SOGO Sogou Inc

Sogou Inc.
Tencent Holdings Limited
THL A21 Limited
TitanSupernova Limited
Tencent Mobility Limited
Sohu.com Limited
Sohu.com (Search) Limited
(Name of Person(s) Filing Statement)

Class A Ordinary Shares, par value $0.001 per share*
American Depositary Shares, each representing one Class A Ordinary Share
(Title of Classes of Securities)

83409V104**
(CUSIP Number of Classes of Securities)

With copies to:

Calculation of Filing Fee

*

Not for trading, but only in connection with the listing on the New York Stock Exchange of the American depositary shares ("ADSs"), each representing one class A ordinary share, par value $0.001 per share, of the issuer (a "Class A Ordinary Share" and collectively, the "Class A Ordinary Shares").

**

CUSIP number of the ADSs.

***

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. The filing fee is calculated based on the sum of (a) the aggregate cash payment for the proposed per-share cash payment of $9.00 for 3,717,250 outstanding Class A Ordinary Shares and 127,200,000 outstanding Class B ordinary shares, par value $0.001 per share, of the issuer that are proposed to be purchased by TitanSupernova Limited from Sohu.com (Search) Limited, plus (b) the aggregate cash payment for the proposed per-share cash payment of $9.00 for 103,216,791 outstanding Class A Ordinary Shares subject to the proposed merger of TitanSupernova Limited with and into the issuer, plus (c) the product of 1,748,565 Class A Ordinary Shares underlying the outstanding options that have vested or are expected to vest prior to the closing of the merger, multiplied by $8.999 per option share (which is the difference between the $9.00 per Class A Ordinary Share merger consideration and the exercise price of the options of $0.001 per Class A Ordinary Share) ((a), (b) and (c) together, the "Transaction Valuation").

****

The amount of the filing fee, calculated in accordance with Exchange Act Rule 0-11(b)(1) and the Securities and Exchange Commission Fee Rate Advisory #1 for Fiscal Year 2021, was calculated by multiplying the Transaction Valuation by 0.0001091.

ý

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and date of its filing.

Amount Previously Paid: $231,300.95
Form or Registration No.:Schedule 13E-3 (File No. 005-90221)
Filing Party: Sogou Inc.; Tencent Holdings Limited; THL A21 Limited; TitanSupernova Limited; Tencent Mobility Limited; Sohu.com Limited; and Sohu.com (Search) Limited
Date Filed: October 28, 2020

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of this transaction, passed upon the merits or fairness of this transaction, or passed upon the adequacy or accuracy of the disclosure in this transaction statement on schedule 13e-3. Any representation to the contrary is a criminal offense.

Table of Contents

TABLE OF CONTENTS

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INTRODUCTION

        This Amendment No. 1 to the transaction statement pursuant to Rule 13e-3 amends in its entirety the transaction statement pursuant to Rule 13e-3 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") on October 28, 2020 (together with the exhibits thereto and as amended, this "Transaction Statement") and is being filed jointly by the following Persons (each separately, a "Filing Person," and collectively, the "Filing Persons"):

•

Sogou Inc., an exempted company with limited liability incorporated under the laws of the Cayman Islands (the "Company");



•

Tencent Holdings Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands ("Tencent");



•

THL A21 Limited, a business company with limited liability organized under the laws of the British Virgin Islands ("THL");



•

TitanSupernova Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands ("Parent");



•

Tencent Mobility Limited, a company limited by shares incorporated under the laws of Hong Kong ("TML");



•

Sohu.com Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands ("Sohu.com"); and



•

Sohu.com (Search) Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands ("Sohu Search").

        Tencent, THL, Parent and TML are sometimes referred to in this Transaction Statement collectively as the "Tencent Group."

        The Items specified by Schedule 13E-3, with page references to the locations where the information required by such Items can be found, are enumerated beginning on page 72 of this Transaction Statement.

SUMMARY

        This summary, together with the "Questions and Answers about the Merger" below, highlights selected information contained in the remainder of this Transaction Statement. This summary does not contain all of the information that may be important to an Unaffiliated Security Holder (as defined below) of the Company. Unaffiliated Security Holders should read this entire Transaction Statement and the other documents to which this Transaction Statement refers for a more complete understanding of the Merger (as defined below) and the related transactions and how they affect Unaffiliated Security Holders.

        The terms "we," "us," "our," and the "Company" as used in this Transaction Statement refer to Sogou Inc. and/or its direct and indirect subsidiaries and variable interest entities ("VIEs"), as the context may require, and references to the Company's "Subsidiaries" refer to Sogou Inc.'s direct and indirect subsidiaries and VIEs. The term "Sogou Board" refers to the board of directors of the Company. The term "Special Committee" refers to a special committee of independent, disinterested directors of the Company that was formed by the Sogou Board. The term "Unaffiliated Security Holders" is used in this Transaction Statement as such term is defined in Rule 13e-3(a)(4) under the Exchange Act, and refers to holders of Class A Ordinary Shares and ADSs (both as defined below) other than Tencent, THL, Parent, TML, Sohu.com, Sohu Search, and directors and executive officers of the Company and of members of the Tencent Group. The term "Person" refers to a natural person, a

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partnership, a corporation, a limited liability company, a business trust, a joint share company, a trust, an unincorporated association, a joint venture, a governmental entity or another entity or organization. References to "dollars" and "$" in this Transaction Statement are to U.S. dollars and references to "RMB" in this Transaction Statement are to Renminbi, the lawful currency of the People's Republic of China (the "PRC" or "China").

The Parties Involved in the Merger

The Company

        The Company is an innovator in search and a leader in China's Internet industry. The Company operates Sogou Search, which is the second largest search engine in China by mobile queries, according to CVSC TNS Research. The Company is the fourth largest Internet company in China based on monthly active users (MAU) in December 2019, according to iResearch. Through a robust ecosystem that the Company has built and shared with Tencent and other strategic partners, the Company delivers differentiated content to its users, including search access to the vast content from Tencent's Weixin/WeChat Official Accounts. The Company also operates Sogou Input Method, which is the largest Chinese language input software by MAU for both mobile and PC. Sogou Input Method is also the largest voice application in China and the first cloud-based Chinese language input software, interfacing with virtually all applications that involve Chinese-language input.

        The Company's principal executive offices are located at Level 15, Sohu.com Internet Plaza, No. 1 Unit Zhongguancun East Road, Haidian District, Beijing 100084, People's Republic of China. The Company's telephone number at that address is +86-10-5689-9999.

        The Company is the issuer of ordinary shares designated as Class A ordinary shares, par value $0.001 per share (each, a "Class A Ordinary Share" and collectively, the "Class A Ordinary Shares"), including Class A Ordinary Shares represented by American depositary shares, each representing one Class A Ordinary Share (the "ADSs"). The ADSs are traded on the New York Stock Exchange ("NYSE") under the symbol "SOGO." As of the date of this Transaction Statement, there were a total of 108,833,041 Class A Ordinary Shares issued and outstanding (including 1,899,000 Restricted Shares (as defined below) but excluding 5,790,800 Class A Ordinary Shares held for the account of the Company that are not treated as issued and outstanding for financial statement purposes or for the calculation of percentage ownership and voting power in the Company). The Company is also the issuer of ordinary shares designated as Class B ordinary shares, par value $0.001 per share (each, a "Class B Ordinary Share" and collectively, the "Class B Ordinary Shares" and together with the Class A Ordinary Shares, the "Shares" and each a "Share"). The Class B Ordinary Shares are not listed for trading on the NYSE or any other stock exchange. As of the date of this Transaction Statement, there were a total of 278,757,875 issued and outstanding Class B Ordinary Shares. In matters requiring a shareholder vote, holders of Class A Ordinary Shares and holders of Class B Ordinary Shares vote together as a single class, with each Class A Ordinary Share entitled to one vote and each Class B Ordinary Share entitled to ten votes.

        For a more complete description of the Company's business, history, and organizational structure, please see the Company's Annual Report on Form 20-F for the year ended December 31, 2019 filed with the SEC on April 21, 2020 (the "Sogou 2019 Form 20-F"), which is incorporated by reference herein. See "Where You Can Find More Information" beginning on page 71 for instructions on obtaining a copy of the Sogou 2019 Form 20-F.

Tencent

        Tencent is an exempted company with limited liability incorporated under the laws of the Cayman Islands. The business address of Tencent is 29/F., Three Pacific Place, No. 1 Queen's Road East, Wanchai, Hong Kong and the business telephone number of Tencent is +852 3148 5100. Tencent is an

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Internet company headquartered in China providing value-added Internet services, including communications and social, entertainment, content, online advertising, FinTech and cloud services. It has been listed on the Main Board of the Hong Kong Stock Exchange since June 16, 2004 (stock code: 700).

THL

        THL is a business company with limited liability incorporated under the laws of the British Virgin Islands and wholly-owned by Tencent. THL is principally engaged in the business of holding securities in the portfolio companies in which Tencent invests. The business address of THL is c/o Tencent Holdings Limited, 29/F., Three Pacific Place, No. 1 Queen's Road East, Wanchai, Hong Kong, and the business telephone number of THL is +852 3148 5100. THL directly holds 151,557,875 Class B Ordinary Shares as of the date of this Transaction Statement.

Parent

        Parent is an exempted company with limited liability incorporated under the laws of the Cayman Islands and wholly-owned by THL. Parent is a holding company formed solely for the purpose of completing the transactions contemplated under the Merger Agreement. The business address of Parent is c/o Tencent Holdings Limited, 29/F., Three Pacific Place, No. 1 Queen's Road East, Wanchai, Hong Kong, and the business telephone number of Parent is +852 3148 5100.

TML

        TML is a company limited by shares incorporated in Hong Kong and wholly-owned by Tencent. TML is principally engaged in the activities of development and operation of entertainment applications, provision of promotion activities for WeChat, and investment holding. The business address of TML is c/o Tencent Holdings Limited, 29/F., Three Pacific Place, No. 1 Queen's Road East, Wanchai, Hong Kong, and the business telephone number of TML is +852 3148 5100.

Sohu.com

        Sohu.com is a leading Chinese online media, search and game service group providing comprehensive online products and services on PCs and mobile devices in China. Sohu.com's businesses are conducted by the "Sohu Group," which consists of Sohu.com (which, unless the context requires otherwise, excludes the businesses of the Company and its various Subsidiaries). American depositary shares representing Sohu.com's ordinary shares are traded on NASDAQ under the symbol "SOHU." As of the date of this Transaction Statement, Sohu.com is the beneficial owner of 3,717,250 Class A Ordinary Shares and 127,200,000 Class B Ordinary Shares that are held of record by its wholly-owned subsidiary Sohu Search. Sohu.com, through its indirect ownership of Class A Ordinary Shares and Class B Ordinary Shares and a voting agreement, dated as of August 11, 2017, among Sohu Search, THL, and the Company (the "Sohu-Tencent Voting Agreement"), has the power to appoint a majority of the Sogou Board. See "Related Party Transactions" beginning on page 61 for additional information. For periods prior to June 1, 2018, references to "Sohu.com" in this Transaction Statement refer to Sohu.com's predecessor Sohu.com Inc., which was a Delaware corporation that was the ultimate publicly-traded parent company of the Sohu Group until its dissolution on May 31, 2018 in connection with a reorganization of the Sohu Group.

        Sohu.com's principal executive offices are located at Sohu.com Media Plaza, No. 2, Kexueyuan South Road, Haidian District, Beijing, 100190, People's Republic of China. Sohu.com's telephone number at that address is +86-10-6272-6666. Sohu.com's registered office in the Cayman Islands is located at the offices of Maples Corporate Services Limited, P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.

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Sohu Search

        Sohu Search is a wholly-owned subsidiary of Sohu.com. As of the date of this Transaction Statement, Sohu Search is the record holder of 3,717,250 Class A Ordinary Shares and 127,200,000 Class B Ordinary Shares. Sohu Search's principal executive offices are located at Sohu.com Media Plaza, No. 2, Kexueyuan South Road, Haidian District, Beijing, 100190, People's Republic of China. Sohu Search's telephone number at this address is +86 10-6272-6666. Sohu Search's registered office in the Cayman Islands is located at the offices of Maples Corporate Services Limited, P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.

Key Transaction Agreements

        On September 29, 2020, the Company, THL, Parent, and TML entered into an agreement and plan of merger, which was amended on December 1, 2020 to extend the termination date thereunder (such agreement as so amended, the "Merger Agreement"), which includes a plan of merger required to be filed with the Registrar of Companies of the Cayman Islands substantially in the form attached as Annex A to the Merger Agreement (the "Plan of Merger"). Following satisfaction of the conditions to the closing of the Merger (as defined below), Parent will merge with and into the Company (the "Merger") in accordance with the Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands (the "Cayman Islands Companies Law"), with the Company continuing as the surviving company (as defined in the Cayman Islands Companies Law, the "Surviving Company") resulting from the Merger.

        On or about the same time as the Merger Agreement was signed, Sohu.com, Sohu Search, and Parent entered into a share purchase agreement, which was amended on December 1, 2020 to extend the termination date thereunder (such agreement as so amended, the "Sohu Share Purchase Agreement"). Pursuant to the Sohu Share Purchase Agreement, Sohu Search agreed to sell all of the Class A Ordinary Shares and Class B Ordinary Shares owned by it to Parent (the "Sohu Share Purchase"). Also on or about the same time, THL and Parent entered into a contribution agreement (the "Contribution Agreement"), pursuant to which THL agreed to contribute all of the Class B Ordinary Shares owned by it to Parent (the "Share Contribution"). The Share Contribution and the Sohu Share Purchase are expected to be completed shortly prior to the filing of the Plan of Merger with the Registrar of Companies of the Cayman Islands under the Merger Agreement.

        If the Sohu Share Purchase is completed, Sohu.com will no longer have any beneficial ownership interest in the Company. Upon the completion of the Share Contribution and the Sohu Share Purchase, Parent will hold at least 90% of the voting power represented by all issued and outstanding Shares immediately prior to the closing of the Merger. Accordingly, the Merger will be in the form of a short-form merger of Parent with and into the Company in accordance with section 233(7) of the Cayman Islands Companies Law.

The Merger Agreement and the Plan of Merger

        The following summary describes the material terms of the Merger Agreement, including the Plan of Merger, but does not purport to describe all of the terms of the Merger Agreement and is qualified in its entirety by reference to the complete text of the Merger Agreement, which is attached as Exhibit (d)(1) and Exhibit (d)(4) to this Transaction Statement. Unaffiliated Security Holders should read the Merger Agreement and the Plan of Merger in their entirety because they, and not this Transaction Statement, are the legal documents that govern the Merger.

The Merger

        At the Effective Time (as defined below), Parent will merge with and into the Company in accordance with Part XVI of the Cayman Islands Companies Law through a statutory short-form

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merger in accordance with section 233(7) of the Cayman Islands Companies Law. We expect the Merger to occur soon after 20 days following the date of the mailing of this Transaction Statement, or such later date as may be required to comply with Rule 13e-3 under the Exchange Act and all other applicable laws, after all the closing conditions to the Merger have been satisfied or waived in accordance with the Merger Agreement (the date and time of the effectiveness of the Merger, the "Effective Time"). Following the Effective Time, the ADSs will no longer be listed on the NYSE, and the Company will cease to be a publicly-traded company and will be a privately-held, indirect wholly-owned subsidiary of Tencent.

Merger Consideration

        Under the terms of the Merger Agreement and the Plan of Merger, at the Effective Time (a) each issued and outstanding Class A Ordinary Share immediately prior to the Effective Time, other than Excluded Shares (as defined below), will be cancelled in exchange for the right for the holders thereof to receive $9.00 in cash per Class A Ordinary Share without interest and net of any applicable withholding taxes for the Class A Ordinary Shares (the "Per Share Merger Consideration"), (b) each ADS, each representing one Class A Ordinary Share, issued and outstanding immediately prior to the Effective Time (other than ADSs representing Excluded Shares), will be cancelled in exchange for the right to receive $9.00 in cash per ADS (the "Per ADS Merger Consideration"), less $0.05 per ADS cancellation fees and other fees as applicable pursuant to the terms of the deposit agreement, dated November 8, 2017, by and among the Company, The Bank of New York Mellon, as depositary for ADSs (the "Depositary"), and all holders from time to time of ADSs issued thereunder (the "Deposit Agreement"), without interest and net of any applicable withholding taxes for the ADSs, (c) each Class A Ordinary Share and each Class B Ordinary Share held by Parent that are issued and outstanding will be converted into one Class A ordinary share or one Class B ordinary share, respectively, of the Surviving Company, all of which shall be registered in the name of THL, being the sole shareholder of Parent immediately prior to the Effective Time, and (d) each other Excluded Share issued and outstanding immediately prior to the Effective Time will automatically be cancelled and cease to exist, without payment of any consideration or distribution therefor.

