UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO.
1
TO
SCHEDULE 13E-3
RULE 13e-3 TRANSACTION STATEMENT
UNDER SECTION 13(e) OF
THE SECURITIES EXCHANGE ACT OF 1934
Bona Film Group Limited
(Name of the Issuer)
Bona
Film Group Limited
Mountain
Tiger International Limited
Mountain
Tiger Limited
Dong
Yu
Skillgreat
Limited
Vantage
Global Holdings Ltd
Fosun
International Limited
Orrick
Investments Limited
Alibaba
Pictures Group Limited
SAC
Finance Company Limited
|
Sequoia
Capital China I, L.P.
Sequoia Capital China Partners Fund I, L.P.
Sequoia Capital China Principals Fund I, L.P.
Sequoia
Capital China Management I, L.P.
SC
China Holding Limited
SNP
China Enterprises Limited
Nan
Peng Shen
SAIF
Partners IV L.P.
Tencent
Holdings Limited
Oriental
Power Holdings Limited
Willow
Investment Limited
Uranus
Connection Limited
All
Gain Ventures Limited
Zhanshan
Xie |
(Names of Persons Filing Statement)
Ordinary Shares, par value $0.0005 per
share
American Depositary Shares, each two
representing one Ordinary Share
(Title of Class of Securities)
09777B1071
(CUSIP Number)
Bona
Film Group Limited
18/F,
Tower A, U-town Office Building
No.1
San Feng Bei Li
Chaoyang
District, Beijing 100020,
People’s
Republic of China
Tel:
+86-10-5631-0700 |
Dong
Yu
Skillgreat
Limited
Vantage
Global Holdings Ltd
18/F,
Tower A, U-town Office Building
No.
1 San Feng Bei Li
Chaoyang
District, Beijing 100020,
People’s
Republic of China
Tel:
+86-10-5631-0700 |
Sequoia
Capital China I, L.P.
Sequoia
Capital China Partners Fund I, L.P.
Sequoia
Capital China Principals Fund I, L.P.
Sequoia
Capital China Management I, L.P.
SC
China Holding Limited
SNP
China Enterprises Limited
Nan
Peng Shen
Suite
3613, 36/F, Two Pacific Place
88
Queensway Road, Hong Kong
Tel:
+852-2501-8989 |
1 This CUSIP number
applies to the Issuer’s American Depositary Shares, each two of which represent one Ordinary Share.
Mountain
Tiger International Limited
Mountain
Tiger Limited
c/o Offshore Incorporations (Cayman)
Limited,
Floor 4, Willow House,
Cricket Square, P O Box 2804,
Grand
Cayman KY1-1112
Cayman Islands
Tel:
+86-10-8525-5529 |
Fosun
International Limited
Orrick
Investments Limited
Room
808, ICBC Tower,
3
Garden Road, Central,
Hong
Kong
Tel:
+852-2509-3228
|
All
Gain Ventures Limited
Zhanshan
Xie
c/o Global Incorporations Limited,
Suite 1107, Office Tower C1, Oriental Plaza,
No.1 East Chang An Avenue,
Beijing 100738,
People’s Republic of China
Tel:
+86-10-8525-5529 |
|
|
|
SAIF
Partners IV L.P.
Suites
2516-2520, Two Pacific Place, 88 Queensway, Hong Kong
Tel:
+852-2918-2200 |
Uranus
Connection Limited
c/o
17/F, CITIC Securities Tower
No.
48 Liangmaqiao Road
Chaoyang
District
Beijing
People's
Republic of China
Tel:
+86-10-6083-7583 |
Alibaba
Pictures Group Limited
SAC
Finance Company Limited
26/F,
Tower One,
Times
Square, 1 Matheson Street,
Causeway
Bay
Hong
Kong
Tel:
+852-2215-5428 |
|
|
|
|
Tencent
Holdings Limited
Oriental
Power Holdings Limited
Willow
Investment Limited
29/F.,
Three Pacific Place,
No.
1 Queen’s Road East,
Wanchai
Hong
Kong
Tel:
+86-755-8601-3388 ext 72000 |
|
(Name, Address and Telephone Number of
Person Authorized to Receive Notices and Communications)
With copies to:
Stephanie
Tang, Esq.
Shearman
& Sterling
12th
Floor, Gloucester Tower
The
Landmark
15
Queen’s Road, Central
Hong
Kong
Tel:
+852-2978-8028 |
Chris
K.H. Lin, Esq.
Daniel
Fertig, Esq.
Simpson
Thacher & Bartlett
c/o
35th Floor, ICBC Tower
3
Garden Road, Central
Hong
Kong
Tel:
+852-2514-7600 |
David
Zhang, Esq.
Jesse
Sheley, Esq.
Kirkland
& Ellis
26th
Floor, Gloucester Tower,
The
Landmark
15
Queen’s Road, Central
Hong
Kong
Tel:
+852-3761-3300 |
|
|
|
Weiheng
Chen, Esq.
Zhan
Chen, Esq.
Wilson
Sonsini Goodrich & Rosati, P.C.
Suite
1509, 15F, Jardine House
1
Connaught Place, Central
Hong
Kong
Tel:
+852-3972-4955 |
Gerard
S. DiFiore, Esq.
Gregory
Wang, Esq.
Reed
Smith LLP
20th
Floor Alexandra House
18
Chater Road
Central,
Hong Kong
Tel:
+852-2810-8008 |
Ke Geng, Esq.
O’Melveny & Myers LLP
Yin Tai Centre, Office Tower, 37th
Floor
No. 2 Jianguomenwai Ave.
Chao Yang District
Beijing
People’s Republic of China
Tel: +86-10-6563-4261 |
David M. Ludwick, Esq.
Freshfields Bruckhaus Deringer
11/F, Two Exchange Square
8 Connaught Place
Central, Hong Kong
Tel: +852-2846-3400
|
|
|
This statement is filed in connection with (check the appropriate
box):
| ¨ | The filing
of solicitation materials or an information statement subject to Regulation 14A,
Regulation 14-C or Rule 13e-3(c) under the Securities Exchange Act of 1934. |
| ¨ | The filing
of a registration statement under the Securities Act of 1933. |
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies: ¨
Check the following box if the filing is a final amendment
reporting the results of the transaction: ¨
Calculation of Filing Fee | |
Transactional Valuation* | | |
Amount of Filing Fee** | |
$ | 352,560,278.62 | | |
$ | 35,502.82 | |
* Calculated solely for the purpose
of determining the filing fee in accordance with Rule 0-11(b)(1) under the Securities Exchange Act of 1934, as amended. The filing
fee is calculated based on the sum of (a) the aggregate cash payment of $27.40 per share for the 11,973,704 issued and outstanding
ordinary shares of the issuer (including shares represented by American Depositary Shares) subject to the transaction plus (b)
the product of 911,879 ordinary shares issuable under all outstanding and unexercised options multiplied by $19.78 per share (which
is the difference between the $27.40 per share merger consideration and the weighted average exercise price of $7.62 per share)
plus (c) the product of 235,176 ordinary shares underlying the restricted share multiplied by $27.40 per share ((a), (b), and
(c) together, the “Transaction Valuation”).
** The amount of the filing fee,
calculated in accordance with Exchange Act Rule 0-11(b)(1) under the Securities Exchange Act of 1934, as amended, and the Securities
and Exchange Commission Fee Rate Advisory #1 for Fiscal Year 2016, issued on August 27, 2015, was calculated by multiplying the
Transaction Valuation by 0.0001007.
¨
Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the
offsetting of the fee was previously paid. Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
Amount Previously
Paid: |
Form or
Registration No.: |
|
|
Filing Party: |
Date Filed: |
TABLE OF CONTENTS
INTRODUCTION
This Amendment No. 1 to the Rule 13e-3
transaction statement on Schedule 13E-3, together with the exhibits hereto (this “Transaction Statement”), is being
filed with the Securities and Exchange Commission (the “SEC”) pursuant to Section 13(e) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), jointly by the following persons (each, a “Filing Person,”
and collectively, the “Filing Persons”): (a) Bona Film Group Limited, an exempted company with limited liability incorporated
under the laws of the Cayman Islands (the “Company”), the issuer of the ordinary shares, par value $0.0005 per share
(each, a “Share”), including the Shares represented by the American depositary shares (each an “ADS,”
or collectively, the “ADSs”), each two of which represent one Share, that is subject to the transaction pursuant to
Rule 13e-3 under the Exchange Act; (b) Mountain Tiger International Limited, an exempted company with limited liability incorporated
under the laws of the Cayman Islands (“Parent”); (c) Mountain Tiger Limited, an exempted company with limited liability
incorporated under the laws of the Cayman Islands (“Merger Sub”); (d) Mr. Dong Yu, the founder, chairman of the board
of directors of the Company (the “Board”) and chief executive officer of the Company (the “Chairman”),
(e) Skillgreat Limited, a business company with limited liability incorporated under the laws of the British Virgin Islands (“Skillgreat”);
(f) Vantage Global Holdings Ltd, a business company with limited liability incorporated under the laws of the British Virgin Islands
(“Vantage”, and collectively with the Chairman and Skillgreat, the “Chairman Parties”); (g) Fosun International
Limited, a limited company incorporated under the laws of Hong Kong S.A.R. (“Hong Kong”) (“Fosun”); (h)
Orrick Investments Limited, a business company with limited liability incorporated under the laws of the British Virgin Islands
(“Orrick”, together with “Fosun”, the “Fosun Entities”); (i) Sequoia Capital China I, L.P.,
an exempted limited partnership registered in the Cayman Islands (“Sequoia”); (j) Sequoia Capital China Partners Fund
I, L.P., an exempted limited partnership registered in the Cayman Islands (“Sequoia Partners”); (k) Sequoia Capital
China Principals Fund I, L.P., an exempted limited partnership registered in the Cayman Islands (“Sequoia Principals”,
and collectively with Sequoia and Sequoia Partners, the “Sequoia Entities”); (l) Sequoia Capital China Management
I, L.P., an exempted limited partnership registered in the Cayman Islands (“Sequoia Capital”); (m) SC China Holding
Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands (“SC China”);
(n) SNP China Enterprises Limited, a business company with limited liability incorporated under the laws of British Virgin Islands
(“SNP China”); (o) Nan Peng Shen, a Hong Kong citizen and the sole owner of SNP China, which in turn is the sole owner
and director of SC China, which in turn is the general partner of Sequoia Capital, which in turn is the general partner of the
Sequoia Entities (“Mr. Shen”, and collectively with Sequoia Entities, Sequoia Capital, SC China and SNP China, the
“Sequoia Filing Persons”) (p) SAIF Partners IV L.P., an exempted limited partnership registered in the Cayman Islands
(“SAIF”); (q) Uranus Connection Limited, a company with limited liability incorporated under the laws
of the British Virgin Islands (“Uranus”); (r) Alibaba Pictures Group Limited, a company with limited liability incorporated
under the laws of Bermuda (“Alibaba Pictures”); (s) SAC Finance Company Limited, a company with limited liability
incorporated under the laws of Hong Kong (“SAC Finance”, and collectively with Alibaba Pictures, the “Alibaba
Entities”); (t) Tencent Holdings Limited, a Cayman Islands Company (“Tencent”); (u) Oriental Power Holdings
Limited, a company with limited liability incorporated under the laws of Hong Kong (“Oriental Power”); (v) Willow
Investment Limited, a company with limited liability incorporated under the laws of the British Virgin Islands and a direct wholly-owned
subsidiary of Oriental Power (“Willow”, and collectively with Oriental Power and Tencent, the “Tencent Entities”);
(w) Mr. Zhanshan Xie (“Mr. Xie”); and (x) All Gain Ventures Limited, a company with limited liability incorporated
under the laws of the British Virgin Islands (“All Gain”, and collectively with Mr. Xie, the “All Gain Parties”).
The Chairman Parties, the Fosun Entities, the Sequoia Entities, SAIF and Uranus are collectively referred to as the “Rollover
Shareholders”. The Chairman, Uranus, Alibaba Pictures, Oriental Power and Mr. Xie are collectively referred to as the “Sponsors”.
Parent, Merger Sub, the Chairman Parties, the Fosun Entities, the Sequoia Filing Persons, SAIF, Uranus, the Alibaba Entities,
the Tencent Entities and the All Gain Parties are collectively referred to as the “Buyer Group”.
On December 15, 2015, Parent, Merger Sub
and the Company entered into an agreement and plan of merger (the “merger agreement”) providing for the merger of
Merger Sub with and into the Company (the “merger”) in accordance with Cayman Islands Companies Law (the “CICL”),
with the Company continuing as the surviving corporation (the “surviving corporation”) after the merger as a wholly
owned subsidiary of Parent. Parent and Merger Sub are currently beneficially owned by the Chairman.
Under the terms of the merger agreement,
if the merger is completed, at the effective time of the merger (the “Effective Time”), each Share, including Shares
represented by ADSs, issued and outstanding immediately prior to the Effective Time, other than (a) Shares (including Shares represented
by ADSs) owned by Parent, Merger Sub or the Company (as treasury, if any), or by any direct or indirect wholly-owned subsidiary
of Parent, Merger Sub or the Company, (b) Shares (including Shares represented by ADSs) reserved (but not yet allocated) by the
Company for settlement upon exercise or vesting of Company Share Award (as defined below) or by any direct or indirect wholly-owned
subsidiary of Parent, Merger Sub or the Company, (c) Shares owned by shareholders who have validly exercised and have not effectively
withdrawn or lost their dissenter rights under the CICL (the “Dissenting Shares”), and (d) Shares (including Shares
issuable under the Company Options, the Restricted Shares and Shares represented by ADSs) beneficially owned by the Rollover Shareholders
(the “Rollover Shares”) (Shares described under (a) through (d) above are collectively referred to herein as the “Excluded
Shares”), will be cancelled in exchange for the right to receive $27.40 in cash per Share without interest and net of any
applicable withholding taxes. Each ADS issued and outstanding immediately prior to the Effective Time (other than ADSs representing
the Excluded Shares) will be cancelled in exchange for the right to receive $13.70 in cash per ADS without interest and net of
any applicable withholding taxes (less $0.05 per ADS cancellation fees pursuant to the terms and conditions of the deposit agreement,
dated as of December 8, 2010, by and among the Company, Deutsche Bank Trust Company Americas (the “ADS depositary”)
and the holders and beneficial owners from time to time of ADSs issued thereunder, as may be amended from time to time (the “Deposit
Agreement”)). The Excluded Shares other than Dissenting Shares will be cancelled for no consideration. The Dissenting Shares
will be cancelled and each holder thereof will be entitled to receive only the payment of the fair value of such Dissenting Shares
in accordance with the CICL.
In addition, at the Effective Time, the
Company will terminate the Company’s 2009 Stock Incentive Plan and the 2010 Stock Incentive Plan (collectively, the “Share
Incentive Plans”), terminate all relevant award agreements entered into under the Share Incentive Plans, cancel all options
to purchase Shares or ADSs (the “Company Options”) and all restricted shares (the “Restricted Shares”,
collectively with the Company Options, the “Company Share Awards”) granted under the Share Incentive Plans that are
then outstanding and unexercised, whether or not vested or exercisable.
At the Effective Time, as to the Company
Options that are not Rollover Shares: (a) each Company Option vested on or prior to the Effective Time (a “Vested Company
Option”) will be cancelled in exchange for the right to receive either a cash amount equal to the excess of $27.40 over
the applicable per share exercise price of such Vested Company Option or, as agreed upon by the holder thereof and Parent, an
equity incentive award of Parent with substantially the same economic value as such Vested Company Option under the terms to be
determined by Parent; and (b) each Company Option not vested on or prior to the Effective Time (an “Unvested Company Option”)
will be cancelled in exchange for a right to receive an equity incentive award of Parent with substantially the same economic
value as such Unvested Company Option under the terms to be determined by Parent. The payment or grant of substituted equity incentive
awards in connection with the treatment of applicable Company Options will be made by the surviving corporation as promptly as
practicable following the Effective Time.
At the Effective Time, each Company Option
that is a Rollover Share (whether vested or unvested) will be cancelled in exchange for an option to purchase a number of ordinary
shares of Parent (the “Parent Shares”) equal to the number of Shares underlying such Company Option, under the terms
to be determined by Parent.
At the Effective Time, as to the outstanding
Restricted Shares that are not Rollover Shares: (a) each outstanding Restricted Share vested on or prior to the Effective Time
(a “Vested Restricted Share”) will be cancelled in exchange for a right to receive either an equity incentive award
of Parent with substantially the same economic value as such Vested Restricted Share under the terms determined by Parent, or
as agreed upon by the holder thereof and Parent, $27.40 in cash; and (b) each outstanding Restricted Share not vested on or prior
to the Effective Time (an “Unvested Restricted Share”) will be cancelled in exchange for a right to receive an equity
incentive award of Parent with substantially the same economic value as such Unvested Restricted Share under the terms to be determined
by Parent. The payment or grant of substituted equity incentive awards in connection with the treatment of applicable Restricted
Shares will be made by the surviving corporation as promptly as practicable following the Effective Time.
At the Effective Time, each outstanding
Restricted Share that is a Rollover Share (whether vested or unvested) will be cancelled in exchange for a right to receive one
Parent Share.
In order for the merger to be completed,
the merger agreement, the plan of merger and the transactions contemplated by the merger agreement, including the merger, must
be authorized and approved by the affirmative vote of holders of Shares representing at least two-thirds of the voting rights
of the Shares present and voting in person or by proxy as a single class at an extraordinary general meeting of shareholders in
accordance with Section 233(6) of the CICL. However, the authorization and approval of the merger agreement, the plan of
merger and the transactions contemplated by the merger agreement, including the merger, are not subject to the authorization and
approval of holders of a majority of the Company’s outstanding Shares and ADSs unaffiliated with the Buyer Group.
As of the date of this proxy statement,
the Rollover Shareholders beneficially own approximately 62.9% of the total issued and outstanding Shares. Pursuant to the terms
of the Support Agreement, the Rollover Shares and all other Shares acquired by the Rollover Shareholders after the date of the
Support Agreement will be voted in favor of the authorization and approval of the merger agreement, the plan of merger and the
transactions contemplated by the merger agreement, including the merger, at the extraordinary general meeting of shareholders
of the Company.
The Company will make available to its
shareholders a proxy statement (the “proxy statement,” a preliminary copy of which is attached as Exhibit (a)-(1)
to this Transaction Statement), relating to the extraordinary general meeting of shareholders of the Company, at which the shareholders
of the Company will consider and vote upon, among other proposals, a proposal to authorize and approve the merger agreement, the
plan of merger and the transactions contemplated by the merger agreement, including the merger. Copies of the merger agreement
and the plan of merger are attached to the proxy statement as Annex A and are incorporated herein by reference. As of the date
hereof, the proxy statement is in preliminary form and is subject to completion.
The cross-references below are being supplied
pursuant to General Instruction G to Schedule 13E-3 and show the location in the proxy statement of the information required to
be included in response to the items of Schedule 13E-3. Pursuant to General Instruction F to Schedule 13E-3, the information contained
in the proxy statement, including all annexes thereto, is incorporated in its entirety herein by this reference, and the responses
to each item in this Schedule 13E-3 are qualified in their entirety by the information contained in the proxy statement and the
annexes thereto. Capitalized terms used but not defined in this Transaction Statement shall have the meanings given to them in
the proxy statement.
All information contained in this Transaction
Statement concerning each Filing Person has been supplied by such Filing Person. No Filing Person has produced any disclosure
with respect to any other Filing Person.
The information set forth in
the proxy statement under the following captions is incorporated herein by reference:
• “Summary Term Sheet”
• “Questions and Answers about the
Extraordinary General Meeting and the Merger”
| Item 2 | Subject Company Information |
| (a) | Name and Address. The information set forth in the proxy
statement under the following caption is incorporated herein by reference: |
• “Summary Term Sheet—The Parties
Involved in the Merger”
| (b) | Securities. The information set forth in the proxy statement
under the following captions is incorporated herein by reference: |
• “The Extraordinary General Meeting—Record
Date; Shares and ADSs Entitled to Vote”
• “The Extraordinary General Meeting—Shareholders
and ADS Holders Entitled to Vote; Voting Materials”
• “Security Ownership of Certain Beneficial
Owners and Management of the Company”
| (c) | Trading Market and Price. The information set forth in the
proxy statement under the following caption is incorporated herein by reference: |
• “Market Price of the ADSs, Dividends
and Other Matters—Market Price of the ADSs”
| (d) | Dividends. The information set forth in the proxy statement
under the following caption is incorporated herein by reference: |
• “Market Price of the ADSs, Dividends
and Other Matters—Dividend Policy”
| (e) | Prior Public Offering. The information set forth in the
proxy statement under the following caption is incorporated herein by reference: |
• “Transactions in the Shares and ADSs—Prior
Public Offerings”
| (f) | Prior Stock Purchase. The information set forth in the proxy
statement under the following caption is incorporated herein by reference: |
• “Transactions in the Shares and ADSs”
• “Special Factors—Related Party
Transactions”
| Item 3 | Identity and Background of Filing Person |
| (a) | Name and Address. Bona Film Group Limited is the subject
company. The information set forth in the proxy statement under the following captions
is incorporated herein by reference: |
• “Summary Term Sheet—The Parties
Involved in the Merger”
• “Annex D—Directors and Executive
Officers of Each Filing Person”
| (b) | Business and Background of Entities. The information set
forth in the proxy statement under the following captions is incorporated herein by reference: |
• “Summary Term Sheet—The Parties
Involved in the Merger”
• “Annex D—Directors and Executive
Officers of Each Filing Person”
| (c) | Business and Background of Natural Persons. The information
set forth in the proxy statement under the following captions is incorporated herein
by reference: |
• “Summary Term Sheet—The Parties
Involved in the Merger”
• “Annex D—Directors and Executive
Officers of Each Filing Person”
| Item 4 | Terms of the Transaction |
| (a)-(1) | Material Terms. Not applicable. |
| (a)-(2) | Material Terms. The information set forth in the proxy
statement under the following captions is incorporated herein by reference: |
• “Summary Term Sheet”
• “Questions and Answers about the
Extraordinary General Meeting and the Merger”
• “Special Factors”
• “The Extraordinary General Meeting”
• “The Merger Agreement and Plan of
Merger”
• “Annex A—Agreement and Plan
of Merger”
| (c) | Different Terms. The information set forth in the proxy
statement under the following captions is incorporated herein by reference: |
• “Summary Term Sheet—Interests
of the Company’s Executive Officers and Directors in the Merger”
• “Special Factors—Interests
of Certain Persons in the Merger”
• “The Extraordinary General Meeting—Proposals
to be Considered at the Extraordinary General Meeting”
• “The Merger Agreement and Plan of
Merger”
• “Annex A—Agreement and Plan
of Merger”
| (d) | Dissenter Rights. The information set forth in the proxy
statement under the following captions is incorporated herein by reference: |
• “Summary Term Sheet— Dissenter
Rights”
• “Questions and Answers about the
Extraordinary General Meeting and the Merger”
• “Dissenter Rights”
• “Annex C—Cayman Islands Companies
Law Cap. 22 (Law 3 of 1961, as consolidated and revised) – Section 238”
| (e) | Provisions for Unaffiliated Security Holders. The information
set forth in the proxy statement under the following caption is incorporated herein by
reference: |
• “Provisions for Unaffiliated Security
Holders”
| (f) | Eligibility of Listing or Trading. Not applicable. |
| Item 5 | Past Contracts, Transactions, Negotiations and Agreements |
| (a) | Transactions. The information set forth in the proxy statement
under the following captions is incorporated herein by reference: |
• “Special Factors—Interests
of Certain Persons in the Merger”
• “Special Factors—Related Party
Transactions”
• “Transactions in the Shares and ADSs”
| (b) | Significant Corporate Events. The information set forth
in the proxy statement under the following captions is incorporated herein by reference: |
• “Special Factors—Background
of the Merger”
• “Special Factors—Reasons for
the Merger and Recommendation of the Independent Committee and the Board”
• “Special Factors—Buyer Group’s
Purpose of and Reasons for the Merger”
• “Special Factors—Interests
of Certain Persons in the Merger”
• “The Merger Agreement and Plan of
Merger”
• “Annex A—Agreement and Plan
of Merger”
| (c) | Negotiations or Contacts. The information set forth in the
proxy statement under the following captions is incorporated herein by reference: |
• “Special Factors—Background
of the Merger”
• “Special Factors—Plans for
the Company after the Merger”
• “Special Factors—Interests
of Certain Persons in the Merger”
• “The Merger Agreement and Plan of
Merger”
• “Annex A—Agreement and Plan
of Merger”
| (e) | Agreements Involving the Subject Company’s Securities.
The information set forth in the proxy statement under the following captions is incorporated
herein by reference: |
• “Summary Term Sheet—Plans for
the Company after the Merger”
• “Summary Term Sheet—Support
Agreement”
• “Summary Term Sheet—Financing
of the Merger”
• “Special Factors—Background
of the Merger”
• “Special Factors—Plans for
the Company after the Merger”
• “Special Factors—Financing”
• “Special Factors—Support Agreement”
• “Special Factors—Interests
of Certain Persons in the Merger”
• “Special Factors—Voting by
the Rollover Shareholders at the Extraordinary General Meeting”
• “The Merger Agreement and Plan of
Merger”
• “Transactions in the Shares and ADSs”
• “Annex A—Agreement and Plan
of Merger”
| Item 6 | Purposes of the Transaction and Plans or Proposals |
| (a) | Purposes. The information set forth in the proxy statement
under the following captions is incorporated herein by reference: |
• “Summary Term Sheet—Purposes
and Effects of the Merger”
• “Summary Term Sheet—Plans for
the Company after the Merger”
• “Special Factors—Reasons for
the Merger and Recommendation of the Independent Committee and the Board”
• “Special Factors—Buyer Group’s
Purpose of and Reasons for the Merger”
| (b) | Use of Securities Acquired. The information set forth in
the proxy statement under the following captions is incorporated herein by reference: |
• “Summary Term Sheet”
• “Questions and Answers about the
Extraordinary General Meeting and the Merger”
• “Special Factors—Buyer Group’s
Purpose of and Reasons for the Merger”
• “Special Factors—Effect of
the Merger on the Company”
• “The Merger Agreement and Plan of
Merger”
• “Annex A—Agreement and Plan
of Merger”
(c)(1)-(8) Plans. The information
set forth in the proxy statement under the following captions is incorporated herein by reference:
• “Summary Term Sheet—The Merger”
• “Summary Term Sheet—Purposes
and Effects of the Merger”
• “Summary Term Sheet—Plans for
the Company after the Merger”
• “Summary Term Sheet—Financing
of the Merger”
• “Summary Term Sheet—Interests
of the Company’s Executive Officers and Directors in the Merger”
• “Special Factors—Background
of the Merger”
• “Special Factors—Reasons for
the Merger and Recommendation of the Independent Committee and the Board”
• “Special Factors—Buyer Group’s
Purpose of and Reasons for the Merger”
• “Special Factors—Effect of
the Merger on the Company”
• “Special Factors—Plans for
the Company after the Merger”
• “Special Factors—Financing”
• “Special Factors—Interests
of Certain Persons in the Merger”
• “The Merger Agreement and Plan of
Merger”
• “Annex A—Agreement and Plan
of Merger”
| Item 7 | Purposes, Alternatives, Reasons and Effects |
| (a) | Purposes. The information set forth in the proxy statement
under the following captions is incorporated herein by reference: |
• “Summary Term Sheet—Purposes
and Effects of the Merger”
• “Summary Term Sheet—Plans for
the Company after the Merger”
• “Special Factors—Reasons for
the Merger and Recommendation of the Independent Committee and the Board”
• “Special Factors—Buyer Group’s
Purpose of and Reasons for the Merger”
| (b) | Alternatives. The information set forth in the proxy statement
under the following captions is incorporated herein by reference: |
• “Special Factors—Background
of the Merger”
• “Special Factors—Reasons for
the Merger and Recommendation of the Independent Committee and the Board”
• “Special Factors—Position of
the Buyer Group as to the Fairness of the Merger”
• “Special Factors—Buyer Group’s
Purpose of and Reasons for the Merger”
• “Special Factors—Alternatives
to the Merger”
• “Special Factors—Effects on
the Company if the Merger is not Completed”
| (c) | Reasons. The information set forth in the proxy statement
under the following captions is incorporated herein by reference: |
• “Summary Term Sheet—Purposes
and Effects of the Merger”
• “Special Factors—Background
of the Merger”
• “Special Factors—Reasons for
the Merger and Recommendation of the Independent Committee and the Board”
• “Special Factors—Position of
the Buyer Group as to the Fairness of the Merger”
• “Special Factors—Buyer Group’s
Purpose of and Reasons for the Merger”
• “Special Factors—Effect of
the Merger on the Company”
| (d) | Effects. The information set forth in the proxy statement
under the following captions is incorporated herein by reference: |
• “Summary Term Sheet—Purposes
and Effects of the Merger”
• “Special Factors—Background
of the Merger”
• “Special Factors—Reasons for
the Merger and Recommendation of the Independent Committee and the Board”
• “Special Factors—Effect of
the Merger on the Company”
• “Special Factors—Plans for
the Company after the Merger”
• “Special Factors—Effects on
the Company if the Merger is not Completed”
• “Special Factors—Effect of
the Merger on the Company’s Net Book Value and Net Earnings”
• “Special Factors—Interests
of Certain Persons in the Merger”
• “Special Factors—Material U.S.
Federal Income Tax Consequences”
• “Special Factors—Material PRC
Income Tax Consequences”
• “Special Factors—Material Cayman
Islands Tax Consequences”
• “The Merger Agreement and Plan of
Merger”
• “Annex A—Agreement and Plan
of Merger”
| Item 8 | Fairness of the Transaction |
| (a)-(b) | Fairness; Factors Considered in Determining Fairness.
The information set forth in the proxy statement under the following captions incorporated
herein by reference: |
• “Summary Term Sheet—Recommendations
of the Independent Committee and the Board”
• “Summary Term Sheet—Position
of Buyer Group as to the Fairness of the Merger”
• “Summary Term Sheet—Opinion
of the Independent Committee’s Financial Advisor”
• “Summary Term Sheet—Interests
of the Company’s Executive Officers and Directors in the Merger”
• “Special Factors—Background
of the Merger”
• “Special Factors—Reasons for
the Merger and Recommendation of the Independent Committee and the Board”
• “Special Factors—Position of
the Buyer Group as to the Fairness of the Merger”
• “Special Factors—Opinion of
the Independent Committee’s Financial Advisor”
• “Special Factors—Interests
of Certain Persons in the Merger”
• “Annex B—Opinion of Barclays
Bank PLC as Financial Advisor”
| (c) | Approval of Security Holders. The information set forth
in the proxy statement under the following captions is incorporated herein by reference: |
• “Summary Term Sheet—Shareholder
Vote Required to Authorize and Approve the Merger Agreement and Plan of Merger”
• “Questions and Answers about the
Extraordinary General Meeting and the Merger”
• “The Extraordinary General Meeting—Vote
Required”
| (d) | Unaffiliated Representative. The information set forth in
the proxy statement under the following captions is incorporated herein by reference: |
• “Special Factors—Background
of the Merger”
• “Special Factors—Reasons for
the Merger and Recommendation of the Independent Committee and the Board”
• “Special Factors—Opinion of
the Independent Committee’s Financial Advisor”
• “Annex B—Opinion of Barclays
Bank PLC as Financial Advisor”
| (e) | Approval of Directors. The information set forth in the
proxy statement under the following captions is incorporated herein by reference: |
• “Summary Term Sheet—Recommendations
of the Independent Committee and the Board”
• “Questions and Answers about the
Extraordinary General Meeting and the Merger”
• “Special Factors—Background
of the Merger”
• “Special Factors—Reasons for
the Merger and Recommendation of the Independent Committee and the Board”
| (f) | Other Offers. The information set forth in the proxy statement
under the following captions is incorporated herein by reference: |
• “Special Factors—Background
of the Merger”
• “Special Factors—Reasons for
the Merger and Recommendation of the Independent Committee and the Board”
| Item 9 | Reports, Opinions, Appraisals and Negotiations |
| (a) | Report, Opinion or Appraisal. The information set forth
in the proxy statement under the following captions is incorporated herein by reference: |
• “Summary Term Sheet—Opinion
of the Independent Committee’s Financial Advisor”
• “Special Factors—Background
of the Merger”
• “Special Factors—Opinion of
the Independent Committee’s Financial Advisor”
• “Annex B—Opinion of Barclays
Bank PLC as Financial Advisor”
| (b) | Preparer and Summary of the Report, Opinion or Appraisal.
The information set forth in the proxy statement under the following captions is incorporated
herein by reference: |
• “Special Factors—Opinion of
the Independent Committee’s Financial Advisor”
• “Annex B—Opinion of Barclays
Bank PLC as Financial Advisor”
| (c) | Availability of Documents. The information set forth in
the proxy statement under the following caption is incorporated herein by reference: |
• “Where You Can Find More Information”
The reports, opinions or appraisals referenced in
this Item 9 will be made available for inspection and copying at the principal executive offices of the Company during its regular
business hours by any interested holder of the Shares and ADSs or his, her or its representative who has been so designated in
writing.
| Item 10 | Source and Amount of Funds or Other Consideration |
| (a) | Source of Funds. The information set forth in the proxy
statement under the following captions is incorporated herein by reference: |
• “Summary Term Sheet—Financing
of the Merger”
• “Special Factors—Financing”
• “The Merger Agreement and Plan of
Merger”
• “Annex A—Agreement and Plan
of Merger”
| (b) | Conditions. The information set forth in the proxy statement
under the following captions is incorporated herein by reference: |
• “Summary Term Sheet—Financing
of the Merger”
• “Special Factors—Financing”
| (c) | Expenses. The information set forth in the proxy statement
under the following caption is incorporated herein by reference: |
• “Summary Term Sheet— Fees and
Expenses”
• “Special Factors—Fees and Expenses”
• “The Merger Agreement and Plan of
Merger— Fees and Expenses”
| (d) | Borrowed Funds. The information set forth in the proxy statement
under the following caption is incorporated herein by reference: |
• “Summary Term Sheet—Financing
of the Merger”
• “Special Factors—Financing”
• “The Merger Agreement and Plan of
Merger—Financing”
| Item 11 | Interest in Securities of the Subject Company |
| (a) | Securities Ownership. The information set forth in the proxy
statement under the following captions is incorporated herein by reference: |
• “Summary Term Sheet—Share Ownership
of the Company Directors and Officers and Voting Commitments”
• “Special Factors—Interests
of Certain Persons in the Merger”
• “Security Ownership of Certain Beneficial
Owners and Management of the Company”
| (b) | Securities Transaction. The information set forth in the
proxy statement under the following caption is incorporated herein by reference: |
• “Transactions in the Shares and ADSs”
| Item 12 | The Solicitation or Recommendation |
| (d) | Intent to Tender or Vote in a Going-Private Transaction.
The information set forth in the proxy statement under the following captions is incorporated
herein by reference: |
• “Summary Term Sheet—Share Ownership
of the Company Directors and Officers and Voting Commitments”
• “Summary Term Sheet—Support
Agreement”
• “Questions and Answers about the
Extraordinary General Meeting and the Merger”
• “Special Factors—Support Agreement”
• “Special Factors—Voting by
the Rollover Shareholders at the Extraordinary General Meeting”
• “The Extraordinary General Meeting—Vote
Required”
• “Security Ownership of Certain Beneficial
Owners and Management of the Company”
| (e) | Recommendations of Others. The information set forth in
the proxy statement under the following captions is incorporated herein by reference: |
• “Summary Term Sheet—Recommendations
of the Independent Committee and the Board”
• “Summary Term Sheet—Position
of Buyer Group as to the Fairness of the Merger”
• “Summary Term Sheet—Share Ownership
of the Company Directors and Officers and Voting Commitments”
• “Special Factors—Reasons for
the Merger and Recommendation of the Independent Committee and the Board”
• “Special Factors—Position of
the Buyer Group as to the Fairness of the Merger”
• “The Extraordinary General Meeting—Our
Board’s Recommendation”
| Item 13 | Financial Statements |
| (a) | Financial Information. The audited consolidated financial
statements of the Company for the two years ended December 31, 2013 and December 31,
2014 are incorporated herein by reference to the Company’s Form 20-F for the year
ended December 31, 2014, filed on April 30, 2015 (see page F-1 and following pages).
The unaudited consolidated financial statements of the Company for the nine months periods
ended September 30, 2014 and September 30, 2015 are incorporated herein by reference
to the Company’s 2015 third quarter earnings release furnished on Form 6-K on November
25, 2015. The unaudited balance sheet information of the Company as of September 30,
2014 is incorporated herein by reference to the Company’s report on Form 6-K filed
on December 30, 2014. |
The information set forth in the proxy statement
under the following captions is incorporated herein by reference:
• “Financial Information”
• “Where You Can Find More Information”
| (d) | Pro Forma Information. Not applicable. |
| Item 14 | Persons/Assets, Retained, Employed, Compensated or Used |
| (a) | Solicitation or Recommendations. The information set forth
in the proxy statement under the following caption is incorporated herein by reference: |
• “The Extraordinary General Meeting—Solicitation
of Proxies”
| (b) | Employees and Corporate Assets. The information set forth
in the proxy statement under the following captions is incorporated herein by reference: |
• “Summary Term Sheet—The Parties
Involved in the Merger”
• “Special Factors—Interests
of Certain Persons in the Merger”
• “Annex D—Directors and Executive
Officers of Each Filing Person”
| Item 15 | Additional Information |
| (c) | Other Material Information. The information contained in
the proxy statement, including all annexes thereto, is incorporated herein by reference. |
| (a)-(1) | Preliminary
Proxy Statement of the Company dated ___________, 2016 (the “proxy statement”). |
|
(a)-(2) |
Notice of Extraordinary General Meeting of Shareholders of the Company, incorporated herein by reference to the proxy statement. |
|
(a)-(3) |
Depositary's Notice, incorporated herein by reference to Annex E to the proxy statement. |
|
(a)-(4) |
Form of Proxy Card, incorporated herein by reference to Annex F to the proxy statement. |
|
(a)-(5) |
ADS Voting Instructions Card, incorporated herein by reference to Annex G to the proxy statement. |
|
(a)-(6) |
Press Release issued by the Company, dated December 15, 2015, incorporated herein by reference to Exhibit 99.1 to the Report on Form 6-K furnished by the Company to the SEC on December 15, 2015. |
|
(b)-(1)* |
Equity Commitment
Letter, dated December 15, 2015, by and between Parent and Uranus. |
|
(b)-(2)* |
Equity Commitment
Letter, dated December 15, 2015, by and between Parent and Alibaba Pictures. |
|
(b)-(3)* |
Equity Commitment
Letter, dated December 15, 2015, by and between Parent and Oriental Power. |
|
(b)-(4)* |
Equity Commitment
Letter, dated December 15, 2015, by and between Parent and Mr. Xie. |
|
(b)-(5)* |
Equity Commitment
Letter, dated December 15, 2015, by and between Parent and the Chairman. |
|
(c)-(1) |
Opinion of Barclays Bank PLC, dated December 15, 2015, incorporated herein by reference to Annex B to the proxy statement. |
|
(c)-(2)* |
Discussion materials
prepared by Barclays Bank PLC for discussion with the Independent Committee, dated December 13, 2015. |
|
(d)-(1) |
Agreement and Plan of Merger, dated as of December 15, 2015, by and among the Company, Parent and Merger Sub, incorporated herein by reference to Annex A to the proxy statement. |
|
(d)-(2)* |
Support Agreement,
dated December 15, 2015, by and among Parent, the Chairman Parties, Fosun Entities, Sequoia Entities, SAIF and Uranus. |
|
(d)-(3)* |
Limited Guarantee,
dated December 15, 2015, by Uranus in favor of the Company. |
|
(d)-(4)* |
Limited Guarantee,
dated December 15, 2015, by Alibaba Pictures in favor of the Company. |
|
(d)-(5)* |
Limited Guarantee,
dated December 15, 2015, by Oriental Power in favor of the Company. |
|
(d)-(6)* |
Limited Guarantee,
dated December 15, 2015, by Mr. Xie in favor of the Company. |
|
(d)-(7)* |
Limited Guarantee,
dated December 15, 2015, by the Chairman in favor of the Company. |
|
(d)-(8)* |
Consortium Agreement,
dated June 12, 2015, by and among the Chairman, Skillgreat, Fosun Entities, Peak Reinsurance Company Limited, Fidelidade-Companhia
de Seguros, S.A. and Sequoia Entities. |
|
(d)-(9)* |
Interim Investors
Agreement, dated December 15, 2015, by and among Parent, Merger Sub, the Chairman Parties, Fosun Entities, Sequoia Entities,
SAIF, SAC Finance, Willow, Uranus and All Gain. |
| (d)-(10) | Securities Purchase Agreement, dated October 12,
2015, by and among Skillgreat, the Chairman, Peak Reinsurance Company Limited and Fidelidade-Companhia de Seguros, S.A., incorporated
herein by reference to Exhibit 99.11 to the Schedule 13D Amendment filed by Fosun Entities, Peak Reinsurance Company Limited and
Fidelidade-Companhia de Seguros, S.A. on October 14, 2015. |
| (d)-(11) | Investment Agreement, dated October 19, 2015, by
and among the Chairman Parties and Uranus incorporated herein by reference to Exhibit 99.1 to the Schedule 13D Amendment filed
by the Chairman Parties on October 27, 2015. |
| (d)-(12) | Loan Agreement, dated November 25, 2015, by and among
the Chairman Parties and Uranus, incorporated herein by reference to Exhibit 99.8 to the Schedule 13D Amendment filed by the Chairman
Parties on December 18, 2015. |
| (d)-(13) | Share Purchase Agreement, dated July 13, 2014, by and
among the Chairman, Skillgreat, Fidelidade-Companhia de Seguros, S.A. and Fosun incorporated herein by reference to Exhibit 99.4
to the Schedule 13D filed by Fosun Entities, Peak Reinsurance Company Limited and Fidelidade-Companhia de Seguros, S.A. on July
28, 2014. |
| (d)-(14) | Share Purchase Agreement, dated September 30, 2013, by
and among the Chairman, Skillgreat and Orrick, incorporated herein by reference to Exhibit 99.2 to the Schedule 13D Amendment
filed by the Chairman Parties on October 9, 2013. |
| (f)-(1) | Dissenter Rights, incorporated herein by reference to
the section entitled “Dissenter Rights” in the proxy statement. |
| (f)-(2) | Section 238 of the Cayman Islands Companies Law Cap.
22 (Law 3 of 1961, as consolidated and revised), incorporated herein by reference to Annex C to the proxy statement. |
* Previously filed
SIGNATURES
After due inquiry and to the best of my
knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.
Date: January 22, 2016
|
Bona Film Group Limited |
|
|
|
By: |
/s/ Daqing Dave Qi |
|
|
|
Name: Daqing Dave Qi |
|
|
|
Title: Chairman of the Independent Committee |
|
Mountain Tiger International Limited |
|
|
|
By: |
/s/ Dong YU |
|
|
|
Name: Dong YU |
|
|
|
Title: Director |
|
|
Mountain Tiger Limited |
|
|
|
By: |
/s/ Dong YU |
|
|
|
Name: Dong YU |
|
|
|
Title: Director |
|
|
Skillgreat Limited |
|
|
|
By: |
/s/ Dong YU |
|
|
|
Name: Dong YU |
|
|
|
Title: Director |
|
|
|
|
Vantage Global Holdings Ltd |
|
|
|
By: |
/s/ Dong YU |
|
|
|
Name: Dong YU |
|
|
|
Title: Director |
|
|
|
|
Fosun International Limited
Orrick Investments Limited |
|
|
|
By: |
/s/ Jingyan Huang |
|
|
|
Name: Jingyan Huang |
|
|
|
Title: Authorized Signatory |
|
|
Sequoia Capital China I, L.P.
Sequoia Capital China Partners Fund I, L.P.
Sequoia Capital China Principals Fund I, L.P.
By: Sequoia Capital China Management I, L.P., General
Partner of Each
By: SC China Holding Limited, its General Partner |
|
|
|
By: |
/s/ Nan Peng Shen |
|
|
|
Name: Nan Peng Shen |
|
|
|
Title: Authorized Signatory |
|
|
Sequoia Capital China Management I, L.P.
By: SC China Holding Limited, its General Partner |
|
|
|
By: |
/s/ Nan Peng Shen |
|
|
|
Name: Nan Peng Shen |
|
|
|
Title: Authorized Signatory |
|
|
SC China Holding Limited |
|
|
|
By: |
/s/ Nan Peng Shen |
|
|
|
Name: Nan Peng Shen |
|
|
|
Title: Authorized Signatory |
|
|
SNP China Enterprises Limited |
|
|
|
By: |
/s/ Nan Peng Shen |
|
|
|
Name: Nan Peng Shen |
|
|
|
Title: Authorized Signatory |
|
|
Nan Peng Shen |
|
|
|
/s/ Nan Peng Shen |
|
|
SAIF Partners IV L.P.
By: SAIF IV GP, L.P., is General Partner
By: SAIF IV GP Capital Ltd., its General Partner |
|
|
|
By: |
/s/ Andrew Y. Yan |
|
|
|
Name: Andrew Y. Yan |
|
|
|
Title: Authorized Signatory |
|
|
Alibaba Pictures Group Limited |
|
|
|
By: |
/s/ Zhang Qiang |
|
|
|
Name: Zhang Qiang |
|
|
|
Title: Chief Executive Officer |
|
|
|
|
SAC Finance Company Limited |
|
|
|
By: |
/s/ Zhang Qiang |
|
|
|
Name: Zhang Qiang |
|
|
|
Title: Director |
|
|
|
|
|
|
Tencent Holdings Limited |
|
|
|
|
|
By: |
/s/ Huateng Ma |
|
|
|
Name: Huateng Ma |
|
|
|
Title: Director |
|
|
|
|
|
|
Oriental Power Holdings Limited |
|
|
|
By: |
/s/ Huateng Ma |
|
|
|
Name: Huateng Ma |
|
|
|
Title: Director |
|
|
Willow Investment Limited |
|
|
|
By: |
/s/ Huateng Ma |
|
|
|
Name: Huateng Ma |
|
|
|
Title: Director |
|
|
|
|
|
|
Uranus Connection Limited |
|
|
|
By: |
/s/ Yao SUN |
|
|
|
Name: Yao SUN |
|
|
|
Title: Chief Executive Officer |
|
|
Zhanshan XIE |
|
|
|
/s/ Zhanshan Xie |
|
|
All Gain Ventures Limited |
|
|
|
By: |
/s/ Zhanshan Xie |
|
|
|
Name: Zhanshan Xie |
|
|
|
Title: Director |
|
Exhibit
Index
| (a)-(1) | Preliminary
Proxy Statement of the Company dated ___________, 2016 (the “proxy statement”). |
|
(a)-(2) |
Notice of Extraordinary General Meeting of Shareholders of the Company, incorporated herein by reference to the proxy statement. |
|
(a)-(3) |
Depositary's Notice, incorporated herein by reference to Annex E to the proxy statement. |
|
(a)-(4) |
Form of Proxy Card, incorporated herein by reference to Annex F to the proxy statement. |
|
(a)-(5) |
ADS Voting Instructions Card, incorporated herein by reference to Annex G to the proxy statement. |
|
(a)-(6) |
Press Release issued by the Company, dated December 15, 2015, incorporated herein by reference to Exhibit 99.1 to the Report on Form 6-K furnished by the Company to the SEC on December 15, 2015. |
|
(b)-(1)* |
Equity Commitment
Letter, dated December 15, 2015, by and between Parent and Uranus. |
|
(b)-(2)* |
Equity Commitment
Letter, dated December 15, 2015, by and between Parent and Alibaba Pictures. |
|
(b)-(3)* |
Equity Commitment
Letter, dated December 15, 2015, by and between Parent and Oriental Power. |
|
(b)-(4)* |
Equity Commitment
Letter, dated December 15, 2015, by and between Parent and Mr. Xie. |
|
(b)-(5)* |
Equity Commitment
Letter, dated December 15, 2015, by and between Parent and the Chairman. |
|
(c)-(1) |
Opinion of Barclays Bank PLC, dated December 15, 2015, incorporated herein by reference to Annex B to the proxy statement. |
|
(c)-(2)* |
Discussion materials
prepared by Barclays Bank PLC for discussion with the Independent Committee, dated December 13, 2015. |
|
(d)-(1) |
Agreement and Plan of Merger, dated as of December 15, 2015, by and among the Company, Parent and Merger Sub, incorporated herein by reference to Annex A to the proxy statement. |
|
(d)-(2)* |
Support Agreement,
dated December 15, 2015, by and among Parent, the Chairman Parties, Fosun Entities, Sequoia Entities, SAIF and Uranus. |
|
(d)-(3)* |
Limited Guarantee,
dated December 15, 2015, by Uranus in favor of the Company. |
|
(d)-(4)* |
Limited Guarantee,
dated December 15, 2015, by Alibaba Pictures in favor of the Company. |
|
(d)-(5)* |
Limited Guarantee,
dated December 15, 2015, by Oriental Power in favor of the Company. |
|
(d)-(6)* |
Limited Guarantee,
dated December 15, 2015, by Mr. Xie in favor of the Company. |
|
(d)-(7)* |
Limited Guarantee,
dated December 15, 2015, by the Chairman in favor of the Company. |
|
(d)-(8)* |
Consortium Agreement,
dated June 12, 2015, by and among the Chairman, Skillgreat, Fosun Entities, Peak Reinsurance Company Limited, Fidelidade-Companhia
de Seguros, S.A. and Sequoia Entities. |
|
(d)-(9)* |
Interim Investors
Agreement, dated December 15, 2015, by and among Parent, Merger Sub, the Chairman Parties, Fosun Entities, Sequoia Entities,
SAIF, SAC Finance, Willow, Uranus and All Gain. |
| (d)-(10) | Securities Purchase Agreement, dated October 12,
2015, by and among Skillgreat, the Chairman, Peak Reinsurance Company Limited and Fidelidade-Companhia de Seguros, S.A., incorporated
herein by reference to Exhibit 99.11 to the Schedule 13D Amendment filed by Fosun Entities, Peak Reinsurance Company Limited and
Fidelidade-Companhia de Seguros, S.A. on October 14, 2015. |
| (d)-(11) | Investment Agreement, dated October 19, 2015, by
and among the Chairman Parties and Uranus incorporated herein by reference to Exhibit 99.1 to the Schedule 13D Amendment filed
by the Chairman Parties on October 27, 2015. |
| (d)-(12) | Loan Agreement, dated November 25, 2015, by and among
the Chairman Parties and Uranus, incorporated herein by reference to Exhibit 99.8 to the Schedule 13D Amendment filed by the Chairman
Parties on December 18, 2015. |
| (d)-(13) | Share Purchase Agreement, dated July 13, 2014, by and
among the Chairman, Skillgreat, Fidelidade-Companhia de Seguros, S.A. and Fosun incorporated herein by reference to Exhibit 99.4
to the Schedule 13D filed by Fosun Entities, Peak Reinsurance Company Limited and Fidelidade-Companhia de Seguros, S.A. on July
28, 2014. |
| (d)-(14) | Share Purchase Agreement, dated September 30, 2013, by
and among the Chairman, Skillgreat and Orrick, incorporated herein by reference to Exhibit 99.2 to the Schedule 13D Amendment
filed by the Chairman Parties on October 9, 2013. |
| (f)-(1) | Dissenter Rights, incorporated herein by reference to
the section entitled “Dissenter Rights” in the proxy statement. |
| (f)-(2) | Section 238 of the Cayman Islands Companies Law Cap.
22 (Law 3 of 1961, as consolidated and revised), incorporated herein by reference to Annex C to the proxy statement. |
* Previously filed
Exhibit (a)-(1)
Bona Film Group Limited
_______, 2016
Shareholders of Bona Film Group Limited
Re: Notice of Extraordinary General Meeting of Shareholders
Dear Shareholder:
You are cordially invited to attend an
extraordinary general meeting of shareholders of Bona Film Group Limited (the “Company”) to be held on ________, 2016
at ______ (Beijing Time). The meeting will be held at the Company’s office at 18/F, Tower 1, U-town Office Building, No.
1 San Feng Bei Li, Chaoyang District, Beijing 100020, the People’s Republic of China. The attached notice
of the extraordinary general meeting and proxy statement provide information regarding the matters to be considered and voted
on at the extraordinary general meeting, including at any adjournment thereof.
On December 15, 2015, the Company entered
into an agreement and plan of merger (the “merger agreement”) with Mountain Tiger International Limited, an exempted
company incorporated with limited liability under the laws of the Cayman Islands (“Parent”) and Mountain Tiger Limited,
an exempted company incorporated with limited liability under the laws of the Cayman Islands (“Merger Sub”), pursuant
to which Merger Sub will be merged with and into the Company (the “merger”) and cease to exist, with the Company continuing
as the surviving corporation (the “surviving corporation”) and becoming a wholly owned subsidiary of Parent. At the
extraordinary general meeting you will be asked to consider and vote upon a proposal to authorize and approve the merger agreement,
the plan of merger required to be filed with the Registrar of Companies of the Cayman Islands in connection with the merger (the
“plan of merger”), and the transactions contemplated by the merger agreement, including the merger. Copies of the
merger agreement and the plan of merger are attached as Annex A to the accompanying proxy statement.
Each of Parent and Merger Sub is a
Cayman Islands exempted company formed solely for purposes of the merger. Parent, at the effective time of the merger, will
be beneficially owned by Mr. Dong Yu, the founder, chairman of the board of directors of the Company (the
“Board”) and chief executive officer of the Company (the “Chairman”), Skillgreat Limited, a business
company with limited liability incorporated under the laws of the British Virgin Islands (“Skillgreat”); Vantage
Global Holdings Ltd, a business company with limited liability incorporated under the laws of the British Virgin Islands
(“Vantage”, and collectively with the Chairman and Skillgreat, the “Chairman Parties”); Fosun
International Limited, a limited company incorporated under the laws of Hong Kong S.A.R. (“Hong Kong”)
(“Fosun”); Orrick Investments Limited, a business company with limited liability incorporated under the laws of
the British Virgin Islands (“Orrick”, together with “Fosun”, the “Fosun Entities”);
Sequoia Capital China I, L.P., an exempted limited partnership registered in the Cayman Islands (“Sequoia”);
Sequoia Capital China Partners Fund I, L.P., an exempted limited partnership registered in the Cayman Islands (“Sequoia
Partners”); Sequoia Capital China Principals Fund I, L.P., an exempted limited partnership registered in the Cayman
Islands (“Sequoia Principals”, and collectively with Sequoia and Sequoia Partners, the
“Sequoia Entities”); Sequoia Capital China Management I, L.P., an exempted limited partnership registered in the
Cayman Islands (“Sequoia Capital”); SC China Holding Limited, an exempted company with limited liability
incorporated under the laws of the Cayman Islands (“SC China”); SNP China Enterprises Limited, a business company
with limited liability incorporated under the laws of British Virgin Islands (“SNP China”); Nan Peng Shen, a Hong
Kong citizen and the sole owner of SNP China, which in turn is the sole owner of SC China, which in turn is the general
partner of Sequoia Capital, which in turn is the general partner of the Sequoia Entities (“Mr. Shen”, and
collectively with Sequoia Entities, Sequoia Capital, SC China and SNP China, the “Sequoia Filing Persons”); SAIF
Partners IV L.P., an exempted limited partnership registered in the Cayman Islands (“SAIF”); Uranus Connection
Limited, a company with limited liability incorporated under the laws of the British Virgin Islands (“Uranus”);
Alibaba Pictures Group Limited, a company with limited liability incorporated under the laws of Bermuda (“Alibaba
Pictures”); SAC Finance Company Limited, a company with limited liability incorporated under the laws of Hong Kong
(“SAC Finance”, and collectively with Alibaba Pictures, the “Alibaba Entities”); Tencent Holdings
Limited, a Cayman Islands Company (“Tencent”); Oriental Power Holdings Limited, a company with limited liability
incorporated under the laws of Hong Kong (“Oriental Power”); Willow Investment Limited, a company with
limited liability incorporated under the laws of the British Virgin Islands and a direct wholly-owned subsidiary of Oriental
Power (“Willow”, and collectively with Oriental Power and Tencent, the “Tencent Entities”), Mr.
Zhanshan Xie (“Mr. Xie”); and All Gain Ventures Limited, a company with limited liability incorporated under the
laws of the British Virgin Islands (“All Gain”, and collectively with Mr. Xie, the “All Gain
Parties”). Mr. Xie, the Chairman, Uranus, Alibaba Pictures and Oriental Power are collectively referred to as the
“Sponsors”. The Chairman Parties, Fosun Entities, Sequoia Entities, SAIF and Uranus are collectively referred to
as the “Rollover Shareholders”. Parent, Merger Sub, the Chairman Parties, Fosun Entities, Sequoia Filing Persons,
SAIF, Uranus, Alibaba Entities, Tencent Entities and All Gain Parties are collectively referred to as the “Buyer
Group”.
As of the date of this proxy statement,
the Rollover Shareholders collectively beneficially own, in the aggregate, 62.9% of the total issued and outstanding ordinary
shares of the Company, par value $0.0005 per share (each, a “Share”), including Shares represented by ADSs, (collectively,
the “Rollover Shares”). If the merger is completed, the Company will continue its operations as a privately held company
and will be beneficially owned by the Buyer Group and, as a result of the merger, the American depositary shares, each two of
which represent one Share (the “ADSs”), will no longer be listed on The NASDAQ Select Global Market (“NASDAQ”)
and the American depositary shares program for the ADSs will terminate.
If the merger is completed, at the effective
time of the merger (the “Effective Time”), each Share (including Shares represented by ADSs) issued and outstanding
immediately prior to the Effective Time, other than (a) the Rollover Shares, (b) Shares (including Shares represented by ADSs)
owned by Parent, Merger Sub or the Company (as treasury, if any), or by any direct or indirect wholly-owned subsidiary of Parent,
Merger Sub or the Company, (c) Shares (including Shares represented by ADSs) reserved (but not yet allocated) by the Company for
settlement upon exercise or vesting of Company Share Awards (as defined below), and (d) Shares owned by shareholders who have
validly exercised and have not effectively withdrawn or lost their dissenter rights under the Cayman Islands Companies Law (the
“Dissenting Shares”) (Shares described under (a) through (d) above are collectively referred to herein as the “Excluded
Shares”), shall be cancelled in exchange for the right to receive $27.40 in cash per Share without interest and net of any
applicable withholding taxes, and for the avoidance of doubt, because each two ADSs represent one Share, each ADS issued and outstanding
immediately prior to the Effective Time (other than ADSs representing the Excluded Shares) shall be cancelled in exchange for
the right to receive $13.70 in cash per ADS without interest and net of any applicable withholding taxes (less up to $0.05 per
ADS cancellation fees pursuant to the terms and conditions of the deposit agreement, dated as of December 8, 2010, by and among
the Company, Deutsche Bank Trust Company Americas (the “ADS depositary”) and the holders and beneficial owners from
time to time of ADSs issued thereunder, as may be amended from time to time (the “Deposit Agreement”)). The Excluded
Shares other than Dissenting Shares will be cancelled for no consideration. The Dissenting Shares will be cancelled and each holder
thereof will be entitled to receive only the payment of the fair value of such Dissenting Shares in accordance with the Cayman
Islands Companies Law.
In addition, at the Effective Time, the
Company will terminate the Company’s 2009 Stock Incentive Plan and the 2010 Stock Incentive Plan (collectively, the “Share
Incentive Plans”), terminate all relevant award agreements entered into under the Share Incentive Plans, cancel all options
to purchase Shares or ADSs (the “Company Options”) and all restricted shares (the “Restricted Shares”,
collectively with the Company Options, the “Company Share Awards”) granted under the Share Incentive Plans that are
then outstanding and unexercised, whether or not vested or exercisable.
At the Effective Time, as to the Company
Options that are not Rollover Shares: (a) each Company Option vested on or prior to the Effective Time (a “Vested Company
Option”) will be cancelled in exchange for the right to receive either a cash amount equal to the excess of $27.40 over
the applicable per share exercise price of such Vested Company Option or, as agreed upon by the holder thereof and Parent, an
equity incentive award of Parent with substantially the same economic value as such Vested Company Option under the terms to be
determined by Parent; and (b) each Company Option not vested on or prior to the Effective Time (an “Unvested Company Option”)
will be cancelled in exchange for a right to receive an equity incentive award of Parent with substantially the same economic
value as such Unvested Company Option under the terms to be determined by Parent. The payment or grant of substituted equity incentive
awards in connection with the treatment of applicable Company Options will be made by the surviving corporation as promptly as
practicable following the Effective Time.
At the Effective Time, each Company Option
that is a Rollover Share (whether vested or unvested) will be cancelled in exchange for an option to purchase a number of ordinary
shares of Parent (the “Parent Shares”) equal to the number of Shares underlying such Company Option, under the terms
to be determined by Parent.
At the Effective Time, as to the outstanding
Restricted Shares that are not Rollover Shares: (a) each outstanding Restricted Share vested on or prior to the Effective Time
(a “Vested Restricted Share”) will be cancelled in exchange for a right to receive either an equity incentive award
of Parent with substantially the same economic value as such Vested Restricted Share under the terms determined by Parent, or
as agreed upon by the holder thereof and Parent, $27.40 in cash; and (b) each outstanding Restricted Share not vested on or prior
to the Effective Time (an “Unvested Restricted Share”) will be cancelled in exchange for a right to receive an equity
incentive award of Parent with substantially the same economic value as such Unvested Restricted Share under the terms to be determined
by Parent. The payment or grant of substituted equity incentive awards in connection with the treatment of applicable Restricted
Shares will be made by the surviving corporation as promptly as practicable following the Effective Time.
At the Effective Time, each outstanding
Restricted Share that is a Rollover Share (whether vested or unvested) will be cancelled in exchange for a right to receive one
Parent Share.
The Buyer Group intends to fund the merger
consideration through equity financing provided by the Chairman, Uranus, Oriental Power, Alibaba Pictures and Mr. Xie in an aggregate
amount equal to $365,976,730.70 pursuant to equity commitment letters issued by the Chairman, Uranus, Oriental Power, Alibaba
Pictures and Mr. Xie. In calculating this amount, the Company and the Buyer Group did not consider the value of the Rollover Shares,
which will be cancelled for no consideration pursuant to the merger agreement.
The Independent Committee, consisting of
three independent directors, Dr. Daqing Dave Qi, Mr. Jie Lian and Mr. Zhong Jiang (the “Independent Committee”) reviewed
and considered the terms and conditions of the merger agreement, the plan of merger and the transactions contemplated by the merger
agreement, including the merger. On December 15, 2015, the Independent Committee unanimously (a) determined that the merger agreement
and the plan of merger are fair to and in the best interests of the Company and its security holders unaffiliated to the Buyer
Group (the “unaffiliated security holders”), (b) declared it advisable to enter into the merger agreement, (c) recommended
that the Board approve the merger agreement, the plan of merger and the transactions contemplated by the merger agreement, including
the merger, and (d) recommended that the Board submit the merger agreement, the plan of merger and the transactions contemplated
by the merger agreement, including the merger, to the shareholders of the Company for approval and authorization at an extraordinary
general meeting of the shareholders of the Company, with the recommendation of the Board that the shareholders of the Company
authorize and approve by way of a special resolution the merger agreement, the plan of merger and the transactions contemplated
under the merger agreement, including the merger.
On December 15, 2015, the Board, after
carefully considering all relevant factors, including the unanimous determination and recommendation of the Independent Committee,
(a) determined that it was fair (both substantively and procedurally) to and in the best interests of the Company and the unaffiliated
security holders, and declared it advisable, to enter into the merger agreement and the transaction agreements contemplated by
the merger agreement, (b) authorized and approved the execution, delivery and performance of the merger agreement and the transaction
agreements contemplated by the merger agreement and the consummation of the contemplated transactions, including the merger, and
(c) resolved to direct that the authorization and approval of the merger agreement, the plan of merger and the transactions contemplated
under the merger agreement, including the merger be submitted to a vote at an extraordinary general meeting of the shareholders
with the recommendation of the Board that the shareholders of the Company authorize and approve by way of special resolution the
merger agreement, the plan of merger and the transactions contemplated under the merger agreement, including the merger.
After careful consideration and upon
the unanimous recommendation of the Independent Committee composed solely of directors unrelated to any of the management members
of the Company or any member of the Buyer Group, the Board authorized and approved the merger agreement and recommends that you
vote FOR the proposal to authorize and approve the merger agreement, the plan of merger and the transactions contemplated by the
merger agreement, including the merger, FOR the proposal to authorize each of the members of the Independent Committee
to do all things necessary to give effect to the merger agreement, the plan of merger, and the transactions contemplated by the
merger agreement, including the merger and FOR the proposal to instruct the chairman of the extraordinary general meeting to adjourn
the extraordinary meeting in order to allow the Company to solicit additional proxies in the event that there are insufficient
proxies received at the time of the extraordinary general meeting to pass the special resolutions to be proposed at the extraordinary
general meeting.
The accompanying proxy statement provides
detailed information about the merger and the extraordinary general meeting. We encourage you to read the entire document and
all of the attachments and other documents referred to or incorporated by reference herein carefully. You may also obtain more
information about the Company from documents the Company has filed with the United States Securities and Exchange Commission,
(referred to herein as the “SEC”), which are available for free at the SEC’s website www.sec.gov.
Regardless of the number of Shares you
own, your vote is very important. In order for the merger to be completed, the merger agreement, the plan of merger and the transactions
contemplated under the merger agreement, including the merger, must be authorized and approved by a special resolution of the
Company passed by an affirmative vote of shareholders representing at least two-thirds of the Shares present and voting in person
or by proxy as a single class at the extraordinary general meeting. In considering the recommendation of the Independent Committee
and the Board, you should be aware that some of the Company’s directors or executive officers have interests in the merger
that are different from, or in addition to, the interests of the shareholders generally. As of the date of this proxy statement,
the Chairman Parties and other Rollover Shareholders beneficially own approximately 38.1% and 24.8%, respectively, of the total
issued and outstanding Shares of the Company entitled to vote. Whether or not you plan to attend the extraordinary general meeting,
please complete the enclosed proxy card, in accordance with the instructions set forth on your proxy card, as promptly as possible.
The deadline to lodge your proxy card is ________, 2016 at ____ a.m. (Beijing Time). Each shareholder has one vote for each Share
held as of the close of business in the Cayman Islands on ________, 2016.
Voting at the extraordinary general meeting
will take place by poll voting, as the chairman of the Board has undertaken to demand poll voting at the meeting.
As the registered holder of the Shares
represented by ADSs, the ADS depositary will endeavor to vote (or will endeavor to cause the vote of) the Shares it holds on deposit
at the extraordinary general meeting in accordance with the voting instructions, the form of which is attached as Annex G to the
accompanying proxy statement, timely received from holders of ADSs at the close of business in New York City on ________, 2016,
the ADS record date. The ADS depositary must receive such instructions no later than ____ a.m. (New York City Time) on ________,
2016. If the ADS depositary timely receives voting instructions from an ADS holder which fail to specify the manner in which the
ADS depositary is to vote the Shares represented by the holder’s ADSs, or if holders of ADSs do not timely deliver specific
voting instructions to the ADS depositary, they will, under the terms of Deposit Agreement, be deemed to have instructed the ADS
depositary to give a discretionary proxy to a person designated by the Company (the “Designee”) to vote the Shares
represented by such holder’s ADSs, unless the Company notifies the ADS depositary that it does not wish such proxy to be
given, that substantial opposition exists to the matters to be voted on at the extraordinary general meetings or that such matters
would have a material adverse impact on the holders of the ADSs or on the holders of the Shares. Likewise, unless the Company
notifies the ADS depositary that the Company does not wish to give such proxy or there exists substantial opposition to the matters
to be voted on at the extraordinary general meeting or that such matters would have a material adverse impact on the holders of
the ADSs or on the holders of the Shares, the Designee will receive a discretionary proxy from the ADS depositary and will vote
all Shares underlying such uninstructed ADSs FOR the authorization and approval of the merger agreement, the plan of merger
and the transactions contemplated by the merger agreement, including the merger, FOR the proposal to authorize each of
the members of the Independent Committee to do all things necessary to give effect to the merger agreement, the plan of merger,
and the transactions contemplated by the merger agreement, including the merger, and FOR the adjournment of the extraordinary
general meeting in order to allow the Company to solicit additional proxies in the event that there are insufficient proxies received
to pass the special resolutions to be proposed at the extraordinary general meeting.
Holders of ADSs will not be able to attend
the extraordinary general meeting unless they cancel their ADSs and become registered in the Company’s register of members
as the holders of Shares prior to the close of business in the Cayman Islands on ________, 2016, the Share record date. ADS holders
who wish to cancel their ADSs need to make arrangements to deliver the ADSs to the ADS depositary for cancellation before the
close of business in New York City on ________, 2016 together with (a) delivery instructions for the corresponding Shares
(name and address of the person who will be the registered holder of the Shares), (b) payment of the ADS cancellation fees ($0.05
per ADS to be cancelled pursuant to the terms of the Deposit Agreement), and any applicable taxes, and (c) a certification that
the ADS holder either (i) held the ADSs as of the applicable ADS record date for the extraordinary general meeting and has not
given, and will not give, voting instructions to the ADS depositary as to the ADSs being cancelled, or has given voting instructions
to the ADS depositary as to the ADSs being cancelled but undertakes not to vote the corresponding Shares at the extraordinary
general meeting, or (ii) did not hold the ADSs as of the applicable ADS record date for the extraordinary general meeting and
undertakes not to vote the corresponding Shares at the extraordinary general meeting. If you hold your ADSs in a brokerage, bank
or nominee account, please contact your broker, bank or nominee to find out what actions you need to take to instruct the broker,
bank or nominee to cancel the ADSs on your behalf. Upon cancellation of the ADSs, the ADS depositary will arrange for the Deutsche
Bank AG Hong Kong Branch, the custodian holding the Shares, to transfer registration of the Shares to the former ADS holder (or
a person designated by the former ADS holder). If, after the registration of Shares in your name, you wish to receive a certificate
evidencing the Shares registered in your name, you will need to request the Cayman registrar of the Shares, to issue and mail
a certificate to your attention. If the merger is not completed, the Company would continue to be a public company in the U.S.
and the ADSs would continue to be listed on the NASDAQ. The Company’s Shares are not listed and cannot be traded on any
stock exchange other than the NASDAQ, and in such case only in the form of ADSs. As a result, if you have cancelled your ADSs
to attend the extraordinary general meeting and the merger is not completed and you wish to be able to sell your Shares on a stock
exchange, you would need to deposit your Shares into the Company’s American depositary shares program for the issuance of
the corresponding number of ADSs, subject to the terms and conditions of applicable law and the Deposit Agreement, including,
among other things, payment of relevant fees of the ADS depositary for the issuance of ADSs (up to $0.05 per ADS issued) and any
applicable stock transfer taxes (if any) and related charges pursuant to the Deposit Agreement.
Completing the proxy card in accordance
with the instructions set forth on the proxy card will not deprive you of your right to attend the extraordinary general meeting
and vote your Shares in person. Please note, however, that if your Shares are held of record by a broker, bank or other nominee
and you wish to vote at the extraordinary general meeting in person, you must obtain from the registered holder a proxy issued
in your name. If you submit a signed proxy card without indicating how you wish to vote, the Shares represented by your proxy
card will be voted FOR the resolution to authorize and approve the merger agreement, the plan of merger, and the transactions
contemplated by the merger agreement, including the merger, FOR the resolution to authorize each of the members of the
Independent Committee to do all things necessary to give effect to the merger agreement, the plan of merger, and the transactions
contemplated by the merger agreement, including the merger, and FOR the resolution to instruct the chairman of the extraordinary
general meeting to adjourn the extraordinary general meeting in order to allow the Company to solicit additional proxies, in the
event that there are insufficient proxies received to pass the special resolutions to be proposed at the extraordinary general
meeting, unless you appoint a person other than the chairman of the meeting as proxy, in which case the Shares represented by
your proxy card will be voted (or not submitted for voting) as your proxy determines.
Shareholders who dissent from the merger
will have the right to receive payment of the fair value of their Shares in accordance with Section 238 of the Cayman Islands
Companies Law if the merger is completed, but only if they deliver to the Company, before the vote to authorize and approve the
merger is taken at the extraordinary general meeting, a written objection to the merger and subsequently comply with all procedures
and requirements of Section 238 of the Cayman Islands Companies Law for the exercise of dissenter rights, a copy of which is attached
as Annex C to the accompanying proxy statement. The fair value of your Shares as determined under that statute could be more than,
the same as, or less than the merger consideration you would receive pursuant to the merger agreement if you do not exercise dissenter
rights with respect to your Shares.
ADS HOLDERS WILL NOT HAVE THE RIGHT
TO EXERCISE DISSENTER RIGHTS AND RECEIVE PAYMENT OF THE FAIR VALUE OF THE SHARES UNDERLYING THEIR ADSs. THE ADS DEPOSITARY WILL
NOT EXERCISE OR ATTEMPT TO EXERCISE ANY DISSENTER RIGHTS WITH RESPECT TO ANY OF THE SHARES THAT IT HOLDS, EVEN IF AN ADS HOLDER
REQUESTS THE ADS DEPOSITARY TO DO SO. ADS HOLDERS WISHING TO EXERCISE DISSENTER RIGHTS MUST SURRENDER THEIR ADSs TO THE ADS DEPOSITARY
FOR CONVERSION INTO SHARES, PAY THE ADS DEPOSITARY’S FEES REQUIRED FOR THE CANCELLATION OF THEIR ADSs, PROVIDE INSTRUCTIONS
FOR THE REGISTRATION OF THE CORRESPONDING SHARES IN THE COMPANY’S REGISTER OF MEMBERS, AND CERTIFY THAT THEY HELD THE ADSs
AS OF THE ADS RECORD DATE AND HAVE NOT GIVEN, AND WILL NOT GIVE, VOTING INSTRUCTIONS AS TO THEIR ADSs BEFORE 5:00 P. M. (NEW YORK
CITY TIME) ON ________, 2016, AND BECOME REGISTERED HOLDERS OF SHARES NOT LATER THAN ________, 2016. THEREAFTER, SUCH FORMER ADS
HOLDERS MUST ALSO COMPLY WITH THE PROCEDURES AND REQUIREMENTS FOR EXERCISING DISSENTER RIGHTS WITH RESPECT TO THE SHARES UNDER
SECTION 238 OF THE CAYMAN ISLANDS COMPANIES LAW. IF THE MERGER IS NOT COMPLETED, THE COMPANY WOULD CONTINUE TO BE A PUBLIC COMPANY
IN THE U.S. AND THE ADSs WOULD CONTINUE TO BE LISTED ON THE Nasdaq. THE COMPANY’S
SHARES ARE NOT LISTED AND CANNOT BE TRADED ON ANY STOCK EXCHANGE OTHER THAN THE Nasdaq,
AND IN SUCH CASE ONLY IN THE FORM OF ADSs. AS A RESULT, IF A FORMER ADS HOLDER HAS CANCELLED HIS, HER OR ITS ADSs TO EXERCISE
DISSENTER RIGHTS AND THE MERGER IS NOT COMPLETED AND SUCH FORMER ADS HOLDER WISHES TO BE ABLE TO SELL HIS OR HER SHARES ON A STOCK
EXCHANGE, SUCH FORMER ADS HOLDER WOULD NEED TO DEPOSIT HIS, HER OR ITS SHARES INTO THE COMPANY’S AMERICAN DEPOSITARY SHARES
PROGRAM FOR THE ISSUANCE OF THE CORRESPONDING NUMBER OF ADSs, SUBJECT TO THE TERMS AND CONDITIONS OF APPLICABLE LAW AND THE DEPOSIT
AGREEMENT, INCLUDING, AMONG OTHER THINGS, PAYMENT OF RELEVANT FEES OF THE ADS DEPOSITARY FOR THE ISSUANCE OF ADSs (UP TO $0.05
PER ADS ISSUED) AND ANY APPLICABLE STOCK TRANSFER TAXES (IF ANY) AND RELATED CHARGES PURSUANT TO THE DEPOSIT AGREEMENT.
Neither the SEC nor any state securities
regulatory agency has approved or disapproved the merger, passed upon the merits or fairness of the merger or passed upon the
adequacy or accuracy of the disclosure in this letter or in the accompanying notice of the extraordinary general meeting or proxy
statement. Any representation to the contrary is a criminal offense.
If you have any questions or need assistance
in voting your Shares or ADSs, you can contact Investor Relations, Bona Film Group Limited, at +86-10-5631-0700 ext. 398 or at
ir@bonafilm.cn.
Thank you for your cooperation and continued
support.
Sincerely, |
Sincerely, |
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Dr. Daqing Dave Qi |
Dong Yu |
Chairman of the Independent Committee |
Chairman of the Board |
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The accompanying proxy statement is dated
________, 2016, and is first being mailed to the Company’s shareholders and ADS holders on or about ________, 2016.
Bona
Film Group Limited
NOTICE OF EXTRAORDINARY GENERAL MEETING
OF SHAREHOLDERS TO BE HELD ON ________, 2016
Dear Shareholder:
Notice is hereby given that an extraordinary
general meeting of shareholders of Bona Film Group Limited (the “Company”) will be held on ________, 2016 at ____
(Beijing Time) at the Company’s office at 18/F, Tower 1, U-town Office Building, No. 1 San Feng Bei Li, Chaoyang District,
Beijing 100020, the People’s Republic of China.
Only registered holders of ordinary shares
of the Company, par value $0.0005 per share, (each, a “Share”), at the close of business in the Cayman Islands on
________, 2016 or their proxy holders are entitled to attend or to vote at this extraordinary general meeting or any adjournment
thereof. At the extraordinary general meeting, you will be asked to consider and vote upon the following resolutions:
• as special resolutions:
THAT the agreement and plan of merger,
dated as of December 15, 2015 (the “merger agreement”), among the Company, Mountain Tiger International Limited, an
exempted company incorporated with limited liability under the laws of the Cayman Islands (“Parent”) and Mountain
Tiger Limited, an exempted company incorporated with limited liability under the laws of the Cayman Islands (“Merger Sub”)
(such merger agreement being in the form attached to the proxy statement accompanying this notice of extraordinary general meeting
and which will be produced and made available for inspection at the extraordinary general meeting), the plan of merger (the “plan
of merger”) among the Company and Merger Sub required to be registered with the Registrar of Companies of the Cayman Islands
for the purposes of the merger (such plan of merger being substantially in the form attached to the merger agreement and which
will be produced and made available for inspection at the extraordinary general meeting), and any and all transactions contemplated
by the merger agreement, including the merger (the “merger”) and the amendment and restatement of the existing memorandum
and articles of association of the Company by their deletion in their entirety and the substitution in their place of a new memorandum
and articles of association at the effective time of the merger, a copy of which is attached as Appendix II to the plan of merger,
be authorized, approved and adopted;
THAT each of the members of the
Independent Committee (as defined below) be authorized to do all things necessary to give effect to the merger agreement, the
plan of merger and the transactions contemplated by the merger agreement, including the merger; and
• if necessary, as an ordinary
resolution:
THAT the chairman of the extraordinary
general meeting be instructed to adjourn the extraordinary general meeting in order to allow the Company to solicit additional
proxies in the event that there are insufficient proxies received at the time of the extraordinary general meeting to pass the
special resolutions to be proposed at the extraordinary general meeting.
Please refer to the accompanying proxy
statement, which is attached to and made a part of this notice. A list of the Company’s shareholders will be available at
its principal executive offices at 18/F, Tower 1, U-town Office Building, No. 1 San Feng Bei Li, Chaoyang District, Beijing 100020,
the People’s Republic of China, during ordinary business hours for the two business days immediately prior to the extraordinary
general meeting.
If you own American depositary shares,
each two of which represent one Share (the “ADSs”), you cannot vote at the extraordinary general meeting directly,
but you may instruct the ADS depositary (as the holder of the Shares underlying the ADSs) how to vote the Shares underlying your
ADSs. The ADS depositary must receive such instructions no later than ____ a.m. (New York City Time) on ________, 2016 in order
to vote the underlying Shares at the extraordinary general meeting. Alternatively, you may vote directly at the extraordinary
general meeting if you surrender your ADSs to the ADS depositary, pay the ADS depositary’s fees required for the cancellation
of the ADSs ($0.05 per ADS to be cancelled pursuant to the terms of the ADS deposit agreement) and any applicable taxes, provide
instructions for the registration of the corresponding Shares, and certify that you have not given, and will not give, voting
instructions as to the ADSs (or alternatively, you will not vote the Shares) before the close of business in New York City on
________, 2016, and become a registered holder of Shares by the close of business in the Cayman Islands no later than the Share
record date. In addition, if you hold your ADSs through a financial intermediary such as a broker, you must rely on the procedures
of the financial intermediary through which you hold your ADSs if you wish to vote at the extraordinary general meeting. Furthermore,
if holders of ADSs do not timely deliver specific voting instructions to the ADS depositary, or if holders of ADSs do not timely
deliver specific voting instructions to the ADS depositary, they will, under the terms of ADS deposit agreement, be deemed to
have instructed the ADS depositary to give a discretionary proxy to a person designated by the Company (the “Designee”)
to vote the Shares represented by such holder’s ADSs, unless the Company notifies the ADS depositary that it does not wish
such proxy to be given, that substantial opposition exists to the matters to be voted on at the extraordinary general meetings
or that such matters would have a material adverse impact on the holders of the ADSs or on the holders of the Shares. Likewise,
unless the Company notifies the ADS depositary that that the Company does not wish to give such proxy or there exists substantial
opposition to the matters to be voted on at the extraordinary general meeting or that such matters would have a material adverse
impact on the holders of the ADSs or on the holders of the Shares, the Designee will receive a discretionary proxy from the ADS
depositary and will vote all Shares underlying such uninstructed ADSs FOR the authorization and approval of the merger
agreement, the plan of merger and the transactions contemplated by the merger agreement, including the merger, FOR the
proposal to authorize each of the members of the Independent Committee to do all things necessary to give effect to the merger
agreement, the plan of merger, and the transactions contemplated by the merger agreement, including the merger, and FOR
the adjournment of the extraordinary general meeting in order to allow the Company to solicit additional proxies in the event
that there are insufficient proxies received to pass the special resolutions to be proposed at the extraordinary general meeting.
After careful consideration and upon
the unanimous recommendation of the Independent Committee of the Board consisting of three independent directors Dr. Daqing
Dave Qi, Mr. Jie Lian and Mr. Zhong Jiang (the “Independent Committee”), the Board authorized and approved the
merger agreement and recommends that you vote FOR the proposal to authorize and approve the merger agreement, the plan of merger
and the transactions contemplated by the merger agreement, including the merger, FOR the proposal to authorize each of the members
of the Independent Committee to do all things necessary to give effect to the merger agreement, the plan of merger, and the transactions
contemplated by the merger agreement, including the merger, and FOR the proposal to instruct the chairman of the extraordinary
general meeting to adjourn the extraordinary general meeting in order to allow the Company to solicit additional proxies in the
event that there are insufficient proxies received to pass the special resolutions to be proposed at the extraordinary general
meeting.
In order for the merger to be completed,
the merger agreement, the plan of merger and the transactions contemplated under the merger agreement, including the merger, must
be authorized and approved by a special resolution of the Company passed by an affirmative vote of shareholders representing at
least two-thirds of the Shares present and voting in person or by proxy as a single class at the extraordinary general meeting.
As of the date of this proxy statement,
the Rollover Shareholders beneficially own approximately 58.8% of the total issued and outstanding Shares of the Company entitled
to vote.
Regardless of the number of Shares that
you own, your vote is very important. Even if you plan to attend the extraordinary general meeting in person, we request that
you submit your proxy in accordance with the instructions set forth on the proxy card, which is attached as Annex G to the accompanying
proxy statement, as promptly as possible. To be valid, your proxy card must be completed, signed and returned to the Company’s
offices at 18/F, Tower 1, U-town Office Building, No. 1 San Feng Bei Li, Chaoyang District, Beijing 100020, the People’s
Republic of China, attention: Ms. Menglei Zou so that the proxy card is received by the Company no later than ________, 2016 at
____ a.m. (Beijing Time) (being not less than forty-eight (48) hours before the time appointed for holding the meeting). The proxy
card is the “instrument of proxy” as referred to in the Company’s articles of association. Voting at the extraordinary
general meeting will take place by poll voting, as the chairman of the Board has undertaken to demand poll voting at the meeting.
Each holder has one vote for each Share, in each case held as of the close of business in the Cayman Islands on ________, 2016.
If you receive more than one proxy card because you own Shares that are registered in different names, please vote all of your
Shares shown on each of your proxy cards in accordance with the instructions set forth on the proxy card.
Completing the proxy card in accordance
with the instructions set forth on the proxy card will not deprive you of your right to attend the extraordinary general meeting
and vote your Shares in person. Please note, however, that if your Shares are registered in the name of a broker, bank or other
nominee and you wish to vote at the extraordinary general meeting in person, you must obtain from the registered holder a proxy
issued in your name.
If you abstain from voting, fail to cast
your vote in person, fail to complete and return your proxy card in accordance with the instructions set forth on the proxy card,
or fail to give voting instructions to your broker, dealer, commercial bank, trust company or other nominee, your vote will not
be counted.
When proxies are properly dated, executed
and returned by holders of Shares, the Shares they represent will be voted at the extraordinary general meeting in accordance
with the instructions of the shareholders. If no specific instructions are given by such shareholders, such Shares will be voted
FOR the proposals as described above, unless you appoint a person other than the chairman of the meeting as proxy, in which
case the Shares represented by your proxy card will be voted (or not submitted for voting) as your proxy determines.
Shareholders who dissent from the merger
will have the right to receive payment of the fair value of their Shares in accordance with Section 238 of the Cayman Islands
Companies Law if the merger is consummated, but only if they deliver to the Company, before the vote to authorize and approve
the merger is taken at the extraordinary general meeting, a written objection to the merger and subsequently comply with all procedures
and requirements of Section 238 of the Cayman Islands Companies Law for the exercise of dissenter rights, a copy of which is attached
as Annex C to the accompanying proxy statement. The fair value of their Shares as determined under that statute could be more
than, the same as, or less than the merger consideration they would receive pursuant to the merger agreement if they do not exercise
dissenter rights with respect to their Shares.
ADS HOLDERS WILL NOT HAVE THE RIGHT
TO EXERCISE DISSENTER RIGHTS AND RECEIVE PAYMENT OF THE FAIR VALUE OF THE SHARES UNDERLYING THEIR ADSs. THE ADS DEPOSITARY WILL
NOT EXERCISE OR ATTEMPT TO EXERCISE ANY DISSENTER RIGHTS WITH RESPECT TO ANY OF THE SHARES THAT IT HOLDS, EVEN IF AN ADS HOLDER
REQUESTS THE ADS DEPOSITARY TO DO SO. ADS HOLDERS WISHING TO EXERCISE DISSENTER RIGHTS MUST SURRENDER THEIR ADSs TO THE ADS DEPOSITARY
FOR CONVERSION INTO SHARES, PAY THE ADS DEPOSITARY’S FEES REQUIRED FOR THE CANCELLATION OF THEIR ADSs, PROVIDE INSTRUCTIONS
FOR THE REGISTRATION OF THE CORRESPONDING SHARES IN THE COMPANY’S REGISTER OF MEMBERS, AND CERTIFY THAT THEY HELD THE ADSs
AS OF THE ADS RECORD DATE AND HAVE NOT GIVEN, AND WILL NOT GIVE, VOTING INSTRUCTIONS AS TO THEIR ADSs BEFORE 5:00 P. M. (NEW YORK
CITY TIME) ON ________, 2016, AND BECOME REGISTERED HOLDERS OF SHARES NOT LATER THAN ________, 2016. THEREAFTER, SUCH FORMER ADS
HOLDERS MUST ALSO COMPLY WITH THE PROCEDURES AND REQUIREMENTS FOR EXERCISING DISSENTER RIGHTS WITH RESPECT TO THE SHARES UNDER
SECTION 238 OF THE CAYMAN ISLANDS COMPANIES LAW. IF THE MERGER IS NOT COMPLETED, THE COMPANY WOULD CONTINUE
TO BE A PUBLIC COMPANY IN THE U.S. AND THE ADSs WOULD CONTINUE TO BE LISTED ON
THE Nasdaq SELECTED Global Market. THE COMPANY’S SHARES ARE NOT LISTED AND CANNOT BE TRADED ON ANY STOCK EXCHANGE OTHER
THAN THE Nasdaq SELECTED Global Market, AND IN SUCH CASE ONLY IN THE FORM OF ADSs.
AS A RESULT, IF A FORMER ADS HOLDER HAS CANCELLED HIS, HER OR ITS ADSs TO EXERCISE
DISSENTER RIGHTS AND THE MERGER IS NOT COMPLETED AND SUCH FORMER ADS HOLDER WISHES TO BE ABLE TO SELL HIS OR HER SHARES
ON A STOCK EXCHANGE, SUCH FORMER ADS HOLDER WOULD NEED TO DEPOSIT HIS, HER OR ITS SHARES INTO THE COMPANY’S AMERICAN DEPOSITARY
SHARES PROGRAM FOR THE ISSUANCE OF THE CORRESPONDING NUMBER OF ADSs, SUBJECT TO THE TERMS AND CONDITIONS OF APPLICABLE LAW AND
THE ADS DEPOSIT AGREEMENT, INCLUDING, AMONG OTHER THINGS, PAYMENT OF RELEVANT FEES OF THE ADS DEPOSITARY FOR THE ISSUANCE OF ADSs
(UP TO $0.05 PER ADS ISSUED) AND ANY APPLICABLE STOCK TRANSFER TAXES (IF ANY) AND RELATED CHARGES PURSUANT TO THE ADS DEPOSIT
AGREEMENT.
PLEASE DO NOT SEND YOUR SHARE CERTIFICATES
OR CERTIFICATES EVIDENCING YOUR ADSs (“ADRs”) AT THIS TIME. IF THE MERGER IS CONSUMMATED, YOU WILL BE SENT INSTRUCTIONS
REGARDING THE SURRENDER OF YOUR SHARE CERTIFICATES or ADRs.
If you have any questions or need assistance
in voting your Shares or ADSs, you can contact Investor Relations, Bona Film Group Limited, at +86-10-5631-0700 ext. 398 or at
ir@bonafilm.cn.
The merger agreement, the plan of merger
and the transactions, including the merger are described in the accompanying proxy statement. A copy of the merger agreement and
a copy of the plan of merger are included as Annex A to the accompanying proxy statement. We urge you to read the entire accompanying
proxy statement carefully.
Notes:
1. Where there are joint holders
of any Share any one of such joint holders may vote, either in person or by proxy, in respect of such Share as if he were solely
entitled thereto, but if more than one of such joint holders be present at any meeting, the vote of the senior holder who tenders
a vote, whether in person or by proxy, will be accepted to the exclusion of the votes of the other joint holders and for this
purpose seniority will be determined by the order in which the names stand in the register of members of the Company in respect
of the joint holding.
2. The instrument appointing a proxy must be in writing
under the hand of the appointer or of his attorney duly authorized in writing or, if the appointer is a corporation, either under
seal or under the hand of an officer or attorney or other person duly authorized to sign the same.
3. A proxy need not be a member (registered shareholder)
of the Company.
4. The chairman of the extraordinary general meeting may
at his or her discretion direct that a proxy card shall be deemed to have been duly deposited where sent by telefax upon receipt
of telefax confirmation that the signed original thereof has been sent. A proxy card that is not deposited in the manner permitted
shall be invalid.
5. Votes given in accordance with the terms of a proxy card
shall be valid notwithstanding the previous death or insanity of the principal or revocation of the proxy or of the authority
under which the proxy was executed, or the transfer of the Share or Shares in respect of which the proxy is given, provided that
no intimation in writing of such death, insanity, revocation or transfer was received by the Company at the Company’s offices
at 18/F, Tower 1, U-town Office Building, No. 1 San Feng Bei Li, Chaoyang District, Beijing 100020, the People’s Republic
of China, attention: Ms. Menglei Zou, no later than the commencement of the extraordinary general meeting, or adjourned meeting
at which such proxy is used.
