SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

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If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [  ].

Note: Schedules filed in paper format shall include a signed original and five copies of the Schedule including all exhibits.  See Section 240.13d-7 for other parties to whom copies are to be sent.

*The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

 

SCHEDULE 13D

INTRODUCTORY NOTE.

The following constitutes Amendment No. 1 (the “Amendment”) to the Original Schedule 13D filed by the undersigned with the SEC on September 30, 2011 (the “Original Schedule 13D”) relating to the common stock, par value $0.0001 per share (the “Common Stock”) of China XD Plastics Company Limited, a Nevada corporation (the “Issuer”).  This Amendment amends, and, with respect to certain information set forth herein, supersedes the Original Schedule 13D.  Unless otherwise stated herein, the Original Schedule 13D remains in full force and effect.  Terms used therein and not defined herein have the meanings ascribed thereto in the Original Schedule 13D.

Item 2.

Identity and Background

The response set forth in Item 2 of the Original Schedule 13D is hereby amended and supplemented by the following.

This Amendment is being filed jointly on behalf of (i) Morgan Stanley, a Delaware corporation (“MS Parent”), (ii) MS Holdings Incorporated, a Delaware corporation (“MS Holdings”), (iii) Morgan Stanley Private Equity Asia III, Inc., a Delaware corporation (“MS Inc”), (iv) Morgan Stanley Private Equity Asia III, L.L.C., a Delaware limited liability company (“MS LLC”), (v) North Haven Private Equity Asia III, L.P., formerly known as Morgan Stanley Private Equity Asia III, L.P., a Cayman Islands limited partnership (“NH LP”), (vi) Morgan Stanley Private Equity Asia Employee Investors III, L.P., a Cayman Islands limited partnership (“MS Employee”), (vii) Morgan Stanley Private Equity Asia III Holdings (Cayman) Ltd, a Cayman Islands limited liability company (“MSPEA Holdings”) and (viii) MSPEA Modified Plastics Holding Limited, a Cayman Islands limited liability company (“MSPEA”) (collectively, the “Reporting Persons”). The Reporting Persons have entered into a joint filing agreement, dated as of February 17, 2017, a copy of which is attached hereto as Exhibit 99.7.

The principal business office of MSPEA Holdings and MSPEA is C/O Sertus Incorporations (Cayman) Limited, Sertus Chambers, Governors Square, Suite #5-204, 23 Lime Tree Bay Avenue, Grand Cayman, Cayman Islands, KYI-1104.

The name, business address, present principal occupation or employment and citizenship of each director and executive officer of MS Parent, MS Holdings, MS Inc, MSPEA Holdings and MSPEA, and the name, business address, present principal occupation or employment and citizenship of each executive officer of MS LLC, NH LP and MS Employee are set forth in Schedule A attached hereto and incorporated herein by reference.

During the last five years, none of the Reporting Persons, nor, to the knowledge of the Reporting Persons, any of the persons listed on Schedule A attached hereto and incorporated herein by reference, has been (1) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (2) a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws, other than, in the case of clause (2), as described in Schedule B attached hereto and incorporated herein by reference.

Item 3.

Source and Amount of Funds or Other Consideration.

The response set forth in Item 3 of the Original Schedule 13D is hereby amended and supplemented by adding the following at the end thereof.

The funds for Additional Shares purchased after the date of the Original Schedule 13D which are held in client accounts with respect to which MS Parent or a subsidiary of MS Parent or their employees have investment or voting discretion came from client funds.

The last paragraph of Item 6 of this Amendment is incorporated herein by reference in its entirety.

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Item 4.

Purpose of Transaction.

The response set forth in Item 4 of the Original Schedule 13D is hereby amended and restated in its entirety as follows.

The Reporting Persons originally acquired the Preferred Shares for investment purposes.  MS Reporting Units (as defined in Item 5) acquired the Additional Shares for investment purposes.

On February 16, 2017, MSPEA entered into a consortium agreement (the “Consortium Agreement”) with Jie Han and XD. Engineering Plastics Company Limited, a company wholly owned by Jie Han (together, “Mr. Han,” and  collectively with MPSEA or one or more of the Reporting Persons through which it will be acting, the “Consortium”), pursuant to which the Consortium will cooperate in good faith to acquire all of the outstanding capital stock of the Issuer other than those shares (the “Consortium Shares”) beneficially owned by the members of the Consortium or their affiliates, through a going-private transaction (the “Transaction”).

