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PROXY STATEMENT/PROSPECTUS TABLE OF CONTENTS

As filed with the Securities and Exchange Commission on March 14, 2007

Registration No. 333-        



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933


HSW International, Inc.
(Exact name of Registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
  4899
(Primary Standard Industrial
Classification Code Number)
  33-1135689
(I.R.S. Employer
Identification Number)

One Capital City Plaza
3350 Peachtree Road, Suite 1500
Atlanta, Georgia 30326
(404) 364-5823
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)

Jeffrey Arnold
HSW International, Inc.
One Capital City Plaza
3350 Peachtree Road, Suite 1500
Atlanta, Georgia 30326
(404) 364-5823
(Name, address, including zip code, and telephone number, including
area code, of agent for service)


Copies to:
Lee Edwards, Esq.
Paul Strecker, Esq.
Shearman & Sterling LLP
2318 China World Tower Two
1 Jianguomenwai Dajie
100004 Beijing, China
+(8610) 6505 3399
  J. David Darnell
INTAC International, Inc.
12221 Merit Drive, Suite 600
Dallas, Texas 75251
(469) 916-9891
  James Altenbach, Esq.
Greenberg Traurig, LLP
The Forum
3290 Northside Parkway, Suite 400
Atlanta, GA 30327
(678) 553-2100

        Approximate date of commencement of proposed sale to the public: As soon as practicable following the effectiveness of this Registration Statement, satisfaction or waiver of the other conditions to closing of the merger described herein and consummation of the merger.

        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. o

        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. o

CALCULATION OF REGISTRATION FEE


Title of Each Class of Securities to
be Registered(1)

  Amount to be
Registered(2)

  Proposed Maximum
Offering Price Per
Share

  Proposed Maximum
Aggregate Offering
Price(3)

  Amount of
Registration
Fee(4)


Common Stock, par value $0.001 per share   23,390,727   N/A   $146,659,858.29   $4,502.46

(1)
This Registration Statement relates to common stock, par value $0.001 per share (the "Registrant Common Stock"), of the Registrant issuable to holders of common stock, par value $0.001 per share ("INTAC Common Stock"), of INTAC International, Inc. ("INTAC"), in the proposed merger (the "Merger") of HSW International Merger Corporation, a wholly owned subsidiary of the Registrant ("Merger Sub"), with and into INTAC.
(2)
Based on the number of shares of Registrant Common Stock to be issued in connection with the Merger, calculated as the product of (a) 23,390,727, the aggregate number of shares of INTAC Common Stock outstanding as of March 14, 2007 and the number of shares of INTAC Common Stock issuable pursuant to the exercise of options outstanding as of March 14, 2007 and (b) an exchange ratio of one share of the Registrant Common Stock for each share of INTAC Common Stock, representing the share consideration issuable in the Merger.
(3)
Pursuant to Rules 457(c) and 457(f)(1) under the Securities Act of 1933, as amended (the "Securities Act"), and solely for purposes of calculating this registration fee, the proposed maximum aggregate offering price is equal to the market value of shares of INTAC Common Stock (the securities to be cancelled in the merger) in accordance with Rule 457(c) under the Securities Act calculated as follows: (a) $6.27, the average of the high and low prices per share of INTAC Common Stock on March 12, 2007, as reported on the Nasdaq Capital Market, multiplied by (b) 23,390,727, the aggregate number of shares of INTAC Common Stock outstanding as of March 14, 2007 and shares of INTAC Common Stock issuable pursuant to the exercise of outstanding options outstanding as of March 14, 2007.
(4)
Reflects the product of (a) 0.0000307 multiplied by (b) the proposed maximum aggregate offering price for INTAC Common Stock.


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 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.




PRELIMINARY—SUBJECT TO COMPLETION—DATED MARCH 14, 2007
PROXY STATEMENT/PROSPECTUS

The information in this document is not complete and may be changed. HSW International may not sell the securities offered by this document until the registration statement filed with the Securities and Exchange Commission is effective. This document is not an offer to sell these securities, and HSW International is not soliciting an offer to buy these securities, in any state where the offer or sale is not permitted.

To the stockholders of INTAC:

        I am pleased to report that on April 20, 2006, INTAC International, Inc. ("INTAC") entered into a merger agreement with HowStuffWorks, Inc., an online publishing company ("HSW"), HSW International, Inc., a new company formed by HSW ("HSW International") and HSW International Merger Corporation, a wholly owned subsidiary of HSW International, which was amended on January 29, 2007, pursuant to which INTAC will become a wholly owned subsidiary of HSW International (the "merger") and, in related transactions contemplated by the merger agreement, (i) HSW will contribute to HSW International, in exchange for common stock of HSW International, principally exclusive digital publishing rights to HSW's content for the countries of China and Brazil (the "contribution") and (ii) certain investors have agreed to purchase shares of HSW International having an aggregate value of approximately $50 million (the "equity financing," and together with the contribution, the "related transactions"). Upon consummation of the merger and the related transactions, HSW International intends to launch an Internet business based on HSW's content, including advertising, search, e-commerce and sponsorships, in China and Brazil.

        On January 29, 2007, INTAC, INTAC International Holdings Limited ("INTAC Holdings"), a wholly-owned subsidiary of INTAC, and INTAC (Tianjin) International Trading Company, a wholly owned subsidiary of INTAC Holdings ("INTAC Trading"), entered into a share purchase agreement with Wei Zhou, INTAC's Chief Executive Officer and President, and Cyber Proof Investments Ltd. ("Cyber"), a corporation controlled by Wei Zhou, pursuant to which INTAC Holdings will sell all the issued and outstanding shares of Global Creative International Limited, INTAC Telecommunications Limited, INTAC Deutschland GmbH and FUTAC Group Limited, each a wholly owned subsidiary of INTAC Holdings ("distribution companies"), to Cyber in exchange for 3 million shares of INTAC common stock held by Mr. Zhou (the "distribution business sale"). The distribution/telecommunications segment of INTAC's business, which consists of the distribution of wireless handset products and the sale of prepaid calling cards, is conducted in whole by these four subsidiaries of INTAC Holdings. In addition, INTAC Trading has agreed to transfer its rights and control with respect to Beijing INTAC Meidi Technology Development Co., Ltd. to Cyber.

        You are cordially invited to attend the special meeting of INTAC stockholders to be held on                        , 2007 at             a.m. central time to consider and vote on the adoption of the merger agreement and the share purchase agreement and approval of the merger, the related transactions and the distribution business sale.

        Only stockholders who owned shares of INTAC common stock at the close of business on                        , 2007, the record date for the special meeting, are entitled to notice of and to vote at the special meeting and any adjournments or postponements of the special meeting.

        The merger and related transactions cannot be completed unless the stockholders of INTAC holding a majority of the outstanding shares on the record date for the special meeting adopt the merger agreement and approve the merger and related transactions. The completion of the merger and the related transactions is also subject to the satisfaction of other conditions, including approval of HSW International's application to list its common stock on either the Nasdaq National Market or Nasdaq Capital Market and the completion of the distribution business sale.

        The distribution business sale cannot be completed unless the stockholders of INTAC (other than Mr. Zhou, his affiliates and associates) holding a majority of the outstanding shares (other than those shares held by Mr. Zhou, his affiliates and associates) on the record date for the special meeting adopt the share purchase agreement and approve the distribution business sale.

        If the merger is completed, INTAC stockholders will be entitled to receive in exchange for each of their shares of INTAC common stock one share of HSW International common stock.

        HSW International plans to list its common stock on either the Nasdaq National Market or Nasdaq Capital Market under the symbol "HSWI." You should obtain current market quotations for INTAC common stock from the Nasdaq Capital Market under the symbol "INTN."



        After careful consideration, the INTAC board of directors adopted the merger agreement and the share purchase agreement and determined that the merger agreement, the share purchase agreement, the merger, the related transactions and the distribution business sale are fair to and in the best interests of INTAC and its stockholders. The INTAC board of directors unanimously recommends that you vote "FOR" adoption of the merger agreement and the share purchase agreement and approval of the merger, related transactions and the distribution business sale.

        Our President and Chief Executive Officer, who owns approximately    % of our outstanding shares of common stock as of the record date, has entered into a voting agreement in which he has agreed to vote his shares in favor of adoption of the merger agreement and approval of the merger and related transactions. Therefore, the merger agreement will be adopted and the merger and related transactions will be approved regardless of how our other stockholders vote their shares. Because the shares of INTAC common stock held by Mr. Zhou, his affiliates and associates will not participate in the vote to adopt the share purchase agreement and approve the distribution business sale, your vote is extremely important in determining whether the share purchase agreement will be adopted and the distribution business sale approved.

        Whether or not you plan to be present at the special meeting, please complete, sign, date and return the enclosed proxy card or submit your proxy by telephone or on the Internet as soon as possible. If you hold your shares in "street name," you should instruct your broker how to vote in accordance with your voting instruction form. If you fail to submit a proxy, fail to vote in person, abstain from voting or do not instruct your broker how to vote your shares, it will have the same effect as a vote against adoption of the merger agreement and the share purchase agreement.

        This proxy statement/prospectus provides detailed information concerning the merger, the other transactions contemplated by the merger, the distribution business sale and the INTAC special meeting. Additional information regarding INTAC and HSW International, Inc., has been filed with the Securities and Exchange Commission and is publicly available. We encourage you to read carefully this entire document, including all of its annexes, and we especially encourage you to read the section entitled "Risk Factors" beginning on page 21.

        On behalf of the INTAC board of directors, I thank you for your support and appreciate your consideration of this matter.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved the HSW International common stock to be issued by HSW International under this document or passed upon the adequacy or accuracy of this document. Any representation to the contrary is a criminal offense.

This proxy statement/prospectus is dated            , 2007 and is first being mailed
to INTAC stockholders on or about            , 2007.



REFERENCES TO ADDITIONAL INFORMATION

        This proxy statement/prospectus incorporates by reference important business and financial information about INTAC and HSW International from documents that are not included in or delivered with this proxy statement/prospectus. This information is available to you without charge upon your written or oral request. You can obtain the documents incorporated by reference in this proxy statement/prospectus by requesting them in writing or by telephone from the appropriate company at the following addresses and telephone numbers:

INTAC International, Inc.
12221 Merit Drive, Suite 600
Dallas, TX 75251-2248
Attention: J. David Darnell
Telephone: (469) 916-9891
  HSW International, Inc.
One Capital City Plaza
3350 Peachtree Road, Suite 1500
Atlanta, GA 30326-1039
Telephone: (404) 364-5823

        If you would like to request documents, please do so by                        , 2007 in order to receive them before the INTAC special meeting.

See "Where You Can Find More Information" on page 154.



INTAC INTERNATIONAL, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON                        , 2007

To the stockholders of INTAC International, Inc.:

        A special meeting of stockholders of INTAC International, Inc. ("INTAC") will be held on                        , 2007, at             a.m., central time, at                        , for the following purpose:

        We will transact no other business at the INTAC special meeting, except such business as may properly be brought before the INTAC special meeting and any adjournment or postponement of it.

        Only stockholders who owned shares of INTAC common stock at the close of business on                        , 2007, the record date for the INTAC special meeting, are entitled to notice of, and to vote at, the INTAC special meeting and any adjournment or postponement of it. A stockholders' list will be available for inspection by any stockholder entitled to vote at the special meeting beginning no later than ten days before the date of the INTAC special meeting and continuing through the INTAC special meeting.

        We cannot complete the merger and the related transactions unless the stockholders of INTAC holding a majority of the outstanding shares on the record date for the special meeting adopt the merger agreement and approve the merger and the related transactions. We cannot complete the distribution business sale unless the stockholders of INTAC (other than Mr. Zhou, his affiliates and associates) holding a majority of the outstanding shares (other than those shares held by Mr. Zhou, his affiliates and associates) on the record date for the special meeting adopt the share purchase agreement and approve the distribution business sale.

        Our President and Chief Executive Officer, who owns approximately    % of our outstanding shares of common stock as of the record date, has entered into a voting agreement in which he has agreed to vote his shares in favor of adoption of the merger agreement and approval of the merger and the related transactions. Therefore, the merger agreement will be adopted and the merger and the related transactions will be approved regardless of how our other stockholders vote their shares. Because the shares of INTAC common stock held by Mr. Zhou, his affiliates and associates will not participate in the vote to adopt the share purchase agreement and approve the distribution business sale, your vote is extremely important in determining whether the share purchase agreement will be adopted and the distribution business sale approved.

        INTAC stockholders have no dissenters' rights under Nevada law in connection with the merger. The proxy statement/prospectus accompanying this notice explains the merger and the related



transactions, as well as the merger agreement, and provides specific information concerning the INTAC special meeting. Please review the proxy statement/prospectus carefully.

        After careful consideration, the INTAC board of directors adopted the merger agreement and the share purchase agreement and determined that the merger agreement, the share purchase agreement, the merger, the related transactions and the distribution business sale are fair to and in the best interests of INTAC and its stockholders. The INTAC board of directors unanimously recommends that you vote "FOR" adoption of the merger agreement AND the share purchase agreement and approval of the merger, the related transactions and the distribution business sale.

        Whether or not you plan to attend the INTAC special meeting, please complete, sign and date the enclosed proxy card and return it promptly in the enclosed postage-paid return envelope or submit your proxy by telephone or on the Internet as soon as possible. You may revoke the proxy at any time prior to its exercise in the manner described in the proxy statement/prospectus. Any stockholder of record present at the INTAC special meeting, including any adjournment or postponement of it, may revoke his or her proxy and vote personally on the merger agreement. Executed proxies with no instructions indicated thereon will be voted "FOR" adoption of the merger agreement AND the share purchase agreement and approval of the merger, the related transactions and the distribution business sale.

        Please do not send any stock certificates at this time.

Dallas, Texas
            , 2007


TABLE OF CONTENTS

 
QUESTIONS AND ANSWERS ABOUT THE MERGER
SUMMARY
  General
  The INTAC Special Meeting
  The Merger Agreement
  The Share Purchase Agreement
  Market Prices and Dividend Information
  Comparative Per Share Information
  Selected Historical Consolidated Financial Data of INTAC International, Inc.
  Selected Unaudited Pro Forma Condensed Combined Consolidated Financial Information
RISK FACTORS
  Risks Related to the Transactions
  Risks Related to the Combined Company
THE INTAC SPECIAL MEETING
  Date, Time and Place
  Purpose of the Special Meeting
  Record Date; Shares Entitled to Vote; Quorum
  Vote Required
  Shares Owned by INTAC Directors and Executive Officers
  Voting Agreement
  Voting of Proxies
  Revocability of Proxies
  Solicitation of Proxies
THE COMPANIES
  INTAC
  HSW
  HSW International
  HSW International's Resulting Lines of Businesses
THE MERGER AND THE DISTRIBUTION BUSINESS SALE
  General
  Asset Contribution
  Equity Financing
  Background of the Merger and Distribution Business Sale
  INTAC's Reasons for the Merger and Distribution Business Sale and Recommendation of the INTAC Board of Directors
  Opinions of INTAC's Financial Advisor
  Interests of INTAC Directors and Executive Officers in the Merger and Distribution Business Sale
  Interests of HSW International Directors and Executive Officers in the Merger and Distribution Business Sale
  Merger Consideration
  Ownership of HSW International Following the Merger
  Conversion of Shares; Procedures for Exchange of Certificates
  Effective Time of the Merger
  Stock Exchange Listing of HSW International Common Stock
  Delisting and Deregistration of INTAC Common Stock
  Material United States Federal Income Tax Consequences of the Merger
  Regulatory Matters
  Dissenters' Rights
  INTAC and HSW International Employee Benefit Matters
  Effect on Awards Outstanding Under INTAC Stock Incentive Plan
  Resale of HSW International Common Stock
THE MERGER AGREEMENT
  Conditions to the Completion of the Merger
  No Solicitation
  Termination of the Merger Agreement
  Fees and Expenses
  Conduct of Business Pending the Merger
  Representations and Warranties
  Additional Terms
  Certificate of Incorporation and By-laws of the Surviving Corporation
  Amendment; Extension and Waiver
AGREEMENTS RELATED TO THE MERGER
  The Contribution Agreements, Services Agreement, Update Agreement and Letter Agreement
  The Stock Purchase Agreements
  The Voting Agreement
  The Amended and Restated Stockholders Agreement
  The Share Purchase Agreement
HSW INTERNATIONAL AND INTAC MANAGEMENT'S DISCUSSION AND ANALYSES OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  HSW International
  Operations--Selling, General and Administrative Expenses
  Other Income (Expense)
  Liquidity and Capital Resources
  Intac International
  Critical Accounting Policies
  Results of Operations for the Three Months Ended December 31, 2006 and 2005
  Results of Operations for the Three Months Ended December 31, 2006, Compared to the Three Months Ended December 31, 2005
RESULTS OF OPERATIONS FOR THE YEARS ENDED SEPTEMBER 30, 2006 AND 2005 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
  Results of Operations for the Year Ended September 30, 2006, Compared to the Year Ended September 30, 2005
  Results of Operations for the Nine Months Ended September 30, 2005, Compared to the Nine Months Ended September 30, 2004
  Liquidity and Capital Resources--INTAC
  Commitments and Contingencies
  Off-Balance Sheet Arrangements
INTAC MANAGEMENT
HSW INTERNATIONAL MANAGEMENT FOLLOWING THE MERGER
BENEFICIAL OWNERSHIP INFORMATION
  Security Ownership of Certain Beneficial Owners and Management of INTAC Prior to the Merger
  Security Ownership of Certain Beneficial Owners and Management of HSW International Following the Merger
ACCOUNTING TREATMENT
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
COMPARATIVE STOCK PRICES AND DIVIDENDS
DESCRIPTION OF HSW INTERNATIONAL CAPITAL STOCK FOLLOWING THE MERGER
COMPARISON OF RIGHTS OF COMMON STOCKHOLDERS OF HSW INTERNATIONAL AND INTAC
LEGAL MATTERS
EXPERTS
 

i


OTHER MATTERS
FUTURE INTAC SHAREHOLDER PROPOSALS
WHERE YOU CAN FIND MORE INFORMATION
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

Annexes

 
  Annex A — Agreement and Plan of Merger
  Annex B — First Amendment to Agreement and Plan of Merger
  Annex C — Form of Contribution Agreement (PRC Territories)
  Annex D — Form of Contribution Agreement (Brazil)
  Annex E — Form of Services Agreement
  Annex F — Form of Update Agreement
  Annex G — Letter Agreement
  Annex H — Amended and Restated Stockholders Agreement
  Annex I — Stock Purchase Agreements with American Investors
  Annex J — Stock Purchase Agreements with European Investors
  Annex K — DWS Stock Purchase Agreement
  Annex L — First Amendment to DWS Stock Purchase Agreement
  Annex M — Voting Agreement
  Annex N — Opinion of Savvian LLC dated January 28, 2007
  Annex O — Opinion of Savvian LLC dated January 28, 2007
  Annex P — Form of Amended and Restated Certificate of Incorporation of HSW International, Inc.
  Annex Q — Form of Amended and Restated Bylaws of HSW International, Inc.
  Annex R — Share Purchase Agreement

ii



QUESTIONS AND ANSWERS ABOUT THE MERGER

Q:       Why am I receiving this proxy statement/prospectus?

 

 

A.

 

HowStuffWorks, Inc. (referred to in this proxy statement/prospectus as HSW), HSW International, Inc. (referred to in this proxy statement/prospectus as HSW International), HSW International Merger Corporation, a wholly-owned subsidiary of HSW International (referred to in this proxy statement/prospectus as merger sub) and INTAC International, Inc. (referred to in this proxy statement/prospectus as INTAC) have entered into the Agreement and Plan of Merger, dated as of April 20, 2006, as amended (referred to in this proxy statement/prospectus as the merger agreement) by First Amendment to Agreement and Plan of Merger (referred to in this proxy statement/prospectus as the amendment to merger agreement), among HSW, HSW International, merger sub and INTAC, that is described in this proxy statement/prospectus. Additionally, INTAC, INTAC Holdings, INTAC Trading, Cyber and Wei Zhou, INTAC's Chief Executive Officer and President, have entered into a Share Purchase Agreement, dated as of January 29, 2007 (referred to in this proxy statement/prospectus as the share purchase agreement). See "
The Merger Agreement" beginning on page 79 of this proxy statement/prospectus and "The Share Purchase Agreement" beginning on page 99 of this proxy statement/prospectus. Copies of the merger agreement, the amendment to merger agreement and the share purchase agreement are attached to this proxy statement/prospectus as Annexes A, B and R, respectively.

 

 

 

 

In order to complete the merger, INTAC stockholders must adopt the merger agreement and approve the merger (as defined below) and the related transactions (as defined below), all necessary governmental approvals must be received and all other conditions to the merger must be satisfied or waived, including the distribution business sale. In order to complete the distribution business sale (as defined below), the INTAC stockholders (other than Mr. Zhou, his affiliates and associates) must adopt the share purchase agreement and approve the distribution business sale (as defined below), all necessary governmental approvals must be received and all other conditions to the distribution business sale must be satisfied or waived. INTAC will hold a special meeting of its stockholders (referred to in this proxy statement/prospectus as the INTAC special meeting) to obtain the required approvals of its stockholders.

 

 

 

 

This proxy statement/prospectus contains important information about the merger agreement, the share purchase agreement, the merger, the other transactions contemplated by the merger agreement, the distribution business sale and the INTAC special meeting. You should read it carefully.

Q:

 

 

 

What will happen in the distribution business sale?

 

 

A.

 

Under the terms of the share purchase agreement, INTAC Holdings will sell all the issued and outstanding shares of Global Creative International Limited, INTAC Telecommunications Limited, INTAC Deutschland GmbH and FUTAC Group Limited, each a wholly owned subsidiary of INTAC Holdings, and INTAC Trading will transfer its right and control with respect to Beijing INTAC Meidi Technology Development Co., Ltd. ("Meidi Technology") to Cyber in exchange for 3 million shares of INTAC common stock held by Wei Zhou (the "distribution business sale"). The distribution/telecommunications segment of INTAC's business, which consists of the distribution of wireless handset products and the sale of prepaid calling cards, is conducted by the four subsidiaries of INTAC Holdings. The distribution business sale will be consummated immediately prior to the consummation of the merger.
         


Q:

 

 

 

What will happen in the merger and the related transactions and what will be HSW International's resulting lines of businesses?

 

 

A.

 

Merger

 

 

 

 

Under the terms of the merger agreement, merger sub will be merged with INTAC (referred to in this proxy statement/prospectus as the merger), with INTAC surviving as a wholly owned subsidiary of HSW International.

 

 

 

 

Related Transactions

 

 

 

 

The Asset Contribution

 

 

 

 

In connection with the merger, and as contemplated by the merger agreement, HSW will contribute certain assets, properties and rights to HSW International in exchange for shares of HSW International common stock (referred to in this proxy statement/prospectus as the asset contribution) pursuant to two contribution agreements, which will result in HSW International having exclusive digital publishing rights to HSW's content that is posted or has been posted on the HSW website on or before the merger as translated in the language of the respective territories in both China and Brazil (referred to in this proxy statement/prospectus as the contributed assets). Copies of the contribution agreements are attached to this proxy statement/prospectus as Annexes C and D.

 

 

 

 

The Other Rights

 

 

 

 

HSW will also grant HSW International the right to exclusively license for a fee the digital publishing rights in the territories to new and modified HSW content pursuant to an update agreement. Additionally, HSW will provide certain transitional services to HSW International for the purposes of developing, supporting, translating and facilitating the digital transmission of the contributed assets pursuant to a services agreement. HSW will also grant HSW International an 18 month option to acquire from HSW the exclusive digital publishing rights for HSW content in India and Russia on the same terms and conditions as those in respect of China and Brazil. Finally, HSW will agree to make an irrevocable offer to HSW International to participate in any transaction involving an investment or acquisition of an interest in any entity, business, assets, properties or securities in connection with a sale, transfer, assignment or license of HSW's rights in the licensed content or sublicensed content in any geographical area outside the United States or the territories. Copies of the Services Agreement, Update Agreement and Letter Agreement are attached to this proxy statement/prospectus as Annexes E, F and G, respectively. See "
Agreements Related to the Merger—The Contribution Agreements, Services Agreement, Update Agreement and Letter Agreement" beginning on page 92.

 

 

 

 

The Equity Financing

 

 

 

 

Ashford Capital Partners, L.P., Harvest 2004, LLC, American Funds Insurance Series—Global Small Capitalization Fund, SMALLCAP World Fund, Inc., Chilton Investment Partners, L.P., Chilton QP Investment Partners, L.P., Chilton International, L.P., Chilton New Era Partners, L.P., Chilton New Era International, L.P., Chilton Small Cap Partners, L.P., Chilton Small Cap International, L.P. and Zeke, LP (collectively, "American investors") have agreed to purchase $22.5 million of shares of HSW International common stock (referred to in this proxy statement/prospectus as the American investors stock purchase) pursuant to stock purchase agreements (referred to in this proxy statement/prospectus as the American investors stock purchase agreements).

 

 

 

 

 

2



 

 

 

 

Additionally, DWS Finanz-Service GmbH (referred to in this proxy statement/prospectus as DWS), an affiliate of INTAC's largest institutional investor, Nordinvest, Deka Investment GmbH and Brompton Cross Master Fund, Ltd. (collectively, "European investors") have agreed to purchase approximately $27 million of shares of HSW International common stock (referred to in this proxy statement/prospectus as the European investors stock purchase, and together with the American investors stock purchase, the equity financing) pursuant to stock purchase agreements (referred to in this proxy statement/prospectus as the European investors stock purchase agreements, and together with the American investors stock purchase agreements, the stock purchase agreements). A copy of the stock purchase agreements, including amendment to the stock purchase agreement with DWS, are attached to this proxy statement/prospectus as Annexes I, J, K and L. See "
Agreements Related to the Merger—The Stock Purchase Agreements" beginning on page 94.

 

 

 

 

The asset contribution and the equity financing are referred to in this proxy statement/prospectus as the "related transactions."

 

 

 

 

HSW International's Resulting Lines of Businesses

 

 

 

 

Upon consummation of the merger and the related transactions, HSW International intends to launch an Internet business based on HSW's content, including advertising, search, e-commerce and sponsorships, in China and Brazil. HSW International will also continue to operate INTAC's career development and training services business segment.

Q:

 

 

 

Why is INTAC proposing the distribution business sale?

 

 

A.

 

INTAC and HSW International intend to focus their post-merger operations on content acquisition, creation, and dissemination, including online publishing, career development and training and education markets. INTAC does not believe that the distribution/telecommunications segment of INTAC's current business is a complementary fit to the post-merger business plans of the combined company, as it involves the purchase and sale of physical inventory and has historically generated low profit margins. Also, due to an influx of both local and foreign competitors in the Chinese wireless handset distribution market, the distribution/telecommunications segment of INTAC's business has become increasing competitive and its future business prospects have become increasingly uncertain.

Q:

 

 

 

Why are HSW, HSW International and INTAC proposing the merger and the related transactions?

 

 

A.

 

HSW, HSW International and INTAC believe that a combination of HSW International and INTAC will provide substantial strategic and financial benefits to the stockholders of both companies by integrating the contributed assets with INTAC's expertise and relationships in China, thereby creating an interactive media and service platform for Chinese Internet users that has the potential to create greater stockholder value than either HSW or INTAC could create separately. INTAC will be able to utilize its international experience and leverage an interactive media and service platform to launch an online business in Brazil. In addition, the companies believe that the equity financing will prove beneficial to HSW International's future plans and operations. The success of the merger and HSW International are, however, subject to substantial risks. Please see the sections entitled "
Risk Factors" on page 21. Additionally, to review INTAC's reasons for the merger, including specific risks considered by the INTAC board of directors, in greater detail, please see the section entitled "The Merger and the Distribution Business Sale—INTAC's Reasons for the Merger and Distribution Business Sale and Recommendation of the INTAC Board of Directors" beginning on page 53.

 

 

 

 

 

3



Q:

 

 

 

Have any executive officers or directors of INTAC agreed to vote in favor of the adoption of the merger agreement and approval of the merger and the related transactions?

 

 

A.

 

Yes. Mr. Wei Zhou, INTAC's President and Chief Executive Officer, who owns approximately    % of the outstanding shares of INTAC common stock as of the record date, has entered into a voting agreement pursuant to which he has agreed to vote his shares in favor of the adoption of the merger agreement and approval of the merger and the related transactions. Therefore, the merger agreement will be adopted and the merger and the related transactions approved regardless of how INTAC's other stockholders vote their shares. Because the shares of INTAC common stock held by Mr. Zhou, his affiliates and associates will not participate in the vote to adopt the share purchase agreement or approve the distribution business sale, your vote is extremely important in determining whether the share purchase agreement will be adopted and the distribution business sale approved. If the share purchase agreement is not adopted and the distribution sale is not approved, the parties do not intend to consummate the merger and related transactions.

Q:

 

 

 

What will INTAC stockholders receive in the merger?

 

 

A.

 

Upon completion of the merger, for each share of INTAC common stock that they own, INTAC stockholders will receive one share of HSW International common stock.

Q:

 

 

 

What will INTAC stockholders receive in the distribution business sale?

 

 

A.

 

Nothing. However, INTAC Holdings will receive the 3 million shares of INTAC common stock tendered by Wei Zhou as payment for the distribution business sale.

Q:

 

 

 

What will HSW International stockholders receive in the merger and the distribution business sale?

 

 

A.

 

Nothing. Each share of HSW International common stock outstanding immediately prior to the merger will remain outstanding as a share of HSW International common stock immediately following the merger. HSW will, however, receive shares of the common stock of HSW International in connection with the asset contribution.

Q:

 

 

 

How much of HSW International will INTAC stockholders own if the merger is completed?

 

 

A.

 

Upon the consummation of the merger and the asset contribution but without giving effect to the equity financing, INTAC stockholders will own approximately 46.5% of the outstanding shares of HSW International. After giving effect to the equity financing, INTAC stockholders will own a percentage of the outstanding shares of HSW International that will vary depending upon the HSW International stock price. The maximum percentage of outstanding HSW International common stock that current INTAC stockholders may own upon consummation of the merger and the related transactions is approximately 39.6%. Please see the section entitled "
The Merger and the Distribution Business Sale—Ownership of HSW International Following the Merger" beginning on page 73 for more information.

Q:

 

 

 

Where will the shares of HSW International common stock to be received by INTAC stockholders be listed?

 

 

A.

 

HSW International will apply to have the HSW International common stock listed on either the Nasdaq National Market or the Nasdaq Capital Market under the symbol "HSWI" and will use its best efforts to obtain Nasdaq approval for the quotation of HSW International common stock prior to the closing of the merger.
         

4



Q:

 

 

 

Does the INTAC board of directors support the merger and the distribution business sale?

 

 

A.

 

Yes. After careful consideration, the INTAC board of directors adopted the merger agreement and the share purchase agreement and determined that the merger agreement, the merger, the related transactions, the share purchase agreement and the distribution business sale are fair to and in the best interests of INTAC and its stockholders. The INTAC board of directors recommends that INTAC stockholders vote "
FOR" adoption of the merger agreement and the share purchase agreement and approval of the merger, the related transactions and the distribution business sale.

 

 

 

 

In reaching its decision to adopt the merger agreement and the share purchase agreement and to recommend the adoption of the merger agreement, approval of the merger, the related transactions, the share purchase agreement and the distribution business sale by INTAC's stockholders, the INTAC board of directors consulted with INTAC's management, as well as its legal and financial advisors, and considered the terms of the proposed merger agreement and the transactions contemplated by the merger agreement. INTAC's board of directors also considered each of the items set forth on pages 53 through 55 under
"The Merger and the Distribution Business Sale—INTAC'S Reasons for the Merger and Distribution Business Sale and Recommendation of the INTAC Board of Directors."

Q:

 

 

 

Are there risks involved in undertaking the merger and distribution business sale?

 

 

A.

 

Yes. In evaluating the merger and the distribution business sale, INTAC stockholders should carefully consider the factors discussed in the section of this proxy statement/prospectus entitled "
Risk Factors" beginning on page 21 and other information about HSW International and INTAC included in the documents incorporated by reference in the proxy statement/prospectus.

Q:

 

 

 

Where and when is the special meeting of INTAC stockholders?

 

 

A.

 

The INTAC special meeting will be held on                        , 2007 at             a.m., central time, at                        . INTAC stockholders may attend the INTAC special meeting and vote their shares in person, in addition to completing, signing, dating and returning the enclosed proxy or submitting a proxy on the Internet.

Q:

 

 

 

Who can vote at the INTAC special meeting?

 

 

A.

 

INTAC stockholders can vote at the INTAC special meeting if they owned shares of INTAC common stock at the close of business on                        , 2007 (referred to in this proxy statement/prospectus as the INTAC record date), the record date for the INTAC special meeting.

Q:

 

 

 

What vote is required by INTAC stockholders to adopt the merger agreement?

 

 

A.

 

The affirmative vote of the holders of a majority of the outstanding shares of INTAC common stock entitled to vote at the INTAC special meeting (as determined on the record date of the INTAC special meeting) is required to adopt the merger agreement.

 

 

 

 

As of the close of business on                        , 2007, the record date,             shares of INTAC common stock were outstanding.

Q:

 

 

 

What vote is required by INTAC stockholders to adopt the share purchase agreement?

 

 

A.

 

The affirmative vote of the holders of a majority of the outstanding shares of INTAC common stock (other than those shares held by Mr. Zhou, his affiliates and associates) entitled to vote at the INTAC special meeting (as determined on the record date of the special meeting) is required to adopt the distribution business sale.
         

5



Q:

 

 

 

As of the record date, what percentage of outstanding INTAC common stock was owned by INTAC's executive officers and directors as a group?

 

 

A.

 

As of the record date, INTAC's executive officers and directors as a group beneficially owned and were entitled to vote in the aggregate            shares of INTAC common stock, which represented approximately    % of the shares of INTAC common stock outstanding on the record date.

Q:

 

 

 

What do INTAC stockholders need to do now?

 

 

A.

 

After carefully reading and considering the information contained in this proxy statement/prospectus, please complete, sign and date your proxy and return it in the enclosed postage-paid return envelope or vote your shares on the Internet as soon as possible, so that your shares may be represented at the INTAC special meeting. If you sign and send in your proxy and do not indicate your vote for the merger agreement and/or the share purchase agreement, INTAC will count your proxy as a vote in favor of approval of the merger agreement, the share purchase agreement or both agreements, as applicable.

 

 

 

 

Because the required vote of INTAC stockholders for the merger is based upon the number of outstanding shares of INTAC common stock entitled to vote, and the required vote of INTAC stockholders for the distribution business sale is based upon the number of outstanding shares of INTAC common stock (other than those shares held by Mr. Zhou, his affiliates and associates) entitled to vote, failure to submit a proxy or to vote in person, abstentions and broker non-votes will have the same effect as a vote against approval of the merger agreement and the share purchase agreement.

Q:

 

 

 

Can I change my vote after I have mailed my signed proxy?

 

 

A.

 

Yes. You can change your vote at any time before your proxy is voted at the INTAC special meeting. You can do this in one of two ways. First, you can send a written notice stating that you would like to revoke your proxy. Second, you can complete and submit a new valid proxy bearing a later date by mail or on the Internet. Attendance at the INTAC special meeting will not in and of itself constitute revocation of a proxy.

 

 

 

 

If you are an INTAC stockholder and you choose to send a written notice or to mail a new proxy, you must submit your notice of revocation or your new proxy to INTAC International, Inc. at 12221 Merit Drive, Suite 600, Dallas, Texas 75251-2248, Attention: Secretary, and it must be received by                        , 2007.

Q:

 

 

 

If my shares are held in "street name" by my broker, will my broker vote my shares for me?

 

 

A.

 

Your broker will vote your shares only if you provide instructions on how to vote. You should follow the directions provided by your broker regarding how to instruct your broker to vote your shares. Without instructions, your shares will not be voted, which will have the effect of a vote against the approval of the merger agreement and the share purchase agreement at the INTAC special meeting.

Q.

 

 

 

Should I send in my INTAC stock certificates now?

 

 

A.

 

No. After the merger is completed, you will receive a transmittal form with instructions for the surrender of INTAC common stock certificates. Please do not send in your stock certificates with your proxy.

Q:

 

 

 

Is the merger expected to be taxable to INTAC stockholders?

 

 

A.

 

Based upon current law and certain covenants, assumptions and representations as to factual matters made

 

 

 

 

 

6



 

 

 

 

by, among others, HSW, HSW International and INTAC, all of which must continue to be true and accurate as of the closing of the merger, it is the opinion of Shearman & Sterling LLP (referred to in this proxy statement/prospectus as Shearman & Sterling), counsel to INTAC, that the merger and the asset contribution together will qualify as a transaction pursuant to Section 351 of the Internal Revenue Code of 1986, as amended (referred to in this proxy statement/prospectus as the Internal Revenue Code). Therefore, INTAC stockholders will generally not recognize taxable gain or loss for United States federal income tax purposes as a result of the merger. The opinion does not address state, local or foreign tax consequences of the merger which may be applicable to INTAC and its stockholders.

 

 

 

 

You should read "
The Merger and the Distribution Business Sale—Material United States Federal Income Tax Consequences of the Merger" beginning on page 75 for a more complete discussion of the United States federal income tax consequences of the merger. Tax matters can be complicated and the tax consequences of the merger to you will depend on your particular tax situation. You should consult your tax advisor to determine the tax consequences of the merger to you.

Q:

 

 

 

If I also hold options to purchase shares of INTAC common stock, how will my stock options be treated in the merger?

 

 

A.

 

All outstanding stock options to purchase shares of INTAC common stock will be assumed by HSW International. The terms and conditions of the assumed options will remain unchanged as a result of the assumption except that, upon exercise, the optionholder shall receive one share of HSW International common stock for every one share of INTAC common stock that the optionholder otherwise would have been entitled to receive.

Q:

 

 

 

When do you expect the distribution business sale and the merger to be completed?

 

 

A.

 

INTAC, HSW and HSW International are working to complete the distribution business sale and the merger as quickly as possible. If the INTAC stockholders approve the share purchase agreement and the merger agreement and the parties receive the necessary governmental approvals, INTAC, HSW and HSW International anticipate that the merger will be completed in the first half of 2007. However, it is possible that factors outside the control of the parties could require them to complete the merger at a later time or not complete it at all.

Q:

 

 

 

Can I dissent and require appraisal of my shares?

 

 

A.

 

No. INTAC stockholders have no dissenters' rights under Nevada law in connection with the merger.

Q:

 

 

 

Where can I find more information about the companies?

 

 

A:

 

You can obtain more information about HSW International and INTAC from the various sources described under "
Where You Can Find More Information" on page 154.

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/prospectus or the relevant proxy card, you should contact:
 
  For HSW International

  For INTAC

    HSW International, Inc.
One Capital City Plaza
3350 Peachtree Road,
Suite 1500
Atlanta, GA 30326-1039
Telephone: (404) 364-5823
  INTAC International, Inc.
12221 Merit Drive
Suite 600
Dallas, TX 75251-2248
Telephone: (469) 916-9891

7



SUMMARY

        This summary highlights selected information from and incorporated by reference into this proxy statement/prospectus. This summary may not contain all of the information that is important to you. To understand the merger and the distribution business sale fully and for a more complete description of the legal terms of the merger and the distribution business sale, you should carefully read this entire proxy statement/prospectus and the other documents to which we refer you, including in particular the copies of the merger agreement, the share purchase agreement, the voting agreement,the contribution agreements, the services agreement, the update agreement, the letter agreement, the stock purchase agreements, the stockholders agreement, the HSW International Amended and Restated Certificate of Incorporation, the HSW International Amended and Restated Bylaws and the opinions of Savvian, LLC (referred to in this proxy statement/prospectus as Savvian) that are attached as annexes to this proxy statement/prospectus or as exhibits to the registration statement on Form S-4, of which this proxy statement/prospectus forms a part, filed by HSW International with the Securities and Exchange Commission (referred to in this proxy statement/prospectus as the SEC). See also "Where You Can Find More Information" on page 154. We have included page references parenthetically to direct you to a more complete description of the topics presented in this summary.


General

The Companies (page 41)

INTAC International, Inc.
Unit 6-7, 32/F.
Laws Commercial Plaza
788 Cheung Sha Wan Road
Kowloon, Hong Kong
(852) 2385-8789

        INTAC is a U.S. holding company focused on the development of strategic business opportunities available in China and the Asia-Pacific Rim. The Company currently maintains offices in China (Hong Kong, Beijing and Tianjin), Germany (Frankfurt) and the United States (Dallas, Texas). INTAC services the education and career development markets in China with software for school administration and consumer-focused websites, and distributes wireless handsets to equipment wholesalers, agents, retailers and other distributors, mainly in Hong Kong.

HowStuffWorks, Inc.
One Capital City Plaza
3350 Peachtree Road, Suite 1500
Atlanta, GA 30326-1039
Telephone: (404) 760-4729

        HSW is a privately-held online publishing company that provides objective, credible, and useful information for people to learn about the world around them. The company's website attracts millions of unique visitors each month and is a source for in-depth, easy-to-understand explanations on hundreds of topics ranging from science and technology to health and electronics. In 2005, HSW became the exclusive online publisher for Publications International, Ltd. and its Consumer Guide and Mobil Travel Guide brands.

HSW International, Inc.
One Capital City Plaza
3350 Peachtree Road, Suite 1500
Atlanta, GA 30326-1039
Telephone: (404) 364-5823

8



        HSW International was formed on March 14, 2006 as a wholly owned subsidiary of HSW in order to effect the merger. Prior to the consummation of the merger, HSW International will have no assets or operations other than incident to its formation and in preparation for the merger and subsequent business. After the merger, INTAC will be a wholly owned subsidiary of HSW International, and the current stockholders of INTAC will become stockholders of HSW International. Upon consummation of the merger and the related transactions, HSW International will launch an Internet business based on translated and localized versions of the HowStuffWorks website, including advertising, search, e-commerce and sponsorships, in China and Brazil, leveraging the appropriate elements of INTAC's business.

HSW International Merger Corporation
One Capital City Plaza
3350 Peachtree Road, Suite 1500
Atlanta, GA 30326-1039
Telephone: (404) 760-5823

        HSW International Merger Corporation was formed on February 27, 2006, and became a wholly owned subsidiary of HSW International on March 14, 2006. This subsidiary was formed as a Nevada corporation solely to effect the merger, and this subsidiary has not conducted and will not conduct any business during any period of its existence. We refer to this subsidiary throughout this proxy statement/prospectus as the merger sub.

The Merger (page 46)

        On April 20, 2006, HSW, HSW International, INTAC and merger sub, a wholly owned subsidiary of HSW International, entered into the merger agreement which was amended by the amendment to merger agreement dated January 29, 2007, which is the legal document governing the proposed merger. Under the terms of the merger agreement, merger sub will be merged with INTAC, with INTAC continuing as the surviving corporation. Upon the consummation of the merger, INTAC will be a wholly owned subsidiary of HSW International and INTAC common stock will no longer be publicly traded. HSW International will apply to have the HSW International common stock listed for trading on either the Nasdaq National Market or the Nasdaq Capital Market under the symbol "HSWI" and will use its best efforts to obtain Nasdaq approval for the quotation of HSW International common stock prior to the closing of the merger.

The Distribution Business Sale (page 46)

        On January 29, 2007, INTAC, INTAC International Holdings Limited ("INTAC Holdings"), a wholly owned subsidiary of INTAC, INTAC (Tianjin) International Trading Company ("INTAC Trading"), a wholly owned subsidiary of INTAC Holdings, Cyber Proof Investments Ltd. ("Cyber"), an entity controlled by Mr. Zhou, and Mr. Zhou entered into the share purchase agreement, which is the legal document governing the proposed distribution business sale. Pursuant to the share purchase agreement, INTAC Holdings will sell all the issued and outstanding shares of Global Creative International Limited, INTAC Telecommunications Limited, INTAC Deutschland GmbH and FUTAC Group Limited, each a wholly owned subsidiary of INTAC Holdings ("distribution companies"), and INTAC Trading will transfer its rights and control with respect to Meidi Technology, to Cyber in exchange for 3 million shares of INTAC common stock held by Mr. Zhou. The distribution/telecommunications segment of INTAC's business, which consists of the distribution of wireless handset products and the sale of prepaid calling cards, is conducted in whole by the distribution companies.

What INTAC Stockholders Will Receive in the Merger (page 73)

        At the closing of the merger, each outstanding share of INTAC common stock will be converted into the right to receive one share of HSW International common stock. Upon the consummation of the merger and the asset contribution but without giving effect to the equity financing, INTAC

9



stockholders will own approximately 46.5% of the outstanding shares of HSW International. After giving effect to the equity financing, INTAC stockholders will own a percentage of the outstanding shares of HSW International that will vary depending upon the HSW International stock price.