        The "Excluded Shares" include: (a) Shares held by Sohu Search; (b) Shares held by THL, Parent, the Company or any of their subsidiaries; (c) Shares underlying outstanding restricted share awards (the "Restricted Shares") granted under the Company's 2010 Share Incentive Plan or 2017 Share Incentive Plan (collectively, the "Company Equity Plans"); and (d) Shares (including ADSs corresponding to such Shares) held by the Depositary and reserved for issuance and allocation pursuant to the Company Equity Plans.

        At the Effective Time, each share of Parent issued and outstanding immediately prior to the Effective Time will be cancelled and cease to exist, without payment of any consideration or distribution therefor.

Treatment of Vested Company Options

        Each option to purchase Class A Ordinary Shares (each a "Company Option") granted under the Company Equity Plans that is vested and outstanding immediately prior to the Effective Time (the "Vested Company Option") will be cancelled as of the Effective Time in exchange for the holder's right to receive an amount of cash (the "Option Consideration") equal to (a) the excess, if any, of (i) the Per Share Merger Consideration over (ii) the exercise price per Class A Ordinary Share subject to such Vested Company Option, multiplied by (b) the number of Class A Ordinary Shares underlying such Vested Company Option.

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Treatment of Unvested Company Options and Restricted Shares

        Each Company Option granted under a Company Equity Plan that is outstanding but is unvested immediately prior to the Effective Time (an "Unvested Company Option") will be cancelled as of the Effective Time in exchange for the holder's right to receive a restricted cash award (a "Restricted Cash Award"), to be issued by the Surviving Company, in an amount of cash equal to the product of (a) the excess, if any, of (i) the Per Share Merger Consideration over (ii) the exercise price per Class A Ordinary Share subject to such Unvested Company Option, multiplied by (b) the number of Class A Ordinary Shares underlying such Unvested Company Option. Each Restricted Share (together with the Unvested Company Options, collectively, the "Unvested Equity Awards") that is outstanding immediately prior to the Effective Time will be cancelled as of the Effective Time in exchange for the holder's right to receive a Restricted Cash Award in an amount of cash equal to the Per Share Merger Consideration. Any Restricted Cash Award issued by the Surviving Company in respect of any Unvested Equity Award will be subject to the same vesting conditions and schedules applicable to such Unvested Equity Award without giving effect to the Merger, and on the date, and to the extent, that any Unvested Equity Award would have become vested without giving effect to the Merger, such corresponding portion of the Restricted Cash Award will be delivered to the holder of such Restricted Cash Award as soon as practicable thereafter.

Representations and Warranties

        The Merger Agreement contains representations and warranties made by the Company to THL and Parent and representations and warranties made by THL and Parent to the Company, in each case, as of specific dates. The statements embodied in those representations and warranties are made for purposes of the Merger Agreement and are subject to important qualifications and limitations agreed to by the parties in 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, and may have been made for the principal purposes of establishing the circumstances in which a party to the Merger Agreement may have the right not to 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. The representations and warranties made by the Company are also qualified by its public disclosure and filings with the SEC after November 8, 2017 and prior to the date of the Merger Agreement and a disclosure schedule delivered by the Company to THL and Parent contemporaneously with the execution of the Merger Agreement.

        The representations and warranties made by the Company to THL and Parent include representations and warranties relating to, among other things:

•

due organization, valid existence, good standing and qualification or license to carry on the Company's business;



•

compliance with the Company's memorandum and articles of association;



•

the capitalization of the Company, including with respect to the number and type of Shares;



•

except for Company Options outstanding under the Company Equity Plans, the absence of (i) any options, warrants, or other rights or commitments of any kind relating to the issued or unissued capital shares of the Company obligating the Company or any of its Subsidiaries to issue or sell any equity interest in the Company or any of its Subsidiaries or obligating the Company or any of its Subsidiaries to grant any such option, warrant, or other such similar rights or commitments or (ii) any outstanding obligation of the Company or its Subsidiaries to repurchase any equity securities of the Company or any of its Subsidiaries;

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•

the Company's corporate power and authority to execute, deliver, and perform its obligations under the Merger Agreement and to consummate the transactions contemplated thereby, and the enforceability of the Merger Agreement against the Company;



•

the receipt of a fairness opinion from Duff & Phelps, LLC ("Duff & Phelps"), as financial advisor to the Special Committee;



•

the Sogou Board's authorization and approval (acting upon the recommendation of the Special Committee) of the Merger Agreement, the Merger, and the related transactions;



•

the absence of any conflict with or breach of the governing documents of the Company or any of its Subsidiaries, any agreement to which the Company or any of its Subsidiaries is a party, or any governmental order or applicable law arising from the execution, delivery, and performance of the Merger Agreement by the Company or the completion of the Merger or any of the related transactions;



•

the validity of all approvals of, and filings and registrations and other requisite formalities with, governmental entities required to be made by the Company or its Subsidiaries;



•

the absence of any violations of applicable anticorruption laws;



•

the Company's audited and unaudited financial statements filed with or furnished to the SEC since November 8, 2017 having been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") and having presented fairly, in all material respects, the financial position, results of operations, shareholders' equity, and cash flows of the Company and its Subsidiaries as of and for the periods presented;



•

the absence of material undisclosed liabilities;



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compliance with the applicable provisions of the United States Sarbanes-Oxley Act of 2002;



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the Company's disclosure controls and procedures and internal control over financial reporting;



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no untrue or misleading information in the Schedule 13E-3;



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the absence of any Material Adverse Effect (as defined below) since December 31, 2019;



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the absence of any legal proceedings and governmental orders against the Company or any of its Subsidiaries, which would have a Material Adverse Effect;



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employee benefit and compensation plans;



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labor and employment matters;



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properties;



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intellectual property;



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privacy and data security;



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taxes;



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absence of secured creditors;



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material contracts and the absence of any default under, or breach or violation of, any material contract;



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environmental matters;



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insurance;



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interested party transactions;

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•

the absence of a shareholder rights agreement or plan and the inapplicability of certain anti-takeover laws to the Merger Agreement and the Merger;



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the absence of any broker's or finder's fees, other than with respect to the financial advisor to the Special Committee;



•

authority and validity of contractual arrangements through which the Company exerts effective control over its VIEs; and



•

the absence of any other representations and warranties by the Company to THL or Parent, 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 "Material Adverse Effect." For purposes of the Merger Agreement, a "Material Adverse Effect" means any event, circumstance, change, development, condition or effect (each, an "Effect") that, individually or in the aggregate, is or would reasonably be expected to (i) be materially adverse to business, condition (financial or otherwise), assets, liabilities or results of operations of the Company and its Subsidiaries taken as a whole, or (ii) prevent or materially delay the consummation of the Merger; provided, however, for the purpose of clause (i) above, that any Effect resulting from the following shall not be deemed to constitute a Material Adverse Effect or shall be taken into account when determining whether a Material Adverse Effect has occurred or would reasonably be expected to occur:

(a)

changes in general economic conditions or changes in securities markets in general;



(b)

the public announcement of the Merger, including the initiation of litigation or other legal proceeding by any person with respect to the Merger Agreement or the Merger or any losses of employees resulting from the public announcement of the Merger;



(c)

any change in GAAP or interpretation thereof or any change in applicable laws or the interpretation or enforcement thereof;



(d)

changes that are the result of factors generally affecting the industries in which the Company operates;



(e)

changes affecting the financial, credit or securities markets in which the Company operates, including changes in interest rates or foreign exchange rates;



(f)

any failure by the Company to meet any estimates, forecasts or expectations of the Company's revenue, earnings or other financial performance or results of operation or a change in the Company's credit ratings (it being understood that this clause (f) shall not include the Effects giving rise to or contributing to such failure to meet any estimates, forecasts or expectations or change in credit ratings);



(g)

natural disasters, acts of sabotage or terrorism or armed hostilities, or war (whether or not declared);



(h)

changes in the market price or trading volume of the ADSs; and



(i)

actions taken (or omitted to be taken) by the Company or any of its Subsidiaries that are required by, or are otherwise requested by, THL or Parent in writing;

provided that if any Effect described in clauses (a), (c), (d), (e) and (g), individually or in the aggregate, has a disproportionate adverse impact on the Company and its Subsidiaries relative to other comparable industry participants, then the impact of such Effect shall be taken into account for the purpose of determining whether a Material Adverse Effect has occurred.

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        The representations and warranties made by THL and Parent to the Company include representations and warranties relating to, among other things:

•

their due organization, valid existence and good standing;



•

their corporate power and authority to execute, deliver and perform their obligations under the Merger Agreement and to consummate the Merger, and the enforceability of the Merger Agreement against them;



•

the absence of any conflict with or breach of the governing documents of THL or Parent, any agreement to which THL or Parent is a party, or any governmental order or applicable law arising from the execution, delivery, and performance of the Merger Agreement by THL or Parent or the completion of the Merger or any of the related transactions;



•

the capitalization of Parent and THL's ownership of Parent;



•

sufficiency of funds to pay the merger consideration and any other amounts required to be paid in connection with the consummation of the Merger;



•

the absence of any broker's, finder's or financial advisor's fees, except as otherwise disclosed;



•

no untrue or misleading information in the Schedule 13E-3;



•

the absence of legal proceedings against THL or Parent that would reasonably be expected to prevent or materially impair or delay the consummation of the Merger;



•

the independent investigation of the Company and its Subsidiaries by THL;



•

non-reliance by THL or Parent on any estimates, projections and other predictions for the business of the Company and its Subsidiaries provided by the Company; and



•

the absence of any other representations and warranties by THL or Parent to the Company, other than the representations and warranties made by THL or Parent in the Merger Agreement.

Conduct of Business Pending the Merger

        Except as expressly contemplated by the Merger Agreement, as required by applicable laws, or as consented to in writing by THL (which consent shall not be unreasonably withheld, conditioned or delayed), during the period from the date of the Merger Agreement until the Effective Time or the earlier termination of the Merger Agreement, the Company will and will cause its Subsidiaries to, (i) conduct its business in a lawfully permitted manner in the ordinary course of business and in a manner consistent with past practice, (ii) use reasonable best efforts to preserve their business organization intact, keep available the services of the current officers and employees, preserve their current relationship with governmental authorities, customers, suppliers and those persons with whom the Company or any of its Subsidiaries has a material relation, and (iii) not do any of the following:

•

amend its memorandum and articles of association or equivalent organizational documents;



•

issue, sell, pledge, lease, assign, license or otherwise transfer, dispose of or encumber any (a) share of the Company or its Subsidiaries, (b) any property or assets of the Company or any of its Subsidiaries, or (c) any material intellectual property owned by the Company or its Subsidiaries;



•

declare, set aside or pay any dividend on or make any other distributions (whether in cash, stock, property or otherwise) with respect to shares of capital stock of the Company or any of its Subsidiaries, except for distributions from any Subsidiary of the Company to the Company or any of its other Subsidiaries consistent with past practice;

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•

split, combine, subdivide, reclassify or redeem any shares of capital stock of the Company or any of its Subsidiaries;



•

effect any liquidation, dissolution, scheme of arrangement, merger, consolidation, amalgamation, restructuring, reorganization or similar transaction involving the Company or its Subsidiaries;



•

acquire (including by purchase, merger, spin-off, consolidation, scheme of arrangement, amalgamation or acquisition of stock or assets, or otherwise) any assets, property, or securities with a value in excess of $5,000,000 in the aggregate;



•

make any capital contribution or investment in any corporation, partnership, other business organization or any division thereof with a value in excess of $5,000,000 in the aggregate;



•

incur, assume, alter, amend or modify any indebtedness, or guarantee any indebtedness, or issue any debt securities or make any loans or advances;



•

create or grant any lien, other than a permitted lien, on any assets of the Company or its Subsidiaries;



•

authorize, or make any commitment with respect to, any single capital expenditure which is in excess of $5,000,000 or capital expenditures which are, in the aggregate, in excess of $10,000,000 for the Company and its Subsidiaries taken as a whole;



•

except as required by law, (a) enter into new employment agreements or terminated any such employment agreements for an aggregate annual compensation of more than $200,000; (b) grant termination or severance benefits; (c) increase bonus or compensation payments, or pay any bonuses to employees, except in the ordinary course of business and in a manner consistent with past practice; (d) adopt or amend any benefit plan or amend the terms of any outstanding equity awards; (e) accelerate any vesting of equity under any share incentive plans; (f) change how contributions to any employee plan are calculated; or (g) forgive any loan to any employee;



•

issue or grant any equity awards under the Company Equity Plans;



•

make any change to any credit practice, method of financial accounting or the financial accounting policies or procedures of the Company or its Subsidiaries, except as required by a change in GAAP;



•

enter into, amend, modify or consent to the termination of any material contract (or any contract that, if existing as of the date of the Merger Agreement, would be a material contract) which calls for annual aggregate payments of $2,500,000 or more, or amend, waive, modify or consent to termination of any rights thereunder, except for renewal of a material contract in substantially the same form, with similar terms;



•

enter into any material contract with an affiliate, officer, director or employee 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 material insurance policies maintained by it which are not promptly replaced by a comparable amount of insurance coverage;



•

commerce, settle, release, waive or compromise any legal action, proceeding or investigation, pending or threatened against the Company or any of its Subsidiaries, in each case in an amount exceeding $200,000 individually or $5,000,000 in the aggregate, other than in accordance with the terms of any disclosed material contracts;



•

permit any intellectual property owned by any the Company or its Subsidiaries to lapse or to be abandoned, dedicated, or disclaimed, fail to perform or make any applicable filings, recordings

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or other similar actions or filings, or fail to pay all required fees and taxes required to maintain and protect its interest in such intellectual property;

•

fail to make in a timely manner any filings or registrations with the SEC required under the Securities Act of 1933, as amended, or the Exchange Act or the rules and regulations promulgated thereunder;



•

enter into any transaction involving any material earn-out or similar payment payable by the Company or its Subsidiaries, other than payments in connection with purchases of vehicles, plant, equipment, supplies or computers in the ordinary course of business;



•

enter into any new line of business that is material to the Company and its Subsidiaries taken as a whole;



•

make or change any material tax election, materially amend any tax return, enter into any closing agreement with respect to taxes, surrender any right to claim a material refund of taxes, settle or finally resolve any controversy with respect to taxes or materially change any method of tax accounting, except as required by law;



•

take or omit to take any action that would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;



•

carry out fundraising or accept contribution from any person for the purpose of carrying out the Company's online lending and microcredit business; extend or facilitate or permit the incurrence of any new loan or advance under the online lending and microcredit program; or otherwise expand the Company's online lending and microcredit business; or



•

agree or commit to do any of the foregoing.

No Solicitation; Change in Company Approval

        The Company has agreed that it will and will cause each of its Subsidiaries and their respective representatives acting in such capacity (i) to immediately cease and cause to be terminated any and all existing discussions or negotiations, if any, with any third party conducted prior to the date of the Merger Agreement with respect to any Competing Transaction (as defined below), and shall request any such third party to return to the Company or destroy any nonpublic information concerning the Company or any of its Subsidiaries, and (ii) not to release any third party from, or waive or amend, any standstill, confidentiality or similar agreement or takeover statutes.

        In addition, the Company has agreed that it will not, and will cause each of its Subsidiaries not to, from the date of the Merger Agreement until the Effective Time or, if earlier, the termination of the Merger Agreement, directly or indirectly, (i) solicit, initiate, knowingly encourage, or take any other action to knowingly facilitate, any inquiry, proposal or offer that constitutes or would reasonably be expected to result in a Competing Transaction, (ii) engage in, continue or otherwise participate in any discussions or negotiations with, or provide any nonpublic information with respect to the Company or any of its Subsidiaries to, any third party in furtherance of or in order to obtain any inquiry, proposal or offer that constitutes or would reasonably be expected to result in any Competing Transaction, (iii) agree to, approve, endorse, recommend or consummate, or enter into any letter of intent or other contract contemplating or otherwise relating to any proposal or offer that constitutes or would reasonably be expected to result in a Competing Transaction, or (iv) agree or authorize to do any of the foregoing.

