As filed with the Securities and Exchange Commission on November 13, 2007
Registration No.
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ON
FORM S-4
ASCEND ACQUISITION CORP.
(Exact Name of Each Registrant as Specified in its Charter)
Delaware
6770
20-3881465
(State or other jurisdiction of
incorporation or organization)
(Primary standard industrial
classification code number)
(I.R.S. Employer
Identification Number)
435 Devon Park Drive, Bldg. 400,
Wayne, Pennsylvania 19087
(610) 519-1336
(Address,
including zip code, and telephone number, including area code, of each registrant’s principal executive offices)
Don K. Rice
Chairman
435
Devon Park Drive, Bldg. 400,
Wayne, Pennsylvania 19087
(610) 519-1336
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
David Alan Miller, Esq.
Graubard Miller
The Chrysler
Building
405 Lexington Avenue
New York, New York 10174
Telephone: (212) 818-8800
Fax: (212) 818-8881
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement
becomes effective and all other conditions to the merger contemplated by the merger agreement described in the included proxy statement/prospectus have been satisfied or waived.
If any of the securities being registered on this form are to be offered in connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box:
¨
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering.
¨
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering.
¨
CALCULATION OF
REGISTRATION FEE
Title of each Class of Security being registered
Amount being
Registered(1)(4)
Proposed Maximum
Offering Price Per
Security(2)
Proposed Maximum
Aggregate Offering
Price(2)
Amount of
Registration
Fee
Common stock
8,566,667 shares
$5.64
$48,316,002
$1,483
Common stock purchase warrants (“warrants”)(3)
14,133,334 warrants
$0.56
$7,914,667
$243
Common stock underlying the warrants(3)
14,133,334 shares
$5.00
$70,666,670
$2,169
Representative’s unit purchase option (“UPO”)
1
$100
$100.00
—(2)
Common stock issuable on exercise of the UPO(3)
300,000 shares
$7.50
$2,250,000
$69
Warrants issuable on exercise of the UPO(3)
600,000 warrants
—
—
—(2)
Common stock underlying the warrants included in the UPO(3)
600,000 shares
$5.00
$3,000,000
$92
Total
$132,147,439
$4,056
(1)
In connection with the redomestication merger described in the proxy statement/prospectus forming part of this registration statement, Ascend Acquisition Corp. (“Ascend”)
and Ascend’s wholly owned subsidiary, Ascend Company Limited (“ACL”), will merge for purposes of redomesticating Ascend’s jurisdiction of formation from Delaware to Bermuda. Under Bermuda law, Ascend and ACL will amalgamate, with
a single company resulting from the amalgamation (“Continuing Pubco”). The name of Continuing Pubco following the amalgamation will be “ePAK International Limited.” These securities represent the securities to be issued by
Continuing Pubco in exchange for the outstanding securities of Ascend Acquisition Corp. (“Ascend”).
(2)
Based on the market prices on November 6, 2007 of the common stock and warrants of Ascend Acquisition Corp. (the company to which ePAK International Limited will succeed after
the merger and resultant redomestication to Bermuda described in this registration statement and enclosed proxy statement) or the exercise price of such warrants for the purpose of calculating the registration fee pursuant to Rule 457(f)(1) and Rule
457(g)(1).
(3)
No fee pursuant to Rule 457(g).
(4)
There are also being registered such indeterminable additional securities as may be issued pursuant to Rule 416 to prevent dilution resulting from stock splits, stock dividends or
similar transactions under the provisions contained in the warrants.
The registrant hereby amends this registration statement
on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
Ascend Acquisition Corp.
435 Devon Park Drive, Building 400
Wayne, Pennsylvania 19087
(610) 519-1336
NOTICE OF SPECIAL
MEETING OF STOCKHOLDERS
TO BE HELD ON
, 2008
TO ALL STOCKHOLDERS OF ASCEND ACQUISITION CORP.:
NOTICE IS HEREBY GIVEN that a special meeting of the stockholders of Ascend Acquisition Corp., a
Delaware corporation (“Ascend”), will be held at 10:00 a.m., Eastern time, on , 2008, at the offices of our
general counsel, Graubard Miller, located at The Chrysler Building, 405 Lexington Avenue, 19
th
Floor, New York, New York 10174.
The purpose of the special meeting will be to consider and vote upon proposals relating to Ascend’s reincorporation and redomestication to Bermuda
via a merger with a wholly owned subsidiary, Ascend Company Limited, a Bermuda exempted company (“ACL”), with the continuing company after the merger (“Continuing Pubco” or “ePAK International”) acquiring, concurrently
with the merger, all of the outstanding capital stock of e.PAK Resources (S) Pte. Ltd., a Singapore limited company (“ePAK”). ePAK is a leading full-service designer, manufacturer and supplier of precision engineered products and
solutions for the automated transport and handling of semiconductor and electronics devices.
Holders of Ascend’s outstanding common
stock and warrants will receive in exchange therefor, on a one-for-one basis, shares of common stock and warrants of Continuing Pubco. Continuing Pubco will be a reporting company under the Securities Exchange Act of 1934, as amended. Continuing
Pubco will apply to have its common stock and warrants listed on the Nasdaq Global Market or Nasdaq Capital Market concurrently with the closing of the merger and acquisition of ePAK.
At the meeting, you will be asked to consider and vote upon the following proposals:
1. To approve an agreement and plan of reorganization, dated as of July 30, 2007 (the “acquisition agreement”), among
Ascend, ACL, ePAK, and ePAK’s parent company and sole stockholder, ePAK Holdings Limited (“EHL”), and the transactions contemplated thereby, including the acquisition (the “acquisition”) of ePAK by Continuing Pubco. We refer
to this as the “acquisition proposal.”
2. To approve the merger (the “redomestication merger”) of
Ascend and ACL for the purposes of (a) moving the domicile of our public company from Delaware to Bermuda and (b) concurrently with the redomestication merger acquiring ePAK in the acquisition. We refer to this as the “redomestication
proposal.”
3. To approve the 2007 Equity Incentive Plan (“2007 incentive plan”) on behalf of Continuing
Pubco. We refer to this as the “2007 incentive plan proposal.”
Stockholders also would be asked to consider and vote upon a
proposal to adjourn the special meeting to a later date or dates to permit further solicitation and voting of proxies if, based upon the tabulated vote at the time of the special meeting, the vote necessary to approve the above proposals has not
been obtained. We refer to this as the “adjournment proposal.”
The board of directors has fixed the close of business on
, 200 (“record date”) as the date for which Ascend’s stockholders are entitled to receive
notice of, and to vote at, the special meeting. Only the
1
holders of record of Ascend common stock on that date are entitled to have their votes counted at the special meeting. Ascend will not transact any other
business at the special meeting, except for business properly brought before the special meeting.
We will not consummate the transactions
described in proposals 1, 2 and 3, above, unless all of those proposals are approved. Accordingly, the approval of each such proposal is a condition to the adoption of each other proposal. Approval of the acquisition proposal will require the
affirmative vote of the holders of a majority of the shares of Ascend common stock issued in its initial public offering (“Public Shares”), including holders who purchase Public Shares subsequent to the initial public offering
(“IPO”), and voted on the matter. Approval of the redomestication proposal will require the affirmative vote of the holders of a majority of the outstanding shares of Ascend common stock. Approval of the 2007 incentive plan proposal will
require the affirmative vote of holders of a majority of the shares of Ascend’s common stock present in person or by proxy at meeting.
Each holder of Public Shares has the right to vote against the acquisition proposal and at the same time demand that Ascend convert such stockholder’s Public Shares into cash equal to a pro rata portion of the funds held in the trust
account into which a substantial portion of the net proceeds of Ascend’s IPO was deposited. These Public Shares will be converted into cash only if the acquisition is consummated. However, if the holders of 20% or more of the Public Shares
(
i.e.,
1,380,000 shares or more) vote against the acquisition proposal and demand conversion of their Public Shares, then Ascend will not consummate the redomestication merger or the acquisition or adopt the 2007 incentive plan. Ascend’s
initial stockholders who purchased their shares of common stock prior to its IPO and presently own an aggregate of 1,666,667 shares of common stock, or approximately 19.5% of the outstanding shares of Ascend, have agreed to vote all of their shares
on the acquisition proposal as the majority of the Public Shares are voted, and have indicated that they intend to vote “for” the redomestication proposal and 2007 incentive plan proposal.
Enclosed is a proxy statement/prospectus containing detailed information concerning the acquisition agreement and the transactions contemplated thereby,
the redomestication merger and the 2007 incentive plan. Whether or not you plan to attend the special meeting, we urge you to read this material carefully.
Your vote is important. Whether or not you plan on attending the special meeting, please sign, date and return your proxy card as soon as possible to make sure that your shares are represented at the special
meeting.
