UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
SCHEDULE 13E-3
RULE 13e-3 TRANSACTION
STATEMENT UNDER SECTION 13(E)
OF THE SECURITIES EXCHANGE
ACT OF 1934
Country Style Cooking
Restaurant Chain Co., Ltd.
(Name of the Issuer)
|
Country Style Cooking
Restaurant Chain Co., Ltd.
Country Style Cooking
Restaurant Chain Holding Limited
Country Style Cooking
Restaurant Chain Merger Company Limited
Ms. Hong Li
Mr. Xingqiang Zhang
Mr. Zhiyun Peng
Mr. Zhiyong Hong
Regal Fair Holdings
Limited
Sky Success Venture
Holdings Limited |
(Names of Persons Filing
Statement)
Ordinary Shares, par
value $0.001 per share
American Depositary
Shares, each representing four Ordinary Shares
(Title of Class of
Securities)
22238M109
(CUSIP Number)
|
Country Style Cooking
Restaurant Chain Co., Ltd.
Country Style Cooking Restaurant Chain Holding Limited
Country Style Cooking
Restaurant Chain Merger Company Limited
16th Floor, C1 Building,
Chongqing Headquarters
City District C
No.780 Jingwei Avenue,
Yuzhong District
Chongqing 400020
the People’s Republic
of China
Tel: +86-23-8866-8866 |
|
Hong Li
Xingqiang Zhang
Regal Fair Holdings
Limited
c/o Country Style Cooking
Restaurant Chain Co., Ltd.
16th Floor, C1 Building,
Chongqing Headquarters
City District C
No.780 Jingwei Avenue,
Yuzhong District
Chongqing 400020
the People’s Republic
of China
Tel: +86-23-8866-8866 |
| |
|
|
|
Zhiyun Peng
Zhiyong Hong
Sky Success Venture
Holdings Limited
c/o Sky Success Venture
Holdings Limited
13/F, No. 609 Yunling
East Road,
Putuo District, Shanghai
20062
the People’s
Republic of China
Tel: +86-21-3250-8855 |
|
|
(Name, Address and
Telephone Number of Person Authorized to Receive Notices and Communications)
With copies to:
David T. Zhang, Esq.
Jesse Sheley, Esq.
Kirkland & Ellis
26th Floor, Gloucester Tower
The Landmark
15 Queen’s Road, Central
Hong Kong
|
Z. Julie Gao, Esq.
Skadden, Arps, Slate, Meagher & Flom
LLP
42/F, Edinburgh Tower
The Landmark
15 Queen’s Road, Central
Hong Kong
|
Peter X. Huang, Esq.
Skadden, Arps, Slate, Meagher &
Flom LLP
30/F, China World Office 2
No. 1, Jianguomenwai Avenue
Chaoyang District
Beijing 100004
the People’s Republic of China |
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. |
| |
|
| ¨ |
|
A tender offer |
| |
|
| x |
|
None of the above |
Check the following box
if the soliciting materials or information statement referred to in checking box (a) are preliminary copies: ¨
Check the following box
if the filing is a final amendment reporting the results of the transaction: ¨
Calculation of Filing
Fee
| Transactional Valuation* |
|
Amount of Filing Fee** |
| |
|
|
| $45,502,090.71 |
|
$4,582.06 |
* Calculated solely for
the purpose of determining the filing fee in accordance with Rule 0-11(b)(1) under the Securities Exchange Act of 1934, as amended.
The filing fee is calculated based on the sum of (a) the aggregate cash payment for the proposed per share cash payment of $1.3075
for 33,632,236 outstanding Shares and 955,232 restricted Shares of the issuer and subject to the transaction plus (b) the product
of options to purchase 907,240 Shares multiplied by $0.3075 per option (which is the difference between the $1.3075 per share merger
consideration and the weighted average exercise price of $1 per share) ((a) and (b) together, the “Transaction Valuation”).
** The amount of the
filing fee, calculated in accordance with Exchange Act Rule 0-11(b)(1) and the Securities and Exchange Commission Fee Rate Advisory
#1 for Fiscal Year 2016, was calculated by multiplying the Transaction Valuation by 0.0001007.
| ¨ |
Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting of the fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
Table
of Contents
INTRODUCTION
This Rule 13e-3 transaction
statement on Schedule 13E-3, together with the exhibits hereto (this “Transaction Statement”), is being filed with
the Securities and Exchange Commission (the “SEC”) pursuant to Section 13(e) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), jointly by the following persons (each, a “Filing Person,” and collectively,
the “Filing Persons”): (a) Country Style Cooking Restaurant Chain Co., Ltd., an exempted company with limited liability
incorporated under the laws of the Cayman Islands (the “Company”), the issuer of the ordinary shares, par value US$0.001
per share (each, a “Share” and collectively, the “Shares”), including the Shares represented by the American
depositary shares, each representing four Shares (“ADSs”), that is subject to the transaction pursuant to Rule 13e-3
under the Exchange Act; (b) Country Style Cooking Restaurant Chain Holding Company Limited, an exempted company with limited liability
incorporated under the laws of the Cayman Islands (“Parent”); (c) Country Style Cooking Restaurant Chain Merger Company
Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands that is wholly-owned by Parent
(“Merger Sub”); (d) Ms. Hong Li, the co-founder and chairwoman of the board of directors of the Company (“Ms.
Li” or the “Chairwoman”); (e) Mr. Xingqiang Zhang, the co-founder, chief executive officer, chief operating officer,
acting chief financial officer and a director of the Company (“Mr. Zhang”); (f) Mr. Zhiyun Peng, a director of the
Company (“Mr. Peng”); (g) Mr. Zhiyong Hong, a joint owner of Sky Success Venture Holdings Limited (“Mr. Hong”);
(h) Regal Fair Holdings Limited, a British Virgin Islands company jointly owned by Ms. Li and Mr. Zhang (“Regal Fair”);
and (i) Sky Success Venture Holdings Limited, a British Virgin Islands company jointly owned by Mr. Peng, Mr. Hong, Mr. Jinjing
Hong and Mr. Lipeng Deng (“Sky Success”). Filing Persons (d) through (i), together with SIG China Investments One,
Ltd., a Cayman Islands company ("SIG China"), are collectively referred to herein as the “Rollover Shareholders.”
Filing Persons (b) through (i) are collectively referred to herein as the “Buyer Group.”
On December 17, 2015,
Parent, Merger Sub and the Company entered into an agreement and plan of merger (the “merger agreement”) which included
a plan of merger required to be filed with the Registrar of Companies of the Cayman Islands, substantially in the form attached
as Annex A to the merger agreement (the “plan of merger”). If the merger agreement and the plan of merger are approved
and authorized by the Company’s shareholders and the other conditions to the closing of the merger (as described below) are
met, Merger Sub will merge with and into the Company (the “merger”), with the Company continuing as the surviving company
after the merger.
Under the terms of
the merger agreement, at the effective time of the merger, each outstanding Share (including Shares represented by ADSs), other
than (a) Shares (and the Shares represented by ADSs) beneficially owned by the Rollover Shareholders (such Shares collectively,
the “Rollover Shares”), (b) Shares (including Shares represented by ADSs) owned by Parent, Merger Sub or the Company
(as treasury shares, 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 of Company
Share Awards (as defined below) under the Share Incentive Plan (as defined below), and (d) Shares owned by shareholders who have
validly exercised and have not effectively withdrawn or lost their dissenters’ 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”), will be cancelled and cease to exist in exchange for the right to receive $1.3075
in cash without interest, and for the avoidance of doubt, because each ADS represents four Shares, each issued and outstanding
ADS (other than any ADS representing Excluded Shares) will represent the right to surrender the ADS in exchange for $5.23 in cash
per ADS without interest (less $0.05 per ADS cancellation fees pursuant to the terms of the deposit agreement, dated as of October
1, 2010, by and among the Company, Citibank, N.A. (the “ADS depositary”), and the holders and beneficial owners of
ADSs issued thereunder), in each case, net of any applicable withholding taxes. The Excluded Shares other than Dissenting Shares
will be cancelled and cease to exist without payment of any consideration or distribution therefor. The Dissenting Shares will
be cancelled and cease to exist and each holder thereof will be entitled to receive only the payment of the fair value of such
Dissenting Shares as determined in accordance with the Cayman Islands Companies Law.
At the effective time
of the merger, each share option (“Company Share Option”) or restricted share (“Company Restricted Share”)
(each a “Company Share Award”) issued by the Company pursuant to the Company’s 2009 Share Incentive Plan (the
“Share Incentive Plan”) other than the Company Share Awards owned by the Rollover Shareholders (which shall
be treated in accordance with the Rollover Agreement as defined below) that is outstanding and unexercised, whether vested or not
vested or exercisable, will be cancelled in exchange for (i) with respect to a Company Share Option, a cash amount to be paid by
the surviving company or one of its subsidiaries, as soon as practicable after the effective time of the merger (without interest)
equal to the product of (1) the excess, if any, of $1.3075 over the exercise price of such Company Share Option multiplied by (2)
the number of shares underlying such Company Share Option; provided that if the exercise price of any such Company Share Option
is equal to or greater than the $1.3075, such Company Share Option shall be cancelled without any payment therefor; and (ii) with
respect to a Company Restricted Share, for a cash amount equal to the $1.3075.
Under the terms of
the rollover agreement entered into by and among Parent and the Rollover Shareholders (the “Rollover Agreement”) concurrently
with the execution and delivery of the merger agreement immediately prior to the closing of the merger, the Rollover Shares shall
be cancelled and each Rollover Shareholder shall subscribe for the number of ordinary shares in Parent as set forth in the Rollover
Agreement. Pursuant to the Rollover Agreement, immediately prior to the closing of the merger, Parent shall become wholly beneficially
owned by the Rollover Shareholders and/or their affiliate(s).
The merger remains
subject to the satisfaction or waiver of the conditions set forth in the merger agreement, including obtaining the requisite authorization
and approval of the shareholders of the Company. In order for the merger to be completed, the merger agreement, the plan of merger
and the merger must be authorized and approved by a special resolution (as defined in the Cayman Islands Companies Law) of the
Company’s shareholders, which requires an affirmative vote of such shareholders representing two-thirds or more of the Shares
(including Shares represented by ADSs) present and voting in person or by proxy as a single class at the extraordinary general
meeting of the 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.
The information set
forth in the proxy statement under the following captions is incorporated herein by reference:
| · | “Questions and Answers about the Extraordinary General Meeting and the Merger” |
| Item 2 | Subject Company Information |
| (a) | Name and Address. The information set forth in the proxy statement under the following caption
is incorporated herein by reference: |
| · | “Summary Term Sheet—The Parties Involved in the Merger” |
| (b) | Securities. The information set forth in the proxy statement under the following captions is incorporated
herein by reference: |
| · | “The Extraordinary General Meeting—Record Date; Shares and ADSs Entitled to Vote” |
| · | “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 Company’s 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 Company’s 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. Country Style Cooking Restaurant Chain Co., Ltd. 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: |
| · | “Questions and Answers about the Extraordinary General Meeting and the Merger” |
| · | “The Extraordinary General Meeting” |
| · | “The Merger Agreement and Plan of Merger” |
| · | “Annex A—Agreement and Plan of Merger” |
| (b) | 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) | Appraisal Rights. The information set forth in the proxy statement under the following captions
is incorporated herein by reference: |
| · | “Summary Term Sheet—Dissenters’ Rights of Shareholders” |
| · | “Questions and Answers about the Extraordinary General Meeting and the Merger” |
| · | “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—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 Special Committee
and Our Board of Directors” |
| · | “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—Rollover 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—Interests of Certain Persons in the Merger” |
| · | “Special Factors—Voting by the Voting 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 |
| (b) | Use of Securities Acquired. The information set forth in the proxy statement under the following
captions is incorporated herein by reference: |
| · | “Questions and Answers about the Extraordinary General Meeting and the Merger” |
| · | “Special Factors— 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 Special Committee
and Our Board of Directors” |
| · | “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 Special Committee
and Our Board of Directors” |
| · | “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 Special Committee
and Our Board of Directors” |
| · | “Special Factors—Position as to the Fairness of the Merger” |
| · | “Special Factors— Buyer Group’s Purpose of and Reasons for the Merger” |
| · | “Special Factors—Effects on the Company if the Merger is not Completed” |
| (c) | Reasons. The information set forth in the proxy statement under the following captions is
incorporated herein by reference: |
| · | “Summary Term Sheet—Purposes and Effects of the Merger” |
| · | “Special Factors—Background of the Merger” |
| · | “Special Factors—Reasons for the Merger and Recommendation of the Special Committee
and Our Board of Directors” |
| · | “Special Factors—Position 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” |
| · | “Special Factors—Alternatives to the Merger” |
| (d) | Effects. The information set forth in the proxy statement under the following captions is
incorporated herein by reference: |
| · | “Summary Term Sheet—Purposes and Effects of the Merger” |
| · | “Special Factors—Background of the Merger” |
| · | “Special Factors—Reasons for the Merger and Recommendation of the Special Committee
and Our Board of Directors” |
| · | “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—U.S. Federal Income Tax Consequences” |
| · | “Special Factors—PRC Tax Consequences” |
| · | “Special Factors—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 is incorporated herein by reference:
| · | “Summary Term Sheet—Recommendations of the Special Committee and the Board of Directors” |
| · | “Summary Term Sheet—Position as to Fairness” |
| · | “Summary Term Sheet—Interests of the Company’s Executive Officers and Directors
in the Merger” |
| · | “Special Factors—Background of the Merger” |
| · | “Special Factors—Reasons for the Merger and Recommendation of the Special Committee
and Our Board of Directors” |
| · | “Special Factors—Position as to the Fairness of the Merger” |
| · | “Special Factors—Opinion of the Special Committee’s Financial Advisor” |
| · | “Special Factors—Interests of Certain Persons in the Merger” |
| · | “Annex B—Opinion of Duff & Phelps, LLC 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 Special Committee
and Our Board of Directors” |
| · | “Special Factors—Opinion of the Special Committee’s Financial Advisor” |
| (e) | Approval of Directors. The information set forth in the proxy statement under the following
captions is incorporated herein by reference: |
| · | “Summary Term Sheet—Recommendations of the Special Committee and the Board of Directors” |
| · | “Questions and Answers about the Extraordinary General Meeting and the Merger” |
| · | “Special Factors—Background of the Merger” |
| · | “Special Factors—Reasons for the Merger and Recommendation of the Special Committee
and Our Board of Directors” |
| (f) | Other Offers. The information set forth in the proxy statement under the following captions
is incorporated herein by reference: |
| · | “Special Factors—Background of the Merger” |
| · | “Special Factors—Reasons for the Merger and Recommendation of the Special Committee
and Our Board of Directors” |
| 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 Special Committee’s Financial Advisor” |
| · | “Special Factors—Background of the Merger” |
| · | “Special Factors—Opinion of the Special Committee’s Financial Advisor” |
| · | “Annex B—Opinion of Duff & Phelps, LLC 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 Special Committee’s Financial Advisor” |
| · | “Annex B—Opinion of Duff & Phelps, LLC 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 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” |
| · | “Questions and Answers about the Extraordinary General Meeting and the Merger” |
| · | “Special Factors—Voting by the Voting Shareholders at the Extraordinary General Meeting” |
| · | “The Extraordinary General Meeting—Vote Required” |
| · | “Security Ownership of Certain Beneficial Owners and Management of the Company” |
| (e) | Recommendations of Others. The information set forth in the proxy statement under the following
captions is incorporated herein by reference: |
| · | “Summary Term Sheet—Recommendations of the Special Committee and the Board of Directors” |
| · | “Summary Term Sheet—Position as to Fairness” |
| · | “Summary Term Sheet—Share Ownership of the Company Directors and Officers and Voting
Commitments” |
| · | “Special Factors—Reasons for the Merger and Recommendation of the Special Committee
and Our Board of Directors” |
| · | “Special Factors—Position 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 as of December 31, 2013 and 2014, and for the years
ended December 31, 2012, 2013 and 2014 included in the Company's Annual Report on Form 20-F for the year ended December 31,
2014 filed with the SEC on April 20, 2015. The unaudited consolidated financial statements as of September 30, 2014 and for the
three-month period ended September 30, 2014 included in the Company’s 2014 third quarter earnings release furnished with
the SEC on Form 6-K on November 14, 2014. The unaudited consolidated financial statements as of March 31, 2015 and for the three-month
period ended March 31, 2015 included in the Company’s 2015 first quarter earnings release furnished with the SEC on Form
6-K on May 18, 2015. The unaudited consolidated financial statements of the Company as of June 30, 2015 and for the three-month
period ended June 30, 2015 included in the Company’s 2015 second quarter earnings release furnished with the SEC on Form
6-K on August 20, 2015. The unaudited consolidated financial statements of the Company for the as of September 30, 2015 and for
the three-month period ended September 30, 2015 included in the Company’s 2015 third quarter earnings release furnished with
the SEC on Form 6-K on November 20, 2015. |
The information
set forth in the proxy statement under the following captions is incorporated herein by reference:
| · | “Where You Can Find More Information” |
| (b) | Pro Forma Information. Not applicable. |
| Item 14 | Persons/Assets, Retained, Employed, Compensated or Used |
| (a) | Solicitation or Recommendations. The information set forth in the proxy statement under the following
caption is incorporated herein by reference: |
| · | “The Extraordinary General Meeting—Solicitation of Proxies” |
| (b) | Employees and Corporate Assets. The information set forth in the proxy statement under the following
captions is incorporated herein by reference: |
| · | “Summary Term Sheet—The Parties Involved in the Merger” |
| · | “Special Factors—Interests of Certain Persons in the Merger” |
| · | “Annex 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) Form
of Proxy Card, incorporated herein by reference to the proxy statement.
(a)-(4) Form
of Depositary’s Notice, incorporated herein by reference to the proxy statement.
(a)-(5) Form
of ADS Voting Instructions Card, incorporated herein by reference to the proxy statement.
(a)-(6) Press
Release issued by the Company, dated December 18, 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 18, 2015.
(b)-(1) Commitment
Letter, dated as of December 17, 2015, by and among China Merchants Bank Co., Ltd., New York Branch, Parent and Merger Sub.
(c)-(1) Opinion
of Duff & Phelps, LLC dated December 16, 2015, incorporated herein by reference to Annex B of the proxy statement.
(c)-(2) Discussion
Materials prepared by Duff & Phelps, LLC for discussion with the special committee of the board of directors of the Company,
dated December 16, 2015.
(d)-(1) Agreement
and Plan of Merger, dated as of December 17, 2015, by and among the Company, Parent and Merger Sub incorporated herein by reference
to Annex A to the proxy statement.
(d)-(2) Rollover
Agreement, dated as of December 17, 2015, by and among Parent and the Rollover Shareholders incorporated herein by reference to
Annex E to the proxy statement.
(d)-(3) Limited
Guarantee, dated as of December 17, 2015, by Regal Fair, Sky Success and SIG China in favor of the Company incorporated herein
by reference to Annex F to the proxy statement.
(d)-(4) Voting
Agreement, dated as of December 17, 2015, by and among Parent, the Rollover Shareholders and Mr. Tim T. Gong incorporated herein
by reference to Annex G to the proxy statement.
(f)-(1) Dissenters’
Rights, incorporated herein by reference to the section entitled “Dissenters’ Rights” in the proxy statement.
(f)-(2) Section 238
of the Cayman Islands Companies Law Cap. 22 (Law 3 of 1961, as consolidated and revised), incorporated herein by reference to Annex
C to the proxy statement.
(g) Not applicable.
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 15, 2016
| |
Country Style Cooking Restaurant Chain Co., Ltd. |
| |
|
| |
By: |
/s/ Li-Lan Cheng |
| |
|
Name: Li-Lan Cheng |
| |
|
Title: Special Committee Chairman |
| |
|
| |
Country Style Cooking Restaurant Chain Holding Limited |
| |
|
| |
By: |
/s/ Hong Li |
| |
|
Name: Hong Li |
| |
|
Title: Director |
| |
|
| |
Country Style Cooking Restaurant Chain Merger Company Limited |
| |
|
| |
By: |
/s/ Hong Li |
| |
|
Name: Hong Li |
| |
|
Title: Director |
| |
|
| |
Ms. Hong Li |
| |
|
| |
|
/s/ Ms. Hong Li |
| |
|
| |
Mr. Xingqiang Zhang |
| |
|
| |
|
/s/ Mr. Xingqiang Zhang |
| |
Mr. Zhiyun Peng |
| |
|
| |
|
/s/ Mr. Zhiyun Peng |
| |
|
| |
Mr. Zhiyong Hong |
| |
|
| |
|
/s/ Mr. Zhiyong Hong |
| |
|
| |
Regal Fair Holdings Limited |
| |
|
| |
By: |
/s/ Hong Li |
| |
|
Name: Hong Li |
| |
|
Title: Director |
| |
|
| |
Sky Success Venture Holdings Limited |
| |
|
| |
By: |
/s/ Zhiyun Peng |
| |
|
Name: Zhiyun Peng |
| |
|
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) Form
of Proxy Card, incorporated herein by reference to the proxy statement.
(a)-(4) Form
of Depositary’s Notice, incorporated herein by reference to the proxy statement.
(a)-(5) Form
of ADS Voting Instructions Card, incorporated herein by reference to the proxy statement.
(a)-(6) Press
Release issued by the Company, dated December 18, 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 18, 2015.
(b)-(1) Commitment
Letter, dated as of December 17, 2015, by and among China Merchants Bank Co., Ltd., New York Branch, Parent and Merger Sub.
(c)-(1) Opinion
of Duff & Phelps, LLC dated December 16, 2015, incorporated herein by reference to Annex B of the proxy statement.
(c)-(2) Discussion
Materials prepared by Duff & Phelps, LLC for discussion with the special committee of the board of directors of the Company,
dated December 16, 2015.
(d)-(1) Agreement
and Plan of Merger, dated as of December 17, 2015, by and among the Company, Parent and Merger Sub incorporated herein by reference
to Annex A to the proxy statement.
(d)-(2) Rollover
Agreement, dated as of December 17, 2015, by and among Parent and the Rollover Shareholders incorporated herein by reference to
Annex E to the proxy statement.
(d)-(3) Limited
Guarantee, dated as of December 17, 2015, by Regal Fair, Sky Success and SIG China in favor of the Company incorporated herein
by reference to Annex F to the proxy statement.
(d)-(4) Voting
Agreement, dated as of December 17, 2015, by and among Parent, the Rollover Shareholders and Mr. Tim T. Gong incorporated herein
by reference to Annex G to the proxy statement.
(f)-(1) Dissenters’
Rights, incorporated herein by reference to the section entitled “Dissenters’ Rights” in the proxy statement.
(f)-(2) Section 238
of the Cayman Islands Companies Law Cap. 22 (Law 3 of 1961, as consolidated and revised), incorporated herein by reference to Annex
C to the proxy statement.
(g) Not applicable.
Exhibit
(a)-(1)
Country
Style Cooking Restaurant Chain Co., Ltd.
, 2016
Shareholders of Country
Style Cooking Restaurant Chain Co., Ltd.
Re: Notice of Extraordinary
General Meeting of Shareholders
Dear Shareholder:
You are cordially invited
to attend an extraordinary general meeting of shareholders of Country Style Cooking Restaurant Chain Co., Ltd. (the “Company”)
to be held on , 2016 at 10:00 a.m. (Hong Kong Time). The meeting will be held at 42nd Floor, Edinburgh Tower, The Landmark,
15 Queen’s Road, Central, Hong Kong. The attached notice of the extraordinary general meeting and proxy statement provide
information regarding the matters to be acted on at the extraordinary general meeting, including at any adjournment or postponement
thereof.
At the extraordinary
general meeting you will be asked to consider and vote upon a proposal to authorize and approve the agreement and plan of merger
dated as of December 17, 2015, (the “merger agreement”), among the Company, Country Style Cooking Restaurant Chain
Holding Limited (“Parent”) and Country Style Cooking Restaurant Chain Merger Company Limited (“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 Annex A to the merger agreement (the “plan of merger”) and the transactions contemplated by the merger agreement,
including the merger (the “merger”). Copies of the merger agreement and the plan of merger are attached as Annex
A to the accompanying proxy statement.
Under the terms of
the merger agreement, Merger Sub, a Cayman Islands company wholly-owned by Parent, will be merged with and into the Company, with
the Company continuing as the surviving company after the merger. Merger Sub is a Cayman Islands company formed solely for
purposes of the merger. Parent is a Cayman Islands company, which, at the effective time of the merger, will be wholly beneficially
owned by (a) Ms. Hong Li, the co-founder and chairwoman of the Company (“Ms. Li” or the “Chairwoman”);
(b) Mr. Xingqiang Zhang, the co-founder, chief executive officer, chief operating officer, acting chief financial officer and a
director of the Company (“Mr. Zhang”); (c) Mr. Zhiyun Peng, a director of the Company (“Mr. Peng”); (d)
Mr. Zhiyong Hong, a joint owner of Sky Success Venture Holdings Limited; (e) Regal Fair Holdings Limited, a British Virgin Islands
company jointly owned by Ms. Li and Mr. Zhang (“Regal Fair”); (f) Sky Success Venture Holdings Limited, a British Virgin
Islands company jointly owned by Mr. Peng, Mr. Hong, Mr. Jinjing Hong and Mr. Lipeng Deng; (g) SIG China Investments One, Ltd.,
a Cayman Islands company. Parties (a) through (g) are collectively referred to herein as the “Rollover Shareholders.”
Parties (a) through (f), together with Parent and Merger Sub, are collectively referred to herein as the “Buyer Group.”
If the merger is completed,
the Company will continue its operations as a privately held company and will be wholly-owned by Parent and, as the result of the
merger, the Company’s American depositary shares (“ADSs”), each representing four ordinary shares of the Company,
par value US$0.001 per share (the “Shares”), will no longer be listed on the New York Stock Exchange (the “NYSE”)
and the American depositary shares program for the ADSs will terminate.
If the merger is completed,
at the effective time of the merger, each outstanding Share (including Shares represented by ADSs), other than (a) Shares (and
the Shares represented by ADSs) beneficially owned by the Rollover Shareholders, (b) Shares (including Shares represented by ADSs)
owned by Parent, Merger Sub or the Company (as treasury shares, 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 of Company Share Awards (as defined below) under the Share Incentive Plan (as defined below), and
(d) Shares owned by shareholders who have validly exercised and have not effectively withdrawn or lost their dissenters’
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”), will be cancelled and cease to exist in exchange for
the right to receive $1.3075 in cash without interest, and for the avoidance of doubt, because each ADS represents four Shares,
each issued and outstanding ADS (other than any ADS representing Excluded Shares) will represent the right to surrender the ADS
in exchange for $5.23 in cash per ADS without interest (less $0.05 per ADS cancellation fees pursuant to the terms of the deposit
agreement (the “deposit agreement”), dated as of October 1, 2010, by and among the Company, Citibank, N.A. (the “ADS
depositary”), and the holders and beneficial owners of ADSs issued thereunder), in each case, net of any applicable withholding
taxes. The Excluded Shares other than Dissenting Shares will be cancelled and cease to exist without payment of any consideration
or distribution therefor. The Dissenting Shares will be cancelled and cease to exist and each holder thereof will be entitled to
receive only the payment of the fair value of such Dissenting Shares as determined in accordance with the Cayman Islands Companies
Law.
At the effective time
of the merger, each share option or each restricted share (each a “Company Share Award”) issued by the Company pursuant
to the Company’s 2009 Share Incentive Plan (the “Share Incentive Plan”) other than the Company Share Awards owned
by the Rollover Shareholders (which shall be treated in accordance with the Rollover Agreement as defined below) that is outstanding
and unexercised, whether vested or not vested or exercisable, will be cancelled in exchange for (i) with respect to a Company Share
Option, a cash amount to be paid by the surviving company or one of its subsidiaries, as soon as practicable after the effective
time of the merger (without interest) equal to the product of (1) the excess, if any, of $1.3075 over the exercise price of such
Company Share Option multiplied by (2) the number of shares underlying such Company Share Option; provided that if the exercise
price of any such Company Share Option is equal to or greater than the $1.3075, such Company Share Option shall be cancelled without
any payment therefor; and (ii) with respect to a Company Restricted Share, for a cash amount equal to the $1.3075.
Under the terms of
the rollover agreement entered into by and among Parent and the Rollover Shareholders (the “Rollover Agreement”) concurrently
with the execution and delivery of the merger agreement, immediately prior to the closing of the merger, the Rollover Shares shall
be cancelled and each Rollover Shareholder shall subscribe for or cause its, his or her affiliate(s) to subscribe for, the number
of ordinary shares in Parent as set forth in the Rollover Agreement. Pursuant to the Rollover Agreement, immediately prior to the
closing of the merger, Parent shall become wholly-owned by the Rollover Shareholders and/or their affiliate(s).
A special committee
of the board of directors of the Company, consisting of directors who are independent of, and unaffiliated with, any of the management
members of the Company, the Rollover Shareholders, Parent, Merger Sub or their affiliates and are not employees of the Company
or any of its subsidiaries, reviewed and considered the terms and conditions of the merger agreement and the transactions contemplated
by the merger agreement, including the merger. The special committee unanimously (a) determined that the merger agreement
is fair to, and in the best interests of, the Company and its unaffiliated security holders, (b) declared it advisable to
enter into the merger agreement, (c) recommended that the board of directors of the Company 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 of directors of the Company direct that the authorization and approval of the merger agreement, the plan of merger and
the transactions contemplated by the merger agreement, including the merger, be submitted to a vote at an extraordinary general
meeting of the shareholders of the Company with the recommendation of the board of directors 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 16, 2015,
the board of directors of the Company, after carefully considering all relevant factors, including the unanimous determination
and recommendation of the special committee, (a) determined that it is fair to and in the best interests of the Company and
its unaffiliated security holders, and declared it advisable, to enter into the merger agreement, (b) authorized and approved
the execution, delivery and performance of the merger agreement, the plan of merger and the consummation of the transactions contemplated
by the merger agreement, 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 of the Company.
After careful consideration
and upon the unanimous recommendation of the special committee of the board of directors of the Company, the Company’s board
of directors, in a vote that involved solely directors unrelated to any of the management members of the Company, the Rollover
Shareholders, Parent or Merger Sub, 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, 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 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 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 merger must be authorized and approved by a special resolution (as defined in the Cayman Islands Companies Law)
of the Company’s shareholders, which require an affirmative vote of such shareholders representing two-thirds or more of
the Shares (including Shares represented by ADSs) present and voting in person or by proxy as a single class at the extraordinary
general meeting of the shareholders of the Company. 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 Shares unaffiliated with the Buyer Group or SIG China. As of the date of this proxy statement,
the Rollover Shareholders and Mr. Tim T. Gong (collectively, the “Voting Shareholders”) owned, in aggregate, approximately
69.01% of the issued and outstanding Shares entitled to vote (excluding Shares that the applicable Voting Shareholders will have
the right to purchase upon the exercise of Company Share Awards). Pursuant to the terms of a voting agreement dated December 17,
2015, by and among Parent and the Voting Shareholders (the “Voting 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. Assuming their compliance with their voting obligations under the Voting Agreement based on the number of
Shares expected to be outstanding on the record date, no additional Shares entitled to vote owned by the remaining shareholders
need be voted in favor of the proposal in order for the merger to be approved. 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 10:00 a.m. (Hong Kong 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 chairwoman of the Company’s board of directors has undertaken
to demand poll voting at the meeting.
As the record
holder of the Shares represented by ADSs, the ADS depositary will endeavor to vote (or will endeavor to cause the vote of) the
Shares it holds on deposit at the extraordinary general meeting in accordance with the voting instructions timely received from
holders of ADSs at the close of business in New York City on , 2016, the ADS record date. The ADS depositary must receive such
instructions no later than 10:00 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
ADS, the ADS depositary will deem such holder to have instructed the ADS depositary to 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, and FOR any adjournment of the extraordinary general meeting.
Holders of ADSs
will not be able to attend the extraordinary general meeting unless they cancel their ADSs and become holders of Shares prior to
the close of business in the Cayman Islands on , 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 person who will be the registered
holder of the 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 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 Citibank Hong Kong, 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 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 Company’s ADSs would continue to be listed on the NYSE. The Company’s
Shares are not listed and cannot be traded on any stock exchange other than the NYSE, 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.
Completing the
proxy card in accordance with the instructions set forth on the proxy card will not deprive you of your right to attend the extraordinary
general meeting and vote your Shares in person. Please note, however, that if your Shares are held of record by a broker, bank
or other nominee and you wish to vote at the extraordinary general meeting in person, you must obtain from the record holder a
proxy issued in your name. If you submit a signed proxy card without indicating how you wish to vote, the Shares represented by
your proxy card will be voted FOR the resolution to authorize and approve 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 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 in the event that there are insufficient proxies received to authorize and approve the merger agreement, the
plan of merger and the transactions contemplated by the merger agreement, including the merger, 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. Furthermore, if holders of ADSs do not timely deliver specific voting instructions to the
ADS depositary, they may, under the terms of the ADS deposit agreement, be deemed to have instructed the ADS depositary to give
a discretionary proxy to a person designated by the Company, which in this case will be a member of the independent committee of
the board of directors of the Company (the “Designee”). Unless the Company notifies the ADS depositary that it does
not wish such proxy to be given, that there exists substantial opposition on the matters to be voted on at the extraordinary general
meeting or that such matters would have a material adverse impact on the rights of the holders of Shares on deposit with the ADS
depositary, 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, and FOR any adjournment of the extraordinary general meeting.
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 is taken at the extraordinary general meeting, a written objection to the
merger and subsequently comply with all procedures and requirements of Section 238 of the Cayman Islands Companies Law for the
exercise of dissenters’ rights, which is attached as Annex C to the accompanying proxy statement. The fair value of your
Shares as determined under Cayman Islands Companies Law could be more than, the same as, or less than the merger consideration
you would receive pursuant to the merger agreement if you do not exercise dissenters’ rights with respect to your Shares.
ADS HOLDERS
WILL NOT HAVE THE RIGHT TO 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 DISSENTERS’ RIGHTS WITH RESPECT TO ANY OF THE SHARES THAT IT HOLDS,
EVEN IF AN ADS HOLDER REQUESTS THE ADS DEPOSITARY TO DO SO. ADS HOLDERS WISHING TO EXERCISE DISSENTERS’ RIGHTS MUST SURRENDER
THEIR ADSs TO THE ADS DEPOSITARY, PAY THE ADS DEPOSITARY’S FEES REQUIRED FOR THE CANCELLATION OF THE ADSs, 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, THAT THEY WILL NOT VOTE THE SHARES) BEFORE THE CLOSE OF BUSINESS IN NEW YORK CITY ON , 2016,
AND BECOME REGISTERED HOLDERS OF SHARES BEFORE THE VOTE TO AUTHORIZE AND APPROVE THE MERGER IS TAKEN AT THE EXTRAORDINARY GENERAL
MEETING. THEREAFTER, SUCH FORMER ADS HOLDERS MUST COMPLY WITH THE PROCEDURES AND REQUIREMENTS FOR EXERCISING DISSENTERS’
RIGHTS WITH RESPECT TO THE SHARES UNDER SECTION 238 OF THE CAYMAN ISLANDS COMPANIES LAW. IF THE MERGER IS NOT COMPLETED, THE COMPANY
WOULD CONTINUE TO BE A PUBLIC COMPANY IN THE U.S. AND THE COMPANY’S ADSs WOULD CONTINUE TO BE LISTED ON THE NYSE. THE COMPANY’S
SHARES ARE NOT LISTED AND CANNOT BE TRADED ON ANY STOCK EXCHANGE OTHER THAN THE NYSE, AND IN SUCH CASE ONLY IN THE FORM OF ADSs.
AS A RESULT,
IF A FORMER ADS HOLDER HAS CANCELLED HIS OR HER ADSs TO EXERCISE DISSENTERS’ 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 OR HER 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 Country Style Cooking Restaurant Chain Co., Ltd. at +86-23-8866-8866
or at ir@csc100.com.
Thank you for your
cooperation and continued support.
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Sincerely, |
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Sincerely, |
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On behalf of the Special Committee |
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Chairwoman of the Board |
|
The proxy statement
is dated , 2016, and is first being mailed to the shareholders on or about , 2016.
Country
Style Cooking Restaurant Chain Co., Ltd.
NOTICE OF EXTRAORDINARY
GENERAL MEETING OF SHAREHOLDERS TO BE HELD ON , 2016
Dear Shareholder:
Notice is hereby given
that an extraordinary general meeting of the shareholders of Country Style Cooking Restaurant Chain Co., Ltd. (the “Company”)
will be held on , 2016 at 10:00 a.m. (Hong Kong Time) at 42nd Floor, Edinburgh Tower, The Landmark, 15 Queen’s Road, Central,
Hong Kong.
Only holders of ordinary
shares, par value US$0.001, of the Company (the “Shares”) of record on the close of business in the Cayman Islands
on , 2016 or their proxy holders are entitled to attend and to vote at this extraordinary general meeting or any adjournment or
postponements thereof. At the meeting, you will be asked to consider and vote upon the following resolutions:
| · | as a special resolution: |
THAT the agreement
and plan of merger dated as of December 17, 2015, (the “merger agreement”), among the Company, Country Style Cooking
Restaurant Chain Holding Limited (“Parent”) and Country Style Cooking Restaurant Chain Merger Company Limited (“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 Merger Sub and the Company required to be registered with the Registrar of Companies
of the Cayman Islands for the purposes of the merger (such plan of merger being in the form attached as Annex H to the accompanying
proxy statement 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 (i) the merger, (ii) the variation of the authorized share capital
of the Company from US$2,000,000 divided into 2,000,000,000 shares with a par value of US$0.001 each to US$50,000 divided into
50,000 ordinary shares with a par value of US$1.00 each, and (iii) the amendment and restatement of the existing memorandum and
articles of association of the Company by their deletion in their entirety and the substitution in their place of the memorandum
and articles of association in the form attached as Appendix A to the plan of merger, be and are hereby authorized and approved;
and
| · | as an ordinary resolution: |
THAT the extraordinary
general meeting be adjourned in order to allow the Company to solicit additional proxies in the event that there are insufficient
proxies received at the time of the extraordinary general meeting to pass the special resolution to be proposed at the extraordinary
general meeting.
A list of the ordinary
shareholders of the Company will be available at its principal executive offices at 16th Floor, C1 Building, Chongqing Headquarters
City District C, No.780 Jingwei Avenue, Yuzhong District, Chongqing 400020, 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 of the Company, each representing four Shares (“ADSs”), you cannot vote at the extraordinary general
meeting directly, but you may instruct Citibank, N.A., (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 10:00 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, 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 on , 2016. 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, they may, under the terms of the ADS deposit
agreement, be deemed to have instructed the ADS depositary to give a discretionary proxy to a person designated by the Company,
which in this case will be a member of the independent committee of the board of directors of the Company (the “Designee”).
Unless the Company notifies the ADS depositary that it does not wish such proxy to be given, that there exists substantial opposition
on the matters to be voted on at the extraordinary general meeting or that such matters would have a material adverse impact on
the the rights of the holders of Shares on deposit with the ADS depositary, 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, and FOR any adjournment
of the extraordinary general meeting.
After careful consideration
and upon the unanimous recommendation of the special committee of the board of directors of the Company composed solely of directors
unrelated to any of the management members of the Company, the Rollover Shareholders, Parent or Merger Sub, the Company’s
board of directors 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,
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 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 (as defined in the Cayman Islands Companies Law) of the Company’s
shareholders, which requires an affirmative vote of such shareholders representing two-thirds or more of the Shares (including
Shares represented by ADSs) present and voting in person or by proxy as a single class at the extraordinary general meeting of
the shareholders of the Company.
As of the date of this
proxy statement, the Rollover Shareholders and Mr. Tim T. Gong (collectively, the “Voting Shareholders”) owned, in
aggregate, approximately 69.01% of the issued and outstanding Shares entitled to vote (excluding Shares that the applicable Voting
Shareholders will have the right to purchase upon the exercise of Company Share Awards). Pursuant to the terms of a voting agreement
dated December 17, 2015, by and among Parent and the Voting Shareholders (the “Voting 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. Assuming their compliance with their voting obligations under the Voting Agreement,
based on the number of Shares expected to be outstanding on the record date, no additional Shares entitled to vote owned by the
remaining shareholders need be voted in favor of the proposal in order for the merger to be approved.
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 as promptly as possible. You
should simply indicate on your proxy card how you want to vote, sign and date the proxy card, and mail the proxy card in the enclosed
return envelope as soon as possible to ensure that it will be received by the Company no later than , 2016 at 10:00 a.m. (Hong
Kong Time), which is the deadline to lodge your proxy card. The proxy card is the “instrument of proxy” and the “instrument
appointing a proxy” as referred to in the Company’s articles of association. Voting at the extraordinary general meeting
will take place by poll voting, as the chairwoman of the Company’s board of directors has undertaken to demand poll voting
at the meeting. Each shareholder has one vote for each Share held as of the close of business in the Cayman Islands on , 2016.
Completing the proxy
card in accordance with the instructions set forth on the proxy card will not deprive you of your right to attend the extraordinary
general meeting and vote your Shares in person. Please note, however, that if your Shares are registered in the name of a broker,
bank or other nominee and you wish to vote at the extraordinary general meeting in person, you must obtain from the record holder
a proxy issued in your name.
If you abstain from
voting, fail to cast your vote in person, fail to complete and return your proxy card in accordance with the instructions set forth
on the proxy card, or fail to give voting instructions to your broker, dealer, commercial bank, trust company or other nominee,
your vote will not be counted.
If you fail to complete
your proxy card in accordance with the instructions set forth on the proxy card or if you abstain from voting, your vote will not
be counted.
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 each such proxy card.
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 is taken, a written objection to the merger and subsequently comply with all procedures
and requirements of Section 238 of the Cayman Islands Companies Law for the exercise of dissenters’ rights, which is attached
as Annex C to the accompanying proxy statement. The fair value of your Shares as determined under the Cayman Islands Companies
Law could be more than, the same as, or less than the merger consideration you would receive pursuant to the merger agreement if
you do not exercise dissenters’ rights with respect to your Shares.
ADS HOLDERS WILL
NOT HAVE THE RIGHT TO 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 DISSENTERS’ RIGHTS WITH RESPECT TO ANY OF THE SHARES THAT IT HOLDS, EVEN IF
AN ADS HOLDER REQUESTS THE ADS DEPOSITARY TO DO SO. ADS HOLDERS WISHING TO EXERCISE DISSENTERS’ RIGHTS MUST SURRENDER THEIR
ADSs TO THE ADS DEPOSITARY, PAY THE ADS DEPOSITARY’S FEES REQUIRED FOR THE CANCELLATION OF THE ADSs, 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, THAT THEY WILL NOT VOTE THE SHARES) BEFORE THE CLOSE OF BUSINESS IN NEW YORK CITY ON , 2016,
AND BECOME REGISTERED HOLDERS OF SHARES BEFORE THE VOTE TO AUTHORIZE AND APPROVE THE MERGER IS TAKEN AT THE EXTRAORDINARY GENERAL
MEETING. THEREAFTER, SUCH FORMER ADS HOLDERS MUST COMPLY WITH THE PROCEDURES AND REQUIREMENTS FOR EXERCISING DISSENTERS’
RIGHTS WITH RESPECT TO THE SHARES UNDER SECTION 238 OF THE CAYMAN ISLANDS COMPANIES LAW.
PLEASE DO NOT SEND
YOUR SHARE CERTIFICATES AT THIS TIME. IF THE MERGER IS COMPLETED, YOU WILL BE SENT INSTRUCTIONS REGARDING THE SURRENDER OF YOUR
SHARE CERTIFICATES.
If you have any questions
or need assistance voting your Shares, you can contact Country Style Cooking Restaurant Chain Co., Ltd. at +86-23-8866-8866 or
at ir@csc100.com.
The merger agreement,
the plan of merger and 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 proxy statement
carefully.
Notes:
| 1. | In the case of joint holders the vote of the senior holder who tenders a vote whether in person
or by proxy will be accepted to the exclusion of the votes of the joint holders and for this purpose seniority will be determined
by the order in which the names stand in the register of members of the Company. |
| 2. | The instrument appointing a proxy must be in writing under the hand of the appointor or of his
attorney duly authorized in writing or, if the appointor is a corporation, either under seal or under the hand of an officer or
attorney duly authorized in writing. |
| 3. | A proxy need not be a member (registered shareholder) of the Company. |
| 4. | The chairman of the meeting may at his discretion direct that a proxy card shall be deemed to have
been duly deposited. A proxy card that is not deposited in the manner permitted (that is, in accordance with the instructions set
forth on the proxy card, or which is otherwise directed by the chairman to be deemed to have been duly deposited) 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 in respect of which the proxy is given unless notice in writing of such death, insanity, revocation or transfer was
received by the Company at 16th Floor, C1 Building, Chongqing Headquarters City District C, No.780 Jingwei Avenue, Yuzhong District,
Chongqing 400020, the People’s Republic of China at least two hours before the commencement of the general meeting, or adjourned
meeting at which it is sought to use the proxy. |
| |
BY ORDER OF THE BOARD OF DIRECTORS, |
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Director |
, 2016
Registered Office:
Maples Corporate Services
Limited
PO Box 309
Ugland House
Grand Cayman, KY1-1104
Cayman Islands
Head Office Address:
Country Style Cooking Restaurant
Chain Co., Ltd.
16th Floor, C1 Building,
Chongqing Headquarters City District C
No.780 Jingwei Avenue, Yuzhong
District
Chongqing 400020
the People’s Republic
of China
TABLE
OF CONTENTS
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Page |
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| SUMMARY TERM SHEET |
|
1 |
| The Parties Involved in the Merger |
|
1 |
| The Merger |
|
3 |
| Merger Consideration |
|
3 |
| Treatment of Company Share Awards |
|
3 |
| Rollover Agreement and Voting Agreement |
|
4 |
| Purposes and Effects of the Merger |
|
4 |
| Plans for the Company after the Merger |
|
4 |
| Recommendations of the Special Committee and the Board of Directors |
|
4 |
| Position as to Fairness |
|
5 |
| Financing of the Merger |
|
5 |
| Limited Guarantee |
|
5 |
| Share Ownership of the Company Directors and Officers and Voting Commitments |
|
6 |
| Opinion of the Special Committee’s Financial Advisor |
|
6 |
| Interests of the Company’s Executive Officers and Directors in the Merger |
|
6 |
| Conditions to the Merger |
|
7 |
| No Solicitation |
|
8 |
| Termination of the Merger Agreement |
|
9 |
| U.S. Federal Income Tax Consequences |
|
10 |
| PRC Tax Consequences |
|
11 |
| Cayman Islands Tax Consequences |
|
11 |
| Regulatory Matters |
|
11 |
| Litigation Related to the Merger |
|
11 |
| Accounting Treatment of the Merger |
|
11 |
| Market Price of the Shares |
|
11 |
| QUESTIONS AND ANSWERS ABOUT THE EXTRAORDINARY GENERAL MEETING AND THE MERGER |
|
12 |
| SPECIAL FACTORS |
|
19 |
| Background of the Merger |
|
19 |
| Reasons for the Merger and Recommendation of the Special Committee and Our Board of Directors |
|
24 |
| Position as to the Fairness of the Merger |
|
29 |
| Certain Financial Projections |
|
32 |
| Opinion of the Special Committee’s Financial Advisor |
|
34 |
| Buyer Group’s Purpose of and Reasons for the Merger |
|
42 |
| Effect of the Merger on the Company |
|
43 |
| Effect of the Merger on the Company’s Net Book Value and Net Earnings |
|
46 |
| Plans for the Company after the Merger |
|
46 |
| Alternatives to the Merger |
|
47 |
| Effects on the Company if the Merger is not Completed |
|
48 |
| Financing |
|
48 |
| Rollover Agreement |
|
50 |
| Voting Agreement |
|
51 |
| Limited Guarantee |
|
51 |
| Remedies and Limitations on Liability |
|
51 |
| Interests of Certain Persons in the Merger |
|
52 |
| Related Party Transactions |
|
55 |
| Fees and Expenses |
|
55 |
| Voting by the Voting Shareholders at the Extraordinary General Meeting |
|
55 |
| Litigation Related to the Merger |
|
55 |
| Accounting Treatment of the Merger |
|
56 |
| Regulatory Matters |
|
56 |
| Dissenters’ Rights |
|
56 |
| U.S. Federal Income Tax Consequences |
|
56 |
| PRC Tax Consequences |
|
59 |
| Cayman Islands Tax Consequences |
|
60 |
| MARKET PRICE OF THE COMPANY’S ADSs, DIVIDENDS AND OTHER MATTERS |
|
61 |
| THE EXTRAORDINARY GENERAL MEETING |
|
63 |
| Date, Time and Place of the Extraordinary General Meeting |
|
63 |
| Proposals to be Considered at the Extraordinary General Meeting |
|
63 |
| Our Board’s Recommendation |
|
63 |
| Quorum |
|
64 |
| Record Date; Shares and ADSs Entitled to Vote |
|
64 |
| Vote Required |
|
64 |
| Shareholders and ADS Holders Entitled to Vote; Voting Materials |
|
65 |
| Proxy Holders for Registered Shareholders |
|
66 |
| Voting of Proxies and Failure to Vote |
|
66 |
| Revocability of Proxies |
|
66 |
| Rights of Shareholders Who Object to the Merger |
|
67 |
| Whom to Call for Assistance |
|
68 |
| Solicitation of Proxies |
|
68 |
| Other Business |
|
68 |
| THE MERGER AGREEMENT AND PLAN OF MERGER |
|
69 |
| Structure and Completion of the Merger |
|
69 |
| Memorandum and Articles of Association; Directors and Officers of the Surviving Company |
|
69 |
| Merger Consideration |
|
69 |
| Treatment of Company Share Awards |
|
70 |
| Exchange Procedures |
|
70 |
| Representations and Warranties |
|
71 |
| Conduct of Business Prior to Closing |
|
75 |
| No Solicitation |
|
77 |
| No Change of Recommendation |
|
78 |
| Indemnification; Directors’ and Officers’ Insurance |
|
79 |
| Financing |
|
80 |
| Shareholders’ Meeting |
|
81 |
| Conditions to the Merger |
|
81 |
| Termination of the Merger Agreement |
|
82 |
| Termination Fee |
|
84 |
| Remedies and Limitations on Liability |
|
85 |
| Amendment; Waiver of Conditions |
|
85 |
| PROVISIONS FOR UNAFFILIATED SECURITY HOLDERS |
|
86 |
| DISSENTERS’ RIGHTS |
|
87 |
| FINANCIAL INFORMATION |
|
89 |
| TRANSACTIONS IN THE SHARES AND ADSs |
|
91 |
| SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF THE COMPANY |
|
92 |
| FUTURE SHAREHOLDER PROPOSALS |
|
94 |
| CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS |
|
95 |
| WHERE YOU CAN FIND MORE INFORMATION |
|
97 |
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| ANNEX A: Agreement and Plan of Merger |
|
A-1 |
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| ANNEX B: Opinion of Duff & Phelps, LLC as Financial Advisor |
|
B-1 |
| |
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| ANNEX C: Cayman Islands Companies Law Cap. 22 (Law 3 of 1961, as consolidated and revised)—Section 238 |
|
C-1 |
| |
|
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| ANNEX D: Directors and Executive Officers of Each Filing Person |
|
D-1 |
| |
|
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| ANNEX E: Rollover Agreement |
|
E-1 |
| |
|
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| ANNEX F: Limited Guarantee |
|
F-1 |
| ANNEX G: Voting Agreement |
|
G-1 |
| |
|
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| ANNEX H: Plan of Merger |
|
H-1 |
| |
|
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| FORM OF PROXY CARD |
|
|
| |
|
|
| FORM OF DEPOSITARY’S NOTICE |
|
|
| |
|
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| FORM OF ADS VOTING INSTRUCTIONS CARD |
|
|
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 97. In this proxy statement, the terms “we,” “us,” “our,” and the “Company”
refer to Country Style Cooking Restaurant Chain Co., Ltd. and its subsidiaries. All references to “dollars” and “$”
in this proxy statement are to U.S. dollars.
The Parties Involved
in the Merger
The Company
We
are a quick service restaurant chain in China. Our principal executive offices are located at 16th Floor, C1 Building, Chongqing
Headquarters City District C, No.780 Jingwei Avenue, Yuzhong District, Chongqing 400020, the People’s Republic of China.
Our telephone number at this address is +86-23-8866-8866. Our registered office in the Cayman Islands is located at Maples Corporate
Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.
For a description
of our history, development, business and organizational structure, see our Annual Report on Form 20-F for the year ended December
31, 2014, filed on April 20, 2015, which is incorporated herein by reference. Please see “Where You Can Find More Information”
beginning on page 97 for a description of how to obtain a copy of our Annual Report.
Parent
Country
Style Cooking Restaurant Chain Holding Limited (“Parent”) is an exempted company with limited liability
incorporated 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.
Pursuant to the Rollover Agreement (as defined below), immediately prior to the closing of the merger, Parent shall become
wholly beneficially owned by the Rollover Shareholders (as defined below) and/or their affiliate(s). The registered office of
Parent is located at P.O. Box 472, 2nd Floor, Harbour Place, 103 South Church Street, George Town, Grand Cayman KY1-1106,
Cayman Islands, and its telephone number is +86-23-8866-8866.
Merger Sub
Country Style Cooking
Restaurant Chain Merger Company Limited (“Merger Sub”) is an exempted company with limited liability incorporated under
the laws of the Cayman Islands and a direct, wholly-owned subsidiary of Parent. Merger Sub was formed by Parent solely for the
purpose of entering into the merger agreement and consummating the transactions contemplated by the merger agreement. The registered
office of Merger Sub is located at P.O. Box 472, 2nd Floor, Harbour Place, 103 South Church Street, George Town, Grand Cayman KY1-1106,
Cayman Islands, and its telephone number is
+86-23-8866-8866.
Ms. Hong Li
Ms. Hong Li (“Ms.
Li” or the “Chairwoman”) is the co-founder and chairwoman of the board of directors of the Company. She is a
citizen of the People’s Republic of China and her principal occupation is the chairwoman of the board of directors of the
Company. Her business address is 16th Floor, C1 Building, Chongqing Headquarters City District C, No.780 Jingwei Avenue, Yuzhong
District, Chongqing 400020, the People’s Republic of China, and her telephone number is +86-23-8866-8866. She has served
as the chairwoman of the board of directors of the Company since the Company’s inception, and as the chief executive officer
of the Company from the Company’s inception until February 2015.
Mr. Xingqiang Zhang
Mr. Xingqiang Zhang
(“Mr. Zhang”) is the husband of Ms. Li and the co-founder and a director of the Company. He is a citizen of the People’s
Republic of China and his principal occupation is the Company’s chief executive officer, chief operating officer, acting
chief financial officer and a director of the Company. His business address is 16th Floor, C1 Building, Chongqing Headquarters
City District C, No.780 Jingwei Avenue, Yuzhong District, Chongqing 400020, the People’s Republic of China, and his telephone
number is +86-23-8866-8866. He has been the Company’s chief operating officer since February 2015, the Company’s chief
executive officer since February 2015 and the Company’s acting chief financial officer since June 2015, and has served as
one of the Company’s directors since its inception.
Mr. Zhiyun Peng
Mr. Zhiyun Peng
(“Mr. Peng”) is a director of the Company. He is also a joint owner and director of Sky Success Venture Holdings
Limited. He is a citizen of the People’s Republic of China and his principal occupation is the general manager of
Shanghai Novich Venture Investment Co., Ltd. His business address is 13F, No. 609 Yunling East Road, Putuo District,
Shanghai, the People’s Republic of China, and his telephone number is +86-21-3250-8855.
Mr. Zhiyong Hong
Mr. Zhiyong Hong (“Mr. Hong”) is a joint owner of Sky Success Venture Holdings Limited. He is a citizen of the People’s
Republic of China and his principal occupation is the Vice President of K-boxing (Shanghai) Co., Ltd. His business address is Building
No. 19, Lane 599, Yunling East Road, Putuo District, Shanghai, the People’s Republic of China, and his telephone number is
+86-21-3250-8855.
Regal Fair Holdings
Limited
Regal Fair Holdings
Limited (“Regal Fair”) is a company incorporated under the laws of the British Virgin Islands. Regal Fair Holdings
Limited is jointly owned by Ms. Li and Mr. Zhang. The registered office of Regal Fair is located at P.O. Box 916, Woodbourne Hall,
Road Town, Tortola, British Virgin Islands, and its telephone number is +86-23-8866-8866.
Sky Success Venture
Holdings Limited
Sky Success
Venture Holdings Limited (“Sky Success”) is a company incorporated under the laws of the British Virgin Islands.
Sky Success is jointly owned and controlled by Mr. Peng, Mr. Hong, Mr. Jinjing Hong and Mr. Liping Deng. The registered
office of Sky Success is located at 13/F, No. 609 Yunling East Road, Putuo District, Shanghai 200062, the People’s
Republic of China, and its telephone number is +86-21-3250-8855.
SIG China Investments
One, Ltd.
SIG China Investments
One Ltd. (“SIG China”) is a company incorporated under the laws of the Cayman Islands. The business address of SIG
China is c/o SIG Asia Investment, LLLP, 101 California Street Suite 3250, San Francisco, CA 94111, U.S.A., and its telephone number
is +1 (415) 403-6500.
Throughout this proxy
statement, Ms. Li, Mr. Zhang, Mr. Peng, Mr. Hong, Regal Fair, Sky Success and SIG China are collectively referred to as the “Rollover
Shareholders.” Parent, Merger Sub, Ms. Li, Mr. Zhang, Mr. Peng, Mr. Hong, Regal Fair and Sky Success are collectively referred
to herein 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 and the relevant members of the Rollover Shareholders as
listed in Annex D of this proxy statement, has been (a) convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (b) a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction
or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting
activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws.
The Merger (Page
69)
You are being asked
to vote to authorize and approve the agreement and plan of merger dated as of December 17, 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 Annex A to the merger agreement (the “plan of merger”) and the transactions
contemplated by 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 company. The Company, as the surviving
company, will continue to do business under the name “Country Style Cooking Restaurant Chain Co., Ltd.” 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 69)
Under the terms of
the merger agreement, at the effective time of the merger, each outstanding Share (including Shares represented by ADSs), other
than (a) Shares (and the Shares represented by ADSs) beneficially owned by the Rollover Shareholders (such Shares collectively,
the “Rollover Shares”), (b) Shares (including Shares represented by ADSs) owned by Parent, Merger Sub or the Company
(as treasury shares, 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 of Company
Share Awards (as defined below) under the Share Incentive Plan (as defined below), and (d) Shares owned by shareholders who have
validly exercised and have not effectively withdrawn or lost their dissenters’ 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”), will be cancelled and cease to exist in exchange for the right to receive $1.3075
in cash without interest, and for the avoidance of doubt, because each ADS represents four Shares, each issued and outstanding
ADS (other than any ADS representing Excluded Shares) will represent the right to surrender the ADS in exchange for $5.23 in cash
per ADS without interest (less $0.05 per ADS cancellation fees pursuant to the terms of the deposit agreement, dated as of October
1, 2010, by and among the Company, Citibank, N.A. (the “ADS depositary”), and the holders and beneficial owners of
ADSs issued thereunder), in each case, net of any applicable withholding taxes. The Excluded Shares other than Dissenting Shares
and ADSs representing such Excluded Shares issued and outstanding immediately prior to the effective time will be cancelled and
cease to exist, and no consideration shall be delivered or deliverable in exchange therefor. The Dissenting Shares issued and outstanding
immediately prior to the effective time will be cancelled and each holder thereof will be entitled to receive only the payment
of the fair value of such Dissenting Shares determined in accordance with the Cayman Islands Companies Law.
Treatment of Company
Share Awards (Page 70)
At the effective time
of the merger, each share option (each, a “Company Share Option”) or each restricted share (each, a “Company
Restricted Share”) (each a “Company Share Award”) issued by the Company pursuant to the Company’s 2009
Share Incentive Plan (the “Share Incentive Plan”) other than the Company Share Awards owned by the Rollover Shareholders
(which shall be treated in accordance with the Rollover Agreement as defined below) that is outstanding and unexercised, whether
vested or not vested or exercisable will be cancelled in exchange for (i) with respect to a Company Share Option, a cash amount
to be paid by the surviving company or one of its subsidiaries, as soon as practicable after the effective time of the merger (without
interest) equal to the product of (1) the excess, if any, of $1.3075 over the exercise price of such Company Share Option multiplied
by (2) the number of shares underlying such Company Share Option; provided that if the exercise price of any such Company Share
Option is equal to or greater than the $1.3075, such Company Share Option shall be cancelled without any payment therefor; and
(ii) with respect to a Company Restricted Share, for a cash amount equal to the $1.3075.
Rollover Agreement
and Voting Agreement (Page 50)
Concurrently with the
execution and delivery of the merger agreement, Parent and the Rollover Shareholders entered into a rollover agreement (the “Rollover
Agreement”), pursuant to which, immediately prior to the closing of the merger, the Rollover Shares shall be cancelled and
each Rollover Shareholder shall subscribe for, or cause its, his or her affiliate(s) to subscribe for, the number of ordinary shares
in Parent as set forth in the Rollover Agreement. A copy of the Rollover Agreement is attached as Annex E to this proxy statement.
In addition, Parent,
the Rollover Shareholders and Mr. Tim T. Gong (collectively, the “Voting Shareholders”) have executed a voting agreement
(the “Voting Agreement”), dated December 17, 2015, providing that, among other things, all of the Shares (including
Shares represented by ADSs) owned by the Voting Shareholders as set forth in Part II of Schedule A of the Voting Agreement (the
“Voting Securities”) 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. As of the date of this proxy statement,
the Voting Shareholders beneficially owned approximately 69.01% of our issued and outstanding Shares entitled to vote (excluding
Shares that the applicable Voting Shareholders will have the right to purchase upon the exercise of Company Share Awards). A copy
of the Voting Agreement is attached as Annex G to this proxy statement.
Purposes and Effects
of the Merger (Page 42)
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 $1.3075 per Share, 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 42 for additional information.
ADSs representing
the Shares are currently listed on the New York Stock Exchange (the “NYSE”) under the symbol “CCSC.” 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 directly owned by Parent and indirectly by the other members of the Buyer Group (other
than Merger Sub) and by SIG China. Following the completion of the merger, the ADSs will cease to be listed on the NYSE, 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 will be terminated 90 days after the filing of Form 15 by the Company in
connection with the completion of the merger or such shorter period as may be determined by the SEC. Accordingly, the Company
will no longer be required to file periodic reports with the SEC. Furthermore, following the completion of the merger, the American
depositary shares program for the ADSs will terminate. Please see “Special Factors—Effect of the Merger on the Company”
beginning on page 43 for additional information.
Plans for the Company
after the Merger (Page 46)
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.
Recommendations
of the Special Committee and the Board of Directors (Page 24)
The special committee
unanimously:
| (a) | determined that it is fair to and in the best interests of the Company and its unaffiliated security
holders, and declared it advisable, to enter into the merger agreement, |
| (b) | recommended that the board of directors of the Company approve the execution, delivery and performance of the merger agreement,
the plan of merger and the consummation of the transactions contemplated by the merger agreement, including the merger, and |
| (c) | resolved to recommend that the board of directors of the Company direct that the authorization
and approval of the merger agreement, the plan of merger and the transaction contemplated by the merger agreement, including the
merger, be submitted to a vote at an extraordinary general meeting of the shareholders of the Company with the recommendation of
the board of directors that the shareholders of the Company authorize and approve by way of a special resolution the merger agreement,
the plan of merger and the transaction contemplated by the merger agreement, including the merger. |
ACCORDINGLY,
OUR BOARD OF DIRECTORS 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, 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 TO BE PROPOSED AT THE EXTRAORDINARY GENERAL MEETING.
Position as to
Fairness (Page 29)
Each Buyer
Group Member believes that the merger is substantively and procedurally fair to the Company’s unaffiliated security
holders. Their belief is based upon the factors discussed under the caption “Special Factors—Position as to the
Fairness of the Merger” beginning on page 29.
Each Buyer
Group Member
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 Buyer
Group Member 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 48)
The Company and the
Buyer Group estimate that the total amount of funds necessary to complete the merger and other transactions contemplated by the
merger agreement, including payment of fees and expenses in connection with the merger, is anticipated to be approximately US$45.5
million, assuming no exercise of dissenters’ rights by shareholders of the Company.
The Buyer Group expects
to provide this amount through the proceeds from a committed senior secured term loan facility contemplated by a debt commitment
letter, dated as of December 17, 2015 (the “Debt Commitment Letter”), by and among Merger Sub, Parent and China Merchants
Bank Co., Ltd., New York Branch (the “Commitment Party”). Under the terms and subject to the conditions of the Debt
Commitment Letter, the Commitment Party committed to arrange and provide a senior secured term loan facility of up to US$50 million
in principal amount for Merger Sub to consummate the merger. See “Special Factors—Financing” beginning on page
48 for more information regarding the financing of the merger.
Limited Guarantee
(Page 51)
Concurrently with
the execution and delivery of the merger agreement, Regal Fair, Sky Success and SIG China (together the
“Guarantors”)) in favor of the Company with respect to the payment obligations of Parent and Merger Sub under
the merger agreement for the termination fee payable by Parent and certain other costs and expenses that, in each case, may become
payable to the Company by Parent or Merger Sub under certain circumstances as set forth in the merger agreement. See “Special
Factors—Limited Guarantee” beginning on page 51 for additional information.
Share Ownership
of the Company Directors and Officers and Voting Commitments (Page 92)
As of the date
of this proxy statement, the directors and executive officers of the Company held an aggregate of 86,202,012 Shares and
Company Share Awards for the right to purchase or exchange for 536,616 Shares within 60 days after the date of this proxy
statement. Please see “Security Ownership of Certain Beneficial Owners and Management of the Company” beginning
on page 92 for additional information. In addition, as of the date of this proxy statement, the Voting Shareholders,
including certain of our directors and management members, owned approximately 69.01% of our issued and outstanding Shares
entitled to vote (excluding Shares that the applicable Voting Shareholders will have the right to purchase upon the exercise
of Company Share Awards). Please see “Special Factors—Interests of Certain Persons in the Merger” beginning
on page 52 for additional information. Pursuant to the Voting Agreement, each of the Voting Shareholders has agreed to vote
the Voting Securities in favor of the approval of the merger agreement and the transactions contemplated by the
merger agreement, including the merger.
Opinion of the
Special Committee’s Financial Advisor (Page 34)
On December 16, 2016,
at a meeting of the special committee, Duff & Phelps, LLC (“Duff & Phelps”), rendered to the special committee
its oral opinion, subsequently confirmed in writing, that, as of December 16, 2016, and based upon and subject to the factors and
assumptions set forth in Duff & Phelps’ written opinion, the $1.3075 in cash for each Share and the $5.23 in cash for
each ADS to the holders (other than the Rollover Shareholders) of the Shares or ADSs pursuant to the merger agreement was fair
from a financial point of view to such holders.
The full text of
the written opinion of Duff & Phelps, dated December 16, 2016, which sets forth the assumptions made, procedures followed,
matters considered, qualifications and limitations on the review undertaken in connection with the opinion, is attached to this
proxy statement as Annex B. The summary of the Duff & Phelps opinion provided in this proxy statement is qualified in its entirety
by reference to the full text of the written opinion. Duff & Phelps’ advisory services and opinion were provided for
the information and assistance of the special committee in connection with its consideration of the proposed transaction and the
opinion does not constitute a recommendation as to how any holder of our ordinary shares or ADSs should vote with respect to the
proposed transaction or any other matter.
Interests of the
Company’s Executive Officers and Directors in the Merger (Page 52)
In considering
the recommendations of the board of directors, 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 Rollover Shareholders; |
| · | the potential enhancement or decline of share value for Parent, which the Rollover Shareholders
beneficially own, as a result of the merger and future performance of the surviving company; |
| · | continued indemnification rights, rights to advancement of fees and directors and officers liability
insurance to be provided by the surviving company to former directors and officers of the Company; |
| · | the monthly compensation of $10,000 of each member of the special committee in exchange for his
services in such capacity, subject to a cap of $60,000 (and, in the case of the chairman of the special committee, monthly compensation
of $15,000, subject to a cap of $90,000) (the payment of which is not contingent upon the completion of the merger or the special
committee’s or the board’s recommendation of the merger); and |
| · | the continuation of service of the executive officers of the Company with the surviving company
in positions that are substantially similar to their current positions. |
As of the date
of this proxy statement, the directors and executive officers of the Company held an aggregate of 86,202,012 Shares and
Company Share Awards for the right to purchase or exchange for 536,616 Shares within 60 days after the date of this proxy
statement. Please see “Security Ownership of Certain Beneficial Owners and Management of the Company” beginning
on page 92 and “Special Factors—Interests of Certain Persons in the Merger” beginning on page 52 for
additional information.
The special committee
and our board of directors 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 52 for additional information.
Conditions to the
Merger (Page 81)
The obligations
of the Company, Parent and Merger Sub to consummate the merger are subject to the satisfaction or waiver of the following mutual
conditions:
| · | the merger agreement, the plan of merger and the transactions contemplated thereby including the
merger being authorized and approved by way of special resolution (as defined in the Companies Law of the Cayman Islands (the “CICL”))
by the Company’s shareholders at the extraordinary general meeting; |
| · | no governmental authority of competent jurisdiction having enacted, issued, promulgated, enforced
or entered any law or award, writ, injunction, determination, rule, regulation, judgment, decree or executive order that has or
would have the effect of making the merger illegal or otherwise prohibit the consummation of the merger; and |
| · | all requisite regulatory approvals having been obtained and be in full force and effect, except
where the failure to obtain such requisite regulatory approvals would not, individually or in the aggregate prevent the consummation
of any of the transactions. |
The obligations
of Parent and Merger Sub to consummate the merger are also subject to the satisfaction, or waiver, of the following additional
conditions:
| · | (a)
certain representations and warranties of the Company in the merger agreement regarding (i) the capitalization information of
the Company, (ii) the Company’s obligations to repurchase or otherwise acquire any share capital of the Company or its subsidiaries,
(iii) the share capital of the Company’s subsidiaries, (iv) the Company’s power and authority to enter into the merger
agreement and consummate the transactions contemplated thereunder, (v) the board of directors’ determination and recommendation
with respect to the merger and the vote required in connection with the merger and (vi) the special committee’s receipt
of a fairness opinion from Duff& Phelps, being true and correct in all material respects; and (b) each of the other representations
and warranties of the Company set forth in the merger agreement (disregarding any limitation or qualification by materiality or
Material Adverse Effect (as defined in the section titled “The Merger Agreement and Plan of Merger—Representations
and Warranties,” beginning on page 71)) being true and correct in all respects as of the date of the merger agreement and
as of the closing date of the merger, as if made on such date and time, except to the extent such failures to be true and correct,
would not have a Material Adverse Effect;; |
| · | the Company having performed or complied in all material respects with all agreements and covenants
required by the merger agreement to be performed or complied with by it on or prior to the closing date of the merger; |
| · | the Company having delivered to Parent a certificate, dated the closing date of the merger, signed
by a senior executive officer of the Company, certifying as to the satisfaction of the above conditions; and |
| · | since the date of the merger agreement, there not having occurred a Material Adverse Effect. |
The obligations
of the Company to consummate the merger are also subject to the satisfaction, or waiver by the Company, of the following additional
conditions:
| · | the representations and warranties of Parent and Merger Sub in the merger agreement (disregarding
any limitation or qualification by materiality or Material Adverse Effect) being true and correct in all respects as of the date
of the merger agreement and as of the closing date of the merger, as if made on and at such date and time (other than representations
and warranties that by their terms address matters only as of such a specified other time, which must be true and correct as of
such time), except where the failure of such representations and warranties to be true and correct, individually or in the aggregate,
have not, and would not prevent or materially impede or impair the ability of Parent and Merger Sub to consummate any of the transactions
contemplated under the merger agreement or the plan of merger; |
| · | each of Parent and Merger Sub having performed or complied in all material respects with all covenants
and agreements required to be performed or complied with by it under the merger agreement prior to or on the closing date of the
merger; and |
| · | Parent having delivered to the Company a certificate, dated the closing date of the merger, signed
by an executive officer of Parent, certifying as to the fulfillment of the above conditions. |
No Solicitation
(Page 77)
The Company has agreed
that, neither it nor any of its subsidiaries nor any of its directors or officers will, and that it will instruct the Company representatives
not to, directly or indirectly:
| · | solicit,
initiate or knowingly encourage (including by way of furnishing nonpublic information with respect to the Company or any of its
subsidiaries), or knowingly facilitate, any inquiries or the making of any proposal or offer (including any proposal or offer
to its shareholders) that constitutes, or could reasonably be expected to lead to, any Competing Transaction (as defined in the
section “Merger Agreement and Plan of Merger—No Solicitation” beginning on page 77; |
| · | enter into, maintain or continue discussions or negotiations with the intention of encouraging
a proposal with respect to a Competing Transaction, or provide any nonpublic information with respect to the Company or any of
its subsidiaries to, any person in furtherance of or to obtain a proposal or offer for a Competing Transaction; |
| · | agree to, approve, endorse or recommend any Competing Transaction or enter into any letter of intent
or contract or commitment contemplating or otherwise relating to any Competing Transaction; or |
| · | authorize or permit any of the Company or any of its subsidiaries, or any Company representative
retained by or acting directly or indirectly under the direction of the Company or any of its subsidiaries, to do any of the foregoing. |
The Company shall
not release any third party from, or waive any provision of, any confidentiality or standstill agreement to which it is a party
in respect of a Competing Transaction. The Company has agreed that it shall notify Parent as promptly as practicable (and in any
event within 48 hours after the Company attains knowledge of any written proposal or offer) of any written proposal or offer regarding
a Competing Transaction, specifying the identity of the party making such proposal or offer, and providing copies of such written
proposal or offer, and whether the Company has any intention to provide confidential information to such person. Immediately upon
the execution and delivery of the merger agreement, the Company shall cease and cause to be terminated all existing discussions
or negotiations with any person conducted heretofore with respect to any possible Competing Transaction.
Notwithstanding
the foregoing, prior to receiving the required shareholder authorization and approval for the merger agreement, the board of
directors may directly or indirectly through the Company representatives (x) contact any person that has made a proposal or
offer regarding a Competing Transaction in order to clarify and understand the terms and conditions thereof in order to
assess whether such offer or proposal is reasonably expected to lead to a Superior Proposal (as defined in the section
“Merger Agreement and Plan of Merger - No Solicitation” beginning on page 77, and (y) furnish information to, and
enter into discussions with, a person who has made an unsolicited, written, bona fide proposal or offer regarding a Competing
Transaction, in the case of this clause (y), if the special committee has (i) determined, in its good faith judgment (after
consultation with its financial advisor and outside legal counsel), that such proposal or offer constitutes or is likely to
result in a Superior Proposal, (ii) determined, in its good faith judgment (upon advice by outside legal counsel), that, in
light of such Superior Proposal, failure to furnish such information or enter into discussions would reasonably be expected
to be inconsistent with its fiduciary obligations under applicable law, and (iii) obtained from such person an executed
confidentiality agreement satisfying the requirements of the merger agreement; provided that the Company shall
concurrently make available to Parent any material information concerning the Company and its subsidiaries that is provided
to any such person and that was not previously made available to Parent or its Representatives.
Termination of
the Merger Agreement (Page 82)
The merger agreement
may be terminated at any time prior to the effective time:
| · | by mutual written consent of the Company and Parent with the approval of their respective boards
of directors (or in the case of the Company, acting upon the recommendation of the special committee); |
| · | by either the Company (upon the recommendation by the special committee) or Parent, if: |
| · | the merger is not completed by the September 16, 2016 (provided that this termination right is
not available to any party if the failure of the merger to have been consummated was primarily due to such party’s breach
or failure to perform in any material respect any of its obligations under the merger agreement); |
| · | any governmental authority of competent jurisdiction having enacted, issued, promulgated, enforced
or entered any final and non-appealable law or award, writ, injunction, determination, rule, regulation, judgment, decree or executive
order or taken any other final and non-appealable action that has the effect of making consummation of the merger illegal or otherwise
prohibiting consummation of the merger (provided that this termination right is not available any party if the issuance of such
order was primarily due to such party’s breach or failure to perform in any material respect any of its obligations under
the merger agreement); or |
| · | the required vote of the Company’s shareholders is not obtained at the extraordinary general
meeting or any adjournment or postponement thereof (provided that this termination right is not available any party if the failure
to obtain the required vote was primarily due to such party’s breach or failure to perform any of its obligations under the
merger agreement); |
| · | by the Company (upon the recommendation of the special committee) at any time prior to the effective
time, if: |
| · | Parent or Merger Sub has breached in any material respect any of its representations, warranties,
covenants or agreements under the merger agreement, such that the corresponding condition to closing would not be satisfied by
September 16, 2016; provided that the Company will not have the right to terminate if the Company is in material breach of any
representations, warranties, agreements or covenants that would give rise to the failure of a corresponding closing condition not
being satisfied; |
| · | (a) all of the conditions to the obligations of Parent and Merger Sub to consummate the merger
have been satisfied (other than those conditions that by their nature are to be satisfied by actions taken at the closing of the
merger); (b) the Company has delivered to Parent an irrevocable written notice confirming that all of the conditions to the obligation
of the Company to consummate the merger have been satisfied (or that the Company is willing to waive any unsatisfied conditions);
and (c) Parent and Merger Sub fail to complete the closing of the merger within ten business days following the delivery of such
notice; or |
| · | prior to the receipt of the required vote of the Company’s shareholders, (a) the board of
directors (acting upon the recommendation of the Special Committee) has authorized the Company to enter into an alternative acquisition
agreement with respect to a Superior Proposal in accordance with the terms of the merger agreement and (b) the Company concurrently
with, or immediately after, the termination of the merger agreement enters into an alternative acquisition agreement with respect
to such Superior Proposal; provided that the Company will not have the right to terminate unless the Company has (A) complied in
all respects with the requirements under the merger agreement with respect to such Superior Proposal and/or alternative acquisition
agreement (other than immaterial non-compliance that does not adversely affect Parent or Merger Sub) and (B) complied in all respects
with the merger agreement regarding termination fee and pays the company termination fee prior to or concurrently with such termination; |
| · | by Parent, at any time prior to the effective time, if: |
| · | the Company has breached in any material respect any of its representations, warranties, covenants
or agreements under the merger agreement, such that the corresponding condition to closing would not be satisfied by September
16, 2016; provided that Parent will not have the right to terminate if either Parent or Merger Sub is in material breach of any
representations, warranties, agreements or covenants that would give rise to the failure of a corresponding closing condition not
being satisfied; or |
| · | the board of directors of the Company has effected a change in the Company’s recommendation
to the Company shareholders, has publicly recommended to the shareholders of the Company a Competing Transaction or has entered
into an alternative acquisition agreement with respect to any Competing Transaction; provided that Parent will not have the right
to terminate if Parent’s or Merger Sub’s failure to fulfill any of its obligations under the merger agreement has been
a cause of or resulted in such change in recommendation. |
U.S. Federal Income
Tax Consequences (Page 56)
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. In addition, holders of our ADSs and Shares should be aware that we believe
that we were likely a “passive foreign investment company” (a “PFIC”) for the period ended December 31,
2015 and that we may be a PFIC for 2016. Such classification could have material adverse tax consequences to you. Please see “Special
Factors—U.S. Federal Income Tax Consequences” beginning on page 56. The 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,
foreign and other tax consequences of the merger to you.
PRC Tax Consequences (Page
59)
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 Shares or ADSs should otherwise be subject to PRC tax to holders of
such Shares or ADSs that are not PRC residents. However, there is uncertainty regarding whether the PRC tax authorities would deem
the Company to be a resident enterprise. If the PRC tax authorities were to determine that the Company should be considered a resident
enterprise, then gain recognized on the receipt of cash for our Shares or ADSs pursuant to the merger by our shareholders or ADSs
holders who are not PRC residents could be treated as PRC-source income that would be subject to PRC income tax at a rate of 10%
in the case of enterprises or 20% in the case of individuals (subject to applicable tax treaty relief, if any), and, even in the
event that the Company is not considered a resident enterprise, gain recognized on the receipt of cash for Shares or ADSs is subject
to PRC tax if the holders of such Shares or ADSs are PRC residents. You should consult your own tax advisor for a full understanding
of the tax consequences of the merger to you, including any PRC tax consequences.
Please see “Special
Factors—PRC Income Tax Consequences” beginning on page 59 for additional information.
Cayman Islands
Tax Consequences (Page 60)
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 qualifications 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 60 for additional information.
Regulatory Matters (Page
60)
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 the approvals, filings or notices required under the federal securities laws and the filing of the plan of merger (and
supporting documentation as specified in the Cayman Islands Companies Law) with the Cayman Islands Registrar of Companies and in
the event the merger becomes effective, a copy of the certificate of merger being given to the shareholders and creditors of the
Company and Merger Sub as at the time of the filing of the plan of merger and the notice of the merger published in the
Cayman Islands Government Gazette.
Litigation Related
to the Merger (Page 55)
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 (Page 56)
Upon completion of
the merger, the Company would cease to be a publicly traded company, and the Company expects to account for the merger at historical
cost.
Market Price of
the Shares (Page 61)
On August 13, 2015,
the last trading day immediately prior to August 14, 2015, the date that the Company announced that it had received a “going-private”
proposal, the reported closing price of the Company’s ADSs on the NYSE was $4.40. The merger consideration of $1.3075 per
Share, or $5.23 per ADS, represents a premium of 18.9% over the Company’s closing price of $4.40 per ADS on August 13, 2015
and a 10.3% premium over the closing price of $4.74 per ADS on December 17, 2015, the trading day immediately before the merger
agreement was signed.
QUESTIONS AND ANSWERS
ABOUT THE EXTRAORDINARY GENERAL MEETING AND THE MERGER
The following questions
and answers address briefly some questions you may have regarding the extraordinary general meeting and the merger. These questions
and answers may not address all questions that may be important to you as a shareholder of the Company. Please refer to the more
detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred
to or incorporated by reference in this proxy statement.
| Q: | 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 three business days after the effective time of the merger), an exchange agent appointed by Parent will mail you (a)
a form of 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 exchange 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 $1.3075 in cash, without interest
and net of any applicable withholding tax, in exchange for the cancellation of your Shares. |
| | 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 represented by certificates, also referred to as American depositary receipts
(“ADRs”), unless you have surrendered your ADRs to the ADS depositary for cancellation prior to the effective time
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 of the merger), the
ADS depositary will send you a check for the per ADS merger consideration of $5.23 (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, for each ADS represented
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 of the merger, the ADS depositary will automatically send you a check for the per ADS merger consideration of $5.23 (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 backup withholding taxes if the ADS depositary has not received from you a properly completed and
signed U.S. Internal Revenue Service Form W–8 or W–9. |
| | In the event of a transfer of ownership of ADSs that are not registered in the register of ADS
holders maintained by the ADS depositary, the check for any cash to be exchanged upon cancellation of the ADSs will be issued to
such transferee only if the ADRs, if applicable, are presented to the ADS depositary, accompanied by all documents reasonably required
to evidence and effect such transfer and to evidence that any applicable ADS transfer taxes have been paid or are not applicable.
The per ADS merger consideration may be subject to backup withholding taxes if the ADS depositary has not received from 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: | When and where will the extraordinary general meeting be held? |
| A: | The extraordinary general meeting will take place on , 2016, at 10:00 a.m. (Hong Kong Time)
at 42nd Floor, Edinburgh Tower, The Landmark, 15 Queen’s Road Central, Hong Kong. |
| Q: | What matters will be voted on at the extraordinary general meeting? |
| A: | You will be asked to consider and vote on the following proposals: |
| · | to authorize and approve the merger agreement, the plan of merger and the transactions contemplated
by the merger agreement, including the merger; and |
| · | to approve any motion to adjourn or postpone 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
to be proposed at the extraordinary general meeting. |
| Q: | How does the Company board of directors recommend that I vote on the proposals? |
| A: | After careful consideration and upon the unanimous recommendation of the special committee, our
board of directors by a unanimous vote recommends that you vote: |
| · | FOR the proposal to authorize and approve the merger agreement, the plan of merger and the transactions
contemplated by the merger agreement, including the merger; and |
| · | FOR the proposal to approve any motion 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
to be proposed at 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
wholly-owned by the Buyer Group and SIG China. 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 NYSE, 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 first calendar quarter of 2016. In order to complete the merger, we must obtain shareholder approval of the merger
at the extraordinary general meeting and the other closing conditions under the merger agreement must be satisfied or waived in
accordance with the merger agreement. |
| Q: | What happens if the merger is not completed? |
| A: | If 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. In addition, the Company
will remain a publicly traded company. The ADSs will continue to be listed and traded on the NYSE, provided that the Company continues
to meet the NYSE’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 84. |
| 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 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 to be received by the Company no later than 10:00 a.m. on , 2016 (Hong Kong Time),so that
your Shares will be represented and may be voted at the extraordinary general meeting. Furthermore, if holders of ADSs do not timely
deliver specific voting instructions to the ADS depositary, they may, under the terms of the ADS deposit agreement, be deemed to
have instructed the ADS depositary to give a discretionary proxy to a person designated by the Company, which in this case will
be a member of the independent committee of the board of directors of the Company (the “Designee”). Unless the Company
notifies the ADS depositary that it does not wish such proxy to be given, that there exists substantial opposition on the matters
to be voted on at the extraordinary general meeting or that such matters would have a material adverse impact on the rights of
the holders of Shares on deposit with the ADS depositary, 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, and FOR any adjournment of 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, 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 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. If your Shares
are held by your broker, bank or other nominee, please see below for additional information. |
| | Before voting your Shares, we encourage you to read this proxy statement in its entirety, including
all of the annexes, attachments, exhibits and materials incorporated by reference, and carefully consider how the merger will affect
you. To ensure that your Shares can be voted at the extraordinary general meeting, please complete the 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 10:00 a.m. (Hong Kong Time). |
| 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, 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 instruction 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 10:00 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, such ADS holder will be deemed to have instructed the ADS depositary to vote
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 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, 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 Citibank
Hong Kong 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. |
| Q: | If my Shares or ADSs are held in a brokerage 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. Furthermore,
if holders of ADSs do not timely deliver specific voting instructions to the ADS depositary, they may, under the terms of the ADS
deposit agreement, be deemed to have instructed the ADS depositary to give a discretionary proxy to a person designated by the
Company, which in this case will be a member of the independent committee of the board of directors of the Company.
Unless the Company notifies the ADS depositary that it does not wish such proxy to be given, that there exists substantial opposition
on the matters to be voted on at the extraordinary general meeting or that such matters would have a material adverse impact on
the rights of the holders of Shares on deposit with the ADS depositary, 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, and FOR any adjournment of
the extraordinary general meeting. |
| A: | Yes, as a holder of Shares, 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 at least two hours before the extraordinary general meeting commences. Any written notice revoking a proxy should
be sent to Country Style Cooking Restaurant Chain Co., Ltd., 16th Floor, C1 Building, Chongqing Headquarters City District C, No.780
Jingwei Avenue, Yuzhong District, Chongqing 400020, 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 10:00 am (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 instruction card to the
ADS depositary bearing a later date than the ADS voting instruction card sought to be revoked. |
| | If you hold your ADSs through a broker, bank or 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, as a holder of certificated Shares, you will be sent a form
of letter of transmittal with detailed written instructions for exchanging your share certificates for the merger consideration.
Please do not send in your certificates now. Similarly, you should not send in the ADRs that represent your ADSs at this time.
Promptly after the merger is completed, the ADS depositary will call for the surrender of all ADRs for delivery of the merger consideration.
ADR holders will be receiving a similar form of letter of transmittal and written instructions from the ADS depositary relating
to the foregoing. |
| | All holders of uncertificated Shares and uncertificated ADSs (i.e., holders whose Shares or ADSs
are held in book entry) will automatically receive their 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: | Am I entitled to dissenters’ rights? |
| A: | Shareholders who dissent from the merger will have the right to receive payment of the fair value
of their Shares if the merger is completed, but only if they deliver to the Company, before the vote is taken, 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 dissenters’ rights. The fair value of your Shares as determined under the Cayman Islands Companies
Law could be more than, the same as, or less than the merger consideration you would receive pursuant to the merger agreement if
you do not exercise dissenters’ rights with respect to your Shares. |
| | ADS holders will not have the right to 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 dissenters’ rights with respect
to any of the Shares that it holds, even if an ADS holder requests the ADS depositary to do so. ADS holders wishing to exercise
dissenters’ rights must surrender their ADSs to the ADS depositary, pay the ADS depositary’s fees required for such
surrender, 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 before the vote to authorize and approve the merger is
taken at the extraordinary general meeting. Thereafter, such former ADS holders must comply with the procedures and requirements
for exercising dissenters’ rights with respect to the Shares under Section 238 of the Cayman Islands Companies Law. |
| | We encourage you to read the section of this proxy statement entitled “Dissenters’
Rights” as well as Annex C to this proxy statement carefully and to consult your Cayman Islands legal counsel if you desire
to exercise your dissenters’ rights. |
| Q: | If I own ADSs and seek to exercise dissenters’ rights, how do I convert my ADSs to Shares,
and when is the deadline for completing the conversion of ADSs to Shares? |
| A: | If you own ADSs and wish to exercise dissenters’ rights, you must surrender your ADSs to
the ADS depositary (in the case of a certificated ADS by delivering the certificate to Citibank, N.A. at 388 Greenwich Street,
(14th floor), New York, NY 10013). 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 instruct
Citibank Hong Kong to 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
plan of merger prior to vote to authorize and approve 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 dissenters’ rights. Please see
“Dissenters’ Rights” beginning on page 87 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: | Who can help answer my questions? |
| A: | If you have any questions about the merger or if you need additional copies of this proxy statement
or the enclosed proxy card, you should contact Country Style Cooking Restaurant Chain Co., Ltd. at +86-23-8866-8866 or at ir@csc100.com. |
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 Ms. Hong Li, Mr. Xingqiang Zhan, and Sky Success Venture Holdings Limited, as applicable, as the relevant
parties formed and, joined the Consortium at different times described below.
The board of directors
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 of directors and senior management also have periodically
reviewed strategic alternatives that may be available to the Company.
On August 14, 2015,
the board of directors of the Company (the “Board”) received a non-binding proposal letter from Ms. Hong Li (“Ms.
Li” or the “Chairwoman”), co-founder of the Company and Chairwoman of the Board, Mr. Xingqiang Zhang (“Mr.
Zhang”), co-founder, chief executive officer and director of the Company, and Sky Success Venture Holdings Limited (“Sky
Success”) (the “Proposal Letter”) proposing to acquire all of the outstanding ordinary shares of the Company
not already owned by Ms. Li, Mr. Zhang and Sky Success or their respective affiliates in a “going private” transaction
for $1.3075 in cash per Share (or $5.23 in cash per ADS) (the “Proposal”). In the Proposal Letter, the Consortium noted
that it was interested only in acquiring the outstanding Shares of the Company not already owned by the members of the Consortium.
The Proposal Letter also stated that the Consortium intended to finance the acquisition with a combination of debt and equity capital.
Later that day, the
Board held a telephonic conference to discuss, among other things, the Proposal. Mr. Li-Lan Cheng provided an overview of the Proposal,
and all the directors (including Ms. Li, Mr. Zhang and Mr. Zhiyun Peng) disclosed their respective interests in the proposed transaction
as required to be disclosed pursuant to the currently effective Memorandum and Articles of Association of the Company. After such
disclosure, the directors discussed the desirability of establishing a committee of independent and disinterested directors to
evaluate and negotiate the Proposal given the inherent conflicts of interest that may arise from the involvement of Ms. Li, Mr.
Zhang and Mr. Zhiyun Peng (who is a joint owner and director of Sky Success, “Mr. Peng”) in the proposed transaction.