On February 16, 2017, the Consortium submitted a preliminary, non-binding letter (the “Letter”) to the Issuer’s board of directors (the “Board”).  In the Letter, the Consortium outlined its proposal (“Proposal”) for the Transaction.  Under the Proposal, members of the Consortium propose to acquire, through an acquisition vehicle to be formed by them, all of the outstanding capital stock of the Issuer (other than the Consortium Shares which will be rolled over in connection with the Transaction) for $5.21 per share in cash.  The Proposal also provides that, among other things, the Consortium will (a) conduct customary due diligence on the Issuer and (b) negotiate and execute definitive agreements with respect to the Transaction.  In the Proposal, members of the Consortium also stated that they expect that the Board will appoint a special committee of independent directors to consider the Proposal and make a recommendation to the Board.   Members of the Consortium will not move forward with the transaction unless it is approved by such a special committee, and the Transaction will be subject to a non-waivable condition requiring approval by majority shareholder vote of shareholders other than the Consortium members.

The Reporting Persons anticipate that, at the price per share of Common Stock set forth in the Proposal, approximately $91 million would be expended in acquiring all of the outstanding capital stock of the Issuer that the members of the Consortium or their affiliates do not already own.

References to the Consortium Agreement and the Letter in this Amendment are qualified in their entirety by reference to the Consortium Agreement and the Letter themselves, which are attached hereto as Exhibit 99.8 and Exhibit 99.9, respectively, and are incorporated by reference as if set forth in their entirety.

If the Transaction is carried out and consummated, the Common Stock of the Issuer will no longer be traded on the NASDAQ Global Select Market and the registration of the Common Stock of the Issuer under Section 12 of the Act is expected to be terminated.  No assurance can be given that any proposal, any definitive agreement or any transaction relating to a proposed Transaction will be entered into or be consummated.  The Letter provides that no binding obligation on the part of the Issuer or the Consortium shall arise with respect to the proposed Transaction unless and until definitive agreements have been executed.

The Reporting Persons reserve their right to change their plans and intentions in connection with any of the actions discussed in this Item 4.  Any action taken by the Reporting Persons may be effected at any time or from time to time, subject to any applicable limitations imposed thereon by any applicable laws and the terms of the Consortium Agreement.

As part of the Reporting Persons’ continuing evaluation of, and preservation of the value of their investment in, the Common Stock of the Issuer, subject to the terms of the Consortium Agreement, the Reporting Persons may from time to time (i) engage in discussions with certain persons, including, without limitation, management or representatives of the Issuer, members of the Board, other shareholders of the Issuer and other relevant parties, concerning matters with respect to the Reporting Persons' investment in the Common Stock, including, without limitation, the business, operations, governance, management, strategy and future plans of the Issuer and (ii) write

 

 

 

 

the beneficial owner of any Additional Shares for purposes of Section 13(d) of the Act, or for any other purpose, and such beneficial ownership is expressly disclaimed.

MS Parent is filing this Amendment in its capacity as a parent company of MS Holdings, MS Inc, MS LLC, NH LP, MS Employee, MSPEA Holdings, MSPEA and the MS Reporting Units described above.  The Reporting Persons are filing this Amendment jointly pursuant to Rule 13d-1(k)(i) promulgated under the Act, provided that, as contemplated by Rule 13d-1(k)(ii), no Reporting Person shall be responsible for the completeness or accuracy of the information concerning the other persons making the filing of this Amendment unless such Reporting Person knows or has reason to believe that such information is inaccurate.

To the knowledge of the Reporting Persons, none of the persons listed on Schedule A hereto beneficially owns any shares of Common Stock.

Except as set forth in Item 3 above, none of the Reporting Persons, or to their knowledge, any other person or entity referred to in Item 2 (including those listed on Schedule A hereto) has effected any transactions in the Common Stock during the past 60 days.

Except as set forth in this Item 5, no person other than the Reporting Persons is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the Preferred Shares or the Common Stock issuable upon conversion of the Preferred Shares held by MSPEA.

Except as set forth in this Item 5 and except for clients of MS Parent who may have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the shares of Common Stock, if any, held in their accounts, no person other than MS Parent is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the Additional Shares.

Item 6.

Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer

The response set forth in Item 6 of the Original Schedule 13D is hereby amended and supplemented by adding the following at the end thereof.

The maturity date of the Preferred Shares was extended to February 4, 2019 on January 24, 2014. The Issuer has the right to require MSPEA to convert any outstanding share of the Preferred Shares held by it into shares of Common Stock of the Issuer at any time prior to the maturity date at the then applicable conversion price. 

