UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the
Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X]
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Preliminary Proxy Statement
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[ ]
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Confidential, for use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
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[ ]
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Definitive Proxy Statement
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[ ]
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Definitive Additional Materials
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[ ]
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Soliciting Material Under Rule 14a-12
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CHINA TRANSINFO TECHNOLOGY CORP.
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[ ]
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No fee required
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[X]
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Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11(c)(1)
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(1)
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Title of each class of securities to which transaction
applies:
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Common stock, par value $0.001 per share of China
TransInfo Technology Corp. (
common stock
)
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(2)
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Aggregate number of securities to which transaction
applies:
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(A) 13,071,944 shares of common stock issued and
outstanding as of June 25, 2012 (consisting of the 25,270,069 shares of
common stock outstanding as of June 25, 2012 minus 12,198,125 shares held
by Mr. Shudong Xia, Karmen Investment Holdings Limited, SAIF Partners III,
L.P., Ms. Danxia Huang and Mr. Shufeng Xia (the
Rollover
Shares
)*), (B) 924,901 shares of common stock underlying outstanding
options as of June 25, 2012 with an exercise price below $5.80
per share, and (C) 5,555 shares of common stock underlying outstanding
warrants as of June 25, 2012 with an exercise price below $5.80 per
share.
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* The Rollover Shares are being contributed to Shudong
Investments Limited immediately prior to the consummation of the
merger.
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(3)
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Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 and the Securities and
Exchange Commission Fee Rate Advisory #3 for Fiscal Year 2012 (set forth
the amount on which the filing fee is calculated and state how it was
determined):
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The proposed maximum aggregate value of the transaction
for purposes of calculating the filing fee is $76,745,899. The maximum
aggregate value of the transaction was calculated based upon the sum of
(A) 13,071,944 shares of common stock issued and outstanding as of June
25, 2012 (consisting of the 25,270,069 shares of common stock outstanding
as of June 25, 2012 minus the Rollover Shares) multiplied by $5.80 per
share merger consideration, (B) 924,901 shares of common stock underlying
outstanding options as of June 25, 2012 with an exercise price
below $5.80 per share multiplied by $0.98 per share (which is the
difference between the $5.80 per share merger consideration and the
weighted average exercise price of such options of $4.82 per share), and
(C) 5,555 shares of common stock underlying outstanding warrants as of
June 25, 2012 multiplied by $4.00 per share (which is the difference
between the $5.80 per share merger consideration and the weighted average
exercise price of $1.80 per share). The filing fee equals the product of
0.0001146 multiplied by the maximum aggregate value of the transaction.
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(4)
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Proposed maximum aggregate value of transaction:
$76,745,899
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(5)
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Total fee paid: $8,796
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[ ]
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Fee paid previously with preliminary materials.
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[X]
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Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
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(1)
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Amount Previously Paid: $560.89
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(2)
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Form, Schedule or Registration Statement No.: Form S-3
(Registration No. 333 -162689)
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(3)
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Filing party: China TransInfo Technology Corp.
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(4)
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Date Filed: October 27, 2009
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__________, 2012
To the Stockholders of China TransInfo Technology Corp.:
You are cordially invited to attend a special meeting of
stockholders of China TransInfo Technology Corp., a Nevada corporation (the
Company
,
we
,
us
or
our
) to be held at
a.m.,
Beijing time, on
, 2012, at
.
At the special meeting, you will be asked to consider and vote
upon a proposal to approve an Agreement and Plan of Merger, dated as of June 8,
2012 (the
merger agreement
), among the Company, TransCloud Company
Limited, a Cayman Islands exempted company with limited liability
(
Parent
) and TransCloud Acquisition, Inc., a Nevada corporation and a
wholly owned subsidiary of Parent (
Merger Sub
). Under the terms of the
merger agreement, Merger Sub will be merged with and into the Company (the
merger
), with the Company surviving the merger as a wholly owned
subsidiary of Parent. Parent and Merger Sub were formed and are beneficially
owned by Mr. Shudong Xia (
Mr. Xia
).
If the merger is completed, each share of Company common stock,
other than as provided below, will be converted into the right to receive $5.80
in cash, without interest. We refer to this amount as the
per share merger
consideration
. Each share of Company common stock held by the Company as
treasury stock or owned, directly or indirectly, by Parent, Merger Sub or any
wholly owned subsidiary of the Company immediately prior to the effective time
of the merger, including each share of Company common stock to be contributed to
Parent by the Rollover Holders (as defined below) immediately prior to the
effective time of the merger, will automatically be cancelled without payment of
the per share merger consideration.
A special committee of our board of directors, consisting
entirely of independent directors, reviewed and considered the terms and
conditions of the merger agreement and the transactions contemplated by the
merger agreement, including the merger. The special committee unanimously
determined that the merger agreement and the transactions contemplated by the
merger agreement, including the merger, are advisable, fair to and in the best
interests of the Company and its stockholders (other than Parent, Merger Sub and
their affiliates, and the Rollover Holders), whom we refer to as the
unaffiliated stockholders
, and recommended that our board of directors
approve and declare the advisability of the merger agreement and the
transactions contemplated by the merger agreement, including the merger, and
recommend that our stockholders approve the merger agreement. Our board of
directors, after careful consideration and acting on the unanimous
recommendation of the special committee, deemed it advisable, fair to and in the
best interests of the Company and the unaffiliated stockholders that the Company
enter into the merger agreement, determined that the merger agreement and the
transactions contemplated by the merger agreement, including the merger, are
advisable, fair to and in the best interests of the Company and the unaffiliated
stockholders and recommended that our stockholders approve the merger agreement
at the special meeting.
Our board of directors recommends that you vote
FOR
the proposal to approve the merger agreement
.
The merger cannot be completed unless the merger agreement is
approved by both (i) the holders of a majority of the shares of Company common
stock and (ii) the holders of a majority of the shares of Company common stock
(excluding the shares of Company common stock owned by the Rollover Holders).
More information about the merger is contained in the accompanying proxy
statement and a copy of the merger agreement is attached thereto as Annex A.
In considering the recommendation of the special committee and
the board of directors, you should be aware that some of the Companys directors
and officers have interests in the merger that are different from, or in
addition to, the interests of our stockholders generally. Mr. Xia (our chairman,
president, chief executive officer and secretary), Ms. Danxia Huang (one of our
directors, our vice president of operations and our treasurer), Mr. Shufeng Xia
(the director of financial department of China TransInfo Technology Group Co.,
Ltd., our consolidated variable interest entity), Karmen Investment Holdings
Limited (one of our stockholders and beneficially owned by Mr. Xia), and SAIF
Partners III, L.P. (collectively, the
Rollover Holders
) beneficially
own in aggregate approximately 48.3% of the total outstanding shares of Company
common stock. The Rollover Holders are parties to the contribution agreements
described in the accompanying proxy statement and have agreed with Parent and
Shudong Investments Limited, a British Virgin Islands company and the sole
shareholder of Parent (
Holdco
), to contribute to Parent the shares of
Company common stock owned by them in exchange for newly issued shares of
Holdco, immediately prior to the effective time of the merger. In addition, Mr.
Brandon Ho-Ping Lin (one of our directors) is a partner at SAIF Advisors
Limited. The accompanying proxy statement includes additional information
regarding certain interests of the Companys directors and officers that may be
different from, or in addition to, the interests of our stockholders generally.
We encourage you to read the accompanying proxy statement in
its entirety because it explains the proposed merger, the documents related to
the merger and other related matters.
Regardless of the number of shares of Company common stock
you own, your vote is important. The failure to vote will have the same effect
as a vote AGAINST the proposal to approve the merger agreement.
Whether or not you plan to attend the special meeting, please
take the time to submit a proxy by following the instructions on your proxy card
as soon as possible. If your shares of Company common stock are held in an
account at a broker, dealer, commercial bank, trust company or other nominee,
you should instruct your broker, dealer, commercial bank, trust company or other
nominee how to vote in accordance with the voting instruction form furnished by
your broker, dealer, commercial bank, trust company or other nominee. The
failure to instruct your broker, dealer, commercial bank, trust company or other
nominee to vote your shares of our common stock FOR the proposal to approve
the merger agreement will have the same effect as a vote AGAINST the proposal
to approve the merger agreement.
We appreciate your continued support of the Company.
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Sincerely,
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Shudong Xia
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Chairman, President, Chief Executive Officer
and Secretary
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The merger has not been approved or disapproved by the
Securities and Exchange Commission or any state securities commission. Neither
the Securities and Exchange Commission nor any state securities commission has
passed upon the merits or fairness of the merger or upon the adequacy or
accuracy of the information contained in this document or the accompanying proxy
statement. Any representation to the contrary is a criminal offense.
The accompanying proxy statement is dated
, 2012 and is first
being mailed to stockholders on or about
, 2012.
CHINA TRANSINFO TECHNOLOGY CORP.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON _________, 2012
NOTICE IS HEREBY GIVEN that the special meeting of stockholders
of China TransInfo Technology Corp. (the
Company
,
we
,
us
or
our
) will be held at
a.m., Beijing time, on
, 2012, at
,
for the following purposes:
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1.
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To approve the Agreement and Plan of Merger, dated as of
June 8, 2012 (the
merger agreement
), with TransCloud Company
Limited, a Cayman Islands exempted company with limited liability
(
Parent
) and TransCloud Acquisition, Inc., a Nevada corporation
and a wholly owned subsidiary of Parent, (
Merger Sub
), providing
for the merger of Merger Sub with and into the Company (the
merger
), with the Company surviving the merger as a wholly owned
subsidiary of Parent. Parent and Merger Sub were formed and are
beneficially owned by Mr. Shudong Xia (
Mr. Xia
); and
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2.
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To approve the adjournment of the special meeting, if
necessary or appropriate, to solicit additional proxies if there are
insufficient votes at the time of the special meeting to approve the
merger agreement.
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For more information about the merger and the other
transactions contemplated by the merger agreement, please review the
accompanying proxy statement and the merger agreement attached thereto as Annex
A.
A special committee of our board of directors, consisting
entirely of independent directors, reviewed and considered the terms and
conditions of the merger agreement and the transactions contemplated by the
merger agreement, including the merger. The special committee unanimously
determined that the merger agreement and the transactions contemplated by the
merger agreement, including the merger, are advisable, fair to and in the best
interests of the Company and its stockholders (other than Parent, Merger Sub and
their affiliates, and the Rollover Holders), whom we refer to as the
unaffiliated stockholders
, and recommended that our board of directors
approve and declare the advisability of the merger agreement and the
transactions contemplated by the merger agreement, including the merger, and
recommend that our stockholders approve the merger agreement. Our board of
directors, acting on the unanimous recommendation of the special committee,
deemed it advisable, fair to and in the best interests of the Company and the
unaffiliated stockholders that the Company enter into the merger agreement,
determined that the merger agreement and the transactions contemplated by the
merger agreement, including the merger, are advisable, fair to and in the best
interests of the Company and the unaffiliated stockholders and recommended that
our stockholders approve the merger agreement at the special meeting.
Our
board of directors recommends that you vote FOR approval of the merger
agreement, and FOR the proposal to approve the adjournment of the special
meeting, if necessary or appropriate, to solicit additional proxies if there are
insufficient votes at the time of the special meeting to approve the merger
agreement
.
Mr. Xia (our chairman, president, chief executive officer and
secretary), Ms. Danxia Huang (one of our directors, our vice president of
operations and our treasurer), Mr. Shufeng Xia (the director of financial
department of China TransInfo Technology Group Co., Ltd., our consolidated
variable interest entity), Karmen Investment Holdings Limited (one of our
stockholders and beneficially owned by Mr. Xia), and SAIF Partners III, L.P.
(collectively, the
Rollover Holders
) beneficially own in aggregate
approximately 48.3% of the total outstanding shares of Company common stock. The
Rollover Holders are parties to the contribution agreements described in the
accompanying proxy statement and have agreed with Parent and Shudong Investments
Limited, a British Virgin Islands company and the sole shareholder of Parent
(
Holdco
), to contribute to Parent the shares of Company common stock owned by them in exchange for newly issued shares
of Holdco, immediately prior to the effective time of the merger. In addition,
Mr. Brandon Ho-Ping Lin (one of our directors) is a partner at SAIF Advisors
Limited.
Only stockholders of record at the close of business, New York
time, on
, 2012 are entitled to notice of and to vote at the special meeting and
at any and all adjournments or postponements thereof.
The approval of the merger agreement requires the affirmative
vote by both (i) the holders of a majority of the shares of Company common stock
and (ii) the holders of a majority of the shares of Company common stock (excluding
the shares of Company common stock owned by the Rollover Holders). The approval
of the adjournment of the special meeting requires the affirmative vote of the
holders of at least a majority of the shares of Company common stock present and
entitled to vote at the special meeting as of the record date, whether or not a
quorum is present.
Regardless of the number of shares of Company common stock
you own, your vote is important. The failure to vote will have the same effect
as a vote AGAINST the proposal to approve the merger agreement.
Whether or not you plan to attend the special meeting, please
take the time to submit a proxy by following the instructions on your proxy card
as soon as possible. If your shares of Company common stock are held in an
account at a broker, dealer, commercial bank, trust company or other nominee,
you should instruct your broker, dealer, commercial bank, trust company or other
nominee how to vote in accordance with the voting instruction form furnished by
your broker, dealer, commercial bank, trust company or other nominee. The
failure to instruct your broker, dealer, commercial bank, trust company or other
nominee to vote your shares of our common stock FOR the proposal to approve
the merger agreement will have the same effect as a vote AGAINST the proposal
to approve the merger agreement.
If you plan to attend the special meeting, please note that you
may be asked to present valid photo identification, such as a drivers license
or passport. If you wish to attend the special meeting and your shares of
Company common stock are held in an account at a broker, dealer, commercial
bank, trust company or other nominee (i.e., in street name), you will need to
bring a copy of your voting instruction card or statement reflecting your share
ownership as of the record date.
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By Order of the Board of Directors,
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Shudong Xia
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Chairman, President, Chief Executive Officer
and Secretary
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, 2012
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Important Notice of Internet Availability
This proxy statement for the special meeting to be held on
, 2012 is available free of charge at
www.shareholdermaterial.com/ctfo
.
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, YOU ARE ENCOURAGED TO VOTE AS SOON AS POSSIBLE. YOU MAY VOTE YOUR SHARES OF COMPANY COMMON STOCK BY TELEPHONE, OVER THE INTERNET, OR IF YOU RECEIVED A PAPER COPY OF THE PROXY CARD, BY
SIGNING AND DATING IT AND RETURNING IT PROMPTLY. VOTING BY PROXY WILL NOT PREVENT YOU FROM ATTENDING THE MEETING AND VOTING IN PERSON IF YOU SO DESIRE.
SUMMARY VOTING INSTRUCTIONS
Ensure that your shares of Company common stock can be voted
at the special meeting by submitting your proxy or contacting your broker,
dealer, commercial bank, trust company or other nominee.
If your shares of Company common stock are registered in
the name of a broker, dealer, commercial bank, trust company or other
nominee
: check the voting instruction card forwarded by your broker,
dealer, commercial bank, trust company or other nominee to see which voting
options are available or contact your broker, dealer, commercial bank, trust
company or other nominee in order to obtain directions as to how to ensure that
your shares of Company common stock are voted at the special meeting.
If your shares of Company common stock are registered in
your name
: submit your proxy as soon as possible by telephone, via the
Internet or by signing, dating and returning the enclosed proxy card in the
enclosed postage-paid envelope, so that your shares of Company common stock can
be voted at the special meeting.
Instructions regarding telephone and Internet voting are
included on the proxy card.
The failure to vote will have the same effect as a vote
AGAINST the proposal to approve the merger agreement. If you sign, date and
mail your proxy card without indicating how you wish to vote, your proxy will be
voted
in favor of
the proposal to approve the merger agreement and
the proposal to adjourn the special meeting, if necessary and appropriate, to
solicit additional proxies.
The failure to instruct your broker, dealer, commercial bank,
trust company or other nominee to vote your shares of our common stock FOR the
proposal to approve the merger agreement will have the same effect as a vote
AGAINST the proposal to approve the merger agreement.
If you have any questions, require
assistance with voting your proxy card, or need additional copies of proxy
material, please call
at
.
TABLE OF CONTENTS
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Page
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PROXY STATEMENT
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1
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SUMMARY TERM SHEET RELATED TO THE MERGER
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1
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QUESTIONS AND ANSWERS ABOUT THE SPECIAL
MEETING AND THE MERGER
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11
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SPECIAL FACTORS RELATING TO THE MERGER
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16
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The Parties
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16
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Overview of the Transaction
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17
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Management and Board of
Directors of the Surviving Corporation
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18
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Background of the Merger
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18
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Purposes and Reasons of Our
Board of Directors and Special Committee for the Merger
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24
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Recommendation of Our Board of Directors and
Special Committee; Reasons for Recommending the Approval of the Merger
Agreement; Fairness of the Merger
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25
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Opinion of William Blair,
Financial Advisor to the Special Committee
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29
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Purposes and Reasons of the Buyer Group for
the Merger
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36
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Positions of the Buyer Group
Regarding the Fairness of the Merger
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36
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Certain Effects of the Merger
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40
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Effects on the Company if
Merger is not Completed
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41
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Plans for the Company
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41
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Prospective Financial
Information
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42
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Financing of the Merger
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44
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Limited Guarantee
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46
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Voting Agreement
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46
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Limitation on Remedies
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46
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Interests of the Companys Directors and
Officers in the Merger
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47
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Relationship Between Us and
Buyer Group
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49
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Dividends
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49
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Determination of the Per Share
Merger Consideration
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49
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Regulatory Matters
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49
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Fees and Expenses
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50
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Material United States Federal Income Tax
Consequences
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50
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Material PRC Tax Consequences
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52
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Delisting and Deregistration of the Company
Common Stock
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52
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Litigation Relating to the
Merger
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53
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THE SPECIAL MEETING
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54
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Date, Time and Place
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54
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Purpose of the Special Meeting
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54
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Recommendation of Our Board of
Directors and Special Committee
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54
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Record Date; Stockholders Entitled to Vote;
Quorum
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54
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Vote Required
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55
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Stock Ownership and Interests of Certain
Persons
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55
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Voting Procedures
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55
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Other Business
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56
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Adjournments and Postponements
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57
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Revocation of Proxies
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57
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Rights of Stockholders Who
Object to the Merger
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57
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Solicitation of Proxies
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57
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Assistance
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57
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PROPOSAL ONE
APPROVAL OF THE MERGER
AGREEMENT
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58
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THE MERGER AGREEMENT
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58
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i
Explanatory Note Regarding the
Merger Agreement
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58
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Effects of the Merger; Directors and Officers;
Certificate of Incorporation; Bylaws
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58
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Closing and Effective Time of
the Merger
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58
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Treatment of Common Stock, Company Options and
Company Warrants
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59
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Exchange and Payment
Procedures
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59
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Representations and Warranties
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60
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Conduct of Business Prior to
Closing
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64
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Parent Forbearance
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65
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Access to Information
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65
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Alternative Takeover Proposals
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65
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Indemnification; Directors
and Officers Insurance
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67
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Financing
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68
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Obligation of Parent
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69
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Payment to Certain Creditor
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69
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Conditions to the Merger
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69
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Termination
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70
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Termination Fees and
Reimbursement of Expenses
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71
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Fees and Expenses
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71
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Remedies
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72
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Amendment; Waiver of Conditions
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72
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COMMON STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL
OWNERS
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72
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Changes in Control
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75
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COMMON STOCK TRANSACTION INFORMATION
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75
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APPRAISAL RIGHTS
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75
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SELECTED FINANCIAL INFORMATION
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76
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Selected Historical Financial Information
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76
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Ratio of Earnings to Fixed
Charges
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76
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Net Book Value per Share of Company Common
Stock
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76
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MARKET PRICE AND DIVIDEND INFORMATION
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77
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PROPOSAL TWOADJOURNMENT OR POSTPONEMENT OF THE SPECIAL
MEETING
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77
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OTHER MATTERS
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78
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
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79
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WHERE YOU CAN FIND MORE INFORMATION
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79
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ANNEX A: MERGER AGREEMENT
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A-1
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ANNEX B: LIMITED GUARANTEE
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B-1
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ANNEX C: FINANCIAL ADVISOR OPINION
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C-1
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ANNEX D: DIRECTORS AND EXECUTIVE OFFICERS OF EACH FILING
PERSON
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D-1
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ANNEX E: FORM OF PROXY CARD
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E-1
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ii
CHINA TRANSINFO TECHNOLOGY CORP.
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON
, 2012
PROXY STATEMENT
This proxy statement contains information related to a special
meeting of stockholders of China TransInfo Technology Corp. which will be held
at
a.m., Beijing time, on
, 2012, at
, and any adjournments or postponements
thereof. We are furnishing this proxy statement to stockholders of China TransInfo Technology Corp. as part of the solicitation of proxies by the
Companys board of directors for use at the special meeting. This proxy
statement is dated
, 2012 and is first being mailed to stockholders on or about
, 2012.
SUMMARY TERM SHEET RELATED TO THE MERGER
This summary term sheet highlights selected information in this
proxy statement regarding the merger and may not contain all of the information
about the merger that is important to you. We have included page references in
parentheses to direct you to more complete descriptions of the topics presented
in this summary term sheet. You should carefully read this proxy statement in
its entirety, including the annexes and the other documents to which we have
referred you, for a more complete understanding of the matters being considered
at the special meeting. You may obtain without charge copies of documents
incorporated by reference into this proxy statement by following the
instructions under
Where You Can Find More Information
beginning on
page 79. In this proxy statement, the terms
we
,
us
,
our
,
CTFO
and the
Company
refer to China TransInfo
Technology Corp. and its subsidiaries. We refer to Shudong Investments Limited
as
Holdco
, TransCloud Company Limited as
Parent
and TransCloud
Acquisition, Inc. as
Merger Sub
. We refer to Mr. Shudong Xia (
Mr.
Xia
), Ms. Danxia Huang, Mr. Shufeng Xia, Karmen Investment Holdings Limited
(
Karmen
) and SAIF Partners III, L.P. (
SAIF III
) collectively
as the
Rollover Holders
. We refer to the stockholders of the Company
(other than Parent, Merger Sub and their affiliates, and the Rollover Holders)
as the
unaffiliated stockholders
. We refer to Holdco, Parent, Merger
Sub, SAIF Partners IV, L.P. (
SAIF IV
) and the Rollover Holders as the
buyer group
. We refer to SAIF III and SAIF IV as
SAIF
Partners
. When we refer to the
merger agreement
, we mean the
Agreement and Plan of Merger, dated as of June 8, 2012, among the Company,
Parent and Merger Sub.
The Parties (page 16)
China TransInfo Technology Corp. is a leading provider of
end-to-end intelligent transportation systems (
ITS
) and related
comprehensive technology solutions servicing the transportation industry in
China. We are involved in developing multiple applications in highway ITS, urban
ITS, commercial vehicles ITS plus location based services, and to a lesser
degree, in digital city, and land and resource filling systems based on
geographic information systems technologies which are used to service both the
public and private sector.
Both Parent and Merger Sub were formed for the sole purpose of
entering into the merger agreement and consummating the transactions
contemplated by the merger agreement. Both Parent and Merger Sub were formed and
are beneficially owned by Mr. Xia.
The Rollover Holders beneficially own in the aggregate
approximately 48.3% of the total outstanding shares of Company common stock. The
Rollover Holders have agreed with Parent and Holdco to contribute to Parent the
shares of Company common stock owned by them (the
Rollover Shares
) in
exchange for newly issued shares of Holdco immediately prior to the effective
time of the merger pursuant to the contribution agreements.
1
Overview of the Transaction (page 17)
The Company, Parent and Merger Sub entered into the merger
agreement on June 8, 2012. Under the terms of the merger agreement, Merger Sub
will be merged with and into the Company, with the Company surviving the merger
as a wholly owned subsidiary of Parent (the
merger
). The Company, as
the surviving corporation, will continue to do business under the name China
TransInfo Technology Corp. following the merger. At the effective time of the
merger, the following will occur in connection with the merger:
-
each share of Company common stock issued and outstanding immediately
prior to the effective time of the merger (other than shares held by the
Company as treasury stock or owned, directly or indirectly, by Parent, Merger
Sub or any wholly owned subsidiary of the Company immediately prior to the
effective time of the merger, including the Rollover Shares) will be converted
into the right to receive $5.80 (the "
per share merger consideration
")
in cash without any interest thereon;
-
each outstanding, vested and unexercised option to purchase shares of
Company common stock will be cancelled and converted into the right to
receive, as soon as reasonably practicable after the effective time of the
merger, a cash amount equal to the number of shares underlying such option
immediately prior to the effective time of the merger multiplied by the amount
by which $5.80 exceeds the exercise price per share of such option, net of any
applicable withholding taxes;
-
each outstanding and unvested option to purchase shares of Company common
stock will be cancelled and converted into the right to receive, as soon as
reasonably practicable after the effective time of the merger, a restricted
cash award in an amount equal to the number of shares underlying such option
immediately prior to the effective time of the merger multiplied the amount by
which $5.80 exceeds the exercise price per share of such option; and
-
each outstanding and unexercised warrant to purchase shares of Company
common stock will be cancelled and converted into the right to receive, as
soon as reasonably practicable after the effective time of the merger, a cash
amount equal to the total number of shares underlying such warrant immediately
prior to the effective time of the merger multiplied by the amount by which
$5.80 exceeds the exercise price per share of such warrant.
Following and as a result of the merger:
-
the unaffiliated stockholders will no longer have any interest in, and
will no longer be stockholders of the Company, and will not participate in any
of the Companys future earnings or growth;
-
shares of Company common stock will no longer be listed on the NASDAQ
Global Market, and price quotations with respect to shares of Company common
stock in the public market will no longer be available; and
-
the registration of shares of Company common stock under the Securities
Exchange Act of 1934, as amended (the
Exchange Act
) will be
terminated.
The Special Meeting (page 54)
The special meeting will be held at
a.m., Beijing time, on
,
2012, at
. At the special meeting, you will be asked to, among other things,
approve the merger agreement. See
Questions and Answers About the Special
Meeting and the Merger
for additional information on the special meeting,
including how to vote your shares of Company common stock.
Stockholders Entitled to Vote; Vote Required to Approve the
Merger Agreement (page 54)
You may vote at the special meeting if
you owned any shares of Company common stock at the close of business, New York
time, on
, 2012, the record date for the special meeting. On that date, there were
shares of Company common stock outstanding and entitled to vote
at the special meeting. You may cast one vote for each share of Company common
stock that you owned on that date. Approval of the merger agreement requires the
affirmative vote of (i) the holders of a majority of the shares of Company
common stock and (ii) the holders of a majority of the shares of Company common
stock (excluding the Rollover Shares). Assuming 25,270,069 shares of Company
common stock are outstanding on the record date, at least 6,535,973 shares of
Company common stock owned by the unaffiliated stockholders must be voted in
favor of the proposal to approve the merger agreement in order for the proposal
to be approved pursuant to the approval requirement set forth in (ii). See
The Special Meeting
beginning on page 54 for additional information.
2
Merger Consideration (page 59)
If the merger is completed, each share of Company common stock
issued and outstanding immediately prior to the effective time of the merger,
other than as provided below, will be converted into the right to receive the
per share merger consideration in cash without interest. Shares of Company
common stock held by the Company as treasury stock or owned, directly or
indirectly, by Parent, Merger Sub or any wholly owned subsidiary of the Company
immediately prior to the effective time of the merger , including the Rollover
Shares will be canceled without conversion or consideration.
Prior to the effective time of the merger, Parent will
designate a bank or trust company reasonably acceptable to the Company to act as
the paying agent for the per share merger consideration. Promptly after the
effective time of the merger (but in any event no later than five business
days), the paying agent will send each record holder of shares of Company common
stock (i) a letter of transmittal describing how it may exchange its shares of
Company common stock for the per share merger consideration and (ii)
instructions for effecting the surrender of share certificates in exchange for
its per share merger consideration. Do not return your stock certificates with
the enclosed proxy card, and do not forward your stock certificates to the
paying agent without a letter of transmittal. You will not be entitled to
receive the per share merger consideration until you surrender your stock
certificate or certificates along with a duly completed and executed letter of
transmittal to the paying agent or until the paying agent receives an agents
message in the case of shares held in book-entry form and other documents
reasonably required by the paying agent and approved by Parent and us. See
The Merger AgreementTreatment of Common Stock, Company Options and Company
Warrants
and
The Merger AgreementExchange and Payment
Procedures
beginning on page 59 for additional information.
Treatment of Company Options and Company Warrants (page 59)
As of the effective time of the merger, each outstanding,
vested and unexercised option to purchase shares of Company common stock will be
cancelled and converted into the right to receive, as soon as reasonably
practicable after the effective time of the merger, a cash amount equal to the
number of shares underlying such option immediately prior to the effective time
of the merger multiplied by the amount by which $5.80 exceeds the exercise price
per share of such option, net of any applicable withholding taxes.
As of the effective time of the merger, each outstanding and
unvested option to purchase shares of Company common stock will be cancelled and
converted into the right to receive, as soon as reasonably practicable after the
effective time of the merger, a restricted cash award in an amount equal to the
number of shares underlying such option immediately prior to the effective time
of the merger multiplied the amount by which $5.80 exceeds the exercise price
per share of such option.
As of the effective time of the merger, each outstanding and
unexercised warrant to purchase shares of Company common stock will be cancelled
and converted into the right to receive, as soon as reasonably practicable after
the effective time of the merger, a cash amount equal to the total number of
shares underlying such warrant immediately prior to the effective time of the
merger multiplied by the amount by which $5.80 exceeds the exercise price per
share of such warrant.
See
The Merger AgreementTreatment of Common Stock, Company
Options and Company Warrants
beginning on page 59 for additional
information.
3
Recommendation of Our Board of Directors and Special
Committee; Reasons for Recommending the Approval of the Merger Agreement;
Fairness of the Merger (page 25)
Our board of directors, after careful consideration and acting
on the unanimous recommendation of the special committee composed entirely of
independent directors, recommends that you vote
FOR
the proposal to
approve the merger agreement and
FOR
the proposal to approve the
adjournment of the special meeting in order to take such actions as our board of
directors determines are necessary or appropriate, including to solicit
additional proxies if there are insufficient votes at the time of the special
meeting to approve the merger agreement. Our board of directors and the special
committee believe that the merger is fair to the unaffiliated stockholders. For
a discussion of the material factors considered by our board of directors and
the special committee in determining to recommend the approval of the merger
agreement and in determining that the merger is fair to the unaffiliated
stockholders, see
Special Factors Relating to the MergerPurposes and
Reasons of Our Board of Directors and Special Committee for the Merger
beginning on page 24 and
Special Factors Relating to the
MergerRecommendation of Our Board of Directors and Special Committee; Reasons
for Recommending the Approval of the Merger Agreement; Fairness of the
Merger
beginning on page 25.
Positions of the Buyer Group Regarding the Fairness of the
Merger (page 36)
Each member of the buyer group believes that the merger is fair
to the unaffiliated stockholders. Their belief is based upon the factors
discussed under the caption
Special Factors Relating to the MergerPositions
of the Buyer Group Regarding the Fairness of the Merger
beginning on page
36.
Opinion of William Blair, Financial Advisor to the Special
Committee (page 29)
In connection with the merger, the special committee received a
written opinion from William Blair & Company, L.L.C. (
William
Blair
), financial advisor to the special committee, as to the fairness,
from a financial point of view and as of the date of its opinion, to the
unaffiliated stockholders of the per
share merger consideration to be received by the unaffiliated stockholders. The
full text of William Blairs written opinion, dated June 7, 2012, is attached to
this proxy statement as Annex C. You are encouraged to read this opinion
carefully in its entirety for a description of the assumptions made, procedures
followed, matters considered and qualifications and limitations on the review
undertaken.
William Blairs opinion was provided to the special committee in
connection with, and for the purposes of, its evaluation of the per share merger
consideration from a financial point of view, does not address any other aspect
or implication of the proposed merger or the merits of the underlying decision
by the Company to engage in the merger or the relative merits of any
alternatives discussed by the special committee and the board of directors of
the Company, does not constitute an opinion with respect to the Companys
underlying business decision to effect the merger, any legal, tax or accounting
issues concerning the merger, or any terms of the merger (other than the per
share merger consideration) and does not constitute a recommendation as to any
vote or action the Company or any stockholders of the Company should take in
connection with the merger or any aspect thereof.
For a more complete
description of William Blairs opinion, see
Special Factors Relating to the
MergerOpinion of William Blair, Financial Advisor to the Special Committee
beginning on page 29.
Financing of the Merger (page 44)
The buyer group estimates that the total amount of funds
required to consummate the merger and related transactions, including payment of
fees and expenses in connection with the merger, is anticipated to be
approximately $200.3 million. The buyer group expects to fund this amount
through a combination of the contribution of 12,198,125 shares of Company common
stock from the Rollover Holders to Parent (the equivalent of an investment of
approximately $70.7 million based upon the per share merger consideration of
$5.80), equity financing from Mr. Shudong Xia of up to $26,955,708, equity
financing from SAIF IV of up to $11,552,446, and debt financing of up to $96
million from China Development Bank Corporation Hong Kong Branch (
CDB
),
which we refer to as the
CDB Loan
. See
Special Factors Relating to
the MergerFinancing of the Merger
beginning on page 44 for additional
information.
4
Limited Guarantee (page 46)
On June 8, 2012, Mr. Xia and SAIF IV delivered a limited
guarantee in which they agreed to guarantee the obligations of Parent and Merger
Sub to pay certain fees and reimburse certain expenses, including the $2.8
million termination fee that may become payable to the Company by Parent under
certain circumstances set forth in the merger agreement. See
Special Factors
Relating to the MergerLimited Guarantee
beginning on page 46 and
The Merger AgreementTermination Fees and Reimbursement of
Expenses
beginning on page 71 for additional information. A copy of the
limited guarantee is attached as Annex B to this proxy statement.
Contribution Agreements (page 46)
Pursuant to two contribution agreements dated as of June 7,
2012, at or prior to the effective time of the merger, the Rollover Holders will
contribute to Parent an aggregate amount of 12,198,125 shares of Company common
stock beneficially owned by them in exchange for shares of Holdco. See
Special Factors Relating to the Merger
Financing of the
MergerRollover Financing
beginning on page 46 for additional
information.
Voting Agreement (page 46)
Parent and the Rollover Holders have entered into a voting
agreement in which the Rollover Holders agreed to vote all of their shares in
favor of approval of the merger agreement at the special meeting. See
Special Factors Relating to the MergerVoting Agreement
beginning on
page 46 for additional information.
Interests of the Companys Directors and Officers in the
Merger (page 47)
When considering the recommendation of our board of directors
in favor of the approval of the merger agreement, you should be aware that the
members of our board of directors and certain of our officers have interests in
the merger in addition to their interests as our stockholders generally. These
interests may be different from, or in addition to, your interests as our
stockholders.
Concurrently with the execution and delivery of the merger
agreement, Parent delivered to us two contribution agreements executed by
certain members of the buyer group, including Mr. Xia (our chairman, president,
chief executive officer and secretary), Ms. Danxia Huang (one of our directors,
our vice president of operations and our treasurer), Mr. Shufeng Xia (the
director of financial department of China TransInfo Technology Group Co., Ltd.,
our consolidated variable interest entity) and SAIF III. Mr. Brandon Ho-Ping Lin
(one of our directors) is a partner at SAIF Advisors Limited, an affiliate of
SAIF III. These members of the buyer group have agreed, among other things, to
contribute the shares of Company common stock beneficially owned by them to
Parent in exchange for newly issued shares of Holdco. The effect of these
transactions will be to allow such members of the buyer group to remain indirect
owners of the surviving corporation after the merger is completed. Because of
their equity ownership of Holdco, each such member of the buyer group will enjoy
the benefits from any future earnings and growth of the Company after the merger
and will also bear the corresponding risks of any possible decreases in future
earnings, growth, or value. Such members of the buyer group may also benefit
after the merger from the elimination of expenses associated with public company
reporting and compliance requirements and increased flexibility as a private
rather than a publicly-traded company.
Additionally, members of the special committee received
compensation for their service of evaluating and negotiating the merger
agreement and the transactions contemplated by the merger agreement, including
the merger. See
Special Factors Relating to the Merger Background of the
Merger
beginning on page 18. Parent also agreed to indemnify our directors and officers against
certain claims and liabilities arising from their actions taken prior to the
effective time of the merger for the six years following the effective time of
the merger.
The members of our board of directors were aware of these
additional interests, and considered them, when they approved the merger
agreement, the merger and the other transactions contemplated by the merger
agreement. See
Special Factors Relating to the Merger Interests of the Companys Directors
and Officers in the Merger
beginning on page 47.
5
Conditions to the Merger (page 69)
The respective obligations of each of the Company, Parent and
Merger Sub to consummate the merger are subject to the satisfaction or waiver of
certain conditions. For a more detailed description of these conditions, see
The Merger AgreementConditions to the Merger
beginning on page 69.
Regulatory Matters (page 49)
The Company does not believe that any material federal,
national, provincial, local or state, whether domestic or foreign, regulatory
approvals, filings or notices are required in connection with the merger other
than the approvals, filings or notices required under the U.S. federal
securities laws and the filing of the articles of merger with the Secretary of
State of the State of Nevada with respect to the merger.
Alternative Takeover Proposals (page 65)
Until 11:59 p.m. New York City time on July 18, 2012, the
Company and its subsidiaries and their respective representatives are permitted
to:
-
solicit, initiate, facilitate and encourage any inquiry or the making of
takeover proposals (as defined below under
The Merger AgreementAlternative
Takeover Proposals
) from third parties, including by providing third parties
access to information pursuant to confidentiality agreements containing terms
at least as restrictive with respect to such third parties as the
confidentiality terms contained in the merger agreement (provided that the
Company simultaneously or as promptly as reasonably practicable provides any
material non-public information concerning the Company or its subsidiaries to
Parent if not previously provided to Parent); and
-
enter into, continue or otherwise participate in discussions or
negotiations with any person with respect to any takeover proposal, or
otherwise cooperate with, assist, participate in, facilitate or take any
action in connection with such inquiries, proposals, discussions or
negotiations.
From and after 12:00 a.m. New York City time on July 19, 2012,
the Company and its subsidiaries and their respective representatives are
required to immediately cease any discussions or negotiations with any persons
that may be ongoing with respect to any takeover proposals, except as may relate
to continuing parties (as defined below under
The Merger
AgreementAlternative Takeover Proposals
). From and after 12:00 a.m. New
York City on July 19, 2012 until the earlier of the effective time of the merger
or the termination of the merger agreement, the Company and its subsidiaries and
their respective representatives will not:
-
solicit, initiate, knowingly encourage or knowingly induce the making of
takeover proposals from any third parties;
-
provide any material non-public information concerning the Company or its
subsidiaries to a third party in connection with a takeover proposal; or
-
engage in discussions or negotiations with any third party concerning a
takeover proposal.
However, the Company may continue to
engage in the actions described in the first and second bullet above until 11:59 p.m. New York
City time on August 2, 2012 with a continuing party.
Prior to the time the Companys stockholders approve the merger
agreement, if the Company receives an unsolicited written takeover proposal from
a third party that the special committee determines in good faith (after
consultation with its financial and legal advisors) could result in a superior
proposal and the failure to take action would result in a breach of its
fiduciary duties under applicable law, the Company may:
6
The Company shall promptly advise Parent within 24 hours,
orally or in writing, of any takeover proposal, any initial request for
non-public information and any initial request for discussions or negotiations
related to a takeover proposal. In connection with such notice, Company must
also provide the material terms and conditions and the identity of the third
party making the takeover proposal or request. The Company must also keep Parent
informed in all material respects of the status and details of such takeover
proposal or request.
The merger agreement provides that the
board of directors of the Company can only (a) effect a change of
recommendation (as defined below under The Merger AgreementAlternative
Takeover Proposals) or (b) enter into a takeover proposal (as described under
The Merger AgreementAlternative Takeover Proposals) if at any time prior to
the receipt of the requisite stockholder approvals of the merger, (x) the
special committee determines in good faith (after consultation with the
Companys outside legal advisors) that the failure to do so would be
inconsistent with its fiduciary duties under applicable law, then the board of
directors of the Company, acting upon the recommendation of the special
committee, may make a change of recommendation; and (y) the board of directors
of the Company determines in good faith (after consultation with the Companys
outside financial and legal advisors) that a takeover proposal constitutes a
superior proposal, then the Company may enter into a definitive written
agreement with respect to such superior proposal and terminate the merger
agreement.
The Company is not entitled to effect a change of
recommendation or terminate the merger agreement unless (i) the Company has
provided written notice at least five business days in advance to Parent and
Merger Sub advising Parent that the board of directors of the Company intends to
make a change of recommendation or enter into a definitive written agreement
with respect to such superior proposal, as applicable, and specifying the
reasons therefor, including in the case of a superior proposal the material
terms and conditions of such superior proposal that is the basis of the proposed
action by the board of directors of the Company (including the identity of the
third party making the superior proposal and any financing materials related
thereto, if any), (ii) during the five business day period following Parents
and Merger Subs receipt of the notice of superior proposal, the Company will,
and will cause its representatives to, negotiate with Parent and Merger Sub in
good faith (to the extent Parent and Merger Sub desire to negotiate) to make
such adjustments in the terms and conditions of the merger agreement and the
financing commitments so that such superior proposal ceases to constitute a
superior proposal, and (iii) following the end of the five business day period,
the board of directors of the Company and the special committee will have
determined in good faith, taking into account any changes to the merger
agreement and the terms of the debt financing and the equity financing proposed
in writing by Parent and Merger Sub in response to the notice of superior
proposal or otherwise, that the superior proposal giving rise to the notice of
superior proposal continues to constitute a superior proposal. Any material
amendment to the financial terms or any other material amendment of such
superior proposal will require a new notice of superior proposal and the Company
will be required to comply again with the procedures in this paragraph, provided
that references above in this paragraph to five business days will be changed to
references to three business days.
The Company is not restricted from issuing a stop, look and
listen communication pursuant to Rule 14d-9(f) promulgated under the Exchange
Act or taking or disclosing to its stockholders any position contemplated by
Rule 14e-2(a) or Rule 14d-9 promulgated under the Exchange Act or from making
any other disclosure to its stockholders to comply with applicable law. For a
more detailed description of the alternative takeover proposals, see
The
Merger AgreementAlternative Takeover Proposals
beginning on page 65.
Termination of the Merger Agreement (page 70)
The merger agreement may be terminated at any time prior to the
effective time of the merger, whether before or after requisite stockholder
approvals of the merger have been obtained:
by mutual written agreement of the Company and Parent;
7
by either of the Company or Parent, if:
-
any governmental entity has issued a final order, injunction or decree
permanently enjoining or otherwise prohibiting consummation of the merger;
provided, that this termination right will not be available to a party if the
failure of such party to fulfill any of its obligations under the merger
agreement is the primary cause or material contributing factor to the denial
of such approval, or issuance of such final order, injunction or decree;
-
the merger is not completed by April 7, 2013, provided that this
termination right will not be available to a party if the failure of such
party to fulfill any of its obligations under the merger agreement is the
primary cause or material contributing factor to the failure of the closing to
occur by that date; or
-
our stockholders do not approve the merger agreement at the special
meeting or any adjournment or postponement thereof.
by the Company, if:
-
either Parent or Merger Sub has breached any of its representations,
warranties, covenants or agreements under the merger agreement, such that any
condition to the obligation of the Company to closing would not be satisfied
and such breach or inaccuracy cannot be cured or if curable, is not cured by
Parent or Merger Sub within thirty business days after written notice of such
breach or if earlier, by April 7, 2013, provided that this termination right
will not be available to the Company if a material breach of the merger
agreement by the Company is the primary cause or material contributing factor
to the failure of such condition to be satisfied;
-
all of the closing conditions are otherwise satisfied or waived by Parent
but Parent and Merger Sub fail to close within two business days following the
date the closing should have occurred; or
-
the Company effects a change of recommendation or enters into a definitive
written agreement with respect to a superior proposal after (a) complying with
the applicable provisions of the merger agreement and (b) paying to Parent a
termination fee payable pursuant to the merger agreement.
by Parent, if:
-
the Company has breached any of its representations, warranties, covenants
or agreements under the merger agreement, such that any condition to the
obligation of Parent of Merger Sub to closing would not be satisfied and such
breach or inaccuracy cannot be cured or if curable, is not cured by the
Company within thirty business days after written notice of such breach or if
earlier, by the April 7, 2013, provided that this termination right will not
be available to Parent if a material breach of the merger agreement by Parent
is the primary cause or material contributing factor to the failure of such
condition to be satisfied; or
-
the board of directors of the Company effects a change of recommendation.
Termination Fees and Reimbursement of Expenses (page 71)
The Company is required to pay Parent a termination fee of $1.5
million, approximately 1% of the enterprise value of the Company calculated
based on the $5.80 per share merger consideration, in the event that the merger agreement is terminated:
-
by the Company in order to effect a change of recommendation or enter into
a definitive written agreement with respect to a superior proposal;
-
by Parent or the Company due to (a)(i) a failure of either the Company or
Parent to consummate the merger by April 7, 2013 or (ii) a failure by the
Company to obtain the requisite stockholder approvals of the merger and (b) on
or after the signing of the merger agreement but prior to the date of the stockholders meeting, a third
party makes a takeover proposal which is publicly disclosed and not withdrawn
and (c) within twelve months following such termination, the Company
consummates or enters into a transaction with respect to such takeover
proposal; or
8
-
by Parent due to (i) a breach by Company of any of their representations,
warranties, covenants or agreements under the merger agreement, such that the
condition to the obligation of Parent or Merger Sub to closing would not be
satisfied; or (ii) the board of directors of the Company effects a change of
recommendation.
Parent is required to pay the Company a termination fee of $2.8
million, approximately 2% of the enterprise value of the Company calculated
based on the $5.80 per share merger consideration, in the event that the merger agreement is terminated by the Company:
-
due to a breach by Parent or Merger Sub of any of their representations,
warranties, covenants or agreements under the merger agreement, such that the
condition to the obligation of the Company to closing would not be satisfied;
or
-
if all of the closing conditions are otherwise satisfied or waived by
Parent but Parent and Merger Sub fail to close within two business days
following the date the closing should have occurred.
Remedies (page 72)
The Companys right to terminate the merger agreement and
receive payment of (i) a termination fee of $2.8 million, approximately 2% of
the enterprise value of the Company calculated based on the $5.80 per share
merger consideration, in connection with the
merger from Parent, (ii) any reimbursement of costs and expenses pursuant to the
merger agreement, and (iii) any amount in respect of which it is indemnified by
Parent pursuant to the merger agreement under certain circumstance is the sole
and exclusive remedy of the Company against the Parent, Merger Sub, their
respective affiliates or financing source for any loss or damage suffered as a
result of any such breach or failure to perform under the merger agreement or
other failure of the merger to be consummated. However, such limitation of
remedies shall not apply in the event Parent has not deposited or caused to be
deposited in full the amounts as set forth in the merger agreement within one
business day following the effective time of the merger.
Subject to any equitable remedies Parent may be entitled to,
Parents right to receive payment of (i) a termination fee of $1.5 million, approximately
1% of the enterprise value of the Company calculated based on the $5.80 per
share merger consideration, and
(ii) any reimbursement of costs and expenses pursuant to the merger agreement,
is the sole and exclusive remedy of Parent and Merger Sub against the Company
for any loss or damage suffered as a result of any such breach or failure to
perform under the merger agreement or other failure of the merger to be
consummated.
Parent and Merger Sub are entitled to specific performance of
the terms under the merger agreement, including an injunction or injunctions to
prevent breaches of the merger agreement and to enforce specifically the terms
and provisions of the merger agreement. The Company is not entitled to an
injunction or injunctions to prevent breaches of the merger agreement by Parent
or Merger Sub or any remedy to enforce specifically the terms and provisions of
the merger agreement.
Appraisal Rights (page 75)
You are not entitled to dissenters rights or any other
statutory rights of objection in connection with the merger under Nevada law.
Section 92A.390 of the Nevada Revised Statutes, or the NRS, does not provide any
right of dissent with respect to a plan of merger under criteria described in
that section of the NRS, which the Company satisfies.
Material United States Federal Income Tax Consequences (page
50)
The receipt of cash in exchange for Company common stock
pursuant to the merger will be a taxable transaction for U.S. federal income tax
purposes and may also be taxable under applicable state, local, foreign or other
tax laws. In general, a U.S. Holder (as defined below under
Special
Factors Relating to the MergerMaterial United
States Federal Income Tax Consequences
) of Company common stock will
recognize gain or loss in an amount equal to the difference, if any, between the
amount of cash received in the merger and the U.S. Holders adjusted tax basis
in the shares of Company common stock. In general, a Non-U.S. Holder (as defined
below under
Special Factors Relating to the Merger-Material United States Federal Income Tax Consequences
) of shares of Company common
stock will not be subject to U.S. federal income tax in respect of cash received
in the merger, unless such Non-U.S. Holder has certain connections to the United
States. You should consult your tax advisors to determine the particular tax
consequences to you (including the application and effect of any state, local or
foreign income and other tax laws) of the merger.
9
Material PRC Tax Consequences (page 52)
Under the PRC Enterprise Income Tax Law (the
EIT Law
),
which took effect on January 1, 2008, enterprises established outside of the
Peoples Republic of China (
PRC
) whose de facto management bodies are
located in the PRC are considered resident enterprises. The implementation
rules for the EIT Law define the de facto management body as an establishment
that has substantial management and control over the business, personnel,
accounts and properties of an enterprise. Although there has not been a
definitive determination of the Companys status by the PRC tax authorities, the
Company does not believe that it should be considered a resident enterprise
under the EIT Law or that the gain recognized on the receipt of cash for Company
common stock should otherwise be subject to PRC tax to holders of such common
stock that are not PRC residents. If, however, the PRC tax authorities were to
determine that the Company should be considered a resident enterprise or that
the receipt of cash for these common stock should otherwise be subject to PRC
tax, then gain recognized on the receipt of cash for Company common stock
pursuant to the merger by holders of such common stock who are not PRC residents
could be treated as PRC-source income that would be subject to PRC tax at a rate
of up to 10%. You should consult your own tax advisor for a full understanding
of the tax consequences of the merger to you, including any PRC tax
consequences.
Litigation Relating to the Merger (page 53)
The Company and certain directors of the Company were named as
defendants in three putative class action complaints filed in the Eighth
Judicial District Court of Clark County, Nevada (the
Eighth Judicial
District Court
) by stockholders of the Company in connection with the
proposed merger. The complaints allege, among other things, that the members of
the board of directors breached their fiduciary duties owed to the Company's
stockholders and seek, among other things, to enjoin the defendants from
completing the proposed merger. The Company and the board of directors believe
that the claims in these complaints are without merit and intend to defend
against them vigorously.
One of the conditions to the closing of the merger is that no
order by a court or other governmental entity shall be in effect that prohibits
the consummation of the merger or that makes the consummation of the merger
illegal. As such, if the plaintiffs are successful in obtaining an injunction
prohibiting the defendants from completing the merger on the agreed-upon terms,
then such injunction may prevent the merger from becoming effective, or from
becoming effective within the expected timeframe.
Where You Can Find More Information (page 79)
You can find more information about the Company in the periodic
reports and other information we file with the SEC. The information is available
at the SECs public reference facilities and at the website maintained by the
SEC at www.sec.gov. For a more detailed description of the additional
information available, see
Where You Can Find More Information
beginning on page 79.
10
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE
MERGER
The following questions and answers are intended to address
commonly asked questions regarding the merger, the merger agreement, and the
special meeting. These questions and answers may not address all questions that
may be important to you as a Company stockholder. Please refer to the section
titled Summary Term Sheet Related to the Merger beginning on page 1 and the more detailed
information contained elsewhere in this proxy statement, the annexes to this
proxy statement, and the documents referred to in this proxy statement, all of
which you should read carefully and in their entirety. You may obtain the
documents incorporated by reference in this proxy statement without charge by
following the instructions in the section titled Where You Can Find More
Information beginning on page 79.
Q:
|
When and where is the special meeting of our
stockholders?
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A:
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The special meeting of stockholders will be held
at
a.m., Beijing time,
on
, 2012,
at
.
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Q:
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Why am I receiving this proxy statement?
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A:
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You are receiving this proxy statement in connection with
the solicitation of proxies by the board of directors of the Company in
favor of, among other things, the approval of the merger agreement. On
June 8, 2012, we entered into the merger agreement, with Parent and Merger
Sub providing for the merger of Merger Sub with and into the Company, with
the Company surviving the merger as a wholly owned subsidiary of Parent.
After the merger, shares of Company common stock will not be publicly
traded. Parent and Merger Sub are beneficially owned by Mr. Shudong Xia,
the chairman, president, chief executive officer and secretary of the
Company.
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Q:
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What matters will be voted on at the special
meeting?
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A:
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You will be asked to consider and vote on the following
proposals:
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approval of the merger agreement and the transactions
contemplated by the merger agreement, including the merger; and
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approval of the adjournment of the special meeting, if
necessary or appropriate, to solicit additional proxies if there are
insufficient votes at the time of the special meeting to approve the
merger agreement.
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Q:
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As a stockholder, what will I receive in the
merger?
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A:
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If the merger is completed, you will be entitled to
receive $5.80 in cash, without interest, for each share of Company common
stock that you own immediately prior to the effective time of the merger
as described in the merger agreement.
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See
Special Factors Relating to the MergerMaterial
United States Federal Income Tax Consequences
and
Material PRC
Tax Consequences
beginning on pages 50 and 52, respectively, for a
more detailed description of the U.S. federal and PRC tax consequences of
the merger. You should consult your own tax advisor for a full
understanding of how the merger will affect your U.S. federal, state,
local, PRC and/or other non-U.S. taxes.
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Q:
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When will I receive the merger consideration for my
shares of Company common stock?
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A:
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After the merger is completed, you will receive written
instructions, including a letter of transmittal, that explain how to
exchange your shares for the per share merger consideration. When you
properly complete and return the required documentation described in the
written instructions, you will promptly receive from the paying agent
payment of the merger consideration for your
shares.
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11
Q:
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How will the Companys options be treated in the
merger?
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A:
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The merger agreement provides that each outstanding,
vested and unexercised option to purchase shares of Company common stock
will be cancelled and converted into the right to receive, as soon as
reasonably practicable after the effective time of the merger, a cash
amount equal to the number of shares underlying such option immediately
prior to the effective time of the merger multiplied by the amount by
which $5.80 exceeds the exercise price per share of such option, net of
any applicable withholding taxes. In addition, each outstanding and
unvested option to purchase shares of Company common stock will be
cancelled and converted into the right to receive, as soon as reasonably
practicable after the effective time of the merger, a restricted cash
award in an amount equal to the number of shares underlying such option
immediately prior to the effective time of the merger multiplied the
amount by which $5.80 exceeds the exercise price per share of such option.
See
The Merger AgreementTreatment of Common Stock, Company Options
and Company Warrants
beginning on page 59 for additional
information.
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Q:
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How will the Companys warrants be treated in the
merger?
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A:
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The merger agreement provides that each outstanding and
unexercised warrant to purchase shares of Company common stock will be
cancelled and converted into the right to receive, as soon as reasonably
practicable after the effective time of the merger, a cash amount equal to
the total number of shares underlying such warrant immediately prior to
the effective time of the merger multiplied by the amount by which $5.80
exceeds the exercise price per share of such warrant. See
The Merger
AgreementTreatment of Common Stock, Company Options and Company
Warrants
beginning on page 59 for additional information.
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Q:
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What vote of our stockholders is required to approve
the merger agreement and other proposals?
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A:
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The vote requirements to approve the proposals are as
follows:
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For Proposal No. 1 (approval of the merger agreement),
both (i) the holders of a majority of the shares of Company common stock
and (ii) the holders of a majority of the shares of Company common stock
(excluding Rollover Shares) must vote
FOR
the proposal to approve
the merger agreement.
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For Proposal No. 2 (approval of the adjournment or
postponement of the special meeting), the affirmative vote of the holders
of a majority of the shares of Company common stock present in person or
represented by proxy at the meeting and entitled to vote, whether or not
the quorum is present, is required.
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At the close of business, New York time,
on
, 2012, the record
date,
shares of Company common stock were outstanding and entitled to vote at
the special meeting.
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Q:
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Who can attend and vote at the special
meeting?
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A:
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All stockholders of record as of the close of business,
New York time,
on
, 2012, the record date for the special meeting, are entitled to
receive notice of and to attend and vote at the special meeting, or any
postponement or adjournment thereof. If you wish to attend the special
meeting and your shares of Company common stock are held in an account at
a broker, dealer, commercial bank, trust company or other nominee (i.e.,
in street name), you will need to bring a copy of your voting
instruction card or statement reflecting your share ownership as of the
record date. Street name holders who wish to vote at the special meeting
will need to obtain a proxy from the broker, dealer, commercial bank,
trust company or other nominee that holds their shares of Company common
stock. Seating will be limited at the special meeting. Admission to the
special meeting will be on a first-come, first-served basis.
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Q:
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How does our board of directors recommend that I
vote?
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A:
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Our board of directors, after careful consideration and
acting on the unanimous recommendation of the special committee composed
entirely of independent directors, recommends that you vote
FOR
the proposal to approve the merger agreement and
FOR
the proposal to approve the adjournment of the special meeting, if
necessary or appropriate, to solicit additional proxies if there are
insufficient votes at the time of the special meeting to approve the
merger agreement.
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12
Q:
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How will our directors and executive officers vote on
the proposal to approve the merger agreement?
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A:
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Our directors and current executive officers have
informed us that, as of the date of this proxy statement, they intend to
vote all of their shares of Company common stock in favor of the approval
of the merger agreement. As
of
, 2012, the record date for the special meeting, our directors
(including Mr. Xia and Ms. Danxia Huang) and current executive officers
beneficially owned, in the aggregate, 9,196,276 shares of Company common
stock, or collectively approximately 36.39% of the total outstanding
shares of Company common stock.