Thereafter, the Board determined that it would be in the best interests of the Company to form a special committee, and after discussing
the various qualifications and independence of the members of the Board to serve on the special committee, the Board resolved to
form the special committee, comprised of three independent directors, Messrs. Li-Lan Cheng (to serve as chairman of the committee),
Winston Jin Li and Eric Haibing Wu, to, among other things, consider and negotiate the proposed transaction and any alternative
transactions to the proposed transaction as the special committee, in its sole discretion, deems appropriate, including maintaining
the Company’s current status as a public company or a potential change of control transaction involving an alternative buyer
and to retain, in its sole discretion, and on terms and conditions acceptable to the special committee, such advisors, including
legal counsels, financial advisors and outside consultants, as the special committee in its sole discretion deems appropriate to
assist the special committee in discharging its responsibilities.
At the telephonic conference,
the Board further resolved that it grant to the special committee the power to (a) make such investigation of the Proposal, the
proposed transaction and any matters relating thereto as the special committee, in its sole discretion, deems appropriate, (b)
evaluate the terms of the Proposal, (c) discuss and negotiate with the Consortium and its representatives any terms of the proposed
transaction and implement the proposed transaction as the special committee deems appropriate, (d) explore and pursue any alternative
transaction, (e) if and when appropriate, negotiate definitive agreements with respect to the proposed transaction or any alternative
transaction, the execution and delivery of any such agreement being subject, however, to the approval of the Board, (f) report
to the Board the recommendations and conclusions that the special committee with respect to the proposed transaction or any alternative
transaction and any recommendation as to whether the final terms of the proposed transaction or any alternative transaction are
fair to and in the best interests of the shareholders of the Company and should be approved by the Board and, if applicable, by
the Company’s shareholders, and determinations and recommendations with respect to any other matters requested by the Board,
and (g) retain, in its sole discretion, and on terms and conditions acceptable to these special committee, such advisors, including
legal counsel, financial advisors and outside consultants, as the special committee in its sole discretion deems appropriate to
assist the special committee in discharging its responsibilities.
Later that day, the
Company issued a press release regarding its receipt of the Proposal Letter and the transaction proposed therein, and on August
17, 2015 furnished the press release as an exhibit to its Current Report on Form 6-K.
On August 24, 2015,
the Chairwoman, Mr. Zhang and Sky Success entered into a consortium agreement pursuant to which the Consortium members agreed to,
among other things, form a consortium to work exclusively with one another to undertake the proposed transaction described in the
Proposal Letter.
Later that day, the
Chairwoman, Mr. Zhang, Sky Success and their respective affiliated entities filed a Schedule 13D announcing the execution of the
consortium agreement.
On August 27, 2015,
after considering proposals from multiple prospective U.S. legal advisors, the special committee retained Kirkland & Ellis
as its U.S. legal advisor. From time to time thereafter, Kirkland & Ellis had discussions with representatives of Maples and
Calder, the Company’s Cayman Islands legal counsel, regarding the Proposal, the directors’ duties in connection with
considering and evaluating the Proposal and other matters of Cayman Islands law that were relevant to the proposed transaction.
On September 1, 2015,
after deliberation on the experience, qualifications and reputation of each of the potential financial advisors evaluated by the
special committee, the special committee decided to engage Duff & Phelps, LLC (“Duff & Phelps”) as its financial
advisor. Among the reasons for Duff & Phelps’s selection were its extensive experience in M&A transactions, including
representing special committees in going private transactions, its strong reputation, its significant experience dealing with China-based
companies, its lack of existing material relationships with the Company or the Consortium and its ability to interact in both English
and Chinese. As part of the engagement, the special committee also retained Duff & Phelps Securities, LLC (“DPS”),
an affiliate of Duff & Phelps, to act as financial advisor to the special committee to provide such financial and market related
advice and assistance as deemed necessary by the special committee in connection with the proposed transaction. The special committee
subsequently entered into an engagement letter with Duff & Phelps and DPS.
On September 17, 2015,
the special committee convened a meeting by telephone with Kirkland & Ellis, Duff & Phelps and DPS. During the meeting,
the special committee and Kirkland & Ellis discussed the scope and authority of the special committee and reviewed the independence
of each member of the special committee. Kirkland & Ellis then led the special committee in a discussion of its key duties,
responsibilities and guidelines and highlighted to the special committee members that they should substantively engage with the
Consortium only if the special committee determined to do so following its review of the Proposal, as assisted by its financial
and legal advisors. Thereafter, the special committee engaged in a discussion with its advisors regarding establishing a process
and adopting a strategy and practices designed to maximize shareholder value in light of the circumstances, including the fact
that the Consortium beneficially owned approximately 56.9% of the outstanding Shares (as of September 17, 2015). Finally, the special
committee concluded that it was in the best interests of the Company at that stage to enter into confidentiality agreements with
each member of the Consortium that would, among other things, include a standstill preventing members of the Consortium entering
into exclusive arrangements with other shareholders regarding a transaction and authorized Kirkland & Ellis to negotiate such
confidentiality agreements on behalf of the Company.
Following the special
committee meeting, on September 18, 2015, Kirkland & Ellis sent a form of confidentiality agreement to Skadden, Arps, Slate,
Meagher & Flom LLP (“Skadden”), counsel to the Consortium, that all members of the Consortium were requested to
sign.
On September 21, 2015,
the Company issued a press release regarding the special committee’s appointment of Duff & Phelps and DPS as its financial
advisor and Kirkland & Ellis as its U.S. legal counsel and furnished the press release as an exhibit to its Current Report
on Form 6-K.
On October 7, 2015,
Skadden sent a draft merger agreement, voting agreement and rollover agreement to Kirkland & Ellis.
Around this time,
SIG China informed the Consortium and Skadden that SIG China is interested in participating in the Merger as a rollover
shareholder. On October 12, 2015, Skadden, the Consortium and SIG China held a telephone conference to discuss SIG China's
role in the Merger, and SIG China agreed in principle that it would roll over all of its shares in the Company in the form of
being a shareholder of Parent and remain an indirect beneficial owner of the Company after the completion of the Merger in
the form of being a shareholder of Parent. Although SIG was not a party to the consortium agreement and did not otherwise
participate in the Consortium, SIG China undertook to sign the rollover agreement and voting agreement and provide limited
guarantee for the performance of the Parent and Merger Sub under the merger agreement.
On October 14, 2015,
the special committee convened a meeting by telephone with Kirkland & Ellis and DPS. During the meeting, DPS provided the special
committee with an update on the Consortium’s debt financing plans, which, among other things, contemplated making use of
the Company’s cash located in China. The special committee discussed with its advisors the need to further understand the
details of the Consortium’s financing plan, the impact that the financing structure could have on the certainty of closing
for any transaction and overall timing. Thereafter, Kirkland & Ellis discussed with the special committee certain key issues
raised by the draft merger agreement received from Skadden, including, among other things, (1) the inability of the Company to
terminate the agreement if it received a Superior Proposal following execution of a definitive agreement, (2) the lack of clarity
and certainty with respect to the Consortium’s proposed financing and (3) that the Company would not be entitled to specific
performance under any circumstances. The special 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 a review by Kirkland & Ellis of the special
committee’s duties in this regard under applicable law, DPS noted that since the public disclosure of the Proposal on August
14, 2015, there had been no inquiries from third parties. After discussion with its advisors, and taking into consideration all
available facts, including (1) the Consortium’s beneficial ownership of approximately 56.9% of the total outstanding shares
and their collective ability to veto any other transaction by voting against it, (2) the absence of any indication of interest
to DPS or the Special Committee by any potential bidder in making an alternative offer since the public announcement of the Proposal
and (3) the significant disruption to the operations of the Company that a pre-signing market check may cause, the special 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 and therefore, although the special committee would not pursue an active
market check at that stage, it would remain open to any competing bids received and focus on negotiating the best deal available
with the Consortium. In that regard, the special committee then engaged in a robust discussion with its advisors regarding the
best strategy to obtain the highest price reasonably available from the Consortium.
On October 16, 2015,
Kirkland & Ellis delivered its initial comments to the merger agreement to Skadden.
On October 28, 2015,
Skadden circulated a revised draft of the merger agreement.
On the following day,
Kirkland & Ellis held a telephone conference with Skadden to discuss the merger agreement.
On November 6, 2015,
Kirkland & Ellis sent a second round of comments on the merger agreement as well as the comments on the drafts of the rollover
agreement and voting agreement.
On November 12, 2015,
Skadden circulated the further revised draft of the merger agreement.
On
November 13, 2015, the special committee held a telephonic meeting with Kirkland & Ellis, Duff & Phelps and DPS. DPS provided
the special committee with an update on the Consortium’s financing which would focus on securing debt financing from China
Merchant Bank and of which the financing commitment papers were expected to be finalized by the end of November 2015. Kirkland
& Ellis then provided the Special Committee with an update on the revised merger agreement received from the Consortium’s
counsel on November 12, 2015. After discussions, the special committee instructed Kirkland
& Ellis to continue to try to settle technical points with the Consortium’s counsel, but continue to stand firm on the
key issues until the special committee and its advisors have collected more information and conducted additional financial analyses.
Thereafter, the special committee engaged with its advisors in a discussion about the ten-year financial projections of the Company
prepared by management for the Company’s future financial performance for the fiscal years ending December 31, 2015 through
December 31, 2024 (which financial projections are summarized under “Special Factors — Certain Financial Projections”).
Duff & Phelps orally summarized the key financial projections set forth in the financial projections and discussed various
assumptions underlying the financial projections as well as certain observations by Duff & Phelps regarding the reasonableness
of such assumptions. The special committee then inquired about the reasonableness of certain assumptions and projections, and a
discussion ensued. After the discussion, the special committee directed Duff & Phelps to conduct further research on certain
points discussed at the meeting, and decided that the special committee will seek additional input on certain issues from the Company’s
management at the meeting of the board of the Company scheduled on Thursday, November 19, 2015 before making a decision on whether
to authorize Duff & Phelps to use the financial projections in connection with its fairness analysis in connection with the
evaluation of the proposed transaction and other strategic alternatives of the Company.
On November 23, 2015
the special committee convened a telephonic meeting with Kirkland & Ellis, Duff & Phelps and DPS. The chairman of the special
committee, Mr. Li-Lan Cheng, briefed the special committee and its advisors on the meeting of the board of the Company held on
November 19, 2015 and introduced the analyses of certain assumptions and projections that the management of the Company provided
at the meeting of the board in connection with the ten-year financial projections. Thereafter, the special committee engaged its
advisors in a discussion about the reasonableness of the ten-year financial projections. After the discussion, the special committee
directed Duff & Phelps to utilize such projections in its financial analyses. In the meantime, the special committee also authorized
DPS to take the lead in drafting and sending a letter to the Consortium to request a price increase. Thereafter, DPS and Kirkland
& Ellis provided the special committee with an update on various workstreams including the status of the debt financing and
the relevant commitment papers from China Merchant Bank, and certain points in connection with the comments on the merger agreement.
Following the meeting,
Kirkland & Ellis sent a further revised draft of the merger agreement to Skadden, and Skadden sent a revised draft of the merger
agreement to Kirkland & Ellis on November 29, 2015.
On December 1, 2015,
the Consortium rejected the special committee’s request for a price increase, noting among other things, a general deterioration
in China’s economic condition, that the global financial markets had experienced significant volatility which had increased
the Consortium’s challenge in maintaining the previously proposed offer price in the Proposal and that the competition in
the fast service food industry as well as the increase in operating costs of the Company had sharply narrowed the possibility of
immediate increase in the Company’s market share price.
Later that day, Skadden
passed along a draft debt commitment letter from China Merchants Bank.
Later on the same day,
the special committee convened two meetings, in the afternoon and evening time respectively, with Kirkland & Ellis, Duff &
Phelps and DPS, to engage in intensive discussions about further negotiations on the price, the final resolution of all open items
on the merger agreement and other transaction documents, and the overall strategy and timeline. At the afternoon meeting, the special
committee discussed with its advisors and considered the course of dealing with the Consortium and various options available to
the Company, including, among other things, responding to the Consortium with a further request for an improved price and/or other
terms. After the discussion and deliberation, the special committee instructed DPS to negotiate with the Consortium for a second
time for a higher offer price. DPS then reached out on behalf of the special committee to Mr. Zhang who has been representing the
Consortium in previous negotiations and requested a higher price for the second time.
Following DPS’s
communications with Mr. Zhang, the special committee convened another meeting with its advisors in the evening. At the evening
meeting, DPS noted to the special committee that the Consortium rejected the request and emphasized that the proposed price was
already providing a meaningful premium to the market price. DPS further noted that Mr. Zhang suggested in the communications that
in the event that the special committee accepted the proposed price, the Consortium would consider accepting the special committee’s
positions on most of the outstanding key issues in the merger agreement including an increase in the reverse termination fee. The
special committee then engaged with its advisors in discussions with respect to, among other things, the Consortium’s rejection
of its request for a price increase, the open items on which the Consortium would accept the terms more favorable to the Company
and minority shareholders and the timing of the proposed transaction. After deliberating, the special committee determined that
the likelihood of the Consortium increasing its offer price was low, and it would be in the best interest of the Company and minority
shareholders if the Consortium agrees on the terms more favorable to the Company on the open items of the merger agreement. Therefore,
the special committee determined to drop the price negotiation and instructed Kirkland & Ellis to work with Skadden to finalize
the merger agreement.
During the ensuing
days, Kirkland & Ellis and Skadden continued to negotiate the merger agreement and related documentation, including, among
other things, finalizing the scope of the Company’s representations and warranties, the covenants applicable to the Company
prior to closing and the terms of the limited guarantee.
On December 16, 2015,
the board of directors of the Company held a telephonic meeting with Kirkland & Ellis, Duff & Phelps and DPS. None of the
Chairwoman, Mr. Zhang, Mr. Peng or Mr. Tim T. Gong attended, participated in or voted upon any matters discussed during the meeting.
Following a recap of previous fiduciary duty presentations by Kirkland & Ellis, Kirkland & Ellis gave an update on the
status of the negotiations with the Consortium and summarized for the board of directors the key terms and final resolution of
all open items on the merger agreement and other transaction documents. Duff & Phelps then made a presentation regarding consideration
that would be paid to the Company’s shareholders in the potential merger and its financial analyses of the Company. Thereafter,
Duff & Phelps delivered its oral opinion, subsequently confirmed in writing and attached hereto as Exhibit B, to the special
committee to the effect that, as of December 16, 2015, and based upon and subject to the factors and assumptions set forth in Duff
& Phelps’ written opinion, the $1.3075 in cash for each of the Company’s ordinary shares and the $5.23 in cash
for each ADS to be paid to the holders (other than Parent, the Rollover Shareholders and their respective affiliates) of the Company’s
ordinary shares or ADSs pursuant to the merger agreement was fair from a financial point of view to such holders.
Mr. Steve Yue Ji then
left the telephonic board meeting and Messrs. Li-Lan Cheng, Winston Jin Li and Eric Haibing Wu commenced a telephonic meeting
of the special committee. After considering the proposed terms of the merger agreement and the other transaction agreements, as
well as the financial presentation of Duff & Phelps, including receipt of the oral opinion from Duff & Phelps as described
above, and taking into account the other factors described below under the headings titled “Recommendations of the Special
committee and the Board of Directors” beginning on page 4, “Reasons for the Merger and Recommendation of the Special
Committee and Our Board of Directors” beginning on page 24 and “Opinion of the Special Committee’s Financial
Advisor” beginning on page 34, the special committee then unanimously determined that the merger agreement, the plan of merger
and the merger and the other transactions 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 other transaction agreements and recommended that the board of directors adopt a resolution
approving and declaring the advisability of the merger agreement, the merger and the other transactions contemplated by the merger
agreement and recommending that the shareholders of the Company authorize and approve the merger agreement, the plan of merger
and the merger.
Thereafter, Mr.
Steve Yue Ji rejoined the telephonic meeting and Mr. Li-Lan Cheng resumed the meeting of the board of directors. The special
committee presented its recommendation to the board of directors. After considering the proposed terms of the merger
agreement and the other transaction agreements, as well as the financial presentation of Duff & Phelps, including the
oral opinion provided by Duff & Phelps to the special committee described above, and taking into account the other
factors described below under the headings titled “Recommendations of the Special Committee and the Board of
Directors” beginning on page 4, “Reasons for the Merger and Recommendation of the Special Committee and Our Board
of Directors” beginning on page 24 and “Opinion of the Special committee’s Financial Advisor”
beginning on page 34, the board of directors, with the Chairwoman, Messrs. Zhang, Peng and Tim T. Gong not present or
participating, 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 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 directed 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 of directors that the shareholders of the Company authorize and approve by way of special resolutions the
merger agreement, the plan of merger and the transactions contemplated under the merger agreement, including the merger. See
“Recommendations of the Special committee and the Board of Directors,” beginning on page 6, “Reasons for
the Merger and Recommendation of the Special Committee and Our Board of Directors” beginning on page 24 and
“Opinion of the Special Committee’s Financial Advisor” beginning on page 34 for a full description of the
resolutions of the board of directors at this meeting.
On December 17, 2015,
the Company, Parent and Merger Sub executed and delivered the merger agreement and the applicable parties executed the ancillary
documents relating thereto as to which they respectively are a party and the Company issued a press release announcing the execution
of the merger agreement and the ancillary documents on December 19, 2015.
Reasons for the
Merger and Recommendation of the Special Committee and Our Board of Directors
Our board of directors,
acting upon the unanimous recommendation of the special committee, which special committee acted with the advice and assistance
of our management and its financial and legal advisors, evaluated the merger, including the terms and conditions of the merger
agreement.
At a meeting on
December 16, 2015, the special committee unanimously recommended that our board of directors adopt resolutions that:
| · | determine that the merger, on the terms and subject to the conditions set forth in the merger agreement,
is fair to and in the best interests of, the Company and its unaffiliated security holders, and declare it advisable to enter into
the merger agreement; |
| · | authorize and approve the execution, delivery and performance by the Company of the merger agreement
and the completion of the transactions contemplated thereby, including the merger; and |
| · | direct that the authorization and approval of the merger agreement, plan of merger and the transactions
contemplated by the merger agreement, including the merger, be submitted to a vote at an extraordinary general meeting of the shareholders
of the Company with the recommendation 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 16,
2015, our board of directors approved and adopted the resolutions recommended by the special committee. Please see “Special
Factors—Interests of Certain Persons in the Merger” beginning on page 52 for additional information.
In the course
of reaching their respective determinations, the special committee and our board of directors considered the following substantive
factors and potential benefits of the merger, each of which the special committee and our board of directors believed supported
their respective decisions, but which are not listed in any relative order of importance:
| · | the current and historical market prices of the Company’s ADSs, including the fact that the
$1.3075 per Share or $5.23 per ADS merger consideration offered to the Company’s unaffiliated security holders represents
a premium of 18.9% over the Company’s closing price of $ 4.40 per ADS on August 13, 2015, the last trading day immediately
prior to August 14, 2015, the date that the Company announced that it had received a “going-private” proposal and a
10.3% premium over the closing price of $4.74 per ADS on December 17, 2015, the trading day immediately before the merger agreement
was signed; |
| · | the possibility that it could take a considerable period of time before the trading price of the
ADSs would reach and sustain at the per ADS merger consideration of $5.23, as adjusted for present value; |
| · | the negotiations with respect to the merger consideration and the special committee’s determination
that, following negotiations with the Buyer Group, $1.3075 per Share or $5.23 per ADS was the highest price that the Buyer Group
would agree to pay, with the special committee basing its belief on a number of factors, including the duration and tenor of negotiations
and the experience of the special committee and its advisors; |
| · | the all-cash merger consideration, which will allow our 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 financial analysis reviewed and discussed with the special committee by representatives of
Duff & Phelps, as well as the opinion delivered by Duff & Phelps to the special committee on December 16, 2015, which opinion
was subsequently confirmed in writing and attached hereto as Annex B, to the effect that, as of December 16, 2015, and based upon
and subject to the factors and assumptions set forth in Duff & Phelps’ written opinion, the $1.3075 in cash for each
of our ordinary shares and the $5.23 in cash for each ADS to be paid to the holders (other than the Rollover Shareholders and their
respective affiliates) of our ordinary shares or ADSs pursuant to the merger agreement was fair from a financial point of view
to such holders; |
| · | 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, including the absence of significant required regulatory approvals; and |
| · | the fact the merger agreement provides that, in the event of a failure of the merger to be completed
under certain circumstances, Parent will pay the Company a $4,000,000 termination fee, and the guarantee of such payment obligation
by the Guarantors pursuant to the limited guarantee; |
| · | the
recognition by the special committee and our board of directors that, under the terms of the merger agreement, it has the ability
to consider any proposal regarding a Competing Transaction reasonably expected to lead to a Superior Proposal until the date our
shareholders vote upon and authorize and approve the merger agreement (as further explained under the caption “The Merger
Agreement and Plan of Merger—No Solicitation” beginning on page 77; |
| · | our
ability, subject to compliance with the terms and conditions of the merger agreement, to terminate the merger agreement prior
to shareholder approval has been obtained in order to enter into an alternative transaction proposed by a third party that is
a Superior Proposal (as further explained under the caption “The Merger Agreement and Plan of Merger—No Solicitation”
beginning on page 77; |
| · | our ability, under certain circumstances, to change, withhold, withdraw, qualify or modify our
recommendation that our shareholders vote to authorize and approve the merger agreement; |
| · | our ability, under certain circumstances, to specifically enforce the terms of the merger agreement;
and |
| · | the consideration and negotiation of the merger agreement was conducted entirely under the control
and supervision of the special committee, which consists of three independent directors, each of whom is an outside, non-employee
director, and that no limitations were placed on the special committee’s authority. |
In addition, the
special committee and our board of directors believed that sufficient procedural safeguards were and are present to ensure that
the merger is procedurally fair to our unaffiliated security holders and to permit the special committee and our board of directors
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 special committee acted solely to represent
the interests of the unaffiliated security holders, and the special committee had independent control of the negotiations with
the Buyer Group and its legal and financial advisors on behalf of such unaffiliated security holders; |
| · | all of the directors serving on the special committee during the entire process were and are independent
directors and free from any affiliation with the Buyer Group or SIG China. In addition, 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 directors’ receipt
of board compensation in the ordinary course, (ii) special committee members’ compensation in connection with its evaluation
of the merger (which is not contingent upon the completion of the merger or the special committee’s or board’s recommendation
of the merger), and (iii) the directors’ indemnification and liability insurance rights under the merger agreement; |
| · | following its formation, the special committee’s independent control of the sale process
with the advice and assistance of Duff & Phelps and DPS, as its financial advisors, and Kirkland & Ellis and Maples and
Calder, as its legal advisors, each reporting solely to the special committee; |
| · | the special committee was empowered to consider, attend to and take any and all actions in connection
with the written proposal from the Buyer Group and the transactions contemplated thereby from the date the 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 our board of directors for authorization and approval unless the special committee had recommended such
action to our board of directors; |
| · | the special committee had the authority to reject the terms of any strategic transaction, including
the merger; |
| · | the special committee met regularly to consider and review the terms of the merger; |
| · | the recognition by the special committee and our board of directors that it had no obligation to
recommend the authorization and approval of the proposal or any other transaction; |
| · | the
recognition by the special committee and our board of directors that, under the terms of the merger agreement, it has the ability
to consider any proposal regarding a Competing Transaction reasonably expected to lead to a Superior Proposal until the date our
shareholders vote upon and authorize and approve the merger agreement (as further explained under the caption “The Merger
Agreement and Plan of Merger—No Solicitation” beginning on page 77); |
| · | the ability of the Company to terminate the merger agreement in connection with a Superior
Proposal (as further explained under the caption “The Merger Agreement and Plan of Merger—No Solicitation”
beginning on page 77 subject to compliance with the terms and conditions of the merger agreement; and |
| · | the availability of dissenters’ 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 dissenters’ rights,
which allow such holders to receive the fair value of their Shares as determined by the Grand Court of the Cayman Islands. |
The special committee
and board of directors also considered a variety of potentially negative factors discussed below concerning the merger agreement
and the merger, which are not listed in any relative order of importance:
| · | the 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 unaffiliated with the Buyer Group and SIG China: |
| · | 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 our 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, including, among other things,
restrictions on: (i) the amendment of the organizational documents of the Company or any of its subsidiaries, (ii) the issuance,
sale, pledge or disposal of any securities of the Company or any of its subsidiaries, (iii) declaring dividends, with certain
exceptions, (iv) acquiring or making capital contributions in any corporation or other business organization or acquiring any
significant amount of assets, with certain exceptions, (v) incurring indebtedness in excess of $5 million individually or $10
million in aggregate or guarantee indebtedness in excess of $10 million individually or $50 million in the aggregate, (vi) entering
into any new employment or compensatory agreements or terminate such agreements (with certain exceptions), granting of severance
or termination payments to or materially increasing in compensation of any director or executive officer of the Company or acceleration
of vesting or payment of benefits under the Company’s employee benefits plan, (vi) selling property or assets material to
the Company and its subsidiaries, taken as a whole (vii) entering into any new line of business material to the Company and its
subsidiaries, taken as a whole. See “The Merger Agreement and Plan of Merger—Conduct of Business Prior to Closing”
beginning on page 75 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 $1,538,250
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 $4,000,000, and that the Company may not be entitled to a termination fee at all if, among
other things, (i) the merger is not completed by September 16, 2016 or (ii) 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 82 and “The Merger Agreement and Plan of
Merger—Termination Fee” beginning on page 84 for additional information; |
| · | the
terms of the Voting Shareholders’ participation in the merger and the fact that the Voting Shareholders may have interests
in the transaction that are different from, or in addition to, those of our 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 52 for additional information; |
| · | the possibility that the merger might not be completed and the negative impact of a public announcement
of the merger on our sales and operating results and our ability to attract and retain key management, marketing and technical
personnel; and |
| · | the taxability of an all-cash transaction to our unaffiliated security holders that are U.S. holders
as defined below in “Special Factors—U.S. Federal Income Tax Consequences.” |
The foregoing
discussion of information and factors considered by the special committee and our board of directors is not intended to be exhaustive,
but includes the material factors considered by the special committee and our board of directors. In view of the wide variety of
factors considered by the special committee and our board of directors, neither the special committee nor our board of directors
found it practicable to quantify or otherwise assign relative weights to the foregoing factors in reaching its conclusions. In
addition, individual members of the special committee and our board of directors may have given different weights to different
factors and may have viewed some factors more positively or negatively than others. The special committee recommended that our
board of directors authorize and approve, and our board of directors authorized and approved, the merger agreement 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 special committee considered the opinion and related financial analyses presented by Duff & Phelps,
among other factors. These analyses included, among others, discounted cash flow analysis, selected public companies and merger
and acquisition transactions analyses and premium paid analysis. All of the material analyses as presented to the special committee
on December 16, 2015 are summarized below under the caption “Opinion of the Special Committee’s Financial Advisor”
beginning on page 34.
Neither the special
committee nor our board of directors considered the liquidation value of the Company’s assets because each considers the
Company to be a viable going concern business where value is derived from cash flows generated from its continuing operations.
The special committee and the Company's board of directors believe that the trading price of the ADSs at any given time represents
the best available indicator of the Company's going concern value at that time, so long as the trading price at that time is not
impacted by speculation regarding the likelihood of a potential transaction and did not determine a going concern value for the
Company. Each of the special committee and board of directors also considered the historical market prices of our ADSs as described
under the caption “Market Price of the Company’s ADSs, Dividends and Other Matters—Market Price of the ADSs”
beginning on page 61. Neither the special committee nor our board of directors 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 special
committee and board of directors 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 US$1.50 based on the number of 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 or the business risks inherent in competing with larger companies in the Company’s industry.
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 our unaffiliated security holders and its decision to authorize and approve
the merger agreement and recommend the authorization and approval of the merger agreement, the plan of merger and the transactions
contemplated thereby, including the merger, by our shareholders, our board of directors, on behalf of the Company, considered the
analysis and recommendation of the special committee and the factors examined by the special committee as described above under
this section and adopted such recommendations and analysis. For the foregoing reasons, each of the Company and our board of directors
believes that the merger agreement, the plan of merger and the transactions contemplated thereby are substantively and procedurally
fair to and in the best interests of the Company and our unaffiliated security holders. The special committee and the board of
directors on behalf of the Company believe that it is appropriate for the Company to undertake the merger and the going private
transaction at this time, so that it can achieve its goal of exiting the U.S. public equity market and become a privately held
company.
Except as discussed
in “Special Factors—Background of the Merger,” “Special Factors—Reasons for the Merger and Recommendation
of the Special Committee and our Board of Directors,” and “Special Factors—Opinion of the Special 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.
Position as to the
Fairness of the Merger
Under SEC rules governing
going-private transactions, each member of the Buyer Group may be deemed to be an affiliate of the Company, and therefore, each
is required to express its belief as to the fairness of the merger to the Company’s unaffiliated security holders. Each
member of the Buyer Group is making the statements included in this section solely for the purpose of complying with the requirements
of Rule 13e-3 and related rules under the Exchange Act. The views of the Buyer Group as to the fairness of the merger,
as indicated herein, are not intended and should not be construed as a recommendation to any holder of Shares or ADSs as to how
to vote on the proposal to authorize and approve the merger agreement, the plan of merger and the transactions contemplated thereby,
including the merger. The Buyer Group has interests in the merger that are different from, and in addition to, those of the Company’s
unaffiliated security holders by virtue of the Buyer Group members' continuing interests in the surviving corporation after the
consummation of the merger. See “Special Factors—Interests of Certain Persons in the Merger” beginning on page 52
for additional information.
The Buyer Group believes
the interests of the unaffiliated security holders were fully represented by the special committee, which negotiated the terms
and conditions of the merger agreement with the assistance of its independent outside legal and financial advisors. The Buyer Group
attempted to negotiate a transaction that would be most favorable to the Buyer Group, rather than to the Company’s unaffiliated
security holders and, accordingly, did not negotiate the merger agreement with the goal of obtaining terms that were substantively
and procedurally fair to such unaffiliated security holders. No member of the Buyer Group or SIG China participated in the deliberations
of the special committee regarding, and did not receive any advice from, or discuss with the special committee’s legal or
financial advisors as to, the fairness of the merger to the unaffiliated security holders. Furthermore, none of the members of
the Buyer Group engaged a financial advisor for the purpose of performing any independent valuation or other analysis to assist
them in assessing the fairness of the Buyer Group’s offer price to the Company’s unaffiliated security holders.
Based on their thorough
knowledge and detailed analysis of available information regarding the Company, as well as the factors considered by, and the
analysis and resulting conclusions of, the special committee and the Board discussed in “Special Factors—Reasons for
the Merger and Recommendation of the Independent Committee and the Board of Directors” beginning on page 24, the Buyer Group
believes that the merger is substantively and procedurally fair to the Company’s unaffiliated security holders. In particular,
such belief is based on consideration of the following factors, which are not listed in any relative order of importance:
| · | the Per ADS merger consideration of US$5.23 represents a premium of 18.9% over the Company’s
closing trading price of US$4.40 per ADS as quoted by the NYSE on August 13, 2015, the last trading day prior to August 14, 2015,
the date the Buyer Group submitted its non-binding going-private proposal to the Company; |
| · | the Company’s ADSs traded as low as US$3.82 per ADS during the 52-week period prior to the
announcement of the execution of the merger agreement; |
| · | the special committee consists solely of directors who are unaffiliated with any member of the
Buyer Group and SIG China or any officer or employee of the Company and do not have any interests in the merger different from,
or in addition to, those of the unaffiliated security holders, other than (i) the directors’ receipt of compensation
in the ordinary course of business, (ii) special committee members’ compensation in connection with its evaluation of
the merger (which is not contingent upon the consummation of the merger or the special committee’s or board of directors’
recommendation of the merger) and (iii) the directors’ indemnification and liability insurance rights under the merger
agreement; |
| · | the special committee was given
authority to, among other things, review, evaluate and negotiate the terms of the merger and to recommend to the board of directors
what action should be taken by the Company, such as not to engage in the transactions contemplated under the merger agreement,
including the merger, and none of the Buyer Group or SIG China participated in or sought to influence in any way the deliberative
process of, or the conclusions reached by, the special committee or the negotiating positions of the special committee; |
| · | the special committee and the board of directors had no obligation to recommend the authorization
and the approval of the merger agreement, the plan of merger or the transactions contemplated under the merger agreement, including
the merger; |
| · | the special committee retained and was advised by independent outside legal counsels and independent
financial advisors, all of whom are experienced in advising committees such as the special committee in similar transactions, and
the compensation received by such independent legal counsel and financial advisors is not contingent upon the consummation of the
merger or the special committee’s or board of directors’ recommendation of the merger; |
| · | the special committee and, acting upon the unanimous recommendation of the special committee, the
board of directors (other than Ms. Hong Li, Mr. Xingqiang Zhang, Mr. Tim T. Gong and Mr. Zhiyun Peng, who abstained from the vote)
determined that the merger agreement, the plan of merger and the transactions contemplated under the merger agreement, including
the merger, are in the best interests of the unaffiliated security holders, the authorization and approval of the merger agreement,
the plan of merger and the transactions contemplated under the merger agreement, including the merger, is subject to the affirmative
vote of the 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 the extraordinary general meeting; |
| · | the merger consideration and other terms and conditions of the merger agreement, the plan of merger
and the transactions contemplated under the merger agreement, including the merger, were the result of robust, arms-length negotiations
between the Buyer Group and the special committee and their respective legal and financial advisors; |
| · | under the terms of the merger agreement, prior to the time the necessary shareholder authorization
and approval of the merger agreement, the plan of merger and the transactions contemplated under the merger agreement, the Company
is permitted to (i) contact any person that has made a proposal or offer regarding a Competing Transaction to assess whether
such offer or proposal is reasonably expected to lead to a proposal superior to the proposal of the Buyer Group, and (ii) furnish
information to, and enter into discussions with, a person that has made an unsolicited, written, bona fide proposal or offer regarding
a Competing Transaction; |
| · | the ability of the Company to terminate the merger agreement under the terms of thereunder to enter
into a Superior Proposal or upon a change in the Company’s recommendation to its shareholders, subject to compliance with
the terms and conditions of the merger agreement; |
| · | the termination fee payable by the Company to Parent if the merger agreement is terminated under
certain circumstances is US$1,538,250 million, or approximately 1.1% of the Company’s total equity value implied by the merger
consideration, whereas the termination fee payable by Parent to the Company if the merger agreement is terminated under certain
circumstances is twice that, or US$4.0 million, the equivalent of approximately 2.8% of the Company’s total equity value
implied by the merger consideration; |
| · | each of Regal Fair Holdings Limited, Sky Success Venture Holdings Limited and SIG China Investments
One, Ltd. has agreed to guarantee the obligations of Parent or Merger Sub under the merger agreement to pay the relevant termination
fee to the Company and reimburse certain costs and expenses of the Company if the merger agreement is terminated under certain
circumstances; |
| · | the Company has the ability to specifically enforce the terms of the merger agreement under certain
circumstances; |
| · | notwithstanding that the Buyer Group may not rely upon that certain fairness opinion dated December
16, 2015 provided by the financial advisors to the special committee, stating that, as of the date of the merger agreement, and
based upon and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken and
other matters considered by the financial advisor in preparing its opinion, the US$1.3075 per Share merger consideration to be
received by the holders of Shares and US$5.23 per ADS merger consideration to be received by holders of ADSs (in each case, other
than holders of the Excluded Shares and/or the Dissenting Shares) in the merger was fair, from a financial point of view, to such
holders; |
| · | the consideration to be paid to the unaffiliated security holders in the merger is all cash, allowing
the unaffiliated security holders to immediately realize certainty of value and liquidity for all of their Shares or ADSs, without
incurring brokerage and other costs typically associated with market sales; |
| · | the Buyer Group obtained debt financing commitment for the merger with a limited number of conditions
attached, thus increasing the likelihood that the merger will be consummated and the merger consideration will be paid to the unaffiliated
security holders; and |
| · | the recognition of the potential disadvantages that the Company would continue to face as an SEC-reporting
public company, including continuing to be subject to the (i) significant costs associated with regulatory compliance for
a publicly listed company; (ii) requirement to disclose a considerable amount of business information to the public, some
of which would otherwise be considered competitively sensitive and would not be disclosed by a non-reporting company and which
potentially may help the Company’s actual or potential competitors, customers, lenders and vendors compete against the Company
or make it more difficult for the Company to negotiate favorable terms with them, as the case may be and (iii) the limited
trading volume and fluctuating trading prices of the Company’s ADSs on the NYSE. |
In its extensive consideration
of the fairness of the merger, the Buyer Group members did not:
| · | consider the Company’s net book value, an accounting concept based on historical costs, as
a factor. This is because the Buyer Group members believe that net book value is not a material indicator of the Company’s
value as a going concern, particularly given the uncertainties the Company's business faces in the highly competitive consumer
food services industry in China; |
| · | undertake an appraisal of the assets of the Company to determine the Company’s liquidation
value for the unaffiliated security holders due to the impracticability of determining a liquidation value, given the significant
execution risk involved in any breakup. The Buyer Group also did not consider the Company’s liquidation value to be a relevant
valuation method because it considers the Company to be a viable going concern where value is derived from cash flows generated
from its continuing operations, and because the Company will continue to operate its business following the merger; |
| · | seek to establish a pre-merger going concern value for the Company’s Shares and ADSs to determine
the fairness of the merger consideration to the unaffiliated security holders. This is because following the merger the Company
will have a significantly different capital structure as a result of the merger. However, to the extent the pre-merger going concern
value was reflected in the pre-announcement price of the ADSs, the Buyer Group believes that the merger consideration represented
a premium to the going concern value of the Company; |
| · | consider
any offers or proposals made by any unaffiliated third parties—of which the Buyer Group members were aware of none—with
respect to (a) a merger or consolidation of the Company with or into another company, (b) a sale of all or a substantial
part of the Company’s assets or (c) the purchase of the Company’s voting securities that would enable the holder
to exercise control over the Company. Other than purchases made by Sky Success Venture Holdings Limited (as described under the
caption “Transactions in the Shares and ADSs—Purchases by the Buyer Group beginning on page 91), none of the Buyer Group
members made any purchases of securities of the Company during the past two years, and so did not consider any such purchases
in their fairness determination; and |
| · | the full availability of dissenters’ rights to the unaffiliated security holders (and any
ADS holder who elects to first convert his or her ADSs for the Shares) who comply with the required procedures under Section 238
of the Cayman Islands Companies Law for exercising dissenters’ rights, which allow such holders to seek appraisal of the
fair value of their Shares as determined by the Grand Court of the Cayman Islands. |
The foregoing discussion
of the information and factors considered by the Buyer Group in connection with its evaluation of the substantive and procedural
fairness of the merger to the unaffiliated security holders is not intended to be exhaustive, but is believed to include all material
factors considered. The Buyer Group found it impracticable to assign, and did not assign, relative weights to the foregoing factors
considered in reaching its conclusions as to the substantive and procedural fairness of the merger to the unaffiliated security
holders. Rather, the Buyer Group made the fairness determinations after considering all of the foregoing factors as a whole.
The Buyer Group believes
these factors provide a reasonable basis for their belief that the merger is both substantively and procedurally fair to the unaffiliated
security holders. This belief, however, is not intended to be and should not be construed as a recommendation by the Buyer Group
to any shareholder or ADS holder of the Company to authorize and approve the merger agreement, the plan of merger and the transactions
contemplated under the merger agreement, including the merger. The Buyer Group does not make any recommendation as to how such
shareholders or ADS holders should vote relating to the proposal to authorize and approve the merger agreement, the plan of merger
and the transactions contemplated under the merger agreement, including the merger, at the extraordinary general meeting.
Certain Financial
Projections
The Company does not
generally make public detailed financial forecasts or internal projections as to future performance, revenues, earnings or financial
condition. However, the Company’s management prepared certain financial projections for the fiscal year ending December 31,
2015 through the fiscal year ending December 31, 2024 for the special committee and Duff & Phelps in connection with the financial
analysis of the merger. These financial projections, which were based on Company management’s estimates of the Company’s
future financial performance as of the date provided, were prepared by the Company’s management for internal use and for
use by Duff & Phelps in its financial analyses, and were not prepared with a view toward public disclosure or compliance with
published guidelines of the SEC regarding forward-looking information or the guidelines established by the American Institute of
Certified Public Accountants for preparation and presentation of financial forecasts or U.S. generally accepted accounting principles.
None of the Buyer Group were provided with, and none of such persons were entitled to or relied on any of these financial projections.
The financial projections
are not a guarantee of performance. They involve significant risks, uncertainties and assumptions. In compiling the projections,
our management took into account historical performance, combined with estimates regarding net revenue, gross profit, operating
expenses, income from operations and net income. Although the projections are presented with numerical specificity, they were based
on numerous assumptions and estimates as to future events made by our management that our management believed were prepared on
a reasonable basis, reflected the best estimates and judgments available at that time and presented, to the best of the management’s
knowledge and belief, the expected course of action and the expected future financial performance of the Company. However, this
information is not fact and should not be relied upon as being necessarily indicative of actual future results and shareholders
are cautioned not to place undue reliance on the prospective financial information. In addition, factors such as industry performance,
the market for our existing and new products, the competitive environment, expectations regarding future acquisitions or any other
transactions and general business, economic, regulatory, market and financial conditions, all of which are difficult to predict
and beyond the control of our management, may cause actual future results to differ materially from the results forecasted in these
financial projections.
In
addition, the projections do not take into account any circumstances or events occurring after the date that they were prepared.
For instance, the projections do not give effect to completion of the merger or any changes to our operations or strategy that
may be implemented after the time the projections were prepared. As a result, there can be no assurance that the projections will
be realized, and actual results may be significantly different from those contained in the projections. Neither the Company’s
independent registered public accounting firm, Deloitte Touche Tohmatsu Certified Public Accountants LLP, nor any other
independent accountants have examined, compiled, or performed any procedures with respect to the financial projections or any amounts
derived therefrom or built thereupon, nor have they given any opinion or any other form of assurance on such information or its
achievability, and they assume no responsibility for, and disclaim any association with, the prospective 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 special committee and Duff & Phelps, and are not included in this proxy statement in order to induce any holder
of Shares or ADSs to vote in favor of approval of the merger agreement or to elect not to seek appraisal for his or her Shares.
The following table
summarizes the financial projections prepared by our management and considered by the special committee in connection with their
analysis of the Merger and Duff & Phelps in connection with the delivery of its fairness opinion:
Management Projections
Fiscal Year Ending
December 31,
| | |
| 2015 | E | |
| 2016 | E | |
| 2017 | E | |
| 2018 | E | |
| 2019 | E | |
| 2020 | E | |
| 2021 | E | |
| 2022 | E | |
| 2023 | E | |
| 2024 | E |
| | |
| (in RMB million except percentage) | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net Revenues | |
| 1,437 | | |
| 1,472 | | |
| 1,522 | | |
| 1,568 | | |
| 1,645 | | |
| 1,726 | | |
| 1,807 | | |
| 1,896 | | |
| 1,977 | | |
| 2,057 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Gross Profit | |
| 176 | | |
| 179 | | |
| 184 | | |
| 188 | | |
| 197 | | |
| 207 | | |
| 217 | | |
| 228 | | |
| 237 | | |
| 247 | |
| % Margin | |
| 12.2 | % | |
| 12.2 | % | |
| 12.1 | % | |
| 12.0 | % | |
| 12.0 | % | |
| 12.0 | % | |
| 12.0 | % | |
| 12.0 | % | |
| 12.0 | % | |
| 12.0 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Operating Expenses* | |
| 165 | | |
| 168 | | |
| 172 | | |
| 176 | | |
| 181 | | |
| 190 | | |
| 195 | | |
| 200 | | |
| 205 | | |
| 210 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Income from Operations | |
| 11 | | |
| 11 | | |
| 12 | | |
| 13 | | |
| 17 | | |
| 17 | | |
| 22 | | |
| 27 | | |
| 32 | | |
| 37 | |
| % Margin | |
| 0.8 | % | |
| 0.8 | % | |
| 0.8 | % | |
| 0.8 | % | |
| 1.0 | % | |
| 1.0 | % | |
| 1.2 | % | |
| 1.4 | % | |
| 1.6 | % | |
| 1.8 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net Income | |
| 27 | | |
| 25 | | |
| 26 | | |
| 26 | | |
| 29 | | |
| 30 | | |
| 33 | | |
| 36 | | |
| 40 | | |
| 43 | |
| % Margin | |
| 1.9 | % | |
| 1.7 | % | |
| 1.7 | % | |
| 1.7 | % | |
| 1.8 | % | |
| 1.7 | % | |
| 1.8 | % | |
| 1.9 | % | |
| 2.0 | % | |
| 2.1 | % |
* Management projected
operating expenses include depreciation and amortization, property and equipment impairment charges.
NONE OF THE COMPANY
OR OUR AFFILIATES, ADVISORS, OFFICERS, DIRECTORS OR REPRESENTATIVES HAS MADE OR MAKES ANY REPRESENTATION TO ANY SHAREHOLDER OR
OTHER PERSON REGARDING THE ULTIMATE PERFORMANCE OF THE COMPANY COMPARED TO THE INFORMATION CONTAINED IN THE PROJECTIONS OR THAT
PROJECTED RESULTS WILL BE ACHIEVED.
BY INCLUDING IN
THIS PROXY STATEMENT A SUMMARY OF ITS INTERNAL FINANCIAL PROJECTIONS, THE COMPANY UNDERTAKES NO OBLIGATIONS TO UPDATE, OR PUBLICLY
DISCLOSE ANY UPDATE TO, THESE FINANCIAL PROJECTIONS TO REFLECT CIRCUMSTANCES OR EVENTS, INCLUDING UNANTICIPATED EVENTS, THAT MAY
HAVE OCCURRED OR THAT MAY OCCUR AFTER THE PREPARATION OF THESE PROJECTIONS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS
UNDERLYING THE FINANCIAL PROJECTIONS ARE SHOWN TO BE IN ERROR OR CHANGE EXCEPT TO THE EXTENT REQUIRED BY APPLICABLE FEDERAL SECURITIES
LAW.
The financial projections
are forward-looking statements. For information on factors which may cause our future financial results to materially vary, please
see “Cautionary Note Regarding Forward-Looking Statements” beginning on page 95, and “Item 3. Key Information—D.
Risk Factors” included in our Annual Report on Form 20-F for the fiscal year ended December 31, 2014, incorporated by reference
into this proxy statement.
Opinion of the Special
Committee’s Financial Advisor
Pursuant to an engagement
letter dated September 1, 2015, the special committee retained Duff & Phelps as its financial advisor to deliver a fairness
opinion in connection with the merger. Duff & Phelps 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.
At the meeting of the
special committee on December 16, 2015, Duff & Phelps rendered its oral opinion (which was confirmed in writing later that
same day) to the special committee that, as of such date and based upon and subject to the factors, assumptions, and limitations
set forth in its opinion, the per Share merger consideration to be paid to the holders of the Shares (other than the Excluded Shares)
and the per ADS merger consideration to be paid to the holders of ADSs (other than ADSs representing the Excluded Shares) in the
merger were each fair, from a financial point of view, to such holders (without giving effect to any impact of the merger on any
particular holder of the Shares or ADSs other than in their capacity as holders of Shares or ADSs). No limitations were imposed
by the special committee upon Duff & Phelps with respect to the investigations made or procedures followed by it in rendering
its opinion.
The full text of the
written opinion of Duff & Phelps dated December 16, 2015, which sets forth the procedures followed, assumptions made, matters
considered and qualifications and limitations on the review undertaken, is attached as Annex B to this proxy statement and is incorporated
herein by reference. The summary of the opinion of Duff & Phelps set forth in this proxy statement is qualified in its entirety
by reference to the full text of such opinion. The shareholders of the Company are urged to read the opinion in its entirety. Duff
& Phelps’ written opinion is addressed to the special committee (in its capacity as such), is directed only to the per
Share merger consideration and the per ADS merger consideration to be paid in the merger and does not constitute a recommendation
to any shareholder of the Company as to how such shareholder should vote or act with respect to the merger or any other matter.
In connection with
its opinion, Duff & Phelps made such reviews, analyses and inquiries as it deemed necessary and appropriate under the circumstances.
Duff & Phelps also took into account its assessment of general economic, market and financial conditions, as well as its experience
in securities and business valuation in general, and with respect to similar transactions in particular. Duff & Phelps’
procedures, investigations and financial analyses with respect to the preparation of its opinion included, but were not limited
to, the items summarized below:
| · | reviewed the Company’s annual reports and audited financial statements on Form 20-F filed
with the Securities and Exchange Commission (“SEC”) for the years ended December 31, 2013 and December 31, 2014; and
the Company’s unaudited interim financial statements for the nine months ended September 30, 2014 and September 30, 2015
included in the Company’s Form 6-K filed with the SEC; |
| · | reviewed a detailed financial projection model for the years ending December 31, 2015 through 2024,
prepared and provided to Duff & Phelps by the management of the Company, upon which Duff & Phelps has relied, with the
Company’s and the special committee’s consent, in performing its analysis (the ‘‘Management Projections’’); |
| · | reviewed other internal documents relating to the history, past and current operations, financial
conditions, and probable future outlook of the Company, provided to Duff & Phelps by management of the Company; |
| · | reviewed a letter dated December 2, 2015 from the management of the Company, which made certain
representations as to the Management Projections and the underlying assumptions for the Company (the “Management Representation
Letter”); |
| · | reviewed documents related to the merger, including a draft of the merger agreement received on
December 15, 2015; |
| · | discussed the information referred to above and the background and other elements of the merger
with the management of the Company; |
| · | discussed with Company management its plans and intentions with respect to the management and operation
of the business; |
| · | reviewed the historical trading price and trading volume of the Company’s ADSs, and the publicly
traded securities of certain other companies that Duff & Phelps deemed relevant; |
| · | performed certain valuation and comparative analyses using generally accepted valuation and analytical
techniques, including a discounted cash flow analysis, an analysis of selected public companies that Duff & Phelps deemed relevant,
an analysis of selected transactions that Duff & Phelps deemed relevant, and an analysis of premiums paid in selected transactions
that Duff & Phelps deemed relevant; and |
| · | conducted such other analyses and considered such other factors as Duff & Phelps deemed necessary
or appropriate. |
In performing
its analyses and rendering its opinion with respect to the merger, Duff & Phelps, with the Company’s and the special
committee’s consent:
| · | relied upon the accuracy, completeness, and fair presentation of all information, data, advice,
opinions and representations obtained from public sources or provided to it from private sources, including Company management,
and did not independently verify such information (or assume any responsibility or liability for independently verifying such information); |
| · | relied upon the fact that the special committee, the board of directors and the Company have been
advised by counsel as to all legal matters with respect to the merger, including whether all procedures required by law to be taken
in connection with the merger have been duly, validly and timely taken; |
| · | assumed that any estimates, evaluations, forecasts and projections including, without limitation,
the Management Projections, furnished to Duff & Phelps were reasonably prepared and based upon the best currently available
information and good faith judgment of the person furnishing the same, and Duff & Phelps expresses no view or opinion with
respect to such estimates, evaluations, forecasts and projections or the underlying assumptions; |
| · | assumed that the information relating to the Company and the merger supplied by the Company to
Duff & Phelps and the representations made by Company management regarding the Company and the merger in the Management Representation
Letter are complete and accurate in all material respects, did not and does not omit to state a material fact in respect of the
Company and the merger necessary to make the information not misleading in light of the circumstances under which the information
was provided; |
| · | assumed that the representations and warranties made by all parties in the merger agreement and
the Management Representation Letter are true and correct and that each party to the merger agreement will fully and timely perform
all covenants, undertakings and obligations required to be performed by such party; |
| · | assumed that the final versions of all documents reviewed by Duff & Phelps in draft form, including
the merger agreement, conform in all material respects to the drafts reviewed; |
| · | assumed that there has been no material change in the assets, liabilities, financial condition,
results of operations, business, or prospects of the Company since the date of the most recent financial statements and other information
made available to Duff & Phelps, and that there is no information or facts withheld from Duff & Phelps which would make
the information reviewed by Duff & Phelps incomplete or misleading; |
| · | assumed that all of the conditions required to implement the merger will be satisfied and that
the merger will be completed in accordance with the merger agreement without any amendments thereto or any waivers of any terms
or conditions thereof, and in a manner that complies in all material respects with all applicable laws; and |
| · | assumed that all governmental, regulatory or other consents and approvals necessary for the consummation
of the merger will be obtained without any undue delay, limitation, restriction or condition that would have a material effect
on the Company or the contemplated benefits expected to be derived in the merger. |
To the extent that
any of the foregoing assumptions or any of the facts on which the opinion is based prove to be untrue in any material respect,
the opinion cannot and should not be relied upon for any purpose. Furthermore, in Duff & Phelps’ analysis and in connection
with the preparation of the opinion, Duff & Phelps has made numerous assumptions with respect to industry performance, general
business, market and economic conditions and other matters, many of which are beyond the control of any party involved in the merger
and as to which Duff & Phelps does not express any view or opinion in the opinion, including as to the reasonableness of such
assumptions.
Duff & Phelps prepared
its opinion effective as of the date thereof. Its opinion was necessarily based upon market, economic, financial and other conditions
as they existed and could be evaluated as of the date thereof, and Duff & Phelps disclaims any undertaking or obligation to
advise any person of any change in any fact or matter affecting its opinion which may come or be brought to the attention of Duff
& Phelps after the date thereof. Duff & Phelps assumes no obligation to update, revise or reaffirm its opinion after the
date thereof.
Duff & Phelps did
not evaluate the Company’s solvency or conduct an independent appraisal or physical inspection of any specific assets or
liabilities (contingent or otherwise) of the Company. Duff & Phelps is not expressing any opinion as to the market price or
value of the Shares or ADSs (or anything else) after the announcement or the consummation of the merger (or any other time). Duff
& Phelps’ opinion should not be construed as a valuation opinion, a credit rating, a solvency opinion, an analysis of
the Company’s credit worthiness, as tax advice, or as accounting advice. Duff & Phelps has not made, and assumes no responsibility
to make, any representation or warranty (express or implied) or render any opinion, as to any legal or regulatory or tax or accounting
matter. Duff & Phelps expressly disclaims any responsibility or liability in this regard. The issuance of Duff & Phelps’
opinion was approved by an authorized fairness opinion committee of Duff & Phelps.
In rendering its opinion,
Duff & Phelps was not expressing any opinion with respect to the amount or nature of any compensation payable to or to be received
by the Company’s officers, directors or employees, or any class of such persons, relative to the per Share merger consideration
or the per ADS merger consideration, or with respect to the fairness of any such compensation. In addition, Duff & Phelps’
opinion does not address the fairness to, or any other consideration of, the holders of any class of securities, creditors or other
constituencies of the Company other than the holders of the Shares (other than the Excluded Shares) and the holders of ADSs (other
than ADSs representing the Excluded Shares).
Duff & Phelps’
opinion was furnished solely for the use and benefit of the special committee in connection with its consideration of the merger
and is not intended to, and does not, confer any rights or remedies upon any other person, and it is not intended to be used, and
may not be used, by any other person or for any other purpose, without Duff & Phelps’ written consent. The opinion should
not be construed as creating any fiduciary duty on the part of Duff & Phelps to any party. The opinion (i) does not address
the merits of the underlying business decision to enter into the merger versus any alternative strategy or transaction; (ii) does
not address any transaction related to the merger; (iii) is not a recommendation as to how the special committee or any shareholder
should vote or act with respect to any matters relating to the merger, or whether to proceed with the merger or any related transaction;
and (iv) does not indicate that the per Share merger consideration or the per ADS merger consideration is the best possibly attainable
under any circumstances; instead, it merely states whether the per Share merger consideration and the per ADS merger consideration
is within a range suggested by certain financial analyses. The decision as to whether to proceed with the merger or any related
transaction may depend on an assessment of factors unrelated to the financial analysis on which the opinion is based.
Duff & Phelps was
directed by the special committee not to and, therefore, did not (i) initiate or participate in any negotiations with, or solicit
any indications of interest from, third parties with respect to the merger, the securities, assets, businesses or operations of
the Company or any other party, or any alternatives to the merger; (ii) negotiate the terms of the merger, and therefore, Duff
& Phelps has assumed that such terms are the most beneficial terms, from the Company’s perspective, that could, under
the circumstances, reasonably be negotiated among the parties to the merger agreement and the merger; or (iii) advise the special
committee, the board or any other party with respect to alternatives to the merger. Duff & Phelps did not participate in the
negotiations with respect to the terms of the merger.
Set forth below is
a summary of the material analyses performed by Duff & Phelps in connection with the delivery of its opinion to the special
committee. This summary is qualified in its entirety by reference to the full text of the opinion, attached hereto as Annex B.
While this summary describes the analyses and factors that Duff & Phelps deemed material in its presentation to the special
committee, it is not a comprehensive description of all analyses and factors considered by Duff & Phelps. The preparation of
a fairness opinion is a complex process that involves various determinations as to the most appropriate and relevant methods of
financial analysis and the application of these methods to the particular circumstances. Therefore, a fairness opinion is not readily
susceptible to partial analysis. In arriving at its opinion, Duff & Phelps did not attribute any particular weight to any analysis
or factor considered by it, but rather made qualitative judgments as to the significance and relevance of each analysis and factor.
Accordingly, Duff & Phelps believes that its analyses must be considered as a whole and that selecting portions of its analyses
and of the factors considered by it in rendering the fairness opinion without considering all analyses and factors could create
a misleading or incomplete view of the evaluation process underlying its opinion. The conclusion reached by Duff & Phelps was
based on all analyses and factors taken as a whole, and also on the application of Duff & Phelps’ own experience and
judgment.
The financial analyses
summarized below include information presented in tabular format. In order for Duff & Phelps’ financial analyses to be
fully understood, the tables must be read together with the text of each summary. The tables alone do not constitute a complete
description of the financial analyses. Considering the data below without considering the full narrative description of the financial
analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of
Duff & Phelps’ financial analyses.
Discounted Cash Flow
Analysis
Duff & Phelps
performed a discounted cash flow analysis of the estimated future unlevered free cash flows attributable to the Company for the
fiscal years ending December 31, 2015 through December 31, 2024, with ‘‘free cash flow’’ defined as cash
that is available either to reinvest or to distribute to security holders. The discounted cash flow analysis was used to determine
the net present value of estimated future free cash flows utilizing a weighted average cost of capital as the applicable discount
rate. For the purposes of its discounted cash flow analysis, Duff & Phelps utilized and relied upon the Management Projections,
which are described in this proxy statement in the section entitled “Special Factors—Certain Financial Projections”
beginning on page 32. The costs associated with the Company being a publicly listed company were excluded from the financial projections
because such costs would likely be eliminated as a result of the merger.
Duff & Phelps estimated
the net present value of all cash flows attributable to the Company after fiscal year 2024 (the “Terminal Value”) using
a perpetuity growth formula assuming a 3.00% terminal growth rate, which took into consideration an estimate of the expected long-term
growth rate of the Chinese economy and the Company’s business. Duff & Phelps used discount rates ranging from 13.5% to
16.5%, reflecting Duff & Phelps’ estimate of the Company’s weighted average cost of capital, to discount the projected
free cash flows and the Terminal Value. Duff & Phelps estimated the Company’s weighted average cost of capital by estimating
the weighted average of the Company’s cost of equity (derived using the capital asset pricing model) and the Company’s
after-tax cost of debt. Duff & Phelps believes that this range of discount rates is consistent with the rate of return that
security holders could expect to realize on alternative investment opportunities with similar risk profiles.
Based on these assumptions,
Duff & Phelps’ discounted cash flow analysis resulted in an estimated enterprise value for the Company of US$36.4 million
to US$49.5 million and a range of implied values of the Company’s ADSs of US$4.86 to US$5.34 per ADS.
Selected Public Companies
and merger and Acquisition Transactions Analyses
Duff & Phelps analyzed
selected public companies and selected merger and acquisition transactions for purposes of estimating valuation multiples with
which to calculate a range of implied enterprise values of the Company. This collective analysis was based on publicly available
information and is described in more detail in the sections that follow.
The companies utilized
for comparative purposes in the following analysis were not directly comparable to the Company, and the transactions utilized for
comparative purposes in the following analysis were not directly comparable to the merger. Duff & Phelps does not have access
to nonpublic information of any of the companies used for comparative purposes. Accordingly, a complete valuation analysis of the
Company and the merger cannot rely solely upon a quantitative review of the selected public companies and selected transactions
but involves complex considerations and judgments concerning differences in financial and operating characteristics of such companies
and targets, as well as other factors that could affect their value relative to that of the Company. Therefore, the selected public
companies and selected merger and acquisition transactions analysis is subject to certain limitations.
Selected Public
Companies Analysis. Duff & Phelps compared certain financial information of the Company to corresponding data and ratios
from publicly traded companies in the quick service restaurant (“QSR”) industry that Duff & Phelps deemed relevant
to its analysis. For purposes of its analysis, Duff & Phelps used certain publicly available historical financial data and
consensus equity analyst estimates for the selected publicly traded companies. This analysis produced valuation multiples based
on selected financial metrics, which Duff & Phelps utilized to estimate the enterprise value of the Company. The nine companies
included in the selected public company analysis in the quick service restaurant industry were:
| HK-Listed Chinese QSR Companies |
• Café de Coral Holdings Limited |
| • Fairwood Holdings Ltd. |
| • Xiabuxiabu Catering Management (China) Holdings Co., Ltd. |
| • Ajisen China Holdings Ltd. |
| • Hop Hing Group Holdings Limited |
| |
| Asia QSR Companies |
• MK Restaurant Group Public Company Limited |
| • Wowprime Corp. |
| • | PT Fast Food Indonesia Tbk |
Duff & Phelps selected
these companies for its analysis based on their relative similarity, primarily in terms of business model, to that of the Company.
The tables below summarize
certain observed trading multiples and historical and projected financial performance, on an aggregate basis, of the selected public
companies. The estimates for 2016 and 2017 in the tables below with respect to the selected public companies were derived based
on information for the 12-month periods ending closest to the Company’s fiscal year end for which information was available.
Data related to the Company’s earnings before interest, taxes, depreciation and amortization (“EBITDA”) were
adjusted for purposes of this analysis to eliminate public company costs and non-recurring income (expenses).
| | |
Revenue
Growth | | |
EBITDA
Growth | | |
EBITDA
Margin | | |
EBIT
Margin | |
| | |
LTM1 | | |
2016 | | |
2017 | | |
LTM | | |
2016 | | |
2017 | | |
LTM | | |
2016 | | |
2017 | | |
LTM | | |
2016 | | |
2017 | |
| HK-Listed Chinese QSR Companies | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Group Median | |
| 5.9 | % | |
| 8.0 | % | |
| 7.6 | % | |
| -1.2 | % | |
| 12.5 | % | |
| 13.7 | % | |
| 11.9 | % | |
| 13.9 | % | |
| 14.0 | % | |
| 8.8 | % | |
| 9.2 | % | |
| 9.4 | % |
| Asia QSR Companies | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Group Median | |
| 4.4 | % | |
| 8.7 | % | |
| 12.9 | % | |
| -12.6 | % | |
| 17.2 | % | |
| 9.5 | % | |
| 11.0 | % | |
| 15.8 | % | |
| 15.1 | % | |
| 6.1 | % | |
| 11.1 | % | |
| 11.0 | % |
| Aggregate | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Mean | |
| 4.0 | % | |
| 10.4 | % | |
| 10.8 | % | |
| -3.9 | % | |
| 16.0 | % | |
| 11.7 | % | |
| 12.3 | % | |
| 15.1 | % | |
| 15.1 | % | |
| 7.8 | % | |
| 9.8 | % | |
| 10.1 | % |
| Median | |
| 4.4 | % | |
| 8.7 | % | |
| 8.9 | % | |
| -2.0 | % | |
| 17.2 | % | |
| 11.2 | % | |
| 11.8 | % | |
| 15.2 | % | |
| 14.7 | % | |
| 8.0 | % | |
| 10.1 | % | |
| 10.1 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Country Style Cooking Restaurant
Chain Co., Ltd. | |
| 0.9 | % | |
| 2.5 | % | |
| 3.4 | % | |
| -8.5 | % | |
| 3.1 | % | |
| 2.0 | % | |
| 7.6 | % | |
| 7.6 | % | |
| 7.5 | % | |
| 2.4 | % | |
| 2.2 | % | |
| 2.2 | % |
| | |
Enterprise Value as a Multiple of | |
| | |
LTM
EBITDA | | |
2016
EBITDA | | |
2017
EBITDA | | |
LTM
EBIT | | |
2016
EBIT | | |
2017
EBIT | | |
LTM
Revenue | |
| HK-Listed Chinese QSR Companies | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Group Median | |
| 5.5 | x | |
| 3.2 | x | |
| 2.8 | x | |
| 11.4 | x | |
| 5.1 | x | |
| 4.3 | x | |
| 0.71 | x |
| Asia QSR Companies | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Group Median | |
| 5.9 | x | |
| 10.8 | x | |
| 9.7 | x | |
| 13.2 | x | |
| 15.4 | x | |
| 13.3 | x | |
| 0.59 | x |
| Aggregate | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Mean | |
| 7.5 | x | |
| 6.8 | x | |
| 6.2 | x | |
| 12.4 | x | |
| 10.3 | x | |
| 9.1 | x | |
| 0.99 | x |
| Median | |
| 5.9 | x | |
| 4.7 | x | |
| 4.3 | x | |
| 12.3 | x | |
| 8.9 | x | |
| 7.2 | x | |
| 0.65 | x |
1
Latest twelve months
Selected M&A
Transactions Analysis. Duff & Phelps compared the Company to the target companies involved in the selected merger and acquisition
transactions listed in the tables below. The selection of these transactions was based on, among other things, the target company’s
industry, the relative size of the transaction compared to the merger and the availability of public information related to the
transaction. The selected restaurant transactions indicated enterprise value to LTM EBITDA multiples ranging from 6.3x to 27.6x
with a median of 9.3x, and enterprise value to LTM revenue multiples ranging from 0.28x to 5.98x with a median of 1.18x.
The Company is not
directly comparable to the target companies in the selected M&A transactions analysis given certain characteristics of the
transactions and the target companies, including business and industry comparability and lack of recent relevant transactions.
Therefore, although reviewed, Duff & Phelps did not select valuation multiples for the Company based on the selected M&A
transactions analysis.
| Date Announced |
|
Acquirer Name |
|
Target Name |
| Asia Restaurant Companies M&A Transactions |
|
|
| 10/30/2015 |
|
House Foods Group Inc. (TSE:2810) |
|
Ichibanya Co., Ltd. (TSE:7630) |
| 6/6/2015 |
|
Carnival Group International Holdings Limited (SEHK:996) |
|
Nice Race Management Limited |
| 7/23/2014 |
|
Berjaya Food Berhad (KLSE:BJFOOD) |
|
Berjaya Starbucks Coffee Company Sdn Bhd |
| 5/7/2014 |
|
CVC Capital Partners Limited |
|
SRS KOREA Co., Ltd. |
| 1/31/2014 |
|
CVC Capital Partners Limited |
|
South Beauty Investment Co. Ltd |
| Date Announced |
|
Acquirer Name |
|
Target Name |
| Non- Asia Restaurant Companies M&A Transactions |
|
|
| 10/14/2015 |
|
Domino's Pizza Enterprises Limited (ASX:DMP) |
|
SAS FRA MA PIZZ |
| 6/2/2015 |
|
JAB Holdings B.V. |
|
Espresso House Holding AB |
| 5/21/2015 |
|
NRD Capital Management, LLC |
|
Frisch's Restaurants, Inc. |
| 4/15/2015 |
|
Danske Koncept Restauranter Holding ApS |
|
Nordic Service Partners Holding AB (OM:NSPB) |
| 4/3/2015 |
|
IDeA Capital Funds SGR SPA |
|
Gruppo La Piadineria S.r.l. |
| 3/27/2015 |
|
The Fulham Shore PLC (AIM:FUL) |
|
Rocca Limited |
| 1/14/2015 |
|
Controlling Shareholders |
|
Brazil Fast Food Corp. |
| 11/6/2014 |
|
TPG Capital, LLP; TPG Partners VI-AIV, L.P. |
|
Prezzo Limited |
| 10/1/2014 |
|
Elior (ENXTPA:ELIOR) |
|
Lexington Catering Limited |
| 9/29/2014 |
|
BDT Capital Partners, LLC; JAB Beech Inc. |
|
Einstein Noah Restaurant Group, Inc. |
| 8/1/2014 |
|
Alsea, S.A.B. De C.V. (BMV:ALSEA*); Alia Capital Partners, S.L. |
|
Food Services Project, S.L. |
| 1/31/2014 |
|
CVC Capital Partners Limited |
|
South Beauty Investment Co. Ltd |
| 6/11/2014 |
|
NPC Quality Burgers, Inc. |
|
56 Wendy's Restaurants |
| 5/8/2014 |
|
Bain Capital, LLC |
|
Retail Zoo Pty Ltd. |
| 3/30/2014 |
|
Apex Restaurant Management, Inc |
|
Morgan's Foods Inc. |
Summary of Selected
Public Companies / M&A Transactions Analyses
In order to estimate
a range of enterprise values for the Company, Duff & Phelps applied valuation multiples to the Company’s projected EBIT
for the fiscal years ending December 31, 2016 and December 31, 2017. The projected EBIT, for each of these years was adjusted to
exclude public company costs and non-recurring income (expenses). Duff & Phelps’ selected valuation multiples were as
follows: the projected fiscal 2016 EBIT multiple ranged from 4.1x to 17.3x, and the projected fiscal 2017 EBIT multiple ranged
from 3.3x to 16.2x. Valuation multiples were selected taking into consideration historical and projected financial performance
metrics of the Company relative to such metrics of the selected public companies. Rather than applying the average or median multiple
from the public company set, Duff & Phelps selected multiples that reflect the Company’s size, growth outlook, capital
requirements, profit margins, revenue mix, and other characteristics relative to the group. Duff & Phelps noted that while
it reviewed the selected M&A transactions, it did not select valuation multiples for the Company based on the Selected M&A
Transactions Analysis for the reasons described in the section titled “Selected M&A Transactions Analysis” above.
As a result of the analysis of the selected valuation multiples described above, the selected public companies analysis indicated
an estimated enterprise value for the Company of US$35.9 million to US$46.1 million and a range of implied values of the Company’s
ADSs of US$4.84 to US$5.21 per ADS.
Premiums Paid Analysis
Duff & Phelps analyzed
the premiums paid by acquirers over the public market trading prices in going-private merger and acquisition transactions and in
change of control transactions in the restaurants industry. The transactions analyzed by Duff & Phelps included transactions
announced since January 2012. The medians of the premiums paid over the stock prices one-day, one-week, and one-month prior to
the announcement of the transactions in going private transactions were 23.8%, 26.2%, and 28.0%, respectively. The medians of the
premiums paid over the stock prices one-day, one-week, and one-month prior to the announcement of the change of control transactions
in the restaurants industry were 11.7%, 25.7%, and 29.9%, respectively. Duff & Phelps noted that the proposed per ADS merger
consideration implies an 18.9% premium over the Company’s closing price of US$4.40 per ADS on August 13, 2015, the last full
trading day prior to the public announcement of the terms of the offer, a 13.0% premium over the Company’s closing price
of $4.63 per ADS on August 7, 2015, one week prior to the public announcement of the terms of the offer and a 10.6% premium over
to the Company’s closing price of $4.73 per ADS on July 15, 2015, one month prior to the public announcement of the terms
of the offer.
Summary of Analyses
The range of estimated
enterprise values for the Company that Duff & Phelps derived from its discounted cash flow analysis was US$36.4 million to
US$49.5 million, and the range of estimated enterprise values that Duff & Phelps derived from its selected public companies
analysis was US$35.9 million to US$46.1 million. Duff & Phelps concluded that the Company’s enterprise value was within
a range of US$36.1 million to US$47.8 million based on the analyses described above.
Based
on the concluded enterprise value, Duff & Phelps estimated the range of common equity value of the Company to be US$132.7
million to US$144.4 million by:
| • | subtracting income tax payable of US$1.2
million as of September 30, 2015; |
| • | adding excess cash of US$96.6 million
as of September 30, 2015; |
| • | adding the estimated cash proceeds from the
exercise of in-the-money options of US$1.0 million; and |
| • | adding an amount due from a related party
of US$0.1 million as of September 30, 2015. |
Based on the foregoing
analysis, Duff & Phelps estimated the value of each ADS to range from US$4.85 to US$5.27. Duff & Phelps noted that the
per Share merger consideration to be received by the holders of the Shares (other than the Excluded Shares) and the per ADS merger
consideration to be received by the holders of the ADSs (other than ADSs representing the Excluded Shares) in the merger was within
the range of the per Share and per ADS value, respectively, indicated by its analyses.
Duff & Phelps’
opinion was only one of the many factors considered by the special committee in its evaluation of the merger and should not be
viewed as determinative of the views of the special committee.
Fees and Expenses
As compensation for
Duff & Phelps’ services in connection with the rendering of its opinion to the special committee, the Company agreed
to pay Duff & Phelps a fee of US$500,000, consisting of a nonrefundable retainer of $250,000 payable upon engagement, and $250,000
payable upon Duff & Phelps rendering the opinion at the written request of the special committee.
The special committee
also retained DPS, an affiliate of Duff & Phelps, to act as financial advisor to the special committee providing such financial
and market related advice and assistance as deemed appropriate in connection with the merger, including assisting the special committee
in initiating, soliciting and encouraging any alternative transaction proposals from third parties. For that engagement, the Company
would pay DPS a US$100,000 nonrefundable retainer at the time that a market check or Go-Shop was authorized by the special committee.
Since the special committee decided not to conduct a market check, such fee was never incurred.
No portion of Duff
& Phelps’ fee is refundable or contingent upon the consummation of a transaction, including the merger, or the conclusion
reached in the opinion. The Company has also agreed to indemnify Duff & Phelps and DPS for certain liabilities arising out
of its engagement. In addition, the Company has agreed to reimburse Duff & Phelps and DPS for its reasonable out-of-pocket
expenses incurred in connection with the rendering of its opinion not to exceed $50,000 without the Company’s prior written
consent.
The terms of the fee
arrangements with Duff & Phelps and DPS, which the Company believes are customary in transactions of this nature, were negotiated
at arm’s length, and the special committee and the Company’s board of directors are aware of these fee arrangements.
Other than the DPS engagement described above and Duff & Phelps’ engagement to render its opinion to the special committee,
Duff & Phelps has not had any material relationship with any party to the merger for which compensation has been received or
is intended to be received, nor is any such material relationship or related compensation mutually understood to be contemplated.
Buyer Group’s
Purpose of and Reasons for the Merger
Under a possible interpretation
of the SEC rules governing going-private transactions, each member of the Buyer Group may be deemed to be engaged in a going-private
transaction and, therefore, required to express his or its reasons for the merger to the Company’s unaffiliated security
holders. Each of the members of the Buyer Group is making the statements included in this section solely for the purpose of complying
with the requirements of Rule 13e-3 and related rules under the Exchange Act. For the Buyer Group, the purpose of the
merger is to enable Parent to acquire 100% control of the Company in a transaction in which the Company’s shareholders and
ADS holders (other than the Excluded Shares) will be cashed out in exchange for US$1.3075 per Share and US$5.23 per ADS, respectively,
so that Parent will bear the rewards and risks of the sole ownership of the Company after the merger, including any future earnings
and growth of the Company as a result of improvements to the Company’s operations or acquisitions of other businesses. In
addition, the merger will allow members of the Buyer Group, which are currently shareholders of the Company, to maintain a significant
portion of their investment in the Company through their respective indirect ownership in Parent as described under “Special
Factors—Interests of Certain Persons in the Merger—Interests of the Buyer Group” below and at the same time enable
members of the Buyer Group to maintain their leadership role with the Company.
The Buyer Group believes
the Company’s operating environment has changed significantly and become more challenging since the Company’s initial
public offering, in part due to recent operating conditions and industry trends. There is greater domestic competition in the consumer
food services industry in China. These changes have increased the uncertainty and volatility inherent in the Company's business.
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, including potentially taking the Company’s business focus in innovative
directions, 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 survival and 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 is expected to 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.
In addition, the Buyer
Group expects that, 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. In particular, the Buyer Group believes that as a privately held company,
the Company would no longer be subject to (i) the significant regulatory compliance costs associated with being a NYSE-listed
SEC reporting company and (ii) the requirement to disclose a considerable amount of business information to the public, some
of which would otherwise be considered competitively sensitive and may potentially help the Company’s actual or potential
competitors, customers, lenders and vendors compete against the Company or make it more difficult for the Company to negotiate
favorable terms with them, as the case may be.
The Buyer Group members
decided to undertake the going-private transaction at this time because they want to take advantage of the benefits of the Company
being a privately held company as described above and due to the timely availability of the necessary financing arrangements upon
acceptable terms. In the course of considering the going-private transaction, the Buyer Group did not consider alternative transaction
structures, because they believed the merger was the most direct and effective way to enable them to acquire ownership and control
of the Company.
Effect of the Merger
on the Company
Directors and Management
of the Surviving Company
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 of Merger Sub, as in effect prior to the completion of the merger, except that (i) all references
to the name “Country Style Cooking Restaurant Chain Merger Company Limited” in the memorandum and articles of association
of the Surviving Company shall be amended to “Country Style Cooking Restaurant Chain Co., Ltd.” and (ii) references
therein to the authorized share capital of the Surviving Company shall be amended as necessary to correctly describe the authorized
share capital of the Surviving Company as approved in the Plan of Merger and (iii) the memorandum and articles of association will
contain provisions no less favorable with respect to exculpation, advancement of expenses and indemnification than are set forth
in the memorandum and articles of association of the Company as in effect on the date hereof, as required by Section 6.05(a) of
the Merger Agreement. 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 company and the
officers of the Company immediately prior to the effective time will become the officers of the surviving company.
Private Ownership
ADSs representing
Shares of the Company are currently listed on the NYSE under the symbol “CCSC.” 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
directly owned by Parent and indirectly by the other members of the Buyer Group and SIG China. Following the completion of the
merger, the ADSs will cease to be listed on the NYSE, 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 record holders of the Shares in the U.S. Ninety days after the filing of Form 25 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, applicable to public companies, and
our 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.
At the effective
time of the merger, each outstanding Share (including Shares represented by ADSs), other than the Excluded Shares, will be cancelled
in exchange for the right to receive $1.3075 in cash without interest, and for the avoidance of doubt, because one ADS represents
four Shares, each issued and outstanding ADS (other than any ADS representing Excluded Shares) will represent the right to surrender
the ADS in exchange for $5.23 in cash per ADS without interest (less $0.05 per ADS cancellation fees pursuant to the terms of the
ADS deposit agreement), in each case, net of any applicable withholding taxes. The Excluded Shares other than Dissenting Shares
will be cancelled for no consideration.
At the effective
time of the merger, each Company Share Award issued by the Company pursuant to the Share Incentive Plan other than the Company
Share Awards owned by the Rollover Shareholders (which shall be treated in accordance with the Rollover Agreement) that is outstanding
and unexercised, whether vested or not vested or exercisable will be cancelled in exchange for (i) with respect to a Company Share
Option, a cash amount to be paid by the surviving company or one of its subsidiaries, as soon as practicable after the effective
time of the merger (without interest) equal to the product of (1) the excess, if any, of $1.3075 over the exercise price of such
Company Share Option multiplied by (2) the number of shares underlying such Company Share Option; provided that if the exercise
price of any such Company Share Option is equal to or greater than the $1.3075, such Company Share Option shall be cancelled without
any payment therefor; and (ii) with respect to a Company Restricted Share, for a cash amount equal to the $1.3075.
Under the terms
of the Rollover Agreement entered into by and among Parent, and the Rollover Shareholders concurrently with the execution and delivery
of the merger agreement immediately prior to the closing of the merger, each Rollover Shares owned by the Rollover Shareholders
shall be cancelled and each Rollover Shareholder shall subscribe for, or cause its, his or her affiliate(s) to subscribe for, the
number of ordinary shares in Parent as set forth in the Rollover Agreement. Pursuant to the Rollover Agreement, immediately prior
to the closing of the merger, Parent shall become wholly beneficially owned by the Rollover Shareholders and/or their affiliates.
Primary Benefits and
Detriments of the Merger
The primary benefits
of the merger to the Company’s unaffiliated security holders include, without limitation, the following:
| · | the receipt by such security holders of $1.3075 per Share or $5.23 per ADS in cash, represents
a premium of 18.9% over the Company’s closing price of $4.40 per ADS on August 13, 2015, the last trading day immediately
prior to August 14, 2015, the date that the Company announced that it had received a “going-private” proposal and a
10.3% premium over the closing price of $4.74 per ADS on December 17, 2015, the trading day immediately before the merger agreement
was signed; and |
| · | the avoidance of the risk associated with any possible decrease in our future revenues and free
cash flow, growth or value, and the risks related to our substantial leverage, following the merger. |
The primary detriments
of the merger to the Company’s 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, 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—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 as a result of the
merger for U.S. federal income tax purposes if the amount of cash received exceeds 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 include, without limitation, the following:
| · | continued indemnification rights, rights to advancement of fees and directors and executive officers
liability insurance to be provided by the surviving company to former directors and officers of the Company; |
| · | the conversion of Company Share Awards for the right to receive an amount in cash, to be paid as
soon as practicable after the effective time of the merger, equal to the product of (i) the excess, if any, of $1.3075 over the
exercise price of such each Company Share Award and (ii) the number of Shares underlying such Company Share Award, provided that
if the exercise price of any such Company Share Award is equal to or greater than $1.3075, such Company Share Award shall be cancelled
without any payment therefor; |
| · | the monthly compensation of $10,000 of each member of the special committee in exchange for his
services in such capacity, subject to a cap of $60,000 (and, in the case of the chairman of the special committee, monthly compensation
of $15,000, subject to a cap of $90,000) (the payment of which is not contingent upon the completion of the merger or the special
committee’s or the board’s recommendation of the merger); and |
| · | the continuation of service of the executive officers of the Company with the surviving company
in positions that are substantially similar to their current positions. |
The primary detriments
of the merger to the Company’s directors and executive officers include, without limitation, the following:
| · | such directors and executive officers (other than those who are Rollover Shareholders) 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 deploy new services 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. |
The primary detriments
of the merger to the Buyer Groupa include the following:
| · | all of the risk of any possible decrease in our revenues, free cash flow or value following the
merger 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 company by Parent 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 company’s equity securities. |
Effect of the Merger
on the Company’s Net Book Value and Net Earnings
Parent does not currently
own any interest in the Company. Immediately after the closing of the merger, Parent will own 100% of the outstanding Shares and
will have a corresponding share in the Company’s net book value and net income. After completion of the merger, pursuant
to the Rollover Agreement, Ms. Hong Li, Mr. Xingqiang Zhang and the other Rollover Shareholders and their affiliates will
beneficially own 100% of the outstanding shares of Parent and will have an indirect share in the Company’s net book value
and net loss in proportion to such shareholder’s ownership interest in Parent. The Company’s net income attributable
to its shareholders for the nine months ended September 30, 2015 was approximately $3.7 million and its net book value as
of September 30, 2015 was approximately $162 million.
The table below sets
out the direct or indirect share in the Company’s net book value and net income for the parties listed below before and immediately
after the merger, based on the historical net book value and net income of the Company as of and for the nine months ended September
30, 2015.
| | |
Ownership Prior to the Merger(1) | | |
Ownership After the Merger(2) | |
| | |
Net Book Value | | |
Net Income | | |
Net Book Value | | |
Net Income | |
| Name | |
$’000 | | |
% | | |
$’000 | | |
% | | |
$’000 | | |
% | | |
$’000 | | |
% | |
| Parent | |
| — | | |
| — | | |
| — | | |
| — | | |
| 162,000 | | |
| 100.0 | | |
| 3,700 | | |
| 100.0 | |
| Chairman Parties | |
| 67,019.4 | | |
| 41.37 | | |
| 1,530.69 | | |
| 41.37 | | |
| 97,362 | | |
| 60.1 | | |
| 2,223.7 | | |
| 60.1 | |
| Sky Success Parties | |
| 26,535.6 | | |
| 16.38 | | |
| 606.06 | | |
| 16.38 | | |
| 38,556 | | |
| 23.8 | | |
| 880.6 | | |
| 23.8 | |
| SIG Parties | |
| 17,998.2 | | |
| 11.11 | | |
| 411.07 | | |
| 11.11 | | |
| 26,082 | | |
| 16.1 | | |
| 595.7 | | |
| 16.1 | |
| (1) | Ownership percentages are based on 108,000,000 Shares outstanding as of the date of this proxy
statement (excluding Shares and Shares represented by ADSs reserved by the Company for settlement upon exercise of Company Share
Awards under any Share Incentive Plan). |
| (2) | Ownership percentages assume that the Rollover Shareholders roll over all of their Rollover Shares
and are calculated based on 74,367,764 ordinary shares of Parent outstanding immediately after the merger. |
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. As of the date of this proxy statement, there are no plans to repay the debt incurred to finance the merger, other
than in accordance with the terms of the Debt Commitment Letter. Please see “Special Factors—Financing” beginning
on page 48 for additional information.
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 an extraordinary corporate transaction involving the Company’s corporate structure, business,
or management, such as a merger, reorganization, liquidation, relocation of any material operations, or sale or transfer of a material
amount of assets. However, the Rollover Shareholders 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. Following the effective time of the merger, Parent expects that it
may also potentially adopt one or more share-based compensation plans for certain employees and officers of the Company. At this
time, however, no actual agreement or understanding as to the particulars of the abovementioned plans has been determined or agreed
upon. The implementation, terms and cost allocations of such plan or plans will need the approval of the board and/or shareholders
of Parent in accordance with a shareholders agreement to be entered into following the effective time of the merger.
Subsequent to the completion
of the merger and the termination of the registration of the ADSs and underlying Shares under the Exchange Act, the Company will
no longer be subject to the Exchange Act and the NYSE compliance and reporting requirements or the related direct and indirect
costs and expenses, and may experience positive effects on profitability as a result of the elimination of such costs and expenses.
Alternatives to
the Merger
The board of directors
of the Company did not independently determine to initiate a process for the sale of the Company. The special committee was formed
on August 14, 2015, in response to the receipt of the Proposal Letter on August 14, 2015. The special committee noted that the
Consortium, which collectively owned approximately 56.9% of the total outstanding Shares as of August 14, 2015, had entered into
the Consortium Agreement on August 24, 2015 pursuant to which each Consortium member committed to supporting the Consortium’s
proposal only. Taking these considerations into account and the significant disruption to the operations of the Company that a
broad pre-signing market check may cause, including the potential risk of competitive harm to the Company if strategic buyers conducted
due diligence but a transaction did not occur, and the increased risk of leaks, which could create instability among the Company’s
employees as well as its customers and vendors, the special committee decided 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.
Since the Company’s receipt of the proposal letter on August 14, 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 special committee also took into account that,
prior to the receipt of shareholder approval, the Company 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 special committee recognized that it has flexibility under the merger agreement to respond to an
alternative transaction proposed by a third party that is or is reasonably likely to result in a Superior Proposal, including the
ability to provide information to and engage in discussions and negotiations with such party (and, if such proposal is a Superior
Proposal, recommend such proposal to the Company’s shareholders).
In addition, the special
committee and the board of directors also considered remaining as a public company. However, based on the considerations set forth
in the section entitled “Special Factors—Reasons for the Merger and Recommendation of the Special Committee and Our
Board of Directors,” beginning on page 24, the special committee and the board of directors have concluded that it is more
beneficial to the unaffiliated security holders to enter into the merger agreement and pursue the consummation of the transactions
contemplated thereto, 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, shareholders will not receive any payment for their Shares or ADSs in connection with the merger. Instead,
the Company will remain a publicly traded company, the ADSs will continue to be listed and traded on the NYSE, provided that the
Company continues to meet the NYSE’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 $1,538,250, or Parent
may be required to pay the Company a termination fee of $4,000,000, in each case, as described under the caption “The Merger
Agreement and Plan of Merger—Termination Fee” beginning on page 84.
If the merger is not
completed, from time to time, the Company’s board of directors 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 Buyer Group estimates
that the total amount of funds necessary to complete the transactions contemplated under the merger agreement, including the merger,
will be approximately US$45.5 million, assuming no exercise of dissenters’ rights by holders of Shares of the Company. This
amount includes the cash to be paid to the holders of Shares and ADSs (other than the Rollover Shareholders) and holders of Company
Share Awards, as well as the related costs and expenses, in connection with the merger and other transactions contemplated under
the merger agreement. It does not include the value of the Excluded Shares (which includes the Rollover Shares contributed by
the Rollover Shareholders), which will be cancelled for no consideration in the merger. For a discussion of the Rollover Shares
and the transactions contemplated by the Rollover Agreement, please see “Special Factors—Interests of Certain Persons
in the Merger—Interests of Rollover Shareholders” beginning on page 53.
The total amount of
funds necessary to consummate the transactions contemplated under the merger agreement, including the merger, is expected to be
provided through the aggregate debt financing commitments of up to US$50 million as set forth in the Debt Commitment Letter (as
discussed below). As of the date of this proxy statement, there are no alternative financing arrangements or plans in place to
obtain the funds necessary for the consummation of transactions contemplated under the merger agreement, including the merger.
On December 17, 2015,
Parent and Merger Sub received the Debt Commitment Letter from the Commitment Party, pursuant to which and subject to the conditions
set forth therein, the Commitment Party committed to arrange and provide a senior secured term loan facility of up to US$50 million
in aggregate principal amount (the “Term Facility”) for Parent and Merger Sub to finance the merger.
The Debt Commitment
Letter expires on the earliest of (i) any termination of the merger agreement by Parent or Merger Sub in a signed writing
in accordance with the terms of the merger agreement (or a written confirmation or public announcement thereof by Parent or Merger
Sub), (ii) the consummation of the transactions contemplated under the merger agreement without the funding of the Term Facility
and (iii) 11:59 p.m. (New York City time) on the date that is 5 business days after September 17, 2016, as such termination
date may be extended pursuant to the terms of the merger agreement. The Merger Sub and, after the merger, the Company are collectively
called the “Borrower.” The Commitment Party (as the “Initial Lender”), together with its permitted successors
and assigns under the Term Facility, are collectively called the “Initial Lenders” and together with any other lender
party to the Term Facility from time to time, the “Lenders.” The Commitment Party as the off-shore collateral agent
for the Term Facility and China Merchants Bank Co., Ltd., Chongqing Branch as the on-shore collateral agent for the Term Facility
are collectively called the “Collateral Agents.”