        Set forth below is a table showing a range of hypothetical values representing 90% of the 10 trading day volume weighted average price of HSW International common stock commencing on the first trading day following the date on which the shelf registration statement to be filed by HSW International in connection with the equity financing is declared effective by the SEC (referred to in this proxy statement/prospectus as the shelf purchase price), the approximate number of shares of HSW International common stock to be issued pursuant to the equity financing based on the applicable hypothetical shelf purchase price, and the aggregate percentage ownership of HSW International common stock to be held by current INTAC stockholders given these hypothetical values. If the shelf purchase price is lower than $6.57, equal to 90% of the 10 trading day volume weighted average price of the common stock of INTAC on the Nasdaq Capital Market ending on the trading day prior to the public announcement of the amendment to merger agreement (referred to in this proxy statement/prospectus as the public announcement price), then the investors in connection with the equity financing (other than the one European investor as described below) will ultimately receive an aggregate amount of shares equal to the value of their combined investment, or $43.5 million, divided by the shelf purchase price. However, if the public announcement price is lower than the shelf purchase price, then such investors will ultimately receive an aggregate amount of shares equal to the value of their combined investment, or $43.5 million, divided by the public announcement price. Instead of a defined purchase amount, one of the European investors has agreed to purchase 900,000 shares of HSW International common stock at the lower of the public announcement price, the shelf purchase price or highest trading price of HSW International common stock on the closing date of the purchase. The table below does not take into account any stock options to be assumed or issued by HSW International.

Hypothetical shelf
purchase price

  Approximate number of shares of HSW International common stock issuable pursuant to equity financing
  Approximate aggregate ownership of HSW International common stock by current INTAC stockholders*
>= $6.57   7,500,000   39.6%

$6.00

 

8,200,000

 

39.0%

$5.00

 

9,600,000

 

38.0%

$4.00

 

11,800,000

 

36.5%

* HSW International outstanding shares based on 19,940,727 shares of HSW International common stock to be issued to current INTAC stockholders, 22,940,727 shares of HSW International common stock to be issued to HSW and the variable number of shares of HSW International common stock issuable pursuant to the equity financing.

        See also "The Merger and the Distribution Business Sale—Ownership of HSW International Following the Merger" beginning on page 73.

Asset Contribution Between HSW and HSW International (page 46)

        In connection with the merger, HSW and HSW International will enter into two contribution agreements, through which HSW will contribute the contributed assets to HSW International in exchange for shares of HSW International common stock and HSW International will have exclusive digital publishing rights to HSW's content in China and Brazil. In addition to the contributed assets, HSW will grant HSW International the right to exclusively license for a fee the digital publishing rights in China and Brazil to new and modified content developed by HSW after the merger is consummated (subject to the rights of third parties to such new and modified content), pursuant to an update

10



agreement. HSW will also provide certain transitional services to HSW International for the purposes of developing, supporting, translating, and facilitating the digital transmission of the contributed assets pursuant to a services agreement. Finally, HSW will grant HSW International an 18 month option to acquire from HSW the exclusive digital publishing rights for HSW content in India and Russia. The China and Brazil contribution agreements, services agreement, update agreement and letter agreement are attached to this proxy statement/prospectus as Annexes C, D, E, F and G, respectively.

        See also "Agreements Related to the Merger—The Contribution Agreements, Services Agreement, Update Agreement and Letter Agreement" beginning on page 92.

Stock Purchase Agreements (page 94)

        American investors have agreed to purchase $22.5 million of HSW International common stock pursuant to the American investors stock purchase agreements, and European investors have agreed to purchase approximately $27 million of HSW International common stock pursuant to the European investors stock purchase agreements. The American investors stock purchase is conditioned upon the consummation of the merger and the European investors stock purchase is conditioned upon consummation of the merger and the effectiveness of a resale registration statement. The stock purchase agreements and the First Amendment to the DWS Stock Purchase Agreement are attached to this proxy statement/prospectus as Annexes I, J, K and L, respectively.

        For a more complete description, see "Agreements Related to the Merger—The Stock Purchase Agreements" beginning on page 94.

Treatment of INTAC Stock Options (page 77)

        Outstanding INTAC stock options at the closing date of the merger will be assumed by HSW International and converted into options to purchase HSW International common stock on the same terms and conditions existing prior to the merger; provided, however, that outstanding options held by non-employee directors will vest as to all of the covered shares. For a more complete description of the treatment of INTAC stock options, see "The Merger and the Distribution Business Sale—Effect on Awards Outstanding Under INTAC Stock Incentive Plans" beginning on page 77.

Dissenters' Rights (page 77)

        Under Nevada law, INTAC stockholders will not have dissenters' rights in connection with the merger.

Material United States Federal Income Tax Consequences of the Merger (page 75)

        The merger is conditioned upon INTAC's receipt of an opinion of Shearman & Sterling, counsel to INTAC, to the effect that either (i) the merger and the asset contribution together will qualify as a transaction under Section 351 of the Internal Revenue Code, or (ii) the merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code. This opinion of counsel to INTAC will be based on, among other things, current law and certain covenants, assumptions and representations as to factual matters made by, among others, HSW, HSW International and INTAC, which, if incorrect, could jeopardize the conclusions reached by such counsel in their opinions. So long as the merger and the asset contribution together constitutes a transaction under Section 351 of the Internal Revenue Code, the receipt by INTAC stockholders of the merger consideration in exchange for INTAC common stock pursuant to the merger will not be a taxable transaction for United States federal income tax purposes.

        You should read "The Merger and the Distribution Business Sale—Material United States Federal Income Tax Consequences of the Merger" beginning on page 75 for a more complete discussion of the United States federal income tax consequences of the merger. Tax matters can be complicated, and the

11



tax consequences of the merger to you will depend on your particular tax situation. We urge you to consult your tax advisor to determine the tax consequences of the merger to you.

Recommendation of the INTAC Board of Directors (page 53)

        After careful consideration, the INTAC board of directors adopted the merger agreement and the share purchase agreement and determined that the merger agreement, the share purchase agreement, the merger, the related transactions and the distribution business sale are fair to and in the best interests of INTAC and its stockholders. The INTAC board of directors unanimously recommends that you vote "FOR" adoption of the merger agreement and the share purchase agreement and approval of the merger, the related transactions and the distribution business sale.

        In reaching its decision to adopt the merger agreement and the share purchase agreement and to recommend the adoption of the merger agreement and the share purchase agreement and approval of the merger, the related transactions, the share purchase agreement by INTAC's stockholders, the INTAC board of directors consulted with INTAC's management, as well as its legal and financial advisors, and considered the terms of the merger agreement, the share purchase agreement and the transactions contemplated by the merger agreement.

        To review the background of, and INTAC's reasons for, the merger and the distribution business sale, as well as certain risks related to the merger and the combined company, see "The Merger and the Distribution Business Sale—Background of the Merger and Distribution Business Sale, "The Merger and the Distribution Business Sale—INTAC's Reasons for the Merger and Distribution Business Sale and Recommendation of the INTAC Board of Directors" and "Risk Factors" beginning on page 47, 53 and 21, respectively.

Opinions of INTAC's Financial Advisor (page 56)

        On January 28, 2007, Savvian Advisors, LLC, or Savvian, financial advisor to INTAC, delivered to the INTAC board of directors its oral opinion, which was subsequently confirmed in writing, that, as of that date and based upon and subject to the assumptions, factors, qualifications and limitations set forth in the written opinion, the consideration to be received by the holders of shares of INTAC common stock, other than Mr. Zhou and his affiliates, taken in the aggregate pursuant to the merger agreement was fair from a financial point of view to such holders.

        In addition, on January 28, 2007, Savvian delivered to the INTAC board of directors its oral opinion, which was subsequently confirmed in writing, that, as of that date and based upon and subject to the assumptions, factors, qualifications and limitations set forth in the written opinion, the consideration to be received by INTAC for all of the issued and outstanding shares of the distribution companies pursuant to the share purchase agreement was fair from a financial point of view to INTAC.

        The full text of the written opinions of Savvian, each dated January 28, 2007, which set forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken by Savvian in connection with the opinions, are attached to this proxy statement/prospectus as Annex N and Annex O, respectively. Savvian provided its opinions for the information and assistance of the INTAC board of directors in connection with its consideration of the proposed transactions. The Savvian opinions are not a recommendation to any stockholder of INTAC as to how to vote or act with respect to the proposed transactions, and do not address the prices at which HSW International common stock will trade following the consummation of the merger and the distribution business sale. You are urged to read the opinions carefully and in their entirety.

Board of Directors and Management of HSW International After the Merger

        Upon the consummation of the merger, the board of directors of HSW International will consist of seven individuals, with five persons to be named by HSW (consisting of Mr. Jeffrey Arnold, and four other directors to be named) and two persons to be named by Mr. Wei Zhou, Chief Executive Officer,

12



President and Secretary of INTAC (consisting of Mr. Zhou and Dr. Heinz-Gerd Stein). Mr. Arnold will serve as chairman of the board of HSW International. A majority of the board of directors will be "independent" under both United States federal securities laws and the rules of the Nasdaq Stock Market.

        Following the merger, Mr. Zhou will continue to serve as President, Chief Executive Officer and Chairman of INTAC. Mr. Zhou's current INTAC employment agreement will be assumed by HSW International. The terms of Mr. Zhou's employment will remain unchanged.

        Following the merger, Mr. Robert C. Bicksler will serve as Executive Vice President, Chief Financial Officer and Chief Operating Officer of HSW International.

        Following the merger, Mr. David Darnell will continue to serve as Senior Vice President and Chief Financial Officer of INTAC pursuant to the terms of his existing INTAC employment agreement.

        For a more complete description, see "HSW International Management Following the Merger" and "The Merger and the Distribution Business Sale—Interests of HSW International Directors and Executive Officers in the Merger and Distribution Business Sale" beginning on page 120 and 71, respectively.

Interests of HSW International Directors and Executive Officers in the Merger (page 71)

        Certain of HSW International's directors and/or executive officers may be deemed to have additional interests in the merger due to their control and/or ownership interest in HSW and/or its stockholders. In addition, Mr. Arnold's consulting agreement provides that HSW International shall grant him options to acquire 3,000,000 shares of HSW International's common stock and shall grant options to acquire an additional 1,000,000 shares to one or more individuals in the eligible grantee group, which includes Mr. Arnold. The consulting agreement further provides that Mr. Arnold shall recommend to HSW International a suggested manner of allocating the additional options. Mr. Bicksler's employment agreement provides that HSW International shall grant him options to acquire 500,000 shares of HSW International's common stock.

        For a more complete description, see "The Merger and the Distribution Business Sale—Interests of HSW International Directors and Executive Officers in the Merger and Distribution Business Sale" beginning on page 71.

Interests of INTAC Directors and Executive Officers in the Merger (page 70)

        None of INTAC's executive officers are entitled to any additional compensation as a result of the merger. Outstanding stock options granted to INTAC directors and executive officers will be assumed, meaning the options will become options to purchase HSW International common stock. Outstanding stock options held by non-employee directors (consisting of Mr. Theodore Botts, Mr. Kevin Jones, Dr. Heinz-Gerd Stein and Larrie Weil) will vest in full as a result of the merger.

        For a more complete description, see "The Merger and the Distribution Business Sale—Interests of INTAC Directors and Executive Officers in the Merger and Distribution Business Sale" beginning on page 70.

        Comparison of Rights of Common Stockholders of HSW International and INTAC (page 134)

        INTAC stockholders, whose rights are currently governed by the INTAC Amended and Restated Articles of Incorporation, the INTAC Amended and Restated By-laws and Nevada law, will, upon completion of the merger, become stockholders of HSW International and their rights will be governed by the HSW International Amended and Restated Certificate of Incorporation, attached to this proxy statement/prospectus as Annex P, the HSW International Amended and Restated By-laws, attached to this proxy statement/prospectus as Annex Q, and Delaware law.

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The INTAC Special Meeting

        The special meeting of INTAC stockholders will be held at                        , at             a.m., central time, on                        , 2007. At the INTAC special meeting, INTAC stockholders will be asked to adopt the merger agreement and the share purchase agreement and approve the merger, the related transactions and the distribution business sale.

Record Date; Voting Power (page 38)

        INTAC stockholders are entitled to vote at the INTAC special meeting if they owned shares of INTAC common stock as of the close of business on                        , 2007, the INTAC record date.

        On the INTAC record date, there were            shares of INTAC common stock entitled to vote at the INTAC special meeting. Stockholders will have one vote at the INTAC special meeting for each share of INTAC common stock that they owned on the INTAC record date.

Vote Required (page 38)

        Adoption of the merger agreement and approval of the merger and the related transactions requires the affirmative vote of the holders of a majority of the outstanding shares of INTAC common stock entitled to vote on the INTAC record date.

        Adoption of the share purchase agreement and approval of the distribution business sale requires the affirmative vote of the holders of a majority of the outstanding shares of INTAC common stock entitled to vote on the record date (other than shares held by Mr. Zhou, his affiliates and associates).

Shares Owned by INTAC Directors and Executive Officers (page 39)

        On the INTAC record date, directors and executive officers of INTAC beneficially owned and were entitled to vote            shares of INTAC common stock in the aggregate, which represented approximately    % of the shares of INTAC common stock outstanding on that date.

Voting Agreement (page 39)

        Wei Zhou, INTAC's President and Chief Executive Officer, who owns approximately        % of the outstanding shares of INTAC common stock as of the INTAC record date, has entered into a voting agreement pursuant to which he has agreed to vote his shares in favor of the adoption of the merger agreement and approval of the merger and the related transactions. Therefore, the merger agreement will be adopted and the merger and the related transactions approved regardless of how INTAC's other stockholders vote their shares. Because the shares of INTAC common stock held by Mr. Zhou, his affiliates and associates will not participate in the vote to adopt the share purchase agreement and approve the distribution business sale, your vote is extremely important in determining whether the share purchase agreement will be adopted and the distribution business sale approved. The voting agreement is attached to this proxy statement/prospectus as Annex M.

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The Merger Agreement

        The merger agreement is attached as Annex A to this proxy statement/prospectus and the amendment to merger agreement is attached as Annex B to this proxy statement/prospectus. We strongly encourage you to read the merger agreement, as amended by the amendment to merger agreement, in its entirety because it is the principal document governing the merger.

Conditions to the Completion of the Merger (page 79)

        HSW International and INTAC are obligated to complete the merger only if certain conditions are satisfied, or, in some cases, waived, including but not limited to the following:

        For a more complete description of the conditions to completion of the merger, see "The Merger Agreement—Conditions to the Completion of the Merger" beginning on page 79.

Termination of the Merger Agreement; Termination Fee (pages 84 and 85)

        The merger agreement contains provisions addressing the circumstances under which HSW International or INTAC may terminate the merger agreement. No termination fees are payable by either party in the event the merger agreement is terminated.

        For a more complete description, see "The Merger Agreement—Termination of the Merger Agreement" and "The Merger Agreement—Fees and Expenses" beginning on page 84 and 85, respectively.

Fees and Expenses (page 85)

        Each of HSW (including HSW International) and INTAC will initially pay its own fees and expenses in connection with the merger, except that they will share equally (i) the expenses incurred in connection with the printing, filing and mailing of the registration statement on Form S-4 of which this proxy statement/prospectus is a part, (ii) the expenses incurred in connection with the printing, filing and mailing of any other registration statements required by the transactions contemplated by the merger agreement and (iii) Nasdaq listing application and other listing costs. Subject to certain exceptions, if the merger and the related transactions are consummated, the surviving corporation will be responsible for, reimburse or pay all expenses incurred by the parties to the merger agreement.

        For a more complete description of INTAC's repayment obligation, see "The Merger Agreement—Fees and Expenses" beginning on page 85.


The Share Purchase Agreement

        The share purchase agreement is attached as Annex R to this proxy statement/prospectus. We strongly encourage you to read the share purchase agreement in its entirety because it is the principal document governing the distribution business sale.

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Sale of Distribution Companies (page 99)

        INTAC Holdings has agreed to sell to Cyber, a corporation wholly-owned by Mr. Zhou, all shares of the INTAC Holdings subsidiaries responsible for the distribution/telecommunications segment of INTAC's business in exchange for 3,000,000 shares of INTAC common stock. In addition, INTAC Trading has agreed to transfer its rights and control with respect to Meidi Technologies to Cyber.

Closing (page 99)

        The closing of the share purchase agreement, subject to the satisfaction or waiver of certain closing conditions, including the requisite shareholder approval for the share purchase agreement and termination of certain guaranties provided by INTAC, INTAC International Holdings Limited, and certain of their affiliates, with respect to liabilities of the distribution companies or Meidi Technologies in favor of Delta One Holland for amounts owed by INTAC Telecommunications, shall take place on the closing date of, but immediately prior to, the merger.

        For a more complete description, see "Agreements Related to the Merger—The Share Purchase Agreement" beginning on page 99.


Market Prices and Dividend Information

        Shares of INTAC common stock are listed on the Nasdaq Capital Market under the symbol "INTN." Both HSW and HSW International common stock are privately held. As a result, there is no established trading market for either HSW or HSW International common stock. HSW International will apply to have its common stock listed on either the Nasdaq National Market or the Nasdaq Capital Market under the symbol "HSWI."

        The following table presents the last reported sale prices of INTAC common stock, as reported by the Nasdaq Capital Market on:


 
  INTAC Common Stock
 
  Close

April 19, 2006   $ 10.99
January 26, 2007   $ 7.02
March 13, 2007   $ 6.00

        These prices will fluctuate prior to the closing date of the merger and the distribution business sale, and INTAC stockholders are urged to obtain current market quotations prior to making any decision with respect to the merger and the distribution business sale.

        HSW International and INTAC have not historically paid regular quarterly dividends. See "Comparative Stock Prices and Dividends" beginning on page 132.

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Comparative Per Share Information

        The following table sets forth for the periods presented certain per share data of INTAC on a historical basis and certain per share data of HSW International on an unaudited pro forma basis after giving effect to the merger under the purchase method of accounting, assuming that 19,940,727 shares of HSW International common stock had been issued in exchange for all outstanding shares of INTAC common stock on a fully diluted basis. The historical per share data of INTAC has been derived from, and should be read in conjunction with, the historical financial statements of INTAC incorporated by reference in this proxy statement/prospectus. See "Where You Can Find More Information" beginning on page 154. HSW International has only limited historical operations prior to the consummation of the merger. See "HSW International and INTAC Management's Discussion and Analyses of Financial Condition and Results of Operations" on page 101 for more information. The unaudited pro forma per share data has been derived from, and should be read in conjunction with, the unaudited pro forma condensed consolidated financial statements included elsewhere in this proxy statement/prospectus. The unaudited pro forma per share data, however, is not intended to reflect future per share levels of net income and book value of HSW International. See "Unaudited Pro Forma Condensed Consolidated Financial Statements" beginning on page 126.

 
  Year Ended
September 30, 2006

  Three
Months Ended
December 31, 2006

 
INTAC—HISTORICAL              
Per common share data:              
  Basic and diluted loss from continuing operations   $ (0.18 ) $ (0.05 )
  Basic and diluted loss from discontinued operations   $ (0.18 ) $ (0.02 )
   
 
 
  Net loss   $ (0.36 ) $ (0.07 )
  Dividends declared per common share          
  Unaudited book value per share (basic)   $ 1.45   $ 1.36  
HSW INTERNATIONAL—UNAUDITED PRO FORMA CONSOLIDATED WITH INTAC              
Per common share data:              
  Basic and diluted loss   $ (0.25 ) $ (0.08 )
  Unaudited book value per share (basic)   $ 2.08   $ 2.04  

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Selected Historical Consolidated Financial Data of INTAC International, Inc.

        The following selected consolidated financial information of INTAC as of and for each of the three years in the period ended December 31, 2004, the nine month transition period ended September 30, 2005 and the year ended September 30, 2006 have been derived from INTAC's audited historical financial statements incorporated by reference into this proxy statement/prospectus. The consolidated financial statements for the years and transition period beginning with the period ended December 31, 2002 were audited by KBA Group LLP, an independent registered public accounting firm. The following selected consolidated financial information of INTAC as of and for the three-month periods ended December 31, 2005 and December 31, 2006 has been derived from the unaudited consolidated financial statements included in INTAC's Form 10-Q for the three-month period ended December 31, 2006 incorporated by reference into this proxy statement/prospectus and, in the opinion of INTAC management, includes all adjustments consisting only of normal recurring adjustments, necessary for a fair statement of such information for the interim periods. The operating results for the three month period ended December 31, 2006 are not necessarily indicative of the results for the full fiscal year ending September 30, 2007. The following information should be read in conjunction with management's discussion and analysis of financial condition and results of operations of INTAC and the consolidated financial statements and notes thereto of INTAC from and incorporated by reference into this proxy statement/prospectus. HSW International has only limited historical operations prior to the consummation of the merger with INTAC.

 
   
   
   
   
   
  Three Months Ended
December 31,

 
 
  Year Ended December 31,
   
   
 
 
  Nine Month Transition Period Ended
September 30,
2005(4)

  Year Ended
September 30,
2006

 
 
  2002
  2003(2)
  2004(3)
  2005
  2006
 
Operating Data:(1)                                            
Career development services revenue   $   $   $ 4,231,076   $ 4,218,779   $ 5,749,932   $ 1,190,630   $ 2,018,899  
Career development services gross profit             2,997,586     3,179,480     4,241,406     972,845     1,330,994  
Income (loss) from continuing operations         (131,618 )   883,259     (931,916 )   (4,156,367 )   (301,962 )   (1,268,270 )
Income (loss) from discontinued operations     (776,755 )   (107,578 )   4,933,238     (534,466 )   (3,985,629 )   (432,468 )   (390,988 )
Net income (loss)   $ (776,755 ) $ (239,196 ) $ 5,816,497   $ (1,466,382 ) $ (8,141,996 ) $ (734,430 ) $ (1,659,258 )
Basic income (loss) per share                                            
Income (loss) from continuing operations   $   $ (0.01 ) $ 0.04   $ (0.04 ) $ (0.18 ) $ (0.01 ) $ (0.05 )
Income (loss) from discontinued operations     (0.04 )       0.24     (0.03 )   (0.18 )   (0.02 )   (0.02 )
   
 
 
 
 
 
 
 
Net income (loss)   $ (0.04 ) $ (0.01 ) $ 0.28   $ (0.07 ) $ (0.36 ) $ (0.03 ) $ (0.07 )
   
 
 
 
 
 
 
 
Diluted income (loss) per share                                            
Income (loss) from continuing operations   $   $ (0.01 ) $ 0.04   $ (0.04 ) $ (0.18 ) $ (0.01 ) $ (0.05 )
Income (loss) from discontinued operations     (0.04 )       0.24     (0.03 )   (0.18 )   (0.02 )   (0.02 )
   
 
 
 
 
 
 
 
Net income (loss)   $ (0.04 ) $ (0.01 ) $ 0.28   $ (0.07 ) $ (0.36 ) $ (0.03 ) $ (0.07 )
   
 
 
 
 
 
 
 
Dividends declared per common share                              
                                             

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Balance Sheet Data (as of the period end)(1):                                            
Assets held for sale   $ 4,720,549   $ 5,942,010   $ 19,311,736   $ 20,507,450   $ 13,234,743   $ 21,233,260   $ 16,790,118  
Total assets     4,720,549     12,521,698     41,689,772     44,391,959     38,578,436     44,858,100     41,770,615  
Liabilities held for sale     2,823,467     2,240,357     1,219,966     5,321,526     1,959,111     4,303,953     6,133,841  
Short-term borrowings         2,728,202                      
Total liabilities     2,823,467     5,801,560     4,104,592     8,156,480     5,855,492     9,265,664     10,645,788  
Stockholders' equity     1,897,082     6,720,138     37,585,180     36,235,479     32,722,944     35,592,436     31,124,827  

(1)
Pursuant to the proposed sale of INTAC's distribution business, the selected historical consolidated financial data of INTAC reflects a reclassification of the distribution business financial statement balances to "held for sale" in the balance sheet data and to "discontinued operations" in the operating data.

(2)
In September 2003, INTAC issued 1 million shares of common stock in a private placement transaction for cash proceeds of $4.5 million.

(3)
In May 2004, INTAC issued 800,000 shares of common stock in a private placement transaction for cash proceeds of $12 million, and in December 2004, INTAC issued 1 million shares with a fair value of $13 million in conjunction with the acquisition of Huana Xinlong.

(4)
In August 2005, INTAC changed its fiscal year from December 31 to September 30.

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Selected Unaudited Pro Forma Condensed Combined Consolidated Financial Information

        The following table sets forth a summary of the unaudited pro forma financial information giving effect to the merger of INTAC's career development and training services business and HSW International as if the merger had occurred on October 1, 2005. The unaudited pro forma financial data does not purport to represent what the combined results of operations of INTAC's career development and training services business and HSW International would have been had the merger occurred on October 1, 2005 or to project the results of operations or financial condition for any future date or period. See "Unaudited Pro Forma Condensed Consolidated Financial Statements" beginning on page 126.

 
  Year Ended
September 30, 2006

  Three Months Ended
December 31, 2006

 
 
  (Unaudited)

 
 
  (In thousands, except per share data)

 
Selected Operating Data:              
Career development services revenue   $ 5,750   $ 2,019  
Career development services gross profit     4,085     1,292  
Loss before income taxes     (10,401 )   (3,295 )
Net loss     (10,827 )   (3,301 )
Net loss per share-              
  basic and diluted   $ (0.25 ) $ (0.08 )
   
 
 
 
   
  December 31, 2006
Selected Balance Sheet Data:          
Cash and cash equivalents       $ 43,634
Total assets         93,741
Total Liabilities         6,180
Stockholders' equity         87,561

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RISK FACTORS

        In addition to the other information included and incorporated by reference in this proxy statement/prospectus, INTAC stockholders should consider carefully the matters described below in determining whether to approve the merger, the merger agreement, the distribution business sale, the share purchase agreement and the other related matters. In these risk factors, HSW International and INTAC are at times referred to on a combined and post-merger basis as the "combined company."


Risks Related to the Transactions

        The failure to close, in timely manner or at all, the merger and distribution business sale, or any negative market perception of the merger and distribution business sale may adversely affect the INTAC business and the market price of INTAC common stock and the listing of HSW International common stock.

        If INTAC stockholders do not adopt the merger agreement and the share purchase agreement and approve the merger, the distribution business sale and the related transactions, or if there is a delay in the consummation of the merger, the distribution business sale, or if the merger or the distribution business sale does not close as a result of a failure to satisfy closing conditions or otherwise, the market price of INTAC common stock may decline as a result. In addition, to the extent that the investing public has a negative perception of the merger or the distribution business sale, the public's perception of the INTAC business or the value of INTAC common stock may be negatively impacted. Also, if the merger or the distribution business sale is delayed or does not close, approval of HSW International's application to list its stock on either the Nasdaq National Market or the Nasdaq Capital Market may be delayed or may not be approved at all.

        Whether or not the merger is consummated, the announcement and pendency of the merger could cause disruptions in the INTAC business, which could have an adverse effect on INTAC's business and financial results.

        Whether or not the merger is consummated, the announcement and pendency of the merger could cause disruptions in or otherwise negatively impact the INTAC business. Specifically:

        These disruptions could be exacerbated by a delay in the consummation of the merger or termination of the merger agreement and could have an adverse effect on the INTAC business and financial results if the merger is not consummated or of the combined company if the merger is consummated.

        The distribution business sale may adversely affect the market price of INTAC common stock

        The wireless handset distribution business has historically accounted for, on average, approximately 94% of INTAC's total revenues. Because, as a result of the distribution business sale, the company will no longer engage in the wireless handset distribution business, there is a risk that the approval and announcement of the distribution business sale may negatively impact the public's perception of INTAC's business and/or the market value of INTAC common stock.

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        HSW International and INTAC will incur significant costs associated with the merger whether or not the merger is consummated.

        HSW International and INTAC will incur significant costs related to the merger, including legal, accounting, advisory, filing and printing fees. In the event that the merger is consummated, the combined company will pay for all expenses incurred by HSW, HSW International and INTAC. However, some of these costs will be incurred whether or not the merger is consummated. In the event the merger is not consummated, INTAC will pay its own fees and expenses in connection with the merger and HSW will pay for its and HSW International's fees and expenses in connection with the merger, except that HSW and INTAC will share equally (i) the expenses incurred in connection with the printing, filing and mailing of the registration statement of which this proxy statement/prospectus is a part (ii) the expenses incurred in connection with the printing, filing and mailing of any other registration statements required by the transactions contemplated by the merger agreement and (iii) Nasdaq listing application and other listing costs. In addition, the closing of the stock purchase with European investors, including DWS, is conditioned upon a registration statement covering the resale of the securities being purchased thereunder being declared effective by the SEC. Accordingly, it is possible that the parties will close the merger but that the stock purchase with European investors will not be consummated. If the stock purchase with European investors is not consummated, the expected working capital of the combined company will be significantly reduced which may have an adverse affect on the combined company's ability to implement its business plan in a timely manner or at all.

        The combined company may not realize the intended benefits of the merger if the combined company does not integrate certain of INTAC's operations and assets with the contributed assets in a timely and efficient manner.

        Achieving the benefits of the merger will depend to a significant extent on the integration of certain of INTAC's assets, operations and business segments with the contributed assets in a timely and efficient manner and the ability of the combined company to realize the anticipated synergies from this integration. This integration may be difficult and unpredictable for many reasons, including, among others, the translation of the contributed assets into Chinese, Portuguese and other languages and because HSW's and INTAC's internal systems and processes were developed without regard to such integration. The combined company's successful integration of the contributed assets with INTAC's current business will also require coordination of different personnel, which may be difficult and unpredictable because of possible cultural conflicts and differences in policies, procedures and operations among HSW, HSW International and INTAC, and the different geographical locations of the companies. If the combined company cannot successfully integrate the contributed assets with certain of INTAC's businesses, the combined company may not realize the expected benefits of the merger, which could adversely affect the combined company's business and could adversely affect the value of the combined company's common stock after the merger.

        In addition, the integration of the INTAC business with the contributed assets may place a significant burden on management of the combined company and its internal resources. The diversion of management's attention from ongoing business concerns and any difficulties encountered in the transition and integration process could harm the combined company's business and the value of the combined company's common stock.

        The combined company expects to incur substantial expenses related to the commercialization of the contributed assets.

        The combined company expects to incur substantial expenses in connection with the commercialization of the contributed assets. The failure of the combined company to meet the challenges involving this commercialization, or to do so on a timely basis, could cause substantial additional expenses and serious harm to the combined company. For example, pursuant to a services

22



agreement the combined company has agreed to pay HSW for services for an 18 month period following the consummation of the merger. These services are related to the commercialization of the contributed assets, including, among other services, translation, designing and developing the Internet sites through which the contributed assets will be distributed to customers and providing the technology for establishing and operating these Internet sites. While the combined company has assumed that a certain level of expenses would be incurred, there are a number of factors, some of which are beyond the control of HSW International and INTAC, that could affect the total amount or the timing of all of the expected commercialization expenses including:

        Many of the expenses that will be incurred, by their nature, are impracticable to estimate at the present time. These expenses could, particularly in the near term, exceed the benefits that the combined company expects to realize from the inclusion of the contributed assets to the business and operations of the combined company following the consummation of the merger. In addition, if the combined company fails to successfully commercialize the contributed assets within the term of the services agreement with HSW, the combined company may have to complete the commercialization itself or engage other parties to complete the commercialization. The diversion of employee resources to complete the commercialization of the contributed assets, any need to contract certain elements of the commercialization to third parties or any delay in the successful commercialization of the contributed assets could lead to additional commercialization expenses and have an adverse effect on the combined company's business and operations.

        Obtaining required approvals and satisfying closing conditions may delay or prevent completion of the merger.

        Completion of the merger is conditioned upon the receipt of all material governmental authorizations, consents, orders and approvals, including approval of HSW International's application to list its common stock on either the Nasdaq National Market or the Nasdaq Capital Market. These consents, orders and approvals may impose conditions on the divisions, operations or assets of HSW International or INTAC. These conditions may jeopardize or delay completion of the merger or may reduce the anticipated benefits of the merger. Further, no assurance can be given that the required consents and approvals will be obtained or that the required conditions to closing will be satisfied, and, if all such consents and approvals are obtained and the conditions are satisfied, no assurance can be given as to the terms, conditions and timing of the approvals or that they will satisfy the terms of the merger agreement. See "The Merger Agreement—Conditions to the Completion of the Merger" beginning on page 79 for a discussion of the conditions to the completion of the merger and "The Merger and the Distribution Business Sale—Regulatory Matters" beginning on page 76 for a description of the regulatory approvals necessary in connection with the merger.

        Completion of the merger is subject to the completion of the distribution business sale. No assurance can be given that the distribution business sale will be completed pursuant to the share

23



purchase agreement, and failure to complete the distribution business sale may delay or prevent completion of the merger.

        As a result of the merger, the combined company may become responsible for undisclosed liabilities or claims related to the assets contributed by HSW or the assets of INTAC for which it may not be indemnified against adequately or at all.

        There may be undiscovered claims or undisclosed liabilities that existed before the merger and arise subsequent to the merger for which no contractual remedies exist, and the combined company will be responsible for those claims and liabilities. INTAC is not obligated to indemnify the combined company for any undiscovered claims or undisclosed liabilities related to INTAC's assets that existed prior to the merger and that arise subsequent to the closing of the merger, which may include liabilities related to the wireless handset distribution business if such liabilities are not fully transferred by the distribution business sale. Wei Zhou has limited obligations to pay the combined company for any losses, damages, costs or expenses arising out of or related to any breach of the representations and warranties of INTAC in the merger agreement related to third party debt or payables. HSW has limited obligations to indemnify the combined company for undiscovered claims and undisclosed liabilities related to the assets contributed to the combined company by HSW. The combined company cannot assure you that any of Wei Zhou's payment obligations or any undiscovered claims or undisclosed liabilities for which it may become responsible will not be material or will not exceed the limitations of any applicable indemnification or payment obligations. Such liabilities could have a material adverse effect on the combined company's financial condition.

        The combined company will incur amortization expense as a result of acquiring intangible assets in connection with its acquisition of the assets of INTAC, which will result in a charge against its revenues.

        The acquisition of INTAC will be accounted for using the purchase method of accounting, which means assets and liabilities of INTAC, including its intangible assets, will be recorded on the combined company's balance sheets at their fair market value. On a pro forma basis, as of December 31, 2006, the combined company will have preliminary net intangible assets on its balance sheets of $43.2 million, representing approximately 46% of its total assets. The combined company's intangible assets, other than goodwill and intangibles with indefinite lives, will be amortized over periods ranging from 2 to 5 years. There can be no assurance that the value of the intangible assets will ever be realized by the combined company. Any future determination requiring the write-off of a significant portion of the combined company's unamortized intangible assets could have a material adverse effect on its financial condition and results of operations.


Risks Related to the Combined Company

        The combined company will be an early stage company and therefore its business and prospects are difficult to evaluate.

        INTAC's distribution companies, the shares of which are held by INTAC Holdings, which commenced operations from 2000 through 2002, will be sold to Cyber immediately prior to the consummation of the merger. Further, INTAC has only recently refocused its business model to the career development and training services segment and INTAC has limited experience in this industry. HSW International has no operating history, and the combined company has no experience in marketing and selling the contributed assets in the Chinese and Brazilian markets. Substantially all of INTAC's revenues to date have been in its distribution/ telecommunications segment which is being sold pursuant to the distribution business sale, and the combined company faces substantial risks that its results of operations will be materially and adversely affected by the shift in focus if the combined company is unable to successfully implement INTAC's refocused business plans and develop a market for the contributed assets. Consequently, the combined company will be an early stage company with a limited operating history upon which investors and others can evaluate its current business and

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prospects. The combined company's prospects must be considered in light of the many risks, uncertainties, expenses, delays, and difficulties frequently encountered by companies in their early stages of development. Some of the risks and difficulties the combined company expects to encounter include its ability to:

        Because of the lack of operating history for INTAC and HSW International and the early stage of the combined company's development, the combined company will have limited insight into trends and conditions that may exist or might emerge and affect the combined company's business, especially with respect to the online publishing, career development and training and education markets. The combined company cannot be certain that its business strategy will be successful or that it will successfully address these risks. Any failure by the combined company to successfully implement its new business plans would have a material adverse effect on its business, results of operations and financial condition.

        The combined company may not succeed in marketing and monetizing the contributed assets to potential customers or developing strategic partnerships for the distribution of its products and services.

        The combined company's plans to market and monetize the contributed assets in the Chinese and Brazilian online markets through the Internet are new and unproven. Moreover, the combined company will have limited experience in determining the pricing of the products and services that will be developed with the contributed assets. Because the combined company has never marketed or sold these products and services, the combined company may not be successful in establishing a customer base or strategic partnerships for the distribution of its products and services. If the combined company is not successful in developing, releasing and marketing these products and services on a profitable basis, the combined company's results of operations would be materially and adversely affected.

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        The combined company does not have significant experience in the Brazilian marketplace. Additionally, the combined company may not have the resources available to simultaneously develop operations in China and Brazil. Accordingly, there may be a delay in developing such operations in Brazil, which could affect the combined company's business plan and results of operations.

        In addition, any delay in developing the combined company's operations in Brazil may play a factor in the combined company's decision to exercise its option to acquire the exclusive digital publishing rights for the content in India and Russia pursuant to the Letter Agreement. The option is for a period of eighteen months after the closing of the merger and the combined company's failure to exercise such option may have an adverse affect on the combined company's ability to expand its international operations, which could affect its business plan and results of operations.

        The growth the combined company seeks is rare.

        Substantial future growth will be required in order for the combined company to realize its business objectives. Growth of this magnitude is rare. To the extent the combined company is capable of growing its business as necessary, the combined company expects that such growth will place a significant strain on its managerial, operational and financial resources. The combined company must manage its growth, if any, through appropriate systems and controls in each of these areas. The combined company must also establish, train and manage a larger work force. If the combined company does not manage the growth of its business effectively, its business, results of operations and financial condition could be materially and adversely affected.

        The combined company will face intense competition, which could have an adverse effect on the business, financial condition and results of operations of the combined company.

        The online publishing, career development and training and education markets are highly competitive. The combined company will encounter significant competition across its business lines and in each market in which it offers its products and services.

        In the online publishing market, the combined company expects that its competitors will include national Internet portals in China such as Baidu, NetEase.com, Shanda Interactive Entertainment, Sina, sohu.com and tom.com, which will compete with the combined company for online advertising revenue and end users.

        INTAC's primary historical competitors in the career development and training and education markets have included universities and private firms offering software and telecommunications related training, several local and national, primarily Chinese firms, some of which offer more complete product lines than INTAC, dedicated job search websites such as 51job.com, ChinaHR.com, Cjol.com and Zhaopin.com, national Internet portals in China such as NetEase.com, sina.com, sohu.com and tom.com, each of which provides online recruitment services, and executive search firms and other competitors currently engaged in print advertising that have started to internally develop or acquire online capabilities.

        Many of INTAC's historical competitors and the combined company's potential competitors have long operating histories, may have greater financial, management, technological development, sales, marketing and other resources than INTAC does or the combined company will, and may be able to adopt the combined company's business model or adopt alternative models that the combined company cannot match. As a result of competition, the combined company may experience reduced margins, loss of market share or less use of the combined company's services. The combined company will not be able to assure you that existing or future competitors will not develop or offer services and products which provide significant performance, price, creative or other advantages over the combined company's services. If the combined company is unable to compete effectively with current or future competitors as a result of these or other factors, the combined company's market share and its results of operations may be materially and adversely affected.

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        The company's proposed sale of the wireless handset distribution business and shift in strategic focus to the online publishing, career training and development and education markets could have an adverse effect on the business, financial condition and results of operations of the combined company.

        INTAC's wireless handset distribution business accounted for approximately 89% of its total revenues for the first quarter of fiscal year 2007 and approximately 92% of its total revenues for the fiscal year ended September 30, 2006. INTAC has shifted its business focus from the wireless handset distribution business, which INTAC Holdings has agreed to sell to Cyber, to the career training and development and education markets in order to focus on businesses with more attractive growth opportunities and higher margins than the wireless handset distribution business. The combined company intends to continue this revised business strategy, as well as focusing on the online publishing market using the contributed assets. The diversion of the combined company's management and resources to this revised business strategy may adversely affect the combined company's business, financial condition and results of operations, and there is no guarantee that the combined company would be able to offset the sale of the wireless handset distribution business through comparable growth in its online publishing, career training and development, and education businesses.

        The combined company will be subject to risks of customers defaulting on payments due.

        In some cases, INTAC will give credit terms to customers for the balance outstanding if they have an established and good payment history with INTAC. INTAC's Career Development Services had a net trade receivable balance of approximately $5.2 million as of December 31, 2006. This receivables balance relates primarily to Huana Xinlong and the sale of educational software to school districts within China. These school districts pay for their software purchases using funds supplied by the Chinese government. Historically, this funding takes many months, which is typical of the business process in China. As of December 31, 2006, approximately $1.6 million of INTAC's trade receivable balance relates to sales of educational software completed before March 31, 2005 and is fully reserved. While INTAC believes these Career Development Services receivables to be fully collectible, the timing of the collections cannot be estimated with certainty. Access to courts in China is less certain than in the United States, and furthermore it is difficult to assess the possibility of winning or collecting a judgment against the Chinese government. The combined company will be vulnerable to customers that do not pay or delay payment of their outstanding balances due for reasons beyond the combined company's control. Any failure of, or undue delay by, the combined company's customers in making payments to it would have a material adverse effect on the combined company's business, financial condition and results of operations.

        Resales of the combined company's common stock following the merger and additional obligations to issue the combined company's common stock may cause the market price of that stock to fall.

        Upon the consummation of the merger and the related transactions, HSW and current INTAC stockholders will in the aggregate each hold a substantial percentage of the outstanding common stock of HSW International. HSW will also be granted a warrant to purchase the number of shares of the combined company's common stock equal to the number of shares eligible for purchase under INTAC stock options that are assumed by the combined company. In addition, the combined company has agreed to register for resale shares of the combined company's common stock that will be held by Mr. Zhou, other INTAC affiliates, HSW, and the investors participating in the equity financing, although Mr. Zhou has agreed to lock up 4,000,000 shares for 12 months, and HSW has agreed to lock up all of its shares for 12 to 24 months. The resale registration statements for investors in the combined company are expected to take effect immediately or shortly after the closing of the merger. The issuance of these new shares and the resale of additional shares of the combined company's common stock could have the effect of depressing the market price for the combined company's common stock.

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        The combined company's internal control over financial reporting and its disclosure controls and procedures may not prevent all possible errors that could occur. Material weaknesses exist with INTAC's internal control over financial reporting, and may continue to exist with the combined company's internal control over financial reporting. Internal control over financial reporting and disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objective will be met.

        INTAC makes evaluations of its internal control over financial reporting and its disclosure controls and procedures, which include a review of the objectives, design, implementation and effect of the controls and information generated for use in INTAC's periodic reports. In the course of INTAC's controls evaluation, it seeks to identify data errors, control problems and to confirm that appropriate corrective action, including process improvements, are being undertaken. This type of evaluation is conducted on a quarterly basis so that the conclusions concerning the effectiveness of INTAC's controls can be reported in INTAC's periodic reports.

        In connection with INTAC management's evaluation of the effectiveness of INTAC's internal control over financial reporting as of September 30, 2005, INTAC determined that material weaknesses existed with its internal control over financial reporting. INTAC management has taken various actions to improve its internal controls in the identified areas and has resolved these weaknesses as of INTAC's second fiscal quarter of 2006.

        A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be satisfied. Internal control over financial reporting and disclosure controls and procedures are designed to give a reasonable assurance that they are effective to achieve their objectives. The combined company cannot provide absolute assurance that all possible future control issues within the combined company will be detected. These inherent limitations include the real world possibility that judgments in the combined company's decision making can be faulty, and that isolated breakdowns can occur because of simple human error or mistake. The design of the combined company's system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed absolutely in achieving the combined company's stated goals under all potential future or unforeseeable conditions. Because of the inherent limitations in a cost effective control system, misstatements due to error could occur and not be detected.

        The state of the telecommunications and Internet infrastructure in China and Brazil may limit the combined company's growth.

        The combined company will rely on the Internet for certain aspects of its business, including the publication of content online and its Internet portals. The telecommunications and Internet infrastructures in China and Brazil are not well developed and are subject to regulatory control and, in the case of China, ownership by the Chinese government. The cost of Internet access is high relative to the average income in China. Failure to further develop these infrastructures could limit the combined company's ability to grow. Alternatively, as these infrastructures improve and Internet use increases, the combined company may not be able to scale its systems proportionately. The combined company's reliance on these infrastructures will make it vulnerable to disruptions or failures in service, without sufficient access to alternative networks and services. Such disruptions or failures could reduce its user satisfaction. Should these risks be realized, the combined company's ability to increase revenues and profitability would be impaired.

        The combined company's operations will be vulnerable to natural disasters and other events, as INTAC has only limited backup systems and does not maintain any backup servers outside of China.

        The combined company will have limited backup systems and could experience system failures and electrical outages from time to time in the future, which could disrupt its operations. All of INTAC's

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servers and routers are currently hosted in a single location. INTAC does not maintain any back up servers outside of Beijing, and does not have a disaster recovery plan in the event of damage from fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break ins and similar events. If any of the foregoing occurs, the combined company may experience a complete system shutdown. INTAC does not carry any business interruption insurance. To improve the performance and to prevent disruption of its services, the combined company may have to make substantial investments to deploy additional servers or one or more copies of its websites to mirror its online resources. Although INTAC carries property insurance with low coverage limits, its coverage may not be adequate to compensate the combined company for all losses, particularly with respect to loss of business and reputation that may occur.

        The combined company's network operations may be vulnerable to hacking, viruses and other disruptions, which may make its products and services less attractive and reliable.

        Internet usage could decline if any well publicized compromise of the combined company's security occurs. "Hacking" involves efforts to gain unauthorized access to information or systems or to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment. Hackers, if successful, could misappropriate proprietary information or cause disruptions in the combined company's service. The combined company may be required to expend capital and other resources to protect its website against hackers. The combined company cannot assure you that any measures it may take will be effective. In addition, the inadvertent transmission of computer viruses could expose the combined company to a material risk of loss or litigation and possible liability, as well as materially damage the combined company's reputation and decrease the combined company's user traffic.

        Unauthorized use of the combined company's intellectual property by third parties, and the expenses incurred in protecting its intellectual property rights, may adversely affect its business.

        The combined company regards its copyrights, service marks, trademarks, trade secrets and other intellectual property as critical to its success. Unauthorized use of the combined company's intellectual property by third parties may adversely affect its business and reputation. The combined company will rely on trademark and copyright law, trade secret protection and confidentiality agreements with its employees, customers, business partners and others to protect its intellectual property rights. Despite the combined company's precautions, it may be possible for third parties to obtain and use its intellectual property without authorization. Furthermore, the validity, enforceability and scope of protection of intellectual property in Internet related industries are uncertain and still evolving. In particular, the laws of the PRC, Brazil and certain other countries are uncertain or do not protect intellectual property rights to the same extent as do the laws of the United States. Moreover, litigation may be necessary in the future to enforce the combined company's intellectual property rights, to protect its trade secrets or to determine the validity and scope of the proprietary rights of others. Future litigation could result in substantial costs and diversion of resources.

        The combined company may be subject to intellectual property infringement claims, which may force it to incur substantial legal expenses and, if determined adversely against it, materially disrupt its business.

        The combined company cannot be certain that its products and services will not infringe valid patents, copyrights or other intellectual property rights held by third parties. The combined company may in the future be subject to legal proceedings and claims from time to time relating to the intellectual property of others in the ordinary course of its business. In particular, if the combined company is found to have violated the intellectual property rights of others, it may be enjoined from using such intellectual property, and it may incur licensing fees or be forced to develop alternatives. The combined company may incur substantial expenses in defending against these third party infringement claims, regardless of their merit. Successful infringement claims against the combined

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company may result in substantial monetary liability or may materially disrupt the conduct of its business.

        The contribution of the sublicensed content to the combined company is subject to the terms and conditions of agreements between HSW and third parties.

        Under the terms of the contribution agreements, HSW is transferring and contributing to the combined company all rights, but only those rights, which belong to and are held by HSW pursuant to third party licenses. Some of those licenses, including HSW's licenses with Publications International, Inc. (including the licenses for Consumer Guide and Mobile Travel Guide) contain restrictions on the use of such content and termination provisions for breaches of the license agreements. Accordingly, a breach of any third party license by HSW may cause the combined company to lose its license with such third party, which could have a material adverse effect on the implementation of the combined company's business plan, value of its content offering and results of its operations.

        A slowdown or other adverse developments in the PRC economy may materially and adversely affect the combined company's customers, demand for its services and its business.

        Initially, substantially all of the combined company's operations will be conducted in China and a significant amount of its growth in revenues will be generated from providing career development and training services for customers in China, including the government. Although the PRC economy and government spending on education have grown significantly in recent years, the combined company cannot assure you that such growth will continue. Career development and training services businesses are all relatively new industries in China, and the combined company may be sensitive to a slowdown in economic growth or other adverse changes in the PRC economy. In response to adverse economic developments, employers might hire fewer permanent employees, engage in hiring freezes, lay off employees, or reduce spending on marketing and the PRC government might reduce spending on education. As a result, a slowdown in overall economic growth, an economic downturn or recession or other adverse economic developments in China may materially reduce the demand for the combined company's services and materially and adversely affect its business.

        PRC laws and regulations related to the PRC Internet sector are unclear and will likely change in the near future. If the combined company is found to be in violation of current or future PRC laws or regulations, the combined company could be subject to severe penalties.

        The PRC regulates its Internet sector by making pronouncements or enacting regulations regarding the legality of foreign investment in the PRC Internet sector and the existence and enforcement of content restrictions on the Internet. The combined company believes that its current ownership structure complies with all existing PRC laws, rules and regulations. There are, however, substantial uncertainties regarding the interpretation of current PRC Internet laws and regulations. Accordingly, it is possible that the PRC government will ultimately take a view contrary to that of the combined company.

        Issues, risks and uncertainties relating to PRC government regulation of the PRC Internet sector include the following:

        The PRC enacted regulations applying to Internet related services and telecom related activities. While many aspects of these regulations remain unclear, they purport to limit and require licensing of various aspects of the provision of Internet information services. If these regulations are interpreted to be inconsistent with the combined company's ownership structure, its business will be severely impaired.

        Under the agreement reached in November 1999 between the PRC and the United States concerning the United States' support of China's entry into the World Trade Organization, or the WTO, foreign investment in PRC Internet services will be liberalized to allow for 30% foreign

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ownership in key telecommunication services, including PRC Internet ventures, for the first year after China's entry into the WTO, 49% in the second year and 50% thereafter. China officially entered the WTO on December 11, 2001. However, the implementation of China's WTO accession agreements is still subject to various conditions.

        The Ministry of Information Industry, or the MII, has also stated that the activities of Internet content providers are subject to regulation by various PRC government authorities, depending on the specific activities conducted by the Internet content provider. Various government authorities have stated publicly that they are in the process of preparing new laws and regulations that will govern these activities. The areas of regulation currently include online advertising, online news reporting, online publishing, online securities trading and the provision of industry specific (e.g., drug related) information over the Internet. Other aspects of the combined company's online operations may be subject to regulation in the future.

        The interpretation and application of existing PRC laws and regulations, the stated positions of the MII and the possible new laws or regulations have created substantial uncertainties regarding the legality of existing and future foreign investments in, and the businesses and activities of, PRC Internet companies, including the combined company.

        Accordingly, it is possible that the relevant PRC authorities could, at any time, assert that any portion or all of the combined company's future ownership structure and business violate existing or future PRC laws, regulations or policies. It is also possible that the new laws or regulations governing the PRC Internet sector that have been adopted or may be adopted in the future will prohibit or restrict foreign investment in, or other aspects of, any of the combined company's proposed businesses and operations. In addition, these new laws and regulations may be retroactively applied to the combined company.

        If the combined company is found to be in violation of any existing or future PRC laws or regulations, the relevant PRC authorities would have broad discretion in dealing with such violation, including, without limitation, the following:


        Any of these actions could have a material adverse effect on the combined company's financial condition and results of operations.

        The online advertising markets in China and Brazil are still developing, and present risk to the combined company's revenues to be generated from its online publishing business using the contributed assets.

        The combined company's online publishing businesses in China and Brazil are expected to derive significant revenue from online advertisements. The online advertising markets in China and Brazil are still developing, and future growth and expansion of such is uncertain. If these online advertising markets do not grow at expected rates, the combined company's revenues, results of operations and financial condition will be materially adversely affected.

        The combined company's international operations will subject it to other significant risks.

        The combined company's international operations will expose it to a wide variety of other risks including increased credit risks, customs duties, import quotas and other trade restrictions, potentially

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greater inflationary pressures, the risk of failure or material interruption of wireless systems and services. Changes may occur in foreign trade and investment laws in the territories and countries where the combined company will operate. U.S. laws and regulations relating to investment and trade in foreign countries could also change to its detriment. Any of these factors could materially and adversely affect the combined company's revenues and profits. The combined company will be subject to risk of political instability and trade sanctions within China.

        China has traditionally been a closed market with strict political controls. As China shifts to a market economy, growing economic and social freedoms may conflict with the more restrictive political and governmental policies. In addition, democratic countries throughout the world have, from time to time, attempted to use economic and other sanctions to achieve political or social change in other countries. In addition, the Chinese government has insisted that Taiwan is part of China and, from time to time, has threatened military action in the region when Taiwanese independence has been asserted. Each of these factors could result in economic sanctions, economic instability, the disruption of trading and war within China and the Asia Pacific Rim, any of which could result in the combined company's inability to conduct business operations in China. Because a substantial majority of the combined company's business is currently within China, the disruption of distribution channels into China would have material and adverse consequences to the combined company.

        In the past, the Brazilian government has intervened in the Brazilian economy and occasionally made drastic changes in economic policy. The Brazilian government's actions to control inflation and affect other policies have included high interest rates, wage and price controls, currency devaluations, capital controls and limits on exports, among other actions. The combined company's business, financial condition, revenues, results of operations, prospects and the market price of the combined company's securities may be adversely affected by changes in Brazilian government policies, as well as general economic factors, including:

        Also, the President of Brazil has considerable power to determine governmental policies and actions that relate to the Brazilian economy and, consequently, affect the operations and financial performance of businesses operating in Brazil. The combined company will have no control over, and cannot predict, what policies or actions the Brazilian government may take in the future.

        Further risks relating to international operations include, but are not restricted to, unexpected changes in legal and regulatory requirements, changes in tariffs, exchange rates and other barriers, political and economic instability, possible effects of war and acts of terrorism, difficulties in account receivable collection, difficulties in managing distributors or representatives, difficulties in staffing and managing international operations, difficulties in protecting the combined company's intellectual property overseas, seasonality of sales and potentially adverse tax consequences. Any of these factors could materially and adversely affect the combined company's revenues and profits.

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        Restrictions on currency exchange may limit the combined company's ability to utilize its revenues effectively.

        Some of the combined company's revenues and operating expenses will be denominated in Chinese Renminbi. Currently, the combined company may purchase foreign exchange for settlement of "current account transactions" without the approval of the State Administration for Foreign Exchange, or SAFE. The combined company may also retain foreign exchange in its current account (subject to a ceiling approved by the SAFE) to satisfy foreign exchange liabilities or to pay dividends. However, the relevant PRC governmental authorities may limit or eliminate the combined company's ability to purchase and retain foreign currencies in the future.

        Additionally, once the combined company launches operations in Brazil, some of the combined company's revenues and operating expenses may be denominated in Brazilian Reais. Brazilian law allows the Brazilian government to impose restrictions on the conversion of the Real into foreign currencies and on the remittance to foreign investors of proceeds from their investments in Brazil. The government may impose such restrictions whenever there is a serious imbalance in Brazil's balance of payments or there are reasons to foresee a serious imbalance. The Brazilian government last imposed remittance restrictions for approximately six months in 1989 and early 1990. The likelihood that the Brazilian government would impose such restrictions again may depend on the extent of Brazil's foreign currency reserves, the availability of foreign currency in the foreign exchange markets on the date a payment is due, the size of Brazil's debt service burden relative to the economy as a whole, Brazil's policy toward the International Monetary Fund and other factors.

        Since a significant amount of the combined company's future revenues will be denominated in Renminbi, existing and future restrictions on the exchange of Renminbi to other currencies may limit the combined company's ability to use revenue generated in Renminbi to fund its business activities outside China, if any, or expenditures denominated in foreign currencies. Similarly, in the event that a significant amount of the combined company's future revenues will be denominated in Reais, any future restrictions on the exchange of Reais for other currencies or the remittance to foreign investors of proceeds from their investments in Brazil may limit the combined company's ability to use revenue generated in Reais to fund its business activities outside Brazil, or expenditures denominated in foreign currencies.

        The combined company will be subject to risks of currency fluctuations and exchange restrictions.

        Currency fluctuations, devaluations and exchange restrictions may adversely affect the combined company's liquidity and results of operations. In some countries, local currencies may not be readily converted into Euros or U.S. dollars (or other "hard currencies") or may only be converted at government controlled rates, and, in some countries, the transfer of hard currencies offshore has been restricted from time to time. Very limited hedging transactions are available in China to reduce its exposure to exchange rate fluctuations. To date, INTAC has not entered into any hedging transactions in an effort to reduce its exposure to foreign currency exchange risk. While the combined company may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and the combined company may not be able to successfully hedge its exposure, if at all. The combined company's revenues as expressed in its U.S. dollar financial statements will decline in value if Renminbi depreciates relative to the U.S. dollar. In addition, the combined company's currency exchange losses may be magnified by PRC exchange control regulations that restrict its ability to convert Renminbi into U.S. dollars or by Brazilian exchange control regulations that restrict its ability to convert Reais into U.S. dollars.

        Regulation and censorship of information collection and distribution in China may adversely affect the combined company's business.

        China has enacted regulations governing Internet access and the distribution of news and other information. Furthermore, the Propaganda Department of the Chinese Communist Party has been

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given the responsibility to censor news published in China to ensure, supervise and control a particular political ideology. In addition, the MII has published implementing regulations that subject online information providers to potential liability for content included on their portals and the actions of subscribers and others using their systems, including liability for violation of PRC laws prohibiting the distribution of content deemed to be socially destabilizing. Because many PRC laws, regulations and legal requirements with regard to the Internet are relatively new and untested, their interpretation and enforcement may involve significant uncertainty. In addition, the PRC legal system is a civil law system in which decided legal cases have limited binding force as legal precedents. As a result, in many cases it is difficult to determine the type of content that may result in liability for a website operator.

        Periodically, the Ministry of Public Security has stopped the distribution over the Internet of information which it believes to be socially destabilizing. The Ministry of Public Security has the authority to cause any local Internet service provider to block any website maintained outside China at its sole discretion. If the PRC government were to take action to limit or eliminate the distribution of information through the combined company's portals or to limit or regulate current or future applications available to users of its portals, the combined company's business would be adversely affected.

        The State Secrecy Bureau, which is directly responsible for the protection of state secrets of all PRC government and Chinese Communist Party organizations, is authorized to block any website it deems to be leaking state secrets or failing to meet the relevant regulations relating to the protection of state secrets in the distribution of online information. Under the applicable regulations, the combined company may be held liable for any content transmitted on its portal. Furthermore, where the transmitted content clearly violates the laws of the PRC, the combined company will be required to delete it, and where the transmitted content is considered suspicious, the combined company is required to report such content. The combined company must also undergo computer security inspections, and if the combined company fails to implement the relevant safeguards against security breaches, the combined company's operations in the PRC may be shut down.

        Although the PRC has several laws and regulations relating to the use of the Internet, addressing personal privacy in use of the Internet and the freedom of communications, the PRC government does not restrict online service providers in the collection, transmission and commercial use of personal information or data. Personal data is protected from unlawful use by general statutes and by any contractual arrangement between the user and the service provider.

        Since spring of 2005, the National People's Congress and the State Council have begun legislative review of a draft Law for Protection of Personal Information which provides a wider scope of information protection than that required to merely protect the personal privacy of a citizen. Cellular phone number, home address, medical files and occupational information will all be protected. The draft further provides that usage of such personal information by service providers (excluding the national security authority, research institutions, and news agency) shall be subject to the prior authorization of each individual and violation under this law could result in administrative, civil, and be even criminal liabilities. If regulations are adopted addressing the collection, transmission and commercial use of personal information or data, the combined company could be subject to these penalties, certain aspects of its business plan may no longer be viable and its business would thus be adversely affected.

        Political and economic policies of the PRC government could affect the combined company's business.

        A significant portion of the combined company's business, assets and operations will be located in China and a significant portion of its future revenues are expected to be derived from its operations in China. Accordingly, its business could be adversely affected by changes in political, economic or social conditions in China, adjustments in PRC government policies or changes in laws and regulations.

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        The economy of China differs from the economies of most countries belonging to the Organization for Economic Cooperation and Development in a number of respects, including:


        Since 1949, China has been primarily a planned economy subject to a system of macroeconomic management. Although the Chinese government still owns a significant portion of the productive assets in China, economic reform policies since the late 1970s have emphasized decentralization, autonomous enterprises and the utilization of market mechanisms. The combined company cannot predict what effects the economic reform and macroeconomic measures adopted by the Chinese government may have on its business or results of operations.

        The PRC legal system embodies uncertainties which could limit the legal protections available to the combined company.

        The PRC legal system is a civil law system based on written statutes. Unlike common law systems, it is a system in which decided legal cases have little precedential value. In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The combined company will be subject to laws and regulations applicable to foreign investment in mainland China. However, these laws, regulations and legal requirements are relatively recent, and their interpretation and enforcement involve uncertainties. These uncertainties could limit the legal protections available to the combined company and other foreign investors. In addition, the combined company cannot predict the effect of future developments in the PRC legal system, particularly with regard to the Internet, the combined company's ownership structure and currency exchange, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws.

        It may be difficult to enforce any civil judgments against the combined company or its board of directors or officers, because most of its assets are located outside of the United States.

        Although the combined company is incorporated in the State of Delaware, substantially all of its assets are located in the PRC. As a result, it may be difficult for investors to enforce outside the United States any actions brought against the combined company in the United States, including actions predicated upon the civil liability provisions of the federal securities laws of the United States or of the securities laws of any state of the United States. In addition, certain of the combined company's directors and officers and all or a substantial portion of their assets may be located outside the United States (principally in the PRC). As a result, it may not be possible for investors to effect service of process within the United States upon those directors and officers, or to enforce against them or the combined company judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the federal securities laws of the United States or of the securities laws of any state of the United States. There is doubt as to the enforceability in the PRC, in original actions or in actions for enforcement of judgments of United States courts, of civil liabilities predicated solely upon the federal securities laws of the United States or the securities laws of any state of the United States.

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        If the combined company is not able to attract and retain key management and consultants, the combined company may not successfully integrate the contributed assets into INTAC'S historical business or achieve its other business objectives.

        The combined company will depend upon its senior management and consultants for its business success. Key members of the senior team will include Wei Zhou, INTAC's chief executive officer, and Jeff Arnold, a consultant and the combined company's chairman. INTAC's employment agreement with Mr. Zhou, dated October 16, 2001, which will continue in effect, had an initial term of three years and automatically renews for successive one-year terms thereafter. Mr. Zhou may also terminate his employment agreement at any time effective upon thirty days notice to the board of directors. In addition, the combined company's consulting agreement with Mr. Arnold has a term of only two years and is non-exclusive. The loss of the service of any of the key members of the combined company's senior management may significantly delay or prevent the integration of the contributed assets and other business objectives. The combined company's ability to attract and retain qualified personnel, consultants and advisors will be critical to its success. It may be unable to attract and retain these individuals, and its failure to do so would adversely affect its business. For more information on Mr. Arnold's consulting agreement see also "The Merger and the Distribution Business Sale—Interests of HSW International Directors and Executive Officers in the Merger and Distribution Business Sale" beginning on page 71.

        The concentration of the combined company's stock ownership will likely limit your ability to influence corporate matters.

        After completion of the merger and the related transactions, HSW and Mr. Zhou will together beneficially own a majority of the combined company's common stock then outstanding and are entering into a stockholders agreement in connection with the merger. The stockholders agreement entitles HSW and Mr. Zhou the right to designate nominees to the combined company's board of directors, and each of HSW and Mr. Zhou has agreed to vote all shares of the combined company's common stock held by them in favor of the election of their designated directors. Furthermore, Jeffrey Arnold, the chairman of the board of the combined company, is the Chief Executive Officer and Chairman of HSW. As a result, these stockholders, acting together, will have the ability to influence the combined company's management and affairs and determine the outcome of matters submitted to stockholders for approval, including the election and removal of directors, amendments to the charter, approval of equity-based employee compensation plans and any merger, consolidation or sale of all or substantially all of the combined company's assets.

        The concentration of the combined company's stock ownership, as well as the combined company's Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, stockholders agreement and Delaware law contain provisions that may make the acquisition of the combined company more difficult without the approval of its board of directors, which could discourage, delay or prevent a transaction involving a change of control of the combined company.

        After completion of the merger and related transactions, HSW and Wei Zhou will beneficially own in the aggregate a majority of the combined company's then outstanding shares of common stock. As a result, it will be difficult for other stockholders of the combined company to approve a takeover of the combined company without the cooperation of HSW and Mr. Zhou.

        Furthermore, the combined company's Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws contain certain anti-takeover provisions, including but not limited to the following provisions:

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        In addition, the stockholders agreement gives HSW and Mr. Zhou the right to designate nominees to the combined company's board of directors, and each of HSW and Mr. Zhou has agreed to vote all shares of the combined company's common stock held by them in favor of the election of their designated directors.

        These anti-takeover defenses could discourage, delay or prevent a transaction involving a change of control of the combined company. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to cause the combined company to take other corporate actions you may desire.

        Section 203 of the Delaware General Corporation Law may also delay, defer or prevent a change in control that the combined company's stockholders might consider to be in their best interest. The combined company is subject to Section 203 of the Delaware General Corporation Law which, subject to certain exceptions, prohibits "business combinations" between a publicly-held Delaware corporation and an "interested stockholder," which is generally defined as a stockholder who becomes a beneficial owner of 15% or more of a Delaware corporation's voting stock for a three-year period following the date that such stockholder became an interested stockholder. Section 203 could have the effect of delaying, deferring or preventing a change in control of the combined company that its stockholders might consider to be in their best interest.

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THE INTAC SPECIAL MEETING

        INTAC is furnishing this proxy statement/prospectus to INTAC stockholders as of the INTAC record date as part of the solicitation of proxies by the INTAC board of directors for use at the INTAC special meeting.


Date, Time and Place

        The INTAC special meeting will be held on                        , 2007, at             a.m., central time, at                        .


Purpose of the Special Meeting

        At the INTAC special meeting, INTAC stockholders will be asked to consider and vote upon (i) a proposal to adopt the merger agreement and approve the merger and the related transactions, and (ii) a proposal to adopt the share purchase agreement and adopt the distribution business sale. It is currently contemplated that no other matters will be considered at the INTAC special meeting.

        The INTAC board of directors believes that the merger agreement, the share purchase agreement, the merger, the related transactions and the distribution business sale are fair to and in the best interests of INTAC and its stockholders and adopted the merger agreement and the share purchase agreement and recommends that INTAC stockholders vote "FOR" adoption of the merger agreement and the share purchase agreement, approval of the merger and the related transactions and the distribution business sale.


Record Date; Shares Entitled to Vote; Quorum

        Only holders of record of INTAC common stock at the close of business on                        , 2007, the INTAC record date for the INTAC special meeting, are entitled to notice of, and to vote at, the INTAC special meeting and any adjournment or postponement of it. On the INTAC record date,                         shares of INTAC common stock were issued and outstanding and held by approximately                        holders of record.

        A quorum is present at the INTAC special meeting if a majority of all the shares of INTAC common stock issued and outstanding on the INTAC record date and entitled to vote at the INTAC special meeting are represented at the INTAC special meeting in person or by a properly executed proxy. Abstentions and broker non-votes will be treated as present at the INTAC special meeting for purposes of determining the presence or absence of a quorum for the transaction of all business. In the event that a quorum is not present at the INTAC special meeting, it is expected that the meeting will be adjourned or postponed to solicit additional proxies. Holders of record of INTAC common stock on the INTAC record date are entitled to one vote per share on each matter submitted to a vote at the INTAC special meeting.


Vote Required

        The adoption of the merger agreement and the approval of the merger and the related transactions requires the affirmative vote of the holders of a majority of the outstanding shares of INTAC common stock entitled to vote on the INTAC record date. Adoption of the share purchase agreement and approval of the distribution business sale requires the affirmative vote of the holders of a majority of the outstanding shares of INTAC common stock (other than those shares held by Mr. Zhou, his affiliates and associates) entitled to vote at the INTAC special meeting on the INTAC record date. Because the required vote of INTAC stockholders is based upon the number of outstanding shares of INTAC common stock entitled to vote, if you fail to submit a proxy, fail to vote

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in person, abstain from voting or do not instruct your broker how to vote your shares, it will have the same effect as a vote against approval of the merger agreement and the share purchase agreement.


Shares Owned by INTAC Directors and Executive Officers

        At the close of business on the INTAC record date, directors and executive officers of INTAC beneficially owned and were entitled to vote                        shares of INTAC common stock in the aggregate, which represented approximately            % of the shares of INTAC common stock outstanding on that date.


Voting Agreement

        In connection with the merger agreement, Wei Zhou, the President and Chief Executive Officer of INTAC, entered into a voting agreement with HSW whereby Mr. Zhou has agreed to vote, or cause to be voted, at the INTAC special meeting, all of the shares of INTAC common stock that he owns in favor of the adoption of the merger agreement and approval of the merger and the related transactions. As of the record date, Mr. Zhou owned                  shares of INTAC common stock representing approximately      % of the issued and outstanding shares of INTAC common stock. Therefore, the merger agreement will be adopted and the merger and the related transactions approved regardless of how INTAC's other stockholders vote their shares.

        A copy of the voting agreement is attached as Annex M to this proxy statement/prospectus.


Voting of Proxies

        Stockholders of record may vote their shares by attending the INTAC special meeting and voting their shares in person at the meeting, or by completing the enclosed proxy card, signing and dating it and mailing it in the enclosed postage pre-paid envelope. Stockholders also may submit their proxy on the Internet by following the instructions provided in the enclosed proxy card. If a proxy card is signed by a stockholder of record and returned without specific voting instructions, the shares represented by the proxy will be voted "FOR" the proposals presented at the INTAC special meeting.

        Stockholders whose shares are held in "street name" must either instruct the record holder of their shares how to vote their shares or obtain a proxy from the record holder to vote at the INTAC special meeting. Please check the voting form used by your bank, broker, nominee, fiduciary or other custodian for information on how to submit your instructions to them. Failure to provide voting instructions to your record holder will result in a "broker non-vote" for those shares held in street name. While shares represented by broker non-votes will not be voted "FOR" or "AGAINST" the proposal, such shares will be counted in determining whether or not a quorum exists and will have the same effect as a vote "AGAINST" the proposal.

        The persons named as proxies by a stockholder may propose and vote for one or more adjournments of the INTAC special meeting, including adjournments to permit further solicitations of proxies. Any adjournment may be made at any time by stockholders representing a majority of the votes present in person or by proxy at the INTAC special meeting, whether or not a quorum exists, without further notice other than by an announcement made at the meeting. INTAC does not currently intend to seek an adjournment of the INTAC special meeting. No proxy voted against the proposal to approve the merger agreement will be voted in favor of any adjournment or postponement.

        INTAC does not expect that any matter other than the proposal to approve the merger agreement will be brought before the INTAC special meeting. If, however, other matters are properly brought before the INTAC special meeting, or any adjourned meeting, the persons named as proxies will vote in accordance with their judgment.

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Revocability of Proxies

        Stockholders of record may revoke their proxy at any time prior to the time it is voted at the meeting. Stockholders of record may revoke their proxy by:

        Any written revocation or subsequent proxy card should be delivered to INTAC International, Inc., 12221 Merit Drive, Suite 600, Dallas, Texas 75251, Attention: Secretary, or hand delivered to INTAC's Secretary or his representative before the taking of the vote at the INTAC special meeting.


Solicitation of Proxies

        INTAC is soliciting proxies for the INTAC special meeting and will bear all expenses in connection with solicitation of proxies, except those expenses incurred in connection with the printing and mailing of this proxy statement/prospectus which will be shared equally by HSW International and INTAC. Upon request, INTAC will pay banks, brokers, nominees, fiduciaries or other custodians their reasonable expenses for sending proxy material to, and obtaining instructions from, persons for whom they hold shares.

        INTAC expects to solicit proxies primarily by mail, but directors, officers and other employees of INTAC may also solicit in person or by Internet, telephone or mail. No additional compensation will be paid to directors, officers or other employees of INTAC in connection with this solicitation.

        INTAC stockholders who receive more than one proxy card or voting instruction form have shares registered in different forms or in more than one account. Please complete, sign, date and return all proxy cards and provide instructions for all voting instruction forms received to ensure that all of your shares are voted.

        INTAC stockholders should not send stock certificates with their proxies. A transmittal form with instructions for the surrender of INTAC common stock certificates will be mailed to INTAC stockholders shortly after completion of the merger.

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THE COMPANIES

INTAC

        INTAC is a United States company focused on the development of strategic business opportunities available in China and the Asia Pacific Rim. INTAC currently maintains offices in China (Hong Kong and Beijing), Germany (Frankfurt) and the United States (Dallas, Texas).

        INTAC operates in two segments, its career development and training services segment and its distribution/telecommunications segment. While INTAC's distribution/telecommunications segment historically has been its primary business segment and generated substantially all of its operating revenue, INTAC shifted its focus in 2004 to the expansion and maturation of its career development and training services segment in China. The latter business segments represented potentially greater opportunities for growth and higher margins than the distribution/telecommunications segment. Consequently, INTAC and INTAC Holdings have agreed to sell all shares of the subsidiaries conducting the distribution/telecommunications business to Cyber, a British Virgin Islands corporation wholly owned by Wei Zhou, pursuant to the share purchase agreement. Initially, INTAC's efforts centered on recruiting and training services to be offered online through its Internet portals phrbank.com and joyba.com. These efforts did not achieve the results INTAC had anticipated in 2005, due in part to the strength of established competitors in the market. As a result, INTAC determined to establish a foothold in the marketplace by focusing on a specific segment market from which it can later expand. To this end, recognizing the growing opportunities within both the education industry and the mobile telecommunications/Internet industry in China, and in order to better utilize its strategic resources and enhance its strengths in both industries, INTAC further refined its business strategy, as announced on November 23, 2005, through a press release. For details of this press release, please see INTAC's Current Report on Form 8-K, which was filed with the SEC on November 28, 2005, and is incorporated by reference in this proxy statement/prospectus. Under INTAC's refocused business strategy, INTAC operates in two business segments, the career development and training services segment and the distribution/telecommunications segment, each as further described below.

        INTAC chose to focus its career development and training services segment initially in China, in part due to the significant market opportunity. The most populated country in the world, China, has the second largest Internet population (approximately 111 million) and, at 350%, the fastest Internet usage growth rate over the past three years, according to the China Internet Network Information Center (CNNIC) and Internet World Stats. Additionally, the Internet population in China is ideally suited for education-related services: Morgan Stanley Research states China has the most Internet users under the age of 30 of any country (65 million in 2004). And, according to the Harvard Graduate School of Education, China has a population of 220 million students.

        In the career development and training services segment, INTAC focuses its operations primarily on three business units:

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        INTAC's distribution/telecommunications segment includes its wireless handset distribution business, which INTAC operates through INTAC Holdings, a Hong Kong corporation and wholly owned subsidiary of INTAC, Global Creative International Limited and INTAC Telecommunications Limited, both of which are Hong Kong corporations and wholly owned subsidiaries of INTAC Holdings, INTAC Deutschland GmbH, a German corporation and wholly owned subsidiary of INTAC Holdings, and FUTAC Group Limited, a British Virgin Islands company and wholly owned subsidiary of INTAC Holdings. Through these subsidiaries, INTAC distributes wireless handset products to mobile communications equipment wholesalers, agents, retailers and other distributors mainly in Hong Kong. These products are then sold primarily to local customers in Hong Kong or customers in China. INTAC and INTAC Holdings have agreed to sell all shares of the subsidiaries conducting the distribution/telecommunications business to Cyber, a British Virgin Islands corporation wholly owned by Wei Zhou, pursuant to the share purchase agreement. Additionally, INTAC is working with Primus Telecommunications Ltd., a global telecommunications services provider (Nasdaq: PRTL), to develop products which involve originating international voice and data traffic from within China throughout Southeast Asia for termination around the world. The first product to be offered under this relationship will be a global prepaid calling card, an Internet Protocol, or IP, calling card that provides access to over fifty countries.


HSW

        HSW is a privately-held online publishing company that provides objective and useful information for people to learn about the world around them and make informed decisions. The company's Web site, HowStuffWorks.com, offers in-depth, easy-to-understand explanations, expert product reviews, comprehensive buying guides and informational videos, simplifying thousands of topics in the areas of health, science, travel, automotive, electronics, consumer products and many other areas.

        Since its inception in 1999, HSW has continually grown in popularity and brand recognition. Web site traffic for its core HowStuffWorks.com site has grown successively, averaging almost 50,000,000 page views per month, according to Omniture's March 2006 reporting with approximately 52,100,000 page views in January 2007. Each user views an average of five to six pages during a visit to HowStuffWorks, and the site has a significant number of repeat visitors. The site currently ranks among the top most visited educational Web sites by Nielsen/NetRatings and in the Educational Resource category by Alexa. Additionally, HSW content is regularly cited in the media as a credible resource for stories and HSW often provides video content or live expert interviews to cable and network television broadcasters such as CNN and NBC.

        HSW targets consumers who are actively seeking credible and comprehensive information on the Internet. While many of these consumers are familiar with certain Internet sites and will access them directly; the majority of Internet users now use search engines to find the information they seek. The number of consumers using search engine users is sizable and growing at a significant rate: Americans conducted approximately 6.7 billion searches online in December 2006, up 1% versus November 2006, and annual growth rates in search query volume remain strong with a 30% increase since December 2005, according to comScore Network statistics, and Nielsen/NetRatings research showed 38% year-over-year growth in United States searches from 3.8 billion in February 2005 to 5.3 billion in February 2006. Through the effective development and positioning of proprietary digital content, HSW aims to consistently meet the needs of information-seeking consumers.

        HSW recently acquired the exclusive digital rights to more than 30,000 books and magazines, certain future books and magazines, one million images and access to over 300 writers from Publications International Ltd. (PIL), the second largest mass market publisher in the country. PIL is the largest publisher of cooking related books currently publishing more than 500 new book and magazine titles a year in categories including cooking, how-to and crafts, entertainment, medical and health, auto and consumer information. HSW also acquired ConsumerGuide.com and

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MobilTravelGuide.com from PIL. Through this acquisition, HSW plans to accelerate the growth of its online content library, adding a significant number of new articles per month across all twelve of its content channels. By providing information that helps make the Internet more useful for consumers, HSW intends to expand on its current base of users to become the destination of choice for consumers looking for explanations, reviews, opinions and comparative pricing integrated into a single destination.

        Be it directly or via a search engine, once a consumer accesses HSW content about a given topic, HSW aims to present them with a comprehensive suite of contextual content including explanation, expert reviews, consumer opinions and price comparison information. HSW has positioned itself to execute this strategy by offering the following:

        HSW focuses on the relevance of its offerings, presenting consumers with a balance of timely, newsworthy content. HSW also monitors and analyzes site traffic and trends in an effort to improve the quality of the user experience, thus maximizing page views and minimizing user attrition.

        As the fastest growing advertising medium, the Internet is attracting advertisers with its rapidly expanding audience, extensive reach, interactive nature and ability to target specific consumer segments. The online advertising market is expected to grow from $18.5 billion in 2005 to $55.0 billion globally ($31.8 billion in the U.S.) by 2010.

        Revenue for HSW is generated from four primary sources, each of which is anticipated to increase alongside the growth of the online advertising market:


        Through a combination of these revenue sources, HSW presents an integrated offering, enabling advertisers to reach consumers with demographic and psychographic profiles that match the advertiser's

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targeted consumer. In addition to the standard demographic information, such as location and day-part, HSW's site architecture allows delivery of advertising to consumers who have expressed an interest in specific keywords or keyword phrases, either by directly searching for them or by viewing information and articles identified by HSW as relevant to such.

        In addition to offering highly targeted advertising opportunities, HSW offers advertisers performance-based advertising models, which have grown in popularity in recent years. According to the Internet Advertising Bureau (IAB), in 2003, performance-based marketing transactions generated $2.7 billion in revenue (37% market share) and are estimated to grow to $14.4 billion in revenue (78% market share) by 2008. HSW aims to deliver advertisers such opportunities, primarily around contextually relevant CPC and CPA based lead generation opportunities.

        Management believes that HSW is well-positioned to become a one stop shop for Internet users by providing them with explanations, expert reviews, consumer opinions and price comparisons all in one place. With the acquisition of PIL assets, HSW plans to increase content and revenues in advertising, search, shopping and sponsorship.


HSW International

        HSW International was formed on March 14, 2006, as a wholly owned subsidiary of HSW in order to effect the merger. Prior to the completion of the merger, HSW International will have only limited assets and operations incident to its formation, the merger, and its business following the merger. After the merger, INTAC will be a wholly owned subsidiary of HSW International, and the current shareholders of INTAC will become stockholders of HSW International. Immediately after the merger, HSW International's operations will include all of INTAC's current operations after giving effect to the distribution business sale and a perpetual, royalty-free and exclusive license to the translated version of the content on the HSW website in China and Brazil in electronic form and certain other contractual rights with HSW, including rights related to the international exploitation of such website.


HSW International's Resulting Lines of Businesses

        Upon completion of the merger, HSW International will be positioned to become a leader in the Chinese online publishing market and enter the Brazilian online publishing market by leveraging a consistently expanding and proprietary digital content database designed to meet the information needs of the online community. HSW International will do so utilizing the combination of the contributed assets from HSW with the relationships, core competencies, and knowledge of the Chinese markets developed by INTAC. HSW International also intends to generate revenue by assembling a library of digital content and licensing such to various customers, including HSW, in territories outside of HSW International's markets. It is anticipated that this content will include originally authored content as well as that which has been acquired from other parties.

        Both China and Brazil represent significant, growing markets for HSW International's initial online publishing strategy. In addition to offering access to a rapidly expanding Internet audience for online advertisers, Chinese Internet users are already looking for the type of information that will be provided by HSW International. China had 137 million internet users by the end of 2006, an increase of almost 25% over 2005 according to the China Internet Network Information Center (CNNIC). According to CNNIC, "getting information" is among the top two primary purposes for accessing the Internet in China. CNNIC also found that nearly half of all Internet users in China (44%) are either students or teachers and that "studying and browsing knowledge" is the third primary purpose for using the Internet. Zenith Optimedia expects China to be one of the top eight contributors to online advertising expenditure growth by 2008. According to Analysys International, online advertising spending in China totaled $405 million in 2006, and Deutche Bank has forecasted online advertising spending to be $731 million in 2007 and $1.79 billion in 2008. China's search market is on the rise; in 2005 Chinese

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search users increased to 97 million and are expected to reach over 200 million by 2010, according to iResearch. iResearch also estimates that by 2010 daily search queries may reach 2.4 billion. E-commerce in China is also expected to show significant growth. According to the Internet Society of China, 2006 E-commerce spending in China was $35.5 billion (second only to the United States). iResearch forecasts that the number of online shoppers in China will increase by 42.3% annually in the following three years.

        In terms of overall Internet usage, Brazil was ranked tenth largest in the world, with over 25.9 million users, according to eTForecasts. comScore Networks found that users over the age of 15 spent an average of 41.2 hours per month online, the seventh largest amount in the world. Additionally, Brazilian Internet use continues to grow at a fast pace: active home Internet usage increased 6.54% in Brazil between February and March 2006, as compared to the worldwide average of 2.16%, according to Neilsen/NetRatings. Reports show that the online advertising market in Brazil is increasing as well. In 2004 and 2005, advertising expenditures in Brazil grew at 26.4% and 39.6%, respectively, the largest growth rates in Latin America, according to Latin Business Chronicle. E-commerce in Brazil is also expected to show significant growth. Forrester Research estimates that the market for e-commerce in Brazil was approximately $2.9 billion in 2005 and will reach $12.8 billion by 2010. In addition, Forrester Research data shows that the number of Brazilian online shoppers is 3.6 million and will grow to 29.5 million by 2010.

        HSW International's initial focus in the online publishing market will be the online publishing of localized, translated Chinese and Brazilian editions of the HowStuffWorks Internet site, utilizing strategies based on those utilized by HSW and described above, as tailored to the needs of each localized market Additionally, HSW International will explore strategic partnerships for INTAC's current educational software and training services to aid in the execution and growth of the online publishing business and how these services can potentially be offered online within each country. HSW International expects to continue to operate INTAC's career development and training services business segment.

        Jeffrey Arnold will join HSW International as Chairman and consultant, architecting the business model for online publishing in China and Brazil and providing strategic services in furtherance thereof. Mr. Arnold will also remain the Chairman and Chief Executive Officer of HSW.

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THE MERGER AND THE DISTRIBUTION BUSINESS SALE

General

        Pursuant to the merger agreement, merger sub, a wholly owned subsidiary of HSW International, will merge with and into INTAC. INTAC will be the surviving corporation and will become a wholly owned subsidiary of HSW International. Under the terms of the merger agreement, holders of INTAC common stock will receive in exchange for each of their shares of INTAC common stock one share of HSW International common stock.

        Pursuant to the share purchase agreement, INTAC Holdings will sell all the issued and outstanding shares of Global Creative International Limited, INTAC Telecommunications Limited, INTAC Deutschland GmbH and FUTAC Group Limited, each a wholly owned subsidiary of INTAC Holdings ("distribution companies"), and INTAC Trading will transfer its rights and control with respect to Meidi Technology, to Cyber, a corporation wholly-owned by Mr. Zhou, in exchange for 3 million shares of INTAC common stock held by Mr. Zhou. The distribution/telecommunications segment of INTAC's business, which consists of the distribution of wireless handset products and the sale of prepaid calling cards, is conducted in whole by the distribution companies.


Asset Contribution

        In connection with the merger and as contemplated by the merger agreement, HSW will contribute certain licensed and sublicensed content (referred to in this proxy statement/prospectus collectively as the content) to HSW International in exchange for shares of HSW International common stock by granting to HSW International a perpetual, royalty-free exclusive license in (i) the PRC, the Hong Kong Special Administrative Region, the Macao Special Administrative Region and Taiwan and (ii) Brazil ((i) and (ii) collectively, the territories) to the contributed assets, which specifically consist of the right to render Chinese and Portuguese translations of, the right to publish or use any or all actual renderings in the Chinese and Portuguese languages (referred to in this proxy statement/prospectus as the translation languages) and all such actual renderings, of such licensed and sublicensed content, including derivative works, solely in digital and/or electronic form, in the territories.

        HSW will also grant to HSW International a limited, exclusive license in the territories to (i) use the content solely for purposes of translating it into the translation languages in order to create the contributed assets; and (ii) use limited excerpts of the licensed content translated into the translation languages in print format with limited distribution to businesses solely for purposes of marketing, business development, financings and other similar legitimate business purposes, provided that any such limited print excerpts are not distributed publicly.

        HSW will also grant to HSW International the same license rights as those granted above with respect to any updates to the content from which the contributed assets are created in exchange for a fee equal to: (i) one percent per territory of HSW's fully allocated costs directly attributable to producing the updates purchased by HSW International and (ii) HSW's actual cost in transferring the purchased updates to HSW International, plus (iii) five percent of (i) and (ii) above. Sublicensed content restrictions, ownership rights and termination rights are the same as those granted pursuant to the contribution agreements.

        Upon HSW International's written request, HSW will provide the following services to HSW International or Intac International Management Consultancy (Beijing) Co., Ltd., a wholly owned subsidiary of INTAC: (i) translating the content into the translation languages; (ii) designing and developing HSW International's Internet sites for the territories; (iii) providing the technology for establishing, operation and use of such Internet sites; (iv) providing support and consulting concerning the hosting, operation and display of such Internet sites; (v) securing the registration and maintaining the domain names for such Internet sites; and (vi) providing other services reasonably agreed to by

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HSW and HSW International as may be necessary to develop, operate and maintain such Internet sites. HSW International will pay HSW a fee equal to HSW's fully allocated costs in providing the services.

        See also "Agreements Related to the Merger—The Contribution Agreements, Services Agreement, Update Agreement and Letter Agreement" beginning on page 92.


Equity Financing

        In connection with the merger, American investors have agreed to purchase $22.5 million of HSW International common stock, respectively, for a price per share of $6.57, the public announcement price. Based on the public announcement price, approximately 3.4 million shares of HSW International common stock in the aggregate are issuable pursuant to the American investors stock purchase. However, this number of shares is subject to adjustment as described in the following paragraph. In connection with the American investors stock purchase, American investors will be granted registration rights for the shares of HSW International common stock received by them.

        The number of shares issued to American investors will be adjusted on the eleventh day after the date the shelf registration statement filed by HSW International in connection with the American investors stock purchase is declared effective by the SEC. HSW International will recalculate the number of shares using the shelf purchase price. If the shares issued to American investors calculated on the basis of the public announcement price is less than the number of shares calculated on the basis of the shelf purchase price, then HSW International will issue to American investors the difference in the number of shares.

        In connection with the merger, European investors have also agreed to purchase approximately $27 million of HSW International common stock for a price per share equal to the lower of (i) the public announcement price, and (ii) the shelf purchase price (with one investor subject to an additional provision that if the per share purchase price calculated is greater than the highest trading price of HSW International common stock on the closing date of the purchase, then the per share purchase price will be adjusted to be such highest trading price).