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You should read
Special Factors Relating to the
MergerRecommendation of Our Board of Directors and Special Committee;
Reasons for Recommending the Approval of the Merger Agreement; Fairness of
the Merger
beginning on page 25 for a discussion of the factors that
our special committee and board of directors considered in deciding to
recommend the approval of the merger agreement. In addition, in
considering the recommendation of the special committee and the board of
directors with respect to the merger agreement, you should be aware that
some of the Companys directors and officers may have interests that are
different from, or in addition to, the interests of our stockholders
generally. See
Special Factors Relating to the MergerInterests of the
Companys Directors and Officers in the Merger
, beginning on page 47
for additional information.
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Q:
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Am I entitled to exercise appraisal rights instead of
receiving the per share merger consideration for my shares of Company
common stock?
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A:
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You are not entitled to dissenters rights or other
statutory rights of objection in connection with the merger under Nevada
law. Section 92A.390 of the NRS, does not provide any right of dissent
with respect to a plan of merger under criteria described in that section
of the NRS, which the Company satisfies.
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Q:
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How do I cast my vote if I am a holder of
record?
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A:
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If you were a holder of record as of the close of
business, New York time,
on
, 2012, you may vote in person at the special meeting or by submitting
a proxy for the special meeting. You can submit your proxy by completing,
signing, dating and returning the enclosed proxy card in the accompanying
pre-addressed, postage paid envelope. Holders of record may also vote by
telephone or the Internet by following the instructions on the proxy
card.
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If you properly transmit your proxy, but do not
indicate how you want to vote, your proxy will be voted FOR the approval
of the merger agreement, and FOR the proposal to approve the adjournment
of the special meeting, if necessary or appropriate, to solicit additional
proxies if there are insufficient votes at the time of the special meeting
to approve the merger agreement.
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Q:
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How do I cast my vote if my shares of Company common
stock are held in street name by my broker, dealer, commercial bank,
trust company or other nominee?
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A:
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If you hold your shares in street name, which means
your shares of Company common stock are held of record
on
, 2012 by a broker, dealer, commercial bank, trust company or other
nominee, you must provide the record holder of your shares of Company
common stock with instructions on how to vote your shares of Company
common stock in accordance with the voting directions provided by your
broker, dealer, commercial bank, trust company or other nominee.
If you
do not provide your broker, dealer, commercial bank, trust company or
other nominee with instructions on how to vote your shares, your shares of
Company common stock will not be voted, which will have the same effect as
voting AGAINST the proposal to approve the merger agreement.
Please
refer to the voting instruction card used by your broker, dealer,
commercial bank, trust company or other nominee to see if you may submit
voting instructions using the Internet or
telephone.
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13
Q:
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What will happen if I abstain from voting or fail to
vote on the proposal to approve the merger
agreement or other
proposals?
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A:
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In all matters, if you abstain from voting, fail to cast
your vote in person or by proxy or fail to give voting instructions to
your broker, dealer, commercial bank, trust company or other nominee with
respect to any particular proposal, it will have the same effect as a vote
against such proposal, although your abstention or failure to act will not
count as a vote against, withheld or abstained with respect to any other
proposal, unless you also abstain or fail to act with respect to such
other proposal. If you are a beneficial owner of shares held in street
name and do not provide the organization that holds your shares with
specific voting instructions, under the rules of various national and
regional securities exchanges, the organization that holds your shares may
generally vote on routine matters but cannot vote on non-routine matters.
If the organization that holds your shares does not receive instructions
from you on how to vote your shares on a non-routine matter, the
organization that holds your shares does not have the authority to vote on
the matter with respect to those shares. This is generally referred to as
a broker non-vote.
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All proposals involve matters that we believe will be
considered non-routine. We encourage you to provide voting instructions to
the organization that holds your shares by carefully following the
instructions provided on your proxy card.
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Q:
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Can I change my vote after I have delivered
my proxy?
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A:
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Yes. If you are a record holder, you can change your vote
at any time before your proxy is voted at the special meeting by properly
delivering a later-dated proxy either by mail, the Internet or telephone
or attending the special meeting in person and voting. You also may revoke
your proxy by delivering a notice of revocation to the Companys corporate
secretary prior to the vote at the special meeting. If your shares of
Company common stock are held in street name, you must contact your
broker, dealer, commercial bank, trust company or other nominee to revoke
your proxy.
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Q:
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What should I do if I receive more than one
set of voting materials?
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A.
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You may receive more than one set of voting materials,
including multiple copies of this proxy statement or multiple proxy or
voting instruction cards. For example, if you hold your shares of Company
common stock in more than one brokerage account, you will receive a
separate voting instruction card for each brokerage account in which you
hold shares of Company common stock. If you are a holder of record and
your shares of Company common stock are registered in more than one name,
you will receive more than one proxy card.
Please submit each proxy and
voting instruction card that you receive
.
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Q:
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If I am a holder of certificated shares of
Company common stock, should I send in my share
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certificates now?
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A:
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No. Promptly after the merger is completed, each holder
of record as of the time of the merger will be sent written instructions
for exchanging their stock certificates for the per share merger
consideration. These instructions will tell you how and where to send in
your stock certificates for your cash consideration. You will receive your
cash payment after the paying agent receives your share certificates and
any other documents requested in the instructions. Please do not send
stock certificates with your proxy.
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Holders of uncertificated shares of Company common stock
(i.e., holders whose shares are held in book-form entry) will
automatically receive their cash consideration as soon as practicable
after the effective time of the merger without any further action required
on the part of such holders.
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Q:
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What constitutes a quorum for the special
meeting?
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A:
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The presence at the special meeting in person or by proxy
of the holders of a majority of shares of Company common stock issued and
outstanding and entitled to vote at the special meeting as of the record
date will be necessary and sufficient to constitute a quorum for the
purposes of the special meeting.
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14
Q:
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Will any proxy solicitors be used in connection with
the special meeting?
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A:
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Yes. To assist in the solicitation of proxies, the
Company has
engaged
.
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Q:
|
What happens if the merger is not
completed?
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A:
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If the merger agreement is not approved by our
stockholders, or if the merger is not completed for any other reason, you
will not receive any payment for your Company common stock pursuant to the
merger agreement. Instead, we will remain a publicly traded company and
our common stock will continue to be registered under the Exchange Act and
listed and traded on the NASDAQ Global Market. Under certain circumstances
specified in the merger agreement, we may be required to pay Parent a
termination fee of $1.5 million, approximately 1% of the enterprise value
of the Company calculated based on the $5.80 per share merger
consideration or, Parent may be required to pay us a
termination fee of $2.8 million, approximately 2% of the enterprise value
of the Company calculated based on the $5.80 per share merger
consideration. See
The Merger AgreementTermination
Fees and Reimbursement of Expenses
beginning on page 71 for
additional information.
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Q:
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When is the merger expected to be
completed?
|
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A:
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We are working to complete the merger as quickly as
possible. We currently expect the transaction to close in the fourth
quarter of 2012; however, we cannot predict the exact timing of the
merger. In order to complete the merger, we must obtain the requisite
stockholder approvals of the merger and the other closing conditions under
the merger agreement must be satisfied or waived.
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Q:
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What is householding and how does it affect
me?
|
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A:
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The Securities and Exchange Commission (
SEC
)
permits companies to send a single set of certain disclosure documents to
any household at which two or more stockholders reside, unless contrary
instructions have been received, but only if the company provides advance
notice and follows certain procedures. In such cases, each stockholder
continues to receive a separate notice of the meeting and proxy card. This
householding process reduces the volume of duplicate information and
reduces printing and mailing expenses. We have not instituted householding
for stockholders of record; however, certain brokerage firms may have
instituted householding for beneficial owners of Company common stock held
through brokerage firms. If your family has multiple accounts holding
Company common stock, you may have already received householding
notification from your broker. Please contact your broker directly if you
have any questions or require additional copies of this proxy statement.
The broker will arrange for delivery of a separate copy of this proxy
statement promptly upon your written or oral request. You may decide at
any time to revoke your decision to household, and thereby receive
multiple copies.
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Q:
|
Who can help answer my questions?
|
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A:
|
If you have any questions about the merger or how to
submit your proxy, or if you need additional copies of this proxy
statement or the enclosed proxy card, you should
contact
, by email
at
.
|
15
SPECIAL FACTORS RELATING TO THE MERGER
The following is a description of the material aspects of
the merger. While we believe that the following description covers the material
terms of the merger, the description may not contain all of the information that
is important to you. We encourage you to read carefully this entire document,
including the merger agreement attached to this proxy statement as Annex A, for
a more complete understanding of the merger. The following description is
subject to, and is qualified in its entirety by reference to, the merger
agreement.
The Parties
The Company
China TransInfo Technology Corp. is a leading transportation
information products and comprehensive solutions provider, and aims to be the
largest real time transportation information service provider and major fleet
management service provider in China. Through its affiliate and its Chinese
operating subsidiaries, the Company is primarily focused on providing urban and
highway transportation management solutions and information services. The
Companys principal executive offices are located at 9th Floor, Vision Building,
No. 39 Xueyuanlu, Haidian District, Beijing, PRC, 100191. The Companys
telephone number is (86) 10-5169-1999.
Parent
TransCloud Company Limited was formed under the laws of the
Cayman Islands by Mr. Xia solely for the purpose of owning the Company after the
merger and arranging the financing for the merger. Parent is a wholly-owned
subsidiary of Holdco. Parent has not engaged in any business except for
activities incidental to its formation and in connection with the transactions
contemplated by the merger agreement, including the merger and related financing
transactions. The registered office of Parent is The Grand Pavilion Commercial
Centre, Oleander Way, 802 West Bay Road, P.O. Box 32052, Grand Cayman KY1-1208,
Cayman Islands, and its telephone number is (86) 10-5169-1999.
Merger Sub
TransCloud Acquisition, Inc. was formed under the laws of the
State of Nevada by Parent solely for the purpose of effecting the merger. Merger
Sub is a wholly-owned subsidiary of Parent. Upon completion of the merger,
Merger Sub will no longer exist. Merger Sub has not engaged in any business
except for activities incidental to its formation and in connection with the
transactions contemplated by the merger agreement, including the merger. The
registered office of Merger Sub is c/o Paracorp Incorporated 318 N Carson St.
#208 Carson City, Nevada 89701, and its telephone number is (86)
10-5169-1999.
Holdco
Shudong Investments Limited was formed under the laws of the
British Virgin Islands by Mr. Xia solely for the purpose of owning Parent and
arranging the financing of the merger. Mr. Xia is currently the sole beneficial
owner of Holdco. Prior to the closing of the merger, each of Mr. Xia, Mr.
Shufeng Xia, Ms. Danxia Huang, Karmen and SAIF III will receive equity interests
in Holdco in exchange for contributing their shares of Company common stock to
Parent pursuant to two contribution agreements, as part of the Rollover
Financing. Holdco has not engaged in any business except for activities
incidental to its formation and in connection with the transactions contemplated
by the merger agreement, including the merger and related financing
transactions. The registered office of Holdco is 3rd Floor, Omar Hodge Building,
Wickhams Cay 1, Road Town, Tortola, British Virgin Islands, and its telephone
number is (86) 10-5169-1999.
Mr. Shudong Xia
Mr. Xia is and has been the chairman, president, chief
executive officer and secretary of the Company for the past five years. Mr.
Shudong Xias business address is c/o China TransInfo Technology Corp., Vision
Bldg., 39 Xueyuan Rd., 9th Floor, Haidian District, Beijing 100191, PRC. His
telephone number is (86) 10-5169-1999. He is a citizen of the PRC. During the
past five years, Mr. Xia has not been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors), nor has
he been a party to any judicial or administrative proceeding (except for matters
that were dismissed without sanction or settlement) that resulted in a judgment,
decree or final order enjoining the person from future violations of, or
prohibiting activities subject to, federal or state securities laws, or a
finding of any violation of federal or state securities laws.
16
Karmen
Karmen Investment Holdings Limited was formed under the laws of
the British Virgin Islands by Mr. Xia for the purpose of making investments in
China-related companies. Karmen is a wholly owned subsidiary of East Action
Investment Holdings Ltd., which in turn is wholly owned by Mr. Xia. The
registered office of Karmen is P.O.Box 3444 Road Town, Tortola, British Virgin
Islands, and its telephone number is (86) 10-5169-1999.
Ms. Danxia Huang
Ms. Danxia Huang is and has been a vice president and a
director of the Company for the past five years. The business address of Ms.
Danxia Huang is c/o China TransInfo Technology Corp., Vision Bldg., 39 Xueyuan
Rd., 9th Floor, Haidian District, Beijing 100191, PRC. Her telephone number is
(86) 10-5169-1999. She is a citizen of the PRC. During the past five years, Ms.
Danxia Huang has not been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors), nor has she been a party to any judicial or
administrative proceeding (except for matters that were dismissed without
sanction or settlement) that resulted in a judgment, decree or final order
enjoining the person from future violations of, or prohibiting activities
subject to, federal or state securities laws, or a finding of any violation of
federal or state securities laws.
Mr. Shufeng Xia
Mr. Shufeng Xia is and has been the director of financial
department of China TransInfo Technology Group Co., Ltd. for the past five
years. Mr. Shufeng Xias business address is c/o China TransInfo Technology
Corp., Vision Bldg., 39 Xueyuan Rd., 9th Floor, Haidian District, Beijing
100191, PRC. His telephone number is (86) 10-5169-1999. He is a citizen of the
PRC. During the past five years, Mr. Shufeng Xia has not been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors), nor
has he been a party to any judicial or administrative proceeding (except for
matters that were dismissed without sanction or settlement) that resulted in a
judgment, decree or final order enjoining the person from future violations of,
or prohibiting activities subject to, federal or state securities laws, or a
finding of any violation of federal or state securities laws.
SAIF III
SAIF Partners III L.P. was formed under the laws of the Cayman
Islands. The principal business of SAIF III is to make investments in companies
in China and India. The registered office of SAIF III is c/o M&C Corporate
Services Limited, P. O. Box 309 GT, Ugland House, South Church Street, George
Town, Grand Cayman, Cayman Islands and its telephone number is +852 2918 2203.
SAIF IV
SAIF Partners IV L.P. was formed under the laws of the Cayman
Islands. The principal business of SAIF IV is to make investments in companies
in China and India. The registered office of SAIF IV is c/o M&C Corporate
Services Limited, P. O. Box 309 GT, Ugland House, South Church Street, George
Town, Grand Cayman, Cayman Islands and its telephone number is +852 2918
2203.
Overview of the Transaction
The Company, Parent and Merger Sub entered into the merger
agreement on June 8, 2012. Under the terms of the merger agreement, Merger Sub
will be merged with and into the Company, with the Company surviving the merger
as a wholly owned subsidiary of Parent. The Company, as the surviving
corporation, will continue to do business under the name China TransInfo
Technology Corp. following the merger. At the effective time of the merger, the
following will occur in connection with the merger:
17
-
each share of Company common stock issued and outstanding immediately
prior to the effective time of the merger (other than shares held by the
Company as treasury stock or owned, directly or indirectly, by Parent, Merger
Sub or any wholly owned subsidiary of the Company immediately prior to the
effective time of the merger, including the Rollover Shares) will be converted
into the right to receive per share merger consideration of $5.80 without
interest;
-
each outstanding, vested and unexercised option to purchase shares of
Company common stock will be cancelled and converted into the right to
receive, as soon as reasonably practicable after the effective time of the
merger, a cash amount equal to the number of shares underlying such option
immediately prior to the effective time of the merger multiplied by the amount
by which $5.80 exceeds the exercise price per share of such option, net of any
applicable withholding taxes;
-
each outstanding and unvested option to purchase shares of Company common
stock will be cancelled and converted into the right to receive, as soon as
reasonably practicable after the effective time of the merger, a restricted
cash award in an amount equal to the number of shares underlying such option
immediately prior to the effective time of the merger multiplied the amount by
which $5.80 exceeds the exercise price per share of such option; and
-
each outstanding and unexercised warrant to purchase shares of Company
common stock will be cancelled and converted into the right to receive, as
soon as reasonably practicable after the effective time of the merger, a cash
amount equal to the total number of shares underlying such warrant immediately
prior to the effective time of the merger multiplied by the amount by which
$5.80 exceeds the exercise price per share of such warrant.
Following and as a result of the merger:
-
the unaffiliated stockholders will no longer have any interest in, and
will no longer be stockholders of, the Company, and will not participate in
any of the Companys future earnings or growth;
-
shares of Company common stock will no longer be listed on the NASDAQ
Global Market, and price quotations with respect to shares of Company common
stock in the public market will no longer be available; and
-
the registration of shares of Company common stock under the Exchange Act
will be terminated.
Management and Board of Directors of the Surviving
Corporation
The board of directors of the surviving corporation will, from
and after the effective time of the merger, consist of the directors of Merger
Sub as of immediately prior to the effective time of the merger (identified
below under
Annex DDirectors and Executive Officers of Each Filing
Person
), until their respective successors are duly elected or appointed
and qualified or their earlier death, resignation or removal. The officers of
the surviving corporation will, from and after the effective time of the merger,
be the officers of the Company as of immediately prior to the effective time of
the merger (identified below under
Annex DDirectors and Executive Officers
of Each Filing Person
), until their respective successors are duly elected
or appointed and qualified, or until their earlier death, resignation or
removal.
Background of the Merger
Our board of directors and senior management periodically
review the Companys long-term strategic plans with the goal of enhancing
stockholder value. As part of this ongoing process, our board of directors and
senior management, from time to time, have considered strategic alternatives
that may be available to the Company.
Around the end of September and early October 2011, Mr. Xia
started to contemplate the feasibility of a going-private transaction involving
the Company after he learned of the completion of the going private transactions
including those involving Chemspec International Limited, Funtalk China Holdings Limited and
China Security & Surveillance Technology Inc.
18
In early October 2011, Mr. Xia met with CDB
in Hong Kong to discuss the possibility of CDB providing financing to Mr. Xia
for a possible
going-private transaction involving the Company. No details regarding the terms
or timing of the possible transaction were discussed.
On October 14, 2011, Mr. Xia consulted with Skadden, Arps,
Slate, Meagher & Flom LLP (
Skadden
) regarding a possible
transaction involving the Company and engaged Skadden as his legal
counsel for the possible transaction based on, among other
factors, Skaddens extensive experience with mergers and acquisitions
transactions, particularly going-private transactions, its significant
history of representing Asia-based companies and its ability to communicate
easily in both English and Chinese.
On November 7, 2011, Mr. Xia met with CDB
in Beijing to further consider the possibility of CDB providing financing for
the
possible transaction.
On November 14, 2011, Mr. Xia met with SAIF
III, an institutional stockholder of the Company since July 17, 2008 to discuss the
possible transaction as well as Mr. Xias
discussions with CDB concerning a transaction and the current status of these
efforts. No details regarding the terms or timing of the possible transaction
were discussed. SAIF III expressed its preliminary interest in
participating in the possible transaction.
On November 21, 2011, Mr. Xia met with Houlihan Lokey (China)
Limited (
Houlihan
) regarding the possibility of Houlihan
representing Mr. Xia and the buyer group in the possible transaction. Houlihan was engaged as the financial advisor to Mr. Xia and the buyer
group on November 21, 2011.
On December 21, 2011, Mr. Xia met with CDB
again in HK to discuss the possibility of CDB providing financing for the possible transaction.
On December 22, 2011, Mr. Xia met with SAIF III again and
discussed further the feasibility of and SAIF IIIs participation in the
possible transaction. Mr. Xia updated SAIF III on the status of
his efforts in securing debt financing from CDB. SAIF III continued to show
interest in participating in the possible transaction.
On February 15, 2012, Mr. Xia met again with CDB
in Hong Kong to discuss the possibility of CDB providing financing for the
possible transaction. CDB indicated during
the meeting that its credit committee would discuss financing to the possible transaction
during the following week.
On February 16, 2012, Mr. Xia had another meeting with SAIF III
in Hong Kong to discuss the feasibility of and SAIF IIIs participation in the
possible transaction. Mr. Xia updated SAIF III on the status of
his efforts in securing debt financing from CDB and SAIF III indicated its strong
interests in participating in the possible transaction,
provided that debt financing from CDB was secured.
On February 19, 2012, after taking into consideration the
status of the discussions with CDB and SAIF III regarding the financing
of the possible transaction, Mr. Xia
submitted a preliminary, non-binding letter (the
Proposal
Letter
) to the board of directors of the Company proposing to undertake
the possible transaction by acquiring all of the shares of Company common stock
not currently directly or indirectly owned by him for cash consideration of
$5.65 per share of Company common stock. In the Proposal Letter, Mr. Xia
outlined his intention to finance the possible transaction with a combination of
debt financing and equity financing. He indicated that he had held preliminary
discussions with a Chinese bank which is experienced in financing going-private
transactions, and he also had held preliminary discussions with
certain stockholders of the Company and other potential sources of equity
financing, and could make agreements with them relating to possible investments in
the possible transaction.
On February 21, 2012, the Company issued a press release
regarding its receipt of the Proposal Letter and the transaction proposed
therein.
19
On February 23, 2012, following a telephonic meeting attended
by all disinterested directors, the board of directors of the Company decided by
written resolution that it was in the best interest of the Company to form a
special committee, consisting of four independent directors, Mr. Xingming Zhang
(to serve as chairman of the special committee), Mr. Zhongsu Chen, Mr. Dan Liu
and Mr. Walter Teh Ming Kwauk, to consider and attend to all matters in
connection with the Proposal Letter and the transactions contemplated thereby.
The board of directors authorized the special committee to, among other things,
(i) consider, review and evaluate the terms and conditions of any proposed
transaction; (ii) negotiate the terms and conditions of any proposed
transaction; (iii) express its view as to the fairness to the Company and the
unaffiliated stockholders of any proposed transaction; (v) reject the proposed
transaction or any alternative proposals; (v) recommend to the board of
directors what action, if any, should be taken by the Company with respect to
the proposed transaction; and (vi) retain legal counsel, financial advisors and
such other accountants, appraisers, consultants or advisors to assist it in
connection with the performance of its duty if the special committee deemed it
appropriate in its sole discretion.
On February 23, 2012, the Company issued a press release
regarding the establishment of the special committee to consider the Proposal
Letter and to evaluate any additional proposal that Mr. Xia may make.
Between February 24 and March 5, 2012, the special committee
interviewed several global investment banks which had submitted their
qualifications and proposals to act as the special committees financial advisor
and interviewed international law firms which had submitted their qualifications
and proposals to act as the special committees legal counsel.
Between February 24 and March 6, 2012, several lawsuits were
filed in the Eighth Judicial District Court in Clark County, Nevada against the
Company and all of its directors alleging similar breaches of fiduciary duties
in connection with the proposed transaction.
On March 6, 2012, the special committee held a telephonic
meeting to discuss the engagement of a financial advisor and legal counsel. Having
considered, among other things, the credentials of the candidates, the relevant
experience of team members, the negotiation power and skills of the team members
in the proposed transaction, the strategic process management capability and
execution skills, independence of each candidate in the proposed transaction and
the knowledge of the Company, the special committee decided to engage William
Blair as its financial advisor. After deliberations on the experience in similar
transactions, qualifications and reputation of each of these law firms, the
special committee decided to engage Shearman & Sterling LLP
(
Shearman
) as its legal counsel. Subsequently, the special committee
negotiated and formally executed an engagement letter with Shearman on March 9,
2012, and an engagement letter and indemnity letter with William Blair on March 13,
2012.
On March 14, 2012, the special committee held a telephonic
meeting with representatives of William Blair and Shearman to discuss the
process of a potential transaction with respect to Mr. Xias proposal including,
among other things, (a) preliminary timeline of the proposed transaction, (b)
financial analysis of the price offered in Mr. Xias proposal and related due diligence to be
conducted by William Blair, (c) confidentiality requirements and publicity
restrictions and (d) the retention of Nevada legal counsel to the special
committee. William Blair further elaborated on the timetable in connection with
a market check, assuming one were considered necessary.
On March 15, 2012, Mr. Xia received from White & Case LLP
(
White & Case
), legal counsel to CDB, a preliminary draft of the
facility agreement for the proposed financing by CDB in connection with the
proposed transaction, which we refer to as
the
facility agreement
.
On March 16, 2012, an interested financial investor
(
investor A
) contacted Shearman and William Blair and indicated its
interest in the proposed transaction. It was not clear whether investor A would
form its own independent proposal or join Mr. Xia in his proposal.
On March 19, 2012, the board of directors held a telephonic
special meeting to discuss the compensation of the members of the special
committee. All directors except Mr. Xia attended the meeting. After discussions,
the board determined monthly compensation for the members of the special
committee of $7,500 for the chair and $5,000 for the other members of such
committee for the duration of each person's service on such committee.
On March 19, 2012, the special committee held a telephonic
meeting with representatives of William Blair and Shearman to discuss the
progress of the preliminary financial analysis and related due diligence conducted by
William Blair, the selection and engagement of a Nevada legal counsel
to the special committee, the financing arrangement of the buyer group and the
response to the interest in the proposed transaction expressed by investor A.
After discussions, the special committee instructed Shearman to clarify with the
buyer group the buyer groups contemplated financing arrangement in connection
with the proposed transaction and instructed William Blair to confirm with
investor A its interest in the proposed transaction.
20
On March 19, 2012, Mr. Xia met with CDB and discussed
commercial issues relating to the facility agreement.
On March 19, 2012, Mr. Xia received a conditional debt
commitment letter from CDB to provide a loan in connection with the proposed
transaction, subject to, among other
conditions, execution of mutually acceptable definitive documents for the loan. CDBs commitment under the conditional commitment letter will terminate on
February 16, 2013 unless CDB by written confirmation further extends the
termination date. On March 20, 2012, Skadden delivered a copy of the conditional
debt commitment letter to Shearman.
On March 21, 2012, White & Case circulated to Mr. Xia a
revised draft of the facility agreement based on the discussion between Mr. Xia
and CDB on March 19, 2012.
From March 22, 2012 to April 5, 2012, Skadden prepared a
preliminary draft of the merger agreement with respect to the proposed
transaction, which we refer to as the
merger agreement
, as well as
preliminary drafts of the voting agreement, the contribution agreement and
equity commitment letter, and assisted Mr. Xia to negotiate with SAIF III on
these agreements.
On March 30, 2012, members of the
management of the Company met with representatives of William Blair and
discussed the due diligence being conducted by William Blair.
On March 26, 2012 and April 1, 2012 the
special committee held telephonic meetings with representatives of William
Blair and Shearman to discuss the progress of the preliminary financial analysis
and related due diligence conducted by William Blair, the selection and
engagement of a Nevada legal counsel to the special committee, and the interest
of investor A in the proposed transaction. The special committee decided not to
respond to Investor A until after (i) confirmation by Investor A of its interest
in the proposal transaction, and (ii) a discussion with representatives of
William Blair regarding William Blair's preliminary valuation analysis.
On April 1, 2012, Skadden circulated to White & Case the
buyer groups comments to the facility agreement.
On April 16, 2012, the special committee held a meeting with
representatives of William Blair and Shearman. At the meeting, the special
committee decided not to respond the draft merger agreement provided by Skadden
until William Blairs preliminary financial analysis was available.
On April 20, 2012, the special
committee held a telephonic meeting with representatives of William Blair and
Shearman. At the meeting, the representatives of William Blair discussed with
the special committee the methodologies it intended to utilize in assisting the special committee in
analyzing the financial aspects of Mr. Xias proposal,
including selected public company analysis, selected transactions analysis,
discounted cash flow analysis, leveraged buyout analysis and premiums paid
analysis. The special committee and its
advisors further discussed a number of potential strategic alternatives and the
implications of each strategy, and suggested next steps. Shearman also
highlighted factors to be considered in the special committees decision making
process in light of the fiduciary duties of the special committee members. In
order to maximize value for the Companys stockholders and also facilitate
the consummation of a transaction that is fair to the Company and the
unaffiliated stockholders, the special committee instructed William Blair and
Shearman to initiate financial and legal negotiations with the buyer group in
connection with the proposed transaction and continued the preparatory work for
a market check in case the parties were not able to reach agreement on terms
acceptable to the special committee. The special committee also instructed
William Blair to contact investor A to clarify its interest in the proposed
transaction and whether investor A intended to form its own independent proposal
or join the buyer group as an equity financing source.
21
On April 20, 2012, Skadden provided Shearman a draft of
Mr. Xias equity commitment letter, voting agreement and contribution agreements
for the review and comments of the special committee and its advisors, which
Shearman then provided to the special committee.
On April 23, 2012, representatives of William Blair also
contacted investor A, which indicated it was only interested in
joining Mr. Xia, as opposed to making its own independent proposal with respect
to a proposed transaction.
On April 24, 2012, representatives of
William Blair, on behalf of the special committee, asked representatives of Houlihan and
Skadden to request Mr. Xia to consider an increase of the offer price. Skadden indicated that the buyer group would agree in principle to
consider a price increase together with the special committees positions and
comments on the draft merger agreement provided by Skadden.
Around April 25, 2012, Mr. Xia discussed with Ms. Danxia Huang
and Mr. Shufeng Xia potentially committing to rolling over their shares
of Company common stock and joining the buyer group. Ms. Danxia Huang and Mr.
Shufeng Xia agreed to Mr. Xias proposal and became members of the buyer group.
On April 26, 2012, the special committee held a telephonic
meeting with representatives of William Blair and Shearman. Representatives of
William Blair reported to the special committee that Mr. Xia would consider a
price increase as well as the special committees other positions and
comments on the draft merger agreement. Representatives of William Blair also reported that
investor A was only interested in joining the buyer group in its proposal, as
opposed to forming an independent proposal. Considering the intent of investor
A, the special committee decided to cease discussions with investor A. At the
meeting, the special committee also discussed with representatives of Shearman and William Blair
the key terms proposed by the buyer group in the draft merger agreement and the
proposed position of the special committee as to those terms, including (a) the
offered price of $5.65, (b) whether Holdco should be a party to the merger
agreement, (c) treatment of the Companys stock options and warrants, (d)
confidentiality provision, (e) withholding tax provision, (f) majority of
minority vote and dissenters rights, (g) the special committees rights and
limitations in dealing with third party competing proposals including a go-shop
provision, (h) specific performance remedies, (i) the amount of the termination fee and
the Parent termination fee and the triggering events for the termination fee
and the Parent termination fee, (j) buyer groups proposed financing
arrangement, (k) expenses, and (l) governing law. After lengthy discussions with
representatives of Shearman and William Blair, the special committee decided to propose, among
other things, (i) merger consideration of $5.80 per share of Company common
stock, (ii) a majority of minority voting provision, (iii) a go-shop
provision, and (iv) a reverse termination fee of $2.8 million.
On April 29, 2012, Shearman provided to Skadden a revised draft
of the merger agreement reflecting the positions of the special committee as to
the terms of the merger agreement.
On May 3, 2012, Skadden provided Shearman with a revised draft
of the merger agreement, a draft facility agreement for the proposed CDB debt
financing and a draft of the limited guarantee, which Shearman then provided to
the special committee.
On May 3, 2012 and May 7, 2012, the special committee held two
telephonic meetings with representatives of William Blair and Shearman
to discuss the revised draft merger agreement and agreed on the negotiation
positions regarding key terms of the merger agreement.
On May 3, 2012, White & Case provided Skadden with a
further revised draft of the facility agreement, which was shared by Skadden
with Shearman together with a revised draft of the merger agreement and a
revised draft of the limited guarantee. Shearman then provided these draft
agreements to the special committee.
On May 4, 2012, the buyer group contacted CDB to discuss
outstanding issues with respect to the facility agreement. The parties were able
to reach agreement on a majority of issues discussed.
On May 7, 2012, White & Case provided Skadden with
preliminary drafts of the security documents in connection with and ancillary to
the facility agreement. Skadden continued to negotiate certain outstanding
issues on the facility agreement with White & Case.
22
On May 8, 2012, the special committee and its advisors had a
face-to-face intensive negotiation session with Mr. Xia and Skadden with respect
to key issues of the merger agreement. As a result of the discussion, the buyer
group agreed to increase the purchase price to $5.80 per share, accept majority
of the minority voting provision, go-shop provision and Parent termination fee
provision, and the special committee agreed, among other things, (i) not to
conduct any market check before signing the merger agreement, (ii) not to
include any dissenters rights provision in the merger agreement, (iii) not to
carve out from the Companys representations and warranties Mr. Xias
knowledge, (iv) to a unilateral specific performance remedy for the buyer group only. In
addition, representatives of Skadden and Shearman also discussed and reached
agreements on certain other legal terms of the merger agreement.
On May 10, 2012, representatives from Skadden, Shearman and
White & Case held a meeting via conference call to discuss the sequence of
funding for the CDB loan and the merger consideration and the filing and
effectiveness of the Nevada articles of merger in connection with the proposed
transaction so as to assure the special committee of the funding process and
funding certainty.
On May 10, 2012 and May 14, 2012, the special committee held
two telephonic meetings with representatives of William Blair and Shearman to discuss
pending issues relating to the merger agreement, including the sequence of funding for the CDB
loan, the merger consideration and the filing and effectiveness of the Nevada
articles of merger in connection with the proposed transaction. The special
committee instructed Shearman to further negotiate and discuss with Skadden and
White & Case to ensure that the closing mechanism would not expose the
Company and unaffiliated stockholders to any unreasonable or unacceptable
risk.
From May 15, 2012 to May 17, 2012, Shearman and Skadden
continued discussions on the sequence of funding for the CDB loan, the merger
consideration and the filing and effectiveness of the Nevada articles of merger,
and reached agreement that (i) the Nevada articles of merger would be filed
before the funding of the merger consideration, (ii) the buyer group and CDB
would each confirm the satisfaction or waiver of all conditions
precedent under the merger agreement and the facility agreement, and (iii) the
buyer group would covenant in the merger agreement to cooperate with the Company
to unwind the transaction if the funding of the merger agreement did not occur
within one full business day after the effective time of the merger.
From May 10, 2012 to May 17, 2012, Skadden and White & Case
engaged in extensive negotiations on the facility agreement and the ancillary
security documents, which was finalized and submitted to CDB for its internal
approval process on May 17, 2012.
On June 1, 2012, Skadden received confirmation from White &
Case that CDB had completed its internal approval process for the facility
agreement and that the facility agreement had been approved.
From June 4, 2012 to June 7, 2012, Mr. Xia engaged in
extensive negotiations with SAIF Partners with respect to the contribution
agreement, the voting agreement, the equity commitment letter and the limited
guarantee. SAIF Partners confirmed that SAIF IV would execute the equity
commitment letter and the limited guarantee. During the same period, the
buyer group and Skadden were engaged in extensive negotiations with the special
committee and Shearman with respect to contribution agreements, the voting
agreement, the equity commitment letters and the limited guarantee. All parties
finalized the forms of contribution agreements, voting agreement, equity
commitment letters and limited guarantee on June 7, 2012.
On June 7, 2012, the special committee held a meeting, at which
representatives of Shearman and William Blair were also present, to consider
approving a revised merger agreement reflecting the terms discussed between
representatives of Shearman and Skadden. Representatives of William Blair
provided a summary of the various financial analyses they had performed and discussed various
other data used to evaluate the Company. Representatives of William Blair then
verbally rendered William Blair's opinion to the special committee, which was confirmed in writing by
delivery of its written opinion dated the same date, based upon and subject to
the assumptions made, procedures followed, matters considered, and
qualifications and limitations on the review undertaken, as to the fairness,
from a financial point of view and as of that date, to the unaffiliated
stockholders of the per share merger consideration to be received by the unaffiliated stockholders in connection with the
proposed transaction. Shearman then provided a summary of
the merger agreement and the limited guarantee to the special committee. After
due consideration of the presentations made by and the discussions with
representatives of William
Blair and Shearman, and having deemed the terms of the merger to be advisable, fair to and in
the best interests of the Company and the unaffiliated stockholders, the members of the special
committee unanimously approved the terms of the merger agreement and the limited
guarantee and the transactions contemplated therein. Following the meeting of
the special committee, based upon the unanimous approval of the special
committee, our board of directors adopted resolutions approving the terms of the
merger agreement and the limited guarantee and the transactions contemplated
thereby, and resolutions recommending that the Companys stockholders vote to
approve the terms of the merger agreement. See
Special Factors Relating to
the MergerPurposes and Reasons of Our Board of Directors and Special Committee
for the Merger
and
Special Factors Relating to the
MergerRecommendation of Our Board of Directors and Special Committee; Reasons
for Recommending the Approval of the Merger Agreement; Fairness of the
Merger
below for a description of the resolutions of our board of directors
at this meeting.
23
On June 7, 2012, each of Mr. Xia and SAIF IV executed an equity
commitment letter in favor of Holdco. On the same day, the Rollover Holders,
Parent and Holdco executed two contribution agreements and the Rollover Holders
and Parent executed a voting agreement.
On June 8, 2012, Mr. Xia, on behalf of Parent and Merger Sub,
and Mr. Xingming Zhang, on behalf of the Company, executed the merger agreement.
On the same day, Mr. Xia and SAIF IV executed the limited guarantee in favor of
the Company, and Parent and CDB executed the facility agreement and the related
ancillary financing documents.
On June 8, 2012, prior to the commencement of trading on the
NASDAQ Global Market, the Company issued a press release announcing the
transaction and its entry into a definitive merger agreement.
Purposes and Reasons of Our Board of Directors and Special
Committee for the Merger
The special committee and our board of directors believe that,
as a privately-held entity, the Companys management may have greater
flexibility to focus on improving the Companys financial performance without
the constraints caused by the public equity markets valuation of the Company
and emphasis on short-term period-to-period performance. As a publicly-traded
entity, the Company faces pressure from public stockholders and investment
analysts to make decisions that might produce better short-term results, but
over the long term lead to a reduction in the per share price of the Companys
publicly traded common stock.
The special committee and our board of directors also believe
that it is appropriate for the Company to undertake the merger and terminate the
registration of the Company common stock at this time due to the high costs of
remaining a public company, including the cost of complying with the
Sarbanes-Oxley Act of 2002 and other U.S. federal securities laws. We estimate
such costs to be, on an annualized basis, approximately $330,000 for service
fees and expenses of public accountants (excluding fees and expenses relating to
the merger), approximately $150,000 for fees and expenses of U.S. securities
counsel (excluding fees and expenses relating to the merger) and $80,000 for
fees and expenses of the Companys investor relations firm (excluding fees and
expenses relating to the merger). These costs are ongoing, comprise a
significant element of our corporate overhead expense, and are difficult to
reduce. In addition to the direct out-of-pocket costs associated with SEC
reporting and compliance, the Companys management and accounting staff, which
comprises a handful of individuals, need to devote significant time to these
matters.
Furthermore, as an SEC-reporting company, the Company is
required to disclose a considerable amount of business information to the
public, some of which would be considered proprietary and would not be disclosed
by a non-reporting company. As a result, our actual or potential competitors,
customers, lenders and vendors all have ready access to this information which
potentially may help them compete against us or make it more difficult for us to
negotiate favorable terms with them, as the case may be.
The special committee and our board of
directors also believe that it is appropriate for the Company to undertake the
merger and terminate the registration at this time because the per share merger consideration of $5.80
represents a significant premium over recent market prices of the shares of
Company common stock.
24
Based on the foregoing considerations, each of the special
committee and our board of directors has concluded that it is more beneficial to
the Company to undertake the proposed merger and become a private company than
to remain a public company.
Recommendation of Our Board of Directors and Special
Committee; Reasons for Recommending the Approval of the Merger Agreement;
Fairness of the Merger
At a meeting on June 7, 2012, the special committee unanimously
recommended that our board of directors adopt resolutions that:
-
determine that the merger agreement, the limited guarantee and the
transactions contemplated by the merger agreement and the limited guarantee,
including the merger, advisable and fair to and in the best interests of the
Company and the unaffiliated stockholders;
-
approve in all respects, the form, terms, provisions and conditions of the
merger agreement and the limited guarantee, and the transactions contemplated
by the merger agreement and the limited guarantee, including the merger; and
-
submit the merger agreement to the stockholders of the Company for
approval at the meeting of the stockholders of the Company, and recommend that
the stockholders of the Company vote for the approval of the merger agreement
and the consummation of the transactions contemplated by the merger agreement,
including the merger.
On June 7, 2012, our board of directors unanimously adopted the
resolutions recommended by the special committee.
In the course of reaching their respective determinations, the
special committee and our board of directors considered the following
substantive factors and potential benefits of the merger, each of which the
special committee and our board of directors believed supported their respective
decisions, but which are not listed in any relative order of importance:
-
our board of directors knowledge of our business, financial condition,
results of operations, prospects and competitive position and its belief that
the merger is more favorable to our stockholders than any other alternative
reasonably available to the Company and our stockholders;
-
estimated forecasts of our future financial performance prepared by our
management, together with our managements view of our financial condition,
results of operations, business, prospects and competitive position;
-
the financing obtained by and the ability of the buyer group to consummate
the merger assuming the availability of such financing;
-
the all-cash merger consideration, which will allow the unaffiliated
stockholders to immediately realize a determinate value for their shares of
Company common stock and provide liquidity for their investment without
incurring brokerage and other costs typically associated with market sales;
-
the limited trading volume of our common stock on the NASDAQ Global
Market;
-
the current and historical market prices of the Company common stock,
including the fact that the per share merger consideration to be paid to the
unaffiliated stockholders represents a 12.6% premium to the closing price of
shares of Company common stock on February 17, 2012, the last trading day
prior to the Companys announcement on February 21, 2012 of the Companys
receipt of Mr. Xias going-private proposal and the fact that the per share
merger consideration to be paid to the unaffiliated stockholders in the merger
also represents a 52.6% premium over the 90-trading day volume weighted
average price as of February 17, 2012, the last trading day prior to the Companys announcement on February 21, 2012 of
the Companys receipt of Mr. Xias going- private proposal;
-
the stand alone value of the
Company on a going-forward basis, including the fact that the per share merger
consideration to be paid to the unaffiliated stockholders represents a premium
that compares favorably with such value;
25
-
the possibility that it could take a considerable period of time before
the trading price of the Company common stock would reach and sustain the
level of the per share merger consideration of $5.80, as adjusted for the time
value of money, and the possibility that such value might never be obtained,
particularly in light of:
-
our board of directors recognition of the challenges to our efforts to
increase stockholder value as an independent publicly traded company,
including competition we face from companies with substantially greater
resources than we currently have; and
-
the negative impact of the existence of the SEC investigation and the
heightened scrutiny by the SEC of certain PRC-based companies that had
initially been listed in the U.S. through reverse mergers on the trading price
of the Company common stock;
-
the negotiations with respect to the merger consideration and the special
committees determination that, following extensive negotiations with the
buyer group, $5.80 per share of Company common stock was the highest price
that the buyer group would agree to pay, with the special committee basing its
belief on a number of factors, including the duration and tenor of
negotiations and the experience of the special committee and its advisors;
-
the likelihood that the merger would be completed based on, among other
things (not in any order of importance):
-
the fact that Parent had obtained the signed facility agreement, the
limited number and nature of the conditions to the debt financing, the
reputation of the financing source and the obligation of Parent to use its
reasonable best efforts to obtain the debt financing, each of which, in the
reasonable judgment of the special committee, increases the likelihood of such
financing being completed;
-
the fact that Parent had obtained equity commitment letters from Mr. Xia
and SAIF IV, the limited number and nature of the conditions to the equity
financing, the reputation of the financing sources and the obligation of
Parent to use its reasonable best efforts to obtain the equity financing, each
of which, in the reasonable judgment of the special committee, increases the
likelihood of such financing being completed;
-
the absence of a financing condition in the merger agreement;
-
the likelihood and anticipated timing of completing the proposed merger in
light of the scope of the conditions to completion, including the absence of
significant required regulatory approvals; and
-
the fact the merger agreement provides that, in the event of a failure of
the merger to be consummated under certain circumstances, Parent will pay the
Company a termination fee of $2.8 million;
-
Mr. Xia has agreed to guarantee 70%, and SAIF IV has agreed to guarantee
30%, of the obligations of Parent under the merger agreement to pay, under
certain circumstances, a termination fee to the Company and reimburse certain
expenses of the Company;
-
the belief of the special committee that the terms of the merger
agreement, including the parties representations, warranties and covenants,
and the conditions to their respective obligations, are reasonable;
-
our ability, subject to compliance with the terms and conditions of the
merger agreement, to terminate the merger agreement prior to the receipt of
stockholders approval if our board of directors determines (upon recommendation of
the special committee) in its good faith judgment that failure to do so would
be inconsistent with its fiduciary duties;
26
-
our ability, subject to compliance with the terms and conditions of the
merger agreement, to terminate the merger agreement prior to the completion of
the merger in order to accept an alternative transaction proposed by a third
party that is a superior proposal (as defined in the merger agreement and
further explained under
The Merger AgreementAlternative Takeover
Proposals
below);
-
both the special committee and
our board of directors recognize that, under the terms of the merger
agreement, the Company has a period of 40 days to actively solicit competing
proposals for the Company and furthermore, that the Company has the ability
after such go-shop period to consider any acquisition proposal reasonably
likely to lead to a superior proposal until the date our stockholders vote
upon and approve the merger agreement;
-
our ability to obtain a
termination fee in the amount of $2.8 million, approximately 2% of the
enterprise value of the Company calculated based on the $5.80 per share merger
consideration, in the event the merger agreement is terminated by the Company
under certain circumstances. See
The Merger Agreement Termination Fees and
Reimbursement of Expenses
for additional information;
-
our requirement to pay Parent
a termination fee in connection with the termination of the merger agreement
under certain circumstances is limited to $1.5 million, approximately 1% of
the enterprise value of the Company calculated based on the $5.80 per share
merger consideration. See
The Merger Agreement Termination Fees and
Reimbursement of Expenses
for additional information;
-
our ability, under certain circumstances, to change, withhold, withdraw,
qualify or modify our recommendation that our stockholders vote to approve the
merger agreement; and
-
the financial analysis reviewed and discussed with the special committee
by representatives of William Blair, as well as the oral opinion of William
Blair rendered to the special committee on June 7, 2012 (which was confirmed
in writing by delivery of William Blairs written opinion dated the same date) as to
the fairness, from a financial point of view, to the unaffiliated stockholders of the $5.80 per share merger
consideration to be received by the unaffiliated stockholders in the merger,
as of June 7, 2012, based upon and subject to the assumptions made, procedures followed,
matters considered, and qualifications and limitations on the review undertaken by William Blair in preparing its opinion. See
Special Factors Relating to the MergerOpinion of William Blair,
Financial
Advisor to the Special Committee
for additional
information.
In addition, the special committee and our board of directors
believed that sufficient procedural safeguards were and are present to ensure
that the proposed merger, based upon the terms of the merger agreement, was
procedurally fair to the unaffiliated stockholders and to permit the special
committee and our board of directors to represent effectively the interests of
such unaffiliated stockholders. These procedural safeguards, which are not
listed in any order of importance, are discussed below:
-
in considering the transaction with the buyer group, the special committee
acted solely to represent the interests of the unaffiliated stockholders, and
the special committee had independent control of the extensive negotiations
with the buyer groups advisors on behalf of such stockholders;
-
all of the directors serving on the special committee during the entire
process are independent directors and free from any affiliation with any of
the buyer group. In addition, none of such directors is or ever was an
employee of the Company or any of its subsidiaries or affiliates;
-
other than their receipt of board and special committee compensation
(which are not contingent upon the consummation of the merger or the special
committees or boards recommendation of the merger) and their indemnification
and liability insurance rights under the merger agreement, members of the
special committee do not have interests in the merger different from, or in
addition to, those of the unaffiliated stockholders;
-
the consideration and negotiation of the merger agreement was conducted
entirely under the oversight of and controlled by the special committee, with
the advice and assistance of William Blair and Shearman as its financial and
legal advisors, respectively, reporting solely to the special committee;
-
the special committee was empowered to consider, attend to and take any
all actions in connection with the written proposal from Mr. Xia and the
transactions contemplated by the written proposal from the date the committee
was established, and no evaluation, negotiation, or response regarding the
transaction or any documentation in connection with the written proposal from
that date forward was considered by our board of directors for approval unless
the special committee had recommended such action to our board of directors;
27
-
the terms and conditions of the merger agreement were the product of extensive negotiations between the special committee and its advisors, on the one hand, and the buyer group and its advisors, on the other hand;
-
the special committee had the authority to reject the terms of any strategic transaction, including the merger;
-
the special committee met regularly to consider and review the proposed merger with advice from its advisors;
-
both the special committee and our board of directors recognize that either of them had any obligation to recommend the approval of any merger proposal from the buyer group or any other transaction;
-
both the special committee and our board of directors recognize that, under the terms of the merger agreement, the Company has a period of 40 days to actively solicit competing proposals for the Company and furthermore, that the Company has the
ability after such go-shop period to consider any acquisition proposal reasonably likely to lead to a superior proposal until the date our stockholders vote upon and approve the merger agreement; and
-
the Company may terminate the merger agreement in order to enter into an agreement relating to a superior proposal.
The special committee and the board of directors also considered a variety of potentially negative factors discussed below concerning the merger agreement and the merger, which are not listed in any relative order of importance:
-
the unaffiliated stockholders will have no ongoing equity participation in the Company following the merger, and they will cease to participate in our future earnings or growth, if any, or to benefit from increases, if any, in the value of the
shares of Company common stock, and will not participate in any potential future sale of the Company to a third party or any potential recapitalization of the Company which could include a dividend to stockholders;
-
due to the expressed unwillingness of Mr. Xia to sell his stake in the Company to a third party, the special committee recognized that it was possible that potential acquiror may be discouraged from making a bid for the Company;
-
due to the lack of a market
check, the special committee recognized that the opportunities are limited for a
potential acquiror to make a bid prior to the execution of the merger agreement;
-
the restrictions on the conduct of the Company’s business prior to the completion of the merger may delay or prevent the Company from undertaking business opportunities that may arise or any other action it would otherwise take with respect to
the operations of the Company pending completion of the merger;
-
since the Company became publicly listed on the NASDAQ Global Market, the highest historical closing price of our common stock exceeds the merger consideration offered to the unaffiliated stockholders;
-
the risks and costs to the Company if the merger does not close, including the diversion of management and employee attention, potential employee attrition and the potential disruptive effect on business and customer relationships;
-
the Company will be required to, under certain circumstances, pay Parent a termination fee of $1.5 million,
approximately 1% of the enterprise value of the Company calculated based on the
$5.80 per share merger consideration, in connection with the termination of the merger agreement;
-
the Companys remedy in the
event of breach of the merger agreement by Parent or Merger Sub is limited to
receipt of a termination fee of $2.8 million, approximately 2% of the enterprise
value of the Company calculated based on the $5.80 per share merger
consideration, and under certain circumstances the Company may not be entitled to a termination fee at
all;
28
-
the buyer group may have interests in the transaction that are different
from, or in addition to, those of the unaffiliated stockholder, see
Special Factors Relating to the MergerInterests of the
Companys
Directors and Officers in the Merger
for additional information;
-
the possibility that the merger might not be completed and the negative
impact of a public announcement of the merger on our sales and operating
results and our ability to attract and retain key management, marketing and
technical personnel;
-
the taxability of an all cash transaction to our unaffiliated stockholders
who are U.S. Holders (as defined below under
Material United States
Federal Income Tax Consequences
) for U.S. federal income tax purposes;
-
the possibility of the imposition of PRC or other foreign taxes in
connection with the merger; and
-
the possibility that Parent and Merger Sub may be unable or unwilling to
complete the merger, including if Parent and Merger Sub are unable to obtain
sufficient financing to complete the merger despite their compliance with
their financing obligations set forth in the merger agreement or if Parent and
Merger Sub choose not to complete despite the availability of financing.
The foregoing discussion of information and factors considered
by the special committee and our board of directors is not intended to be
exhaustive, but includes a number of the factors considered by the special
committee and our board of directors. In view of the wide variety of factors
considered by the special committee and our board of directors, neither the
special committee nor our board of directors found it practicable to, and
neither did quantify or otherwise assign relative weights to the foregoing
factors in reaching its conclusion. In addition, individual members of the
special committee and our board of directors may have given different weights to
different factors and may have viewed some factors more positively or negatively
than others. The special committee recommended that our board of directors
approve, and our board of directors approved, the merger agreement based upon
the totality of the information presented to and considered by it.
In reaching its determination that the merger agreement and the
transactions contemplated thereby, including the merger, are advisable, fair to
and in the best interests to the Company and the unaffiliated stockholders and
its decision to approve the merger agreement and recommend the approval of the
merger agreement by our stockholders, our board of directors considered the
analysis and recommendation of the special committee and the factors examined by
the special committee as described above under the captions
Special Factors
Relating to the MergerPurposes and Reasons of Our Board of Directors and
Special Committee for the Merger
and
Special Factors Relating to the
MergerRecommendation of Our Board of Directors and Special Committee; Reasons
for Recommending the Approval of the Merger Agreement; Fairness of the
Merger
, and adopted such recommendations and analysis. For the foregoing
reasons, our board of directors believes that the merger agreement and the
transactions contemplated thereby are fair to the unaffiliated stockholders.
Our board of directors recommends that you vote FOR
approval of the merger agreement, and FOR the proposal to approve the
adjournment of the special meeting, if necessary or appropriate, to solicit
additional proxies if there are insufficient votes at the time of the special
meeting to approve the merger agreement.
Opinion of William Blair, Financial Advisor to the Special
Committee
William Blair was retained to act as financial advisor to the
special committee in connection with the proposed merger. As part of its
engagement, William Blair was asked by the special committee to render an
opinion to the special committee as to whether the per share merger
consideration to be received by the unaffiliated stockholders was fair to the
unaffiliated stockholders, from a financial point of view. On June 7, 2012,
William Blair rendered its oral opinion to the special committee and
subsequently confirmed in writing, as to the fairness, from a financial point of
view, as of that date and based upon and subject to the assumptions made,
procedures followed, matters considered, and
qualifications and limitations on the review undertaken stated in its opinion, of the per share merger
consideration to be received by the unaffiliated stockholders.
William Blair provided its opinion for the information and
assistance of the special committee in connection with its consideration of the
proposed merger. William Blairs opinion was one of many factors taken into account by the special committee in making its
determination to recommend that our board of directors approve the proposed
merger. The terms of the merger agreement and the amount and form of the
consideration to be paid pursuant to the merger agreement, however, were
determined through negotiations between the special committee and the buyer
group and were recommended by the special committee for approval by the board of
directors. William Blair did not recommend any specific consideration to us, the
special committee or the board of directors or that any specific consideration
constituted the only appropriate consideration for the proposed merger.
29
The full text of William Blairs written opinion, dated June
7, 2012, is attached as Annex C to this proxy statement and incorporated herein
by reference. You are urged to read the entire opinion carefully and in its
entirety to learn about the assumptions made, procedures followed, matters
considered and limits on the scope of the review undertaken by William Blair in
rendering its opinion. The analysis performed by William Blair should be viewed
in its entirety; none of the methods of analysis should be viewed in isolation.
William Blairs opinion was directed to the special committee for its benefit
and use in evaluating the fairness of the per share merger consideration to be
received pursuant to the merger agreement and relates only to the fairness, as
of the date of the opinion and from a financial point of view, of the per share
merger consideration to be received by the unaffiliated stockholders in the
proposed merger pursuant to the merger agreement, does not address any other
aspects of the proposed merger or any related transaction, and does not
constitute a recommendation to any stockholder of the Company as to how that
stockholder should vote with respect to the merger agreement or the proposed
merger. William Blair did not address the merits of the underlying decision by
the Company to engage in the proposed merger.
In connection with its opinion, William Blair examined or
discussed, among other things:
-
a draft of the merger agreement sent to William Blair on June 6, 2012;
-
certain audited historical financial statements of the Company for the
years ended December 31, 2009 through December 31, 2011;
-
the unaudited financial statements of the Company for the three month
periods ended March 31, 2011 and March 31, 2012;
-
certain internal business, operating and financial information and
forecasts of the Company for the fiscal years ending December 31, 2012 through
2016 prepared by the senior management of the Company (the
forecasts
);
-
information regarding publicly available financial terms of certain other
business combinations that William Blair deemed relevant;
-
the financial position and operating results of the Company compared with
those of certain other publicly traded companies that William Blair deemed
relevant;
-
current and historical market prices and trading volumes of the Company
common stock; and
-
certain other publicly available information about the Company and the
industry in which it operates.
William Blair also held discussions with certain members of our
senior management to discuss the foregoing, considered other matters which it
deemed relevant to its inquiry, and took into account those accepted financial
and investment banking procedures and considerations that it deemed relevant.
30
In rendering its opinion, William Blair assumed and relied,
without independent verification, upon the accuracy and completeness of all the
information examined by or otherwise reviewed or discussed with William Blair
for purposes of the opinion including, without limitation, the forecasts
provided by the senior management of the Company. William Blair did not make or
obtain an independent valuation or appraisal of the assets, liabilities or
solvency of the Company. William Blair was advised by the senior management of
the Company that the forecasts were reasonably prepared on bases reflecting the
best estimates then available to, and judgments of, the senior management of the
Company. In that regard, William Blair assumed, with the consent of the senior
management of the Company, that (a) the forecasts would be achieved in the
amounts and at the times contemplated thereby and (b) all of the material assets and liabilities (contingent or
otherwise) of the Company were as set forth in the Companys financial
statements or other information made available to William Blair. William Blair
expressed no opinion with respect to the forecasts or the estimates and
judgments on which they were based. William Blair assumed, at the direction of
the senior management of the Company, that the final executed merger agreement
would not differ in any material respect from the draft of the merger agreement
William Blair reviewed. William Blair did not consider and expressed no opinion
as to the amount or nature of the compensation of any of the Companys officers,
directors or employees (or any class of such persons) relative to the per share
merger consideration to be received by the unaffiliated stockholders. William
Blair was not asked to consider, and its opinion did not address, the relative
merits of the proposed merger as compared to any alternative business strategies
that might have existed for the Company or the effect of any other transaction
in which the Company might have engaged. William Blairs opinion was based upon
economic, market, financial and other conditions existing on, and other
information disclosed to William Blair, as of the date of its opinion. Although
subsequent developments may affect its opinion, William Blair does not have any
obligation to update, revise or reaffirm its opinion. William Blair is a
financial advisor only and relied upon, without independent verification, the
assessment of the Company and its counsel and accountants for legal, accounting,
tax and regulatory matters and William Blair expressed no opinion as to any of
such advice. William Blair assumed that the proposed merger would be consummated
on the terms described in the merger agreement, without any amendment,
modification or waiver of any material terms or conditions. As of the date of
its opinion, William Blair did not seek alternative participants for the
proposed merger.