The Commitment
Party’s commitments to provide the debt financing to Parent and Merger Sub are subject to, among other things:
· The
Initial Lender shall have received a copy of the fairness opinion provided by Duffs & Phelps; provided that the Initial Lender
shall be deemed to have received such opinion to the extent and upon the filing of such opinion with the SEC by the Company;
· since
the date of the merger agreement, there has not been any Material Adverse Effect (as defined in the section entitled “Merger
Agreement—Representations and Warranties,” beginning on page 71);
· the
merger will have been consummated, or substantially simultaneously with the borrowing under the Term Facility, will be consummated,
in all material respects in accordance with the terms of the merger agreement, after giving effect to any modifications, amendments,
consents or waivers by Merger Sub thereto, other than those modifications, amendments, consents or waivers that are materially
adverse to the interests of the Lenders or the Commitment Party, unless consented to in writing by the Initial Lender (such consent
not to be unreasonably withheld or delayed);
· the
Initial Lender shall have received evidence that (i) the staff of the SEC have indicated to the Company’s counsel that
they are not reviewing or, in connection with their review, have no further comments with respect to, this proxy statement or the
Schedule 13E-3 filed with the SEC in connection with the Transactions (as defined in the Debt Commitment Letter) and (ii) the
public announcement of the execution and delivery of the merger agreement by the Company;
· the
Initial Lender shall have received evidence substantially simultaneously with the borrowing under the Term Facility that Ms. Hong
Li and Mr. Xingqiang Zhang own directly or indirectly not less than 50.1% of the ownership interest in Parent;
· the
Initial Lender shall have received (a) audited consolidated balance sheets of the Company and its consolidated subsidiaries
as at the end of, and related statements of income, stockholders’ equity and cash flows of the Company and its consolidated
subsidiaries for, the three most recently completed fiscal years ended not less than 180 days prior to the closing date of the
merger; (b) unaudited consolidated balance sheets of the Company and its consolidated subsidiaries as at the end of, and related
statements of income, stockholders’ equity and cash flows of the Company and its consolidated subsidiaries for each subsequent
fiscal quarter occurring after the last fiscal year of Company and ended not less than 90 days before the closing date of the merger.
in each case, prepared in accordance with the generally applicable accounting principles in the United States;
· subject
in all respects to the limited conditionality provisions in the Debt Commitment Letter, all documents and instruments (including
without limitation stock certificates and related stock transfer powers) required to create and perfect the Collateral Agents’
security interest in the collateral in respect of the Term Facility shall have been executed and delivered and, if applicable,
be in proper form for filing;
· the
Initial Lender shall have received evidence of the deposit of an amount in RMB that is equal to no less than 120% of the RMB equivalent
of the (i) Cash Pledge Amount, which shall equal the sum of (x) the USD amount of the entire principal amount of the term
loan under the Term Facility to be borrowed on the closing date of the Transactions (as defined in the Debt Commitment Letter)
and (y) the first installment of the interest thereon and the facility fee under the Fee Letter (as defined below) for the
Term Facility and (ii) maintenance of such Cash Pledge Amount in the cash pledge account;
· at
least two business days prior to the closing of the Transactions (as defined in the Debt Commitment Letter), the Initial Lender
shall have received all documentation and other information about Merger Sub, Regal Fair Holdings Limited and Parent, in each case
that have been reasonably requested by the Initial Lender in writing at least 10 business days prior to the closing date of the
merger and that the Initial Lender reasonably determines is required by United States regulatory authorities under applicable “know
your customer” and anti-money laundering rules and regulations, including without limitation the USA PATRIOT Act;
· the
closing of the Term Facility shall have occurred on or before the expiration of the Debt Commitment Letter;
· (i)
the execution and delivery by the Borrower, Regal Fair Holdings Limited and Parent of the documentation for the Term Facility (including
guarantees by the applicable guarantors and the cash pledge agreement) in accordance with the terms of the Debt Commitment Letter
(and the term sheet attached thereto); (ii) delivery to the Initial Lender of customary legal opinions, customary officer’s
closing certificates, organizational documents, customary evidence of authorization and good standing certificates in jurisdictions
where applicable, in each case with respect to the Borrower, Regal Fair Holdings Limited, Parent and the Security Grantors (as
defined in the Debt Commitment Letter) (to the extent applicable); and (iii) delivery by the Borrower of a customary borrowing
notice;
· no
bankruptcy event of default in relation to Parent, the Borrower, Ms. Hong Li, Mr. Xingqiang Zhang or any Onshore Cash Pledgor (as
defined in the Debt Commitment Letter) shall have occurred and continuing on such date or would result after giving effect to the
extensions of credit requested to be made on the closing date of the merger;
· all
fees required to be paid on or prior to the closing date of the merger pursuant to the fee letter executed by the parties to the
Debt Commitment Letter simultaneously therewith (the “Fee Letter”) and reasonable out-of-pocket expenses required to
be paid on the closing date of the merger pursuant to the Debt Commitment Letter, to the extent invoiced at least three business
days prior to the closing date of the merger (except as otherwise reasonably agreed by Borrower), will, upon the borrowings under
the Term Facility, have been, or will be substantially simultaneously paid;
· the
accuracy of (i) certain specific representations made by the Company, by the Company on behalf of its subsidiaries, or by
its subsidiaries in the merger agreement, and (ii) certain specified representations and warranties applicable to Regal Fair
Holdings Limited, Parent, Merger Sub and the Security Grantors (as defined in the Debt Commitment Letter) (other than the Company)
to be set forth in the definitive documentation for the Term Facility, in each case in all material respects;
The Debt Commitment
Letter and the commitments thereunder will not be assignable by any party thereto without the prior written consent of each other
party thereto, such consent not to be unreasonably withheld, conditioned or delayed.
The foregoing summary
of the Debt Commitment Letter does not purport to be complete and is qualified in its entirety by reference to the Debt Commitment
Letter.
Rollover Agreement
Concurrently with the
execution of the merger agreement, the Rollover Shareholders entered into the Rollover Agreement with Parent, pursuant to which
each of the Rollover Shareholders agreed that, in connection with the consummation of the transactions contemplated by the merger
agreement, he, she or it agrees to the cancellation of the Rollover Shares for no consideration at the effective time of the Merger
and to subscribe, or cause his, her or its affiliate(s) to subscribe, for a corresponding number of newly issued ordinary shares
of Parent, par value US$1 per share, in accordance with the terms of the Rollover Agreement. The Rollover Agreement will terminate
immediately upon the valid termination of the merger agreement.
Under the terms of
the Rollover Agreement, the Company is an express third-party beneficiary of Section 5 of the Rollover Agreement, pursuant to which
each Rollover Shareholder irrevocably elects and agrees to subscribe for Parent’s shares and agree to the cancellation of
its, his or her respective Rollover Shares on the terms and conditions set forth in the Rollover Agreement and covenants and agrees,
severally and not jointly, that such Rollover Shareholder shall promptly notify Parent of any new Shares with respect to which
beneficial ownership is acquired by such Rollover Shareholder.
Voting Agreement
Concurrently with the
execution of the merger agreement and the Rollover Agreement, the Voting Shareholders also entered into the Voting Agreement with
Parent, pursuant to which each of the Voting Shareholders undertook to vote or cause to be voted (including by proxy or written
resolution, if applicable) all of its Voting Securities for authorization and approval of the merger agreement and the transactions
contemplated by the merger agreement and against, among other matters, any Competing Transaction, at any meeting of the Company’s
shareholders or in connection with any written resolution of the Company’s shareholders. Also pursuant to the Voting Agreement,
each Voting Shareholder appointed Parent, and any designee of Parent, as its proxy and attorney-in-fact, with full power of substitution,
to vote or cause to be voted (including by proxy or written resolution, if applicable) its Voting Securities in accordance with
the foregoing. Each Voting Shareholder further agreed, during the term of the Voting Agreement, not to sell, transfer, pledge,
or otherwise dispose of any Voting Securities. The obligations under the Voting Agreement terminate upon the earlier to occur of
(a) the closing of the merger or (b) the date of termination of the merger agreement in accordance with its terms.
Limited Guarantee
Concurrently with the
execution of the merger agreement, Regal Fair Holdings Limited, Sky Success Venture Holdings Limited and SIG China Investment One,
Ltd. (together, the “Guarantors”) entered into a limited guarantee (the “Limited Guarantee”) with the Company,
pursuant to which each Guarantor guaranteed severally but not jointly, to the Company, on the terms and subject to the conditions
set forth therein, the due and punctual payment, performance and discharge of its respective percentage as set forth opposite to
its name in Annex A thereto (for each such Guarantor, the “Guaranteed Percentage”) of the obligations of Parent or
Merger Sub, to pay the Company (a) the Parent Termination Fee (as defined in the merger agreement) pursuant to Section 8.06(b)
of the merger agreement (the “Parent Fee Obligations”) and (b) the costs, expenses and interests payable pursuant to
Section 6.14(c) and Section 8.06(c) of the merger agreement (the “Expense Obligations,” and together with the Parent
Fee Obligations, the “Guaranteed Obligations”) as and when due. In addition, the Guarantors agree to pay on demand
all reasonable and documented out-of-pocket expenses (including reasonable fees and expenses of counsel) incurred by the Company
in connection with enforcement of its rights thereunder pursuant to Section 1(b) of the Limited Guarantee. A Guarantor’s
liability under the Limited Guarantee shall not exceed an amount equal to its Guaranteed Percentage of (i) the Parent Fee Obligations,
plus (ii) the Expense Obligations, minus (iii) any portion of the Guaranteed Obligations actually paid by Parent or Merger Sub
in accordance with the terms thereof and under the merger agreement.
The Limited Guarantee
will terminate as of the earliest of (i) the effective time of the merger, (ii) the termination of the merger agreement in accordance
with its terms (other than a termination of the merger agreement for which a Parent Termination Fee is, in accordance with Section
8.06(b) of the merger agreement, due and owing by Parent (a “Qualifying Termination”)), and (iii) the date following
ninety (90) days from the date of a Qualifying Termination if the Company has not presented a written claim for payment of the
Guaranteed Obligation to any Guarantor by such date.
Remedies and Limitations
on Liability
The parties to
the merger agreement may be entitled to specific performance of the terms of the merger agreement, including an injunction or injunctions
to prevent breaches of the merger agreement, in addition to any other remedy at law or equity.
The Company’s
right to obtain an injunction or injunctions, or other appropriate form of specific performance or equitable relief to enforce
Parent’s obligation to consummate the merger and the transactions contemplated under the merger agreement is subject to (A)
all conditions to the closing of the merger (other than those conditions that by their nature are to be satisfied by actions taken
at the Closing) have been satisfied or waived, (B) the Company has irrevocably confirmed by notice to Parent that all conditions
to the obligations of the Company have been satisfied or that it is willing to waive any unsatisfied conditions, and (C) the financing
for the merger has been funded or the Lenders have irrevocably confirmed in writing that all conditions to funding have been satisfied
and the financing will be funded or the alternative financing will be funded in accordance with its terms at the effective time.
The maximum aggregate
liabilities of Parent and Merger Sub, on the one hand, and the Company, on the other hand, for monetary damages in connection with
the merger agreement or any of the transactions contemplated thereunder are limited to a termination fee of US$4,000,000 and US$1,538,250,
respectively, reimbursement of certain expenses in the event the applicable termination fee is not paid when due and in accordance
with the requirements of the merger agreement and, with respect to Company’s remedy only, the guarantee of such obligations
pursuant to the Limited Guarantee. While Parent may pursue both a grant of specific performance and monetary damages, under no
circumstances shall Parent be permitted or entitled to receive both such grant of specific performance and payment of the $1,538,250
Company termination fee.
Interests of Certain
Persons in the Merger
In considering the recommendation
of the special committee and our board of directors with respect to the merger, you should be aware that the Rollover Shareholders
have interests in the transaction that are different from, and/or in addition to, the interests of our shareholders generally.
The Company’s board of directors and special committee were aware of such interests and considered them, among other matters,
in reaching their decisions to authorize and approve the merger agreement, the plan of merger and the transactions 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 and SIG China
As a result of the
merger, Parent will own 100% of the equity interest in the surviving company and the Buyer Group (other than Parent and Merger
Sub) and SIG China and/or their affiliate(s) will own, directly or indirectly, 100% of the equity interest in Parent immediately
following the completion of the merger.
Because of Parent’s
equity interest in the surviving company, each member of the Buyer Group (other than the Merger Sub) and SIG China 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 (other than Merger Sub) and SIG China
will also directly bear the corresponding risks of any possible decreases in the future earnings or value of the Company or slowdown
in the growth of the Company. The investment by the Buyer Group (other than Merger Sub) and SIG China in the surviving company
will be illiquid, with no public trading market for the surviving company’s shares and no certainty that an opportunity to
sell its shares in the surviving company at an attractive price, or that dividends paid by the surviving company will be sufficient
to recover its investment.
The merger may also provide
additional means to enhance shareholder value for the Buyer Group (other than Merger Sub) and SIG China, 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 (other than Merger Sub) and SIG China, such as through dividends
or other distributions.
Interests of Rollover
Shareholders
Concurrently with
the execution of the merger agreement, the Rollover Shareholders executed the Rollover Agreement pursuant to which they have agreed
to contribute to Parent the Rollover Shares, and subscribe for, or cause its, his or her affiliate(s) to subscribe for, certain
equity interest in Parent at par value such that immediately upon the completion of the merger (i) Ms. Li, Mr. Zhang and Regal
Fair and their affiliate(s) (together, the "Chairman Parties") will indirectly hold in aggregate approximately 60.1%
of the outstanding interest in Parent, (ii) Sky Success and its affiliate(s) (the "Sky Success Parties") will hold
(directly or indirectly) in aggregate approximately 23.8% of the outstanding interest in Parent, and (iii) SIG China and
its affiliate(s) (the "SIG Parties") will hold (directly or indirectly) in aggregate approximately 16.1% of the outstanding
interest in Parent.
Given the Company will
become a privately-held company following the completion of the merger, the Rollover Shareholders’ interests in the surviving
company will be illiquid, with no public trading market for the surviving company’s shares and no certainty of an opportunity
to sell their beneficial interests in the surviving company at an attractive price, or that any dividends or other distributions
from the surviving company will be sufficient to recover their investment. Each of the Rollover Shareholders may also enjoy benefits
from any future earnings and growth of the surviving company.
Shares, Options and Restricted
Share Units Held by Officers and Directors
As of the date of this
proxy statement, the directors and executive officers of the Company held an aggregate of 86,202.012 Shares, Company Share Awards
for the right to purchase 40,000 Shares and 496,616 restricted shares within 60 days after the date of this proxy statement.
Each option to purchase Shares under the share incentive plan adopted by the Company in December 2009 (as amended in August 2011,
the “Share Incentive Plan”) is called a “Company Option” and each restricted share award granted by the
Company under the Share Incentive Plan is called a “Company Restricted Share.” Company Options and Company Restricted
Shares are collectively referred to as “Company Share Awards.”
At the effective time
of the merger, each Company Share Award (other than any Company Share Awards held by any Rollover Shareholders), whether vested
or not vested, will be cancelled and, in exchange thereof, (i) with respect to each holder of a Company Option, be paid as soon
as practicable after the effective time of the merger (without interest), a cash amount equal to the product of (1) the excess,
if any, of $1.3075 over the exercise price of such Company Option multiplied by (2) the number of Shares underlying such Company
Option, provided that if the exercise price of any such Company Option is equal to or greater than $1.3075, such Company Option
shall be cancelled without any payment therefor; and (ii) with respect to holder of a Company Restricted Share, be paid a cash
amount equal to $1.3075.
The table below sets forth,
as of the date of this proxy statement, the number of outstanding Shares beneficially held by each director and executive officer
and the corresponding number of ordinary shares in Parent that such officer or director will subscribe for pursuant to the Rollover
Agreement, as well as the number of outstanding Company Restricted Shares held by each director and executive officer and the corresponding
number of options of Parent issuable to such executive officer or director immediately after the completion of the merger.
| Name | |
Shares | | |
Cash payment
to be received
upon
completion of
the merger in
US$ | | |
Shares of
Parent
Immediately
Upon
Completion of
the Merger | | |
Company
Share
Awards* | | |
Share Awards
of Parent
Immediately
Upon
Completion of
the Merger | |
| Hong Li(1) | |
| 44,674,364 | | |
| — | | |
| 44,674,364 | | |
| — | | |
| — | |
| Xingqiang Zhang(1) | |
| 44,674,364 | | |
| — | | |
| 44,674,364 | | |
| — | | |
| — | |
| Zhiyun Peng(2) | |
| 17,415,400 | | |
| — | | |
| 17,415,400 | | |
| — | | |
| — | |
| Tim T. Gong(3) | |
| 12,161,000 | | |
| 210,508 | | |
| 12,000,000 | | |
| 63,000 | | |
| — | |
| Steve Yue Ji(4) | |
| 12,156,000 | | |
| 15,893,970 | | |
| — | | |
| 156,000 | | |
| — | |
| Jin Li | |
| — | | |
| 94,140 | | |
| — | | |
| 112,000 | | |
| — | |
| Li-Lan Cheng | |
| — | | |
| 67,990 | | |
| — | | |
| 52,000 | | |
| — | |
| Eric Haibing Wu | |
| — | | |
| 188,280 | | |
| — | | |
| 144,000 | | |
| — | |
| Cheng Xiao | |
| — | | |
| 31,202 | | |
| — | | |
| 9,616 | | |
| — | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total(5) | |
| 86,738,628 | | |
| 16,486,090 | | |
| 74,089,764 | | |
| 536,616 | | |
| — | |
| * |
includes all Company Share Awards held by each person that are outstanding and unexercised, whether vested or not vested, or exercisable |
| (1) |
For purposes of this calculation, Shares beneficially owned by the Ms. Hong Li and Mr. Xingqiang Zhang includes (i) 44,522,148 ordinary shares held by Regal Fair Holdings Limited, a British Virgin Islands company, (ii) 78,504 ordinary shares represented by ADSs held by Ms. Li and (iii) 73,712 ordinary shares represented by ADSs held by Mr. Zhang. Ms. Li and Mr. Zhang are husband and wife. |
| (2) |
For purposes of this calculation, Shares beneficially owned by Mr. Zhiyun Peng includes (i) 17,384,544 ordinary shares, 11,106,692 of which are represented by ADSs, held by Sky Success Venture Holdings Limited and (ii) 30,856 ordinary shares, represented by ADSs, held by Mr. Peng. Mr. Peng is a director of Sky Success Venture Holdings Limited. Sky Success Venture Holdings Limited is jointly owned by Jinjing Hong, Zhiyong Hong, Lipeng Deng and Zhiyun Peng. |
| (3) |
For purposes of this calculation, Shares beneficially owned by Mr. Tim T. Gong includes (i) 12,000,000 ordinary shares held by SIG China Investments One, Ltd. and (ii) 98,000 ordinary shares, represented by ADSs, and 63,000 vested restricted shares held by Mr. Tim T. Gong. Mr. Tim T. Gong disclaims beneficial ownership with respect to the shares owned by SIG China Investments One, Ltd. except to the extent of his pecuniary interest therein. |
| (4) |
For purposes
of this calculation, Shares beneficially owned by Mr. Steve Yue Ji includes (i) 10,059,600 ordinary shares held by Sequoia Capital China II, L.P., (ii) 250,800 ordinary shares held by Sequoia Capital
China Partners Fund II, L.P., (iii) 1,689,600 ordinary shares held by Sequoia Capital China Principals
Fund II, L.P. and (iv) 156,000 vested restricted shares held by Mr. Ji. Mr. Ji is a managing director of Sequoia
Capital China. Mr. Ji disclaims beneficial ownership with respect to the shares held by Sequoia Capital China II, L.P., Sequoia
Capital China Partners Fund II, L.P. and Sequoia Capital China Principals Fund II. L.P. except to the extent of his pecuniary
interest therein. |
| (5) |
For purposes of this calculation, Shares beneficially
held by all directors and executive officers includes (i) 86,202,012 ordinary shares held directly or indirectly by all directors
and executive officers, and (ii) Company Share Awards for the right to purchase or exchange for 536,616 ordinary shares held directly
or indirectly by all directors and executive officers.
|
The Special Committee
On August 14, 2015,
our board of directors established a special committee of directors to consider the proposal and to take any actions it deems appropriate
to assess the fairness and viability of such proposal. The special committee is composed of independent directors—Messrs.
Li-Lan Cheng (serving as chairman of the committee), Winston Jin Li and Eric Haibing Wu. All such directors are free from any affiliation
with the Buyer Group and SIG China 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 directors’ receipt of board compensation in the ordinary course,
(ii) special committee members’ compensation in connection with its evaluation of the merger (which is not contingent upon
the completion of the merger or the special committee’s or board’s recommendation of the merger), and (iii) the directors’
indemnification and liability insurance rights under the merger agreement. Our board of directors did not place any limitations
on the authority of the special committee regarding its investigation and evaluation of the merger.
The Company has compensated
each member of the special committee in exchange for his service in such capacity an aggregate monthly amount of $10,000 per member,
subject to a cap of $60,000 (and, in the case of the chairman of the special committee, a monthly amount of $15,000, subject to
a cap of $90,000), the payment of which is not contingent upon the completion of the merger or the special committee’s or
the board’s recommendation of the merger.
Position with the Surviving
Company
After completion of
the merger, it is anticipated that the executive officers of the Company will hold positions with the surviving company that are
substantially similar to their current positions.
Related Party Transactions
The Company has an
audit committee charter in place, which requires the audit committee to review and approve all related-party transactions as defined
in Item 404 of Regulation S-K on an ongoing basis.
For a description
of significant related party transactions for the years ended December 31, 2013 and 2014, see “Item 7. Major Shareholders
and Related Party Transactions” included in the Company’s annual report on Form 20-F for the fiscal year ended
December 31, 2014, incorporated by reference into this proxy statement. See “Where You Can Find More Information”
beginning on page 97 for a description of how to obtain a copy of the Company’s annual report.
Fees and Expenses
Fees and expenses incurred
or to be incurred by the Company and the Buyer Group in connection with the merger are estimated at the date of this proxy statement
and set forth in the table below. Such fees are subject to change pending completion of the merger.
| Description | |
Amount
(in ‘000) | |
| Legal fees and expenses | |
$ | 875 | |
| Financial advisory fees and expenses | |
$ | 550 | |
| Special committee fees | |
$ | 210 | |
| Filing fees | |
$ | 5 | |
| Miscellaneous (including printing, proxy solicitation and mailing costs) | |
$ | 200 | |
| Total | |
$ | 1,840 | |
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 Voting
Shareholders at the Extraordinary General Meeting
Pursuant to the Voting
Agreement, the Voting Shareholders have agreed to vote all of the Voting Securities 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, at the extraordinary general meeting of the shareholders of the Company. As of the record date, we expect that the Voting
Shareholders as a group will own, in the aggregate, approximately 74,528,764 outstanding Shares (including shares represented by
ADSs but excluding Shares that the applicable Voting Shareholders will have the right to purchase upon the exercise of Company
Share Awards), which represents approximately 69.01% of the total outstanding Shares entitled to vote.
Litigation Related
to the Merger
We are not aware of
any lawsuit that challenges the merger, the merger agreement or any of the transactions contemplated thereby.
Accounting Treatment
of the Merger
Upon completion of
the merger, the Company would cease to be a publicly traded company, and the Company expects to account for the merger at historical
cost.
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 the approvals, filings or notices required under the federal securities laws and the registration of the plan of merger
(and supporting documentation as specified in the Cayman Islands Companies Law) with the Cayman Islands Registrar of Companies
and, in the event the merger becomes effective, a copy of the certificate of merger being given to the shareholders and creditors
of the Company and Merger Sub as at the time of the filing of the plan of merger, and notification of the merger being
published in the Cayman Islands Government Gazette.
Dissenters’
Rights
Holders of Shares
who exercise dissenters’ rights will have the right to receive payment of the fair value of their Shares in accordance with
Section 238 of the Cayman Islands Companies Law if the Merger is consummated, but only if they deliver to the Company, before
the vote to authorize and approve the Merger is taken at the extraordinary general meeting, a written objection to the Merger
and subsequently comply with all procedures and requirements of Section 238 of the Cayman Islands Companies Law for the exercise
of dissenters’ rights, a copy of which is attached as Annex C to this proxy statement. The fair value of their Shares as
determined under the Cayman Islands Companies Law could be more than, the same as, or less than the merger consideration they
would receive pursuant to the Merger Agreement if they do not exercise dissenters’ rights with respect to their Shares.
These procedures are complex and you should consult your Cayman Islands legal counsel. If you do not fully and precisely satisfy
the procedural requirements of the Cayman Islands Companies Law, you will lose your Dissenters’ Rights (as described under
the section entitled “Dissenters’ Rights” on page 87).
U.S. Federal Income
Tax Consequences
The following discussion
is a summary of U.S. federal income tax consequences generally applicable to 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, the Agreement Between the Government
of the United States of America and the Government of the People’s Republic of China for the Avoidance of Double Taxation
and the Prevention of Tax Evasion With Respect to Taxes on Income (the “Treaty”), 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, or
disagree with, 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 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, (ix)
S corporations, or (x) partnerships or other entities classified as partnerships for U.S. federal income tax purposes. This discussion
assumes that Shares are held as capital assets, within the meaning of Section 1221 of the Code, at all relevant times. This discussion
applies only to U.S. Holders who completely terminate their interest in the Company following the merger, whether such interest
is held directly or indirectly, including by application of attribution rules for U.S. federal income tax purposes. Attribution
rules may apply, e.g., if such U.S. Holder holds interests in 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 who or that is (i) an individual citizen or resident of the United States for U.S.
federal income tax purposes, (ii) a corporation (or other entity treated as a corporation for U.S. federal income tax purposes)
created or organized under the laws of the United States, any state thereof, or the District of Columbia, (iii) an estate the income
of which is subject to U.S. federal income taxation regardless of its source or (iv) a trust which (a) is subject to the primary
jurisdiction of a court within the United States and for which one or more U.S. persons have authority to control all substantial
decisions, or (b) has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person for
U.S. federal income tax purposes.
If a partnership (including
any entity classified as a partnership for U.S. federal income tax purposes) is a beneficial owner of Shares, the U.S. federal
income tax treatment of a partner in the partnership generally will depend on the status of the partner and the activities of the
partnership. Any partner of a partnership holding Shares is urged to consult its own tax advisor.
ALL 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
caption “Dissenters’ Rights” beginning on page 87, 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, subject to the rules described under “Passive
Foreign Investment Company Considerations” below, recognize gain or loss in an amount equal to the difference between (i)
the amount of cash received (including the amount of any non-U.S. taxes withheld from such amount) and (ii) such U.S. Holder’s
adjusted tax basis in the Shares exchanged therefor. The character of such gain or loss depends on whether we are treated as a
“passive foreign investment company” as described under “Passive Foreign Investment Company Considerations”
below.
Subject to
the rules described under “Passive Foreign Investment Company Consideration” below, any gain or loss recognized
by U.S. Holders will generally be treated as U.S. source gain or loss for U.S. foreign tax credit purposes. However, in
the event that we are deemed to be a PRC “resident enterprise” under the PRC tax law and gain from the
disposition of Shares is regarded as gain sourced from the PRC and is subject to tax in the PRC (see “Special
Factors—PRC Tax Consequences” beginning on page 59, you may be eligible to elect to treat such gain as PRC source
gain under 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 (or other non-U.S.
withholding tax) imposed on the exchange of Shares pursuant to the merger agreement unless such credit can be applied
(subject to applicable limitations) against tax due on other income treated as derived from foreign sources. U.S. Holders are
urged to consult their tax advisors regarding the tax consequences if PRC tax (or other non-U.S. withholding tax) is imposed
on gain on a disposition of the Shares, including the availability of the foreign tax credit, based on their particular
circumstances.
Passive Foreign
Investment Company Considerations
As a non-United
States corporation, we will be treated as a “passive foreign investment company,” or PFIC, for U.S. federal income
tax purposes for any taxable year, if either (i) 75% or more of our gross income for such year consists of certain types of “passive”
income (the “income test”), or (ii) 50% or more of the value of our assets (determined on the basis of a quarterly
average) during such year produce or are held for the production of passive income (the “asset test”). For purposes
of the income test, passive income is any income that would be foreign personal holding company income under the Code, including,
without limitation, dividends, interest, certain rents and royalties, annuities, net gains from the sale or exchange of property
producing such income, net gains from commodity transactions, net foreign currency gains and net income from notional principal
contracts. For purposes of the asset test, cash, cash equivalents, securities held for investment purposes and other similar assets
are generally categorized as passive assets. We will be treated as owning a proportionate share of the assets and earning a proportionate
share of the income of any other corporation in which we own, directly or indirectly, more than 25% (by value) of the stock.
Although the application
of these rules is unclear and therefore determinations are not free from doubt, and although we do not yet know the composition
of our income and assets for the quarter ended December 31,2015, based on the market price of our ADSs and the composition of our
income and assets for the quarters ended March 31, 2015, June 30, 2015 and September 30, 2015, and our estimates for the quarter
ended December 31, 2015, we believe that we were a PFIC for the taxable year ended December 31, 2015. We believe that there
is a risk that we may also be treated as a PFIC for the current year, however, we do not yet know the composition of our assets
and income and the market price of our ADSs for the portion of the year preceding the merger. Because PFIC status is a fact-intensive
determination made on an annual basis, and because the IRS does not issue rulings with respect to PFIC status, there can be no
assurance that we are not or will not become a PFIC. Accordingly, U.S. Holders are urged to consult their tax advisors with regard
to the potential application of the tax consequences to them if we are a PFIC.
Although the law in
this regard is unclear, we treat our consolidated affiliated entities as being owned by us for United States federal income tax
purposes, not only because we exercise effective control over the operation of such entities but also because we are entitled to
substantially all of their economic benefits, and, as a result, we consolidate their results of operations in our consolidated
financial statements. If it were determined, however, that we are not the owner of the above entities for United States federal
income tax purposes, we would likely be treated as a PFIC even if we were not otherwise treated as a PFIC based on the analysis
described above.
If we are a PFIC for
the 2015 taxable year, for 2016, 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 “deemed sale” election or mark-to-market election, any gain recognized by such U.S. Holder in
the merger generally would be allocated ratably over such U.S. Holder’s holding period for the Shares. The amount allocated
to the taxable year of the disposition and to any year before we became a PFIC would be treated as ordinary income and could not
be offset by any net operating losses. The amount allocated to each other taxable year would be subject to tax at the highest rate
in effect for that year, and such amount would be increased by an additional tax equal to interest on the resulting tax deemed
deferred with respect to such years. If a U.S. Holder has made a valid mark-to-market election with respect to its ADSs (but not
ordinary shares), any gain such U.S. Holder recognizes would be treated as ordinary income and any loss would be treated as ordinary
loss, but only to the extent of the net amount previously included in income as a result of the mark-to-market election.
If we are a PFIC for
the 2015 taxable year, for 2016, or have been a PFIC during any prior year in which a U.S. Holder held ADSs (but not ordinary shares)
and certain conditions relating to the regular trading of the Company’s ADSs have been met in the past, a U.S. Holder of
ADSs (but not ordinary shares) may have been able to make a so-called “mark-to-market” election with respect to their
ADSs. 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). Because a mark-to-market
election, as a technical matter, cannot be made for any of our subsidiaries that may have been PFICs, a U.S. Holder may continue
to be subject to the PFIC rules with respect to its indirect interest in any investments held by us that are treated as an equity
interest in a PFIC for U.S. federal income tax purposes.
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 2015 taxable year, for 2016, 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. Significant penalties are imposed for failure to file IRS Form 8621, and the failure to
file such form may suspend the running of the statute of limitations on such U.S. Holder’s entire tax return. The PFIC rules
are complex, and each U.S. Holder is urged to consult its tax advisor 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.
If we are not a PFIC for
the 2015 taxable year or for 2016 and have not been a PFIC for prior years, then 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 of the merger. 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.
If the IRS makes a determination that we are not a PFIC and you previously paid taxes pursuant to
a “deemed sale” election or mark-to-market election, then you may have paid more taxes than you legally
owed due to such election. If you do not file, or are not able to file, a refund claim before the expiration of the
applicable statute of limitations, you will not be able to claim a refund for those taxes.
Medicare Tax
Recently enacted legislation generally imposes a 3.8% Medicare tax on a portion or all of the net investment income of certain
individuals with a modified adjusted gross income of over $200,000 (or $250,000 in the case of joint filers or $125,000 in the
case of married individuals filing separately) and on the undistributed net investment income of certain estates and trusts. For
these purposes, “net investment income” generally includes gain from the disposition of Shares in the merger and certain
other income, reduced by any deductions properly allocable to such income or net gain. U.S. Holders are urged to consult their
tax advisors regarding the applicability of the Medicare tax to their gains, if any, in respect of their Shares exchanged for cash
in the merger.
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 financial institution to the IRS. This law also imposes penalties if a U.S. Holder is required to report such information to
the IRS and fails to do so. U.S. Holders should consult their tax advisors regarding their reporting obligation with respect to
the disposition of their Shares.
PRC Tax Consequences
Under the Enterprise
Income Tax Law (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 Enterprise Income Tax Law, 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, provided that the “non-resident enterprise” does not have
a de facto management body in the PRC and also (a) does not have an establishment or place of business in the PRC or (b) has an
establishment or place of business in the PRC, but the relevant income is not effectively connected with the establishment or place
of business, to the extent such gain is 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 applicable Income Tax Treaties with China.
The Company does not
believe we it is a resident enterprise defined and regulated by the aforesaid regulations or that the gain recognized on the receipt
of cash consideration for your Share should otherwise be subject to PRC income tax to holders of such Shares that are not PRC residents
as none of our shareholders is a PRC company or PRC corporate group, however, 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 cash 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, unless the amount of
the equity interest to be transferred and the transfer price are determined pursuant to standard trading rules of a public security
market and not by the purchaser and the seller by mutual agreement prior to such transactions. According to Circular 698, Bulletin
24 and Bulletin 7, where a non-resident enterprise indirectly holds and transfers equity of a PRC resident enterprise held through
an offshore holding company, a list of factors set out by Bulletin 7 should be taken into consideration to assess whether the transfer
arrangement would be deemed as having a reasonable commercial purpose. Where non-resident enterprises indirectly transfer PRC resident
enterprises’ equity and avoid obligations to pay enterprise income tax through arrangement without a reasonable commercial
purpose, PRC taxation authorities have the power to redefine and deem the transaction as a direct transfer of PRC resident enterprises’
equity and impose a 10% income tax on the gain from such offshore share transfer. Circular 698 or Bulletin 7 may be determined
by the PRC 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 non-PRC resident shareholders
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).
You should consult
your own tax advisor for a full understanding of the tax consequences of the merger to you, including any PRC tax consequences.
Cayman Islands Tax
Consequences
The Cayman Islands
currently have no form of income, corporate or capital gains tax and no estate duty, inheritance tax or gift tax. No taxes, fees
or charges will payable (either by direct assessment or withholding) to the government or other taxing authority in the Cayman
Islands under the laws of the Cayman Islands in respect of the Merger or the receipt of cash for Shares and ADSs under the terms
of the Merger. This is subject to the qualifications 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
COMPANY’S ADSs, DIVIDENDS AND OTHER MATTERS
Market Price of the
ADSs
The following table
provides the high and low sales prices for our ADSs on the NYSE under the symbol “CCSC,” for each quarter during the
past two years:
| | |
Sales Price
Per ADS
(in $) | |
| | |
High | | |
Low | |
| Quarterly: | |
| | | |
| | |
| 2013 | |
| | | |
| | |
| First quarter | |
| 8.90 | | |
| 6.50 | |
| Second quarter | |
| 7.14 | | |
| 5.95 | |
| Third quarter | |
| 9.87 | | |
| 6.04 | |
| Fourth quarter | |
| 11.26 | | |
| 9.17 | |
| 2014 | |
| | | |
| | |
| First quarter | |
| 14.03 | | |
| 9.50 | |
| Second quarter | |
| 10.09 | | |
| 8.85 | |
| Third quarter | |
| 9.06 | | |
| 6.41 | |
| Fourth quarter | |
| 6.62 | | |
| 5.00 | |
| 2015 | |
| | | |
| | |
| First quarter | |
| 7.07 | | |
| 3.82 | |
| Second quarter | |
| 6.37 | | |
| 4.51 | |
| Third quarter | |
| 5.98 | | |
| 4.00 | |
| Fourth quarter | |
| 5.00 | | |
| 4.42 | |
| 2016 | |
| | | |
| | |
| First Quarter (through January 14, 2016) | |
| 5.03 | | |
| 4.76 | |
On August 13, 2015,
the last trading day immediately prior to August 14, 2015, the date that the Company announced that it had received a “going-private”
proposal, the reported closing price of our ADSs on the NYSE was $4.40. The merger consideration of $1.3075 per Share, or $5.23
per ADS, represents a premium of 18.9% over the Company’s closing price of $4.40 per ADS on August 13, 2015, the last trading
day immediately prior to August 14, 2015, the date that the Company announced that it had received a “going-private”
proposal, and a 11.0% premium over the closing price of $4.71 per ADS on December 16, 2015, the trading day immediately before
the merger agreement was signed. On January 14, 2016, the most recent practicable date before the date of this proxy statement,
the high and low reported sales prices of our ADSs were $4.93 and $4.87, respectively. You are urged to obtain a current market
price quotation for your Shares in connection with voting your Shares.
Dividend Policy
We have never declared
or paid any dividends, nor do we have any present plan to declare and pay any dividends on our ordinary shares or ADSs for the
foreseeable future. We currently intend to retain our available funds and any earnings for the foreseeable future to operate and
expand our business.
We are a holding company
incorporated in the Cayman Islands. We rely principally on dividends from our subsidiaries in China for our cash needs. Current
PRC regulations restrict the ability of our subsidiaries to pay dividends to us; for example, PRC regulations permit our subsidiaries
to pay dividends to us only out of their accumulated profits, if any, determined in accordance with PRC accounting standard and
regulations. For further details of such restrictions, see “Item 4.D.—Risk Factors—Risks Related to Doing
Business in China—We rely principally on dividends and other distributions paid by our wholly owned operating subsidiaries
in China to fund any cash and financing requirements we may have, and any limitation on the ability of our operating subsidiaries
to pay dividends to us could have a material adverse effect on our ability to borrow money or pay dividends to holders of our ADSs”
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.
Subject to our currently
effective memorandum and articles of association and applicable laws, our board of directors has discretion as to whether to declare
a distribution of dividends to shareholders. Even if our board of directors decides to recommend the payment of dividends, the
form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial
condition, contractual restrictions and other factors that our board of directors may deem relevant. If we pay dividends, we will
pay our ADS holders to the same extent as holders of our ordinary shares, subject to the terms of the deposit agreement, including
the fees and expenses payable thereunder. See “Item 12.D.—American Depositary Shares” 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.
Cash dividends on our ADSs and ordinary shares, if any, will be paid in U.S. dollars.
THE EXTRAORDINARY
GENERAL MEETING
We are furnishing this
proxy statement to you, as a holder of our Shares, as part of the solicitation of proxies by the Company’s board of directors
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 10:00 a.m. (Hong Kong Time) at 42nd Floor, Edinburgh Tower, The Landmark, 15 Queen’s
Road, Central, Hong Kong.
Proposals to be
Considered at the Extraordinary General Meeting
At the meeting,
you will be asked to consider and vote upon:
| · | as a special resolution: |
THAT the
agreement and plan of merger dated as of December 17, 2015 (the “merger agreement”) among Parent, Merger Sub and the
Company (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 Merger Sub and the Company required to be registered
with the Registrar of Companies of the Cayman Islands for the purposes of the merger (such plan of merger being in the form attached
as Annex H to the accompanying proxy statement 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 (i) the merger, , (ii) the variation
of the authorized share capital of the Company from US$2,000,000 divided into 2,000,000,000 shares with a par value of US$0.001
each to US$50,000 divided into 50,000 ordinary shares with a par value of US$1.00 each, and (iii) the amendment and restatement
of the existing memorandum and articles of association of the Company by their deletion in their entirety and the substitution
in their place of the memorandum and articles of association in the form attached as Appendix A to the plan of merger, be and are
hereby authorized and approved; and
| · | as an ordinary resolution: |
THAT the
extraordinary general meeting be adjourned in order to allow the Company to solicit additional proxies in the event that there
are insufficient proxies received at the time of the extraordinary general meeting to pass the special resolution 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 the Excluded Shares,
will be cancelled and cease to exist in exchange for the right to receive $1.3075 in cash without interest, and for the avoidance
of doubt, because each ADS represents four Shares, each issued and outstanding ADS (other than ADS that represents Excluded Shares),
will represent the right to surrender the ADS in exchange for $5.23 in cash per ADS without interest (less $0.05 per ADS cancellation
fees pursuant to the terms of the deposit agreement), in each case, net of any applicable withholding taxes, in accordance with
the terms and conditions set forth in the merger agreement. At the effective time, all of the Shares will be cancelled and cease
to exist. Each Dissenting Share will thereafter represent only the right to receive the fair value of such Share as determined
under the Cayman Islands Companies Law. Each Excluded Share other than Dissenting Share will be cancelled for no consideration.
At the effective time, each outstanding ordinary share, par value $1.00 per share, of Merger Sub will be converted into one fully
paid and non-assessable ordinary share of the surviving company.
Our Board’s
Recommendation
Our board of directors,
acting upon the unanimous recommendation of the special committee of our board of directors:
| · | determined that it is fair to and in the best interests of the Company and its shareholders (other
than holders of Excluded Shares), and declared it advisable, to enter into the merger agreement; |
| · | authorized and approved the execution, delivery and performance of the merger agreement, the plan
of merger and the transactions contemplated by the merger agreement, including the merger; and |
| · | resolved to direct that the authorization and approval of the merger agreement, the plan of merger
and the transactions contemplated by the merger agreement, including the merger, be submitted to a vote at an extraordinary general
meeting of the shareholders of the Company. |
Quorum
Two or more shareholders
on record holding in aggregate not less than one-tenth of the Shares in the Company in issue carrying the right to vote at the
meeting, present in person or by proxy or, if a corporation or other non-natural person, by its duly authorized representative
or proxy, will constitute a quorum.
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,
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 10:00 am (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 attend and 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 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 108,000,000 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 10:00 a.m. (Hong Kong Time). Please see “Procedures for Voting” 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 Company’s
ADSs would continue to be listed on the NYSE. The Company’s Shares are not listed and cannot be traded on any stock exchange
other than the NYSE, 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 (up to $0.05 per ADS issued) and any applicable stock transfer taxes
(if any) and related charges pursuant to the deposit agreement.
Vote Required
Under the Cayman
Islands Companies Law and the merger agreement, we cannot complete the merger unless the merger agreement, the plan of merger
and the transactions contemplated by the merger agreement, including the merger, are authorized and approved by a special
resolution (as defined in the Cayman Islands Companies Law) of the Company's shareholders, which requires 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 Voting Shareholders as a group owned, in the
aggregate approximately 74,528,764 outstanding Shares (including Shares represented by ADSs but excluding Shares that the
applicable Voting Shareholders will have the right to purchase upon the exercise of Company Incentive Awards), which
represents approximately 69.0% of the total issued and outstanding Shares entitled
to vote. Please see “Security Ownership of Certain Beneficial Owners and Management of the Company” beginning on
page 92 for additional information. Pursuant to the terms of the Voting 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 shareholders of the Company. Based on the number
of Shares expected to be outstanding on the record date, no additional Shares entitled to vote owned by the remaining
shareholders need be voted in favor of the proposal in order for the merger to be approved.
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 in the Cayman Islands on , 2016, 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 wanting to vote by proxy should simply indicate on their proxy card how
they want to vote, sign and date the proxy card, and mail the proxy card in the return envelope as soon as possible but in any
event so that it is received by the Company no later than 10:00 a.m. on , 2016 (Hong Kong Time).
Holders of ADSs
as of the close of business in New York City on , 2016, the ADS record date, will receive the final proxy statement and ADS voting
instruction card either directly from the Company’s ADS depositary (in the case of holders of ADSs who hold ADSs registered
in their name on the books of the ADS depositary) or these materials will be forwarded to them by a third party service provider
(in the case of beneficial owners of ADSs who hold ADSs in street name (i.e., through a broker)). Holders of ADSs as of the close
of business in New York City on , 2016, cannot attend or vote at the extraordinary general meeting directly, but may instruct the
ADS depositary how to vote the Shares underlying the ADSs by completing and signing an ADS voting instruction card provided by
the ADS depositary and returning it in accordance with the instructions printed on it. The ADS depositary must receive the ADS
voting instruction card no later than 10:00 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.
Holders of ADSs
may vote in person at the extraordinary general meeting if they cancel their ADSs and become a holder of Shares by the close of
business in the Cayman Islands on , 2016. 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 ADS represents
four Shares. As of the date of this proxy statement, there were 108,000,000 Shares issued and outstanding (including Shares represented
by ADSs but excluding Shares and Shares represented by ADSs reserved by the Company for settlement upon exercise of Company Share
Awards under any Share Incentive Plan), all of which are entitled to vote on the proposals at the extraordinary general meeting,
subject to the procedures described above. As of the date of this proxy statement, there were 8,300,000 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 in the Cayman Islands
on , 2016 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 in New York City on , 2016 will receive the ADS voting instruction card from the ADS
depositary before the extraordinary general meeting. Shareholders who have acquired Shares after the close of business in the Cayman
Islands on , 2016 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 participate in the extraordinary general
meeting may appoint as a representative another shareholder, a third party or the Company as proxy holder by completing and returning
the form of proxy in accordance with the instructions printed thereon. With regard to the items listed on the agenda and without
any explicit instructions to the contrary, the Company as proxy holder will vote in favor of the merger according to the recommendation
of the board of directors of the Company. 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 of directors of the Company.
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, 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
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, the ADS depositary will deem such holder to have instructed the ADS depositary
to 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, and FOR any adjournment of the extraordinary general meeting. Furthermore,
if holders of ADSs do not timely deliver specific voting instructions to the ADS depositary, they may, 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,
which in this case will be a member of the independent committee of the board of directors of the Company (the “Designee”).
Unless the Company notifies the ADS depositary that it does not wish such proxy to be given, that 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 the rights of the holders of the Shares on deposit with the ADS depositary, 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, and FOR any adjournment of the extraordinary
general meeting.
Revocability of
Proxies
Registered holders
of our 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 at least two hours before the extraordinary general meeting commences. Any written
notice revoking a proxy should be sent to Country Style Cooking Restaurant Chain Co., Ltd., 16th Floor, C1 Building, Chongqing
Headquarters City District C, No.780 Jingwei Avenue, Yuzhong District, Chongqing 400020, 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 our
ADSs may revoke their voting instructions by notification to the ADS depositary in writing at any time prior to 10:00 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 instruction card to the
ADS depositary bearing a later date than the ADS voting instruction card sought to be revoked. |
If you hold your ADSs
through a broker, bank or 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 until the completion of the merger 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 is taken, a written objection to the merger and subsequently comply with all procedures and requirements of Section 238
of the Cayman Islands Companies Law, which is attached as Annex C to this proxy statement, for the exercise of dissenters’
rights. The fair value of your Shares as determined under the Cayman Islands Companies Law could be more than, the same as, or
less than the merger consideration you would receive pursuant to the merger agreement if you do not exercise dissenters’
rights with respect to your Shares.
ADS HOLDERS WILL
NOT HAVE THE RIGHT TO 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 DISSENTERS’ RIGHTS WITH RESPECT TO ANY OF THE SHARES THAT IT HOLDS, EVEN IF AN
ADS HOLDER REQUESTS THE ADS DEPOSITARY TO DO SO. ADS HOLDERS WISHING TO EXERCISE DISSENTERS’ RIGHTS MUST SURRENDER THEIR
ADSs TO THE ADS DEPOSITARY, PAY THE ADS DEPOSITARY’S FEES REQUIRED FOR THE CANCELLATION OF THE ADSs, 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, THAT THEY WILL NOT VOTE THE SHARES) BEFORE THE CLOSE OF BUSINESS IN NEW YORK CITY ON ,
2016, AND BECOME REGISTERED HOLDERS OF SHARES BEFORE THE VOTE TO AUTHORIZE AND APPROVE THE MERGER IS TAKEN AT THE EXTRAORDINARY
GENERAL MEETING. THEREAFTER, SUCH FORMER ADS HOLDERS MUST COMPLY WITH THE PROCEDURES AND REQUIREMENTS FOR EXERCISING DISSENTERS’
RIGHTS WITH RESPECT TO THE SHARES UNDER SECTION 238 OF THE CAYMAN ISLANDS COMPANIES LAW. IF THE MERGER IS NOT COMPLETED, THE COMPANY
WOULD CONTINUE TO BE A PUBLIC COMPANY IN THE U.S. AND THE COMPANY’S ADSs WOULD CONTINUE TO BE LISTED ON THE NYSE. THE COMPANY’S
SHARES ARE NOT LISTED AND CANNOT BE TRADED ON ANY STOCK EXCHANGE OTHER THAN THE NYSE, AND IN SUCH CASE ONLY IN THE FORM OF ADSs.
AS A RESULT, IF A FORMER ADS HOLDER HAS CANCELLED HIS OR HER ADSs TO EXERCISE DISSENTERS’ 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 OR HER 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.
Whom to Call for
Assistance
If you have any questions
or need assistance in voting your Shares or ADSs, you can contact Country Style Cooking Restaurant Chain Co., Ltd. at +86-23-8866-8866
or at ir@csc100.com.
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. The Company will reimburse
banks, brokers, nominees, custodians and fiduciaries for their reasonable expenses in forwarding copies of this proxy statement
to the beneficial owners of the Company’s Shares and in obtaining voting instructions from those owners. The Company 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 and the plan of merger but does not purport to describe all
of the terms of the merger agreement and the plan of merger. The following summary is qualified in its entirety by reference to
the complete text of the merger agreement and the plan of merger, which is attached as Annex A to this proxy statement and incorporated
into this proxy statement by reference. 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. This description of the merger agreement and the
plan of merger have been included to provide you with information regarding their 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
and the plan of merger, with the Company as the surviving entity of the merger. If the merger is completed, the Company will cease
to be a publicly traded company. The closing will occur no later than the third business day after all of the closing conditions
have been satisfied or waived. At the closing, Merger Sub and the Company will execute the plan of merger and file 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 first calendar quarter of 2016, after all conditions to the merger have been satisfied
or waived. We cannot specify when, or assure you that, all conditions to the merger will be satisfied or waived; however, we intend
to complete the merger as promptly as practicable.
Memorandum and Articles
of Association; Directors and Officers of the Surviving Company
At the effective
time, in accordance with the plan of merger and without any further action on the part of the parties to the merger agreement,
the surviving company will adopt the memorandum and articles of association of Merger Sub, as in effect immediately prior to the
effective time of the merger, as the memorandum and articles of association of the surviving company until thereafter amended as
provided by law or by such memorandum and articles of association; provided, however, that, at the effective time
of the merger (i) all references to the name “Country Style Cooking Restaurant Chain Merger Company Limited” in
the memorandum and articles of association of the surviving company shall be amended to “Country Style Cooking Restaurant
Chain Co., Ltd.” and (ii) references therein to the authorized share capital of the surviving company shall be amended
as necessary to correctly describe the authorized share capital of the surviving company as approved in the plan of merger and
(iii) the memorandum and articles of association will contain provisions no less favorable with respect to exculpation, advancement
of expenses 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, as required by Section 6.05(a) of the merger agreement.
The directors
of Merger Sub immediately prior to the effective time shall be the directors of the surviving company upon the effective time,
and the officers of the Company immediately prior to the effective time of the merger shall be the officers of the surviving company
upon the effective time of the merger, in each case, except as otherwise determined by Parent prior to the effective time, and
until their respective successors are duly elected or appointed and qualified or until the earlier of their death, resignation
or removal in accordance with the memorandum and articles of association of the surviving company.
Merger Consideration
Under the terms
of the merger agreement, at the effective time of the merger, each issued and outstanding Share (including Shares represented by
ADSs), other than Excluded Shares and the Dissenting Shares, will be cancelled and cease to exist in exchange for the right to
receive $1.3075 in cash without interest, and for the avoidance of doubt, because each ADS represents four Shares, each issued
and outstanding ADS (other than any ADS representing Excluded Shares) will represent the right to receive $5.23 in cash per ADS
without interest (less $0.05 per ADS cancellation fees pursuant to the deposit agreement, in each case, net of any applicable withholding
taxes).
The Excluded
Shares (other than the Dissenting Shares) and ADSs representing such Excluded Shares issued and outstanding immediately prior
to the effective time will be cancelled and cease to exist without payment of any consideration or distribution therefor.
Each Dissenting Share issued and outstanding immediately prior to the effective time will be cancelled and cease to exist and
each holder thereof will be entitled to receive only the payment of the fair value of such Dissenting Shares resulting from
the procedures set forth in Section 238 of the Cayman Islands Companies Law. Please see “Dissenters’
Rights” beginning on page 87 for additional information.
At the effective
time, each ordinary share, par value $1.00 per share, of Merger Sub issued and outstanding immediately prior to the effective time
of the merger will be converted into one validly issued, fully paid and non-assessable ordinary share, par value $1.00 per share,
of the surviving company. Such conversion will be effected by means of the cancellation of such ordinary shares of Merger Sub,
in exchange for the right to receive one such ordinary share of the surviving company. Such ordinary shares of the Surviving Company
will constitute the only issued and outstanding share capital of the surviving company.
Treatment of Company
Share Awards
At the effective time
of the merger, each Company Share Award issued by the Company pursuant to the Share Incentive Plan other than the Company Share
Awards owned by the Rollover Shareholders (which shall be treated in accordance with the Rollover Agreement) that is outstanding
and unexercised, whether vested or not vested or exercisable will be cancelled in exchange for (i) with respect to a Company Share
Option, a cash amount to be paid by the surviving company or one of its subsidiaries, as soon as practicable after the effective
time of the merger (without interest) equal to the product of (1) the excess, if any, of $1.3075 over the exercise price of such
Company Share Option multiplied by (2) the number of shares underlying such Company Share Option; provided that if the exercise
price of any such Company Share Option is equal to or greater than the $1.3075, such Company Share Option shall be cancelled without
any payment therefor; and (ii) with respect to a Company Restricted Share, a cash amount equal to the $1.3075.
Exchange Procedures
At or prior to the
effective time, Parent will deposit, or cause to be deposited, with the paying agent for payment to the holders of the Shares (other
than Excluded Shares), ADSs (other than the holders of ADSs representing Excluded Shares) and Company Share Awards (other than
the Rollover Shareholders), an amount of cash sufficient to pay all the payments required to be made pursuant to the merger agreement.
As promptly as practicable after the effective time, the surviving company will cause the paying agent to mail (or in the case
of the ADS depositary, deliver) or otherwise disseminate to each registered holder of Shares entitled to receive the per Share
merger consideration (other than in respect of Excluded Shares or Dissenting Shares), (i) a letter of transmittal in customary
form for a Cayman Islands incorporated company listed on the New York Stock Exchange reasonably acceptable to Parent and the Company
specifying the manner in which the delivery of the cash payment to each registered holders of Shares (other than the Excluded Shares
and the Dissenting Shares) shall be effected and contain such other provisions as Parent and the Company may mutually agree), and
(ii) instructions for use in effecting the surrender of the share certificates (or the delivery of affidavits and indemnities of
loss in lieu of the share certificates) or uncertificated Shares and/or such other documents as may be required in exchange for
the applicable merger consideration. Each registered holder of Shares (in the case of Shares represented by a share certificate,
subject to the surrender of a share certificate (or deliver of an affidavits and indemnities of loss in lieu of the share certificates),
or in the case of uncertificated Shares, subject to the surrender of such other duly executed documents as may be required pursuant
to instructions to the paying agent in accordance with the terms of such letter of transmittal, will be entitled to receive in
exchange for the cancellation of such Shares a check, in the amount equal to (x) the number of Shares (other than Excluded Shares
and Dissenting Shares) held by such registered holder multiplied by (y) US$1.3075.
Prior to the effective
time, Parent and the Company will establish procedures with the paying agent and the ADS depositary to ensure that the paying agent
will transmit to the ADS depositary as promptly as reasonably practicable following the effective time of the merger 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 of the merger (other than ADSs representing Excluded Shares) and (y) the per ADS merger consideration, and
that the ADS depositary will distribute the per ADS merger consideration to ADS holders with respect to each ADS held by them (other
than ADSs representing Excluded Shares) upon surrender by them of the ADSs. The Surviving Company will pay any applicable fees,
charges and expenses of the ADS depositary and government charges (other than withholding taxes, if any) due to or incurred by
the ADS depositary in connection with distribution of the per ADS merger consideration to ADSs holders for each ADS (other than
the ADS cancellation fee, which is up to $0.05 per ADS pursuant to the deposit agreement).
Representations
and Warranties
The merger agreement
contains representations and warranties made by the Company to Parent and Merger Sub and representations and warranties made by
Parent and Merger Sub to the Company, in each case, as of specific dates. The statements embodied in those representations and
warranties were made for purposes of the merger agreement and are subject to important qualifications and limitations agreed by
the parties in connection with negotiating the terms of the merger agreement (including those set forth in the disclosure schedules
delivered by the Company and Parent in connection therewith). 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 risk between the parties to the merger agreement rather than establishing matters as facts. The representations
and warranties made by the Company were qualified by its SEC reports since January 1, 2014 and prior to the date of the merger
agreement (other than in any “risk factor” disclosure or any other forward-looking statements or other disclosures
included in such SEC reports to the extent that such statements or disclosures are generally cautionary, predicative or forward-looking
in nature, in each case other than any specific factual information contained therein). Moreover, the representations and warranties
made by the Company does not cover any matters with respect to which Ms. Hong Li, Mr. Xingqiang Zhang and/or Mr. Zhiyun Peng has
actual knowledge of, or after reasonable inquiry and investigation would reasonably be expected to have actual knowledge of, as
an inducement to Parent and Merger Sub to enter into 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:
| · | the Company’s and the Company’s subsidiaries’ organization, existence, good standing
and authority to carry on their respective businesses; |
| · | the memorandum and articles of association or other equivalent organizational documents, as applicable,
of each of the Company and its subsidiaries being in full force and effect; |
| · | the Company’s capitalization, the absence of subscription, repurchase or other similar rights
with respect to securities of the Company or any of its subsidiaries, or any other securities of the Company that give their holders
the right to vote with the Company’s shareholders; |
| · | the Company’s corporate power and authority to execute and deliver the merger agreement,
to perform its obligations under and to consummate the transactions contemplated by the merger agreement, and the enforceability
of the merger agreement against the Company; |
| · | the board of directors’ (a) determination that the merger agreement and the plan of merger
and the transactions contemplated under the merger agreement, including the merger, are in the best interests of, the Company and
its shareholders (other than holders of Excluded Shares); (b) approval and declaration of the advisability of the merger agreement,
the merger and the other transactions contemplated under the merger agreement; and (c) resolution to recommend the approval and
authorization of the merger agreement, the plan of merger and the transactions contemplated under the merger agreement to the shareholders
and direction that the merger agreement be submitted for approval by the shareholders of the Company at the extraordinary general
meeting, such action in each case being made upon the recommendation of the special committee; |
| · | the receipt by the special committee if a fairness opinion from Duff & Phelps; |
| · | the absence of violations of, or conflict with the governing documents of the Company and laws
applicable to the Company and breach of or default under certain agreements of the Company as a result of the Company entering
into and performing under the merger agreement and consummating the merger; |
| · | compliance with applicable laws, licenses and permits, including applicable anti-corruption laws; |
| · | the Company’s SEC filings since January 1, 2014 and the financial statements included therein; |
| · | the Company’s disclosure controls and procedures and internal controls over financial reporting; |
| · | the absence of undisclosed liabilities; |
| · | compliance with the applicable rules and regulations of the NYSE; |
| · | the absence of false statement or omission of material facts in this proxy statement; |
| · | the absence of any “Material Adverse Effect” (as defined below) on the Company and
certain other changes or events since December 31, 2014; |
| · | the absence of any legal proceedings and governmental orders against the Company; |
| · | labor and employment matters, including matters relating to employee benefit plans; |
| · | absence of any secured creditors; |
| · | neither has taken steps to seek protection pursuant to any bankruptcy law or is or at the time
of closing of the merger will be insolvent; |
| · | material contracts and the absence of any default under, or breach or violation of, any material
contract; |
| · | the absence of a shareholder rights agreement and the inapplicability of any anti-takeover law
to the merger; |
| · | the absence of any undisclosed broker’s or finder’s fees; and |
| · | the absence of any additional representations or warranties made by the Company. |
Many of the representations
and warranties made by the Company are qualified as to “materiality” or “Material Adverse Effect.” For
purposes of the Merger Agreement, a “Material Adverse Effect” means any event, circumstance, change or effect that,
individually or in the aggregate, with all other facts, events, circumstances, changes and effects, is or would reasonably be expected
to be materially adverse to the business, financial condition, or results of operations of the Company and its subsidiaries taken
as a whole or prevent or materially delay the consummation of the transactions contemplated under the merger agreement or otherwise
be materially adverse to the ability of the Company to perform its material obligations under merger agreement. However, none of
the following events, either alone or in combination, will constitute a Material Adverse Effect or will be taken into account in
determining whether a Material Adverse Effect has occurred or may, or would, occur:
| 1. | changes affecting the economic conditions or financial markets generally in any country or region
in which the Company or any of its Subsidiaries conducts business; |
| 2. | changes in U.S. generally accepted accounting principles or any interpretation thereof after the date
hereof, or to applicable laws or the interpretation or enforcement thereof that are applicable to the Company or any of its subsidiaries
after the date of the merger agreement; |
| 3. | changes that are the result of factors generally affecting the industries in which the Company and
its subsidiaries operate; |
| 4. | changes affecting the financial, credit or securities markets in which the Company or any of its subsidiaries
operates, including changes in interest rates or foreign exchange rates; |
| 5. | effects resulting from the public announcement of the transactions contemplated under the merger agreement,
including the initiation of litigation or other legal proceeding by any person with respect to the merger agreement or the transactions
thereunder or any losses of employees; |
| 6. | the Company’s failure to meet any estimates, forecasts or expectations of the Company’s
revenue, earnings or other financial performance or results of operation or a change in the Company’s credit ratings; |
| 7. | natural disasters, declarations of war, acts of sabotage or terrorism or armed hostilities, in each
case occurring after the date hereof; |
| 8. | changes in the market price or trading volume of the ADSs; |
| 9. | actions taken (or omitted to be taken) at the request of Parent or Merger Sub; |
| 10. | effects resulting from the identity of, or any facts or circumstances relating to Parent, Merger Sub,
the Guarantors or any of their respective affiliates; or |
| 11. | loss of, or change in, the relationship of the Company or any of its subsidiaries, contractual or
otherwise, with its customers, suppliers, vendors, lenders, employees, investors, or joint venture partners arising out of the
execution, delivery or performance of the merger agreement, the consummation of the transactions contemplated thereunder or the
announcement of any of the foregoing, |
provided that the facts,
events, circumstances, developments, conditions, changes, occurrences or effects set forth in clauses (1), (2), (3) and (7) above
may be taken into account in determining whether a “Material Adverse Effect” has occurred or reasonably would be expected
to occur if and to the extent such facts, events, circumstances, developments, conditions, changes, occurrences or effects individually
or in the aggregate have a materially disproportionate impact on the Company and its subsidiaries, taken as a whole, relative to
the other participants in the industries and geographic markets in which the Company and its subsidiaries conduct their businesses.
The representations
and warranties made by Parent and Merger Sub to the Company include representations and warranties relating to, among other things:
| · | their due organization, existence and good standing and authority to carry on their businesses; |
| · | 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 the
merger agreement and to consummate the transactions contemplated by the merger agreement and the plan of merger, 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
and laws applicable to Parent or Merger Sub and the breach of or default under certain agreements of Parent or Merger Sub as a
result of Parent and Merger Sub entering into and performing under the merger agreement and consummating the transactions contemplated
by the merger agreement; |
| · | governmental consents and approvals in connection with performance under the merger agreement and
the transactions contemplated thereunder; |
| · | sufficiency of funds in the financing to pay the merger consideration and any other amounts required
to be paid in connection with the consummation of the transactions contemplated by the merger agreement; |
| · | the validity of the Limited Guarantee and the lack of any default thereunder; |
| · | the absence of any undisclosed broker’s or finder’s fees; |
| · | the absence of false statement or omission of material facts in the Proxy Statement |
| · | the absence of legal proceedings against Parent or Merger Sub or any of their respective affiliates; |
| · | solvency of Parent and Merger Sub after giving effect to the transactions contemplated by the merger
agreement; |
| · | the absence of any undisclosed secured creditors of Parent and Merger Sub; |
| · | none of Parent, Merger Sub or any of their respective affiliates has taken steps to seek protection
pursuant to any bankruptcy law and neither Parent nor Merger Sub is or at the time of closing of the merger will be insolvent; |
| · | no undisclosed contractual arrangements among parent group; |
| · | the absence of any additional representations or warranties with respect to the Company or any
of its subsidiaries or their respective business or operations made by any member of the Company group or any other Person (as
defined in the merger agreement); |
| · | the absence of any liability or indemnification obligation or other obligation resulting from the
delivery, dissemination, any other distribution or the use of any such information provided or made available by any member of
the Company group or any other Person (as defined in the merger agreement); |
| · | the absence of undisclosed ordinary shares of the Company or other securities of, any rights to
acquire the ordinary shares of the Company or other securities of, or any other economic interest in, the Company, beneficially
owned by member of parent group or any of their affiliates; |
| · | taking full responsibility for making their own evaluation of the adequacy and accuracy of all
estimates, projections, forecasts and other forward looking information, as well as such business plans, so furnished to them (including
the reasonableness of the assumptions underlying such estimates, projections, forecasts, forward looking information or business
plans), and have no claim against any member of the Company Group or any other person, with respect thereto; and |
| · | the absence of any additional representations or warranties made by Parent and Merger Sub. |
Certain representations
and warranties in the merger agreement made by Parent and Merger Sub are qualified as to whether or not their satisfaction will,
individually or in the aggregate, prevent or materially delay the consummation by Parent and Merger Sub of the transactions contemplated
by the merger agreement or otherwise be materially adverse to the performance by Parent and Merger Sub of their respective covenants
and obligations under the merger agreement.
Conduct of Business
Prior to Closing
The Company has
agreed that, subject to certain exceptions and unless Parent shall otherwise consent in writing, from the date of the merger agreement
until the earlier of the effective time of the merger and the termination of the merger agreement, the businesses of the Company
and its subsidiaries shall only be conducted, and the Company and its subsidiaries shall not take any action except, in a lawfully
permitted manner in the ordinary course of business and consistent with past practice or at the direction of or with approval from
any of Parent, Merger Sub, Rollover Shareholders or their respective affiliates.
In addition, from
the date of the merger agreement until the earlier of the effective time of the merger and the termination of the merger agreement,
except as expressly permitted by any other provision of the merger agreement or as required by Law, , the Company will not, and
will not permit any of its subsidiaries to directly or indirectly, do, or propose to do, without the prior written consent of Parent
(which consent shall not be unreasonably withheld, conditioned or delayed), except at the direction of or with written approval
from any of Parent, Merger Sub, Rollover Shareholders or their respective affiliates:
| · | amend or otherwise change the memorandum and articles of association or equivalent organizational
documents of the Company or any of its subsidiaries; |
| · | issue, sell, transfer, lease, sublease, license, pledge, dispose of, grant or encumber, or authorize
the issuance, sale, transfer, lease, sublease, license, pledge, disposition, grant or encumbrance of, other than in connection
with the exercise, settlement or vesting of any Company Share Award in accordance with the Share Incentive Plan and other than
transactions between the Company and any of the Company’s subsidiaries or between or among one or more of the Company’s
subsidiaries, (i) any shares of the Company or any options, warrants, convertible securities or other rights of any kind to acquire
any shares, or any other ownership interest (including any phantom interest), of the Company or any of its subsidiaries except
pursuant to the terms of any company benefit plan, or (ii) any property or assets (whether real, personal or mixed, and including
leasehold interests and intangible property) of the Company or any of its subsidiaries that are material to the business of the
Company and its subsidiaries, taken as a whole, except in the ordinary course of business and in a manner consistent with past
practice, except for the expiration of intellectual property; |
| · | declare, set aside, make or pay any dividend or other distribution, payable in cash, shares, property
or otherwise, with respect to any of its shares (other than (i) pursuant to the Company’s previously announced dividend policy,
and (ii) dividends or other distributions from any subsidiary of the Company to the Company or to another Company’s subsidiary
consistent with past practice); |
| · | reclassify, combine, split, subdivide or redeem, or purchase or otherwise acquire, directly or
indirectly, any of its shares, or any options, warrants, convertible securities or other rights exchangeable into or convertible
or exercisable for any of its shares, except pursuant to (i) the Company’s previously announced share repurchase policy;
or (ii) the exercise or settlement of Company Share Awards, employee severance, retention, termination, change of control and other
contractual rights in existence on the date hereof on the terms in effect on the date of the merger agreement; |
| · | effect or commence any liquidation, dissolution, scheme of arrangement, merger, consolidation,
amalgamation, restructuring, reorganization or similar transaction involving the Company or any of its subsidiaries (other than
the merger or any merger, restructuring or consolidation among wholly-owned subsidiaries of the Company) or create any new subsidiaries; |
| · | (i) acquire (including by merger, consolidation, scheme of arrangement, amalgamation or acquisition
of stock or assets or any other business combination) or make any capital contribution or investment in any corporation, partnership,
other business organization or any division thereof or acquire any significant amount of assets (other than the acquisition, sale
or other disposition of assets in the ordinary course of business consistent with past practice or pursuant to the contracts in
existence on the date of the merger agreement and on the terms in effect on the date of the merger agreement); (ii) incur, assume,
alter, amend or modify any indebtedness in excess of $5,000,000 individually or $10,000,000 in the aggregate, or guarantee such
indebtedness, or issue any debt securities or make any loans or advances in excess of $10,000,000 individually or $50,000,000 in
the aggregate; or (iii) authorize, or make any commitment with respect to, any single capital expenditure which is in excess of
$10,000,000 or capital expenditures which are, in the aggregate, in excess of $50,000,000 for the Company and its subsidiaries
taken as a whole; |
| · | except as otherwise required by law or pursuant to any contract in existence as of the date of
the merger agreement or the terms of a company benefit plan or as otherwise contemplated by the merger agreement, (i) enter into
any new employment or compensatory agreements (including the renewal of any such agreements), or terminate any such agreements,
with any director or executive officer of the Company or any of its subsidiaries (other than the hiring or termination of executive
officer with aggregate annual compensation of less than $200,000), (ii) grant or provide any severance or termination payments
or benefits to any director or executive officer of the Company or any of its subsidiaries outside the ordinary course of business,
(iii) materially increase the compensation, bonus or pension, welfare, severance or other benefits of, pay any bonus to, or make
any new equity awards to any director or executive officer of the Company or any of its subsidiaries, (iv) establish, adopt, materially
amend or terminate any company benefit plan or amend the terms of any outstanding Company Share Award, (v) take any action to accelerate
the vesting or payment, or fund or in any other way secure the payment, of compensation or benefits under the company benefit plan,
(vi) materially change any actuarial or other assumptions used to calculate funding obligations with respect to any company benefit
plan or materially change the manner in which contributions to such plans are made or the basis on which such contributions are
determined, except as may be required by U.S. generally accepted accounting principles, or (vii) forgive any loans to directors
or executive officers of the Company or any of its subsidiaries; |
| · | issue or grant any new Company Share Award to any person under any Company Benefit Plan; |
| · | make any material changes with respect to any credit practice, method of financial accounting,
or financial accounting policies or procedures, including changes affecting the reported consolidated assets, liabilities or results
of operations of the Company or any of its subsidiaries, except as required by changes in U.S. generally accepted accounting principles
or as a result of a change in law; |
| · | pay, discharge or satisfy any material claim, liability or obligation (absolute, accrued, asserted
or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction of liabilities or obligations as they
become due in the ordinary course of business and consistent with past practice; |
| · | enter into, materially amend, modify or consent to the termination (other than extension at the
end of a term in the ordinary course of business) of any material contract (or any contract that would be a material contract if
such contract had been entered into prior to the date hereof), or waive the Company’s or any of its subsidiaries’ material
rights thereunder; |
| · | terminate or cancel, let lapse, or amend or modify in any material respect, other than renewals
in the ordinary course of business, any material insurance policies maintained by it which is not promptly replaced by a comparable
amount of insurance coverage; |
| · | settle any litigation, suit, claim, action, proceeding or investigation; |
| · | (i) abandon or dedicate to the public any item of Company owned intellectual property, or (ii)
with respect to any Company owned intellectual property registered with or applied to governmental authorities and to the extent
required by applicable laws to maintain the validity of such Company owned intellectual property, (A) fail to make any applicable
filings with governmental authorities when finally due, or (B) fail to pay all required fees and taxes to governmental authorities
when finally due; in each case, except for expiration of intellectual property; |
| · | fail to make in a timely manner any filings or registrations with the SEC required under the Securities
Act or the Exchange Act or the rules and regulations promulgated thereunder; |
| · | engage in the conduct of any new line of business material to the Company and its subsidiaries,
taken as a whole; |
| · | make or change any material tax election, materially amend any tax return (except as required by
applicable law), enter into any material closing agreement with respect to taxes, surrender any right to claim a material refund
of taxes, settle or finally resolve any material controversy with respect to taxes or materially change any method of tax accounting;
or |
| · | publicly announce an intention, enter into any formal agreement or otherwise make a legal commitment,
to do any of the foregoing. |
No Solicitation
The Company has agreed
that, neither it nor any of its subsidiaries nor any of its directors or officers will, and that it will instruct the Company representatives
not to, directly or indirectly:
| · | solicit, initiate or knowingly encourage (including by way of furnishing nonpublic information
with respect to the Company or any of its subsidiaries), or knowingly facilitate, any inquiries or the making of any proposal or
offer (including any proposal or offer to its shareholders) that constitutes, or could reasonably be expected to lead to, any Competing
Transaction; |
| · | enter into, maintain or continue discussions or negotiations with the intention of encouraging
a proposal with respect to a Competing Transaction, or provide any nonpublic information with respect to the Company or any of
its subsidiaries to, any person in furtherance of or to obtain a proposal or offer for a Competing Transaction; |
| · | agree to, approve, endorse or recommend any Competing Transaction or enter into any letter of intent
or contract or commitment contemplating or otherwise relating to any Competing Transaction; or |
| · | authorize or permit any of the Company or any of its subsidiaries, or any Company representative
retained by or acting directly or indirectly under the direction of the Company or any of its subsidiaries, to do any of the foregoing. |
The Company shall
not release any third party from, or waive any provision of, any confidentiality or standstill agreement to which it is a party
in respect of a Competing Transaction. The Company has agreed that it shall notify Parent as promptly as practicable (and in any
event within 48 hours after the Company attains knowledge of any written proposal or offer) of any written proposal or offer regarding
a Competing Transaction, specifying the identity of the party making such proposal or offer, and providing copies of such written
proposal or offer, and whether the Company has any intention to provide confidential information to such person. Immediately upon
the execution and delivery of the merger agreement, the Company shall cease and cause to be terminated all existing discussions
or negotiations with any Person (as defined in the merger agreement) conducted heretofore with respect to any possible Competing
Transaction.
A “Competing
Transaction” means any of the following (other than the transactions contemplated by the merger): (i) any merger, consolidation,
share exchange, business combination, scheme of arrangement, amalgamation, recapitalization, liquidation, dissolution or other
similar transaction which would result in a third party acquiring assets, individually or in the aggregate, constituting 15% or
more of the consolidated assets of the Company or to which 15% or more of the total revenue, operating income or EBITDA of the
Company are attributable; (ii) any sale, lease, exchange, transfer or other disposition of assets or businesses that constitute
or represent 15% or more of the total revenue, operating income, EBITDA or assets of the Company and its subsidiaries, taken as
a whole; (iii) any sale, exchange, transfer or other disposition of 15% or more of any class of equity securities of the Company;
or (iv) any general offer, tender offer or exchange offer that, if consummated, would result in any third party beneficially owning
15% or more of any class of equity securities of the Company.
Notwithstanding the
foregoing, prior to receiving the required shareholder authorization and approval for the merger agreement, the board of directors
may directly or indirectly through the Company representatives (x) contact any person that has made a proposal or offer regarding
a Competing Transaction in order to clarify and understand the terms and conditions thereof in order to assess whether such offer
or proposal is reasonably expected to lead to a Superior Proposal, and (y) furnish information to, and enter into discussions with,
a person who has made an unsolicited, written, bona fide proposal or offer regarding a Competing Transaction, in the case of this
clause (y), if the special committee has (i) determined, in its good faith judgment (after consultation with its financial advisor
and outside legal counsel), that such proposal or offer constitutes or is likely to result in a Superior Proposal, (ii) determined,
in its good faith judgment (upon advice by outside legal counsel), that, in light of such Superior Proposal, failure to furnish
such information or enter into discussions would reasonably be expected to be inconsistent with its fiduciary obligations under
applicable law, and (iii) obtained from such person an executed confidentiality agreement satisfying the requirements of the merger
agreement; provided that the Company shall concurrently make available to Parent any material information concerning the Company
and its subsidiaries that is provided to any such person and that was not previously made available to Parent or its representatives.
A “Superior
Proposal” means a written, bona fide offer made by a third party for a Competing Transaction (with all percentages included
in the definition of Competing Transaction above increased to 50%) on terms (including conditions to consummation of the contemplated
transaction) that the board of directors of the Company determines, in its good faith judgment upon the recommendation of the special
committee (after consultation with its financial advisor and outside legal counsel and taking into consideration such factors as
the special committee considers appropriate), to be more favorable to the Company’s shareholders from a financial point of
view (other than holders of Excluded Shares) than the merger and accordingly to be in the best interests of the Company and its
shareholders (other than holders of Excluded Shares).
No Change of Recommendation
Except for situations
provided in the merger agreement, the board of directors of the Company will recommend that the Company’s shareholders approve
the merger agreement and the plan of merger.
Under the terms
of the merger agreement, neither the board of directors nor any committee thereof shall:
| · | (A) withhold, withdraw, qualify or modify, in a manner adverse to Parent or Merger Sub, or propose
to withhold, withdraw, qualify or modify, in a manner adverse to Parent or Merger Sub, its recommendation, (B) fail to include
the recommendation in this proxy statement, (C) approve or recommend, or publicly propose to approve or recommend to the shareholders
of the Company, a Competing Transaction or (D) if a tender offer or exchange offer for 15% or more of the outstanding shares of
the Company that constitutes a Competing Transaction is commenced, fail to recommend against acceptance of such tender offer or
exchange offer by the shareholders of the Company (including, for these purposes, by disclosing that it is taking no position with
respect to the acceptance of such tender offer or exchange offer by its shareholders, which shall constitute a failure to recommend
against acceptance of such tender offer or exchange offer, provided that a customary “stop, look and listen” communication
by the board of directors pursuant to Rule 14d−9(f) of the Exchange Act or a statement that the board of directors has received
and is currently evaluating such Competing Transaction shall not be prohibited or be deemed to be a change in the company recommendation),
within 10 business days after commencement, or |
| · | cause or permit the Company or any of its subsidiaries to enter into any letter of intent, memorandum
of understanding, agreement in principle, merger agreement, acquisition agreement or any other similar document or contract with
respect to any Competing Transaction (other than a confidentiality agreement that satisfies the requirements of the merger agreement). |
Notwithstanding
the foregoing, if the board of directors determines, in its good faith judgment upon the recommendation of the special committee,
prior to the time of the shareholders’ meeting and upon advice by outside legal counsel, that failure to make a change in
its recommendation would reasonably be expected to be inconsistent with its fiduciary obligations under applicable law, the board
of directors may, effect a change in its recommendation and/or terminate the merger agreement in accordance with the terms of the
merger agreement, provided that:
| · | the Company has complied with the requirements of the merger agreement with respect to any proposal
or offer; and |
| · | if the board of directors effects a change in the Company recommendation and/or terminates the
merger agreement in response to a Superior Proposal, then the Company shall (x) provide at least five business days’ written
notice to Parent, (y) make available its financial and legal advisors to negotiate with Parent in good faith (to the extent Parent
desires to negotiate) to make adjustments in the terms and conditions of the merger agreement so that such third party proposal
or offer would cease to constitute a Superior Proposal, and (z) permit Parent to make a presentation to the board of directors
and the special committee regarding the merger agreement and any adjustments with respect thereto (to the extent Parent desires
to make such a presentation); |
Indemnification;
Directors’ and Officers’ Insurance
Pursuant to the
merger agreement, Parent and Merger Sub have agreed that:
| · | the memorandum and articles of association of the surviving company will contain provisions no
less favorable with respect to exculpation, advancement of expenses and indemnification than are set forth in the memorandum and
articles of association of the Company, which provisions will not be repealed, amended or otherwise modified for a period of six
years from the effective time of the merger in any manner except as required by law; |
| · | the surviving company shall maintain in effect for six years from the effective time of the merger,
the current directors’ and officers’ liability insurance policies maintained by the Company with respect to matters
occurring prior to the effective time of the merger, including acts or omissions occurring in connection with the merger agreement
and the consummation of the transactions contemplated thereby; provided, however, that the surviving company may substitute therefor
policies of at least the same coverage containing terms and conditions that are no less favorable, and provided, further, that
in no event shall the surviving company be required to expend more than an amount per year equal to 300% of current annual premiums
paid by the Company for such insurance. In addition, the Company may and, at Parent’s request, the Company shall, purchase
a six year “tail” prepaid policy prior to the effective time on terms and conditions no less advantageous than the
directors’ and officers’ liability insurance maintained by the Company; and |
| · | from and after the effective time of the merger, the surviving company shall comply with all of
the Company’s obligations, and shall cause its subsidiaries to comply with their respective obligations to indemnify and
hold harmless (including any obligations to advance funds for expenses) (i) the present and former officers and directors thereof
against any and all costs or expenses and damages, arising out of, relating to or in connection with (A) the fact that such person
is or was a director, officer or employee of the Company or such subsidiary, or (B) any acts or omissions occurring or alleged
to have occurred prior to or at the effective time of the merger, to the extent provided under the Company’s or such subsidiaries’
respective organizational and governing documents or agreements in effect on the date of the merger agreement and to the fullest
extent permitted by the Cayman Islands Companies Law or any other applicable law, including the approval of the merger agreement,
the plan of merger and the transactions contemplated thereunder, and (ii) such Persons (as defined in the merger agreement) against
any and all damages arising out of acts or omissions in such Persons’ as defined in the merger agreement) official capacity
as an officer, director or other fiduciary in the Company or any of its subsidiaries if such service was at the request or for
the benefit of the Company or any of its subsidiaries. |
Financing
Parent has delivered
to the Company true, correct and complete copies of (a) an executed debt commitment letter dated December 17, 2015 (as may be amended,
restated, replaced, supplemented, modified and substituted in accordance with the merger agreement) pursuant to which the Commitment
Party has agreed to provide the debt financing in the aggregate amount set forth in such Debt Commitment Letter and the proceeds
of which will be used to finance the consummation of the Transactions, including the Merger, (b) the Rollover Agreement and (c)
a fee letter in connection with the financing.
As of the date of the
merger agreement, (a) the debt financing document and the Rollover Agreement, in the form so delivered, are in full force and effect
and are the legal, valid and binding obligations of Parent and Merger Sub (as applicable and subject to the Bankruptcy and Equity
Exception) and, to the knowledge of Parent, of the other parties thereto (subject to the Bankruptcy and Equity Exception), specifically
enforceable in accordance with the terms and conditions thereof, (b) neither the debt financing document nor the Rollover Agreement
has been amended or modified and to the knowledge of Parent, no such amendment or modification is contemplated, (c) the respective
commitments contained in the debt financing document have not been withdrawn, terminated or rescinded in any respect and to the
knowledge of Parent, no such withdrawal, termination or rescission is contemplated and (d) no event has occurred that (with or
without notice, lapse of time, or both) would constitute a material breach or default under the debt financing document or the
Rollover Agreement by Parent or Merger Sub and, to the knowledge of Parent, by the other parties thereto. Parent and Merger Sub
have fully paid any and all commitment fees or other fees that have been incurred and are due and payable in connection with the
debt financing document prior to or in connection with the execution of the merger agreement.
Parent and Merger Sub
will use their 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 for the merger on the terms and conditions described in the debt financing document in a timely manner,
including to (a) maintain in effect the debt financing document, (b) satisfy on a timely basis all conditions in the debt financing
document that are within its control (other than any condition where the failure to be so satisfied is a direct result of the Company’s
failure to comply with its obligations under the merger agreement), (c) consummate the debt financing and (d) fully enforce the
parties’ obligations (and the rights of Parent and Merger Sub) under the debt financing document in the event that all conditions
applicable to Parent and Merger Sub contained in the debt financing document have been satisfied.
If Parent or Merger
Sub becomes aware that any portion of the debt financing for the merger has become unavailable on the terms and conditions contemplated
in the debt financing document, (a) Parent and Merger Sub will promptly notify the Company, and (b) Parent and Merger Sub will
use their reasonable best efforts to arrange and obtain alternative financing from alternative sources in an amount sufficient,
when added to the portion of the debt financing that is available, to consummate the transactions contemplated under the merger
agreement with terms and conditions that are not less favorable to Parent and Merger Sub (as determined in the reasonable discretion
of Parent and Merger Sub) than the terms and conditions set forth in the debt financing document as promptly as practicable following
the occurrence of such event (the “Alternative Financing”).
Neither Parent nor
Merger Sub may amend, alter or waive, or agree to amend, alter or waive any term of the debt financing document, without the prior
written consent of the board of directors of the Company, to (a) reduce the aggregate amount of the debt financing such that the
aggregate funds that would be available to Parent or Merger Sub would not be sufficient to complete the transactions contemplated
hereunder on the Closing Date (as defined in the Debt Commitment Letter) or (b) impose new or additional conditions to the debt
financing or otherwise amend or modify the debt financing in a manner that would reasonably be expected to (i) prevent or materially
delay the ability of Parent or Merger Sub to consummate the merger and the other transactions contemplated under the merger agreement,
(ii) adversely impact in any material respect the ability of Parent or Merger Sub to enforce its rights against the other parties
to the debt financing document or (iii) prevent or materially delay the ability of the Company to satisfy its obligation under
the merger agreement to provide cooperation in connection with the debt financing.
Parent will give
the Company prompt notice (and in any event within 2 business days) upon becoming aware of (i) the expiration or termination of
any debt financing document, (ii) any breach of material provisions of the debt financing document, or (iii) any refusal by the
parties to the debt financing document to provide full financing.
Shareholders’
Meeting
The Company will,
promptly after the SEC confirms that it has no further comments on the Schedule 13E-3 and this proxy statement, (i) establish a
record date for determining shareholders of the Company entitled to vote at the Shareholders’ Meeting (as defined below),
(ii) with the assistance of Parent and Merger Sub, prepare, mail or cause to be mailed this proxy statement to the holders of Shares
(and concurrently furnish this proxy statement under Form 6-K to the SEC), including Shares represented by ADSs, as of the record
date established for the shareholders’ meeting (the “Shareholders’ Meeting”),
for the purpose of voting upon the authorization and approval of the merger agreement, the plan of merger and the transactions,
and (iii) instruct or otherwise cause the depositary to (A) fix the record date established by the Company for the Shareholders’
Meeting as the record date for determining the holders of ADSs who shall be entitled to give instructions for the exercise of the
voting rights pertaining to the Shares represented by ADSs (the “Record ADS Holders”),
(B) provide all proxy solicitation materials to all Record ADS Holders, and (C) vote all shares represented by ADSs in accordance
with the instructions of such corresponding Record ADS Holders. Without the prior written consent of Parent, authorization and
approval of the merger agreement, the plan of merger and the transactions are the only matters (other than procedural matters)
that will be proposed to be voted upon by the shareholders of the Company at the Shareholders’ Meeting.
Subject to non-solicitation
clauses under the merger agreement, the board of directors will recommend to holders of the shares that they authorize and approve
the merger agreement, the plan of merger and the transactions contemplated thereby, and shall include such recommendation in this
proxy statement. Unless there is a change in the Company recommendation, the Company will use its reasonable best efforts to solicit
from its shareholders proxies in relation to the Shareholders’ Meeting.
Conditions to the
Merger
The obligations
of the Company, Parent and Merger Sub to consummate the merger are subject to the satisfaction or waiver of the following mutual
conditions:
| · | the merger agreement, the plan of merger and the transactions contemplated thereby being authorized
and approved by way of special resolution (as defined in the CICL) by the Company’s shareholders at the extraordinary general
meeting; |
| · | no governmental authority of competent jurisdiction having enacted, issued, promulgated, enforced
or entered any law or award, writ, injunction, determination, rule, regulation, judgment, decree or executive order that has or
would have the effect of making the merger illegal or otherwise prohibit the consummation of the merger; and |
| · | all requisite regulatory approvals having been obtained and be in full force and effect, except
where the failure to obtain such requisite regulatory approvals would not, individually or in the aggregate prevent the consummation
of any of the transactions. |
The obligations
of Parent and Merger Sub to consummate the merger are also subject to the satisfaction, or waiver, of the following additional
conditions:
| · | certain representations and warranties of the Company in the merger agreement regarding (i) the
capitalization information of the Company, (ii) the Company’s obligations to repurchase or otherwise acquire any share capital
of the Company or its subsidiaries, (iii) the share capital of the Company’s subsidiaries, (iv) the Company’s power
and authority to enter into the merger agreement and consummate the transactions contemplated thereunder, (v) the board of directors’
determination and recommendation with respect to the merger and the vote required in connection with the merger and (vi) the special
committee’s receipt of a fairness opinion from Duff& Phelps, being true and correct in all material respects as of the
date of the merger agreement and as of the closing date of the merger; and (b) each of the other representations and warranties
of the Company set forth in the merger agreement (disregarding any limitation or qualification by materiality or Material Adverse
Effect) being true and correct in all respects as of the date of the merger agreement and as of the closing date of the merger,
as if made on such date and time, except to the extent such failures to be true and correct, would not have a Material Adverse
Effect; |
| · | the Company having performed or complied in all material respects with all agreements and covenants
required by the merger agreement to be performed or complied with by it on or prior to the closing date of the merger; |
| · | the Company having delivered to Parent a certificate, dated the closing date of the merger, signed
by a senior executive officer of the Company, certifying as to the satisfaction of the above conditions; and |
| · | since the date of the merger agreement, there not having occurred a Material Adverse Effect. |
The obligations
of the Company to consummate the merger are also subject to the satisfaction, or waiver by the Company, of the following additional
conditions:
| · | the representations and warranties of Parent and Merger Sub in the merger agreement (disregarding
any limitation or qualification by materiality or Material Adverse Effect) being true and correct in all respects as of the date
of the merger agreement and as of the closing date of the merger, as if made on and at such date and time (other than representations
and warranties that by their terms address matters only as of such a specified other time, which must be true and correct as of
such time), except where the failure of such representations and warranties to be true and correct, individually or in the aggregate,
have not, and would not prevent or materially impede or impair the ability of Parent and Merger Sub to consummate any of the transactions
contemplated under the merger agreement or the plan of merger; |
| · | each of Parent and Merger Sub having performed or complied in all material respects with all covenants
and agreements required to be performed or complied with by it under the merger agreement prior to or on the closing date of the
merger; and |
| · | Parent having delivered to the Company a certificate, dated the closing date of the merger, signed
by an executive officer of Parent, certifying as to the fulfillment of the above conditions. |
Termination of the
Merger Agreement
The merger agreement
may be terminated at any time prior to the effective time of the merger:
| · | by mutual written consent of the Company and Parent with the approval of their respective boards
of directors (or in the case of the Company, acting upon the recommendation of the special committee); |
| · | by either the Company (upon the recommendation by the special committee) or Parent, if: |
| · | the merger is not completed by the September 16, 2016 (provided that this termination right is
not available to any party if the failure of the merger to have been consummated was primarily due to such party’s breach
or failure to perform in any material respect any of its obligations under the merger agreement); |
| · | any governmental authority of competent jurisdiction having enacted, issued, promulgated, enforced
or entered any final and non-appealable law or award, writ, injunction, determination, rule, regulation, judgment, decree or executive
order or taken any other final and non-appealable action that has the effect of making consummation of the merger illegal or otherwise
prohibiting consummation of the merger (provided that this termination right is not available any party if the issuance of such
order was primarily due to such party’s breach or failure to perform in any material respect any of its obligations under
the merger agreement); or |
| · | the required vote of the Company’s shareholders is not obtained at the Shareholders’
Meeting duly convened therefor and concluded or at any adjournment or postponement thereof (provided that this termination right
is not available to a party if the failure to obtain the required vote was primarily due to such party’s breach or failure
to perform any of its obligations under the merger agreement); |
| · | by the Company (upon the recommendation of the special committee) at any time prior to the effective
time of the merger, if: |
| · | Parent or Merger Sub has breached in any material respect any of its representations, warranties,
covenants or agreements under the merger agreement, such that the corresponding condition to closing would not be satisfied by
September 16, 2016; provided that the Company will not have the right to terminate if the Company is in material breach
of any representations, warranties, agreements or covenants that would give rise to the failure of a corresponding closing condition
not being satisfied; |
| · | (a) all of the conditions to the obligations of Parent and Merger Sub to consummate the merger
have been satisfied (other than those conditions that by their nature are to be satisfied by actions taken at the closing of the
merger); (b) the Company has delivered to Parent an irrevocable written notice confirming that all of the conditions to the obligation
of the Company to consummate the merger have been satisfied (or that the Company is willing to waive any unsatisfied conditions);
and (c) Parent and Merger Sub fail to complete the closing of the merger within ten business days following the delivery of such
notice; or |
| · | prior to the receipt of the required vote of the Company’s shareholders, (a) the board of
directors (acting upon the recommendation of the Special Committee) has authorized the Company to enter into an alternative acquisition
agreement with respect to a Superior Proposal in accordance with the terms of the merger agreement and (b) the Company concurrently
with, or immediately after, the termination of the merger agreement enters into an alternative acquisition agreement with respect
to such Superior Proposal; provided that the Company will not have the right to terminate unless the Company has (A) complied
in all respects with the requirements under the merger agreement with respect to such Superior Proposal and/or alternative acquisition
agreement (other than immaterial non-compliance that does not adversely affect Parent or Merger Sub) and (B) complied in all respects
with the merger agreement regarding termination fee and pays the company termination fee prior to or concurrently with such termination; |
| · | by Parent, at any time prior to the effective time of the merger, if: |
| · | the Company has breached in any material respect any of its representations, warranties, covenants
or agreements under the merger agreement, such that the corresponding condition to closing would not be satisfied by September
16, 2016; provided that Parent will not have the right to terminate if either Parent or Merger Sub is in material breach
of any representations, warranties, agreements or covenants that would give rise to the failure of a corresponding closing condition
not being satisfied; or |
| · | the board of directors of the Company has effected a change in the Company’s recommendation
to the Company shareholders, has publicly recommended to the shareholders of the Company a Competing Transaction or has entered
into an alternative acquisition agreement with respect to any Competing Transaction; provided that Parent will not have
the right to terminate if Parent’s or Merger Sub’s failure to fulfill any of its obligations under the merger agreement
has been a cause of or resulted in such change in recommendation. |
Termination Fee
The Company is
required to pay Parent a termination fee of US$1,538,250 in the event the merger agreement is terminated:
| · | by Parent if the Company has breached in any material respect any of its representations, warranties,
covenants or agreements under the merger agreement, such that the corresponding condition to closing would not be satisfied by
September 16, 2016, or the board of directors of the Company has effected a change in the Company’s recommendation to the
Company shareholders, has publicly recommended to the shareholders of the Company a Competing Transaction or has entered into an
alternative acquisition agreement with respect to any Competing Transaction; |
| · | by the Company or Parent if the merger is not completed by the September 16, 2016 or the required
vote of the Company’s shareholders is not obtained at the extraordinary general meeting or any adjournment or postponement
thereof, if and only if, (A) at or prior to the time of such termination, a bona fide proposal or offer with respect to a Competing
Transaction shall have been submitted, proposed or publicly announced or publicly made known to the Company, and not withdrawn,
and (B) following the occurrence of an event described in the preceding clause (A), the merger agreement is terminated by the Company
or Parent pursuant to Section 8.02(a) or Section 8.02(c), and (C) within twelve (12) months after such termination the Company
or any of its subsidiaries consummates a Competing Transaction with a third party (provided that all references to “15%”
in the definition of “Competing Transaction” shall be deemed to be references to “50%” for this purpose); |
| · | by the Company if prior to the receipt of the required vote of the Company’s shareholders,
(a) the board of directors (acting upon the recommendation of the Special Committee) has authorized the Company to enter into an
alternative acquisition agreement with respect to a Superior Proposal in accordance with the terms of the merger agreement and
(b) the Company concurrently with, or immediately after, the termination of the merger agreement enters into an alternative acquisition
agreement with respect to such Superior Proposal. |
Parent is required
to pay the Company a termination fee of US$4,000,000 in the event the merger agreement is terminated:
| · | by the Company if Parent or Merger Sub has breached in any material respect any of its representations,
warranties, covenants or agreements under the merger agreement, such that the corresponding condition to closing would not be satisfied
by September 16, 2016; or |
| · | by the Company if (a) all of the conditions to the obligations of Parent and Merger Sub to consummate
the merger have been satisfied (other than those conditions that by their nature are to be satisfied by actions taken at the closing
of the merger); (b) the Company has delivered to Parent an irrevocable written notice confirming that all of the conditions to
the obligation of the Company to consummate the merger have been satisfied (or that the Company is willing to waive any unsatisfied
conditions); and (c) Parent and Merger Sub fail to complete the closing of the merger within ten business days following the delivery
of such notice. |
In the event that
the Company or Parent fails to pay the applicable termination fee or any expenses when due and in accordance with the requirements
of the merger agreement, the Company or Parent, as the case may be, is required to reimburse the other party for reasonable costs
and expenses actually incurred or accrued by the other party (including fees and expenses of counsel) in connection with collection
of such unpaid termination fee or any expenses.
