consents, approvals, authorizations, qualifications and orders
of all governmental authorities and officials and parties to contracts with the Company
and the subsidiaries that may be or become necessary for the performance of the obligations
of such parties thereto pursuant to the Merger Agreement and the consummation of the
Transactions and will cooperate fully with the other parties in promptly seeking to obtain
all such permits, consents, approvals, authorizations, qualifications and orders. |
| · | cooperate and
vigorously contest and resist any action, including any administrative or judicial action,
and to have vacated, lifted, reversed or overturned any order (whether temporary, preliminary
or permanent) that is in effect and that restricts, prevents or prohibits consummation
of the Transactions, including by vigorously pursuing all available avenues of administrative
and judicial appeal. |
Financing
As of the date of the Merger Agreement, Parent has delivered to
the Company a copy of an executed Equity Commitment Letter from the Sponsor, pursuant to which the Sponsor has committed to purchase,
or cause the purchase of, for cash, subject to the terms and conditions therein, equity securities of Parent, up to the aggregate
amount set forth therein, the proceeds of which will be used to finance the consummation of the Transactions, including the Merger.
The equity commitment letter provides, and will continue to provide, that the Company is a third party beneficiary with respect
to the provisions therein.
Parent shall use its reasonable best efforts to (a) obtain the
financing on the terms and conditions described in the Equity Commitment Letter, (b) maintain in effect the Equity Commitment
Letter until the Transactions are consummated, (c) satisfy, or cause to be satisfied, on a timely basis all conditions to the
closing of and funding under the Equity Commitment Letter applicable to Parent, and/or Merger Sub that are within its control,
(d) seek to enforce its rights under the Equity Commitment Letter, and (e) consummate the financing at or prior to the Effective
Time.
Buyer Group Contracts
Parent and Merger Sub will not, and will cause its respective affiliates
not to (a) amend, modify, withdraw, waive or terminate any Buyer Group Contract (as defined in the Merger Agreement), or (b) enter
into or modify any other Contract directly relating to the Transactions (excluding any Contract solely relating to Parent or the
Surviving Company taking effect following the Effective Time), in each case, without the prior written consent of the Special
Committee (acting on behalf of the Company), if such amendment, modification, withdrawal, waiver or termination of any Buyer Group
Contract or such other contract including any modification thereto (each, an “Amendment to Buyer Group Contract”)
would be reasonably expected to prevent, materially delay, materially impede or impair the consummation of the Merger, provided
that Parent and Merger Sub will, prior to its and/or its affiliate’s entering into such Amendment to Buyer Group Contract,
notify the Special Committee (acting on behalf of the Company) in writing, which notice shall be accompanied by a true and complete
copy of such Amendment to Buyer Group Contract.
Certain additional Covenants
The Merger Agreement contains additional agreements between the
Company and Parent and/or Merger Sub relating to, among other things:
| · | the filing
of this proxy statement and the Rule 13e-3 transaction statement on Schedule 13E-3 with
the SEC (and cooperation in response to any comments from the SEC with respect to either
statement); |
| · | access by Parent
and its representatives to the offices, properties, books, 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 the termination of the Merger Agreement (subject
to all applicable legal or contractual obligations and restrictions); |
| · | delisting and
deregistration of the Shares; |
| · | consultation
with respect to press releases and other public announcements relating to the Merger
Agreement and the transactions contemplated by the Merger Agreement; |
| · | notification
of certain events; |
| · | elimination
or minimization of the effects of certain takeover statutes. |
| · | resignation
of the directors of the Company and its subsidiaries pursuant to Parent’s request; |
| · | participation
in the defense and settlement of any shareholder litigation relating to the Merger Agreement
or the Transactions; |
| · | Parent’s
obligation to cause Merger Sub to perform its obligations under the Merger Agreement;
and |
| · | acknowledgment
that the Company will not be in breach of the Merger Agreement if the Company establishes
that the alleged breach is the proximate result of any action or inaction taken by the
Company at the direction of Parent or the Rollover Shareholders. |
Conditions to the Merger
The obligations of each party to consummate the Transactions, including
the Merger, are subject to the satisfaction or written waiver of the following conditions:
| · | the Company
Shareholder Approval having been obtained; and |
| · | no governmental
entity of competent jurisdiction having enacted, issued, promulgated, enforced or entered
any law or order which is then in effect and has the effect of enjoining, restraining,
prohibiting or otherwise making illegal the consummation of the Transactions. |
The obligations of Parent and Merger Sub to consummate the Merger
are also subject to the satisfaction or written waiver of the following conditions:
| · | (i) the representations
and warranties of the Company regarding the capitalization of the Company and its Key
Subsidiaries, authority relative to Merger Agreement and the vote required to be taken
by the Company’s shareholders and the brokerage, finder’s or other fees or
commission in connection with the Transactions (without giving effect to any limitation
as to “materiality” or “Company Material Adverse Effect” set
forth therein) being true and correct in all respects (except for de minimus inaccuracies)
and (ii) each of the other representations and warranties of the Company contained in
the Merger Agreement (without giving effect to any limitation as to “materiality”
or “Company Material Adverse Effect” set forth therein) being true and correct
except where the failure of such representations and warranties of the Company to be
so true and correct, individually or in the aggregate, would not constitute a Company
Material Adverse Effect, in each case as of the date of this Agreement and as of the
Effective Time, 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); |
| · | the Company
having performed in all material respects all obligations required to be performed by
it under the Merger Agreement at or prior to the Effective Time; |
| · | since the date
of the Merger Agreement, there having not been a Company Material Adverse Effect; and |
| · | the Company
having delivered to Parent a certificate, dated the closing date of the Merger, signed
by an executive officer of the Company, certifying as to the fulfillment of the above
conditions. |
The obligations of the Company to consummate the Merger are also
subject to the satisfaction or written waiver of the following conditions:
| · | the representations
and warranties of Parent and Merger Sub contained in the Merger Agreement being true
and correct (without giving effect to any limitation as to “materiality”
set forth therein), in each case as of the date of the Merger Agreement and as of the
Effective Time, 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 where
the failure of such representations and warranties of the Company to be so true and correct,
individually or in the aggregate, have not and would not prevent, materially delay or
materially impede the impair the ability of Parent and Merger Sub to consummate the Merger. |
| · | Parent and
Merger Sub having performed in all material respects all obligations required to be performed
by them under the Merger Agreement at or prior to the Effective Time; and |
| · | Parent and
Merger Sub having each delivered to the Company a certificate, dated the closing date
of the Merger, signed by a director of Parent and Merger Sub, respectively certifying
as to the fulfillment of the above conditions. |
Prior to the End Date, none of the Company, Parent or Merger Sub
may rely on the non-satisfaction of any condition set forth in the Merger Agreement to be satisfied if such non-satisfaction was
caused by such party’s failure to comply with the Merger Agreement and consummate the Transactions.
Termination of the Merger Agreement
The Merger Agreement may be terminated at any time prior to the
Effective Time, whether before or after the Company Shareholder Approval has been obtained:
| (a) | by mutual written consent of Parent and the Company; |
| (b) | by either Parent or the Company (provided that this termination
right is not available to either Parent or the Company, as applicable, whose failure
to fulfill any obligation under the Merger Agreement or other intentional breach has
been the primary cause of, or resulted in, the failure of the applicable condition(s)
being satisfied), if: |
| · | the Merger
is not consummated by September 22, 2016; |
| · | any governmental
authority has enacted, issued, promulgated, enforced or entered any Law or Order (whether
temporary, preliminary or permanent) which is then in effect and has the effect of enjoining,
restraining, prohibiting or otherwise making illegal the consummation of the Transaction,
including the Merger, which shall be in effect and have become final and non-appealable;
or |
| · | the Company
Shareholder Approval has not been obtained upon a vote held at the general meeting of
shareholders or any adjournment thereof; |
| · | upon a breach
by Parent or Merger Sub of any representation, warranty, covenant or agreement set forth
in the Merger Agreement, or if any representation or warranty of Parent and Merger Sub
has become untrue, in either case such that the corresponding closing conditions would
not be satisfied prior to the End Date and such breach would not be curable or, if curable
has not been cured within the earlier of (i) 30 calendar days following receipt of written
notice by Parent from the Company of such breach and (ii) any shorter period of time
that remains between the date the Company provides written notice of such breach and
the End Date, provided that the Company is not then in material breach of any representations
and warranties, covenants or agreements set forth in the Merger Agreement; |
| · | if (a) all
the conditions to closing for the obligations of Parent and Merger Sub to consummate
the Merger have been satisfied or waived by Parent and Merger Sub, and (b) Parent fails
to complete the closing of the Merger within 10 business days following the date on which
the closing of the Merger should have occurred, provided that the Company has delivered
to Parent an irrevocable commitment in writing that it is ready, willing and able to
consummate the Transactions during such period; |
| · | prior to receipt
of the Company Shareholder Approval, in order to enter into an Alternative Acquisition
Agreement with respect to a Superior Proposal, provided that the Superior Proposal did
not result from any breach by the Company of its non-solicitation obligations under the
Merger Agreement; provided that within five business days after such termination, the
Company pays the termination fee payable pursuant to the Merger Agreement; or |
| · | the Board (or
the Special Committee) has made a Change in the Company Recommendation with respect to
a Superior Proposal; provided that within five business days after such termination,
the Company pays the termination fee payable pursuant to the Merger Agreement. |
| · | upon a breach
by the Company of any representation, warranty, covenant or agreement set forth in the
Merger Agreement, or if any representation or warranty of the Company has become untrue,
in either case such that the corresponding conditions to closing would not be satisfied
prior to the End Date and such breach would not be curable or, if curable, has not been
cured within the earlier of (a) thirty calendar days following receipt of written notice
by the Company from Parent of such breach and (b) any shorter period of time that remains
between the date Parent provides written notice of such breach and the End Date, provided
that Parent is not then in material breach of any representations and warranties, covenants
or agreements set forth in the Merger Agreement; |
| · | if the Board
(or any committee thereof) has effected a Change in the Company Recommendation; or |
| · | if the Board
has (a) failed to include the Company Recommendation in this proxy statement; (b) failed
to publicly reaffirm the Company Recommendation within three business day after Parent
so requests in writing; (c) recommended to the shareholders of the Company a Competing
Transaction; (d) failed to recommend against any Competing Transaction within ten business
days; or (e) entered into any letter of intent, memorandum of understanding or other
document or contract relating to any Competing Transaction; |
| · | if the Company
has failed to hold the general meeting of the Company according to the Merger Agreement,
and failed to remedy such breach within 30 calendar days following receipt of the written
request by Parent; or |
| · | if the Company
has failed to comply with the no-shop undertakings set forth in the Merger Agreement
in any material respect, and failed to remedy such breach within 30 calendar days following
receipt of the written request by Parent. |
Termination Fee
The Company is required to pay Parent a termination fee of US$1.1
million (the “Termination Fee”) if the Merger Agreement is terminated:
| · | by Parent if
(a) the Company breaches its representations, warranties, covenants or agreements under
the Merger Agreement (and such breach remains uncured); (b) the Board changes its recommendation
in favor of the Merger; (c) the Board (V) fails to included its recommendation in this
proxy statement; (W) fails to publicly reaffirm its recommendation within three business
day after Parent so requests in writing; (X) recommends to the shareholders of the Company
a Competing Transaction; (Y) fails to recommend against any Competing Transaction within
ten business days; or (Z) enters into any letter of intent, memorandum of understanding
or other document or contract relating to any Competing Transaction, (d) if the Company
has failed to hold the shareholders’ meeting of the Company according to the Merger
Agreement, and failed to remedy such breach within 30 calendar days following receipt
of the written request by Parent, or (e) if the Company has failed to comply with the
no-shop undertakings set forth in the Merger Agreement in any material respect, and failed
to remedy such breach within 30 calendar days following receipt of the written request
by Parent; |
| · | by the Company
(a) in order to enter into an Alternative Acquisition Agreement with respect to a Superior
Proposal; or (b) in the event that the Board makes a Changes in the Company Recommendation
with respect to a Superior Proposal; and |
| · | by either of
the Company or Parent due to (a) the Merger is not completed by the End Date or the failure
of obtaining the Company Shareholder Approval, and (b) within 12 months following the
termination of the Merger Agreement, the Company consummates a Competing Transaction
or enters into a definitive agreement for a Competing Transaction (provided that all
references to “20%” in the definition of “Competing Transaction”
under the Merger Agreement will be deemed to be references to “50%” here). |
Parent is required to pay the Company a termination fee of US$2.2
million (the “Parent Termination Fee”) if the Merger Agreement is terminated:
| · | by the Company
due to a breach by Parent or Merger Sub of its representations, warranties, covenants
or agreements under the Merger Agreement (and such breach remains uncured); or |
| · | by the Company
due to the failure of Parent to complete the Merger within ten business days following
the date on which the closing should have occurred pursuant to the Merger Agreement and
(a) all of the conditions to the obligations of Parent and Merger Sub to consummate the
Merger have been satisfied (or waived by Parent and Merger Sub) and (b) the Company has
delivered to Parent an irrevocable commitment in writing that it is ready, willing and
able to consummate the closing. |
In the event that the Company or Parent fails to pay the Termination
Fee or the Parent Termination Fee, as the case may be, when due and in accordance with the requirements of the Merger Agreement,
the Company or Parent, as the case may be, will be 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, together with accrued interest on such unpaid termination fee.
Remedies and Limitations on Liability
Company, Parent and Merger Sub are entitled to an injunction, specific
performance and other equitable relief to prevent breaches of the Merger Agreement and to enforce specifically the terms and provisions
of the Merger Agreement, which remedies are in addition to any other remedy to which they are entitled at law or in equity.
While the parties may pursue both a grant of specific performance
and monetary damages until such time as the other party pays a termination fee (as applicable under the Merger Agreement), none
of them will be permitted or entitled to receive both a grant of specific performance that results in the closing of the Merger
and monetary damages.
Until such time as the Company pays the Company Termination Fee
to Parent or Parent pays the Parent Termination Fee to the Company, as the case may be, pursuant to the terms of the Merger Agreement,
the remedies available to each party will be in addition to any other remedy to which it is entitled at law or in equity, and
the election to pursue an injunction or specific performance will not restrict, impair or otherwise limit Parent or Merger Sub
from, in the alternative, seeking to terminate the Merger Agreement and collect the Company Termination Fee from the Company or
the Company from, in the alternative, seeking to terminate the Merger Agreement and collect the Parent Termination Fee from Parent.
The maximum aggregate liabilities of Parent, on the one hand, and
the Company, on the other hand, for monetary damages in connection with the Merger Agreement are limited to the Parent Termination
fee of US$2.2 million and the Termination Fee of US$1.1 million, respectively, and reimbursement of certain expenses in the event
that Company or Parent fails to pay the applicable termination fee when due and in accordance with the requirements of the Merger
Agreement, as the case may be. If (a) the Company pays, and Parent receives, the Termination Fee pursuant to the Merger Agreement,
then any such payment will be the sole and exclusive remedy of Parent, Merger Sub and their respective affiliates against the
Company and its subsidiaries (and other related persons) and if (b) Parent pays, and the Company receives, the Parent Termination
Fee pursuant to the Merger Agreement, then any such payment will be the sole and exclusive remedy of the Company and its affiliates
against Parent, Merger Sub and their respective affiliates (and other related persons) under the Merger Agreement and the Limited
Guarantee.
Amendment
The Merger Agreement may be amended by the parties to the Merger
Agreement by action taken by or on behalf of each of their respective board of directors (or in the case of the Company, the Special
Committee) at any time prior to the Effective Time, provided, that after the Company Shareholder Approval has been obtained, no
amendment may be made that under applicable law requires further approval by the shareholders of the Company without such approval
having been obtained.
PROVISIONS FOR UNAFFILIATED SECURITY HOLDERS
No provision has been made to (a) grant the Unaffiliated Security
Holders access to corporate files of the Company or any member of the Buyer Group or (b) obtain counsel or appraisal services
at the expense of the Company or any member of the Buyer Group.
DISSENTERS’ RIGHTS
The following is a brief summary of the rights of holders of the
Shares to dissent from the Merger and receive payment equal to the fair value of their Shares (“dissenters’ rights”).
This summary is not a complete statement of the law, and is qualified in its entirety by the complete text of Section 238 of the
Cayman Islands Companies Law, a copy of which is attached as Annex D to this proxy statement. If you are contemplating the possibility
of dissenting from the Merger, you should carefully review the text of Annex D, particularly the procedural steps required to
perfect your dissenters’ rights. 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 will lose your
dissenters’ rights.
Requirements for Exercising Dissenters’ Rights
A dissenting shareholder of the Company is entitled to payment
of the fair value of its, his or her Shares upon dissenting from the Merger in accordance with Section 238 of the Cayman Islands
Companies Law.
The valid exercise of your dissenters’ rights will preclude
the exercise of any other rights by virtue of holding Shares in connection with the Merger, other than the right to participate
fully in proceedings to determine the fair value of Shares held by such persons and to seek relief on the grounds that the Merger
is void or unlawful. To exercise your dissenters’ rights, the following procedures must be followed:
| · | You must give
written notice of objection to the Company prior to the vote to authorize and 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 20 days
immediately following the date on which the vote approving the Merger is made, the Company
must give written notice of the authorization (“Approval Notice”) to all
dissenting shareholders who have served a notice of objection. |
| · | Within 20 days
immediately following the date on which the Approval Notice is given (the “Dissent
Period”), any dissenting shareholder who elects to dissent must give a written
notice of its, his or her decision to dissent (a “Notice of Dissent”) to
the Company stating its, his or her name and address and the number and class of the
Shares with respect to which it, he or she dissents and demanding payment of the fair
value of its, his or her Shares. A dissenting shareholder must dissent in respect of
all the Shares which it, he or she holds. |
| · | Within seven
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 Company, must make a written offer (a “Fair Value Offer”)
to each dissenting shareholder to purchase its, his or her Shares at a price determined
by the Company to be the fair value of such Shares. |
| · | If, within
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 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, which petition by the Company must be accompanied by a verified list containing
the names and addresses of all members who have filed a Notice of Dissent and who have
not agreed with the Company as to the fair value of such Shares. |
| · | If a petition
is timely filed and served, the Grand Court will determine at a hearing (a) which shareholders
are entitled to dissenters’ rights, (b) the fair value of such Shares held by those
shareholders with a fair rate of interest, if any, to be paid by the Company upon the
amount determined to be the fair value and (c) 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 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 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. The agent must, however, identify the record owner and expressly disclose the fact that, in exercising
the notice, he or she 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 other 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 such 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, her or its ADSs to the ADS Depositary
for conversion into Shares and pay the fees of the ADS Depositary to cancel his, her or its ADSs and then become a record holder
of such Shares and comply with the procedures described above in order to exercise 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’s office at JPMorgan Chase Bank, N.A., 4 New York
Plaza, Floor 12, New York, NY 10004 (Attention: Depositary Receipts Group).
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 authorize and approve the Merger Agreement,
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 to Room 302, Qilai Building, No. 889, Yishan Road, Shanghai 200233, People’s Republic
of China, 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 US$0.114 in cash, without interest, for each Share of the Company that you would otherwise receive as consideration
pursuant to the Merger Agreement if you do not exercise dissenting rights with respect to your Shares. 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 Company uses U.S. dollars as its reporting currency in its
consolidated financial statements. However, The Company’s business is primarily conducted in China. A significant portion
of its sales, costs and expenses are denominated in Renminbi. This proxy statement contains translations of RMB into U.S. dollars
at specific rates solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars
and from U.S. dollars to RMB in this section were made at a rate of RMB6.2046 to US$1.00, the exchange rate on December 31, 2014
as set forth in the H.10 statistical release published by the Federal Reserve Board. The Company makes no representation that
any RMB or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or RMB, as the case may be, at any particular
rate or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the
conversion of RMB into foreign currency and through restrictions on foreign exchange activities.
Selected Historical Financial Information
The following table presents our selected consolidated financial
information. The selected consolidated statements of income and comprehensive income data for the three years ended December 31,
2012, 2013 and 2014 and the consolidated balance sheet data as of December 31, 2013 and 2014 have been derived from our audited
consolidated financial statements of the Company, which are included in the Company’s Annual Report on Form 20-F for the
year ended December 31, 2014, beginning on page F-1. The Company’s historical results do not necessarily indicate results
expected for any future periods. The selected consolidated financial data should be read in conjunction with, and are qualified
in their entirety by reference to, the Company’s audited consolidated financial statements and related notes and “Item
5. Operating and Financial Review Prospects” in the Company’s Annual Report on Form 20-F for the year ended December
31, 2014, which are incorporated into this proxy statement by reference. See “Where You Can Find More Information”
for a description of how to obtain a copy of such Annual Report.
Cosolidated Statement of Comprehensive Loss
| | |
2012 | | |
2013 | | |
2014 | |
| | |
US$ | | |
US$ | | |
US$ | |
| Net revenues | |
| 38,819,954 | | |
| 42,623,591 | | |
| 49,609,483 | |
| Cost of goods sold (excluding depreciation and amortization) | |
| 12,958,247 | | |
| 15,896,128 | | |
| 17,334,312 | |
| Operating expenses: | |
| | | |
| | | |
| | |
| Selling, general and administrative expenses | |
| 19,530,250 | | |
| 24,987,475 | | |
| 24,880,448 | |
| Depreciation and amortization | |
| 1,204,679 | | |
| 2,279,191 | | |
| 1,618,791 | |
| Other operating income, net | |
| (852,888 | ) | |
| (6,182,764 | ) | |
| (1,088,346 | ) |
| Total operating expenses | |
| 19,882,041 | | |
| 21,083,902 | | |
| 25,410,893 | |
| Income from operations | |
| 5,979,666 | | |
| 5,643,561 | | |
| 6,864,278 | |
| Interest expense | |
| — | | |
| (341,773 | ) | |
| (15,988 | ) |
| Interest income | |
| 2,143,396 | | |
| 977,104 | | |
| 273,984 | |
| Other income (expense), net | |
| 120,315 | | |
| 1,039,084 | | |
| (133,818 | ) |
| Income before income tax, equity in an affiliate and
noncontrolling interests | |
| 8,243,377 | | |
| 7,317,976 | | |
| 6,988,456 | |
| Income tax expense | |
| (323,911 | ) | |
| — | | |
| — | |
| Income before equity in an affiliate and noncontrolling
interests | |
| 7,919,466 | | |
| 7,317,976 | | |
| 6,988,456 | |
| Loss from equity in an affiliate | |
| — | | |
| (5,491,484 | ) | |
| (4,876,523 | ) |
| Gain on disposal of the equity interest
of an affiliate | |
| — | | |
| — | | |
| 1,330,165 | |
| Income from continuing operations | |
| 7,919,466 | | |
| 1,826,492 | | |
| 3,442,098 | |
| Loss on discontinued operations,
net of tax of nil | |
| (30,351,616 | ) | |
| (28,436,783 | ) | |
| (19,792,358 | ) |
| Net loss | |
| (22,432,150 | ) | |
| (26,610,291 | ) | |
| (16,350,260 | ) |
| Accretion of interest to redeemable noncontrolling interests | |
| 20,416 | | |
| 102,958 | | |
| 3,836 | |
| Net loss attributable to redeemable
noncontrolling interests | |
| (20,416 | ) | |
| (102,958 | ) | |
| (3,836 | ) |
| Net loss attributable to Mecox Lane Limited shareholders | |
| (22,432,150 | ) | |
| (26,610,291 | ) | |
| (16,350,260 | ) |
| | |
| | | |
| | | |
| | |
| Other comprehensive income (loss), net of tax of nil: | |
| | | |
| | | |
| | |
| Change in cumulative foreign currency
translation adjustment | |
| 91,198 | | |
| 1,408,045 | | |
| (472,357 | ) |
| Comprehensive loss | |
| (22,340,952 | ) | |
| (25,202,246 | ) | |
| (16,822,617 | ) |
| Comprehensive loss attributable
to redeemable noncontrolling interests | |
| — | | |
| — | | |
| — | |
| Comprehensive loss attributable
to Mecox Lane Limited shareholders | |
| (22,340,952 | ) | |
| (25,202,246 | ) | |
| (16,822,617 | ) |
| | |
| | | |
| | | |
| | |
| Net income per share attributable to Mecox Lane-Basic
and diluted | |
| | | |
| | | |
| | |
| Income from continuing operations | |
$ | 0.02 | | |
$ | 0.01 | | |
$ | 0.01 | |
| Loss on discontinued operations | |
$ | (0.08 | ) | |
$ | (0.07 | ) | |
$ | (0.04 | ) |
| Net loss | |
$ | (0.06 | ) | |
$ | (0.06 | ) | |
$ | (0.03 | ) |
| Net income per ADS attributable to Mecox Lane-Basic and
diluted | |
| | | |
| | | |
| | |
| Income from continuing operations | |
$ | 0.69 | | |
$ | 0.15 | | |
$ | 0.27 | |
| Loss on discontinued operations | |
$ | (2.63 | ) | |
$ | (2.38 | ) | |
$ | (1.53 | ) |
| Net loss | |
$ | (1.94 | ) | |
$ | (2.23 | ) | |
$ | (1.26 | ) |
| Weighted average ordinary shares used in per share calculation | |
| | | |
| | | |
| | |
| Basic | |
| 404,247,016 | | |
| 418,347,060 | | |
| 452,758,464 | |
| Diluted | |
| 404,387,223 | | |
| 422,251,663 | | |
| 452,758,464 | |
| Weighted
average ADS used in per share calculation (1) | |
| | | |
| | | |
| | |
| Basic | |
| 11,549,914 | | |
| 11,952,773 | | |
| 12,935,956 | |
| Diluted | |
| 11,553,921 | | |
| 12,064,333 | | |
| 12,935,956 | |
| (1) | ADS
amounts adjusted for a change in the ratio of ADSs to Shares from 1:7 to 1:35, effective
as of February 1, 2013. |
Consolidated Balance Sheet Data
| | |
For the year ended December
31, | |
| | |
2013 | | |
2014 | |
| | |
US$ | | |
US$ | |
| Cash and cash equivalents | |
| 14,261,249 | | |
| 18,180,733 | |
| Total current assets | |
| 91,964,105 | | |
| 25,511,642 | |
| Total non-current assets | |
| 10,685,558 | | |
| 43,637,188 | |
| Total assets3 | |
| 102,649,663 | | |
| 69,148,830 | |
| Total current liabilities | |
| 34,460,910 | | |
| 16,796,922 | |
| Total non-current liabilities | |
| — | | |
| — | |
| Total liabilities | |
| 34,460,910 | | |
| 16,796,922 | |
| Total shareholders’ equity | |
| 68,188,753 | | |
| 52,351,908 | |
| Total liabilities and shareholders’ equity | |
| 102,649,663 | | |
| 69,148,830 | |
Ratio of Earnings to Fixed Charges
| | |
For the year ended December
31, | |
| | |
2013 | | |
2014 | |
| | |
US$ | | |
US$ | |
| | |
(unaudited) | | |
(unaudited) | |
| Ratio of
Earnings to Fixed Charges | |
| 22.41 | | |
| 438.11 | |
Net Book Value per Share of Our Shares
The Company’s net book value per Share as of December 31,
2014 was US$0.115, based on the numbe of Shares issued and outstanding as of that date. The Company’s net book value per
Share as of September 30, 2015 was US$0.120, based on the numbe of Shares issued and outstanding as of that date.
TRANSACTIONS IN SHARES AND ADSs
Purchases by the Company
On May 21, 2012, the Board approved a share repurchase plan (the
“2012 Share Repurchase Plan”) to repurchase up to US$10 million worth of our ADSs from May 20, 2012 to May 19, 2013
in the open market. The following table summarize the repurchases of ADSs by the Company in 2013 under the 2012 Share Repurchase
Plan.
| Period | |
Total
Number of
ADSs
Repurchased
(1) | | |
Average Price
Paid per
ADS(1)
(US$) | |
| January 2013 | |
| 20,630 | | |
| 3.02 | |
| February 2013 | |
| 11,460 | | |
| 2.36 | |
| March 2013 | |
| 33,462 | | |
| 2.13 | |
| April 2013 | |
| 109,267 | | |
| 4.95 | |
| May 2013 (ending at May 19, 2013) | |
| — | | |
| — | |
| (1) | The
total number of ADSs repurchased and average price paid per ADS have been retroactively
adjusted for a change in the ratio of ADS to ordinary shares from one ADS representing
seven ordinary shares to one ADS representing 35 ordinary shares, which was effective
as of February 1, 2013. |
On January 29, 2014, certain then existing shareholders of our
Company entered into a definitive share purchase agreement with Cnshangquan E-Commerce, the sole shareholder of CNShangquan, pursuant
to which Cnshangquan E-Commerce purchased 290,564,842 Shares of the Company from certain then existing shareholders, representing
approximately 63.7% of the issued and outstanding Shares of the Company as of December 31, 2013, for a total cash consideration
of approximately US$39.0 million. Such transactions closed on May 21, 2014.
Except as described above, no member of the Buyer Group nor any
of their respective affiliates has purchased any Shares or ADSs at any time within the past two years.
Prior Public Offerings
We completed our initial public offering of ADSs in October 2010.
In our initial public offering, we offered 13,504,286 ADSs (approximately 2,700,857 ADSs if retroactively adjusted to reflect
the ADS to ordinary share ratio change on February 1, 2013) at US$11.0 per ADS and received an aggregate amount of approximately
US$101.6 million from the proceeds of the initial public offering.
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 Agreements, the Limited Guarantee and
the Equity Commitment Letter, 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 E 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 our
directors and executive officers; |
| · | our directors
and executive officers as a group; and |
| · | each person
known to us to beneficially own more than 5.0% of the total issued and outstanding Shares. |
As of the date of this proxy statement, we have 455,227,428 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 or other right or the conversion of any other security. These Shares, however, are not included in the computation of the
percentage ownership of any other person.
| | |
Share Beneficially Owned | |
| | |
Number (1) | | |
% (2) | |
| Directors and Executive Officers: | |
| | | |
| | |
| Michael Guisheng
Liu(3) | |
| 337,540 | | |
| 0.07 | |
| Willy Yili Wu(4) | |
| 1,164,030 | | |
| 0.26 | |
| Yang Wang | |
| -- | | |
| -- | |
| Ingrid Ye Wang | |
| -- | | |
| -- | |
| Fan Zhang | |
| -- | | |
| -- | |
| Rock Yanshi Jin | |
| -- | | |
| -- | |
| Xiongsheng Yang | |
| -- | | |
| -- | |
| Xiaohua Li | |
| -- | | |
| -- | |
| All Directors and Executive Officers as a Group | |
| 1,501,570 | | |
| 0.33 | |
| | |
| | | |
| | |
| Principal Shareholders: | |
| | | |
| | |
| CNshangquan Limited (5) | |
| 290,564,842 | | |
| 0.33 | |
| ChinaEquity USD Fortune
Co., Ltd.(6) | |
| 36,464,575 | | |
| 8.01 | |
| (1) | | Beneficial ownership
is determined in accordance with the rules of the SEC and includes voting or investment
power with respect to the securities. |
| (2) | | For each person
and group included in this table, percentage ownership is calculated by dividing the
number of shares beneficially owned by such person or group by the sum of the number
of outstanding Shares as of the date of this proxy statement. |
| (3) | | Includes 337,540
Shares. The business address for Mr. Liu is located at Room 302, Qilai Building, No.
889 Yishan Road, Shanghai 200233, People’s Republic of China. |
| (4) | | Includes 1,164,030
Shares. The business address for Mr. Wu is located at Room 302, Qilai Building, No.889
Yishan Road, Shanghai 200233, People’s Republic of China. |
| (5) | | Includes 290,564,842
Shares held by CNshangquan. CNshangquan is a wholly-owned subsidiary of Cnshangquan E-Commerce,
and accordingly, Cnshangquan E-Commerce may be deemed to beneficially own the Shares
as a result of its direct or indirect power to vote or dispose of such shares. The principal
business address for CNshangquan Limited is located at Unit 8, 3/F., Qwomar Trading Complex,
Blackburne Road, Port Purcell, Road Town, Tortola, British Virgin Islands VG1110. |
| (6) | | Includes
36,464,575 Shares held by ChinaEquity. ChinaEquity is a wholly-owned subsidiary of ChinaEquity
USD Fund I L.P., and accordingly, ChinaEquity USD Fund I L.P. may be deemed to beneficially
own the Shares as a result of its direct or indirect power to vote or dispose of such
shares. The principal business address for ChinaEquity is located at 3rd Floor, Building
C, Shou Kai Xing Fu Square, Xin Dong Road, Chaoyang
District, Beijing, People’s Republic of China. |
FUTURE SHAREHOLDER PROPOSALS
If the Merger is consummated, we will not have public shareholders
and there will be no public participants in any future shareholders’ meeting.