William Blairs investment banking services and its opinion
were provided for the use and benefit of the special committee in connection
with its consideration of the proposed merger. William Blairs opinion was
limited to the fairness, from a financial point of view, to the unaffiliated
stockholders of the per share merger consideration to be received by such
stockholders in the proposed merger pursuant to the merger agreement, and
William Blair did not address the merits of the underlying decision of the
special committee to recommend that our board of directors engage in the
proposed merger or of the board of directors to engage in the proposed merger
and its opinion did not constitute a recommendation to the special committee,
the board of directors or any stockholder of the Company as to how such person
should act or vote with respect to the proposed merger.
The following is a summary of the material financial analyses
performed and material factors considered by William Blair to arrive at its
opinion. William Blair performed certain procedures, including each of the
financial analyses described below, and reviewed with the special committee the
assumptions upon which such analyses were based, as well as other factors.
Although the summary does not purport to describe all of the analyses performed
or factors considered by William Blair in this regard, it does set forth those
considered by William Blair to be material in arriving at its opinion. The
financial analyses summarized below include information presented in tabular
format. In order to understand fully the financial analyses performed by William
Blair, the tables must be read together with the text of each summary. The
tables alone do not constitute a complete description of the financial analyses
performed by William Blair. Considering the data set forth in the tables below
without considering the full narrative description of the financial analyses,
including the methodologies and assumptions underlying the analyses, could
create a misleading or incomplete view of the financial analyses performed by
William Blair. The order of the summaries of the analyses described below does
not represent the relative importance or weight given to those analyses by
William Blair.
The analyses performed by William Blair are based on the
financial results of the Company as reported in its SEC filings for the fiscal
year ended December 31, 2011, the three month periods ended March 31, 2011 and
2012 and the financial projections of the Company for the fiscal years 2012
through 2016.
Selected Public Company Analysis
William Blair reviewed and compared certain financial
information relating to us to corresponding financial information, ratios and
public market multiples for certain publicly traded companies that William Blair
deemed relevant. Among the factors William Blair considered to select these
companies were nationality of its domicile, exchange on which the company was
trading, method with which it achieved its listing, size of market
capitalization, size of revenue, profitability, publicly available Wall Street
analysts estimates, product and service offering and business model. No
companies that met this criteria were excluded. Among the information William
Blair considered was revenue, earnings before interest, taxes, depreciation and
amortization (
EBITDA
), and earnings per share (
EPS
). William
Blair considered the enterprise value as a multiple of revenue and EBITDA for
each company for the latest twelve months (
LTM
) for which results were
publicly available and as a multiple of calendar year revenue and EBITDA estimates for 2012 and 2013
and the stock price of common equity as a multiple of EPS for each company for
the LTM for which results were publicly available and as a multiple for the
calendar year EPS estimates for 2012 and 2013. The operating results and the
corresponding derived multiples for us and each of the selected public companies
were based on each companys most recent publicly available financial
information, closing share prices as of June 5, 2012 and consensus Wall Street
analysts estimates for calendar years 2012 and 2013, as well as, for the
Company only, the Companys senior managements estimate of revenue, EBITDA and
EPS for 2012 and 2013.
31
William Blair then used the implied enterprise value to derive
implied valuation multiples for the Company based on revenue, EBITDA and
price/earnings (
P/E
) results, for LTM as of March 31, 2012 and
estimates for fiscal years 2012 and 2013.
William Blair then compared the multiples implied for us based
on the terms of the proposed merger to the range of trading multiples for the
selected public companies. The table below sets forth a summary of relevant
information reviewed by William Blair for conducting its selected public company
analysis. Information for each of the selected public companies was based on
each companys most recent publicly available financial information and closing
share prices as of June 5, 2012.
|
|
Market
|
|
|
LTM
|
|
|
LTM
|
|
|
|
Capitalization
|
|
|
Revenue
|
|
|
EBITDA
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|
U.S. Listed Other
Companies
|
|
|
|
|
|
|
|
|
|
AutoNavi Holdings Limited
|
$
|
529.7
|
|
$
|
137.2
|
|
$
|
44.7
|
|
China Information Technology, Inc.
|
$
|
25.9
|
|
$
|
103.9
|
|
$
|
10.5
|
|
Federal Signal Corp.
|
$
|
281.7
|
|
$
|
846.6
|
|
$
|
56.7
|
|
Hollysys Automation Technologies, Ltd.
|
$
|
460.9
|
|
$
|
305.4
|
|
$
|
63.2
|
|
Image Sensing Systems, Inc.
|
$
|
25.4
|
|
$
|
29.6
|
|
$
|
1.2
|
|
U.S. Listed Reverse
Takeover Chinese Companies
|
|
|
|
|
|
|
|
|
|
China Recycling Energy Corporation
|
$
|
52.5
|
|
$
|
19.9
|
|
$
|
23.4
|
|
China Shengda Packaging Group Inc.
|
$
|
27.9
|
|
$
|
125.5
|
|
$
|
13.1
|
|
China Valves Technology, Inc.
|
$
|
48.4
|
|
$
|
213.6
|
|
$
|
48.2
|
|
Deer Consumer Products, Inc.
|
$
|
94.4
|
|
$
|
241.9
|
|
$
|
55.6
|
|
Feihe International, Inc.
|
$
|
91.7
|
|
$
|
288.2
|
|
$
|
21.3
|
|
SORL Auto Parts, Inc.
|
$
|
53.3
|
|
$
|
209.4
|
|
$
|
27.6
|
|
Although William Blair compared the trading multiples of the
selected public companies to those implied for the Company, none of the selected
public companies is identical or directly comparable to the Company.
Accordingly, any analysis of the selected publicly traded companies necessarily
involved complex considerations and judgments concerning the differences in
financial and operating characteristics and other factors that would necessarily
affect the analysis of trading multiples of the selected publicly traded
companies. Information regarding the multiples derived from William Blairs
selected public company analysis is set forth in the following table.
|
|
Proposed
|
|
|
Selected
Companies
|
|
|
|
Transaction
|
|
|
Valuation Multiples
|
|
|
|
Multiples
|
|
|
Min
|
|
|
Median
|
|
|
Mean
|
|
|
Max
|
|
Enterprise Value / LTM
Revenue
|
|
0.96x
|
|
|
0.20x
|
|
|
0.60x
|
|
|
1.14x
|
|
|
5.31x
|
|
Enterprise Value / 2012E Revenue
|
|
0.85x
|
|
|
0.18x
|
|
|
0.64x
|
|
|
0.84x
|
|
|
2.12x
|
|
Enterprise Value / 2013E
Revenue
|
|
0.82x
|
|
|
0.29x
|
|
|
0.61x
|
|
|
0.79x
|
|
|
1.79x
|
|
Enterprise Value / LTM EBITDA
|
|
9.5x
|
|
|
0.9x
|
|
|
5.9x
|
|
|
5.8x
|
|
|
14.0x
|
|
Enterprise Value / 2012E
EBITDA
|
|
8.2x
|
|
|
0.7x
|
|
|
3.7x
|
|
|
3.8x
|
|
|
6.7x
|
|
Enterprise Value / 2013E EBITDA
|
|
7.6x
|
|
|
3.0x
|
|
|
4.1x
|
|
|
4.2x
|
|
|
5.5x
|
|
LTM P/E
|
|
11.1x
|
|
|
1.5x
|
|
|
3.7x
|
|
|
6.2x
|
|
|
15.1x
|
|
2012E P/E
|
|
11.3x
|
|
|
1.1x
|
|
|
6.0x
|
|
|
6.8x
|
|
|
12.9x
|
|
2013E P/E
|
|
10.8x
|
|
|
2.6x
|
|
|
8.5x
|
|
|
7.7x
|
|
|
10.3x
|
|
32
The special committee noted that the implied multiples for the
proposed merger were within or above the range of multiples for the selected
public companies.
Selected Transactions Analysis
William Blair performed an analysis of selected precedent
transactions consisting of transactions announced since January 1, 2005 and
focused primarily on target companies that it deemed relevant. Among the factors
William Blair considered to select these transactions were announcement date,
status of completion, the target companys industry, the size of the target
company, and the target companys product and service offering.
No transactions that met this criteria were excluded. William
Blair did not take into account any announced transactions that were
subsequently abandoned or otherwise not consummated. William Blairs analysis
was based solely on publicly available information regarding such transactions.
The selected transactions were not intended to be representative of the entire
range of possible transactions in the respective industries. The table below
sets forth a summary of relevant information reviewed by William Blair for its
selected transactions analysis.
Announced
|
|
Target
|
|
|
|
|
|
Enterprise
|
|
|
EV/LTM
|
|
|
EV/LTM
|
|
|
|
|
Date
|
|
Company
|
|
|
Bidder
|
|
|
Value
|
|
|
Revenue
|
|
|
EBITDA
|
|
|
P/E
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
|
3/14/2012
|
|
China Information
Technology, Inc.
|
|
|
Jiang Huai Lin
|
|
$
|
81.3
|
|
|
0.71x
|
|
|
3.7x
|
|
|
4.1x
|
|
1/28/2011
|
|
China Security & Surveillance
Technology
|
|
|
Al Faisal Holding Co.
|
|
$
|
783.7
|
|
|
1.14x
|
|
|
6.7x
|
|
|
6.9x
|
|
1/18/2011
|
|
China ITS (Holdings)
Co., Ltd.
|
|
|
C&C Pacific
Capital Limited
|
|
$
|
949.7
|
|
|
3.37x
|
|
|
16.0x
|
|
|
21.7x
|
|
5/27/2010
|
|
Petards Group PLC
|
|
|
Water Hill Group plc
|
|
$
|
7.8
|
|
|
0.30x
|
|
|
2.9x
|
|
|
3.7x
|
|
5/12/2010
|
|
Cybertech Systems
and Software Ltd.
|
|
|
Viswanath Tadimety
|
|
$
|
5.6
|
|
|
0.50x
|
|
|
4.9x
|
|
|
14.5x
|
|
4/3/2007
|
|
Industronics Bhd
|
|
|
Chan Sing Pong
|
|
$
|
10.0
|
|
|
0.47x
|
|
|
2.5x
|
|
|
16.1x
|
|
12/8/2006
|
|
Stratech Systems
Ltd.
|
|
|
Transpac Capital Pte
Ltd.
|
|
$
|
8.1
|
|
|
1.23x
|
|
|
NM
|
|
|
NM
|
|
William Blair reviewed the consideration paid in the selected
transactions in terms of the enterprise value of the target as a multiple of its
revenue, EBITDA and P/E for the LTM prior to the announcement of the respective
transaction. William Blair compared the resulting range of transaction multiples
of revenue, EBITDA and P/E for the selected transactions to the implied
transaction multiples of LTM revenue, EBITDA and P/E for us based on the terms
of the proposed merger. Information regarding the manner in which William Blair
derived the implied transaction multiple for the Company and the underlying
financial information used in that analysis is set forth above. Information
regarding the multiples from William Blairs analysis of the selected
transactions is set forth in the following table:
|
|
Proposed
|
|
|
M&A Transactions
|
|
|
|
Transaction
|
|
|
Valuation Multiples
|
|
Multiple
|
|
Multiples
|
|
|
Min
|
|
|
Median
|
|
|
Mean
|
|
|
Max
|
|
Enterprise Value / LTM Revenue
|
|
0.96x
|
|
|
0.30x
|
|
|
0.71x
|
|
|
1.10x
|
|
|
3.37x
|
|
Enterprise Value / LTM EBITDA
|
|
9.5x
|
|
|
2.5x
|
|
|
4.3x
|
|
|
6.1x
|
|
|
16.0x
|
|
P/E
|
|
11.1x
|
|
|
3.7x
|
|
|
10.7x
|
|
|
11.2x
|
|
|
21.7x
|
|
Although William Blair analyzed the multiples implied by the
selected transactions and compared them to the implied transaction multiples of
us, none of these transactions or associated companies is identical or directly
comparable to the proposed merger or us. Accordingly, this involved complex
considerations and judgments concerning the differences in financial and
operating characteristics, parties involved and terms of their transactions and
other factors therein.
33
The special committee noted that the implied multiples for the
proposed merger were within the range of multiples for the selected
transactions.
Discounted Cash Flow Analysis
William Blair utilized the forecasts to perform a discounted
cash flow analysis to estimate the present value as of March 31, 2012 of the
Companys forecasted free cash flows through the fiscal year ending December 31,
2016. William Blair calculated the assumed terminal value of the enterprise at
December 31, 2016 by multiplying projected EBITDA in the fiscal year ending
December 31, 2016 by multiples ranging from 5.0x to 7.0x. William Blair selected
the range of 5.0x to 7.0x based on an approximate range around the average
enterprise value to LTM EBITDA multiple derived for the transactions used in the
Selected Transactions Analysis described above.
To discount the projected free cash flows and assumed terminal
value to present value, William Blair used discount rates ranging from 19% to
25%. The discount rates were selected by William Blair based on the weighted
average cost of capital for the public companies used in the Selected Public
Company Analysis described above. To determine the range of fully diluted
implied equity value per share for us, William Blair subtracted net debt as of
March 31, 2012. William Blair then divided this result by the total Shares
outstanding and in-the-money options as of June 6, 2012, which were
approximately 25.6 million Shares. The fully diluted equity value implied by the
discounted cash flow analysis ranged from $1.57 per Share to $3.01 per Share,
based on a range of terminal values derived by multiples of EBITDA, as compared
to the per share merger consideration in the proposed merger.
|
|
Exit Multiple
|
Discount Rate
|
|
5.0x
|
6.0x
|
7.0x
|
19.0%
|
|
$2.04
|
$2.52
|
$3.01
|
20.5%
|
|
$1.91
|
$2.36
|
$2.82
|
22.0%
|
|
$1.79
|
$2.21
|
$2.64
|
23.5%
|
|
$1.67
|
$2.08
|
$2.48
|
25.0%
|
|
$1.57
|
$1.95
|
$2.33
|
The special committee noted that the per share merger
consideration in the proposed merger exceeded the per share price range of the
fully diluted equity value derived by this analysis.
Leveraged Buyout Analysis
Based on the forecasts provided by the senior management of the
Company for fiscal years 2012 through 2016, William Blair performed a leveraged
acquisition analysis to determine, based on the Companys ability to service a
given level of debt using its projected future earnings stream and corresponding
cash flows, an estimate of a theoretical purchase price that could be paid by a
hypothetical financial sponsor in an acquisition of the Company, assuming such
transaction was financed on customary market terms and assuming that such
financial buyer will seek to realize a return on its investment in 2016.
Estimated exit values were calculated by applying a range of exit value
multiples from 5.0x to 7.0x of 2016 estimated EBITDA, which exit value multiples
were determined based on an approximate range around the average enterprise
value to LTM EBITDA multiple derived for the transactions used in the Selected
Transactions Analysis described above. William Blair then derived a range of
theoretical purchase prices based on assumed required internal rates of return
for a buyer between 20% and 30%, which range of percentages was, in William
Blairs professional judgment, generally reflective of the range of required
internal rates of return commonly assumed when performing a leveraged
acquisition analysis of this type. This analysis indicated an implied per share
equity reference range of $2.42 to $3.60 as compared to the per share merger
consideration of $5.80.
The special committee noted that the per share merger
consideration was above the per share equity reference range implied by the
leveraged acquisition analysis.
Premiums Paid Analysis
William Blair reviewed data from 541 acquisitions of publicly
traded companies, in which 100% of the targets equity was acquired for cash,
announced between January 1, 2006 and June 6, 2012 and with transaction values
between $100 million and $500 million. William Blair did not exclude any
transactions from this range. Specifically, William Blair analyzed the
acquisition price per share as a premium to the closing share price one day, one
month, 90 days, 180 days and 270 days prior to the announcement of the
transaction, for all 541 transactions. William Blair compared the range of
resulting per Share stock price premiums for the reviewed transactions to the
premiums implied by the proposed merger based on our Share prices one day, one
month, 90 days, 180 days and 270 days prior to February 21, 2012. Information
regarding the premiums from William Blairs analysis of selected transactions is
set forth in the following table:
34
|
|
|
|
|
Implied
|
|
|
|
|
Premium
|
|
|
|
|
Company
|
|
|
|
|
Period
|
|
Company
|
|
|
Premium
|
|
|
|
|
Before
|
|
Share
|
|
|
at $5.80 /
|
|
|
Premiums Paid Percentage Data by
Percentile
|
|
Announcement
|
|
Price
|
|
|
Share
|
|
|
10
th
|
|
|
20
th
|
|
|
30
th
|
|
|
40
th
|
|
|
50
th
|
|
|
60
th
|
|
|
70
th
|
|
|
80
th
|
|
|
90
th
|
|
One Day Prior
|
$
|
5.15
|
|
|
12.6%
|
|
|
4.3%
|
|
|
10.4%
|
|
|
15.4%
|
|
|
21.2%
|
|
|
27.6%
|
|
|
32.5%
|
|
|
39.0%
|
|
|
54.2%
|
|
|
74.7%
|
|
One Month Prior
|
$
|
4.71
|
|
|
23.1%
|
|
|
6.9%
|
|
|
16.5%
|
|
|
22.5%
|
|
|
28.9%
|
|
|
34.5%
|
|
|
40.4%
|
|
|
47.6%
|
|
|
59.7%
|
|
|
81.9%
|
|
90 Days Prior
|
$
|
3.41
|
|
|
70.1%
|
|
|
7.4%
|
|
|
20.0%
|
|
|
25.1%
|
|
|
33.8%
|
|
|
45.1%
|
|
|
52.9%
|
|
|
60.9%
|
|
|
78.7%
|
|
|
112.9%
|
|
180 Days Prior
|
$
|
3.00
|
|
|
93.3%
|
|
|
4.8%
|
|
|
19.7%
|
|
|
23.6%
|
|
|
34.8%
|
|
|
49.7%
|
|
|
62.7%
|
|
|
74.8%
|
|
|
92.2%
|
|
|
138.0%
|
|
270 Days Prior
|
$
|
4.50
|
|
|
28.9%
|
|
|
3.9%
|
|
|
16.0%
|
|
|
26.1%
|
|
|
32.9%
|
|
|
42.6%
|
|
|
52.4%
|
|
|
67.0%
|
|
|
99.6%
|
|
|
148.9%
|
|
The special committee noted that the premiums implied by the
transaction exceeded the 20th percentile one day prior to the announcement,
exceeded the 30th percentile one month prior to the announcement, exceeded the
70th percentile 90 days prior to the announcement, exceeded the 80th percentile
180 days prior to the announcement, and exceeded the 30th percentile 270 days
prior to the announcement.
General
This summary is not a complete description of the analysis
performed by William Blair but contains the material elements of the analysis.
The preparation of an opinion regarding fairness is a complex process involving
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of those methods to the particular
circumstances, and, therefore, such an opinion is not readily susceptible to
partial analysis or summary description. The preparation of an opinion regarding
fairness does not involve a mathematical evaluation or weighing of the results
of the individual analyses performed, but requires William Blair to exercise its
professional judgment, based on its experience and expertise, in considering a
wide variety of analyses taken as a whole. Each of the analyses conducted by
William Blair was carried out in order to provide a different perspective on the
financial terms of the proposed merger and add to the total mix of information
available. The analyses were prepared solely for the purpose of William Blair
providing its opinion and do not purport to be appraisals or necessarily reflect
the prices at which securities actually may be sold. William Blair did not form
a conclusion as to whether any individual analysis, considered in isolation,
supported or failed to support an opinion about the fairness of the per share
merger consideration to be received by the unaffiliated stockholders. Rather, in
rendering its oral opinion (subsequently confirmed in writing) on June 7, 2012
to the special committee as of that date and based upon and subject to the
assumptions, qualifications and limitations stated in its written opinion, as to
the fairness, from a financial point of view, to the unaffiliated stockholders
of the per share merger consideration to be received by such stockholders,
William Blair considered the results of the analyses in light of each other and
ultimately reached its opinion based on the results of all analyses taken as a
whole. William Blair did not place particular reliance or weight on any
particular analysis, but instead concluded that its analyses, taken as a whole,
supported its determination. Accordingly, notwithstanding the separate factors
summarized above, William Blair believes that its analyses must be considered as
a whole and that selecting portions of its analyses and the factors considered
by it, without considering all analyses and factors, may create an incomplete
view of the evaluation process underlying its opinion. No company or transaction
used in the above analyses as a comparison is identical or directly comparable
to the Company or the proposed merger. In performing its analyses, William Blair
made numerous assumptions with respect to industry performance, business and
economic conditions and other matters. The analyses performed by William Blair
are not necessarily indicative of future actual values and future results, which
may be significantly more or less favorable than suggested by such analyses.
William Blair is an internationally recognized firm and, as
part of its investment banking activities, is regularly engaged in the valuation
of businesses and their securities in connection with merger transactions and
other types of strategic combinations and acquisitions. Furthermore, in the
ordinary course of business, William Blair and its affiliates may beneficially
own or actively trade the Companys securities for its own account and for the
accounts of customers, and, accordingly, may at any time hold a long or short
position in such securities.
35
The special committee hired William Blair based on its
qualifications and expertise in providing financial advice to companies and its
reputation as an internationally recognized investment banking firm. Pursuant to
a letter agreement dated March 13, 2012, a fee of $50,000 was paid to William
Blair upon execution of that letter agreement, a fee of $650,000 became payable
to William Blair upon delivery of its opinion, and a fee of $100,000 is payable
to William Blair upon stockholders approval of the merger. In addition, we have
agreed to reimburse William Blair for certain of its out-of-pocket expenses
(including fees and expenses of its counsel) reasonably incurred by it in
connection with its services and will indemnify William Blair against potential
liabilities arising out of its engagement, including certain liabilities under
the U.S. federal securities laws.
Purposes and Reasons of the Buyer Group for the Merger
Under SEC rules governing going-private transactions, each
member of the buyer group may be deemed to be an affiliate of the Company and
required to express its reasons for the merger to the unaffiliated stockholders.
Each member of the buyer group is making the statements included in this section
solely for the purpose of complying with the requirements of Rule 13e-3 and
related rules under the Exchange Act. For the buyer group, the purpose of the
merger is to enable Parent to acquire control of the Company, in a transaction
in which the unaffiliated stockholders will receive $5.80 per share of Company
common stock. After shares of Company common stock cease to be publicly traded,
Parent will bear 100% of the rewards and risks of ownership of the Company. In
addition, the merger will allow the buyer group to maintain their investment in
the Company through their respective equity investments in Parent as described
in this proxy statement under the section captioned
Special Factors Relating
to the MergerFinancing of the MergerRollover Financing
, and at the same
time enable Mr. Xia to maintain a leadership role with the surviving
corporation.
The buyer group believes that, after the Company becomes a
privately-held entity, the Companys management will have greater flexibility to
focus on improving the Companys long-term profitability without the constraints
caused by the public equity markets valuation of the Company and emphasis on
short-term period-to-period performance. As a privately-held entity, the Company
will have greater flexibility to make decisions that might negatively affect
short-term results but that could increase the Companys value over the long
term. In contrast, as a publicly-traded entity, the Company faces pressure from
public stockholders and investment analysts to make decisions that might produce
improved short-term results, but which are not necessarily beneficial in the
long term.
As a privately-held entity, the Company will be relieved of
many of the other expenses, burdens and constraints imposed on companies that
are subject to the public reporting requirements under the federal securities
laws of the United States, including the Exchange Act and Sarbanes-Oxley Act of
2002. The need for the management of the Company to be responsive to the
concerns of the unaffiliated stockholders and to engage in dialogue with the
unaffiliated stockholders can also at times distract managements time and
attention from the effective operation and improvement of the business. See
Special Factors Relating to the MergerPurposes and Reasons of Our Board of
Directors and Special Committee for the Merger
and
Special Factors
Relating to the MergerRecommendation of Our Board of Directors and Special
Committee; Reasons for Recommending the Approval of the Merger Agreement;
Fairness of the Merger
.
The buyer group decided to undertake the going-private
transaction at this time because it wants to take advantage of the benefits of
the Company being a privately-held company as described above and because Holdco
and Parent were able to obtain debt and equity financing commitment from CDB,
Mr. Xia and SAIF IV, in each case on terms satisfactory to the buyer group.
Positions of the Buyer Group Regarding the Fairness of the
Merger
Under SEC rules governing going-private transactions, each
member of the buyer group may be deemed to be an affiliate of the Company and
required to express its beliefs as to the fairness of the proposed merger to the
unaffiliated stockholders. The buyer group is making the statements included in
this section solely for the purposes of complying with the requirements of Rule
13e-3 and related rules under the Exchange Act. The views of the buyer group as
to the fairness of the proposed merger are not intended and should not be
construed as a recommendation to any stockholder of the Company as to how to
vote on the proposal to approve the merger agreement. The buyer group has
interests in the merger that are different from those of the other stockholders
of the Company by virtue of their continuing interests in the surviving company
after the consummation of the merger. These interests are described under
Special Factors Relating to the
MergerInterests of the Company's Directors and Officers in the Merger
of
this proxy statement.
36
The buyer group believes the interests of the unaffiliated
stockholders were represented by the special committee, which negotiated the
terms and conditions of the merger agreement with the assistance of its
independent legal and financial advisors. The buyer group attempted to negotiate
a transaction that would be most favorable to them, and not to the unaffiliated
stockholders and, accordingly, did not negotiate the merger agreement with a
goal of obtaining terms that were substantively and procedurally fair to such
unaffiliated stockholders. The buyer group did not participate in the
deliberations of the special committee regarding, and did not receive any advice
from the special committees independent legal or financial advisors as to, the
fairness of the proposed merger to the unaffiliated stockholders. The buyer
group did not perform, or engage a financial advisor to perform, any independent
valuation or other analysis for the buyer group to assist them in assessing the
substantive and procedural fairness of the proposed merger to the unaffiliated
stockholders.
Based on their knowledge and analysis of available information
regarding the Company, as well as discussions with the Companys senior
management regarding the Company and its business and the factors considered by,
and findings of, the special committee and the Companys board of directors
discussed in
Special Factors Relating to the MergerPurposes and Reasons of
Our Board of Directors and Special Committee for the Merger
and
Special
Factors Relating to the MergerRecommendation of Our Board of Directors and
Special Committee; Reasons for Recommending the Approval of the Merger
Agreement; Fairness of the Merger
of this proxy statement (which
considerations and findings are adopted by the buyer group solely for the
purposes of making the statements in this section), the buyer group believes the
proposed merger is substantively fair to the unaffiliated stockholders based
upon the following factors:
-
the current and historical market prices of the Company common stock,
including the fact that the per share merger consideration to be paid to the
unaffiliated stockholders represents a 12.6% premium to the closing price of
shares of Company common stock on February 17, 2012, the last trading day
prior to the Companys announcement on February 21, 2012 of the Companys
receipt of Mr. Xias going- private proposal and the fact that the per share
merger consideration to be paid to the unaffiliated stockholders in the merger
also represents a 52.6% premium over the 90-trading day volume weighted
average price as of February 17, 2012, the last trading day prior to the
Companys announcement on February 21, 2012 of the Companys receipt of Mr.
Xias going-private proposal;
-
the Company common stock traded as high as $5.20 per share and as low as
$2.07 per share during the 52-week period prior to the announcement of the
execution of the merger agreement;
-
the merger consideration of $5.80 per share is payable entirely in cash,
thus allowing the unaffiliated stockholders to realize liquidity and a
determined value for their investment;
-
the members of the special committee are not officers or employees of the
Company and do not have any interests in the proposed merger different from,
or in addition to, those of the unaffiliated stockholders, other than the
members receipt of board and special committee compensation (which are not
contingent upon the consummation of the proposed merger or the special
committees or the boards recommendation of the proposed merger) and their
indemnification and liability insurance rights under the merger agreement;
-
the special committee and, based in part upon the unanimous recommendation
of the special committee, the Companys board of directors unanimously
determined that the merger agreement and the transactions contemplated by the
merger agreement, including the proposed merger, are advisable, fair to and in
the best interests of the Company and the unaffiliated stockholders;
-
the proposed merger is not conditioned on any financing being obtained by
Parent or Merger Sub, thus increasing the likelihood that the proposed merger
will be consummated and the merger consideration will be paid to the
unaffiliated stockholders;
-
Parent has entered into a facility agreement with CDB, pursuant to which
CDB has agreed to provide debt financing, on the terms and conditions set
forth in the facility agreement, in an aggregate amount up to $96 million, to fund the merger and pay
certain fees and expenses contemplated by the facility agreement and the
merger agreement;
37
-
SAIF IV has entered into an equity commitment letter pursuant to which it
will purchase or cause certain funds and/or entities that it manages or
advises to purchase preference shares of Holdco, on terms and conditions set
forth in the equity commitment letter, for an aggregate amount of $11,552,446,
which will be used to fund the merger and pay certain fees and expenses
contemplated by the merger agreement;
-
Mr. Xia has entered into an equity commitment letter pursuant to which he
will purchase or cause one of his affiliates to purchase ordinary shares of
Holdco, on terms and conditions set forth in the equity commitment letter, for
an aggregate amount of $26,955,708, which will be used to fund the merger and
pay certain fees and expenses contemplated by the merger agreement;
-
Mr. Xia has agreed to guarantee 70%, and SAIF IV has agreed to guarantee
30%, of the obligations of Parent under the merger agreement to pay, under
certain circumstances, a termination fee to the Company and reimburse certain
expenses of the Company; and
-
the proposed merger will provide liquidity for the unaffiliated
stockholders without incurring brokerage and other costs typically associated
with market sales.
The buyer group did not consider the Companys net book value,
which is defined as total assets minus total liabilities, as a factor. The buyer
group believes that net book value, which is an accounting concept based on
historical costs, is not a material indicator of the value of the Company as a
going concern because it does not take into account the future prospects of the
Company, market conditions, trends in the industry in which the Company conducts
its business or the business risks inherent in competing with other companies in
the same industry.
The buyer group did not consider the Companys liquidation
value to be a relevant valuation method because they consider the Company to be
a viable, going concern and because the Company will continue to operate its
business following the merger.
The buyer group did not establish, and did not consider, a
going concern value for the Company common stock as a public company to
determine the fairness of the proposed merger consideration to the unaffiliated
stockholders. However, to the extent the pre-merger going concern value was
reflected in the pre-announcement price of the Company common stock, the merger
consideration of $5.80 per share represented a premium to the per share going
concern value of the Company.
The buyer group is not aware of, and thus did not consider in
its fairness determination, any offers or proposals made by any unaffiliated
third parties with respect to a merger or consolidation of the Company with or
into another company, a sale of all or a substantial part of the Companys
assets, or the purchase of the Company voting securities that would enable the
holder to exercise control over the Company.
The buyer group did not receive any independent reports,
opinions or appraisals from any outside party related to the proposed merger,
and thus did not consider any such reports, opinions or appraisals
in determining the substantive and procedural fairness of the merger to the
unaffiliated stockholders.
The buyer group believes the proposed merger is procedurally
fair to the unaffiliated stockholders based upon the following factors:
-
the special committee, consisting entirely of directors who are not
officers or employees of the Company and who are not affiliated with the buyer
group, was established and given absolute authority to, among other things,
review, evaluate and negotiate the terms of the proposed merger and to decide
not to engage in the merger;
-
the members of the special committee do not have any interests in the
proposed merger different from, or in addition to, those of the unaffiliated
stockholders, other than the members receipt of board and special committee compensation (which are not
contingent upon the consummation of the proposed merger or special committees
or boards recommendation of the proposed merger) and their indemnification
and liability insurance rights under the merger agreement;
38
-
while each of Mr. Xia, Ms. Danxia Huang and Mr. Brandon Ho-Ping Lin is a
director, officer or employee of the Company, because of their participation
in the transaction as described under the section captioned
Special
Factors Relating to the MergerInterests of the Companys Directors and
Officers in the Merger
, neither of them served on the special
committee, nor did any of the buyer group participate or have any influence
over the deliberative process of, or the conclusions reached by, the special
committee or the negotiating positions of the special committee;
-
the special committee retained and was advised by its independent legal
and financial advisors who are experienced in advising committees such as the
special committee in similar transactions;
-
the special committee and the Companys board of directors had no
obligation to recommend the approval of the merger agreement and the
transactions contemplated thereby, including the merger, or any other
transaction;
-
the merger was unanimously approved by the special committee;
-
the merger consideration and other terms and conditions of the merger
agreement were the result of extensive negotiations over an extended period of
time between Mr. Xia, Parent, Merger Sub and their legal and financial
advisors, on the one hand, and the special committee and its legal and
financial advisors, on the other hand;
-
in addition to the statutory stockholder approval requirement under Nevada
law, approval of the merger agreement is subject to the approval of a majority
of holders of shares of Company common stock (excluding the Rollover Holders),
giving such unaffiliated stockholders a meaningful opportunity to consider and
vote upon the approval of the merger agreement;
-
the special committee negotiated a 40-day go-shop period;
-
the special committee received from its financial advisor an opinion,
dated June 7, 2012, as to the fairness, from a financial point of view, to the
unaffiliated stockholders of the per share merger consideration of $5.80 to be
received by those stockholders in the proposed merger, as of June 7, 2012,
based upon and subject to the assumptions made, procedures followed, matters
considered, and
qualifications and limitations on the review undertaken by William Blair in preparing its opinion;
-
under the terms of the merger agreement, in certain circumstances prior to
obtaining the requisite stockholder approvals of the merger, the Company is
permitted to provide information to and participate in discussions or
negotiations with persons making takeover proposals and the board of directors
of the Company is permitted to withdraw or modify its recommendation of the
merger agreement; and
-
the ability of the Company to terminate the merger agreement (in
accordance with the terms of the merger agreement) upon acceptance of a
superior proposal.
The foregoing discussion of the information and factors
considered and given weight by the buyer group in connection with their
evaluation of the substantive and procedural fairness to the unaffiliated
stockholders of the merger agreement and the transactions contemplated by the
merger agreement, including the proposed merger, is not intended to be
exhaustive, but is believed by the buyer group to include all material factors
considered by them. The buyer group did not find it practicable to and did not
quantify or otherwise attach relative weights to the foregoing factors in
reaching their position as to the substantive and procedural fairness of the
merger agreement and the proposed merger to the unaffiliated stockholders.
Rather, the buyer group made the fairness determinations after considering all
of the foregoing as a whole.
39
The buyer group believes these factors provide a reasonable
basis for its belief that the proposed merger is both substantively and
procedurally fair to the unaffiliated stockholders. This belief, however, is not
intended to be and should not be construed as a recommendation by the buyer
group to any stockholder of the Company as to how such stockholder should vote
with respect to the approval of the merger agreement.
Certain Effects of the Merger
If the merger is completed, all of our equity interests will be
owned by Parent. Except for the Rollover Holders, none of our current
stockholders will have any ownership interest in, or be a stockholder of, the
Company after the completion of the merger. As a result, our unaffiliated
stockholders will no longer benefit from any increase in our value, nor will
they bear the risk of any decrease in our value. Following the merger, Parent
will benefit from any increase in our value and also will bear the risk of any
decrease in our value.
Each share of Company common stock issued and outstanding
immediately prior to the effective time of the merger (other than shares held by
the Company as treasury stock or owned, directly or indirectly, by Parent,
Merger Sub or any wholly owned subsidiary of the Company immediately prior to
the effective time of the merger, including the Rollover Shares) will be
converted into the right to receive per share merger consideration, without
interest.
Each outstanding, vested and unexercised option to purchase shares of
Company common stock will be cancelled and converted into the right to receive,
as soon as reasonably practicable after the effective time of the merger, a cash
amount equal to the number of shares underlying such option immediately prior to
the effective time of the merger multiplied by the amount by which $5.80 exceeds
the exercise price per share of such option, net of any applicable withholding
taxes.
Each outstanding and unvested option to purchase shares of
Company common stock will be cancelled and converted into the right to receive,
as soon as reasonably practicable after the effective time of the merger, a
restricted cash award in an amount equal to the number of shares underlying such
option immediately prior to the effective time of the merger multiplied the
amount by which $5.80 exceeds the exercise price per share of such option.
Each outstanding and unexercised warrant to purchase shares of
Company common stock will be cancelled and converted into the right to receive,
as soon as reasonably practicable after the effective time of the merger, a cash
amount equal to the total number of shares underlying such warrant immediately
prior to the effective time of the merger multiplied by the amount by which
$5.80 exceeds the exercise price per share of such warrant.
Following the merger, shares of Company common stock will no
longer be traded on the NASDAQ Global Market or any other public market. Our
common stock is registered as a class of equity security under the Exchange Act.
Registration of our common stock under the Exchange Act may be terminated upon
the Companys application to the SEC if our common stock is not listed on a
national securities exchange. Termination of registration of our common stock
under the Exchange Act will substantially reduce the information required to be
furnished by the Company to our stockholders and the SEC, and would make certain
provisions of the Exchange Act, such as the short-swing trading provisions of
Section 16(b) of the Exchange Act and the requirement of furnishing a proxy
statement in connection with stockholders meetings pursuant to Section 14(a) of
the Exchange Act, no longer applicable to the Company.
The buyer group expects that following completion of the
merger, our operations will be conducted substantially the same as they are
currently being conducted. However, following completion of the merger, the
Company will have significantly more debt than it currently has. The buyer group
has informed us that it has no current plans or proposals or negotiations which
relate to or would result in an extraordinary corporate transaction involving
our corporate structure, business or management, such as a merger,
reorganization, liquidation, relocation of any operations, or sale or transfer
of a material amount of assets except as described in this proxy statement. The
buyer group may initiate from time to time reviews of the Company and our
assets, corporate structure, capitalization, operations, properties, management
and personnel to determine what changes, if any, would be desirable following
the merger. The buyer group expressly reserves the right to make any changes
that it deems necessary or appropriate in the light of its review or in the
light of future developments.
Following consummation of the merger, Parent will directly or
indirectly own 100% of our outstanding common stock and will have a
corresponding interest in our net book value and net earnings. The table below
sets forth the direct and indirect beneficial interest in our net book value and
net earnings for each of the Rollover
40
Holders and SAIF IV before and after the merger in proportion to each such
partys direct and indirect beneficial ownership in the Company before and after
the merger, based on our net income for the fiscal year ended December 31, 2011
of approximately $14.0 million and our net book value as of December 31, 2011 of
approximately $149.9 million.
All dollar figures in the chart immediately below are in the
thousands and rounded to the nearest dollar amount.
|
|
Ownership
of the Company
|
|
|
Ownership
of the Company
|
|
|
|
Prior to the Merger
|
|
|
After the Merger
|
|
|
|
|
|
|
|
|
|
Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for the
|
|
|
Net book
|
|
|
|
|
|
Net earnings
|
|
|
|
Net book
|
|
|
|
|
|
fiscal year
|
|
|
value as
|
|
|
|
|
|
for the fiscal
|
|
|
|
value as of
|
|
|
|
|
|
ended
|
|
|
of
|
|
|
|
|
|
year ended
|
|
|
|
December
|
|
|
%
|
|
|
December
|
|
|
December
|
|
|
%
|
|
|
December 31,
|
|
|
|
31, 2011
|
|
|
Ownership
|
|
|
31, 2011
|
|
|
31, 2011
|
|
|
Ownership
|
|
|
2011
|
|
Shudong Xia
(1)
|
$
|
6,121
|
|
|
4.08%
|
|
$
|
570
|
|
$
|
49,107
|
|
|
32.76%
|
|
$
|
4,576
|
|
Karmen
|
$
|
35,623
|
|
|
23.76%
|
|
$
|
3,319
|
|
$
|
47,788
|
|
|
31.88%
|
|
$
|
4,453
|
|
SAIF III
|
$
|
24,625
|
|
|
16.43%
|
|
$
|
2,294
|
|
$
|
33,033
|
|
|
22.04%
|
|
$
|
3,078
|
|
Danxia Huang
|
$
|
3,025
|
|
|
2.02%
|
|
$
|
282
|
|
$
|
4,058
|
|
|
2.71%
|
|
$
|
378
|
|
Shufeng Xia
|
$
|
2,966
|
|
|
1.98%
|
|
$
|
276
|
|
$
|
3,979
|
|
|
2.65%
|
|
$
|
371
|
|
SAIF IV
|
$
|
0
|
|
|
0.00%
|
|
$
|
0
|
|
$
|
11,937
|
|
|
7.96%
|
|
$
|
1,112
|
|
(1)
The aggregate number of shares of Company common
stock beneficially owned by Mr. Xia does not include 6,005,242 shares owned by
Karmen, which is wholly owned by East Action Investment Holdings Ltd. of which
Mr. Xia is the sole shareholder.
Effects on the Company if Merger is not Completed
If our stockholders do not approve the merger agreement or if
the merger is not completed for any other reason, our stockholders will not
receive any payment for their shares of Company common stock provided by the
merger agreement. Instead, unless the Company is sold to a third party, we will
remain an independent publicly traded company, the management expects to operate
the business in a manner similar to that in which it is being operated today,
and our stockholders will continue to be subject to similar risks and
opportunities as they currently are with respect to their ownership of our
common stock. If the merger is not completed, there is no assurance as to the
effect of these risks and opportunities on the future value of your shares of
Company common stock, including the risk that the market price of our common
stock may decline to the extent that the current market price of our stock
reflects a market assumption that the merger will be completed. From time to
time, the board of directors of the Company will evaluate and review the
business operations, properties and capitalization of the Company and, among
other things, make such changes as are deemed appropriate and continue to seek
to maximize stockholder value. If our stockholders do not approve the merger
agreement or the merger is not completed for any other reason, there is no
assurance that any other transaction acceptable to the Company will be offered
or that the business, prospects or results of operations of the Company will not
be adversely impacted. Pursuant to the merger agreement, under certain
circumstances the Company is permitted to terminate the merger agreement and
recommend an alternative transaction. Also under other circumstances, if the
merger is not completed, the Company may be obligated to pay to Parent a
termination fee and reimburse certain of Parents expenses. See
The Merger
AgreementTermination Fees and Reimbursement of Expenses
for additional
information.
Plans for the Company
After the effective time of the merger, Parent anticipates that
the Company will continue its current operations, except that it will (i) cease
to be an independent publicly traded company and will instead be a wholly owned
subsidiary of Parent and (ii) have substantially more debt than it currently
has. There are no current plans to repay the debt taken out to finance the
merger. After the effective time of the merger, the directors of Merger Sub
immediately prior to the effective time of the merger will become the directors
of the Company, and the officers of the Company immediately prior to the
effective time of the merger will remain the officers of the Company, in each case until the earlier of their resignation or removal or until
their respective successors are duly elected or appointed and qualified, as the
case may be.
41
Prospective Financial Information
The Companys management does not, as a matter of course, make
available to the public future financial projections. However, in connection
with the financial analysis of the proposed merger, our management provided
certain financial projections for fiscal years 2012 through 2016 to William
Blair and provided the buyer group a copy of these projections in connection
with their due diligence of the Company.
The summary of such information below is included solely to
give stockholders access to the information that was made available to William
Blair and the buyer group and is not included in this proxy statement in order
to influence any stockholder to make any investment decision with respect to the
merger.
The prospective financial information was not prepared with a
view toward public disclosure, or with a view toward compliance with published
guidelines of the SEC, the guidelines established by the American Institute of
Certified Public Accountants for preparation and presentation of financial
forecasts, or GAAP. Neither the Companys independent registered public
accounting firm, nor any other independent accountants, have compiled, examined
or performed any procedures with respect to the prospective financial
information included below, or expressed any opinion or any other form of
assurance on such information or its achievability.
The prospective financial information reflects numerous
estimates and assumptions made by the Company with respect to industry
performance, general business, economic, regulatory, market and financial
conditions and other future events, as well as matters specific to the Companys
business, all of which are difficult to predict and many of which are beyond the
Companys control. The prospective financial information reflects subjective
judgment in many respects and thus is susceptible to multiple interpretations
and periodic revisions based on actual experience and business developments. As
such, the prospective financial information constitutes forward-looking
information and is subject to risks and uncertainties that could cause actual
results to differ materially from the results forecasted in such prospective
information, including, but not limited to, the Companys performance, industry
performance, general business and economic conditions, customer requirements,
competition, adverse changes in applicable laws, regulations or rules, and the
various risks set forth in the Companys reports filed with the SEC. There can
be no assurance that the prospective results will be realized or that actual
results will not be significantly higher or lower than forecast. The prospective
financial information covers multiple years and such information by its nature
becomes less reliable with each successive year. In addition, the prospective
information will be affected by the Companys ability to achieve strategic
goals, objectives and targets over the applicable periods. The assumptions upon
which the prospective information was based necessarily involve judgments with
respect to, among other things, future economic, competitive and regulatory
conditions and financial market conditions, all of which are difficult or
impossible to predict accurately and many of which are beyond the Companys
control. The prospective information also reflects assumptions as to certain
business decisions that are subject to change. Such prospective information
cannot, therefore, be considered a guaranty of future operating results, and
this information should not be relied on as such. The inclusion of this
information should not be regarded as an indication that the Company, the buyer
group, the special committee, any of their respective financial advisors or
anyone who received this information then considered, or now considers, it a
reliable prediction of future events, and this information should not be relied
upon as such. None of the Company, the buyer group, the special committee or any
of their financial advisors or any of their affiliates intends to, and each of
them disclaims any obligation to, update, revise or correct such prospective
information if they are or become inaccurate (even in the short term).
The prospective financial information does not take into
account any circumstances or events occurring after the date it was prepared,
including the transactions contemplated by the merger agreement. Further, the
prospective financial information does not take into account the effect of any
failure of the merger to occur and should not be viewed as accurate or
continuing in that context.
The inclusion of the prospective financial information herein
should not be deemed an admission or representation by the Company, the buyer
group or the special committee that they are viewed by the Company or the buyer
group or the special committee as material information of the Company, and in
fact the Company, the buyer group, and the special committee view the
prospective financial information as non-material because of the inherent risks and uncertainties associated with such long
range forecasts. The prospective information should be evaluated, if at all, in
conjunction with the historical financial statements and other information
regarding the Company contained in the Companys public filings with the SEC. In
light of the foregoing factors and the uncertainties inherent in the Companys
prospective information, stockholders are cautioned not to place undue, if any,
reliance on the prospective information included in this proxy statement.
42
Certain of the prospective financial information set forth
herein, including EBITDA, may be considered non-GAAP financial measures. The
Company provided this information to William Blair and the buyer group because
the Company believed it could be useful in evaluating, on a prospective basis,
the Companys potential operating performance and cash flow. Non-GAAP financial
measures should not be considered in isolation from, or as a substitute for,
financial information presented in compliance with GAAP, and non-GAAP financial
measures as used by the Company may not be comparable to similarly titled
amounts used by other companies. The Company did not prepare prospective
financial information related to stock-based compensation.
|
|
2012 FY
|
|
|
2013 FY
|
|
|
2014 FY
|
|
|
2015 FY
|
|
|
2016 FY
|
|
|
|
(amounts in
millions)
|
|
Revenue
|
$
|
179.4
|
|
$
|
186.3
|
|
$
|
196.5
|
|
$
|
198.6
|
|
$
|
208.6
|
|
Gross Profit
|
$
|
45.1
|
|
$
|
47.3
|
|
$
|
50.9
|
|
$
|
53.5
|
|
$
|
57.8
|
|
Income from Operations
|
$
|
15.5
|
|
$
|
16.3
|
|
$
|
18.6
|
|
$
|
20.8
|
|
$
|
23.2
|
|
EBITDA
|
$
|
18.7
|
|
$
|
20.0
|
|
$
|
22.6
|
|
$
|
25.2
|
|
$
|
28.1
|
|
Net Income
|
$
|
15.0
|
|
$
|
16.1
|
|
$
|
18.2
|
|
$
|
20.2
|
|
$
|
22.3
|
|
Unlevered Free Cash Flow
(1)
|
$
|
2.5
|
|
$
|
(5.1
|
)
|
$
|
(3.8
|
)
|
$
|
(1.7
|
)
|
$
|
(0.2
|
)
|
(1)
Unlevered Free Cash Flow refers to EBITDA less taxes and
capital expenditures and plus or minus changes in working capital.
The increases in the forecasts for the Companys working
capital (current assets less current liabilities) for the period ranging from
2012 through the end of fiscal year 2016 reflect the nature of the business, the
type of customers the Company has and the Companys projected growth of its
business during such period. A significant portion of the Companys business
consists of large government contracts and consequently the Company typically
receives payment at some point following the completion of a project. Many of
these projects require more than a year to complete, while at the same time the
Company continues to incur expenses to manufacture, purchase and install the
systems and products required in connection with such a project. As the Company
expects to grow its business rapidly and to undertake more of such projects,
both the amount of accounts receivable and the cash it needs for such projects
are expected to increase significantly, and therefore lead to a corresponding
increase in the Companys expected working capital needs.
Pursuant to the requirements of Regulation G, the Company sets
forth below a reconciliation of projected EBITDA to the most directly comparable
financial measure prepared in accordance with GAAP.
|
|
2012 FY
|
|
|
2013 FY
|
|
|
2014 FY
|
|
|
2015 FY
|
|
|
2016 FY
|
|
|
|
(amounts in
millions)
|
|
Income from Operations
|
$
|
15.5
|
|
$
|
16.3
|
|
$
|
18.6
|
|
$
|
20.8
|
|
$
|
23.2
|
|
Add:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
$
|
3.2
|
|
$
|
3.7
|
|
$
|
4.0
|
|
$
|
4.4
|
|
$
|
4.9
|
|
EBITDA
|
$
|
18.7
|
|
$
|
20.0
|
|
$
|
22.6
|
|
$
|
25.2
|
|
$
|
28.1
|
|
Pursuant to the requirements of Regulation G, the Company sets
forth below a reconciliation of projected Unlevered Free Cash Flow to the most directly comparable
financial measure prepared in accordance with GAAP.
|
|
2012 FY
|
|
|
2013 FY
|
|
|
2014 FY
|
|
|
2015 FY
|
|
|
2016 FY
|
|
|
|
(amounts in
millions)
|
|
Income from Operations
|
$
|
15.5
|
|
$
|
16.3
|
|
$
|
18.6 $
|
|
|
20.8
|
|
$
|
23.2
|
|
Add:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
$
|
3.2
|
|
$
|
3.7
|
|
$
|
4.0
|
|
$
|
4.4
|
|
$
|
4.9
|
|
Subtract:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes
|
$
|
3.9
|
|
$
|
4.0
|
|
$
|
4.7
|
|
$
|
5.2
|
|
$
|
5.8
|
|
Subtract:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures
|
$
|
5.4
|
|
$
|
5.9
|
|
$
|
6.4
|
|
$
|
7.6
|
|
$
|
8.9
|
|
Changes in Working Capital
|
$
|
6.9
|
|
$
|
15.2
|
|
$
|
15.3
|
|
$
|
14.1
|
|
$
|
13.7
|
|
Unlevered Free Cash Flow
|
$
|
2.5
|
|
$
|
(5.1
|
)
|
$
|
(3.8
|
)
|
$
|
(1.7
|
)
|
$
|
(0.2
|
)
|
43
Financing of the Merger
The buyer group estimates that the total amount of funds
necessary to consummate the merger and related transactions, including the
payment of customary fees and expenses in connection with the merger, will be
approximately $200.3 million. Parent and Merger Sub expect this amount to be
provided through a combination of debt financing, equity financing and the
contribution of Rollover Shares to Parent immediately prior to the merger.
Neither Parent nor Merger Sub has entered into any alternative financing
arrangements or alternative financing plans.
Debt Financing
On June 8, 2012, Parent entered into the facility agreement
with CDB pursuant and subject to which CDB has agreed to provide
the CDB Loan in an aggregate amount of up to $96 million, to fund the
merger and pay certain fees and expenses contemplated by the facility agreement
and the merger agreement.
Conditions to Financing.
The funding of the CDB Loan is
subject to the satisfaction or waiver of the following conditions:
-
receipt by CDB of the documentary conditions precedent required under
Schedule 1 of the facility agreement;
-
no major default (as defined in the facility agreement) that is continuing
or would result from the proposed borrowing;
-
all of the major representations (as defined in the facility agreement)
being true;
-
receipt by CDB of a certified copy of the register of members of Parent
evidencing that Holdco is the beneficial owner of the entire equity interest
of Parent and that the shares of Parent issued to Holdco have been validly
issued and fully paid up;
-
receipt by CDB of (a) the relevant bank receipt evidencing the irrevocable
wire transfers of an aggregate amount of no less than the difference between
the Acquisition Consideration (as defined in the facility agreement) and the
Total Commitment (as defined in the facility agreement) by Mr. Xia and SAIF IV
to a bank account under the name of Parent or the paying agent, (b) a copy of
a resolution of the board of directors of Holdco resolving to contribute the
aggregate amount received under (a) above to Parent, and (c) a copy of
Parents instructions to Holdco, signed by an authorized signatory of Parent,
directing Holdco to transfer such amount contributed under (b) by Mr. Xia and
SAIF IV above to the paying agent; and
-
receipt by CDB of a letter from Parent confirming that (a) all of the
conditions precedent to the merger have been satisfied or waived in accordance
with the terms of the merger agreement and the articles of merger has been
filed with the Secretary of State of the State of Nevada (and attaching the
stamped articles of merger), (b) the merger agreement remains in full force
and effect and has not been rescinded or repudiated by any party to it, and
(c) the effective time of the merger has occurred.
44
Interest Rate
. The interest rate of the CDB Loan is
LIBOR plus 5.2% per annum at all times from and including date of utilization to
and including the date of a listing (as defined in the facility agreement) and
LIBOR plus 4.8% per annum at all times thereafter.
Prepayments and Amortization
. Parent may, if it gives
CDB not less than five business days prior notice, prepay the whole or any part
of the CDB Loan (but, if in part, the amount paid must be an amount that reduces
the amount of the CDB Loan by at least $10 million). Parent is required to make
a mandatory prepayment upon the occurrence of any of the following:
-
a listing (as defined in the facility agreement);
-
a change of control (as defined in the facility agreement);
-
a currency event (as defined in the facility agreement); or
-
the sale of all or substantially all of the assets of Parent and its
subsidiaries, as a group, or of the Company and its subsidiaries, as a group
(other than the merger).
Parent is required to repay 5%, 5%, 20% and 30% of the total
outstanding principal amount of the CDB Loan on the second, third, fourth and
fifth anniversaries of the initial drawdown, respectively, and the balance of
the outstanding principal amount on the sixth anniversary of the initial
drawdown. Currently, Parent does not have any plans or arrangements to refinance
the CDB Loan.
Security.
The obligations of Parent under the facility
agreement will be secured by:
-
a personal guarantee and a deed of undertaking from Mr. Xia and Ms. Yang
Lan, Mr. Xias wife;
-
a pledge of 100% of the equity interest of the Parent held by Holdco in
favor of CDB; and
-
a pledge of 100% of the equity interest of Beijing TransCloud Information
Technology Limited by China TransInfo Technology Limited in favor of CDB.
Other Terms.
The facility agreement contains customary
representations and warranties and customary affirmative and negative covenants,
including, among others, restrictions on indebtedness, disposal of assets,
declaration of dividends and mergers and consolidations. The facility agreement
also includes customary events of default.
Equity Financing
Chairman Equity Commitment
. On June 7, 2012, Mr. Xia
entered into an equity commitment letter with Holdco pursuant to which Mr. Xia
committed to subscribe, or caused to be subscribed, directly to indirectly
through one or more intermediary entities, for equity securities of Holdco at or
immediately prior to the effective time of the merger in immediately available
funds equal to $26,955,708. The equity commitment of Mr. Xia is conditioned upon
the satisfaction or waiver by Parent of each of the conditions to Parents and
Merger Subs obligations to effect the merger (other than those conditions that
by their nature are to be satisfied at the closing of the merger). Unless
otherwise agreed in writing by Mr. Xia, the equity commitment of $26,955,708 is
subject to reduction to a level sufficient to, in combination with the other
financing arrangements contemplated by the merger agreement, fully fund the
merger and other transactions contemplated by the merger agreement, including
the payment of customary fees and expenses in connection with the merger, in a
circumstance where Parent does not require the full amount of the $26,955,708 to
consummate the merger. The equity commitments will terminate automatically and
immediately upon the earliest to occur of (i) the effective time of the merger;
provided that Mr. Xia shall at or prior to the effective time of the merger have
fully funded and paid to Holdco his commitment and fully performed his
obligations under the equity commitment letter, and (ii) the valid termination
of the merger agreement in accordance with its terms.
SAIF IV Equity Commitment
. On June 7, 2012, SAIF IV
entered into an equity commitment letter with Holdco pursuant to which SAIF IV
committed to subscribe, or caused to be subscribed, directly to indirectly
through one or more intermediary entities, for equity securities of
Holdco at or immediately prior to the effective time of the merger in
immediately available funds equal to $11,552,446. The equity commitment of SAIF
IV is conditioned upon the satisfaction or waiver by Parent of each of the
conditions to Parents and Merger Subs obligations to effect the merger (other
than those conditions that by their nature are to be satisfied at the closing of
the merger). Unless otherwise agreed in writing by Mr. Xia, the equity
commitment of $11,552,446 is subject to reduction to a level sufficient to, in
combination with the other financing arrangements contemplated by the merger
agreement, fully fund the merger and other transactions contemplated by the
merger agreement, including the payment of customary fees and expenses in
connection with the merger, in a circumstance where Parent does not require the
full amount of the $11,552,446 to consummate the merger. The equity commitments
will terminate automatically and immediately upon the earliest to occur of (i)
the effective time of the merger; provided that SAIF IV shall at or prior to the
effective time of the merger have fully funded and paid to Holdco his commitment
and fully performed his obligations under the equity commitment letter, and (ii)
the valid termination of the merger agreement in accordance with its terms.