The responses set forth in Item 4 of this Amendment are incorporated herein by reference in their entirety.

Consortium Agreement.  The Consortium Agreement provides, among other things, for coordination in (i) performing due diligence, (ii) arranging financing, (iii) structuring and negotiating the Transaction and, if applicable, entering into definitive agreements with respect to the Transaction, and (iv) engaging advisors and sharing certain expenses.  During the period beginning on the date of the Consortium Agreement and ending on the earlier of (a) the six-month anniversary of the date of the Consortium Agreement and (b) the termination of the Consortium Agreement on the occurrence of other termination events, members of the Consortium have agreed, among other things, (i) to work exclusively with each other with respect to the Transaction, (ii) not to sell, pledge, encumber or otherwise transfer the Consortium Shares except for certain limited exceptions set forth in the Consortium Agreement, and (iii) not to enter into any voting agreement with respect to the Consortium Shares. Upon a termination of the Consortium Agreement, the Consortium will negotiate in good faith to extend its term.

It is anticipated that the funding for the Transaction will be provided by a combination of debt and equity capital.  Equity financing will be provided by the members of the Consortium in the form of cash and/or through the rollover of existing equity interests in the Issuer held by certain members of the Consortium.  Debt financing will be primarily provided by third party financial institutions.  

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Item 7.

Material to be Filed as Exhibits.

The response set forth in Item 7 of the Original Schedule 13D is hereby amended and supplemented by adding the following at the end thereof.

Exhibit 99.7

Joint Filing Agreement by and between MS Parent, MS Holdings, MS Inc, MS LLC, NH LP, MS Employee, MSPEA Holdings and MSPEA, dated February 17, 2017 (filed herewith)

Exhibit 99.8

Consortium Agreement, dated February 16, 2017, by and among Mr. Han, XD. Engineering Plastics Company Limited and MSPEA (filed herewith)

Exhibit 99.9

Letter to the Board of Directors of China XD Plastic Company Limited, dated February 16, 2017 (filed herewith)

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SCHEDULE A

The names of the directors and the names and titles of the executive officers of Morgan Stanley (“MS”) and their principal occupations are set forth below. The business address of each of the directors or executive officers is that of MS at 1585 Broadway, New York, New York 10036. Unless otherwise indicated, each occupation set forth opposite an individual’s name refers to MS and each individual is a United States citizen.

 

 

¹  Dual citizenship – Australia and United States

²  Citizenship – England

³  Citizenship – Japan

⁴  Citizenship – Germany

⁵  Citizenship – Japan

⁶  Citizenship – Japan

⁷  Dual citizenship – England and Ireland

*  Director

 

SCHEDULE A

The names of the directors and the names and titles of the executive officers of MS Holdings Incorporated and their principal occupations are set forth below.  The business address of each of the directors or executive officers is that of MS Holdings Incorporated at 1585 Broadway, New York, New York 10036.  Unless otherwise indicated, each individual is a United States citizen and each occupation set forth opposite an individual’s name refers to MS Holdings Incorporated.

 

SCHEDULE A

The names of the directors and the names and titles of the executive officers of Morgan Stanley Private Equity Asia III, Inc. and their principal occupations are set forth below.  The business address of each of the directors or executive officers is as provided below.  Unless otherwise indicated, each individual is a United States citizen and each occupation set forth opposite an individual’s name refers to Morgan Stanley Private Equity Asia III, Inc.

 

 

 

 

SCHEDULE A

The sole member of Morgan Stanley Private Equity Asia III, L.L.C. is Morgan Stanley Private Equity Asia III, Inc.  Morgan Stanley Private Equity Asia III, L.L.C. does not have officers or directors.

 

SCHEDULE A

The general partner of North Haven Private Equity Asia III, L.P. is Morgan Stanley Private Equity Asia III, LLC.  North Haven Private Equity Asia III, L.P. does not have officers or directors.

SCHEDULE A

The general partner of Morgan Stanley Private Equity Asia Employee Investors III, L.P. is Morgan Stanley Private Equity Asia III, LLC.  Morgan Stanley Private Equity Asia Employee Investors III, L.P. does not have officers or directors.