If you are a stockholder of record of Ascend common stock as of the record date, you may also cast your vote in person at the special meeting. If your shares are held in an account at a brokerage firm or bank, you must instruct your
broker or bank on how to vote your shares. If you do not vote or do not instruct your broker or bank how to vote, it will have the same effect as voting against the acquisition and redomestication merger proposals. Only an affirmative vote against
the acquisition proposal will permit a stockholder to pursue its conversion rights. A non-vote is not sufficient to permit conversion rights to be exercised.
The board of directors of Ascend unanimously recommends that you vote
“
FOR
”
the approval of each of the acquisition proposal, the redomestication proposal and the 2007 incentive plan
proposal. A proxy card that is returned without an indication of how to vote on a particular matter will be voted “FOR” each such proposal.
Very truly yours,
Don K. Rice
Chairman of the Board
2
SEE THE SECTION ENTITLED “RISK FACTORS,” IMMEDIATELY FOLLOWING THE SECTION ENTITLED
“SUMMARY,” FOR A DISCUSSION OF VARIOUS FACTORS THAT YOU SHOULD CONSIDER IN CONNECTION WITH THE PROPOSALS AND THE TRANSACTIONS CONTEMPLATED THEREBY.
The information in this proxy statement/prospectus is not complete and may be changed. We may not issue these
securities until the registration statement filed with the Securities and Exchange Commissions is effective. This proxy statement/prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED NOVEMBER 13, 2007
PROXY STATEMENT FOR SPECIAL MEETING OF STOCKHOLDERS OF
ASCEND ACQUISITION CORP.
PROSPECTUS FOR UP TO 23,600,001 SHARES OF COMMON STOCK AND
14,733,334 WARRANTS OF ePAK INTERNATIONAL LIMITED
AND ONE PURCHASE OPTION
EXERCISABLE FOR 300,000 SHARES OF COMMON STOCK AND 600,000 WARRANTS OF ePAK INTERNATIONAL LIMITED
The board of directors of each of Ascend Acquisition Corp., a Delaware corporation (“Ascend”), and Ascend’s wholly owned subsidiary, Ascend
Company Limited, a Bermuda exempted company (“ACL”), has unanimously approved the merger of Ascend and ACL (“redomestication merger”), with the company continuing after the redomestication merger being a Bermuda exempted company
(“Continuing Pubco” or “ePAK International”). In the redomestication merger, Continuing Pubco will issue its common stock and warrants in exchange for the outstanding common stock and warrants of Ascend on a one-for-one basis.
This prospectus covers an aggregate of 23,600,001 shares of common stock, 14,733,334 warrants and one purchase option to be issued or issuable by Continuing Pubco as part of the exchange. The aforementioned shares to be issued include 8,566,667
shares issuable in exchange for all of the outstanding shares of common stock of Ascend, 14,133,334 shares that may be issued on exercise of warrants to be issued hereby, 300,000 shares that may be issued on exercise of the purchase option to be
issued hereby and 600,000 shares that may be issued on exercise of warrants that may be issued on exercise of the purchase option to be issued hereby. The warrants to be issued hereby include 14,133,334 warrants to be issued in exchange for a like
number of outstanding warrants of Ascend and 600,000 warrants that may be issued on exercise of the purchase option to be issued hereby. The purchase option will be issued in exchange for the outstanding underwriter’s unit purchase option that
was issued in connection with the May 2006 initial public offering by Ascend. The warrants and purchase option issued by Continuing Pubco hereby will have substantially identical terms to those of Ascend for which they are exchanged.
The board of directors of each of Ascend and ACL also has approved the acquisition (the “acquisition”) by Continuing Pubco, concurrently with
the consummation of the redomestication merger, of all of the outstanding capital stock of e.PAK Resources (S) Pte. Ltd., a Singapore limited company (“ePAK” or the “Company”), pursuant to an agreement and plan of
reorganization, dated July 30, 2007 (“acquisition agreement”), by and among Ascend, ACL, ePAK and ePAK’s sole shareholder, ePAK Holdings Limited, a Hong Kong limited company (“EHL”). The acquisition will result in ePAK
being a wholly owned subsidiary of Continuing Pubco.
Ascend’s units, common stock and warrants are currently listed on the
Over-the-Counter Bulletin Board under the symbols ASAQU, ASAQ and ASAQW, respectively. Ascend’s units will be separated into their component securities immediately prior to the redomestication merger and the units will cease to exist as a
separate security. Continuing Pubco will apply for listing, to be effective at the time of the redomestication merger and acquisition, of its common stock and warrants on the Nasdaq Global Market or Nasdaq Capital Market under the proposed symbols
and , respectively. Such listing is a condition of the consummation of the redomestication merger and
acquisition, although there can be no assurance such listing will be obtained. If such listing is not obtained, these transactions will not be consummated unless the Nasdaq listing condition set forth in the acquisition agreement is waived by EHL.
The board of directors of Ascend also is requesting that stockholders vote in favor of adopting Continuing Pubco’s 2007 Equity
Incentive Plan (the “2007 incentive plan”). Upon consummation of the redomestication merger and acquisition, the 2007 incentive plan will be utilized by Continuing Pubco with respect to the officers, directors and employees of and
consultants to Continuing Pubco and ePAK. The approval of the 2007 incentive plan requires the affirmative vote of a majority of the votes cast on the proposal at the Annual Meeting.
shares of Continuing Pubco’s common stock will be available pursuant to awards that may be granted under the 2007 incentive plan.
This proxy statement/prospectus provides you with detailed information about the redomestication merger and acquisition and other matters to be considered
at the special meeting of Ascend’s stockholders. We encourage you to carefully read this entire document and the documents incorporated by reference. You should also carefully consider the risk factors described in “
Risk
Factors
.”
These securities have not been approved or disapproved by the Securities and Exchange Commission or any state
securities commission nor has the Securities and Exchange Commission or any state securities commission passed upon the accuracy or adequacy of this proxy statement/prospectus. Any representation to the contrary is a criminal offense.
This proxy statement/prospectus is dated
, 200 , and is first being mailed to Ascend stockholders on or about
, 200 .
Restated Certificate of Incorporation and By-laws of Continuing Pubco*
Annex E
-
2007 Equity Incentive Plan*
Annex F
-
Form of Tax Opinion to be issued by Graubard Miller*
Annex G
-
Escrow Agreement
Annex H
-
Registration Rights Agreement
Annex I
-
Form of Employment Agreement between the Continuing Pubco and each of Steve Dezso, Mao Shi Khoo, Don K. Rice, Chok Chun Weng, James Thomas and Jeffrey Blaine
Annex J
-
Employment Agreement between the Continuing Pubco and Richard Brook
Annex P
-
Section 262 of the Delaware General Corporate Law (Appraisal Rights)*
Note: Under the law of Bermuda, Continuing Pubco (ePAK International Limited) will be authorized to
issue “ordinary shares” and holders of such ordinary shares are typically referred to as “members.” Ordinary shares are the equivalent of the common stock issued by U.S. companies and members are the equivalent of stockholders of
U.S. companies. Under the law of Bermuda, an “amalgamation” is substantially similar to a “merger” under laws of the states of the U.S. A company is formed under the law of Bermuda utilizing a certificate of incorporation, which
is the functional equivalent of a U.S. company’s certificate of incorporation. In this proxy statement/prospectus, the terms “ordinary shares,” “members,” “amalgamation” and “certificate of incorporation”
have been referenced herein as “common stock,” “stockholders,” “merger” and “certificate of incorporation,” respectively, which are terms more familiar to U.S. persons, which Ascend believes are the majority
of its stockholders.
This proxy statement/prospectus incorporates important business and financial information about Ascend and
ePAK and its subsidiaries that is not included in or delivered with the document. This information is available without charge to security holders upon written or oral request. To make this request, or if you would like additional copies of this
proxy statement/prospectus or have questions about the acquisition, you should contact:
Mr. Don K. Rice
Ascend Acquisition Corp.
435 Devon
Park Drive
Building 400
Wayne, Pennsylvania 19087
(610) 519 1336
To obtain timely delivery of requested materials, security holders must request the information no later than five business days before the date they
submit their proxies or attend the special meeting. The latest date to request the information to be received timely is ,
200 .
3
SUMMARY
This summary highlights selected information from this proxy statement/prospectus and does not contain
all of the information that is important to you. To better understand the acquisition and the redomestication merger, you should read this entire document carefully, including the acquisition agreement attached as
Annex A
. The acquisition
agreement is the legal document that governs the acquisition and the acquisition agreement, the articles of merger and Continuing Pubco’s restated certificate of incorporation and by-laws are the legal documents governing the redomestication
merger and the corporation surviving the redomestication merger. These documents are described elsewhere in this proxy statement/prospectus and attached as annexes hereto.