45
Rollover Financing
On June 7, 2012, Mr. Xia, Karmen, Ms. Danxia Huang and Mr.
Shufeng Xia entered into a contribution agreement with Parent and Holdco
pursuant to which the Mr. Xia, Karmen, Ms. Danxia Huang and Mr. Shufeng Xia
collectively committed to contribute, immediately prior to the consummation of
the merger, an aggregate amount of 8,046,973 shares of Company common stock to
Parent (the equivalent of a $46,672,443.40 investment based upon the per share
merger consideration of $5.80) in exchange for certain newly issued shares of
Holdco.
On June 7, 2012, SAIF III entered into a contribution agreement
with Parent and Holdco pursuant to which SAIF III committed to contribute,
immediately prior to the consummation of the merger, an aggregate amount of
4,151,152 shares of Company common stock to Parent (the equivalent of a
$24,076,681.60 investment based upon the per share merger consideration of
$5.80) in exchange for certain newly issued shares of Holdco. The Rollover
Holders commitments pursuant to the contribution agreements are conditioned
upon the satisfaction or waiver of the conditions to the obligations of Parent
and Merger Sub to complete the merger contained in the merger agreement, the
funding of the debt financing described above and the substantially simultaneous
consummation of the merger in accordance with the terms of the merger
agreement.
Limited Guarantee
On June 8, 2012, Mr. Xia and SAIF IV entered into a limited
guarantee with the Company pursuant to which each of Mr. Xia and SAIF IV has
agreed to guarantee 70% and 30%, respectively, of the obligations of Parent
under the merger agreement to pay, under certain circumstances, a termination
fee to the Company and reimburse certain expenses (including disbursements and
reasonable fees of counsel) incurred by the Company in connection with the
collection of such termination fee, if overdue. Each of Mr. Xia and SAIF IV has
also agreed to guarantee 70% and 30%, respectively, of the obligations of Parent
and Merger Sub under the merger agreement to reimburse reasonable and documented
out-of-pocket costs incurred by the Company in connection with the cooperation
provided by the Company to the buyer group in connection with the buyer group's
debt financing.
Voting Agreement
On June 7, 2012, the Rollover Holders entered into the voting
agreement with Parent under which they have agreed to, among other things, vote
all shares of Company common stock beneficially owned by them in favor of
approval of the merger agreement and against any other acquisition proposal. The
voting agreement will terminate upon the earliest of (i) the termination of the
merger agreement, (ii) the written agreement of Parent and, at the direction of
the special committee, the Company to terminate the voting agreement, and (iii)
the effective time of the merger.
Limitation on Remedies
The Companys right to terminate the merger agreement and
receive payment of (i) a termination fee of $2.8 million, approximately 2% of
the enterprise value of the Company calculated based on the $5.80 per share
merger consideration, in connection with the
merger from Parent, (ii) any reimbursement of costs and expenses pursuant to the
merger agreement, and (iii) any amount in respect of which it is indemnified by
Parent pursuant to the merger agreement under certain circumstances is the sole
and exclusive remedy of the Company against the Parent, Merger Sub, their respective affiliates or financing sources for any
loss or damage suffered as a result of any such breach or failure to perform
under the merger agreement or other failure of the merger to be consummated.
However, such limitation of remedies shall not apply in the event Parent has not
deposited or caused to be deposited in full the amounts as set forth in the
merger agreement within one business day following the effective time of the
merger.
46
Subject to any equitable remedies Parent may be entitled to,
Parents right to receive payment of (i) a termination fee of $1.5 million,
approximately 1% of the enterprise value of the Company calculated based on the
$5.80 per share merger consideration, and
(ii) any reimbursement of costs and expenses pursuant to the merger agreement is
the sole and exclusive remedy of Parent and Merger Sub against the Company for
any loss or damage suffered as a result of any such breach or failure to perform
under the merger agreement or other failure of the merger to be consummated.
Parent and Merger Sub are entitled to specific performance of
the terms under the merger agreement, including an injunction or injunctions to
prevent breaches of the merger agreement and to enforce specifically the terms
and provisions of the merger agreement. The Company is not entitled to an
injunction or injunctions to prevent breaches of the merger agreement by Parent
or Merger Sub or any remedy to enforce specifically the terms and provisions of
the merger agreement.
Interests of the Companys Directors and Officers in the
Merger
Interests of Continuing Stockholders
As a result of the merger, Mr. Xia (our chairman, president,
chief executive officer and secretary), Ms. Danxia Huang (one of our directors,
our vice president of operations and our treasurer), Mr. Shufeng Xia (the
director of financial department of China TransInfo Technology Group Co., Ltd.,
our consolidated variable interest entity) will indirectly hold 64.64%, 2.71% and
2.65%, respectively, of the fully diluted equity interest of Parent, which will
own 100% of the Company immediately following the completion of the merger.
Affiliates of SAIF Partners will indirectly hold 30.0% of the fully diluted
equity interest of Parent immediately following the completion of the merger.
Mr. Brandon Ho-Ping Lin (one of our directors) is a partner at SAIF Advisors
Limited, an affiliate of SAIF Partners. Because of the indirect equity ownership
of these continuing stockholders in Parent, each of them will enjoy the benefits
from any future earnings and growth of the Company after the merger which, if
the Company is successfully managed, could exceed the value of their original
investments in the Company, including the amount paid by Parent as merger
consideration to the unaffiliated stockholders. These continuing stockholders
will also bear the corresponding risks of any possible decreases in the future
earnings, growth or value of the Company and they will have no certainty of any
future opportunity to sell their shares in Parent at an attractive price, or
that any dividends paid by Parent will be sufficient to recover their
investment.
The merger may provide additional means to enhance stockholder
value for the continuing stockholders, including improved profitability due to
the elimination of the expenses associated with public company reporting and
compliance, increased flexibility and responsiveness in management of the
business to achieve growth and respond to competition without the restrictions
of short-term earnings comparisons, and additional means for making liquidity
available to them, such as through dividends or other distributions.
Special Committee Compensation
In consideration of the expected time and effort that would be
required of the members of the special committee in evaluating the proposed
merger, including negotiating the terms and conditions of the merger agreement,
the board of directors of the Company determined that the chairman of the
special committee shall receive a retainer of $7,500 per month and that each
other member of the special committee shall receive a retainer of $5,000 per
month for the duration of their service on the special committee. Such fees are
payable whether or not the merger is completed and were approved by the board of
directors of the Company. No other meeting fees or other compensation (other
than reimbursement for out-of-pocket expenses in connection with attending
special committee meetings) will be paid to the members of the special committee
in connection with their service on the special committee.
47
Indemnification and Insurance
Parent and the surviving corporation will assume the
indemnification obligations, now existing in favor of the current or former
directors, officers or employees of the Company or any of its subsidiaries or
fiduciaries of the Company or any of its subsidiaries under benefit plans of the
Company and its subsidiaries (collectively, the
Indemnified Parties
)
with respect to acts or omissions occurring at or prior to the effective time,
as provided in the organizational documents of the Company or its subsidiaries.
The articles of incorporation and bylaws of the surviving corporation will
contain provisions no less favorable to the Indemnified Parties with respect to
rights to indemnification, advancement of expenses and limitations on
liabilities as set forth in the Companys organizational documents in effect as
of the date of the merger agreement. The relevant provisions may not be amended,
repealed or otherwise modified in a manner that would adversely affect the
rights of the Indemnified Parties, unless such modification is required by
applicable law.
Following the effective time of the merger, Parent and the
surviving corporation will, jointly and severally, indemnify and hold harmless
each Indemnified Party, and anyone who becomes an Indemnified Party between the
date of the merger agreement and the effective time of the merger, against any
costs or expenses (including reasonable attorneys fees and expenses),
judgments, losses, claims, damages or liabilities and amounts paid in settlement
incurred in connection with any actual or threatened proceeding, including any
matter arising in connection with the transactions contemplated by the merger
agreement, to the fullest extent permitted by applicable law (and Parent and the
surviving corporation will also advance expenses as incurred to the fullest
extent permitted under applicable law). Notwithstanding anything to the contrary
contained in the merger agreement, Parent shall not (and Parent will cause the
surviving corporation not to) settle or compromise or consent to the entry of
any judgment or otherwise terminate any proceeding, unless such settlement,
compromise, consent or termination includes an unconditional release of all of
the Indemnified Parties from all liability and does not include an admission of
fault or wrongdoing by any Indemnified Party.
For at least six years after the effective time of the merger,
(i) Parent and the surviving corporation will maintain the existing directors
and officers liability insurance and fiduciary insurance (or substitute
policies including comparable coverage) maintained by the Company as of the date
of the merger agreement, covering claims arising from facts or events that
occurred on or before the effective time of the merger, including the
transactions contemplated by the merger agreement (provided that Parent or the
surviving corporation, as applicable, will not be required to pay an annual
premium for such insurance in excess of 300% of the total annual premiums
currently paid by the Company on a yearly basis; and (ii) Parent and the
surviving corporation will not take any action that would prejudice the rights
of, or impede recovery by, the beneficiaries of any such insurance, whether in
respect of claims arising before or after the effective time of the merger. In
lieu of such insurance, prior to the effective time of the merger, the Company
may purchase a six year tail prepaid policy with substantially similar
coverage (provided that the premium for such tail policy shall not exceed an
amount equal to 300% of the total annual premiums currently paid by the Company
on a yearly basis).
Company Options
As of the effective time of the merger, each outstanding,
vested and unexercised option to purchase shares of Company common stock will be
cancelled and converted into the right to receive, as soon as reasonably
practicable after the effective time of the merger, a cash amount equal to the
number of shares underlying such option immediately prior to the effective time
of the merger multiplied by the amount by which $5.80 exceeds the exercise price
per share of such option, net of any applicable withholding taxes.
As of the effective time of the merger, each outstanding and
unvested option to purchase shares of Company common stock will be cancelled and
converted into the right to receive, as soon as reasonably practicable after the
effective time of the merger, a restricted cash award in an amount equal to the
number of shares underlying such option immediately prior to the effective time
of the merger multiplied the amount by which $5.80 exceeds the exercise price
per share of such option.
Company Warrants
As of the effective time of the merger, each outstanding and
unexercised warrant to purchase shares of Company common stock will be cancelled
and converted into the right to receive, as soon as reasonably practicable after the effective time of the merger, a cash amount equal to
the total number of shares underlying such warrant immediately prior to the
effective time of the merger multiplied by the amount by which $5.80 exceeds the
exercise price per share of such warrant.
48
Relationship Between Us and Buyer Group
Relationship with Rollover Holders
Mr. Xia is the sole director, officer and 100% owner of Parent
and Merger Sub. As such, Mr. Xia and his affiliates will have direct and
indirect interests in the Company after the merger. Mr. Xia has also been the
chairman, president, chief executive officer and secretary of the Company since
May 14, 2007. Ms. Danxia Huang currently is the vice president of operations of
the Company and has been the Companys director since May 27, 2007. Both Mr. Xia
and Ms. Danxia Huang received compensation for their services as employees of
the Company. Both Mr. Xia and Ms. Danxia Huang recused themselves from the
deliberations and the board of directors determination with respect to the
merger agreement and the proposed merger.
Karmen is a wholly owned subsidiary of East Action Investment
Holdings Ltd., of which Mr. Xia is the sole shareholder. Karmen currently holds
23.76% shares of Company common stock.
Mr. Shufeng Xia is and has been the director of financial
department of China TransInfo Technology Group Co., Ltd. since May 2007 and is
Mr. Xias brother.
SAIF III was formed under the laws of the Cayman Islands and
holds 16.43% shares of Company common stock. The principal business of SAIF III
is to make investments in companies in China and India. The registered office of
SAIF III is c/o M&C Corporate Services Limited, P. O. Box 309 GT, Ugland
House, South Church Street, George Town, Grand Cayman, Cayman Islands and its
telephone number is +852 2918 2203.
All Rollover Holders are parties to the contribution agreements
and have agreed with Parent to contribute to Parent shares of Company common
stock owned by them in exchange for newly issued shares of Holdco. As such,
Rollover Holders may have indirect interests in the Company after the merger.
Except as set forth above and elsewhere in this proxy
statement, none of the buyer group, nor any of their respective directors,
executive officers or other affiliates engaged in any transactions with us or
any of our directors, officers or other affiliates that would require disclosure
under the rules and regulations of the SEC applicable to this proxy
statement.
Dividends
Pursuant to the merger agreement, we are prohibited from
making, declaring, paying or setting aside for payment any dividend on or in
respect of, or declare or make any distribution with respect to the capital
stock of the Company or any of its subsidiaries (except for dividends paid by
any subsidiaries) from the date of the merger agreement until the earlier of the
effective time of the merger or the termination of the merger agreement.
Determination of the Per Share Merger Consideration
The per share merger consideration was determined as a result
of extensive negotiations over an extended period of time between Parent, Merger
Sub and their advisors, on the one hand, and the special committee, comprising
solely of the independent directors, and its legal and financial advisors, on
the other hand.
Regulatory Matters
In connection with the merger, we are required to make certain
filings with, and comply with certain laws of, various federal and state
governmental agencies, including:
-
filing the articles of merger with the Secretary of State of the State of
Nevada in accordance with the NRS after the approval of the merger agreement
by our stockholders; and
-
complying with U.S. federal securities laws.
49
Fees and Expenses
Fees and expenses incurred or to be incurred by the Company and
the buyer group in connection with proposed merger are estimated at the date of
this proxy statement to be as follows:
Description
|
Amount
|
Financing fees and expenses and
related professional fees
|
$5,200,000
|
Financial advisory fees and expenses
|
$1,800,000
|
Legal and accounting fees and
expenses
|
$3,720,000
|
Special committee fees
|
$180,000
|
Miscellaneous (including
printing, proxy solicitation, filing fees, mailing costs, etc.)
|
$850,000
|
Directors & officers liability and Company
reimbursement insurance
|
$1,450,000
|
Total
|
$13,200,000
|
These expenses will not reduce the per share merger
consideration to be received by the Company stockholders. The party incurring
any costs and expenses in connection with the proposed merger and the merger
agreement will pay such costs and expenses.
Material United States Federal Income Tax
Consequences
The following is a discussion of the material U.S. federal
income tax consequences to holders of shares of Company common stock upon the
exchange of shares of Company common stock for cash pursuant to the merger. This
discussion does not purport to be a comprehensive description of all of the tax
consequences that may be relevant to a decision to dispose of shares of Company
common stock in the merger, including tax considerations that arise from rules
of general application to all taxpayers or to certain classes of investors. This
summary is based on the Internal Revenue Code of 1986, as amended (the
Code
), Treasury regulations, administrative rulings and court
decisions, all as in effect as of the date hereof and all of which are subject
to differing interpretations and/or change at any time (possibly with
retroactive effect). In addition, this discussion is not a complete description
of all the tax consequences of the merger and, in particular, does not address
U.S. federal income tax considerations for holders of shares of Company common
stock received in connection with the exercise of employee stock options or
otherwise as compensation, or holders subject to special treatment under U.S.
federal income tax law (such as insurance companies, banks and other financial
institutions, tax-exempt entities, broker-dealers, mutual funds, traders in
securities who elect the mark-to-market method of accounting, tax-deferred or
other retirement accounts, holders subject to the alternative minimum tax, U.S.
persons that have a functional currency other than the U.S. dollar, certain
former citizens or residents of the United States or holders that hold shares of
Company common stock as part of a hedge, straddle, integration, constructive
sale or conversion transaction). In addition, this discussion does not discuss
any consequences to stockholders of the Company that will directly or indirectly
hold an ownership interest in Parent or the Company after the merger, to holders
of options or warrants to purchase shares of Company common stock, any aspect of
state, local or foreign tax law that may be applicable to any holder of shares
of Company common stock, or any U.S. federal tax considerations other than U.S.
federal income tax considerations. This discussion assumes that holders own
shares of Company common stock as capital assets.
We urge holders of shares of Company common stock to consult
their own tax advisors with respect to the specific tax consequences to them in
connection with the offer and the merger in light of their own particular
circumstances, including the tax consequences under state, local, foreign and
other tax laws.
50
For purposes of this discussion, a U.S. Holder is a
beneficial owner of shares of Company common stock that is: a citizen or
resident of the United States for U.S. federal income tax purposes, a
corporation, or other entity treated as a corporation for U.S. federal income
tax purposes, created or organized in or under the laws of the United States,
any state thereof or the District of Columbia, any estate the income of which is
subject to U.S. federal income tax regardless of the source of its income and
any trust if (i) a court within the United States is able to exercise primary
supervision over the administration of the trust, and one or more U.S. persons
have the authority to control all substantial decisions of the trust or (ii) it
has a valid election in place to be treated as a domestic trust for U.S. federal
income tax purposes.
If a partnership (including any entity treated as a partnership
for U.S. federal income tax purposes) holds shares of Company common stock, the
tax treatment of a holder that is a partner in the partnership generally will
depend upon the status of the partner and the activities of the partnership.
Such holders should consult their own tax advisors regarding the tax
consequences of exchanging the shares of Company common stock pursuant to the
merger.
Payments with Respect to Shares of Company Common Stock
The receipt of cash in exchange for shares of Company common
stock pursuant to the merger will be a taxable transaction for U.S. federal
income tax purposes. In general, a U.S. Holder who exchanges shares of Company
common stock for cash in the merger will recognize gain or loss in an amount
equal to the difference, if any, between the amount of cash received in exchange
for such shares and the U.S. Holders adjusted tax basis in such shares. If a
U.S. Holder acquired different blocks of shares of Company common stock at
different times or different prices, such U.S. Holder must determine its tax
basis and holding period separately with respect to each block of shares of
Company common stock. Such gain or loss will be capital gain or loss, and will
be long term capital gain or loss if such U.S. Holders holding period for the
shares of Company common stock is more than one year at the time of completion
of the merger. Long term capital gains recognized by a non-corporate U.S. Holder
(including an individual) are generally eligible for a reduced rate of U.S.
federal income tax. There are limitations on the deductibility of capital
losses. U.S. Holders of Company common stock should consult their tax advisors
regarding the determination and allocation of their tax basis in their stock
surrendered in the merger.
Information Reporting and Backup Withholding
Payments made with respect to shares of Company common stock
exchanged for cash in the merger may be subject to information reporting, and
such payments will be subject to U.S. federal backup withholding unless the U.S.
Holder (i) furnishes an accurate tax identification number or otherwise complies
with applicable U.S. information reporting or certification requirements
(typically, by completing and signing an Internal Revenue Service (
IRS
)
Form W-9) or (ii) is an exempt recipient and, when required, demonstrates such
fact. Backup withholding is not an additional tax and any amounts withheld under
the backup withholding rules may be refunded or credited against a U.S. Holders
U.S. federal income tax liability, if any, provided that such U.S. Holder
furnishes the required information to the IRS in a timely manner.
The following is a discussion of certain U.S. federal income
tax consequences that will apply to a Non-U.S. Holder of shares of Company
common stock. The term Non-U.S. Holder means a beneficial owner of shares of
Company common stock that, for U.S. federal income tax purposes, is not a U.S.
Holder and is not a partnership or other entity classified as a partnership.
Payments with Respect to Shares of Company Common Stock
Payments made to a Non-U.S. Holder with respect to shares of
Company common stock exchanged for cash pursuant to the merger generally will be
exempt from U.S. federal income tax, unless:
-
the gain on shares of Company common stock, if any, is effectively
connected with the conduct by the Non-U.S. Holder of a trade or business in
the United States (and, if required by an applicable U.S. income tax treaty, is attributable to the
Non-U.S. Holders permanent establishment in the United States);
51
-
the Non-U.S. Holder is an individual who was present in the United States
for 183 days or more in the taxable year in which the merger occurs and
certain other conditions are met; or
-
the Non-U.S. Holder owned (actually or constructively) more than five
percent of the Companys common stock at any time during the five years
preceding the merger, and the Company is or has been a United States real
property holding corporation for U.S. federal income tax purposes during such
time.
A Non-U.S. Holder whose gain is described in the first bullet
point above will generally be subject to tax on its net gain in the same manner
as if it were a U.S. Holder. In addition, such a Non-U.S. Holder that is a
corporation may be subject to a branch profits tax equal to 30% of its
effectively connected earnings and profits (including such gain) or such lower
rate as may be specified by an applicable income tax treaty. An individual
Non-U.S. Holder described in the second bullet point above will be required to
pay a flat 30% tax on the gain derived from the sale, which gain may be offset
by U.S. source capital losses (even though such Non-U.S. Holder is not
considered a resident of the United States). The Company does not believe that
it currently is a United States real property holding corporation or that it has
been a United States real property holding corporation during the past five
years.
Information Reporting and Backup Withholding
In general, a Non-U.S. Holder will not be subject to backup
withholding and information reporting with respect to a payment made with
respect to shares of Company common stock exchanged for cash in the merger if
the Non-U.S. Holder has provided an IRS Form W-8BEN (or an IRS Form W-8ECI if
the Non-U.S. Holders gain is effectively connected with the conduct of a U.S.
trade or business). If shares are held through a foreign partnership or other
flow-through entity, certain documentation requirements also apply to the
partnership or other flow-through entity. Backup withholding is not an
additional tax and any amounts withheld under the backup withholding rules may
be refunded or credited against a Non-U.S. Holders U.S. federal income tax
liability, if any, provided that such Non-U.S. Holder furnishes the required
information to the IRS in a timely manner.
Material PRC Tax Consequences
Under the EIT Law, enterprises established outside of China
whose de facto management bodies are located in the PRC are considered
resident enterprises. The implementation rules for the EIT Law define the de
facto management body as an establishment that has substantial management and
control over the business, personnel, accounts and properties of an enterprise.
Although there has not been a definitive determination of the Companys status
by the PRC tax authorities, the Company does not believe that it should be
considered a resident enterprise under the EIT Law or that the gain recognized
on the receipt of cash for Company common stock should otherwise be subject to
PRC tax to holders of such common stock that are not PRC residents. If, however,
the PRC tax authorities were to determine that the Company should be considered
a resident enterprise or that the receipt of cash for these common stocks should
otherwise be subject to PRC tax, then gain recognized on the receipt of cash for
Company common stock pursuant to the merger by holders of such common stock who
are not PRC residents could be treated as PRC-source income that would be
subject to PRC tax at a rate of up to 10%. You should consult your own tax
advisor for a full understanding of the tax consequences of the merger to you,
including any PRC tax consequences.
Delisting and Deregistration of the Company Common Stock
If the merger is completed, the shares of Company common stock
will be delisted from the NASDAQ Global Market and will be deregistered under
the Exchange Act, and shares of Company common stock will no longer be publicly
traded.
52
Litigation Relating to the Merger
We are aware of three putative class action complaints related
to the merger filed in the Eighth Judicial District Court against, among others,
the Company and certain directors of the Company:
-
Oswald Velz v. China TransInfo Technology Corp. et al.
, Case No.:
A-657022 (
Velz
Complaint
): On February 24, 2012, Oswald Velz
brought a stockholder class action with the Eighth Judicial District Court
against the Company and others in connection with the proposed going private
transaction by Mr. Xia (the
proposed transaction
), alleging that the
consideration of the proposed transaction was grossly inadequate and Mr. Xia
had breached his fiduciary duties to the Companys stockholders. In Velz
Complaint, the plaintiff seeks (i) injunctive relief enjoining the proposed
transaction, (ii) rescission or rescissory damages if the proposed transaction
is consummated, (iii) requiring the approval of the majority of shareholders
unaffiliated with the defendants to proceed with the proposed transaction,
(iv) damages in an unspecified amount, and (v) attorneys fees and costs.
-
Tim Valles v. Shudong Xia et al.
, Case No. A-12-657443-C
(
Valles Complaint
): On March 1, 2012, Tim Valles brought a
stockholder class action with the Eighth Judicial District Court against the
Company and others in connection with the proposed transaction, alleging that
the members of the board of directors of the Company had breached their
fiduciary duties to the Companys stockholders. In Valles Complaint, the
plaintiff seeks (i) injunctive relief enjoining the proposed transaction, (ii)
rescission or rescissory damages if the proposed transaction is consummated,
(iii) damages in an unspecified amount, and (iv) attorneys fees and costs.
-
Carl M. Domitrovich v. Shudong Xia et al.
, Case No. A-12-657440-C
(
Domitrovich
Complaint
): On March 6, 2012, Carl M. Domitrovich
brought a stockholder class action with the Eighth Judicial District Court
against the Company and others in connection with the proposed transaction,
alleging that the consideration of the proposed transaction was grossly
inadequate and the members of the board of directors of the Company had
breached their fiduciary duties to the Companys stockholders. In Domitrovich
Complaint, the plaintiff seeks (i) injunctive relief enjoining the proposed
transaction, (ii) rescission or rescissory damages if the proposed transaction
is consummated, (iii) damages in an unspecified amount, and (v) attorneys
fees and costs.
The Company and our board of directors believe that the claims
in these complaints are without merit and intend to defend against them
vigorously.
One of the conditions to the closing of the merger is that no
order by a court or other governmental entity shall be in effect that prohibits
the consummation of the merger or that makes the consummation of the merger
illegal. As such, if the plaintiffs are successful in obtaining an injunction
prohibiting the defendants from completing the merger on the agreed-upon terms,
then such injunction may prevent the merger from becoming effective, or from
becoming effective within the expected timeframe.
53
THE SPECIAL MEETING
We are furnishing this proxy statement to the Companys
stockholders as part of the solicitation of proxies by the board of directors of
the Company for use at the special meeting.
Date, Time and Place
We will hold the special meeting at
a.m., Beijing time, on
,
2012, at
. Seating will be limited to stockholders. Admission to the special
meeting will be on a first-come, first-served basis. If you plan to attend the
special meeting, please note that you may be asked to present valid photo
identification, such as a drivers license or passport. Stockholders owning
stock in brokerage accounts must bring a copy of a brokerage statement
reflecting stock ownership as of the record date. Cameras, recording devices and
other electronic devices will not be permitted at the meeting.
Purpose of the Special Meeting
The special meeting is being held for the following
purposes:
-
to approve the merger agreement (see
The Merger Agreement
beginning on page 58); and
-
to approve the adjournment of the special meeting, if necessary or
appropriate, to solicit additional proxies if there are insufficient votes at
the time of the special meeting to approve the merger agreement.
A copy of the merger agreement is attached as Annex A to this
proxy statement.
Recommendation of Our Board of Directors and Special
Committee
The board of directors of the Company, after careful
consideration and acting on the unanimous recommendation of the special
committee composed entirely of independent directors, deemed it advisable, fair
to and in the best interests of the Company and the unaffiliated stockholders
that the Company enter into the merger agreement, determined that the merger
agreement and the transactions contemplated by the merger agreement, including
the merger, are advisable, fair to and in the best interests of the Company and
the unaffiliated stockholders and recommended that the Companys stockholders
approve the merger agreement at the special meeting. The board of directors of
the Company recommends that you vote
FOR
the approval of the merger
agreement.
Our board of directors also recommends that you vote
FOR
the proposal to approve the adjournment of the special meeting, if
necessary or appropriate, to solicit additional proxies if there are
insufficient votes at the time of the special meeting to approve the merger
agreement.
Record Date; Stockholders Entitled to Vote; Quorum
Only holders of record of Company common stock at the close of
business, New York time, on
, 2012, the record date, are entitled to notice of
and to vote at the special meeting. On the record date,
shares of Company common
stock were issued and outstanding and held by
holders of record. Holders of
record of shares of Company common stock on the record date are entitled to one
vote per share of Company common stock at the special meeting on each proposal.
For ten days prior to the meeting, a complete list of stockholders entitled to
vote at the meeting will be available for examination by any stockholder, for
any purpose relating to the meeting, during ordinary business hours at our
offices located at 9th Floor, Vision Building, No. 39 Xueyuanlu, Haidian
District, Beijing, PRC, 100191.
Shares of Company common stock represented by proxies
reflecting abstentions will be counted as present and entitled to vote for
purposes of determining a quorum. Broker non-votes will not be counted for
purposes of determining a quorum. A broker non-vote occurs when a broker,
dealer, commercial bank, trust company or other nominee does not vote on a
particular matter because such broker, dealer, commercial bank, trust company or
other nominee does not have the discretionary voting power with respect to that
proposal and has not received voting instructions from the beneficial owner.
Brokers, dealers, commercial banks, trust companies and other nominees will not have discretionary voting power with respect to the
proposal to approve the merger agreement or the adjournment proposal. The
presence at the special meeting in person or by proxy of the holders of a
majority of shares of the Companys capital stock issued and outstanding and
entitled to vote at the special meeting as of the record date will constitute a
quorum for purposes of the special meeting. In the event that a quorum is not
present, or if there are insufficient votes to approve the merger agreement at
the time of the special meeting, it is expected that the meeting will be
adjourned or postponed to solicit additional proxies.
54
Vote Required
Proposal No. 1
The approval of the merger agreement by our stockholders
requires the affirmative vote of both (i) the holders of a majority of the
shares of Company common stock and (ii) the holders of a majority of the shares of
Company common stock (excluding Rollover Shares).
The requirement that the merger agreement be approved by
the holders of a majority of the shares of Company common stock (excluding Rollover
Shares) is not mandated by Nevada law but was negotiated by the special
committee in order to further protect the interests of the unaffiliated
stockholders in connection with the merger.
Failure to vote your shares of Company common stock will have
the same effect as a vote AGAINST the proposal to approve the merger
agreement.
Proposal No. 2
For the approval of the adjournment or postponement of the
special meeting, the affirmative vote of the holders of at least a majority of
the shares of Company common stock present in person or represented by proxy at
the meeting and entitled to vote, whether or not a quorum is present, is
required.
Stock Ownership and Interests of Certain Persons
As of
, 2012, the record date for the special meeting, our
directors (including Mr. Xia and Ms. Danxia Huang) and current executive
officers owned, in the aggregate,
shares of Company common stock, or
collectively approximately ______% of the outstanding shares of Company common stock.
See
Common Stock Ownership of Management and Certain Beneficial Owners
beginning on page 72 for additional information. Our directors and current
executive officers have informed us that they intend, as of the date hereof, to
vote all of their shares of Company common stock in favor of the approval of the
merger agreement.
Certain members of our management and the board of directors of
the Company have interests that may be different from, or in addition to, those
of our stockholders generally. See
Special Factors Relating to the
MergerInterests of the Companys Directors and Officers in the Merger
beginning on page 47 for additional information.
Voting Procedures
Ensure that your shares of Company common stock can be voted
at the special meeting by submitting your proxy or contacting your broker,
dealer, commercial bank, trust company or other nominee.
If your shares of Company common stock are registered in
the name of a broker, dealer, commercial bank, trust company or other
nominee
: check the voting instruction card forwarded by your broker,
dealer, commercial bank, trust company or other nominee to see which voting
options are available or contact your broker, dealer, commercial bank, trust
company or other nominee in order to obtain directions as to how to ensure that
your shares of Company common stock are voted at the special meeting.
If your shares of Company common stock are registered in
your name:
submit your proxy as soon as possible by telephone, via the
Internet or by signing, dating and returning the enclosed proxy card in the
enclosed postage-paid envelope, so that your shares of Company common stock can
be voted at the special meeting.
Instructions regarding telephone and Internet voting are
included on the proxy card.
55
The failure to vote will have the same effect as a vote against
the proposal to approve the merger agreement. If you sign, date and mail your
proxy card without indicating how you wish to vote, your proxy will be voted
FOR
the approval of the merger agreement and the proposal to postpone
or adjourn the special meeting, if necessary or appropriate, to solicit
additional proxies in the event there are insufficient votes at the time of the
special meeting to approve the merger agreement.
The failure to instruct your broker, dealer, commercial bank,
trust company or other nominee to vote your shares of our common stock FOR the
proposal to approve the merger agreement will have the same effect as a vote
AGAINST the proposal to approve the merger agreement.
For additional questions about the merger, assistance in
submitting proxies or voting shares of Company common stock, or to request
additional copies of the proxy statement or the enclosed proxy card, please
contact:
________________
Voting by Proxy or in Person at the Special Meeting
Holders of record can ensure that their shares of Company
common stock are voted at the special meeting by completing, signing, dating and
delivering the enclosed proxy card in the enclosed postage-paid envelope.
Submitting by this method or voting by telephone or the Internet as described
below will not affect your right to attend the special meeting and to vote in
person. If you plan to attend the special meeting and wish to vote in person,
you will be given a ballot at the special meeting. Please note, however, that if
your shares of Company common stock are held in street name by a broker,
dealer, commercial bank, trust company or other nominee and you wish to vote at
the special meeting, you must bring to the special meeting a proxy from the
record holder of those shares of Company common stock authorizing you to vote at
the special meeting.
If you vote your shares of Company common stock by submitting a
proxy, your shares will be voted at the special meeting as you indicated on your
proxy card or Internet or telephone proxy. If no instructions are indicated on
your signed proxy card, all of your shares of Company common stock will be voted
FOR
the approval of the merger agreement and the approval to
postpone or adjourn the special meeting, if necessary or appropriate, to solicit
additional proxies if there are insufficient votes at the time of the special
meeting to approve the merger agreement. You should return a proxy by mail, by
telephone or via the Internet even if you plan to attend the special meeting in
person.
Electronic Voting
Our holders of record and many stockholders who hold their
shares of Company common stock through a broker, dealer, commercial bank, trust
company or other nominee will have the option to submit their proxy cards or
voting instruction cards electronically by telephone or the Internet. Please
note that there are separate arrangements for voting by telephone and Internet
depending on whether your shares of Company common stock are registered in our
records in your name or in the name of a broker, dealer, commercial bank, trust
company or other nominee. If you hold your shares of Company common stock
through a broker, bank or other nominee, you should check your voting
instruction card forwarded by your broker, dealer, commercial bank, trust
company or other nominee to see which options are available.
Please read and follow the instructions on your proxy card or
voting instruction card carefully.
Other Business
We do not expect that any matter other than (i) the proposal to
approve the merger agreement and (ii) the approval of the adjournment or
postponement of the special meeting, if necessary or appropriate, to solicit
additional proxies if there are insufficient votes at the time of the special
meeting to approve the merger agreement, will be brought before the special
meeting. If, however, other matters are properly presented at the special
meeting, the persons named as proxies will vote in accordance with their best
judgment with respect to those matters.
56
Adjournments and Postponements
The Company may request the adjournment or postponement of the
special meeting, and the holders of a majority of the shares of Company common
stock present in person or by proxy at the special meeting may approve any
adjournment or postponement of the special meeting, whether or not a quorum
exists, without further notice other than by an announcement made at the special
meeting. If a quorum is not present at the special meeting, or if a quorum is
present at the special meeting but there are not sufficient votes at the time of
the special meeting to approve the merger agreement, the Company may, at its
sole discretion, adjourn or postpone the special meeting so as to permit the
further solicitation of proxies.
The Company is permitted to delay, postpone, or cancel the
special meeting if in the good faith judgment of our board of directors, acting
upon a recommendation of the special committee, a failure to do so would be
inconsistent with their respective fiduciary duty obligations. The Company is
permitted to delay the meeting in order to allow for completion of the proxy
solicitation process.
Revocation of Proxies
Submitting a proxy on the enclosed form does not preclude a
stockholder from voting in person at the special meeting. A stockholder of
record may revoke a proxy at any time before it is voted by filing with our
corporate secretary a duly executed revocation of proxy, by properly submitting
a proxy by mail, the Internet or telephone with a later date or by appearing at
the special meeting and voting in person. A stockholder of record may revoke a
proxy by any of these methods, regardless of the method used to deliver the
stockholders previous proxy. Attendance at the special meeting without voting
will not itself revoke a proxy. If your shares of Company common stock are held
in street name, you must contact your broker, dealer, commercial bank, trust
company or other nominee to revoke your proxy.
Rights of Stockholders Who Object to the Merger
You do not have any dissenters rights or other statutory
rights of objection in connection with the merger under Nevada law. Section
92A.390 of the NRS does not provide any right of dissent with respect to a plan
of merger under criteria described in that section of the NRS, which the Company
satisfies.
Solicitation of Proxies
This proxy solicitation is being made by the Company on behalf
of the board of directors of the Company and will be paid for by the Company. In
addition, we have engaged
to assist in the solicitation of proxies for the
special meeting and we estimate that we will pay
a fee of $
excluding certain
out-of-pocket expenses. The Companys directors, officers and employees may also
solicit proxies by personal interview, mail, e-mail, telephone, facsimile or
other means of communication. These persons will not be paid additional
remuneration for their efforts. The Company will also request brokers, dealers,
commercial banks, trust companies and other nominees to forward proxy
solicitation material to the beneficial owners of shares of Company common stock
that the brokers, dealers, commercial banks, trust companies and other nominees
hold of record. Upon request, the Company will reimburse them for their
reasonable out-of-pocket expenses.
Assistance
If you need assistance in completing your proxy card or have
questions regarding the special meeting, please contact
or by email at
.
57
PROPOSAL ONEAPPROVAL OF THE MERGER AGREEMENT
THE MERGER AGREEMENT
The following is a summary of the material terms and
conditions of the merger agreement. The description in this section and
elsewhere in this proxy statement is qualified in its entirety by reference to
the complete text of the merger agreement, dated as of June 8, 2012, a copy of
which is attached as
Annex A, and is incorporated by
reference into this proxy statement. This summary does not purport to be
complete and may not contain all of the information about the merger agreement
that is important to you. We encourage you to read the merger agreement
carefully and in its entirety because it is the legal document that governs this
merger.
Explanatory Note Regarding the Merger Agreement
The merger agreement and this summary of its terms have been
included to provide you with information regarding the terms of the merger
agreement. Factual disclosures about the Company contained in this proxy
statement or in the Companys public reports filed with the SEC may supplement,
update or modify the factual disclosures about the Company contained in the
merger agreement and described in this summary. The representations, warranties
and covenants made in the merger agreement by the Company, Parent and Merger Sub
were qualified and subject to important limitations agreed to by the Company,
Parent and Merger Sub in connection with negotiating the terms of the merger
agreement. In particular, in your review of the representations and warranties
contained in the merger agreement and described in this summary, it is important
to bear in mind that the representations and warranties were negotiated with the
principal purposes of establishing the circumstances in which a party to the
merger agreement may have the right not to close the merger if the
representations and warranties of the other party prove to be untrue due to a
change in circumstance or otherwise, and allocating risk between the parties to
the merger agreement, rather than establishing matters as facts. The
representations and warranties may also be subject to a contractual standard of
materiality different from those generally applicable to stockholders and
reports and documents filed with the SEC and in some cases were qualified by
disclosures that were made by each party to the other, which disclosures are not
reflected in the merger agreement. Moreover, information concerning the subject
matter of the representations and warranties, which do not purport to be
accurate as of the date of this proxy statement, may have changed since the date
of the merger agreement and subsequent developments or new information
qualifying a representation or warranty may have been included in this proxy
statement.
Effects of the Merger; Directors and Officers; Certificate
of Incorporation; Bylaws
The merger agreement provides for the merger of Merger Sub with
and into the Company upon the terms, and subject to the conditions, set forth in
the merger agreement. As the surviving corporation, the Company will continue to
exist following the merger. The surviving corporation will be a privately held
corporation and the unaffiliated stockholders will cease to have any ownership
interest in the surviving corporation or rights as our stockholders. Therefore,
such current stockholders will not participate in any future earnings or growth
of the surviving corporation and will not benefit from any appreciation in value
of the surviving corporation.
The board of directors of the surviving corporation will, from
and after the effective time of the merger, consist of the directors of Merger
Sub until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal. The officers of the surviving
corporation will, from and after the effective time of the merger, be the
officers of the Company until their successors have been duly appointed and
qualified or until their earlier death, resignation or removal.
At the effective time of the merger, the articles of
incorporation and bylaws of the surviving corporation will be amended in its
entirety to read as the articles of incorporation and bylaws, respectively, of
Merger Sub as in effect immediately prior to the effective time of the merger,
until thereafter amended as provided therein and by applicable law.
Closing and Effective Time of the Merger
The closing of the merger will take place on the second
business day after the satisfaction or, to the extent permitted by applicable
law, waiver by the party or parties entitled to the benefits of the conditions
to closing (described under
The Merger AgreementConditions to the
Merger
) (other than those conditions that by their nature are to be
satisfied at the closing, but subject to the satisfaction or, to the extent
permitted by law, waiver of those conditions).
58
The merger will become effective on the business day
immediately after the date on which the articles of merger are duly filed with
the Secretary of State of the State of Nevada (or on such other date and time as
Parent and the Company will agree in writing and specify in the articles of
merger, and in each case, such date may not be more than ninety days after the
date on which the articles of merger are filed).
Treatment of Common Stock, Company Options and Company
Warrants
As of the effective time of the merger, each share of Company
common stock issued and outstanding immediately prior to the effective time of
the merger (other than shares held by the Company as treasury stock or owned,
directly or indirectly, by Parent, Merger Sub or any wholly owned subsidiary of
the Company immediately prior to the effective time of the merger, including the
Rollover Shares) will be converted into the right to receive the per share
merger consideration in cash without any interest thereon.
As of the effective time of the merger, each outstanding,
vested and unexercised option to purchase shares of Company common stock will be
cancelled and converted into the right to receive, as soon as reasonably
practicable after the effective time of the merger, a cash amount equal to the
number of shares underlying such option immediately prior to the effective time
of the merger multiplied by the amount by which $5.80 exceeds the exercise price
per share of such option, net of any applicable withholding taxes.
As of the effective time of the merger, each outstanding and
unvested option to purchase shares of Company common stock will be cancelled and
converted into the right to receive, as soon as reasonably practicable after the
effective time of the merger, a restricted cash award in an amount equal to the
number of shares underlying such option immediately prior to the effective time
of the merger multiplied the amount by which $5.80 exceeds the exercise price
per share of such option.
As of the effective time of the merger, each outstanding and
unexercised warrant to purchase shares of Company common stock will be cancelled
and converted into the right to receive, as soon as reasonably practicable after
the effective time of the merger, a cash amount equal to the total number of
shares underlying such warrant immediately prior to the effective time of the
merger multiplied by the amount by which $5.80 exceeds the exercise price per
share of such warrant.
Exchange and Payment Procedures
Prior to the effective time of the merger, Parent will
designate a bank or trust company reasonably acceptable to the Company to act as
the paying agent. At or prior to the effective time of the merger, Parent will
deposit, or will cause to be deposited, with the paying agent an amount in cash
sufficient for the paying agent to make payment of the aggregate per share
merger consideration to the holders of shares of Company common stock.
Promptly after the effective time of the merger (but in any
event no later than five business days), each record holder of shares of Company
common stock will be sent (i) a letter of transmittal describing how it may
exchange its shares of Company common stock for the per share merger
consideration and (ii) instructions for effecting the surrender of share
certificates in exchange for its per share merger consideration.
You should not return your stock certificates with the
enclosed proxy card, and you should not forward your stock certificates to the
paying agent without a letter of transmittal.
You will not be entitled to receive the per share merger
consideration until you surrender your stock certificate or certificates along
with a duly completed and executed letter of transmittal to the paying agent or
until the paying agent receives an agents message in the case of shares held
in book-entry form and other documents reasonably required by the paying agent
and approved by Parent and us. If payment of the per share merger consideration
is to be made to a person other than the person in whose name the surrendered
certificate is registered, a check for any cash to be delivered will only be
issued if (i) the certificate shall be properly endorsed or shall otherwise be
in proper form for transfer, and (ii) the person requesting such payment shall
have paid any transfer and other taxes required by reason of the payment of the per
share merger consideration to a person other than the registered holder of such
certificate surrendered or shall have established to the reasonable satisfaction
of the paying agent that such tax either has been paid or is not payable.
59
No interest will be paid or accrued on the cash payable as the
per share merger consideration as provided above.
From and after the effective time of the merger, there will be
no transfers on the stock transfer books of the surviving corporation of shares
of Company common stock that were outstanding immediately prior to the effective
time of the merger. If, after the effective time of the merger, any person
presents to the surviving corporation, any certificates relating to shares
canceled in the merger, such person will be given a copy of the letter of
transmittal and told to comply with the instructions in that letter of
transmittal in order to receive the cash to which such person is entitled.
Any portion of the per share merger consideration deposited
with the paying agent that remains undistributed to holders of Company common
stock for twelve months after the effective time of the merger may be delivered
to the surviving corporation. Any holders of Company common stock who have not
complied with the above-described exchange and payment procedures will
thereafter only look to the surviving corporation for payment of the per share
merger consideration. None of the surviving corporation, Parent, the paying
agent or any other person will be liable to any holders of Company common stock
for any per share merger consideration delivered to a public official pursuant
to any applicable abandoned property, escheat or similar laws.
If you have lost a certificate, or if it has been stolen or
destroyed, then before you will be entitled to receive the per share merger
consideration, you will have to make an affidavit of the loss, theft or
destruction, and if required by the surviving corporation, deliver an agreement
of indemnification in a form reasonably satisfactory to the surviving
corporation or post a bond in a reasonable amount as indemnity against any claim
that may be made against it with respect to such certificate. These procedures
will be described in the letter of transmittal that you will receive, which you
should read carefully in its entirety.
Representations and Warranties
The merger agreement contains representations and warranties
made by the Company to Parent and Merger Sub and representations and warranties
made by Parent and Merger Sub to the Company, in each case, as of specific
dates. The statements embodied in those representations and warranties were made
for purposes of the merger agreement and are subject to important qualifications
and limitations agreed by the parties in connection with negotiating the terms
of the merger agreement (including the disclosure letter delivered by the
Company in connection therewith but not reflected in 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
stockholders, may have been made for the principal purposes of establishing the
circumstances in which a party to the merger agreement may have the right not to
close the merger if the representations and warranties of the other party prove
to be untrue due to a change in circumstance or otherwise, and allocating risk
between the parties to the merger agreement rather than establishing matters as
facts. Moreover, information concerning the subject matter of the
representations and warranties, which do not purport to be accurate as of the
date of this proxy statement, may have changed since the date of the merger
agreement and subsequent developments or new information qualifying a
representation or warranty may have been included in this proxy statement.
The representations and warranties made by the Company to
Parent and Merger Sub include representations and warranties relating to, among
other things:
-
due organization, existence, good standing and authority to own and use
the Companys properties and assets and to carry on the Companys businesses;
-
the absence of encumbrances on the Companys ownership of the equity
interests of its subsidiaries;
60
-
the Company’s corporate power and authority to execute, deliver and perform its obligations under and to consummate the transactions under the merger agreement, and the enforceability of the merger agreement against the Company;
-
the declaration of advisability of the merger agreement and the merger by the special committee and by the board of directors of the Company, the approval of the merger agreement and the merger by the board of directors of the Company and the board
of directors’ submission of the merger agreement to a vote by the stockholders of the Company;
-
the required vote of the Company’s stockholders to approve the merger agreement;
-
the absence of conflicts with, or breaches or default under, organizational documents, contracts and applicable law;
-
the Company’s capitalization, the absence of preemptive or other similar rights or any debt securities that give its holders the right to vote with the Company’s stockholders;
-
governmental consents and approvals;
-
the Company’s SEC filings since January 1, 2010 and the financial statements included therein;
-
the absence of a Company “Material Adverse Effect” (as defined below) and the absence of certain other changes or events since December 31, 2011;
-
the absence of certain undisclosed liabilities;
-
the absence of legal proceedings against the Company or its subsidiaries;
-
compliance with applicable laws, licenses and permits;
-
possession of all material regulatory permits;
-
title to assets and absence of liens on assets (other than certain permitted liens);
-
intellectual property;
-
insurance;
-
material contracts and the absence of any material default under, or termination of, any material contract;
-
the absence of certain transactions with the Company’s affiliates and employees;
-
the Company’s disclosure controls and procedures and internal controls over financial reporting;
-
the accuracy of the information provided in the Schedule 13E-3 and this proxy statement;
-
the opinion from William Blair;
-
tax matters;
-
environmental matters;
-
the absence of foreign corrupt practices;
-
the disclosure letter to the merger agreement;
61
-
the inapplicability of Nevada anti-takeover statutes to the merger;;
-
the absence of any undisclosed brokers or finders fees; and
-
acknowledgment as to absence of any other representations and warranties.
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 circumstance, event, change, effect or development, that
individually or in the aggregate with all other circumstances, events, changes,
effects, or developments, has had or would reasonably be expected to have a
material adverse effect on the financial condition, results of operations,
prospects, assets, liabilities, properties or business of the Company and its
subsidiaries, taken as a whole. However, a Material Adverse Effect does not
include the effects relating to or resulting from:
-
changes or modifications in GAAP or regulatory accounting requirements or
changes in laws (or interpretations thereof) applicable to the Company or any
of its subsidiaries;
-
changes, effects or circumstances in the industries or markets in which
the Company or any of its subsidiaries operates;
-
changes in general business, economic, political or financial market
conditions;
-
changes in the financial, credit or securities markets in the United
States, the PRC or any other country or region in the world, including changes
in interest rates, foreign exchange rates and sovereign credit ratings;
-
the public disclosure of the merger agreement or the transactions
contemplated or the consummation of the transactions contemplated or the
announcement of the execution of the merger agreement, including, without
limitation, any stockholder litigation relating to the merger agreement;
-
any change in the price of the shares of Company common stock or trading
volume as quoted on the NASDAQ Global Market;
-
any outbreak or escalation of hostilities, declared or undeclared acts of
war or terrorism, acts of God or natural disasters;
-
actions or omissions taken with the prior written consent of or at the
written request of the other parties under the merger agreement or required or
permitted by the merger agreement;
-
the failure by the Company or any of its subsidiaries to meet any internal
or industry estimates, expectations, forecasts, projections or budgets for any
period ;
-
any change or prospective change in the Companys credit ratings; or
-
any loss of, or change in, the relationship of the Company or any of its
subsidiaries, contractual or otherwise, with its brokers, customers,
suppliers, vendors, lenders, employees, investors, or joint venture partners
arising out of the execution, delivery or performance of the merger agreement,
the consummation of the transactions contemplated or the announcement of any
of the foregoing.
The representations and warranties made by Parent and Merger
Sub to the Company include representations and warranties relating to, among
other things:
62
-
their corporate power and authority to execute, deliver and perform their obligations under and to consummate the transactions contemplated by the merger agreement, and the enforceability of the merger agreement against them;
-
the absence of conflicts with, or breaches or defaults under, organizational documents, contracts and applicable law;
-
governmental consents and approvals;
-
operations and ownership of Merger Sub;
-
the absence of legal proceedings against Parent, Merger Sub or any of their respective affiliates;
-
the accuracy of the information provided by Parent or Merger Sub or any of its subsidiaries for inclusion in the Schedule 13E-3 and this proxy statement;
-
sufficiency of funds in the financing to pay the aggregate merger consideration and other amounts required to be paid in connection with the consummation of the transactions contemplated by the merger agreement;
-
delivery of the facility agreement, the equity commitment letters and the contribution agreements and the absence of any default thereunder;
-
Parent and Merger Sub has no reason to believe that it will be unable to satisfy on a timely basis each and every term or condition of closing to be satisfied by it in any of the financing documents or the contribution agreements, on or prior to the
closing date of the merger;
-
the absence of conditions precedent to the funding or investing of the full amount of the debt financing and the equity financing other than as expressly set forth in or contemplated by the financing documents;
-
the absence of any side letters or other agreements to which Parent or its affiliates are a party relating to the financing or investing;
-
the absence of any undisclosed brokers’ or finders’ fees;
-
the absence of any other arrangements between or among Mr. Xia, Holdco, Parent, Merger Sub, SAIF IV, guarantor or any of their respective affiliates, on the one hand, and any stockholder, member of the Company board or officer of the Company, on the
other hand relating to the merger agreement, the merger or any other transactions contemplated by the merger agreement, or the ownership or operation of Parent, the surviving corporation or any of its subsidiaries, businesses or operations
(including as to continuing employment) from and after the effective time of the merger;
-
the absence of any undisclosed side letters or other agreements among the Mr. Xia, Holdco, SAIF IV, Parent, Merger Sub and guarantor or any of their respective affiliates relating to the transactions contemplated by the merger agreement;
-
independent investigation conducted by Parent and Merger Sub and non-reliance on the Company’s estimates, projections, forecasts, plans or budgets;
-
the execution and the validity and enforceability of the limited guarantee provided by Mr. Xia and SAIF IV of certain obligations of Parent and the absence of any default thereunder;
-
solvency of Parent, Merger Sub and the surviving corporation immediately following consummation of the merger; and
-
acknowledgement as to the absence of any other representations and
warranties.
63
Many of the Parents and Merger Subs representations and
warranties are qualified as to, among other things materiality or Parent
material adverse effect. For purposes of the merger agreement, Parent material
adverse effect means any circumstance, event, change, effect or development
that, individually or in the aggregate, prevents, materially impedes, interferes
with, hinders or delays the consummation by Parent or Merger Sub of the
transactions contemplated by the merger agreement on a timely basis, including
the merger.
Conduct of Business Prior to Closing
Under the merger agreement, the Company has agreed that,
subject to certain exceptions set forth in the merger agreement and the
disclosure letter the Company delivered in connection with the merger agreement
or with the written consent of Parent, from the date of the merger agreement
until the earlier of the effective time of the merger or the termination of the
merger agreement, the Company will and will cause each of its subsidiaries to
conduct its business in the ordinary course in all material respects and use
reasonable best efforts to maintain and preserve intact its business
organizations and advantageous business relationships, and keep available the
services of its current key officers and employees.
Subject to certain exceptions set forth in the merger agreement
and the disclosure letter the Company delivered in connection with the merger
agreement or as required by applicable law or a governmental entity, unless
Parent consents in writing, the Company will not and will not permit its
subsidiaries to, among other things:
-
issue, sell, pledge, dispose, encumber, grant, or authorize any capital
stock of the Company or any of its subsidiaries, subject to certain
exceptions;
-
make, declare, pay or set aside dividends or other distribution with
respect to the capital stock of the Company or any of its subsidiaries (except
for dividends paid by any subsidiaries);
-
adjust, split, combine, redeem, or otherwise acquire any of the capital
stock of the Company or any of its subsidiaries, subject to certain
exceptions;
-
sell, transfer, mortgage, encumber, or otherwise dispose of or discontinue
any of the Companys assets, deposits, business or properties, other than in
the ordinary course of business;
-
acquire all or any portion of assets, business, deposits or properties of
any other entity;
-
amend the governing documents of the Company or its subsidiaries in any
material respect;
-
change accounting principles or methods, except as required by United
States generally accepted accounting principles or applicable regulatory
accounting requirements or as a result of change in law;
-
grant any material increases in the compensation of any of the Companys
or its subsidiaries directors or executive officers other than in the
ordinary course of business;
-
except in the ordinary course of business and consistent with past
practice, (a) grant or increase any severance, change in control, termination
or similar compensation or benefits payable to any director, officer or
employee, (b) accelerate the time of payment or vesting of, or the lapsing of
restrictions with respect to, or fund or otherwise secure the payment of, any
compensation or benefits under any Company option plan, (c) enter into,
terminate or materially amend any Company option plan (or any plan, program,
agreement, or arrangement that would constitute a plan if in effect on the
date hereof), (d) enter into any employment agreement with any officer or
employee of the Company or any subsidiary of the Company, (e) establish,
adopt, enter into or amend any collective bargaining agreement, plan, trust,
fund, policy or arrangement for the benefit of any current or former
directors, officers or employees of the Company or its subsidiaries or any of
their beneficiaries, or (f) issue or grant any options, warrants, scrip rights
to subscribe to, calls or commitments of any character whatsoever relating to,
or securities, rights or obligations convertible into or exercisable or
exchangeable for, or giving any person any right to subscribe for or acquire,
for any shares of Company common stock, or contracts, commitments,
understandings or arrangements by which the Company or any subsidiary is or
may become bound to issue additional shares of Company common stock or
preferred stock;
64
-
incur or guarantee any long-term indebtedness for borrowed money;
-
enter into, terminate, modify or amend any contracts that calls for annual
aggregate payments of $1,000,000 or more with a term longer than one year
which cannot be terminated without material penalty upon notice of ninety days
or less, other than in the ordinary course of business; or
-
agree to take any of the actions prohibited by the foregoing.
Parent Forbearance
Except as expressly contemplated by or permitted by the merger
agreement or with the written consent of the Company, during the period from the
date of the merger agreement until the earlier of the effective time of the
merger or the termination of the merger agreement, neither Parent nor Merger Sub
shall, and Parent shall cause Merger Sub not to, engage in any business activity
or operations.
Access to Information
Upon reasonable notice and subject to applicable laws relating
to the confidentiality of information or requirements of governmental entities
and certain other exceptions, the Company shall, and shall cause each of its
subsidiaries to, afford Parents representatives reasonable access, during
normal business hours, upon reasonable advance notice, to all of its properties,
books, contracts, commitments and records, and, during such period, each of
Parent and the Company shall, and shall cause its subsidiaries to, make
available to the other party (a) to the extent not publicly available, a copy of
each report, schedule, correspondence, registration statement and other document
filed or received by it during such period pursuant to the requirements of
federal or state securities laws and (b) all other information concerning its
business, properties and personnel as the other party may reasonably
request.
Alternative Takeover Proposals
Until 11:59 p.m. New York City time on July 18, 2012, the
Company and its subsidiaries and their respective representatives are permitted
to:
-
solicit, initiate, facilitate and encourage any inquiry or the making of
takeover proposals from third parties, including by providing third parties
access to information pursuant to confidentiality agreements containing terms
at least as restrictive with respect to such third parties as the
confidentiality terms contained in the merger agreement (provided that the
Company simultaneously or as promptly as reasonably practicable provides any
material non-public information concerning the Company or its subsidiaries to
Parent if not previously provided to Parent); and
-
enter into, continue or otherwise participate in discussions or
negotiations with any person with respect to any takeover proposal, or
otherwise cooperate with, assist, participate in, facilitate or take any
action in connection with such inquiries, proposals, discussions or
negotiations.