        As used in the Merger Agreement, a "Competing Transaction" means any proposal or offer relating to (i) any merger, consolidation, share exchange, business combination, scheme of arrangement, amalgamation, recapitalization, liquidation, dissolution or other similar transaction involving the Company or any of its Subsidiaries whose assets, individually or in the aggregate, constitute 20% or

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more of the consolidated assets of the Company or to which 20% or more of the total revenue or operating income of the Company are attributable; (ii) any sale, exchange, transfer or other disposition of assets or businesses that constitute or represent 20% or more of the total revenue, operating income or assets of the Company and its Subsidiaries, taken as a whole; (iii) any sale, exchange, transfer or other disposition of 20% or more of any class of equity securities or voting power of the Company, or securities convertible into or exchangeable for 20% or more of any class of equity securities of the Company; (iv) any tender offer or exchange offer that, if consummated, would result in any person beneficially owning 20% or more of any class of equity securities or voting power of the Company; or (v) any combination of the foregoing.

        The Company has agreed to notify THL within forty-eight (48) hours after its receipt of any inquiry, proposal or offer, or any request for nonpublic information on the Company or any of its Subsidiaries by any third party which indicates that it is considering making or has made a proposal or offer, that constitutes or would reasonably be expected to result in any Competing Transaction. Such notice shall specify in writing in reasonable detail (i) the material terms and conditions thereof, (ii) the identity of the third party making such inquiry, proposal, offer, request or contact, and (iii) whether the Company has any intention to provide confidential information to such person.

        Notwithstanding the foregoing, if the Company or any of its representatives receives an unsolicited, bona fide written proposal or offer regarding a Competing Transaction, (i) the Company and its representatives may contact such person solely to request clarification of the terms and conditions thereof to the extent the Special Committee has determined in good faith that such contact is necessary to determine whether such proposal or offer constitutes or would reasonably be expected to result in a Superior Proposal (as defined below), and (ii) if the Special Committee has determined, in its good faith judgment, after consultation with its financial advisor and outside legal counsel, that such proposal or offer constitutes or would reasonably be expected to result in a Superior Proposal and that failure to take such action would violate its fiduciary duties to the Company and its shareholders, (A) provide information in response to the request of the third party who has made such proposal or offer pursuant to an executed confidentiality agreement between the Company and such person, and (B) engage in or otherwise participate in discussions or negotiations with the third party making such proposal or offer.

        As used in the Merger Agreement, a "Superior Proposal" means any unsolicited, written, bona fide offer or proposal with respect to a Competing Transaction that the Sogou Board (acting upon the recommendation of the Special Committee) has determined in good faith (i) is reasonably likely to be consummated in accordance with its terms and (ii) would, if consummated, result in a transaction that is more favorable from a financial point of view to the shareholders of the Company than the Merger, in each case, after (a) consultation with its financial advisor and outside legal counsel and (b) taking into account all such factors and matters deemed relevant in good faith by the Sogou Board, including legal, financial (including the financing terms of any such proposal), regulatory, timing or other aspects of such proposal and the Merger; provided, that for purposes of the definition of "Superior Proposal", the references to "20%" in the definition of Competing Transaction shall be deemed to be references to "50%"; provided, further, that any such offer shall not be deemed to be a "Superior Proposal" if (i) such offer is subject to the conduct of any due diligence review or investigation of the Company or any of its Subsidiaries by the party making the offer, (ii) any financing required to consummate the transaction contemplated by such offer is not then fully committed and non-contingent, or (iii) the consummation of the transaction contemplated by such offer is conditional upon receipt of financing.

        Neither the Sogou Board nor the Special Committee may (i) change, withhold, withdraw, qualify or modify, or propose to change, withhold, withdraw, qualify or modify, in a manner adverse to THL or Parent, any recommendation or approval that the Sogou Board or the Special Committee has previously made or resolved with respect to the Merger and the related transactions, (ii) adopt, approve or recommend, or propose to adopt, approve or recommend to the shareholders of the Company, any Competing Transaction, (iii) if a tender offer or exchange offer that constitutes a

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Competing Transaction is commenced, fail to publicly recommend against acceptance of such tender offer or exchange offer by the Company shareholders (including, for these purposes, by disclosing that it is taking no position with respect to the acceptance of such tender offer or exchange offer by its shareholders, which shall constitute a failure to recommend against acceptance of such tender offer or exchange offer) within ten (10) business days after commencement thereof, (iv) fail to recommend against any Competing Transaction subject to Regulation 14D under the Exchange Act in a Solicitation/Recommendation Statement on Schedule 14D-9 within ten (10) business days after the commencement of such Competing Transaction, or (v) propose, cause or permit the Company or any of its Subsidiaries to enter into any letter of intent, memorandum of understanding, agreement in principle, merger agreement, acquisition agreement or other or similar document or contract with respect to any Competing Transaction (any of the foregoing actions, a "Change in the Company Approval").

        Notwithstanding the foregoing, prior to the consummation of the Merger, if the Company has received a bona fide written proposal or offer with respect to a Competing Transaction which was not withdrawn and the Sogou Board (acting upon recommendation of the Special Committee) has determined in its good faith judgment, after consultation with its financial advisor and outside legal counsel, that such proposal or offer constitutes a Superior Proposal and that failure to make a Change in the Company Approval would violate its fiduciary duties to the Company and its shareholders, the Sogou Board (acting upon recommendation of the Special Committee) may effect a Change in the Company Approval with respect to such Superior Proposal; provided, that, (i) the Company has materially complied with the no solicitation obligations under the Merger Agreement described above with respect to such proposal or offer; (ii) the Company has (a) provided at least five (5) business days' prior written notice to THL advising THL that the Sogou Board has received a Superior Proposal, specifying the material terms and conditions of such Superior Proposal (and providing any proposed agreements related thereto), identifying the person making such Superior Proposal and indicating that the Sogou Board intends to effect a Change in the Company Approval, (b) negotiated with and caused its representatives to negotiate with THL and its representatives in good faith during such notice period to make such adjustments in the terms and conditions of the Merger Agreement, so that such third party proposal or offer would cease to constitute a Superior Proposal, and (c) permitted THL and its representatives to make a presentation to the Sogou Board and the Special Committee regarding the Merger Agreement and any adjustments with respect thereto; and (iii) following the end of such five (5) business day notice period, the Sogou Board (acting upon recommendation of the Special Committee) has determined in its good faith judgment, after consultation with its financial advisor and outside legal counsel and taking into account any changes to the Merger Agreement proposed by THL, that the proposal or offer with respect to the Competing Transaction continues to constitute a Superior Proposal and that failure to make a Change in the Company Approval would violate its fiduciary duties to the Company and its shareholders; provided further, that any material modifications or changes to such third party proposal or offer will be deemed a new Superior Proposal and the Company will be required to again comply with the foregoing requirements, except that with respect to such new Superior Proposal, the notice periods will be deemed to be a three (3) business day period rather than a five (5) business day period.

        In addition, the Sogou Board (acting upon recommendation of the Special Committee) or the Special Committee may direct the Company to terminate the Merger Agreement (such a termination, the "Intervening Event Termination") if and only if (i) a material development or change in circumstances has occurred or arisen after the date of the Merger Agreement that was not known to, or reasonably foreseeable by, any member of the Special Committee as of or prior to the date of the Merger Agreement and did not result from or arise out of the announcement or pendency of, or any actions required to be taken by the Company (or to be refrained from being taken by the Company) pursuant to, the Merger Agreement (an "Intervening Event"), provided, that in no event will the following developments or changes in circumstances constitute an Intervening Event: (a) the receipt, existence, or terms of a proposal or offer regarding a Competing Transaction or any matter relating

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thereto or consequence thereof or any inquiry, proposal, offer, or transaction from any third party relating to or in connection with a Competing Transaction (which, for the purposes of the Intervening Event definition, shall be read without reference to the percentage thresholds set forth in the definition thereof), or (b) any change in the price, or change in trading volume, of the Shares or the ADSs (provided, however, that the exception to this clause (b) shall not apply to the underlying causes giving rise to or contributing to such change or prevent any of such underlying causes from being taken into account in determining whether an Intervening Event has occurred), (ii) the Sogou Board has first reasonably determined in good faith, after consultation with its financial advisor and outside legal counsel, that failure to do so would reasonably be expected to violate its fiduciary duties to the Company and its shareholders under applicable law, (iii) five (5) business days have elapsed since the Company has given written notice of such Intervening Event Termination to THL advising that it intends to take such action and specifying in reasonable detail the reasons therefor and including a reasonably detailed written description of the Intervening Event, (iv) during such five (5) business day period, the Company has considered and, if requested by THL, engaged in good faith discussions with THL regarding, any adjustment or modification to the terms of the Merger Agreement proposed by THL, and (v) the Sogou Board (acting upon recommendation of the Special Committee) or the Special Committee, following such five (5) business day period, again reasonably determines in good faith, after consultation with its financial advisor and outside legal counsel and taking into account any adjustment or modification to the terms of the Merger Agreement proposed by THL, that failure to do so would reasonably be expected to violate its fiduciary duties to the Company and its shareholders under applicable law.

Directors' and Officers' Indemnification and Insurance

        The memorandum and articles of association of the Surviving Company are required to contain provisions no less favorable with respect to exculpation and indemnification than are set forth in the memorandum and articles of association of the Company as in effect on the date of the Merger Agreement, which provisions may not be amended, repealed or otherwise modified for a period of six (6) years from the Effective Time in any manner that would affect adversely the rights thereunder of individuals who, at or prior to the Effective Time, were directors, officers, employees, fiduciaries or agents of the Company, unless such modification is required by law.

        The Surviving Company is required to maintain in effect, for a period of six (6) years after the Effective Time, the current policies of directors' and officers' liability insurance maintained by the Company, or a substitute policy of at least the same coverage containing terms and conditions that are no less favorable, with respect to matters occurring prior to the Effective Time. The Surviving Company will not be obligated to make annual premium payments for such insurance to the extent such premiums exceed 300% of current annual premiums paid by the Company for such insurance (such 300% amount, the "Max Annual Premium"). In lieu of the foregoing insurance, the Company may elect to purchase a directors' and officers' liability insurance "tail" or "runoff' insurance for a period of six (6) years after the Effective Time, with the annual premium not exceeding the Max Annual Premium.

Certain Additional Covenants

        The Merger Agreement also contains covenants of the Company, on the one hand, and THL and Parent, on the other hand, relating to, among other matters:

•

the filing of this Transaction Statement with the SEC (and cooperation in response to any comments from the SEC);



•

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

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the earlier of the Effective Time and the termination of the Merger Agreement (subject to all applicable legal or contractual obligations and restrictions);

•

the use of reasonable best efforts by each party to (i) consummate the Merger and the related transactions; (ii) obtain from any governmental entity any consent, license, permit, waiver, approval, authorization or order required for the completion of the Merger and the related transactions, and (iii) make all necessary filings and submissions with respect to the Merger Agreement, the Merger, and the other transactions contemplated thereby; provided that neither THL nor its affiliates will be required to sell, divest, lease, license, transfer, dispose of or otherwise encumber or hold separate, before or after the Effective Time, any of the assets, licenses, operations, rights, products or businesses held by any of them prior to the Effective Time, or any interest therein, or to agree to any material change (including through a licensing arrangement) or restriction on, or other impairment of THL's or its affiliates' ability to own, manage or operate, any such assets, licenses, operations, rights, products or businesses, or any interest therein, or THL's ability to vote, transfer, receive dividends or otherwise exercise full ownership rights with respect to the shares of the Surviving Company (any of the foregoing actions, a "Non-Required Remedy");



•

the use of reasonable best efforts by each party to take action necessary so that no takeover, anti-takeover, moratorium, "fair price," "control share," or other similar law is or becomes applicable to the Merger or any of the related transactions; and



•

the delisting of the Class A Ordinary Shares and ADSs from the NYSE, and the termination of the registration of the Class A Ordinary Shares and ADSs under the Exchange Act, as promptly as practicable after the Effective Time;



•

consultation with respect to public announcements relating to the Merger Agreement and the transactions contemplated by the Merger Agreement; and



•

participation in the defense and settlement of any shareholder litigation relating to the Merger Agreement or the transactions contemplated thereby.

Conditions to the Merger

        The obligations of each party to effect the Merger are subject to the satisfaction or waiver (if permitted by law) of the following conditions:

•

no law, statute, rule, or regulation having been enacted or promulgated or order issued by any governmental entity of competent jurisdiction which prohibits or makes illegal the consummation of the Merger and the related transactions;



•

not less than 20 days having elapsed following the date when this Transaction Statement was first mailed to the Company's shareholders; and



•

the transactions under the Sohu Share Purchase Agreement having been consummated.

        The obligations of THL and Parent to complete the Merger are also subject to the satisfaction or waiver at or prior to the Effective Time of the following conditions:

•

the representations and warranties of the Company in the Merger Agreement regarding the share capital of the Company being true and correct in all respects (except for de minimis inaccuracies), at the date of the Merger Agreement and as of the Effective Time, except that any such representations and warranties that by their terms speak as of a specific date need be true and correct only as of such date;



•

the representations and warranties in the Merger Agreement regarding organization, qualification, authority, absence of conflicts, and brokers being true and correct in all respects, at

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the date of the Merger Agreement and as of the Effective Time, except that any such representations and warranties that by their terms speak as of a specific date need be true and correct only as of such date;

•

each of the other representations and warranties of the Company in the Merger Agreement being true and correct in all respects (without giving effect to any "materiality," "Material Adverse Effect" or similar qualifier), at the date of the Merger Agreement and as of the Effective Time, except that any such representations and warranties that by their terms speak as of a specific date need be true and correct only as of such date, except to the extent any failures to be true and correct would not, individually or in the aggregate, have a Material Adverse Effect;



•

the Company having performed or complied in all material respects with all agreements and covenants required to be performed or complied with by it under the Merger Agreement at or prior to the Effective Time;



•

since the date of the Merger Agreement, no Material Adverse Effect having occurred that is continuing;



•

THL having received a certificate signed on behalf of the Company by a duly authorized executive officer of the Company certifying as to the satisfaction of each of the foregoing conditions;



•

all regulatory filings, permits, authorizations, consents and approvals that are required by applicable PRC laws to be made or obtained (the "PRC Regulatory Filings or Approvals") having been duly made or obtained, or the statutory clearance or non-objection period in respect of any such regulatory filing or notification having expired and no objection having been raised, in each case in accordance with applicable PRC laws, and no Non-Required Remedy has been imposed; and



•

the Company having delivered to THL certain documents relating to control over its VIEs and documents evidencing any requested resignations.

        The obligations of the Company to effect the Merger are also subject to the satisfaction or waiver of the following conditions:

•

the representations and warranties of THL and Parent set forth in the Merger Agreement being true and correct in all respects (without giving effect to any "materiality," "Material Adverse Effect" or similar qualifier), at the date of the Merger Agreement and as of the Effective Time, except that any such representations and warranties that by their terms speak as of a specific date need be true and correct only as of such date, except to the extent any failures to be true and correct would not, and would not reasonably be expected to, individually or in the aggregate, prevent, materially delay or materially impede the consummation of the Merger by THL or Parent;



•

THL and Parent having performed or complied in all material respects with all agreements and covenants required to be performed or complied with by them under the Merger Agreement at or prior to the Effective Time; and



•

the Company having received a certificate signed on behalf of THL by a director of THL certifying as to the satisfaction of each of the foregoing conditions.