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 the consummation 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 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 consummated in a timely manner or at all, which may adversely affect
our business and the prices of our 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 103 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, however, 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.gomo.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 filed with the SEC on April 29, 2015 is incorporated herein by reference. The Company’s
reports on Form 6-K furnished to the SEC since April 29, 2015, if any, are 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 Investor
Relations Department, 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 ________, 2016. 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
ANNEX A: AGREEMENT
AND PLAN OF MERGER
PRIVILEGED AND CONFIDENTIAL
Execution Version
AGREEMENT AND PLAN OF MERGER
among
MINAT
ASSOCIATED CO., LTD.,
ChinaEquity
Alliance Victory Co., Ltd.,
and
Mecox
lane limited
Dated as of December 22, 2015
TABLE OF CONTENTS
| |
|
Page |
| |
|
|
| Article I |
| |
| Defined Terms |
| |
| Section 1.01 |
Certain Defined Terms |
A-2 |
| Section 1.02 |
Other Defined Terms |
A-10 |
| Section 1.03 |
Interpretation; Headings |
A-11 |
| |
|
|
| Article II |
| |
| THE MERGER |
| |
| Section 2.01 |
The Merger |
A-12 |
| Section 2.02 |
Closing |
A-12 |
| Section 2.03 |
Effective Time |
A-12 |
| Section 2.04 |
Effect of the Merger |
A-13 |
| Section 2.05 |
Memorandum and Articles of Association |
A-13 |
| Section 2.06 |
Directors |
A-13 |
| Section 2.07 |
Officers |
A-13 |
| |
|
|
| Article III |
| |
| conversion of securities; merger consideration |
| |
| Section 3.01 |
Conversion of Securities |
A-13 |
| Section 3.02 |
Exchange of Share Certificates |
A-15 |
| Section 3.03 |
Treatment of Company Incentive Plans |
A-19 |
| |
|
|
| Article IV |
| |
| REPRESENTATIONS AND WARRANTIES OF THE COMPANY |
| |
| Section 4.01 |
Organization and Qualification; Subsidiaries |
A-20 |
| Section 4.02 |
Memorandum and Articles of Association |
A-20 |
| Section 4.03 |
Capitalization |
A-20 |
| Section 4.04 |
Authority Relative to This Agreement; Vote Required |
A-21 |
| Section 4.05 |
No Conflict; Required Filings and Consents |
A-22 |
| Section 4.06 |
Permits; Compliance |
A-23 |
| Section 4.08 |
No Undisclosed Liabilities |
A-25 |
| Section 4.09 |
Absence of Certain Changes or Events |
A-25 |
| Section 4.10 |
Absence of Litigation |
A-25 |
| Section 4.11 |
Employee Benefit Plans |
A-26 |
| Section 4.12 |
Labor and Employment Matters |
A-26 |
| Section 4.13 |
Real Property; Title to Assets |
A-27 |
| Section 4.14 |
Intellectual Property |
A-28 |
| Section 4.15 |
Taxes |
A-29 |
| Section 4.16 |
Environmental Matters |
A-30 |
| Section 4.17 |
Material Contracts |
A-30 |
| Section 4.18 |
Insurance |
A-32 |
| Section 4.19 |
Suppliers |
A-32 |
| Section 4.20 |
Interested Party Transactions |
A-32 |
| Section 4.21 |
Opinion of Financial Advisor |
A-33 |
| Section 4.22 |
Brokers |
A-33 |
| Section 4.23 |
Takeover Statute |
A-33 |
| Section 4.24 |
No Additional Representations |
A-33 |
| |
|
|
| Article V |
| |
| REPRESENTATIONS AND WARRANTIES OF PARENT
AND MERGER SUB |
| |
| Section 5.01 |
Corporate Organization |
A-34 |
| Section 5.02 |
Certificate of Incorporation and Bylaws |
A-34 |
| Section 5.03 |
Capitalization |
A-34 |
| Section 5.04 |
Authority Relative to This Agreement |
A-34 |
| Section 5.05 |
No Conflict; Required Filings and Consents |
A-35 |
| Section 5.06 |
Absence of Litigation |
A-36 |
| Section 5.07 |
Operations of Parent and Merger Sub |
A-36 |
| Section 5.08 |
Available Funds and Financing |
A-36 |
| Section 5.09 |
Guarantee |
A-36 |
| Section 5.10 |
Brokers |
A-37 |
| Section 5.11 |
Ownership of Company Shares |
A-37 |
| Section 5.12 |
Solvency |
A-37 |
| Section 5.13 |
Independent Investigation |
A-37 |
| Section 5.14 |
Buyer Group Contracts |
A-38 |
| Section 5.15 |
Proxy Statement |
A-38 |
| Section 5.16 |
Vote/Approval Required |
A-38 |
| Section 5.17 |
Non-Reliance on Company Estimates |
A-38 |
| Section 5.18 |
No Additional Representations |
A-39 |
| |
|
|
| Article VI |
| |
| CONDUCT OF BUSINESS PENDING THE MERGER |
| |
| Section 6.01 |
Conduct of Business by the Company Pending the Merger |
A-39 |
| Section 6.02 |
Conduct of Business by Parent and Merger Sub Pending the Merger |
A-43 |
| Section 6.03 |
No Control of Other Party’s Business |
A-43 |
| Article VII |
| |
| ADDITIONAL AGREEMENTS |
| |
| Section 7.01 |
Preparation of Proxy Statement and Schedule 13E-3 |
A-43 |
| Section 7.02 |
Company Shareholders’ Meeting |
A-45 |
| Section 7.03 |
Competing Transaction |
A-46 |
| Section 7.04 |
Access to Information; Confidentiality |
A-49 |
| Section 7.05 |
Directors’ and Officers’ Indemnification and Insurance |
A-50 |
| Section 7.06 |
Stock Exchange Delisting |
A-52 |
| Section 7.07 |
Public Announcements |
A-52 |
| Section 7.08 |
Notification of Certain Matters |
A-52 |
| Section 7.09 |
Reasonable Best Efforts; Further Action |
A-53 |
| Section 7.10 |
Expenses |
A-53 |
| Section 7.11 |
Takeover Statutes |
A-53 |
| Section 7.12 |
Resignations |
A-53 |
| Section 7.13 |
Participation in Litigations |
A-53 |
| Section 7.14 |
Obligations of Merger Sub |
A-54 |
| Section 7.15 |
Financing |
A-54 |
| Section 7.16 |
No Amendment to Buyer Group Contracts |
A-54 |
| Section 7.17 |
Actions Taken at Direction of Parent or the Rollover Holders |
A-54 |
| |
|
|
| Article VIII |
| |
| CONDITIONS TO THE MERGER |
| |
| Section 8.01 |
Conditions to the Obligations of Each Party |
A-54 |
| Section 8.02 |
Conditions to the Obligations of Parent and Merger Sub |
A-55 |
| Section 8.03 |
Conditions to the Obligations of the Company |
A-55 |
| Section 8.04 |
Frustration of Closing Conditions |
A-56 |
| |
|
|
| Article IX |
| |
| TERMINATION, AMENDMENT AND WAIVER |
| |
| Section 9.01 |
Termination |
A-56 |
| Section 9.02 |
Effect of Termination |
A-58 |
| Section 9.03 |
Termination Fees and Expenses |
A-59 |
| Section 9.04 |
Amendment |
A-60 |
| Section 9.05 |
Waiver |
A-60 |
| |
|
|
| Article X |
| |
| GENERAL PROVISIONS |
| |
| Section 10.01 |
Non-Survival of Representations, Warranties, Covenants and Agreements |
A-60 |
| Section 10.02 |
Notices |
A-60 |
| Section 10.03 |
Severability |
A-61 |
| Section 10.04 |
Entire Agreement; Assignment |
A-62 |
| Section 10.05 |
Parties in Interest |
A-62 |
| Section 10.06 |
Limitations on Liabilities; Remedies |
A-62 |
| Section 10.07 |
Governing Law; Dispute Resolution |
A-64 |
| Section 10.08 |
Counterparts |
A-64 |
Appendix 1 – Form of Cayman Plan of Merger
AGREEMENT AND PLAN OF MERGER, dated as of
December 22, 2015 (this “Agreement”), among MINAT ASSOCIATED CO., LTD., a business company incorporated
under the laws of the British Virgin Islands (“Parent”), ChinaEquity Alliance Victory Co., Ltd., an
exempted company with limited liability incorporated under the laws of the Cayman Islands, all of the issued and outstanding shares
of which are owned by Parent (“Merger Sub”), and Mecox Lane Limited, an exempted company with limited
liability incorporated under the laws of the Cayman Islands (the “Company”).
WHEREAS, Parent, Merger Sub and the Company
intend that Merger Sub be merged with and into the Company (the “Merger”) with the Company surviving
the Merger upon the terms and subject to the conditions set forth in this Agreement and becoming a wholly owned Subsidiary of
Parent as a result of the Merger;
WHEREAS, the board of directors of each of
Parent and Merger Sub has (i) approved the execution, delivery and performance by Parent and Merger Sub, as the case may
be, of this Agreement, the Cayman Plan of Merger (as defined below) and consummation of the Transactions (as defined below), including
the Merger and (ii) declared it advisable for Parent and Merger Sub, as the case may be, to enter into this Agreement and
the Cayman Plan of Merger, and Parent, as the sole shareholder of Merger Sub, has authorized and approved this Agreement, the
Cayman Plan of Merger and the Transactions;
WHEREAS, the Company Board (as defined below),
acting upon the unanimous recommendation of the Special Committee (as defined below), has unanimously (i) determined that
it is fair and in the best interests of the Company and its shareholders (other than the Rollover Holders (as defined below)),
and declared it advisable, to enter into this Agreement and the Cayman Plan of Merger, (ii) approved the execution, delivery and
performance by the Company of this Agreement and the Cayman Plan of Merger and the consummation of the Transactions, including
the Merger, and (iii) resolved to recommend the approval and adoption of this Agreement, the Cayman Plan of Merger and the
Transactions, including the Merger, by the shareholders of the Company at the Company Shareholders’ Meeting (as defined
below);
WHEREAS, as an inducement to Parent’s
and Merger Sub’s willingness to enter into this Agreement, concurrently with the execution and delivery of this Agreement,
each of CNshangquan Limited (“CNshangquan”) and ChinaEquity USD Fortune Co., Ltd. (“ChinaEquity”,
together with CNshangquan, the “Rollover Holders”) has executed a support agreement with Parent, dated
as of the date hereof (collectively, the “Support Agreements”), providing that, among other things,
(i) each Rollover Holder will vote all Shares held by it (the “Rollover Shares”) in favor of the authorization
and approval of this Agreement, the Cayman Plan of Merger and the Transactions in accordance with the terms set forth therein,
and (ii) each Rollover Holder agrees, 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 the terms of this Agreement, and to subscribe for newly issued
shares of Parent; and
WHEREAS, as a condition and inducement to
the Company’s willingness to enter into this Agreement, concurrently with the execution of this Agreement, ChinaEquity USD
Fortune Co., Ltd. (the “Guarantor”) has executed and delivered a limited guarantee dated as of the date
hereof in favor of the Company with respect to certain obligations of Parent and Merger Sub under this Agreement (the “Limited
Guarantee”);
NOW, THEREFORE, in consideration of the foregoing
and the respective representations, warranties, covenants and agreements contained in this Agreement, and intending to be legally
bound hereby, Parent, Merger Sub and the Company hereby agree as follows:
Article I
Defined
Terms
Section 1.01 Certain
Defined Terms. For purposes of this Agreement:
“2014 Balance Sheet”
means the consolidated balance sheet of the Company and its consolidated Subsidiaries as at December 31, 2014, including the notes
thereto.
“Acceptable Confidentiality
Agreement” means an executed confidentiality agreement between the Company and a Person who has made a proposal
satisfying the requirements of Section 7.03(c), which contains terms no less favorable to the Company than those contained
in the Confidentiality Agreementand which contains a customary “standstill” or similar provisions.
“Action”
means any litigation, suit, claim, action, proceeding or investigation.
“Affiliate”
means, in relation to any party, any entity controlling, controlled by or under common control with, that party, whether directly
or indirectly through one or more third parties, including any fund or other similar investment vehicle of which the investment
manager is an entity controlling, controlled by or under common control with that party or the investment manager of that party
where the party is a fund or other similar investment vehicle.
“Anticorruption Laws”
means Laws relating to anti-bribery or anticorruption (governmental or commercial), which apply to the business and dealings of
the Company or any of its Subsidiaries, including, without limitation, the PRC Law on Anti-Unfair Competition adopted on September
2, 1993, the Interim Rules on Prevention of Commercial Bribery issued by the PRC State Administration of Industry and Commerce
on November 15, 1996 and the U.S. Foreign Corrupt Practices Act of 1977, as amended from time to time.
“beneficial owner”,
with respect to any Shares, has the meaning ascribed to such term under Rule 13d-3 of the Exchange Act.
“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, Hong Kong or the PRC.
“Buyer Group Contracts”
means collectively, the Second Amended and Restated Consortium Agreement by and among the Rollover Holders and Chinaequity Capital
Investments Co., Limited, an affiliate of the Sponsor, dated December 17, 2015, the Support Agreements, the Limited Guarantee
and the Equity Commitment Letter, including all amendments thereto or modifications thereof.
“Code”
means Internal Revenue Code of 1986, as amended and the regulations promulgated thereunder.
“Company Board”
means the board of directors of the Company.
“Company Disclosure
Schedule” means the disclosure schedule dated as of the date of this Agreement and delivered by the Company to Parent
and Merger Sub simultaneously with the signing of this Agreement.
“Company Incentive
Plans” means the equity incentive plans of the Company for the benefits of the employees, officers, consultants
and directors of the Company, including without limitation, the 2006 Stock Option Plan, the 2008 Stock Option Plan, the 2011 Share
Incentive Plan, and the 2012 Share Incentive Plan.
“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, is or is reasonably likely to be materially adverse
to the business, financial condition, assets, liabilities or results of operations of the Company and its Subsidiaries taken as
a whole, or would prevent or materially delay consummation of the Transactions by the Company or otherwise prevent or materially
delay the Company from performing its obligations under this Agreement; provided, however, that the following shall
not be taken into account in determining whether a Company Material Adverse Effect has occurred: (i) changes in general business,
economic, political or financial market conditions; (ii) changes in GAAP or any interpretation or enforcement thereof after the
date hereof; (iii) changes that are the result of factors generally affecting the principal industries in which the Company and
its Subsidiaries operate; (iv) the public announcement of this Agreement or the consummation of the Transactions, including any
initiation of shareholder litigation or other legal proceeding relating to this Agreement or the Transactions; (v) any outbreak
or escalation of hostilities, declared or undeclared acts of war, sabotage or terrorism, act of God or natural disasters, or similar
events; (vi) changes in the market price or trading volume of Shares (it being understood that the underlying cause of such
change may, except as otherwise provided in the other clauses of this proviso, be taken into account in determining whether
a Material Adverse Effect has occurred or would reasonably be expected to occur); (vii) actions or omissions of the Company
or any of its Subsidiaries (a) that are required by this Agreement, (b) taken with the consent of Parent, Merger Sub, or any Consortium
Member, or (c) taken at the request of Parent, Merger Sub or any Consortium Member; (viii) any breach of this Agreement by
Parent or Merger Sub; (ix) the failure by the Company or any of its Subsidiaries to meet any internal or industry estimates,
expectations, forecasts, projections or budgets for any period (it being understood that the underlying cause of such failure
may, except as otherwise provided in the other clauses of this proviso, be taken into account in determining whether a Material
Adverse Effect has occurred or would reasonably be expected to occur); or (x) any change or prospective change in the Company’s
credit ratings (it being understood that the underlying cause of such failure may, except as otherwise provided in the other clauses of
this proviso, be taken into account in determining whether a Material Adverse Effect has occurred or would reasonably be expected
to occur); provided, that facts, events, circumstances, developments, conditions, changes, occurrences or effects set forth
in clauses (i), (ii), (iii) and (v) above shall 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 principal industries and geographic
markets in which the Company and its Subsidiaries conduct their businesses.
“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 necessary for each of the Company and
its Subsidiaries to own, lease and operate their respective properties and assets or to carry on their respective businesses as
they are now being conducted.
“Company Recommendation”
means the recommendation of the Company Board that the shareholders of the Company approve and adopt this Agreement.
“Company Shareholder
Approval” means the approval and adoption of this Agreement, the Cayman Plan of Merger and the Transactions (including
the Merger) at the Company Shareholders’ Meeting by the Required Company Vote.
“Company Shareholders’
Meeting” means the meeting of the Company’s shareholders (including any adjournments or postponements thereof)
to be held to consider approval and adoption of this Agreement, the Cayman Plan of Merger and the Transactions, including the
Merger.
“Competing Transaction”
means any transaction or series of related transactions (other than the Merger) that constitute, or may reasonably be expected
to lead to (a) any merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution
or other similar transaction involving the Company or any of its Subsidiaries, whose assets, individually or in the aggregate,
constitute 20% or more of the consolidated assets of the Company or to which 20% or more of the total revenue, operating income
or EBITDA of the Company are attributable (collectively, “Key Subsidiaries”); (b) any sale, lease,
license, exchange, transfer or other disposition of, or joint venture involving, assets or businesses that constitute or represent
more than 20% of the total revenue, operating income, EBITDA or fair market value of the assets of the Company and its Subsidiaries,
taken as a whole; (c) any sale, exchange, transfer or other disposition of more than 20% of any class of equity securities,
or securities convertible into or exchangeable for equity securities, of the Company or any Key Subsidiary; (d) any tender
offer or exchange offer that, if consummated, would result in any Person becoming the beneficial owner of more than 20% of any
class of equity securities of the Company or any Key Subsidiary; (e) any other transaction the consummation of which would
be reasonably likely to impede, interfere with, prevent or materially delay the Merger or any Transaction; or (f) any combination
of the foregoing.
“Confidentiality
Agreement” means, the confidentiality agreement dated October 10, 2015 between ChinaEquity and the Company.
“Consortium Members”
means, collectively, the Rollover Holders and the Sponsor.
“Contract”
means any note, bond, mortgage, indenture, Lease, license, permit, concession, franchise, contract, agreement, arrangement, power
of attorney, understanding, plan or other instrument, right or obligation.
“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, as trustee or executor, by contract or credit arrangement
or otherwise.
“Dissenting Shares”
means the Shares owned by Dissenting Shareholders.
“Dissenting Shareholders”
means the holders of Shares who have validly exercised and not effectively withdrawn or lost their rights to dissent from the
Merger, or dissenter rights, pursuant to Section 238 of the Cayman Companies Law.
“Encumbrances”
means mortgages, pledges, liens, security interests, licenses, conditional and installment sale agreements, encumbrances, charges
or other claims of third parties or restrictions of any kind, including any easement, reversion interest, right of way or other
encumbrance to title, limitations on voting rights, or any options, rights of first refusal or rights of first offer.
“End Date”
means the date that is nine (9) months from the date of this Agreement.
“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended and the rules and regulations promulgated thereunder.
“Exchange Act”
means the Securities Exchange Act of 1934, as amended.
“Excluded Shares”
means, collectively, (i) the Rollover Shares, and (ii) the Shares held by Parent, the Company or any of their Subsidiaries,
in each case, including such Shares represented by ADSs.
“Expenses”
means 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 a party hereto and its Affiliates) actually incurred or accrued by a
party hereto 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 Proxy Statement, the solicitation of shareholder approvals, the filing of any required notices under anti-trust,
anti-monopoly law or other similar regulations and all other matters related to the closing of the Merger and the other Transactions.
“GAAP”
means United States generally accepted accounting principles in effect from time to time applied consistently throughout the periods
involved.
“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.
“Hazardous Substances”
means any chemical, pollutant, waste or substance that is (a) listed, classified or regulated under any Environmental Law
as hazardous substance, toxic substance, pollutant, contaminant or oil or (b) any petroleum product or by-product, asbestos
containing material, polychlorinated biphenyls or radioactive material.
“Indebtedness”
means, with respect to any Person, without duplication: (a) all indebtedness of such Person, whether or not contingent, for
borrowed money, including all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments; (b) all
obligations of such Person for the deferred purchase of property or services; (c) all indebtedness created or arising under
any conditional sale or other title retention agreement with respect to property acquired by such Person (even if 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);
(d) all obligations of such Person as lessee under Leases that have been or should be, in accordance with GAAP, recorded
as capital leases; (e) all obligations, contingent or otherwise, of such Person under acceptance, letter of credit or similar
facilities; (f) all Indebtedness of others referred to in clauses (a) through (e) above guaranteed (or in
effect guaranteed) directly or indirectly in any manner by such Person, and (g) all Indebtedness of others referred to in
clauses (a) through (f) above secured by (or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Encumbrance 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 (a) patents, utility models, inventions and discoveries, statutory invention registrations, mask works, invention
disclosures, and industrial designs, community designs and other designs; (b) Trademarks; (c) works of authorship (including
Software) and copyrights, and moral rights, design rights and database rights therein and thereto; (d) confidential and proprietary
information, including trade secrets, know-how and invention rights; (e) rights of privacy and publicity; (f) registrations,
applications, renewals and extensions for any of the foregoing in clauses (a)-(e); (g) any and all other proprietary rights,
and (h) any documents or other tangible media containing any of the foregoing, and all rights to prosecute and perfect the foregoing
through administrative prosecution, registration, recordation, or other proceeding, and all causes of action and rights to sue
or seek other remedies arising from or relating to the foregoing, including for any past or ongoing misuse or misappropriation.
“IT Assets”
means Software, systems, servers, computers, hardware, firmware, middleware, networks, data communications lines, routers, hubs,
switches and all other information technology equipment, and all associated documentation.
“Knowledge of the
Company” or “Company’s Knowledge” means the actual knowledge, after reasonable inquiry,
of the officers identified in the Company’s annual report on Form 20-F for the year ended December 31, 2014 and any subsequent
current reports on Form 6-K, as of the date hereof.
“Knowledge of Parent”
or “Parent’s Knowledge” or “Known to Parent” means the actual knowledge,
after reasonable inquiry, of any director or officer of Parent, Merger Sub or any Consortium Member.
“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.
“Lease”
means any and all leases, subleases, licenses or other occupancy agreements, sale/leaseback arrangements or similar arrangements.
“NASDAQ”
means the NASDAQ Global Select Market.
“Order”
means any order, judgment, injunction, award, decision, determination, stipulation, ruling, subpoena, writ, decree or verdict
entered by or with any Governmental Authority.
“Owned Intellectual
Property” means all Intellectual Property owned by, or under obligation of assignment to, the Company or any of
its Subsidiaries.
“Parent Board”
means the board of directors of Parent.
“Parent Ordinary
Share” means the ordinary share without par value of Parent.
“Parent Termination
Fee” means an amount in cash equal to US$2.2 million.
“Permitted Encumbrances”
means: (i) Encumbrances for Taxes, assessments and governmental charges or levies not
yet due and payable or that are being contested in good faith and by appropriate proceedings; (ii) mechanics’, carriers’,
workmen’s, repairmen’s, material men’s or other Encumbrances 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) Encumbrances 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) 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; (vii) 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; and (viii) any
other Encumbrances that have been incurred or suffered in the ordinary course of business and that would not reasonably be expected
to have a Company Material Adverse Effect.
“Person”
means an individual, corporation, partnership, limited partnership, limited liability company, syndicate, person (as defined in
Section 13(d)(3) of the Exchange Act), trust, association, entity or Governmental Authority.
“PRC”
means the People’s Republic of China, but solely for purposes of this Agreement, excluding the Hong Kong Special Administrative
Region, the Macau Special Administrative Region and Taiwan.
“Remedial Action”
means all actions, including, without limitation, any capital expenditures, required by a Governmental Authority or required under
or taken pursuant to any Environmental Law, or voluntarily undertaken to (i) clean up, remove, treat, or in any other way, ameliorate
or address any Hazardous Substances or other substance in the indoor or outdoor environment; (ii) prevent the release or threat
of release, or minimize the further release of any Hazardous Substances so it does not endanger or threaten to endanger the public
health or welfare of the indoor or outdoor environment; (iii) perform pre-remedial studies and investigations or post-remedial
monitoring and care pertaining or relating to a release; or (iv) bring the applicable party into compliance with any Environmental
Law
“Representatives”
means a Person’s officers, directors, employees, accountants, consultants, legal counsel, investment bankers, advisors,
agents and other representatives.
“SEC”
means the Securities and Exchange Commission.
“Securities Act”
means the Securities Act of 1933, as amended.
“Service Provider”
means each of the officers, employees and directors of the Company and each of its Subsidiaries.
“Special Committee”
means a committee of the Company Board consisting of two members of the Company Board that are not affiliated with Parent or Merger
Sub and are not members of the Company’s management.
“Subsidiary”
or “Subsidiaries” of any specified Person means an Affiliate controlled by such Person, directly or
indirectly, through one or more intermediaries; provided that, with respect to the Company, for purpose of Article
IV of this Agreement (other than Section 4.08 and Section 4.10), the Company’s Subsidiaries shall not include
the entities set forth on Section 4.01(b)(i). For the avoidance of doubt, Subsidiaries of the Company include the
variable interest entities that are part of the Company Group.
“Superior Proposal”
means an unsolicited written bona fide offer or proposal made by a third party with respect to a Competing Transaction on terms
and conditions that the Company Board determines, in its good faith judgment, after having received the advice of a financial
advisor of internationally recognized reputation and outside legal counsel, and taking into account all legal, financial and regulatory
and other aspects of the proposal and any changes to the terms of this Agreement proposed by Parent in response to such offer
or proposal or otherwise (including financing, regulatory approvals, shareholder litigations, identity of the Person or group
making the offer or proposal, breakup or termination fee and expense reimbursement provisions, expected timing, risk and likelihood
of consummation and other relevant events and circumstances), to be (a) more favorable, including from a financial point
of view, to the shareholders of the Company (other than the holders of the Excluded Shares)than the Merger, (b) fully financed,
and (c) reasonably expected to be consummated; provided, however, 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 limited
in any material respect. For purposes of the definition of “Superior Proposal”, each reference to “20%”
in the definition of “Competing Transaction” shall be replaced with “50%”; provided further that
no offer or proposal shall be deemed to be a “Superior Proposal” if such offer or proposal treats the Rollover Holders
less favorable than the other shareholders of the Company in term of consideration and payment terms.
“Tax”
or “Taxes” means (a) 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, including taxes or other charges on or with respect to income, franchise, windfall or other
profits, gross receipts, property, sales, use, capital stock, payroll, employment, social security, workers’ compensation,
unemployment compensation or net worth; (b) taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer,
value-added or gains taxes; (c) license, registration and documentation fees; and (d) customs duties, tariffs and similar charges.
“Tax Return”
shall mean 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.
“Termination Fee”
means an amount in cash equal to US$1.1 million.
“Trademarks”
means trademarks, service marks, domain names, uniform resource locators, trade dress, trade names, geographical indications and
other identifiers of source or goodwill, including the goodwill symbolized thereby or associated therewith.
“Transactions”
means the Merger and the other transactions contemplated by this Agreement.
“US$”
or “$” means the legal currency of the United States of America.
Section 1.02 Other
Defined Terms. The following terms have the meanings set forth in the Sections set forth below:
| Defined Term |
|
Location of Definition |
| |
|
|
| Agreement |
|
Preamble |
| Alternative Acquisition Agreement |
|
Section 7.03(d) |
| Applicable Merger Consideration |
|
Section 3.01(e) |
| Articles of Association |
|
Section 2.05 |
| Bankruptcy and Equity Exception |
|
Section 4.04(a) |
| Cayman Companies Law |
|
Section 2.01 |
| Cayman Plan of Merger |
|
Section 2.03 |
| Change in the Company Recommendation |
|
Section 7.03(d) |
| Closing |
|
Section 2.02 |
| Closing Date |
|
Section 2.02 |
| Company |
|
Preamble |
| Company Intellectual Property |
|
Section 4.14(b) |
| Company Real Property |
|
Section 4.13(d) |
| Company SEC Reports |
|
Section 4.07(a) |
| Damages |
|
Section 7.05(b) |
| Deposit Agreement |
|
Section 3.03(m) |
| Depositary |
|
Section 3.03(m) |
| Dispute |
|
Section 10.07(b) |
| Effective Time |
|
Section 2.03 |
| Environmental Law |
|
Section 4.16 |
| Environmental Permits |
|
Section 4.16 |
| Equity Commitment Letter |
|
Section 5.08 |
| Exchange Fund |
|
Section 3.02(a) |
| Excluded Shares |
|
Section 3.01(b) |
| Financial Advisor |
|
Section 4.21 |
| Financing |
|
Section 5.08 |
| Guarantor |
|
Recitals |
| Limited Guarantee |
|
Recitals |
| Indemnified Parties |
|
Section 7.05(a) |
| HKIAC |
|
Section 10.07(b) |
| HKIAC Rules |
|
Section 10.07(b) |
| Leased Real Property |
|
Section 4.13(b) |
| Defined
Term |
|
Location
of Definition |
| |
|
|
| Material Contracts |
|
Section 4.17(a) |
| Merger |
|
Recitals |
| Merger Consideration |
|
Section 3.02(a) |
| Merger Sub |
|
Preamble |
| Notice of Superior Proposal |
|
Section 7.03(d) |
| Notice Period |
|
Section 7.03(d) |
| Owned Real Property |
|
Section 4.13(a) |
| Parent |
|
Preamble |
| Paying Agent |
|
Section 3.02(a) |
| Parent Group |
|
Section 10.06 |
| Per Share Merger Consideration |
|
Section 3.01(b) |
| Per ADS Merger Consideration |
|
Section 3.01(b) |
| Plans |
|
Section 4.11(a) |
| Proxy Statement |
|
Section 4.05(b) |
| Real Property Leases |
|
Section 4.13(b) |
| Record Date |
|
Section 7.02(b) |
| Required Company Vote |
|
Section 4.04(c) |
| Restraint |
|
Section 8.01(b) |
| Revised Transaction Proposal |
|
Section 7.03(d) |
| Rollover Holders |
|
Recitals |
| Rollover Shares |
|
Recitals |
| Schedule 13E-3 |
|
Section 7.01(b) |
| Shares |
|
Section 3.01(b) |
| Share Certificates |
|
Section 3.02(c) |
| Side Letter |
|
Section 3.02(m) |
| Sponsor |
|
Section 5.08 |
| Support Agreement |
|
Recitals |
| Surviving Company |
|
Section 2.01 |
| Takeover Statute |
|
Section 4.23 |
| Uncertificated Shares |
|
Section 3.02(c) |
Section 1.03 Interpretation;
Headings. Whenever the words “include”, “includes” or “including” are used in this Agreement,
they shall be deemed to be followed by the words “without limitation”. The 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. When reference is made to an Article, Section, Exhibit, Appendix or Schedule, such reference is to an Article
or Section of, or Exhibit, Appendix or Schedule to, this Agreement unless otherwise indicated. The table of contents and descriptive
headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning
or interpretation of this Agreement. All terms defined in this Agreement shall have the defined meanings when used in any certificate
or other document made available or delivered pursuant hereto, unless otherwise defined therein. The words “hereof”,
“herein” and “hereunder” and words of similar import, when used in this Agreement, refer to this Agreement
as a whole and not to any particular provision of this Agreement. References to a Person are also to its successors and permitted
assigns. Each of the parties hereto has participated in the drafting and negotiation of this Agreement. If an ambiguity or question
of intent or interpretation arises, this Agreement must be construed as if it is drafted by all the parties hereto, and no presumption
or burden of proof shall arise favoring or disfavoring any party hereto by virtue of authorship of any of the provisions of this
Agreement.
Article II
THE
MERGER
Section 2.01 The
Merger. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the Companies Law
(2013 Revision) of the Cayman Islands (as amended) (the “Cayman Companies Law”), at the Effective Time,
Merger Sub shall be merged with and into the Company. The Company shall be the surviving company in the Merger (the “Surviving
Company”), become a wholly owned subsidiary of Parent and Merger Sub shall be struck off the register of companies
in the Cayman Islands and thereupon be dissolved, such that the separate corporate existence of Merger Sub shall cease. The Company
shall succeed to and assume all the business, undertakings, goodwill benefit, property, assets, rights, privileges, immunities,
powers, franchises, debts, mortgages, charges or security interests, contracts, claims, liabilities, duties and obligations of
Merger Sub and the Company in accordance with the Cayman Companies Law. The Merger shall have the effects specified in the Cayman
Companies Law.
Section 2.02 Closing.
Unless otherwise mutually agreed in writing between the Company, Merger Sub and Parent, the closing for the Merger (the “Closing”)
shall take place at the offices of Gibson Dunn & Crutcher LLP, Unit 1301, Tower 1, China Central Place, No. 81 Jianguo Road,
Chaoyang District, Beijing, 100025, PRC at 10:00 a.m. (Beijing time), on the second Business Day immediately following the
day on which the last to be satisfied or, if permissible, waived of the conditions set forth in Article VIII (other
than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those
conditions at the Closing) shall be satisfied or, if permissible, waived in accordance with this Agreement (the date on which
the Closing actually takes place being the “Closing Date”).
Section 2.03 Effective
Time. On the Closing Date, Merger Sub and the Company shall execute a plan of merger (the “Cayman Plan of Merger”)
in substantially the form contained in Appendix 1 hereto and the parties hereto shall file the Cayman Plan of Merger and
such other documents as required by the Cayman Companies Law with the Registrar of Companies of the Cayman Islands as provided
in Section 233 of the Cayman Companies Law. The Merger shall become effective at the time when the Cayman Plan of Merger is registered
by the Registrar of Companies of the Cayman Islands or at such other subsequent date (being not more than 90 days after the date
of registration of the Plan of Merger by the Registrar of Companies of the Cayman Islands) as may be specified in the Cayman Plan
of Merger in accordance with the Cayman Companies Law (the “Effective Time”).
Section 2.04 Effect
of the Merger. At the Effective Time, the Merger shall have the effects specified in this Agreement, the Cayman Plan of Merger
and the Cayman Companies Law. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, the
Surviving Company shall succeed to and assume all the business, undertakings, goodwill benefit, property, assets, rights, privileges,
immunities, powers, franchises, debts, mortgages, charges or security interests, contracts, claims, liabilities, duties and obligations
of Merger Sub and the Company in accordance with the Cayman Companies Law.
Section 2.05 Memorandum
and Articles of Association. At the Effective Time, the Surviving Company shall adopt the memorandum of association and articles
of association of Merger Sub, as in effect immediately prior to the Effective Time, as the memorandum of association and articles
of association (the “Articles of Association”) of the Surviving Company until thereafter changed or
amended as provided therein or by applicable Law; provided that at the Effective Time, (a) Article 1 of the memorandum
of association of the Surviving Company shall be amended to read as follows: “The name of the Company is “Mecox Lane
Limited” and the articles of association of the Surviving Company shall be amended to refer to the name of the Surviving
Company as “Mecox Lane Limited”, (b) references therein to the authorized share capital of the Surviving Company shall
be amended to refer to the correct authorized capital of the Surviving Company as approved in the Cayman Plan of Merger, if necessary,
and (c) the memorandum and articles of association of the Surviving Company will contain provisions no less favorable to the intended
beneficiaries with respect to exculpation and indemnification of liability and advancement of expenses than as set forth in the
memorandum and articles of association of the Company as in effect on the date hereof, in accordance with Section 7.05(a).
Section 2.06 Directors.
The parties hereto shall take all actions necessary so that the directors of Merger Sub at the Effective Time shall, from and
after the Effective Time, be the directors of the Surviving Company, unless otherwise determined by Parent prior to the Effective
Time, until their respective successors have been duly elected or appointed and qualified or until their earlier death, resignation
or removal in accordance with the Articles of Association.
Section 2.07 Officers.
The parties hereto shall take all actions necessary so that the officers of the Company at the Effective Time shall, from and
after the Effective Time, be the officers of the Surviving Company, unless otherwise determined by Parent prior to the Effective
Time, until their respective successors have been duly elected or appointed and qualified or until their earlier death, resignation
or removal in accordance with the Articles of Association.
Article III
conversion
of securities; merger consideration
Section 3.01 Conversion
of Securities. At the Effective Time, as a result of the Merger and without any action on the part of the Company, Parent,
Merger Sub or any other holders of any shares or other securities of the Company:
(a) Shares
of Merger Sub. Each ordinary share, par value US$1.00 per share, of Merger Sub issued and outstanding immediately prior to
the Effective Time shall be converted into one fully paid and non-assessable ordinary share, par value US$0.0001 per share, of
the Surviving Company. Such conversion shall be effected by means of the cancellation of such ordinary shares of Merger Sub, in
exchange for the right to receive one such ordinary share of the Surviving Company. Such ordinary shares of the Surviving Company
shall be the only issued and outstanding share capital of the Surviving Company and this will be reflected in the register of
members of the Surviving Company.
(b) Merger
Consideration. Each ordinary share, par value US$0.0001 per share, of the Company (a “Share” or,
collectively, the “Shares”), issued and outstanding immediately prior to the Effective Time, other than
the Excluded Shares and the Dissenting Shares shall be cancelled and cease to exist in exchange for the right to receive US$0.114
in cash per Share without interest (the “Per Share Merger Consideration”). In exchange for the cancellation
of the Shares represented by ADSs (other than ADSs representing the Excluded Shares) pursuant to this Section 3.01(b), the Depositary,
as the registered holder of such Shares, shall be entitled to receive the Per Share Merger Consideration for such Shares. Each
American Depositary Share, representing thirty-five Shares (an “ADS” or collectively, the “ADSs”),
issued and outstanding immediately prior to the Effective Time (other than the ADSs representing the Excluded Shares) shall be
cancelled in exchange for the right to receive an amount in cash equal to US$4.00 without interest (the “Per ADS Merger
Consideration”) which shall be distributed by the Depositary to the holders of such ADSs pursuant to the terms and
conditions set forth in this Agreement and the Deposit Agreement (as defined below). In the event of any conflict between this
Agreement and the Deposit Agreement, this Agreement shall prevail. The register of members of the Company will be amended accordingly.
(c) Cancellation
of Shares. At the Effective Time, all of the Shares, 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 will be amended accordingly. Each Share
(other than the Excluded Shares and Dissenting Shares) shall thereafter represent only the right to receive the Per Share Merger
Consideration without interest, and each Dissenting Share shall thereafter represent only the right to receive the applicable
payments set forth in Section 3.02(f). At the Effective Time, by virtue of the Merger and without any action on the part
of the holder thereof, each of the Excluded Shares and ADSs representing the Excluded Shares issued and outstanding immediately
prior to the Effective Time shall automatically be cancelled and cease to exist and no payment or distribution shall be made with
respect thereto and the register of members of the Company will be amended accordingly.