BY ORDER OF THE BOARD,
|
|
|
Dong Yu |
|
Chairman of the Board |
PROXY STATEMENT
Dated ____________, ______
SUMMARY VOTING INSTRUCTIONS
Ensure that your Shares or ADSs of Bona
Film Group Limited can be voted at the extraordinary general meeting by submitting your proxy card or ADS voting instructions
card, or by contacting your broker, bank or other nominee.
If your Shares are registered in
the name of a broker, bank or other nominee: check the voting instruction card forwarded by your broker, bank or other
nominee to see which voting options are available or contact your broker, bank or other nominee in order to obtain directions
as to how to ensure that your Shares are voted at the extraordinary general meeting.
If your Shares are registered in
your name: submit your proxy as soon as possible by signing, dating and returning the accompanying proxy card in the enclosed
postage-paid envelope, so that your Shares can be voted at the extraordinary general meeting.
If you submit your signed proxy card without
indicating how you wish to vote, the Shares represented by your proxy will be voted in favor of the resolutions to be proposed
at the extraordinary general meeting.
If your ADSs are registered in the
name of a broker, bank or other nominee: check the ADS voting instructions card forwarded by your broker, bank or other
nominee to see which voting options are available or contact your broker, bank or other nominee in order to obtain directions
as to how to ensure that the Shares represented by your ADSs are voted at the extraordinary general meeting.
If your ADSs are registered in your
name: submit your ADS voting instructions card as soon as possible by signing, dating and returning the enclosed ADS voting
instructions card in the enclosed postage-paid envelope, so that the Shares represented by your ADSs can be voted at the extraordinary
general meeting on behalf of the ADS depositary, as the registered holder of the Shares represented by your ADSs.
If you submit your ADS voting instructions
card without indicating how you wish to vote, the Shares represented by your ADSs will be voted in favor of the resolutions to
be proposed at the extraordinary general meeting.
If you have any questions, require assistance
with voting your proxy card, or need additional copies of proxy materials, please contact Investor Relations, Bona Film Group
Limited, at +86-10-5631-0700 ext. 398 or at ir@bonafilm.cn.
TABLE OF CONTENTS
|
|
Page |
SUMMARY TERM SHEET |
|
1 |
The Parties Involved in the Merger |
|
1 |
The Merger |
|
4 |
Merger Consideration |
|
4 |
Treatment of Company Options |
|
5 |
Treatment of Restricted Shares |
|
5 |
Support Agreement |
|
5 |
Record Date and Voting |
|
6 |
Shareholder Vote Required to Authorize and Approve the Merger Agreement and Plan of Merger |
|
6 |
Voting Information |
|
6 |
Dissenter Rights |
|
7 |
Purposes and Effects of the Merger |
|
8 |
Plans for the Company after the Merger |
|
8 |
Recommendations of the Independent Committee and the Board |
|
8 |
Position of Buyer Group as to the Fairness of the Merger |
|
9 |
Financing of the Merger |
|
9 |
Interim Investors Agreement |
|
10 |
Limited Guarantee |
|
10 |
Share Ownership of the Company Directors and Officers and Voting Commitments |
|
10 |
Opinion of the Independent Committee’s Financial Advisor |
|
10 |
Interests of the Company’s Executive Officers and Directors in the Merger |
|
11 |
Conditions to the Merger |
|
12 |
No Solicitation |
|
13 |
Termination of the Merger Agreement |
|
14 |
Termination Fee |
|
15 |
Material U.S. Federal Income Tax Consequences |
|
16 |
Material PRC Income Tax Consequences |
|
16 |
Material Cayman Islands Tax Consequences |
|
16 |
Regulatory Matters |
|
16 |
Accounting Treatment of the Merger |
|
17 |
Market Price of the Shares |
|
17 |
Fees and Expenses |
|
17 |
Remedies |
|
17 |
QUESTIONS AND ANSWERS ABOUT THE EXTRAORDINARY GENERAL MEETING AND THE MERGER |
|
18 |
SPECIAL FACTORS |
|
26 |
Background of the Merger |
|
26 |
Reasons for the Merger and Recommendation of the Independent Committee and the Board |
|
35 |
Position of the Buyer Group as to the Fairness of the Merger |
|
40 |
Certain Financial Projections |
|
42 |
Opinion of the Independent Committee’s Financial Advisor |
|
44 |
Buyer Group’s Purpose of and Reasons for the Merger |
|
51 |
Effect of the Merger on the Company |
|
51 |
Effect of the Merger on the Company’s Net Book Value and Net Earnings |
|
54 |
Plans for the Company after the Merger |
|
55 |
Alternatives to the Merger |
|
55 |
Effects on the Company if the Merger is not Completed |
|
56 |
Financing |
|
56 |
Interim Investors Agreement |
|
57 |
Limited Guarantee |
|
57 |
Support Agreement |
|
57 |
Remedies |
|
58 |
Interests of Certain Persons in the Merger |
|
58 |
Related Party Transactions |
|
62 |
Fees and Expenses |
|
66 |
Voting by the Rollover Shareholders at the Extraordinary General Meeting |
|
67 |
Litigation
Related to the Merger |
|
67 |
Accounting Treatment
of the Merger |
|
67 |
Regulatory Matters |
|
67 |
Dissenters Rights |
|
67 |
Material U.S. Federal
Income Tax Consequences |
|
67 |
Material PRC Income
Tax Consequences |
|
70 |
Material Cayman Islands
Tax Consequences |
|
71 |
MARKET PRICE OF THE
ADSs, DIVIDENDS AND OTHER MATTERS |
|
72 |
Market Price of the
ADSs |
|
72 |
Dividend Policy |
|
72 |
THE EXTRAORDINARY
GENERAL MEETING |
|
73 |
Date, Time and Place
of the Extraordinary General Meeting |
|
73 |
Proposals to be Considered
at the Extraordinary General Meeting |
|
73 |
Our Board’s
Recommendation |
|
74 |
Quorum |
|
74 |
Record Date; Shares
and ADSs Entitled to Vote |
|
74 |
Vote Required |
|
74 |
Shareholders and
ADS Holders Entitled to Vote; Voting Materials |
|
75 |
Proxy Holders for
Registered Shareholders |
|
76 |
Voting of Proxies
and Failure to Vote |
|
76 |
Revocability of Proxies |
|
76 |
Rights of Shareholders
Who Object to the Merger |
|
77 |
Whom to Call for
Assistance |
|
77 |
Solicitation of Proxies |
|
78 |
Other Business |
|
78 |
THE MERGER AGREEMENT
AND PLAN OF MERGER |
|
79 |
Structure and Completion
of the Merger |
|
79 |
Memorandum and Articles
of Association; Directors and Officers of the Surviving Corporation |
|
79 |
Merger Consideration |
|
79 |
Treatment of Company
Options |
|
79 |
Treatment of Restricted
Shares |
|
80 |
Exchange Procedures |
|
80 |
Representations and
Warranties |
|
81 |
Conduct of Business
Pending the Merger |
|
84 |
Shareholders’
Meeting |
|
85 |
No Solicitation |
|
86 |
Directors’
and Officers’ Indemnification and Insurance |
|
87 |
Financing |
|
87 |
Other Covenants |
|
87 |
Conditions to the
Merger |
|
88 |
Termination of the
Merger Agreement |
|
89 |
Termination Fee |
|
90 |
Remedies |
|
91 |
Amendment |
|
91 |
PROVISIONS FOR UNAFFILIATED
SECURITY HOLDERS |
|
92 |
DISSENTER RIGHTS |
|
93 |
Requirements for
Exercising Dissenter Rights |
|
93 |
FINANCIAL INFORMATION |
|
95 |
Ratio of Earnings
to Fixed Charges |
|
96 |
Net Book Value per
Share of the Shares |
|
97 |
TRANSACTIONS IN THE
SHARES AND ADSs |
|
98 |
Purchases by the
Company |
|
98 |
Purchases by the
Buyer Group |
|
98 |
Prior Public Offerings |
|
98 |
Transactions in Prior
60 Days |
|
98 |
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF THE COMPANY |
|
99 |
FUTURE SHAREHOLDER
PROPOSALS |
|
101 |
CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS |
|
102 |
WHERE YOU CAN FIND
MORE INFORMATION |
|
103 |
ANNEX
A: Agreement and Plan of Merger |
|
A-1 |
ANNEX B: Opinion of
Barclays Bank PLC as Financial Advisor |
|
B-1 |
ANNEX C: Cayman Islands
Companies Law Cap. 22 (Law 3 of 1961, as consolidated and revised) – Section 238 |
|
C-1 |
ANNEX D: Directors
and Executive Officers of Each Filing Person |
|
D-1 |
ANNEX E: Depositary’s
Notice |
|
E-1 |
ANNEX F: Proxy
Card |
|
F-1 |
ANNEX G: ADS Voting
Instructions Card |
|
G-1 |
SUMMARY TERM SHEET
This “Summary Term Sheet,” together with the
“Questions and Answers about the Extraordinary General Meeting and the Merger,” highlights selected information contained
in this proxy statement regarding the merger and may not contain all of the information that may be important to your consideration
of the merger. You should carefully read this entire proxy statement and the other documents to which this proxy statement refers
for a more complete understanding of the matters being considered at the extraordinary general meeting. In addition, this proxy
statement incorporates by reference important business and financial information about the Company. You are encouraged to read
all of the documents incorporated by reference into this proxy statement and you may obtain such information without charge by
following the instructions in “Where You Can Find More Information” beginning on page 103. In this proxy statement,
the terms “we,” “us,” “our,” and the “Company” refer to Bona Film Group Limited
and its subsidiaries. All references to “dollars”, “US$”and “$” in this proxy statement are
to U.S. dollars and all references to “RMB” in this proxy statement are to Renminbi, the lawful currency of the People's
Republic of China (“PRC” or “China”).
The Parties Involved in the Merger
The Company
The Company is an
exempted company with limited liability incorporated under the laws of the Cayman Islands and a leading vertically integrated
film company in China. The Company operates in multiple stages of the film industry value chain, including film distribution,
film investment and production, talent agency services and movie theater operations.
Our principal executive
offices are located at 18/F, Tower 1, U-town Office Building, No. 1 San Feng Bei Li, Chaoyang District, Beijing 100020, the People's
Republic of China. The Company’s telephone number at this address is +86-10-5631-0700 and fax number is +86-10-5631-0828.
For a description of the
Company’s history, development, business and organizational structure, see the Company’s Annual Report on Form
20-F for the year ended December 31, 2014 filed on April 30, 2015, which is incorporated herein by reference. Please see
“Where You Can Find More Information” beginning on page 103 for a description of how to obtain a copy of the
Company’s Annual Report.
Parent
Mountain Tiger International Limited (“Parent”)
is an exempted company incorporated with limited liability under the laws of the Cayman Islands. Parent was formed solely for
the purpose of entering into the merger agreement and the related financing agreements and consummating the transactions contemplated
by such agreements. The registered office of Parent is located at the offices of Offshore Incorporations (Cayman) Limited, Floor
4, Willow House, Cricket Square, P O Box 2804, Grand Cayman KY1-1112, Cayman Islands, and its telephone number is +86-10-8525-5529.
Merger Sub
Mountain Tiger Limited (“Merger Sub”)
is an exempted company with limited liability under the laws of the Cayman Islands. Merger Sub was formed solely for the purpose
of entering into the merger agreement and consummating the transactions contemplated by such agreements. The registered office
of Merger Sub is located at the offices of Offshore Incorporations (Cayman) Limited, Floor 4, Willow House, Cricket Square, P
O Box 2804, Grand Cayman KY1-1112, Cayman Islands, and its telephone number is +86-10-8525-5529.
The Chairman Parties
Mr. Yu
Mr. Dong Yu (the “Chairman”)
is the founder, chairman of the board of directors (the “Board”) and chief executive officer of the Company. His business
address is 18/F, Tower 1, U-town Office Building, No. 1 San Feng Bei Li, Chaoyang District, Beijing 100020, the People’s
Republic of China, and his telephone number is +86-10-5631-0700. He is a citizen of the People’s Republic of China and his
principal occupation is the chairman and chief executive office of the Company.
Vantage
Vantage Global Holdings Ltd (“Vantage”)
is a company with limited liability incorporated under the laws of the British Virgin Islands. It’s registered address is
Portcullis TrustNet (BVI) Limited of Portcullis TrustNet Chambers, P.O. Box 3444, Road Town, Tortola, British Virgin Islands,
and its telephone number is +852-2525-9991. Vantage is wholly-owned by the Chairman.
Skillgreat Limited
Skillgreat Limited (“Skillgreat”,
and together with the Chairman and Vantage, the “Chairman Parties”) is a company with limited liability incorporated
under the laws of British Virgin Islands. Its registered address is P.O. Box 957, Offshore Incorporations Center, Road Town, Tortola,
British Virgin Islands, and its telephone number is +86-10-8525-5529. Skillgreat is wholly-owned by Vantage which is wholly-owned
by the Chairman.
Fosun Entities
Fosun
Fosun International Limited (“Fosun”)
is a company organized under the laws of Hong Kong S.A.R. (“Hong Kong”). Its principal businesses include integrated
finance (insurance, investment, asset management and banking and other financial business) and industrial operations (health,
happy lifestyle, steel, property development and sales and resources). Fosun mainly operates its business through its subsidiaries.
As of December 31, 2015, Fosun was owned as to 71.37% by Fosun Holdings Limited, which in turn is a wholly-owned subsidiary of
Fosun International Holdings Ltd. Its principal business address is at Room 808, ICBC Tower, 3 Garden Road, Central, Hong Kong,
and its telephone number is +852-2509-3228.
Orrick
Orrick Investments Limited (“Orrick”
and, together with Fosun, the “Fosun Entities”) is a limited liability company organized under the laws of the British
Virgin Islands. It is principally engaged in investment holding. Orrick Investments Limited is wholly owned by Fosun Industrial
Holdings Limited, which in turn is a wholly-owned subsidiary of Fosun. Its registered office is located at P.O. Box 957, Offshore
Incorporations Centre, Road Town, Tortola, British Virgin Islands, and its telephone number is +852-2509-3228.
Sequoia Filing Persons
Sequoia Entities
Each of Sequoia Capital China I, L.P.
(“Sequoia”), Sequoia Capital China Partners Fund I, L.P. (“Sequoia Partners”) and Sequoia Capital China
Principals Fund I, L.P. (“Sequoia Principals”, and together with Sequoia and Sequoia Partners, the “Sequoia
Entities”) is an exempted limited partnership organized under the laws of the Cayman Islands, with its principal business
address at Suite 3613, 36/F, Two Pacific Place, 88 Queensway Road, Hong Kong and its business telephone number is +852-2501-8989.
The general partner of each Sequoia Entity is Sequoia Capital (as defined below).
Sequoia Capital
Sequoia Capital China Management I, L.P.
(“Sequoia Capital”) is an exempted limited partnership organized under the laws of the Cayman Islands, with its principal
business address at Suite 3613, 36/F, Two Pacific Place, 88 Queensway Road, Hong Kong and its business telephone number is +852-2501-8989.
The general partner of Sequoia Capital is SC China (as defined below).
SC China
SC China Holding Limited (“SC China”)
is an exempted company organized under the laws of the Cayman Islands, with its principal business address at Suite 3613, 36/F,
Two Pacific Place, 88 Queensway Road, Hong Kong and its business telephone number is +852-2501-8989. SC China is wholly and directly
owned by SNP China (as defined below).
SNP China
SNP China Enterprises Limited (“SNP
China”) is a business company organized under the laws of the British Virgin Islands, with its principal business address
at Suite 3613, 36/F, Two Pacific Place, 88 Queensway Road, Hong Kong and its business telephone number is +852-2501-8989. SNP
China is wholly and directly owned by Mr. Shen (as defined below).
Mr. Shen
Nan Peng Shen (“Mr. Shen”
and, together with and collectively with Sequoia Entities, Sequoia Capital, SC China and SNP China, the “Sequoia Filing
Persons”) is a Hong Kong citizen and serves as the director and whole owner of SNP China. His business address is Suite
3613, 36/F, Two Pacific Place, 88 Queensway Road, Hong Kong and business telephone number +852-2501-8989.
SAIF
SAIF Partners IV L.P. (“SAIF”)
is an exempted limited partnership under the laws of the Cayman Islands, with the registered address at c/o Maples Corporate Services
Limited, P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands and its business telephone number is +852-2918-2200.
The principal business of SAIF is to make investment in companies based in or having a principal place of business in the Asia-Pacific
region.
Uranus
Uranus Connection Limited (“Uranus”)
is a company incorporated with limited liability under the laws of the British Virgin Islands. The business address of Uranus
is c/o 17/F, CITIC Securities Tower, No. 48 Liangmaqiao Road, Chaoyang District, Beijing, the People’s Republic of China.
Uranus’s business telephone number is +86-10-6083-7800.
Alibaba Entities
Alibaba Pictures
Alibaba Pictures Group Limited (“Alibaba Pictures”)
is a company incorporated in Bermuda and listed on both the Main Board of The Hong Kong Stock Exchange Limited (stock code: 1060)
and the Singapore Exchange Securities Trading Limited (stock code: S91). The registered office of Alibaba Pictures is situated
at 26/F, Tower One, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong and its business telephone number is +852-2215-5428.
Alibaba Pictures is a flagship unit of Alibaba Group’s movie, television and other entertainment businesses and its core
businesses includes four main segments: film and television production centred on intellectual property; internet-based promotion
and distribution combining internet technologies and traditional off-line distribution; the building and operation of e-commerce
platforms for entertainment as an extension of the Alibaba Group ecosystem; and international operations that consolidate global
resources, technologies and talents in order to compete in the global entertainment industry.
SAC Finance
SAC Finance Company Limited (“SAC
Finance”) is a private limited company incorporated in Hong Kong. The registered office of SAC Finance is situated at 26/F,
Tower One, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong and its business telephone number is +852-2215-5428.
Tencent Entities
Tencent
Tencent Holding Limited (“Tencent”)
is an exempted company with limited liability incorporated under the laws of the Cayman Islands. The business address of Tencent
is 29/F., Three Pacific Place, No. 1 Queen’s Road East, Wanchai, Hong Kong and its business telephone number is +86-755-8601-3388
ext 72000. Tencent is an internet service portal in China providing value-added internet, mobile and telecom
services and online advertising and has been listed on the Main Board of The Hong Kong Stock Exchange Limited since June 16, 2004
(stock code: 700).
Oriental Power
Oriental Power Holdings Limited (“Oriental Power”)
is a company with limited liability incorporated under the laws of Hong Kong. The business address of Oriental Power is 29/F.,
Three Pacific Place, No. 1 Queen’s Road East, Wanchai, Hong Kong and its business telephone number is +86-755-8601-3388
ext 72000. Oriental Power is principally engaged in providing management and marketing consultancy services,
internet value-added services and telecommunications services.
Willow
Willow Investment Limited (“Willow”)
is a company incorporated with limited liability under the laws of the British Virgin Islands. The business address of Willow
is 29/F., Three Pacific Place, No. 1 Queen’s Road East, Wanchai, Hong Kong and its business telephone number is +86-755-8601-3388
ext 72000. Willow is principally engaged in holding securities in companies in which Tencent invests.
All Gain Parties
Mr. Xie
Mr. Zhanshan Xie (“Mr.
Xie”) is a businessman, whose business address is c/o Global Incorporations Limited, Suite 1107, Office Tower C1, Oriental
Plaza, No.1 East Chang An Avenue, Beijing 100738, the People’s Republic of China. He is a citizen of the People’s
Republic of China and his telephone number is +86-10-8525-5529.
All Gain
All Gain Ventures
Limited (“All Gain”), and together with Mr. Xie, the “All Gain Parties”) is a company with limited liability
incorporated under the laws of the British Virgin Islands. The address of its principal office is c/o Global Incorporations Limited,
Suite 1107, Office Tower C1, Oriental Plaza, No.1 East Chang An Avenue, Beijing 100738, the People’s Republic of China,
and its telephone number is +86-10-8525-5529.
Throughout this proxy statement, the Chairman
Parties, Fosun Entities, Sequoia Entities, SAIF and Uranus are collectively referred to as the “Rollover Shareholders”.
The Chairman, Uranus, Alibaba Pictures, Oriental Power and Mr. Xie are collectively referred to as the “Sponsors”.
Parent, Merger Sub, the Chairman Parties, Fosun Entities, Sequoia Filing Persons, SAIF, Uranus, Alibaba Entities, Tencent Entities
and All Gain Parties are collectively referred to as the “Buyer Group”.
During the last five years, none of the
persons referred to above under the heading titled “The Parties Involved in the Merger,” or the respective directors
or executive officers of the Company, members of the Buyer Group and their affiliates as listed in Annex D to this proxy statement
has been (a) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (b) a party to any judicial
or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment,
decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities
laws, or a finding of any violation of federal or state securities laws.
The Merger (Page 79)
You are being asked to vote to authorize
and approve the agreement and plan of merger, dated as of December 15, 2015 (the “merger agreement”), among the Company,
Parent and Merger Sub, the plan of merger required to be filed with the Registrar of Companies of the Cayman Islands, substantially
in the form attached as Exhibit A to the merger agreement (the “plan of merger”), and the transactions contemplated
in the merger agreement, including the merger (the “merger”). Once the merger agreement and plan of merger are authorized
and approved by the requisite vote of the shareholders of the Company and the other conditions to the consummation of the transactions
contemplated by the merger agreement are satisfied or waived in accordance with the terms of the merger agreement, Merger Sub
will merge with and into the Company, with the Company continuing as the surviving corporation of the merger (“surviving
corporation”) under the laws of the Cayman Islands as a wholly-owned subsidiary of Parent. The Company, as surviving corporation,
will continue to do business under the name “Bona Film Group Limited” following the merger. If the merger is completed,
the Company will cease to be a publicly traded company. Copies of the merger agreement and the plan of merger are attached as
Annex A to this proxy statement. You should read the merger agreement and the plan of merger in their entirety because they, and
not this proxy statement, are the legal documents that govern the merger.
Merger Consideration (Page 79)
Under the terms of the merger agreement,
if the merger is completed, at the effective time of the merger (the “Effective Time”), each of the Company’s
ordinary shares, par value $0.0005 per share (each a “Share”), including Shares represented by American Depositary
Shares, each two representing one Share (the “ADSs”), issued and outstanding immediately prior to the Effective Time,
other than (a) Shares (including Shares represented by ADSs) owned by Parent, Merger Sub or the Company (as treasury, if any),
or by any direct or indirect wholly-owned subsidiary of Parent, Merger Sub or the Company, (b) Shares (including Shares represented
by ADSs) reserved (but not yet allocated) by the Company for settlement upon exercise or vesting of Company Share Award (as defined
below), (c) Shares owned by shareholders who have validly exercised and have not effectively withdrawn or lost their dissenter
rights under the Cayman Islands Companies Law (the “CICL”) (the “Dissenting Shares”), and (d) Shares (including
Shares issuable under the Company Options (as defined below), the Restricted Shares (as defined below) and Shares represented
by ADSs) beneficially owned by the Rollover Shareholders (the “Rollover Shares”) (Shares described under (a) through
(d) above are collectively referred to herein as the “Excluded Shares”), will be cancelled in exchange for the right
to receive $27.40 in cash per Share without interest and net of any applicable withholding taxes.
Each ADS issued and outstanding immediately
prior to the Effective Time (other than ADSs representing the Excluded Shares) will be cancelled in exchange for the right to
receive $13.70 in cash per ADS without interest and net of any applicable withholding taxes (less $0.05 per ADS cancellation fees
pursuant to the terms and conditions of the deposit agreement, dated as of December 8, 2010, by and among the Company, Deutsche
Bank Trust Company Americas (the “ADS depositary”) and the holders and beneficial owners from time to time of ADSs
issued thereunder, as may be amended from time to time (the “Deposit Agreement”)). The Excluded Shares other than
Dissenting Shares will be cancelled for no consideration. The Dissenting Shares will be cancelled and each holder thereof will
be entitled to receive only the payment of the fair value of such Dissenting Shares in accordance with the CICL. Please see “Dissenter
Rights” beginning on page 93 for additional information.
Treatment of Company Options (Page 79)
At the Effective Time, the Company will
terminate the Company’s 2009 Stock Incentive Plan and the 2010 Stock Incentive Plan (collectively, the “Share Incentive
Plans”), terminate all relevant award agreements entered into under the Share Incentive Plans, cancel all options to purchase
Shares or ADSs (the “Company Options”) and all restricted shares (the “Restricted Shares”, collectively
with the Company Options, the “Company Share Awards”) granted under the Share Incentive Plans that are then outstanding
and unexercised, whether or not vested or exercisable.
At the Effective Time, as to the Company
Options that are not Rollover Shares: (a) each Company Option vested on or prior to the Effective Time (a “Vested Company
Option”) will be cancelled in exchange for the right to receive either a cash amount equal to the excess of $27.40 over
the applicable per share exercise price of such Vested Company Option or, as agreed upon by the holder thereof and Parent, an
equity incentive award of Parent with substantially the same economic value as such Vested Company Option under the terms to be
determined by Parent; and (b) each Company Option not vested on or prior to the Effective Time (an “Unvested Company Option”)
will be cancelled in exchange for a right to receive an equity incentive award of Parent with substantially the same economic
value as such Unvested Company Option under the terms to be determined by Parent. The payment or grant of substituted equity incentive
awards in connection with the treatment of applicable Company Options will be made by the surviving corporation as promptly as
practicable following the Effective Time.
At the Effective Time, each Company Option
that is a Rollover Share (whether vested or unvested) will be cancelled in exchange for an option to purchase a number of ordinary
shares of Parent (the “Parent Shares”) equal to the number of Shares underlying such Company Option, under the terms
to be determined by Parent.
Treatment of Restricted Shares (Page 80)
At the Effective Time, as to the outstanding
Restricted Shares that are not Rollover Shares: (a) each outstanding Restricted Share vested on or prior to the Effective Time
(a “Vested Restricted Share”) will be cancelled in exchange for a right to receive either an equity incentive award
of Parent with substantially the same economic value as such Vested Restricted Share under the terms determined by Parent, or
as agreed upon by the holder thereof and Parent, $27.40 in cash; and (b) each outstanding Restricted Share not vested on or prior
to the Effective Time (an “Unvested Restricted Share”) will be cancelled in exchange for a right to receive an equity
incentive award of Parent with substantially the same economic value as such Unvested Restricted Share under the terms to be determined
by Parent. The payment or grant of substituted equity incentive awards in connection with the treatment of applicable Restricted
Shares will be made by the surviving corporation as promptly as practicable following the Effective Time.
At the Effective Time, each outstanding
Restricted Share that is a Rollover Share (whether vested or unvested) will be cancelled in exchange for a right to receive one
Parent Share.
Support Agreement (Page 57)
Concurrently with the execution and delivery
of the merger agreement, the Rollover Shareholders entered into a support agreement (the “Support Agreement”) with
Parent. Pursuant to the Support Agreement, at the closing of the merger, the Rollover Shares will be cancelled for no consideration.
Immediately prior to the closing of the merger, each Rollover Shareholder will subscribe, or will cause its affiliate to subscribe,
and Parent shall issue to such Rollover Shareholder or its affiliate, as the case may be, for consideration of par value for the
number of ordinary shares and/or option to purchase ordinary shares of Parent set forth in the Support Agreement.
Pursuant to the terms of the Support Agreement,
the Rollover Shares and all other Shares acquired by the Rollover Shareholders after the date of the Support Agreement will be
voted in favor of the authorization and approval of the merger agreement, the plan of merger and the transactions contemplated
by the merger agreement, including the merger, at the extraordinary general meeting of the Company.
Record Date and Voting (Page 74)
You are entitled to attend and vote at
the extraordinary general meeting if you have Shares registered in your name in the Company’s register of members at the
close of business in the Cayman Islands on ________, 2016, the Share record date for voting at the extraordinary general meeting.
If you own ADSs on ________, 2016, the ADS record date (and do not cancel such ADSs and become a registered holder of the Shares
underlying such ADSs as explained below), you cannot vote at the extraordinary general meeting directly, but you may instruct
the ADS Depositary (as the holder of the Shares underlying the ADSs) on how to vote the Shares underlying your ADSs. The ADS depositary
must receive your instructions no later than ____ a.m. (New York City Time) on ________, 2016 in order to ensure your Shares are
properly voted at the extraordinary general meeting. Alternatively, if you own ADSs on the ADS record date, you may vote at the
extraordinary general meeting by cancelling your ADSs (and certifying you have not instructed, and will not instruct, the ADS
depositary to vote the Shares represented by your ADSs) before the close of business in New York City on ________, 2016 and becoming
a registered holder of Shares prior to the close of business in the Cayman Islands not later than ________, 2016, the Share record
date. Each outstanding Share on the Share record date entitles the holder to one vote for each Share on each matter submitted
to the shareholders for authorization and approval at the extraordinary general meeting and any adjournment thereof. We expect
that, as of the Share record date, there will be __________Shares issued and outstanding and entitled to vote at the extraordinary
general meeting. If you have Shares registered in your name on the Share record date, the deadline for you to lodge your proxy
card and vote is ________, 2016 at ____ a.m. (Beijing Time). Please see “Summary Term Sheet– Voting Information”
below.
Shareholder Vote Required to Authorize and Approve the Merger
Agreement and Plan of Merger (Page 74)
In order for the merger to be completed,
the merger agreement, the plan of merger and the transactions contemplated by the merger agreement, including the merger, must
be authorized and approved by the affirmative vote of holders of Shares representing at least two-thirds of the voting rights
of the Shares present and voting in person or by proxy as a single class at an extraordinary general meeting of shareholders (the
“Requisite Company Vote”) in accordance with Section 233(6) of the CICL.
As of the date of this proxy statement,
the Rollover Shareholders beneficially own approximately 62.9% of the total issued and outstanding Shares of the Company and approximately
58.8% of the total issued and outstanding Shares of the Company entitled to vote. Please see “Security Ownership of Certain
Beneficial Owners and Management of the Company” beginning on page 99 for additional information. Pursuant to the terms
of the Support Agreement, the Rollover Shares and all other Shares acquired by the Rollover Shareholders after the date of the
Support Agreement will be voted in favor of the authorization and approval of the merger agreement, the plan of merger and the
transactions contemplated by the merger agreement, including the merger, at the extraordinary general meeting of shareholders
of the Company.
If your Shares are held in the name of
a broker, bank or other nominee, your broker, bank or other nominee will not vote your Shares in the absence of specific instructions
from you. These non-voted Shares are referred to as “broker non-votes.”
Voting Information (Page 75)
Before voting your Shares, we encourage
you to read this proxy statement in its entirety, including all of the annexes, attachments, exhibits and materials incorporated
by reference, and carefully consider how the merger will affect you. To ensure that your Shares can be voted at the extraordinary
general meeting even in the event that you are unable to attend, please complete the enclosed proxy card in accordance with the
instructions set forth on the proxy card as soon as possible. The deadline for you to lodge your proxy card is ________, 2016
at ____ a.m. (Beijing Time).
If you own ADSs as of the close of business
in New York City on ________, 2016, the ADSs record date (and do not cancel such ADSs and become a registered holder of the Shares
underlying such ADSs as explained below), you cannot vote at the extraordinary general meeting directly, but you may instruct
the ADS depositary (as the holder of the Shares underlying the ADSs) how to vote the Shares underlying your ADSs. The ADS depositary
must receive such instructions no later than ____ a.m. (New York City Time) on ________, 2016 in order to ensure your Shares are
properly voted at the extraordinary general meeting. Alternatively, you may vote at the extraordinary general meeting if you cancel
your ADSs and become a holder of Shares prior to the close of business in the Cayman Islands not later than ________, 2016. If
you wish to cancel your ADSs for the purpose of voting Shares, you need to make arrangements to deliver your ADSs to the ADS depositary
for cancellation before the close of business in New York City on ________, 2016 together with (a) delivery instructions for the
corresponding Shares (name and address of person who will be the registered holder of Shares), (b) payment of the ADS cancellation
fees ($0.05 per ADS to be cancelled) and any applicable taxes, and (c) a certification that you held the ADS as of the ADS record
date and you have not given, and will not give, voting instructions to the ADS depositary as to the ADSs being cancelled or have
given voting instructions to the ADS depositary as to the ADSs being cancelled but undertake not to vote the corresponding Shares
at the extraordinary general meeting. If you hold your ADSs in a brokerage, bank or nominee account, please contact your broker,
bank or nominee to find out what actions you need to take to instruct the broker, bank or nominee to cancel the ADSs on your behalf.
Upon cancellation of the ADSs, the ADS depositary will arrange for the Deutsche Bank AG Hong Kong Branch, the custodian holding
the Shares, to transfer registration of the Shares to the former ADS holder (or a person designated by the former ADS holder).
If after registration of Shares in your name, you wish to receive a certificate evidencing the Shares registered in your name,
you will need to request the registrar of the Shares to issue and mail a certificate to your attention.
If the ADS depositary timely receives voting
instructions from an ADS holder which fail to specify the manner in which the ADS depositary is to vote the Shares represented
by the holder’s ADSs, or if an ADS holder does not timely deliver specific voting instructions to the ADS depositary, the
depositary will, under the terms of Deposit Agreement, deemed such ADS holder to have instructed the ADS depositary to give a
discretionary proxy to a person designated by the Company (the “Designee”) to vote the Shares represented by such
holder’s ADSs, unless the Company notifies the ADS depositary that it does not wish such proxy to be given, that substantial
opposition exists to the matters to be voted on at the extraordinary general meetings or that such matters would have a material
adverse impact on the holders of the ADSs or on the holders of the Shares. Likewise, unless the Company notifies the ADS depositary
that the Company does not wish to give such proxy or there exists substantial opposition to the matters to be voted on at the
extraordinary general meeting or that such matters would have a material adverse impact on the holders of the ADSs or on the holders
of the Shares, the Designee will receive a discretionary proxy from the ADS depositary and will vote all Shares underlying such
uninstructed ADSs, FOR the authorization and approval of the merger agreement, the plan of merger and the transactions
contemplated by the merger agreement, including the merger, FOR the proposal to authorize each of the members of the Independent
Committee to do all things necessary to give effect to the merger agreement, the plan of merger, and the transactions contemplated
by the merger agreement, including the merger, and FOR the adjournment of the extraordinary general meeting in order to
allow the Company to solicit additional proxies in the event that there are insufficient proxies received at the time of the extraordinary
general meeting to pass the special resolutions to be proposed at the extraordinary general meeting.
Dissenter Rights (page 93)
Shareholders who dissent
from the merger will have the right to receive payment of the fair value of their Shares if the merger is completed, but only
if they deliver to the Company, before the vote on the merger is taken at the extraordinary general meeting, a written objection
to the merger and subsequently comply with all procedures and requirements of Section 238 of the CICL for the exercise of dissenter
rights. The fair value of your Shares as determined under that statute could be more than, the same as, or less than the merger
consideration you would receive pursuant to the merger agreement if you do not exercise dissenter rights with respect to your
Shares.
ADS HOLDERS WILL NOT HAVE THE RIGHT
TO EXERCISE DISSENTER RIGHTS AND RECEIVE PAYMENT OF THE FAIR VALUE OF THE SHARES UNDERLYING THEIR ADSs. THE ADS DEPOSITARY WILL
NOT EXERCISE OR ATTEMPT TO EXERCISE ANY DISSENTER RIGHTS WITH RESPECT TO ANY OF THE SHARES THAT IT HOLDS, EVEN IF AN ADS HOLDER
REQUESTS THE ADS DEPOSITARY TO DO SO. ADS HOLDERS WISHING TO EXERCISE DISSENTER RIGHTS MUST SURRENDER THEIR ADSs TO THE ADS DEPOSITARY
FOR CONVERSION INTO SHARES, PAY THE ADS DEPOSITARY’S FEES REQUIRED FOR THE CANCELLATION OF THEIR ADSs, PROVIDE INSTRUCTIONS
FOR THE REGISTRATION OF THE CORRESPONDING SHARES IN THE COMPANY’S REGISTER OF MEMBERS, AND CERTIFY THAT THEY HELD THE ADSs
AS OF THE ADS RECORD DATE AND HAVE NOT GIVEN, AND WILL NOT GIVE, VOTING INSTRUCTIONS AS TO THEIR ADSs BEFORE 5:00 P. M. (NEW YORK
CITY TIME) ON ________, 2016, AND BECOME REGISTERED HOLDERS OF SHARES NOT LATER THAN ________, 2016. THEREAFTER,
SUCH FORMER ADS HOLDERS MUST ALSO COMPLY WITH THE PROCEDURES AND REQUIREMENTS FOR EXERCISING DISSENTER RIGHTS WITH RESPECT TO
THE SHARES UNDER SECTION 238 OF THE CAYMAN ISLANDS COMPANIES LAW. IF THE MERGER IS NOT COMPLETED, THE COMPANY WOULD CONTINUE TO
BE A PUBLIC COMPANY IN THE U.S. AND THE ADSs WOULD CONTINUE TO BE LISTED ON THE NASDAQ SELECT GLOBAL MARKET (“NASDAQ”).
THE COMPANY’S SHARES ARE NOT LISTED AND CANNOT BE TRADED ON ANY STOCK EXCHANGE OTHER THAN THE
Nasdaq, AND IN SUCH CASE ONLY IN THE FORM OF ADSs. AS A RESULT, IF A FORMER ADS HOLDER HAS CANCELLED HIS, HER OR ITS ADSs
TO EXERCISE DISSENTER RIGHTS AND THE MERGER IS NOT COMPLETED AND SUCH FORMER ADS HOLDER WISHES TO BE ABLE TO SELL HIS, HER OR
ITS SHARES ON A STOCK EXCHANGE, SUCH FORMER ADS HOLDER WOULD NEED TO DEPOSIT HIS, HER OR ITS SHARES INTO THE COMPANY’S AMERICAN
DEPOSITARY SHARES PROGRAM FOR THE ISSUANCE OF THE CORRESPONDING NUMBER OF ADSs, SUBJECT TO THE TERMS AND CONDITIONS OF APPLICABLE
LAW AND THE ADS DEPOSIT AGREEMENT, INCLUDING, AMONG OTHER THINGS, PAYMENT OF RELEVANT FEES OF THE ADS DEPOSITARY FOR THE ISSUANCE
OF ADSs (UP TO $0.05 PER ADS ISSUED) AND ANY APPLICABLE STOCK TRANSFER TAXES (IF ANY) AND RELATED CHARGES PURSUANT TO THE ADS
DEPOSIT AGREEMENT.
We encourage you to read the section of
this proxy statement entitled “Dissenter Rights” as well as Annex C to this proxy statement carefully and to consult
your Cayman Islands legal counsel if you desire to exercise your dissenter rights.
Purposes and Effects of the Merger (page 51)
The purpose of the merger is to
enable Parent to acquire 100% control of the Company in a transaction in which the Company’s shareholders other than
the holders of Excluded Shares will be cashed out in exchange for $27.40 in cash per Share or $13.70 in cash per ADS, so that
Parent will bear the rewards and risks of the sole ownership of the Company after the merger, including any future earnings
and growth of the Company as a result of improvements to the Company’s operations or acquisitions of other businesses.
Please see “Special Factors – Buyer Group’s Purpose of and Reasons for the Merger” beginning on page
51 for additional information.
ADSs representing Shares of the Company
are currently listed on The NASDAQ Select Global Market (“NASDAQ”) under the symbol “BONA.” It is expected
that, immediately following the completion of the merger, the Company will cease to be a publicly traded company and will instead
become a privately-held company beneficially owned by the Buyer Group. Following the completion of the merger, the ADSs will cease
to be listed on the NASDAQ, and price quotations with respect to sales of the ADSs in the public market will no longer be available.
In addition, registration of the ADSs and the underlying Shares under the Exchange Act may be terminated upon the Company’s
application to the SEC if the Shares are not listed on a national securities exchange and there are fewer than 300 registered
holders of the Shares. Ninety days after the filing of Form 15 in connection with the completion of the merger or such longer
period as may be determined by the SEC, registration of the ADSs and the underlying Shares under the Exchange Act will be terminated.
At such time, the Company will no longer be required to file periodic reports with the SEC or otherwise be subject to the United
States federal securities laws, including Sarbanes-Oxley Act, applicable to public companies. After the completion of the merger,
the Company’s shareholders will no longer enjoy the rights or protections that the United States federal securities laws
provide, including reporting obligations for directors, officers and principal securities holders of the Company. Furthermore,
following the completion of the merger, the ADS program of Shares will terminate. Please see “Special Factors – Effect
of the Merger on the Company” beginning on page 51 for additional information.
Plans for the Company after the Merger (Page 55)
After the Effective Time, the Buyer
Group anticipates that the Company’s operations will be conducted substantially as they are currently being conducted,
except that the Company will cease to be a publicly traded company and will instead be a wholly-owned subsidiary of Parent.
Please see “Special Factors – Plans for the Company after the Merger” beginning on page 55 for additional
information.
Recommendations of the Independent Committee and the Board
(Page 35)
The Independent Committee unanimously (a)
determined that the merger agreement and the plan of merger are fair to and in the best interests of the Company and its security
holders unaffiliated to the Buyer Group (the “unaffiliated security holders”), (b) declared it advisable to enter
into the merger agreement, (c) recommended that the Board approve the merger agreement, the plan of merger and the transactions
contemplated by the merger agreement, including the merger, and (d) recommended that the Board submit the merger agreement, the
plan of merger and the transactions contemplated by the merger agreement, including the merger, to the shareholders of the Company
for approval and authorization at an extraordinary general meeting of the shareholders of the Company, with the recommendation
of the Board that the shareholders of the Company authorize and approve by way of a special resolution the merger agreement, the
plan of merger and the transactions contemplated by the merger agreement, including the merger.
The Board, acting upon the unanimous recommendation
of the Independent Committee, (a) determined that it was fair (both substantively and procedurally) to and in the best interests
of the Company and the unaffiliated security holders, and declared it advisable, to enter into the merger agreement and the transaction
agreements contemplated by the merger agreement, (b) authorized and approved the execution, delivery and performance of the merger
agreement and the transaction agreements contemplated by the merger agreement and the consummation of the contemplated transactions,
including the merger, and (c) resolved to direct that the authorization and approval of the merger agreement, the plan of merger
and the merger be submitted to a vote at an extraordinary general meeting of the shareholders with the recommendation of the Board
that the shareholders of the Company authorize and approve by way of special resolution the merger agreement, the plan of merger
and the transactions contemplated under the merger agreement, including the merger.
ACCORDINGLY, THE BOARD RECOMMENDS THAT
YOU VOTE FOR THE PROPOSAL TO AUTHORIZE AND APPROVE THE MERGER AGREEMENT, THE PLAN OF MERGER AND THE TRANSACTIONS CONTEMPLATED
BY THE MERGER AGREEMENT, INCLUDING THE MERGER, FOR THE PROPOSAL TO AUTHORIZE EACH OF THE MEMBERS OF THE INDEPENDENT COMMITTEE
TO DO ALL THINGS NECESSARY TO GIVE EFFECT TO MERGER AGREEMENT, THE PLAN OF MERGER, AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER
AGREEMENT, INCLUDING THE MERGER, AND FOR THE PROPOSAL TO INSTRUCT THE CHAIRMAN OF THE EXTRAORDINARY GENERAL MEETING TO ADJOURN
THE EXTRAORDINARY GENERAL MEETING IN ORDER TO ALLOW THE COMPANY TO SOLICIT ADDITIONAL PROXIES IN THE EVENT THAT THERE ARE INSUFFICIENT
PROXIES RECEIVED TO PASS THE SPECIAL RESOLUTIONS TO BE PROPOSED AT THE EXTRAORDINARY GENERAL MEETING.
For a detailed discussion of the
material factors considered by the Independent Committee and the Board in determining to recommend the approval of the merger
agreement and the approval of the transactions, including the merger, and in determining that the merger is fair to and in
the best interest of the unaffiliated security holders, see “Special Factors—Reasons
for the Merger and Recommendation of the Independent Committee and the Board” beginning on page 35 and “Special
Factors—Effect of the Merger on the Company—Primary
Benefits and Detriments of the Merger” beginning on page 52. The foregoing summary is qualified in its entirety by
reference to these sections.
Position of Buyer Group as to the Fairness of the Merger
(Page 40)
Each member of the Buyer Group believes
that the merger is substantively and procedurally fair to the unaffiliated security holders. Their belief is based upon the factors
discussed under the caption “Special Factors—Position of the Buyer Group as to the Fairness of the Merger” beginning
on page 40.
Each member of the Buyer Group is making
the statements included in this paragraph solely for the purpose of complying with the requirements of Rule 13e-3 and related
rules under the Exchange Act. The views of each member of the Buyer Group as to the fairness of the merger are not intended to
be and should not be construed as a recommendation to any shareholder of the Company as to how that shareholder should vote on
the proposal to authorize and approve the merger agreement, the plan of merger and the transactions contemplated by the merger
agreement, including the merger.
Financing of the Merger (Page 56)
The Company and the Buyer Group estimate
that the total amount of funds necessary to complete the merger and the related transactions is approximately $375 million (assuming
no exercise of dissenter rights by shareholders of the Company). In calculating this amount, the Company and the Buyer Group did
not consider the value of the Rollover Shares, which will be cancelled for no consideration pursuant to the merger agreement.
This amount includes (i) the cash to be paid to the Company’s unaffiliated shareholders and holders of the ADSs, Vested
Company Options and Vested Restricted Shares (except for any Company Share Awards held by the Rollover Shareholder), and (ii)
the related costs and expenses, in connection with the merger and related transactions. The merger and the related transactions
are expected to be funded by equity contributions contemplated by the equity commitment letters (each such equity commitment letter,
and “Equity Commitment Letter” and, together, the “Equity Commitment Letters”), by and between Parent
and each of the Sponsors. Under the terms and subject to the conditions of the Equity Commitment Letters, the Sponsors will contribute
equity financing in an aggregate amount of $365,976,730.70 to Parent to complete the merger. Pursuant to these Equity Commitment
Letters, each of the Chairman Parties, Uranus, Alibaba Pictures, Oriental Power and Mr. Xie has committed to contribute, or will
cause to be contributed, as an equity contribution to Parent, an amount, equal to $125,697,403.80, $79,904,208.80, $85,982,898.80,
$60,188,018.20 and $14,204,201.10, respectively, subject to the terms and conditions therein, in each case in exchange for proportionate
newly issued equity interests in Parent to be held by such Sponsor or its affiliate. Such funds are to be used solely for the
purpose of completing the merger and the other transactions in accordance with the merger agreement. Such funds are to be paid
from accounts outside China, and such payment will not be subject to any restriction, registration, approval or procedural requirements
under applicable PRC laws, rules and regulations.
Interim Investors Agreement (Page 57)
Concurrently with the execution and delivery
of the merger agreement, Uranus, SAC Finance, Willow, All Gain, the Rollover Shareholders, Parent and Merger Sub entered into
an interim investors agreement (as may be amended from time to time in accordance with its terms, the “Interim Investors
Agreement”) which governs the relationship among the parties thereto with respect to the merger agreement and matters relating
thereto until the earlier of the termination of the merger agreement or consummation of the merger. The Interim Investors Agreement
provides for, among other things and, subject to certain limitations or exceptions therein, (i) the mechanism for making decisions
relating to the merger agreement and ancillary agreements pending consummation of the merger, (ii) the mechanism for making decisions
relating to the equity financing pending consummation of the merger, and the right of Parent at the direction of the parties thereto
representing at least 75% of the aggregate commitments under the Interim Investors Agreement to enforce (including by specific
performance) the provisions of each Equity Commitment Letter and the Support Agreement, (iii) the entrance into, concurrent with
the consummation of the merger, a shareholders agreement of Parent by all parties to the Interim Investors Agreement, and (iv)
certain fee and expense sharing arrangements among Uranus, SAC Finance, Willow, All Gain and the Rollover Shareholders.
Limited Guarantees (Page 57)
Concurrently with the execution of the
merger agreement, each of the Sponsors entered into a limited guarantee (each such limited guarantee, a “Limited Guarantee”
and, together, the “Limited Guarantees”). Under the Limited Guarantees, the Sponsors have collectively guaranteed
in favor of the Company the entire portion of the Parent’s payment obligations with respect to the termination fee, if and
when required under the merger agreement, up to a defined maximum amount. Each Limited Guarantee will terminate on the earliest
of (a) the Effective Time, (b) the payment in full of the guaranteed obligation under such Limited Guarantee, (c) any termination
of the Sponsor’s obligation under the Equity Commitment Letter as a result of the making of the contribution by such Sponsor
pursuant to the Equity Commitment Letter, and (d) the termination of the merger agreement in accordance with its terms by mutual
consent of Parent and the Company or under circumstances in which Parent and Merger Sub would not be obligated to pay the termination
fee in accordance with the merger agreement.
Share Ownership of the Company Directors and Officers and
Voting Commitments (Page 99)
As of the Share record date, we
expect that the Buyer Group will beneficially own, in the aggregate, approximately ______% of the issued and outstanding
Shares. Please see “Security Ownership of Certain Beneficial Owners and Management of the Company” beginning on
page 99 for additional information.
Pursuant to the Support Agreement, the
Rollover Shareholders have agreed to vote all of the Shares they beneficially own in favor of the authorization and approval of
the merger agreement, the plan of merger and the transactions contemplated by the merger agreement, including the merger.
Opinion of the Independent Committee’s Financial Advisor
(Page 44)
Pursuant to an engagement letter dated
July 13, 2015, the Independent Committee retained Barclays Bank PLC (“Barclays”) to act as its financial advisor to
provide financial advice and related assistance to the Independent Committee in connection with the merger. Barclays is an internationally
recognized financial services firm that, among other things, is regularly engaged in the investment banking business, including
the valuation of businesses and securities in connection with mergers and acquisitions, underwritings and private placements of
securities, and other investment banking services.
On December 15, 2015, at a meeting of the
Independent Committee to evaluate the merger, Barclays rendered its oral opinion to the Independent Committee, subsequently confirmed
in writing, to the effect that, as of that date and based on and subject to the assumptions, procedures, factors, limitations
and qualifications set forth in Barclays’ written opinion, the merger consideration to be paid to the holders of Shares
(other than holders of Excluded Shares) and the holders of ADSs (other than holders of ADSs representing Excluded Shares) in the
merger was fair, from a financial point of view, to those holders.
The full text of Barclays’ written
opinion, dated as of December 15, 2015, is attached to this proxy statement as Annex B and is incorporated into this proxy statement
by reference. The description of Barclays’ opinion set forth in this proxy statement is qualified in its entirety by reference
to the full text of the opinion. Shareholders are urged to read the Barclays opinion in its entirety for a description of the
procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Barclays
in connection with the opinion.
Barclays’ engagement and opinion
were for the benefit of the Independent Committee, in its capacity as such, and its opinion was rendered to the Independent Committee
in connection with its consideration of the merger. Barclays’ opinion was not intended to and does not constitute a recommendation
to any shareholder as to how the shareholder should vote or act with respect to the merger or any matter relating thereto.
See “Special Factors—Opinion
of the Independent Committee’s Financial Advisor” beginning on page 44 for additional information.
Interests of the Company’s Executive Officers and
Directors in the Merger (Page 58)
In considering the recommendations of the
Board with respect to the merger, the Company’s shareholders should be aware that certain of the Company’s directors
and executive officers have interests in the transaction that are different from, and/or in addition to, the interests of the
Company’s shareholders generally. These interests include, among others:
| • | the beneficial ownership of equity interests in Parent
by the Chairman; |
| • | the potential enhancement or decline of share value of
Parent’s shares directly or indirectly held by the Chairman as a result of the
merger and future performance of the surviving corporation; |
| • | either the cash-out of or replacement of Vested Company
Options and Vested Restricted Shares beneficially held by employees, executive officers
and directors of the Company (other than the Chairman) by a grant of equity incentive
awards of Parent with substantially the same economic value, as agreed upon by the holders
thereof and Parent; |
| • | the replacement of Unvested Company Options and Unvested
Restricted Shares beneficially held by employees, executive officers and directors of
the Company (other than the Chairman) by a grant of equity incentive awards of Parent
with substantially the same economic value; |
| • | continued indemnification, rights to advancement of fees
and directors and officers liability insurance to be provided by the surviving corporation
to former directors and officers of the Company; |
| • | the monthly compensation of $10,000 of members of the Independent
Committee in exchange for their services in such capacity (or, in the case of the chairman
of the Independent Committee, monthly compensation of $15,000) (the payment of which
is not contingent upon the completion of the merger or the Independent Committee’s
or the Board’s recommendation of the merger); and |
| • | the continuation of service of the executive officers of
the Company with the surviving corporation in positions that are substantially similar
to their current positions. |
As of the date of this proxy statement,
the Chairman, being a member of the Buyer Group, beneficially owns 11,015,387.5 issued and outstanding Shares entitled to vote.
All such Shares held by the Chairman will be cancelled in the merger and not be converted into the right to receive the merger
consideration at the Effective Time. Instead, the Chairman directly and/or indirectly receives newly issued ordinary shares of
Parent.
As of the date of this proxy statement,
the directors and executive officers of the Company (as set forth in “Security Ownership of Certain Beneficial Owners and
Management of the Company” beginning on page 99), as a group and other than the members of the Buyer Group, beneficially
own an aggregate of 1,144,450 Shares. These consist of (i) 946,192 issued and outstanding Shares, (ii) outstanding and unexercised
Company Options to purchase 168,055 Shares issued pursuant to the Share Incentive Plans and exercisable within 60 days from the
date of this proxy statement, and (iii) 30,203 Restricted Shares that will vest within 60 days from the date of this proxy statement.
The options to purchase Shares issued pursuant to the Company Share Incentive Plan and held by each of our directors and executive
officers have a weighted average exercise price of $$9.19 per Share. After the completion of the merger, the maximum amount of
cash payments our directors and executive officers (other than the Chairman being a member of the Buyer Group) may receive in
respect of their Shares, Company Options and Restricted Shares is approximately $29.8 million, including approximately $25.9 million
in respect of Shares and approximately $3.9 million in respect of outstanding and unexercised Company Options that are exercisable
within 60 days from the date of this proxy statement and Vested Restricted Shares and Restricted Shares that will vest within
60 days from the date of this proxy statement.
The Independent Committee and the Board
were aware of these potential conflicts of interest and considered them, among other matters, in reaching their decisions and
recommendations with respect to the merger agreement and related matters. Please see “Special Factors – Interests
of Certain Persons in the Merger” beginning on page 58 for additional information.
Conditions to the Merger (Page 88)
The obligations of the Company, Parent,
and Merger Sub to consummate the transactions contemplated by the merger agreement, including the merger, are subject to the satisfaction
or waiver at or prior to the closing of the merger (the “Closing”) of the following conditions:
| • | the merger agreement, the plan of merger and the transactions
contemplated by the merger agreement being approved by a special resolution by holders
of Shares constituting the Requisite Company Vote at the extraordinary general meeting
of shareholders; and |
| • | no governmental entity or court of competent jurisdiction
having enacted, issued, promulgated, enforced or entered any law or order that has the
effect of prohibiting or making the merger illegal. |
The obligations of Parent and Merger Sub
to consummate the merger are also subject to the satisfaction or waiver at or prior to the Closing of the following conditions:
| • | (i) other than those regarding capitalization, Company
Share Awards, corporate authority and fairness and inapplicability of anti-takeover provisions,
the representations and warranties of the Company contained in the merger agreement being
true and correct as of the date of the merger agreement and as of the Closing, as though
made on such date (except to the extent expressly made as of a specified date, in which
case as of such specified date), in each case, disregarding for this purpose any limitation
or qualification by materiality or Company Material Adverse Effect, except to the extent
such failures to be true and correct would not have a Company Material Adverse Effect;
(ii) the representations and warranties regarding corporate authority and fairness being
true and correct in all respects as of the date of the merger agreement and as of the
Closing, as though made on such date; and (iii) the representations and warranties
regarding capitalization, Company Share Awards and inapplicability of anti-takeover provisions
being true and correct in all respects (except for de minimus inaccuracies) as
of the date of the merger agreement and as of the Closing, as though made on such date; |
| • | the Company having performed in all material respects all
obligations required to be performed by it under the merger agreement at or prior to
the Closing; |
| • | since the date of the merger agreement, there not having
occurred a Company Material Adverse Effect; |
| • | the amount of Dissenting Shares being less than 15% of
the total outstanding Shares immediately prior to the Effective time; and |
| • | the Company having delivered to Parent a certificate of
an executive officer of the Company confirming the above conditions have been satisfied. |
The obligations of the Company to consummate
the merger are also subject to the satisfaction or waiver at the Closing of the following conditions:
| • | the representations and warranties of Parent and Merger
Sub contained in the merger agreement being true and correct as of the date of the merger
agreement and as of the closing, as though made on such date (except to the extent expressly
made as of a specified date, in which case as of such specified date), disregarding for
this purpose any limitation or qualification by materiality, except to the extent such
failures to be true and correct would not prevent or materially delay the consummation
of any transactions contemplated under the merger agreement by Parent and Merger Sub; |
| • | Parent and Merger Sub having performed in all material
respects all obligations required to be performed by it under the merger agreement on
or prior to the Closing; and |
| • | the Company having received a certificate of an executive
officer of Parent confirming the above conditions have been satisfied. |
No Solicitation (Page 86)
From the date of the merger agreement until
the earlier of the Effective Time or the valid termination of the merger agreement, the Company will not, will instruct its subsidiaries
and their respective representatives not to:
| • | initiate, solicit, propose, encourage or take other actions
to facilitate, any inquiries or the making of any proposal or offer that constitutes,
or may reasonably be expected to lead to, an acquisition proposal; |
| • | engage in, continue or otherwise participate in discussions
or negotiations with, or provide any non-public information concerning the Company or
its subsidiary to any person with the intent to induce the making, submission or announcement
of, or the intent to encourage, facilitate or assist any acquisition proposal or any
proposal or offer that could reasonably be expected to lead to an acquisition proposal; |
| • | grant any waiver, amendment or release under any standstill
or confidentiality agreement to which the Company is a party or any anti-takeover law,
or otherwise knowingly facilitate any effort or attempt by any person to make an acquisition
proposal; |
| • | approve, endorse, recommend, execute or enter into any
letter of intent, agreement in principle, merger agreement, acquisition agreement or
other similar agreement relating to an acquisition proposal or any proposal or offer
that could reasonably be expected to lead to an acquisition proposal, or that conflicts
with or is inconsistent with the merger agreement or requires the Company to abandon
the merger agreement or the merger; or |
| • | resolve, propose, agree or publicly announce an intention
to do any of the above actions. |
The Company will immediately cease and
cause to be terminated all discussion with any third parties existing as of the date of the merger agreement regarding an acquisition
proposal.
Prior to obtaining the Requisite Company
Vote, if the Company receives an unsolicited, written and bona fide acquisition proposal from any person that did not result from
a breach by the Company of its obligations set forth in the above paragraph, (i) the Independent Committee may directly or indirectly
through the Company and its representatives contact such person to clarify the terms and conditions of the proposal so as to determine
whether such proposal constitutes or is reasonably expected to result in a superior proposal, and (ii) if the Independent Committee
determines in good faith, after consultation with and based upon the advice of its financial advisor and outside legal counsel,
that such proposal constitutes or is reasonably likely to result in a superior proposal, then the Independent Committee may directly
or indirectly through the Company and its representatives, pursuant to an executed confidentiality agreement on terms no less
favorable to the Company in the aggregate than those contained in the confidentiality agreements between the Company, the Chairman,
Skillgreat, Fosun and Sequoia, furnish information to the person who has made such proposal, provided that the Company will concurrently
make available to Parent any material information provided to such person that was not previously made available to Parent.
Prior to obtaining the Requisite Company
Vote, (a) if the Company has received a written bona fide acquisition proposal that did not arise or result from a breach of the
Company’s “no solicitation” obligations described above that is not withdrawn and that the Board determines,
upon the recommendation of the Independent Committee and in its good faith judgment, that (i) such acquisition proposal constitutes
a superior proposal, and (ii) the failure to change its recommendation to the Company’s shareholders would violate its fiduciary
duties to the Company and its shareholders under applicable law (after consultation with its financial advisor and outside legal
counsel), the Board may change its recommendation and/or authorize the Company to terminate the merger agreement to enter into
an alternative acquisition agreement with respect to such superior proposal. However, prior to taking any such action, the Board
must give Parent at least five business days’ prior written notice of its intention to take such action and a description
of the material terms and conditions of such proposal and identifying the person making such proposal. Further, the Company must
provide to Parent any confidential information disclosed to the person making the superior proposal but not previously disclosed
to Parent, negotiate in good faith with Parent during such notice period, to the extent Parent wishes to negotiate, to enable
Parent to revise the terms of the merger agreement, so that the proposal would cease to constitute a superior proposal, and permit
Parent to make a presentation of any amendments to the Board and the Independent Committee (to the extent Parent wishes to make
such presentation).
Termination of the Merger Agreement (Page 89)
The merger agreement may be terminated
at any time prior to the Effective Time:
| • | by mutual written consent of Parent and the Company; |
| • | by either Company or Parent, if: |
| • | the merger is not consummated by 11:59 p.m. on June 30,
2016 (Hong Kong Time), provided that this termination right is not available to a party
if the failure to consummate the merger by such date was primarily caused by such party’s
breach of the merger agreement; |
| • | any governmental entity of competent jurisdiction has
enacted, issued, promulgated, enforced or entered any order that has or would have the
effect of enjoining the transactions contemplated by the merger agreement or making the
merger illegal, which shall have become final and non-appealable, or there is any law
that makes the consummation of the merger illegal or prohibited, provided that this termination
right is not be available to a party if the circumstances described in the foregoing
are caused by such party’s breach of the merger agreement; or |
| • | the merger agreement is not approved by Requisite Company
Vote at the extraordinary general meeting or any adjournment thereof. |
| • | Parent or Merger Sub has breached any representation,
warranty, covenant or agreement set forth in the merger agreement, such that the corresponding
condition to Closing would not be satisfied and such breach cannot be cured, or if capable
of being cured, is not cured (i) within 30 calendar days following receipt of written
notice by Parent or Merger Sub of such breach from the Company or (ii) any shorter period
of time that remains between the date the Company provides written notice of such breach
and 11:59 p.m. on June 30, 2016 (Hong Kong Time), provided that, the Company will not
have this termination right if it is then in breach of any representation, warranty,
covenant or agreement under the merger agreement that would result in the failure to
satisfy the corresponding condition to Closing; |
| • | prior to obtaining the Requisite Company Vote, (i) the
Board determines (in its good faith judgment upon the recommendation of the independent
committee), that failure to enter into a definitive agreement relating to a superior
proposal would violate its fiduciary duties under applicable law, and authorizes the
Company to enter into such definitive agreement, (ii) the Company, concurrently with
the termination of the merger agreement, enters into such definitive agreement, (iii)
such superior proposal did not result from any breach by the Company’s non-solicitation
obligations under the merger agreement, (iv) the Company has delivered notice of such
superior proposal to Parent, and if requested by Parent, has made its representatives
available to Parent to discuss proposed changes to the merger agreement, and (v) the
Company pays in full a termination fee to Parent concurrently with such termination;
or |
| • | (i) all of the conditions to the merger regarding
obtaining Requisite Company Vote and no governmental injunction and all of the conditions
to be performed by the Company are satisfied (other than those conditions that by their
nature are to be satisfied at the Closing, but subject to their satisfaction or waiver
by the party having the benefit thereof), (ii) the Company has irrevocably confirmed
by written notice to Parent that all of the conditions to be performed by Parent and
Merger Sub have been satisfied or waived by the Company and that the Company is ready,
willing and able to consummate the Closing, and (iii) Parent and Merger Sub fail to complete
the Closing within 10 business days after the delivery of such notice. |
| • | the Company has breached any representation, warranty,
covenant or agreement set forth in the merger agreement, such that the corresponding
condition to Closing would not be satisfied and such breach cannot be cured, or if capable
of being cured, is not cured: (i) (x) within 5 calendar days following receipt of
written notice by the Company from Parent or Merger Sub of such breach with respect to
the “no solicitation” obligations, or (y) within 30 calendar days following
receipt of written notice by the Company from Parent or Merger Sub of such breach with
respect to any other representation, warranty or covenant, or (ii) any shorter period
of time that remains between the date Parent or Merger Sub provides written notice of
such breach and 11:59 p.m. on June 30, 2016 (Hong Kong Time), provided that, Parent will
not have this termination right if it is then in breach of any representation, warranty,
covenant or agreement under the merger agreement that would result in the failure to
satisfy the corresponding condition to Closing; |
| • | the Board has changed its recommendation to the shareholders
of the Company relating to the approval of the merger in a manner adverse to Parent or
Merger Sub; |
| • | the Board has approved any acquisition proposal or fails
to publicly recommended against any acquisition proposal; |
| • | the Board has failed to include the recommendation to
the shareholders of the Company to approve the merger agreement, the plan of merger and
the transaction contemplated under the merger agreement in this proxy statement; |
| • | the Board has entered into any letter of intent, contract,
memorandum or similar document with respect to any acquisition proposal, or has authorized
the Company to enter into a definitive agreement with respect to such proposal; or |
| • | the Board has taken any other action or made any other
public statement that is inconsistent with its recommendation to the shareholders of
the Company relating to the approval of the merger. |
Termination Fee (Page 90)
The Company will pay to Parent or its designees
a termination fee of $15.0 million, if the merger agreement is terminated:
| • | by Parent where (i) the Company has breached any representation,
warranty, covenant or agreement set forth in the merger agreement, such that the corresponding
condition to Closing would not be satisfied and such breach cannot be cured, or if capable
of being cured, is not cured within the requisite time period, or (ii) the Board (a)
has changed its recommendation to the shareholders of the Company relating to the approval
of the merger in a manner adverse to Parent or Merger Sub, (b) has approved any acquisition
proposal or fails to publicly recommended against any acquisition proposal, (c) has failed
to include the recommendation to the shareholders of the Company to approve the merger
agreement, the plan of merger and the transaction contemplated under the merger agreement
in this proxy statement, (d) has entered into any letter of intent, contract, memorandum
or similar document with respect to any acquisition proposal, or has authorized the Company
to enter into a definitive agreement with respect to such proposal, or (e) or has taken
any other action or made any other public statement that is inconsistent with its recommendation
to the shareholders of the Company relating to the approval of the merger; |
| • | by the Company where, prior to obtaining the Requisite
Company Vote, (i) the Board has determined (in its good faith judgment upon the recommendation
of the independent committee), that failure to enter into a definitive agreement relating
to a superior proposal would violate its fiduciary duties under applicable law, and authorized
the Company to enter into such definitive agreement, (ii) the Company, concurrently with
the termination of the merger agreement, has entered into such definitive agreement,
(iii) such superior proposal did not result from any breach by the Company’s non-solicitation
obligations under the merger agreement, and (iv) the Company has delivered notice of
such superior proposal to Parent, and if requested by Parent, has made its representatives
available to Parent to discuss proposed changes to the merger agreement; |
| • | by the Company or Parent where either (i) the merger is
not consummated by 11:59 p.m. on June 30, 2016 (Hong Kong Time), or (ii) the Requisite
Company Vote is not obtained, and where (a) neither Parent nor Merger Sub has breached
any representation, warranty or covenant under the merger agreement in any material respect,
and (b) at or prior to the time of such termination, the Company has received a bona
fide acquisition proposal from a third party that is not withdrawn and enters into a
definitive agreement with respect to such acquisition proposal within 12 months following
such termination; or |
Parent will pay to the Company
a termination fee of $30.0 million, if the merger agreement is terminated:
| • | by the Company where Parent or Merger Sub has breached
any representation, warranty, covenant or agreement set forth in the merger agreement,
such that the corresponding condition to Closing would not be satisfied and such breach
cannot be cured, or if capable of being cured, is not cured within the requisite time
period; or |
| • | by the Company where (i) all of the conditions to the merger
regarding obtaining Requisite Company Vote and no governmental injunction and all of
the conditions to be performed by the Company are satisfied (other than those conditions
that by their nature are to be satisfied at the Closing, but subject to their satisfaction
or waiver by the party having the benefit thereof), (ii) the Company has irrevocably
confirmed by written notice to Parent that all of the conditions to be performed by Parent
and Merger Sub have been satisfied or waived by the Company and that the Company is ready,
willing and able to consummate the Closing, and (iii) Parent and Merger Sub fail to complete
the Closing within 10 business days after the delivery of such notice. |
If Parent decides not to proceed to consummate
the merger due to the fact that the amount of Dissenting Shares represent no less than 15% of the total outstanding Shares immediately
prior to the Effective Time, then Parent will pay to Company or its designees a termination fee of $15.0 million.
Material U.S. Federal Income Tax Consequences (Page 67)
For a U.S. Holder (as defined under
“Special Factors – Material U.S. Federal Income Tax Consequences), the receipt of cash pursuant to the merger
will be a taxable transaction for U.S. federal income tax purposes and may also be a taxable transaction under applicable
state, local and other tax laws. Please see “Special Factors – Material U.S. Federal Income Tax
Consequences” beginning on page 67 for additional information. The U.S. federal income tax consequences of the merger
to you will depend upon your personal circumstances. You should consult your tax advisors for a full understanding of the
U.S. federal, state, local, non-U.S. and other tax consequences of the merger to you.
Material PRC Income Tax Consequences (Page 70)
The Company does not believe that it should
be considered a resident enterprise under the PRC Enterprise Income Tax Law (the “EIT Law”) or that the gain recognized
on the receipt of cash for the Company’s Shares or ADSs should otherwise be subject to PRC tax to holders of such Shares
or ADSs that are not PRC tax residents. However, there is uncertainty regarding whether the PRC tax authorities would deem the
Company to be a resident enterprise or that PRC tax would otherwise apply. If the PRC tax authorities were to determine that the
Company should be considered a resident enterprise then the gain recognized on the receipt of cash for the Company’s Shares
or ADSs by the holders of such ADSs or Shares that are not PRC tax residents could be treated as PRC-source income that would
be subject to PRC income tax at a rate of 10% in the case of enterprises or 20% in the case of individuals (subject to applicable
tax treaty relief, if any). Furthermore, even in the event that the Company is not considered a resident enterprise, gain recognized
on the receipt of cash for Shares or ADSs is subject to PRC tax if the holders of such Shares or ADSs are PRC resident individuals.
However, neither Parent nor Merger Sub intends to withhold any PRC taxes on the consideration provided to non-PRC resident shareholders
of the Company in connection with the Merger. You should consult your own tax advisor for a full understanding of the tax consequences
of the merger to you, including any PRC tax consequences. Please see “Special Factors – Material PRC Income Tax Consequences”
beginning on page 70 for additional information.
Material Cayman Islands Tax Consequences (Page 71)
The Cayman Islands currently have no
form of income, corporate or capital gains tax and no estate duty, inheritance tax or gift tax. No taxes, fees or charges
will payable (either by direct assessment or withholding) to the government or other taxing authority in the Cayman Islands
under the laws of the Cayman Islands in respect of the merger or the receipt of cash for Shares and ADSs under the terms of
the merger. This is subject to the qualification that (i) Cayman Islands stamp duty may be payable if any original
transaction documents are brought into or executed or produced before a court in the Cayman Islands (for example, for
enforcement), (ii) registration fees will be payable to the Registrar of Companies of the Cayman Islands to register the plan
of merger and (iii) fees will be payable to the Cayman Islands Government Gazette Office to publish the notice of the merger
in the Cayman Islands Government Gazette. Please see “Special Factors – Material Cayman Islands Tax
Consequences” beginning on page 71 for additional information.
Regulatory Matters (Page 67)
The Company does not believe that any material
federal or state regulatory approvals, filings or notices are required in connection with the merger other than (i) the approvals,
filings or notices required under the federal securities laws, and (ii) the registration of the plan of merger (and supporting
documentation as specified in the CICL) with the Registrar of Companies of the Cayman Islands and, in the event the merger becomes
effective, a copy of the certificate of merger being given to the shareholders and creditors of the Company and Merger Sub at
the time of the filing of the plan of merger, and notification of the merger being published in the Cayman Islands Government
Gazette.
Accounting Treatment of the Merger (Page 67)
The merger is expected to be accounted
for, as a merger of entities under common control in accordance with Accounting Standards Codification 805-50,
“Business Combinations—Related Issues.”
Market Price of the Shares (Page 72)
The closing price of the ADSs on the NASDAQ
on June 11, 2015, the last trading date immediately prior to the Company’s announcement on June 12, 2015 that it had received
a going-private proposal, was $12.86 per ADS. The merger consideration of approximately $27.40 per Share, or $13.70 per ADS, to
be paid in the merger represents a premium of approximately 6.53% to that closing price.
Fees and Expenses (Page 66)
Except for the circumstances where either
the Company or Parent is required to pay a termination fee as appropriate under the merger agreement, all fees and expenses incurred
in connection with the merger agreement and the transactions contemplated by the merger agreement will be paid by the party incurring
such expenses, whether or not the merger is consummated.
Remedies (Page 91)
The parties to the merger agreement may
be entitled to the payment of a termination fee or the grant of specific performance of the terms of the merger agreement, including
an injunction or injunctions to prevent breaches of the merger agreement, in addition to any other remedy at law or equity. Specifically,
the Company is entitled to an injunction or injunctions, or other appropriate form of specific performance or equitable relief
to enforce Parent’s and Merger Sub’s obligation to cause the equity financing for the merger to be funded at the Effective
Time, but only in the event that each of the following conditions has been satisfied: (i) all conditions to Parent’s and
Merger Sub’s obligations to consummate the merger (other than those conditions that by their terms are to be satisfied at
the Closing) have been satisfied or waived, (ii) the Company has irrevocably confirmed in writing that if the equity financing
is funded, then the Closing will occur, and (iii) the equity financing has not been funded and Parent and Merger Sub fail to complete
the Closing by the date the Closing is required to have occurred pursuant to the merger agreement.
While the parties may pursue both a grant
of specific performance (including an injunction and injunctions) and monetary damages until such time as the other party pays
a termination fee (as applicable under the merger agreement), none of them will be permitted or entitled to receive both a grant
of specific performance (including an injunction and injunctions) that results in the Closing and monetary damages.
Subject to the equitable remedies the parties
may be entitled to as discussed above, the maximum aggregate liabilities of Parent, on the one hand, and the Company, on the other
hand, for monetary damages in connection with the merger agreement are limited to the Parent termination fee of $30.0 million and
the Company termination fee of $15.0 million, respectively, and reimbursement of certain expenses accrued in the event that Company
or Parent fails to pay the applicable termination fee when due and in accordance with the requirements of the merger agreement,
as the case may be.
QUESTIONS AND ANSWERS ABOUT THE EXTRAORDINARY
GENERAL MEETING AND THE MERGER
The following questions and answers
briefly address some questions you may have regarding the extraordinary general meeting and the merger. These questions and answers
may not address all questions that may be important to you as a shareholder of the Company. Please refer to the more detailed
information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to or
incorporated by reference in this proxy statement.
| Q: | Why am I receiving this proxy statement? |
| A: | On December 15, 2015, we entered into the merger agreement with
Parent and Merger Sub. You are receiving this proxy statement in connection with the
solicitation of proxies by the Board in favor of the proposal to authorize and approve
the merger agreement, the plan of merger and the transactions, including the merger,
at an extraordinary general meeting or at any adjournment of such extraordinary general
meeting. |
| Q: | When and where will the extraordinary general meeting
be held? |
| A: | The extraordinary general meeting will take place on_____, 2016,
at _____ (Beijing Time) at the Company’s office at 18/F, Tower 1, U-town Office
Building, No. 1 San Feng Bei Li, Chaoyang District, Beijing 100020, the People's Republic
of China. |
| Q: | What am I being asked to vote on? |
| A: | You will be asked to consider and vote on the following proposals:
(a) as a special resolution, to authorize and approve the merger agreement, the plan
of merger and the transactions, including the merger; (b) as a special resolution, to
authorize each of the members of the Independent Committee of the Board (the “Independent
Committee”) to do all things necessary to give effect to the merger agreement,
the plan of merger and the transactions, including the merger; and (c) if necessary,
as an ordinary resolution, to approve that the chairman of the extraordinary general
meeting be instructed to adjourn the extraordinary general meeting in order to allow
the Company to solicit additional proxies in the event that there are insufficient proxies
received at the time of the extraordinary general meeting to pass the special resolutions
to be proposed at the extraordinary general meeting. |
| A: | The merger is a going-private transaction pursuant to which Merger
Sub will merge with and into the Company. Once the merger agreement is authorized and
approved by the shareholders of the Company and the other closing conditions under the
merger agreement have been satisfied or waived, Merger Sub will merge with and into the
Company, with the Company continuing as the surviving corporation after the merger. If
the merger is completed, the Company will be a privately held company beneficially owned
by the Buyer Group, and as a result of the merger, the ADSs will no longer be listed
on the NASDAQ, and the Company will cease to be a publicly traded company. |
| Q: | What will I receive in the merger? |
| A: | If you own Shares and the merger is completed, you will be entitled
to receive $27.40 in cash for each Share (other than the Rollover Shares) you own as
of the effective time of the merger (unless you validly exercise and have not effectively
withdrawn or lost your dissenter rights under Section 238 of the Cayman Islands Companies
Law with respect to the merger, in which event you will be entitled to the fair value
of each Share pursuant to the Cayman Islands Companies Law). |
If you own ADSs (other than ADSs which represent
Rollover Shares) and the merger is completed, you will be entitled to receive $13.70 per ADS (less $0.05 per ADS cancellation
fees pursuant to the terms of the ADS deposit agreement) in cash, without interest, for each ADS you own as of the effective time
of the merger unless you (a) surrender your ADS to the ADS depositary, pay the ADS depositary’s fees required for the cancellation
of ADSs, provide instructions for the registration of the corresponding Shares, and certify that you have not given, and will
not give, voting instructions as to the ADSs (or, alternatively, you will not vote the Shares) before the close of business in
New York City on ________, 2016 and become a registered holder of Shares before ________, 2016 and (b) comply with the procedures
and requirements for exercising dissenter rights for the Shares under Section 238 of the Cayman Islands Companies Law.
Please see “Special Factors –
Material U.S. Federal Income Tax Consequences,” “Special Factors – Material PRC Income Tax
Consequences” and “Special Factors – Material Cayman Islands Tax Consequences” beginning on page 71
for a more detailed description of the tax consequences of the merger. You should consult with your own tax advisor for a
full understanding of how the merger will affect your U.S. federal, state, local, non-U.S. and other taxes.
| Q: | How will the Company’s options be treated in
the merger? |
| A: | If the merger is completed, at the Effective Time, the Company will
terminate the Company’s 2009 Stock Incentive Plan and the 2010 Stock Incentive
Plan (collectively, the “Share Incentive Plans”), terminate all relevant
award agreements entered into under the Share Incentive Plans, cancel all options to
purchase Shares or ADSs (the “Company Options”) and all restricted shares
(the “Restricted Shares”, collectively with the Company Options, the “Company
Share Awards”) granted under the Share Incentive Plans that are then outstanding
and unexercised, whether or not vested or exercisable. |
If the merger is completed, at the Effective Time,
as to the Company Options that are not Rollover Shares: (a) each Company Option vested on or prior to the Effective Time (a “Vested
Company Option”) will be cancelled in exchange for the right to receive either a cash amount equal to the excess of $27.40
over the applicable per share exercise price of such Vested Company Option or, as agreed upon by the holder thereof and Parent,
an equity incentive award of Parent with substantially the same economic value as such Vested Company Option under the terms to
be determined by Parent; and (b) each Company Option not vested on or prior to the Effective Time (an “Unvested Company
Option”) will be cancelled in exchange for a right to receive an equity incentive award of Parent with substantially the
same economic value as such Unvested Company Option under the terms to be determined by Parent. The payment or grant of substituted
equity incentive awards in connection with the treatment of applicable Company Options will be made by the surviving corporation
as promptly as practicable following the Effective Time.
If the merger is completed, at the Effective Time,
each Company Option that is a Rollover Share (whether vested or unvested) will be cancelled in exchange for an option to purchase
a number of ordinary shares of Parent (the “Parent Shares”) equal to the number of Shares underlying such Company
Option, under the terms to be determined by Parent.
| Q: | How will the Company’s restricted shares be treated
in the merger? |
| A: | If the merger is completed, at the Effective Time, as to the outstanding
Restricted Shares that are not Rollover Shares: (a) each outstanding Restricted Share
vested on or prior to the Effective Time (a “Vested Restricted Share”) will
be cancelled in exchange for a right to receive either an equity incentive award of Parent
with substantially the same economic value as such Vested Restricted Share under the
terms determined by Parent, or as agreed upon by the holder thereof and Parent, $27.40
in cash; and (b) each outstanding Restricted Share not vested on or prior to the Effective
Time (an “Unvested Restricted Share”) will be cancelled in exchange for a
right to receive an equity incentive award of Parent with substantially the same economic
value as such Unvested Restricted Share under the terms to be determined by Parent. The
payment or grant of substituted equity incentive awards in connection with the treatment
of applicable Restricted Shares will be made by the surviving corporation as promptly
as practicable following the Effective Time. |
If the merger is completed, at the Effective Time,
each outstanding Restricted Share that is a Rollover Share (whether vested or unvested) will be cancelled in exchange for a right
to receive one Parent Share.
| Q: | After the merger is completed, how will I receive the
merger consideration for my Shares? |
| A: | If you are a registered holder of Shares, promptly after the effective
time of the merger (in any event within five business days after the Effective Time),
a paying agent appointed by Parent will mail you (a) a letter of transmittal specifying
how the delivery of the merger consideration to you will be effected and (b) instructions
for effecting the surrender of share certificates in exchange for the applicable merger
consideration. You will receive cash for your Shares from the paying agent after you
comply with these instructions. Upon surrender of your share certificates or a declaration
of loss or non-receipt, you will receive an amount equal to the number of your Shares
multiplied by $27.40 in cash, without interest and net of any applicable withholding
tax, in exchange for the cancellation of your Shares. The merger consideration may be
subject to U.S. federal income tax backup withholding if the paying agent has not received
from you a properly completed and signed U.S. Internal Revenue Service Form W-8 or W-9. |
If your Shares are held in “street name”
by your broker, bank or other nominee, you will receive instructions from your broker, bank or other nominee on how to surrender
your Shares and receive the merger consideration for those Shares.
| Q: | After the merger is completed, how will I receive
the merger consideration for my ADSs? |
| A: | If your ADSs are evidenced by certificates, also referred to as
American depositary receipts (the “ADRs”), unless you have surrendered your
ADRs to the ADS depositary for cancellation prior to the effective time of the merger,
upon your surrender of the ADRs (or an affidavit and indemnity of loss in lieu of the
ADRs) together with a duly completed letter of transmittal (which will be supplied to
you by the ADS depositary after the Effective Time), the ADS depositary will send you
a check for the per ADS merger consideration of $13.70 (less $0.05 per ADS cancellation
fees pursuant to the terms of the ADS deposit agreement), without interest, for each
ADS evidenced by the ADRs, in exchange for the cancellation of your ADRs after the completion
of the merger. If you hold your ADSs in uncertificated form, that is, without an ADR,
unless you have surrendered your ADSs to the ADS depositary for cancellation prior to
the Effective Time, the ADS depositary will automatically send you a check for the per
ADS merger consideration of $13.70 (less $0.05 per ADS cancellation fees pursuant to
the terms of the ADS deposit agreement), without interest and net of any applicable withholding
taxes, in exchange for the cancellation of each of your ADSs after the completion of
the merger. The per ADS merger consideration may be subject to U.S. federal income tax
backup withholding if the ADS depositary has not received from you a properly completed
and signed U.S. Internal Revenue Service Form W–8 or W–9. |
In the event of a transfer of ownership of ADSs that
is not registered in the register of ADS holders maintained by the ADS depositary, the check for any cash to be exchanged upon
cancellation of the ADSs will be issued to such transferee only if the ADRs, if applicable, are presented to the ADS depositary,
accompanied by all documents reasonably required to evidence and effect such transfer and to evidence that any applicable ADS
transfer taxes have been paid or are not applicable. The per ADS merger consideration may be subject to U.S. federal income tax
backup withholding if the ADS depositary has not received from the transferee a properly completed and signed U.S. Internal Revenue
Service Form W–8 or W–9.
If your ADSs are held in “street name”
by your broker, bank or other nominee, you will not be required to take any action to receive the net merger consideration for
your ADSs as the ADS depositary will arrange for the surrender of the ADSs and the remittance of the per ADS merger consideration
with The Depository Trust Company (the clearance and settlement system for the ADSs) for distribution to your broker, bank or
nominee on your behalf. If you have any questions concerning the receipt of the per ADS merger consideration, please contact your
broker, bank or nominee.
| Q: | What vote of our shareholders is required to authorize
and approve the merger agreement and the plan of merger? |
| A: | In order for the merger to be completed, the merger agreement, the
plan of merger and the transactions contemplated by the merger agreement, including the merger, must be authorized and approved
by a special resolution of the Company passed by an affirmative vote of shareholders representing at least two-thirds of the Shares
present and voting in person or by proxy as a single class at the extraordinary general meeting. At the close of business in the
Cayman Islands on ________, 2016, the Share record date for the extraordinary general meeting, we expect that there will be _______Shares
issued and outstanding and entitled to vote at the extraordinary general meeting. Pursuant to the Support Agreement, the Rollover
Shareholders have agreed to vote all of the Shares beneficially owned by them in favor of the authorization and approval of the
merger agreement, the plan of merger and the transactions contemplated by the merger agreement, including the merger. As of the
date of this proxy statement, the Rollover Shareholders beneficially own approximately 58.8% of the total issued and outstanding
Shares of the Company entitled to vote. |
| Q: | What vote of our shareholders is required to approve the
proposal to adjourn and postpone the extraordinary general meeting, if necessary, to
solicit additional proxies? |
| A: | The authorization and approval of the merger agreement, the plan
of merger and the merger must be authorized and approved by a special resolution of the
Company passed by an affirmative vote of shareholders representing at least two-thirds
of the Shares present and voting in person or by proxy as a single class at the extraordinary
general meeting. If there are insufficient votes at the time of the extraordinary general
meeting to authorize and approve the merger agreement, the plan of merger and the transactions
contemplated by the merger agreement, including the merger, you will also be asked to
vote on the proposal to adjourn the extraordinary general meeting to allow us to solicit
additional proxies. |
The proposal to adjourn and postpone the extraordinary
general meeting, if necessary, to solicit additional proxies must be authorized and approved by an affirmative vote of the majority
of such shareholders of the Company as, being entitled to do so, vote in person or by proxy as a single class at the extraordinary
general meeting.
| Q: | How does the Board recommend that I vote on the proposals? |
| A: | After careful consideration and upon the unanimous recommendation
of the Independent Committee, our Board recommends that you vote: |
| • | FOR the proposal to authorize and approve the merger
agreement, the plan of merger and the transactions contemplated by the merger agreement,
including the merger; |
| • | FOR the proposal to authorize each of the members
of the Independent Committee to do all things necessary to give effect to the merger
agreement, the plan of merger, and the transactions contemplated by the merger agreement,
including the merger; and |
| • | FOR the proposal to instruct the chairman of the
extraordinary general meeting to adjourn the extraordinary general meeting in order to
allow the Company to solicit additional proxies in the event that there are insufficient
proxies received to pass the special resolutions to be proposed at the extraordinary
general meeting. |
| Q: | Who is entitled to vote at the extraordinary general meeting? |
| A: | The Share record date is ________, 2016. Only shareholders entered
in the register of members of the Company at the close of business in the Cayman Islands
on the Share record date or their proxy holders are entitled to vote at the extraordinary
general meeting or any adjournment thereof. The record date for ADS holders entitled
to instruct the ADS depositary to vote at the extraordinary general meeting is ________,
2016. Only ADS holders of the Company at the close of business in New York City on the
ADS record date are entitled to instruct the ADS depositary to vote at the extraordinary
general meeting. Alternatively, you may vote at the extraordinary general meeting if
you cancel your ADSs by the close of business in New York City on ________, 2016 and
become a holder of Shares by the close of business in the Cayman Islands on the Share
record date. |
| Q: | What constitutes a quorum for the extraordinary general
meeting? |
| A: | The presence, in person or by proxy, of two or more shareholders
holding not less than one-third in nominal value of the total issued and outstanding
Shares on the Share record date will constitute a quorum for the extraordinary general
meeting. |
| Q: | What effects will the merger have on the Company? |
| A: | As a result of the merger, the Company will cease to be a publicly-traded
company and will be beneficially owned by the Buyer Group. Your Shares and/or ADSs in
the Company will be cancelled, and you will no longer have any interest in our future
earnings or growth. Following consummation of the merger, the registration of our Shares
and ADSs and our reporting obligations with respect to our Shares and ADSs under the
Exchange Act, will be terminated upon application to the SEC. In addition, upon completion
of the merger, our ADSs will no longer be listed or traded on any stock exchange, including
the NASDAQ and the American depositary shares program for the ADSs will terminate. |
| Q: | When do you expect the merger to be completed? |
| A: | We are working toward completing the merger as quickly as possible
and currently expect the merger to close in the second quarter of 2016. In order to complete
the merger, we must obtain the Requisite Company Vote of the merger at the extraordinary
general meeting and the other closing conditions under the merger agreement must be satisfied
or waived in accordance with the merger agreement. |
| Q: | What happens if the merger is not completed? |
| A: | If our shareholders do not authorize and approve the merger agreement,
the plan of merger and the transactions contemplated by the merger agreement, including
the merger, or if the merger is not completed for any other reason, our shareholders
will not receive any payment for their Shares or ADSs pursuant to the merger agreement
nor will the holders of any options or restricted shares receive payment pursuant to
the merger agreement. In addition, the Company will remain a publicly traded company.