From and after 12:00 a.m. New York City time on July 19, 2012,
the Company and its subsidiaries and their respective representatives are
required to immediately cease any discussions or negotiations with any persons
that may be ongoing with respect to any takeover proposals, except as may relate
to continuing parties (as defined below). From and after 12:00 a.m. New York
City on July 19, 2012 until the earlier of the effective time of the merger or
the termination of the merger agreement, the Company and its subsidiaries and
their respective representatives will not:
65
-
provide any material non-public information concerning the Company or its
subsidiaries to a third party in connection with a takeover proposal; or
-
engage in discussions or negotiations with any third party concerning a
takeover proposal.
However, the Company may continue to
engage in the actions described in the first and second bullet above until 11:59 p.m. New York
City time on August 2, 2012 with a continuing party.
Prior to the time the Companys stockholders approve the merger
agreement, if the Company receives an unsolicited written takeover proposal from
a third party that the special committee determines in good faith (after
consultation with its financial and legal advisors) could result in a superior
proposal and the failure to take action would result in a breach of its
fiduciary duties under applicable law, the Company may:
-
contact such party to clarify and understand the terms and conditions
thereof to the extent the special committee shall have determined in good
faith that such contact is necessary to determine whether such proposal or is
reasonably likely to result in a superior proposal;
-
furnish information to such party pursuant to an acceptable
confidentiality agreement; and
-
engage in discussions or negotiations with such party with respect to such
proposal.
The Company shall promptly advise Parent within 24 hours,
orally or in writing, of any takeover proposal, any initial request for
non-public information and any initial request for discussions or negotiations
related to a takeover proposal. In connection with such notice, Company must
also provide the material terms and conditions and the identity of the third
party making the takeover proposal or request. The Company must also keep Parent
informed in all material respects of the status and details of such takeover
proposal or request.
The merger agreement provides that the
board of directors of the Company can only (a)(i) withdraw
(or modify in a manner adverse to Parent and Merger Sub), or propose publicly to
withdraw (or modify in a manner adverse to Parent and Merger Sub), the board of
directors recommendation or (ii) adopt, approve or recommend, or propose
publicly to adopt, approve or recommend, any takeover proposal (any action in
this clause (a) being referred to as a
change of recommendation
)
or (b) adopt, approve or recommend, or allow the Company or any of its
subsidiaries to execute or enter into, any letter of intent, memorandum of
understanding, agreement in principle, merger agreement, acquisition agreement,
option agreement or other similar agreement constituting or related to, or that
would reasonably be expected to result in, any takeover proposal (other than a
confidentiality agreement referred to under the merger agreement) if at any time prior to the receipt of the requisite
stockholder approvals of the merger, (x) the special committee determines in
good faith (after consultation with the Companys outside legal advisors) that
the failure to do so would be inconsistent with its fiduciary duties under
applicable law, then the board of directors of the Company, acting upon the
recommendation of the special committee, may make a change of recommendation;
and (y) the board of directors of the Company determines in good faith (after
consultation with the Companys outside financial and legal advisors) that a
takeover proposal constitutes a superior proposal, then the Company may enter
into a definitive written agreement with respect to such superior proposal and
terminate the merger agreement.
The Company is not entitled to effect a change of
recommendation or terminate the merger agreement unless (i) the Company has
provided written notice at least five business days in advance to Parent and
Merger Sub advising Parent that the board of directors of the Company intends to
make a change of recommendation or enter into a definitive written agreement
with respect to such superior proposal, as applicable, and specifying the
reasons therefor, including in the case of a superior proposal the material
terms and conditions of such superior proposal that is the basis of the proposed
action by the board of directors of the Company (including the identity of the
third party making the superior proposal and any financing materials related
thereto, if any), (ii) during the five business day period following Parents
and Merger Subs receipt of the notice of superior proposal, the Company will,
and will cause its representatives to, negotiate with Parent and Merger Sub in
good faith (to the extent Parent and Merger Sub desire to negotiate) to make
such adjustments in the terms and conditions of the merger agreement and the
financing commitments so that such superior proposal ceases to constitute a
superior proposal, and (iii) following the end of the five business day period,
the board of directors of the Company and the special committee will have
determined in good faith, taking into account any changes to the merger
agreement and the terms of the debt financing and the equity financing proposed in writing by Parent and Merger Sub
in response to the notice of superior proposal or otherwise, that the superior
proposal giving rise to the notice of superior proposal continues to constitute
a superior proposal. Any material amendment to the financial terms or any other
material amendment of such superior proposal will require a new notice of
superior proposal and the Company will be required to comply again with the
procedures in this paragraph, provided that references above in this paragraph to
five business days will be changed to references to three business days.
66
The Company is not restricted from issuing a stop, look and
listen communication pursuant to Rule 14d-9(f) promulgated under the Exchange
Act or taking or disclosing to its stockholders any position contemplated by
Rule 14e-2(a) or Rule 14d-9 promulgated under the Exchange Act or from making
any other disclosure to its stockholders to comply with applicable law.
As used in this proxy statement, the following terms shall have
the following meanings:
The term
continuing party
means any person or group
(other than Parent or Merger Sub) (i) from whom the Company has received, after
the date of the merger agreement and prior to July 18, 2012, a written takeover
proposal that the Company board and the special committee determines, as of July
18, 2012, in good faith (after consultation with its independent financial
advisor and outside legal counsel) would reasonably be expected to result in a
superior proposal and (ii) is engaged in good faith discussions with the Company
with respect to such takeover proposal immediately prior to 11:59 p.m. New York
time on July 18, 2012.
The term
takeover proposal
means any proposal or offer
made by any third party to purchase or otherwise acquire (A) beneficial
ownership (as defined under section 13(d) of the Exchange Act) of 15% or more of
any class of equity securities of the Company pursuant to a merger,
consolidation or other business combination, sale of shares of capital stock,
tender offer, exchange offer or similar transaction or (B) any one or more
assets or businesses of the Company and its subsidiaries that constitute 15% or
more of the revenues or assets of the Company and its subsidiaries, taken as a
whole.
The term
superior proposal
means a written takeover
proposal (provided that for purposes of this definition, references to 15% in
the definition of takeover proposal shall be deemed to be references to 50%)
on terms which the board of directors of the Company and the special committee
determines in good faith (after consultation with the Companys outside legal
and financial advisors) to be more favorable to the Companys stockholders than
the terms of the merger agreement (taking into account such factors as the board
of directors of the Company and the special committee deems appropriate
including any changes to the terms of the merger agreement proposed by Parent)
and to be reasonably capable of being consummated on the terms proposed.
Indemnification; Directors and Officers Insurance
Parent and the surviving corporation will assume the
indemnification obligations, now existing in favor of the Indemnified Parties
with respect to acts or omissions occurring at or prior to the effective time of
the merger, as provided in the organizational documents of the Company or its
subsidiaries. The articles of incorporation and bylaws of the surviving
corporation will contain provisions no less favorable to the Indemnified Parties
with respect to rights to indemnification, advancement of expenses and
limitations on liabilities as set forth in the Companys organizational
documents in effect as of the date of the merger agreement. The relevant
provisions may not be amended, repealed or otherwise modified in a manner that
would adversely affect the rights of the Indemnified Parties, unless such
modification is required by applicable law.
Following the effective time of the merger, Parent and the
surviving corporation will, jointly and severally, indemnify and hold harmless
each Indemnified Party, and anyone who becomes an Indemnified Party between the
date of the merger agreement and the effective time of the merger, against any
costs or expenses (including reasonable attorneys fees and expenses),
judgments, losses, claims, damages or liabilities and amounts paid in settlement
incurred in connection with any actual or threatened proceeding, including any
matter arising in connection with the transactions contemplated by the merger
agreement, to the fullest extent permitted by applicable law (and Parent and the
surviving corporation will also advance expenses as incurred to the fullest
extent permitted under applicable law). Notwithstanding anything to the contrary
contained in the merger agreement, Parent shall not (and Parent will cause the
surviving corporation not to) settle or compromise or consent to the entry of
any judgment or otherwise terminate any proceeding, unless such settlement,
compromise, consent or termination includes an unconditional release of all of the Indemnified Parties from
all liability and does not include an admission of fault or wrongdoing by any
Indemnified Party.
67
For at least six years after the effective time of the merger,
(i) Parent and the surviving corporation will maintain the existing directors
and officers liability insurance and fiduciary insurance (or substitute
policies including comparable coverage) maintained by the Company as of the date
of the merger agreement, covering claims arising from facts or events that
occurred on or before the effective time of the merger, including the
transactions contemplated by the merger agreement (provided that Parent or the
surviving corporation, as applicable, will not be required to pay an annual
premium for such insurance in excess of 300% of the total annual premiums
currently paid by the Company on a yearly basis; and (ii) Parent and the
surviving corporation will not take any action that would prejudice the rights
of, or impede recovery by, the beneficiaries of any such insurance, whether in
respect of claims arising before or after the effective time of the merger. In
lieu of such insurance, prior to the effective time of the merger, the Company
may purchase a six year tail prepaid policy with substantially similar
coverage (provided that the premium for such tail policy shall not exceed an
amount equal to 300% of the total annual premiums currently paid by the Company
on a yearly basis).
Financing
As of the date of the merger agreement, Parent has delivered to
the Company a copy of the executed facility agreement from CDB, pursuant to
which CDB has committed to provided debt financing to Parent in the aggregate
amount set forth therein.
Holdco, Parent and Merger Sub will use their reasonable best
efforts to complete the debt financing and the equity financing on the terms and
conditions described in the financing documents and shall not agree to any
amendment or modification to be made to, or any waiver of any provision or
remedy under, the financing documents without the prior written consent of the
special committee if such amendments, modifications or waivers would or would
reasonably be expected to (i) reduce the aggregate amount of the debt financing
and equity financing below the amount required to consummate the merger, (ii)
impose new or additional conditions to the receipt of the debt financing or the
equity financing, (iii) prevent or materially delay the consummation of the
transactions contemplated by the merger agreement or (iv) adversely impact the
ability of Holdco, Parent or Merger Sub enforce its rights against the other
parties to the financing documents.
Holdco, Parent and Merger Sub will use their reasonable best
efforts to (i) negotiate definitive agreements with respect to the equity
financing on reasonably acceptable terms and conditions, and (ii) satisfy on a
timely basis all conditions applicable to the debt financing set forth in the
facility agreement. In the event that all conditions to funding under the
financing documents (other than, with respect to the debt financing, the
availability of the equity financing) have been satisfied, Holdco and Parent
will use their reasonable best efforts to cause the bank lender, Mr. Xia and
SAIF IV to fund the debt financing and the equity financing required to
consummate the transactions contemplated by the merger agreement.
In the event that any portion of the debt financing or the
equity financing on the terms and conditions contemplated by the financing
documents, (i) Parent shall promptly notify the Company, and (ii) Holdco, Parent
and Merger Sub shall each use its reasonable best efforts to arrange to obtain
alternative financing from alternative sources on terms not materially less
beneficial to Holdco, Parent and Merger Sub, in an amount sufficient to
consummate the merger as promptly as possible, but in any event no later than
the earlier of (a) thirty days after the originally contemplated closing date,
or (b) at ten business days prior to April 7, 2013.
Holdco, Parent and Merger Sub will each use its reasonable best
efforts to consummate the transactions contemplated by the contribution
agreements immediately prior to the closing on the terms and conditions
described in the contribution agreements and will not agree to any amendment or
modification to be made to, or any waiver of any provision or remedy under, the
contribution agreements that would reasonably be expected to (in the special
committees reasonable judgment) prevent, materially delay or materially impede
the consummation of the transactions contemplated by the merger agreement.
The Company and its subsidiaries will use reasonable best
efforts to provide to Holdco, Parent and Merger Sub, and to use its reasonable
best efforts to cause its representatives to provide (each at Parents sole
expense), such cooperation reasonably requested by Parent that is necessary in
connection with the debt financing, (provided that such requested cooperation would not require the Company to pay
or agree to pay any fees or expenses or give any indemnities prior to effective
time of the merger and does not unreasonably interfere with the ongoing
operations of the Company and its subsidiaries). Parent or Merger Sub will,
promptly upon request by the Company, reimburse the Company for all reasonable
and documented out-of-pocket costs incurred by the Company or any of its
subsidiary or any of their representatives in connection with such cooperation
requested by Parent.
68
Parent will indemnify, defend, and hold harmless the Company,
its subsidiaries and their respective representatives from and against any and
all losses suffered or incurred by them in connection with (i) any action taken
by them at the request of Holdco, Parent or Merger Sub pursuant to the foregoing
or in connection with the arrangement of any debt financing or (ii) any
information utilized in connection therewith (other than information provided by
the Company or its subsidiaries).
Obligation of Parent
At the stockholders meeting and any other meeting of the
stockholders of the Company called to seek the stockholder approvals or in any
other circumstances upon which a vote, consent or other approval (including by
written consent) with respect to the merger agreement, the merger or any other
transactions contemplated is sought, Parent will cause the Rollover Shares to be
voted in favor of granting the stockholder approvals.
Payment to Certain Creditor
Pursuant to a memorandum of cooperation between China TransInfo
Group Co., Ltd., a variable interest entity of the Company, and Beijing Shiji
Yingli Technologies, Co., Ltd. (
BSYT
), dated as of October 19, 2010,
BSYT transferred the NEDO Project to China TransInfo Group Co., Ltd. In
consideration for the benefits received in the transfer of the NEDO Project, the
Company has agreed to issue 200,000 shares to BSYT (the
NEDO Project
Shares
) or otherwise pay BSYT an amount in cash equal to the value of NEDO
Project Shares. Unless otherwise mutually agreed in writing between Parent and
BSYT, no later than two business days after the effective time of the merger,
Parent will pay, or will cause to be paid, to Mr. Xiao Yu, as the beneficiary
designated by BSYT, an amount in cash equal to $1,160,000, which is the amount
equal to (x) the merger consideration multiplied by (y) the number of the NEDO
Project Shares, in substitution for, and in full satisfaction of, the Companys
obligation to deliver the NEDO Project Shares.
Conditions to the Merger
The consummation of the merger is subject to the satisfaction
or waiver by Parent and the Company of the following conditions:
-
the requisite stockholder approvals of the merger shall have been
obtained; and
-
no order, injunction or decree issued by any court or agency of competent
jurisdiction or other law preventing the consummation of the merger or any of
the transactions contemplated by the merger agreement is in effect.
The obligations of Parent and Merger Sub to consummate the
merger are also subject to the satisfaction, or waiver by Parent, of the
following conditions:
-
the representations and warranties of the Company set forth in the merger
agreement, without giving effect to any materiality or material adverse effect
qualifications therein, being true and correct as of the date of the merger
agreement and as of the effective time of the merger (except that
representations and warranties that by their terms speak specifically as of
the date of the merger agreement or another date shall be so true and correct
as of such date), except where the failure to be true and correct would not
reasonably be expected to have, in the aggregate, a material adverse effect,
and Parent and Merger Sub shall have received a certificate signed on behalf
of the Company by a senior executive officer of the Company to such effect;
-
the Company having performed in all material respects all obligations
required to be performed by it under the merger agreement at or before the
effective time of the merger, and Parent and Merger Sub shall have received a certificate signed
on behalf of the Company by a senior executive officer of the Company to such
effect; and
69
-
since the date of the merger agreement, no effect, change, event or
occurrence having occurred that has had, or would reasonably be expected to
have, a material adverse effect, and Parent and Merger Sub shall have received
a certificate signed on behalf of the Company by a senior executive officer of
the Company to such effect.
The obligations of the Company to consummate the merger are
subject to the satisfaction, or waiver by the Company, of the following
conditions:
-
the representations and warranties of Parent and Merger Sub set forth in
the merger agreement being true and correct as of the date of the merger
agreement and as of effective time of the merger (except that representations
and warranties that by their terms speak specifically as of the date of the
merger agreement or another date shall be so true and correct as of such
date), except when a failure to be true and correct would not reasonably be
expected to have, in the aggregate, a Parent material adverse effect, and the
Company shall have received a certificate signed by a senior executive officer
of Parent to such effect; and
-
each of Parent and Merger Sub having performed in all material respects
all obligations required to be performed by it under the merger agreement at
or prior to the effective time of the merger, and the Company shall have
received a certificate signed by a senior executive officer of Parent to such
effect.
Termination
The merger agreement may be terminated at any time prior to the
effective time of the merger, whether before or after requisite stockholder
approvals of the merger have been obtained:
by mutual written agreement of the Company and Parent;
by either of the Company or Parent, if:
-
any governmental entity has issued a final order, injunction or decree
permanently enjoining or otherwise prohibiting consummation of the merger;
provided, that this termination right will not be available to a party if the
failure of such party to fulfill any of its obligations under the merger
agreement is the primary cause or material contributing factor to the denial
of such approval, or issuance of such final order, injunction or decree;
-
the merger is not completed by April 7, 2013, provided that this
termination right will not be available to a party if the failure of such
party to fulfill any of its obligations under the merger agreement is the
primary cause or material contributing factor to the failure of the closing to
occur by that date; or
-
our stockholders do not approve the merger agreement at the special
meeting or any adjournment or postponement thereof.
by the Company:
-
if Parent or Merger Sub has breached any of its representations
warranties, covenants or agreements under the merger agreement, such that the
corresponding condition to closing would not be satisfied and such breach or
inaccuracy cannot be cured or if curable, is not cured by Parent or Merger Sub
within thirty business days after written notice of such breach or if earlier,
by April 7, 2013, provided that this termination right will not be available
to the Company if a material breach of the merger agreement by the Company is
the primary cause or material contributing factor to the failure of such
condition to be satisfied;
70
-
if all of the closing conditions are otherwise satisfied or waived by
Parent but Parent and Merger Sub fail to close within two business days
following the date the closing should have occurred; or
-
if the Company effects a change of recommendation or enters into a
definitive written agreement with respect to a superior proposal after (a)
complying with the applicable provisions of the merger agreement and (B)
paying to Parent a termination fee payable pursuant to the merger agreement.
by Parent, if:
-
if the Company has breached any of its representations, warranties,
covenants or agreements under the merger agreement, such that the
corresponding condition to closing would not be satisfied and such breach or
inaccuracy cannot be cured or if curable, is not cured by the Company within
thirty business days after written notice of such breach or if earlier, by
April 7, 2013, provided that this termination right will not be available to
Parent if a material breach of the merger agreement by Parent is the primary
cause or material contributing factor to the failure of such condition to be
satisfied; or
-
the board of directors of the Company effects a change of recommendation.
Termination Fees and Reimbursement of Expenses
The Company is required to pay Parent a termination fee of $1.5
million, approximately 1% of the enterprise value of the Company calculated based
on the $5.80 per share merger consideration, in the event the merger agreement is terminated:
-
by the Company in order to effect a change of recommendation or enter into
a definitive written agreement with respect to a superior proposal;
-
by Parent or the Company due to (a)(i) a failure of either the Company or
Parent to consummate the merger by April 7, 2013 or (ii) a failure by the
Company to obtain the requisite stockholder approvals of the merger and (b) on
or after the signing of the merger agreement but prior to the date of the
stockholders meeting, a third party makes a takeover proposal which is
publicly disclosed and not withdrawn and (c) within twelve months following
such termination, the Company consummates or enters into a transaction with
respect to such takeover proposal; or
-
by Parent due to (i) a breach by Company of any of their representations,
warranties, covenants or agreements under the merger agreement, such that the
corresponding condition to closing would not be satisfied; or (ii) the board
of directors of the Company effects a change of recommendation.
Parent is required to pay the Company a termination fee of $2.8
million, approximately 2% of the enterprise value of the Company calculated
based on the $5.80 per share merger consideration, in the event the merger agreement is terminated by the Company:
-
due to a breach by Parent or Merger Sub of any of their representations,
warranties, covenants or agreements under the merger agreement, such that the
corresponding condition to closing would not be satisfied ; or
-
if all of the closing conditions are otherwise satisfied or waived by
Parent but Parent and Merger Sub fail to close within two business days
following the date the closing should have occurred.
Fees and Expenses
All fees and expenses incurred in connection with the merger
agreement, the merger and the other transactions contemplated thereby, other
than fees and expenses described under the section entitled
The Merger
AgreementTermination Fees and Reimbursement of Expenses
above, will be
paid by the party incurring such fees and expenses, whether or not the merger or
any of the transactions contemplated by the merger agreement are consummated.
71
Remedies
The Companys right to terminate the merger agreement and
receive payment of (i) a termination fee of $2.8 million, approximately 2% of
the enterprise value of the Company calculated based on the $5.80 per share
merger consideration, in connection with the
merger from Parent, (ii) any reimbursement of costs and expenses pursuant to the
merger agreement, and (iii) any amount in respect of which it is indemnified by
Parent pursuant to the merger agreement under certain circumstance is the sole
and exclusive remedy to the Company against the Parent, Merger Sub, their
respective affiliates or financing source for any loss or damage suffered as a
result of any such breach or failure to perform under the merger agreement or
other failure of the merger to be consummated. However, such limitation of
remedies shall not apply in the event Parent has not deposited or caused to be
deposited in full the amounts as set forth in the merger agreement within one
business day following the effective time of the merger.
Subject to any equitable remedies Parent may be entitled to,
Parents right to receive payment of (i) a termination fee of $1.5 million,
approximately 1% of the enterprise value of the Company calculated based on the
$5.80 per share merger consideration, and
(ii) any reimbursement of costs and expenses pursuant to the merger agreement,
is the sole and exclusive remedy of Parent and Merger Sub against the Company
for any loss or damage suffered as a result of any such breach or failure to
perform under the merger agreement or other failure of the merger to be
consummated.
Parent and Merger Sub are entitled to specific performance of
the terms under the merger agreement, including an injunction or injunctions to
prevent breaches of the merger agreement and to enforce specifically the terms
and provisions of the merger agreement. The Company is not entitled to an
injunction or injunctions to prevent breaches of the merger agreement by Parent
or Merger Sub or any remedy to enforce specifically the terms and provisions of
the merger agreement.
Amendment; Waiver of Conditions
The merger agreement may be amended with the approval of the
respective boards of directors of the parties at any time; provided, however,
that in the case of the Company, the board of directors and the special
committee must approve such amendment in writing; and provided further, that
after any such approval of the merger agreement by the requisite stockholder
approvals, no amendment shall be made which changes the merger consideration,
adversely affects the stockholders, or otherwise requires further approval of
the stockholders by law without the further approval of such stockholders.
At any time before the consummation of the merger, each of the
parties to the merger agreement may waive compliance with any of the agreements
or conditions contained in the merger agreement to the extent permitted by
applicable law.
COMMON STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL
OWNERS
The following table sets forth information regarding beneficial
ownership of Company common stock, as of the date of this proxy statement, (i)
by each person who is known by us to beneficially own more than 5% of Company
common stock; (ii) by each of our officers and directors; (iii) by all of our
officers and directors as a group; and (iv) the Rollover Holders. Information
concerning beneficial ownership was obtained from publicly available
filings.
Unless otherwise specified, the address of each of the persons
set forth below is in care of China TransInfo Technology Corp., 9
th
Floor, Vision Building, No. 39 Xueyuanlu, Haidian District, Beijing, PRC,
100191.
72
Name & Address of
Beneficial Owner
|
Office, if Any
|
Title of Class
|
Amount &
Nature
of Beneficial
Ownership
(1)
|
Percent of
Class
(2)
|
Officers and Directors
|
Shudong Xia
|
Chairman, President,
Chief
Executive
Officer and Secretary
|
Common Stock,
$0.001 par value
|
7,037,077
(3)
|
27.85%
|
Rong Zhang
|
Chief Financial
Officer
|
Common Stock
$0.001 par value
|
189,337
|
*
|
Danxia Huang
|
Vice President of
Operations,
Treasurer and
Director
|
Common Stock
$0.001 par value
|
509,896
|
2.02%
|
Zhibin Lai
|
Vice President
|
Common
Stock
$0.001 par value
|
634,378
|
2.51%
|
Zhiping Zhang
|
Vice President of
Research and
Development
|
Common Stock
$0.001 par value
|
628,088
|
2.49%
|
Shan Qu
|
Vice President
|
Common
Stock
$0.001 par value
|
112,500
|
*
|
Walter Teh-Ming Kwauk
|
Director
|
Common Stock
$0.001 par value
|
5,000
|
*
|
Zhongsu Chen
|
Director
|
Common Stock
$0.001 par value
|
30,000
|
*
|
Dan Liu
|
Director
|
Common Stock
$0.001 par
value
|
0
|
*
|
Brandon Ho-Ping Lin
|
Director
|
Common Stock
$0.001 par value
|
30,000
|
*
|
Xingming Zhang
|
Director
|
Common Stock
$0.001 par
value
|
20,000
|
*
|
All officers and
directors
as a group
(11 persons named above)
|
|
Common Stock
$0.001 par value
|
9,196,276
|
36.39%
|
5% Securities Holder
|
Leguna Verde
Investments,
Ltd.
P.O. Box 3444
Road Town, Tortola
British Virgin Islands
|
|
Common Stock
$0.001 par value
|
1,275,218
(4)
|
5.05%
|
Karmen Investment
Holdings Limited
P.O.
Box 3444
Road Town, Tortola
British Virgin Islands
|
|
Common Stock
$0.001 par value
|
6,005,242
(3)
|
23.76%
|
SAIF Partners III L.P.
#2516, Two Pacific Place,
88 Queensway,
Admiralty,
Hong Kong
|
|
Common Stock
$0.001 par value
|
4,151,152
(5)
|
16.43%
|
Andrew Y. Yan
#2516, Two Pacific Place,
88 Queensway,
Admiralty,
Hong Kong
|
|
Common Stock
$0.001 par value
|
4,151,152
(5)
|
16.43%
|
73
Total Shares Owned
by
Persons Named
above:
|
|
Common Stock
$0.001 par value
|
14,548,590
|
56.87%
|
Rollover Holder
|
Shudong Xia
|
Chairman, President,
Chief Executive
Officer and Secretary
|
Common Stock,
$0.001 par value
|
7,037,077
(3)
|
27.85%
|
Karmen Investment
Holdings Limited
P.O.
Box 3444
Road Town, Tortola
British Virgin Islands
|
|
Common Stock
$0.001 par value
|
6,005,242
(3)
|
23.76%
|
SAIF Partners III L.P.
#2115, Two Pacific Place,
88 Queensway,
Admiralty,
Hong Kong
|
|
Common Stock
$0.001 par value
|
4,151,152
(5)
|
16.43%
|
Danxia Huang
|
Vice President of
Operations,
Treasurer and
Director
|
Common Stock
$0.001 par value
|
509,896
|
2.02%
|
Shufeng Xia
|
|
Common
Stock
$0.001 par value
|
500,000
|
1.98%
|
*Less than 1%.
(1)
|
Beneficial ownership is determined in accordance with the
rules of the SEC and includes voting or investment power with respect to
Company common stock.
|
|
|
(2)
|
A total of 25,270,069 shares of Company common stock as
of date of this proxy statement are considered to be outstanding pursuant
to SEC Rule 13d-3(d)(1). For each beneficial owner above, any options
exercisable within 60 days have been included in the
denominator.
|
|
|
(3)
|
Includes 6,005,242 shares of Company common stock owned
by Karmen, which is wholly owned by East
Action Investment Holdings Ltd. of which Shudong Xia is the sole
shareholder. Mr. Xia may be deemed to be a beneficial owner of the shares
held by Karmen.
|
|
|
(4)
|
Chuang Yang is the owner of Leguna Verde Investments,
Ltd. and exercises voting and investment power over the shares owned by
Leguna Verde Investments, Ltd. Mr. Yang may be deemed to be a beneficial
owner of the shares held by Leguna Verde Investments, Ltd.
|
|
|
(5)
|
Andrew Y. Yan is the sole shareholder and sole director
of SAIF III GP Capital Ltd., a limited liability entity formed under the
laws of the Cayman Islands, the sole general partner of SAIF III GP, L.P.,
a limited partnership formed under the laws of the Cayman Islands, which
in turn is the sole general partner of SAIF Partners III L.P., a limited
partnership formed under the laws of the Cayman Islands. Mr. Yan is deemed
to have shared voting and dispositive powers with respect to the securities
held by SAIF Partners III L.P.
|
74
Changes in Control
Except for the proposed merger, there are currently no other
arrangements known to us, including any pledge by any person of our securities,
the operation of which may at a subsequent date result in a change in control of
the Company.
COMMON STOCK TRANSACTION INFORMATION
The Company has not made any underwritten public offering of
Company common stock for cash during the past three years that was registered
under the Securities Act or exempt from registration under Regulation A of the
Securities Act.
The Company has not purchased any shares of Company common
stock within the past two years.
The following table shows purchases of the Company common stock
during the past two years effected by Mr. Xia, showing the number of Company
common stock purchased, the range of prices paid for those shares and the
average price paid per quarter:
Quarter
|
Amount
|
Minimum Daily
|
Maximum Daily
|
Average Price
|
|
|
Weighted
|
Weighted
|
(US$)
|
|
|
Average
Price
(1)
|
Average
Price
(2)
|
|
|
|
(US$)
|
(US$)
|
|
Quarter ended June 30, 2012
|
0
|
-
|
-
|
-
|
Quarter ended March 31, 2012
|
23,600
|
3.650
|
3.980
|
3.694
|
Quarter ended December 31, 2011
|
399,272
|
2.421
|
3.626
|
3.299
|
Quarter ended September 30, 2011
|
174,763
|
2.562
|
3.729
|
3.191
|
Quarter ended June 30, 2011
|
169,000
|
3.286
|
4.728
|
4.394
|
Quarter ended March 31, 2011
|
265,200
|
4.379
|
4.786
|
4.587
|
Quarter ended December 31, 2010
|
0
|
-
|
-
|
-
|
Quarter ended September 30, 2010
|
0
|
-
|
-
|
-
|
(1) The price reported is the lowest price from a comparison of
all daily weighted average prices (each calculated as the weighted average price
of all Company common stock purchased in a given day) in the applicable quarter.
(2) The price reported is the highest price from a comparison
of all daily weighted average prices (each calculated as the weighted average
price of all Company common stock purchased in a given day) in the applicable
quarter.
Other than the transactions listed above in this section, there
have been no prior stock purchases of Company common stock by any member of the
buyer group during the past two years.
APPRAISAL RIGHTS
You are not entitled to dissenters rights or any other
statutory rights of objection in connection with the merger under Nevada law.
Section 92A.390 of the NRS does not provide any right of dissent with respect to
a plan of merger under criteria described in that section of the NRS, which the
Company satisfies.
75
SELECTED FINANCIAL INFORMATION
Selected Historical Financial Information
Set forth below is certain selected historical consolidated
financial data relating to the Company. The financial data has been derived from
the audited financial statements filed as part of our Annual Report on Form 10-K
for the year ended December 31, 2011 and the unaudited financial statements
filed as part of our Quarterly Reports on Form 10-Q for the periods ended March
31, 2012 and 2011. The information set forth below is not necessarily indicative
of future results and should be read in conjunction with the financial
statements and the related notes and other financial information contained in
such Form 10-K and Forms 10-Q. See
Where You Can Find More Information
.
|
|
Three Months
Ended
|
|
|
Year Ended
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2011
|
|
|
2010
|
|
Statement of Operations
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
$
|
28,928,717
|
|
$
|
36,499,159
|
|
$
|
167,023,594
|
|
$
|
122,727,958
|
|
Gross Profit
|
|
9,582,605
|
|
|
10,393,121
|
|
|
44,675,825
|
|
|
42,448,493
|
|
Income From Operations
|
|
2,645,559
|
|
|
4,072,062
|
|
|
14,850,745
|
|
|
19,966,735
|
|
Net Income
|
|
2,419,296
|
|
|
2,967,276
|
|
|
13,967,152
|
|
|
15,469,158
|
|
Earnings Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.10
|
|
$
|
0.12
|
|
$
|
0.55
|
|
$
|
0.63
|
|
Diluted
|
|
0.10
|
|
|
0.12
|
|
|
0.55
|
|
|
0.63
|
|
Balance Sheet Data (at
period end):
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
$
|
221,231,552
|
|
$
|
185,278,111
|
|
$
|
211,507,416
|
|
$
|
180,525,852
|
|
Total Current Liabilities
|
|
63,854,360
|
|
|
56,086,367
|
|
|
61,605,570
|
|
|
69,093,964
|
|
Total Long Term Liabilities
|
|
27,086
|
|
|
-
|
|
|
-
|
|
|
200,699
|
|
Total Equity
|
|
157,350,106
|
|
|
129,191,744
|
|
|
149,901,846
|
|
|
111,231,189
|
|
Statement of Cash Flows Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used
in) operating activities
|
$
|
(9,399,831
|
)
|
$
|
(16,310,263
|
)
|
$
|
3,237,474
|
|
$
|
3,866,303
|
|
Net cash used in investing activities
|
|
(2,037,135
|
)
|
|
(1,368,686
|
)
|
|
(8,011,473
|
)
|
|
(4,073,547
|
)
|
Net cash provided by (used
in) financing activities
|
|
(2,082,598
|
)
|
|
(1,407,665
|
)
|
|
4,266,428
|
|
|
15,389,585
|
|
Effect of foreign currency exchange
translation
|
|
319,105
|
|
|
219,746
|
|
|
1,623,612
|
|
|
1,333,836
|
|
Net cash inflow (outflow)
|
|
(13,200,459
|
)
|
|
(18,866,868
|
)
|
|
1,116,040
|
|
|
16,516,177
|
|
Ratio of Earnings to Fixed Charges
|
|
March 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
Ratio of Earnings to Fixed
Charges(1)
|
|
31.79
|
|
|
24.12
|
|
|
45.92
|
|
(1) For purposes of calculating the ratio of earnings to fixed
charges, earnings consist of income before income taxes plus fixed charges.
Fixed charges consist of interest expense. The Ratio of Earnings to Fixed
Charges should be read in conjunction with the Consolidated Financial Statements
and Managements Discussion and Analysis of Financial Condition and Results of
Operations filed with the Companys Annual Report on Form 10-K and Quarterly
Report on Form 10-Q for the relevant periods.
Net Book Value per Share of Company Common Stock
The net book value per share of Company common stock as of
March 31, 2012 was $6.23, computed by dividing stockholders equity at the end
of such period by the weighted average number of shares of Company common stock
outstanding.
76
No separate financial information is provided for Parent
because Parent is a newly formed entity formed in connection with the merger and
has no independent operations. No pro forma data giving effect to the merger has
been provided. The Company does not believe that such information is material to
stockholders in evaluating the proposed merger and merger agreement because (i)
the proposed per share merger consideration is all-cash, and (ii) if the merger
is completed, Company common stock will cease to be publicly traded.
MARKET PRICE AND DIVIDEND INFORMATION
The Company common stock is listed for trading on the NASDAQ
Global Market under the symbol CTFO. The following table sets forth the
quarterly high and low sales prices of a share of Company common stock as
reported by the NASDAQ Global Market for the periods indicated. The quotations
listed below reflect inter-dealer prices, without retail mark-ups, mark-downs or
commissions and may not necessarily represent actual transactions.
|
|
Closing Bid Prices
|
|
|
|
High
|
|
|
Low
|
|
Year Ended December 31,
2012
|
|
|
|
|
|
|
1st Quarter
|
$
|
5.20
|
|
$
|
3.51
|
|
2nd Quarter (through June 25,
2012)
|
|
5.50
|
|
|
4.41
|
|
Year Ended December 31, 2011
|
|
|
|
|
|
|
1st Quarter
|
$
|
5.31
|
|
$
|
4.45
|
|
2nd Quarter
|
|
5.01
|
|
|
2.45
|
|
3rd Quarter
|
|
3.94
|
|
|
2.46
|
|
4th Quarter
|
|
3.63
|
|
|
2.43
|
|
Year Ended December 31,
2010
|
|
|
|
|
|
|
1st Quarter
|
$
|
9.72
|
|
$
|
6.33
|
|
2nd Quarter
|
|
7.78
|
|
|
5.05
|
|
3rd Quarter
|
|
7.85
|
|
|
5.15
|
|
4th Quarter
|
|
6.43
|
|
|
4.28
|
|
If the merger is closed, there will be no further market for
shares of Company common stock and shares of Company common stock will be
delisted from the NASDAQ Global Market and deregistered under the Exchange
Act.
The Company has never paid dividends.
Accordingly, we do not
expect to declare or pay any further dividends prior to the merger, and under
the terms of the merger agreement, are prohibited from doing so.
On June 7, 2012, the last full trading day prior to the public
announcement of the terms of the offer and the merger, the reported closing
sales price per share on the NASDAQ Global Market was $4.52. On the record date,
the closing price per share was $
. You are encouraged to obtain current market
quotations for shares of Company common stock in connection with voting your
shares of Company common stock.
As of the record date, there were approximately
record holders
of shares of Company common stock.
PROPOSAL TWOADJOURNMENT OR POSTPONEMENT OF THE SPECIAL
MEETING
If there are insufficient votes at the time of the special
meeting to approve the merger agreement, we may propose to adjourn or postpone
the special meeting for the purpose of soliciting additional proxies to approve
the merger agreement. We currently do not intend to propose adjournment or
postponement at the special meeting if there are sufficient votes to approve the
merger agreement. If approval of the proposal to adjourn or postpone the special
meeting for the purpose of soliciting additional proxies is submitted to our
stockholders for approval, such approval requires the affirmative vote of the
holders of a majority of the shares of Company common stock present or
represented by proxy and voting on the matter.
Our board of directors unanimously recommends that you vote
FOR the proposal to adjourn or postpone the special meeting, if necessary or
appropriate, to solicit additional proxies if there are insufficient votes at
the time of the meeting to approve the merger agreement.
77
OTHER MATTERS
Other Matters for Action at the Special Meeting
As of the date of this proxy statement, the board of directors
of the Company knows of no other matters which may be presented for
consideration at the special meeting. However, if any other matter is presented
properly for consideration and action at the meeting or any adjournment or
postponement thereof, it is intended that the proxies will be voted with respect
thereto in accordance with the best judgment and in the discretion of the proxy
holders.
Submission of Stockholder Proposals
If the merger is completed, we will cease to have public
stockholders and there will be no public participation in any future meeting of
stockholders. However, if the merger is not completed, we expect to hold our 2012
annual meeting of stockholders.
78
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
This proxy statement contains forward-looking statements that
involve risks, uncertainties and assumptions. If such risks or uncertainties
materialize or such assumptions prove incorrect, the results of the Company and
its consolidated subsidiaries and actual results of matters related to the
merger could differ materially from those expressed or implied by such
forward-looking statements and assumptions. All statements other than statements
of historical fact are statements that could be deemed forward-looking
statements. In many cases you can identify forward-looking statements by the use
of words such as believe, anticipate, intend, plan, estimate, may,
could, predict, or expect and similar expressions, although the absence of
such words does not necessarily mean that a statement is not forward-looking.
You should be aware that forward-looking statements involve
known and unknown risks and uncertainties. We cannot assure you that the actual
results or developments reflected in these forward-looking statements will be
realized or, even if they are realized, that they will have the expected effects
on the merger or on our business or operations. These forward-looking statements
speak only as of the date on which the statements were made, and we assume no
obligation and do not intend to update these forward-looking statements, except
as required by law.
Risks, uncertainties and assumptions include the occurrence of
any event, change or other circumstances that could give rise to the termination
of the merger agreement; the possibility that various closing conditions for the
merger (including the requisite stockholder approvals of the merger) may not be
satisfied or waived; the possibility that alternative acquisition proposals will
or will not be made; the failure to obtain sufficient funds to close the merger;
the failure of the merger to close for any other reason; the amount of fees and
expenses related to the merger; the diversion of managements attention from
ongoing business concerns; the effect of the announcement of the merger on our
business relationships, operating results and business generally, including our
ability to retain key employees; the merger agreements contractual restrictions
on the conduct of our business prior to the completion of the merger; the
possible adverse effect on our business and the price of our common stock if the
merger is not completed in a timely matter or at all; the outcome of any legal
proceedings, regulatory proceedings or enforcement matters that have been or may
be instituted against us and others relating to the merger and other risks that
are set forth in the Companys filings with the SEC, which are available without
charge at
www.sec.gov
.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the
Exchange Act, as amended. We file reports, proxy statements
and other information with the SEC. You may read and copy these reports, proxy
statements and other information at the SECs Public Reference Section at 100 F
Street, N.E., Washington, D.C. 20549. You may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The
SEC also maintains an Internet website, located at www.sec.gov, that contains
reports, proxy statements and other information regarding companies and
individuals that file electronically with the SEC.
You also may obtain free copies of the documents the Company
files with the SEC by going to the Investors Relations section of our website
at
www.chinatransinfo.com
. Our website address is provided as an inactive
textual reference only. The information provided on our website is not part of
this proxy statement, and therefore is not incorporated by reference.
The information contained in this proxy statement speaks only
as of the date indicated on the cover of this proxy statement unless the
information specifically indicates that another date applies.
Statements contained in this proxy statement, or in any
document incorporated in this proxy statement by reference, regarding the
contents of any contract or other document, are not necessarily complete and
each such statement is qualified in its entirety by reference to that contract
or other document filed as an exhibit with the SEC. The SEC allows us to
incorporate by reference information into this proxy statement. This means
that we can disclose important information by referring to another document
filed separately with the SEC. The information incorporated by reference is
considered to be part of this proxy statement. This proxy statement and the
information that we later file with the SEC may update and supersede the
information incorporated by reference. Similarly, the information that we later
file with the SEC may update and supersede the information in this proxy
statement. We also incorporate by reference into this proxy statement the
following documents filed by us with the SEC under the Exchange Act and any documents filed by us pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this proxy
statement and before the date of the special meeting:
79
-
our Annual Report on Form 10-K for the fiscal year ended December 31,
2011;
-
our Quarterly Report on Form 10-Q for the quarter ended March 31, 2012;
and
-
our Current Reports on Form 8-K filed on February 21, 2012, February 23,
2012, March 13, 2012, March 29, 2012, May 14, 2012 and June 8, 2012
Notwithstanding the foregoing, information furnished under
Items 2.02 and 7.01 of any Current Report on Form 8-K, including the related
exhibits, is not incorporated by reference in this proxy statement.
We undertake to provide without charge to each person to whom a
copy of this proxy statement has been delivered, upon request, by first class
mail or other equally prompt means, within one business day of receipt of the
request, a copy of any or all of the documents incorporated by reference into
this proxy statement, other than the exhibits to these documents, unless the
exhibits are specifically incorporated by reference into the information that
this proxy statement incorporates.
Requests for copies of our filings should be directed to China
TransInfo Technology Corp., 9th Floor, Vision Building, No. 39 Xueyuanlu,
Haidian District, Beijing, PRC, 100191, Attention: Corporate Secretary, and should be made at least
five business days before the date of the special meeting in order to receive
them before the special meeting.
The proxy statement does not constitute an offer to sell, or a
solicitation of an offer to buy, any securities, or the solicitation of a proxy,
in any jurisdiction to or from any person to whom it is not lawful to make any
offer or solicitation in that jurisdiction. The delivery of this proxy statement
should not create an implication that there has been no change in our affairs
since the date of this proxy statement or that the information herein is correct
as of any later date.
You should rely only on the information contained in this
proxy statement. We have not authorized anyone to provide you with information
that is different from what is contained in this proxy statement. Therefore, if
anyone does give you information of this sort, you should not rely on it. If you
are in a jurisdiction where the solicitation of proxies is unlawful, or if you
are a person to whom it is unlawful to direct these types of activities, then
the offer presented in this proxy statement does not extend to you. You should
not assume that the information contained in this proxy statement is accurate as
of any date other than the date of this proxy statement, unless the information
specifically indicates that another date applies. The mailing of this proxy
statement to our stockholders does not create any implication to the contrary.
80
ANNEX A
EXECUTION VERSION
AGREEMENT AND PLAN OF MERGER
by and among
TRANSCLOUD COMPANY LIMITED
TRANSCLOUD ACQUISITION, INC.
and
CHINA TRANSINFO TECHNOLOGY CORP.
Dated as of June 8, 2012
A-1
EXECUTION VERSION
TABLE OF CONTENTS
|
|
|
Page
|
|
|
|
|
ARTICLE I THE MERGER
|
2
|
|
1.1
|
The Merger
|
2
|
|
1.2
|
Closing
|
2
|
|
1.3
|
Effective Time
|
2
|
|
1.4
|
Effects of the
Merger
|
3
|
|
1.5
|
Effect on Capital Stock
|
3
|
|
1.6
|
Treatment of Options
and Warrants.
|
3
|
|
1.7
|
Changes in Company Common Stock
|
5
|
|
1.8
|
Articles of
Incorporation and Bylaws of the Surviving Corporation
|
5
|
|
1.9
|
Directors and Officers of the
Surviving Corporation
|
5
|
|
|
|
|
ARTICLE II DELIVERY OF MERGER
CONSIDERATION
|
5
|
|
2.1
|
Paying Agent
|
5
|
|
2.2
|
Exchange Procedures
|
6
|
|
2.3
|
Termination of
Exchange Fund
|
7
|
|
2.4
|
Withholding Rights
|
7
|
|
2.5
|
Lost, Stolen or
Destroyed Certificates
|
7
|
|
2.6
|
Transfer Books
|
8
|
|
2.7
|
Unwinding the Merger
|
8
|
|
|
|
|
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
|
8
|
|
3.1
|
Organization and Qualification
|
8
|
|
3.2
|
Subsidiaries
|
10
|
|
3.3
|
Authorization, Special Committee and
Fairness
|
10
|
|
3.4
|
No Conflicts
|
11
|
|
3.5
|
Capitalization
|
11
|
|
3.6
|
Consents and
Approvals
|
12
|
|
3.7
|
Company SEC Reports; Financial
Statements
|
12
|
|
3.8
|
Material Changes;
Undisclosed Events, Liabilities or Developments
|
13
|
|
3.9
|
Legal Proceedings
|
13
|
|
3.10
|
Compliance
|
14
|
|
3.11
|
Regulatory Permits
|
14
|
|
3.12
|
Title to Assets
|
14
|
|
3.13
|
Patents and Trademarks
|
14
|
|
3.14
|
Insurance
|
15
|
|
3.15
|
Contracts
|
15
|
|
3.16
|
Transactions With
Affiliates and Employees
|
15
|
|
3.17
|
Sarbanes-Oxley; Internal Accounting
Controls
|
15
|
|
3.18
|
Company Information
|
16
|
|
3.19
|
Opinion
|
16
|
|
3.20
|
Tax Status
|
16
|
|
3.21
|
Environmental
Matters
|
17
|
|
3.22
|
Foreign Corrupt Practices
|
17
|
|
3.23
|
Other
Representations and Warranties Relating to the Company and Subsidiaries
|
17
|
|
3.24
|
Disclosure Letter
|
18
|
|
3.25
|
Nevada Takeover
Statutes
|
18
|
|
3.26
|
Brokers Fees
|
18
|
|
3.27
|
No Other
Representations or Warranties
|
18
|
|
|
|
|
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
|
19
|
|
4.1
|
Corporate Organization
|
19
|
|
4.2
|
Authorization
|
19
|
|
4.3
|
No Conflicts
|
20
|
|
4.4
|
Consents and
Approvals
|
20
|
|
4.5
|
Operation and Ownership of Merger
Sub
|
20
|
|
4.6
|
Legal Proceedings
|
20
|
|
4.7
|
Parent Information
|
20
|
|
4.8
|
Financing; Equity
Rollover.
|
21
|
|
4.9
|
Broker's Fees
|
22
|
|
4.10
|
Certain Arrangements
|
22
|
|
4.11
|
Buyer Group Contracts
|
22
|
|
4.12
|
No Reliance on
Company Estimates
|
23
|
|
4.13
|
Guaranty
|
23
|
|
4.14
|
Solvency
|
23
|
|
4.15
|
No Other Representations or
Warranties
|
24
|
|
|
|
|
ARTICLE V COVENANTS RELATING TO
CONDUCT OF BUSINESS
|
24
|
|
5.1
|
Conduct of Business
Prior to the Effective Time
|
24
|
|
5.2
|
Company Forbearances
|
24
|
|
5.3
|
Conduct of Business
Prior to the Effective Time
|
26
|
|
|
|
|
ARTICLE VI ADDITIONAL
AGREEMENTS
|
26
|
|
6.1
|
Proxy Statement and Schedule 13E-3;
Stockholder Approval
|
26
|
|
6.2
|
Reasonable Best
Efforts
|
27
|
|
6.3
|
Access to Information
|
29
|
|
6.4
|
Indemnification;
Advancement of Expenses; Exculpation and Insurance
|
29
|
|
6.5
|
Stock Exchange Delisting
|
31
|
|
6.6
|
Solicitation; Change
of Recommendation
|
31
|
|
6.7
|
Notification of Certain Matters
|
35
|
|
6.8
|
Financing
|
35
|
|
6.9
|
Takeover Statutes
|
36
|
|
6.10
|
Resignations
|
37
|
|
6.11
|
Participation in Litigation
|
37
|
|
6.12
|
Publicity
|
37
|
|
6.13
|
Obligations of Parent and Merger Sub
|
37
|
ii
|
6.14
|
Payment to a Certain
Creditor
|
37
|
|
|
|
|
ARTICLE VII CONDITIONS
PRECEDENT
|
38
|
|
7.1
|
Conditions to Each Party's
Obligation To Effect the Merger
|
38
|
|
7.2
|
Conditions to
Obligations of Parent and Merger Sub
|
38
|
|
7.3
|
Conditions to Obligations of the
Company
|
39
|
|
|
|
|
ARTICLE VIII TERMINATION AND AMENDMENT
|
39
|
|
8.1
|
Termination
|
39
|
|
8.2
|
Effect of Termination
|
41
|
|
8.3
|
Fees and Expenses
|
41
|
|
8.4
|
Amendment
|
43
|
|
8.5
|
Extension; Waiver
|
43
|
|
|
|
|
ARTICLE IX GENERAL
PROVISIONS
|
43
|
|
9.1
|
Nonsurvival of Representations,
Warranties and Agreements
|
43
|
|
9.2
|
Notices
|
44
|
|
9.3
|
Interpretation
|
45
|
|
9.4
|
Severability
|
45
|
|
9.5
|
Entire Agreement
|
45
|
|
9.6
|
Governing Law;
Jurisdiction
|
45
|
|
9.7
|
Assignment; Third Party
Beneficiaries
|
46
|
|
9.8
|
Specific Performance
|
46
|
|
9.9
|
Confidentiality
|
46
|
|
9.10
|
WAIVER OF JURY TRIAL
|
48
|
|
9.11
|
Counterparts
|
48
|
iii
INDEX OF DEFINED TERMS
|
Section
|
|
|
Section
|
Affiliate
|
3.8
|
|
Evaluation Date
|
3.16
|
Agreement
|
Preamble
|
|
Exchange Act
|
3.7(a)
|
Alternative Transaction Proposal
|
6.6(h)(i)
|
|
Exchange Fund
|
2.1
|
Articles of Merger
|
1.3
|
|
Facility Agreement
|
4.8(b)
|
Bank Lender
|
4.8(b)
|
|
Filings
|
3.6
|
BSYT
|
6.14
|
|
Financing Documents
|
4.8(b)
|
Business Day
|
1.2
|
|
GAAP
|
3.7(b)
|
Buyer Group Contracts
|
4.11
|
|
Governmental Entity
|
3.6
|
Certificate
|
1.5(a)
|
|
Guarantors
|
Recitals
|
Chairman Commitment Letter
|
4.8(b)
|
|
Guaranty
|
Recitals
|
Chairman Equity Financing
|
4.8(b)
|
|
Holdco
|
4.8(b)
|
Change of Recommendation
|
6.6(e)
|
|
Indemnified Parties
|
6.4(a)
|
claim
|
4.14
|
|
Intellectual Property Rights
|
3.13
|
Closing
|
1.2
|
|
Judgment
|
3.9
|
Closing Date
|
1.2
|
|
Knowledge
|
3.5
|
Company
|
Preamble
|
|
Law
|
3.3(a)
|
Company Articles
|
3.1(a)
|
|
Liens
|
3.2
|
Company Board
|
Recitals
|
|
Material Permits
|
3.11
|
Company Board Recommendation
|
Recitals
|
|
Merger
|
Recitals
|
Company Bylaws
|
3.1(a)
|
|
Merger Consideration
|
1.5(a)
|
Company Contract
|
3.15(a)
|
|
Merger Sub
|
Preamble
|
Company Group
|
8.3(e)
|
|
Merger Sub Common Stock
|
1.5(c)
|
Company Material Adverse Effect
|
3.1(b)
|
|
Mr. Xia
|
Article III
|
Company Option
|
1.6(a)
|
|
NASDAQ
|
3.3(a)
|
Company Option Plan
|
1.6(a)
|
|
NEDO Project Shares
|
6.14
|
Company Preferred Stock
|
3.5
|
|
Nevada Secretary of State
|
1.3
|
Company SEC Reports
|
3.7(a)
|
|
Notice of Superior Proposal
|
6.6(f)
|
Company Termination Fee
|
8.3(b)
|
|
NRS
|
1.1
|
Company Warrant
|
1.6(b)
|
|
NRS 92A
|
Recitals
|
Confidential Information
|
9.9(c)
|
|
Parent
|
Preamble
|
Continuing Party
|
6.6(h)(iii)
|
|
Parent Group
|
8.3(e)
|
Contract
|
4.8(e)
|
|
Parent Material Adverse Effect
|
4.1
|
Contribution Agreements
|
Recitals
|
|
Parent Termination Fee
|
8.3(c)
|
Cut-Off Date
|
6.6(b)
|
|
Parties
|
Preamble
|
D&O Premium
|
6.4(c)
|
|
Paying Agent
|
2.1
|
debt
|
4.14
|
|
Person
|
2.2(a)
|
Debt Financing
|
4.8(b)
|
|
PRC
|
3.22(a)
|
Disclosure Letter
|
3.24
|
|
Proceeding
|
3.1(a)
|
Effect
|
3.1(b)
|
|
Proxy Statement
|
3.6
|
Effective Time
|
1.3
|
|
RCA
|
1.6(a)
|
End Date
|
8.1(c)
|
|
Regulatory Approvals
|
3.6
|
Environmental Laws
|
3.20
|
|
Representatives
|
6.6(a)
|
Equity Financing
|
4.8(b)
|
|
Rollover Holders
|
Recitals
|
iv
Rollover Shares
|
Recitals
|
|
Stockholder Approval
|
3.3(c)
|
SAIF
|
4.8(b)
|
|
Stockholders' Meeting
|
3.17
|
SAIF Commitment Letter
|
4.8(b)
|
|
Subsidiary
|
3.2
|
SAIF Equity Financing
|
4.8(b)
|
|
Superior Proposal
|
6.6(h)(ii)
|
SEC
|
3.6
|
|
Surviving Corporation
|
Recitals
|
Securities Act
|
3.7(a)
|
|
Takeover Statutes
|
3.25
|
Shares
|
Recitals
|
|
Transaction Agreements
|
4.14
|
Solicitation Period End Date
|
6.6(a)
|
|
Unvested Company Option
|
1.6(a)
|
Solvent
|
4.14
|
|
Vested Company Option
|
1.6(a)
|
Special Committee
|
Recitals
|
|
Voting Agreement
|
Recitals
|
v
AGREEMENT AND PLAN OF MERGER
, dated as of June
8, 2012
(this "
Agreement
"), by and among
TransCloud Company Limited, a
Cayman Islands exempted company with limited liability ("
Parent
"),
TransCloud Acquisition, Inc., a Nevada corporation and a wholly owned, direct
subsidiary of Parent ("
Merger Sub
"), and China TransInfo Technology
Corp., a Nevada corporation (the "
Company
" and, together with Parent and
Merger Sub, the "
Parties
").
RECITALS
WHEREAS, upon the terms and subject to the conditions of this
Agreement and in accordance with Chapter 92A of the Nevada Revised Statutes
("
NRS 92A
"), Merger Sub will merge with and into the Company (the
"
Merger
"), with the Company as the surviving corporation in the Merger
(sometimes referred to herein in such capacity as the "
Surviving
Corporation
");
WHEREAS, the board of directors of the Company (the "
Company
Board
"), acting upon the unanimous recommendation of the special committee
of the Company Board (the "
Special Committee
"), has (a) determined that
this Agreement and the transactions contemplated hereby, including the Merger,
are advisable to, and in the best interests of, the Company and its
stockholders, (b) approved and adopted the execution, delivery and performance
by the Company of this Agreement and consummation of the transactions
contemplated hereby, including the Merger, and (c) resolved to recommend that
the stockholders of the Company approve this Agreement (the "
Company Board
Recommendation
"), in each case upon the terms and subject to the conditions
set forth herein;
WHEREAS, the board of directors of Parent has approved this
Agreement and declared it advisable for Parent to enter into this Agreement;
WHEREAS, the board of directors of Merger Sub has approved and
adopted this Agreement and recommended to Merger Subs sole stockholder that it
approve this Agreement in accordance with NRS 92A on the terms and conditions
set forth herein; and
WHEREAS, concurrently with the execution of this Agreement, and
as a condition and inducement to Parent's and Merger Sub's willingness to enter
into this Agreement, certain beneficial owners (the "
Rollover Holders
")
of Shares (as defined below) have entered into two contribution agreements (the
"
Contribution Agreements
") pursuant to which the Rollover Holders are
agreeing, among other things, to contribute the outstanding shares of common
stock, par value US$0.001 per share, of the Company (the "
Shares
") set
forth in the Contribution Agreements owned by such Rollover Holders (the
"
Rollover Shares
") to Parent immediately prior to the Effective Time of
the Merger in exchange for shares of Holdco (as defined below);
WHEREAS, concurrently with the execution of this Agreement, and
as a condition and inducement to Parent's and Merger Sub's willingness to enter
into this Agreement, the Rollover Holders of the Company are entering into a
voting agreement in favor of Parent (the "
Voting Agreement
");
WHEREAS, concurrently with the execution of this Agreement, and
as a condition and inducement to the Company's willingness to enter into this
Agreement, Parent has delivered to the Company a limited guaranty of Mr. Xia (as
defined below) and SAIF (as defined below) (together with Mr. Xia, the
"
Guarantors
"), dated as of the date hereof, in favor of the Company with
respect to certain obligations of Parent and Merger Sub under this Agreement
(the "
Guaranty
");
WHEREAS, the Parties desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe certain conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the Parties
hereby agree as follows:
ARTICLE I
THE MERGER
1.1
The Merger
. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the Nevada
Revised Statutes (
NRS
), at the Effective Time, Merger Sub shall merge
with and into the Company. As a result of the Merger, the separate corporate
existence of Merger Sub shall cease and the Company shall continue as the
Surviving Corporation in the Merger.