Except as described
above or as otherwise provided in the merger agreement, whether or not the merger or any other transaction contemplated thereunder
is consummated, all costs and expenses incurred in connection with the merger agreement and the transactions contemplated thereunder
will be paid by the party incurring such costs and expenses.
Remedies and Limitations
on Liability
The parties to
the merger agreement may be entitled to specific performance of the terms of the merger agreement, including an injunction or injunctions
to prevent breaches of the merger agreement, in addition to any other remedy at law or equity.
The Company’s
right to obtain an injunction or injunctions, or other appropriate form of specific performance or equitable relief to enforce
Parent’s obligation to consummate the merger and the transactions contemplated under the merger agreement is subject to (A)
all conditions to the closing of the merger (other than those conditions that by their nature are to be satisfied by actions taken
at the Closing) have been satisfied or waived, (B) the Company has irrevocably confirmed by notice to Parent that all conditions
to the obligations of the Company have been satisfied or that it is willing to waive any unsatisfied conditions, and (C) the debt
financing for the merger has been funded or the Lenders have irrevocably confirmed in writing that all conditions to funding have
been satisfied and the debt financing will be funded in accordance with the terms of the debt financing document or the Alternative
Financing will be funded in accordance with its terms at the effective time.
The maximum aggregate
liabilities of Parent and Merger Sub, on the one hand, and the Company, on the other hand, for monetary damages in connection with
the merger agreement or any of the transactions contemplated thereunder are limited to a termination fee of US$4,000,000 and US$1,538,250,
respectively, reimbursement of certain expenses in the event the applicable termination fee is not paid when due and in accordance
with the requirements of the merger agreement and, with respect to Company’s remedy only, the guarantee of such obligations
pursuant to the Limited Guarantee. While Parent may pursue both a grant of specific performance and monetary damages, under no
circumstances shall Parent be permitted or entitled to receive both such grant of specific performance and payment of the $1,538,250
company termination fee.
Amendment; Waiver
of Conditions
The merger agreement
may be amended by the parties to the merger agreement by action taken by or on behalf of their respective board of directors at
any time prior to the effective time of the merger; provided that, after the approval of the merger agreement and the transactions
contemplated thereby by the shareholders of the Company, no amendment may be made that would reduce the amount or change the type
of consideration in exchange for which each Share will be cancelled upon consummation of the merger; provided further that
certain sections of the merger agreement may not be amended or modified in a manner that is adverse to any source of debt financing
to the merger, unless such source of debt financing executes such amendment or modification in writing.
At any time
prior to the effective time of the merger, any party to the merger agreement may (a) extend the time for the performance of any
obligation or other act of any other party to the merger agreement, (b) waive any inaccuracy in the representations and warranties
of any other party contained in the merger agreement or in any document delivered pursuant to the merger agreement and (c) waive
compliance with any agreement of any other party or any condition to its own obligations contained in the merger agreement. Any
such extension or waiver shall be valid if set forth in an instrument in writing signed by the party or parties to be bound thereby.
No failure or delay by any party in exercising any right, power or privilege under the merger agreement shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege.
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.
DISSENTERS’
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 (“Dissenters’ Rights”). This summary is not a complete statement of the law, and is qualified in its entirety
by the complete text of Section 238 of the Cayman Islands Companies Law, a copy of which is attached as Annex 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 perfect your Dissenters’ Rights. These procedures are complex and you should consult your
Cayman Islands legal counsel. If you do not fully and precisely satisfy the procedural requirements of the Cayman Islands Companies
Law, you will lose your Dissenters’ Rights.
Requirements for Exercising
Dissenters’ Rights
A dissenting registered
shareholder of the Company is entitled to payment of the fair value of its, his or her Shares upon dissenting from the Merger in
accordance with Section 238 of the Cayman Islands Companies Law.
The valid exercise
of your dissenters’ rights will preclude the exercise of any other rights by virtue of holding Shares in connection with
the Merger, other than the right to participate fully in proceedings to determine the fair value of Shares held by such persons
and to institute proceedings to obtain relief on the ground that the Merger is void or unlawful. To exercise your Dissenters’
Rights, the following procedures must be followed:
| · | You must give written notice of objection (“Notice of Objection”) to the Company prior
to the vote to authorize and approve the Merger. The Notice of Objection must include a statement that you propose to demand payment
for your Shares if the Merger is authorized by the vote at the extraordinary general meeting. |
| · | Within 20 days immediately following the date on which the vote 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. |
| · | Within 20 days immediately following the date on which the Approval Notice is given (the “Dissent
Period”), any dissenting shareholder who elects to dissent must give a written notice of its, his or her decision to dissent
(a “Notice of Dissent”) to the Company stating its, his or her name and address and the number and class of the Shares
with respect to which it, he or she dissents and demanding payment of the fair value of its, his or her Shares. A dissenting shareholder
must dissent in respect of all the Shares which it, he or she holds. |
| · | Within seven days immediately following (a) the date of expiry of the Dissent Period or (b) the
date on which the Plan of Merger is filed with the Registrar of Companies of the Cayman Islands, whichever is later, the Company,
as the surviving company, must make a written offer (a “Fair Value Offer”) to each dissenting shareholder to purchase
its, his or her Shares at a price determined by the Company to be the fair value of such Shares. |
| · | If, within 30 days immediately following the date of the Fair Value Offer, the Company and the
dissenting shareholder fail to agree on the price to be paid for the Shares owned by the dissenting shareholder, 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 their Shares held by all dissenting shareholders who have served a Notice of Dissent and who have not agreed the fair value
of their Shares with the Company, which petition by the Company must be accompanied by a verified list containing the names and
addresses of all members who have filed a Notice of Dissent and who have not agreed the fair value of their Shares with the Company. |
| · | 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 such Shares held by those shareholders together with
a fair rate of interest, if any, to be paid by the Company 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. |
All notices and petitions
must be executed by or for the registered shareholder, fully and correctly, as such shareholder’s name appears on the register
of members of the Company. If Shares are held by a fiduciary, such as by a trustee, guardian or custodian, such notices and petitions
must be executed by or for the fiduciary. If 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 executing the notice or petition, he or she is acting as agent for the registered owner. A person having a beneficial
interest in Shares registered in the name of another person, such as a broker or other nominee, must act promptly to cause the
registered holder to follow the steps summarized above and in a timely manner to exercise the Dissenters’ Rights attached
to such Shares.
You must be a registered
holder of Shares in order to exercise Dissenters’ Rights. A holder of ADSs who wishes to dissent must surrender his, her
or its ADSs to the ADS Depositary for conversion into Shares and pay the fees of the ADS Depositary to cancel his, her or its ADSs
and then become a registered holder of such Shares and comply with the procedures described above in order to exercise Dissenters’
Rights with respect to the Shares prior to the extraordinary general meeting. The ADS Depositary will not exercise Dissenters’
Rights on behalf of a holder of ADSs and any Notice of Dissent delivered to the ADS Depositary will not be effective under the
Cayman Islands Companies Law. If you wish to cancel your ADSs, please contact the ADS Depositary’s office at Citibank, N.A.
at 388 Greenwich Street (14th floor), New York, NY 10013 (Attention: Depositary Receipts Group).
If you do not satisfy
each of these requirements, you cannot exercise Dissenters’ Rights and will be bound by the terms of the Merger Agreement
and the Plan of Merger. Submitting a proxy card that does not direct how the Shares represented by that proxy are to be voted will
give the proxy discretion to vote as it determines appropriate. In addition, failure to vote your Shares, or a vote against the
proposal to authorize and approve the Merger Agreement, the Plan of Merger and the Transactions, including the Merger, will not
alone satisfy the notice requirement referred to above. You must send all notices to the Company to Country Style Cooking Restaurant
Chain Co., Ltd., 16th Floor, C1 Building, Chongqing Headquarters City District C, No.780 Jingwei Avenue, Yuzhong District, Chongqing
400020, 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 Cayman Islands Companies
Law could be more than, the same as, or less than the US$1.3075 in cash, without interest, for each Share of the Company that you
would otherwise receive as consideration pursuant to the Merger Agreement if you do not exercise Dissenters’ Rights with
respect to your Shares. In addition, in any proceedings for determination of the fair value of the Shares covered by a Notice of
Dissent, the Company and the Buyer Group intend to assert that the Per Share Merger Consideration is equal to the fair value of
each of your Shares.
The provisions of
Section 238 of the Cayman Islands Companies Law are technical and complex. If you fail to comply strictly with the procedures set
forth in Section 238, you will lose your Dissenters’ Rights. You should consult your Cayman Islands legal counsel if you
wish to exercise Dissenters’ Rights.
FINANCIAL INFORMATION
The following sets
forth certain selected historical consolidated financial information of the Company. The financial data for the years ended December 31,
2013 and 2014 has been derived from the audited financial statements filed as part of the Company’s Annual Report on Form
20-F for the year ended December 31, 2014. The financial data for the nine months ended September 30, 2014 and 2015, respectively,
is unaudited and prepared in accordance with U.S. GAAP. The information set forth below is not necessarily indicative of future
results and should be read in conjunction with “Item 5. Operating and Financial Review and Prospects’’ and the
consolidated financial statements, related notes and other financial information included in the Company’s annual report
on Form 20-F for the year ended December 31, 2014, which are incorporated into this proxy statement by reference. Please see
“Where You Can Find More Information” for a description of how to obtain a copy of such reports.
| | |
For
the Year Ended
December 31, | | |
For
the Nine Months Ended
September 30, | |
| | |
2013 | | |
2014 | | |
2014 | | |
2015 | |
| | |
RMB | | |
RMB | | |
US$ | | |
RMB | | |
RMB | | |
US$ | |
| | |
(in thousands, except for share,
per share and per ADS data) | |
Selected
Consolidated Statements
of Income: | |
| | |
| | |
| | |
| | |
| | |
| |
| Revenue —
restaurant sales | |
| 1,360,086 | | |
| 1,462,185 | | |
| 235,661 | | |
| 1,100,896 | | |
| 1,089,208 | | |
| 175,679 | |
| Costs
and expenses: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Restaurant
expenses: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Food and paper | |
| 624,356 | | |
| 659,875 | | |
| 106,353 | | |
| 497,132 | | |
| 497,843 | | |
| 80,297 | |
| Restaurant wages and related
expenses | |
| 265,711 | | |
| 310,829 | | |
| 50,097 | | |
| 230,864 | | |
| 239,858 | | |
| 38,687 | |
| Restaurant rent expense | |
| 131,327 | | |
| 146,231 | | |
| 23,568 | | |
| 109,113 | | |
| 110,285 | | |
| 17,788 | |
| Restaurant
utilities expense | |
| 80,928 | | |
| 87,263 | | |
| 14,064 | | |
| 65,969 | | |
| 65,827 | | |
| 10,617 | |
| Other
restaurant operating expenses | |
| 51,806 | | |
| 55,190 | | |
| 8,895 | | |
| 40,829 | | |
| 40,769 | | |
| 6,576 | |
| Selling, general and administrative | |
| 83,639 | | |
| 83,038 | | |
| 13,383 | | |
| 61,524 | | |
| 55,147 | | |
| 8,895 | |
| Pre-opening
expenses | |
| 9,884 | | |
| 10,326 | | |
| 1,664 | | |
| 8,787 | | |
| 3,961 | | |
| 639 | |
| Depreciation | |
| 70,008 | | |
| 78,585 | | |
| 12,666 | | |
| 58,475 | | |
| 56,033 | | |
| 9,038 | |
| Property
and equipment impairment charges | |
| 8,594 | | |
| 7,864 | | |
| 1,267 | | |
| 4,975 | | |
| 8,961 | | |
| 1,445 | |
| Goodwill impairment | |
| — | | |
| 424 | | |
| 68 | | |
| — | | |
| — | | |
| — | |
| Total operating expenses | |
| 1,326,253 | | |
| 1,439,625 | | |
| 232,025 | | |
| 1,077,668 | | |
| 1,078,684 | | |
| 173,982 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Income
from operations | |
| 33,833 | | |
| 22,560 | | |
| 3,636 | | |
| 23,228 | | |
| 10,524 | | |
| 1,697 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Interest
income | |
| 27,178 | | |
| 26,363 | | |
| 4,249 | | |
| 20,138 | | |
| 21,820 | | |
| 3,519 | |
| Foreign
exchange gain (loss) | |
| (3,543 | ) | |
| 70 | | |
| 11 | | |
| 295 | | |
| 1,173 | | |
| 189 | |
| Other income, net | |
| 893 | | |
| 4,549 | | |
| 733 | | |
| 2,642 | | |
| 851 | | |
| 137 | |
| Income before income taxes | |
| 58,361 | | |
| 53,542 | | |
| 8,629 | | |
| 46,303 | | |
| 34,368 | | |
| 5,542 | |
| Income tax benefit (expenses) | |
| (18,811 | ) | |
| (15,588 | ) | |
| (2,512 | ) | |
| 12,761 | | |
| 11,158 | | |
| 1,800 | |
| Net income | |
| 39,550 | | |
| 37,954 | | |
| 6,117 | | |
| 33,542 | | |
| 23,210 | | |
| 3,742 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net income attributable
to shareholders | |
| 39,550 | | |
| 37,954 | | |
| 6,117 | | |
| 33,542 | | |
| 23,210 | | |
| 3,742 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Basic net income per share | |
| 0.38 | | |
| 0.36 | | |
| 0.06 | | |
| 0.31 | | |
| 0.22 | | |
| 0.03 | |
| Diluted net income per share | |
| 0.37 | | |
| 0.35 | | |
| 0.06 | | |
| 0.31 | | |
| 0.21 | | |
| 0.03 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Basic weighted average ordinary
shares outstanding | |
| 104,996,276 | | |
| 106,603,255 | | |
| 106,603,255 | | |
| 106,513,162 | | |
| 107,587,057 | | |
| 107,587,057 | |
| Diluted weighted average
ordinary shares outstanding | |
| 105,979,373 | | |
| 107,961,708 | | |
| 107,961,708 | | |
| 107,880,977 | | |
| 108,287,737 | | |
| 108,289,737 | |
| | |
For
the Year Ended
December 31, | | |
For
the Nine Months Ended
September 30, | |
| | |
2013 | | |
2014 | | |
2014 | | |
2015 | |
| | |
RMB | | |
RMB | | |
US$ | | |
RMB | | |
RMB | | |
US$ | |
| | |
(in thousands, except for share,
per share and per ADS data) | |
Selected
Consolidated Statements
of Comprehensive Income (Loss): | |
| | |
| | |
| | |
| | |
| | |
| |
| Net income | |
| 39,550 | | |
| 37,954 | | |
| 6,117 | | |
| 33,542 | | |
| 23,210 | | |
| 3,742 | |
| Other
comprehensive income (loss), net of tax: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Foreign
currency translation adjustments | |
| (810 | ) | |
| 127 | | |
| 20 | | |
| 298 | | |
| 1,247 | | |
| 201 | |
| Comprehensive income | |
| 38,740 | | |
| 38,081 | | |
| 6,137 | | |
| 33,840 | | |
| 24,457 | | |
| 3,943 | |
| | |
As
of
December 31, | | |
As
of
September 30, | |
| | |
2013 | | |
2014 | | |
2014 | | |
2015 | |
| | |
RMB | | |
RMB | | |
US$ | | |
RMB | | |
RMB | | |
US$ | |
| | |
(in thousands) | |
| Selected Consolidated Balance
Sheet Data: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Cash
and cash equivalents | |
| 372,493 | | |
| 193,554 | | |
| 31,195 | | |
| 314,419 | | |
| 281,675 | | |
| 44,319 | |
| Total
current assets | |
| 673,440 | | |
| 669,281 | | |
| 107,868 | | |
| 715,408 | | |
| 742,574 | | |
| 116,837 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total assets | |
| 1,106,436 | | |
| 1,181,746 | | |
| 190,463 | | |
| 1,188,253 | | |
| 1,227,698 | | |
| 193,168 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total current liabilities | |
| 147,368 | | |
| 156,300 | | |
| 25,192 | | |
| 175,354 | | |
| 168,918 | | |
| 26,578 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total liabilities | |
| 173,979 | | |
| 187,583 | | |
| 30,234 | | |
| 204,524 | | |
| 199,639 | | |
| 31,412 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total equity | |
| 932,457 | | |
| 994,163 | | |
| 160,229 | | |
| 983,729 | | |
| 1,028,059 | | |
| 161,756 | |
| Total
liabilities and equity | |
| 1,106,436 | | |
| 1,181,746 | | |
| 190,463 | | |
| 1,188,253 | | |
| 1,227,698 | | |
| 193,168 | |
Ratio of
Earnings to Fixed Charges
| | |
For the year ended
December 31, 2013 | | |
For the year ended
December 31, 2014 | | |
For the nine months ended
September 30, 2015 | |
| | |
| | | |
| | | |
| | |
| Ratio
of Earnings to Fixed Charges | |
| N/A
| | |
| N/A | | |
| N/A | |
There is no fixed charges
incurred during the year ended December 31, 2013 and 2014, and the nine months period ended September 30, 2015.
Net Book Value per Share
of Our Shares
The net book value
per Share as of September 30, 2015 was approximately $1.5 based on the number of issued and outstanding Shares as of September 30,
2015 (excluding Shares and Shares represented by ADSs reserved by the Company for settlement upon exercise of Company Share Awards
under the Share Incentive Plan).
TRANSACTIONS IN THE
SHARES AND ADSs
Purchases by the Buyer
Group
Other than purchases
made by Sky Success Venture Holdings Limited (as described below), no member of the Buyer Group nor any of their respective
affiliates has purchased any Shares or ADSs at any time within the past two years.
| Transaction Period | |
Total Number of
the Shares
Purchased | | |
Range of Prices
Paid per Share (US$) | | |
Average
Purchase Price
Paid per Share (US$) | |
| 2013 | |
| | | |
| | | |
| | |
| First quarter | |
| 153,588 | | |
| 6.57 – 7.91 | | |
| 7.00 | |
| Second quarter | |
| 534,574 | | |
| 5.96 – 6.69 | | |
| 6.36 | |
| Third quarter | |
| 36,916 | | |
| 6.14 – 7.21 | | |
| 6.56 | |
| Fourth quarter | |
| 119,387 | | |
| 9.42 – 10.62 | | |
| 9.85 | |
| 2014 | |
| | | |
| | | |
| | |
| First quarter | |
| 13,422 | | |
| 10.03 – 10.47 | | |
| 10.19 | |
| Second quarter | |
| 107,378 | | |
| 0.95 – 9.98 | | |
| 7.73 | |
| Third quarter | |
| 24,227 | | |
| 7.14 – 9.07 | | |
| 7.23 | |
| Fourth quarter | |
| – | | |
| – | | |
| – | |
Purchases by the Company
No share or ADSs has
been repurchased by the Company at any time within the past two years.
Prior Public Offerings
Our ADSs, each representing
four of our Shares, have been listed on the NYSE since September 27, 2010 under the symbol “CCSC.” We completed our
initial public offering of ADSs on September 27, 2010. We have not made any underwritten public offering of our securities since
then.
Transactions in Prior
60 Days
Other than the merger
agreement and agreements entered into in connection therewith including the Rollover Agreement, the Voting Agreement, the Limited
Guarantee and the Debt Commitment Letter, and as disclosed above, there have been no transactions in the Company’s Shares
or ADSs during the past 60 days by us, any of our officers or directors (including the Rollover Shareholders), Parent, Merger Sub,
or any person with respect to which disclosure is provided in Annex D or any associate or majority-owned subsidiary of the foregoing,
except for the selling of a certain number of Ordinary Shares for the payment of applicable PRC taxes connected to the vesting
of Mr. Peng, Ms. Li and Mr. Zhang's Restricted Shares in the Company in December 2015.
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF THE COMPANY
The following table
sets forth information with respect to the beneficial ownership of our Shares as of the date of this proxy statement by:
| • | each of our directors and executive officers; |
| • | our directors and executive officers as a group; and |
| • | each person known to us to own more than 5.0% of our
ordinary shares. |
| | |
Ordinary Shares
Beneficially Owned† | |
| | |
Number | | |
% | |
| Directors and Executive Officers: | |
| | | |
| | |
| Hong Li(1) | |
| 44,674,364 | | |
| 41.37 | |
| Xingqiang Zhang(1) | |
| 44,674,364 | | |
| 41.37 | |
| Zhiyun Peng(2) | |
| 17,415,400 | | |
| 16.13 | |
| Tim T. Gong(3) | |
| 12,161,000 | | |
| 11.26 | |
| Steve Yue Ji(4) | |
| 12,156,000 | | |
| 11.26 | |
| Jin Li | |
| | * | |
| | * |
| Li-Lan Cheng | |
| | * | |
| | * |
| Eric Haibing Wu | |
| | * | |
| | * |
| Cheng Xiao(5) | |
| | * | |
| | * |
| All directors and executive officers as a group(8) | |
| 86,738,628 | | |
| 80.31 | |
| | |
| | | |
| | |
| Principal Shareholders: | |
| | | |
| | |
| Regal Fair Holdings Limited(1) | |
| 44,522,148 | | |
| 41.22 | |
| Sky Success Venture Holdings Limited(2) | |
| 17,384,544 | | |
| 16.10 | |
| SIG China Investments One, Ltd.
(6) | |
| 12,000,000 | | |
| 11.11 | |
| Sequoia Capital China II, L.P. and affiliated funds(7) | |
| 12,000,000 | | |
| 11.11 | |
| * |
Aggregate beneficial ownership of our company by such director or officer is less than 1% of our total outstanding ordinary shares. |
| † |
Unless otherwise specified, the number of ordinary shares beneficially owned by each listed person or group in the chart above includes the ordinary shares such person or group has the right to acquire within 60 days of the date of this proxy statement. Percentage of beneficial ownership of each listed person or group is based on (i) 108,000,000 ordinary shares issued and outstanding as of the date of this proxy statement (excluding Shares and Shares represented by ADSs reserved by the Company for settlement upon exercise of Company Share Awards under any Share Incentive Plan) and (ii) the number of ordinary shares such person or group has the right to acquire within 60 days of the date of this proxy statement. |
| (1) |
Consists of (i) 44,522,148 ordinary shares held by Regal Fair Holdings
Limited, a British Virgin Islands company, (ii) 78,504 ordinary shares represented by ADSs held by Ms. Li and (iii)
73,712 ordinary shares represented by ADSs held by Mr. Zhang. Regal Fair Holdings Limited is jointly owned by
Ms. Li and Mr. Zhang and Ms. Li and Mr. Zhang share voting and dispositive power over the shares held by
Regal Fair Holdings Limited. The registered address of Regal Fair Holdings Limited is P.O. Box 916, Woodbourne Hall,
Road Town, Tortola, British Virgin Islands. Ms. Li and Mr. Zhang are husband and wife. The business address for
Ms. Li and Mr. Zhang is c/o Country Style Cooking Restaurant Chain Co., Ltd., 16th Floor, C1 Building, Chongqing
Headquarters City, District C, No.780 Jingwei Avenue, Yuzhong District, Chongqing, the People’s Republic of China
|
| (2) |
Consists of (i) 17,384,544 ordinary shares, represented by ADSs, 11,106,692
of which are represented by ADSs, held by Sky Success Venture Holdings Limited and (ii) 30,856 ordinary shares, represented
by ADSs, held by Mr. Peng. Mr. Peng is a director of Sky Success Venture Holdings Limited. Sky Success Venture
Holdings Limited is jointly owned by Jinjing Hong, Zhiyong Hong, Lipeng Deng and Zhiyun Peng. The business address for
Mr. Peng and Sky Success Venture Holdings Limited is 13F, No. 609 Yunling East Road, Putuo District, Shanghai, the
People’s Republic of China. |
| (3) |
Consists of (i) 12,000,000 ordinary shares held by SIG China Investments One, Ltd. and (ii) 98,000 ordinary shares, represented by ADSs, and 63,000 vested restricted shares held by Mr. Gong. Mr. Gong disclaims beneficial ownership with respect to the shares owned by SIG China Investments One, Ltd. except to the extent of his pecuniary interest therein. For more information regarding SIG China Investments One Ltd., see note (6) below. The business address for Mr. Gong is c/o SIG Asia Investment, LLLP, 101 California Street Suite 3250, San Francisco, CA 94111, U.S.A. |
| (4) |
Consists of (i) 10,059,600 ordinary shares held by Sequoia Capital China II, L.P., (ii) 250,800 ordinary shares held by Sequoia Capital China Partners Fund II, L.P., (iii) 1,689,600 ordinary shares held by Sequoia Capital China Principals Fund II, L.P. and (iv) 156,000 vested restricted shares held by Mr. Ji. Mr. Ji is a managing director of Sequoia Capital China. Mr. Ji disclaims beneficial ownership with respect to the shares held by Sequoia Capital China II, L.P., Sequoia Capital China Partners Fund II, L.P. and Sequoia Capital China Principals Fund II. L.P. except to the extent of his pecuniary interest therein. For more information about Sequoia China II, L.P. and affiliated funds, see note (7) below. The business address of Mr. Ji is Room 4603, Plaza 66, Tower 2, 1366 Nanjing West Road, Shanghai, China. |
| (5) |
The business address for Mr. Xiao is c/o Country Style Cooking Restaurant Chain Co., Ltd., 16th Floor, C1 Building, Chongqing Headquarters City,
District C, No.780 Jingwei Avenue, Yuzhong District, Chongqing, the People’s Republic of China |
| (6) |
Consists of 12,000,000 ordinary shares held by SIG China Investments One, Ltd. SIG Asia Investment, LLLP, the authorized agent of SIG China Investments One, Ltd., has the discretionary authority to vote and dispose of the shares held by SIG China Investments One, Ltd. Mr. Arthur Dantchik, in his capacity as president of SIG Asia Investment, LLLP, may also be deemed as having investment discretion and voting power over the shares held by SIG China Investments One, Ltd. Mr. Dantchik disclaims beneficial ownership with respect to the shares owned by SIG China Investments One, Ltd. except to the extent of his pecuniary interest therein. The business address for SIG China Investments One Ltd. is c/o SIG Asia Investment, LLLP, 101 California Street Suite 3250, San Francisco, CA 94111, U.S.A. |
| |
|
| (7) |
Consists of (i) 10,059,600 ordinary shares held by Sequoia Capital
China II, L.P., (ii) 250,800 ordinary shares held by Sequoia Capital China Partners Fund II, L.P. and
(iii) 1,689,600 ordinary shares held by Sequoia Capital China Principals Fund II, L.P. Sequoia
Capital China II, L.P., Sequoia Capital China Partners Fund II, L.P. and Sequoia Capital China Principals Fund II. L.P. are
managed by Sequoia Capital China Advisors Limited, a company incorporated in the Cayman Islands. The general partner of
Sequoia Capital China II, L.P., Sequoia Capital China Partners Fund II, L.P. and Sequoia Capital China Principals Fund II.
L.P. is Sequoia Capital China Management II, L.P., whose general partner is SC China Holding Limited, a company incorporated
in the Cayman Islands. SC China Holding Limited is wholly owned by SNP China Enterprises Limited, a company wholly owned by
Neil Nanpeng Shen. Mr. Shen disclaims beneficial ownership with respect to the shares held by Sequoia Capital China II,
L.P., Sequoia Capital China Partners Fund II, L.P. and Sequoia Capital China Principals Fund II. L.P. except to the extent of
his pecuniary interest therein. The business address of Sequoia Capital China II, L.P., Sequoia Capital China Partners Fund
II, L.P. and Sequoia Capital China Principals Fund II. L.P. is 36/F, Two Pacific Place, 88 Queensway, Hong
Kong. |
| |
|
| (8) |
Consists of (i) 86,202,012 ordinary shares held directly
or indirectly by all directors and executive officers, and (ii) Company Share Awards for the right to purchase or exchange for
536,616 ordinary shares held directly or indirectly by all directors and executive officers.
|
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 will be held in 2016 in accordance with the Corporate Government and
Listing Rules of the New York Stock Exchange.
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; |
| · | debt financing may not be funded at the effective time of the merger 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; |
| · | 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, including the SEC’s investigation into whether
there have been any past violations of the federal securities laws related to the Company; and |
| · | other
risks detailed in our filings with the SEC, including the information set forth under
the caption “Item 3D. 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 97 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, 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 the “Investor Relations” section of our website
at http://csc100.investorroom.com/. Our website address is provided as an inactive textual reference only. The information
provided on our website is not part of this proxy statement, and therefore is not incorporated by reference.
Because the merger
is a going private transaction, the Company and the Buyer Group have filed with the SEC a transaction statement on Schedule 13E-3
with respect to the merger. The Schedule 13E-3, including any amendments and exhibits filed or incorporated by reference therein,
is available for inspection as set forth above. The Schedule 13E-3 will be amended to report promptly any material changes in the
information set forth in the most recent Schedule 13E-3 filed with the SEC.
Statements contained
in this proxy statement regarding the contents of any contract or other document, are not necessarily complete and each such statement
is qualified in its entirety by reference to that contract or other document attached as an exhibit hereto. The SEC allows us to
“incorporate by reference” information into this proxy statement. This means that we can disclose important information
by referring to another document filed separately with the SEC. The information incorporated by reference is considered to be part
of this proxy statement. This proxy statement and the information that we later file with the SEC may update and supersede the
information incorporated by reference. Similarly, the information that we later file with the SEC may update and supersede the
information in this proxy statement. The Company’s Annual Report on Form 20-F for the year ended December 31, 2014 filed
with the SEC on April 20, 2015 is incorporated herein by reference. The Company’s reports on Form 6-K furnished to the SEC
on November 20, 2015 and December 18, 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
you 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 Country Style Cooking Restaurant Chain Co., Ltd. at the address and phone numbers provided
in this proxy statement. The opinion and presentation materials prepared by Duff & Phelps for the special committee referenced
in this proxy statement 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 or his, her or its representative who has been so designated
in writing.
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
among
COUNTRY STYLE COOKING RESTAURANT CHAIN HOLDING
LIMITED,
COUNTRY STYLE COOKING RESTAURANT CHAIN MERGER
COMPANY LIMITED
and
COUNTRY STYLE COOKING RESTAURANT CHAIN CO.,
LTD.
Dated December 17, 2015
TABLE OF CONTENTS
| |
|
Page |
| |
|
|
| Article I |
| |
| THE MERGER |
| |
|
|
| Section 1.01 |
The Merger |
A-6 |
| Section 1.02 |
Closing; Closing Date |
A-6 |
| Section 1.03 |
Effective Time |
A-6 |
| Section 1.04 |
Effects of the Merger |
A-7 |
| Section 1.05 |
Memorandum and Articles of Association of Surviving Company |
A-7 |
| Section 1.06 |
Directors and Officers |
A-7 |
| |
|
|
| Article II |
| |
| EFFECT ON ISSUED SECURITIES; EXCHANGE OF CERTIFICATES |
| |
|
|
| Section 2.01 |
Effect of Merger on Issued Securities |
A-7 |
| Section 2.02 |
Share Incentive Plan and Outstanding Share Awards |
A-8 |
| Section 2.03 |
Dissenting Shares |
A-9 |
| Section 2.04 |
Exchange of Share Certificates, etc. |
A-10 |
| Section 2.05 |
No Transfers |
A-13 |
| Section 2.06 |
Termination of Deposit Agreement |
A-13 |
| Section 2.07 |
Agreement of Fair Value |
A-13 |
| |
|
|
| Article III |
| |
| REPRESENTATIONS AND WARRANTIES OF THE COMPANY |
| |
|
|
| Section 3.01 |
Organization and Qualification |
A-13 |
| Section 3.02 |
Memorandum and Articles of Association |
A-14 |
| Section 3.03 |
Capitalization |
A-14 |
| Section 3.04 |
Authority Relative to This Agreement; Fairness |
A-15 |
| Section 3.05 |
No Conflict; Required Filings and Consents |
A-16 |
| Section 3.06 |
Permits; Compliance with Laws |
A-16 |
| Section 3.07 |
SEC Filings; Financial Statements |
A-18 |
| Section 3.08 |
Proxy Statement |
A-19 |
| Section 3.09 |
Absence of Certain Changes or Events |
A-19 |
| Section 3.10 |
Absence of Litigation |
A-20 |
| Section 3.11 |
Employment Matters |
A-20 |
| Section 3.12 |
Labor Matters |
A-21 |
| Section 3.13 |
Real Property; Title to Assets |
A-21 |
| Section 3.14 |
Intellectual Property |
A-21 |
| Section 3.15 |
Taxes |
A-23 |
| Section 3.16 |
No Secured Creditors; Solvency |
A-23 |
| Section 3.17 |
Material Contracts |
A-23 |
| Section 3.18 |
Environmental Matters |
A-24 |
| Section 3.19 |
Insurance |
A-24 |
| Section 3.20 |
Anti-Takeover Provisions |
A-24 |
| Section 3.21 |
Brokers |
A-24 |
| Section 3.22 |
No Additional Representations |
A-25 |
| |
|
|
| Article IV |
| |
| REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB |
| |
|
|
| Section 4.01 |
Corporate Organization |
A-25 |
| Section 4.02 |
Capitalization of Parent and Merger Sub; No Prior Activities |
A-25 |
| Section 4.03 |
Authority Relative to This Agreement |
A-26 |
| Section 4.04 |
No Conflict; Required Filings and Consents |
A-26 |
| Section 4.05 |
Financing |
A-27 |
| Section 4.06 |
Limited Guarantees |
A-28 |
| Section 4.07 |
Brokers |
A-28 |
| Section 4.08 |
Proxy Statement |
A-28 |
| Section 4.09 |
Absence of Litigation |
A-28 |
| Section 4.10 |
No Secured Creditors; Solvency |
A-29 |
| Section 4.11 |
Parent Group Contracts |
A-29 |
| Section 4.12 |
Ownership of Shares |
A-29 |
| Section 4.13 |
No Other Company Representations or Warranties |
A-29 |
| Section 4.14 |
Non Reliance on Company Estimates, Projections, Forecasts, Forward Looking Statements and Business Plans |
A-30 |
| Section 4.15 |
No Additional Representations |
A-30 |
| |
|
|
| Article V |
| |
| CONDUCT OF BUSINESS PENDING THE MERGER |
| |
|
|
| Section 5.01 |
Conduct of Business by the Company Pending the Merger |
A-30 |
| |
|
|
| Article VI |
| |
| ADDITIONAL AGREEMENTS |
| |
|
|
| Section 6.01 |
Proxy Statement and Schedule 13E-3 |
A-34 |
| Section 6.02 |
Company Shareholders’ Meeting |
A-34 |
| Section 6.03 |
Access to Information |
A-35 |
| Section 6.04 |
No Solicitation of Transactions |
A-35 |
| Section 6.05 |
Directors’ and Officers’ Indemnification and Insurance |
A-38 |
| Section 6.06 |
Notification of Certain Matters |
A-40 |
| Section 6.07 |
Further Action; Reasonable Best Efforts |
A-40 |
| Section 6.08 |
Obligations of Merger Sub |
A-41 |
| Section 6.09 |
Participation in Litigation |
A-41 |
| Section 6.10 |
Resignations |
A-41 |
| Section 6.11 |
Public Announcements |
A-41 |
| Section 6.12 |
Stock Exchange Delisting |
A-42 |
| Section 6.13 |
Takeover Statutes |
A-42 |
| Section 6.14 |
Cooperation in Financing |
A-42 |
| Section 6.15 |
Knowledge of Parent/ Merger Sub/ Rollover Shareholders |
A-45 |
| Section 6.16 |
Amendments to Parent Group Contracts |
A-45 |
| Article VII |
| |
| CONDITIONS TO THE MERGER |
| |
|
|
| Section 7.01 |
Conditions to the Obligations of Each Party |
A-46 |
| Section 7.02 |
Conditions to the Obligations of Parent and Merger Sub |
A-46 |
| Section 7.03 |
Conditions to the Obligations of the Company |
A-47 |
| Section 7.04 |
Frustration of Closing Conditions |
A-47 |
| |
|
|
| Article VIII |
| |
| TERMINATION, AMENDMENT AND WAIVER |
| |
|
|
| Section 8.01 |
Termination by Mutual Consent |
A-48 |
| Section 8.02 |
Termination by Either the Company or Parent |
A-48 |
| Section 8.03 |
Termination by the Company |
A-48 |
| Section 8.04 |
Termination by Parent |
A-49 |
| Section 8.05 |
Effect of Termination |
A-49 |
| Section 8.06 |
Fees Following Termination |
A-50 |
| |
|
|
| Article IX |
| |
| GENERAL PROVISIONS |
| |
|
|
| Section 9.01 |
Non-Survival of Representations, Warranties and Agreements |
A-53 |
| Section 9.02 |
Notices |
A-53 |
| Section 9.03 |
Certain Definitions |
A-54 |
| Section 9.04 |
Severability |
A-63 |
| Section 9.05 |
Interpretation |
A-63 |
| Section 9.06 |
Entire Agreement; Assignment |
A-63 |
| Section 9.07 |
Parties in Interest |
A-64 |
| Section 9.08 |
Specific Performance |
A-64 |
| Section 9.09 |
Governing Law and Jurisdiction |
A-64 |
| Section 9.10 |
Amendment |
A-65 |
| Section 9.11 |
Waiver |
A-65 |
| Section 9.12 |
Counterparts |
A-65 |
| Section 9.13 |
Waiver of Jury Trial |
A-66 |
| |
|
|
| Annex A PLAN OF MERGER |
A-68 |
| Annex B EXCLUDED SHARES |
A-71 |
AGREEMENT AND PLAN OF
MERGER, dated December 17, 2015 (this “Agreement”), among Country Style
Cooking Restaurant Chain Holding Limited, an exempted company with limited liability incorporated under the laws of the Cayman
Islands (“Parent”), Country Style Cooking Restaurant Chain Merger Company
Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands and a wholly owned subsidiary
of Parent (“Merger Sub”), and Country Style Cooking Restaurant Chain
Co., Ltd., an exempted company with limited liability incorporated under the laws of the Cayman Islands (the “Company”).
WHEREAS, upon the terms
and subject to the conditions of this Agreement and in accordance with the Companies Law (2013 Revision, as consolidated, revised
and amended) of the Cayman Islands (the “CICL”), Parent and the Company
will enter into a statutory merger pursuant to which Merger Sub will merge with and into the Company (the “Merger”),
with the Company surviving the Merger and becoming a wholly owned subsidiary of Parent as a result of the Merger;
WHEREAS, the board of
directors of the Company (the “Company Board”), acting upon the unanimous
recommendation of the Special Committee of the Company Board (the “Special Committee”),
has (i) determined that it is in the best interests of the Company and its shareholders (other than the holders of the Excluded
Shares), 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, the Plan of Merger and the consummation of the transactions contemplated hereby and
thereby, including the Merger (collectively, the “Transactions”), and
(iii) resolved to recommend the authorization and approval of this Agreement, the Plan of Merger and the Transactions by the shareholders
of the Company at the Shareholders’ Meeting (as defined below);
WHEREAS, as an inducement
to the Company’s willingness to enter into this Agreement, concurrently with the execution and delivery of this Agreement,
each of Regal Fair Holdings Limited, Sky Success Venture Holdings Limited and SIG China Investments One, Ltd. (each a “Guarantor”
and collectively, the “Guarantors”) has executed and delivered to the
Company a limited guarantee, dated the date hereof, in favor of the Company pursuant to which such Guarantor is guaranteeing certain
obligations of Parent and Merger Sub under this Agreement (each a “Limited Guarantee”
and collectively, the “Limited Guarantees”);
WHEREAS, each of the
boards of directors of Parent and Merger Sub has (i) approved the execution, delivery and performance by Parent and Merger Sub,
respectively, of this Agreement, the Plan of Merger and the consummation of the Transactions, and (ii) declared it advisable for
Parent and Merger Sub, respectively, to enter into this Agreement and the Plan of Merger, and Parent (as the sole member of Merger
Sub) has authorized and approved the Plan of Merger by special resolution; and
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, (a) the Rollover Shareholders each have executed and delivered to Parent a rollover agreement (the “Rollover
Agreement”), dated the date hereof, providing that, among other things and subject to the terms and conditions
set forth therein, the Rollover Shareholders each agrees to receive no consideration for the cancellation of certain Shares (as
defined below) held by each of them as set forth therein, and will subscribe for or otherwise receive, or cause such Rollover Shareholder’s
affiliates to subscribe for or otherwise receive, newly issued shares of Parent, at or immediately prior to the Effective Time,
and (b) each of the Rollover Shareholders have executed and delivered to Parent a voting agreement (the “Voting
Agreement”), dated the date hereof, providing that, among other things and subject to the terms and conditions
set forth therein, such shareholders will vote their respective Shares in favor of the authorization and approval of this Agreement,
the Plan of Merger and the Transactions.
NOW, THEREFORE, in consideration
of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Parent, Merger
Sub and the Company hereby agree as follows:
Article
I
THE MERGER
Section 1.01 The
Merger.
Upon the terms and subject
to the conditions set forth in this Agreement, and in accordance with the CICL, at the Effective Time, Merger Sub shall be merged
with and into the Company. As a result of the Merger, 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 and Merger Sub shall be
struck off the register of companies in the Cayman Islands and thereupon be dissolved, such that the separate corporate existence
of Merger Sub shall cease.
Section 1.02 Closing;
Closing Date.
Unless otherwise mutually
agreed in writing between the Company, Parent and Merger Sub, the closing for the Merger (the “Closing”)
shall take place at 10:00 a.m. (Hong Kong time) at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 42/F Edinburgh
Tower, The Landmark, 15 Queen’s Road Central, Hong Kong on the third Business Day following the day on which the last to
be satisfied or, if permissible, waived of the conditions set forth in Article VII (other than those conditions that by their nature
are to be satisfied at the Closing, but subject to the satisfaction or, if applicable, waiver of those conditions) shall be satisfied
or, if permissible, waived in accordance with this Agreement (such date when the Closing actually occurs being the “Closing
Date”).
Section 1.03 Effective
Time.
Subject to the provisions
of this Agreement, as early as practical on the Closing Date, Merger Sub and the Company shall execute a plan of merger (the “Plan
of Merger”) substantially in the form set out in Annex A, and the parties shall file the Plan of Merger and other
documents required under the CICL to effect the Merger with the Registrar of Companies of the Cayman Islands as provided by Section
233 of the CICL. The Merger shall become effective upon the date when the Plan of Merger is registered by the Registrar of Companies
of the Cayman Islands, or as specified in the Plan of Merger in accordance with the CICL (the “Effective
Time”).
Section 1.04 Effects
of the Merger.
The Merger shall have
the effect specified in the CICL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time,
the Surviving Company shall succeed to and assume all the rights, property of every description, including choses in action, and
the business, undertaking, goodwill, benefits, immunities and privileges, mortgages, charges or security interests and all contracts,
obligations, claims, debts and liabilities of the Company and Merger Sub in accordance with the CICL.
Section 1.05 Memorandum
and Articles of Association of Surviving Company.
At the Effective Time,
in accordance with the Plan of Merger and without any further action on the part of the parties hereto, the Surviving Company will
adopt the memorandum and articles of association of Merger Sub, as in effect immediately prior to the Effective Time, as the memorandum
and articles of association of the Surviving Company until thereafter amended as provided by law or by such memorandum and articles
of association; provided, however, that, at the Effective Time (i) all references to the name “Country
Style Cooking Restaurant Chain Merger Company Limited” in the memorandum and articles of association of the Surviving Company
shall be amended to “Country Style Cooking Restaurant Chain Co., Ltd.” and (ii) references therein to the authorized
share capital of the Surviving Company shall be amended as necessary to correctly describe the authorized share capital of the
Surviving Company as approved in the Plan of Merger and (iii) the memorandum and articles of association will contain provisions
no less favorable with respect to exculpation, advancement of expenses and indemnification than are set forth in the memorandum
and articles of association of the Company as in effect on the date hereof, as required by Section 6.05(a) hereof.
Section 1.06 Directors
and Officers.
The parties hereto shall
take all actions necessary so that (a) the directors of Merger Sub immediately prior to the Effective Time shall be the directors
of the Surviving Company upon the Effective Time, and (b) the officers of the Company immediately prior to the Effective Time shall
be the officers of the Surviving Company upon the Effective Time, in each case, except as otherwise determined by Parent prior
to the Effective Time, and until their respective successors are duly elected or appointed and qualified or until the earlier of
their death, resignation or removal in accordance with the memorandum and articles of association of the Surviving Company.
Article
II
EFFECT
ON ISSUED SECURITIES; EXCHANGE OF CERTIFICATES
Section 2.01 Effect
of Merger on Issued Securities.
At the Effective Time,
by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company or the holders of any shares or other
securities of the Company:
(a) each
ordinary share, par value US$0.001 per share, of the Company (a “Share”
or, collectively, the “Shares”) issued and outstanding immediately
prior to the Effective Time (other than the Excluded Shares and the Dissenting Shares) shall be cancelled in consideration and
exchange for the right to receive US$1.3075 in cash per Share without interest (the “Per
Share Merger Consideration”) payable in the manner provided in Section 2.04;
(b) each
American Depositary Share, representing four Shares (an “ADS” or, collectively,
the “ADSs”), issued and outstanding immediately prior to the Effective
Time (other than ADSs representing the Excluded Shares) shall be cancelled in consideration for the right of the Depositary, as
the registered holder of such Shares to receive US$5.23 in cash per ADS without interest (the “Per
ADS Merger Consideration”), which shall be distributed by the Depositary to the holders of such ADSs pursuant
to the terms and conditions set forth in this Agreement and the Deposit Agreement, and in the event of any conflict between this
Agreement and the Deposit Agreement, this Agreement shall prevail;
(c) all
of the Shares issued and outstanding immediately prior to the Effective Time, including Shares represented by ADSs (other than
the Excluded Shares and the Dissenting Shares), shall cease to exist and shall thereafter represent only the right to receive the
Per Share Merger Consideration or Per ADS Merger Consideration without interest, and the register of members of the Company shall
be amended accordingly;
(d) each
of the Excluded Shares and ADSs representing such Excluded Shares issued and outstanding immediately prior to the Effective Time
shall cease to be outstanding, shall be cancelled and shall cease to exist without payment of any consideration or distribution
therefor;
(e) each
of the Dissenting Shares issued and outstanding immediately prior to the Effective Time shall be cancelled and cease to exist in
accordance with Section 2.03;
(f) each
ordinary share, par value US$1.00 each, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted
into and become one validly issued, fully paid and non-assessable ordinary share, par value US$1.00 each, of the Surviving Company.
Such conversion shall be effected by means of the cancellation of such ordinary shares of Merger Sub, in exchange for the right
to receive one such ordinary share of the Surviving Company. Such ordinary shares of the Surviving Company shall constitute the
only issued and outstanding share capital of the Surviving Company; and
(g) the
Surviving Company shall amend its register of members to reflect the transactions set forth in this Section 2.01.
Section 2.02 Share
Incentive Plan and Outstanding Share Awards.
(a) At
the Effective Time, the Company shall (i) terminate the Share Incentive Plan, and any relevant award agreements applicable to the
Share Incentive Plan, and (ii) cancel each Company Share Award (other than the Company Share Awards owned by the Rollover Shareholders,
which shall be treated in accordance with subsection (d) of this Section 2.02) that is outstanding and unexercised, whether or
not vested or exercisable.
(b) Each
former holder of a Company Share Award (other than the Rollover Shareholders), whether vested or unvested, that is cancelled at
the Effective Time shall, in exchange thereof, (i) with respect to holder of a Company Option, be paid by the Surviving Company
or one of its Subsidiaries, as soon as practicable after the Effective Time (without interest), a cash amount equal to the product
of (1) the excess, if any, of the Per Share Merger Consideration over the Exercise Price of such Company Option multiplied by (2)
the number of Shares underlying such Company Option; provided that if the Exercise Price of any such Company Option is equal
to or greater than the Per Share Merger Consideration, such Company Option shall be cancelled without any payment therefor; and
(ii) with respect to holder of a Company Restricted Share, be paid a cash amount equal to the Per Share Merger Consideration.
(c) At
or prior to the Effective Time, the Company, the Company Board or the compensation committee of the Company Board, as applicable,
shall pass any resolutions that are reasonably necessary to effectuate the provisions of this Section 2.02. Promptly following
the date hereof, the Company shall deliver written notice to each holder of Company Share Awards informing such holder of the effect
of the Merger on their Company Share Awards.
(d) The
Company Share Awards that are owned by the Rollover Shareholders shall be treated in accordance with the Rollover Agreement.
Section 2.03 Dissenting
Shares.
(a) Notwithstanding
any provision of this Agreement to the contrary and to the extent available under the CICL, Shares that are issued and outstanding
immediately prior to the Effective Time and that are held by shareholders who shall have validly exercised and not effectively
withdrawn or lost their rights to dissent from the Merger (the “Dissenter Right”)
in accordance with Section 238 of the CICL (collectively, the “Dissenting Shares”;
holders of Dissenting Shares being referred to as “Dissenting Shareholders”)
shall at the Effective Time be cancelled and cease to exist, and the Dissenting Shareholders shall not be entitled to receive the
Per Share Merger Consideration and shall instead be entitled to receive only the payment of the fair value of such Dissenting Shares
held by them determined in accordance with the provisions of Section 238 of the CICL, except that all Shares held by Dissenting
Shareholders who shall have withdrawn or lost their Dissenter Rights in respect of such Shares under Section 238 of the CICL shall
thereupon (i) not be deemed to be Dissenting Shares and (ii) be and be deemed to have been cancelled and cease to exist as of the
Effective Time, and converted into, and to have become exchanged for the right of the holder thereof to receive the Per Share Merger
Consideration, without any interest thereon, in the manner provided in Section 2.04.
(b) The
Company shall give Parent (i) prompt notice of any notices of objection or notice of dissent to the Merger or demands for appraisal
under Section 238 of the CICL received by the Company, attempted withdrawals of such objections, dissents or demands, and any other
instruments served pursuant to the CICL and received by the Company relating to its shareholders’ Dissenter Rights and (ii) the
opportunity to direct all negotiations and proceedings with respect to demands for appraisal under the CICL. The Company shall
not, except with the prior written consent of Parent, make any payment with respect to any exercise of Dissenter Rights or any
demands for appraisal or offer to settle any such Dissenter Rights or demands or approve any withdrawal of any such Dissenter Rights
or demands.
(c) In
the event that any written notices of dissents or objection to the Merger are served by any shareholders of the Company pursuant
to section 238(2) of the CICL, the Company shall serve written notice of the authorization of the Merger on such shareholders pursuant
to section 238(4) of the CICL within two (2) days of the approval and authorization of the Merger by shareholders of the Company
at the Shareholders’ Meeting (as defined below).
Section 2.04 Exchange
of Share Certificates, etc.
(a) Paying
Agent. Prior to the Effective Time, Parent shall appoint a paying agent that is reasonably satisfactory to the Company (such
consent not to be unreasonably withheld, conditioned or delayed) to act as paying agent (the “Paying
Agent”) for all payments required to be made pursuant to Sections 2.01(a), 2.01(b) and 2.02 (collectively, the
“Merger Consideration”) and, in connection therewith, shall enter into
an agreement with the Paying Agent in a form reasonably acceptable to the Company. At or prior to the Effective Time, Parent shall
deposit, or cause to be deposited, with the Paying Agent, for the benefit of the holders of Shares (other than Excluded Shares),
ADSs (other than the holders of ADSs representing Excluded Shares) and Company Share Awards (other than the Rollover Shareholders),
cash in an amount sufficient to pay the Merger Consideration (such cash being hereinafter referred to as the “Exchange
Fund”).
(b) Exchange
Procedures. As promptly as practicable after the Effective Time, the Surviving Company shall cause the Paying Agent to mail
(or in the case of the Depositary, deliver) or otherwise disseminate to each Person who was, at the Effective Time, a registered
holder of Shares entitled to receive the Per Share Merger Consideration pursuant to Section 2.01(a)(other than in respect of Excluded
Shares or Dissenting Shares): (i) a letter of transmittal (which shall be in customary form for a company incorporated in the Cayman
Islands listed on the New York Stock Exchange reasonably acceptable to Parent and the Company, and shall specify the manner in
which the delivery of the Exchange Fund to registered holders of Shares (other than the Excluded Shares and the Dissenting Shares)
shall be effected and contain such other provisions as Parent and the Company may mutually agree); and (ii) instructions for
use in effecting the surrender of any issued share certificates representing Shares (the “Share
Certificates”) (or the delivery of affidavits and indemnities of loss in lieu of the Share Certificates as provided
in Section 2.04(c)) or non-certificated Shares represented by book entry (“Uncertificated
Shares”) and/or such other documents as may be required in exchange for the Per Share Merger Consideration. Each
registered holder of Shares (in the case of Shares represented by a Share Certificate, subject to the surrender of, if applicable,
a Share Certificate (or deliver of an affidavit and indemnity of loss in lieu of the Share Certificate as provided in Section 2.04(c)),
or in the case of Uncertificated Shares, subject to the surrender of such other documents as may be required pursuant to such instructions
to the Paying Agent in accordance with the terms of such letter of transmittal, duly executed in accordance with the instructions
thereto) shall be entitled to receive in exchange for the cancellation of such
Shares a check, in the amount equal to (x) the number of Shares (other than Excluded Shares and Dissenting Shares) held by such
registered holder multiplied by (y) the Per Share Merger Consideration. Any Share Certificate so surrendered shall forthwith be
marked as cancelled. Prior to the Effective Time, Parent and the Company shall establish procedures with the Paying Agent and the
Depositary to ensure that (A) the Paying Agent will transmit to the Depositary as promptly as reasonably practicable following
the Effective Time an amount in cash in immediately available funds equal to the product of (x) the number of ADSs issued and outstanding
immediately prior to the Effective Time (other than ADSs representing the Excluded Shares) multiplied by (y) the Per ADS Merger
Consideration, and (B) the Depositary will distribute the Per ADS Merger Consideration to holders of ADSs with respect to each
ADS held by them (other than ADSs representing the Excluded Shares) upon surrender by them of each ADS. The Surviving Company will
pay any applicable fees, charges and expenses of the Depositary and government charges (other than withholding Taxes if any) due
to or incurred by the Depositary in connection with distribution of the Per ADS Merger Consideration to ADS holders for each ADS
(other than the ADS cancellation fee, which shall be payable in accordance with the Deposit Agreement). No interest shall be paid
or will accrue on any amount payable in respect of the Shares or ADSs pursuant to the provisions of this Article II. In the event
of a transfer of ownership of Shares that is not registered in the register of members of the Company, the Per Share Merger Consideration
in respect of each such Share may be paid to such transferee upon delivery of evidence to the satisfaction of Parent (or any agent
designated by Parent) of such transferee’s entitlement to the relevant Share and evidence that any applicable share transfer
taxes have been paid or are not applicable.
(c) Lost
Certificates. If any Share Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact
by the Person claiming such Share Certificate to be lost, stolen or destroyed and, if required by the Surviving Company or the
Paying Agent, the posting by such Person of a bond, in such reasonable amount as the Surviving Company or the Paying Agent may
direct, as indemnity against any claim that may be made against it with respect to such Share Certificate, the Paying Agent will
pay in respect of the Shares represented by such lost, stolen or destroyed Share Certificate (but excluding any Excluded Shares
or Dissenting Shares) an amount equal to the Per Share Merger Consideration multiplied by the number of Shares represented by such
Share Certificate to which the holder thereof is entitled pursuant to Section 2.01(a).
(d) Untraceable
Shareholders. Remittances for the Per Share Merger Consideration or the Per ADS Merger Consideration, as the case may be, shall
not be sent to holders of Shares or ADSs who are untraceable unless and until, except as provided below, they notify the Paying
Agent or the Depositary, as applicable, of their current contact details prior to the Effective Time. A holder of Shares or ADSs
will be deemed to be untraceable if (i) such Person has no registered address in the register of members (or branch register)
maintained by the Company or the Depositary, as applicable, or (ii) on the last two consecutive occasions on which a dividend
has been paid by the Company a check payable to such Person either (x) has been sent to such Person and has been returned
undelivered or has not been cashed, or (y) has not been sent to such Person because on an earlier occasion a check for a dividend
so payable has been returned undelivered, and in any such case no valid claim in respect thereof has been communicated in writing
to the Company or the Depositary, as applicable, or (iii) notice of the Shareholders’ Meeting convened to vote on the
Merger has been sent to such Person and has been returned undelivered. Dissenting Shareholders and holders of Shares or ADSs who
are untraceable and who subsequently wish to receive any monies otherwise payable in respect of the Merger within applicable time
limits or limitation periods will be advised to contact the Surviving Company.
(e) Adjustments
to Merger Consideration. The Per Share Merger Consideration and the Per ADS Merger Consideration shall be adjusted to reflect
appropriately the effect of any share split, reverse share split, share dividend (including any dividend or distribution of securities
convertible into Shares), extraordinary cash dividends, reorganization, recapitalization, reclassification, combination, exchange
of shares, change or readjustment in the ratio of Shares represented by each ADS or other like change with respect to Shares occurring
on or after the date hereof and prior to the Effective Time.
(f) Investment
of Exchange Fund. The Exchange Fund, pending its disbursement to the holders of Shares and ADSs, shall be invested by the Paying
Agent as directed by Parent or, after the Effective Time, the Surviving Company in (i) short-term direct obligations of the United
States of America, (ii) short-term obligations for which the full faith and credit of the United States of America is pledged to
provide for the payment of principal and interest, (iii) short-term commercial paper rated the highest quality by either Moody’s
Investors Service, Inc. or Standard and Poor’s Ratings Services, or (iv) certificates of deposit, bank repurchase agreements
or banker’s acceptances of commercial banks with capital exceeding US$1 billion. Earnings from investments shall be the sole
and exclusive property of the Surviving Company.
(g) Termination
of Exchange Fund. Any portion of the Exchange Fund (including any income or proceeds thereof or of any investment thereof)
that remains undistributed to the holders of Shares or ADSs for six (6) months after the Effective Time shall be delivered to the
Surviving Company upon demand, and any holders of Shares (other than the Excluded Shares) and ADSs (other than ADSs representing
Excluded Shares) that were issued and outstanding immediately prior to the Effective Time who have not theretofore complied with
this Article II shall thereafter look only to the Surviving Company for the cash to which they are entitled pursuant to Sections
2.01(a), 2.01(b) and 2.02. Any portion of the Exchange Fund remaining unclaimed by holders of Shares and ADSs as of a date which
is immediately prior to such time as such amounts would otherwise escheat to or become property of any Governmental Authority shall,
to the extent permitted by applicable Law, become the property of the Surviving Company free and clear of any claims or interest
of any Person previously entitled thereto.
(h) No
Liability. None of the Paying Agent, the Rollover Shareholders, Parent, the Surviving Company or the Depositary shall be liable
to any former holder of Shares for any such Shares (including Shares represented by ADSs) or dividends or distributions with respect
thereto or Company Share Awards, for any amount delivered to a public official pursuant to any abandoned property, escheat or similar
Law.
(i) Withholding
Rights. Each of Parent, the Surviving Company, Merger Sub, the Paying Agent and the Depositary (and any other Person that has
a withholding obligation pursuant to this Agreement), without double counting, shall only be entitled to deduct and withhold from
the Merger Consideration otherwise payable pursuant to this Agreement to any holder of Shares, ADSs or Company Share Awards such
amounts as it is required to deduct and withhold with respect to the making of such payment under any provision of U.S. federal,
state, local or foreign Tax Law and that are (i) compensatory-related withholding with respect to holders of Company Share Awards
on account of their Company Share Awards or (ii) U.S. federal backup withholding tax to a payee that does not provide the required
documentation with respect to its U.S. tax status. In the event that Parent, the Surviving Company, Merger Sub, the Paying Agent,
or the Depositary (or any other Person that has a withholding obligation pursuant to this Agreement) determines that any such permitted
deduction or withholding is required to be made from any amounts payable pursuant to this Agreement, such Person shall promptly
inform the Special Committee and the other parties hereto of such determination and provide them with a reasonably detailed explanation
of such determination and the parties hereto shall consult with each other in good faith regarding such determination. To the extent
that such permitted amounts are so withheld by Parent, the Surviving Company, Merger Sub, the Paying Agent or the Depositary (or
such other Person), as the case may be, and paid over to the appropriate Governmental Authority, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of the Shares, ADSs or Company Share Awards in respect
of which such deduction and withholding was made by Parent, Merger Sub, the Surviving Company, the Paying Agent or the Depositary
(or such other Person), as the case may be.
Section 2.05 No
Transfers. From and after the Effective Time, (a) no transfers of Shares shall be effected in the register of members of the
Company, and (b) the holders of Shares (including Shares represented by ADSs) issued and outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such Shares, except as otherwise provided in this Agreement or by
Law, provided that nothing herein shall prevent the Surviving Company from maintaining a register of members in respect of its
ordinary shares after the Effective Time and from registering transfers of such ordinary shares after the Effective Time. On or
after the Effective Time, any Share Certificates presented to the Paying Agent, Parent or Surviving Company for transfer or any
other reason shall be canceled (except for the Excluded Shares and the Dissenting Shares) in exchange for the right to receive
the cash consideration to which the holders thereof are entitled pursuant to Section 2.01(a).
Section 2.06 Termination
of Deposit Agreement. As soon as reasonably practicable after the Effective Time, the Surviving Company shall provide notice
to Citibank, N.A. (the “Depositary”) to terminate the deposit agreement,
dated September 27, 2010 between the Company, the Depositary and all holders from time to time of American depositary receipts
issued thereunder, the form of which was filed with the SEC on September 14, 2010 (the “Deposit
Agreement”) in accordance with its terms.
Section 2.07 Agreement
of Fair Value. Parent, Merger Sub and the Company respectively agree that the Per Share Merger Consideration represents the
fair value of each of the Shares for the purposes of Section 238(8) of the CICL.
Article
III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except (a) as set forth
in the Company SEC Reports (other than in any “risk factor” disclosure or any other forward-looking statements or other
disclosures included in such Company SEC Reports to the extent that such statements or disclosures are generally cautionary, predicative
or forward-looking in nature, in each case other than any specific factual information contained therein), or (b) for any matters
with respect to which Ms. Hong Li, Mr. Xingqiang Zhang and/or Mr. Zhiyan Peng has actual knowledge of, or after reasonable inquiry
and investigation would reasonably be expected to have actual knowledge of, as an inducement to Parent and Merger Sub to enter
into this Agreement, the Company hereby represents and warrants to Parent and Merger Sub that:
Section 3.01 Organization
and Qualification.
(a) Each
of the Group Companies is duly organized, validly existing and, where such concept is recognized, in good standing under the laws
of the jurisdiction of its organization and has the requisite corporate or similar power and authority to own, lease, operate and
use its properties and assets and to carry on its business as it is now being conducted, except to the extent the failure of such
Group Company to be so organized, existing or in good standing has not had a Material Adverse Effect. Each Group Company is duly
qualified or licensed to do business, in each jurisdiction where the character of the properties and assets owned, leased, operated
or used by it or the nature of its business makes such qualification or licensing necessary, except for such failures to be so
qualified or licensed that have not had a Material Adverse Effect.
(b) Except
for the Company and its Subsidiaries disclosed in the Company SEC reports, as of the date hereof, (i) there are no other corporations,
partnerships, joint ventures, associations, or entities through which any Group Company conducts business in each case that is
material to the Group Company, taken as a whole or other entities in which a Group Company owns, of record or beneficially, any
direct or indirect equity or other interest or right (contingent or otherwise) to acquire the same, and (ii) no Group Company is
a participant in (nor is any part of their businesses conducted through) any joint venture, partnership, or similar arrangement,
in each case that is material to the business of the Company or the Group Company.
Section 3.02 Memorandum
and Articles of Association.
The memorandum and articles
of association or equivalent organizational documents, each as amended as of the date hereof, of the Company and each of its Subsidiaries
are in full force and effect. Neither the Company nor any of its Subsidiaries is in violation of any of the provisions of its memorandum
and articles of association or equivalent organizational documents in any material respect.
Section 3.03 Capitalization.
(a) The
authorized share capital of the Company is US$2,000,000 divided into 1,000,000,000 Shares and 1,000,000,000 shares of a par value
of US$0.001 per share of such class or classes (howsoever designated) as the board of directors of the Company may determine in
accordance with the articles of association of the Company. As of December 15, 2015, (i) 107,932,572 Shares are issued and outstanding,
all of which have been duly authorized and are validly issued, fully paid and non-assessable, (ii) 67,428 Shares have been issued
to the Depositary and are held in the Company’s name and reserved for future issuance pursuant to outstanding Company Share
Awards granted pursuant to the Share Incentive Plan (and for the avoidance of doubt, such Shares are not included in the number
of issued and outstanding Shares set forth in clause (i) above) and (iii) no preferred shares are issued and outstanding. Except
for this Agreement, the Company Share Awards, the Voting Agreement and the Rollover Agreement, there are no options, warrants,
preemptive rights, conversion rights, redemption rights, share appreciation rights, repurchase rights or other rights, agreements,
arrangements or commitments of any character relating to the issued or unissued share capital of the Company or any of its Subsidiaries
or obligating the Company or any of its Subsidiaries to issue or sell any shares or securities of, or other equity interests in
the Company or any of its Subsidiaries. The Company does not have outstanding, as of the date hereof, any bonds, debentures, notes
or other obligations the holders of which have the right to vote (or convertible into or exercisable for securities having the
right to vote) with the shareholders of the Company on any matter.
(b) The
Company has made available to Parent or Ms. Hong Li, Mr. Xingqiang Zhang or Mr. Zhiyan Peng have previously had access to accurate
and complete copies of (x) the Share Incentive Plan pursuant to which the Company has granted the Company Share Awards that are
currently outstanding, and (y) the form of all award agreements evidencing such Company Share Awards.
(c) There
are no outstanding contractual obligations of any Group Company to repurchase, redeem or otherwise acquire any share capital or
registered capital, as the case may be, of any Group Company or to provide funds to, or make any investment (in the form of a loan,
capital contribution or otherwise) in, any of the Company’s Subsidiaries or any other Person, other than in the ordinary
course of business or pursuant to any share repurchase policy or plan existing on the date hereof.
(d) The
outstanding share capital or registered capital, as the case may be, of each of the Company’s Subsidiaries is duly authorized,
validly issued, fully paid and non-assessable, and the portion of the outstanding share capital or registered capital, as the case
may be, of each of the Company’s Subsidiaries is owned by the relevant Group Company free and clear of all Liens, other than
Permitted Liens. Subject to limitations imposed by applicable Law and other than as restricted by Permitted Liens, such Group Company
has the unrestricted right to vote, and to receive dividends and distributions on, all such equity securities of its Subsidiaries.
Section 3.04 Authority
Relative to This Agreement; Fairness.
(a) The
Company has the requisite corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder
and to consummate the Transactions. The execution, delivery and performance by the Company of this Agreement, the Plan of Merger
and the consummation by the Company of the Transactions have been duly authorized by the Company Board and no other corporate action
on the part of the Company is necessary to authorize the execution and delivery by the Company of this Agreement, the Plan of Merger
and the consummation by it of the Transactions, in each case, subject only, if necessary, to the authorization and approval of
this Agreement, the Plan of Merger and the Merger 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 in accordance with
Section 233(6) of the CICL (the “Requisite Company Vote”). This Agreement
has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery by
Parent and Merger Sub, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar Laws of general
applicability relating to or affecting creditors’ rights and to general principles of equity (the “Bankruptcy
and Equity Exception”).
(b) The
Company Board, acting upon the recommendation of the Special Committee, has, as of the date hereof (i) determined that this
Agreement, the Plan of Merger and the Transactions, on the terms and subject to the conditions set forth herein, are in the best
interests of the Company and its shareholders (other than the holders of Excluded Shares), (ii) approved and declared advisable
this Agreement, the Plan of Merger and the Transactions, and (iii) resolved to recommend that the holders of the Shares,
if required by applicable Law, approve and authorize this Agreement, the Plan of Merger and the Transactions (the “Company
Recommendation”). The Company Board, acting upon the recommendation of the Special Committee, has, as of the date
hereof, directed that this Agreement, the Plan of Merger and the Transactions be submitted to holders of Shares for authorization
and approval.
(c) The
Special Committee has received the written opinion of Duff & Phelps, LLC (the “Financial
Advisor”) dated the date of this Agreement, to the effect that, subject to the limitations, qualifications and
assumptions set forth therein and as of the date hereof, the Merger Consideration to be received by holders of Shares (other than
Excluded Shares) and ADSs (other than ADSs representing Excluded Shares) is fair, from a financial point of view, to such holders.
The Financial Advisor has consented to the inclusion of a copy of such opinion in the Proxy Statement.
Section 3.05 No
Conflict; Required Filings and Consents.
(a) The
execution and delivery of this Agreement and the Plan of Merger by the Company do not, and the performance of this Agreement and
the Plan of Merger by the Company and the consummation of the Transactions will not, (i) assuming that the Requisite Company Vote
is obtained, conflict with or violate the memorandum and articles of association of the Company or any equivalent organizational
documents of any other Group Company, (ii) assuming (solely with respect to performance of this Agreement and consummation of the
Transactions) that the matters referred to in Section 3.05(b) are complied with and the Requisite Company Vote (if necessary) is
obtained, conflict with or violate any statute, law, ordinance, regulation, rule, code, executive order, injunction, judgment,
decree or other order of any Governmental Authority (“Law”) applicable
to any Group Company or by which any property or asset of any Group Company is bound or affected, or (iii) result in any breach
of or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, or give to
others any right of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien (other than Permitted
Liens) on any property or asset of any Group Company pursuant to, any Contract or obligation to which any Group Company is a party
or by which any of their respective properties or assets are bound, except, with respect to clauses (ii) and (iii), for any such
breaches, defaults or other occurrences which would not have a Material Adverse Effect.
(b) The
execution and delivery of this Agreement and the Plan of Merger by the Company do not, and the performance of this Agreement and
the Plan of Merger by the Company 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 nation or government, any agency, public or regulatory authority,
instrumentality, department, commission, court, arbitrator, ministry, tribunal or board of any nation or government or political
subdivision thereof, in each case, whether foreign or domestic and whether national, supranational, federal, provincial, state,
regional, local or municipal (each, a “Governmental Authority”), except
(i) for compliance with the applicable requirements of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and the rules and regulations promulgated thereunder (including the joining of the Company in the filing
of a Schedule 13E-3 which shall incorporate by reference the Proxy Statement, and the filing or furnishing of one or more amendments
to the Schedule 13E-3 to respond to comments of the Securities and Exchange Commission (the “SEC”),
if any, on such documents), (ii) for compliance with the rules and regulations of the New York Stock Exchange (the “NYSE”),
(iii) 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 pursuant to the CICL, (iv) for any filings
with, notifications to or approvals of, the applicable Governmental Authorities as required pursuant to the Anti-Monopoly Law of
PRC implemented as of August 1, 2008 and (v) such other consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Authority, the failure to make or obtain which would not have a Material Adverse Effect.
Section 3.06 Permits;
Compliance with Laws.
(a) Except
as would not have a Material Adverse Effect, each Group Company is in possession of all material franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates, approvals and orders ("Permits") of any
Governmental Authority necessary for it to own, lease, operate and use its properties and assets or to lawfully carry on its business
as it is now being conducted (the “Material Company Permits”) as of
the date hereof (other than Permits which are being or will be applied for or obtained in the ordinary course in connection with
the opening of the relevant restaurant location). No suspension or cancellation of any of the Material Company Permits is pending
or, to the knowledge of the Company, threatened.
(b) Except
as would not have a Material Adverse Effect, no Group Company is in default, breach or violation of any Law applicable to it in
material respects (including without limitation, (A) any Laws applicable to its business and (B) any Laws related to the protection
of personal data) or by which any of its share, security, equity interest, property or asset is bound or affected. To the knowledge
of the Company, no Group Company has received any notice or communication in writing of any material non-compliance with any applicable
Laws that has not been cured.
(c) Except
as would not have a Material Adverse Effect, to the knowledge of the Company, no Group Company or any directors, officers, employees
or agents that act on behalf of a Group Company (the “Company Representative”)
have violated any Anticorruption Laws, nor has any Group Company or any Company Representative offered, paid, promised to pay,
or authorized the payment of any money, or offered, given, promised to give, or authorized the giving of anything of value, to
any Government Official or to any Person under circumstances where a Group Company or any Company Representative knew or ought
reasonably to have known (after due and proper inquiry) that all or a portion of such money or thing of value would be offered,
given, or promised, directly or indirectly, to a Person:
(i) for
the purpose of: (A) influencing any act or decision of a Government Official in his or her official capacity; (B) inducing a Government
Official to do or omit to do any act in violation of their lawful duties; (C) securing any improper advantage; (D) inducing a Government
Official to influence or affect any act or decision of any Governmental Authority; or (E) assisting a Group Company or any Company
Representative in obtaining or retaining business for or with, or directing business to, a Group Company or any Company Representative;
or
(ii) in
a manner which would constitute or have the purpose or effect of public or commercial bribery, acceptance of, or acquiescence in
extortion, kickbacks or other unlawful or improper means of obtaining business or any improper advantage.
(d) No
Group Company has conducted or initiated any internal investigation or made a voluntary, directed or involuntary disclosure to
any Governmental Authority with respect to any alleged act or omission arising under or relating to any noncompliance with any
Anticorruption Law. No Group Company or any Company Representative has received any notice, request or citation for any actual
or potential noncompliance with any of the foregoing in this Section 3.06(d).
(e) No
officer, director or employee of any Group Company is a Government Official.
(f) Each
Group Company has maintained complete and accurate books and records, including records of payments to any agents, consultants,
representatives, third parties and, Government Officials to the extent as required by GAAP.
(g) No
Group Company nor, to the knowledge of the Company, any Company Representative (i) is currently subject to any U.S. economic sanctions
administered by the Office of Foreign Assets Control of the U.S. Treasury Department; or (ii) has violated, or operated not in
compliance with, any applicable economic sanctions, export restrictions, anti-boycott regulations or embargo regulations.
(h) This
Section 3.06 does not relate to Taxes, which are the subject of Section 3.15.
Section 3.07 SEC
Filings; Financial Statements.
(a) The
Company has filed or furnished, as applicable, all forms, reports and documents required to be filed by it with the SEC since January
1, 2014 and prior to the date hereof (collectively, the “Company SEC Reports”),
each of which has complied in all material respects with all applicable requirements of the Securities Act of 1933, as amended
(the “Securities Act”) and the Exchange Act, each as in effect on the
dates such forms, reports and documents were filed. No Subsidiary of the Company has filed or furnished, or is required to file
or furnish, any form, report or other document with the SEC. The Company SEC Reports did not contain, when filed or furnished,
any untrue statement of a material fact or omitted to state a material fact required to be stated or incorporated by reference
therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
(b) The
audited and unaudited consolidated financial statements of the Company included (or incorporated by reference) in the Company SEC
Reports complied, or in the case of Company SEC Reports filed after the date of this Agreement, will comply, as to form in all
material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto
and fairly present, or in the case of Company SEC Reports filed after the date of this Agreement, will fairly present, in all material
respects, the consolidated balance sheets of the Company and its consolidated Subsidiaries as of the dates thereof and their consolidated
statements of operations and changes in shareholders’ equity and comprehensive income for the periods then ended (subject,
in the case of the unaudited interim financial statements, to normal year-end adjustments that are not material in the aggregate
and the exclusion of certain notes in accordance with the published rules promulgated by the SEC relating to unaudited financial
statements). Such financial statements have been prepared in accordance with U.S. generally accepted accounting principles applied
on a consistent basis (“GAAP”), except as specifically indicated in
the notes thereto.
(c) The
Company has implemented disclosure controls and procedures (as such term is defined in Rule 13a-15 under the Exchange Act) that
are reasonably designed to ensure that material information relating to the Company, including its consolidated Subsidiaries, required
to be included in reports filed under the Exchange Act is made known to the Company’s chief executive officer and chief financial
officer or other Persons performing similar functions by others within those entities.
(d) Except
as and to the extent set forth on the audited annual report of the Group Companies filed with the SEC on April 25, 2015, including
the notes thereto, no Group Company has outstanding (i) any Indebtedness or any commitments therefor, or (ii) any financial liability
or obligation (whether accrued, absolute, determined, determinable, fixed, contingent or otherwise), except for financial liabilities
and obligations (1) incurred in the ordinary course of business consistent with past practice since December 31, 2014, or (2) incurred
pursuant to this Agreement or in connection with the Transactions or (3) that would not have a Material Adverse Effect.
(e) The
Company is in compliance with the applicable listing and corporate governance rules and regulations of the NYSE, subject to availing
itself of any “home country” exemption from such rules and regulations available to a “foreign private issuer”
(as defined under the Exchange Act and under the relevant rules and regulations of the NYSE).
Section 3.08 Proxy
Statement.
The information supplied
by the Company for the inclusion in the Proxy Statement to be sent to the shareholders of the Company in connection with the Shareholders’
Meeting (including any amendment or supplement thereto or document incorporated by reference therein) and the Schedule 13E-3 relating
to the authorization and approval of this Agreement, the Plan of Merger and the Transactions by the shareholders of the Company
shall not, (i) on the date the Proxy Statement (including any amendment or supplement thereto) is first mailed to shareholders
of the Company or at the time of the Shareholders’ Meeting, contain any statement of a material fact which, at the time and
in the light of the circumstances under which it is made, is false or omit to state any material fact necessary in order to make
the statements made therein, or in light of the circumstances under which they are made, is not misleading, or (ii) on the date
the Schedule 13E-3 and any amendment or supplement thereto is filed with the SEC, contain any statement of a material fact which
at the time and in the light of the circumstances under which it is made is false, or omit to state a material fact necessary in
order to make the statements made therein, or in light of the circumstances under which they are made, is not misleading. The Proxy
Statement and the Schedule 13E-3 will comply as to form in all material respects with the requirements of the Exchange Act. Notwithstanding
the foregoing, the Company makes no representation with respect to statements made or incorporated by reference therein based on
information supplied by or on behalf of Parent or Merger Sub for inclusion or incorporation by reference in the Proxy Statement
or the Schedule 13E-3.
Section 3.09 Absence
of Certain Changes or Events.
Except for the execution
and performance of this Agreement and the discussions, negotiations and transactions related thereto and except as expressly contemplated
by this Agreement, since September 30, 2015, the Group Companies have conducted their respective businesses in all material respects
in the ordinary course of business consistent with past practice and there has not been any Material Adverse Effect.
Section 3.10 Absence
of Litigation.
Except as would not have
a Material Adverse Effect, as of the date hereof, there is no litigation, suit, claim, action, proceeding or investigation (an
“Action”) pending or, to the knowledge of the Company, threatened in
writing against any Group Company, or any share, security, equity interest, property or asset of any Group Company, before any
Governmental Authority. As of the date hereof, no Group Company, nor any share, security, equity interest, or material property
or asset of any Group Company is subject to any continuing order of, consent decree, settlement agreement or other similar written
agreement with, or, to the knowledge of the Company, continuing investigation by, any Governmental Authority, or any order of any
Governmental Authority, except as would not have a Material Adverse Effect.
Section 3.11 Employment
Matters.
(a) Except
as would not have a Material Adverse Effect, each Group Company (i) is in compliance in all material respects with all applicable
Laws relating to employment and employment practices, including those related to wages, work hours, shifts, overtime, holidays
and leave, collective bargaining terms and conditions of employment and the payment and withholding of social security Taxes or
any other Taxes and other sums as required by the appropriate Governmental Authority, (ii) has, in all material respects, withheld
and paid to the appropriate Governmental Authority, or are holding for payment not yet due to such Governmental Authority, the
amounts required to be withheld from or paid with respect to Employees (including the withholding and payment of all individual
income Taxes), and (iii) is not liable for any material arrears of wages, taxes, penalties or other sums for failure to comply
with any of the foregoing. To the Company’s knowledge, there is no material claim with respect to payment of wages, salaries,
commissions or overtime pay that has been asserted or is now pending or threatened before any Governmental Authority with respect
to any persons currently or formerly employed or engaged by any Group Company. To the Company’s knowledge, no Group Company
is a party to, or otherwise bound by, any material consent decree with, or citation by, any Governmental Authority relating to
persons employed or engaged by it or their labor or employment practices. There is no material charge or proceeding with respect
to a material violation of any occupational safety or health standards that has been asserted, or to the Company’s knowledge,
is now pending or threatened in writing with respect to any Group Company. Except as would not have a Material Adverse Effect,
with respect to each material benefit and compensation plan (each a “Company Benefit
Plan”, collectively, the “Company Benefit Plans”)
covering current (including those on layoff, disability or leave of absence, whether paid or unpaid) employees, officers, consultants,
independent contractors providing individual services, agents or directors of the Company or any Subsidiary of the Company (collectively,
“Employees”), each Company Benefit Plan is operated and administered
in compliance with the provisions thereof and all applicable legal requirements in all material respects. Each contribution or
other payment that is required to have been accrued or made under or with respect to any Company Benefit Plan has been duly accrued
and made on a timely basis in all material respects. There are no material claims (other than for benefits incurred in the ordinary
course) or legal proceedings pending or, to the knowledge of the Company, threatened in writing against any Company Benefit Plan
or against the assets of any Company Benefit Plan.
(b) The
Company is not obligated, pursuant to any of the Company Benefit Plans or otherwise, to newly grant any options or other rights
to purchase or acquire Shares to any Employees, consultants or directors of the Company after the date hereof.
Section 3.12 Labor
Matters.
No Group Company is
party to any labor or collective bargaining agreements which pertain to Employees of the Company or any of its Subsidiaries.
Section 3.13 Real
Property; Title to Assets.
(a) With
respect to all buildings, structures, improvements and fixtures located thereon, and all easements and other rights and interests
appurtenant thereto, owned by the Group Companies (“Owned Real Property”),
each of the Group Companies has good title, validly granted land use rights or building ownership rights, as applicable, to each
parcel of Owned Real Property, free and clear of all Liens (except for Permitted Liens). There are no outstanding options or rights
of first refusal to purchase the Owned Real Property, or any portion of the Owned Real Property or interest therein.
(b) With
respect to all leases, subleases and other agreements (the “Real Property Leases”)
under which the Company or any of its Subsidiaries uses or occupies or has the right to use or occupy, now or in the future, any
real property (and all modifications, amendments and supplements thereto and all side letters to which the Company or any of its
Subsidiaries is a party affecting the obligations of any party thereunder) (“Leased
Real Property”), each Real Property Lease constitutes a valid and legally binding obligation of the Company or
its Subsidiaries, enforceable in accordance with its terms, subject to the Bankruptcy and Equity Exception, and is in full force
and effect. All rent and other sums and charges payable by the Group Companies as tenants under each Real Property Lease are current,
no termination event or condition or uncured default of a material nature on the part of the Company or any such Subsidiary or,
to the Company’s knowledge, the landlord, exists under any Real Property Lease. Each of the Group Companies has a good and
valid leasehold interest in each parcel of Leased Real Property, free and clear of all Liens (except for Permitted Liens).
(c) No
party to any such Real Property Leases has given notice to the Company or any of its Subsidiaries of or made a claim against the
Company or any of its Subsidiaries with respect to any material breach or default thereunder.
(d) Except
as would not have a Material Adverse Effect, the Group Companies have good title to, or a valid and binding leasehold interest
in, all other material properties and assets (excluding Owned Real Property, Leased Real Property and Intellectual Property), in
each case free and clear of all Liens (other than Permitted Liens).
Section 3.14 Intellectual
Property.
(a) The
Group Companies own or have a valid and enforceable right or license to use (in substantially the manner in which the same is being
used on the date hereof), all Intellectual Property that is used by the Group Companies and material to the business of the Group
Companies taken as a whole. With respect to each item of Intellectual Property owned by any Group Company that is material to the
business of the Group Companies taken as a whole (“Company Owned Intellectual Property”),
such Group Company is the owner of the entire right, title and interest in and to such Company Owned Intellectual Property free
and clear of all encumbrances (other than licenses granted to any Person in the ordinary course of business), and is entitled to
use such Company Owned Intellectual Property in the continued operation of its respective business. The Company Owned Intellectual
Property, has not been adjudged invalid or unenforceable in whole or in part in a proceeding before any Governmental Authority
against any Group Company.
(b) With
respect to each item of Intellectual Property licensed to any Group Company that is material to the business of the Group Companies
taken as a whole (“Company Licensed Intellectual Property”), such Group
Company has the right to use such Company Licensed Intellectual Property in the continued operation of its respective business
in accordance with the terms of the license agreement (to which such Group Company is a party) governing such Company Licensed
Intellectual Property. To the knowledge of the Company, all registrations with any Governmental Authority in respect of the Company
Owned Intellectual Property are valid and in full force and effect.
(c) Neither
the execution of this Agreement nor the consummation of any Transaction shall adversely affect in material respects any Group Company’s
rights with respect to the Company Owned Intellectual Property or the Company Licensed Intellectual Property.
(d) The
Group Companies have taken commercially reasonable measures to protect the confidentiality, integrity and security of confidential
or proprietary information, and trade secrets of the Group Companies, confidential or proprietary information and trade secrets
entrusted to the Company or any of its Subsidiaries by their customers, clients, or other Persons to whom the Company or any of
its Subsidiaries owes a duty or obligation under applicable Law or any Contract to maintain the security or confidentiality thereof,
and confidential or proprietary information and trade secrets developed by the Company or any of its Subsidiaries but based on
Contract or operation of applicable Law belonging to their customers, clients or other Persons, and regarding which the Company
or any of its Subsidiaries owes a duty or obligation under applicable Law or any Contract to maintain the security or confidentiality
thereof (together, the “Trade Secrets”); and (ii) to the knowledge
of the Company, except as would not have a Material Adverse Effect, no Trade Secrets owned by the Group Companies have been obtained
from the Group Companies by, or disclosed by the Group Companies to any Third Party, except pursuant to and in accordance with
valid non-disclosure and/or license agreements or pursuant to duties or obligations arising by operation of applicable Law.
(e) To
the knowledge of the Company, the conduct of the business of each Group Company as currently conducted is not infringing upon or
misappropriating any Intellectual Property rights, including rights of privacy and publicity, of any third party. There are no
pending or, to the knowledge of the Company, threatened written claim or proceeding before any Governmental Authority by any Person
against any Group Company alleging infringement, dilution, or misappropriation by such Group Company of the Intellectual Property
rights of such Person, demands or unsolicited offers for such Group Company to license any Intellectual Property from such Person,
or challenges to the validity, enforceability or ownership of, or the right to use, any Company Owned Intellectual Property. To
the knowledge of the Company, no Person is infringing, diluting or misappropriating any Company Owned Intellectual Property. The
representations and warranties set forth in this Section 3.14(e) are the sole and exclusive representations and warranties of the
Company concerning matters relating to infringement, dilution, misappropriation or other violation of any Intellectual Property
rights.
Section 3.15 Taxes.
Except as would not have a Material Adverse
Effect:
(a) Each
Group Company has timely filed all Tax returns and reports required to be filed by it and has paid and discharged all Taxes required
to be paid or discharged, other than such payments as are being contested in good faith by appropriate proceedings. All such Tax
returns are true, accurate and complete in all material respects. As of the date hereof, no taxing authority or agency is asserting
or, to the knowledge of the Company, threatening to assert against any Group Company any deficiency or claim for any material Taxes
or interest thereon or penalties in connection therewith. As of the date hereof, there are no pending or, to the knowledge of the
Company, threatened Actions for the assessment or collection of Taxes against any Group Company. Each Group Company has properly
and timely withheld, collected and deposited all Taxes that are required to be withheld, collected and deposited under applicable
Law. No Group Company has granted any waiver of any statute of limitations with respect to, or any extension of a period for the
assessment of, any Tax which in either case, is still outstanding. There are no unresolved claims by a Governmental Authority in
a jurisdiction where any Group Company does not file Tax returns that such Group Company is or may be subject to taxation by that
jurisdiction.