(d) Dissenting
Shares. 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 Cayman Companies Law 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
3.02. 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 Cayman Companies Law.
(e) Certain
Adjustments. Notwithstanding any provision of this Article III, if between the date of this Agreement and the
Effective Time the outstanding Shares shall have been changed into a different number of shares or a different class, solely by
reason of any share dividend, subdivision, reclassification, recapitalization, split, reverse split, combination or exchange of
shares or any other similar transaction, the Per Share Merger Consideration and Per ADS Merger Consideration (as the case may
be, the “Applicable Merger Consideration”) shall be appropriately adjusted to reflect such share dividend,
subdivision, reclassification, recapitalization, split, reverse split, combination or exchange of shares or any other similar
transaction and to provide to the holders of Shares and ADSs the same economic effect as contemplated by this Agreement prior
to such action.
Section 3.02 Exchange
of Share Certificates. (a) Paying Agent. Prior to the Effective Time, Parent shall select a bank or trust company reasonably
satisfactory to the Company to act as paying agent (the “Paying Agent”) for all payments required to
be made pursuant to Section 3.01(b) and Section 3.01(d) (collectively, the “Merger Consideration”).
At or prior to the Effective Time, or in the case of payments pursuant to Section 3.01(d), when ascertained, 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 in immediately
available funds sufficient to pay the Merger Consideration (such cash being hereinafter referred to as the “Exchange
Fund”).
(b) Investment
of Exchange Fund. The Paying Agent shall invest the Exchange Fund as directed by Parent; provided, that Parent shall
not direct the Paying Agent to make any such investments that are speculative in nature. Any interest and other income resulting
from such investments shall become a part of the Exchange Fund, and any amounts in excess of the Merger Consideration shall be
returned to the Surviving Company or Parent (as directed by Parent) in accordance with Section 3.02(g). To the extent that
there are any losses with respect to any such investments, or the Exchange Fund diminishes for any reason below the level required
for the Paying Agent to make prompt cash payment for the Merger Consideration, Parent shall, or shall cause the Surviving Company
to, promptly replace or restore the cash in the Exchange Fund 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.
(c) Exchange
Procedures. Promptly after the Effective Time (and in any event within five (5) Business Days), the Surviving Company
and Parent shall cause the Paying Agent to mail to each registered holder of Shares (other than the Excluded Shares and Dissenting
Shares) (i) a letter of transmittal in customary form for a Cayman Islands incorporated company specifying how
the delivery of the Exchange Fund to registered holders of the Shares (other than the Excluded Shares and Dissenting Shares)
shall be effected, such letter of transmittal to be in such form and have such other provisions as Parent and the Company may
reasonably agree; and (ii) instructions for effecting the surrender of share certificates, if any, representing Shares (the
“Share Certificates”) (or affidavits and indemnities of loss in lieu of the Share Certificates as provided
in Section 3.02(i)) in exchange for the Per Share Merger Consideration. Upon surrender of any Share Certificate (or affidavit
and indemnity of loss in lieu of the Share Certificate as provided in Section 3.02(i)) to the Paying Agent in accordance
with the terms of such letter of transmittal, duly executed, each registered holder of Shares represented by such Share Certificate
and each registered holder of Shares which are not represented by a Share Certificate (“Uncertificated Shares”)
shall be entitled to receive in exchange therefor a cheque, 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 3.02(i))
or the number of Uncertificated Shares multiplied by (y) the Per Share Merger Consideration, subject to any required tax
withholding or deduction as provided in Section 3.02(j) below, and any Share Certificate so surrendered shall forthwith be marked
as cancelled. In the event of a transfer of ownership of Shares that is not registered in the register of members of the Company,
a cheque 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) which 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.
(d) Depositary.
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, after deducting any fees, including ADS cancellation fees,
charges and expenses due to or incurred by the Depositary as provided in this Section 3.02(d), and any necessary tax withholding
or deductions as provided in Section 3.02(j) below. The holders of ADSs shall bear any applicable fees, charges and expenses of
the Depositary and government charges due to or incurred by the Depositary in connection with distribution of the Per ADS Merger
Consideration to holders of ADSs, including applicable ADS cancellation fees, and any such fees, charges and expenses incurred
by the Depositary shall be treated for all purposes of this Agreement as having been paid to the holders of ADSs.
(e) Transfer
Books; No Further Ownership Rights. The Per Share Merger Consideration paid in respect of the Shares upon the surrender for
exchange of Share Certificates or for Uncertificated Shares and the Per ADS Merger Consideration paid in respect of the ADSs,
in each case, in accordance with the terms of this Article III shall be deemed to have been paid in full satisfaction
of all rights pertaining to the Shares previously represented by such Share Certificates or Uncertificated Shares and the ADSs,
and at the Effective Time, the register of members of the Company shall be closed and thereafter there shall be no further registration
of transfers on the register of members of the Surviving Company of Shares that were outstanding immediately prior to the Effective
Time. From and after the Effective Time, the holders of Share Certificates or Uncertificated Shares outstanding immediately prior
to the Effective Time and ADSs outstanding immediately prior to the Effective Time shall cease to have any rights with respect
to such Shares and ADSs, except as otherwise provided for herein or by applicable Law. If, after the Effective Time, any Share
Certificate is presented to the Surviving Company, Parent or the Paying Agent for transfer or any other reason, such Share Certificate
shall be cancelled and except for the Excluded Shares, exchanged for the cash amount in immediately available funds to which the
holder of the Share Certificate is entitled pursuant to this Article III.
(f) Dissenter’s
Rights. No Person who has validly exercised their rights to dissent from the Merger pursuant to Section 238 of the Cayman
Companies Law shall be entitled to receive the Per Share Merger Consideration or Per ADS Merger Consideration with respect to
the Shares owned by such Person unless and until such Person shall have lost such Person’s rights to dissent from the Merger
under the Cayman Companies Law. Each Dissenting Shareholder shall be entitled to receive only the payment resulting from the procedure
in Section 238 of the Cayman Companies Law with respect to Shares owned by such Dissenting Shareholder. The Company shall
give Parent (i) prompt notice of any written demands for appraisal and any other instruments served pursuant to the Cayman
Companies Law that are received by the Company relating to its shareholders’ rights to dissent from the Merger and (ii) the
opportunity to direct all negotiations and proceedings with respect to demand for appraisal under the Cayman Companies Law. The
Company shall not, except with the prior written consent of Parent, voluntarily make any payment with respect to the exercise
of any rights to dissent from the Merger or any demands for appraisal, offer to settle or settle any such demands or approve any
withdrawal of any such demands. In the event that any written notices of objection to the Merger are served by any shareholder
of the Company pursuant to Section 238(2) of the Cayman Companies Law, 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
Cayman Companies Law within 20 days of obtaining the Required Company Vote at the Company Shareholders’ Meeting.
(g) Untraceable
and Dissenting Shareholders. Remittances for the Applicable Merger Consideration shall not be sent to the holders of the Shares
and ADSs who are untraceable unless and until, except as provided below, they notify the Paying Agent or the Depositary, as the
case may be, of their current contact details prior to the Effective Time. A holder of Shares or ADSs will be deemed to be untraceable
if (i) he has no registered address in the register of members (or branch register) maintained by the Company or the Depositary,
as applicable; or (ii) on the last two consecutive occasions on which a dividend has been paid by the Company a cheque 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 cheque 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 Company Shareholders’ Meeting convened to vote on the Merger has been sent to such
person and has been returned undelivered. Monies due to holders of Dissenting Shares and shareholders of the Company who are untraceable
shall be returned (without duplication of any amounts held by the Paying Agent) to the Surviving Company on demand, and shall
be held by the Surviving Company without interest for the benefit of holders of Dissenting Shares and the holders of the Shares
and ADSs who are untraceable. Dissenting Shareholders and holders of Shares and ADSs who are untraceable who subsequently wish
to receive any monies otherwise payable in respect of the Merger within applicable time limits or limitation periods will be advised
to contact the Surviving Company.
(h) Termination
of Exchange Fund. Any portion of the Exchange Fund (including the proceeds of any investments of the Exchange Fund) that remains
unclaimed by the shareholders of the Company for nine (9) months after the Effective Time shall be delivered to the Surviving
Company upon demand by the Surviving Company. Any holder of Shares (other than the Excluded Shares) and ADSs (other than ADSs
representing the Excluded Shares) who has not theretofore complied with this Article III shall thereafter look only
to the Surviving Company for payment of the Applicable Merger Consideration to which such holder is entitled pursuant to this
Article III upon due surrender of its Share Certificates, if any, (or affidavits and indemnities of loss in lieu of
the Share Certificates as provided in Section 3.02(i)), without any interest thereon.
(i) Lost,
Stolen or Destroyed Share Certificates. In the event 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
reasonably required by Parent or by the Paying Agent, the posting by such Person of a bond in customary amount and upon such terms
as may be reasonably required by Parent or the Paying Agent as an indemnity against any claim that may be made against it or the
Surviving Company with respect to such Share Certificate, the Paying Agent will issue a cheque to such Person in the amount equal
to (x) the number of Shares represented by such lost, stolen or destroyed Share Certificate multiplied by (y) the Per
Share Merger Consideration, but subject to any required tax withholding or deduction as provided in Section 3.02(j) below.
(j) Withholding
Rights. Each of the Surviving Company, Parent, the Paying Agent and the Depositary shall be entitled to deduct and withhold
from any amounts otherwise payable pursuant to this Agreement such amount 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 and paid over
to the appropriate Governmental Authority by the Surviving Company, Parent, the Paying Agent or the Depositary, as the case may
be, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Shares
and ADSs to whom such amounts would otherwise have been paid.
(k) No
Liability. None of the Surviving Company, the Rollover Holders, Parent, the Sponsor, the Paying Agent, the Depositary, or
any other Person shall be liable to any former holder of Shares (including Shares represented by ADSs) for any amount properly
delivered to a public official pursuant to applicable abandoned property, bona vacantia, escheat or similar Laws. 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 Company or its designee, free
and clear of all claims or interest of any Person previously entitled thereto.
(l) 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 Cayman Companies Law, and the Per ADS Merger Consideration represents
the fair value of ADSs for the purposes of Section 238(8) of the Cayman Companies Law.
(m) Termination
of Deposit Agreement. As soon as reasonably practicable after the Effective Time, the Surviving Company shall provide notice
to JPMorgan Chase Bank, N.A. (the “Depositary”) to terminate the deposit agreement, dated as of October
26, 2010 between the Company, the Depositary and all holders from time to time of ADSs issued thereunder (as amended, the “Deposit
Agreement”) in accordance with its terms. The Surviving Company shall pay all applicable fees, charges and expenses
of the Depositary and government charges (other than withholding Taxes, if any) in connection with the termination of the Deposit
Agreement and the ADS program pursuant to the Side Letters.
(n) No
Further Dividends. No dividends or other distributions with respect to share capital of the Surviving Company with a record
date on or after the Effective Time shall be paid to the holder of any unsurrendered Share Certificates.
Section 3.03 Treatment
of Company Incentive Plans. 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 necessary to terminate all Company Incentive
Plans and any relevant award agreements applicable to the Company Incentive Plans. The Company shall not grant any awards under
the Company Incentive Plans and shall take all actions necessary to ensure that from and after the Effective Time neither Parent
nor the Surviving Company will be required to issue Shares or other share capital of the Surviving Company to any Person pursuant
to or in settlement of any awards granted under the Company Incentive Plans.
Article IV
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
As an inducement to Parent and Merger Sub
to enter into this Agreement, except (a) as set forth in the corresponding section of the Company Disclosure Schedule (it
being agreed that disclosure of any item in any section of the Company Disclosure Schedule shall be deemed disclosure with respect
to such section of this Agreement to which it corresponds in number and any other section of this Agreement to which the relevance
of such item is reasonably apparent on the face of such disclosure, without independent inquiry); (b) other than with respect
to Section 4.03(a) and Section 4.07(a), as disclosed in the Company SEC Reports filed prior to the date of this Agreement (and
then (i) only to the extent reasonably apparent in the Company SEC Reports that such disclosed item is an event, item or
occurrence that would otherwise constitute a breach of a representation or warranty set forth in this Article IV and
(ii) other than in “risk factors” or any language in such filings that is cautionary, predictive or forward-looking);
or (c) any information that would cause one or more of the representations and warranties contained in this Article IV to be untrue
or incorrect which information is Known to Parent prior to the date of this Agreement, the Company hereby represents and warrants
to Parent and Merger Sub as of the date of this Agreement that:
Section 4.01 Organization
and Qualification; Subsidiaries. (a) Each of the Company and each of its Key Subsidiaries is an entity duly organized, validly
existing and in good standing under the Laws of the jurisdiction of its organization or incorporation and has the requisite corporate
or similar power and authority and all necessary governmental approvals in all material respects, to own, lease and operate its
properties and assets and to carry on its business as it is now being conducted. Each of the Company’s Subsidiaries (other
than its Key Subsidiaries and those set forth in Section 4.01(a) of the Company Disclosure Schedule) is an entity duly organized,
validly existing and in good standing under the Laws of the jurisdiction of its organization and has the requisite corporate or
similar power and authority and all necessary governmental approvals, to own, lease and operate its properties and assets and
to carry on its business as it is now being conducted, except where the failure to have such power, authority and governmental
approvals 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, 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 or desirable, except where the failure to be so qualified or licensed and in good standing
would not reasonably be expected to have a Company Material Adverse Effect.
(b) A
true and complete list of all the Subsidiaries of the Company, identifying the jurisdiction of incorporation or organization of
each such Subsidiary, the percentage of the outstanding share capital or other equity interests of, or other interest in, each
such Subsidiary owned or held by the Company and each of its other Subsidiaries is set forth in Section 4.01(b)(ii) of the Company
Disclosure Schedule. Except as set forth in Section 4.01(b)(ii) of the Company Disclosure Schedule, the Company does not directly
or indirectly own any equity interest in, or any interest convertible into or exchangeable or exercisable for any equity interest
in, or otherwise control any corporation, partnership, joint venture or other business association or entity.
Section 4.02 Memorandum
and Articles of Association. The memorandum and articles of association, bylaws 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, bylaws or equivalent organizational documents,
as applicable, in any material respect.
Section 4.03 Capitalization.
(a) The authorized share capital of the Company consists of 10,000,000,000 Shares of a nominal or par value of US$0.0001 each.
As of the date of this Agreement, 455,227,428 Shares are issued and outstanding, all of which are duly authorized, validly issued,
fully paid and non-assessable. There are no options, warrants, restricted stock units, convertible debt, other convertible instruments
or other rights, agreements, arrangements or commitments of any character 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 share capital
of the Company or any of its Subsidiaries. There are no outstanding restricted share units, options or share appreciation rights
or any other awards granted under the Company Incentive Plans. 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.
(b) The
Company has made available to Parent, accurate and complete copies of the Company Incentive Plans.
(c) As
of the date of this Agreement, the Company does not have any outstanding bonds, debentures, notes or other Indebtedness the holders
of which have 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. None of the Company or any Subsidiaries thereof are subject to any outstanding obligations
requiring the registration of any equity securities thereof under any securities laws for sale of such equity securities.
(d) All
outstanding share capital of, or other equity interest in, each Subsidiary wholly owned by the Company is (i) duly authorized,
validly issued, fully paid and non-assessable and (ii) owned by the Company or another of its wholly owned Subsidiaries free and
clear of all Encumbrances (except for Encumbrances imposed by applicable Law). All outstanding share capital or other equity interest
in each Subsidiary that is not wholly owned by the Company is (x) duly authorized, validly issued, fully paid and non-assessable
and (y) directly or indirectly controlled by the Company, and the portion of the outstanding share capital or other equity interest
in each such Subsidiary is owned by the relevant Group Company free and clear of all Encumbrances (except for Encumbrances imposed
by applicable Law).
Section 4.04 Authority
Relative to This Agreement; Vote Required. (a) The Company has all necessary 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 Merger, obtaining
the Company Shareholder Approval and the filing of the Cayman Plan of Merger and related documents as required by the Cayman Companies
Law). 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, has (i) approved and declared advisable
to enter into this Agreement, the Cayman Plan of Merger and the Transaction, including the Merger; (ii) determined that the Merger
is fair to, and in the best interests of, the Company and its shareholders (other than the Rollover Holders); (iii) approved
the execution, delivery and performance of this Agreement and the Cayman Plan of Merger and the consummation of the Transactions,
including the Merger; and (iv) resolved to recommend the approval and adoption of this Agreement, the Cayman Plan of Merger and
the Transactions including the Merger, and directed that this Agreement, the Cayman Plan of Merger and the Transactions, including
the Merger, be submitted for approval and authorization, by the shareholders of the Company at the Company Shareholders’
Meeting.
(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 representing two-thirds or more of the Shares present and voting in person
or by proxy as a single class at the Company Shareholders’ Meeting (the “Required Company Vote”).
Section 4.05 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) 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 4.05(b) have been obtained or taken and all
filings and obligations described in Section 4.05(b) have been made or satisfied, and assuming receipt of the Company Shareholder
Approval, 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 which, 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 an Encumbrance (other than Permitted Encumbrances) on any property or asset of the Company or any of
its Subsidiaries pursuant to any note, bond, mortgage, indenture, deed of trust, contract, agreement or Company Permit or other
instrument or obligation to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries
or any of their respective asset or property is bound or affected, except, with respect to clause (ii) to (iii), for any such
conflicts, violations, breaches, defaults or other occurrences which would not reasonably be expected to have a Company Material
Adverse Effect.
(b) Other
than filings and/or notices required for (i) compliance with the applicable requirements of 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 such documents), (ii) compliance with the rules and regulations of NASDAQ, and (iii) the
filing of the Cayman Plan of Merger and related documentation with the Registrar of Companies of the Cayman Islands pursuant to
the Cayman Companies Law, no material notices, reports or other filings are required to be made by the Company with, nor are any
material 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 of
the Merger and the other Transactions.
(c) The
Proxy Statement to be sent to the shareholders of the Company in connection with the Company Shareholders’ Meeting (including
any amendment or supplement or document incorporated by reference) and the Schedule 13E-3 relating to the adoption of this Agreement
by the shareholders of the Company, as amended or supplemented from time to time and including any document incorporated by reference
therein, shall not, on the date the Proxy Statement (including any amendment or supplement thereto) is first mailed to shareholders
of the Company or at the time of the Company Shareholders’ Meeting or, in the case of the Schedule 13E-3, on the date it
(and any amendment or supplement to it) is filed with the SEC, contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements made therein, in light of the circumstances under which they are made,
not misleading. The Proxy Statement and the Schedule 13E-3 will comply as to form in all material respects with the requirements
of the Exchange Act. Notwithstanding the foregoing, the Company makes no representation with respect to the statements made or
incorporated by reference therein based on information supplied by or on behalf of Parent or Merger Sub for inclusion or incorporation
by reference in the Proxy Statement or the Schedule 13E-3.
Section 4.06 Permits;
Compliance.
(a) (i)
The business of each of the Company and its Subsidiaries is, and has been, conducted in compliance in all material respects 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 in all material respects, (iii) each of the Company and its Subsidiaries is in possession of all material Company Permits
necessary for the ownership, use, occupancy and operation of its assets and properties and the lawful conduct of its business
as it is now being conducted, (iv) each of the Company and its Subsidiaries is in compliance in all material respects with the
terms of such Company Permits, (v) all such material Company Permits are valid and in full force and effect, (vi) no suspension
or cancellation of any of the material Company Permits is pending or, to the Knowledge of the Company, threatened and (vii) no
such material Company Permit shall cease to be effective as a result of the Transactions.
(b) 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 Subsidiary (each, a “Company
Affiliate”) has violated any Anticorruption Law in any material respects.
Section 4.07 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 by it with the SEC since October 6, 2010 (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 or the Exchange Act, applicable accounting standards
and the Sarbanes-Oxley Act of 2002 (as amended and including the rules and regulations promulgated thereunder), and any rules
and regulations promulgated thereunder applicable to the Company SEC Reports, 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) Since
September 18, 2014, neither the Company nor any of its Subsidiaries, nor, to the Company’s Knowledge, any of its or its
Subsidiaries’ Representatives, has received or otherwise been made aware of any complaint, allegation, assertion or claim,
whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of the Company or
any of its Subsidiaries or their respective internal accounting controls, including any complaint, allegation, assertion or claim
that the Company or any of its Subsidiaries has engaged in questionable accounting or auditing practices. Since September 18,
2014, there have been no internal investigations regarding accounting or revenue recognition discussed with, reviewed by or initiated
at the direction of the chief executive officer, chief financial officer, general counsel, the Company Board or any committee
thereof.
(c) The
Company is in compliance, in all material respects, with the applicable provisions of the Sarbanes-Oxley Act of 2002. The Company
maintains internal control over financial reporting (as defined in Rule 13a-15 or 15d-15, as applicable, under 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 and includes policies and procedures that (i) pertain to the maintenance
of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company,
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations
of management and directors of the Company, and (iii) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the assets of the Company that could have a material effect on its financial statements.
Since December 31, 2014, there have been no changes in the Company’s internal control over financial reporting (as such
term is defined in the Exchange Act) that have materially affected, or are reasonably likely to materially affect, the Company’s
internal control over financial reporting.
(d) Each
of the consolidated financial statements included in or incorporated by reference into the Company SEC Reports (including the
related notes and schedules) fairly presents, or, in the case of Company SEC Reports filed after the date hereof, will fairly
present, in all material respects, the consolidated financial position, results of operations, shareholders’ equity and
cash flows of the Company and its consolidated Subsidiaries as at the respective dates thereof and for the respective periods
indicated therein (subject, in the case of unaudited interim statements, to normal year-end audit adjustments and the exclusion
of certain notes in accordance with the rules of the SEC relating to unaudited financial statements), in each case in accordance
with GAAP, Regulation S-X of the SEC and the rules and standards of the Public Company Accounting Oversight Board except as may
be noted therein.
(e) The
Company has implemented disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) that are reasonably
designed to ensure that material information relating to the Company required to be included in reports filed under the Exchange
Act is made known to its chief executive officer and chief financial officer or other persons performing similar functions. 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 no fraud, whether or not material, that involves
the management of the Company who has a significant role in the internal controls over financial reporting utilized by the Company.
Section 4.08 No
Undisclosed Liabilities. None of the Company or any Subsidiary of the Company has any liabilities or obligations of any nature,
whether accrued, absolute, contingent or otherwise, and whether or not required to be recorded or reflected on a balance sheet
under GAAP, and there is no existing condition, situation or set of circumstances which could be expected to result in such a
liability or obligation, except for liabilities or obligations (i) set forth, or for which reserves were adequately established,
in the 2014 Balance Sheet included in the Company SEC Reports, (ii) incurred after December 31, 2014, in the ordinary course of
business consistent with past practice, (iii) incurred in connection with the Transactions, or (iv) that do not exceed RMB5 million.
The Company has provided to the Parent and Merger Sub a complete copy of the Depositary Agreement, including all the side letters
(the “Side Letters”) entered into with the Depositary.
Section 4.09 Absence
of Certain Changes or Events. 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, (b) there has not been
(A) any change in the financial condition, business or results of their operations or any circumstance, occurrence or development
of which the Company has Knowledge, that has had or is reasonably likely to have a 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 to the Company or to any Subsidiary of the
Company); (C) any material change in any method of accounting or accounting practice by the Company or any of its Subsidiaries;
(D) any making or revocation of any material Tax election, any settlement or compromise of any material Tax liability, or any
change (or request to any taxing authority to change) any material aspect of the method of accounting of the Company or any of
its Subsidiaries for Tax purposes; (E) any amendment to the memorandum and articles of association (or other similar governing
instrument) of the Company or any of its Subsidiaries; (F) 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; (G) any receiver, trustee,
administrator or other similar Person appointed in relation to the affairs of the Company or its property or any part thereof;
or (H) any agreement to do any of the foregoing .
Section 4.10 Absence
of Litigation. There is no Action pending or, to the Knowledge of the Company, threatened in writing 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
(i) the Company or any of its Subsidiaries would be held liable for more than US$200,000, (ii) prevents, materially delays or
materially impedes, or if determined adversely against the Company, would reasonably be expected to prevent, materially delay
or materially impede, the performance by the Company of its obligations under this Agreement or the consummation of the Transactions,
or (iii) if determined adversely against the Company, would reasonably be expected to have a Company Material Adverse Effect.
Except as disclosed in Section 4.10 of the Company Disclosure Schedule, none of the Company, its Subsidiaries or any material
property or asset of the Company or any of its Subsidiaries is, in any material respects, 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.
Section 4.11 Employee
Benefit Plans. (a) All material benefit and compensation plans, agreements, or arrangements, whether written or oral, including,
without limitation, plans and agreements to provide incentive compensation, retention payments, severance or fringe benefits maintained
or contributed to by the Company or its Subsidiaries covering current Service Providers (the “Plans”)
are listed in Section 4.11(a) of the Company Disclosure Schedule. There are no outstanding restricted shares, options or share
appreciation rights or any other awards granted under the Plans. 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
(i) result in any payment becoming due to any current or former Service Provider under any of the Plans; (ii) increase any benefits
otherwise payable under any of the Plans; or (iii) result in any acceleration of the time of payment or vesting of any such benefits.
(b) There
is no outstanding Order against the Plans that would have a Company Material Adverse Effect. Each document prepared in connection
with a Plan complies with applicable Law in all material respects. Except as would not have a Company Material Adverse Effect,
(i) each Plan has been operated in accordance 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, and (ii) no circumstance, fact
or event exists that could result in any default under or violation of any Plan, and no Action is pending or threatened with respect
to any Plan.
(c) No
Plan is subject to Title IV of ERISA.
(d) The
Company is not obligated, pursuant to any of the Plans or otherwise, to grant any rights to acquire shares, whether in the form
of options, unit awards, or otherwise to any Service Provider after the date hereof. The Company does not have any obligation
to gross-up, indemnify or otherwise reimburse any person for any income, excise or other tax incurred by such person pursuant
to any applicable federal, state, local or non-U.S. Law resulting from the execution and delivery of this Agreement or the consummation
of the Transactions by the Company.
Section 4.12 Labor
and Employment Matters. (a) Neither the Company nor any of its Subsidiaries is a party to any collective bargaining, trade
union or works council agreement or other labor union contract applicable to persons employed by the Company or any of its Subsidiaries,
and, to the Knowledge of the Company, there are no organizational campaigns, petitions or other unionization activities seeking
recognition of a collective bargaining unit relating to any employee of the Company any of its Subsidiaries. Except as would not
reasonably be expected to have a Material Adverse Effect, there are no unfair labor practice complaints pending against the Company
or any of its Subsidiaries before any Governmental Authority or any current union representation questions involving employees
of the Company or any of its Subsidiaries. The consent of, consultation of or the rendering of formal advice by any labor or trade
union, works council, or any other employee representative body is not required for the Company to enter into this Agreement or
to consummate any of the Transactions.
(b) Except
as would not reasonably be expected to have a Material Adverse Effect, 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 and the payment and
withholding of Taxes.
Section 4.13 Real
Property; Title to Assets. (a) Section 4.13(a) of the Company Disclosure Schedule sets forth all of the real property owned
by the Company and its Subsidiaries (the “Owned Real Property”). Each of the Company and its Subsidiaries
has good and marketable title to each parcel of all of the Owned Real Property material for their operations, free and clear of
all Encumbrances, except Permitted Encumbrances.
(b) The
Company has made available to Parent true, correct and complete copies of all leases, subleases and other agreements (and all
modifications, amendments and supplements thereto and all side letters to which the Company or any of its Subsidiaries is a party
affecting the obligations of any party thereunder) (collectively, the “Real Property Leases”) with respect
to all of the real property in which the Company or any of its Subsidiaries holds leasehold or subleasehold estates or other rights
to use or occupy and that is material to the business of the Company or any of its Key Subsidiaries as currently conducted (the
“Leased Real Property”). Each Real Property Lease constitutes a valid and legally binding obligation
of the Company or its Subsidiaries, enforceable in accordance with its terms, subject to the Bankruptcy and Equity Exception,
and is in full force and effect. Each of the Company and its Subsidiaries has a good and valid leasehold interest in each parcel
of Leased Real Property material for their operations, free and clear of all Encumbrances, except Permitted Encumbrances.
(c) As
of the date of this Agreement, all rent and other sums and charges payable by the Company or its Subsidiaries as tenants under
each Real Property Lease material for their operations are current, no termination event (except for termination upon expiry of
its current term) or condition or uncured default of a material nature on the part of the Company or any such Subsidiary or, to
the Company’s Knowledge, the landlord, exists under any Real Property Lease and no party to any such Real Property Leases
has given written notice to the Company or any of its Subsidiaries of or made a written claim against the Company or any of its
Subsidiaries with respect to any material breach or default thereunder.
(d) The
Owned Real Property and the Leased Real Property (collectively, the “Company Real Property”) comprise
all of the real property used or intended to be used in and that is material to, the business of the Company and its Key Subsidiaries
as currently conducted as of the date hereof.
(e) 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) material forthe business of the Company
and its Subsidiaries as of the date hereof, in each case free and clear of all Encumbrances, except Permitted Encumbrances.
Section 4.14 Intellectual
Property. (a) Section 4.14(a) of the Company Disclosure Schedule sets forth a list of all Intellectual Property owned by the
Company or any of its Subsidiaries (collectively, the “Owned Intellectual Property”) that is material
to the business of the Company or any of its Key Subsidiaries as currently conducted in the form of (i) issued patents and pending
patent applications, (ii) registrations of Trademarks and applications for registration thereof, (iii) copyright registrations
and applications for registration thereof, and (iv) internet domain name registrations.
(b) (i)
The Company or one of the Company’s Subsidiaries exclusively owns all right, title and interest in and to the Owned Intellectual
Property (except for such Owned Intellectual Property in the form of applications for registration), free and clear of all Encumbrances,
except Permitted Encumbrances, and (ii) the Company and its Subsidiaries have valid and enforceable rights to use all other Intellectual
Property material to the conduct of the business of the Company and its Subsidiaries as it is currently conducted, free and clear
of all Encumbrances except Permitted Encumbrances (together with the Owned Intellectual Property, the “Company
Intellectual Property”).
(c) (i)
Neither the Company nor any of its Subsidiaries has received written notice of any claim that it, or the business currently conducted
by it, is infringing, diluting or misappropriating or has infringed, diluted or misappropriated any Intellectual Property right
of any Person, including any demands or unsolicited offers to license any Intellectual Property; (ii) neither the Company nor
any of its Subsidiaries nor the business conducted by the Company or any of its Subsidiaries since September 18, 2014 infringes,
dilutes or misappropriates or has infringed, diluted or misappropriated any Intellectual Property rights of any Person in any
material respects; provided that, this representation shall be subject to the Knowledge of the Company with respect to
patent rights of any Person; and (iii) to the Knowledge of the Company, no third party is currently infringing, diluting or misappropriating
any Owned Intellectual Property in any material respects .
(d) (i)
To the Knowledge of the Company, all of the Company Intellectual Property is valid and enforceable; (ii) there are no pending
or, to the Knowledge of the Company, threatened, Actions by any Person against the Company or any of its Subsidiaries 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 material for the business it currently conducts; (iii) to the Knowledge of the Company, no loss or expiration of any
of the Company Intellectual Property that is material to the business of the Company or any of its Subsidiaries as currently conducted
is threatened, pending or reasonably foreseeable, except for patents expiring at the end of their statutory terms.
(e) The
Company and each Subsidiary of the Company own all right, title and interest in and to all material Intellectual Property created
or developed by, for or under the direction or supervision of the Company or such Subsidiary of the Company, and all current or
former employees, consultants, or contractors who have participated in the creation or development of any such material Intellectual
Property, have executed and delivered to the Company or such Subsidiary of the Company a valid and enforceable agreement (i) providing
for the non-disclosure by such Person of confidential information and (ii) providing for the assignment by such Person to the
Company or such Subsidiary of the Company of any Intellectual Property developed or arising out of such Person’s employment
by, engagement by or contract with the Company or such Subsidiary of the Company. To the Knowledge of the Company, none of such
agreements have been breached in any material respects.
(f) The
Company and its Subsidiaries have taken all commercially reasonable actions to maintain and protect each material item of Intellectual
Property that they own as of the date hereof.
(g) The
IT Assets of the Company and its Subsidiaries are adequate for, and operate and perform in all material respects in accordance
with their documentation and functional specifications and otherwise as required in connection with, the operation of the business
of the Company and its Subsidiaries. The Company and the Subsidiaries of the Company have implemented commercially reasonable
backup, security and disaster recovery measures and technology consistent with industry practices.
Section 4.15 Taxes.
(a) All material Tax Returns required to be filed by or with respect to the Company or any of its Subsidiaries have been timely
filed (taking into account any extension of time within which to file) and all such Tax Returns are true, correct, and complete
in all material respects.
(b) All
material Taxes of the Company and its Subsidiaries that are due and payable (whether or not shown on any Tax Return) have been
timely paid. Neither the Company nor any of its Subsidiaries has incurred any material liability for Taxes since January 1, 2012
other than in the ordinary course of business consistent with past practice. There are no material Tax liens on the assets of
the Company or any of its Subsidiaries other than for (i) Taxes not yet due and payable and (ii) Taxes that are being contested
in good faith and for which adequate reserves have been established in accordance with GAAP.
(c) Each
of the Company and its Subsidiaries has timely paid or withheld all material 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 agreed to any outstanding
extension of the period, for the assessment or collection of any material Tax and, to the Knowledge of the Company, there has
been no written request by a 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 in writing of any request for,
or, to the Knowledge of the Company, 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 a Governmental Authority against the Company or
any of its Subsidiaries that has not been satisfied by payment, settled or withdrawn.
(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 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 misstatement or omission that would have adversely 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 threatened. The Transactions will not have any adverse effect on the continued validity and effectiveness
of any such Tax exemptions, Tax holidays, Tax deferrals, Tax incentives or other preferential Tax treatments and will not result
in the claw-back or recapture of any such Tax exemptions, Tax holidays, Tax deferrals, Tax incentives or other preferential Tax
treatments.
Section 4.16 Environmental
Matters. (a) None of the Company nor any of its Subsidiaries has violated or is in violation of any Environmental Law in any
material respects; (b) none of the properties owned or operated by the Company or any of its Subsidiaries (including soils and
surface and ground waters) are contaminated with any Hazardous Substance in a manner that would reasonably be expected to require
material remediation or other material action pursuant to any Environmental Law; (c) none of the Company or any of its Subsidiaries
or any of their material assets is subject to any Order with respect to any Remedial Action; (d) each of the Company and its Subsidiaries
has all material Environmental Permits required for their establishment and operation; and (e) each of the Company and its Subsidiaries
has always been and is in compliance with its Environmental Permits in all material respects. As used herein, (x) the term “Environmental
Permits” means all material permits, licenses and other authorizations currently required under any Environmental
Law and (y) the term “Environmental Law” means any applicable PRC local, provincial or national Law
relating to: (i) the protection of health, safety or the environment or (ii) the handling, use, transportation, disposal,
release or threatened release of any Hazardous Substance.