1.2
Closing
. The closing of the Merger (the
"
Closing
") shall take place at 10:00 a.m., Beijing time, at the offices
of Skadden, Arps, Slate, Meagher & Flom LLP, 30th Floor, China World Office
2, No. 1 Jianguomenwai Avenue, Beijing 100004, China, on the second
(2
nd
) Business Day after the satisfaction or, to the extent permitted
by applicable Law, waiver by the Party or Parties entitled to the benefits of
the conditions set forth in Article VII (other than those conditions that by
their nature are to be satisfied at the Closing, but subject to the satisfaction
or, to the extent permitted by Law, waiver thereof), or at such other place,
time and date as shall be agreed in writing between Parent and the Company. The
date on which the Closing occurs is referred to in this Agreement as the
"
Closing Date
." As used in this Agreement, the term "
Business Day
"
shall mean any day other than Saturday, Sunday or a day on which banking
institutions in New York, Nevada or PRC are authorized or obligated under
applicable Law to be closed.
1.3
Effective Time
. Subject to the provisions of this
Agreement, as soon as practicable on the Closing Date, the Parties shall file
articles of merger (the "
Articles of Merger
") with the Secretary of State
of the State of Nevada (the
Nevada Secretary of State
) with respect to
the Merger, in such form as is required by, and executed and acknowledged in
accordance with, the relevant provisions of NRS 92A, and, as soon as practicable
on or after the Closing Date, shall make any and all other filings or recordings
required under NRS 92A. The Merger shall become effective on the Business Day
immediately after the date on which the Articles of Merger are duly filed with
the Nevada Secretary of State or on such other date and time as Parent and the
Company shall agree in writing that, in each case, may not be more than ninety
(90) days after the date on which the Articles of Merger are filed, and
shall be specified in the Articles of Merger (the date the Merger becomes
effective being the
Effective Time
).
2
1.4
Effects of the Merger
. At and after the Effective
Time, the Merger shall have the effects set forth in this Agreement, the
Articles of Merger and in the relevant provisions of NRS 92A. Without limiting
the generality of the foregoing, at the Effective Time, all the properties,
rights, privileges, powers, immunities and franchises of the Company and Merger
Sub shall vest in the Surviving Corporation, and all claims, obligations,
liabilities, debts and duties of the Company and Merger Sub shall become the
claims, obligations, liabilities, debts and duties of the Surviving Corporation,
all as provided in NRS 92A and other applicable Laws of the State of Nevada.
1.5
Effect on Capital Stock
. At the Effective Time, by
virtue of the Merger and without any action on the part of Parent, Merger Sub,
the Company or the holder of any of the following securities:
(a)
Conversion of Shares
. Subject to Sections 1.5(b) and
2.4, each Share issued and outstanding immediately prior to the Effective Time
shall be converted into the right to receive an amount in cash equal to US$5.80
(the
Merger Consideration
), without any interest thereon. All of the
Shares converted into the right to receive the Merger Consideration pursuant to
this Section 1.5(a) shall no longer be outstanding and shall automatically be
cancelled and cease to exist as of the Effective Time, and each certificate (or
evidence of shares in book-entry form) that, immediately prior to the Effective
Time, represented any such Shares (each such certificate or evidence, a
Certificate
) shall cease to have any rights with respect thereto,
except the right to receive the Merger Consideration to be paid in consideration
therefor upon surrender of such Certificate in accordance with Section 2.2(b),
without interest.
(b)
Cancellation of Treasury Shares and Rollover Shares
.
Each Share held by the Company as treasury stock or owned, directly or
indirectly, by Parent, Merger Sub or any wholly owned Subsidiary of the Company
immediately prior to the Effective Time shall be cancelled and retired and shall
cease to exist as of the Effective Time, and no consideration shall be delivered
with respect thereto. For the avoidance of doubt, the Rollover Shares
contributed to Parent by the Rollover Holders pursuant to the Contribution
Agreements immediately prior to the Effective Time shall not be converted into
the right to receive the Merger Consideration.
(c)
Common Stock of Merger Sub
. Each share of common
stock, no par value per share, of Merger Sub (
Merger Sub Common Stock
)
issued and outstanding immediately prior to the Effective Time shall be
converted into and become one (1) fully paid and non-assessable share of common
stock, no par value per share, of the Surviving Corporation. From and after the
Effective Time, all certificates, if any, representing shares of Merger Sub
Common Stock shall be deemed for all purposes to represent the number of shares
of common stock of the Surviving Corporation into which they were converted in
accordance with the immediately preceding sentence.
1.6
Treatment of Options and Warrants
.
3
(a) As of the Effective Time, each option to purchase Shares (a
Company Option
) pursuant to the China TransInfo Technology Corp. Equity
Incentive Plan 2009 (the
Company Option Plan
) that is then outstanding,
vested and unexercised (a
Vested
Company Option
) shall be
cancelled and converted into the right to receive, net of any applicable
withholding taxes, as soon as reasonably practicable after the Effective Time,
cash in an amount equal to (i) the total number of Shares subject to such Vested
Company Option immediately prior to the Effective Time multiplied by (ii) the
excess, if any, of (x) the Merger Consideration over (y) the exercise price
payable per Share issuable under such Vested Company Option. As of the Effective
Time, each Company Option that is then outstanding and unvested (an
Unvested
Company Option
) shall be cancelled and converted into the right to receive
as soon as reasonably practicable after the Effective Time, a restricted cash
award (
RCA
) in an amount equal to (i) the total number of Shares
subject to such Unvested Company Option immediately prior to the Effective Time
multiplied by (ii) the excess, if any, of (x) the Merger Consideration over (y)
the exercise price payable per Share issuable under such Unvested Company
Option. RCAs shall be subject to the same vesting conditions and vesting
schedules applicable to the respective Unvested Company Options without giving
effect to the transactions contemplated herein and unvested RCAs are not
transferable by means of sale, assignment, exchange, pledge or otherwise. On the
date, and to the extent, that the Unvested Company Options would have become
vested without giving effect to the transactions contemplated herein, such
corresponding portion of the RCAs shall be converted into U.S. dollars and will
be delivered to the holder of such RCAs, net of any applicable withholding tax,
as soon as practicable thereafter.
(b) As of the Effective Time, each warrant to purchase Shares
(a
Company Warrant
) that is then outstanding and unexercised shall be
cancelled and converted into the right to receive as soon as reasonably
practicable after the Effective Time, cash in an amount equal to (i) the total
number of Shares subject to such Company Warrant immediately prior to the
Effective Time multiplied by (ii) the excess, if any, of (x) the Merger
Consideration over (y) the exercise price payable per Share issuable under such
Company Warrant.
(c) As provided herein, unless otherwise determined by Parent,
the Company Option Plan shall terminate as of the Effective Time.
(d) At or prior to the Effective Time, the Company shall take
all actions reasonably necessary to (i) effect the measures contemplated by this
Section 1.6, including the adoption of any plan amendments, obtaining the
approval of the Company Board or a committee thereof, and/or obtaining any
necessary employee consents and (ii) cause there to be no rights under the
Company Option Plan to acquire Shares following the Effective Time.
(e) Prior to the Effective Time, the Company shall take all
such steps as may be required to cause the transactions contemplated by this
Section 1.6 and any other dispositions of equity securities of the Company
(including derivative securities) in connection with this Agreement by each
individual who is a director or officer of the Company subject to the Section 16
of the Exchange Act to be exempt under Rule 16b-3 promulgated under the Exchange
Act.
4
1.7
Changes in Company Common Stock
. If at any time
during the period between the date of this Agreement and the Effective Time, the
number of outstanding Shares shall have been changed into, or exchanged for, a
different number of shares or a different class of shares, by reason of any
stock dividend or distribution, subdivision, reclassification, recapitalization,
stock split (including a reverse stock split), combination, readjustment or
exchange of shares, or any similar event shall have occurred, then the Merger
Consideration shall be equitably adjusted to reflect such change.
1.8
Articles of Incorporation and Bylaws of the Surviving
Corporation
. At the Effective Time, each of the articles of incorporation
and bylaws of the Surviving Corporation shall be amended in its entirety to read
as the articles of incorporation and bylaws, respectively, of Merger Sub as in
effect immediately prior to the Effective Time, until thereafter amended as
provided therein and by applicable Law, in each case except to the extent
necessary to (a) comply with Section 6.4 and (b) reflect that the name of the
Surviving Corporation shall be China TransInfo Technology Corp. until thereafter
amended as provided therein and by applicable Law.
1.9
Directors and Officers of the Surviving Corporation
.
From and after the Effective Time, the directors of the Surviving Corporation
shall consist of the directors of Merger Sub as of immediately prior to the
Effective Time, until their respective successors are duly elected or appointed
and qualified or their earlier death, resignation or removal in accordance with
the Surviving Corporation's articles of incorporation and bylaws. From and after
the Effective Time, the officers of the Surviving Corporation shall consist of
the officers of the Company as of immediately prior to the Effective Time, until
their respective successors are duly elected or appointed and qualified, or
until their earlier death, resignation or removal in accordance with the
Surviving Corporation's articles of incorporation and bylaws.
ARTICLE II
DELIVERY OF MERGER CONSIDERATION
2.1
Paying Agent
. At or prior to the Effective Time,
Parent shall deposit, or shall cause to be deposited, by wire transfer of
immediately available funds (i) with a bank or trust company that is reasonably
acceptable to the Company as may be designated by Parent at its own cost and
expense (the "
Paying Agent
"), for the benefit of the holders of Shares
(excluding any Shares to be cancelled pursuant to Section 1.5(b)), cash in an
amount sufficient for the Paying Agent to make payments under Sections 1.5(a)
(such cash amount being hereinafter referred to as the "
Exchange Fund
")
and (ii) in an account designated by Parent cash immediately available funds in
an amount sufficient to make payments under Sections 1.6(a) and 1.6(b) . The
Paying Agent shall also act as the agent for the holders of Shares for the
purpose of holding the Certificates and shall obtain no rights or interests in
the Shares represented by such Certificates. The Exchange Fund shall, pending
its disbursement to the holders of Shares, be invested by the Paying Agent as
directed by Parent or, after the Effective Time, the Surviving Corporation;
provided
that no such investment or losses shall affect the amounts
payable to such holders and Parent shall promptly replace or cause to be
replaced any funds deposited with the Paying Agent that are lost through any
investment;
provided
, further, that such investments shall be in
obligations of or guaranteed by the United States of America, in commercial
paper obligations rated A-l or P-1 or better by Moodys Investors
Service, Inc. or Standard & Poors Corporation, respectively, or in money
market funds having a rating in the highest investment category granted by a
recognized credit rating agency at the time of investment. Earnings from
investments, subject to the immediately preceding proviso, shall be the sole and
exclusive property of Parent and the Surviving Corporation. The Exchange Fund
shall not be used for any other purpose.
5
2.2
Exchange Procedures
.
(a) Promptly after the Effective Time (but in no event later
than five (5) Business Days following the Effective Time), Parent shall cause
the Paying Agent to mail to each individual, partnership, joint venture,
corporation, limited liability company, limited liability partnership, trust,
unincorporated organization or other entity ("
Person
") who was at the
Effective Time a holder of record of Shares entitled to receive the Merger
Consideration pursuant to Section 1.5(a) (i) a letter of transmittal (which
shall be in customary form and shall specify that delivery shall be effected,
and risk of loss and title to the Certificates that formerly evidenced the
Shares shall pass, only upon proper delivery of such Certificates (or affidavits
of loss in lieu thereof) to the Paying Agent, and which shall have such
customary provisions with respect to delivery of an "agent's message" with
respect to Shares held in book-entry form as Parent may reasonably specify) and
(ii) instructions for use in effecting the surrender of Certificates pursuant to
such letter of transmittal in exchange for the Merger Consideration (which
instructions shall provide that, at the election of the surrendering holder,
such Certificates (including, as applicable, any book-entry Shares) may be
surrendered and the Merger Consideration in exchange therefor collected by hand
delivery), in each case in form and substance reasonably agreed to by Parent and
the Company.
(b) Upon (i) surrender to the Paying Agent of a Certificate for
cancellation, together with such letter of transmittal, duly completed and
validly executed in accordance with the instructions thereto or (ii) receipt of
an "agent's message" by the Paying Agent, as applicable, in the case of Shares
held in book-entry form, and such other documents as may be reasonably required
by the Paying Agent and reasonably approved by Parent and the Company, the
holder of such Certificate (including, as applicable, book-entry Shares) shall
be entitled to receive in respect of each Share previously represented thereby
the Merger Consideration, and the Certificate so surrendered shall forthwith be
cancelled. No interest will be paid or will accrue on any cash payable pursuant
to Sections 1.5(a) or 1.6(a) .
(c) If payment of the Merger Consideration is to be made to a
Person other than the Person in whose name the surrendered Certificate is
registered, it shall be an obligation of payment that (i) the Certificate so
surrendered shall be properly endorsed or shall otherwise be in proper form for
transfer and (ii) the Person requesting such payment shall have paid any
transfer and other taxes required by reason of the payment of the Merger
Consideration to a Person other than the registered holder of such Certificate
surrendered or shall have established to the reasonable satisfaction of the
Paying Agent that such tax either has been paid or is not payable.
(d) Until surrendered as contemplated by this Section 2.2, each
Certificate (including, as applicable, book-entry Shares) shall be deemed at all
times after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration in respect of the number of Shares previously
represented thereby. From and after the Effective Time, holders of Certificates
(including, as applicable, book-entry Shares) shall cease to have any rights as
stockholders of the Company, except as provided herein or by applicable Law.
6
2.3
Termination of Exchange Fund
. Any portion of the
Exchange Fund (including any interest or earnings from investments received with
respect thereto) that remains undistributed to the holders of Shares twelve (12)
months after the Effective Time shall be delivered to the Surviving Corporation,
upon demand by the Surviving Corporation, and any holder of Shares who has not
theretofore complied with this Article II shall thereafter look only to the
Surviving Corporation for payment of their respective claims for the Merger
Consideration that may be payable upon due surrender of their Certificates, as
determined pursuant to this Agreement (subject to abandoned property, escheat or
other similar Laws), without any interest thereon and less any required
withholding of taxes. Any amounts remaining unclaimed by such holders
immediately prior to such time at which such amounts would otherwise escheat to
or become property of any Governmental Entity shall become, to the extent
permitted by applicable Law, the property of the Surviving Corporation, free and
clear of all claims or interest of any Person previously entitled thereto.
Notwithstanding any provision of this Agreement to the contrary, none of Parent,
the Surviving Corporation, the Paying Agent or any other Person shall be liable
to any holder of a Certificate for Merger Consideration that was required to be
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar Law and was so delivered.
2.4
Withholding Rights
. The current understanding of
Parent or Merger Sub is that no Party will be required to deduct or withhold any
amount from the consideration otherwise payable pursuant to this Agreement under
applicable PRC Law;
provided
that, in the event that the circumstances
change after the date hereof such that the Surviving Corporation or Parent
reasonably determines a deduction or withholding is required, the Surviving
Corporation and Parent shall inform the Special Committee in detail of such
change in circumstances and consult with the Special Committee concerning such
proposed deduction or withholding, and each of the Surviving Corporation, Parent
and the Paying Agent shall be entitled to deduct and withhold appropriate
amounts. To the extent that amounts are so withheld and paid over to the
appropriate Governmental Entity by the Surviving Corporation, Parent or the
Paying Agent, as the case may be, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the Shares in
respect of which such deduction and withholding was made by the Surviving
Corporation, Parent or the Paying Agent, as the case may be.
2.5
Lost, Stolen or Destroyed Certificates
. If any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Certificate to be lost,
stolen or destroyed the Paying Agent will issue in exchange for such lost,
stolen or destroyed Certificate the Merger Consideration with respect to each
Share formerly represented by such Certificate;
provided
,
however
,
the Surviving Corporation may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
Certificates to deliver an agreement of indemnification in a form reasonably
satisfactory to the Surviving Corporation, or a bond, in such reasonable amount
as the Surviving Corporation may direct, as indemnity against any claim that may
be made against it with respect to such Certificate alleged to have been lost,
stolen or destroyed.
7
2.6
Transfer Books
. The Merger Consideration paid in
respect of Shares upon the surrender for exchange of Certificates in accordance
with the terms of this Article II shall be deemed to have been paid in full
satisfaction of all rights pertaining to the Shares previously represented by
such Certificates. At the Effective Time, the stock transfer books of the
Company shall be closed and thereafter there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the Shares
that were outstanding immediately prior to the Effective Time. Subject to
Section 2.4, if, at any time after the Effective Time, Certificates are
presented to the Surviving Corporation for any reason, they shall be cancelled
and exchanged as provided in this Article II.
2.7
Unwinding the Merger
. If (i) one (1) full Business
Day has elapsed since the Effective Time and (ii) Parent has not deposited or
cause to be deposited in full the amount specified in Section 2.1, the Parties
agree they shall, at the Special Committee's request, take any and all steps as
may be necessary or appropriate in order to unwind the effect of the filing of
the Articles of Merger in order to place the Parties, and their respective
stockholders and owners, in the same positions they occupied prior to the filing
of the Articles of Merger.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except (a) as set forth in the Disclosure Letter (it being
understood that any information set forth on one section or subsection of the
Disclosure Letter shall be deemed to apply and qualify the section or subsection
of this Agreement to which it corresponds in number and each other section or
subsection of this Agreement to the extent that it is reasonably apparent that
such information is relevant to such other section or subsection), (b) as may be
disclosed in the Company SEC Reports, other than disclosures in the Company SEC
Reports contained in the "Risk Factors" and "Forward Looking Statements"
sections or any other disclosures in the Company SEC Reports to the extent they
are general, nonspecific, forward-looking or cautionary in nature, or (c) for
any matters with respect to which both Mr. Shudong Xia (
Mr. Xia
) and
SAIF Partners III L.P. have actual knowledge, the Company hereby represents and
warrants to Parent and Merger Sub as follows:
3.1
Organization and Qualification
.
(a) Each of the Company and the Subsidiaries is an entity duly
incorporated or otherwise organized, validly existing and in good standing (with
respect to jurisdictions that recognize the concept of good standing) under the
Laws of the jurisdiction of its incorporation or organization (as applicable),
with the requisite power and authority to own and use its properties and assets
and to carry on its business as currently conducted. Neither the Company nor any
Subsidiary is in violation or default of any of the provisions of its articles
of incorporation, bylaws or other equivalent organizational documents. Each of
the Company and the Subsidiaries is duly qualified to conduct business and is in
good standing (with respect to jurisdictions that recognize the concept of good
standing) as a foreign corporation or other entity in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may be,
does not have or reasonably be expected to result in a Company Material Adverse
Effect, and no action, claim, suit, investigation or proceeding (including,
without limitation, an informal investigation or partial proceeding, such as
deposition) ("
Proceeding
") has been instituted or, to the Knowledge of
the Company, threatened in any such jurisdiction revoking, limiting or
curtailing or seeking to revoke, limit or curtail such power and authority or
qualification. True, complete and correct copies of the Articles of
Incorporation of the Company as amended to date (the "
Company Articles
")
and the Bylaws of the Company (the "
Company Bylaws
"), as in effect as of
the date of this Agreement, have been publicly filed by the Company as part of
the Company SEC Reports.
8
(b) As used in this Agreement, the term "
Company Material
Adverse
Effect
" means, with respect to the Company and its
Subsidiaries, any circumstance, event, change, effect, or development (any such
item, an "
Effect
") that, individually or in the aggregate together with
all other Effects, has had or would reasonably be expected to have a material
adverse effect on the financial condition, results of operations, prospects,
assets, liabilities, properties or business of the Company and its Subsidiaries,
taken as a whole;
provided
,
however
, that a Company Material
Adverse Effect shall not be deemed to include Effects arising out of, relating
to or resulting from (i) changes or modifications in GAAP or regulatory
accounting requirements or changes in Laws (or interpretations thereof)
applicable to the Company or any of its Subsidiaries, (ii) changes, effects or
circumstances in the industries or markets in which the Company or any of its
Subsidiaries operates, (iii) changes in general business, economic, political or
financial market conditions, (iv) changes in the financial, credit or securities
markets in the United States, the PRC or any other country or region in the
world, including changes in interest rates, foreign exchange rates and sovereign
credit ratings; (v) the public disclosure of this Agreement or the transactions
contemplated hereby or the consummation of the transactions contemplated hereby
or the announcement of the execution of this Agreement, including, without
limitation, any stockholder litigation relating to this Agreement; (vi) any
change in the price of the Shares or trading volume as quoted on NASDAQ (it
being understood that the underlying cause of such change in stock price or
trading volume may be taken into account in determining whether a Company
Material Adverse Effect has occurred or is reasonably expected to occur); (vii)
any outbreak or escalation of hostilities, declared or undeclared acts of war or
terrorism, acts of God or natural disasters; (viii) actions or omissions taken
with the prior written consent of or at the written request of the other Parties
hereto or required or permitted by this Agreement; (ix) the failure by the
Company or any of its Subsidiaries to meet any internal or industry estimates,
expectations, forecasts, projections or budgets for any period (it being
understood that the underlying cause of such failure may be taken into account
in determining whether a Company Material Adverse Effect has occurred or is
reasonably expected to occur); (x) any change or prospective change in the
Companys credit ratings (it being understood that the underlying cause of such
change or prospective change may be taken into account in determining whether a
Company Material Adverse Effect has occurred or is reasonably expected to
occur); or (xi) any loss of, or change in, the relationship of the Company or
any of its Subsidiaries, contractual or otherwise, with its brokers, customers,
suppliers, vendors, lenders, employees, investors, or joint venture partners
arising out of the execution, delivery or performance of this Agreement, the
consummation of the transactions contemplated hereby or the announcement of any
of the foregoing;
provided
, further, that in the case of the
foregoing clauses (i), (ii) and (iii), the impact of such Effect is not
disproportionately adverse to the Company and its Subsidiaries, taken as a
whole, as compared to other companies in the industries in which the Company and
its Subsidiaries operate.
9
3.2
Subsidiaries
. All of the Subsidiaries of the Company
are set forth in the Company SEC Reports. Except as disclosed in the Company SEC
Reports, the Company owns, directly or indirectly, all of the capital stock or
other equity interests of each Subsidiary free and clear of any liens, charges,
security interests, encumbrances, rights of first refusal, preemptive rights or
other restrictions ("
Liens
"), and all of the issued and outstanding
shares of capital stock of each Subsidiary are validly issued and are fully paid
except as permitted under applicable Law, non-assessable and free of preemptive
and similar rights to subscribe for or purchase securities. The Company or one
of its Subsidiaries has the unrestricted right to vote, and (subject to
limitations imposed by applicable Law) to receive dividends and distributions
on, all capital securities of its Subsidiaries as owned by the Company or such
Subsidiary. As used in this Agreement, the term "
Subsidiary
" means any
entity in which the Company directly or indirectly, owns at least a majority of
capital stock or holds at least a majority of equity or similar interest and
shall, where applicable, include any subsidiary of the Company formed or
acquired after the date hereof.
3.3
Authorization, Special Committee and Fairness
.
(a) The Company has the requisite corporate power and authority
to execute and deliver this Agreement and, subject to the Stockholder Approval,
to consummate the transactions contemplated hereby, including the Merger. The
execution and delivery of this Agreement by the Company and, subject to the
Stockholder Approval, the consummation by it of the Merger and the other
transactions contemplated hereby have been duly authorized by all necessary
action on the part of the Company and, except for the Stockholder Approval, no
further action is required on the part of the Company in connection therewith.
This Agreement has been duly executed and delivered by the Company and (assuming
due authorization, execution and delivery by Parent and Merger Sub) constitutes
the valid and binding obligation of the Company enforceable against the Company
in accordance with its terms, except (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization, moratorium and
other Laws of general application affecting enforcement of creditors' rights
generally, (ii) as limited by Laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by any applicable
Laws. As used in this Agreement, the term "
Law
" means any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Entity or the
NASDAQ Global Market ("
NASDAQ
"), as amended, modified, codified, replaced
or reenacted, in whole or in part, and in effect from time to time.
(b) The Special Committee is composed of four members of the
Company Board who are not affiliated with Parent or Merger Sub and are not
members of the Company's management. As of the date hereof and with respect to
and based on the facts and circumstances as of the date hereof, the Company Board, acting
upon the recommendation of the Special Committee, has (i) determined that the
Merger, on the terms and subject to the conditions set forth herein, is fair to,
and in the best interests of, the Company and its stockholders, (ii) adopted,
approved and declared advisable this Agreement, the Merger and the other
transactions contemplated hereby and (iii) subject to the terms of this
Agreement (including Section 6.6), resolved to make the Company Board
Recommendation to the holders of Shares. The Company Board, acting upon the
recommendation of the Special Committee, has directed that this Agreement be
submitted to the holders of Shares for their approval.
10
(c) (i) The affirmative vote (in person or by proxy) of both
(i) the holders of a majority of the Shares and (ii) holders of a majority of
the Shares (excluding the Rollover Shares) at the Stockholders' Meeting, or any
adjournment or postponement thereof, in favor of the adoption of this Agreement
(the "
Stockholder Approval
") are the only votes or approvals of the
holders of any class or series of capital stock of the Company or any of its
Subsidiaries which is necessary to adopt this Agreement and approve the Merger
and the other transactions contemplated hereby.
3.4
No Conflicts
. The execution, delivery and
performance of this Agreement by the Company and the consummation by the Company
of the Merger and the other transactions contemplated hereby do not and will not
(a) assuming Stockholder Approval is obtained, conflict with or violate any
provision of the Company Articles or Company Bylaws, or the articles of
incorporation, bylaws or other equivalent organizational documents of any
Subsidiary of the Company, (b) conflict with, or constitute a default (or an
event that with notice or lapse of time or both would become a default) under,
result in the creation of any Lien (other than the Liens, if any, created as a
result of any actions by Holdco, Parent, or Merger Sub) upon any of the
properties or assets of the Company or any Subsidiary, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or (c)
conflict with or result in a violation of any Law applicable to the Company or a
Subsidiary, or by which any property or asset of the Company or a Subsidiary is
bound or affected.
3.5
Capitalization
. The authorized capital stock of the
Company consists of 150,000,000 Shares and 10,000,000 shares of preferred stock,
US$0.001 par value per share ("
Company Preferred Stock
") of which, as of
the date of this Agreement, (i) 25,270,069 Shares and no shares of Company
Preferred Stock are issued and outstanding, and (ii) 3,000,000 Shares are
reserved for future issuance pursuant to outstanding Company Options and 5,555
Shares are reserved for future issuance pursuant to outstanding Company
Warrants. Except as set forth in the Company SEC Reports, the Company has not
issued any capital stock since its most recently filed periodic report under the
Exchange Act. Except as disclosed herein, in Section 3.5 of the Disclosure
Letter or in the Company SEC Reports, there are no outstanding options,
warrants, scrip rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible into or
exercisable or exchangeable for, or giving any Person any right to subscribe for
or acquire, any Shares or shares of Company Preferred Stock. All of the Shares
are validly issued, fully paid and nonassessable, have been issued in compliance
with all federal and state securities Laws, and none of such Shares was issued
in violation of any preemptive rights or similar rights to
subscribe for or purchase securities. Except as disclosed in the SEC Reports and
the Transaction Agreements (as defined below), there are no stockholders
agreements, voting agreements or other similar agreements with respect to the
Company's capital stock to which the Company is a party or, to the Knowledge of
the Company, between or among any of the Company's stockholders. As used in this
Agreement, the term "
Knowledge
" or "
Knowledge of the Company
"
means the actual knowledge of Mr. Rong Zhang, the Chief Financial Officer of the
Company.
11
3.6
Consents and Approvals
. Assuming that the Filings
and Regulatory Approvals referred to in Section 4.4 are duly made and obtained,
as applicable, and except for (a) the filing with the Securities and Exchange
Commission (the "
SEC
") of a Proxy Statement in definitive form relating
to the meeting of the Company's stockholders to be held in connection with
approval by the Company's stockholders of this Agreement, the Merger and the
transactions contemplated hereby (together with any supplements or amendments
thereto, the "
Proxy
Statement
") and a Schedule 13E-3, (b) the
filing of the Articles of Merger with the Nevada Secretary of State pursuant to
the NRS, (c) any Filings or Regulatory Approvals in connection with compliance
with the rules of NASDAQ), and (d) such other Filings or Regulatory Approvals
the failure of which to be made or obtained, as applicable, as would not have a
Company Material Adverse Effect, no Filings with, or Regulatory Approvals from,
any Governmental Entity are necessary in connection with the consummation by the
Company of the Merger and the other transactions contemplated by this Agreement.
As used in this Agreement, the term "
Governmental Entity
" means any
federal, national, state, provincial or local, whether domestic or foreign,
government or any court of competent jurisdiction, administrative agency or
commission or other governmental, regulatory, self-regulatory or enforcement
authority or instrumentality, whether domestic, foreign or supranational, the
term "
Filings
" means filings of applications, notices, petitions,
filings, registrations, declarations, submissions and other documentation with
any Governmental Entity, and the term "
Regulatory Approvals
" means
permits, consents, approvals, authorizations, clearances, exemptions,
nonobjections, waivers or orders from any Governmental Entity.
3.7
Company SEC Reports; Financial Statements
.
(a) The Company has filed all reports, schedules, forms,
statements and other documents required to be filed by it under the Securities
Act of 1933, as amended (the "
Securities Act
") and the Securities
Exchange Act of 1934, as amended (the "
Exchange
Act
") since
January 1, 2010, including the exhibits thereto and documents incorporated by
reference therein, being collectively referred to herein as the "
Company SEC
Reports
") on a timely basis or has received a valid extension of such time
of filing and has filed any such Company SEC Reports prior to the expiration of
any such extension. As of the date of filing, in the case of Company SEC Reports
filed pursuant to the Exchange Act (and to the extent such SEC Report was
amended, then as of the date of filing of such amendment), and as of the date of
effectiveness in the case of Company SEC Reports filed pursuant to the
Securities Act (and to the extent such Company SEC Report was amended, then as
of the date of effectiveness of such amendment), the Company SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations of the SEC promulgated
thereunder, as applicable, and none of the Company SEC Reports, as of the date
of filing, in the case of Company SEC Reports filed pursuant to the Exchange Act
(and to the extent such Company SEC Report was amended, then as to the
date of filing of such amendment), and as of the date of effectiveness in the
case of Company SEC Reports filed pursuant to the Securities Act (and to the
extent such Company SEC Report was amended, then as of the date of effectiveness
of such amendment), contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
12
(b) The consolidated financial statements of the Company
included in the Company SEC Reports complied in all material respects with
applicable accounting requirements and the rules and regulations of the SEC with
respect thereto as in effect at the time of filing. Such financial statements
have been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis during the periods involved
("
GAAP
"), except as may be otherwise specified in such financial
statements or the notes thereto and except that unaudited financial statements
may not contain all footnotes required by GAAP, and fairly present in all
material respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal year-end audit adjustments.
3.8
Material Changes; Undisclosed Events, Liabilities or
Developments
. Since the date of the latest audited financial statements
included within the Company SEC Reports, except (i) as specifically disclosed in
a subsequent Company SEC Report filed prior to the date of this Agreement or
(ii) as expressly contemplated by this Agreement, (a) there has been no event,
occurrence or development that has had or that could reasonably be expected to
result in a Company Material Adverse Effect, (b) the Company has not altered its
method of accounting, (c) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock and (d) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to the Company Option Plan. The Company
does not have pending before the SEC any request for confidential treatment of
information. Except for the Merger or the other transactions contemplated hereby
or as disclosed in the Company SEC Reports, no event, liability or development
has occurred or exists with respect to the Company or its Subsidiaries or their
businesses, properties, operations or financial condition, that would be
required to be disclosed by the Company under applicable securities Laws. For
purposes of this Agreement, "
Affiliate
" means any Person that, directly
or indirectly, through one or more intermediaries, controls or is controlled by
or is under common control with a Person as such terms are used in and construed
under Rule 405 under the Securities Act.
3.9
Legal Proceedings
. Except as set forth in Section
3.9 of the Disclosure Letter, (i) neither the Company nor any of its
Subsidiaries is a party to any, and there are no pending or, to the Company's
Knowledge, threatened in writing, Proceedings of any nature against the Company
or any of its Subsidiaries or to which any of their material properties or
assets is subject, and (ii) as of the date of this Agreement, there is no
material judgment, order, injunction or decree ("
Judgment
") (other than
those of general application that apply to similarly situated companies)
outstanding against the Company, any of its Subsidiaries or any of their
material properties or assets.
13
3.10
Compliance
. Neither the Company nor any Subsidiary
(a) is in material default under or in violation of (and no event has occurred
that has not been waived that, with notice or lapse of time or both, would
result in a default by the Company or any Subsidiary under), nor has the Company
or any Subsidiary received notice of a claim that it is in default under or that
it is in violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound (whether or not such default or violation has been waived),
(b) is in violation of any order of any court, arbitrator or Governmental
Entity, or (c) is or has been in violation of any statute, rule or regulation of
any Governmental Entity, including without limitation, (i) any Law applicable to
its business, (ii) the Currency and Foreign Transactions Reporting Act of 1970,
as amended, or any money laundering Laws, rules or regulations, and (iii) any
Laws, rules or regulations related to health, safety or the environment,
including those relating to the regulation of hazardous substances.
3.11
Regulatory Permits
. The Company and the
Subsidiaries possess all material certificates, authorizations and permits
issued by the appropriate federal, state, local or foreign regulatory
authorities necessary to conduct their respective businesses as described in the
Company SEC Reports ("
Material Permits
"), and neither the Company nor any
Subsidiary has received any notice of Proceedings relating to the revocation or
modification of any Material Permit.
3.12
Title to Assets
. Neither the Company nor any of its
Subsidiaries owns any real property. The Company and the Subsidiaries have good
and marketable title in all personal property owned by them that is material to
the business of the Company and the Subsidiaries, in each case free and clear of
all Liens, except for Liens as do not materially affect the value of such
property and do not materially interfere with the use made and proposed to be
made of such property by the Company and the Subsidiaries and Liens for the
payment of federal, state or other taxes, the payment of which is neither
delinquent nor subject to penalties. Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases (except as may be limited by bankruptcy,
insolvency, fraudulent transfer, moratorium, reorganization, preference or
similar Laws of general applicability relating to or affecting the rights of
creditors generally and subject to general principles of equity (regardless of
whether enforcement is sought in equity or at law)) with which the Company and
the Subsidiaries are in compliance.
3.13
Patents and Trademarks
. The Company and the
Subsidiaries have, or have rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names, trade secrets,
inventions, copyrights, licenses and other intellectual property rights and
similar rights necessary or material for use in connection with their respective
businesses as described in the Company SEC Reports (collectively, the
"
Intellectual Property Rights
"). Neither the Company nor any Subsidiary
has received a written notice that any of the Intellectual Property Rights used
by the Company or any Subsidiary violates or infringes upon the intellectual
property rights of any Person. To the Knowledge of the Company, all such
Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights. The
Company and its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual properties.
14
3.14
Insurance
. The Company and the Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as the Company deems adequate for the businesses
in which the Company and the Subsidiaries are engaged, including, but not
limited to, directors and officers insurance. Neither the Company nor any
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business without a significant increase in cost.
3.15
Contracts
.
(a) Neither the Company nor any of its Subsidiaries is a party
to or bound by any contract, arrangement, commitment or understanding (whether
written or oral) that is a "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC) to be performed after the date of this
Agreement that has not been filed or incorporated by reference in the Company
SEC Reports filed prior to the date hereof. Each contract, arrangement,
commitment or understanding of the type described in this Section 3.15(a) is
referred to herein as a "
Company Contract
."
(b) (i) Each Company Contract is valid and binding on the
Company or its applicable Subsidiary, enforceable against it in accordance with
its terms (except as may be limited by bankruptcy, insolvency, fraudulent
transfer, moratorium, reorganization, preference or similar Laws of general
applicability relating to or affecting the rights of creditors generally and
subject to general principles of equity (regardless of whether enforcement is
sought in equity or at law)), and is in full force and effect, and (ii) as of
the date of this Agreement, to the Knowledge of the Company, no other party to
any Company Contract is in breach of or default under the terms of any Company
Contract.
3.16
Transactions With Affiliates and Employees
. None of
the officers or directors of the Company and, to the Knowledge of the Company,
none of the employees of the Company is presently a party to any transaction
with the Company or any of its Subsidiaries which would be required to be
reported under Item 404 of Regulation S-K promulgated under the Exchange Act
with the Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the Knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner other than for (a)
payment of salary or consulting fees for services rendered, (b) reimbursement
for expenses incurred on behalf of the Company and (c) other employee benefits,
including stock option agreements under any stock option plan of the Company.
3.17
Sarbanes-Oxley; Internal Accounting Controls
. The
Company is in material compliance with all provisions of the United States
Sarbanes-Oxley Act of 2002 which are applicable to it. The Company and the
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (a) transactions are executed in accordance
with management's general or specific authorizations, (b) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (c) access to assets is
permitted only in accordance with management's general or specific
authorization, and (d) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company has established disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
Company and designed such disclosure controls and procedures to ensure that
information required to be disclosed by the Company in the reports it files or
submits under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the SEC's rules and forms. The Company's
certifying officers have evaluated the effectiveness of the Company's disclosure
controls and procedures as of the end of the period covered by the Company's
most recently filed periodic report under the Exchange Act (such date, the
"
Evaluation Date
"). The Company presented in its most recently filed
periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date. Since the Evaluation Date, there
has been no change in the Company's internal control over financial reporting
(as such term is defined in the Exchange Act) that has materially affected, or
is reasonably likely to materially affect, the Company's internal control over
financial reporting.
15
3.18
Company Information
. None of the information
supplied or to be supplied by or on behalf of the Company or any of its
Subsidiaries for inclusion or incorporation by reference in (a) Schedule 13E-3
will, at the time such document is filed with the SEC, or at any time such
document is amended or supplemented, contained any untrue statement of material
fact or omit to state any material fact required to be stated therein or
necessary in order to make statements therein, in light of the circumstances
under which they are made, not misleading, or (b) the Proxy Statement will, at
the date it is first mailed to the stockholders of the Company or at the time of
the meeting of stockholders for the purpose of considering and taking action
upon this Agreement (the "
Stockholders' Meeting
"), contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The Proxy Statement
will comply as to form in all material respects with the applicable requirements
of the Exchange Act and the rules and regulations thereunder.
3.19
Opinion
. The Special Committee and the Company
Board have received the opinion of William Blair & Company, L.L.C. to the
effect that, as of the date of such opinion and based upon and subject to the
assumptions, qualifications and limitations set forth in such opinion, the
consideration to be received by the holders of Shares (other than Parent, Merger
Sub and their Affiliates, and the Rollover Holders) pursuant to the Merger is
fair, from a financial point of view, to such holders.
3.20
Tax Status
. The Company and each Subsidiary has
filed all necessary federal, state and foreign income and franchise tax returns
and has paid or accrued all taxes shown as due thereon, and the Company has no
knowledge of a tax deficiency which has been asserted or threatened against the
Company or any Subsidiary. The provisions for taxes payable, if any, shown on
the financial statements filed with or as part of the Company SEC Reports are
sufficient for all accrued and unpaid taxes, whether or not disputed, and for
all periods to and including the dates of such consolidated financial
statements.
16
3.21
Environmental Matters
. The Company and its
Subsidiaries are in compliance in all material respects with applicable Laws
relating to (a) the protection of the environment, human health or natural
resources, (b) the handling, use, disposal, release or threatened release of any
hazardous substance and (c) pollution, contamination or any injury to Persons or
property involving any hazardous substance ("
Environmental Laws
"). There
are no material Proceedings pending before, or, to the Company's Knowledge,
threatened in writing by, any Governmental Entity against the Company or its
Subsidiaries relating to any noncompliance under Environmental Law and, to the
Knowledge of the Company, there is no reasonable basis for any such Proceeding.
There are no Judgments by or with any Governmental Entity which could reasonably
be expected to result in any material liabilities or obligations under or in
respect of any Environmental Law. To the Knowledge of the Company, there are no
hazardous substances at any property (currently or formerly owned or leased by
the Company or any of its Subsidiaries) under circumstances which could
reasonably be expected to result in material liability to or claims against the
Company or its Subsidiaries relating to any Environmental Law.
3.22
Foreign Corrupt Practices
. Neither the Company,
nor, to the Knowledge of the Company, any agent or other person acting on behalf
of the Company, has violated in any material respect any provision of (a) any
company contribution or bribery Laws, (b) the Foreign Corrupt Practices Act of
1977, as amended, or (c) any similar domestic or foreign Laws applicable to the
Company.
3.23
Other Representations and Warranties Relating to the
Company and
Subsidiaries
.
(a) All material consents, approvals, authorizations or
licenses requisite under applicable Law of the People's Republic of China
("
PRC
") for the due and proper establishment and operation of the Company
and Subsidiaries have been duly obtained from the relevant PRC Governmental
Entity and are in full force and effect.
(b) Except as disclosed in the Company SEC Reports, all
material filings and registrations with the PRC Governmental Entities required
in respect of the Company and Subsidiaries and their capital structure and
operations including, without limitation, the registration with the Ministry of
Commerce, the State Administration of Industry and Commerce, the State
Administration of Foreign Exchange, State Administration of Taxation, General
Administration of Customs, and their respective competent local counterparts,
have been duly completed in accordance with the applicable PRC Law.
(c) Each of the Company and the Subsidiaries has complied in
all material respects with all applicable PRC Laws regarding the contribution
and payment of its registered capital. Except as disclosed in the Company SEC
Reports and expressly contemplated under this Agreement, there are no binding
commitments made by the Company or any Subsidiary to sell any equity interest in
the Company or any Subsidiary.
(d) Neither the Company nor any Subsidiary has received any
letter or notice from any relevant PRC Governmental Entity notifying it of
revocation of any material licenses or qualifications issued to it or any
subsidy granted to it by any PRC Governmental Entity for non-compliance with the
terms thereof or with applicable PRC Law, or the lack of compliance or remedial actions in respect of the activities
carried out by the Company or any Subsidiary.
17
(e) Each of the Company and the Subsidiaries has conducted its
business activities within the permitted scope of business or have otherwise
operated their business in compliance with applicable PRC Law and with all
requisite licenses and approvals granted by competent PRC Governmental Entity
other than such non-compliance that do not, and would not, individually or in
the aggregate, have a Company Material Adverse Effect. As to licenses, approvals
and government grants and concessions requisite or material for the conduct of
any material part of the Company or the Subsidiaries' business which is subject
to periodic renewal, the Company has no Knowledge of any reasons for which such
requisite renewals will not be granted by the relevant PRC Governmental
Entities.
(f) With regard to employment and staff or labor, each of the
Company and the Subsidiaries has complied with all applicable PRC Laws in all
material respects, including, without limitation, those pertaining to welfare
funds, social benefits, medical benefits, insurance, retirement benefits,
pensions or similar plans.
3.24
Disclosure Letter
. Simultaneously with the
execution of this Agreement, the Company delivered to Parent a letter (the
Disclosure Letter
) that sets forth, among other things, items the
disclosure of which is necessary or appropriate either in response to an express
disclosure requirement contained in a provision hereof or as an exception to one
or more representations or warranties contained in Article III, or to one or
more covenants contained herein;
provided
,
however
, that
notwithstanding anything in this Agreement to the contrary, the mere inclusion
of an item as an exception to a representation or warranty shall not be deemed
an admission or evidence of materiality of such item or that such item has had
or, individually or in the aggregate, would reasonably be expected to have a
Company Material Adverse Effect, nor shall it establish any standard of
materiality for any purpose whatsoever. Disclosure of any fact, circumstance or
information in any Section of the Disclosure Letter shall be deemed to be
disclosure of such fact, circumstance or information with respect to any other
Sections of the Disclosure Letter if it is reasonably apparent that such
disclosure relates to one or more of all of such Sections.
3.25
Nevada Takeover Statutes
. None of the requirements
or restrictions of (a) the "Combinations With Interested Stockholders" statutes
set forth in NRS 78.41178.444 or (b) the acquisition of controlling interest
statutes set forth in NRS 78.37878.3793 (collectively, the
Takeover
Statutes
) would apply to prevent the consummation of any of the
transactions contemplated hereby, including the Merger.
3.26
Brokers Fees
. None of the Company or any of its
Subsidiaries nor any of their officers, directors, employees or agents has
utilized any broker, finder or financial advisor or incurred any liability for
any broker's fees, commissions or finder's fees in connection with the Merger or
any other transactions contemplated by this Agreement, other than William Blair
& Company, L.L.C., the fees and expenses of which will be paid by the
Company.
3.27
No Other Representations or Warranties
. Except for
the representations and warranties contained in this Article III, none of the
Company, its Affiliates or their Representatives makes any representation or warranty, express
or implied, at law or in equity, with respect to the Company or its Subsidiaries
or their businesses, assets or properties, or with respect to any other
information provided to Parent, Merger Sub, their Affiliates or their
Representatives in connection with the transactions contemplated hereby. None of
the Company, its Affiliates or their Representatives will have or be subject to
any liability or indemnification obligation to Parent, Merger Sub, their
Affiliates or their Representatives resulting from the distribution, or making
available, to such Persons, or such Persons' use of, any such information,
including any documents, projections, forecasts, management presentations or
other materials made available to Parent or Merger Sub in connection with the
transactions contemplated by this Agreement. The Company hereby acknowledges
that Parent and Merger Sub make no representations or warranties except for the
representations and warranties contained in Article IV.
18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Each of Parent and Merger Sub, jointly and severally, hereby
represents and warrants to the Company as follows:
4.1
Corporate Organization
. Each of Parent and Merger
Sub is a corporation duly incorporated or otherwise organized, validly existing
and in good standing under the Laws of the jurisdiction of its incorporation or
organization and, except as would not have a Parent Material Adverse Effect, has
all requisite corporate power and authority to carry on its business as
presently conducted. As used in this Agreement, the term "
Parent Material
Adverse Effect
" means any circumstance, event, change, effect or development
that, individually or in the aggregate, prevents or materially impedes,
interferes with, hinders or delays the consummation by Parent or Merger Sub of
the transactions contemplated by this Agreement on a timely basis, including the
Merger.
4.2
Authorization
. Each of Parent and Merger Sub has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby, including the Merger.
The execution and delivery of this Agreement by Parent and Merger Sub and the
consummation of the Merger and the transactions contemplated hereby, have been
duly authorized by all necessary action on the part of each of Parent and Merger
Sub, and no further action is required on the part of Parent or Merger Sub in
connection therewith. The board of directors of each of Parent and Merger Sub
has determined that this Agreement and the transactions contemplated hereby,
including the Merger, are advisable and in the best interests of their
stockholders, and has approved and adopted this Agreement and the transactions
contemplated hereby, including the Merger, Merger Sub has recommended this
Agreement to Parent and Parent, as the sole stockholder of Merger Sub, has
approved this Agreement. This Agreement has been duly executed and delivered by
each of Parent and Merger Sub and (assuming due authorization, execution and
delivery by the Company) constitutes the valid and binding obligation of each of
Parent and Merger Sub, enforceable against each of Parent and Merger Sub in
accordance with its terms, except (a) as limited by general equitable principles
and applicable bankruptcy, insolvency, reorganization, moratorium and other Laws
of general application affecting enforcement of creditors' rights generally, (b)
as limited by Laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (c) insofar as indemnification
and contribution provisions may be limited by any applicable Law.
19
4.3
No Conflicts
. The execution, delivery and
performance of this Agreement by Parent or Merger Sub and the consummation by
Parent or Merger Sub of the Merger and the other transactions contemplated
hereby do not and will not (a) conflict with or violate any provision of the
articles of incorporation, bylaws or other equivalent organizational documents
of Parent or its Subsidiaries, or (b) conflict with, or constitute a default (or
an event that with notice or lapse of time or both would become a default)
under, result in the creation of any Lien upon any of the properties or assets
of Parent or Merger Sub, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of,
any agreement, credit facility, debt or other instrument (evidencing a debt of
Parent or Merger Sub or otherwise) or other understanding to which Parent or
Merger Sub is a party or by which any property or asset of Parent or Merger Sub
is bound or affected, or (c) conflict with or result in a violation of any Law
applicable to Parent or Merger Sub, or by which any property or asset of Parent
or Merger Sub is bound or affected.
4.4
Consents and Approvals
. Except for Filings required
under and compliance with the applicable requirements of the Exchange Act and
the NRS, no Filings with, or Regulatory Approvals from, any Governmental Entity
are necessary in connection with the consummation by Parent or Merger Sub of the
Merger and the other transactions contemplated by this Agreement.
4.5
Operation and Ownership of Merger Sub
. Merger Sub
has been formed solely for the purpose of engaging in the transactions
contemplated hereby and, prior to the Effective Time, will not have engaged in
any business activities or conducted any operations, other than pursuant to or
in connection with this Agreement. Parent owns, beneficially and of record, all
of the outstanding shares of Merger Sub Common Stock, free and clean of all
Liens (other than Liens created pursuant to the Debt Financing).
4.6
Legal Proceedings
. There is no Proceeding pending
or, to the knowledge of Parent or Merger Sub, threatened in writing against
Parent, Merger Sub or any of their respective Affiliates that would reasonably
be expected to have a Parent Material Adverse Effect. There is no Judgment
outstanding against Parent, Merger Sub or any of their respective Affiliates
that would reasonably be expected to have a Parent Material Adverse Effect.
4.7
Parent Information
. None of the information supplied
or to be supplied by or on behalf of Parent or Merger Sub or any of its
Subsidiaries for inclusion or incorporation by reference in (a) Schedule 13E-3
will, at the time such document is filed with the SEC, or at any time such
document is amended or supplemented, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading, or (b) the Proxy Statement will, at
the date it is first mailed to the stockholders of the Company and at the time
of the Stockholders' Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading.
20
4.8
Financing; Equity Rollover
.
(a) Parent will have, available at the Effective Time,
sufficient cash and cash equivalent resources to consummate the transactions
contemplated by this Agreement, including the Merger, and to pay all reasonable
related fees and expenses, including legal, accounting, and advisory fees and
expenses. Subject to the terms and conditions of the Financing Documents, and
subject to the terms and conditions of this Agreement, the aggregate proceeds
contemplated by the Financing Documents will be sufficient for Parent and Merger
Sub to consummate the Merger upon the terms contemplated by this Agreement, to
pay any and all fees and expenses required to be paid by Parent, Merger Sub and
the Surviving Corporation in connection with the Merger and the Debt Financing
and to satisfy all of the other payment obligations of Parent, Merger Sub and
the Surviving Corporation contemplated hereunder.
(b) Parent has delivered to the Company true, complete and
correct copies of (i) an executed Facility Agreement, dated as of June 8, 2012
(the
Facility
Agreement
), between Parent and China Development
Bank Corporation Hong Kong Branch (the
Bank Lender
), pursuant to which
the Bank Lender has agreed, subject to the terms and conditions thereof, to
provide the term loans described therein (the
Debt Financing
), (ii) an
executed equity commitment letter (the
Chairman Commitment Letter
) from
Mr. Xia to Shudong Investments Limited, a Cayman Islands exempted company with
limited liability (
Holdco
), pursuant to which Mr. Xia has committed,
subject to the terms and conditions thereof, to provide the equity investment
set forth therein (the
Chairman Equity Financing
), (iii) an executed
equity commitment letter (the
SAIF Commitment Letter
, and together with
the Facility Agreement and the Chairman Commitment Letter, the
Financing
Documents
) from SAIF Partners IV L.P. (
SAIF
) to Holdco, pursuant
to which SAIF has committed, subject to the terms and conditions thereof, to
provide the equity investment set forth therein (the
SAIF Equity
Financing
, together with the Chairman Equity Financing, the
Equity
Financing
) and (iv) the executed Contribution Agreements.
(c) Each of the Chairman Commitment Letter and the SAIF
Commitment Letter is in full force and effect and is a legal, valid and binding
obligation of Holdco and of the other parties thereto. The Facility Agreement is
in full force and effect and is the legal, valid and binding obligations of
Parent and, to the knowledge of Parent, the Bank Lender. Each of the
Contribution Agreements is in full force and effect and is a legal, valid and
binding obligation of Holdco, Parent, Mr. Xia, SAIF Partners III L.P. and the
other parties thereto. None of the Financing Documents has been or will be
amended or modified, except as consistent with Section 6.8, and the respective
commitments contained in the Financing Documents have not been withdrawn or
rescinded in any respect as of the date hereof. None of the Contribution
Agreements has been or will be amended or modified.
(d) No event has occurred which, with or without notice, lapse
of time or both, would constitute a default or breach under the Contribution
Agreements or any Financing Document or that would otherwise excuse or permit
the Bank Lender, Mr. Xia or SAIF to refuse to fund their respective obligations
under the Financing Documents to which each is party; and subject to the
accuracy of the representations and warranties of the Company set forth in
Article III hereof and the satisfaction of the conditions set forth in Sections
7.1 and 7.3 hereof, none of Holdco, Parent and Merger Sub has any reason to
believe that it will be unable to satisfy on a timely basis each and every term or
condition of closing to be satisfied by it in any of the Financing Documents or
the Contribution Agreements, on or prior to the Closing Date. There are no
conditions precedent related to the funding or investing, as applicable, of the
full amount of the Debt Financing and the Equity Financing other than as
expressly set forth in or contemplated by the Financing Documents as in effect
on the date hereof. There are no conditions precedent related to the
contribution of Shares or issuance of new shares of Holdco contemplated by the
Contribution Agreements other than as expressly set forth therein or
contemplated thereby.
21
(e) There are no side letters or other Contracts or
arrangements (written or oral) related to the funding or investing, as
applicable, of the full amount of (i) the Debt Financing other than as expressly
set forth in or contemplated by the Facility Agreement, (ii) the Chairman Equity
Financing other than as expressly set forth or contemplated in the Chairman
Commitment Letter, and (iii) the SAIF Equity Financing other than as expressly
set forth or contemplated in the SAIF Commitment Letter. There are no side
letters or other Contracts or arrangements related to the contribution of Shares
or issuance of new shares of Parent or Holdco other than as expressly set forth
in or contemplated by the Contribution Agreements. As used in this Agreement,
the term "
Contract
" means any note, bond, mortgage, indenture, lease,
license, permit, concession, franchise, contract, agreement, arrangement, plan
or other instrument, right or obligation.
4.9
Broker's Fees
. Neither Parent or any of its
Subsidiaries nor any of their respective officers, directors, employees or
agents has utilized any broker, finder or financial advisor or incurred any
liability for any broker's fees, commissions or finder's fees in connection with
the Merger or any other transactions contemplated by this Agreement, other than
Houlihan Lokey (China) Limited, the fees and expenses of which will be paid by
Parent.
4.10
Certain Arrangements
. Parent has disclosed to the
Company all contracts, agreements, formal or informal arrangements or
understandings (whether or not binding)(and, with respect to those that are
written, Parent has furnished to the Company correct and complete copies
thereof) between or among, Holdco, Parent, Merger Sub, the Guarantors or any of
their respective Affiliates, on the one hand, and any stockholder, member of the
Company Board or officer of the Company, on the other hand relating to this
Agreement, the Merger or any other transactions contemplated by this Agreement,
or the ownership or operation of Parent, the Surviving Corporation or any of its
Subsidiaries, businesses or operations (including as to continuing employment)
from and after the Effective Time.
4.11
Buyer Group Contracts
. Parent has delivered to the
Company a true, correct and complete copy of: (a) each of the Contribution
Agreements; (b) the Voting Agreement; (c) the Chairman Commitment Letter; and
(d) the SAIF Commitment Letter (collectively, the "
Buyer Group
Contracts
"), including all amendments thereto or modifications thereof.
Except as set forth in a buyer disclosure letter from Parent and Merger Sub to
the Company simultaneously executed with this Agreement and other than the Buyer Group Contracts, there are no side letters or other oral or
written Contract relating to the transactions contemplated hereby between two or
more of the following persons: each of Holdco, Parent, Merger Sub and the
Guarantors or any of their respective Affiliates (excluding any agreements among
any one or more of the foregoing solely relating to the management and control
of the Surviving Corporation following the Effective Time). The Voting Agreement
has been duly and validly executed and delivered by Parent and other parties thereto and constitutes a valid and binding agreement of Parent
and each of the other parties thereto, enforceable against Parent and such party
in accordance with its terms, except as may be limited by bankruptcy,
insolvency, fraudulent transfer, moratorium, reorganization, preference or
similar Laws of general applicability relating to or affecting the rights of
creditors generally and subject to general principles of equity (regardless of
whether enforcement is sought in equity or at law).