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Termination of the Merger Agreement

        The Merger Agreement may be terminated and the Merger and the other transactions contemplated by the Merger Agreement and Plan of Merger may be abandoned, at any time prior to the Effective Time, as follows:

•

by mutual written consent of the Company (acting upon the recommendation of the Special Committee) and THL;



•

by either the Company (acting upon the recommendation of the Special Committee) or THL:



•

if the Effective Time has not occurred by 11:59 pm, New York City time on July 31, 2021 (the "Termination Date"); provided, that the right to so terminate the Merger Agreement shall not be available to any party whose failure to fulfill any of its obligations under the Merger Agreement has been the primary cause of the Effective Time not occurring on or prior to the Termination Date; or



•

if a governmental entity of competent jurisdiction issues a final, non-appealable order, decree or ruling which has the effect of making consummation of the Merger illegal or otherwise preventing or prohibiting consummation of the Merger; provided that the right to so terminate the Merger Agreement shall not be available to any party whose failure to fulfill any of its obligations under the Merger Agreement has been the primary cause of such order, decree or ruling;



•

by the Company:



•

if there has been a breach by THL or Parent of any representation, warranty, covenant or agreement set forth in the Merger Agreement, which breach would result in the corresponding closing condition regarding accuracy of such representations and warranties or compliance with covenants not being satisfied, and such breach is not curable or, if curable, has not been cured within the earlier of 30 calendar days after the receipt of notice thereof or the Termination Date, provided that such right to terminate will not be available to the Company if it is then in material breach of any representation, warranty, covenant or agreement of the Company set forth in the Merger Agreement;



•

if the Sogou Board (acting upon the recommendation of the Special Committee) has effected a Change in the Company Approval as a result of a Superior Proposal and the Company, concurrently with or promptly after the termination of the Merger Agreement, enters into a definitive agreement with respect to such Superior Proposal, provided that prior to or concurrently with such termination the Company has paid in full the Company Termination Fee (as defined below);



•

if the Sogou Board (acting upon the recommendation of the Special Committee) or the Special Committee has approved an Intervening Event Termination; or



•

if (i) all of the conditions to closing for the obligations of THL and Parent to consummate the Merger have been satisfied, (ii) the Company has irrevocably confirmed by written notice to THL that all conditions to closing for the obligations of the Company have been satisfied, or that it is willing to waive any unsatisfied condition, and that the Company is ready, willing and able to complete the Merger, and (iii) THL and Parent fail to effect the closing within five (5) business days following the later of the date the closing should have occurred pursuant to the terms of the Merger Agreement and THL's receipt of the written notice from the Company;

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•

by THL:



•

if there has been a breach by the Company of any representation, warranty, covenant or agreement set forth in the Merger Agreement, which breach would result in the corresponding closing condition regarding accuracy of such representations and warranties or compliance with covenants not being satisfied, and such breach is not curable or, if curable, has not been cured within the earlier of 30 calendar days after the receipt of notice thereof or the Termination Date, provided that such right to terminate will not be available to THL if either THL or Parent is then in material breach of any representation, warranty, covenant or agreement of THL or Parent set forth in the Merger Agreement; or



•

if the Sogou Board or any committee thereof (including the Special Committee) has effected a Change in the Company Approval.

Termination Fees

        The Company is required to pay Parent a termination fee of $30,000,000 (the "Company Termination Fee") if the Merger Agreement is terminated (i) by THL due to a breach or failure to perform by the Company of any representation, warranty, covenant or agreement set forth therein, (ii) by THL due to a Change in the Company Approval, (iii) by the Company as a result of a Change in the Company Approval in light of a Superior Proposal and the Company's entry into a definitive agreement with respect to such Superior Proposal, (iv) by the Company as an Intervening Event Termination, or (v) by either the Company or THL (a) as a result of the Effective Time not occurring prior to the Termination Date (except in the case that the THL Termination Fee is payable as described below) and (b) after the date of the Merger Agreement and prior to the termination of the Merger Agreement, a Competing Transaction has been made known to the Company, or has been publicly announced or disclosed and not withdrawn, and (c) within twelve (12) months of such termination the Company or any of its Subsidiaries consummates or enters into any definitive agreement in connection with a Competing Transaction (provided that for this purpose, all references to "20%" in the definition of "Competing Transaction" are deemed to be references to "50%").

        THL is required to pay the Company a termination fee of $60,000,000 (the "THL Termination Fee") if the Merger Agreement is terminated (i) by the Company due to (a) a breach or failure to perform by THL or Parent of any representation, warranty, covenant or agreement set forth therein, or (b) the failure of THL to effect the closing within five (5) business days following the later of the date the closing should have occurred pursuant to the terms of the Merger Agreement and THL's receipt of the written notice from the Company that it is willing to waive any unsatisfied condition to its obligation to effect the Merger, and that the Company is ready, willing and able to complete the Merger, if all other closing conditions have been satisfied or duly waived; or (ii) by either the Company or THL (a) because the closing of the Merger has failed to occur prior to the Termination Date or a government entity has entered an order, decree or ruling prohibiting or preventing the Merger (to the extent the relevant order primarily relates to any PRC Regulatory Filing or Approval), and (b) all conditions to closing other than (1) the condition related to there being no order, decree or ruling prohibiting or preventing the Merger (to the extent the relevant order primarily relates to any PRC Regulatory Filing or Approval) and/or (2) the condition that all PRC Regulatory Filings or Approvals have been duly made or obtained have been satisfied or waived (other than those that by their terms are to be satisfied at the closing, provided that such conditions are capable of being satisfied at the time of the termination by the Company or THL as if such time were the closing), and (c) the Company is in compliance with its covenants with respect to the relevant PRC Regulatory Filing or Approval.

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Remedies and Limitations on Liability

        The Company, THL and Parent are entitled to seek specific performance of the terms and provisions of the Merger Agreement, including to seek an injunction to prevent breaches of the Merger Agreement by the other parties and to seek an injunction, specific performance or other equitable relief to enforce the other parties' obligations to consummate the Merger, subject to the terms and conditions of the Merger Agreement, in addition to any other remedy by law or equity.

        Subject to the above:

•

in the event that THL or Parent fails to effect the Merger for any reason or no reason or they otherwise breach the Merger Agreement or otherwise fail to perform the obligations under the Merger Agreement, the Company's right to terminate the Merger Agreement and receive the THL Termination Fee will be the sole and exclusive remedy (whether at law, in equity, in contract, in tort or otherwise) of the Company, any of its Subsidiaries, any shareholder of the Company or any of its Subsidiaries or any of their respective affiliates against THL, Parent, or any of their respective affiliates, for any loss or damage suffered as a result of any breach of any representation, warranty, covenant or agreement or failure to perform the obligations under the Merger Agreement or other failure of the Merger to be consummated. None of the THL or Parent or any of their respective affiliates will have any liability for monetary damages in connection with the Merger Agreement or any of the transactions contemplated under the Merger Agreement other than the payment of the THL Termination Fee pursuant to the terms of the Merger Agreement; and



•

in the event that the Company fails to effect the Merger for any reason or no reason or otherwise breaches the Merger Agreement or otherwise fails to perform the obligations under the Merger Agreement, THL's right to terminate the Merger Agreement and receive the Company Termination Fee will be the sole and exclusive remedy (whether at law, in equity, in contract, in tort or otherwise) of any of THL and Parent against any of the Company, its Subsidiaries, shareholders of the Company or any of its Subsidiaries and any of their respective affiliates for any loss or damage suffered as a result of any breach of any representation, warranty, covenant or agreement or failure to perform the obligations under the Merger Agreement or other failure of the Merger to be consummated. None of the Company, any of its Subsidiaries, any shareholder of the Company or any of its Subsidiaries or any of their respective affiliates will have any liability for monetary damages in connection with the Merger Agreement or the transactions contemplated by the Merger Agreement other than the payment by the Company of the Company Termination Fee.

Guarantee

        TML has agreed to unconditionally and irrevocably guarantee the performance and payment of all obligations and liabilities of THL and Parent under the Merger Agreement.

Amendment

        The Merger Agreement may be amended only by written agreement of THL, Parent, TML, and the Company.

The Contribution Agreement

        The following summary describes the material terms of the Contribution Agreement, but does not purport to describe all of the terms of the Contribution Agreement and is qualified in its entirety by reference to the complete text of the Contribution Agreement, which is attached as Exhibit (d)(2) to this Transaction Statement.

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        Pursuant to the Contribution Agreement, THL will contribute all of the 151,557,875 Class B Ordinary Shares held by it to Parent, in exchange for the issuance of one ordinary share of Parent to THL. The Shares contributed by THL to Parent will remain as Class B Ordinary Shares.

The Sohu Share Purchase Agreement

        The following summary describes the material terms of the Sohu Share Purchase Agreement, but does not purport to describe all of the terms of the Sohu Share Purchase Agreement and is qualified in its entirety by reference to the complete text of the Sohu Share Purchase Agreement, which is attached as Exhibit (d)(3) and Exhibit (d)(5) to this Transaction Statement.

        Pursuant to the Sohu Share Purchase Agreement, subject to the terms and conditions thereof, Sohu Search will sell to Parent all of the 3,717,250 Class A Ordinary Shares and 127,200,000 Class B Ordinary Shares held by Sohu Search for consideration of $9.00 per Share, provided that in connection with the completion of the Sohu Share Purchase all of such Class B Ordinary Shares will be converted into Class A Ordinary Shares.

        It is a condition to the obligations of Parent to complete the Sohu Share Purchase that each of the conditions to the obligations of THL and Parent to consummate the Merger under the Merger Agreement, other than conditions that by their nature will only be satisfied at the Effective Time and other than the completion of the Sohu Share Purchase itself, be first satisfied or waived. Accordingly, the Sohu Share Purchase is expected to be completed shortly prior to the filing of the Plan of Merger with the Registrar of Companies of the Cayman Islands under the Merger Agreement.

        The Sohu Share Purchase Agreement also contains covenants of Sohu.com and Sohu Search, providing that, among other matters:

•

for a period of three years, neither Sohu.com nor Sohu Search nor any of their affiliates will (i) directly or indirectly, own, invest in, manage or operate any business that competes with the input method or general search business of the Company and its Subsidiaries, or (ii) employ, hire, or solicit the performance of services by any existing employee of the Company and its Subsidiaries, except for any general solicitation of employment not targeted specifically at employees of the Company and its Subsidiaries;



•

Sohu Search consents to the Company, THL, Parent, and TML entering into the Merger Agreement and to the consummation of the Merger and related transactions for all purposes of Sohu-Tencent Voting Agreement, and acknowledges that the Sohu-Tencent Voting Agreement will automatically terminate upon the closing of the Sohu Share Purchase;



•

all of the contracts between any of Sohu.com or Sohu Search or any of their affiliates, on the one hand, and the Company or any of its Subsidiaries, on the other hand, will terminate upon the closing of the Sohu Share Purchase, except for certain contracts specified in the Sohu Share Purchase Agreement or unless the parties otherwise agree prior to the closing of the Sohu Share Purchase;



•

Sohu.com and Sohu Search will cooperate with Parent and Beijing Sogou Information Service Co., Ltd, a variable interest entity of the Company (the "VIE Entity"), to complete the transfer of all of the equity interests in the VIE Entity held by the nominee shareholder that is designated by Sohu.com or Sohu Search to person(s) designated by Parent; and



•

Upon the request of Parent, if there is a Sogou Board meeting prior to the closing of the Sohu Share Purchase, Sohu Search will cause each of Charles (Chaoyang) Zhang and Joanna (Yanfeng) Lu, who are incumbent directors on the Sogou Board designated by Sohu Search, to (i) resign from the Sogou Board, (ii) vote to increase the size of the Sogou Board and elect persons designated by Parent as directors of the Sogou Board such that the directors designated

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by Parent will constitute a majority of the directors of the Sogou Board; and (iii) vote to appoint a director designated by Parent as the chairman of the Sogou Board, in each case effective as of the closing of the Sohu Share Purchase.

No Shareholder Vote Required to Authorize the Plan of Merger and the Merger

        Holders of Shares (including holders of Class A Ordinary Shares represented by ADSs) will not be entitled to a vote with respect to the Merger, as Parent will hold at least 90% of the total voting power in the Company prior to the Merger, and the Merger will be a "short-form" merger in accordance with Part XVI (and in particular section 233(7)) of the Cayman Islands Companies Law, which does not require approval of the shareholders of the constituent companies to the Merger if a copy of the Plan of Merger is given to every registered shareholder of each constituent company.

No Ability to Follow the Statutory Procedure to Exercise Dissenters' Rights

        As the Merger will be a "short-form" merger pursuant to section 233(7) of the Cayman Islands Companies Law, no shareholder vote on the Merger will be held. Registered holders of Class A Ordinary Shares (including holders of Class A Ordinary Shares represented by ADSs) will not be able to follow the statutory procedure to exercise dissenters' rights under section 238 of the Cayman Islands Companies Law, which would otherwise apply if the Merger were a "long-form" merger under section 233(6) of the Cayman Islands Companies Law. A copy of section 238 of the Cayman Islands Companies Law is attached to this Transaction Statement as Exhibit (f)(2) for the information of the Unaffiliated Security Holders. Unaffiliated Security Holders are urged to seek their own advice on Part XVI of the Cayman Islands Companies Law from a licensed Cayman Islands law firm.

Purposes and Effects of the Merger

        The purpose of the Merger is to enable Tencent to acquire indirect ownership of all of the outstanding equity capital in the Company which Tencent does not already beneficially own, and to cause the Unaffiliated Security Holders to be cashed out and obtain immediate liquidity. Tencent will enjoy any future earnings and growth of the Company and bear the burden of any future losses of the Company. See "Special Factors—Reasons for the Merger and Position of the Special Committee and the Sogou Board" beginning on page 34, "Special Factors—Tencent Group's Reasons for the Merger" beginning on page 53, and "Item 6—Purposes of the Transaction and Plans or Proposals" beginning on page 77 for additional information.

        ADSs representing Class A Ordinary Shares are currently listed on the NYSE under the symbol "SOGO." Following the Effective Time, the Company will cease to be a publicly-traded company and will instead be indirectly wholly owned by Tencent. Following the completion of the Merger, the ADS program will terminate and the ADSs will be de-listed from the NYSE. In addition, registration of the ADSs and the underlying Class A Ordinary Shares under the Exchange Act will be terminated 90 days after the filing of Form 15 by the Company in connection with the completion of the Merger or such shorter period as may be determined by the SEC. Accordingly, the Company will no longer be required to file periodic reports with the SEC. See "Special Factors—Effects of the Merger on the Company" beginning on page 54 for additional information.

Plans for the Company After the Merger

        The Tencent Group anticipates that the Company's operations will be conducted after the Merger substantially as they are currently being conducted, except that the Company will no longer be a publicly-traded company and will instead be an indirect wholly-owned subsidiary of Tencent. See "Special Factors—Plans for the Company after the Merger" beginning on page 57 for additional information.

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Recommendation of the Special Committee to the Sogou Board

        The Special Committee, after evaluating the proposed terms of the Merger and the related transactions with the assistance of independent financial and legal advisors, unanimously determined that the Merger Agreement and the Plan of Merger are fair to and in the best interests of the Company and the Unaffiliated Security Holders, and unanimously recommended that the Sogou Board authorize and approve the Merger Agreement, the Plan of Merger, and the consummation of the transactions contemplated thereby, including the Merger. The Sogou Board, acting on the unanimous recommendation of the Special Committee, determined that Merger Agreement and the Plan of Merger are fair to and in the best interests of the Company and the Unaffiliated Security Holders and authorized and directed the execution, delivery, and performance of the Merger Agreement and the Plan of Merger and the consummation of the transactions contemplated thereby, including the Merger.

        For a detailed discussion of the material factors considered (a) by the Special Committee in determining that the Merger Agreement and the Plan of Merger are fair to and in the best interests of the Company and the Unaffiliated Security Holders and in recommending that the Sogou Board authorize and approve the Merger Agreement, the Plan of Merger, and the consummation of the transactions contemplated thereby and (b) by the Sogou Board in determining that the Merger Agreement and the Plan of Merger are fair to and in the best interests of the Company and the Unaffiliated Security Holders and in authorizing and directing the execution, delivery, and performance of the Merger Agreement and the Plan of Merger and the consummation of the transactions contemplated thereby, including the Merger, please see "Special Factors—Reasons for the Merger and Position of the Special Committee and the Sogou Board" beginning on page 34 and "Special Factors—Primary Benefits and Detriments of the Merger" beginning on page 55.

Position of the Tencent Group as to Fairness

        Each member of the Tencent Group believes that the Merger is fair to the Unaffiliated Security Holders. The belief is based upon the factors discussed under the caption "Special Factors—Position of the Tencent Group as to the Fairness of the Merger" beginning on page 39. Members of the Tencent Group are making this statement solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act.