Section 4.17 Material
Contracts. (a) For the purpose of this Agreement, “Material Contracts” shall mean:
(i) any
Contract that would be required to be filed by the Company pursuant to Item 4 of the Instructions to Exhibits to the Company’s
most recently filed annual report on Form 20-F;
(ii) any
Contract that is relating to the purchase or sale of any Shares or other securities of the Company or any of the Company’s
Subsidiaries;
(iii) any
Contract that has an outstanding amount payable or receivable by the Company or any of its Subsidiaries, or relating to Indebtedness,
in each case, in excess of US$1 million individually or US$1 million in aggregate in any calendar year and other than intercompany
contracts;
(iv) any
Contract granting a right of first refusal, first offer or first negotiation;
(v) any
Contract that is a joint venture contract, partnership arrangement or any other agreement outside the ordinary course of business
involving a sharing of profits, losses, costs or liabilities by the Company or any of its Subsidiaries with any third party with
a contractual value more than US$2 million as set forth therein;
(vi) any
Contract that limits, or purports to limit, the ability of the Company or any of its Subsidiaries to compete in any line of business
or with any Person or entity or in any geographic area or during any period of time;
(vii) any
Contract that has not yet consummated, for the acquisition or disposition, directly or indirectly (including by merger, consolidation,
combination or amalgamation) of assets (other than assets purchased pursuant to capital expenditures) or share capital or other
equity interests of another Person for aggregate consideration in excess of US$2 million;
(viii) any
Contract between or among the Company or any of its Subsidiaries, on the one hand, and any of their respective Affiliates (other
than the Company or any of its Subsidiaries), on the other hand, that involves payments of more than US$500,000 in any one year,
other than any such Contract entered into during the ordinary course of business and on arm’s length basis;
(ix) any
Contract that is 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;
(x) any
Contract that obligates the Company or any of its Subsidiaries to conduct business on an exclusive or preferential basis with
any third party;
(xi) the
Contracts filed as exhibits to the Company SEC Reports; and
(xii) any
other contracts and agreements, whether or not made in the ordinary course of business, which are material to the Company and
its Subsidiaries taken as a whole, or the conduct of their respective businesses as currently conducted, or the absence of which
would have a Company Material Adverse Effect.
(b) (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, 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, in any material respects, 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, in any material respects,
any Material Contract; and (iii) to the Knowledge of the Company, the Company and its Subsidiaries have not received any
written claim or notice of default, termination or cancellation under any such Material Contract.
Section 4.18 Insurance.
The Company has made available to Parent accurate and complete copies of all material insurance policies and all material self-insurance
programs and arrangements relating to the business currently conducted, assets, liabilities and operations of the Company and
its Subsidiaries. Except as would not reasonably be expected to have a Company Material Adverse Effect, all such policies, programs
and arrangements are in full force and effect and are of the type and in amounts customarily carried by Persons conducting businesses
similar to the Company in the PRC. The Company has no reason to believe that it or any of its Subsidiaries will not be able (i) to
renew its existing insurance coverage as and when such policies expire or (ii) to obtain comparable coverage from similar
institutions as may be necessary to conduct its business as now conducted. To the Knowledge of the Company, (X) neither the Company
nor any of its Subsidiaries has received any written notice of any threatened termination of, material premium increase with respect
to, or material alteration of coverage under, any of its respective insurance policies; and (Y) neither the Company nor any of
its Subsidiaries has been denied any insurance coverage which it has sought or for which it has applied.
Section 4.19 Suppliers.
Section 4.19 of the Company Disclosure Schedule sets forth a true, correct and complete list of the ten largest suppliers
or vendors to the Company and its Subsidiaries (based on purchases from January 1, 2013 through the date of this Agreement). The
Company has not received, as of the date of this Agreement, any notice from any such supplier or vendor that such supplier or
vendor intends to materially reduce, terminate, cancel or not renew, its relationship with the Company or its relevant Subsidiary
and, to the Company’s Knowledge, no such supplier or vendor intends to materially reduce, terminate, cancel or not renew,
its relationship with the Company or its relevant Subsidiary.
Section 4.20 Interested
Party Transactions. No director, officer or other Affiliate of the Company or any of its Subsidiaries (other than any such
director, officer or other Affiliate who is any Consortium Member or any Affiliate of any Consortium Member) has or, since September
18, 2014, has had, directly or indirectly, (a) an economic interest in any Person that has furnished or sold, or furnishes or
sells, services or products that the Company or any of its Subsidiaries furnishes or sells, or proposes to furnish or sell; or
(b) an economic interest in any Person that purchases from, or sells or furnishes to, the Company or any of its Subsidiaries,
any goods or services. No director, officer or other Affiliate of the Company or any of its Subsidiaries has, or, since September
18, 2014, has had, directly or indirectly any material contractual or other arrangement with the Company or any of its Subsidiaries
other than those entered into in the ordinary course of business and on arms-length basis; provided, however, that
ownership of no more than three percent of the outstanding voting stock of a publicly traded corporation shall not be deemed an
“economic interest in any Person” for purposes of this Section 4.20. The Company and its Subsidiaries have not, since
September 18, 2014, except for such loans extended or renewed in connection with any variable interest entities, (i) extended
or maintained credit, arranged for the extension of credit or renewed an extension of credit in the form of a personal loan to
or for any director or executive officer (or equivalent thereof) of the Company, or (ii) materially modified any term of any such
extension or maintenance of credit.
Section 4.21 Opinion
of Financial Advisor. The Company has received the written opinion of HOULIHAN LOKEY (CHINA) LIMITED (the “Financial
Advisor”), dated the date of this Agreement, to the effect that, as of the date of this Agreement, the Per Share
Merger Consideration and the Per ADS Merger Consideration to be received in the Merger by holders of Shares and ADS, as applicable
(other than holders of the Excluded Shares and the Dissenting 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. The Financial Advisor has consented to the inclusion of a copy of such opinion in the Proxy Statement.
It is agreed and understood that such opinion may not be relied on by Parent or Merger Sub or any of their respective Affiliates
or Representatives.
Section 4.22 Brokers.
No broker, finder or investment banker (other than the Financial 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 between the Company and the Financial Advisor pursuant to
which such firm would be entitled to any payment relating to the Transactions.
Section 4.23 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 Cayman Companies Law 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 4.24 No
Additional Representations. Except for the representations and warranties made by the Company in Article IV, 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 its Affiliates or Representatives, notwithstanding the delivery or
disclosure to Parent or any of its Affiliates or Representatives of any documentation, 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 its 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 Article IV.
Article V
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
As an inducement to the Company to enter
into this Agreement, Parent and Merger Sub hereby, jointly and severally, represent and warrant to the Company that:
Section 5.01 Corporate
Organization. Each of Parent and Merger Sub is an exempted company duly organized, validly existing and in good standing under
the Laws of the Cayman Islands and each of Parent and Merger Sub has the requisite corporate power and authority and all necessary
governmental approvals to own, lease and operate its properties and assets and to carry on its business as it is now being conducted.
Section 5.02 Certificate
of Incorporation and Bylaws. The certificate of incorporation and memorandum and articles of association of each of Parent
and the Merger Sub are in full force and effect. Neither Parent nor Merger Sub is in violation of any of the provisions of its
certificate of incorporation or memorandum and articles of association. Parent has heretofore furnished to the Company (i) complete
and correct copies of certificate of incorporation and memorandum and articles of association of each of Parent and Merger Sub,
each as amended to date, and (ii) a true and complete list of all directors and executive officers of Parent and Merger Sub, as
of the date hereof.
Section 5.03 Capitalization.
(a) As of the date of this Agreement, the authorized share capital of Parent consists of 50,000 Parent Ordinary Shares. As of
the date of this Agreement, 50,000 Parent Ordinary Shares are issued and outstanding, duly authorized, validly issued, fully paid
and non-assessable. Except as set forth in the Support Agreement, there are no options, warrants, convertible debt or other convertible
instruments or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued share
capital of Parent or Merger Sub or obligating Parent or Merger Sub to issue or sell any share capital of, or other equity interests
in, Parent or Merger Sub.
(b) The
authorized share capital of Merger Sub is US$50,000 divided into 50,000 shares of a par value of US$1.00 each, one of which is
issued and outstanding, duly authorized, validly issued, fully paid and non-assessable and free of any preemptive rights in respect
thereof and is owned by Parent. All outstanding share capital of Merger Sub is owned by Parent free and clear of all Encumbrances
except where failure to own such share capital free and clear would not, individually or in the aggregate, materially adversely
affect Parent’s ability to consummate the Transactions.
Section 5.04 Authority
Relative to This Agreement. (a) Each of Parent and Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement 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 or to
consummate the Transactions (other than, with respect to the Merger, the filing of the Cayman Plan of Merger and the related documents
as required by the Cayman Companies Law). This Agreement has been duly and validly executed and delivered by each of Parent and
Merger Sub and constitutes a valid, legal and binding agreement 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.
(b) The
Parent Board, the board of directors of Merger Sub, and Parent as the sole shareholder of Merger Sub, have duly and validly approved
by resolution and authorized the execution, delivery and performance of this Agreement, the Cayman Plan of Merger and the consummation
of the Transactions by Parent and Merger Sub, as the case may be, and taken all corporate actions required to be taken by the
Parent Board, the board of directors of Merger Sub and by Parent as the sole shareholder of Merger Sub for the consummation of
the Transactions.
Section 5.05 No
Conflict; Required Filings and Consents. (a) The execution, delivery and performance of this Agreement by Parent and Merger
Sub do not, and the consummation by Parent and Merger Sub of the Merger and the other Transactions will not, constitute or result
in (i) a breach or violation of, or a default under, the memorandum and articles of association, or similar governing documents,
of Parent or Merger Sub, (ii) a breach or violation of, assuming all consents, approvals, authorizations and other actions
described in Section 5.05(b) have been obtained or taken and all filings and obligations described in Section 5.05(b)
have been made or satisfied, any Law applicable to Parent or Merger Sub or by which any property or asset of Parent or Merger
Sub is bound or affected, (iii) a default under any of the terms, conditions or provisions of any Contract to which Parent
or Merger Sub is a party, or an acceleration of Parent’s or Merger Sub’s obligations under any such Contract, or (iv) the
creation of any Encumbrance on any properties or assets of Parent or Merger Sub, except, in the case of clause (iii) or clause
(iv), for any such default, acceleration or creation as would not, individually or in the aggregate, reasonably be expected to
prevent or materially impair the ability of Parent or Merger Sub to consummate the Merger and the other Transactions.
(b) Other
than (i) the filings and/or notices pursuant to Section 13 of the Exchange Act and the rules and regulations promulgated
thereunder (including the joining of Parent and Merger Sub (and certain of their Affiliates) in the filing of the Schedule 13E-3,
the filing or furnishing of one or more amendments to the Schedule 13E-3 to respond to comments of the SEC, if any, on the Schedule
13E-3, and the filing of a Schedule 13D with the SEC); (ii) compliance with the rules and regulations of NASDAQ, and (iii) the
filing of the Cayman Plan of Merger with the Registrar of Companies of the Cayman Islands pursuant to the Cayman Companies Law,
no notices, reports or other filings are required to be made by Parent or Merger Sub with, nor are any consents, registrations,
approvals, permits or authorizations required to be obtained by Parent or Merger Sub from, any Governmental Authority in connection
with the execution, delivery and performance of this Agreement by Parent and Merger Sub and the consummation by Parent and Merger
Sub of the Merger and the other Transactions, except those that the failure to make or obtain are not, individually or in the
aggregate, reasonably likely to prevent or materially impair the ability of Parent or Merger Sub to consummate the Merger and
the other Transactions.
Section 5.06 Absence
of Litigation. There is no Action pending or, to the Knowledge of Parent, threatened against Parent or Merger Sub or any property
or asset of Parent or Merger Sub and neither Parent nor Merger Sub is subject to any outstanding Order.
Section 5.07 Operations
of Parent and Merger Sub. Parent and Merger Sub were formed solely for the purpose of engaging in the Transactions (including
the contribution of the Rollover Shares), and each of Parent and Merger Sub 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 Merger and the other Transactions.
Section 5.08 Available
Funds and Financing. Parent has delivered to the Company a true and complete copy of an executed equity commitment letter
(the “Equity Commitment Letter”) from 北京信中利投资股份有限公司,
a company organized and existing under the laws of the PRC (the “Sponsor”), pursuant to which the Sponsor
has committed to purchase, or cause the purchase of, for cash, subject to the terms and conditions thereof, equity securities
of Parent (the “Financing”). The Equity Commitment Letter provides, and will continue to provide, that
the Company is a third party beneficiary with respect to the provisions therein. The proceeds of the Financing shall be used to
finance the consummation of the Transactions, including the Merger. Parent and Merger Sub will have available to them, as of the
Effective Time, all funds necessary for the payment to the Paying Agent of the aggregate amount of the Exchange Fund and any related
Expenses required to be paid by Parent and Merger Sub in connection with the consummation of the Merger and the other Transactions.
The Equity Commitment Letter is in full force and effect and is a legal, valid and binding obligation of Parent and the Sponsor.
No event has occurred which, with or without notice, lapse of time or both, would constitute a default or breach on the part of
Parent or Merger Sub or any other parties thereto, under the Equity Commitment Letter. The Equity Commitment Letter has not been
amended or modified, no such amendment or modification is contemplated, the obligations and commitments contained in the Equity
Commitment Letter have not been withdrawn, terminated or rescinded in any respect and no such withdrawal, termination or restriction
is contemplated. The Equity Commitment Letter contains all of the conditions precedent to the obligations of the parties thereunder
to make the Financing available to Parent on the terms therein. There are no side letters or other oral or written contracts,
agreements, arrangements or understanding related to the funding of the full amount of the Equity Financing other than as expressly
set forth in the Equity Commitment Letter. Between the date hereof and the Effective Time, Parent and Merger Sub will not need
to enter into any new agreements and arrangements with unaffiliated third parties with respect to the provision of financing or
funds in order to satisfy their obligations in this Agreement. For the avoidance of doubt, it is not a condition to Closing under
this Agreement or to the consummation of the Merger, for Parent or Merger Sub to obtain the Financing or any alternative financing.
Section 5.09 Guarantee.
Parent has delivered to the Company a duly executed Limited Guarantee with respect to matters on the terms specified therein.
The Limited Guarantee is in full force and effect and is a legal, valid and binding obligation of the Guarantor, 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 the Guarantor under the Limited Guarantee.
Section 5.10 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 5.11 Ownership
of Company Shares. As of the date hereof, other than the Rollover Shares which will be cancelled at the Effective Time in
accordance with the Support Agreement, none of Parent, Merger Sub, the Sponsor, Rollover Holders or 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 5.12 Solvency.
Neither Parent nor Merger Sub is entering into the Transactions with the intent to hinder, delay or defraud either present or
future creditors. Assuming the satisfaction or the waiver of the conditions of Parent and Merger Sub to consummate the Merger
as set forth herein, immediately after giving effect to all of the Transactions, including the Financing, the payment of the Per
Share Merger Consideration and the Per ADS Merger Consideration, the payment of all other amounts required to be paid in connection
with the consummation of the Transactions, and the payment of all related Expenses, the Surviving Company will be solvent as of
the Effective Time and immediately after the Effective Time.
Section 5.13 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 was 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 the representations, warranties, covenants and agreements of the Company set forth
in this Agreement and in any certificate delivered pursuant to this Agreement).
Section 5.14 Buyer
Group Contracts. Parent has delivered to the Company a true, correct and complete copy of each of the Buyer Group Contracts.
As of the date hereof, other than the Buyer Group Contracts and any documents or agreements solely with respect to the shareholder
arrangements of Parent (or any shareholder (or equity holder) of Parent), there are (a) no side letters or other Contracts (whether
oral or written) relating to Transactions between two or more of the following persons: Rollover Holders, Parent, Merger Sub,
Guarantor or any of their respective Affiliates (other than any side letter or other Contract among any one or more of the foregoing
solely relating to Parent or the Surviving Corporation taking effect following the Effective Time) and (b) no Contracts (whether
oral or written) (i) between Parent, Merger Sub or any of their Affiliates (excluding the Company and its Subsidiaries), on the
one hand, and any of the Company’s or its Subsidiaries’ directors, officers or shareholders, on the other hand, that
relate in any way to the Transactions, or (ii) pursuant to which any shareholder of the Company (other than the Rollover Holders)
would be entitled to receive consideration of a different amount or nature than the Per Share Merger Consideration or Per ADS
Merger Consideration, or (iii) 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, or (iv) pursuant to which any person has agreed to provide, directly
or indirectly, equity capital to Parent, Merger Sub or the Company to finance in whole or in part the Merger.
Section 5.15 Proxy
Statement. The information supplied by Parent and Merger Sub for inclusion in the Proxy Statement to be sent to the shareholders
of the Company in connection with the Company Shareholders’ Meeting (including any amendment or supplement thereto or document
incorporated by reference therein) and the Schedule 13E-3 relating to the authorization and approval of this Agreement and the
Transactions by the shareholders of the Company shall not, (i) on the date the Proxy Statement (including any amendment or supplement
thereto) is first mailed to shareholders of the Company or at the time of the Company Shareholders’ Meeting and (ii) on
the date the Schedule 13E-3 and any amendment or supplement thereto is filed with the SEC, contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements made therein, in light of the circumstances under
which they are made, not misleading. Notwithstanding the foregoing, neither Parent nor Merger Sub makes any representation with
respect to statements made or incorporated by reference therein based on information supplied by or on behalf of the Company and
its Subsidiaries, for inclusion or incorporation by reference in the Proxy Statement or the Schedule 13E-3.
Section 5.16 Vote/Approval
Required. No vote or consent of the holders of any class or series of share capital of Parent is necessary to approve this
Agreement, the Plan of Merger or the Transactions, including the Merger. The vote or consent of Parent, as the sole shareholder
of Merger Sub (which has occurred prior to the Effective Time) is the only vote or consent of the holders of any class or series
of share capital of Merger Sub necessary to authorize and approve this Agreement, the Plan of Merger and the Transactions, including
the Merger.
Section 5.17 Non-Reliance
on Company Estimates. The Company has made available to Parent and Merger Sub, and may continue to make available, certain
estimates, projections and other forecasts for the business of the Company and its Subsidiaries and certain plan and budget information.
Each of Parent and Merger Sub acknowledges that these estimates, projections, forecasts, plans and budgets and the assumptions
on which they are based were prepared for specific purposes and may vary significantly from each other. Further, each of Parent
and Merger Sub acknowledges that there are uncertainties inherent in attempting to make such estimates, projections, forecasts,
plans and budgets, that Parent and Merger Sub are taking full responsibility for making their own evaluation of the adequacy and
accuracy of all estimates, projections, forecasts, plans and budgets so furnished to them (including the reasonableness of the
assumptions underlying such estimates, projections, forecasts, plans and budgets), and that neither Parent nor Merger Sub is relying
on any estimates, projections, forecasts, plans or budgets furnished by the Company, its Subsidiaries or their respective Affiliates
and Representatives, and neither Parent nor Merger Sub shall, and shall cause its Affiliates and their respective Representatives
not to, hold any such Person liable with respect thereto.
Section 5.18 No
Additional Representations. Except for the representations and warranties made by Parent and Merger Sub in this Article V,
neither Parent nor Merger Sub nor any other Person makes any other express or implied representation or warranty with respect
to Parent or Merger Sub or any of its Subsidiaries 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 VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.01 Conduct
of Business by the Company Pending the Merger. (a) The Company covenants and agrees that, between the date of this Agreement
and the earlier of the Effective Time and the termination of this Agreement pursuant to Article IX, except (i) as set forth
in Section 6.01 of the Company Disclosure Schedule, (ii) as expressly contemplated or permitted by this Agreement or (iii) 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 only in, and the Company and its Subsidiaries shall not take any action
except 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 substantially intact their existing assets, (B) preserve substantially
intact their business organization, (C) keep available the services of their current officers, employees and consultants,
(D) maintain and preserve intact their current relationships with customers, suppliers, distributors, creditors and other
Persons with which the Company or any of its Subsidiaries has significant business relations and (E) comply in all material
respects with applicable Law.
(b) By
way of amplification and not limitation, except as set forth in Section 6.01 of the Company Disclosure Schedule, as expressly
contemplated or permitted by this Agreement or 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, between the date of this Agreement
and the earlier of the Effective Time and the termination of this Agreement pursuant to Article IX, to:
(i) amend
or otherwise change its memorandum and articles of association or other equivalent organizational documents;
(ii) adopt
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 (other than the Merger);
(iii) alter
through merger, liquidation, reorganization, restructuring or in any other fashion the corporate structure or ownership of any
of its Subsidiaries;
(iv) (A)
issue, sell, pledge, terminate or dispose of, (B) grant an Encumbrance on or permit an Encumbrance to exist on, or (C) authorize
the issuance, sale, pledge, termination or disposition of, or granting or placing of an Encumbrance 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;
(v) (A)
sell, pledge or dispose of, (B) grant an Encumbrance on or permit an Encumbrance to exist on, or (C) authorize the sale, pledge
or disposition of, or granting or placing of an Encumbrance on, any material assets of the Company or any of its Subsidiaries
having a current value in excess of US$1 million, except in the ordinary course of business and in a manner consistent with past
practice;
(vi) 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;
(vii) adjust,
reclassify, combine, split, subdivide or redeem, or purchase or otherwise acquire, directly or indirectly, any of its share capital;
(viii) (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 material amount of assets other than those with a value or purchase
price not in excess of US$1 million in any transaction or a related series of transactions; (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 for Indebtedness incurred in the
ordinary course of business and in an amount not to exceed US$2 million in the aggregate, including any short-term borrowings
to fund working capital needs, and such other actions taken in the ordinary course of business consistent with past practice;
(C) authorize, or make any commitment with respect to, any single capital expenditure which is in excess of US$1 million
or capital expenditures which are, in the aggregate, in excess of US$1 million for the Company and its Subsidiaries taken as a
whole; or (D) enter into or amend any Contract with respect to any matter set forth in this Section 6.01(b)(viii);
(ix) create
any new Subsidiary;
(x) engage
in the conduct of any new line of business material to the Company and its Subsidiaries, taken as a whole;
(xi) make
any 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;
(xii) revalue
in any material respect any of its assets, including, without limitation, writing down the value of inventory or writing-off notes
or accounts receivable other than in the ordinary and usual course of business consistent with past practice or as required by
GAAP;
(xiii) waive
the benefits of, or agree to modify in any manner, any standstill or similar agreement with respect to any class of equity securities
of the Company or any of its Subsidiaries;
(xiv) commence
or settle any Action, other than settlements (A) in the ordinary course of business and consistent with past practice and (B)
requiring the Company and its Subsidiaries to pay monetary damages not exceeding US$200,000;
(xv) enter
into, amend, modify or consent to the termination of any Material Contract, or enter into, amend, waive, modify 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;
(xvi) 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;
(xvii) (A)
abandon, disclaim, dedicate to the public, sell, assign or grant any security interest in, to or under any material Company Intellectual
Property, including failing to perform or cause to be performed all applicable filings, recordings and other acts, or to pay or
cause to be paid all required fees and Taxes, to maintain and protect its interest in the 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 that have been disclosed
to Parent; (D) disclose or allow to be disclosed any confidential information or 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 that have been disclosed to Parent; or (E) fail
to notify Parent promptly of any infringement, misappropriation 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 consult with Parent regarding the actions (if any)
to take to protect such Company Intellectual Property;
(xviii) 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 officer or director of the Company or any
of its Subsidiaries with an annual base salary in excess of US$200,000, (B) grant or provide any severance or termination
payments or benefits to Service Providers in an amount in excess of US$200,000 in the aggregate, (C) increase the compensation,
bonus or pension, welfare, severance or other benefits of, pay any bonus to by an amount in excess of US$1 million, or make any
new equity awards to Service Providers in the aggregate, (D) establish, adopt, amend or terminate any Plan (except as required
by Law) or amend the terms of any outstanding equity-based awards, (E) take any action to accelerate the vesting or payment,
or fund or in any other way secure the payment, of compensation or benefits under any Plan, to the extent not already required
in any such Plan, (F) materially change any actuarial or other assumptions used to calculate funding obligations with respect
to any Plan or to 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, or (G) forgive any loans to directors, officers or employees of the Company
or any of its Subsidiaries;
(xix) terminate
or cancel, let lapse, or amend or modify in any material respect, other than renewals in the ordinary course of business, any
insurance policies maintained by it which is not promptly replaced by a comparable amount of insurance coverage;
(xx) 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
(xxi) agree,
authorize, commit, announce an intention, enter into any formal or informal agreement or otherwise make a commitment, to do any
of the foregoing.
(c) In
addition, between the date of this Agreement and the Effective Time, the Company and its Subsidiaries shall (i) prepare and
timely file all Tax Returns required to be filed in all material respects, (ii) timely pay all Taxes shown to be due and
payable on such Tax Returns in all material respects, and (iii) promptly notify Parent of any notice of any material suit,
claim, action, investigation, audit or proceeding in respect of any Tax matters (or any significant developments with respect
to ongoing suits, claims, actions, investigations, audits or proceedings in respect of such Tax matters).
Section 6.02 Conduct
of Business by Parent and Merger Sub Pending the Merger. Each of Parent and Merger Sub agrees that, from the date hereof to
the Effective Time, it shall not: (i) 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; (ii) take any action or fail to take any
action which 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.
Section 6.03 No
Control of Other Party’s Business. Nothing contained in this Agreement is intended to give Parent or Merger Sub, directly
or indirectly, the right to control or direct the operations of the Company or its Subsidiaries 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 VII
ADDITIONAL AGREEMENTS
Section 7.01 Preparation
of Proxy Statement and Schedule 13E-3. (a) As soon as reasonably practicable following the date hereof and in any event no
later than fifteen (15) Business Days after the date hereof, the Company, with the assistance and cooperation of Parent and Merger
Sub, shall prepare the Proxy Statement and cause the Proxy Statement to be filed with the SEC and mailed to the shareholders of
the Company pursuant to Section 7.01(c). Each of Parent, Merger Sub and the Company shall furnish all information concerning
itself and its Affiliates that is required to be included in the Proxy Statement. Neither the Proxy Statement, nor any amendment
or supplement thereto, or any other materials used in connection with the Company Shareholders’ Meeting shall be filed or
disseminated without providing Parent a reasonable opportunity to review and comment thereon and the Company shall consider in
good faith all additions, deletions or changes reasonably proposed by Parent in good faith. If at any time prior to the Company
Shareholders’ Meeting, any information relating to the Company, Parent or Merger Sub, or any of their respective Affiliates,
directors or officers, should be discovered by the Company, Parent or Merger Sub which should be set forth in an amendment or
supplement to the Proxy Statement, 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 which discovers such information shall promptly notify the other party and an appropriate amendment or supplement describing
such information shall be disseminated to the shareholders of the Company to the extent required by Law; provided, however,
nothing in this Section 7.01(a) shall limit or preclude the Company Board to effect a Change in the Company Recommendation in
accordance with the terms of Section 7.03(d) or Section 7.03(e); provided, further, that no representation, warranty,
covenant or agreement is made by the Company with respect to information supplied by Parent for inclusion or incorporation by
reference in the Proxy Statement.
(b) Concurrently
with the preparation and filing of the Proxy Statement, Parent, Merger Sub, their Affiliates and the Company shall prepare and
file with the SEC the Rule 13E-3 transaction statement on Schedule 13E-3 relating to the adoption of this Agreement by the shareholders
of the Company (the “Schedule 13E-3”). Parent, Merger Sub and the Company shall cause the Schedule 13E-3
to comply with the rules and regulations promulgated by the SEC and respond promptly to any comments of the SEC or its staff regarding
the Schedule 13E-3. Each party agrees to promptly provide the other parties and their respective counsels with copies of any comments
that such party or its counsel may receive from the staff of the SEC regarding the Schedule 13E-3. Each of Parent, Merger
Sub and the Company shall furnish all information concerning itself and its Affiliates that is required to be included in the
Schedule 13E-3. Each of Parent, Merger Sub, the Company, and their respective counsels shall be given a reasonable opportunity
to review and comment on the Schedule 13E-3 and each supplement, amendment or response to comments with respect thereto prior
to filing with the SEC and Company shall consider in good faith all additions, deletions or changes reasonably proposed by Parent
in good faith. Parent and Merger Sub shall provide reasonable assistance and cooperation to the Company in the preparation of
the Proxy Statement, the Schedule 13E-3 and the resolution of comments from the SEC. If at any time prior to the Effective Time,
any information relating to the Company, Parent or Merger Sub, or any of their respective Affiliates, directors or officers, should
be discovered by the Company, Parent or Merger Sub which should be set forth in an amendment or supplement to 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 which discovers such
information shall promptly notify the other party and an appropriate amendment or supplement describing such information shall
be disseminated to the shareholders of the Company to the extent required by Law.
(c) As
promptly as reasonably practicable after the SEC confirms that it has no further comments on the Schedule 13E-3 and Proxy Statement,
the Company shall mail the Proxy Statement and all other proxy materials to the holders of the Shares and, if necessary in order
to comply with applicable Laws, after the Proxy Statement shall have been so mailed, promptly circulate amended, supplemental
or supplemented proxy material, and, if required in connection therewith, re-solicit proxies.
(d) Notwithstanding
the foregoing or anything else herein to the contrary, and subject to compliance with the terms of Section
7.03, in connection with any disclosure regarding a Change in the Company Recommendation or an Alternative Acquisition Agreement,
the Company shall not be required to provide Parent or Merger Sub (i) the opportunity to review or comment on (or include comments
proposed by Parent or Merger Sub in) the Proxy Statement or any amendment or supplement thereto, (ii) any comments thereon or
requests related thereto or any other filing or correspondence with the SEC or any other Governmental Authority, in each case
with respect to such disclosure, or (iii) any notification with respect to any of the foregoing.
Section 7.02 Company
Shareholders’ Meeting. (a) Subject to Section 9.01, as promptly as practicable, but in any event, no later than ten
(10) calendar days, after the SEC confirms that it has no further comments on the Schedule 13E-3 and Proxy Statement, the Company
shall take all lawful action to call, give notice of, and convene the Company Shareholders’ Meeting for the purpose of obtaining
the Company Shareholder Approval. As soon as reasonably practicable, but no later than the thirtieth calendar day after the date
on which the notice of the Company Shareholders’ Meeting is issued, the Company shall hold such Company Shareholders’
Meeting in accordance with its memorandum and articles of association; provided, however, for the avoidance of doubt,
the Company may postpone or adjourn the Company Shareholders’ Meeting for up to thirty (30) calendar days (but in any event
no later than five (5) Business Days prior to the End Date), (i) with the prior written consent of Parent (which consent
shall not be unreasonably withheld, conditioned or delayed); (ii) if at the time the Company Shareholders’ Meeting
proceeds to business there are insufficient Shares represented (either in person or by proxy) to constitute a quorum necessary
to conduct business at the Company Shareholders’ Meeting; or (iii) to allow reasonable time for the filing and mailing
of any supplemental or amended disclosure which the Company Board has determined in good faith after consultation with outside
counsel is necessary or advisable under applicable Law and for such supplemental or amended disclosure to be disseminated and
reviewed by the Company’s shareholders prior to the Company Shareholders’ Meeting. Parent may request once that the
Company adjourn or postpone the Company Shareholders’ Meeting for up to thirty (30) calendar days (but in any event no later
than five (5) Business Days prior to the End Date), (x) if as of the time for which the Company 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 Company Shareholders’ Meeting or (B) voting in favor
of approval of this Agreement and the Transactions to obtain the Company Shareholder Approval or (y) in order to allow reasonable
additional time for (1) the filing and mailing of, at the reasonable request of Parent, any supplemental or amended disclosure
and (2) such supplemental or amended disclosure to be disseminated and reviewed by the Company’s shareholders prior
to the Company Shareholders’ Meeting, in which event the Company shall, in each case, cause the Company Shareholders’
Meeting to be postponed or adjourned in accordance with Parent’s request.
(b) The
Company shall establish a record date for purposes of determining shareholders entitled to notice of and vote at the Company Shareholders’
Meeting (the “Record Date”). Once the Company has established the Record Date, the Company shall
not change such Record Date or establish a different record date for the Company Shareholders’ Meeting without the prior
written consent of Parent, unless required to do so by applicable Law, the memorandum and articles of association of the Company.
In the event that the date of the Company 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, it shall implement such
adjournment or postponement or other delay in such a way that the Company does notestablish a new Record Date for the Company
Shareholders’ Meeting, as so adjourned, postponed or delayed, except as required by applicable Law.
(c) Subject
to Section 7.03, the Company Board shall make the Company Recommendation and shall take all lawful actions to solicit the
Company Shareholder Approval. In the event that subsequent to the date hereof, the Company Board authorizes the Company to terminate
this Agreement pursuant to Section 9.01(b) or Section 9.01(c), the Company shall not be required to convene the Company Shareholders’
Meeting and submit this Agreement to the holders of the Shares for approval. Upon request of Parent, the Company shall use its
reasonable best efforts to advise Parent on a daily basis on each of the last ten (10) Business Days prior to the date of the
Company Shareholders’ Meeting, as to the aggregate tally of the proxies received by the Company with respect to the Company
Shareholder Approval.
Section 7.03 Competing
Transaction.
(a) Except
as provided in Section 7.03(c), until the Effective Time or, if earlier, the termination of this Agreement in accordance
with Article IX, the Company agrees that neither it nor any of its Subsidiaries nor any of their respective Representatives will,
and that it will cause each of its Subsidiaries and each of its and its Subsidiaries’ Representatives not to, directly or
indirectly, (i) solicit, initiate or knowingly encourage (including by way of furnishing nonpublic information), or knowingly
take any other action to facilitate, any inquiries or the making of any proposal or offer (including without limitation any proposal
or offer to the Company’s shareholders) with respect to, or that may reasonably be expected to lead to, any Competing Transaction,
(ii) enter into, maintain, continue or otherwise engage or participate in any discussions or negotiations with, or provide
any non-public information or data concerning the Company or any Subsidiary to, any Person or entity in furtherance of such inquiries
or to obtain a proposal or offer with respect to a Competing Transaction or any proposal or offer that may reasonably be expected
to lead to a Competing Transaction, (iii) agree to, approve, endorse, recommend, execute, enter into or consummate any Competing
Transaction or any proposal or offer that may reasonably be expected to lead to a Competing Transaction, or that requires the
Company to abandon this Agreement or the Merger (other than any Acceptable Confidentiality Agreement), (iv) grant any waiver,
amendment or release under any standstill or confidentiality agreement or Takeover Statutes (and the Company shall promptly take
all actions reasonably necessary to terminate or cause to be terminated any such waiver previously granted with respect to any
provision of any such confidentiality or standstill agreement or Takeover Statute), or (v) resolve, propose or agree, or
authorize or permit any Representative, to do any of the foregoing. The Company shall, and shall cause its Subsidiaries and its
Subsidiaries’ Representatives to, immediately cease and cause to be terminated all existing discussions or negotiations
with any Persons conducted prior to the execution of this Agreement by the Company, any of its Subsidiaries or any of their Representatives
with respect to a Competing Transaction. The Company shall promptly request each Person that has heretofore executed a confidentiality
agreement in connection with such Person’s consideration of acquiring (whether by merger, acquisition of share or assets
or otherwise) the Company or any of its Subsidiaries, to return (or if permitted by the applicable confidentiality agreement,
destroy) all information required to be returned (or, if applicable, destroyed) by such Person under the terms of the applicable
confidentiality agreement.
(b) The
Company shall notify Parent as promptly as practicable (and in any event within 48 hours after the Company attains knowledge thereof),
orally and in writing, after the receipt by the Company, any of its Subsidiaries or any of their respective Representatives of
any proposal or offer (or any amendment thereto) with respect to a Competing Transaction. Such notice shall indicate the identity
of the Person making such proposal or offer and the material terms and conditions of such proposal or offer, accompanied by, if
applicable, copies of any written materials received by the Company in connection with any of the foregoing. The Company agrees
that it shall keep Parent informed, on a reasonably prompt basis (at least within 48 hours of occurrence of any material changes,
developments, discussions or negotiations), of the status and material details of (including discussions with respect to or amendments
or proposed amendments to) any such proposal or offer.