        As part of the stock purchase, it is contemplated that HSW International will file, prior to closing, a shelf registration statement covering the resale of the shares to be purchased by the European investors. The purchase of the HSW International common stock by European investors is conditioned upon the shelf registration statement being declared effective. HSW International and the American investors will enter into a registration rights agreement at the closing that requires HSW International to use its best efforts to cause to be filed a shelf registration covering the resale of the shares purchased by the American investors no later than 90 days after the closing.


Background of the Merger and Distribution Business Sale

        INTAC's board of directors and management have periodically reviewed and assessed the various business trends, competitive factors, including, but not limited to, INTAC's cost structure as compared to its competitors, and market conditions impacting INTAC and the career development and training services and distribution/telecommunications business generally. As part of INTAC's ongoing evaluation of the marketplace and its competitive position, at its meetings on August 27 and 28, 2005, INTAC's board of directors reviewed with management in detail the opportunities, challenges and risks associated with INTAC's business. The INTAC board of directors reviewed INTAC's 2004 and 2005 financial results, anticipated trends in the career development and training services and distribution/telecommunications business, competitive factors, INTAC's business model and the elements necessary for INTAC to be successful as an independent entity. The INTAC board of directors recognized that INTAC was at a competitive disadvantage, particularly in the distribution/telecommunications markets due to the limited growth potential of INTAC's distribution business. The INTAC board of directors noted that both revenues and margins of the distribution business had been declining. The INTAC board of directors also noted the single customer concentration risk, the capital constraints on the

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company due to lengthy receivables on payment plan, the expanded inventory exposure and the significant working capital risk associated with the distribution business. The INTAC board of directors noted that this trend had persisted throughout much of 2005 and was expected to continue at least periodically for the foreseeable future. The INTAC board of directors endorsed management's plan to focus on ways to address the risks and disadvantages with respect to the distribution business and to refocus the strategy of providing top-class integrated mobile telecommunications/Internet services to China's education market. The refocused strategy aimed at combining INTAC's comprehensive understanding of China's mobile telecommunications/Internet industry, as well as its established cooperation with mobile network operators, with its unique long-term relationship with the Ministry of Education and its strong presence in the education market, to achieve its ultimate goal of becoming China's dominant interactive education services provider. Under the refocused business strategy, it was determined that INTAC would continue to operate in two business segments—the Career Development and Training Services Segment and the Distribution/Telecommunications Segment. The plan also included a number of operational steps intended to improve execution and to improve financial performance. The INTAC board of directors recognized that given the anticipated trends in these two business segments, one option for INTAC would be to expand or establish a significant partnership with a leading on-line education publisher with the capacity to offer online education publications and materials. The INTAC board of directors also acknowledged that if such efforts were not successful, INTAC would have to consider strategic alternatives, including a business combination, and the INTAC board of directors discussed what options would be available to INTAC regarding strategic alternatives.

        On December 1, 2005, the INTAC board of directors held a meeting in which, among other things, INTAC management provided an update regarding INTAC's financial and operating results as well as INTAC management's plan to address the risks and disadvantages with respect to the distribution business and plan to implement the refocused strategy of INTAC, focus on profitability and improve INTAC's execution and financial performance.

        On December 7, 2005, the INTAC board of directors held a special meeting in which, among other things, the audit committee of the board reviewed INTAC's financial and operating results as well as INTAC management's plan to implement the refocused strategy of INTAC, focus on profitability and improve INTAC's execution and financial performance.

        In mid-December 2005, INTAC was approached by HSW on an unsolicited basis to discuss a potential business combination. INTAC's management indicated to HSW that INTAC was receptive to this discussion and would be willing to discuss a potential business combination with HSW. Over the course of the next two weeks, preliminary discussions took place between the management of both companies.

        In early January 2006, discussions between the representatives of INTAC and HSW continued, and culminating in meetings of senior management of both companies during the week of January 9, 2006 to discuss, among other items, a term sheet for a potential business combination of the two companies, respective financial outlooks and potential synergies. At the end of that week, INTAC management briefed the INTAC board of directors on the discussions regarding a potential business combination with HSW. The INTAC board of directors authorized management to continue discussions with HSW and to enter into a non-binding term sheet with HSW with respect to a potential business combination.

        During the week of January 16, 2006, the representatives of INTAC and HSW continued to negotiate the terms and conditions of a term sheet.

        On January 23, 2006, the parties entered into a term sheet for a proposed business combination, subject to the parties agreeing on the structure of the business combination.

        On January 25, 2006, a meeting of senior management and advisors of INTAC and HSW was held to discuss the structure of the proposed business combination. During that meeting, senior management of INTAC met with Savvian to discuss its potential engagement as financial advisor for INTAC.

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        On February 11, 2006, representatives of Greenberg Traurig LLP (referred to in this proxy statement/prospectus as Greenberg Traurig), counsel to HSW, provided representatives of Shearman & Sterling LLP, counsel to INTAC, representatives of Savvian, financial advisor to INTAC, and INTAC with a proposed deal structure for the proposed business combination. Over the course of the next week, representatives of INTAC, HSW and their respective legal and financial advisors had several telephone conference calls to discuss the proposed deal structure for the proposed business combination. As a result of these discussions, the parties agreed to the structure of the proposed business combination as a merger transaction, pursuant to which (i) HSW would contribute certain assets, properties and rights to HSW International, a new company to be established by HSW in connection with the proposed merger, in exchange for shares of HSW International common stock, (ii) a merger subsidiary to be established by HSW International in connection with the merger would merge into INTAC with INTAC surviving the merger, and (iii) all stockholders of INTAC would receive shares of HSW International common stock upon the closing of the proposed merger.

        Over the course of the next few weeks, representatives of Shearman & Sterling and INTAC conducted a legal due diligence review of HSW and the intellectual property rights of HSW which would be licensed or contributed to the combined company, or otherwise would be related to the merger transaction. Representatives of Shearman & Sterling and INTAC continued their due diligence review of HSW and its intellectual property rights until the signing of the merger agreement.

        In the meanwhile, representatives of Greenberg Traurig, HSW and White & Case LLP, international counsel to HSW, conducted a legal due diligence review of INTAC and the business operation and financial results of INTAC, and representatives of White & Case and HSW also conducted a legal due diligence review of the assets and intellectual property rights of INTAC which would be contributed to the combined company, or otherwise would be related to the merger transaction. Representatives of Greenberg Traurig, HSW and White & Case LLP continued their due diligence review of INTAC until the signing of the merger agreement.

        On February 21, 2006, representatives of Greenberg Traurig provided representatives of Shearman & Sterling and INTAC with an initial draft of the merger agreement, and over the course of the same week, representatives of INTAC, HSW and their respective legal and financial advisors held a telephone conference call to discuss the initial draft of the merger agreement and related issues.

        On February 27, 2006, representatives of Greenberg Traurig provided representatives of Shearman & Sterling and INTAC with a revised draft of the merger agreement, and over the course of the same week, representatives of INTAC, HSW and their respective legal and financial advisors held various telephone conference calls to discuss the revised draft of the merger agreement and related issues.

        From March 1 through March 2, 2006, representatives of Greenberg Traurig provided representatives of Shearman & Sterling and INTAC with a revised draft of the merger agreement and initial drafts of the voting agreement, the content license agreement, the services agreement and the management services agreement.

        On March 10, 2006, representatives of Shearman & Sterling provided representatives of HSW and Greenberg Traurig with proposed revisions to the draft of the merger agreement. On March 12, 2006, representatives of Shearman & Sterling provided HSW and Greenberg Traurig with proposed revisions to the draft of the content license agreement.

        From March 13 through March 17, 2006, representatives of HSW and INTAC, their respective legal and financial advisors held meetings at the New York office of Shearman & Sterling to discuss the transaction structure issues and negotiate the key terms of the merger agreement, the content license agreement, the services agreement and other related transaction agreements. The parties also discussed the corporate governance matters of the combined entity and the proposed composition of the board of directors and the management team of the combined entity, which would include Mr. Arnold serving as Chairman of the combined entity.

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        From March 20 through March 26, 2006, during various telephone conference calls, representatives of HSW and INTAC and their respective legal advisors continued to negotiate the terms of the merger agreement, the content license agreement, the services agreement, the stockholders agreement, the voting agreement and other related transaction agreements.

        From March 27 through March 31, 2006, during various telephone conference calls, representatives of HSW and INTAC and their respective legal advisors continued to negotiate the terms of the merger agreement, the content license agreement, the services agreement, and other related transaction agreements. During these negotiations, the content license agreement was amended to be the contribution agreement. The parties also had extensive discussions on the transaction structure for the proposed purchase of HSW International common stock by an entity affiliated with Deutsche Bank and the parties drafted the DWS stock purchase agreement.

        On April 3, 2006, at a special meeting of the INTAC board of directors, INTAC management described the rationale for their recommendation of the merger. Representatives from Shearman & Sterling reviewed in detail with the INTAC board of directors the terms of the proposed merger with HSW International, including the agreements related to the merger. Representatives from Shearman & Sterling also advised the INTAC board of directors on its fiduciary duties to the INTAC stockholders. The INTAC board of directors deliberated and discussed the outstanding issues related to the merger agreement, the contribution agreement, the DWS stock purchase agreement, and other transaction agreements.

        The INTAC board of directors was also advised that HSW was continuing to conduct its legal, business and financial due diligence review of INTAC, that the negotiation of certain provisions of the merger agreement and other related agreements was continuing, and that the strategic investors were continuing to conduct negotiations of certain provisions of the DWS stock purchase agreement. The board was also apprised of the interests of INTAC's executive officers and directors in the merger.

        At the conclusion of this meeting, the board expressed support for continuing negotiations regarding a potential merger with HSW International and indicated certain terms of the merger agreement that were essential to INTAC's negotiations with HSW regarding the proposed merger.

        From April 4 through April 8, 2006, during various telephone conference calls, representatives of HSW and INTAC and their respective legal advisors continued to negotiate the outstanding terms and open issues of the merger agreement and other agreements related to the merger.

        From April 10 through April 12, 2006, legal counsel for INTAC and HSW and representatives of both companies worked to finish due diligence, complete the disclosure schedules and resolve the outstanding issues related to the merger agreement and other transaction agreements.

        On April 13, 2006, the INTAC board of directors held a special meeting in which INTAC management, representatives from Shearman & Sterling and representatives from Savvian updated the INTAC board of directors on matters related to and the status of the proposed merger with HSW International. At the meeting, the representatives from Savvian reviewed with the INTAC board of directors the financial terms of the proposed merger and presented detailed financial analysis regarding those financial terms.

        The Savvian representatives discussed the market's current valuation of INTAC and a summary of certain advantages and disadvantages of various possible strategic alternatives. The INTAC board of directors, in consultation with Savvian representatives, discussed the issues and risks facing the company in maintaining the existing business. These issues and risks included continued uncertainty in distribution business economics, limited ability to fund the career development business, a poor track record in developing new business and limited liquidity, capital resources and access to capital. The INTAC board of directors also considered the possibility that absent a business combination or significant new partnership with a leading online education publisher, INTAC could have difficulty achieving sustained satisfactory financial performance.

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        The Savvian representatives also discussed the possibility of selling INTAC's operating business. During this discussion, INTAC management and the INTAC board of directors, in consultation with Savvian, concluded that such an approach might be feasible, but might also raise certain issues that might be surmountable. These issues included the possibility of putting the proposed transaction/financing at risk, the short list of potential acquirers, the complexity that certain assets (the distribution business and the relationship with the Ministry of Education) might not be transferable to an acquiror, and the potential that the financial and operational profile of the company might not imply a deal value at or near INTAC's then current market price.

        The Savvian representatives also discussed the possibility of divesting INTAC's distribution business separately and certain advantages and disadvantages of pursuing such an alternative. The INTAC board of directors, in consultation with Savvian representatives, discussed risks and issues associated with this alternative, including the limited ability to monetize assets due to a lack of customer and supplier contracts, the possibility that INTAC's historical performance could adversely impact valuation and the risk that the sale of the distribution business could adversely impact INTAC's ability to collect the $15 million trade receivables owed to INTAC.

        From April 14 through April 15, 2006, respective legal counsel for INTAC and HSW and representatives of both companies worked to resolve the outstanding issues related to the contribution agreements, the services agreement and related transaction agreements.

        On April 17, 2006, the INTAC board of directors held a special meeting in which INTAC management, representatives from Shearman & Sterling and representatives from Savvian updated the INTAC board of directors on matters related to and the status of the proposed merger with HSW International. At the meeting, the Savvian representatives reviewed the updates on evaluation of the financial terms of the proposed merger, and delivered its oral opinion, subsequently confirmed in writing, that, as of that date and based upon and subject to the assumptions, factors, qualifications and limitations set forth in the written opinion, the consideration to be received by the holders of INTAC common stock, taken in the aggregate pursuant to the merger agreement, was fair from a financial point of view to such holders.

        Following the presentations, and after further review and discussion, the INTAC board of directors unanimously determined that the merger agreement with HSW International was fair to, and in the best interests of, INTAC and its stockholders.

        On April 18, 2006, the INTAC board of directors held a special meeting in which management and representatives from Shearman & Sterling updated the INTAC board of directors on matters related to and the status of the proposed merger with HSW International. The INTAC board of directors voted unanimously to adopt the merger agreement and approve the merger and the related transactions, and resolved to recommend that INTAC stockholders adopt the merger agreement and approve the merger and the related transactions.

        On April 19, 2006, the parties and their respective legal counsel discussed and finalized the execution copies of the merger agreement, the DWS stock purchase agreement and other transaction agreements.

        Early on the morning of April 20, 2006, the parties signed the merger agreement and the DWS stock purchase agreement, Mr. Zhou and HSW signed the voting agreement and Mr. Zhou, HSW and HSW International signed the stockholders agreement. The parties then issued a joint press release publicly announcing the merger and the related transactions.

        In July 2006, the INTAC board of directors began to discuss the sale to Wei Zhou, INTAC's Chief Executive Officer and President, of the distribution/telecommunications business of INTAC by way of a sale of the shares of the INTAC subsidiaries conducting the distribution/telecommunications business to an entity owned and controlled by Wei Zhou, in light of the decision by INTAC and HSW International to focus post-merger operations on content acquisition, creation and dissemination,

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including online publishing, career development and training and education markets. The INTAC management and board of directors considered the limited growth potential of the distribution/telecommunications and the market risks it had previously identified in connection with the merger agreement, and determined that a sale of the distribution business might be beneficial to INTAC and the post-merger business.

        In early August 2006, representatives of INTAC proposed to representatives of HSW that the sale of the distribution business be considered. Representatives of INTAC and HSW discussed the terms of the distribution business sale and determined to proceed with the transaction.

        From August 2 to August 7, 2006, representatives of INTAC and HSW, through various telephone conferences and meetings, continued to discuss the terms for the sale of the distribution/telecommunications business, including the terms for a share purchase agreement and any amendments that may be required to the merger agreement.

        On or about August 8, 2006, members of the INTAC Board of Directors discussed the proposed sale of the distribution/telecommunications of INTAC to Mr. Zhou. After discussing the advantages and disadvantages of the sale of the distribution/telecommunications business, members of the Board of Directors determined that a sale of the business to Mr. Zhou, subject to the negotiation of a final purchase agreement, obtaining a favorable fairness opinion from INTAC's financial advisors, and approval of the transaction by INTAC's stockholders, would be in the best interests of INTAC, and the members of the Board therefore determined to proceed with negotiation of a purchase agreement for the sale of the distribution business to Mr. Zhou or a company controlled by Mr. Zhou. The members of the Board of Directors further determined that if INTAC is ultimately unsuccessful in selling the distribution business to Mr. Zhou, it would be in the best interests of INTAC to pursue a sale of the distribution business to other parties who may be subsequently identified by the Board or management of INTAC, subject to the negotiation of favorable terms and conditions and obtaining a favorable fairness opinion from INTAC's financial advisors.

        On August 10, 2006, INTAC entered into a letter of intent with Mr. Zhou providing for the negotiation of an agreement to purchase from INTAC Holdings of all outstanding shares of the distribution companies by Mr. Zhou or a company controlled by Mr. Zhou in exchange for 3 million shares of INTAC, subject to the approval of the Board of Directors and the stockholders of INTAC other than Mr. Zhou and his affiliates.

        On August 25, 2006, representatives of Greenberg Traurig provided representatives of Shearman & Sterling with initial drafts of amendments to the merger agreement and other transaction documents.

        On October 9, 2006, representatives of Shearman & Sterling provided representatives of Greenberg Traurig with an initial draft of the share purchase agreement.

        On October 11, 2006, representatives of Greenberg Traurig provided representatives of Shearman & Sterling with revised drafts of the Share Purchase Agreement for the sale of the distribution business and the amendment to merger agreement.

        On November 30, 2006, the INTAC Board of Directors resolved by unanimous written consent to ratify the decision made on August 8, 2006 to pursue, subject to negotiation of a definitive agreement and obtaining a favorable opinion from INTAC's financial advisor regarding the fairness of the proposed consideration, the sale of the distribution/telecommunications business to Mr. Zhou or, in the alternative, to seek opportunities to sell the distribution/telecommunications business to a third party.

        On January 28, 2007, the INTAC board of directors held special meetings in which management, representatives from Shearman & Sterling and representatives from Savvian updated the INTAC board of directors on matters related to and the status of the proposed merger with HSW International and distribution business sale. At the meetings, the representative from Savvian reviewed with the disinterested INTAC directors the financial terms of the proposed merger and distribution business sale and presented detailed financial analysis regarding those financial terms. The disinterested INTAC

52



directors then voted to adopt the amendment to merger agreement and share purchase agreement and approved the distribution business sale.

        Early in the morning of January 29, 2007, the parties signed the amendment to merger agreement, share purchase agreement and stock purchase agreements in connection with equity financing. Mr. Zhou, HSW and HSW International signed the amended and restated stockholders agreement. The parties then issued a joint press release publicly announcing the amendment to merger agreement, share purchase agreement and the equity financing.


INTAC's Reasons for the Merger and Distribution Business Sale and Recommendation of the INTAC Board of Directors

        At a special meeting held on April 18, 2006, the INTAC board, including all disinterested INTAC directors (as required pursuant to Nevada law), unanimously adopted the merger agreement, determined that the merger agreement, the merger and the related transactions are fair to and in the best interests of INTAC and its stockholders and recommended that INTAC stockholders vote "FOR" adoption of the merger agreement and approval of the merger and the related transactions.

        At a meeting held on January 28, 2007, the INTAC board, through its disinterested directors (as required pursuant to Nevada law), adopted the share purchase agreement, determined that the share purchase agreement, the distribution business sale and related transactions are fair to and in the best interests of INTAC and its stockholders and recommend that INTAC stockholders vote "FOR" adoption of the share purchase agreement and approval of the distribution business sale and related transactions.

        In reaching its decision to adopt the merger agreement and the share purchase agreement and recommend that INTAC stockholders vote to adopt the merger agreement and the share purchase agreement and approve the merger, the distribution business sale and the related transactions, the INTAC board of directors considered a number of factors, including the following:

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54


        In the judgment of INTAC's board, however, these potential risks were more than offset by the potential benefits of the merger and distribution business sale discussed above.

        The above discussion is not intended to be exhaustive, but INTAC believes it addresses the material information and factors considered by the INTAC board of directors in its consideration of the merger and distribution business sale, including factors that may support the merger and distribution business sale as well as factors that may weigh against it. In view of the variety of factors and the amount of information considered, the INTAC board of directors did not find it practicable to, and did not make specific assessments of, quantify or otherwise assign relative weights to, the specific factors considered in reaching its determination. In addition, the INTAC board of directors did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to its ultimate determination, and individual members of INTAC's board of directors may have given different weights to different factors.

        In considering the recommendation of the INTAC board of directors to approve the merger agreement and the share purchase agreement, INTAC stockholders should be aware that certain executive officers and directors of INTAC have certain interests in the merger and distribution business sale that may be different from, or in addition to, the interests of INTAC stockholders generally. The INTAC board of directors was aware of these interests and considered them when adopting the merger agreement and the share purchase agreement and recommending that INTAC stockholders vote to adopt the merger agreement and the share purchase agreement and approve the merger, the distribution business sale and the related transactions. See "—Interests of INTAC Directors and Executive Officers in the Merger and Distribution Business Sale" beginning on page 70.

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Opinions of INTAC's Financial Advisor

        On January 28, 2007, Savvian rendered its oral opinion to the INTAC board of directors, which was subsequently confirmed in writing, that as of such date and based upon and subject to the assumptions, factors, qualifications and limitations set forth in the written opinion, the consideration to be received by the holders of shares of INTAC common stock, other than Mr. Zhou and his affiliates, taken in the aggregate, pursuant to the merger agreement was fair from a financial point of view to such holders.

        The full text of the written opinion of Savvian dated January 28, 2007, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken by Savvian in connection with its opinion as to the consideration received in the merger, is attached to this document as Annex N and is incorporated herein by reference. The summary of Savvian's fairness opinion set forth in this document is qualified in its entirety by reference to the full text of the opinion. Stockholders should read the opinion carefully and in its entirety. Savvian's opinion does not constitute a recommendation to any stockholder of INTAC as to how to vote or act with respect to the proposed transactions contemplated by the merger agreement and the contribution agreement (referred to in this proxy statement/prospectus as the merger transactions) or in connection with the distribution business sale.

        In connection with its review, Savvian reviewed financial projections of INTAC and HSW's business in China. These financial projections were prepared by the management of INTAC based on assumptions regarding INTAC's future performance. The financial projections do not take into account any circumstances or events occurring after the date they were prepared. In addition, factors such as industry performance, general business, economic, regulatory, market and financial conditions, as well as risk factors identified in this proxy statement/prospectus, may cause actual future results to differ materially from the financial projections prepared by INTAC management. Therefore, the financial projections are not necessarily indicative of future results.

        Savvian's opinion was directed to the INTAC board of directors in connection with its consideration of the merger transactions and addresses only the fairness from a financial point of view of the consideration to be received by the holders of INTAC common stock, other than Mr. Zhou and his affiliates, taken in the aggregate, pursuant to the merger agreement. The Savvian opinion does not address any other aspect or implication of the merger transactions, the equity financing, the distribution business sale or any other agreement, arrangement or understanding entered into in connection with the merger transactions, the equity financing, the distribution business sale or otherwise, including the value of the HSW International stock to be issued in connection with the equity financing or the issuance of additional equity of HSW International pursuant to the issuance of stock options.

        In connection with the opinion, Savvian, among other things:

56


        In connection with Savvian's review, Savvian assumed and relied upon, without independent verification, the accuracy and completeness of the information reviewed by it for the purposes of the opinion. With respect to financial projections of either INTAC or HSW (China), Savvian assumed that the projections were reasonably prepared on bases reflecting the best currently available estimates and judgments of management of INTAC or HSW, respectively, of the future financial performance of INTAC or HSW (China), respectively. In addition, Savvian assumed that the merger transactions would be consummated in accordance with the terms set forth in the drafts of the merger agreement, the contribution agreement and certain related agreements provided to Savvian (without any amendments or modifications thereto), without waiver by any party of any material rights thereunder, and that in all respects material to Savvian's analysis, the representations and warranties made by parties thereto are true and correct. Savvian also assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the merger transactions will be obtained without any adverse effect on INTAC, HSW (China) or on the expected benefits of the merger transactions in any way meaningful to Savvian's analysis. Savvian's opinion is necessarily based on financial, economic, market and other conditions in effect on, and the information made available to Savvian as of, the date of the opinion. Savvian reserves the right, however, to withdraw, revise or modify its opinion based upon additional information which may be provided to it or obtained by it, which suggests, in its judgment, a change in the assumptions (or the bases therefor) upon which its opinion is based.

        Savvian also relied upon, without independent verification, the assessment by the managements of both INTAC and HSW of: (i) the strategic rationale for the merger transactions; (ii) the timing and risks associated with the deployment of HSW content by HSW International; and (iii) the validity of, and risks associated with, INTAC's and HSW's existing and future technologies, services or business models. Savvian did not make any independent valuation or appraisal of the assets or technology of HSW and INTAC, nor was Savvian furnished with any such appraisals. Savvian did not make any

57



independent investigation of any legal, accounting or tax matters affecting INTAC, and Savvian assumed the correctness of all legal, accounting and tax advice given to INTAC and its board of directors. Savvian took into account its experience in transactions that it believed to be generally comparable or relevant and its experience in valuation of securities or businesses in general. The Savvian opinion did not address the underlying business decision of INTAC to proceed with the merger transactions or the distribution business sale. The Savvian opinion did not address the value of the HSW International stock to be issued in connection with the equity financing. Savvian was not authorized to and did not solicit indications of interest in a business combination with INTAC from any party.

        The following is a summary of the material financial analyses performed by Savvian in connection with the preparation of its fairness opinion. The following summary of the analyses is not a complete description of the analyses underlying Savvian's opinion, nor does the order of analyses described represent relative importance or weight given to those analyses by Savvian. The preparation of a fairness opinion is a complex process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. In arriving at its opinion, Savvian made qualitative judgments as to the significance and relevance of each factor that it considered. Accordingly, Savvian believes that its analyses must be considered as a whole and that selecting portions of its analyses and factors or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying its analyses and opinions.

        In connection with its opinion, Savvian performed several financial analyses, each of which implied a significantly lower equity value of INTAC than the equity value implied by trading prices of shares of INTAC common stock as of the date of Savvian's opinion. Savvian noted the following circumstances that affect the trading price performance of INTAC's common stock:

        In addition, Savvian noted other publicly disclosed liquidity and capital resources concerns facing INTAC, which under certain circumstances could have a material adverse effect on INTAC. Savvian believes that these factors are sufficient to support the large difference between the implied equity value determined by Savvian and the equity value implied by the trading prices of shares of INTAC common stock as of the date of the Savvian opinion.

        Nonetheless, the implied value determined by Savvian of the portion of HSW International to be received by INTAC stockholders compared favorably to the implied equity value of INTAC. Because the implied value of consideration compared favorably to the value of their current equity, Savvian determined that the consideration to be received by the holders of shares of INTAC common stock, other than Mr. Zhou and his affiliates, taken in the aggregate, pursuant to the merger agreement is fair from a financial point of view to such holders. Savvian presented these conclusions to the board of directors of INTAC, as necessary determinations for Savvian to arrive at its opinion.

        In addition to the distribution business, which Savvian's analysis did not address, INTAC operates the career development business and the educational software business, which have different valuation

58


metrics. Savvian performed a separate comparable companies analysis for each of INTAC's career development and educational software businesses, and then added the results together to determine the valuation of INTAC (excluding the distribution business). Savvian compared certain financial information relating to each of INTAC's career development and educational software businesses to corresponding financial information for the following six publicly traded companies in the career development (post-secondary educators) industry and nine publicly traded companies in the educational or enterprise resource planning software industry.

        Although none of the selected companies is directly comparable to any of the INTAC businesses, the companies included were chosen because the selected companies are publicly traded companies with operations that, for purposes of analysis, may be considered similar to the operations of each of the relevant businesses of INTAC.

        For each of INTAC's career development and educational software businesses, Savvian calculated (i) implied enterprise value (which represents total equity value on a fully diluted basis assuming treasury method plus book values of total debt, preferred stock and minority interests less cash and cash equivalents) as a multiple of INTAC management's estimates of revenue for calendar year 2007 and 2008, (ii) implied enterprise value as a multiple of INTAC management's estimates of earnings before interest, taxes, depreciation and amortization (referred to in this proxy statement/prospectus as EBITDA) for calendar year 2007 and 2008 and (iii) implied value of INTAC common stock per share (assuming the sale of the distribution business). By adding the implied enterprise values for each of INTAC's career development and educational software businesses, Savvian determined implied enterprise value for INTAC, excluding the distribution business. Savvian determined implied equity value of INTAC (assuming the sale of the distribution business) by adding $0.9 million of cash and zero debt, based on amounts outstanding as of September 30, 2006.

 
   
  Multiple Range
  Implied Enterprise
Value Range

  Implied Equity
Value Range

  Implied Value
Per Share Range

INTAC
($MM)

  Est. 2007
Revenue

  Low
  High
  Low
  High
  Low
  High
  Low
  High
Career Development   6.2   1.5x   3.5x     9.3     21.8                
Education Software   6.3   1.5x   3.5x     9.4     22.0                
INTAC Total—based on 2007 Revenue               $ 18.8   $ 43.8   $ 19.6   $ 44.7   $ 0.98   $ 2.23

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  Multiple Range
  Implied Enterprise
Value Range

  Implied Equity
Value Range

  Implied Value
Per Share Range

INTAC
($MM)

  Est. 2008
Revenue

  Low
  High
  Low
  High
  Low
  High
  Low
  High
Career Development   11.7   1.0x   3.0x     11.7     35.0                
Education Software   6.9   1.0x   3.0x     6.9     20.8                
INTAC Total—based on 2008 Revenue               $ 18.6   $ 55.8   $ 19.4   $ 56.6   $ 0.97   $ 2.83
 
   
   
   
  Implied Enterprise
Value Range

  Implied Equity
Value Range

  Implied Value
Per Share Range

 
   
  Multiple Range
INTAC
($MM)

  Est. 2007
EBITDA

  Low
  High
  Low
  High
  Low
  High
  Low
  High
Career Development   (0.5 ) 9.0x   11.0x     0.0     0.0                
Education Software   1.4   10.0x   12.0x     14.4     17.2                
INTAC Total—based on 2007 EBITDA               $ 14.4   $ 17.2   $ 15.2   $ 18.1   $ 0.76   $ 0.90
 
   
   
   
  Implied Enterprise
Value Range

  Implied Equity
Value Range

  Implied Value
Per Share Range

 
   
  Multiple Range
INTAC
($MM)

  Est. 2008
EBITDA

  Low
  High
  Low
  High
  Low
  High
  Low
  High
Career Development   1.2   7.0x   10.0x     8.4     12.0                
Education Software   1.8   9.0x   11.0x     16.5     20.2                
INTAC Total—based on 2008 EBITDA               $ 25.0   $ 32.2   $ 25.8   $ 33.1   $ 1.29   $ 1.65

        Savvian then compared certain financial information relating to HSW (China) to corresponding financial information for the following eight publicly traded Chinese Internet content and media companies and eight publicly traded U.S. Internet content and media companies.

        Although none of the selected companies is directly comparable to HSW (China), the companies included were chosen because the selected companies are publicly traded companies with operations that, for purposes of analysis, may be considered similar to the expected operations of HSW (China).

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        Savvian calculated for HSW (China) (i) implied enterprise value/equity value (assumes $5.0 million of cash and zero debt) as a multiple of HSW management's estimates of revenue for calendar year 2008, (ii) implied enterprise value/equity value as a multiple of HSW management's estimates of EBITDA for calendar year 2008 and (iii) implied value of HSW (China) common stock per share assuming 23 million shares outstanding.

 
   
   
   
  Implied Enterprise
Value/Equity Value
Range

  Implied Value
Per Share Range

 
   
  Multiple Range
HSW ($MM)

   
  CY2008
  Low
  High
  Low
  High
  Low
  High
CY 2008 Revenue   $ 25.0   2.0x   4.0x   $ 55.0   $ 104.9   $ 2.39   $ 4.56
CY 2008 EBITDA   $ 2.4   11.0x   13.0x   $ 26.3   $ 31.1   $ 1.14   $ 1.35

        Savvian then calculated the implied equity value of HSW International (after the completion of the equity financing) on a pro forma per share basis, based on the sum of (i) the average of the midpoints of the INTAC comparable companies analyses based on 2008 revenue and 2008 EBITDA and (ii) the midpoint of the mean range of the HSW comparable companies analyses based on 2008 revenue and 2008 EBITDA. Based upon the foregoing and assuming completion of the equity financing, the range of the implied value of HSW (China) common stock per share utilizing the trading comparables for 2008 revenue was a range of $2.45 to $4.18 and for 2008 EBITDA was a range of $2.01 to $2.25.

        In addition to the distribution business, which Savvian's analysis did not address, INTAC operates the career development business and the educational software business, which have different valuation metrics. Savvian performed a separate precedent transaction analysis for each of INTAC's career development and educational software businesses, and then added the results together to determine the valuation of INTAC (excluding the distribution business). Savvian compared certain financial information relating to each of INTAC's career development and educational software businesses to corresponding financial information for the following eleven transactions in the career development industry and ten transactions in the educational software industry.

Acquiror

  Target
  Date Announced
Career Development (>$500MM)        
Citigroup Private Equity and Sterling Partners   Educate Inc.   September 25, 2006
Providence Equity Partners Inc. and Goldman Sachs Group Inc.   Education Management Corp   March 6, 2006

Career Development (<$500MM)

 

 

 

 
Noble Learning Communities
Castle Harlan
Liberty Higher Education
Xap Corporation
Laureate Education Inc.
Laureate Education Inc.
Laureate Education Inc.
Corinthian Colleges, Inc.
Career Education Corp.
  Discovery Isle Child Development Center
Study Group International
Concorde Career Colleges
Bridges Transitions, Inc.
Universidade Anhembi Morumbi
Walden University
KIT eLearning, BV
CDI Education Corporation
Whitman Education Group, Inc.
  October 26, 2006
August 3, 2006
June 21, 2006
May 24, 2006
December 1, 2005
September 16, 2004
April 1, 2004
June 24, 2003
March 26, 2003

Educational Software (>$500MM)

 

 

 

 
SunGard Data Systems Inc.   Systems & Computer Technology Corp.   December 10, 2003
         

61


Educational Software (<$500MM)        
Parametric Technology Corp.
Totvs SA
Blackboard Inc.
Saba Software, Inc.
SumTotal Systems, Inc.
Convergys Corp.
Docent, Inc.
eCollege Inc.
SkillSoft PLC
  Mathsoft Engineering & Education
RM Sistemas
WebCT
Centra Software, Inc.
Pathlore Software Corp.
DigitalThink Inc.
Click2learn, Inc.
Datamark, Inc.
SmartForce PLC
  April 26, 2006
April 13, 2006
October 12, 2005
October 6, 2005
August 3, 2005
March 25, 2004
October 20, 2003
September 16, 2003
June 10, 2002

        Although none of the precedent transactions is directly comparable to any of the INTAC businesses, the precedent transactions included were chosen because the merger transactions involve publicly traded companies with operations that, for purposes of analysis, may be considered similar to the operations of each of the relevant businesses of INTAC.

        For each of INTAC's career development and educational software businesses, Savvian calculated (i) implied enterprise value/equity value as a multiple of INTAC management's estimates of revenue for forward twelve months (referred to in this proxy statement/prospectus as NTM), (ii) implied enterprise value/equity value as a multiple of INTAC management's estimates of revenue for NTM +1, (iii) implied enterprise value/equity value as a multiple of INTAC management's estimates of EBITDA for NTM, (iv) implied enterprise value/equity value as a multiple of INTAC management's estimates of EBITDA for NTM +1 and (v) implied value of INTAC common stock per share based upon the foregoing. With respect to Savvian's analysis of INTAC management's estimates of revenue for NTM +1, Savvian applied a 20% discount rate to the NTM multiple. By adding the implied enterprise values for each of INTAC's career development and educational software businesses, Savvian determined implied enterprise value for INTAC. Savvian determined implied equity value of INTAC by adding $0.9 million of cash and zero debt, based on amounts outstanding as of September 30, 2006.

 
   
  Multiple Range
  Implied Enterprise
Value Range

  Implied Equity
Value Range

  Implied Value
Per Share Range

INTAC
($MM)

  Est. NTM
Revenue

  Low
  High
  Low
  High
  Low
  High
  Low
  High
Career Development   $ 6.2   1.0x   2.0x     6.2     12.4                
Education Software   $ 6.3   1.0x   3.0x     6.3     18.9                
INTAC Total—based on NTM Revenue                 $ 12.5   $ 31.3   $ 13.4   $ 32.2   $ 0.67   $ 1.61
 
   
  Multiple Range
  Implied Enterprise
Value Range

  Implied Equity
Value Range

  Implied Value
Per Share Range

INTAC
($MM)

  Est. NTM +1
Revenue

  Low
  High
  Low
  High
  Low
  High
  Low
  High
Career Development   $ 11.7   0.8x   1.6x     9.3     18.6                
Education Software   $ 6.9   0.8x   2.4x     5.5     16.6                
INTAC Total—based on NTM +1 Revenue                 $ 14.9   $ 35.3   $ 15.7   $ 36.1   $ 0.78   $ 1.80
 
   
   
   
  Implied Enterprise
Value Range

  Implied Equity
Value Range

  Implied Value
Per Share Range

 
   
  Multiple Range
INTAC
($MM)

  Est. NTM
EBITDA

  Low
  High
  Low
  High
  Low
  High
  Low
  High
Career Development   $ (0.5 ) 7.0x   10.0x     0.0     0.0                
Education Software   $ 1.4   7.0x   9.0x     10.0     12.9                
INTAC Total—based on NTM EBITDA                 $ 10.0   $ 12.9   $ 10.9   $ 13.8   $ 0.54   $ 0.69

62


 
   
  Multiple Range
  Implied Enterprise
Value Range

  Implied Equity
Value Range

  Implied Value
Per Share Range

INTAC
($MM)

  Est. NTM +1
EBITDA

  Low
  High
  Low
  High
  Low
  High
  Low
  High
Career Development   $ 1.2   5.6x   8.0x     6.7     9.6                
Education Software   $ 1.8   5.6x   7.2x     10.3     13.2                
INTAC Total—based on NTM +1 EBITDA                 $ 17.0   $ 22.9   $ 17.9   $ 23.7   $ 0.89   $ 1.18

        Savvian then compared certain financial information relating to HSW (China) to corresponding financial information for the following fourteen transactions involving Internet content and media companies.

Acquiror

  Target
  Date Announced
Transactions >$500MM        
Publicis Group
NBC Universal
News Corporation
E. W. Scripps Company
eBay Inc.
Hellman & Friedman LLC
IAC/InterActiveCorp
  Digitas
iVillage Inc.
Intermix Media, Inc.
Shopzilla Inc.
Shopping.com Inc.
DoubleClick Inc.
AskJeeves, Inc.
  December 20, 2006
March 6, 2006
July 18, 2005
June 6, 2005
June 1, 2005
April 25, 2005
March 21, 2005

Transactions <$500MM

 

 

 

 
eBay
The Knot
Reader's Digest Association
ValueClick, Inc.
Gannett Co., Inc.
Acxiom Corp.
The New York Times Company
  StubHub.com
WeddingChannel.com
Allrecipes.com, Inc.
Fastclick, Inc.
PointRoll, Inc.
Digital Impact, Inc.
About.com, Inc.
  December 20, 2006
June 5, 2006
March 31, 2006
August 11, 2005
June 10, 2005
March 28, 2005
February 17, 2005

        Although none of the precedent transactions is directly comparable to the merger transactions or the HSW (China) business, the precedent transactions included were chosen because the transactions involve publicly traded companies with operations that, for purposes of analysis, may be considered similar to the expected operations of HSW (China).

        Based on the precedent transactions, Savvian calculated for HSW (China) (i) implied equity value as a multiple of HSW management's estimates of revenue for NTM +1 and (ii) implied value of HSW International common stock per share, assuming 23 million shares outstanding, based on the foregoing. With respect to Savvian's analysis of HSW management's estimates of revenue for NTM +1, Savvian applied a 20% discount rate to the NTM multiple. Savvian determined implied equity value of HSW (China) by adding $5.0 million of cash and zero debt, based on amounts outstanding as of October 31, 2006.

 
   
  Multiple Range
  Implied Equity
Value Range

  Implied Value
Per Share Range

HSW (China)
($MM)

  Est. NTM
+1 Revenue

  Low
  High
  Low
  High
  Low
  High
HSW (China) Total—based on NTM +1 Revenue   $ 25.0   2.0x   5.0x   $ 45.0   $ 104.9   $ 1.95   $ 4.56

        Savvian then calculated the implied equity value of HSW International and the relative contribution of INTAC and HSW (China) on a pro forma per share basis, based on the sum of (i) the average of the midpoints of the INTAC precedent transaction analyses based on NTM +1 revenue and (ii) the midpoint of the mean range of the HSW precedent transaction analyses based on NTM +1 revenue. Based upon the foregoing, the range of the pro forma value of HSW International common

63



stock per share utilizing the precedent transaction analysis for NTM +1 revenue was a range of $2.18 to $3.77.

        Savvian performed a discounted cash flow analysis on INTAC using projections provided by INTAC management. Savvian calculated illustrative net present value indications of free cash flows for INTAC for the years 2006 through 2011 using a discount rate of 20%. Savvian calculated illustrative value indications per share for INTAC using illustrative terminal value indications in the year 2011 based on terminal growth rates ranging from 2% to 4%. These illustrative terminal value indications were then discounted to calculate illustrative present value indications using discount rates ranging from 15% to 25%. The results of a discounted cash flow analysis may vary based upon, among other factors, the discount rates and the terminal values used in the analysis. The various ranges for discount rates and terminal growth rates were chosen to reflect theoretical analyses of cost of capital solely for the purpose of the discounted cash flow analysis. The following table presents the results of this analysis on a per share basis:

 
  Implied Value
Per Share Range

INTAC

  Low
  High
Discounted Cash Flow Analysis   $ 0.56   $ 0.68

        Savvian then performed a discounted cash flow analysis on HSW (China) using projections provided by HSW management. Savvian calculated illustrative net present value indications of free cash flows for HSW (China) for the years 2007 through 2011 using a discount rate of 25%. Savvian calculated illustrative value indications per share for HSW (China) using illustrative terminal value indications in the year 2011 based on a terminal growth rate of 3% and percentages of revenue achieved ranging from 50% to 100%. These illustrative terminal value indications were then discounted to calculate illustrative present value indications using discount rates ranging from 25% to 35%. The following table presents the results of this analysis on a per share basis:

 
  Implied Value
Per Share Range

HSW (China)

  Low
  High
Discounted Cash Flow Analysis   $ 1.25   $ 5.56

        Savvian then calculated the implied equity value on a pro forma per share basis of HSW International and the relative contribution of INTAC and HSW (China), based on the sum of the midpoints of the INTAC and HSW discounted cash flow analyses. Based upon the foregoing, the range of the pro forma value of HSW International common stock per share utilizing the discounted cash flow analysis was a range of $1.78 to $3.78.

        Savvian then compiled the above information to show the overall mean range of the implied value of INTAC on a pro forma basis assuming the sale of the distribution business based on the range of implied pro forma values utilizing each of the Comparable Companies Analysis, Precedent Transactions Analysis and Discounted Cash Flow Analysis, including the mean of the three analyses. Based upon the foregoing, the overall mean range of the implied value of INTAC on a pro forma per share basis was a range of $0.83 to $1.51. Savvian then compiled the above information to show the overall mean range of the implied value of HSW International immediately after completion of the merger on a pro forma basis assuming the sale of the distribution business based on the range of implied pro forma values utilizing each of the Comparable Companies Analysis, Precedent Transactions Analysis and Discounted Cash Flow Analysis, including the mean of the three analyses. Based upon the foregoing, the overall mean range of the implied value of HSW International immediately after completion of the merger on

64



a pro forma per share basis was a range of $2.30 to $3.66, which compares favorably to the implied value of INTAC on a stand-alone basis (assuming the sale of the distribution business).

        On January 28, 2007, Savvian rendered its oral opinion to the INTAC board of directors, which was subsequently confirmed in writing, that as of such date and based upon and subject to the assumptions, factors, qualifications and limitations set forth in the written opinion, the consideration to be received by INTAC for all of the issued and outstanding shares of the distribution companies pursuant to the share purchase agreement was fair from a financial point of view to INTAC.

        The full text of the written opinion of Savvian dated January 28, 2007, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken by Savvian in connection with its opinion as to the distribution business sale, is attached to this document as Annex O and is incorporated herein by reference. The summary of Savvian's fairness opinion set forth in this document is qualified in its entirety by reference to the full text of the opinion. Stockholders should read the opinion carefully and in its entirety. Savvian's opinion does not constitute a recommendation to any stockholder of INTAC as to how to vote or act with respect to the merger transactions, the equity financing or the distribution business sale.

        In connection with its review, Savvian reviewed financial projections of the distribution business. These financial projections were prepared by the management of INTAC based on assumptions regarding the future performance of the distribution business. The financial projections do not take into account any circumstances or events occurring after the date they were prepared. In addition, factors such as industry performance, general business, economic, regulatory, market and financial conditions, as well as risk factors identified in this proxy statement/prospectus, may cause actual future results to differ materially from the financial projections prepared by INTAC management. Therefore, the financial projections are not necessarily indicative of future results.

        Savvian's opinion was directed to the INTAC board of directors in connection with its consideration of the distribution business sale and addresses only the fairness from a financial point of view of the consideration to be received by INTAC for all of the issued and outstanding shares of the distribution companies pursuant to the distribution agreement. The Savvian opinion does not address any other aspect or implication of the distribution business sale or any other agreement, arrangement or understanding entered into in connection with the distribution business sale, the merger transactions, the equity financing or otherwise, including the value of the HSW International stock to be issued in connection with the equity financing or the issuance of additional equity of HSW International pursuant to the issuance of stock options.

        In connection with the opinion, Savvian, among other things:

65


        In connection with Savvian's review, Savvian assumed and relied upon, without independent verification, the accuracy and completeness of the information reviewed by it for the purposes of the opinion. With respect to financial projections of the distribution business, Savvian assumed that the projections were reasonably prepared on bases reflecting the best currently available estimates and judgments of management of INTAC, of the future financial performance of the distribution business. In addition, Savvian assumed that the merger transactions and the distribution business sale would be consummated in accordance with the terms set forth in the drafts of the share purchase agreement, merger agreement, contribution agreement and certain related agreements provided to Savvian (without any amendments or modifications thereto), without waiver by any party of any material rights thereunder, and that in all respects material to Savvian's analysis, the representations and warranties made by parties thereto are true and correct. Savvian also assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the merger transactions and distribution business sale will be obtained without any adverse effect on INTAC or the distribution business or the expected benefits of the merger transactions or distribution business sale in any way meaningful to Savvian's analysis. Savvian's opinion is necessarily based on financial, economic, market and other conditions in effect on, and the information made available to Savvian as of, the date of the opinion. Savvian reserves the right, however, to withdraw, revise or modify its opinion based upon additional information which may be provided to it or obtained by it, which suggests, in its judgment, a change in the assumptions (or the bases therefor) upon which its opinion is based.

        Savvian also relied upon, without independent verification, the assessment by the managements of INTAC of: (i) the strategic rationale for the merger transactions and the distribution business sale; (ii) the future performance and prospects of the distribution business; and (iii) the validity of, and risks associated with, INTAC's existing and future technologies, services or business models. Savvian did not make any independent valuation or appraisal of the assets or technology of INTAC or the distribution

66



business, nor was Savvian furnished with any such appraisals. Savvian did not make any independent investigation of any legal, accounting or tax matters affecting INTAC, or the distribution business and Savvian assumed the correctness of all legal, accounting and tax advice given to INTAC and its board of directors. Savvian took into account its experience in transactions that it believed to be generally comparable or relevant and its experience in valuation of securities and businesses in general. The Savvian opinion did not address the underlying business decision of INTAC to proceed with the merger transactions or the distribution business sale. The Savvian opinion did not address the value of the HSW International stock to be issued in connection with the equity financing. Savvian was not authorized to and did not solicit indications of interest in a sale of the distribution business from any party.

        The following is a summary of the material financial analyses performed by Savvian in connection with the preparation of its fairness opinion. The following summary of the analyses is not a complete description of the analyses underlying Savvian's opinion, nor does the order of analyses described represent relative importance or weight given to those analyses by Savvian. The preparation of a fairness opinion is a complex process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. In arriving at its opinion, Savvian made qualitative judgments as to the significance and relevance of each factor that it considered. Accordingly, Savvian believes that its analyses must be considered as a whole and that selecting portions of its analyses and factors or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying its analyses and opinions.

        In addition, Savvian noted INTAC's dependence on a single customer, accounted for 38% of INTAC's revenue in the nine months ended September 30, 2006, from whom INTAC had a receivable balance of approximately $11.2 million as of September 30, 2006, and with whom INTAC has entered into an installment payment plan. Savvian also noted other publicly disclosed liquidity and capital resources concerns facing INTAC, which under certain circumstances could have a material adverse effect on INTAC. Savvian also noted the declining revenue and profitability of the distribution business since March 2006, as well as the current management forecast, which replaced the forecast provided in March 2006, reflecting material reductions in estimated future revenue and profitability of the distribution business. Savvian also noted that the obligations of HSW under the merger agreement to consummate the merger are conditioned upon the closing of the distribution business sale.

        The implied value as determined by Savvian of the consideration to be received by INTAC compared favorably to the implied value of the distribution business. Because the implied value of the consideration compared favorably to the implied value of the distribution business, Savvian determined that the consideration to be received by INTAC for all of the issued and outstanding shares of the distribution companies pursuant to the distribution agreement was fair from a financial point of view to INTAC. Savvian presented these conclusions to the board of directors of INTAC, as necessary determinations for Savvian to arrive at its opinion.

        Savvian performed a comparable companies analysis for INTAC's distribution business as a separate entity. Savvian compared certain financial information relating to the distribution business to corresponding financial information for the following nine publicly traded companies in the information technology distributor industry.

67


        Large Cap (> $1 billion):


        Small Cap (< $1 billion):

        Although none of the selected companies is directly comparable to the distribution business, the companies included were chosen because the selected companies are publicly traded companies with operations that, for purposes of analysis, may be considered similar to the operations of each of the distribution business.

        For the distribution business, Savvian calculated the (i) implied equity value as a multiple of INTAC management's estimates of revenue of the distribution business for calendar year 2006 and (ii) implied value of Intac common stock per share for the distribution business assuming 23 million shares outstanding. Savvian determined implied equity value of the Company by adding $1.0 million of cash and zero debt based on amounts outstanding as of September 30, 2006.

 
   
  Multiple Range
  Implied Equity
Value Range

  Implied Value
Per Share Range

INTAC
($MM)

  Est. 2006
Revenue

  Low
  High
  Low
  High
  Low
  High
Distribution Business   $ 58.3   0.1x   0.3x   $ 6.8   $ 18.5   $ 0.30   $ 0.80

        Savvian performed a precedent transaction analysis for INTAC's distribution business as a separate entity. Savvian compared certain financial information relating to the distribution business to corresponding financial information for the following thirteen transactions in the information technology distribution industry.

Acquiror

  Target
  Date Announced
IT Distribution (>$500MM)        
Avnet, Inc.
Avnet, Inc.
Arrow Electronics Inc.
Avnet, Inc.
  Memec Group Holdings Limited
Kent Electronics Corporation
Wyle Components
Marshall Industries, Inc.
  April 26, 2005
March 22, 2001
August 7, 2000
June 28, 1999

IT Distribution (<$500MM)

 

 

 

 
Arrow Electronics Inc.
Arrow Electronics Inc.
Ingram Micro
Tech Data Corp.
Arrow Electronics Inc.
Avnet, Inc.
  Agilysys KeyLink Systems Group
DNSint.com AG
Tech Pacific Limited
Azlan Group PLC
Pioneer Standard Electronics Inc.
Savoir Technology Inc.
  January 2, 2007
October 27, 2005
September 26, 2004
February 6, 2003
January 14, 2003
March 1, 2000
         

68



IT Distribution (<$100MM)

 

 

 

 
Itautec Philco SA
Telmar Network Technology
SYNNEX Corp.
  Tallard Technologies
Somera Communications
EMJ Data Systems Limited
  June 30, 2006
June 24, 2006
July 14, 2004

        Although none of the precedent transactions is directly comparable to the distribution business, the precedent transactions included were chosen because the transactions involve publicly traded companies with operations that, for purposes of analysis, may be considered similar to the operations of each of the distribution business.

        For the distribution business, Savvian calculated the (i) implied equity value as a multiple of INTAC management's estimates of revenue of the distribution business for LTM and (ii) implied value of the distribution business common stock per share assuming 23 million shares outstanding. Savvian determined implied equity value of the Company by adding $1.0 million of cash and zero debt based on amounts outstanding as of September 30, 2006.

 
   
  Multiple Range
  Implied Equity
Value Range

  Implied Value
Per Share Range

INTAC
($MM)

  LTM Revenue
  Low
  High
  Low
  High
  Low
  High
Distribution Business   $ 62.6   0.1x   0.3x   $ 7.3   $ 19.8   $ 0.32   $ 0.86

        Savvian then calculated the implied value of INTAC common stock per share for the distribution business based upon the above analyses against the implied value of INTAC common stock based upon the trading price of INTAC common stock as of January 25, 2007, which was $7.20 per share. Savvian also compared the implied value of INTAC common stock based upon the trading price of INTAC common stock as of January 25, 2007, of $7.20 per share, against the implied book value per share of the distribution business as of September 30, 2006, and against such implied book value per share using discount rates ranging from 25% to 50%. The various ranges for discount rates were chosen to reflect the liquidity and capital resources concerns as previously noted with respect to the distribution business solely for the purpose of the valuation analysis. Based upon the foregoing, the value of the consideration of three million shares to be received for the distribution business compares favorably to the implied valuation of the distribution business.

        Savvian performed a variety of financial and comparable analyses for purposes of rendering its opinions. The preparation of a fairness opinion is a complex process and is not susceptible to partial analysis or summary description. In arriving at its opinions, Savvian considered the results of all of its analyses as a whole and did not attribute any particular weight to any analysis or factor considered. Furthermore, Savvian believes that the summaries provided and the analyses described above must be considered as a whole and that selecting any portion of the analyses, without considering all of them as a whole, would create an incomplete view of the process underlying Savvian's analyses and opinions. In addition, Savvian may have given various analyses and factors more or less weight than other analyses and factors, and may have deemed various assumptions more or less probable than other assumptions. As a result, the ranges of valuations resulting from any particular analysis or combination of analyses described above should not be taken to be the view of Savvian with respect to the actual value of HSW (China), INTAC common stock, the distribution business or the value of HSW International. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold. Accordingly, the analyses and estimates of INTAC and HSW are inherently subject to substantial uncertainty.

        In performing its analyses, Savvian made numerous assumptions with respect to industry performance, general business, regulatory, and economic conditions and other matters, many of which

69



are beyond the control of Savvian, INTAC, HSW or HSW International. Any estimates contained in the analyses of Savvian are not necessarily indicative of future results or actual values, which may be significantly more or less favorable than those suggested by such estimates.

        The opinions of Savvian were two of the many factors taken into consideration by INTAC's board of directors in making its determination to approve the proposed transactions. Consequently, the analyses as described above should not be viewed as determinative of the opinions of INTAC's board of directors with respect to the merger consideration or the consideration to be received by INTAC for the distribution business. The foregoing summaries do not purport to be a complete description of all of the analyses performed by Savvian.

        Savvian is an investment banking and advisory firm. Savvian, as part of its business, is continuously engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate, estate and other purposes.

        Pursuant to an engagement letter, INTAC has agreed to pay Savvian customary fees in connection with each of the merger and the distribution business sale, much of which is contingent upon the consummation of the merger transactions. INTAC has also agreed to reimburse Savvian for its fees and expenses incurred in performing its services. In addition, INTAC has agreed to indemnify Savvian and its affiliates, their respective directors, officers, agents and employees and each person, if any, controlling Savvian or any of its affiliates against certain liabilities and expenses, including certain liabilities under the federal securities laws, related to or arising out of Savvian's engagement and any related transactions.

        In the past, Savvian and its affiliates have provided financial advisory and financing services for HSW and certain of its affiliates on unrelated transactions, and have received aggregate fees of approximately $2.5M for the rendering of these services. Savvian may also provide HSW, HSW International, or their affiliates services in the future and may receive fees in connection with such services.


Interests of INTAC Directors and Executive Officers in the Merger and Distribution Business Sale

        The following table sets forth, as of March 14, 2007, the number of shares subject to unvested options held by INTAC's executives and directors and the weighted average exercise prices of those options:

Name

  Number of Shares Subject
to Unvested Options

  Weighted Average
Exercise Price

Wei Zhou
Director, Chief Executive Officer,
President and Secretary
     
J. David Darnell
Director, Senior Vice President and
Chief Financial Officer
     
Theodore P. Botts
Director
  20,833   $ 6.40
Kevin Jones
Director
  20,833   $ 6.40
Dr. Heinz-Gerd Stein
Director
  20,833   $ 6.40
Larrie A. Weil
Director
  20,833   $ 6.40

70


        Under the terms of the merger agreement, all outstanding options to purchase INTAC common stock existing at the time of the completion of the merger, including those held by executive officers and directors, will be assumed by HSW International and will become options to purchase HSW International common stock. However, outstanding stock options held by Messrs. Botts, Jones, Stein and Weil will vest in full at the consummation of the merger. For a more complete description of the treatment of INTAC stock options, see "—Effect on Awards Outstanding Under INTAC Stock Incentive Plan" beginning on page 77.

        Under the terms of the merger agreement, each former restricted share of INTAC common stock will be converted into one share of HSW International common stock.

        Following the merger, Mr. Zhou will continue to serve as President, Chief Executive Officer and Chairman of INTAC. Mr. Zhou's current INTAC employment agreement will continue in effect. The terms of Mr. Zhou's employment will remain unchanged.

        Following the merger, Mr. David Darnell will continue to serve as Senior Vice President and Chief Financial Officer of INTAC pursuant to the terms of his existing INTAC employment agreement.

        For a description of Mr. Zhou's and Mr. Darnell's employment agreements see "INTAC Management—Employment Contracts" beginning on page 118.

        Mr. Zhou is the sole shareholder of Cyber, which will acquire the distribution/telecommunication segment of INTAC's business pursuant to the share purchase agreement.


Interests of HSW International Directors and Executive Officers in the Merger and Distribution Business Sale

Directors

        Under the terms of an amended and restated stockholders agreement, the HSW International board shall consist of seven directors. HSW shall have the right to designate five directors, and Wei Zhou shall have the right to designate two directors. One of the designees of HSW will be Jeffrey Arnold. Mr. Arnold is the Chairman and Chief Executive Officer of HSW and the Chairman and Chief Executive Officer of Convex Group, Inc. (referred to herein as Convex), which owns a controlling interest in HSW. Mr. Arnold also owns an interest in Convex and holds an option to purchase a significant number of shares of HSW common stock. As described below, HSW International has granted Mr. Arnold options to purchase a significant number of shares of HSW International common stock pursuant to a consulting agreement between them.

Arnold Consulting Agreement

        In connection with the merger, Mr. Arnold has entered into an amended and restated consulting agreement with HSW International. The consulting agreement has a term of two (2) years and permits Mr. Arnold to engage in non-competitive employment or consulting activities, including specifically activities for and on behalf of HSW and Convex. Mr. Arnold is prohibited from competing with HSW International in HSW International's territories during the term of the consulting agreement and for a period of one year thereafter. The consulting agreement provides that Mr. Arnold is obligated to notify either HSW or HSW International of any corporate opportunities that may benefit HSW International as well as HSW or Convex or all of them, and HSW and HSW International will thereafter determine how to act upon such opportunity.

        As compensation for his consulting services, HSW International will grant Mr. Arnold a ten year option to acquire 3,000,000 shares of HSW International's common stock, which grant was made on August 23, 2006. The consulting agreement also provides that HSW International will grant options to acquire an additional 1,000,000 shares to one or more individuals in the eligible grantee group, which

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includes Mr. Arnold. The consulting agreement further provides that Mr. Arnold shall recommend to HSW International a suggested manner of allocating the additional options, and HSW International granted 1,000,000 options based on Mr. Arnold's suggestion on August 23, 2006. All of the options granted under the consulting agreement have a per share exercise price of $6.50, the fair market value on the date of grant. Fifty percent (50%) of Mr. Arnold's options vested on the grant date and the remaining fifty percent (50%) will vest on the second anniversary of the effective date of the consulting agreement.

        In the event that Mr. Arnold is terminated for cause under the consulting agreement, any unvested options shall terminate with the termination of the consulting agreement. Cause is defined in the consulting agreement as (i) conviction of, or plea of nolo contendere to, a felony that results in material damage to the business or reputation of HSW International, (ii) gross misconduct that results in material damage to the business or reputation of HSW International, (iii) act of dishonesty or fraud in connection with the performance of his responsibilities with the intention that such act results in improper and substantial personal enrichment, (iv) violation or breach of any contractual duty that results in substantial monetary harm to HSW International or any fiduciary duty owed to HSW International. Cause shall not exist under (iv) if such act is done by Mr. Arnold in the good faith belief that it would be beneficial to HSW International or failure to act is done in the good faith belief that the act would be materially harmful to HSW International.

        If a change of control (as defined in HSW International's equity incentive plan) of the company shall occur during the term of the consulting agreement, any unvested options shall fully vest as of the date of the change in control. To the extent vested, the options shall be irrevocable and may be exercised by Mr. Arnold's heirs or estate.

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Merger Consideration

        At the effective time of the merger, each share of INTAC common stock (other than shares owned by INTAC, HSW International and merger sub) will be converted into the right to receive one share of HSW International common stock. Upon the consummation of the merger but without giving effect to the equity financing, INTAC stockholders will own 46.5% of the outstanding shares of HSW International. After giving effect to the equity financing, INTAC stockholders will own a percentage of the outstanding shares of HSW International that will vary as set forth below.


Ownership of HSW International Following the Merger

        At the closing of the merger, each outstanding share of INTAC common stock will be converted into the right to receive one share of HSW International common stock. The aggregate percentage ownership by INTAC stockholders of HSW International following the consummation of the merger, the related transactions and the additional issuances of stock options to certain members of HSW International management and to consultants is dependent upon the trading price of HSW International common stock following the consummation of the merger.

        Set forth below is a table showing (i) a range of hypothetical values representing the shelf purchase price, (ii) the approximate number of shares of HSW International common stock to be issued pursuant to the equity financing based on the applicable hypothetical shelf purchase price, (iii) the approximate aggregate percentage ownership of HSW International common stock to be held by current INTAC stockholders given these hypothetical values, (iv) the approximate aggregate percentage ownership of HSW International common stock to be held by HSW given these hypothetical values, and (v) the approximate aggregate percentage ownership of HSW International common stock to be held by investors in connection with equity financing in the aggregate given these hypothetical values. If the shelf purchase price is lower than $6.57, the public announcement price, then the investors in connection with the equity financing (other than the one European investor as described below) will ultimately receive an aggregate amount of shares equal to the value of their combined investment, or $43.5 million, divided by the shelf purchase price. However, if the public announcement price is lower than the shelf purchase price, then such investors will ultimately receive an aggregate amount of shares equal to the value of their combined investment, or $43.5 million, divided by the public announcement price. Instead of a defined purchase amount, one of the European investors has agreed to purchase 900,000 shares of HSW International common stock at the lower of the public announcement price, the shelf purchase price or highest trading price of HSW International common stock on the closing date of the purchase. The table below does not take into account any stock options to be assumed or issued by HSW International.

Hypothetical DWS shelf purchase price
  Approximate number of shares of HSW International common stock issuable pursuant to equity financing
  Approximate aggregate ownership of HSW International common stock by current INTAC stockholders*
  Approximate aggregate ownership of HSW International common stock by HSW*
  Approximate aggregate ownership of HSW International common stock by investors in connection with equity financing
>= $6.57   7,500,000   39.6%   45.5%   14.9%

$6.00

 

8,200,000

 

39.0%

 

44.9%

 

16.1%

$5.00

 

9,600,000

 

38.0%

 

43.7%

 

18.3%

$4.00

 

11,800,000

 

36.5%

 

42.0%

 

21.5%

*
HSW International outstanding shares based on 19,940,727 shares of HSW International common stock to be issued to current INTAC stockholders, 22,940,727 shares of HSW International common stock to be issued to HSW and the variable number of shares of HSW International common stock issuable pursuant to the equity financing.

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Conversion of Shares; Procedures for Exchange of Certificates

        The conversion of INTAC common stock into the right to receive the merger consideration will occur automatically at the effective time of the merger. Promptly after the completion of the merger,                        , the exchange agent selected by HSW International and INTAC, will send a letter of transmittal to each former holder of record of shares of INTAC common stock. The transmittal letter will contain instructions for obtaining the merger consideration. INTAC stockholders should not return stock certificates with the enclosed proxy.

        After the effective time of the merger, each certificate that previously represented shares of INTAC common stock will no longer be outstanding, will be automatically canceled and retired, will cease to exist and will represent only the right to receive the merger consideration as described above. No merger consideration shall be delivered to any holder of INTAC stock deemed to be an "affiliate" of INTAC for purposes of Rule 145 under the Securities Act until such person executes a customary affiliate letter agreement. The stock transfer books of INTAC will be closed at the effective time and there will no further registration of transfers of shares of INTAC on the records of INTAC.

        Until holders of certificates previously representing INTAC common stock have surrendered those certificates to the exchange agent for exchange, those holders will not receive dividends or distributions on the HSW International common stock into which those shares have been converted with respect to a record date after the effective time of the merger. When holders surrender those certificates, they will receive any dividends made subsequent to a record date after the effective time. No interest will be paid or will accrue on any amount due.

        HSW International and INTAC are entitled to deduct and withhold from the merger consideration any taxes required under federal, state, local or foreign tax laws.

        In the event of a transfer of ownership of INTAC common stock that is not registered in the transfer agent's records of INTAC, payment of the merger consideration as described above will be made to a person other than the person in whose name the certificate so surrendered is registered if:

        Six months after the effective time, HSW International may request that the exchange agent return all unexchanged shares of HSW International common stock deposited with the exchange agent and all holders of INTAC common stock that have not exchanged their shares shall look to HSW International for merger consideration.


Effective Time of the Merger

        The merger will become effective upon the filing of the articles of merger with the Secretary of State of the State of Nevada or as otherwise specified in the articles of merger. The filing of the articles of merger will occur upon satisfaction or waiver of the conditions to the completion of the merger described in the merger agreement.


Stock Exchange Listing of HSW International Common Stock

        It is a condition to the completion of the merger that the shares of HSW International common stock issuable to INTAC stockholders in the merger have been approved for listing on either the Nasdaq National Market or the Nasdaq Capital Market, subject to official notice of issuance.

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Delisting and Deregistration of INTAC Common Stock

        If the merger is completed, INTAC common stock will be delisted from the Nasdaq Capital Market and will be deregistered under the Securities Exchange Act of 1934, as amended.


Material United States Federal Income Tax Consequences of the Merger

        The following discussion constitutes the opinion of Shearman & Sterling LLP, counsel to INTAC, regarding the material United States federal income tax consequences of the merger to U.S. Holders, as defined below. This discussion is based on provisions of the Internal Revenue Code, Treasury regulations promulgated thereunder, and administrative and judicial interpretations thereof, all as in effect as of the date hereof and all of which are subject to change, possibly with retroactive effect.

        This discussion applies only to holders of INTAC common stock who received such stock in the merger who are U.S. Holders. For purposes of this discussion, a U.S. Holder is:

        If a partnership holds INTAC common stock, the United States 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. Partners of partnerships that hold INTAC common stock should consult their tax advisors regarding the United States federal income tax consequences to them of the merger.

        This discussion is not a comprehensive description of all the tax consequences that may be relevant to holders of INTAC common stock. It applies only to holders of INTAC common stock that hold their INTAC common stock and will hold the HSW International common stock that they receive in the merger as capital assets within the meaning of section 1221 of the Internal Revenue Code. No attempt has been made to address all aspects of United States federal income taxation that may be relevant to a particular holder of INTAC common stock in light of its particular circumstances or to holders of INTAC common stock subject to special treatment under the United States federal income tax laws, including:

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        In addition, this discussion does not address any alternative minimum tax, United States federal estate and gift tax, or any state, local or foreign tax consequences of the merger.

EACH HOLDER OF INTAC COMMON STOCK SHOULD CONSULT ITS TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES OF THE MERGER TO SUCH HOLDER.

The Merger

        For United States federal income tax purposes, the merger has been structured to qualify as a transaction described in section 351 of the Internal Revenue Code. Shearman & Sterling LLP is of the opinion that the merger will constitute a transaction described in Section 351 of the Internal Revenue Code. These opinions rely upon certain factual representations made by HSW, HSW International, INTAC and merger sub as of the date of this registration statement. It is a condition to the closing that INTAC shall have each received an opinion to such effect from Shearman & Sterling LLP, which opinion shall not have been withdrawn or modified in any material respect. Such opinions will neither bind the U.S. Internal Revenue Service (referred to in this proxy statement/prospectus as the IRS) nor preclude the IRS from adopting a contrary position.

        A U.S. Holder who exchanges INTAC common stock for HSW International common stock will not recognize any gain or loss on the exchange. The aggregate adjusted tax basis of the HSW International common stock received by a U.S. Holder of INTAC common stock will equal the U.S. Holder's aggregate adjusted tax basis in the INTAC common stock surrendered in the merger. The holding period of the HSW International common stock received pursuant to the merger will include the holding period of the INTAC common stock surrendered in the merger.


Regulatory Matters

        HSW, HSW International and INTAC have determined that no filings are required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 in connection with the merger and the related transactions. Filings with or the consent of other federal, state or foreign governmental agencies may be required to be obtained prior to the effective time of the merger and the completion of the related transactions. HSW International and INTAC are currently in the process of reviewing whether other filings or approvals may be required or advisable.

        It is possible that any of the governmental entities with which filings have been made may seek additional regulatory concessions or impose additional conditions or states or private parties may commence litigation to prevent the completion of the merger. There can be no assurance that:

        See "The Merger Agreement—Conditions to the Completion of the Merger" beginning on page 79.

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Dissenters' Rights

        Under Nevada law, holders of INTAC common stock will not be entitled to dissenters' rights in connection with the merger.


INTAC and HSW International Employee Benefit Matters

        Following the merger, all INTAC employee benefit plans will remain in effect for a period of at least two years.

        HSW International has adopted an equity compensation plan that provides for the issuance of up to 8,000,000 shares of HSW International common stock to HSW International employees, directors, and consultants. The plan permits HSW International to issue stock options, restricted stock, restricted stock units, stock appreciation rights, and other forms of equity compensation. Generally, the exercise price per share cannot be less than 100% of the "fair market value" per share of HSW International common stock on the date of grant. In the case of an ISO, if the proposed optionee owns more than 10% of the total combined voting power of all classes of outstanding stock of HSW International at the time of grant, the option price may not be less than 110% of the fair market value per share.

        In the case of an ISO, the term of the option will be ten years from the date of grant or such shorter term as may be provided in the award agreement. However, in the case of an ISO granted to an optionee who, at the time the ISO is granted, owns stock representing more than 10% of the total combined voting power of HSW International, the term of the ISO will be five years from the date of grant or such shorter term as may be provided in the award agreement.

        If a participant ceases to be an employee, director or consultant of HSW International (other than as a result of death or disability), any option will remain exercisable for three months following such termination, unless the award agreement provides otherwise. Unless otherwise provided in the award agreement, if on the date of termination the participant is not vested as to his or her entire option, any unvested portion of the option will revert to the plan. If a participant ceases to be an employee, director or consultant as a result of death or disability, any option will remain open for a period of twelve months following such termination, unless the award agreement provides otherwise. Unless otherwise provided in the award agreement, if on the date of termination, the participant is not vested as to his or her entire option, any unvested portion of the option will revert to the plan. In the event of a change of control of HSW International, vesting of outstanding awards fully accelerates unless the successor entity assumes, or provides new awards in substitution for, outstanding awards.

        The plan contains provisions concerning adjustments to the outstanding awards in the case of dividends, recapitalization, reorganizations, stock splits, mergers, consolidations and other changes in the corporate structure of HSW International.

        The plan is administered by HSW International's board of directors, or a committee of the board satisfying any applicable laws. The board or such committee determines the recipients of awards, the amount of awards, and other terms and conditions of the awards, including exercise price, vesting, term and type of award.

        HSW International has granted stock options covering 5,737,500 shares (including options covering 3,000,000 shares to Jeff Arnold and options covering 1,000,000 shares to individuals selected by Jeff Arnold, and options covering 500,000 shares to Robert C. Bicksler, and 2,262,500 shares are available for future issuance.


Effect on Awards Outstanding Under INTAC Stock Incentive Plan

        As of the consummation of the merger, all outstanding stock options to purchase shares of INTAC common stock granted under the INTAC 2001 Long Term Incentive Plan will be assumed by HSW

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International. The terms and conditions of the assumed options will remain unchanged as a result of the assumption except that, (i) upon exercise, the optionholder shall receive one share of HSW International common stock for every one share of INTAC common stock that the optionholder otherwise would have been entitled to receive and (ii) unvested stock options held by INTAC non- employee directors (Messrs. Botts, Jones, Stein and Weil) will immediately vest as to all of the covered shares.


Resale of HSW International Common Stock

        HSW International common stock to be issued in the merger will not be subject to any restrictions on transfer arising under the Securities Act of 1933, as amended, except for shares issued to any INTAC stockholder who may be deemed to be an "affiliate" of INTAC or HSW International for purposes of Rule 145 under the Securities Act. It is expected that each affiliate will agree not to transfer any HSW International common stock received in the merger except in compliance with the resale provisions of Rule 144 or 145 under the Securities Act or as otherwise permitted under the Securities Act. The merger agreement requires INTAC to use its reasonable best efforts to cause its affiliates to enter into those agreements prior to the merger. In connection with the merger, HSW International will also enter into a registration rights agreement with HSW and Wei Zhou that provides that each of HSW and Wei Zhou shall have the right to make three requests to HSW International to register shares held by them on Form S-3, and unlimited requests to HSW International to include shares held by them on other registration statements filed by HSW International. HSW International will also make available to other "affiliates" of INTAC the same registration rights pursuant to the form affiliate registration rights agreement. This proxy statement/prospectus does not cover resales of HSW International common stock received by any person upon completion of the merger, including shares of HSW International common stock received pursuant to the asset contribution and the equity financing, and no person is authorized to make any use of this proxy statement/prospectus in connection with any resale.

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THE MERGER AGREEMENT

        This is a summary of the material provisions of the merger agreement as amended on January 29, 2007. All references to the merger agreement refer to the merger agreement as amended. The merger agreement, which is attached as Annex A to this proxy statement/prospectus and the amendment to merger agreement, which is attached as Annex B to this proxy statement/prospectus, and which are incorporated herein by reference, contain the complete terms of that agreement. You should read the entire merger agreement carefully.

        The merger agreement has been included to provide you with information regarding its terms. It is not intended to provide any other factual information about HSW International and INTAC. That information can be found elsewhere in this proxy statement/prospectus and in the other public filings made by HSW International or INTAC with the SEC, which are available without charge at www.sec.gov.

        The merger agreement contains representations and warranties the parties made to each other as of specific dates. The assertions embodied in those representations and warranties were made solely for purposes of the contract between HSW International and INTAC and may be subject to important qualifications and limitations agreed by HSW International and INTAC in connection with negotiating its terms. Moreover, certain representations and warranties may not be accurate or complete as of any specified date because they are subject to a contractual standard of materiality different from standards of materiality generally applicable to stockholders or because they were used for the purpose of allocating risk between HSW International and INTAC rather than establishing matters as facts. For the foregoing reasons, you should not rely on the representations and warranties as statements of factual information.


Conditions to the Completion of the Merger

        Conditions to HSW's, HSW International's, merger sub's and INTAC's Obligations to Complete the Merger.     Each party's obligation to effect the asset contribution and merger, as applicable, is subject to the satisfaction or waiver of various conditions that include, in addition to other customary closing conditions, the following:

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        Conditions to HSW's, HSW International's and merger sub's Obligation to Complete the Merger.    The obligation of HSW, HSW International and merger sub to effect the asset contribution and the merger is further subject to satisfaction or waiver of the following additional conditions:

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        Conditions to INTAC's Obligation to Complete the Merger.    INTAC's obligation to effect the merger is further subject to satisfaction or waiver of the following additional conditions:

        Important Definitions.    The merger agreement provides that a "material adverse effect" means:

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        HSW, HSW International, merger sub and INTAC can provide no assurance that all of the conditions precedent to the merger will be satisfied or waived by the party permitted to do so. INTAC cannot at this point determine whether it would resolicit proxies in the event that it decides to waive any of the items listed above. Each of HSW's, HSW International's, merger sub's and INTAC's decisions would depend upon the facts and circumstances leading to their respective decisions to complete the merger and whether HSW, HSW International or INTAC believes there has been a material change in the terms of the merger and its effect on HSW, HSW International or INTAC and their respective stockholders. In making this determination, HSW, HSW International and INTAC would consider, among other factors, the reasons for the waiver, the effect of the waiver on the terms of the merger, whether the requirement being waived was necessary in order to make the transaction fair to HSW stockholders, HSW International stockholders or INTAC stockholders from a financial point of view, the availability of alternative transactions and the prospects of HSW, HSW International or INTAC as an independent entity. If INTAC determines that a waiver of a condition would materially change the terms of the merger, it will resolicit proxies.


No Solicitation

        The merger agreement provides that INTAC will not, nor will it authorize or permit any of its subsidiaries, any of their respective directors, officers or employees or any investment banker, financial advisor, attorney, accountant or other advisor, agent or representative retained by it or any of its subsidiaries to (and will use reasonable best efforts to cause such person not to), directly or indirectly through another person:

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        The merger agreement provides that the term "acquisition proposal" means any offer or proposal for, or any indication of interest, letter of intent, memorandum of understanding, term sheet or inquiry relating to:

in each case, other than the transactions contemplated by the merger agreement.

        The merger agreement provides further that if:

INTAC may engage in any discussions or negotiations with, or provide material, non-public data or information to, any such person.

        The merger agreement provides that the term "superior proposal" means any bona fide offer made by a third party that, if consummated, would result in a person (or its stockholders) owning, directly or indirectly, a majority of the voting power of the surviving entity in a merger, reorganization, consolidation, share exchange, business combination, recapitalization or similar transaction with such person, which the INTAC board of directors in good faith determines (after consultation with outside counsel and a financial advisor of nationally recognized reputation) to be more favorable to the INTAC stockholders than the transactions contemplated by the merger agreement and which provides that any external financing required to pay the cash portion, if any, of the transaction consideration is either committed or funded and not subject to any material contingency.

        The merger agreement provides further that if, in connection with any acquisition proposal, INTAC or its board of directors (or any committee of the board of directors) (i) withdraws, modifies or qualifies its recommendation of the merger in a manner adverse to HSW or HSW International or (ii) takes any action in connection with the INTAC special meeting inconsistent with its recommendation of the merger, INTAC will:

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        Notwithstanding the above but subject to INTAC's obligations, INTAC or its board of directors may approve or recommend, or propose to approve or recommend, or execute or enter into, any term sheet, memorandum of understanding, letter of intent, agreement-in-principle, contract, commitment, plan, arrangement or agreement, or propose, publicly or otherwise or agree to do any of the foregoing, related to any superior proposal without being liable to pay either HSW or HSW International a termination fee.


Termination of the Merger Agreement

        The merger agreement may be terminated at any time prior to the effective time of the merger, even if the merger agreement has been approved by INTAC stockholders:

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Fees and Expenses

        Each of HSW and INTAC will pay its own fees and expenses in connection with the merger, except that they will share equally in the expenses and fees (i) incurred in connection with the printing, filing and mailing of the registration statement of which this proxy statement/prospectus is a part, (ii) incurred in connection with the printing, filing and mailing of any other registration statements required by the transactions contemplated by the merger agreement, and (iii) associated with the NASDAQ listing application and other listing costs. However, subject to certain exceptions, if the merger and the transactions contemplated by the merger are consummated, the surviving corporation will be responsible for, reimburse or pay all expenses incurred by the parties to the merger agreement.


Conduct of Business Pending the Merger

        Under the merger agreement INTAC has agreed that, except as contemplated by the merger agreement, provided in the disclosure schedule related to the merger agreement or reports filed by INTAC with the SEC within the last two years, required by a governmental entity or consented to by HSW International, during the period from the date of the merger agreement to the effective time of the merger, it will, and will cause each of its subsidiaries to (i) use their reasonable best efforts to preserve intact their lines of business, maintain material rights and franchises and preserve their relationships with significant customers, suppliers and others having significant business dealings with them, (ii) carry on their respective businesses in the ordinary course in all material respects, in substantially the same manner as previously conducted and (iii) shall not do any of the following:

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        In addition, except as contemplated by the merger agreement, as required by a governmental entity or as consented to by INTAC, during the period from the date of the merger agreement to the effective time of the merger, HSW and its subsidiaries shall not to do any of the following:

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        Additionally, HSW agrees that neither it nor any of its subsidiaries nor any of the officers and directors of it or any of its subsidiaries will, and that it shall use its reasonable best efforts to cause the employees, agents and representatives of it or any of its subsidiaries not to (i) have any discussion with or provide any material, non-public information to any person relating to any transaction or business combination by HSW or any of its subsidiaries in the territories (as defined in the contribution agreements) regarding the ownership, use or license of any contributed assets in the territories or (ii) approve or enter into any agreement with respect to the foregoing. HSW will cease all existing discussions with all persons conducted prior to the date of the merger agreement with respect to any of the foregoing.

        During the period from the date of the merger agreement and continuing until the effective time of the merger, HSW International and merger sub agree to engage in no business or other activities other than the performance of or compliance with the agreements and covenants required to be performed by them under the merger agreement or the stock purchase agreements or actions taken in connection with the consummation of the transactions contemplated by the merger agreement or the stock purchase agreements.


Representations and Warranties

        The merger agreement contains customary representations and warranties relating to, among other things:

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        The representations, warranties, covenants and other agreements of each of HSW, HSW International, merger sub and INTAC will not survive consummation of the merger unless any representations, warranties, covenants and other agreements by their terms apply to or are to be performed in whole or in part after the effective time.


Additional Terms

        Subject to the terms and conditions of the merger agreement, HSW, HSW International, merger sub and INTAC have agreed to use all reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary to consummate the merger and the asset contribution and the other transactions contemplated by the merger agreement, including:

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        The merger agreement further provides that:

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Certificate of Incorporation and By-laws of the Surviving Corporation

        The merger agreement provides that the HSW International Certificate of Incorporation will be amended to read in its entirety as set forth in Exhibit H to the merger agreement and, as so amended, will be the certificate of incorporation of HSW International upon the effective time. The merger agreement further provides that the By-laws of HSW International, as in effect immediately prior to the completion of the merger, will be amended to read in their entirely as set forth in Exhibit I to the merger agreement and, as so amended, will be the by-laws of HSW International upon effective time. For a summary of certain provisions of the amended HSW International Certificate of Incorporation, HSW International amended By-laws and the associated rights of INTAC stockholders, see "Comparison of Rights of Common Stockholders of HSW International and INTAC" beginning on page 134.

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Amendment; Extension and Waiver

        The merger agreement provides that:

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AGREEMENTS RELATED TO THE MERGER

The Contribution Agreements, Services Agreement, Update Agreement and Letter Agreement

        This is a summary of the material provisions of the contribution agreements, the services agreement, the update agreement and the letter agreement related to the asset contribution. The forms of contribution agreements, services agreement, update agreement and letter agreement which are attached as Annexes C, D, E, F and G, respectively, to this proxy statement/prospectus and are incorporated herein by reference, contain the complete terms of these agreements. See also "Where You Can Find More Information" on page 154. You should read the forms of contribution agreements, services agreement, update agreement and letter agreement carefully.

        Contribution Agreements.    HSW will contribute the content (owned by or licensed to HSW) to HSW International by granting to HSW International a perpetual, fully paid up, royalty-free, sublicensable, exclusive license in the territories to the contributed assets, which specifically consist of the right to render Chinese and Portuguese translations of, the right to publish or use any or all actual renderings in the translation languages and all such actual renderings, of such licensed and sublicensed content, including derivative works, solely in digital and/or electronic form. Notwithstanding the foregoing, all sublicensed content is subject to the terms, conditions and restrictions set forth in the applicable third party licenses from which the sublicensed content is sublicensed. HSW is the sole and exclusive owner of the licensed content, the applicable third party licensors are the sole and exclusive owners of the applicable sublicensed content and HSW International is the sole and exclusive owner of the contributed assets, subject to HSW and its licensors rights in the underlying content.

        HSW will also grant to HSW International a limited, perpetual, fully paid up, royalty-free, non-sublicensable, non-transferable, exclusive license in the territories to (i) use the content solely for purposes of translating it into the translation languages for the purposes thereby of creating the contributed assets; and (ii) use limited excerpts of the licensed content translated into the translation languages in print format with limited distribution to businesses solely for purposes of marketing, business development, financings and other similar legitimate business purposes, provided that any such limited print excerpts are not distributed publicly.

        HSW may terminate the licenses granted in the paragraph immediately above in either of the territories upon written notice to HSW International if (i) HSW International files a petition for bankruptcy or is adjudicated bankrupt, (ii) a petition in bankruptcy is filed against HSW International and this petition is not dismissed within ninety calendar days, (iii) HSW International becomes insolvent or makes an assignment for the benefit of its creditors or an arrangement for its creditors pursuant to any bankruptcy law; (iv) HSW International discontinues the business that is covered by either of the contribution agreements; (v) a receiver is appointed for HSW International or its business; or (vi) HSW International is in material breach of any of the terms or conditions set forth in either of the contribution agreements, which breach remains uncured thirty days after written notice of such breach from HSW so long as such material breach was not caused by any action or inaction of HSW, and HSW did not prevent or limit HSW International's attempts to cure such breach.

        Update Agreement.    HSW will provide all updates (i.e., modifications and new content) to HSW International for its purchase. With respect to updated content that HSW International elects to purchase, HSW will grant to HSW International the same license rights as those granted pursuant to the contribution agreements with respect to any updates to the content licensed pursuant to the contribution agreement for a fee equal to (i) one percent per territory of HSW's fully allocated costs directly attributable to producing the updates purchased by HSW International and (ii) HSW's actual cost in transferring the purchased updates to HSW International, plus (iii) five percent of (i) and (ii) above. Sublicensed content restrictions, ownership rights and termination rights are the same as those granted pursuant to the contribution agreements. HSW may suspend its obligation to provide

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updates to HSW International if HSW International fails to pay any update fee for 90 days after such fee was due or if HSW International becomes insolvent.

        Services Agreement.    Upon HSW International's written request, HSW will provide the following services to HSW International or Intac International Management Consultancy (Beijing) Co., Ltd., as reasonably designated by HSW International: (i) translating the content into the translation languages, (ii) designing and developing HSW International Internet sites for the territories; (iii) providing the technology for establishing, operation and use of such Internet sites; (iv) providing support and consulting concerning the hosting, operation, and display of such Internet sites; (v) securing the registration and maintaining the domain names for such Internet sites; and (vi) providing other services reasonably agreed to by the parties as necessary to develop, operate and maintain such Internet sites. HSW International will pay HSW a fee equal to HSW's fully allocated costs in providing the services. The term of the services agreement is for a period of 18 months beginning the date of the contribution agreements. The services agreement may be terminated earlier if the parties mutually agree that HSW International is able to perform the services on its own behalf, and HSW International may terminate any or all services upon 30 days written notice to HSW. HSW may suspend any service to HSW International if HSW International fails to pay the fee for such service for 90 days after such fee was due.

        Letter Agreement.    HSW International will have the option to acquire the exclusive digital publishing rights for the content in India and Russia on the same terms and conditions as those with respect to China and Brazil under the Contribution Agreements and the Update Agreement. HSW International will have the right to exercise this option within eighteen months after the closing of the merger. In the event that HSW International exercises this option, a limited partnership or limited liability company will be formed, and HSW International will, and will also cause INTAC to, contribute all of their respective assets to the formed entity. In exchange, HSW International and INTAC will receive in the aggregate a number of units in the formed entity equal to the total number of shares of HSW International common stock then outstanding. The number of units to be received by HSW International and INTAC will be allocated based on the relative fair market value of their assets contributed to the formed entity. HSW will contribute the exclusive digital publishing rights for the content in India and Russia to the formed entity and receive 6,000,000 units in the formed entity. HSW will have the right to exchange any or all of its units for shares of HSW International common stock. Income and loss of the formed entity will be allocated among the parties on a pro rata basis.

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The Stock Purchase Agreements

        This is a summary of the material provisions of the stock purchase agreements. The stock purchase agreements which are attached as Annexes I, J, K and L to this proxy statement/prospectus and which are incorporated herein by reference, contain the complete terms of this agreement. See also "Where You Can Find More Information" on page 154. You should read the stock purchase agreements carefully.

        American investors have agreed to purchase $22.5 million of HSW International common stock for a price per share equal to the public announcement price.

        The number of shares issued to American investors will be adjusted on the eleventh day after the date the shelf registration statement filed by HSW International in connection with the equity financing is declared effective by the SEC. HSW International will recalculate the number of shares using a per share price equal to the shelf purchase price. If the shares issued to American investors calculated on the basis of the public announcement price is less than the number of shares calculated on the basis of the shelf purchase price, then HSW International will issue to American investors the difference in the number of shares.

        The American investors stock purchase agreements contain a number of covenants, representations and warranties for the parties. The representations and warranties will not survive the closing under the stock purchase agreement. The stock purchase agreements incorporate the representations and warranties made by INTAC, HSW International, merger sub and HSW under the merger agreement and such representations and warranties are deemed to have been made by HSW International under the American investors stock purchase agreements. Compliance with all such representations and warranties and HSW International's obligations under the merger agreement and the stock purchase agreements are conditions to closing. The closing of the American investors stock purchase will, subject to the satisfaction or waiver of other closing conditions, including the completion of the merger.

        The American investors stock purchase agreements may be terminated at any time prior to the closing (i) by any of the parties in the event that any governmental order restraining, enjoining or otherwise prohibiting the transactions contemplated by the American investors stock purchase agreements or the merger agreement has become final and nonappealable, or (ii) by mutual written consent of the parties.