Financing of the Merger

        The Tencent Group estimates the total amount of funds necessary to complete the Sohu Share Purchase, the Merger and the related transactions at the closing of the Merger to be approximately $2.1223 billion. In calculating this amount, the Tencent Group did not consider the value of the Excluded Shares (other than the Shares subject to the Sohu Share Purchase), which will not be entitled to receive any cash consideration in the Sohu Share Purchase or pursuant to the Merger Agreement. The amount of the Tencent Group's estimate includes (i) cash to be paid to Sohu Search in the Sohu Share Purchase, (ii) cash to be paid to the holders of Class A Ordinary Shares (other than the Excluded Shares) and the holders of ADSs (other than ADSs representing Excluded Shares) in connection with the Merger; (iii) cash to be paid as Option Consideration (the total of the aggregate amounts to be paid to the holders of Class A Ordinary Shares (other than the Excluded Shares) and the holders of ADSs (other than ADSs representing Excluded Shares) and as Option Consideration, the "Aggregate Merger Consideration") pursuant to the Merger; and (iv) other costs and expenses in connection with the Sohu Share Purchase, the Merger, and the related transactions. The purchase price for the Sohu Share Purchase, the Aggregate Merger Consideration, and the other costs and expenses incurred in connection with the Merger and related transactions are expected to be funded with existing cash of the Tencent Group.

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Opinion of the Special Committee's Financial Advisor

        At a meeting of the Special Committee held on September 29, 2020, Duff & Phelps rendered its oral opinion (which was confirmed in writing by delivery of its written opinion dated the same date) to the Special Committee that, as of such date and based upon and subject to the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken and other matters considered by Duff & Phelps in preparing its opinion, the Per Share Merger Consideration and the Per ADS Merger Consideration to be paid to the holders of Class A Ordinary Shares (other than the Excluded Shares) and the holders of ADSs representing Class A Ordinary Shares (other than ADSs representing the Excluded Shares) in the Merger were fair, from a financial point of view, to such holders (without giving effect to any impact of the Merger on any particular holder of Class A Ordinary Shares or ADSs other than in their capacity as holders of such Class A Ordinary Shares or ADSs).

        The full text of Duff & Phelps's written opinion dated September 29, 2020, which sets forth the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken and other matters considered by Duff & Phelps in preparing its opinion, is attached as Exhibit (c)(1) to this Transaction Statement and is incorporated herein by reference. The summary of Duff & Phelps's opinion set forth in this Transaction Statement is qualified in its entirety by reference to the full text of such opinion. The shareholders of the Company are urged to read the opinion in its entirety. Duff & Phelps's written opinion is addressed to the Special Committee (in its capacity as such), is directed only to the Per Share Merger Consideration and the Per ADS Merger Consideration to be paid in the Merger and does not constitute a recommendation to any shareholder of the Company as to how such shareholder should vote or act with respect to the Merger or any other matter. Duff & Phelps did not recommend any specific amount of consideration for the Merger or that any specific amount of consideration constituted the only appropriate consideration for the Merger.

        See "Special Factors—Opinion of the Special Committee's Financial Advisor" beginning on page 44 for additional information.

Share Ownership of the Company's Directors and Executive Officers

        As of the date of this Transaction Statement, the directors and executive officers of the Company held an aggregate of 48,707,576 Class A Ordinary Shares (including Class A Ordinary Shares represented by ADSs and 1,899,000 Restricted Shares). See "Special Factors—Interests of Certain Persons in the Merger" beginning on page 59 of this Transaction Statement and "Security Ownership of Certain Beneficial Owners and Management of the Company" beginning on page 70 of this Transaction Statement.

Interests of the Company's Directors and Executive Officers in the Merger

        The Company's directors and executive officers have interests in the Merger and related transactions that are different from the interests of the Company's shareholders generally. These interests include:

•

the cash-out of Vested Company Options held by directors and executive officers of the Company at the Option Consideration;



•

the receipt by directors and executive officers of the Company of Restricted Cash Awards with respect to Unvested Equity Awards held by such directors and executive officers based on the Per Share Merger Consideration;



•

continued indemnification rights, rights to advancement of fees, and directors and officers liability insurance that are required by the Merger Agreement to be provided by the Surviving Company to the existing directors and officers of the Company following the Effective Time;

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•

the monthly compensation of $12,000 of each member of the Special Committee in exchange for his services in such capacity (and, in the case of the chairman of the Special Committee, monthly compensation of $15,000); and



•

the continuation of service of the executive officers of the Company in positions that are substantially similar to their current positions.

        The Special Committee and the Sogou Board were aware of these potential conflicts of interest and considered them, among other matters, in reaching their decisions with respect to the Merger Agreement, the Plan of Merger, and related matters. See "Special Factors—Interests of Certain Persons in the Merger" beginning on page 59.

Material U.S. Federal Income Tax Consequences

        The receipt of cash pursuant to the Merger may be a taxable transaction for U.S. federal income tax purposes and may also be a taxable transaction under applicable state, local, foreign, and other tax laws. See "Special Factors—Material U.S. Federal Income Tax Consequences" beginning on page 63. The tax consequences of the Merger to a holder of Class A Ordinary Shares or ADSs will depend upon that holder's particular circumstances. As indicated in the Sogou 2019 Form 20-F, the Company believes that it may have been a passive foreign investment company ("PFIC") for U.S. federal income tax purposes for its 2019 taxable year ended November 30, 2019, which may result in adverse tax consequences to certain U.S. Holders (as defined herein) of Class A Ordinary Shares or ADSs. "See "Special Factors—Material U.S. Federal Income Tax Consequences—Passive Foreign Investment Company Considerations." Holders of Class A Ordinary Shares or ADSs should consult their own tax advisors for a full understanding of the U.S. federal, state, local, foreign and other tax consequences of the Merger to them.

Material PRC Income Tax Consequences

        The Company does not believe that it should be considered a resident enterprise under the PRC Enterprise Income Tax Law or that the gain recognized on the receipt of cash for Class A Ordinary Shares or ADSs should otherwise be subject to PRC tax to holders of such Class A Ordinary Shares or ADSs that are not PRC residents. However, there is uncertainty regarding whether the PRC tax authorities would deem the Company to be a resident enterprise. If the PRC tax authorities were to determine that the Company should be considered a resident enterprise, then gain recognized on the receipt of cash for Class A Ordinary Shares or ADSs pursuant to the Merger by holders of Class A Ordinary Shares or ADSs who are not PRC 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 Class A Ordinary Shares or ADSs will be subject to PRC tax if the holders of such Class A Ordinary Shares or ADSs are PRC residents. Shareholders should consult their own tax advisor for a full understanding of the tax consequences of the Merger to them, including any PRC tax consequences.

        See "Special Factors—Material PRC Income Tax Consequences" beginning on page 66.

Cayman Islands Tax Consequences

        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 Class A Ordinary Shares or 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 in or produced

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before a court in the Cayman Islands (for example, for enforcement); (ii) registration fees will be payable to the Registrar of Companies of the Cayman Islands to register the Plan of Merger; and (iii) fees will be payable to the Cayman Islands Government Gazette Office to publish the notice of the Merger in the Cayman Islands Government Gazette.

Regulatory Matters

        Each of the Sohu Share Purchase Agreement and the Merger Agreement provides that the obligations of THL and/or Parent to complete the Sohu Share Purchase or the Merger (as applicable) are subject to the satisfaction or waiver of the condition that all PRC Regulatory Filings or Approvals to be made or obtained in connection with all transactions contemplated thereby have been duly made or obtained, or the statutory clearance or non-objection period in respect of any such regulatory filing or notification has expired and no objection has been raised with respect thereto, in each case in accordance with applicable PRC law. THL and Parent have submitted an antitrust filing with relevant PRC regulatory authorities in connection with the Sohu Share Purchase and the Merger and expect that the closings of the Sohu Share Purchase and the Merger will be subject to the clearance of such filing.

Litigation Related to the Merger

        The Company and THL are not aware of any lawsuit that challenges the Merger Agreement, the Merger, or any of the related transactions.

Accounting Treatment of the Merger

        THL and Parent expect the Merger to be accounted for as a business combination by Tencent in accordance with International Financial Reporting Standards 3 "Business Combinations" as of the Effective Time.

Market Price of the ADSs

        On July 24, 2020, the last trading day prior to July 27, 2020, which is the date when the Company announced that the Sogou Board had received from Tencent a preliminary non-binding proposal to acquire all of the outstanding Shares (including Class A Ordinary Shares represented by ADSs) not already beneficially owned by Tencent, the reported closing price of the ADSs on the NYSE was $5.75. The Per Share Merger Consideration and Per ADS Merger Consideration of $9.00 per Class A Ordinary Share or ADS represents a premium of 56.5% over the closing price of $5.75 per ADS on July 24, 2020, and a premium of approximately 83.0% to the volume-weighted average price during the last 30 trading days prior to the Sogou Board's receipt of the Proposal on July 27, 2020.

Fees and Expenses

        All fees and expenses incurred in connection with the Sohu Share Purchase Agreement and the Sohu Share Purchase, the Merger Agreement and the Merger, and the related transactions will be paid by the party incurring such expenses whether or not the Sohu Share Purchase or the Merger is completed. See "Special Factors—Fees and Expenses" beginning on page 62.

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QUESTIONS AND ANSWERS ABOUT THE MERGER

        The following questions and answers address briefly some questions Unaffiliated Security Holders may have regarding the Merger. These questions and answers may not address all questions that may be important to the Unaffiliated Security Holders as holders of Class A Ordinary Shares or ADSs. See the more detailed information contained elsewhere in this Transaction Statement and the documents referred to or incorporated by reference in this Transaction Statement.

Q:    What is the Merger and who will own the Company after the Merger?

A:

The Merger is a going-private transaction pursuant to which Parent will merge with and into the Company, with the Company continuing as the Surviving Company resulting from the Merger. The Merger will be effected through a statutory short-form merger in accordance with section 233(7) of the Cayman Islands Companies Law. After the Merger is completed, the Company will be a privately-held company, all of the outstanding equity shares of which will be owned by THL, which in turn is wholly-owned by Tencent. THL is a major shareholder of the Company, holding 151,557,875 Class B Ordinary Shares as of the date of this Transaction Statement, and has the right to designate one individual for election to the Sogou Board. As a result of the Merger, the ADSs will no longer be listed on the NYSE, and the Company will cease to be a publicly-traded company.

Q:    What consideration will I be entitled to receive in the Merger?

A:

Holders of ADSs (other than ADSs representing Excluded Shares) will be entitled to receive the Per ADS Merger Consideration of $9.00 per ADS (less $0.05 per ADS cancellation fees and other fees as applicable pursuant to the terms of the Deposit Agreement, without interest and net of any applicable withholding taxes for the ADSs) for each ADS held as of the Effective Time.

Holders of Class A Ordinary Shares (other than Excluded Shares) will be entitled to receive the Per Share Merger Consideration of $9.00 in cash for each Class A Ordinary Share held as of the Effective Time (without interest and net of any applicable withholding taxes for the Class A Ordinary Shares).

See "Special Factors—Material U.S. Federal Income Tax Consequences," "Special Factors—Material PRC Income Tax Consequences", and "Special Factors—Cayman Islands Tax Consequences" beginning on page 63 for a description of the tax consequences of the Merger. Unaffiliated Security Holders should consult with their own tax advisors for a full understanding of how the Merger will affect their U.S. federal, state, and local and PRC and other non-U.S. taxes.

Q:    How will a holder of ADSs receive the net Per ADS Merger Consideration to which the holder is entitled after the Merger is completed?

A:

If the ADSs are held in a securities account with a broker, bank, or other intermediary, the beneficial holder will not be required to take any action to receive the net Per ADS Merger Consideration, because the Depositary will arrange for the surrender of the ADSs and the remittance of the net Per ADS Merger Consideration with The Depository Trust Company (the clearance and settlement system for the ADSs) for distribution to the beneficial holder's broker, bank or other intermediary on the holder's behalf. Such beneficial holders of ADSs with questions concerning receipt of the net Per ADS Merger Consideration should contact their brokers, banks, or other intermediaries.

If the ADSs are not held in a securities account with a broker, bank, or other intermediary and are held directly by the beneficial holder in uncertificated form (that is, without an American Depositary Receipt or "ADR"), unless the holder has surrendered the holder's ADSs to the

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Depositary for cancellation prior to the Effective Time, after the completion of the Merger the Depositary will automatically send the holder a check for the net Per ADS Merger Consideration in exchange for the cancellation of each of the beneficial holder's ADSs. The Per ADS Merger Consideration may be subject to backup withholding taxes if the ADS depositary has not received from the holder a properly completed and signed U.S. Internal Revenue Service Form W-8 or W-9.

If the ADSs are represented by ADRs, unless the holder has surrendered the holder's ADRs to the Depositary for cancellation prior to the Effective Time, upon the holder's 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 the holder by the Depositary after the Effective Time), after the completion of the Merger the Depositary will send the holder a check for the net Per ADS Merger Consideration for each ADS represented by the ADRs in exchange for the cancellation of the ADRs.

Q:    How will a holder of Class A Ordinary Shares receive the net Per Share Merger Consideration to which the holder is entitled after the Merger is completed?

A:

If Class A Ordinary Shares are held directly by a registered holder, promptly after the Effective Time, a bank or trust company appointed by the Tencent Group, which will act as paying agent (the "Class A Paying Agent"), will mail to the holder (i) a form of letter of transmittal specifying how the delivery of the net Per Share Merger Consideration to the holder will be made and (ii) instructions for surrendering share certificates in exchange for the net Per Share Merger Consideration. Subject to complying with these instructions, the holder will receive cash for the holder's Class A Ordinary Shares from the Class A Paying Agent. Upon surrender of the share certificates or a declaration of loss or non-receipt, the holder will receive an amount in cash equal to the number of the holder's Class A Ordinary Shares multiplied by the net Per Share Merger Consideration, in exchange for cancellation of the holder's Class A Ordinary Shares. The Per Share Merger Consideration may be subject to U.S. federal income tax backup withholding if the Class A Paying Agent has not received from the holder a properly completed and signed U.S. Internal Revenue Service Form W-8 or W-9.

Q:    How will Company Options be treated in the Merger?

A:

Each Company Option that is vested and outstanding immediately prior to the Effective Time will be cancelled as of the Effective Time and converted into the right to receive the Option Consideration.

Each Company Option granted under a Company Equity Plan that is outstanding but is unvested prior to the Effective Time will be cancelled as of the Effective Time and converted into the right to receive a Restricted Cash Award.

Q:    How will Restricted Shares be treated in the Merger?

A:

Each Restricted Share granted under a Company Equity Plan that is outstanding prior to the Effective Time will be cancelled as of the Effective Time and converted into the right to receive a Restricted Cash Award.

Q:    When do you expect the Merger to be completed?

A:

In order for the Merger to be completed, the closing conditions under the Merger Agreement, including the passage of not less than 20 days after this Transaction Statement is first mailed to the shareholders of the Company and the making and obtaining of the PRC Regulatory Filings or Approvals in accordance with applicable PRC law, must be satisfied or waived. The parties are

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working toward completing the Merger as quickly as possible and currently expect the Merger to be completed by the first half of 2021, subject to all conditions to the Merger having been satisfied or waived.

Q:    What will be the result if the Merger is not completed?

A:

If the Merger is not completed for any reason, the shareholders of the Company will not receive any payment for their Class A Ordinary Shares or ADSs pursuant to the Merger Agreement, the Company will remain a publicly-traded company, and the ADSs will continue to be listed and traded on the NYSE for so long as the Company continues to meet the NYSE's listing requirements.

Q:    Will shareholders be able to assert dissenters' rights (also referred to as "appraisal rights") in connection with the Merger?

A:

No. Because the Merger will be a "short-form" merger pursuant to section 233(7) of the Cayman Islands Companies Law, no shareholder vote on the Merger will be held. Registered holders of Class A Ordinary Shares (including holders of Class A Ordinary Shares represented by ADSs) will not be able to follow the statutory procedure to exercise dissenters' or appraisal rights under section 238 of the Cayman Islands Companies Law, which would otherwise apply if the Merger was a "long-form" merger under section 233(6) of the Cayman Islands Companies Law. Unaffiliated Security Holders are urged to seek their own advice on Part XVI of the Cayman Islands Companies Law from a licensed Cayman Islands law firm.