(c) Notwithstanding
anything to the contrary in Section 7.03(a), at any time prior to the receipt of the Company Shareholder Approval, the Company
may, subject to compliance with this Section 7.03(c) and acting under the direction of the Special Committee, furnish information
to, and enter into discussions or negotiations with, a Person who has made an unsolicited, written, bona fide proposal or offer
with respect to a Competing Transaction that did not arise or result from any breach of this Section 7.03(a), if, prior to furnishing
such information and entering into such discussions, the Company Board has (i) determined, in its good faith judgment (after having
received the advice of a financial advisor of internationally recognized reputation and outside legal counsel) that (A) such proposal
or offer constitutes, or would reasonably be expected to lead to, a Superior Proposal and (B) the failure to furnish such information
to, or enter into such discussions with, the Person who made such proposal or offer would violate the Company Board’s fiduciary
duties to the Company and its shareholders under applicable Law, (ii) provided written notice to Parent of its intent to furnish
information or enter into discussions with such Person at least three (3) Business Days prior to taking any such action, and (iii)
obtained from such Person an Acceptable Confidentiality Agreement (it being understood that an Acceptable Confidentiality Agreement
and any related agreements shall not include any provision granting such Person exclusive rights to negotiate with the Company
or having the effect of prohibiting the Company from satisfying its obligations under this Agreement) and, immediately upon its
execution, delivered to Parent a copy of such Acceptable Confidentiality Agreement; provided, that the Company shall promptly
make available to Parent any material 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.
(d) Except
as set forth in this Section 7.03(d) or Section 7.03(e), neither the Company Board nor any committee thereof shall (i) (A)
withhold, withdraw (or not continue to make), qualify or modify (or publicly propose or resolve to withhold, withdraw (or not
continue to make), qualify or modify), in a manner adverse to Parent or Merger Sub or the Company Recommendation with respect
to the Merger, or (B) adopt, approve or recommend or propose to adopt, approve or recommend (publicly or otherwise) any Competing
Transaction (any action described in clauses (A) or (B), a “Change in the Company Recommendation”),
or (ii) cause or permit the Company or any of its Subsidiaries to enter into any acquisition agreement, merger agreement or other
similar definitive agreement relating to any Competing Transaction (an “Alternative Acquisition Agreement”).
Notwithstanding the foregoing, if at any time prior to the receipt of the Company Shareholder Approval, the Company has received
an unsolicited, written, bona fide proposal or offer with respect to a Competing Transaction that did not arise or result from
any breach of this Section 7.03, that is not withdrawn and that the Company Board (upon recommendation of the Special Committee)
determines, in its good faith judgment (after having received the advice of a financial advisor of internationally recognized
reputation and outside legal counsel) constitutes, or would reasonably be expected to lead to, a Superior Proposal, the Company
Board (upon recommendation of the Special Committee) may, with respect to such Superior Proposal, make a Change in the Company
Recommendation and/or authorize the Company to enter into an Alternative Acquisition Agreement with respect to such Superior Proposal;
provided, however, that the Company Board shall not be entitled to exercise its right to make a Change in the Company
Recommendation or to authorize the Company to enter into an Alternative Acquisition Agreement pursuant to this Section 7.03(d)
unless:
(1) the Company Board (upon recommendation
of the Special Committee) determines in its good faith judgment (after having received the advice of its financial advisor and
outside legal counsel), that the failure to do so would violate its fiduciary duties to the Company and its shareholders under
applicable Law;
(2) prior to effecting a Change
in the Company Recommendation or terminating this Agreement to enter into an Alternative Acquisition Agreement, the Company has
provided written notice to Parent (a “Notice of Superior Proposal”) advising Parent that the Company
Board has received a Superior Proposal promptly after the Company Board determines it has received a Superior Proposal, stating
that the Company Board intends to make a Change in the Company Recommendation and the manner in which it intends to do so, specifying
the information required to be included in any notice required to be delivered to Parent under Section 7.03(b) and including
written evidence of the determination of the Company Board that the Company has received a Superior Proposal; and
(3) Parent does not, within five
(5) Business Days of receipt of the Notice of Superior Proposal (the “Notice Period”), make an offer
or proposal to revise the terms of this Agreement (any such offer, a “Revised Transaction Proposal”)
in a manner that the Company Board determines in its good faith judgment, after having received the advice of its financial advisor
and outside legal counsel, to be at least as favorable to the Company’s shareholders (other than the holders of the Excluded
Shares) as such Superior Proposal; provided, however, that during the Notice Period the Company shall negotiate
in good faith with Parent (to the extent Parent desires to negotiate) regarding any Revised Transaction Proposal; provided,
further, that any amendment to the terms of such Superior Proposal during the Notice Period shall require a new written
notice of the terms of such amended Superior Proposal from the Company and an additional Notice Period that satisfies this Section 7.03(d)(3).
(e) Notwithstanding
anything in this Section 7.03 to the contrary, prior to obtaining the Company Shareholder Approval, if the Company Board
determines, in its good faith judgment upon the recommendation of the Special Committee (after having received the advice of its
financial advisor and outside legal counsel), other than in response to or in connection with a Competing Transaction, that failure
to make a Change in the Company Recommendation would be inconsistent with its fiduciary duties under applicable Law, the Company
Board may, upon the recommendation of the Special Committee, effect a Change in the Company Recommendation; provided, that
the Company has provided Parent at least five (5) Business Days’ prior written notice indicating that the Company
Board intends to effect a Change in the Company Recommendation. Notwithstanding that the Company Board shall have effected a Change
in Company Recommendation pursuant to this Section 7.03(e), upon Parent’s written request, the Company shall convene Company
Shareholders’ Meeting promptly and submit this Agreement to the holders of the Shares to obtain the Company Shareholder
Approval at a duly convened Company Shareholders’ Meeting, in each case in accordance with the terms and conditions hereof.
(f) Nothing
contained in this Section 7.03 shall be deemed to prohibit the Company from complying with its disclosure obligations under
United States federal or state Law, or other applicable Laws, with regard to a Competing Transaction; provided, however,
that if such disclosure includes a Change in the Company Recommendation or has the substantive effect of withdrawing or adversely
modifying the Company Recommendation, such disclosure shall be deemed to be a Change in the Company Recommendation and Parent
and Merger Sub shall have the right to terminate this Agreement as set forth in Section 9.01(d) (it being understood that
a statement by the Company that describes the Company’s receipt of a Competing Transaction and the operation of this Agreement
with respect thereto, or any “stop, look or listen” communication that contains only the information set forth in
Rule 14d-9(f) under the Exchange Act shall not be deemed a Change in the Company Recommendation or be deemed to have the substantive
effect of withdrawing or adversely modifying the Company Recommendation).
Section 7.04 Access
to Information; Confidentiality. (a) Except as otherwise prohibited by applicable Law or the terms of any Contract to which
the Company or any of its Subsidiaries is subject (provided, that the Company shall use its reasonable best
efforts to promptly obtain any consent required under such contract or agreement in order that it may comply with the terms of
this Section 7.04(a)), from the date of this Agreement until the earlier of the date on which this Agreement is terminated
in accordance with its terms and the Effective Time, the Company shall, and shall cause its Subsidiaries to, (i) provide
to Parent and Parent’s Representatives access, at reasonable times upon prior notice, to the officers, employees, agents,
properties, offices and other facilities of the Company and its Subsidiaries and to the books and records thereof; (ii) furnish
promptly to Parent such information concerning the business, properties, contracts, assets, liabilities, personnel and other aspects
of the Company and its Subsidiaries as Parent or its Representatives may reasonably request, provided, however,
that the Company shall not be required to provide access to or disclose any information if such access or disclosure would (A)
jeopardize any attorney-client privilege, work product doctrine or other applicable privilege of the Company or any of its Subsidiaries,
(B) violate any Contract entered into prior to the date of this Agreement, Law or Order, or (C) give a third party the right to
terminate or accelerate the rights under a Contract entered into prior to the date of this Agreement; provided, in each case of
(A), (B) and (C), that the Company shall use its commercially reasonable efforts to cause such information to be provided in a
manner that would not result in such jeopardy or violation or third party right; and (iii) instruct its 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 unreasonably interfere with the business or operations of the Company or its Subsidiaries.
(b) All
information obtained by the parties pursuant to this Section 7.04 shall be kept confidential in accordance with the Confidentiality
Agreement. Parent shall be responsible for any unauthorized disclosure of any such information provided or made available pursuant
to this Section 7.04 by its Representatives, except for any such Representative who is not one of Parent’s or its Affiliates’
directors, members, partners, officers or employees and who has agreed to be bound by the confidentiality and use terms of the
Confidentiality Agreement (and any other terms which are applicable to such Representative).
(c) No
investigation pursuant to this Section 7.04 shall affect any representation, warranty, covenant or agreement in this Agreement
of any party hereto or any condition to the obligations of the parties hereto.
Section 7.05 Directors’
and Officers’ Indemnification and Insurance. (a) 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 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 of the indemnified parties thereunder. The Surviving Company and its
Subsidiaries shall (and Parent shall cause the Surviving Company and its Subsidiaries to) honor and fulfill in all respects the
obligations of the Company and its Subsidiaries under (i) any indemnification, advancement of expenses and exculpation provision
set forth in any memorandum and articles of association or comparable organizational documents of the Company or any of its Subsidiaries
as in effect on the date of this Agreement and (ii) all indemnification agreements between the Company or any of its Subsidiaries
and any of their respective current or former directors and officers and any person who becomes a director or officer of the Company
or any of its Subsidiaries prior to the Effective Time (the “Indemnified Parties”), a true and complete
copy of such agreements entered into prior to the date of this Agreement has been provided by the Company to Parent prior to the
date hereof. The Articles of Association will contain provisions with respect to exculpation and indemnification that are at least
as favorable to the directors, officers or employees of the Company as those contained in the memorandum and articles of association
of the Company as in effect on the date hereof, except to the extent prohibited by the Cayman Companies Law or any other applicable
Law, 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 adversely affect the rights thereunder of the Indemnified Parties, unless such modification is required
by Law.
(b) From
and after the Effective Time, the Surviving Company shall comply with all of the Company’s obligations, and 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 such Subsidiary or (B) any acts or omissions occurring
or alleged to occur 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 and to the fullest extent permitted
by the Cayman Companies Law or any other applicable Law, including (X) the approval of this Agreement, the Merger or the
other Transactions or arising out of or pertaining to the Transactions; and (Y) actions to enforce this provision or any
other indemnification or advancement right of any Indemnified Party; provided, however, that such indemnification
shall be subject to any limitation imposed from time to time under applicable Law; and (ii) such Indemnified Parties against
any and all Damages arising out of acts or omissions in connection with such persons serving as an officer, director or other
fiduciary in any entity if such service was at the request or for the benefit of the Company or any of its Subsidiaries.
(c) The
Surviving Company shall, and Parent shall cause the Surviving Company to, maintain the Company’s and its Subsidiaries’
existing directors’ and officers’ liability insurance (including for acts or omissions occurring in connection with
this Agreement and the consummation of the Transactions) covering each Indemnified Party by the Company’s officers’
and directors’ liability insurance policy on terms with respect to coverage and amount no less favorable than those of such
policy in effect on the date hereof for a period of six years after the Effective Time; provided, however, that,
subject to the immediately succeeding sentence, in no event shall the Surviving Company 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. In addition, the Company may
at its option purchase a six year “tail” prepaid policy prior to the Effective Time on terms and conditions providing
substantially equivalent benefits as 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 Closing, the Surviving Company shall,
and Parent shall cause the Surviving Company to, maintain such policies in full force and effect, and continue to honor the respective
obligations thereunder, and all other obligations under this Section 7.05(c) shall terminate.
(d) If
Parent, the Surviving Company 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 company or entity of such consolidation or merger, or (ii) transfers
or conveys all or substantially all of its properties and assets to any Person, then the obligations of Parent or the Surviving
Company, as the case may be, that are set forth under this Section 7.05 shall survive, and to the extent necessary, proper
provision shall be made so that the successors and assigns of Parent or the Surviving Company, as the case may be, shall assume
the obligations set forth in this Section 7.05.
(e) The
provisions of this Section 7.05 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 7.05.
(f) The
agreements and covenants contained in this Section 7.05 shall not be deemed to be exclusive of any other rights to which
any such Indemnified Party is entitled, whether pursuant to Law, Contract or otherwise. 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 7.05 is not
prior to or in substitution for any such claims under any such policies.
Section 7.06 Stock
Exchange Delisting. Parent shall use commercially reasonable efforts to cause the Shares of the Company to be de-listed from
NASDAQ and the Company de-registered under the Exchange Act as promptly as practicable after the Effective Time.
Section 7.07 Public
Announcements. The initial press release relating to this Agreement shall be a joint press release the text of which has been
agreed to by each of Parent and the Company. Thereafter, unless otherwise required by applicable Law or the requirements of NASDAQ,
each of Parent and the Company shall each use its reasonable best efforts to consult with the other before issuing any press release
or otherwise making any public statements with respect to this Agreement, the Merger or any of the other Transactions (other than
any press release or public statement with respect to a Change in the Company Recommendation, a Competing Transaction, Superior
Proposal or any action taken by the Company, the Company Board or the Special Committee permitted under Section 7.03); provided,
however, that this Section 7.07 shall terminate upon a Change in the Company Recommendation.
Section 7.08 Notification
of Certain Matters. (a) The Company shall give prompt notice to Parent, and Parent shall give prompt notice to the Company,
of (i) the discovery of any fact or circumstance, or the occurrence, or non-occurrence, of any event which could reasonably
be expected to cause any of their respective representations or warranties contained in this Agreement to become untrue or inaccurate
in any material respect or to cause any condition to the obligation of any party to effect the Transactions not to be satisfied
or the satisfaction of those conditions being materially delayed and (ii) any failure of the Company, Parent or Merger Sub,
as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under
this Agreement; provided, however, that the delivery of any notice pursuant to this Section 7.08 shall not
(A) be deemed to cure any breach of any representation or warranty requiring disclosure of such matter prior to the date hereof,
or non-compliance with, any other provision of this Agreement, or (B) limit or otherwise affect the remedies available hereunder
to the party receiving such notice; provided, further, that failure to give prompt notice pursuant to this Section 7.08
which does not adversely prejudice the rights of the parties to whom such notice should be delivered shall not constitute a failure
of a condition to the Merger set forth in Article VIII except to the extent that the underlying fact or circumstance, the occurrence
or non-occurrence of the event, or failure to comply with or satisfy any covenant, condition or agreement not so notified would,
standing alone, constitute such a failure.
(b) The
Company shall give prompt notice to Parent, and Parent shall give prompt notice to the Company, of (i) any notice or other
communication from any Governmental Authority in connection with the Transactions or from any Person alleging that the consent
of such Person is or may be required in connection with the Transactions and (ii) any Action commenced or, to each of their
respective Knowledge, threatened in writing, relating to or involving or otherwise affecting it or any of its Subsidiaries which,
if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Article IV or
Article V, as applicable, or which relates to the consummation of the Transactions.
Section 7.09 Reasonable
Best Efforts; Further Action. (a) Each party hereto shall use its 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 using its reasonable best efforts to obtain, or cause to be obtained,
all permits, consents, approvals, authorizations, qualifications and Orders of all Governmental Authorities and officials and
parties to contracts with the Company and the Subsidiaries that may be or become necessary for the performance of the obligations
of such party hereto pursuant to this Agreement and the consummation of the Transactions and will cooperate fully with the other
parties in promptly seeking to obtain all such permits, consents, approvals, authorizations, qualifications and Orders.
(b) Each
of the parties hereto agrees to cooperate and use its reasonable best efforts to vigorously contest and resist any Action, including
any administrative or judicial Action, and to have vacated, lifted, reversed or overturned any Order (whether temporary, preliminary
or permanent) that is in effect and that restricts, prevents or prohibits consummation of the Transactions, including by vigorously
pursuing all available avenues of administrative and judicial appeal.
Section 7.10 Expenses.
In the event that the Merger is consummated, all costs and expenses incurred in connection with this Agreement, the Merger and
the other Transactions shall be paid by the party incurring such expense except as otherwise provided in this Agreement.
Section 7.11 Takeover
Statutes. If any Takeover Statute is or may become applicable to the Merger or the other Transactions, the parties shall use
their respective reasonable best efforts (a) to take all action necessary so that no Takeover Statute is or becomes applicable
to the Merger or any of the other 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 Merger and the other Transactions may be consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise act to eliminate or lawfully minimize the effects of such statute, regulation or provision in the Company’s
memorandum and articles of association on the Merger and the other Transactions.
Section 7.12 Resignations.
To the extent requested by Parent in writing at least three (3) 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 and the Subsidiaries designated by Parent.
Section 7.13 Participation
in Litigations. Prior to the Effective Time, Parent shall give prompt notice to the Company, and the Company shall give prompt
notice to Parent, of any actions, suits, claims or proceedings commenced or, to the Company’s Knowledge on the one hand
and Parent’s Knowledge on the other hand, threatened against such party which relate to this Agreement and the Transactions.
The Company and Parent shall give each other reasonable opportunity to participate in the defense or settlement of any shareholder
litigation against the Company and/or its directors relating to this Agreement or the Transactions, and no such litigation shall
be settled without the other party’s prior written consent (such consent not to be unreasonably withheld, conditioned or
delayed).
Section 7.14 Obligations
of Merger Sub. Parent shall take all action necessary to cause Merger Sub to perform its obligations under this Agreement
and to consummate the Merger on the terms and subject to the conditions set forth in this Agreement.
Section 7.15 Financing.
Subject to the terms and conditions of this Agreement, Parent shall use its reasonable best efforts to (i) obtain the Financing
on the terms and conditions described in the Equity Commitment Letter, (ii) maintain in effect the Equity Commitment Letter 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 Letter applicable to Parent, and/or Merger Sub that are within its control, (iv) seek
to enforce its rights under the Equity Commitment Letter, and (v) consummate the Financing at or prior to the Effective Time.
Section 7.16 No
Amendment to Buyer Group Contracts. Parent and Merger Sub shall not, and shall cause its respective Affiliates not to (a)
amend, modify, withdraw, waive or terminate any Buyer Group Contract, or (b) enter into or modify any other Contract directly
relating to the Transactions (excluding any Contract solely relating to Parent or the Surviving Corporation taking effect following
the Effective Time), in each case, without the prior written consent of the Special Committee (acting on behalf of the Company),
if such amendment, modification, withdrawal, waiver or termination of any Buyer Group Contract or such other Contract including
any modification thereto (each, an “Amendment to Buyer Group Contract”) would be reasonably expected
to prevent, materially delay, materially impede or impair the consummation of the Merger, provided that Parent and Merger
Sub shall, prior to its and/or its Affiliate’s entering into such Amendment to Buyer Group Contract, notify the Special
Committee (acting on behalf of the Company) in writing, which notice shall be accompanied by a true and complete copy of such
Amendment to Buyer Group Contract.
Section 7.17 Actions
Taken at Direction of Parent or the Rollover Holders. Notwithstanding any other provision of this Agreement to the contrary,
the Company shall not be deemed to be in breach of any representation, warranty, covenant or agreement hereunder, including, without
limitation, Article IV and Article VI hereof, if the alleged breach is the proximate result of action or inaction by the Company
at the direction of Parent or the Rollover Holders.
Article VIII
CONDITIONS TO THE MERGER
Section 8.01 Conditions
to the Obligations of Each Party. The respective obligations of the Company, Parent and Merger Sub to consummate the Merger
and the other Transactions are subject to the satisfaction or written waiver (where permissible under applicable Law) at or prior
to the Closing Date of the following conditions:
(a) Shareholder
Approval. The Company Shareholder Approval shall have been obtained.
(b) No
Order. No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Law or Order (whether temporary,
preliminary or permanent) which is then in effect and has the effect of enjoining, restraining, prohibiting or otherwise making
illegal the consummation of the Transactions (collectively, a “Restraint”).
Section 8.02 Conditions
to the Obligations of Parent and Merger Sub. The obligations of Parent and Merger Sub to consummate the Merger and the other
Transactions are subject to the satisfaction or written waiver (where permissible under applicable Law) at or prior to the Closing
Date of the following additional conditions:
(a) Representations
and Warranties. (i) The representations and warranties of the Company contained in Section 4.03(a), Section 4.03(c),
Section 4.03(d)(solely in respect of Key Subsidiaries), Section 4.04 and Section 4.22 of this Agreement (without giving effect
to any limitation as to “materiality” or “Company Material Adverse Effect” set forth therein) shall be
true and correct in all respects (except for de minimus inaccuracies) and (ii) each of the other representations and
warranties of the Company contained in this Agreement (without giving effect to any limitation as to “materiality”
or “Company Material Adverse Effect” set forth therein) shall be true and correct except where the failure of such
representations and warranties of the Company to be so true and correct, individually or in the aggregate, would not constitute
a Company Material Adverse Effect, in each case as of the date of this Agreement and as of the Effective Time, 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).
(b) Agreements
and Covenants. The Company shall have performed or complied in all material respects with all of the agreements and covenants
required by this Agreement to be performed or complied with by it at or prior to the Effective Time.
(c) No
Material Adverse Effect. Since the date hereof, there shall not have occurred and be continuing a Company Material Adverse
Effect.
(d) Officer
Certificate. The Company shall have delivered to Parent a certificate, dated the Closing Date, signed by an executive officer
of the Company, certifying as to the satisfaction of the conditions specified in Section 8.02(a), Section 8.02(b) and
Section 8.02(c).
Section 8.03 Conditions
to the Obligations of the Company. The obligations of the Company to consummate the Merger and the other Transactions are
subject to the satisfaction or waiver (where permissible under applicable Law) at or prior to the Closing Date of the following
additional conditions:
(a) Representations
and Warranties. The representations and warranties of Parent and Merger Sub contained in this Agreement shall be true and
correct (without giving effect to any limitation as to “materiality” set forth therein), in each case as of the date
of this Agreement and as of the Effective Time, 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 where the failure of such representations and warranties of
the Company to be so true and correct, individually or in the aggregate, have not and would not prevent, materially delay or materially
impede the impair the ability of Parent and Merger Sub to consummate the Merger.
(b) Agreements
and Covenants. Parent and Merger Sub shall have performed or complied in all material respects with all of the agreements
and covenants required by this Agreement to be performed or complied with by it at or prior to the Effective Time.
(c) Officer
Certificate. Parent shall have delivered to the Company a certificate, dated the Closing Date, signed by a designated director
of Parent, certifying as to the satisfaction of the conditions specified in Section 8.03(a) and Section 8.03(b).
Section 8.04 Frustration
of Closing Conditions. Prior to the End Date, none of the Company, Parent or Merger Sub may rely on the non-satisfaction of
any condition set forth in Article VIII to be satisfied if such non-satisfaction was caused by such party’s failure
to comply with this Agreement and consummate the Transactions.
Article IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.01 Termination.
This Agreement may be terminated and the Transactions may be abandoned at any time prior to the Effective Time, whether before
or after receipt of the Company Shareholder Approval:
(a) by
mutual written consent of Parent and the Company (upon the approval of the Special Committee); or
(b) by
either Parent or the Company if:
(i) the
Effective Time shall not have occurred on or before the End Date; provided, however, that the right to terminate
this Agreement under this Section 9.01(b)(i) shall not be available to any party whose failure to fulfill any obligation
under this Agreement or other breach has been a material cause of, or resulted in, the failure of the Effective Time to occur
on or before the End Date; or
(ii) any
Restraint having the effect set forth in Section 8.01(b) hereof shall have become final and non-appealable; provided,
however, that the right to terminate this Agreement under this Section 9.01(b)(ii) shall not be available to any party
whose failure to fulfill any obligation under this Agreement or other breach has been a material cause of, or resulted in, if
the issuance of such final, non-appealable Restraint; or
(iii) the
Company Shareholder Approval shall not have been obtained upon a vote held at the Company Shareholders’ Meeting or any adjournment
thereof; or
(c) by
the Company:
(i) upon
a breach by Parent or Merger Sub of any representation, warranty, covenant or agreement set forth in this Agreement such that
the conditions set forth in Section 8.03(a) or Section 8.03(b) would not be satisfied prior to the End Date and such
breach would not be curable, or if capable of being cured, has not been cured within the earlier of (x) thirty (30) calendar days
of the receipt by Parent of written notice thereof from the Company of such breach and (y) any shorter period of time that remains
between the date the Company provides written notice of such breach and the End Date; provided, that the Company shall
not have the right to terminate this Agreement pursuant to this Section 9.01(c)(i) if, at the time of such termination, there
exists a breach of any representation, warranty, covenant or agreement of the Company contained in this Agreement that would result
in the closing conditions set forth in Section 8.02 not being satisfied; or
(ii) if
(x) all of the conditions to closing contained in Section 8.01 and Section 8.02 have been satisfied (other than those
conditions that by their nature are to be satisfied at the Closing (but subject to their satisfaction or waiver by the party having
the benefit thereof)), and (y) Parent and Merger Sub fail to complete the Closing within ten (10) Business Days following the
date the Closing should have occurred pursuant to Section 2.02; provided, that the Company has delivered to Parent
an irrevocable commitment in writing that it is ready, willing and able to consummate the Closing during such period; or
(iii) at
any time prior to obtaining the Company Shareholder Approval, in order to enter into an Alternative Acquisition Agreement with
respect to a Superior Proposal in accordance with Section 7.03(d), provided that within five (5) Business Days after
such termination, the Company pays the Termination Fee payable pursuant to Section 9.03(a); or
(iv) the
Company Board (or the Special Committee) shall have made a Change in the Company Recommendation with respect to a Superior Proposal
in accordance with Section 7.03(d), provided that within five (5) Business Days after such termination, the Company pays
the Termination Fee payable pursuant to Section 9.03(a);
(d) by
Parent:
(i) upon
a breach by the Company of any representation, warranty, covenant or agreement set forth in this Agreement such that the conditions
set forth in Section 8.02(a) or Section 8.02(b) would not be satisfied prior to the End Date and such breach would not
be curable or, if capable of being cured, has not been cured within the earlier of (x) thirty (30) calendar days following receipt
of written notice by the Company from Parent of such breach and (y) any shorter period of time that remains between the date Parent
provides written notice of such breach and the End Date; provided, that Parent shall not have the right to terminate this
Agreement pursuant to this Section 9.01(d)(i) if, at the time of such termination, there exists a breach of any representation,
warranty, covenant or agreement of Parent or Merger Sub contained in this Agreement that would result in the closing conditions
set forth in Section 8.03 not being satisfied; or
(ii) if
the Company Board or any committee thereof shall have effected a Change in the Company Recommendation; or
(iii) if
the Company Board shall have (v) failed to include the Company Recommendation in the Proxy Statement; (w) failed to publicly reaffirm
the Company Recommendation within three Business Days after Parent so requests in writing; (x) recommended to the shareholders
of the Company a Competing Transaction; or (y) failed to recommend against any Competing Transaction subject to Regulation 14D
under the Exchange Act in a Solicitation/Recommendation Statement on Schedule 14D-9 within ten (10) Business Days after the commencement
of such Competing Transaction; or (z) entered into any letter of intent, memorandum of understanding or other document or Contract
relating to any Competing Transaction (other than any Acceptable Confidentiality Agreement entered into in accordance with Section
7.03(c)); or
(iv) if
the Company shall have failed to hold the Company Shareholders’ Meeting in accordance with Section 7.02, and failed to remedy
such breach within thirty (30) calendar days following receipt of the written request by Parent; or
(v) if
the Company shall have failed to comply with the no-shop undertakings set forth under Section 7.03(a) in any material respect,
and failed to remedy such breach within thirty (30) calendar days following receipt of the written request by Parent.
Section 9.02 Effect
of Termination. In the event of the valid termination of this Agreement pursuant to Section 9.01, written notice thereof
shall be given to the other party or parties, specifying the provision or provisions hereof pursuant to which such termination
shall have been made, and this Agreement shall forthwith become void, and there shall be no liability under this Agreement on
the part of any party hereto or their respective Subsidiaries or Representatives, except (a) with respect to this Section 9.02,
Section 7.04(b), Section 9.03 and Article X which shall remain in full force and effect and (b) nothing
in this Section 9.02 or Section 9.03 shall relieve any party from liability for fraud committed prior to such termination
or for any intentional breach prior to such termination of any of its representations, warranties, covenants or agreements set
forth in this Agreement; provided, however, that the Confidentiality Agreement and the terms of Section 7.04(b),
and Section 9.03 shall survive any termination of this Agreement.
Section 9.03 Termination
Fees and Expenses. (a) The Company agrees that
(i)
in the event this Agreement is terminated by Parent pursuant to Section 9.01(d), or by the Company pursuant to Section 9.01(c)(iii)
or Section 9.01(c)(iv), the Company shall pay the Termination Fee to Parent or its designee, but in any event within five (5)
Business Days after the date of such termination, by wire transfer of same day funds to one or more accounts designated by Parent
or its designee (it being understood that in no event shall the Company be required to pay the Termination Fee on more than one
occasion); or
(ii) in
the event that (x) this Agreement is terminated by either Parent or the Company pursuant to Section 9.01(b)(i) or Section 9.01(b)(iii)
and (y) within twelve (12) months after such termination, the Company consummates a Competing Transaction or enters into a definitive
agreement for a Competing Transaction (provided that for purposes of this Section 9.03(a), all references to “20%”
in the definition of “Competing Transaction” shall be deemed to be references to “50%”), the Company shall
pay the Termination Fee to Parent or its designee by wire transfer of same day funds to one or more accounts designated by Parent
or its designee within five (5) Business Days following the consummation of such Competing Transactionor the entry by the Company
into such definitive agreement for such Competing Transaction; it being understood that in no event shall the Company be required
to pay the Termination Fee on more than one occasion.
(b) Parent
agrees that in the event that this Agreement is terminated by the Company pursuant to Section 9.01(c)(i) or Section 9.01(c)(ii),
then Parent shall promptly, but in no event later than five(5) Business Days after the date of such termination, pay or cause
to be paid to the Company or its designees the Parent Termination Fee 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) Except
as set forth in this Section 9.03, 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.
(d) The
Company and Parent acknowledge that (i) the agreements contained in this Section 9.03 are an integral part of the Transactions,
(ii) the damages resulting from termination of this Agreement under circumstances where a Termination Fee or Parent Termination
Fee is payable are uncertain and incapable of accurate calculation and therefore, the amounts payable pursuant to Section 9.03
are not a penalty but rather constitute 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 9.03, the Parties would not have entered into this Agreement. In the event that any party shall fail to pay
the Termination Fee or Parent Termination Fee when due, and, in order to obtain the payment, Parent or the Company, as the case
may be, commences an Action which results in a judgment against the other party for such payment, such paying party shall pay
the other party its reasonably documented costs and expenses (including reasonable legal fees and expenses) in connection with
such Action, together with interest on such amount at the annual rate of five percent (5%) plus the prime rate as published in
the Wall Street Journal in effect on the date such payment was required to be made through the date such payment is actually received.
Section 9.04 Amendment.
This Agreement may be amended by the parties hereto by action taken by or on behalf of their respective boards of directors (or,
in the case of the Company, the Special Committee) at any time prior to the Effective Time; provided, however, that,
after the Company Shareholder Approval has been obtained, no amendment may be made if such amendment is required under applicable
Law or in accordance with the rules of NASDAQ to be further approval by the shareholders of the Company without such approval
having been obtained. This Agreement may not be amended except by an instrument in writing signed by each of the parties hereto.
Section 9.05 Waiver.
At any time prior to the Effective Time, any party hereto may (a) extend the time for the performance of any obligation or
other act of any other party hereto, (b) waive any breach of or inaccuracy in the representations and warranties of any other
party contained in this Agreement or in any document delivered pursuant hereto and (c) subject to the proviso in the first
sentence of Section 9.04 and to the extent permitted by applicable Law, waive compliance with any agreement of any other
party or any condition to its own obligations contained in this Agreement. Notwithstanding the foregoing, no failure or delay
by the Company or Parent or Merger Sub in exercising any right hereunder shall operate as a waiver thereof nor shall any single
or partial exercise thereof preclude any other or future exercise of any other right hereunder. 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.
Article X
GENERAL PROVISIONS
Section 10.01 Non-Survival
of Representations, Warranties, Covenants and Agreements. The representations, warranties, covenants and agreements in this
Agreement and in any instrument delivered pursuant hereto shall terminate at the Effective Time or upon the termination of this
Agreement pursuant to Section 9.01, as the case may be, except for those covenants and agreements contained in this Agreement
(including Article II, Article III, Section 7.04(b), Section 7.05, Section 9.03 and this
Article X) that by their terms are to be performed in whole or in part after the Effective Time (or termination of
this Agreement, as applicable).
Section 10.02 Notices.
All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed to
have been duly given (a) when delivered in person, (b) upon confirmation of receipt after transmittal by facsimile (to such number
specified below or another number or numbers as such Person may subsequently specify by proper notice under this Agreement), with
a confirmatory copy to be sent by overnight courier, and (c) on the next Business Day when sent by national overnight courier,
in each case to the respective parties and accompanied by a copy sent by email (which copy shall not constitute notice) 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 10.02):
if to Parent or Merger Sub:
3rd Floor, Building C, Shou Kai Xing Fu Square,
Xin Dong Road, Chaoyang District
Beijing 100000
Telephone: 010-85550508
Fax: 010-85550509
with a copy to (which alone shall not constitute notice):
Fang Xue
Gibson, Dunn & Crutcher LLP
Unit 1301, Tower 1, China Central Place
No. 81 Jianguo Road, Chaoyang District
Beijing, 100025, P.R.C.
Tel +86 10 6502 8600
Fax +86 10 6502 8510
if to the Company:
Ingrid Wang
Mecox Lane Limited
3F, Qilai Building, 889 Yi Shan Road, Shanghai
Tel: +86 21 31081111-8330
Fax: +86 21 31081111-8999
with a copy to:
Peter Huang
Skadden, Arps, Slate, Meagher & Flom LLP
30th Floor, China World Office 2
1 Jianguomenwai Avenue
Beijing 100004, P.R.C.
Tel: +86 10 6535 5599
Fax: +86 10 6535 5577
Section 10.03 Severability.
If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by virtue of 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 materially 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 10.04 Entire
Agreement; Assignment. This Agreement (including the exhibits and schedules hereto and the Company Disclosure Schedule), the
Limited Guarantee, the Equity Commitment Letter, the Support Agreements and the Confidentiality Agreement constitute the entire
agreement among the parties with respect to the subject matter hereof and thereof 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 and thereof. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties, in whole or in part
(whether pursuant to a merger, by operation of Law or otherwise), without the prior written consent of the other parties, except
that Parent and Merger Sub may assign all or any of their rights and obligations under this Agreement to any Affiliate of Parent;
provided, that no such assignment shall relieve the assigning party of its obligations under this Agreement if such assignee
does not perform such obligations.
Section 10.05 Parties
in Interest. This Agreement shall be binding upon, inure solely to the benefit of, and be enforceable by, only the parties
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 7.05 (which is intended to be
for the benefit of the Persons covered thereby and may be enforced by such Persons).