The Parties
•
The parties to the acquisition agreement are Ascend Acquisition Corp. (“Ascend”), Ascend’s wholly owned subsidiary, Ascend Company Limited
(“ACL”), e.PAK Resources (S) Pte. Ltd. (“ePAK” or “the Company”), and ePAK’s sole shareholder, ePAK Holdings Limited (“EHL”). Its principal offices are located at 121 Genting Lane, #04-00, Singapore
349572 and its phone number is 011-(65)-6846-9908.
•
Ascend is a blank check company formed to serve as a vehicle for the acquisition of an operating business. Ascend was incorporated in Delaware on December 5,
2005 and consummated its initial public offering (“IPO) on May 17, 2006. Its principal offices are located at 435 Devon Park Drive, Building 400, Wayne, Pennsylvania 19087 and its phone number is (610) 519-1336. See the section
entitled “
Other Information Related to Ascend.
”
•
ePAK is a leading full-service designer, manufacturer and supplier of precision engineered products and solutions for the automated transport and handling of
semiconductor and electronics devices. The Company and its subsidiaries operate a large scale design and manufacturing facility in Shenzhen, Peoples Republic of China (the “PRC”), with additional sales, design and applications engineering
operations located in a number of offices servicing North America, Europe and Asia. ePAK’s precision manufactured handling solutions provide the Company’s customers with the automated means of manufacturing, handling, and transporting
their critical semiconductor and electronic devices with a high degree of reliability and efficiency. See the section entitled “
Business of ePAK.
”
Transactions
•
Under the terms of the acquisition agreement, among other things:
•
Ascend and ACL will be combined in the redomestication merger, with the continuing entity, Continuing Pubco, existing as an exempted company under the law of
Bermuda;
•
each outstanding share of Ascend’s common stock will be exchanged for one share of Continuing Pubco’s common stock;
•
each outstanding warrant to purchase a share of Ascend’s common stock will be exchanged for a warrant to purchase one share of Continuing Pubco’s common
stock, with each new warrant having substantially the same terms as the Ascend warrant for which it is exchanged;
•
concurrently with the redomestication merger, Continuing Pubco will acquire all of ePAK’s outstanding capital stock from EHL in the acquisition;
•
all of the outstanding options to purchase common stock of EHL will be assumed by Continuing Pubco and such options (“Assumed Options”) shall entitle the
holders thereof to purchase common stock of Continuing Pubco;
•
all of the current security holders of Ascend, together with EHL and holders of the EHL Options, will become the initial security holders of Continuing Pubco;
4
•
Continuing Pubco will be a publicly reporting company, registered under the United States federal securities laws;
•
Continuing Pubco’s common stock and the warrants will be traded on the Nasdaq Capital Market or Nasdaq Global Market;
•
ePAK will continue its operations as a wholly owned subsidiary of Continuing Pubco;
•
Continuing Pubco will change its name to “ePAK International Limited;” and
•
EHL will liquidate within 12 months after the acquisition and distribute the common stock of Continuing Pubco in pursuance of a plan of reorganization with respect
to EHL.
•
The board of directors of each of Ascend and ACL, and the board of directors of each of ePAK and EHL, have approved the acquisition agreement and the transactions
contemplated thereby in accordance with the applicable company laws of their respective jurisdictions of formation.
Acquisition
Consideration
•
In consideration of the acquisition, EHL will receive, at closing, the aggregate number of shares of Continuing Pubco’s common stock (the “Transaction
Shares”) determined by a formula set forth in the acquisition agreement that effectively allocates to EHL a post-issuance ownership of the outstanding common stock of Continuing Pubco based on a comparison of (1) 5.72 times ePAK’s
twelve month trailing EBITDA at June 30, 2007, as adjusted for various expenses and liabilities of ePAK (“Subject Adjusted EBITDA,”), plus the aggregate exercise price of the Assumed Options and (2) the value of Ascend’s
trust at closing as adjusted for various liabilities of Ascend (“Adjusted Ascend Trust Value”), less the number of ordinary shares issuable upon the exercise of the Assumed Options. Notwithstanding the foregoing, the number of shares
issued to EHL, excluding those underlying the Assumed Options, will not be less than 50.1% of the outstanding shares of Continuing Pubco immediately following the acquisition. The acquisition agreement provides for a grace range on Subject Adjusted
EBITDA, such that if it is within 5% of $6,675,000, it will be deemed to be $6,675,000 for purposes of calculating the number of Transaction Shares to be issued. Similarly, the acquisition agreement provides for a grace range on Adjusted Ascend
Trust Value, such that if it is within 5% of $38,200,000, it will be deemed to be $38,200,000 for purposes of calculating the number of Transaction Shares to be issued. The minimum and maximum percentage ownership by EHL in the outstanding common
stock of Continuing Pubco immediately following the closing is effectively limited under the terms of the acquisition agreement to a low of 50.1% and a high of 54.5%. See the section entitled “
The Acquisition Agreement—Acquisition
Consideration.