Q:    What do Unaffiliated Security Holders need to do now?

A:

We urge all the Unaffiliated Security Holders to read this Transaction Statement carefully, including its annexes, exhibits, attachments, and the other documents referred to or incorporated by reference herein. As the Company is not soliciting proxies from the shareholders of the Company (because there will be no shareholder vote with respect to the Merger Agreement, the Plan of Merger, and the Merger), there is nothing else that Unaffiliated Security Holders will need to do in connection with the Merger until the Merger is completed. Please see the questions above, "How will a holder of ADSs receive the net Per ADS Merger Consideration to which the holder is entitled after the Merger is completed?" and "How will a holder of Class A Ordinary Shares receive the net Per Share Merger Consideration to which the holder is entitled after the Merger is completed?," and the answers to those questions, for the steps Persons who are Unaffiliated Security Holders as of the Effective Time should take after the Merger is completed in order to receive the consideration which they are entitled to receive in the Merger.

Q:    Who can answer Unaffiliated Security Holders' questions?

A:

Unaffiliated Security Holders with questions about the Merger may contact Sogou by email at ir@sogou-inc.com or by telephone at +86-10-5689-9999.

SPECIAL FACTORS

Background of the Merger

        Events leading to the execution of the Merger Agreement and the Sohu Share Purchase Agreement described below occurred primarily in the PRC. Accordingly, all dates and times referenced in this Background of the Merger, including events that may have occurred in different time zones, refer to PRC Time.

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        As an existing beneficial owner of the Shares, Tencent has continuously evaluated the Company's business, prospects and financial condition, market conditions and other developments and factors it deems relevant to the management of its investment in the Company.

        On May 16, 2020, Tencent approached and met with Mr. Xiaochuan Wang ("Mr. Wang"), the Company's Chief Executive Officer, and expressed an interest in having a majority equity ownership interest in, and control of, the Company. On the same day, Mr. Wang had a conversation with Ms. Jinmei He, an independent director of the Company, in which he informed Ms. He that Tencent had expressed an interest in having a majority equity ownership interest in, and control of, the Company.

        On June 2, 2020, at a meeting with Dr. Charles (Chaoyang) Zhang ("Dr. Zhang"), Sohu.com's Chairman and Chief Executive Officer and Chairman of the Sogou Board, and other representatives of Sohu.com, Mr. Wang reported that Tencent had expressed an interest in having a majority equity ownership interest in, and control of, the Company.

        On June 28, 2020, in a phone call between Mr. Martin Lau ("Mr. Lau") of Tencent and Dr. Zhang of Sohu.com, Mr. Lau expressed Tencent's interest in having a majority equity ownership interest in, and control of, the Company. Dr. Zhang and Mr. Lau discussed possible transaction structures, including a sale by Sohu.com to Tencent of the Company shares beneficially owned by Sohu.com, and a business combination pursuant to which Tencent would acquire all of the outstanding Company shares that Tencent did not already own. During the discussion, Mr. Lau generally mentioned that Tencent might value the Company within the range from $7.00 to $8.00 per Share or ADS.

        On July 10, 2020, in a second phone call between Mr. Lau and Dr. Zhang, Mr. Lau told Dr. Zhang that Tencent would want to pursue a business combination pursuant to which Tencent would acquire all of the outstanding Company shares that Tencent did not already own. Mr. Lau suggested that the price could be $8.50 per Share or ADS, and Dr. Zhang indicated that he believed $9.50 per Share or ADS would be more appropriate. During the call, Mr. Lau also preliminarily discussed with Dr. Zhang whether Dr. Zhang would support such a transaction in his capacity as a beneficial owner of Class A Ordinary Shares.

        On July 20, 2020, in a third phone call between Mr. Lau and Dr. Zhang, Mr. Lau told Dr. Zhang that Tencent would be ready to make a non-binding proposal to acquire the Company's outstanding shares that it did not already own for $9.00 per Share, and Dr. Zhang indicated to Mr. Lau that he believed that $9.00 per Share or ADS could be acceptable.

        On July 21, 2020, Mr. James (Xiufeng) Deng ("Mr. Deng"), Sohu.com's VP of Finance, contacted representatives of Tencent to follow up on the preliminary discussions between Mr. Lau of Tencent and Dr. Zhang of Sohu.com.

        On July 25, 2020, representatives of Tencent contacted representatives of Sohu.com, and indicated that Tencent would like Dr. Zhang to sign an agreement with Tencent pursuant to which he would agree, in his individual capacity as the beneficial owner of Class A Ordinary Shares, to support and vote in favor of any agreement entered into between Tencent and the Company for Tencent to take the Company private.

        On July 26, 2020, Mr. Deng of Sohu.com and a representative of Goulston & Storrs PC ("Goulston & Storrs"), Sohu.com's and the Company's U.S. legal counsel, participated in a conference call with representatives of Tencent; Davis Polk & Wardwell LLP ("Davis Polk"), Tencent's U.S. legal counsel; and Goldman Sachs (Asia) L.L.C., Tencent's financial advisor, during which Tencent indicated that it expected to make a non-binding proposal within the coming week to take the Company private. On the same July 26, 2020 conference call, representatives of Tencent indicated that they hoped that Sohu.com would enter into an agreement with Tencent pursuant to which Sohu.com would agree to sell all of its shares in the Company to Tencent prior to the completion of a transaction in which Tencent

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would take the Company private, for the same price per share as might ultimately be agreed to between Tencent and the Company for a going-private transaction. Representatives of Tencent also indicated that they hoped such an agreement could be entered into prior to or very soon after the time Tencent made a non-binding proposal to take the Company private. Both Mr. Deng and Goulston & Storrs informed the representatives of Tencent that the Sohu.com board of directors (the "Sohu Board") had not been informed of the possibility of a non-binding proposal by Tencent to take the Company private nor of such a possible agreement between Tencent and Sohu.com, and that the timing suggested by Tencent was not feasible, because the Sohu Board would need to take all time as would be necessary to permit it to carefully weigh the advisability of Sohu.com entering into such an agreement with Tencent and to determine whether such an agreement would be fair to, and in the best interests of, Sohu.com and its shareholders.

        On July 27, 2020, Sohu.com and Tencent Limited, an affiliate of Tencent, signed a confidentiality agreement with respect to matters relating to the Proposed Transaction.

        Also on July 27, 2020, Dr. Zhang, solely in his individual capacity as the beneficial holder of Class A Ordinary Shares, entered into an agreement with Tencent in which Dr. Zhang agreed to vote his Class A Ordinary Shares in favor of a transaction between Tencent and the Company and to sell such Class A Ordinary Shares to Tencent, either prior to or in such a transaction, at the same price per share as paid by Tencent to other shareholders of the Company in such a transaction.

        Later on July 27, 2020, the Sogou Board received a letter from Tencent with Tencent's non-binding proposal (the "Proposal") for Tencent and its affiliates to acquire all of the outstanding Class A Ordinary Shares, including Class A Ordinary Shares represented by ADSs, and Class B Ordinary Shares not already beneficially owned by Tencent in a statutory merger for cash consideration of $9.00 per Share or ADS (as revised from time to time, the "Proposed Transaction").

        Later on the same day, the Company and Sohu.com both issued press releases regarding the Sogou Board's receipt of the Proposal. Sohu.com and the Company furnished Forms 6-K to the SEC on July 27, 2020 and July 28, 2020, respectively, with copies of their press releases.

        At a special meeting of the Sogou Board held on July 31, 2020, the Sogou Board approved the formation of the Special Committee, consisting of Mr. Bin Gao, Ms. Janice Lee, and Ms. Jinmei He, all of whom are independent and disinterested members of the Sogou Board, to review and evaluate the Proposal; delegated to the Special Committee the authority to approve or reject a transaction based on the Proposal, to consider alternatives to the Proposal, and to retain a financial advisor and legal counsel to the Special Committee at the Company's expense; and appointed Mr. Gao as the Chair of the Special Committee.

        Later on the same day, the Special Committee held a meeting at which the Special Committee retained Goulston & Storrs to be the U.S. legal counsel to the Special Committee. In making the determination to retain Goulston & Storrs, the Special Committee considered the fact that Goulston & Storrs had been the Company's U.S. legal counsel for several years, as well as Goulston & Storrs's extensive experience with transactions similar to the Proposed Transaction. The Special Committee also considered whether Goulston & Storrs's concurrent representation of Sohu.com and the Special Committee might present a conflict of interest, and determined that it would not, because the interests of Sohu.com and of the Unaffiliated Security Holders, both being shareholders of the Company who would sell their Shares and ADSs to Tencent in, or in connection with, the Proposed Transaction and would receive the same price per Share or ADS, could be expected to be aligned for all relevant purposes. Members of the Special Committee also noted that having the same U.S. legal counsel for both Sohu.com and the Special Committee could facilitate lines of communication as to matters that could be of assistance to the Special Committee in its evaluation and negotiation of the Proposed Transaction. Representatives of Goulston & Storrs then reviewed with members of the Special Committee the scope of the Special Committee's authority delegated to the Special Committee by the

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Sogou Board and certain legal and procedural considerations with respect to the Proposed Transaction, and the Special Committee determined that it would invite a number of investment banks to submit proposals to serve as the Special Committee's financial advisor with respect to the Proposed Transaction.

        On July 31, 2020, the Company issued a press release announcing that the Sogou Board had formed the Special Committee to review and evaluate the Proposal and that the Special Committee had retained Goulston & Storrs as its U.S. legal counsel in connection with such review and evaluation. Both the Company and Sohu.com furnished Forms 6-K to the SEC with a copy of the Company's press release. On August 5, 2020, Tencent and THL filed with the SEC a joint Schedule 13D (the "Original Tencent Schedule 13D") with respect to the submission of the Proposal.

        Between July 31, 2020 and August 8, 2020, the Special Committee interviewed three investment banks that had submitted proposals to serve as the Special Committee's financial advisor. At a meeting held on August 8, 2020, after discussion and consideration of various matters related to such investment banks' proposals and qualifications, including their experience in going-private transactions involving China-based companies listed in the U.S., the presence and depth of their operating teams in China, and their previous working relationships with the Company and Sohu.com, the Special Committee determined that it would retain Duff & Phelps as the financial advisor to the Special Committee, for a fixed fee, which would not be contingent upon the consummation of the proposed privatization transaction in relation to the Proposal or any conclusion in any opinion rendered by Duff & Phelps with respect to the Proposed Transaction. The Special Committee then negotiated the terms of Duff & Phelps's retention, and entered into an engagement letter with Duff & Phelps on August 10, 2020.

        On August 11, 2020, the Company issued a press release announcing that the Special Committee had retained Duff & Phelps as the Special Committee's financial advisor in connection with its review and evaluation of the Proposal. On August 12, 2020, both the Company and Sohu.com furnished Forms 6-K to the SEC with a copy of the Company's press release.

        Between August 11, 2020 and August 18, 2020, as directed by the Special Committee, representatives of Duff & Phelps had several discussions with members of the management of the Company in connection with Duff & Phelps's financial due diligence on the Company.

        On August 17, 2020, the Company and Tencent entered into a confidentiality agreement with respect to the Proposal.

        On August 17, 2020, Tencent sent an initial draft of the Sohu Share Purchase Agreement to Sohu.com. Between August 17, 2020 and September 27, 2020, representatives of Goulston & Storrs and of Davis Polk exchanged a number of interim drafts of, and had a number of discussions regarding, the Sohu Share Purchase Agreement.

        On August 19, 2020, the Company and Sohu.com entered into a confidentiality agreement with respect to the Proposal.

        On August 19, 2020, the Special Committee held a meeting with Duff & Phelps and Goulston & Storrs. At the meeting, representatives of Duff & Phelps reported to the Special Committee on the Duff & Phelps team's financial due diligence investigation on the Company, which included on-site interviews of members of the management of the Company and finance team, and that Duff & Phelps had obtained from the management of the Company financial projections for the Company, which were prepared with respect to the Company as a standalone entity based on management's current best estimates and judgment. Representatives of Duff & Phelps went over in detail with the Special Committee key line items in the financial projections, and answered various related questions from members of the Special Committee, and the Special Committee authorized Duff & Phelps to use such financial projections as a basis to perform a discounted cash flow analysis to be used as one of the key metrics in performing a valuation of the Company. The Special Committee also considered and

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determined that, in view of Sohu.com's potentially stronger negotiating position with Tencent as the Company's controlling shareholder, it would be desirable to discuss with Sohu.com whether Sohu.com expected to negotiate with Tencent as to the $9.00 price per Share contemplated by the Proposal. The Special Committee requested that Mr. Gao, as the Chair of the Special Committee, have such a discussion with Sohu.com.

        On August 24, 2020, Davis Polk sent an initial draft of the Merger Agreement to Goulston & Storrs.

        On September 1, 2020, the Sohu Board held a special meeting at which the Sohu Board, with assistance from its financial and legal advisors, determined that the $9.00 price per Share proposed by Tencent for the Sohu Share Purchase appeared to be fair to Sohu.com and its shareholders, while noting that the price per Share that would be agreed to by Sohu.com would be equal to, and therefore subject to, such price per Share or ADS as might be determined by the Special Committee to be fair to and in the best interests of the Company and the Unaffiliated Security Holders and approved by the Sogou Board. Such determination by the Sohu Board was based, in part, on Dr. Zhang's informing the Sohu Board that he had negotiated hard with Mr. Lau of Tencent to reach a preliminary understanding as to the $9.00 price per Share, and that he did not believe that seeking a higher price would be fruitful. At the special meeting, the Sohu Board directed Sohu.com's management to continue negotiating the other terms and conditions of the Sohu Share Purchase.

        On September 2, 2020, Mr. Gao and representatives of Goulston & Storrs held a telephonic meeting with Mr. Deng of Sohu.com, at which Mr. Deng notified Mr. Gao that the Sohu Board had determined to not seek a price higher than $9.00 per Share for the Sohu Share Purchase.

        Later on September 2, 2020, the Special Committee held a meeting with Duff & Phelps and Goulston & Storrs. Representatives of Duff & Phelps informed the Special Committee that Duff & Phelps had completed the financial and valuation analysis necessary to complete its fairness opinion, subject to receiving from the Company of final outstanding share and incentive award numbers. Representatives of Duff & Phelps also reported that its preliminary conclusion was that the Per Share Merger Consideration of $9.00 proposed by Tencent was above the price ranges resulting from each of the models used by Duff & Phelps in its financial and valuation analysis. Representatives of Goulston & Storrs then discussed with the Special Committee certain key issues with respect to the draft Merger Agreement requiring further negotiation, including the size and specified triggers of termination fees that would be required to be paid by the Company to THL, or by THL to the Company, upon termination of the Merger Agreement under certain circumstances without the Merger having been completed. Mr. Bin Gao reported to the Special Committee the meeting with Mr. Deng of Sohu.com at which Mr. Deng informed him that the Sohu Board had determined that Sohu.com would not seek a price higher than $9.00 per Share with respect to the Sohu Share Purchase. The Special Committee then tentatively determined, subject to further consideration by the members, that the Special Committee would also not seek a higher price than $9.00 for the Per Share Merger Consideration and Per ADS Merger Consideration, and directed Goulston & Storrs to continue to negotiate with Davis Polk the other terms and conditions of the Merger Agreement.

        On September 4, 2020, Goulston & Storrs sent a revised draft of the Merger Agreement to Davis Polk.

        On September 11, 2020, Davis Polk sent a further revised draft of the Merger Agreement to Goulston & Storrs.

        Between September 13, 2020 and September 28, 2020, representatives of Goulston & Storrs and of Davis Polk had a number of discussions regarding the Merger Agreement and exchanged a number of interim drafts of the Merger Agreement.