22
4.12
No Reliance on Company Estimates
. The Company has
made available to Parent and Merger Sub, and may continue to make available,
certain estimates, projections and other forecasts for the business of the
Company and its Subsidiaries and certain plan and budget information. Each of
Parent and Merger Sub acknowledges that these estimates, projections, forecasts,
plans and budgets and the assumptions on which they are based were prepared for
specific purposes and may vary significantly from each other. Further, each of
Parent and Merger Sub acknowledges that there are uncertainties inherent in
attempting to make such estimates, projections, forecasts, plans and budgets,
that Parent and Merger Sub are taking full responsibility for making their own
evaluation of the adequacy and accuracy of all estimates, projections,
forecasts, plans and budgets so furnished to them (including the reasonableness
of the assumptions underlying such estimates, projections, forecasts, plans and
budgets), and that neither Parent nor Merger Sub is relying on any estimates,
projections, forecasts, plans or budgets furnished by the Company, its
Subsidiaries or their respective Affiliates and Representatives, and neither
Parent nor Merger Sub shall, and shall cause its Affiliates and their respective
Representatives not to, hold any such Person liable with respect thereto, other
than fraud in connection therewith.
4.13
Guaranty
. Concurrently with the execution of this
Agreement, Parent has delivered to the Company the duly executed Guaranty with
respect to certain matters on the terms specified therein. The Guaranty is in
full force and effect and constitutes a legal, valid, binding and enforceable
obligation of each Guarantor (except as may be limited by bankruptcy,
insolvency, fraudulent transfer, moratorium, reorganization, preference or
similar Laws of general applicability relating to or affecting the rights of
creditors generally and subject to general principles of equity (regardless of
whether enforcement is sought in equity or at law)), and no event has occurred,
which, with or without notice, lapse of time or both, would constitute a default
on the part of each Guarantor under the Guaranty.
4.14
Solvency
. Neither Parent nor Merger Sub is entering
into the transactions contemplated hereby with the intent to hinder, delay or
defraud either present or future creditors of the Company. As of the date
hereof, neither Parent nor Merger Sub owns any asset (except for cash in a
de
minimis
amount) and neither Parent nor Merger Sub have liabilities other
than liabilities incidental to their formation or relating to the transactions
contemplated by this Agreement or the Transaction Documents. Assuming that (a)
the Company is Solvent immediately prior to the Effective Time and (b) the
satisfaction of the conditions to the obligation of Parent and Merger Sub to
consummate the Merger as set forth in Section 7.1
and Section 7.2, at and
immediately following the Effective Time, after giving effect to all of the
transactions contemplated hereby, including the Debt Financing and the Equity
Financing, the payment of the aggregate Merger Consideration and the aggregate
amount of consideration payable at the Effective Time in accordance with Section
1.6(a) and Section 1.6(b), the payment of all other amounts required to be paid
in connection with the consummation of the transactions contemplated by this Agreement, and the payment of all related
fees and expenses, each of Parent and the Surviving Corporation will be Solvent
at and immediately after the Effective Time. As used in this Section 4.14, the
term "
Transaction Agreements
" means this Agreement, the Buyer Group
Contracts, the Guaranty, and the Facility Agreement, and the term
"
Solvent
" shall mean, with respect to a particular date, that on such
date, in each case on a consolidated basis (i) the sum of the assets, at a fair
valuation, of Parent and Merger Sub and, after the Merger, Parent and the
Surviving Corporation and its Subsidiaries will exceed their debts, (ii) Parent
and Merger Sub and, after the Merger, Parent and the Surviving Corporation and
its Subsidiaries have not incurred or agreed to incur debts beyond their ability
to pay such debts as such debts mature, and (iii) Parent and Merger Sub and,
after the Merger, Parent and the Surviving Corporation and its Subsidiaries have
sufficient capital and liquidity with which to conduct their business. For
purposes of this Section 4.14, "
debt
" means any liability on a claim, and
"
claim
" means any right to payment, whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, secured or unsecured.
23
4.15
No Other Representations or Warranties
. Except for
the representations and warranties contained in this Article IV, none of Parent,
Merger Sub, their Affiliates or their respective Representatives makes any
representation or warranty, express or implied, at law or in equity, with
respect to Parent or Merger Sub or their respective businesses, assets or
properties, or with respect to any other information provided to the Company,
its Affiliates or their respective Representatives in connection with the
transactions contemplated hereby. None of Parent, Merger Sub, their Affiliates
or their Representatives will have or be subject to any liability or
indemnification obligation to the Company, its Affiliates or their
Representatives resulting from the distribution, or making available, to such
Persons, or such Persons' use of, any such information. Parent and Merger Sub
hereby acknowledge that the Company makes no representations or warranties
except for the representations and warranties contained in Article III.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1
Conduct of Business Prior to the Effective Time
.
Except for matters set forth in the Disclosure Letter, as expressly contemplated
by or permitted by this Agreement or with the written consent of Parent, during
the period from the date of this Agreement to the Effective Time or the date, if
any, on which this Agreement is terminated pursuant to Section 8.1, the Company
shall, and shall cause each of its Subsidiaries to, (a) conduct its business in
the ordinary course in all material respects and (b) use reasonable best efforts
to maintain and preserve intact its business organization and advantageous
business relationships and keep available the services of its current key
officers and employees.
5.2
Company Forbearances
.
(a) During the period from the date of this Agreement to the
Effective Time or the date, if any, on which this Agreement is terminated
pursuant to Section 8.1, except as set forth in the Disclosure Letter, as
expressly contemplated by or permitted by this Agreement or as required by applicable Law or a Governmental
Entity, the Company shall not, and shall not permit any of its Subsidiaries to,
without the written consent of Parent:
24
(i) issue, sell, pledge, dispose, encumber, grant, or authorize
any Shares or any other capital stock of the Company or its Subsidiaries (other
than pursuant to the Company Option Plan and the exercise of Company Options
existing on the date hereof on the terms in effect on the date hereof);
(ii) (A) make, declare, pay or set aside for payment any
dividend on or in respect of, or declare or make any distribution on any shares
of its stock (other than dividends from its wholly owned Subsidiaries to it or
another of its wholly owned Subsidiaries) or (B) directly or indirectly adjust,
split, combine, redeem, reclassify, repurchase or otherwise acquire any shares
of its stock (other than in the ordinary course of business to satisfy
obligations under equity incentive, deferred compensation, employee benefit
plans or other similar plans or arrangements);
(iii) sell, transfer, mortgage, encumber or otherwise dispose
of or discontinue any of its assets, deposits, business or properties, except
for sales, transfers, mortgages, encumbrances or other dispositions or
discontinuances in the ordinary course of business;
(iv) acquire (including by merger, consolidation or acquisition
of stock or assets) all or any portion of the assets, business, deposits or
properties of any other entity;
(v) amend or otherwise change the Company Articles or the
Company Bylaws or amend or otherwise change the equivalent governing documents
of any of the Subsidiaries of the Company in any material respect;
(vi) implement or adopt any change in its accounting
principles, practices or methods, other than as may be required by GAAP or
applicable regulatory accounting requirements or as a result of change in Law;
(vii) grant any material increases in the compensation of any
of its or its Subsidiaries' directors or executive officers other than in the
ordinary course of business;
(viii) except in the ordinary course of business and consistent
with past practice, (A) grant or increase any severance, change in control,
termination or similar compensation or benefits payable to any director, officer
or employee, (B) accelerate the time of payment or vesting of, or the lapsing of
restrictions with respect to, or fund or otherwise secure the payment of, any
compensation or benefits under any Company Option Plan, (C) enter into,
terminate or materially amend any Company Option Plan (or any plan, program,
agreement, or arrangement that would constitute a Plan if in effect on the date
hereof), (D) enter into any employment agreement with any officer or employee of
the Company or any Subsidiary of the Company, (E) establish, adopt, enter into or amend any collective bargaining agreement, plan, trust,
fund, policy or arrangement for the benefit of any current or former directors,
officers or employees of the Company or its Subsidiaries or any of their
beneficiaries, or (F) issue or grant any options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exercisable or
exchangeable for, or giving any Person any right to subscribe for or acquire,
any Shares or Company Preferred Stock, or contracts, commitments, understandings
or arrangements by which the Company or any Subsidiary is or may become bound to
issue additional Shares or Company Preferred Stock;
25
(ix) incur or guarantee any long-term indebtedness for borrowed
money;
(x) enter into, terminate, modify or amend any Company Contract
that calls for annual aggregate payments of US$1,000,000 or more with a term
longer than one (1) year which cannot be terminated without material penalty
upon notice of ninety (90) days or less, other than in the ordinary course of
business; or
(xi) agree to take any of the actions prohibited by this
Section 5.2(a) .
(b) Notwithstanding anything in Section 5.2(a) or otherwise in
this Agreement to the contrary, nothing contained in this Agreement is intended
to give Parent or Merger Sub, directly or indirectly, the right to control or
direct the Company's or its Subsidiaries' operations prior to the Effective
Time. Prior to the Effective Time, the Company shall exercise, consistent with
the terms and conditions of this Agreement, complete control and supervision
over its and its Subsidiaries' respective operations.
5.3
Conduct of Business Prior to the Effective Time
.
Except as expressly contemplated by or permitted by this Agreement or with the
written consent of the Company, during the period from the date of this
Agreement to the Effective Time or the date, if any, on which this Agreement is
terminated pursuant to Section 8.1, neither Parent nor Merger Sub shall, and
Parent shall cause Merger Sub not to, engage in any business activity or
operations.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1
Proxy Statement and Schedule 13E-3; Stockholder
Approval
.
(a) Subject to Section 6.6, promptly following the date hereof,
the Company shall, with the assistance and cooperation of Parent and Merger Sub,
prepare and cause to be filed with the SEC the Proxy Statement relating to the
Stockholders' Meeting and the Company and Parent shall jointly prepare and
caused to be filed with the SEC the Schedule 13E-3. Each of the Company and
Parent shall, and shall cause its Subsidiaries and Representatives to, provide
such information specifically for inclusion or incorporation by reference in the Proxy Statement and Schedule 13E-3 as may be
necessary or appropriate so that, at the date it is first mailed to the
Company's stockholders and at the time of the Stockholders' Meeting or filed
with the SEC (as applicable), the Proxy Statement and Schedule 13E-3 will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. Each of the Parties shall use its reasonable best efforts so that
the Proxy Statement and Schedule 13E-3 will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and regulations
thereunder. If at any time prior to the Effective Time any information relating
to Parent or the Company or any of their respective Subsidiaries, officers or
directors should become known to Parent or the Company which should be set forth
in an amendment or supplement to the Proxy Statement or Schedule 13E-3, so that
any of such documents would not include any untrue statement of a material fact
or omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, the Party
which discovers such information shall promptly notify the other Parties and an
appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by applicable Law,
disseminated to the stockholders of the Company. The Company agrees to promptly
(i) notify Parent of the receipt of any comments from the SEC with respect to
the Proxy Statement or Schedule 13E-3 and of any request by the SEC for
amendments of, or supplements to, the Proxy Statement or Schedule 13E-3, and
(ii) provide Parent with copies of all correspondence between such Party and the
SEC with respect to the Proxy Statement and Schedule 13E-3. Prior to filing or
mailing (as applicable) the Proxy Statement and Schedule 13E-3 (or any amendment
of supplement thereto), or responding to any comments from the SEC with respect
thereto, Parent and its counsel shall be given a reasonable opportunity to
review and comment on the Proxy Statement, Schedule 13E-3 and any proposed
responses to any SEC comments or communications, and the Company shall consider
all additions, deletions or changes suggested thereto by Parent and its counsel
in good faith. Each of the Company and Parent shall use its reasonable best
efforts to resolve all comments from the SEC with respect to the Proxy Statement
and Schedule 13E-3 as promptly as reasonably practicable.
26
(b) Subject to Section 6.6, as promptly as reasonably
practicable after the Proxy Statement and Schedule 13E-3 shall have been cleared
by the SEC, the Company shall (i) establish a record date for, duly call, give
proper notice of, convene and hold the Stockholders' Meeting and (ii) mail a
Proxy Statement to the holders of Shares as of the record date established for
the Stockholders' Meeting;
provided
that the Company shall not be
required to mail the Proxy Statement on or before the Solicitation Period End
Date or, in the event the Company is continuing to engage in activities pursuant
to Section 6.6(a)(ii)
with respect to an Acquisition Proposal submitted
by a Continuing Party on or before the Solicitation Period End Date, the Cut-Off
Date. Subject to Section 6.6(e), the Company shall include in the Proxy
Statement the recommendation of the Company Board that the Company's
stockholders approve this Agreement.
6.2
Reasonable Best Efforts
.
(a) The Parties shall cooperate with each other and shall, and
shall cause each of their respective Subsidiaries or Representatives to, as the
case may be, (i) promptly prepare and file all Filings with Governmental
Entities that are necessary, proper or advisable to consummate the transactions
contemplated by this Agreement (including the Merger); and (ii) use its
reasonable best efforts promptly to (A) obtain all Regulatory Approvals of all
Governmental Entities, and to comply with the terms and conditions thereof,
including (1) consulting and cooperating with the other Party in connection with
any analyses, appearances, presentations, memoranda, briefs, arguments, opinions
and proposals to be made or submitted by or on behalf of such Party in
connection with proceedings relating to or arising out of such transactions; (2)
providing the other Party prior notice of any proposed substantive
communication, or any proposed understanding, undertaking or agreement, with any
Governmental Entity relating to such transactions or any investigations or other
inquiries relating thereto, and not participating independently in any meeting,
engage in any such substantive communication or furthering any such
understanding, undertaking or agreement without giving the other Party prior
notice thereof and, unless prohibited by such Governmental Entity, a reasonable
opportunity to participate therein; and (3) keeping the other Party fully
apprised of the status of matters relating to completion of such transactions;
and (B) take, or to cause to be taken, all actions, and to do, or to cause to be
done, all other things necessary, proper or advisable under applicable Law or
otherwise to consummate and make effective the transactions contemplated by this
Agreement in the most expeditious manner practicable (and, in any event, by no
later than the End Date). Each Party shall furnish all information reasonably
required for any Filing to be made pursuant to this Section 6.2 and shall have
the right to review in advance, and each will consult the other on, in each case
subject to applicable Laws relating to the confidentiality of information, all
of the information relating to such Party or any of its Subsidiaries or
Representatives, or otherwise relating to the transactions contemplated by this
Agreement, that appears in any such Filing made with, or other written materials
submitted to, any Governmental Entity in connection with the transactions
contemplated by this Agreement.
27
(b) In furtherance and not in limitation of the foregoing, each
Party shall, and shall cause its respective Subsidiaries to, take any and all
actions to (i) avoid the entry of, or to have vacated, lifted, reversed or
overturned, any Judgment, whether temporary, preliminary or permanent, that
would restrain, prevent or delay the Closing, including vigorously defending any
Proceedings, whether judicial or administrative, challenging this Agreement or
the transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any Governmental Entity vacated or
reversed, and (ii) eliminate each and every impediment under any applicable Law
so as to enable the Closing to occur as soon as possible, including proposing,
negotiating, committing to and effecting, by consent decree, hold separate
order, or otherwise, the licensing or disposition of businesses or assets of
Parent, the Company or their respective Subsidiaries or otherwise taking or
committing to take actions that limit Parent's or its Subsidiaries' freedom of
action with respect to, or their ability to retain, any of their respective
businesses or assets or those of the Company or its Subsidiaries, in each case,
as may be required in order to avoid the entry of, or to effect the dissolution
or lift of, any injunction, temporary restraining order, or other order in any
Proceeding, which would otherwise have the effect of preventing or delaying the
consummation of the transactions contemplated by this Agreement. No Party shall
consent to any voluntary delay of the consummation of the transactions
contemplated by this Agreement at the request of any Governmental Entity without
the consent of the other Parties to this Agreement.
28
6.3
Access to Information
.
(a) From the date hereof until the earlier of the Effective
Time or the date on which this Agreement is terminated pursuant to Section 8.1,
upon reasonable notice and subject to applicable Laws relating to the
confidentiality of information or requirements of Governmental Entities, the
Company shall, and shall cause each of its Subsidiaries to, afford Parent's
Representatives reasonable access, during normal business hours, upon reasonable
advance notice, to all of its properties, books, contracts, commitments and
records, and, during such period, each of Parent and the Company shall, and
shall cause its Subsidiaries to, make available to the other Party (a) to the
extent not publicly available, a copy of each report, schedule, correspondence,
registration statement and other document filed or received by it during such
period pursuant to the requirements of federal or state securities Laws and (b)
all other information concerning its business, properties and personnel as the
other Party may reasonably request. Neither the Company, nor Parent, nor any of
their respective Subsidiaries shall be required to provide access to or to
disclose information where such access or disclosure would (i) jeopardize the
attorney-client or other privilege of such Party or such Subsidiaries or (ii)
contravene any applicable Law or requirements of Governmental Entities or
binding agreement entered into prior to the date of this Agreement.
(b) For the avoidance of doubt, all information and materials
provided pursuant to this Section 6.3 shall be subject to the provisions of
Section 9.9.
6.4
Indemnification; Advancement of Expenses; Exculpation
and Insurance
.
(a) Parent shall, and shall cause the Surviving Corporation to,
assume the obligations with respect to all rights to indemnification,
advancement of expenses and limitations on, or exculpation from, liabilities,
for acts or omissions occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time (including any
matter in connection with the transactions contemplated by this Agreement), now
existing in favor of the current or former directors, officers or employees of
the Company or any of its Subsidiaries or fiduciaries of the Company or any of
its Subsidiaries under benefit plans of the Company and its Subsidiaries
(collectively, the "
Indemnified Parties
"), as provided in the Company
Articles or the Company Bylaws (or equivalent organizational documents of the
Company's Subsidiaries), without further action, as of the Effective Time, and
such obligations shall survive the Merger and shall continue in full force and
effect in accordance with their terms. Without limiting the foregoing, Parent
shall cause the articles of incorporation and bylaws and indemnification or
similar agreements of the Surviving Corporation (or any successor) to contain
provisions no less favorable to the Indemnified Parties with respect to rights
to indemnification, advancement of expenses and limitations on, or exculpation
from, liabilities, for acts or omissions than are set forth as of the date of
this Agreement in the Company Articles and the Company Bylaws and
indemnification or similar agreements in effect as of the date of this
Agreement, which provisions shall not be amended, repealed or otherwise modified
in a manner that would adversely affect the rights thereunder of the Indemnified
Parties, unless such modification shall be required by applicable Law.
(b) Without limiting the provisions of Section 6.4(a),
following the Effective Time, Parent shall, and shall cause the Surviving
Corporation to, jointly and severally indemnify and hold harmless each Indemnified Party, and any
Person who becomes an Indemnified Party between the date hereof and the
Effective Time, against any costs or expenses (including reasonable attorneys'
fees and expenses), judgments, fines, losses, claims, damages or liabilities and
amounts paid in settlement incurred in connection with any actual or threatened
Proceeding, whether civil, criminal, administrative or investigative, arising
out of matters existing or occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time (including any
matters arising in connection with the transactions contemplated by this
Agreement), to the fullest extent permitted by applicable Law (and Parent and
the Surviving Corporation shall also advance expenses as incurred to the fullest
extent permitted under applicable Law);
provided
that if required by
applicable Law, the Person to whom expenses are advanced provides an undertaking
to repay such advances if it is ultimately determined that such Person is not
entitled to indemnification. Notwithstanding anything to the contrary contained
in this Agreement, Parent shall not (and Parent shall cause the Surviving
Corporation and its other Subsidiaries not to) settle or compromise or consent
to the entry of any judgment or otherwise seek termination with respect to any
Proceeding, unless such settlement, compromise, consent or termination includes
an unconditional release of all of the Indemnified Parties covered by such
Proceeding from all liability arising out of such Proceeding, and does not
include an admission of fault or wrongdoing by any Indemnified Party.
29
(c) Except as provided below, for at least six (6) years after
the Effective Time, (i) Parent shall, and shall cause the Surviving Corporation
and its other Subsidiaries to, maintain in full force and effect, on terms and
conditions no less advantageous to the Indemnified Parties, or any other Person
entitled to the benefit of this Section 6.4, as applicable, than, the existing
directors' and officers' liability insurance and fiduciary insurance maintained
by the Company as of the date of this Agreement, covering, without limitation,
claims arising from facts or events that occurred on or before the Effective
Time, including the transactions contemplated hereby (provided that Parent or
the Surviving Corporation, as applicable, shall not be required to pay an annual
premium for such insurance in excess of three hundred percent (300%) of the
aggregate annual premiums currently paid by the Company on an annualized basis
(the "
D&O Premium
"), but in such case shall purchase as much of such
coverage as possible for such amount); and (ii) Parent shall not, and shall not
permit the Surviving Corporation or its other Subsidiaries to, take any action
that would prejudice the rights of, or otherwise impede recovery by, the
beneficiaries of any such insurance, whether in respect of claims arising before
or after the Effective Time. In lieu of such insurance, prior to the Effective
Time, the Company may, following consultation with Parent, purchase a six (6)
year "tail" prepaid policy on such terms and conditions (provided that the
premium for such "tail" policy shall not exceed an amount equal to the D&O
Premium), in which event Parent shall cease to have any obligations under the
first sentence of this Section 6.4(c) .
(d) The obligations of Parent and the Surviving Corporation and
its other Subsidiaries under this Section 6.4 shall not be terminated or
modified by such Parties in a manner so as to adversely affect any Indemnified
Party, or any other Person entitled to the benefit of this Section 6.4, to whom
this Section 6.4 applies, without the consent of the affected Indemnified Party
or such other Person, as the case may be. If Parent or the Surviving Corporation
or any of their respective Subsidiaries or any of their respective successors or
assigns shall (i) consolidate with or merge into any other corporation or entity
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfer all or substantially all of its
properties and assets to any Person, then, and in each such case, proper
provisions shall be made so that the successors and assigns of Parent or the
Surviving Corporation, as the case may be, shall succeed to and assume all of
the obligations set forth in this Section 6.4.
30
(e) The provisions of this Section 6.4 shall survive the Merger
indefinitely and shall be binding, jointly and severally, on all successors and
assigns of Parent and the Surviving Corporation and their respective
Subsidiaries, and are (i) intended to be for the benefit of, and will be
enforceable by, each Indemnified Party and each other Person entitled to the
benefit of this Section 6.4, his or her heirs and his or her Representatives and
(ii) in addition to, and not in substitution for, any other rights to
indemnification or contribution that any such Person may have by contract or
otherwise.
6.5
Stock Exchange Delisting
. Prior to the Effective
Time, the Company shall cooperate with Parent and use reasonable best efforts to
take, or cause to be taken, all actions, and do or cause to be done all things,
reasonably necessary, proper or advisable on its part under applicable Laws and
rules and policies of NASDAQ to enable the delisting by the Surviving
Corporation of the Shares from NASDAQ and the deregistration of the Shares under
the Exchange Act as promptly as practicable after the Effective Time.
6.6
Solicitation; Change of Recommendation
.
(a) Notwithstanding anything to the contrary set forth in this
Agreement, during the period beginning on the date of this Agreement and
continuing until 11:59 p.m. (New York City time) on the day that is forty (40)
days following the date of this Agreement (the "
Solicitation Period End
Date
"), the Company, the Company Subsidiaries and their respective
directors, officers, employees, advisors, representatives or agents
(collectively, "
Representatives
") shall have the right (acting under the
direction of the Special Committee) to, directly or indirectly: (i) solicit,
initiate, facilitate and encourage any Alternative Transaction Proposal from any
third party, including by way of providing access to information pursuant to one
or more confidentiality agreements containing terms at least as restrictive with
respect to such Person as the terms contained in Section 9.9 are with respect to
Parent, provided that any material non-public information concerning the Company
or the Company Subsidiaries provided to any third party given such access shall,
to the extent not previously provided to Parent or Merger Sub, be provided to
Parent simultaneously or as promptly as reasonably practicable after it is
provided to such third party; (ii) enter into, continue or otherwise participate
in any discussions or negotiations with respect to any Alternative Transaction
Proposal or otherwise cooperate with or assist or participate in or facilitate
any such discussions or negotiations or any effort or attempt to make any
Alternative Transaction Proposal.
(b) Except as expressly permitted by this Section 6.6, the
Company shall, and the Company shall instruct the Subsidiaries and Company
Representatives to, immediately after the Solicitation Period End Date (or, as
may relate to any Continuing Party, immediately after the Cut-Off Date): (A)
cease all discussions and negotiations with any Persons that may be ongoing with
respect to an Alternative Transaction Proposal; and (B) until the earlier of the
Effective Time or the date on which this Agreement is terminated pursuant to Section 8.1 hereof, not, directly or indirectly, (i) solicit,
initiate, knowingly encourage or knowingly induce an Alternative Transaction
Proposal; (ii) provide any material non-public information concerning the
Company or its Subsidiaries to any Person in connection with an Alternative
Transaction Proposal; or (iii) engage in any discussions or negotiations with
any third party concerning an Alternative Transaction Proposal. For the
avoidance of doubt, after the Solicitation Period End Date, the Company may
continue to engage in the activities described in this Section 6.6(b)
with respect to any Alternative Transaction Proposal submitted by a
Continuing Party on or before the Solicitation Period End Date until 11:59 p.m.
(New York City time) on the fifteenth (15th) day following the Solicitation
Period End Date (the "
Cut-Off Date
"), including with respect to any
amended or revised Alternative Transaction Proposal submitted by such Continuing
Party on or before the Cut-Off Date.
31
(c) Notwithstanding anything to the contrary contained in
Section 6.6(a), in the event that, prior to the receipt of Stockholder Approval,
the Company receives an unsolicited written Alternative Transaction Proposal,
then the Company may take the following actions:
(i) contact the Person who has made such Alternative
Transaction Proposal to clarify and understand the terms and conditions thereof
to the extent the Special Committee shall have determined in good faith that
such contact is necessary to determine whether such Alternative Transaction
Proposal constitutes a Superior Proposal or is reasonably likely to result in a
Superior Proposal;
(ii) furnish information concerning the Company and its
Subsidiaries to the Person making such Alternative Transaction Proposal (and its
respective Representatives) pursuant to a customary confidentiality agreement
containing terms at least as restrictive with respect to such Person as the
terms contained in Section 9.9 are with respect to Parent; and
(iii) engage in discussions or negotiations (including, as a
part thereof, making counterproposals) with such Person (and its
Representatives) with respect to such Alternative Transaction Proposal;
provided
that prior to taking any action described in
Section 6.6(c)(ii) or Section 6.6(c)(iii) above, the Special Committee shall
have determined in good faith (i) (after consultation with the Company's outside
financial advisors) that such Alternative Transaction Proposal constitutes or
could reasonably be expected to result in a Superior Proposal, and (ii) (after
consultation with the Company's outside legal advisors) that the failure to take
such action would result in a breach of its fiduciary duties under applicable
Law,
(d) The Company shall promptly (and in any event within
twenty-four (24) hours) advise Parent, orally or in writing, of (i) any
Alternative Transaction Proposal, (ii) any initial request for non-public
information concerning the Company or any of its Subsidiaries related to, or
from any Person or group who would reasonably be expected to make an Alternative
Transaction Proposal or (iii) any initial request for discussions or
negotiations related to any Alternative Transaction Proposal, and in connection
with such notice, provide the material terms and conditions thereof and
the identity of the Person making such Alternative Transaction Proposal or
request. The Company shall keep Parent informed in all material respects of the
status and details (including material amendments to the terms thereof) of such
Alternative Transaction Proposal or request.
32
(e) Except as otherwise provided in this Agreement, the Company
Board shall not (i) (A) withdraw (or modify in a manner adverse to Parent and
Merger Sub), or propose publicly to withdraw (or modify in a manner adverse to
Parent and Merger Sub), the Company Board Recommendation or (B) adopt, approve
or recommend, or propose publicly to adopt, approve or recommend, any
Alternative Transaction Proposal (any action in this clause (i) being referred
to as a "
Change of Recommendation
") or (ii) adopt, approve or recommend,
or allow the Company or any of its Subsidiaries to execute or enter into, any
letter of intent, memorandum of understanding, agreement in principle, merger
agreement, acquisition agreement, option agreement or other similar agreement
constituting or related to, or that would reasonably be expected to result in,
any Alternative Transaction Proposal (other than a confidentiality agreement
referred to in Section 6.6(a)(i) or Section 6.6(c)(ii)) . Notwithstanding
anything in this Agreement to the contrary, at any time prior to the receipt of
Stockholder Approval (either before or after the Solicitation Period End Date),
(x) if the Special Committee determines in good faith (after consultation with
the Company's outside legal advisors) that the failure to do so would be
inconsistent with its fiduciary duties under applicable Law, then the Company
Board, acting upon the recommendation of the Special Committee, may make a
Change of Recommendation; and (y) if the Company Board determines in good faith
(after consultation with the Company's outside financial and legal advisors)
that an Alternative Transaction Proposal constitutes a Superior Proposal, then
the Company may enter into a definitive written agreement with respect to such
Superior Proposal and terminate this Agreement in accordance with Section
8.1(d)(iii).
(f) The Company shall not be entitled to effect a Change of
Recommendation or terminate this Agreement as permitted under Section 6.6(e)
unless (i) the Company has provided written notice (a "
Notice of Superior
Proposal
") at least five (5) Business Days in advance to Parent and Merger
Sub advising Parent that the Company Board intends to make a Change of
Recommendation or enter into a definitive written agreement with respect to such
Superior Proposal, as applicable, and specifying the reasons therefor, including
in the case of a Superior Proposal the material terms and conditions of such
Superior Proposal that is the basis of the proposed action by the Company Board
(including the identity of the third party making the Superior Proposal and any
financing materials related thereto, if any), (ii) during the five (5) Business
Day period following Parent's and Merger Sub's receipt of the Notice of Superior
Proposal, the Company shall, and shall cause its Representatives to, negotiate
with Parent and Merger Sub in good faith (to the extent Parent and Merger Sub
desire to negotiate) to make such adjustments in the terms and conditions of
this Agreement and the Financing Commitments so that such Superior Proposal
ceases to constitute a Superior Proposal; and (iii) following the end of the
five (5) Business Day period, the Company Board and the Special Committee shall
have determined in good faith, taking into account any changes to this Agreement
and the terms of the Debt Financing and the Equity Financing proposed in writing
by Parent and Merger Sub in response to the Notice of Superior Proposal or
otherwise, that the Superior Proposal giving rise to the Notice of Superior
Proposal continues to constitute a Superior Proposal. Any material amendment to
the financial terms or any other material amendment of such Superior Proposal shall require a
new Notice of Superior Proposal and the Company shall be required to comply
again with the requirements of this Section 6.6(f);
provided
that
references above in this Section 6.6(f) to five (5) Business Days shall be
change to references to three (3) Business Days.
33
(g) Nothing in this Agreement shall restrict the Company from
issuing a "stop, look and listen" communication pursuant to Rule 14d-9(f)
promulgated under the Exchange Act or taking or disclosing to its stockholders
any position contemplated by Rule 14e-2(a) or Rule 14d-9 promulgated under the
Exchange Act or from making any other disclosure to its stockholders to comply
with applicable Law.
(h) As used in this Agreement, the following terms shall have
the following meanings:
(i) The term "
Alternative Transaction Proposal
" means
any proposal or offer made by any Person (other than Parent, Merger Sub or any
Affiliate thereof) to purchase or otherwise acquire, directly or indirectly, in
one transaction or a series of transactions, (A) beneficial ownership (as
defined under section 13(d) of the Exchange Act) of fifteen percent (15%) or
more of any class of equity securities of the Company pursuant to a merger,
consolidation or other business combination, sale of shares of capital stock,
tender offer, exchange offer or similar transaction or (B) any one or more
assets or businesses of the Company and its Subsidiaries that constitute fifteen
percent (15%) or more of the revenues or assets of the Company and its
Subsidiaries, taken as a whole.
(ii) The term "
Superior Proposal
" means a written
Alternative Transaction Proposal (
provided
that for purposes of this
definition, references to "fifteen percent (15%)" in the definition of
Alternative Transaction Proposal shall be deemed to be references to "fifty
percent (50%)") on terms which the Company Board and Special Committee
determines in good faith (after consultation with the Company's outside legal
and financial advisors) to be more favorable to the Company's stockholders than
the terms of this Agreement (taking into account such factors as the Company
Board and Special Committee deems appropriate, including any changes to the
terms of this Agreement proposed by Parent in response to such offer or
otherwise) and to be reasonably capable of being consummated on the terms
proposed.
(iii) The term "
Continuing Party
" shall mean any Person
or group (other than Parent or Merger Sub) (i) from whom the Company has
received, after the date of this Agreement and prior to the Solicitation Period
End Date, a written Alternative Transaction Proposal that the Company Board and
Special Committee determines, as of the Solicitation Period End Date, in good
faith (after consultation with its independent financial advisor and outside
legal counsel) would reasonably be expected to result in a Superior Proposal and
(ii) is engaged in good faith discussions with the Company with respect to such
Alternative Transaction Proposal immediately prior to the Solicitation Period
End Date.
34
6.7
Notification of Certain Matters
. The Company shall
give prompt notice to Parent, and Parent shall give prompt notice to the
Company, of (a) any notice or other communication received by such Party from
any Governmental Entity in connection with this Agreement or the transactions
contemplated hereby, or from any Person alleging that the consent of such Person
is or may be required in connection with the transactions contemplated hereby,
if the subject matter of such communication or the failure of such Party to
obtain such consent could be material to the Company, the Surviving Corporation
or Parent, or could have a Parent Material Adverse Effect, and (b) any
Proceedings commenced or, to such Party's Knowledge, threatened against,
relating to or involving or otherwise affecting such Party or any of its
Affiliates which relate to this Agreement or the transactions contemplated
hereby.
6.8
Financing
.
(a) Prior to the Closing, the Company shall, and shall cause
its Subsidiaries to, use reasonable best efforts to cause its and their
respective Representatives to, at Parents cost and expense, provide to Holdco,
Parent and Merger Sub such cooperation reasonably requested by Parent that is
necessary in connection with the Debt Financing, including (i) participation in
a reasonable number of meetings, presentations, and due diligence sessions; (ii)
as promptly as reasonably practical, furnishing Holdco, Parent and, as
applicable, the Bank Lender with financial and other information regarding the
Company and its Subsidiaries as may be reasonably requested by Parent; and (iii)
using reasonable best efforts to obtain customary legal opinions, as applicable,
and other documentation and items relating to the Debt Financing as reasonably
requested by Parent and, if requested by Holdco, Parent or Merger Sub, to
cooperate with and assist Holdco, Parent or Merger Sub in obtaining such
documentation and items. Nothing in this Section 6.8(a) shall require such
cooperation to the extent it would (i) require the Company to pay or agree to
pay any fees, reimburse any expenses or give any indemnities prior to the
Effective Time or (ii) unreasonably interfere with the ongoing operations of the
Company or its Subsidiaries. The effectiveness of any documents executed by the
Company or any Subsidiary shall be subject to the Closing having occurred.
Parent or Merger Sub shall, promptly upon request by the Company, reimburse the
Company for all reasonable and documented out-of-pocket costs incurred by the
Company or any Subsidiary or any of their Representatives in connection with
such cooperation requested by Parent. Parent shall indemnify, defend, and hold
harmless the Company, its Subsidiaries and their respective Representatives from
and against any and all losses suffered or incurred by them in connection with
(i) any action taken by them at the request of Holdco, Parent or Merger Sub
pursuant to this Section 6.8 or in connection with the arrangement of any Debt
Financing or (ii) any information utilized in connection therewith (other than
information provided by the Company or its Subsidiaries). Nothing contained in
this Section 6.8 or otherwise shall require the Company to be an issuer or other
obligor with respect to any Debt Financing prior to the Effective Time. All
material, non-public information regarding the Company and its Subsidiaries
provided to Holdco, Parent, Merger Sub or their respective Representatives
pursuant to this Section 6.8 shall be kept confidential by them in accordance
with Section 9.9.
(b) Holdco, Parent and Merger Sub shall each use its reasonable
best efforts to complete the Debt Financing and the Equity Financing on the
terms and conditions described in the Financing Documents and shall not agree to
any amendment or modification to be made to, or any waiver of any provision or
remedy under, the Financing Documents without the prior written consent of the Special Committee if such
amendments, modifications or waivers would or would reasonably be expected to
(i) reduce the aggregate amount of the Debt Financing and the Equity Financing
below the amount required to consummate the Merger, (ii) impose new or
additional conditions to the receipt of the Debt Financing or the Equity
Financing, (iii) prevent or materially delay the consummation of the
transactions contemplated by this Agreement or (iv) adversely impact the ability
of Holdco, Parent or Merger Sub to enforce their respective rights against the
other parties to the Financing Documents. In addition, Holdco, Parent and Merger
Sub shall each use its reasonable best efforts to (i) negotiate definitive
agreements with respect to the Chairman Equity Financing and SAIF Equity
Financing on the terms and conditions contained in the Chairman Commitment
Letter and the SAIF Commitment Letter respectively, or on other terms reasonably
acceptable to Holdco and Parent and not in violation of this Section 6.8(b), and
(ii) satisfy on a timely basis all conditions applicable to the Debt Financing
set forth in the Facility Agreement. In the event that all conditions to funding
under the Financing Documents (other than, with respect to the Debt Financing,
the availability of the Equity Financing) have been satisfied, Holdco and Parent
shall each use its reasonable best efforts to cause the Bank Lender, Mr. Xia and
SAIF to fund the Debt Financing and the Equity Financing required to consummate
the transactions contemplated under this Agreement, including the Merger in
accordance with the terms of this Agreement. In the event any portion of the
Debt Financing or the Equity Financing becomes unavailable on the terms and
conditions contemplated in the Financing Documents, (i) Parent shall promptly
notify the Company, and (ii) Holdco, Parent and Merger Sub shall each use its
reasonable best efforts to arrange to obtain alternative financing from
alternative sources on terms not materially less beneficial to Holdco, Parent
and Merger Sub, in an amount sufficient to consummate the Merger as promptly as
possible, but in any event no later than the earlier of (A) thirty (30) days
after the originally contemplated Closing Date, or (B) at ten (10) Business Days
prior to the End Date.
35
(c) Holdco, Parent and Merger Sub shall each use its reasonable
best efforts to consummate the transactions contemplated by the Contribution
Agreements immediately prior to the Closing on the terms and conditions
described in the Contribution Agreements and shall not agree to any amendment or
modification to be made to, or any waiver of any provision or remedy under, the
Contribution Agreements that would reasonably be expected to (in the Special
Committees reasonable judgment) prevent, materially delay or materially impede
the consummation of the transactions contemplated hereby.
6.9
Takeover Statutes
. If any Takeover Statute is or may
become applicable to the Merger or the other transactions contemplated by this
Agreement, the Parties shall use their reasonable best efforts (a) to take all
reasonable action necessary so that no Takeover Statute is or becomes applicable
to the Merger or any of the other transactions contemplated by this Agreement
and (b) if any such Takeover Statute is or becomes applicable to any of the
foregoing, to take all reasonable action necessary (including, in the case of
the Company and its board of directors, grant all necessary approvals) so that
the Merger and the other transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise act to eliminate or minimize the effects of such statute
or regulation on the Merger and the other transactions contemplated by this
Agreement.
36
6.10
Resignations
. To the extent requested by Parent in
writing at least three (3) Business Days prior to Closing, on the Closing Date,
the Company shall use reasonable best efforts to cause to be delivered to Parent
duly signed resignations, effective as of the Effective Time, of the directors
of the Company and the Subsidiaries designated by Parent.
6.11
Participation in Litigation
. The Company shall give
Parent the opportunity to participate in the defense or settlement of any
stockholder litigation against the Company and/or its directors relating to the
transactions contemplated hereby, and no such litigation shall be settled
without Parent's prior written consent (such consent not to be unreasonably
withheld, conditioned or delayed).
6.12
Publicity
. Each of the Company, Parent and Merger
Sub shall consult with the other prior to issuing any press release or making
other similar public disclosures with respect to this Agreement, the Merger or
the other transactions contemplated hereby and prior to making any filings with
any Governmental Entity with respect thereto, except as may be required by
applicable Law or by obligations pursuant to any listing agreement with or rules
of any national securities exchange or national market system on which such
Party's securities are listed or traded, in which case the Party required to
make the release or other similar public disclosure or filing shall consult with
each other Party to the extent practicable. The Parties agree that the initial
press release to be issued with respect to the transactions contemplated by this
Agreement shall be in a form heretofore agreed to by the Parties.
6.13
Obligations of Parent and Merger Sub
. Parent shall
take all action necessary to cause Merger Sub to perform its obligations under
this Agreement and to consummate the Merger on the terms and subject to the
conditions set forth in this Agreement. At the Stockholders' Meeting and any
other meeting of the stockholders of the Company called to seek the Stockholder
Approval or in any other circumstances upon which a vote, consent or other
approval (including by written consent) with respect to this Agreement, the
Merger or any other transactions contemplated herein is sought, Parent shall
vote the Shares it beneficially owns, and shall cause the Rollover Shares and
Voting Shares to be voted, in favor of granting the Stockholder Approval.
6.14
Payment to a Certain Creditor
. Pursuant to a
Memorandum of Cooperation between China TransInfo Group Co., Ltd., a variable
interest entity of the Company, and Beijing Shiji Yingli Technologies, Co., Ltd.
(
BSYT
), dated as of October 19, 2010, BSYT transferred the NEDO Project
to China TransInfo Group Co., Ltd. In consideration for the benefits received in
the transfer of the NEDO Project, the Company has agreed to issue 200,000 Shares
to BSYT (the
NEDO Project Shares
) or otherwise pay BSYT an amount in
cash equal to the value of NEDO Project Shares. Parent and Merger Sub covenant
that, unless otherwise mutually agreed in writing between Parent and BSYT, no
later than two Business Days after the Effective Time, Parent shall pay, or
shall cause to be paid, to Mr. Xiao Yu, as the beneficiary designated by BSYT,
an amount in cash equal to US$1,160,000, which is the amount equal to (x) the
Merger Consideration multiplied by (y) the number of the NEDO Project Shares, in
substitution for, and in full satisfaction of, the Company's obligation to
deliver the NEDO Project Shares.
37
ARTICLE VII
CONDITIONS PRECEDENT
7.1
Conditions to Each Party's Obligation To Effect the
Merger
. The respective obligations of the Parties to consummate the Merger
shall be subject to the satisfaction or waiver (to the extent permissible under
applicable Law) by Parent and the Company prior to the Effective Time of the
following conditions:
(a)
Stockholder Approval
. The Stockholder Approval shall
have been obtained.
(b)
No Injunctions or Restraints; Illegality
. No order,
injunction or decree issued by any court or agency of competent jurisdiction or
other Law preventing or making illegal the consummation of the Merger or any of
the other transactions contemplated by this Agreement shall be in effect.
7.2
Conditions to Obligations of Parent and Merger Sub
.
The obligation of Parent and Merger Sub to consummate the Merger is also subject
to the satisfaction, or waiver (to the extent permissible under applicable Law)
by Parent, at or prior to the Effective Time, of the following conditions:
(a)
Representations and Warranties
. The representations
and warranties of the Company (i) set forth in Sections 3.1 (Organization and
Qualification), 3.3 (Authorization, Special Committee and Fairness), 3.5
(Capitalization) and 3.8(a) (Material Changes; Undisclosed Events, Liabilities
or Developments) shall be true and correct in all respects and (ii) set forth in
each other Section or subsection of this Agreement shall be true and correct in
all respects, except for such failures to be true and correct as would not
reasonably be expected to have, in the aggregate, a Company Material Adverse
Effect, in the case of clause (i) and (ii) both as of the date of this Agreement
and as of the Effective Time (except that representations and warranties that by
their terms speak specifically as of the date of this Agreement or another date
shall be so true and correct as of such date) and disregarding for this purpose
all qualifications or limitations set forth in any representations or warranties
as to "materiality," "Company Material Adverse Effect" and words of similar
import. Parent and Merger Sub shall have received a certificate signed on behalf
of the Company by a senior executive officer of the Company to the foregoing
effect.
(b)
Performance of Obligations of the Company
. The
Company shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the Effective Time;
and Parent and Merger Sub shall have received a certificate signed on behalf of
the Company by a senior executive officer of the Company to such effect.
(c)
No Material Adverse Effect
. Since the date hereof,
there shall not have been any effect, change, event or occurrence that has had
or would reasonably be expected to have a Company Material Adverse Effect; and
Parent and Merger Sub shall have received a certificate signed on behalf of the Company by a senior
executive officer of the Company to such effect.
38
7.3
Conditions to Obligations of the Company
. The
obligation of the Company to consummate the Merger is also subject to the
satisfaction or waiver (to the extent permissible under applicable Law) by the
Company at or prior to the Effective Time of the following conditions:
(a)
Representations and Warranties
. The representations
and warranties of Parent and Merger Sub set forth in this Agreement shall be
true and correct in all respects both as of the date of this Agreement and as of
the Effective Time except for such failures to be true and correct as would not
reasonably be expected to have, in the aggregate, a Parent Material Adverse
Effect, as of the Effective Time as though made on and as of the Effective Time
(except that representations and warranties that by their terms speak
specifically as of the date of this Agreement or another date shall be so true
and correct as of such date) and disregarding for this purpose all
qualifications or limitations set forth in any representations or warranties as
to "materiality," "Parent Material Adverse Effect" and words of similar import.
The Company shall have received a certificate signed on behalf of Parent by a
senior executive officer of Parent to the foregoing effect.
(b)
Performance of Obligations of Parent
. Each of Parent
and Merger Sub shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the Effective
Time, and the Company shall have received a certificate signed on behalf of
Parent by a senior executive officer of Parent to such effect.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1
Termination
. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after the receipt of
Stockholder Approval:
(a) by the mutual written agreement of the Company and Parent
duly authorized by their boards of directors (in the case of the Company, acting
upon the recommendation of the Special Committee);
(b) by either the Company or Parent, if any Governmental Entity
of competent jurisdiction shall have issued a final order, injunction or decree
permanently enjoining or otherwise prohibiting or making illegal the
consummation of the Merger contemplated by this Agreement;
provided
that
the right to terminate this Agreement under this Section 8.1(b) shall not be
available to any Party whose failure to fulfill any obligation under this
Agreement has been the primary cause of, primarily resulted in or materially
contributed to such denial of approval, order, injunction or decree;
(c) by either the Company or Parent if (i) the Merger shall not
have been consummated on or before April 7, 2013 (as may be extended pursuant to
this Section 8.1(c), the "
End Date
");
provided
that the right to
terminate this Agreement under this Section 8.1(c)(i) shall not be available to
any Party whose failure to fulfill any obligation under this Agreement has been the primary cause of or primarily resulted
in the failure of the Closing to occur by such date;
provided
,
further
, that, if as of the Business Day immediately preceding the End
Date (without any extension thereto, or in the event any Party has extended the
End Date pursuant to this Section 8.1(c), as of the Business Day immediately
preceding the end of such extension) the condition in Section 7.1(b) has not
been satisfied or waived, and all other conditions set forth in Article VII have
been satisfied or waived (or, in the case of those conditions that by their
nature may only be satisfied at the Closing, such conditions would be satisfied
if such Business Day were the Closing Date), then the Company or Parent may
extend the End Date for periods of additional twenty (20) calendar days, by
delivery to the other Parties of written notice of such extension signed by a
senior executive officer of the Company or Parent, as applicable, but in no
event will the End Date be extended beyond June 7, 2013; or (ii) the
Stockholders' Meeting (including any adjournments or postponements thereof)
shall have concluded and the Stockholder Approval contemplated by this Agreement
shall not have been obtained;
39
(d) by the Company, if:
(i) Parent or Merger Sub shall have breached or failed to
perform any of its representations, warranties, covenants or agreements set
forth in this Agreement, which breach or failure to perform (A) has given rise
to or would give rise to the failure of a condition set forth in Section 7.3(a)
or 7.3(b) and (B) is incapable of being cured or, if capable of being cured, is
not cured by Parent or Merger Sub, as applicable, within thirty (30) calendar
days following receipt of written notice of such breach or failure to perform
from the Company (or, if the End Date is less than thirty (30) calendar days
from the date of receipt of such notice, by the End Date);
provided
,
however
, that the right to terminate this Agreement under this Section
8.1(d)(i) shall not be available to the Company if a material breach of this
Agreement by the Company has been the primary cause of or primarily resulted in
the failure of any such condition capable of satisfaction;
(ii) if (x) all of the conditions to closing contained in
Section 7.1 and Section 7.2 have been satisfied or waived by Parent (other than
those conditions that by their nature are to be satisfied at the Closing (but
subject to their satisfaction or waiver by Parent at the Closing)) and (y)
Parent and Merger Sub fail to complete the Closing within two (2) Business Days
following the date the Closing should have occurred pursuant to Section 1.2; or
(iii) the Company effects a Change of Recommendation or enters
into a definitive written agreement with respect to a Superior Proposal after
(A) complying with the applicable provisions of Section 6.6 and (B) paying to
Parent the Company Termination Fee payable pursuant to Section 8.3(b); or
(e) by Parent, if:
(i) the Company shall have breached or failed to perform any of
its representations, warranties, covenants or agreements set forth in this Agreement, which breach or failure to perform (A) has given
rise to or would give rise to the failure of a condition set forth in Section
7.2(a) or 7.2(b) of this Agreement and (B) is incapable of being cured or, if
capable of being cured, is not cured by the Company within thirty (30) calendar
days following receipt of written notice of such breach or failure to perform
from Parent (or, if the End Date is less than thirty (30) calendar days from the
date of receipt of such notice, by the End Date);
provided
,
however
, that the right to terminate this Agreement under this Section
8.1(e)(i) shall not be available to Parent if a material breach of this
Agreement by Parent or Merger Sub has been the primary cause of or primarily
resulted in the failure of any such condition capable of satisfaction; or
40
(ii) the Company Board effects a Change of Recommendation.
The Party desiring to terminate this Agreement pursuant to
clause (b), (c), (d), or (e) of this Section 8.1 shall give written notice of
such termination to the other Party in accordance with Section 9.2, specifying
the provision or provisions hereof pursuant to which such termination is being
effected.
8.2
Effect of Termination
. In the event of termination
of this Agreement by either the Company or Parent as provided in Section 8.1,
this Agreement shall forthwith become void and have no effect, and none of the
Company, Parent, any of their respective Subsidiaries or any of their respective
Representatives shall have any liability of any nature whatsoever under this
Agreement, or in connection with the transactions contemplated hereby, except
that (a) Sections 6.3(b), 6.12, 8.2 and 8.3 and Article IX shall survive any
termination of this Agreement, and (b) no Party shall be relieved or released
from any liabilities or damages arising out of its fraud or willful and material
breach of any provision of this Agreement.
8.3
Fees and Expenses
.
(a) Except as otherwise provided in this Section 8.3, all fees
and expenses incurred in connection with this Agreement, the Merger and the
other transactions contemplated by this Agreement shall be paid by the Party
incurring such fees or expenses, whether or not the Merger or any of the other
transactions contemplated by this Agreement are consummated.
(b) In the event that (i) the Company terminates this Agreement
pursuant to Section 8.1(d)(iii); (ii) (A) prior to the Stockholders' Meeting and
after the date hereof, any Person shall have made an Alternative Transaction
Proposal, which proposal has been publicly disclosed and not withdrawn, and
thereafter the Company or Parent terminates this Agreement pursuant to Section
8.1(c)(i) without the Stockholder Approval having been obtained or Section
8.1(c)(ii), and (B) within twelve (12) months after such termination, such
Alternative Transaction Proposal shall have been consummated or any definitive
written agreement with respect to such Alternative Transaction Proposal shall
have been entered into; or (iii) Parent terminates this Agreement pursuant to
Section 8.1(e)(i) or Section 8.1(e)(ii), then the Company shall pay Parent a fee
in the amount of US$1,500,000 (the "
Company
Termination Fee
") at
the time of such termination, in the case of a termination described in clause (i) or (iii) above, or upon the consummation of such
transaction, in the case of a termination described in clause (ii) above. For
the purposes of the foregoing, the term "Alternative Transaction Proposal" shall
have the meaning assigned to such term in Section 6.6(h)(i) except that the
references to "fifteen percent (15%)" shall be deemed to be references to "fifty
percent (50%)." Notwithstanding the foregoing, in no event shall the Company be
required to pay the Company Termination Fee (x) on more than one (1) occasion or
(y) if, at the time this Agreement is terminated, this Agreement could have been
terminated by the Company pursuant to Section 8.1(d)(i) .
41
(c) In the event that the Company terminates this Agreement
pursuant to Section 8.1(d)(i) or Section 8.1(d)(ii), then Parent shall pay a
termination fee to the Company in an amount equal to US$2,800,000 (the
"
Parent Termination Fee
").
(d) The payments of the Company Termination Fee and the Parent
Termination Fee contemplated by Sections 8.3(b) and 8.3(c), respectively, shall
be made by wire transfer of immediately available funds to an account designated
by Parent or the Company, as applicable, and shall be reduced by any amounts
required to be deducted or withheld therefrom under applicable Law in respect of
taxes. The Company and Parent acknowledge that the agreements contained in this
Section 8.3 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, neither Party would enter into
this Agreement, and (ii) the damages resulting from termination of this
Agreement under circumstances where a Company Termination Fee or Parent
Termination Fee is payable are uncertain and incapable of accurate calculation
and therefore, the amounts payable pursuant to this Section 8.3 are not a
penalty but rather constitute liquidated damages in a reasonable amount that
will compensate Parent or the Company, as the case may be, for the efforts and
resources expended and opportunities foregone while negotiating this Agreement
and in reliance on this Agreement and on the expectation of the consummation of
the transactions contemplated by this Agreement. In the event that either Party
fails to pay when due any amounts payable under this Section 8.3, then such
Party shall (i) reimburse the other Party for all costs and expenses (including
disbursements and reasonable fees of counsel) incurred in connection with the
collection of such overdue amount, and (ii) pay to the other Party interest on
such overdue amount (for the period commencing as of the date that such overdue
amount was originally required to be paid and ending on the date that such
overdue amount is actually paid in full) at a rate per annum equal to the prime
rate published in The Wall Street Journal on the date such payment was required
to be made.
(e) In the event that either of Parent or Merger Sub fails to
effect the Closing when required by Section 1.2 for any reason or otherwise
breaches this Agreement or fails to perform hereunder (in each case, whether
willfully, intentionally, unintentionally or otherwise), the Companys right to
terminate this Agreement and receive (i) the Parent Termination Fee; (ii) any
reimbursement of costs and expenses pursuant to the last sentence of Section
8.3(d); and (iii) any amount in respect of which it is indemnified by Parent
pursuant to Section 6.8(a) shall be the sole and exclusive remedy (whether at
law, in equity, in contract, in tort or otherwise) of any member of the Company
Group against the Parent Group, for any loss or damage suffered as a result of
any such breach or failure to perform hereunder or other failure of the Merger
to be consummated (in each case, whether willfully, intentionally,
unintentionally or otherwise);
provided
,
however
, the limitation
of remedies set forth under this Section 8.3(e) shall not apply in the event Parent has not
deposited or caused to be deposited in full the amounts specified in Section 2.1
within one (1) Business Day following the Effective Time. As used in this
Agreement, the term "
Company Group
") means the Company, its Subsidiaries
and their respective direct or indirect stockholders, Affiliates and
Representatives, and the term "
Parent
") means Parent, Merger Sub, their
respective direct and indirect stockholders and Affiliates and any lender or
prospective lender, lead arranger, arranger, agent or Representative of or to
Parent and Merger Sub.
42
(f) Subject to Section 9.8, in the event that the Company fails
to effect the Closing when required by Section 1.2 for any reason or otherwise
breaches this Agreement or fails to perform hereunder (whether willfully,
intentionally, unintentionally or otherwise), Parents right to terminate this
Agreement and receive (i) the Company Termination Fee; and (ii) any
reimbursement of costs and expenses pursuant to the last sentence of Section
8.3(d) shall be the sole and exclusive remedy (whether at law, in equity, in
contract, in tort or otherwise) of any member of the Parent Group against the
Company Group, for any loss or damage suffered as a result of any such breach or
failure to perform hereunder or other failure of the Merger to be consummated
(in each case, whether willfully, intentionally, unintentionally or otherwise).
8.4
Amendment
. Subject to the applicable provisions of
the NRS, at any time prior to the Effective Time, the Parties may modify or
amend this Agreement, with the approval of the boards of directors of the
Parties at any time;
provided
,
however
, that (a) in the case of
the Company, each of the Company Board and Special Committee have approved such
amendment in writing, and (b) after approval of this Agreement by the
stockholders of the Company, no amendment shall be made which changes the Merger
Consideration or adversely affects the rights of the Company's stockholders
hereunder or is otherwise required under any applicable Law to be approved by
such stockholders without, in each case, the approval of such stockholders.
8.5
Extension; Waiver
. At any time prior to the
Effective Time, any Party may, to the extent permitted under applicable Law, (a)
extend the time for the performance of any of the obligations or other acts of
the other Party, (b) waive any inaccuracies in the representations and
warranties of the other Party contained in this Agreement or (c) waive
compliance with any of the agreements or conditions of the other Party contained
in this Agreement. Any agreement on the part of a Party to any such extension or
waiver shall be valid only if set forth in a written instrument signed on behalf
of such Party, but such extension or waiver shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure.
ARTICLE IX
GENERAL PROVISIONS
9.1
Nonsurvival of Representations, Warranties and
Agreements
. None of the representations, warranties, covenants or agreements
set forth in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Effective Time, except for Section 6.3 (Access to
Information), 6.4 (Indemnification; Advancement of Expenses; Exculpation and Insurance), 8.2 (Effect of Termination) and
this Article IX, and for those other covenants and agreements contained in this
Agreement that by their terms apply or are to be performed in whole or in part
after the Effective Time.
43
9.2
Notices
. All notices and other communications in
connection with this Agreement shall be in writing and shall be deemed given if
delivered personally, sent via facsimile (with confirmation), mailed by
registered or certified mail (return receipt requested) or delivered by an
express courier (with confirmation) to the Parties at the following addresses
(or at such other address for a Party as shall be specified by like notice):
(a) if to the Company, to:
China TransInfo Technology Corp.