        In connection with the American investors stock purchase, American investors will be granted registration rights for the shares of HSW International common stock received by them. The registration rights agreement requires HSW International to file a shelf registration statement covering the resale of the shares purchased by American investors under the American investors stock purchase within 90 days of the closing of the American investors stock purchase and that such shelf registration statement will become effective within 180 days of the closing. In the event, the shelf registration statement is not effective within 180 days of closing, subject to limited exceptions, HSW International is required to pay to American investors a monthly cash penalty equal to 0.5% of the $22.5 million received by HSW International under the American investors stock purchase agreements.

        Under the registration rights agreement American investors shall also be able to participate in underwritten registered offerings of the HSW International. HSW International will be responsible for all expenses incurred in filing and maintaining the shelf registration statement. The registration rights agreement includes obligations of HSW International relating to the registration procedures and mutual indemnification provisions among the parties.

        European investors have agreed to purchase approximately $27 million of HSW International common stock (this amount is an estimate based on the purchase of $21.0 million of HSW International common stock and an additional 900,000 shares of HSW International common stock at a price to be determined at the closing of such purchase) for a price per share of the lower of (i) the public announcement price and (ii) shelf purchase price (with one investor subject to an additional

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provision that if the per share purchase price calculated is greater than the highest trading price of HSW International common stock on the closing date of the purchase, then the per share purchase price will be adjusted to be such highest trading price).

        As part of the European investors stock purchase, it is contemplated that HSW International will file, prior to closing, a shelf registration statement covering the resale of the shares to be purchased by European investors.

        The closing of the European investors stock purchase will, subject to the satisfaction or waiver of certain closing conditions such as the completion of the merger and the SEC declaring effective the shelf registration statement, on the eleventh day after the SEC declares effective the registration statement.

        The European investors stock purchase agreements may be terminated at any time prior to the closing (i) by any of the parties in the event that any governmental order restraining, enjoining or otherwise prohibiting the transactions contemplated by the European investors stock purchase agreements has become final and nonappealable, (ii) by mutual written consent of HSW International and the European investors or (iii) by HSW International if the purchase price is less than $5.00.

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The Voting Agreement

        This is a summary of the material provisions of the voting agreement. The voting agreement, which is attached as Annex M to this proxy statement/prospectus and is incorporated herein by reference, contains the complete terms of this agreement. You should read the voting agreement carefully.

        Mr. Zhou and HSW have entered into a voting agreement on April 20, 2006 whereby Mr. Zhou has agreed to vote, or cause to be voted, at the INTAC special meeting, all the shares of INTAC common stock owned by him on such date and any additional shares he may acquire after such date, in favor of the approval of the merger agreement, the merger and the transactions contemplated by the merger agreement. As of the record date, Mr. Zhou owned          shares of the INTAC common stock representing      % of the issued and outstanding shares of INTAC common stock. Mr. Zhou has granted HSW an irrevocable proxy to be used solely in the event of a breach of or non-compliance by him of the foregoing voting obligations, solely for the purposes of (i) demanding that the INTAC secretary call a special meeting of INTAC stockholders to consider matters related to the merger, and (ii) voting all of the shares owned by Mr. Zhou in favor of the approval of the merger agreement, the merger and the transactions contemplated by the merger agreement in accordance with the terms and provisions of the merger agreement.

        Mr. Zhou has agreed to use all reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective, the merger and each of the transactions contemplated by the merger agreement, and to carry out the intent and purposes of the voting agreement.

        Pursuant to the voting agreement, Mr. Zhou also agreed, during the term of the voting agreement, not to sell, transfer, pledge, encumber, assign or otherwise dispose of or enforce or permit the execution of the provisions of any redemption, share purchase or sale, recapitalization or other agreement with INTAC or enter into any contract, option or other arrangement or understanding with respect to the offer for sale, sale, transfer, pledge, encumbrance, assignment or other disposition of, any of the shares of INTAC common stock owned by Mr. Zhou, any securities exercisable for or convertible into INTAC common stock, any other capital stock of INTAC or any interest in any of the foregoing with any person, except that Mr. Zhou has the right to transfer no more than 4,000,000 shares of INTAC common stock to any immediate family member, if such family member has agreed in writing to (i) accept the shares of INTAC common stock subject to the terms and conditions of the voting agreement and (ii) be bound by the voting agreement.

        The voting agreement will terminate, and no party shall have any rights or obligations under the voting agreement, upon the earlier of (i) the effective time of the merger and (ii) termination of the merger agreement in accordance with the terms thereof.

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The Amended and Restated Stockholders Agreement

        This is a summary of the material provisions of the stockholders agreement, as amended and restated on January 29, 2007. All references herein to the stockholders agreement refer to the stockholders agreement as amended and restated. The stockholders agreement, which is attached as Annex H to this proxy statement/prospectus and is incorporated herein by reference, contains the complete terms of this agreement. See also "Where You Can Find More Information" on page 154. You should read the stockholders agreement carefully.

        Transfer Restrictions.    HSW may not make or solicit any sale of, or create, incur or assume any encumbrance with respect to, the HSW International common stock issued to it pursuant to the asset contribution (referred to in this proxy statement/prospectus as the HSW asset contribution stock) during the period ending (i) 12 months after the closing of the merger with respect to one-third of the shares of HSW asset contribution stock, (ii) 18 months after the closing of the merger with respect to the next one-third of the shares of HSW asset contribution stock and (iii) 24 months after the closing of the merger with respect to the remaining one-third of the shares of HSW asset contribution stock (referred to in this proxy statement/prospectus as the applicable restricted period), except that during the applicable restricted period HSW may make or solicit a sale to a permitted transferee. No sale of HSW asset contribution stock to a permitted transferee will be effective if it was a purpose of such transfer to circumvent the restrictions above. Mr. Zhou may not make or solicit any sale or create, incur or assume any encumbrance with respect to at least 4 million shares of HSW common stock issued to him pursuant to the merger for a period of 12 months after the closing of the merger.

        Corporate Governance.    Following the merger, the number of directors serving on the HSW International board of directors will be seven. As of the Closing, HSW, Mr. Zhou and HSW International will take all actions necessary to cause the persons designated by each of HSW and Mr. Zhou as set forth in the stockholders agreement to be duly appointed to the HSW International board of directors, each to serve until the next annual election of directors of HSW International, and to cause the special committee, the compensation committee and the audit committee of the board to be established, each composed of the persons set forth in the stockholders agreement and to serve for such term during which such person remains a director of HSW International. HSW will have the right to designate five directors (three of whom will be independent directors). Mr. Zhou will have the right to designate two directors (one of whom will be an independent director). Each of HSW and Mr. Zhou will have the right to request the removal, with or without cause, of any directors designated by HSW or Mr. Zhou, as applicable, and HSW, Mr. Zhou and HSW International, through the HSW International board of directors, will cause any such person to be removed from the HSW International board of directors.

        Following the nomination of the designees to the HSW International board of directors, at each election of directors at which the term of any designated director will expire, the HSW International board of directors will (i) recommend for election to the HSW International board of directors a nominee designated by the person that initially designated the director whose term will expire and (ii) use best efforts to solicit proxies in favor of such nominee consistent with the efforts used to solicit proxies for any other nominees.

        Each of the special committee, the compensation committee and the audit committee will be comprised of at least three members. One independent director designated by each of HSW and Mr. Zhou will serve on each committee. All members of the compensation committee and the audit committee will be independent directors.

        Each of HSW and Mr. Zhou agrees that at every meeting of the HSW International's stockholders at which directors are to be elected or at any meeting at which the removal of a director is subject to the vote of HSW International's stockholders, each of HSW and Mr. Zhou and its permitted transferees will cause all of their shares of HSW International common stock to be represented either

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by proxy or in person and to be voted in favor of (i) the election of the designees of HSW and Mr. Zhou and (ii) the removal of any designee if requested by the person designating such designee. If directors are to be elected or removed by written consent of HSW International's stockholders, each of HSW and Mr. Zhou agrees that it and its permitted transferees will execute written consents in favor of (x) the election of the designees of HSW and Mr. Zhou and (y) the removal of any designee if requested by the person designating such designee.

        In order to effectuate these corporate governance provisions, each of HSW and Mr. Zhou will grant to the Secretary of HSW International an irrevocable proxy to be used solely in the event of a breach of or non-compliance with the voting agreements described immediately above, solely for the purpose of voting all of the shares of HSW International common stock owned by such person in favor of (i) the election of all designees of HSW and Mr. Zhou and (ii) the removal of any designee if requested by the person designating such designee.

        Other than with respect to the election of directors, each stockholder and its permitted transferees may vote all of their respective shares of common stock of HSW International in their absolute discretion.

        Other Markets.    If HSW proposes to, or receives a bona fide offer from any other person to, engage in a transaction involving an investment or acquisition of an interest in any entity, business, assets, properties or securities in connection with a sale, transfer, assignment or license of HSW's rights in the licensed content or sublicensed content in any geographical area outside the United States or the territories (referred to in this proxy statement/prospectus as an other market transaction), HSW agrees to:

        If HSW elects to participate in any such other market transaction, HSW International or one of its subsidiaries may acquire between 25% and 50% of HSW's interest in such other market transaction at a price equal to $10 million for 50% of HSW's interest in such other market transaction, provided that if HSW International elects to purchase less than 50% of HSW's interest in such other market transaction, the price will be decreased in proportion to the decrease in percentage of HSW's interest in such other market transaction purchased by HSW International. HSW International will have 60 days from the date of the offer within which to notify HSW that it elects to purchase a portion of HSW's interest in such other market transaction.

        Additional Content.    If HSW International acquires any rights in any text, images, designs, graphics, artwork or other content (referred to in this proxy statement/prospectus as the additional content), HSW International will use commercially reasonable efforts to obtain, as a part of such acquisition, (i) the worldwide digital publishing rights to such additional content and (ii) digital publishing rights for HSW in respect of such additional content for use outside the territories ((i) and (ii), referred to in this proxy statement/prospectus as the additional rights). Notwithstanding the foregoing, HSW International will not be required to pay or be obligated to incur additional fees or costs for additional rights obtained for HSW unless HSW agrees to bear such additional fees and/or costs.

        Non-Competition.    HSW International agrees that, during the term of the stockholders agreement, it will not, and will use its best efforts to cause each of its subsidiaries not to, within the United States, (a) enter into any agreement with, hold any equity or financial interest in, or permit its name or any

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part thereof to be associated in business with, any person that provides any services or products that compete with any services or products of HSW in the United States, or (b) otherwise provide any services or products that compete with any services or products of HSW in the United States, except with the prior written consent of HSW.

        Termination.    The stockholders agreement may be terminated by written agreement of all parties with rights under the stockholders agreement, or upon the expiration of (i) all rights created pursuant to the stockholders agreement and (ii) all applicable statutes of limitations applicable to the enforcement of claims under the stockholders agreement, except that (a) HSW International's right to participate in other markets transactions and HSW's rights to any additional content will terminate three years after the date of the stockholders agreement. The rights of HSW or Mr. Zhou, as applicable, pursuant to the provisions regarding transfer restrictions and corporate governance will terminate on the date HSW or Mr. Zhou, as applicable, beneficially owns less than 10% of HSW International common stock on a fully diluted basis. The transfer restrictions will terminate upon a change of control of HSW International or a sale of all or substantially all of HSW International's assets.


The Share Purchase Agreement

        This is a summary of the material provisions of the share purchase agreement. The share purchase agreement which is attached as Annex R to this proxy statement/prospectus and is incorporated herein by reference, contains the complete terms of this agreement. See also "Where You Can Find More Information" on page 154. You should read the share purchase agreement carefully.

        INTAC Holdings has agreed to sell all the issued and outstanding shares of Global Creative International Limited, INTAC Telecommunications Limited, INTAC Deutschland GmbH, and FUTAC Group Limited (collectively known as the "Distribution Companies"), each a wholly owned subsidiary of INTAC Holdings, and INTAC Trading has agreed to transfer its rights and control with respect to Meidi Technology to Cyber, a corporation wholly-owned by Mr. Zhou. The distribution/telecommunications segment of INTAC's business, which consists of the distribution of wireless handset products and the sale of prepaid calling cards, is conducted in whole by the Distribution Companies. In exchange, Mr. Zhou shall transfer 3,000,000 shares of INTAC common stock that he currently holds to INTAC Holdings.

        The parties have agreed that any and all amounts paid on the receivables balance due from Lam Ching Wing on or after the execution of the share purchase agreement until the closing of the merger shall be paid into a receivables escrow account. Further, the parties have agreed that any and all expenditures incurred by the Distribution Companies during the same period shall be paid out of the receivables escrow account. Upon closing of the merger, any funds remaining in the receivables escrow account will be paid to Cyber.

        Mr. Zhou has also agreed to place 1,000,000 shares of INTAC common stock in a payables escrow at the closing of the merger. INTAC has provided a representation and warranty under the merger agreement that there will be no third party debt or payables upon closing under the merger agreement other than debts and payables incurred in connection with the merger and in the ordinary course of business (other than the distribution/telecommunications business). If there is a breach of such representation and warranty by INTAC under the merger agreement, Mr. Zhou shall be responsible for paying, in cash, the amount of any losses, damages, costs and expenses arising out of such breach. If Mr. Zhou fails to pay such amount to INTAC in cash, INTAC and/or HSW International may call on the shares placed in the payables escrow. The number of shares to be called shall equal to the amount due from Mr. Zhou divided by the per-share closing market price of HSW International common stock on the date that such right is exercised.

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        The closing of the share purchase agreement, subject to the satisfaction or waiver of certain closing conditions such as the requisite shareholder approval for the share purchase agreement and termination of certain guaranties provided by INTAC, INTAC Holdings, and certain of their affiliates, with respect to liabilities of the distribution companies or Meidi Technology in favor of Delta One Holland for amounts owed by INTAC Telecommunications, shall take place on the closing date of, but immediately prior to, the merger.

        The share purchase agreement may be terminated at any time prior to the closing of the share purchase agreement (i) by any parties in the event that the closing shall not have occurred by August 31, 2007, unless that party's failure to fulfill its obligations under the share purchase agreement caused the failure of the closing, (ii) by any of the parties in the event that any governmental order restraining, enjoining or otherwise prohibiting the transactions contemplated by the share purchase agreement has become final and nonappealable, (iii) by any parties if the other party has breached any of its representations, warranties, covenants or agreements and the breach cannot be or has not be cured within 30 days after the giving of written notice by the non-breaching party or (iv) by mutual written consent of the parties.

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HSW INTERNATIONAL AND INTAC MANAGEMENT'S DISCUSSION AND ANALYSES OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        HSW International ("HSWI") has only limited historical operations prior to the consummation of the merger. Consequently, the following management discussion and analysis of financial condition and results of operations with respect to historical operations primarily relate only to the stand-alone historical operations of INTAC pre-merger. A complete description of INTAC's Management Discussion and Analysis of Financial Condition and Results of Operations is included in, "Management Discussion And Analysis Of Financial Condition And Results Of Operations" in Item 7 of INTAC's Annual Report on Form 10-K for the year ended September 30, 2006 and Form 10-Q for the quarter ending December 31, 2006 which are incorporated by reference in this proxy statement/prospectus.


HSW International

Operations--Selling, General and Administrative Expenses:

HSWI's operating expenses consist of SG&A expenses which total $6.4 million for the period from inception to September 30, 2006 and $1.8 million for the three months ended December 31, 2006. The most significant components of SG&A expenses are:


Other Income (Expense):

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Liquidity and Capital Resources

        Prior to the merger, HSW International has had only limited operations and is reliant for contributed assets, liquidity and capital resources on its parent HSW. As of the date of this proxy statement/prospectus, HSW International does not have any financing arrangements other than ongoing support from its parent HSW until the date of completion of the merger and the equity financing in connection with the merger under this proxy statement/prospectus. Subsequent to the merger, HSW International believes that it will have sufficient capital for the next twelve months to launch the Internet business in China primarily resulting from capital raised of $49.5 million in connection with the merger less approximately $7 million of transaction costs and contingent fees, to result in net proceeds of approximately $42.5 million.

        With the focus of HSW International's business plans on integrating digital content and technology with INTAC's expertise and unrealized intangible assets, the combined company's capital will be directed primarily towards executing this strategy of building an interactive media platform in China under the licenses obtained from HSW. HSW International does not expect significant revenues from these new operations until 2008 or subsequent years. Developing revenue for these new operations will be dependent on management's ability to timely translate content, attract consumers to its web sites and sell advertising. HSW International believes that the capital raised in connection with the merger will be sufficient to construct the website, translate content, and market the site to consumers and advertisers until reaching positive cash flow from operations. However, if any of these planned activities require higher levels of investment than currently planned and/or the INTAC subsidiary business segment requires higher levels of capital than expected, HSW International may be required to raise additional capital through equity and/or debt financing. For any capital raised by HSW International by issuing equity or convertible debt securities, the percentage ownership of its current stockholders will be reduced. Any new securities may have rights, preferences or privileges senior to those of HSW International's current common stockholders. There can be no assurances that HSW International will be able to obtain additional financing on terms that are acceptable to HSW International or at all.


Intac International

Critical Accounting Policies:

        INTAC's discussion and analysis of its financial condition and results of operations are based upon INTAC's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires INTAC to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, INTAC evaluates its estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The Company believes that of its significant accounting policies, the following may involve a higher degree of judgment and complexity:

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        A complete description of all of our accounting policies is included in Note 1, "General and Summary of Significant Accounting Policies" in INTAC's consolidated financial statements included in Item 8 of our annual report on Form 10-K for the fiscal year ended September 30, 2006 which is incorporated by reference to this proxy statement/prospectus.

Revenue Recognition:

Career Development Services (included in continuing operations in the consolidated statement of operations):

        Product revenue from the license of the Company's software products is recognized in accordance with Staff Accounting Bulletin ("SAB") No. 104, "Revenue Recognition" when persuasive evidence of an arrangement exists, the product has been delivered, the fee is fixed or determinable, and collection of the resulting receivable is reasonably assured, and, if applicable, upon acceptance when acceptance criteria are specified or upon expiration of the acceptance period. Maintenance and support revenue for customer support is deferred and recognized ratably over the service period unless it is included in the initial license fee, provided for less than one year and is not a significant portion of the total license revenue. In this case, maintenance support revenue is recognized when all revenue recognition criteria under SOP 97-2, SOP 98-9 and SAB 104 have been met. Product upgrades and enhancement revenue is deferred and recognized ratably over the service period unless it is included in the initial license fee and is not significant. Training and consulting revenue is recognized as services are performed and billable according to the terms of the service arrangement.

        The Company applies the provisions of Statement of Position 97-2, "Software Revenue Recognition," ("SOP 97-2") as amended by Statement of Position 98-9 "Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions" to all transactions involving the sale of all its software products.

        For arrangements with multiple obligations (e.g. undelivered maintenance and support bundled with term licenses), the Company allocates revenue to each component of the arrangement using the residual value method based on evidence of the fair value of the undelivered elements, which is specific to the Company. The vendor specific objective evidence of the fair values for the ongoing maintenance and support obligations for term licenses are based upon the prices paid for the separate renewal of these services by the customer or upon substantive renewal rates stated in the contractual arrangements. In this case, maintenance support revenue is recognized when all revenue recognition criteria under SOP 97-2, SOP 98-9 and SAB 104 have been met. Vendor specific objective evidence of the fair value of other services, primarily consulting and training services, is based upon separate sales of these services.

        Franchise fee revenue is derived from the sale to customers of the exclusive rights to provide training courses to prospective students. This arrangement consists of an up-front, non-refundable license fee, as well as fees for training materials and contingent payments based on a percentage of the student tuition. The up-front, non-refundable franchise fee is recognized as revenue at the time the agreement is entered into, and the fees for other services are recognized as performed. Contingent payments are recognized when received. The Company has considered the relevant provisions of FAS 45 "Accounting for Franchise Fee Revenue" in accounting for its franchise revenue.

        The Company licenses access to its student database and education materials under one, two and three-year term licenses. The software licenses provide for updates to new versions if and when made

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available. No express rights of return are granted. The Company sells its products and services via a direct sales force and under certain circumstances, sales agents.

        Subscription revenue which will be earned primarily through our Internet portal business, will be recognized on a straight line basis over the term of the service contract provided. The Company may also contract with third-party mobile operators for the transmission of wireless short messages and subscriptions as well as for the billing and collection of service fees from customers. Revenues are recorded as the services are provided monthly or on a per usage basis. The Company will recognize the net amount billed by the mobile operator as revenue. To date, the Company has generated minimal revenue from subscription services.

Distribution Business (included in discontinued operations in the consolidated statement of operations):

        The Company's wireless handset revenues are generally generated from a quick turn of product. The Company recognizes revenue upon delivery of product to its customers. Products are sold "as is" and the Company does not provide servicing of the wireless handsets, nor does the Company receive any usage revenue from the wireless handsets distributed.

        Revenue is recognized when customers take delivery of the goods, which is taken to be the point in time where the customer has accepted the goods and the related risks and rewards of ownership. Certain sales arrangements provide the Company the right to receive a contingent payment based on sales made by the customers. Contingent payment revenue for these arrangements is recognized as the cash is received. Receipts of cash in advance of shipment or delivery are recorded as deposits received.

        License fee revenue is derived from the sale to customers of the rights to sell products under arrangements in which the Company is the distributor. These arrangements consist of an up-front, non-refundable license fee, as well as contingent payments based on a percentage of the customer revenue. The services provided by the Company after the receipt of the up-front license fee are not significant. The up-front, non-refundable license fee is recognized as revenue at the time the agreement is entered into, and the contingent payments are recognized when received. The Company has considered the relevant provisions of SAB 104 and Emerging Issues Task Force No. 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables" in accounting for license fee revenue.

Inventory:

        Inventory in continuing operations consists primarily of training material and other supplies related to our career development services business and is generally immaterial.

        Inventory in assets held for sale consists primarily of wireless handsets. Generally, we do not maintain any inventory of wireless handsets; however, due to the timing of the inventory being received and then being shipped to customers, we may hold inventory for a minimal time period, commonly a few days. We purchase products only upon the receipt of an order. Once an order is received, we solicit additional orders to gain greater discounts from suppliers. Aggregate orders are then delivered in bulk to be allocated among customers.

        Inventories for wireless handsets are stated at the lower of cost and net realizable value, calculated on the first-in, first-out basis, and are comprised of finished goods. Net realizable value is determined on the basis of anticipated sales proceeds less estimated costs for selling expenses.

Concentration of Credit Risk, Accounts Receivable and Related Provision for Doubtful Accounts:

        Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents, short-term investments, and trade receivables. We are exposed to credit risks in the event of default by the financial institutions or issuers of investments to the extent of amounts recorded on the balance sheet. We are also exposed to credit risks in the event of

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non-payment by customers to the extent of amounts recorded on the balance sheet. We limit our exposure to credit risk by performing ongoing credit evaluations of our customers' financial condition and generally require no collateral. We are exposed to credit risks in the event of insolvency by our customers and manage such exposure to accounting losses by limiting the amount of credit extended whenever deemed necessary.

Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of:

        The Company accounts for long-lived assets in accordance with the provisions of SFAS No. 144, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This Statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flow expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

        Foreign Currency Exchange:    We are subject to fluctuations in foreign currencies, as distribution business customer orders may involve multi-currency product and delivery transactions before the sale is complete. Additionally, a period of up to three months' time may lapse between when an order is placed until revenue and costs are recognized and the supplier is paid. We do not engage in hedging activities nor in the use of financial derivatives.

        The functional currencies of the Company are the People's Republic of China Renminbi ("RMB") and the Hong Kong dollar ("HK$"). The accompanying consolidated financial statements have been expressed in United States dollars, the reporting currency of the Company.

        Reported assets and liabilities of INTAC's foreign subsidiaries have been translated at the rate of exchange at the end of each reporting period. Revenues and expenses have been translated at the weighted average rate of exchange in effect during the respective reporting period. Gains and losses resulting from translation are accumulated in other comprehensive income (loss) in stockholders' equity.

        Realized and unrealized gains (losses) on currency transactions between foreign entities are included in other income (expense) in the statements of operations.

        Goodwill:    We assess the carrying value of goodwill annually and when factors are present that indicate an impairment may have occurred. Goodwill is considered impaired and a loss is recognized when its carrying value exceeds its implied fair value. We may use a number of valuation methods including quoted market prices, discounted cash flows and revenue multiples to determine fair value. The carrying value of goodwill amounted to $16.7 million as of December 31 and September 30, 2006. No impairment charge has been made.

        Factors that we consider important which could trigger an impairment review include the following:

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        If we determine that the carrying value of identifiable intangibles and goodwill may not be recoverable based upon the existence of one or more of the above indicators of impairment, we assess whether the carrying value of the asset is greater than the undiscounted future operating cash flow of the acquired operations. Any impairment is measured based on a projected discounted cash flow method using a discount rate reflecting our average cost of funds.

        Product and Software Development Expenses:    Product and software development expenses primarily include payroll and other employee benefit costs. For software to be marketed or sold, financial accounting standards require the capitalization of development costs after technological feasibility is established. Due to the relatively short period between technological feasibility and the completion of product development, and the insignificance of the related costs, the Company generally does not capitalize software development costs. All product and software development costs are expensed when incurred. Research and development costs to date have not been significant.

        Purchase Price Allocations:    We account for our acquisitions using the purchase method of accounting. This method requires that the acquisition cost be allocated to the assets and liabilities we acquired based on their fair values. We make estimates and judgments in determining the fair value of the acquired assets and liabilities. We base our determination on independent appraisal reports as well as our internal judgments based on the existing facts and circumstances. If we were to use different judgments or assumptions, the amounts assigned to the individual assets or liabilities could be materially different.


Results of Operations for the Three Months Ended December 31, 2006 and 2005

 
  Three Months Ended December 31,
 
 
  2006
  2005
 
Career development services revenue   $ 2,018,899   $ 1,190,630  
Career development services cost of revenue     687,905     217,785  
   
 
 
Career development services gross profit     1,330,994     972,845  
Operating expenses              
  Product development     974,790     762,254  
  Selling, general and administrative expenses     693,392     512,537  
  Provision for doubtful accounts     653,917      
  Merger transaction costs     411,186      
   
 
 
Total operating expenses     2,733,285     1,274,791  
Total other income (expenses), net         (16 )
   
 
 
Loss from continuing operations before taxes     (1,402,291 )   (301,962 )
Income taxes     (134,021 )    
   
 
 
Loss from continuing operations     (1,268,270 )   (301,962 )
Loss from discontinued operations     (390,988 )   (432,468 )
   
 
 
Net loss   $ (1,659,258 ) $ (734,430 )
   
 
 


Results of Operations for the Three Months Ended December 31, 2006, Compared to the Three Months Ended December 31, 2005

        Revenue:    Revenue, consisting of education and administrative software sales and training revenue, increased by $828,269 to $2.0 million for the three months ended December 31, 2006, from $1.2 million for the same period in 2005. This was due to an increase of approximately $520,000 in training

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revenues and a $308,000 increase in sales of our education and administration software to Chinese school districts.

        Career Development Services Gross Profit:    Gross profit increased by $358,149 to $1.3 million for the three months ended December 31, 2006, from $972,845 for the same period in 2005 and the gross margin decreased by 15.8% to 66% for the three months ended December 31, 2006 from 81.7% for the same period in year 2005. The increase in gross profit is due to the increased sales volume. Gross margins decreased due to increased technical service fees related to current software sales. Increased technical service fees are attributable to outsourced installation and maintenance support services for software installations not in close proximity to Company operations.

        Operating Expenses:    Product development expense was $974,790 for the three months ended December 31, 2006, as compared to $762,254 for the three months ended December 31, 2005. Product development expense is principally comprised of costs directly attributable to the development, production and delivery of our career development services, such as salaries and facility costs. These costs are generally the type of costs that are fixed in nature and do not fluctuate in proportion to revenue.

        Selling, general and administrative expense increased by $180,855 to $693,392 for the three months ended December 31, 2006, from $512,537 for the same period in 2005, but decreased as a percentage of revenue to 34.3% in 2006 from 43% in 2005. This increase is primarily comprised of a $48,000 increase in business development costs, a $75,000 increase in staff costs, a $60,000 increase in professional fees, as well as a $47,000 increase in office expenses related to our new Intac International Management Consultancy Beijing Limited Company which was established in January 2006.

        Provision for doubtful accounts of $653,917 includes amounts reserved for trade receivables related to our career development services business that are outstanding in excess of 21 months net of any recoveries in the current period. A total of $1,217,000 was reserved during the current quarter for receivables that have been outstanding 21 months. This amount was offset by $564,000 of recoveries during the current period.

        Merger transaction costs of $411,186 are principally comprised of professional and investment banking fees related to the announced merger of the Company and HSW. Since HSW has been determined to be the acquiring company, accounting rules require that the acquiree (the Company) record all transaction costs as expense to its statement of operations. We expect to incur additional costs during the next quarter, prior to closing of the transaction.

        We anticipate that our operating expenses will increase in future periods as we increase sales and marketing operations for our Career Development and Training Services business.

        Deferred income tax benefit of $134,021 was recorded for the three months ended December 31, 2006 due to the reversal of temporary timing differences between the recognition of Huana Xinlong revenue for financial reporting purposes and the amounts used for income tax purposes.

        Loss from continuing operations:    Loss from continuing operations was $1.3 million for the three months ended December 31, 2006, as compared to loss from continuing operations of $301,962 for the same period in 2005. The increase in loss from continuing operations is primarily due to the provision for doubtful accounts and merger transaction costs in the current period, partially offset by higher career development sales in the current year.

        Loss from discontinued operations:    Loss from discontinued operations was $390,988 million for the three months ended December 31, 2006, as compared to loss from discontinued operations of $432,468 million for the same period in 2005. The decline in loss from discontinued operations is primarily due to improved gross margins, partially offset by lower sales resulting from increased competition in the wireless handset distribution industry in China.

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        Net loss:    Net loss for the three months ended December 31, 2006 was $1.7 million, as compared to a net loss of $734,430 million for the same period in 2005. The decline was primarily due to higher product development and SG&A costs, the provision for doubtful accounts and the merger transaction costs, partially offset by higher revenues in the current period.


RESULTS OF OPERATIONS FOR THE YEARS ENDED SEPTEMBER 30, 2006 AND 2005 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004

        In 2005, we changed our fiscal year-end from December 31 to September 30. As a result of this change, we have prepared financial statements for the year ended September 30, 2005 and for the nine months ended September 30, 2004. Accordingly, the following discussion of results of operations will compare the audited balances for the year ended September 30, 2006 to the unaudited balances for the year ended September 30, 2005 and the previously audited nine months ended September 30, 2005 with the unaudited balances for the nine months ended September 30, 2004.

        The following table summarizes the operating results for the years ended September 30, 2006 and 2005 and the nine months ended September 30, 2005 and 2004 and should be read in conjunction with the audited consolidated financial statements and related notes contained herein.

 
  Year Ended
September 30,

  Nine Months Ended
September 30,

 
 
  2006
  2005
  2005
  2004
 
Career development services revenue   $ 5,749,932   $ 8,390,880   $ 4,218,779   $ 58,975  
Career development services cost of revenue     1,508,526     2,272,789     1,039,299      
   
 
 
 
 
Career development services gross profit     4,241,406     6,118,091     3,179,480     58,975  
Operating expenses (income)                          
  Product development     3,422,312     3,359,075     2,660,793     1,121,219  
  Selling, general and administrative expenses     2,258,089     2,018,815     1,836,777     655,117  
  Provision for doubtful accounts     950,608              
  Merger transaction costs     1,340,319              
  Gain on sale of assets         (383,933 )   (383,933 )    
   
 
 
 
 
Total operating expenses     7,971,328     4,993,957     4,113,637     1,776,336  
Total other income (expenses) net     2     (145,870 )   2,241     358,244  
   
 
 
 
 
Income (loss) from continuing operations before taxes     (3,729,920 )   978,264     (931,916 )   (1,359,117 )
Deferred income taxes     426,447              
   
 
 
 
 
Income (loss) from continuing operations     (4,156,367 )   978,264     (931,916 )   (1,359,117 )
Income (loss) from discontinued operations     (3,985,629 )   2,397,522     (534,466 )   2,333,446  
   
 
 
 
 
Net income (loss)   $ (8,141,996 ) $ 3,375,786   $ (1,466,382 ) $ 974,329  
   
 
 
 
 


Results of Operations for the Year Ended September 30, 2006, Compared to the Year Ended September 30, 2005

        Revenue:    Revenue decreased by $2.7 million to $5.7 million for the year ended September 30, 2006, from $8.4 million for the same period in 2005. The decrease in revenue is primarily due to decreased sales of education and administrative software. This is partly due to a significant amount of sales in the quarter ended December 31, 2004 in the prior year caused by backlogged orders and from overall slower than anticipated orders in the current year from the Chinese school districts. We currently expect career development and training services revenue to grow during fiscal 2007.

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        Career Development Services Gross Profit:    Gross profit decreased by $1.9 million to $4.2 million for the year ended September 30, 2006, from $6.1 million for the same period in 2005 and the gross margin increased by .9% to 73.8% for the year ended September 30, 2006 from 72.9% for the same period in 2004. The decrease in gross profit is mainly due to lower sales volume explained above. We expect margins to remain high due to the nature of this service business. Unlike the distribution business which has product costs in cost of revenue, our career development services' cost of revenues does not have these types of product costs and therefore produces higher margins.

        Operating Expenses:    Product development expense was $3.4 million for the year ended September 30, 2006, as compared to $3.4 million for the year ended September 30, 2005. Product development expense is principally comprised of costs directly attributable to the development, production and delivery of our career development services, such as salaries and facility costs. These costs are generally the type of costs that are fixed in nature and do not fluctuate in proportion to revenue.

        Selling, general and administrative expense increased by $239,275 to $2.2 million for the year ended September 30, 2006, from $2.0 million for the same period in 2005, and increased as a percentage of revenue to 39.3% in 2006 from 24.1% in 2005. This increase is primarily comprised of an $88,000 increase in occupancy and insurance costs due to expansion into a new facility in Beijing, an $80,000 increase in business development costs as well as a $71,000 increase in staff costs related to our new Intac International Management Consultancy Beijing Limited Company which was established in January 2006.

        Provision for doubtful accounts includes amounts reserved for trade receivables related to our career development services business that are for balances outstanding in excess of 21 months.

        Merger transaction costs are principally comprised of professional and investment banking fees related to the announced merger of the Company and HSW. Since HSW has been determined to be the acquiring company, accounting rules require that the acquiree (the Company) record all transaction costs as expense to its statement of operations. We expect to incur additional costs during the next quarter, prior to closing of the transaction.

        Gain on sale of assets in 2005 relates to a gain recognized on the sale of software which was developed for Intac Purun's internal use but subsequently sold to a third party.

        We anticipate that our operating expenses will increase in future periods as we increase sales and marketing operations for our Career Development and Training Services business.

        Deferred income tax expense:    Deferred income tax expense of $426,447 was recorded for the year ended September 30, 2006 as the result of a temporary timing difference between the recognition of Huana Xinlong revenue for financial reporting purposes and the amounts used for income tax purposes.

        Income (loss) from continuing operations:    Loss from continuing operations was $4.2 million for the year ended September 30, 2006, as compared to income from operations of $978,264 for the same period in 2005. The decline in income from continuing operations is primarily due to lower sales, a gain on sale of assets in the prior year, a provision for doubtful accounts, merger transaction costs in the current year and deferred income tax expense, partially offset by improved gross margins.

        Income (loss) from discontinued operations:    Loss from discontinued operations was $4.0 million for the year ended September 30, 2006, as compared to income from discontinued operations of $2.4 million for the same period in 2005. The decline in income (loss) from discontinued operations is primarily due to lower sales resulting from increased competition in the wireless handset distribution industry in China. The decline was also due to a provision for doubtful accounts of $2.2 million recorded to provide a reserve for uncertainty regarding the use of certain vendor rebates and due to

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increased selling general and administrative costs resulting from increased costs for the audit of our financial statements and overall increased costs associated with being a public company including Sarbanes Oxley compliance, stock-based compensation and other professional fees.

        Net income (loss):    Net loss for the year ended September 30, 2006 was $8.1 million, as compared to a net income of $3.4 million for the year ended September 30, 2005. The decline was primarily due to lower revenues, reserves for vendor rebates, higher selling, general and administrative costs, a gain on sale of assets in the prior year, new expenses for merger transaction costs in the current year, a provision for doubtful accounts related to career development services in the current year, and deferred income tax expense, partially offset by improved gross margins.


Results of Operations for the Nine Months Ended September 30, 2005, Compared to the Nine Months Ended September 30, 2004

        Revenue:    Revenue increased by $4.1 million to $4.2 million for nine months ended September 30, 2005, from $58,975 for the same period in 2004. This new revenue is due to the redirection of the Company's business plan from the traditional distribution business to its career development services, and primarily consisted of revenues from sales of our education administration software.

        Career Development Services Gross Profit:    Gross profit was $3.2 million and $58,975 for the nine months ended September 30, 2005 and 2004. This generated a gross margin of 75.4% and 100% for the nine month periods ended September 30, 2005 and 2004. The improvement in gross margin is due to the change in focus of the Company's business plan from the traditional distribution business to its career development services, and primarily consisted of gross profit from sales of our education administration software. We expect margins to remain high due to the nature of this service business.

        Operating Expenses:    Product development expense was $2.7 million for the nine months ended September 30, 2005, as compared to $1.1 million for the nine months ended September 30, 2004. Product development expense is principally comprised of costs directly attributable to the development, production and delivery of our career development services, such as salaries and facility costs. The increase in product development costs was primarily due to new salaries and other employee costs as the career development business expanded. We expect to continue to incur significant product development costs in future years.

        Selling, general and administrative expenses increased by $1.2 million to $1.8 million for the nine months ended September 30, 2005, from $655,117 for the same period in 2004. This increase was primarily due to the acquisition of Huana Xinlong, the increased business activity related to our career development services and due to higher selling, general and administrative costs related to being a public company, including Sarbanes-Oxley compliance. Specifically, professional fees increased $545,000 due to costs related to public company compliance costs, staff and salary costs increased $335,000, promotion and business development costs increased $220,000 and occupancy and other costs increased $100,000.

        Gain on sale of assets relates to a gain recognized on the sale of software which was developed for Intac Purun's internal use but subsequently sold to a third party.

        Income (Loss) from Continuing Operations:    Loss from continuing operations was $931,916 for the nine months ended September 30, 2005 compared to a $1.4 million loss for the same period in 2004. The improvement in loss from operations is primarily due to the career development services business and the higher sales of education and administrative software and higher gross profit.

        Income (Loss) from Discontinued Operations:    Loss from discontinued operations was $534,466 for the nine months ended September 30, 2005, as compared to income from discontinued operations of $2.3 million for the nine months ended September 30, 2004. The decrease in income from

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discontinued operations was due to a decrease in distribution revenues resulting from increased competition in the wireless handset distribution industry in China. While demand for cell phones increased, the number of distributors and manufacturers also increased to meet demand. The decrease was also due to a lower gross margin resulting from pricing pressures from increased competition and higher selling, general and administrative costs related to being a public company, including Sarbanes-Oxley compliance.

        Net income (loss):    Net loss for the nine months ended September 30, 2005 was $1.5 million compared to a net income of $974,329 for the nine months ended September 30, 2004. The decline was primarily due to lower distribution and career development services revenues, lower distribution gross margins, higher product development and selling, general and administrative costs discussed above, partially offset by the improved career development services gross profits.


Liquidity and Capital Resources

        As of December 31, 2006 and September 30, 2006, INTAC maintained cash of $820,598 and $804,973, respectively. The Company measures liquidity through working capital (measured by current assets less current liabilities). As of December 31, 2006, and September 30, 2006, INTAC maintained working capital of $12,209,490 and $13,472,770, respectively. The decrease in working capital is primarily due to losses during the current period.

        Within our Distribution Business (included in discontinued operations), a large portion of trade accounts receivable is attributable to our largest customer—Mr. Lam, from whom we derived substantially all of our distribution revenue for three months ended December 31, 2006. The amount of the receivable balance with this customer was $11.3 million at December 31, 2006 and $11.2 million at September 30, 2006. We expect this balance to remain high for the foreseeable future. We collected approximately $1.5 million of the balance outstanding at December 31, 2006 in January 2007.

        We have entered into a new installment payment plan agreement with Mr. Lam to pay his current balance over a period of six months. As part of the installment plan agreement, we have agreed that all future sales to Mr. Lam are due and payable within 45 days. At December 31, 2006, Mr. Lam was in compliance with this agreement. The volume of sales in the Distribution Business relies on keeping Mr. Lam as a customer. In order to demonstrate his belief that Mr. Lam's receivable is collectible, Wei Zhou, the Company's Chairman and CEO, entered into a Security and Pledge Agreement with INTAC whereby Mr. Zhou pledged 3 million shares of INTAC common stock to secure collection of this receivable.

        In addition, at December 31, 2006, the Company has approximately $1.6 million of supplier rebates receivable from its major mobile handset supplier, T-Mobile Deutschland. This amount has been fully reserved based on historical trends and due to the uncertainty of their use when considering the distribution business' anticipated reduced revenue. Mr. Zhou's pledge of 3 million shares of INTAC common stock under the Security and Pledge Agreement also secures this receivable.

        As of December 31, 2006, we have a net trade receivable balance of $5.2 million related to our Career Development Services business. The trade receivable balance relates primarily to Huana Xinlong and the sale of educational software to school districts within China. These school districts pay for their software purchases using funds supplied by the Chinese government. Historically, this funding takes many months, which is typical of the business process in China. In our September 30, 2006 financials, the Company reserved $950,608 for trade receivables related to sales of educational software completed in December 2004. Since that time, approximately $564,000 of these reserved amounts have been collected and recorded as recoveries against the provision for doubtful accounts. The Company continues its policy of reserving receivables that have aged in excess of 21 months and has recorded a reserve of $1,217,000 during the current quarter for receivables related to educational software sales

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during March of 2005. As with previously reserved accounts, the Company fully intends to pursue collection of these receivables.

        We believe that the Company will have sufficient capital for the next twelve months if we are able to collect our trade receivables and sell our Career development software and training services according to our business plan. However, if we are not able to complete sales in a timely manner or if the Chinese government does not fund our school district customers in a reasonable amount of time, it could have a material adverse effect on our liquidity. Long-term plans will require that we obtain additional financing through the issuance of debt, equity, other securities or a combination thereof in order to take advantage of other strategic agreements and business alliances. In addition, we may seek to obtain a working capital or other traditional loan facility from a bank or other lending source. Unless we are able to continue to improve our career development services operating performance with which we have limited experience, additional outside financing required to execute our long-term business plan would be difficult to obtain on acceptable terms, if at all. As of the date of this prospectus/proxy statement, we do not have any financing arrangements, nor do we have any commitments to obtain such an arrangement with any bank or other third party. If we raise capital by issuing equity or convertible debt securities, the percentage ownership of our current stockholders will be reduced. Any new securities may have rights, preferences or privileges senior to those of our current common stockholders. There can be no assurances that we will be able to obtain additional financing on terms which are acceptable to us.

        For the three months ended December 31, 2006, cash used by continuing operating activities (which is comprised of the career development business) totaled $150,542. This was primarily due to the net loss for the period and increases in our trade accounts receivable, partially offset by increases in the provision for doubtful accounts and accounts payable and accrued expenses. For the three months ended December 31, 2005, cash provided by operating activities totaled $2.5 million. This consists mainly of a decrease in trade accounts receivable and an increase in income taxes payable, partially offset by the net loss for the quarter.

        For the three months ended December 31, 2006, cash provided by discontinued operating activities (which is comprised of the wireless handset distribution business) totaled $182,282. This was primarily due to an increase in the accounts payable and accrued expenses, partially offset by the net loss for the period and an increase in inventories. For the three months ended December 31, 2005, cash used in discontinued operating activities totaled $2.2 million. The use of funds was primarily due to an increase in trade accounts receivable and a decrease in trade accounts payable, accrued expenses and income taxes payable, as well as the net loss for the quarter, partially offset by a decrease in inventory.

        For the three months ended December 31, 2006, cash used in investing activities amounted to $16,114 primarily due advances made to officers of subsidiaries and employees and the purchase of property and equipment, partially offset by sales of property and equipment held for sale. For the three months ended December 31, 2005, cash used in investing activities amounted to $250,863 comprised primarily of the purchase of property and equipment and advances to officers of subsidiaries and employees.

        For the three months ended December 31, 2005, cash provided by financing activities amounted to $57,963 consisting of proceeds from the exercise of stock options.

        Assets held for sale increased by $3.6 million to $16.8 million at December 31, 2006, from $13.2 million at September 30, 2006. The increase primarily relates to higher inventory balances due to the timing of inventory purchases.

        Property and equipment, net, and acquired software, decreased by $68,804 to $974,103 million at December 31, 2006, compared to $1 million at September 30, 2006. This decrease was primarily due to

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normal depreciation and amortization. We do not expect our purchases of property and equipment to change materially in fiscal 2007.