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        On September 22, 2020 representatives of Goulston & Storrs, through electronic text messaging, discussed with the Special Committee remaining key issues under the Merger Agreement and made suggestions as to how those issues might be resolved. Members of the Special Committee considered and generally adopted Goulston & Storrs's suggestions. Also through electronic text messaging, the Special Committee confirmed that it did not consider it necessary or worthwhile to seek a higher price than $9.00 per Class A Ordinary Share or ADS under the Merger Agreement. The Special Committee's determination was based, among other things, on the facts that the price of $9.00 per Class A Ordinary Share or ADS proposed by Tencent not only represented a significant premium over the trading prices of the ADSs on the NYSE prior to Sogou's announcement of receipt of the Proposal, but also was above the price per Share ranges that the preliminary results of Duff & Phelps's financial and valuation models had shown, and that Sohu.com had determined that it would not seek a price higher than $9.00 for the Sohu Share Purchase.

        On September 27, 2020, Goulston & Storrs and Davis Polk reached a preliminary understanding as to the final form of the Sohu Share Purchase Agreement. Later on the same day, the Sohu Board adopted resolutions authorizing and approving, among other things, the execution, delivery, and performance of the Sohu Share Purchase Agreement and the consummation of the Sohu Share Purchase and the other transactions relating thereto.

        On September 28, 2020, Goulston & Storrs and Davis Polk reached a preliminary understanding as to the final form of the Merger Agreement.

        During the negotiations between the Special Committee and Tencent on the Merger Agreement, Conyers Dill & Pearman, the Special Committee's Cayman Islands legal counsel, passed upon and advised on the validity of the Merger and certain other legal matters with respect to Cayman Islands law.

        On September 29, 2020, the Special Committee held a meeting with Duff & Phelps and Goulston & Storrs. During the meeting, representatives of Duff & Phelps presented to the Special Committee its financial analyses with respect to the Company and the transaction proposed by Tencent to acquire, through the Merger, the Class A Ordinary Shares (other than the Excluded Shares) at the Per Share Merger Consideration and the ADSs (other than ADSs representing Excluded Shares) at the Per ADS Merger Consideration, and then rendered its oral opinion that as of September 29, 2020, the Per Share Merger Consideration and the Per ADS Merger Consideration to be paid to the Unaffiliated Security Holders in the Proposed Transaction were fair, from a financial point of view, to such Unaffiliated Security Holders, based upon and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered in preparing its opinion. Its written fairness opinion was delivered later dated the same day. The full text of the written opinion of Duff & Phelps is attached as Exhibit (c)(1) to this Transaction Statement. For additional information regarding the financial analyses performed by and the opinion rendered by Duff & Phelps, please refer to "Special Factors—Opinion of the Special Committee's Financial Advisor" beginning on page 44. Representatives of Goulston & Storrs then gave the Special Committee an overview of the material terms of the final draft of the Merger Agreement. The Special Committee members then, with the assistance of Goulston & Storrs, discussed and weighed various factors, including Duff & Phelps's financial analysis and fairness opinion, tending to support a determination that the Merger, subject to the terms and conditions of the Merger Agreement, is fair to, and in the best interests of, the Company and the Unaffiliated Security Holders, and certain factors tending to not support such a determination. The Special Committee then unanimously (i) 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 the Unaffiliated Security Holders, (ii) declared it advisable for the Company to enter into the Merger Agreement, the Plan of Merger, and the other transactions contemplated thereby, including the Merger, and (iii) recommended that the audit committee of the Sogou Board and the Sogou Board approve the Merger Agreement and the Plan of Merger, substantially in the form presented to the

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Special Committee, and the performance by the Company of its obligations under the Merger Agreement and the Plan of Merger, and that the consummation by the Company of the Merger and the other transactions relating thereto, be approved by the audit committee of the Sogou Board and the Sogou Board. See "Special Factors—Reasons for the Merger and Position of the Special Committee and the Sogou Board" beginning on page 34 for a detailed description of matters considered and determined by the Special Committee at the meeting.

        Also on September 29, 2020, the Sogou Board and the Audit Committee of the Sogou Board, acting by unanimous written consent upon the Special Committee's recommendation, authorized and approved the execution, delivery, and performance of the Merger Agreement and the Plan of Merger and the consummation of the Merger and the transactions related thereto.

        On September 29, 2020, the Company, THL, Parent and TML executed the Merger Agreement. At or about the same time as the Merger Agreement was executed, Sohu.com, Sohu Search, and Parent executed the Sohu Share Purchase Agreement, and THL and Parent entered into the Contribution Agreement.

        On the same day, prior to the opening of the U.S. financial markets, the Company issued a press release announcing that the Company, THL, Parent and TML had entered into the Merger Agreement, and furnished a Form 6-K to the SEC with a copy of the Company's press release and the Merger Agreement. Sohu.com issued a press release announcing that the Company had entered into the Merger Agreement and that Sohu.com, Sohu Search, and Parent had entered into the Sohu Share Purchase Agreement, and furnished a Form 6-K to the SEC with copies of the Company's and Sohu.com's press releases, the Merger Agreement, and the Sohu Share Purchase Agreement.

        On October 2, 2020, Tencent and THL jointly filed with the SEC an amendment to the Original Tencent Schedule 13D with respect to the execution of the Merger Agreement, the Share Purchase Agreement, and the Contribution Agreement.

        On October 9, 2020, Sohu.com and Sohu Search jointly filed with the SEC Schedule 13D with respect to the execution of the Sohu Share Purchase Agreement.

        In late November 2020, THL and Parent made an antitrust filing with relevant PRC regulatory authorities in connection with the Sohu Share Purchase and the Merger. Considering the time needed for the clearance of such filing, the parties decided to extend the termination date under the Sohu Share Purchase Agreement and the Merger Agreement. On December 1, 2020, (i) Sohu.com, Sohu Search, and Parent executed an Amendment No. 1 to Share Purchase Agreement, to extend the termination date under the Sohu Share Purchase Agreement from March 29, 2021 to July 31, 2021, and (ii) the Company, THL, Parent and TML executed an Amendment No. 1 to Agreement and Plan of Merger, to extend the termination date under the Merger Agreement from March 29, 2021 to July 31, 2021.

Reasons for the Merger and Position of the Special Committee and the Sogou Board

        At a meeting on September 29, 2020, the Special Committee, after consultation with Duff & Phelps and Goulston & Storrs and after considering and weighing various factors, unanimously (i) 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 the Unaffiliated Security Holders, (ii) declared it advisable for the Company to enter into the Merger Agreement, the Plan of Merger, and the other transactions contemplated thereby, including the Merger, and (iii) recommended that the audit committee of the Sogou Board and the Sogou Board approve the Merger Agreement and the Plan of Merger, substantially in the form presented to the Special Committee, and the performance by the Company of its obligations under the Merger Agreement and the Plan of Merger, and that the consummation by the Company of the Merger and the other transactions relating thereto, be approved by the audit committee of the Sogou Board and the Sogou Board.

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        On September 29, 2020, the audit committee of the Sogou Board and the Sogou Board, each in their capacities as such, on behalf of the Company and acting by unanimous written consent upon the recommendation of the Special Committee, authorized and approved the execution, delivery, and performance of the Merger Agreement and the Plan of Merger, and the consummation of the Merger and the transactions related thereto.

        In reaching their determination, the Special Committee and the Sogou Board considered the factors and potential benefits of the Merger discussed below, each of which the Special Committee and the Sogou Board believe supported their decision to approve the Merger Agreement and the Special Committee's determination that the Merger is fair to the Unaffiliated Security Holders. These factors and potential benefits are not listed in any relative order of importance.

•

General Economic Trends and Business Pressures.  The headwinds faced by the Company resulting from increasing competition in the online search industry in China, from adverse pressure on the Company's operating margins resulting from increases in traffic acquisition costs, and from the recent economic slowdown in China and throughout the world resulting from the Covid-19 pandemic, which have had, and can be expected to continue to have, an adverse impact on the Company's financial performance.



•

Premium Over Market Price of the ADSs.  The fact that the Per Share Merger Consideration and the Per ADS Merger Consideration of $9.00 represent a premium of approximately 56.5% to the closing trading price of the ADSs on July 24, 2020, the last trading day prior to the Company's announcement of the Sogou Board's receipt of the Proposal, and a premium of 83.0% to the volume-weighted average price during the last 30 trading days prior to the Company's announcement.



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All-Cash Merger Consideration.  The fact that the merger consideration will be all cash, which will provide immediate liquidity to the Unaffiliated Security Holders and allow them to avoid post-Merger risks and uncertainties relating to the prospects of the Company.



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Opinion of Financial Advisor.  The Special Committee considered the financial analysis conducted and discussed with the Special Committee by representatives of Duff & Phelps, as well as the oral and written opinion of Duff & Phelps rendered to the Special Committee on September 29, 2020 as to the fairness, from a financial point of view as of that date, of the Per Share Merger Consideration and the Per ADS Merger Consideration to be paid to the Unaffiliated Security Holders in the Merger based upon and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Duff & Phelps in preparing its opinion (see "Opinion of the Special Committee's Financial Advisor" beginning on page 44 of this Transaction Statement).



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Controlling Shareholder Approval.  The fact that Sohu.com, the Company's indirect controlling shareholder, has indicated that it will agree to cause its subsidiary Sohu Search to sell all the Class A Ordinary Shares and Class B Ordinary Shares that Sohu.com beneficially owns, which represent approximately 33.8% of the outstanding Shares, to Tencent pursuant to the Sohu Share Purchase Agreement for the same $9.00 per Share that will be paid to the Unaffiliated Security Holders in the Merger.



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Approval of the Chairman of the Board as to His Shares.  The fact that Dr. Charles Zhang, the Company's Chairman of the Board and the beneficial holder individually of approximately 6.4% of the Company's outstanding shares, has agreed with Tencent that that he will support the Merger as to his Shares, and will receive the same $9.00 per Share in the Merger as will be paid to the Unaffiliated Security Holders.



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Potential Adverse U.S. Regulatory Changes.  The possibility that China-based U.S.-listed public companies such as the Company could be delisted from U.S. stock exchanges, or be subject to

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other burdensome restrictions, by reason of any newly enacted law or regulation similar in substance to the proposed "Holding Foreign Companies Accountable Act" adopted by the U.S. Senate and introduced in the U.S. House of Representatives in May 2020 and the "Memorandum on Protecting United States Investors from Significant Risks from Chinese Companies" issued by the U.S. White House in June 2020, both of which purport to address perceived risks to investors in U.S. financial markets from the PRC government's purported failure to allow audit firms, such as the Company's independent auditor, that audit U.S.-listed companies based in China to be adequately examined by the U.S. Public Company Accounting Oversight Board pursuant to U.S. securities law.

•

Elimination of Unaffiliated Security Holder Exposure to Future Performance Risks of the Company. The Merger would shift the risk of the future financial performance of the Company from the Unaffiliated Security Holders, who do not have the power to control decisions made regarding the Company's business, entirely to Tencent, which would have the power to control the Company's business.



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No Third-Party Offers.  There has been no offer, other than the Proposal, within the past two years of which the Company is aware for a going-private or other similar transaction with respect to the Company.



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Unanimous Recommendation of the Special Committee.  The Sogou Board considered that the Special Committee, after evaluating the Proposed Transaction, unanimously determined that the Merger Agreement, the Plan of Merger, and the Merger are fair to, advisable, and in the best interests of the Company and Unaffiliated Security Holders and recommended that the Sogou Board authorize and approve the Merger Agreement, the Plan of Merger, and the Merger.

        The Special Committee and the Sogou Board did not consider the Company's net book value, which is an accounting concept based on historical costs, as a factor because they 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 (and does not, for example, take into account the future prospects of the Company, market trends and conditions, or business risks inherent in a competitive market) and therefore, in their view, is not a relevant measure in the determination as to the fairness of the Merger.

        In their consideration of the fairness of the proposed Merger, the Special Committee 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 Special Committee did not consider the Company's liquidation value to be a relevant valuation method because it considers the Company to be a viable going concern 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 foregoing discussion of the information and factors considered and given weight by the Special Committee in connection with their evaluation of the fairness of the Merger to the Unaffiliated Security Holders is not intended to be exhaustive, but includes all material factors considered. The Special Committee found it impracticable to assign, and did not assign, relative weights to the foregoing factors considered by the Special Committee in reaching its conclusions as to the fairness of the Merger to the Unaffiliated Security Holders. Rather, the Special Committee made the fairness determinations after considering all of the foregoing factors as a whole.

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        In addition to the foregoing factors and analyses that supported the Special Committee's conclusion that the Merger is fair to the Unaffiliated Security Holders, the Special Committee also weighed the following negative factors:

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No Future Participation in the Prospects of the Company.  Following the consummation of the Merger, the Unaffiliated Security Holders will cease to participate in any future earnings of or benefit from any increases in the value of the Company. Following the Merger, Tencent could be in a better position than it is now to increase the Company's revenues by fully integrating the Company's products and services into Tencent's popular platforms, including the QQ browser and WeChat, and Tencent could also cause the Company's traffic acquisition costs to decrease considerably, in view of the fact that a significant portion of the Company's existing user traffic is generated through Tencent platforms. Only Tencent, and not the Unaffiliated Security Holders, would enjoy any such benefits.



•

No Opportunity for the Unaffiliated Security Holders to Vote on the Merger.  Because the Merger is to be effected as a "short-form" merger pursuant to section 233(7) of Cayman Islands Companies Law, the Merger will not require approval by the Company's shareholders. Therefore, the Unaffiliated Security Holders will not have the opportunity to vote on the Merger.



•

No Ability for the Unaffiliated Security Holders to Follow the Statutory Procedure to Exercise Dissenters' or Appraisal Rights.  Because the Merger will be a "short-form" merger pursuant to section 233(7) of the Cayman Islands Companies Law, registered holders of Class A Ordinary Shares (including holders of Class A Ordinary Shares represented by ADSs) will not be able to follow the statutory procedure to exercise dissenters' or appraisal rights under section 238 of the Cayman Islands Companies Law, which would otherwise apply if the Merger was a "long-form" merger under section 233(6) of the Cayman Islands Companies Law.



•

Potential Tax Liability of Unaffiliated Security Holders.  The potential tax consequences of the Merger to Unaffiliated Security Holders who are U.S. taxpayers or are taxpayers in other jurisdictions, notwithstanding that the Unaffiliated Security Holders will not be able to choose whether or not to participate in the Merger.



•

Breakup Fees and Limitation of Tencent Liability.  The fact that the Company may be required, under certain circumstances, to pay THL a termination fee of $30,000,000 in connection with a termination of the Merger Agreement and the fact that the Company's right to recover damages from THL and Parent for a breach of the Merger Agreement will be limited, in most circumstances, to payment by THL of a termination fee of $60,000,000.

        After weighing these negative factors and giving them due consideration, the Special Committee concluded that none of these factors, alone or in the aggregate, is significant enough to outweigh the factors and analyses that it considered to support its belief that the Merger is fair to the Unaffiliated Security Holders.

        In addition, the Special Committee and the Sogou Board believe that sufficient procedural safeguards are present to ensure that the Merger is procedurally fair to the Unaffiliated Security Holders and to permit the Special Committee 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:

•

all of the members of the Special Committee during the entire process were and are disinterested and independent directors free from any affiliation with the Tencent Group; none of the members of the Special Committee is or ever was an employee of the Company or any of its Subsidiaries; 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

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compensation in the ordinary course as members of the Sogou Board, their non-contingent compensation as members of the Special Committee, and their indemnification and liability insurance rights under the Merger Agreement;

•

the consideration and negotiation of the Merger Agreement were conducted entirely under the control and supervision of the Special Committee, and that no limitations were placed on the Special Committee's authority;



•

in considering the Proposed Transaction, the Special Committee acted solely to represent the interests of the Unaffiliated Security Holders, and the Special Committee had full control of the extensive negotiations with the Tencent Group and its advisors on behalf of the Unaffiliated Security Holders;



•

the Special Committee was assisted in negotiations with the Tencent Group and in its evaluation of the Merger by Duff & Phelps as its financial advisor and Goulston & Storrs as its U.S. legal advisor;



•

the Special Committee was delegated from the Sogou Board the full and exclusive authority to evaluate the terms of the Proposed Transaction, to negotiate the terms of the Merger Agreement and the Merger, to consider alternative transactions, to determine whether to reject the Proposed Transaction, and to determine whether the Merger would be fair to, and in the best interests of, the Unaffiliated Security Holders and whether to recommend to the Sogou Board that it approve the Company's entering into definitive agreements based on the Proposed Transaction;



•

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 Tencent Group and its advisors, on the other hand;



•

the Special Committee held meetings on multiple occasions to consider and review the terms of the Merger Agreement and the Merger;



•

the Special Committee has the right pursuant to the Merger Agreement to evaluate on behalf of the Company unsolicited alternative acquisition proposals from third parties that might arise between the date of the Merger Agreement and the Effective Time, 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 THL of a termination fee, and to recommend that the Sogou Board accept an alternative acquisition proposal, consistent with the Sogou Board's fiduciary obligations; and



•

the Special Committee did not have any obligation to find that Merger Agreement is fair to, and in the best interests of, the Unaffiliated Security Holders, or to recommend that the Sogou Board approve the Merger Agreement and the Merger.