”
•
As of the date hereof, based on (a) information and projections currently available to the parties, including Subject Adjusted EBITDA of $6.7 million
(resulting in a 5.72 multiple result of $38.3 million) and estimated Adjusted Ascend Trust Value of $38.2 million, and (b) 8,566,666 shares of Ascend common stock currently outstanding, the aggregate number of Transaction Shares that will be
issued at closing to EHL, excluding those underlying the Assumed Options, will be 8,601,002 shares, or 50.1% of the outstanding common stock of Continuing Pubco immediately following the closing. The foregoing figures give no effect to any
additional shares that may be issued to EHL post-closing, as described below, and assume none of Ascend’s currently outstanding common stock is converted into cash as permitted by Ascend’s certificate of incorporation.
•
As additional consideration, EHL also will be entitled to receive the following after closing:
•
up to an aggregate of 442,625 additional shares of Continuing Pubco’s common stock if the market price of Continuing Pubco’s common stock exceed certain
levels ranging from $6.00 to $8.00 during the period from the closing of the acquisition until the 180th day thereafter;
5
•
an aggregate of 442,625 additional shares of Continuing Pubco’s common stock upon redemption of Continuing Pubco’s publicly traded warrants; and
•
up to three tranches of 88,525 additional shares of Continuing Pubco’s common stock if Continuing Pubco generates consolidated annual EBITDA (as defined in the
acquisition agreement) for the years ending December 31, 2008, 2009 and/or 2010 in excess of $14,727,000, $24,268,000 and $37,935,000, respectively, for a total additional issuance of up to 265,575 shares.
See the section entitled “
The Acquisition Agreement—Acquisition Consideration.
”
Indemnification
•
The acquisition agreement provides for the obligation of Continuing Pubco to indemnify EHL and its officers, directors and shareholders for breaches of
representations and warranties made and covenants undertaken by Ascend and ACL in the acquisition agreement. The payment of any indemnity obligations of Continuing Pubco shall be satisfied by the issuance by Continuing Pubco to EHL of additional
shares of common stock as determined in accordance with the acquisition agreement.
•
The acquisition agreement also provides the obligation of EHL (and any other recipient of Continuing Pubco shares issued in the acquisition) to indemnify Continuing
Pubco for breaches of representations and warranties made and covenants undertaken by ePAK and EHL in the acquisition agreement.
As the sole remedy for this indemnity obligation, Continuing
Pubco will have recourse against EHL and any recipients of Continuing Pubco shares issued in the acquisition solely during the period beginning on the closing date and ending on the one year anniversary thereof, and for such further period as may be
required pursuant to an indemnification agreement to be executed at closing. The aggregate amount of this indemnity obligation will be limited solely to the fair market value, as of the time an indemnity claim
is established, of the number of
shares of Continuing Pubco common stock equal to (X) 15% of the sum of the Transaction Shares plus the number of shares issuable upon exercise of the Assumed Options, minus (Y) the sum of the quotients obtained by dividing the dollar amount of each
previous indemnity claim by the fair market value, as of the time such previous indemnity claim
was established, of one share of Continuing Pubco common stock. EHL and any recipients of Continuing Pubco shares issued in the acquisition may
pay any indemnity claim in cash, or in its sole discretion, shares of Continuing Pubco common stock valued at a per share price equal to the fair market value thereof as determined in acquisition agreement.
Lock-ups and Registration Rights
•
The recipients of Continuing Pubco’s common stock in the acquisition and Ascend’s founding stockholders have agreed not to sell any of these shares until
after the six-month anniversary of the closing date.
•
Following the closing, the recipients of the common stock in the acquisition will have the right to demand on two occasions that Continuing Pubco cause a
registration statement to be filed and declared effective under the Securities Act of 1933 as well as certain piggyback registration rights.