Section 10.06 Limitations
on Liabilities; Remedies. (a) Notwithstanding anything to the contrary in this Agreement, in the event that Parent or Merger
Sub fails to effect the Closing when required by Section 2.02 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, subject to Section 10.06(c), the Company’s right to terminate this Agreement and receive
the Parent Termination Fee pursuant to Section 9.03(b) and the guarantee of such obligations pursuant to the Limited Guarantee,
shall be the sole and exclusive remedy (whether at law, in equity, in contract, in tort or otherwise) of the Company, its Subsidiaries
and all members of the Company Group (as defined below) against (A) Parent or Merger Sub, (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, assignees of Parent or Merger Sub, (C) any
lender or prospective lender, lead arranger, arranger, agent or representative of or to Parent or Merger Sub 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 to be consummated (whether willfully, intentionally, unintentionally or otherwise). For the avoidance of doubt,
neither Parent nor any 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 other than the payment of the Parent Termination
Fee pursuant to Section 9.03(b) and the amount payable pursuant to Section 9.03(d) and in no event shall any of the Company,
its Subsidiaries, the direct or indirect shareholders of the Company or any other Person, or any of their respective Affiliates
or Representatives (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, other than (without duplication) from Parent or Merger Sub to the extent provided in Section 9.03(b)
and Section 9.03(d).
(b) Notwithstanding
anything to the contrary in this Agreement, in the event that the Company fails to effect the Closing for any reason or no reason
or otherwise breaches this Agreement (whether willfully, intentionally, unintentionally or otherwise) or otherwise fails to perform
hereunder (whether willfully, intentionally, unintentionally or otherwise), then, subject to Section 10.06(c), Parent’s
right to terminate this Agreement and receive the Termination Fee pursuant to Section 9.03(a) 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 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). For the avoidance of doubt, if Parent seeks monetary damages against the Company Group, neither the Company nor
any 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 of the Termination Fee pursuant to Section 9.03(a)
and the amount payable pursuant to Section 9.03(d) and in no event shall any of the members of the Parent Group seek, or permit
to be sought, 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 9.03(a) and Section 9.03(d).
(c) Notwithstanding
anything to the contrary in this Agreement, the parties agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed by a party in accordance with their specific terms or were otherwise breached
by such party. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches
of this Agreement and to enforce specifically the terms and provisions of this Agreement (including the obligation of the parties
to consummate the Merger, subject in each case to the terms and conditions of this Agreement), this being in addition to any other
remedy to which they are entitled at Law or in equity. Each of the parties hereby waives (i) any defense in any action for specific
performance that a remedy at Law would be adequate, and (ii) any requirement under any Law to post security as a prerequisite
to obtaining equitable relief. Until such time as the Company pays the Termination Fee or Parent pays the Parent Termination Fee,
as the case may be, the remedies available to each party pursuant to this Section 10.06(c) shall be in addition to any other remedy
to which they are entitled at law or in equity, and the election to pursue an injunction or specific performance shall not restrict,
impair or otherwise limit Parent or Merger Sub from, in the alternative, seeking to terminate this Agreement and collect the Termination
Fee under Section 9.03(a) or the Company from, in the alternative, seeking to terminate this Agreement and collect the Parent
Termination Fee under Section 9.03(b). Notwithstanding anything in this Agreement to the contrary, (A) under no circumstances
will the Company be entitled to monetary damages in connection with this Agreement in excess of the aggregate amount of (x) Parent
Termination Fee, and (y) any amount payable by Parent pursuant to Section 9.03(d), and (B) under no circumstances will Parent
be entitled to monetary damages in excess of the aggregate amount of (A) the Termination Fee and (B) any amount payable by the
Company pursuant to Section 9.03(d).
Section 10.07 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. Notwithstanding the foregoing, if any provision
of this Agreement with specific reference to the Laws of the Cayman Islands shall be subject to the Laws of the Cayman Islands,
including the duties of the board of directors, internal corporate affairs of the Merger Sub and the Company, the Merger and the
exercise of dissenter’s right with respect to the Merger, the Laws of the Cayman Islands shall supersede the Laws of the
State of New York with respect to such provision.
(b) Any
dispute, controversy or claim arising out of or relating to this Agreement or its subject matter (including a dispute regarding
the existence, validity, formation, effect, interpretation, performance or termination of this Agreement) (each, a “Dispute”)
shall be finally settled by arbitration. The place of arbitration shall be Hong Kong, and the arbitration shall be administered
by the Hong Kong International Arbitration Centre (the “HKIAC”) in accordance with the Arbitration Rules
of the HKIAC in force at the date of commencement of the arbitration (the “HKIAC Rules”). The arbitration
shall be decided by a tribunal of three (3) arbitrators, who shall be qualified to practice law in the State of New York,
the United States of America. Each party to the Dispute shall select one arbitrator, and the HKIAC Council shall select the third
arbitrator, whose appointment shall be in accordance with the HKIAC Rules. Arbitration proceedings (including but not limited
to any arbitral award rendered) shall be in English. Subject to the agreement of the tribunal, any Dispute(s) which arise subsequent
to the commencement of arbitration of any existing Dispute(s), shall be resolved by the tribunal already appointed to hear the
existing Dispute(s). The award of the arbitration tribunal shall be final and conclusive and binding upon the parties as from
the date rendered. Judgment upon any award may be entered and enforced in any court having jurisdiction over a party or any of
its assets. For the purpose of the enforcement of an award, the parties irrevocably and unconditionally submit to the jurisdiction
of any competent court and waive any defenses to such enforcement based on lack of personal jurisdiction or inconvenient forum.
In any action at law or suit in equity to enforce this Agreement or the rights of any of the parties hereunder, the prevailing
party in such action or suit shall be entitled to receive a reasonable sum for its attorneys’ fees and all other reasonable
costs and expenses incurred in such action or suit.
Section 10.08 Counterparts.
This Agreement may be executed and delivered (including by facsimile transmission or pdf) in two 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.
IN WITNESS WHEREOF, the Parties have caused
this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.
| |
MINAT ASSOCIATED CO., LTD. |
| |
|
|
| |
By |
/s/ Dan Chen |
| |
|
Name: Dan Chen |
| |
|
Title: Director |
[Signature Page to Merger Agreement]
IN WITNESS WHEREOF, the Parties have caused
this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.
| |
CHINAEQUITY ALLIANCE VICTORY CO., LTD. |
| |
|
|
| |
By |
/s/ Xu Wang |
| |
|
Name: Xu Wang |
| |
|
Title: Director |
[Signature Page to Merger Agreement]
IN WITNESS WHEREOF, the Parties have caused
this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.
| |
Mecox lane limited |
| |
|
|
| |
By |
/s/ Xiaohua Li |
| |
|
Name: Xiaohua Li |
| |
|
Title: Director |
[Signature Page to
Merger Agreement]
Appendix 1
Plan of Merger
[Signature Page to Merger Agreement]
Annex
B
PLAN
OF MERGER
THIS
PLAN OF MERGER is made on [date].
BETWEEN
(1) ChinaEquity
Alliance Victory Co., Ltd., an exempted company incorporated under the Laws of the Cayman Islands on 4 March 2015, with its registered
office situated at the offices of Harneys Services (Cayman) Limited, 4th Floor, Harbour Place, 103 South Church Street, P.O. Box
10240, Grand Cayman KY1-1002, Cayman Islands (“Merging Company”); and
(2) Mecox
Lane Limited, an exempted company incorporated under the Laws of the Cayman Islands on 28 May 1996, with its registered office
situated at the offices of Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands
(the “Company” or the “Surviving Company” and together with Merging Company, the “Constituent
Companies”).
WHEREAS
(a) Merging
Company 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 as of [date] between the Merging Company 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 (2013 Revision) of the Cayman Islands (as consolidated and revised) (the “Companies Law”), pursuant
to which the Merging Company will merge with and into the Company and cease to exist and the Surviving Company will continue as
the surviving company 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 the Merging Company and the Company.
NAME
OF THE SURVIVING CORPORATION
2. The
surviving company (as defined in the Companies Law) is the Surviving Company, which shall be named Mecox Lane Limited.
REGISTERED
OFFICE
3. The
Surviving Company shall have its registered office at the offices of Maples Corporate Services Limited, PO Box 309, Ugland House,
Grand Cayman, KY1-1104, Cayman Islands.
AUTHORISED
AND ISSUED SHARE CAPITAL
4. Immediately
prior to the Effective Time (as defined below) the authorized share capital of Merging Company was US$50,000 divided into 50,000
ordinary shares with a par value of US$1.00 each, of which one ordinary share was issued fully paid.
5. Immediately
prior to the Effective Time the authorized share capital of the Company was US$1,000,000 divided into 10,000,000,000 ordinary
shares with a par value of US$0.0001 each, of which [455,227,428] ordinary shares were issued fully paid.
6. The
authorized share capital of the Surviving Company shall be US$50,000 divided into 500,000,000 ordinary shares with a par value
of US$0.0001 each.
7. At
the Effective Time, and in accordance with the terms and conditions of the Agreement:
(a) Each
ordinary share in the Merging Company issued and outstanding immediately prior to the Effective Time shall be converted into and
become one validly issued and fully paid ordinary share with a par value of US$0.0001 each in the share capital of the Surviving
Company.
(b) Each
ordinary share in the Company issued and outstanding immediately prior to the Effective Time, other than (i) the Excluded Shares
and (ii) the Dissenting Shares, shall be cancelled and cease to exist in exchange for the right to receive US$0.114 in cash per
share without interest.
(c) Each
of the Excluded Shares issued and outstanding immediately prior to the Effective Time shall be cancelled and cease to exist without
payment of any consideration or distribution therefor.
(d) 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 cancelled and ceased to exist following payment of their fair value in accordance
with section 238 of the Companies Law.
8. At
the Effective Time, the rights and restrictions attaching to the shares of the Surviving Company are set out in the Amended and
Restated Memorandum of Association and Articles of Association of the Surviving Company in the form attached as Appendix II
to this Plan of Merger.
EFFECTIVE
TIME
9. The
effective date of the Merger, being the date on which it is intended that the Merger is to take effect, shall be the date on which
this Plan of Merger is registered by the Registrar of Companies of the Cayman Islands (the “Effective Time”).
PROPERTY
10. At
the Effective Time, 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 Company 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 Company shall be amended and restated in the form attached
as Appendix II to this Plan of Merger at the Effective Time.
DIRECTORS
BENEFITS
12. There
are no amounts or benefits paid or payable to any director of the Constituent Companies or the Surviving Company consequent upon
the Merger.
DIRECTORS
OF THE SURVIVING CORPORATION
13. The
names and addresses of the directors of the Surviving Company are as follows:
| NAME |
ADDRESS |
| |
|
| [name] |
[address] |
SECURED
CREDITORS
14. (a)
the Merging 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, and
(b) 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 Time.
APPROVAL
AND AUTHORIZATION
16. This
Plan of Merger has been approved by the board of directors of each of the Merging Company and the Company pursuant to section
233(3) of the Companies Law.
17. This
Plan of Merger has been authorised by the shareholders of each of the Merging Company 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.
In witness
whereof the parties hereto have caused this Plan of Merger to be executed on the day and year first above written.
Duly authorized
for and on behalf of ChinaEquity Alliance Victory Co., Ltd.:
Duly authorized
for and on behalf of Mecox Lane Limited:
Appendix
I
(The Agreement)
Appendix
II
(Amended
and Restated Memorandum of Association and Articles of Association of Surviving Company)
Annex C
ANNEX C: OPINION
OF Houlihan Lokey (China) Limited AS FINANCIAL ADVISOR
December 22, 2015
The Special Committee of the Board of
Directors of Mecox Lane Limited
Room 302, Qilai Building,
No.889, Yishan Road, Shanghai, China 200233
Dear Members of the Special Committee:
We understand that
Minat Associated Co., Ltd. (“Parent”), ChinaEquity Alliance Victory Co., Ltd., a wholly owned subsidiary of Parent
(“Merger Sub”), and Mecox Lane Limited (the “Company”)
propose to enter into the Agreement (as defined below) pursuant to which, among other things, Merger Sub will be merged with and
into the Company (the “Transaction”) and (a) each issued and outstanding ordinary share, par value US$0.0001 per share,
of the Company (each, a “Share”, and collectively, the “Shares”), other than the Excluded Shares (as defined
below), shall be cancelled and cease to exist in consideration for the right to receive US$0.114 in cash per Share without interest
(the “Per Share Merger Consideration”), and (b) each issued and outstanding American Depositary Share, representing
thirty-five (35) Shares (the “ADSs”), other than ADSs representing Excluded Shares, shall be cancelled in exchange
for the right to receive US$4.00 in cash per ADS without interest, subject to any cancellation fees, charges and expenses due
to the Depositary (as defined in the Agreement) (the “Per ADS Merger Consideration”). “Excluded Shares”
shall mean (i) the Rollover Shares (as defined in the Agreement), (ii) the Shares held by Parent, the Company or any of their
Subsidiaries, and (iii) the Dissenting Shares (as defined in the Agreement), in each case, including such Shares represented by
ADSs.
The Special Committee
(the “Committee”) of the Board of Directors (the “Board”) of the Company has requested that Houlihan Lokey
(China) Limited (“Houlihan Lokey”) provide an opinion (this “Opinion”) to the Committee as to whether,
as of the date hereof, the Per Share Merger Consideration and the Per ADS Merger Consideration, as applicable, to be received
in the Transaction by holders of the Shares and ADSs, as applicable (in each case, other than holders of the Excluded Shares,
including Excluded Shares represented by ADSs), is fair, from a financial point of view, to such holders.
In connection with
this Opinion, we have made such reviews, analyses and inquiries as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:
| 1. | reviewed the draft dated December
22, 2015 of the Agreement and Plan of Merger to be entered into among Parent,
Merger Sub and the Company (the “Agreement”); |
| 2. | reviewed certain publicly available
business and financial information relating to the Company that we deemed to be relevant; |
| 3. | reviewed certain information relating
to the historical, current and future operations, financial condition and prospects of
the Company made available to us by the Company, including financial projections
prepared by the management of the Company relating to the Company for the calendar years
ending 2015 through 2019; |
Houlihan Lokey (China) Limited
华 利 安 诺 基
(中 国) 有 限 公 司
2106
l Alexandra House
l 18 Chater Road l
Central l
Hong Kong l Tel +852.3551.2300
l Fax +852.3551.2551
l www.HL.com
香港中环 遮打道18号
历山大厦 2106
Incorporated
in Hong Kong No. 1176730 l
Licensed and Regulated by the Securities and Futures Commission
The Special Committee of the Board of Directors of Mecox Lane
Limited
December 22, 2015
| 4. | spoken with certain members of
the management of the Company and certain of its representatives and advisors regarding
the business, operations, financial condition and prospects of the Company, the Transaction
and related matters; |
| 5. | compared the financial and operating
performance of the Company with that of other public companies that we deemed to be relevant; |
| 6. | considered the publicly available
financial terms of certain transactions that we deemed to be relevant; |
| 7. | reviewed the current and historical
market prices and trading volume for certain of the Company’s publicly traded securities,
and the current and historical market prices and trading volume of the publicly traded
securities of certain other companies that we deemed to be relevant; and |
| 8. | conducted such other financial
studies, analyses and inquiries and considered such other information and factors as
we deemed appropriate. |
We have relied upon
and assumed, without independent verification, the accuracy and completeness of all data, material and other information furnished,
or otherwise made available to us, discussed with or reviewed by us, or publicly available, and do not assume any responsibility
with respect to such data, material and other information. In addition, management of the Company has advised us, and we
have assumed, that the financial projections reviewed by us have been reasonably prepared in good faith on bases reflecting
the best currently available estimates and judgments of such management as to the future financial results and condition of the
Company, and we express no opinion with respect to such projections or the assumptions on which they are based. We
have relied upon and assumed, without independent verification, that there has been no change in the business, assets, liabilities,
financial condition, results of operations, cash flows or prospects of the Company since the respective dates of the most
recent financial statements and other information, financial or otherwise, provided to us that would be material to our analyses
or this Opinion, and that there is no information or any facts that would make any of the information reviewed by us incomplete
or misleading. Further, management of the Company has advised us that (i) the financial projections provided to us are
the only projections prepared by management of the Company (or any affiliated entity) in connection with the Transaction, (ii)
they have not received, reviewed, approved, commented on or otherwise contributed to any other projections or similar information
prepared by any other party in connection with the Transaction, nor have they updated or otherwise revised the financial projections
since the last date they were provided to Houlihan Lokey and (iii) to the best of their knowledge and belief, no other projections
or similar information have been provided to any party involved in the Transaction, and the Committee has received all projections
and/or similar information that have been received by any other party involved in the Transaction.
We understand that
holders of the Rollover Shareholders have indicated that they are only willing to consider entering into an agreement with Parent
and amongst themselves in relation to the Transaction and have no interest in entering into any agreement, arrangement or understanding
with other parties as an alternative thereto.
The Special Committee of the Board of Directors of Mecox Lane
Limited
December 22, 2015
We have relied upon
and assumed, without independent verification, that (a) the representations and warranties of all parties to the Agreement
and all other related documents and instruments that are referred to therein are true and correct, (b) each party to the Agreement
and such other related documents and instruments will fully and timely perform all of the covenants and agreements
required to be performed by such party, (c) all conditions to the consummation of the Transaction will be satisfied without waiver
thereof, and (d) the Transaction will be consummated in a timely manner in accordance with the terms described in all such agreements
and other related documents and instruments, without any amendments or modifications thereto. We also have relied upon
and assumed, without independent verification, that (i) the Transaction will be consummated in a manner that complies in all respects
with all applicable international, federal and state statutes, rules and regulations, and (ii) all governmental, regulatory,
and other consents and approvals necessary for the consummation of the Transaction will be obtained and that no delay, limitations,
restrictions or conditions will be imposed or amendments, modifications or waivers made that
would have an effect on the Transaction or the Company that would be material to our analyses or this Opinion. In addition, we
have relied upon and assumed, without independent verification, that the final form of the Agreement, including, without limitation,
the Per Share Merger Consideration and the Per ADS Merger Consideration, will not differ in any material respect from the draft
of the Agreement identified above.
Furthermore, in connection
with this Opinion, we have not been requested to make, and have not made, any physical inspection or independent appraisal or
evaluation of any of the assets, properties or liabilities (fixed, contingent, derivative, off-balance-sheet or otherwise) of
the Company or any other party, nor were we provided with any such appraisal or evaluation. We did not estimate, and express
no opinion regarding, the liquidation value of any entity or business. We have undertaken no independent analysis of any
potential or actual litigation, regulatory action, possible unasserted claims or other contingent liabilities, to which the Company
is or may be a party or is or may be subject, or of any governmental investigation of any possible unasserted claims or other
contingent liabilities to which the Company is or may be a party or is or may be subject.
We have been directed
by the Committee not to and, therefore, we did not (a) initiate or participate in any negotiations with (other than participating
in negotiations with the parties to the Transaction), or solicit any indications of interest from, third parties with respect
to the Transaction, the securities, assets, businesses or operations of the Company or any other party, or any alternatives to
the Transaction, or (b) advise the Committee, the Board or any other party with respect to alternatives to the Transaction.
This Opinion is necessarily
based on financial, economic, market and other conditions as in effect on, and the information made available to us as of, the
date hereof. We have not undertaken, and are under no obligation, to update, revise, reaffirm or withdraw this Opinion, or otherwise
comment on or consider events occurring or coming to our attention after the date hereof.
This Opinion is furnished
for the use of the Committee (solely in its capacity as such) in connection with its evaluation of the Transaction and may not
be used for any other purpose without our prior written consent. This Opinion should not be construed as creating any fiduciary
duty on Houlihan Lokey’s part to any party. This Opinion is not intended to be, and does not constitute, a recommendation
to the Committee, the Board, any security holder or any other person as to how to act or vote with respect to any matter relating
to, or whether to tender Shares in connection with, the Transaction or otherwise.
The Special Committee of the Board of Directors of Mecox Lane
Limited
December 22, 2015
In the ordinary course
of business, certain of our employees and affiliates, as well as investment funds in which they may have financial interests or
with which they may co-invest, may acquire, hold or sell long or short positions, or trade, in debt, equity, and other securities
and financial instruments (including loans and other obligations) of, or investments in, the Company or any other party that may
be involved in the Transaction and their respective affiliates or any currency or commodity that may be involved in the Transaction.
Houlihan Lokey has
in the past provided investment banking, financial advisory and other financial services to certain affiliates of the
Company and the Acquiror, for which Houlihan Lokey has received compensation, including, among other things, having acted
as financial advisor in the following: (i) advising CNshangquan Limited (“CNshangquan”) in connection with its acquisition
of a 63.7% interest in the Company in February 2014; (ii) advising the Company in the disposal of its apparel business in August
2014; (iii) advising Sanpower Group, the controlling shareholder of CNshangquan, on the acquisition of Brookstone Inc. in June
2014; and (iv) advising CNshangquan on other potential acquisition opportunities which Sanpower and CNshangquan ultimately decided
to not pursue. For its services to Sanpower, CNshangquan and the Company, Houlihan Lokey received aggregate fees of US$350,000
during the last two years. Houlihan Lokey and certain of its affiliates may provide investment banking, financial advisory and
other financial services to the Company, other participants in the Transaction or certain of their respective affiliates
in the future, for which Houlihan Lokey and such affiliates may receive compensation. In addition, Houlihan Lokey and certain
of its affiliates and certain of our and their respective employees may have committed to invest in private equity or other investment
funds managed or advised by participants in the Transaction or certain of their respective affiliates, and in portfolio companies
of such funds, and may have co-invested with the Company, other participants in the Transaction or certain of their respective
affiliates, and may do so in the future. Furthermore, in connection with bankruptcies, restructurings, and similar matters,
Houlihan Lokey and certain of its affiliates may have in the past acted, may currently be acting and may in the future act
as financial advisor to debtors, creditors, equity holders, trustees and other interested parties (including, without limitation, formal
and informal committees or groups of creditors) that may have included or represented and may include or represent, directly or
indirectly, or may be or have been adverse to, the Company, other participants in the Transaction or certain of their respective
affiliates, for which advice and services Houlihan Lokey and such affiliates have received and may receive compensation.
Houlihan Lokey has
also acted as financial advisor to the Committee in connection with, and has participated in certain of the negotiations leading
to, the Transaction and will receive a fee for such services, a portion of which is contingent upon the consummation of the Transaction.
In addition, we will receive a fee for rendering this Opinion, which is not contingent upon the successful completion of the Transaction.
The Company has agreed to reimburse certain of our expenses and to indemnify us and certain related parties for certain potential
liabilities arising out of our engagement.
This Opinion is issued
in the English language and reliance may only be placed on this Opinion as issued in the English language. If any translations
of this Opinion are delivered, they are provided only for ease of reference, have no legal effect and Houlihan Lokey makes no
representation as to (and accepts no liability in respect of) the accuracy or completeness of any such translations.
The Special Committee of the Board of Directors of Mecox Lane
Limited
December 22, 2015
We have not been requested
to opine as to, and this Opinion does not express an opinion as to or otherwise address, among other things: (i) the underlying
business decision of the Committee, the Board, the Company, its security holders or any other party to proceed
with or effect the Transaction, (ii) the terms of any arrangements, understandings, agreements or documents related to, or the
form, structure or any other portion or aspect of, the Transaction or otherwise (other than the Per Share Merger Consideration
and the Per ADS Merger Consideration to the extent expressly specified herein), (iii) the fairness of any portion or aspect of
the Transaction to the holders of any class of securities, creditors or other constituencies of the Company, or to any other party,
except if and only to the extent expressly set forth in the last sentence of this Opinion, (iv) the relative merits of the Transaction
as compared to any alternative business strategies that might exist for the Company or any other party or the effect of any other
transaction in which the Company or any other party might engage, (v) the fairness of any portion or aspect of the
Transaction to any one class or group of the Company’s or any other party’s security holders or other constituents
vis-à-vis any other class or group of the Company’s or such other party’s security holders or other constituents
(including, without limitation, the allocation of any consideration amongst or within such classes or groups of security holders
or other constituents), (vi) whether or not the Company, its security holders or any other party is receiving or paying reasonably
equivalent value in the Transaction, (vii) the solvency, creditworthiness or fair value of the Company or any other participant
in the Transaction, or any of their respective assets, under any applicable laws relating to bankruptcy, insolvency, fraudulent
conveyance or similar matters, or (viii) the fairness, financial or otherwise, of the amount, nature or any other aspect of any
compensation to or consideration payable to or received by any officers, directors or employees of any party to the Transaction,
any class of such persons or any other party, relative to the Per Share Merger Consideration, the Per ADS Merger Consideration
or otherwise. Furthermore, no opinion, counsel or interpretation is intended in matters that require legal, regulatory, accounting,
insurance, tax or other similar professional advice. It is assumed that such opinions, counsel or interpretations have been or
will be obtained from the appropriate professional sources. Furthermore, we have relied, with the consent of the Committee, on
the assessments by the Committee, the Board, the Company and their respective advisors, as to all legal, regulatory, accounting,
insurance and tax matters with respect to the Company and the Transaction or otherwise. The issuance of this Opinion was
approved by a committee authorized to approve opinions of this nature.
Based upon and subject
to the foregoing, and in reliance thereon, it is our opinion that, as of the date hereof, the Per Share Merger Consideration and
the Per ADS Merger Consideration, as applicable, to be received in the Transaction by holders of the Shares and ADSs, as applicable
(other than holders of the Excluded Shares, including Excluded Shares represented by ADSs), is fair, from a financial point of
view, to such holders.
Very truly yours,
HOULIHAN LOKEY (CHINA) LIMITED
Annex D
ANNEX D: CAYMAN COMPANIES LAW CAP. 22 (LAW
3 OF 1961, AS CONSOLIDATED AND
REVISED) – SECTION 238
238. Rights of dissenters
| (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
authorized by the vote. |
| (4). | Within twenty days immediately following the date on which the
vote of members giving authorization for the merger or consolidation is made, the constituent
company shall give written notice of the authorization 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- |
| (a). | his name and address; |
| (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. |
Annex E
ANNEX E: DIRECTORS AND EXECUTIVE OFFICERS
OF EACH FILING PERSON
1. Directors and Executive Officers of the Company
The Company is a company organized under the laws of the Cayman
Islands with its principal business address at Room 302, Qilai Building, No. 889 Yishan Road, Shanghai 200233, People’s
Republic of China. The telephone number of the Company’s principal executive office is +86-21-3108-1111. Set forth below
for the name, address, citizenship, respective present principal occupation or employment, the name of the corporation or other
organization in which such occupation or employment is conducted, the five-year employment history of each such director and executive
officer:
Name |
|
Business
Address |
|
Present
Principal Employment |
|
Citizenship |
| |
|
|
|
| Yang Wang |
|
* |
|
Vice Chairman of the Board;
Director; and
Executive Vice President of Sanpower (1) |
|
People’s Republic of China |
| |
|
|
|
| Ingrid Ye Wang |
|
* |
|
Director; and
Chief Executive Officer (2) |
|
People’s Republic of China |
| |
|
|
|
|
|
| Willy Yili Wu |
|
* |
|
Chief Operating Officer;
Director(3) |
|
Taiwan |
| |
|
|
|
|
|
|
| Fan Zhang |
|
* |
|
Chairman of the Board;
Independent Director; and
Senior Vice President and Chairman of Ingram Micro (China)
Holding & Commercial Co. Ltd.(4) |
|
People’s Republic of China |
| |
|
|
|
|
|
|
| Rock Yanshi Jin |
|
* |
|
Independent Director;
chief executive officer of Pop Eton Investment Advisor
Co., Ltd;
Director of the Institute of Behavioral Finance in Shanghai
Jiaotong University Overseas Education School; and
Professor at Peking University’s HSBC Business School |
|
United States |
| |
|
|
|
| Xiongsheng Yang |
|
* |
|
Independent Director;
Dean of the department of accounting of Nanjing University;
Professor at the Business School of Nanjing University;
Independent Director of IDT International Limited, Hisap
High Technology Corporation, Yizheng Chemical Fiber Co., Ltd. and Jiangsu Sunrain Solar Energy Co., Ltd.(6) |
|
People’s Republic of China |
| |
|
|
|
| Xiaohua Li |
|
* |
|
Independent Director;
Professor at Southeast University; and
Deputy Head of Display Technology R&D Center of Southeast
University and the Jiangsu Information Display Engineering Technology Research Center(7) |
|
People’s Republic of China |
| |
|
|
|
| Michael Guisheng Liu |
|
* |
|
Vice President of Finance;
and
Acting Chief Financial Officer(8) |
|
People’s Republic of China |
* Room 302, Qilai Building,
No. 889 Yishan Road, Shanghai 200233, People’s Republic of China.
| (1) | | Ms. Yang Wang has
served the Company’s director since November 2014. Ms. Wang has served as the executive
vice president of Sanpower since 2013. Prior to joining Sanpower, Ms. Wang worked at
Citigroup from 2009 to 2011 and Barclays from 2011 to 2013. |
| (2) | | Ms. Ingrid Ye Wang
has been the Company’s director and chief executive officer since May 2014. Ms.
Wang previously served as the chief executive officer of Cnshangquan E-Commerce from
April 2012 to March 2015. Ms. Wang served as the chief operating officer of Shanghai
Blackspace Information Technology Co., Ltd from 2010 to 2012. |
| (3) | | Mr. Willy Yili Wu
has been the Company’s COO since May 2014 and the Company’s director since
May 2015. Mr. Wu served as the head of the Company’s health and beauty division
since March 2005. |
| (4) | | Mr. Fan Zhang has
served as the Company’s independent director since May 2014. He started working
at Ingram Micro (China) Holding & Commercial Co. Ltd. from 2004 and has been
its senior vice president and chairman since 2014. |
| (5) | | Mr. Rock Yanshi
Jin has served as the Company’s independent director since June 2014. Mr. Jin is
currently the chief executive officer of Pop Eton Investment Advisor Co., Ltd, the director
of the Institute of Behavioral Finance in Shanghai Jiaotong University Overseas Education
School, a professor at Peking University’s HSBC Business School. |
| (6) | | Mr. Xiongsheng Yang
has served as the Company’s independent director since May 2014. He has served
as the dean of the department of accounting of Nanjing University since 2000 and as a
professor at the Business School of Nanjing University since 1999. Mr. Yang is currently
the independent director of IDT International Limited, Hisap High Technology Corporation,
Yizheng Chemical Fiber Co., Ltd. and Jiangsu Sunrain Solar Energy Co., Ltd. |
| (7) | | Mr. Xiaohua Li has
served as the Company’s independent director since June 2014. Mr. Li has served
as a professor at Southeast University since 1993 and the deputy head of Display Technology
R&D Center of Southeast University and the Jiangsu Information Display Engineering
Technology Research Center since 1996. |
| (8) | | Mr. Michael Guisheng
Liu has served as the Company’s acting chief financial officer since January 2014.
Mr. Liu joined Company in 2009, has served as the Company’s vice president of finance
since November 2013, and was a key member of the Company’s financial team during
the initial public offering in 2010. |
2. Directors and Executive Officers of Parent
Parent is a business company incorporated under
the laws of the British Virgin Islands with its principal business address at 3rd Floor, Building C, Shou Kai Xing Fu Square,
Xin Dong Road, Chaoyang District, Beijing, People’s Republic of China.
The sole director of Parent is Ms. Dan Chen, whose business
address is at 3rd Floor, Building C, Shou Kai Xing Fu Square, Xin Dong Road, Chaoyang District, Beijing, People’s Republic
of China. Ms. Dan Chen is currently employed with the Sponsor as Director, and she is a citizen of People’s Republic of
China.
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 with its principal business address at 3rd Floor, Building C, Shou Kai Xing
Fu Square, Xin Dong Road, Chaoyang District, Beijing, People’s Republic of China.
The sole director of Merger Sub is
Mr. Xu Wang, whose business address is at 3rd Floor, Building C, Shou Kai Xing Fu Square, Xin Dong Road, Chaoyang District, Beijing,
People’s Republic of China. Mr. Xu Wang is currently employed with the Sponsor as Associated Director, and he is a citizen
of People’s Republic of China.
4. Directors and Executive Officers of CNshangquan
CNshangquan is a business company incorporated under the
laws of the British Virgin Islands, with its principal business address at Unit 8, 3/F., Qwomar Trading Complex, Blackburne Road,
Port Purcell, Road Town, Tortola, British Virgin Islands VG1110. The sole director of CNshangquan is Mr. Wei Zhu, whose business
address is at 2nd floor, Unit AB of Jia 12 Main Building, Xi Da Wang Road, Chaoyang District, Beijing, People’s Republic
of China. Mr. Wei Zhu is currently employed with Beijing Funtalk Century Communication Equipment Chain Co., Ltd. as vice president,
and is a citizen of People’s Republic of China.
5. Directors and Executive Officers of Cnshangquan E-Commerce
Cnshangquan E-Commerce is a company incorporated under
the laws of the People’s Republic of China, with the principal business address at 9th floor, International Financial Center,
No.1 Hanzhong Road, Nanjing, Jiangsu Province, People’s Republic of China.
The name, business address, present principal employment
and citizenship of each director and each executive officer of Cnshangquan E-Commerce are set forth below:
Name |
|
Business Address |
|
Present Principal Employment |
|
Citizenship |
| |
|
|
|
| Lei
Zhao |
|
68
Software Avenue, Nanjing, Jiangsu Province, PRC |
|
Chairman
of the Supervisors of Cnshangquan E-Commerce |
|
People’s
Republic of China |
| |
|
|
|
|
|
|
| Yuan Jiang |
|
68 Software Avenue, Nanjing, Jiangsu Province, PRC
|
|
Supervisor of Cnshangquan
E-Commerce |
|
People’s Republic
of China |
| Xueyin Cheng |
|
68 Software Avenue, Nanjing, Jiangsu Province, PRC
|
|
Director of Cnshangquan
E-Commerce |
|
People’s Republic
of China |
| Jun Zhu |
|
10 Yurun Road, Nanjing, Jiangsu Province, PRC
|
|
Director of Cnshangquan
E-Commerce |
|
People’s Republic
of China |
| Tiemin Wu |
|
8/F, Deji Plaza,18 East Zhongshan Road, Nanjing,
Jiangsu Province, PRC
|
|
Director of Cnshangquan
E-Commerce |
|
People’s Republic
of China |
| Lijian Pan |
|
12/F, Nanjing Center, 1 South Zhongshan Road, Nanjing,
Jiangsu Province, PRC
|
|
Director of Cnshangquan
E-Commerce |
|
People’s Republic
of China |
| Wenzhi Ma |
|
c/o 68 Software Avenue, Nanjing, Jiangsu Province,
PRC
|
|
Director of Cnshangquan
E-Commerce |
|
People’s Republic
of China |
| Shuping Xia |
|
c/o 68 Software Avenue, Nanjing, Jiangsu Province,
PRC
|
|
Director of Cnshangquan
E-Commerce |
|
People’s Republic
of China |
| Suming Yang |
|
c/o 68 Software Avenue,
Nanjing, Jiangsu Province, PRC |
|
Supervisor of Cnshangquan
E-Commerce |
|
People’s Republic
of China |
6. Directors and Executive Officers of Sanpower
Sanpower is a company incorporated under the laws of the
People’s Republic of China, with principal business address at 68 Software Avenue, Nanjing, Jiangsu Province, People’s
Republic of China.
The name, business address, present principal employment
and citizenship of each director and each executive officer of Sanpower are set forth below:
| Name |
|
Business Address |
|
Present Principal Employment |
|
Citizenship |
| Yafei Yuan |
|
68 Software Avenue, Nanjing,
Jiangsu Province, PRC
|
|
Chairman of the Board
of Directors of Sanpower |
|
People’s Republic
of China |
| Huaizhen Yang |
|
68 Software Avenue, Nanjing,
Jiangsu Province, PRC
|
|
Director and General
Manager of Sanpower |
|
People’s Republic
of China |
| Lei Yue |
|
68 Software Avenue, Nanjing,
Jiangsu Province, PRC
|
|
Director of Sanpower |
|
People’s Republic
of China |
| Jiaming Tan |
|
68 Software Avenue, Nanjing,
Jiangsu Province, PRC
|
|
Director of Sanpower
|
|
People’s Republic
of China |
| Min Li |
|
68
Software Avenue, Nanjing, Jiangsu Province, PRC |
|
Supervisor of Sanpower |
|
People’s Republic
of China |
7. Directors and Executive Officers of ChinaEquity
ChinaEquity is a business company incorporated under the
laws of the British Virgin Islands, with the principal business address at 3rd Floor, Building C, Shou Kai Xing Fu Square, Xin
Dong Road, Chaoyang District, Beijing, People’s Republic of China.