        Inventory and trade accounts receivable balances at December 31, 2006 were comparable to September 30, 2006.

        Accrued expenses increased $670,579 from September 30, 2006 to December 31, 2006 primarily due to the accrual of merger transaction costs such as professional and investment banking fees related to the pending merger with HSW.

        Liabilities held for sale increased due to the timing of invoices received for inventory.

        In connection with the merger under this proxy statement/prospectus, INTAC is incurring substantial transaction costs related to legal, investment banking, accounting and consulting services. Transaction costs to be expensed by INTAC have been estimated to be up to $4.5 million. Total transaction costs to be expensed or capitalized in the purchase price allocation by INTAC or HSW International are estimated to be up to $7 million if the merger is completed, as certain legal and investment banking fees are contingent upon successful completion of the merger. If the merger and equity financing in connection with the merger is not consummated the transaction costs incurred by INTAC could have a material adverse effect on INTAC's liquidity.


Commitments and Contingencies

        Liabilities for loss contingencies arising from claims, assessments and litigation and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. In the opinion of management, after consultation with legal counsel, there are no claims, assessments and litigation against the Company.


Off-Balance Sheet Arrangements

        The Company has no off-balance sheet arrangements that have had, or are reasonably likely to have, a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

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INTAC MANAGEMENT

Directors And Executive Officers

        The following table sets forth information regarding INTAC's directors and executive officers:

Name

  Age
  Position
Wei Zhou   37   Chief Executive Officer, President Secretary and Director (Principal Executive Officer)

J. David Darnell

 

61

 

Senior Vice President, Chief Financial Officer and Director (Principal Financial Officer)

Theodore P. Botts

 

61

 

Director; Chairman of the Audit Committee

Kevin Jones

 

57

 

Director; Member of the Audit Committee

Dr. Heinz-Gerd Stein

 

66

 

Director

Larrie A. Weil

 

63

 

Director; Member of the Audit Committee

        Below is information, including biographical information, about INTAC's current executive officers and directors:

        Wei Zhou has served as INTAC's Chief Executive Officer, President and Secretary since October 2001. Mr. Zhou became a director on October 12, 2001. Mr. Zhou is responsible for all of INTAC's day-to-day operations, including developing strategic plans for the business, building relationships and alliances with customers, suppliers and strategic partners, overseeing the sales and marketing activities of the business and managing the operations of INTAC's offices in China (Hong Kong, Beijing and Tianjin) and Germany. From January 1997 through September 27, 2001, Mr. Zhou served as Managing Director of Tai Pan Trading GmbH, a Frankfurt, Germany-based enterprise that distributes mobile telecommunications equipment worldwide. Mr. Zhou plays a key oversight role in INTAC's redirection from the traditional distribution of premium brand wireless handsets to its career development and training services segment.

        J. David Darnell became INTAC's Senior Vice President and Chief Financial Office in June of 2002. From November 2000 to May 2002, Mr. Darnell served as Senior Vice President and Chief Financial Officer of Nucentrix Broadband Networks, Inc., a publicly-held provider of broadband wireless Internet and multichannel video services. Mr. Darnell became one of INTAC's directors on October 15, 2001. From 1997 to October 2000, he served as Senior Vice President and Chief Financial Officer of ILD Telecommunications, Inc., a nationwide facilities-based provider of prepaid phone services and telecommunications outsourcing services. From 1993 to 1997, Mr. Darnell was Senior Vice President, Finance and Chief Financial Officer for SA Telecommunications, Inc., a publicly held, full service interexchange carrier that provided a wide range of telecommunications services. From 1990 to 1993, Mr. Darnell served as Chief Financial Officer of Messagephone, Inc., a telecommunications technology and intellectual property firm. Mr. Darnell is a certified public accountant.

        Theodore P. Botts is a private financial advisor, providing strategic and financial advice to individuals and companies since 2000 through his Kensington Gate Capital firm. Mr. Botts became an INTAC director on December 16, 2002. Mr. Botts served as the President, Chief Executive Officer and a member of the board of directors of Stereo Vision Entertainment, Inc., a Nevada corporation, through October 20, 2005. From 1998 to 2000, he served as the Managing Director for UBS Warburg's Latin American Corporate Finance, with generalist corporate finance activities. From 1994 to 1997, he served in a similar position for UBS Securities. From 1988 to 1993, he was the Managing Director and Head of International Corporate Finance of UBS Limited, managing the group responsible for the development and execution of corporate finance business in Continental Europe.

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        Kevin Jones is a director of Ermgassen & Co. in London, UK, a leading independent investment banking advisory firm focusing on cross-border mergers and acquisitions and corporate finance. Mr. Jones became an INTAC director on March 3, 2004. He is a non-executive director of WITAN Pacific Investment PLC Trust and an adviser to Hayco Ltd. and to several Indian companies. Mr. Jones was a consultant for 25 years. From 1983 to 1992, he was a partner of McKinsey & Co., based in Tokyo. From 1992 to 1998, he was a partner of Booz-Allen & Hamilton, where he was responsible for developing the firm's practice in China, South Korea and Taiwan. He speaks several languages, including Japanese and Mandarin.

        Dr. Heinz-Gerd Stein served as Chief Financial Officer and was a member of the Executive Board of ThyssenKrupp AG in Germany until his retirement in September 2002. Dr. Stein became an INTAC director on December 16, 2002, and served as a member of the Audit Committee from December 16, 2002 until August 2005. Dr. Stein joined Thyssen AG, later known as ThyssenKrupp AG, in 1966 within their tax department and progressed to Head of the Finance Department and ultimately Chief Financial Officer and Member of the Executive Board. He is a currently a member of the supervisory and advisory boards of several German companies.

        Larrie A. Weil is Senior Managing Director of Howard Frazier Barker Elliott, Inc. in Dallas, Texas and has been a senior executive in major regional investment banking firms for 35 years. Mr. Weil became an INTAC director on March 3, 2004. From 1996 to 2002, he was the Executive Vice President and Head of Investment Banking for Southwest Securities, Inc., a publicly traded securities firm that offers a complete range of investment services including access to the capital markets. In addition, Mr. Weil has served as a director on the boards of public and private companies, as well as on securities industry committees.


Corporate Governance

Board of Directors

        Theodore P. Botts, Kevin Jones, Dr. Heinz-Gerd Stein and Larrie A. Weil, each satisfy the independence requirements of the Nasdaq Stock Market and together comprise a majority of the directors on the INTAC board of directors.

        Any vacancy occurring on the INTAC board of directors may be filled by the affirmative vote of a majority of the remaining directors, although less than a quorum, or by the sole remaining director. During the fiscal year ended September 30, 2006, INTAC's board of directors held 9 meetings and took action by unanimous written consent 3 times. Each of INTAC's directors attended at least 75% of the total of all such meetings at the time they were directors, except Kevin Jones and Dr. Heinz-Gerd Stein, who attended four meetings. The Audit Committee of the board of directors held 5 meetings during the fiscal year ended September 30, 2006. Directors are encouraged but not required to attend annual meetings of INTAC's stockholders. INTAC held an annual stockholders meeting on February 15, 2006, where Messrs. Zhou and Darnell were in attendance and INTAC's stockholders approved the election of directors and ratified the appointment of KBA Group LLP as INTAC's independent auditors for the fiscal year ending September 30, 2006.

Board of Directors Committees

        INTAC is a "controlled company" as defined under the rules of the Nasdaq Stock Market because more than 50% of INTAC's voting power is held by an individual, a group or another company. See "Beneficial Ownership Information—Security Ownership of Certain Beneficial Owners and Management of INTAC Prior to the Merger" beginning on page 123 for more information. As a "controlled company," INTAC is exempt from the Nasdaq Stock Market requirements with respect to (i) having a majority of independent directors on INTAC's board of directors (although INTAC voluntarily complies with such standard), (ii) having the compensation of INTAC's executive officers determined by a majority of

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independent directors or a compensation committee composed solely of independent directors and (iii) having nominees for director selected or recommended for selection by a majority of the independent directors or a committee composed solely of independent directors.

        The INTAC board of directors established INTAC's single standing committee, the audit committee, on December 16, 2002 and adopted a written charter to govern such committee, a copy of which is available on INTAC's website at www.intac-asia.com. In accordance with the charter, all members of the audit committee are independent as defined in the applicable rules and regulations of the Nasdaq Stock Market, are financially literate and at least one member of the audit committee has accounting or related financial management expertise and experience as required by the Nasdaq Stock Market. The audit committee is also comprised entirely of "independent directors" as required by Section 301 of the Sarbanes-Oxley Act of 2002. The chairman of the audit committee is Mr. Botts and Mr. Weil is the audit committee's "financial expert" as such term is defined in Item 401 of Regulation S-K of the Securities Exchange Act of 1934. Mr. Jones also serves as a member of the audit committee.

        The audit committee devotes attention to specific subjects and assists the INTAC board of directors in the discharge of its responsibilities. The audit committee recommends to the INTAC board of directors the appointment of the firm selected to serve as the independent auditors for INTAC and its subsidiaries and monitors the performance of any such firm. It also reviews and approves the scope of the audit and evaluates, with the independent auditors, INTAC's audit and annual financial statements, reviews with management the status of internal accounting controls, evaluates issues having a potential financial impact on INTAC, which may be brought to the audit committee's attention by management, the independent auditors, or the INTAC board of directors, and evaluates public financial reporting documents of INTAC. During the fiscal year ended September 30, 2006, the audit committee met 5 times.

        The INTAC board of directors does not have a designated compensation committee. Director and officer compensation decisions are made by the full board. See "Compensation of Directors" and "Executive Compensation" below for more information.

        The INTAC board of directors does not have a nominating committee as director nominations are made by the INTAC board of directors as a whole. The INTAC board of directors believes it is in the best interests of INTAC to avail itself of the extensive business and other experience of each member of the INTAC board of directors in evaluating potential candidates to serve as directors.

        Director nominees are recommended to the full INTAC's board of directors by INTAC's Chairman and Chief Executive Officer, Mr. Zhou. In identifying nominees for director, Mr. Zhou considers the appropriate skills and personal characteristics required in light of the then-current makeup of the INTAC board of directors and in the context of the perceived needs of INTAC at the time, including the following experience and personal attributes: stockholder-orientation; financial acumen; general business experience; industry knowledge; diversity; special business experience and expertise; leadership abilities; high ethical standards; independence; interpersonal skills; and overall effectiveness. With respect to the selection of the director nominees, Mr. Zhou has recommended that the INTAC board of directors nominate each director nominee.

        INTAC does not have a formal policy by which stockholders may recommend director candidates, but the INTAC board of directors will consider appropriate candidates recommended by stockholders. A stockholder wishing to submit such a recommendation should send a letter to the INTAC Secretary at 12221 Merit Drive, Suite 600, Dallas, TX 75251-2248, U.S.A. The mailing envelope must contain a clear notation that the enclosed letter is a "Director Nominee Recommendation." The letter must be received by the Company at least 120 days before the date of the Company's proxy statement released to stockholders for the prior years' annual meeting, and must identify the author as a stockholder and provide a brief summary of the candidate's qualifications. Candidates recommended for election to the

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INTAC board of directors must be independent as defined by the applicable requirements of the Nasdaq Stock Market and financially literate, and will be subject to review based on the criteria described above.


Compensation Of Directors

        INTAC's bylaws specifically grant to the INTAC board of directors the authority to fix the compensation of the directors. INTAC provides each non-employee director who serves as a member of the INTAC board of directors an annual cash retainer of $15,000 payable quarterly in arrears for service as a director, provided such director attends at least 75% of the meetings of the INTAC board of directors in such fiscal quarter. If any director fails to receive a quarterly payment of his retainer because such director failed to attend at least 75% of the meetings of the INTAC board of directors held in such fiscal quarter, but the director attends at least 75% of the meetings of the INTAC board of directors held during the entire fiscal year, then such director shall receive his quarterly retainer payment for the fourth quarter as well as all prior quarterly retainer payments for the fiscal year previously withheld. If a director resigns, is removed, fails to stand for re-election or otherwise ceases to serve as director during any fiscal quarter, such director will receive a prorated portion of his retainer for such quarter, subject to satisfying the other conditions to receiving the retainer. Each non-employee director also will receive (i) $1,000 for service on each committee of the INTAC board of directors of which he is a member payable upon appointment and upon each anniversary of such appointment so long as he remains a member of such committee, (ii) an annual cash retainer of $5,000 for service as chairman of the audit committee payable upon appointment and each anniversary of such appointment so long as he remains chairman and (iii) $3,000 for service as chairman of any other committee of the INTAC board of directors payable upon appointment and each anniversary of such appointment so long as he remains chairman. Each director also is reimbursed for all ordinary and necessary expenses incurred in attending any meeting of the INTAC board of directors or any committee of the INTAC board of directors.

        Each non-employee director also receives (i) options to purchase 50,000 shares of INTAC's common stock upon such director's initial election to the INTAC board of directors and (ii) options to purchase an additional 12,500 shares of INTAC's common stock upon each such director's annual re-election to the INTAC board of directors. Each such option will be granted pursuant to INTAC's 2001 Long Term Incentive Plan (referred to in this proxy statement/prospectus as the 2001 LTIP) will vest and will become exercisable in three equal installments on the first three anniversary dates following the date of the grant, and will have an exercise price equal to the closing price of INTAC's common stock as reported on the Nasdaq Capital Market on the date of the grant.

        On August 28, 2005, each currently serving non-employee director also was awarded options to purchase 25,000 shares of the Company's common stock as compensation for serving as directors during 2004, for which they were not previously compensated. Each such option was granted pursuant to the 2001 LTIP, will vest and will become exercisable in two equal installments on the first two anniversary dates following the date of the grant, and has an exercise price of $6.40 per share, an amount equal to the closing price of INTAC's common stock as reported on the Nasdaq Capital Market on the date of the grant.

        All stock options granted to non-employee directors vest in full upon a change of control. The merger will constitute a change of control with respect to these stock options.


Executive Compensation

        The following table provides summary information concerning compensation paid by INTAC to its Chief Executive Officer and other executive officers who earned more than $100,000 in salary and bonus for all services rendered in all capacities during the nine months ended September 30, 2005 and the fiscal years 2004, 2003 and 2002 (referred to in this proxy statement/prospectus as the named executive officers).

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Summary Compensation Table(1)

 
   
   
   
   
  Long Term Compensation
   
 
   
  Annual Compensation
   
 
   
  Restricted
Stock
Awards
($)

  Securities
Underlying
Options/SARs
(#)

   
Names and Principal position

  Year
  Salary
($)

  Bonus
($)

  Other Annual
Compensation
($)(3)

  All Other
Compensation
($)

Wei Zhou
President and Chief
Executive Officer
  2006
2005
2004
2003

(2)

120,000
90,000
120,000
120,000
 


 


 


 


 



J. David Darnell
Senior Vice President and
Chief Financial Officer

 

2006
2005
2004
2003


(2)


175,000
131,250
175,000
175,000

 

25,000
25,000
25,000
25,000

 





 





 





 





(1)
Other than Mr. Zhou and Mr. Darnell, no other INTAC employee received an annual salary of more than $100,000 during fiscal year 2006, the twelve months ended September 30, 2005 or fiscal year 2004.

(2)
During 2005, INTAC changed its fiscal year end from December 31 to September 30. Figures for 2005 represent the nine month period from January 1, 2005 to September 30, 2005.

(3)
Other annual compensation not properly categorized as salary or bonus (e.g., perquisites and other personal benefits) has been omitted for the named executive officers because the aggregate amount of this other annual compensation was less than the lesser of $50,000 or 10% of the total of annual salary and bonuses for the named executive officers in the nine months ended September 30, 2005 and fiscal years 2004, 2003 and 2002.

Option/SAR Grants

        INTAC did not grant any stock appreciation rights ("SAR") or stock options to any named executive officers during fiscal year 2006.

Aggregate Option/SAR Exercises in 2006 and Fiscal Year-End Option/SAR Value

        The following table provides information about the number and value of unexercised options for the named executive officers as of September 30, 2006. No named executive officers exercised any stock options during fiscal year 2006 and no SARs have been granted.

Name

  Shares
Acquired on
Exercise (#)

  Value
Realized ($)

  Number of Securities
Underlying Unexercised
Options/SARs at
September 30, 2006 (#)
Exercisable/Unexercisable

  Value of Unexercised
In-the-Money Options/SARs at
September 30, 2006($)
Exercisable/Unexercisable(1)

J. David Darnell   0   0   150,000/0 (2) 513,000/0

(1)
Based on the closing price ($6.92) of INTAC common stock on September 29, 2006, as reported on the Nasdaq Capital Market.

(2)
Of the 300,000 options awarded to Mr. Darnell on July 29, 2002, 150,000 options were transferred to a third party on September 14, 2005 pursuant to a domestic relations order.

Employment Contracts

        On October 16, 2001, INTAC entered into an employment agreement with Mr. Zhou to serve as INTAC's Chief Executive Officer and President. The initial term of the agreement was effective through October 16, 2004 and the agreement automatically renews for successive one-year terms. Under the agreement, Mr. Zhou receives a base salary of $120,000 per year and is entitled to receive

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an annual bonus at the discretion of the INTAC board of directors. The agreement with Mr. Zhou may be terminated by INTAC at any time for cause as such term is defined in the employment agreement. However, if Mr. Zhou's employment is terminated by INTAC without cause (as such term is defined in the employment agreement), INTAC is obligated to pay Mr. Zhou compensation earned through the date of termination plus a severance payment equal to 12 months base salary. If Mr. Zhou's employment is terminated for cause, by mutual agreement, or upon death or disability, he will be paid his annual base salary, a lump sum payment for all earned and unused benefits through the date of termination and any vested pension or retirement benefits.

        On June 11, 2002, INTAC entered into an employment agreement with J. David Darnell to serve as INTAC's Senior Vice President and Chief Financial Officer. The initial term of the agreement was effective through June 11, 2005. The agreement automatically renews for successive one-year periods unless INTAC permits the agreement to expire upon the giving of written notice to Mr. Darnell at least 365 days prior to the expiration of the original term or any successive term. INTAC has not provided any such notice to date and, therefore, Mr. Darnell's employment agreement currently is effective through June 11, 2008. Under the agreement, Mr. Darnell receives a base salary of $175,000 per year and a guaranteed annual cash bonus of $25,000. The agreement with Mr. Darnell may be terminated by INTAC at any time for cause as such term is defined in the employment agreement. However, if Mr. Darnell's employment is terminated by INTAC without cause (as such term is defined in the employment agreement), INTAC is obligated to pay Mr. Darnell compensation earned through the date of termination plus a severance payment equal to 12 months base salary from the date of termination payable as if he had remained an employee of INTAC plus the amount of the guaranteed annual cash bonus that would have accrued had he remained with INTAC through the first anniversary of the date of termination. If Mr. Darnell's employment is terminated for cause, by mutual agreement, or upon death or disability, he will be paid his annual base salary and a lump sum payment for all earned and unused benefits, in each case through the date of termination, plus his annual guaranteed cash bonus earned as of the date of termination (prorated for any year less than a full calendar year), and any vested pension or retirement plan.

Related Party Transactions

        (a)   As of July 7, 2006, September 30, 2005 and December 31, 2004, INTAC's majority stockholder, Mr. Zhou, was the beneficial owner of 52.1%, 54.0% and 54.0% respectively, of INTAC's issued and outstanding common stock.

        (b)   Mr. Zhou is the CEO, President, Treasurer and a director of INTAC. As of September 30, 2005 and December 31, 2004, Mr. Zhou had made net advances to INTAC amounting to $116,661 and $115,664, respectively.

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HSW INTERNATIONAL MANAGEMENT FOLLOWING THE MERGER

Directors

        Under the terms of the stockholders agreement, following the merger the number of directors serving on HSW International's board of directors will be seven. As of the closing of the merger, HSW, Mr. Zhou and HSW International will take all actions necessary to cause five persons designated by HSW and two persons designated by Mr. Zhou to be duly appointed to the HSW International board of directors, each to serve until the next annual election of directors of HSW International, and to cause the special committee, the compensation committee and the audit committee of the board to be established. Pursuant to the stockholders agreement, Mr. Zhou has designated himself and Dr. Heinz-Gerd Stein to serve on the HSW International board following the merger, and HSW has designated Jeffrey Arnold to serve on the HSW International board following the merger.

        Each of HSW and Mr. Zhou will have the right to request the removal, with or without cause, of any directors designated by HSW or Mr. Zhou, as applicable, and HSW, Mr. Zhou and HSW International, through the HSW International board of directors, will cause any such person to be removed from the HSW International board of directors. Following the nomination of the designees to the HSW International board of directors, at each election of directors at which the term of any designated director will expire, the HSW International board of directors will (i) recommend for election to the HSW International board of directors a nominee designated by the person that initially designated the director whose term will expire and (ii) use best efforts to solicit proxies in favor of such nominee consistent with the efforts used to solicit proxies for any other nominees.

Officers

        Jeffrey T. Arnold will serve as the chairman of HSW International after the merger. Mr. Arnold has also entered into a consulting agreement with HSW International (see "The Merger and the Distribution Business Sale—Interests of HSW International Directors and Executive Officers in the Merger" beginning on page 71). Wei Zhou will continue to serve as the president, chief executive officer and chairman of INTAC. Robert C. Bicksler will serve as executive vice president, chief financial officer, and chief operating officer after the merger and has entered into an employment agreement described below. J. David Darnell will continue to serve as a senior vice president and chief financial officer of INTAC after the merger.

        Jeffrey T. Arnold, age 37, has a proven track record in creating successful business enterprises. Mr. Arnold's most recent venture is The Convex Group, which acquires and integrates entertainment and distribution assets to create new media enterprises, and which includes HSW. Prior to starting The Convex Group, Mr. Arnold was founder and CEO of WebMD, an ehealthcare company seeking to transform healthcare into a more accessible, efficient and innovative system utilizing the Internet. Between August 1998 and September 2000, Mr. Arnold negotiated over ten acquisitions, growing WebMD from 60 people and $75,000 in annual revenues to over 5,000 people and 2001 revenues of close to $1 billion. Additionally, at WebMD Mr. Arnold raised over $1.5 billion in public and private capital in a 12 month period, negotiated over 100 strategic partnerships with both established Fortune 500 and emerging companies and established a strong operational management team. Prior to founding WebMD, Mr. Arnold was chairman and CEO of Quality Diagnostic Services (QDS), a cardiac arrhythmia monitoring company, which he founded in 1994. After growing QDS to one of the nation's largest cardiac-event monitoring companies, he sold QDS to Matria Healthcare for $25 million in 1998. In 1997, Mr. Arnold started Endeavor Technologies, Inc. to explore enhanced applications for Internet and computer telephony services. Endeavor, with the proceeds from the sale of QDS, became WebMD in August 1998.

        Robert C. Bicksler, age 53, will serve as executive vice president, chief financial officer and chief operating officer of HSW International after the merger. Prior to joining HSW International, he was

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the interim Chief Financial Officer at Netifice Communications, Inc., a leading provider of managed IP data, voice and security solutions for distributed enterprises. From 2002 to 2004, he was a principal with Catalina Consulting, providing strategic merger and acquisition consulting services to venture firms and corporate clients focusing on the telecommunication and technology industries. Previously, he was Chief Executive Officer of Global Metro Networks, a builder of dark fiber communication networks in major centers of business throughout Europe and the United States. Mr. Bicksler joined Global Metro in 2000 from AT&T Canada where he served as Executive Vice President and Chief Financial Officer. Prior to AT&T Canada, Mr. Bicksler was CFO of MetroNet Communications from 1997 until its $3.5 billion merger with AT&T Canada in 1999. Prior to joining MetroNet, Mr. Bicksler served as Chief Financial and Administrative Officer for several software companies. Mr. Bicksler began his career at PriceWaterhouseCoopers LLP, where he became partner in 1984 and served as Managing Tax Partner, Carolinas. He is a Certified Public Accountant and holds a Bachelor of Science degree in Business Administration from The Pennsylvania State University. He also holds a Master of Science degree from the University of North Texas.

Bicksler Employment Agreement

        Under the terms of his employment agreement, Mr. Bicksler will serve an executive vice president, chief financial officer and chief operating officer of HSW International. The employment agreement has a term of three years and shall automatically renew for successive one year terms unless either party elects not to renew the agreement. Mr. Bicksler will receive a base salary of $225,000 per year and be eligible to participate in any bonus pool or other bonus plan that HSW International may establish for its senior management. Mr. Bicksler will also receive reimbursement for reasonable travel and living expenses and relocation expenses should Mr. Bicksler relocate to Atlanta. In addition, Mr. Bicksler will receive a ten-year option to acquire 500,000 shares of HSW International common stock.

        One-third (1/3) of his options will vest on the first anniversary of the grant date and the remaining two-thirds (2/3) shall thereafter vest at a rate of 1/24th per month for the remainder of the term of the employment agreement. Mr. Bicksler shall have the right to vote the shares underlying the options prior to their vesting or his exercise of the options. To the extent vested, the options shall be irrevocable and may be exercised by Mr. Bicksler's heirs or estate.

        The employment agreement may be terminated (i) at HSW International's election for cause, (ii) at either HSW International's or Mr. Bicksler's election without cause upon 30 day's written notice, (iii) at Mr. Bicksler's election for good reason, or (iv) upon Mr. Bicksler's death or disability. Cause is defined in the employment agreement as (i) material dishonesty or material misappropriation, embezzlement, fraud or similar conduct, (ii) conviction of, or plea of nolo contendere to, a felony charge or crime involving moral turpitude or dishonesty, (iii) intentional damage of a material nature to any property of HSW International, (iv) gross negligence in serving in his capacity as an employee of HSW International, (v) breach of the non-competition, non-solicitation agreement, (vi) material breach of any material obligation or fiduciary duties which is not cured within 30 days of receipt of written notice of such breach or (vii) engaging in employment practices which violate federal, state or local law.

        In the event that Mr. Bicksler is terminated for cause under the employment agreement, he shall receive his base salary and certain benefits through the date of termination, and any unvested options shall terminate with the termination of the employment agreement. In the event that Mr. Bicksler is terminated without cause or terminates the agreement for good reason, he shall receive severance payments equal to one-year of base salary, be entitled to participate in any applicable bonus plan for a period of one-year after termination, and be entitled to continue to receive benefits under HSW International's benefits plan at HSW International's expense for a period of one year after termination. In addition, in the event that Mr. Bicksler is terminated without cause, all unvested options that would have vested in the twelve months following the date of termination shall vest. If a change of control of

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the company shall occur during the term of the employment agreement, any unvested options shall fully vest as of the date of the change in control. Change in control is defined as (i) a merger or consolidation of HSW International, or transfer of equity interests in a single transaction or series of transactions in which the equity holders of HSW International prior to such transaction or series of transactions possess less than a majority of to voting power of HSW International's (or its successor's) voting power after the transaction or series of transactions, or (ii) a single transaction or series of transactions in which a person or persons acquire substantially all of HSW International's assets.

        Mr. Bicksler will be prohibited from competing with HSW International, soliciting HSW International's customers or HSW International's employees during his employment with HSW International and for a period of one year thereafter.

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BENEFICIAL OWNERSHIP INFORMATION

Security Ownership of Certain Beneficial Owners and Management of INTAC Prior to the Merger

        The following table shows, as of March 14, 2007, the beneficial ownership of INTAC common stock held by (i) each person known to INTAC to be the beneficial owner of more than 5% of INTAC common stock; (ii) each director; (iii) each named executive officer listed in the summary compensation table included elsewhere; and (iv) all directors and executive officers as a group. The address of each executive officer and director is c/o INTAC International, Inc., 12221 Merit Drive, Suite 600, Dallas, TX 75251-2248 U.S.A.

Name of Beneficial Owners

  Number of Shares
Beneficially Owned(1)

  Percentage of
Ownership(2)

 
Deutsche Bank Aktlengesellschaft
Taunusanlage 12, D-60325
Frankfurt am Main
Federal Republic of Germany
  2,017,123   8.8 %

Ashford Capital Management, Inc.
P.O.Box 4172
Wilmington, DE 19807

 

1,223,800

 

5.3

%

Executive Officers and Directors:

 

 

 

 

 
Wei Zhou   11,950,000   52.1 %
Dr. Heinz-Gerd Stein(3)   616,667   2.7 %
J. David Darnell(4)   184,000   *  
Theodore P. Botts(5)   66,667   *  
Kevin Jones(5)   66,667   *  
Larrie A. Weil(5)   66,667   *  
All Executive Officers and Directors as a Group (6 persons)   12,950,668   55.9 %

*
Represents less than 1%

(1)
Pursuant to the rules of the SEC, a person or group is deemed to have "beneficial ownership" of any shares with regard to which such person or group has or shares voting or investment power or has or shares the right to acquire such power within 60 days of March 14, 2007, such as pursuant to the conversion or exchange of securities or the exercise of stock options or warrants. For purposes of computing the percentage of outstanding shares held by any person or group of persons, shares that such person or group has the right to acquire within 60 days of March 14, 2007 are deemed to be outstanding for the purpose of computing the percentage ownership of such person or group but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person or group.

(2)
Based on 22,940,727 shares of INTAC common stock outstanding on March 14, 2007.

(3)
Includes 16,667 shares of INTAC common stock that may be acquired upon exercise of options that are exercisable within 60 days of March 14, 2007.

(4)
Includes 150,000 shares of INTAC common stock that may be acquired upon the exercise of options that are currently exercisable.

(5)
Consists solely of 66,667 share of INTAC common stock that may be acquired upon exercise of options that are exercisable within 60 days of March 14, 2007.

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Security Ownership of Certain Beneficial Owners and
Management of HSW International Following the Merger

        The following table shows the beneficial ownership of HSW International common stock after the consummation of the merger, related transactions and the distribution business sale held by (i) each person known to HSW International to be the beneficial owner of more than 5% of HSW International common stock; (ii) each director; (iii) each named executive officer; and (iv) all directors and executive officers as a group. The address of each executive officer and director is c/o HSW International, Inc., One Capital City Plaza, 3350 Peachtree Road, Suite 1500, Atlanta, Georgia 30326 U.S.A.

Name of Beneficial Owners

  Number of Shares
Beneficially Owned(1)

  Percentage of
Ownership(2)

 
HowStuffWorks, Inc.(3)
One Capital City Plaza
3350 Peachtree Road, Suite 1500
Atlanta, Georgia 30326 U.S.A.
  31,890,727   63.3 %

Deutsche Bank Aktlengesellschaft(4)
Taunusanlage 12, D-60325
Frankfurt am Main
Federal Republic of Germany

 

4,452,435

 

8.8

%

Executive Officers and Directors:

 

 

 

 

 
Wei Zhou(3)   31,890,727   63.3 %
Jeffrey Arnold(5)   1,510,000   2.9 %
Dr. Hein-Gerd Stein(6)   616,667   1.2 %
Robert Bicksler     *  
All Executive Officers and Directors as a Group (4 persons)   34,017,394   65.5 %

*
Represents less than 1%

(1)
Pursuant to the rules of the SEC, a person or group is deemed to have "beneficial ownership" of any shares with regard to which such person or group has or shares voting or investment power or has or shares the right to acquire such power within 60 days, such as pursuant to the conversion or exchange of securities or the exercise of stock options or warrants. For purposes of computing the percentage of outstanding shares held by any person or group of persons, shares that such person or group has the right to acquire within 60 days are deemed to be outstanding for the purpose of computing the percentage ownership of such person or group but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person or group.

(2)
Based on 50,381,454 shares of HSW International common stock outstanding, which assumes 42,881,454 shares issued to HSW and all INTAC stockholders as of March 14, 2007, and 7,500,000 shares issued pursuant to the equity financing.

(3)
Includes 22,940,727 shares of HSW International common stock to be beneficially owned by HowStuffWorks, Inc. and 8,950,000 shares of HSW International common stock to be beneficially owned by Wei Zhou. The shares to be held by HowStuffWorks and Mr. Zhou are subject to the stockholders agreement entered into between the parties. Each party disclaims beneficial ownership of the shares to be held by the other party. For a more detailed description of the stockholders agreement, see the section entitled "Agreements Related to the Merger—The Amended and Restated Stockholders Agreement" beginning on page 97.

(4)
Includes 2,017,123 shares of HSW International common stock to be beneficially owned by Deutsche Bank Aktlengesellschaft and 2,435,312 shares of HSW International common stock to be purchased (assuming at the public announcement price) by DWS pursuant to the DWS stock purchase.

(5)
Includes 1,500,000 shares of HSW International common stock that may be acquired upon the exercise of options that will be exercisable within 60 days of the closing of the merger, and 10,000 shares owned directly by Mr. Arnold.

(6)
Includes 16,667 shares of HSW International common stock that may be acquired upon exercise of options that will be exercisable within 60 days of the closing of the merger.

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ACCOUNTING TREATMENT

        The merger will be accounted for under the purchase method of accounting in accordance with U.S. generally accepted accounting principles. Under this method of accounting, since HSW will have the majority ownership and will control HSW International's board of directors and management following consummation of the merger, HSW International is deemed to be the acquirer of INTAC for financial reporting purposes. The purchase price will be determined based on the fair value of the HSW International common stock issued to INTAC stockholders to complete the merger, the fair value of options to purchase HSW International common stock exchanged for INTAC stock options outstanding at the time of the merger and HSWI transaction costs. The excess purchase price over the fair value of the tangible assets acquired will be allocated to identifiable intangible assets and goodwill.

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

        The following unaudited pro forma condensed consolidated financial statements reflect the acquisition of INTAC's career development and training services business ("INTAC continuing operations") by HSW International. HSW International has only limited historical operations prior to the consummation of the merger, with minimal historical cost basis for the assets contributed by HSW into HSW International. Consequently, the following HSW International unaudited pro forma condensed consolidated financial statements have been primarily derived from the historical financial statements of HSW International and INTAC to give effect to the HSW International and INTAC continuing operations becoming a wholly owned subsidiary of HSW International upon completion of the merger.

        In the HSW International pro formas, HSW International and INTAC historical financial statements are adjusted to include only the HSW International and INTAC continuing operations and to reflect HSW International's estimated purchase price of the INTAC continuing operations. The merger will be accounted for using the purchase method whereby the INTAC continuing operations will be treated as the "acquired" company for financial reporting purposes. The purchase price will be determined based on an independent valuation of the HSW International shares issued to INTAC shareholders to complete the merger, and the fair value of HSW International options issued in exchange for all of INTAC's outstanding options and transaction costs. The estimated purchase price and the fair value of the assets acquired are preliminary and may change subsequent to consummation of the merger upon completion of the final valuation. If these assumptions and estimates change significantly upon completion of the final valuation, there may be a significant difference between the actual amounts allocated to identifiable intangible assets and goodwill and the amounts reflected in these pro forma financial statements, as well as a significant difference between the actual intangible amortization expense and the amortization expense reflected in these pro forma financial statements.

        The pro forma condensed consolidated balance sheet has been prepared assuming the merger was consummated on December 31, 2006. The pro forma condensed consolidated statements of operations have been prepared assuming the merger was consummated on October 1, 2005. The unaudited pro forma financial statements should be read in conjunction with the accompanying notes to the pro forma financial statements and with the historical financial statements and related notes of HSW International and INTAC that have been incorporated by reference herein.

        The following unaudited pro forma financial statements include the HSW International and INTAC unaudited condensed consolidated balance sheets as of December 31, 2006, and the INTAC unaudited condensed consolidated statements of operations for the year ended September 30, 2006 and the three months ended December 31, 2006, adjusted to reflect only the HSW International and INTAC continuing operations.

        The unaudited pro forma financial data does not purport to represent what the combined results of operations of the INTAC continuing operations and HSW International would have been had the merger occurred on October 1, 2005 or to project the results of operations or financial condition for any future date or period.

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HSW INTERNATIONAL AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

 
  December 31, 2006
 
 
  HSW
International

  INTAC
  Adjustments
  Pro forma
 
Assets                          
Current assets                          
  Cash and cash equivalents   $ 105,262   $ 820,599   $ 42,707,842   (1) $ 43,633,703  
  Trade accounts receivable, net         5,169,623           5,169,623  
  Inventories         74,938           74,938  
  Prepaid expenses     56,924             56,924  
  Assets held for sale         16,790,118     (16,790,118 )    
   
 
 
 
 
    Total current assets     162,186     22,855,278     25,917,724     48,935,188  
  Property and equipment, net     110,994     974,103         $ 1,085,097  
  Other assets         342,201           342,201  
  Advances to officers and employees         223,126           223,126  
  Capitalized transaction costs     1,263,246         (1,263,246 )(1)    
  Internet portal database gateway, net         166,559     (166,559 )(2)    
  Acquired software, net         466,882     (466,882 )(2)    
  Identifiable intangible assets             26,350,000   (2)   26,350,000  
  Goodwill         16,742,466     63,386(2 )   16,805,852  
   
 
 
 
 
    Total assets   $ 1,536,426   $ 41,770,615   $ 50,434,423   $ 93,741,464  
   
 
 
 
 
Liabilities                          
Current liabilities                          
  Trade accounts payable   $ 114,836   $ 1,143,371   $   $ 1,258,207  
  Accrued expenses         2,643,022     (1,543,663 )(1)   1,099,359  
  Other liabilities         433,128           433,128  
  Deferred tax liability         292,426           292,426  
  Related party payable     4,360,229   (3)       (1,263,246 )   3,096,983  
  Liabilities held for sale         6,133,841     (6,133,841 )    
   
 
 
 
 
    Total current liabilities     4,475,065     10,645,788     (8,940,750 )   6,180,103  
Commitments and contingencies                          
Stockholders' equity                     (1)(2)      
  Common stock     1,000     22,940     29,462   $ 53,402  
  Treasury stock             (10,656,277 )   (10,656,277 )
  Additional paid in capital     5,443,606     38,074,969     63,028,906     106,547,481  
  Retained earnings (deficit)     (8,383,245 )   (7,014,647 )   7,014,647     (8,383,245 )
  Accumulated other comprehensive income         41,565     (41,565 )    
   
 
 
 
 
    Total stockholders' equity     (2,938,639 )   31,124,827     59,375,173     87,561,361  
   
 
 
 
 
Total liabilities and stockholders' equity   $ 1,536,426   $ 41,770,615   $ 50,434,423   $ 93,741,464  
   
 
 
 
 

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HSW INTERNATIONAL AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 
  Year ended September 30, 2006
 
 
  HSW
International

  INTAC
  Adjustments
  Pro forma
 
 
  (historical continuing operations)

   
   
 
Career development services revenue   $   $ 5,749,932   $   $ 5,749,932  
Career development services cost of revenue           1,508,526     156,415   (4)   1,664,941  
   
 
 
 
 
Career development services gross profit         4,241,406     (156,415 )   4,084,991  
Operating expenses                          
  Product development         3,422,312           3,422,312  
  Selling, general and administrative     6,414,571     2,258,089     100,000   (4)   8,772,660  
  Provision for doubtful accounts         950,608           950,608  
  Merger transaction costs         1,340,319           1,340,319  
   
 
 
 
 
  Total operating expenses     6,414,571     7,971,328     100,000     14,485,899  
   
 
 
 
 
Loss from operations     (6,414,571 )   (3,729,922 )   (256,415 )   (10,400,908 )
Other income (expense), net         2           2  
   
 
 
 
 
Loss before income taxes     (6,414,571 )   (3,729,920 )   (256,415 )   (10,400,906 )
Income taxes         426,447         (5)   426,447  
   
 
 
 
 
Net loss   $ (6,414,571 ) $ (4,156,367 ) $ (256,415 ) $ (10,827,353 )
   
 
 
 
 
Net loss per share- basic and diluted         $ (0.18 )       $ (0.25 )
   
 
 
 
 
Weighted average shares outstanding-basic and diluted           22,587,806         (6)   42,881,454  
         
       
 

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HSW INTERNATIONAL AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 
  Three months ended December 31, 2006
 
 
  HSW
International

  INTAC
  Adjustments
  Pro forma
 
 
  (historical continuing operations)

   
   
 
Career development services revenue   $   $ 2,018,899   $   $ 2,018,899  
Career development services cost of revenue           687,905     39,104   (4)   727,009  
   
 
 
 
 
Career development services gross profit         1,330,994     (39,104 )   1,291,890  
Operating expenses                          
  Product development         974,790           974,790  
  Selling, general and administrative     1,828,285     693,392     25,000   (4)   2,546,677  
  Provision for doubtful accounts         653,917           653,917  
  Merger transaction costs         411,186           411,186  
   
 
 
 
 
  Total operating expenses     1,828,285     2,733,285     25,000     4,586,570  
   
 
 
 
 
Loss from operations     (1,828,285 )   (1,402,291 )   (64,104 )   (3,294,680 )
Other income (expense), net     (140,388 )           (140,388 )
   
 
 
 
 
Loss before income taxes     (1,968,673 )   (1,402,291 )   (64,104 )   (3,435,068 )
Income taxes         (134,021 )       (5)   (134,021 )
   
 
 
 
 
Net loss   $ (1,968,673 ) $ (1,268,270 ) $ (64,104 ) $ (3,301,047 )
   
 
 
 
 
Net loss per share-basic and diluted         $ (0.06 )       $ (0.08 )
   
 
 
 
 
Weighted average shares outstanding-basic and diluted           22,940,727         (6)   42,881,454  
         
       
 

Notes to Financial Statements and Pro Forma Adjustments

        (1)   Reflects the issuance of approximately 7,500,000 shares of common stock to certain investors in exchange for cash proceeds of $49,500,000, for which there is a firm commitment, immediately following the consummation of the transaction, less $2,500,000 of estimated direct transaction costs (of which $1,263,246 have been capitalized) to be included in the purchase price accounting and $4,500,000 of transaction costs incurred by INTAC (of which $207,842 has been paid and $1,543,663 has been accrued as of December 31, 2006) expected to be expensed. The number of shares assumed to be issued is based on the $49,500,000 proceeds divided by an assumed purchase price per share of $6.57 as determined per the merger agreement.

        (2)   Reflects the estimated purchase price of the INTAC continuing operations and related purchase price allocation. The computation of the purchase price, the allocation of the purchase price to net assets of the INTAC continuing operations, and the resulting goodwill are presented below. The preliminarily estimated purchase price was determined based on 19,940,727 shares of HSW International, net of 3.0 million shares tendered by Wei Zhou, the majority shareholder of INTAC, to acquire the distribution business, issued for all of the outstanding shares of INTAC, at total fair value of $40,500,000, plus 450,000 HSW International stock options with a fair value of $500,000 issued in exchange for the same number of INTAC stock options outstanding and estimated transaction costs of $2,500,000. In addition, the 3.0 million shares received from Mr. Zhou for the purchase of the distribution business will be recorded to Treasury Stock at the historical net asset value which approximates fair value. The fair value of the HSW International shares was derived from a preliminary

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independent valuation using a discounted cash flow model, among other methods. The transaction costs are reflected as a reduction in cash in the pro forma balance sheet.

        (3)   The related party payable of $4.36 million is due to HSWI's parent HSW for advances to HSWI for organizational start-up costs, $1.26 million for direct acquisition costs incurred through December 31, 2006 and other accrued corporate expenses. The amounts due to HSW are expected to be paid within one year of closing of the proposed merger.

ESTIMATED PURCHASE PRICE       $ 43,500,000

ESTIMATED NET ASSETS ACQUIRED

 

 

 

 

 
  Acquired INTAC net assets   20,468,550      
  Elimination of INTAC's previous intangible assets   (17,375,907 )    
  Estimated transaction costs to be expensed by INTAC   (2,748,495 )   344,148
   
 
  Excess purchase price over carrying value of net tangible assets acquired (assumed fair value)         43,155,852

Fair value adjustments:

 

 

 

 

 
Licenses to operate in China (indefinite life)   10,000,000      
Vendor endorsement in China (indefinite life)   12,500,000      
Acquired database (5 year life)   1,400,000      
Acquired software (3 year life)   2,250,000      
Employment agreements (2 year life)   200,000     26,350,000
   
 
Estimated Goodwill       $ 16,805,852
       

        The final allocation of the purchase price will be determined after the merger is completed and after completion of thorough analyses to determine the fair values of INTAC's tangible and identifiable intangible assets and liabilities as of the date the merger is completed. If the assumptions and estimates used to determine the purchase price and fair value of assets acquired change significantly upon completion of the final valuation, there may be a significant difference between the actual amounts allocated to identifiable intangible assets and goodwill and the amounts reflected in these pro forma financial statements. Any change in the fair value of the INTAC continuing operations net assets, which is currently estimated to approximate their carrying amounts, will change the amount of the purchase price allocable to goodwill. Additionally, changes to INTAC's net assets, including net loss, after December 31, 2006, through the date the merger is completed, will also change the amount of goodwill recorded.

        Upon the consummation of the merger and the related transactions, HSW International will have 50,381,454 shares of common stock outstanding, consisting of 22,940,727 shares issued to HSW in exchange for the contribution of certain assets, 19,940,727 shares issued for the acquisition of INTAC, and approximately 7,500,000 shares issued for cash to certain investors.