See the section entitled “
The Acquisition Agreement—Lock-up and Registration Rights Agreement
s.”
6
Post-Transaction Management
•
The current executive officers of ePAK will continue in their positions with ePAK after the acquisition and also assume equivalent offices with Continuing Pubco.
Steve Dezso, ePAK’s current president and chief executive officer, also will become the president and chief executive officer of Continuing Pubco upon consummation of the acquisition. Don K. Rice, Ascend’s current chairman of the board,
will become chairman of the board of Continuing Pubco upon consummation of the acquisition. See the section entitled “
Directors and Executive Officers of Continuing Pubco Following the Acquisition—Employment Agreements
.”
•
Upon consummation of the acquisition, the board of directors of Continuing Pubco will be comprised of five members. The board will include three persons designated
by EHL, such designees initially being Mr. Dezso, Hock Voon Loo and Steve San Filippo, and two persons designated by certain stockholders of Ascend (“Founding Ascend Holders”), such designees initially being Mr. Rice and Warren
“Budd” Florkiewicz. The majority of the board shall be “independent directors” within the meaning of the Nasdaq rules. See the voting agreement attached to this proxy statement/prospectus as
Annex B
and the section hereof
entitled “
The Acquisition Agreement—Election of Directors; Voting Agreement
.”
U.S. Federal Income Tax
Consequences
Ascend expects that the redomestication merger will qualify as a reorganization for United States federal income tax
purposes, but there can be no assurances that this will be the case. If (i) not more than 50% of the outstanding shares of Continuing Pubco are issued in connection with the transactions to the Ascend stockholders that are U.S. persons
(treating any shares owned by a partnership or other entity or arrangement taxed as a partnership for U.S. federal income tax purposes as owned proportionately by its partners) and (ii) the fair market value of ePAK equals or exceeds the fair
market value of Ascend at the time of the transactions, gain or loss generally will not be recognized on the exchange of the securities of Ascend for the securities of Continuing Pubco by any holder of Ascend common stock that owns less than 5% of
the common stock of Continuing Pubco following the redomestication merger. If an Ascend stockholder owns 5% or more of the common stock of Continuing Pubco after the redomestication merger, that stockholder would be subject to tax on the difference
between the fair market value of the Continuing Pubco common stock and the tax basis of the Ascend common stock for which it is exchanged, unless such Ascend stockholder files a gain recognition agreement with the stockholder’s income tax
return. If (i) more than 50% of the outstanding shares of Continuing Pubco are issued in connection with the transactions to the Ascend stockholders that are U.S. persons (treating any shares owned by a partnership or other entity or
arrangement taxed as a partnership for U.S. federal income tax purposes as owned proportionately by its partners) or (ii) the fair market value of ePak is less than the fair market value of Ascend at the time of the transactions, an Ascend
stockholder, regardless of the percentage of common stock owned, will recognize gain for U.S. federal income tax purposes equal to the difference between the fair market value of the Continuing Pubco common stock and the tax basis of the Ascend
common stock for which it is exchanged.
The percentage of Continuing Pubco common stock that will be issued to the Ascend stockholders in
the transactions will not be greater than 49.9% of the outstanding shares of Continuing Pubco common stock, including as outstanding certain shares that EHL or the other recipients of Transaction Shares may elect to return to Continuing Pubco to
satisfy indemnity claims, if any. Ascend believes that the fair market value of ePAK equals or exceeds the fair market value of Ascend. However, the determination of the relative fair market values of ePAK and Ascend is inherently factual and cannot
be made with precision. If the Internal Revenue Service were to successfully challenge either the percentage ownership of the Ascend stockholders or the relative fair market values of ePAK and Ascend, Ascend stockholders would recognize gain upon
the redomestication merger Stockholders of Ascend are strongly encouraged to consult their own tax advisors regarding the tax consequences to them of the transactions described herein.
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Ascend also believes that Continuing Pubco will not recognize any material
gain or loss as a result of the acquisition or redomestication merger. An evaluation will be made to establish whether Ascend or ACL has any intangible assets which would be deemed transferred in the redomestication merger. If there are any such
intangible assets, it is not expected that they will be of a substantial amount and any U.S. federal income tax will not be of material significance. The Internal Revenue Service may not agree with this conclusion, in which event there may be a
significant tax obligation for Continuing Pubco to pay based on the value of its assets at the time of the redomestication merger.
See the
section entitled “
The Acquisition Proposal—Material Federal Income Tax Consequences of the Acquisition.