 

SCHEDULE A

The name of the director and the names and titles of the executive officer of Morgan Stanley Private Equity Asia III Holdings (Cayman) Ltd and their principal occupations are set forth below.  The business address of each of the director or executive officer is also set forth below.  Unless otherwise indicated, each individual is a United States citizen and each occupation set forth opposite an individual’s name refers to Morgan Stanley Private Equity Asia III Holdings (Cayman) Ltd.

* Citizenship - Canadian

 

SCHEDULE A

The name of the director and the names and titles of the executive officer of MSPEA Modified Plastics Holding Limited and their principal occupations are set forth below.  The business address of each of the director or executive officer is also set below.  Unless otherwise indicated, each individual is a United States citizen and each occupation set forth opposite an individual’s name refers to MSPEA Modified Plastics Holding Limited.

* Citizenship - Canadian

SCHEDULE B

LEGAL PROCEEDINGS

Unless the context otherwise requires, the term “Morgan Stanley” means Morgan Stanley and its consolidated subsidiaries. Morgan Stanley & Co. LLC (“MS&Co.”) and Morgan Stanley Smith Barney LLC (“MSSB LLC”), referenced below, are Morgan Stanley’s primary U.S. broker-dealers.

(a) In October 2014, the Illinois Attorney General’s Office (“ILAG”) sent a letter to Morgan Stanley alleging that Morgan Stanley knowingly made misrepresentations related to Residential Mortgage Backed Securities purchased by certain pension funds affiliated with the State of Illinois and demanding that Morgan Stanley pay ILAG approximately $88 million.  On February 10, 2016, Morgan Stanley and ILAG reached an agreement to resolve the matter.

(b) On January 13, 2015, the New York Attorney General’s Office (“NYAG”) indicated that it intended to file a lawsuit related to approximately 30 subprime securitizations sponsored by Morgan Stanley.  NYAG indicated that the lawsuit would allege that Morgan Stanley misrepresented or omitted material information related to the due diligence, underwriting and valuation of the loans in the securitizations and the properties securing them and indicated that its lawsuit would be brought under the Martin Act.  On February 10, 2016, Morgan Stanley and NYAG reached an agreement to resolve the matter.

(c) On February 10, 2016, Morgan Stanley reached an agreement with the United States Department of Justice, Civil Division and the United States Attorney’s Office for the Northern District of California, Civil Division (collectively, the “Civil Division”) to pay $2.6 billion to resolve certain claims that the Civil Division indicated it intended to bring against Morgan Stanley.

 (d) On July 23, 2014, the U.S. Securities and Exchange Commission (“SEC”) approved Morgan Stanley’s Offer of Settlement to resolve an investigation of certain subprime RMBS transactions sponsored and underwritten by Morgan Stanley in 2007.  Pursuant to the settlement, Morgan Stanley neither admitted nor denied the SEC’s findings but was charged with violating Sections 17(a)(2) and 17(a)(3) of the Securities Act, and agreed to pay disgorgement and penalties in an amount of $275 million. 

In addition, MS&Co. has been involved in a number of civil proceedings and regulatory actions which concern matters arising in connection with the conduct of its business. Certain of such proceedings have resulted in findings of violation of federal or state securities laws. Such proceedings are reported and summarized in the MS&Co. Form BD filed with the SEC, which descriptions are hereby incorporated by reference. The MSSB LLC Form BD filed with the SEC is also hereby incorporated by reference.

SIGNATURES

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Amendment is true, complete and correct.

Dated February 17, 2017

MORGAN STANLEY
By:	/s/ Christina Huffman
	Name:	Christina Huffman
	Title:	Authorized Signatory
MS HOLDINGS INCORPORATED
By:	/s/ Christina Huffman
	Name:	Christina Huffman
	Title:	Vice President
MORGAN STANLEY PRIVATE EQUITY ASIA III, INC.
By:	/s/ Christopher L. O’Dell
	Name:	Christopher L. O’Dell
	Title:	Vice President
MORGAN STANLEY PRIVATE EQUITY ASIA III, L.L.C.
By:	Morgan Stanley Private Equity Asia III, Inc., its managing member
By:	/s/ Christopher L. O’Dell
	Name:	Christopher L. O’Dell
	Title:	Vice President

MORGAN STANLEY PRIVATE EQUITY ASIA EMPLOYEE INVESTORS III, L.P.
By:	Morgan Stanley Private Equity Asia III, L.L.C., its general partner
By:	Morgan Stanley Private Equity Asia III, Inc., its managing member
By:	/s/ Christopher L. O’Dell
	Name:	Christopher L. O’Dell
	Title:	Vice President
MORGAN STANLEY PRIVATE EQUITY ASIA III HOLDINGS (CAYMAN) LTD
By:	/s/ Ivan John Sutlic
	Name:	Ivan John Sutlic
	Title:	Sole Director
MSPEA MODIFIED PLASTICS HOLDING LIMITED
By:	/s/ Ivan John Sutlic
	Name:	Ivan John Sutlic
	Title:	Director