9th Floor, Vision
Building,
39 Xueyuanlu, Haidian District,
Beijing 100191, China
Attention: General Counsel
Facsimile: +86 10 5169 1666
with a copy to:
Shearman & Sterling LLP
12F East Tower, Twin Towers
B-12 Jianguomenwai Dajie
Beijing 100022, China
Attention: Lee
Edwards
Facsimile: +86 10 6563 6001
and
Pillsbury Winthrop Shaw Pittman LLP
2300 N Street, N.W.
Washington, DC 20037
Attention: Louis Bevilacqua
Facsimile: +1
202-663-8007
if to Parent or Merger Sub, to:
c/o China TransInfo Technology Corp
9th Floor, Vision
Building,
39 Xueyuanlu, Haidian District,
Beijing 100191, China
Attention: Mr. Shudong Xia
Facsimile: +86 10 5169 1666
with a copy to:
44
Skadden, Arps, Slate, Meagher & Flom LLP
30/F, China
World Office 2
No. 1, Jian Guo Men Wai Avenue
Beijing 100004 China
Attention: Peter X. Huang
Facsimile: +86 10 6535 5577
9.3
Interpretation
. When a reference is made in this
Agreement to Articles, Sections, Exhibits or Sections of the Disclosure Letter,
such reference shall be to an Article or Section of or Exhibit or Section of the
Disclosure Letter to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." The words "hereof," "herein," "hereby," "herewith," "hereto" and
"hereunder" and words of similar import shall refer to this Agreement as a whole
and not to any particular provision of this Agreement. The definitions in this
Agreement are applicable to the singular as well as the plural forms of such
terms. Any agreement, instrument or Law defined or referred to herein means such
agreement, instrument or Law as from time to time amended, modified or
supplemented, unless otherwise specifically indicated. All Sections of the
Disclosure Letter and exhibits hereto shall be deemed part of this Agreement and
included in any reference to this Agreement.
9.4
Severability
. If any term, provision, covenant or
restriction contained in this Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions contained in this Agreement shall remain in full force and effect,
and shall in no way be affected, impaired or invalidated. If for any reason such
court or regulatory agency determines that any term, provision, covenant or
restriction is invalid, void or unenforceable, it is the express intention of
the Parties that such provision, covenant or restriction be enforced to the
maximum extent permitted.
9.5
Entire Agreement
. This Agreement (including the
documents and the instruments referred to in this Agreement) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, between the Parties with respect to the subject matter of this
Agreement.
9.6
Governing Law; Jurisdiction
. This Agreement shall be
governed and construed in accordance with the Laws of the State of New York
applicable to contracts made and performed entirely within such state, without
regard to any applicable conflicts of law principles, except that matters
relating to the fiduciary duties of the Company Board and internal corporate
affairs of the Company shall be governed by the Laws of the State of Nevada. The
Parties agree that any Proceeding brought by any Party to enforce any provision
of, or based on any matter arising out of or in connection with, this Agreement
or the transactions contemplated hereby shall be brought in any federal or state
court located in the Borough of Manhattan of the City of New York. Each of the
Parties submits to the jurisdiction of any such court in any Proceeding seeking to enforce any provision of, or based on any
matter arising out of, or in connection with, this Agreement or the transactions
contemplated hereby, and hereby irrevocably waives the benefit of jurisdiction
derived from present or future domicile or otherwise in such Proceeding. Each
Party irrevocably waives, to the fullest extent permitted by Law, any objection
that it may now or hereafter have to the laying of the venue of any such
Proceeding in any such court or that any such Proceeding brought in any such
court has been brought in an inconvenient forum.
45
9.7
Assignment; Third Party Beneficiaries
. Neither this
Agreement nor any of the rights, interests or obligations under this Agreement
shall be assigned by any of the Parties (whether by operation of law or
otherwise) without the prior written consent of the other Parties. Any purported
assignment in contravention hereof shall be null and void. Subject to the
preceding sentence, this Agreement shall be binding upon, inure to the benefit
of and be enforceable by each of the Parties and their respective successors and
assigns. The Parties hereby agree that this Agreement is not intended to, and
does not, confer upon any Person other than the Parties any rights or remedies
hereunder, other than Section 6.4 and Section 6.14 (which is intended to be for
the benefit of the Persons covered thereby and may be enforced by such Persons).
The representations and warranties in this Agreement are the product of
negotiations among the Parties and are for the sole benefit of the Parties. Any
inaccuracies in such representations and warranties are subject to waiver by the
Parties in accordance with Section 8.5 without notice or liability to any other
Person. The representations and warranties in this Agreement may represent an
allocation among the Parties of risks associated with particular matters
regardless of the knowledge of any of the Parties. Accordingly, Persons other
than the Parties may not rely upon the representations and warranties in this
Agreement as characterizations of actual facts or circumstances as of the date
of this Agreement or as of any other date.
9.8
Specific Performance
. The Parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed by the Company in accordance with their specific
terms or were otherwise breached. Accordingly, each of Parent and Merger Sub
shall be entitled to specific performance of the terms hereof, including an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any federal or state
court located in the Borough of Manhattan of the City of New York, this being in
addition to any other remedy to which such Party is entitled at Law or in
equity. The Company further waives (i) any defense in any action for specific
performance that a remedy at Law would be adequate, and (ii) any requirement
under any Law to post security as a prerequisite to obtaining equitable relief.
The Parties acknowledge that the Company shall not be entitled to an injunction
or injunctions to prevent breaches of this Agreement by Parent or Merger Sub or
any remedy to enforce specifically the terms and provisions of this Agreement
(other than the remedies for failure to fund the Merger Consideration set forth
in Section 2.7) and that the Companys sole and exclusive remedies with respect
to any such breach shall be the remedies set forth in Sections 8.1, 8.2 and 8.3
(which shall be in addition to the remedies set forth in Section 2.7, if
applicable).
9.9
Confidentiality
.
46
(a) Prior to and during the term of this Agreement, each Party
has disclosed or may disclose to the other Party Confidential Information.
Subject to Section 9.9(b), unless otherwise agreed to in writing by the
disclosing Party, the receiving Party shall (i) except as required by Law, keep
confidential and not disclose or reveal any Confidential Information to any
Person other than the receiving Partys Representatives or, in the case of
Parent as the receiving Party, SAIF and any source of potential debt financing
and their respective Representatives, in each case, (A) who are actively and
directly participating in the consummation of the transactions contemplated by
this Agreement and other Transaction Documents or who otherwise need to know the
Confidential Information for the transactions contemplated by this Agreement and
other Transaction Documents and (B) whom the receiving Party will cause to
observe the terms of this Section 9.9, and (ii) not to use Confidential
Information for any purpose other than in connection with transactions
contemplated by this Agreement and other Transaction Documents. Each Party
acknowledges that such Party shall be responsible for any breach of the terms of
this Section 9.9 by such Party or its Representatives and each Party agrees, at
its sole expense, to take all reasonable measures (including but not limited to
court proceedings) to restrain its Representatives from prohibited or
unauthorized disclosure or use of the Confidential Information.
(b) In the event that the receiving Party or any of its
Representatives or, in the case of Parent as the receiving Party, SAIF or any
source of potential debt financing or any of their respective Representatives,
is requested pursuant to, or required by, Law to disclose any the Confidential
Information, the receiving Party will provide the disclosing Party with prompt
notice of such request or requirement in order to enable the disclosing Party to
seek an appropriate protective order or other remedy (and if the disclosing
Party seeks such an order, the receiving Party will provide such cooperation as
the disclosing Party shall reasonably request), to consult with the receiving
Party with respect to the disclosing Partys taking steps to resist or narrow
the scope of such request or legal process, or to waive compliance, in whole or
in part, with the terms of this Section 9.9. In the event that such protective
order or other remedy is not obtained, or the disclosing Party waives
compliance, in whole or in part, with the terms of this Section 9.9, the
receiving Party or its Representative will disclose only that portion of the
Confidential Information that the receiving Party is advised by counsel is
legally required to be disclosed and will use such disclosing Partys best
efforts to ensure that all Confidential Information so disclosed will be
accorded confidential treatment.
(c) As used in this Agreement, the term
Confidential
Information
means any confidential or proprietary information, disclosed
prior to or after the date hereof by one Party or any of its Affiliates to the
other Party or any of its Affiliates, concerning the disclosing Partys
business, financial condition, proprietary technology, research and development
and other confidential matters, including without limitation, any confidential
or proprietary information provided under this Agreement, any other Transaction
Documents, or any of the exhibits or schedule attached hereto. Confidential
Information shall not include any information which (i) is or becomes generally
available to the public other than as a result of a disclosure by the receiving
Party or its Representatives in violation of this Section 9.9 or other
obligation of confidentiality, (ii) was available to the receiving Party on a
nonconfidential basis prior to its disclosure by the disclosing Party or the
disclosing Partys Representatives, or (iii) becomes available to the receiving
Party on a nonconfidential basis from a Person (other than the disclosing Party
or the disclosing Partys Representatives) who is not prohibited from disclosing such information to the receiving Party by a legal,
contractual or fiduciary obligation to the disclosing Party or any of the
disclosing Partys Representatives.
47
9.10
WAIVER OF JURY TRIAL
. EACH OF PARENT, MERGER SUB
AND THE COMPANY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH
PARTY MAY HAVE TO TRIAL BY JURY IN ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY DOCUMENTS OR INSTRUMENTS REFERRED TO IN THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, OR THE ACTIONS OF PARENT, MERGER
SUB OR THE COMPANY IN NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT
OF THIS AGREEMENT.
9.11
Counterparts
. This Agreement may be executed in two
or more counterparts (including by facsimile or other electronic means), all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each of the Parties and delivered to the
other Parties, it being understood that each Party need not sign the same
counterpart.
48
IN WITNESS WHEREOF
, Parent, Merger Sub and the Company
have caused this Agreement to be executed by their respective officers thereunto
duly authorized as of the date first above written.
|
TRANSCLOUD COMPANY LIMITED
|
|
|
|
|
|
By:
/s/ Shudong Xia
|
|
Name: Shudong Xia
|
|
Title: Director
|
|
|
|
|
|
TRANSCLOUD ACQUISITION, INC.
|
|
|
|
|
|
By:
/s/ Shudong Xia
|
|
Name: Shudong Xia
|
|
Title: Director
|
|
|
IN WITNESS WHEREOF
, Parent, Merger Sub and the Company
have caused this Agreement to be executed by their respective officers thereunto
duly authorized as of the date first above written.
|
CHINA TRANSINFO TECHNOLOGY CORP.
|
|
|
|
|
|
By:
/s/ Xingming Zhang
|
|
Name: Xingming Zhang
|
|
Title: Chairman of the Special Committee
|
|
|
ANNEX B
EXECUTION VERSION
LIMITED GUARANTEE
LIMITED GUARANTEE, dated as of June 8, 2012 (this
Limited
Guarantee
), by Mr. Shudong Xia and SAIF Partners IV L.P. (the
Guarantors
) in favor of China TransInfo Technology Corp., a Nevada
corporation (the
Guaranteed Party
). Capitalized terms used but not
defined in this Limited Guarantee shall have the meanings assigned to such terms
in the Merger Agreement (as defined below).
1.
GUARANTEE
. (a) To induce the Guaranteed Party to
enter into that certain Agreement and Plan of Merger, dated as of the date
hereof (as amended, supplemented or otherwise modified from time to time in
accordance with its terms, the
Merger Agreement
), by and among the
Guaranteed Party, TransCloud Company Limited, a Cayman Islands exempted company
with limited liability (
Parent
) and TransCloud Acquisition, Inc., a
Nevada corporation and a wholly-owned subsidiary of Parent (
Merger
Sub
), pursuant to which Merger Sub will merge with and into the Guaranteed
Party, each Guarantor hereby absolutely, unconditionally and irrevocably
guarantees to the Guaranteed Party the due and punctual performance and
discharge of all of the payment obligations of Parent and Merger Sub with
respect to the payment of (i) the Parent Termination Fee pursuant to Section
8.3(c) of the Merger Agreement, (ii) any reimbursement of costs and expenses
pursuant to the last sentence of Section 8.3(d) of the Merger Agreement, and
(iii) any amount in respect of which the Guaranteed Party is reimbursed by
Parent or Merger Sub pursuant to Section 6.8(a) of the Merger Agreement
(collectively, the
Obligations
);
provided
that, notwithstanding
anything to the contrary contained in this Limited Guarantee, in no event shall
such Guarantors aggregate liability under this Limited Guarantee exceed such
Guarantors respective percentage, as set forth opposite its or his name on
Annex A hereto, of the amount of the Obligations (the
Maximum Amount
).
No Guarantor shall have any obligations or liability to any Person relating to,
arising out of or in connection with this Limited Guarantee other than as
expressly set forth herein.
(b) Subject to the terms and conditions of this Limited
Guarantee, if Parent fails to pay the Obligations when due, then all of the
Guarantors liabilities to the Guaranteed Party hereunder in respect of such
Obligations shall become immediately due and payable and the Guaranteed Party
may, at the Guaranteed Partys option, take any and all actions available
hereunder or under applicable Law to collect such Obligations from the
Guarantors (subject to each Guarantors Maximum Amount). In furtherance of the
foregoing, the Guarantors acknowledge that the Guaranteed Party may, in its sole
discretion, bring and prosecute a separate action or actions against the
Guarantors for the full amount of the Obligations (subject to each Guarantors
Maximum Amount), regardless of whether any action is brought against Parent or
Merger Sub. Each Guarantor agrees, severally but not jointly nor jointly and
severally, to pay on demand its pro rata portion (based on the percentage set
forth in Annex A hereto) of all reasonable and documented out-of-pocket expenses
(including reasonable fees and expenses of counsel) incurred by the Guaranteed
Party in connection with enforcement of its rights hereunder if (i) any of the
Guarantors assert in any litigation or other proceeding that this Guarantee is
illegal, invalid or unenforceable in accordance with its terms or (ii) any of
the Guarantors fail or refuse to make any payment to the Guaranteed Party
hereunder when due and payable and it is judicially determined that the
Guarantors are required to make such payment hereunder.
2.
NATURE OF GUARANTEE
. The Guaranteed Party shall not
be obligated to file any claim relating to the Obligations in the event that
Parent or Merger Sub becomes subject to a bankruptcy, reorganization or similar
proceeding, and the failure of the Guaranteed Party to so file shall not affect
the Guarantors obligations hereunder. This is an unconditional guarantee of
payment and not of collectability. Each Guarantor reserves the right to assert
defenses which Parent or Merger Sub may have to payment of any Obligations,
other than defenses arising from the bankruptcy or insolvency of Parent or
Merger Sub and other defenses expressly waived herein.
B-1
3.
CERTAIN WAIVERS
. Each Guarantor agrees that the
Guaranteed Party may at any time and from time to time, without notice to or
further consent of such Guarantor, extend the time of payment of any of the
Obligations, and may also make any agreement with Parent or Merger Sub for the
extension, renewal, payment, compromise, discharge or release thereof, in whole
or in part, or for any modification of the terms thereof or of any agreement
between the Guaranteed Party, Parent or Merger Sub without in any way impairing
or affecting each Guarantors obligations under this Limited Guarantee or
affecting the validity or enforceability of this Limited Guarantee. Each
Guarantor agrees that the obligations of such Guarantor hereunder shall not be
released or discharged, in whole or in part, or otherwise affected by (a) the
failure of the Guaranteed Party to assert any claim or demand or to enforce any
right or remedy against Parent, Merger Sub, or any other person interested in
the transactions contemplated by the Merger Agreement; (b) any change in the
corporate existence, structure or ownership of Parent, Merger Sub, or any other
Person interested in the transactions contemplated by the Merger Agreement; (c)
any insolvency, bankruptcy, reorganization or other similar proceeding affecting
Parent, Merger Sub or any other Person interested in the transactions
contemplated by the Merger Agreement; (d) the existence of any claim, set-off or
other right which such Guarantor may have at any time against Parent, Merger Sub
or the Guaranteed Party, whether in connection with the Obligations or
otherwise; (e) the adequacy of any other means the Guaranteed Party may have of
obtaining repayment of any of the Obligations; (f) any change in the time, place
or manner of payment of the Obligations or any rescission, waiver, compromise,
consolidation or other amendment or modification of any of the terms or
provisions of the Merger Agreement made in accordance with the terms of Section
8.4 thereof or any agreement evidencing, securing or otherwise executed in
connection with the Obligations; (g) the addition, substitution or release of
any entity or other Person interested in the transactions contemplated by the
Merger Agreement; or (h) any discharge of any Guarantor as a matter of
applicable Law (other than as a result of, and to the extent of, payment of the
Obligations in accordance with the terms of the Merger Agreement). To the
fullest extent permitted by applicable law, each Guarantor hereby expressly
waives any and all rights or defenses arising by reason of any applicable Law
which would otherwise require any election of remedies by the Guaranteed Party.
Each Guarantor waives promptness, diligence, notice of the acceptance of this
Limited Guarantee and of the Obligations, presentment, demand for payment,
notice of non-performance, default, dishonor and protest, notice of the
incurrence of any Obligations and all other notices of any kind, all defenses
which may be available by virtue of any valuation, stay, moratorium law or other
similar Law now or hereafter in effect, any right to require the marshaling of
assets of any Person interested in the transactions contemplated by the Merger
Agreement, and all suretyship defenses generally (other than defenses to the
payment of the Obligation (x) that are available to Parent or Merger Sub under
the Merger Agreement, (y) in respect of a breach by the Guaranteed Party of this
Limited Guarantee or (z) in respect of fraud or willful misconduct of the
Guaranteed Party or any of its Affiliates in connection with the Merger
Agreement), including, without limitation, any event, condition or circumstance
that might be construed to constitute, an equitable or legal discharge of such
Guarantors obligations hereunder. Each Guarantor acknowledges that it will
receive substantial direct and indirect benefits from the transactions
contemplated by the Merger Agreement and that the waivers set forth in this
Limited Guarantee are knowingly made in contemplation of such benefits.
B-2
The Guaranteed Party hereby covenants and agrees that it shall
not institute, directly or indirectly, and shall cause all of its Related
Persons (as defined below) not to institute, any proceeding or bring any other
claim (whether in tort, contract or otherwise) arising under, or in connection
with, the Merger Agreement, the Equity Financing or the transactions
contemplated thereby against the Guarantors or any Non-Recourse Party (as
defined below), except for (i) claims against the Guarantors under this Limited
Guarantee (subject to the limitations contained herein) and (ii) claims against
Parent and Merger Sub under the Merger Agreement ((i) and (ii) collectively, the
Retained Claims
). The Guaranteed Party hereby agrees that to the extent
Parent or Merger Sub is relieved of all or any portion of its payment
obligations under the Merger Agreement (other than by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar Laws,
affecting creditors rights generally, or general equitable principles (whether
considered in a proceeding in equity or at Law)), each Guarantor shall be
similarly relieved of its corresponding obligations under this Limited
Guarantee.
4.
NO WAIVER; CUMULATIVE RIGHTS
. No failure on the part
of the Guaranteed Party to exercise, and no delay in exercising, any right,
remedy or power hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise by the Guaranteed Party of any right, remedy or power
hereunder preclude any other or future exercise of any right, remedy or power
hereunder. Each and every right, remedy and power hereby granted to the
Guaranteed Party or allowed it by Law or other agreement shall be cumulative and
not exclusive of any other, and may be exercised by the Guaranteed Party at any
time or from time to time.
5.
REPRESENTATIONS AND WARRANTIES
. Each Guarantor (other
than, in the case of Mr. Shudong Xia, the representations and warranties
contained in Sections 5(a) and 5(b)(i)) hereby represents and warrants to the
Guaranteed Party that:
(a) such Guarantor is a legal entity duly organized and validly
existing under the Laws of its jurisdiction of organization;
(b) the execution, delivery and performance of this Limited
Guarantee have been duly authorized by all necessary action and do not
contravene (i) any provision of such Guarantors charter documents, partnership
agreement, operating agreement or similar organizational documents or (ii) any
Law or contractual restriction binding on the Guarantor or its assets;
(c) all consents, approvals, authorizations and permits of,
filings with and notifications to, any Governmental Entity necessary for the due
execution, delivery and performance of this Limited Guarantee by such Guarantor
have been obtained or made and all conditions thereof have been duly complied
with, and no other action by, and no notice to or filing with, any Governmental
Entity or regulatory body is required from such Guarantor in connection with the
execution, delivery or performance of this Limited Guarantee;
(d) this Limited Guarantee constitutes a legal, valid and
binding obligations of such Guarantor enforceable against such Guarantor in
accordance with its terms, subject to (i) the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar Laws
affecting creditors rights generally and (ii) general equitable principles
(whether considered in a proceeding in equity or at Law); and
(e) (i) such Guarantor is solvent and shall not be rendered
insolvent as a result of its execution and delivery of this Limited Guarantee or
the performance of its obligations hereunder, (ii) such Guarantor has the
financial capacity to pay and perform its obligations under this Limited Guarantee, and (iii) all funds
necessary for such Guarantor to fulfill its obligations under this Limited
Guarantee shall be available to such Guarantor for so long as this Limited
Guarantee shall remain in effect in accordance with Section 8 hereof.
B-3
6.
NO ASSIGNMENT
. Neither the Guarantors nor the
Guaranteed Party may assign its rights, interests or obligations hereunder to
any other Person (except by operation of Law) without the prior written consent
of the other party hereto.
7.
NOTICES
. All notices, requests and other
communications to any party hereunder shall be given in the manner specified in
the Merger Agreement (and shall be deemed given as specified therein) as
follows:
if to Mr. Shudong Xia, to:
c/o China TransInfo Technology Corp.
9th Floor, Vision
Building,
39 Xueyuanlu, Haidian District,
Beijing 100191, China
Attention: Mr. Shudong Xia
Facsimile: +86 10 5169
1666
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
30/F, China
World Office 2
No. 1, Jian Guo Men Wai Avenue
Beijing 100004 China
Attention: Peter X. Huang
Facsimile: +86 10 6535
5577
if to SAIF, to:
SAIF Partners IV L.P.
2516-2520, Two Pacific Place
88
Queensway, Hong Kong
Attention: Andrew Y. Yan
Facsimile: +852 2234
9116
or to such other address or facsimile number as the Guarantors
shall have notified the Guaranteed Party in a written notice delivered to the
Guaranteed Party in accordance with the Merger Agreement. All notices to the
Guaranteed Party hereunder shall be given as set forth in the Merger
Agreement.
B-4
8.
CONTINUING GUARANTEE
. This Limited Guarantee will
terminate, and be of no further force or effect, upon the earlier of (a) the
Effective Time, (b) the termination of the Merger Agreement in accordance with
its terms by mutual consent of the parties thereto or under circumstances in
which Parent and Merger Sub would not have any Obligations (including, without
limitation, the obligation to pay the Parent Termination Fee pursuant to Section
8.3(c) of the Merger Agreement) and (c) the 90
th
day following the
termination of the Merger Agreement in accordance with its terms under
circumstances in which Parent or Merger Sub would have such Obligations (including, without limitation, the obligation to
pay the Parent Termination Fee pursuant to Section 8.3(c) of the Merger
Agreement), unless a claim for such a payment has been made in writing prior
thereto, in which case this Limited Guarantee shall terminate upon either (i) a
final, non-appealable resolution of such claim and payment of the Guarantors
obligations hereunder (subject to each Guarantors Maximum Amount), if
applicable or (ii) a written agreement signed by each of the parties hereto
terminating this Limited Guarantee. If any payment or payments made by Parent or
Merger Sub or any part thereof, are subsequently invalidated, declared to be
fraudulent or preferential, set aside or are required to be repaid to a trustee,
receiver, or any other person under any bankruptcy act, state or federal law,
common law or equitable cause, then to the extent of such payment or payments,
the Obligations or part thereof hereunder intended to be satisfied shall be
revived and continued in full force and effect as if said payment or payments
had not been made. Notwithstanding the foregoing, in the event that the
Guaranteed Party or any of its controlled Affiliates asserts in any litigation
or other proceeding that any provision of this Limited Guarantee limiting each
Guarantors liability to the Maximum Amount are illegal, invalid or
unenforceable in whole or in part or that any Guarantor is liable in excess of
or to a greater extent than the Maximum Amount, or asserts any theory of
liability against any Non-Recourse Party (other than the Retained Claims) or any
Guarantor, Parent or Merger Sub with respect to the transactions contemplated by
the Merger Agreement (other than the Retained Claims), then (x) the obligations
of the Guarantors under this Limited Guarantee shall terminate
ab initio
and be null and void, (y) if any Guarantor has previously made any payments
under this Limited Guarantee, such Guarantor shall be entitled to recover such
payments and (z) neither the Guarantors nor any Non-Recourse Party shall have
any liability to the Guaranteed Party with respect to the Merger Agreement and
the transactions contemplated thereby, the Equity Financing or under this
Limited Guarantee.
9.
NO RECOURSE
.
(a) The Guaranteed Party acknowledges that the sole assets of
each of Parent and Merger Sub are (i) its rights under the Transaction
Agreements and (ii) de minimis amount of cash and that no funds are expected to
be contributed to either Parent or Merger Sub until immediately prior to the
Closing. Notwithstanding anything that may be expressed or implied in this
Limited Guarantee or any document or instrument delivered in connection
herewith, by its acceptance of the benefits of this Limited Guarantee, the
Guaranteed Party covenants, agrees and acknowledges that no Person (other than
the Guarantors and any permitted assignees thereof) have any obligations under
this Limited Guarantee and that, notwithstanding that any Guarantor may be a
partnership or limited liability company, the Guaranteed Party has no right of
recovery under this Limited Guarantee, or any claim based on such obligations
against, and no personal liability shall attach to, the former, current or
future equity holders, controlling Persons, directors, officers, employees,
agents, general or limited partners, managers, members, or Affiliates of a
Guarantor, Merger Sub or Parent, or any former, current or future equity
holders, controlling Persons, directors, officers, employees, agents, general or
limited partners, managers, members, or Affiliates of any of the foregoing,
excluding however any such Persons that constitute a Guarantor hereunder or an
assignee thereof (each of excluded parties, a
Non-Recourse Party
and
collectively, the
Non-Recourse Parties
), through Parent or Merger Sub
or otherwise, whether by or through attempted piercing of the corporate (or
limited partnership or limited liability company) veil, by or through a claim by
or on behalf of Parent or Merger Sub against any Non-Recourse Party, by the
enforcement of any assessment or by any legal or equitable proceeding, by virtue
of any applicable Law, or otherwise, except for any Retained Claims.
B-5
(b) Recourse against the Guarantors and their permitted
assignees under and pursuant to the terms of this Limited Guarantee and the
Retained Claims shall be the only and exclusive remedy of the Guaranteed Party
and all of its Related Persons against the Guarantors and the Non-Recourse
Parties in respect of any liabilities or obligations arising under, or in
connection with, the Merger Agreement or the transactions contemplated thereby.
Nothing set forth in this Limited Guarantee shall affect or be construed to
affect any liability of Parent or Merger Sub to the Guaranteed Party under the
Merger Agreement or otherwise or give or shall be construed to confer or give to
any Person other than the Guaranteed Party any rights or remedies against any
Person, except as expressly set forth in this Limited Guarantee.
(c) For the purposes of this Limited Guarantee, pursuit of a
claim against a Person by the Guaranteed Party or any Related Person of the
Guarantee Party shall be deemed to be pursuit of a claim by the Guaranteed
Party. A Person shall be deemed to have pursued a claim against another Person
if such first Person brings a legal action against such second Person, adds such
second Person to an existing legal proceeding or otherwise asserts a legal claim
of any nature against such second Person.
(d) For the purposes of this Limited Guarantee, the term
Related Person
shall mean any former, current or future director,
officer, agent, employee, general or limited partner, manager, member,
stockholder or Affiliate of a Person or any former, current or future director,
officer, agent, employee, general or limited partner, manager, member,
stockholder or Affiliate of any of the foregoing, but shall not include Parent,
Merger Sub or any of their controlled Affiliates.
10.
AMENDMENTS AND WAIVERS
. No amendment or waiver of
any provision of this Limited Guarantee will be valid and binding unless it is
in writing and signed, in the case of an amendment, by the Guarantors and the
Guaranteed Party, or in the case of waiver, by the party against whom the waiver
is to be effective. No waiver by any party of any breach or violation of, or
default under, this Limited Guarantee, whether intentional or not, will be
deemed to extend to any prior or subsequent breach, violation or default
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
11.
ENTIRE AGREEMENT
. This Limited Guarantee constitutes
the entire agreement with respect to the subject matter hereof and supersedes
any and all prior discussions, negotiations, proposals, undertakings,
understandings and agreements, whether written or oral, among Parent, Merger Sub
and the Guarantors or any of their respective Affiliates on the one hand, and
the Guaranteed Party or any of its Affiliates on the other hand.
12.
GOVERNING LAW; SUBMISSION TO JURISDICTION
. This
Limited Guarantee and all claims and defenses arising out of or relating to this
Limited Guarantee or the breach, termination or validity of this Limited
Guarantee, shall in all respects be governed by, and construed in accordance
with, the Laws of the State of New York without giving effect to any choice of
law or other conflict of law provision or rule (whether of the State of New York
or any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York. The parties hereto hereby (a)
submit for itself and its property to the exclusive jurisdiction of any state
court sitting in New York City or any federal court sitting in the Southern
District of New York for the purpose of any action arising out of or relating to
this letter agreement brought by any party hereto; (b) consents that any such
action may and shall be brought in such courts and waives any objection that it
may now or hereafter have to the venue or jurisdiction of any such action in
such court or that such court is an inconvenient forum for the action and agrees
not to assert, plead or claim the same; (c) agrees that the final judgment of
such court shall be enforceable in any court having jurisdiction
over the relevant party or any of its assets; (d) irrevocably waives any right
to remove any such action from the state court sitting in New York City or any
federal court sitting in the Southern District of New York to any other court;
(e) agrees that service of process in any such action may be effected by mailing
a copy of such process by registered or certified mail (or any substantially
similar form of mail), postage prepaid, to such party at the address set forth
in Section 7 of this Limited Guarantee); and (f) agrees that nothing in this
Limited Guarantee shall affect the right to effect service of process in any
other manner permitted by the applicable rules of procedure.
B-6
13.
WAIVER OF JURY TRIAL
. EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY AND ALL
RIGHT SUCH PARTY MAY HAVE TO TRIAL BY JURY IN ANY LEGAL ACTION, SUIT OR
PROCEEDING BETWEEN THE PARTIES HERETO ARISING OUT OF, BASED UPON OR RELATING TO
THIS LIMITED GUARANTEE OR THE NEGOTIATION, EXECUTION OR PERFORMANCE HEREOF.
14.
NO THIRD PARTY BENEFICIARIES
. Except for the rights
of Non-Recourse Parties provided hereunder, the parties hereto hereby agree that
their respective representations, warranties and covenants set forth herein are
solely for the benefit of the other party hereto, in accordance with and subject
to the terms of this Limited Guarantee and the Merger Agreement, and this
Limited Guarantee is not intended to, and does not, confer upon any Person other
than the parties hereto any rights or remedies hereunder, including the right to
rely upon the representations and warranties set forth herein.
15.
COUNTERPARTS
. This Limited Guarantee may be signed
in any number of counterparts and may be executed and delivered by facsimile or
in .pdf form, and each counterpart shall be an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument.
16.
SEVERABILITY
. If any term or other provision of this
Limited Guarantee is invalid, illegal or incapable of being enforced by any rule
of law, or public policy, all other conditions and provisions of this Limited
Guarantee shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party;
provided
,
however
, that this Limited Guarantee may not be enforced against the
Guarantors without giving effect to the Maximum Amount of the Guarantors or the
provisions set forth in Sections 3, 9 and 10. No party hereto shall assert, and
each party shall cause its respective Related Persons not to assert, that this
Limited Guarantee or any part hereof is invalid, illegal or unenforceable. Upon
a determination that any term or provision is invalid, illegal or incapable of
being enforced, the parties hereto shall negotiate in good faith to modify this
Limited Guarantee so as to effect the original intent of the parties as closely
as possible in a mutually acceptable manner in order that the transactions
contemplated hereby be consummated as originally contemplated to the fullest
extent possible.
17.
HEADINGS
. Headings are used for reference purposes
only and do not affect the meaning or interpretation of this Limited
Guarantee.
[
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]
B-7
IN WITNESS WHEREOF, the Guarantors and the Guaranteed Party
have caused this Limited Guarantee to be executed and delivered as of the date
first written above by its officer thereunto duly authorized.
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SHUDONG XIA
|
|
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By:
/s/ Shudong Xia
|
|
|
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SAIF PARTNERS IV L.P.
|
|
|
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By:
/s/ Andrew Y. Yan
|
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Name: Andrew Y. Yan
|
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Title: Authorized Signatory
|
B-8
Accepted and Agreed to:
CHINA TRANSINFO TECHNOLOGY CORP.
By:
/s/ Xingming Zhang
Name: Xingming Zhang
Title: Chairman of the Special Committee
B-9
Annex A
Guarantor
|
Pro Rata Share
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Mr. Shudong Xia
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70%
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SAIF Partners IV L.P.
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30%
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B-10
ANNEX C
FINANCIAL ADVISOR OPINION
June 7, 2012
China TransInfo Technology Corp.
Special Committee of the
Board of Directors
9th Floor, Vision Building
No 39 Xueyuanlu Haidian
District
Beijing, 100191, China
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a
financial point of view, to the holders (collectively the Stockholders) of the
outstanding shares (each, a Share) of common stock of China TransInfo
Technology Corp. (the Company), other than Shares owned by the Excluded
Holders (as defined below), of $5.80 per share in cash (the Merger
Consideration) proposed to be paid to such Stockholders pursuant to the
Agreement and Plan of Merger (the Merger Agreement) to be entered into by and
among TransCloud Company Limited, a Cayman Islands exempted company with limited
liability (Parent), TransCloud Acquisition, Inc., a Nevada corporation and a
wholly owned, direct subsidiary of Parent (Merger Sub), and the Company. The
Excluded Holders are defined herein as Parent, Merger Sub and their Affiliates
(as defined in the Merger Agreement) and the Rollover Holders (as defined in the
Merger Agreement). Pursuant to the terms of and subject to the conditions set
forth in the Merger Agreement, Merger Sub will be merged with and into the
Company with the Company surviving as a wholly-owned subsidiary of Parent (the
Merger) and each Share, other than Shares held by the Excluded Holders, will
be converted into the right to receive the Merger Consideration upon
consummation of the Merger.
In connection with our review of the proposed Merger and the
preparation of our opinion herein, we have examined: (a) a draft of the Merger
Agreement sent to us on June 6, 2012; (b) certain audited historical financial
statements of the Company for the years ended December 31, 2009 through December
31, 2011; (c) the unaudited financial statements of the Company for the 3 month
periods ended March 31, 2011 and March 31, 2012; (d) certain internal business,
operating and financial information and forecasts of the Company for the fiscal
years ending December 31, 2012 through 2016 (the Forecasts), prepared by the
senior management of the Company; (e) information regarding publicly available
financial terms of certain other business combinations we deemed relevant; (f)
the financial position and operating results of the Company compared with those
of certain other publicly traded companies we deemed relevant; (g) current and
historical market prices and trading volumes of the common stock of the Company;
and (h) certain other publicly available information on the Company and the
industry in which it operates. We have also held discussions with members of the
senior management of the Company to discuss the foregoing, have considered other
matters which we have deemed relevant to our inquiry and have taken into account such
accepted financial and investment banking procedures and considerations as we
have deemed relevant.
C-1
In rendering our opinion, we have assumed and relied, without
independent verification, upon the accuracy and completeness of all the
information examined by or otherwise reviewed or discussed with us for purposes
of this opinion including without limitation the Forecasts provided by the
senior management of the Company. We have not made or obtained an independent
valuation or appraisal of the assets, liabilities or solvency of the Company. We
have been advised by the senior management of the Company that the Forecasts
examined by us have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the senior management of the
Company. In that regard, we have assumed, with your consent, that, (i) the
Forecasts will be achieved in the amounts and at the times contemplated thereby
and (ii) all material assets and liabilities (contingent or otherwise) of the
Company are as set forth in the Companys financial statements or other
information made available to us. We express no opinion with respect to the
Forecasts or the estimates and judgments on which they are based. We have
assumed, at the direction of the Company, that the final executed Merger
Agreement will not differ in any material respect from the draft of the Merger
Agreement referred to above. We did not consider and express no opinion as to
the amount or nature of the compensation to any of the Companys officers,
directors or employees (or any class of such persons) relative to the Merger
Consideration. We were not asked to consider, and our opinion does not address,
the relative merits of the Merger as compared to any alternative business
strategies that might exist for the Company or the effect of any other
transaction in which the Company might engage. Our opinion herein is based upon
economic, market, financial and other conditions existing on, and other
information disclosed to us as of, the date of this letter. It should be
understood that, although subsequent developments may affect this opinion, we do
not have any obligation to update, revise or reaffirm this opinion. We are
financial advisors only and have relied upon, without independent verification,
the assessment of the Company and its counsel and accountants for legal,
accounting, tax and regulatory matters and we express no opinion as to any of
such advice. We have assumed that the Merger will be consummated on the terms
described in the Merger Agreement, without any amendment, modification or waiver
of any material terms or conditions. As of the date of this letter, we did not
seek alternative participants for the proposed Merger.
William Blair & Company has been engaged in the investment
banking business since 1935. We continually undertake the valuation of
investment securities in connection with public offerings, private placements,
business combinations, estate and gift tax valuations and similar transactions.
In the ordinary course of our business, we may from time to time trade the
securities of the Company for our own account and for the accounts of customers,
and accordingly may at any time hold a long or short position in such
securities. We have acted as the investment banker to the Company in connection
with the Merger and will receive a fee from the Company for our services, a
portion of which was payable when we rendered this opinion and a portion of
which is contingent upon consummation of the Merger. In addition, the Company
has agreed to indemnify us against certain liabilities arising out of our
engagement.
C-2
Our investment banking services and our opinion were provided
for the use and benefit of the Special Committee (the Committee) of the Board
of Directors of the Company (the Board) in connection with its consideration of the Merger. Our opinion
is limited to the fairness, from a financial point of view, to the Stockholders,
other than the Excluded Holders, of the Merger Consideration in connection with
the Merger, and we do not address the merits of the underlying decision by the
Company to engage in the Merger and this opinion does not constitute a
recommendation to the Board, the Committee or any Stockholder as to how such
person should act or vote with respect to the proposed Merger. It is understood
that this letter may not be disclosed or otherwise referred to without our prior
written consent, except that the opinion may be reproduced in its entirety in a
proxy statement that is required to be filed with the Securities and Exchange
Commission and mailed to the Stockholders by the Company with respect to the
Merger. This opinion has been reviewed and approved by our Fairness Opinion
Committee.
Based upon and subject to the foregoing, it is our opinion as
investment bankers that, as of the date hereof, the Merger Consideration is
fair, from a financial point of view, to the Stockholders other than the
Excluded Holders.
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Very truly yours,
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/s/ William Blair & Company L.L.C.
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WILLIAM BLAIR & COMPANY, L.L.C.
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C-3
ANNEX D
DIRECTORS AND EXECUTIVE OFFICERS OF EACH FILING PERSON
China TransInfo Technology Corp.
: Set forth below
for each director and executive officer of the Company is his respective present
principal occupation or employment, the name of the corporation or other
organization in which such occupation or employment is conducted and the
five-year employment history of each such director and executive officer. None
of the Company or any of the Companys directors or executive officers has,
during the past five years, been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors). None of the Company nor any of the
Companys directors or executive officers listed below has, during the past five
years, been a party to any judicial or administrative proceeding (except for
matters that were dismissed without sanction or settlement) that resulted in a
judgment, decree or final order enjoining the person from future violations of,
or prohibiting activities subject to, federal or state securities laws, or a
finding of any violation of federal or state securities laws.
Directors of China TransInfo Technology Corp.
Shudong Xia
. Mr. Xia has been the chairman, president,
chief executive officer and secretary of the Company since May 14, 2007. Mr. Xia
also serves on several government advisory committees for the development of GIS
services for urban planning. Mr. Xia founded the Companys affiliate, Beijing
PKU Chinafront High Technology Co., Ltd. (PKU) in 2000. Prior to his
involvement with PKU, Mr. Xia, from 1998 was involved in several research
projects at Peking University. Mr. Xia is a citizen of the PRC.
Walter Teh-Ming Kwauk.
Mr. Kwauk has been the Companys
director since December 12, 2011. Mr. Kwauk is a vice president of Motorola
Solutions, Inc. (Motorola) and its director of corporate strategic finance and
tax, Asia Pacific. He joined Motorola in January 2003 after 25 years of
professional services with KPMG in Vancouver, Hong Kong, Beijing and Shanghai.
Between 1987 and 2002, Mr. Kwauk held a number of senior positions in KPMG,
including general manager of KPMGs joint accounting firm, managing partner in
KPMGs Shanghai office and partner in KPMGs Hong Kong office. Mr. Kwauk is also
an independent non-executive director of Alibaba.com Limited. Mr. Kwauk is a
member of the Hong Kong Institute of Certified Public Accountants. Mr. Kwauk is
a citizen of Canada.
Zhongsu Chen.
Dr. Chen has been the Companys director
since May 1, 2008. Dr. Chen has more than 20 years of experience in information
technology, including nine years in Wall Street firms such as DLJ, Standard
& Poors, New York Life and Ambac Financial Group. Since May 2005, Dr. Chen
has been the managing director of Time Innovation Ventures, a venture capital
company. He also serves on the board of directors of Beijing Ahelios Consulting,
an IT consulting company and Beijing Xiakexing Network Technologies, a Chinese
company producing animation products. From 2001 to 2005, Dr. Chen worked as the
deputy chief technology officer at the Shanghai Stock Exchange. From 2003 to
2004, he led Chinas National Financial Standardization Securities Trading
Protocol Working Group, which defined Chinas Securities Trading Exchange
Protocol technology standard, and served as an advisor of the Shenzhen Stock
Exchange Technology Development Strategy Committee. In 2006, Dr. Chen was
appointed by the Chinese government as a member of the Working Group for the
Foundation of Chinas Futures Exchange. Dr. Chen is a citizen of the United
States.
Danxia Huang.
Ms. Huang became the Companys vice
president of finance and treasurer on May 14, 2007 and became the Companys
director on May 27, 2007. Currently, Ms. Huang is vice president of operations
in charge of the Companys strategic development, business administration
management and finance. Since November 2006, Ms. Huang has been Vice President
of PKU, where she is in charge of strategic development, business administration
management and finance. From April 2005 to November 2006, Ms. Huang was the vice
president of First City Investment Inc. of Hong Kong. From April 2001 to April
2005, Ms Huang worked at Beijing Business Travel Holiday Net-Tech Co., Ltd., an
internet company, as chief executive officer. Ms. Huang is a citizen of the
PRC.
Dan Liu.
Mr. Liu has been the Companys director since
May 1, 2008. Mr. Liu held several management positions at China Electronics
Import and Export Corporation for more than ten years and was vice president of
China Electronics Corporation from 1990 to 1991. From 1991 to 1997, Mr. Liu was
chairman of the board of Intel (China), a semiconductor manufacturer. Mr. Liu
was also senior advisor to Motorola (China), a provider of mobile devices and
broad band communication and enterprise mobility solutions, from 1994 to 1998.
From 1991 to 2000, Mr. Liu was the president of China Tongda Networking
Corporation, a communication system integration company. From 2001 to 2002, Mr.
Liu was the vice general manager of China Electronics Corporation. Mr. Liu is
currently a councilor at Chinese Association of Electronics, China Software
Industry Association, China News Technology Association, and China Public
Relations Association. Mr. Liu is a citizen of the PRC.
Brandon Ho-Ping Lin
. Mr. Lin has been the Companys
director since September 28, 2008. Mr. Lin is a partner at SAIF Advisors
Limited, which is one of the largest and most successful growth venture capital
funds focused on China. Prior to joining SAIF Advisors Limited in 2001, Mr. Lin
was a Vice President in investment banking with Credit Suisse/Donaldson, Lufkin
& Jenrette (DLJ) in New York from 1997 to 2001 where he executed mergers
& acquisitions, high yield debt and initial public offering transactions for
leveraged buy-outs and technology companies. From 1994 to 1997, Mr. Lin worked
as an associate with Sullivan & Cromwell LLP. Mr. Lin is also a
director of several SAIF Advisors Limiteds portfolio companies, which include
NVC Lighting Holding Limited, Jiangxi Runtian Beverage LLC and Best Elite
International Limited. Mr. Lin is a citizen of Hong Kong Special Administrative
Region, the PRC.
D-1
Xingming Zhang
. Mr. Zhang has been the Companys
director since June 11, 2010. Mr. Zhang has severed as an executive director of
investment banking in Guotai Junan Securities Co., Ltd., ("Guotai"), one of the
largest investment banking and securities companies in China, since March 2009.
Mr. Zhang is mainly in charge of the investment banking services of Guotai in
the transportation industry including financing, IPO, restructuring and M&A.
From May 2006 to March 2009, Mr. Zhang worked as the executive director of
Antaeus Capital Inc.s China office, which is a full service securities
brokerage and investment banking firm. From 2003 to 2006, he worked as General
Manager of the Investment Department of China Landgent Group, a company engaged
in the business of real estate development and education industry. Mr. Zhang is
a qualified securities practitioner and a charted representative of underwriters
in China. Mr. Zhang is a citizen of the PRC.
Executive Officers of China TransInfo Technology Corp.
(other than Mr. Xia and Danxia Huang)
Zhibin Lai
. Mr. Lai has been the Companys Vice
President since May 14, 2007. Mr. Lai is in charge of GIS application service
for the Transportation sector. Since 2000, Mr. Lai has been Vice President of
PKU, where he is in charge of the GIS application service for the transportation
sector. From 1988 to 2000, Mr. Lai was the head of the Software Department of
Fangda Century Group (Beijing) where he was in charge of the GIS Study Center in
City and Environment Department at Peking University. Mr. Lai is a citizen of
the PRC.
Zhiping Zhang
. Mr. Zhang has been the Companys Vice
President of Research and Development since May 14, 2007. Mr. Zhang is in charge
of the R&D and GIS application service in Land and Resources sector. Since
2001, Mr. Zhang has been Vice President of PKU, where he is in charge of the
R&D and GIS application service in Land and Resources sector. From July 1995
to 2001, Mr. Zhang was a professor of Remote Sensing at the Geography
Information Institute of Peking University. Mr. Zhang is a citizen of the
PRC.
Shan Qu.
Mr. Qu became the Companys Vice President on
January 26, 2011. Mr. Qu has served as the General Manager of Beijing UNISITS
Technology Co., Ltd. since November 2002. From September 1995 to November 2002,
he served as the general manager in the intelligent transportation and
engineering control department of Tsinghua Unisplendour Corporation Limited., a
company engaged in the business of transportation. Mr. Qu is a citizen of the
PRC.
Rong Zhang.
Mr. Zhang has been the Companys Chief
Financial Officer since January 1, 2011. Prior to joining the Company, from July
2009 to December 2010, Mr. Zhang worked in Beijing as the Chief Financial
Officer of China Vocational Training Holdings Co., Ltd., the largest automotive
technician training school chain in China. Since August 2008, Mr. Zhang has
served as a non-employee director of SVTeck, Inc., a silicon valley start-up in
online reputation grading/search business using advanced dynamic programming as
well as artificial intelligence and of OKIKI Education Management Co., Ltd., a
preschool education chain aiming at expansion in China. From August 2007 to
August 2008, Mr. Zhang worked as the Chief Financial Officer of Taizinai Group,
a major company in Chinas beverage market. From July 2005 to July 2007, Mr.
Zhang was the Asia Pacific Controller of DraftFCB as well as the Asia Pacific
Lead Area Controller of Interpublic Group of Companies, Inc. (DraftFCB's parent
company), one of the worlds largest advertising and marketing services
companies. From January 2004 to July 2005, Mr. Zhang was a Senior Analyst and
Project Leader at MCI, Inc., now a telecommunications subsidiary of Verizon
Communications Inc., a global broadband and telecommunications company. From
July 1997 to January 2004, Mr. Zhang worked in several finance and accounting
positions in the United States, including as a Senior Analyst in Atlanta at ACSI
Network Technologies, a telecommunications company that specialized in fiber
optic broadband services; Senior Auditor at Union Camp Corporation and
International Paper, an American pulp and paper company and as a Staff Auditor
at Deloitte & Touche's Atlanta, Georgia office. Mr. Zhang is a U.S.
Certified Public Accountant. Mr. Zhang is a citizen of the United States.
Parent, Merger Sub and Holdco
: Set
forth below for the sole director and executive officer of each of Parent,
Merger Sub and Holdco, is his present principal occupation or employment, the
name of the organization in which such occupation or employment is conducted and
the five-year employment history of such director. During the past five years,
none of Parent, Merger Sub, Holdco and none of their respective directors has
been convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors). During the past five years, none of Parent, Merger Sub, Holdco
and none of their respective directors has been a party to any judicial or
administrative proceeding (except for matters that were dismissed without
sanction or settlement) that resulted in a judgment, decree or final order
enjoining the person from future violations of, or prohibiting activities
subject to, federal or state securities laws or a finding of any violation of
federal or state securities laws.
Sole Director and Executive Officer of Parent, Merger Sub
and Holdco
Shudong Xia
. Mr. Xia has been the chairman, president,
chief executive officer and secretary of the Company since May 14, 2007. Mr. Xia
also serves on several government advisory committees for the development of GIS
services for urban planning. Mr. Xia founded the Companys affiliate, PKU in
2000. Prior to his involvement with PKU, Mr. Xia, from 1998 was involved in
several research projects at Peking University. Mr. Xia is a citizen of the PRC.
D-2
Karmen Investment Holdings Limited
: Set forth
below for the sole director and executive officer of Karmen is his present
principal occupation or employment, the name of the organization in which such
occupation or employment is conducted and the five-year employment history of
such director. During the past five years, none of Karmen and none of Karmens
directors or executive officers has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors). During the past five
years, none of Karmen and none of Karmens respective directors has been a party
to any judicial or administrative proceeding (except for matters that were
dismissed without sanction or settlement) that resulted in a judgment, decree or
final order enjoining the person from future violations of, or prohibiting
activities subject to, federal or state securities laws or a finding of any
violation of federal or state securities laws.
Sole Director and Executive Officer of Karmen Investment
Holdings Limited
Shudong Xia
. Mr. Xia has been the chairman, president,
chief executive officer and secretary of the Company since May 14, 2007. Mr. Xia
also serves on several government advisory committees for the development of GIS
services for urban planning. Mr. Xia founded the Companys affiliate, PKU in
2000. Prior to his involvement with PKU, Mr. Xia, from 1998 was involved in
several research projects at Peking University. Mr. Xia is a citizen of the PRC.
SAIF III
: Andrew Y. Yan is the sole shareholder
and sole director of SAIF III GP Capital Ltd., a limited liability entity formed
under the laws of the Cayman Islands, the sole general partner of SAIF III GP,
L.P., a limited partnership formed under the laws of the Cayman Islands, which
in turn is the sole general partner of SAIF Partners III, a limited partnership
formed under the laws of the Cayman Islands. Mr. Yan is deemed to have sole
voting and dispositive powers with respect to the securities held by SAIF
Partners III.
SAIF III GP L.P.
is a limited partnership formed under
the laws of the Cayman Islands and was formed for the purpose of making
investments in companies in China and India. The principal business of SAIF III GP
L.P. is to serve as the general partner and adviser in various investment
vehicles, including SAIF III. The registered office of SAIF III GP L.P. is c/o
M&C Corporate Services Limited, P. O. Box 309 GT, Ugland House, South Church
Street, George Town, Grand Cayman, Cayman Islands and its telephone number is
+852 2918 2203.
SAIF III GP Capital Ltd.
is a limited liability entity
formed under the laws of the Cayman Islands and was formed for the purpose of
making investments in companies in China and India. The principal business of
SAIF III GP Capital Ltd. is to serve as the general partner and adviser in
various investment vehicles, including SAIF III. The registered office of SAIF
III GP Capital Ltd. is c/o M&C Corporate Services Limited, P. O. Box 309 GT,
Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands and
its telephone number is +852 2918 2203.
Andrew Y. Yan
. Mr. Yan has been the managing partner of SAIF Advisors Limited for the past ten years. Mr. Yan is a citizen of Hong Kong,
Special Administrative Region, the PRC.
SAIF IV:
Andrew Y. Yan is
the sole shareholder and sole director of SAIF IV GP Capital Ltd., a limited
liability entity formed under the laws of the Cayman Islands, the sole general
partner of SAIF IV GP, L.P., a limited partnership formed under the laws of the
Cayman Islands, which in turn is the sole general partner of SAIF Partners IV, a
limited partnership formed under the laws of the Cayman Islands. Mr. Yan is
deemed to have sole voting and dispositive powers with respect to the securities
held by SAIF Partners IV L.P.
SAIF IV GP L.P.
is a limited
partnership formed under the laws of the Cayman Islands and was formed for the
purpose of making investments in companies in China and India. The principal
business of SAIF IV GP L.P. is to serve as the general partner and adviser in
various investment vehicles, including SAIF IV. The registered office of SAIF IV
GP L.P. is c/o M&C Corporate Services Limited, P. O. Box 309 GT, Ugland House,
South Church Street, George Town, Grand Cayman, Cayman Islands and its contact
telephone number is +852 2918 2200.
SAIF IV GP Capital Ltd.
is a
limited liability entity formed under the laws of the Cayman Islands and was
formed for the purpose of making investments in companies in China and India.
The principal business of SAIF IV GP Capital Ltd. is to serve as the general
partner and adviser in various investment vehicles, including SAIF IV. The
registered office of SAIF IV GP Capital Ltd. is c/o M&C Corporate Services
Limited, P. O. Box 309 GT, Ugland House, South Church Street, George Town, Grand
Cayman, Cayman Islands and its contact telephone number is +852 2918 2200.
Andrew Y. Yan.
Mr. Yan has been
the managing partner of SAIF Advisors Limited for the past ten years. Mr. Yan
is a citizen of Hong Kong, Special Administrative Region, the PRC.
D-3
ANNEX E
PRELIMINARY PROXY MATERIAL SUBJECT TO COMPLETION
CHINA TRANSINFO TECHNOLOGY CORP.
SPECIAL MEETING OF
STOCKHOLDERS
TO BE HELD ON _____, 2012
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
The undersigned hereby appoints
_____and _____, or either of them, as proxies, each with full power of
substitution, to represent and vote as designated on the reverse side, all the
shares of common stock of China TransInfo Technology Corp. (the
Company
) held of record by the undersigned on ____, 2012, at the
special meeting of stockholders to be held at _____local time, on _____, 2012,
at _____or any adjournment or postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED,
WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED STOCKHOLDER. IF NO SUCH DIRECTIONS
ARE MADE, THIS PROXY WILL BE VOTED FOR THE PROPOSALS LISTED ON THE REVERSE SIDE.
IF OTHER MATTERS THAN THE PROPOSALS LISTED ON THE REVERSE SIDE ARE PRESENTED AT
THE SPECIAL MEETING, THE PERSONS NAMED ABOVE WILL VOTE IN ACCORDANCE WITH THEIR
BEST JUDGMENT WITH RESPECT TO THOSE MATTERS.
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY USING THE ENCLOSED REPLY ENVELOPE OR VOTE BY INTERNET OR
TELEPHONE FOLLOWING THE INSTRUCTIONS ON THE REVERSE SIDE.
(Continued and to be signed on the Reverse Side)
E-1
THERE ARE THREE WAYS TO VOTE: BY INTERNET, TELEPHONE OR MAIL
Internet and telephone voting is available 24 hours a day, 7
days a week through
11:59 PM Eastern Time the day prior to the special
meeting date.
Your Internet or telephone vote authorizes the named proxies to
vote your shares in the same manner as if you marked, signed and
returned
your proxy card
INTERNET
|
TELEPHONE
|
MAIL
|
|
|
|
Go to the website listed above.
|
Use any touch-tone telephone.
|
Mark, sign and date your proxy card.
|
Have your proxy card ready.
|
Have your proxy card ready.
|
Detach your proxy card.
|
Follow the simple instructions that
|
Follow the simple recorded
|
Return your proxy card in the
|
appear on your computer screen.
|
instructions.
|
postage-paid envelope provided.
|
Please Vote, Sign, Date and Return Promptly in the Enclosed
Postage-Paid Envelope
E-2
▼
DETACH PROXY CARD HERE TO VOTE BY MAIL
▼
The Board of Directors, acting on the unanimous recommendation
of the special committee composed entirely of independent directors, recommends
a vote FOR the approval of the merger agreement and a vote FOR Proposal
2.
|
|
FOR
|
AGAINST
|
ABSTAIN
|
1.
|
To approve the Agreement and Plan of Merger, dated as of
June 8, 2012 (the
merger agreement
), with TransCloud Company
Limited, a Cayman Islands exempted company with limited liability
(
Parent
) and TransCloud Acquisition, Inc., a Nevada corporation
and a wholly owned subsidiary of Parent, (
Merger Sub
), providing
for the merger of Merger Sub with and into the Company (the
merger
), with the Company surviving the merger as a wholly owned
subsidiary of Parent.
|
[ ]
|
[ ]
|
[ ]
|
|
|
FOR
|
AGAINST
|
ABSTAIN
|
2.
|
To approve the adjournment of the special meeting, if
necessary or appropriate, to solicit additional proxies if there are
insufficient votes at the time of the special meeting to approve the
merger agreement.
|
[ ]
|
[ ]
|
[ ]
|
Note:
Please sign your name exactly as it appears
hereon. If signing as attorney, executor, administrator, trustee or
guardian, please give full title as such, and, if signing for a
corporation, give your title. When shares are in the names of more than
one person, each should sign.
|
|
|
Dated:
, 2012
|
|
Signature:
|
|
Title or Authority:
|
|
Signature (if held
|
jointly):
|
E-3
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