”
Accounting Treatment
The acquisition will be accounted for as a “reverse merger” and recapitalization at the date of the consummation of the
transaction since the stockholders of ePAK will own at least 50.1% of the outstanding shares of the common stock immediately following the completion of the acquisition, will have its current officers assuming all almost all corporate and day-to-day
management offices of Continuing Pubco other than chairman of the board, including chief executive officer, chief operating officer and chief financial officer and will have the sole right to appoint three of the five directors to the board.
Accordingly, ePAK will be deemed to be the accounting acquirer in the transaction and, consequently, the transaction is treated as a recapitalization of ePAK. Accordingly, the assets and liabilities and the historical operations that will be
reflected in the Ascend financial statements after consummation of the acquisition will be those of ePAK and will be recorded at the historical cost basis of ePAK. Ascend’s assets, liabilities and results of operations will be consolidated with
the assets, liabilities and results of operations of EPAK upon consummation of the acquisition.
Regulatory Matters
The redomestication merger and acquisition and the transactions contemplated by the acquisition agreement are not subject to any federal or state
regulatory requirement or approval, including the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”), except for filings necessary to effectuate the transactions contemplated by these transactions and the acquisition
agreement with the State of Delaware, Singapore, Bermuda and the Peoples Republic of China.
Fairness Opinion
In connection with the acquisition, Ascend’s board of directors received an opinion from Capitalink LC, as to (i) the fairness to the holders of
Ascend common stock from a financial point of view and as of the date of the opinion of the consideration to be paid by Ascend pursuant to the acquisition agreement, and (ii) whether the fair market value of ePAK as of the date of the opinion
was at least equal to 80% of Ascend’s net assets. The full text of the opinion is attached to this proxy statement as
Annex C
.
Reasons for
the Acquisition
Ascend believes that ePAK is positioned for continued growth in its markets and believes that a business combination
with ePAK will provide our stockholders with an opportunity to participate in an enterprise with significant growth potential.
ePAK’s
revenues were approximately $36.1 million for the year ended December 31, 2006, an increase of 33.7% as compared to approximately $27.0 million for the year ended December 31, 2005. ePAK’s unaudited revenues for the first six months
of 2007 were approximately $20.4 million, an increase of 22.2% as compared to unaudited revenues of approximately $16.7 million for the first six months of 2006. Net income for the year
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ended December 31, 2006 was approximately $2.2 million, compared to approximately $0.1 million for the year ended December 31, 2005. Unaudited net
income for the first six months of 2007 was approximately $1.2 million, compared to unaudited net income for the first six months of 2006 of approximately $1.1 million.
Earnings before interest, taxes, depreciation and amortization (“EBITDA”) was approximately $5.2 million in the year ended December 31,
2006, an increase of 93% as compared to EBITDA of approximately $2.7 million in the year ended December 31, 2005. EBITDA for the first six months of 2007 was approximately $3.0 million, an increase of 25% as compared to EBITDA of
approximately $2.4 million for the first six months of 2006.
Reasons for the Redomestication Merger
Ascend is proposing to merge with its wholly owned subsidiary, ACL, which was formed under the laws of Bermuda specifically for the purpose of affecting
the redomestication merger and has no commercial operations. The purpose of the redomestication merger is to align the post-transaction companies’ income tax liabilities with the location of their business activities, thereby reducing the
overall impact of corporate income tax and tax on dividends paid by one company to another within the holding company structure of Continuing Pubco. Because ePAK’s business operations are principally outside of the United States, the
redomestication merger is intended to reduce the future income tax liability and tax on internal holding company dividend income under the United States tax law that might be assessed on Continuing Pubco if it had been incorporated in the United
States and to permit greater flexibility in structuring acquisitions or creating subsidiaries in China and other countries as the business of ePAK expands. By reincorporating in Bermuda, it is believed that Continuing Pubco will be taxed by the
jurisdictions in which its business and assets are located and undertaken, and will not be subject to additional income taxes merely by virtue of the location of its original place of incorporation.
Reasons for the 2007 Incentive Plan
Ascend is
proposing the 2007 Equity Incentive Plan (“2007 incentive plan”) to enable the company to attract, retain and reward Continuing Pubco’s and ePAK’s directors, officers, employees and consultants using equity-based incentives.
Recommendation of Ascend’s Board of Directors
Ascend’s board of directors:
•
has unanimously determined that each of the acquisition proposal, redomestication merger proposal and 2007 in
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