        (4)   Of the total $26,350,000 of identifiable intangible assets, $22,500,000 is preliminarily estimated to have an indefinite life and will not be amortized to expense. The average useful life of the $3,850,000 of amortizable intangible assets is 3.7 years. Pro forma identified intangible amortization is estimated based on the preliminary estimated fair value and useful lives of the identified intangibles. If these assumptions and estimates change upon completion of the purchase accounting subsequent to the consummation of the merger there may be a significant difference between actual intangible amortization expense and the amortization expense reflected in these pro forma financial statements.

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        Based upon the assumptions applied in these pro forma adjustments, the effect of the purchase accounting allocation will result in an increase in net loss or decrease in net income as follows for each year following the close of the merger:

Year 1   $ 580,785
Year 2     1,047,667
Year 3     1,028,107
Year 4     280,000
Year 5     280,000
   
    $ 3,216,559
   

        The difference between the $3,850,000 of estimated amortizable intangible assets and the approximate $3,217,000 of estimated future amortization expense reflects the $500,000 and $200,000 historical carrying amounts of the acquired software and database intangible assets, respectively, on the balance sheet of INTAC at December 31, 2006. The pro forma adjustments in the accompanying pro forma condensed consolidated statements of operations reflect the incremental amortization expense resulting from the adjustment of the acquired software and database to their estimated fair values.

        Amortization expense will increase or decrease by approximately $270,000 per annum for each $1 million increase or decrease, respectively, in the final valuation of identifiable intangible assets with a weighted average expected life of 3.7 years.

        (5)   There is no tax effect for the pro forma adjustments due to uncertainty regarding the deductibility for tax purposes of the purchase accounting related assets and the current operating loss position.

        (6)   The pro forma weighted average basic and diluted shares outstanding reflect the 22,940,727 shares issued to HSW in exchange for the contributed assets and the 19,940,727 shares issued as consideration for the INTAC continuing operations, as if such shares were issued on October 1, 2005. The approximately 7,500,000 shares to be issued to certain investors have been excluded as the cash proceeds from issuance will be used for general corporate purposes and developing the HSW website. No common stock equivalents are included in pro forma diluted shares as their effect is anti-dilutive.

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COMPARATIVE STOCK PRICES AND DIVIDENDS

        INTAC common stock is listed for trading on the Nasdaq Capital Market under the trading symbol "INTN." The following table sets forth, for the periods indicated, dividends declared and the high and low sales prices per share of INTAC common stock. For current price information, INTAC stockholders are urged to consult publicly available sources.

 
  INTAC Common Stock
Calendar Period

  High
  Low
  Dividends
Declared

2005            
First Quarter   17.65   10.74   0.00
Second Quarter   14.11   5.02   0.00
Third Quarter   8.90   5.31   0.00
Fourth Quarter   6.25   4.79   0.00
2006            
First Quarter   8.87   3.83   0.00
Second Quarter   14.49   4.80   0.00
Third Quarter   8.02   5.67   0.00
Fourth Quarter   7.69   6.10   0.00
2007            
First Quarter (through March 13, 2007)   8.92   5.82   0.00

        The following table sets forth the last reported sales prices per share of INTAC common stock, as reported by the Nasdaq Capital Market on:


 
  INTAC Common Stock
  
Close

April 19, 2006   $ 10.99
January 26, 2007   $ 7.02
March 13, 2007   $ 6.00

        These prices will fluctuate prior to the closing date of the merger and INTAC stockholders are urged to obtain current market quotations prior to making any decision with respect to the merger.

        HSW, HSW International and INTAC have historically not paid regular quarterly dividends.

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DESCRIPTION OF HSW INTERNATIONAL CAPITAL STOCK FOLLOWING THE MERGER

        The following summary of the capital stock of HSW International following the merger is subject in all respects to applicable Delaware law, the HSW International Amended and Restated Certificate of Incorporation and the HSW International Amended and Restated By-laws. See "Comparison of Rights of Common Stockholders of HSW International and INTAC" and "Where You Can Find More Information" beginning on page 134 and 154, respectively.

        The total authorized shares of capital stock of HSW International currently consists of (1) 200,000,000 shares of common stock, par value $0.001 per share, and (2) 10,000,000 shares of preferred stock, par value $0.001 per share. At the close of business on July 7, 2006, ten shares of HSW International common stock were issued and outstanding and no shares of HSW International preferred stock were issued and outstanding.

        The HSW International board of directors is authorized to provide for the issuance from time to time of HSW International preferred stock in series and, as to each series, to fix the designation, the dividend rate, preferences and relative dividend participation or other rights thereof, including dividend rights, conversion rights, voting rights, redemption terms and liquidation preferences, and the restrictions on the issue or reissue of additional preferred stock. Cumulative dividends, dividend preferences and conversion, exchange and redemption provisions, to the extent that some or all of these features may be present when shares of HSW International preferred stock are issued, could have an adverse effect on the availability of earnings for distribution to the holders of HSW International common stock or for other corporate purposes.

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COMPARISON OF RIGHTS OF COMMON STOCKHOLDERS OF HSW INTERNATIONAL AND INTAC

        HSW International is a Delaware corporation subject to the provisions of the Delaware General Corporation Law (Delaware law). INTAC is a Nevada corporation subject to the provisions of the Nevada Revised Statutes (Nevada law). INTAC stockholders, whose rights are currently governed by the INTAC Amended and Restated Articles of Incorporation, the INTAC Amended and Restated By-laws and Nevada law, will, if the merger is completed, become stockholders of HSW International and their rights will be governed by the HSW International Amended and Restated Certificate of Incorporation, the HSW International Amended and Restated By-laws, and Delaware law.

        The following description summarizes the material differences that may affect the rights of stockholders of HSW International and INTAC but does not purport to be a complete statement of all those differences, or a complete description of the specific provisions referred to in this summary. The identification of specific differences is not intended to indicate that other equally or more significant differences do not exist. Stockholders should read carefully the relevant provisions of Delaware law, Nevada law, the HSW International Amended and Restated Certificate of Incorporation, the HSW International Amended and Restated By-laws, the INTAC Amended and Restated Articles of Incorporation and the INTAC Amended and Restated By-laws.


Summary of Material Differences Between the Rights of
HSW International Stockholders and INTAC Stockholders

 
  HSW International Stockholder
  INTAC Stockholder
Capitalization   HSW International's authorized capital stock is described under "Description of HSW International Capital Stock following the merger."   The total authorized shares of capital stock of INTAC consist of (1) 100,000,000 shares of common stock, par value $0.001 per share, and (2) 10,000,000 shares of preferred stock, par value $0.001 per share. On the close of business on March 14, 2007, approximately 22,940,727 shares of INTAC common stock were issued and outstanding and no shares of INTAC preferred stock were issued and outstanding.

Number, Election, Vacancy and Removal of Directors

 

The HSW International Amended and Restated Certificate of Incorporation and the HSW International Amended and Restated By-laws provide that the total number of HSW International directors will be seven. The HSW International Amended and Restated Certificate of Incorporation and the HSW International Amended and Restated By-laws do not allow for cumulative voting in the

 

The INTAC Amended and Restated By-laws provide that the total number of INTAC directors will not be less than one nor more than 15, as determined by the INTAC board of directors from time to time. INTAC currently has six directors. Under Nevada law, cumulative voting in the election of directors is only available if the corporation's articles of incorporation provide for such an election. INTAC's Amended
         

134


    election of directors. The HSW International Amended and Restated Certificate of Incorporation and the HSW International Amended and Restated By-laws provide that vacancies on the HSW International board of directors will be filled by appointment made by a majority vote of the remaining directors. The HSW International Amended and Restated Certificate of Incorporation and the HSW International Amended and Restated By-laws provide that directors may be removed, with or without cause, by an affirmative vote of a majority of outstanding shares of capital stock of HSW International entitled to vote generally in the election of directors, voting together as a single class. Further, the HSW International Amended and Restated Certificate of Incorporation and the HSW International Amended and Restated By-laws provide that a director may be removed for cause by the affirmative vote of a majority of all directors on the board of directors.   and Restated Articles of Incorporation do not provide for cumulative voting. The INTAC Amended and Restated By-laws provide that vacancies on the INTAC board of directors will be filled by appointment made by a majority vote of the remaining directors. The INTAC Amended and Restated By-laws provide that directors may be removed by an affirmative vote of two-thirds of the holders of the outstanding shares of INTAC voting stock entitled to vote on such removal.

Amendments to Charter Documents

 

Generally, under Delaware law a proposed amendment to a corporation's certificate of incorporation requires approval by its board of directors and an affirmative vote of a majority of the outstanding stock entitled to vote on the amendment and a majority of the outstanding stock of each class entitled to vote on the amendment. The HSW International Amended and Restated Certificate of Incorporation provides that the HSW International Amended and Restated Certificate of

 

Under Nevada law, a proposed amendment to a corporation's articles of incorporation must generally be proposed by the corporation's board of directors and approved by an affirmative vote of the holders of a majority of the outstanding stock entitled to vote on such amendment, and if such amendment would adversely affect the rights of any class or series of share, the holders of the outstanding shares of such class or series are entitled to vote as a class to approve the amendment (unless
         

135


    Incorporation may be amended in any manner prescribed by law.   the articles of incorporation specifically deny the right to vote on such amendment). Also, under Nevada law, the articles of incorporation may require, in the case of any specified amendments, the vote of a larger proportion of the voting power of stockholders. INTAC's Amended and Restated Articles of Incorporation do not specifically deny any such right to vote or require such a vote of a larger proportion of the voting power of stockholders.

Amendments to By-laws

 

Under Delaware law, the stockholders entitled to vote have the power to adopt, amend or repeal by-laws. A corporation may also confer, in its certificate of incorporation, that power upon the board of directors. Under the HSW International Amended and Restated By-laws, the HSW International Restated By-laws generally may be amended at any annual or special meeting of HSW International stockholders by a majority vote of the outstanding shares entitled to vote on such amendment or by the affirmative vote of a majority of the entire board of directors.

 

Under Nevada law, unless otherwise prohibited by any by-law adopted by the stockholders, directors may adopt, amend or repeal any by-law, including any by-law adopted by the stockholders. Nevada law also provides that the articles of incorporation may grant the authority to adopt bylaws exclusively to the directors. The INTAC Amended and Restated By-laws give both the INTAC board and the stockholders the power to amend, alter or repeal the by-laws.

Action by Written Consent

 

Under Delaware law, unless otherwise provided in a corporation's certificate of incorporation, any action that may be taken at a meeting of stockholders may be taken without a meeting and without prior notice if a written consent is signed by the holders of the minimum number of votes necessary to authorize the action at a meeting at which all shares entitled to vote were present and voted. Both the HSW International Amended and Restated Certificate of

 

Under Nevada law, any action required or permitted to be taken at a meeting of stockholders may be taken without a meeting if a written consent is signed by the holders of at least the minimum amount of outstanding voting stock required to authorize any such action. The INTAC Amended and Restated By-laws also provide for stockholders to take action by written consent.
         

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    Incorporation and the HSW International Amended and Restated By-laws specifically provide that stockholders may not take any action by written consent.    

Notice of Stockholder Meetings and Actions

 

Delaware law and the HSW International Amended and Restated By-laws provide that written notice of the date, place, time and, in the case of special meetings, the purpose or purposes of every meeting of stockholders must be given not less than 10 nor more than 60 days before the date of the meeting, either personally or by mail, to each stockholder of record entitled to vote at the meeting. The HSW International Amended and Restated By-laws further provide that the only matters that may be considered and acted upon at an annual meeting of stockholders are those matters brought before the meeting:

•    as specified in the notice of meeting given by or at the direction of the HSW International board of directors;

•    as otherwise properly brought before the meeting by or at the direction of the HSW International board of directors; or

•    as otherwise properly brought before the meeting by a stockholder.

Generally, the HSW International Amended and Restated By-laws require a stockholder who intends to bring matters before an annual meeting to provide advance

 

Nevada law and the INTAC Amended and Restated By-laws provide that written notice of the time, place and date of every meeting of stockholders must be delivered or mailed not less than 10 nor more than 60 days before the date of the meeting to each stockholder of record entitled to vote at the meeting, except where the matter to be acted upon at such meeting is a merger or consolidation of INTAC, in which case the INTAC Amended and Restated By-laws provide that notice shall be given not less than 20 and not more than 60 days prior to such meeting. The INTAC Amended and Restated By-laws further require that, in the case of a meeting of stockholders to vote on a proposed merger or consolidation, such notice state the purpose of the meeting and contain a copy or a brief summary of the merger agreement. The INTAC Amended and Restated By-laws provide that the only business to be conducted at an annual meeting of stockholders is that business properly brought before the meeting:

•    through the notice of meeting;

•    by the INTAC board of directors;

•    by a stockholder with legal right and authority to do so, or
         

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    notice of such intended action not less than 60 nor more than 90 days prior to the first anniversary of the preceding year's annual meeting; except that in the event the date of the annual meeting is advanced by more than 30 or delayed by more than 60 days from such anniversary date, advance notice must be delivered no earlier than 90 days and no later than 60 days prior to such annual meeting or 10 days following public announcement of the date of such annual meeting. The notice generally must contain a brief description of the business desired to be brought before the annual meeting, the reasons for conducting the business at the annual meeting, the name and record address of such stockholder, the class and number of shares of HSW International stock owned by such stockholder, a description of all arrangements between such stockholder and other persons regarding the proposal of such business and any material interest of the stockholder in the proposed business, and a representation that the stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting. For the annual meeting of stockholders to be held following the end of the fiscal year ending on December 31, 2006, the date of the preceding year's annual meeting will be deemed to be February 15, 2006.   •    by the chairman of the meeting.

Generally, the INTAC Amended and Restated By-laws require a stockholder who intends to bring matters before an annual meeting to provide advance notice of that intended action not less than 70 nor more than 90 days prior to the first anniversary of the prior year's annual meeting except that in the event the date of the annual meeting is advanced by more than 20 days or delayed by more than 70 days from such anniversary date, advance notice must be delivered no earlier than 90 days and no later than 70 days prior to such annual meeting or within 10 days following public announcement of the date of such annual meeting. The notice generally must contain, among other things, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting, any material interest of the stockholder in that proposed business, and the name, address, class and number of shares of INTAC stock owned by such stockholder.

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Special Stockholder Meetings   Under the HSW International Amended and Restated Certificate of Incorporation and the HSW International Amended and Restated By-laws, a special meeting of the stockholders may be called at any time by the board of directors. Stockholders do not have the right to call special meetings or to bring business before special meetings.   Under the INTAC Amended and Restated By-laws, a special meeting of the stockholders may be called at any time by the board of directors, chairman of the INTAC board of directors, the INTAC president or the INTAC secretary. Stockholders do not have the right to call special meetings or to bring business before special meetings.

Stockholder Inspection Rights; Stockholder Lists

 

Under Delaware law, every stockholder of record has the right to inspect, upon written demand under oath stating the stockholder's purpose for inspection, in person or by agent or attorney, the corporation's stock ledger, stockholder list, its other books and records and, subject to certain restrictions, the books and records of a subsidiary of the corporation.

Under Delaware law, the HSW International officer having charge of the HSW International stock ledger will make a complete list of the stockholders entitled to vote at any meeting of stockholders at least 10 days before that meeting. This list is open to the examination of any stockholder for purposes related to the meeting for a period of at least 10 days prior to the meeting.

 

Under Nevada law, a corporation must allow stockholders of record who own or represent at least fifteen percent of a corporation's shares the right, upon at least five days' written demand, to inspect, in person or by an agent, during normal business hours, the books of account and financial records of the corporation, to make extracts therefrom and to conduct an audit of such records, except that any corporation listed and traded on any recognized stock exchange or any corporation that furnishes to its stockholders a detailed, annual financial statement is exempt from this requirement.

Under the INTAC Amended and Restated By-laws, INTAC must make a list of the stockholders entitled to vote at any meeting of stockholders available for inspection by stockholders at least 10 days prior to any such meeting.

Limitation of Personal Liability and Indemnification of Directors and Officers

 

As permitted under Delaware law, the HSW International Amended and Restated Certificate of Incorporation provides that no director of HSW International will be personally liable to HSW

 

Under Nevada law, and except as provided in the corporation's articles of incorporation, a director or officer is not individually liable to the corporation or its stockholders for any damages as a result of
         

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    International or its stockholders for monetary damages except (i) for breach of the director's duty of loyalty to HSW International or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of Delaware law, relating to prohibited dividends or distributions or the repurchase or redemption of stock, or (iv) for any transaction from which the director derives improper personal benefit.

The HSW International Amended and Restated Certificate of Incorporation and HSW International Amended and Restated By-laws provide that HSW International will indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, or investigative (other than an action by or in the right of the corporation) by reason of the fact that he or she is or was a director, officer, employee or other agent of HSW International or is or was serving at the request of HSW International as a director, officer, employee or other agent of an other corporation or other enterprise, including any employee benefit plans, against all expenses (including attorneys' fees), judgments, fines, excise taxes with respect to employee benefit plans and amounts paid in settlement that were reasonably incurred in
  any act or failure to act in his or her capacity as a director or officer; unless it is proven that such act or failure to act constituted a breach of fiduciary duties as a director or officer; and the breach of those duties involved intentional misconduct, fraud or a knowing violation of law. Such provisions, however, will not eliminate a director or officer's liability to the corporation in the case of a judgment of ouster rendered against a corporation on account of the misconduct of the director or officer, a violation of Nevada state securities laws, or certain other violations of law.

Under the INTAC Amended and Restated Bylaws, INTAC may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, except an action by or in the right of the corporation, by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with the action, suit or proceeding, but only if such person acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.

  
         

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    connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in the best in, or not opposed to, the best interests of HSW International and, with respect to any criminal action or proceeding, had no reasonable cause to believe that such person's conduct was unlawful.

The HSW International Amended and Restated Certificate of Incorporation and HSW International Amended and Restated By-laws also provide that HSW International will indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he or she is or was a director, officer, employee or other agent of HSW International or is or was serving at the request of HSW International as a director, officer, employee or other agent of an other corporation or other enterprise, including any employee benefit plans, against all expenses (including attorneys' fees) actually and reasonably incurred in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in the best in, or not opposed to, the best interests of HSW International and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged
  Under the INTAC Amended and Restated Bylaws, INTAC may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of the corporation against expenses, including amounts paid in settlement and attorneys' fees actually and reasonably incurred in connection with the defense or settlement of the action or suit if such person acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation.

The INTAC Amended and Restated By-laws further provide that indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court determines the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.

The INTAC Amended and Restated By-laws provide for mandatory indemnification of a director, officer, employee or agent of a corporation to the extent that such person has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to above against
         

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    to be liable to the corporation unless and only to the extent that a court shall determine that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper.

The HSW International Amended and Restated Certificate of Incorporation and HSW International Amended and Restated By-laws further provide for mandatory indemnification of a present or former director or officer of the corporation to the extent that such officer or director has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to above against expenses, including attorneys' fees, actually and reasonably incurred by such person in connection therewith.

The HSW International Amended and Restated Certificate of Incorporation and HSW International Amended and Restated By-laws further provide that expenses (including attorneys' fees) incurred by an officer or director in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation.
  expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense.

The INTAC Amended and Restated By-laws provide that the right of an officer or director to indemnification under such by-laws includes the right to be paid the expenses (including attorneys' fees) incurred by an officer or director in defending any civil, criminal, administrative or investigative action, suit or proceeding by INTAC as they are incurred and in advance of the final disposition of such action, suit or proceeding; provided, however, that INTAC shall pay such expenses only upon receipt of an undertaking by or on behalf of such officer or director to repay the amount if it is ultimately determined that such person is not entitled to be indemnified by the corporation.

The right to indemnification and advancement of expenses provided under the INTAC Amended and Restated By-laws (a) does not exclude any other rights to which a person seeking indemnification or advancement of expenses may be entitled under the articles of incorporation of INTAC or any agreement, vote of stockholders or disinterested directors or otherwise, for either an action in such person's official capacity or an action in another capacity while holding such person's office, except that indemnification, unless ordered by a court pursuant to Nevada law or the advancement of
         

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    The indemnification and advancement of expenses provided by the HSW International Amended and Restated Certificate of Incorporation or the HSW International Amended and Restated By-laws are not exclusive of any other right to which a person seeking indemnification or advancement of expenses may be entitled under any law, bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office. Such indemnification and advancement of expenses shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

HSW International may, in its discretion, purchase insurance on behalf of any person who is or was a director, officer, employee or agent of HSW International, or is or was serving at the request of HSW International as a director, officer, employee or agent of another corporation or other enterprise, against any liability asserted against and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not HSW International would have the power to indemnify such person against such liability under Delaware law.
  expenses as provided above, may not be made to or on behalf of any director or officer if a final adjudication establishes that such person's acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and were material to the cause of action; and (b) continues for a person who has ceased to be a director, officer, employee or agent and inures to the benefit of the heirs, executors and administrators of such a person.

INTAC may purchase and maintain insurance or make other financial arrangements on behalf of any person who is or was a director, officer, employee or agent of INTAC, or is or was serving at the request of INTAC as a director, officer, employee or agent of another corporation or other enterprise, for any liability asserted against such person and liability and expenses incurred by such person in any such capacity, or arising out of such person's status as such, whether or not INTAC has the authority to indemnify such person against such liability and expenses.
         

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Dividends

 

Under Delaware law, a corporation's board of directors may, subject to any restrictions contained in its certificate of incorporation, declare and pay dividends upon the shares of its capital stock either out of its surplus or, where there is no surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the previous fiscal year provided that if the capital of the corporation shall have been diminished to an amount less than the aggregate amount of the capital represented by issued and outstanding stock of all classes having a preference upon the distribution of assets, the directors shall not declare and pay out any dividends until the deficiency in the amount of such capital shall have been repaid. The HSW International Amended and Restated Certificate of Incorporation provides that the HSW International board of directors may from time to time declare dividends on its outstanding shares.

 

Except as otherwise provided in the corporation's articles of incorporation, Nevada law authorizes a corporation to make distributions to its stockholders as authorized by its board of directors; provided, however, the corporation may not make such a distribution if (i) the corporation would not be able to pay its debts as they become due in the usual course of business, or (ii) unless otherwise specifically provided in the corporation's articles of incorporation, the corporation's total assets would be less than the sum of its total liabilities plus any amount owed, if the corporation were to be dissolved at the time of distribution, to stockholders with preferential rights superior to those receiving the distribution.

Conversion

 

Holders of HSW International common stock have no rights to convert their shares into any other securities.

 

Holders of INTAC common stock have no rights to convert their shares into any other securities.

Stockholder Rights Plan

 

HSW International does not have a stockholder rights plan.

 

INTAC does not have a stockholder rights plan.

Voting Rights; Required Vote for Authorization of Certain Actions

 

Each holder of HSW International common stock is entitled to one vote for each share held of record and may not cumulate votes for the election of directors.

Mergers or Consolidations. Generally, under Delaware law, the approval of a corporation's

 

Each holder of INTAC common stock is entitled to one vote for each share held of record and may not cumulate votes for the election of directors.

Merger or Consolidation. Under Nevada law, the consummation of a merger requires the approval of a majority of the
         

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    board of directors and the approval of a majority of the outstanding stock entitled to vote is required to approve mergers or consolidations. However, unless a corporation's certificate of incorporation provides otherwise, no stockholder vote is required in connection with a merger where:

•    the corporation's certificate of incorporation is not amended, the shares of the corporation's stock outstanding immediately prior to the merger are to be identical outstanding or treasury shares of the surviving corporation after the merger, and the common stock issuable as a result of the merger does not exceed 20% of the previously outstanding common stock; or

•    the merger is with a wholly owned subsidiary of the corporation and certain conditions are met.

Similarly, a sale of all or substantially all of a corporation's assets other than in the ordinary course of business, or a voluntary dissolution of a corporation, requires the approval of a corporation's board of directors and the approval of a majority of the outstanding stock entitled to vote on the transaction.

Business Combinations. Under Delaware law, a corporation may not engage in any "business combination" with any interested stockholder (generally, a 15% or greater
  board of directors of each corporation and the approval of a majority of the voting power of the stockholders entitled to vote on a merger.

Under Nevada law, approval of the stockholders of a Nevada corporation which is a surviving corporation in a merger is not required if:

•    the articles of the surviving corporation will not differ from its articles before the merger;

•    immediately after the effective date each stockholder of the surviving corporation will hold the same number of shares as those held by the stockholder immediately prior to the merger, with identical designations, preferences, limitations and rights; and

•    the number of voting or participating shares, as the case may be, outstanding immediately after the merger (either by conversion of other securities or upon exercise of rights or warrants issued pursuant to the merger), plus the number of voting or participating shares issuable as a result of the merger, will not exceed by more than 20% the number of voting or participating shares (adjusted to reflect any share split under the plan of merger) of the surviving corporation outstanding immediately prior to the merger.
  
         

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    stockholder) for a period of three years following the time that the stockholder became an interested stockholder, unless:

•    prior to that time the corporation's board of directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;

•    upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the outstanding voting stock of the corporation at the time the transaction commenced, excluding in the determination of the outstanding voting stock those shares owned (i) by persons who are directors and also officers and (ii) employee stock plans in which employee participants do not have the right to determine confidentially whether shares subject to the plan will be tendered in a tender or exchange offer; or

•    at or subsequent to the time the business combination is approved by the corporation's board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 662/3% of s the outstanding voting stock which is not owned by the interested stockholder.
  
  Under Nevada law, a sale of all or substantially all of INTAC's assets outside of the regular course of business, or a voluntary dissolution of INTAC, requires same board of director and stockholder approval thresholds as that for a merger.

•    
Business Combinations. Sections 78.411 to 78.444 of the Nevada Revised Statutes, inclusive, restrict the ability of a resident domestic corporation to engage in any combination with an interested stockholder for three years after the date the interested stockholder acquired that caused such stockholder to become an interested stockholder unless the combination or the purchase of shares by the interested stockholder that caused such stockholder to become an interested stockholder is approved by the board of directors of the resident domestic corporation before the date the person became an interested stockholder. If the combination was not previously approved, the interested stockholder may effect a combination after the three-year period only if such tockholder receives approval from a majority of the disinterested shares or the offer meets various fair price criteria. For purposes of the foregoing provisions, "resident domestic corporation" means a Nevada corporation that has 200 or more stockholders and "interested stockholder" means generally a 10% or
         

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    These restrictions will not apply if the corporation's original certificate of incorporation contains a provision expressly electing not to be governed by these provisions or if the corporation's certificate of incorporation or bylaws are amended to contain such a provision or under certain circumstances. The HSW International Amended and Restated Certificate of Incorporation and the HSW International Amended ad Restated Bylaws do not contain a provision electing not to be governed by these restrictions so these restrictions will generally apply.

Under Delaware law, a "business combination" includes:

•    any merger or consolidation of the corporation or any majority owned subsidiary of the corporation with (i) the interested stockholder, or (ii) with any other corporation or other entity if the merger or consolidation is caused by the interested stockholder and as a result of the merger or consolidation the business combination provisions of Delaware law do not apply to the surviving entity;

•    any sale or other disposition (except proportionally as a stockholder of the corporation) to or with the interested stockholder, of assets of the corporation or of any majority-owned subsidiary of the corporation which assets have an aggregate market value
  greater stockholder:

The above provisions do not apply to any combination involving a resident domestic corporation:

•    whose original articles of incorporation expressly elect not to be governed by Sections 78.411 to 78.444 of Nevada law, inclusive;

•    which does not, as of the date the interested stockholder first became an interested stockholder, have a class of voting shares registered with the SEC under Section 12 of the Securities Act, unless the corporation's articles of incorporation provide otherwise;

•    whose articles of incorporation were amended to provide that the corporation is subject to the above provisions and which did not have a class of voting shares registered under Section 12 of the Securities Act on the effective date of such amendment, if the combination is with an interested stockholder who first became an interested stockholder before the effective date of such amendment; or

•    that amends its articles of incorporation, approved by a majority of the disinterested shares, to expressly elect not to be governed by Sections 78.411 to 78.444 of Nevada law, inclusive. Such an
         

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    equal to 10% of more of either the aggregate market value of all the assets of the corporation determined on a consolidated basis or the aggregate market value of all the outstanding stock of the corporation;

•    any transaction which results in the issuance or transfer by the corporation or by any majority-owned subsidiary of the corporation of any stock of the corporation or of the subsidiary to the interested stockholder, except: (i) pursuant to the exercise, exchange or conversion of securities exercisable for, exchangeable for or convertible into stock of the corporation or such subsidiary which securities were outstanding prior to the time that the interested stockholder became an interested stockholder, (ii) pursuant to a merger with a wholly owned subsidiary of the corporation, (iii) pursuant to a dividend or distribution paid or made, or the exercise, exchange or conversion of securities exercisable for, exchangeable for or convertible into stock of the corporation or such subsidiary which security is distributed, pro rata to all holders of a class or series of stock of the corporation subsequent to the time the interested stockholder became an interested stockholder, (iv) pursuant to an exchange offer by the corporation to purchase stock made on the same
  amendment, however, would not become effective until 18 months after its passage and would apply only stock acquisitions occurring after the effective date of the amendment. The INTAC articles of incorporation do not exempt INTAC from the restrictions imposed by such provisions of Nevada law.

Control share acquisitions. Sections 78.378 to 78.3793 of the Nevada Revised Statutes, inclusive, provide, in effect, that a person acquiring a controlling interest in an issuing corporation, and those acting in association with such person, obtain only such voting rights in the control shares as are conferred by a resolution of the stockholders (excluding such acquiring and associated persons) approved at a special or annual meeting of stockholders. For purposes of the foregoing provisions, "issuing corporation" means a corporation organized in Nevada that has 200 or more stockholders of record, at least 100 of whom have addresses in Nevada on the corporation's stock ledger, and does business in Nevada directly or through an affiliate, and "controlling interest" means the ownership of outstanding voting shares enabling the acquiring person to exercise (either directly or in association with others) one-fifth or more but less than one-third, one-third but less than a majority, or a majority or more of the voting power of the issuing corporation in the election of directors.
         

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    terms to all holders of the stock; or (v) any issuance or transfer of stock by the corporation, except that in no case under items (iii)-(v) above shall there be an increase in the interested stockholder's proportionate share of the stock of any class or series of the corporation or of the voting stock of the corporation;

•    any transaction involving the corporation or any majority-owned subsidiary of the corporation which has the effect of increasing the proportionate share of the stock of any class or series, or securities convertible into the stock of any class or series, of the corporation or of such subsidiary which is owned by the interested stockholder, except as a result of immaterial changes due to fractional share adjustments or as a result of any purchase or redemption of any shares of stock not caused, directly or indirectly, by the interested stockholder; or

•    any receipt by the interested stockholder of the benefit (except proportionately as a stockholder of the corporation) of any loans, advances, guarantees, pledges or other financial benefits (other than those expressly permitted) provided by or through the corporation or any majority-owned subsidiary.
  Accordingly, the provisions could require multiple votes with respect to voting rights in share acquisitions effected in separate stages.

The above provisions do not apply to an acquisition of a controlling interest if the articles of incorporation or bylaws of the issuing corporation in effect on the tenth day following the acquisition of such controlling interest provide either specifically or generally that the provisions do not apply to such acquisitions. The provisions are also inapplicable to shares acquired pursuant to a statutory merger (such as the merger) effected pursuant to Nevada law or by operation of law such as inheritance or the enforcement of a judgment or security interest.

Depending on the issuing corporation's articles of incorporation and bylaws in effect on the tenth day following the applicable controlling interest acquisition, the issuing corporation may have rights to redeem the shares so acquired, and its stockholders may have dissenters' rights with respect to the approval of voting rights equivalent to those described under "Dissenters' Rights" below.

Under the INTAC Amended and Restated By-laws, INTAC has elected to exempt itself from the Nevada control share statute.

Other Corporate Constituencies

 

The HSW International Amended and Restated

 

Under Nevada law, the INTAC board of directors and officers,
         

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    Certificate of Incorporation and the HSW International Amended and Restated By-laws provide that in taking any action, the HSW International board of directors may consider, among other things, both the long term and short term interest of HSW International and its stockholders and the effects that HSW International's actions may have in the short term or long term upon any one or more of the following:

•    the prospects for potential growth, development, productivity and profitability of HSW International;

•    HSW International's current employees;

•    HSW International's employees and other beneficiaries receiving or entitled to receive retirement, welfare or similar benefits from or pursuant to any plan sponsored, or agreement entered into, by HSW International;

•    HSW International's customers and creditors;

•    the ability of HSW International to provide, as a going concern, goods, services, employment opportunities and employment benefits and otherwise to contribute to the communities in which it does business; and

•    such other additional factors as a director may consider appropriate in such circumstances.
  in exercising their respective powers with a view to the interests of INTAC, may consider, among other things:

•    the interests of INTAC's employees, suppliers, creditors and customers;

•    the economy of Nevada and the United States;

•    the interests of the community and of society; and

•    the long term and short term interests of INTAC and its stockholders, including the possibility that these interests may be best served by the continued independence of INTAC.

Under Nevada law, directors and officers are not required to consider the effect of a proposed corporate action upon any particular group having an interest in INTAC as a dominant factor.
         

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Dissenters' Rights

 

Under Delaware law, stockholders of any class or series of stock have the right, in specified circumstances, to dissent from a merger or consolidation by demanding payment in cash for the stockholder's shares equal to the fair value of those shares, as determined by the Delaware Chancery Court in an action timely brought by the corporation or a dissenting stockholder. Delaware law grants these appraisal rights only in the case of mergers or consolidations and not in the case of a sale or transfer of assets or a purchase of assets for stock. Further, no appraisal rights are available for shares of any class or series that is listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or held of record by more than 2,000 stockholders, unless the agreement of merger or consolidation requires the holders to accept for their shares anything other than:

•    shares of stock of the surviving corporation;

•    shares of stock of another corporation that are either listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or held of record by more than 2,000 stockholders;

 

Under Nevada law, a stockholder of a Nevada corporation, with certain exceptions, has the right to dissent from, and obtain payment of the fair value of his shares in the event of:

•    consummation of a merger or conversion to which the corporation is a party;

•    consummation of a plan of exchange to which the corporation is a party as the corporation whose shares will be acquired, if the stockholder "s shares are to be acquired in the plan;

•    any corporate action taken pursuant to a vote of the stockholders to the extent that the articles of incorporation, bylaws or a resolution of the board of directors provides that voting or non-voting stockholders are entitled to dissent and obtain payment for their shares; and

•    any corporate action not described in the bullet points above that will result in the stockholder receiving money or scrip instead of fractional shares.

Under Nevada law, unless a corporation's articles of incorporation provide otherwise, there is no right of dissent with respect to a plan of merger or share exchange, in favor of stockholders of any class or series that are either registered on a national securities exchange, or included in the national market system by the
         

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    •    cash in lieu of fractional shares of the stock described in the two preceding clauses; or

•    any combination of the above.

In addition, appraisal rights are not available to holders of shares of the surviving corporation in specified mergers that do not require the vote of the stockholders of the surviving corporation.

The HSW International Amended and Restated Certificate of Incorporation and Amended and Restated By-laws are silent as to dissenters' rights.
  National Association of Securities Dealers, Inc., or held of record by 2,000 or more stockholders, unless the plan of merger or exchange requires the holders to accept for their shares anything other than:

•    cash, owner's interests or owner's interests and cash in lieu of fractional owner's interests of the surviving or acquiring entity;

•    any other entity that is either listed on a national securities exchange, included in the national market system by the National Association of Securities Dealers, Inc. or held of record by more at least 2,000 stockholders; or

•    any combination of the above.

A stockholder of the surviving corporation does not have a right to dissent with respect to a plan of merger if the plan of merger does not require approval of the stockholders of the surviving corporation.

A stockholder of record of a Nevada corporation may dissent as to less than all the shares registered in his name only if he dissents with respect to all shares beneficially owned by any one person and notifies the corporation in writing of the name and address of each person on whose behalf he asserts dissenters' rights. In such event, the stockholder's rights will be determined as if the shares to which he dissented and his other shares were
         

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        registered in the names of different stockholders.

The INTAC Amended and Restated Articles of Incorporation and the INTAC Amended and Restated By-laws are silent as to dissenter's rights.

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LEGAL MATTERS

        The legality of HSW International common stock offered by this proxy statement/prospectus will be passed upon for HSW International by Greenberg Traurig. It is a condition to the completion of the merger that HSW and HSW International receive an opinion from Greenberg Traurig, LLP and INTAC receive an opinion from Shearman & Sterling LLP, each with respect to the tax treatment of the merger.


EXPERTS

        The consolidated financial statements of INTAC appearing in INTAC's Annual Report on Form 10-K for the year ended September 30, 2006, the nine month period ended September 30, 2005 and the year ended December 31, 2004, and INTAC management's assessment of the effectiveness of internal control over financial reporting as of September 30, 2006, included therein, have been audited by KBA Group LLP, an independent registered public accounting firm, as set forth in their reports thereon, included therein and incorporated herein by reference. Such consolidated financial statements and management's assessment are incorporated herein by reference in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.


OTHER MATTERS

        As of the date of this proxy statement/prospectus, the INTAC board of directors knows of no matters that will be presented for consideration at the INTAC special meeting other than as described in this proxy statement/prospectus.


FUTURE INTAC SHAREHOLDER PROPOSALS

        In the event the merger is not consummated by prior to the time of INTAC's 2008 Annual Meeting of Stockholders, any stockholder proposal intended to be considered for inclusion in the INTAC proxy statement for presentation at the 2008 Annual Meeting of Stockholders should have been received by INTAC at its offices located at 12221 Merit Drive, Suite 600, Dallas, TX 75251-2248, U.S.A. by October 1, 2007. INTAC stockholders are advised to review INTAC's Amended and Restated Bylaws, which contain additional requirements about advance notice of stockholder proposals and director nominations.


WHERE YOU CAN FIND MORE INFORMATION

        Prior to the date hereof, HSW International was not required to file reports with the SEC. INTAC files annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy this proxy statement/prospectus and all future materials HSW International files with the SEC and any reports, statements or other information that INTAC files with the SEC at the SEC's public reference room at the following location:

Public Reference Room
100 F Street, N.W.
Room 1580
Washington, D.C. 20549

        Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. These SEC filings are also available to the public from commercial document retrieval services and at the website maintained by the SEC at "http://www.sec.gov".

        The SEC allows INTAC to "incorporate by reference" information into this proxy statement/prospectus, which means that INTAC can disclose important information to you by referring you to other documents filed separately with the SEC. The information incorporated by reference is

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considered part of this proxy statement/prospectus, except for any information superseded by information contained directly in this proxy statement/prospectus or in later filed documents incorporated by reference in this proxy statement/prospectus.

        This proxy statement/prospectus incorporates by reference the documents set forth below that INTAC has previously filed with the SEC. These documents contain important business and financial information about INTAC that is not included in or delivered with this proxy statement/prospectus.

Annual Report on Form 10-K   Fiscal year ended September 30, 2006
Quarterly Report on Form 10-Q   Fiscal quarter ended December 31, 2006
Current Report(s) on Form 8-K/A   Filed on February 15, 2007

        HSW International and INTAC also incorporate by reference additional documents that may be filed with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act between the date of this proxy statement/prospectus and, in the case of HSW International, the date of the consummation of the merger, and, in the case of INTAC, the date of the INTAC special meeting. These include periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K (other than portions of such Current Reports on Form 8-K furnished under Item 2.02 or Item 7.02 thereof, unless otherwise indicated therein), as well as proxy statements.

        HSW International has supplied all information contained or incorporated by reference in this proxy statement/prospectus relating to HSW International and INTAC has supplied all such information relating to INTAC.

        If you are a stockholder, the companies may have previously sent you some of the documents incorporated by reference, but you can obtain any of them through the companies, the SEC or the SEC's website at www.sec.gov. Documents incorporated by reference are available from the companies without charge, excluding all exhibits, except that if the companies have specifically incorporated by reference an exhibit in this proxy statement/prospectus, the exhibit will also be provided without charge. Stockholders may obtain documents incorporated by reference in this proxy statement/prospectus by requesting them in writing or by telephone from the appropriate company at the following addresses:

HSW International, Inc.
One Capital City Plaza
3350 Peachtree Road, Suite 1500
Atlanta, GA 30326
Attention: Secretary
Telephone Number: (404) 364-5823
  INTAC International, Inc.
12221 Merit Drive, Suite 600
Dallas, TX 75251
Attention: Secretary
Telephone Number: (469) 916-9891

        You should rely only on the information contained or incorporated by reference in this proxy statement/prospectus. Neither HSW International nor INTAC has authorized anyone to provide you with information that is different from what is contained in this proxy statement/prospectus. You should assume that the information in this proxy statement/prospectus supplement is accurate only as of March 14, 2007. You should also assume that the information contained in any document incorporated by reference herein is accurate only as of the date of such document. Neither the mailing of this proxy statement/prospectus to INTAC stockholders nor the issuance of HSW International common stock in the merger creates any implication to the contrary.

Information on INTAC's Website

        Information on INTAC's Internet website is not part of this proxy statement/prospectus and you should not rely on that information in deciding whether to adopt the merger agreement and approve the merger agreement and the related transactions.

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Information on HSW's and the Convex Group's Website

        Neither the information on HSW's or the Convex Group's Internet websites is part of this proxy statement/prospectus and you should not rely on that information in deciding whether to adopt the merger agreement and approve the merger agreement and the related transactions.


SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

        This proxy statement/prospectus contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive positions, growth opportunities for existing products, plans and objectives of management, markets for stock of HSW International and INTAC and other matters. Statements in this proxy statement/prospectus that are not historical facts are identified as "forward-looking statements" for the purpose of the safe harbor provided by Section 21E of the Exchange Act and Section 27A of the Securities Act. These forward-looking statements, including, without limitation, those relating to the future business prospects, revenues and income, in each case relating to HSW International or INTAC, wherever they occur in this proxy statement/prospectus, are necessarily estimates reflecting the best judgment of the senior management of HSW International (with regard to matters relating to HSW International) or INTAC (with regard to matters relating to INTAC) and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Such forward-looking statements should, therefore, be considered in light of various important factors, including those set forth in this proxy statement/prospectus. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include without limitation:

        Words such as "estimate," "project," "plan," "intend," "expect," "believe" and similar expressions are intended to identify forward-looking statements. These forward-looking statements are found at various places throughout this proxy statement/prospectus and the other documents incorporated by reference. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this proxy statement/prospectus. Neither HSW International nor INTAC undertakes any obligation to publicly update or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this proxy statement/prospectus or to reflect the occurrence of unanticipated events.

        The foregoing list sets forth some, but not all, of the factors that could impact upon HSW International's and INTAC's ability to achieve results described in any forward-looking statements. A further list and description of these and other factors can be found in the section entitled "Risk

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Factors" beginning on page 21 and in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business" in INTAC's Form 10-K for the year ended September 30, 2006, as filed with the SEC on December 14, 2006, and INTAC's Form 10-Q for the quarter ended December 31, 2006, as filed with the SEC on February 9, 2007. Investors are cautioned not to place undue reliance on forward-looking statements that speak only as of the date made. Investors also should understand that it is not possible to predict or identify all such factors and that this list should not be considered a complete statement of all potential risks and uncertainties. Investors should also realize that if underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results could vary materially from HSW International's or INTAC's projections. HSW International and INTAC undertake no obligation to update any forward-looking statements as a result of future events or developments.

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Annex A


AGREEMENT AND PLAN OF MERGER

by and among

HOWSTUFFWORKS, INC.,

HSW INTERNATIONAL, INC.,

HSW INTERNATIONAL MERGER CORPORATION

and

INTAC INTERNATIONAL, INC.

DATED AS OF APRIL 20, 2006



Index of Defined Terms

Defined Terms

  Defined in Section
Acquisition Proposal   7.11(a)

Affiliate

 

10.14

Affiliate Agreement

 

7.6(a)

Affiliate Registration Rights Agreement

 

7.6(b)

Agreement

 

Recitals

Ancillary Agreements

 

10.14

Arnold Consulting Agreement

 

7.22

Articles of Merger

 

2.2

Blue Sky Laws

 

5.6(e)

Board of Directors

 

10.14

Business Day

 

10.14

Closing

 

1.4

Closing Date

 

1.4

Code

 

Recitals

Company

 

Preamble

Company Benefit Plans

 

5.17(a)

Company Certificate

 

3.3

Company Common Stock

 

5.3(a)

Company Contracts

 

5.14(a)

Company Disclosure Schedule

 

Article 5

Company Filed SEC Reports

 

5.7(b)

Company Material Adverse Effect

 

10.14

Company Options

 

3.2

Company Permits

 

5.19

Company Recommendation

 

7.10

Company Related Persons

 

5.21(a)

Company SEC Reports

 

5.7(a)

Company Stockholders

 

3.3

Company Stockholders Meeting

 

7.10

Confidentiality Agreement

 

10.14

Consent

 

5.6(e)

Contributed Content

 

10.14
     

A-i



Contribution

 

Recitals</