The sole director of is ChinaEquity is Mr. Chaoyong Wang,
whose business address is at 3rd Floor, Building C, Shou Kai Xing Fu Square, Xin Dong Road, Chaoyang District, Beijing, People’s
Republic of China. Mr. Chaoyong Wang is currently employed with the Sponsor as President, and he is a citizen of People’s
Republic of China.
9. Directors and Executive Officers of ChinaEquity USD Fund
I L.P.
ChinaEquity USD Fund I L.P., is a limited partnership organized
under the laws of Cayman Islands, with the principal business address at 3rd Floor, Building C, Shou Kai Xing Fu Square, Xin Dong
Road, Chaoyang District, Beijing, People’s Republic of China.
The sole director of is ChinaEquity USD Fund I L.P. is
Mr. Chaoyong Wang, whose business address is at 3rd Floor, Building C, Shou Kai Xing Fu Square, Xin Dong Road, Chaoyang District,
Beijing, People’s Republic of China. Mr. Chaoyong Wang is currently employed with the Sponsor as President, and he is a
citizen of People’s Republic of China.
10. Directors and Executive Officers of ChinaEquity USD Investment
GP L.P.
ChinaEquity USD Investment GP L.P., is a limited partnership
organized under the laws of Cayman Islands, with the principal business address at 3rd Floor, Building C, Shou Kai Xing Fu Square,
Xin Dong Road, Chaoyang District, Beijing, People’s Republic of China.
The sole director of is ChinaEquity USD Investment
GP L.P. is Mr. Chaoyong Wang, whose business address is at 3rd Floor, Building C, Shou Kai Xing Fu Square, Xin Dong Road, Chaoyang
District, Beijing, People’s Republic of China. Mr. Chaoyong Wang is currently employed with the Sponsor as President, and
he is a citizen of People’s Republic of China.
11. Directors and Executive Officers of ChinaEquity USD Investment
Management Co.
ChinaEquity USD Investment Management Co., is a company
organized under the laws of Cayman Islands, with the principal business address at 3rd Floor, Building C, Shou Kai Xing Fu Square,
Xin Dong Road, Chaoyang District, Beijing, People’s Republic of China.
The sole director of is ChinaEquity USD Investment
Management Co. is Mr. Chaoyong Wang, whose business address is at 3rd Floor, Building C, Shou Kai Xing Fu Square, Xin Dong Road,
Chaoyang District, Beijing, People’s Republic of China. Mr. Chaoyong Wang is currently employed with the Sponsor as President,
and he is a citizen of People’s Republic of China.
12. Directors and Executive Officers of ChinaEquity Global Holding
Co., Ltd.
ChinaEquity Global Holding Co., Ltd., is a company organized
under the laws of the British Virgin Islands, with the principal business address at 3rd Floor, Building C, Shou Kai Xing Fu Square,
Xin Dong Road, Chaoyang District, Beijing, People’s Republic of China.
The sole director of ChinaEquity Global Holding Co.,
Ltd. is Mr. Xu Wang, whose business address is at 3rd Floor, Building C, Shou Kai Xing Fu Square, Xin Dong Road, Chaoyang District,
Beijing, People’s Republic of China. Mr. Xu Wang is currently employed with the Sponsor as Associate Director, and he is
a citizen of People’s Republic of China.
13. Directors and Executive Officers of Chinaequity Capital
Investments Co., Limited.
Chinaequity Capital Investments Co., Limited is a business
company incorporated under the laws of Hong Kong, with the principal business at 3rd Floor, Building C, Shou Kai Xing Fu Square,
Xin Dong Road, Chaoyang District, Beijing, People’s Republic of China.
The sole director of is Chinaequity Capital Investments
Co., Limited is Mr. Chaoyong Wang, whose business address is at 3rd Floor, Building C, Shou Kai Xing Fu Square, Xin Dong Road,
Chaoyang District, Beijing, People’s Republic of China. Mr. Chaoyong Wang is currently employed with the Sponsor as President,
and he is a citizen of People’s Republic of China.
14. Directors and Executive Officers of the Sponsor
The Sponsor is a joint-stock company incorporated under
the laws of the People’s Republic of China, with the principal business address at 3rd Floor, Building C, Shou Kai Xing
Fu Square, Xin Dong Road, Chaoyang District, Beijing, People’s Republic of China.
The name, business address, present principal employment
and citizenship of each director and each executive officer of the Sponsor are set forth below:
| Name |
|
Business Address |
|
Present Principal
Employment |
|
Citizenship |
| Wang
Chaoyong |
|
3rd
Floor, Building C, Shou Kai Xing Fu Square, Xin Dong Road, Chaoyang District, Beijing, |
|
President
of the Sponsor |
|
People’s
Republic of China |
| |
|
|
|
|
|
|
| Dan
Chen |
|
3rd
Floor, Building C, Shou Kai Xing Fu Square, Xin Dong Road, Chaoyang District, Beijing, |
|
Director
of the Sponsor |
|
People’s
Republic of China |
| |
|
|
|
|
|
|
| Zhaochen Liu |
|
3rd
Floor, Building C, Shou Kai Xing Fu Square, Xin Dong Road, Chaoyang District, Beijing, |
|
Director
of the Sponsor |
|
People’s
Republic of China |
| |
|
|
|
|
|
|
| Xiaochao
Shen |
|
3rd
Floor, Building C, Shou Kai Xing Fu Square, Xin Dong Road, Chaoyang District, Beijing, |
|
Director
of the Sponsor |
|
People’s
Republic of China |
| |
|
|
|
|
|
|
| Xudong
Wang |
|
3rd
Floor, Building C, Shou Kai Xing Fu Square, Xin Dong Road, Chaoyang District, Beijing, |
|
Director
of the Sponsor |
|
People’s
Republic of China |
| |
|
|
|
|
|
|
| Jie
Zhang |
|
3rd
Floor, Building C, Shou Kai Xing Fu Square, Xin Dong Road, Chaoyang District, Beijing, |
|
Director
of the Sponsor |
|
People’s
Republic of China |
| |
|
|
|
|
|
|
| Jing
Zhang |
|
3rd
Floor, Building C, Shou Kai Xing Fu Square, Xin Dong Road, Chaoyang District, Beijing, |
|
Director
of the Sponsor |
|
People’s
Republic of China |
During the last five years, none of the persons referred to above,
or the respective directors or executive officers of the Company, members of the Buyer Group and their affiliates 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.
Annex F
ANNEX F: FORM OF PROXY CARD
MECOX LANE LIMITED
(Incorporated in the Cayman Islands with limited
liability)
(NASDAQ Ticker: MCOX)
Form of Proxy for Extraordinary General
Meeting (or any adjournment thereof)
to be held at ____ on _______, 2016 at ____
a.m. (Beijing time)
| I/We, |
|
|
| |
|
Please Print Name(s) |
| of |
|
|
| |
|
Please Print Address(es) |
the undersigned, being the registered holder(s) of ________ ordinary
shares (Note 1), par value US$0.0001 per share, of Mecox Lane Limited (the “Company”), hereby (a) acknowledge the
receipt of the notice of the extraordinary general meeting of the shareholders of the Company to be held on ______, 2016 at _______
a.m. (Beijing time) (the “Extraordinary General Meeting”) and the proxy statement, each dated ________,
2016, and (b) appoint the Chairman of the Extraordinary General Meeting (Note 2) or _________ of _________ as my/our proxy to
attend and act for me/us at the Extraordinary General Meeting and at any adjournment(s) or postponement(s) thereof, to vote for
me/us as indicated below, or if no such indication is given, as my/our proxy thinks fit.
| |
|
PROPOSALS |
|
FOR
(Note
3) |
|
AGAINST
(Note 3) |
|
ABSTAIN
(Note 3) |
| 1. |
|
As a special resolution:
THAT the Agreement and Plan of Merger, dated as
of December 22, 2015 (the “Merger Agreement”), among MINAT ASSOCIATED CO., LTD., a business company with limited
liability incorporated under the laws of the British Virgin Islands (“Parent”), ChinaEquity Alliance Victory
Co., Ltd., 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, pursuant to which Merger Sub will be merged with and into the Company
and cease to exist, with the Company surviving as the surviving company and 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 variation of the authorized share capital of the Company from US$1,000,000
divided into 10,000,000,000 ordinary shares of a par value of US$0.0001 each to US$50,000 divided into 50,000 ordinary
shares of a par value of US$1.00 each (the “Variation of Capital”), and (iii) the amendment and restatement
of the existing memorandum and articles of association of the Company by their deletion in their entirety and the substitution
in their place of the with a new amended and restated memorandum and articles of association in the form attached as Appendix
II to the Plan of Merger (the “Adoption of Amended M&A”), be authorized, approved and adopted; |
|
¨ |
|
¨ |
|
¨ |
| 1. |
Please insert the number of or strike out the class of shares registered
in your name(s) to which this proxy relates. If no number is inserted, this form of proxy will be deemed to relate to all
the shares in the Company registered in your name(s). |
| 2. |
If any proxy other than the Chairman is preferred, strike out the words “THE CHAIRMAN
OF THE EXTRAORDINARY GENERAL MEETING OR” and insert the name and address of the proxy desired in the space provided.
A member may appoint one or more proxies to attend and vote in his or her stead. ANY ALTERATION MADE TO THIS FORM OF PROXY
MUST BE INITIALED BY THE PERSON(S) WHO SIGN(S) IT |
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IMPORTANT: IF YOU WISH TO VOTE FOR THE RESOLUTION, TICK THE
APPROPRIATE BOX MARKED “FOR.” IF YOU WISH TO VOTE AGAINST THE RESOLUTION, TICK THE APPROPRIATE BOX MARKED “AGAINST.”
IF YOU WISH TO ABSTAIN FROM VOTING ON A PARTICULAR RESOLUTION, TICK THE APPROPRIATE BOX MARKED “ABSTAIN.” Failure
to complete any or all the boxes will entitle your proxy to cast his or her votes at his or her discretion. |
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As a special resolution:
THAT each of 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, the Variation of Capital and the Adoption of Amended M&A. |
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As an ordinary resolution:
THAT the Extraordinary General Meeting be adjourned
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 special resolutions to be proposed at the Extraordinary General
Meeting. |
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| Dated ,
2016 |
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Signature(s) (Note 4) |
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This form of proxy must be completed, signed by the person registered
in the register of members at the close of business in the Cayman Islands on______, 2016 (Cayman Islands time) and returned to
the Company’s offices at Room 302, Qilai Building, No. 889, Yishan Road, Shanghai 200233, People’s Republic of China,
attention: Investor Relations Department, no later than _______, 2016 at 12:00 p.m. (Beijing time).
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This form of proxy must be signed by you or your attorney duly authorized in writing or,
in the case of a corporation, must be executed under the hand of an officer or attorney duly authorized to sign the same.
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Annex G
ANNEX G: FORM OF ADS VOTING INSTRUCTION
CARD
Exhibit (c)(2)
Draft – for discussion only CORPORATE FINANCE FINANCIAL ADVISORY SERVICES FINANCIAL RESTRUCTURING STRATEGIC CONSULTING HL.com Project Beauty Presentation to the Special Committee of the Board of Directors December 22, 2015 Confidential
Draft – for discussion only Table of Contents Page Merger Overview 2 Financial Analysis 10 Appendix 18 Additional Financial Data 19 Disclaimer 25 Project Beauty 1
Draft – for discussion only Merger Overview
Draft – for discussion only Summary of Selected Transaction Terms 1 Parties to the Transaction (as defined below)
Mecox Lane Limited, a Cayman Islands corporation (“ Mecox Lane” or the “Company ”)
Minat Associated Co . , Ltd . , a business company incorporated under the laws of the British Virgin Islands (“ Parent”) ChinaEquity Alliance Victory Co . , Ltd . , an exempted company with limited liability incorporated under the laws of the Cayman Islands, all of the issued and outstanding shares of which are owned by Parent (“Merger Sub ”) The “Rollover Holders” : CNshangquan Limited (the “CNshangquan”) ChinaEquity USD Fortune Co . , Ltd . (together with CNshangquan and Leading Capital, the “Rollover Holders”) Transaction Structure Merger : Merger Sub to be merged with and into the Company, with the Company surviving the Merger as a wholly owned subsidiary of Parent (the “Transaction ”) 3 Form of Consideration Cash Only : Each ordinary share of the Company (a “Share” or, collectively, the “Shares”), other than the Excluded Shares and the Dissenting Shares shall be cancelled in exchange for the right to receive [US $ 0 . 114 ] in cash per Share without interest (the “Per Share Merger Consideration”) . Each American Depositary Share, representing thirty - five Shares (an “ADS” or collectively, the “ADSs”), other than the ADSs representing the Excluded Shares and Dissenting Shares, shall be cancelled in exchange for the right to receive an amount in cash equal to US $ [ 4 . 00 ] without interest (the “Per ADS Merger Consideration”) “ Rollover Shares ” means all of the issued and outstanding shares held by each of the Rollover Holders “Excluded Shares” means Rollover Shares and Shares owned by Parent, the Company or any of their subsidiaries, including Shares represented by ADSs Certain Closing Conditions Vote requirements : affirmative vote of shareholders representing two - thirds or more of the Shares present and voting in person or by proxy as a single class at the Company Shareholders’ Meeting Company Termination Fee US $ 1 . 1 million Parent Termination Fee US $ 2 . 2 million Source: Draft dated December 18, 2015 of the Agreement and Plan of Merger among Minat Associated Co., Ltd., ChinaEquity Alliance Victory Co., Ltd., and Mecox Lane Limited (the “Agreement”) Note: 1. This summary is intended only as an overview of selected terms and is not intended to cover all terms or details of the Transaction; this summary is qualified by the terms and conditions of the Agreement. Merger Overview
Draft – for discussion only Buyer Group ADS Holders ADS HeldOwnership % CNshangquan Limited 8,301,853 63.8% ChinaEquity USD Fortune Co., Ltd. 1,041,845 8.0% Total Buyer Group Ownership 9,343,698 71.8% Unaffiliated ADS Holders ADS HeldOwnership % CDIB & Partners 46,224 0.4% Others 3,616,577 27.8% Total Unaffiliated Ownership 3,662,800 28.2% Total ADS Outstanding 13,006,498 100.0% Unaffiliated Shareholders 28.2% Buyer Group 71.8% ADS H older Structure Merger Overview 4 Ownership Structure (ADS H older Detail) 1 Source: Capital IQ, Company filings and Company management Note: 1. Based on 455,227,428 ordinary shares or 13,006,498 ADS outstanding as of December 18, 2015 Ownership Structure
Draft – for discussion only (dollars and ADSs in millions, except per ADS values) Per ADS ADS Transaction Security Outstanding 1 Consideration 2 ADS 13.0 $4.00 Implied Values Implied Common Equity $52.0 Adjustments: Add: Total Debt 3 0.0 Add: Noncontrolling Interest 0.1 Less: Cash and Cash Equivalents 4 (20.6) Implied Enterprise Value $31.6 Implied Transaction Multiples Implied Revenues, Net Multiple LTM 9/30/15 0.56x NFY 2015E 0.57x NFY+1 2016E 0.51x EBITDA LTM 9/30/15 4.8x NFY 2015E 5.0x NFY+1 2016E 5.1x Implied Premium of Per ADS Trading Period Closing Transaction Consideration over Prior to Announcement ADS Price Average Closing ADS Price 1-Day $3.40 17.6% 5-Day Average $3.26 22.5% 10-Day Average $3.19 25.4% 1-Month Average $3.27 22.3% 3-Month Average $3.63 10.1% 6-Month Average $3.70 8.2% 1-Year Average 5 $3.73 7.1% 52-Week High 5 7/22/14 $4.69 -14.7% 52-Week Low 5 7/8/15 $2.60 53.8% Transaction Value Overview 5 Source: Company filings; LTM financial per Company filings, NFY and NFY+1 financials per Company management Notes: 1. Based on 455,227,428 ordinary shares or 13,006,498 ADS outstanding as of December 18, 2015 2. The Company received an offer from the Buyer Group on 7/21/2015 at $4.00 per ADS for all the outstanding ADSs of the Company 3. Total debt includes zero short - term and long - term debt as of 9/30/2015 per unaudited figures provided by Company management 4. Cash and cash equivalents and short - term investment as of 9/30/2015 per unaudited figures provided by Company management 5. Includes pricing prior to the spin - off of Giosis Mecoxlane Limited and Mixblu Limited LTM refers to the most recently completed twelve month period for which financial information has been made public, NFY refers to ne xt fiscal year, NFY+1 refers to the year after next fiscal year E refers to Estimated Summary of Proposed Transaction Value Implied Premiums to Historical ADS Trading Prices Merger Overview
Draft – for discussion only 0.000 0.500 1.000 1.500 2.000 2.500 3.000 3.500 4.000 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 12/17/12 03/18/13 06/12/13 09/10/13 12/04/13 03/04/14 06/02/14 08/27/14 11/24/14 02/24/15 06/02/15 09/08/15 12/16/15 Daily Volume (MMs) Closing Stock Price (US$) Daily Volume Mecox Lane Limited ADS Trading History 6 1 - Week Avg. Daily Volume 5,340 1 - Month Avg. Daily Volume 14,100 3 - Month Avg. Daily Volume 11,700 6 - Month Avg. Daily Volume 13,230 52 Week High (7/22/2014) $4.69 52 Week Low (7/8/2015) $2.60 All Time High (10/26/2010) $92.50 All Time Low (3/14/2013) $1.67 Source: Capital IQ, Factiva, Company filings, public information ADS price reflects 1 for 5 share split of the ADSs exchange ratio in January 2013 ADS Price & Volume History for Last 3 Years Proposed Per ADS Transaction Consideration of $4.00 Price & Volume Statistics (Trading Period P rior to Announcement) 7/21/2015 CNshangquan and Leading Capital submitted a preliminary non - binding going private proposal 12/22/2014 Oak Investment signed an agreement to acquire 57.14% stake in Giosis Mecoxlane Limited from Mecox Lane for $2 million 9/18/2014 Fast Fashion China Limited completed the acquisition of Mixblu Limited from Mecox Lane for $6.1 million 5/20/2014 CNshangquan E - Commerce completed the acquisition of 63.7% stake of Mecox Lane for $39.0 million 8/13/2013 Mecox Lane announced decrease in net revenue, gross profit and net loss worse than previous forecast 8/8/2014 Mecox Lane announced spin - off of apparel and accessories business 1/21/2013 Mecox Lane announced ADS ratio change from one ADS representing 7 shares to one ADS representing 35 shares Merger Overview
Draft – for discussion only 0.000 0.020 0.040 0.060 0.080 0.100 0.120 0.140 0.160 $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 12/22/14 02/18/15 04/14/15 06/16/15 08/17/15 10/15/15 12/17/15 Daily Volume (MMs) Closing Stock Price (US$) Daily Volume ADS Trading History Since Mixblu & Giosis Spin - off in 2014 7 52 Week High (7/22/2014) $4.69 52 Week Low (7/8/2015) $2.60 All Time High (10/26/2010) $92.50 All Time Low (3/14/2013) $1.67 Source: Capital IQ, Factiva, Company filings, public information ADS Price & Volume History Since Mixblu & Giosis Spin - off in 2014 Price & Volume Statistics (Trading Period P rior to Announcement) 7/21/2015 CNshangquan E - Commerce and Leading Capital submitted a preliminary non - binding going private proposal 12/22/2014 Oak Investment signed an agreement to acquire 57.14% stake in Giosis Mecoxlane Limited from Mecox Lane for $2 million Proposed Per ADS Merger Consideration of $4.00 1 - Week Avg. Daily Volume 5,340 1 - Month Avg. Daily Volume 14,100 3 - Month Avg. Daily Volume 11,700 6 - Month Avg. Daily Volume 13,230 Merger Overview
Draft – for discussion only 50% 70% 90% 110% 130% 150% 170% 190% 210% 230% 250% Indexed Prices Mecox Lane Limited S&P 500 Index Selected Companies Index Relative ADS and Share Performance 8 Indexed ADS and Share Price Performance for Last 3 Years S&P 500 Index: +42.8% Mecox Lane Limited: +23.4% Selected Companies Index 1 : - 1.9% Merger Overview Source: Capital IQ Notes: 1. Selected Companies Index includes: Avon Products (NYSE:AVP), Nu Skin Enterprises (NYSE: NUS), Evine Live ( NasdaqGS : EVLV), Lifevantage ( NasdaqCM : LFVN), Mannatech ( NasdaqGS : MTEX), GS Home Shopping (KOSDAQ: A028150), Amway (KLSE: AMWAY), Tea Life (TSE:3172)
Draft – for discussion only 50% 60% 70% 80% 90% 100% 110% 120% 130% 140% 150% Indexed Prices Mecox Lane Limited S&P 500 Index Selected Companies Index Relative ADS and Share Performance Since Mixblu & Giosis Spin - off in 2014 9 Indexed ADS and Share Price Performance Since Mixblu & Giosis Spin - off in 2014 Mecox Lane Limited: 12.9% S&P 500 Index: - 1.8% Selected Companies Index 1 : - 27.0% Merger Overview Source: Capital IQ Notes: 1. Selected Companies Index includes: Avon Products (NYSE:AVP), Nu Skin Enterprises (NYSE: NUS), Evine Live ( NasdaqGS : EVLV), Lifevantage ( NasdaqCM : LFVN), Mannatech ( NasdaqGS : MTEX), GS Home Shopping (KOSDAQ: A028150), Amway (KLSE: AMWAY), Tea Life (TSE:3172)
Draft – for discussion only Financial Analysis
Draft – for discussion only $3.62 $3.52 $3.25 $3.87 $3.68 $4.88 $4.74 $4.45 $4.62 $4.46 $3.00 $3.25 $3.50 $3.75 $4.00 $4.25 $4.50 $4.75 $5.00 Selected Companies Analysis Selected Companies Analysis Selected Companies Analysis Selected Transactions Analysis Discounted Cash Flow Analysis 4.0x - 6.0x 4.0x - 6.0x 3.5x - 5.5x 4.5x - 5.5x Discount Rate: LTM Ended 9/30/15 EBITDA NFY 2015E EBITDA NFY+1 2016E EBITDA LTM Ended 9/30/15 EBITDA 14.0% - 16.0% Perpetual Growth Rate: 2.5% - 3.5% Financial Analyses S ummary Financial Analysis 11 Notes: No particular weight was attributed to any individual analysis 1. Based on 13.0 million ADSs outstanding as of December 18 , 2015 per Company management 2 . Debt, preferred stock, cash and cash equivalents and non - controlling interest as of 9 / 30 / 2015 per unaudited figures provided by Company management 3 . Financial analysis excludes discontinued operations 4 . NOL value provided by Company management and valued by discounting projected tax savings at cost of equity ; NOL refers to net operating loss LTM refers to the most recently completed twelve month period for which financial information has been made public NFY refers to the next fiscal year for which financial information has not been made public NFY+1 refers to the year after next fiscal year Proposed Per ADS Merger Consideration of $4.00 (US$ P er ADS) Implied Per ADS Equity Value Reference Range 1,2,3, 4
Draft – for discussion only (ADSs outstanding and dollars in millions, except per ADS values) Selected Companies Selected Companies Selected Companies Selected Transactions Discounted Cash Flow Analysis Analysis Analysis Analysis Analysis LTM Ended 9/30/15 NFY 2015E NFY+1 2016E LTM Ended 9/30/15 EBITDA EBITDA EBITDA EBITDA Corresponding Base Amount $6.6 $6.3 $6.2 $6.6 Selected Multiples Range 4.0x -- 6.0x 4.0x -- 6.0x 3.5x -- 5.5x 4.5x -- 5.5x Implied Enterprise Value Reference Range $26.6 -- $39.9 $25.4 -- $38.1 $21.8 -- $34.3 $29.9 -- $36.5 $27.4 -- $34.4 Add: Cash and Cash Equivalents as of 9/30/2015 1 $20.6 -- $20.6 $20.6 -- $20.6 $20.6 -- $20.6 $20.6 -- $20.6 $20.6 -- $20.6 Implied Total Enterprise Value Reference Range $47.1 -- $60.4 $45.9 -- $58.6 $42.4 -- $54.9 $50.5 -- $57.1 $48.0 -- $54.9 Add: NOL Value 2 $0.0 -- $3.1 $0.0 -- $3.1 $0.0 -- $3.1 $0.0 -- $3.1 $0.0 -- $3.1 Less: Noncontrolling Interest as of 9/30/15 1 ($0.1) -- ($0.1) ($0.1) -- ($0.1) ($0.1) -- ($0.1) ($0.1) -- ($0.1) ($0.1) -- ($0.1) Implied Total Equity Value Reference Range $47.0 -- $63.5 $45.8 -- $61.7 $42.3 -- $57.9 $50.4 -- $60.1 $47.9 -- $58.0 Shares Outstanding 3 13.0 -- 13.0 13.0 -- 13.0 13.0 -- 13.0 13.0 -- 13.0 13.0 -- 13.0 Implied Per ADS Reference Range $3.62 -- $4.88 $3.52 -- $4.74 $3.25 -- $4.45 $3.87 -- $4.62 $3.68 -- $4.46 Financial Analyses Summary (cont.) Financial Analysis 12 Source : Financial items are based on Mecox Lane’s public filings ; NFY and NFY+ 1 revenue and EBITDA based on Company management projections Note : 1. Cash and cash equivalents and non - controlling interest as of 9 / 30 / 2015 per unaudited figures provided by Company management 2. NOL value provided by Company management and valued by discounting projected tax savings at cost of equity ; NOL refers to net operating loss 3. Based on 13 . 0 million ADSs outstanding as of December 18 , 2015 per Company management NFY refers to the next fiscal year for which financial information has not been made public NFY +1 refers to the year after next fiscal year
Draft – for discussion only (dollars in millions) Fiscal Year Ended December 31, LTM Ended Fiscal Year Ending December 31, CAGR 2012 2013 2014 9/30/15 2015E 2016E 2017E 2018E 2019E 2014 to 2019E Revenues, Net $38.8 $42.6 $49.6 $56.7 $55.5 $62.5 $71.9 $81.8 $93.1 13.4% Growth % #VALUE! 9.8% 16.4% 11.8% 12.6% 15.0% 13.9% 13.7% Cost of Goods Sold (13.0) (15.9) (17.3) (20.1) (19.5) (22.5) (26.5) (30.6) (35.3) Gross Profit $25.9 $26.7 $32.3 $36.6 $36.0 $40.0 $45.4 $51.2 $57.8 Margin % 66.6% 62.7% 65.1% 64.5% 64.9% 63.9% 63.1% 62.6% 62.1% SG&A (excluding D&A) (19.5) (25.0) (24.9) (29.9) (29.7) (33.7) (37.9) (41.8) (47.3) EBITDA $6.3 $1.7 $7.4 $6.6 $6.3 $6.2 $7.5 $9.4 $10.5 7.2% Margin % 16.3% 4.1% 14.9% 11.7% 11.4% 10.0% 10.4% 11.5% 11.2% Growth % #DIV/0! -72.5% 325.0% -14.2% -1.6% 20.1% 25.7% 10.9% Depreciation & Amortization (1.2) (2.3) (1.6) (2.7) (2.6) (2.7) (2.8) (2.8) (2.9) EBIT $5.1 ($0.5) $5.8 $4.0 $3.7 $3.5 $4.7 $6.6 $7.6 5.6% Margin % 13.2% -1.3% 11.6% 7.0% 6.8% 5.6% 6.5% 8.1% 8.1% Selected Historical and Projected Financial Information Financial Analysis 13 Source: Public filings, Capital IQ, Company management Notes: Excludes discounted operations Converted all RMB - denominated projections into U.S. dollars at the exchange rate of forward exchange rate with mid year adjustme nt CAGR refers to Compound Annual Growth Rate, 5 - year CAGR for RMB Revenue, EBITDA and EBIT projections are 13.9%, 7.6% and 6.0%, respectively EBITDA refers to Earnings Before Interest, Taxes, Depreciation & Amortization, adjusted for certain non - recurring items EBIT refers to Earnings Before Interest and Taxes, adjusted for certain non - recurring items E refers to Estimated LTM refers to the most recently completed twelve month period for which financial information has been made public
Draft – for discussion only (dollars, ADSs and shares in millions, except per share or per ADS values, as of 12/17/2015) Equity Enterprise EV / Revenue EV / EBITDA P / E Stock Price Value Value LTM NFY NFY+1 LTM NFY NFY+1 LTM NFY NFY+1 Company Ticker (12/17/2015) (US$mm) (US$mm) (x) (x) (x) (x) (x) (x) (x) (x) (x) Selected Firms Avon Product NYSE:AVP $4.03 $1,754 $3,457 0.45x 0.47x 0.49x 5.7x 5.8x 5.7x 10.3x 12.6x 8.9x Nu Skin Enterprises NYSE:NUS 37.90 2,235 2,172 0.95x 0.90x 0.84x 6.3x 5.4x 5.0x 14.5x 10.7x 9.4x Amway KLSE:AMWAY 2.23 367 314 1.38x 1.47x 1.41x 12.2x 10.1x 9.6x 19.4x 16.7x 16.0x GS Home Shopping KOSDAQ:A028150 142.51 889 283 0.30x 0.30x 0.28x 2.7x 2.5x 2.3x 11.9x 10.6x 9.4x EVINE Live NasdaqGS:EVLV 1.57 90 134 0.20x 0.20x 0.18x 11.3x 10.7x 6.0x NMF NA NA Lifevantage NasdaqCM:LFVN 8.30 118 121 0.66x 0.64x NA 10.9x 7.0x NA 35.3x 13.5x NA Tea Life TSE:3172 7.95 34 30 0.53x NA NA 7.5x NA NA 19.8x NA NA Mannatech NasdaqGS:MTEX 19.40 53 19 0.10x NA NA 1.4x NA NA 8.6x NA NA Mean 0.57x 0.66x 0.64x 7.3x 6.9x 5.7x 17.1x 12.8x 10.9x Median 0.49x 0.56x 0.49x 6.9x 6.4x 5.7x 14.5x 12.6x 9.4x High 1.38x 1.47x 1.41x 12.2x 10.7x 9.6x 35.3x 16.7x 16.0x Low 0.10x 0.20x 0.18x 1.4x 2.5x 2.3x 8.6x 10.6x 8.9x Current Mecox Lane NasdaqGS:MCOX $3.58 47 26 0.46x 0.47x 0.42x 3.9x 4.1x 4.2x 13.3x 14.5x 14.7x Offer Mecox Lane NasdaqGS:MCOX $4.00 52 32 0.56x 0.57x 0.51x 4.8x 5.0x 5.1x 14.9x 16.2x 16.4x Selected Companies Trading Statistics Financial Analysis 14 Sources: Capital IQ, Company public filings, analyst reports; NFY and NFY+1 per Company management Notes: 1 . Equity Market Value refers to share price * (common ADS or shares outstanding + options and warrants per the treasury stock m eth od) 2. Enterprise Value refers to equity market value + debt + preferred stock + derivative liabilities + minority interest – cash and short term investment LTM refers to the most recently completed twelve month period for which financial information has been made public NFY refers to next fiscal year; NFY+1 refers to the year after next fiscal year NA refers to not available figure No company used in this analysis for comparative purposes is identical to the Company
Draft – for discussion only (US$ in millions) Announcement % Implied Implied Implied EV / EBITDA Date Target Acquiror Sought Equity Value EV EBITDA Margin % 05/27/2015 Orchard Brands Corporation Bluestem Brands, Inc. 100% $410.0 $410.0 5.8x NA 6.9% 09/16/2014 The Book People Limited Endless LLP 100% 24.3 24.3 NA NANA NA NA 03/26/2014 R&Y Corporation LG Household and Health Care, Ltd. 100% 50.7 50.7 NA NA NA NA 12/06/2013 Tea Life Co., Ltd. N&K Co., Ltd. 26% 27.3 11.1 2.1x 9.8% 07/02/2013 Silpada Designs, Inc. Rhinestone Holdings Inc. 100% 85.0 100.0 NA NA NANA NA NA 06/10/2013 JIMOS Co.,Ltd. Nac Co., Ltd. 100% 60.7 60.7 NA NA NA NA 01/17/2013 New Image Group Limited New Image Trustee Limited 94% 51.3 42.9 5.3x NMF 8.9% 10/23/2012 Apex Co., Ltd. Tea Life Co., Ltd. 100% 6.0 6.0 NA NA NA NA Mean 4.4x 8.6% Median 5.3x 8.9% High 5.8x 9.8% Low 2.1x 6.9% 07/21/2015 Mecox Lane Limited Cnshangquan E-Commerce; ChinaEquity 28% $52.0 $31.6 4.8x 11.7% Selected Transactions Statistics Financial Analysis 15 Source: Capital IQ, Mergermarket Based on reported metric for the most recent LTM period prior to the announcement of the transaction NA refers to not available figure NMF refers to no meaningful figure No transaction used in this analysis for comparative purposes is identical to the Transaction Implied enterprise value of target company based on the announced transaction equity price and other public information avail abl e at the time of the announcement