Section 3.16 No
Secured Creditors; Solvency.
(a) Except
as already disclosed to Parent, no Group Company has any secured creditors holding a fixed or floating charge or security interest.
(b) No
Group Company has taken any steps to effect or commence any liquidation, dissolution, restructuring, reorganization or otherwise
seek protection pursuant to any bankruptcy or insolvency law, nor does the Company have any knowledge or reason to believe that
its creditors intend to initiate any involuntary bankruptcy proceedings or any knowledge of any fact which would reasonably lead
a creditor to do so. Each Group Company and the Group Companies 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.
Section 3.17 Material
Contracts.
(a) Except
for this Agreement and except for Contracts filed as exhibits to the Company SEC Reports prior to the date hereof, as of the date
hereof, none of the Company or its Subsidiaries is a party to or bound by any Contract that would be required to be filed by the
Company pursuant to Item 19 and paragraph 4 of the Instructions to Exhibits of Form 20-F under the Exchange Act. Each Contract
of the type described in the second half of the immediately preceding sentence which any of the Company or its Subsidiaries is
a party to or bound by, is referred to herein as a “Material Contract.”
(b) Except
as has not had and would not have a Material Adverse Effect, (i) each Material Contract is a legal, valid and binding obligation
of the relevant Group Companies, as applicable, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and similar Laws of general applicability relating to or affecting creditors’ rights and to general principles of equity,
and no Group Company is in material breach or violation of, or default under, the Material Contract to which it is a party, (ii)
no Material Contract has been canceled by the other party; (iii) to the Company’s knowledge, no other party is in material
breach or violation of, or default under, any Material Contract; and (iv) no Group Company has received any written claim of material
default under any such Material Contract and, to the Company’s knowledge, no fact or event exists that would give rise to
any claim of material default under any Material Contract.
Section 3.18 Environmental
Matters.
Except in each case as
would not have a Material Adverse Effect, each Group Company is in compliance with all applicable Environmental Laws and has obtained
and possesses all permits, licenses and other authorizations currently required for their establishment and their operations as
currently conducted under any Environmental Law, and all such permits, licenses and other authorizations are in full force and
effect. No Group Company has received any written notice, demand, letter, claim or request for information alleging that any Group
Company is in violation of or liable under any Environmental Law, the subject matter of which would have a Material Adverse Effect.
No Group Company is subject to any order of any Governmental Authority or agreement with any third party concerning liability under
any Environmental Law or relating to Hazardous Substances, the subject matter of which would have a Material Adverse Effect. This
Section 3.18 contains the sole and exclusive representations and warranties of the Company with respect to any environmental, health
or safety matter, including any arising under Environmental Laws or relating to Hazardous Substances.
Section 3.19 Insurance.
Except in each case as
would not have a Material Adverse Effect, (a) the Group Companies maintain insurance coverage with reputable insurers or self-insurance
programs in such amounts and covering such risks as are in accordance with normal industry practice for companies engaged in businesses
similar to that of the Group Companies; (b) no Group Company has any reason to believe that it will not be able to renew any of
its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business without a significant increase in cost; and (c) to the Company’s knowledge, none of the
Group Companies have received any written notice of any threatened termination of, material premium increase with respect to, or
material alteration of coverage under, any of its respective insurance policies.
Section 3.20 Anti-Takeover
Provisions.
The Company is not party
to a shareholder rights agreement, “poison pill” or similar anti-takeover agreement or plan. The Company Board has
taken all necessary action so that any takeover, anti-takeover, moratorium, “fair price”, “control share”
or other similar Laws enacted under any Laws applicable to the Company other than the CICL (each, a “Takeover
Statute”) do not, and will not, apply to this Agreement or the Transactions.
Section 3.21 Brokers.
Except for Duff &
Phelps, LLC and Duff & Phelps Securities, LLC, no broker, finder or investment banker is entitled to any brokerage, finder’s
or other fee or commission in connection with the Transactions based upon arrangements made by or on behalf of the Company.
Section 3.22 No
Additional Representations.
Except for the representations
and warranties set forth in this Article III, none of the Group Companies or any other Person on behalf of any of them makes any
other express or implied representation or warranty with respect to any Group Company, or their respective business, operations,
assets, liabilities, condition (financial or otherwise) or prospects, notwithstanding the delivery or disclosure to Parent, Merger
Sub or any of its Affiliates or Representatives of any documentation, forecasts or other information with respect to any one or
more of the foregoing, and Parent and Merger Sub acknowledge the foregoing. Neither the Company nor any other Person will have
or be subject to any liability or indemnity obligations to Parent, Merger Sub or any other Person resulting from the distribution
or disclosure or failure to distribute or disclose to Parent, Merger Sub or any of its Affiliates or Representatives, or their
use of, any information, unless and to the extent such information is expressly included in the representations and warranties
contained in Article III.
Article
IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
As an inducement to the
Company to enter into this Agreement, Parent and Merger Sub hereby, jointly and severally, represent and warrant to the Company
that:
Section 4.01 Corporate
Organization.
Each of Parent and Merger
Sub is an exempted company duly incorporated, validly existing and in good standing under the laws of the Cayman Islands and has
the requisite corporate power and authority and all necessary governmental approvals to own, lease and operate its properties and
to carry on its business as it is now being conducted, except where the failure to be so organized, existing or in good standing
or to have such power, authority and governmental approvals would not, individually or in the aggregate, prevent or materially
delay consummation of any of the Transactions by Parent or Merger Sub or otherwise be materially adverse to the ability of Parent
or Merger Sub to perform their obligations under this Agreement.
Section 4.02 Capitalization
of Parent and Merger Sub; No Prior Activities.
(a) The
authorized share capital of Parent consists solely of 50,000 ordinary shares, par value US$1.00 per share, 1 of which is validly
issued and outstanding as of the date hereof.
(b) The
authorized share capital of Merger Sub consists of 50,000 ordinary shares, par value US$1.00 per share, 1 of which is validly issued
and outstanding as of the date hereof. Parent owns 100% of the issued and outstanding share capital of Merger Sub.
(c) Parent
and Merger Sub were formed solely for the purpose of engaging in the Transactions. Except for obligations or liabilities incurred
in connection with its formation and related to the Transactions, each of Parent and Merger Sub has not and will not, prior to
the Effective Time, have incurred, directly or indirectly, through any Subsidiary or affiliate, any obligations or liabilities
or engaged in any business activities of any type or kind whatsoever or entered into any agreements or arrangements with any Person.
Section 4.03 Authority
Relative to This Agreement.
Each of Parent and Merger
Sub has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder
and to consummate the Transactions. The execution and delivery of this Agreement by Parent and Merger Sub, the execution and delivery
of the Plan of Merger by Merger Sub, and the consummation by Parent and Merger Sub of the Transactions have been duly and validly
authorized by all necessary corporate action, and no other corporate proceedings on the part of Parent or Merger Sub are necessary
to authorize this Agreement and the Plan of Merger or to consummate the Transactions (other than the filings, notifications and
other obligations and actions described in Section 4.04(b)). This Agreement has been duly and validly executed and delivered by
Parent and Merger Sub and, assuming due authorization, execution and delivery by the Company, constitutes a legal, valid and binding
obligation of each of Parent and Merger Sub, enforceable against each of Parent and Merger Sub in accordance with its terms, subject
to the Bankruptcy and Equity Exception.
Section 4.04 No
Conflict; Required Filings and Consents.
(a) The
execution and delivery of this Agreement by Parent and Merger Sub and the execution and delivery of the Plan of Merger by Merger
Sub do not, and the performance of this Agreement by Parent and Merger Sub and the performance of the Plan of Merger by Merger
Sub will not, (i) conflict with or violate the memorandum and articles of association of either Parent or Merger Sub, (ii)
assuming that all consents, approvals, authorizations and other actions described in Section 4.04(b) have been obtained and all
filings and obligations described in Section 4.04(b) have been made, conflict with or violate any Law applicable to Parent or Merger
Sub or by which any property or asset of either of them is bound or affected, or (iii) result in any breach of, or constitute a
default (or an event which, with notice or lapse of time or both, would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on any property or asset of Parent
or Merger Sub pursuant to, any Contract or obligation to which Parent or Merger Sub is a party or by which Parent or Merger Sub
or any property or asset of either of them is bound or affected, except, with respect to clauses (ii) and (iii), for any such conflicts,
violations, breaches, defaults or other occurrences which 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 obligations under this Agreement.
(b) The
execution and delivery of this Agreement by Parent and Merger Sub and the execution and delivery of the Plan of Merger by Merger
Sub do not, and the performance of this Agreement by Parent and Merger Sub and the performance of the Plan of Merger by Merger
Sub and the consummation by Parent and Merger Sub of the Transactions will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Authority, except (i) for compliance with the applicable requirements
of the Exchange Act and the rules and regulations promulgated thereunder, (ii) for compliance with the rules and regulations
of the NYSE, (iii) 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 pursuant to the CICL and
(iv) for any filings with, notifications to or approvals of, the applicable Governmental Authorities as required pursuant to the
Anti-Monopoly Law of PRC implemented as of August 1, 2008.
(c) Except
as contemplated under the Debt Financing Document, Merger Sub has no secured creditors holding a fixed or floating security interest.
Section 4.05 Financing.
(a) Parent
has delivered to the Company true, complete and correct copies of an executed debt commitment letter dated December 17, 2015, among
Parent, Merger Sub, and China Merchants Bank Co., Ltd., New York Branch (the “Lender”)
(as the same may be amended or modified pursuant to Section 6.04(b) (the “Debt Financing
Document”), pursuant to which the Lender has agreed, subject to the terms and conditions therein, to provide or
cause to be provided the aggregate debt amounts set forth therein for the purpose of financing the Transactions (the “Debt
Financing”) and (ii) the Rollover Agreement. Parent has also delivered to the
Company a true, complete and correct copy of any fee letter in connection with the Debt Financing (any such fee letter, a “Fee
Letter”) (it being understood that any such Fee Letter provided to the Company may be redacted to omit the numerical
fee amounts and other economic terms provided therein).
(b) As
of the date hereof, (i) the Debt Financing Document and the Rollover Agreement, in the form so delivered, are in full force and
effect and are the legal, valid and binding obligations of Parent and Merger Sub (as applicable and subject to the Bankruptcy and
Equity Exception) and, to the knowledge of Parent, of the other parties thereto (subject to the Bankruptcy and Equity Exception),
specifically enforceable in accordance with the terms and conditions thereof, (ii) neither the Debt Financing Document nor the
Rollover Agreement has been amended or modified and to the knowledge of Parent, no such amendment or modification is contemplated,
(iii) the respective commitments contained in the Debt Financing Document have not been withdrawn, terminated or rescinded in any
respect and to the knowledge of Parent, no such withdrawal, termination or rescission is contemplated and (iv) no event has occurred
that (with or without notice, lapse of time, or both) would constitute a material breach or default under the Debt Financing Document
or the Rollover Agreement by Parent or Merger Sub and, to the knowledge of Parent, by the other parties thereto.
(c) Assuming
(x) the Debt Financing occurs in accordance with the Debt Financing Document, and (y) the transactions contemplated by the Rollover
Agreement are consummated in accordance with the Rollover Agreement and (z) the satisfaction of the conditions to the obligation
of Parent and Merger Sub to consummate the Merger as set forth in Section 7.01 and Section 7.02 or the waiver of such conditions,
Parent and Merger Sub will have funds sufficient to (1) consummate the Transactions on the terms contemplated by this Agreement,
and (2) pay any other amounts required to be paid in connection with the consummation of the Transactions upon the terms and conditions
contemplated hereby and all related fees and expenses associated therewith. The Debt Financing Document contains all of the conditions
precedent to the obligations of the parties thereunder to make the Debt Financing available to Parent or Merger Sub on the terms
and conditions therein. As of the date hereof and subject to the satisfaction of the conditions set forth in Section 7.01 and 7.02,
Parent and Merger Sub do not have any reason to believe that any of the conditions to the Debt Financing will not be satisfied
or that the Debt Financing will not be available to Parent and Merger Sub at the time required to consummate the Transactions;
provided, however, that Parent is not making any representation or warranty regarding the effect of the inaccuracy and the representations
and warranties in in Article III, or compliance by the Company with its obligations with this Agreement. Parent and Merger Sub
have fully paid any and all commitment fees or other fees that have been incurred and are due and payable in connection with the
Debt Financing Document prior to or in connection with the execution of this Agreement. There are no side letters or other oral
or written Contracts to which Parent or any of its Affiliates is a party related to the funding or investing, as applicable, of
the full amount of the Debt Financing other than (i) as expressly set forth in the Debt Financing Document, (ii) the Fee Letter,
and (iii) any customary engagement letter(s) and non-disclosure agreement(s) (complete copies of which have been provided to the
Company) that do not impact the conditionality or amount of the Debt Financing.
Section 4.06 Limited
Guarantees.
Concurrently with the
execution of this Agreement, Parent has caused each of the Guarantors to deliver to the Company a duly executed Limited Guarantee.
Each of the Limited Guarantees is in full force and effect and constitutes a legal, valid, binding and specifically enforceable
obligation of the corresponding 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 the Guarantors under any of the Limited Guarantees.
Section 4.07 Brokers.
No broker, finder or
investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Transactions based
upon arrangements made by or on behalf of Parent or Merger Sub.
Section 4.08 Proxy
Statement.
None of the information
provided by Parent or Merger Sub with respect to itself or its Affiliates or Representatives for inclusion or incorporation by
reference in the Schedule 13E-3 or the Proxy Statement will, in the case of the Schedule 13E-3, as of the date of its filing and
the date of each amendment or supplement thereto and, in the case of the Proxy Statement, (i) at the time of the mailing of the
Proxy Statement or any amendments or supplements thereto to the shareholders of the Company and (ii) at the time of the Shareholders’
Meeting, contain any untrue statement of a material fact which, at the time and in light of the circumstances under which it was
made, is false, or omit to state any material fact required to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.
Section 4.09 Absence
of Litigation.
There is no Action pending
or, to the knowledge of Parent and Merger Sub, threatened in writing against Parent, Merger Sub or any of their respective Affiliates
before any Governmental Authority that, individually or in the aggregate, would prevent or materially delay consummation of the
Transactions by Parent or Merger Sub. Neither Parent nor Merger Sub nor any of their Affiliates is subject to any continuing order
of, consent decree, settlement agreement or other similar written agreement with, or, to the knowledge of Parent and Merger Sub,
continuing investigation by, any Governmental Authority, or any order, writ, judgment, injunction, decree, determination or award
of any Governmental Authority.
Section 4.10 No
Secured Creditors; Solvency.
(a) Except
as may be contemplated under the Debt Financing Document, none of Parent, Merger Sub or any of their respective Affiliates has
any secured creditors holding a fixed or floating charge or security interest in respect of Parent, Merger Sub or their securities.
(b) None
of Parent, Merger Sub or any of their respective Affiliates has taken any steps to effect or commence any liquidation, dissolution,
restructuring, reorganization or otherwise seek protection pursuant to any bankruptcy or insolvency law, nor does such Person have
any knowledge or reason to believe that its creditors intend to initiate any involuntary bankruptcy proceedings or any knowledge
of any fact which would reasonably lead a creditor to do so. Neither Parent nor Merger Sub is, as of the date hereof, and after
giving effect to the Transactions to occur at the Closing will be, Insolvent.
Section 4.11 Parent
Group Contracts.
Other than the Consortium
Agreement, the Rollover Agreement, the Voting Agreement and the Limited Guarantee (collectively, the “Parent Group Contracts”),
a copy of each of which (including all amendments thereto or modifications thereof) has been delivered to the Company by Parent,
there are no Contract, arrangements or understandings, whether or not legally enforceable, with respect to any security of the
Company between or among two or more of the following Persons: each of the Rollover Shareholders, any member of the Parent Group,
the Lender, the Guarantors, and/or any of their respective Affiliates.
Section 4.12 Ownership
of Shares.
Other than the Rollover
Shares (as defined in the Rollover Agreement), no member of the Parent Group or any of their Affiliates beneficially own (as such
term is used in Rule 13d-3 promulgated under the Exchange Act) any Shares or other securities of the Company or any options, warrants
other rights to acquire Shares or other securities of, or any other economic interest in, the Company or any of its Subsidiaries.
Section 4.13 No
Other Company Representations or Warranties.
Except for the representations
and warranties set forth in Article III, Parent and Merger Sub hereby acknowledge and agree that (a) no member of the Company Group,
nor any other Person, has made or is making any other express or implied representation or warranty with respect to the Company
or any of its Subsidiaries or their respective business or operations, including with respect to any information provided or made
available to any member of the Parent Group or any other person, and (b) neither the Company nor any of its Subsidiaries, nor any
of member of the Company Group nor any other Person, will have or be subject to any liability or indemnification obligation or
other obligation of any kind or nature to any member of the Parent Group or any other Person, resulting from the delivery, dissemination
or any other distribution to any member of the Parent Group or any other Person, or the use by any member of the Parent Group or
any other Person, of any such information provided or made available to any of them by any member of the Company Group or any other
Person, including any information, documents, estimates, projections, forecasts or other forward-looking information, business
plans or other material provided or made available to any member of the Parent Group or any other Person, in “data rooms,”
confidential information memoranda or management presentations in anticipation or contemplation of any of the Transaction.
Section 4.14 Non
Reliance on Company Estimates, Projections, Forecasts, Forward Looking Statements and Business Plans.
In connection with the
due diligence investigation of the Company by the Parent Group, members of the Parent Group have received and may continue to receive
after the date hereof from members of the Company Group certain estimates, projections, forecasts and other forward looking information,
as well as certain business plan information, regarding the Company and its business and operations. Parent and Merger Sub hereby
acknowledge and agree (a) that there are uncertainties inherent in attempting to make such estimates, projections, forecasts and
other forward looking statements, as well as in such business plans, with which Parent and Merger Sub are familiar, (b) that Parent
and Merger Sub are taking full responsibility for making their own evaluation of the adequacy and accuracy of all estimates, projections,
forecasts and other forward looking information, as well as such business plans, so furnished to them (including the reasonableness
of the assumptions underlying such estimates, projections, forecasts, forward looking information or business plans) and (c) that
Parent and Merger Sub will have no claim against any member of the Company Group or any other person, with respect thereto. Accordingly,
Parent and Merger Sub hereby acknowledge and agree that no member of the Company Group nor any other Person, has made or is making,
and neither Parent nor Merger Sub has relied or is relying on, any express or implied representation or warranty with respect to
such estimates, projections, forecasts, forward looking statements or business plans (including the reasonableness of the assumptions
underlying such estimates, projections, forecasts, forward looking statements or business plans),and neither Parent nor Merger
Sub shall hold the Company Group or such other Person liable with respect thereto, other than fraud in connection herewith.
Section 4.15 No
Additional Representations.
Except for the representations
and warranties set forth in this Article IV, neither Parent nor Merger Sub nor any other person on behalf of either of them makes
any other express or implied representation or warranty with respect to Parent or Merger Sub, or their respective business, operations,
assets, liabilities, condition (financial or otherwise) or prospects, notwithstanding the delivery or disclosure to the Company
or any of its Affiliates or Company Representatives of any documentation or other information with respect to any one or more of
the foregoing, and the Company acknowledges the foregoing. Neither Parent nor Merger Sub will have or be subject to any liability
or indemnity obligations to the Company or any other Person resulting from the distribution or disclosure or failure to distribute
or disclose to the Company or any of its Affiliates or Company Representatives, or their use of, any information, unless and to
the extent such information is expressly included in the representations and warranties contained in Article IV.
Article
V
CONDUCT OF BUSINESS PENDING THE MERGER
Section 5.01 Conduct
of Business by the Company Pending the Merger.
The Company agrees that,
between the date of this Agreement and the earlier of the Effective Time and the termination of this Agreement pursuant to Article
VIII, except as required by applicable Law or as expressly permitted by any other provision of this Agreement, unless Parent shall
otherwise consent in writing (which consent shall not be unreasonably withheld, conditioned or delayed), the businesses of the
Group Companies shall only be conducted, and the Group Companies shall not take any action except, in a lawfully permitted manner
in the ordinary course of business and consistent with past practice or at the direction of or with approval from any of Parent,
Merger Sub, Rollover Shareholders or their respective Affiliates.
By way of amplification
and not limitation, except as expressly permitted by any other provision of this Agreement or as required by Law, unless Parent
shall otherwise consent in writing (which consent shall not be unreasonably withheld, conditioned or delayed), the Company shall
not permit any of its Subsidiaries to, between the date of this Agreement and the earlier of the Effective Time and the termination
of this Agreement pursuant to Article VIII, directly or indirectly, do, or propose to do, any of the following without the prior
written consent of Parent (which consent shall not be unreasonably withheld, conditioned or delayed), except at the direction of
or with written approval from any of Parent, Merger Sub, Rollover Shareholders or their respective Affiliates:
(a) amend
or otherwise change the memorandum and articles of association or equivalent organizational documents of the Company or any of
Company’s Subsidiaries;
(b) issue,
sell, transfer, lease, sublease, license, pledge, dispose of, grant or encumber, or authorize the issuance, sale, transfer, lease,
sublease, license, pledge, disposition, grant or encumbrance of, other than in connection with the exercise, settlement or vesting
of any Company Share Award in accordance with the Share Incentive Plan and other than transactions between the Company and any
of the Company’s Subsidiaries or between or among one or more of the Company’s Subsidiaries, (i) any shares of the
Company or any options, warrants, convertible securities or other rights of any kind to acquire any shares, or any other ownership
interest (including any phantom interest), of any Group Company except pursuant to the terms of any Company Benefit Plan, or (ii) any
property or assets (whether real, personal or mixed, and including leasehold interests and intangible property) of any Group Company
that are material to the business of the Group Companies, taken as a whole, except in the ordinary course of business and in a
manner consistent with past practice, except for the expiration of Intellectual Property;
(c) declare,
set aside, make or pay any dividend or other distribution, payable in cash, shares, property or otherwise, with respect to any
of its shares (other than (i) pursuant to the Company’s previously announced dividend policy, and (ii) dividends or other
distributions from any Subsidiary of the Company to the Company or to another Company’s Subsidiary consistent with past practice);
(d) reclassify,
combine, split, subdivide or redeem, or purchase or otherwise acquire, directly or indirectly, any of its shares, or any options,
warrants, convertible securities or other rights exchangeable into or convertible or exercisable for any of its shares, except
pursuant to (i) the Company’s previously announced share repurchase policy, or (ii) the exercise or settlement of Company
Share Awards, employee severance, retention, termination, change of control and other contractual rights in existence on the date
hereof on the terms in effect on the date hereof;
(e) effect
or commence any liquidation, dissolution, scheme of arrangement, merger, consolidation, amalgamation, restructuring, reorganization
or similar transaction involving any Group Company (other than the Merger or any merger restructuring or consolidation among wholly-owned
Subsidiaries of the Company), or create any new Subsidiaries;
(f) (i)
acquire (including by merger, consolidation, scheme of arrangement, amalgamation or acquisition of stock or assets or any other
business combination) or make any capital contribution or investment in any corporation, partnership, other business organization
or any division thereof or acquire any significant amount of assets (other than the acquisition, sale or other disposition of assets
in the ordinary course of business consistent with past practice or pursuant to the Contracts in existence on the date hereof and
on the terms in effect on the date hereof); (ii) incur, assume, alter, amend or modify any Indebtedness in excess of US$5,000,000
individually or US$10,000,000 in the aggregate, or guarantee such Indebtedness, or issue any debt securities or make any loans
or advances in excess of US$10,000,000 individually or US$50,000,000 in the aggregate; or (iii) authorize, or make any commitment
with respect to, any single capital expenditure which is in excess of US$10,000,000 or capital expenditures which are, in the aggregate,
in excess of US$50,000,000 for the Group Companies taken as a whole;
(g) except
as otherwise required by Law or pursuant to any Contract in existence as of the date hereof or the terms of a Company Benefit Plan
or as otherwise contemplated by this Agreement, (i) enter into any new employment or compensatory agreements (including the renewal
of any such agreements), or terminate any such agreements, with any director or executive officer of any Group Company (other than
the hiring or termination of executive officer with aggregate annual compensation of less than US$200,000), (ii) grant or provide
any severance or termination payments or benefits to any director or executive officer of any Group Company outside the ordinary
course of business, (iii) materially increase the compensation, bonus or pension, welfare, severance or other benefits of, pay
any bonus to, or make any new equity awards to any director or executive officer of any Group Company, (iv) establish, adopt, materially
amend or terminate any Company Benefit Plan or amend the terms of any outstanding Company Share Awards, (v) take any action to
accelerate the vesting or payment, or fund or in any other way secure the payment, of compensation or benefits under the Company
Benefit Plan, (vi) materially change any actuarial or other assumptions used to calculate funding obligations with respect to any
Company Benefit Plan or materially change the manner in which contributions to such plans are made or the basis on which such contributions
are determined, except as may be required by GAAP, or (vii) forgive any loans to directors or executive officers of any Group Company;
(h) issue
or grant any new Company Share Award to any Person under any Company Benefit Plan;
(i) make
any material changes with respect to any credit practice, method of financial accounting, or financial accounting policies or procedures,
including changes affecting the reported consolidated assets, liabilities or results of operations of the Group Companies, except
as required by changes in GAAP or as a result of a change in Law;
(j) pay,
discharge or satisfy any material claim, liability or obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction of liabilities or obligations as they become due in the ordinary course of business
and consistent with past practice;
(k) enter
into, materially amend, modify or consent to the termination (other than extension at the end of a term in the ordinary course
of business) of any Material Contract (or any Contract that would be a Material Contract if such Contract had been entered into
prior to the date hereof), or waive any Group Company’s material rights thereunder;
(l) terminate
or cancel, let lapse, or amend or modify in any material respect, other than renewals in the ordinary course of business, any material
insurance policies maintained by it which is not promptly replaced by a comparable amount of insurance coverage;
(m) settle
any Action;
(n) (i)
abandon or dedicate to the public any item of Company Owned Intellectual Property or (ii) with respect to any Company Owned Intellectual
Property registered with or applied to Governmental Authorities and to the extent required by applicable Laws to maintain the validity
of such Company Owned Intellectual Property, (A) fail to make any applicable filings with Governmental Authorities when finally
due, or (B) fail to pay all required fees and taxes to Governmental Authorities when finally due; in each case, except for expiration
of Intellectual Property;
(o) fail
to make in a timely manner any filings or registrations with the SEC required under the Securities Act or the Exchange Act or the
rules and regulations promulgated thereunder;
(p) engage
in the conduct of any new line of business material to the Group Companies, taken as a whole;
(q) make
or change any material Tax election, materially amend any Tax return (except as required by applicable Law), enter into any material
closing agreement with respect to Taxes, surrender any right to claim a material refund of Taxes, settle or finally resolve any
material controversy with respect to Taxes or materially change any method of Tax accounting; or
(r) publicly
announce an intention, enter into any formal agreement or otherwise make a legal commitment, to do any of the foregoing.
Article
VI
ADDITIONAL AGREEMENTS
Section 6.01 Proxy
Statement and Schedule 13E-3.
As soon as practicable
following the date of this Agreement, the Company, with the assistance of Parent and Merger Sub, shall prepare a proxy statement
relating to the authorization and approval of this Agreement, the Plan of Merger and the Transactions by the shareholders of the
Company including a notice convening the Shareholders’ Meeting in accordance with the Company’s memorandum and articles
of association (such proxy statement and notice, as amended or supplemented, being referred to herein as the “Proxy
Statement”). Concurrently with the preparation of the Proxy Statement, the Company, Parent and Merger Sub shall
jointly prepare a Schedule 13E-3. The Company, Parent and Merger Sub shall use their reasonable efforts to cause the initial Schedule
13E-3 to be filed with the SEC (with the initial Proxy Statement filed as an exhibit) as soon as practicable after the date of
this Agreement. Each of the Company, Parent and Merger Sub shall use its reasonable best efforts so that the Schedule 13E-3 will
comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations promulgated
thereunder. Each of the Company, Parent and Merger Sub shall use its reasonable best efforts to respond promptly to any comments
of the SEC with respect to the Proxy Statement and Schedule 13E-3 and to resolve comments from the SEC. Each of the Company, Parent
and Merger Sub shall 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 and Schedule 13E-3. The Company shall promptly notify Parent and
Merger Sub upon the receipt of any comments from the SEC or its staff or any request from the SEC or its staff for amendments or
supplements to the Proxy Statement and Schedule 13E-3 and shall provide Parent with copies of all correspondence between it and
its Representatives, on the one hand, and the SEC and its staff, on the other hand. Prior to filing or mailing the Proxy Statement
and Schedule 13E-3 (or any amendment or supplement thereto) or responding to any comments of the SEC with respect thereto, the
Company (i) shall provide Parent and Merger Sub a reasonable amount of time to review and comment on such document or response
and (ii) shall consider in good faith including in such document or response all comments reasonably proposed by Parent and Merger
Sub. If at any time prior to the Shareholders’ Meeting, any information relating to the Company, Parent, Merger Sub or any
of their respective Affiliates, officers or directors, is discovered by the Company, Parent or Merger Sub which should be set forth
in an amendment or supplement to the Proxy Statement and Schedule 13E-3 so that (x) the Proxy Statement and Schedule 13E-3 shall
not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under which they are made, not misleading, and (y) the shareholders
of the Company are able to make an informed decision on whether or not to attend the Shareholders’ Meeting and how to vote,
the party which discovers such information shall promptly notify the other parties hereto and an appropriate amendment or supplement
describing such information shall be filed with the SEC and, to the extent required by applicable Law, disseminated to the shareholders
of the Company.
Section 6.02 Company
Shareholders’ Meeting.
(a) The
Company shall, promptly after the SEC confirms that it has no further comments on the Schedule 13E-3 and the Proxy Statement, (i)
establish a record date for determining shareholders of the Company entitled to vote at the Shareholders’ Meeting, (ii) with
the assistance of Parent and Merger Sub, prepare, mail or cause to be mailed the Proxy Statement to the holders of Shares (and
concurrently furnish the Proxy Statement under Form 6-K to the SEC), including Shares represented by ADSs, as of the record date
established for the shareholders’ meeting (the “Shareholders’ Meeting”),
for the purpose of voting upon the authorization and approval of this Agreement, the Plan of Merger and the Transactions, and (iii)
instruct or otherwise cause the Depositary to (A) fix the record date established by the Company for the Shareholders’ Meeting
as the record date for determining the holders of ADSs who shall be entitled to give instructions for the exercise of the voting
rights pertaining to the Shares represented by ADSs (the “Record ADS Holders”),
(B) provide all proxy solicitation materials to all Record ADS Holders, and (C) vote all Shares represented by ADSs in accordance
with the instructions of such corresponding Record ADS Holders. Without the prior written consent of Parent, authorization and
approval of this Agreement, the Plan of Merger and the Transactions are the only matters (other than procedural matters) that shall
be proposed to be voted upon by the shareholders of the Company at the Shareholders’ Meeting.
(b) Subject
to Section 6.04(c), the Company Board shall recommend to holders of the Shares that they authorize and approve this Agreement,
the Plan of Merger and the Transactions, and shall include such recommendation in the Proxy Statement. Unless there is a Change
in the Company Recommendation, the Company shall use its reasonable best efforts to solicit from its shareholders proxies in relation
to the Shareholders' Meeting.
Section 6.03 Access
to Information.
(a) From
the date hereof until the earlier of the Effective Time and the termination of this Agreement pursuant to Article VIII and subject
to applicable Law and the Confidentiality Agreements, upon reasonably advance notice from Parent, the Company shall (i) provide
to Parent (and Parent’s officers, directors, employees, accountants, consultants, financial and legal advisors, agents, financing
sources and other representatives, collectively, “Representatives”)
reasonable access during normal business hours to the offices, properties, books and records of any Group Company, (ii) furnish
to Parent and its Representatives such existing financial and operating data and other existing information as such Persons may
reasonably request, and (iii) instruct the Company Representatives to reasonably cooperate with Parent and its Representatives
in their investigation; 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 Confidentiality Agreements or any similar agreement with respect to
such information, (B) take or allow actions that would unreasonably interfere with the Company’s or any of its Subsidiaries’
operation of their respective business or (C) provide access to or furnish any information if doing so would violate any agreement
with any Third Party or any applicable Law, 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 of its Subsidiaries’ privilege with respect thereto.
(b) No
investigation pursuant to this Section 6.03 shall affect any representation or warranty in this Agreement of any party hereto or
any condition to the obligations of the parties hereto.
Section 6.04 No
Solicitation of Transactions.
(a) The
Company agrees that neither it nor any of its Subsidiaries nor any of its directors or officers will, and that it will instruct
the Company Representatives (including any investment banker, attorney or accountant retained by any Group Company), not to, in
each case, directly or indirectly, (i) solicit, initiate or knowingly encourage (including by way of furnishing nonpublic information
with respect to any Group Company), or knowingly facilitate, any inquiries or the making of any proposal or offer (including any
proposal or offer to its shareholders) that constitutes, or could reasonably be expected to lead to, any Competing Transaction,
or (ii) enter into, maintain or continue discussions or negotiations with the intention of encouraging a proposal with respect
to a Competing Transaction, or provide any nonpublic information with respect to any Group Company to, any Person in furtherance
of or to obtain a proposal or offer for a Competing Transaction, or (iii) agree to, approve, endorse or recommend any Competing
Transaction or enter into any letter of intent or Contract or commitment contemplating or otherwise relating to any Competing Transaction
(in each case, other than as permitted pursuant to Section 6.04(c)), or (iv) authorize or permit any of the Company or any of its
Subsidiaries, or any Company Representative retained by or acting directly or indirectly under the direction of the Company or
any of its Subsidiaries, to take any action set forth in clauses (a)(i) – (a)(iii) of this Section 6.04. The Company shall
not release any Third Party from, or waive any provision of, any confidentiality or standstill agreement to which it is a party
in respect of a Competing Transaction. The Company shall notify Parent as promptly as practicable (and in any event within forty-eight
(48) hours after the Company attains knowledge of any written proposal or offer) of any written proposal or offer regarding a Competing
Transaction, specifying (x) the identity of the party making such proposal or offer, and providing copies of such written proposal
or offer, and (y) whether the Company has any intention to provide confidential information to such Person. Immediately upon the
execution and delivery of this Agreement, the Company shall cease and cause to be terminated all existing discussions or negotiations
with any Person conducted heretofore with respect to any possible Competing Transaction.
(b) Notwithstanding
anything to the contrary in this Section 6.04, prior to the time the Requisite Company Vote is obtained, but not after, the Company
Board may directly or indirectly through the Company Representatives (x) contact any Person that has made a proposal or offer regarding
a Competing Transaction in order to clarify and understand the terms and conditions thereof in order to assess whether such offer
or proposal is reasonably expected to lead to a Superior Proposal, and (y) furnish information to, and enter into discussions with,
a Person who has made an unsolicited, written, bona fide proposal or offer regarding a Competing Transaction (provided that
such bona fide proposal or offer shall not have been obtained in violation of Section 6.04(a) and the Company shall have complied
with the requirements of Section 6.04(a) with respect to such proposal or offer), in the case of this clause (y), if the Special
Committee has (i) determined, in its good faith judgment (after consultation with its financial advisor and outside legal counsel),
that such proposal or offer constitutes or is likely to result in a Superior Proposal, (ii) determined, in its good faith judgment
(upon advice by outside legal counsel), that, in light of such Superior Proposal, failure to furnish such information or enter
into discussions would reasonably be expected to be inconsistent with its fiduciary obligations under applicable Law, and (iii)
obtained from such Person an executed confidentiality agreement on terms no less favorable in the aggregate to the Company than
those contained in the Confidentiality Agreements (it being understood that such confidentiality agreement and any related agreements
shall not include any provision calling for any exclusive right to negotiate with such party or having the effect of prohibiting
the Company from satisfying its obligations under this Agreement); provided that the Company shall concurrently make available
to Parent any material information concerning the Company and the Company’s Subsidiaries that is provided to any such Person
and that was not previously made available to Parent or its Representatives.
(c) Except
as set forth in Section 6.04(d), neither the Company Board nor any committee thereof shall (i) (A) withhold, withdraw, qualify
or modify, in a manner adverse to Parent or Merger Sub, or propose to withhold, withdraw, qualify or modify, in a manner adverse
to Parent or Merger Sub, the Company Recommendation, (B) fail to include the Company Recommendation in the Proxy Statement, (C)
approve or recommend, or publicly propose to approve or recommend to the shareholders of the Company, a Competing Transaction or
(D) if a tender offer or exchange offer for 15% or more of the outstanding shares of the Company that constitutes a Competing Transaction
is commenced, fail to recommend against acceptance of such tender offer or exchange offer by the shareholders of the Company (including,
for these purposes, by disclosing that it is taking no position with respect to the acceptance of such tender offer or exchange
offer by its shareholders, which shall constitute a failure to recommend against acceptance of such tender offer or exchange offer,
provided that a customary “stop, look and listen” communication by the Company Board pursuant to Rule 14d−9(f)
of the Exchange Act or a statement that the Company Board has received and is currently evaluating such Competing Transaction shall
not be prohibited or be deemed to be a Change in the Company Recommendation), within ten (10) Business Days after commencement
(any of the foregoing, a “Change in the Company Recommendation”), or
(ii) cause or permit the Company or any of its Subsidiaries to enter into any letter of intent, memorandum of understanding, agreement
in principle, merger agreement, acquisition agreement or any other similar document or Contract with respect to any Competing Transaction
(other than a confidentiality agreement entered into in compliance with Section 6.04(b))(each, an “Alternative
Acquisition Agreement”).
(d) Notwithstanding
the foregoing, if the Company Board determines, in its good faith judgment upon the recommendation of the Special Committee, prior
to the time of the Shareholders’ Meeting and upon advice by outside legal counsel, that failure to make a Change in the Company
Recommendation would reasonably be expected to be inconsistent with its fiduciary obligations under applicable Law, the Company
Board may effect a Change in the Company Recommendation and/or terminate this Agreement in accordance with Section 8.03(c), provided
that the Company shall have complied with the requirements of this Section 6.04 with respect to any proposal or offer. If the
Company Board effects a Change in the Company Recommendation and/or terminates this Agreement in response to a Superior Proposal,
then the Company shall (x) provide at least five (5) Business Days’ written notice to Parent (a “Notice
of Superior Proposal”) advising Parent that the Company Board has received a Superior Proposal, specifying the
material terms and conditions of such Superior Proposal, identifying the Person making such Superior Proposal and indicating that
the Company Board intends to effect a Change in the Company Recommendation and the manner in which it intends to do so (it being
agreed that the Notice of Superior Proposal and any amendment or update to such notice and the determination to so deliver such
notice, or update or amend public disclosures with respect thereto shall not constitute a Change in the Company Recommendation
for purposes of this Agreement), (y)make available its financial and legal advisors to negotiate with Parent and its Representatives
in good faith (to the extent Parent desires to negotiate) to make adjustments in the terms and conditions of this Agreement so
that such Third Party proposal or offer would cease to constitute a Superior Proposal, and (z) permit Parent and its Representatives
to make a presentation to the Company Board and the Special Committee regarding this Agreement and any adjustments with respect
thereto (to the extent Parent desires to make such a presentation); provided that any material modifications to such Third
Party proposal or offer that the Company Board has determined to be a Superior Proposal shall be deemed a new Superior Proposal
and the Company shall be required to again comply with the requirements of this Section 6.04(d) (provided that the reference to
five (5) Business Days' written notice in (x) above shall be deemed to be a reference to two (2) Business Days' written notice).
(e) A
“Competing Transaction” means any of the following (other than the
Transactions): (i) any merger, consolidation, share exchange, business combination, scheme of arrangement, amalgamation, recapitalization,
liquidation, dissolution or other similar transaction which would result in a Third Party acquiring assets, individually or in
the aggregate, constituting 15 % or more of the consolidated assets of the Company or to which 15% or more of the total revenue,
operating income or EBITDA of the Company are attributable; (ii) any sale, lease, exchange, transfer or other disposition of assets
or businesses that constitute or represent 15% or more of the total revenue, operating income, EBITDA or assets of the Group Companies,
taken as a whole; (iii) any sale, exchange, transfer or other disposition of 15% or more of any class of equity securities of the
Company; or (iv) any general offer, tender offer or exchange offer that, if consummated, would result in any Third Party beneficially
owning 15% or more of any class of equity securities of the Company.
(f) A
“Superior Proposal” means a written, bona fide offer made by a Third
Party for a Competing Transaction (with all percentages included in the definition of Competing Transaction increased to 50%) on
terms (including conditions to consummation of the contemplated transaction) that the Company Board determines, in its good faith
judgment upon the recommendation of the Special Committee (after (x) consultation with its financial advisor and outside legal
counsel, and (y) taking into consideration such factors as the Special Committee considers appropriate, which may include, among
other things, the legal, financial, regulatory and other aspects, of such offer and this Agreement (in each case taking into account
any revisions to this Agreement made or proposed in writing by Parent pursuant to Section 6.04(d) or otherwise prior to the time
of determination), including financing, regulatory approvals, breakup or termination fee and expense reimbursement provisions,
expected timing and risk and likelihood of consummation and other relevant events and circumstances), to be more favorable to the
Company’s shareholders from a financial point of view (other than holders of Excluded Shares) than the Merger and accordingly
to be in the best interests of the Company and its shareholders (other than holders of Excluded Shares).
Section 6.05 Directors’
and Officers’ Indemnification and Insurance.
(a) The
memorandum and articles of association of the Surviving Company shall contain provisions no less favorable with respect to exculpation,
advancement of expenses and indemnification than are set forth in the memorandum and articles of association of the Company as
in effect on the date hereof, which provisions shall not be amended, repealed or otherwise modified for a period of six (6) years
from the Effective Time in any manner that would affect adversely the rights thereunder of individuals who, at or prior to the
Effective Time, were directors, officers, employees, fiduciaries or agents of the Company, unless such modification shall be required
by Law.
(b) The
Surviving Company shall maintain in effect for six (6) years from the Effective Time, the current directors’ and officers’
liability insurance policies maintained by the Company with respect to matters occurring prior to the Effective Time, including
acts or omissions occurring in connection with this Agreement and the consummation of the Transactions (the parties covered thereby,
the “Indemnified Parties”); provided, however, that the
Surviving Company may substitute therefor policies of at least the same coverage containing terms and conditions that are no less
favorable, and provided, further, that in no event shall the Surviving Company be required to expend pursuant to
this Section 6.05(b) more than an amount per year equal to 300% of current annual premiums paid by the Company for such insurance.
In addition, the Company may and, at Parent’s request, the Company shall, purchase a six (6)-year “tail” prepaid
policy prior to the Effective Time on terms and conditions no less advantageous to the Indemnified Parties than the existing directors’
and officers’ liability insurance maintained by the Company. If such “tail” prepaid policies have been obtained
by the Company prior to the Effective Time, the Surviving Company shall, and Parent shall cause the Surviving Company to, maintain
such policies in full force and effect, and continue to honor the respective obligations thereunder, and all other obligations
of Parent or Surviving Company under this Section 6.05(b) shall terminate.
(c) From
and after the Effective Time, the Surviving Company shall comply with all of the Company’s obligations, and shall cause its
Subsidiaries to comply with their respective obligations to indemnify and hold harmless (including any obligations to advance funds
for expenses) (i) the present and former officers and directors thereof against any and all costs or expenses (including reasonable
attorneys’ fees and expenses), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection
with any actual or threatened claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative
(“Damages”), arising out of, relating to or in connection with (A)
the fact that such Person is or was a director, officer or employee of the Company or such Subsidiary, or (B) any acts or omissions
occurring or alleged to have occurred prior to or at the Effective Time, to the extent provided under the Company’s or such
Subsidiaries’ respective organizational and governing documents or agreements in effect on the date hereof and to the fullest
extent permitted by the CICL or any other applicable Law, including the approval of this Agreement, the Plan of Merger, the Transactions,
or the other Transactions or arising out of or pertaining to the Transactions and actions to enforce this provision or any other
indemnification or advancement right of any such Person, provided that such indemnification shall be subject to any limitation
imposed from time to time under applicable Law; and (ii) such Persons against any and all Damages arising out of acts or omissions
in such Persons' official capacity as an officer, director or other fiduciary in the Company or any of its Subsidiaries if such
service was at the request or for the benefit of the Company or any of its Subsidiaries.
(d) A
person seeking indemnification in accordance with Section 6.05(c) shall use commercially reasonably efforts to promptly notify
the Surviving Company, to prevent the Surviving Company or any of its Subsidiaries from being materially and adversely prejudiced
by late notice. The right of the Surviving Company (or a subsidiary nominated by it), if any, to participate in and/or assume the
defense of any Action in respect of which indemnification is sought under Section 6.05(c) shall be determined in accordance with
the applicable agreement or document providing for such indemnification.
(e) In
the event the Company or the Surviving Company or any of their respective successors or assigns (i) consolidates with or merges
into any other Person and shall not be the continuing or surviving company or entity of such consolidation or merger or (ii) transfers
all or substantially all of its properties and assets to any person, then, and in each such case, proper provision shall be made
so that the successors and assigns of the Company or the Surviving Company, as the case may be, or at Parent’s option, Parent,
shall assume the obligations set forth in this Section 6.05.
(f) The
provisions of this Section 6.05 shall survive the consummation of the Merger and are intended to be for the benefit of, and shall
be enforceable by, each of the Indemnified Parties and their heirs and legal representatives, each of which shall be a third-party
beneficiary of the provisions of this Section 6.05.
(g) Nothing
in this Agreement is intended to, shall be construed to or shall release, waive or impair any rights to directors’ and officers’
insurance claims under any policy that is or has been in existence with respect to the Company or any of its Subsidiaries or their
respective officers, directors and employees, it being understood and agreed that the indemnification provided for in this Section
6.05 is not prior to or in substitution for any such claims under any such policies.
Section 6.06 Notification
of Certain Matters.
Each of the Company and
Parent shall promptly notify the other in writing of:
(a) any
notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with
the Transactions;
(b) any
notice or other communication from any Governmental Authority in connection with the Transactions; and
(c) any
Actions commenced or, to the knowledge of the Company or the knowledge of Parent, threatened against the Company or any of its
Subsidiaries or Parent and any of its Subsidiaries, as the case may be, that, if pending on the date of this Agreement, would have
been required to have been disclosed by such party pursuant to any of such party’s representations and warranties contained
herein, or that relate to such party’s ability to consummate the Transactions.
together, in each case, with a copy of
any such notice, communication or Action; provided that the delivery of any notice pursuant to this Section 6.06 shall not
limit or otherwise affect the remedies available hereunder to the party receiving such notice; provided, further, that failure
to give notice pursuant to this Section 6.06 shall not constitute a failure of a condition to the Merger set forth in Article VII.
Section 6.07 Further
Action; Reasonable Best Efforts.
(a) Upon
the terms and subject to the conditions of this Agreement, each of the parties hereto shall, (i) make promptly its respective
filings, and thereafter make any other required submissions, with each relevant Governmental Authority with jurisdiction over enforcement
of any applicable antitrust or competition Laws with respect to the Transactions, and coordinate and cooperate fully with the other
parties in exchanging such information and providing such assistance as the other parties may reasonably request in connection
therewith (including (A) notifying the other parties promptly of any communication (whether verbal or written) it or any of its
Affiliates receives from any Governmental Authority in connection with such filings or submissions, (B) permitting the other parties
to review in advance, and consulting with the other parties on, any proposed filing, submission or communication (whether verbal
or written) by such party to any Governmental Authority, and (C) giving the other parties the opportunity to attend and participate
at any meeting with any Governmental Authority in respect of any filing, investigation or other inquiry); and (ii) use its
reasonable best efforts to take, or cause to be taken, all appropriate action, and to do, or cause to be done, all things necessary,
proper or advisable under applicable Laws or otherwise to consummate and make effective the Transactions, including employing such
resources as are necessary to obtain the Requisite Regulatory Approvals; provided, that none of the Company, Parent, Merger
Sub or any of their Affiliates shall be required to hold separate, restructure, reorganize, sell, divest, dispose of, or otherwise
take or commit to any action that limits its freedom of action with respect to, or its ability to retain, any of its businesses,
services or assets. If, at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes
of this Agreement, the proper officers and directors of each party to this Agreement shall use their reasonable best efforts to
take all such action.
(b) Each party hereto
shall, upon request by any other party, furnish such other party with all information concerning itself, its Subsidiaries, directors,
officers and shareholders and such other matters as may be reasonably necessary or advisable in connection with the Proxy Statement,
the Schedule 13E-3, or any other statement, filing, notice or application made by or on behalf of Parent, Merger Sub, the Company
or any of their respective Subsidiaries to any third party and/or any Governmental Authority in connection with the Transactions.
Section 6.08 Obligations
of Merger Sub.
Parent shall take all
action necessary to cause Merger Sub to perform its obligations under this Agreement and to consummate the Transactions on the
terms and subject to the conditions set forth in this Agreement.
Section 6.09 Participation
in Litigation.
Prior to the Effective
Time, each of Parent and the Company shall (a) give prompt notice to the other party of any Actions commenced or, to the knowledge
of Parent or the Company, as the case may be, threatened, against the Company and/or its directors which relate to this Agreement
or the Transactions, and (b) the Company shall give Parent the opportunity to participate in the defense or settlement of any shareholder
Action against the Company and/or its directors relating to this Agreement or the Transactions, and no such Action shall be settled
or compromised, and the Company shall not take any action to adversely affect or prejudice any such Action, without Parent’s
prior written consent (such consent not to be unreasonably withheld, conditioned or delayed).
Section 6.10 Resignations.
To the extent requested
by Parent in writing at least five (5) Business Days prior to Closing, on the Closing Date, the Company shall use reasonable best
efforts to cause to be delivered to Parent duly signed resignations, effective as of the Effective Time, of the directors of the
Company designated by Parent.
Section 6.11 Public
Announcements.
Except as may be required
by applicable Law, the press release announcing the execution of this Agreement shall be issued only in such form as shall be mutually
agreed upon by the Company and Parent. Thereafter, at any time prior to the earlier of the Effective Time and the termination of
this Agreement pursuant to Article VIII, Parent and the Company shall consult with each other before issuing any press release,
having any communication with the press (whether or not for attribution), making any other public statement or scheduling any press
conference or conference call with investors or analysts with respect to this Agreement or the Transactions and, except in respect
of any such press release, communication, other public statement, press conference or conference call as may be required by applicable
Law or rules and policies of the NYSE, 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 6.11 shall not apply to any release or announcement made or proposed to be made by the
Company in connection with a Change in the Company Recommendation in compliance with this Agreement.
Section 6.12 Stock
Exchange Delisting.
Prior to the Effective
Time, the Company shall cooperate with Parent and use reasonable best efforts to take, or cause to be taken, all actions, and do
or cause to be done all things, reasonably necessary, proper or advisable on its part under applicable Laws and rules and policies
of the NYSE to enable the delisting of the Surviving Company from the NYSE and the deregistration of the Shares under the Exchange
Act as promptly as practicable after the Effective Time.
Section 6.13 Takeover
Statutes.
If any Takeover Statute
is or may become applicable to any of the Transactions, the parties shall use their respective reasonable best efforts (a) to take
all action necessary so that no Takeover Statute is or becomes applicable to any of the Transactions and (b) if any such Takeover
Statute is or becomes applicable to any of the foregoing, to take all action necessary (including, in the case of the Company and
the Company Board, grant all necessary approvals) so that the Transactions may be consummated as promptly as practicable on the
terms contemplated by this Agreement, including all actions to eliminate or lawfully minimize the effects of such Takeover Statute
in the Company’s memorandum and articles of association on the Transactions.
Section 6.14 Cooperation
in Financing.
(a) Each of Parent
and Merger Sub shall use reasonable best efforts to take, or cause to be taken, all actions and do, or cause to be done, all things
necessary, proper or advisable to arrange and obtain the Debt Financing on the terms and conditions described in the Debt Financing
Document in a timely manner including by (i) maintaining in effect the Debt Financing Document, (ii) satisfying on a timely basis
all conditions applicable to Parent and Merger Sub in the Debt Financing Document that are within their respective control, (iii)
consummating the Debt Financing, and (iv) fully enforcing the parties’ obligations (and the rights of Parent and Merger Sub)
under the Debt Financing Document in the event that all conditions applicable to Parent and Merger Sub contained in the Debt Financing
Document have been satisfied. In addition, Parent and Merger Sub shall pay, when due, all commitment fees and other fees arising
under the Debt Financing Documents as and when they become due and payable thereunder. If any portion of the Debt Financing becomes
unavailable on the terms and conditions contemplated by the Debt Financing Document, (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, when added to the portion of the Debt Financing that is available, to consummate the
Transactions with terms and conditions that are not less favorable to Parent and Merger Sub (as determined in the reasonable discretion
of Parent and Merger Sub) than the terms and conditions set forth in the Debt Financing Document as promptly as practicable following
the occurrence of such event (the “Alternative Financing”). Parent
shall promptly provide a true, correct and complete copy of the commitment letter in connection with an Alternative Financing ("Alternative
Financing Document") (together with a copy of any related fee letter with the fee amounts, pricing caps and other
economic terms redacted) to the Company. In the event Alternative Financing is obtained, any reference in this Agreement to “Debt
Financing” shall include Alternative Financing and any reference to “Debt Financing Document” shall include Alternative
Financing Document.
(b) Neither Parent
nor Merger Sub shall amend, alter or waive, or agree to amend, alter or waive (in any case whether by action or inaction), any
term of the Debt Financing Document to (i) reduce the aggregate amount of the Debt Financing such that the aggregate funds that
would be available to Parent or Merger Sub on the Closing Date would not be sufficient to complete the Transactions contemplated
hereunder on the Closing Date or (ii) impose new or additional conditions to the Debt Financing or otherwise expand, amend or modify
the Debt Financing in a manner that would reasonably be expected to (A) prevent or materially delay the ability of Parent or Merger
Sub to consummate the Merger and the other Transactions, (B) adversely impact in any material respect the ability of Parent or
Merger Sub to enforce its rights against the other parties to the Debt Financing Document, or (C) prevent or materially delay the
ability of the Company to satisfy its obligation under Section 6.14 (c)(ix), in each case, without the prior written consent of
the Company Board (such consent not to be unreasonably withheld, conditioned or delayed). Upon knowledge of any of the following,
Parent shall promptly (and in any event within two (2) Business Days) notify the Company of (i) the expiration or termination (or
attempted or purported termination, whether or not valid) of any Debt Financing Document, (ii) any breach of any material provisions
of any of the Debt Financing Documents by any party thereto or (iii) any refusal by the parties to the Debt Financing Document
to provide, or any stated intent in writing by the parties to the Debt Financing Document to refuse to provide, or expression of
concern or reservation by the parties to the Debt Financing Document regarding their obligation and/or ability to provide, the
full financing contemplated by the Debt Financing Document.
(c) The Company
agrees to use reasonable best efforts to provide, and shall instruct each of its Subsidiaries and each of their respective officers,
employees and Representatives to provide to Parent and Merger Sub (at Parent’s sole cost and expense), all reasonable cooperation
as may be requested by Parent or its Representatives in connection with the Debt Financing , including, without limitation:
(i) participation
in a reasonable number of meetings, presentations, due diligence sessions, road shows, sessions with rating agencies and other
meetings, including arranging for reasonable direct contact between senior management, representatives and advisors of the Company
with Representatives of Parent and its Debt Financing sources;
(ii) assisting
in the preparation of bank information memoranda, rating agency presentations, and similar documents reasonably requested by Parent
or its Representatives in connection with the Debt Financing (provided that such materials shall contain disclosure and financial
statements reflecting the Surviving Company as obligor) (including using reasonable best efforts to obtain consents of accountants
for use of their reports in any materials relating to the Debt Financing and delivery of one or more customary representation letters);
(iii) as
promptly as practicable, furnishing Parent and its Debt Financing sources with financial and other pertinent information regarding
the Company and its Subsidiaries customarily required for financing of the type contemplated under the Debt Financing Document
(including pursuant to Exhibit C of the Debt Financing Document);
(iv) cooperating
with advisors, consultants and accountants of Parent or its Debt Financing sources with respect to the conduct of any examination,
appraisal or review of the financial condition or any of the assets or liabilities of the Company or any Subsidiary of the Company,
including for the purpose of establishing collateral eligibility and values;
(v) executing
and delivering any customary officer certificates as may be reasonably requested by Parent;
(vi) facilitating
the securing or pledging of collateral and executing and delivering any pledge and security documents, commitment letters, underwriting
or placement agreements or other definitive financing documents, provided that any collateral or security granted to secure the
Financing and any obligations of the Company or any of its Subsidiaries under any such definitive documents shall be contingent
upon the occurrence of the Closing;
(vii) taking
all actions reasonably necessary to permit the prospective lenders involved in the Debt Financing to evaluate the Company’s
current assets, cash management and accounting systems, policies and procedures relating thereto for the purpose of establishing
collateral arrangements;
(viii) furnishing
Parent, Merger Sub and their Representatives promptly, and in any event at least 2 Business Days prior to the Closing Date (to
the extent requested by Parent or Merger Sub in writing at least 10 Business Days prior to the Closing Date), with all documentation
and other information required with respect to the Debt Financing under applicable “know your customer” and anti-money
laundering rules and regulations; and
(ix) with
respect to the Debt Financing only, establishing and maintaining a segregated bank account (the "CMB
Account") with China Merchants Bank Co., Ltd., Chongqing branch, and depositing into such account the RMB amount
specified in the Debt Financing Document under the heading "Cash Pledge Accounts"
(the "Cash Deposit") at least three (3) Business Days prior to Closing,
and maintaining such Cash Deposit in the CMB Account up to and including the date of Closing.
provided that
(1) nothing herein shall require any of the foregoing cooperation to the extent it would interfere unreasonably with the business
or operations of the Company or its Subsidiaries, and (2) neither the Company nor any of the Company’s Subsidiaries shall
be required to pay any commitment fee or similar fee or incur any liability with respect to the Debt Financing prior to the Closing;
provided further that neither the Company nor any of the Company's Subsidiaries shall be considered required to pay any commitment
fee or similar fee or incur any liability with respect to this clause (2) if Parent or Merger Sub pays for such commitment fee
or similar fee. Each of Parent and Merger Sub shall promptly, upon request by the Company, reimburse the Company for all reasonable
and documented out-of-pocket costs incurred by the Company or any of its Subsidiaries in connection with the foregoing cooperation
and shall indemnify and hold harmless the Company, the Company’s Subsidiaries and their respective directors, officers, employees,
agents and other representatives from and against any and all losses, damages, claims, costs or expenses suffered or incurred by
any of them in connection with the arrangement of the Debt Financing and/or Alternative Financing and any information utilized
in connection therewith to the fullest extent permitted by applicable Law and with appropriate contribution to the extent such
indemnification is not available, and the Limited Guarantees shall guarantee the obligations of Parent and Merger Sub pursuant
to this sentence of this Section 6.14(c).
(d) The Company
hereby consents to the use of its and its Subsidiaries' logos in connection with the Debt Financing; provided that such logos are
used solely in a manner that is not intended to or reasonably likely to harm or disparage the Company or any of its Subsidiaries
or the reputation or goodwill of the Company or any of its Subsidiaries.
Section 6.15 Knowledge
of Parent/ Merger Sub/ Rollover Shareholders. 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 Article V and Article
VI hereof, if the alleged breach is the proximate result of action or inaction taken by the Company or any of its Subsidiaries
at the direction of Parent, Merger Sub, any Rollover Shareholder or any shareholder, officer or director of Parent, Merger Sub
or any Rollover Shareholder without the approval or direction of the Company Board (acting with the concurrence of the Special
Committee) or the Special Committee. Neither Parent nor Merger Sub shall have any right to (a) terminate this Agreement under Section
8.04, or (b) claim any damage or seek any other remedy at law or in equity, in each case for any breach or inaccuracy in the representations
and warranties made by the Company in Article III to the extent Parent, Merger Sub, any Rollover Shareholder, any shareholder,
officer, or director of Parent, Merger Sub or any Rollover Shareholder has knowledge of such breach or inaccuracy.
Section 6.16 Amendments
to Parent Group Contracts.
(a) Without the Special
Committee’s prior written consent (which consent shall not be unreasonably withheld, delayed or conditioned), (i) Parent
and Merger Sub shall not, and shall cause any member of the Parent Group not to, unless and until a Change in the Company Recommendation
has occurred, amend, modify, waive any provision of, withdraw, terminate or enter into any Parent Group Contract, and (ii) Parent,
Merger Sub and any member of the Parent Group, including their respective Affiliates, shall not enter into or modify any Contract
pursuant to which any management members, directors or shareholders of the Company (other than the individual Guarantors), or any
of their respective Affiliates receives any consideration or other economic value from any person in connection with the Transactions
that is not provided in the Parent Group Contracts as of the date hereof.
(b) As soon as practicable
after the execution thereof (but in no event later than two (2) Business Days after the execution thereof), Parent and Merger Sub
shall provide the Special Committee with a copy of any Contract (other than Contracts that are entered into between any member
of the Parent Group, on the one hand, and any Representative of such member of the Parent Group, on the other hand) (i) (A) under
which the obligations of the parties to such Contract are similar to those in any existing Parent Group Contract, (B) solely among
one or more members of the Parent Group (including a consortium agreement or similar contractual arrangement) but not including
any third party or (C) relate to any of the matters described in Section 6.16 (a)(ii), and (ii) that relates to the Transactions,
in each case that is entered into after the date hereof and to which a member of the Parent Group is a party. Parent and Merger
Sub agree that any action by members of the Parent Group who are not parties to this Agreement that would constitute a breach of
this Section 6.16 if such member of the Parent Group who are not parties to this Agreement were a party to this Agreement for the
purposes of this Section 6.16 shall be deemed to be a breach of this Section 6.16.
Article
VII
CONDITIONS
TO THE MERGER
Section 7.01 Conditions
to the Obligations of Each Party.
The obligations of the
Company, Parent and Merger Sub to consummate the Merger are subject to the satisfaction or waiver (where permissible) of the following
conditions:
(a) Shareholder
Approval. This Agreement, the Plan of Merger and the Transactions shall have been authorized and approved by way of special
resolution (as defined in the CICL) by holders of Shares constituting the Requisite Company Vote at the Shareholders’ Meeting
in accordance with the CICL and the Company’s memorandum and articles of association.
(b) No Injunction.
No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Law or award, writ, injunction, determination,
rule, regulation, judgment, decree or executive order (an “Order”)
which is then in effect or is pending in writing and has or would have the effect of making the Merger illegal or otherwise prohibiting
the consummation of the Transactions.
(c) Regulatory
Approvals. All Requisite Regulatory Approvals shall have been obtained and be in full force and effect, except where the failure
to obtain such Requisite Regulatory Approvals would not, individually or in the aggregate prevent the consummation of any of the
Transactions.
Section 7.02 Conditions
to the Obligations of Parent and Merger Sub.
The obligations of Parent
and Merger Sub to consummate the Merger are subject to the satisfaction or waiver (where permissible) of the following additional
conditions:
(a) Representations
and Warranties. (i) Other than the representations and warranties of the Company contained in Sections 3.03 and 3.04, the representations
and warranties of the Company contained in this Agreement (disregarding for this purpose any limitation or qualification by materiality
or Material Adverse Effect) shall be true and correct in all respects as of the date hereof and as of the Closing Date, as though
made on and as of such date (other than representations and warranties that by their terms address matters only as of a specified
date, which shall be true and correct only as of such date), except to the extent such failures to be true and correct would not
have a Material Adverse Effect; and (ii) the representations and warranties set forth in Sections 3.03 and 3.04 shall be true
and correct in all material respects as of the date hereof and as of the Closing Date, as though made on and as of such date (other
than representations and warranties that by their terms address matters only as of a specified date, which shall be true and correct
only as of such date), in each case, interpreted without giving effect to any limitations or qualifications as to “materiality”
(including the word “material”) or “Material Adverse Effect”
set forth therein.
(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 provided that, for the purposes
of this Section 7.02(b) only, the covenant in Section 6.14(c)(ix) shall have been performed by the Company in full prior to and
on the Closing Date as outlined therein without regard to (A) the "to use reasonable best efforts" in Section 6.14(c)
or (B) the proviso (1) in Section 6.14(c).
(c) Officer Certificate.
The Company shall have delivered to Parent a certificate, dated the Closing Date, signed by a senior executive officer of the Company,
certifying as to the satisfaction of the conditions specified in Sections 7.02(a) and 7.02(b).
(d) Material
Adverse Effect. Since the date of this Agreement, there shall not have occurred and be continuing a Material Adverse Effect.
Section 7.03 Conditions
to the Obligations of the Company.
The obligations of the
Company to consummate the Merger are subject to the satisfaction or waiver (where permissible) of the following additional conditions:
(a) Representations
and Warranties. The representations and warranties of Parent and Merger Sub contained in this Agreement (disregarding for this
purpose any limitation or qualification by materiality) shall be true and correct in all respects as of the date hereof and as
of the Closing Date, as though made on and as of such date (other than representations and warranties that by their terms address
matters only as of a specified date, which shall be true and correct only as of such date), except to the extent such failures
to be true and correct, individually or in the aggregate, would not prevent or materially impede or impair the ability of Parent
and Merger Sub to consummate any of the Transactions.
(b) Agreements
and Covenants. Each of Parent and Merger Sub shall have performed or complied in all material respects with all agreements
and covenants required by this Agreement to be performed or complied with by it on or prior to the Closing Date.
(c) Officer Certificate.
Parent shall have delivered to the Company a certificate, dated the date of the Closing, signed by an executive officer of Parent,
certifying as to the satisfaction of the conditions specified in Sections 7.03(a) and 7.03(b).
Section 7.04 Frustration
of Closing Conditions.
Prior to the Termination
Date, none of the Company, Parent or Merger Sub may rely on the failure of any condition set forth in this Article VII to be satisfied
if such failure was caused by such party’s failure to comply with this Agreement and consummate the Transactions as contemplated
by this Agreement.
Article
VIII
TERMINATION,
AMENDMENT AND WAIVER
Section 8.01 Termination
by Mutual Consent.
This Agreement may be
terminated and the Transactions may be abandoned at any time prior to the Effective Time by mutual written consent of Parent and
the Company (acting through the Special Committee) with the approval of their boards of directors.
Section 8.02 Termination
by Either the Company or Parent.
This Agreement may be
terminated by either the Company (upon the recommendation by the Special Committee) or Parent at any time prior to the Effective
Time, if:
(a) the Merger shall
not have been consummated on or before the date falling nine months from the date of this Agreement (the “Termination
Date”) provided, that the right to terminate this Agreement pursuant to this Section 8.02(a) shall
not be available to any party hereto if the failure of the Merger to have been consummated on or before the Termination Date was
primarily due to such party’s breach of this Agreement or failure to perform in any material respect any of its obligations
under this Agreement;
(b) any Governmental
Authority of competent jurisdiction over the Merger shall have enacted, issued, promulgated, enforced or entered any final and
non-appealable Order which has the effect of making the consummation of the Merger illegal or otherwise preventing or prohibiting
the consummation of the Transactions provided, that the right to terminate this Agreement pursuant to this Section
8.02(b) shall not be available to any party hereto if the issuance of such final, non-appealable Order was primarily due to such
party’s breach of this Agreement or failure to perform in any material respect any of its obligations under this Agreement;
or
(c) the Requisite
Company Vote shall not have been obtained at the Shareholders’ Meeting duly convened therefor and concluded or at any adjournment
or postponement thereof; provided that the right to terminate this Agreement pursuant to this Section 8.02(c) shall not
be available to a party if the failure to obtain the Requisite Company Vote was primarily due to such party’s breach of this
Agreement or failure to perform any of its obligations under this Agreement.
Section 8.03 Termination
by the Company.
This Agreement may be
terminated by the Company (upon the recommendation of the Special Committee) at any time prior to the Effective Time, if:
(a) a breach in
any material respect of any representation, warranty, agreement or covenant of Parent or Merger Sub set forth in this Agreement,
shall have occurred, which breach would give rise to the failure of a condition set forth in Section 7.01 or Section 7.03 and as
a result of such breach by Parent or Merger Sub, such condition would not be capable of being satisfied prior to the Termination
Date; provided, however, that, the Company shall not have the right to terminate this Agreement pursuant to this
Section 8.03(a) if the Company is then in material breach of any representations, warranties, agreements or covenants hereunder
that would result in the conditions to Closing set forth in Section 7.01 or Section 7.02 not being satisfied;
(b) if (i) all of
the conditions set forth in Section 7.01 and Section 7.02 (other than those conditions that by their nature are to be satisfied
by actions taken at the Closing) have been satisfied, (ii) the Company has irrevocably confirmed by notice to Parent that all conditions
set forth in Section 7.03 have been satisfied or that it is willing to waive any unsatisfied conditions in Section 7.03 and (iii)
Parent and Merger Sub fail to consummate the Merger within ten (10) Business Days following the delivery of such notice; or
(c) prior to the
receipt of the Requisite Company Vote, (i) the Company Board (acting upon the recommendation of the Special Committee) has authorized
the Company to enter into an Alternative Acquisition Agreement with respect to a Superior Proposal pursuant to Section 6.04(d),
and (ii) the Company concurrently with, or immediately after, the termination of this Agreement enters into the Alternative Acquisition
Agreement with respect to the Superior Proposal referred to in the foregoing clause (i); provided that the Company shall
not be entitled to terminate this Agreement pursuant to this Section 8.03(c) unless the Company has (A) complied in all respects
with the requirements in Section 6.04 with respect to such Superior Proposal and/or Alternative Acquisition Agreement (other than
immaterial non-compliance that does not adversely affect Parent or Merger Sub) and (B) complied in all respects with Section 8.06
and pays the Company Termination Fee prior to or concurrently with taking any action pursuant to this Section 8.03(c), and any
purported termination pursuant to this Section 8.03(c) shall be void and of no force or effect if the Company shall not have paid
the Company Termination Fee.
Section 8.04 Termination
by Parent.
This Agreement may be
terminated by Parent at any time prior to the Effective Time, if:
(a) a breach in
any material respect of any representation, warranty, agreement or covenant of the Company set forth in this Agreement shall have
occurred, which breach would give rise to the failure of a condition set forth in Section 7.01 or Section 7.02 and as a result
of such breach by the Company, such condition would not be capable of being satisfied prior to the Termination Date; provided,
however, that, Parent shall not have the right to terminate this Agreement pursuant to this Section 8.04(a) if either Parent
or Merger Sub is then in material breach of any representations, warranties, agreements or covenants hereunder that would result
in the conditions to Closing set forth in Section 7.01 or Section 7.03 not being satisfied; or
(b) a Company Triggering
Event shall have occurred; provided that Parent shall not have the right to terminate this Agreement pursuant to this Section 8.04(b)
if Parent or Merger Sub’s failure to fulfill any of its obligations under this Agreement has been a cause or, or resulted
in, such Company Triggering Event.
Section 8.05 Effect
of Termination.
In the event of the termination
of this Agreement pursuant to this Article VIII, this Agreement shall forthwith become void, and there shall be no liability under
this Agreement on the part of any party hereto; provided, however, that the terms of Section 6.11, Article VIII and
Article IX shall survive any termination of this Agreement.
Section 8.06 Fees
Following Termination.
(a) The Company
will pay, or cause to be paid, by wire transfer of same day funds, to one or more designees of Parent a cash amount equal to $1,538,250
(the “Company Termination Fee”) if this Agreement is terminated:
(i) by Parent
pursuant to Section 8.04;
(ii) by the
Company or Parent pursuant to Section 8.02(a) or Section 8.02(c), if and only if, (A) at the time of such termination, a bona fide
proposal or offer with respect to a Competing Transaction shall have been submitted, proposed or publicly announced or publicly
made known to the Company, and not withdrawn; (B) following the occurrence of an event described in the preceding clause (A), this
Agreement is terminated by the Company or Parent pursuant to Section 8.02(a) or Section 8.02(c), and (C) within twelve (12) months
after such termination, the Company or any of its Subsidiaries consummates a Competing Transaction with a Third Party; provided
that for purposes of this Section 8.06(a), all references to “15%” in the definition of “Competing
Transaction” shall be deemed to be references to “50%”); or
(iv) by the
Company pursuant to Section 8.03(c),
such payment to be
made, in the case of termination pursuant to clauses (i) and (ii) above, at or prior to the time of such termination, and, in the
case of termination pursuant to clause (ii) above as promptly as possible (but in any event within two (2) Business Days following
the consummation by the Company or its Subsidiary of the Competing Transaction).
(b) Parent will
pay, or cause to be paid, by wire transfer of same day funds, to the Company a cash amount equal to $4,000,000 (the “Parent
Termination Fee”) if this Agreement is terminated by the Company pursuant to Section 8.03(a) or (b), such payment
to be made as promptly as possible (but in any event within two (2) Business Days) following such termination. For the avoidance
of doubt, in the event the Company fails to carry out any of the following actions, which do not result from any action, inaction
or direction of Parent, Merger Sub or any shareholders, directors or officers of Parent or Merger Sub, and, solely as a result
of such event and through no fault of Parent, Merger Sub or any shareholders, directors or officers of Parent or Merger Sub, Parent
fails to obtain the Debt Financing in accordance with the Debt Financing Document, Parent shall not be required to pay the Parent
Termination Fee: (i) establish and maintain a segregated bank account with China Merchants Bank Co., Ltd., Chongqing branch, (ii)
deposit into such account the amount of cash deposit specified in the Debt Financing Document (under the heading “Cash
Pledge Accounts” therein) at least three (3) Business Days prior to Closing and (iii) maintain such cash deposit
in the CMB Account up to and including the day of Closing.
(c) 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 reasonable,
out of pocket costs and expenses actually incurred or accrued by the other party (including fees and expenses of counsel) in connection
with the collection under and enforcement of this Section 8.06. Such collection expenses shall not otherwise diminish in any way
the payment obligations hereunder.
(d) Each of the
Company, Parent and Merger Sub acknowledges that (i) the agreements contained in this Section 8.06 are an integral part of the
Transactions, (ii) the damages resulting from termination of this Agreement under circumstances where a Company Termination Fee
or Parent Termination Fee is payable are uncertain and incapable of accurate calculation and therefore, the amounts payable pursuant
to Section 8.06(a) or Section 8.06(b) are not a penalty but rather constitute amounts akin to liquidated damages in a reasonable
amount that will compensate Parent or the Company, as the case may be, for the efforts and resources expended and opportunities
foregone while negotiating this Agreement and in reliance on this Agreement and on the expectation of the consummation of the Transactions,
and (iii) without the agreements contained in this Section 8.06, the parties hereto would not have entered into this Agreement.
(e) Notwithstanding
anything to the contrary in this Agreement, in the event that Parent or Merger Sub fails to effect the Closing for any reason or
no reason or they otherwise breach this Agreement (whether willfully, intentionally, unintentionally or otherwise) or otherwise
fail to perform hereunder (whether willfully, intentionally, unintentionally or otherwise), then except for an order of specific
performance to the extent permitted by Section 9.08, the Company’s right to terminate this Agreement and receive the Parent
Termination Fee pursuant to Section 8.06(b) and, if applicable, expenses pursuant to Section 6.14(c) or Section 8.06(c) and the
guarantee of such obligations pursuant to the Limited Guarantees shall be the sole and exclusive remedy (whether at law, in equity,
in contract, in tort or otherwise) of any Group Company and all members of the Company Group (as defined below) against (i) Parent
or Merger Sub, (ii) the former, current and future holders of any equity, partnership or limited liability company interest, controlling
persons, directors, officers, employees, agents, attorneys, Affiliates, members, managers, general or limited partners, stockholders,
assignees of Parent or Merger Sub, (iii) any Debt Financing source, or any other Persons that have committed to provide or otherwise
entered into agreements in connection with the Debt Financing or (iv) any holders or future holders of any equity, stock, partnership
or limited liability company interest, controlling persons, present and former directors, officers, employees, agents, attorneys,
Affiliates, members, managers, general or limited partners, stockholders, representatives and their successors and assignees of
any of the foregoing (clauses (i) – (iv), 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 Transactions to be consummated (whether willfully, intentionally, unintentionally or otherwise).
For the avoidance of doubt, except in the event of fraud or willful breach, neither Parent nor any member of the Parent Group shall
have any liability for monetary damages of any kind or nature or arising in any circumstance in connection with this Agreement
or any of the Transactions other than the payment of the Parent Termination Fee pursuant to Section 8.06(b) and, if applicable,
expenses pursuant to Section 8.06(c), and in no event other than fraud or willful breach shall any Group Company, 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, agents, successors or permitted assigns 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, other than (without duplication) from Parent or Merger Sub to the extent provided in Section 8.06(b) and,
if applicable, expenses pursuant to Section 8.06(c) and the guarantee of such obligations pursuant to 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 set forth in Section 9.08. For the avoidance of doubt, while the Company may pursue both a grant of specific performance
as permitted by Section 9.08 and the payment of the Parent Termination Fee pursuant to Section 8.06(b), plus any amounts pursuant
to Section 8.06(c) (if any), under no circumstances shall the Company be permitted or entitled to receive both such grant of specific
performance and payment of the Parent Termination Fee. In addition, the Company shall be the only Person entitled to seek payment
of the Parent Termination Fee and such expenses. This provision was specifically bargained for and reflected in the Merger Consideration
and is intended to be for the benefit of, and shall be enforceable by, each member of the Parent Group.
(f) Notwithstanding
anything to the contrary in this Agreement, in the event that the Company fails to perform hereunder or breach any provision of
this Agreement (whether willfully, intentionally, unintentionally or otherwise), then except for an order of specific performance
to the extent permitted by Section 9.08, Parent’s right to terminate this Agreement and receive the Company Termination Fee
pursuant to Section 8.06(a), plus any amounts pursuant to Section 8.06(c) (if any) shall be the sole and exclusive remedy (whether
at law, in equity, in contract, in tort or otherwise) of any member of the Parent Group against any member of the Company Group,
for any loss or damage suffered as a result of any breach of any representation, warranty, covenant or agreement (whether
willfully, intentionally, unintentionally or otherwise), any failure to perform hereunder or other failure of the Transactions
to be consummated (whether willfully, intentionally, unintentionally or otherwise). For the avoidance of doubt, except in the event
of fraud or willful breach, 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 8.06(a), plus any amounts pursuant to Section 8.06(c) (if any), and
in no event (other than in case of fraud or willful breach) 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 (without duplication) from the Company to the extent
provided in Section 8.06(a), plus any amounts pursuant to Section 8.06(c) (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
set forth in Section 9.08. For the avoidance of doubt, while Parent may pursue both a grant of specific performance as permitted
by Section 9.08 and the payment of the Company Termination Fee pursuant to Section 8.06(a), plus any amounts pursuant to Section
8.06(c) (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. In addition, Parent shall be the only Person entitled to seek payment of the Company
Termination Fee and such expenses. This provision was specifically bargained for and reflected in the Merger Consideration and
is intended to be for the benefit of, and shall be enforceable by, each member of the Company Group.
Article
IX
GENERAL
PROVISIONS
Section 9.01 Non-Survival
of Representations, Warranties and Agreements.
None of the representations
and warranties in this Agreement or in any schedule or instrument delivered pursuant to this Agreement shall survive beyond the
Effective Time. None of the covenants and agreements in this Agreement shall survive beyond the Effective Time, other than the
covenants and agreements contained in this Article IX, the agreements of the Company, Parent and Merger Sub contained in Article
II and Article VIII and those other covenants and agreements of the parties which by their terms apply or contemplate performance
after the Effective Time until fully performed.
Section 9.02 Notices.
All notices, requests,
claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly
given upon receipt) by delivery in person, by telecopy or by registered or certified mail (postage prepaid, return receipt requested)
to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given
in accordance with this Section 9.02):
if to Parent or Merger Sub:
16th Floor, C1 Building,
Chongqing Headquarters City District C
No.780 Jingwei Avenue, YuZhong District
Chongqing, the People's Republic of China
with a copy to:
Skadden, Arps, Slate, Meagher & Flom,
42/F Edinburgh Tower, The Landmark,
15 Queen’s Road Central, Hong Kong
Attention: Z. Julie Gao / Will Cai
Facsimile: +852 3910 4850 / +852 3910 4891
if to the Company:
16th Floor, C1 Building,
Chongqing Headquarters City District C
No.780 Jingwei Avenue, YuZhong District
Chongqing, the People's Republic
of China
with a copy to:
Kirkland & Ellis International LLP
c/o 26/F Gloucester Tower
The Landmark
15 Queen’s Road Central
Central, Hong Kong
Attention: David Zhang / Jesse Sheley
Facsimile: +852-3761-3301
Section 9.03 Certain
Definitions.
(a) For purposes
of this Agreement:
“Affiliate”
of a specified Person means a Person who, directly or indirectly through one or more intermediaries, controls, is controlled by,
or is under common control with, such specified Person.
“Anticorruption
Laws” means Laws relating to anti-bribery or anticorruption (governmental or commercial), which apply to the business
and dealings of any Group Company, including laws that prohibit the corrupt payment, offer, promise or authorization of the payment
or transfer of Anything of Value directly or indirectly, to any foreign government official, foreign government employee or commercial
entity to obtain a business advantage such as, without limitation, the PRC Law on Anti-Unfair Competition adopted on September
2, 1993, the Interim Rules on Prevention of Commercial Bribery issued by the PRC State Administration of Industry and Commerce
on November 15, 1996, the U.S. Foreign Corrupt Practices Act of 1977, as amended from time to time and all applicable Laws enacted
to implement the OECD Convention on Combating Bribery of Foreign Officials in International Business Transactions.
“Anything
of Value” means cash, gift, travel, meal, entertainment, scholarship, and loan at below market rate.
“Business
Day” means any day on which the principal offices of the SEC in Washington, D.C. are open to accept filings, or,
in the case of determining a date when any payment is due, any day on which banks are not required or authorized to close in New
York or Hong Kong.
“Company
Option” means each option to purchase Shares under the Share Incentive Plan.
“Company
Restricted Share” means each restricted share award granted by the Company under the Share Incentive Plan.
“Company
Share Award” means each Company Option or each Company Restricted Share granted by the Company under the Share
Incentive Plan.
“Company
Triggering Event” shall be deemed to have occurred if (i) there shall have been a Change in the Company Recommendation
or (ii) the Company Board shall have publicly recommended to the shareholders of the Company a Competing Transaction or shall
have entered into any Alternative Acquisition Agreement with respect to any Competing Transaction (other than a confidentiality
agreement entered into in compliance with Section 6.04(b)).
“Confidentiality
Agreements” means, collectively, the confidentiality agreement between the Company and Sky Success Venture Holdings
Limited, dated October 16, 2015; the confidentiality agreement between the Company and Ms. Hong Li, dated October 16, 2015 and
the confidentiality agreement between the Company and Mr. Xingqiang Zhang, dated October 16, 2015.
“Contract”
means any note, bond, mortgage, indenture, deed of trust, contract, agreement, lease, license, permit, franchise or other instrument.
“control”
(including the terms “controlled by” and “under
common control with”) means the possession, directly or indirectly, or as trustee or executor, of the power to
direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities or
the possession of voting power, as trustee or executor, by contract or credit arrangement or otherwise.
“Environmental
Law” means any applicable local, provincial or national Law relating to (a) the protection of the environment
or (b) the handling, use, transportation, disposal, release or threatened release of any Hazardous Substance.
“Excluded
Shares” means, collectively, (i) the Shares (including Shares represented by ADSs) beneficially owned by each
Rollover Shareholder, as set forth on Annex B; (ii) Shares held by Parent, the Company or any of their Subsidiaries; and (iii)
Shares held by the Depositary that are not represented by ADSs (including Shares reserved for the issuance and allocation of ADSs
pursuant to the Share Incentive Plan and/or any Company Share Award granted thereunder).
“Exercise
Price” means, with respect to any Company Option, the applicable exercise price per Share underlying such Company
Option.
“Government
Official” means (i) any official, officer, employee or representative of, or any Person acting in an official
capacity for or on behalf of, any Governmental Authority, (ii) any political party or party official or candidate for political
office or (iii) any company, business, enterprise or other entity owned, in whole or in part, or controlled by any Person described
in the foregoing clause (i) or (ii) of this definition.
“Group
Company” means any of the Company and its Subsidiaries.
“Hazardous
Substance” means any chemical, pollutant, waste or substance that is (a) listed, classified or regulated under
any Environmental Law as hazardous substance, toxic substance, pollutant, contaminant or oil or (b) any petroleum product or by
product, asbestos containing hazardous material, polychlorinated biphenyls or radioactive material.
“Indebtedness”
means, with respect to any Person, (i) all indebtedness of such Person, whether or not contingent, for borrowed money, (ii) all
obligations of such Person for the deferred purchase price of property or services, (iii) all obligations of such Person evidenced
by notes, bonds, debentures or other similar instruments, (iv) all obligations of such Person under currency, interest rate
or other swaps, and all hedging and other obligations of such Person under other derivative instruments, (v) all indebtedness
created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person
(even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession
or sale of such property), (vi) all obligations of such Person as lessee under leases that have been or should be, in accordance
with GAAP, recorded as capital leases, (vii) all obligations, contingent or otherwise, of such Person under acceptance, letter
of credit or similar facilities, (viii) all obligations of such Person to purchase, redeem, retire, defease or otherwise acquire
for value any share capital of such Person or any warrants, rights or options to acquire such share capital, valued, in the case
of redeemable preferred shares, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends,
(ix) all Indebtedness of others referred to in clauses (i) through (viii) above guaranteed directly or indirectly in any manner
by such Person, and (x) all Indebtedness referred to in clauses (i) through (viii) above secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Liens on property (including accounts
and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness.
“Insolvent”
means, 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.
“Intellectual
Property” means in any and all jurisdictions worldwide, to the extent protected by applicable Laws, all (i) patents,
utility models, inventions and discoveries, statutory invention registrations, mask works, invention disclosures, and industrial
designs, community designs and other designs, (ii) trademarks, service marks, domain names, uniform resource locators, trade dress,
trade names, logos and other identifiers of source, including the goodwill symbolized thereby or associated therewith, (iii) works
of authorship (including Software) and copyrights, and moral rights, design rights and database rights therein and thereto, (iv)
confidential and proprietary information, including Trade Secrets, know-how and invention rights, (v) rights of privacy and publicity,
(vi) registrations, applications, renewals, continuations, continuations-in-part, substitutions and extensions for any of the foregoing
in (i)-(ii) and (v), and (vii) any and all other similar proprietary rights.
“knowledge”
means, with respect to the Company, the actual knowledge of the Chief Financial Officer of the Company, and with respect to any
other party hereto, the actual knowledge of any director of such party.
“Liens”
means any security interest, pledge, hypothecation, mortgage, lien (including environmental and Tax liens), violation, charge,
lease, license, encumbrance, servient easement, adverse claim, reversion, reverter, preferential arrangement, restrictive covenant,
condition or restriction of any kind, including any restriction on the use, voting, transfer, receipt of income or other exercise
of any attributes of ownership.
“Material
Adverse Effect” means any event, circumstance, change or effect that, individually or in the aggregate with all
other events, circumstances, changes and effects, is or would reasonably be expected to (i) be materially adverse to the business,
financial condition, or results of operations of the Group Companies taken as a whole or (ii) prevent or materially delay the consummation
of the Transactions or otherwise be materially adverse to the ability of the Company to perform its material obligations under
this Agreement; provided, however, that in no event shall any of the following, either alone or in combination, constitute,
or be taken into account in determining whether there has been, a “Material Adverse
Effect”: (A) changes affecting the economic conditions or financial markets generally in any country or region
in which the Company or any of its Subsidiaries conducts business; (B) changes in GAAP or any interpretation thereof after the
date hereof, or to applicable Laws or the interpretation or enforcement thereof that are applicable to the Company or any of its
Subsidiaries after the date of this Agreement; (C) changes that are the result of factors generally affecting the industries in
which the Company and its Subsidiaries operate; (D) changes affecting the financial, credit or securities markets in which the
Company or any of its Subsidiaries operates, including changes in interest rates or foreign exchange rates; (E) effects resulting
from the public announcement of the Transactions, including the initiation of litigation or other legal proceeding by any Person
with respect to this Agreement or the Transactions or any losses of employees; (F) the Company’s failure to meet any estimates,
forecasts or expectations of the Company’s revenue, earnings or other financial performance or results of operation or a
change in the Company’s credit ratings; (G) natural disasters, declarations of war, acts of sabotage or terrorism or armed
hostilities, in each case occurring after the date hereof; (H) changes in the market price or trading volume of the ADSs; (I) actions
taken (or omitted to be taken) at the request of Parent or Merger Sub; (J) effects resulting from the identity of, or any facts
or circumstances relating to Parent, Merger Sub, the Guarantors or any of their respective Affiliates; or (K) loss of, or change
in, the relationship of the Company or any of its Subsidiaries, contractual or otherwise, with its customers, suppliers, vendors,
lenders, employees, investors, or joint venture partners arising out of the execution, delivery or performance of this Agreement,
the consummation of the Transactions or the announcement of any of the foregoing; provided further, that events, circumstances,
changes or effects set forth in clauses (A), (B), (C) and (G) above shall be taken into account in determining whether a “Material
Adverse Effect” has occurred or reasonably would be expected to occur if and to the extent such events, circumstances,
changes or effects individually or in the aggregate have a materially disproportionate impact on the Company and its Subsidiaries,
taken as a whole, relative to the other participants in the industries and geographic markets in which the Company and its Subsidiaries
conduct their businesses.
“Permitted
Liens” means (i) Taxes, assessments and other governmental levies, fees or charges imposed which are not yet due
and payable, or which are being contested in good faith, (ii) mechanics liens and similar liens arising or incurred in the ordinary
course of business relating to obligations as to which there is no default on the part of the Group Companies or that secure a
liquidated amount, that are being contested in good faith, (iii) zoning, building codes and other land use Laws regulating the
use or occupancy of such real property or the activities conducted thereon which are imposed by any Governmental Authority having
jurisdiction over such real property which are not violated by the current use or occupancy of such real property or the operation
of the business thereon, (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 or the operation of
the business conducted thereon, (v) leases, subleases and licenses (other than capital leases and leases underlying sale and leaseback
transactions), (vi) Liens imposed by applicable Law, (vii) pledges or deposits to secure obligations under workers’ compensation
Laws or similar legislation or to secure public or statutory obligations, (viii) pledges and deposits to secure the performance
of bids, trade contracts, leases, surety and appeal bonds, performance bonds and other obligations of a similar nature, in each
case in the ordinary course of business, (ix) Liens securing indebtedness or liabilities that (A) are reflected in the Company
SEC Reports filed or furnished prior to the date hereof, or (B) that have otherwise been disclosed to Parent in writing as of the
date of this Agreement, (x) Liens arising in connection with contractual arrangements through which the Company controls certain
Group Companies; (xi) Liens created by licenses of Intellectual Properties in the ordinary course of business, and (xii) any other
Liens that have been incurred or suffered in the ordinary course of business and that would not have a Material Adverse Effect.
“Person”
means an individual, corporation, partnership, limited partnership, limited liability company, syndicate, person (including a “person”
as defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision, agency
or instrumentality of a government.
“PRC”
means the People’s Republic of China (for the purpose of this Agreement, excluding Hong Kong, Macau and Taiwan).
“Rollover
Shareholders” means, collectively, Ms. Hong Li, Mr. Xingqiang Zhang, Regal Fair Holdings Limited, Zhiyun Peng,
Zhiyong Hong, Sky Success Venture Holdings Limited, and SIG China Investments One, Ltd., to the extent such Rollover Shareholder
has entered into a Rollover Agreement with respect to his or her Excluded Shares.
“Share
Incentive Plan” means the 2009 Share Incentive Plan of the Company and all amendments and modifications thereto.
“Software”
means all (i) computer programs, applications, systems and code, including software implementations of algorithms, models and methodologies,
program interfaces, and source code and object code, (ii) Internet and intranet websites, databases and data compilations, including
data and collections of data, whether machine-readable or otherwise, (iii) software development and design tools, library functions
and compilers, (iv) technology supporting websites, and the contents and audiovisual displays of websites, and (v) documentation
and other works of authorship (including user manuals and training materials) embodying any of the foregoing.