 

 

 

 

 

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EXHIBIT 99.7

In accordance with Rule 13d−1(k)(l) under the Securities Exchange Act of 1934, as amended, each of the undersigned hereby agrees to the joint filing, along with all other such undersigned, on behalf of the Reporting Persons (as defined in the joint filing), of a statement on Schedule 13D (including amendments thereto) with respect to the common stock, par value $0.0001, of the Issuer (as defined in the attached amendment to Schedule 13D), and agrees that this agreement be included as an Exhibit to such joint filing.  This agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument.

[Signature Page Follows]

IN WITNESS WHEREOF, each of the undersigned has executed this Joint Filing Agreement as of February 17, 2017.

EXHIBIT 99.8

CONSORTIUM AGREEMENT

THIS CONSORTIUM AGREEMENT (this "Agreement") is dated as of February 16, 2017 and is entered into by and among Jie Han ("Founder"), XD. Engineering Plastics Company Limited, a company incorporated in the British Virgin Islands and wholly owned by Founder ("XD Engineering") and MSPEA Modified Plastics Holding Limited, an affiliate of Morgan Stanley Private Equity Asia III, Inc. ("MSPEA").  Each of Founder, XD Engineering and MSPEA is referred to herein as a "Party", and collectively, the "Parties".

RECITALS

WHEREAS, the Parties are interested in jointly pursuing a possible acquisition (the "Transaction") of all of the outstanding shares of common stock ("Common Stock") of China XD Plastics Company Limited (the "Company") through a special purpose vehicle ("Parent") to be formed by the Parties directly or indirectly in the Cayman Islands or another offshore jurisdiction;

WHEREAS, (a) in connection with the Transaction, the Parties will cause Parent to form a direct, wholly-owned subsidiary ("Merger Sub") under the laws of the State of Nevada, and (b) at the closing of the Transaction, the Parties intend that Merger Sub will be merged with and into the Company, with the Company being the surviving company and becoming a direct, wholly-owned subsidiary of Parent which will be beneficially owned by the Parties;

WHEREAS, on the date hereof, the Parties will submit a non-binding proposal, a copy of which is attached hereto as Schedule A (the "Proposal Letter"), to the board of directors of the Company (the "Company Board") in connection with the Transaction; and

WHEREAS, in accordance with the terms of this Agreement, the Parties will cooperate and participate in: (a) the evaluation of the Company, including conducting due diligence of the Company and its business; (b) discussions regarding the Proposal Letter with the Company; and (c) the negotiation of the terms of definitive documentation in connection with the Transaction (in which negotiations the Parties expect that the Company will be represented by a special committee of independent and disinterested directors of the Company Board), including an agreement and plan of merger among Parent, Merger Sub and the Company in form and substance to be agreed by the Parties (the "Merger Agreement"), which shall be subject to the approval of the shareholders of the Company and any financing documents in connection with the Transaction.

NOW, THEREFORE, the Parties agree as follows:

"Competing Transaction" shall mean (i) any direct or indirect acquisition by any person or entity of any securities representing a controlling equity interest in the Company or all or substantially all of its assets or (ii) a recapitalization, restructuring, merger, consolidation or other business combination involving a change in control of the Company or any of its material subsidiaries, in either case other than the Transaction involving all of the Parties.

"Exclusivity Period" shall mean the period beginning on the date hereof and ending on the date of termination of this Agreement pursuant to Section 14.

"Representatives" shall mean, with respect to a person, such person's affiliates and its and their employees, directors, officers, partners, members, agents, advisors (including, but not limited to, legal counsel, accountants, consultants and financial advisors), and any representative of the foregoing.  The Representatives shall include the Legal Advisors as defined in Section 3(c).

"Shares" shall mean all capital stock in the Company.

 

 

 

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.