The ADSs will continue to be listed and traded on the NASDAQ, provided that the Company
continues to meet the NASDAQ’s listing requirements. In addition, the Company will
remain subject to SEC reporting obligations. Therefore, our shareholders will continue
to be subject to similar risks and opportunities as they currently are with respect to
their ownership of our Shares or ADSs. |
Under specified circumstances in which the merger
agreement is terminated, the Company may be required to pay Parent a termination fee, or Parent may be required to pay the Company
a termination fee, in each case, as described under the caption “The Merger Agreement and Plan of Merger – Termination
Fee” beginning on page 90.
| Q: | What do I need to do now? |
| A: | We urge you to read this proxy statement carefully, including its
annexes, exhibits, attachments and the other documents referred to or incorporated by
reference herein and to consider how the merger affects you as a shareholder. After you
have done so, please vote as soon as possible. |
| Q: | How do I vote if my Shares are registered in my name? |
| A: | If Shares are registered in your name (that is, you do not hold
ADSs) as of the Share record date, you should simply indicate on your proxy card how
you want to vote, and sign and mail your proxy card in the enclosed return envelope as
soon as possible but in any event at least 48 hours before the time of the extraordinary
general meeting so that your Shares will be represented and may be voted at the extraordinary
general meeting. |
Alternatively, you can attend the extraordinary general
meeting and vote in person. If you decide to sign and send in your proxy card, and do not indicate how you want to vote, the Shares
represented by your proxy will be voted FOR the proposal to authorize and approve the merger agreement, the plan of merger
and transactions contemplated by the merger agreement, including the merger, FOR the proposal to authorize each of the
members of the Independent Committee to do all things necessary to give effect to the merger agreement, the plan of merger, and
the transactions contemplated by the merger agreement, including the merger and FOR the proposal to adjourn the extraordinary
general meeting in order to allow the Company to solicit additional proxies in the event that there are insufficient proxies received
to pass the special resolution during the extraordinary general meeting unless you appoint a person other than the chairman of
the meeting as proxy, in which case the Shares represented by your proxy card will be voted (or not submitted for voting) as your
proxy determines. If your Shares are held by your broker, bank or other nominee, please see below for additional information.
| Q: | How do I vote if I own ADSs? |
| A: | If you own ADSs as of the close of business in New York City on
________, 2016, the ADS record date (and do not cancel such ADSs and become a registered
holder of the Shares underlying such ADSs as explained below), you cannot vote at the
meeting directly, but you may instruct the ADS depositary (as the holder of the Shares
underlying your ADSs) how to vote the Shares underlying your ADSs by completing and signing
the ADS voting instructions card and returning it in accordance with the instructions
printed on it as soon as possible but, in any event, so as to be received by the ADS
depositary no later than ____ a.m. (New York City Time) on ________, 2016. The ADS depositary
will endeavor, in so far as practicable, to vote or cause to be voted the number of Shares
represented by your ADSs in accordance with your voting instructions. If the ADS depositary
timely receives valid voting instructions from an ADS holder which fail to specify the
manner in which the ADS depositary is to vote the Shares represented by ADSs held by
such ADS holder, or if holders of ADSs do not timely deliver specific voting instructions
to the ADS depositary, they will, under the terms of ADS deposit agreement, be deemed
to have instructed the ADS depositary to give a discretionary proxy to a person designated
by the Company (the “Designee”) to vote the Shares represented by such holder’s
ADS, unless the Company notifies the ADS depositary that it does not wish such proxy
to be given, that substantial opposition exists to the matters to be voted on at the
extraordinary general meetings or that such matters would have a material adverse impact
on the holders of the ADSs or on the holders of the Shares. Likewise, unless the Company
notifies the ADS depositary that the Company does not wish to give such proxy or there
exists substantial opposition to the matters to be voted on at the extraordinary general
meeting or that such matters would have a material adverse impact on the holders of the
ADSs or on the holders of the Shares, the Designee will receive a discretionary proxy
from the ADS depositary and will vote all Shares underlying such uninstructed ADSs in
favor of the items set forth in the voting instructions. |
Alternatively, you may vote at the extraordinary
general meeting if you cancel your ADSs prior to the close of business in New York City on ________, 2016 and become a registered
holder of Shares by the close of business in the Cayman Islands on ________, 2016, the share record date. If you hold your ADSs
through a financial intermediary such as a broker, you must rely on the procedures of the financial intermediary through which
you hold your ADSs if you wish to vote. If your ADSs are held by your broker, bank or other nominee, see below.
If you wish to cancel your ADSs for the purpose of
voting the corresponding Shares, you need to make arrangements to deliver your ADSs to the ADS depositary for cancellation prior
to the close of business in New York City on ________, 2016 together with (a) delivery instructions for the corresponding Shares
(name and address of person who will be the registered holder of Shares), (b) payment of the ADS cancellation fees ($0.05 per
ADS to be cancelled) and any applicable taxes, and (c) a certification that the ADS holder held the ADSs as of the ADS record
date for the extraordinary general meeting and has not given, and will not give, voting instructions to the ADS depositary as
to the ADSs being cancelled, or has given voting instructions to the ADS depositary as to the ADSs being cancelled but undertakes
not to vote the corresponding Shares at the extraordinary general meeting. If you hold your ADSs in a brokerage, bank or nominee
account, please contact your broker, bank or nominee to find out what actions you need to take to instruct the broker, bank or
nominee to cancel the ADSs on your behalf. Upon cancellation of the ADSs, the ADS depositary will arrange for the Deutsche Bank
AG Hong Kong Branch, the custodian holding the Shares, to transfer registration of the Shares to the former ADS holder. If after
registration of Shares in your name you wish to receive a certificate evidencing the Shares registered in your name, you will
need to request the registrar of the Shares to issue and mail a certificate to your attention.
| Q: | If my Shares or ADSs are held in a brokerage or other
nominee account, will my broker vote my Shares on my behalf? |
| A: | Your broker, bank or other nominee will only vote your Shares on
your behalf or give voting instructions with respect to the Shares underlying your ADSs
if you instruct it how to vote. Therefore, it is important that you promptly follow the
directions provided by your broker, bank or nominee regarding how to instruct it to vote
your Shares. If you do not instruct your broker, bank or other nominee how to vote your
Shares that it holds, those Shares may not be voted. |
| Q: | What will happen if I abstain from voting or fail to vote
on the proposal to authorize and approve the merger agreement and the plan of merger? |
| A: | 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, your vote will not be counted. |
| A: | Yes, you may change your vote in one of three ways: |
| • | first, you may revoke a proxy by written notice of revocation
given to the chairman of the extraordinary general meeting before the extraordinary general
meeting commences. Any written notice revoking a proxy should be sent to 18/F, Tower
1, U-town Office Building, No. 1 San Feng Bei Li, Chaoyang District, Beijing 100020,
the People’s Republic of China; |
| • | second, you may complete, date and submit a new proxy card
bearing a later date than the proxy card sought to be revoked to the Company no less
than 48 hours prior to the extraordinary general meeting; or |
| • | third, you may attend the extraordinary general meeting
and vote in person. Attendance, by itself, will not revoke a proxy. It will only be revoked
if the shareholder actually votes at the extraordinary general meeting. |
If you hold Shares through a broker, bank or other
nominee and have instructed the broker, bank or other nominee to vote your Shares, you must follow directions received from the
broker, bank or other nominee to change your instructions.
Holders of our ADSs may revoke their voting instructions
by notification to the ADS depositary in writing at any time prior to ____ a.m. (New York City Time) on ________, 2016. A holder
of ADSs can do this in one of two ways:
| • | first, a holder of ADSs can revoke its voting instructions
by written notice of revocation timely delivered to the ADS depositary; and |
| • | second, a holder of ADSs can complete, date and submit
a new ADS voting instructions card to the ADS depositary bearing a later date than the
ADS voting instructions card sought to be revoked. |
If you hold your ADSs through a broker, bank or nominee
and you have instructed your broker, bank or nominee to give ADS voting instructions to the ADS depositary, you must follow the
directions of your broker, bank or nominee to change those instructions.
| Q: | What should I do if I receive more than one set of
voting materials? |
| A: | You may receive more than one set of voting materials, including
multiple copies of this proxy statement or multiple proxy or voting instruction cards.
For example, if you hold your Shares or ADSs in more than one brokerage account, you
will receive a separate voting instruction card for each brokerage account in which you
hold Shares or ADSs. If you are a holder of record and your Shares or ADSs are registered
in more than one name, you will receive more than one proxy card. Please submit each
proxy card that you receive. |
| Q: | If I am a holder of certificated Shares or ADRs, should
I send in my share certificates or my ADRs now? |
| A: | No. After the merger is completed, you will be sent a letter of
transmittal with detailed written instructions for exchanging your share certificates
for the merger consideration. Please do not send in your certificates now. Similarly,
you should not send in the ADRs that evidence your ADSs at this time. Promptly after
the merger is completed, the ADS depositary will call for the surrender of all ADRs for
delivery of the merger consideration. ADR holders will be receiving a similar form of
letter of transmittal and written instructions from the ADS depositary relating to the
foregoing. |
All holders of uncertificated Shares and uncertificated
ADSs (i.e., holders whose Shares or ADSs are held in book entry) will automatically receive their cash consideration shortly after
the merger is completed without any further action required on the part of such holders. If your Shares or your ADSs are held
in “street name” by your broker, bank or other nominee you will receive instructions from your broker, bank or other
nominee as to how to effect the surrender of your share certificates or ADRs in exchange for the merger consideration.
| Q: | What happens if I sell my Shares or ADSs before the
extraordinary general meeting? |
| A: | The share record date for determining shareholders entitled to vote
at the extraordinary general meeting is earlier than the date of the extraordinary general
meeting and the date that the merger is expected to be consummated. If you transfer your
Shares after the share record date but before the extraordinary general meeting, you
will retain your right to vote at the extraordinary general meeting unless you have given,
and not revoked, a valid proxy to the person to whom you transfer your Shares, but will
transfer the right to receive the merger consideration in cash without interest to such
person, so long as such person is registered as the owner of such Shares when the merger
is consummated. In such case, your vote is still very important and you are encouraged
to vote. |
The ADS record date is the close of business in New
York City on _______, 2016. If you transfer your ADSs after the ADS record date but before the extraordinary general meeting,
you will retain your right to instruct the ADS depositary to vote at the extraordinary general meeting, but will transfer the
right to receive the merger consideration in cash without interest to the person to whom you transfer your ADSs, so long as such
person owns such ADSs when the merger is consummated.
| Q: | Am I entitled to dissenter rights? |
| A: | Shareholders who dissent from the merger will have the right to
receive payment of the fair value of their Shares if the merger is completed, but only
if they deliver to the Company, before the vote on the merger is taken at the extraordinary
general meeting, a written objection to the merger and they subsequently comply with
all procedures and requirements of Section 238 of the Cayman Islands Companies Law for
the exercise of dissenter rights. The fair value of their Shares as determined under
that statute could be more than, the same as, or less than the merger consideration they
would receive pursuant to the merger agreement if you do not exercise dissenter rights
with respect to their Shares. |
ADS holders will not have the right to dissent from
the merger and receive payment of the fair value of the Shares underlying their ADSs. The ADS depositary will not attempt to exercise
any dissenter rights with respect to any of the Shares that it holds, even if an ADS holder requests the ADS depositary to do
so. ADS holders wishing to exercise dissenter rights must surrender their ADSs to the ADS depositary, pay the ADS depositary’s
fees required for such surrender and any applicable taxes, provide instructions for the registration of the corresponding Shares,
and certify that they have not given, and will not give, voting instructions as to the ADSs (or alternatively, they will not vote
the Shares) before the close of business in New York City on ________, 2016, and become registered holders of Shares by the close
of business in the Cayman Islands before ________, 2016. Thereafter, such former ADS holders must also comply with the procedures
and requirements for exercising dissenter rights with respect to the Shares under Section 238 of the Cayman Islands Companies
Law.
| Q: | If I own ADSs and seek to exercise dissenter rights, how
do I convert my ADSs to Shares, and when is the deadline for completing the conversion
of ADSs to Shares? |
| A: | If you own ADSs and wish to exercise dissenter rights, you must
surrender your ADSs to the ADS depositary (in the case of a certificated ADS by delivering
the certificate to Deutsche Bank Trust Company Americas at 60 Wall Street, New York,
NY 10005, United States of America). Upon your payment of its fees, including the applicable
ADS cancellation fee ($0.05 per ADS) and any applicable taxes, and a certification that
you have not given, and will not give, voting instructions to the ADS depositary in respect
of the ADSs being cancelled (or, alternatively, that you will not vote the Shares), the
ADS depositary will transfer the Shares and any other deposited securities underlying
the ADSs to such ADS holder or a person designated by such ADS holder. The deadline for
surrendering ADSs to the ADS depositary for these purposes is the close of business in
New York City on ________, 2016. |
You must become a registered holder of your Shares
and lodge a written notice of objection to the merger prior to the vote on the merger being taken at the extraordinary general
meeting.
We encourage you to read the information set
forth in this proxy statement carefully and to consult your own Cayman Islands legal counsel if you desire to exercise your
dissenter rights. Please see “Dissenter Rights” beginning on page 93 as well as “Annex C – Cayman
Islands Companies Law Cap. 22 (Law 3 of 1961, as consolidated and revised) – Section 238” to this proxy statement
for additional information.
| Q: | Will any proxy solicitors be used in connection with the
extraordinary general meeting? |
| A: | No. The Company does not plan to engage a proxy solicitor to assist
in the solicitation of proxies. |
| Q: | Do any of the Company’s directors or executive officers
have interests in the merger that may differ from those of other shareholders? |
| A: | Yes. Some of the Company’s directors or executive officers
have interests in the merger that may differ from those of other shareholders, including: |
| • | the beneficial ownership of equity interests in Parent
by Mr. Dong Yu, the chairman of the Board and chief executive officer of the Company; |
| • | the potential enhancement or decline of share value of
Parent’s shares directly or indirectly held by Mr. Dong Yu as a result of the merger
and future performance of the surviving corporation; |
| • | either the cash-out of or replacement of Vested Company
Options and Vested Restricted Shares beneficially held by employees, executive officers
and directors of the Company (other than Mr. Dong Yu) by a grant of equity incentive
awards of Parent with substantially the same economic value, as agreed upon by the holders
thereof and Parent; |
| • | the replacement of Unvested Company Options and Unvested
Restricted Shares beneficially held by employees, executive officers and directors of
the Company (other than Mr. Dong Yu) by a grant of equity incentive awards of Parent
with substantially the same economic value; |
| • | continued indemnification, rights to advancement of fees
and directors and officers liability insurance to be provided by the surviving corporation
to former directors and officers of the Company; |
| • | the monthly compensation of $10,000 of members of the Independent
Committee in exchange for their services in such capacity (or, in the case of the chairman
of the Independent Committee, monthly compensation of $15,000) (the payment of which
is not contingent upon the completion of the merger or the Independent Committee’s
or the Board’s recommendation of the merger); and |
| • | the continuation of service of certain executive officers
of the Company with the surviving corporation in positions that are substantially
similar to their current positions. |
Please see “Special Factors –
Interests of Certain Persons in the Merger” beginning on page 58 for a more detailed discussion of how some of our
Company’s directors and executive officers have interests in the merger that are different from, or in addition to, the
interests of our shareholders generally.
| Q: | How will our directors and executive officers vote on
the proposal to authorize and approve the merger agreement and the plan of merger?
|
| A: | Pursuant to the Support Agreement, each of the Rollover Shareholders,
including the Chairman Parties, has agreed to vote all of the Shares beneficially owned
by it in favor of the authorization and approval of the merger agreement, the plan of
merger and the transactions contemplated by the merger agreement, including the merger.
As of the record date, we expect that the Chairman Parties will beneficially own approximately
_______% of the total issued and outstanding Shares of the Company entitled to vote. |
| Q: | Who can help answer my questions? |
| A: | If you have any questions or need assistance in voting your Shares
or ADSs, you can contact Investor Relations, Bona Film Group Limited, at +86-10-5631-0700
ext. 398 or at ir@bonafilm.cn. |
SPECIAL FACTORS
Background of the Merger
Events leading to the execution of
the merger agreement described in this Background of the Merger occurred in China and Hong Kong. As a result, China Standard
Time is used for all dates and times given. The term “Consortium” used at various times refers to the consortium
consisting of the Chairman Parties, Fosun, the Sequoia Entities, SAIF, Alibaba Pictures, Willow, Uranus, All Gain, as applicable, as
the relevant parties formed or joined the Consortium at different times described below.
The Board and senior management of the
Company have been reviewing periodically the Company’s long-term strategic plan with the goal of maximizing shareholder
value. As part of this ongoing process, the Board and senior management of the Company also have periodically reviewed strategic
alternatives that may be available to the Company.
On June 12, 2015, the Chairman, Skillgreat,
Sequoia Entities, Fosun Entities, Peak Reinsurance Company Limited (“PeakRe”) and Fidelidade-Companhia de Seguros,
S.A. (“Fidelidade”, together with Fosun Entities, the “Fosun Group”, and together with Sequoia Entities,
Fosun Entities and PeakRe, the “Sponsor Group”) entered into a consortium agreement (the “Consortium Agreement”),
pursuant to which the Chairman, Skillgreat and the Sponsor Group submitted to the Board a preliminary non-binding proposal (the
“Proposal Letter”) to acquire the Company in a going private transaction for $27.40 in cash per Share (or $13.70 in
cash per ADS, on the basis that two ADSs shall represent one Share), other than any Shares or ADSs beneficially held by the Consortium
that may be rolled over in connection with the proposed transaction. The Consortium Agreement provided, among other things, for
coordination in (a) the evaluation of the Company, including conducting due diligence of the Company and its business, (b) discussions
regarding the proposed transaction with the Company, and (c) the negotiation of the terms of definitive documentation in
connection with the proposed transaction. In connection with finalizing the Consortium Agreement and preparing for the proposed
transaction, the Consortium retained Kirkland & Ellis International LLP (“Kirkland & Ellis”) as its U.S. legal
advisor.
On June 15, 2015, the Board held a telephonic
meeting to discuss, among other things, the Proposal Letter. During the meeting, Simpson Thacher & Bartlett LLP, the Company’s
outside U.S. legal counsel provided the Board with an overview of the procedures, process and duties of directors under applicable
law in connection with the Proposal Letter and the possibility of establishing a committee of independent directors to evaluate
the proposed transaction. After the presentation and a thorough discussion, the Board determined that it was in the best interests
of the Company to establish the Independent Committee consisting of Dr. Daqing Dave Qi, Mr. Jie Lian and Mr. Zhong Jiang, with
Dr. Daqing Dave Qi serving as chairman of the Independent Committee. The Independent Committee was granted, by way of unanimous
written resolutions by the Board on July 9, 2015, the power and authority to (i) establish, approve, modify, monitor and direct
the process and procedures related to the review and evaluation of the proposed transaction and any alternative transaction, including
the authority to determine not to proceed with any such process, procedures, review or evaluation; (ii) respond to any communications,
inquiries or proposals regarding the proposed transaction or any alternative transaction; (iii) review, evaluate, investigate,
pursue and negotiate the terms and conditions of the proposed transaction or any alternative transaction; (iv) solicit expressions
of interest or other proposals for alternative transactions to the extent the Independent Committee deems appropriate; (v) recommend
to the Board and the Company whether the proposed transaction or any alternative transaction is advisable and is fair to, and
in the best interests of, the Company and its shareholders (or any subset of the shareholders of the Company that the Independent
Committee determines to be appropriate); (vi) recommend rejection or approval of the proposed transaction or any alternative transaction
to the Board; (vii) effect or recommend to the Board the consummation of the proposed transaction or any alternative transaction;
(viii) review, analyze, evaluate and monitor all proceedings and activities of the Company related to the proposed transaction
or any alternative transaction; (ix) take such actions as the Independent Committee may deem to be necessary or appropriate in
connection with anti-takeover provisions, including, without limitation, actions with respect to the adoption, amendment or redemption
of a shareholder rights plan; (x) investigate the Company and any prospective acquirers, the proposed transaction or alternative
transaction and matters related thereto as it deems appropriate; (xi) review and comment upon any and all documents and other
instruments used in connection with the proposed transaction or any alternative transaction, including any and all materials to
be filed with the SEC and other governmental and non-governmental persons and entities; (xii) authorize the issuance of press
releases and other public statements, including filings with the SEC and other governmental and non-governmental persons and entities
as the Independent Committee considers appropriate regarding the proposed transaction or any alternative transaction or consideration
thereof; and (xiii) take such other actions as the Independent Committee may deem to be necessary or appropriate for the Independent
Committee to discharge its duties.
On June 16, 2015, the Company issued a
press release regarding its receipt of the Proposal Letter and the proposed transaction dated as of June 12, 2015, and furnished
the press release as an exhibit to its current report on Form 6-K.
From June 17, 2015 to June 19, 2015, the
Chairman, Skillgreat, Fosun Group and Sequoia Entities filed with the SEC their respective Schedule 13D or Schedule 13D amendment
announcing (i) the execution of the Consortium Agreement and (ii) the execution and the submission of the Proposal Letter to the
Board. According to their respective Schedule 13D or Schedule 13D amendment, as of June 12, 2015, the Chairman, Skillgreat, Fosun
Group and Sequoia Entities beneficially owned approximately 28.7%, 20.1% and 5.1%, respectively, of the outstanding Shares, respectively.
On June 18, 2015, after considering proposals
from multiple prospective U.S. legal advisors, the Independent Committee determined to retain Shearman & Sterling (“Shearman
& Sterling”) as its U.S. legal advisor to assist the Independent Committee in evaluating and negotiating the proposed
transaction or any alternative transaction. The Independent Committee’s decision was based on, among other factors, Shearman
& Sterling’s qualifications, extensive experience with mergers and acquisitions transactions, including representation
of independent committees in going private transactions, and its significant history of working with China-based companies.
Later that day, the Independent Committee
authorized Shearman & Sterling to contact four investment banks that had expressed interest in being considered for the role
of financial advisor to the Independent Committee and to request that they submit detailed proposals, including their qualifications,
advisory experience and a fee proposal for consideration by the Independent Committee.
On June 22, 2015, the Independent Committee
convened an organizational meeting by telephone with Shearman & Sterling. During the meeting, the Independent Committee ratified
the retention of Shearman & Sterling as its U.S. legal advisor. Shearman & Sterling then led the Independent Committee
in a discussion of its key duties and responsibilities in the context of a going private transaction and suggested key guidelines
for the Independent Committee to consider in this context. Thereafter, the Independent Committee engaged in a discussion with
Shearman & Sterling regarding establishing a process and adopting a strategy and practices designed to maximize shareholder
value.
During the meeting, the Independent Committee
also discussed draft communications and confidentiality guidelines prepared by Shearman & Sterling for directors, officers
and employees of the Company to follow in light of and in connection with the proposed transaction and any alternative transaction,
including guidelines on what information can and should be provided to the Consortium and to third parties involved in or potentially
interested in pursuing an alternative transaction, and the circumstances and conditions under which such information should be
provided. After discussion, the Independent Committee decided to provide the guidelines to management. The guidelines were subsequently
delivered to the management on July 23, 2015.
During the meeting, the Independent Committee
also considered the proposal of each candidate investment bank, including their experience with similar transactions, reputation,
knowledge of the relevant industry, fee proposals, relevant qualifications of team members and potential conflicts of interests.
After discussion, the Independent Committee decided to engage Barclays Bank PLC (“Barclays”) as its financial advisor.
Among the reasons for Barclays’s selection were their extensive experiences in mergers and acquisitions transactions, its
strong reputation, its significant experience dealing with China-based companies, and its lack of existing material relationships
with the Company or the Consortium. The Independent Committee, on behalf of the Company, subsequently entered into an engagement
letter with Barclays on July 13, 2015.
During the meeting, the Independent Committee
also authorized Shearman & Sterling to contact reputable Cayman Islands counsel to submit credentials and proposal for its
consideration.
On July 3, 2015, the Independent Committee
held a telephonic meeting with Shearman & Sterling and Barclays. During the meeting, Barclays gave the Independent Committee
an overview of the Proposal Letter. Thereafter, the Independent Committee engaged in a discussion with its advisors regarding
adopting practices throughout its work that are designed to maximize shareholder value in light of the circumstances, including
the fact that the Consortium collectively held approximately 53.9% voting power in the Company. The Independent Committee requested
that its advisors (i) seek to obtain clarification from the members of the Consortium as to whether and under what circumstances
they might be willing to support an alternative transaction, including but not limited to a potential sale of their shares held
in the Company; and (ii) engage in discussion with the Consortium to better understand their financing plan and corresponding
timing in connection with their proposal. The Independent Committee also approved Barclays to commence its due diligence on the
Company as necessary for Barclays to conduct its valuation for the Company. Then the Independent Committee engaged in a discussion
with its advisors regarding the communication protocol with respect to potential investor questions and market inquires. After
discussion, the Independent Committee decided that all questions from external parties should be addressed to Barclays who should
consult the Independent Committee and Shearman & Sterling in responding to such questions. The Independent Committee also
concluded that it was in the best interests of the Company at that stage to enter into a confidentiality agreement with the Consortium
and authorized Shearman & Sterling to negotiate such confidentiality agreement on behalf of the Company. Finally, after considering
the relevant experience and credentials of Maples and Calder, the Independent Committee determined to retain Maples and Calder
as its Cayman Islands legal advisor.
On July 6, 2015, Shearman & Sterling
sent a confidentiality agreement to Kirkland & Ellis.
During the ensuing days, Shearman &
Sterling and Kirkland & Ellis negotiated and finalized the terms of the confidentiality agreement through several telephonic
meetings.
On July 13, 2015, the Company issued a
press release regarding the formation of the Independent Committee and the Independent Committee’s appointment of Barclays
as its financial advisor and Shearman & Sterling as its U.S. legal advisor and furnished the press release as an exhibit to
its current report on Form 6-K.
On July 21, 2015, Fosun International Holdings
Limited (“Fosun International Holdings”), an indirect controlling shareholder of Fosun, executed a deed of release
to discharge 2,250,711 Shares of the Company from the security created by a prior mortgage deed executed by Skillgreat in favor
of Fosun International Holdings. The execution of this deed of release followed Fosun International Holdings’ receipt from
Skillgreat of a series of payments in satisfaction of all outstanding principal and interest under a loan agreement dated as of
July 23, 2014, by and among the Chairman, Skillgreat and Fosun International Holdings.
On July 22, 2015, Barclays
and Shearman & Sterling held a telephonic meeting with the Chairman in order to explore the Chairman’s willingness
to consider potential alternatives to the transaction proposed by the Consortium in the Proposal Letter. During the meeting,
the Chairman confirmed that he would not sell his Shares in the Company nor participate in any alternative transaction.
The Chairman also indicated that the Consortium had not yet determined a specific transaction timetable to submit a
binding proposal, which would largely be driven by the financing timetable, and that he was in discussions with a number of
banks regarding debt financing. The Chairman said he was not in a position to represent the Sequoia Entities and Fosun
regarding their intentions with respect to the proposed transaction.
On July 23, 2015, representatives of Tencent
spoke with the Chairman’s representatives, regarding the possibility of Tencent joining the Consortium. During the preliminary
discussions at that time, however, no agreement, arrangement or understanding was reached with the Chairman and no confidential
information was shared with Tencent.
On July 28, 2015, Barclays held an initial
due diligence session with the Company regarding the Company’s strategy and operations.
On July 30, 2015, the Independent
Committee held a telephonic meeting with Shearman & Sterling and Barclays. During the meeting, Barclays reported to the
Independent Committee a summary of its discussion with the Chairman on July 22, 2015. Shearman & Sterling and Barclays
also provided the Independent Committee with an update of various work streams. Shearman & Sterling noted that the
Consortium had yet to enter into a confidentiality agreement with the Company, and as a result, no confidential information
had been shared with the Consortium. After discussion, the Independent Committee requested that Barclays reach out to the
Sequoia Entities and Fosun to clarify their respective intentions with respect to the proposed transaction.
As instructed by the
Independent Committee, Barclays made enquires to each of the Sequoia Entities and Fosun as to whether such entity would
consider selling its shares in the Company and/or taking part in any alternative transactions. On August 8, 2015, the
Sequoia Entities replied to Barclays that they would not sell their shares in the Company. The Sequoia Entities also
mentioned that they did not have any plan for, but they were open to consider, any transactions alternative to the proposed
transaction. On August 11, 2015, Fosun replied to Barclays that it intended to comply with its contractual obligations under
the Consortium Agreement; and subject to those contractual obligations, Fosun remained open to considering all options
available to it.
On August 5, 2015, the Independent Committee,
on behalf of the Company, entered into the confidentiality agreement with the Consortium, pursuant to which the Consortium would
need to seek the Independent Committee’s consent to allow the Consortium to bring in potential additional equity investors
in connection with the proposed transaction. The Consortium commenced due diligence shortly after executing the confidentiality
agreement.
In early August 2015, Goldstone Investment
Co., Ltd. (“Goldstone”) noted the public disclosure of the going private transaction as proposed in the Proposal Letter
and voluntarily reached out to the Chairman for a discussion on the potential investment opportunity. Due to the uncertainties
in the proposed transaction, Goldstone and the Chairman did not reach any agreement, arrangement or understanding in connection
with Goldstone’s proposed participation in the Consortium and no confidential information was shared with Goldstone.
During the period from early August through
late September 2015, Kirkland & Ellis, the members of
the Consortium and their respective advisors had several weekly telephonic meetings to review term sheets prepared by Kirkland
& Ellis and discussed various aspects of the proposed transaction, including the deal structure, financing and process related
matters. No decision, arrangement or agreement was made with respect to the proposed transaction. The Consortium suspended the
weekly telephonic meetings among all members in early October, 2015.
In September 2015, through Fosun, PeakRe
and Fidalidade raised to the Chairman that they might consider transferring the Shares and ADSs held by them.
On October 8, 2015, the Chairman approached
Goldstone on a proposed transaction for the acquisition by the Chairman Parties of 13.94% of the then issued and outstanding Shares
of the Company in aggregate from two affiliates of Fosun Entities (PeakRe and Fidalidade). Goldstone decided not to engage in
such transactions after considering the regulatory burden under the PRC law and introduced its indirect wholly-owned subsidiary,
Uranus, to the Chairman. After intensive negotiation with the Chairman, Uranus generally agreed to extend loans to the Chairman
to fund the proposed acquisition and retain the rights to join the Consortium, as appropriate, at a later time subject to any
contractual restrictions or procedures applicable to the Consortium. Uranus and the Chairman also agreed in principle that Uranus
could, subject to applicable contractual restrictions, participate in the follow-up transactions relating to the merger.
On October 12, 2015, (i) the Chairman Parties
and (ii) PeakRe and Fidelidade entered into a Securities Purchase Agreement (the “Fosun SPA”), pursuant to which the
Skillgreat Limited acquired all of the 663,201 ADSs owned by PeakRe and all of the 39,116 ADSs and 4,165,926 Shares owned by Fidelidade,
at a price of $13.70 per ADS or $27.40 per Share, for an aggregate purchase price of $123,768,115.3 (the “Fosun Transfer”).
On October 19, 2015, the Chairman Parties
and Uranus entered into an Investment Agreement (the “Uranus Investment Agreement”), pursuant to which, among other
things, Skillgreat issued two notes to Uranus, one in the principal amount of $68,072,463.42 with simple interest rate of 9.25%
per year and another 0% interest rate exchangeable note in the principal amount of $55,695,651.88 that would allow Uranus to,
at its election under certain circumstances, convert to equity interests (the “Exchange Right”) in the Company (before
the closing of the going-private transaction) or Parent (after the closing of the going-private transaction) at the proposed going-private
valuation ($13.70 per ADS or $27.40 per Share). The aggregate proceeds from the issuance of the two notes amounted to $123,768,115.30,
which were used by the Chairman Parties to finance the Fosun Transfer.
On October 26, 2015, Skillgreat, PeakRe
and Fidelidade completed the Fosun Transfer pursuant to the terms of the Fosun SPA.
On October 27, 2015, Skillgreat agreed
to pledge an aggregate of 4,517,085 Shares to Uranus to secure Skillgreat’s obligations under the two notes issued pursuant
to the Uranus Investment Agreement.
From late October 2015 to late November
2015, the Consortium received inquiries about the status of the proposed transaction from certain parties who were interested
in potentially joining or financing the proposed transaction. During the preliminary discussions at that time, however, no agreement,
arrangement or understanding was reached with any of these parties and no confidential information was shared with these parties.
On October 28, 2015, representatives of
Alibaba Pictures met with the Chairman’s representatives to discuss the possibility of Alibaba Pictures joining the Consortium,
subject to any contractual restrictions or procedures applicable to the Consortium. No agreement, arrangement or understanding
was reached with the Chairman’s representatives and no confidential information was shared with Alibaba Pictures.
On November 11, 2015, representatives of
Alibaba Pictures discussed with the Chairman regarding the possible participation in the proposed transaction, subject to any
contractual restrictions and procedures applicable to the Consortium.
On November 13, 2015, the representatives
of Alibaba Pictures and the representatives of the Chairman discussed the expected timetable of the proposed transaction.
On November 25, 2015, after careful consideration,
Uranus internally decided, subject to any contractual restrictions and procedures applicable to the Consortium, to join the Consortium
and participate in the proposed transaction with other members of the Consortium.
On the same day, the Chairman Parties entered
into a loan agreement with Uranus pursuant to which Skillgreat issued to Uranus, and Uranus subscribed from Skillgreat, a loan
note in an aggregate principal amount of $97,660,641.80. The aggregate proceeds from the issuance of the loan note will be used
to finance the Chairman Parties’ commitment under the applicable equity commitment letter. To secure Skillgreat’s
obligation under the loan note, Skillgreat pledged a total of 3,564,257 Shares pursuant to a share charge dated as of November
30, 2015.
Also on November 25, 2015, representatives
of the Chairman discussed with Kirkland & Ellis possible changes to the timetable and the transaction structure, including
potential admission of new members to the Consortium. Later on the same day, Kirkland & Ellis prepared an amended and restated
consortium agreement draft in anticipation of the potential structure change to facilitate the discussions among the members of
the Consortium.
Throughout the night of November 25, 2015
to November 26, 2015, Kirkland & Ellis discussed with various members of the Consortium issues under the amended and restated
consortium agreement and alternative structures to the proposed transaction.
On November 27, 2015, Kirkland & Ellis, the existing members of the Consortium, Alibaba Pictures and their respective advisors had a
telephonic meeting to discuss status of the proposed transaction, including possibility of bringing in new members to the Consortium,
and an updated and accelerated timetable to negotiate and finalize definitive documents.
On November 27, 2015 and November 28,
2015, Freshfields Bruckhaus Deringer, counsel to Alibaba Pictures, provided comments on the draft amended and restated
consortium agreement to Kirkland & Ellis. Late on November 28, 2015, the draft announcement of Alibaba Pictures regarding
its participation in the proposed transaction, subject to any contractual restrictions and procedures applicable to
the Consortium, was shared with the Company and the Company provided comments.
On November 28, 2015, Kirkland & Ellis
discussed the proposed timetable and transaction structure with Shearman & Sterling, including potential changes to the composition
of the Consortium pending confirmation from existing members of the Consortium.
On December 1, 2015, PeakRe and Fidelidade,
in light of the completion of the Fosun Transfer, delivered to the rest of the Consortium a withdrawal notice to terminate their
participation in the proposed transaction.
Also on December 1, 2015, Tencent contacted
a representative of the Chairman to discuss Tencent joining the Consortium and the potential amount of Tencent’s equity
investment in the proposed transaction. Later on that day, representatives of the Consortium provided Tencent with a draft amended
and restated consortium agreement for discussion purposes, with the understanding that there would be no need to sign such amended
and restated consortium agreement if an interim investors agreement would be signed soon at the same time of the signing of the
merger agreement.
On December 2, 2015, Kirkland & Ellis
sent an initial draft of the merger agreement to Shearman & Sterling with an offer price of $13.70 per ADS.
Later on December 2, 2015, the Consortium
decided to retain Conyers Dill & Pearman as its Cayman Islands legal advisor.
Also on December 2, 2015, representatives
of Tencent and Kirkland & Ellis held a conference call to discuss the process and timing for reaching definitive agreements
regarding Tencent’s participation in the transaction, subject to any contractual restrictions and procedures applicable
to the Consortium.
On December 3, 2015, Kirkland & Ellis
sent drafts of the ancillary documents to Shearman & Sterling.
On December 4, 2015, the Independent Committee
held a telephonic meeting with Shearman & Sterling and Barclays. During the meeting, Barclays provided the Independent Committee
with an update on the proposed transaction and that it expected to receive the Company’s financial projections prepared
by Company’s management shortly which would facilitate finalization of its valuation analyses. Shearman & Sterling then
summarized for the Independent Committee the key issues contained in the initial draft of the merger agreement, including among
other things, (i) the Consortium’s plan to finance the proposed transaction through a combination of rollover financing
from the rollover shareholders and equity financing provided by the Sponsor Group and potential additional equity investors, (ii)
the inability of the Company to solicit any acquisition proposal following the execution of a definitive agreement, (iii) the
inability of the Company to terminate the agreement if it received a superior proposal following the execution of a definitive
agreement, (iv) the closing condition for the benefit of the Consortium that shareholders representing no more than 5% of the
outstanding shares had exercised dissenters rights, and (v) certain trigger events for the termination of the merger agreement
and the payment of termination fees. After lengthy discussion and considering the views of its advisors, the Independent Committee
agreed on a proposed response to the key issues in the merger agreement, including, among other things, rejecting the closing
condition relating to the exercise of dissenters rights, adding termination for failing to close by the Consortium if all conditions
to close are satisfied as another trigger for payment of the termination fee by the Consortium, requesting the ability for the
Company to terminate the agreement if it received a superior proposal following execution of a definitive agreement, requesting
the ability for the Company to change its recommendation in the absence of a superior proposal if the Independent Committee determines
that failure to do so would be inconsistent with its fiduciary duties, and requesting the Consortium to provide drafts of its
proposed form of equity commitment letter, limited guarantee, and support agreement. The Independent Committee then engaged in
a discussion with its advisors regarding (i) whether to perform an active market check or otherwise conduct a broader sale process
and (ii) whether to request the Consortium to increase the offer price. The Independent Committee, after discussions with its
financial and legal advisors, resolved that it would evaluate and revisit options available to it subject to the outcome of the
valuation analysis.
Also on December 4, 2015, Kirkland &
Ellis sent a written request to Shearman & Sterling, seeking the Independent Committee’s written consent to allow the
Consortium to bring in Uranus, Alibaba Pictures, Tencent, SAIF and All Gain in connection with the proposed transaction. During
the course of the next few days, Shearman & Sterling and Kirkland & Ellis negotiated a draft acknowledgement letter, pursuant
to which the Chairman requested the Company to acknowledge and agree to treat such potential additional equity investors as representatives
of the Chairman under the Confidentiality Agreement and to provide such investors with the Company’s confidential information
in connection with such investors’ evaluation of the proposed transaction. On December 8, 2015, Shearman & Sterling
and Kirkland & Ellis finalized the terms of the acknowledgement letter, following which the Independent Committee, on behalf
of the Company, executed the acknowledgement letter with the Chairman on the same day.
Also on December 4, 2015, representatives
of Tencent spoke with representatives of the Chairman to discuss the level of Tencent’s proposed participation in the transaction,
subject to any contractual restrictions and procedures applicable to the Consortium.
On December 6, 2015, representatives of
Paul, Weiss, Rifkind, Wharton & Garrison LLP (“Paul Weiss”), counsel to Tencent, spoke by phone with representatives
of Kirkland & Ellis regarding the status of negotiations with the Independent Committee and the expected timeline for Tencent
to join the proposed transaction.
On the same day, the representatives of
the Chairman had a discussion with the representatives of Alibaba Pictures regarding the change to the level of Alibaba Pictures’
proposed participation in the proposed transaction, subject to any contractual restrictions and procedures applicable to the Consortium.
Also on December 6, 2015, the Company provided
management financial projections to Barclays. Barclays reviewed the financial projections and on the same day conducted a due
diligence call with the Company to go through the management financial projections as well as certain aspects of the proposed
transaction, such as the final consortium structure and funding plan. Over the following few days, Barclays had a number of follow-up
discussions with the Company.
On December 7, 2015, Shearman & Sterling
delivered its initial comments to the merger agreement, equity commitment letter, limited guarantee and support agreement to Kirkland
& Ellis.
Also on December 7, 2015, representatives
of Tencent spoke with representatives of the Chairman to discuss the level of Tencent’s participation in the proposed transaction.
On December 7 and December 8, 2015, representatives
of Paul Weiss provided Kirkland & Ellis with comments on the transaction agreements relating to Tencent’s investment
in the proposed transaction. Paul Weiss and Kirkland & Ellis, as well as other members of the Consortium and their respective
advisors, continued to negotiate intensively those agreements between December 8, 2015 and the execution of such documents on
December 15, 2015.
On December 8, 2015, pursuant to discussions
between Tencent and representatives of All Gain, Willow subscribed for notes in the aggregate principal amount of $14,204,201.10
issued by All Gain for the sole purpose of All Gain’s financing the acquisition of its interest in the proposed transaction.
Following the completion of the merger, the obligations under such notes will be secured by a share charge granted by All Gain
to Willow in respect of the shares of Parent held by All Gain.
On December 9, 2015, Kirkland & Ellis
sent to Shearman & Sterling a revised draft of the merger agreement.
Later that day, the Independent Committee
held a telephonic meeting with Shearman & Sterling and Barclays, during which meeting Shearman & Sterling summarized the
key issues in the revised draft of the merger agreement, including, among other things, (i) the inability of the Company to terminate
the agreement if it received a superior proposal, (ii) the closing condition for the benefit of the Consortium that shareholders
representing no more than 10% of the outstanding shares had exercised dissenters rights, and (iii) the equal amount of termination
fee payable of $9,000,000 by the Company and the Consortium under the applicable trigger events.
At the same meeting, Barclays and the
Independent Committee also discussed the financial projections provided by the Company’s management, including the
assumptions underlying the financial projections and key line items in the projections. Barclays also verbally discussed its
valuation approach and preliminary observations. The Independent Committee also discussed with Barclays and Shearman &
Sterling the email Barclays had received from a certain shareholder of the Company (“Shareholder A”), regarding
Shareholder A’s view with respect to the valuation of the offer. The Independent Committee concluded that it would
consider the views expressed by Shareholder A and any other shareholders of the Company in its evaluation of the
proposed transaction. Please see “Special Factors — Reasons for the Merger and Recommendation of the Independent
Committee and the Board” beginning on page 35 for more information on the substantive factors considered and the
procedures exercised by the Independent Committee and the Board when evaluating the proposed transaction. After discussion,
the Independent Committee concluded that there was basis for the Consortium to consider seeking an improvement on the
current offer price and instructed Barclays and Shearman & Sterling to communicate the same to the Consortium. The
Independent Committee further resolved to reject certain changes to the merger agreement proposed by the Consortium and
instructed Shearman & Sterling to convey this response to Kirkland & Ellis.
On December 10, 2015, Barclays and Shearman
& Sterling delivered the request to increase the offer price to CITIC Securities Co., Ltd.
Later that day, Kirkland & Ellis, after
several telephonic meetings with members of the Consortium and CITIC Securities Co., Ltd, sent a letter on behalf of the Consortium
to Barclays and Shearman & Sterling, confirming that the Consortium would not be able to raise the offer price. The Consortium
explained in the letter that the Consortium was unable to raise the offer price because of a multitude of factors, including that
the offer price was higher than the trading price of the Company’s ADSs at any time during the entire period that the Company
had been listed on the NASDAQ, the substantial uncertainty in the nature of the Company’s business and a slowdown of the
overall Chinese economy, the rising costs and increasing competition in the Company’s businesses and the depreciation of
Renminbi against the US dollar that had a significant negative effect on the valuation of the Company and the acquisition costs
for the Consortium.
Also on December 10, 2015, Shearman &
Sterling and Kirkland & Ellis had a lengthy telephonic meeting on remaining major issues under the revised drafts of the merger
agreement and the ancillary documents. After the discussion, Shearman & Sterling delivered its comments to the merger agreement
and ancillary documents to Kirkland & Ellis.
During the course of next few days, Shearman
& Sterling and Kirkland & Ellis, through exchange of multiple drafts and telephonic meetings, continued to negotiate intensively
the terms of the merger agreement, equity commitment letter, limited guarantee, support agreement and related documentation.
On December 12, 2015, Barclays conducted
a follow-up due diligence call with the Company in relation to the management’s financial projections, particularly around
the management’s view of the nature of the film business and some practical issues around developing the Company’s
business plan.
On December 13, 2015, the Independent Committee
held a telephonic meeting with Shearman & Sterling and Barclays. After a brief update from its advisors regarding ongoing
work streams, Barclays and the Independent Committee discussed the Company’s financial projections and additional information
provided by the management, and Barclays presented its valuation analyses of the Company based on the management financial projections.
The financial projections are summarized under “Special Factors — Certain Financial Projections” beginning
on page 42 in its financial analysis.
The Independent Committee then engaged
in a discussion with its advisors regarding whether to perform an active market check or otherwise conduct a broader sale
process. After discussion with its legal and financial advisors, and taking into consideration all available facts, including
(i) the fact that, given the Consortium’s beneficial ownership of approximately 53.9% of the Company's total
issued and outstanding Shares (as of June 12, 2015), and they have agreed to vote for the proposal transaction and vote
against any competing proposal pursuant to the Consortium Agreement (ii) the absence of any indication of interest
to Barclays or the Independent Committee by any potential bidder in making an alternative offer since the public announcement
of the Proposal Letter on June 12, 2015 and (iii) the significant disruption to the operations of the Company that
a pre-signing market check may cause, the Independent Committee concluded that reaching out to third parties to assess
their interest in an alternative transaction would be futile and would not be in the best interests of the Company or
its shareholders because it would be unlikely to produce a competing offer on terms better than Consortium’s offer
and therefore, although the Independent Committee would not pursue an active market check at that stage, it would remain open
to any competing bids received. The Independent Committee then resolved to seek to negotiate the best deal
available with the Consortium.
At the same meeting, Shearman & Sterling
then reviewed with the Independent Committee the revised terms of the merger agreement, including (i) the ability of the Company
to terminate the agreement if it received a superior proposal, (ii) the termination for failing to close by the Consortium if
all conditions to close are satisfied as a trigger for payment of the termination fee by the Consortium, (iii) the closing condition
for the benefit of the Consortium that shareholders representing no more than 15% of the outstanding shares had exercised dissenters
rights, and (iv) the termination fee payable of $15,000,000 by the Company and the termination fee payable of $30,000,000 by the
Consortium under the applicable trigger events (or $15,000,000 if the Consortium chose not to close the proposed transaction if
15% or more of the outstanding shares had exercised dissenters rights).
During the ensuing days, Shearman &
Sterling and Kirkland & Ellis continued to vigorously negotiate the merger agreement and related documentation.
On December 14, 2015, the Chairman Parties
and Uranus entered into a side letter in connection with the Uranus Investment Agreement, pursuant to which the Chairman Parties
agreed that Uranus may exercise the Exchange Right by delivering a notice and the exchange note to the Chairman Parties at any
time on or after the earlier of (i) the execution of the interim investors agreement by, among others, Uranus or its affiliates;
or (ii) the execution of the merger agreement but in each case of (i) and (ii), on or before the tenth business day following
the execution thereof, so that upon Uranus’ exercise of the Exchange Right, the Chairman Parties would, as contemplated
under the support agreement, transfer 2,032,689 Shares to Uranus.
On December 15, 2015, the Independent
Committee held a telephonic meeting with Shearman & Sterling and Barclays. Shearman & Sterling reviewed the fiduciary
duties applicable to the Independent Committee in connection with the proposed transaction and the key terms in the merger
agreement and the related transaction documents. Barclays then presented its financial analyses to the Independent Committee
and provided its oral opinion, which was subsequently confirmed in writing and attached hereto as Annex B, to the effect
that, as of December 15, 2015, and based upon and subject to the various assumptions made, procedures followed, matters
considered and qualifications and limitations set forth in the opinion, the $27.40 per Share (or $13.70 per ADS) cash merger
consideration to be received by the holders of Shares and ADSs, respectively (other than holders of Excluded Shares or ADSs
representing Excluded Shares), pursuant to the merger agreement was fair, from a financial point of view, to such holders.
Please see “Special Factors – Opinion of the Independent Committee’s Financial Advisor” beginning on
page 44 for additional information regarding the financial analysis performed by Barclays and the opinion rendered by
Barclays to the Independent Committee. The full text of the written opinion of Barclays to the Independent Committee, dated
December 15, 2015, is attached as Annex B to this proxy statement. After considering the presentations of Shearman &
Sterling and Barclays, including Barclays’s fairness opinion, and taking into account the other factors described below
under the heading titled “– Reasons for the Merger and Recommendation of the Independent Committee and the
Board” the Independent Committee then unanimously determined that the merger agreement and the transaction agreements
contemplated by the merger agreement were fair (both substantively and procedurally) to and in the best interests of the
Company and its unaffiliated security holders and declared it advisable for the Company to enter into the merger
agreement and the transaction agreements contemplated by the merger agreement and recommended that the Board adopt a
resolution approving the merger agreement, the transaction agreements contemplated by the merger agreement and the other
contemplated transactions, including the merger, and recommending that the shareholders of the Company authorize and approve
the merger agreement, the plan of merger and the merger.
Following the meeting of the Independent
Committee, the Board (without the participation of the Chairman and Mr. Donghui Pan) convened a meeting with Shearman & Sterling,
Maples and Calder and Barclays. The Chairman and Mr. Donghui Pan did not attend, participate in or vote upon any matters discussed
during the meeting. The Independent Committee then provided to the Board an overview of the proposed transaction and presented
its recommendation to the Board. After considering the proposed terms of the merger agreement, the other transaction agreements
and the recommendation of the Independent Committee, the Board (i) determined that it was fair (both substantively and procedurally)
to and in the best interests of the Company and its unaffiliated security holders, and declared it advisable, to enter into the
merger agreement and the transaction agreements contemplated by the merger agreement, (ii) authorized and approved the execution,
delivery and performance of the merger agreement and the transaction agreements contemplated by the merger agreement and the consummation
of the contemplated transactions, including the merger, and (iii) resolved to direct that the authorization and approval of the
merger agreement, the plan of merger and the merger be submitted to a vote at an extraordinary general meeting of the shareholders
with the recommendation of the Board that the shareholders of the Company authorize and approve by way of special resolution the
merger agreement, the plan of merger and the transactions contemplated under the merger agreement, including the merger. See “Special
Factors – Reasons for the Merger and Recommendation of the Independent Committee and the Board” beginning on page
35 for a full description of the resolutions of the Board at this meeting.
Later in the evening on December 15, 2015,
the Company, Parent and Merger Sub executed the merger agreement. Other transaction documents, including the limited guarantees,
the support agreement, the equity commitment letters and the interim investors agreement (which would be deemed to terminate and
supersede the Consortium Agreement upon execution) were also executed on December 15, 2015. The Company then issued a press release
announcing the execution of the merger agreement and the ancillary documents, and furnished the press release as an exhibit to
its current report on Form 6-K.
Later on December 15, 2015, after the execution
of the merger agreement and other transaction documents, Uranus exercised the Exchange Right so that, as contemplated under the
support agreement, the Chairman Parties would transfer 2,032,689 Shares to Uranus within forty-five (45) days after the date of
the support agreement and Uranus would release the share charge on such Shares immediately before or upon the registration of
such Shares under the name of Uranus in the register of members of the Company.
On December 23, 2015, the transfer of
2,032,689 Shares from the Chairman Parties to Uranus was completed and the share charge on such Shares was released and discharged.
Reasons for the Merger and Recommendation of the Independent
Committee and the Board
The Independent Committee and the Board
believe that, as a privately-held entity, the Company’s management may have greater flexibility to focus on improving the
Company’s long term financial performance without the pressures caused by the public equity market’s valuation of
the Company and emphasis on short-term period-to-period performance.
Additionally, as an SEC-reporting company,
the Company’s management and accounting staff, which comprises a handful of individuals, must devote significant time to
SEC reporting and compliance. The Company is also required to disclose a considerable amount of business information to the public,
some of which would otherwise be considered proprietary and competitively sensitive and would not be disclosed by a non-reporting
company. As a result, the Company’s actual or potential competitors, customers, suppliers, lenders and vendors all have
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.
Our Board, acting upon the unanimous recommendation
of the Independent Committee, which the Independent Committee acted with the advice and assistance of our management (other than
Mr. Dong Yu, a member of the Buyer Group, and Mr. Donghui Pan, a director of the Company appointed by Fosun, owing to their respective
interests in the proposed transaction) and its financial and legal advisors, evaluated the merger, including the terms and conditions
of the merger agreement.
At a meeting on December 15, 2015, the
Independent Committee unanimously recommended that the Company’s Board adopt resolutions that:
| • | determined that it was fair (both substantively and procedurally)
to and in the best interests of the Company and the unaffiliated security holders, and
declared it advisable, to enter into the merger agreement and the transaction agreements
contemplated by the merger agreement; |
| • | authorized and approved the execution, delivery and performance
of the merger agreement and the transaction agreements contemplated by the merger agreement
and the consummation of the transactions contemplated thereby, including the merger;
and |
| • | resolved to direct that the authorization and approval
of the merger agreement, the plan of merger and the merger be submitted to a vote at
an extraordinary general meeting of the shareholders with the recommendation of the Board
that the shareholders of the Company authorize and approve by way of special resolution
the merger agreement, the plan of merger and the transactions contemplated under the
merger agreement, including the merger. |
On December 15, 2015, the Board (other
than Mr. Dong Yu, a member of the Buyer Group, and Mr. Donghui Pan, a director of the Company appointed by Fosun, who did not
attend, participate in or vote upon any matters discussed during the Board meeting, owing to their respective interests in the
proposed transaction) approved and adopted the resolutions recommended by the Independent Committee.
In the course of reaching their respective
determinations, the Independent Committee and the Board considered the following substantive factors and potential benefits of
the merger, each of which the Independent Committee and the Board believed supported their respective decisions, but which are
not listed in any relative order of importance:
| • | the current and historical market prices of the ADSs, including
the fact that per Share merger consideration of $27.40 and the per ADS merger consideration
of $13.70 representing a premium of 6.5% over the Company’s closing price of $12.86
per ADS on June 11, 2015, the last trading day prior to June 12, 2015, the date that
it announced that it had received a going-private proposal, and a premium of 28.7% over
the 60 trading day volume-weighted average trading price prior to June 12, 2015; |
| • | the Company’s ADSs traded between $5.70 and $12.86
per ADS during the 52-week period prior to June 12, 2015, the date that it announced that it had received a going-private proposal; |
| • | the fact that per Share merger consideration of $27.40
and the per ADS merger consideration of $13.70 represent a premium of 6.5% over the Company’s
highest ADSs closing price, since Company’s initial public offering and prior to
the date that it announced that it had received a going-private proposal, at $12.86 per
ADS on June 11, 2015; |
| • | the possibility that it could take a considerable period
of time before the trading price of the ADSs would reach and sustain a per ADS price
equal to or greater than the per ADS merger consideration of $13.70, as adjusted for
present value, particularly in light of (i) the trading price of the Company’s
ADSs prior to announcing the receipt of the going-private proposal, and (ii) the Board’s
recognition of the challenges involved in increasing shareholder value as an independent
publicly traded company; |
| • | the all-cash merger consideration, which will allow the
unaffiliated security holders to immediately realize liquidity for their investment and
provide them with a specific amount of cash consideration for their Shares or ADSs; |
| • | the negotiations with respect to the merger consideration
and the Independent Committee’s determination that, following negotiations with
the Buyer Group, $27.40 per Share or $13.70 per ADS was the highest price that the Buyer
Group would agree to pay, with the Independent Committee basing its belief on a number
of factors, including the process of negotiations and the experience of the Independent
Committee’s advisors; |
| • | the fact that the Chairman and certain Rollover Shareholders
(including Skillgreat, Sequoia Entities and Fosun Entities), who collectively own approximately
55.5% of the outstanding Shares, entered into the Consortium Agreement together with
PeakRe and Fidelidade on June 12, 2015; pursuant to which, the parties agreed, (i) to
participate in the proposed transaction, (ii) to vote for the proposed transaction and
vote against any competing proposal, and (iii) not to sell their respective shares in
the Company; |
| • | the financial analysis reviewed and discussed with the
Independent Committee by representatives of Barclays, as well as the oral opinion of
Barclays to the Independent Committee on December 15, 2015 (which was subsequently confirmed
by delivery of a written opinion of Barclays dated the same date) with respect to the
fairness, from a financial point of view, the $27.40 per Share (or $13.70 per ADS) cash
merger consideration to be received by the holders of Company’s Shares and ADSs,
respectively (other than holders of Excluded Shares), pursuant to the merger agreement,
as of December 15, 2015, based upon and subject to the procedures followed, assumptions
made, qualifications and limitations on the review undertaken and other matters considered
by Barclays in preparing their opinion. Please see “Special Factors – Opinion
of the Independent Committee’s Financial Advisor” beginning on page 44 for
additional information; |
| • | potential adverse effects on the Company’s business,
financial condition and results of operations caused by recent economic conditions in
the PRC, which have resulted in reduced liquidity, greater volatility, widening of credit
spreads, lack of price transparency in credit markets, a reduction in available financing
and reduced market confidence; |
| • | estimated forecasts of the Company’s future financial
performance prepared by the Company’s management, together with the Company’s
management’s view of the Company’s financial condition, results of operations,
business and prospects, including, without limitation, the fact that the Company’s
net revenues increased by approximately 70.1% from 2013 to 2014, compared to a projected
increase in net revenues of 31.3% from 2014 to 2015, indicating that the Company may
face uncertain business conditions in China, which made the transaction desirable at
this time as compared with other times since the Company’s initial public offering
in 2010; |
| • | the increased costs of regulatory compliance for public
companies; |
| • | the trends in the Company’s industry, including competition; |
| • | the recognition that, as a privately-held entity, the Company’s
management may have greater flexibility to focus on improving the Company’s long
term financial performance without the pressures caused by the public equity market’s
valuation of the Company and emphasis on short-term period-to-period performance; |
| • | the recognition that, as an SEC-reporting company, the
Company’s management and accounting staff, which comprises a handful of individuals,
must devote significant time to SEC reporting and compliance; |
| • | the recognition that, as an SEC-reporting company, the
Company is required to disclose a considerable amount of business information to the
public, some of which would otherwise be considered proprietary and competitively sensitive
and would not be disclosed by a non-reporting company and which potentially may help
our actual or potential competitors, customers, lenders and vendors compete against us
or make it more difficult for us to negotiate favorable terms with them, as the case
may be; |
| • | the belief of the Independent Committee that the terms
of the merger agreement, including the parties’ representations, warranties and
covenants and the conditions to their respective obligations, are reasonable; |
| • | the likelihood that the merger would be completed based
on, among other things (not in any relative order of importance): |
| • | the absence of a financing condition in the merger agreement; |
| • | the likelihood and anticipated timing of completing the
merger in light of the scope of the conditions to completion; and |
| • | the fact the merger agreement provides that, in the event
of a failure of the merger to be completed under certain circumstances, Parent will pay
the Company a $30.0 million termination fee and the guarantee of such payment obligation
by the Chairman, Uranus, Oriental Power, Alibaba Pictures and Mr. Xie pursuant to the
Limited Guarantees; |
| • | since the announcement of the proposed transaction on June
12, 2015 and prior to the entry into the merger agreement, no party other than the members
of the Buyer Group had contacted the Company or the Independent Committee expressing
an interest in exploring an alternative transaction with the Company; and |
| • | the consideration and negotiation of the merger agreement
was conducted entirely under the control and supervision of the Independent Committee,
which consists of three independent directors, each of whom is an outside, non-employee
director, and that no limitations were placed on the Independent Committee’s authority. |
In addition, the Independent Committee
and the Board believed that sufficient procedural safeguards were and are present to ensure that the merger is procedurally fair
to the unaffiliated security holders and to permit the Independent Committee and the Board to represent effectively the interests
of such unaffiliated security holders. These procedural safeguards, which are not listed in any relative order of importance,
are discussed below:
| • | in considering the merger with the Buyer Group, the Independent
Committee, which consists of three independent directors, acted solely to represent the
interests of the unaffiliated security holders, and the Independent Committee had independent
control of the negotiations with the Buyer Group and its legal advisor on behalf of such
unaffiliated security holders; |
| • | all of the directors serving on the Independent Committee
during the entire process were and are independent directors and free from any affiliation
with 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 and none of such directors has
any financial interest in the merger that is different from that of the unaffiliated
security holders other than (i) the director’s receipt of board compensation in
the ordinary course, (ii) Independent Committee members’ compensation in connection
with its evaluation of the merger (which is not contingent upon the completion of the
merger or the Independent Committee’s or Board’s recommendation of the merger),
and (iii) the director’s indemnification and liability insurance rights under the
merger agreement; |
| • | following its formation, the Independent Committee’s
independent control the sale process with the advice and assistance of Barclays as its
financial advisor, and Shearman & Sterling and Maples and Calder, as its legal advisors,
each reporting solely to the Independent Committee; |
| • | the Independent Committee was empowered to consider, attend
to and take any and all actions in connection with the written proposal from the Buyer
Group and the transactions contemplated thereby from the date the Independent Committee
was established, and no evaluation, negotiation, or response regarding the transaction
or any documentation in connection therewith from that date forward was considered by
the Board for authorization and approval unless the Independent Committee had recommended
such action to the Board; |
| • | there are no limitations placed on the Independent Committee’s
authority, including the authority to reject the terms of any strategic transaction,
including the merger; |
| • | the Independent Committee held telephonic meetings to consider
and review the terms of the merger agreement and the merger; |
| • | the recognition by the Independent Committee and the Board
that it had no obligation to recommend the authorization and approval of the proposal
from the Buyer Group or any other transaction; |
| • | the recognition by the Independent Committee and the Board
that, under the terms of the merger agreement, it has the ability to consider any proposal
regarding a competing transaction that is reasonably likely to lead to a “superior
proposal” (as defined in the merger agreement and further explained under the caption
“The Merger Agreement and Plan of Merger – No Solicitation” beginning
on page 86) until the date the Company’s shareholders vote upon and authorize
and approve the merger agreement; |
| • | the ability of the Company to terminate the merger agreement
in connection with a “superior proposal” (as defined in the merger agreement
and further explained under the caption “The Merger Agreement and Plan of Merger
– No Solicitation” beginning on page 86) subject to compliance with the
terms and conditions of the merger agreement; and |
| • | the availability of dissenter rights to the shareholders,
other than the Rollover Shareholders, who comply with all of the required procedures
under the Cayman Islands Companies Law for exercising dissenter rights, which allow such
holders to receive the fair value of their Shares as determined by the Grand Court of
the Cayman Islands. |
The Independent Committee and the Board
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 fact that authorization and approval of the merger
agreement are not subject to the authorization and approval of holders of a majority
of the Company’s outstanding Shares and ADSs unaffiliated with the Buyer Group; |
| • | the fact that the Company’s shareholders, other than
the Rollover Shareholders, will have no ongoing equity participation in the Company following
the merger, and that they will cease to participate in the Company’s future earnings
or growth, if any, or to benefit from increases, if any, in the value of the Shares,
and will not participate in any potential future sale of the Company to a third party
or any potential recapitalization of the Company which could include a dividend to shareholders; |
| • | the restrictions on the conduct of the Company’s
business prior to the completion of the merger. See “The Merger Agreement and Plan
of Merger – Conduct of Business Pending the Merger” beginning on page 84
for additional information; |
| • | 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 $15.0 million in connection with the termination of the
merger agreement; |
| • | the fact that Parent and Merger Sub are newly formed corporations
with essentially no assets, and that the Company’s legal remedy in the event of
breach of the merger agreement by Parent or Merger Sub is limited to receipt of a termination
fee of $30.0 million, and that the Company may not be entitled to a termination fee at
all if, among other things, the Company’s shareholders do not approve the merger
agreement at the extraordinary general meeting. See “The Merger Agreement and Plan
of Merger – Termination of the Merger Agreement” beginning on page 89 and
“The Merger Agreement and Plan of Merger – Termination Fee” beginning
on page 90 for additional information; |
| • | the merger agreement precludes the Company from actively
soliciting alternative transaction proposals; |
| • | the fact that Mr. Dong Yu may have interests in the transaction
that are different from, or in addition to, those of the unaffiliated security holders,
as well as the other interests of the Company’s directors and officers in the merger.
Please see “Special Factors – Interests of Certain Persons in the Merger”
beginning on page 58 for additional information; |
| • | the rights of Parent under the merger agreement not to
consummate the merger and/or to terminate the merger agreement if certain events that
are not within the Company’s control take place, including, among other events,
the occurrence of any material adverse effect or the holders of more than 15% of the
outstanding Share having validly served notice of objection prior to the vote on the
merger at the extraordinary general meeting; |
| • | that while the Independent Committee expects to complete
the merger, there can be no assurance that all conditions to the parties’ obligations
to complete the merger will be satisfied and, as a result, it is possible that the merger
may not be completed even if Company shareholders approve it; |
| • | the possibility that the merger might not be completed
and the negative impact of a public announcement of the merger on the Company’s
sales and operating results and the Company’s ability to attract and retain key
management, marketing and technical personnel; and |
| • | the taxability of an all-cash transaction to the unaffiliated
security holders. |
The forgoing information and factors considered
by the Independent Committee and the Board are not intended to be exhaustive, but include the material factors considered by the
Independent Committee and the Board. In view of the wide variety of factors considered by the Independent Committee and the Board,
neither the Independent Committee nor the Board found it practicable to quantify or otherwise assign relative weights to the foregoing
factors in reaching its conclusions. In addition, individual members of the Independent Committee and the Board may have given
different weights to different factors and may have viewed some factors more positively or negatively than others. The Independent
Committee recommended that the Board authorize and approve, and the Board authorized and approved, the merger agreement, the plan
of merger and the transactions contemplated by the merger agreement, including the merger, based upon the totality of the information
presented to and considered by it.
In the course of reaching its conclusion
regarding the fairness of the merger to the unaffiliated security holders and its decision to recommend the authorization and
approval of the merger agreement, the plan of merger and the transactions contemplated by the merger agreement, including the
merger, the Independent Committee considered financial analyses presented by Barclays as an indication of the going concern value
of the Company. These analyses included, among others, selected public companies analysis, selected transactions analysis and
discounted cash flow analysis. All of the material analyses as presented to the Independent Committee on December 15, 2015 are
summarized below under the caption “Special Factors – Opinion of the Independent Committee’s Financial Advisor”
beginning on page 44. The Independent Committee expressly adopted these analyses and the opinion of Barclays, among other factors
considered, in reaching its determination as to the fairness of the transactions contemplated by the merger agreement, including
the merger.
Neither the Independent Committee nor the
Board considered the liquidation value of Company’s assets because each considers the Company to be a viable going concern
business where value is derived from cash flows generated from its continuing operations. In addition, the Independent Committee
and the Board believe that the value of the Company’s assets that might be realized in a liquidation would be significantly
less than its going concern value on the following grounds: (i) the realization of value in a liquidation would involve selling
many distinct operating entities and such a process would likely be complex and time consuming, as buyers for each asset would
need to be found, agreements negotiated and various regulatory approvals would be required, which might delay or impede such a
process, (ii) a liquidation of some (but not all) assets would risk leaving unattractive, orphaned assets that would be difficult
to monetize, (iii) the tax implications in a liquidation are difficult to quantify, and could be significant relative to a sale
of the Company as a going concern, (iv) neither the Independent Committee nor the Board were aware of any precedents of U.S.-listed
PRC companies liquidating their entire business and returning the proceeds to shareholders and (v) liquidation value analysis
does not take into account any value that may be attributed to the Company’s ability to build and attract new business.
Each of the Independent Committee and the
Board believes the analyses and additional factors it reviewed provided an indication of the Company’s going concern value.
The Board and management of the Company have been dedicated to maximizing shareholder value. Taking into account the historical
trading prices of ADSs and the current condition of the U.S. stock market, each of the Independent Committee and the Board believes
that the per Share merger consideration and the per ADS merger consideration offered by the Buyer Group appropriately reflects
the intrinsic present value of Shares and ADSs, while allowing sufficient potential for future growth to attract the Buyer Group
to enter into the merger agreement and complete the merger. Each of the Independent Committee and the Board also considered the
purchase prices paid in previous purchases as described under the caption “Transactions in the Shares and ADSs” beginning
on page 98. Neither the Independent Committee nor the Board considered the Company’s net book value, which is defined as
total assets minus total liabilities, attributable to the shareholders of the Company, as a factor. The Independent Committee
and the Board believe that net book value is not a material indicator of the value of the Company as a going concern. The Company’s
net book value per Share as of September 30, 2015 was $7.20, based on the 32,402,346 issued and outstanding Shares as of September
30, 2015. Net book value does not take into account the future prospects of the Company, market conditions, trends in the industry
related to film or the business risks inherent in competing with other companies in that industry. The Company is not aware of
any firm offers made by any unaffiliated person, other than the filing persons, during the past two years for (i) the merger or
consolidation of the Company with or into another company, or vice-versa; (ii) the sale or other transfer of all or any substantial
part of the assets of the Company; or (iii) a purchase of the Company’s securities that would enable the holder to exercise
control of the Company.
In reaching its determination that the
merger agreement, the plan of merger and the transactions contemplated thereby, including the merger, are fair to and in the best
interests of the Company and the unaffiliated security holders and its decision to authorize and approve the merger agreement,
the plan of merger and the transactions contemplated thereby, including the merger, and recommend the authorization and approval
of the merger agreement, the plan of merger and the transactions contemplated thereby, including the merger, by the Company’s
shareholders, the Board, on behalf of the Company, considered the analysis and recommendation of the Independent Committee and
the factors examined by the Independent Committee as described above under this section and under “Special Factors –
Background of the Merger,” and adopted such recommendations and analysis. During its consideration of the merger agreement,
the plan of merger and the consummation of the transactions, including the merger, the Board was also aware that some of the Company’s
directors and shareholders, including Mr. Dong Yu, the chairman of the Board and chief executive officer of the Company, and other
employees of the Company, have interests with respect to the merger that are, or may be, different from, or in addition to those
of the unaffiliated security holders generally, as described under the section entitled “Special Factors —Interests
of Certain Persons in the Merger” beginning on page 58. Except as discussed in “Special Factors – Background
of the Merger,” “Special Factors – Reasons for the Merger and Recommendation of the Independent Committee and
the Board,” and “Special Factors – Opinion of the Independent Committee’s Financial Advisor,” no
director who is not an employee of the Company has retained an unaffiliated representative to act solely on behalf of unaffiliated
security holders for purposes of negotiating the terms of the transaction and/or preparing a report concerning the fairness of
the transaction.
For the foregoing reasons, each of the
Company and the Board believes that the merger agreement, the plan of merger and the transactions contemplated thereby, including
the merger, are substantively and procedurally fair to and in the best interests of the Company and the unaffiliated security
holders.
Position of the Buyer Group as to the Fairness of the Merger
Under SEC rules governing “going
private” transactions, each member of the Buyer Group is deemed to be an affiliate of the Company and is required to express
its beliefs as to the fairness of the merger to the Company’s unaffiliated security holders, as defined in Rule 13e-3 of
the Exchange Act. Each member of the Buyer Group is making the statements included in this section solely for the purpose of complying
with the requirements of Rule 13e-3 and related rules under the Exchange Act. The views of the Buyer Group as to the fairness
of the merger are not intended to be and should not be construed as a recommendation to any shareholder of the Company or holder
of ADSs as to how to vote on the proposal to authorize and approve the merger agreement, the Plan of Merger and the transactions,
including the merger. The Buyer Group has interests in the merger that are different from, and/or in addition to, those of the
unaffiliated security holders of the Company by virtue of its continuing interests in the surviving corporation after the consummation
of the merger. These interests are described under the caption “— Interests of Certain Persons in the Merger —Interests
of the Buyer Group” beginning on page 59.
The Buyer Group believes that the interests
of the Company’s unaffiliated security holders were represented by the Independent Committee, which negotiated the terms
and conditions of the merger agreement with the assistance of its legal and financial advisors. The Buyer Group did not participate
in the deliberations of the Independent Committee regarding, and did not receive any advice from the Independent Committee’s
advisors as to, the fairness of the merger to the Company’s unaffiliated security holders. The Buyer Group attempted to
negotiate a transaction that would be most favorable to it, and not to the Company’s unaffiliated security holders and,
accordingly, did not negotiate the merger agreement with a goal of obtaining terms that were substantively and procedurally fair
to such holders. The members of the Buyer Group did not perform, or engage a financial advisor to perform, any special valuation
or other analysis to assist them in assessing the substantive and procedural fairness of the merger consideration to the Company’s
unaffiliated security holders.
Based on their knowledge and analysis of
available information regarding the Company, as well as discussions with the Company’s management regarding the Company
and its business, and the factors considered by, and the conclusions of, the Independent Committee and the Board discussed in
“Special Factors — Reasons for the Merger and Recommendation of the Independent Committee and the Board” beginning
on page 35, the Buyer Group believes the merger is both substantively and procedurally fair to the Company’s unaffiliated
security holders based upon the following factors, which are not listed in any relative order of importance:
| • | in considering the merger with the Buyer Group, the Independent
Committee, which consists of three independent directors, acted solely to represent the
interests of the unaffiliated security holders, and the Independent Committee had independent
control of the negotiations with the Buyer Group and its legal advisor on behalf of such
unaffiliated security holders; |
| • | all of the directors serving on the Independent Committee
during the entire process were and are independent directors and free from any affiliation
with 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 and none of such directors has
any financial interest in the merger that is different from that of the unaffiliated
security holders other than (i) the director’s receipt of board compensation in
the ordinary course, (ii) Independent Committee members’ compensation in connection
with its evaluation of the merger (which is not contingent upon the completion of the
merger or the Independent Committee’s or Board’s recommendation of the merger),
and (iii) the director’s indemnification and liability insurance rights under the
merger agreement; |
| • | the Independent Committee retained and was advised by legal
and financial advisors experienced in assisting committees such as the Independent Committee
in similar transactions; |
| • | neither the Independent Committee nor the Board had any
obligation to recommend authorization or approval of the merger agreement, the plan of
merger and the transactions contemplated thereby, including the merger, or any other
transaction; |
| • | the current and historical market prices of the ADSs, including
the fact that per Share merger consideration of $27.40 and the per ADS merger consideration
of $13.70 representing a premium of 6.5% over the Company’s closing price of $12.86
per ADS on June 11, 2015, the last trading day prior to June 12, 2015, the date that
it announced that it had received a going-private proposal, and a premium of 23.6% and
28.7% over the 30 and 60 trading day volume-weighted average trading price prior to June
12, 2015, respectively; |
| • | the fact that the merger consideration is all cash, which
provides a specific amount of cash consideration for Shares and ADSs held by, and liquidity
to, unaffiliated security holders and allows the unaffiliated security holders not to
be exposed to risks and uncertainties relating to the prospects of the Company; |
| • | the fact that the Independent Committee received from its
financial advisor an opinion, dated December 15, 2015, as to the fairness, from a financial
point of view and as of such date, of the per Share merger consideration to be received
by holders of Shares and the per ADS merger consideration to be received by holders of
ADSs (other than holders of Excluded Shares); |
| • | the fact that, under the terms of the merger agreement,
the Company has the ability to consider any proposal regarding a competing transaction
that is reasonably likely to lead to a “superior proposal” (as defined in
the merger agreement and further explained under the caption “The Merger Agreement
and Plan of Merger – No Solicitation” beginning on page 86) until the date
the Company’s shareholders vote upon and authorize and approve the merger agreement; |
| • | the ability of the Company to terminate the merger agreement
in connection with a “superior proposal” (as defined in the merger agreement
and further explained under the caption “The Merger Agreement and Plan of Merger
– No Solicitation” beginning on page 86) subject to compliance with the
terms and conditions of the merger agreement; |
| • | the availability of dissenter rights to the shareholders,
other than the Rollover Shareholders, who comply with all of the required procedures
under the Cayman Islands Companies Law for exercising dissenter rights, which allow such
holders to receive the fair value of their Shares as determined by the Grand Court of
the Cayman Islands; |
| • | the fact that the authorization and approval of the merger
agreement, the plan of merger and the merger is subject to approval by the affirmative
vote of at least two-thirds of the shareholders present and voting in person or by proxy
as a single class in accordance with the Cayman Islands Companies Law and the Company’s
memorandum and articles of association; |
| • | that the Board was fully informed about the extent to which
the interests of the Rollover Shareholders in the merger differed from those of the Company’s
unaffiliated security holders; and |
| • | the fact that none of the directors related to the Rollover
Shareholders or the management of the Company participated in or sought to influence
the deliberative process of the Independent Committee. |
The Buyer Group did not consider the Company’s
net book value, which is defined as total assets minus total liabilities, as a factor because it believed that net book value
is not a material indicator of the Company’s value as a going concern.
In its consideration of the fairness of
the proposed merger, the Buyer Group did not undertake an appraisal of the assets of the Company to determine the Company’s
liquidation value for the Company’s unaffiliated security holders due to the impracticability of determining a liquidation
value given the significant execution risk involved in any breakup, since it considered the Company to be a viable going concern
where value is derived from cash flows generated from its continuing operations, and because the Company will continue to operate
its business following the merger.
The Buyer Group did not seek to establish
a pre-merger going concern value for the Company’s Shares and ADSs to determine the fairness of the merger consideration
to the Company’s unaffiliated security holders because following the merger the Company will have a significant different
capital structure. However, to the extent the pre-merger going concern value was reflected in the pre-announcement price of the
Company’s ADSs, the merger consideration represented a premium to the going concern value of the Company.
Certain Financial Projections
The Company’s management does
not, as a matter of course, make available to the public financial projections. However, in connection with Barclay’s
financial analysis of the consideration to be paid in the merger, the Company’s management provided financial
projections for the fiscal year ending December 31, 2015 through the fiscal year ending December 31, 2020 to Barclays, as the
financial advisor to the Independent Committee, on December 6, 2015. The accompanying prospective financial information was
not prepared with a view toward public disclosure or with a view toward complying with the guidelines established by the
American Institute of Certified Public Accountants with respect to prospective financial information, but, in the view of the
Company's management, was prepared on a reasonable basis, reflects the best currently available estimates and judgments, and
presents, to the best of management's knowledge and belief, the expected course of action and the expected future financial
performance of the Company.
The financial projections are not a
guarantee of performance. They involve significant risks, uncertainties and assumptions. In compiling the projections,
the Company’s management took into account historical performance, combined with estimates regarding net revenues,
EBITDA, adjusted EBITDA, net income and adjusted net income. Although the projections are presented with numerical
specificity, they were based on numerous assumptions and estimates as to future events made by management that management
believed were reasonable at the time the projections were prepared. This information is not, however, fact and should not be
relied upon as being necessarily indicative of actual future results. Readers of this proxy statement are cautioned not to
place undue reliance on the prospective financial information. In addition, factors such as industry performance, the market
for the Company's existing and new products and services, customer behavior and preferences, the competitive
environment, expectations regarding future acquisitions or any other transaction and general business, economic, regulatory,
market and financial conditions, all of which are difficult to predict and beyond the control of management, may cause actual
future results to differ materially from the results forecasted in these financial projections. In addition, the projections
do not take into account any circumstances or events occurring after the date that they were prepared. For instance, the
projections do not give effect to the merger, including, but not limited to, any changes to the projections or the Company's
operations or strategy as a result of the merger or any changes to the Company's operations or strategy that may be
implemented after the time the projections were prepared. We cannot assure you that the projections will be realized or that
actual results will not be significantly different from those contained in the projections.
Neither the Company's independent auditors,
nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the prospective financial
information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability,
and assume no responsibility for, and disclaim any association with, the prospective financial information. The financial
projections included in this proxy statement are included solely to give shareholders access to certain information that was made
available to the financial advisor and are not included for the purpose of influencing any shareholders to make any investment
decision with respect to the merger, including whether or not to seek appraisal for his, her or its Shares.
The following table summarizes the financial
projections provided by management to Barclays on December 6, 2015:
| |
For the year ending December 31, | |
| |
2015E | | |
2016E | | |
2017E | | |
2018E | | |
2019E | | |
2020E | | |
FY15-20E CAGR% | |
| |
RMB | | |
RMB | | |
RMB | | |
RMB | | |
RMB | | |
RMB | | |
| |
| |
(in millions) | |
| |
| |
Net Revenues | |
| 2,068.0 | | |
| 2,868.4 | | |
| 4,260.6 | | |
| 5,170.3 | | |
| 6,147.6 | | |
| 6,721.0 | | |
| 26.6 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
EBITDA (Non-GAAP)(1) | |
| 138.9 | | |
| 277.7 | | |
| 496.4 | | |
| 672.1 | | |
| 817.2 | | |
| 909.2 | | |
| 45.6 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Adjusted EBITDA (Non-GAAP)(2) | |
| 238.1 | | |
| 376.9 | | |
| 595.6 | | |
| 752.7 | | |
| 897.8 | | |
| 989.8 | | |
| 33.0 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
EBIT (Non-GAAP)(1) | |
| 98.7 | | |
| 220.8 | | |
| 430.9 | | |
| 601.2 | | |
| 742.4 | | |
| 833.2 | | |
| 53.2 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net Income Attributable to Bona(3) | |
| 9.0 | | |
| 120.9 | | |
| 289.6 | | |
| 429.1 | | |
| 544.2 | | |
| 605.9 | | |
| 132.1 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Adjusted Net Income Attributable
to Bona (Non-GAAP)(3) | |
| 108.2 | | |
| 220.1 | | |
| 388.8 | | |
| 509.7 | | |
| 624.8 | | |
| 686.5 | | |
| 44.7 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Adjusted Net Income (Non-GAAP)(2) | |
| 104.6 | | |
| 216.4 | | |
| 385.2 | | |
| 506.1 | | |
| 621.1 | | |
| 682.9 | | |
| 45.5 | % |
_______________________________
| (1) | “EBITDA” refers to earnings before interest,
taxes, depreciation and amortization. “EBIT” refers to earnings before interest and taxes. |
| (2) | “Adjusted EBITDA” is adjusted net income
adjusted for interests, taxes, depreciation and amortization. “Adjusted net income” is net (loss) income adjusted
for share-based compensation expenses. |
| (3) | “Net income attributable to Bona” is net
(loss) income less net loss attributable to noncontrolling interests. “Adjusted net income attributable to Bona” is
net income attributable to Bona that is adjusted to exclude share-based compensation expenses. |
EBITDA, adjusted EBITDA, EBIT,
adjusted net income attributable to Bona and adjusted net income are non-GAAP measures that are used by management as supplemental
financial measures to evaluate the Company’s business trends. They are not defined under U.S. generally accepted accounting
principles (“U.S. GAAP”) and, accordingly, they may not be comparable measurements to those used by other companies.
They should not be considered a substitute for or superior to U.S. GAAP results.
In preparing these projections, the Company’s
management necessarily made certain assumptions about future financial factors affecting the Company’s business, including,
primarily, that (i) box office revenue growth in China would be in line with management’s expectations, (ii) the Company
would be able to monetize their film pipeline and expand movie theater network according to management’s plans and schedule,
(iii) the Company would continue to be able to successfully co-invest and co-produce Hollywood films with similar commercial terms
and market them in China largely in accordance with management’s expectations, (iv) the Company would be able to invest,
produce, and market domestic films in China at costs which are in line with management’s expectations, (v) the Company would
continue to be able to raise film funds to finance future film investments and productions at broadly similar terms to management’s
expectations. The Company's management also assumed that the RMB and the overall economy in China will remain stable, and that
there will be no material adverse change in the competition, the industry, and relevant regulations affecting the Company.
For the reasons discussed in this proxy
statement, including the bases and assumptions on which the financial projections and forecasts were compiled, the inclusion of
specific portions of the financial projections and forecasts in this proxy statement should not be regarded as an indication that
the Company, the Independent Committee and its advisors or the Board considers such financial projections or forecasts to be an
accurate prediction of future events, and the projections and forecasts should not be relied on as such an indication. No one
has made any representation to any shareholders of the Company or anyone else regarding the information included in the financial
projections and forecasts discussed above.
The financial projections and forecasts
included in this proxy statement should not be considered in isolation or in lieu of the Company’s operating and other financial
information prepared in accordance with U.S. GAAP.
NONE OF THE COMPANY OR ITS AFFILIATES,
ADVISORS, OFFICERS, DIRECTORS OR REPRESENTATIVES HAS MADE OR MAKES ANY REPRESENTATION TO ANY SHAREHOLDER OR OTHER PERSON REGARDING
THE ULTIMATE PERFORMANCE OF THE COMPANY COMPARED TO THE INFORMATION CONTAINED IN THE PROJECTIONS OR THAT PROJECTED RESULTS WILL
BE ACHIEVED.
BY INCLUDING IN THIS PROXY STATEMENT
A SUMMARY OF ITS INTERNAL FINANCIAL PROJECTIONS, THE COMPANY UNDERTAKES NO OBLIGATIONS TO UPDATE, OR PUBLICLY DISCLOSE ANY UPDATE
TO, THESE FINANCIAL PROJECTIONS TO REFLECT CIRCUMSTANCES OR EVENTS, INCLUDING UNANTICIPATED EVENTS, THAT MAY HAVE OCCURRED OR
THAT MAY OCCUR AFTER THE PREPARATION OF THESE PROJECTIONS, EXCEPT TO THE EXTENT REQUIRED BY APPLICABLE FEDERAL SECURITIES LAW.
The financial projections are
forward-looking statements. For information on factors which may cause the Company’s future financial results to
materially vary, please see “Cautionary Note Regarding Forward-Looking Statements” beginning on page 102, and
“Item 3. Key Information— D. Risk Factors” included in the Company’s Annual Report on Form 20-F for
the fiscal year ended December 31, 2014, incorporated by reference into this proxy statement.
Opinion of the Independent Committee’s Financial Advisor
Pursuant to an engagement letter dated
July 13, 2015, the Independent Committee retained Barclays Bank PLC to act as its financial advisor to provide financial advice
and related assistance to the Independent Committee in connection with the merger. Barclays is an internationally recognized financial
services firm that, among other things, is regularly engaged in the investment banking business, including the valuation of businesses
and securities in connection with mergers and acquisitions, underwritings and private placements of securities, and other investment
banking services.
On December 15, 2015, at a meeting of the
Independent Committee to evaluate the merger, Barclays rendered its oral opinion to the Independent Committee, subsequently confirmed
in writing, to the effect that, as of that date and based on and subject to the assumptions, procedures, factors, limitations
and qualifications set forth in Barclays’ written opinion, the merger consideration to be paid to the holders of Shares
(other than holders of Excluded Shares) and the holders of ADSs (other than holders of ADSs representing Excluded Shares) in the
merger was fair, from a financial point of view, to those holders.
The full text of Barclays’ written
opinion, dated as of December 15, 2015, is attached to this proxy statement as Annex B and is incorporated into this proxy statement
by reference. The description of Barclays’ opinion set forth in this proxy statement is qualified in its entirety by reference
to the full text of the opinion. Shareholders are urged to read the Barclays opinion in its entirety for a description of the
procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Barclays
in connection with the opinion.
Barclays’ engagement and opinion
were for the benefit of the Independent Committee, in its capacity as such, and its opinion was rendered to the Independent Committee
in connection with its consideration of the merger. Barclays has expressly consented to the inclusion of its opinion and presentation
to the Independent Committee, dated December 13, 2015, as exhibits to the transaction statement on Schedule 13E-3 filed with the
SEC in connection with the merger and the availability of these materials in accordance with the immediately following sentence.
These materials will also be available for any interested shareholder of the Company (or any representative of a shareholder who
has been so designated in writing) to inspect and copy at the Company’s principal executive offices during regular business
hours. Shareholders of the Company may consider these materials in connection with their evaluation of the merger. However, neither
Barclays’ opinion nor its presentation to the Independent Committee was intended to nor does it constitute a recommendation
to any shareholder as to how the shareholder should vote or act with respect to the merger or any matter relating thereto.
Barclays rendered its opinion with respect
to, as of the date of the opinion, the fairness, from a financial point of view, to the Company’s shareholders (other than
holders of Excluded Shares) and ADS holders (other than holders of ADSs representing Excluded Shares) of the per Share merger
consideration and Per ADS Merger Consideration, respectively, to be offered to such shareholders and ADS holders, respectively,
in the merger. Barclays was not requested to opine as to, and its opinion does not in any manner address, the Company’s
underlying business decision to proceed with or effect the merger or the likelihood of consummation of the merger. In addition,
Barclays expressed no opinion on, and its opinion does not in any manner address, the fairness of the amount or the nature of
any compensation to any officers, directors or employees of any parties to the merger, or any class of such persons, relative
to the per Share merger consideration to be offered to the holders of Shares or the per ADS merger consideration to be offered
to the holders of ADSs in the merger.
In arriving at its opinion, Barclays reviewed
and analyzed:
| • | a draft of the merger agreement dated as of December 14,
2015 and the specific terms of the merger contained therein; |
| • | certain publicly available information concerning the Company
that Barclays believed to be relevant to its analysis, including the Company’s
financial statements as filed with the SEC; |
| • | financial and operating information with respect to the
business, operations and prospects of the Company furnished to Barclays by the Company,
including financial projections of the Company prepared by the management of the Company; |
| • | historical price and trading volume of the ADSs from June
11, 2014 to December 10, 2015; |
| • | a comparison of the historical financial results and present
financial condition of the Company with those of other companies Barclays deemed relevant;
and |
| • | a comparison of the financial terms of the merger with
the financial terms of certain other recent transactions Barclays deemed relevant. |
In addition, Barclays:
| • | had discussions with the management of the Company concerning
the Company’s business, operations, assets, financial condition, and prospects;
and |
| • | undertook such other studies, analyses and investigations
as Barclays deemed appropriate. |
In arriving at its opinion, Barclays assumed
and relied upon the accuracy and completeness of the financial and other information used by Barclays without any independent
verification of such information (and Barclays has not assumed responsibility or liability for any independent verification of
such information) and further relied upon the assurances of the management of the Company that they are not aware of any facts
or circumstances that would make such information inaccurate or misleading. With respect to the financial projections of the Company,
upon the advice of the Independent Committee, Barclays assumed that such projections had been reasonably prepared on a basis reflecting
the best currently available estimates and judgments of the management of the Company as to the future financial performance of
the Company and that the Company will perform substantially in accordance with such projections. Barclays assumes no responsibility
for and expresses no view as to any such projections or estimates or the assumptions on which they are based. In arriving at its
opinion, Barclay did not conduct a physical inspection of the properties and facilities of the Company and did not make or obtain
any evaluations or appraisals of the assets or liabilities of the Company. Barclays’ opinion necessarily is based upon market,
economic and other conditions as they existed on, and could be evaluated as of, the date on which Barclays rendered its opinion.
Barclays assumes no responsibility for updating or revising its opinion based on events or circumstances that may occur after
the date of its opinion.
In rendering its opinion, Barclays assumed
that the executed merger agreement conformed in all material respects to the last draft dated December 14, 2015 reviewed by Barclays.
In addition, Barclays assumed the accuracy of the representations and warranties contained in the merger agreement and all agreements
related thereto. Barclays also assumed, upon the advice of the Independent Committee and without expressing or implying any opinion
on the probability of the same, that all material governmental, regulatory and third party approvals, consents and releases for
the merger will be obtained within the constraints contemplated by the merger agreement and that the merger will be consummated
in accordance with the terms of the merger agreement without waiver, modification or amendment of any material term, condition
or agreement thereof. Barclays did not express any opinion as to any tax or other consequences that might result from the merger,
nor does Barclays’ opinion address any legal, tax, regulatory or accounting matters, as to which Barclays understands that
the Independent Committee has obtained such advice as it deemed necessary from qualified professionals.
In preparing its opinion, Barclays performed
a variety of financial and comparative analyses that it deemed to be appropriate for this type of transaction, including those
described below. The preparation of a fairness opinion 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 particular circumstances and, therefore, is
not readily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth
below, without considering the analyses as a whole, could create an incomplete or misleading view of the processes underlying
the opinion of Barclays. In arriving at its opinion, Barclays considered the results of all of the analyses as a whole and did
not attribute any particular weight to any factor or analysis considered by it. Rather, Barclays made its determination as to
fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. Accordingly,
Barclays believes that its analyses must be considered as a whole, as considering any portion of such analyses and factors, without
considering all analyses and factors as a whole, could create a misleading or incomplete view of the process underlying its opinion.
In its analyses, Barclays considered and
made numerous assumptions with respect to industry performance, regulatory, general business, economic, market and financial conditions
and other matters, many of which are beyond the control of the Company. No company or transaction used in Barclays’ analyses
as a comparison is identical or necessarily directly comparable to the Company or the merger. Accordingly, a complete analysis
of the results of the following calculations cannot be limited
to a quantitative review of such results and involves complex considerations and judgments concerning financial and operating
characteristics and other factors that could affect the acquisition, public trading or other values of the companies or transactions
analyzed. The estimates contained in Barclays’ analyses and the ranges of valuations resulting from any particular analysis
are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or
less favorable than those suggested by the analyses. Because these analyses are inherently subject to uncertainty, being based
upon numerous factors or events beyond the control of the parties or their respective advisors, Barclays does not assume any responsibility
if future results are materially different from those forecast. In addition, analyses relating to the value of businesses or securities
do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold. Accordingly,
the estimates used in, and the results derived from, Barclays’ analyses and estimates are inherently subject to substantial
uncertainty.
Barclays’ opinion was one of many
factors taken into consideration by the Independent Committee in connection with its consideration of the merger. Consequently,
the analyses described below should not be viewed as determinative of the opinion of the Independent Committee with respect to
the merger consideration or of whether the Independent Committee would have been willing to determine that a different merger
consideration was fair. The merger consideration to be paid to the holders of our Shares and ADSs pursuant to the merger was determined
through arm’s length negotiations between the Independent Committee and representatives of Parent and was approved by the
Independent Committee and the Board. Barclays did not recommend any specific merger consideration to the Independent Committee
or that any given merger consideration constituted the only appropriate consideration for the merger.