“Subsidiary”
means, with respect to any Person, any Person of which (i) such party or any other Subsidiary of such party is a general partner,
(ii) at least a majority of the securities (or other interests having by their terms ordinary voting power to elect a majority
of the board of directors or other performing similar functions with respect to such corporation or other organization) is, directly
or indirectly, owned or controlled by such party or by any one or more of its Subsidiaries, or by such party and one or more of
its Subsidiaries or (iii) such party or any other Subsidiary of such party controls through contractual arrangements.
“Taxes”
means any and all taxes, fees, levies, duties, tariffs, imposts and other charges of any kind (together with any and all interest,
penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any Governmental Authority or taxing
authority, including: taxes or other charges on or with respect to income, franchise, windfall or other profits, gross receipts,
occupation, property, real estate, deed, land use, sales, use, capital stock, payroll, severance, employment (including withholding
obligations imposed on employer/payer), social security, workers’ compensation, unemployment compensation or net worth; taxes
or other charges in the nature of excise, withholding (as payor or payee), ad valorem, stamp, transfer, value-added or gains taxes;
license, registration and documentation fees; and customers’ duties, tariffs and similar charges.
“Third
Party” means any Person or “group” (as defined under Section 13(d) of the Exchange Act) of Persons,
other than Parent or any of its Affiliates or Representatives.
(b) The following
terms have the meaning set forth in the Sections set forth below:
| Defined Term |
|
Location of Definition |
| |
|
|
| 2014 Annual Report |
|
Section 3.07(d) |
| Action |
|
Section 3.10 |
| ADS |
|
Section 2.01(b) |
| ADSs |
|
Section 2.01(b) |
| Affiliate |
|
Section 9.03(a) |
| Agreement |
|
Preamble |
| Alternative Acquisition Agreement |
|
Section 6.04(c) |
| Alternative Financing |
|
Section 6.14(a) |
| Alternative Financing Document |
|
Section 6.14(a) |
| Anticorruption Laws |
|
Section 9.03(a) |
| Anything of Value |
|
Section 9.03(a) |
| Bankruptcy and Equity Exception |
|
Section 3.04(a) |
| Business Day |
|
Section 9.03(a) |
| Cash Deposit |
|
Section 6.14(c)(ix) |
| Cash Pledge Accounts |
|
Section 8.06(b) |
| Change in the Company Recommendation |
|
Section 6.04(c) |
| CICL |
|
Recitals |
| Closing |
|
Section 1.02 |
| Closing Date |
|
Section 1.02 |
| CMB Account |
|
Section 6.14(c)(ix) |
| Company |
|
Preamble |
| Company Benefit Plan |
|
Section 3.11(a) |
| Company Benefit Plans |
|
Section 3.11(a) |
| Company Board |
|
Recitals |
| Company Group |
|
Section 8.06(e) |
| Company Licensed Intellectual Property |
|
Section 3.14(b) |
| Company Option |
|
Section 9.03(a) |
| Company Owned Intellectual Property |
|
Section 3.14(a) |
| Company Recommendation |
|
Section 3.04(b) |
| Company Representative |
|
Section 3.06(c) |
| Company Restricted Share |
|
Section 9.03(a) |
| Company SEC Reports |
|
Section 3.07(a) |
| Company Share Award |
|
Section 9.03(a) |
| Company Termination Fee |
|
Section 8.06(e) |
| Company Triggering Event |
|
Section 9.03(a) |
| Competing Transaction |
|
Section 6.04(e) |
| Confidentiality Agreements |
|
Section 9.03(a) |
| Contract |
|
Section 9.03(a) |
| control |
|
Section 9.03(a) |
| controlled by |
|
Section 9.03(a) |
| Damages |
|
Section 6.05(c) |
| Debt Financing |
|
Section 4.05(a) |
| Debt Financing Document |
|
Section 4.05(a) |
| |
|
|
| Deposit Agreement |
|
Section 2.06 |
| Depositary |
|
Section 2.06 |
| Dissenter Right |
|
Section 2.03(a) |
| Dissenting Shareholders |
|
Section 2.03(a) |
| Dissenting Shares |
|
Section 2.03(a) |
| Effective Time |
|
Section 1.03 |
| Employees |
|
Section 3.11(a) |
| Environmental Law |
|
Section 9.03(a) |
| Exchange Act |
|
Section 3.05(b) |
| Exchange Fund |
|
Section 2.04(a) |
| Excluded Shares |
|
Section 9.03(a) |
| Exercise Price |
|
Section 9.03(a) |
| Fee Letter |
|
Section 4.05(a) |
| Financial Advisor |
|
Section 3.04(c) |
| GAAP |
|
Section 3.07(b) |
| Government Official |
|
Section 9.03(a) |
| Governmental Authority |
|
Section 3.05(b) |
| Group Company |
|
Section 9.03(a) |
| Guarantor |
|
Recitals |
| Guarantors |
|
Recitals |
| Hazardous Substance |
|
Section 9.03(a) |
| Indebtedness |
|
Section 9.03(a) |
| Indemnified Parties |
|
Section 6.05(d) |
| Insolvent |
|
Section 9.03(a) |
| Intellectual Property |
|
Section 9.03(a) |
| knowledge |
|
Section 9.03(a) |
| Law |
|
Section 3.05(a) |
| Leased Real Property |
|
Section 3.13(b) |
| Lender |
|
Section 4.05(a) |
| Liens |
|
Section 9.03(a) |
| Limited Guarantee |
|
Recitals |
| Limited Guarantees |
|
Recitals |
| Material Adverse Effect |
|
Section 9.03(a) |
| Material Company Permits |
|
Section 3.06(a) |
| Material Contract |
|
Section 3.17(a) |
| Merger |
|
Recitals |
| Merger Consideration |
|
Section 2.04(a) |
| Merger Sub |
|
Preamble |
| Notice of Superior Proposal |
|
Section 6.04(d) |
| NYSE |
|
Section 3.05(b) |
| Order |
|
Section 7.01(b) |
| Owned Real Property |
|
Section 3.13(a) |
| Parent |
|
Preamble |
| Parent Group |
|
Section 8.06(e) |
| Parent Group Contracts |
|
Section 4.12 |
| Parent Termination Fee |
|
Section 8.06(b) |
| Paying Agent |
|
Section 2.04(a) |
| Per ADS Merger Consideration |
|
Section 2.01(b) |
| Per Share Merger Consideration |
|
Section 2.01(a) |
| Permitted Liens |
|
Section 9.03(a) |
| Person |
|
Section 9.03(a) |
| Plan of Merger |
|
Section 1.03 |
| PRC |
|
Section 9.03(a) |
| |
|
|
| Proxy Statement |
|
Section 6.01 |
| Real Property Leases |
|
Section 3.13(b) |
| Record ADS Holders |
|
Section 6.02(a) |
| Representatives |
|
Section 6.03(a) |
| Requisite Company Vote |
|
Section 3.04(a) |
| Requisite Regulatory Approvals |
|
Section 3.05(b) |
| Rollover Agreement |
|
Recitals |
| Rollover Shareholders |
|
Section 9.03(a) |
| SEC |
|
Section 3.05(b) |
| Securities Act |
|
Section 3.07(a) |
| Share |
|
Section 2.01(a) |
| Share Certificates |
|
Section 2.04(b) |
| Share Incentive Plan |
|
Section 9.03(a) |
| Shareholders’ Meeting |
|
Section 6.02(a) |
| Shares |
|
Section 2.01(a) |
| Software |
|
Section 9.03(a) |
| Special Committee |
|
Recitals |
| Subsidiary |
|
Section 9.03(a) |
| Superior Proposal |
|
Section 6.04(f) |
| Surviving Company |
|
Section 1.01 |
| Takeover Statute |
|
Section 3.19 |
| Taxes |
|
Section 9.03(a) |
| Termination Date |
|
Section 8.02(a) |
| Third Party |
|
Section 9.03(a) |
| Trade Secrets |
|
Section 3.14(d) |
| Transactions |
|
Recitals |
| Uncertificated Shares |
|
Section 2.04(b) |
| under common control with |
|
Section 9.03(a) |
| Voting Agreement |
|
Recitals |
Section 9.04 Severability.
The provisions of this
Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability
of the other provisions hereof. If any provision of this Agreement, or the application thereof to any Person or any circumstance,
is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far
as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this
Agreement and the application of such provision to other persons or circumstances shall not be affected by such invalidity or unenforceability,
nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application thereof,
in any other jurisdiction.
Section 9.05 Interpretation.
When a reference is made
in this Agreement to a Section, Article, Annex or Exhibit, such reference shall be to a Section, Article, Annex or Exhibit of this
Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement or in any Annex or Exhibit
are for convenience of reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Any capitalized
terms used in any Exhibit but not otherwise defined therein shall have the meaning set forth in this Agreement. All Annexes and
Exhibits annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth herein.
The word “including” and words of similar import when used in this Agreement will mean “including, without limitation,”
unless otherwise specified.
Section 9.06 Entire
Agreement; Assignment.
This Agreement (including
any exhibits or annexes hereto), the Confidentiality Agreements, the Rollover Agreement, the Voting Agreement, the Limited Guarantees
and other documents and instruments and other agreements among the parties hereto as contemplated by or referred to herein and
therein constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements
and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof; provided,
however, for avoidance of doubt, that the Confidentiality Agreements shall not be superseded, shall survive any termination of
this Agreement and shall continue in full force and effect until the earlier to occur of (a) the Effective time, and (b) the date
on which the Confidentiality Agreements expire in accordance with their respective terms or are validly terminated by the parties
thereto. This Agreement shall not be assigned (whether pursuant to a merger, by operation of law or otherwise), except that Parent
and Merger Sub may (a) assign all or any of their rights and obligations hereunder to any Affiliate of Parent or (b) assign
all or any of their rights (but not their obligations) under this Agreement to any Debt Financing source or Alternative Financing
source (if applicable), provided that no such assignment shall relieve the assigning party of its obligations hereunder
if such assignee does not perform such obligations.
Section 9.07 Parties
in Interest.
This Agreement shall
be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended
to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement,
other than Section 6.05 (which is intended to be for the benefit of the Persons covered thereby and may be enforced by such Persons);
provided, however, that in no event shall any holders of Shares (including Shares represented by ADSs) or holders
of Company Share Awards, in each case in their capacity as such, have any right, benefit or remedy of any nature whatsoever under
or by reason of this Agreement; provided, further, that any Debt Financing sources shall be third party beneficiaries of
Sections 8.06(e), 9.06, 9.07, 9.09, 9.10 and 9.13 of this Agreement.
Section 9.08 Specific
Performance.
(a) The parties
hereto agree that irreparable damage would occur in the event that any provision of this Agreement were not performed in accordance
with the terms hereof and that each party hereto shall be entitled to specific performance of the terms hereof (including the other
parties’ obligation to consummate the Transactions, subject in each case to the terms and conditions of this Agreement),
including an injunction or injunctions to prevent breaches of this Agreement, in addition to any other remedy at law or equity.
Each party hereto 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 hereto brings any Action to enforce specifically the performance of the terms and provisions hereof by any
other party, the Termination Date shall automatically be extended by (x) the amount of time during which such Action is pending,
plus twenty (20) Business Days or (y) if longer, such time period established by the court presiding over such Action.
(b) Notwithstanding
anything herein to the contrary, the Company shall have the right to obtain an injunction, specific performance or other equitable
remedies to enforce Parent’s obligation to consummate the Merger and the other Transactions only in the event that (A) all
of the conditions set forth in Section 7.01 and Section 7.02 (other than those conditions that by their nature are to be satisfied
by actions taken at the Closing) have been satisfied or waived, (B) the Company has irrevocably confirmed by notice to Parent that
all conditions set forth in Section 7.03 have been satisfied or that it is willing to waive any unsatisfied conditions in Section
7.03, and (C) the Debt Financing (and any Alternative Financing, if applicable) has been funded or the Lenders have irrevocably
confirmed in writing that all conditions to funding under the Debt Financing Document have been satisfied and the Debt Financing
will be funded in accordance with the terms of the Debt Financing Document or the Alternative Financing will be funded in accordance
with the terms applicable to the Alternative Financing at the Effective Time.
Section 9.09 Governing
Law and Jurisdiction.
This Agreement shall
be interpreted, construed and governed by and in accordance with the Laws of the State of New York without regard to the conflicts
of law principles thereof. Notwithstanding the foregoing, any provision of this Agreement which are required to be governed by
the CICL or the Laws of the Cayman Islands, including the Merger, the vesting of the undertaking, property and liabilities of Merger
Sub in the Surviving Company, the cancellation of the Shares, the rights provided for in Section 238 of the CICL with respect to
the Dissenting Shares and the fiduciary or other duties of the Company, shall be construed and governed by the Laws of the Cayman
Islands, and the Laws of the Cayman Islands shall supersede the Laws of the State of New York with respect to such provision.
All Actions arising out
of or relating to this Agreement shall be heard and determined exclusively in any court in Hong Kong. Notwithstanding anything
to the contrary herein, each party hereto hereby irrevocably agrees (i) that any dispute, claim or controversy of any kind or description,
whether in law or in equity, whether in contract or in tort or otherwise, involving any Debt Financing source or any of its Affiliates
arising out of or relating to the transactions contemplated hereby, including the transactions contemplated hereby, the Debt Financing
and the transactions contemplated by the Debt Financing Document, any related fee letter and engagement letter or the performance
of services thereunder shall be subject to the exclusive jurisdiction of any state or federal court sitting in the City of New
York and (ii) not to bring or permit any of its Affiliates to bring or support any other Person in bringing any such dispute, claim
or controversy of any kind or description in any other court.
Section 9.10 Amendment.
This Agreement may be
amended by the parties hereto by action taken by or on behalf of their respective boards of directors at any time prior to the
Effective Time; provided, however, that, after the approval of this Agreement and the Transactions by the shareholders
of the Company, no amendment may be made that would reduce the amount or change the type of consideration into which each Share
shall be cancelled in exchange for upon consummation of the Merger; provided, further, that Sections 8.06(e), 9.05, 9.06,
9.07, 9.08, 9.09, 9.10, 9.12 and 9.13 (and any provision of this Agreement to the extent a modification, waiver or termination
of such provision would modify the substance of any of the foregoing provisions) will not be amended or modified in a manner that
is adverse to any Debt Financing source unless such Debt Financing source executes such amendment or modification in writing. This
Agreement may not be amended except by an instrument in writing signed by each of the parties hereto.
Section 9.11 Waiver.
At any time prior to
the Effective Time, any party hereto may (a) extend the time for the performance of any obligation or other act of any other
party hereto, (b) waive any inaccuracy in the representations and warranties of any other party contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any agreement of any other party or any condition to its
own obligations contained herein. Any such extension or waiver shall be valid if set forth in an instrument in writing signed by
the party or parties to be bound thereby. No failure or delay by any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.
Section 9.12 Counterparts.
This Agreement may be
executed and delivered (including by pdf electronic transmission) in one or more counterparts, and by the different parties hereto
in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute
one and the same agreement.
Section 9.13 Waiver
of Jury Trial.
The parties to this Agreement
each hereby waives, to the fullest extent permitted by law, any right to trial by jury of any claim, demand, action, or cause of
action against any Debt Financing source (i) arising under this Agreement or (ii) in any way connected with or related or incidental
to the dealings of the parties hereto in respect of this Agreement or any of the transactions related hereto arising out of or
relating to this Agreement, in each case whether now existing or hereafter arising, and whether in contract, tort, equity, or otherwise.
The parties to this Agreement each hereby agrees and consents that any such claim, demand, action, or cause of action against any
Debt Financing source shall be decided by court trial without a jury and that the parties to this Agreement may file an original
counterpart of a copy of this Agreement with any court as written evidence of the consent of the parties hereto to the waiver of
their right to trial by jury.
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.
| |
COUNTRY STYLE COOKING
RESTAURANT CHAIN HOLDING
LIMITED |
| |
|
|
| |
By |
/s/ Hong Li |
| |
Name: |
Hong Li |
| |
Title: |
Director |
| |
|
|
| |
COUNTRY STYLE COOKING
RESTAURANT CHAIN MERGER
COMPANY LIMITED |
| |
|
|
| |
By |
/s/ Hong Li |
| |
Name: |
Hong Li |
| |
Title: |
Director |
| |
|
|
| |
COUNTRY STYLE COOKING
RESTAURANT CHAIN CO., LTD. |
| |
|
|
| |
By |
/s/ Li-Lan Cheng |
| |
Name: |
Li-Lan Cheng |
| |
Title: |
Chairman of the Special Committee of the
Board of Directors |
[Signature Page to the Merger
Agreement]
Annex
A
PLAN OF
MERGER
in accordance
with
Part XVI
of the Companies law (2013 revision)
of the cayman
islands
This Plan of Merger is entered into on [ ]
by and between:
| (1) | Country Style COOKING Restaurant Chain Co., Ltd.
(the "Surviving Company"), an exempted company limited by shares incorporated in the Cayman Islands and whose
registered office is located at the offices of Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104,
Cayman Islands, Cayman Islands; and |
| (2) | Country Style
Cooking Restaurant Chain Merger Company Limited (the "Merging Company"), an exempted
company limited by shares incorporated in the Cayman Islands and whose registered office is located at the offices of International
Company Services Ltd., PO Box 472, 2nd Floor, Harbour Place, 103 South Church Street, George Town, Grand Cayman KY1-1106, Cayman
Islands. |
WITNESSETH as follows:
| 1. | The constituent companies (the "Constituent Companies") to this Plan of Merger
are the Surviving Company and the Merging Company. |
| 1. | The surviving company to this Plan of Merger is the Surviving Company. |
| 2. | The Surviving Company shall have its registered office at the offices of International Company
Services Ltd., PO Box 472, 2nd Floor, Harbour Place, 103 South Church Street, George Town, Grand Cayman KY1-1106, Cayman Islands. |
| 3. | Immediately prior to the Effective Time (as defined below) the authorized share capital of the
Merging Company was US$50,000 divided into 50,000 ordinary shares of US$1.00 par value per share, of which one (1) share has been
issued. |
| 4. | Immediately prior to the registration of this Plan of Merger the authorized share capital of the
Surviving Company was is US$2,000,000 divided into (i) 1,000,000,000 Ordinary Shares of a nominal or par value of US$0.001 each
and (ii) 1,000,000,000 shares of a nominal or par value of US$0.001 each of such Class or Classes (howsoever designated) as the
Board of Directors may determine in accordance with the articles of association of the Company, of which: |
| (i) | [●] Shares are issued and outstanding, all of which have been duly authorized and are validly
issued, fully paid and non-assessable, |
| (ii) | [●] Shares have been issued to the Depositary and are held in the Company’s name and
reserved for future issuance pursuant to outstanding Company Share Awards granted pursuant to the Share Incentive Plan (and for
the avoidance of doubt, are not included in the number of issued and outstanding Shares set forth in clause (i) above) and |
| (iii) | no preferred shares are issued and outstanding. |
| 5. | The authorized share capital of the Surviving Company shall be US$50,000 divided into 50,000 ordinary
shares of US$1.00 par value per share immediately following the Merger. |
| 6. | The merger shall be effective immediately when the Plan of Merger is registered by the Registrar
of Companies of the Cayman Islands (the "Effective Time"). |
| (i) | each ordinary share, par value US$0.001
per share, of the Surviving Company (a "Share"
or, collectively, the "Shares")
issued and outstanding immediately prior to the Effective Time other than: |
| (a) | ordinary shares owned by holders who have validly exercised and not effectively withdrawn or lost
their right to dissent from the Merger (the "Dissenting Shares") pursuant to Section 238 of the Cayman Islands
Companies Law (2013 Revision) (the "Cayman Companies Law"); and |
| (b) | the shares held by each of Ms. Hong Li, Mr. Xingqiang Zhang, Regal Fair Holdings Limited, Mr. Zhiyun
Peng, Mr. Zhiyong Hong, Sky Success Venture Holdings Limited and SIG China Investments One, Ltd. (the "Excluded Shares"), |
shall
be cancelled in consideration and exchange for the right to receive US$1.3075 in cash per Share without interest (the "Per
Share Merger Consideration");
| (ii) | each American Depositary Share, representing
four Shares (an "ADS"
or, collectively, the "ADSs"),
issued and outstanding immediately prior to the Effective Time (other than ADSs representing the Excluded Shares) shall be cancelled
in consideration for the right of the Depositary, as the registered holder of such Shares to receive US$5.23 in cash per ADS without
interest (the "Per ADS Merger Consideration");
|
| (iii) | all of the Shares issued and outstanding immediately prior to the Effective Time, including Shares
represented by ADSs (other than the Excluded Shares and the Dissenting Shares), shall cease to exist and shall thereafter represent
only the right to receive the Per Share Merger Consideration or Per ADS Merger Consideration without interest, and the register
of members of the Company shall be amended accordingly; |
| (iv) | each of the Excluded Shares and ADSs representing such Excluded Shares issued and outstanding immediately
prior to the Effective Time shall cease to be outstanding, shall be cancelled and shall cease to exist without payment of any consideration
or distribution therefor; |
| (v) | each of the Dissenting Shares issued and outstanding immediately prior to the Effective Time shall
be cancelled and cease to exist in exchange for the right to a payment resulting from the procedure in Section 238 of the Cayman
Companies Law, unless a holder of Dissenting Shares fails to exercise or withdraw their rights under Section 238 of the Cayman
Companies Law in which event the holder shall receive the Per Share Merger Consideration for their shares; and |
| (vi) | each ordinary share, par value US$1.00 each, of the Merging Company issued and outstanding immediately
prior to the Effective Time shall be converted into and become one validly issued, fully paid and non-assessable ordinary share,
par value US$1.00 each, of the Surviving Company. Such conversion shall be effected by means of the cancellation of such ordinary
shares of the Merging Company, in exchange for the right to receive one such ordinary share of the Surviving Company. Such ordinary
shares of the Surviving Company shall constitute the only issued and outstanding share capital of the Surviving Company. |
| 9. | The Memorandum of Association and Articles of Association of the Surviving Company shall remain
unamended and in full force and effect from the Effective Time. |
| 10. | From 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. |
| 11. | No amount or benefit has been or will be paid or payable to any director of the Surviving Company
or the Merging Company consequent upon the Merger. |
| 12. | The names and addresses of the directors of the Surviving Company are as follows: |
| 13. | The Constituent Companies have no secured creditors and have not granted any fixed or floating
security interests that are outstanding as at the date of this Plan of Merger. |
| 14. | This Plan of Merger has been approved by the board of directors of each of the Constituent Companies
pursuant to Section 233(3) of the Cayman Companies Law. |
| 15. | This Plan of Merger has been authorised by the shareholders of each of the Constituent Companies
pursuant to Section 233(6) of the Cayman Companies Law. |
| 16. | This Plan of Merger may be executed in counterparts each of which when executed and delivered shall
constitute an original but all such counterparts together shall constitute one and the same instrument. |
IN WITNESS WHEREOF
the parties hereto have caused this Plan of Merger to be executed on the date first set out in this Plan of Merger.
| SIGNED for and on behalf of Country
Style |
) |
|
| COOKING Restaurant Chain Co., Ltd. |
) |
Duly Authorised Signatory |
| by: |
) |
|
| |
) |
Name: |
|
| |
) |
|
| |
) |
Title: |
|
| |
) |
|
| SIGNED for and on behalf of Country
Style |
) |
|
| Cooking Restaurant Chain Merger |
) |
Duly Authorised Signatory |
| Company Limited
by: |
) |
|
| |
) |
Name: |
|
| |
) |
|
| |
) |
Title: |
|
| |
) |
|
Annex
B
EXCLUDED
SHARES
Rollover
Shares
| Shareholder | |
Owned Shares | | |
Company Restricted Shares | |
| Hong Li | |
| - | | |
| 86,500 | |
| Xingqiang Zhang | |
| - | | |
| 78,500 | |
| Zhiyun Peng | |
| - | | |
| 20,000 | |
| Zhiyong Hong | |
| 278,000 | * | |
| - | |
| Regal Fair Holdings Limited | |
| 44,522,148 | | |
| - | |
| Sky Success Venture Holdings Limited | |
| 16,417,928 | | |
| - | |
| SIG China Investments One, Ltd. | |
| 12,000,000 | | |
| - | |
*Held in the form of ADSs.
ANNEX B
| Confidential |
December
16, 2015 |
| |
|
| Country
Style Cooking Restaurant Chain Co., Ltd. |
|
| No.
19 Yunshan South Road |
|
| Yubei
District, Chongqing |
|
| People’s
Republic of China |
|
Dear Members of the Special
Committee:
Country
Style Cooking Restaurant Chain Co., Ltd. (“Country Style Cooking” or the “Company”) and
the special committee of independent directors (the "Special Committee”) of the board of directors (the “Board
of Directors”) of the Company have engaged Duff & Phelps, LLC (“Duff & Phelps”) to
serve as an independent financial advisor to the Special Committee (solely in its capacity as the Special Committee) to provide
an opinion (the “Opinion”) as of the date hereof as to the fairness, from a financial point of view, to (i)
the holders of ordinary shares, par value US$0,001 per share, of the Company (each, a “Share” and collectively,
the “Shares”), other than the Excluded Shares and the Dissenting Shares (as defined below), and (ii) the holders
of American Depositary Shares of the Company, each representing four Shares (each, an “ADS” and collectively,
“ADSs”), other than ADSs representing the Excluded Shares, of the Merger Consideration (as defined below) to
be received by such holders in the Proposed Transaction (as defined below) (without giving effect to any impact of the Proposed
Transaction on any particular holder of the Shares or ADSs other than in their capacity as holders of Shares or ADSs).
Description of the
Proposed Transaction
It
is Duff & Phelps’ understanding that the Company, Country Style Cooking Restaurant Chain Holding Limited, an
exempted company with limited liability incorporated under the laws of the Cayman Islands (“Parent"), and
Country Style Cooking Restaurant Chain Merger Company Limited, an exempted company with limited liability incorporated under
the laws of the Cayman Islands and a wholly owned subsidiary of Parent (“Merger Sub”), propose to enter
into an Agreement and Plan of Merger (the “Merger Agreement”), dated as of the date hereof, the latest
draft of which Duff & Phelps has reviewed is dated December 9, 2015. Pursuant to the Merger Agreement, among other
things, Merger Sub will merge with and into the Company, whereupon the separate existence of Merger Sub will cease and the
Company will be the surviving company, and in connection with such merger each issued and outstanding Share (other than the
Excluded Shares and the Dissenting Shares) will be cancelled in exchange for the right to receive US $1.3075 in cash per
Share without interest (the “Per Share Merger Consideration”) and each issued and outstanding ADS (other
than ADSs representing the Excluded Shares) will be cancelled in exchange for the right to receive US $5.23 in cash per ADS
without interest (the “Per ADS Merger Consideration”, and together with the Per Share Merger
Consideration, the “Merger Consideration”) (collectively, the “Proposed Transaction”).
The terms and conditions of the Proposed Transaction are more fully set forth in the Merger Agreement.
| Special
Committee of Independent Directors |
| Country
Style Cooking Restaurant Chain Co., Ltd. |
| Page
2 of 6 |
| December
16, 2015 |
For purposes of this Opinion,
(i) “Excluded Shares” shall mean, collectively, (a) the Shares (including Shares represented by ADSs) beneficially
owned by each Rollover Shareholder (as defined in the Merger Agreement), (b) Shares held by Parent, the Company or any of their
Subsidiaries (as defined in the Merger Agreement), and (c) Shares held by the Depositary (as defined in the Merger Agreement)
that are not represented by ADSs (including Shares reserved for the issuance and allocation of ADSs pursuant to the Share Incentive
Plan and/or any Company Share Award) (as defined in the Merger Agreement); and (ii) “Dissenting Shares” shall have
the meaning set forth in the Merger Agreement.
Scope of Analysis
In connection with this
Opinion, Duff & Phelps has made such reviews, analyses and inquiries as it has deemed necessary and appropriate under the
circumstances. Duff & Phelps also took into account its assessment of general economic, market and financial conditions, as
well as its experience in securities and business valuation, in general, and with respect to similar transactions, in particular.
Duff & Phelps’ procedures, investigations, and financial analysis with respect to the preparation of this Opinion included,
but were not limited to, the items summarized below:
| 1. | Reviewed the following documents: |
| a. | The
Company’s annual reports and audited financial statements on Form 20-F filed with
the Securities and Exchange Commission ("SEC”) for the years ended
December 31, 2013 and December 31, 2014; and the Company’s unaudited interim financial
statements for the nine months ended September 30, 2014 and September 30, 2015 included
in the Company’s Form 6-K filed with the SEC; |
| |
b. |
A detailed financial projection
model for the years ending December 31, 2015 through 2024, prepared and provided to Duff & Phelps by management of the
Company, upon which Duff & Phelps has relied, with your consent, in performing its analysis (the “Management
Projections”); |
| |
c. |
Other
internal documents relating to the history, past and current operations, financial conditions, and probable future outlook
of the Company, provided to Duff & Phelps by management of the Company; |
| |
d. |
A letter
dated December 2, 2015 from the management of the Company, which made certain representations as to the Management Projections
and the underlying assumptions for the Company (the "Management Representation Letter”); and |
| Special
Committee of Independent Directors |
| Country
Style Cooking Restaurant Chain Co., Ltd. |
| Page
3 of 6 |
| December
16, 2015 |
| e. | Documents related to the Proposed
Transaction, including the Merger Agreement; |
| 2. | Discussed
the information referred to above and the background and other elements of the Proposed
Transaction with the management of the Company; |
| 3. | Discussed
with Company management its plans and intentions with respect to the management and operation
of the business; |
| 4. | Reviewed
the historical trading price and trading volume of the ADSs and the publicly traded securities
of certain other companies that Duff & Phelps deemed relevant; |
| 5. | Performed
certain valuation and comparative analyses using generally accepted valuation and analytical
techniques including a discounted cash flow analysis, an analysis of selected public
companies that Duff & Phelps deemed relevant, an analysis of selected transactions
that Duff & Phelps deemed relevant, and a review of premiums paid in selected transactions
that Duff & Phelps deemed relevant; and |
| 6. | Conducted
such other analyses and considered such other factors as Duff & Phelps deemed necessary
or appropriate |
Assumptions, Qualifications
and Limiting Conditions
In performing its analyses
and rendering this Opinion with respect to the Proposed Transaction, Duff & Phelps, with the Company’s and the Special
Committee’s consent:
| 1. | Relied
upon the accuracy, completeness, and fair presentation of all information, data, advice,
opinions and representations obtained from public sources or provided to it from private
sources, including Company management, and did not independently verify such information
(or assume any responsibility or liability for independently verifying such information); |
| 2. | Relied
upon the fact that the Special Committee, the Board of Directors and the Company have
been advised by counsel as to all legal matters with respect to the Proposed Transaction,
including whether all procedures required by law to be taken in connection with the Proposed
Transaction have been duly, validly and timely taken; |
| 3. | Assumed
that any estimates, evaluations, forecasts and projections including, without limitation,
the Management Projections, furnished to Duff & Phelps were reasonably prepared and
based upon the best currently available information and good faith judgment of the person
furnishing the same, and Duff & Phelps expresses no view or opinion with respect
to such estimates, evaluations, forecasts or projections or their underlying assumptions; |
| 4. | Assumed
that the information relating to the Company and the Proposed Transaction supplied by
the Company to Duff & Phelps and the representations made by Company management regarding
the Company and the Proposed Transaction in the Management Representation Letter are
complete and accurate in all material respects, did not and does not omit to state a
material fact in respect of the Company and the Proposed Transaction necessary to make
the information not misleading in light of the circumstances under which the information
was provided; |
| Special
Committee of Independent Directors |
| Country
Style Cooking Restaurant Chain Co., Ltd. |
| Page
4 of 6 |
| December
16, 2015 |
| 5. | Assumed
that the representations and warranties made by all parties in the Merger Agreement and
in the Management Representation Letter are true and correct and that each party to the
Merger Agreement will fully and timely perform all covenants, undertakings and obligations
required to be performed by such party; |
| 6. | Assumed
that the final versions of all documents reviewed by Duff & Phelps in draft form,
including the Merger Agreement, conform in all material respects to the drafts reviewed; |
| 7. | Assumed
that there has been no material change in the assets, liabilities, financial condition,
results of operations, business, or prospects of the Company since the date of the most
recent financial statements and other information made available to Duff & Phelps,
and that there is no information or facts withheld from Duff & Phelps which would
make the information reviewed by Duff & Phelps incomplete or misleading; |
| 8. | Assumed
that all of the conditions required to implement the Proposed Transaction will be satisfied
and that the Proposed Transaction will be completed in accordance with the Merger Agreement
without any amendments thereto or any waivers of any terms or conditions thereof, and
in a manner that complies in all material respects with all applicable laws; and |
| 9. | Assumed
that all governmental, regulatory or other consents and approvals necessary for the consummation
of the Proposed Transaction will be obtained without any undue delay, limitation, restriction
or condition that would have a material effect on the Company or the contemplated benefits
expected to be derived in the Proposed Transaction. |
To the extent that any of
the foregoing assumptions or any of the facts on which this Opinion is based prove to be untrue in any material respect, this
Opinion cannot and should not be relied upon for any purpose. Furthermore, in Duff & Phelps’ analysis and in connection
with the preparation of this Opinion, Duff & Phelps has made numerous assumptions with respect to industry performance, general
business, market and economic conditions and other matters, many of which are beyond the control of any party involved in the
Proposed Transaction and as to which Duff & Phelps does not express any view or opinion in this Opinion, including as to the
reasonableness of such assumptions.
Duff & Phelps has prepared
this Opinion effective as of the date hereof. This Opinion is necessarily based upon market, economic, financial and other conditions
as they exist and can be evaluated as of the date hereof, and Duff & Phelps disclaims any undertaking or obligation to (i)
advise any person of any change in any fact or matter affecting this Opinion which may come or be brought to the attention of
Duff & Phelps after the date hereof or (ii) update, revise or reaffirm this Opinion after the date hereof.
| Special
Committee of Independent Directors |
| Country
Style Cooking Restaurant Chain Co., Ltd. |
| Page
5 of 6 |
| December
16, 2015 |
Duff & Phelps did not
evaluate the Company’s solvency or conduct an independent appraisal or physical inspection of any specific assets or liabilities
(contingent or otherwise) of the Company. Duff & Phelps has not been requested to, and did not, (i) initiate any discussions
with, or solicit any indications of interest from, third parties with respect to the Proposed Transaction, the assets, businesses
or operations of the Company, or any alternatives to the Proposed Transaction, (ii) negotiate the terms of the Proposed Transaction,
and therefore, Duff & Phelps has assumed that such terms are the most beneficial terms, from the Company’s perspective,
that could, under the circumstances, reasonably be negotiated among the parties to the Merger Agreement and the Proposed Transaction,
or (iii) advise the Special Committee or any other party with respect to alternatives to the Proposed Transaction.
Duff & Phelps is not
expressing any opinion as to the market price or value of the Shares or ADSs (or anything else) after the announcement or the
consummation of the Proposed Transaction (or any other time). This Opinion should not be construed as a valuation opinion, credit
rating, solvency opinion, an analysis of the Company’s credit worthiness, as tax advice, or as accounting advice. Duff &
Phelps has not made, and assumes no responsibility to make, any representation or warranty (express or implied), or render any
opinion, as to any legal or regulatory or tax or accounting matter. Duff & Phelps expressly disclaims any responsibility or
liability in this regard.
In rendering this Opinion,
Duff & Phelps is not expressing any opinion with respect to the amount or nature of any compensation payable to or to be received
by the Company’s officers, directors, or employees, or any class of such persons, relative to the Merger Consideration,
or with respect to the fairness of any such compensation.
This Opinion is furnished
solely for the use and benefit of the Special Committee in connection with its consideration of the Proposed Transaction and is
not intended to, and does not, confer any rights or remedies upon any other person, and is not intended to be used, and may not
be used, by any other person or for any other purpose, without Duff & Phelps’ written consent. This Opinion (i) does
not address the merits of the underlying business decision to enter into the Proposed Transaction versus any alternative strategy
or transaction; (ii) does not address any transaction related to the Proposed Transaction; (iii) is not a recommendation as to
how the Special Committee or any stockholder should vote or act with respect to any matters relating to the Proposed Transaction,
or whether to proceed with the Proposed Transaction or any related transaction, and (iv) does not indicate that the Merger Consideration
is the best possibly attainable under any circumstances; instead, it merely states whether the Merger Consideration is within
a range suggested by certain financial analyses. The decision as to whether to proceed with the Proposed Transaction or any related
transaction may depend on an assessment of factors unrelated to the financial analysis on which this Opinion is based. This Opinion
should not be construed as creating any fiduciary duty on the part of Duff & Phelps to any party.
This Opinion is solely that
of Duff & Phelps, and Duff & Phelps’ liability in connection with this Opinion shall be limited in accordance with
the terms set forth in the engagement letter among Duff & Phelps, Duff & Phelps Securities, LLC (“DPS”),
the Company, and the Special Committee dated September 1, 2015 (the “Engagement Letter"). This Opinion is confidential,
and its use and disclosure is strictly limited in accordance with the terms set forth in the Engagement Letter.
| Special
Committee of Independent Directors |
| Country
Style Cooking Restaurant Chain Co., Ltd. |
| Page
6 of 6 |
| December
16, 2015 |
Disclosure of Prior
Relationships
Duff & Phelps and DPS
have acted as financial advisor to the Special Committee providing such financial and market related advice and assistance as
requested by the Special Committee in connection with the Proposed Transaction, and will receive a fee for such services. In addition,
pursuant to the Engagement Letter, the Company has agreed to reimburse certain expenses of Duff & Phelps and DPS (subject
to a cap) and to indemnify Duff & Phelps and DPS for certain liabilities. Duff & Phelps has acted as financial advisor
to the Special Committee (solely in its capacity as the Special Committee) and will receive a fee for its services. No portion
of Duff & Phelps’ fee is contingent upon either the conclusion expressed in this Opinion or whether or not the Proposed
Transaction is successfully consummated. Pursuant to the terms of the Engagement Letter, a portion of Duff & Phelps' fee is
payable upon Duff & Phelps’ stating to the Special Committee that it is prepared to deliver its Opinion. Other than
this engagement, during the two years preceding the date of this Opinion, Duff & Phelps has not had any material relationship
with any party to the Proposed Transaction for which compensation has been received or is intended to be received, nor is any
such material relationship or related compensation mutually understood to be contemplated.
Conclusion
Based upon and subject to
the foregoing, Duff & Phelps is of the opinion that as of the date hereof, the Merger Consideration to be received by the
holders of Shares (other than the Excluded Shares and the Dissenting Shares) and the holders of ADSs (other than ADSs representing
the Excluded Shares) in the Proposed Transaction is fair from a financial point of view to such holders (without giving effect
to any impact of the Proposed Transaction on any particular holder of the Shares or ADSs other than in their capacity as holders
of Shares or ADSs).
This Opinion has been approved
by the Opinion Review Committee of Duff & Phelps.
Respectfully submitted,
Duff & Phelps, LLC
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 authorised by the vote. |
| (4) | Within twenty days immediately following the date on which the vote of members giving authorisation
for the merger or consolidation is made, the constituent company shall give written notice of the authorisation to each member
who made a written objection. |
| (5) | A member who elects to dissent shall, within twenty days immediately following the date on which
the notice referred to in subsection (4) is given, give to the constituent company a written notice of his decision to dissent,
stating- |
| (b) | the number and classes of shares in respect of which he dissents; and |
| (c) | a demand for payment of the fair value of his shares. |
| (6) | A member who dissents shall do so in respect of all shares that he holds in the constituent company. |
| (7) | Upon the giving of a notice of dissent under subsection (5), the member to whom the notice relates
shall cease to have any of the rights of a member except the right to be paid the fair value of his shares and the rights referred
to in subsections (12) and (16). |
| (8) | Within seven days immediately following the date of the expiration of the period specified in subsection
(5), or within seven days immediately following the date on which the plan of merger or consolidation is filed, whichever is later,
the constituent company, the surviving company or the consolidated company shall make a written offer to each dissenting member
to purchase his shares at a specified price that the company determines to be their fair value; and if, within thirty days immediately
following the date on which the offer is made, the company making the offer and the dissenting member agree upon the price to be
paid for his shares, the company shall pay to the member the amount in money forthwith. |
| (9) | If the company and a dissenting member fail, within the period specified in subsection (8), to
agree on the price to be paid for the shares owned by the member, within twenty days immediately following the date on which the
period expires- |
| (a) | the company shall (and any dissenting member may) file a petition with the Court for a determination
of the fair value of the shares of all dissenting members; and |
| (b) | the petition by the company shall be accompanied by a verified list containing the names and addresses
of all members who have filed a notice under subsection (5) and with whom agreements as to the fair value of their shares have
not been reached by the company. |
| (10) | A copy of any petition filed under subsection (9)(a) shall be served on the other party; and where
a dissenting member has so filed, the company shall within ten days after such service file the verified list referred to in subsection
(9)(b). |
| (11) | At the hearing of a petition, the Court shall determine the fair value of the shares of such dissenting
members as it finds are involved, together with a fair rate of interest, if any, to be paid by the company upon the amount determined
to be the fair value. |
| (12) | Any member whose name appears on the list filed by the company under subsection (9)(b) or (10)
and who the Court finds are involved may participate fully in all proceedings until the determination of fair value is reached. |
| (13) | The order of the Court resulting from proceeding on the petition shall be enforceable in such manner
as other orders of the Court are enforced, whether the company is incorporated under the laws of the Islands or not. |
| (14) | The costs of the proceeding may be determined by the Court and taxed upon the parties as the Court
deems equitable in the circumstances; and upon application of a member, the Court may order all or a portion of the expenses incurred
by any member in connection with the proceeding, including reasonable attorney’s fees and the fees and expenses of experts,
to be charged pro rata against the value of all the shares which are the subject of the proceeding. |
| (15) | Shares acquired by the company pursuant to this section shall be cancelled and, if they are shares
of a surviving company, they shall be available for re-issue. |
| (16) | The enforcement by a member of his entitlement under this section shall exclude the enforcement
by the member of any right to which he might otherwise be entitled by virtue of his holding shares, except that this section shall
not exclude the right of the member to institute proceedings to obtain relief on the ground that the merger or consolidation is
void or unlawful. |
ANNEX D
Directors and Executive
Officers of Each Filing Person
|
I. |
Directors and Executive Officers of the Company |
The name, business
address, present principal employment, principal employment during the past five years and citizenship of each director and executive
officer of the Company are set forth below.
| Name |
|
Starting |
|
Ending |
|
Business Address |
|
Principal Employment |
|
Citizenship |
| Hong Li |
|
2007.9 |
|
2015.2.13 |
|
c/o Country Style Cooking Restaurant Chain Co., Ltd., 16th Floor, C1 Building, Chongqing Headquarters City, District C, No.780 Jingwei Avenue, Yuzhong District, Chongqing, the People’s Republic of China |
|
Chairwoman of the Board of Directors of the Company and Chief Executive Officer of the Company |
|
PRC |
| |
|
2015.2.14 |
|
present |
|
c/o Country Style Cooking Restaurant Chain Co., Ltd., 16th Floor, C1 Building, Chongqing Headquarters City, District C, No.780 Jingwei Avenue, Yuzhong District, Chongqing, the People’s Republic of China |
|
Chairwoman of the Board of Directors of the Company |
|
|
| Xingqiang Zhang |
|
2007.9 |
|
2015.2.13 |
|
c/o Country Style Cooking Restaurant Chain Co., Ltd., 16th Floor, C1 Building, Chongqing Headquarters City, District C, No.780 Jingwei Avenue, Yuzhong District, Chongqing, the People’s Republic of China |
|
Director of the Company |
|
PRC |
| |
|
2015.2.14 |
|
present |
|
c/o Country Style Cooking Restaurant Chain Co., Ltd., 16th Floor, C1 Building, Chongqing Headquarters City, District C, No.780 Jingwei Avenue, Yuzhong District, Chongqing, the People’s Republic of China |
|
Director, Chief Executive Officer, Chief Operating Officer and Acting Chief Financial Officer of the Company |
|
|
| Tim T. Gong |
|
2006.1 |
|
present |
|
c/o SIG Asia Investment, LLLP, 101 California Street Suite 3250, San Francisco, CA 94111, U.S.A. |
|
Director of SIG China Investments One, Ltd. |
|
U.S.A. |
| |
|
2007.9 |
|
present |
|
c/o Country Style Cooking Restaurant Chain Co., Ltd., 16th Floor, C1 Building, Chongqing Headquarters City, District C, No.780 Jingwei Avenue, Yuzhong District, Chongqing, the People’s Republic of China |
|
Director of the Company |
|
|
| Steve Yue Ji |
|
2005 |
|
present |
|
Room 4603, Plaza 66, Tower 2, 1366 Nanjing West Road, Shanghai, the People’s Republic of China |
|
Managing Director of Sequoia Capital China |
|
PRC |
| |
|
2007.9 |
|
present |
|
c/o Country Style Cooking Restaurant Chain Co., Ltd., 16th Floor, C1 Building, Chongqing Headquarters City, District C, No.780 Jingwei Avenue, Yuzhong District, Chongqing, the People’s Republic of China |
|
Director of the Company |
|
|
| Zhiyun Peng |
|
2010.8.18 |
|
present |
|
c/o Sky Success Venture Holdings Limited, 13F, No. 609 Yunling East Road, Putuo District, Shanghai,the People’s Republic of China |
|
General Manger of Shanghai Novich Venture Investment Co., Ltd. |
|
PRC |
| |
|
2014.3.10 |
|
present |
|
c/o Country Style Cooking Restaurant Chain Co., Ltd., 16th Floor, C1 Building, Chongqing Headquarters City, District C, No.780 Jingwei Avenue, Yuzhong District, Chongqing, the People’s Republic of China |
|
Director of the Company |
|
|
| Li-Lan Cheng |
|
2012.4 |
|
present |
|
383 Guangyan Road,
Qiushi Building, 11/F, Shanghai 200072, the People’s Republic of China |
|
Chief Operating Officer of E-House (China) Holdings Limited (NYSE: EJ) |
|
U.S.A. |
| |
|
2014.3 |
|
present |
|
383 Guangyan Road,
Qiushi Building, 11/F, Shanghai 200072. the People’s Republic of China |
|
Executive Director of E-House’s subsidiary Leju Holdings Limited (NYSE: EJ) |
|
|
| |
|
2010.9 |
|
present |
|
c/o Country Style Cooking Restaurant Chain Co., Ltd., 16th Floor, C1 Building, Chongqing Headquarters City, District C, No.780 Jingwei Avenue, Yuzhong District, Chongqing, the People’s Republic of China |
|
Director of the Company |
|
|
| Jin Li |
|
2013.7.1 |
|
present |
|
c/o Country Style Cooking Restaurant Chain Co., Ltd., 16th Floor, C1 Building, Chongqing Headquarters City, District C, No.780 Jingwei Avenue, Yuzhong District, Chongqing, the People’s Republic of China |
|
Director of the Company |
|
PRC |
| Eric Haibing Wu |
|
2007 |
|
present |
|
No. 1 West Creative Rd., TIT Creativity Industry Zone,
No. 397 XinGangZhong Rd., Guangzhou, Guangdong 510310, the People’s Republic of China |
|
Chief Financial Officer of Plateno Group |
|
PRC |
| |
|
2011.9 |
|
present |
|
c/o Country Style Cooking Restaurant Chain Co., Ltd., 16th Floor, C1 Building, Chongqing Headquarters City, District C, No.780 Jingwei Avenue, Yuzhong District, Chongqing, the People’s Republic of China |
|
Director of the Company |
|
|
| Cheng Xiao |
|
2007 |
|
present |
|
c/o Country Style Cooking Restaurant Chain Co., Ltd., 16th Floor, C1 Building, Chongqing Headquarters City, District C, No.780 Jingwei Avenue, Yuzhong District, Chongqing, the People’s Republic of China |
|
Vice President for Product Development of the Company |
|
PRC |
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 |
The name, business
address, present principal employment, principal employment during the past five years and citizenship of each director and executive
officer of Parent are set forth below.
| Name |
Starting |
Ending |
Business Address |
|
Principal Employment |
|
Citizenship |
| Hong Li |
2007.9 |
2015.2.13 |
c/o Country Style Cooking Restaurant Chain Co., Ltd., 16th Floor, C1 Building, Chongqing Headquarters City, District C, No.780 Jingwei Avenue, Yuzhong District, Chongqing, the People’s Republic of China |
|
Chairwoman of the Board of Directors of the Company and Chief Executive Officer of the Company |
|
PRC |
| |
2015.2.14 |
present |
c/o Country Style Cooking Restaurant Chain Co., Ltd., 16th Floor, C1 Building, Chongqing Headquarters City, District C, No.780 Jingwei Avenue, Yuzhong District, Chongqing, the People’s Republic of China |
|
Chairwoman of the Board of Directors of the Company |
|
|
| |
2015.11.6 |
present |
c/o Country Style Cooking Restaurant Chain Co., Ltd., 16th Floor, C1 Building, Chongqing Headquarters City, District C, No.780 Jingwei Avenue, Yuzhong District, Chongqing, the People’s Republic of China |
|
Sole Director of the Parent |
|
|
| III. |
Directors and Executive Officers of Merger Sub |
The name, business
address, present principal employment, principal employment during the past five years and citizenship of each director and executive
officer of Merger Sub are set forth below.
| Name |
Starting |
Ending |
Business Address |
|
Principal Employment |
|
Citizenship |
| Hong Li |
2007.9 |
2015.2.13 |
c/o Country Style Cooking Restaurant Chain Co., Ltd., 16th Floor, C1 Building, Chongqing Headquarters City, District C, No.780 Jingwei Avenue, Yuzhong District, Chongqing, the People’s Republic of China |
|
Chairwoman of the Board of Directors of the Company and Chief Executive Officer of the Company |
|
PRC |
| |
2015.2.14 |
present |
c/o Country Style Cooking Restaurant Chain Co., Ltd., 16th Floor, C1 Building, Chongqing Headquarters City, District C, No.780 Jingwei Avenue, Yuzhong District, Chongqing, the People’s Republic of China |
|
Chairwoman of the Board of Directors of the Company |
|
|
| |
2015.11.6 |
present |
c/o Country Style Cooking Restaurant Chain Co., Ltd., 16th Floor, C1 Building, Chongqing Headquarters City, District C, No.780 Jingwei Avenue, Yuzhong District, Chongqing, the People’s Republic of China |
|
Sole Director of the Merger Sub |
|
|
| IV. |
Directors and Executive Officers of Regal Fair Holdings Limited |
The name, business
address, present principal employment, principal employment during the past five years and citizenship of each director and executive
officer of Regal Fair Holdings Limited are set forth below.
| Name |
Starting |
Ending |
Business Address |
|
Principal Employment |
|
Citizenship |
| Hong Li |
2007.9 |
2015.2.13 |
c/o Country Style Cooking Restaurant Chain Co., Ltd., 16th Floor, C1 Building, Chongqing Headquarters City, District C, No.780 Jingwei Avenue, Yuzhong District, Chongqing, the People’s Republic of China |
|
Chairwoman of the Board of Directors of the Company and Chief Executive Officer of the Company |
|
PRC |
| |
2015.2.14 |
present |
c/o Country Style Cooking Restaurant Chain Co., Ltd., 16th Floor, C1 Building, Chongqing Headquarters City, District C, No.780 Jingwei Avenue, Yuzhong District, Chongqing, the People’s Republic of China |
|
Chairwoman of the Board of Directors of the Company |
|
|
| Xingqiang Zhang |
2007.9 |
2015.2.13 |
c/o Country Style Cooking Restaurant Chain Co., Ltd., 16th Floor, C1 Building, Chongqing Headquarters City, District C, No.780 Jingwei Avenue, Yuzhong District, Chongqing, the People’s Republic of China |
|
Director of the Company |
|
PRC |
| |
2015.2.14 |
present |
c/o Country Style Cooking Restaurant Chain Co., Ltd., 16th Floor, C1 Building, Chongqing Headquarters City, District C, No.780 Jingwei Avenue, Yuzhong District, Chongqing, the People’s Republic of China |
|
Director, Chief Executive Officer, Chief Operating Officer and Acting Chief Financial Officer of the Company |
|
|
| V. |
Directors and Executive Officers of Sky Success Venture Holdings Limited |
The name, business
address, present principal employment, principal employment during the past five years and citizenship of each director and executive
officer of Sky Success Venture Holdings Limited are set forth below.
| Name |
Starting |
Ending |
Business Address |
|
Principal Employment |
|
Citizenship |
| Zhiyun Peng |
2010.8.18 |
present |
c/o Sky Success Venture Holdings Limited, 13F,
No. 609 Yunling East Road, Putuo District, Shanghai, the People’s Republic of China |
|
General Manger of Shanghai Novich Venture Investment Co., Ltd. |
|
PRC |
| |
2014.3.10 |
present |
c/o Country Style Cooking Restaurant Chain Co., Ltd., 16th Floor, C1 Building, Chongqing Headquarters City, District C, No.780 Jingwei Avenue, Yuzhong District, Chongqing, the People’s Republic of China |
|
Director of the Company |
|
|
| Jinjing Hong |
2010.8.18 |
present |
c/o K-boxing (Shanghai) Co., Ltd, Building No. 19, Lane 599, Yunling East Road, Putuo District, Shanghai, the People’s Republic of China |
|
President of K-boxing (Shanghai) Co., Ltd |
|
PRC |
| Zhiyong Hong |
2010.8.18 |
present |
c/o K-boxing (Shanghai) Co., Ltd, Building No. 19, Lane 599, Yunling East Road, Putuo District, Shanghai, the People’s Republic of China |
|
Vice president of K-boxing (Shanghai) Co., Ltd |
|
PRC |
| Liping Deng |
2010.8.18 |
present |
c/o Unit 303 DBS Bank Tower,
1318 Lujiazui Ring Road, Shanghai,
the People’s Republic of China |
|
President of Trout & Partners (China) Ltd. |
|
PRC |
ANNEX E
Execution Version
ROLLOVER AGREEMENT
This ROLLOVER AGREEMENT
(this “Agreement”) is entered into as of December 17, 2015 by and among Country Style Cooking Restaurant Chain
Holding Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands (“Parent”),
and certain shareholders of Country Style Cooking Restaurant Chain Co., Ltd., an exempted company with limited liability incorporated
under the laws of the Cayman Islands (the “Company”), listed on Schedule A hereto (each, a “Rollover
Shareholder” and collectively, the “Rollover Shareholders”). Capitalized terms used but not defined
herein shall have the meanings ascribed to such terms in the Merger Agreement (as defined below).
RECITALS
WHEREAS, Parent, Country
Style Cooking Restaurant Chain Merger Company Limited, an exempted company with limited liability incorporated under the laws of
the Cayman Islands and a wholly owned subsidiary of Parent (“Merger Sub”), and the Company have, concurrently
with the execution of this Agreement, entered into an Agreement and Plan of Merger, dated as of the date hereof (as may be amended,
supplemented or otherwise modified from time to time, the “Merger Agreement”), which provides, among other things,
for the merger of Merger Sub with and into the Company, with the Company continuing as the surviving corporation and a wholly owned
subsidiary of Parent (the “Merger”), upon the terms and subject to the conditions set forth in the Merger Agreement;
WHEREAS, as of the date
hereof, each Rollover Shareholder is the registered holder and beneficial owner (as defined under Rule 13d-3 of the Exchange Act)
of the number of (a) ordinary shares, par value US$0.001 per share, of the Company (the “Shares”), including
Shares represented by ADSs, each representing four Shares (collectively, the “Owned Shares”) and (b) Company
Restricted Shares (the “Share Awards”), as set forth in the columns titled “Owned Shares” and “Company
Restricted Shares” as applicable, opposite such Rollover Shareholder’s name on Schedule A hereto;
WHEREAS, in connection
with the consummation of the transactions contemplated by the Merger Agreement, including the Merger, each of the Rollover Shareholders
agrees:
(a) to the cancellation
of his, her or its Owned Shares and the Shares issuable upon the vesting and acceleration of the Share Awards for no Merger Consideration
(such cancelled Shares collectively, the “Rollover Shares”), and
(b) to subscribe for,
or to cause any of his, her or its Affiliates to subscribe for, the number of newly issued ordinary shares of Parent (the “Parent
Shares”) immediately prior to the Closing in the amount set forth in the column titled “Parent Shares” opposite
such Rollover Shareholder’s name on Schedule B hereto in accordance with the terms of this Agreement;
WHEREAS, in order to
induce Parent and Merger Sub to enter into the Merger Agreement and consummate the transactions contemplated thereby, including
the Merger, the Rollover Shareholders are entering into this Agreement; and
WHEREAS, the Rollover
Shareholders acknowledge that Parent and Merger Sub are entering into the Merger Agreement in reliance on the representations,
warranties, covenants and other agreements of the Rollover Shareholders set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration
of the foregoing and the mutual covenants and agreements contained herein, and intending to be legally bound hereby, Parent and
the Rollover Shareholders hereby agree as follows:
Section 1. Cancellation
of Rollover Shares. Subject to the terms and conditions set forth herein, each Rollover
Shareholder agrees that the Rollover Shares held by him, her or it shall be cancelled at the Effective Time for nil consideration.
Section 2. Subscription
of Parent Shares. Immediately prior to the Closing, Parent shall issue to each Rollover
Shareholder, and such Rollover Shareholder (or, if designated by such Rollover Shareholder in writing, an Affiliate of such Rollover
Shareholder) shall subscribe for, the number of Parent Shares as set forth opposite such Rollover Shareholder’s name on
Schedule A hereto. Each Rollover Shareholder hereby acknowledges and agrees that such Rollover Shareholder shall have no
right to any Merger Consideration in respect of its Rollover Shares.
Section 3. Closing.
Subject to the satisfaction in full (or waiver) of all of the conditions set forth in Sections 7.01 and 7.02 of the Merger Agreement
(other than conditions that by their nature are to be satisfied or waived, as applicable, at the Closing), the closing of the
subscription and issuance of Parent Shares contemplated in Section 2 of this Agreement shall take place immediately prior to the
Closing.
Section 4. Deposit
of Rollover Shares. No later than three (3) Business Days prior to the Closing,
the Rollover Shareholders and any agent of the Rollover Shareholders holding certificates evidencing any Rollover Shares shall
deliver or cause to be delivered to Parent all certificates representing Rollover Shares in such Persons’ possession, for
disposition in accordance with the terms of this Agreement; such certificates and documents shall be held by Parent or any agent
authorized by Parent until the Closing.
Section 5. Irrevocable
Election; Restrictions on Transfers.
(a) The
execution of this Agreement by the Rollover Shareholders evidences, subject to Section 8 and the proviso in Section 10(l),
the irrevocable election and agreement by the Rollover Shareholders to subscribe for Parent Shares and agree to the cancellation
of their respective Owned Shares and Share Awards on the terms and conditions set forth herein. In furtherance of the foregoing,
each Rollover Shareholder covenants and agrees, severally and not jointly, that from the date hereof until any termination of this
Agreement pursuant to Section 8, such Rollover Shareholder shall not, directly or indirectly, (i) tender any equity securities
of the Company into any tender or exchange offer, (ii) sell (constructively or otherwise), transfer, pledge, hypothecate, grant,
encumber, assign or otherwise dispose of (collectively, “Transfer”), or enter into any Contract, option or other
arrangement or understanding with respect to the Transfer of, any Owned Shares, Share Awards or other equity securities of the
Company or any right, title or interest thereto or therein (including by operation of law) including, without limitation, any swap
transaction, option, warrant, forward purchase or sale transaction, futures transaction, cap transaction, floor transaction, collar
transaction or any other similar transaction (including any option with respect to any such transaction) or combination of any
such transactions, in each case involving any equity securities of the Company and (x) has, or would reasonably be expected to
have, the effect of reducing or limiting such Rollover Shareholder’s economic interest in such Owned Shares, Share Awards
or other equity securities of the Company and/or (y) grants a third party the right to vote or direct the voting of such Owned
Shares, Share Awards or other equity securities of the Company (any such transaction, a “Derivative Transaction”),
(iii) deposit Owned Shares or any equity securities of the Company into a voting trust or grant any proxy or power of attorney
or enter into a voting agreement (other than that certain Voting Agreement of even date herewith by and among Parent and certain
shareholders of the Company party thereto (the “Voting Agreement”)) with respect to any Owned Shares or other
equity securities of the Company, (iv) knowingly take any action that would make any representation or warranty of such Rollover
Shareholder set forth in this Agreement untrue or incorrect or have the effect of preventing, disabling, or delaying such Rollover
Shareholder from performing any of his, her, or its obligations under this Agreement, or (v) agree (whether or not in writing)
to take any of the actions referred to in the foregoing clauses (i) through (iv). Any purported Transfer in violation of this paragraph
shall be void.
(b) Each
Rollover Shareholder covenants and agrees, severally and not jointly, that such Rollover Shareholder shall promptly (and in any
event within twenty-four (24) hours) notify Parent of any new Shares with respect to which beneficial ownership (within the meaning
of Rule 13d-3 of the Exchange Act) is acquired by such Rollover Shareholder, including, without limitation, by purchase, as a result
of a share dividend, share split, recapitalization, combination, reclassification, exchange or change of such shares, or upon exercise
or conversion of any securities of the Company, if any, after the date hereof. Any such Shares shall automatically become subject
to the terms of this Agreement, and Schedule A hereto shall be deemed amended accordingly.
Section 6. Representations
and Warranties of the Rollover Shareholders. To induce Parent to accept the Rollover
Shares and issue the Parent Shares, each Rollover Shareholder makes the following representations and warranties, severally and
not jointly, to Parent, each and all of which shall be true and correct as of the date of this Agreement and as of the Closing:
(a) Ownership
of Shares. (i) Such Rollover Shareholder (A) is and, immediately prior to the Closing
will be, the beneficial owner of, and has and will have good and valid title to, the Owned Shares and Share Awards set forth opposite
its name in Schedule A hereto, free and clear of Liens other than as created by this Agreement and the Voting Agreement,
and (B) has and will have sole or shared (together with Affiliates controlled by such Rollover Shareholder) voting power, power
of disposition, and power to demand dissenter’s rights (if applicable), in each case with respect to all of such securities,
with no limitations, qualifications, or restrictions on such rights, subject to applicable United States federal securities laws,
laws of the Cayman Islands, laws of the British Virgin Islands, laws of the People’s Republic of China and the terms of
this Agreement and the Voting Agreement; (ii) such Rollover Shareholder’s Owned Shares and Share Awards are not subject
to any voting trust agreement or other Contract to which such Rollover Shareholder is a party restricting or otherwise relating
to the voting or Transfer of such Rollover Shareholder’s Owned Shares and Share Awards other than this Agreement and the
Voting Agreement; and (iii) such Rollover Shareholder has not Transferred any of such Rollover Shareholder’s Owned Shares
and Share Awards pursuant to any Derivative Transaction. As of the date hereof, other than as set forth on Schedule A hereto,
such Rollover Shareholder does not own, beneficially or of record, any Shares, securities of the Company, or any direct or indirect
interest in any such securities (including by way of derivative securities). Such Rollover Shareholder has not appointed or granted
any proxy or power of attorney that is still in effect with respect to any of such Rollover Shareholder’s Owned Shares or
Share Awards, except as contemplated by this Agreement or the Voting Agreement.
(b) Organization,
Standing and Authority. Each such Rollover Shareholder has full legal right, power, capacity
and authority to execute and deliver this Agreement, to perform such Rollover Shareholder’s obligations hereunder and to
consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by such Rollover
Shareholder. Assuming due authorization, execution and delivery by Parent, this Agreement constitutes a legal, valid and binding
obligation of such Rollover Shareholder, enforceable against such Rollover Shareholder in accordance with its terms, except as
enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’
rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law). If
such Rollover Shareholder is married, and any of such Rollover Shareholder’s Owned Shares and Share Awards constitute community
property or otherwise need spousal or other approval for this Agreement to be legal, valid and binding, this Agreement has been
duly and validly executed and delivered by such Rollover Shareholder’s spouse and, assuming due authorization, execution
and delivery by Parent, constitutes a legal, valid and binding obligation of such Rollover Shareholder’s spouse, enforceable
against such Rollover Shareholder’s spouse in accordance with its terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general
principles of equity (regardless of whether considered in a proceeding in equity or at law).
(c) Consents
and Approvals; No Violations. Except for the applicable requirements of the Exchange
Act, (i) no filing with, and no permit, authorization, consent or approval of, any Governmental Authority is necessary on the
part of such Rollover Shareholder for the execution, delivery and performance of this Agreement by such Rollover Shareholder or
the performance by such Rollover Shareholder of the actions contemplated hereby and (ii) neither the execution, delivery or performance
of this Agreement by such Rollover Shareholder nor the performance by such Rollover Shareholder of the actions contemplated hereby,
nor compliance by such Rollover Shareholder with any of the provisions hereof shall (A) conflict with or violate any provision
of the organizational documents of any such Rollover Shareholder which is an entity, (B) result in any breach or violation of,
or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on property or assets
of such Rollover Shareholder pursuant to any Contract to which such Rollover Shareholder is a party or by which such Rollover
Shareholder or any property or asset of such Rollover Shareholder is bound or affected, or (C) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to such Rollover Shareholder or any of such Rollover Shareholder’s properties
or assets.
(d) Litigation.
There is no Action pending against any such Rollover Shareholder or, to the knowledge of such Rollover Shareholder, any other
Person or, to the knowledge of such Rollover Shareholder, threatened against any such Rollover Shareholder or any other Person
that restricts or prohibits (or, if successful, would restrict or prohibit) the performance by such Rollover Shareholder of his,
her or its obligations under this Agreement.
(e) Reliance.
Such Rollover Shareholder understands and acknowledges that Parent and Merger Sub are entering into the Merger Agreement in reliance
upon such Rollover Shareholder’s execution, delivery and performance of this Agreement.
(f)
Receipt of Information. Such Rollover Shareholder acknowledges that such Rollover
Shareholder has been advised to discuss with his, her or its own counsel the meaning and legal consequences of such Rollover Shareholder’s
representations and warranties in this Agreement and the transactions contemplated hereby.
Section 7. Representations
and Warranties of Parent. Parent represents and warrants to each Rollover Shareholder
that:
(a) Organization,
Standing and Authority. Parent is duly organized, validly existing and in good
standing under the laws of the Cayman Islands and has all requisite power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. This Agreement has been duly and validly executed and delivered by Parent and, assuming
due authorization, execution and delivery by the Rollover Shareholders subject to the proviso in Section 10(l), constitutes
a legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, except as enforcement
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights
generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law).
(b) Consents
and Approvals; No Violations. Except for the applicable requirements of the Exchange
Act and laws of the Cayman Islands, (i) no filing with, and no permit, authorization, consent or approval of, any Governmental
Authority is necessary on the part of Parent for the execution, delivery and performance of this Agreement by Parent or the consummation
by Parent of the transactions contemplated hereby and (ii) neither the execution, delivery or performance of this Agreement by
Parent nor the consummation by Parent of the transactions contemplated hereby nor compliance by Parent with any of the provisions
hereof shall (A) conflict with or violate any provision of the organizational documents of Parent, (B) result in any breach or
violation of, or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under,
or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on
such property or asset of Parent pursuant to, any Contract to which Parent is a party or by which such Parent or any property
or asset of Parent is bound or affected, (C) violate any order, writ, injunction, decree, statute, rule or regulation applicable
to Parent or any of Parent’s properties or assets.
(c) Issuance
of Parent Shares. At and immediately after the Closing, the authorized capital
stock of Parent shall consist of 500,000,000 ordinary shares, of which, at and immediately after the Closing, 73,403,076 ordinary
shares shall be issued and outstanding and owned of record as set forth on Schedule B hereto. At and immediately after
the Closing, there shall be (i) no options, warrants, or other rights to acquire share capital of Parent, (ii) no outstanding
securities exchangeable for or convertible into share capital of Parent, and (iii) no outstanding rights to acquire or obligations
to issue any such options, warrants, rights or securities. The Parent Shares will be duly authorized, validly issued, fully paid
and nonassessable, and free and clear of all Liens, preemptive rights, rights of first refusal, subscription and similar rights
(other than those arising under any agreements entered into at the Closing by all of the Rollover Shareholders) when issued.
Section 8. Termination.
This Agreement, and the agreement of the Rollover Shareholders to the cancellation of the Rollover Shares, will terminate immediately
upon the valid termination of the Merger Agreement in accordance with its terms; provided, that this Section 8 and Section
10 shall survive the termination of this Agreement. Nothing in this Section 8 shall relieve or otherwise limit any
party’s liability for any breach of this Agreement prior to the termination of this Agreement.
Section 9. Further
Assurances. Each Rollover Shareholder hereby covenants that, from time to time,
such Rollover Shareholder will do, execute, acknowledge and deliver, or will cause to be done, executed, acknowledged and delivered,
such further acts, conveyances, transfers, assignments, powers of attorney and assurances necessary to cancel all of the Rollover
Shares in accordance with the terms of this Agreement.
Section 10. Miscellaneous.
(a) Notices.
All notices and other communications hereunder shall be in writing (in the English language) and shall be deemed duly given (i)
upon receipt if delivered personally, or if by email or facsimile, upon confirmation of receipt by email or facsimile, (ii) one
Business Day after being sent by express courier service, or (iii) three Business Days after being sent by registered or certified
mail, return receipt requested. All notices hereunder shall be delivered to the addresses set forth on the signature pages hereto
under each party’s name, or pursuant to such other instructions as may be designated in writing by the party to receive
such notice.
(b) Severability.
Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable,
such provision shall be interpreted to be only as broad as is enforceable.
(c) Entire
Agreement. This Agreement, the Merger Agreement, the Voting Agreement and other
documents and instruments and other agreements as contemplated by or referred to herein and therein embody the complete agreement
and understanding among the parties hereto with respect to the subject matter hereof and thereof and supersede and preempt any
prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject
matter hereof in any way.
(d) Specific
Performance. Each Rollover Shareholder acknowledges and agrees that monetary damages
would not be an adequate remedy in the event that any covenant or agreement of such Rollover Shareholder in this Agreement is
not performed in accordance with its terms, and therefore agrees that, in addition to and without limiting any other remedy or
right available to Parent and Merger Sub, Parent and Merger Sub will have the right to an injunction, temporary restraining order
or other equitable relief in any court of competent jurisdiction enjoining any such breach and enforcing specifically the terms
and provisions hereof. Each Rollover Shareholder agrees not to oppose the granting of such relief in the event a court determines
that such a breach has occurred, and to waive any requirement for the securing or posting of any bond in connection with such
remedy. All rights, powers, and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise or beginning of the exercise of any thereof by Parent and Merger Sub
shall not preclude the simultaneous or later exercise of any other such right, power or remedy by Parent.
(e) Amendments;
Waivers. At any time prior to the Expiration Time, any provision of this Agreement
may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by the
Rollover Shareholders, Parent, or in the case of a waiver, by the party against whom the waiver is to be effective. Notwithstanding
the foregoing, no failure or delay by a party hereto in exercising any right hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise of any other right hereunder.
(f) Governing
Law. This Agreement and the schedules hereto shall be governed and construed in
accordance with the laws of the State of New York, without regard to any applicable conflicts of law principles that would cause
the application of the laws of any other jurisdiction.
(g) Dispute
Resolution; Jurisdiction; Enforcement. All actions arising under the laws of the
State of New York out of or relating to this Agreement shall be heard and determined exclusively in any New York federal court
sitting in the Borough of Manhattan of The City of New York, provided, however, that if such federal court does not have jurisdiction
over such action, such action shall be heard and determined exclusively in any New York state court sitting in the Borough of
Manhattan of The City of New York. Each of the parties hereto agrees that mailing of process or other papers in connection with
any such action in the manner provided in Section 10(a) hereof or in such other manner as may be permitted by applicable
Laws, will be valid and sufficient service thereof. Each of the parties hereto hereby (a) submits to the exclusive jurisdiction
of any federal or state court sitting in the Borough of Manhattan of The City of New York for the purpose of any action arising
under the laws of the State of New York out of or relating to this Agreement brought by any party hereto and (b) irrevocably waives,
and agrees not to assert, by way of motion, as a defense, counterclaim or otherwise, in any action with respect to this Agreement
and the rights and obligations arising hereunder, or for recognition and enforcement of any judgment in respect of this Agreement
and the rights and obligations arising hereunder (i) any claim that it is not personally subject to the jurisdiction of the aforesaid
courts for any reason other than the failure to serve process in accordance with this Section 10(g), (ii) any claim that
it or its property is exempt or immune from the jurisdiction of any such court or from any legal process commenced in such courts
(whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment
or otherwise) and (iii) to the fullest extent permitted by applicable law, any claim that (A) the action in such court is brought
in an inconvenient forum, (B) the venue of such action is improper or (C) this Agreement, or the subject matter hereof, may not
be enforced in or by such courts.
(h) Waiver
of Jury Trial. EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH OF THE PARTIES HERETO HEREBY
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS Section 10(h).
(i) No
Third-Party Beneficiaries. There are no third party beneficiaries of this Agreement
and nothing in this Agreement, express or implied, is intended to or shall confer on any person other than the parties hereto
(and their respective successors, heirs and permitted assigns), any rights, remedies, obligations or liabilities, except as specifically
set forth in this Agreement.
(j) Assignment;
Binding Effect. Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Parent may assign this Agreement (in whole but not in part) in connection with a permitted
assignment of the Merger Agreement by Parent, as applicable. Subject to the preceding sentence, this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns and, in the case
of each Rollover Shareholder, his, her or its estate, heirs, beneficiaries, personal representatives and executors.
(k) No
Presumption Against Drafting Party. Each of the parties to this Agreement acknowledges
that he, she or it has been represented by independent counsel in connection with this Agreement and the transactions contemplated
by this Agreement. Accordingly, any rule of law or any legal decision that would require interpretation of any claimed ambiguities
in this Agreement against the drafting party has no application and is expressly waived.
(l) Counterparts.
This Agreement may be executed in two or more consecutive counterparts (including by facsimile or email pdf format), each of which
shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument, and shall become
effective when one or more counterparts have been signed by each of the parties and delivered (by telecopy, email pdf format or
otherwise) to the other parties; provided, however, that if any of the Rollover Shareholders fails for any reason to execute,
or perform his, her or its obligations under, this Agreement, this Agreement shall remain effective as to all parties executing
this Agreement.
IN WITNESS WHEREOF, the
parties hereto have duly executed and delivered this Agreement as of the date and year first written above.
| |
COUNTRY STYLE COOKING
RESTAURANT CHAIN HOLDING
LIMITED |
| |
|
|
| |
By: |
/s/ Hong Li |
| |
|
Name: |
Hong Li |
| |
|
Title: |
Director |
| |
|
| |
Address: 16th Floor, C1 Building, Chongqing
Headquarters City District C, No. 780 Jingwei
Avenue, Yuzhong Disctrict, Chongqing, the
People’s Republic of China |
[Signature Page To Rollover Agreement]
IN WITNESS WHEREOF, the parties hereto have
duly executed and delivered this Agreement as of the date and year first written above.
| |
ROLLOVER SHAREHOLDERS |
| |
|
| |
Hong Li |
| |
|
| |
/s/ Hong Li |
| |
|
| |
Address: 16th Floor, C1 Building,
Chongqing Headquarters City District C,
No. 780 Jingwei Avenue, Yuzhong
Disctrict, Chongqing, the People’s
Republic of China |
| |
|
| |
Xingqiang Zhang |
| |
|
| |
/s/ Xingqiang Zhang |
| |
|
| |
Address: 16th Floor, C1 Building,
Chongqing Headquarters City District C,
No. 780 Jingwei Avenue, Yuzhong
Disctrict, Chongqing, the People’s
Republic of China |
| |
|
| |
Regal Fair Holdings Limited |
| |
|
| |
By: |
/s/ Hong Li |
| |
|
Name: |
Hong Li |
| |
|
Title: |
Director |
| |
|
|
|
| |
Address: P.O. Box 916, Woodburne
Hall, Road Town, Tortola, British Virgin
Islands |
[Signature Page
To Rollover Agreement]
| |
ROLLOVER SHAREHOLDERS |
| |
|
| |
Zhiyun Peng |
| |
|
| |
/s/ Zhiyun Peng |
| |
|
| |
Address: |
| |
c/o Sky Success Venture Holdings Limited,
13F, No. 609 Yunling East Road,
Putuo District, Shanghai,
People’s Republic of China |
[Signature Page
To Rollover Agreement]
| |
ROLLOVER SHAREHOLDERS |
| |
|
| |
Zhiyong Hong |
| |
|
| |
/s/ Zhiyong Hong |
| |
|
| |
Address: |
| |
c/o Sky Success Venture Holdings Limited,
13F, No. 609 Yunling East Road,
Putuo District, Shanghai,
People’s Republic of China |
[Signature Page
To Rollover Agreement]
| |
ROLLOVER SHAREHOLDERS |
| |
|
| |
Sky Success Venture Holdings Limited |
| |
By: |
/s/ Zhiyun Peng |
| |
|
Name: |
Zhiyun Peng |
| |
|
Title: |
Director |
| |
Address: |
| |
c/o Sky Success Venture Holdings Limited,
13F, No. 609 Yunling East Road,
Putuo District, Shanghai,
People’s Republic of China |
[Signature Page
To Rollover Agreement]
| |
ROLLOVER SHAREHOLDERS |
| |
|
| |
SIG China Investments One, Ltd. |
| |
|
|
| |
By: |
SIG Asia Investment LLLP, as authorized agent |
| |
|
|
| |
By: |
Heights Capital Management Inc., as authorized agent |
| |
|
|
| |
By: |
/s/ Michael L. Spolan |
| |
Name: |
Michael L. Spolan |
| |
Title: |
General Counsel |
| |
|
Heights Capital Management, Inc. |
| |
|
as authorized agent |
| |
|
|
| |
Address: |
| |
|
| |
c/o SIG Asia Investment, LLLP, |
| |
101 California Street Suite 3250, San |
| |
Francisco, CA 94111, U.S.A. |
| |
|
|
[Signature Page To Rollover Agreement]
Schedule
A
Rollover Shares
| Shareholder | |
Owned Shares | | |
Company Restricted Shares | |
| Hong Li | |
| - | | |
| 86,500 | |
| Xingqiang Zhang | |
| - | | |
| 78,500 | |
| Zhiyun Peng | |
| - | | |
| 20,000 | |
| Zhiyong Hong | |
| 278,000 | * | |
| - | |
| Regal Fair Holdings Limited | |
| 44,522,148 | | |
| - | |
| Sky Success Venture Holdings Limited | |
| 16,417,928 | | |
| - | |
| SIG China Investments One, Ltd. | |
| 12,000,000 | | |
| - | |
*Held in the form of ADSs.
Schedule
B
Parent Shares At and Immediately After the Closing
| Parent Shares |
|
Shareholders * |
| 86,500 |
|
Ms. Hong Li |
| 78,500 |
|
Mr. Xingqiang Zhang |
| 44,522,148 |
|
Regal Fair Holdings Limited |
| 16,715,928 |
|
Sky Success Venture Holdings Limited |
| 12,000,000 |
|
SIG China Investments One, Ltd. |
*Any individual or entity shareholder named herein may, at his/her/its
sole discretion, name any affiliate(s) to take his/her/its place as direct record holders of Parent Shares at and immediately after
the Closing.
ANNEX F
Execution Version
LIMITED GUARANTEE
Limited Guarantee,
dated as of December 17, 2015 (this “Limited Guarantee”), by Regal Fair Holdings Limited (“Regal Fair”),
Sky Success Venture Holdings Limited (“Sky Success”), SIG China Investments One, Ltd. (“SIG China”,
together with Regal Fair and Sky Success, the “Guarantors”, and each a “Guarantor”), in favor
of Country Style Cooking Restaurant Chain Co., Ltd., an exempted company with limited liability incorporated under the laws of
the Cayman Islands (the “Guaranteed Party”). Reference is hereby made to the Agreement and Plan of Merger, dated
as of the date hereof (the “Merger Agreement”), by and among the Guaranteed Party, Country Style Cooking Restaurant
Chain Holding Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands (“Parent”),
and Country Style Cooking Restaurant Chain Merger Company Limited, an exempted company with limited liability incorporated under
the laws of the Cayman Islands and a wholly owned subsidiary of Parent (“Merger Sub”). Capitalized terms used
herein but not otherwise defined have the meanings given to them in the Merger Agreement.
1. LIMITED GUARANTEE. (a) To induce the
Guaranteed Party to enter into the Merger Agreement, each Guarantor, intending to be legally bound, hereby absolutely, unconditionally
and irrevocably, severally but not jointly, guarantees to the Guaranteed Party, as the primary obligor and not merely as surety,
on the terms and subject to the conditions herein, the due and punctual payment, performance and discharge of its respective percentage
as set forth opposite to its name in Annex A (for each such Guarantor, the “Guaranteed Percentage”) of
the obligations of Parent or Merger Sub, to pay the Guaranteed Party (a) the Parent Termination Fee pursuant to Section 8.06(b)
of the Merger Agreement (the “Parent Fee Obligations”) and (b) the costs, expenses and interests payable pursuant
to Section 6.14(c) and Section 8.06(c) of the Merger Agreement (the “Expense Obligations,” and together with
the Parent Fee Obligations, the “Guaranteed Obligations”) as and when due (with respect to each Guarantor, its
Guaranteed Percentage of the Guaranteed Obligations, the “Guarantor Obligations”), provided that in no
event shall a Guarantor’s liability under this Limited Guarantee exceed an amount equal to its Guaranteed Percentage of (i)
the Parent Fee Obligations, plus (ii) the Expense Obligations, minus (iii) any portion of the Guaranteed Obligations actually paid
by Parent or Merger Sub in accordance with the terms hereof and under the Merger Agreement (such limitation set forth in the foregoing
clauses (i) and (ii) on the liability of a Guarantor with respect to its Guarantor Obligations being hereinafter referred as the
“Maximum Amount”). This Limited Guarantee may be enforced for the payment of money only. All payments hereunder
shall be made in United States dollars, in immediately available funds. Each Guarantor shall make all payments hereunder free and
clear of any deduction, offset, defense, claim or counterclaim of any kind. Each Guarantor acknowledges that the Guaranteed Party
entered into the transactions contemplated by the Merger Agreement in reliance on this Limited Guarantee.
(b) Subject to the terms and conditions
of this Limited Guarantee, if Parent or Merger Sub is in breach of the Guaranteed Obligations, then all of the Guarantors’
liabilities and obligations to the Guaranteed Party hereunder in respect of their respective Guarantor Obligations shall, at the
Guarantee Party’s option, become immediately due and payable and the Guaranteed Party may at any time and, from time to time,
at the Guaranteed Party’s option, take any and all actions available hereunder or under applicable law to collect the Guarantor
Obligations from each Guarantor (subject to the Maximum Amount). In furtherance of the foregoing, each Guarantor acknowledges that
the Guaranteed Party may, in its sole discretion, bring and prosecute a separate action or actions against such Guarantor for its
Guarantor Obligations (subject to the Maximum Amount), regardless of whether any action is brought against Parent, Merger Sub or
any other Guarantors, or whether Parent, Merger Sub or any other Guarantor is joined in any action or actions. Notwithstanding
anything herein to the contrary, the Guaranteed Party agrees and acknowledges that this Limited Guarantee may not be enforced without
giving full and absolute effect to the Maximum Amount. Each of the Guarantors agrees to pay on demand all reasonable and documented
out-of-pocket expenses (including reasonable fees and expenses of counsel) incurred by the Guaranteed Party in connection with
enforcement of its rights hereunder with respect to such Guarantor if (i) the Guarantor asserts in any litigation or other proceeding
that this Limited Guarantee is illegal, invalid or unenforceable in accordance with its terms or (ii) the Guarantor fails or refuses
to make any payment to the Guaranteed Party hereunder when due and payable.
(c) The parties hereto acknowledge and
agree that irreparable damage would occur in the event that any of the provisions of this Limited Guarantee were not performed
in accordance with its specific terms or were otherwise breached and further agree that the Guaranteed Party shall be entitled
to an injunction, specific performance and other equitable relief against any Guarantor to prevent breaches of this Limited Guarantee
and to enforce specifically the terms and provisions hereof, in addition to any other remedy to which it is entitled at law or
in equity, and shall not be required to provide any bond or other security in connection with any such order or injunction. Each
Guarantor further agrees not to oppose the granting of any such injunction, specific performance and other equitable relief on
the basis that (i) the Guaranteed Party has an adequate remedy at law or (ii) an award of an injunction, specific performance or
other equitable relief is not an appropriate remedy for any reason at law or in equity (collectively, the “Prohibited
Defenses”).
2. NATURE OF GUARANTEE. The Guarantors’
liability hereunder is absolute, unconditional, irrevocable and continuing irrespective of any modification, amendment or waiver
of or any consent to departure from the Merger Agreement that may be agreed to by Parent or Merger Sub. The Guaranteed Party shall
not be obligated to file any claim relating to the Guaranteed Obligations in the event that Parent or Merger Sub becomes subject
to a bankruptcy, reorganization or similar proceeding, and the failure of the Guaranteed Party to so file shall not affect the
Guarantors’ obligations hereunder. Subject to the terms hereof, each Guarantor’s liability hereunder is absolute, unconditional,
irrevocable and continuing irrespective of any modification, amendment or waiver of or any consent to departure from the Merger
Agreement that may be agreed to by Parent or Merger Sub. In the event that any payment to the Guaranteed Party in respect of any
Guarantor Obligations is rescinded or must otherwise be returned for any reason whatsoever, the relevant Guarantor shall remain
liable hereunder with respect to such Guarantor Obligations (subject to the Maximum Amount) as if such payment had not been made.
This Limited Guarantee is an unconditional guarantee of payment and not of collection, and the Guaranteed Party shall not be required
to initiate any legal proceedings against Parent or Merger Sub before proceeding against the Guarantors hereunder.
3. CERTAIN WAIVERS. Each Guarantor agrees
that its obligations hereunder shall not be released or discharged, in whole or in part, or otherwise affected by (a) the failure
or delay of the Guaranteed Party to assert any claim or demand or to enforce any right or remedy against Parent, Merger Sub or
any other Person interested in the transactions contemplated by the Merger Agreement; (b) any change in the time, place or manner
of payment of the Guarantor Obligations or any rescission, waiver, compromise, consolidation or other amendment or modification
of any of the terms or provisions of the Merger Agreement made in accordance with the terms of Section 9.10 thereof or any agreement
evidencing, securing or otherwise executed in connection with the Guarantor Obligations; (c) the addition, substitution, any legal
or equitable discharge or release of such Guarantor with respect to the Guarantor Obligations (other than a discharge or release
of such Guarantor with respect to its Guarantor Obligations as a result of payment in full of the applicable Guarantor Obligations
in accordance with the terms hereunder) or any Person now or hereafter liable with respect to any of the Guaranteed Obligations
or otherwise interested in the transactions contemplated by the Merger Agreement; (d) any change in the corporate existence, structure
or ownership of Parent, Merger Sub or any other Person now or hereafter liable with respect to the Guaranteed Obligations or otherwise
interested in the transactions contemplated by the Merger Agreement; (e) the existence of any claim, set-off, judgment or other
right which such Guarantor may have at any time against Parent, Merger Sub or the Guaranteed Party or any of their respective Affiliates,
whether in connection with the Guarantor Obligations or otherwise; (f) the adequacy of any other means the Guaranteed Party may
have of obtaining payment related to the Guaranteed Obligations; (g) any insolvency, bankruptcy, reorganization or other similar
proceeding affecting Parent, Merger Sub or any other Person now or hereafter liable with respect to the Guaranteed Obligations
or otherwise interested in the transactions contemplated by the Merger Agreement or affecting any of their respective assets; or
(h) any discharge of such Guarantor as a matter of applicable law (other than as a result of, and to the extent of, payment of
such Guarantor's Guarantor Obligation in accordance with the terms of the Merger Agreement). To the fullest extent permitted by
Law, each Guarantor hereby expressly waives any and all rights or defenses arising by reason of any Law which would otherwise require
any election of remedies by the Guaranteed Party. Each Guarantor waives promptness, diligence, notice of the acceptance of this
Limited Guarantee and of the Guarantor Obligations, presentment, demand for payment, notice of non-performance, default, dishonor
and protest, notice of the incurrence of any Guarantor Obligations and all other notices of any kind (except for notices to be
provided to Parent or Merger Sub pursuant to the Merger Agreement or notices expressly provided pursuant to this Limited Guarantee),
all defenses which may be available by virtue of any valuation, stay, moratorium Law or other similar Law now or hereafter in effect,
any right to require the marshalling of assets of Parent, Merger Sub or any other Person now or hereafter liable with respect to
the Guaranteed Obligations or otherwise interested in the transactions contemplated by the Merger Agreement, and all suretyship
defenses generally (other than a breach by the Guaranteed Party of this Limited Guarantee). Each Guarantor acknowledges that it
will receive substantial direct and indirect benefits from the transactions contemplated by the Merger Agreement and that the waivers
set forth in this Limited Guarantee are knowingly made in contemplation of such benefits. Without limiting anything else in this
Limited Guarantee, each Guarantor hereby covenants and agrees that it shall not institute, directly or indirectly, and shall cause
its Affiliates not to institute, directly or indirectly, any proceeding asserting the Prohibited Defenses or that this Limited
Guarantee is illegal, invalid or unenforceable in accordance with its terms.
4. NO WAIVER; CUMULATIVE RIGHTS. No failure
on the part of the Guaranteed Party to exercise, and no delay in exercising, any right, remedy or power hereunder or under the
Merger Agreement shall operate as a waiver hereof or thereof, nor shall any single or partial exercise by the Guaranteed Party
of any right, remedy or power hereunder preclude any other or future exercise of any right, remedy or power hereunder. Each and
every right, remedy and power hereby granted to the Guaranteed Party or allowed it by Law or other contracts shall be cumulative
and not exclusive of any other, and may be exercised by the Guaranteed Party at any time or from time to time subject to the terms
and provisions hereof. The Guaranteed Party shall not have any obligation to proceed at any time or in any manner against, or exhaust
any or all of the Guaranteed Party’s rights against Parent or Merger Sub or any other Person now or hereafter liable for
any Guaranteed Obligations or interested in the transactions contemplated by the Merger Agreement (including any other Guarantor)
prior to proceeding against any Guarantor hereunder, and the failure by the Guaranteed Party to pursue rights or remedies against
Parent or Merger Sub shall not relieve any Guarantor of any liability hereunder, and shall not impair or affect the rights and
remedies, whether express, implied or available as a matter of law, of the Guaranteed Party.
5. REPRESENTATIONS AND WARRANTIES.
Each Guarantor hereby represents and warrants
that:
(a) (i) such Guarantor, if an entity, is
a legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; (ii) such
Guarantor has all corporate power (if the Guarantor is an entity) and authority to execute, deliver and perform this Limited Guarantee;
(iii) the execution, delivery and performance of this Limited Guarantee (A) have been duly authorized by all necessary corporate
action (if the Guarantor is an entity), and (B) do not, or will not, as the case may be (if the Guarantor is an entity) conflict
with or violate any provision of each Guarantor’s organizational documents, applicable material Law or material contractual
restriction binding on each Guarantor or its assets;
(b) this Limited Guarantee constitutes
a legal, valid and binding obligation of such Guarantor enforceable against such Guarantor in accordance with its terms, subject
to the effects of bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar Laws of general applicability
relating to or affecting creditors’ rights and to general equity principles;
(c) such Guarantor has the financial capacity
to pay and perform its obligations under this Limited Guarantee, and all funds necessary for such Guarantor to fulfill its obligations
under this Limited Guarantee shall be available to such Guarantor for so long as this Limited Guarantee shall remain in effect
in accordance with Section 8 (Continuing Guarantee) hereof; and
(d) all consents, approvals, authorizations,
permits of, filings with and notifications to, any governmental authority necessary for the due execution, delivery and performance
of this Limited Guarantee by such Guarantor have been obtained or made and all conditions thereof have been duly complied with,
and no other action by, and no notice to or filing with, any governmental authority or regulatory body is required in connection
with the execution, delivery or performance of this Limited Guarantee, except for the registration of onshore security for offshore
loan with the PRC State Administration of Foreign Exchange by the individual Guarantors, which shall be carried out as soon as
practicable after the execution and delivery of this Limited Guarantee.
6. NO ASSIGNMENT.
The provisions of this Limited Guarantee
shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Neither
this Limited Guarantee nor any rights, interests or obligations hereunder shall be assigned by either party hereto (whether by
operation of Law or otherwise) without the prior written consent of the other party (which consent shall not be unreasonably withheld,
conditioned or delayed); provided, that no assignment by either party shall relieve the assigning party of any of its obligations
hereunder. Any purported assignment in violation of this Limited Guarantee will be null and void.
7. NOTICES. Any notice, request, instruction
or other document to be given hereunder by one party to the other party shall be in writing and delivered personally or sent by
registered or certified mail, postage prepaid, by facsimile or overnight courier.
(a) If to a Guarantor, in accordance with
the contact information set forth next to such Guarantor’s name on Annex A, with a copy to (which shall not constitute
notice):
Skadden, Arps, Slate, Meagher & Flom
42/F, Edinburgh Tower, The Landmark
15 Queen's Road Central
Hong Kong
Facsimile: +852 3740 4727
Attention: Z. Julie Gao
Phone: +852 3740 4863
E-mail: Julie.Gao@skadden.com
(b) If to the Guaranteed Party, as provided
in the Merger Agreement.
8. CONTINUING GUARANTEE.
(a) This Limited Guarantee may not be revoked
or terminated and shall remain in full force and effect and shall be binding on each Guarantor, its successors and assigns until
all of its Guarantor Obligation has been fully performed. Notwithstanding the foregoing, this Limited Guarantee shall terminate
and the Guarantors shall have no further obligations under this Limited Guarantee as of the earliest of: (i) the Effective Time,
(ii) the termination of the Merger Agreement in accordance with its terms (other than a termination of the Merger Agreement for
which a Parent Termination Fee is, in accordance with Section 8.06(b) of the Merger Agreement, due and owing by Parent (a "Qualifying
Termination")), and (iii) the date following ninety (90) days from the date of a Qualifying Termination if the Guaranteed
Party has not presented a written claim for payment of the relevant Guarantor Obligation to such Guarantor by such date; provided,
that, if the Guaranteed Party has presented such a written claim by such date, this Limited Guarantee shall terminate upon the
date that such claim is finally satisfied or otherwise resolved by agreement of the parties hereto or by a final, non-appealable
resolution of such claim pursuant to Section 10 (Governing Law; Jurisdiction) hereof.
(b) Notwithstanding the foregoing, in the
event the Guaranteed Party or any of its controlled Affiliates (which, for the avoidance of doubt, shall not include any Rollover
Shareholder or any of their Affiliates or any such Persons’ respective officers and directors) asserts in any litigation
or other proceeding that any provision of this Limited Guarantee limiting any Guarantor’s liability to the Maximum Amount
is illegal, invalid or unenforceable in whole or in part or that any Guarantor is liable for an amount in excess of or to a greater
extent than the Maximum Amount, or asserts any theory of liability against any Non-Recourse Party with respect to this Limited
Guarantee, the Merger Agreement, any other agreement or instrument delivered in connection with this Limited Guarantee or the Merger
Agreement, or the transactions contemplated hereby or thereby, other than the Retained Claims (as defined in Section 9 hereof),
then (x) the obligations of the Guarantors under this Limited Guarantee shall terminate and be null and void ab initio, (y) if
any Guarantor has previously made any payments under this Limited Guarantee, it shall be entitled to recover such payments and
(z) neither such Guarantor nor any Non-Recourse Party shall have any liability to the Guaranteed Party or any of its controlled
Affiliates (which, for the avoidance of doubt, shall not include any Rollover Shareholder or any of their Affiliates or any such
Persons’ respective officers and directors) with respect to this Limited Guarantee, the Merger Agreement, any other agreement
or instrument delivered in connection with this Limited Guarantee or the Merger Agreement, or the transactions contemplated hereby
or thereby. If any payment or payments made by Parent or Merger Sub in respect of the Parent Termination Fee or any part thereof,
are subsequently invalidated, declared to be fraudulent or preferential, set aside or are required to be repaid to a trustee, receiver
or any other person under any bankruptcy act, state or federal law, common law or equitable cause, then to the extent of such payment
or payments, the Guarantor Obligations or part thereof with respect to any Guarantor hereunder intended to be satisfied shall be
revived and continued in full force and effect as if said payment or payments had not been made.
9. NO RECOURSE. Each Guarantor shall have
no obligations under or in connection with this Limited Guarantee except as expressly provided by this Limited Guarantee. No personal
liability shall attach to, and no recourse shall be had by the Guaranteed Party, any of its Affiliates or any Person purporting
to claim by or through any of them or for the benefit of any of them, under any theory of liability (including without limitation
by attempting to pierce a corporate or other veil or by attempting to compel any party to enforce any actual or purported right
that they may have against any Person) against any Non-Recourse Party, except for claims with respect to (i) the Guarantors and
their respective successors and assigns (but not any Non-Recourse Party) under this Limited Guarantee pursuant to the terms thereof
or hereof, as applicable, (ii) the signatories and their respective successor and assigns (but not any Non-Recourse Party) under
the Debt Financing Document or pursuant to the terms thereof, (iii) Parent and Merger Sub and their respective successors and assigns
under the Merger Agreement pursuant to the terms thereof, (iv) all signatories and their respective successors and assigns under
the Confidentiality Agreements pursuant to the terms thereof, and (iv) any of the Rollover Shareholders or their respective successors
and assigns (but not any Non-Recourse Party) under the Voting Agreement (the “Retained Claims”). Each of the
Guarantors hereby unconditionally and irrevocably agree not to exercise any rights that they may now have or hereafter acquire
against Parent or Merger Sub that arise from the existence, payment, performance or enforcement of the applicable Guarantor Obligations
under or in respect of this Limited Guarantee or any other agreement in connection therewith, including, without limitation, any
right of subrogation, reimbursement, exoneration, contribution or indemnification unless and until the applicable Guarantor Obligations
and any other amounts that may be payable under this Limited Guarantee shall have been paid in full in cash. As used herein, the
term “Non-Recourse Parties” means the Guarantors and any former, current or future equity holders, controlling
Persons, directors, officers, employees, agents, general or limited partners, managers, members or Affiliates of the Guarantors
(including but not limited to Merger Sub and Parent) and any former, current or future equity holders, controlling Persons, directors,
officers, employees, agents, general or limited partners, managers, members or Affiliates of any of the foregoing.
10. GOVERNING LAW; JURISDICTION.
(a) This Limited Guarantee shall be governed
by and construed in accordance with the Laws of the State of New York, without giving effect to the choice of Law principles thereof.
(b) Any dispute, controversy or claim arising
out of or relating to this Limited Guarantee or its subject matter (including a dispute regarding the existence, validity, formation,
effect, interpretation, performance or termination of this Limited Guarantee) (each a “Dispute”) shall be finally
settled by arbitration. The place of arbitration shall be Hong Kong, and the arbitration shall be administered by the Hong Kong
International Arbitration Centre (the “HKIAC”) in accordance with the arbitration rules of the HKIAC in force
at the date of commencement of the arbitration (the “HKIAC Rules”). The arbitration shall be decided
by a tribunal of three (3) arbitrators, whose appointment shall be in accordance with the HKIAC Rules. Arbitration proceedings
(including but not limited to any arbitral award rendered) shall be in English. Subject to the agreement of the tribunal, any Dispute(s)
which arise subsequent to the commencement of arbitration of any existing Dispute(s), shall be resolved by the tribunal already
appointed to hear the existing Dispute(s). The award of the arbitration tribunal shall be final and conclusive and binding upon
the parties as from the date rendered. Judgment upon any award may be entered and enforced in any court having jurisdiction over
a party or any of its assets. For the purpose of the enforcement of an award, the parties irrevocably and unconditionally submit
to the jurisdiction of any competent court and waive any defenses to such enforcement based on lack of personal jurisdiction or
inconvenient forum.
11. COUNTERPARTS. This Limited Guarantee
shall not be effective until it has been executed and delivered by each of the Guarantors and the Guaranteed Party. This Limited
Guarantee may be executed in any number of counterparts, each such counterpart being deemed to be an original instrument, but all
such counterparts shall together constitute one and the same agreement. This Limited Guarantee may be executed and delivered by
facsimile transmission or by e-mail delivery of a “.pdf” format data file, and in the event this Limited Guarantee
is so executed and delivered, such signature shall create a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original
thereof.
12. SEVERABILITY. The provisions of this
Limited Guarantee shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity
or enforceability of the other provisions hereof. If any provision of this Limited Guarantee or the application thereof to any
Person or any circumstance is determined to be invalid, illegal, void or unenforceable, the remaining provisions hereof shall remain
in full force and effect and shall in no way be affected, impaired or invalidated thereby so long as the economic or legal substance
of the transactions contemplated hereby is not affected in any manner adverse to any party; provided, however, that this Limited
Guarantee may not be enforced against any Guarantor without giving effect to the Maximum Amount or the provisions set forth in
Section 9 hereof. Upon such determination that any provision or the application thereof is invalid, illegal, void or unenforceable,
the parties hereto shall negotiate in good faith to modify this Limited Guarantee so as to effect the original intent of the parties
as closely as possible in a mutually acceptable manner so that the transactions contemplated hereby are consummated as originally
contemplated to the fullest extent permitted by applicable Law.
13. NO THIRD PARTY BENEFICIARIES. Except
for the rights of the Non-Recourse Parties provided hereunder, this Limited Guarantee shall be binding upon and inure solely to
the benefit of the parties hereto and their respective successors and permitted assigns, and nothing express or implied in this
Limited Guarantee is intended to, or shall, confer upon any other Person any benefits, rights or remedies under or by reason of,
or any rights to enforce or cause the Guaranteed Party to enforce, the obligations set forth herein.
14. CONFIDENTIALITY. This Limited Guarantee
shall be treated as confidential and is being provided to the Guaranteed Party solely in connection with the Merger. Unless required
by applicable laws, regulations or rules (including rules promulgated by either the U.S. Securities and Exchange Commission or
the New York Stock Exchange), this Limited Guarantee may not be used, circulated, quoted or otherwise referred to in any document,
except pursuant to the Merger Agreement or otherwise with the written consent of all the parties hereto.
15. MISCELLANEOUS.
(a) This Limited Guarantee, together with
the Merger Agreement (including any schedules and exhibits thereto) and any other agreement or instrument delivered in connection
with the transactions contemplated by the Merger Agreement, constitute the entire agreement with respect to the subject matter
hereof and supersedes any and all prior discussions, negotiations, proposals, undertakings, understandings and agreements, whether
written or oral, among Parent, Merger Sub and the Guarantors or any of their respective Affiliates on the one hand, and the Guaranteed
Party or any of its Affiliates on the other hand. No amendment, modification or waiver of any provision hereof shall be enforceable
unless approved by the Guaranteed Party and the Guarantors in writing.
(b) The descriptive headings contained
in this Limited Guarantee are for reference purposes only and shall not affect in any way the meaning or interpretation of this
Limited Guarantee.
(c) The parties hereto acknowledge that
each party and its counsel have reviewed this Limited Guarantee and that any rule of construction to the effect that any ambiguities
are to be resolved against the drafting party shall not be employed in the interpretation of this Limited Guarantee.
[Remainder of Page Intentionally Left
Blank]
IN WITNESS WHEREOF,
the undersigned have duly executed and delivered this Limited Guarantee as of the date first set forth above.
| |
GUARANTEED PARTY: |
| |
|
| |
Country Style Cooking Restaurant Chain Co., Ltd. |
| |
By: |
/s/ Li-Lan Cheng |
| |
Name: |
Li-Lan Cheng |
| |
Title: |
Chairman of the Special |
| |
|
Committee of the |
| |
|
Board of Directors |
| |
|
|
[Signature
Page to the Limited Guarantee]
IN WITNESS WHEREOF,
the undersigned have duly executed and delivered this Limited Guarantee as of the date first set forth above.
| |
GUARANTOR: |
| |
|
| |
REGAL FAIR HOLDINGS LIMITED |
| |
By: |
/s/ Hong Li |
| |
Name: |
Hong Li |
| |
Title: |
Director |
[Signature
Page to the Limited Guarantee]
IN WITNESS WHEREOF,
the undersigned have duly executed and delivered this Limited Guarantee as of the date first set forth above.
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GUARANTOR: |
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SKY SUCCESS VENTURES HOLDINGS LIMITED |
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By: |
/s/ Zhiyun Peng |
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Name: |
Zhiyun Peng |
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Title: |
Director |
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Address: |
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c/o Sky Success Venture Holdings Limited, |
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13F, No. 609 Yunling East Road, |
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Putuo District, Shanghai, |
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People’s Republic of China |
[Signature Page
to the Limited Guarantee]
IN WITNESS WHEREOF,
the undersigned have duly executed and delivered this Limited Guarantee as of the date first set forth above.
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GUARANTOR: |
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SIG CHINA INVESTMENTS ONE, LTD. |
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By: |
SIG Asia Investment LLLP, as authorized agent |
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By: |
Heights Capital Management Inc., as authorized agent |
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By: |
/s/ Michael L. Spolan |
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Name: |
Michael L. Spolan |
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Title: |
General Counsel |
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Heights Capital Management, Inc. |
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as authorized agent |
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Address: |
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c/o SIG Asia Investment, LLLP, |
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101 California Street Suite 3250, San |
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Francisco, CA 94111, U.S.A. |
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|
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[Signature
Page to the Limited Guarantee]
Annex A
| Guarantor |
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Notice Address |
|
Guaranteed
Percentage |
| Regal Fair Holdings Limited, |
|
c/o Country Style Cooking Restaurant Chain Co., Ltd.,
No. 19 Yunshan South Road, Yubei District,
Chongqing, Chongqing,
The People’s Republic of China |
|
60.8% |
| Sky Success Ventures Holdings Limited |
|
c/o Sky Success Venture Holdings Limited,
13F, No. 609 Yunling East Road,
Putuo District, Shanghai,
The People’s Republic of China |
|
22.8% |
| SIG China Investments One, Ltd. |
|
c/o SIG Asia Investment, LLLP, 101 California Street Suite 3250, San Francisco, CA 94111, U.S.A. |
|
16.4% |
ANNEX
G
Execution Version
VOTING AGREEMENT
This VOTING AGREEMENT (this
“Agreement”) is entered into as of December 17, 2015 by and among Country Style Cooking Restaurant Chain Holding
Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands (“Parent”),
and the shareholders of Country Style Cooking Restaurant Chain Co., Ltd., an exempted company with limited liability incorporated
under the laws of the Cayman Islands (the “Company”) listed on Schedule A hereto (each, a “Shareholder”
and collectively, the “Shareholders”). Capitalized terms used but not defined herein shall have the meanings
ascribed to such terms in the Merger Agreement (as defined below).
WHEREAS, Parent, Country
Style Cooking Restaurant Chain Merger Company Limited, an exempted company with limited liability incorporated under the laws of
the Cayman Islands and a wholly owned subsidiary of Parent (“Merger Sub”), and the Company have, concurrently
with the execution of this Agreement, entered into an Agreement and Plan of Merger, dated as of the date hereof (as may be amended,
supplemented or otherwise modified from time to time, the “Merger Agreement”), which provides, among other things,
for the merger of Merger Sub with and into the Company, with the Company continuing as the surviving corporation and a wholly owned
subsidiary of Parent (the “Merger”), upon the terms and subject to the conditions set forth in the Merger Agreement;
WHEREAS, as of the date hereof,
each Shareholder is the beneficial owner (as defined under Rule 13d-3 of the Exchange Act) of (a) certain ordinary shares, par
value US$0.001 per share, of the Company (the “Shares”) (including Shares represented by ADSs, each representing
four Shares) as set forth in the column titled “Owned Shares” opposite such Shareholder’s name on Schedule A
hereto (the “Owned Shares”) and (b) Company Restricted Shares as set forth in the column titled “Company
Restricted Shares” opposite such Shareholder’s name on Schedule A hereto (the “Share Awards”) (such
Owned Shares and Share Awards, together with any other Shares acquired (whether beneficially or of record) by the Shareholder after
the date hereof and prior to the earlier of the Effective Time and the termination of all of the Shareholder’s obligations
under this Agreement, including any Shares acquired by means of purchase, dividend or distribution, or issued upon the exercise
of any Company options or warrants or the conversion of any convertible securities or the vesting of any Company Restricted Shares
or otherwise, being collectively referred to herein as the “Securities”);
WHEREAS, Parent and certain
of the Shareholders have, concurrently with the execution of this Agreement, entered into a Rollover Agreement, dated as of the
date hereof (as may be amended, supplemented or otherwise modified from time to time, the “Rollover Agreement”),
which provides, among other things, for the cancellation of certain Securities beneficially owned by such Shareholders for no Merger
Consideration and subscription of newly issued ordinary shares of Parent immediately prior to the Closing;
WHEREAS, in order to induce
Parent and Merger Sub to enter into the Merger Agreement and consummate the transactions contemplated thereby, including the Merger,
the Shareholders are entering into this Agreement; and
WHEREAS, the Shareholders
acknowledge that Parent and Merger Sub are entering into the Merger Agreement in reliance on the representations, warranties, covenants
and other agreements of the Shareholders set forth in this Agreement.
NOW, THEREFORE, in consideration
of the foregoing, the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
Article
I
VOTING; GRANT AND APPOINTMENT OF PROXY
Section 1.1 Voting.
From and after the date hereof until the earliest of (i) the Effective Time, (ii) the termination of the Merger Agreement pursuant
to and in compliance with the terms therein and (iii) the occurrence of a Change in the Company Recommendation (such earliest
time, the “Expiration Time”), each Shareholder irrevocably and unconditionally hereby agrees that at the Shareholders’
Meeting or other annual or extraordinary general meeting of the shareholders of the Company, however called, at which any of the
matters described in paragraphs (a) – (f) hereof is to be considered (and any adjournment or postponement thereof), or in
connection with any written resolution of the Company’s shareholders, such Shareholder shall (x) cause his, her or its representative(s)
to appear at such meeting or otherwise cause his, her or its Securities to be counted as present thereat for purposes of determining
whether a quorum is present and (y) vote or cause to be voted (including by proxy or written resolution, if applicable) all of
such Shareholder’s Securities:
(a) for
authorization and approval of the Merger Agreement and the transactions contemplated by the Merger Agreement,
(b) against
any Competing Transaction or any other transaction, proposal, agreement or action made in opposition to authorization and approval
of the Merger Agreement or in competition or inconsistent with the Merger and the other transactions contemplated by the Merger
Agreement,
(c) against
any other action, agreement or transaction that is intended, that could reasonably be expected, or the effect of which could reasonably
be expected, to materially impede, interfere with, delay, postpone, discourage or adversely affect the Merger or any of the other
transactions contemplated by the Merger Agreement or this Agreement or the performance by such Shareholder of his, her or its obligations
under this Agreement, including, without limitation: (i) any extraordinary corporate transaction, such as a scheme of arrangement,
merger, consolidation or other business combination involving the Company or any of its Subsidiaries (other than the Merger); (ii)
a sale, lease or transfer of a material amount of assets of the Company or any of its Subsidiaries or a reorganization, recapitalization
or liquidation of the Company or any of its Subsidiaries; (iii) an election of new members to the board of directors of the Company,
other than nominees to the board of directors of the Company who are serving as directors of the Company on the date of this Agreement
or as may be otherwise provided in the Merger Agreement; (iv) any material change in the present capitalization or dividend policy
of the Company or any amendment or other change to the Company’s memorandum or articles of association, except if approved
in writing by Parent; or (v) any other action that would require the consent of Parent pursuant to the Merger Agreement, except
if approved in writing by Parent,
(d) against
any action, proposal, transaction or agreement that would reasonably be expected to result in a breach in any respect of any covenant,
representation or warranty or any other obligation or agreement of the Company contained in the Merger Agreement, or of such Shareholder
contained in this Agreement,
(e) in
favor of any adjournment or postponement of the Shareholders’ Meeting as may be reasonably requested or approved in writing
by Parent, and
(f) in
favor of any other matter necessary to effect the transactions contemplated by the Merger Agreement.
Section 1.2 Grant
of Irrevocable Proxy; Appointment of Proxy.
(a) Each
Shareholder hereby irrevocably appoints Parent and any designee thereof as his, her or its proxy and attorney-in-fact (with full
power of substitution), prior to the Expiration Time, to vote or cause to be voted (including by proxy or written resolution, if
applicable) the Securities in accordance with Section 1.1 above at the Shareholders’ Meeting or other annual
or special meeting of the shareholders of the Company, however called, including any adjournment or postponement thereof, at which
any of the matters described in Section 1.1 above is to be considered. Each Shareholder represents that all proxies, powers
of attorney, instructions or other requests given by such Shareholder prior to the execution of this Agreement in respect of the
voting of such Shareholder’s Securities, if any, are not irrevocable and each Shareholder hereby revokes (or causes to be
revoked) any and all previous proxies, powers of attorney, instructions or other requests with respect to such Shareholder’s
Securities. Each Shareholder shall take such further action or execute such other instruments as may be necessary to effectuate
the intent of this proxy.
(b) Each
Shareholder affirms that the irrevocable proxy set forth in this Section 1.2 is given in connection with the execution of
the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of such Shareholder under
this Agreement. Each Shareholder further affirms that the irrevocable proxy is coupled with an interest and, except as set forth
in this Section 1.2, is intended to be irrevocable prior to the Expiration Time. If for any reason the proxy granted herein
is not irrevocable, then each Shareholder agrees to vote such Shareholder’s Securities in accordance with Section 1.1
above prior to the Expiration Time. The parties agree that the foregoing is a voting agreement.
Section 1.3 Restrictions
on Transfers. Except as provided for in the Rollover Agreement or pursuant to the Merger Agreement, each Shareholder hereby
agrees that, from the date hereof until the Expiration Time, such Shareholder shall not, directly or indirectly, (a) sell (constructively
or otherwise), transfer, assign, tender in any tender or exchange offer, pledge, grant, encumber, hypothecate or similarly dispose
of (by merger, testamentary disposition, operation of law or otherwise) (collectively, “Transfer”), either
voluntarily or involuntarily, or enter into any Contract, option or other arrangement or understanding with respect to the Transfer
of any Securities, including, without limitation, any swap transaction, option, warrant, forward purchase or sale transaction,
futures transaction, cap transaction, floor transaction, collar transaction or any other similar transaction (including any option
with respect to any such transaction) or combination of any such transactions, in each case involving any Securities and (i) has,
or would reasonably be expected to have, the effect of reducing or limiting such Shareholder’s economic interest in such
Securities and/or (ii) grants a third party the right to vote or direct the voting of such Securities (any such transaction, a
“Derivative Transaction”), (b) deposit any Securities into a voting trust or enter into a voting agreement
or arrangement or grant any proxy or power of attorney with respect thereto that is inconsistent with this Agreement, (c) convert
or exchange, or take any action which would result in the conversion or exchange, of any Securities, (d) knowingly take any action
that would make any representation or warranty of such Shareholder set forth in this Agreement untrue or incorrect or have the
effect of preventing, disabling, or delaying such Shareholder from performing any of his, her or its obligations under this Agreement,
or (e) agree (whether or not in writing) to take any of the actions referred to in the foregoing clauses (a), (b) (c) or (d).
For purposes of clarification only, any pledge by any Shareholder for the securing of Debt Financing should not be prohibited
by anything in this Agreement.
Article
II
NO SOLICITATION
Section 2.1 Restricted
Activities. Prior to the Expiration Time, each Shareholder, solely in his, her or its capacity as a shareholder of the Company,
shall not, and shall cause such Shareholder’s officers, directors, employees, agents, advisors and other representatives
(in each case, acting in their capacity as such to such Shareholder (the “Shareholder’s Representatives”))
not to, directly or indirectly: (a) initiate, solicit, propose, encourage or knowingly facilitate (including by providing information)
any inquiries, proposals or offers with respect to, or the making or completion of, a Competing Transaction or offer that would
reasonably be expected to lead to a Competing Transaction, (b) engage, continue or participate in any negotiations concerning,
or provide or cause to be provided any non-public information or data relating to the Company or any of its Subsidiaries in connection
with, or have any discussions (other than to state that they are not permitted to have discussions) with any Person relating to,
an actual or proposed Competing Transaction or offer that would reasonably be expected to lead to a Competing Transaction, or
otherwise knowingly facilitate any effort or attempt to make or implement a Competing Transaction or offer that would reasonably
be expected to lead to a Competing Transaction, (c) to the extent not required by applicable law, grant any waiver, amendment
or release under any standstill or confidentiality agreement or Takeover Statutes, or otherwise knowingly facilitate any effort
or attempt by any Person to make a Competing Transaction, (d) approve, endorse or recommend, or propose to approve, endorse or
recommend, or execute or enter into, any letter of intent, agreement in principle, merger agreement, acquisition agreement, option
agreement or other similar agreement relating to any Competing Transaction or offer that would reasonably be expected to lead
to a Competing Transaction, or (e) resolve or propose or agree to do any of the foregoing.
Section 2.2 Notification.
Each Shareholder, solely in his, her or its capacity as a shareholder of the Company, shall and shall cause such Shareholder’s
Representatives to, immediately cease and cause to be terminated any discussions or negotiations with any parties that may have
been conducted heretofore with respect to a Competing Transaction. From and after the date hereof until the Expiration Time, each
Shareholder shall promptly advise each of Parent and the Company in writing of (a) any Competing Transaction, (b) any request
such Shareholder receives in his, her or its capacity as a shareholder of the Company for non-public information relating to the
Company, any of its Subsidiaries or the Merger, and (c) any inquiry or request for discussion or negotiation such Shareholder
receives in his, her or its capacity as a shareholder of the Company regarding a Competing Transaction, including in each case
the identity of the Person making any such Competing Transaction or indication or inquiry and the terms of any such Competing
Transaction or indication or inquiry (including, if applicable, copies of any written requests, proposals or offers, including
proposed agreements). Each Shareholder, in his, her or its capacity as a shareholder of the Company, shall keep Parent reasonably
informed on a reasonably current basis of the status and terms (including any material changes to the terms thereof) of any such
Competing Transaction or indication or inquiry (including, if applicable, any revised copies of written requests, proposals and
offers) and the status of any such discussions or negotiations to the extent known by such Shareholder. This Section 2.2
shall not apply to any Competing Transaction received by the Company. Each Shareholder’s receipt, in his, her or its capacity
as a shareholder of the Company, of any Competing Transaction shall not relieve such Shareholder from any of his, her or its obligations
hereunder.
Section 2.3 Capacity.
Notwithstanding anything to the contrary in this Agreement, (i) each Shareholder is entering into this Agreement, and agreeing
to become bound hereby, solely in his, her or its capacity as a beneficial owner of the Securities owned by such Shareholder and
not in any other capacity (including without limitation any capacity as a director or officer of the Company) and (ii) nothing
in this Agreement shall obligate such Shareholder to take, or forbear from taking, as a director or officer of the Company, any
action which is inconsistent with his, her or its fiduciary duties under the applicable Laws.
Article
III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE SHAREHOLDERS
Section 3.1 Representations
and Warranties. Each Shareholder, severally and not jointly, represents and warrants to Parent as of the date hereof and as
of the Closing:
(a) such
Shareholder has full legal right, power, capacity and authority to execute and deliver this Agreement, to perform such Shareholder’s
obligations hereunder and to perform the actions contemplated hereby;
(b) this
Agreement has been duly executed and delivered by such Shareholder and the execution, delivery and performance of this Agreement
by such Shareholder and the performance of the actions contemplated hereby have been duly authorized by all necessary action on
the part of such Shareholder and no other actions or proceedings on the part of such Shareholder are necessary to authorize this
Agreement or to perform the actions contemplated hereby;
(c) assuming
due authorization, execution and delivery by Parent, this Agreement constitutes a legal, valid and binding agreement of such Shareholder,
enforceable against such Shareholder in accordance with its terms, except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of
equity (regardless of whether considered in a proceeding in equity or at law);
(d) (i)
such Shareholder (A) is and, immediately prior to the Closing, will be the beneficial owner of, and has and will have good and
valid title to, the Securities, free and clear of Liens other than as created by this Agreement, and (B) has and will have sole
or shared (together with affiliates controlled by such Shareholder) voting power, power of disposition, and power to demand dissenter’s
rights (if applicable), in each case with respect to all of the Securities, with no limitations, qualifications, or restrictions
on such rights, subject to applicable United States federal securities laws, laws of the Cayman Islands, laws of the British Virgin
Islands, laws of the People’s Republic of China and the terms of this Agreement; (ii) the Securities are not subject to any
voting trust agreement or other Contract to which such Shareholder is a party restricting or otherwise relating to the voting or
Transfer of the Securities other than this Agreement and the Rollover Agreement, as applicable; (iii) such Shareholder has not
Transferred any Securities pursuant to any Derivative Transaction; (iv) as of the date hereof, other than as set forth on Schedule
A hereto, such Shareholder does not own, beneficially or of record, any Shares, securities of the Company, or any direct or indirect
interest in any such securities (including by way of derivative securities); and (v) such Shareholder has not appointed or granted
any proxy or power of attorney that is still in effect with respect to any Securities, except as contemplated by this Agreement;
(e) except
for the applicable requirements of the Exchange Act, neither the execution, delivery or performance of this Agreement by such Shareholder
nor the performance by such Shareholder of the actions contemplated hereby, nor compliance by such Shareholder with any of the
provisions hereof shall (A) conflict with or violate any provision of the organizational documents of any such Shareholder which
is an entity, (B) result in any breach or violation of, or constitute a default (or an event which, with notice or lapse of time
or both, would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of,
or result in the creation of a Lien on property or assets of such Shareholder pursuant to any Contract to which such Shareholder
is a party or by which such Shareholder or any property or asset of such Shareholder is bound or affected, or (C) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to such Shareholder or any of such Shareholder’s properties
or assets;
(f) there
is no Action pending against any such Shareholder or, to the knowledge of such Shareholder, any other Person or, to the knowledge
of such Shareholder, threatened against any such Shareholder or any other Person that restricts or prohibits (or, if successful,
would restrict or prohibit) the performance by such Shareholder of his, her or its obligations under this Agreement;
(g) such
Shareholder acknowledges that such Shareholder has been advised to discuss with his, her or its own counsel the meaning and legal
consequences of such Shareholder’s representations and warranties in this Agreement and the actions contemplated hereby;
and
(h) each
Shareholder understands and acknowledges that Parent and Merger Sub are entering into the Merger Agreement in reliance upon such
Shareholder’s execution, delivery and performance of this Agreement.
Section 3.2 Covenants.
Each Shareholder hereby:
(a) agrees,
prior to the Expiration Time, not to knowingly take any action that would make any representation or warranty of such Shareholder
contained herein untrue or incorrect or have or could have the effect of preventing, impeding or interfering with or adversely
affecting the performance by such Shareholder of his, her or its obligations under this Agreement;
(b) irrevocably
waives, and agrees not to exercise, any rights of appraisal or rights of dissent from the Merger that such Shareholder may have
with respect to such Shareholder’s Securities (including without limitation any rights under Section 238 of the CICL) prior
to the Expiration Time;
(c) agrees
to permit the Company to publish and disclose in the Proxy Statement (including all documents filed with the SEC in accordance
therewith), such Shareholder’s identity and beneficial ownership of Shares and Company Share Awards or other equity securities
of the Company and the nature of such Shareholder’s commitments, arrangements and understandings under this Agreement and
the Rollover Agreement, as applicable;
(d) agrees
and covenants, severally and not jointly, that such Shareholder shall promptly (and in any event within twenty-four (24) hours)
notify Parent and the Company of any new Shares with respect to which beneficial ownership (within the meaning of Rule 13d-3 of
the Exchange Act) is acquired by such Shareholder, including, without limitation, by purchase, as a result of a share dividend,
share split, recapitalization, combination, reclassification, exchange or change of such shares, or upon exercise or conversion
of any securities of the Company after the date hereof (any such Shares shall automatically become subject to the terms of this
Agreement, and Schedule A hereto shall be deemed amended accordingly); and
(e) agrees
further that, upon request of Parent, such Shareholder shall execute and deliver any additional documents, consents or instruments
and take such further actions as may reasonably be deemed by Parent to be necessary or desirable to carry out the provisions of
this Agreement.
Article
IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Section 4.1 Representations
and Warranties. Parent hereby represents and warrants to each Shareholder as follows: (a) this Agreement has been duly and
validly authorized by Parent’s board of directors, (b) this Agreement has been duly executed and delivered by a duly authorized
officer or other representative of Parent, and (c) assuming this Agreement constitutes a valid and binding agreement of the Shareholders,
this Agreement constitutes a valid and binding agreement of Parent, enforceable against Parent in accordance with its terms, and
(d) the execution and delivery of this Agreement by Parent does not, and the performance of the actions contemplated hereby and
the compliance with the provisions hereof will not, conflict with or violate any law or agreement binding upon Parent, nor require
any authorization, consent or approval of, or filing with, any Governmental Authority, except for filings with the SEC.
Article
V
TERMINATION
This Agreement, and the obligations
of the Shareholders hereunder (including, without limitation, Section 1.2 hereof), shall terminate and be of no further
force or effect immediately upon the earlier to occur of (a) the Closing and (b) the date of termination of the Merger Agreement
in accordance with its terms. Notwithstanding the preceding sentence, this Article V and Article VI shall survive
any termination of this Agreement. Nothing in this Article V shall relieve or otherwise limit any party’s liability
for any breach of this Agreement prior to the termination of this Agreement.
Article
VI
MISCELLANEOUS
Section 6.1 Notices.
All notices and other communications hereunder shall be in writing (in the English language) and shall be deemed duly given (a)
upon receipt if delivered personally, or if by email or facsimile, upon confirmation of receipt by email or facsimile, (b) one
Business Day after being sent by express courier service, or (c) three Business Days after being sent by registered or certified
mail, return receipt requested. All notices hereunder shall be delivered to the address set forth on the signature pages hereto
under each party’s name, or pursuant to such other instructions as may be designated in writing by the party to receive
such notice.
Section 6.2 Severability.
Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable,
such provision shall be interpreted to be only as broad as is enforceable.
Section 6.3 Entire
Agreement. This Agreement, the Merger Agreement, the Rollover Agreement and other documents and instruments and other agreements
as contemplated by or referred to herein and therein together embody the complete agreement and understanding among the parties
hereto with respect to the subject matter hereof and thereof and supersede and preempt any prior understandings, agreements or
representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.
Section 6.4 Specific
Performance. Each Shareholder acknowledges and agrees that monetary damages would not be an adequate remedy in the event that
any covenant or agreement of such Shareholder in this Agreement is not performed in accordance with its terms, and therefore agrees
that, in addition to and without limiting any other remedy or right available to Parent, Merger Sub, and the Company, Parent,
Merger Sub, and the Company will have the right to an injunction, temporary restraining order or other equitable relief in any
court of competent jurisdiction enjoining any such breach and enforcing specifically the terms and provisions hereof. Each Shareholder
agrees not to oppose the granting of such relief in the event a court determines that such a breach has occurred, and to waive
any requirement for the securing or posting of any bond in connection with such remedy. All rights, powers, and remedies provided
under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and
the exercise or beginning of the exercise of any thereof by Parent, Merger Sub or the Company shall not preclude the simultaneous
or later exercise of any other such right, power or remedy by such entity.
Section 6.5 Amendments;
Waivers. At any time prior to the Expiration Time, any provision of this Agreement may be amended or waived if, and only if,
such amendment or waiver is in writing and signed, in the case of an amendment, by the Shareholders, Parent, and the Company,
or in the case of a waiver, by the party against whom the waiver is to be effective. Notwithstanding the foregoing, no failure
or delay by a party hereto or the Company in exercising any right hereunder shall operate as a waiver thereof nor shall any single
or partial exercise thereof preclude any other or further exercise of any other right hereunder.
Section 6.6 Governing
Law. This Agreement and the schedules hereto shall be governed and construed in accordance with the laws of the State of New
York, without regard to any applicable conflicts of law principles that would cause the application of the laws of any other jurisdiction.
Section 6.7 Dispute
Resolution; Jurisdiction; Enforcement. All actions arising under the laws of the State of New York out of or relating to this
Agreement shall be heard and determined exclusively in any New York federal court sitting in the Borough of Manhattan of The City
of New York, provided, however, that if such federal court does not have jurisdiction over such action, such action shall be heard
and determined exclusively in any New York state court sitting in the Borough of Manhattan of The City of New York. Each of the
parties hereto agrees that mailing of process or other papers in connection with any such action in the manner provided in Section
6.1 hereof or in such other manner as may be permitted by applicable Laws, will be valid and sufficient service thereof. Each
of the parties hereto hereby (a) submits to the exclusive jurisdiction of any federal or state court sitting in the Borough of
Manhattan of The City of New York for the purpose of any action arising under the laws of the State of New York out of or relating
to this Agreement brought by any party hereto and (b) irrevocably waives, and agrees not to assert, by way of motion, as a defense,
counterclaim or otherwise, in any action with respect to this Agreement and the rights and obligations arising hereunder, or for
recognition and enforcement of any judgment in respect of this Agreement and the rights and obligations arising hereunder (i)
any claim that it is not personally subject to the jurisdiction of the aforesaid courts for any reason other than the failure
to serve process in accordance with this Section 6.7, (ii) any claim that it or its property is exempt or immune from the
jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment
prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (iii) to the fullest extent
permitted by applicable law, any claim that (A) the action in such court is brought in an inconvenient forum, (B) the venue of
such action is improper or (C) this Agreement, or the subject matter hereof, may not be enforced in or by such courts.
Section 6.8 Waiver
of Jury Trial. EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR THE ACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH OF THE PARTIES HERETO HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND
PERFORM THE ACTIONS CONTEMPLATED BY THIS AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS
IN THIS Section 6.8.
Section 6.9 Third
Party Beneficiaries. The Company is an intended third party beneficiary of this Agreement, with full rights of enforcement
of this Agreement against the Shareholders. Other than as set forth in the preceding sentence, there are no third party beneficiaries
of this Agreement and nothing in this Agreement, express or implied, is intended to or shall confer on any person other than the
parties hereto (and their respective successors, heirs and permitted assigns), any rights, remedies, obligations or liabilities,
except as specifically set forth in this Agreement.
Section 6.10 Assignment;
Binding Effect. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties and the
Company, except that Parent may assign this Agreement (in whole but not in part) in connection with a permitted assignment of
the Merger Agreement by Parent, as applicable. Subject to the preceding sentence, this Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and permitted assigns and, in the case of each Shareholder,
his, her or its estate, heirs, beneficiaries, personal representatives and executors. Parent shall cause Merger Sub, and any assignee
thereof, to perform its obligations under this Agreement and shall be responsible for any failure of Merger Sub or such assignee
to comply with provision of this Agreement applicable to Merger Sub.
Section 6.11 No
Presumption Against Drafting Party. Each of the parties to this Agreement acknowledges that he, she or it has been represented
by independent counsel in connection with this Agreement and the transactions contemplated by this Agreement. Accordingly, any
rule of law or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the drafting
party has no application and is expressly waived.
Section 6.12 Counterparts.
This Agreement may be executed in two or more consecutive counterparts (including by facsimile or email pdf format), each of which
shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument, and shall become
effective when one or more counterparts have been signed by each of the parties and delivered (by telecopy, email pdf format or
otherwise) to the other parties; provided, however, that if any of the Shareholders fails for any reason to execute, or perform
their obligations under, this Agreement, this Agreement shall remain effective as to all parties executing this Agreement.
[Signature Pages to follow]
IN WITNESS WHEREOF, the parties
hereto have duly executed and delivered this Agreement as of the date and year first written above.
| |
COUNTRY STYLE COOKING
RESTAURANT CHAIN HOLDING
LIMITED |
| |
|
|
| |
By: |
/s/ Hong Li |
| |
|
Name: |
Hong Li |
| |
|
Title: |
Director |
| |
|
|
| |
Address: 16th Floor, C1 Building,
Chongqing Headquarters City District C,
No. 780 Jingwei Avenue, Yuzhong District,
Chongqing, the People’s Republic of China |
[Signature Page to Voting Agreement]
IN WITNESS WHEREOF, the parties
hereto have duly executed and delivered this Agreement as of the date and year first written above.
| |
SHAREHOLDERS |
| |
|
| |
Hong Li |
| |
|
| |
/s/ Hong Li |
| |
|
| |
Address: 16th Floor, C1 Building,
Chongqing Headquarters City District C,
No. 780 Jingwei Avenue, Yuzhong
District, Chongqing, the People’s
Republic of China
|
| |
|
| |
Xingqiang Zhang |
| |
|
| |
/s/ Xingqiang Zhang |
| |
|
| |
Address: 16th Floor, C1 Building,
Chongqing Headquarters City District C,
No. 780 Jingwei Avenue, Yuzhong
District, Chongqing, the People’s
Republic of China |
| |
|
| |
Regal Fair Holdings Limited |
| |
|
|
| |
By: |
/s/ Hong Li |
| |
|
Name: |
Hong Li |
| |
|
Title: |
Director |
| |
|
|
|
| |
Address: P.O. Box 916, Woodbourne
Hall, Road Town, Tortola, British Virgin
Islands
|
[Signature Page to Voting Agreement]
| |
SHAREHOLDERS |
| |
|
| |
Zhiyun Peng |
| |
|
| |
/s/ Zhiyun Peng |
| |
|
| |
Address: |
| |
|
| |
c/o Sky Success Venture Holdings Limited,
13/F, No. 609 Yunling East Road,
Putuo District, Shanghai,
People’s Republic of China |
[Signature Page to
Voting Agreement]
| |
SHAREHOLDERS |
| |
|
| |
Zhiyong Hong |
| |
|
| |
/s/ Zhiyong Hong |
| |
|
| |
Address: |
| |
|
| |
c/o Sky Success Venture Holdings Limited,
13/F, No. 609 Yunling East Road,
Putuo District, Shanghai,
People’s Republic of China |
[Signature Page to Voting Agreement]
| |
SHAREHOLDERS |
| |
|
| |
Sky Success Venture Holdings Limited |
| |
|
|
| |
By: |
/s/ Zhiyun Peng |
| |
|
Name: |
Zhiyun Peng |
| |
|
Title: |
Director |
| |
|
| |
Address: |
| |
|
| |
c/o Sky Success Venture Holdings Limited,
13/F, No. 609 Yunling East Road,
Putuo District, Shanghai,
People’s Republic of China |
[Signature Page to Voting Agreement]
| |
SHAREHOLDERS |
| |
|
| |
Tim T. Gong |
| |
|
| |
/s/ Tim T. Gong |
| |
|
| |
Address: c/o SIG Asia Investment, LLLP,
101 California Street Suite 3250, San
Francisco, CA 94111, U.S.A. |
[Signature Page to
Voting Agreement]
| |
SHAREHOLDERS |
| |
|
| |
SIG China Investments One, Ltd. |
| |
|
|
| |
By: |
SIG Asia Investment LLLP, as authorized agent |
| |
|
|
| |
By: |
Heights Capital Management Inc., as authorized agent |
| |
|
|
| |
By: |
/s/ Michael L. Spolan |
| |
Name: |
Michael L. Spolan |
| |
Title: |
General Counsel |
| |
|
Heights Capital Management, Inc. |
| |
|
as authorized agent |
| |
|
|
| |
Address: |
| |
|
| |
c/o SIG Asia Investment, LLLP, |
| |
101 California Street Suite 3250, San |
| |
Francisco, CA 94111, U.S.A. |
| |
|
|
[Signature Page to Voting Agreement]
Schedule
A
| Shareholder | |
Owned Shares | | |
Company Restricted
Shares | |
| Hong Li | |
| - | | |
| 86,500 | |
| Xingqiang Zhang | |
| - | | |
| 78,500 | |
| Zhiyun Peng | |
| - | | |
| 20,000 | |
| Zhiyong Hong | |
| 278,000 | * | |
| - | |
| Tim T. Gong | |
| - | | |
| 138,500 | |
| Regal Fair Holdings Limited | |
| 44,522,148 | | |
| - | |
| Sky Success Venture Holdings Limited | |
| 16,417,928 | | |
| - | |
| SIG China Investments One, Ltd. | |
| 12,000,000 | | |
| - | |
* Held in the form of ADSs.
ANNEX H
PLAN OF
MERGER
in accordance
with
Part XVI
of the Companies law (2013 revision)
of the cayman
islands
This Plan of Merger is entered into on by
and between:
| (1) | Country Style COOKING Restaurant Chain Co., Ltd.
(the "Company" or the "Surviving Company"), an exempted company limited by shares incorporated
in the Cayman Islands and whose registered office is located at the offices of Maples Corporate Services Limited, PO Box 309, Ugland
House, Grand Cayman, KY1-1104, Cayman Islands; and |
| (2) | Country Style
Cooking Restaurant Chain Merger Company Limited (the "Merging Company"), an exempted
company limited by shares incorporated in the Cayman Islands and whose registered office is located at the offices of International
Company Services Ltd., PO Box 472, 2nd Floor, Harbour Place, 103 South Church Street, George Town, Grand Cayman KY1-1106, Cayman
Islands. |
WITNESSETH as follows:
| 1. | The constituent companies (as defined in the Companies Law) (the "Constituent Companies")
to the merger are the Company and the Merging Company. |
| 1. | The name of the surviving company (as defined in the Companies Law) shall be Country Style Cooking
Restaurant Chain Co., Ltd. |
| 2. | The Surviving Company shall have its registered office at the offices of International Company
Services Ltd., PO Box 472, 2nd Floor, Harbour Place, 103 South Church Street, George Town, Grand Cayman KY1-1106, Cayman Islands. |
| 3. | Immediately prior to the Effective Time (as defined below) the authorized share capital of the
Merging Company was US$50,000 divided into 50,000 ordinary shares of US$1.00 par value per share, of which one (1) share has been
issued. |
| 4. | Immediately prior to the registration of this Plan of Merger the authorized share capital of the
Company was US$2,000,000 divided into (i) 1,000,000,000 Ordinary Shares of a nominal or par value of US$0.001 each and (ii) 1,000,000,000
shares of a nominal or par value of US$0.001 each of such Class or Classes (howsoever designated) as the Board of Directors may
determine in accordance with the articles of association of the Company, of which: |
| (i) | 108,000,000 Ordinary Shares are issued and outstanding, all of which have been duly authorized
and are validly issued, fully paid and non-assessable, |
| (ii) | no preferred shares are issued and outstanding. |
| 5. | The authorized share capital of the Surviving Company shall be US$50,000 divided into 500,000,000
ordinary shares of US$0.0001 par value per share immediately following the Merger. |
| 6. | The merger shall be effective immediately when the Plan of Merger is registered by the Registrar
of Companies of the Cayman Islands (the "Effective Time"). |
| (i) | each ordinary share, par value US$0.001
per share, of the Company (a "Share"
or, collectively, the "Shares")
issued and outstanding immediately prior to the Effective Time other than: |
| (a) | ordinary shares owned by holders who have validly exercised and not effectively withdrawn or lost
their right to dissent from the Merger (the "Dissenting Shares") pursuant to Section 238 of the Cayman Islands
Companies Law (2013 Revision) (the "Cayman Companies Law"); and |
| (b) | the shares held by each of Ms. Hong Li, Mr. Xingqiang Zhang, Regal Fair Holdings Limited, Mr. Zhiyun
Peng, Mr. Zhiyong Hong, Sky Success Venture Holdings Limited and SIG China Investments One, Ltd. (the "Excluded Shares"), |
shall
be cancelled in consideration and exchange for the right to receive US$1.3075 in cash per Share without interest (the "Per
Share Merger Consideration");
| (ii) | each American Depositary Share, representing
four Shares (an "ADS"
or, collectively, the "ADSs"),
issued and outstanding immediately prior to the Effective Time (other than ADSs representing the Excluded Shares) shall be cancelled
in consideration for the right of the Depositary, as the registered holder of such Shares to receive US$5.23 in cash per ADS without
interest (the "Per ADS Merger Consideration");
|
| (iii) | all of the Shares issued and outstanding immediately prior to the Effective Time, including Shares
represented by ADSs (other than the Excluded Shares and the Dissenting Shares), shall cease to exist and shall thereafter represent
only the right to receive the Per Share Merger Consideration or Per ADS Merger Consideration without interest, and the register
of members of the Company shall be amended accordingly; |
| (iv) | each of the Excluded Shares and ADSs representing such Excluded Shares issued and outstanding immediately
prior to the Effective Time shall cease to be outstanding, shall be cancelled and shall cease to exist without payment of any consideration
or distribution therefor; |
| (v) | each of the Dissenting Shares issued and outstanding immediately prior to the Effective Time shall
be cancelled and cease to exist and the holders of such Dissenting Shares shall not be entitled to receive the Per Share Merger
Consideration and shall instead be entitled to receive only the payment of the fair value of such Dissenting Shares held by them
determined in accordance with the provisions of Section 238 of the Companies Law, except that all Dissenting Shares held by holders
who shall have withdrawn or lost their rights to dissent from the merger under Section 238 of the Companies Law shall thereupon
(i) not be deemed to be Dissenting Shares and (ii) be and be deemed to have been cancelled and cease to exist as of the Effective
Time, and converted into, and to have become exchanged for the right of the holder thereof to receive the Per Share Merger Consideration,
without any interest thereon; and |
| (vi) | each ordinary share, par value US$1.00 each, of the Merging Company issued and outstanding immediately
prior to the Effective Time shall be converted into and become one validly issued, fully paid and non-assessable ordinary share,
par value US$1.00 each, of the Surviving Company. Such conversion shall be effected by means of the cancellation of such ordinary
shares of the Merging Company, in exchange for the right to receive one such ordinary share of the Surviving Company. Such ordinary
shares of the Surviving Company shall constitute the only issued and outstanding share capital of the Surviving Company. |
| 9. | The Memorandum of Association and Articles of Association of the Company shall be amended and restated
by their deletion in their entirety and the substitution in their place of the Amended and Restated Memorandum of Association and
Articles of Association of the Surviving Company in the form attached as Appendix A to this Plan of Merger at the Effective Time. |
| 10. | From 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. |
| 11. | No amount or benefit has been or will be paid or payable to any director of either Constituent
Company or the Surviving Company consequent upon the Merger. |
| 12. | The names and addresses of the directors of the Surviving Company are as follows: |
| 13. | The Constituent Companies have no secured creditors and have not granted any fixed or floating
security interests that are outstanding as at the date of this Plan of Merger. |
| 14. | This Plan of Merger has been approved by the board of directors of each of the Constituent Companies
pursuant to Section 233(3) of the Cayman Companies Law. |
| 15. | This Plan of Merger has been authorised by the shareholders of each of the Constituent Companies
pursuant to Section 233(6) of the Cayman Companies Law. |
| 16. | This Plan of Merger may be executed in counterparts each of which when executed and delivered shall
constitute an original but all such counterparts together shall constitute one and the same instrument. |
IN WITNESS WHEREOF
the parties hereto have caused this Plan of Merger to be executed on the date first set out in this Plan of Merger.
| SIGNED
for and on behalf of Country Style COOKING Restaurant Chain Co., Ltd. by: |
|
) |
|
| ) |
Duly Authorised Signatory |
| ) |
|
| |
|
) |
Name: |
|
| |
|
) |
|
|
| |
|
) |
Title: |
|
| |
|
) |
|
|
| SIGNED
for and on behalf of Country Style Cooking Restaurant Chain Merger Company
Limited by: |
|
) |
|
| ) |
Duly Authorised Signatory |
| ) |
|
| |
|
) |
Name: |
|
| |
|
) |
|
|
| |
|
) |
Title: |
|
| |
|
) |
|
|
APPENDIX
A
Amended
and Restated Memorandum of Association and Articles of Association of
the Surviving Company
FORM
OF PROXY CARD
Country
Style Cooking Restaurant Chain Co., Ltd.
(Incorporated
in the Cayman Islands with limited liability)
(NYSE
Ticker : CCSC)
FORM
OF PROXY FOR EXTRAORDINARY GENERAL MEETING (OR ANY ADJOURNMENT THEREOF) TO BE HELD on , 2016 at 10:00 a.m. (Hong Kong Time) at
42nd Floor, Edinburgh Tower, The Landmark, 15 Queen’s Road, Central, Hong Kong
| I/We, |
|
| |
Please Print Name(s) |
| of |
|
| |
Please Print Address(es) |
the undersigned, being the registered holder(s)
of ______ ordinary shares1, par value $0.001 per share,
of Country Style Cooking Restaurant Chain Co., Ltd. (the “Company”), hereby (a) acknowledge the receipt of the notice
of the extraordinary general meeting of the shareholders of the Company to be held on ______, 2016 at 10:00 a.m. (Hong Kong time)
(the “Extraordinary General Meeting”) and the proxy statement, each dated ______, 2016, and (b) appoint the Chairman
of the Extraordinary General Meeting2 or ____________________________
of ____________________________ as my/our proxy to attend and act for me/us at the Extraordinary General Meeting and at any adjournment(s)
or postponement(s) thereof, and in the event of a poll voting, to vote for me/us as indicated below, or if no such indication is
given, as my/our proxy thinks fit3.
| |
|
PROPOSALS |
|
FOR(3) |
|
AGAINST(3) |
|
ABSTAIN(3) |
| |
|
|
|
|
|
|
|
|
| 1. |
|
As a special resolution: THAT the agreement and plan of merger dated as of December 17, 2015, (the “merger agreement”), among the Company, Country Style Cooking Restaurant Chain Holding Limited (“Parent”) and Country Style Cooking Restaurant Chain Merger Company Limited (“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 Merger Sub and the Company required to be registered with the Registrar of Companies of the Cayman Islands for the purposes of the merger (such plan of merger being in the form attached as Annex H to the accompanying proxy statement 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 (i) the merger, (ii) the variation of the authorized share capital of the Company from US$2,000,000 divided into 2,000,000,000 shares with a par value of US$0.001 each to US$50,000 divided into 50,000 ordinary shares with a par value of US$1.00 each, and (iii) the amendment and restatement of the existing memorandum and articles of association of the Company by their deletion in their entirety and the substitution in their place of the memorandum and articles of association in the form attached as Appendix A to the plan of merger, be and are hereby authorized and approved; |
|
|
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| |
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| 2. |
|
As an ordinary resolution: THAT the extraordinary general meeting be adjourned in order to allow the Company to solicit additional proxies in the event that there are insufficient proxies received at the time of the extraordinary general meeting to pass the special resolution to be proposed at the extraordinary general meeting |
|
|
|
|
|
|
| 1 |
Please insert the number of or strike out the class of shares registered in your name(s) to which this proxy relates. If no number is inserted, this form of proxy will be deemed to relate to all the shares in the Company registered in your name(s) |
| 2 |
If any proxy other than the Chairman is preferred, strike out the words "THE CHAIRMAN OF THE EXTRAORDINARY GENERAL MEETING OR" and insert the name and address of the proxy desired in the space provided. A member may appoint one or more proxies to attend and vote in his or her stead. |
| 3 |
IMPORTANT: IF YOU WISH TO VOTE FOR THE RESOLUTION, TICK THE APPROPRIATE BOX MARKED "FOR." IF YOU WISH TO VOTE AGAINST THE RESOLUTION, TICK THE APPROPRIATE BOX MARKED "AGAINST." IF YOU WISH TO ABSTAIN FROM VOTING ON A PARTICULAR RESOLUTION, TICK THE APPROPRIATE BOX MARKED "ABSTAIN." Failure to complete any or all the boxes will entitle your proxy to cast his or her votes at his or her discretion. |
Dated ______, 2016 Signature(s)(4)
______
This form of proxy
must be completed and signed by the person registered in the register of members at the close of business in the Cayman Islands
on ______, 2016 (Cayman Islands time) and returned to the Company's offices at , attention: , 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).
ANY ALTERATION MADE
TO THIS FORM OF PROXY MUST BE INITIALED BY THE PERSON(S) WHO SIGN(S) IT.
| 4 | This form of proxy must be signed by you or your attorney duly authorized in writing or, in the case of a corporation, must
be executed under the hand of an officer or attorney duly authorized to sign the same. |
Depositary’s Notice of
Extraordinary General Meeting of Shareholders of Country Style Cooking Restaurant Chain Co., Ltd.
| ADSs: |
American Depositary Shares (“ADSs”). |
| ADS CUSIP No.: |
22238M109. |
| ADS Record Date: |
_________, 2016 |
| Meeting Specifics: |
Extraordinary General Meeting of Shareholders to be held on ______, ______, 2016 at 10:00 a.m. (local time) at [42nd Floor, Edinburgh Tower, The Landmark, 15 Queen’s Road, Central, Hong Kong] (the “Meeting”). |
| Meeting Agenda: |
Please refer to the Company’s Notice of Meeting. |
| ADS Voting Instructions Deadline: |
On or before 10:00 a.m. (New York City time) on __________, 2016. |
| Deposited Securities: |
Ordinary Shares (the “Shares”) of Country Style Cooking Restaurant Chain Co., Ltd., an exempted company with limited liability incorporated under the laws of the Cayman Islands (the “Company”). |
| ADS Ratio: |
Four (4) Shares to one (1) ADS. |
| Depositary: |
Citibank, N.A. |
| Custodian of Deposited Securities: |
Citibank, N.A. - Hong Kong Branch. |
| Deposit Agreement: |
Deposit Agreement, dated as of October 1, 2010, by and among the Company, the Depositary and all Holders and Beneficial Owners of ADSs issued thereunder. |
To be counted, your Voting Instructions
need to be received by the Depositary prior to 10:00 a.m. (New York City time) on
____________,
2016.
The Company has announced that an Extraordinary
General Meeting of Shareholders will be held at the date, time and location identified above. A copy of the Notice of Meeting
from the Company which includes the agenda for such Meeting is enclosed.
Holders of ADSs wishing to give voting instructions
to the Depositary must sign, complete and return the enclosed Voting Instructions prior to the ADS Voting Instructions Deadline
in the enclosed pre-addressed envelope.
Upon timely receipt of signed and completed
Voting Instructions from a Holder of ADSs, the Depositary shall endeavor insofar as practicable and permitted under applicable
law and the provisions of the Deposit Agreement, the Articles of Association of the Company, and the provisions of the Deposited
Securities to vote or to cause the Custodian to vote, the Deposited Securities (in person or by proxy) represented by such Holder’s
ADSs in accordance with the voting instructions received from the Holders of ADSs. Voting instructions may be given only in respect
of a number of ADSs representing an integral number of Deposited Securities. If the Depositary does not receive instructions from
a Holder as of the ADS Record Date on or before the date established by the Depositary for such purpose, such Holder shall be deemed,
and the Depositary shall deem such Holder, to have instructed the Depositary to give a discretionary proxy to a person designated
by the Company to vote the Deposited Securities; provided, however, that no such discretionary proxy shall be given by the Depositary
with respect to any matter to be voted upon as to which the Company informs the Depositary that (A) the Company does not wish such
proxy to be given, (B) substantial opposition exists, or (C) the rights of holders of Deposited Securities may be materially adversely
affected.
The Depositary has been advised by
the Company that pursuant to Cayman Islands law, voting at the Meeting will be by poll.
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, attempt
to exercise the right to vote, or in any way make use of, for purposes of establishing a quorum or otherwise, the Deposited Securities
represented by ADSs, except pursuant to and in accordance with the voting instructions timely received from Holders or as otherwise
contemplated in the Deposit Agreement. If the Depositary timely receives voting instructions from a Holder which fail to specify
the manner in which the Depositary is to vote the Deposited Securities represented by such Holder’s ADSs, the Depositary
will deem such Holder to have instructed the Depositary to vote in favor of the items set forth in such voting instructions.
Notwithstanding anything else contained
in Section 4.10 of the Deposit Agreement, the Depositary shall, if so requested in writing by the Company, represent all Deposited
Securities (whether or not voting instructions have been received in respect of such Deposited Securities from Holders as of the
ADS Record Date) for the sole purpose of establishing quorum at a meeting of shareholders.
The information contained herein with respect
to the Meeting has been provided by the Company. Citibank, N.A. is forwarding this information to you solely as Depositary and
in accordance with the terms of the Deposit Agreement and disclaims any responsibility with respect to the accuracy of such information.
Citibank, N.A. does not, and should not be deemed to, express any opinion with respect to the proposals to be considered at the
Meeting. The rights and obligations of Holders and Beneficial Owners of ADSs, the Company and the Depositary are set forth in their
entirety in the Deposit Agreement and summarized in the American Depositary Receipts. If you wish to receive a copy of the Deposit
Agreement, please contact the Depositary at the number set forth below.
If you have any questions, please
contact Citibank, N.A. - ADR Shareholder Services at 1-877-CITI-ADR (1-877-248-4237).
Citibank, N.A., as Depositary
Extraordinary General Meeting of Shareholders
The Voting Instructions must be signed,
completed and received at the indicated address prior to
10:00 a.m.
(New York City time) on__________ , 2016 for action to be taken.
| 2016 VOTING INSTRUCTIONS |
AMERICAN DEPOSITARY SHARES |
Country Style Cooking Restaurant Chain
Co., Ltd. (the “Company”)
| ADS CUSIP No.: |
22238M109. |
| ADS Record Date: |
___________, 2016. |
| Meeting Specifics: |
Extraordinary General Meeting of Shareholders to be held on _______, _______ , 2016 at 10:00 a.m. (local time) at 42nd Floor, Edinburgh Tower, The Landmark, 15 Queen’s Road, Central, Hong Kong (the “Meeting”). |
| Depositary: |
Citibank, N.A. |
| Deposit Agreement: |
Deposit Agreement, dated as of October 1, 2010. |
| Deposited Securities: |
Ordinary Shares of the Company. |
| Custodian(s): |
Citibank, N.A. - Hong Kong Branch. |
The undersigned holder, as of the ADS Record Date, of the American
Depositary Shares issued under the Deposit Agreement and identified above (such American Depositary Shares, the “ADSs”),
hereby authorizes and directs the Depositary to cause to be voted at the Meeting (and any adjournment or postponement thereof)
the Deposited Securities represented by the ADSs in the manner indicated on the reverse side hereof.
Notwithstanding anything else contained
herein, the Depositary shall, if so requested in writing by the Company, represent all Deposited Securities (whether or not voting
instructions have been received in respect of such Deposited Securities from Holders as of the ADS Record Date) for the sole purpose
of establishing quorum at a meeting of shareholders.
The Depositary has been advised by the Company that pursuant
to Cayman Islands law, voting at the Meeting will be by poll.
Voting instructions may be given only in
respect of a number of ADSs representing an integral number of Deposited Securities. Upon the timely receipt from a Holder of ADSs
as of 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, Articles of Association of the Company
and the provisions of the Deposited Securities, to vote, or cause the Custodian to vote, the Deposited Securities (in person or
by proxy) represented by such Holder’s ADSs in accordance with the voting instructions received from the Holders of ADSs.
If the Depositary does not receive instructions from a Holder as of the ADS Record Date on or before the date established by the
Depositary for such purpose and voting is by poll, such Holder shall be deemed, and the Depositary shall deem such Holder, to have
instructed the Depositary to give a discretionary proxy to a person designated by the Company to vote the Deposited Securities;
provided, however, that no such discretionary proxy shall be given by the Depositary with respect to any matter to be voted upon
as to which the Company informs the Depositary that (A) the Company does not wish such proxy to be given, (B) substantial opposition
exists, or (C) the rights of holders of Deposited Securities may be materially adversely affected.
If the Depositary timely receives voting
instructions from a Holder which fail to specify the manner in which the Depositary is to vote the Deposited Securities represented
by such Holder’s ADSs, the Depositary will deem such Holder to have instructed the Depositary to vote in favor of the items
set forth in such voting instructions.
Please indicate on the reverse side hereof how the Deposited
Securities are to be voted.
The Voting Instructions must be marked, signed and returned
on time in order to be counted.
By signing on the reverse side hereof, the undersigned represents
to the Depositary and the Company that the undersigned is duly authorized to give the Voting Instructions contained herein.
| 1. | as a special resolution: |
THAT the agreement and plan of merger dated
as of December 17, 2015, (the "merger agreement"), among the Company, Country Style Cooking Restaurant Chain Holding
Limited ("Parent") and Country Style Cooking Restaurant Chain Merger Company Limited ("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 Merger Sub and the Company required to be registered with the Registrar of Companies of the Cayman Islands
for the purposes of the merger (such plan of merger being 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"), be and are hereby authorized and approved;
THAT upon the Effective Date (as defined in
the plan of merger), the Company amend and restate its memorandum and articles of association; and
| 2. | 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
resolution to be proposed at the extraordinary general meeting.
The Depositary has been advised by the Company
that its Board of Directors recommends a FOR vote for all resolutions.
| A Issues |
Country Style Cooking Restaurant Chain Co., Ltd. |
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Against |
Abstain |
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B
Authorized Signatures - Sign Here - This section must be completed for your instructions to be executed.
If these Voting Instructions
are signed and timely returned to the Depositary but no specific direction as to voting is marked above as to an issue, the undersigned
shall be deemed to have directed the Depositary to give Voting Instructions “FOR” the unmarked issue.
If these Voting Instructions
are signed and timely returned to the Depositary but multiple specific directions as to voting are marked above as to an issue,
the undersigned shall be deemed to have directed the Depositary to give an “ABSTAIN” Voting Instruction for such issue.
Please be sure to sign and date this Voting Instruction
Card.
Please sign your name to the
Voting Instructions exactly as printed. When signing in a fiduciary or representative capacity, give full title as such. Where
more than one owner, each MUST sign. Voting Instructions executed by a corporation should be in full name by a duly authorized
officer with full title as such.
| Signature 1 - Please
keep signature within the line |
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Signature 2 - Please keep signature within the line |
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Exhibit (b)-(1)
EXECUTION VERSION
CHINA MERCHANTS BANK CO., LTD.,
NEW YORK BRANCH
535 Madison Ave., 18th Floor
New York, NY 10022
CONFIDENTIAL
December 17, 2015
Country Style Cooking Restaurant Chain Holding Limited
Country Style Cooking Restaurant Chain Merger Company Limited
c/o Country Style Cooking Restaurant Chain Co., Ltd.
No. 19, Yushan South Road
Yubei District, Chongqing
People’s Republic of China
Attention: Vivian He
Project Charm Commitment Letter
Ladies and Gentlemen:
You have advised China
Merchants Bank Co., Ltd., New York Branch (“CMB NY”, “we”, “us”
or the “Commitment Party”) that Country Style Cooking Restaurant Chain Holding Limited, a Cayman Islands
exempted company (the “Parent”), formed at the direction of and controlled by Ms. Hong Li and Mr. Xingqiang
Zhang (together the “Sponsors”), intends to consummate through Country Style Cooking Restaurant Chain
Merger Company Limited, a Cayman Islands exempted company (“Merger Sub” and together with Parent, “you”),
the Transactions described in the Transaction Description attached hereto as Exhibit A (the “Transaction Description”).
Capitalized terms used but not defined herein shall have the meanings assigned to them in the Transaction Description and the
Summary of Principal Terms and Conditions attached hereto as Exhibit B (the “Term Sheet”). This
commitment letter, the Transaction Description and the Term Sheet, are collectively referred to as the “Commitment
Letter.”
In connection with
the Transactions, CMB NY is pleased to advise you of its commitment to provide 100% of the aggregate principal amount of the Term
Facility, subject only to the satisfaction of the conditions set forth in Section 5 hereof, the section entitled “Conditions
to the Borrowing” in Exhibit B hereto (limited on the Closing Date (as defined below) as indicated therein) and in
Exhibit C hereto. The Commitment Party is referred to herein as the “Initial Lender”. “Closing
Date” is the date on which the Acquisition has been consummated and the funding under the Term Facility has occurred.
It is agreed that (i)
the Commitment Party will act as the off-shore collateral agent for the Term Facility, and (ii) China Merchants Bank Co., Ltd.,
Chongqing Branch (“CMB CQ”) will act as the on-shore collateral agent for the Term Facility. You agree
that no arrangers, other agents or managers will be appointed, and no other titles will be awarded unless you and the Commitment
Party shall so agree.
You hereby represent
and warrant that (a) all written information and written data (such information and data, other than (i) customary financial estimates,
forecasts and other projections (the “Projections”) and forward looking statements and (ii) information
of a general economic or industry specific nature, the “Information”) (in the case of Information regarding
the Target and its subsidiaries and its and their respective businesses, to the best of your knowledge), that has been or will
be made available to the Commitment Party directly or indirectly by you, the Target or by any of your or their respective subsidiaries
or representatives, in each case, on your or their behalf in connection with the transactions contemplated hereby, is or will be,
when furnished and taken as a whole, correct in all material respects and does not or will not, when furnished and taken as a whole,
contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained
therein not materially misleading in light of the circumstances under which such statements are made (after giving effect to all
supplements and updates thereto provided to the Commitment Party from time to time) and (b) the Projections that have been or will
be made available to the Commitment Party by you or by any of your subsidiaries or representatives, in each case, on your behalf
in connection with the transactions contemplated hereby have been, or will be, prepared in good faith based upon assumptions that
are believed by you to be reasonable at the time prepared and at the time the related Projections are so furnished to the Commitment
Party; it being understood that the Projections are as to future events and are not to be viewed as facts, the Projections are
subject to significant uncertainties and contingencies, many of which are beyond your control, that no assurance can be given that
any particular Projections will be realized and that actual results during the period or periods covered by any such Projections
may differ significantly from the projected results and such differences may be material. You agree that, if at any time prior
to the Closing Date, you become aware that any of the representations and warranties in the preceding sentence would be incorrect
in any material respect if the Information and the Projections were being furnished, and such representations and warranties were
being made, at such time, then you will (or, with respect to the Information and Projections relating to the Target and its subsidiaries,
will use your commercially reasonable efforts to) promptly supplement the Information and the Projections such that such representations
and warranties are correct in all material respects under those circumstances (or, in the case of the Information relating to the
Target and its subsidiaries and its and their respective businesses, to the best of your knowledge, such representations and warranties
are correct in all material respects under those circumstances). The accuracy of the foregoing representations shall not be a condition
to our commitments hereunder or the funding of the Term Facility on the Closing Date. In arranging the Term Facility, the Commitment
Party (i) will be entitled to use and rely on the Information and the Projections without responsibility for independent verification
thereof and (ii) assume no responsibility for the accuracy or completeness of the Information or the Projections.
As consideration for
the commitments of the Initial Lender hereunder and for the agreement of the Commitment Party to perform the services described
herein, you agree to pay (or cause to be paid) the fees set forth in the Fee Letter dated the date hereof and delivered herewith
with respect to the Term Facility (the “Fee Letter”), if and to the extent payable in accordance with
the terms thereof. Once paid, such fees shall not be refundable under any circumstances.
The commitment of the
Initial Lender hereunder to fund the Term Facility on the Closing Date and the agreement of the Commitment Party to perform the
services described herein are subject solely to the satisfaction of the conditions set forth in the section entitled “Conditions
to the Borrowing” in Exhibit B hereto (limited on the Closing Date as indicated therein) and in Exhibit C hereto,
in each case subject to the applicable Limited Conditionality Provisions as defined below, and upon satisfaction (or waiver by
the Commitment Party) of such conditions, the funding of the Term Facility shall occur.
Notwithstanding anything
to the contrary in this Commitment Letter (including each of the exhibits attached hereto), the Fee Letter, the Term Facility Documentation
or any other letter agreement or other undertaking concerning the financing of the Transactions to the contrary, (i) the only representations
and warranties the accuracy of which shall be a condition to the availability and funding of the Term Facility on the Closing Date
shall be (a) such of the representations and warranties made by the Target, by the Target on behalf of its subsidiaries, or by
its subsidiaries in the Acquisition Agreement as are material to the interests of the Lenders, but only to the extent that you
(or your affiliates) have the right (taking into account any applicable cure provisions) to terminate your (and/or its) obligations
under the Acquisition Agreement or decline to consummate the Acquisition (in each case, in accordance with the terms thereof) as
a result of a breach of such representations and warranties in the Acquisition Agreement (to such extent, the “Specified
Acquisition Agreement Representations”) and (b) the Specified Representations (as defined below), and (ii) the terms
of the Term Facility Documentation shall be in a form such that they do not impair the availability or funding of the Term Facility
on the Closing Date if the conditions set forth in the section entitled “Conditions to the Borrowing” in Exhibit
B hereto (limited on the Closing Date as indicated therein) and in Exhibit C hereto are satisfied (or waived by the
Commitment Party) (it being understood that (x) to the extent the effectiveness or perfection of any security interest in any Collateral
is not or cannot be achieved on the Closing Date (other than the effectiveness of the cash pledge and the offshore share pledges
set forth in Exhibit B hereto and delivery of certificated equities issued by entities other than Target and any of its
subsidiaries), after your use of commercially reasonable efforts to do so, then the effectiveness or perfection of the security
interest in such Collateral shall not constitute a condition precedent to the availability of the Term Facility on the Closing
Date, but instead shall be required to be effected or delivered after the Closing Date pursuant to arrangements and timing to be
mutually agreed by the Initial Lender and the Borrower acting reasonably, but no later than (1) five business days after the Closing
Date with respect to the effectiveness of the onshore share pledges set forth on Exhibit B hereto and delivery of the certificated
equity securities of subsidiaries of Target and (2) otherwise, 30 days after the Closing Date (in each case, or such longer period
as may be agreed by the Initial Lender and the Borrower acting reasonably); provided that with respect to security interest
in the Collateral that may be perfected by means of the filing or registration of a financing statement or the equivalent thereof
under Cayman Islands, Hong Kong or British Virgin Islands laws, you shall have delivered, or caused to be delivered, on or prior
to the Closing Date, such necessary financing statements or the equivalent thereof and to irrevocably authorize, and to cause the
applicable Security Grantors to irrevocably authorize, the Collateral Agents to file such financing statements or equivalent thereof,
and (y) without limitation of clause (x) above, with respect to security interests to be provided by the Target and any subsidiary
of the Target that is required to provide security (other than the required deposits into the Cash Pledge Accounts which shall
occur at least three days prior to the Closing Date and the pledge of the Cash Pledge Accounts which shall become effective on
the Closing Date), if such security interests cannot be provided (including, for the avoidance of doubt, any evidence of authorization,
opinions or customary closing certificates for such security providers) as a condition precedent solely because the directors or
managers of the Target or such subsidiaries have not authorized such security interests and the election of new directors or managers
to authorize such security has not taken place prior to the funding of the Term Facility (such security interests, “Duly
Authorized Security”), such election shall take place and such Duly Authorized Security shall be provided within
five business days of the Closing Date (or such longer period as may be agreed by the Initial Lender). For purposes hereof, “Specified
Representations” means, the applicable representations and warranties applicable to the Guarantors, the Borrower
(for the avoidance of doubt, excluding Target) and the Security Grantors (other than Target) to be set forth in the Term Facility
Documentation relating to organizational existence; power and authority, due authorization, execution, delivery and enforceability,
in each case, related to, the entering into, borrowing under, guaranteeing under, performance of, and granting of security interests
in the Collateral pursuant to, the Term Facility Documentation, Federal Reserve margin regulations; Patriot Act; the use of the
proceeds of the Term Facility not violating the Patriot Act, OFAC, FCPA or anti-money laundering laws; the Investment Company Act;
the incurrence of the loans to be made under the Term Facility, and the granting of the security interests in the Collateral to
secure the Term Facility, and the entering into of the Term Facility Documentation, do not conflict with the organizational documents,
or material laws; and, subject to the proviso in clause (x) of the immediately preceding sentence, creation, validity and perfection
of security interests in the Collateral. This paragraph, and the provisions herein, shall be referred to as the “Limited
Conditionality Provisions”.
To induce the Commitment
Party to enter into this Commitment Letter and the Fee Letter and to proceed with the Term Facility Documentation, you agree (a)
to indemnify and hold harmless the Commitment Party, the agents identified herein, their respective affiliates and the respective
officers, directors, employees, agents, controlling persons, advisors and other representatives of each of the foregoing and their
successors and permitted assigns (each, an “Indemnified Person”), from and against any and all losses,
claims, damages and liabilities of any kind or nature and reasonable and documented or invoiced out-of-pocket fees and expenses,
joint or several, to which any such Indemnified Person may become subject to the extent arising out of or in connection with any
actual or threatened claim, litigation, investigation or proceeding (including any inquiry or investigation) in connection with
this Commitment Letter (including the Term Sheet), the Fee Letter, the Transactions or any related transaction contemplated hereby
or thereby, the Term Facility or any use of the proceeds thereof (any of the foregoing, a “Proceeding”),
regardless of whether any such Indemnified Person is a party thereto, whether or not such Proceedings are brought by you, your
equity holders, affiliates or creditors or any other third person, and to promptly reimburse after receipt of a written request,
each such Indemnified Person for any reasonable and documented or invoiced out-of-pocket legal fees and expenses incurred in connection
with investigating or defending any of the foregoing by one firm of counsel for all such Indemnified Persons, taken as a whole
and, if necessary, by a single firm of local counsel in each appropriate jurisdiction (which may include a single firm of special
counsel acting in multiple jurisdictions) for all such Indemnified Persons, taken as a whole (and, in the case of an actual or
perceived conflict of interest where the Indemnified Person affected by such conflict notifies you of the existence of such conflict
and thereafter retains its own counsel, by another firm of counsel for such affected Indemnified Person) or other reasonable and
documented or invoiced out-of-pocket fees and expenses incurred in connection with investigating, responding to, or defending any
of the foregoing; provided that the foregoing indemnity will not, as to any Indemnified Person, apply to losses, claims,
damages, liabilities or related expenses to the extent that they have resulted from (i) the willful misconduct, bad faith or gross
negligence of such Indemnified Person or any Related Indemnified Person (as defined below) (as determined by a court of competent
jurisdiction in a final and non-appealable decision), (ii) a material breach of the obligations of such Indemnified Person or any
Related Indemnified Person under this Commitment Letter or the Fee Letter (as determined by a court of competent jurisdiction in
a final and non-appealable decision), or (iii) any Proceeding solely between or among Indemnified Persons not arising from any
act or omission by you or any of your affiliates; provided that the agents identified herein to the extent fulfilling their
roles as an agent under the Term Facility and in their capacities as such, shall remain indemnified in such Proceedings to the
extent that none of the exceptions set forth in any of clauses (i) or (ii) of the immediately preceding proviso applies to such
person at such time, and (b) to the extent the Closing Date occurs, to reimburse the Commitment Party from time to time, upon presentation
of a summary statement, for all reasonable and documented or invoiced out-of-pocket expenses (including but not limited to travel
expenses and reasonable fees, disbursements and other charges of one firm of counsel to the Commitment Party and the agents identified
in the Term Sheet (and, in the case of an actual or perceived conflict of interest where the Indemnified Person affected by such
conflict informs you of such conflict and thereafter retains its own counsel, of another firm of counsel for such affected Indemnified
Person), and, if necessary, of a single firm of local counsel to the Commitment Party in each appropriate jurisdiction (which may
include a single firm of special counsel acting in multiple jurisdictions) and of such other counsel retained with your prior written
consent (not to be unreasonably withheld or delayed)), in each case incurred in connection with the Term Facility and the preparation,
negotiation and enforcement of this Commitment Letter, the Fee Letter, the Term Facility Documentation and any security arrangements
in connection therewith (collectively, the “Expenses”); provided that notwithstanding the foregoing,
only one inventory appraisal and one field exam in each relevant jurisdiction shall be included in the definition of Expenses.
The foregoing provisions in this paragraph shall be superseded, in each case, to the extent covered thereby by the applicable provisions
contained in the Term Facility Documentation upon execution thereof and thereafter shall have no further force and effect. You
acknowledge that the Indemnified Persons may receive a benefit, including without limitation, a discount, credit or other accommodation,
from any of such counsel based on the fees such counsel may receive on account of their relationship with us including, without
limitation, fees paid pursuant hereto.
Notwithstanding any
other provision of this Commitment Letter, (i) no Indemnified Person shall be liable for any damages arising from the use by others
of information or other materials obtained through internet, electronic, telecommunications or other information transmission systems,
except to the extent that such damages have resulted from the willful misconduct, bad faith or gross negligence of such Indemnified
Person or any Related Indemnified Person (as determined by a court of competent jurisdiction in a final and non-appealable decision)
and (ii) none of you (or any of your subsidiaries), the Target (or any of its subsidiaries) or any Indemnified Person shall be
liable for any indirect, special, punitive or consequential damages (including, without limitation, any loss of profits, business
or anticipated savings) in connection with this Commitment Letter, the Fee Letter, the Transactions (including the Term Facility
and the use of proceeds thereunder), or with respect to any activities related to the Term Facility, including the preparation
of this Commitment Letter, the Fee Letter and the Term Facility Documentation; provided that nothing in this paragraph shall
limit your indemnity and reimbursement obligations to the extent that such indirect, special, punitive or consequential damages
are included in any claim by a third party with respect to which the applicable Indemnified Person is entitled to indemnification
under the first paragraph of this Section 6.
You shall not be liable
for any settlement of any Proceeding effected without your written consent (which consent shall not be unreasonably withheld, conditioned
or delayed), but if settled with your written consent or if there is a final and non-appealable judgment by a court of competent
jurisdiction against one or more Indemnified Persons in any such Proceeding, you agree to indemnify and hold harmless each Indemnified
Person from and against any and all losses, claims, damages, liabilities and reasonable and documented legal or other out-of-pocket
expenses by reason of such settlement or judgment in accordance with and to the extent provided in the other provisions of this
Section 6.
“Related
Indemnified Person” of an Indemnified Person means (1) any controlling person or any controlled affiliate of such
Indemnified Person, (2) the respective directors, officers, or employees of such Indemnified Person or any of its controlling persons
or any of its controlled affiliates and (3) the respective agents, advisors and representatives of such Indemnified Person or any
of its controlling persons or any of its controlled affiliates, in the case of this clause (3), acting at the instructions of such
Indemnified Person, controlling person or such controlled affiliate (it being understood and agreed that any agent, advisor or
representative of such Indemnified Person or any of its controlling persons or any of its controlled affiliates engaged to represent
or otherwise advise such Indemnified Person, controlling person or controlled affiliate in connection with the Transactions shall
be deemed to be acting at the instruction of such person).
| 7. | Sharing of Information, Absence of Fiduciary Relationships, Affiliate Activities. |
You acknowledge that
the Commitment Party and its affiliates may be providing debt financing, equity capital or other services (including, without limitation,
financial advisory services) to other persons in respect of which you, the Target and your and their respective subsidiaries and
affiliates may have conflicting interests regarding the transactions described herein and otherwise. The Commitment Party and its
affiliates will not use confidential information obtained from you, the Target or any of your or its subsidiaries or affiliates
by virtue of the transactions contemplated by this Commitment Letter or their other relationships with you, the Target or any of
your or its subsidiaries or affiliates in connection with the performance by them or their affiliates of services for other persons,
and the Commitment Party and its affiliates will not furnish any such information to other persons, except to the extent permitted
below. You also acknowledge that the Commitment Party and its affiliates do not have any obligation to use in connection with the
transactions contemplated by this Commitment Letter, or to furnish to you, the Target or any of your or its subsidiaries or affiliates
confidential information obtained by them from other persons.
You further acknowledge
that the Commitment Party and its affiliates may be engaged, either directly or through their affiliates, in various activities,
including securities trading, commodities trading, investment management, financing and brokerage activities and financial planning
and benefits counseling for both companies and individuals. In the ordinary course of these activities, the Commitment Party and
its affiliates may actively engage in commodities trading or trade the debt and equity securities (or related derivative securities)
and financial instruments (including bank loans and other obligations) of you (and your affiliates), the Target, the Target’s
customers or competitors and other companies which may be the subject of the arrangements contemplated by this Commitment Letter
for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities.
The Commitment Party and its affiliates may also co-invest with, make direct investments in, and invest or co-invest client monies
in or with funds or other investment vehicles managed by other parties, and such funds or other investment vehicles may trade or
make investments in securities of you (and your affiliates), the Borrower, the Target or other companies which may be the subject
of the arrangements contemplated by this Commitment Letter or engage in commodities or other trading with any thereof.
The Commitment Party
and its affiliates may have economic interests that conflict with those of the Target, you and the Borrower and your and their
respective subsidiaries and affiliates and are under no obligation to disclose any conflicting interest to you, the Target and
the Borrower and your and their respective subsidiaries and affiliates. You agree that the Commitment Party will act under this
Commitment Letter as an independent contractor and that nothing in this Commitment Letter or the Fee Letter will be deemed to create
an advisory, fiduciary or agency relationship or fiduciary or other implied duty between the Commitment Party and its affiliates,
on the one hand, and you, the Borrower and the Target, your and their respective equity holders or your and their respective subsidiaries
and affiliates, on the other hand. You acknowledge and agree that (i) the transactions contemplated by this Commitment Letter and
the Fee Letter are arm’s-length commercial transactions between the Commitment Party and its affiliates, on the one hand,
and you, on the other, (ii) in connection therewith and with the process leading to such transaction the Commitment Party and its
applicable affiliates (as the case may be) is acting solely as a principal and not as agents or fiduciaries of you, the Borrower,
the Target, your and their respective management, equity holders, creditors, subsidiaries, affiliates or any other person, (iii)
the Commitment Party and its applicable affiliates (as the case may be) have not assumed any advisory or fiduciary responsibility
or any other obligation in favor of you, the Target, the Borrower or your or their respective affiliates with respect to the financing
transactions contemplated hereby, the exercise of the remedies with respect thereto or the process leading thereto (irrespective
of whether the Commitment Party or any of its affiliates has advised or is currently advising you, the Borrower, or the Target
or any of your or their respective affiliates on other matters), and the Commitment Party has no obligation to you, the Target,
the Borrower or your or their respective affiliates with respect to the transactions contemplated hereby except the obligations
expressly set forth in this Commitment Letter and the Fee Letter and (iv) the Commitment Party and its affiliates have not provided
any legal, accounting, regulatory or tax advice and you have consulted your own legal and financial advisors to the extent you
deemed appropriate.
You further acknowledge
and agree that you are responsible for making your own independent judgment with respect to such transactions and the process leading
thereto. You agree that you will not claim that the Commitment Party or its affiliates, as the case may be, have rendered advisory
services of any nature or respect, or owe a fiduciary, agency or similar duty to you or your affiliates, in connection with such
transactions or the process leading thereto.
Furthermore, without
limiting any provision set forth herein, you waive, to the fullest extent permitted by law, any claims you may have against us
or our affiliates for breach of fiduciary duty or alleged breach of fiduciary duty and agree that we and our affiliates shall have
no liability (whether direct or indirect) to you in respect of such a fiduciary claim or to any person asserting a fiduciary duty
claim on behalf of or in right of you, including your stockholders, employees or creditors.
You agree that you
will not disclose, directly or indirectly, the Fee Letter or the contents thereof or, prior to your acceptance hereof, this Commitment
Letter, the Term Sheet, the other exhibits and attachments hereto or the contents of each thereof, or the activities of the Commitment
Party pursuant hereto or thereto, to any person or entity without the prior written approval of the Commitment Party (such approval
not to be unreasonably withheld, delayed or conditioned), except (a) to your and your affiliates’ officers, directors, employees,
agents, attorneys, accountants, advisors, controlling persons and equity holders and to actual and potential co-investors who are
informed of the confidential nature thereof, on a confidential and need-to-know basis, (b) if the Commitment Party consents in
writing to such proposed disclosure, or (c) pursuant to an order of any court or administrative agency or in any pending legal,
judicial or administrative proceeding, or otherwise as required by applicable law, rule or regulation or compulsory legal process
or to the extent requested or required by governmental and/or regulatory authorities, in each case based on the reasonable advice
of your legal counsel (in which case you agree, to the extent practicable and not prohibited by applicable law, rule or regulation,
to inform us promptly thereof prior to disclosure); provided that (i) you may disclose this Commitment Letter (but not the
Fee Letter or the contents thereof, except as provided in clause (iv) below), and the contents hereof to the Target, its subsidiaries
and its officers, directors, employees, agents, attorneys, accountants, advisors and controlling persons, on a confidential and
need-to-know basis, (ii) you may disclose the Commitment Letter and its contents (including the Term Sheet and other exhibits and
attachments hereto) (but not the Fee Letter or the contents thereof) in connection with any public or regulatory filing requirement
relating to the Transactions, (iii) you may disclose the aggregate fee amount contained in the Fee Letter as part of Projections,
pro forma information or a generic disclosure of aggregate sources and uses related to fee amounts related to the Transactions
to the extent customary or required in offering and marketing materials for the Term Facility or in any public or regulatory filing
requirement relating to the Transactions (and only to the extent aggregated with all other fees and expenses of the Transactions
and not presented as an individual line item unless required by applicable law, rule or regulation), (iv) if the fee amounts payable
pursuant to the Fee Letter and such other portions as mutually agreed have been redacted in a manner reasonably agreed by us (including
the portions thereof addressing fees payable to the Commitment Party and/or the Lenders), you may disclose the Fee Letter and the
contents thereof to the Target, its subsidiaries and its officers, directors, employees, agents, attorneys, accountants, advisors
and controlling persons, on a confidential and need-to-know basis, (v) you may disclose this Commitment Letter and the information
contained herein and the Fee Letter in connection with the exercise by you of any remedies or enforcement of any rights hereunder
in any suit, action or proceeding brought by you against us relating to this Commitment Letter, the Fee Letter or the transactions
contemplated thereby, and (vi) you may disclose this Commitment Letter and its contents (but not the Fee Letter or the contents
thereof) to the extent that such information becomes publicly available other than by reason of improper disclosure by you in violation
of any confidentiality obligations hereunder.
The Commitment Party
and its affiliates will use all non-public information provided to any of them or such affiliates by or on behalf of you hereunder
or in connection with the Acquisition and the related Transactions solely for the purpose of providing the services which are the
subject of this Commitment Letter and negotiating, evaluating and consummating the transactions contemplated hereby and shall treat
confidentially all such information and shall not publish, disclose or otherwise divulge, such information; provided that
nothing herein shall prevent the Commitment Party and its affiliates from disclosing any such information (a) pursuant to the order
of any court or administrative agency or in any pending legal, judicial or administrative proceeding, or otherwise as required
by applicable law, rule or regulation or compulsory legal process based on the reasonable advice of counsel (in which case the
Commitment Party agrees (except with respect to any audit or examination conducted by bank accountants or any governmental or regulatory
(including self-regulatory) authority exercising examination or regulatory authority), to the extent practicable and not prohibited
by applicable law, rule or regulation, to inform you promptly thereof prior to disclosure), (b) upon the request or demand of any
regulatory authority having jurisdiction, or purporting to have jurisdiction over, the Commitment Party or any of its affiliates
(in which case the Commitment Party agrees (except with respect to any audit or examination conducted by bank accountants or any
governmental or regulatory (including self-regulatory) authority exercising examination or regulatory authority), to the extent
practicable and not prohibited by applicable law, rule or regulation, to inform you promptly thereof prior to disclosure), (c)
to the extent that such information becomes publicly available other than by reason of improper disclosure by the Commitment Party
or any of its Related Parties (as defined below) in violation of any confidentiality obligations owing to you, the Target or any
of your or their respective subsidiaries, (d) to the extent that such information is or was received by the Commitment Party or
any of its Related Parties from a third party that is not, to the Commitment Party’s knowledge, subject to contractual or
fiduciary confidentiality obligations owing to you, the Target or any of your or their respective subsidiaries, (e) to the extent
that such information is independently developed by the Commitment Party or any of its Related Parties without the use of any confidential
information, (f) to the Commitment Party’s affiliates and to its and their respective directors, officers, employees, legal
counsel, independent auditors, professionals and other experts or agents who need to know such information in connection with the
Transactions and who are informed of the confidential nature of such information and who are subject to customary confidentiality
obligations and who have been advised of their obligation to keep information of this type confidential (such related persons described
in this clause (f), collectively, the “Related Parties”), (g) to potential or prospective Lenders, participants
or assignees, (h) for purposes of establishing a “due diligence” defense, (i) to the extent you consent in writing
to any specific disclosure, (j) to the extent such information was already in the Commitment Party’s possession prior to
any duty or other understanding of confidentiality entered into in connection with the Transactions; provided that for purposes
of clause (g) above, the disclosure of any such information to any Lenders, participants or assignees or prospective Lenders, participants
or assignees referred to above shall be made subject to the acknowledgment and acceptance by such Lender, participant or assignee
or prospective Lender, participant or assignee that such information is being disseminated on a confidential basis (on substantially
the terms set forth in this paragraph or as is otherwise reasonably acceptable to you and the Commitment Party, including, without
limitation, as agreed in any marketing materials) in accordance with customary market standards for dissemination of such type
of information, which shall in any event require “click through” or other affirmative actions on the part of recipient
to access such information. In the event that the Term Facility is funded, the Commitment Party’s and its affiliates’,
if any, obligations under this paragraph shall terminate automatically and be superseded (except as otherwise specified herein)
by the confidentiality provisions in the Term Facility Documentation upon the funding thereunder to the extent that such provisions
are binding on the Commitment Party .