 

 

 

EXHIBIT 99.9

 

Mr. Jie Han

XD. Engineering Plastics Company Limited

MSPEA Modified Plastics Holding Limited

February 16, 2017

The Board of Directors

China XD Plastics Company Limited

No. 9 Dalian North Road, Haping Road Centralized Industrial Park

Harbin Development Zone

Heilongjiang Province, P. R. China

Dear Sirs:

Mr. Jie Han (“Mr. Han”), Chief Executive Officer and Chairman of China XD Plastics Company Limited (the “Company”), XD. Engineering Plastics Company Limited (“XD Engineering”), a company incorporated in the British Virgin Islands and wholly owned by Mr. Han and MSPEA Modified Plastics Holding Limited, an affiliate of Morgan Stanley Private Equity Asia III, Inc. (“MSPEA”, together with Mr. Han and XD Engineering, the “Buyer Group”, “we” or “us”), are pleased to submit this preliminary non-binding proposal to acquire all of the outstanding shares of common stock (“Common Stock”) of the Company not already owned by the Buyer Group in a going-private transaction (the “Acquisition”).  The Buyer Group currently beneficially owns approximately 74% of the issued and outstanding shares of Common Stock of the Company on a fully diluted and as-converted basis.

We believe that our proposal of US$5.21 in cash per share of Common Stock will provide a very attractive opportunity to the Company’s stockholders. This price represents a premium of approximately 28.6% to the Company’s closing price on February 15, 2017, and a premium of approximately 29.3% to the average closing price during the last 30 trading days.

The terms and conditions upon which we are prepared to pursue the Acquisition are set forth below.  We are confident in our ability to consummate an Acquisition as outlined in this letter.

1.  Buyer.  We intend to form an acquisition vehicle for the purpose of pursuing the Acquisition (the “Acquisition Vehicle”). The Acquisition will be in the form of a merger of the Company with the acquisition vehicle. We are interested only in pursuing this Acquisition and are not interested in selling our shares of Common Stock or preferred stock of the Company, as the case may be, in any other transaction involving the Company.

2.  Purchase Price.  Our proposed consideration payable for the Company’s Common Stock acquired in the Acquisition will be US$5.21 in cash per share.

3.  Financing.  We intend to finance the Acquisition with a combination of debt and equity capital.  Equity financing is expected to be provided by the Buyer Group in the form of rollover equity in the Company and cash contributions from third party sponsors.  Debt financing is expected to be provided by loans from third party financial institutions.  We are confident that we can timely secure adequate financing to consummate the Acquisition.

4.  Due Diligence.  Parties providing financing will require a timely opportunity to conduct customary due diligence on the Company.  We would like to ask the board of directors of the

 

 

Company to accommodate such due diligence request and approve the provision of confidential information relating to the Company and its business to possible sources of equity and debt financing subject to confidentiality agreements with customary terms.

5.  Definitive Agreements.  Mr. Han has engaged Skadden, Arps, Slate, Meagher & Flom LLP as his U.S. legal counsel.  MSPEA has engaged Paul, Weiss, Rifkind, Wharton & Garrison LLP as its U.S. legal counsel.  We are prepared to negotiate and finalize definitive agreements (the "Definitive Agreements") expeditiously.  This proposal is subject to execution of the Definitive Agreements.  These documents will include provisions typical for transactions of this type.

6.  Confidentiality.   The Buyer Group will, as required by law, promptly file a Schedule 13D amendment to disclose this letter.  We are sure you will agree with us that it is in all of our interests to ensure that we proceed our discussions relating to the Acquisition in a confidential manner, unless otherwise required by law, until we have executed the Definitive Agreements or terminated our discussions.

7.  Process.  We believe that the Acquisition will provide superior value to the Company’s stockholders.  We recognize of course that the Board will evaluate the proposed Acquisition independently before it can make its determination whether to endorse it.  It is our expectation that the Board will appoint a special committee of independent directors to consider our proposal and make a recommendation to the Board.   We will not move forward with the transaction unless it is approved by such a special committee.  In addition, the transaction will be subject to a non-waivable condition requiring approval by majority shareholder vote of shareholders other than the Buyer Group.

8.  No Binding Commitment.  This letter constitutes only a preliminary indication of our interest, and does not constitute any binding commitment with respect to an Acquisition.  Such a commitment will result only from the execution of Definitive Agreements, and then will be on the terms provided in such documentation.

In closing, we would like to express our commitment to working together with you to bring this Acquisition to a successful and timely conclusion.  Should you have any questions regarding this proposal, please do not hesitate to contact us.  We look forward to speaking with you.

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[Signature Page to Follow]

 

 

 

 

 

 

 

	Sincerely,
	Jie HAN
	/s/ JIE HAN

 

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