In accordance with customary investment
banking practice, Barclays employed generally accepted valuation methods in reaching its opinion. The following is a summary of
the material financial and comparative analyses that were performed by Barclays in connection with rendering its opinion and does
not purport to be a complete description of the financial analyses performed by Barclays. Some of the summaries of the financial
analyses include information presented in tabular format. The tables must be read together with the full text of each summary
and are alone not a complete description of Barclays’ financial analyses. Considering the data in the tables without considering
the full narrative description of the financial analyses, including the methodologies and assumption underlying the analyses,
could create a misleading impression of Barclays’ financial analyses. Except as otherwise noted, the following quantitative
information, to the extent that it is based on market data, is based on market data as it existed on or before December 10, 2015,
and is not necessarily indicative of current market conditions.
Discounted Cash Flow
Analysis
Based upon the financial forecasts provided
by management of the Company, Barclays performed a discounted cash flow analysis to determine a range of illustrative net present
values per ADS as at December 31, 2015. For purpose of this analysis, Barclays applied discount rates ranging from 10.5% to 11.5%,
reflecting an estimate of the Company’s weighted average cost of capital (calculated based on macro-economic and industry
specific estimate of risk, opportunity cost of capital among other appropriate factors), to (i) the estimated unlevered free cash
flows of the Company from 2016 through the end of 2020 and (ii) the terminal value of the Company as of the end of 2020 derived
by applying perpetuity growth rates ranging from 3.0% to 4.0% to the Company’s estimated unlevered free cash flow. Unlevered
free cash flow was calculated as adjusted earnings before interest and taxes plus depreciation and amortization, less share-based
compensation expenses (to the extent that these expenses corresponded to share-based compensation that has not been currently
issued and that has not been accounted for in the calculation of the current Shares issued and outstanding, on a fully diluted
basis), unlevered tax expenses, capital expenditures and changes in net working capital. The sum of the present value of (i) and
(ii) were then adjusted by subtracting total debt outstanding (including minority interest), adding total cash, cash equivalents
and restricted cash outstanding, as of September 30, 2015. From these figures, Barclays’ calculations resulted in illustrative
net present values per ADS ranging from $11.84 to $14.90.
Selected Transaction
Analysis
Barclays reviewed and analyzed certain
publicly available information relating to the following completed transactions involving (a) film exhibition companies, (b) production
and distribution companies and (c) film exhibition or production and distribution companies located in the PRC, respectively.
Barclays compared certain financial information and transaction multiples relating to the target companies in those transactions
to the corresponding information for the Company:
Film Exhibition Target Company Transaction Comparables
Date
Announced |
|
Acquiror |
|
Target
Company |
|
Target
Nationality |
13/08/2014 |
|
SongLiao Automobile |
|
Jiangsu Yaolai Cinema Management |
|
PRC |
10/01/2014 |
|
Cineworld Group |
|
Cinema City Holding |
|
Poland |
10/06/2013 |
|
OMERS Private Equity |
|
Vue Entertainment |
|
UK |
19/02/2013 |
|
Regal Entertainment |
|
Hollywood Theaters |
|
US |
16/11/2012 |
|
Cinemark |
|
Rave Cinemas |
|
US |
01/10/2012 |
|
Carmike Cinemas |
|
Rave Reviews Cinemas (16 Theaters) |
|
US |
10/07/2012 |
|
Doughty Hanson & Co |
|
CinemaxX AG |
|
Germany |
18/05/2012 |
|
Dalian Wanda Group |
|
AMC Entertainment |
|
US |
05/11/2010 |
|
Doughty Hanson & Co |
|
Vue Entertainment |
|
UK |
Production and Distribution Target Company Transaction Comparables
Date
Announced |
|
Acquiror |
|
Target
Company |
|
Target
Nationality |
21/11/2014 |
|
BesTV New Media |
|
SMG Pictures |
|
PRC |
29/08/2014 |
|
Zhejiang Jinlei
Refractories |
|
Perfect Pictures
& Media |
|
PRC |
24/06/2014 |
|
Alibaba Investment |
|
ChinaVision Media Group |
|
PRC |
07/08/2013 |
|
Jiangsu Hongbao
Hardware |
|
Great Wall Film
& TV |
|
PRC |
22/07/2013 |
|
Huace Film &
TV |
|
Croton Cultural
Media |
|
PRC |
20/07/2012 |
|
DreamWorks |
|
Classic Media |
|
US |
27/07/2011 |
|
Walt Disney |
|
UTV Software
Communications |
|
India |
31/08/2009 |
|
Walt Disney |
|
Marvel Entertainment |
|
US |
24/01/2006 |
|
Walt Disney |
|
Pixar |
|
US |
09/12/2005 |
|
Viacom / Paramount |
|
DreamWorks |
|
US |
PRC Located Film Exhibition Target Company or Production
and Distribution Target Company Transaction Comparables
Date
Announced |
|
Acquiror |
|
Target
Company |
|
Target
Nationality |
21/11/2014 |
|
BesTV New Media |
|
SMG Pictures |
|
PRC |
29/08/2014 |
|
Zhejiang Jinlei
Refractories |
|
Perfect Pictures
& Media |
|
PRC |
13/08/2014 |
|
SongLiao Automobile |
|
Jiangsu Yaolai
Cinema Management |
|
PRC |
24/06/2014 |
|
Alibaba Investment |
|
ChinaVision Media Group |
|
PRC |
07/08/2013 |
|
Jiangsu Hongbao
Hardware |
|
Great Wall Film
& TV |
|
PRC |
22/07/2013 |
|
Huace Film &
TV |
|
Croton Cultural
Media |
|
PRC |
None of the selected transactions or the
companies party to the transactions are identical or directly comparable to the proposed merger or to the Company. The selected
transactions were identified based on the three groups above which Barclays considered generally relevant for the purpose of its
analysis: (a) target companies with film exhibition business operations in common with the Company; (b) target companies operating
in the adjacent production and distribution industry verticals to the Company; and (c) target companies located in the PRC with
film exhibition business operations or operating in the adjacent production and distribution industry verticals. However, the
reasons for and the circumstances surrounding each of the selected precedent transactions analyzed were diverse and there are
inherent differences in the business, operations, financial conditions and prospects of the Company and the companies included
in the selected precedent transaction analysis. Barclays therefore made qualitative judgments concerning differences between the
characteristics of the selected precedent transactions and the proposed transaction which would affect the acquisition values
of the selected target companies and the Company.
Based on the management forecast for the
Company and publicly announced historical financial information for the target company in each selected transaction, Barclays
calculated, among other things, the enterprise value of the Company and each target company, as applicable, as a multiple of such
company’s EBITDA for the twelve-month period prior to the date on which the relevant transaction was announced (“LTM”).
The results of this analysis are summarized as follows:
Film
Exhibition Target Company Comparables |
|
EV
/ EBITDA Multiple LTM |
Mean |
9.2x |
Median |
7.6x |
|
|
Production and Distribution
Target Company Comparables |
|
|
EV
/ EBITDA Multiple LTM |
Mean |
17.6x |
Median |
15.3x |
PRC Located Film Exhibition
Target Company or Production and Distribution Target Company Transaction Comparables
|
EV
/ EBITDA Multiple LTM |
Mean |
17.1x |
Median |
15.4x |
Based on the results of the foregoing analysis
and Barclays’ professional judgment, Barclays applied multiples ranging from 10.4x to 24.3x, based on the minimum and maximum
multiples for the transaction comparables involving PRC located target companies (with the minimum representing the Huace Film-Croton
transaction and the maximum representing the Alibaba-ChinaVision transaction), to the Company’s estimated adjusted EBITDA
for 2015 and derived illustrative implied values per ADS ranging from $5.40 to $12.80.
In addition, as part of its selected transaction
comparable companies analysis, Barclays also performed a premia paid analysis based on the premia paid in 46 previously announced
take-private transactions involving U.S.-listed companies with business and operations primarily in the PRC in various industries.
For purposes of this analysis, Barclays calculated the premia represented by the acquisition price in each of the transactions
to the volume weighted average closing price (“VWAP”) of the applicable target company’s shares as of one day,
30 days, and 90 days prior to the announcement of the receipt of the applicable proposal for a take-private transaction. The results
of these calculations are summarized as follows:
| |
Precedent Transactions | |
| |
1-day VWAP | | |
30-days VWAP | | |
90-days VWAP | |
Mean | |
| 31.0 | % | |
| 34.3 | % | |
| 33.7 | % |
Median | |
| 26.2 | % | |
| 32.9 | % | |
| 30.8 | % |
Barclays applied premia ranging from 20.7%
to 39.9% (representing the 1st and 3rd quartile of the 90-day VWAP premia of such take-private comparable transactions, respectively)
over $10.18, the VWAP of the ADSs during the 90 trading days prior to, and including, June 11, 2015, the last trading date before
information about a potential proposal for a going private transaction involving the Company became public and derived illustrative
prices for the ADSs ranging from $12.30 to $14.20.
Selected Trading Analysis
Barclays reviewed and analyzed certain
publicly available market trading data, financial information and valuation metrics of the following groups of selected publicly
traded companies and compared such information to the corresponding information for the Company:
PRC Filmed Entertainment Companies
US-Listed Filmed Entertainment Companies
Global Exhibition Companies
The selected companies were chosen based
on Barclays’ knowledge of the filmed entertainment and film exhibition industries. Although none of the selected companies
is identical or necessarily directly comparable to the Company, the selected companies are publicly traded on exchanges accessible
to foreign investors with operations and/or other criteria, such as lines of business, revenue model, markets, business risks,
growth prospects, maturity of business and size and scale of business, that Barclays considered generally relevant for purposes
of its analysis.
Based on available data with respect to
the closing share price as of December 10, 2015, historical financial information contained in public filings and Wall Street
research analyst estimates for the selected companies, Barclays calculated, among other things, the enterprise value as a multiple
of estimated EBITDA for 2015, 2016, and 2017 for each selected company. The results of this analysis are summarized as follows:
|
|
Enterprise
Value / EBITDA |
|
|
|
|
|
|
|
|
|
2015E |
|
2016E |
|
2017E |
PRC Filmed Entertainment Companies |
|
|
|
Mean |
|
25.7x |
|
15.2x |
|
11.5x |
Median |
|
14.5x |
|
8.6x |
|
6.2x |
|
|
|
|
|
|
|
U.S.-Listed Filmed Entertainment Companies |
|
|
|
Mean |
|
18.7x |
|
13.4x |
|
12.0x |
Median |
|
11.8x |
|
10.6x |
|
9.8x |
|
|
|
|
|
|
|
Global Exhibition Companies |
|
|
|
Mean |
|
11.5x |
|
10.0x |
|
8.8x |
Median |
|
11.1x |
|
8.6x |
|
7.9x |
|
|
|
|
|
|
|
All Companies |
|
|
|
Mean |
|
16.8x |
|
12.2x |
|
10.5x |
Median |
|
12.9x |
|
9.6x |
|
8.7x |
Based on the results of the foregoing Enterprise
Value / EBITDA analysis and Barclays’ professional judgment, Barclays applied multiples ranging from 14.2x to 16.2x (with
the range based on the mean of the PRC filmed entertainment comparable companies) to the Company’s estimated adjusted EBITDA
for 2016 to derive an illustrative enterprise value of the Company. Barclays derived illustrative enterprise value of the Company
implied values per ADS ranging from $11.80 to $13.50.
In addition, Barclays applied multiples
ranging from 10.5x to 12.5x (with the range based on the mean of the PRC filmed entertainment comparable companies) to the Company’s
estimated adjusted EBITDA for 2017 to derive an illustrative enterprise value of the Company. Using the same methodologies described
above, Barclays derived illustrative implied values per ADS ranging from $13.80 to $16.40.
Historical Trading Range
Barclays reviewed the historical price
performance of the ADSs for the 52-week period ending June 11, 2015, which represents the last trading day prior to
the announcement of receipt of the merger proposal. During this period the range of closing prices of the ADSs was
between $5.70 and $12.86. Barclays also observed that the volume weighted average prices of the ADSs for the 1-day, 30-day,
60-day, 90-day, and 180-day periods prior to the announcement of receipt of the merger proposal, dated June 12, 2015, were
$12.86, $11.37, $10.64, $10.18 and $9.42 respectively. Based on the offer price and the unaffected share prices, Barclays
also observed implied premiums of 20.4% to volume weighted average prices of the ADSs for the 30-day period preceding the
announcement date, 28.7% to volume weighted average prices of the ADSs for the 60-day period preceding the announcement date,
34.6% to volume weighted average prices of the ADSs for the 90-day period preceding the announcement date, and 45.5% to
volume weighted average prices of the ADSs for the 180-day period preceding the announcement date.
Miscellaneous
Pursuant to the terms of Barclays’
engagement letter, the Company has agreed to pay an opinion fee of $1,000,000 to Barclays, which became payable upon Barclays’
delivery of its opinion to the Independent Committee. In addition, the Company has agreed to pay a discretionary fee of up to
$500,000 to Barclays, which shall be payable, in the sole discretion of the Independent Committee, upon the closing of the merger.
The Company has also agreed to reimburse Barclays for certain expenses and indemnify Barclays for certain liabilities that may
arise out of its engagement.
Barclays and its affiliates engage in a
wide range of businesses from investment and commercial banking, lending, asset management and other financial and non-financial
services. Barclays has in the past provided, and is currently providing, investment banking and financial services to the Company
and certain investors from which Parent proposes to obtain equity financing for the consummation of the merger or their respective
affiliates and we may in the future provide investment banking and financial services to such investors, the Company or any of
their respective affiliates. In the ordinary course of its business, Barclays and its affiliates may actively trade and effect
transactions in the equity, debt and/or other securities (and any derivatives thereof) and financial instruments (including loans
and other obligations) of the Company and Parent for Barclay’s own account and for the accounts of its customers and, accordingly,
may at any time hold long or short positions and investments in such securities and financial instruments.
Buyer Group’s Purpose of and Reasons for the Merger
Under SEC rules governing “going
private” transactions, each member of the Buyer Group is deemed to be engaged in a “going private” transaction
and is required to express its reasons for the merger to the Company’s unaffiliated security holders, as defined in Rule
13e-3 of the Exchange Act. Each member of the Buyer Group is making the statements included in this section solely for the purpose
of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act. For the Buyer Group, the purpose of
the merger is to enable Parent to acquire 100% control of the Company, in a transaction in which unaffiliated holders of the Shares
and the ADSs will be cashed out in exchange for $27.40 per share or $13.70 per ADS, respectively, without interest and net of
any applicable withholding taxes, so Parent will bear the rewards and risks of the sole ownership of the Company after all of
the ADSs and Shares are cancelled, including any increases in value of the Company as a result of improvements to the Company’s
operations or acquisitions of other businesses.
The Buyer Group believes the operating
environment has changed in a significant manner since the Company’s initial public offering. There is greater domestic competition
in the businesses in which the Company operates. These changes have increased the uncertainty and volatility inherent in the business
models of companies similar to the Company. As a result, the Buyer Group is of the view that there is potential for considerably
greater short- and medium-term volatility in the Company’s earnings. Responding to current market challenges will require
tolerance for volatility in the performance of the Company’s business and a willingness to make business decisions focused
on improving the Company’s long-term profitability. The Buyer Group believes that these strategies would be most effectively
implemented in the context of a private company structure. As a privately held entity, the Company’s management will have
greater flexibility to focus on improving long-term profitability without the pressures exerted by the public market’s valuation
of the Company and its emphasis on short-term period-to-period performance.
Further, as a privately held company, the
Company will be relieved of many of the expenses, burdens and constraints imposed on companies that are subject to the public
reporting requirements under the U.S. federal securities laws, including the Exchange Act and the Sarbanes-Oxley Act of 2002.
The Buyer Group decided to undertake the
“going private” transaction at this time because it wants to take advantage of the benefits of the Company being a
privately held company as described above. In the course of considering the “going private” transaction, the Buyer
Group did not consider alternative transaction structures because the Buyer Group believed the merger was the most direct and
effective way to enable the Buyer Group to acquire ownership and control of the Company.
Effect of the Merger on the Company
Private Ownership
ADSs representing Shares of the Company
are currently listed on the NASDAQ under the symbol “BONA.” It is expected that, immediately following the completion
of the merger, the Company will cease to be a publicly traded company and will instead become a privately-held company beneficially
owned by the Buyer Group. Following the completion of the merger, the ADSs will cease to be listed on the NASDAQ, and price quotations
with respect to sales of the ADSs in the public market will no longer be available. In addition, registration of the ADSs and
the underlying Shares under the Exchange Act may be terminated upon the Company’s application to the SEC if the Shares are
not listed on a national securities exchange and there are fewer than 300 registered holders of the Shares. Ninety days after
the filing of Form 15 in connection with the completion of the merger or such longer period as may be determined by the SEC, registration
of the ADSs and the underlying Shares under the Exchange Act will be terminated. At such time, the Company will no longer be required
to file periodic reports with the SEC or otherwise be subject to the United States federal securities laws, including Sarbanes-Oxley
Act, applicable to public companies. After the completion of the merger, the Company’s shareholders will no longer enjoy
the rights or protections that the United States federal securities laws provide, including reporting obligations for directors,
officers and principal securities holders of the Company. Furthermore, following the completion of the merger, the ADS program
of Shares will terminate.
Under the terms of the merger agreement,
if the merger is completed, at the Effective Time, each of the Shares, including Shares represented by ADSs, issued and outstanding
immediately prior to the Effective Time, other than the Excluded Shares, will be cancelled in exchange for the right to receive
$27.40 in cash per Share without interest and net of any applicable withholding taxes. Each ADS issued and outstanding immediately
prior to the Effective Time (other than ADSs representing the Excluded Shares) will be cancelled in exchange for the right to
receive $13.70 in cash per ADS without interest and net of any applicable withholding taxes (less $0.05 per ADS cancellation fees
pursuant to the terms and conditions of the Deposit Agreement). The Excluded Shares other than Dissenting Shares will be cancelled
for no consideration. The Dissenting Shares will be cancelled for their fair value determined in accordance with the CICL.
In addition, at the Effective Time, the
Company will terminate the Share Incentive Plans, terminate all relevant award agreements entered into under the Share Incentive
Plans and cancel all the Company Share Awards granted under the Share Incentive Plans that are then outstanding and unexercised,
whether or not vested or exercisable.
At the Effective Time, as to the Company
Options that are not Rollover Shares: (a) each Vested Company Option will be cancelled in exchange for the right to receive either
a cash amount equal to the excess of $27.40 over the applicable per share exercise price of such Vested Company Option or, as
agreed upon by the holder thereof and Parent, an equity incentive award of Parent with substantially the same economic value as
such Vested Company Option under the terms to be determined by Parent; and (b) each Unvested Company Option will be cancelled
in exchange for a right to receive an equity incentive award of Parent with substantially the same economic value as such Unvested
Company Option under the terms to be determined by Parent. The payment or grant of substituted equity incentive awards in connection
with the treatment of applicable Company Options will be made by the surviving corporation as promptly as practicable following
the Effective Time.
At the Effective Time, each Company Option
that is a Rollover Share (whether vested or unvested) will be cancelled in exchange for an option to purchase a number of Parent
Shares equal to the number of Shares underlying such Company Option, under the terms to be determined by Parent.
At the Effective Time, as to the outstanding
Restricted Shares that are not Rollover Shares: (a) each Vested Restricted Share will be cancelled in exchange for a right to
receive either an equity incentive award of Parent with substantially the same economic value as such Vested Restricted Share
under the terms determined by Parent, or as agreed upon by the holder thereof and Parent, $27.40 in cash; and (b) each Unvested
Restricted Share will be cancelled in exchange for a right to receive an equity incentive award of Parent with substantially the
same economic value as such Unvested Restricted Share under the terms to be determined by Parent. The payment or grant of substituted
equity incentive awards in connection with the treatment of applicable Restricted Shares will be made by the surviving corporation
as promptly as practicable following the Effective Time.
At the Effective Time, each outstanding
Restricted Share that is a Rollover Share (whether vested or unvested) will be cancelled in exchange for a right to receive one
Parent Share.
Memorandum and Articles of Association of the Surviving
Corporation; Directors and Management of the Surviving Corporation
If the merger is completed, the current
memorandum and articles of association of the Company will be replaced in its entirety by the memorandum and articles of association
in the form attached as Appendix II to the plan of merger (which is substantially the form of the memorandum and articles of association
of Merger Sub, as in effect prior to the completion of the merger, except that at the effective time of the merger, the memorandum
and articles of association shall refer to the name of the surviving corporation as “Bona Film Group Limited.)” In
addition, the directors of Merger Sub immediately prior to the effective time (identified below in “Annex D – Directors
and Executive Officers of each Filing Person”) will become the directors of the surviving corporation and the officers of
the Company immediately prior to the effective time will become the officers of the surviving corporation.
Primary Benefits and Detriments of the
Merger
The primary benefits of the merger to the
unaffiliated security holders include, without limitation, the following:
| • | the receipt by such security holders of $27.40 per Share
or $13.70 per ADS in cash, representing a premium of 6.5% over the Company’s closing
price of $12.86 per ADS on June 11, 2015, the last trading day prior to June 12, 2015,
the date that it announced that it had received a going-private proposal, and a premium
of 28.7% over the 60 trading day volume-weighted average trading price prior to June
12, 2015; and |
| • | the avoidance of the risk associated with any possible
decrease in the Company’s future revenues and free cash flow, growth or value,
and the risks related to the Company’s substantial leverage, following the merger. |
The primary detriments of the merger to
the unaffiliated security holders include, without limitation, the following:
| • | such security holders will cease to have an interest in
the Company and, therefore, will no longer benefit from possible increases in the future
revenues and free cash flow, growth or value of the Company or payment of dividends on
the Shares, if any; and |
| • | in general, for a U.S. Holder (as defined under “Special
Factors – Material U.S. Federal Income Tax Consequences”), the receipt of
cash pursuant to the merger will be a taxable transaction for U.S. federal income tax
purposes and may also be a taxable transaction under other applicable tax laws. As a
result, a U.S. Holder (as defined under “Special Factors – Material U.S.
Federal Income Tax Consequences”) of the Shares or ADSs who receives cash in exchange
for all of such U.S. Holder’s Shares or ADSs in the merger generally will be required
to recognize gain or loss equal to the difference, if any, between the amount of cash
received and such U.S. Holder’s aggregate adjusted tax basis in such Shares. |
The primary benefits of the merger to the
Company’s directors and executive officers (other than the Chairman) include, without limitation, the following:
| • | either the cash-out of or replacement of Vested Company
Options and Vested Restricted Shares beneficially held by employees, executive officers
and directors of the Company (other than the Chairman) by a grant of equity incentive
awards of Parent with substantially the same economic value, as agreed upon by the holders
thereof and Parent; |
| • | the replacement of Unvested Company Options and Unvested
Restricted Shares beneficially held by employees, executive officers and directors of
the Company (other than the Chairman) by a grant of equity incentive awards of Parent
with substantially the same economic value; |
| • | continued indemnification rights, rights to advancement
of fees and directors and officers liability insurance to be provided by the surviving
corporation to former directors and officers of the Company provided under the merger
agreement; |
| • | the monthly compensation of $10,000 of members of the Independent
Committee in exchange for their services in such capacity (or, in the case of the chairman
of the Independent Committee, monthly compensation of $15,000) (the payment of which
is not contingent upon the completion of the merger or the Independent Committee’s
or the board’s recommendation of the merger); and |
| • | the expected continuation of service of certain executive
officers of the Company with the surviving corporation in positions that are substantially
similar to their current positions. |
The primary detriments of the merger to
the Company’s directors and executive officers (other than Mr. Dong Yu) include, without limitation, the following:
| • | certain directors and officers, to the extent and in their
capacity as shareholders of the Company, will no longer benefit from possible increases
in the future revenues and free cash flow, growth or value of the Company or payment
of dividends on the Shares, if any; and |
| • | in general, the receipt of cash pursuant to the merger
will be a taxable transaction for U.S. federal income tax purposes and may also be a
taxable transaction under other applicable tax laws. |
The primary benefits of the merger to the
Buyer Group include the following:
| • | if the Company successfully executes its business strategies,
the value of their equity investment could increase because of possible increases in
future revenues and free cash flow, increases in the underlying value of the Company
or the payment of dividends, if any, that will accrue to Parent; |
| • | the Company will no longer have continued pressure to meet
quarterly forecasts set by analysts. In contrast, as a publicly traded company, the Company
currently faces public shareholders and investment analyst pressure to make decisions
that may produce better short term results, but which may not over the long term lead
to a maximization of its equity value; |
| • | the Company will have more freedom to focus on long-term
strategic planning in a highly competitive business; |
| • | the Company will have more flexibility to change its capital
spending strategies without public market scrutiny or analysts’ quarterly expectations; |
| • | the Company will be able to introduce new products or change
its pricing strategies to attract customers without public market scrutiny or the pressure
to meet quarterly forecasts set by analysts; and |
| • | there will be a reduction of the costs and administrative
burden associated with operating the Company as a U.S. publicly traded company, including
the costs associated with regulatory filings and compliance requirements. In 2014, such
costs that would be reduced as a result of the Company no longer being publicly listed
totaled approximately $1.9 million and included, but were not limited to, (i) fees and
expenses related to Sarbanes-Oxley compliance and valuation services, (ii) fees and expenses
of U.S. securities counsel and investor relations firm, (iii) printing costs and (iv)
and directors’ and officers’ liability insurance. Such cost savings will
directly benefit the Buyer Group following the closing, and will be recurring in nature
if and for so long as the Company remains private. |
The primary detriments of the merger to the Buyer
Group include the following:
| • | all of the risk of any possible decrease in the Company’s
revenues, free cash flow or value following the merger will be borne by the Buyer Group; |
| • | risks associated with pending legal and regulatory proceedings
against the Company will be borne by the Buyer Group; |
| • | the business risks facing the Company will be borne by
the Buyer Group; |
| • | an equity investment in the surviving corporation by the
Buyer Group following the merger will involve substantial risk resulting from the limited
liquidity of such an investment; and |
| • | following the merger, there will be no trading market for
the surviving corporation’s equity securities. |
Effect of the Merger on the Company’s Net Book Value
and Net Earnings
Following consummation of the merger, Parent
will own 100% of the outstanding share capital of the Company and will have a corresponding interest in our net book value and
net earnings.
Our net income attributable to our shareholders
for the fiscal year ended December 31, 2014 was approximately $6.4 million and our net tangible book value as of December 31,
2014 was approximately $166.0 million.
The Table below sets out the direct or
indirect interest in the Company’s net earnings and net tangible book value for members of the Buyer Group before and immediately
after the merger, based on the historical net tangible book value and net earnings of the Company as of and for the year ended
December 31, 2014.
| |
Ownership
Prior to the Merger(1) | | |
Ownership
After the Merger(2) | |
| |
Earnings | | |
Net Tangible
Book Value | | |
Earnings | | |
Net Tangible
Book Value | |
Name | |
$’000 | | |
% | | |
$’000 | | |
% | | |
$’000 | | |
% | | |
$’000 | | |
% | |
Chairman Parties | |
| 2,439.6 | | |
| 38.1 | | |
| 63,308.1 | | |
| 38.1 | | |
| 3,156.8 | | |
| 49.3 | | |
| 81,918.0 | | |
| 49.3 | |
Sequoia Entities | |
| 325.1 | | |
| 5.1 | | |
| 8,435.2 | | |
| 5.1 | | |
| 278.1 | | |
| 4.3 | | |
| 7,216.9 | | |
| 4.3 | |
Fosun Entities | |
| 394.9 | | |
| 6.2 | | |
| 10,247.0 | | |
| 6.2 | | |
| 337.8 | | |
| 5.3 | | |
| 8,767.1 | | |
| 5.3 | |
SAIF | |
| 464.5 | | |
| 7.3 | | |
| 12,053.6 | | |
| 7.3 | | |
| 397.4 | | |
| 6.2 | | |
| 10,312.8 | | |
| 6.2 | |
Uranus | |
| 403.4 | | |
| 6.3 | | |
| 10,468.3 | | |
| 6.3 | | |
| 836.0 | | |
| 13.1 | | |
| 21,693.8 | | |
| 13.1 | |
Alibaba Entities | |
| - | | |
| - | | |
| - | | |
| - | | |
| 530.1 | | |
| 8.3 | | |
| 13,755.9 | | |
| 8.3 | |
Tencent Entities | |
| - | | |
| - | | |
| - | | |
| - | | |
| 371.1 | | |
| 5.8 | | |
| 9,629.1 | | |
| 5.8 | |
All Gain Parties | |
| - | | |
| - | | |
| - | | |
| - | | |
| 87.6 | | |
| 1.4 | | |
| 2,272.4 | | |
| 1.4 | |
| (1) | Ownership percentages are based on 32,402,346 Shares issued and outstanding
as of the date of this proxy statement and taking into
consideration Company Options exercisable and Restricted Shares vesting within
60 days from the date of this proxy statement. |
| (2) | Ownership percentages are subject to adjustment pursuant to the terms and conditions of the
merger agreement, the Equity Commitment Letters and the Support Agreement and are on a fully diluted basis. |
Plans for the Company after the Merger
After the effective time of the merger,
Parent anticipates that the Company’s operations will be conducted substantially as they are currently being conducted,
except that the Company will cease to be a publicly traded company and will instead be a wholly-owned subsidiary of Parent.
Other than as described in this proxy statement
and transactions already under consideration by the Company, there are no present plans or proposals that relate to or would result
in any of the following:
| • | an extraordinary corporate transaction involving the Company’s
corporate structure, business, or management, such as a merger, reorganization, liquidation,
relocation of any material operations; |
| • | sale or transfer of a material amount of assets; or |
| • | any other material changes in the Company’s business. |
However, the Buyer Group will continue
to evaluate the Company’s entire business and operations from time to time, and may propose or develop plans and proposals
which they consider to be in the best interests of the Company and its equity holders, including the disposition or acquisition
of material assets, alliances, joint ventures, and other forms of cooperation with third parties or other extraordinary transactions,
including the possibility of relisting the Company or a substantial part of its business on another stock exchange.
Alternatives to the Merger
The Board did not independently determine
to initiate a process for the sale of the Company. The Independent Committee was formed on June 15, 2015, in response to the receipt
of the going-private proposal letter from the Buyer Group (which at that time comprised of Mr. Dong Yu, the Sequoia Entities and
Fosun) on June 12, 2015. In light of (i) the Buyer Group’s intention to work together exclusively in pursuit of any acquisition
of the Company and its combined beneficial ownership of approximately 62.9% of the total issued and outstanding Shares (as of
the dates of this proxy statement), (ii) no attempt was made to contact third parties who might otherwise consider an acquisition
of the Company, and (iii) since the Company’s receipt of the proposal letter from the Buyer Group (which at that time comprised
of Mr. Dong Yu, the Sequoia Entities and Fosun) on June 12, 2015, the Company has not received any actionable offer from any third
party for (a) a merger or consolidation of the Company with another company, (b) the sale or transfer of all or substantially
all of the Company’s assets or (c) the purchase of all or a substantial portion of the Shares that would enable such person
to exercise control of or significant influence over the Company, the Independent Committee determined that there was no viable
alternative to the proposed sale of the Company to the Buyer Group.
The Independent Committee also took into
account that, prior to the receipt of shareholder approval, the Company, subject to compliance with the terms and conditions of
the merger agreement, can terminate the merger agreement in order to enter into an acquisition agreement with respect to a superior
proposal, subject to the payment of a termination fee to the extent provided in the merger agreement. In this regard, the Independent
Committee recognized that it has flexibility under the merger agreement to respond to an alternative transaction proposed by a
third party that is or is reasonably likely to result in a superior proposal, including the ability to provide information to
and engage in discussions and negotiations with such party (and, if such proposal is a superior proposal, recommend such proposal
to the Company’s shareholders).
In addition, the Independent Committee
also considered the alternative for the Company to remain as a public company. However, the Independent Committee did not believe
such options to be equally or more favorable in enhancing shareholder value, after considering factors such as the forecasts of
future financial performance prepared by management, the increased costs of regulatory compliance for public companies, the challenges
to the Company's efforts to increase shareholder value as an independent publicly-traded company, and the requirement, as an SEC-reporting
company, to disclose a considerable amount of business information to the public which will limit the Company's ability to compete
in the market. The Independent Committee has concluded that it is more beneficial to the unaffiliated security holders to enter
into the merger agreement and pursue the consummation of the transactions, including the merger, and become a private company
rather than to remain a public company.
Effects on the Company if the Merger is not Completed
If the merger agreement and the plan of
merger are not authorized and approved by the Company’s shareholders or if the merger is not completed for any other reason,
the Company’s shareholders will not receive any payment for their Shares or ADSs in connection with the merger. The holders
of Vested Company Options and/or Vested Restricted Shares will not receive payment pursuant to the merger agreement or an equity
incentive award of Parent. The holders of Unvested Company Options and/or Unvested Restricted Shares will not receive an equity
incentive award of Parent. Instead, the Company will remain a publicly traded company, the ADSs will continue to be listed and
traded on the NASDAQ, provided that the Company continues to meet the NASDAQ’s listing requirements, and the Company will
remain subject to SEC reporting obligations. Therefore, the Company’s shareholders will continue to be subject to similar
risks and opportunities as they currently are with respect to their ownership of our Shares or ADSs. Accordingly, if the merger
is not completed, there can be no assurance as to the effect of these risks and opportunities on the future value of your Shares
or ADSs, including the risk that the market price of the ADSs may decline to the extent that the current market price reflects
a market assumption that the merger will be completed.
Under specified circumstances in which
the merger agreement is terminated, the Company may be required to pay Parent a termination fee of $15.0 million, or Parent may
be required to pay the Company a termination fee of either $30.0 million, in each case, as described under the caption “The
Merger Agreement and Plan of Merger—Termination Fee” beginning on page 90.
If the merger is not completed, from time
to time, the Board will evaluate and review, among other things, the business, operations, dividend policy and capitalization
of the Company and make such changes as are deemed appropriate and continue to seek to identify strategic alternatives to enhance
shareholder value. If the merger agreement is not authorized and approved by the Company’s shareholders or if the merger
is not completed for any other reason, there can be 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.
Financing
The Company and the Buyer Group estimate
that the total amount of funds necessary to complete the merger and the related transactions is approximately $375 million (assuming
no exercise of dissenter rights by shareholders of the Company). In calculating this amount, the Company and the Buyer Group did
not consider the value of the Rollover Shares, which will be cancelled for no consideration pursuant to the merger agreement.
This amount includes the cash to be paid to the Company’s unaffiliated shareholders and holders of ADSs, Vested Company
Options and Vested Restricted Shares, except for any Company Share Awards held by the Rollover Shareholders, which will be cancelled
pursuant to the merger agreement, as well as the related costs and expenses, in connection with the merger and the related transactions.
The merger and the related transactions
are expected to be funded by equity contributions contemplated in the equity commitment letters (each such equity commitment letter,
and “Equity Commitment Letter” and, together, the “Equity Commitment Letters”), by and between Parent
and each of the Sponsors. Under the terms and subject to the conditions of the Equity Commitment Letters, the Sponsors will contribute
equity financing in an aggregate amount of $365,976,730.70 to Parent to complete the merger. Pursuant to these Equity Commitment
Letters, each of the Chairman Parties, Uranus, Alibaba Pictures, Oriental Power and Mr. Xie has committed to contribute, or will
cause to be contributed, as an equity contribution to Parent, an amount, equal to $125,697,403.80, $79,904,208.80, $85,982,898.80,
$60,188,018.20 and $14,204,201.10, respectively, subject to the terms and conditions therein, in each case in exchange for proportionate
newly issued equity interests in Parent to be held by such Sponsor or its affiliate. Such funds are to be used solely for the
purpose of completing the merger and the other transactions in accordance with the merger agreement. Such funds are to be paid
from accounts outside China, and such payment will not be subject to any restriction, registration, approval or procedural requirements
under applicable PRC laws, rules and regulations.
Each Sponsor’s commitment under its
Equity Commitment Letter is conditioned upon (a) the satisfaction or waiver at the closing of the merger of all conditions precedent
to the obligations of Parent and Merger Sub to consummate the transactions contemplated by the merger agreement, (b) completion
of or contemporaneous funding of the portion of the equity financing that is to be funded by the other Sponsors pursuant to the
other Equity Commitment Letters, and (c) either the contemporaneous consummation of the Closing or the obtaining by the Company
an order requiring Parent to cause the equity financing to be funded and to consummate the merger.
The obligation of each of the Sponsors
to fund the equity commitment under its Equity Commitment Letter will terminate automatically and immediately upon the earliest
to occur of (a) the valid termination of the merger agreement in accordance with its terms; (b) the closing of the merger;
(c) the making of the contribution by such Sponsor or its assigns; (d) the Company or any of its affiliates, directly or indirectly,
asserting any claim against (i) such Sponsor or other Sponsors under the Limited Guarantees or (ii) the Sponsor or other Sponsors
or any related person thereof (other than Parent and Merger Sub) in connection with the merger agreement or any of the transactions
contemplated thereby (other than a claim seeking specific performance to fund the contribution); or (e) July 1, 2016.
The Company is an express third-party beneficiary
of each of the Equity Commitment Letters to the extent of its right to seek specific performance of each of the equity commitments
under the circumstances in which the Company would be permitted by the merger agreement to obtain specific performance requiring
Parent and Merger Sub to enforce the equity commitments. Each of the Sponsors may assign or delegate all or a portion of its obligations
to fund its equity commitment to any of its affiliates or any other investment fund sponsored or managed by such affiliate.
Interim Investors Agreement
Concurrently with the execution and delivery
of the merger agreement, Uranus, SAC Finance, Willow, All Gain, the Rollover Shareholders, Parent and Merger Sub entered into
an interim investors agreement (as may be amended from time to time in accordance with its terms, the “Interim Investors
Agreement”) which governs the relationship among the parties thereto with respect to the merger agreement and matters relating
thereto until the earlier of the termination of the merger agreement or consummation of the merger. The Interim Investors Agreement
provides for, among other things and, subject to certain limitations or exceptions therein, (i) the mechanism for making decisions
relating to the merger agreement and ancillary agreements pending consummation of the merger, (ii) the mechanism for making decisions
relating to the equity financing pending consummation of the merger, and the right of Parent at the direction of the parties thereto
representing at least 75% of the aggregate commitments under the Interim Investors Agreement to enforce (including by specific
performance) the provisions of each Equity Commitment Letter and the Support Agreement, (iii) the entrance into, concurrent with
the consummation of the merger, a shareholders agreement of Parent by all parties to the Interim Investors Agreement, and (iv)
certain fee and expense sharing arrangements among Uranus, SAC Finance, Willow, All Gain and the Rollover Shareholders.
Limited Guarantees
Concurrently with the execution of the
merger agreement, each of the Sponsors entered into a limited guarantee (each such limited guarantee, a “Limited Guarantee”
and, together, the “Limited Guarantees”). Under the Limited Guarantees, the Sponsors have collectively guaranteed
in favor of the Company the entire portion of the Parent’s payment obligations with respect to the termination fee, if and
when required under the merger agreement, up to a defined maximum amount. Each Limited Guarantee will terminate on the earliest
of (a) the Effective Time, (b) the payment in full of the guaranteed obligation under such Limited Guarantee, (c) any termination
of the Sponsor’s obligation under the Equity Commitment Letter as a result of the making of the contribution by such Sponsor
pursuant to the Equity Commitment Letter, and (d) the termination of the merger agreement in accordance with its terms by mutual
consent of Parent and the Company or under circumstances in which Parent and Merger Sub would not be obligated to pay the termination
fee in accordance with the merger agreement.
Support Agreement
Concurrently with the execution and delivery
of the merger agreement, the Rollover Shareholders entered into the Support Agreement with Parent. Pursuant to the Support Agreement,
at the closing of the merger, the Rollover Shares will be cancelled for no consideration. Immediately prior to the closing of
the merger, each Rollover Shareholder will subscribe, or will cause its affiliate to subscribe, and Parent shall issue to such
Rollover Shareholder or its affiliate, as the case may be, for consideration of par value for the number of ordinary shares and/or
option to purchase ordinary shares of Parent set forth in the Support Agreement.
Each Rollover Shareholder further agreed,
with respect to the Rollover Shares beneficially owned by such Rollover Shareholder, to vote, (i) in favor of the authorization
and approval of the merger agreement, the merger and other transactions contemplated by the merger agreement and any actions required
in furtherance thereof, (ii) against any alternative acquisition proposal or any other transaction, proposal, agreement or action
made in opposition to authorization and approval of the merger, (iii) against any action, agreement or transaction that is intended,
that could reasonably be expected, or the effect of which could reasonably be expected, to materially impede, interface with,
delay or postpone, discourage or adversely affect the transaction contemplated by the merger agreement or the performance by such
Rollover Shareholder of its/his obligations under the Support Agreement, (iv) against any action, proposal, transaction or agreement
that would reasonably be expected to result in a breach in any respect of any covenant, representation or warranty or other obligation
or agreement of the Company contained in the merger agreement, or of any Rollover Shareholder contained in the Support Agreement,
(v) in favor of any adjournment or postponement of the extraordinary general meeting of the Company’s shareholders as may
be reasonably requested by Parent, and (vi) in favor of any matters necessary for the consummation of the transactions contemplated
by the merger agreement. Subject to applicable laws, each Rollover Shareholder irrevocably appoints Parent and any designee of
Parent as its proxy and attorney-in-fact in connection with the voting of the Rollover Shares beneficially owned by such Rollover
Shareholder.
In addition, from the date of the Support
Agreement until its termination, each Rollover Shareholder will not, without the prior approval of all other Rollover Shareholders,
directly or indirectly, (i) sell (constructively or otherwise) or transfer any of the securities of the Company owned by such
Rollover Shareholder, or enter into any contract, option or other arrangement or understanding with respect to the sale or transfer
of any of the securities of the Company owned by such Rollover Shareholder, including, without limitation, through any derivative
transaction that involves any of the securities of the Company owned by such Rollover Shareholder and (x) has, or would reasonably
be expected to have, the effect of reducing or limiting such Rollover Shareholder’s economic interest in such securities
of the Company owned by such Rollover Shareholder and/or (y) grants a third party the right to vote or direct the voting of such
securities of the Company owned by such Rollover Shareholder, (ii) deposit any securities into a voting trust or enter into a
voting agreement or grant any voting proxy that is inconsistent with the Support Agreement, (iii) convert or exchange, or take
any action which would result in the conversion or exchange, of any of the securities of the Company owned by such Rollover Shareholder,
(iv) knowingly take any action that would make any representation or warranty of such Rollover Shareholder set forth in the Support
Agreement untrue or incorrect or have the effect of preventing, disabling, or delaying such Rollover Shareholder from performing
any of its/his obligations under the Support Agreement, or (v) agree (whether or not in writing) to take any of the actions referred
to in the foregoing clauses (i) through (iv).
The Support Agreement will terminate immediately
upon the earlier to occur (a) the closing of the merger, or (b) the valid termination of the merger agreement.
Remedies
The parties to the merger agreement may
be entitled to the payment of a termination fee or the grant of specific performance of the terms of the merger agreement, including
an injunction or injunctions to prevent breaches of the merger agreement, in addition to any other remedy at law or equity. Specifically,
the Company is entitled to an injunction or injunctions, or other appropriate form of specific performance or equitable relief
to enforce Parent’s and Merger Sub’s obligation to cause the equity financing for the merger to be funded at the Effective
Time, but only in the event that each of the following conditions has been satisfied: (i) all conditions to Parent’s and
Merger Sub’s obligations to consummate the merger (other than those conditions that by their terms are to be satisfied at
the Closing) have been satisfied or waived, (ii) the Company has irrevocably confirmed in writing that if the equity financing
is funded, then the Closing will occur, and (iii) the equity financing has not been funded and Parent and Merger Sub fail to complete
the Closing by the date the Closing is required to have occurred pursuant to the merger agreement.
While the parties may pursue both a grant
of specific performance (including an injunction and injunctions) and monetary damages until such time as the other party pays
a termination fee (as applicable under the merger agreement), none of them will be permitted or entitled to receive both a grant
of specific performance (including an injunction and injunctions) that results in the Closing and monetary damages.
Subject to the equitable remedies the parties
may be entitled to as discussed above, the maximum aggregate liabilities of Parent, on the one hand, and the Company, on the other
hand, for monetary damages in connection with the merger agreement are limited to the Parent termination fee of $30.0 million and
the Company termination fee of $15.0 million, respectively, and reimbursement of certain expenses accrued in the event that Company
or Parent fails to pay the applicable termination fee when due and in accordance with the requirements of the merger agreement,
as the case may be.
Interests of Certain Persons in the Merger
In considering the recommendation of the
Independent Committee and our Board with respect to the merger, you should be aware that each of the Buyer Group has interests
in the transaction that are different from, and/or in addition to, the interests of our shareholders generally. The Board and
Independent Committee were aware of such interests and considered them, among other matters, in reaching their decisions to authorize
and approve the merger agreement, the plan of merger and the transactions contemplated by the merger agreement, including the
merger, and recommend that our shareholders vote in favor of authorizing and approving the merger agreement, the plan of merger
and the transactions contemplated by the merger agreement, including the merger.
Interests of the Buyer Group
As a result of the merger, Parent
will own 100% of the equity interest in the surviving corporation and the Buyer Group will own, directly or indirectly, 100%
of the equity interest in Parent immediately following the completion of the merger. The Chairman Parties, Sequoia Entities,
Fosun Entities, SAIF, Alibaba Entities, Tencent Entities, Uranus and the All Gain Parties will beneficially
hold approximately 49.3%, 4.3%, 5.3%, 6.2%, 8.3%, 5.8%, 13.1% and 1.4% respectively, of the equity interest in Parent
immediately following the completion of the merger on a fully diluted basis. Because of Parent’s equity interest in the
surviving corporation, each member of the Buyer Group will directly or indirectly enjoy the benefits from any future earnings
and growth of the Company after the merger which, if the Company is successfully managed, could exceed the value of their
original investments in the Company. The Buyer Group will also directly bear the corresponding risks of any possible
decreases in the future earnings, growth or value of the Company. The Buyer Group’s investment in the surviving
corporation will be illiquid, with no public trading market for the surviving corporation’s shares and no certainty
that an opportunity to sell its shares in the surviving corporation at an attractive price, or that dividends paid by the
surviving corporation will be sufficient to recover its investment.
The merger may also provide additional
means to enhance shareholder value for the Buyer Group, including improved profitability due to the elimination of the expenses
associated with public company reporting and compliance, increased flexibility and responsiveness in management of the business
to achieve growth and respond to competition without the restrictions of short-term earnings comparisons, and additional means
for making liquidity available to the Buyer Group, such as through dividends or other distributions.
Interests of the Rollover Shareholders
Concurrently with the execution and
delivery of the merger agreement, the Rollover Shareholders entered into the Support Agreement with Parent. Pursuant to the
Support Agreement, at the closing of the merger, the Rollover Shares will be cancelled pursuant to the merger agreement.
Immediately prior to the closing of the merger, each Rollover Shareholder shall subscribe, or shall cause its affiliate to
subscribe, and Parent shall issue to such Rollover Shareholder or its affiliate, as the case may be, for consideration of par
value for the number of ordinary shares and/or option to purchase ordinary shares of Parent set forth in the Support
Agreement. The Chairman Parties, Fosun Entities, Sequoia Entities, SAIF and Uranus will beneficially hold approximately
49.3%, 5.3%, 4.3%, 6.2% and 13.1%, respectively, of the equity interest in Parent immediately following the completion of the
merger on a fully diluted basis.
Given the Company will become a privately-held
company following the completion of the merger, the Rollover Shareholders’ interests in the surviving corporation will be
illiquid, with no public trading market for the surviving corporation’s shares and no certainty of an opportunity to sell
their beneficial interests in the surviving corporation at an attractive price, or that any dividends paid by the surviving corporation
will be sufficient to recover their investment. Each of the Rollover Shareholders may also enjoy benefits from future earnings
and growth of the surviving corporation.
Shares, Company Options, and Restricted Shares Held by Officers
and Directors
As of the date of this proxy statement,
the Company’s directors and executive officers (as set forth in “Security Ownership of Certain Beneficial Owners and
Management of the Company” beginning on page 99), as a group and excluding the Chairman Parties, beneficially own an aggregate
of 1,144,450 Shares. These consist of (a) 946,192 issued and outstanding Shares, (b) issued and unexercised options to purchase
168,055 Shares issued pursuant to the Company Share Incentive Plan and exercisable within 60 days from the date of this proxy
statement, and (c) 30,203 Company restricted shares that will vest within 60 days from the date of this proxy statement. The options
to purchase Shares issued pursuant to the Company Share Incentive Plan and held by each of our directors and executive officers
have a weighted average exercise price of $9.19 per Share.
At the Effective Time, the Company will
terminate the Share Incentive Plans, terminate all relevant award agreements entered into under the Share Incentive Plans and
cancel all the Company Share Awards granted under the Share Incentive Plans that are then outstanding and unexercised, whether
or not vested or exercisable.
At the Effective Time, as to the Company
Options that are not Rollover Shares: (a) each Vested Company Option will be cancelled in exchange for the right to receive either
a cash amount equal to the excess of $27.40 over the applicable per share exercise price of such Vested Company Option or, as
agreed upon by the holder thereof and Parent, an equity incentive award of Parent with substantially the same economic value as
such Vested Company Option under the terms to be determined by Parent; and (b) each Unvested Company Option will be cancelled
in exchange for a right to receive an equity incentive award of Parent with substantially the same economic value as such Unvested
Company Option under the terms to be determined by Parent. The payment or grant of substituted equity incentive awards in connection
with the treatment of applicable Company Options will be made by the surviving corporation as promptly as practicable following
the Effective Time.
At the Effective Time, each Company Option
that is a Rollover Share (whether vested or unvested) will be cancelled in exchange for an option to purchase a number of Parent
Shares equal to the number of Shares underlying such Company Option, under the terms to be determined by Parent.
At the Effective Time, as to the outstanding
Restricted Shares that are not Rollover Shares: (a) each Vested Restricted Share will be cancelled in exchange for a right to
receive either an equity incentive award of Parent with substantially the same economic value as such Vested Restricted Share
under the terms determined by Parent, or as agreed upon by the holder thereof and Parent, $27.40 in cash; and (b) each Unvested
Restricted Share will be cancelled in exchange for a right to receive an equity incentive award of Parent with substantially the
same economic value as such Unvested Restricted Share under the terms to be determined by Parent. The payment or grant of substituted
equity incentive awards in connection with the treatment of applicable Restricted Shares will be made by the surviving corporation
as promptly as practicable following the Effective Time.
At the Effective Time, each outstanding
Restricted Share that is a Rollover Share (whether vested or unvested) will be cancelled in exchange for a right to receive one
Parent Share.
The table below sets forth for each of
our directors and officers:
| • | the number of issued and outstanding Shares beneficially
held by such person as of the date of this proxy statement; |
| • | the number of Shares issuable under, and the exercise price payable per Share
for, the outstanding and unexercised Company Options held by such person that are exercisable within 60 days from the date of
this proxy statement; |
| • | the number of Vested Restricted Shares held by such person and Restricted Shares that will vest within 60 days from the
date of this proxy statement; and |
| • | the maximum amount of cash payment to be received by such person, calculated by
adding (a) the product of (i) the number of issued and outstanding Shares
beneficially held by such person as of the date of this proxy statement and (ii)
$27.40 per Share, (b) the product of (i) the total number of Shares subject to
outstanding and unexercised Company Options that are exercisable within 60 days from the date of
this proxy statement held by such person and (ii) the
excess of $27.40 over the exercise price payable per Share, and (c) the product of
(i) the number of such Vested Restricted Shares and Restricted Shares that will
vest within 60 days from the date of this proxy statement
and (ii)
$27.40 per
Share. |
Name | |
Shares | | |
Shares Issuable Under Outstanding and Unexercised
Company Options that are exercisable within 60 days from the date of this proxy statement | | |
Exercise Price Payable per Share | | |
Vested Restricted Shares and Restricted
Shares that will vest within 60 days from the date of this proxy statement | | |
Maximum Cash Consideration Upon
Completion of the Merger | |
Dong Yu (1) | |
| 11,015,387.5 | | |
| 26,991 | | |
$ | 6.31 | | |
| 2,300 | | |
| Nil | |
| |
| | | |
| 435,774 | | |
$ | 6.31 | | |
| 359,818 | | |
| | |
| |
| | | |
| 222,222 | | |
$ | 10.96 | | |
| | | |
| | |
| |
| | | |
| 277,778 | | |
$ | 7.76 | | |
| | | |
| | |
Jeffrey Chan | |
| Nil | | |
| Nil | | |
| Nil | | |
| * | | |
| * | |
Donghui Pan | |
| Nil | | |
| Nil | | |
| Nil | | |
| Nil | | |
| Nil | |
Zhong Jiang | |
| * | | |
| * | | |
$ | 11.56 | | |
| Nil | | |
| * | |
| |
| | | |
| * | | |
$ | 7.76 | | |
| Nil | | |
| | |
Daqing Dave Qi | |
| * | | |
| * | | |
$ | 7.76 | | |
| Nil | | |
| * | |
Jie Lian | |
| * | | |
| * | | |
$ | 8.62 | | |
| Nil | | |
| * | |
| |
| | | |
| * | | |
$ | 7.76 | | |
| Nil | | |
| | |
Peixin Xu | |
| 792,679 | | |
| Nil | | |
| Nil | | |
| Nil | | |
$ | 21,719,404.60 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Nicolas Zhi Qi | |
| Nil | | |
| * | | |
$ | 8.62 | | |
| * | | |
| * | |
| |
| | | |
| * | | |
$ | 7.76 | | |
| * | | |
| | |
All directors and executive officers as a group | |
| 11,961,579.5 | | |
| 1,130,820 | | |
$ | 9.19 | | |
| 392,321 | | |
$ | 29,825,840.44 | |
| (1) | Mr. Dong Yu will rollover all the Shares, Company Options and
Restricted Shares beneficially held by him in exchange for a right to receive one Parent
Share at the Effective Time. |
| * | Aggregate Shares, Company Options and Restricted Shares are less
than 1% of issued and outstanding Shares as of the date of this proxy statement. |
After the completion of the merger,
the maximum amount of cash payments our directors and executive officers (other than Mr. Dong Yu being a member of the Buyer Group)
may receive in respect of their Shares, Company Options and Restricted Shares is approximately $29.8 million, including approximately
$25.9 million in respect of Shares and approximately $3.9 million in respect of outstanding and unexercised Company Options that
are exercisable within 60 days from the date of this proxy statement and Vested Restricted Shares and Restricted Shares that will
vest within 60 days from the date of this proxy statement.
Indemnification and Insurance
Pursuant to the merger agreement, it has
been agreed, among other provisions, that:
| • | From and after the Effective Time, the surviving corporation
will comply with all of its obligations under the memorandum and articles of association
of any Group Company to indemnify and hold harmless the present and former officers and
directors thereof against all kinds of liabilities incurred in connection with any action
arising out of or relating to the services performed by such officers or directors at
request of the Group Company. |
| • | The memorandum and articles of association of the surviving
corporation will contain provisions no less favorable with respect to exculpation and
indemnification than are set forth in the memorandum and articles of association of the
Company as in effect on the date of the merger agreement, which provisions will not be
amended, repealed or otherwise modified for a period of six years from the Effective
Time in any manner that would affect adversely the rights thereunder of individuals who,
at or prior to the Effective Time, were directors, officers, employees, fiduciaries or
agents of the Company, unless such modification is required by law. |
| • | Prior to the Effective Time, the Company will, and, if
the Company is unable to, Parent will cause the surviving corporation, as of the Effective
Time to, obtain and maintain in effect for six years from the Effective Time the current
directors’ and officers’ liability insurance policies maintained by the Company
with respect to matters occurring at or prior to the Effective Time, with terms at least
as favorable as the coverage provided under the Company’s existing policy, provided
that neither Parent or the surviving corporation will be required to expend for such
policy an annual premium in excess of 300% of the current annual premium paid by the
Company. |
The Independent Committee
On June 15, 2015, the Board established
an Independent Committee to consider the proposal from the Buyer Group (which at that time comprised of Mr. Dong Yu, the Sequoia Entities and
Fosun) and to take any actions it deems appropriate to assess the fairness and viability of such proposal. The Independent Committee
is composed of independent directors Dr. Daqing Dave Qi, Mr. Jie Lian and Mr. Zhong Jiang. All such directors are free from any
affiliation with the Buyer Group, and none of such directors is or was ever an employee of the Company or any of its subsidiaries
or has any financial interest in the merger that is different from that of the unaffiliated security holders other than (i) the
director’s receipt of board compensation in the ordinary course, (ii) Independent Committee members’ compensation
in connection with its evaluation of the merger (which is not contingent upon the completion of the merger or the Independent
Committee’s or Board’s recommendation of the merger), and (iii) the director’s indemnification and liability
insurance rights under the merger agreement. The Board did not place any limitations on the authority of the Independent Committee
regarding its investigation and evaluation of the merger.
The Company has compensated the members
of the Independent Committee in exchange for their service in such capacity a monthly amount of $10,000 per member (or, in the
case of the chairman of the Independent Committee, a monthly amount of $15,000), the payment of which is not contingent upon the
completion of the merger or the Independent Committee’s or the Board’s recommendation of the merger.
Position with the Surviving Corporation
After completion of the merger, the Chairman
expects to continue to serve as chairman of the board of directors of the surviving corporation and chief executive officer of
the surviving corporation. It is anticipated that the other executive officers of the Company will hold positions with the surviving
corporation that are substantially similar to their current positions.
Related Party Transactions
Transactions Related to the Company’s Corporate Structure
To comply with the applicable PRC laws,
rules and regulations, the Company conducts its operations in China through contractual arrangements between its wholly owned
PRC subsidiary, Beijing Bona New World Media Technology Co., Ltd. (“Bona New World”), and its affiliated consolidated
entities.
Exclusive technology and consulting
service agreements. Under the exclusive technology and consulting service agreements between Bona New World and each of the
affiliated consolidated entities as amended and restated, Bona New World provides film investment consulting, operations management
and marketing strategy consulting services to the affiliated consolidated entities, in exchange for a service fee to Bona New
World that is no less than 100% of their net profit before tax. The service fee is payable at such time as agreed between Bona
New World and the affiliated consolidated entity and approved by the board of such affiliated consolidated entity. The term of
each exclusive technology and consulting service agreement is from the effective date until the dissolution of either Bona New
World or the affiliated consolidated entity. Bona New World has the right to terminate the exclusive technology and consulting
service agreement (i) at any time by giving 30 days' prior written notice to the affiliated consolidated entity, or (ii) immediately
by sending written notice to the affiliated consolidated entity if either the affiliated consolidated entity is in substantial
default of the agreement and has failed to cure such default within 30 days of receipt of notice from Bona New World, or the affiliated
consolidated entity enters into liquidation or similar judicial procedures. The affiliated consolidated entity has no right to
terminate the exclusive technology and consulting service agreement prior to its expiration date.
Equity pledge agreements. Bona New
World has entered into an equity pledge agreement as amended and restated, with the shareholders of each affiliated consolidated
entity. Under each equity pledge agreement, the shareholders have pledged their respective equity interests in the affiliated
consolidated entity to Bona New World to secure the obligations of the affiliated consolidated entity under its exclusive technology
and consulting service agreement with Bona New World. In addition, the shareholders have agreed not to transfer, sell, pledge,
or create any encumbrance on their equity interests in the affiliated consolidated entity except for a transfer in accordance
with the voting trust and equity purchase option agreement or between shareholders which does not affect the validity of the equity
pledge. The term of each equity pledge agreement is from the effective date until the termination of the corresponding exclusive
technology and consulting service agreement. In addition, upon full payment of all liabilities and termination of all obligations
of the affiliated consolidated entity under the exclusive technology and consulting service agreement, Bona New World shall terminate
the agreement as soon as reasonably practicable.
Voting trust and equity purchase option
agreements. The shareholders of each affiliated consolidated entity have signed voting trust and equity purchase option agreements,
as amended and restated, pursuant to which the shareholders have granted Bona New World, or a person designated by Bona New World,
the right to exercise all of the voting rights of the shareholders of the affiliated consolidated entity. The Company has an exclusive
option to purchase, or to designate other persons to purchase, to the extent permitted by applicable PRC laws, rules and regulations,
up to 100% of the equity interest in the affiliated consolidated entities from the shareholders. The purchase price for the entire
equity interest is the minimum price permitted by applicable PRC laws, rules and regulations, except that the purchase price for
the equity interest held by the Chairman in Bona Film Group Co., Ltd. (PRC) shall be equal to the principal of the loan outstanding
under the loan agreement described below, unless otherwise required by applicable PRC laws, rules and regulations. Each affiliated
consolidated entity covenants that without prior consent of Bona International Film Group Limited, it will not distribute any
dividends. The term of each voting trust and equity purchase option agreement is from the effective date until termination of
the corresponding exclusive technology and consulting service agreement.
Loan agreement. The Chairman has
entered into a loan agreement with Bona New World, under which Bona New World has granted an interest-free loan of RMB10 million
to the Chairman solely for purposes of the Chairman's increased capital contributions to Bona Film Group Co., Ltd. (PRC). The
loan has a term of 10 years and may be extended upon mutual written consent of the parties. Any proceeds generated from the transfer
of equity interests held by the Chairman in Bona Film Group Co., Ltd. (PRC) to the Company shall be used to repay the loan and
the loan can only be repaid using such proceeds. The loan agreement contains a number of covenants that restrict the actions that
the Chairman may take or cause Bona Film Group Co., Ltd. (PRC) to take. For example, the Chairman (i) shall not transfer, sell,
mortgage, dispose of, or encumber his equity interest in Bona Film Group Co., Ltd. (PRC) except in accordance with the Equity
Pledge Agreement discussed above, (ii) without Bona New World's prior written consent, shall not take actions or omissions that
may have a material impact on the assets, business and liabilities of Bona Film Group Co., Ltd. (PRC), (iii) shall cause the shareholders'
meeting and/or the board of directors of Bona Film Group Co., Ltd. (PRC) not to approve the merger or consolidation of Bona Film
Group Co., Ltd. (PRC) with any person, or any acquisition or investment in any person, without Bona New World's prior written
consent, and (iv) shall appoint any director candidates nominated by Bona New World.
Contractual Arrangement with Cinema Popular Limited
In October 2008, the Company entered into
an agreement with Hurry Up Limited, the holder of the remaining 50% equity interest of Cinema Popular Limited, under the terms
of which the Company controls the board of directors of Cinema Popular Limited and absorbs all of the expected losses of Cinema
Popular Limited. Hurry Up Limited is controlled by Peter Chan, a producer and director of Chinese films. Accordingly, the Company
treats Cinema Popular Limited as a variable interest entity and has consolidated its historical financial results in its consolidated
financial statements in accordance with U.S. GAAP.
Film Funds
Wuhu Bona Jinyu Film Investment Center,
L.P., (the “First Film Fund”), was established on August 1, 2013 and commenced its operation on September 17, 2013.
The First Film Fund is a RMB1.0 billion fund that is expected to finance the development and production of the Company’s
film and television projects for two years, beginning from September 2013. Projects financed by the First Film Fund are expected
to include theatrical releases and television series, and both Bona-produced films as well as films developed through co-production
agreements with Fox International Productions, Universal Pictures and Working Title Films. Proceeds from the First Film Fund will
be distributed to investors based on their initial investment percentage and each film's profitability. The First Film Fund, which
was established by and is managed by Wuhu Bona Film Investment Management Co., Ltd., (the “Film Fund General Partner”),
is held by the Company, Sequoia Capital Investment Advisory (Tianjin) LLC and Gopher Asset Management Co., Ltd. The Company holds
approximately 29.9% of the equity interest in the First Film Fund. The remaining equity interest is held by outside investors.
Pursuant to a cooperation framework agreement
entered in September 2013 by and among the First Film Fund, the Film Fund General Partner, the Company, Tianjin Bona Culture Media
Co., Ltd., (“Tianjin Bona), and Zhejiang Bona Film and Television Production Co., Ltd. (together with Company and Tianjin
Bona, the “Bona Affiliates”), the First Film Fund authorizes the Bona Affiliates to invest its capital in all types
of film and television production projects. The Bona Affiliates are to invest in these projects upon receipt of payment from the
First Film Fund, and be in charge of the filming, production and distribution of these projects. The Company solely owns the perpetual
copyright and all the intellectual property of these projects globally. During the term of the First Film Fund, all proceeds from
these projects globally belong to the First Film Fund. After the term of the First Film Fund, all proceeds from these projects
globally belong to the Company. The Company has the right to develop business and put its name on the products of the projects
it distributes globally.
On March 6, 2015, the Company launched
Wuhu Bona Boxin Film Investment Center, L.P. (the “Second Film Fund”), a RMB1.7 billion fund that is expected to finance
the development and production of its films and television projects for the next two to three years, including Chinese language
films and foreign language films. Projects financed by the Second Film Fund are expected to include theatrical releases and television
series of Bona as well as those developed through co-production agreements with the Hollywood studios, including Studio 8, Fox
International Productions, Universal Pictures and Working Title Films. Proceeds from the Second Film Fund will be distributed
to investors based on their initial investment percentage and each film's profitability. The Second Film Fund, which was established
by and is managed by the Film Fund General Partner, is held by the Company, Sequoia Capital Investment Advisory (Tianjin) LLC
and Gopher Asset Management Co., Ltd. The Company holds approximately 30.0% of the equity interest in the Second Film Fund. The
remaining equity interest is held by outside investors.
Agreement with News America Incorporated
On July 13, 2014, the Chairman, Skillgreat
and 21st Century Fox America, Inc. (formerly known as News America Incorporated) entered into a stock purchase agreement pursuant
to which the Chairman and Skillgreat agreed to purchase an aggregate 6,050,067 ordinary shares from 21st Century Fox America,
Inc. for a consideration of $11.80 per ordinary share, or approximately $71.4 million in total. Upon the closing of the transaction,
Form F-3 and piggyback registration rights were assigned to the Chairman and Skillgreat. 21st Century Fox America, Inc. (formerly
known as News America Incorporated) ceased to be the Company’s shareholder.
Share Purchase Agreement with Fosun Group
On September 30, 2013, the Chairman, Skillgreat
and Orrick, which is a wholly-owned indirect subsidiary of Fosun, entered into a share purchase agreement, pursuant to which Skillgreat
agreed to sell to Orrick an aggregate of 2,000,000 Shares for an aggregate purchase price of $20,800,000. The closing of the transactions
occurred on October 4, 2013.
On July 13, 2014, the Chairman, Skillgreat,
Fidelidade and Fosun entered into a share purchase agreement pursuant to which Fidelidade, an indirectly held subsidiary of Fosun,
agreed to purchase 4,165,926 Shares from Skillgreat for a consideration of $11.80 per ordinary share, or approximately $49.2 million
in total. The transaction was completed on July 24, 2014.
Pursuant to the terms of such share purchase
agreement, the Chairman and Skillgreat agreed, for so long as Fosun International beneficially owns at least 5% of the total issued
and outstanding Shares on a fully-diluted basis, to use their best efforts to support the election and re-election of an individual
designated by Fidelidade to the Board. In addition, under the share purchase agreement, (i) the Chairman granted Fosun a right
of first refusal with respect to any voluntary sale of Shares beneficially owned by the Chairman after he is no longer employed
by the Company and is no longer a director of the Board due to certain reasons. Such right of first refusal will terminate as
soon as Fosun beneficially owns less than 5% of the total and outstanding Shares on a fully-diluted basis; (ii) Fosun and Fidelidade
agreed to support the appointment of the Chairman as the chief executive officer and the chairman of the Board and the exercise
by the Chairman, as chief executive officer, of management power with respect to the Company, including without limitation supporting
the appointment of senior officers nominated by the Chairman; (iii) Fosun and Fidelidade agreed to use their commercially reasonable
efforts to support the future debt and equity financing activities of the Issuer; and (iv) with respect to any financing proposals,
Fosun (x) will advise each director on the Board nominated by it or any of its affiliates to vote in the same manner as the Chairman,
and (y) will cause all voting securities of the Company held or beneficially owned by it to be voted, in the same manner as Skillgreat,
which manner shall be, in the Chairman’s best judgment, commercially reasonable to the Company. In August 2014, Mr. Donghui
Pan, a representative of Fosun, was appointed to the Company’s board.
In connection with this transaction, on
July 23, 2014, Fosun International Holdings Ltd. (“Fosun International Holdings”), which is an indirect controlling
shareholder of Fosun, Skillgreat and the Chairman entered into a loan agreement, pursuant to which Fosun International Holdings
agreed to make a term loan of $22,232,863.80 to Skillgreat to enable it to acquire Shares from 21st Century Fox America, Inc.
The loan bears interest at a rate of 4.5% per annum and has an initial term of one year, which can be extended for six months
at the election of Skillgreat. Skillgreat’s obligations under the loan agreement are guaranteed by the Chairman and secured
by a mortgage of 2,250,711 Shares owned by Skillgreat pursuant to a share mortgage agreement.
On October 12, 2015, the Chairman, Skillgreat,
PeakRe and Fidelidade entered into a securities purchase agreement, pursuant to which, Skillgreat agreed to purchase from PeakRe
an aggregate of 663,201 ADSs and from Fidelidade an aggregate of (i) 39,116 ADSs and (ii) 4,165,926 Shares at a price of $27.40
per Share (equivalent to $13.70 per ADS), for an aggregate purchase price of $123,768,115.30. PeakRe and Fidelidade are both indirectly-held
subsidiaries of Fosun. The transaction was completed on October 26, 2015. Pursuant to the terms of the securities purchase agreement,
the Chairman and Skillgreat agreed, for as long as Fosun directly or indirectly beneficially owns at least 5% of the total issued
and outstanding Shares on a fully-diluted basis, to continue to use their best efforts to support the election and re-election
of an individual designated by Orrick to the Board and to one or more committees of the Board, subject to applicable legal limitations.
Related Party Loans and Other Payments
In July 2015, the Company entered into
an agreement with Jinhong Culture Communication (Shanghai) Company Limited (“Jinhong”), a noncontrolling interests
holder of one of our movie theater companies, for an interest-free loan of RMB2.0 million ($0.3 million). As of the date of this
proxy statement, the Company owed payables in the amount of RMB2.0 million to Jinhong.
The Company had amounts due from We Distribution
Ltd. of $0.3 million and $0.3 million as of December 31, 2013 and 2014, respectively, in connection with receivables from affiliates
for operations.
As of December 31, 2013 and 2014, the Company
had amounts outstanding from Tianjin Nongken Group Real Estate Development Co., Ltd., the noncontrolling interests holder of Tianjin
Nongken Bona Film Investment Ltd., a subsidiary of one of its affiliated consolidated entities, of $0.001 million and nil respectively,
for payments of theater rental fees.
As of December 31, 2013 and 2014, the Company
had amounts outstanding from Tianjin Nongken Group Co., Ltd. of $0.06 million and $0.001 million respectively, for payments of
theater rental fees. Tianjin Nongken Group Co., Ltd. is a shareholder of Tianjin Nongken Group Real Estate Development Co., Ltd.,
which is the noncontrolling interests holder of Tianjin Nongken Bona Film Investment Ltd., a subsidiary of one of the Company’s
affiliated consolidated entities.
As of December 31, 2013 and 2014, the Company
had amounts outstanding from Sanya Beauty Crown Bona International Cinema Co., Ltd., a company in which it has an equity interest,
of $0.003 million and nil.
In 2013, the Company entered into a consulting
agreement with Wuhu Bona Film Investment Management Co., Ltd., a company in which it has an equity interest. As of December 31,
2013 and 2014, the Company had amounts outstanding from Wuhu Bona Film Investment Management Co., Ltd. of $0.16 million and $0.01
million, respectively, for consulting services provided to it.
As of December 31, 2013 and 2014, the Company
had outstanding loan amounts from Hubei Film Distribution, a noncontrolling interests holder of one of its movie theater companies,
of $0.5 million and $0.5 million, respectively.
As of December 31, 2013 and 2014, the Company
owed payables in the amounts of $0.8 million and nil, respectively, to Wuhan Lianzhong Digital Film Technology Co., Ltd., the
Company’s cost method investee, for film projection equipment the Company purchased from it.
As of December 31, 2013 and 2014, the Company
had outstanding loan amounts of $0.2 million and $0.2 million, respectively, from Hunan Xiaoxiang Cineplex Investment Management
Co., Ltd., a noncontrolling interests holder of Changsha Mango Bona Cineplex Management Co., Ltd.
As of December 31, 2013 and 2014, the Company
owed payables of $0.7 million and $1.0 million, respectively, to Film Workshop Co., Ltd. for film production services. Nansun
Shi, a consultant and former director of the Company, is a principal shareholder of Film Workshop Co., Ltd.
In April 2012, the Company entered into
a rental agreement with Tianjin Nongken Group Culture Investment Co., Ltd., a company in which Tianjin Nongken Group Real Estate
Development Co., Ltd. has an equity interest, to lease a piece of property for a movie theater. As of December 31, 2013 and 2014,
the Company owed $1.5 million and $1.8 million, respectively, for rental expenses payable to Tianjin Nongken Group Culture Investment
Co., Ltd., respectively.
As of December 31, 2013 and 2014, the Company
had outstanding payables in the amount of $2.1 million and $2.5 million, respectively, in respect of a loan from Nongken Group
Real Estate Development Co., Ltd.
As of December 31, 2013 and 2014, the Company
owed payables of $0.003 million and nil, respectively, to Mr. Guoqiang Lu, a noncontrolling interests holder of Tianjin Bona Guoqiang
Film and Culture Media Co., Ltd., a subsidiary of one of the Company’s affiliated consolidated entities.
As of December 31, 2013 and 2014, the Company
owed payables of $0.06 million and $0.06 million, respectively, to Beijing Xinliliang Television Culture Co., Ltd., whose founder
is the Company’s noncontrolling interests holder, Mr. Guoqiang Lu.
As of December 31, 2014, the Company owed
payables of $1.9 million for cineplex construction project by Beijing Shui Shang Quan Jing Cineplex Construction Consultation Co,
Ltd., whose founder is related to one director.
As of December 31, 2014, the Company owned
payables of $0.4 million for repayment the operations supporting fund, to N&J Partners Ltd, who is a principal shareholder
of Distribution Workshop (BVI) Ltd.
From time to time, the Chairman has
provided personal guarantees in order to help enable the Company to procure bank borrowings. As of the date of this proxy statement,
the Chairman is providing a personal guarantee in respect of a loan facility from Bank of Beijing under which Bona Film Group
Co., Ltd. (PRC) has loans with principal amount of approximately RMB145.0 million ($22.4 million) outstanding. This loan facility
is jointly guaranteed by Beijing Bona Cineplex, Zhejiang Bona Film and Television Production Co., Ltd. and Tianjin Bona Culture
Media Co., together with the Chairman. The Chairman is also providing, as of the date of this proxy statement, a personal guarantee
in respect of a fixed asset loan facility provided by Industrial and Commercial Bank of China to Bona Film Group Co., Ltd. (PRC),
which has a principal amount of approximately RMB100.0 million ($15.7 million) outstanding. Zhejiang Bona Film and Television
Production Co., Ltd. and Tianjin Bona Culture Media Co. are providing a joint guarantee with the Chairman for this loan. The Chairman
is further providing, as the date of this proxy statement, a personal guarantee in respect of a loan facility from China Minsheng
Bank under which Bona Film Group Co., Ltd. (PRC) has a loan with principal amount of approximately RMB68.12 million ($10.5 million)
outstanding. This loan facility is jointly guaranteed by Bona Film Group Co., Ltd. (PRC) and Zhejiang Bona Film and Television
Production Co., Ltd. In August 2015, the Chairman provided a personal guarantee in respect of a loan facility from Gopher Investment
Fund III SPC under which the Company has loans with principal amount of approximately $25.0 million outstanding. This loan facility
is jointly guaranteed by Bona Film Group Co., Ltd. (PRC) and with the Chairman.
Other Related Party Transactions
The Company has adopted an audit committee
charter, which requires the audit committee to review and approve all proposed related party transactions as defined in Item 404
of Regulation S-K on an ongoing basis. For a description of our related party transactions, please see “Item 7. Major Shareholders
and Related Party Transactions” included in our annual report on Form 20-F for the fiscal year ended December 31, 2014, incorporated
by reference into this proxy statement. Please see “Where You Can Find More Information” for a description of how to
obtain a copy of our annual report.
Except for the transactions discussed above
under this caption titled “Related Party Transactions” and the arrangements in connection with the merger discussed
elsewhere in this proxy statement, during the past two years (i) there were no negotiations, transactions or material contacts
between the Company and its affiliates, on the one hand, and any member of the Buyer Group, on the other hand, concerning any merger,
consolidation, acquisition, tender offer for or other acquisition of any class of the Company’s securities; election of the
Company’s directors or sale or other transfer of a material amount of assets of the Company; (ii) the Company and its affiliates
did not enter into any other transaction with an aggregate value exceeding 1% of the Company’s consolidated revenues with
any member of the Buyer Group, and (iii) none of the Company’s executive officers, directors or affiliates that is a natural
person entered into any transaction during the past two years with an aggregate value (in respect of such transaction or series
of similar transactions with that person) exceeding $60,000 with any member of the Buyer Group.
Fees and Expenses
Fees and expenses incurred or to be incurred
by the Company and the Buyer Group in connection with the merger are estimated at the date of this proxy statement and set forth
in the table below. Such fees are subject to change pending completion of the merger.
Description |
|
Amount |
|
|
|
(US$ in ‘000) |
|
|
|
|
|
|
Legal fees and expenses |
|
$ |
2,210 |
|
|
|
|
|
|
Financial advisory fees and expenses |
|
$ |
1,650 |
|
|
|
|
|
|
Independent Committee fees |
|
$ |
240 |
|
|
|
|
|
|
Miscellaneous (including printing, filing fees, and mailing
costs) |
|
$ |
120 |
|
|
|
|
|
|
Total |
|
$ |
4,220 |
|
These expenses will not reduce the merger
consideration to be received by the Company shareholders. If the merger is completed, the party incurring any costs and expenses
in connection with the merger and the merger agreement will pay those costs and expenses.
Voting by the Rollover Shareholders at the Extraordinary
General Meeting
Pursuant to the Support Agreement, the Rollover
Shareholders have agreed to vote all of the Shares they beneficially own in favor of the approval of the merger agreement, the
plan of merger and the transactions contemplated by the merger agreement, including the merger, at the extraordinary general meeting
of the Company. As of the record date, we expect that the Rollover Shareholders collectively will beneficially own, in the aggregate,
approximately _______ outstanding Shares, which represents approximately _________% of the total outstanding Shares entitled to
vote.
Litigation Related to the Merger
The Company is not aware of any lawsuit
that challenges the merger, the merger agreement or any of the transactions contemplated thereby.
Accounting Treatment of the Merger
The merger is expected to be accounted for,
as a merger of entities under common control in accordance with Accounting Standards Codification 805-50, “Business
Combinations—Related Issues.”
Regulatory Matters
The Company does not believe that any material
federal or state regulatory approvals, filings or notices are required in connection with the merger other than (i) the approvals,
filings or notices required under the federal securities laws, and (ii) the registration of the plan of merger (and supporting
documentation as specified in the CICL) with the Registrar of Companies of the Cayman Islands and, in the event the merger becomes
effective, a copy of the certificate of merger being given to the shareholders and creditors of the Company and Merger Sub at the
time of the filing of the plan of merger, and notification of the merger being published in the Cayman Islands Government Gazette.
Dissenter Rights
Please see “Dissenter Rights”
beginning on page 93.
Material U.S. Federal Income Tax Consequences
The following is a general discussion of
material U.S. federal income tax consequences to only U.S. Holders (as defined below) of the exchange of Shares for cash pursuant
to the merger agreement. For purposes of this discussion, except as otherwise noted, references to Shares include ownership interests
in Shares through ADSs. This discussion is based on the U.S. Internal Revenue Code of 1986, as amended (the “Code”),
final and temporary U.S. Treasury Regulations promulgated thereunder, administrative pronouncements, and judicial decisions as
of the date hereof, all of which are subject to change, possibly on a retroactive basis, and to differing interpretation, which
may result in tax consequences different from those described below. This discussion is not binding on the U.S. Internal Revenue
Service (the “IRS”), and the IRS or a court in the event of an IRS dispute may challenge any of the conclusions set
forth below.
This discussion does not address any U.S.
federal estate, gift, or other non-income tax, or any state, local, or non-U.S. tax consequences of the merger. This discussion
is a summary for general information purposes only and does not consider all aspects of U.S. federal income taxation that may be
relevant to particular shareholders in light of their individual investment circumstances or to certain types of shareholders subject
to special tax rules, including (i) holders that are banks, financial institutions, or insurance companies; regulated investment
companies, mutual funds, or real estate investment trusts; brokers or dealers in securities or currencies or traders in securities
that elect to apply a mark-to-market accounting method; or tax-exempt organizations, (ii) holders that own Shares as part of a
straddle, hedge, constructive sale, conversion transaction, or other integrated investment, (iii) holders that acquired Shares
in connection with the exercise of employee share options or otherwise as compensation for services, (iv) holders that have a “functional
currency” other than the U.S. dollar, (v) retirement plans, individual retirement accounts, or other tax-deferred accounts,
(vi) U.S. expatriates, (vii) holders that are subject to alternative minimum tax, (viii) holders that actually or constructively
own 10% or more of our voting stock or (ix) partnerships or other entities classified as partnerships for U.S. federal income tax
purposes. This discussion assumes that Shares are held as capital assets within the meaning of Section 1221 of the Code (generally,
property held for investment) at all relevant times. This discussion applies only to U.S. Holders who completely terminate their
interest in the Company following the merger, whether such interest is held directly or indirectly, including by application of
attribution rules for U.S. federal income tax purposes. Attribution rules may apply, e.g., if such U.S. Holder holds interests
in the Company indirectly through an interest owned by a family member (subject to certain exceptions and elective procedures)
or a partnership or other related entity.
As used herein, a “U.S. Holder”
is any beneficial owner of Shares that is (i) an individual citizen or resident of the United States for U.S. federal income tax
purposes, (ii) a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized
under the laws of the United States, any state thereof, or the District of Columbia, (iii) an estate the income of which is subject
to U.S. federal income taxation regardless of its source or (iv) a trust which (a) is subject to the primary jurisdiction of a
court within the United States and for which one or more U.S. persons have authority to control all substantial decisions, or (b)
has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person for U.S. federal income
tax purposes.
If a partnership (including any entity classified
as a partnership for U.S. federal income tax purposes) is a beneficial owner of Shares, the U.S. federal income tax treatment of
a partner in the partnership generally will depend on the status of the partner and the activities of the partnership. A U.S. Holder
that is a partner of a partnership holding Shares is urged to consult its own tax advisor.
ALL HOLDERS OF SHARES SHOULD CONSULT
THEIR TAX ADVISORS REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE MERGER IN LIGHT OF THEIR PARTICULAR SITUATIONS, INCLUDING THE
APPLICABILITY AND EFFECT OF U.S. FEDERAL, STATE, LOCAL, NON-U.S. AND OTHER LAWS.
Consequences of Participation in the Merger or an Exercise
of Dissenter Rights
The receipt of cash, either as consideration
in the merger or as a result of a U.S. Holder exercising its Dissenter Rights (as described under the section entitled “Dissenter
Rights”), will be a taxable transaction for U.S. federal income tax purposes, and a U.S. Holder who so exchanges Shares for
cash will generally recognize gain or loss in an amount equal to the difference between (i) the amount of cash received and (ii)
such U.S. Holder’s adjusted tax basis in the Shares exchanged therefor. Subject to the discussion under “Passive Foreign
Investment Company” below, such recognized gain or loss will generally be capital gain or loss, and will constitute long-term
capital gain or loss if the U.S. Holder’s holding period for the Shares exchanged is greater than one year at the Effective
Time.
Long-term capital gains of non-corporate
U.S. Holders are currently subject to U.S. federal income tax at a reduced rate. The ability to use any capital loss to offset
other income or gain is subject to certain limitations under the Code. If a U.S. Holder acquired different blocks of Shares at
different times and different prices, such U.S. Holder must determine the adjusted tax basis and holding period separately with
respect to each such block of Shares.
Any gain or loss recognized by U.S. Holders
will generally be treated as U.S. source gain or loss for U.S. foreign tax credit purposes. However, in the event that we are deemed
to be a PRC “resident enterprise” under the PRC tax law and gain from the disposition of Shares is regarded as gain
sourced from the PRC and is subject to tax in the PRC (see “—Material PRC Income Tax Consequences”) or you are
subject to PRC income tax pursuant to Circular 698 or Bulletin 7 as described below under the “—Material PRC Income
Tax Consequences,” you may be eligible to elect to treat such gain as PRC source gain under the income tax treaty between
the United States and the PRC (the “Treaty”). If we are not eligible for the benefits of the Treaty or you fail to
make the election to treat any gain as PRC source, then you may not be able to use the foreign tax credit arising from any PRC
tax imposed on the exchange of Shares pursuant to the merger agreement unless such credit can be applied (subject to applicable
limitations) against tax due on other income treated as derived from non-U.S. sources. U.S. Holders are urged to consult their
tax advisors regarding the tax consequences if PRC tax is imposed on gain on a disposition of the Shares, including the availability
of the foreign tax credit under their particular circumstances.
Passive Foreign Investment Company
We believe that we were not a passive foreign
investment company or “PFIC” for our taxable year ended December 31, 2014 or any previous taxable years, and we do
not expect to be a PFIC in the current taxable year. However, our PFIC status is tested each year and is dependent on the composition
of our assets and income and the value of our assets from time to time. Because we currently hold, and expect to continue to hold,
a substantial amount of cash and other passive assets, and because the value of our assets is to be determined in large part by
reference to the market price of our ADSs and Shares, which is likely to fluctuate over time, there can be no assurance that we
will not be a PFIC for 2015.
In general, we will be classified as a PFIC
in any taxable year if either (a) the average quarterly value of our gross assets that produce passive income or are held for the
production of passive income is at least 50% of the average quarterly value of our total gross assets (the “asset test”)
or (b) at least 75% of our gross income for the taxable year is passive income (such as certain dividends, interest or royalties).
For this purpose, we will be treated as owning our proportionate share of the assets and earning our proportionate share of the
income in any other corporation in which we own, directly or indirectly, at least 25% (by value) of the stock. For purposes of
the asset test: (a) any cash and cash invested in short-term, interest bearing debt instruments or bank deposits that are readily
convertible into cash will generally count as producing passive income or held for the production of passive income, and (b) the
total value of our assets is calculated based on our market capitalization.
If we are a PFIC for the current taxable
year or have been a PFIC during any prior year in which a U.S. Holder held Shares and the U.S. Holder has not made a valid mark-to-market
election or qualified electing fund election, any gain recognized by a U.S. Holder on the disposition of a Share generally (a)
would be allocated ratably to each day over such U.S. Holder’s holding period for the Share, (b) the amount allocated to
the current year and any tax year prior to the first taxable year in which we were a PFIC would be taxed as ordinary income in
the current year, (c) the amount allocated to each other taxable year would be subject to tax at the highest applicable marginal
rate in effect for that year and (d) an interest charge at the rate for underpayments of taxes would be imposed on the resulting
tax allocated to such period.
If we were a PFIC in any year in which a
U.S. Holder held Shares and certain conditions relating to the regular trading of the Company’s Shares have been met in the
past, a U.S. Holder of Shares may have been able to make a so-called “mark-to-market” election with respect to their
Shares. If a U.S. Holder made this election in a timely fashion, then instead of the tax treatment described in the preceding paragraph,
any gain recognized by the U.S. Holder in the merger would generally be treated as ordinary income or ordinary loss (limited to
the extent of the net amount of previously included income as a result of the mark-to-market election, if any).
We did not and do not intend to provide
the information U.S. Holders would need to make a qualified electing fund election for the current taxable year, and as such the
qualified electing fund election has not been and will not be available to U.S. Holders.
If we are a PFIC for the current taxable
year or have been a PFIC during any prior year in which a U.S. Holder held Shares, a U.S. Holder generally would be required to
file IRS Form 8621 with respect to the disposition of Shares. The PFIC rules are complex, and each U.S. Holder should consult its
own tax advisors regarding the applicable consequences of the merger to such U.S. Holder if we are a PFIC or have been a PFIC during
any prior year in which a U.S. Holder held Shares.
Information Reporting and Backup Withholding
A U.S. Holder may be subject, under certain
circumstances, to information reporting and backup withholding with respect to the amount of cash received in the merger. Under
the backup withholding rules, a U.S. Holder may be subject to backup withholding unless the U.S. Holder is an exempt recipient
and, when required, demonstrates this fact or provides a taxpayer identification number, makes certain certifications on IRS Form
W-9, and otherwise complies with the applicable requirements. A U.S. Holder that does not provide its correct taxpayer identification
number may also be subject to penalties imposed by the IRS.
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. Holder’s U.S.
federal income tax liability, if any, provided that the required procedures are followed. U.S. Holders should consult their tax
advisors as to their qualification for exemption from backup withholding and the procedure for obtaining such an exemption.
Certain U.S. Holders may be required to
report information with respect to their investment in our Shares not held through a custodial account with a U.S. financial institution
to the IRS. U.S. Holders should consult their tax advisors regarding their reporting obligation with respect to the disposition
of their Shares.
Medicare Tax
A U.S. Holder that is an individual or estate,
or a trust that does not fall into a special class of trusts that is exempt from such tax, will be subject to a 3.8% tax on the
lesser of (i) such holder’s “net investment income” (or undistributed “net investment income” in
the case of an estate or trust) for the relevant taxable year and (ii) the excess of such holder’s modified adjusted gross
income for the taxable year over a certain threshold (which in the case of individuals will be between $125,000 and $250,000, depending
on the individual’s circumstances). A U.S. Holder’s net investment income will generally include gains from the sale
or other disposition of capital assets such as the Shares. U.S. Holders that are individuals, estates or trusts should consult
their tax advisors regarding the effect, if any, of this tax on their ownership and disposition of Shares.
Consequences to the Company
No gain or loss is expected to be recognized
by the Company.
Material PRC Income Tax Consequences
Under the EIT Law, which took effect on
January 1, 2008, enterprises established outside of China whose "de facto management bodies" are located in the PRC are
considered "resident enterprises," and thus will generally be subject to the enterprise income tax at the rate of 25%
on their global income. On December 6, 2007, the State Council adopted the Regulation on the Implementation of EIT Tax Law, effective
as of January 1, 2008, which defines the "de facto management body" as an establishment that has substantial management
and control over the business, personnel, accounts and properties of an enterprise. The State Administration of Taxation issued
the Notice Regarding the Determination of Chinese-Controlled Offshore Incorporated Enterprises as PRC Tax Resident Enterprises
on the Basis of De Facto Management Bodies (“Circular 82”) on April 22, 2009. Circular 82 provides certain specific
criteria for determining whether the "de facto management body" of a Chinese-controlled offshore incorporated enterprise
is located in China. Under the EIT Law and its implementation regulations, the PRC income tax at the rate of 10% is applicable
to any gain recognized on receipt of consideration by a "non-resident enterprise" from transfer of its equity in a PRC
resident enterprise if such gain is regarded as incomes derived from sources within the PRC. The term "non-resident enterprise"
means an enterprise established under the laws of a jurisdiction other than the PRC and whose actual administrative organization
is not in the PRC, which has established offices or premises in the PRC, or which has not established any offices or premises in
the PRC but has obtained income derived from sources within the PRC. Under the Individual Income Tax Law, an individual who disposes
a capital asset in China is subject to PRC individual income tax at the rate of 20%. Relief from these taxes may be sought under
an applicable income tax treaty with China.
As there has not been a definitive determination
of the Company's status by the PRC tax authorities, the Company cannot confirm whether it would be considered a PRC resident enterprise
under the EIT Law or whether the gain recognized on the receipt of consideration for Shares would otherwise be subject to PRC tax
to holders of such Shares that are not PRC tax residents.
In addition, under the Circular on Strengthening
the Administration of Enterprises Income Tax on Non-resident Enterprises' Equity Transfer Income (“Circular 698”) issued
by the State Administration of Taxation, which became effective as of January 1, 2008, the Circular Concerning Various Questions
on the Administration of Enterprises Income Tax on Non-resident Enterprises (“Bulletin 24”) issued by the State Administration
of Taxation, which became effective as of April 1, 2011, and the Bulletin on Certain Issues Relating to Indirect Transfer of Assets
by Non-resident Enterprises (“Bulletin 7”) issued by the State Administration of Taxation, which became effective on
February 3, 2015, if any non-resident enterprise transfers equity of a resident enterprise, the non-resident enterprise may be
subject to a 10% PRC income tax on the gain from such equity transfer. In addition, if a non-PRC resident enterprise indirectly
transfers so-called PRC Taxable Properties, referring to properties of an establishment or a place of business in China, real estate
properties in China and equity investments in a PRC tax resident enterprise, by disposition of the equity interests in an overseas
non-resident enterprise without a reasonable commercial purpose and resulting in the avoidance of PRC enterprise income tax, the
transfer will be re-characterized as a direct transfer of the PRC Taxable Properties and gains derived from the transfer may be
subject to a PRC withholding tax of up to 10%. The transferee or other person who is obligated to pay for the transfer is obligated
to withhold the applicable taxes. Bulletin 7 has listed several factors to be taken into consideration by the tax authorities in
determining if an indirect transfer has a reasonable commercial purpose. However, despite these factors, an indirect transfer satisfying
all the following criteria will be deemed to lack reasonable commercial purpose and be taxable under the PRC laws: (i) 75% or more
of the equity value of the overseas non-resident holding enterprise being transferred is derived directly or indirectly from PRC
Taxable Properties; (ii) at any time during the one year period before the indirect transfer, 90% or more of the asset value of
the overseas non-resident holding (excluding cash) is comprised directly or indirectly of investments in the PRC, or 90% or more
of its income is derived directly or indirectly from the PRC; (iii) the functions performed and risks assumed by the overseas non-resident
holding enterprise and any of its subsidiaries that directly or indirectly hold the PRC Taxable Properties are limited and are
insufficient to prove their economic substance; and (iv) the tax payable incurred in other jurisdictions other than in the PRC
on the gain derived from the indirect transfer of the PRC Taxable Properties is lower than the potential Chinese tax on the direct
transfer of those assets. Nevertheless, the indirect transfers falling into the scope of the safe harbor under Bulletin 7 may not
be subject to PRC tax. The safe harbor includes qualified group restructurings, exemptions under tax treaties, and public market
trades, which refers to a trading of equity interest in which the equity interest to be transferred and the transfer price thereof
are determined pursuant to standard trading rules of a public securities market and not by the purchaser and the seller by mutual
agreement prior to such transactions. Circular 698 or Bulletin 7 may be determined by the tax authorities to be applicable to the
merger where non-PRC resident corporate shareholders or ADS holders were involved, if the merger is determined by the PRC tax authorities
to lack reasonable commercial purpose. As a result, if PRC tax authorities were to invoke Circular 698 or Bulletin 7 and impose
tax on the receipt of consideration for Shares or ADSs, then any gain recognized on the receipt of consideration for such Shares
or ADSs pursuant to the merger by the Company’s shareholders who are non-PRC resident enterprises could be treated as PRC-source
income and thus be subject to PRC income tax at a rate of 10% (subject to applicable treaty relief). Parent is entitled under the
merger agreement to withhold any tax arising in relation to filings required by Circular 698 or Bulletin 7. However, neither Parent
nor Merger Sub intends to withhold any PRC taxes on the consideration provided to non-PRC resident shareholders of the Company
in connection with the merger.
You should consult your own tax advisor
for a full understanding of the tax consequences of the merger to you, including any PRC tax consequences.
Material Cayman Islands Tax Consequences
The Cayman Islands currently have no form
of income, corporate or capital gains tax and no estate duty, inheritance tax or gift tax. No taxes, fees or charges will payable
(either by direct assessment or withholding) to the government or other taxing authority in the Cayman Islands under the laws of
the Cayman Islands in respect of the merger or the receipt of cash for Shares and ADSs under the terms of the merger. This is subject
to the qualification that (i) Cayman Islands stamp duty may be payable if any original transaction documents are brought into or
executed or produced before a court in the Cayman Islands (for example, for enforcement), (ii) registration fees will be payable
to the Registrar of Companies of the Cayman Islands to register the plan of merger and (iii) fees will be payable to the Cayman
Islands Government Gazette Office to publish the notice of the merger in the Cayman Islands Government Gazette.
MARKET PRICE OF THE ADSs, DIVIDENDS
AND OTHER MATTERS
Market Price of the ADSs
The following table provides the high and
low sales prices for the ADSs on the NASDAQ under the symbol “BONA” for the periods indicated:
| |
Sales
Price Per ADS (in
$) | |
| |
High | | |
Low | |
Quarterly: | |
| | | |
| | |
2014 | |
| | | |
| | |
First quarter | |
| 8.92 | | |
| 5.60 | |
Second quarter | |
| 6.80 | | |
| 5.50 | |
Third quarter | |
| 7.69 | | |
| 5.99 | |
Fourth quarter | |
| 7.30 | | |
| 5.70 | |
2015 | |
| | | |
| | |
First quarter | |
| 7.90 | | |
| 6.15 | |
Second quarter | |
| 13.28 | | |
| 7.32 | |
Third quarter | |
| 12.38 | | |
| 9.83 | |
Fourth quarter | |
| 13.35 | | |
| 11.85 | |
2016 | |
| | | |
| | |
First quarter (through January 21, 2016) | |
| 13.31 | | |
| 13.02 | |
On June 11, 2015, the last trading day
immediately prior to the Company’s announcement on June 12, 2015 that it had received a preliminary going private proposal,
the reported closing price of our ADSs on the NASDAQ was $12.86 per ADS. The merger consideration of $27.40 per Share, or $13.70
per ADS, represents a premium of 6.5% over the closing price of $12.86 per ADS on June 11, 2015, and a 23.6% and 28.7% premium
over the Company’s 30 and 60 trading day volume-weighted average closing price as quoted by the NASDAQ on June 11, 2015,
respectively. On January 21, 2016, the most recent practicable date before the date of this proxy statement, the high and low
reported sales prices of our ADSs were $13.26 and $13.15, respectively. You are urged to obtain a current market price
quotation for your Shares in connection with voting your Shares.
Dividend Policy
The Company neither declared nor paid
any dividends in 2013, 2014, 2015 or 2016 through the date of this proxy statement to its shareholders, nor does the Company have
any present plan to pay any cash dividends on its ordinary shares in the foreseeable future. The Company currently intends to
retain the Company’s available funds and any future earnings to operate and expand the Company’s business.
Under the terms of the merger agreement,
the company is not permitted to pay any dividends or repurchase any of the Shares pending consummation of the merger.
In the event the merger agreement is terminated
for any reason and the merger is not consummated, the payment of future dividends will be subject to the discretion of the Board.
Even if the Board decides to pay dividends, the form, frequency and amount will depend upon the Company's future operations and
earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the Board
may deem relevant. If the Company pays any dividends, the ADS depositary will distribute such payments to the Company's ADS holders
to the same extent as holders of the Shares, subject to the terms of the deposit agreement, including the fees and expenses payable
thereunder. Cash dividends on the Shares, if any, will be paid in U.S. dollars.
We are a holding company incorporated in
the Cayman Islands. We rely substantially on dividends from our subsidiaries in the PRC to fund our payment of dividends, if any,
to our shareholders. Current PRC regulations permit our subsidiaries to pay dividends to us only out of their accumulated profits,
if any, determined in accordance with PRC accounting standards and regulations. In addition, each of our subsidiaries in China
is required to set aside a certain amount of its accumulated after-tax profits, if any, based on PRC accounting standards each
year to their general reserves until the accumulative amount of such reserves reach a certain percent of their registered capital,
to fund certain statutory reserves. These reserves may not be distributed as cash dividends. Further, if our subsidiaries in China
incur debt on their own behalf, the instruments governing the debt may restrict their ability to pay dividends or make other payments
to us. Cash transfers from our PRC subsidiaries to us are subject further to the PRC government’s foreign exchange control
policy, and our PRC subsidiaries may not be able to obtain the relevant approvals or complete the requisite registrations for distributing
dividends to us. Any failure by any of the Company’s shareholders or any beneficial owner of Shares who is a PRC resident
to comply with the approval or registration requirements imposed by the State Administration of Foreign Exchange with respect to
their investment in us could also subject us to legal sanctions, including a restriction on our PRC subsidiaries’ ability
to distribute dividends to us. Furthermore, the EIT Law eliminates the exemption of enterprise income tax on dividends derived
by foreign investors from foreign invested enterprises and imposes on our subsidiaries in China an obligation to withhold tax on
dividend distributions to their non-PRC shareholders, provided that such non-PRC shareholders are not classified as resident enterprises.
THE EXTRAORDINARY GENERAL MEETING
We are furnishing this proxy statement
to you, as a holder of the Shares, as part of the solicitation of proxies by the Board for use at the extraordinary general meeting
described below.
Date, Time and Place of the Extraordinary General Meeting
The extraordinary general meeting will be
held on ________, 2016, at ______ (Beijing Time) at the Company’s office at 18/F, Tower 1, U-town Office Building, No. 1
San Feng Bei Li, Chaoyang District, Beijing 100020, the People's Republic of China.
Proposals to be Considered at the Extraordinary General Meeting
At the meeting, you will be asked to consider
and vote upon:
THAT the agreement and plan of merger,
dated as of December 15, 2015 (the “merger agreement”) among the Company, Parent and Merger Sub (such merger agreement
being in the form attached as Annex A to this proxy statement, which will be produced and made available for inspection at the
extraordinary general meeting), the plan of merger among the Company and Merger Sub required to be registered with the Registrar
of Companies of the Cayman Islands for the purposes of the merger (such plan of merger being substantially in the form attached
to the merger agreement and which will be produced and made available for inspection at the extraordinary general meeting) and
any and all transactions contemplated by the merger agreement, including the merger (the “merger”) and the amendment
and restatement of the existing memorandum and articles of association of the Company by their deletion in their entirety and the
substitution in their place of a new memorandum and articles of association at the effective time of the merger, a copy of which
is attached as Appendix II to the plan of merger, be authorized, approved and adopted;
THAT each of the members of the Independent
Committee be authorized to do all things necessary to give effect to the merger agreement, the plan of merger and the transactions
contemplated by the merger agreement, including the merger; and
| • | if necessary, as an ordinary resolution: |
THAT the chairman of the extraordinary
general meeting be instructed to adjourn the extraordinary general meeting in order to allow the Company to solicit additional
proxies in the event that there are insufficient proxies received at the time of the extraordinary general meeting to pass the
special resolutions to be proposed at the extraordinary general meeting.
If the merger is completed, at the effective
time of the merger, each outstanding Share (including Shares represented by ADSs), other than (i) the Shares (including Shares
represented by ADSs) owned by Parent, Merger Sub or the Company (as treasury, if any), or by any direct or indirect wholly-owned
subsidiary of Parent, Merger Sub or the Company, (ii) the Shares (including Shares represented by ADSs) reserved (but not yet allocated)
by the Company for settlement upon exercise or vesting of Company share awards, (iii) Rollover Shares and (iv) the Dissenting Shares
(Share described under (a) through (d) above are collectively referred to herein as the “Excluded Shares”), will be
cancelled in exchange for the right to receive $27.40 in cash without interest and net of any applicable withholding taxes, and
for the avoidance of doubt, because each two ADSs represent one Share, each issued and outstanding ADS (other than ADS that represents
Excluded Shares), will represent the right to surrender the ADS in exchange for $13.70 in cash per ADS without interest and net
of any applicable withholding taxes (less $0.05 per ADS cancellation fees pursuant to the terms of the ADS deposit agreement),
in each case, in accordance with the terms and conditions set forth in the merger agreement. At the effective time of the merger,
all of the Shares will be cancelled and cease to exist. Each Dissenting Share will be cancelled and thereafter represent only the
right to receive the fair value of such Dissenting Share in accordance with the CICL. At the effective time of the merger, each
Excluded Share other than Dissenting Shares will be cancelled for no consideration. Each ordinary share, par value $0.0005 per
share, of Merger Sub issued and outstanding immediately prior to the effective time of the merger will be converted into and become
one validly issued, fully paid and non-assessable ordinary share, par value $0.0005 per share, of the surviving corporation.
Our Board’s Recommendation
The Board, acting upon the unanimous recommendation
of the Independent Committee:
| • | determined that it was fair (both substantively and procedurally) to and in the best interests of the Company and its unaffiliated
security holders, and declared it advisable, to enter into the merger agreement and the transaction agreements contemplated by
the merger agreement; |
| • | authorized and approved the execution, delivery and performance of the merger agreement and the transaction agreements contemplated
by the merger agreement and the consummation of the contemplated transactions, including the merger; and |
| • | resolved to direct that the authorization and approval of the merger agreement, the plan of merger and the merger be submitted
to a vote at an extraordinary general meeting of the shareholders with the recommendation of the Board that the shareholders of
the Company authorize and approve by way of special resolution the merger agreement, the plan of merger and the transactions contemplated
under the merger agreement, including the merger. |
Quorum
The presence, in person or by proxy, of
two or more shareholders holding not less than one-third of the nominal value of the total issued and outstanding Shares on the
Share record date will constitute a quorum for the extraordinary general meeting.
Record Date; Shares and ADSs Entitled to Vote
You are entitled to attend and vote at the
extraordinary general meeting if you have Shares registered in your name at the close of business in the Cayman Islands on ________,
2016, or if you are a holder of ADSs at the close of business in New York City on ________, 2016, the Share record date and the
ADS record date for voting at the extraordinary general meeting, respectively. If you own ADSs on the ADS record date (and do not
cancel such ADSs and become a registered holder of the Shares underlying such ADSs as explained below), you cannot vote at the
extraordinary general meeting directly, but you may instruct the ADS depositary (as the registered holder of the Shares underlying
the ADSs) on how to vote the Shares underlying your ADSs. The ADS depositary must receive your instructions no later than ____
a.m. (New York City Time) on ________, 2016 in order to ensure your Shares are properly voted at the extraordinary general meeting.
Alternatively, if you own ADSs on the ADS record date, you may vote at the extraordinary general meeting by cancelling your ADSs
(and certifying you have not instructed, and will not instruct, the ADS depositary to vote the Shares represented by your ADSs)
before the close of business in New York City on ________, 2016 and becoming a holder of Shares prior to the close of business
in the Cayman Islands on ________, 2016, the Share record date. Each outstanding Share on the Share record date entitles the holder
to one vote for each Share on each matter submitted to the shareholders for authorization and approval at the extraordinary general
meeting and any adjournment thereof. We expect that, as of the Share record date, there will be ______ Shares entitled to be voted
at the extraordinary general meeting. If you have Shares registered in your name on the Share record date, the deadline for you
to lodge your proxy card and vote is ________, 2016, at ____ a.m. (Beijing Time). Please see “—Shareholders and ADS
Holders Entitled to Vote; Voting Materials” below for additional information. If the merger is not completed, the Company
would continue to be a public company in the U.S. and the ADSs would continue to be listed on The NASDAQ Selected Global Market
(“NASDAQ”). The Company’s Shares are not listed and cannot be traded on any stock exchange other than the NASDAQ,
and in such case only in the form of ADSs. As a result, if you have cancelled your ADSs to attend the extraordinary general meeting
and the merger is not completed and you wish to be able to sell your Shares on a stock exchange, you would need to deposit your
Shares into the Company’s American depositary shares program for the issuance of the corresponding number of ADSs, subject
to the terms and conditions of applicable law and the ADS deposit agreement, including, among other things, payment of relevant
fees of the ADS depositary for the issuance of ADSs (up to $0.05 per ADS issued) and any applicable stock transfer taxes (if any)
and related charges pursuant to the ADS deposit agreement.
Vote Required
We cannot complete the merger unless the
merger agreement, plan of merger, and the transactions contemplated by the merger agreement are authorized and approved by the
affirmative vote of holders of Shares representing at least two-thirds of the Shares present and voting in person or by proxy
as a single class at the shareholders’ meeting (the “Requisite Company Vote”) in accordance with Section 233(6)
of the Cayman Islands Companies Law. As of the date of this proxy statement, the Rollover Shareholders beneficially owned approximately
58.8% of the total issued and outstanding Shares of the Company entitled to vote. Pursuant to the terms of the Support Agreement,
these Shares will be voted in favor of the authorization and approval of the merger agreement, the plan of merger and the transactions
contemplated by the merger agreement, including the merger at the extraordinary general meeting of the Company.
Shareholders and ADS Holders Entitled to Vote; Voting Materials
Only holders of Shares entered in the register
of members of the Company at the close of business on ________, 2016 (Cayman Islands Time), the Share record date, will receive
the final proxy statement and proxy card directly from the Company. Shareholders registered in the register of members of the Company
as of the Share record date or their proxy holders are entitled to vote and may participate in the extraordinary general meeting
or any adjournment thereof. Shareholders who have acquired Shares after the close of business on the Share record date may not
attend the extraordinary general meeting unless they receive a proxy from the person or entity who had sold them the Shares. Each
holder has one vote for each Share. Shareholders wanting to vote by proxy should indicate on their proxy card how they want to
vote, sign and date the proxy card, and mail the proxy card in the return envelope as soon as possible but in any event so that
it is received by the Company no later than ____ a.m. on ________, 2016 (Beijing Time). Shareholders can also attend the extraordinary
general meeting and vote in person.
Holders of ADSs as of the close of business
on ________, 2016 (New York City Time), the ADS record date, will receive the final proxy statement and ADS voting instructions
card either directly from the ADS depositary (in the case of holders of ADSs who hold the ADSs in certificated form, i.e., in the
form of ADRs) or these materials will be forwarded to them by a third party service provider (in the case of beneficial owners
of ADSs who do not hold the ADSs in the form of ADRs). Holders of ADSs as of the close of business on ________, 2016 (New York
City Time) (who do not cancel such ADSs and become a registered holder of the Shares underlying such ADSs as explained in the following
paragraph) cannot attend or vote at the extraordinary general meeting directly, but may instruct the ADS depositary how to vote
the Shares underlying the ADSs by completing and signing an ADS voting instructions card provided by the ADS depositary and returning
it in accordance with the instructions printed on it. The ADS depositary must receive the ADS voting instructions card no later
than ____ a.m. (New York City Time) on ________, 2016. The ADS depositary shall endeavor, in so far as practicable, to vote or
cause to be voted the Shares represented by ADSs in accordance with your voting instructions.
The ADS depositary has advised us that,
pursuant to Section 15 of the American Depositary Receipt evidencing your ADSs, it will not vote or attempt to exercise the right
to vote any Shares other than in accordance with signed voting instructions from the relevant ADS holder and, accordingly, Shares
represented by ADSs for which no timely voting instructions are received by the ADS Depositary will not be voted. If you hold your
ADSs in a brokerage, bank or other nominee account, you must rely on the procedures of the broker, bank or other nominee through
which you hold your ADSs if you wish to vote.
Holders of ADSs may vote at the extraordinary
general meeting if they cancel their ADSs and become a holder of Shares by the close of business on ________, 2016 (Cayman Islands
Time). ADS holders wanting to cancel their ADSs need to make arrangements to deliver their ADSs to the ADS depositary for cancellation
prior to the close of business in New York City on ________, 2016 and complete certain other procedures required by the ADS depositary.
Persons who hold ADSs in a brokerage, bank or nominee account, must contact their broker, bank or nominee to find out what actions
they need to take to instruct the broker, bank or nominee to cancel the ADSs on their behalf.
Persons holding ADSs in a brokerage, bank
or nominee account should consult with their broker, bank or nominee to obtain directions on how to provide such broker, bank or
nominee with instructions on how to vote their ADSs.
Each two of ADS represents one Share. As
of ________, 2016, there were ____ ADSs outstanding; subject to the cancellation procedures described above, none of the holders
of these ADSs may vote in person at the extraordinary general meeting.
Persons who have acquired Shares and whose
names are entered in the Company’s register of members before the close of business on ________, 2016 (Cayman Islands Time)
will receive the proxy form (including the voting material) before the extraordinary general meeting, and persons who are ADS holders
as of the close of business on ________, 2016 (New York City Time) will receive the ADS voting instructions card from the ADS depositary
before the extraordinary general meeting. Shareholders who have acquired Shares after the close of business on ________, 2016 (Cayman
Islands Time) may not attend the extraordinary general meeting unless they receive a proxy from the person or entity who had sold
them the Shares.
Proxy Holders for Registered Shareholders
Shareholders registered in the register
of members of the Company as of the Share record date who are unable to attend the extraordinary general meeting may appoint another
person (including another shareholder, a third party or the chairman of the meeting) as their proxy to attend the meeting and to
vote their Shares on their behalf, by completing and returning the form of proxy in accordance with the instructions printed thereon.
With regard to the items listed on the agenda and without any explicit instructions to the contrary, the Company as proxy holder
will vote in favor of the resolutions proposed at the extraordinary general meeting according to the recommendation of the Board.
If new proposals (other than those on the agenda) are put forth before the extraordinary general meeting, the Company as proxy
holder will vote in accordance with the position of the Board.
Voting of Proxies and Failure to Vote
All Shares represented by valid proxies
will be voted at the extraordinary general meeting in the manner specified by the holder. If a shareholder returns a properly signed
proxy card but does not indicate how the shareholder wants to vote, Shares represented by that proxy card will be voted FOR
the proposal to authorize and approve the merger agreement, the plan of merger and the transactions contemplated by the merger
agreement, including the merger, FOR the proposal to authorize each of the members of the Independent Committee to do all
things necessary to give effect to the merger agreement, the plan of merger, and the transactions contemplated by the merger agreement,
including the merger, and FOR the proposal to instruct the chairman of the extraordinary general meeting to adjourn the
extraordinary general meeting in order to allow the Company to solicit additional proxies in the event that there are insufficient
proxies received to pass the special resolutions to be proposed at the extraordinary general meeting unless the shareholder appoints
a person other than the chairman of the meeting as proxy, in which case the Shares represented by that proxy card will be voted
(or not submitted for voting) as the proxy determines. Shareholders who fail to cast their vote in person or by proxy will not
have their votes counted.
If the ADS depositary timely receives voting
instructions from an ADS holder which fail to specify the manner in which the ADS depositary is to vote the Shares represented
by the holder’s ADS, or if holders of ADSs do not timely deliver specific voting instructions to the ADS depositary, they
will, under the terms of ADS deposit agreement, be deemed to have instructed the ADS depositary to give a discretionary proxy to
a person designated by the Company (the “Designee”) to vote the Shares represented by such holder’s ADSs, unless
the Company notifies the ADS depositary that it does not wish such proxy to be given, that substantial opposition exists to the
matters to be voted on at the extraordinary general meetings or that such matters would have a material adverse impact on the holders
of the ADSs or on the holders of the Shares. Likewise, unless the Company notifies the ADS depositary that the Company does not
wish to give such proxy or there exists substantial opposition to the matters to be voted on at the extraordinary general meeting
or that such matters would have a material adverse impact on the holders of the ADSs or on the holders of the Shares, the Designee
will receive a discretionary proxy from the ADS depositary and will vote all Shares underlying such uninstructed ADSs FOR
the authorization and approval of the merger agreement and the transactions contemplated by the merger agreement, including the
merger, FOR the proposal to authorize each of the members of the Independent Committee to do all things necessary to give
effect to the merger agreement, the plan of merger, and the transactions contemplated by the merger agreement, including the merger,
and FOR the adjournment of the extraordinary general meeting in order to allow the Company to solicit additional proxies
in the event that there are insufficient proxies received at the time of the extraordinary general meeting to pass the special
resolutions to be proposed at the extraordinary general meeting.
Revocability of Proxies
Registered holders of the Company’s
Shares may revoke their proxies in one of three ways:
| • | first, a registered shareholder may revoke a proxy by written notice of revocation given to the chairman of the extraordinary
general meeting before the extraordinary general meeting commences. Any written notice revoking a proxy should be sent to 18/F,
Tower 1, U-town Office Building, No. 1 San Feng Bei Li, Chaoyang District, Beijing 100020, the People’s Republic of China; |
| • | second, a registered shareholder may complete, date and submit a new proxy card bearing a later date than the proxy card sought
to be revoked to the Company no less than 48 hours prior to the extraordinary general meeting; or |
| • | third, a registered shareholder may attend the extraordinary general meeting and vote in person. Attendance, by itself, will
not revoke a proxy. It will only be revoked if the shareholder actually votes at the extraordinary general meeting. |
If a shareholder holds Shares through a
broker, bank or other nominee and has instructed the broker, bank or other nominee to vote the shareholder’s Shares, the
shareholder must follow directions received from the broker, bank or other nominee to change those instructions.
Holders of the ADSs may revoke their voting
instructions by notification to the ADS depositary in writing at any time prior to ____ a.m. (New York City Time) on ________,
2016. A holder of ADSs can do this in one of two ways:
| • | first, a holder of ADSs can revoke its voting instructions by written notice of revocation timely delivered to the ADS depositary;
or |
| • | second, a holder of ADSs can complete, date and submit a new ADS voting instructions card to the ADS depositary bearing a later
date than the ADS voting instructions card sought to be revoked. |
If you hold your ADSs through a broker,
bank or nominee and you have instructed your broker, bank or nominee to give ADS voting instructions to the ADS depositary, you
must follow the directions of your broker, bank or nominee to change those instructions.
Rights of Shareholders Who Object to the Merger
Shareholders who continue to hold their
Shares in their own name will have the right to dissent from the merger and receive payment of the fair value of their Shares if
the merger is completed, but only if they deliver to the Company, before the vote on the merger is taken at the extraordinary general
meeting, a written objection to the merger and subsequently comply with all procedures and requirements of Section 238 of the Cayman
Islands Companies Law, which is attached as Annex C to this proxy statement, for the exercise of dissenter rights. The fair value
of your Shares as determined under that statute could be more than, the same as, or less than the merger consideration you would
receive pursuant to the merger agreement if you do not exercise dissenter rights with respect to your Shares.
ADS HOLDERS WILL NOT HAVE THE RIGHT TO
EXERCISE DISSENTER RIGHTS AND RECEIVE PAYMENT OF THE FAIR VALUE OF THE SHARES UNDERLYING THEIR ADSs. THE ADS DEPOSITARY WILL NOT
EXERCISE OR ATTEMPT TO EXERCISE ANY DISSENTER RIGHTS WITH RESPECT TO ANY OF THE SHARES THAT IT HOLDS, EVEN IF AN ADS HOLDER REQUESTS
THE ADS DEPOSITARY TO DO SO. ADS HOLDERS WISHING TO EXERCISE DISSENTER RIGHTS MUST SURRENDER THEIR ADSs TO THE ADS DEPOSITARY FOR
CONVERSION INTO SHARES, PAY THE ADS DEPOSITARY’S FEES REQUIRED FOR THE CANCELLATION OF THEIR ADSs, PROVIDE INSTRUCTIONS FOR
THE REGISTRATION OF THE CORRESPONDING SHARES IN THE COMPANY’S REGISTER OF MEMBERS, AND CERTIFY THAT THEY HELD THE ADSs AS
OF THE ADS RECORD DATE AND HAVE NOT GIVEN, AND WILL NOT GIVE, VOTING INSTRUCTIONS AS TO THEIR ADSs BEFORE 5:00 P. M. (NEW YORK
CITY TIME) ON ________, 2016, AND BECOME REGISTERED HOLDERS OF SHARES NOT LATER THAN ________, 2016. THEREAFTER, SUCH FORMER ADS
HOLDERS MUST ALSO COMPLY WITH THE PROCEDURES AND REQUIREMENTS FOR EXERCISING DISSENTER RIGHTS WITH RESPECT TO THE SHARES UNDER
SECTION 238 OF THE CAYMAN ISLANDS COMPANIES LAW. IF THE MERGER IS NOT COMPLETED, THE COMPANY WOULD CONTINUE TO BE A PUBLIC COMPANY
IN THE U.S. AND THE ADSs WOULD CONTINUE TO BE LISTED ON THE Nasdaq. THE COMPANY’S
SHARES ARE NOT LISTED AND CANNOT BE TRADED ON ANY STOCK EXCHANGE OTHER THAN THE Nasdaq,
AND IN SUCH CASE ONLY IN THE FORM OF ADSs. AS A RESULT, IF A FORMER ADS HOLDER HAS CANCELLED HIS, HER OR ITS ADSs TO EXERCISE DISSENTER
RIGHTS AND THE MERGER IS NOT COMPLETED AND SUCH FORMER ADS HOLDER WISHES TO BE ABLE TO SELL HIS OR HER SHARES ON A STOCK EXCHANGE,
SUCH FORMER ADS HOLDER WOULD NEED TO DEPOSIT HIS, HER OR ITS SHARES INTO THE COMPANY’S AMERICAN DEPOSITARY SHARES PROGRAM
FOR THE ISSUANCE OF THE CORRESPONDING NUMBER OF ADSs, SUBJECT TO THE TERMS AND CONDITIONS OF APPLICABLE LAW AND THE ADS DEPOSIT
AGREEMENT, INCLUDING, AMONG OTHER THINGS, PAYMENT OF RELEVANT FEES OF THE ADS DEPOSITARY FOR THE ISSUANCE OF ADSs (UP TO $0.05
PER ADS ISSUED) AND ANY APPLICABLE STOCK TRANSFER TAXES (IF ANY) AND RELATED CHARGES PURSUANT TO THE ADS DEPOSIT AGREEMENT.
Whom to Call for Assistance
If you need assistance, including help in
changing or revoking your proxy, please contact Investor Relations, Bona Film Group Limited, at +86-10-5631-0700 ext. 398 or at
ir@bonafilm.cn.
Solicitation of Proxies
The Company does not plan to engage a proxy
solicitor to assist in the solicitation of proxies. Instead, proxies may be solicited by mail, in person, by telephone, by internet
or by facsimile by certain of our officers, directors and employees. These persons will receive no additional compensation for
solicitation of proxies but may be reimbursed for reasonable out-of-pocket expenses. We will reimburse banks, brokers, nominees,
custodians and fiduciaries for their reasonable expenses in forwarding copies of this proxy statement to the beneficial owners
of our Shares and in obtaining voting instructions from those owners. We will pay all expenses of filing, printing and mailing
this proxy statement.
Other Business
We are not currently aware of any business
to be acted upon at the extraordinary general meeting other than the matters discussed in this proxy statement.
THE MERGER AGREEMENT AND PLAN OF MERGER
This section of the proxy statement describes the material
terms of the merger agreement but does not purport to describe all of the terms of the merger agreement. The following summary
is qualified in its entirety by reference to the complete text of the merger agreement, which is attached as Annex A to this proxy
statement and incorporated into this proxy statement by reference. You should read the merger agreement in its entirety because
it, and not this proxy statement, is the legal document that governs the merger. This description of the merger agreement has been
included to provide you with information regarding its terms.
Structure and Completion of the Merger
The merger agreement provides for the merger
of Merger Sub with and into the Company upon the terms, and subject to the conditions, of the merger agreement, with the Company
as the surviving corporation of the merger. If the merger is completed, the Company will cease to be a publicly traded company.
Unless otherwise mutually agreed between the Company, Parent and Merger Sub, the closing will take place as soon as practicable
after, and in any event no later than the fifth business day immediately after all the closing conditions have been satisfied or
waived (other than those that by their nature are to be satisfied or waived at the closing). At the closing, Merger Sub and the
Company will execute a plan of merger and register the plan of merger and other related documents with the Registrar of Companies
of the Cayman Islands. The merger will become effective on the date specified in the plan of merger.
We expect that the merger will be completed
during the second quarter of 2016, after all conditions to the merger have been satisfied or waived. We cannot specify when, or
assure you that, all conditions to the merger will be satisfied or waived; however, the parties intend to complete the merger as
promptly as practicable.
Memorandum and Articles of Association; Directors and Officers
of the Surviving Corporation
Upon completion of the merger, the current
memorandum and articles of association of the Company will be replaced in their entirety by the memorandum and articles of association
in the form attached to the plan of merger, which are substantively identical to the memorandum and articles of association of
Merger Sub, as in effect prior to the completion of the merger except that at the Effective Time, all references to the name “Mountain
Tiger Limited shall be amended to “Bona Film Group Limited” and all references to the authorized share capital will
be amended as necessary to correctly describe the authorized share capital of the surviving corporation as approved in the plan
of merger. In addition, the directors of Merger Sub immediately prior to the Effective Time will become the initial directors of
the surviving corporation and the officers of the Company immediately prior to the Effective Time will become the initial officers
of the surviving corporation.
Merger Consideration
Under the terms of the merger
agreement, if the merger is completed, at the Effective Time, each of the Company’s Share, including Shares represented
by ADSs, issued and outstanding immediately prior to the Effective Time, other than the Excluded Shares, will be cancelled in
exchange for the right to receive $27.40 in cash per Share without interest, and each ADS issued and outstanding immediately
prior to the Effective Time (other than ADSs representing the Excluded Shares) will be cancelled in exchange for the right to
receive $13.70 in cash per ADS without interest (less $0.05 per ADS cancellation fees pursuant to the terms and conditions of
the Deposit Agreement), in each case, net of any applicable withholding taxes. The Excluded Shares other than Dissenting
Shares will be cancelled for no consideration. The Dissenting Shares will be cancelled and each holder thereof will be
entitled to receive only the payment of the fair value of such Dissenting Shares in accordance with the CICL. Please see
“Dissenter Rights” beginning on page 93 for additional information.
At the Effective Time, each ordinary share,
par value of $0.0001 per share of Merger Sub issued and outstanding immediately prior to the Effective Time will be converted into
one validly issued, fully paid and non-assessable ordinary share of the surviving corporation.
Treatment of Company Options
At the Effective Time, the Company will
terminate the Share Incentive Plans, terminate all relevant award agreements entered into under the Share Incentive Plans and cancel
all Company Share Awards granted under the Share Incentive Plans that are then outstanding and unexercised, whether or not vested
or exercisable.
At the Effective Time, as to the Company
Options that are not Rollover Shares: (a) each Vested Company Option will be cancelled in exchange for the right to receive either
a cash amount equal to the excess of $27.40 over the applicable per share exercise price of such Vested Company Option or, as agreed
upon by the holder thereof and Parent, an equity incentive award of Parent with substantially the same economic value as such Vested
Company Option under the terms to be determined by Parent; and (b) each Unvested Company Option will be cancelled in exchange for
a right to receive an equity incentive award of Parent with substantially the same economic value as such Unvested Company Option
under the terms to be determined by Parent. The payment or grant of substituted equity incentive awards in connection with the
treatment of applicable Company Options will be made by the surviving corporation as promptly as practicable following the Effective
Time.
At the Effective Time, each Company Option
that is a Rollover Share (whether vested or unvested) will be cancelled in exchange for an option to purchase a number of Parent
Shares equal to the number of Shares underlying such Company Option, under the terms to be determined by Parent.
Treatment of Restricted Shares
At the Effective Time, as to the outstanding
Restricted Shares that are not Rollover Shares: (a) each Vested Restricted Share will be cancelled in exchange for a right to receive
either an equity incentive award of Parent with substantially the same economic value as such Vested Restricted Share under the
terms determined by Parent, or as agreed upon by the holder thereof and Parent, $27.40 in cash; and (b) each Unvested Restricted
Share will be cancelled in exchange for a right to receive an equity incentive award of Parent with substantially the same economic
value as such Unvested Restricted Share under the terms to be determined by Parent. The payment or grant of substituted equity
incentive awards in connection with the treatment of applicable Restricted Shares will be made by the surviving corporation as
promptly as practicable following the Effective Time.
At the Effective Time, each outstanding
Restricted Share that is a Rollover Share (whether vested or unvested) will be cancelled in exchange for a right to receive one
Parent Share.
Exchange Procedures
Prior to the Effective Time, Parent will
deposit with the paying agent for the benefit of the holders of the Shares and the ADSs (other than the Excluded Shares) an amount
in cash that is sufficient for the paying agent to make payments under the merger agreement. Promptly after the Effective Time,
Parent and the surviving corporation shall cause the paying agent to mail (or in the case of the Depository Trust Company, deliver),
to each person who was, as of immediately prior to the Effective Time, a registered holder of Shares entitled to receive the per
Share merger consideration (i) a letter of transmittal in customary form specifying how the delivery of the
merger consideration to registered holders of Shares (other than Rollover Shares) will be effected; and (ii) instructions
for effecting the surrender of share certificates representing the Shares (the “Share Certificates”) or affidavits
of loss in lieu of the Share Certificates, or non-certificated Shares represented by book entry ( the “Uncertificated Shares”).
Promptly after a dissenting shareholder has effectively withdrawn or lost his, her or its appraisal rights under the CICL, Parent
shall cause the paying agent to mail to such dissenting shareholder such letter of transmittal and instructions. Upon surrender
of any Share Certificate (or affidavit and indemnity of loss in lieu of the Share Certificate) or cancellation of Uncertificated
Shares, each registered holder of Shares represented by such Share Certificate and each registered holder of Uncertificated Shares
will receive an amount equal to (x) the number of Shares (other than the Excluded Shares) represented by such Share Certificate
(or affidavit of loss in lieu of the Share Certificates) or the number of Uncertificated Shares multiplied by (y) the per
share merger consideration.
Promptly after the Effective Time, the paying
agent will transmit to the ADS depositary an amount in cash in immediately available funds equal to the product of (x) the
number of ADSs issued and outstanding immediately prior to the Effective Time (other than ADSs representing Excluded Shares) and
(y) the per ADS merger consideration, and the Depositary will distribute the per ADS merger consideration to ADS holders (other
than with respect to ADSs representing Excluded Shares) upon surrender by them of the ADSs. Pursuant to the Deposit Agreement,
the ADS holders will pay any applicable fees, charges and expense of the Depositary and government charges (including withholding
Taxes if any) due to or incurred by the Depositary in connection with the cancellation of the ADSs surrendered and distribution
of the per ADS merger consideration to ADS holders. No interest will be paid or accrued on any amount payable in respect of the
Shares or ADSs.
Representations and Warranties
The merger agreement contains representations
and warranties made by the Company to Parent and Merger Sub and representations and warranties made by Parent and Merger Sub to
the Company, in each case, as of specific dates. The statements embodied in those representations and warranties were made for
purposes of the merger agreement and are subject to important qualifications and limitations agreed by the parties in connection
with negotiating the terms of the merger agreement. In addition, some of those representations and warranties may be subject to
a contractual standard of materiality different from that generally applicable to shareholders, may have been made for the principal
purposes of establishing the circumstances in which a party to the merger agreement may have the right not to 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
risks between the parties to the merger agreement rather than establishing matters as facts. Moreover, the representations and
warranties made by the Company were qualified by its public disclosures with the SEC since December 31, 2012 and prior to the date
of the merger agreement and a disclosure schedule delivered by the Company to Parent and Merger Sub concurrently with the execution
of the merger agreement, and the representations and warranties made by Parent and Merger Sub to the Company were qualified by
a disclosure schedule delivered by Parent and Merger Sub to the Company concurrently with the execution of the merger agreement
.
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 carry on the businesses of the Company and its subsidiaries; |
| • | the furnishing by the Company to Parent of accurate memorandum and articles of association, and its compliance with the terms
thereof; |
| • | the capitalization of the Company and the absence of preemptive or other similar rights with respect to securities of the Company
and its subsidiaries (any of which a “Group Company”), or any encumbrances on Company securities that would give their
holders the right to vote with the Company’s shareholders; |
| • | the validity of Company Share Awards and the absence of any agreements (other than the Share Incentive Plans or award agreements
evidencing the Company Share Awards) binding any Group Company to accelerate the vesting of such awards as a result of the transactions
contemplated by the merger agreement; |
| • | the identity and capitalization of the Company’s subsidiaries; |
| • | the absence of contracts binding the any Group Company with respect to capital contribution and voting; |
| • | the absence of secured creditors; |
| • | the Company’s corporate power and authority to execute and deliver, to perform its obligations under and to consummate
the transactions under the merger agreement, and the enforceability of the merger agreement against the Company; |
| • | the required vote of the Company’s shareholders to adopt the merger agreement; |
| • | the declaration of advisability and recommendation to the shareholders of the Company of the merger agreement, the plan of
merger and the merger by the Independent Committee and by the Board, and the authorization and approval of the merger agreement,
the plan of merger and the transactions contemplated under the merger agreement, including the merger, by the Board; |
| • | the receipt of a fairness opinion from the financial advisor to the Independent Committee; |
| • | the absence of violations of or conflict with the governing documents of the Company, applicable laws and certain agreements
of the Company as a result of the Company entering into and performing under the merger agreement and consummating the transactions
contemplated by the merger agreement; |
| • | the obtaining of all governmental consents and approvals in connection with the transactions contemplated by the merger agreement |
| • | compliance with applicable laws (including anti-corruption laws) and possession of licenses and permits; |
| • | the completeness and accuracy of the Company’s SEC filings since December 31, 2012 and the financial statements included
therein; |
| • | the accuracy of the information provided in the Schedule 13E-3 and this proxy statement; |
| • | compliance in all material respects with the applicable listing and corporate governance rules and regulations of the NASDAQ; |
| • | the Company’s internal control over financial reporting; |
| • | the absence of undisclosed liabilities; |
| • | the absence of any “Company Material Adverse Effect” (as defined below) or certain other changes or events since
December 31, 2014; |
| • | labor and employment matters; |
| • | validity of material contracts and the absence of any breach thereof which would have a Company Material Adverse Effect; |
| • | the absence of material litigation against any Group Company; |
| • | the absence of certain transactions with the directors, officers or certain shareholders of the Company; |
| • | the absence of any undisclosed broker’s or finder’s fees; |
| • | the absence of a shareholder rights plan and the inapplicability of any anti-takeover law (other than the CICL) to the merger; |
| • | the Company’s subsidiaries incorporated under the PRC laws; and |
| • | the absence of any other representations and warranties by the Company to Parent and Merger Sub, other than the representations
and warranties made by the Company in the merger agreement. |
Many of the representations and warranties
in the merger agreement made by the Company are qualified as to “materiality” or “Company Material Adverse Effect.”
For purposes of the merger agreement, a “Company Material Adverse Effect” means any fact, event, circumstance, development,
condition, occurrence, change or effect (“Effect”) that, individually or in the aggregate with all other Effects, has
or would reasonably be expected to have a material adverse effect on the business, properties, assets, liabilities, condition (financial
or otherwise) or results of operations of the Company and its subsidiaries taken as a whole, or the Company’s ability to
perform its obligations under the merger agreement and consummate the transactions contemplated by the merger agreement. However,
none of the followings will constitute a Company Material Adverse Effect itself, or will be considered in determining whether a
Company Material Adverse Effect has occurred or is reasonably expected to occur:
| (i) | changes affecting the economy or financial markets or political conditions generally in the PRC; |
| (ii) | changes in GAAP or any interpretation thereof after the date of the merger agreement; |
| (iii) | factors generally affecting the principal industries in which the Group Companies operate; |
| (iv) | the consummation of the transactions contemplated under the merger agreement or the public announcement of the merger agreement
(including the initiation of shareholder litigation or similar legal proceedings relating to the merger agreement or the transactions
contemplated under the merger agreement); |
| (v) | any outbreak or escalation of hostilities, declared or undeclared acts of war, sabotage or terrorism, act of God or natural
disasters, or similar events; |
| (vi) | changes in the market price or trading volume of Shares (it being understood that the underlying cause of such change may,
except as otherwise provided in the other clauses of this proviso, be taken into account in determining whether a Company
Material Adverse Effect has occurred or would reasonably be expected to occur); |
| (vii) | actions or omissions of any Group Company (a) that are required by the merger agreement, (b) taken with the consent of Parent
or Merger Sub or (c) taken at the written request of Parent or Merger Sub; |
| (viii) | any breach of the merger agreement by Parent or Merger Sub; or |
| (ix) | the failure by the Group Companies to meet any internal or industry estimates, expectations, forecasts, projections or budgets
for any period (it being understood that the underlying cause of such failure may, except as otherwise provided in the other clauses of
this proviso, be taken into account in determining whether a Material Adverse Effect has occurred or would reasonably be expected
to occur); |
provided, further, that the Effects set
forth in clauses (i), (ii), (iii) and (v) above will be taken into account in determining whether a “Company Material
Adverse Effect” has occurred or reasonably would be expected to occur if and to the extent such Effects individually or in
the aggregate have a materially disproportionate impact on the Group Companies, taken as a whole, relative to the other participants
in the same industries and geographic markets in which the Group Companies conduct their businesses.
The representations and warranties made
by Parent and Merger Sub to the Company include representations and warranties relating to, among other things:
| • | their due organization, existence and good standing; |
| • | their memorandum and articles of association being in full force and effect; |
| • | the capitalization of Parent and Merger Sub, Parent’s ownership of Merger Sub and the operations of Parent and Merger
Sub; |
| • | 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 violations of, or conflicts with, the governing documents of Parent or Merger Sub, applicable laws and certain
agreements of Parent or Merger Sub as a result of the execution, delivery and performance of the merger agreement and the consummation
of the transactions contemplated by the merger agreement by Parent and Merger Sub; |
| • | the obtaining of all governmental consents and approvals in connection with the transactions contemplated by the merger agreement; |
| • | the absence of secured creditors of Merger Sub; |
| • | the absence of material legal proceedings against Parent, Merger Sub; |
| • | the delivery of the financing documents and the absence of any breach or default under the financing documents; |
| • | sufficiency of funds to consummate the merger and the other transactions contemplated by the merger agreement, subject to certain
conditions set forth in the financing documents; |
| • | the non-existence of any economic interest in the Company by Parent or Merger Sub other than interests contemplated by the
transactions contemplated under the merger agreement or the Support Agreement; |
| • | the absence of any undisclosed broker’s or finder’s fees; |
| • | solvency of Parent and Merger Sub; |
| • | other than the merger agreement, the Support Agreement, the Interim Investors Agreement, the Limited Guarantees, the Equity
Commitment Letters and as disclosed in the disclosure schedule delivered by Parent and Merger Sub to the Company, the absence of
any other agreements (i) between Parent, Merger Sub or any of their affiliates on one hand, and any member of the Group Company’s
management, directors, employees or shareholders, on the other, that relate to the transactions contemplated by the merger agreement
or (ii) pursuant to which any holder of Shares would be entitled to receive consideration different than the merger consideration
or pursuant to which a shareholder agreed to vote to approve the merger agreement or against any superior proposal; |
| • | execution and delivery of Limited Guarantees; and |
| • | the acknowledgment of the Parent and Merger Sub as to their non-reliance on any estimates, forecasts, projections, plans and
budgets provided by the Group Companies. |
Conduct of Business Pending the Merger
The Company has agreed that from the date
of the merger agreement until the earlier of the Effective Time and the termination of the merger agreement, it will conduct its
business in the ordinary course, use reasonable best efforts to keep available the service of its current officers, key employees
and consultants, and preserve its current relationships with key customers, suppliers and any other persons with whom it has material
relations.
From the date of the merger agreement until
the earlier of the Effective Time and the termination of the merger agreement, without the prior written consent of Parent, the
Company will not and will not permit any of its subsidiaries to, among other things:
| • | amend its memorandum and articles of association or equivalent organizational documents; |
| • | issue, deliver, sell, pledge, transfer, encumber or otherwise dispose of any equity securities, or authorize, propose or agree
to do the same or agree or commit to do the same, except for exercise or settlement of Company Share Awards existing or required
by any contract in effect on the date of the merger agreement; |
| • | declare, set aside, establish a record for, or pay any dividend or other distribution with respect to any of its share capital
(other than dividends paid by any of its subsidiary to the Company or to any other subsidiary wholly-owned by the Company), or
enter into any agreement with respect to the voting of its share capital; |
| • | reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire or offer to acquire, directly or indirectly,
any of its share capital or other equity securities, except for the exercise or settlement of Company Share Awards and other contractual
rights existing on the date hereof on the date of the merger agreement; |
| • | acquire any interest in any person or any assets, or make any loan, advance or capital contribution to, or investment in, any
person, except any such acquisitions, loans, advances, contributions or investments that are consistent with past practice and
are for consideration not in excess of $5 million individually and $30 million in the aggregate for all such transactions by the
Group Companies; |
| • | redeem, prepay, defease, cancel, incur or otherwise acquire, or modify the terms of, any indebtedness or issue any debt securities
or other contracts evidencing indebtedness or assume, guarantee or endorse, or otherwise become responsible for, the obligations
of any person for indebtedness, except for (i) indebtedness incurred under the Group Companies’ existing credit facilities
as in effect on the date of the merger agreement up to the maximum amount authorized under the contracts evidencing such indebtedness,
(ii) indebtedness for borrowed money incurred in the ordinary course of business consistent with past practices in a principal
amount up to $200 million for all such indebtedness by the Group Companies in the aggregate and (iii) indebtedness owed by any
wholly-owned subsidiary of the Company to the Company or any other wholly-owned subsidiary; |
| • | sell, transfer, lease, license, assign or otherwise dispose of any entity, business, assets, rights or properties of the Group
Companies having a current value in excess of $5 million in the aggregate; |
| • | grant any lien on any of its assets, other than liens granted in connection with any indebtedness permitted under the merger
agreement; |
| • | except for disclosure of confidential information in the ordinary course of business consistent with past practice and pursuant
to confidentiality agreements, and non-exclusive licenses of intellectual property granted by any Group Company in the ordinary
course of business consistent with past practice, sell, transfer, assign, license, grant any other rights under, or otherwise dispose
of, abandon, permit to lapse, permit to be subject to any lien, or fail to maintain or protect in full force and effect, any intellectual
property exclusively owned by the Company, or disclose to any person any confidential information; |
| • | authorize, or make any commitment with respect to, any single capital expenditure in excess of $5 million or capital expenditures
for the Group Companies in excess of $30 million in the aggregate; |
| • | enter into any new line of business outside of its existing business segments that is material to the Group Companies taken
as a whole; |
| • | except as otherwise required by law or expressly required under any contract in effect on the date of the merger agreement,
(i) grant or announce incentive awards or change the vesting dates of outstanding Company Share Awards, (ii) increase the compensation
payable by any Group Company to its employees, directors, shareholders or other service providers having a total annual compensation
opportunity in excess of $1 million, except under certain permitted circumstances, (iii) hire any employees having a total annual
compensation opportunity in excess of $1 million, (iv) pay or agree to pay any pension, severance pay, bonus or other employee
benefit not required by any existing company benefit plan, (v) adopt, renew, amend or terminate any existing company benefit plan,
or (vi) give rise to a payment or rights of any person in connection with the merger or other transactions contemplated by the
merger agreement; |
| • | change the Company’s methods of accounting, except as required by concurrent changes in GAAP or applicable law; |
| • | materially change any method of tax accounting, make or change any material tax election, adopt or change any material accounting
method, file any amended material tax return, settle or compromise any material tax liability, agree to an extension or waiver
of the statute of limitations with respect to the assessment or determination of taxes, enter into any material closing agreement
with respect to any tax, surrender any right to claim a material tax refund, fail to pay any material taxes as due, or take any
other similar action relating to the filing of tax return or the payment of tax; |
| • | settle, release, waive or compromise any pending or threatened action of or against any Group Company (i) for an amount in
excess of $5 million in the aggregate, (ii) entailing the incurrence of any liability of any Group Company in excess of such amount,
or obligations that would impose material restrictions on the business of the Group Companies, or (iii) that is brought by or on
behalf of any holder of securities of the any Group Company relating to the merger or other transactions contemplated by the merger
agreement; |
| • | enter into, terminate or materially amend any material contract, VIE contract or contract that would have been a material contract
if in effect on the date of the merger agreement, or waive any material default under, or release or settle any material claim
against any Group Company or liability owing to any Group Company under any material contract or VIE contract; |
| • | fail to maintain material insurance policies covering the Group Companies and their properties, assets and businesses consistent
with past practice; |
| • | adopt or enter into a plan of liquidation, merger or reorganization of any Group Company (other than the merger or any merger
or consolidation among wholly-owned subsidiaries of the Company); |
| • | fail to make in a timely manner any SEC filings as required by applicable laws; |
| • | take any action that would result in failure of any condition to the merger or that would reasonably be expected to prevent,
materially delay or impair the Company’s ability to consummate the merger; or |
| • | knowingly commit, authorize or agree to do any of the foregoing. |
Shareholders’ Meeting
As soon as practicable after the SEC confirms
that it has no further comments on the Schedule 13E-3 and proxy statement filed in connection with the transactions contemplated
by the merger agreement, the Company will, subject to certain exceptions, take all action necessary to call, give notice of, set
a record date for and convene a general meeting of its shareholders for the purpose of obtaining the Requisite Company Vote, which
meeting shall be held within 45 days after the date on which this proxy statement is mailed to the shareholders. The Company may
adjourn the general meeting of its shareholders (i) with the consent of Parent, or (ii) to allow reasonable additional time for
the filing and mailing of any supplemental or amended disclosure and such supplemental or amended disclosure to be disseminated
and reviewed by the Company’s shareholders prior to such adjourned meeting.
Unless the Board has (i) changed its recommendation
to the shareholders relating to the approval of the merger in a manner adverse to Parent or Merger Sub, (ii) approved any acquisition
proposal or fails to publicly recommended against any acquisition proposal, (iii) failed to include the recommendation to the shareholders
of the Company to approve the merger agreement, the plan of merger and the transaction contemplated under the merger agreement
in this proxy statement, (iv) entered into any letter of intent, contract, memorandum or similar document with respect to any acquisition
proposal, or authorized the Company to enter into a definitive agreement with respect to such proposal, or (v) taken any other
action or made any other public statement that is inconsistent with its recommendation to the shareholders of the Company relating
to the approval of the merger (any action described in above (i) through (v), a “Company Adverse Recommendation Change”),
in each case, in accordance with the merger agreement, the Board will (a) make a recommendation to the shareholders to approve
the merger agreement, the plan of merger and the merger, and include such recommendation in this proxy statement and (b) will take
all lawful actions to solicit the Requisite Company Vote. Even if the Board has effected any Company Adverse Recommendation Change,
the merger agreement will nevertheless be submitted to shareholders for approval unless it is validly terminated pursuant to its
terms.
No Solicitation
From the date of the merger agreement until
the earlier of the Effective Time or the valid termination of the merger agreement, the Company will not, will instruct its subsidiaries
and their respective representatives not to:
| • | initiate, solicit, propose, encourage or take other actions to facilitate, any inquiries or the making of any proposal or offer
that constitutes, or may reasonably be expected to lead to, an acquisition proposal; |
| • | engage in, continue or otherwise participate in discussions or negotiations with, or provide any non-public information concerning
the Company or its subsidiary to any person with the intent to induce the making, submission or announcement of, or the intent
to encourage, facilitate or assist any acquisition proposal or any proposal or offer that could reasonably be expected to lead
to an acquisition proposal; |
| • | grant any waiver, amendment or release under any standstill or confidentiality agreement to which the Company is a party or
any anti-takeover law, or otherwise knowingly facilitate any effort or attempt by any person to make an acquisition proposal; |
| • | approve, endorse, recommend, execute or enter into any letter of intent, agreement in principle, merger agreement, acquisition
agreement or other similar agreement relating to an acquisition proposal or any proposal or offer that could reasonably be expected
to lead to an acquisition proposal, or that conflicts with or is inconsistent with the merger agreement or requires the Company
to abandon the merger agreement or the merger; or |
| • | resolve, propose, agree or publicly announce an intention to do any of the above actions. |
The Company will immediately cease and cause
to be terminated all discussion with any third parties existing as of the date of the merger agreement regarding an acquisition
proposal.
Prior to obtaining the Requisite Company
Vote, if the Company receives an unsolicited, written and bona fide acquisition proposal from any person that did not result from
a breach by the Company of its obligations set forth in the above paragraph, (i) the Independent Committee may directly or indirectly
through the Company and its representatives contact such person to clarify the terms and conditions of the proposal so as to determine
whether such proposal constitutes or is reasonably expected to result in a superior proposal, and (ii) if the Independent Committee
determines in good faith, after consultation with and based upon the advice of its financial advisor and outside legal counsel,
that such proposal constitutes or is reasonably likely to result in a superior proposal, then the Independent Committee may directly
or indirectly through the Company and its representatives, pursuant to an executed confidentiality agreement on terms no less favorable
to the Company in the aggregate than those contained in the confidentiality agreements between the Company, the Chairman, Skillgreat,
Fosun and Sequoia, furnish information to the person who has made such proposal, provided that the Company will concurrently make
available to Parent any material information provided to such person that was not previously made available to Parent.
Prior to obtaining the Requisite Company
Vote, (a) if the Company has received a written bona fide acquisition proposal that did not arise or result from a breach of the
Company’s “no solicitation” obligations described above that is not withdrawn and that the Board determines,
upon the recommendation of the Independent Committee and in its good faith judgment, that (i) such acquisition proposal constitutes
a superior proposal, and (ii) the failure to change its recommendation to the Company’s shareholders would violate its fiduciary
duties to the Company and its shareholders under applicable law (after consultation with its financial advisor and outside legal
counsel), the Board may change its recommendation and/or authorize the Company to terminate the merger agreement to enter into
an alternative acquisition agreement with respect to such superior proposal. However, prior to taking any such action, the Board
must give Parent at least five business days’ prior written notice of its intention to take such action and a description
of the material terms and conditions of such proposal and identifying the person making such proposal. Further, the Company must
provide to Parent any confidential information disclosed to the person making the superior proposal but not previously disclosed
to Parent, negotiate in good faith with Parent during such notice period, to the extent Parent wishes to negotiate, to enable Parent
to revise the terms of the merger agreement, so that the proposal would cease to constitute a superior proposal, and permit Parent
to make a presentation of any amendments to the Board and the Independent Committee (to the extent Parent wishes to make such presentation).
Directors’ and Officers’ Indemnification and
Insurance
Pursuant to the merger agreement, it has
been agreed, among other provisions, that:
| • | From and after the Effective Time, the surviving corporation will comply with all of its obligations under the memorandum and
articles of association of any Group Company to indemnify and hold harmless the present and former officers and directors thereof
against all kinds of liabilities incurred in connection with any action arising out of or relating to the services performed by
such officers or directors at request of the Group Company. |
| • | The memorandum and articles of association of the surviving corporation will contain provisions no less favorable with respect
to exculpation and indemnification than are set forth in the memorandum and articles of association of the Company as in effect
on the date of the merger agreement, which provisions will not be amended, repealed or otherwise modified for a period of six years
from the Effective Time in any manner that would affect adversely the rights thereunder of individuals who, at or prior to the
Effective Time, were directors, officers, employees, fiduciaries or agents of the Company, unless such modification is required
by law. |
| • | Prior to the Effective Time, the Company will, and, if the Company is unable to, Parent will cause the surviving corporation,
as of the Effective Time to, obtain and maintain in effect for six years from the Effective Time the current directors’ and
officers’ liability insurance policies maintained by the Company with respect to matters occurring at or prior to the Effective
Time, with terms at least as favorable as the coverage provided under the Company’s existing policy, provided that neither
Parent or the surviving corporation will be required to expend for such policy an annual premium in excess of 300% of the current
annual premium paid by the Company. |
Financing
As of the date of the merger agreement,
Parent has delivered to the Company copies of (a) the Equity Commitment Letters, pursuant to which the Sponsors have agreed to
purchase or cause the purchase of equity securities of Parent up to the aggregate amount set forth in such Equity Commitment Letter
and the proceeds of which will be used to finance the consummation of the merger and (b) the Support Agreement from the Rollover
Shareholders. The Equity Commitment Letters and the rollover related section of the Support Agreement are collectively referred
to as “financing commitments”.
Parent and Merger Sub will use their reasonable
best efforts to (a) arrange and obtain the financing for the merger on the terms and conditions described in the financing commitments,
(b) maintain in effect the financing commitments, (c) satisfy all conditions in the financing commitments on a timely basis, (d)
consummate the financing at or prior to the Effective Time, and (e) enforce the funding obligation under the financing commitments.
However, Parent and/or Merger Sub may amend the financing commitments so long as the aggregate proceeds of financing as amended
is sufficient to fund the merger under the merger agreement, and such amendment will not prevent, materially delay or impair the
ability of Parent and Merger Sub to close the transactions under the merger agreement or the Company’s rights contemplated
under the financing commitments
If any portion of the financing becomes
unavailable, (a) Parent and Merger Sub must promptly notify the Company and use their reasonable best efforts to arrange and obtain
alternative financing from alternative sources in an amount sufficient to consummate the transactions contemplated under the merger
agreement, with terms and conditions that are not less favorable from the standpoint of the Company in any material respect than
as set forth in the financing commitments as promptly as practicable, and (b) the Company shall provide cooperation as reasonably
requested by Parent and Merger Sub in connection with obtaining financing from alternative sources.
Other Covenants
The merger agreement contains additional
agreements between the Company and Parent and/or Merger Sub relating to, among other things:
| • | the filing of this proxy statement and the Rule 13e-3 transaction statement on Schedule 13E-3 with the SEC (and cooperation
in response to any comments from the SEC with respect to either statement); |
| • | reasonable access by Parent and Parent’s authorized representatives to the offices, properties, books and records of
the Group Companies from the date of the merger agreement and until the earlier of the Effective Time and the valid termination
of the merger agreement (subject to all applicable law and the contractual obligations and restrictions); |
| • | reasonable best efforts of each party to consummate the transactions contemplated by this merger agreement; |
| • | ensure the compliance of Merger Sub with its obligations under the merger agreement; |
| • | coordination of press releases and other public announcements or filings relating to the merger; |
| • | notification of certain events; |
| • | participation in litigation relating to the merger or the merger agreement; |
| • | resignation of the directors of the Company and its subsidiaries pursuant to Parent’s request; |
| • | matters relating to takeover statutes; |
| • | delisting and deregistration of the Shares; and |
| • | exculpation for actions taken at the direction of the chairman of the Board without the Board’s approval. |
Conditions to the Merger
The obligations of the Company, Parent,
and Merger Sub to consummate the transactions contemplated by the merger agreement, including the merger, are subject to the satisfaction
or waiver at or prior to the Closing of the following conditions:
| • | the merger agreement, the plan of merger and the transactions contemplated by the merger agreement being approved by a special
resolution by holders of Shares constituting the Requisite Company Vote at the shareholders’ meeting; and |
| • | no governmental entity or court of competent jurisdiction having enacted, issued, promulgated, enforced or entered any law
or order that has the effect of prohibiting or making the merger illegal. |
The obligations of Parent and Merger Sub
to consummate the merger are also subject to the satisfaction or waiver at or prior to the Closing of the following conditions:
| • | (i) other than those regarding capitalization, Company Share Awards, corporate authority and fairness and inapplicability of
anti-takeover provisions, the representations and warranties of the Company contained in the merger agreement being true and correct
as of the date of the merger agreement and as of the Closing, as though made on such date (except to the extent expressly made
as of a specified date, in which case as of such specified date), in each case, disregarding for this purpose any limitation or
qualification by materiality or Company Material Adverse Effect, except to the extent such failures to be true and correct would
not have a Company Material Adverse Effect; (ii) the representations and warranties regarding corporate authority and fairness
being true and correct in all respects as of the date of the merger agreement and as of the Closing, as though made on such date;
and (iii) the representations and warranties regarding capitalization, Company Share Awards and inapplicability of anti-takeover
provisions being true and correct in all respects (except for de minimus inaccuracies) as of the date of the merger agreement
and as of the Closing, as though made on such date; |
| • | the Company having performed in all material respects all obligations required to be performed by it under the merger agreement
at or prior to the Closing; |
| • | since the date of the merger agreement, there not having occurred a Company Material Adverse Effect; |
| • | the amount of Dissenting Shares being less than 15% of the total outstanding Shares immediately prior to the Effective time;
and |
| • | the Company having delivered to Parent a certificate of an executive officer of the Company confirming the above conditions
have been satisfied. |
The obligations of the Company to consummate
the merger are also subject to the satisfaction or waiver at the Closing of the following conditions:
| • | the representations and warranties of Parent and Merger Sub contained in the merger agreement being true and correct as of
the date of the merger agreement and as of the closing, as though made on such date (except to the extent expressly made as of
a specified date, in which case as of such specified date), disregarding for this purpose any limitation or qualification by materiality,
except to the extent such failures to be true and correct would not prevent or materially delay the consummation of any transactions
contemplated under the merger agreement by Parent and Merger Sub; |
| • | Parent and Merger Sub having performed in all material respects all obligations required to be performed by it under the merger
agreement on or prior to the Closing; and |
| • | the Company having received a certificate of an executive officer of Parent confirming the above conditions have been satisfied. |
Termination of the Merger Agreement
The merger agreement may be terminated at
any time prior to the Effective Time:
| • | by mutual written consent of Parent and the Company; |
| • | by either Company or Parent, if: |
| • | the merger is not consummated by 11:59 p.m. on June 30, 2016 (Hong Kong Time), provided that this termination right is not
available to a party if the failure to consummate the merger by such date was primarily caused by such party’s breach of
the merger agreement; |
| • | any governmental entity of competent jurisdiction has enacted, issued, promulgated, enforced or entered any order that has
or would have the effect of enjoining the transactions contemplated by the merger agreement or making the merger illegal, which
shall have become final and non-appealable, or there is any law that makes the consummation of the merger illegal or prohibited,
provided that this termination right is not be available to a party if the circumstances described in the foregoing are caused
by such party’s breach of the merger agreement; or |
| • | the merger agreement is not approved by Requisite Company Vote at the extraordinary general meeting or any adjournment thereof. |
| • | Parent or Merger Sub has breached any representation, warranty, covenant or agreement set forth in the merger agreement, such
that the corresponding condition to Closing would not be satisfied and such breach cannot be cured, or if capable of being cured,
is not cured (i) within 30 calendar days following receipt of written notice by Parent or Merger Sub of such breach from the
Company or (ii) any shorter period of time that remains between the date the Company provides written notice of such breach and
11:59 p.m. on June 30, 2016 (Hong Kong Time), provided that, the Company will not have this termination right if it is then in
breach of any representation, warranty, covenant or agreement under the merger agreement that would result in the failure to satisfy
the corresponding condition to Closing; |
| • | prior to obtaining the Requisite Company Vote, (i) the Board determines (in its good faith judgment upon the recommendation
of the independent committee), that failure to enter into a definitive agreement relating to a superior proposal would violate
its fiduciary duties under applicable law, and authorizes the Company to enter into such definitive agreement, (ii) the Company,
concurrently with the termination of the merger agreement, enters into such definitive agreement, (iii) such superior proposal
did not result from any breach by the Company’s non-solicitation obligations under the merger agreement, (iv) the Company
has delivered notice of such superior proposal to Parent, and if requested by Parent, has made its representatives available to
Parent to discuss proposed changes to the merger agreement, and (v) the Company pays in full a termination fee to Parent concurrently
with such termination; or |
| • | (i) all of the conditions to the merger regarding obtaining Requisite Company Vote and no governmental injunction and
all of the conditions to be performed by the Company are satisfied (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to their satisfaction or waiver by the party having the benefit thereof), (ii) the Company
has irrevocably confirmed by written notice to Parent that all of the conditions to be performed by Parent and Merger Sub have
been satisfied or waived by the Company and that the Company is ready, willing and able to consummate the Closing, and (iii) Parent
and Merger Sub fail to complete the Closing within 10 business days after the delivery of such notice. |
| • | the Company has breached any representation, warranty, covenant or agreement set forth in the merger agreement, such that the
corresponding condition to Closing would not be satisfied and such breach cannot be cured, or if capable of being cured, is not
cured: (i) (x) within 5 calendar days following receipt of written notice by the Company from Parent or Merger Sub of such
breach with respect to the “no solicitation” obligations, or (y) within 30 calendar days following receipt of written
notice by the Company from Parent or Merger Sub of such breach with respect to any other representation, warranty or covenant,
or (ii) any shorter period of time that remains between the date Parent or Merger Sub provides written notice of such breach and
11:59 p.m. on June 30, 2016 (Hong Kong Time), provided that, Parent will not have this termination right if it is then in breach
of any representation, warranty, covenant or agreement under the merger agreement that would result in the failure to satisfy the
corresponding condition to Closing; |
| • | the Board has changed its recommendation to the shareholders of the Company relating to the approval of the merger in a manner
adverse to Parent or Merger Sub; |
| • | the Board has approved any acquisition proposal or fails to publicly recommended against any acquisition proposal; |
| • | the Board has failed to include the recommendation to the shareholders of the Company to approve the merger agreement, the
plan of merger and the transaction contemplated under the merger agreement in this proxy statement; |
| • | the Board has entered into any letter of intent, contract, memorandum or similar document with respect to any acquisition proposal,
or has authorized the Company to enter into a definitive agreement with respect to such proposal; or |
| • | the Board has taken any other action or made any other public statement that is inconsistent with its recommendation to the
shareholders of the Company relating to the approval of the merger. |
Termination Fee
The Company will pay to Parent or its designees
a termination fee of $15.0 million, if the merger agreement is terminated:
| • | by Parent where (i) the Company has breached any representation, warranty, covenant or agreement set forth in the merger agreement,
such that the corresponding condition to Closing would not be satisfied and such breach cannot be cured, or if capable of being
cured, is not cured within the requisite time period, or (ii) the Board (a) has changed its recommendation to the shareholders
of the Company relating to the approval of the merger in a manner adverse to Parent or Merger Sub, (b) has approved any acquisition
proposal or fails to publicly recommended against any acquisition proposal, (c) has failed to include the recommendation to the
shareholders of the Company to approve the merger agreement, the plan of merger and the transaction contemplated under the merger
agreement in this proxy statement, (d) has entered into any letter of intent, contract, memorandum or similar document with respect
to any acquisition proposal, or has authorized the Company to enter into a definitive agreement with respect to such proposal,
or (e) or has taken any other action or made any other public statement that is inconsistent with its recommendation to the shareholders
of the Company relating to the approval of the merger; |
| • | by the Company where, prior to obtaining the Requisite Company Vote, (i) the Board has determined (in its good faith judgment
upon the recommendation of the independent committee), that failure to enter into a definitive agreement relating to a superior
proposal would violate its fiduciary duties under applicable law, and authorized the Company to enter into such definitive agreement,
(ii) the Company, concurrently with the termination of the merger agreement, has entered into such definitive agreement, (iii)
such superior proposal did not result from any breach by the Company’s non-solicitation obligations under the merger agreement,
and (iv) the Company has delivered notice of such superior proposal to Parent, and if requested by Parent, has made its representatives
available to Parent to discuss proposed changes to the merger agreement; |
| • | by the Company or Parent where either (i) the merger is not consummated by 11:59 p.m. on June 30, 2016 (Hong Kong Time), or
(ii) the Requisite Company Vote is not obtained, and where (a) neither Parent nor Merger Sub has breached any representation, warranty
or covenant under the merger agreement in any material respect, and (b) at or prior to the time of such termination, the Company
has received a bona fide acquisition proposal from a third party that is not withdrawn and enters into a definitive agreement with
respect to such acquisition proposal within 12 months following such termination; or |
Parent will pay to the Company
a termination fee of $30.0 million, if the merger agreement is terminated:
| • | by the Company where Parent or Merger Sub has breached any representation, warranty, covenant or agreement set forth in the
merger agreement, such that the corresponding condition to Closing would not be satisfied and such breach cannot be cured, or if
capable of being cured, is not cured within the requisite time period; or |
| • | by the Company where (i) all of the conditions to the merger regarding obtaining Requisite Company Vote and no governmental
injunction and all of the conditions to be performed by the Company are satisfied (other than those conditions that by their nature
are to be satisfied at the Closing, but subject to their satisfaction or waiver by the party having the benefit thereof), (ii)
the Company has irrevocably confirmed by written notice to Parent that all of the conditions to be performed by Parent and Merger
Sub have been satisfied or waived by the Company and that the Company is ready, willing and able to consummate the Closing, and
(iii) Parent and Merger Sub fail to complete the Closing within 10 business days after the delivery of such notice. |
If Parent decides not to proceed to consummate
the merger due to the fact that the amount of Dissenting Shares represent no less than 15% of the total outstanding Shares immediately
prior to the Effective Time, then Parent will pay to Company or its designees a termination fee of $15.0 million.
Remedies
The parties to the merger agreement may
be entitled to the payment of a termination fee or the grant of specific performance of the terms of the merger agreement, including
an injunction or injunctions to prevent breaches of the merger agreement, in addition to any other remedy at law or equity. Specifically,
the Company is entitled to an injunction or injunctions, or other appropriate form of specific performance or equitable relief
to enforce Parent’s and Merger Sub’s obligation to cause the equity financing for the merger to be funded at the Effective
Time, but only in the event that each of the following conditions has been satisfied: (i) all conditions to Parent’s and
Merger Sub’s obligations to consummate the merger (other than those conditions that by their terms are to be satisfied at
the Closing) have been satisfied or waived, (ii) the Company has irrevocably confirmed in writing that if the equity financing
is funded, then the Closing will occur, and (iii) the equity financing has not been funded and Parent and Merger Sub fail to complete
the Closing by the date the Closing is required to have occurred pursuant to the merger agreement.
While the parties may pursue both a grant
of specific performance (including an injunction and injunctions) and payment of termination fee (as applicable under the merger
agreement), none of them will be permitted or entitled to receive both a grant of specific performance (including an injunction
and injunctions) that results in the Closing and termination fee (or any other monetary damages).
Subject to the equitable remedies the parties
may be entitled to as discussed above, the maximum aggregate liabilities of Parent, on the one hand, and the Company, on the other
hand, for monetary damages in connection with the merger agreement are limited to the Parent termination fee of $30.0 million and
the Company termination fee of $15.0 million, respectively, and reimbursement of certain expenses accrued in the event that Company
or Parent fails to pay the applicable termination fee when due and in accordance with the requirements of the merger agreement,
as the case may be.
Amendment
The merger agreement may be amended by the
parties by action taken by or on behalf of their respective boards of directors (or in the case of the Company, the Independent
committee) at any time prior to the Effective Time; provided that, after the approval of the merger agreement and the transactions
by the shareholders of the Company, no amendment may be made without shareholders’ approval again. The merger agreement may
only be amended by an instrument in writing signed by the Company and Parent.
PROVISIONS FOR UNAFFILIATED SECURITY
HOLDERS
No provision has been made to (a) grant
the Company's shareholders or ADS holders access to corporate files of the Company and other parties to the merger or any of their
respective affiliates or (b) to obtain counsel or appraisal services at the expense of the Company or any other such party or affiliate.
DISSENTER RIGHTS
The following is a brief summary of the
rights of holders of the Shares to dissent from the merger and receive payment of the fair value of their Shares (“Dissenter
Rights”). This summary is not a complete statement of the law, and is qualified in its entirety by the complete text of Section
238 of the CICL, a copy of which is attached as Annex C to this proxy statement. If you are contemplating the possibility of dissenting
from the merger, you should carefully review the text of Annex C, particularly the procedural steps required to exercise Dissenter
Rights. These procedures are complex and you should consult your Cayman Islands legal counsel if you are considering exercising
such rights. If you do not fully and precisely satisfy the procedural requirements of the CICL, you will lose your Dissenter Rights.
Requirements for Exercising Dissenter Rights
A dissenting registered shareholder of the
Company is entitled to payment of the fair value of his or her Shares upon dissenting from the merger.
The valid exercise of your Dissenter Rights
will preclude the exercise of any other rights by virtue of holding Shares in connection with the merger, other than the right
to participate fully in proceedings to determine the fair value of Shares held by such persons and to seek relief on the grounds
that the merger is void or unlawful. To exercise your Dissenter Rights, the following procedures must be followed:
| • | you must give written notice of objection to the merger (“Notice of Objection”) to the Company prior to the vote
to authorize the merger. The Notice of Objection must include a statement that you propose to demand payment for your Shares if
the merger is authorized by the vote at the extraordinary general meeting; |
| • | within 20 days immediately following the date on which the vote authorizing the merger is made, the Company must give written
notice of the authorization (“Approval Notice”) to all Dissenting Shareholders who have served a Notice of Objection.
The merger agreement also provided that the company has agreed to serve any Approval Notice within five days of the approval of
the merger by shareholders; |
| • | within 20 days immediately following the date on which the Approval Notice is given (the “Dissent Period”), the
Dissenting Shareholder must give to the Company a written notice of his decision to dissent (a “Notice of Dissent”)
stating his name and address, the number and class of the Shares with respect to which he dissents and demanding payment of the
fair value of his Shares. A Dissenting Shareholder must dissent in respect of all the Shares which he holds; the Dissenting Shareholder
will cease to have any rights as a shareholder upon the giving of such Notice of Dissent, except for (a) the right to be paid the
fair value of his or her Shares, (b) the right to participate in the court proceedings to determine the fair value of his or her
Shares, and (c) the right to institute proceedings on the grounds that the merger is unlawful or void; |
| • | within seven days immediately following (a) the date of expiry of the Dissent Period or (b) the date on which the plan of merger
is filed with the Registrar of Companies of the Cayman Islands, whichever is later, the Company, as the Surviving Corporation,
must make a written offer (a “Fair Value Offer”) to each Dissenting Shareholder to purchase their Shares at a price
determined by the Company to be the fair value of such Shares. The merger agreement also provides that the Company has agreed that
the per Share merger consideration represents the fair value of the Shares; |
| • | if, within 30 days immediately following the date of the Fair Value Offer, the Company and the Dissenting Shareholder fail
to agree on a price at which the Company will acquire the Dissenting Shareholder’s Shares, then, within 20 days immediately
following the date of the expiry of such 30-day period, the Company must, and the Dissenting Shareholder may, file a petition with
the Grand Court of the Cayman Islands (the “Grand Court”) for a determination of the fair value of the Shares held
by all Dissenting Shareholders The petition by the Company must be accompanied by a verified list containing the names and addresses
of all members who have filed a Notice of Dissent and who have not agreed upon the fair value of their Shares with the Company,
and if a Dissenting Shareholder files a petition the Company must file such verified list within 10 days of service of such petition;
and |
| • | if a petition is timely filed and served, the Grand Court will determine at a hearing at which Dissenting Shareholders are
entitled to participate (a) the fair value of the Shares held by those Dissenting Shareholders together with a fair rate of interest,
if any, to be paid upon the amount determined to be the fair value and (b) the costs of the proceeding and the allocation of such
costs upon the parties. |
Once you have given a Notice of Dissent
to the Company, you will cease to have any of the rights of a shareholder except the right to be paid the fair value of your Shares
(and the right to participate in the proceedings to determine their fair value, and the right to seek relief on the grounds that
the merger is void or unlawful). The enforcement of your Dissenter Rights will preclude the enforcement of any other rights to
which you might otherwise be entitled by virtue of your holding Shares, other than the rights referred to in the preceding sentence.
All notices and petitions must be executed
by the registered shareholder or a person duly authorized on behalf of the Dissenting Shareholder, fully and correctly, as such
shareholder’s name appears on the register of members of the Company. If the Shares are held by a fiduciary, such as by a
trustee, guardian or custodian, these notices must be executed by a duly authorized person on behalf of the fiduciary. If the Shares
are held by or for more than one person such notices and petitions must be executed by or for all joint owners. An authorized agent,
including an agent for two or more joint owners, may execute the notices or petitions for a registered shareholder; however, the
agent must identify the registered owner and expressly disclose the fact that, in exercising the notice, he is acting as a duly
authorized agent for the registered holder. A person having a beneficial interest in Shares registered in the name of another person,
such as a broker or nominee, must act promptly to cause the registered holder to follow the steps summarized above and in a timely
manner to exercise whatever Dissenter Rights attached to the Shares.
You must be a registered holder of Shares
in order to exercise your Dissenter Rights in respect of such Shares. A holder of ADSs who wishes to dissent must surrender his
or her ADSs to the ADS depositary and pay the fee of ADS depositary to withdraw his or her Shares and then become a registered
holder of such Shares and comply with the procedures described above in order to exercise the Dissenter Rights with respect to
the Shares prior to the extraordinary general meeting. The ADS depositary will not exercise Dissenter Rights on behalf of a holder
of ADSs, and any Notice of Objection or Notice of Dissent delivered to the ADS depositary will not be effective under the CICL.
If you wish to cancel your ADSs, please contact the ADS depositary's office at 60 Wall Street, New York, NY 10005, Tel No. +1-212-250-9100,
Attention: Deutsche Bank Trust Company Americas. If the merger is not completed, the Company would continue to be
a public company in the U.S. and the ADSs would continue to be listed on the NASDAQ. The Company’s Shares are not listed
and cannot be traded on any stock exchange other than the NASDAQ, and in such case only in the form of ADSs. As a result, if you
have cancelled your ADSs to attend the extraordinary general meeting or to exercise Dissenter Rights, and the merger is not completed
and you wish to be able sell your Shares on a stock exchange, you would need to deposit your Shares into the Company’s American
depositary shares program for the issuance of the corresponding number of ADSs, subject to the terms and conditions of applicable
law and the ADS deposit agreement, including, among other things, payment of relevant fees of the ADS depositary for the issuance
of ADSs (up to $0.05 per ADS issued) and any applicable stock transfer taxes (if any) and related charges pursuant to the ADS deposit
agreement.
If you do not satisfy each of the above
requirements and otherwise comply strictly with the procedures required by the CICL with regard to the exercise of Dissenter Rights,
you will not be entitled to exercise your Dissenter Rights and will be bound by the terms of the merger agreement and the plan
of merger. Submitting a signed proxy card that does not direct how the Shares represented by that proxy are to be voted will give
the proxy discretion to vote as it determines appropriate. In addition, failure to vote your Shares, or a vote against the proposal
to authorize and approve the merger agreement, the plan of merger and the transactions contemplated by the merger agreement, including
the merger, will not alone entitle you to exercise your Dissenter Rights. You must send all notices to the Company to Attention:
Board Secretary Office, 18/F, Tower 1, U-town Office Building, No. 1 San Feng Bei Li, Chaoyang District, Beijing 100020, the People's
Republic of China.
If you are considering dissenting, you should
be aware that the fair value of your Shares determined under Section 238 of the CICL could be more than, the same as, or less than
the $27.40 in cash without interest for each Share of the Company that you would otherwise receive as consideration in the merger.
In addition, in any proceedings for determination of the fair value of the Shares covered by a Notice of Dissent, the Company and
the Buyer Group intend to assert that the per Share merger consideration of $27.40 is equal to the fair value of each of your Shares.
You may also be responsible for the cost of any appraisal proceedings pursuant to the exercise of Dissenter Rights.
The provisions of Section 238 of the CICL
are technical and complex. If you fail to comply strictly with the procedures set forth in Section 238, you will lose your Dissenter
Rights. You should consult your Cayman Islands legal counsel if you wish to exercise Dissenter Rights.
FINANCIAL INFORMATION
The following sets forth certain selected
historical consolidated financial information of the Company for each of the two years ended December 31, 2013 and 2014 and each
of nine months ended September 30, 2014 and 2015. The historical consolidated financial information as of and for the years ended
December 31, 2013 and December 31, 2014 has been derived from the audited financial statements filed as part of the Company’s
Annual Report on Form 20-F for the year ended December 31, 2014, beginning on page F-1, which are incorporated into this proxy
statement by reference. The historical consolidated financial information for the nine months ended September 30, 2014 and September
30, 2015 and as of September 30, 2015 has been derived from the unaudited financial information included in the Company’s
2015 third quarter earnings release furnished on Form 6-K on November 25, 2015, and the selected historical consolidated balance
sheet data as of September 30, 2014 has been derived from the unaudited financial information included in the Company’s report
on Form 6-K filed on December 30, 2014, which are incorporated into this proxy statement by reference. 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 Annual Report on Form 20-F and Company’s Reports on Form 6-K. Please
see “Where You Can Find More Information” for a description of how to obtain a copy of such Annual Report on Form 20-F
and Company’s Report on Form 6-K, respectively.
| |
For the year ended December 31, | | |
For the nine months ended September 30, | |
| |
2013 | | |
2014 | | |
2014 | | |
2015 | |
| |
(in thousands of $ except for share and per share data) | |
| |
| | |
| |
Consolidated Statements of Operations | |
| | |
| | |
| |
Net revenues | |
| 149,336 | | |
| 254,086 | | |
| 201,504 | | |
| 267,554 | |
Cost of revenues | |
| 82,839 | | |
| 141,298 | | |
| 114,050 | | |
| 148,194 | |
Gross profit | |
| 66,497 | | |
| 112,788 | | |
| 87,454 | | |
| 119,360 | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | |
Film participation expenses | |
| (1,319 | ) | |
| 12,247 | | |
| 11,856 | | |
| 13,541 | |
Selling and marketing expenses | |
| 14,373 | | |
| 31,528 | | |
| 20,530 | | |
| 35,120 | |
General and administrative expenses | |
| 49,854 | | |
| 63,321 | | |
| 45,047 | | |
| 60,769 | |
Total operating expenses | |
| 62,908 | | |
| 107,096 | | |
| 77,433 | | |
| 109,430 | |
Government subsidies | |
| 5,022 | | |
| 5,978 | | |
| 1,876 | | |
| 3,278 | |
Equity in earnings of equity method investments, net of tax | |
| — | | |
| 3,350 | | |
| 3,328 | | |
| 2,981 | |
Operating income | |
| 8,611 | | |
| 15,020 | | |
| 15,225 | | |
| 16,189 | |
Interest income from bank deposits | |
| 281 | | |
| 1,318 | | |
| 904 | | |
| 1,284 | |
Interest income from loan to producer of TV series | |
| — | | |
| 41 | | |
| 10 | | |
| 90 | |
Interest expenses | |
| (1,381 | ) | |
| (1,830 | ) | |
| (1,198 | ) | |
| (3,625 | ) |
Exchange gain (loss) | |
| 1,780 | | |
| (1,589 | ) | |
| (673 | ) | |
| (3,949 | ) |
Investment income | |
| — | | |
| 64 | | |
| 64 | | |
| — | |
Other income | |
| 284 | | |
| 284 | | |
| 213 | | |
| 522 | |
Loss on deconsolidation of a subsidiary | |
| — | | |
| — | | |
| — | | |
| (1,803 | ) |
Income before income tax and equity in earnings of equity method investments, net of tax | |
| 9,575 | | |
| 13,308 | | |
| 14,545 | | |
| 8,708 | |
Provision for income taxes | |
| 5,129 | | |
| 7,467 | | |
| 6,982 | | |
| 6,880 | |
Equity in earnings of equity method investments, net of tax | |
| 78 | | |
| — | | |
| — | | |
| — | |
Net income | |
| 4,524 | | |
| 5,841 | | |
| 7,563 | | |
| 1,828 | |
Less: Net loss attributable to noncontrolling interests | |
| (1,133 | ) | |
| (557 | ) | |
| (422 | ) | |
| (433 | ) |
Net income attributable to Bona Film Group Limited | |
| 5,657 | | |
| 6,398 | | |
| 7,985 | | |
| 2,261 | |
Net income per ordinary share | |
| | | |
| | | |
| | | |
| | |
Basic | |
| 0.19 | | |
| 0.21 | | |
| 0.26 | | |
| 0.07 | |
Diluted | |
| 0.19 | | |
| 0.20 | | |
| 0.25 | | |
| 0.07 | |
Net income per ADS | |
| | | |
| | | |
| | | |
| | |
Basic | |
| 0.09 | | |
| 0.11 | | |
| 0.13 | | |
| 0.04 | |
Diluted | |
| 0.09 | | |
| 0.10 | | |
| 0.13 | | |
| 0.03 | |
| |
As of December 31, | | |
As of September 30, | |
| |
2013 | | |
2014 | | |
2014 | | |
2015 | |
| |
(Amounts expressed in thousands of $) | |
| |
| | |
| |
Selected Consolidated Balance Sheets Data: | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Cash and cash equivalents | |
| 32,684 | | |
| 97,171 | | |
| 28,595 | | |
| 75,799 | |
Total current assets | |
| 121,943 | | |
| 252,225 | | |
| 224,432 | | |
| 251,707 | |
Total assets | |
| 420,086 | | |
| 596,078 | | |
| 576,403 | | |
| 795,287 | |
Total current liabilities | |
| 178,173 | | |
| 334,234 | | |
| 302,514 | | |
| 378,727 | |
Total liabilities | |
| 217,230 | | |
| 376,367 | | |
| 357,561 | | |
| 560,324 | |
Total Bona Film Group Limited’s equity | |
| 201,060 | | |
| 217,672 | | |
| 216,667 | | |
| 233,368 | |
Non-controlling interests | |
| 1,796 | | |
| 2,039 | | |
| 2,175 | | |
| 1,595 | |
Total equity | |
| 202,856 | | |
| 219,711 | | |
| 218,842 | | |
| 234,963 | |
Total liabilities and equity | |
| 420,086 | | |
| 596,078 | | |
| 576,403 | | |
| 795,287 | |
Ratio of Earnings to Fixed Charges
| |
For the year ended December 31, | | |
For the nine months ended September
30, | |
| |
2013 | | |
2014 | | |
2014 | | |
2015 | |
| |
$ | | |
$ | | |
$ | | |
$ | |
| |
(unaudited) | | |
(unaudited) | | |
(unaudited) | | |
(unaudited) | |
| |
| | | |
| | | |
| | | |
| | |
Ratio of Earnings to Fixed Charges(1) | |
| 4.0 | | |
| 3.4 | | |
| 5.1 | | |
| 3.3 | |
| (1) | For purposes of determining the ratios, earnings consist of the total of the following: (i) income before income tax and equity
in earnings of equity method investments, net of tax, (ii) fixed charges, and (iii) amortization of capitalized interests, minus
interests capitalized. Fixed charges are defined as the sum of the following: (i) interests expensed and capitalized, and (ii)
amortization of debt issuance costs and discounts. The ratio of earnings to fixed charges should be read in conjunction with the
financial statements and the related notes and other financial information contained in such Annual Report on Form 20-F and Company’s
Report on Form 6-K. Please see “Where You Can Find More Information” for a description of how to obtain a copy of such
Annual Report on Form 20-F and Company’s Report on Form 6-K, respectively. |
Net Book Value per Share of the Shares
The Company’s net book value per Share
as of December 31, 2014 was $6.93, based on the 31,402,346 issued and outstanding Shares for the applicable period. The Company’s
net book value per Share as of September 30, 2015 was $7.20, based on the 32,402,346 issued and outstanding Shares as of September
30, 2015.
TRANSACTIONS IN THE SHARES AND ADSs
Purchases by the Company
The Company has not repurchased any Shares
or ADSs at any time within past two years.
Purchases by the Buyer Group
On July 13, 2014, the Chairman and Skillgreat
purchased an aggregate 6,050,067 Shares from 21st Century Fox America, Inc. (formerly known as News America Incorporated) for a
consideration of $11.80 per Share, or an aggregate purchase price of approximately $71.4 million.
On July 24, 2014, Fidelidade purchased 4,165,926
Shares from Skillgreat for a consideration of $11.80 per Share, or an aggregate purchase price of approximately $49.2 million in
the aggregate.
On October 26, 2015, Skillgreat purchased
from PeakRe an aggregate of 663,201 ADSs and from Fidelidade an aggregate of (i) 39,116 ADSs and (ii) 4,165,926 Shares at a price
of $27.40 per Share (equivalent to $13.70 per ADS), for an aggregate purchase price of $123.7 million.
On December 23, 2015, the Chairman Parties
transferred 2,032,689 Shares to Uranus as contemplated under the Support Agreement.
Prior Public Offerings
Our ADSs, each two representing one Share,
have been listed on the NASDAQ since December 9, 2010 under the symbol “BONA.” On December 14, 2010, we completed our
initial public offering, in which we offered and sold 5,870,000 Shares in the form of ADSs, raising $92.8 million in proceeds before
expenses to us. We have not made any underwritten public offering of our securities since then.
Transactions in Prior 60 Days
Other than the transactions discussed above
under this caption titled “Purchases by the Buyer Group”, the merger agreement and agreements entered into in connection
therewith including the Support Agreement, there have been no transactions in the Company’s Shares or ADSs during the past
60 days by us, any of the Company’s officers or directors (including the Chairman), Parent, Merger Sub, or any other person
with respect to which disclosure is provided in Annex D or any associate or majority-owned subsidiary of the foregoing (excluding
any independently managed or operated portfolio companies or platforms affiliated with the foregoing).
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT OF THE COMPANY
The following table sets forth information
with respect to the beneficial ownership, within the meaning of Rule 13d-3 under the Exchange Act, of the Company’s ordinary
shares, as of the date of this proxy statement, by:
• each of the Company’s directors
and executive officers who beneficially own the Company’s ordinary shares;
• all directors and executive officers
as a group; and
• each person known to us to beneficially
own more than 5.0% of the Company’s ordinary shares.
Beneficial ownership includes voting or
investment power with respect to the securities. Except as indicated below, and subject to applicable community property laws,
the persons named in the table have sole voting and investment power with respect to all ordinary shares shown as beneficially
owned by them. Percentage of beneficial ownership is based on 32,402,346 ordinary shares outstanding as of the date of this proxy
statement, and taking into consideration options exercisable by such person and restricted shares vesting within 60 days from the
date of this proxy statement.
| |
Shares
Beneficially Owned(1) | |
| |
Number | | |
% | |
Directors and Executive Officers: | |
| | | |
| | |
Dong
Yu (2) | |
| 12,340,270.5 | | |
| 38.1 | % |
Jeffrey Chan | |
| * | | |
| * | |
Donghui Pan | |
| Nil | | |
| Nil | |
Zhong Jiang | |
| * | | |
| * | |
Daqing Dave Qi | |
| * | | |
| * | |
Nicolas Zhi Qi | |
| * | | |
| * | |
Jie Lian | |
| * | | |
| * | |
Peixin Xu | |
| 792,679 | | |
| 2.4 | % |
All Directors and Executive Officers as a Group | |
| 13,484,720.5 | | |
| 41.6 | % |
| |
| | | |
| | |
Principal Shareholders: | |
| | | |
| | |
Skillgreat Limited | |
| 11,015,387.5 | | |
| 34.0 | % |
Sequoia Entities(3) | |
| 1,646,362 | | |
| 5.1 | % |
Fosun Group(4) | |
| 2,000,000 | | |
| 6.2 | % |
SAIF Partners IV
L.P.(5) | |
| 2,352,605 | | |
| 7.3 | % |
Uranus Connection
Limited (6) | |
| 2,032,689 | | |
| 6.3 | % |
| * | Beneficially owns less than 1% of outstanding Shares. |
| (1) | Beneficial ownership is determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended, and
includes voting or investment power with respect to the securities and outstanding share options exercisable, and restricted shares
vesting, within 60 days from the date of this proxy statement. |
| (2) | Includes 11,015,387.5 ordinary shares held by Skillgreat Limited,
1,297,892 ordinary shares underlying options and restricted shares held by Mr. Dong Yu,
and 26,991 ordinary shares underlying options held by Vantage Global Holdings Ltd. Skillgreat
Limited is a limited liability company organized under the laws of the British Virgin
Islands and its address is P.O. Box 957, Offshore Incorporations Center, Road Town, Tortola,
British Virgin Islands. Skillgreat Limited is wholly owned by Vantage Global Holdings
Ltd, which is wholly owned by Mr. Dong Yu. Vantage Global Holdings Ltd is a limited liability
company organized under the laws of the British Virgin Islands with its registered office
at Portcullis TrustNet (BVI) Limited of Portcullis TrustNet Chambers, P.O. Box 3444,
Road Town, Tortola, British Virgin Islands. |
| (3) | Information based on the Schedule 13D filed on June 19, 2015 on behalf of Sequoia Capital China I, L.P., Sequoia
Capital China Partners Fund I, L.P., Sequoia Capital China Principals Fund I, L.P., Sequoia Capital China Management I,
L.P., SC China Holding Limited (“SC China”), SNP
China Enterprises Limited (“SNP China”) and Nan Peng
Shen. Includes (i) 1,296,678
ordinary shares held by Sequoia Capital China I, L.P.; (ii) 148,993 ordinary shares held by Sequoia Capital China Partners
Fund I, L.P.; and (iii) 200,691 ordinary shares held by Sequoia Capital China Principals Fund I, L.P. The general partner of
each of the Sequoia Entities is Sequoia Capital China Management I, L.P., whose general partner is SC China, a
company incorporated in the Cayman Islands. SC China is wholly owned by SNP China, a
company wholly owned by Nan Peng Shen. Nan Peng Shen disclaims beneficial ownership in all securities shown except
to the extent of his pecuniary interests therein. The principal
business office address of the Sequoia Entities is Suite 3613, 36/F, Two Pacific Place, 88 Queensway Road, Hong Kong. |
|
(4) |
Information based
on the Schedule 13D/A filed on December 18, 2015 by Fosun International Limited, a company organized under the laws of Hong
Kong, Fosun Industrial Holdings Limited, a company organized under the laws of Hong Kong and Orrick Investments Limited, a
company organized under the laws of the British Virgin Islands. Orrick Investments Limited is a wholly-owned subsidiary of
Fosun Industrial Holdings Limited, which in turn is a wholly-owned subsidiary of Fosun International Limited. As of December
31, 2015, Fosun International Limited was 71.37% owned by Fosun Holdings Limited, a company organized under the laws of Hong
Kong, which in turn is a wholly-owned subsidiary of Fosun International Holdings Ltd., a corporation organized under the laws
of the British Virgin Islands and controlled by Mr. Guangchang Guo, a citizen of the PRC. The registered office address of
Orrick Investments Limited is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. The
principal business office address of Fosun Industrial Holdings Limited, Fosun International Limited, Fosun Holdings Limited
and Fosun International Holdings Ltd. is Room 808, ICBC Tower, 3 Garden Road, Central, Hong Kong. |
| (5) | Information based on the amended Schedule 13G filed on January 22, 2014 on behalf of SAIF Partners IV L.P. Includes 4,705,210
ADSs, representing 2,352,605 ordinary shares held by SAIF Partners IV L.P. The sole general partner of SAIF Partners IV L.P. is
SAIF IV GP, L.P., whose sole general partner is SAIF IV GP Capital Ltd., a Cayman Islands company. Andrew Y. Yan (“Mr. Yan”)
is the sole director and shareholder of SAIF IV GP Capital Ltd. Pursuant to Section 13(d) of the Exchange Act, Mr. Yan may be deemed
to beneficially own all of the ADSs held by SAIF Partners IV L.P. Mr. Yan disclaims such beneficial ownership. The registered address
of SAIF Partners IV L.P. is c/o Maples Corporate Services Limited, P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. |
|
(6) |
Information
based on the Schedule 13D filed on December 23, 2015 on behalf of Uranus Connection Limited, Gstone Investment International
Ltd., Goldstone Investment International Limited, Goldstone Boxin Investment Management Co., Ltd., Goldstone Investment Co.,
Ltd. and CITIC Securities Company Limited. Includes 2,032,689 ordinary shares held by Uranus Connection Limited. Uranus
Connection Limited is indirectly owned by Goldstone Investment Co., Ltd., a wholly owned subsidiary of CITIC Securities
Company Limited. Goldstone Investment Co., Ltd. and its intermediate holding vehicles which own the equity interests in
Uranus have sole investment and voting control over the securities acquired by Uranus and may be deemed to beneficially
own all of the Shares held by Uranus. CITIC Securities Company Limited, the ultimate controller of Uranus, does not
exercise investment and voting control over the Shares held by Uranus and expressly disclaims its beneficial ownership in
all securities shown except to the extent of its pecuniary interests therein. The principal business office address of
Uranus Connection Limited is c/o 17/F, CITIC Securities Tower, No. 48 Liangmaqiao Road, Chaoyang District, Beijing,
PRC. |
FUTURE SHAREHOLDER PROPOSALS
If the merger is completed, we will not
have public shareholders and there will be no public participants in any future shareholders' meeting. However, if the merger is
not completed, an annual general meeting is expected to be held in the fourth quarter of 2016.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
Certain statements in this proxy statement,
the documents attached hereto and the documents incorporated by reference in this proxy statement are forward-looking statements
based on estimates and assumptions. These include statements as to such things as our financial condition, results of operations,
plans, objectives, future performance and business, as well as forward-looking statements relating to the merger. Such forward-looking
statements are based on facts and conditions as they exist at the time such statements are made. Forward-looking statements are
also based on current expectations, estimates and projections about our business and the merger, the accurate prediction of which
may be difficult and involve the assessment of events beyond our control. The forward-looking statements are further based on assumptions
made by management. Forward-looking statements can be identified by forward-looking language, including words such as “believes,”
“anticipates,” “expects,” “estimates,” “intends,” “may,” “plans,”
“predicts,” “projects,” “will,” “would” and similar expressions, or the negative
of these words. These statements are not guarantees of the underlying expectations or future performance and involve risks and
uncertainties that are difficult to predict. Readers of this proxy statement are cautioned to consider these risks and uncertainties
and not to place undue reliance on any forward- looking statements.
The following factors, among others, could
cause actual results or matters related to the merger to differ materially from what is expressed or forecasted in the forward-looking
statements:
| • | the satisfaction of the conditions to completion of the merger, including the authorization and approval of the merger agreement
by our shareholders; |
| • | the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement; |
| • | the cash position of the Company and its subsidiaries at the Effective Time; |
| • | equity financing may not be funded at the Effective Time because of the failure of Parent to meet the closing conditions or
for other reasons, which may result in the merger not being completed promptly or at all; |
| • | the effect of the announcement or pendency of the merger on our business relationships, operating results and business generally; |
| • | the risk that the merger may not be completed in a timely manner or at all, which may adversely affect our business and the
prices of our Shares and ADSs; |
| • | the potential adverse effect on our business, properties and operations because of certain covenants we agreed to in the merger
agreement; |
| • | diversion of our management’s attention from our
ongoing business operations; |
| • | loss of our senior management; |
| • | the amount of the costs, fees, expenses and charges related to the merger and the actual terms of the financings that will
be obtained for the merger; |
| • | the outcome of any legal proceedings, regulatory proceedings or enforcement matters that may be instituted against us and others
relating to the merger or any other matters; and |
| • | other risks detailed in our filings with the SEC, including the information set forth under the caption “Item 3. Key
Information—D. Risk Factors” in our Annual Report on Form 20-F for the year ended December 31, 2014. Please see “Where
You Can Find More Information” beginning on page 103 for additional information. |
Furthermore, the forward-looking statements
do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, collaborations, dividends
or investments made by the parties. We believe that the assumptions on which our forward-looking statements are based are reasonable.
However, forward-looking statements involve inherent risks, uncertainties and assumptions. In addition, many of the factors that
will determine our future results are beyond our ability to control or predict and we cannot guarantee any future results, levels
of activity, performance or achievements. We cannot assure you that the actual results or developments we anticipate will be realized
or, if realized, that they will have the expected effects on our business or operations. In light of the significant uncertainties
inherent in the forward-looking statements, readers should not place undue reliance on forward-looking statements, which speak
only as of the date on which the statements were made and it should not be assumed that the statements remain accurate as of any
future date. All subsequent written and oral forward-looking statements concerning the merger or other matters addressed in this
proxy statement and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary
statements contained or referred to in this section. Further, forward-looking statements speak only as of the date they are made
and, except as required by applicable law or regulation, we undertake no obligation to update these forward-looking statements
to reflect future events or circumstances.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended, applicable to foreign private issuers and we file or furnish our annual and
current reports and other information with the SEC. You may read and copy these reports and other information at the SEC’s
Public Reference Room at 100 F Street NE, Washington, D.C. 20549 at prescribed rates. Information on the operation of the Public
Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The information we file or furnish is also available free
of charge on the SEC’s website at http://www.sec.gov.
You also may obtain free copies of the documents
the Company files with the SEC by going to our website at www.bonafilm.cn. Our website address is provided as an inactive
textual reference only. The information provided on our website is not part of this proxy statement, and therefore is not incorporated
by reference.
Because the merger is a going-private transaction,
the Company and the Buyer Group have filed with the SEC a transaction statement on Schedule 13E-3 with respect to the merger. The
Schedule 13E-3, including any amendments and exhibits filed or incorporated by reference therein, is available for inspection as
set forth above. The Schedule 13E-3 will be amended to report promptly any material changes in the information set forth in the
most recent Schedule 13E-3 filed with the SEC.
Statements contained in this proxy
statement regarding the contents of any contract or other document, are not necessarily complete and each such statement is
qualified in its entirety by reference to that contract or other document attached as an exhibit hereto. The SEC allows us to
“incorporate by reference” information into this proxy statement. This means that we can disclose important
information by referring to another document filed separately with the SEC. The information incorporated by reference is
considered to be part of this proxy statement. Information that we later file with the SEC may update and supersede the
information in this proxy statement where it is provided in a manner reasonably calculated to inform security holders. The
Company’s Annual Report on Form 20-F for the year ended December 31, 2014 filed with the SEC on April 30, 2015 is
incorporated herein by reference. The Company’s reports on Form 6-K filed with the SEC on December 30,2014
and furnished to the SEC since April 30, 2015, including, without limitation, the reports on Form 6-K filed with the SEC on
May 7, 2015, June 16, 2015, July 13, 2015, August 24, 2015, November 25, 2015, December 3, 2015, December 15, 2015 and
December 21, 2015 are incorporated herein by reference. To the extent that any of the periodic reports
incorporated by reference in this proxy statement contain references to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 with respect to forward-looking statements, we note that these safe harbor
provisions do not apply to any forward-looking statements we make in connection with the going-private transaction described
in this proxy statement.
We undertake to provide without charge to
each person to whom a copy of this proxy statement has been delivered, upon request, by first-class mail or other equally prompt
means, within one business day of receipt of the request, a copy of any or all of the documents incorporated by reference into
this proxy statement, other than the exhibits to these documents, unless the exhibits are specifically incorporated by reference
into the information that this proxy statement incorporates.
Requests for copies of our filings should
be directed to Investor Relations, Bona Film Group Limited, at +86-10-5631-0700 ext. 398 or at ir@bonafilm.cn.
If you have any questions or need assistance
in voting your Shares or ADSs, you can contact Investor Relations, Bona Film Group Limited, at +86-10-5631-0700 ext. 398 or at
ir@bonafilm.cn.
THIS PROXY STATEMENT DOES NOT CONSTITUTE
THE SOLICITATION OF A PROXY IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION
IN THAT JURISDICTION. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT TO
VOTE YOUR SHARES AT THE EXTRAORDINARY GENERAL MEETING. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT
FROM WHAT IS CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT.
THIS PROXY STATEMENT IS DATED ____________,
2016. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THAT
DATE, AND THE MAILING OF THIS PROXY STATEMENT TO SHAREHOLDERS DOES NOT CREATE ANY IMPLICATION TO THE CONTRARY.
ANNEX A
Execution Version
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MOUNTAIN TIGER INTERNATIONAL LIMITED
MOUNTAIN TIGER LIMITED
and
BONA FILM GROUP LIMITED
Dated as of December 15, 2015
TABLE OF CONTENTS
Article I Defined Terms and Interpretation |
2 |
Section 1.1 Certain Definitions |
2 |
Section 1.2 Terms Defined Elsewhere |
14 |
Section 1.3 Interpretation |
16 |
|
|
Article II The Merger |
17 |
Section 2.1 The Merger |
17 |
Section 2.2 Closing |
17 |
Section 2.3 Effective Time |
17 |
Section 2.4 Effect of the Merger |
17 |
Section 2.5 Company Memorandum and Articles of Association |
18 |
Section 2.6 Directors and Officers. |
18 |
|
|
Article III Effect of Merger on Issued Share Capital; Merger Consideration; Exchange of Certificates |
18 |
Section 3.1 Share Capital |
18 |
Section 3.2 Exchange of Certificates |
22 |
Section 3.3 No Further Ownership Rights |
26 |
Section 3.4 Lost, Stolen or Destroyed Certificates |
26 |
Section 3.5 Termination of Deposit Agreement |
26 |
Section 3.6 Fair Value |
26 |
Section 3.7 Necessary Further Actions. |
26 |
|
|
Article IV Representations and Warranties of the Company |
27 |
Section 4.1 Organization and Qualification |
27 |
Section 4.2 Capitalization. |
28 |
Section 4.3 Corporate Authority; Approval and Fairness. |
30 |
Section 4.4 No Conflict; Required Filings and Consents. |
31 |
Section 4.5 Compliance with Laws; Permits. |
32 |
Section 4.6 SEC Filings; Financial Statements. |
33 |
Section 4.7 No Undisclosed Liabilities |
34 |
Section 4.8 Absence of Certain Changes or Events |
34 |
Section 4.9 Company Plans; Employees and Employment Practices. |
35 |
Section 4.10 Labor and Employment Matters |
35 |
Section 4.11 Contracts. |
36 |
Section 4.12 Litigation |
37 |
Section 4.13 Environmental Matters |
38 |
Section 4.14 Intellectual Property |
38 |
Section 4.15 Taxes |
41 |
Section 4.16 Insurance |
42 |
Section 4.17 Real Estate |
42 |
Section 4.18 Affiliate Transactions |
43 |
Section 4.19 Brokers |
43 |
Section 4.20 Anti-Takeover Provisions. |
43 |
Section 4.21 PRC Subsidiaries. |
43 |
Section 4.22 No Additional Representations |
45 |
|
|
Article V Representations and Warranties of Parent and Merger Sub |
45 |
Section 5.1 Organization and Qualification |
45 |
Section 5.2 Capitalization |
46 |
Section 5.3 Authority |
46 |
Section 5.4 No Conflict; Required Filings and Consents |
47 |
Section 5.5 Litigation |
47 |
Section 5.6 Financing |
48 |
Section 5.7 Ownership of Equity Interests |
48 |
Section 5.8 Brokers. |
49 |
Section 5.9 Solvency. |
49 |
Section 5.10 Certain Arrangements. |
49 |
Section 5.11 Limited Guarantees. |
49 |
Section 5.12 No Reliance on Company Estimates |
49 |
|
|
Article VI Covenants |
50 |
Section 6.1 Conduct of Business by the Company Pending the Closing |
50 |
Section 6.2 Proxy Statement; Schedule 13E-3; Company Shareholders Meeting |
54 |
Section 6.3 Access to Information; Confidentiality |
57 |
Section 6.4 No Solicitation of Transactions |
57 |
Section 6.5 Reasonable Best Efforts |
61 |
Section 6.6 Financing. |
62 |
Section 6.7 Financing Assistance |
63 |
Section 6.8 Notices of Certain Events |
63 |
Section 6.9 Transaction Litigation |
64 |
Section 6.10 Publicity |
64 |
Section 6.11 Resignation of Directors |
64 |
Section 6.12 Indemnification of Directors and Officers |
64 |
Section 6.13 Anti-takeover Law |
66 |
Section 6.14 Stock Exchange De-Listing |
66 |
Section 6.15 Actions Taken at Direction of the Chairman of the Company Board. |
66 |
|
|
Article VII Closing Conditions |
66 |
Section 7.1 Conditions to Obligations of Each Party Under This Agreement |
66 |
Section 7.2 Additional Conditions to Obligations of Parent and Merger Sub |
67 |
Section 7.3 Additional Conditions to Obligations of the Company |
67 |
Section 7.4 Frustration of Closing Conditions |
68 |
|
|
Article VIII Termination, Amendment and Waiver |
68 |
Section 8.1 Termination |
68 |
Section 8.2 Effect of Termination; Termination Fee |
70 |
Section 8.3 Extension; Waiver |
74 |
Section 8.4 Amendment |
74 |
|
|
Article IX General Provisions |
74 |
Section 9.1 Non-Survival of Representations, Warranties and Covenants |
74 |
Section 9.2 Notices |
74 |
Section 9.3 Fees and Expenses |
76 |
Section 9.4 Severability |
76 |
Section 9.5 Entire Agreement |
76 |
Section 9.6 Specific Performance |
76 |
Section 9.7 Governing Law; Jurisdiction; Waiver of Jury Trial |
77 |
Section 9.8 No Third-Party Beneficiaries |
79 |
Section 9.9 Assignment |
79 |
Section 9.10 Obligations of Parent and of the Company |
79 |
Section 9.11 Mutual Drafting |
79 |
Section 9.12 Headings |
79 |
Section 9.13 Counterparts |
79 |
Exhibits
EXHIBIT A – Plan of Merger
This AGREEMENT AND PLAN
OF MERGER (including the exhibits and disclosure schedules attached hereto, this “Agreement”), dated as of December
15, by and among Mountain Tiger International Limited, an exempted company incorporated with limited liability under the laws of
the Cayman Islands (“Parent”), Mountain Tiger Limited, an exempted company incorporated with limited liability
under the laws of the Cayman Islands and a wholly owned subsidiary of Parent (“Merger Sub”), and Bona Film Group
Limited, an exempted company incorporated with limited liability under the laws of the Cayman Islands (the “Company”).
Each of Parent, Merger Sub and the Company are referred to herein as a “Party” and together as “Parties”.
WHEREAS, it is proposed
that Merger Sub will merge with and into the Company in accordance with the Companies Law (2013 Revision) of the Cayman Islands
(the “Cayman Companies Law”) and the terms and conditions of this Agreement (the “Merger”),
with the Company surviving the Merger and becoming a wholly owned subsidiary of Parent as a result of the Merger;
WHEREAS, the board of
directors of the Company (the “Company Board”), acting upon the unanimous recommendation of an independent committee
of the Company Board consisting of independent directors (the “Independent Committee”), has unanimously (i)
determined that it is in the best interests of the Company and its shareholders (other than the Rollover Securityholders (as defined
below)), and declared it advisable, to enter into this Agreement and the Plan of Merger (as defined below), (ii) approved the execution,
delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, including the Merger (collectively,
the “Transactions”), and (iii) resolved to recommend that the shareholders of the Company authorize and approve
this Agreement, the Plan of Merger and the Transactions (including the Merger), in each case in accordance with the Cayman Companies
Law;
WHEREAS, the respective
sole director of Parent and Merger Sub has each (i) determined that it is in the best interests of Parent and Merger Sub to enter
into this Agreement, and (ii) approved the execution, delivery and performance of this Agreement and the consummation of the Transactions,
including the Merger, and Parent, as the sole shareholder of Merger Sub, has authorized and approved this Agreement, the Plan of
Merger and the Transactions (including the Merger), in each case in accordance with the Cayman Companies Law;
WHEREAS, as an inducement
to Parent’s and Merger Sub’s willingness to enter into this Agreement, concurrently with the execution and delivery
of this Agreement, the Rollover Securityholders and Parent have executed a support agreement, dated as of the date hereof (the
“Support Agreement”), providing that, among other things, the Rollover Securityholders will (i) vote all of
the Company Shares held by them as of the date hereof, together with any other Company Shares and/or Company Restricted Shares
acquired (whether beneficially or of record) by such Rollover Securityholders after the date hereof and prior to the earlier of
the Effective Time and the termination of such Rollover Securityholders’ obligations under the Support Agreement, including
any Company Shares and/or Company Restricted Shares acquired by means of purchase, dividend or distribution, or issued upon the
exercise of any Company Options or the conversion of any convertible securities or otherwise, in favor of the authorization and
approval of this Agreement, the Plan of Merger and the Transactions (including the Merger) and (ii) agree, upon the terms and subject
to the conditions in the Support Agreement, to receive no consideration for the cancellation of certain Company Shares (including
Company Shares represented by ADSs), Company Restricted Shares and/or Company Options held by each of them as set forth in the
Support Agreement (the “Rollover Securities”) in accordance with this Agreement; and
WHEREAS, concurrently
with the execution and delivery of this Agreement, and as a condition and inducement to the willingness of the Company to enter
into this Agreement, each of Mr. Dong YU, Uranus Connection Limited, Oriental Power Holdings Limited, Alibaba Pictures Group Limited
and Mr. Zhanshan XIE (each, a “Guarantor”, and collectively, the “Guarantors”) is
entering into a limited guarantee in favor of the Company with respect to certain obligations of Parent under this Agreement (each,
a “Limited Guarantee”, and collectively, the “Limited Guarantees”).
NOW, THEREFORE, in consideration
of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Agreement and intending
to be legally bound hereby, the Parties agree as follows:
Article
I
Defined Terms and Interpretation
Section 1.1 Certain
Definitions. For purposes of this Agreement, the term:
(a) “Acquisition
Proposal” shall mean any proposal or offer with respect to any transaction or series of related transactions relating
to (i) the acquisition, directly or indirectly, of twenty percent (20%) or more of the Equity Interests in the Company (by vote
or by value) by any Third Party, (ii) any merger, consolidation, business combination, amalgamation, scheme of arrangement, reorganization,
share exchange, sale, lease, license, exchange, transfer or other disposition of assets, recapitalization, equity investment, joint
venture, liquidation, dissolution or other transaction which would result in any Third Party acquiring assets or business of the
Company (including share capital of or interest in any Subsidiary or Affiliate of the Company) representing, directly or indirectly,
twenty percent (20%) or more of the net revenues, net income, earnings before interest, taxes and depreciation or assets of the
Company and the Company Subsidiaries, taken as a whole, (iii) the acquisition (whether by merger, consolidation, equity investment,
share exchange, joint venture or otherwise) by any Third Party, directly or indirectly, of any Equity Interest in any entity that
would result in such Person holding assets representing, directly or indirectly, twenty percent (20%) or more of the net revenues,
net income, earnings before interest, taxes and depreciation or assets of the Company and the Company Subsidiaries, taken as a
whole, (iv) any tender offer or exchange offer, as such terms are defined under the Exchange Act, that, if consummated, would result
in any Third Party beneficially owning directly or indirectly twenty percent (20%) or more of the outstanding Company Shares and
any other voting securities of the Company, or (v) any combination of the foregoing, in each case other than the Merger.
(b) “ADSs”
shall mean the Company’s American depositary shares, each two of which represent one Ordinary Share.
(c) “Affiliate”
of a Person shall mean any other Person that directly or indirectly through one or more intermediaries, controls, is controlled
by, or is under common control with, the first-mentioned Person, where “control” (including the terms “controlled
by” and “under common control with”) shall mean the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership
of voting securities or as trustee or executor, by Contract or otherwise.
(d) “Business
Day” shall mean any day other than a Saturday, Sunday and any day which is a legal holiday under the Laws of New York,
the Cayman Islands, Hong Kong or the PRC or is a day on which banking institutions located in New York, the Cayman Islands, Hong
Kong or the PRC are authorized or required by Law or other action of any Governmental Entity to close.
(e) “Code”
shall mean the United States Internal Revenue Code of 1986, as amended.
(f) “Company
Disclosure Schedule” shall mean the disclosure schedule, dated as of the date of this Agreement and delivered by the
Company to Parent concurrently with the execution and delivery of this Agreement (it being understood that (i) any matter disclosed
in any section of the Company Disclosure Schedule shall be deemed to apply and qualify the section of this Agreement to which it
corresponds in number, (ii) any matter disclosed in any section of the Company Disclosure Schedule shall be deemed to be disclosed
in any other section of the Company Disclosure Schedule to the extent that it is reasonably apparent from the face of such disclosure
that such disclosure is applicable to such other section, and (iii) the disclosure of any matter or item in the Company Disclosure
Schedule shall not be deemed to constitute an acknowledgement that such matter or item is required to be disclosed therein or is
material to a representation or warranty set forth in this Agreement and shall not be used as a basis for interpreting the terms
“material,” “materially,” “materiality” or “Company Material Adverse Effect” or
any word or phrase of similar import and does not mean that such matter or item would, alone or together with any other matter
or item, have a Company Material Adverse Effect).
(g) “Company
IT Systems” shall mean all computer and information technology systems, platforms and networks owned by the Company or
any Company Subsidiary or used or held for use in the conduct of any business of the Company or any Company Subsidiary, as currently
conducted and as currently proposed to be conducted, including Software, hardware, data processing, data, information, record keeping,
communications, telecommunications, networks, network equipment, information technology, mobile and other platforms, peripherals
computer systems, and computerized, automated, or other similar systems, platforms, and networks, in each case, whether outsourced
or not, as well as data and information stored or contained in, or transmitted by, any of the foregoing, and documentation relating
to any of the foregoing.
(h) “Company
Material Adverse Effect” shall mean any fact event, circumstance, development, condition, change, occurrence or effect
that has or reasonably would be expected to have, individually or in the aggregate with all other facts, events, circumstances,
developments, conditions, changes, occurrences or effects, a material adverse effect on (i) the business, properties, assets, liabilities,
condition (financial or otherwise) or results of operations of the Company and the Company Subsidiaries taken as a whole, or (ii)
the ability of the Company to perform its obligations under and consummate the transactions contemplated by this Agreement in accordance
with its terms; provided that in no event shall any of the following in and of itself constitute a Company Material Adverse
Effect or be taken into account in determining whether a Company Material Adverse Effect has occurred or would reasonably be expected
to occur: (A) changes affecting the economy or financial markets or political conditions generally in the PRC; (B) changes in GAAP
or any interpretation thereof after the date hereof; (C) changes that are the result of factors generally affecting the principal
industries in which the Company and the Company Subsidiaries operate; (D) the consummation of the Transactions or the public announcement
of this Agreement (including the initiation of shareholder litigation or similar legal proceedings relating to this Agreement or
the Transactions); (E) any outbreak or escalation of hostilities, declared or undeclared acts of war, sabotage or terrorism, act
of God or natural disasters, or similar events; (F) changes in the market price or trading volume of Company Shares (it being understood
that the underlying cause of such change may, except as otherwise provided in the other clauses of this proviso, be taken into
account in determining whether a Company Material Adverse Effect has occurred or would reasonably be expected to occur); (G) actions
or omissions of the Company or any Company Subsidiaries (x) that are required by this Agreement, (y) taken with the written consent
of Parent or Merger Sub or (z) taken at the written request of Parent or Merger Sub; (H) any breach of this Agreement by Parent
or Merger Sub; or (I) the failure by the Company or any Company Subsidiaries to meet any internal or industry estimates, expectations,
forecasts, projections or budgets for any period (it being understood that the underlying cause of such failure may, except as
otherwise provided in the other clauses of this proviso, be taken into account in determining whether a Company Material Adverse
Effect has occurred or would reasonably be expected to occur); provided that facts, events, circumstances, developments,
conditions, changes, occurrences or effects set forth in clauses (A), (B), (C) and (E) above shall be taken into account in determining
whether a Company Material Adverse Effect has occurred or reasonably would be expected to occur if and to the extent such
facts, events, circumstances, developments, conditions, changes, occurrences or effects individually or in the aggregate have a
materially disproportionate impact on the Company and the Company Subsidiaries, taken as a whole, relative to the other participants
in the principal industries and geographic markets in which the Company and the Company Subsidiaries conduct their business.
(i) “Company
Memorandum and Articles” shall mean the Second Amended and Restated Memorandum of Association and Articles of Association
of the Company adopted by special resolution passed on November 17, 2010, as amended by special resolution passed on December 28,
2012.
(j)
“Company Option” shall mean the options to purchase Company Shares (including Company Shares represented by
ADS) granted under the Company Share Plans in accordance with the terms thereof whether or not such option has become vested on
or prior to the Closing Date.
(k) “Company
Restricted Share” shall mean the Company Shares granted under the Company Share Plans in accordance with and subject
to certain restrictions pursuant to the terms of the Company Share Plans.
(l) “Company
Shares” shall mean the Ordinary Shares of the Company.
(m) “Company
Share Award” shall mean any Company Option and Company Restricted Share granted in accordance with the Company Share
Plans.
(n) “Company
Share Plans” shall mean, collectively, the 2009 Stock Incentive Plan and the 2010 Stock Incentive Plan of the Company,
each as amended and restated from time to time.
(o) “Company
Software” shall mean the Software owned by the Company or any Company Subsidiary, whether complete or under development,
that has been, is or currently proposed to be developed, manufactured, marketed, sold, offered for sale, licensed, distributed,
made available, imported, exported, hosted, implemented, provided as a service, provided via a network as a service or application,
used, maintained, supported, or otherwise commercialized by the Company or any Company Subsidiary, in each case together with any
versions (including Chinese, English and foreign language versions), supplements, modifications, updates, upgrades, corrections
and enhancements to any of the foregoing, and any documentation relating to the foregoing.
(p) “Company
Termination Fee” shall mean an amount in cash equal to $15,000,000.
(q) “Contract”
shall mean any note, bond, mortgage, indenture, lease, license, permit, concession, franchise, contract, deed of trust, agreement,
arrangement, plan or other legally binding instrument, right or obligation.
(r)
“Deposit Agreement” shall mean the deposit agreement dated December 8, 2010 among the Company, the Depositary
and all holders and beneficiary owners from time to time of ADSs issued thereunder, or, if amended or supplemented as provided
therein, as so amended or supplemented.
(s) “Depositary”
shall mean Deutsche Bank Trust Company Americas, as depositary for the ADSs.
(t) “Environmental
Laws” shall mean, whenever in effect, any Law relating to pollution, the protection of the environment, public health
and safety, occupational health and safety or fire safety.
(u) “Equity
Interest” shall mean any share, share capital, registered capital, partnership, member or similar interest in any entity
and any option, warrant, right or security convertible, exchangeable or exercisable therefor or any other instrument or right the
value of which is based on any of the foregoing.
(v) “Exchange
Act” shall mean the United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.
(w) “Excluded
Shares” shall mean (i) Company Shares (including Company Shares represented by ADSs) owned by Parent, Merger Sub
or the Company (as treasury shares, if any) and any Company Shares (including Company Shares represented by ADSs) reserved (but
not yet allocated) by the Company for settlement upon exercise or vesting of any Company Share Awards or by any direct or indirect
wholly-owned Subsidiary of Parent, Merger Sub or the Company, in each case immediately prior to the Effective Time, (ii) Dissenting
Shares (if any), and (iii) Rollover Securities.
(x) “Exercise
Price” shall mean, with respect to any Company Option, the applicable exercise price per Ordinary Share underlying such
Company Option.
(y) “Expenses”
shall mean, with respect to any Party, all out of pocket fees and expenses (including all fees and expenses of counsel, accountants,
investment banking firms and other financial institutions, experts and consultants to such Party) actually incurred or accrued
by or on behalf of such Party or for which it is liable in connection with or related to the authorization, preparation, negotiation,
execution and performance of the Transactions, the preparation, printing, filing and mailing of the Schedule 13E-3 and the Proxy
Statement, the solicitation of shareholder approvals, the filing of any required notices under applicable Law and all other matters
related to the closing of the Merger and the other Transactions.
(z) “GAAP”
shall mean generally accepted accounting principles as applied in the United States.
(aa) “Governmental
Entity” shall mean any and all PRC (including any subdivision, municipality, province or locality of the PRC), United
States federal, state or local or other non-United States or non-PRC governmental, administrative, judicial or regulatory Person
or any instrumentality thereof, authority, agency, department, bureau, commission, body, court, self-regulatory organization, or
other legislative or judicial governmental entity or arbitrator.
(bb) “Hazardous
Material” shall mean (i) any petroleum products or byproducts, radioactive materials, asbestos, polychlorinated biphenyls,
noise, odor or mold, (ii) any waste, material or substance defined as a “hazardous substance,” “hazardous material,”
or “hazardous waste,” “pollutant,” “contaminant,” or words of similar import, under any applicable
Environmental Law or (iii) any other substances for which liability or standards of conduct can be imposed under Environmental
Laws.
(cc) “Indebtedness”
shall mean, without duplication, (i) any indebtedness for borrowed money or issued in substitution for, or in exchange of, indebtedness
for borrowed money, (ii) any indebtedness evidenced by any note, bond, debenture or other debt security or under any swap, cap,
future or other derivative financial instrument, (iii) any indebtedness for the deferred purchase price of property or services
with respect to which a Person is liable, contingently or otherwise, as obligor or otherwise (other than trade payables and other
current liabilities incurred in the ordinary course of business), (iv) any obligation in respect of outstanding letters of credit,
acceptances and similar obligations created for the account of such Person, (v) any commitment by which a Person assures a creditor
against loss (including contingent reimbursement obligations with respect to letters of credit), (vi) any obligations under capitalized
leases with respect to which a Person is liable, contingently or otherwise, as obligor, guarantor or otherwise, (vii) any indebtedness
secured by a Lien on a Person’s assets and (viii) any guarantee (including guarantees in the form of an agreement to repurchase
or reimburse) of any indebtedness, including such obligations described in clauses (i) through (vii) of this definition.
(dd) “Insolvent”
shall mean, with respect to any Person (i) the present fair saleable value of such Person’s assets is less than the amount
required to pay such person’s total Indebtedness, (ii) such Person is unable to pay its debts and liabilities, subordinated,
contingent or otherwise, as such debts and liabilities become absolute and matured, (iii) such Person intends to incur or believes
that it will incur debts that would be beyond its ability to pay as such debts mature, or (iv) such Person has unreasonably small
capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted.
(ee) “Intellectual
Property” shall mean, collectively, all intellectual property and proprietary rights in any jurisdiction throughout the
world and tangible embodiments thereof, including all (i) patents, patent applications (including provisional applications), patent
disclosures, invention disclosures, utility models, design patents, certificates of invention, supplementary protection certificates,
and industrial designs, and applications for any of the foregoing, including continuations, continuations-in-part, divisionals,
substitutions, re-examinations, re-issues, additions, renewals, extensions, patent term extensions, confirmations, registrations,
requests for continued examinations, and foreign counterparts, (ii) trademarks, service marks, certification marks, trade dress,
trade styles, logos, designs, slogans, brands, product names, trade names, corporate names, domain names, websites, uniform resource
locators, rights to social media accounts, and other indicia of source, origin or quality, and registrations and applications for
registration for each of the foregoing, including renewals, and any translations, adaptations, derivations and combinations of
any of the foregoing, together with all goodwill of any business symbolized by any of the foregoing, (iii) copyrights, copyrightable
works, works of authorship, content, website content, moral rights, data and database rights, and mask works, and registrations
and applications for registration for each of the foregoing, including renewals, (iv) trade secrets and confidential or proprietary
information (including ideas, discoveries, improvements, recipes, specifications, concepts, methods, processes, techniques, instructions,
formulae, compositions, inventions (whether or not patentable or reduced to practice), know-how, technology, research and development
information, data, databases, records, notebooks, drawings, blueprints, flowcharts, diagrams, sketches, specifications, designs,
models, methodologies, documentation, plans, proposals, technical and non-technical data, test results, pricing, sales, marketing
and cost data and information, financial and marketing plans, and customer and supplier lists and information), (v) Software, (vi)
rights of privacy, personality, publicity and endorsement (including rights related to an individual’s name, voice, signature,
persona, image, likeness and biographical information); (vii) other registrations and applications for any of the foregoing, and
(viii) other intellectual property and proprietary rights.
(ff) “Interim
Investors Agreement” shall mean the interim investors agreement dated as of the date hereof by and among Parent, Merger
Sub, the Rollover Securityholders, Uranus Connection Limited, SAC Finance Company Limited, Willow Investment Limited and All Gain
Ventures Limited (百得創投有限公司).
(gg) “Knowledge”
shall mean (i) in the case of the Company, the actual knowledge of the individuals listed in Section 1.01(a) of the Company
Disclosure Schedules after reasonable inquiry, and (ii) in the case of Parent, Merger Sub or any other member of the Parent Group,
the actual knowledge of each director thereof after reasonable inquiry.
(hh) “Law”
shall mean any Order or any PRC (including any subdivision, municipality, province or locality of the PRC), United States federal,
state or local or other non-United States or non-PRC law, statute, treaty, convention or ordinance, common law, or any rule, regulation,
standard, directive, requirement, policy, license or permit of any Governmental Entity.
(ii) “Lien”
shall mean, with respect to any asset, any mortgage, pledge, security interest, encumbrance, lien, license, covenant not to sue,
option, right of first refusal, right of first offer, or charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof) in respect of such asset, and, with respect to an Equity Interest, any right of first
refusal, right of first offer, transfer restriction or call option in respect of such Equity Interest.
(jj) “MOFCOM”
shall mean the Ministry of Commerce of the PRC or its competent local counterparts.
(kk) “Nasdaq”
shall mean the NASDAQ Select Global Market.
(ll) “NDA”
shall mean that certain Confidential Agreement dated as of August 5, 2015 by and among the Company, Mr. Dong YU, Skillgreat
Limited, Fosun International Limited and Sequoia Capital China I, L.P.
(mm) “NDRC”
shall mean the National Development and Reform Commission of the PRC or its competent local counterparts.
(nn) “Order”
shall mean any order, judgment, writ, stipulation, settlement, award, injunction, decree or arbitration award of any Governmental
Entity that is binding on any Person or its property or assets under applicable Law.
(oo) “Ordinary
Share” shall mean each ordinary share, par value $0.0005 per share of the Company.
(pp) “Parent
Disclosure Schedule” shall mean the disclosure schedule, dated as of the date of this Agreement and delivered by Parent
to the Company concurrently with the execution and delivery of this Agreement (it being understood that (i) any matter disclosed
in any section the Parent Disclosure Schedule shall be deemed to apply and qualify the section of this Agreement to which it corresponds
in number, (ii) the disclosure of any fact or item in any section of the Parent Disclosure Schedule shall, should the relevance
of such fact or item to any other section be reasonably apparent on its face, be deemed to be disclosed with respect to that other
section, and (iii) disclosure of any matter or item in the Parent Disclosure Schedule shall not be deemed to constitute an acknowledgement
that such matter or item is required to be disclosed therein or is material to a representation or warranty set forth in this Agreement
and shall not be used as a basis for interpreting the terms “material,” “materially” or “materiality"
or any word or phrase of similar import).
(qq) “Parent
Termination Fee” shall mean an amount in cash equal to $30,000,000.
(rr) “Permits”
shall mean all permits, licenses, franchises, approvals, registrations, filings, qualifications, rights, variances, certificates,
certifications, consents, approvals and Orders of all Governmental Entities.
(ss) “Permitted
Encumbrances” shall mean, with respect to each Owned Real Property and other assets or property of the Company or Company
Subsidiaries (as the case may be): (i) Liens for Taxes, assessments and other levies, fees or charges imposed by any Governmental
Entity which are not yet due and payable, or which are being contested in good faith and by appropriate proceedings and, in each
case, for which appropriate reserves have been established in accordance with GAAP, (ii) mechanics liens and similar liens for
labor, materials or supplies incurred in the ordinary course of business for amounts which are not due and payable and which shall
be paid in full and released at Closing, (iii) Liens imposed by applicable Law, (iv) easements, covenants, conditions, restrictions
and other similar matters of record affecting title to such real property which do not or would not materially impair the use or
occupancy of such real property in the operation of the business conducted thereon, (v) non-exclusive licenses of Intellectual
Property granted by the Company or any Company Subsidiary in the ordinary course of business consistent with past practice, (vi)
pledges or deposits to secure the performance of bids, trade contracts, leases, surety and appeal bonds, performance bonds and
other obligations of a similar nature, in each case, in the ordinary course of business, (vii) Liens that are disclosed in the
Company SEC Filings filed or furnished prior to the date hereof; (viii) Liens securing Indebtedness or liabilities that are
reflected in the Company SEC Filings filed or furnished prior to the date hereof; and (ix) any other Liens that do not secure a
liquidated amount, that have been incurred or suffered in the ordinary course of business and that would not have a Company Material
Adverse Effect.
(tt) “Person”
shall mean an individual, corporation, limited liability company, partnership, association, trust, unincorporated organization,
Governmental Entity or other entity.
(uu) “Personal
Data” shall mean any information or data that can be used, directly or indirectly, alone or in combination with other
information, to identify an individual and any other information or data pertaining to any individual, including an individual’s
name, address, credit or payment card information, bank account number, financial data, email address, date of birth, government-issued
identifier, social security number, race, ethnic origin/nationality, and mental or physical health or medical information.
(vv) “PRC”
shall mean the People’s Republic of China excluding, for the purposes of this Agreement only, the Hong Kong Special Administrative
Region, the Macau Special Administrative Region and Taiwan.
(ww) “PRC
Subsidiaries” shall mean all Company Subsidiaries organized under the Laws of the PRC.
(xx) “Processed”
or “Processing” shall mean processing, collection, acquisition, recording, organization, storage, maintenance,
adaptation, alteration, retrieval, access, use, disclosure, transfer (including relating to any cross-border transfer), transmission,
sharing, combination, blockage, disposition, erasure, or destruction.
(yy) “Representatives”
shall mean, with respect to any Person, such Person’s Affiliates and such Person and its Affiliates’ respective directors,
officers, employees, members, partners, accountants, consultants, advisors, attorneys, agents and other representatives.
(zz) “RMB”
shall mean renminbi, the legal currency of the PRC.
(aaa)
“Rollover Securityholders” has the meaning given to it in the Support Agreement.
(bbb) “SAFE”
shall mean the State Administration of Foreign Exchange of the PRC or its competent local counterparts.
(ccc) “SAFE
Circular 7” shall mean the Notice of Certain Matters Regarding the Foreign Exchange Administration for Domestic Individuals
Participating in the Share Incentive Plan of An Overseas-Listed Company (《关于境内个人参与境外上市公司股权激励计划外汇管理有关问题的通知》(汇发[2012]7号)),
dated February 15, 2012 and effective as of the same date, including any amendment, implementing rules, or official interpretation
thereof or any replacement, successor or alternative legislation having the same subject matter thereof.
(ddd) “SAFE
Circular 37” shall mean the Notice of Certain Matters Regarding the Administration of Foreign Exchange Involved in Overseas
Investment, Financing and Round-Trip Investment Conducted by Domestic Residents Through Special-Purpose Companies (《国家外汇管理局关于境内居民通过特殊目的公司境外投融资及返程投资外汇管理有关问题的通知》(汇发[2014]37号)),
dated July 4, 2014 and effective as of the same date, including any amendment, implementing rules, or official interpretation thereof
or any replacement, successor or alternative legislation having the same subject matter thereof.
(eee) “Sarbanes-Oxley
Act” shall mean the United States Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations promulgated thereunder.
(fff)
“SEC” shall mean the United States Securities and Exchange Commission.
(ggg) “Securities
Act” shall mean the United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
(hhh) “Shareholder
Approval” shall mean the authorization and approval of this Agreement, the Plan of Merger and the Transactions (including
the Merger) by a special resolution (as defined in the Company Memorandum and Articles), which shall require the affirmative vote
of shareholders representing two-thirds (2/3) or more of the Company Shares present and voting in person or by proxy as a single
class at the Company Shareholders Meeting.
(iii)
“Software” shall mean (i) software of any type, including computer programs, applications, middleware, software
development kits, libraries, tools, interfaces, firmware, compiled or interpreted programmable logic, objects, bytecode, machine
code, games, software implementations of algorithms, models and methodologies, whether in Source Code or object code form; (ii)
data, collections of data, databases and compilations, whether machine readable or otherwise; and (iii) documentation related to
any of the foregoing, including descriptions, schematics, flow-charts, notes, and work product used to design, plan, organize,
and develop any of the foregoing, and programmer and user documentation, manuals, and support and training materials; together
with intellectual property and proprietary rights in and to any of the foregoing.
(jjj) “Source
Code” shall mean one or more statements in human readable form relating to Software and other source code, including
comments, definitions and annotations, which are generally formed and organized to the syntax of a computer or programmable logic
programming language, together with any and all text, data and data structures, diagrams, graphs, charts, presentations, manuals,
instructions, procedures, and other information that describe the foregoing.
(kkk) “Subsidiary”
or “Subsidiaries” of any Person shall mean (i) any corporation of which a majority of the Equity Interest entitled
to vote generally in the election of directors thereof, at the time as of which any determination is being made, are owned, directly
or indirectly, by such Person, (ii) any joint venture, general or limited partnership, limited liability company or other legal
entity in which such Person is the record or beneficial owner, directly or indirectly, of a majority of the voting interests or
the general or managing partner or the managing member and (iii) any corporation, limited liability company, partnership, association,
trust, unincorporated organization, or other entity whose assets and financial results are consolidated with the net earnings of
such Person and are recorded on the books of such Person for financial reporting purposes in accordance with GAAP.
(lll) “Superior
Proposal” shall mean a bona fide written Acquisition Proposal made by a Person that is not solicited in violation of
Section 6.4 of this Agreement and which the Company Board (upon recommendation of the Independent Committee) determines
in good faith that, if consummated in accordance with its terms, would result in a transaction more favorable to the shareholders
of the Company from a financial point of view than the transactions provided for in this Agreement after (i) consultation with
its independent nationally recognized financial advisor and outside legal counsel and (ii) taking into consideration, among other
things, all of the terms, conditions, impact and all legal, financial, regulatory and other aspects of such Acquisition Proposal
and this Agreement (in each case taking into account any revisions to this Agreement made or proposed in writing by Parent prior
to the time of determination), including financing, regulatory approvals, shareholder litigation, identity of the Person or group
making the Acquisition Proposal, breakup or termination fee and expense reimbursement provisions, expected timing and risk and
likelihood of consummation and other relevant events and circumstances); provided that for the purposes of the definition
of “Superior Proposal”, references to “twenty percent (20%)” in the definition of Acquisition Proposal
shall be deemed to be references to “sixty-six and two thirds percent (66 2/3%)”; provided further that
no offer or proposal shall be deemed to be a “Superior Proposal” if (A) any financing required to consummate the transaction
contemplated by such offer or proposal is not fully committed or if the receipt of any such financing is a condition to the consummation
of such transaction, or if the Company’s recourse in the event such transaction is not consummated because of the failure
to obtain financing is less favorable to the Company in any material respect than the Company’s recourse in such an event
hereunder, or (B) the consummation of the transactions contemplated by such offer or proposal is conditioned upon obtaining any
consent or approval of a Governmental Entity or other third party that is not required pursuant to this Agreement as a condition
to the Closing.
(mmm) “Tax”
or “Taxes” shall mean any and all means any and all taxes, fees, levies, duties, tariffs, imposts and other
charges of any kind whatsoever (together with any and all interest, penalties, additions to tax and additional amounts imposed
with respect thereto) imposed by any Governmental Entity or taxing authority, including: taxes or other charges on or with respect
to income, franchise, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment (including
withholding obligations imposed on employer/payer), estimated, unclaimed property, environmental, social security, workers’
compensation, unemployment compensation or net worth; taxes or other charges in the nature of excise, withholding, ad valorem,
stamp, transfer, value-added or gains taxes; license, registration and documentation fees; and customers’ duties, tariffs
and similar charges, and including any obligations to indemnify or otherwise assume or succeed to the Tax liability of any other
Person. “Tax Incentive” shall mean any Tax exemptions, Tax holidays, Tax deferrals, Tax incentives, Tax credits (including
Tax refunds and rebates), or other preferential Tax treatments or Tax rebates (including agreements for the deferred payment of
any Tax liability) or other formal or informal arrangement with any Governmental Entity.
(nnn) “Tax
Returns” shall mean any application, report, filing, claim for return, election or return (including any information
return) or statement filed or required to be filed with any Governmental Entity with respect to Taxes, including any schedules,
attachments, supplements or amendments thereto.
(ooo) “Third
Party” shall mean any Person or group other than the Company, the Company Subsidiaries, Parent or Parent’s Affiliates
or Representatives.
(ppp)
“Unvested Company Option” shall mean any Company Option that is not a Vested Company Option.
(qqq) “Vested
Company Option” shall mean any Company Option that shall have become vested on or prior to the Closing Date in accordance
with the terms of such Company Option.
(rrr) “VIE”
shall mean a variable interest entity of the Company, including Beijing Baichuan Film Distribution Co., Ltd. (北京百川电影发行有限公司,
“Baichuan”), Bona Film Group Co., Ltd. (博纳影业集团有限公司,
“Bona Film Group”), Beijing Bona Advertising Co., Ltd. (北京博纳广告有限公司,
“Bona Advertising”) and Cinema Popular Limited, and their respective subsidiaries.
(sss) “VIE
Contracts” shall mean the following agreements:
(i) An
Amended and Restated Exclusive Technical Support and Consulting Services Agreement (修订和重述的独家技术支持和咨询服务协议)
dated as of April 14, 2014 between the WFOE and Bona Film Group;
(ii) An
Amended and Restated Voting Proxy and Call Option Contract (修订和重述的股权表决权授权及股权购买权合同)
dated as of April 14, 2014 among Bona International Film Group Limited (“Bona International”), the WFOE, Bona
Film Group, Yu Dong (于冬) and Yu Hai (于海);
(iii) An
Amended and Restated Equity Pledge Contract (修订和重述的股权质押合同)
dated as of April 14, 2014 among the WFOE, Yu Dong (于冬)
and Yu Hai (于海);
(iv) A
Loan Agreement dated as of May 23, 2011 between the WFOE and Yu Dong (于冬);
(v) An
Amended and Restated Exclusive Technical Support and Consulting Services Agreement (修订和重述的独家技术支持和咨询服务协议)
dated as of April 14, 2014 between the WFOE and Baichuan;
(vi) An
Amended and Restated Voting Proxy and Call Option Contract (修订和重述的股权表决权授权及股权购买权合同)
dated as of April 14, 2014 among Bona International, the WFOE, Baichuan, Bona Film Group, Yu Dong (于冬)
and Yu Hai (于海);
(vii) An
Amended and Restated Equity Pledge Contract (修订和重述的股权质押合同)
dated as of April 14, 2014 among the WFOE, Bona Film Group, Yu Dong (于冬)
and Yu Hai (于海);
(viii) An
Amended and Restated Exclusive Technical Support and Consulting Services Agreement (修订和重述的独家技术支持和咨询服务协议)
dated as of April 14, 2014 between the WFOE and Bona Advertising;
(ix) An
Amended and Restated Voting Proxy and Call Option Contract (修订和重述的股权表决权授权及股权购买权合同)
dated as of April 14, 2014 among Bona International, the WFOE, Bona Advertising, Bona Film Group, Yu Dong (于冬)
and Jiang Zhong (江中); and
(x) An
Amended and Restated Equity Pledge Contract (修订和重述的股权质押合同)
dated as of April 14, 2014 among the WFOE, Bona Film Group, Yu Dong (于冬)
and Jiang Zhong (江中).
(ttt) “WFOE”
shall mean Beijing Bona New World Media Technology Co., Ltd.
Section 1.2 Terms
Defined Elsewhere. The following terms are defined elsewhere in this Agreement, as indicated below:
Defined Term |
|
Section |
Action |
|
Section 4.12 |
Acceptable Confidentiality Agreement |
|
Section 6.4(b) |
Alternative Acquisition Agreement |
|
Section 6.4(c)(2) |
Alternative Financing |
|
Section 6.6 |
Agreement |
|
Preamble |
Anti-Corruption Laws |
|
Section 4.5(b) |
Bankruptcy and Equity Exception |
|
Section 4.3(a) |
Defined Term |
|
Section |
Cashed-Out Option |
|
Section 3.1(f)(ii) |
Cayman Companies Law |
|
Preamble |
Certificates |
|
Section 3.2(c) |
Closing |
|
Section 2.2 |
Closing Date |
|
Section 2.2 |
Company |
|
Preamble |
Company Adverse Recommendation Change |
|
Section 6.4(b)(i) |
Company Board |
|
Preamble |
Company Financial Advisor |
|
Section 4.3(b) |
Company Financial Statements |
|
Section 4.6(b) |
Company Group |
|
Section 8.2(e)(i) |
Company Intellectual Property |
|
Section 4.14(b) |
Company Material Contract |
|
Section 4.11(b) |
Company Plan(s) |
|
Section 4.9(a) |
Company Recommendation |
|
Section 4.3(b) |
Company SEC Filings |
|
Section 4.6(a) |
Company Shareholders Meeting |
|
Section 6.2(e)(i) |
Company Subsidiary |
|
Section 4.1 |
Company Workers |
|
Section 4.14(f) |
D&O Insurance |
|
Section 6.12(b) |
Dissenter Rights |
|
Section 3.1(e) |
Dissenting Shares |
|
Section 3.1(e) |
Dissenting Shareholders |
|
Section 3.1(e) |
Effective Time |
|
Section 2.3 |
Equity Commitment Letters |
|
Section 5.6 |
Equity Financing |
|
Section 5.6 |
Equity Financing Commitments |
|
Section 5.6 |
End Date |
|
Section 8.1(b)(i) |
Exchange Fund
Financing
Financing Commitments |
|
Section 3.2(b)
Section 5.6(a)
Section 5.6(a) |
Guarantor |
|
Preamble |
HKIAC |
|
Section 9.7(c) |
Indemnified Parties |
|
Section 6.12(a) |
Independent Committee |
|
Preamble |
Investments |
|
Section 4.2(d) |
Leased Real Property |
|
Section 4.17(b) |
Limited Guarantee |
|
Preamble |
Merger |
|
Preamble |
Merger Sub |
|
Preamble |
Notice Period |
|
Section 6.4(d)(iii) |
Defined Term |
|
Section |
Owned Real Property |
|
Section 4.17(a) |
Parent |
|
Preamble |
Parent Group
Parent Material Adverse Effect |
|
Section 8.2(e)(i)
Section 5.4(a) |
Party |
|
Preamble |
Paying Agent |
|
Section 3.2(a) |
Per ADS Merger Consideration |
|
Section 3.1(b) |
Per Share Merger Consideration |
|
Section 3.1(b) |
Plan of Merger |
|
Section 2.3 |
Proxy Statement |
|
Section 6.2(a) |
Registrar of Companies |
|
Section 2.3 |
Rollover Securities |
|
Preamble |
SAFE Rules and Regulations |
|
Section 4.5(c) |
Schedule 13E-3 |
|
Section 4.4(b) |
Services Provider |
|
Section 4.14(g) |
Support Agreement |
|
Preamble |
Surviving Company
Transactions |
|
Section 2.1
Preamble |
Transaction Litigation |
|
Section 6.8 |
Uncertificated Shares |
|
Section 3.2(c) |
Section 1.3 Interpretation.
In this Agreement, unless otherwise specified, the following rules of interpretation apply:
(a) references
to Sections, Schedules, Annexes, Exhibits, Clauses and Parties are references to sections or sub-sections, schedules, annexes,
exhibits and clauses of, and parties to, this Agreement;
(b) references
to any Person include references to such Person’s successors and permitted assigns;
(c) words
importing the singular include the plural and vice versa;
(d) words
importing one gender include the other gender;
(e) references
to the word “including” do not imply any limitation;
(f) references
to months are to calendar months;
(g) the
words “hereof”, “herein” and “hereunder” and words of similar import, when used in this Agreement,
refer to this Agreement as a whole and not to any particular provision of this Agreement;
(h) references
to “$” or “dollars” refer to U.S. dollars; and
(i) a
defined term has its defined meaning throughout this Agreement and in each Exhibit and Schedule to this Agreement, regardless of
whether it appears before or after the place where it is defined.
Article
II
The Merger
Section 2.1 The Merger.
Upon the terms and subject to satisfaction of the conditions set forth in this Agreement or waiver by the Party having the benefit
of such condition, and in accordance with the Cayman Companies Law, Merger Sub shall be merged with and into the Company at the
Effective Time. As a result of the Merger, Merger Sub shall cease to exist and will be struck off the Register of Companies in
the Cayman Islands and the Company shall continue as the surviving company of the Merger (the “Surviving Company”)
under the Laws of the Cayman Islands as a wholly-owned subsidiary of Parent.
Section 2.2 Closing.
Subject to the terms and conditions of this Agreement, the closing of the Merger (the “Closing”) shall
take place on a day that is a Business Day (a) at the offices of Kirkland & Ellis, 26th Floor, Gloucester
Tower, The Landmark, 15 Queen’s Road Central, Hong Kong no later than the fifth (5th) Business Day following
the satisfaction of the conditions set forth in Article VII (other than (i) those conditions that are waived in accordance
with the terms of this Agreement by the Party or Parties for whose benefit such conditions exist and (ii) any such conditions,
which by their terms, are not capable of being satisfied until the Closing (but subject to their satisfaction or waiver prior
to or at the Closing)), or (b) at such other place, time and/or date as the Parties may otherwise agree. The date upon which the
Closing actually occurs is referred to herein as the “Closing Date”. For the avoidance of doubt, a condition
set forth in Article VII may only be waived in writing by the Party or Parties entitled to such condition under this Agreement.
Section 2.3 Effective
Time. Upon the terms and subject to the conditions set forth in this Agreement, on the Closing Date, Parent, Merger Sub and
the Company shall cause the Merger to be consummated under the Cayman Companies Law by executing and filing the Plan of Merger
substantially in the form attached hereto as Exhibit A (the “Plan of Merger”) with the Registrar of Companies
of the Cayman Islands (the “Registrar of Companies”), together with such other appropriate documents,
in such forms as are required by, and executed in accordance with, the applicable provisions of the Cayman Companies Law (the
time of filing of the Plan of Merger by the Registrar of Companies, or such later time as may be agreed in writing by Parent,
Merger Sub and the Company and specified in the Plan of Merger, being referred to herein as the “Effective Time”).
Section 2.4 Effect
of the Merger. At and after the Effective Time, the effect of the Merger shall be as provided in this Agreement, the Plan
of Merger and in the applicable provisions of the Cayman Companies Law. Without limiting the generality of the foregoing, at the
Effective Time, except as otherwise provided herein, all the property, rights, privileges, powers and franchises of the Company
and Merger Sub shall vest in the Surviving Company, and all debts, liabilities and duties of the Company and Merger Sub shall
become the debts, liabilities and duties of the Surviving Company in accordance with the provisions of the Cayman Companies Law.
Section 2.5 Company
Memorandum and Articles of Association. At the Effective Time, subject to Section 6.12 hereof, the memorandum and articles
of association of Merger Sub, as in effect immediately prior to the Effective Time, shall become the memorandum and articles of
association of the Surviving Company, save and except that (a) all references to the name “Mountain Tiger Limited ”
shall be amended to “Bona Film Group Limited” and (ii) the share capital shall be described consistent with the Plan
of Merger, until thereafter amended in accordance with the applicable provisions of the Cayman Companies Law and such memorandum
and articles of association.
Section 2.6 Directors
and Officers.
(a) The
directors of Merger Sub immediately prior to the Effective Time shall, from and after the Effective Time, be the directors of the
Surviving Company until their successors shall have been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the memorandum and articles of association of the Surviving Company.
(b) The
officers of the Company immediately prior to the Effective Time shall, from and after the Effective Time, be the officers of the
Surviving Company until their successors shall have been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the memorandum and articles of association of the Surviving Company.
Article
III
Effect of Merger on Issued Share Capital; Merger Consideration; Exchange of Certificates
Section 3.1 Share
Capital. Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time, by virtue of the
Merger and without any action on the part of Parent, Merger Sub, the Company or the holders of any of the following securities,
the following shall occur:
(a) Share
Capital of Merger Sub. Each ordinary share, par value $0.0001 per share, in the share capital of Merger Sub that is issued
and outstanding immediately prior to the Effective Time shall be converted into one validly issued, fully paid and non-assessable
ordinary share of the Surviving Company.
(b) Company
Shares and ADSs. Each Company Share (including Company Shares represented by ADSs) that is issued and outstanding immediately
prior to the Effective Time (other than Excluded Shares) shall be canceled and cease to exist in exchange for the right to receive
$27.40 in cash without interest (the “Per Share Merger Consideration”), payable in the manner provided in Section
3.2 (or in the case of a Company Share represented by a lost, stolen or destroyed certificate, payable upon delivery of an
affidavit in the manner provided in Section 3.4). For the avoidance of doubt, because each two (2) ADS represents one (1)
Company Share, each ADS that is issued and outstanding immediately prior to the Effective Time (other than ADSs that represent
Excluded Shares) shall represent the right to surrender the ADS in exchange for $13.70 in cash without interest (the “Per
ADS Merger Consideration”) subject to the terms and conditions set forth in this Agreement and in the Deposit Agreement.
(c) Cancellation
of Certain Shares. Each Excluded Share other than Dissenting Shares shall be cancelled and shall cease to exist, and no consideration
shall be delivered or deliverable in exchange therefor and the register of members of the Company shall be amended accordingly.
(d) Certain
Adjustments. Notwithstanding anything in this Agreement to the contrary, the Per Share Merger Consideration and/or the Per
ADS Merger Consideration, as applicable, shall be adjusted appropriately to reflect the effect of any share split, reverse share
split, share dividend (including any dividend or distribution of securities convertible into Company Shares), reclassification,
combination, exchange of shares, change or readjustment in the ratio of Company Shares represented by each ADS or other like change
with respect to Company Shares occurring, or with a record date, on or after the date hereof and prior to the Effective Time, and
such adjustment to the Per Share Merger Consideration and/or the Per ADS Merger Consideration, as applicable, shall provide to
the holders of Company Shares (including Company Shares represented by ADSs) the same economic effect as contemplated by this Agreement
prior to such action.
(e) Statutory
Dissenters Rights. Notwithstanding anything in this Agreement to the contrary, any Company Shares that are issued and outstanding
immediately prior to the Effective Time and are held by a holder of Company Shares (each, a “Dissenting Shareholder”)
who has validly exercised and not withdrawn or lost its right to dissent from the Merger (“Dissenter Rights”)
pursuant to Section 238 of the Cayman Companies Law (collectively, the “Dissenting Shares”) shall be cancelled
and cease to exist at the Effective Time, but shall not be exchangeable for or represent the right to receive the Per Share Merger
Consideration (except as provided in this Section 3.1(e)), and each such Dissenting Shareholder shall be entitled only to
payment of the fair value of such Dissenting Shares in accordance with Section 238 of the Cayman Companies Law. If any Dissenting
Shareholder shall have effectively withdrawn (in accordance with the Cayman Companies Law) or lost the right to dissent, then as
of the later of the Effective Time or the occurrence of such event, the Dissenting Shareholder shall, in respect of its Dissenting
Shares cancelled at the Effective Time, be entitled to receive the Per Share Merger Consideration (without interest), pursuant
to this Section 3.1. The Company shall give Parent (i) prompt notice of any written notice of exercise of Dissenter Rights,
attempted withdrawals of such Dissenter Rights, and any other instruments served pursuant to applicable Law that are received by
the Company relating to Dissenting Shareholders’ exercise of Dissenter Rights and (ii) the opportunity to direct all negotiations
and proceedings with respect to the exercise of Dissenter Rights under the Cayman Companies Law. The Company shall not, except
with the prior written consent of Parent, voluntarily make any payment with respect to any exercise of Dissenter Rights, offer
to settle or settle any such Dissenter Rights or approve any withdrawal of any such Dissenter Rights prior to the vote on the Merger
at the Company Shareholders Meeting.
(f) Company
Share Awards
(i) Equity
Award Waivers and Termination of Company Share Plans and Company Share Awards. Prior to the Effective Time, the Company shall
use its reasonable best efforts to (x) obtain all necessary waivers, consents or releases, in form and substance reasonably satisfactory
to Parent, from holders of Company Options and other equity awards under the Company Share Plans and (y) take all such other action,
without incurring any liabilities in connection therewith, as may be necessary to give effect to the transactions contemplated
by this Section 3.1(f). As promptly as practicable following the date of this Agreement, the Company Board (or, if appropriate,
any committee thereof administering the Company Share Plans) shall adopt resolutions to (A) terminate the Company Share Plans and
any relevant award agreements entered into under the Company Share Plans, (B) cancel each Company Option that is outstanding and
unexercised, whether or not vested or exercisable, and (C) cancel each Company Restricted Share, whether or not vested, that is
outstanding immediately prior to the Effective Time, each of the foregoing (A) to (C) taking effect at the Effective Time, and
take such other actions as are required to give effect to the transactions contemplated by this Section 3.1(f).
(ii) Vested
Company Options. Upon the terms and subject to the conditions set forth in this Agreement, each Vested Company Option (other
than any Vested Company Option that is a Rollover Security under the Support Agreement) outstanding and unexercised immediately
prior to the Effective Time, with a per share exercise price less than the Per Share Merger Consideration (each, a “Cashed-Out
Option”), shall automatically and without any action on the part of the holder thereof, be cancelled as of the Effective
Time in exchange for the right to receive, unless otherwise agreed to between such holder and Parent prior to the Closing, an amount
in cash equal to the excess of (x) Per Share Merger Consideration over (y) the exercise price of such Cashed-Out Option, multiplied
by the number of Company Shares underlying such Cashed-Out Option (the “Option Consideration”); provided
that if based on the agreement between a holder of a Cashed-Out Option and Parent prior to the Closing that such Cashed-Out Option
shall not be cancelled in exchange for the right to receive Option Consideration in accordance with this Section 3.1(f)(ii),
such holder of the Cashed-Out Option shall, in exchange for the cancellation of such Cashed-Out Option as of the Effective Time,
have a right to receive an equity incentive award of Parent, pursuant to the terms and conditions to be determined by Parent and
entitling the holder thereof to substantially the same economic value as such Cashed-Out Option, provided further that the
number of shares underlying such award granted in substitution for such Cashed-Out Option may be further adjusted by Parent in
accordance with Parent’s capital structure at the Closing to provide substantially the same economic terms to the holder
of such Cashed-Out Option. Each Vested Company Option outstanding and unexercised immediately prior to the Effective Time with
a per share exercise price greater than or equal to the Per Share Merger Consideration shall automatically be cancelled as of the
Effective time without any consideration payable in respect thereof. As promptly as practicable following the Effective Time, the
Surviving Company shall pay (or cause to be paid on its behalf) to each holder of a Cashed-Out Option the aggregate Option Consideration
(without interest) payable to such holder of Cashed-Out Options pursuant to this Section 3.1(f)(ii). Such Option Consideration
shall be rounded down to the nearest cent and the Surviving Company (or such Person(s) making payment on behalf of the Surviving
Company) shall be entitled to deduct and withhold from such cash consideration all amounts required to be deducted and withheld
under applicable Laws. To the extent that amounts are so withheld by the Surviving Company (or such Person(s) making payment on
behalf of the Surviving Company), such withheld amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of the Cashed-Out Options with respect to whom such amounts were withheld by the Surviving Company (or such Person(s)
making payment on behalf of the Surviving Company).
(iii) Unvested
Company Options. Upon the terms and subject to the conditions set forth in this Agreement, each Unvested Company Option
(other than any Unvested Company Option that is a Rollover Security under the Support Agreement) shall, automatically and without
any action on the part of the holders thereof, be cancelled in exchange for, unless otherwise agreed to between the holder thereof
and Parent prior to the Closing, a right to receive an equity incentive award of Parent, pursuant to the terms and conditions to
be determined by Parent and entitling the holder thereof to substantially the same economic value as the original Unvested Company
Option, provided that the number of shares underlying such award granted in substitution for such Unvested Company Option
may be further adjusted by Parent in accordance with Parent’s capital structure at the Closing to provide substantially the
same economic terms to the holder of such Unvested Company Option.
(iv) Company
Restricted Shares. Upon the terms and subject to the conditions set forth in this Agreement, each Company Restricted Share
(other than any Company Restricted Share that is a Rollover Security under the Support Agreement), whether vested or unvested,
that remains outstanding as of immediately prior to the Effective Time shall, automatically and without any action on the part
of the holders thereof, be cancelled in exchange for, unless otherwise agreed to between the holder thereof and Parent prior to
the Closing, a right to receive an equity incentive award of Parent, pursuant to the terms and conditions to be determined by Parent
and entitling the holder thereof to the same economic value as the original Company Restricted Share; provided that the
number of shares underlying such award granted in substitution for such Company Restricted Share may be further adjusted by Parent
in accordance with Parent’s capital structure at the Closing to provide substantially the same economic terms to the holder
of such Company Restricted Share; provided further that if based on the agreement between a holder of a vested Company
Restricted Share and Parent prior to the Closing that such vested Company Restricted Share shall not be cancelled in exchange for
a right to receive an equity incentive award of Parent, the holder of such vested Company Restricted Share shall, in exchange for
the cancellation of such vested Company Restricted Share as of the Effective Time, have the right to receive an amount in cash
equal to the Per Share Merger Consideration in respect of each Company Share underlying such vested Company Restricted Share, which
shall be paid (or caused to be paid) by the Surviving Company as promptly as practicable following the Effective Time. The aggregate
Per Share Merger Consideration payable with respect to such vested Company Restricted Shares shall be rounded down to the nearest
cent and the Surviving Company (or such Person(s) making payment on behalf of the Surviving Company) shall be entitled to deduct
and withhold from such cash consideration all amounts required to be deducted and withheld under applicable Laws. To the extent
that amounts are so withheld by the Surviving Company (or such Person(s) making payment on behalf of the Surviving Company), such
withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of such vested Company Restricted
Shares with respect to whom such amounts were withheld by the Surviving Company (or such Person(s) making payment on behalf of
the Surviving Company).
(v) Company
Share Awards That Are Rollover Securities. Notwithstanding anything to the contrary in this Agreement, each holder of any Company
Share Awards that are Rollover Securities under the Support Agreement, shall not be entitled to receive any Option Consideration
or Per Share Merger Consideration, or be converted into equity incentive award of Parent (as the case may be) pursuant to Sections
3.1(f)(ii) to 3.1(f)(iv) with respect to such Company Share Award. Each Company Share Award that is a Rollover Security
under the Support Agreement shall, automatically and without any action on the part of the holders thereof, be cancelled at the
Effective Time in accordance with the terms of the Support Agreement.
Section 3.2 Exchange
of Certificates.
(a) Paying
Agent. Prior to the Closing, Parent shall select a bank or trust company reasonably acceptable to the Independent Committee
to act as the paying agent for the Merger (the “Paying Agent”) and, in connection therewith, shall enter into
an agreement with the Paying Agent in a form reasonably acceptable to the Company.
(b) Exchange
Fund. Prior to the Effective Time, Parent shall deposit (or cause to be deposited) with the Paying Agent, for payment to the
holders of Company Shares (including Company Shares represented by ADSs but not including Excluded Shares), pursuant to the provisions
of this Article III, a cash amount in immediately available funds sufficient for the Paying Agent to make payments under
this Article III. Until disbursed in accordance with the terms and conditions of this Agreement, such funds shall be invested
by the Paying Agent, as directed by Parent, in obligations of or guaranteed by the United States of America or obligations of an
agency of the United States of America which are backed by the full faith and credit of the United States of America (such cash
amount being referred to herein as the “Exchange Fund”). Any interest and other income resulting from such investments
shall be paid to Parent. The Exchange Fund shall not be used for any purpose other than to fund payments pursuant to this Section
3.2. Parent or the Surviving Company shall pay all charges and expenses, including those of the Paying Agent, incurred by it
in connection with the exchange of Company Shares pursuant to this Article III. To the extent that there are any losses
with respect to any such investments, or the Exchange Fund diminishes for any reason below the level required for the Paying Agent
to make prompt cash payment under Section 3.1, Parent shall, or shall cause the Surviving Company to, promptly replace or
restore the cash in the Exchange Fund so as to ensure that the Exchange Fund is at all times maintained at a level sufficient for
the Paying Agent to make such payments under Section 3.1.
(c) Payment
Procedures.
(i) Promptly
following the Effective Time, Parent and the Surviving Company shall cause the Paying Agent to mail (or in the case of the Depository
Trust Company, deliver) to each holder of record (as of immediately prior to the Effective Time) of Company Shares, including Company
Shares which immediately prior to the Effective Time were (x) represented by a certificate or certificates (the “Certificates”)
and (y) not represented by a certificate or certificates (the “Uncertificated Shares”) which were cancelled
in exchange for the right to receive the Per Share Merger Consideration pursuant to Section 3.1 (and excluding, for the
avoidance of doubt, the Excluded Shares), (A) a letter of transmittal in customary form (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Paying
Agent), and (B) instructions for use in effecting the surrender of the Certificates in exchange for the Per Share Merger Consideration
payable in respect thereof pursuant to the provisions of this Article III. Promptly after a Dissenting Shareholder has effectively
withdrawn or lost his, her or its appraisal rights under the Cayman Companies Law, Parent shall cause the Paying Agent to mail
to such Dissenting Shareholder such letter of transmittal and instructions.
(ii) Upon
surrender of Certificates for cancellation to the Paying Agent or to such other agent or agents as may be appointed by Parent,
together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, the
holders of the Company Shares represented by such Certificates shall be entitled to receive in exchange therefor an amount in cash
equal to the product of the number of Company Shares represented by such Certificates multiplied by the Per Share Merger Consideration
to which the holder thereof is entitled pursuant to Section 3.1(b) (less any applicable withholding Taxes payable in respect
thereof), and the Certificates so surrendered shall forthwith be canceled. Upon receipt by the Paying Agent of confirmation by
the Company that the Uncertificated Shares have been canceled, the holders of such Uncertificated Shares shall be entitled to receive
in exchange therefor an amount in cash equal to the product of the number of such Uncertified Shares multiplied by the Per Share
Merger Consideration to which the holder thereof is entitled pursuant to Section 3.1(b) (less any applicable withholding
Taxes payable in respect thereof). The Paying Agent shall accept such Certificates and such confirmation by the Company with respect
to the Uncertificated Shares upon compliance with such reasonable terms and conditions as the Paying Agent may impose to effect
an orderly exchange thereof in accordance with normal exchange practices. No interest shall be paid or accrued for the benefit
of holders of the Company Shares represented by the Certificates and the cancellation of such Uncertificated Shares on the aggregate
Per Share Merger Consideration payable upon the surrender of such Certificates and cancellation of Uncertificated Shares pursuant
to this Section 3.2. Until so surrendered, outstanding Certificates shall be deemed from and after the Effective Time, to
evidence only the right to receive an amount in cash equal to the product of the number of Company Shares represented by such Certificates
multiplied by the Per Share Merger Consideration, without interest thereon, payable in respect thereof pursuant to the provisions
of this Article III.
(iii) Prior
to the Effective Time, Parent and the Company shall establish procedures with the Paying Agent and the Depositary to ensure that
(x) the Paying Agent will transmit to the Depositary promptly following the Effective Time an amount in cash in immediately available
funds equal to the product of (1) the number of ADSs issued and outstanding immediately prior to the Effective Time (other than
ADSs representing Excluded Shares) multiplied by (2) the Per ADS Merger Consideration and (y) the Depositary will distribute the
Per ADS Merger Consideration to ADS holders (other than with respect to ADSs representing Excluded Shares) upon surrender by them
of the ADSs. Pursuant to the Deposit Agreement, the ADS holders will pay any applicable fees, charges and expenses of the Depositary
and government charges (including withholding Taxes if any) due to or incurred by the Depositary in connection with the cancellation
of the ADSs surrendered and distribution of the aggregate Per ADS Merger Consideration to ADS holders. No interest will be paid
or accrued on any amount payable in respect of the ADSs.
(iv) Remittances
for the Per Share Merger Consideration or the Per ADS Merger Consideration, as the case may be, shall not be sent to holders of
Company Shares or ADSs who are untraceable unless and until, except as provided below, they notify the Paying Agent or the Depositary,
as applicable, of their current contact details. A holder of Company Shares or ADSs will be deemed to be untraceable if (x) such
Person has no registered address in the register of members (or branch register) maintained by the Company or the Depositary, as
applicable, (y) on the last two (2) consecutive occasions on which a dividend has been paid by the Company a check payable to such
Person either (A) has been sent to such person and has been returned undelivered or has not been cashed or (B) has not been sent
to such person because on an earlier occasion a check for a dividend so payable has been returned undelivered, and in any such
case no valid claim in respect thereof has been communicated in writing to the Company or the Depositary, as applicable or (z)
notice of the Company Shareholders Meeting convened to vote on the Merger has been sent to such Person and has been returned undelivered.
Monies due to Dissenting Shareholders and shareholders of the Company who are untraceable shall be returned to the Surviving Company
on demand and held in a non-interest bearing bank account for the benefit of Dissenting Shareholders and shareholders of the Company
(including holders of ADSs) who are untraceable. Monies unclaimed after a period of seven (7) years from the Closing Date shall
be forfeited and shall revert to the Surviving Company.
(d) Transfers
of Ownership. In the event that a transfer of ownership of Company Shares is not registered in the register of members of the
Company, or if the Per Share Merger Consideration is to be paid in a name other than that in which the relevant Company Share is
registered in the register of members of the Company, the Per Share Merger Consideration may be paid to a Person other than the
Person in whose name the relevant Company Share is registered in the register of members of the Company only upon delivery of evidence
to the satisfaction of Parent (or any agent designated by Parent) of such Person’s entitlement to the relevant Company Share
and if the Person requesting such payment has paid to Parent (or any agent designated by Parent) any transfer Taxes required by
reason of the payment of the Per Share Merger Consideration to a Person other than the registered holder of such Company Shares,
or established to the satisfaction of Parent (or any agent designated by Parent) that such transfer Taxes have been paid or are
otherwise not payable.
(e) Required
Withholding. Each of the Paying Agent, Merger Sub, Parent and the Surviving Company (and any other Person that has a withholding
obligation), without double counting, shall be entitled to deduct and withhold or cause to be deducted and withheld from any consideration
payable pursuant to this Agreement to any holder of Company Shares (including Company Shares represented by ADSs), Company Options
or Company Restricted Shares, or other compensation or equity related payments, such amounts as may be required to be deducted
or withheld therefrom under applicable Tax Laws. If any such withholding is made, the withholding party shall promptly and appropriately
report and pay over the withheld Taxes to the applicable Governmental Authority and provide the Person from who withholding was
made evidence of such payment. To the extent that such amounts are so deducted, withheld and remitted to the applicable Governmental
Entity, such amounts shall be treated for all purposes under this Agreement as having been paid to the Person to whom such amounts
would otherwise have been paid.
(f) No
Liability. Notwithstanding anything to the contrary set forth in this Agreement, none of the Paying Agent, Depositary, Parent,
the Surviving Company or any other Party shall be liable to a holder of Company Shares (including Company Shares represented by
ADSs), Company Options or Company Restricted Shares for any amount properly paid to a public official pursuant to any applicable
abandoned property, escheat or similar Law.
(g) Distribution
of Exchange Fund to Parent. Any portion of the Exchange Fund that remains undistributed to the holders of the Company Shares
or ADSs on the date that is six (6) months after the Effective Time shall be paid to the Parent upon demand, and any holders of
Company Shares (other than Excluded Shares) or ADSs that were issued and outstanding immediately prior to the Effective Time who
have not theretofore received the Per Share Merger Consideration or Per ADS Merger Consideration payable to them in consideration
for the cancellation of each of their Company Shares or ADSs representing such Company Shares pursuant to the provisions of this
Section 3.2 (whether as a result of their failure to surrender their Certificates or otherwise) shall thereafter look for
payment of the Per Share Merger Consideration or Per ADS Merger Consideration, as applicable, payable in respect of each of such
Company Shares or ADSs solely to the Surviving Company for any claim to the applicable Per Share Merger Consideration or Per ADS
Merger Consideration to which such holders may be entitled pursuant to the provisions of this Article III without interest
thereon.
Section 3.3 No Further
Ownership Rights. From and after the Effective Time, all Company Shares (including Company Shares represented by ADSs)
shall no longer be outstanding, all Company Shares shall automatically be cancelled and cease to exist, and all ADSs shall be
surrendered, and each holder of a Company Share or ADSs representing any Company Shares shall cease to have any rights with respect
thereto, except the right to receive the Per Share Merger Consideration or the Per ADS Merger Consideration payable for each of
such Company Shares (other than Excluded Shares) or ADSs (other than ADS representing Excluded Shares) upon the cancellation of
each of such Company Shares or ADSs in accordance with the provisions of Section 3.2. The Per Share Merger Consideration
and the Per ADS Merger Consideration paid for each Company Share or ADS in accordance with the terms of this Article III
shall be deemed to have been paid in full satisfaction of all rights pertaining to such Company Shares (including Company Shares
represented by ADSs). From and after the Effective Time, there shall be no further registration of transfers on the records of
the Surviving Company of Company Shares (including Company Shares represented by ADSs) that were issued and outstanding immediately
prior to the Effective Time, other than transfers to reflect, in accordance with customary settlement procedures, trades effected
prior to the Effective Time. If, after the Effective Time, Certificates, Uncertificated Shares or ADSs are presented to the Surviving
Company for any reason, they shall be surrendered, canceled or exchanged as provided in this Article III.
Section 3.4 Lost,
Stolen or Destroyed Certificates. In the event that any Certificates shall have been lost, stolen or destroyed, the
Paying Agent shall issue in exchange for such lost, stolen or destroyed Certificates, upon the making of an affidavit of that
fact by the holder thereof, an amount in cash equal to the product of the number of Company Shares represented by such Certificates
multiplied by the Per Share Merger Consideration to which the holder thereof is entitled pursuant to Section 3.1(b).
Section 3.5 Termination
of Deposit Agreement . As soon as reasonably practicable after the Effective Time, the Surviving Company shall provide
notice to the Depositary to terminate the Deposit Agreement in accordance with its terms.
Section 3.6 Fair
Value. Parent, Merger Sub and the Company respectively agree that the Per Share Merger Consideration represents the fair value
of the Company Shares for the purposes of Section 238(8) of the Cayman Companies Law.
Section 3.7 Necessary
Further Actions. If, at any time after the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Company with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of the Company and Merger Sub, the directors and officers of the Company and Merger
Sub shall take any such lawful and necessary action.
Article
IV
Representations and Warranties of the Company
Except as (i) disclosed
in the Company SEC Filings filed prior to the date hereof (excluding the exhibits and schedules thereto, disclosures contained
in the “Risk Factors” and “Forward-Looking Statements” sections thereof, any other forward-looking statements
or any other disclosures of risks or uncertainties that are non-specific, of general application, predictive, cautionary or forward-looking
in nature set forth therein prior to the date of this Agreement), or (ii) set forth in the Company Disclosure Schedule, the Company
hereby represents and warrants to Parent and Merger Sub as follows:
Section 4.1 Organization
and Qualification. The Company is an exempted company with limited liability duly incorporated, validly existing and in good
standing under the Laws of the Cayman Islands. Each Subsidiary of the Company (each, a “Company Subsidiary”)
has been duly organized, and is validly existing and, where such concept is recognized, in good standing under the Laws of the
jurisdiction of its incorporation or organization, as the case may be, and each of the Company and the Company Subsidiaries has
obtained all applicable Permits relative to its formation and organization from all applicable Governmental Entities except to
the extent the failure of any Company Subsidiary to be so organized, existing or in good standing or of the Company or any Company
Subsidiary to have such Permits has not had and would not have a Company Material Adverse Effect. Section 4.1 of the Company
Disclosure Schedule contains a correct and complete list of all of the Company Subsidiaries, the ownership interest of the Company
in each Company Subsidiary, and the ownership interest of any other Person or Persons in each Company Subsidiary. Each of the
Company and the Company Subsidiaries has the requisite corporate or similar power and authority to own, lease and operate its
properties and assets and to carry on its business as presently conducted, except where the failure to have such power or authority
has not had and would not have a Company Material Adverse Effect. Each of the Company and the Company Subsidiaries is duly qualified
or licensed to do business (and, in the case of the PRC Subsidiaries, successfully passed all applicable annual audits in accordance
with PRC Law), and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification, licensing or good standing necessary, except for such failures to be
so qualified, licensed or in good standing that have not had and would not have a Company Material Adverse Effect. The Company
has heretofore furnished or otherwise made available to Parent a complete and correct copy of the Company Memorandum and Articles
or equivalent organizational documents, each as amended to date, of each of the Company and the Company Subsidiaries. Such memorandum
and articles of association or equivalent organizational documents are in full force and effect as of the date hereof. The Company
or any Company Subsidiary is not in violation of any of the provisions of its memorandum and articles of association or equivalent
organizational documents in any material respect.
Section 4.2 Capitalization.
(a) The
authorized share capital of the Company consists of 100,000,000 Ordinary Shares. As of the date of this Agreement, there
are (i) 32,402,346 Ordinary Shares issued and outstanding, (ii) 1,874,644 Company Shares (including Company Shares represented
by ADSs) issuable upon exercise of outstanding Company Options, (iii) 3,380,293 Company Shares (including Company Shares represented
by ADSs) represented by outstanding Company Restricted Shares (vested and unvested) and (iv) no Company Shares held in treasury
of the Company and no Company Shares owned by any Company Subsidiary. Section 4.2(a) of the Company Disclosure Schedule
sets forth the following information with respect to the Company Share Awards: (1) each Company Share Plan; (2) the maximum number
of Company Shares which may be issued under each Company Share Plan; (3) the aggregate number of underlying Company Shares represented
by the Company Share Awards that have been granted under each Company Share Plan as of the date hereof, and (4) the aggregate number
of underlying Company Shares represented by Company Share Awards which have vested or will have vested as of December 31, 2015.
All of the outstanding shares in the share capital of the Company have been duly authorized and validly issued and are fully paid,
non-assessable and free of any Liens (except as set forth in Section 4.2(a) of the Company Disclosure Schedule). All Company
Shares issuable upon exercise or vesting of Company Share Awards have been duly reserved for issuance by the Company, and upon
any issuance of such shares in accordance with the terms of the applicable Company Share Plan, will be duly authorized, validly
issued and fully paid and non-assessable. Except as otherwise provided in this Agreement or the Company Share Plans, there are
no commitments or agreements of any character to which the Company or any Company Subsidiary is bound obligating such Company or
Company Subsidiary to accelerate or otherwise alter the vesting of any Company Share Awards as a result of any of the Transactions.
(b) Except
as set forth in Section 4.2(a), there are no options, warrants or other rights, agreements, arrangements or commitments
of any character to which the Company or any Company Subsidiary is a party or by which the Company or any Company Subsidiary is
bound relating to the issued or unissued Equity Interests of the Company, or securities convertible into or exchangeable for such
Equity Interests, or obligating the Company to issue or sell any of its share capital or other Equity Interests, or securities
convertible into or exchangeable for such share capital of, or other Equity Interests in, the Company (which, for purposes of this
Agreement, will be deemed to include share appreciation rights, “phantom shares” or other commitments that provide
any right to receive value or benefits similar to such share capital, securities or other rights). There are no outstanding Contracts
or other obligations of the Company or any Company Subsidiary affecting the voting rights of or requiring the repurchase, redemption,
issuance, creation or disposition of, any Equity Interests in the Company, except in accordance with the VIE Contracts and as set
forth in Section 4.2(b) of the Company Disclosure Schedule. Since the date of this Agreement, the Company has not issued
any shares of its share capital, or securities convertible into or exchangeable for such shares or any other Equity Interests in
the Company, except for issuances pursuant to the exercise of Company Options outstanding on such date in accordance with the terms
of such Company Options as of such date. There are no issued or outstanding bonds, debentures, notes or other Indebtedness of the
Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matter
on which the holders of Company Shares may vote.
(c) Each
outstanding share or other Equity Interest of each Company Subsidiary is duly authorized, validly issued, fully paid (and, in the
case of each PRC Subsidiary, the payment thereof has been duly verified by an independent certified public accountant and has been
duly filed or registered with competent PRC Governmental Entity), non-assessable and free of preemptive rights and is held, directly
or indirectly, by the Company or another Company Subsidiary free and clear of all Liens, and subject to the Laws of the PRC with
respect to the PRC Subsidiaries, free of any restriction which prevents the payment of dividends to the Company or any Company
Subsidiary. There are no subscriptions, options, warrants, rights, calls, Contracts or other commitments, understandings, restrictions
or arrangements relating to the issuance, acquisition, redemption, repurchase, exchange, cancellation or sale of any Equity Interest
or other ownership interests of any Company Subsidiary, including any right of conversion or exchange under any outstanding security,
instrument or agreement, except for those provided in the VIE Contracts.
(d) Section
4.2(d) of the Company Disclosure Schedule sets forth a true and complete list of (i) each Company Subsidiary, and (ii) the
name, jurisdiction of organization and the Company’s (or the Company Subsidiary’s) percentage ownership of any and
all Persons in which the Company or any Company Subsidiary owns, or has the right or obligation to acquire any Equity Interest
(other than any Company Subsidiary) as of the date hereof (collectively, the “Investments”). All of the Investments
are owned by the Company or by a Company Subsidiary free and clear of all Liens. Except for the share capital and other Equity
Interests of the Company Subsidiaries and the Investments, the Company does not own, directly or indirectly, any share capital
or other voting or equity securities or interests in any Person that is material to the business of the Company and the Company
Subsidiaries, taken as a whole.
(e) Except
for Contracts or forms thereof filed as exhibits to the Company SEC Filings, neither the Company nor any of the Company Subsidiaries
has entered into any Contract, commitment, arrangement or agreement, or are otherwise obligated, to contribute capital, loan money
or otherwise provide funds or make additional investments in any other Person. Except for the VIE Contract, there are no shareholder
agreements, voting trusts, proxies or other agreements or understandings to which the Company or any Company Subsidiary is a party
or by which any of them is bound relating to the transfer, voting or registration of any Equity Interests of the Company or any
Company Subsidiary or preemptive rights with respect thereto.
(f) The
Company does not have any secured creditors holding a fixed or floating security interest. Neither the Company nor any Company
Subsidiary has incurred any Indebtedness since December 31, 2014 other than in the ordinary course of business and, in any case,
the aggregate outstanding Indebtedness of the Company and any Company Subsidiary as of the date hereof is not more than $300,000,000
greater than it was as of December 31, 2014. No Indebtedness of the Company or any Company Subsidiary will become due on the Closing
Date, or give the holder thereof the right to accelerate such Indebtedness such that it would become due on the Closing Date, or
require the payment of any premium or penalty on the Closing Date, in each case, as a result of the consummation of the Merger.
Section 4.3 Corporate
Authority; Approval and Fairness.
(a) The
Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder
and to consummate the Transactions, subject only to the authorization and approval of this Agreement, the Plan of Merger and the
Merger by the Shareholder Approval. The execution, delivery and performance by the Company of this Agreement and the consummation
by the Company of the Transactions have been duly authorized by the Company Board and no other corporate authorizations on the
part of the Company and no shareholder votes are necessary to authorize this Agreement or to consummate the Transactions other
than the Shareholder Approval. This Agreement has been duly authorized and validly executed and delivered by the Company and, assuming
due authorization, execution and delivery of this Agreement by Parent and Merger Sub, this Agreement constitutes a legal, valid
and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency
(including all Laws relating to fraudulent transfers), reorganization, moratorium and similar Laws of general applicability relating
to or affecting creditors’ rights and to general equity principles (the “Bankruptcy and Equity Exception”).
(b) On
or prior to the date of this Agreement, (i) the Independent Committee has received from Barclays Bank PLC (the “Company
Financial Advisor”), its written opinion, to the effect that, as of the date of such opinion, subject to the limitations,
qualifications and assumptions set forth therein, that the Per Share Merger Consideration to be received by the holders of Company
Shares (other than Excluded Shares) and the Per ADS Merger Consideration to be received by the holders of the ADSs (other than
ADSs representing the Excluded Shares) are fair, from a financial point of view, to such holders (it being agreed and understood
that such opinion may not be relied on by Parent and Merger Sub) and (ii) the Company Board (acting upon the unanimous recommendation
of the Independent Committee) has determined that this Agreement, the Plan of Merger and the Transactions (including the Merger),
are fair to and in the best interest of the Company and its shareholders (other than the holders of Excluded Shares), validly approved
the execution, delivery and performance by the Company of this Agreement and the Transactions, directed that this Agreement, the
Plan of Merger and the Merger be submitted to the holders of Company Shares for their authorization and approval, and resolved
to recommend to the shareholders of the Company (other than the holders of the Excluded Shares) that they authorize and approve
this Agreement, the Plan of Merger and the Merger in accordance with the Cayman Companies Law (the “Company Recommendation”),
which resolutions, subject to Section 6.4(c), have not been subsequently withdrawn or modified in a manner adverse to Parent.
Section 4.4 No Conflict;
Required Filings and Consents.
(a) The
execution and delivery by the Company of this Agreement do not, and the performance by the Company of this Agreement and the consummation
by the Company of the Merger and the other Transactions hereby will not, (i) assuming the Shareholder Approval is obtained, conflict
with or violate any provision of the Company Memorandum and Articles or any equivalent organizational or governing documents of
any Company Subsidiary, (ii) assuming that all consents, approvals and authorizations described in Section 4.4(b) will
have been obtained prior to the Effective Time, all filings and notifications described in Section 4.4(b) will have been
made and any waiting periods or approvals thereunder will have terminated, expired or been obtained prior to the Effective Time
and the Shareholder Approval is obtained, conflict with or violate any Law applicable to the Company or any Company Subsidiary
or by which any property or asset of the Company or any Company Subsidiary is bound or affected or (iii) violate, conflict with,
require any consent or approval under, result in any breach of or any loss of any benefit under, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, vesting,
amendment, acceleration or cancellation of, or result in the creation of a Lien, except for any Permitted Encumbrance, on any property
or asset of the Company or any Company Subsidiary pursuant to, any Contract to which the Company or any Company Subsidiary is a
party or by which any of their respective properties or assets are bound, except, with respect to clauses (ii) and (iii), for matters
that would not have a Company Material Adverse Effect, provided that solely for the purpose of this Section 4.4(a),
subsection (D) of the definition of “Company Material Adverse Effect” shall be deemed to be excluded therefrom.
(b) The
execution and delivery of this Agreement by the Company do not, and the performance by the Company of this Agreement and the consummation
by the Company of the Transactions will not, require any consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entity, except (i) for any consent, approval, authorization, filing or notification required under the Exchange
Act, the Securities Act, any other U.S. federal or state securities Laws or the rules and regulations of NASDAQ, including the
filing of the Rule 13E-3 Transaction Statement on Schedule 13E-3 (including any amendments or supplements thereto, the “Schedule
13E-3”) and the furnishing of Form 6-K with the Proxy Statement, (ii) for the filing of the Plan of Merger and related
documentation with the Registrar of Companies of the Cayman Islands and publication of notice of the Merger in the Cayman Islands
Government Gazette, in each case as required by the Cayman Companies Law, or (iii) where the failure to obtain such consents, approvals
or authorizations, or to make such filings or notifications would not (x) prevent or materially delay the consummation of the Merger,
(y) otherwise prevent or materially delay performance by the Company of any of its material obligations under this Agreement or
(z) have a Company Material Adverse Effect, provided that solely for the purpose of this Section 4.4(b), subsection
(D) of the definition of “Company Material Adverse Effect” shall be deemed to be excluded therefrom.
Section 4.5 Compliance
with Laws; Permits.
(a) (i)
Each of the businesses of the Company or any Company Subsidiary is, and since December 31, 2012 has been, to the Company’s
Knowledge, conducted in compliance in all respects with all Laws applicable to the Company or such Company Subsidiary or by which
any property, asset or right of the Company or such Company Subsidiary is bound, (ii) the Company is in compliance with the applicable
listing, corporate governance and other rules and regulations of NASDAQ, (iii) to the Company’s Knowledge, each of the Company
and the Company Subsidiaries holds all Permits necessary for the lawful conduct of its business and the ownership, use, occupancy
and operation of its assets and properties, (iv) to the Company’s Knowledge, each of the Company and the Company Subsidiaries
is in compliance in all respects with the terms of such Permits, and (v) no such Permit shall cease to be effective as a result
of the Transactions, except, in each case, where the non-compliance or the failure to possess any Permit would not have a Company
Material Adverse Effect.
(b) Neither
the Company, any Company Subsidiary nor any director or officer, nor, to the Knowledge of the Company, any agent, employee or other
Person acting on behalf of the Company or any Company Subsidiary has, in the course of its actions for, or on behalf of, any of
them (i) violated any provision of (A) the U.S. Foreign Corrupt Practices Act of 1977, as amended (including the rules and regulations
promulgated thereunder), (B) the PRC Law on Anti-Unfair Competition adopted on September 2, 1993, (C) the Interim Rules on Prevention
of Commercial Bribery issued by the PRC State Administration of Industry and Commerce on November 15, 1996 or (D) any other applicable
anti-corruption Law ((A), (B), (C) and (D) collectively, “Anti-Corruption Laws”); or (ii) made or gave any bribe,
rebate, payoff, influence payment, kickback or other payment to any officer, director, employee or official of or any other person
acting in an official capacity for any Governmental Entity that would be unlawful under any applicable Law, including under an
Anti-Corruption Law or (iii) undertaken any act or failed to undertake any act that directly or indirectly caused or contributed
to the Company or any Company Subsidiary to be in violation of any Anti-Corruption Law. During the last three (3) years, neither
the Company nor any Company Subsidiary has received any communication that alleges that the Company or any Company Subsidiary,
or any Representative thereof is, or may be, in violation of, or has, or may have, any material liability under, any Anti-Corruption
Law which has not been resolved. The Company has effective disclosure controls and procedures and an internal accounting controls
system that is sufficient to provide reasonable assurances that violations of applicable Anti-Corruption Laws by the Company or
any Company Subsidiary will be prevented, detected and deterred.
(c) To
the Knowledge of the Company, each holder or beneficial owner of Company Shares, Company Options and/or Company Restricted Shares
who is a PRC resident and subject to any of the registration or reporting requirements of SAFE Circular 7, SAFE Circular 37 or
any other applicable SAFE rules and regulations (collectively, the “SAFE Rules and Regulations”), has complied,
in all material respects, with such reporting and/or registration requirements under the SAFE Rules and Regulations with respect
to its investment in the Company. Neither the Company nor, to the Knowledge of the Company, such holder or beneficial owner has
received any written inquiries, notifications, orders or any other written forms of official correspondence from SAFE or any of
its local branches with respect to any actual or alleged non-compliance with the SAFE Rules and Regulations.
Section 4.6 SEC Filings;
Financial Statements.
(a) Company
SEC Filings. The Company has filed or furnished, as applicable, all forms, reports and other documents (including any amendment
thereof) required to be filed or furnished by it with the SEC, as the case may be, since December 31, 2012 (collectively, the “Company
SEC Filings”). Each Company SEC Filing (i) as of its date, complied in all material respects with the applicable requirements
of the Securities Act, the Exchange Act and the Sarbanes Oxley Act, as the case may be, and (ii) did not, at the time it was filed
or furnished (or, if amended, at the time (and taking into account the content) of such amendment), contain any untrue statement
of a material fact or omit to state a material fact required to be stated or incorporated therein or necessary in order to make
the statements made therein, in the light of the circumstances under which they were made, not misleading. As of the date hereof,
there are no outstanding or unresolved comments in comment letters from the SEC staff with respect to any of the Company SEC Filings.
As of the date hereof, none of the Company SEC Filings is the subject of outstanding SEC investigation, or to the Company's Knowledge,
ongoing SEC review.
(b) Financial
Statements. Each of the consolidated financial statements (including, in each case, any notes thereto) contained in or incorporated
by reference into the Company SEC Filings on or prior to the date hereof (collectively, the “Company Financial Statements”)
was prepared in accordance with GAAP applied (except as may be indicated in the notes thereto and, in the case of unaudited quarterly
financial statements, as permitted by the Exchange Act) on a consistent basis during the periods indicated (except as may be indicated
in the notes thereto), and each presented fairly, in all material respects, the consolidated financial position, results of operations,
changes in shareholders’ equity and cash flows of the Company and its consolidated Subsidiaries as at the respective dates
thereof and for the respective periods indicated therein (subject, in the case of unaudited interim statements, to normal year-end
audit adjustments which have not and would not have a Company Material Adverse Effect and the exclusion of certain notes in accordance
with the published rules promulgated by the SEC relating to unaudited financial statements), in each case in accordance with GAAP.
The books and records of the Company and the Company Subsidiaries have been maintained in all material respects in accordance with
GAAP and any other applicable legal and accounting requirements.
(c) Internal
Controls.
(i) The
Company has established and maintains a system of internal control over financial reporting (as defined in Rule 13a-15 under the
Exchange Act) that are designed to provide reasonable assurance regarding the reliability of the financial reporting and the preparation
of financial statements of the Company and any Company Subsidiary for external purposes in accordance with GAAP.
(ii) The
Company has filed all certifications and statements required by (i) Rule 13a-14 or Rule 15d-14 under the Exchange Act or (ii) 18
U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002) with respect to any Company SEC Filings. The Company has established
and maintains disclosure controls and procedures as defined in and required by Rules 13a-15 and 15d-15 of the Exchange Act reasonably
designed to ensure that all material information concerning the Company and any Company Subsidiary required to be disclosed by
the Company in the reports it files under the Exchange Act is recorded, processed, summarized and reported, within the time periods
specified in the SEC’s rules and related forms, and that such information is accumulated and communicated to the Company’s
chief executive officer and chief financial officer (or persons performing similar functions), as appropriate, to allow timely
decisions regarding required disclosure. Neither the Company nor, to the Company’s Knowledge, its independent registered
public accounting firm has identified or been made aware of any “significant deficiencies” or “material weaknesses”
(as defined by the Public Company Accounting Oversight Board) in the design or operation of the internal controls and procedures
of the Company that are reasonably likely to adversely affect the ability of the Company to record, process, summarize and report
financial data. To the Company’s Knowledge, there is and has been, no fraud, whether or not material, that involves (or involved)
the management of the Company or other employees who have (or had) a significant role in the internal controls over financial reporting
utilized by the Company. Since the date of the Company’s most recently filed annual report under the Exchange Act, there
have been no changes in the Company’s internal control over financial reporting (as such term is defined in the Exchange
Act) that have materially affected or are reasonably likely to materially affect, the Company’s internal control over financial
reporting. As used in this Section 4.6(c)(ii), the term “file” shall be broadly construed to include any manner
in which a document or information is furnished, supplied or otherwise made available to the SEC.
Section 4.7 No Undisclosed
Liabilities. None of the Company or any Company Subsidiary has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise, including any outstanding Indebtedness or any commitments therefor), except for liabilities
or obligations (i) which have not had and would not have a Company Material Adverse Effect, (ii) that were incurred after December
31, 2014, in the ordinary course of business consistent with past practice, (iii) that were set forth in the Company's consolidated
balance sheet as of December 31, 2014 included in the Company Financial Statements prior to the date hereof, or (iv) that were
required to be incurred pursuant to the Transactions.
Section 4.8 Absence
of Certain Changes or Events. Since December 31, 2014, (i) the Company and the Company Subsidiaries have conducted their respective
businesses in all material respects in the ordinary course consistent with past practice, (ii) there has not been any Company
Material Adverse Effect, and (iii) neither the Company nor any Company Subsidiary has taken any action that, if taken after the
date of this Agreement without Parent’s consent, would constitute a breach of any of the covenants set forth in Section
6.1(a) hereof.
Section 4.9 Company
Plans; Employees and Employment Practices.
(a) All
material benefit and compensation plans (including the Company Share Plans) (the “Company Plans”) covering current
or former employees of the Company and the Company Subsidiaries are listed in Section 4.9 of the Company Disclosure Schedule.
Since December 31, 2014, there has been no material change, amendment, modification to, or adoption of, any Company Share Plan,
except for increasing the maximum aggregate number of Company Shares which may be issued for the 2010 Stock Incentive Plan.
(b) Except
as otherwise specifically provided in this Agreement regarding the Company Share Awards, neither the execution and delivery of
this Agreement nor the consummation of the Transactions (either alone or in conjunction with another event, such as a termination
of employment) will (i) result in any payment becoming due to any current or former director, officer or employee of the Company
or any of the Company Subsidiaries under any of the Company Plans or otherwise; (ii) increase any benefits otherwise payable
under any of the Company Plans; or (iii) result in any acceleration of the time of payment or vesting of any such benefits.
(c) There
is no outstanding Order against the Company Plans that would have a Company Material Adverse Effect.
Section 4.10 Labor
and Employment Matters. Neither the Company nor any Company Subsidiary is a party to or bound by any collective bargaining
agreement, trade union, works council or other labor union Contract applicable to persons employed by it, nor is an such agreement
presently being negotiated by the Company or any Company Subsidiary, and there are no labor unions, works councils or other organizations
representing, purporting to represent or, to the Knowledge of the Company, attempting to represent (including organizational campaigns,
petitions or other unionization activities) any employee of the Company or any Company Subsidiary. Except for matters that have
not had and would not have a Company Material Adverse Effect, (a) no strike, slowdown, picketing, work stoppage, concerted refusal
to work overtime or other similar labor activity has occurred or, to the Knowledge of the Company, been threatened or is anticipated
with respect to any employee of the Company or any Company Subsidiary, (b) there are no labor disputes currently subject to any
grievance procedure, arbitration or litigation and there is no representation petition pending or, to the Knowledge of the Company,
threatened or anticipated with respect to any employee of the Company or any Company Subsidiaries, and (c) no executive or key
employee of the Company or any Company Subsidiary has given written notice that he or she plans to terminate employment with the
Company or the applicable Company Subsidiary and no significant number of employees of the Company or any Company Subsidiary have
given written notice that they plan to terminate employment with the Company or applicable Company Subsidiary. The Company and
the Company Subsidiaries are in compliance in all material respects with all applicable Laws relating to employment and employment
practices, social security, workers’ compensation, terms and conditions of employment, worker safety, wages and hours, civil
rights, discrimination, immigration and collective bargaining.
Section 4.11 Contracts.
(a) Except
for this Agreement and except for Contracts or forms or summaries thereof filed as exhibits to the Company SEC Filings prior to
the date hereof or set forth in Section 4.11(a) of the Company Disclosure Schedule, as of the date hereof, neither the Company
nor any Company Subsidiary is a party to or bound by any Contract which:
(i) as
of the date hereof, is a “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K promulgated
by the SEC);
(ii) would
prohibit or materially delay the consummation of the Merger or otherwise materially impair the ability of the Company to perform
its obligations hereunder;
(iii) relates
to a joint venture, partnership, limited liability or other similar agreement or arrangement relating to the formation, creation,
operation, management or control of any partnership, Person or joint venture or relates to business cooperation: (A) that is material
to the business of the Company and the Company Subsidiaries, taken as a whole, (B) in which the Company owns more than a fifteen
percent (15%) voting or economic interest or (C) which imposes on the Company or any Company Subsidiary any obligation of more
than $20,000,000 (or an equivalent amount in RMB) in the aggregate;
(iv) relates
to any indenture, credit agreement, loan agreement, security agreement, guarantee, note, mortgage or other Contract relating to
Indebtedness (in any case, whether incurred, assumed, guaranteed or secured by any asset of the Company or any Company Subsidiary)
in excess of $20,000,000 (or an equivalent amount in RMB);
(v) prohibits
the payment of dividends or distributions in respect of the capital stock of the Company or any of the Company Subsidiaries, prohibits
the pledging of the capital stock of the Company or any Company Subsidiary or prohibits the issuance of guarantees by any Company
Subsidiary;
(vi) requires
or is reasonably likely to require either (x) annual payments from third parties to the Company and the Company Subsidiaries of
at least $5,000,000 (or an equivalent amount in RMB) in the aggregate or (y) annual payments from the Company and Company Subsidiaries
to third parties of at least $5,000,000 (or an equivalent amount in RMB) in the aggregate;
(vii) relates
to any acquisition by the Company or any Company Subsidiary pursuant to which the Company or any Company Subsidiary has continuing
indemnification, “earn-out” or other contingent payment or guarantee obligations;
(viii) involves
any directors, executive officers (as such term is defined in the Exchange Act) or five percent (5%) stockholders of the Company
or any of their respective Affiliates (other than the Company or any Company Subsidiary) or immediate family members;
(ix) contains
any covenant that (A) limits the ability of the Company or any Company Subsidiary (or, after the Effective Time, Parent, the Surviving
Company, or their respective Subsidiaries) to engage in any line of business or to compete with any Person or operate at any location,
or (B) could require the disposition of any material assets or line of business of the Company or any Company Subsidiary (or, after
the Effective Time, Parent, the Surviving Company, or their respective Subsidiaries;
(x) provides
for indemnification by the Company or any Company Subsidiary of any Person, except for any such Contract that is (A) not material
to the Company or any Company Subsidiary and (B) entered into in the ordinary course of business; or
(xi) contains
a put, call or similar right pursuant to which the Company or any Company Subsidiary could be required to purchase or sell, as
applicable, any Equity Interests of any Person or assets that have a fair market value or purchase price of more than $5,000,000
(or an equivalent amount in RMB).
(b) Each
Contract of the type described in Section 4.11(a) to which the Company or any Company Subsidiary is a party is referred
to herein as a “Company Material Contract.” Except as would not constitute a Company Material Adverse Effect,
(i) each Company Material Contract is a legal, valid and binding obligation of the Company or a Company Subsidiary, as applicable,
in full force and effect and enforceable against the Company or a Company Subsidiary in accordance with its terms, subject to the
Bankruptcy and Equity Exception, (ii) to the Knowledge of the Company, each Company Material Contract is a legal, valid and binding
obligation of the counterparty thereto, in full force and effect and enforceable against such counterparty in accordance with its
terms, (iii) neither the Company nor any Company Subsidiary and, to the Company's Knowledge, no counterparty, is or is alleged
to be in breach or violation of, or default under, any Company Material Contract, (iv) neither the Company nor any Company Subsidiary
has received any claim of default under any Company Material Contract, (v) to the Company's Knowledge, no event has occurred which
would result in a breach or violation of, or a default under, any Company Material Contract (in each case, with or without notice
or lapse of time or both) and (vi) the Company has not received any written notice from any other party to any Company Material
Contract, and otherwise has no Knowledge that such other party intends to terminate, or not renew any Company Material Contract
in accordance with its terms.
Section 4.12 Litigation.
(i) There is no legal, administrative, arbitral or other suit, claim, action, inquiry, mediation, proceeding or investigation
of any nature (whether sounding in contract, tort, equity or otherwise) (each, an “Action”) pending or, to
the Knowledge of the Company, threatened in writing against the Company or any Company Subsidiary, or any property or asset of
the Company or any Company Subsidiary and (ii) none of the Company or any of the Company Subsidiaries or any property or asset
of the Company or any Company Subsidiary is subject to or bound by any outstanding Order, except, in each case, where any such
Action or Order would not have a Company Material Adverse Effect.
Section 4.13 Environmental
Matters. Except as would not constitute a Company Material Adverse Effect, (a) the Company and each Company Subsidiary have
complied and are in compliance with all Environmental Laws and have obtained and possess all permits, licenses and other authorizations
currently required for their establishment and their operation under any Environmental Law, and all such permits, licenses and
other authorizations are in full force and effect, (b) neither the Company nor any Company Subsidiary has received any written
notice, report or other information regarding any violation of, or any liability under, any Environmental Law with respect to
the Company's or any Company Subsidiary's past or current operations, properties or facilities, (c) neither the Company nor any
Company Subsidiary has treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled, manufactured,
distributed, exposed any Person to, or released any substance, including any Hazardous Material, or owned or operated its business
or any property or facility which is or has been contaminated by any such substance, so as to give rise to any current or future
liabilities pursuant to Environmental Laws and (d) neither the Company nor any Company Subsidiary has assumed, undertaken, provided
an indemnity with respect to, or otherwise become subject to, any liability of any other Person relating to Environmental Law.
This Section 4.13 constitutes the only representations and warranties of the Company with respect to Environmental Law.
Section 4.14 Intellectual
Property.
(a) To
the Knowledge of the Company, each of the Company and the Company Subsidiaries has complied in all material respects with all of
their respective obligations to the respective patent, trademark, and copyright offices, including the duty of candor and disclosure
to the United States Patent and Trademark Office, and all applicable Laws, with respect to the Company Intellectual Property.
(b) Except
as would not have a Company Material Adverse Effect, the Company or one of the Company Subsidiaries solely and exclusively owns
all right, title and interest in and to the Company Intellectual Property which is exclusively owned by the Company, free and clear
of all Liens, except for Permitted Encumbrances. Each of the Company and the Company Subsidiaries solely and exclusively owns all
right, title and interest in and to, or has valid and enforceable rights to use all other material Intellectual Property used in
or necessary to conduct the businesses of the Company and the Company Subsidiaries as currently conducted and as currently proposed
to be conducted, free and clear of all Liens, except for Permitted Encumbrances (such material Intellectual Property (including
Company Software), the “Company Intellectual Property”). To the Knowledge of the Company, there is no outstanding
Order relating to any material Company Intellectual Property.
(c) Neither
the Company nor any Company Subsidiary has received any written notice or is or has been subject to any Action alleging that the
Company or any Company Subsidiary, or the business previously or currently conducted by the Company or any Company Subsidiary,
is infringing, diluting, misappropriating, or otherwise violating, or has infringed, diluted, misappropriated, or otherwise violated,
any Intellectual Property right of any Person, including any solicited or unsolicited offer, demand, or request to license any
Intellectual Property. Neither the Company nor any Company Subsidiary nor any business previously or currently conducted by the
Company or any Company Subsidiary (including the development, marketing, licensing, sale, offer for sale, distribution, import,
export, hosting, implementation, and use of any Company Software, and the provision of services relating to any Company Software)
infringes, dilutes, misappropriates, or otherwise violates or has infringed, diluted, misappropriated, or otherwise violated any
material Intellectual Property rights of any Person. To the Knowledge of the Company, no third party is currently infringing, diluting,
misappropriating, or otherwise violating any Intellectual Property owned by the Company or any Company Subsidiary.
(d) To
the Knowledge of the Company, all of the Company Intellectual Property is valid, subsisting and enforceable. Neither the Company
nor any Company Subsidiary has received any written notice or is or, to the Knowledge of the Company, has been subject to any Action,
including any opposition, cancellation, reissue, re-examination, inter partes, interference, nullity, revocation, or other proceedings
by any Person challenging the validity, enforceability, patentability, registrability, inventorship, or scope of, or the Company’s
or any Company Subsidiary’s use or ownership of, any of the Company Intellectual Property. No loss or expiration of any of
the material Company Intellectual Property is threatened or pending, except for patents expiring at the end of their statutory
terms (and not as a result of any act or omission by the Company or any Company Subsidiary).
(e) Each
of the Company and the Company Subsidiaries owns all right, title and interest in and to all material Intellectual Property created
or developed by, for or under the direction or supervision of the Company or such Company Subsidiary Except as would not have a
Company Material Adverse Effect, all current and former employees, consultants, and contractors (collectively, “Company
Workers”) who have participated in the creation or development of any such material Intellectual Property have executed
and delivered to the Company or such Company Subsidiary an agreement (i) providing for the obligations of such current or former
employee, consultant, or contractor to maintain and protect the confidential information of the Company or any Company Subsidiary,
and (ii) providing for the present assignment by each such Company Worker to the Company or such Company Subsidiary of all Intellectual
Property rights arising out of such Company Worker’s employment by, engagement by or contract with the Company or such Company
Subsidiary. To the Knowledge of the Company, no Company Worker has materially breached or is in material breach of any such agreement.
(f) The
Company and the Company Subsidiaries have taken reasonable actions to maintain and protect the Company Intellectual Property, including
maintaining and protecting in confidence the confidential information of the Company or any Company Subsidiary. To the Knowledge
of the Company, each service provider of the Company or any Company Subsidiary has taken reasonable actions to maintain and protect
in confidence such Personal Data and confidential information.
(g) Each
Person that has had or has access to material confidential information of the Company or any Company Subsidiary is subject to confidentiality
obligations regarding the non-disclosure and protection of such material confidential information, and, to the Company’s
Knowledge, no such Person has materially breached or is in material breach of any such obligations.
(h) To
the Knowledge of the Company, the Company IT Systems are and will be sufficient for the immediate needs of the Company and the
Company Subsidiaries. The Company and each Company Subsidiary are in substantial compliance with in all material respects the terms
and conditions of the Contracts relating to Software included in the Company IT Systems. Except as would not have a Company Material
Adverse Effect, the Company IT Systems are functional, operate in a reasonable manner, and in sufficiently good working condition
to perform their expected function, operation, and purposes.
(i) The
Company and each Company Subsidiary have taken reasonable steps to maintain and protect the security, confidentiality, integrity,
and continuity of the Company IT Systems (including the data and information stored or contained therein or transmitted thereby),
and to guard against any unauthorized use, access, interruption, or modification of any of the Company IT Systems (including such
data or information), including maintaining compliance with generally accepted industry security standards. Neither the Company
nor any Company Subsidiary has had: (i) any material incidents involving any successful intrusions or breaches of security relating
to any Company IT System (including any data or information stored or contained in, or transmitted by, any Company IT System),
including with respect to any data of any customers of the Company or any Company Subsidiary or any users of products or services
provided by the Company or any Company Subsidiary, or (ii) any material incidents involving any successful unauthorized Processing,
loss, compromise, corruption, or damage of, or breaches of security relating to any Personal Data in the possession, custody, or
control of, or Processed by, the Company or any Company Subsidiary, or any confidential information of the Company or any Company
Subsidiary. The Company and each Company Subsidiary maintains security, disaster recovery, and business continuity plans, procedures,
and facilities To the Knowledge of the Company, the Company IT Systems do not contain any virus, bugs, disabling code, time bombs,
Trojan horses, or other malicious or similar code that could reasonably be expected to cause any material harm to any Company IT
System.
(j) The
Company and each Company Subsidiary has established and maintains policies and procedures regarding the Processing of Personal
Data and privacy and data security and protection. To the Knowledge of the Company, the operation of the businesses of the Company
and each Company Subsidiary, and the Processing of any Personal Data by the Company or any Company Subsidiary, are in material
compliance with all (A) such policies and procedures, (B) applicable Laws relating to privacy or data security or protection, and
(C) applicable requirements relating to privacy or data security or protection under any Contracts to which the Company or any
Company Subsidiary is a party or by which the Company or any Company Subsidiary is bound, including notification, consent, and
transfer requirements. To the Knowledge of the Company, the execution and delivery of this Agreement, the performance of obligations
and exercise of rights under this Agreement, and the consummation of the Merger and the other Transactions do not and will not,
with or without the passage of time or giving of notice, result in any violation of any such policies, procedures, Laws, or requirements.
Section 4.15 Taxes.
(a) All
Tax Returns required to be filed by or with respect to the Company or any Company Subsidiary have been timely filed in accordance
with applicable Law. All such Tax Returns are true, correct, and complete in all respects and were prepared in compliance with
applicable Law. No claim has ever been made by a Governmental Entity in a jurisdiction where the Company or any Company Subsidiary
does not file Tax Returns that the Company or any Company Subsidiary is or may be subject to Taxes in such jurisdiction.
(b) All
Taxes (whether or not shown on a Tax Return) of the Company and each Company Subsidiary due and payable have been timely paid.
(c) No
deficiencies for Taxes have been proposed or assessed in writing against the Company or any Company Subsidiary by any Governmental
Entity, and neither the Company nor any Company Subsidiary has received in writing any (i) notice indicating an intent to open
an audit or other review, (ii) request for information related to Tax matters or (iii) notice of any claim, proposal or assessment
against the Company or any Company Subsidiary for any such deficiency for Taxes. As of the date of this Agreement, there is no
pending or, to the Knowledge of the Company, threatened audit, judicial proceeding or other examination against or with respect
to the Company or any Company Subsidiary with respect to any Taxes. Neither the Company nor any Company Subsidiary has waived any
statute of limitations in respect of Taxes or agreed to any extension of time with respect to the assessment or collection of any
Taxes.
(d) Each
of the Company and the Company Subsidiaries has duly and timely withheld and paid to the appropriate Governmental Entity all Taxes
required to have been withheld and paid in connection with any amounts paid or owing, including in respect of Company Share Awards
to any employee, independent contractor, creditor, stockholder, or other third party and timely and accurately filed all associated
forms and Tax Returns.
(e) There
are no Liens or other security interests upon any property or assets of the Company or any Company Subsidiary for Taxes, except
for Liens for Taxes not yet due and payable and for which adequate reserves have been established in accordance with GAAP
(f) To
the knowledge of the Company, neither the Company nor any Company Subsidiary was, for the taxable year ended December 31, 2014,
treated as a “passive foreign investment company” within the meaning of Section 1297 of the Code.
(g) Neither
the Company nor any Company Subsidiary takes the position for Tax purposes that it is a “resident enterprise” of the
PRC or tax resident in any jurisdiction other than its jurisdiction of formation. Each Company Subsidiary located in the PRC has,
in accordance with applicable PRC Law, duly registered with the relevant PRC Governmental Entity, obtained and maintained the validity
of all national and local Tax registration certificates and complied with all requirements in all material respects imposed by
such Governmental Entities.
(h) All
Tax Incentives (if any) enjoyed by the Company or any Company Subsidiary have been in material compliance with all applicable Laws
and, to the Knowledge of the Company, are not subject to suspension, repeal, reduction, revocation, cancellation or any other changes
(including retroactive changes) in the future. No submissions made by or on behalf of the Company or any Company Subsidiary to
any Governmental Entity in connection with obtaining any Tax Incentive contained any material misstatement or omission that would
have affected the granting of such Tax Incentive.
Section 4.16 Insurance.
The Company has made available to Parent accurate and complete copies of all material insurance policies and all material self-insurance
programs and arrangements relating to the business, assets, liabilities and operations of the Company and the Company Subsidiaries.
Except as would not have a Company Material Adverse Effect, (a) all such policies, programs and arrangements are in full force
and effect, no notice of cancellation or modification has been received, and there is no existing default or event which, with
the giving of notice or lapse of time or both, would constitute a default, by any insured thereunder and (b) as of the date of
this Agreement, the Company has no reason to believe that it or any Company Subsidiary will not be able (i) to renew its
existing insurance coverage as and when such policies expire or (ii) to obtain comparable coverage from similar institutions
as may be necessary or appropriate to conduct its business as now conducted.
Section 4.17 Real
Estate
(a) Section
4.17(a) of the Company Disclosure Schedule lists the location of each parcel of real property in which the Company or any of
the Company Subsidiaries holds any title ownership or land use rights where title ownership is not available to private parties
in the jurisdiction in which such real property is located (“Owned Real Property”). Except as would not have
a Company Material Adverse Effect, (i) each of the Company and the Company Subsidiaries holds good and valid title to, or valid
land use rights with respect to, each parcel of Owned Real Property free and clear of all Liens and encumbrances, except Permitted
Encumbrances and (ii) each of the Company and the Company Subsidiaries has paid in full any and all amounts (including, if applicable,
land grant premiums) required under applicable Law in connection with securing such title or land use rights.
(b) Section
4.17(b) of the Company Disclosure Schedule lists the location of each parcel of real property leased by the Company or a Company
Subsidiary (“Leased Real Property”). The Company has delivered or otherwise made available to Parent a true
and complete copy of each such lease. Except as would not have a Company Material Adverse Effect, each of the Company and the Company
Subsidiaries has a valid leasehold interest in all of its Leased Real Property free and clear of any and all Liens and encumbrances,
except Permitted Encumbrances.
(c) Except
as would not have a Company Material Adverse Effect, each of the Company and the Company Subsidiaries has title to, or a valid
leasehold interest in, as applicable, all personal property used in its businesses free and clear of any and all Liens and encumbrances,
except Permitted Encumbrances. Such personal property and Owned Real Property and Leased Real Property (taken as a whole) are in
good operating condition and repair, ordinary wear and tear and deferred maintenance excepted, and except for such failures to
be in good operating condition and repair which would not have a Company Material Adverse Effect.
Section 4.18 Affiliate
Transactions. Except as disclosed in the Company SEC Filings (including exhibits thereof), no officer or director of the Company
or any Company Subsidiary or any Person beneficially owning five percent (5%) or more of the Company Shares or Equity Interest
of any Company Subsidiary, nor any individual related by blood, marriage or adoption to any such individual or Person nor any
entity in which any such Person or individual owns any beneficial interest, is a party to any material agreement, Contract, commitment
or transaction with the Company or any Company Subsidiary or has any right, title, or interest in any material property owned,
licensed, or used by the Company or any Company Subsidiary (including any Company Intellectual Property).
Section 4.19 Brokers.
Other than the Company Financial Advisor, the fees and expenses of which will be paid by the Company, no broker, finder, financial
advisor, investment banker or other Person is entitled to any brokerage, finder’s, financial advisor’s or other similar
fee or commission in connection with the Merger based upon arrangements made by or on behalf of the Company or any Company Subsidiary.
The Company has provided to Parent a copy of the engagement letter of the Company Financial Advisor and such engagement letter
has not been amended or modified.
Section 4.20 Anti-Takeover
Provisions. The Company is not a
party to a shareholder rights agreement or “poison pill” or similar agreement or plan. The Company Board has acted
in good faith to take all necessary actions, to the extent consistent with the Company Memorandum and Articles and the fiduciary
duties of the members of the Company Board under applicable Laws, so that any takeover, anti-takeover, moratorium, “fair
price”, “control share” or other similar Laws enacted under any Laws applicable to the Company does not, and
will not, apply to this Agreement or the Transactions, other than the Cayman Companies Law.
Section 4.21 PRC Subsidiaries.
(a) The
registered capital of each PRC Subsidiary (including each of the VIEs that were incorporated under the PRC Laws (the “PRC
VIEs”) and each of its Subsidiaries) is fully contributed in accordance with applicable PRC Laws.
(b) No
approvals, other than those already obtained, are required to be obtained for the performance by the respective parties of their
obligations and the transactions contemplated under the VIE Contracts, except (i) if the WFOE (or any other Person designated by
the WFOE) decides to exercise the option granted under the applicable VIE Contract to purchase the Equity Interests in a PRC VIE
and, as a result of such purchase, relevant PRC VIE will be operating its business in a restricted industry under PRC Laws, such
purchase shall be subject to prior approval by MOFCOM and be further subject to registrations with the relevant PRC Government
Entities, and (ii) if there is any change to the shareholding percentage or registered capital of any PRC VIE, the pledges under
the applicable VIE Contract shall be subject to re-registration with the State Administration of Industry and Commerce or its local
counterparts.
(c) The
execution, delivery and performance by each of the relevant parties of their respective obligations under each of the VIE Contracts,
and the consummation of the transactions contemplated thereunder, did not, do not and will not (i) result in any violation of their
respective articles of association, their respective business licenses or constitutive documents, (ii) result in any violation
of any applicable Laws, or (iii) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute
a default under, any agreement, instrument, arbitration award or judgment, Order or decree of any court of the PRC having jurisdiction
over the relevant parties to the VIE Contracts, as the case may be, or any agreement with, or instrument to which any of them is
expressed to be a party or which is binding on any of them.
(d) The
VIE Contracts taken as a whole comprise all of the contracts enabling the Company to effectively control the PRC VIEs and consolidate
the financial statements of the PRC VIEs.
(e) Each
VIE Contract is, and all of the VIE Contracts taken as a whole are, legal, valid and admissible as evidence under applicable PRC
Laws. Each VIE Contract is in proper legal form under applicable PRC Laws for the enforcement thereof against the parties thereto
in the PRC.
(f) As
of the date hereof, the Company has effective control of each PRC VIE and each of its Subsidiaries. All shareholders of the PRC
VIEs are acting in good faith and in the best interests of the Company. As of the date of this Agreement, there have been no disputes,
disagreements, claims, legal proceedings or Actions of any nature, raised by any Governmental Entity or any other party, pending
or threatened against or affecting any of the WFOE, the PRC VIEs, any the PRC VIEs’ Subsidiaries or any of any PRC VIE’s
shareholders or any of their respective shareholders that: (i) challenge the validity or enforceability of any part or all of the
VIE Contracts taken as a whole; (ii) challenge the VIE structure or the ownership structure as set forth in the VIE Contracts and
as disclosed in the Company SEC Filings; (iii) claim any ownership, share, equity or interest in the Company, the WFOE, any PRC
VIE, any PRC VIE’s Subsidiaries or any PRC VIE’s shareholders, or claim any compensation for not being granted any
ownership, share, equity or interest in the Company, the WFOE, any PRC VIE, any PRC VIE’s Subsidiaries or any PRC VIE’s
shareholders; or (iv) claim any of the VIE Contracts or the ownership structure thereof or any arrangements or performance of or
in accordance with the VIE Contracts was, is or will be in violation of any PRC Laws, in each case in the preceding clauses (i)
through (iv), where such dispute, disagreement, claim, legal proceeding or Action has a materially disproportionate adverse effect
on the Company, the WFOE, any PRC VIE, any PRC VIE’s Subsidiaries or any PRC VIE’s shareholders or any of their respective
shareholders as compared to other similarly situated enterprises in the PRC which adopt a similar “variable interest entity”
structure that allows one entity to exercise voting control and have a substantial economic interest in another entity where such
first entity does not, directly or indirectly, own a majority of the equity interests of the second entity.
Section 4.22 No
Additional Representations. Except for the representations and warranties made by the Company in this Article IV,
neither the Company nor any other person makes any other express or implied representation or warranty with respect to the
Company or any Company Subsidiaries or their respective business, operations, assets, liabilities, condition (financial or
otherwise) or prospects or any information provided to Parent or Merger Sub or any of their Affiliates or Representatives,
notwithstanding the delivery or disclosure to Parent or Merger Sub or any of their Affiliates or Representatives of any
documentation, forecasts or other information in connection with the Transactions, and each of Parent and Merger Sub
acknowledges the foregoing. Neither the Company nor any other person will have or be subject to any liability or indemnity
obligations to Parent, Merger Sub or any other person resulting from the distribution or disclosure or failure to distribute
or disclose to Parent, Merger Sub or any of its Affiliates or Representatives, or their use of, any information, unless and
to the extent such information is expressly included in the representations and warranties contained in this Article
IV.
Article
V
Representations and Warranties of Parent and Merger Sub
Except as set forth in
the Parent Disclosure Schedule, Parent and Merger Sub jointly and severally represent and warrant to the Company as follows:
Section 5.1 Organization
and Qualification. (a) Parent is an exempted company, duly incorporated, validly existing and in good standing under the Laws
of the Cayman Islands, and Merger Sub is an exempted company, duly incorporated, validly existing and in good standing under the
Laws of the Cayman Islands; and (b) each of Parent and Merger Sub has the requisite corporate or similar power and authority to
own, lease and operate its properties and to carry on its business as it is now being conducted, except where the failure to be
so organized, existing or in good standing or to have such power and authority would not, individually or in the aggregate, prevent
or materially delay consummation of any of the Transactions by the Parent or Merger Sub or otherwise materially adversely affect
the ability of Parent or Merger Sub to consummate the Transaction or perform their material obligations under this Agreement.
Each of Parent and Merger Sub is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of its business makes such qualification, licensing
or good standing necessary. Parent has heretofore made available to the Company complete and correct copies of the memorandum
and articles of association as in effect as of the date hereof of Parent and Merger Sub, respectively. Such memoranda and articles
of association are in full force and effect. Neither Parent nor Merger Sub is in violation of any of the provisions of its memorandum
and articles of association in any material respect.
Section 5.2 Capitalization.
(a) As
of the date of this Agreement, the authorized share capital of Parent consists solely of 500,000,000 ordinary shares, par value
$0.0001 per share, of which one (1) ordinary share of Parent is issued and outstanding. Parent was formed solely for the purpose
of engaging in the Transactions, and it has not conducted any business prior to the date hereof other than those incident to its
formation and capitalization and pursuant to this Agreement, the Merger and the other Transactions.
(b) As
of the date of this Agreement, the authorized share capital of Merger Sub consists solely of 500,000,000 ordinary shares, par value
$0.0001 per share, of which one (1) ordinary share is issued and outstanding. All of the issued and outstanding share capital of
Merger Sub is, and immediately prior to the Effective Time will be, owned by Parent, free and clear of any Lien. Merger Sub was
formed solely for the purpose of engaging in the Transactions, and it has not conducted any business prior to the date hereof other
than those incident to its formation and capitalization and pursuant to this Agreement, the Merger and the other transactions (including
any financing transactions in connection herewith) contemplated hereby.
Section 5.3 Authority.
(a) Each
of Parent and Merger Sub has all necessary corporate power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the Transactions. The execution and delivery of this Agreement, by each of Parent and Merger
Sub, and the consummation by Parent and Merger Sub of the Transactions have been duly and validly authorized by all necessary corporate
action on the part of Parent and Merger Sub, and no other corporate proceedings on the part of Parent or Merger Sub and no vote
of Parent’s or Merger Sub’s shareholders are necessary to authorize this Agreement or to consummate the Transactions.
This Agreement has been duly authorized and validly executed and delivered by Parent and Merger Sub and, assuming this Agreement
has been duly authorized, executed and delivered by the Company, this Agreement constitutes a legal, valid and binding obligation
of Parent and Merger Sub, enforceable against each of them in accordance with its terms, subject to the Bankruptcy and Equity Exception.
(b) The
sole director of each of Parent and Merger Sub and Parent as the sole shareholder of Merger Sub have duly and validly approved
by resolution and authorized the execution, delivery and performance of this Agreement and the consummation of the Transactions
by Parent and Merger Sub, as the case may be, and taken all such actions as may be required to be taken by the board of directors
of Parent and Merger Sub, and Parent as the sole shareholder of Merger Sub to effect the Transactions.
Section 5.4 No Conflict;
Required Filings and Consents
(a) The
execution and delivery by Parent and Merger Sub of this Agreement do not, and the performance by Parent and Merger Sub of this
Agreement and the consummation by Parent and Merger Sub of the Merger and the other Transactions will not (i) conflict with or
violate any provision of the memorandum and articles of association of Parent or Merger Sub, (ii) assuming that all consents, approvals
and authorizations described in Section 5.4(b) will have been obtained prior to the Effective Time and all filings and notifications
described in Section 5.4(b) will have been made and any waiting periods thereunder will have terminated or expired prior
to the Effective Time, conflict with or violate any Law applicable to Parent or Merger Sub or by which any property or asset of
Parent or Merger Sub is bound or affected or (iii) result in any breach of, any loss of any benefit under, constitute a default
(or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a Lien on any property or asset of Parent or Merger Sub
pursuant to any Contract to which Parent or Merger Sub is a party or by which Parent or Merger Sub or any property or asset of
either of them is bound or affected, except, with respect to clauses (ii) and (iii), for any such conflicts, violations, breaches,
defaults or other occurrences that would not, individually or in the aggregate, prevent or materially delay consummation of any
of the Transactions by Parent or Merger Sub or otherwise be materially adverse to the ability of Parent and Merger Sub to perform
their material obligations under this Agreement (a “Parent Material Adverse Effect”).
(b) The
execution and delivery by Parent and Merger Sub of this Agreement do not, and the performance by Parent and Merger Sub of this
Agreement and the consummation by Parent and Merger Sub of the Merger and the other Transactions will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any Governmental Entity or other Person, except (i) for
any consent, approval, authorization, filing or notification required under by the Exchange Act, the Securities Act or any other
federal or state securities Laws or the rules and regulations of NASDAQ, including
the joining of the Company in the filing of the Rule 13e-3 Transaction Statement on Schedule 13E-3 and the furnishing of Form
6-K with the Proxy Statement, (ii) for the filing of the Plan of Merger and related documentation with the Registrar of Companies
and publication of notice of the Merger in the Cayman Islands Government Gazette, in each case as required by the Cayman Companies
Law, or (iii) any actions or filings the absence of which would not reasonably be expected to materially impair the ability of
Parent and Merger Sub to consummate the Merger and the other Transactions.
(c) Merger
Sub has no secured creditors holding a fixed or floating security interest.
Section 5.5 Litigation.
As of the date hereof, to the Knowledge of Parent, there is no material Action pending or threatened against Parent or Merger
Sub and neither Parent nor Merger Sub is subject to any outstanding Order. As of the date hereof, there is no Action pending or
to the Knowledge of Parent, threatened against Parent or Merger Sub which seeks to, or would reasonably be expected to have a
Parent Material Adverse Effect.
Section 5.6 Financing.
(a) Parent
has provided to the Company the true and complete copies of (i) the equity commitment letters (the “Equity Commitment
Letters”), dated as of the date of this Agreement, from Mr. Dong YU, Uranus Connection Limited, Oriental Power Holdings
Limited, Alibaba Pictures Group Limited and Mr. Zhanshan XIE (collectively, the “Equity Financing Commitments”),
pursuant to which Mr. Dong YU, Uranus Connection Limited, Oriental Power Holdings Limited, Alibaba Pictures Group Limited and Mr.
Zhanshan XIE have committed to purchase, or cause the purchase of, for cash, subject to the terms and conditions therein, equity
securities of Parent up to the aggregate amount set forth therein (the “Equity Financing”), and (ii) the
Support Agreement (the “Rollover Securities” section under the Support Agreement, together with the Equity Financing
Commitments, the “Financing Commitments”). The transactions contemplated under the “Rollover Securities”
section of the Support Agreement, together with the Equity Financing, are collectively referred to as “Financing”.
(b) The
Financing Commitments are in full force and effect as of the date hereof and are the legal, valid and binding obligations of Parent
and Merger Sub and of the other parties thereto in accordance with the terms and conditions thereof, subject to the Bankruptcy
and Equity Exception. Assuming (A) the Equity Financing Commitments are funded in accordance with the Equity Financing Commitments,
(B) the contributions contemplated by the Support Agreement are made in accordance with the terms of the Support Agreement, and
(C) the satisfaction of the conditions to the obligations of Parent and Merger to consummate the Merger as set forth in Section
7.1 and Section 7.2 or waiver of such conditions, Parent and Merger Sub will have at and after the Closing funds sufficient for
the payment to the Paying Agent of the aggregate amount of the Exchange Fund and any other amounts required to be paid in connection
with the consummation of the Merger and the other Transactions. The obligations of the financing sources to fund the commitments
under the Financing Commitments are not subject to any contractual conditions other than as set forth in the Financing Commitments.
As of the date of this Agreement, (i) none of the Financing Commitments has been amended or modified, and none of the respective
commitments contained in the Financing Commitments have been withdrawn or rescinded, (ii) the Financing Commitments are in full
force and effect, and (iii) no event has occurred that (with or without notice, lapse of time, or both) would constitute a breach
or default under the Financing Commitments by Parent or Merger Sub. As of the date of this Agreement, neither Parent nor Merger
Sub has any reason to believe that any of the conditions to the Financing will not be satisfied or that the Financing will not
be available to Parent or Merger Sub at the Effective Time. The parties hereto agree that it shall not be a condition to Closing
for Parent or Merger Sub to obtain the Financing or the Alternative Financing (as defined below).
Section 5.7 Ownership
of Equity Interests. As of the date hereof, other than as a result of this Agreement or the Support Agreement, neither Parent
nor Merger Sub beneficially owns (as such term is used in Rule 13d-3 promulgated under the Exchange Act) any Equity Interest in
the Company or any Company Subsidiary.
Section 5.8 Brokers.
No broker, finder, financial advisor, investment banker or other Person (other than CITIC Securities Co., Ltd. or its
Affiliate) is entitled to any brokerage, finder’s, financial advisor’s or other similar fee or commission in
connection with the Merger based upon arrangements made by or on behalf of Parent or Merger Sub for which the Company could
have any liability prior to the Closing.
Section 5.9 Solvency.
Parent and Merger Sub, individually and on a consolidated basis, are not as of the date hereof, and after giving effect to
the Transactions to occur at the Closing, will not be, Insolvent. Neither Parent nor Merger Sub is in default in any material
respect with respect to any Indebtedness.
Section 5.10 Certain
Arrangements. Other than this Agreement, the Support Agreement, the Interim Investors Agreement, the Limited Guarantees,
the Equity Commitment Letters and as set forth in Section 5.10 of the Parent Disclosure Schedule, as of the date
hereof, there are no written Contracts (i) between Parent, Merger Sub or any of their Affiliates (excluding the Company or
any Company Subsidiary), on the one hand, and any directors, officers, employees or shareholders of the Company or any
Company Subsidiary, on the other hand, that relate in any way to the Transactions; or (ii) pursuant to which any shareholder
of the Company would be entitled to receive consideration of a different amount or nature than the Per Share Merger
Consideration or the Per ADS Merger Consideration in connection with the Transactions or pursuant to which any shareholder of
the Company has agreed to vote to approve this Agreement or the Merger or has agreed to vote against any Superior
Proposal.
Section 5.11 Limited
Guarantees. Concurrently with the execution of this Agreement, each Guarantor has delivered to the Company a duly executed
Limited Guarantee with respect to certain matters on the terms specified therein. Each of the Limited Guarantees is in full force
and effect and constitutes a valid, binding and enforceable obligation of the applicable Guarantor, subject to the Bankruptcy
and Equity Exception, and no event has occurred, which, with or without notice, lapse of time or both, would constitute a default
on the part of any Guarantor under any Limited Guarantee.
Section 5.12 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 Company 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 and Company 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.
Article
VI
Covenants
Section 6.1 Conduct
of Business by the Company Pending the Closing
(a) The
Company agrees that, between the date of this Agreement and until the earlier of the Effective Time and the termination of this
Agreement in accordance with Article VIII, except as set forth in Section 6.1(a) of the Company Disclosure Schedule,
as otherwise expressly required or permitted by this Agreement, as required by applicable Law or as consented to in writing by
Parent (which consent shall not be unreasonably withheld, conditioned or delayed), the Company will, and will cause each Company
Subsidiary to (i) conduct its business in the ordinary course consistent with past practice, and (ii) use its reasonable best efforts
to keep available the services of the current officers, key employees and consultants of the Company and each Company Subsidiary
and to preserve the current relationships of the Company and each Company Subsidiary with each of the key customers, suppliers
and other Persons with whom the Company or any Company Subsidiary has business relations that are material to the Company or any
Company Subsidiary, taken as a whole. Without limiting the foregoing, and as an extension thereof, except as set forth in Section
6.1(a) of the Company Disclosure Schedule, as otherwise expressly required or permitted by this Agreement, as required by applicable
Law or as consented to in writing by Parent (which consent shall not be unreasonably withheld, conditioned or delayed), the Company
shall not, and shall not permit any Company Subsidiary to, between the date of this Agreement and until the earlier of the Effective
Time and the termination of this Agreement in accordance with Article VIII, directly or indirectly, take any of the following
actions:
(i) amend
or otherwise change the Company Memorandum and Articles or equivalent organizational documents of the Company Subsidiaries;
(ii) issue,
deliver, sell, pledge, transfer, encumber or otherwise dispose of, or authorize, propose or agree to the issuance, delivery, sale,
pledge, transfer, encumbrance or disposition of, any shares of any class or series of its share capital or other Equity Interests,
or securities convertible into or exchangeable for, or options, warrants, calls, commitments or rights of any kind to acquire,
any shares of any class or series of its share capital or other Equity Interests (other than (x) pursuant to the exercise or settlement
of the Company Share Awards existing on the date hereof on the terms in effect on the date hereof, or (y) expressly required under
any Contract in effect on the date hereof);
(iii) declare,
set aside, establish a record date for, make or pay any dividend or other distribution (whether payable in cash, stock, property
or a combination thereof) with respect to any of its share capital (other than dividends paid by a Company Subsidiary to the Company
or to any other Company Subsidiary wholly-owned by Company), or enter into any agreement with respect to the voting of its share
capital;
(iv) reclassify,
combine, split, subdivide or redeem, purchase or otherwise acquire or offer to acquire, directly or indirectly, any of its share
capital or other Equity Interests, or securities convertible or exchangeable into or exercisable for any of its share capital or
other Equity Interests, except pursuant to the exercise or settlement of Company Share Awards, employee severance, retention, termination,
change of control and other contractual rights existing on the date hereof on the terms in effect on the date hereof;
(v) acquire
(including by merger, consolidation, or acquisition of stock or assets) any interest in any Person or any division thereof or any
assets thereof, or make any loan, advance or capital contribution to, or investment in, any Person or any division thereof, except
any such acquisitions, loans, advances, contributions or investments that are consistent with past practice and are for consideration
not in excess of $5,000,000 (or an equivalent amount in RMB) individually and $30,000,000 (or an equivalent amount in RMB)
in the aggregate for all such transactions by the Company and the Company Subsidiaries;
(vi) redeem,
repurchase, prepay, defease, cancel, incur or otherwise acquire, or modify the terms of, any Indebtedness or issue any debt securities
or other Contracts evidencing Indebtedness or assume, guarantee or endorse, or otherwise become responsible for, the obligations
of any Person for Indebtedness, except for (A) Indebtedness incurred under the Company's or any Company Subsidiary's existing credit
facilities as in effect on the date hereof in an aggregate amount not to exceed the maximum amount authorized under the Contracts
evidencing such Indebtedness, (B) Indebtedness for borrowed money incurred in the ordinary course of business consistent with past
practices in a principal amount not in excess of $200,000,000 (or an equivalent amount in RMB) for all such Indebtedness by the
Company and the Company Subsidiaries in the aggregate and (C) Indebtedness owed by any wholly-owned Company Subsidiary to the Company
or any other wholly-owned Company Subsidiary.
(vii) grant
any Lien on any of its assets, other than Liens granted in connection with any Indebtedness permitted under Section 6.1(a)(vi);
(viii) sell,
transfer, lease, license, assign or otherwise dispose of (including, by merger, consolidation, or sale of stock or assets) any
entity, business, assets, rights or properties of the Company or any Company Subsidiary having a current value in excess of $5,000,000
(or an equivalent amount in RMB) in the aggregate;
(ix) except
for disclosure of confidential information in the ordinary course of business consistent with past practice and pursuant to confidentiality
agreements, and non-exclusive licenses of Intellectual Property granted by the Company or any Company Subsidiary in the ordinary
course of business consistent with past practice, sell, transfer, assign, license, grant any other rights (including any covenant
not to sue, option, right of first refusal, and right of first offer) under, or otherwise dispose of (including, by merger, consolidation
or sale of stock or assets), abandon, permit to lapse, permit to be subject to any Lien, or fail to maintain or protect in full
force and effect (including any failure to protect the confidentiality of), any Company Intellectual Property, or disclose to any
Person any confidential information;
(x) authorize,
or make any commitment with respect to, any single capital expenditure in excess of $5,000,000 (or an equivalent amount in RMB)
or capital expenditures for the Company and the Company Subsidiaries in excess of $30,000,000 (or an equivalent amount in RMB)
in the aggregate;
(xi) enter
into any new line of business outside of its existing business segments that is material to the Company and the Company Subsidiaries
taken as a whole;
(xii) except
as otherwise required by Law or expressly required under any Contract in effect on the date hereof, (A) grant or announce any stock
option, equity, equity-linked or incentive awards or change the vesting dates of any Company Share Awards from the vesting date
for the Company Share Awards set forth in Section 4.2(a) of the Company Disclosure Schedule, (B) subject to Section 6.12(b),
grant or announce any increase in the salaries, bonuses or other compensation and benefits payable by the Company or any Company
Subsidiary to any of the employees, officers, directors, shareholders or other service providers of the Company or any Company
Subsidiary having a total annual base salary and incentive compensation opportunity in excess of $1,000,000 (or an equivalent amount
in RMB), (C) hire (or enter into any employment agreements with) any employees having a total annual base salary and incentive
compensation opportunity in excess of $1,000,000 (or an equivalent amount in RMB), (D) pay or agree to pay any pension, retirement
allowance, termination or severance pay, bonus or other employee benefit not required by any existing Company Plan, (E) enter into
or adopt any new, or materially increase benefits under or renew, amend or terminate any existing Company Plan or benefit arrangement
or any collective bargaining agreement, or (F) take any action or fail to take any action which would (with the passage of time,
the consummation of the transactions contemplated hereby or otherwise) require a payment or give rise to any rights of any Person
in connection with the Transactions;
(xiii) except
as may be required by GAAP or as a result of a change in Law, make any change in accounting principles, policies, practices, procedures
or methods;
(xiv) materially
change any method of Tax accounting, make or change any material Tax election, adopt or change any material accounting method,
file any amended material Tax Return, settle or compromise any material Tax liability, agree to an extension or waiver of the statute
of limitations with respect to the assessment or determination of Taxes, enter into any material closing agreement with respect
to any Tax, surrender any right to claim a material Tax refund, fail to pay any material Taxes as they become due and payable,
or take any other similar action relating to the filing of any Tax Return or the payment of any Tax;
(xv) settle,
release, waive or compromise any pending or threatened Action of or against the Company or any of the Company Subsidiaries (A)
for an amount in excess of $5,000,000 (or an equivalent amount in RMB) in the aggregate, (B) entailing the incurrence of (x) any
obligation or liability of the Company or any Company Subsidiary in excess of such amount, or (y) obligations that would impose
any material restrictions on the business or operations of the Company or any of the Company Subsidiaries, or (C) that is brought
by or on behalf of any current, former or purported holder of any share capital or debt securities of the Company or any Company
Subsidiary relating to the Transactions;
(xvi) (A)
enter into (other than extensions at the end of a term in the ordinary course of business), terminate or materially amend or modify
any Company Material Contract, VIE Contract or Contract that, if in effect on the date hereof, would have been a Company Material
Contract, or (B) waive any material default under, or release, settle or compromise any material claim against the Company or Company
Subsidiary or liability or obligation owing to the Company or Company Subsidiary under any Company Material Contract or VIE Contract;
(xvii) fail
to maintain in full force and effect material insurance policies covering the Company and the Company Subsidiaries and their respective
properties, assets and businesses in a form and amount consistent with past practice;
(xviii) adopt
or enter into a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization of the Company or any Company Subsidiary (other than the Merger or any merger or consolidation among wholly-owned
Subsidiaries of the Company);
(xix) fail
to make in a timely manner any filings with the SEC required under the Securities Act or the Exchange Act or the rules and regulations
promulgated thereunder;
(xx) take
any action which would result in any of the conditions to the Merger set forth in Article VII not being satisfied or that
would reasonably be expected to prevent, materially delay or impair the ability of the Company to consummate the Merger; or
(xxi) knowingly
commit, authorize or agree to take any of the foregoing actions or enter into any letter of intent (binding or non-binding) or
similar agreement or arrangement with respect to any of the foregoing actions.
(b) Nothing
contained in this Agreement is intended to give Parent, directly or indirectly, the right to control or direct the operations of
the Company or any Company Subsidiary prior to the Effective Time. Prior to the Effective Time, each of Parent and Company shall
exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its and its respective
Subsidiaries’ respective operations.
Section 6.2 Proxy
Statement; Schedule 13E-3; Company Shareholders Meeting
(a) Proxy
Statement. As promptly as practicable after the date hereof, the Company, with the cooperation of the Parent and Merger Sub,
shall prepare a proxy statement relating to authorization and approval of this Agreement, the Plan of Merger and the Transactions,
including the Merger (such proxy statement, as amended or supplemented, the “Proxy Statement”). The Company
shall cause the Proxy Statement to be filed with the SEC as soon as practicable after the date hereof. Parent and Merger Sub shall
furnish all information as the Company may reasonably request in connection with the preparation of the Proxy Statement. Subject
to and without limiting the rights of the Independent Committee and the Company Board pursuant to Section 6.4(d) or Section
6.4(e), the Proxy Statement shall include the Company Recommendation.
(b) Schedule
13E-3. Concurrently with the preparation and filing of the Proxy Statement, the Company, Parent and Merger Sub shall jointly
prepare and file with the SEC the Schedule 13E-3 with respect to the Merger. The Company and Parent shall cooperate and consult
with each other in preparation of the Schedule 13E-3, including furnishing the information required by the Exchange Act to be set
forth in the Schedule 13E-3.
(c) SEC
Comments. The Company, after consultation with Parent, shall respond as promptly as practicable to any comments made by the
SEC with respect to the Proxy Statement and/or the Schedule 13E-3. The Company will advise Parent, promptly after it receives notice
thereof, of any request by the SEC for amendment of the Proxy Statement and/or the Schedule 13E-3 or comments thereon and responses
thereto or requests by the SEC for additional information and will promptly supply Parent with copies of all correspondence between
the Company or any of its Representatives, on the one hand, and the SEC or its staff, on the other hand, with respect to the Proxy
Statement, the Schedule 13E-3 or the Transactions. The Company shall not (i) file or mail the Proxy Statement, including any amendments
or supplements thereto, (ii) file the Schedule 13E-3, including any amendments or supplements thereto, (iii) respond to any comments
by the SEC, or (iv) file any other required filings, including any amendments or supplements thereto, unless (x) Parent and its
counsel have had a reasonable opportunity to review and propose comments on such document or response and (y) the Company has incorporated
those comments reasonably proposed by Parent and its counsel into such document or response. As promptly as practicable after the
SEC confirms that it has no further comments to the Proxy Statement and the Schedule 13E-3, the Company shall mail the Proxy Statement
and all other proxy materials to the holders of Company Shares and, if necessary in order to comply with applicable securities
Laws, after the Proxy Statement shall have been so mailed, promptly circulate amended, supplemental or supplemented proxy material,
and, if required in connection therewith, re-solicit proxies.
(d) Information
Supplied. Each of the Company, Parent and Merger Sub shall promptly furnish all information concerning such Party to the others
as may be reasonably requested in connection with the preparation, filing and distribution of the Proxy Statement, the Schedule
13E-3 or any other documents filed or to be filed with the SEC in connection with the Transactions. Each of Parent, Merger Sub
and the Company agrees, as to it and its respective Affiliates, directors, officers, employees, agents or Representatives, that
none of the information supplied or to be supplied by Parent, Merger Sub or the Company, as applicable, expressly for inclusion
or incorporation by reference in the Proxy Statement, the Schedule 13E-3 or any other documents filed or to be filed with the SEC
in connection with the Transactions, will, as of the time such documents (or any amendment thereof or supplement thereto) are filed
with the SEC, as of the time such documents (or any amendment thereof or supplement thereto) are mailed to the holders of Company
Shares and at the time of the Company Shareholders Meeting or any adjournment thereof, contain any untrue statement of a material
fact, or omit to state any material fact required to be stated therein in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of Parent, Merger Sub and the Company further agrees that all documents
that such Party is responsible for filing with the SEC in connection with the Merger will comply as to form and substance in all
material respects with the applicable requirements of the Securities Act, the Exchange Act and any other applicable Laws and will
not contain any untrue statement of a material fact, or omit to state any material fact required to be stated therein in order
to make the statements therein, in light of the circumstances under which they were made, not misleading. If at any time prior
to the Effective Time, any event or circumstance relating to Parent, Merger Sub or the Company, or their respective officers or
directors, should be discovered which should be set forth in an amendment or a supplement to the Proxy Statement or the Schedule
13E-3 so that such document would not include any misstatement of a material fact or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they are made, not misleading, the Party discovering
such event or circumstance shall promptly inform the other Parties and an appropriate amendment or supplement describing such event
or circumstance shall be promptly filed with the SEC and disseminated to the shareholders of the Company to the extent required
by Law; provided that prior to such filing, the Company and Parent, as the case may be, shall consult with the other Party
with respect to such amendment or supplement and shall afford the other Party and their Representatives reasonable opportunity
to comment thereon.
(e) Shareholders
Meeting.
(i) As
promptly as practicable following the date on which the SEC confirms that it has no further comments on the Schedule 13E-3 and
the Proxy Statement, the Company shall (x) take, in accordance with the applicable Law and the Company Memorandum and Articles,
all action necessary to duly call, give notice of, set a record date for and hold an extraordinary general meeting of its shareholders
(the “Company Shareholders Meeting”), which shall not be held later than forty-five (45) days after the
date on which the Proxy Statement is mailed to the holders of Company Shares for the purpose of obtaining the Shareholder Approval
and (y) mail or cause to be mailed a letter to the holders of Company Shares, notice of the Company Shareholders Meeting and form
of proxy accompanying the Proxy Statement that will be provided to the holders of Company Shares in connection with the solicitation
of proxies for use at the Company Shareholders Meeting.
(ii)
The Company may adjourn the Company Shareholders Meeting (x) with the prior written consent of Parent, or (y) to allow reasonable
time for filing and mailing of any supplemental or amended disclosure which the Company Board has determined (acting upon the recommendation
of the Independent Committee) in good faith after consultation with outside legal counsel is necessary under applicable Laws and
for such supplemental or amended disclosure to be disseminated and reviewed by the holders of Company Shares prior to such adjourned
meeting.
(iii) Once
the Company has established the record date, the Company shall not change such record date or establish a different record date
for the Company Shareholders Meeting without the prior written consent of Parent, unless permitted by this Agreement or required
to do so by applicable Law; provided that, in the event that the date of the Company Shareholders Meeting as originally called
is for any reason adjourned or otherwise delayed, the Company may establish a new record date.
(iv) Subject
to Section 6.4(d), at the Company Shareholders Meeting, the Company shall, through the Company Board or the Independent
Committee, make the Company Recommendation and, unless there has been a Company Adverse Recommendation Change, the Company shall
take all reasonable lawful action to solicit the Shareholder Approval. Notwithstanding any Company Adverse Recommendation Change,
unless this Agreement is validly terminated pursuant to and in accordance with Article VIII, this Agreement shall be submitted
to the holders of Company Shares for the purpose of obtaining the Shareholder Approval. The Company shall, upon the reasonable
request of Parent, advise Parent at least on a daily basis on each of the last ten (10) Business Days prior to the date of the
Company Shareholders Meeting, as to the aggregate tally of the proxies received by the Company with respect to the Shareholder
Approval. Without the prior written consent of Parent, the authorization and approval of this Agreement and the Plan of Merger
and the Transactions (including the Merger) shall be the only matter (other than procedural matters) which the Company shall propose
to be acted on by the holders of Company Shares at the Company Shareholders Meeting or any adjournment thereof.
(f) Company
Obligations. Unless this Agreement is validly terminated in accordance with Article VIII, the Company’s obligations
pursuant to this Section 6.2 shall not be affected by the commencement, public proposal, public disclosure or communication
to the Company or any other Person of any Acquisition Proposal.
Section 6.3 Access
to Information; Confidentiality
(a) Access
to Information. Subject to Section 6.3(b), from the date of this Agreement and until the earlier of the Effective Time
or the termination of this Agreement in accordance with Article VIII, and subject to applicable Law and terms of any Contract
to which the Company or any Company Subsidiary is a party, the Company shall, and shall instruct each of the Company Subsidiaries
to: (i) provide to Parent and its Representatives access at reasonable times during normal business hours, upon reasonable prior
written notice from the Parent, to the officers, employees, properties, offices, other facilities and books and records of the
Company or such Company Subsidiary, and (ii) furnish or cause to be furnished such existing financial and operating data and other
information concerning the Company and the Company Subsidiaries as Parent or its Representatives may reasonably request; provided
that the Company shall not be required to (A) furnish, or provide any access to, any information to any Person not a party to,
or otherwise covered by, the NDA or any similar agreement with respect to such information, (B) take or allow actions that would
unreasonably interfere with the Company’s or any Company Subsidiary’s operation of its business or (C) provide access
to or furnish any information if doing so would violate any Contract with any third party or applicable Law in any material respect,
or where such access to information may involve the waiver of any privilege so long as the Company has taken all reasonable steps
to permit inspection of or to disclose such information on a basis that does not compromise the Company’s or any Company
Subsidiary’s privilege with respect thereto.
(b) Confidentiality
and Restrictions. With respect to the information disclosed pursuant to Section 6.3(a), the Parties shall comply with,
and shall cause their respective Representatives to comply with, all of their respective obligations under the NDA or any similar
confidentiality agreement entered into between the Company and any Person to whom the Company, any Company Subsidiary or any of
its and their respective Representative provides information pursuant to this Section 6.3. Each of the NDA and such confidentiality
agreements shall continue in full force and effect in accordance with its terms until the earlier of the Effective Time or the
expiration of such agreement according to its terms.
Section 6.4 No Solicitation
of Transactions
(a) Except
as expressly permitted by this Section 6.4, the Company and its officers and directors shall, and the Company shall instruct
and cause the Company Subsidiaries and its and their respective Representatives to:
(i) cease
all existing discussions and negotiations with any Persons that may be ongoing with respect to an Acquisition Proposal, effective
on and from the date hereof; and
(ii) from
the date hereof until the Effective Time or, if earlier, the termination of this Agreement in accordance with Article VIII,
not:
(A) initiate,
solicit, propose, encourage (including by providing non-public information with respect to the Company or the Company Subsidiaries)
or take any other action to facilitate any inquiries or the making of any proposal or offer that constitutes, or may reasonably
be expected to lead to, an Acquisition Proposal;
(B) engage
in, continue or otherwise participate in any discussions or negotiations with, or provide any non-public information or data concerning
the Company or any Company Subsidiary to any Person with the intent to induce the making,
submission or announcement of, or the intent to encourage, facilitate or assist any Acquisition Proposal or any proposal
or offer that could reasonably be expected to lead to an Acquisition Proposal;
(C) grant
any waiver, amendment or release under any standstill or confidentiality agreement to which the Company is a party or any anti-takeover
Law, or otherwise knowingly facilitate any effort or attempt by any Person to make an Acquisition Proposal;
(D) approve,
endorse, recommend, execute or enter into any letter of intent, agreement in principle, merger agreement, acquisition agreement
or other similar agreement relating to an Acquisition Proposal or any proposal or offer that could reasonably be expected to lead
to an Acquisition Proposal, or that conflicts with or is inconsistent with this Agreement or requires the Company to abandon this
Agreement or the Merger; or
(E) resolve,
propose, agree or publicly announce an intention to do any of the foregoing.
(b) Subject
to compliance with the other provisions of this Section 6.4, prior to obtaining the Shareholder Approval, the Independent
Committee may directly or indirectly through the Company and its Representatives (i) contact any Person that has made an unsolicited,
written, bona fide proposal or offer regarding an Acquisition Proposal that was not initiated or solicited in breach of
Section 6.4(a) in order to clarify and understand the terms and conditions thereof in order to assess whether such proposal
or offer constitutes or could reasonably be expected to lead to a Superior Proposal, which actions shall not be deemed to violate
Section 6.4(a), and (ii) furnish information (including any non-public information or data concerning the Company or any
of Company Subsidiaries) to, and/or enter into discussions or negotiation with, such Person, to the extent the Independent Committee
has (A) determined in good faith (after consultation with a financial advisor of internationally recognized reputation and outside
legal counsel, as applicable) that such proposal or offer constitutes or could reasonably be expected to result in a Superior Proposal,
and (B) prior to furnishing such information, obtained from such Person an executed confidentiality agreement on terms no less
favorable to the Company than those contained in the NDA (an “Acceptable Confidentiality Agreement”); provided
that the Company shall make available to Parent any material information concerning the Company and the Company Subsidiaries that
is provided to any such Person and that was not previously made available to Parent or its Representatives,
(c) Except
as expressly provided by Section 6.4(d), neither the Company Board nor any committee thereof shall:
(i)
(A) withhold, withdraw (or not continue to make), qualify or modify (or publicly propose or resolve to withhold, withdraw (or not
continue to make), qualify or modify), in a manner adverse to Parent or Merger Sub, the Company Recommendation with respect to
the Merger, (B) authorize, approve or recommend, or propose to authorize, approve or recommend (publicly or otherwise) an Acquisition
Proposal, (C) fail to publicly recommend against any Acquisition Proposal, (D) fail to recommend against any Acquisition Proposal
subject to Regulation 14D under the Exchange Act in a Solicitation/Recommendation Statement on Schedule 14D-9 within ten (10) Business
Days after the commencement of such Acquisition Proposal, (E) fail to include the Company Recommendation in the Proxy Statement,
(F) enter into any letter of intent, memorandum of understanding or similar document or Contract relating to any Acquisition Proposal
or (G) take any other action or make any other public statement that is inconsistent with the Company Recommendation (any action
described in clauses (A) through (G), a “Company Adverse Recommendation Change”); or
(ii) cause
or permit the Company or any Company Subsidiary to enter into any acquisition agreement, merger agreement or other similar definitive
agreement relating to any Acquisition Proposal (each, an “Alternative Acquisition Agreement”).
(d) Notwithstanding
anything to the contrary set forth in this Agreement, if at any time prior to obtaining the Shareholder Approval, the Company has
received a bona fide written Acquisition Proposal from any Person that is not withdrawn and that the Company Board (upon
recommendation of the Independent Committee) concludes in good faith constitutes a Superior Proposal, the Company Board (upon
recommendation of the Independent Committee) may effect a Company Adverse Recommendation Change with respect to such Superior Proposal,
and/or authorize the Company to terminate this Agreement to enter into a definitive agreement with respect to such Superior Proposal,
but if and only if:
(i) the
Company Board determines in good faith, after consultation with its independent nationally recognized financial advisor and outside
legal counsel, that failure to do so would violate its fiduciary duties under applicable Laws;
(ii) the
Company shall have complied with its obligations under this Section 6.4; and
(iii) (A)
the Company shall have provided prior written notice to Parent at least five (5) Business Days in advance (the “Notice
Period”), advising the Parent that the Company Board has received a bona fide written Acquisition Proposal that
is not withdrawn and that the Company Board (upon recommendation of the Independent Committee) concludes in good faith constitutes
a Superior Proposal and, absent any revision to the terms and conditions of this Agreement, the Company Board intends to effect
a Company Adverse Recommendation Change pursuant to this Section 6.4(d), which notice shall specify the basis for such Company
Adverse Recommendation Change in reasonable details, including the identity of the party making the Superior Proposal, the material
terms thereof, it being agreed that such notice and any amendment or update to such notice and the determination to so deliver
such notice, or update or amend public disclosures with respect to thereto shall not constitute a Company Adverse Recommendation
Change, and (B) prior to effecting such Company Adverse Recommendation Change, the Company shall have, and shall have caused its
financial and legal advisors to, during the Notice Period, (1) provide to Parent and its Representatives any confidential information
that has been disclosed to the party making the Superior Proposal and has not been disclosed to Parent or its Representatives,
(2) negotiate with Parent and its Representatives in good faith (to the extent Parent desires to negotiate) to make such adjustments
in the terms and conditions of this Agreement, so that such Acquisition Proposal would cease to constitute a Superior Proposal,
and (3) permit Parent and its Representatives to make a presentation to the Company Board and the Independent Committee regarding
this Agreement and any adjustments with respect thereto (to the extent Parent desires to make such presentation); provided
that in the event of any material revisions to the Acquisition Proposal that the Company Board has determined to be a Superior
Proposal, the Company shall deliver a new written notice to Parent and comply with the requirements of this Section 6.4
(including Section 6.4(d)) with respect to such new written notice.
None of the
Company, the Company Board or any committee of the Company Board shall enter into any binding agreement or Contract with any Person
to limit the Company’s ability to give prior notice to Parent of its intention to effect a Company Adverse Recommendation
Change in light of a Superior Proposal.
(e) Nothing
contained in this Section 6.4 shall be deemed to prohibit the Company or the Company Board from complying with its disclosure
obligations under U.S. federal Law with regard to an Acquisition Proposal, including taking and disclosing to its shareholders
a position contemplated by Rule 14d-9 or Rule 14e-2(a) under the Exchange Act (or any similar communication to shareholders); provided
that if such disclosure includes a Company Adverse Recommendation Change, such disclosure shall be deemed to be a Company Adverse
Recommendation Change (it being understood that a statement by the Company that describes the Company’s receipt of an Acquisition
Proposal and the operation of this Agreement with respect thereto or any “stop, look or listen” communication that
contains only the information set forth in Rule 14d-9(f) under the Exchange Act which did not result from any breach of this Section
6.4 shall not constitute a Company Adverse Recommendation Change).
(f) The
Company shall promptly (and, in any event, within 48 hours after the Company has knowledge thereof) notify Parent if any proposals
or offers with respect to an Acquisition Proposal are received by, any non-public information is requested from, or any discussions
or negotiations are sought to be initiated or continued with, the Company, the Company Board (or the Independent Committee) or
its Representative, and indicating in connection with such notice, (x) the identity of the Person or group of Persons making such
offer or proposal, and (y) the material terms and conditions of such proposals or offers and thereafter shall keep Parent reasonably
informed, on a prompt basis (at least every Business Day), of the status and terms of any such proposals or offers (including any
amendments thereto) and the status of any such discussions or negotiations, including any change in the Company’s intentions
as previously notified.
(g) Prior
to the termination of this Agreement pursuant to Article VIII, the Company shall not submit to the vote of the holders of
Company Shares any Acquisition Proposal or propose to do so.
Section 6.5 Reasonable
Best Efforts.
(a) Subject
to the terms and conditions of this Agreement, including Section 6.4, Parent, Merger Sub and the Company shall cooperate
with each other and use (and shall cause their respective Subsidiaries to use) their respective 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 respective
part under this Agreement and applicable Laws to cause the conditions set forth in Article VII to be satisfied and to consummate
and make effective the Merger and the other Transactions as soon as practicable, including preparing and filing as promptly as
practicable all documentation to effect all necessary notices, reports and other filings and to obtain as promptly as practicable
all consents, approvals, registrations, authorizations, waivers, Permits and Orders, necessary or advisable to be obtained from
any third party and/or any Governmental Entity in order to consummate the Merger or any of the other Transactions; provided
that all obligations of the Company, Parent and Merger Sub relating to the Equity Financing shall be governed exclusively by Section
6.6, and not this Section 6.5.
(b) Each
of Parent and the Company shall, upon request by the other, furnish the other with all information concerning itself, its Subsidiaries,
directors, officers and shareholders and such other matters as may be reasonably necessary or advisable in connection with any
statement, filing, notice or application made by or on behalf of Parent, the Company or any of their respective Subsidiaries to
any third party and/or any Governmental Entity in connection with the Merger and the Transactions. Subject to applicable Laws relating
to the exchange of information, Parent shall have the right to direct all matters with any Governmental Entity consistent with
its obligations hereunder; provided that Parent and the Company shall have the right to review in advance, and to the extent
practicable each will consult with the other on and consider in good faith the views of the other in connection with, all of the
information relating to Parent or the Company, as the case may be, and any of their respective Subsidiaries and Representatives,
that appears in any filing made with, or written materials submitted to, any third party and/or any Governmental Entity in connection
with the Merger and the other Transactions. In exercising the foregoing rights, each of the Company and Parent shall act reasonably
and as promptly as practicable.
(c) Subject
to applicable Laws and the instructions of any Governmental Entity, the Company and Parent each shall keep the other apprised of
the status of matters relating to the completion of the Transactions, including promptly furnishing the other with copies of notices
or other communications received by Parent, the Merger Sub or its and their respective Representatives, or the Company or any Company
Subsidiary or its and their respective Representatives, as the case may be, from any third party and/or any Governmental Entity
with respect to the Merger and the other Transactions. Neither the Company nor Parent shall permit any of its officers or any of
its other Representatives to participate in any meeting with any Governmental Entity in respect of any filings related to the Transactions,
investigation or other inquiry unless it consults with the other Party in advance and, to the extent permitted by such Governmental
Entity, gives the other Party the opportunity to attend and participate thereat.
(d) In
furtherance and not in limitation of the covenants of the Parties contained in Section 6.5(a) through Section 6.5(c),
if any objections are asserted with respect to the Transactions under any Law or if any Action is instituted (or threatened to
be instituted) by any applicable Governmental Entity or any private party challenging any of the Transactions as violation of any
Law or which would otherwise prevent, materially impede or materially delay the consummation of the Transactions, each Party shall
use its reasonable best efforts to vigorously contest, resist and otherwise resolve any such objections or Actions, and to have
vacated, lifted, reversed or overturned any Order, whether temporary, preliminary or permanent, that is in effect and that prohibits,
prevents or restricts consummation of the Transactions so as to permit consummation of the Transactions. Notwithstanding the foregoing,
neither Parent, any of its Affiliates (including, after the Effective Time, the Surviving Company) nor the Company shall be required
to divest, hold separate or otherwise take or commit to take any action that limits its freedom of action with respect to, or its
ability to retain, any of its businesses, services or assets.
Section 6.6 Financing.
(a) Subject
to the terms and conditions of this Agreement, each of Parent and Merger Sub shall use its reasonable best efforts to take, or
cause to be taken, all actions and do, or cause to be done, all things necessary to arrange the Financing including using reasonable
best efforts to (i) obtain the Financing on the terms and conditions described in the Financing Commitments, (ii) maintain in effect
the Financing Commitments until the Transactions (including the Merger) are consummated, (iii) satisfy, or cause to be satisfied,
on a timely basis all conditions to the closing of and funding under the Financing Commitments, (iv) consummate the Financing at
or prior to the Effective Time and (v) enforce the parties’ funding obligations and the rights of Parent and Merger Sub under
the Financing Commitments to the extent necessary to fund the consideration for the Merger; provided that Parent and/or
Merger Sub may amend or modify the Financing Commitments so long as (A) the aggregate proceeds of the Financing (as amended or
modified) will be sufficient for Parent and the Surviving Corporation to pay (1) the consideration for the Merger and (2) any other
amounts required to be paid in connection with the consummation of the Transactions (including the Merger) upon the terms and conditions
contemplated hereby and (B) such amendment or modification would not prevent, materially delay or materially impede or impair (1)
the ability of Parent and Merger Sub to consummate the Transactions (including the Merger) or (2) the rights and benefits of the
Company under the Financing Commitments. Parent shall deliver to the Company true and complete copies of such amendment or modification
as promptly as practicable after execution thereof.
(b) In
the event any portion of the Financing becomes unavailable on the terms and conditions contemplated in the Financing Commitments,
(x) Parent and Merger Sub shall promptly notify the Company and (y) Parent and Merger Sub shall use their reasonable best efforts
to arrange and obtain alternative financing from alternative sources in an amount sufficient to consummate the Transactions with
terms and conditions that are not less favorable, in the aggregate, from the standpoint of the Company in any material respect
than the terms and conditions set forth in the Financing Commitments as promptly as practicable following the occurrence of such
event (the “Alternative Financing”). If Parent becomes aware of the existence of any fact or event that would
reasonably be expected to cause the Financing to become unavailable on the terms and conditions contemplated by the Financing Commitments,
Parent and Merger Sub shall use their reasonable best efforts to either cure or eliminate such fact or event, or to arrange and
obtain the Alternative Financing. Parent shall promptly provide a true, correct and complete copy of each alternative financing
agreement to the Company.
Section 6.7 Financing
Assistance. If any portion of the Financing becomes unavailable on terms and conditions contemplated in the Financing Commitments,
and Parent arranges (or causes to be arranged) to obtain Alternative Financing from alternative sources, the Company shall, and
shall cause each Company Subsidiary and its and their respective Representatives to, provide such cooperation as may be reasonably
requested by Parent and Merger Sub in connection with obtaining financing from alternative sources.
Section 6.8 Notices
of Certain Events. From and after the date of this Agreement until the Effective Time, each of the Company and Parent shall
promptly notify the other in writing of (a) the occurrence, or non-occurrence, of any event that, individually or in the aggregate,
would reasonably be expected to cause any condition to the obligations of any Party to effect the Merger or any of the other Transactions
not to be satisfied, (b) any Action commenced or, to any Party’s knowledge, threatened against, such Party or any of its
Subsidiaries or Affiliates or otherwise relating to, involving or affecting such Party or any of its Subsidiaries or Affiliates,
in each case in connection with, arising from or otherwise relating to the Merger or any other transaction contemplated hereby
(the “Transaction Litigation”), or (c) the failure of any such Party to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it pursuant to this Agreement which, individually or in the aggregate,
would reasonably be expected to result in any condition to the obligations of any Party to effect the Merger or any other Transactions
not to be satisfied; provided that the delivery of any notice pursuant to this Section 6.8 shall not cure any breach
of any representation or warranty requiring disclosure of such matter prior to the date of this Agreement or otherwise limit or
affect the remedies available hereunder to any Party. The failure to deliver any such notice shall not affect any of the conditions
set forth in Article VII.
Section 6.9 Transaction
Litigation. The Company and Parent shall give each other the opportunity to participate in the defense, settlement and/or
prosecution of any Transaction Litigation; provided that neither the Company nor any Company Subsidiary nor any of their
Representatives shall compromise, settle, come to an arrangement regarding or agree to compromise, settle or come to an arrangement
regarding any Transaction Litigation or consent to the same unless Parent shall have first consented thereto in writing(which
consent shall not be unreasonably withheld, conditioned or delayed).
Section 6.10 Publicity.
Except as may be required
by applicable Law, the press release announcing the execution of this Agreement shall be issued only in such form as shall be mutually
agreed upon by the Company and Parent. Thereafter, at any time prior to termination of this Agreement pursuant to Article VIII,
Parent and the Company shall consult with each other before issuing any press release, having any communication with the press
(whether or not for attribution), making any other public statement or scheduling any press conference or conference call with
investors or analysts with respect to this Agreement, the Merger or any other Transactions and, except in respect of any such press
release, communication, other public statement, press conference or conference call as may be required by applicable Law or rules
and policies of NASDAQ, shall not issue any such press release, have any such communication, make any such other public statement
or schedule any such press conference or conference call prior to such consultation. Notwithstanding the foregoing, the restrictions
set forth in this Section 6.10 shall not apply to any release or announcement made or proposed to be made by the Company
in connection with a Company Adverse Recommendation Change made in compliance with this Agreement.
Section 6.11 Resignation
of Directors. To the extent requested by Parent at least three (3) Business Days prior to Closing, the Company shall use commercially
reasonable efforts to cause to be delivered to Parent the resignation of the directors of the Company designated by Parent, which
resignations shall be effective at the Effective Time.
Section 6.12 Indemnification
of Directors and Officers
(a) From
and after the Effective Time, the Surviving Company shall indemnify and hold harmless, to the fullest extent required by the Company
Memorandum and Articles or the memorandum and articles or the Company Subsidiaries or similar constitutional documents (as the
case may be) and as required pursuant to any indemnity agreements of the Company or any Company Subsidiary in effect on the date
hereof, each present and former director and officer of the Company and each Company Subsidiary (collectively, the “Indemnified
Parties”) against any and all costs or expenses (including attorneys’ fees and expenses), judgments, fines, losses,
claims, settlements, damages or liabilities incurred in connection with any Action, whether civil, criminal, administrative or
investigative, arising out of or pertaining to such Indemnified Party’s service as a director or officer of the Company or
any Company Subsidiary or services performed by such Person at the request of the Company or any Company Subsidiary, including
(i) any and all matters pending, existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to,
at or after the Effective Time, (ii) actions to enforce this provision or any other indemnification or advancement right of any
Indemnified Parties, and (iii) any claim arising from Transactions, and any actions taken by Parent and/or Merger Sub with respect
thereto (including any disposition of assets of the Surviving Company or any Company Subsidiary which is alleged to have rendered
the Surviving Company and/or any Company Subsidiary insolvent). The memorandum and articles of the Surviving Company shall contain
provisions no less favorable with respect to exculpation and indemnification than are set forth in the Company Memorandum and Articles
as in effect on the date hereof, and Parent shall cause such provisions not to be amended, repealed or otherwise modified for a
period of six (6) years from the Effective Time in any manner that would affect adversely the rights thereunder of the Indemnified
Parties, unless such modification shall be required by Law.
(b) Prior
to the Effective Time, the Company shall and, if the Company is unable to, Parent shall cause the Surviving Company as of the Effective
Time to, obtain and fully pay the premium for the extension of the directors' and officers’ liability coverage of the Company’s
existing directors’ and officers’ insurance policies, for a claim reporting or discovery period of at least six (6)
years from and after the Effective Time with respect to any claim related to any period or time at or prior to the Effective Time
from an insurance carrier with the same or better credit rating as the Company’s current insurance carrier with respect to
directors’ and officers’ liability insurance and fiduciary liability insurance (the ”D&O Insurance”)
with terms, conditions, retentions and limits of liability that are at least as favorable as the coverage provided under the Company’s
existing policy with respect to any matter claimed against a director or officer of the Company or any Company Subsidiary by reason
of him or her serving in such capacity that existed or occurred at or prior to the Effective Time (including in connection with
this Agreement or the Transactions); provided that in no event shall Parent or the Surviving Company be required to expend
for such policy pursuant to this sentence an annual premium amount in excess of three-hundred percent (300%) of the annual premiums
currently paid by the Company for such insurance; provided, further that if the annual premiums of such insurance
coverage exceed such amount, the Surviving Company shall obtain a policy with the greatest coverage available for a cost not exceeding
such amount.
(c) If
Parent, the Surviving Company or any of their respective successors or assigns (i) shall consolidate with or merge into any other
company or entity and shall not be the continuing or surviving company or entity of such consolidation or merger or (ii) shall
transfer all or substantially all of its properties and assets to any individual, company or other entity, then, and in each such
case, proper provisions shall be made so that the successors and assigns of Parent or the Surviving Company shall assume all of
the obligations set forth in this Section 6.12.
(d) The
agreements and covenants contained in this Section 6.12 shall be in addition to any other rights an Indemnified Party may
have under the memorandum and articles of association of the Company or any Company Subsidiaries (or equivalent constitutional
documents), or any agreement between an Indemnified Party and the Company or any of its Subsidiaries as of the date hereof, under
any applicable Law, or otherwise. The provisions of this Section 6.12 shall survive the consummation of the Merger and shall
be binding on all successors and assigns of Parent and the Surviving Company and their respective Subsidiaries, and are intended
to be for the benefit of, and shall be enforceable by, each of the Indemnified Parties, their respective heirs and representatives,
each of which shall be a third party beneficiary of the provisions of this Section 6.12.
(e) Nothing
in this Agreement is intended to, shall be construed to or shall release, waive or impair any rights to directors’ and officers’
insurance claims under any policy that is or has been in existence with respect to the Company or any Company Subsidiaries or their
respective officers, directors and employees.
Section 6.13 Anti-takeover
Law. Parent, the Company and their respective boards of directors (or with respect to the Company, the Independent Committee,
if appropriate) shall (a) take all reasonable action necessary to ensure that no anti-takeover Law is or becomes applicable to
this Agreement or the transactions provided for in this Agreement (including the Merger) and (b) if any anti-takeover Law becomes
applicable to this Agreement or the Transactions (including the Merger), take all reasonable action necessary to ensure that the
transactions provided for in this Agreement (including the Merger) may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise to lawfully minimize the effect of such anti-takeover Law on this Agreement or the
transactions provided for in this Agreement (including the Merger).
Section 6.14 Stock
Exchange De-Listing. Parent shall cause the ADSs to be de-listed from NASDAQ and the Company de-registered under the Exchange
Act as soon as practicable following the Effective Time.
Section 6.15 Actions
Taken at Direction of the Chairman of the Company Board. Notwithstanding any other provision of this Agreement to the
contrary, the Company shall not be deemed to be in breach of any representation, warranty, covenant or agreement hereunder, including,
without limitation, Article IV and Article VI hereof, if the alleged breach is the proximate result of action or
inaction by the Company at the direction of the Chairman of the Company Board without any approval by or direction from the Company
Board (acting with the concurrence of the Independent Committee) or the Independent Committee.
Article
VII
Closing Conditions
Section 7.1 Conditions
to Obligations of Each Party Under This Agreement. The respective obligations of each Party to effect the Merger and other
Transactions herein shall be subject to the satisfaction, or waiver (in the case of the Company, upon the approval of the Independent
Committee), at or prior to the Closing Date of the following conditions:
(a) Shareholder
Approval. The Shareholder Approval shall have been obtained.
(b) No
Injunctions or Restraints. No Order (whether temporary, preliminary or permanent in nature) issued by any court of competent
jurisdiction or other restraint or prohibition of any Governmental Entity shall be in effect, and no Law shall have been enacted,
entered, promulgated, enforced or deemed applicable by any Governmental Entity that, in any case, prohibits or makes illegal the
consummation of the Merger.
Section 7.2 Additional
Conditions to Obligations of Parent and Merger Sub. The obligations of Parent and Merger Sub to effect the Merger and other
Transactions are also subject to satisfaction as of the Closing of the following conditions, any one or more of which may be waived
in writing by Parent:
(a) Representations
and Warranties. (i) Other than the representations and warranties of the Company contained in sub-clauses (ii) and (iii) below,
the representations and warranties of the Company contained in this Agreement shall be true and correct in all respects as of the
date hereof and as of the Closing as if made at such time (or, to the extent such representations and warranties speak as of a
specified date, they need only be true and correct in all respects as of such specified date) interpreted without giving effect
to the words “materially” or “material” or to any qualifications based on such terms or based on the defined
term “Company Material Adverse Effect,” except where the failure of such representations and warranties to be true
and correct, in the aggregate, does not constitute a Company Material Adverse Effect, (ii) the representations and warranties set
forth in Section 4.3 shall be true and correct in all respects as of the date hereof and as of the Closing as if made at
such time (or, to the extent such representations and warranties speak as of a specified date, they need only be true and correct
in all respects as of such specified date) and (iii) the representations and warranties set forth in Section 4.2(a), Section
4.2(b) and Section 4.20 shall be true and correct in all respects (except for de minimis inaccuracies) as of
the date hereof and as of the Closing as if made at such time (or, to the extent such representations and warranties speak as of
a specified date, they need only be true and correct (except for de minimis inaccuracies) in all respects as of such specified
date).
(b) Agreements
and Covenants. The Company shall have performed or complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to the Closing Date.
(c) Officer’s
Certificate. Parent shall have received a certificate of an executive officer of the Company confirming the satisfaction of
the conditions set forth in Section 7.2(a), Section 7.2(b), Section 7.2(d) and Section 7.2(e).
(d) Dissenting
Shares. The aggregate amount of Dissenting Shares shall be less than fifteen percent (15%) of the total outstanding Company
Shares immediately prior to the Effective Time.
(e) No
Company Material Adverse Effect. Since the date of this Agreement, there shall not have occurred a Company Material Adverse
Effect.
Section 7.3 Additional
Conditions to Obligations of the Company. The obligation of the Company to effect the Merger and other Transactions are also
subject to satisfaction as of the Closing of the following conditions, any one of which may be waived in writing by the Company:
(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 as of the date of this Agreement and as of the Closing Date as if made at and as of the Closing Date (or, to the
extent such representations and warranties speak as of a specified date, they need only be true and correct in all respects as
of such specified date) interpreted without giving effect to the words “materially” or “material” or to
any qualifications based on such terms or based on the defined term “Parent Material Adverse Effect,” except where
the failure of such representations and warranties to be true and correct, in the aggregate, does not constitute a Parent Material
Adverse Effect.
(b) Agreements
and Covenants. Parent and Merger Sub shall have performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by Parent and/or Merger Sub on or prior to the Closing Date.
(c) Officer’s
Certificate. The Company shall have received a certificate of an executive officer of Parent confirming the satisfaction of
the conditions set forth in Section 7.3(a) and Section 7.3(b).
Section 7.4 Frustration
of Closing Conditions. Prior to the End Date, none of the Company, Parent or Merger Sub may rely on the failure of any condition
set forth in Article VII to be satisfied if such failure was caused by such Party’s failure to act in good faith
to comply with this Agreement and consummate the transactions provided for herein.
Article
VIII
Termination, Amendment and Waiver
Section 8.1 Termination.
This Agreement may be terminated, and the Merger contemplated hereby may be abandoned, at any time prior to the Effective Time,
by action taken or authorized by (i) in the case of the Company, the Company Board or the Independent Committee and (ii) in the
case of Parent, its sole director, whether before or after the Shareholder Approval:
(a) by
mutual written consent of Parent and the Company; or
(b) by
either Parent or the Company (provided, in the case of the Company, it has not breached Section 6.4):
(i) if
the Merger has not been consummated by 11:59 p.m., Hong Kong time, on June 30, 2016 (the “End Date”); provided
that the right to terminate this Agreement pursuant to this Section 8.1(b)(i) shall not be available to any Party whose
breach of any provision of this Agreement was a primary contributing factor in the failure of the Merger to have been consummated
prior to the End Date;
(ii) if
(x) any Order of any Governmental Entity having competent jurisdiction is entered enjoining the Company, Parent or Merger Sub from
consummating the Merger and such Order has become final and non-appealable or (y) there shall be any Law that makes consummation
of the Merger illegal or otherwise prohibited; provided that prior to termination pursuant to this Section 8.1(b)(ii),
each of the Parties shall have used its reasonable best efforts to resist, appeal, obtain consent under, resolve or lift, as applicable,
the Order or Law and shall have complied in all material respects with its obligations under Section 6.5; provided,
further that the right to terminate this Agreement pursuant to this Section 8.1(b)(ii) shall not be available to
any Party whose breach of any provision of this Agreement results in the imposition of any such Order or applicability of such
Law; or
(iii) if
the Shareholder Approval is not obtained at the Company Shareholders Meeting or any adjournment thereof at which this Agreement
has been voted upon; or
(c) by
the Company:
(i) if
(x) Parent or Merger Sub shall have breached any of the covenants or agreements contained in this Agreement to be complied with
by Parent or Merger Sub such that the closing condition set forth in Section 7.3(b) would not be satisfied or (y) there
exists a breach of any representation or warranty of Parent or Merger Sub contained in this Agreement such that the closing condition
set forth in Section 7.3(a) would not be satisfied, and, in the case of either (x) or (y), such breach is incapable of being
cured, or if capable of being cured, is not cured by Parent of Merger Sub within thirty (30) calendar days after Parent or Merger
Sub receives written notice of such breach 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 that the Company shall not have the right to terminate this Agreement
pursuant to this Section 8.1(c)(i) if, at the time of such termination, there exists a breach of any representation, warranty,
covenant or agreement of the Company contained in this Agreement that would result in the closing conditions set forth in Section
7.2(a) or Section 7.2(b), as applicable, not being satisfied;
(ii) if
prior to obtaining the Shareholder Approval, (x) the Company Board (acting upon the recommendation of the Independent Committee)
authorizes the Company, subject to complying with the covenants and agreements in Section 6.4(d), to enter into an Alternative
Acquisition Agreement with respect to a Superior Proposal, (y) concurrently with the termination of this Agreement the Company
enters into an Alternative Acquisition Agreement with respect to a Superior Proposal and (z) concurrently with such termination
the Company pays to Parent in immediately available funds the Company Termination Fee required to be paid pursuant to Section
8.2(b)(ii); or
(iii) if
(x) all of the conditions set forth in Section 7.1 and Section 7.2 (other than those conditions that by their nature
are to be satisfied by actions taken at the Closing but subject to their satisfaction or waiver by the Party having the benefit
thereof) have been satisfied, (y) the Company has irrevocably confirmed by written notice to Parent that all conditions set forth
in Section 7.3 have been satisfied or that it is willing to waive any unsatisfied conditions in Section 7.3, and
the Company is ready, willing and able to consummate the Closing, and (z) Parent and Merger Sub fail to complete the Closing within
ten (10) Business Days after the delivery of such notice.
(d) by
Parent:
(i) if
(x) the Company shall have breached any of the covenants or agreements contained in this Agreement to be complied with by the Company
such that the closing condition set forth in Section 7.2(b) would not be satisfied or (y) there exists a breach of any representation
or warranty of the Company contained in this Agreement such that the closing condition set forth in Section 7.2(a) would
not be satisfied, and, in the case of either (x) or (y), such breach is incapable of being cured, or if capable of being cured,
is not cured by the Company: (A) in the case of a breach of Section 6.4, within five (5) calendar days after the Company
receives written notice of such breach from Parent, and (B) in the case of any other breach by the Company, within thirty (30)
calendar days after the Company receives written notice of such breach from Parent or Merger Sub, or, in each case if the End Date
is less than the foregoing five (5) calendar days or thirty (30) calendar days period (as the case may be) from the date of receipt
of relevant notice, by the End Date; provided that Parent shall not have the right to terminate this Agreement pursuant
to this Section 8.1(d)(i) if, at the time of such termination, there exists a breach of any representation, warranty, covenant
or agreement of Parent or Merger Sub contained in this Agreement that would result in the closing conditions set forth in Section
7.3(a) or Section 7.3(b), as applicable, not being satisfied; or
(ii) if
(x) the Company Board or any committee thereof shall have effected a Company Adverse Recommendation Change, or (y) the Company
Board shall have (A) approved, adopted or recommended any Acquisition Proposal or otherwise declared advisable (publicly or otherwise)
or proposed to approve, adopt or recommend (publicly or otherwise), an Acquisition Proposal or (B) approved or recommended, or
entered into or allowed the Company or any Company Subsidiary to enter into an Alternative Acquisition Agreement.
(e) Notice
of Termination. The Party desiring to terminate this Agreement pursuant to this Section 8.1 (other than under Section
8.1(a)) shall give written notice of such termination to the other Parties specifying the provision or provisions of this Section
8.1 pursuant to which such termination is purportedly effected.
Section 8.2 Effect
of Termination; Termination Fee.
(a) Effect
of Termination Generally. Except as otherwise set forth in this Section 8.2, in the event of a termination of this Agreement
by either the Company or Parent as provided in Section 8.1, this Agreement shall forthwith become void and there shall be
no liability or obligation on the part of Parent, Merger Sub or the Company or their respective officers, directors or Affiliates;
provided that the provisions of this Section 8.2, Section 6.3(b), Article IX and the NDA shall remain
in full force and effect and survive any termination of this Agreement. Notwithstanding the foregoing, in no event shall any Party
(or any member of the Parent Group or Company Group) be liable for punitive damages.
(b) Company
Termination Fee. In the event this Agreement is terminated
(i) by
Parent pursuant to Section 8.1(d)(i) or Section 8.1(d)(ii);
(ii) by
the Company pursuant to Section 8.1(c)(ii); or
(iii) by
either Parent or the Company pursuant to Section 8.1(b)(i) or Section 8.1(b)(iii), and (A) neither Parent nor Merger
Sub shall have breached any of its representations, warranties or covenants under this Agreement in any material respect, (B) at
or prior to the termination of this Agreement, a Third Party shall have delivered to the Company Board a bona fide Acquisition
Proposal (and such Acquisition Proposal shall not have been withdrawn prior to the termination of this Agreement), and (C) within
twelve (12) months after the termination of this Agreement, the Company enters into a definitive agreement with respect to such
Acquisition Proposal, provided that, for purpose of the definition of “Acquisition Proposal” in the definition of “Acquisition
Proposal” shall be deemed to be references to “fifty percent (50%)”,
then subject
to Section 8.2(f), the Company shall pay or cause to be paid the Company Termination Fee to Parent (or its designee) promptly,
but in any event within two (2) Business Days after the date of such termination by wire transfer of same day funds to one or more
accounts designated by Parent. For the avoidance of doubt, in no event shall the Company be obligated to pay, or cause to be paid,
the Company Termination Fee on more than one occasion.
(c) Parent
Termination Fee. In the event that this Agreement is validly terminated in accordance with Section 8.1(c)(i) or Section
8.1(c)(iii), then, subject to Section 8.2(f), Parent shall promptly, but in no event later than two (2) Business Days
after the date of such termination, pay or cause to be paid to the Company (or its designees) the Parent Termination Fee by wire
transfer of same day funds (it being understood that in no event shall Parent be required to pay the Parent Termination Fee on
more than one occasion). In addition, in the event that Parent decides not to proceed to consummate the Merger and terminates this
Agreement due to the failure of the condition set forth in Section 7.2(d), then, subject to Section 8.2(f), Parent
shall promptly, but in no event later than two (2) Business Days after the date of such termination, pay or cause to be paid to
the Company (or its designees), an amount equal to fifty percent (50%) of the Parent Termination Fee.
(d)
In the event that the Company fails to pay the Company Termination Fee, or Parent fails to pay the Parent Termination Fee, when
due and in accordance with the requirements of this Agreement, the Company or Parent, as the case may be, shall reimburse the other
party for all costs and expenses actually incurred or accrued by the other party (including fees and expenses of counsel) in connection
with the collection under and enforcement of this Section 8.2.
(e) Acknowledgement.
Each Party acknowledges that (i) the agreements contained in this Section 8.2 are an integral part of the Transactions,
(ii) the damages resulting from termination of this Agreement under circumstances where a Company Termination Fee or Parent Termination
Fee is payable are uncertain and incapable of accurate calculation and therefore, the amounts payable pursuant to Section 8.2(b)
and Section 8.2(c) are not a penalty but rather constitute liquidated damages in a reasonable amount that will compensate
Parent or the Company, as the case may be, for the efforts and resources expended and opportunities foregone while negotiating
this Agreement and in reliance on this Agreement and on the expectation of the consummation of the Transactions, and (iii) without
the agreements contained in this Section 8.2, the Parties would not have entered into this Agreement.
(f) Limitations
on Liabilities.
(i) Notwithstanding
anything to the contrary in this Agreement, the Financing Commitments, or the Limited Guarantees in the event that Parent or Merger
Sub fails to effect the Closing when required pursuant to Section 2.2 for any reason or no reason or they otherwise breach
this Agreement (whether willfully, intentionally, unintentionally or otherwise) or otherwise fail to perform hereunder (whether
willfully, intentionally, unintentionally or otherwise), then, except for an order of specific performance as and only to the extent
expressly permitted by Section 9.6, the Company’s right to terminate this Agreement and receive the Parent Termination
Fee pursuant to Section 8.2(c), any amounts pursuant to Section 8.2(d) (if any), and the guarantee of such obligations
pursuant to the Limited Guarantees (subject to their terms, conditions and limitations), shall be the sole and exclusive remedy
(whether at law, in equity, in contract, in tort or otherwise) of the Company, the Company Subsidiaries and all members of the
Company Group (as defined below) against (A) Parent, Merger Sub or the Guarantors, (B) the former, current and future holders of
any equity, partnership or limited liability company interest, controlling persons, directors, officers, employees, agents, attorneys,
Affiliates, members, managers, general or limited partners, shareholders, assignees of, each of Parent, Merger Sub or the Guarantors,
(C) any lender or prospective lender, lead arranger, arranger, agent or representative of or to Parent, Merger Sub or any Guarantor
or (D) any holders or future holders of any equity, stock, partnership or limited liability company interest, controlling persons,
directors, officers, employees, agents, attorneys, Affiliates, members, managers, general or limited partners, shareholders, assignees
of any of the foregoing (clauses (A) through (D), collectively, the “Parent Group”), for any loss or damage
suffered as a result of any breach of any representation, warranty, covenant or agreement (whether willfully, intentionally, unintentionally
or otherwise) or failure to perform hereunder (whether willfully, intentionally, unintentionally or otherwise) or other failure
of the Merger to be consummated (whether willfully, intentionally, unintentionally or otherwise). For the avoidance of doubt, neither
Parent nor any member of the Parent Group shall have any liability for monetary damages of any kind or nature or arising in any
circumstance in connection with this Agreement or any of the Transactions (including the Financing Commitments and the Limited
Guarantees) other than the payment of the Parent Termination Fee pursuant to Section 8.2(c) and any amounts pursuant to
Section 8.2(d) (if any), and in no event shall any of the Company, the Company Subsidiaries, the direct or indirect shareholders
of the Company or any other Person, or any of their respective Affiliates, directors, officers, employees, members, managers, partners,
representatives, advisors or agents of the foregoing, (collectively, the “Company Group”) seek, or permit
to be sought, on behalf of any member of the Company Group, any monetary damages from any member of the Parent Group in connection
with this Agreement or any of the Transactions (including the Financing Commitments and the Limited Guarantees), other than (without
duplication) from Parent or Merger Sub to the extent provided in Section 8.2(c), any amounts pursuant to Section 8.2(d)
(if any), or the Guarantors to the extent provided in the Limited Guarantees. In no event shall the Company or any member of the
Company Group be entitled to seek the remedy of specific performance of this Agreement other than as specifically set forth in
Section 9.6. For the avoidance of doubt, while the Company may pursue both a grant of specific performance as and only to
the extent expressly permitted by Section 9.6 and the payment of the Parent Termination Fee pursuant to Section 8.2(c),
under no circumstances shall the Company (or any member of the Company Group or any other Person) be permitted or entitled to receive
both such grant of specific performance and payment of the Parent Termination Fee (or any other money damages).
(ii) Notwithstanding
anything to the contrary in this Agreement, except for an order of specific performance to the extent permitted by Section 9.6,
Parent’s right to terminate this Agreement and receive the Company Termination Fee pursuant to Section 8.2(b), and
any amounts pursuant to Section 8.2(d) (if any), shall be the sole and exclusive remedy (whether at law, in equity, in contract,
in tort or otherwise) of Parent and any member of the Parent Group against any member of the Company Group, for any loss or damage
suffered as a result of any breach of any representation, warranty, covenant or agreement, any failure to perform hereunder or
other failure of the Merger to be consummated. For the avoidance of doubt, neither the Company nor any member of the Company Group
shall have any liability for monetary damages of any kind or nature or arising in any circumstance in connection with this Agreement
or any of the Transactions, other than the payment of the Company Termination Fee pursuant to Section 8.2(b) and any amounts
pursuant to Section 8.2(d) (if any), and in no event shall any of Parent or Merger Sub or any other member of the Parent
Group seek, or permit to be sought, on behalf of any member of the Parent Group, any monetary damages from any member of the Company
Group in connection with this Agreement or any of the Transactions, other than from the Company to the extent provided in Section
8.2(b) and any amounts pursuant to Section 8.2(d)(if any). In no event shall any of Parent, Merger Sub, or any other
member of the Parent Group be entitled to seek the remedy of specific performance of this Agreement other than as specifically
set forth in Section 9.6. For the avoidance of doubt, while Parent may pursue both a grant of specific performance as permitted
by Section 9.6 and the payment of the Company Termination Fee pursuant to Section 8.2(b) and any amounts pursuant
to Section 8.2(d)(if any), under no circumstances shall Parent be permitted or entitled to receive both such grant of specific
performance and payment of the Company Termination Fee (or any other money damages).
(iii) The
provisions of this Section 8.2(f) are intended to be for the benefit of, and shall be enforceable by, each member of the
Parent Group and the Company Group.
Section 8.3 Extension;
Waiver. At any time prior to the Effective Time, the Parties may, to the extent permitted by applicable Law and, in the case
of the Company upon the approval of the Independent Committee, subject to Section 8.4, (a) extend the time for the performance
of any of the obligations or other acts of the other Parties, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto or (c) waive compliance with any of the agreements or conditions
contained herein; provided that after this Agreement is approved by the Shareholders Approval, there may not be any extension
or waiver of this Agreement which decreases the Per Share Merger Consideration or Per ADS Merger Consideration or which adversely
affects the rights of the holders of Company Shares or Company Share Awards hereunder without the approval of such holders of
Company Shares or Company Share Awards, as applicable. 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. The failure of any Party to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of those rights.
Section 8.4 Amendment.
This Agreement may be amended by the Parties by action taken by or on behalf of their respective boards of directors at any time
prior to the Effective Time; provided that the Company may only take such action with the approval of the Independent Committee;
provided, further that after approval of this Agreement by the Shareholders Approval, no amendment that, by Law
or in accordance with the rules of any relevant stock exchange, requires further approval by such shareholders may be made without
further Shareholder Approval. This Agreement may not be amended except by an instrument in writing signed by Parent and the Company.
Article
IX
General Provisions
Section 9.1 Non-Survival
of Representations, Warranties and Covenants. None of the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time. None of the covenants or agreements of the Parties in this
Agreement shall survive the Effective Time, other than (a) the covenants and agreements contained in this Article IX,
the agreements of Parent, Merger Sub and the Company in Article III, and Section 6.12 (Indemnification of Directors
and Officers), and (b) those other covenants and agreements contained herein that by their terms apply, or that are to be
performed in whole or in part, after the Effective Time, which shall survive the consummation of the Merger until fully performed.
Section 9.2 Notices.
Any notices or other communications required or permitted under, or otherwise in connection with this Agreement, shall be in writing
and shall be deemed to have been duly given when delivered in person or upon confirmation of receipt when transmitted by facsimile
transmission or by electronic mail (but only if followed by transmittal by overnight courier or hand for delivery on the next
Business Day) or on receipt after dispatch by registered or certified mail, postage prepaid, addressed, or on the next Business
Day if transmitted by international overnight courier, in each case as follows:
(a) if to Parent or Merger Sub, at:
18/F, Tower 1, U-town Office Building
No. 1 San Feng Bei Li, Chaoyang District
Beijing 100020, People's Republic of China
Attention: |
Dong YU |
Facsimile: |
+86 10 5631 0828 |
Email: |
yudong@bonafilm.cn |
with a copy (which shall not constitute notice) to:
Kirkland & Ellis
26th Floor, Gloucester Tower, The Landmark
15 Queen’s Road, Central, Hong Kong
Attention: |
David Zhang |
|
Jesse Sheley |
Facsimile: |
+852-3761-3301 |
Email: |
david.zhang@kirkland.com |
|
jesse.sheley@kirkland.com |
(b) if to the Company, at:
18/F, Tower 1, U-town Office Building
No. 1 San Feng Bei Li, Chaoyang District
Beijing 100020, People's Republic of China
Attention: |
Independent Committee |
Email: |
dqi@ckgsb.edu.cn |
with a copy (which shall not constitute notice) to:
Shearman & Sterling
12th Floor, Gloucester Tower
15 Queen’s Road Central, Hong Kong
Attention: |
Stephanie Tang, Esq. |
Facsimile: |
+852 2140 0328 |
Email: |
stephanie.tang@shearman.com |
(c) if to the Independent Committee, addressed to it
care of the Company, with a copy (which shall not constitute notice) to:
Shearman & Sterling
12th Floor, Gloucester Tower
15 Queen’s Road Central, Hong Kong
Attention: |
Stephanie Tang, Esq. |
Facsimile: |
+852 2140 0328 |
Email: |
stephanie.tang@shearman.com |
Section 9.3 Fees
and Expenses. The Surviving Company shall pay all charges and expenses, including those of the Paying Agent and all transfer,
documentary, sales, use, stamp, registration and other similar such Taxes and fees (including penalties and interest), incurred
in connection with the transactions contemplated by Article III. Except as otherwise expressly set forth in this Agreement
(including Section 8.2), all fees and Expenses incurred in connection herewith and the Transactions shall be paid by the
Party incurring such expenses, whether or not the Merger is consummated.
Section 9.4 Severability.
If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of Law or public
policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the Transactions is not affected in any manner materially adverse to any Party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith
to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to
the end that Transactions are fulfilled to the greatest extent possible.
Section 9.5 Entire
Agreement. This Agreement (together with the Exhibits, Company Disclosure Schedule, Parent Disclosure Schedule and the other
documents delivered pursuant hereto), the Equity Financing Commitments, the Limited Guarantees, the Support Agreement and any
other documents contemplated here by and thereby and the NDA constitute the entire agreement of the Parties and supersede all
prior agreements and undertakings, both written and oral, between the Parties, or any of them, with respect to the subject matter
hereof and thereof.
Section 9.6 Specific
Performance
(a) The
Parties agree that irreparable damage, for which monetary damage would not be an adequate remedy, would occur in the event that
any provision of this Agreement were not performed by the Parties in accordance with the terms hereof or were otherwise breached
by the Parties hereof and that, subject to the limitations set forth in Section 9.6(b), each Party shall be entitled to
specific performance of the terms and provisions hereof (including the Parties’ obligation to consummate the Merger, subject
in each case to the terms and conditions of this Agreement), including an injunction or injunctions to prevent breaches of this
Agreement by the Company, in addition to any other remedy at law or equity. Subject to the limitations set forth in Section
9.6(b), each Party hereby waives (i) any defenses in any action for specific performance, including the defense that a remedy
at law would be adequate and (ii) any requirement under any Law to post a bond or other security as a prerequisite to obtaining
equitable relief. If any Party brings any Action to enforce specifically the performance of the terms and provisions hereof by
any other Party, the End Date shall automatically be extended by (x) the amount of time during which such Action is pending, plus
twenty (20) Business Days or (y) such other time period established by the applicable court presiding over such Action.
(b) Notwithstanding
anything herein to the contrary, the Parties further acknowledge and agree that the right of the Company, or any member of the
Company Group, to obtain an injunction, specific performance or other equitable relief to prevent breaches of this Agreement shall
be limited to seeking an injunction, specific performance or other equitable remedies to enforce Parent's or Merger Sub’s
obligation to cause the Equity Financing to be funded at the Effective Time but only in the event that (A) Parent and Merger Sub
are required to consummate the Closing pursuant to Section 2.2, (B) the Company has irrevocably confirmed in writing that
if the Equity Financing is funded, then it would take such actions that are within its control to cause the consummation of the
Transactions to occur, and (C) the Equity Financing has not been funded and Parent and Merger Sub have not consummated the Merger.
Section 9.7 Governing
Law; Jurisdiction; Waiver of Jury Trial.
(a) This
Agreement (other than Article II and with respect to matters relating to fiduciary duties of the Company Board) and all
claims or causes of action (whether in contract, tort or otherwise) that may be based upon, arise out of or relate to this Agreement
(other than Article II and with respect to matters relating to fiduciary duties of the Company Board) or the negotiation,
execution or performance of this Agreement (other than Article II and with respect to matters relating to fiduciary duties
of the Company Board) (including any claim or cause of action based upon, arising out of or related to any representation or warranty
made in or in connection with this Agreement or as an inducement to enter into this Agreement), shall be interpreted, construed,
performed and enforced in accordance with the Laws of the State of New York without giving effect to its principles or rules of
conflict of laws to the extent such principles or rules would require or permit the application of the Laws of another jurisdiction.
(b) Article
II of this Agreement and all claims or causes of action (whether in contract, tort or otherwise) that may be based upon, arise
out of or relate to Article II of this Agreement, the negotiation, execution or performance of Article II of this
Agreement, or matters relating to fiduciary duties of the Company Board, shall be interpreted, construed, performed and enforced
in accordance with the Laws of the Cayman Islands without giving effect to its principles or rules of conflict of laws to the extent
such principles or rules would require or permit the application of the Laws of another jurisdiction.
(c) Consent
to Jurisdiction. In the event any dispute arises among the Parties out of or in relation to this Agreement, including
any dispute regarding its breach, termination or validity, the Parties shall attempt in the first instance to resolve such dispute
through friendly consultations. If any dispute has not been resolved by friendly consultations within thirty (30) days after any
Party has served written notice on the other Parties requesting the commencement of such consultations, then any Party may demand
that the dispute be finally settled by arbitration in accordance with the following provisions of this Section 9.7(c).
The arbitration shall be conducted in accordance with the Hong Kong International Arbitration Centre (“HKIAC”)
Administered Rules in force when a notice of arbitration is submitted. The seat and venue of the arbitration shall be Hong Kong
and the language of the arbitration shall be English. The appointing authority shall be the HKIAC. There shall be three (3) arbitrators.
One (1) arbitrator shall be nominated by the Company and one (1) arbitrator shall be nominated by Parent. If either the Company
or Parent shall abstain from nominating their arbitrator, the HKIAC shall appoint such arbitrator. The two (2) arbitrators so
chosen shall select a third (3rd) arbitrator; provided that if such two (2) arbitrators shall fail to choose a third (3rd)
arbitrator within thirty (30) days after such two (2) arbitrators have been selected, the HKIAC, upon the request of any Party,
shall appoint a third (3rd) arbitrator. The third (3rd) arbitrator shall be the presiding arbitrator. The Parties agree that the
arbitration shall be kept confidential and that the existence of the proceeding and any element of it shall not be disclosed beyond
the tribunal, the Parties, their legal and professional advisers, and any person necessary for the conduct of the arbitration,
unless otherwise required by Law or the Parties otherwise agree in writing. The Parties agree that all documents and evidence
submitted in the arbitration (including any statements of case and any interim or final award, as well as the fact that an arbitral
award has been made) shall remain confidential both during and after any final award that is rendered unless otherwise required
by Law or the Parties otherwise agree in writing. Upon and after the submission of any dispute to arbitration, the Parties shall
continue to exercise their remaining respective rights, and fulfill their remaining respective obligations under this Agreement,
except insofar as the same may relate directly to the matters in dispute. The Parties agree that any arbitration award rendered
in accordance with the provisions of this Section 9.7(c) shall be final and binding upon them, and the Parties further
agree that such award may be enforced by any court having jurisdiction over the Party against which the award has been rendered
or the assets of such Party wherever the same may be located. In any arbitration proceeding, any legal proceeding to enforce any
arbitration award and in any other legal proceeding among the Parties pursuant to or relating to this Agreement, each Party expressly
waives the defense of sovereign immunity and any other defense based on the fact or allegation that it is an agency or instrumentality
of a sovereign state or is otherwise entitled to immunity.
(d) WAIVER
OF JURY TRIAL. EACH OF PARENT, MERGER SUB AND THE COMPANY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE ACTIONS OF PARENT, MERGER SUB OR THE COMPANY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
Section 9.8 No Third-Party
Beneficiaries. Except as expressly provided in Section 6.3(b) (Confidentiality and Restrictions), Section 6.12
(Indemnification of Directors and Officers), Section 8.2(b) (Company Termination Fee), Section 8.2(c) (Parent Termination
Fee) and Section 8.2(f) (Limitations on Liabilities) (which are intended to be for the benefit of the Persons covered thereby
and may be enforced by such Persons), each of Parent and the Company hereby agrees that their respective representations, warranties
and covenants set forth herein are solely for the benefit of the other Parties, in accordance with and subject to the terms of
this Agreement, and this Agreement is not intended to, and does not, confer upon any Person other than the Parties any rights
or remedies hereunder, including the right to rely upon the representations and warranties set forth herein. The Parties acknowledge
and agree that the rights of third party beneficiaries under Section 6.12 shall not arise unless and until the Effective Time
occurs. The Parties acknowledge and agree that this Agreement may only be enforced against, and any claims or causes of action
that may be based upon, arise out of or relate to this Agreement, or the negotiation, execution or performance of this Agreement
may only be made against the entities that are expressly identified as the Parties and no member of the Parent Group (other than
the Guarantors only to the extent set forth in the Limited Guarantees or the Equity Financing Commitments), shall have any liability
for any obligations or liabilities of the Parties or for any claim (whether in tort, contract or otherwise) based on, in respect
of, or by reason of, the Transactions or in respect of any oral representations made or alleged to be made in connection herewith.
Section 9.9 Assignment.
Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the Parties (whether
by operation of Law or otherwise) without the prior written consent of the other Parties; provided that Parent and/or Merger
Sub may assign this Agreement (in whole but not in part) to any Affiliate of Parent. No assignment by any Party shall relieve
such Party of any of its obligations hereunder. Subject to the foregoing, this Agreement will be binding upon, inure to the benefit
of and be enforceable by the Parties and their respective successors and permitted assigns.
Section 9.10 Obligations
of Parent and of the Company. Whenever this Agreement requires a Subsidiary of Parent to take any action, such requirement
shall be deemed to include an undertaking on the part of Parent to cause such Subsidiary to take such action. Whenever this Agreement
requires a Company Subsidiary to take any action, such requirement shall be deemed to include an undertaking on the part of the
Company to cause such Subsidiary to take such action and, after the Effective Time, on the part of the Surviving Company to cause
such Subsidiary to take such action.
Section 9.11 Mutual
Drafting. Each Party has participated in the drafting of this Agreement, which each Party acknowledges is the result of extensive
negotiations between the Parties.
Section 9.12 Headings.
The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation
of this Agreement.
Section 9.13 Counterparts.
This Agreement may be executed by facsimile and in one or more counterparts, and by the different Parties in separate counterparts,
each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same
agreement.
[Signature page follows.]
IN WITNESS WHEREOF, Parent,
Merger Sub and the Company have caused this Agreement to be executed as of the date first written above by their respective officers
thereunto duly authorized.
|
MOUNTAIN TIGER INTERNATIONAL LIMITED |
|
|
|
By: |
/s/ Dong YU |
|
Name: Dong YU |
|
Title: Director |
|
|
|
MOUNTAIN TIGER LIMITED |
|
|
|
By: |
/s/ Dong YU |
|
Name: Dong YU |
|
Title: Director |
Signature Page to Agreement and Plan
of Merger
IN WITNESS WHEREOF, Parent,
Merger Sub and the Company have caused this Agreement to be executed as of the date first written above by their respective officers
thereunto duly authorized.
|
BONA FILM GROUP LIMITED |
|
|
|
|
By: |
/s/ Daqing Dave Qi |
|
Name: Daqing Dave Qi |
|
Title: Chairman of the Independent Committee |
Signature Page to Agreement and Plan
of Merger
Exhibit A
PLAN OF MERGER
THIS PLAN OF MERGER is made on ________
2015.
BETWEEN
| (1) | Mountain Tiger Limited, an exempted company incorporated
under the laws of the Cayman Islands on December 4, 2015, with its registered office situate at the offices of [●], Cayman
Islands (“Merger Sub”); and |
| (2) | Bona Film Group Limited, an exempted company with limited
liability incorporated under the laws of the Cayman Islands on [●], with its registered office situated at the offices of
[●] (the “Company” or “Surviving Company” and together with Merger Sub, the “Constituent
Companies”). |
WHEREAS
| (a) | Merger Sub and the Company have agreed to merge (the
“Merger”) on the terms and conditions contained or referred to in an Agreement and Plan of Merger (the “Agreement”)
dated December 15, 2015 made by and among Mountain Tiger International Limited, Merger Sub and Company, a copy of which is attached
as Appendix I to this Plan of Merger, and under the provisions of Part XVI of the Companies Law Cap.22 (Law 3 of 1961,
as consolidated and revised) (the “Companies Law”), pursuant to which Merger Sub will merge with and into the
Company and cease to exist, and the Company will continue as the surviving company in the Merger. |
| (b) | This Plan of Merger is made in accordance with section
233 of the Companies Law. |
| (c) | Terms used in this Plan of Merger and not otherwise defined
in this Plan of Merger shall have the meanings given to them under the Agreement. |
WITNESSETH
CONSTITUENT COMPANIES
| 1. | The constituent companies (as defined in the Companies
Law) to the Merger are Merger Sub and the Company. |
NAME OF THE SURVIVING COMPANY
| 2. | The name of the Surviving Company shall be Bona Film
Group Limited, which shall be the surviving company (as defined in the Companies Law) . |
REGISTERED OFFICE
| 3. | The Surviving Company shall have its registered office
at the offices of [●]. |
AUTHORISED AND ISSUED SHARE CAPITAL
| 4. | Immediately prior to the Effective Time (as defined below),
the authorized share capital of Merger Sub was $[●] divided into [●] ordinary shares of $[●] par value per share,
of which [●] shares have been issued and fully paid. |
| 5. | Immediately prior to the Effective Time the authorized
share capital of the Company was $[●] divided into [●] ordinary shares of $[●] par value per share, of which
[●] ordinary shares have been issued and fully paid. |
| 6. | The authorized share capital of the Surviving Company
shall be $[●] divided into [●] ordinary shares of $[●] par value per share. |
| 7. | At the Effective Time, and in accordance with the terms
and conditions of the Agreement: |
| (a) | Each ordinary share, par value $[●] per share,
of the Company other than any Excluded Shares (as defined in the Agreement) shall be cancelled and cease to exist in exchange
for the right to receive the Per Share Merger Consideration (as defined in the Agreement). |
| (b) | Excluded Shares (other than Dissenting Shares) shall
be cancelled and cease to exist, and no consideration shall be delivered or deliverable in exchange therefor. |
| (c) | Dissenting Shares shall be cancelled and cease to exist
in accordance with the procedures set out in Section 238 of the Companies Law, in exchange for the payment of their fair
value in accordance with Section 238 of the Companies Law, but shall not be converted into or exchangeable for or represent
the right to receive the Per Share Merger Consideration (unless any holder of Dissenting Shares withdraws or loses their rights
to dissent from the Merger under section 238 of the Companies Law in which event such holder shall receive the Per Share
Merger Consideration) and each such Dissenting Shareholder shall be entitled only to payment of the fair value of such Dissenting
Shares in accordance with Section 238 of the Companies Law. |
| (d) | Each share of Merger Sub shall be converted into one
validly issued, fully paid and non-assessable ordinary share of the Surviving Company. |
| 8. | At the Effective Time, the rights and restrictions attached
to the ordinary shares of the Surviving Company shall be set out in the Amended and Restated Memorandum of Association and Articles
of Association of the Surviving Company in the form attached as Appendix II to this Plan of Merger. |
EFFECTIVE TIME
| 9. | The effective date of the Merger, being the date on which
it is intended that the Merger is to take effect, shall be the date on which this Plan of Merger is registered by the Registrar
of Companies of the Cayman Islands (the “Effective Time”). |
PROPERTY
| 10. | At the Effective Time, the rights, property of every
description including choses in action and the business, undertaking, goodwill, benefits, immunities and privileges of each of
the Constituent Companies shall immediately vest in the Surviving Company which shall be liable for and subject, in the same manner
as the Constituent Companies, to all mortgages, charges, or security interests and all contracts, obligations, claims, debts and
liabilities of each of the Constituent Companies. |
MEMORANDUM AND ARTICLES OF ASSOCIATION
| 11. | The Memorandum of Association and Articles of Association
of the Surviving Company shall be amended and restated in the form attached as Appendix II to this Plan of Merger at the
Effective Time. |
DIRECTORS BENEFITS
| 12. | There are no amounts or benefits payable to the directors
of the Constituent Companies on the Merger becoming effective. |
DIRECTORS OF THE SURVIVING COMPANY
| 13. | The names and addresses of the directors of the Surviving
Company are as follows: |
NAME |
ADDRESS |
|
|
[●] |
[●] |
[●] |
[●] |
[●] |
[●] |
SECURED CREDITORS
| 14. | (a) |
Merger Sub has no secured creditors and has granted no fixed or floating security interests that are outstanding
as at the date of this Plan of Merger; and |
| (b) | The Surviving Company has no secured creditors and has
granted no fixed or floating security interests that are outstanding as at the date of this Plan of Merger. |
RIGHT OF TERMINATION
| 15. | This Plan of Merger may be terminated pursuant to the
terms and conditions of the Agreement. |
APPROVAL AND AUTHORIZATION
| 16. | This Plan of Merger has been approved by the board of
directors of each of the Surviving Company and Merger Sub pursuant to section 233(3) of the Companies Law. |
| 17. | This Plan of Merger has been authorised by the shareholders
of each of the Surviving Company and Merger Sub pursuant to section 233(6) of the Companies Law. |
COUNTERPARTS
| 18. | This Plan of Merger may be executed by facsimile and
in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the
same instrument. |
GOVERNING LAW
| 19. | This Plan of Merger shall be governed by and construed
in accordance with the laws of the Cayman Islands. |
For and on behalf of
MOUNTAIN TIGER LIMITED
For and on behalf of
Bona Film Group Limited
Appendix I
Appendix II
ANNEX B
![](http://www.sec.gov/Archives/edgar/data/1504796/000114420416076542/tbonitafairnessopinionlogo.jpg)
December 15,
2015
The Independent Committee of the Board of Directors
Bona Film Group Limited
18/F, Tower 1, U-town Office Building,
No. 1 San Feng Bei Li,
Chaoyang District, Beijing 100020
The People’s Republic of China
Members of the Independent Committee of the Board of Directors:
We understand that Bona Film Group Limited
(the “Company”) intends to enter into a transaction (the “Proposed Transaction”) with Mountain Tiger International
Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands (“Parent”) and
Mountain Tiger Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands and a wholly-owned
subsidiary of Parent (“Merger Sub”), pursuant to which (i) Merger Sub will merge with and into the Company, and the
separate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation and a wholly-owned subsidiary
of Parent, and (ii) upon effectiveness of the merger, each issued and outstanding ordinary share of the Company (each, a “Share”
and collectively, the “Shares”), including Shares represented by American Depositary Shares (each, an “ADS”
and collectively, the “ADSs”), other than Shares held by the Company as treasury shares, Shares and ADSs reserved by
the Company for settlement upon exercise or vesting of any Company Share Awards, Rollover Securities and Dissenting Shares (together,
the “Excluded Shares”, and each as defined in the Merger Agreement (as defined below)), will be converted into the
right to receive US$27.40 in cash (the “Per Share Merger Consideration”), and each issued and outstanding ADS (with
two ADSs representing one Share) representing the right to receive US$13.70 in cash (the “Per ADS Merger Consideration”).
The terms and conditions of the Proposed Transaction are set forth in more detail in the Agreement and Plan of Merger among the
Company, Parent and Merger Sub (the “Merger Agreement”), the latest draft of which was dated as of December 14, 2015.
The summary of the Proposed Transaction set forth above is qualified in its entirety by the terms of the Merger Agreement.
We have been requested by the Independent
Committee of the Board of Directors of the Company (the “Independent Committee”) to render our opinion with respect
to the fairness, from a financial point of view, to the Company’s shareholders and ADS holders of the Per Share Merger Consideration
and Per ADS Merger Consideration to be offered to such shareholders and ADS holders, respectively, in the Proposed Transaction.
We have not been requested to opine as to, and our opinion does not in any manner address, the Company’s underlying business
decision to proceed with or effect the Proposed Transaction or the likelihood of consummation of the Proposed Transaction. In addition,
we express no opinion on, and our opinion does not in any manner address, the fairness of the amount or the nature of any compensation
to any officers, directors or employees of any parties to the Proposed Transaction, or any class of such persons, relative to the
Per Share Merger Consideration to be offered to the holders of Shares or the Per ADS Merger Consideration to be offered to the
holders of ADSs in the Proposed Transaction.
In arriving at our opinion, we reviewed
and analyzed: (1) a draft of the Merger Agreement, dated as of December 14, 2015 and the specific terms of the Proposed Transaction;
(2) certain publicly available information concerning the Company that we believe to be relevant to our analysis, including the
Company’s financial statements as filed with the U.S. Securities and Exchange Commission; (3) financial and operating information
with respect to the business, operations and prospects of the Company furnished to us by the Company, including financial projections
of the Company prepared by the management of the Company; (4) historic price and trading volume of the ADSs from June 11, 2014
to December 10, 2015; (5) a comparison of the historical financial results and present financial condition of the Company with
those of other companies that we deemed relevant; and (6) a comparison of the financial terms of the Proposed Transaction with
the financial terms of certain other recent transactions that we deemed relevant. In addition, we have had discussions with the
management of the Company concerning its business, operations, assets, financial condition and prospects and have undertaken such
other studies, analyses and investigations as we deemed appropriate.
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In arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of the financial and other information used by us without any independent verification
of such information (and have not assumed responsibility or liability for any independent verification of such information) and
have further relied upon the assurances of the management of the Company that they are not aware of any facts or circumstances
that would make such information inaccurate or misleading. With respect to the financial projections of the Company, upon the advice
of the Independent Committee, we have assumed that such projections have been reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the management of the Company as to the future financial performance of the Company
and that the Company will perform substantially in accordance with such projections. We assume no responsibility for and
we express no view as to any such projections or estimates or the assumptions on which they are based. In arriving at our
opinion, we have not conducted a physical inspection of the properties and facilities of the Company and have not made or obtained
any evaluations or appraisals of the assets or liabilities of the Company. Our opinion necessarily is based upon market, economic
and other conditions as they exist on, and can be evaluated as of, the date of this letter. We assume no responsibility for updating
or revising our opinion based on events or circumstances that may occur after the date of this letter.
We have assumed that the final executed
Merger Agreement will conform in all material respects to the last draft dated December 14, 2015 reviewed by us. In addition, we
have assumed the accuracy of the representations and warranties contained in the Merger Agreement and all agreements related thereto.
We have also assumed, upon the advice of the Independent Committee and without expressing or implying any opinion on the probability
of the same, that all material governmental, regulatory and third party approvals, consents and releases for the Proposed Transaction
will be obtained within the constraints contemplated by the Merger Agreement and that the Proposed Transaction will be consummated
in accordance with the terms of the Merger Agreement without waiver, modification or amendment of any material term, condition
or agreement thereof. We do not express any opinion as to any tax or other consequences that might result from the Proposed Transaction,
nor does our opinion address any legal, tax, regulatory or accounting matters, as to which we understand that the Independent Committee
has obtained such advice as it deemed necessary from qualified professionals.
Based upon and subject to the foregoing,
we are of the opinion as of the date hereof that, from a financial point of view, the Per Share Merger Consideration to be offered
to holders of Shares (other than holders of Excluded Shares) and the Per ADS Merger Consideration to be offered to holders of ADSs
(other than holders of ADSs representing Excluded Shares) in the Proposed Transaction, is fair to such holders.
We have acted as financial advisor to the
Independent Committee in connection with the Proposed Transaction and will receive a fee for our services, a portion of which is
payable upon rendering this opinion and a substantial portion of which is contingent upon the consummation of the Proposed Transaction.
In addition, the Company has agreed to reimburse us for certain expenses and indemnify us for certain liabilities that may arise
out of our engagement. We have in the past provided, and are currently providing, investment banking and financial services to
the Company and certain of the investors from which Parent proposes to obtain equity financing for the Proposed Transaction or
their respective affiliates and we may in the future provide investment banking and financial services to such investors, the Company,
Parent or any of their respective affiliates.
Barclays Bank PLC and its affiliates engage
in a wide range of businesses from investment and commercial banking, lending, asset management and other financial and non-financial
services. In the ordinary course of our business, we and our affiliates may actively trade and effect transactions in the equity,
debt and/or other securities (and any derivatives thereof) and financial instruments (including loans and other obligations) of
the Company and Parent for our own account and for the accounts of our customers and, accordingly, may at any time hold long or
short positions and investments in such securities and financial instruments.
![](http://www.sec.gov/Archives/edgar/data/1504796/000114420416076542/tbonitafairnessopinionlogo1.jpg)
Page 3 of 3
This opinion, the issuance of which has
been approved by our Fairness Opinion Committee, is for the use and benefit of the Independent Committee (in its capacity as such)
and is rendered to the Independent Committee in connection with its consideration of the Proposed Transaction. This opinion is
not intended to be and does not constitute a recommendation to any shareholder of the Company as to how such shareholder should
vote with respect to the Proposed Transaction.
|
Very truly yours, |
|
|
|
/s/ Vanessa Koo |
|
BARCLAYS BANK PLC |
ANNEX C
Cayman Islands Companies Law Cap. 22
(Law 3 of 1961, as consolidated and revised) – Section 238
238. Rights of
dissenters
| (1) | A member of a constituent company incorporated under this Law shall be entitled to payment of the fair value of his shares
upon dissenting from a merger or consolidation. |
| (2) | A member who desires to exercise his entitlement under subsection (1) shall give to the constituent company, before the vote
on the merger or consolidation, written objection to the action. |
| (3) | An objection under subsection (2) shall include a statement that the member proposes to demand payment for his shares if the
merger or consolidation is authorized by the vote. |
| (4) | Within twenty days immediately following the date on which the vote of members giving authorization for the merger or consolidation
is made, the constituent company shall give written notice of the authorization to each member who made a written objection. |
| (5) | A member who elects to dissent shall, within twenty days immediately following the date on which the notice referred to in
subsection (4) is given, give to the constituent company a written notice of his decision to dissent, stating- |
| (b) | the number and classes of shares in respect of which he dissents; and |
| (c) | a demand for payment of the fair value of his shares. |
| (6) | A member who dissents shall do so in respect of all shares that he holds in the constituent company. |
| (7) | Upon the giving of a notice of dissent under subsection (5), the member to whom the notice relates shall cease to have any
of the rights of a member except the right to be paid the fair value of his shares and the rights referred to in subsections (12)
and (16). |
| (8) | Within seven days immediately following the date of the expiration of the period specified in subsection (5), or within seven
days immediately following the date on which the plan of merger or consolidation is filed, whichever is later, the constituent
company, the surviving corporation or the consolidated company shall make a written offer to each dissenting member to purchase
his shares at a specified price that the company determines to be their fair value; and if, within thirty days immediately following
the date on which the offer is made, the company making the offer and the dissenting member agree upon the price to be paid for
his shares, the company shall pay to the member the amount in money forthwith. |
| (9) | If the company and a dissenting member fail, within the period specified in subsection (8), to agree on the price to be paid
for the shares owned by the member, within twenty days immediately following the date on which the period expires- |
| (a) | the company shall (and any dissenting member may) file a petition with the Court for a determination of the fair value of the
shares of all dissenting members; and |
| (b) | the petition by the company shall be accompanied by a verified list containing the names and addresses of all members who have
filed a notice under subsection (5) and with whom agreements as to the fair value of their shares have not been reached by the
company. |
| (10) | A copy of any petition filed under subsection (9)(a) shall be served on the other party; and where a dissenting member has
so filed, the company shall within ten days after such service file the verified list referred to in subsection (9)(b). |
| (11) | At the hearing of a petition, the Court shall determine the fair value of the shares of such dissenting members as it finds
are involved, together with a fair rate of interest, if any, to be paid by the company upon the amount determined to be the fair
value. |
| (12) | Any member whose name appears on the list filed by the company under subsection (9)(b) or (10) and who the Court finds are
involved may participate fully in all proceedings until the determination of fair value is reached. |
| (13) | The order of the Court resulting from proceeding on the petition shall be enforceable in such manner as other orders of the
Court are enforced, whether the company is incorporated under the laws of the Islands or not. |
| (14) | The costs of the proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances;
and upon application of a member, the Court may order all or a portion of the expenses incurred by any member in connection with
the proceeding, including reasonable attorney’s fees and the fees and expenses of experts, to be charged pro rata against
the value of all the shares which are the subject of the proceeding. |
| (15) | Shares acquired by the company pursuant to this section shall be cancelled and, if they are shares of a surviving corporation,
they shall be available for re-issue. |
| (16) | The enforcement by a member of his entitlement under this section shall exclude the enforcement by the member of any right
to which he might otherwise be entitled by virtue of his holding shares, except that this section shall not exclude the right of
the member to institute proceedings to obtain relief on the ground that the merger or consolidation is void or unlawful. |
ANNEX D
Directors and Executive Officers of Each
Filing Person
| I. | Directors and Executive Officers of the Company |
The Company is an exempted company with
limited liability incorporated under the laws of the Cayman Islands. The Company’s business address is at 18/F, Tower 1,
U-town Office Building, No.1 San Feng Bei Li, Chaoyang District Beijing 100020, the People's Republic of China (the “PRC”),
and its telephone number is +86-10-5631-0700.
The name,
present principal employment, business address and citizenship of each director and executive officer of the Company are set forth
below.
Name |
|
Present Principal Employment |
|
Business Address |
|
Citizenship |
Dong Yu |
|
Chairman of the Board of Directors and Chief Executive Officer of the Company |
|
18/F, Tower 1, U-town Office Building, No.1 San Feng Bei Li, Chaoyang District Beijing 100020, the PRC |
|
PRC |
|
|
|
|
|
|
|
Jeffrey Chan |
|
Director, Chief Operating Officer of the Company |
|
18/F, Tower 1, U-town Office Building, No.1 San Feng Bei Li, Chaoyang District Beijing 100020, the PRC |
|
British |
|
|
|
|
|
|
|
Donghui
Pan |
|
Director of the Company; Vice President of
Fosun International Limited and President of Fosun Internet & Global Strategy Group and Fosun TMT & Entertainment
Investment Group |
|
No. 2 East Fuxing Road, Shanghai 200010,
the PRC |
|
PRC |
|
|
|
|
|
|
|
Zhong Jiang |
|
General Manager of Hengji Jintai Real Estate Brokerage Co., Ltd. |
|
1/F Dongpei Building of No.1 Building, Yard 65, Xing Shi Kou Road, Haidian District, Beijing, the PRC |
|
PRC |
|
|
|
|
|
|
|
Daqing Dave Qi |
|
Professor of accounting and ex-associate dean of the Cheung Kong Graduate School of Business(1) |
|
Room 332, Tower E3, Oriental Plaza, 1 East Chang An Avenue, Beijing, the PRC |
|
Hong Kong |
|
|
|
|
|
|
|
Jie Lian |
|
A Founding Partner of the Primavera Capital Group(2) |
|
Primavera Capital Group, 28th Floor, 28 Hennessy Road, Hong Kong |
|
Hong Kong |
|
|
|
|
|
|
|
Peixin Xu |
|
Chairman of Huasheng Taitong Media Investment Co., Ltd(3) |
|
609-610, 21st Century Tower, 40 Liangmaqiao Road, Chaoyang District, Beijing 100016, the PRC |
|
PRC |
|
|
|
|
|
|
|
Nicolas Zhi Qi |
|
Chief Financial Officer of the Company(4) |
|
18/F, Tower 1, U-town Office Building, No.1 San Feng Bei Li, Chaoyang District Beijing 100020, the PRC |
|
PRC |
____________________________
| (1) | Daqing Dave Qi (“Dr. Qi”) serves as a director of Sohu.com Inc., a NASDAQ-listed company,
iKang Health Group Inc., a NASDAQ-listed company, Momo Inc., a NASDAQ-listed company. Honghua Group Limited, a company listed on
The Hong Kong Stock Exchange Limited, and SinoMedia Holding Limited, a company listed on The Hong Kong Stock Exchange Limited. |
| (2) | Mr. Jie Lian (“Mr. Lian”) serves as a non-executive director of China XLX Fertiliser
Ltd., a company listed on The Hong Kong Stock Exchange Limited and an independent director of Bosideng International Holdings Ltd.,
a company listed on The Hong Kong Stock Exchange Limited. Prior to Primavera, Mr. Lian held various positions at Goldman Sachs,
including managing director as Head of China Financing Group in the investment banking division in Hong Kong, from August 2001
until March 2009. |
| (3) | Mr. Peixin Xu (“Mr. Xu”) is also founder and chairman of Beijing Redbaby Info-Tech
Co., Ltd., a B2C e-commerce company mainly focusing on the maternal and infant products, a partner of venture capital fund New
Enterprise Associates, and a researcher at Peking University. Mr. Xu was a partner of venture capital fund New Enterprise Associates
from September 2008 until September 2012. From July 2013, Mr. Xu was founder and partner of Bison Capital Group, an investment
holding company headquartered in Beijing, specialized in investments in the media, travel and healthcare industries in China. He
also acted as a director of AirMedia Group, a NASDAQ-listed company, since January 2014. |
| (4) | Mr. Nicolas Zhi Qi (“Mr. Qi”) was our financial manager from April 2011 to September
2011 and our financial controller from October 2011 to July 2014. Prior to joining us, Mr. Qi served in the global internal audit
department of corporate governance function at SYNNEX Corporation, a multinational corporation, from 2008 to 2011. |
During the last five years, none of the
Company or any of our directors and executive officers has been (a) convicted in a criminal proceeding (excluding traffic violations
or similar misdemeanors) or (b) a party to any judicial or administrative proceeding (except for matters that were dismissed without
sanction or settlement) that resulted in a judgment or decree or final order enjoining the person from future violations of, or
prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities
laws.
| II. | Directors and Executive Officers of Parent and Merger
Sub |
Vantage Global Holdings Ltd is a limited
liability company organized under the laws of the British Virgin Islands and its registered address is Portcullis TrustNet (BVI)
Limited of Portcullis TrustNet Chambers, P.O. Box 3444, Road Town, Tortola, British Virgin Islands. Mr. Dong Yu (“Mr.
Yu”) is the sole member and sole director of Vantage Global Holdings Ltd.
Skillgreat Limited is a limited liability
company organized under the laws of the British Virgin Islands and its registered address is P.O. Box 957, Offshore Incorporations
Center, Road Town, Tortola, British Virgin Islands. Skillgreat Limited is wholly owned by Vantage Global Holdings Ltd, which
is wholly owned by Mr. Yu. Mr. Yu is the sole director of Skillgreat Limited.
During the last five years, none of the
Chairman Parties has been (a) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (b)
a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that
resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject
to, federal or state securities laws, or a finding of any violation of federal or state securities laws.
| III. | Directors and Executive Officers of the Chairman Parties |
Vantage Global Holdings Ltd is a limited
liability company organized under the laws of the British Virgin Islands and its registered address is Portcullis TrustNet (BVI)
Limited of Portcullis TrustNet Chambers, P.O. Box 3444, Road Town, Tortola, British Virgin Islands. Mr. Yu is the sole member and
sole director of Vantage Global Holdings Ltd.
Skillgreat Limited is a limited liability
company organized under the laws of the British Virgin Islands and its registered address is P.O. Box 957, Offshore Incorporations
Center, Road Town, Tortola, British Virgin Islands. Skillgreat Limited is wholly owned by Vantage Global Holdings Ltd, which is
wholly owned by Mr. Yu. Mr. Yu is the sole director of Skillgreat Limited.
During the last five years, none of the
Chairman Parties has been (a) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (b)
a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that
resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject
to, federal or state securities laws, or a finding of any violation of federal or state securities laws.
| IV. | Directors and Executive Officers of the Fosun Entities |
Fosun International Limited is a company
organized under the laws of Hong Kong with its principal business address at Room 808, ICBC Tower, 3 Garden Road, Central, Hong
Kong. The name, business address, present principal employment and citizenship of each director and executive officer of Fosun
International Limited is set forth below.
Fosun International Limited
Name |
|
Present Principal Employment |
|
Business Address |
|
Citizenship |
Guangchang Guo |
|
Executive Director and Chairman of Fosun International Limited |
|
No.2 East Fuxing Road, Shanghai, the PRC |
|
PRC |
Xinjun Liang |
|
Executive Director, Vice chairman and Chief Executive Officer of Fosun International Limited |
|
No.2 East Fuxing Road, Shanghai, the PRC |
|
PRC |
Qunbin Wang |
|
Executive Director and President of Fosun International Limited |
|
No.2 East Fuxing Road, Shanghai, the PRC |
|
PRC |
Guoqi Ding |
|
Executive Director and Senior Vice President of Fosun International Limited |
|
No.2 East Fuxing Road, Shanghai, the PRC |
|
PRC |
Xuetang Qin |
|
Executive Director and Senior Vice President of Fosun International Limited |
|
No.2 East Fuxing Road, Shanghai, the PRC |
|
PRC |
Qiyu Chen |
|
Executive Director and Vice President of Fosun International Limited |
|
No.2 East Fuxing Road, Shanghai, the PRC |
|
PRC |
Xiaoliang Xu |
|
Executive Director and Vice President of Fosun International Limited |
|
No.2 East Fuxing Road, Shanghai, the PRC |
|
PRC |
Shengman Zhang |
|
Independent Non-executive Director of Fosun International Limited; Chairman of Asia Pacific of Citigroup |
|
50/F Citibank Tower, Citibank Plaza, 3 Garden Road, Hong Kong |
|
Hong Kong |
Huaqiao Zhang |
|
Independent Non-executive Director of Fosun International Limited; Chairman of China Smartpay Group Holdings Limited |
|
Room 809, Hong Kong Plaza, 188 Connaught Road West, Hong Kong |
|
Hong Kong |
David T. Zhang |
|
Independent Non-executive Director of Fosun International Limited; Partner of Kirkland & Ellis LLP |
|
26th Floor, Gloucester Tower, The Landmark, 15 Queen’s Road Central, Hong Kong |
|
Hong Kong |
Chao Yang |
|
Independent Non-executive Director of Fosun International Limited |
|
N/A |
|
PRC |
Orrick Investments Limited is owned by Fosun
Industrial Holdings Limited. Orrick Investments Limited is a limited liability company organized under the laws of the British
Virgin Islands with its address of the registered office at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola,
British Virgin Islands. The name, business address, present principal employment and citizenship of each director and executive
officer of Orrick Investments Limited is set forth below.
Orrick Investments Limited
Name |
|
Present Principal Employment |
|
Business Address |
|
Citizenship |
Donghui Pan
|
|
Director of Orrick Investments Limited |
|
No.2 East Fuxing Road, Shanghai, the PRC |
|
PRC |
Jingyan Huang |
|
Director of Orrick Investments Limited |
|
No.2 East Fuxing Road, Shanghai, the PRC |
|
PRC |
Fosun Industrial Holdings Limited is wholly
owned by Fosun International Limited. Fosun Industrial Holdings Limited is organized under the laws of Hong Kong with its principal
business address at Room 808, ICBC Tower, 3 Garden Road, Central, Hong Kong.
Fosun Industrial Holdings Limited
Name |
|
Present Principal Employment |
|
Business Address |
|
Citizenship |
Guangchang
Guo |
|
Director of Fosun Industrial Holdings Limited |
|
No.2 East Fuxing Road, Shanghai, the PRC |
|
PRC |
During the last five (5) years, none of
the persons referred to above or any of their directors or officers (where applicable) have been (a) convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (b) a party to any judicial or administrative proceeding (except for
matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person
from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation
of federal or state securities laws.
| V. | Directors and Executive Officers of Sequoia Filing Persons |
Each of the Sequoia Entities and Sequoia
Capital is an exempted limited partnership organized under the laws of the Cayman Islands, and Sequoia Capital is the general partner
of each Sequoia Entity. The general partner of Sequoia Capital is SC China, an exempted company organized under the laws of the
Cayman Islands. SC China is wholly and directly owned by SNP China, a business company organized under the laws of British Virgin
Islands. SNP China is wholly and directly owned by Mr. Shen, a citizen of Hong Kong.
The principal occupation or employment of
each of the Sequoia Entities is to acquire, hold and dispose of interests in various companies for investment purposes and to take
all actions incident thereto. The principal occupation or employment of Sequoia Capital is to serve as general partner of each
Sequoia Entity. The principal occupation or employment of SC China is to serve as general partner of Sequoia Capital. The principal
occupation or employment of SNP China is to serve as the director of SC China. The principal occupation or employment of
Mr. Shen is to serve as the director of SNP China and he is the sole owner of SNP China.
The business address of each Sequoia Filing
Person is Suite 3613, 36/F, Two Pacific Place, 88 Queensway Road, Hong Kong, and their business telephone number is +852-2501-8989.
The name, business address, present principal employment and
citizenship of the directors of SC China are set forth below. As of the date of this proxy statement,
SC China does not have any executive officers.
Name |
|
Present Principal Employment |
|
Business Address |
|
Citizenship |
David Bree |
|
Director of SC China |
|
c/o dms Management Ltd.
P.O. Box 31910 SMB
20 Genesis Close
Grand Cayman KY1-1208
Cayman Islands |
|
British Overseas Territories |
Don Seymour |
|
Director of SC China |
|
c/o dms Management Ltd.
P.O. Box 31910 SMB
20 Genesis Close
Grand Cayman KY1-1208
Cayman Islands |
|
British Overseas Territories |
SNP China |
|
Director of SC China |
|
Suite 3613, 36/F, Two Pacific Place, 88 Queensway Road, Hong Kong |
|
British Virgin Islands |
The name, business address, present principal
employment and citizenship of the sole director of SNP China is set forth below. As of the date of this proxy statement, SNP
China does not have any executive officers.
Name |
|
Present
Principal Employment |
|
Business Address |
|
Citizenship |
Nan Peng Shen |
|
Founding Managing Partner of SC
China |
|
Suite 3613, 36/F, Two Pacific Place, 88 Queensway Road, Hong Kong |
|
Hong Kong |
During the last five (5) years, none of
the persons referred to above or any of their directors or officers (where applicable) have been (a) convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (b) a party to any judicial or administrative proceeding (except for
matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person
from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation
of federal or state securities laws.
| VI. | Directors and Executive Officers of SAIF |
Andrew Y. Yan (“Mr. 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 L.P., 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 Partners IV L.P. 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 Partners IV L.P. 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.
Mr. Yan has been the managing partner of
SAIF Advisors Limited for the past ten years. Mr. Yan is a citizen of Hong Kong.
During the last five (5) years, none of
the persons referred to above or any of their directors or officers (where applicable) have been (a) convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (b) a party to any judicial or administrative proceeding (except for
matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person
from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation
of federal or state securities laws.
| VII. | Directors and Executive Officers of Uranus |
Uranus Connection Limited is a company incorporated
with limited liability under the laws of the British Virgin Islands and is principally engaged in the investment holding business.
Uranus Connection
Limited is a direct wholly-owned subsidiary of Gstone Investment International Limited. The business address of Uranus Connection Limited
is c/o 17/F, CITIC Securities Tower, No. 48 Liangmaqiao Road, Chaoyang District, Beijing, the PRC.
Gstone Investment International Limited
is a company incorporated with limited liability under the laws of the British Virgin Islands which engages in investment holding
business. It is a direct wholly-owned subsidiary of Goldstone Investment International Limited. The registered office of Gstone
Investment International Limited is Sertus Chambers, P. O. Box 905, Quastisky Building, Road Town, Tortola, British Virgin Islands.
Goldstone Investment International Limited
is a company incorporated under the laws of Hong Kong which engages in investment holding business. It is a direct wholly-owned
subsidiary of Goldstone Boxin Investment Management Co., Ltd. The registered office of Goldstone Investment International Limited
is 1501(682), 15/F., SPA Centre, 53-55 Lockhart Road, Wanchai, Hong Kong.
Goldstone Boxin Investment Management
Co., Ltd. is a limited liability company incorporated under the laws of the PRC which engages in investment management and
consulting and investment holding business. It is a direct wholly-owned subsidiary of Goldstone Investment Co., Ltd. The
registered address of Goldstone Boxin Investment Management Co., Ltd. is 201, Block A, No.1 Qianwan 1st Road, Qianhai,
Shenzhen, the PRC. The business address of Goldstone Boxin Investment Management Co., Ltd. is c/o 17/F, CITIC Securities
Tower, No. 48 Liangmaqiao Road, Chaoyang District, Beijing, the PRC.
Goldstone Investment Co., Ltd. is a limited
liability company incorporated under the laws of the PRC which engages in private equity investments. It is a direct wholly-owned
subsidiary of CITIC Securities Company Limited. The registered and business address of Goldstone Investment Co., Ltd. is 17/F,
CITIC Securities Tower, No. 48 Liangmaqiao Road, Chaoyang District, Beijing, the PRC.
CITIC Securities Company Limited is the
ultimate controller of Uranus Connection Limited and is a joint stock company incorporated under the laws of the PRC which is a
China-based full-service investment bank that is listed on the Shanghai Stock Exchange. The registered address of CITIC Securities
Company Limited is CITIC Securities Tower, No. 8 Zhong Xin San Road, Futian District, Shenzhen, the PRC. The business address of
CITIC Securities Company Limited is CITIC Securities Tower, No. 48 Liangmaqiao Road, Chaoyang District, Beijing, the PRC.
The following table sets forth information
regarding the sole director and executive officer of Uranus Connection Limited, as of the date of this proxy statement:
Name |
|
Present
Principal Employment |
|
Business
Address |
|
Citizenship |
Shuguang Qi |
|
Sole Director of Uranus Connection Limited |
|
c/o 17/F, CITIC Securities Tower, No. 48 Liangmaqiao Road, Chaoyang District, Beijing, the PRC |
|
PRC |
Yao Sun |
|
Chief Executive Officer of Uranus Connection Limited |
|
c/o 17/F, CITIC Securities Tower, No. 48 Liangmaqiao Road, Chaoyang District, Beijing, the PRC |
|
United States |
For the past four years, Shuguang Qi
was the director and general manager of Goldstone Investment Co., Ltd., and sole director of Uranus Connection Limited since
its incorporation. For one year prior to that, she was the general manager of investment and management department of CITIC
Securities Company Limited.
From December 2010 to December
2013, Yao Sun was an employee of merger & acquisition department of CITIC Securities Company Limited. From January 2014,
Yao Sun has been working as an employee of Goldstone Investment Co., Ltd., and was appointed as the chief executive officer
of Uranus Connection Limited in October 2015.
The following table sets forth information
regarding the directors and executive officers of CITIC Securities Company Limited, as of the date of this proxy statement:
Name |
|
Present
Principal Employment |
|
Business
Address |
|
Citizenship |
Dongming Wang |
|
Director, Chairman of CITIC Securities Company Limited |
|
c/o CITIC Securities Tower, No. 8 Zhong Xin San Road, Futian District, Shenzhen, the PRC |
|
PRC |
|
|
|
|
|
|
|
Boming Cheng |
|
Director, General Manager of CITIC Securities Company Limited |
|
c/o CITIC Securities Tower, No. 8 Zhong Xin San Road, Futian District, Shenzhen, the PRC |
|
PRC |
|
|
|
|
|
|
|
Ke Yin |
|
Director, Vice Chairman of CITIC Securities Company Limited |
|
c/o CITIC Securities Tower, No. 8 Zhong Xin San Road, Futian District, Shenzhen, the PRC |
|
PRC |
|
|
|
|
|
|
|
Lefei Liu |
|
Director, Vice Chairman of CITIC Securities Company Limited |
|
c/o CITIC Securities Tower, No. 8 Zhong Xin San Road, Futian District, Shenzhen, the PRC |
|
PRC |
|
|
|
|
|
|
|
Jun Fang |
|
Director of CITIC Securities Company Limited; General manager of the Investment Management Department of China Life Insurance(Group) Company |
|
c/o CITIC Securities Tower, No. 8 Zhong Xin San Road, Futian District, Shenzhen, the PRC |
|
PRC |
|
|
|
|
|
|
|
Xiaoqiu Wu |
|
Independent Director of CITIC Securities Company Limited; Professor at Renmin University |
|
c/o CITIC Securities Tower, No. 8 Zhong Xin San Road, Futian District, Shenzhen, the PRC |
|
PRC |
|
|
|
|
|
|
|
Gangwei Li |
|
Independent Director of CITIC Securities Company Limited; |
|
c/o CITIC Securities Tower, No. 8 Zhong Xin San Road, Futian District, Shenzhen, the PRC |
|
PRC |
|
|
|
|
|
|
|
Geping Rao |
|
Independent Director of CITIC Securities Company Limited; Professor of Peking University |
|
c/o CITIC Securities Tower, No. 8 Zhong Xin San Road, Futian District, Shenzhen, the PRC |
|
PRC |
|
|
|
|
|
|
|
Xiaobo Ge |
|
Chief Finance Officer of CITIC Securities Company Limited; Managing Director |
|
c/o CITIC Securities Tower, No. 8 Zhong Xin San Road, Futian District, Shenzhen, the PRC |
|
PRC |
Dongming Wang currently serves as the Chairman
of CITIC Securities Company Limited, having previously served as a vice general manager and a general manager of CITIC Securities
Company Limited since 1995.
Boming Cheng currently serves as the general
manager of CITIC Securities Company Limited, having previously served as a secretary to the board, a vice president and an executive
vice general manager of CITIC Securities Company Limited since 2001.
Ke Yin currently serves as the vice chairman
of CITIC Securities Company Limited. He also serves as the chief executive officer of CITIC Securities International Company Limited
since February 2007. The principal business of CITIC Securities International Company Limited is brokerage and asset management
and its business address is Floor 26, CITIC Tower, No. 1 Tim Mei Avenue, Central, Hong Kong.
Lefei Liu currently serves as the vice chairman
of CITIC Securities Company Limited. He has also served as the chairman and the chief executive officer of CITIC Private Equity
Funds Management Co., Ltd. since October 2008. The principal business of this company is private equity funds management and its
business address is Floor 10 Jinbao Tower, No. 89 Jinbao Street, Dongcheng District, Beijing, the PRC.
Jun Fang has served as the general manager
of the Investment Management Department of China Life Insurance(Group) Company since February 2011, having previously served as
its vice general manager and assistant to general manager of this company since 2005. The principal business of this company is
investment management and its business address is Floor 22-28, China Life Center, No. 17 Financial Street, Xicheng District, Beijing,
the PRC.
Xiaoqiu Wu has been a professor of Renmin
University of China since October 1994. The address of Renmin University of China is No. 59 Zhongguancun Street, Haidian District,
Beijing, the PRC.
From 1980 to 2009, Gangwei Li was a partner
of Ernst & Young, the principal business of which is accounting service and its business address is Level 16, Ernst
& Young Tower Oriental Plaza No. 1 East Chang An Avenue, Dong Cheng District, Beijing, the PRC.
Geping Rao has been a professor of Peking
University since August 1994. The address of Peking University is No.5 Yiheyuan Road, Haidian District, Beijing, the PRC.
Xiaobo Ge currently serves as the chief
finance officer and managing director of CITIC Securities Company Limited, having previously served as a manager, a senior
manager, a vice general manager and an executive general manager of CITIC Securities Company Limited since 1997.
To the knowledge of Uranus, during the
last five (5) years, none of the persons referred to above or any of their directors or officers (where applicable) have
been (a) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (b) a party to
any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that
resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities
subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws.
| VIII. | Directors and Executive Officers of the Alibaba Entities |
The name, business address, present principal
employment and citizenship of directors and executive officers of Alibaba Pictures Group Limited and SAC Finance Company Limited
are set forth below.
Alibaba Pictures Group Limited
Name |
|
Present
Principal Employment |
|
Business
Address |
|
Citizenship |
Xiaofeng
Shao |
|
Executive Director
and Chairman of Alibaba Pictures Group Limited |
|
26/F,
Tower One, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong |
|
PRC |
|
|
|
|
|
|
|
Qiang
Zhang |
|
Executive Director
and Chief Executive Officer of Alibaba Pictures Group Limited |
|
26/F,
Tower One, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong |
|
PRC |
|
|
|
|
|
|
|
Kangming
Deng |
|
Executive Director
and Chief Operating Officer of Alibaba Pictures Group Limited |
|
26/F,
Tower One, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong |
|
PRC |
|
|
|
|
|
|
|
Wei
Zhang |
|
Executive Director
and President of Alibaba Pictures Group Limited |
|
26/F,
Tower One, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong |
|
USA |
|
|
|
|
|
|
|
Luyuan
Fan |
|
Executive Director
of Alibaba Pictures Group Limited |
|
26/F,
Tower One, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong |
|
PRC |
|
|
|
|
|
|
|
Lian
Jie Li |
|
Non-Executive
Director of Alibaba Pictures Group Limited and world-renowned martial artist, movie star and social entrepreneur |
|
26/F,
Tower One, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong |
|
Singapore |
|
|
|
|
|
|
|
Lixin
Song |
|
Independent
Non-Executive Director of Alibaba Pictures Group Limited and President of Talents Magazine |
|
26/F,
Tower One, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong |
|
PRC |
|
|
|
|
|
|
|
Xiaomeng
Tong |
|
Independent
Non-Executive Director of Alibaba Pictures Group Limited and Co-founder and Managing Partner of Boyu Capital |
|
26/F,
Tower One, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong |
|
Hong
Kong |
|
|
|
|
|
|
|
SAC
Finance Company Limited |
Name |
|
Present
Principal Employment |
|
Business
Address |
|
Citizenship |
Xiaofeng
Shao |
|
Director |
|
26/F,
Tower One, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong |
|
PRC |
|
|
|
|
|
|
|
Qiang
Zhang |
|
Director |
|
26/F,
Tower One, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong |
|
PRC |
|
|
|
|
|
|
|
Chunning
Liu |
|
Director |
|
26/F,
Tower One, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong |
|
PRC |
SAC Finance Company Limited does not have
any executive officers.
During the last five (5) years, none of the persons referred to above or any of their directors or officers (where
applicable) have been (a) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (b) a
party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement)
that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities
subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws.
IX. Directors and Executive Officers of the Tencent Entities
Tencent Holdings Limited
The names of the directors and the names
and titles of the executive officers of Tencent Holdings Limited and their principal occupations are set forth below. The business
address of each of the directors or executive officers is c/o Tencent Holdings Limited, 29/F., Three Pacific Place, No. 1 Queen’s
Road East, Wanchai, Hong Kong. Unless otherwise indicated, each occupation set forth opposite an individual’s name refers
to Tencent Holdings Limited.
Name |
Present
Principal Employment |
Business
Address |
Citizenship |
Huateng Ma |
Chairman of the Board, Chief Executive Officer of Tencent Holdings Limited |
c/o Tencent Holdings Limited, 29/F., Three
Pacific Place, No. 1 Queen’s Road East, Wanchai, Hong Kong
|
PRC |
Lau Chi Ping Martin |
President |
c/o Tencent Holdings Limited, 29/F., Three Pacific Place, No.
1 Queen’s Road East, Wanchai, Hong Kong
|
Hong Kong |
Charles St Leger Searle |
Director of Tencent Holdings Limited |
c/o Tencent Holdings Limited, 29/F., Three Pacific Place, No.
1 Queen’s Road East, Wanchai, Hong Kong
|
Republic of South Africa |
Jacobus Petrus (Koos) Bekker |
Director of Tencent Holdings Limited |
c/o Tencent Holdings Limited, 29/F., Three Pacific Place, No.
1 Queen’s Road East, Wanchai, Hong Kong
|
Republic of South Africa |
Dong Sheng Li |
Director of Tencent Holdings Limited |
c/o Tencent Holdings Limited, 29/F., Three Pacific Place, No.
1 Queen’s Road East, Wanchai, Hong Kong
|
PRC |
Iain Ferguson Bruce |
Director of Tencent Holdings Limited |
c/o Tencent Holdings Limited, 29/F., Three Pacific Place, No.
1 Queen’s Road East, Wanchai, Hong Kong
|
Hong Kong |
Ian Charles Stone |
Director of Tencent Holdings Limited |
c/o Tencent Holdings Limited, 29/F., Three Pacific Place, No. 1 Queen’s Road East, Wanchai, Hong Kong |
Hong Kong |
David A.M. Wallerstein |
Chief Exploration Officer and Senior Executive Vice President of Tencent Holdings Limited |
c/o Tencent Holdings Limited, 29/F., Three Pacific Place, No. 1 Queen’s Road East, Wanchai, Hong Kong |
United States |
Chenye Xu |
Chief Information Officer of Tencent Holdings Limited |
c/o Tencent Holdings Limited, 29/F., Three Pacific Place, No.
1 Queen’s Road East, Wanchai, Hong Kong
|
PRC |
Yuxin Ren |
Chief Operating Officer of Tencent Holdings Limited |
c/o Tencent Holdings Limited, 29/F., Three Pacific Place, No.
1 Queen’s Road East, Wanchai, Hong Kong
|
PRC |
James Gordon Mitchell |
Chief Strategy Officer and Senior Executive Vice President of Tencent Holdings Limited |
c/o Tencent Holdings Limited, 29/F., Three Pacific Place, No. 1 Queen’s Road East, Wanchai, Hong Kong |
United Kingdom of Great Britain and
Northern Ireland |
John Shek Hon Lo |
Chief Financial Officer and Senior Vice President of Tencent Holdings Limited |
c/o Tencent Holdings Limited, 29/F., Three Pacific Place, No. 1 Queen’s Road East, Wanchai, Hong Kong |
Hong Kong |
Oriental Power Holdings Limited
The directors for Oriental Power are Huateng
Ma and Charles St Leger Searle and their details are as follows:
Name |
|
Present Principal Employment |
|
Business Address |
|
Citizenship |
Huateng Ma |
|
Director |
|
c/o Tencent Holdings Limited, 29/F., Three Pacific Place, No. 1 Queen’s Road East, Wanchai, Hong Kong |
|
PRC |
|
|
|
|
|
|
|
Charles St Leger Searle |
|
Director |
|
c/o Tencent Holdings Limited, 29/F., Three Pacific Place, No. 1 Queen’s Road East, Wanchai, Hong Kong |
|
Republic of South Africa |
Oriental Power does not have any executive
officers.
Willow Investment Limited
The directors for Willow are Huateng Ma
and Charles St Leger Searle and their details are as follows:
Name |
|
Present Principal Employment |
|
Business Address |
|
Citizenship |
Huateng Ma |
|
Director |
|
c/o Tencent Holdings Limited, 29/F., Three Pacific Place, No. 1 Queen’s Road East, Wanchai, Hong Kong |
|
PRC |
|
|
|
|
|
|
|
Charles St Leger Searle |
|
Director |
|
c/o Tencent Holdings Limited, 29/F., Three Pacific Place, No. 1 Queen’s Road East, Wanchai, Hong Kong |
|
Republic of South Africa |
Willow does not have any executive officers.
During the last five (5) years, none of
the persons referred to above or any of their directors or officers (where applicable) have been (a) convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (b) a party to any judicial or administrative proceeding (except for
matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person
from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation
of federal or state securities laws.
| X. | Directors and Executive Officers of the All Gain Parties |
All Gain Ventures Limited is a company with
limited liability incorporated under the laws of the British Virgin Islands. The address of its principal office is c/o Global
Incorporations Limited, Suite 1107, Office Tower C1, Oriental Plaza, No.1 East Chang An Avenue, Beijing 100738, the PRC. Mr.
Zhanshan Xie is the sole member and sole director of All Gain Ventures Limited.
During the last five (5) years, none of
the persons referred to above or any of their directors or officers (where applicable) have been (a) convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (b) a party to any judicial or administrative proceeding (except for
matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person
from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation
of federal or state securities laws.
Annex E
DEPOSITARY'S NOTICE
Deutsche Bank Trust Company
Americas
Trust & Securities Services
Global Equity Services
DEPOSITARY RECEIPTS
Depositary’s Notice of Extraordinary General Meeting of
the Company of Bona Film Group Limited:
|
|
|
Issue: |
|
Bona Film Group Limited / CUSIP: 09777B107 |
Country: |
|
Cayman Islands |
Meeting Details: |
|
Extraordinary General Meeting of Bona Film Group Limited to be held on ___, 2016, _____A.M. (Beijing time) at 18/F, Tower 1, U-town Office Building, No. 1 San Feng Bei Li, Chaoyang District, Beijing 100020, the People's Republic of China. |
Meeting Agenda: |
|
The Company's Notice of Meeting is attached |
Voting Deadline: |
|
On or before ___, 2016 at ______ P.M. (New York City time) |
ADS Record Date: |
|
___, 2016 |
Ordinary : ADS Ratio |
|
1 Ordinary Share : 2 ADSs |
Holders
of American Depositary Receipts (ADRs) representing ordinary shares (the "Deposited Securities") of Bona
Film Group Limited (the “Company”) are hereby notified of the Company's Extraordinary General Meeting of shareholders.
A copy of the Notice of Meeting from the Company is attached.
Holders
of record of ADRs as of the close of business on the ADS Record Date will be entitled, subject to any applicable law, the Deposit
Agreement, the Company's Memorandum and Articles of Association and the provisions of or governing Deposited Securities (which
provisions, if any, shall be summarized in pertinent part by the Company), to instruct Deutsche Bank Trust Company Americas, as
Depositary (the "Depositary"), as to the exercise of voting rights, if any, pertaining to the Deposited Securities
represented by their respective ADRs. Voting instructions may be given only in respect of a number of American Depositary Shares
representing an integral number of Shares or other Deposited Securities. Upon the timely receipt of written instructions of a Holder
of American Depositary Shares on the ADS Record Date of voting instructions in the manner specified by the Depositary, the Depositary
shall endeavor, insofar as practicable and permitted under applicable law, the provisions of the Deposit Agreement, the Company's
Memorandum and Articles of Association and the provisions of or governing the Deposited Securities, to vote or cause the Custodian
to vote the Shares and/or other Deposited Securities (in person or by proxy) represented by American Depositary Shares evidenced
by such Receipt in accordance with such voting instructions. Neither the Depositary nor the Custodian shall, under any circumstances
exercise any discretion as to voting, and neither the Depositary nor the Custodian shall vote, or attempt to exercise the right
to vote, or in any way make use of for purposes of establishing a quorum or otherwise, the Shares or other Deposited Securities
represented by ADSs except pursuant to and in accordance with such written instructions from Holders. Notwithstanding the above,
save for applicable provisions of the law of the Cayman Islands, the Depositary shall not be liable for any failure to carry out
any instructions to vote any of the Deposited Securities or for the manner in which such vote is cast or the effect of any such vote.
Deutsche Bank—Depositary Receipts
ANNEX F
FORM OF PROXY CARD – SHAREHOLDERS
ONLY
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF Bona
Film Group Limited
FOR EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS
TO BE HELD ON ________, ________
The undersigned registered shareholder of Bona Film Group Limited,
a Cayman Islands company (the “Company”), hereby acknowledges receipt of the notice of extraordinary general meeting
of shareholders and proxy statement, each dated ________, ________, and hereby appoints the chairman of the extraordinary general
meeting as proxy, with full power to each of substitution, on behalf and in the name of the undersigned, to represent the undersigned
at the extraordinary general meeting of shareholders of the Company to be held on ________, ________ at ____ a.m. (Beijing Time),
at the Company’s office at 18/F, Tower 1, U-town Office Building, No. 1 San Feng Bei Li, Chaoyang District, Beijing 100020,
the People's Republic of China, and at any adjournment or adjournments thereof, and to vote all ordinary shares which the undersigned
would be entitled to vote if then and there personally present, on the matters set forth below (i) as specified by the undersigned
below and (ii) in the discretion of the proxy upon such other business as may properly come before the meeting, all as set forth
in the notice of annual general meeting and in the proxy statement furnished herewith.
This proxy when properly executed will be voted in the manner
directed herein by the undersigned shareholder. If no direction is made, this proxy will be voted “FOR” the following
proposals:
PROPOSAL 1: As a special resolution, authorize and approve
the agreement and plan of merger, dated as of December 15, 2015 (the “merger agreement”) among the Company, Mountain
Tiger International Limited and Mountain Tiger Limited (“Merger Sub”) (such merger agreement being substantially in
the form attached to the proxy statement and which will be produced and made available for inspection at the extraordinary general
meeting), the plan of merger among the Company and Merger Sub required to be registered with the Registrar of Companies of the
Cayman Islands for the purposes of the merger and any and all transactions contemplated by the merger agreement, including the
merger, and the amendment and restatement of the existing memorandum and articles of association of the Company by their deletion
in their entirety and the substitution in their place of a new memorandum and articles of association at the effective time of
the merger, a copy of which is attached as Appendix II to the plan of merger.
FOR |
AGAINST |
ABSTAIN
|
¨ |
¨ |
¨ |
PROPOSAL 2: As a special resolution, authorize each of the
members of the Independent Committee of the board of directors of the Company to do all things necessary to give effect to the
merger agreement, the plan of merger and the transactions contemplated by the merger agreement, including the merger.
FOR |
AGAINST |
ABSTAIN
|
¨ |
¨ |
¨ |
PROPOSAL 3: As an ordinary resolution, instruct the chairman
of the extraordinary general meeting to adjourn the extraordinary general meeting in order to allow the Company to solicit additional
proxies in the event that there are insufficient proxies received at the time of the extraordinary general meeting to pass the
special resolutions to be proposed at the extraordinary general meeting.
FOR |
AGAINST |
ABSTAIN
|
¨ |
¨ |
¨ |
Dated: ________, ________ |
|
|
|
Shareholder Name: |
|
Co-Owner Name (if applicable): |
|
|
|
|
|
|
|
|
|
Shareholder Signature |
|
Co-Owner Signature |
|
This Proxy Card must be signed by the person registered in the
register of members at the close of business on ________, ________ (Cayman Islands Time). In the case of a corporation, this Proxy
Card must be executed by a duly authorized officer or attorney.
annex
G
Extraordinary General Meeting of Shareholders
ADS Holder's Voting Instruction Card
![](http://www.sec.gov/Archives/edgar/data/1504796/000114420416076542/tlogo1.jpg)
(Name of ADS holder) |
|
|
|
|
|
(Address of ADS holder) |
|
|
|
|
|
(Number of ADSs held) |
|
Resolution presented for consideration by the Extraordinary
General Meeting of Shareholders on ___, 2016
PROPOSAL 1: As a special resolution, authorize and approve
the agreement and plan of merger, dated as of December 15, 2015 (the “merger agreement”) among the Company, Mountain
Tiger International Limited and Mountain Tiger Limited (“Merger Sub”) (such merger agreement being substantially in
the form attached to the proxy statement and which will be produced and made available for inspection at the extraordinary general
meeting), the plan of merger among the Company and Merger Sub required to be registered with the Registrar of Companies of the
Cayman Islands for the purposes of the merger and any and all transactions contemplated by the merger agreement, including the
merger, and the amendment and restatement of the existing memorandum and articles of association of the Company by their deletion
in their entirety and the substitution in their place of a new memorandum and articles of association at the effective time of
the merger, a copy of which is attached as Appendix II to the plan of merger.
FOR |
AGAINST |
ABSTAIN |
|
|
|
¨ |
¨ |
¨ |
PROPOSAL 2: As a special resolution, authorize each of the
members of the Independent Committee of the board of directors of the Company to do all things necessary to give effect to the
merger agreement, the plan of merger and the transactions contemplated by the merger agreement, including the merger.
FOR |
AGAINST |
ABSTAIN |
|
|
|
¨ |
¨ |
¨ |
PROPOSAL 3: As an ordinary resolution, instruct the chairman
of the extraordinary general meeting to adjourn the extraordinary general meeting in order to allow the Company to solicit additional
proxies in the event that there are insufficient proxies received at the time of the extraordinary general meeting to pass the
special resolutions to be proposed at the extraordinary general meeting.
FOR |
AGAINST |
ABSTAIN |
|
|
|
¨ |
¨ |
¨ |
![](http://www.sec.gov/Archives/edgar/data/1504796/000114420416076542/tlogo2.jpg)
Bona Film Grp. Limited ADS (MM) (NASDAQ:BONA)
過去 株価チャート
から 5 2024 まで 6 2024
Bona Film Grp. Limited ADS (MM) (NASDAQ:BONA)
過去 株価チャート
から 6 2023 まで 6 2024