        In the course of determining that such procedural safeguards were sufficient to ensure that the Merger is procedurally fair to the Unaffiliated Security Holders, the Special Committee considered that the negative factors that the Unaffiliated Security Holders will not have the opportunity to vote on the Merger or to follow the statutory procedure to exercise dissenters' or appraisal rights under section 238 of the Cayman Islands Companies Law were outweighed by each of the foregoing factors and, in particular, that (i) because the Merger will be a short-form merger, the Cayman Islands Companies Law does not require a shareholder vote of any kind to approve the Merger, (ii) Cayman Islands Companies Law does not generally require or contemplate the approval of a merger by a majority of unaffiliated shareholders, even in the context of a long-form merger; (iii) the Special Committee believed that the voluntary imposition of such a vote requirement is relatively rare for Cayman Islands Companies, even in the context of transactions requiring an overall shareholder vote, (iv) the

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Unaffiliated Security Holders' inability to follow the statutory procedure to exercise dissenters' or appraisal rights is inherent in the Cayman Islands Companies Law procedures for exercising dissenters' rights, and (v) the Special Committee was aware that Sohu.com, the Company's indirect controlling shareholder, had indicated that it would agree that Sohu Search would sell all the Class A Ordinary Shares and Class B Ordinary Shares that Sohu.com beneficially owns, which represent approximately 33.8% of the outstanding Shares, to Tencent pursuant to the Sohu Share Purchase Agreement for the same $9.00 per Share that will be paid to the Unaffiliated Security Holders in the Merger.

        Following the completion of the Share Contribution under the Contribution Agreement and the Sohu Share Purchase under the Sohu Share Purchase Agreement, each of which is expected to occur shortly prior to the filing of the Plan of Merger with the Registrar of Companies of the Cayman Islands under the Merger Agreement, Parent will hold at least 90% of the total voting power in the Company prior to the Merger, and the Merger will be a "short-form" merger in accordance with Part XVI (and in particular section 233(7)) of the Cayman Islands Companies Law, which does not require approval of the shareholders of the parties to the Merger. Nevertheless, the Special Committee believes that the Merger is procedurally fair to the Unaffiliated Security Holders because various safeguards and protective steps have been adopted to ensure the procedural fairness of the Merger, including (i) the Sogou Board's formation of the Special Committee and granting to the Special Committee of the authority to review, evaluate, and negotiate (and to ultimately either reject or recommend for approval by the Sogou Board) the Merger Agreement; (ii) the Special Committee's retention of, and receipt of advice from, competent and experienced legal counsel and financial advisors; and (iii) the right of the Special Committee to consider, on behalf of the Company, unsolicited alternative acquisition proposals that may arise between the date of the Merger Agreement and the Effective Time.

        Certain directors and executive officers of the Company have interests in the Merger that are different from, and/or 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. These interests are described under the caption "Summary—Interests of the Company's Directors and Executive Officers in the Merger."

Position of the Tencent Group as to the Fairness of the Merger

        Under SEC rules governing "going private" transactions, each member of the Tencent Group is required to express its beliefs as to the fairness of the Merger to the Unaffiliated Security Holders. The members of the Tencent Group are making the statements below solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act. The Tencent Group has interests in the Merger that are different from, and/or in addition to, those of Unaffiliated Security Holders by virtue of its continuing interests in the Surviving Company after the consummation of the Merger. These interests are described under the caption "—Interests of Certain Persons in the Merger—Interests of the Tencent Group" beginning on page 59.

        The Tencent Group did not participate in the deliberations of the Special Committee regarding, and did not receive any advice from the Special Committee's advisors as to, the fairness of the Merger to the Unaffiliated Security Holders. The Tencent Group attempted to negotiate a transaction that would be most favorable to it, and not 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 the Unaffiliated Security Holders. The members of the Tencent Group did not perform, or engage a financial advisor to perform, any formal valuation to assist them in assessing the substantive and procedural fairness of the Per ADS Merger Consideration and Per Share Merger Consideration to the Unaffiliated Security Holders. Nevertheless, based on their knowledge and analysis of available information regarding the Company, as well as discussions with the Company's management regarding the Company and its business, and the factors considered by, and the conclusions of, the Special Committee and the Sogou Board discussed in "—Reasons for the Merger

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and Position of the Special Committee and the Sogou Board" beginning on page 34, the Tencent Group believes the Merger is both substantively and procedurally fair to the Company's Unaffiliated Security Holders based upon the following factors, which are not listed in any relative order of importance:

•

the Per ADS Merger Consideration of $9.00 represents a premium of approximately 56.5% over the closing price of $5.75 per ADS on July 24, 2020, the last trading day prior to the Company's July 27, 2020 announcement of receipt of the Proposal, and a premium of approximately 83.0% over the average closing price per ADS during the 30 trading days preceding July 27, 2020;



•

in considering the Merger, the Special Committee acted solely to represent the interests of the Unaffiliated Security Holders, and the Special Committee was empowered to exercise the full power and authority of the Sogou Board in connection with considering the Merger and had independent control of the negotiations with the Tencent Group and its advisors on behalf of the Unaffiliated Security Holders;



•

the members of the Sogou Board serving on the Special Committee were and are independent and disinterested directors free from any affiliation with the Tencent Group; in addition, none of the members of the Sogou Board serving on the Special Committee has any financial interest in the Merger that is different from that of the Unaffiliated Security Holders other than (i) the Special Committee members' receipt of compensation in the ordinary course for their service on the Sogou Board, (ii) Special Committee members' compensation in connection with Special Committee's evaluation of the Merger (which is not contingent upon the Special Committee's or Sogou Board's approval or disapproval of the Merger), and (iii) the members of the Sogou Board's indemnification and liability insurance rights under the Merger Agreement;



•

the Special Committee retained and was advised by legal and financial advisors experienced in assisting committees such as the Special Committee in similar transactions;



•

the Special Committee did not have any obligation to approve the Merger Agreement, the Plan of Merger, and the related transactions, or to recommend that the Sogou Board approve them;



•

the Per Share Merger Consideration payable to the Unaffiliated Security Holders in the Merger is the same as the consideration of $9.00 per Share payable to Sohu Search, through which Sohu.com is the Company's controlling shareholder, under the Sohu Share Purchase Agreement;



•

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 Tencent Group and its advisors, on the other hand;



•

the Special Committee determined unanimously that the Merger Agreement, the Plan of Merger, and the Merger are fair to and in the best interests of the Company and the Unaffiliated Security Holders;



•

the Sogou Board approved the Merger Agreement, the Plan of Merger, and the Merger based on the unanimous recommendation of the Special Committee and the Special Committee's determination that the Merger Agreement, the Plan of Merger, and the Merger are fair to and in the best interests of the Company and the Unaffiliated Security Holders;



•

the consideration to be paid to the Unaffiliated Security Holders in the Merger is all cash and will provide immediate liquidity to the Unaffiliated Security Holders;



•

the Merger is not conditioned on any financing being obtained by THL or Parent, thus increasing the likelihood that the Merger will be consummated and the merger consideration will be paid to the Unaffiliated Security Holders;

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•

in certain circumstances under the terms of the Merger Agreement, the Special Committee and the Sogou Board are able to change, withhold, withdraw, qualify or modify their approval of the Merger;



•

the Company has the ability, subject to compliance with the terms and conditions of the Merger Agreement, to terminate the Merger Agreement in order to accept an alternative transaction proposed by a third party that is a Superior Proposal or in connection with an Intervening Event;



•

the Merger Agreement requires THL to pay a reverse termination fee of $60,000,000, if the Merger Agreement is terminated under certain circumstances; and



•

the Company has the ability, under certain circumstances, to seek specific performance to prevent breaches of the Merger Agreement and to specifically enforce the terms of the Merger Agreement.

        Notwithstanding the fact that the Unaffiliated Security Holders will not be entitled to vote to approve or disapprove the Merger and notwithstanding the lack of appraisal rights, the Tencent Group believes that the Merger is procedurally fair to the Unaffiliated Security Holders in view of (i) the fact that the consideration and negotiation of the Merger Agreement was conducted independently by the Special Committee, which acted solely to represent the interests of the Unaffiliated Security Holders; (ii) the fact that no shareholder vote is required for a short-form merger, such as the Merger, under the Cayman Islands Companies Law, and that the Unaffiliated Security Holders' inability to follow the statutory procedure to exercise dissenters' or appraisal rights is inherent in the Cayman Islands Companies Law procedures for exercising dissenters' rights; (iii) the fact that the Special Committee received an opinion from Duff & Phelps regarding the fairness, from a financial point of view, of the Per Share Merger Consideration and the Per ADS Merger Consideration to Unaffiliated Security Holders; (iv) the fact that under certain circumstances pursuant to the terms of the Merger Agreement, the Company is able to terminate the Merger Agreement in order to accept an alternative transaction proposed by a third party that is a Superior Proposal or in connection with an Intervening Event; and (v) the fact that in parallel to the negotiation of the Merger, the Tencent Group negotiated the Sohu Share Purchase with Sohu.com, the indirect controlling shareholder of the Company, and the Per Share Merger Consideration payable to the Unaffiliated Security Holders in the Merger is the same as the per Share consideration payable to Sohu Search in the Sohu Share Purchase.

        The Tencent Group did not consider the Company's net book value as a factor in determining the fairness of the Merger to the Unaffiliated Security Holders. The Tencent Group believes that net book value, as an accounting concept based on historical costs, is not a material indicator of the Company's value as a going concern because it does not take into account the future prospects of the Company, market conditions, trends in the industry in which the Company conducts its business or the business risks inherent in competing with other companies in the same industry, but rather is indicative of historical costs and therefore is not a relevant measure in the determination as to the fairness of the Merger.

        The Tencent Group did not establish, and did not consider, a going concern value for the Company as a public company to determine the fairness of the Per Share Merger Consideration and the Per ADS 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 price of the Company's ADSs prior to the announcement of the Proposal, the Per Share Merger Consideration and the Per ADS Merger Consideration represent a premium to the going concern value of the Company.

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        The Tencent Group believes that the Company's potential liquidation value is not a meaningful factor in an assessment of the fairness of the Per ADS Merger Consideration and Per Share Merger Consideration to the Unaffiliated Security Holders, because the Company's value is derived primarily from the cash flows it generates from its current business operations, and the Tencent Group expects the Company to continue its current business operations following the Merger. In addition, in view of the nature of the Company's assets and operations and the consequent considerable execution risk that would be inherent in a liquidation of the Company's assets, the Tencent Group believes that it would be difficult to arrive at a realistic assessment of the Company's liquidation value.

        The Tencent Group did not perform or receive any independent reports, opinions or appraisals from any third party related to the Merger, and thus did not consider any such reports, opinions or appraisals in determining the substantive and procedural fairness of the Merger to the Unaffiliated Security Holders.

        Members of the Tencent Group are not aware of any firm offer made by any Person unaffiliated with the Company during the past two years for (i) the merger or consolidation of the Company with or into another company, or vice versa; (ii) the sale or other transfer of all or any substantial part of the assets of the Company; or (iii) a purchase of the Company's securities that would enable the holder to exercise control of the Company.

        The foregoing is a summary of the information and factors considered by the Tencent Group in connection with its evaluation of the fairness of the Merger to the Unaffiliated Security Holders, which is not intended to be exhaustive, but includes all material factors considered. The Tencent Group did not find it practicable to assign, and did not assign, relative weights to the individual factors considered in reaching its conclusion as to the fairness of the Merger to the Unaffiliated Security Holders. Rather, its fairness determination was made after consideration of all of the foregoing factors as a whole.

Certain Financial Projections

        Other than providing estimates of certain financial results expected for the then current fiscal quarter in its regular press releases reporting results for the previous fiscal quarter, the Company does not generally make public detailed financial forecasts or internal projections as to future performance, revenues, earnings, or financial condition. However, the Company's management prepared a detailed financial projection for the Company for the fiscal years ending December 31, 2020 through December 31, 2025 for the Special Committee and Duff & Phelps in connection with Duff & Phelps's financial analysis of the Merger (the "Management Projections"). The Management Projections, which were based on the Company's management's estimates of the Company's future financial performance as of the date provided, were prepared by the Company's management for internal use by the Special Committee and for use by Duff & Phelps in its financial analysis, 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 the preparation and presentation of financial forecasts or U.S. generally accepted accounting principles.

        The inclusion of the Management Projections should not be regarded as an indication that the Company, the Sogou Board, the Special Committee, or Duff & Phelps considered, or now considers, the Management Projections to be a reliable prediction of future results. No person has made or makes any representation or warranty to any person, including any shareholder of the Company, regarding the information included in the Management Projections.

        The Management Projections were prepared by the Company's management in August 2020, based on certain assumptions that management then believed to be potentially achievable. Although the Management Projections were prepared in good faith by management, no assurance can be made regarding future events, and actual results may be significantly higher or lower than forecasted by the Management Projections. The Management Projections also reflect assumptions as of their respective

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time of preparation as to certain business decisions that are subject to change. Although presented with numerical specificity, the Management Projections are based upon a variety of estimates and numerous assumptions made by management with respect to, among other matters, industry performance, general international business, economic, tax, regulatory, geopolitical, market, and financial conditions and the factors described in "Cautionary Note Regarding Forward-Looking Statements," all of which are difficult to predict, are subject to significant economic and competitive uncertainties, and are beyond the Company's control. The material assumptions underlying the Management Projections are as follows: (a) there will be a gradual lessening of the impact of the COVID-19 pandemic on the Company's business and financial results beginning in 2021; (b) the Company will develop products and services for mobile devices that are successful in an increasingly competitive market; (c) the Company will be able to upgrade its overall online-search capabilities, develop its newsfeed content distribution, and build vertical search capabilities for video content; (d) the Company will continue to upgrade the AI capabilities of the Company's Sogou Input Method and successfully tap the commercial value of Sogou Input Method's large user base; (e) the Company will successfully develop AI-enabled hardware products and services that enable a new level of human-computer interaction; (f) the Company will successfully develop and provide new healthcare information products and services, including digital family doctor services, through content production, knowledge computing, and avatar technology that meet users' expectations and needs; and (g) the Company's expenses will increase, at a projected annual rate of approximately 10%, in line with increased efforts to improve and promote the Company's market competitiveness, products, and brand. The Management Projections also assume that the Company would continue to operate as a standalone company and do not reflect any impact of the Proposed Transaction. Furthermore, the Management Projections do not take into account any failure of the Merger to be completed and should not be viewed as reflective of management's expectations under those circumstances. In addition, because the Management Projections cover multiple years, such information by its nature becomes less reliable with each successive year. As a result, there can be no assurance that the estimates and assumptions made in preparing the Management Projections will prove accurate, that the projected results will be realized, or that actual results will not be significantly higher or lower than projected results. The Management Projections cannot, therefore, be considered a guaranty of future operating results, and this information should not be relied on as such.

        Except to the extent required by law, the Company does not intend to update or otherwise revise the Management Projections to reflect circumstances existing after the date they were prepared or to reflect the occurrence of future events, even in the event that any or all of the assumptions underlying such prospective financial information are no longer appropriate. 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.

        Neither the Company's independent registered public accounting firm nor any other independent registered public accounting firm has examined, compiled, or otherwise performed any procedures with respect to the prospective financial information contained in the Management Projections and, accordingly, neither the Company's independent registered public accounting firm nor any other independent registered public accounting firm has expressed any opinion or given any other form of assurance on such information or its achievability, and assumes no responsibility for, and disclaims any association with, the prospective financial information.

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        The following table summarizes the Management Projections prepared by the management of the Company and considered by the Special Committee in connection with the analysis of the Merger and by Duff & Phelps in connection with the delivery of its fairness opinion: