EXHIBIT 10.1
CONFORMED COPY
--------------
$ 75,000,000
▇▇▇▇▇▇▇.▇▇▇, INC.
Zero Coupon Convertible Subordinated Notes due July 15, 2023
PURCHASE AGREEMENT
------------------
July 8, 2003
Credit Suisse First Boston LLC
Eleven Madison Avenue,
New York, N.Y. 10010-3629
Dear Sirs:
1. Introductory. ▇▇▇▇▇▇▇.▇▇▇, Inc., a Cayman Islands company (the
"Company"), proposes, subject to the terms and conditions stated herein, to
issue and sell to Credit Suisse First Boston LLC ("CSFB") U.S.$75,000,000
principal amount of its Zero Coupon Convertible Subordinated Notes due July 15,
2023 (the "Firm Securities") and also proposes to grant to CSFB an option,
exercisable from time to time by CSFB, to purchase an aggregate of up to an
additional U.S.$25,000,000 principal amount ("Optional Securities") of its Zero
Coupon Convertible Subordinated Notes due July 15, 2023, each to be issued under
an indenture agreement, dated as of July 14, 2003 (the "Indenture"), between the
Company and The Bank of New York, as Trustee. The Firm Securities and the
Optional Securities which CSFB may elect to purchase pursuant to Section 3
hereof are herein collectively called the "Offered Securities". The United
States Securities Act of 1933, as amended, is herein referred to as the
"Securities Act."
The holders of the Offered Securities will be entitled to the benefits of a
Registration Rights Agreement of even date herewith among the Company and CSFB
(the "Registration Rights Agreement"), pursuant to which the Company agrees to
file a registration statement with the United States Securities Exchange
Commission (the "Commission") registering the resale of the Offered Securities
and the Underlying Shares, as hereinafter defined, under the Securities Act.
The Company hereby agrees with CSFB as follows:
2. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, CSFB that:
(a) A preliminary offering circular and an offering circular relating
to the Offered Securities to be offered by CSFB have been prepared by the
Company. Such preliminary offering circular (the "Preliminary Offering
Circular") and offering circular (the "Offering Circular"), as supplemented
as of the date of this Agreement, together with the documents incorporated
by reference in the Preliminary Offering Circular and the Offering
Circular, are hereinafter collectively referred to as the "Offering
Document". On the date of this Agreement, the Offering Document does not
include
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The preceding
sentence does not apply to statements in or omissions from the Offering
Document based upon written information furnished to the Company by CSFB
specifically for use therein, it being understood and agreed that the only
such information is that described as such in Section 7(b) hereof. Except
as disclosed in the Offering Document, on the date of this Agreement, the
Company's Annual Report on Form 20-F most recently filed with the
Commission pursuant to the United States Securities Exchange Act of 1934
(the "Exchange Act") does not include any untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. Such document, when it was filed with the Commission, conformed
in all material respects to the requirements of the Exchange Act and the
rules and regulations of the Commission thereunder.
(b) The accountants, PricewaterhouseCoopers, who certified the
financial statements and supporting schedules, if any, included in the
Offering Document, are independent public accountants as required by the
Securities Act and the regulations promulgated thereunder.
(c) The consolidated financial statements included in the Offering
Document, together with the related notes, present a fair view of the
financial position of the Company, its consolidated subsidiaries and
controlled entities (taken as a whole, the "Group") at the dates indicated
and the results of operations, shareholders' equity and cash flows of the
Group for the periods specified; said consolidated financial statements
have been prepared in conformity with generally accepted accounting
principles in the United States of America ("U.S. GAAP") applied on a
consistent basis throughout the periods involved and as required by the
applicable accounting requirements of the Securities Act and the
regulations promulgated thereunder. The selected consolidated financial
data included in the Offering Document present a fair view of the
information shown therein and have been compiled on a basis consistent with
that of the audited consolidated financial statements included in the
Offering Document. All non-GAAP financial information included or
incorporated by reference in the Offering Document complies with the
requirements of Regulation G and Item 10 of Regulation G under the
Securities Act. Except as disclosed in the Offering Document:
(i) such consolidated financial statements and information make
provision in accordance with U.S. GAAP for any bad or doubtful debts
and make appropriate provision for (or contain a note in accordance
with aforesaid respecting) all taxes and deferred or contingent
liabilities, whether liquidated or unliquidated at the date thereof;
(ii) depreciation of fixed assets has been made at rates
sufficient to spread the cost over their respective estimated useful
lives to the Group; and
(iii) the profits and losses shown by such consolidated financial
statements have not in any material respect been affected by any
unusual or exceptional item or by any other matter which has rendered
such profits or losses unusually high or low.
(d) Since the respective dates as of which information is given in
the Offering Document, except as otherwise stated therein, (A) the Group
has carried on its business in the ordinary and usual course so as to
maintain it as a going concern and in the same manner in all material
respects as previously carried on, (B) there has been no material adverse
change or any event involving a prospective material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Group whether or not arising in the ordinary
course of business (a "Material Adverse Effect"), (C) there have been no
transactions entered into by the Company or any other entity of the Group
other than those in the ordinary course of business, which are material
with respect to the Group, (D) neither the Company nor the Group has
incurred,
2
assumed or acquired any material liability (including contingent
liabilities) or obligation, (E) neither the Company nor the Group has
acquired or disposed of or agreed to acquire or dispose of any business or
any other material asset otherwise than in the ordinary course of business
and, for the avoidance of doubt, any transfer at less than the business' or
asset's market value shall for these purposes be a transfer otherwise than
in the ordinary course of business, (F) there has been no dividend or
distribution of any kind declared, paid or made by the Company on any
shares in its capital, (G) the Group has continued to pay its creditors in
the ordinary course of its business and no debtor has been released by the
Company or the Group, to an extent which is material, on terms that such
debtor pays less than the book value of the related debt and no debt of a
material amount owing to the Company or the Group has been deferred,
subordinated or written off or has proven to any extent irrecoverable, and
(H) no material indebtedness of any kind has been incurred by or on behalf
of the Company or the Group.
(e) The Company has been duly incorporated and is validly existing as
an exempted company with legal person status in good standing under the
laws of the Cayman Islands and has legal right, power and authority
(corporate and other) to own, lease and operate its properties and to
conduct its business as described in the Offering Document and to enter
into and perform its obligations under this Agreement and each of the other
agreements listed as exhibits under Part III, Item 19, "Exhibits" in the
Company's Annual Report on Form 20-F most recently filed with the
Commission pursuant to the Exchange Act (collectively, the "Material
Agreements") to which the Company is a party. The Company is duly
registered and qualified to transact business and is in good standing in
any jurisdiction (including provincial, municipal or local jurisdictions)
in which such registration or qualification or good standing is required,
whether by reason of the ownership or leasing of property, the conduct of
business or otherwise, except where the failure to so register or qualify
or be in good standing would not result in a Material Adverse Effect. The
Memorandum and Articles of Association of the Company, as amended, comply
with the requirements of the laws of the Cayman Islands and are in full
force and effect.
(f) NetEase Information Technology (Beijing) Co., Ltd., a wholly
owned subsidiary of the Company ("NetEase Beijing"), has been duly
organized and is validly existing as a wholly foreign owned enterprise with
legal person status under the laws of the People's Republic of China (the
"PRC" or "China") and has legal right, power and authority (corporate and
other) to own, lease and operate its properties and to conduct its business
as described in the Offering Document and to enter into and perform its
obligations under each of the Material Agreements to which it is a party.
Each of Guangzhou NetEase Computer System Co., Ltd. ("Guangzhou NetEase")
and Beijing Guangyitong Advertising Co., Ltd. ("Guangyitong Advertising")
has been duly organized and is validly existing as a company with legal
person status under the laws of the PRC and has legal right, power and
authority (corporate and other) to own, lease and operate its properties
and to conduct its business as described in the Offering Document and to
enter into and perform its obligations under each of the Material
Agreements to which NetEase Beijing and/or Guangzhou NetEase are/is a party
or parties, as the case may be. Each other "significant subsidiaries" of
the Company (as such term is defined in Rule 1-02 of Regulation S-X)
(including NetEase Beijing, Guangzhou NetEase and Guangyitong Advertising,
each a "Subsidiary" and, collectively, the "Subsidiaries") has been duly
organized and is validly existing as a corporation under the laws of the
jurisdiction of its incorporation and has legal right, power and authority
(corporate and other) to own, lease and operate its properties and to
conduct its business as described in the Offering Document. Each Subsidiary
is duly registered or qualified to transact business and is in good
standing in each jurisdiction (including provincial, municipal or local
jurisdictions) in which such registration or qualification or good standing
is required, whether by reason of the ownership or leasing of property or
the conduct of business or otherwise, except where the failure to so
register or qualify or be in good standing would not result in a Material
Adverse Effect. Except as otherwise disclosed in the Offering Document, all
of the issued and outstanding equity interests in each such Subsidiary has
been duly authorized and validly issued,
3
is fully paid and non-assessable and is owned by the Company (except
Guangzhou NetEase, which is 80% owned by ▇▇. ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ and 20% owned
by Mr. ▇▇ ▇▇▇▇, and Guangyitong Advertising, which is 80% owned by
Guangzhou NetEase and 20% owned by Mr. ▇▇ ▇▇▇▇), directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge,
lien, encumbrance, claim or equity; none of the outstanding equity
interests in any Subsidiary was issued in violation of the preemptive or
similar rights of any securityholder of such Subsidiary. The only
subsidiaries of the Company are the subsidiaries listed on Schedule A
hereto.
(g) The authorized, issued and outstanding shares of the Company are
as set forth in the Offering Document in the columns entitled "Actual"
under the caption "Capitalization" (except for subsequent issuances, if
any, pursuant to this Agreement, pursuant to reservations, agreements or
employee benefit plans referred to in the Offering Document or pursuant to
the exercise of convertible securities or options referred to in the
Offering Document). The issued and outstanding shares of the Company have
been duly authorized and validly issued and are fully paid and
non-assessable; the holders of outstanding shares of the Company are not
entitled to preemptive or other rights to acquire the ordinary shares, par
value U.S.$0.0001, of the Company (the "Ordinary Shares") or American
Depositary Receipts (the "ADRs"), except for rights that terminate upon the
closing of the offering; none of the outstanding shares of the Company was
issued in violation of the preemptive or other similar rights of any
securityholder of the Company. Except as disclosed in the Offering
Document, there are no outstanding securities convertible into, repayable
with or exchangeable for, or warrants or rights to purchase from the
Company, Ordinary Shares, ADRs or any other shares of the Company nor are
there any obligations of the Company to allot, issue or transfer, the
Offered Securities; the Offered Securities are freely transferable by the
Company to or for the account of CSFB, and (to the extent described in the
Offering Document) the initial purchasers thereof; and there are no
restrictions on subsequent transfers of the Offered Securities under the
laws of the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, except to the extent
that any of the Offered Securities are purchased by an "affiliate" of the
Company, as such term is defined in Rule 144 under the Securities Act.
(h) This Agreement and the Registration Rights Agreement have been
duly authorized, executed and delivered by the Company.
(i) The deposit agreement (the "Deposit Agreement"), among the
Company, The Bank of New York, as depositary (the "Depositary"), and the
holders from time to time of the ADRs issued under the Deposit Agreement
and evidencing the American Depository Shares issued under the Deposit
Agreement and representing Ordinary Shares (the "American Depositary
Shares"), has been duly authorized, executed and delivered by the Company
and, assuming due authorization, execution and delivery by the Depositary,
constitutes a valid and legally binding obligation of the Company,
enforceable in accordance with its terms subject as to enforcement to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights generally and to
general equity principles.
(j) Each Material Agreement has been duly authorized, executed and
delivered by the parties thereto and constitutes a valid and legally
binding obligation of each such party, enforceable in accordance with its
terms, subject as to enforcement to bankruptcy, insolvency, reorganization
and other laws of general applicability relating to or affecting creditors'
rights generally and to general equity principles.
(k) The Indenture has been duly authorized; the Offered Securities
have been duly authorized; and when the Offered Securities are delivered
and paid for pursuant to this Agreement on the Closing Date (as defined
below), the Indenture will have been duly executed and delivered, such
Offered Securities will have been duly executed, authenticated, issued and
delivered and will conform to the description thereof contained in the
Offering Document and the Indenture and such Offered
4
Securities will constitute valid and legally binding obligations of the
Company, enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
(l) When the Offered Securities are delivered and paid for pursuant
to this Agreement on the Closing Date, such Offered Securities will be
convertible into the Ordinary Shares ("Underlying Shares") of the Company
in accordance with the terms of the Indenture; the Underlying Shares
initially issuable upon conversion of such Offered Securities have been
duly authorized and reserved for issuance upon such conversion and, when
issued upon such conversion, will be validly issued, fully paid and
nonassessable; the outstanding Underlying Shares have been duly authorized
and validly issued, are fully paid and nonassessable and conform to the
description thereof contained in the Offering Document; and the
shareholders of the Company have no preemptive rights with respect to the
Offered Securities or the Underlying Shares.
(m) Except as disclosed in the Offering Document, under current laws
and regulations of the Cayman Islands or the PRC and any political
subdivision thereof, all interest, principal, premium, if any, and other
payments due or made on the Offered Securities and dividends and other
distributions declared and payable on the Underlying Shares issuable upon
conversion thereof may be paid by the Company to the holder thereof in
United States dollars or that may be converted into foreign currency and
freely transferred out of the Cayman Islands or the PRC and all such
payments made to holders thereof who are non-residents of the Cayman
Islands or the PRC will not be subject to income, withholding or other
taxes under laws and regulations of the Cayman Islands or the PRC or any
political subdivision or taxing authority thereof or therein and will
otherwise be free and clear of any other tax, duty, withholding or
deduction in the Cayman Islands or the PRC or any political subdivision or
taxing authority thereof or therein and without the necessity of obtaining
any governmental authorization in the Cayman Islands or the PRC or any
political subdivision or taxing authority thereof or therein.
(n) Neither the Company nor any entity of the Group is in violation
of its Memorandum and Articles of Association or similar or other
constituent or organizational documents or by-laws or in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, lease or other agreement or instrument to
which it is a party or by which it may be bound, or to which any of its
property or assets is subject (collectively, "Agreements and Instruments")
except for such defaults that would not result in a Material Adverse
Effect; and the execution, delivery and performance of each of this
Agreement, the Indenture, the Offered Securities, the Registration Rights
Agreement and the Material Agreements and the consummation by the Company
or any other entity of the Group of the transactions contemplated in this
Agreement, the Indenture, the Offered Securities, the Registration Rights
Agreement and the Material Agreements and compliance by the Company and any
entity of the Group with their obligations under this Agreement, the
Indenture, the Offered Securities, the Registration Rights Agreement and
the Material Agreements have been duly authorized by all necessary
corporate action and received all required or necessary approvals from any
governmental or regulatory body and do not and will not, whether with or
without the giving of notice or passage or time or both, conflict with or
constitute a breach of, or default or Repayment Event (as defined below)
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Group pursuant to, the
Agreements and Instruments (except for such conflicts, breaches or defaults
or liens, charges or encumbrances that would not result in a Material
Adverse Effect), nor will such action result in any violation of (i) the
provisions of the Memorandum and Articles of Association, or business
license or similar or other constituent or organizational document or
by-laws of the Company or any entity of the Group or (ii) any applicable
law, statute, rule, regulation, judgment, order, writ or decree of any
government, government
5
instrumentality or court, domestic or foreign, having jurisdiction over the
Company or the Group or any of their assets, properties or operations. As
used herein, a "Repayment Event" means any event or condition which gives
the holder of any note, debenture or other evidence of indebtedness (or any
person acting on such holder's behalf) the right to require the repurchase,
redemption or repayment of all or a portion of such indebtedness by the
Company or any entity of the Group. All guarantees of any indebtedness of
the Company or any entity of the Group are in full force and effect. No
facts or circumstances exist whereby any person is, or would with the
giving of notice and/or lapse of time, become entitled to require payment
of any material indebtedness in respect of borrowed monies of the Company
or such entity before its stated maturity. So far as the Company and the
Group are aware, no event has occurred and is subsisting or is about to
occur which constitutes or would reasonably be expected to constitute a
material default or result in the acceleration by reason of default of any
obligation, under any Agreements and Instruments which would in any such
case, singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(o) No labor dispute or other conflict with employees of the Group
exists or is imminent and the Company is not aware of any existing or
imminent labor disturbance by employees of any of the Group's principal
suppliers, customers or contractors, which, in either case, would
reasonably be expected to result in a Material Adverse Effect. There are no
facts or circumstances in existence which would reasonably be expected to
give rise to any such dispute or disturbance which would reasonably be
expected to result in a Material Adverse Effect. Other than as disclosed in
the Offering Document, the Group does not have any legal obligation to
provide retirement benefits, death or disability benefits to any of its
present or past employees.
(p) There is no action, suit, proceeding, inquiry or investigation
before or brought by any court or governmental agency or body, domestic or
foreign, now pending, or threatened, against or affecting the Company or
the Group, which is required to be disclosed in the Offering Document if
the Offering Document were a prospectus included in a registration
statement on Form F-1 under the Securities Act (other than as disclosed
therein), or which might reasonably be expected to result in a Material
Adverse Effect, or which might reasonably be expected to materially and
adversely affect the properties or assets of the Company or the Group or
the consummation of the transactions contemplated in any of this Agreement,
the Registration Rights Agreement or the Material Agreements or the
performance by the Company or the Group of its obligations hereunder or
thereunder. So far as the Company is aware, there are no facts or
circumstances in existence which would reasonably be expected to give rise
to any such actions, suit, proceeding, inquiry or investigation; the
aggregate of all pending legal or governmental proceedings to which the
Company or any entity of the Group is a party or of which any of their
respective property or assets is the subject which are not described in the
Offering Document, including ordinary routine litigation incidental to the
business conducted by the Group, could not reasonably be expected to result
in a Material Adverse Effect.
(q) There are no legal or governmental proceedings, statues,
contracts or documents that are required to be described in the Offering
Document, if the Offering Document were a prospectus included in a
registration statement on Form F-1 under the Securities Act, which have not
been so described. The description in the Offering Document of statutes,
legal and governmental proceedings and contracts and other documents is
accurate and presents the information required to be shown in all material
respects if the Offering Document were a prospectus included in a
registration statement on Form F-1 under the Securities Act. The Offering
Document will contain, when issued, all information and particulars
required to comply with all statutory and other provisions (including,
without limitation, the relevant laws and regulations of the Cayman Islands
and the PRC) so far as applicable, which is material for the purpose of
making an informed decision on investment in the Offered Securities. Except
as may be provided herein and as may be disclosed in the Offering Document,
there are no contracts, agreements or understandings between the Company or
the Group
6
and any person that would give rise to a claim against the Company, any
entity of the Group or CSFB for a brokerage commission, finder's fee or
other like payment in connection with the issuance and sale of the Offered
Securities except for those which have been set forth in the Offering
Documents. Except as disclosed in the Offering Document, the minutes of the
meetings of shareholders and directors of the Company contain no
information which is material for disclosure in the Offering Document and
which has not been so disclosed.
(r) Except as disclosed in the Offering Document, the Group owns,
possesses or otherwise has the legal right to use, or can acquire on
reasonable terms, adequate patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedure), trademarks, service marks, trade names (including the "NetEase"
name and logo in English and in Chinese) or other intellectual property
(collectively, "Intellectual Property") necessary to carry on the business
now operated by it, and neither the Company nor any entity of the Group has
received any notice or is otherwise aware of any infringement of or
conflict with asserted rights of others with respect to any Intellectual
Property or of any facts or circumstances which would render any
Intellectual Property invalid or inadequate to protect the interest of the
Company or the Group therein, and which infringement or conflict (if the
subject of an unfavorable decision, ruling or finding) or invalidity or
inadequacy, singly or in the aggregate, would result in a Material Adverse
Effect.
(s) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or governmental
authority or agency or Nasdaq National Market is necessary or required for
the performance by the Company of its obligations under this Agreement, the
Indenture, the Offered Securities, the Registration Rights Agreement and
the Material Agreements to which it is a party, in connection with the
offering, issuance or sale of the Offered Securities under this Agreement
or the consummation of the transactions contemplated by this Agreement, the
Indenture, the Offered Securities, the Registration Rights Agreement and
the Material Agreements, except (i) such as have been already filed or
obtained or as may be required under the Securities Act or the regulations
promulgated thereunder and under the United States state and other foreign
securities or blue sky laws, (ii) such as have been obtained under the laws
and regulations of jurisdictions outside the Untied States in which the
Offered Securities are offered, and (iii) such as may be required under the
rules and regulations of the NASD.
(t) Except as described in the Offering Document, the Group possesses
such permits, licenses, approvals, consents and other authorizations,
including, but not limited to, the Internet content provider license held
by Guangzhou NetEase and the advertising license held by Guangyitong
Advertising (collectively, "Governmental Licenses") issued by, and has made
all declarations and filings with, the appropriate regulatory agencies or
bodies required or necessary for the authorization, execution and delivery
by the Group of any of this Agreement, the Indenture, the Offered
Securities, the Registration Rights Agreement or the Material Agreements or
necessary to conduct the business in substantially the manner described in
the Offering Document; the Group is in compliance with the terms and
conditions of all such Governmental Licenses (none of which contains
materially burdensome restrictions or conditions not described in the
Offering Document), except where the failure so to comply would not, singly
or in the aggregate, have a Material Adverse Effect; all of the
Governmental Licenses are valid and in full force and effect, except when
the invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and neither the Company nor any entity of the
Group has received any notice of proceedings relating to the revocation or
modification of any such Governmental Licenses or has any reason to believe
that any such Governmental License will be revoked, modified or suspended
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would result in a Material Adverse Effect.
7
(u) Except as disclosed in the Offering Document, neither the Company
nor any of its subsidiaries is in violation of any statute, any rule,
regulation, decision or order of any governmental agency or body or any
court, domestic or foreign, relating to the use, disposal or release of
hazardous or toxic substances or relating to the protection or restoration
of the environment or human exposure to hazardous or toxic substances
(collectively, "environmental laws"), owns or operates any real property
contaminated with any substance that is subject to any environmental laws,
is liable for any off-site disposal or contamination pursuant to any
environmental laws, or is subject to any claim relating to any
environmental laws, which violation, contamination, liability or claim
would individually or in the aggregate have a Material Adverse Effect; and
the Company is not aware of any pending investigation which might lead to
such a claim.
(v) The Group has good and marketable title to all real property
owned by it and good title to all other properties owned by it, in each
case, free and clear of all mortgages, pledges, liens, security interests,
claims, restrictions or encumbrances of any kind except such as (a) are
described in the Offering Document or (b) do not, singly or in the
aggregate, materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company or any entity of the Group; and all of the leases and subleases
material to the business of the Group and under which the Group holds
properties described in the Offering Document are in full force and effect,
and neither the Company nor any entity of the Group has any notice of any
material claim of any sort that has been asserted by anyone adverse to the
rights of the Company or the Group under any of the leases or subleases
mentioned above, or affecting or questioning its rights to the continued
possession of the leased or subleased properties under any such lease or
sublease and neither the Company nor any entity of the Group is aware of
any facts or circumstances which would reasonably be expected to give rise
to such a claim of material importance. The Group does not own, operate or
manage or have any other material right or interest, directly or
indirectly, in any other property of any kind except for that disclosed in
the Offering Document.
(w) The Company is currently subject to the reporting requirements of
Section 13 of the Exchange Act and files reports with the Commission on the
Electronic Data Gathering, Analysis, and Retrieval (▇▇▇▇▇) system.
(x) The Company is not an open-end investment company, unit
investment trust or face-amount certificate company that is or is required
to be registered under Section 8 of the United States Investment Company
Act of 1940 (the "Investment Company Act"); and the Company is not, and
after giving effect to the transactions contemplated by the Purchase
Agreement and the Offering Document and the application of the net proceeds
therefrom as described in the Offering Document, will not be, required to
register as an "investment company", as such term is defined in the
Investment Company Act.
(y) Based on the Company's projected income and assets (including
goodwill), which the Company believes to be reasonable, the nature of the
Company's business and assets and taking into account the receipt of
proceeds from the offerings contemplated by this Agreement, the Company
believes that it will not be classified as a "passive foreign investment
company" ("PFIC") as defined in Section 1297(a) of the U.S. Internal
Revenue Code of 1986, as amended (the "Code"), including the regulations
and rulings and interpretations thereunder, for its current taxable year,
and does not expect to become a passive foreign investment company in the
future.
(z) Except as described in the Offering Document, there are no
persons with registration rights or other similar rights to have any
securities registered under the Securities Act, except pursuant to the
Registration Rights Agreement.
8
(aa) Each of the Company and other entities of the Group has filed all
tax returns that are required to be filed or has duly requested extensions
thereof and all such returns are up to date and correct and on a proper
basis in all material respects, and has paid all taxes required to be paid
by it and any related assessments, charges, levies, fines or penalties,
except for any such taxes, assessments, charges, levies, fines or penalties
that are being contested in good faith and by appropriate proceedings or
that are not material in amounts; and there is no proposed tax deficiency,
assessment, charge, levy, fine or penalty against it as to which a reserve
would be required to be established under U.S. GAAP which has not been so
reserved or which is required to be disclosed in the Offering Document
which has not been so disclosed and so far as the Company is aware, there
are no facts or circumstances in existence which would reasonably be
expected to give rise to any such deficiency, assessment, charge, levy,
fine or penalty; except as otherwise explicitly stated in the Offering
Document, adequate charges, accruals and reserves, to the extent required
under U.S. GAAP, have been provided for in the financial statements
referred to in Section 2(c) hereof in respect of all Cayman Islands, PRC,
U.S. and other taxes for all periods as to which the tax liability of the
Company or any such entity has not been finally determined or remains open
to examination by applicable taxing authorities. The Company is currently
subject to such income taxes as are disclosed in the Offering Document.
Except as set forth in the Offering Document, the Company is not otherwise
subject to any tax on its income, sales or turnover.
(bb) Each of the Company and other entities of the Group (A) makes,
keeps and prepares books, records and accounts in compliance with the
applicable laws which, in reasonable detail, accurately and fairly reflect
transactions and dispositions of its assets and (B) has devised and
maintained a system of internal and accounting controls which provide
reasonable assurance that (a) transactions are executed in accordance with
management's general or specific authorization, (b) transactions are
recorded as necessary (i) to permit preparation of financial statements in
conformity with generally accepted accounting principles and (ii) to
maintain accountability for assets, (c) access to assets is permitted only
in accordance with management's general or specific authorization, and (d)
the recorded accountability for assets is compared with the existing assets
at reasonable intervals and appropriate action is taken with respect to any
differences. These reports provide the basis for the preparation of the
Company's consolidated financial statements under U.S. GAAP included in the
Offering Document.
(cc) Except as disclosed in the Offering Document, no transaction,
stamp, capital, transfer, issuance, registration or other similar taxes or
duties and no capital gains, income, withholding or similar taxes are
payable with respect to (a) the issuance, sale and delivery by the Company
of any Offered Securities to CSFB pursuant to this Agreement and the
Offering Document, (b) the initial sale and delivery by CSFB of such
Offered Securities to purchasers thereof in connection with the offering
contemplated by this Agreement, (c) the holding or transfer of the Offered
Securities outside the Cayman Islands and the PRC (d) the execution and
delivery of this Agreement, the Indenture, the Offered Securities, the
Registration Rights Agreement or any Material Agreement.
(dd) The description set forth in the Offering Document and under Part
I, Item 7.B., "Related Party Transactions" in the Company's Annual Report
on Form 20-F most recently filed with the Commission pursuant to the
Exchange Act, of the events and transactions contemplated by the Material
Agreements (the "Events and Transactions") is true and correct in all
material respects. All consents, approvals, authorizations, orders,
registrations and qualifications required in the Cayman Islands and the PRC
in connection with the Events and Transactions have been made or obtained
in writing and are in full force and effect, and no such consent, approval,
authorization, order, registration or qualification is subject to any
condition precedent which has not been fulfilled or performed, except in
each case where such failure would not result in a Material Adverse Effect.
There are no pending legal or governmental proceedings challenging the
9
effectiveness or validity of any of the Events and Transactions and, to the
knowledge of the Company and its directors and executive officers, no such
proceedings are threatened or contemplated by any governmental authorities
in the PRC or elsewhere.
(ee) Except as disclosed in the Offering Document, the Company is not
a party to any joint venture contract or shareholders' agreement. Neither
the Company nor any other entity of the Group has taken any action, nor
have there been any legal, legislative, or administrative proceedings
started or threatened, (a) to wind up or dissolve the Company or such
entity or (b) to withdraw, revoke or cancel any Governmental Licenses of
the Company or such entity. Except as disclosed in the Offering Document,
neither the Company nor any other entity of the Group acts or carries on
business in partnership with any other person and is a member of any
corporate or unincorporated body, undertaking or association pursuant to
which it is liable on any share or security which is not fully paid up or
which carries any liability. Except as disclosed in the Offering Document,
the Company has no branch, agency, place of business or permanent
establishment inside or outside the PRC. The Group's only material business
activities and material assets or liabilities (actual, contingent or
otherwise) are related solely to the businesses presently conducted by the
Group as described in the Offering Document.
(ff) Except as disclosed in the Offering Document, no material
indebtedness (actual or contingent) and no material contract or arrangement
is outstanding between the Company and any director or executive officer of
the Company or any person connected with such director or executive officer
(including his/her spouse, infant children, any company or undertaking in
which he/she holds a controlling interest). There are no relationships or
transactions between the Company on the one hand and its affiliates,
officers and directors or their shareholders, customers or suppliers on the
other hand which, although required to be disclosed, are not disclosed in
the Offering Document.
(gg) The business, undertakings, properties and assets of the Group
are insured in amounts customary for the Company's business against all
such risks as are normally insured by persons carrying on similar
businesses as those carried on by the Group and such insurances include all
the insurances which any entity of the Group is required under terms of any
lease or any contract in respect of any of its properties to undertake
except where the failure of the Group to obtain such insurance under such
leases or contracts would not have a Material Adverse Effect, and such
insurances and all other insurances undertaken by other parties pursuant to
the terms of any contracts made between such parties and any entity of the
Group in respect of any of its respective properties are in full force and
effect and, so far as the Company is aware, there are no circumstances
which would reasonably be expected to render any of such insurances void or
voidable and there is no material insurance claim made by or against the
Company or any entity of the Group, pending, threatened or outstanding and
so far as the Company is aware, no facts or circumstances exist which would
reasonably be expected to give rise to any such claim and all premiums due
and payable in respect thereof have been paid.
(hh) The American Depositary Shares representing certain of the
Company's Underlying Shares have been authorized for listing on the Nasdaq
National Market under the symbol "NTES".
(ii) Neither the Company nor any entity of the Group has (A) taken, or
will take, directly or indirectly, any action which is designed to or which
constitutes or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Offered Securities, or (B) sold,
bid for, purchased or paid anyone any compensation for soliciting purchases
of, the Offered Securities or (C) since the date of the Preliminary
Offering Circular, paid or agreed to pay to any person any
10
compensation for soliciting another to purchase any other securities of the
Company. Without limiting the foregoing, neither the Company or any entity
of the Group nor, to the best of its knowledge, any of its affiliated
purchasers (as defined in Regulation M under the United States Exchange
Act) has, directly or indirectly, either alone or with one or more other
persons, bid for or purchased, for any account in which the Company or any
such entity nor any of their affiliated purchasers has a beneficial
interest, any Offered Securities, any instruments representing interests
in, or the right to receive, any Offered Securities or any right to
purchase any Offered Securities or any securities into which any Offered
Securities may be converted, exchanged or exercised or which may in whole
or in significant part determine the value of the Offered Securities
(collectively, the "Subject Securities") or attempted to induce any person
to bid for or purchase any Subject Securities except to the extent
otherwise permitted by Regulation M under the Exchange Act; and neither
they nor any of their affiliated purchasers have made bids or purchases for
the purpose of creating actual or apparent active trading in, or of raising
the price of, the Subject Securities.
(jj) Neither the Company nor any director, officer, agent, employee or
other person associated with or acting on behalf of the Company is using
any corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expenses, is making any direct or indirect unlawful payment
to any foreign or domestic government official or employee from corporate
funds, or is in violation of any provision of the United States Foreign
Corrupt Practices Act of 1977, or is making any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment.
(kk) Except as set forth in the Offering Document, neither the Company
nor any entity of the Group is in violation of any applicable law, statute,
ordinance, rule, regulation or administrative or court order or decree to
which it is subject except where such violation, singly or in the
aggregate, would not have a Material Adverse Effect.
(ll) The choice of the law of the State of New York as the governing
law of this Agreement is a valid choice of law under the laws of the Cayman
Islands and the PRC and will be honored by courts in the Cayman Islands and
the PRC. The Company has the power to submit, and pursuant to Section 12 of
this Agreement, has legally, validly, effectively and irrevocably
submitted, to the non-exclusive personal jurisdiction of each United States
federal court and New York state court located in the Borough of Manhattan
in The City of New York, New York, U.S.A. (each, a "New York Court" and
collectively, the "New York Courts") in any suit, action or proceeding
against it arising out of or related to this Agreement or with respect to
its obligations, liabilities or any other matter arising out of or in
connection with the sale of any Offered Securities by the Company to CSFB
under this Agreement and has validly and irrevocably waived any objection
to the venue of a proceeding in any such court; and the Company has the
power to designate, appoint and empower, and pursuant to Section 12 of this
Agreement, has legally, validly, effectively and irrevocably designated,
appointed and empowered, the Authorized Agent (as defined in Section 12
hereof) for service of process in any action arising out of or relating to
this Agreement or the Offered Securities in any New York Court, and service
of process effected on such Authorized Agent will be effective to confer
valid personal jurisdiction over the Company as provided in Section 12
hereof.
(mm) Except as described in the Offering Document, any final judgment
for a fixed or readily calculable sum of money rendered by a New York Court
having jurisdiction under its own domestic laws in respect of any suit,
action or proceeding against the Company based upon this Agreement, the
Indenture, the Offered Securities, the Registration Rights Agreement and
any instruments or agreements entered into for the consummation of the
transactions contemplated herein and therein would be declared enforceable
against the Company without reexamination or
11
review of the merits of the cause of action in respect of which the
original judgment was given or relitigation of the matters adjudicated upon
or payment of any stamp, registration or similar tax or duty (A) by the
courts of the Cayman Islands, provided that the judgment is final, for a
liquidated sum not in respect of taxes or as a fine or penalty, and which
was not obtained in a manner, and is not of a kind the enforcement of which
is, contrary to the public policy of the Cayman Islands, and (B) by the
courts of the PRC, provided that (a) the judgment was not contrary to the
public policy, state sovereignty or security of the PRC, (b) the judgment
was not given or obtained by fraud, (c) the judgment was not based on clear
mistake of law or fact, (d) the judgment was not directly or indirectly for
the payment of taxes or other charges of a like nature or of a fine or
other penalty, (e) the judgment was for a definite sum of money, (f) the
judgment was final and conclusive, (g) adequate service of process has been
effected and the defendant has had a reasonable opportunity to be heard,
(h) such judgments do not conflict with any other valid judgment in the
same matter between the same parties, and (i) an action between the same
parties in the same matter is not pending in any PRC court at the time the
lawsuit is instituted in the New York Court. The Company is not aware of
any reason why the enforcement in the Cayman Islands or the PRC of such a
New York Court judgment would be, as of the date hereof, contrary to public
policy of the Cayman Islands or contrary to the public policy, state
sovereignty or security of the PRC.
(nn) It is not necessary under the laws of the Cayman Islands in order
to enable CSFB to enforce their respective rights under this Agreement, the
Indenture, the Offered Securities and the Registration Rights Agreement or
to enable a subsequent purchaser of the Offered Securities or an owner of
any interest therein to enforce its rights under the Offered Securities or
the Registration Rights Agreement, as the case may be, that CSFB,
subsequent purchaser or owner should, be licensed, qualified or otherwise
entitled to carry on business in the Cayman Islands; this Agreement, the
Indenture, the Offered Securities, and the Registration Rights Agreement
are in proper legal form under the laws of the Cayman Islands for the
enforcement thereof against the Company.
(oo) Each of Messrs. ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ and ▇▇ ▇▇▇▇ is a citizen of the
PRC, excluding Taiwan, Hong Kong SAR and Macau SAR, and no application is
pending in any other jurisdiction by him or on his behalf for
naturalization or citizenship thereof.
(pp) No securities of the same class (within the meaning of Rule
144A(d)(3) under the Securities Act) as the Offered Securities are listed
on any national securities exchange registered under Section 6 of the
Exchange Act or quoted in a U.S. automated inter-dealer quotation system.
(qq) Assuming the accuracy of the representations and warranties
contained in Section 4 (and compliance with the covenants contained
therein), the offer and sale of the Offered Securities in the manner
contemplated by this Agreement will be exempt from the registration
requirements of the Securities Act by reason of Section 4(2) thereof; and
it is not necessary to qualify an indenture in respect of the Offered
Securities under the United States Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act").
(rr) The Company has not entered and will not enter into any
contractual arrangement with respect to the distribution of the Offered
Securities except for this Agreement.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to CSFB, and
CSFB agrees to purchase from the Company, at a purchase price of 97.5% of the
principal amount thereof, U.S.$75,000,000 principal amount of Firm Securities.
12
The Company will deliver against payment of the purchase price the Firm
Securities in the form of one or more permanent global securities in definitive
form (the "Firm Global Securities") deposited with the Trustee as custodian for
The Depository Trust Company ("DTC") and registered in the name of Cede & Co.,
as nominee for DTC. Interests in any permanent global securities will be held
only in book-entry form through DTC, except in the limited circumstances
described in the Offering Document.
Payment for the Firm Securities shall be made by CSFB in Federal (same day)
funds by wire transfer to an account at a bank designated by the Company and
reasonably acceptable to CSFB at 9:30 A.M., (New York City time), on July 14,
2003, or at such other time not later than seven full business days thereafter
as CSFB and the Company determine, such time being herein referred to as the
"First Closing Date", against delivery to the Trustee as custodian for DTC of
(i) the Firm Global Securities representing all of the Firm Securities. The
closing will take place at the office of ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇, The Hong ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇. The Firm Global Securities will be
made available for checking at the above office of ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇ at
least 24 hours prior to the First Closing Date.
In addition, upon written notice from CSFB given to the Company from time
to time not more than 30 days subsequent to the date of this Agreement, CSFB may
purchase all or less than all of the Optional Securities at the purchase price
per principal amount of Offered Securities (including any accrued interest
thereon to the related Optional Closing Date, as hereinafter defined) to be paid
for the Firm Securities. The Company agrees to sell to CSFB the principal amount
of Optional Securities specified in such notice and CSFB agrees to purchase such
Optional Securities. No Optional Securities shall be sold or delivered unless
the Firm Securities previously have been, or simultaneously are, sold and
delivered. The right to purchase the Optional Securities or any portion thereof
may be exercised from time to time and to the extent not previously exercised
may be surrendered and terminated at any time upon notice by CSFB to the
Company.
Each time for the delivery of and payment for the Optional Securities,
being herein referred to as the "Optional Closing Date", which may be the First
Closing Date (the First Closing Date and each Optional Closing Date, if any,
being sometimes referred to as a "Closing Date"), shall be determined by CSFB
but shall not be later than seven full business days after written notice of
election to purchase Optional Securities is given.
The Company will deliver against payment of the purchase price the Optional
Securities being purchased on each Optional Closing Date in the form of one or
more permanent global securities in definitive form (each, an "Optional Global
Security") deposited with the Trustee as custodian for DTC and registered in the
name of Cede & Co., as nominee for DTC. Payment for such Optional Securities
shall be made by CSFB in Federal (same day) funds by wire transfer to an account
at a bank designated by the Company and reasonably acceptable to CSFB, against
delivery to the Trustee as custodian for DTC of the Optional Global Securities
representing all of the Optional Securities being purchased on such Optional
Closing Date. CSFB will not exercise the right to purchase Optional Securities
or sell Optional Securities on or after the thirteenth (13/th/) day after the
day of delivery of the Firm Securities in a way which will create more than a
de-minimis amount of original issue discount under the Code to holders of such
securities.
4. Representations by CSFB; Resale by CSFB. (a) CSFB represents and
warrants to the Company that it is an "accredited investor" within the meaning
of Regulation D under the Securities Act.
(b) CSFB acknowledges that the Offered Securities have not been
registered under the Securities Act and may not be offered or sold within
the United States or to, or for the account or benefit of, U.S. persons
except pursuant to an exemption from the registration requirements of the
Securities Act. CSFB represents and agrees that it has offered and sold the
Offered Securities, and will offer and sell the Offered Securities only in
accordance with Rule 144A under the Securities Act ("Rule 144A").
Accordingly, neither CSFB nor its affiliates, nor any persons acting on its
or their behalf, have engaged or will engage in any directed selling
efforts with respect to the Offered
13
Securities, and CSFB, its affiliates and all persons acting on its or their
behalf have complied and will comply with the offering restrictions
requirements of Rule 144A.
(c) CSFB agrees that it and each of its affiliates has not entered
and will not enter into any contractual arrangement with respect to the
distribution of the Offered Securities except with the prior written
consent of the Company.
(d) CSFB understands that no action has been taken or will be taken
by the Company that would permit a public offering of the Offered
Securities, or possession or distribution of the Offering Document or any
other offering or publicity material relating to the Offered Securities, in
any country or jurisdiction where action for that purpose is required.
(e) CSFB agrees that it and each of its affiliates will not offer or
sell the Offered Securities in the United States by means of any form of
general solicitation or general advertising within the meaning of Rule
502(c) under the Securities Act, including, but not limited to (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio,
or (ii) any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising. CSFB agrees, with respect to
resales made in reliance on Rule 144A of any of the Offered Securities, to
deliver either with the confirmation of such resale or otherwise prior to
settlement of such resale a notice to the effect that the resale of such
Offered Securities has been made in reliance upon the exemption from the
registration requirements of the Securities Act provided by Rule 144A.
5. Certain Agreements of the Company. The Company agrees with CSFB that:
(a) The Company will advise CSFB promptly of any proposal to amend or
supplement the Offering Document and will not effect such amendment or
supplementation without the consent of CSFB, which consent will not be
unreasonably withheld or delayed. If, at any time prior to the completion
of the resale of the Offered Securities by CSFB, any event occurs as a
result of which the Offering Document as then amended or supplemented would
include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, the
Company promptly will notify CSFB of such event and promptly will prepare,
at its own expense, an amendment or supplement which will correct such
statement or omission. Neither the consent of CSFB to, nor CSFB's delivery
to offerees or investors of, any such amendment or supplement shall
constitute a waiver of any of the conditions set forth in Section 6.
(b) The Company will furnish to CSFB copies of any Preliminary
Offering Circular, the Offering Circular and all amendments and supplements
to such documents, including the documents incorporated therein by
reference, in each case as soon as available and in such quantities as CSFB
requests, and the Company will furnish to CSFB on the date hereof three
copies of the Offering Circular signed by a duly authorized officer of the
Company, one of which will include the independent accountants' reports
therein manually signed by such independent accountants. At any time when
the Company is not subject to Section 13 or 15(d) of the Exchange Act and
is not exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange
Act, the Company will promptly furnish or cause to be furnished to CSFB
and, upon request of holders and prospective purchasers of the Offered
Securities, to such holders and purchasers, copies of the information
required to be delivered to holders and prospective purchasers of the
Offered Securities pursuant to Rule 144A(d)(4) under the Securities Act (or
any successor provision thereto) in order to permit compliance with Rule
144A in connection with resales by such holders of the Offered Securities.
The Company will pay the expenses of printing and distributing to CSFB all
such documents.
14
(c) The Company will use commercially reasonable efforts to arrange
for the qualification of the Offered Securities for sale and the
determination of their eligibility for investment under the "blue sky" laws
of such jurisdictions in the United States as CSFB designates and will
continue such qualifications in effect so long as required for the resale
of the Offered Securities by CSFB, provided that the Company will not as a
result thereof be required to qualify as a foreign corporation, to file a
general consent to service of process, or to subject itself to taxation in
respect of doing business, in such jurisdiction.
(d) During the period of five years hereafter, the Company will
furnish to CSFB, as soon as practicable after the end of each fiscal year,
a copy of its annual report to shareholders for such year; and the Company
will furnish to CSFB, as soon as available, a copy of each report or
financial statement furnished to or filed with the Commission or any
securities exchange on which any class of securities of the Company is
listed. During the period of six months hereafter, the Company will furnish
to CSFB, from time to time, such other information concerning the Company
as CSFB may reasonably request.
(e) During the period of two years after the later of the First
Closing Date and the last Optional Closing Date, the Company will, upon
request, furnish to CSFB and any holder of Offered Securities a copy of the
restrictions on transfer applicable to the Offered Securities.
(f) During the period of two years after the later of the First
Closing Date and the last Optional Closing Date, the Company will not, and
will not permit any of its affiliates (as defined in Rule 144 under the
Securities Act) to, resell any of the Offered Securities that have been
reacquired by any of them.
(g) During the period of two years after the later of the First
Closing Date and the last Optional Closing Date, the Company will not be or
become an open-end investment company, unit investment trust or face-amount
certificate company that is or is required to be registered under Section 8
of the Investment Company Act.
(h) The Company will pay all expenses (together with VAT where
applicable) incidental to the performance of its obligations under this
Agreement, the Indenture and the Registration Rights Agreement including
(i) the fees and expenses of the Trustee and its professional advisers;
(ii) all expenses in connection with the execution, issue, authentication,
packaging and initial delivery of the Offered Securities, the preparation
and printing of this Agreement, the Registration Rights Agreement, the
Offered Securities and the Indenture; (iii) the cost of qualifying the
Offered Securities for trading in PORTAL and any expenses incidental
thereto; (iv) the cost of any advertising approved by the Company in
connection with the issue of the Offered Securities; (v) for any expenses
(including fees and disbursements of its counsel) incurred in connection
with qualification of the Offered Securities for sale under the laws of
such jurisdictions in the United States as CSFB designates and the printing
of memoranda relating thereto; and (vi) for expenses incurred in
distributing the Preliminary Offering Circular and the Offering Circular
and all amendments and supplements to such documents, including the
documents incorporated therein by reference, to CSFB. The Company will also
pay for all travel expenses of the Company's officers and employees and any
other expenses of the Company in connection with attending or hosting
meetings with prospective purchasers of the Offered Securities from CSFB.
However, CSFB will pay (i) all expenses in connection with the printing of
the Offering Document and (ii) all of its costs and expenses, including
fees and disbursements of its counsel. In addition to the foregoing, CSFB
will pay to the Company on the First Closing Date the sum of U.S.$50,000 as
a non-accountable reimbursement of the Company's expenses. Such amount may
be added to the purchase price for the Offered Securities set forth in
Section 3 hereof.
15
(i) In connection with the offering, until CSFB shall have notified
the Company of the completion of the resale of the Offered Securities,
neither the Company nor any of its affiliates has or will, either alone or
with one or more other persons, bid for or purchase for any account in
which it or any of its affiliates has a beneficial interest any Offered
Securities or attempt to induce any person to purchase any Offered
Securities; and neither it nor any of its affiliates will make bids or
purchases for the purpose of creating actual, or apparent, active trading
in, or of raising the price of, the Offered Securities.
(j) For a period of 90 days after the date of the initial offering of
the Offered Securities by CSFB, the Company will not offer, sell, contract
to sell, pledge or otherwise dispose of, directly or indirectly, or file
with the Commission a registration statement under the Securities Act
relating to, (i) any Ordinary Shares or (ii) any United States
dollar-denominated debt securities issued or guaranteed by the Company and
having a maturity of more than one year from the date of issue or (iii) any
Ordinary Shares of the Company or securities convertible into or
exchangeable or exercisable for Ordinary Shares of the Company, including
American Depositary Shares, warrants or other rights to purchase Ordinary
Shares of the Company, or publicly disclose the intention to make any such
offer, sale, pledge, disposition or filing, without the prior written
consent of CSFB, except as required by the Registration Rights Agreement
and except for issuances of Ordinary Shares pursuant to the conversion or
exchange of convertible or exchangeable securities or the exercise of
warrants or options, in each case outstanding on the date hereof or grants
of employee stock options pursuant to the terms of a plan in effect on the
date hereof. The Company will not at any time offer, sell, contract to
sell, pledge or otherwise dispose of, directly or indirectly, any
securities under circumstances where such offer, sale, pledge, contract or
disposition would cause the exemption afforded by Section 4(2) of the
Securities Act to cease to be applicable to the offer and sale of the
Offered Securities. Notwithstanding anything to the contrary herein, this
Agreement shall not in any way restrict or limit the Company's ability to
purchase 27,142,000 Ordinary Shares from Best Alliance Profits Limited, an
affiliate of The News Corporation Limited, following the date hereof.
(k) Within five (5) days of the First Closing Date, the Company will
file or record with, or pay stamp, registration or similar taxes or duties
to, such court, authority or agency of the Cayman Islands as necessary to
ensure the legality, validity enforceability or admissibility in evidence
of this Agreement, the Indenture, the Offered Securities, or the
Registration Rights Agreement in the Cayman Islands. The Company will
indemnify and hold harmless CSFB against any documentary, stamp or similar
transfer or issue tax, or fees, including any interest and penalties, which
are or may be required to be paid on or in connection with (A) the
creation, issuance, sale and delivery by the Company of any Offered
Securities to CSFB pursuant to this Agreement and the Offering Document,
(B) the initial sale and delivery by CSFB of such Offered Securities to
purchasers thereof, (C) the holding or transfer of the Securities outside
the Cayman Islands and the PRC, and (D) the execution and delivery of this
Agreement, the Indenture, the Offered Securities, the Registration Rights
Agreement or any Material Agreement. All payments to be made by the Company
hereunder shall be made without withholding or deduction for or on account
of any present or future taxes, duties or governmental charges whatsoever
unless the Company is compelled by law to deduct or withhold such taxes,
duties or charges. In that event, the Company shall pay such additional
amounts as may be necessary in order that the net amounts received after
such withholding or deduction shall equal the amounts that would have been
received if no withholding or deduction had been made.
(l) The Company agrees that, except as disclosed in the Offering
Document and except for those which are not material to the Company, prior
to the later of the First Closing Date and the last Optional Closing Date,
it will not incur any liabilities or enter into any material agreements
(except in the ordinary course of its business or as contemplated in the
Offering Document) without the prior written consent of CSFB.
16
(m) The Company will ensure, or cause to ensure, (A) that the Group
will possess all of the Governmental Licenses to the extent required or
necessary for the operation of the businesses as presently conducted and as
may be conducted from time to time by the Group and for the consummation of
the transactions contemplated in the Material Agreements, will remain in
compliance with the terms and conditions of all such Governmental Licenses,
and will maintain the validity and effectiveness of any Governmental
Licenses so required or necessary, (B) that NetEase Beijing will maintain
its status as a PRC foreign invested entity and will obtain and maintain
its classification as a "high-tech" company in the PRC, to the extent
required or necessary for the operation of the business as presently
conducted and as may be conducted from time to time by the Group without
any Material Adverse Effect, and (C) the Group will comply with the
relevant laws, rules and regulations required or necessary for the holders
of the Offered Securities to continue to be entitled to their rights
specified therein and in the Deposit Agreement.
(n) The Company shall cause the Material Agreements to remain valid
and in full force and effect for so long as required or necessary for the
operation of the businesses as presently conducted and as may be conducted
from time to time by the Group without any Material Adverse Effect.
(o) The Company shall use commercially reasonable efforts to cause
each of Mssrs. ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ and ▇▇ ▇▇▇▇ to remain a citizen of the PRC,
excluding Taiwan, Hong Kong SAR and Macau SAR for as long as such PRC
citizenship is required or necessary under PRC laws and regulations for the
business operations of the Company as currently conducted without any
Material Adverse Effect.
6. Conditions of the Obligations of CSFB. The obligations of CSFB to
purchase and pay for the Firm Securities on the First Closing Date and for the
Optional Securities on each Optional Closing Date will be subject to the
accuracy of the representations and warranties on the part of the Company
herein, to the accuracy of the statements of officers of the Company made
pursuant to the provisions hereof, to the performance by the Company of its
obligations hereunder and to the following additional conditions precedent:
(a) CSFB shall have received from PricewaterhouseCoopers a letter,
dated the date of this Agreement, confirming that they are independent
public accountants within the meaning of the Securities Act and the
applicable published rules and regulations thereunder ("Rules and
Regulations") and to the effect that:
(i) in their opinion the financial statements examined by them
and included in the Offering Document and in the Company's Annual
Report on Form 20-F most recently filed with the Commission comply as
to form in all material respects with the applicable accounting
requirements of the Securities Act and the related published Rules and
Regulations;
(ii) they have performed the procedures specified by the
American Institute of Certified Public Accountants for a review of
interim financial information as described in Statement of Auditing
Standards No. 100, Interim Financial Information, on the unaudited
financial statements included in the Offering Document;
(iii) on the basis of the review referred to in clause (ii)
above, a reading of the latest available interim financial statements
of the Company, inquiries of officials of the Company who have
responsibility for financial and accounting matters and other
specified procedures, nothing came to their attention that caused them
to believe that:
17
(A) the unaudited financial statements included in the
Offering Document do not comply as to form in all material
respects with the applicable accounting requirements of the
Securities Act and the related published Rules and Regulations or
any material modifications should be made to such unaudited
financial statements for them to be in conformity with generally
accepted accounting principles;
(B) at a subsequent specified date not more than three
business days prior to the date of this Agreement, there was any
change in the capital stock or any increase in short-term
indebtedness or long-term debt of the Company and its
consolidated subsidiaries or there was any decrease in
consolidated net current assets or net assets, as compared with
amounts shown on the latest balance sheet included in the
Offering Document; or
(C) for the period from the closing date of the latest
income statement included in the Offering Document to the closing
date of the latest available income statement read by such
accountants there were any decreases, as compared with the
corresponding period of the previous year, in consolidated net
sales, net operating income or in the total or per share amounts
of consolidated net income or in the ratio of earnings to fixed
charges;
except in all cases set forth in clauses (B) and (C) above for
changes, increases or decreases which the Offering Document disclose
have occurred or may occur or which are described in such letter; and
(iv) they have compared specified dollar amounts (or percentages
derived from such U.S. dollar or Renminbi amounts) and other financial
information contained in the Offering Document, in the Company's
Annual Report on Form 20-F most recently filed with the Commission and
the Company's Periodic Report on Form 6-K for the month of April 2003
(in each case to the extent that such U.S. dollar and Renminbi
amounts, percentages and other financial information are derived from
the general accounting records of the Company and its subsidiaries
subject to the internal controls of the Company's accounting system or
are derived directly from such records by analysis or computation)
with the results obtained from inquiries, a reading of such general
accounting records and other procedures specified in such letter and
have found such U.S. dollar and Renminbi amounts, percentages and
other financial information to be in agreement with such results,
except as otherwise specified in such letter.
(b) On each Closing Date, CSFB shall have received from
PricewaterhouseCoopers a letter, dated as of such Closing Date, to the
effect that they reaffirm the statements made in the letter furnished
pursuant to subsection (a) of this Section, except that the specified date
referred to shall be a date not more than three business days prior to such
Closing Date.
(c) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) any change, or any development or event
involving a prospective change, in the condition (financial or other),
business, properties or results of operations of the Company and its
subsidiaries taken as one enterprise which, in the judgment of CSFB, is
material and adverse and makes it impractical or inadvisable to proceed
with completion of the offering or the sale of and payment for the Offered
Securities; (ii) any change in U.S., Chinese (including Hong Kong), Asian
or international financial, political or economic conditions or currency
exchange rates or exchange controls as would, in the judgment of CSFB, be
likely to prejudice materially the success of the proposed issue, sale or
distribution of the Offered Securities, whether in the primary market or in
respect of dealings in the
▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, (▇▇▇) any material suspension or material limitation of
trading in securities generally on the New York Stock Exchange or the
Nasdaq National Market, or any setting of minimum prices for trading on
such exchange; (iv) or any suspension of trading of any securities of the
Company on any exchange or in the over-the-counter market; (v) any banking
moratorium declared by U.S. Federal, New York, Chinese or Hong Kong
authorities; (vi) any major disruption of settlements of securities or
clearance services in the United States, the PRC or Hong Kong or (vii) any
attack on, outbreak or escalation of hostilities or act of terrorism
involving the United States, the PRC or Hong Kong, any declaration of war
by Congress or any other national or international calamity or emergency
if, in the judgment of CSFB, the effect of any such attack, outbreak,
escalation, act, declaration, calamity or emergency makes it impractical or
inadvisable to proceed with completion of the offering or sale of and
payment for the Offered Securities.
(d) At such Closing Date,
(i) CSFB shall have received the favorable opinion, dated as of
such Closing Date, of Commerce & Finance Law Office, PRC counsel to
the Company, in form and substance reasonably satisfactory to counsel
for CSFB, to the effect set forth in Exhibit A hereto and to such
further effect as counsel to CSFB may reasonably request.
(ii) CSFB shall have received the favorable opinion, dated as of
such Closing Date, of ▇▇▇▇▇▇ and Calder Asia, Cayman Islands counsel
for the Company, in form and substance reasonably satisfactory to
counsel for CSFB, to the effect set forth in Exhibit B hereto and to
such further effect as counsel to CSFB may reasonably request.
(iii) CSFB shall have received the favorable opinion, dated as of
such Closing Date, of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, U.S. counsel for the
Company, in form and substance reasonably satisfactory to counsel for
CSFB, to the effect set forth in Exhibit C hereto and to such further
effect as counsel to CSFB may reasonably request. In giving such
opinion such counsel may rely, as to all matters governed by the laws
of jurisdictions other than the law of the State of New York and the
federal law of the United States, upon the opinions of counsel
satisfactory to CSFB. Such counsel may also state that, insofar as
such opinion involves factual matters, they have relied, to the extent
they deem proper, upon certificates of officers of the Company and its
subsidiaries and certificates of public officials.
(iv) CSFB shall have received the favorable opinion, dated as of
such Closing Date, of ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇, U.S. counsel for CSFB, in
form and substance reasonably satisfactory to CSFB, with respect to
the matters as CSFB may reasonably require. In giving such opinion
such counsel may rely, as to all matters governed by the laws of
jurisdictions other than the law of the State of New York and the
federal law of the United States, upon the opinions of counsel
satisfactory to the CSFB. Such counsel may also state that, insofar as
such opinion involves factual matters, they have relied, to the extent
they deem proper, upon certificates of officers of the Company and its
subsidiaries and certificates of public officials.
(v) CSFB shall have received the favorable opinion, dated as of
such Closing Date, of ▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP, U.S. counsel for
the Depositary, in form and substance reasonably satisfactory to
counsel for CSFB, to the effect set forth in Exhibit D hereto and to
such further effect as counsel to CSFB may reasonably request.
(e) CSFB shall have received a certificate, dated such Closing Date,
of the President or any Vice President and a principal financial or
accounting officer of the Company in which such officers, to the best of
their knowledge after reasonable investigation, shall state that the
19
representations and warranties of the Company in this Agreement are true
and correct, that the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied hereunder
at or prior to such Closing Date, and that, subsequent to the respective
dates of the most recent financial statements in the Offering Document
there has been no material adverse change, nor any development or event
involving a prospective material adverse change, in the condition
(financial or other), business, properties or results of operations of the
Company and its subsidiaries taken as a whole except as set forth in the
Offering Document as described in such certificate.
(f) CSFB shall have received a certificate, dated such Closing Date,
of the Chief Financial Officer of the Company certifying that (i) the
Memorandum and Articles of Association of the Company attached to such
certificate are true and correct and in full force and effect, (ii) a
certificate of good standing issued by the Registrar of Companies of the
Cayman Islands dated no earlier than three (3) business days prior to such
Closing Date is attached, certifying that the Company has been duly
incorporated, has paid all required fees, and is validly existing and in
good standing under the laws of the Cayman Islands, (iii) the resolutions
of the Board of Directors of the Company attached to such certificate are
true, correct and complete with respect to all actions taken by the Board
of Directors regarding the transactions contemplated by the Offering
Document, this Agreement, the Registration Rights Agreement and the
Material Agreements, with true and correct English translations thereof,
(iv) all the filings, submissions and correspondences between the Company
and the Nasdaq National Market or on their behalf relating to the Offered
Securities are attached thereto, (v) each person who executed or delivered
instructions with regard to the Offered Securities, the Offering Document,
this Agreement, the Registration Rights Agreement and the Material
Agreements, or any other document related to the transactions contemplated
therein was duly qualified to do so and any signature by such person
therein is genuine, and (vi) CT Corporation System has been appointed, and
CT Corporation System has accepted such appointment as, the Company's agent
to receive and acknowledge, for and on the Company's behalf, service of
process in an action brought before a New York Court.
(g) On or prior to the date of this Agreement, CSFB shall have
received lockup letters from ▇▇▇ Sun, Acting Chief Executive Officer of the
Company, and Shining Globe International Limited and ▇▇▇▇▇▇▇ ▇▇▇▇.
The Company will furnish CSFB with such conformed copies of such opinions,
certificates, letters and documents as CSFB reasonably requests. CSFB may in its
sole discretion waive compliance with any conditions to the obligations of CSFB
hereunder, whether in respect of an Optional Closing Date or otherwise.
7. Indemnification and Contribution. (a) The Company will indemnify and
hold harmless CSFB, its officers, partners, members, directors and each person,
if any, who controls CSFB within the meaning of Section 15 of the Securities
Act, against any losses, claims, damages or liabilities, joint or several, to
which CSFB may become subject, under the Securities Act or the Exchange Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Offering Document, and
all amendments and supplements thereto, including the documents incorporated
therein by reference, or arise out of or are based upon the omission or alleged
omission to state therein a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, including any losses, claims, damages or liabilities
arising out of or based upon the Company's failure to perform its obligations
under Section 5(a) of this Agreement, and will reimburse CSFB for any legal or
other expenses reasonably incurred by CSFB in connection with investigating or
defending any such loss, claim, damage, liability or action as such expenses are
incurred; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement in or omission
or alleged omission from any of such documents in reliance upon and in
conformity with written information furnished to the Company by CSFB
specifically for use therein, it being
20
understood and agreed that the only such information consists of the information
described as such in subsection (b) below.
(b) CSFB will indemnify and hold harmless the Company, its directors
and officers and each person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act, against any losses, claims,
damages or liabilities to which the Company may become subject, under the
Securities Act or the Exchange Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Offering Document, and all amendments and
supplements thereto, including the documents incorporated therein by
reference, or arise out of or are based upon the omission or the alleged
omission to state therein a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by CSFB specifically for use therein,
and will reimburse any legal or other expenses reasonably incurred by the
Company in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred, it being
understood and agreed that the only such information furnished by CSFB
consists of the following information in the Offering Circular: (i) the
name of CSFB which appears at the bottom of the front cover page and the
first paragraph appearing under the caption "Plan of Distribution", (ii)
the third sentence in the sixteenth paragraph appearing under the caption
"Plan of Distribution" and (iii) the seventeenth and eighteenth paragraphs
(including the four subparagraphs under the seventeenth paragraph)
appearing under the caption "Plan of Distribution" concerning stabilization
transactions; provided, however, that CSFB shall not be liable for any
losses, claims, damages or liabilities arising out of or based upon the
Company's failure to perform its obligations under Section 5(a) of this
Agreement.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party
under subsection (a) or (b) above, notify the indemnifying party of the
commencement thereof; but the failure to notify the indemnifying party
shall not relieve it from any liability that it may have under subsection
(a) or (b) above except to the extent that it has been materially
prejudiced (through the forfeiture of substantive rights or defenses) by
such failure; and provided further that the failure to notify the
indemnifying party shall not relieve it from any liability that it may have
to an indemnified party otherwise than under subsection (a) or (b) above.
In case any such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the
extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party),
and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party under this Section for any legal or
other expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party unless such settlement includes (i) an unconditional
release of such indemnified party from all liability on any claims that are
the subject matter of such action and (ii) does not include a statement as
to or an admission of fault, culpability or failure to act by or on behalf
of any indemnified party.
21
(d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute
to the amount paid or payable by such indemnified party as a result of the
losses, claims, damages or liabilities referred to in subsection (a) or (b)
above (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and CSFB on the other from
the offering of the Offered Securities or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company on the one hand
and CSFB on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities as well as any
other relevant equitable considerations. The relative benefits received by
the Company on the one hand and CSFB on the other shall be deemed to be in
the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total discounts and
commissions received by CSFB from the Company under this Agreement. The
relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by the Company or CSFB and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The amount paid by an
indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any action or claim
which is the subject of this subsection (d). Notwithstanding the provisions
of this subsection (d), CSFB shall not be required to contribute any amount
in excess of the amount by which the total price at which the Offered
Securities purchased by it were resold exceeds the amount of any damages
which CSFB has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. CSFB's
obligations in this subsection (d) to contribute are several in proportion
to their respective purchase obligations and not joint.
(e) The obligations of the Company under this Section shall be in
addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who
controls CSFB within the meaning of the Securities Act or the Exchange Act;
and the obligations of CSFB under this Section shall be in addition to any
liability which it may otherwise have and shall extend, upon the same terms
and conditions, to each person, if any, who controls the Company within the
meaning of the Securities Act or the Exchange Act.
8. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Company or its officers and of CSFB set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any investigation,
or statement as to the results thereof, made by or on behalf of CSFB, the
Company or any of their respective representatives, officers or directors or any
controlling person, and will survive delivery of and payment for the Offered
Securities. If for any reason the purchase of the Offered Securities by CSFB is
not consummated, the Company shall remain responsible for the expenses to be
paid or reimbursed by it pursuant to Section 5 and the respective obligations of
the Company and CSFB pursuant to Section 7 shall remain in effect and if any
Offered Securities have been purchased hereunder the representations and
warranties in Section 2 and all obligations under Section 5 shall also remain in
effect. If the purchase of the Offered Securities by CSFB is not consummated for
any reason other than solely because of the occurrence of any event specified in
clause (ii), (iii), (v), (vi) or (vii) of Section 6(c), the Company will
reimburse CSFB for all out-of-pocket expenses (including fees and disbursements
of counsel) reasonably incurred by them in connection with the offering of the
Offered Securities.
9. Notices. All communications hereunder will be in writing and, if sent
to CSFB will be mailed, delivered or faxed and confirmed to the Credit Suisse
First Boston LLC, Eleven Madison Avenue, New York,
22
NY 10010-3629, U.S.A., Attention: Transactions Advisory Group (fax:
▇-▇▇▇-▇▇▇-▇▇▇▇), or, if sent to the Company, will be mailed, delivered or faxed
and confirmed to it at ▇▇▇▇▇▇▇.▇▇▇, Inc., ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇, ▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ District, Beijing 100738, People's Republic of China,
fax (8610) ▇▇▇▇-▇▇▇▇, Attention: Chief Financial Officer (fax: 8610-8518-3618).
10. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the controlling
persons referred to in Section 7, and no other person will have any right or
obligation hereunder, except that holders of Offered Securities shall be
entitled to enforce the agreements for their benefit contained in the second and
third sentences of Section 5(b) hereof against the Company as if such holders
were parties thereto.
11. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
12. Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York without regard to principles
of conflicts of laws.
The Company hereby submits to the non-exclusive jurisdiction of the New
York Courts in any suit or proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby. The Company irrevocably
appoints CT Corporation System, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇/▇▇/ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇ ("Authorized Agent"), as its authorized agent in the Borough of
Manhattan in The City of New York upon which process may be served in any such
suit or proceeding, and agrees that service of process upon such agent, and
written notice of said service to the Company, by the person serving the same to
the address provided in Section 9, shall be deemed in every respect effective
service of process upon the Company in any such suit or proceeding. The Company
further agrees to take any and all action as may be necessary to maintain such
designation and appointment of such agent in full force and effect for a period
of seven years from the date of this Agreement.
The obligation of the Company in respect of any sum due to CSFB shall,
notwithstanding any judgment in a currency other than United States dollars, not
be discharged until the first business day, following receipt by CSFB of any sum
adjudged to be so due in such other currency, on which (and only to the extent
that) CSFB may in accordance with normal banking procedures purchase United
States dollars with such other currency; if the United States dollars so
purchased are less than the sum originally due to CSFB hereunder, the Company
agrees, as a separate obligation and notwithstanding any such judgment, to
indemnify CSFB against such loss. If the United States dollars so purchased are
greater than the sum originally due to CSFB hereunder, CSFB agrees to pay to the
Company an amount equal to the excess of the dollars so purchased over the sum
originally due to CSFB hereunder.
23
If the foregoing is in accordance with the CSFB's understanding of our
agreement, kindly sign and return to us one of the counterparts hereof,
whereupon it will become a binding agreement between the Company and CSFB in
accordance with its terms.
Very truly yours,
▇▇▇▇▇▇▇.▇▇▇, Inc.
By: /s/ ▇▇▇ Sun
----------------------------------
Name: ▇▇▇ Sun
Title: Acting CEO & Director
The foregoing Purchase Agreement is
hereby confirmed and accepted as of
the date first above written.
Credit Suisse First Boston LLC
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Director
24
SCHEDULE A
SUBSIDIARIES OF ▇▇▇▇▇▇▇.▇▇▇, INC.
Jurisdiction of
Subsidiary Organization Ownership
----------------------------------------- --------------- ---------
NetEase Information Technology (Beijing) China 100%
Co., Ltd.
NetEase Information Technology (Shanghai) China 100%
Co., Ltd.
NetEase (U.S.) Inc. U.S. 100%
NetEase Interactive Entertainment Ltd. British 100%
Virgin
Islands
Sch-A-1
EXHIBIT A
FORM OF OPINION OF THE COMPANY'S PRC COUNSEL
We are lawyers qualified in the People's Republic of China ("PRC") and are
qualified to issue opinions on the laws of the PRC. We have acted as PRC counsel
for ▇▇▇▇▇▇▇.▇▇▇, Inc. (the "Company"), a company incorporated under the laws of
the Cayman Islands, in relation to the Company's proposed issuance and sale to
Credit Suisse First Boston LLC ("CSFB") pursuant to the purchase agreement
("Purchase Agreement") entered into by and between the Company and CSFB dated
July 8, 2003 of U.S.$75,000,000 principal amount of its Zero Coupon Convertible
Subordinated Notes due July 15, 2023 and also granting to CSFB an option,
exercisable from time to time by CSFB, to purchase an aggregate of up to an
additional $25,000,000 principal amount ("Optional Securities") of its Zero
Coupon Convertible Subordinated Notes due July 15, 2023, each to be issued under
an indenture agreement, dated as of July 14, 2003 ( the "Indenture"), between
the Company and The Bank of New York, as Trustee.
Unless otherwise defined herein, capitalized terms used in this opinion
shall have the same meaning as set forth in the Purchase Agreement.
In rendering this opinion we have examined copies of such documents, as we
have considered necessary or relevant to provide this opinion. In giving this
opinion, we have made the following assumptions:
1. that all documents submitted to us as originals are authentic and that
all documents submitted to us as copies conform to their originals;
2. that all documents have been validly authorized, executed and
delivered by all of the parties thereto; and
3. that the signatures, seals and chops on the documents submitted to us
are genuine;
This opinion is confined to and given on the basis of the laws of the PRC
as at the date hereof. We do not express or imply any view or opinion on, or in
respect of, the laws of any jurisdiction other than those of the PRC.
Based on the foregoing, we are of the opinion that:
1. NetEase Beijing has been duly incorporated and is validly existing as
a wholly foreign owned enterprise with legal person status in good standing
under the laws of the PRC. Except as otherwise disclosed in the Offering
Document, all of the registered capital of NetEase Beijing has been fully paid
and, to the best of our knowledge, is owned by the Company directly, free and
clear of any security interest, mortgage, pledge, lien, encumbrance, claim or
equity.
2. Guangzhou NetEase has been duly incorporated and is validly existing
as a privately owned enterprise with legal person status in good standing under
the laws of the PRC. Except as otherwise disclosed in the Offering Document, all
of the registered capital of Guangzhou NetEase has been fully paid and, to the
best of our knowledge, is 80% owned by ▇▇. ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ and 20% owned by Mr.
▇▇ ▇▇▇▇, each directly, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity.
3. Guangyitong Advertising has been duly incorporated and is validly
existing as a privately owned enterprise with legal person status in good
standing under the laws of the PRC. Except as otherwise disclosed in the
Offering Document, all of the registered capital of Guangyitong Advertising has
been fully paid and, to the best of our knowledge, is 80% owned by Guangzhou
NetEase and 20% owned by Mr. ▇▇ ▇▇▇▇, each directly, free and clear of any
security interest, mortgage, pledge, lien, encumbrance, claim or equity.
A-1
4. Each of NetEase Beijing, Guangzhou NetEase and Guangyitong Advertising
(together, the "PRC Subsidiaries") has legal right, power and authority
(corporate and other) to own, lease and operate its properties and to conduct
its business as described in the Offering Document (including proper authority
and approval for Guangzhou NetEase to engage in businesses as an Internet
content provider and for Guangyitong NetEase to engage in online advertising
businesses, each as described in the Offering Document) and to enter into and
perform its obligations under each of the Material Agreements, to which it is a
party.
5. Each Material Agreement to which any PRC Subsidiary is a party has
been duly authorized, executed and delivered by such PRC Subsidiary, is in
proper legal form under the laws of the PRC for the enforcement thereof against
the parties thereto; and each such Material Agreement that is governed by PRC
law constitutes a valid and legally binding obligation of the parties thereto,
enforceable in accordance with its terms, subject as to enforcement to
bankruptcy, insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights generally and to general equity
principles; and it is not necessary to ensure the legality, validity,
enforceability or admissibility in evidence of any of the Material Agreements in
the PRC or any political subdivision thereof that any of them be filed or
recorded or enrolled with any court or authority in the PRC or any political
subdivision thereof or that any stamp, registration or similar tax be paid in
the PRC or any political subdivision thereof.
6. Each of the Purchase Agreement, the Registration Rights Agreement, the
Indenture and the Offered Securities is in proper legal form under the laws of
the PRC for the enforcement thereof against the Company and, assuming due
authorization, execution and delivery by each party thereto, constitutes a valid
and legally binding obligation of the Company under the PRC law, enforceable in
accordance with its terms, subject as to enforcement to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting
creditors' rights generally and to general equity principles; and it is not
necessary to ensure the legality, validity, enforceability or admissibility in
evidence of the Purchase Agreement, the Registration Rights Agreement or the
Indenture in the PRC or any political subdivision thereof that any of them be
filed or recorded or enrolled with any court or authority in the PRC or any
political subdivision thereof or that any stamp, registration or similar tax be
paid in the PRC or any political subdivision thereof.
7. Except as set forth in the Offering Document, there are no limitations
under PRC law on the rights of the Company (i) to convert into foreign currency
and freely transfer out of the PRC all dividends, distributions and other
payments declared and made payable by any of the Company's subsidiaries
organized and existing under the laws of the PRC or any other revenues received
by the Company or (ii) to convert the said dividends, distributions and other
payments into foreign currency and freely transfer out of the PRC all amounts
required to pay interest, principal, premium, if any, and other payments on the
Offered Securities and dividends and other distributions declared and payable on
the Underlying Shares issuable upon conversion thereof.
8. Under the laws of the PRC, the Offered Securities are freely
transferable by the Company to or for the account of CSFB, and (to the extent
described in the Offering Document) the initial purchasers thereof; and there
are no restrictions on subsequent transfers of the Offered Securities under the
laws of the PRC.
9. To the best of our knowledge, except as set forth in the Offering
Document, there is not pending or threatened any action, suit, proceeding,
inquiry or investigation, to which the Company or any PRC Subsidiary is a party,
or to which the property of the Company or such PRC Subsidiary is subject,
before or brought by any court or governmental agency or body in the PRC, which
might reasonably be expected to result in a Material Adverse Effect, or which
might reasonably be expected to materially and adversely affect the properties
or assets thereof or the consummation of the transactions contemplated in the
Purchase Agreement, the Registration Rights Agreement, the Indenture, the
Offered Securities, any Material Agreement or the Offering Document or the
performance by the Company or any PRC Subsidiary of their respective obligations
thereunder.
A-2
10. The information under Part I, Item 7.B., "Related Party Transactions",
Part I, Item 4, "Information on the Company" and Part I, Item 3.D., "Risk
Factors" in the Company's Annual Report on Form 20-F most recently filed with
the Commission pursuant to the Exchange Act, to the extent that it constitutes
matters of law or summaries of legal matters of the PRC or legal conclusions in
respect of PRC law, or summaries of legal proceedings, or summarizes the terms
and provisions of the Material Agreements governed by PRC law, has been reviewed
by us and is correct in all material respects; and our opinion set forth under
Part 1, Item 10, "Additional Information - Enforcement of Civil Liabilities" in
the Company's Annual Report on Form 20-F most recently filed with the Commission
pursuant to the Exchange Act is confirmed.
11. To the best of our knowledge, there are no PRC statutes or regulations
that are required to be described in the Offering Document that are not
described as required.
12. The choice of the laws of the State of New York as the governing law
of the Purchase Agreement, the Indenture, the Offered Securities and the
Registration Rights Agreement is a valid choice of law under the laws of the PRC
and courts of the PRC will honor this choice of law.
13. No transaction tax, stamp duty or similar tax or duty or withholding
or other taxes are payable by or on behalf of CSFB in the PRC with respect to
(a) the sale and delivery of the Offered Securities as contemplated by the
Purchase Agreement and the Offering Document, (b) the holding or transfer of the
Offered Securities outside the PRC or (c) the execution, delivery or enforcement
of the Purchase Agreement, the Indenture, the Offered Securities, the
Registration Rights Agreement or any Material Agreement; under the laws of the
PRC, the Company is neither a resident of the PRC nor carrying on a trade or
business in the PRC for PRC tax purposes, and accordingly (x) the Company will
not be subject to income tax imposed in the PRC or any subdivision thereof, (y)
any payments or distributions made by the Company on the Offered Securities will
not be subject to any PRC withholding tax and (z) a holder or beneficial owner
of Offered Securities who is not a resident of the PRC will not be subject to
any PRC transaction tax, stamp duty or PRC similar tax or duty or PRC
withholding or other taxes upon any conversion of the Offered Securities,
disposition of the Offered Securities or disposition of the securities into
which the Offered Securities are converted.
14. Any final judgment for a fixed or readily calculable sum of money
rendered by any court of the State of New York or of the United States located
in the State of New York having jurisdiction under its own domestic laws in
respect of any suit, action or proceeding against the Company based upon the
Purchase Agreement, the Registration Rights Agreement, the Indenture or the
Offered Securities would be declared enforceable against the Company by the
courts of the PRC in accordance with the requirements of PRC Civil Procedures
Law based either on treaties between the PRC and the United States of America or
on reciprocity between jurisdictions, without payment of any stamp, registration
or similar tax or duty, provided that (a) the judgment was not contrary to the
public policy, state sovereignty or security of the PRC, (b) the judgment was
not given or obtained by fraud, (c) the judgment was not based on clear mistake
of law or fact, (d) the judgment was not directly or indirectly for the payment
of taxes or other charges of a like nature or of a fine or other penalty, (e)
the judgment was for a definite sum of money, (f) the judgment was final and
conclusive, (g) adequate service of process has been effected and the defendant
has had a reasonable opportunity to be heard, (h) such judgments do not conflict
with any other valid judgment in the same matter between the same parties, and
(i) an action between the same parties in the same matter is not pending in any
PRC court at the time the lawsuit is instituted in the New York Court.
15. Except as otherwise disclosed in the Offering Document, no filing
with, or authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency in or
of the PRC is necessary or required for (i) each PRC Subsidiary to engage in the
business as presently conducted by it and as described in the Offering Document,
(ii) the due authorization, execution and delivery by each PRC Subsidiary of
each Material Agreement to which it is a party, (iii) the performance by each
PRC Subsidiary of its obligations under each Material Agreement to which it is a
party, or (iv) the consummation of the transactions contemplated under each
Material Agreement.
A-3
16. The execution, delivery and performance of each of the Purchase
Agreement, the Indenture, the Registration Rights Agreement, and each of the
Material Agreements governed by the laws of the PRC, the consummation of the
transactions contemplated therein and in the Offering Document (including the
issuance and sale of the Offered Securities, compliance with the terms and
provisions thereof, and the use of the proceeds from the sale of the Offered
Securities as described in the Offering Document under the caption "Use Of
Proceeds") and compliance by the Company with its obligations under each of the
Purchase Agreement, the Indenture, the Offered Securities, the Registration
Rights Agreement and each of the Material Agreements governed by the laws of the
PRC, will not, whether with or without the giving of notice or passage of time
or both, conflict with or constitute a breach of, or a default or Repayment
Event (as defined in Section 2(n) of the Purchase Agreement) under, or result in
the creation or imposition of any lien, charge or encumbrance upon, any property
or assets of the Company or any PRC Subsidiary pursuant to any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note, lease or any
other agreement or instrument (including the Material Agreements) governed by
the laws of the PRC, known to us, to which the Company or such PRC Subsidiary is
a party or by which they may be bound, or to which any of their property or
assets is subject (except for such conflicts, breaches, defaults or liens,
charges or encumbrances that would not have a Material Adverse Effect), nor will
such action result in any violation of the provisions of the articles of
association or other organizational document of any PRC Subsidiary or any
applicable treaty, law, statute, rule, regulation, judgment, order, writ or
decree, known to us, of any government, government instrumentality or court in
the PRC, having jurisdiction over the Company or the PRC Subsidiaries or any of
their properties, assets or operations.
17. The Company is duly registered or qualified as a foreign corporation,
to the extent that such registration or qualification is required in the PRC, to
transact business as described in the Offering Document and is in good standing
in the PRC (including provincial, municipal or local jurisdictions), whether by
reason of the ownership or leasing of property or the conduct of business or
otherwise, except where the failure to so register or qualify or be in good
standing would not result in a Material Adverse Effect.
18. The Company and its obligations under the Purchase Agreement are
subject to civil and commercial law and suit and none of the Company and its
properties, assets or revenues has any right of immunity, on any grounds, from
any legal action, suit or proceeding, from the giving of any relief in any such
legal action, suit or proceeding, from setoff or counterclaim, from the
jurisdiction of any court, from service of process, attachment upon or prior to
judgment, or attachment in aid of execution of judgment, or from execution of a
judgment, or other legal process or proceeding for the giving of any relief, or
for the enforcement of judgment in the PRC, with respect to their respective
obligations, liabilities or any other matter under or arising out of or in
connection with the Purchase Agreement.
19. It is not necessary in order to enable CSFB to exercise or enforce its
rights under the Purchase Agreement in the PRC or by reason of the entry into
and/or the performance of the Purchase Agreement for CSFB to be licensed,
qualified, authorized or entitled to do business in the PRC.
20. All descriptions in the Offering Document of contracts and other
documents governed by or under PRC law to which the Company or any PRC
Subsidiary is a party are accurate in all material respects; to the best of our
knowledge, there are no franchises, contracts, indentures, mortgages, loan
agreements, notes, leases or other instruments required to be described or
referred to in the Offering Document other than those described or referred to
therein or filed as exhibits thereto, and the descriptions thereof or references
thereto are correct in all material respects.
21. To the best of our knowledge after appropriate investigation, none of
the PRC Subsidiaries is in violation of its articles of association or other
organizational document and no default by any PRC Subsidiary exists in the due
performance or observance of any material obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or other agreement or instrument governed by PRC
law that is described or referred to in the Offering Document.
A-4
22. The performance by CSFB in the PRC of any of their rights, duties,
obligations and responsibilities under the Purchase Agreement will not violate
any law applicable in the PRC.
23. Nothing has come to our attention that would lead us to believe that
the Offering Document or any amendment or supplement thereto (except for
financial statements and schedules and other financial data included therein, as
to which we need make no statement), at the time the Offering Document was
issued, or on the date hereof, included or includes an untrue statement of a
material fact or omitted or omits to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
In rendering such opinion, we have relied (A) as to matters involving the
application of the laws of New York, upon the opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
LLP, United States counsel to the Company, (B) as to matters involving the
application of the laws of the Cayman Islands, upon the opinion of ▇▇▇▇▇▇ and
Calder Asia, Cayman Islands counsel to the Company, and (C) as to matters of
fact (but not as to legal conclusions), to the extent they deem proper, on
certificates and confirmations of responsible officers of the Company or any PRC
Subsidiary and public officials.
This opinion relates to the laws of the PRC (other than the laws of the
Hong Kong Special Administrative Region, the laws of the Macao Special
Administrative Region and the laws of Taiwan Province) in effect on the date
hereof.
This opinion is given solely for the benefit of the persons to whom it is
addressed. It may not, except with our prior written permission, be relied upon
by anyone in connection with this opinion or used for any other purpose;
provided, however, that The Bank of New York, in its capacity as Trustee
pursuant to the terms of the Indenture, may rely, subject to all of the
assumptions and qualifications set forth therein, on this opinion to the same
extent as if this opinion had been addressed and delivered to The Bank of New
York.
A-5
EXHIBIT B
FORM OF OPINION OF THE COMPANY'S CAYMAN ISLANDS COUNSEL
We have acted as Cayman Islands legal advisers to ▇▇▇▇▇▇▇.▇▇▇, Inc. (the
"Company"), a company incorporated in the Cayman Islands in connection with the
issue of US$75,000,000 aggregate principal amount of its Zero Coupon Senior
Convertible Notes due 15th July, 2023 (the "Firm Securities") and the option,
exercisable from time to time by Credit Suisse First Boston LLC, to purchase an
aggregate of up to an additional US$25,000,000 of the aggregate principal amount
of its Zero Coupon Senior Convertible Notes due 15th July, 2023 (the "Optional
Securities", and together with the Firm Securities, the "Offered Securities"),
each to be issued under an indenture, dated as of 14th July, 2003 (the
"Indenture"), between the Company and The Bank of New York, as Trustee. Such
offering is being made pursuant to a purchase agreement between the Company and
the Initial Purchasers (as defined therein) dated 8/th/ July, 2003 (the
"Purchase Agreement").
For the purposes of this opinion, we have reviewed only originals, copies or
final drafts of the following documents:
(a) the certificate of incorporation of the Company dated 6th July, 1999 and
the amended and restated memorandum and articles of association of the
Company as adopted on 12th May, 2000 (the "Memorandum and Articles of
Association");
(b) a certificate of good standing for the Company dated 8th July, 2003 issued
by the Registrar of Companies in the Cayman Islands (the "Certificate of
Good Standing");
(c) the minutes of the meeting of the board of directors of the Company held on
30/th/ June, 2003 (the "Minutes");
(d) a certificate from a director of the Company dated 14th July, 2003, a copy
of which is attached hereto (the "Director's Certificate");
(e) the Purchase Agreement;
(f) the Indenture;
(g) the offering circular issued by the Company dated 9/th/ July, 2003 and all
documents incorporated by reference therein (the "Offering Circular");
(h) the Registration Rights Agreement between the Company and Credit Suisse
First Boston LLC (as representative of the several purchasers named
therein) dated 8/th/ July, 2003 hereto (the "Registration Rights
Agreement");
(i) the form of the Offered Securities;
(j) each of the following agreements (the "Material Agreements"):
(i) 1999 Stock Incentive Plan and Form of Stock Option Agreement
(incorporated by reference to Exhibit 10.1 from the company's Registration
Statement on Form F-1 (file no. 333-11724) filed with the Securities and
Exchange Commission on March 27, 2000);
(ii) Amended and Restated 2000 Stock Incentive Plan and Form of Stock
Option Agreement (including standard and non-standard form)
(incorporated by reference to Exhibit 4.2 from the company's Annual
Report on Form 20-F for the year ended December 31, 2000 filed with
the Securities and Exchange Commission on August 31, 2001;
B-1
(iii) Employment Agreement dated August 31, 1999 between ▇▇▇▇▇▇▇.▇▇▇, Inc.
and ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ (incorporated by reference to Exhibit 10.2 from
the company's Registration Statement on Form F-1 (file no. 333-11724)
filed with the Securities and Exchange Commission on March 27, 2000);
and
(iv) Addendum to Employment Agreement between ▇▇▇▇▇▇▇.▇▇▇, Inc. and
▇▇▇▇▇▇▇ ▇▇▇▇ dated May 1, 2003.
The Purchase Agreement, the Indenture, the Material Agreements and the
Registration Rights Agreement are hereafter together referred to as the
"Agreements".
Terms used herein have the same meanings given in the Purchase Agreement unless
otherwise defined herein.
Save as aforesaid we have not been instructed to undertake and have not
undertaken any further enquiry or due diligence in relation to the transaction
the subject of this opinion. The following opinions are given only as to and
based on circumstances and matters of fact existing at the date hereof and of
which we are aware consequent upon the instructions we have received in relation
to the matter the subject of this opinion and as to the laws of the Cayman
Islands as the same are in force at the date hereof. In giving this opinion, we
have relied upon the completeness and accuracy (and assumed the continuing
completeness and accuracy as at the date hereof) of the Director's Certificate
and the Certificate of Good Standing without further verification and have
relied upon the following assumptions, which we have not independently verified:
(i) The Agreements and the Offered Securities have been or will be duly
authorised, executed and delivered by or on behalf of all relevant
parties (other than the Company).
(ii) The Agreements and the Offered Securities are, or will be, legal, valid,
binding and enforceable against all relevant parties in accordance with
the governing laws expressed therein and all other relevant laws (other
than, with respect to the Company, the laws of the Cayman Islands).
(iii) The power, authority and legal right of all parties under all relevant
laws and regulations (other than, with respect to the Company, the laws
of the Cayman Islands) to enter into, execute and perform their
respective obligations under the Agreements and the Offered Securities.
(iv) The choice of the laws of New York as the governing law of the Agreements
and the Offered Securities has been made by all parties in good faith and
would be regarded as a valid and binding selection which will be upheld
by the courts of New York as a matter of the laws of New York and by all
other courts under all other relevant laws (other than the laws of the
Cayman Islands).
(v) Copy documents or drafts of documents provided to us are true and
complete copies of, or in the final forms of, the originals.
(vi) The genuineness of all signatures and seals.
(vii) All conditions precedent contained in the Agreements have been satisfied
or duly waived and there has been no breach of the terms of the
Agreements or the Offered Securities at the date hereof.
(viii) There is no contractual or other prohibition (other than as may arise by
virtue of the laws of the Cayman Islands) binding on the Company or on
any other party prohibiting it from entering into and performing its
obligations under the Agreements or the Offered Securities.
(ix) The issued shares in the capital of the Company, including those to be
issued pursuant to conversion of the Offered Securities offered in the
Offering Circular, have been, or, upon entry on the Register of Members
of the Company following conversion of the Offered Securities, will be
fully paid up and there are no contractual or other obligations (other
than as may arise by virtue of the laws of the Cayman Islands) binding on
the Company or any of the persons to whom such shares have been
B-2
issued to make any further payment or give any further consideration
in relation thereto other than the conversion price.
(x) The Offered Securities will be issued and authenticated in accordance
with the provisions of the Indenture.
(xi) No invitation has been or will be made by or on behalf of the Company to
the public in the Cayman Islands to subscribe for any of the Offered
Securities.
(xii) The Company is not a sovereign entity of any state and is not a
subsidiary, direct or indirect, of any sovereign entity or state.
The following opinions are given only as to matters of Cayman Islands law and we
have assumed that there is nothing under any other law that would affect or vary
the following opinions. Specifically we have made no investigation of the laws
of New York and we offer no opinion in relation thereto.
Based upon the foregoing and subject to the qualifications set out below and
having regard to such legal considerations as we deem relevant, we are of the
opinion that:
1. The Company has been duly incorporated and is validly existing as an
exempted company with limited liability for an unlimited duration under the
laws of the Cayman Islands with full corporate power and authority to own
its property and assets and to carry on its business in accordance with its
Memorandum and Articles of Association and to enter into and execute and
perform its obligations under the Agreements and the Offered Securities.
2. The Company has an authorised capital as set forth in the Offering
Circular, and all of the issued shares in the capital of the Company
(including the shares being delivered on conversion when issued in
accordance with the terms of the Purchase Agreement and entered on the
Register of Members of the Company) have been duly and validly authorised
and, when issued in accordance with the Purchase Agreement and the Offering
Circular and entered as fully paid on the Register of Members of the
Company, will be fully paid and non-assessable and conform to the
description thereof contained in the Offering Circular.
3. The execution and delivery of the Agreements and the issue and offer of the
Offered Securities by the Company and the performance of its obligations
thereunder have been duly authorised and approved by all necessary
corporate action of the Company and do not violate, conflict with or result
in a breach of any of the terms or provisions of its memorandum and
articles of association or any law, public rule or regulation applicable to
the Company in the Cayman Islands currently in force and do not violate,
conflict with or result in a breach of any existing order or decree of any
governmental authority or agency or any official body in the Cayman
Islands.
4. The Agreements when executed and delivered for and on behalf of the Company
will constitute legal, valid and binding obligations of the Company
enforceable in the Cayman Islands in accordance with their terms except and
in so far as such enforcement may be limited as hereinafter set forth.
5. The Offered Securities when executed and, if appropriate, authenticated in
the manner set forth in the Indenture and delivered against due payment
therefor will be duly executed, issued and delivered and will constitute
the legal, valid and binding obligations of the Company enforceable in the
Cayman Islands in accordance with their terms except and in so far as such
enforcement may be limited as hereinafter set forth.
6. There are no restrictions on subsequent transfers of the Offered Securities
under the laws of the Cayman Islands.
B-3
7. There are no pre-emptive or other rights to subscribe for or purchase, nor
any restriction upon the voting or transfer of any share in the capital of
the Company pursuant to the Memorandum and Articles of Association of the
Company and the Agreements.
8. No authorisations, consents, orders, permissions or approvals are required
from any governmental authorities or agencies or other official bodies in
the Cayman Islands and no notice to or other filing with or action by any
Cayman Islands governmental authority or regulatory body is required in
connection with:
(1) the issue of the Offering Circular;
(2) the execution, creation or delivery of the Agreements by the Company;
(3) subject to the payment of stamp duty, the enforcement of the
Agreements against the Company;
(4) the offering, execution, authentication, allotment, issue or delivery
of the Offered Securities;
(5) the performance of any obligation under the Agreements or the Offered
Securities;
(6) the payment of the principal and interest and any other amounts under
the Offered Securities; or
(7) the payment of any amount under the Agreements.
9. It is not necessary to ensure the legality, validity, enforceability or
admissibility in evidence of the Agreements or the Offered Securities that
any document be filed, recorded or enrolled with any governmental
department, agency or other authority in the Cayman Islands.
10. The Company is in good standing with the Registrar of Companies in the
Cayman Islands.
11. No stamp duties or other similar taxes or charges are payable under the
laws of the Cayman Islands in respect of the execution or delivery of the
Agreements or the Offered Securities unless they are executed in or
thereafter brought within the jurisdiction of the Cayman Islands (e.g. for
the purposes of enforcement).
12. There are currently no taxes or other charges or deductions payable (by
withholding or otherwise) to the Cayman Islands Government or any taxing
authority thereof on or by virtue of (i) the execution, delivery or
enforcement of the Agreements or the Offered Securities or, (ii) any
payment of any nature to be made by the Company under any of the Agreements
or the Offered Securities. The Cayman Islands currently have no income,
corporate or capital gains tax and no estate duty, inheritance tax or gift
tax.
13. The Company can ▇▇▇ and be sued in its own name under the laws of the
Cayman Islands. The choice of the laws of New York to govern the Agreements
and the Offered Securities will be upheld as a valid choice of law under
the laws of the Cayman Islands and the courts of the Cayman Islands would
uphold such choice of law in a suit on the Agreements or the Offered
Securities brought in the courts of the Cayman Islands, assuming it is so
pleaded. An action against the Company in the Cayman Islands under the
Agreements or the Offered Securities could be instituted in the Grand
Court, which has jurisdiction over the Company and would accept
jurisdiction over any action or proceedings based on the Agreements or the
Offered Securities without first having to obtain a judgment in respect of
the Agreements or the Offered Securities in a court of New York or any
other relevant jurisdiction. In the event of any proceedings being brought
in the Cayman Islands courts in respect of a monetary obligation expressed
to be payable in a currency other than Cayman Islands dollars, a Cayman
Islands
B-4
court would give judgment expressed as an order to pay such currency or its
Cayman Islands dollar equivalent at the time of payment or enforcement of
the judgment.
14. The submission to the jurisdiction of the U.S. federal or state courts
sitting in New York City, and the appointment of an agent to accept service
of process in such jurisdiction, is legal, valid and binding on the
Company.
15. Although there is no statutory enforcement in the Cayman Islands of
judgments obtained in New York, the courts of the Cayman Islands will
recognise and enforce a judgment of a foreign court of competent
jurisdiction in respect of any legal suit or proceeding arising out of or
relating to the Agreements without retrial on the merits based on the
principle that a judgment of a competent foreign court imposes upon the
judgment debtor an obligation to pay the sum for which judgment has been
given provided that such judgment is final and conclusive, for a liquidated
sum, not in respect of taxes or a fine or penalty, is not inconsistent with
a Cayman Islands judgment in respect of the same matter, and was not
obtained in a manner and is not of a kind the enforcement of which is
contrary to the public policy of the Cayman Islands. A Cayman Islands court
may stay proceedings if concurrent proceedings are being brought elsewhere.
A foreign judgment may be final and conclusive even if subject to appeal.
However, if appealable, a Cayman Islands court may stay enforcement until
such appeal has been heard.
16. Based on our review of the Register of Writs and other Originating Process
for the period from 6th July, 1999, there are no actions pending against
the Company in the Grand Court of the Cayman Islands on 10/th/ July, 2003.
A search at the Companies Registry in the Cayman Islands would not reveal
any order or resolution for the winding up of the Company because under
Cayman Islands law the records kept by the Registrar of Companies are not
documents of public record. The enquiries referred to above which we have
made at the Grand Court of the Cayman Islands have revealed no record of
the presentation of any winding up petition in respect of the Company. We
assume that there has been no change in this position since the date on
which the enquiries were made.
17. The statements in the Offering Circular issued or to be issued by the
Company, marked "Description of Share Capital", insofar as they describe
provisions in the Company's Memorandum and Articles of Association relating
to the share capital and the Companies Law of the Cayman Islands, and
"Taxation - Cayman Islands Taxation" insofar as they constitute a summary
of the Cayman Islands law on tax matters in relation to the ordinary
shares, are fair summaries or descriptions thereof. Our opinion set forth
under "Enforcement of Civil Liabilities" of the Offering Circular is
confirmed.
18. There is no exchange control legislation under Cayman Islands law and
accordingly there are no exchange control regulations imposed under Cayman
Islands law.
19. To the best of our knowledge, there are no Cayman Islands statutes or
regulations that are required by Cayman Islands law to be described in the
Offering Circulars that are not described as required.
20. The form of certificate used to evidence the ordinary shares complies in
all material respects with applicable statutory requirements of the Cayman
Islands and the Company's Memorandum and Articles of Association.
21. There are no restrictions under Cayman Islands law which would prevent the
Company from paying dividends to shareholders in U.S. Dollars or any other
currency.
22. In any proceedings taken in the Cayman Islands in relation to the
Agreements or the Offered Securities the Company will not be entitled to
claim for itself or any of its assets immunity from suit, execution,
attachment or other legal process.
This opinion is subject to the following qualifications and limitations:
B-5
(1) The term "enforceable" as used above means that the obligations assumed by
the Company under the relevant instrument are of a type which the courts of
the Cayman Islands enforce. It does not mean that those obligations will
necessarily be enforced in all circumstances in accordance with their
terms. In particular:
(a) enforcement may be limited by bankruptcy, insolvency, liquidation,
reorganisation, readjustment of debts or moratorium or other laws of
general application relating to or affecting the rights of creditors;
(b) enforcement may be limited by general principles of equity - for
example, equitable remedies such as specific performance may not be
available, inter alia, where damages are considered to be an adequate
remedy;
(c) claims may become barred under the statutes of limitation or may be or
become subject to defences of set-off, counterclaim, estoppel and
similar defences;
(d) where obligations are to be performed in a jurisdiction outside the
Cayman Islands, they may not be enforceable in the Cayman Islands to
the extent that performance would be illegal under the laws of that
jurisdiction;
(e) the Cayman Islands court has jurisdiction to give judgment in the
currency of the relevant obligation and statutory rates of interest
payable upon judgments will vary according to the currency of the
judgment. If the Company becomes insolvent and is made subject to a
liquidation proceeding, the Cayman Islands court will require all
debts to be proved in a common currency, which is likely to be the
"functional currency" of the Company determined in accordance with
applicable accounting principles. Currency indemnity provisions have
not been tested, so far as we are aware, in the courts of the Cayman
Islands;
(f) obligations to make payments that may be regarded as penalties will
not be enforceable;
(g) the courts of the Cayman Islands may decline to exercise jurisdiction
in relation to substantive proceedings brought under or in relation to
the Agreements in matters where they determine that such proceedings
may be tried in a more appropriate forum; and
(h) a company cannot, by agreement or in its articles of association,
restrict the exercise of a statutory power, and there exists doubt as
to enforceability of any provision in the Agreements whereby the
Company covenants not to exercise powers specifically given to its
shareholders by The Companies Law (2003 Revision) of the Cayman
Islands, including, without limitation, the power to increase its
authorised share capital, amend its Memorandum and Articles of
Association, or present a petition to a Cayman Islands court for an
order to wind up the Company.
(2) With respect to winding up proceedings, Cayman Islands law may require that
all claims or debts of the Company are converted into its functional
currency of account at the exchange rate ruling at the date of commencement
of the winding up.
(3) A certificate, determination, calculation or designation of any party to
the Underwriting Agreement as to any matter provided in any of the
Underwriting Agreement might be held by a Cayman Islands court not to be
conclusive, final and binding if, for example, it could be shown to have an
unreasonable or arbitrary basis or in the event of manifest error.
(4) The obligations of the Company under the Underwriting Agreement to any
person or body connected with, resident in, incorporated in or constituted
under the laws of any country (an "Affected Country") which is currently
the subject of United Nations sanctions extended to the Cayman Islands by
Orders
B-6
in Council, or exercising public functions in any Affected Country or any
person or body controlled by any of the foregoing or any person acting on
behalf of any of the foregoing or any other person or body as prescribed in
such Orders may be subject to restrictions or limitations pursuant to such
Orders.
(5) The irrevocable appointment of an agent for service of process may, as
between the appointor and the agent, be revoked by the appointor unless
given to secure (i) a proprietary interest of the agent or (ii) the
performance of an obligation owed to the agent.
(6) We note that it is contemplated that certain of the Agreements will be
dated "as of" a certain date. Whilst parties to an agreement may agree as a
matter of contract, inter se, that the rights and obligations therein
contained should, in so far as the same may be possible, take effect from a
date prior to the date of execution and delivery, if as a matter of fact
that agreement was executed and delivered after the date "as of" which it
is expressed to be executed and delivered, the agreement only comes into
effect on the actual date of execution and delivery and, with respect to
third parties, the agreement in so far as the rights of third parties may
be available thereunder, take effect only from the actual date of execution
and delivery.
Except as specifically stated herein, we make no comment with respect to any
representations and warranties which may be made by or with respect to the
Company in any of the Agreements or otherwise with respect to the commercial
terms of the transactions the subject of this opinion.
This opinion, although addressed to you, may be relied upon by your legal
advisers (but in that capacity only). This opinion may not be relied upon by any
other person without our prior written consent provided however, that The Bank
of New York (as Trustee under the Indenture) may rely on this opinion to the
same extent as if this opinion had been addressed and delivered to The Bank of
New York.
B-7
EXHIBIT C
FORM OF OPINION OF THE COMPANY'S UNITED STATES COUNSEL
We have acted as special U.S. counsel to ▇▇▇▇▇▇▇.▇▇▇, Inc., a Cayman
Islands corporation (the "Company"), in connection with (i) the issuance and
sale by the Company of US$75,000,000 principal amount of its Zero Coupon
Convertible Subordinated Notes due July 15, 2023 (the "Firm Securities"),
pursuant to the terms of the Purchase Agreement dated July 8, 2003 (the
"Purchase Agreement") between the Company and Credit Suisse First Boston LLC
(the "Purchaser"), and (ii) the grant by the Company to the Purchaser of an
option to purchase an aggregate of up to an additional US$25,000,000 principal
amount of its Zero Coupon Convertible Subordinated Notes due July 15, 2023 (the
"Optional Securities" and, together with the Firm Securities, the "Offered
Securities"), each to be issued under an indenture agreement, dated as of July
14, 2003 (the "Indenture"), between the Company and The Bank of New York, as
Trustee. This opinion is furnished to you pursuant to Section 6(d)(iii) of the
Purchase Agreement. All capitalized terms used herein and not otherwise defined
shall have the respective meanings assigned to them in the Purchase Agreement.
For the avoidance of doubt, references herein to the "Offering Circular" shall
include all documents incorporated therein by reference. The Purchase Agreement,
the Indenture, the Offered Securities and the Registration Rights Agreement are
collectively referred to herein as the "Documents."
In connection with this opinion, we have examined such corporate
records, documents, instruments, certificates of public officials and of the
Company and such questions of law as we have deemed necessary for the purpose of
rendering the opinions set forth herein.
In such examination, we have assumed the genuineness of all signatures
and the authenticity of all items submitted to us as originals and the
conformity with originals of all items submitted to us as copies. In making our
examination of all documents, we have assumed that each party other than the
Company has or had the power and authority to execute and deliver, and to
perform and observe the provisions of, such documents, and the due authorization
by each such party of all requisite action and the due execution and delivery of
such documents by each such party, and that such documents constitute the legal,
valid and binding obligations of each such party. In addition, we have assumed
that the Documents have been duly authorized, executed and delivered by the
Company under the laws of the Cayman Islands. We have also assumed compliance
with all applicable state securities and "blue sky" laws. With respect to the
opinions set forth herein, we have relied as to matters of fact upon the
statements of the Company, including the representations and warranties set
forth in the Documents, in the Certificate of ▇▇▇ Sun, the Acting Chief
Executive Officer of the Company (the "Officer's Certificate"), a copy of which
is attached hereto, and other certificates of officers and other representatives
of the Company delivered on the Closing Date. We have made no independent
investigation as to whether the foregoing statements are accurate or complete.
In rendering the opinions set forth in paragraphs 1 and 3 below, our
opinions are based on a review of those laws which, in our experience, are
normally applicable to transactions of the type contemplated by the Documents.
The opinions hereinafter expressed are subject to the following
qualifications and exceptions:
(i) The effect of bankruptcy, insolvency, reorganization,
arrangement, moratorium or other similar laws relating to or
affecting the rights of creditors generally, including, without
limitation, laws relating to fraudulent transfers or
conveyances, preferences and equitable subordination;
C-1
(ii) Limitations imposed by general principles of equity upon the
availability of equitable remedies or the enforcement of
provisions of the Documents, and the effect of judicial
decisions which have held that certain provisions are
unenforceable where their enforcement would violate the implied
covenant of good faith and fair dealing, or would be
commercially unreasonable, or where their breach is not
material;
(iii) The effect of judicial decisions which may permit the
introduction of extrinsic evidence to supplement the terms of
any Documents or to aid in the interpretation on of such
Documents;
(iv) The enforceability of provisions imposing or which are
construed as effectively imposing penalties or forfeitures;
(v) Our opinion as to the enforceability of any provision of the
Purchase Agreement requiring the Company to submit to the
jurisdiction of a New York state court is based solely on the
statutes and regulations in effect in the State of New York on
the date hereof (including Section 5-1402 of the General
Obligations Law of the State of New York and Section 327 of the
Civil Practice Law and Rules of the State of New York); and
(vi) Our opinion is based upon current statutes, rules, regulations,
cases and official interpretive opinions, and it covers certain
items that are not directly or definitively addressed by such
authorities.
Except to the extent encompassed by an opinion set forth below with
respect to the Company, we express no opinion as to the effect on the opinions
expressed herein of (1) the compliance or non-compliance of any party to the
Documents with any law, regulation or order applicable to it, or (2) the legal
or regulatory status or the nature of the business of any such party.
Whenever our opinion herein with respect to the existence or absence
of facts is indicated to be based on our knowledge, belief or awareness, it is
intended to signify that during the course of our representation of the Company
in connection with the transactions referred to herein, no information has come
to our attention that would give us actual knowledge of the existence or absence
of such facts. However, we have not undertaken any independent investigation to
determine the existence or absence of such facts, except for our participation
in the conferences referred to below and our examination of the corporate
records, documents, instruments and certificates of public officials and of the
Company (including the Officer's Certificate) referred to above, and no
inference as to our knowledge of the existence or absence of such facts should
be drawn from our prior representation of the Company.
Based upon and subject to the foregoing, we are of the opinion that:
1. No filing with or authorization, approval or, to our knowledge,
consent, order or registration of any court or governmental authority or
agency of the United States of America or the State of New York is required
in connection with the consummation of the transactions contemplated by the
Purchase Agreement, the Indenture, the Offered Securities or the
Registration Rights Agreement, including the offer, sale and delivery of
the Offered Securities by the Company, except such as (i) have been filed
or obtained or (ii) may be required under the Securities Act, the Trust
Indenture Act of 1939, as amended (the "TIA") or the rules and regulations
promulgated thereunder; provided, however, the exception provided in clause
(ii) above shall not apply to the offer, sale and delivery of the Offered
Securities by the Company to the Purchaser and the initial resale of such
securities by the
C-2
Purchaser, assuming such offer, sale and delivery by the Company and
resales by the Purchaser are made as contemplated in the Offering Circular
and assuming in each case the accuracy of the representations and
warranties of the Purchaser set forth in Section 5 of the Purchase
Agreement and the compliance by the Purchaser and the Company with the
covenants set forth in the Purchase Agreement (it being understood that no
opinion is being given with respect to any resale of the Offered Securities
other than such sale by the Company and initial resales by the Purchaser).
2. The execution and delivery of the Purchase Agreement, the
Indenture and the Registration Rights Agreement and the performance by the
Company of their respective terms, and the issuance and sale of the Offered
Securities and compliance with the terms and provisions thereof, do not
violate or result in a violation of any judgment, order or decree, known to
us and identified in the Officer's Certificate, of any court or arbitrator
in New York, to which the Company is a party.
3. The execution and delivery of the Purchase Agreement, the
Indenture and the Registration Rights Agreement and the performance by the
Company of their respective terms, and the issuance and sale of the Offered
Securities and compliance with the terms and provisions thereof, do not
violate or result in a violation of any statute, rule or regulation of any
United States or New York State governmental agency or body (it being
understood that no opinion is being given with respect to any resale of the
Offered Securities, or to compliance with the TIA, which is covered by
paragraph 14, below).
4. The execution and delivery of the Indenture, the Purchase
Agreement and the Registration Rights Agreement and the performance by the
Company of their respective terms, and the issuance and sale of the Offered
Securities and compliance with the terms and provisions thereof, will not
conflict with or constitute a material breach of the terms, conditions or
provisions of, or constitute a default under, any of the Material
Agreements, which are attached as exhibits to the Company's Annual Report
on Form 20-F for the year ended December 31, 2002, are governed by the laws
of the State of New York and are in full force and effect on the date
hereof.
5. Each of the Purchase Agreement and the Registration Rights
Agreement has been duly executed and delivered by the Company.
6. Each of the Indenture and the Registration Rights Agreement has
been duly executed and delivered by the Company and constitutes the legal,
valid and legally binding agreement of the Company, enforceable against the
Company in accordance with its terms, except that no opinion is given
hereunder regarding the enforceability of any indemnification and
contribution provisions in the Registration Rights Agreement which may be
limited or prohibited by federal or state securities laws or by public
policy. The Notes, when executed and authenticated in accordance with the
terms of the Indenture and delivered to and paid for by the Purchaser
pursuant to the Purchase Agreement, will constitute the legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms, and conform to the description thereof
contained in the Offering Circular.
7. Under the laws of the State of New York relating to personal
jurisdiction, the Company has, pursuant to Section 12 of the Purchase
Agreement, validly and irrevocably submitted to the personal jurisdiction
of any state or federal court located in the Borough of Manhattan, The City
of New York, New York (each a "New York Court") in any legal suit, action
or proceeding arising out of or based upon the Purchase Agreement or the
transactions contemplated thereby, has validly and irrevocably waived any
objection to the laying of venue of any such proceeding in any such court,
and has validly and irrevocably appointed
C-3
the Authorized Agent as its authorized agent for the purpose described in
Section 12 of the Purchase Agreement; and service of process effected on
such agent in the manner set forth in Section 12 of the Purchase Agreement
will be effective to confer valid personal jurisdiction of such court over
the Company.
8. The statements made in the Offering Circular under the caption
"Certain United States Federal Income Tax Consequences" and under the
caption "Taxation -- United States Federal Income Taxation" which is
incorporated by reference into the Offering Circular from the Company's
Annual Report on Form 20-F for the year ended December 31, 2002, insofar as
such statements purport to summarize certain federal tax laws of the United
States and subject to the qualifications set forth therein, fairly
summarize such laws in all material respects.
9. Upon conversion of the Offered Securities and the issuance by the
Depositary of American Depositary Shares in connection therewith in
accordance with the Deposit Agreement, such American Depositary Shares will
be duly and validly issued and will entitle the holders thereof to the
rights specified therein and in the Deposit Agreement; and the Deposit
Agreement and the American Depositary Shares conform or will conform to the
description thereof in the Offering Circular.
10. The statements set forth in the Offering Circular under the
caption "Description of the Notes" fairly summarize the Offered Securities
in all material respects.
11. To our knowledge, based upon the Officer's Certificate, there are
no material pending or threatened actions, suits, or proceedings before any
New York Court or governmental agency, authority or body or any arbitrator
involving the Company.
12. There is no contract or other document known to us of a character
required to be described in the Offering Circular, if the Offering Circular
were a prospectus included in a registration statement on Form F-1 under
the Securities Act, that is not described as required.
13. The Company is not, and after giving effect to the transactions
contemplated by the Purchase Agreement and the Offering Circular and the
application of the net proceeds therefrom as described in the Offering
Circular and in the Officer's Certificate, will not be, required to
register as an "investment company", as such term is defined in the
Investment Company Act of 1940, as amended.
14. It is not necessary in connection with (i) the offer, sale and
delivery of the Offered Securities by the Company to the Purchaser pursuant
to the Purchase Agreement or (ii) the resales of the Offered Securities by
the Purchaser in a manner contemplated by the Purchase Agreement, to
register the Offered Securities under the Securities Act or to qualify an
indenture in respect thereof under the TIA, assuming such offer, sale and
delivery by the Company and resales by the Purchaser are made as
contemplated in the Offering Circular and assuming in each case the
accuracy of the representations and warranties of the Purchaser set forth
in Section 5 of the Purchase Agreement and the compliance by the Purchaser
and the Company with the covenants set forth in the Purchase Agreement. We
note, however, that pursuant to the Registration Rights Agreement, the
Company will be required to register the Offered Securities and underlying
ordinary shares under the Securities Act and to qualify the Indenture under
the TIA.
In addition, we have participated in conferences with you and with
representatives of the Company and its accountants concerning the Offering
Circular and have considered the matters and statements contained therein,
although we have not independently verified the accuracy,
C-4
completeness or fairness of such statements. Based upon and subject to the
foregoing, nothing has come to our attention that leads us to believe that the
Offering Circular, as of the date of the Offering Circular or as of the date
hereof, contained an untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading (it being understood that
we have not been requested to and do not make any comment in this paragraph with
respect to the financial statements, supporting schedules, footnotes and other
financial information contained or incorporated in the Offering Circular).
We express no opinion as to matters governed by laws of any
jurisdiction other than the laws of the State of New York and the federal laws
of the United States of America, as in effect on the date hereof.
This letter is furnished by us to the Purchaser and is solely for the
benefit of the Purchaser. Neither this letter nor any opinion expressed herein
may be relied upon by, nor may copies be delivered or disclosed to, any other
person or entity without our prior written consent.
C-5
EXHIBIT D
FORM OF OPINION OF THE DEPOSITARY'S UNITED STATES COUNSEL
1. The Deposit Agreement has been duly authorized, executed and
delivered by the Depositary and constitutes a valid and binding agreement of the
Depositary enforceable against the Depositary in accordance with its terms,
except as enforcement of it may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or similar laws of general application
relating to or affecting creditors' rights and by general principles of equity.
2. Upon execution and delivery by the Depositary of ADRs evidencing
the American Depositary Shares against the deposit of Ordinary Shares in
accordance with the provisions of the Deposit Agreement, the American Depositary
Shares will be validly issued and will entitle the holders of the American
Depositary Shares to the rights specified in those ADRs and in the Deposit
Agreement.
3. The legal entity for the issuance of ADRs filed a registration
statement for the American Depositary Shares on Form F-6 under the Securities
Act, the staff of the Commission informed us that the Commission declared that
registration statement effective, to the best of our knowledge, the Commission
has not issued any stop order suspending the effectiveness of that registration
statement or any part of it and the Commission has not instituted, and does not
contemplate, any proceedings for that purpose under that Act and that
registration statement, and each amendment to it, as of its effective date,
complied as to form in all material respects with the requirements of that Act
and the rules and regulations under that Act .
These opinions are based upon the assumptions that (a) the Deposit
Agreement has been duly authorized, executed and delivered by the Company and
constitutes a valid and binding agreement of the Company enforceable against the
Company in accordance with its terms, (b) all the Ordinary Shares are duly
authorized, validly issued, fully paid and non-assessable and are registered or
not required to be registered in accordance with the Securities Act and (c) all
signatures on documents examined by us are genuine. In giving these opinions, we
have also relied as to certain matters, without independent verification, on
information obtained from public officials or officers of the Depositary.
We are members of the New York Bar only and do not hold ourselves out
as practicing under, nor do we express any opinion on or as to the effect of,
any laws other than the laws of the State of New York and the Federal laws of
the United States.
D-1