Draft – for discussion only (dollars in millions, except per ADS values) Projected FYE December 31, 2015E 2016E 2017E 2018E 2019E Terminal Value Assumptions Implied 2019E EBITDA Revenues, Net $2.1 $62.5 $71.9 $81.8 $93.1 Revenues, Net $93.1 Terminal Multiple 4 Growth % 11.8% 12.6% 15.0% 13.9% 13.7% Discount Rate 2.5% 3.0% 3.5% 14.0% 3.6x 3.7x 3.9x Cost of Goods Sold (0.7) (22.5) (26.5) (30.6) (35.3) Cost of Goods Sold (35.3) 14.5% 3.4x 3.6x 3.8x SG&A (excluding D&A) (1.1) (33.7) (37.9) (41.8) (47.3) SG&A (excluding D&A) (47.3) 15.0% 3.3x 3.4x 3.6x EBITDA $0.2 $6.2 $7.5 $9.4 $10.5 EBITDA $10.5 15.5% 3.2x 3.3x 3.5x Margin % 11.4% 10.0% 10.4% 11.5% 11.2% Margin % 11.2% 16.0% 3.1x 3.2x 3.3x Depreciation & Amortization (0.1) (2.7) (2.8) (2.8) (2.9) Depreciation & Amortization (4.4) EBIT $0.1 $3.5 $4.7 $6.6 $7.6 EBIT $6.1 PV of Terminal Value Taxes 3 (0.0) (0.9) (1.2) (1.6) (1.9) Taxes 3 (1.5) as a % of Enterprise Value Unlevered Earnings $0.1 $2.6 $3.5 $4.9 $5.7 Unlevered Earnings $4.6 Discount Rate 2.5% 3.0% 3.5% Depreciation & Amortization 0.1 2.7 2.8 2.8 2.9 Depreciation & Amortization 4.4 14.0% 68.2% 69.3% 70.4% Capital Expenditures (0.0) (1.0) (3.4) (3.9) (4.4) Capital Expenditures (4.4) 14.5% 67.1% 68.2% 69.2% Change in Net Working Capital (0.2) (0.4) (0.5) (0.6) (0.7) Change in Net Working Capital (0.7) 15.0% 66.0% 67.1% 68.1% Unlevered Free Cash Flows ($0.1) $3.9 $2.4 $3.3 $3.5 $3.9 15.5% 65.0% 66.0% 67.0% 16.0% 64.0% 64.9% 65.9% Present Value PV of Terminal Value Based of Cash Flows on Perpetual Growth Rate for Implied Enterprise Value Net Debt and Other 5 Implied Total Equity Value Implied Equity Value Per ADS 6 Discount Rate (2015 - 2019) 2019 Unlevered Free Cash Flow 2.5% 3.0% 3.5% 2.5% 3.0% 3.5% 2.5% 3.0% 3.5% 2.5% 3.0% 3.5% 14.0% $10.2 $21.9 $23.0 $24.2 $32.1 $33.2 $34.4 ($23.6) $55.7 $56.8 $58.0 $4.28 $4.37 $4.46 14.5% $10.1 $20.6 $21.6 $22.7 $30.7 $31.7 $32.8 ($23.6) $54.4 $55.4 $56.5 $4.18 $4.26 $4.34 15.0% $10.0 + $19.5 $20.4 $21.4 = $29.5 $30.4 $31.4 - ($23.6) = $53.1 $54.1 $55.0 = $4.09 $4.16 $4.23 15.5% $9.9 $18.5 $19.3 $20.2 $28.4 $29.3 $30.2 ($23.6) $52.0 $52.9 $53.8 $4.00 $4.06 $4.13 16.0% $9.9 $17.5 $18.3 $19.1 $27.4 $28.2 $29.0 ($23.6) $51.0 $51.8 $52.6 $3.92 $3.98 $4.04 Source : Based on projections provided by Company management Notes : 1 . Present values as of 12 / 17 / 2015 ; excludes discounted operations 2 . Represents a 0 . 5 month stub period with valuation date as of 12 / 17 / 2015 3 . Applies normalized tax rate at 25 % 4 . Implied from corresponding discount rate and perpetual growth rate applied to 2019 EBITDA 5 . Includes net debt and non - controlling interest as of 9 / 30 / 2015 per unaudited figures provided by Company management and $ 3 . 1 million representing the estimated net present value of NOL tax savings ; NOL refers to net operating loss 6 . Based on 13 . 0 million ADSs outstanding as of December 18 , 2015 per Company management Discounted Cash Flow Analysis 1 Financial Analysis 16 2
Draft – for discussion only (dollars in millions, except per ADS values) Projected FYE December 31, 2015E 2016E 2017E 2018E 2019E 2020E NOL Schedule Beginning Balance $16.5 $12.2 $9.8 $8.0 $5.9 $3.4 Less: Annual Usage (4.3) (2.4) (1.7) (2.1) (2.5) (3.4) Ending Balance $12.2 $9.8 $8.0 $5.9 $3.4 $0.0 Present Value Discounted at Ke NOL Usage $4.3 $2.4 $1.7 $2.1 $2.5 $3.4 Multiply: PRC Corporate Income Tax Rate 3 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% NOL Value $1.1 $0.6 $0.4 $0.5 $0.6 $0.9 Discount Period 0.02 0.54 1.54 2.54 3.54 4.54 Discounted Value at 17.0% (Ke) $1.1 $0.6 $0.3 $0.4 $0.4 $0.4 Discounted Value at 16.0% (Ke) $1.1 $0.6 $0.3 $0.4 $0.4 $0.4 Discounted Value at 15.0% (Ke) $1.1 $0.6 $0.4 $0.4 $0.4 $0.5 Net Present Value at 17.0% (Ke) $3.103 Net Present Value at 16.0% (Ke) $3.146 Net Present Value at 15.0% (Ke) $3.191 Source : Based on projections and expected usage per Company management Notes : 1 . Present values as of 12 / 17 / 2015 2 . Represents a 0 . 5 month stub period with valuation date as of 12 / 17 / 2015 4 . Applies normalized tax rate at 25 % Ke refers to cost of equity NOL Tax Savings 1 Financial Analysis 17 2
Draft – for discussion only Appendix
Draft – for discussion only Appendix Additional Financial Data
Draft – for discussion only Size 2 Historical Growth (Enterprise Value as of 12/17/15, millions) (2-Fiscal Year Revenue) Name Value Avon Products Inc. $3,456.6 Nu Skin Enterprises Inc. $2,171.7 Amway Malaysia Holdings Bhd $314.4 GS Home Shopping Inc. $282.8 EVINE Live Inc. $134.5 Lifevantage Corporation $120.8 Tea Life Co., Ltd. $29.6 Mecox Lane Limited $26.2 Mannatech, Incorporated $18.8 Size Size (Sales Per Representative) (Sales Per Order) Name Value Mecox Lane Limited $61,474.0 Amway Malaysia Holdings Bhd $3,536.4 Lifevantage Corporation $2,928.2 Nu Skin Enterprises Inc. $2,250.7 Avon Products Inc. $1,475.2 Mannatech, Incorporated $790.1 EVINE Live Inc. NA GS Home Shopping Inc. NA Tea Life Co., Ltd. NA Size Size 2 (LTM Revenue, millions) (Enterprise Value as of 11/20/15, millions) Name Value Avon Products Inc. $7,625.5 Nu Skin Enterprises Inc. $2,284.5 GS Home Shopping Inc. $966.5 EVINE Live Inc. $677.8 Amway Malaysia Holdings Bhd $229.0 Lifevantage Corporation $184.1 Mannatech, Incorporated $180.1 Mecox Lane Limited $56.7 Tea Life Co., Ltd. $55.5 Benchmarking Analysis 1 Appendix: Additional Financial Data 20 Size Industry Metric 3 (Sales Per Order) (Metric) Name Value Mannatech, Incorporated $167.1 Mecox Lane Limited $109.9 EVINE Live Inc. $67.0 Avon Products Inc. NA GS Home Shopping Inc. NA Lifevantage Corporation NA Nu Skin Enterprises Inc. NA Tea Life Co., Ltd. NA Amway Malaysia Holdings Bhd NA Historical Growth Historical Growth (2-Fiscal Year Revenue) (1-Fiscal Year Revenue) Name Value Mecox Lane Limited 13.0% Tea Life Co., Ltd. 10.0% Nu Skin Enterprises Inc. 9.8% EVINE Live Inc. 7.2% Mannatech, Incorporated 4.7% Amway Malaysia Holdings Bhd 3.6% GS Home Shopping Inc. 3.3% Lifevantage Corporation -4.4% Avon Products Inc. -8.5% Historical Growth Projected Growth (1-Fiscal Year Revenue) (1-Fiscal Year Revenue) Name Value Mecox Lane Limited 16.4% Tea Life Co., Ltd. 13.3% Mannatech, Incorporated 7.1% EVINE Live Inc. 5.3% GS Home Shopping Inc. 3.5% Amway Malaysia Holdings Bhd 2.6% Lifevantage Corporation -11.0% Avon Products Inc. -11.1% Nu Skin Enterprises Inc. -19.1% Historical Growth Historical Growth (2-Fiscal Year EBITDA) (1-Fiscal Year EBITDA) Name Value EVINE Live Inc. 349.0% Mannatech, Incorporated 95.0% Mecox Lane Limited 8.1% Nu Skin Enterprises Inc. 4.3% GS Home Shopping Inc. 3.3% Amway Malaysia Holdings Bhd -2.4% Avon Products Inc. -2.5% Tea Life Co., Ltd. -6.2% Lifevantage Corporation -6.5% Historical Growth Projected Growth (1-Fiscal Year EBITDA) (1-Fiscal Year EBITDA) Name Value Mecox Lane Limited 325.0% Mannatech, Incorporated 108.7% EVINE Live Inc. 27.8% GS Home Shopping Inc. -4.3% Tea Life Co., Ltd. -6.7% Amway Malaysia Holdings Bhd -9.0% Avon Products Inc. -13.9% Lifevantage Corporation -25.0% Nu Skin Enterprises Inc. -30.9% Source: Public filings, Capital IQ, Company management Notes: 1. No company used for comparative purposes is identical to the Company 2. Based on public trading prices of common ADS or common stock, as applicable LTM refers to the most recently completed twelve month period for which financial information has been made public NA refers to not available
Draft – for discussion only Leverage 2 (Debt to EV as of 12/17/15) Name Value Mecox Lane Limited 0.0% GS Home Shopping Inc. 0.0% Amway Malaysia Holdings Bhd 0.0% Mannatech, Incorporated 6.1% Nu Skin Enterprises Inc. 11.6% Tea Life Co., Ltd. 13.7% Lifevantage Corporation 13.9% EVINE Live Inc. 43.8% Avon Products Inc. 66.9% Relative Depreciation Internal Investment (LTM Depr. to LTM EBITDA) (LTM Capital Expenditures to LTM Revenue) Name Value EVINE Live Inc. 75.4% Mecox Lane Limited 40.0% Tea Life Co., Ltd. 27.8% Avon Products Inc. 24.8% Lifevantage Corporation 20.2% Nu Skin Enterprises Inc. 19.9% GS Home Shopping Inc. 18.2% Mannatech, Incorporated 12.4% Amway Malaysia Holdings Bhd 6.7% Profitability Relative Depreciation (LTM EBITDA to LTM Revenue) (LTM Depr. to LTM EBITDA) Name Value Nu Skin Enterprises Inc. 15.0% Mecox Lane Limited 11.7% Amway Malaysia Holdings Bhd 11.4% GS Home Shopping Inc. 11.0% Avon Products Inc. 8.0% Mannatech, Incorporated 7.5% Tea Life Co., Ltd. 7.1% Lifevantage Corporation 6.0% EVINE Live Inc. 1.7% Liquidity Leverage 2 (Current Asset to Current Liability) (Debt to EV as of 11/20/15) Name Value Tea Life Co., Ltd. 2.9 GS Home Shopping Inc. 2.3 Mecox Lane Limited 2.0 Nu Skin Enterprises Inc. 1.9 EVINE Live Inc. 1.8 Amway Malaysia Holdings Bhd 1.7 Mannatech, Incorporated 1.6 Avon Products Inc. 1.4 Lifevantage Corporation 1.1 Internal Investment Liquidity (LTM Capital Expenditures to LTM Revenue) (Current Asset to Current Liability) Name Value Tea Life Co., Ltd. 18.2% Mecox Lane Limited 12.4% GS Home Shopping Inc. 5.8% EVINE Live Inc. 4.8% Nu Skin Enterprises Inc. 2.8% Avon Products Inc. 1.4% Mannatech, Incorporated 0.5% Lifevantage Corporation 0.5% Amway Malaysia Holdings Bhd 0.4% Projected Growth Projected Growth (1-Fiscal Year EBITDA) (5-Fiscal Year EPS) Name Value Lifevantage Corporation 6.9% Nu Skin Enterprises Inc. -0.8% Amway Malaysia Holdings Bhd -0.8% GS Home Shopping Inc. -11.0% Mecox Lane Limited -14.2% Avon Products Inc. -29.9% EVINE Live Inc. -33.6% Mannatech, Incorporated NA Tea Life Co., Ltd. NA Projected Growth (1-Fiscal Year Revenue) Name Value Mecox Lane Limited 11.8% Amway Malaysia Holdings Bhd 8.1% GS Home Shopping Inc. 3.0% EVINE Live Inc. 1.8% Lifevantage Corporation -0.5% Nu Skin Enterprises Inc. -6.1% Avon Products Inc. -17.7% Mannatech, Incorporated NA Tea Life Co., Ltd. NA Benchmarking Analysis 1 (cont.) 21 Source: Public filings, Capital IQ, Company management Notes: 1. No company used for comparative purposes is identical to the Company 2. Based on public trading prices of common ADS or common stock, as applicable LTM refers to the most recently completed twelve month period for which financial information has been made public NA refers to not available Appendix: Additional Financial Data
Draft – for discussion only 7/21/2015 - Mecox Lane Limited $4.00 17.6% 12.2% 11.6% 9.7% 10.5% 7.4% (14.7%) Price Premium 1-Day Prior 30-Day VWAP 2 60-Day VWAP 2 90 -Day VWAP 2 180-Day VWAP 2 52-Week VWAP 2 52-Week High 3 On-Going Deals 12/14/2015 - Trina Solar Limited $11.60 21.5% 17.7% 17.0% 20.6% 9.0% 11.4% (13.0%) 11/2/2015 - China Ming Yang Wind Power Group Ltd. 2.51 13.1% 19.3% 17.8% 11.2% (8.5%) (5.5%) (34.3%) 10/30/2015 - SORL Auto Parts, Inc. 2.84 21.9% 33.5% 38.9% 26.0% (6.7%) (9.7%) (36.7%) 10/16/2015 - Youku Tudou Inc. 27.60 35.1% 53.7% 51.6% 32.0% 31.9% 35.1% (12.4%) 9/15/2015 - Jinpan International Limited 4.50 24.3% 11.4% 3.7% (0.1%) (4.9%) (17.6%) (47.6%) 8/31/2015 - iKang Healthcare Group, Inc. 17.80 10.8% 9.6% 0.0% (3.0%) 0.1% (0.8%) (21.5%) 8/14/2015 - Country Style Cooking Restaurant Chain Co. Ltd. 5.23 18.9% 9.8% 2.5% 0.5% (0.4%) (4.4%) (29.8%) 8/3/2015 - eLong Inc. 18.00 24.1% 20.3% (8.5%) (7.7%) (5.6%) (5.4%) (33.9%) 8/3/2015 - Global-Tech Advanced Innovations 8.85 195.0% 162.2% 148.5% 147.3% 69.3% 68.8% 0.6% 7/21/2015 - Mecox Lane Limited 4.00 17.6% 12.2% 11.6% 9.7% 10.5% 7.4% (14.7%) 7/9/2015 - YY Inc. 68.50 17.4% (1.2%) 2.2% 8.3% 3.5% (2.7%) (28.9%) 7/9/2015 - E-Commerce China Dangdang Inc. 7.81 20.0% (15.9%) (16.6%) (15.6%) (19.8%) (29.8%) (52.4%) 7/6/2015 - China Nepstar Chain Drugstore Ltd. 2.60 18.2% (1.7%) (2.2%) 2.2% 14.0% 14.3% (21.2%) 6/29/2015 - Kongzhong Corp. 8.56 21.8% 11.5% 19.7% 27.0% 32.1% 27.3% (7.9%) 6/23/2015 - Momo Inc. 18.90 20.5% 147.0% 167.9% 183.4% 34.6% 11.2% (5.0%) 6/22/2015 - Vimicro International Corp. 13.50 9.5% 3.4% 9.8% 15.4% 38.8% 50.9% (18.1%) 6/22/2015 - China Information Technology, Inc. 4.43 31.1% 18.0% 12.7% 13.0% 13.3% 8.1% (39.7%) 6/19/2015 - AirMedia Group Inc. 6.00 70.5% 10.8% 30.2% 31.3% 46.2% 52.3% (22.1%) 6/17/2015 - Qihoo 360 Technology Co. Ltd. 77.00 16.6% 30.3% 31.6% 39.2% 29.4% 12.0% (26.5%) 6/15/2015 - iDreamSky Technology Limited 14.00 (3.8%) 24.5% 39.9% 41.5% 11.7% (6.8%) (46.1%) 6/12/2015 - Bona Film Group Limited 13.70 6.5% 20.4% 28.7% 34.6% 45.5% 55.2% 3.2% 6/11/2015 - Homeinns Hotel Group 35.80 18.7% 29.0% 36.4% 36.8% 31.3% 23.9% (2.8%) 6/10/2015 - Renren Inc. 4.20 2.2% 13.6% 24.6% 29.6% 35.5% 32.5% (5.6%) 6/10/2015 - 21Vianet Group, Inc. 23.00 15.5% 48.2% 36.4% 35.1% 28.1% 16.1% (28.9%) 6/9/2015 - E-House China Holdings Limited 6.64 (1.0%) 4.5% 8.4% 6.0% (9.9%) (21.5%) (46.8%) 6/5/2015 - JA Solar Holdings Co., Ltd. 9.69 19.9% 2.6% 1.7% 4.3% 10.2% 5.9% (14.3%) 6/4/2015 - Mindray Medical International Limited 28.00 1.9% (3.1%) (2.3%) (2.4%) (2.6%) (4.2%) (17.2%) 6/1/2015 - Taomee Holdings Ltd. 3.77 26.1% 17.3% 20.9% 13.7% 6.0% (7.1%) (31.8%) 4/27/2015 - China Cord Blood Corporation 6.40 (11.4%) 7.6% 11.0% 13.1% 17.5% 21.8% (11.6%) 4/20/2015 - Xueda Education Group 5.50 95.0% 86.4% 94.0% 100.2% 89.7% 76.7% (2.8%) 3/3/2015 - Jiayuan.com International Ltd. 7.56 62.9% 58.7% 60.6% 52.3% 39.4% 26.9% (14.6%) 8/19/2013 - Exceed Company Ltd. 1.78 19.5% 24.4% 27.9% 30.4% 30.2% 24.0% (6.3%) Mean 26.9% 27.7% 29.0% 29.2% 19.4% 14.6% (21.6%) Median 19.2% 17.5% 18.8% 18.0% 13.6% 11.3% (19.7%) High 195.0% 162.2% 167.9% 183.4% 89.7% 76.7% 3.2% Low (11.4%) (15.9%) (16.6%) (15.6%) (19.8%) (29.8%) (52.4%) Announced Date Closing Date Offer Price 1 (US$) Company Name Implied Premiums Paid in Selected Going - Private Transactions Involving US - Listed Chinese Companies 22 Source: Capital IQ, Company Filings Note: 1. As of announcement date or any revised offers received after announcement date 2. VWAP refers to Volume Weighted Average Price 3. 52 - Week High prior to going private announcement Appendix: Additional Financial Data
Draft – for discussion only Price Premium 1-Day Prior 30-Day VWAP 2 60-Day VWAP 2 90 -Day VWAP 2 180-Day VWAP 2 52-Week VWAP 2 52-Week High 3 Closed Deals 4/30/2015 12/10/2015 WuXi PharmaTech (Cayman) Inc. $46.00 16.5% 18.7% 19.5% 20.5% 23.6% 27.9% 2.2% 1/27/2014 11/19/2015 Shanda Games Limited 7.10 25.7% 47.3% 56.2% 58.7% 61.1% 66.8% 9.2% 4/13/2015 11/18/2015 Sungy Mobile Limited 4.90 8.9% 20.0% 10.9% 4.9% (30.1%) (51.5%) (76.8%) 5/18/2015 8/10/2015 China Mobile Games and Entertainment Group Limited 22.00 7.9% 6.0% 10.6% 15.0% 3.8% (99.9%) (25.9%) 1/2/2015 7/28/2015 Perfect World Co., Ltd. 20.20 28.2% 21.5% 11.3% 6.5% 5.4% 0.3% (23.0%) 5/22/2013 12/2/2014 Le Gaga Holdings Ltd 4.06 21.6% 22.0% 16.6% 15.7% 10.0% 7.7% (21.9%) 4/28/2012 11/26/2014 Sino Gas International Holdings, Inc. 1.30 306.3% 297.8% 271.4% 244.4% 258.2% 196.0% 176.6% 3/10/2014 11/18/2014 Montage Technology Group Limited 22.60 31.7% 28.0% 24.4% 25.8% n.a. n.a. n.a. 2/17/2014 9/29/2014 Chindex International Inc. 24.00 39.9% 44.5% 44.9% 45.5% 44.0% 51.9% 24.9% 9/30/2013 9/24/2014 Charm Communications Inc. 4.70 17.2% 14.3% 13.2% 9.2% 5.2% 4.7% (21.7%) 6/6/2013 8/29/2014 iSoftStone Holdings Limited 5.70 17.8% 26.4% 25.6% 22.1% 21.1% 17.9% (19.6%) 12/24/2013 7/30/2014 Noah Education Holdings Ltd. 2.85 26.7% 21.5% 26.3% 33.5% 50.7% 54.7% 11.3% 11/25/2013 7/18/2014 Giant Interactive Group, Inc. 12.00 18.5% 31.5% 33.7% 37.4% 47.7% 58.2% 5.0% 2/10/2014 7/17/2014 AutoNavi Holdings Limited 21.00 27.0% 38.6% 40.0% 36.1% 46.1% 52.2% (0.9%) 9/4/2013 7/9/2014 China Hydroelectric Corporation 3.51 57.4% 62.5% 54.4% 48.0% 60.2% 72.0% 8.0% 10/15/2012 7/3/2014 Yongye International, Inc. 7.10 48.2% 58.3% 74.1% 83.3% 98.4% 86.2% 20.3% 10/12/2012 5/30/2014 Ninetowns Internet Technology Group Company Limited 2.00 85.2% 79.4% 81.9% 73.7% 62.7% 62.7% (2.4%) 6/20/2013 4/23/2014 ChinaEdu Corporation 7.00 19.9% 17.9% 13.2% 14.0% 15.7% 18.3% (16.3%) 11/2/2012 4/14/2013 Trunkbow International Holdings, Ltd. 1.46 24.8% 48.6% 54.8% 49.3% 6.6% 1.1% (39.4%) 5/20/2013 3/27/2014 Pactera Technology International Ltd. 7.30 38.8% 34.5% 19.9% 14.0% 8.1% 2.5% (33.0%) 3/12/2013 3/28/2014 Camelot Information Systems Inc. 1.85 23.3% 27.6% 53.7% 51.5% 20.7% (20.0%) (54.5%) 1/20/2012 1/15/2014 AsiaInfo-Linkage, Inc. 12.00 21.0% 50.8% 43.2% 38.7% (0.1%) (13.9%) (47.6%) 3/11/2013 12/23/2013 Simcere Pharmaceutical Group. 9.66 21.4% 23.1% 22.7% 21.6% 21.3% 18.3% 2.0% 8/13/2012 7/30/2013 LJ International Inc. 2.00 24.2% 21.4% 29.2% 17.6% 4.7% (4.1%) (31.3%) 9/26/2012 7/5/2013 7 Days Group Holdings Limited 13.80 30.6% 43.2% 45.3% 42.5% 24.3% 15.6% (21.1%) 10/3/2012 6/27/2013 Feihe International, Inc. 7.40 21.3% 23.6% 14.9% 22.9% 42.8% 47.9% (20.4%) 3/27/2012 6/27/2013 Zhongpin, Inc. 13.50 46.6% 46.5% 38.6% 40.3% 44.7% 24.4% (22.0%) 9/12/2012 5/30/2013 3SBio Inc. 16.70 44.1% 45.7% 39.6% 33.8% 33.6% 37.2% 8.9% 8/13/2012 5/23/2013 Focus Media Holding Ltd. 27.50 17.6% 36.6% 33.9% 28.2% 28.2% 26.2% (16.5%) 2/15/2013 5/17/2013 China Shenghuo Pharmaceutical Holdings, Inc. 0.16 18.5% 61.5% 42.8% 46.0% (33.0%) (36.6%) (78.1%) 9/7/2012 4/8/2013 Syswin Inc. 2.05 28.1% 45.7% 39.9% 43.5% 112.5% 103.3% (12.4%) 7/6/2012 3/28/2013 ShangPharma Corporation 9.00 30.8% 44.8% 34.2% 20.4% 13.0% 4.8% (26.5%) 5/9/2012 2/6/2013 China Nuokang Bio-Pharmaceutical Inc. 5.80 56.8% 74.0% 95.9% 102.9% 41.3% 37.3% (1.4%) 5/21/2012 12/28/2012 Yucheng Technologies Limited 3.90 26.4% 28.0% 32.4% 42.5% 52.7% 43.5% 0.8% 11/3/2010 12/27/2012 Fushi Copperweld, Inc. 9.50 4.4% 1.6% 8.0% 9.4% (2.0%) 0.0% (26.6%) 4/2/2012 12/11/2012 Winner Medical Group Inc. 4.50 32.3% 29.2% 40.1% 46.4% 31.7% 12.7% (15.1%) 1/9/2012 11/9/2012 Pansoft Company Limited 4.15 106.5% 83.2% 93.2% 79.6% 36.7% 27.4% (16.0%) Announced Date Closing Date Company Name Offer Price 1 (US$) Implied Premiums Paid in Selected Going - Private Transactions Involving US - Listed Chinese Companies (cont.) 23 Source: Capital IQ, Company Filings Note: 1. As of announcement date or any revised offers received after announcement date 2. VWAP refers to Volume Weighted Average Price 3. 52 - Week High prior to going private announcement NA refers to not available figure Appendix: Additional Financial Data
Draft – for discussion only Price Premium 1-Day Prior 30-Day VWAP 2 60-Day VWAP 2 90 -Day VWAP 2 180-Day VWAP 2 52-Week VWAP 2 52-Week High 3 Closed Deals (cont.) 5/3/2012 11/2/2012 China Mass Media Corp. $5.00 115.5% 133.1% 38.9% (3.2%) (35.0%) (38.2%) (80.8%) 2/21/2012 10/31/2012 China TransInfo Technology Corp. 5.80 12.6% 26.6% 40.0% 52.6% 67.7% 47.7% 11.5% 2/24/2012 10/17/2012 Gushan Environmental Energy Limited 1.65 34.1% 28.1% 27.7% 10.0% (13.6%) (31.8%) (66.7%) 1/6/2012 5/15/2012 Jingwei International Limited 2.20 64.2% 66.6% 57.0% 48.2% 8.3% (5.7%) (46.5%) 10/28/2011 4/20/2012 China Real Estate Information Corporation 5.73 6.1% 20.1% 7.0% (5.8%) (13.3%) (21.8%) (46.3%) 11/14/2011 4/17/2012 China GrenTech Corp. Ltd. 3.15 23.0% 34.3% 42.4% 45.7% 18.4% 11.6% (14.9%) 10/17/2011 2/14/2012 Shanda Interactive Entertainment Ltd. 41.35 23.5% 26.6% 25.1% 20.6% 2.3% 2.5% (23.7%) 3/7/2011 11/4/2011 China Fire & Security Group, Inc. 9.00 43.8% 52.4% 40.1% 28.1% 12.1% (13.5%) (45.4%) 10/11/2010 11/3/2011 Harbin Electric, Inc. 24.00 20.2% 36.3% 35.1% 37.7% 24.8% 22.3% (7.7%) 1/28/2011 9/16/2011 China Security & Surveillance Technology, Inc. 6.50 33.2% 30.1% 26.1% 21.3% 24.9% 11.9% (26.9%) 3/25/2011 8/25/2011 Funtalk China Holdings Limited 7.20 17.1% 34.2% 30.6% 26.7% 2.9% 3.9% (17.5%) 11/11/2010 8/19/2011 Chemspec International Limited 8.10 28.2% 29.2% 27.0% 22.8% 10.4% 14.2% (10.5%) 6/27/2011 8/11/2011 Tiens Biotech Group (USA), Inc. 1.72 67.0% 44.2% 31.5% 27.6% 21.5% 16.5% (13.1%) 4/8/2010 4/15/2011 Tongjitang Chinese Medicines Company 4.50 19.0% 22.3% 21.9% 21.0% 17.9% 18.4% (11.8%) Mean 37.8% 43.3% 40.4% 37.2% 28.4% 22.0% (16.0%) Median 26.4% 34.2% 33.9% 28.2% 21.2% 16.0% (17.0%) High 306.3% 297.8% 271.4% 244.4% 258.2% 196.0% 176.6% Low 4.4% 1.6% 7.0% (5.8%) (35.0%) (51.5%) (80.8%) Overall Mean 33.6% 37.3% 36.0% 34.2% 24.9% 19.1% (18.2%) Median 21.9% 28.0% 29.2% 27.0% 19.6% 13.5% (17.8%) High 306.3% 297.8% 271.4% 244.4% 258.2% 196.0% 176.6% Low (11.4%) (15.9%) (16.6%) (15.6%) (35.0%) (51.5%) (80.8%) Announced Date Closing Date Company Name Offer Price 1 (US$) Implied Premiums Paid in Selected Going - Private Transactions Involving US - Listed Chinese Companies (cont.) 24 Source: Capital IQ, Company Filings Note: 1. As of announcement date or any revised offers received after announcement date 2. VWAP refers to Volume Weighted Average Price 3. 52 - Week High prior to going private announcement Appendix: Additional Financial Data 7/21/2015 - Mecox Lane Limited $4.00 17.6% 12.2% 11.6% 9.7% 10.5% 7.4% (14.7%)
Draft – for discussion only Appendix Disclaimer
Draft – for discussion only Disclaimer Project Beauty 26 This presentation, and any supplemental information (written or oral) or other documents provided in connection therewith (collectively, the “materials”), are provided solely for the information of the Special Committee of the Board of Directors (the “Committee”) of Mecox Lane Limited (the “Company”) by Houlihan Lokey in connection with the Committee’s consideration of a potential transaction (the “Transaction”) involving the Company . This presentation is incomplete without reference to, and should be considered in conjunction with, any supplemental information provided by and discussions with Houlihan Lokey in connection therewith . Any defined terms used herein shall have the meanings set forth herein, even if such defined terms have been given different meanings elsewhere in the materials . The materials are for discussion purposes only and may not be relied upon by any person or entity for any purpose except as expressly permitted by Houlihan Lokey’s engagement letter . The materials were prepared for specific persons familiar with the business and affairs of the Company for use in a specific context and were not prepared with a view to public disclosure or to conform with any disclosure standards under any state, federal or international securities laws or other laws, rules or regulations, and none of the Committee, the Company or Houlihan Lokey takes any responsibility for the use of the materials by persons other than the Committee . The materials are provided on a confidential basis solely for the information of the Committee and may not be disclosed, summarized, reproduced, disseminated or quoted or otherwise referred to, in whole or in part, without Houlihan Lokey’s express prior written consent . Notwithstanding any other provision herein, the Company (and each employee, representative or other agent of the Company) may disclose to any and all persons without limitation of any kind, the tax treatment and tax structure of any transaction and all materials of any kind (including opinions or other tax analyses, if any) that are provided to the Company relating to such tax treatment and structure . However, any information relating to the tax treatment and tax structure shall remain confidential (and the foregoing sentence shall not apply) to the extent necessary to enable any person to comply with securities laws . For this purpose, the tax treatment of a transaction is the purported or claimed U . S . income or franchise tax treatment of the transaction and the tax structure of a transaction is any fact that may be relevant to understanding the purported or claimed U . S . income or franchise tax treatment of the transaction . If the Company plans to disclose information pursuant to the first sentence of this paragraph, the Company shall inform those to whom it discloses any such information that they may not rely upon such information for any purpose without Houlihan Lokey’s prior written consent . Houlihan Lokey is not an expert on, and nothing contained in the materials should be construed as advice with regard to, legal, accounting, regulatory, insurance, tax or other specialist matters . Houlihan Lokey’s role in reviewing any information is limited solely to performing such a review as it shall deem necessary to support its own advice and analysis and shall not be on behalf of the Committee . Any statement contained in the materials as to tax matters was neither written nor intended by Houlihan Lokey or any of its affiliates 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 statement in promoting, marketing or recommending a partnership or other entity, investment Program or arrangement to any taxpayer, then such statement is being delivered to support the promotion or marketing of the transaction or matter addressed and such person should seek advice based on its particular circumstances from an independent tax advisor . The materials necessarily are based on financial, economic, market and other conditions as in effect on, and the information available to Houlihan Lokey as of, the date of the materials . Although subsequent developments may affect the contents of the materials, Houlihan Lokey has not undertaken, and is under no obligation, to update, revise or reaffirm the materials, except as expressly contemplated by Houlihan Lokey’s engagement letter . The materials are not intended to provide the sole basis for evaluation of the Transaction and do not purport to contain all information that may be required . The materials do not address the underlying business decision of the Company or any other party to proceed with or effect the Transaction . The materials do not constitute any opinion, nor do the materials constitute a recommendation to the Committee, any security holder of the Company or any other party as to how to vote or act with respect to any matter relating to the Transaction or otherwise or whether to buy or sell any assets or securities of any company . Houlihan Lokey’s only opinion is the opinion, if any, that is actually delivered to the Committee . The materials may not reflect information known to other professionals in other business areas of Houlihan Lokey and its affiliates . The analyses contained in the materials must be considered as a whole . Selecting portions of the analyses, analytic methods and factors without considering all analyses and factors could create a misleading or incomplete view . The materials reflect 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 participants in the Transaction . Any estimates of value contained in the materials are not necessarily indicative of actual value or predictive of future results or values, which may be significantly more or less favorable . Any analyses relating to the value of assets, businesses or securities do not purport to be appraisals or to reflect the prices at which any assets, businesses or securities may actually be sold . The materials do not constitute a valuation opinion or credit rating . In preparing the materials, Houlihan Lokey has not conducted any physical inspection or independent appraisal or evaluation of any of the assets, properties or liabilities (contingent or otherwise) of the Company or any other party and has no obligation to evaluate the solvency of the Company or any other party under any law . All budgets, projections, estimates, financial analyses, reports and other information with respect to operations (including estimates of potential cost savings and expenses) reflected in the materials have been prepared by management of the relevant party or are derived from such budgets, projections, estimates, financial analyses, reports and other information or from other sources, which involve numerous and significant subjective determinations made by management of the relevant party and/or which such management has reviewed and found reasonable . The budgets, projections and estimates contained in the materials may or may not be achieved and differences between projected results and those actually achieved may be material . Houlihan Lokey has relied upon, with the consent of the Committee, representations made by management of Company that such budgets, projections and estimates have been reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of such management (or, with respect to information obtained from public sources, represent reasonable estimates), and Houlihan Lokey expresses no opinion with respect to such budgets, projections or estimates or the assumptions on which they are based . The scope of the financial analysis contained herein is based on discussions with the Company (including, without limitation, regarding the methodologies to be utilized), and Houlihan Lokey does not make any representation, express or implied, as to the sufficiency or adequacy of such financial analysis or the scope thereof for any particular purpose . Houlihan Lokey has assumed and relied upon the accuracy and completeness of the financial and other information provided to, discussed with or reviewed by it without (and without assuming responsibility for) independent verification of such information, makes no representation or warranty (express or implied) in respect of the accuracy or completeness of such information and has further relied upon the assurances of the Company that it is not aware of any facts or circumstances that would make such information inaccurate or misleading . In addition, Houlihan Lokey has relied upon and assumed, without independent verification, that there has been no change in the business, assets, liabilities, financial condition, results of operations, cash flows or prospects of the Company since the respective dates of the most recent financial statements and other information, financial or otherwise, provided to Houlihan Lokey that would be material to its analyses . Furthermore, and without prejudice to liability for fraud, Houlihan Lokey , its affiliates, and their respective directors, officers, employees and agents, to the extent allowed under applicable law disclaim any liability, responsibility or obligation (whether in contract, tort or otherwise) in relation to the foregoing matters . The materials are not an offer to sell or a solicitation of an indication of interest to purchase any security, option, commodity, future, loan or currency . The materials do not constitute a commitment by Houlihan Lokey or any of its affiliates to underwrite, subscribe for or place any securities, to extend or arrange credit, or to provide any other services . In the ordinary course of business, certain of Houlihan Lokey’s affiliates and employees, as well as investment funds in which they may have financial interests or which they may co - invest, may acquire, hold or sell, long or short positions, or trade or otherwise effect transactions, in debt, equity, and other securities and financial instruments (including loans and other obligations) of, or investments in, one or more parties that may be involved in the Transaction and their respective affiliates or any currency or commodity that may be involved in the Transaction . Houlihan Lokey provides mergers and acquisitions, restructuring and other advisory services to clients . Houlihan Lokey’s personnel may make statements or provide advice that is contrary to information contained in the materials . Houlihan Lokey’s or its affiliates’ proprietary interests may conflict with the Company’s interests . Houlihan Lokey may have advised, may seek to advise and may in the future advise companies mentioned in the materials .
Mecox Lane Limited ADS (MM) (NASDAQ:MCOX)
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