The confidentiality
provisions set forth in this Section 8 shall survive the termination of this Commitment Letter and (other than your obligations
with respect to the Fee Letter) shall expire and shall be of no further effect after the second anniversary of the date hereof.
This Commitment Letter
and the commitments hereunder shall not be assignable by any party hereto without the prior written consent of each other party
hereto (such consent not to be unreasonably withheld, conditioned or delayed) (and any attempted assignment without such consent
shall be null and void). This Commitment Letter and the commitments hereunder are intended to be solely for the benefit of the
parties hereto (and Indemnified Persons) and do not and are not intended to confer any benefits upon, or create any rights in favor
of, any person other than the parties hereto (and Indemnified Persons to the extent expressly set forth herein). The Commitment
Party reserves the right to employ the services of its respective affiliates or branches in providing services contemplated hereby
and to allocate, in whole or in part, to their affiliates or branches certain fees payable to the Commitment Party in such manner
as the Commitment Party and its affiliates or branches may agree in their sole discretion and, to the extent so employed, such
affiliates and branches shall be entitled to the benefits and protections afforded to, and subject to the provisions governing
the conduct of, the Commitment Party hereunder; provided that subject to the satisfaction of the conditions set forth in
the section entitled “Conditions to the Borrowing” in Exhibit B and Exhibit C hereto (subject to the
Limited Conditionality Provisions), (x) the Commitment Party shall not be relieved, released or novated from its obligations hereunder
(including its obligation to fund its commitment in respect of the Term Facility on the Closing Date) until after the funding of
the Commitment Party’s commitment in respect of the Term Facility on the Closing Date has occurred and (y) the Commitment
Party shall retain exclusive control over all rights and obligations with respect to its commitment in respect of the Term Facility,
including all rights with respect to consents, modifications, supplements, waivers and amendments, until after the funding of the
Commitment Party’s commitment in respect of the Term Facility on the Closing Date has occurred. This Commitment Letter may
not be amended or any provision hereof waived or modified except by an instrument in writing signed by the Commitment Party and
you. This Commitment Letter may be executed in any number of counterparts, each of which shall be deemed an original and all of
which, when taken together, shall constitute one agreement. Delivery of an executed counterpart of a signature page of this Commitment
Letter by facsimile transmission or other electronic transmission (e.g., a “pdf” or “tiff”)
shall be effective as delivery of a manually executed counterpart hereof. This Commitment Letter (including the exhibits hereto),
together with the Fee Letter, (i) are the only agreements that have been entered into among the parties hereto with respect to
the Term Facility and (ii) supersede all prior understandings, whether written or oral, among us with respect to the Term Facility
and sets forth the entire understanding of the parties hereto with respect thereto. THIS COMMITMENT LETTER, AND ANY CLAIM, CONTROVERSY
OR DISPUTE ARISING UNDER, OR RELATED TO, THIS COMMITMENT LETTER (INCLUDING, WITHOUT LIMITATION, ANY CLAIMS SOUNDING IN CONTRACT
LAW OR TORT LAW ARISING OUT OF THE SUBJECT MATTER HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.
EACH OF THE PARTIES
HERETO IRREVOCABLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY OR ON BEHALF OF
ANY PARTY RELATED TO OR ARISING OUT OF THIS COMMITMENT LETTER OR THE FEE LETTER OR THE PERFORMANCE OF SERVICES HEREUNDER OR THEREUNDER.
Each of the parties
hereto hereby irrevocably and unconditionally (a) submits, for itself and its property, to the non-exclusive jurisdiction of any
New York State court or Federal court of the United States of America sitting in New York County, and any appellate court from
any thereof, in any action or proceeding arising out of or relating to this Commitment Letter, the Fee Letter or the transactions
contemplated hereby or thereby, or for recognition or enforcement of any judgment, and agrees that all claims in respect of any
such action or proceeding shall be heard and determined in such New York State court or, to the extent permitted by law, in such
Federal court, (b) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of or relating to this Commitment Letter, the Fee Letter
or the transactions contemplated hereby or thereby in any New York State court or in any such Federal court, (c) waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such
court and (d) agrees that a final judgment in any such suit, action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law. Each of the parties hereto agrees that service of
process, summons, notice or document by registered mail addressed to you or us at the addresses set forth above shall be effective
service of process for any suit, action or proceeding brought in any such court.
Each of the parties
hereto agrees that (i) this Commitment Letter is a binding and enforceable agreement with respect to the subject matter contained
herein, including an agreement to negotiate in good faith the Term Facility Documentation by the parties hereto in a manner consistent
with this Commitment Letter, it being acknowledged and agreed that the commitments hereunder are subject to conditions precedent
expressly set forth in Section 5 herein, including the execution and delivery of the definitive documentation for the Term Facility
as provided in this Commitment Letter, and (ii) the Fee Letter is a binding and enforceable agreement with respect to the subject
matter contained therein.
We hereby notify you
that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001) (the “PATRIOT
Act”) or other applicable laws, we and each of the Lenders may be required to obtain, verify and record information
that identifies the Borrower, the Guarantors and their respective affiliates, which information may include their names, addresses,
tax identification numbers and other information that will allow us and the Lenders to identify the Borrower and the Guarantors
in accordance with the PATRIOT Act and the other applicable laws. This notice is given in accordance with the requirements of the
PATRIOT Act and is effective for us and the Lenders.
The indemnification,
compensation, reimbursement, jurisdiction, governing law, venue, waiver of jury trial and confidentiality provisions contained
herein and in the Fee Letter and the provisions of Section 7 of this Commitment Letter shall remain in full force and effect regardless
of whether the Term Facility Documentation shall be executed and delivered and notwithstanding the termination or expiration of
this Commitment Letter or the Initial Lender’s commitments hereunder; provided that your obligations under this Commitment
Letter (other than your obligations with respect to the confidentiality of the Fee Letter and the contents thereof) shall automatically
terminate and be superseded by the provisions of the Term Facility Documentation upon the funding thereunder, and you shall automatically
be released from all liability in connection therewith at such time. You may terminate this Commitment Letter and/or the Initial
Lender’s commitments with respect to the Term Facility (or any portion thereof) at any time subject to the provisions of
the preceding sentence and the Fee Letter.
Section headings used herein are for convenience
of reference only and are not to affect the construction of, or to be taken into consideration in interpreting, this Commitment
Letter.
If the foregoing correctly
sets forth our agreement, please indicate your acceptance of the terms of this Commitment Letter and of the Fee Letter by returning
to the Commitment Party (or their legal counsel) on behalf of the Commitment Party, executed counterparts hereof and of the Fee
Letter not later than 11:59 p.m., New York City time, on December 17, 2015. The Initial Lender’s commitments and the obligations
of the Commitment Party hereunder will expire at such time in the event that the Commitment Party (or their legal counsel) has
not received such executed counterparts in accordance with the immediately preceding sentence. If you do so execute and deliver
to us this Commitment Letter and the Fee Letter at or prior to such time, we agree to hold our commitment to provide the Term Facility
and our other undertakings in connection therewith available for you until the earliest of (i) after execution of the Acquisition
Agreement and prior to the consummation of the Transactions, the termination of the Acquisition Agreement by you in a signed writing
in accordance with its terms (or your written confirmation or public announcement thereof), (ii) the consummation of the Acquisition
without the funding of the Term Facility and (iii) 11:59 p.m., New York City time, on the date that is five business days after
the Termination Date (or other similar term as defined in the Acquisition Agreement as of the date hereof, as such date may be
extended pursuant to the terms of the Acquisition Agreement) (such earliest time, the “Expiration Date”).
Upon the occurrence of any of the events referred to in the preceding sentence, this Commitment Letter and the commitments of the
Commitment Party hereunder and the agreement of the Commitment Party to provide the services described herein shall automatically
terminate unless the Commitment Party shall, in its sole discretion, agree to an extension in writing.
[Remainder of this page intentionally left blank]
We are pleased to have been given the opportunity
to assist you in connection with the financing for the Transactions.
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Very truly yours, |
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CHINA MERCHANTS BANK CO., LTD., |
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NEW YORK BRANCH |
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|
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By: |
/s/ Jian
(Kevin) Ding |
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Name: |
Jian (Kevin) Ding |
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|
Title: |
Head of China Group
Corporate
Banking |
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|
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By: |
/s/ Xuejun (Andrew) Mao |
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|
Name: |
Xuejun (Andrew) Mao |
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|
Title: |
Deputy General Manager |
| Accepted and agreed to as of the date first above written: |
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| Country Style Cooking Restaurant Chain Holding Limited |
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| By: |
/s/ Hong Li |
|
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Name: |
Hong Li |
|
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Title: |
Director |
|
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| Country Style Cooking Restaurant Chain Merger Company Limited |
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| By: |
/s/ Hong Li |
|
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Name: |
Hong Li |
|
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Title: |
Director |
|
[Signature Page
to Commitment Letter]
EXHIBIT A
Project Charm
Transaction Description
Capitalized terms used
but not defined in this Exhibit A shall have the meanings set forth in the other Exhibits to the Commitment Letter (the “Commitment
Letter”) to which this Exhibit A is attached or in the Commitment Letter. In the case of any such capitalized
term that is subject to multiple and differing definitions, the appropriate meaning thereof in this Exhibit A shall be determined
by reference to the context in which it is used.
Sponsors, through Country
Style Cooking Restaurant Chain Holding Limited (the “Parent”), intend to acquire (the “Acquisition”)
Country Style Cooking Restaurant Chain Co. Ltd. (the “Target”) through a wholly-owned subsidiary of Parent,
Country Style Cooking Restaurant Chain Merger Company Limited (“Merger Sub”), from the equity holders
of Target (collectively, the “Sellers”). Parent intends to consummate the Acquisition pursuant to the
Agreement and Plan of Merger, dated on the date hereof (together with all exhibits, schedules and other disclosure letters thereto,
collectively, as amended, the “Acquisition Agreement”) among Parent, Merger Sub and the Target pursuant
to which Merger Sub will merge with and into the Target, with the Target being the surviving entity, and the Sellers will receive
cash in exchange for all of the issued and outstanding equity interests held thereby in the Target (other than any equity interests
held by the Sponsors, entities controlled by the Sponsors, the Rollover Shareholders identified in the Rollover Agreement dated
on or about the date hereof, and any other permitted holders to be mutually agreed by the Sponsors and the Commitment Party prior
to giving effect to the Acquisition (collectively, “Equity Permitted Holders”), which equity interests
shall be rolled over by entities controlled by the Sponsors and such other Equity Permitted Holders in connection with the Acquisition)
(collectively, the “Acquisition Consideration”).
In connection with the foregoing, it is intended that:
| a) | The Borrower (as defined in Exhibit B hereto) will obtain up to $50 million under a senior secured term loan facility
(the “Term Facility”) described in Exhibit B hereto; and |
| d) | The proceeds of the Term Facility will be applied solely (i) to pay the Acquisition Consideration
and (ii) to pay the fees and expenses incurred in connection with the Transactions (such fees and expenses, the “Transaction
Costs”) (the amounts set forth in clauses (i) through (ii) above, collectively, the “Acquisition Funds”). |
The transactions described above (including
the payment of Transaction Costs) are collectively referred to herein as the “Transactions”.
EXHIBIT B
Project Charm
Up to $50 Million Senior Secured Term
Loan Facility
Summary of Principal Terms and Conditions
| Borrower: |
|
Initially, Country Style Cooking Restaurant Chain Merger Company Limited, a Cayman Islands exempted company (“Merger Sub”) and, after the Acquisition, the Target (collectively, the “Borrower”). |
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| Transactions: |
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As set forth in Exhibit A to the Commitment Letter. |
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| Initial Lender and Collateral Agents: |
|
CMB NY will act as off-shore collateral agent and CMB CQ will act as the sole on-shore collateral agent (together with CMB NY, each a “Collateral Agent” and collectively the “Collateral Agents” or the “Agents”) for CMB NY as initial lender (together with its permitted successors and assigns under the Term Facility, collectively, the “Initial Lender”), and will perform the duties customarily associated with such roles. |
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|
|
| Term Facility: |
|
A senior secured term loan facility in an aggregate principal amount of up to $50 million (the “Term Facility”). The loans under the Term Facility are referred to as the “Term Loans”. |
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| Purpose: |
|
The proceeds of borrowings under the Term Facility will be used by the Borrower on the Closing Date solely to pay the Acquisition Funds (including, at the Borrower’s election, to fund any fee required in the Fee Letter). |
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|
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| Availability: |
|
The Term Facility shall be borrowed in a single drawing on the Closing Date. Upon the satisfaction of the conditions set forth in the “Conditions to the Borrowing” section of this term sheet and Exhibit C to the Commitment Letter, the Initial Lender shall fund the Term Facility within three business days after receipt of the Borrowing Notice (as defined below). Amounts borrowed under the Term Facility that are repaid or prepaid may not be reborrowed. |
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| Interest Rates and Fees: |
|
As set forth on Annex I hereto and the Fee Letter, respectively, including, without limitation, a Facility Fee (as defined in the Fee Letter). |
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| Default Rate: |
|
With respect to overdue principal, at LIBOR plus 2.65% per annum plus 2.00% per annum, and with respect to any other overdue amount (including overdue interest and the Facility Fee), at the base rate (to be defined) plus 2.00% per annum, which, in each case, shall be payable on demand. |
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|
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| Final Maturity and Amortization: |
|
The Term Facility will mature on the date that is one (1) year after the Closing Date and its then outstanding aggregate principal amount will be payable on the maturity date. |
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|
| Guarantees: |
|
All the obligations of the Borrower under the Term Facility to the Initial Lender and any other lender party to the Term Facility from time to time (collectively, the “Lenders”) and the Agents (the “Borrower Obligations”) shall, without any limitation, be unconditionally and irrevocably guaranteed on a senior basis by Regal Fair Holdings Limited (“Regal Fair”) and Parent (collectively with Regal Fair, the “Guarantors”). |
| Security: |
|
The Borrower Obligations and all the obligations of the Guarantors under the guarantees (collectively, the “Secured Obligations”) will be secured by a first priority pledge, charge or mortgage (i) by the Onshore Cash Pledgors (as defined below) of the Cash Pledge Accounts (and the deposits in such accounts) described below, which shall become effective on the Closing Date, (ii) to the extent permitted by applicable law, by the direct parent(s) of the Onshore Cash Pledgors of 100% of the equity interests in Country Style Cooking (Chongqing) Investment Co., Ltd. and each other Onshore Cash Pledgor, which shall be executed and delivered on the Closing Date and become effective within five business days following the Closing Date (or such longer period as reasonably agreed to by the Initial Lender), (iii) by Regal Fair of all the shares held by it in Parent, which shall become effective immediately prior to closing, (iv) by Parent of 100% of the equity interests in the Borrower (i.e. in Merger Sub before the Acquisition and in the Target after the Acquisition), which shall become effective immediately prior to closing in the case of the pledge of Merger Sub, and on the Closing Date in the case of the pledge of Target, and (v) by Target of 100% of the equity interests in Country Style Cooking International Restaurant Chain Group Ltd. (Hong Kong), which shall become effective on the Closing Date; in favor of CMB CQ in the case of clauses (i) and (ii), and in favor of CMB NY in the case of clauses (iii) through (v), in each case as the applicable Collateral Agent for the benefit of the Lenders and the Agents (the items described in clauses (i) through (v) above, collectively, the “Collateral”). It is understood and agreed that the perfection of the security interest in the Collateral is subject to the Limited Conditionality Provisions. |
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“Security Grantors” is defined collectively as the security grantors referred to in clauses (i) through (v) above. |
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Notwithstanding anything to the contrary, the Collateral shall exclude margin stock. |
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| Cash Pledge Accounts: |
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The Borrower shall cause Country Style Cooking (Chongqing) Investment Co., Ltd., and  and  (collectively, the “Onshore Cash Pledgors”) to establish and maintain one or more segregated bank accounts with the CMB CQ (the “Cash Pledge Accounts”) and shall ensure that prior to the funding of the Term Facility, an aggregate amount in RMB (which shall consist of at least 50% in cash and up to 50% in investment products approved by CMB NY and CMB CQ in their sole discretion) that is equal to no less than 120% of the RMB equivalent (based on the exchange rate quoted by the Initial Lender) of the sum (the “Cash Pledge Amount”) of (x) the USD amount of the entire principal amount of the Term Loan to be borrowed on the Closing Date and (y) the first installment of the interest thereon and the Facility Fee is on deposit in the Cash Pledge Accounts and be subject to the control of CMB CQ, and that effective on the Closing Date, CMB CQ as the on-shore collateral agent shall have been granted, in form and substance reasonably satisfactory to CMB CQ, a valid security interest in such accounts and the funds or other assets on deposit. |
| FX Risk Buffer and Margin Call |
|
5% Margin Call: if RMB/USD exchange rate adversely moves from the Closing Date and the Term Loan to Cash Pledge Amount (in RMB) ratio increases to 95%, the Borrower is required to deposit an amount in either USD or RMB to the Cash Pledge Accounts within three business days of demand from CMB NY, such that the Term Loan to Cash Pledge Amount (in RMB) ratio is no more than 83%. If such ratio is not reduced to no more than 83% within three business days of demand, CMB CQ or an affiliate thereof shall have the right to enter into RMB/USD forward contracts with a term no shorter than the remaining tenor of the Term Facility, and for an amount that is at least equal to the amounts due under the Term Facility on the Maturity Date, and the Borrower agrees to reimburse CMB CQ or any affiliate thereof for the costs and expenses relating to such forward contracts. |
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“Cash Pledge Requirements” is defined collectively as the requirements imposed on the Borrower and the Onshore Cash Pledgors under the sections entitled “Cash Pledge Accounts” and “FX Risk Buffer and Margin Call” of this Exhibit B. |
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| Mandatory Prepayments: |
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Mandatory prepayments of borrowings under the Term Facility shall be limited to: (a) 100% of the net cash proceeds received after the Closing Date from the sale or other disposition of all or any part of the assets of Parent or any of its subsidiaries in excess of a threshold to be mutually agreed, subject to customary exceptions, thresholds and reinvestment provisions to be agreed in the Term Facility Documentation, (b) 100% of the net proceeds received by Parent or any of its subsidiaries from the issuance of debt or disqualified preferred stock after the Closing Date, other than permitted debt under the Term Facility Documentation, and (c) 100% of all net cash casualty and condemnation proceeds received by Parent or any of its subsidiaries after the Closing Date in excess of a threshold to be mutually agreed upon, subject to customary exceptions and reinvestment provisions to be agreed in the Term Facility Documentation. |
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Mandatory prepayments shall be applied, without premium or penalty, subject to reimbursement of the Lenders’ break-funding costs in the case of a prepayment of LIBOR borrowings other than on the last day of the relevant interest period. |
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Prepayments from the profits to be distributed and asset sale or other disposition proceeds will be limited under the Term Facility Documentation to the extent such prepayments would result in material adverse tax consequences or would be prohibited or restricted by applicable law, rule or regulation. |
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| Voluntary Prepayments: |
|
Voluntary prepayments of borrowings under the Term Facility will be permitted, subject to reimbursement of the Lenders’ break-funding costs in the case of a prepayment of LIBOR borrowings other than on the last day of the relevant interest period, without premium or penalty; provided that (i) the Borrower shall give the Initial Lender written notice no less than thirty (30) days prior to the requested prepayment date and (ii) the amount of each voluntary prepayment must be no less than $3 million and in integral multiples of $1 million. |
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All voluntary prepayments of the Term Facility will be applied as directed by the Borrower (and absent such direction, in direct order of maturity). |
| Conditions to the Borrowing: |
|
The availability of the borrowing and other extensions of credit under the Term Facility on the Closing Date will be subject solely to (a) delivery of a customary borrowing notice (the “Borrowing Notice”), (b) the accuracy of the Specified Representations and the Specified Acquisition Agreement Representations, in each case in all material respects (subject to the Limited Conditionality Provisions); provided that any representations and warranties qualified by materiality shall be accurate in all respects, and (c) the conditions set forth in Exhibit C to the Commitment Letter. |
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| Term Facility Documentation: |
|
The definitive financing documentation for the Term Facility will consist of a credit agreement, guarantees, applicable collateral agreements and the necessary ancillary documents (collectively, the “Term Facility Documentation”) which shall be initially drafted by counsel for the Initial Lender and shall contain the terms set forth in this Exhibit B and, to the extent any other terms are not expressly set forth in this Exhibit B, will (i) be negotiated promptly in good faith and (ii) contain only those conditions, representations, events of default and covenants set forth in this Exhibit B and such other terms as the Borrower and the Initial Lender shall reasonably agree; it being understood and agreed that the Term Facility Documentation shall be based on and substantially consistent with transaction documents for a comparable financing of a going private transaction involving a company publicly listed in the U.S., subject to such changes and adjustments as shall be reasonably necessary and mutually agreed to by the Borrower and the Initial Lender, giving due regard to the operational and strategic requirements of Parent and its subsidiaries in light of their consolidated capital structure, size, industry and practices and proposed business plan (after giving effect to the Transactions) (the principles described above, the “Documentation Principles”). |
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| Representations and Warranties: |
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Limited to the following (in each case, to be applicable to Parent, the Borrower, and its subsidiaries, and the other Guarantors and Security Grantors, and subject to customary exceptions, thresholds and qualifications consistent with the Documentation Principles): organizational status and good standing; power and authority, due authorization, qualification, execution, delivery and enforceability of Term Facility Documentation; with respect to the execution, delivery and performance of the Term Facility Documentation, no violation of, or conflict with, material law, organizational documents or material agreements; compliance with material law (including environmental laws); litigation; use of proceeds and compliance with margin regulations; material governmental and third party approvals with respect to the execution, delivery and performance of the Term Facility; inapplicability of Investment Company Act; solvency of Parent and its subsidiaries on a consolidated basis; accurate and complete disclosure; accuracy of historical financial statements (including pro forma financial statements based on historical balance sheets); since the Closing Date, no Material Adverse Effect (as defined below); taxes; insurance; pension plans; PATRIOT Act; OFAC; FCPA; anti-money laundering laws; subsidiaries; intellectual property; status of Term Facility as “senior debt”; ownership of properties; and creation, perfection and priority of liens. |
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“Material Adverse Effect” shall mean any event, circumstance or condition that has had or could reasonably be expected to have a material and adverse effect on (a) the business or financial condition of Parent and its subsidiaries, taken as a whole, (b) the ability of the Borrower and the Guarantors, taken as a whole, to perform its payment obligations under the Term Facility Documentation or (c) the rights and remedies of the Agents and the Lenders under the Term Facility Documentation. |
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| Affirmative Covenants: |
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Limited to the following (in each case, to be applicable to Parent, the Borrower and its subsidiaries, the other Guarantors and Security Grantors, and subject to customary exceptions, thresholds and qualifications consistent with the Documentation Principles): delivery of annual audited consolidated and semi-annual unaudited financial statements of Parent and its subsidiaries within 120 days of the end of the fiscal year ending after the Closing Date and 60 days of the end of the first fiscal half of any fiscal year ending after the Closing Date, and, in connection with the above-mentioned annual financial statements, an annual audit opinion from nationally recognized auditors that is not subject to any qualification as to “going concern” or scope of the audit (other than any exception or explanatory paragraph, but not a qualification, that is expressly solely with respect to, or expressly resulting solely from, (i) an upcoming maturity date under the Term Facility occurring within one year from the time such opinion is delivered or (ii) any potential, but not actual, inability to satisfy a financial maintenance covenant on a future date or in a future period), or similar explanatory paragraphs, officers’ compliance certificates and other information reasonably requested by the Initial Lender; notices of defaults, material litigation; inspections by the Initial Lender (subject to frequency (so long as there is no ongoing event of default) and cost reimbursement limitations); maintenance of property (subject to casualty, condemnation and normal wear and tear); maintenance of existence and corporate franchises, rights and privileges; maintenance of books and records; payment of taxes and similar claims; compliance with laws and regulations (including environmental, pension plans; Patriot Act, OFAC, FCPA and anti-money laundering laws); use of proceeds; and further assurances on collateral matters; and the Cash Pledge Requirements. |
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| Negative Covenants: |
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Limited to the following (in each case, to be applicable to Parent, the Borrower and its subsidiaries, the other Guarantors and Security Grantors, and subject to customary exceptions, thresholds and qualifications consistent with the Documentation Principles): |
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|
a) |
limitations on the incurrence of indebtedness (which shall permit, among other things, (i) the indebtedness under the Term Facility and any permitted refinancings thereof, (ii) non-speculative hedging arrangements, (iii) any indebtedness of the Target and its subsidiaries incurred prior to the Closing Date which remains outstanding and is permitted to remain outstanding with the consent of the Initial Lender and any permitted refinancings thereof, (iv) purchase money indebtedness and capital leases in an amount to be agreed, (v) indebtedness of an acquired company or secured by acquired assets, to the extent such indebtedness is assumed or remains outstanding in connection with the related acquisition; provided that (A) such indebtedness was not incurred in contemplation of such acquisition, (B) such indebtedness shall not exceed $5 million and (C) such acquisition is a permitted investment or acquisition (“Acquired Indebtedness”), (vi) refinancings of permitted indebtedness (“Refinancing Indebtedness”), subject to customary limitations on the amount, tenor and weighted average life of such Refinancing Indebtedness, (vii) a general debt basket in an amount of $5 million which may be secured to the extent permitted by exceptions to the lien covenant, and (viii) other customary exceptions, including certain intra-group indebtedness); provided that the aggregate amount of all outstanding indebtedness of the Parent and its subsidiaries shall not exceed $60 million at any time; |
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b) |
limitations on liens (which shall prohibit any pledge of the Cash Pledge Accounts and other Collateral to any party other than the Lenders but shall permit, among other things, (i) liens securing the obligations arising under the Term Facility and permitted refinancing thereof, (ii) any liens (other than liens on the Collateral) of the Target and its subsidiaries incurred prior to the Closing Date which remain outstanding and are permitted to remain outstanding with the consent of the Initial Lender, (iii) liens on equipment or fixed assets that are subject to permitted purchase money indebtedness or capital leases in each case permitted to be incurred pursuant to clause (a)(iv) above, (iv) liens (other than liens on the Collateral) securing Acquired Indebtedness; provided that such liens were not created in contemplation of the applicable acquisition, (v) liens (other than liens on the Collateral) securing Refinancing Indebtedness, to the extent the indebtedness being refinanced was secured, (vi) a general lien (other than liens on the Collateral) basket in an amount of $5 million, and (vii) other customary exceptions); |
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limitations on fundamental changes (including, without limitation, the reduction of registered and issued capital of the Borrower, and the restructuring of Parent and the subsidiaries, subject to exceptions for post- merger restructuring plans to be agreed between the Borrower and the Initial Lender); |
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limitations on asset sales (including sales of subsidiaries), sale and lease back transactions and other asset disposals (to be defined in the Term Facility Documentation), with carve outs to include asset sales the proceeds of which are applied to prepay the Term Loans; |
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e) |
limitations on investments and acquisitions, provided that (i) the Borrower may make investments and acquisitions with funds received from its investors (and in compliance with the other covenants or provisions of the Term Facility) and (ii) the Borrower may make any acquisition the aggregate cost of which does not exceed $20 million; |
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f) |
limitations on dividends or distributions on, or redemptions of, equity interests (which shall permit, among other things, (i) subject to no continuing event of default, customary payments or distributions to pay the tax liabilities and overhead expenses of any direct or indirect parent, to the extent such payments cover taxes that are attributable to the activities of the Borrower or its subsidiaries or such parent’s ownership of the Borrower or its subsidiaries and are net of any payments already made by the Borrower and its subsidiaries, (ii) payment of legal, accounting and other ordinary course corporate overhead or other operational expenses of any such parent not to exceed an amount to be agreed in any fiscal year and for the payment of franchise or similar taxes, and (iii) dividends on the Borrower’s shareholdings in its subsidiaries); provided that the Borrower and Parent shall not make any distributions or pay any dividends other than for the purpose of repayment of the debt under the Term Facility. |
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g) |
limitations on prepayments or redemptions of any subordinated indebtedness for borrowed money or any indebtedness for borrowed money secured on a junior basis to the Term Facility; |
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h) |
limitations on negative pledge clauses; |
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i) |
limitations on burdensome agreements; |
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j) |
limitations on amendments of material agreements; |
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k) |
limitations on transactions with affiliates; |
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l) |
limitations on changes in lines of business; and |
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m) |
limitations on changes of fiscal year. |
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| Events of Default: |
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Limited to the following (to be applicable to Parent, the Borrower and its subsidiaries, the other Guarantors and Security Grantors): nonpayment of principal when due; nonpayment of interest or other amounts after a customary five business day grace period; violation of covenants (subject, in the case of affirmative covenants (other than the Cash Pledge Requirements, use of proceeds, notices of default and maintenance of existence), to a thirty day grace period); incorrectness of representations and warranties in any material respect (subject to a thirty day grace period in the case of misrepresentations that are capable of being cured); cross default and cross acceleration to indebtedness of an amount in excess of an amount to be agreed; bankruptcy or other similar events of the Guarantors, the Borrower or any of the material subsidiaries of Parent or the Security Grantors (with a 60 day grace period for involuntary events); monetary judgments of an amount in excess of an amount to be agreed; actual or asserted (in writing) invalidity of material guarantees or security interest in Collateral; Change of Control (as defined below). |
| Change of Control |
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“Change of Control” shall be deemed to have occurred if (a) Ms. Hong Li and Mr. Xingqiang Zhang (together, the “Sponsors” or the “Permitted Holders”) shall fail to own, directly or indirectly, beneficially and of record, shares representing at least 50.1% of the aggregate ordinary voting power represented by the issued and outstanding equity interests of Parent, or (b) Parent shall cease to directly own, beneficially and of record, 100% of the issued and outstanding equity interests of the Borrower. |
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| Voting: |
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Amendments and waivers of the Term Facility Documentation will require the approval of Lenders holding at least 50% of the aggregate amount of the loans and commitments under the Term Facility (the “Required Lenders”), except that (i) the consent of each Lender directly and adversely affected thereby shall be required with respect to: (A) increases in the commitment of such Lender (it being understood that a waiver of any default, event of default or mandatory prepayment shall not constitute an extension or increase of any commitment), (B) reductions or forgiveness of principal, and (C) extensions of scheduled amortization payments or final maturity (it being understood that a waiver of any mandatory prepayment shall not constitute an extension of any maturity date) or the date for the payment of interest, premiums or fees, (ii) the consent of 100% of the Lenders will be required with respect to (A) modifications to any of the voting percentages and (B) releases of all or substantially all of the value of the guarantees or releases of all or substantially all of the Collateral and (iii) customary protections for the Agents will be provided. |
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The Term Facility Documentation shall contain customary provisions for replacing Lenders claiming increased costs, tax gross ups and similar required indemnity payments and replacing non-consenting Lenders in connection with amendments and waivers requiring the consent of all Lenders or of all Lenders directly affected thereby so long as Lenders holding more than 50% of the aggregate amount of the Term Loans shall have consented thereto. |
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| Cost and Yield Protection: |
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The Term Facility Documentation will include customary tax gross-up, cost and yield protection provisions. |
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| Assignments and Participations: |
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The Lenders will not be permitted to assign loans under the Term Facility without the consent of the Borrower (any such consent shall not be unreasonably withheld or delayed and shall be deemed to be given after 15 business days’ notice if the Borrower fails to respond); provided that (A) no consent of the Borrower shall be required after the occurrence and during the continuance of a payment, bankruptcy or non-compliance with the Cash Pledge Requirements Event of Default and (B) no consent of the Borrower shall be required if such assignment is an assignment to another Lender, an affiliate thereof or an approved fund. Each assignment (other than to another applicable Lender, an affiliate thereof or an approved fund) will be in an amount of $5,000,000 (or an integral multiple of $1,000,000 in excess thereof) (or lesser amounts, if agreed between the Borrower and the assigning Lender) or, if less, all of such Lender’s remaining loans. To the extent there are multiple Lenders under the Term Facility following such assignments, the Lenders may appoint an administrative agent, and the Term Facility Documentation may contain customary provisions relating to administrative agent. |
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The Lenders will not be permitted to sell participations in loans. |
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The Guarantors and the Borrower shall pay all reasonable and documented or invoiced out-of-pocket costs and expenses of the Agents and the Commitment Party (without duplication) associated with their due diligence investigation, the preparation, execution and delivery, administration, amendment, modification, waiver and/or enforcement of the Term Facility Documentation (including the reasonable fees, disbursements and other charges of a single New York law firm identified herein, a single local counsel in each relevant jurisdiction or otherwise retained with the Borrower’s consent (such consent not to be unreasonably withheld, conditioned or delayed) and consultants (to the extent retained with Borrower’s consent (such consent not to be unreasonably withheld, conditioned or delayed)). |
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The Borrower will indemnify the Agents, the Commitment Party and the Lenders (without duplication) and their affiliates, and the officers, directors, employees, advisors, agents, controlling persons and other representatives of the foregoing and their successors and permitted assigns (each, an “Indemnified Party”), and hold them harmless from and against any and all losses, claims, damages and liabilities of any kind or nature and the reasonable and documented or invoiced out-of-pocket fees and expenses incurred in connection with investigating or defending any of the foregoing (including the reasonable fees, disbursements and other charges of a single firm of counsel for all Indemnified Parties, taken as a whole, and, if necessary, by a single firm of local counsel in each appropriate jurisdiction (which may include a single firm of special counsel acting in multiple jurisdictions) for all Indemnified Parties taken as a whole (and, in the case of an actual or perceived conflict of interest, where the Indemnified Party(s) affected by such conflict notifies the Borrower of the existence of such conflict and thereafter retains its own counsel, by another firm of counsel for such affected indemnified person)) of any such Indemnified Party arising out of or in connection with, any claim, litigation, investigation or other proceeding (including any inquiry or investigation of the foregoing) (regardless of whether such Indemnified Party is a party thereto or whether or not such action, claim, litigation or proceeding was brought by the Borrower, its equity holders, affiliates or creditors or any other third person) relating to the Transactions, including the financing contemplated hereby; provided that no Indemnified Party will be indemnified for any loss, claim, damage, liability, cost or expense to the extent it has resulted from (i) the gross negligence, bad faith or willful misconduct of such Indemnified Party or any Related Indemnified Person (as determined by a court of competent jurisdiction in a final and non-appealable decision), (ii) a material breach by such Indemnified Party or any Related Indemnified Person of its obligations under the Term Facility (as determined by a court of competent jurisdiction in a final and non-appealable decision), or (iii) any proceeding between and among Indemnified Parties that does not involve an act or omission by Parent, the Borrower or any of their subsidiaries; provided that the Agents and any other agents, to the extent acting in their capacity as such, shall remain indemnified in respect of such proceeding, to the extent that none of the exceptions set forth in any of clauses (i) or (ii) of the immediately preceding proviso applies to such person at such time. |
| Governing Law and Forum: |
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The Term Facility Documentation (other than local law governed security documents) will be governed by New York law and will provide for the parties thereto to submit to the non-exclusive jurisdiction and venue of the Federal and state courts of the State of New York sitting in the Borough of Manhattan in New York City. |
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| Counsel to the Initial Lender: |
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Allen & Overy LLP. |
| Interest Rates: |
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LIBOR plus 1.65% per annum. |
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The Borrower may only elect interest periods of 3 months for LIBOR borrowings. |
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Calculation of interest shall be on the basis of the actual days elapsed in a year of 360 days. |
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Interest shall be payable in arrears at the end of each interest period and on the applicable maturity date. |
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“LIBOR” means the London interbank offered rate for U.S. dollar deposits for a three month interest period appearing on the Reuters Screen LIBOR01 Page or such other screen as may be determined prior to the Closing Date (or otherwise on the Reuters screen). |
EXHIBIT C
Project Charm
Summary of Additional Conditions1
The borrowings under the Term Facility shall
be subject to the satisfaction or waiver, in each case, in the Initial Lender’s reasonable determination, of the following
conditions:
1. The
Initial Lender shall have received a copy of the fairness opinion provided by Duffs & Phelps; provided that the Initial
Lender shall be deemed to have received such opinion to the extent and upon the filing of such opinion with the U.S. Securities
and Exchange Commission by the Target.
2. No
Material Adverse Effect (as defined in the Acquisition Agreement) shall have occurred since the date of the Acquisition Agreement.
3. The
Acquisition shall have been consummated, or substantially simultaneously with the borrowing under the Term Facility, shall be consummated,
in all material respects in accordance with the terms of the Acquisition Agreement, after giving effect to any modifications, amendments,
consents or waivers by you thereto, other than those modifications, amendments, consents or waivers that are materially adverse
to the interests of the Lenders or the Commitment Party in their capacities as such, unless consented to in writing by the Initial
Lender (such consent not to be unreasonably withheld or delayed; provided that (x) any amendment, waiver or consent which
result in a reduction in the purchase price for the Acquisition shall not be deemed to be materially adverse to the Lenders or
the Commitment Party, if it is accompanied by a permanent and automatic reduction of the Commitments under the Term Facility in
an equivalent amount, and (y) any increase in purchase price for the Acquisition equal to or less than 10% shall not be deemed
to be materially adverse to the Lenders or the Commitment Party, if the Borrower can provide evidence satisfactory to the Lenders
and the Commitment Party that it has sufficient funds (in addition to the Commitment hereunder) to pay the adjusted purchase price
in full). The Initial Lender shall have received evidence of (i) the staff of the U.S. Securities and Exchange Commission (“SEC”)
have indicated to the Target’s counsel that they are not reviewing or, in connection with their review, have no further comments
with respect to the Proxy Statement or the Schedule 13E-3 filed with the SEC in connection with the Acquisition and (ii) the public
announcement of execution and delivery of the Acquisition Agreement by the Target.
4. The
Initial Lender shall have received evidence substantially simultaneously with the borrowing under the Term Facility that the Permitted
Holders own directly or indirectly not less than 50.1% of the ownership interest in Parent.
5. The
Initial Lender shall have received (a) audited consolidated balance sheets of the Target and its consolidated subsidiaries as at
the end of, and related statements of income, stockholders’ equity and cash flows of the Target and its consolidated subsidiaries
for, the three most recently completed fiscal years ended not less than 180 days prior to the Closing Date, and (b) unaudited consolidated
balance sheets of the Target and its consolidated subsidiaries as at the end of, and related statements of income, stockholders’
equity and cash flows of the Target and its consolidated subsidiaries for each subsequent fiscal quarter occurring after the last
fiscal year of Target and ended not less than 90 days before the Closing Date, in each case, prepared in accordance with the generally
applicable accounting principles in the United States; provided that, for each of clause (a) and (b) above, the Initial Lender
shall be deemed to have received such financial statements to the extent and upon the filing of such financial statements with
the U.S. Securities and Exchange Commission by the Target.
1 All capitalized terms used
but not defined herein shall have the meaning given them in the Commitment Letter to which this Exhibit C is attached, including
Exhibits A and B. In the case of any such capitalized term that is subject to multiple and differing definitions,
the appropriate meaning thereof in this Exhibit E shall be determined by reference to the context in which it is used.
6. Subject
in all respects to the Limited Conditionality Provisions, all documents and instruments (including without limitation stock certificates
and related stock transfer powers) required to create and perfect the Agents’ security interest in the Collateral in respect
of the Term Facility shall have been executed and delivered and, if applicable, be in proper form for filing.
7. The
Initial Lender shall have received evidence of the deposit of the Cash Pledge Amount and maintenance of such Cash Pledge Amount
in the Cash Pledge Accounts.
8. At
least two business days prior to the Closing Date, the Initial Lender shall have received all documentation and other information
about the Borrower and the Guarantors, in each case that shall have been reasonably requested by the Initial Lender in writing
at least 10 business days prior to the Closing Date and that the Initial Lender reasonably determines is required by United States
regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including
without limitation the PATRIOT Act.
9. The
closing of the Term Facility shall have occurred on or before the Expiration Date.
10. (i)
The execution and delivery by the Borrower and the Guarantors of the Term Facility Documentation (including guarantees by the applicable
Guarantors and the cash pledge agreement) which shall, in each case, be in accordance with the terms of the Commitment Letter and
the Term Sheets and (ii) delivery to the Initial Lender of customary legal opinions (including without limitation US legal opinions
from counsel to the Borrower and the Guarantors), customary officer’s closing certificates, organizational documents, customary
evidence of authorization and good standing certificates in jurisdictions where applicable, in each case with respect to the Borrower,
the Guarantors and the Security Grantors (to the extent applicable).
11. No
bankruptcy Event of Default in relation to Parent, the Borrower, any Permitted Holder or any Onshore Cash Pledgor shall have occurred
and be continuing on such date (immediately prior to giving effect to the extensions of credit requested to be made) or would result
after giving effect to the extensions of credit requested to be made on the Closing Date.
12. All
fees required to be paid on or prior to the Closing Date pursuant to the Fee Letter and reasonable out-of-pocket expenses required
to be paid on the Closing Date pursuant to the Commitment Letter, to the extent invoiced at least three business days prior to
the Closing Date (except as otherwise reasonably agreed by the Borrower), shall, upon the borrowings under the Term Facility, have
been, or will be substantially simultaneously, paid (which amounts may be offset against the proceeds of the Term Facility).
Exhibit (c)-(2)
DUFF & PHELPS
Country Style Cooking Country Style Cooking Restaurant Chain Co., Ltd. December 16, 2015 Fairness Analysis Presented to the Special
Committee of Independent Directors The information contained herein is of a confidential nature and is intended for the use of
the persons or firm to whom it is furnished by us. Reproduction, publication, or dissemination of portions hereof may not be made
without prior approval of Duff & Phelps, LLC and its affiliates.
Duff & Phelps
Disclaimer The following pages contain materials that are being provided by Duff & Phelps, LLC (“Duff & Phelps”)
to the special committee of independent directors (the “Special Committee”) of the board of directors (the “Board
of Directors”) of Country Style Cooking Restaurant Chain Co., Ltd. (“Country Style Cooking” or the “Company”)
in the context of a meeting of the Special Committee held to consider the Proposed Transaction (as defined herein). The accompanying
materials are, and any Opinion (as defined herein) will be, compiled and presented on a confidential basis, solely for the use
and benefit of the Special Committee in connection with their evaluation of the Proposed Transaction and may not be distributed
to any other party, publicly disclosed, or relied upon for any other purpose without the prior written consent of Duff & Phelps.
Because these materials were prepared for use in the context of an oral presentation to the Special Committee, whose members are
familiar with the business and affairs of the Company, neither the Company nor Duff & Phelps, nor any of their respective
legal or financial advisors or accountants, take any responsibility for the accuracy or completeness of any of the materials if
used by persons other than the Special Committee. These materials are not intended to represent an Opinion but rather to serve
as discussion materials for the Special Committee and as a summary of the basis upon which Duff & Phelps may render an Opinion.
The accompanying material does not, and any Opinion provided by Duff & Phelps would not: (i) address the merits of the underlying
business decision of the Special Committee, the Board of Directors or the Company or any other party to the Proposed Transaction
to enter into the Proposed Transaction versus any alternative strategy or transaction; (ii) constitute a recommendation to the
Special Committee, the Board of Directors, the Company or any other person including security holders of the Company as to how
such person should vote or as to any other specific action that should be taken in connection with the Proposed Transaction; or
(iii) create any fiduciary duty on Duff & Phelps’ part to any party. The information utilized in preparing this presentation
was obtained from the Company and from public sources. Any estimates and forecasts contained herein have been prepared by or are
based on discussions with the senior management of the Company and involve numerous and significant subjective determinations,
which may or may not prove to be correct. No representation or warranty, expressed or implied, is made as to the accuracy or completeness
of such information and nothing contained herein is, or shall be relied upon as, a representation, whether as to the past or the
future. Duff & Phelps did not independently verify such information. No selected company or selected transaction used in our
analysis is directly comparable to the Company or the Proposed Transaction. Duff & Phelps’ affiliate, Duff & Phelps
Securities, LLC (“DPS”), has acted as financial advisor to the Special Committee providing such financial and market
related advice and assistance as requested by the Special Committee in connection with the Proposed Transaction, and will receive
a fee for certain investment banking services if requested by the Special Committee. CONFIDENTIAL 2DUFF & PHELPS
Table of Contents
1. Introduction and Transaction Overview 2. Valuation Analysis - Discounted Cash Flow Analysis - Selected Public Companies / M&A
Transactions Analysis Appendix 1. Assumptions, Qualifications, and Limiting Conditions 2. Summary of Premiums Paid Supplemental
CONFIDENTIAL 3 DUFF & PHELPS
Section 01 Introduction
and Transaction Overview
Introduction and
Transaction Overview The Engagement Duff & Phelps was retained by the Special Committee and the Company to serve as independent
financial advisor to the Special Committee (solely in its capacity as such). Specifically, Duff & Phelps has been asked to
provide an opinion (the “Opinion”) to the Special Committee as to the fairness, from a financial point of view, to
(i) the holders of ordinary shares, par value US$0.001 per share, of the Company (each, a “Share” and collectively,
the “Shares”), other than the Excluded Shares and the Dissenting Shares (each as defined below), and (ii) the holders
of American Depositary Shares of the Company, each representing four Shares (each, an “ADS” and collectively, “ADSs”),
other than the ADSs representing the Excluded Shares, of the Merger Consideration (as defined below) to be received by such holders
in the Proposed Transaction (as defined below) (without giving effect to any impact of the Proposed Transaction on any particular
holder of the Shares or ADSs other than in their capacity as holders of Shares or ADSs). The Proposed Transaction It is Duff &
Phelps’ understanding that the Company, Country Style Cooking Restaurant Chain Holding Limited, an exempted company with
limited liability incorporated under the laws of the Cayman Islands (“Parent”), and Country Style Cooking Restaurant
Chain Merger Company Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands and
a wholly owned subsidiary of Parent (“Merger Sub”), propose to enter into an Agreement and Plan of Merger (the “Merger
Agreement”), dated as of the date hereof, the latest draft of which Duff & Phelps has reviewed is dated December 9,
2015. Pursuant to the Merger Agreement, among other things, Merger Sub will merge with and into the Company, whereupon the separate
corporate existence of Merger Sub will cease and the Company will be the surviving company, and in connection with such merger
each issued and outstanding Share (other than the Excluded Shares and the Dissenting Shares) will be cancelled in exchange for
the right to receive US $1.3075 in cash per Share without interest (the “Per Share Merger Consideration”) and each
issued and outstanding ADS (other than ADSs representing the Excluded Shares) will be cancelled in exchange for the right to receive
US $5.23 in cash per ADS without interest (the “Per ADS Merger Consideration”, and together with the Per Share Merger
Consideration, the “Merger Consideration”) (collectively, the “Proposed Transaction”). The terms and conditions
of the Proposed Transaction are more fully set forth in the Merger Agreement. For purposes of this Opinion, (i) “Excluded
Shares” shall mean, collectively, the Shares (including Shares represented by ADSs) beneficially owned by each Rollover
Shareholder (as defined in the Merger Agreement), Shares held by Parent, the Company or any of their Subsidiaries (as defined
in the Merger Agreement), and Shares held by the Depositary (as defined in the Merger Agreement) that are not represented by ADSs
and reserved for the issuance and allocation of ADSs pursuant to the Share Incentive Plan and/or any Company Share Award (as defined
in the Merger Agreement); and (ii) “Dissenting Shares” shall have the meaning set forth in the Merger Agreement. CONFIDENTIAL
5 DUFF & PHELPS
Introduction and
Transaction Overview Scope of Analysis Duff & Phelps has made such reviews, analyses and inquiries as it has deemed necessary
and appropriate under the circumstances. Duff & Phelps also took into account its assessment of general economic, market and
financial conditions, as well as its experience in securities and business valuation, in general, and with respect to similar
transactions, in particular. Duff & Phelps’ procedures, investigations, and financial analysis with respect to the preparation
of its analysis included, but were not limited to, the items summarized below: 1. Reviewed the following documents: - The Company’s
annual reports and audited financial statements on Form 20-F filed with the Securities and Exchange Commission (“SEC”)
for the years ended December 31, 2013 and December 31, 2014; and the Company’s unaudited interim financial statements for
the nine months ended September 30, 2014 and September 30, 2015 included in the Company’s Form 6-K filed with the SEC; -
A detailed financial projection model for the years ending December 31, 2015 through 2024, prepared and provided to Duff &
Phelps by management of the Company, upon which Duff & Phelps has relied, with your consent, in performing its analysis (the
“Management Projections”); - Other internal documents relating to the history, past and current operations, financial
conditions, and probable future outlook of the Company, provided to Duff & Phelps by management of the Company; - A letter
dated December 2, 2015 from the management of the Company, which made certain representations as to the Management Projections
and the underlying assumptions for the Company (the “Management Representation Letter”); and - Documents related to
the Proposed Transaction, including the Merger Agreement; 2. Discussed the information referred to above and the background and
other elements of the Proposed Transaction with the management of the Company; 3. Discussed with Company management its plans
and intentions with respect to the management and operation of the business; 4. Reviewed the historical trading price and trading
volume of the ADSs and the publicly traded securities of certain other companies that Duff & Phelps deemed relevant; 5. Performed
certain valuation and comparative analyses using generally accepted valuation and analytical techniques including a discounted
cash flow analysis, an analysis of selected public companies that Duff & Phelps deemed relevant, an analysis of selected transactions
that Duff & Phelps deemed relevant, and a review of premiums paid in selected transactions that Duff & Phelps deemed relevant;
and 6. Conducted such other analyses and considered such other factors as Duff & Phelps deemed appropriate. CONFIDENTIAL 6
DUFF & PHELPS
Introduction and
Transaction Overview Other Director 0.3% Institutional Investors 13.5% Public & Other Options Shareholders 16.8% Options &
RSUs 2.0% Buyer Consortium 67.5% Source: Company filings, Capital IQ, Company provided. (1) Includes 44,522,148 Ordinary Shares
held by Regal Fair, a British Virgin Islands company jointly owned and controlled by Ms. Li and Mr. Zhang, per 13-D dated August
14, 2015. (2) Includes 17,384,544 Ordinary Shares represented by ADSs, per 13-D dated August 14, 2015. (3) Includes 12,000,000
ordinary shares, per 20-F dated April 20, 2015. (4) Includes 107,352,416 ordinary shares outstanding as of December 31, 2015,
per 20-F dated April 20, 2015. Ownership Summary Country Style Cooking Restaurant Chain Co., Ltd. - Ownership % of Fully Diluted
Current Shareholders ADSs Ownership Buyer Consortium Li, Hong & Zhang, Xingqiang (Co-Founders) (1) 11,130,537 40.7% Sky Success
Venture Holdings Limited (2) 4,346,136 15.9% SIG Asia Investments, LLLP (3) 3,000,000 11.0% Buyer Consortium 18,476,673 67.5%
Other Director Gong, Tim (Director) 34,625 0.1% Ji, Yue (Independent Director) 34,000 0.1% Other Director 68,625 0.3% Institutional
Investors Sequoia Capital China 3,000,000 11.0% Renaissance Technologies Corp. 340,700 1.2% River and Mercantile Asset Management
LLP 259,258 0.9% Allied Finance Asset Management AG 40,000 0.1% Morgan Stanley 23,400 0.1% U.S. Bancorp Asset Management, Inc.
17,800 0.1% Acadian Asset Management, Inc. 2,900 0.0% UBS Global Asset Management 1,687 0.0% Tower Research Capital LLC 209 0.0%
Institutional Investors 3,685,954 13.5% Public & Other Shareholders 4,606,852 16.8% Total ADSs Outstanding (4) 26,838,104
98.0% RSUs & Options In-the-Money at Offer Price 541,359 2.0% Fully Diluted ADSs Outstanding at Offer Price 27,379,463 100.0%
CONFIDENTIAL 7 DUFF & PHELPS
Introduction and
Transaction Overview Trading Analysis Country Style Cooking Restaurant Chain Co., Ltd. - Trading History December 15, 2014 to
December 14, 2015 Offer Price Premium Relative to: Current (12/14/15) $4.70 11.3% One Day Prior $4.40 18.9% 30- Day VWAP (1) $4.74
10.2% 60- Day VWAP (1) $5.08 3.0% 90- Day VWAP (1) $5.19 0.9% ADS Price $3.00 $3.50 $4.00 $4.50 $5.00 $5.50 $6.00 $6.50 $7.00
Volume (thousands) 0.0 50.0 100.0 150.0 200.0 250.0 300.0 Volume Price 30-day Trailing VWAP 60-day Trailing VWAP 90-day Trailing
VWAP Offer 12/15/14 1/15/15 2/15/15 3/15/15 4/15/15 5/15/15 6/15/15 7/15/15 8/15/15 9/15/15 10/15/15 11/15/15 12/14/15 (1) Trailing
Volume Weighted Average Price (VWAP) at Offer Country Style Cooking Restaurant Chain Co., Ltd. Historical Trading Metrics (in
thousands, except per Share) During one year prior to Offer Post offer Average Closing Price $5.48 Average Closing Price $4.66
High $7.43 High $4.88 Low $3.82 Low $4.35 Average Volume 21.3 Average Volume 15.0 % of Shares Issued and Outstanding 0.1% % of
Shares Issued and Outstanding 0.1% % of Float 0.4% % of Float 0.3% Source: Capital IQ CONFIDENTIAL 8 DUFF & PHELPS
Introduction and
Transaction Overview Proposed Transaction Country Style Cooking Restaurant Chain Co., Ltd. - Offer Premium ADS Implied Price Premium
ADS price of 12/14/15 $4.70 11.3% One-week prior to Offer (8/7/15) $4.63 13.0% 30-days trailing VWAP at Offer $4.74 10.2% 60-days
trailing VWAP at Offer $5.08 3.0% 90-days trailing VWAP at Offer $5.19 0.9% One-year prior to Offer (8/14/14) $7.08 (26.1%) Initial
Public Offering (9/27/2010) $16.50 (68.3%) Offer Price $5.23 Country Style Cooking Restaurant Chain Co., Ltd. - Implied Multiples
(USD in millions, except per ADS data) Offer $5.23 Fully Diluted ADSs Issued and Outstanding (millions) 27.4 Implied Fully Diluted
Equity Value $143.2 Plus: Income Tax Payable 1.2 Less: Due from Related Parties (0.1) Less: Proceeds from Exercise of Options
(1.0) Less: Cash (1) (96.6) Implied Enterprise Value $46.6 Implied Offer Multiples: EV / LTM EBITDA $17.1 2.7x EV / 2016 EBITDA
$17.1 2.7x EV / 2017 EBITDA $17.0 2.6x EV / LTM EBIT $5.3 8.8x EV / 2016 EBIT $5.0 9.2x EV / 2017 EBIT $5.0 9.0x EV / LTM Revenue
$224.2 0.21x Note: Balance sheet data and LTM as of September 30, 2015. Financial performance metrics presented are adjusted to
exclude public company costs and non-recurring income (expenses). (1) Includes cash and cash equivalents, short-term investment
and long-term investment. Reflects a 10% withholding tax discount on excess cash and investment held at onshore entities (net
of income tax payable). CONFIDENTIAL 9 DUFF & PHELPS
Introduction and
Transaction Overview Valuation Summary Valuation Range Conclusions (RMB in thousands, except per ADS values or otherwise noted)
Low High Enterprise Value Discounted Cash Flow Analysis ¥235,400 - ¥320,200 Selected Public Companies Analysis ¥232,200
- ¥298,500 Enterprise Value Range ¥233,800 - ¥309,400 Plus: Proceeds from Exercise of Options ¥6,759
- ¥ 6,759 Plus: Due from Related Parties 493 - 493 Less: Income Tax Payable (7,460) - (7,460) Value Attributable to Fully
Diluted ADSs (Excluding Cash) ¥233,592 - ¥309,192 Fully Diluted ADSs Issued and Outstanding 27,379,463 - 27,379,463
Value Per ADS (RMB) ¥8.53 - ¥11.29 RMB to USD FX rate (as of 12/15/2015) 6.47 - 6.47 Value Per ADS Range (Excluding
Excess Cash) $1.32 - $1.75 Excess Cash (1) 625,062 - 625,062 Cash Value Per Fully Diluted ADSs Issued and Outstanding (RMB) ¥22.83
- ¥22.83 Cash Value Per Fully Diluted ADSs Issued and Outstanding (USD) $3.53 - $3.53 Offer Price Value Per ADS Range $4.85
- $5.27 $5.23 Implied Valuation Multiples EV / LTM EBITDA ¥110,483 2.1x - 2.8x 2.7x EV / 2016 EBITDA ¥112,230 2.1x
- 2.8x 2.7x EV / 2017 EBITDA ¥114,447 2.0x - 2.7x 2.6x EV / LTM EBIT ¥34,340 6.8x - 9.0x 8.8x EV / 2016 EBIT ¥32,860
7.1x - 9.4x 9.2x EV / 2017 EBIT ¥33,471 7.0x - 9.2x 9.0x EV / LTM Revenue ¥1,450,497 0.16x - 0.21x 0.21x Note: Balance
sheet data and LTM as of September 30, 2015. Financial performance metrics presented are adjusted to exclude public company costs
and non-recurring income (expenses). (1) Includes cash and cash equivalents, short-term investment and long-term investment. Reflects
a 10% withholding tax discount on excess cash and investment held at onshore entities (net of income tax payable). CONFIDENTIAL
10 DUFF & PHELPS
Introduction and
Transaction Overview ADS Valuation Range $5.23 Offer Price Discounted Cash Flow Analysis $4.86 $5.34 Selected Public Companies
Analysis $4.84 $5.21 Concluded Range $4.85 $5.27 Value Per ADS (USD) $4.40 $4.50 $4.60 $4.70 $4.80 $4.90 $5.00 $5.10 $5.20 $5.30
$5.40 $5.50 $5.60 $5.70 $5.80 CONFIDENTIAL11 DUFF & PHELPS
Section 02Valuation
Analysis
Valuation
Analysis Financial Performance Historical and Projected Financial Performance (RMB in thousands) YTD
YTD LTM Management Projections 2011A
2012A 2013A 2014A 9/30/2014
9/30/2015 9/30/2015 2015P 2016P
2017P 2018P 2019P 2020P
2021P 2022P 2023P 2024P
Net Revenue ¥ 1,019,553 ¥ 1,188,412
¥ 1,360,086 ¥ 1,462,185 ¥
1,100,896 ¥ 1,089,208 ¥ 1,450,497
¥ 1,436,752 ¥ 1,472,330 ¥
1,522,269 ¥ 1,567,778 ¥ 1,644,658
¥ 1,725,862 ¥ 1,807,122 ¥
1,896,379 ¥ 1,976,630 ¥ 2,056,747
Growth 16.6% 14.4% 7.5%
7.5% (1.1%) 0.9% (1.7%)
2.5% 3.4% 3.0% 4.9%
4.9% 4.7% 4.9% 4.2% 4.1%
Gross Profit ¥ 147,910 ¥ 185,037
¥ 205,958 ¥ 202,797 ¥ 156,989
¥ 134,626 ¥ 180,434 ¥ 175,636
¥ 179,344 ¥ 184,041 ¥ 188,095
¥ 197,318 ¥ 207,061 ¥ 216,810
¥ 227,519 ¥ 237,147 ¥ 246,759
Margin % 14.5% 15.6% 15.1%
13.9% 14.3% 12.4% 12.4%
12.2% 12.2% 12.1% 12.0%
12.0% 12.0% 12.0% 12.0%
12.0% 12.0% EBITDA ¥
77,573 ¥ 113,922 ¥ 123,710
¥ 122,317 ¥ 96,341 ¥
84,507 ¥ 110,483 ¥ 108,877
¥ 112,230 ¥ 114,447 ¥
116,241 ¥ 121,647 ¥ 127,357
¥ 133,071 ¥ 139,347 ¥ 144,990
¥ 150,623 Margin % 7.6% 9.6%
9.1% 8.4% 8.8% 7.8%
7.6% 7.6% 7.6% 7.5%
7.4% 7.4% 7.4% 7.4%
7.3% 7.3% 7.3% Growth
46.9% 8.6% (1.1%) (3.0%)
(12.3%) (8.5%) (11.0%) 3.1%
2.0% 1.6% 4.7% 4.7%
4.5% 4.7% 4.0% 3.9%
EBIT ¥ 39,299 ¥ 54,511
¥ 53,702 ¥ 43,732 ¥
37,866 ¥ 28,474 ¥ 34,340
¥ 34,844 ¥ 32,860 ¥
33,471 ¥ 34,128 ¥ 38,266
¥ 38,892 ¥ 43,292 ¥
48,723 ¥ 53,450 ¥ 58,157
Margin % 3.9% 4.6%
3.9% 3.0% 3.4% 2.6%
2.4% 2.4% 2.2% 2.2%
2.2% 2.3% 2.3% 2.4%
2.6% 2.7% 2.8% Growth
38.7% (1.5%) (18.6%) (19.3%)
(24.8%) (23.0%) (20.3%) (5.7%)
1.9% 2.0% 12.1% 1.6%
11.3% 12.5% 9.7% 8.8%
Capital Expenditures ¥ 159,081 ¥
142,355 ¥ 116,731 ¥ 116,248
¥ 98,689 ¥ 41,654 ¥ 59,213
¥ 72,132 ¥ 88,966 ¥ 86,613
¥ 84,269 ¥ 84,925 ¥ 97,551
¥ 95,536 ¥ 90,841 ¥ 88,848
¥ 89,556 % of Net Revenue 15.6%
12.0% 8.6% 8.0% 9.0%
3.8% 4.1% 5.0% 6.0%
5.7% 5.4% 5.2% 5.7%
5.3% 4.8% 4.5% 4.4%
% of EBITDA 205.07% 125.0% 94.4%
95.0% 102.4% 49.3% 53.6%
66.3% 79.3% 75.7% 72.5%
69.8% 76.6% 71.8% 65.2%
61.3% 59.5% Note: Financial performance metrics presented are adjusted to
exclude public company costs and non-recurring income (expenses). Source: Company filings, Company management CONFIDENTIAL13 DUFF
& PHELPS
Valuation Analysis
Discounted Cash Flow Analysis - Methodology and Key Assumptions Discounted Cash Flow Methodology Duff & Phelps performed a
discounted cash flow analysis of the projected unlevered free cash flows. Unlevered free cash flow is defined as cash generated
by the business that is available to either reinvest or to distribute to security holders. Projected free cash flows are discounted
to the present using a discount rate which reflects their relative risk. The discount rate is equivalent to the rate of return
that security holders could expect to realize on alternative investment opportunities with similar risk profiles. Discounted Cash
Flow Key Assumptions Duff & Phelps utilized and relied upon the Management Projections for the fiscal years ending December
31, 2015-2024 (excluding public company expenses, as provided by Company management) as well as discussions with Company management,
a review of the Company’s historical performance and other factors to develop the DCF analysis. Beyond the projection period,
Duff & Phelps estimated the “terminal value” using a perpetuity formula. Duff & Phelps discounted the resulting
free cash flows and terminal value using a weighted average cost of capital range of 13.50% to 16.50%, derived from the Capital
Asset Pricing Model. The following is a summary of the Management Projections utilized in the discounted cash flow analysis: -
The Company’s net revenue increases at a compound annual growth rate (“CAGR”) of 3.5% over the ten-year period
ending 2024. - EBITDA increases at a CAGR of 2.1% over the ten-year period ending 2024. - The Company’s EBITDA margin averages
7.4% over the ten-year period ending 2024. - Capital expenditures average 5.2% of revenue over the ten-year period ending 2024.
CONFIDENTIAL14 DUFF & PHELPS
Valuation Analysis
DCF Analysis Summary Discounted Cash Flow Analysis (RMB in thousands) LTM 2015P 2016P 2017P 2018P 2019P 2020P 2021P 2022P 2023P
2024P Net Revenue ¥1,450,497 ¥1,436,752 ¥1,472,330 ¥1,522,269 ¥1,567,778 ¥1,644,658
¥1,725,862 ¥1,807,122 ¥1,896,379 ¥1,976,630 ¥2,056,747 Growth 0.9% (1.7%) 2.5% 3.4% 3.0% 4.9%
4.9% 4.7% 4.9% 4.2% 4.1% EBITDA ¥110,483 ¥108,877 ¥112,230 ¥114,447 ¥116,241 ¥121,647
¥127,357 ¥133,071 ¥139,347 ¥144,990 ¥150,623 Margin 7.6% 7.6% 7.6% 7.5% 7.4% 7.4% 7.4% 7.4%
7.3% 7.3% 7.3% Growth (8.5%) (11.0%) 3.1% 2.0% 1.6% 4.7% 4.7% 4.5% 4.7% 4.0% 3.9% Q4 2015 Earnings Before Interest and Taxes ¥6,370
¥32,860 ¥33,471 ¥34,128 ¥38,266 ¥38,892 ¥43,292 ¥48,723 ¥53,450 ¥58,157
Pro Forma Taxes @ 25.0% (1,592) (8,215) (8,368) (8,532) (9,566) (9,723) (10,823) (12,181) (13,362) (14,539) Net Operating Profit
After Tax 4,777 24,645 25,103 25,596 28,699 29,169 32,469 36,542 40,087 43,618 Depreciation 18,000 79,371 80,976 82,113 83,381
88,465 89,779 90,624 91,540 92,466 Other Income 192 300 300 300 300 300 300 300 300 300 Capital Expenditures (30,478) (88,966)
(86,613) (84,269) (84,925) (97,551) (95,536) (90,841) (88,848) (89,556) (Increase) / Decrease in Working Capital 12,154 1,752
2,408 2,195 3,647 3,849 3,846 4,224 3,785 3,772 Free Cash Flow (1) ¥4,645 ¥17,101 ¥22,175 ¥25,935
¥31,102 ¥24,232 ¥30,857 ¥40,849 ¥46,864 ¥50,600 Enterprise Value Range Low High Terminal
Growth Rate 3.00% 3.00% Weighted Average Cost of Capital 16.50% 13.50% Concluded Enterprise Value ¥235,400 ¥320,200
Implied Per ADS Range (USD) $4.86 $5.34 Implied Valuation Multiples EV / LTM EBITDA ¥110,483 2.1x 2.9x EV / 2016 EBITDA
¥112,230 2.1x 2.9x EV / 2017 EBITDA ¥114,447 2.1x 2.8x EV / LTM EBIT ¥34,340 6.9x 9.3x EV / 2016 EBIT ¥32,860
7.2x 9.7x EV / 2017 EBIT ¥33,471 7.0x 9.6x EV / LTM Revenue ¥1,450,497 0.16x 0.22x (1) Prior to application of a
10% dividend withholding tax, which is calculated based on levered cash flows and discounted separately at the cost of equity
derived in the WACC calculation and included in the concluded enterprise value range. Note: Balance sheet data and LTM as of September
30, 2015. Financial performance metrics presented are adjusted to exclude public company costs and non-recurring income (expenses).
CONFIDENTIAL15 DUFF & PHELPS
Valuation Analysis
Selected Public Companies / M&A Transactions Analysis Methodology Selected Public Companies Analysis Duff & Phelps selected
nine publicly traded companies in the quick service restaurant industry that were deemed relevant to its analysis. Duff &
Phelps analyzed the financial performance of each of the publicly traded companies. Duff & Phelps then analyzed the selected
public companies’ trading multiples of enterprise value to revenue, enterprise value to EBITDA, enterprise value to EBIT.
Selected M&A Transactions Analysis Duff & Phelps selected precedent transactions within the restaurant industry that it
determined to be relevant to its analysis. Duff & Phelps computed the LTM revenue and EBITDA for each of the target companies
(where publicly disclosed). Duff & Phelps then calculated the implied enterprise value to revenue and enterprise value to
EBITDA multiples for each transaction. Duff & Phelps analyzed a number of factors in comparing the Company to the selected
public companies and the targets in the selected M&A transactions, including historical and forecasted growth in revenue and
profits, profit margins and other characteristics that we deemed relevant. Rather than applying the average or median multiple
from the public company set, Duff & Phelps selected multiples that reflect the Company’s size, growth outlook, capital
requirements, profit margins, revenue mix, and other characteristics relative to the group. None of the companies utilized for
comparative purposes in the following analysis are directly comparable to the Company, and none of the transactions utilized for
comparative purposes in the following analysis are directly comparable to the Proposed Transaction. Duff & Phelps does not
have access to non-public information of any of the companies used for comparative purposes. Accordingly, a complete valuation
analysis of the Company and the Proposed Transaction cannot rely solely upon a quantitative review of the selected companies and
selected transactions, and involves complex considerations and judgments concerning differences in financial and operating characteristics
of such companies and targets, as well as other factors that could affect their value relative to that of the Company. Therefore,
the Selected Public Companies / Selected M&A Transactions Analysis is subject to certain limitations. CONFIDENTIAL 16 DUFF
& PHELPS
Valuation Analysis
Selected Public Companies Analysis - Financial Metrics Selected Public Companies Analysis COMPANY INFORMATION REVENUE GROWTH EBITDA
GROWTH EBITDA MARGIN EBIT MARGIN Company Name HQ Exchange 3-YR CAGR LTM 2016 2017 3-YR CAGR LTM 2016 2017 3-YR AVG LTM 2016 2017
3-YR CAGR LTM 2016 2017 HK-Listed Chinese QSR Companies Cafe de Coral Holdings Limited Hong Kong SEHK 7.3% 5.9% 5.4% 6.3% 8.4%
-7.1% 7.0% 11.9% 13.1% 11.9% 12.5% 13.2% 9.3% 8.0% 8.3% 8.8% Fairwood Holdings Ltd. Hong Kong SEHK 7.1 6.4 NA NA 11.7 -1.2 NA
NA 11.9 11.3 NA NA 8.2 9.5 NA NA Xiabuxiabu Catering Management (China) Holdings Co., Ltd. China SEHK 30.2 12.7 15.7 19.3 24.7
-2.7 17.9 15.6 13.4 13.0 15.2 14.7 9.0 8.8 10.8 10.1 Ajisen China Holdings Ltd. Hong Kong SEHK 2.7 -0.2 2.5 3.6 -1.9 -0.8 2.3
7.9 14.6 16.6 17.0 17.7 9.0 10.8 10.1 11.0 Hop Hing Group Holdings Limited Hong Kong SEHK -4.1 -2.3 10.5 8.9 -15.4 1.1 37.9 24.1
11.6 8.6 11.5 13.2 5.4 2.5 6.1 7.9 Group Median 7.1% 5.9% 8.0% 7.6% 8.4% -1.2% 12.5% 13.7% 13.1% 11.9% 13.9% 14.0% 9.0% 8.8% 9.2%
9.4% Asia QSR Companies MK Restaurant Group Public Company Limited Thailand SET 11.1% 4.4% 6.6% 7.8% 3.5% 9.1% 6.1% 1.6% 21.7%
20.5% 22.4% 21.1% 17.3% 15.1% 16.3% 15.4% Wowprime Corp. Taiwan TSEC 30.0 0.7 8.7 12.9 16.3 -16.9 17.2 9.5 13.4 10.1 11.2 10.9
9.4 5.4 6.0 6.6 Berjaya Food Berhad (1) Malaysia KLSE NM NM 23.2 16.7 NM NM 23.5 11.2 6.1 11.8 15.8 15.1 1.1 6.8 11.1 11.0 PT
Fast Food Indonesia Tbk Indonesia JKSE 9.8 4.4 NA NA -2.0 -12.6 NA NA 9.4 7.1 NA NA 5.8 3.2 NA NA Group Median 11.1% 4.4% 8.7%
12.9% 3.5% -12.6% 17.2% 9.5% 11.4% 11.0% 15.8% 15.1% 7.6% 6.1% 11.1% 11.0% Aggregate Mean 11.7% 4.0% 10.4% 10.8% 5.6% -3.9% 16.0%
11.7% 12.8% 12.3% 15.1% 15.1% 8.3% 7.8% 9.8% 10.1% Aggregate Median 8.5% 4.4% 8.7% 8.9% 5.9% -2.0% 17.2% 11.2% 13.1% 11.8% 15.2%
14.7% 9.0% 8.0% 10.1% 10.1% Country Style Cooking Restaurant Chain Co., Ltd. (Management Projections) (2) 12.8% 0.9% 2.5% 3.4%
16.4% -8.5% 3.1% 2.0% 9.0% 7.6% 7.6% 7.5% 3.8% 2.4% 2.2% 2.2% (1) Acquired 100% of Berjaya Starbucks Coffee Company Sdn Bhd on
September 18, 2014. (2) The Company's financial performance metrics presented are adjusted to exclude public company costs and
non-recurring income (expenses). LTM = Latest Twelve Months CAGR = Compounded Annual Growth Rate EBITDA = Earnings Before Interest,
Taxes, Depreciation and Amortization Source: Bloomberg, Capital IQ, SEC filings CONFIDENTIAL17 DUFF & PHELPS
Valuation Analysis
Selected Public Companies Analysis - Valuation Multiples Selected Public Companies Analysis ($ in millions, except per share data)
COMPANY INFORMATION MARKET DATA ENTERPRISE
VALUE AS MULTIPLE OF Company NameHQ Exchange
Stock Price on 12/14/15 % of 52- Wk High Enterprise
Value LTM EBITDA 2016
EBITDA 2017 EBITDA LTM
EBIT 2016 EBIT 2017
EBIT LTM Revenue HK-Listed
Chinese QSR Companies Cafe de Coral Holdings Limited Hong Kong SEHK
$2.95 76.2% $1,489 13.0x
11.5x 10.3x 19.3x 17.3x
15.3x 1.55x Fairwood Holdings Ltd.
Hong Kong SEHK 3.15
95.3 320 9.6 NA
NA 11.4 NA NA
1.08 Xabuxiabu Catering Management (China) Holdings Co., Ltd. China
SEHK 0.41 58.8 254
5.5 3.8 3.3 8.1
5.4 4.9 0.71 Ajisen
China Holdings Ltd. Hong Kong SEHK
0.43 55.8 178
2.5 2.5 2.3 3.8
4.1 3.7 0.41 Hop
Hing Group Holdings Limited Hong Kong SEHK
0.01 59.1 94 4.0
2.5 2.0 13.7 4.7
3.3 0.34 Group Median 5.5x
3.2x 2.8x 11.4x 5.1x
4.3x 0.71x Asia QSR Companies
MK Restaurant Group Public Company Limited Thailand
SET $1.54 88.8% $1,156
13.7x 11.9x 11.7x 18.6x
16.4x 16.2x 2.80x Wowprime
Corp. Taiwan TSEC 4.81
53.3 303 5.8 4.7
4.3 10.8 8.9 7.2
0.59 Berjaya Food Berhad Malaysia
KLSE 0.54 74.8
244 NM 10.8 9.7
NM 15.4 13.3 NM
PT Fast Food Indonesia Tbk Indonesia JKSE 0.08 52.4 130 5.9 NA NA 13.2 NA NA 0.42 Group Median 5.9x
10.8x 9.7x 13.2x 15.4x
13.3x 0.59x Aggregate Mean 7.5x
6.8x 6.2x 12.4x 10.3x
9.1x 0.99x Aggregate Median 5.9x
4.7x 4.3x 12.3x 8.9x
7.2x 0.65x Enterprise Value = (Market Capitalization) + (Debt + Preferred
Stock + Non-Controlling Interest) - (Cash & Equivalents) - (Net Non-Operating Assets) EBITDA = Earnings Before Interest, Taxes,
Depreciation and Amortization Source: Bloomberg, Capital IQ, SEC filings CONFIDENTIAL18 DUFF & PHELPS
Valuation Analysis
Selected M&A Transactions Analysis Selected
M&A Transactions Analysis
($ in millions) Announced
Status Target Name Target Business Description Acquirer
Name Enterprise Value
LTM Revenue LTM
EBITDA EBITDA Margin
EV / EBITDA EV / Revenue Asia
Restaurant Companies M&A
Transactions 10/30/2015 Pending
Ichibanya Co., Ltd. (TSE:7630) Operates a chain of directly
managed and FC member restaurants House Foods Group Inc. (TSE:2810)
$695.5 $365.9 $43.9
12.0% 15.8x 1.90x
6/6/2015 Closed Nice
Race Management Limited Owns and operates a chain of buffet
restaurants in China Carnival Group International Holdings Limited
(SEHK:996) $32.7 $116.1
NA NA NA
0.28x 7/23/2014 Closed Berjaya
Starbucks Coffee Company Sdn Bhd Purchases, roasts, and sells
whole bean coffees, brewed coffees, Italian-style espresso beverages, and cold blended beverages Berjaya
Food Berhad (KLSE:BJFOOD) $176.5 $95.1
NA NA NA
1.86x 5/7/2014 Closed
SRS KOREA Co., Ltd. Operates fast food restaurant chains
CVC Capital Partners Limited $97.8
$153.5 NA NA
NA 0.64x 1/31/2014
Closed South Beauty Investment Co. Ltd Owns
and operates restaurants in China CVC Capital Partners Limited
$362.8 $229.0 NA
NA NA 1.58x
Group Median 15.8x 1.58x
Non-Asia Restaurant Companies M&A Transactions 10/14/2015
Pending SAS FRA MA PIZZ Owns
and operates pizza restaurants Domino's Pizza Enterprises Limited
(ASX:DMP) $40.0 $34.8
$4.0 11.5% 10.0x
1.15x 6/2/2015 Pending
Espresso House Holding AB Owns and operates a chain of coffee
bars JAB Holdings B.V. $316.9
$118.0 NA NA
NA 2.68x 5/21/2015
Closed Frisch's Restaurants, Inc. Operates
full service family style restaurants under the Frisch's Big Boy name in the United States NRD
Capital Management, LLC $172.8 $215.2
$23.5 10.9% 7.3x
0.80x 4/15/2015 Pending
Nordic Service Partners Holding AB (OM:NSP B) Operates and franchises
quick service restaurants Danske Koncept Restauranter Holding
ApS $45.5 $95.3
$7.2 7.5% 6.3x
0.48x 4/3/2015 Closed
Gruppo La Piadineria S.r.l. Owns and operates a chain of restaurant
IDeA Capital Funds SGR SPA $33.0 $27.5
NA NA NA
1.20x 3/27/2015 Pending
Rocca Limited Owns and operates fast food restaurants
The Fulham Shore PLC (AIM:FUL) $49.0
$8.5 $1.8 20.9%
27.6x 5.76x 1/14/2015
Closed Brazil Fast Food Corp. Operates,
franchisees, and licenses a system of traditional and non- traditional fast-food restaurants in Brazil Controlling
Shareholders $137.5 $114.4
$17.0 14.8% 8.1x
1.20x 11/6/2014 Closed
Prezzo Limited Operates restaurants under the Prezzo brand in
casual dining market in the United Kingdom TPG Capital, LLP;
TPG Partners VI-AV, L.P. $449.1 $284.2
$48.1 16.9% 9.3x
1.58x 10/1/2014 Closed
Lexington Catering Limited Provides food catering services to
blue chip businesses in London and the South East of England Elior
(ENXTPA:ELIOR) $22.7 $53.9
NA NA NA
0.42x 9/29/2014 Closed
Einstein Noah Restaurant Group, Inc. Owns, operates, franchises,
and licenses bagel specialty restaurants in the United States BDT
Capital Partners, LLC; JAB Beech Inc. $463.1 $442.4
$45.0 10.2% 10.3x
1.05x 8/1/2014 Closed
Food Services Project, S.L. Owns and operates Spanish restaurants
in Europe Alsea, S.A.B. De C.V. (BMVALSEA *); Alia Capital Partners,
S.L. $362.2 $354.2
$42.9 12.1% 8.4x
1.02x 1/31/2014 Closed South
Beauty Investment Co. Ltd Owns and operates restaurants in China
CVC Capital Partners Limited $362.8 $229.0
NA NA NA
1.58x 6/11/2014 Closed
56 Wendy's Restaurants Operates quick-service restaurants
NPC Quality Burgers, Inc. $57.1
$77.0 NA NA
NA 0.74x 5/8/2014
Closed Retail Zoo Pty Ltd. Operates
and franchises restaurants and food stores Bain Capital, LLC
$259.6 $43.4 $14.1
32.6% 18.3x 5.98x
3/30/2014 Closed Morgan's
Foods Inc. Operates restaurants under franchise in the United
States Apex Restaurant Management, Inc $49.9
$85.6 $6.5 7.6%
7.7x 0.58x Group
Median 8.9x 1.15x Aggregate Mean 11.8x 1.62x
Aggregate Median 9.3x 1.18x
Source: Capital IQ, company filings, press releases CONFIDENTIAL19 DUFF & PHELPS
Valuation Analysis
Selected Public Companies / M&A Transactions Analysis Summary Selected Public Companies Analysis Summary (RMB in thousands)
Enterprise Valuation Multiples Valuation Summary Public Company Public Company Transaction Company Metric Selected Multiple Range
Enterprise Value Range Range Median Median Performance EV / 2016 EBIT 4.1x - 17.3x 8.9x NA 7.00x - 9.00x ¥32,860
¥230,018 - ¥295,737 EV / 2017 EBIT 3.3x - 16.2x 7.2x NA 7.00x - 9.00x ¥33,471 ¥234,295 - ¥301,237
Concluded Enterprise Value Range ¥232,200 - ¥298,500 Implied Per ADS Range (USD) $4.84 - $5.21 Implied Multiples
EV / LTM EBITDA 2.5x 13.7x 5.9x 9.3x ¥110,483 2.1x - 2.7x EV / 2016 EBITDA 2.5x 11.9x 4.7x NA ¥112,230 2.1x - 2.7x
EV / 2017 EBITDA 2.0x 11.7x 4.3x NA ¥114,447 2.0x - 2.6x EV / LTM EBIT 3.8x 19.3x 12.3x NA ¥34,340 6.8x - 8.7x EV
/ 2016 EBIT 4.1x 17.3x 8.9x NA ¥32,860 7.1x - 9.1x EV / 2017 EBIT 3.3x 16.2x 7.2x NA ¥33,471 6.9x - 8.9x EV / LTM
Revenue 0.34x 2.80x 0.65x 1.18x ¥1,450,497 0.16x - 0.21x Note: Balance sheet data and LTM as of September 30, 2015. Financial
performance metrics presented are adjusted to exclude public company costs and non-recurring income (expenses). CONFIDENTIAL20
DUFF & PHELPS
Appendix 01Assumptions,
Qualifications, and Limiting Conditions
Assumptions, Qualifications,
and Limiting Conditions If issued, our Opinion letter will include assumptions, qualifications and limiting conditions similar
to the following. This is not meant to be a complete list of the assumptions, qualifications and limiting conditions which will
be included in our Opinion letter, if rendered. Assumptions and Reliance – In performing its analyses with respect to the
Proposed Transaction, Duff & Phelps, with the Company’s and the Special Committee’s consent: Relied upon the accuracy,
completeness, and fair presentation of all information, data, advice, opinions and representations obtained from public sources
or provided to it from private sources, including Company management, and did not independently verify such information; Relied
upon the fact that the Special Committee, the Board of Directors and the Company have been advised by counsel as to all legal
matters with respect to the Proposed Transaction, including whether all procedures required by law to be taken in connection with
the Proposed Transaction have been duly, validly and timely taken; Assumed that any estimates, evaluations, forecasts and projections
including, without limitation, the Management Projections, furnished to Duff & Phelps were reasonably prepared and based upon
the best currently available information and good faith judgment of the person furnishing the same, and Duff & Phelps expresses
no view or opinion with respect to such estimates, evaluations, forecasts or projections or the underlying assumptions; Assumed
that the information relating to the Company and the Proposed Transaction supplied by the Company to Duff & Phelps and the
representations made by Company management regarding the Company and the Proposed Transaction in the Management Representation
Letter are complete and accurate in all material respects, did not and does not omit to state a material fact in respect of the
Company and the Proposed Transaction necessary to make the information not misleading in light of the circumstances under which
the information was provided; Assumed that the representations and warranties made by all parties in the Merger Agreement and
in the Management Representation Letter are true and correct and that each party to the Merger Agreement will fully and timely
perform all covenants, undertakings and obligations required to be performed by such party; Assumed that the final versions of
all documents reviewed by Duff & Phelps in draft form, including the Merger Agreement, conform in all material respects to
the drafts reviewed; Assumed that there has been no material change in the assets, liabilities, financial condition, results of
operations, business, or prospects of the Company since the date of the most recent financial statements and other information
made available to Duff & Phelps, and that there is no information or facts that would make the information reviewed by Duff
& Phelps incomplete or misleading; Assumed that all of the conditions required to implement the Proposed Transaction will
be satisfied and that the Proposed Transaction will be completed in accordance with the Merger Agreement without any amendments
thereto or any waivers of any terms or conditions thereof, and in a manner that complies in all material respects with all applicable
laws; and Assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the Proposed
Transaction will be obtained without any undue delay, limitation, restriction or condition that would have a material effect on
the Company or the contemplated benefits expected to be derived in the Proposed Transaction. To the extent that any of the foregoing
assumptions or any of the facts on which the Opinion is based prove to be untrue in any material respect, the Opinion cannot and
should not be relied upon for any purpose. Furthermore, in Duff & Phelps’ analysis and in connection with the preparation
of the Opinion, Duff & Phelps has made numerous assumptions with respect to industry performance, general business, market
and economic conditions and other matters, many of which are beyond the control of any party involved in the Proposed Transaction
and as to which Duff & Phelps does not express any view or opinion in the Opinion, including as to the reasonableness of such
assumptions. CONFIDENTIAL22 DUFF & PHELPS
Assumptions, Qualifications,
and Limiting Conditions Qualifications – If issued, our Opinion will be qualified by the following: Duff & Phelps has
prepared the Opinion effective as of the date thereof. The Opinion is necessarily based upon market, economic, financial and other
conditions as they exist and can be evaluated as of the date thereof, and Duff & Phelps disclaims any undertaking or obligation
to (i) advise any person of any change in any fact or matter affecting the Opinion which may come or be brought to the attention
of Duff & Phelps after the date thereof or (ii) update, revise or reaffirm the Opinion after the date thereof. Duff &
Phelps did not evaluate the Company’s solvency or conduct an independent appraisal or physical inspection of any specific
assets or liabilities (contingent or otherwise) of the Company. Duff & Phelps has not been requested to, and did not, (i)
initiate any discussions with, or solicit any indications of interest from, third parties with respect to the Proposed Transaction,
the assets, businesses or operations of the Company, or any alternatives to the Proposed Transaction, (ii) negotiate the terms
of the Proposed Transaction, and therefore, Duff & Phelps has assumed that such terms are the most beneficial terms, from
the Company’s perspective, that could, under the circumstances, reasonably be negotiated among the parties to the Merger
Agreement and the Proposed Transaction, or (iii) advise the Special Committee or any other party with respect to alternatives
to the Proposed Transaction. Duff & Phelps is not expressing any opinion as to the market price or value of the Shares or
ADSs (or anything else) after the announcement or the consummation of the Proposed Transaction (or any other time). The Opinion
should not be construed as a valuation opinion, credit rating, solvency opinion, an analysis of the Company’s credit worthiness,
as tax advice, or as accounting advice. Duff & Phelps has not made, and assumes no responsibility to make, any representation,
or render any opinion, as to any legal matter. Duff & Phelps expressly disclaims any responsibility or liability in this regard.
In rendering the Opinion, Duff & Phelps is not expressing any opinion with respect to the amount or nature of any compensation
payable to or to be received by the Company’s officers, directors, or employees, or any class of such persons, relative
to the Merger Consideration, or with respect to the fairness of any such compensation. CONFIDENTIAL23 DUFF & PHELPS
Assumptions, Qualifications,
and Limiting Conditions Limiting Conditions – If issued, the use of our Opinion will be strictly limited and will state:
The Opinion is furnished solely for the use and benefit of the Special Committee in connection with its consideration of the Proposed
Transaction and is not intended to, and does not, confer any rights or remedies upon any other person, and is not intended to
be used, and may not be used, by any other person or for any other purpose, without Duff & Phelps’ written consent.
The Opinion (i) does not address the merits of the underlying business decision to enter into the Proposed Transaction versus
any alternative strategy or transaction; (ii) does not address any transaction related to the Proposed Transaction; (iii) is not
a recommendation as to how the Special Committee or any stockholder should vote or act with respect to any matters relating to
the Proposed Transaction, or whether to proceed with the Proposed Transaction or any related transaction, and (iv) does not indicate
that the Merger Consideration is the best possibly attainable under any circumstances; instead, it merely states whether the Merger
Consideration is within a range suggested by certain financial analyses. The decision as to whether to proceed with the Proposed
Transaction or any related transaction may depend on an assessment of factors unrelated to the financial analysis on which the
Opinion is based. The Opinion should not be construed as creating any fiduciary duty on the part of Duff & Phelps to any party.
The Opinion is solely that of Duff & Phelps, and Duff & Phelps’ liability in connection with the Opinion shall be
limited in accordance with the terms set forth in the engagement letter among Duff & Phelps, DPS, the Company, and the Special
Committee dated September 1, 2015 (the “Engagement Letter”). The Opinion is confidential, and its use and disclosure
is strictly limited in accordance with the terms set forth in the Engagement Letter. CONFIDENTIAL24 DUFF & PHELPS
Appendix 02Summary
of Premiums Paid
Summary of Premiums
Paid Premiums Paid Analysis - Going Private Transactions Transactions announced, closed, or effective from January 2012 - December
2015 Premium as a % of One-Day One-Week One-Month One-Day Number of Prior to Prior to Prior to Prior as a % of Deals Announcement
Announcement Announcement 52-Week High Date Date Date Overall Mean 383 36.4 37.3 41.4 71.3 Overall Median 23.8 26.2 28.0 78.8
Chinese Companies Mean 82 35.8 35.9 42.4 65.7 Chinese Companies Median 23.4 25.6 29.2 68.2 US-Listed Chinese Companies Mean 74
36.9 36.9 43.5 65.3 US-Listed Chinese Companies Median 23.4 26.5 29.3 66.1 Country Style Cooking Restaurant Chain Co., Ltd. 18.9
13.0 10.6 59.1 Premiums Paid Analysis - Restaurants Change of Control Transactions Transactions announced, closed, or effective
from January 2012 - December 2015 Premium as a % of One-Day One-Week One-Month One-Day Number of Prior to Prior to Prior to Prior
as a % of Deals Announcement Announcement Announcement 52-Week High Date Date Date Overall Industry Mean 25 21.1 24.6 36.4 52.6
Overall Industry Median 11.7 25.7 29.9 55.6 Asian Companies Mean 11 19.3 17.3 23.3 69.4 Asian Companies Median 11.7 11.9 11.0
80.3 Country Style Cooking Restaurant Chain Co., Ltd. 18.9 13.0 10.6 59.1 Note: Excludes negative premiums. Source: Capital IQ
CONFIDENTIAL26 DUFF & PHELPS
Country Style Cooking Restaurant Chain Co., Ltd American Depositary Shares, Each Representing Four Ordinary Shares (delisted) (NYSE:CCSC)
Historical Stock Chart
From Dec 2024 to Jan 2025
Country Style Cooking Restaurant Chain Co., Ltd American Depositary Shares, Each Representing Four Ordinary Shares (delisted) (NYSE:CCSC)
Historical Stock Chart
From Jan 2024 to Jan 2025
